Wake Forest Law Review

By Mary-Kathryn Hawes

As Walter Bender, Deputy Sheriff in Montgomery County, Ohio stated: “[O]pioids reach every part of society: blue collar, white collar, everybody. It’s nonstop. It’s every day. And it doesn’t seem like it’s getting any better.”[1] It is estimated that forty-six people die from opioid overdoses involving prescription opioids every day, with methadone, oxycodone, and hydrocodone being the most common drugs involved in these deaths.[2] It is further estimated that 4-6% of people who misuse prescription opioids switch to using heroin.[3] These few statistics[4] paint a dire picture: there is an opioid epidemic and we need help.

To that end, states, counties, and towns have filed lawsuits against big pharmaceutical companies, seeking to hold them responsible for the opioid epidemic and receive financial assistance to help pay for some of the astronomical costs inflicted by the scale of the opioid crisis.[5] One such case involved the State of Oklahoma suing major pharmaceutical companies (including Purdue, Teva, and Johnson & Johnson) under a public nuisance theory.[6] Purdue and Teva both settled prior to trial for $270 and $85 million, respectively.[7] However, Johnson & Johnson proceeded to trial, where they were handed a $572 million verdict on 26 August 2019 for deceptively marketing opioids and contributing to the opioid crisis.[8]

This verdict was splashed across television screens and newspapers when it was first rendered, with the underlying facts and findings of the case interestingly providing a bird’s eye view of how involved the pharmaceutical companies were in manufacturing this crisis. In seeking relief in state court, Oklahoma’s sole claim was that the pharmaceutical companies caused a public nuisance and the State sought abatement of that nuisance.[9] It was undisputed that in 2015, there were enough opioids prescribed in Oklahoma for each adult to have 110 pills.[10] Further, “[i]n 2017, 4.2% of babies born covered by SoonerCare [Oklahoma’s state Medicaid] were born with Neonatal Abstinence Syndrome . . . a group of conditions caused when a baby withdraws from certain drugs [that] it’s exposed to in the womb before birth.”[11] Oklahoma is a microcosm of the epidemic ravaging the United States.

In finding Johnson & Johnson caused a public nuisance, Judge Thad Balkman ruled that Johnson & Johnson “marketed, promoted and sold opioid drugs in Oklahoma” since the mid-1990s.[12] The judgment devotes a few pages to discussing Johnson & Johnson’s subsidiary companies. As part of a “pain management franchise,” Johnson & Johnson was owned two subsidiary companies, Tasmanian Alkaloids Limited and Noramco, Inc., from the 1990s through at least 2016.[13] Tasmanian Alkaloids, based in Tasmania (a province of Australia), “cultivated and processed opium poppy plants to manufacture narcotic raw materials” that were imported into the United States and processed by Noramco.[14] Anticipating demand for opioids, in 1994, Tasmanian Alkaloids developed a “high thebaine” opium poppy plant to “enable[] the growth of oxycodone.”[15] Noramco subsequently processed these raw materials into the active pharmaceutical ingredients used in opioids and supplied both Johnson & Johnson and other pharmaceutical companies with these active ingredients.[16] Johnson & Johnson maintained these subsidiaries to “ensure a reliable source of [narcotic] raw materials” and “security of supply.”[17]

Shrouded behind a positive public image as the maker of familiar products like Band-Aids and baby powder, Johnson & Johnson was, and still is, a major player in the opioid supply business. Judge Balkman found that Noramco was used by Johnson & Johnson to supply the top seven generic drug companies with active pharmaceutical ingredients used in opioid manufacturing.[18] Specifically, Noramco provided other manufacturers with “oxycodone, hydrocodone, morphine, codeine, buprenorphine, hydromorphone, and naloxone.”[19] Eventually, Noramco “grew to become the No. 1 narcotic [active pharmaceutical ingredient] supplier of oxycodone, hydrocodone, codeine, and morphine in the United States.”[20]

The judgment then spends several pages detailing exactly how Johnson & Johnson “embarked on a major campaign in which they used branded and unbranded marketing to disseminate the messages that pain was being undertreated and there was a low risk of abuse and a low danger of prescribing opioids to treat chronic, non-malignant pain and overstating the efficacy of opioids.”[21] Specifically, Johnson & Johnson promoted that pain was undertreated in an effort to encourage providers to prescribe opioids as the solution.[22] The Court found that Johnson & Johnson utilized the term “pseudoaddiction” to “convince doctors that patients who exhibited signs of addiction . . . were not actually suffering from addiction, but from the undertreatment of pain; and the solution, according to Defendants’ marketing, was to prescribe the patient more opioids.”[23]

Further, in 2004, the FDA sent Johnson & Johnson a letter noting that a file card used to promote their product Duragesic (a skin patch containing fentanyl, a highly addictive opioid)  was false or misleading because the card suggested that “Duragesic has a lower potential for abuse compared to other opioid products” and could “encourage the unsafe use of the drug.”[24] In conjunction with these instances, Johnson & Johnson used “education from Defendants’ sales representatives, literature funded by Defendants in medical journals and publications, materials from professional societies/patient advocacy groups, continuing medical education funded by Defendants, unbranded marketing materials, and Defendants’ paid speakers” to influence doctors’ prescribing habits and encourage them to utilize opioids to treat pain.[25]

In finding that Johnson & Johnson committed a public nuisance, the Court relied on the statutory definition of a nuisance as “unlawfully doing an act, or omitting to perform a duty, which act or omission either: [f]irst, [a]nnoys, injures, or endangers the comfort, repose, health, or safety of others . . . .”[26] While some states require the use of property to commit a nuisance, Oklahoma has interpreted their public nuisance statute to exclude the use of property, and instead, only requires “unlawfully doing an act, or omitting to perform a duty.”[27] Alternatively, the Court found that if Oklahoma law does require the use of property in committing a nuisance, the State still satisfied its burden by demonstrating that “Defendants pervasively, systematically and substantially used real and personal property, private and public, as well as the public roads, buildings and land of the State of Oklahoma, to create this nuisance.”[28] Ultimately, the Court concluded that “Defendants’ false, misleading, and dangerous marketing campaigns have caused exponentially increasing rates of addiction, overdose deaths, and Neonatal Abstinence Syndrome,” which are “unlawful acts which annoys, injures, or endangers [sic] the comfort, repose, health or safety of others.”[29]

The Court also found that there were no supervening or intervening causes that “supervened or superseded Defendants’ acts and omissions as a direct cause of the State’s injuries.”[30] Thus, the Court found that Johnson & Johnson created a public nuisance that should be remedied by equitable abatement.[31] After detailing Oklahoma’s Abatement plan (described in the table below), the Court found that Oklahoma needed $572,102,028 to carry out the plan in its first year.[32] Even though several of Oklahoma’s witnesses testified that the abatement plan required at least 20 years to be effective, the Court found that the State did not provide sufficient evidence to establish the costs necessary for that timeframe, and thus, were not awarded damages past the first year.[33]

Table 1: Overview of Oklahoma’s Abatement Plan[34]

So, why does all of this matter? Not only is the Oklahoma case the first national civil litigation suit for the opioid epidemic that went to trial,[35] it seriously holds a major pharmaceutical company accountable for catalyzing the opioid epidemic. Johnson & Johnson, along with the other major pharmaceutical companies, aggressively marketed opioids as a low-risk solution to pain, when they were anything but. As Gary Mendell, founder and CEO of the advocacy group Shatterproof, stated: “Today’s monumental decision in Oklahoma is a critical step in setting a precedent for the largest public health crisis facing our country, bringing justice to the lives lost, and reversing the course of addiction crisis for future generations.”[36]


[1] James Nachtwey, The Opioid Diaries, Time, Mar. 5, 2018, at 1.

[2] Overdose Death Maps, Ctr. for Disease Control & Prevention (Aug. 13, 2019), https://www.cdc.gov/drugoverdose/data/prescribing/overdose-death-maps.html.

[3] Opioid Overdose Crisis, Nat’l Inst. on Drug Abuse (Jan. 2019), https://www.drugabuse.gov/drugs-abuse/opioids/opioid-overdose-crisis#seven.

[4] As with many subjects, statistics don’t tell the whole story. No one wants to be an addict and I would be remiss if I did not point readers to an article sharing individual quotes and perspectives on this crisis. See Nachtwey, supra note 1; see also Families Impacted By The Opioid Crisis Testified at Johnson & Johnson Trial, NPR (Aug. 28, 2019), https://www.npr.org/2019/08/28/754962728/families-impacted-by-the-opioid-crisis-testified-at-johnson-johnson-trial (“I wish that someday people would realize I’m not a bad person. I’m a good person with a bad disease.”).

[5] See, e.g., German Lopez, The Thousands of Lawsuits Against Opioid Companies, Explained, Vox (Sep. 11, 2019, 4:30 PM), https://www.vox.com/policy-and-politics/2017/6/7/15724054/opioid-epidemic-lawsuits-purdue-oxycontin.

[6] See generally Oklahoma ex rel. Hunter v. Purdue Pharma L.P., No. CJ-2017-816 (Okla. Dist. Ct. [Cleveland Cty.], Aug. 26, 2019), https://archive.org/download/balkmanopioidjudgment/Balkman-Opioid-Judgment.pdf.

[7] Jackie Fortier & Brian Mann, Johnson & Johnson Ordered to Pay Oklahoma $572 Million in Opioid Trial, NPR (Aug. 26, 2019, 4:19 PM), https://www.npr.org/sections/health-shots/2019/08/26/754481268/judge-in-opioid-trial-rules-johnson-johnson-must-pay-oklahoma-572-million.

[8] Hunter, at *41–42.

[9] Id. at *2 (citing Okla. Stat. Ann. tit. 50, § 1-44 (West 2017)).

[10] Id.

[11] Id.

[12] Id. at *4.

[13] Id. at *5.

[14] Id.

[15] Id. at *7–8.

[16] Id. at *5–6.

[17] Id. at *7 (alteration in original) (quotations omitted).

[18] Id. at *8.

[19] Id.

[20] Id. at *9.

[21] Id. at *9.

[22] Id. at *10. At the time, pain was sometimes referred to as the “fifth vital sign” in a push to have providers respond to patient complaints of pain. See Natalia E. Morone & Debra K. Weiner, Pain As the Fifth Vital Sign: Exposing the Vital Need for Pain Education, 35 Clinical Therapeutics 1728 (2013).

[23] Hunter, at *11.

[24] Id. at *4–5, 18.

[25] Id. at *9–10.

[26] Id. at *22. (citing Okla. Stat. Ann. tit. 50, § 1 (West 2017))

[27] Id.; see also Paul L. Keenan, Note, Death by 1000 Lawsuits: The Public Litigation in Response to the Opioid Crisis Will Mirror the Global Tobacco Settlement of the 1990s, 52 New Eng. L. Rev. 69, 75-77 (2017) (detailing the various theories of liability that communities are using in their lawsuits against pharmaceutical companies).

[28] Hunter, at *24.

[29] Id. at *25–26 (quotations omitted).

[30] Id. at *29.

[31] Id. at *30.

[32] Id. at *41.

[33] Id. (emphasis added).

[34] Id. at *30–41.

[35] Jackie Fortier, Pain Meds As Public Nuisance? Oklahoma Tests a Legal Strategy For Opioid Addiction, NPR (July 16, 2019, 4:49 PM), https://www.npr.org/sections/health-shots/2019/07/16/741960008/pain-meds-as-public-nuisance-oklahoma-tests-a-legal-strategy-for-opioid-addictio.

[36] Statement on Johnson & Johnson Oklahoma Trial Verdict, Shatterproof (Aug. 26, 2019), https://www.shatterproof.org/press/statement-johnson-johnson-oklahoma-trial-verdict.

by Paul Fangrow

Loss of chance is a hot topic in recent American medical malpractice law. In states where it is accepted, loss of chance is a cause of action in medical malpractice cases that asserts a physician’s negligence reduced a patient’s chance for a better outcome or increased their risk of future harm, when the patient’s existing chance is below 50%.[1] Oregon recently changed sides and accepted loss of chance in 2017.[2] Hawaii, one of the last states remaining where loss of chance had not been addressed, just heard oral argument in the Hawaii Supreme Court on Estate of Frey v. Mastroianni[3] involving loss of chance doctrine.[4] Today, nearly every state has either accepted or rejected the doctrine.[5] North Carolina is now one of only three states that have yet to finally rule on the admissibility of loss of chance claims,[6] but that may change very soon.

Parkes v. Hermann[7] is a North Carolina Court of Appeals case involving loss of chance doctrine with a petition for discretionary review pending before the North Carolina Supreme Court.[8] A patient under the care of Defendant doctor died from a stroke that was misdiagnosed.[9] Proper protocol for a stroke is to administer a type of drug within three hours, which Defendant doctor did not do.[10] Issuing the drug within three hours of a stroke results in a 40% chance of a better outcome.[11] Under current North Carolina law, a patient must have a greater than 50% chance of a better outcome to prove that Defendant doctor more likely than not caused the patient’s injury.[12] The North Carolina Court of Appeals rejected loss of chance as a recognized claim,[13] marking Parkes v. Hermann as the first time a North Carolina court explicitly ruled on the admissibility of a loss of chance claim.[14]

In states that have accepted loss of chance doctrine, an injury resulting in a less than a 50% chance of recovery is still a valid cause of action.[15] Two distinct theories have arisen in the state courts: a causation approach first adopted in Pennsylvania,[16] and an injury approach popularized by professor Joseph King, Jr.[17] This is the approach adopted by Oregon[18] and is under consideration in both Hawaii[19] and North Carolina.[20] The causation approach takes cues from Section 323(a) of the Second Restatement of Torts,[21] and lowers the threshold of proof required to submit the question of proximate cause to the jury.[22] The jury is then called on to decide whether the defendant’s negligence was a substantial factor in bringing about the eventual harm.[23] By contrast, the injury approach recharacterizes the harm that recovery is sought for as the loss of chance itself, not the eventual harm.[24] Under this approach, a plaintiff seeks to prove by a preponderance of evidence that the defendant’s negligence resulted in the plaintiff’s loss of chance for a better outcome, or increased their risk of future harm.[25] In almost all states that have adopted loss of chance in some form, a proportional damages formula is used where if the claim is successful, the plaintiff recovers the percentage of chance lost multiplied by the value of what a full recovery would be.[26] That way, the plaintiff only recovers for the harm that the defendant’s negligence actually caused.[27]

The central reasoning for adopting loss of chance doctrine is to alleviate the harshness of the traditional approach.[28] Under the traditional approach currently followed by North Carolina, a plaintiff cannot recover anything unless they prove a doctor’s negligence more likely than not caused the eventual harm suffered.[29] Put into loss of chance terms, a plaintiff does not recover unless the loss of chance suffered is greater than 50%.[30] Thus, even though the patient in Parkes v. Hermann would have had a 40% chance of a better outcome had Defendant doctor correctly diagnosed the patient’s stroke and followed protocol, the patient is categorically barred from any recovery. If this arrangement seems unfair, many states agree that it is.[31] At present, twenty-five states have accepted loss of chance in either theory.[32] Hawaii may very well make it twenty-six.[33]

North Carolina has the opportunity to become the twenty-seventh[34] state to adopt loss of chance as a compensable claim in medical malpractice cases, but there are troublesome rumblings that suggest an uphill battle for loss of chance advocates. The sheer brevity of the Parkes v. Hermann opinion is one indicator. While the court in Estate of Frey v. Mastroianni took care to analyze both loss of chance theories, debate their merits, and cite case law from dozens of other jurisdictions,[35] the court in Parkes v. Hermann issued a very short and curt opinion comprised of only six paragraphs of analysis.[36] The court only cited a single case with reference to the various approaches adopted in each state.[37] The reasoning given for rejecting loss of chance was that no North Carolina case was cited that recognized such a claim, but this is to be expected when North Carolina courts have never taken any position regarding loss of chance until Parkes v. Hermann, rendering this reasoning entirely circular. While the court points to Gower v. Davidian[38]—a North Carolina Supreme Court case from 1937—to support a broad claim that “[t]he rights of the parties cannot be determined upon chance,”[39] this seems a thin reed upon which to hang the resolution of the loss of chance issue in light of the Gower court’s explicit statement that there was no evidence that loss of chance even occurred.[40] Besides, advances in medical technology made in the last eighty years have enabled expert witnesses to testify to reasonable medical certainty about the chances of recovery are in a wide variety of scenarios, and courts already rely wholly on chance to determine whether a patient had a 51% or more chance of making a recovery to establish proximate cause.

It seems like the court has no desire to seriously engage with the merits of the debate on loss of chance. Both the majority opinion and the concurrence written by Judge Berger cite dicta from Curl v. American Multimedia, Inc.[41] for the proposition that “recognition of a new cause of action is a policy decision which falls within the province of the legislature.”[42] While this is not a new idea even where loss of chance is concerned, [43] the underlying reason given for requiring legislative action is usually the presence of a conflict between loss of chance and a current medical malpractice statute.[44] The Parkes v. Hermann opinion contains no discussion of any conflict with existing North Carolina medical malpractice law.

In the absence of any statutory conflicts, there is no reason for the judiciary to paralyze itself regarding its own common law. Ever since the founding of the country, courts across the United States have interpreted statutes and maintained their common law without legislative handholding. In the wake of rapid technological progress that puts the legal community in a constant state of catch-up, courts cannot afford to tentatively wait for the legislature on every difficult question of evolving legal doctrine. A substantial majority of states that have both accepted and rejected loss of chance did so without any prior legislative direction.[45] Further, nothing stops the legislature from stepping in after the fact and reverting the law back to the traditional approach should it want to. Lord v. Lovett,[46] Jorgenson v. Vener,[47] and Falcon v. Memorial Hospital[48]are all state supreme court decisions that adopted loss of chance and were subsequently superseded by statutes passed by their respective state legislatures.

Parkes v. Hermann is a case of first impression in the North Carolina courts. Hopefully, the North Carolina Supreme Court considers the issues presented with greater care.


[1] See Joseph H. King, Jr., “Reduction of Likelihood” Reformulation and Other Retrofitting of the Loss-of-a-Chance Doctrine, 28 U. Mem. L. Rev. 491, 508–511 (1998).

[2] Smith v. Providence Health & Servs.-Or., 393 P.3d 1106, 1121 (Ore. 2017).

[3] No. CAAP-14-0001030, 2018 Haw. Ap. LEXIS 327 (Haw. Ct. App. June 29, 2018), cert. granted, No. SCWC-14-0001030, 2018 Haw. LEXIS 255 (Haw. Nov. 29, 2018).

[4] Oral Argument, Estate of Frey v. Mastroianni, No. SCWC-14-0001030 (Haw. argued Feb. 12, 2019), http://oaoa.hawaii.gov/jud/oa/19/SCOA_022119_SCWC_14_1030.mp3.

[5] See Lauren Guest et al., The “Loss of Chance” Rule as a Special Category of Damages in Medical Malpractice: A State-by-State Analysis, 21 J. Legal Econ. 53, 59 (2015).

[6] Id.

[7] 828 S.E.2d 575 (N.C. Ct. App. 2019).

[8] Petition for Discretionary Review, Parkes v. Hermann, No. 241P19 (N.C. filed July 5, 2019), https://www.ncappellatecourts.org/show-file.php?document_id=250145.

[9] Parkes, 828 S.E.2d at 576.

[10] Id.

[11] Id.

[12] Id. at 577.

[13] Id. at 578.

[14] Bennett v. Hospice & Palliative Care Ctr. of Alamance Caswell, 783 S.E.2d 260, 261–62 (N.C. Ct. App. 2016) (pro se plaintiff did not attach Rule 9(j) certification to complaint, among other errors); Curl v. Am. Multimedia, Inc., 654 S.E.2d 76, 80–81 (N.C. Ct. App. 2007) (loss of chance not asserted in the complaint); Franklin v. Britthaven, Inc., No. COA05-1603, 2006 N.C. App. LEXIS 2119, at *12–13 (loss of chance not considered because plaintiff did not raise it at trial).

[15] See Joseph H. King, Jr., Causation, Valuation, and Chance in Personal Injury Torts Involving Preexisting Conditions and Future Consequences, 90 Yale L.J. 1353, 1364 (1981).

[16] Hamil v. Bashline, 392 A.2d 1280, 1286–90 (Pa. 1978).

[17] See King, supra note 14, at 1365–76 (for an in-depth explanation of the injury approach to loss of chance).

[18] Smith v. Providence Health & Servs.-Or., 393 P.3d 1106, 1112–17 (Ore. 2017) (discussing and rejecting the causation approach while adopting the injury approach).

[19] Estate of Frey v. Mastroianni, No. CAAP-14-0001030, 2018 Haw. Ap. LEXIS 327, at *13–15 (Haw. Ct. App. June 29, 2018) (agreeing with courts that have adopted the injury approach).

[20] Parkes v. Hermann, 828 S.E.2d 575, 577 (N.C. Ct. App. 2019) (“The question presented is whether her loss of this 40% chance, itself, is a type of injury for which Ms. Parkes can recover.”).

[21] Restatement (Second) of Torts § 323(a) (Am. Law Inst. 1965).

[22] Hamil, 392 A.2d at 1286 (“We agree . . . that the effect of § 323(a) is to relax the degree of certitude normally required of plaintiff’s evidence in order to make a case for the jury as to whether a defendant may be held liable . . . .”).

[23] Id. at 1288 (“[S]uch evidence furnishes a basis for the fact-finder to go further and find that such an increased risk was in turn a substantial factor in bringing about the resultant harm . . . .”).

[24] Parkes, 828 S.E.2d at 575 (“[Plaintiff] argues, however, that she has suffered a different type of injury for which she is entitled to recovery; namely, her “loss of chance” of a better neurological outcome.”).

[25] Smith v. Providence Health & Servs.-Or., 393 P.3d 1106, 1114 (Ore. 2017) (“[T]reating loss of chance as a theory of injury does not dispense with causation requirements, but instead shifts the causation inquiry to whether a defendant caused the opportunity of a better outcome to be lost . . . .”).

[26] See, e.g., King, supra note 14, at 1382 (“The value placed on the patient’s life would reflect such factors as his age, health, and earning potential, including the fact that he had suffered the heart attack and the assumption that he had survived it. The 40% computation would be applied to that base figure.”).

[27] See, e.g., Estate of Frey v. Mastroianni, No. CAAP-14-0001030, 2018 Haw. Ap. LEXIS 327, at *14 (Haw. Ct. App. June 29, 2018) (“As such, damages are then limited only to those proximately caused by the medical provider’s breach of duty.”).

[28] See, e.g., King, supra note 14, at 1381 (“In summary, the all-or-nothing approach to the loss of a chance irrationally and unfairly denies the reality of chance as an appropriately cognizable interest in the torts system.”).

[29] Parkes, 828 S.E.2d at 577 (“To establish proximate cause, the plaintiff must show that the injury was more likely than not caused by the defendant’s negligent conduct.”).

[30] Id. at 578 (“Under the “traditional” approach, a plaintiff may not recover for the loss of less than 50% chance of a healthier outcome.”).

[31] See Guest, supra note 4, at 59 (note all the states in the “accepted” category).

[32] Id. (note that since this article was written, Oregon accepted loss of chance doctrine to make 25 states).

[33] See generally Oral Argument, supra note 4.

[34] Assuming Hawaii also adopts the doctrine.

[35] Estate of Frey v. Mastroianni, No. CAAP-14-0001030, 2018 Haw. Ap. LEXIS 327, at *8–18 (Haw. Ct. App. June 29, 2018).

[36] Parkes v. Hermann, 828 S.E.2d 575, 577–78 (N.C. Ct. App. 2019).

[37] Id. at 577 (the cited case is Valadez v. Newstart, No. W2007-01550-COA-R3-CV, 2008 Tenn. App. LEXIS 683 (Tenn. Ct. App. Nov. 7, 2008)).

[38] 193 S.E. 28 (N.C. 1937).

[39] Id. at 30.

[40] Id. at 30–31 (“The evidence discloses that the use of modern equipment and methods by trained and skillful surgeons . . . has availed nothing. . . . Unfortunately, upon this record as it now appears, the plaintiff has suffered an injury that could not then and cannot now be relieved by the medical profession.”)

[41] 654 S.E.2d 76 (N.C. Ct. App. 2007).

[42] Id. at 81. (quoting Ipock v. Gilmore, 354 S.E.2d 315, 317 (N.C. Ct. App. 1987)).

[43] Smith v. Parrott, 833 A.2d 843, 848 (Vt. 2003) (“[W]e are persuaded that the decision to expand the definition of causation and thus the potential liability of the medical profession in Vermont “involves significant and far-reaching policy concerns” more properly left to the Legislature . . . .”).

[44] Id. (“Plaintiff urges us nevertheless to depart from the strict statutory requirements, noting that they were codified in 1976, well before “loss of chance” became a recognized as a viable theory of recovery.”) (emphasis added).

[45] See Guest, supra note 4, at 63–103 (tables showing authority from each state jurisdiction and the reason behind adoption or rejection of loss of chance doctrine).

[46] 770 A.2d 1103 (N.H. 2001) (superseded by a 2003 amendment to N.H. Rev. Stat. Ann. § 507-E:2 (2019)).

[47] 616 N.W.2d 366 (S.D. 2000) (abrogated by S.D. Codified Laws § 20-9-1.1 (2019)).

[48] 462 N.W.2d 44 (Mich. 1990) (superseded by a 1993 amendment to Mich. Comp. Laws. § 600.2912a (2019)).

By Greg Berman

Controversy erupted last week after a George Washington University professor, Dave Karpf, tweeted a joke at New York Times columnist Bret Stephens’s expense.  Quoting an 8-word post about a bedbug infestation in the Times’ newsroom, Karpf joked that “[t]he bedbugs are a metaphor.  The bedbugs are Bret Stephens.”[1]  Although this tweet did not initially gain much traction, it later went viral when Stephens personally emailed Karpf, as well as the George Washington University provost, demanding an apology for the insult.[2]  After several more tweets and an off-scheduled column post by Stephens with visible references to the controversy, both sides of the feud seem to be slowing down.[3]  Although this back and forth is just one isolated incident between two individuals, it highlights a growing trend in our discourse.  With the growing usage of social media in our society, these sorts of ideological clashes have seemingly become more prevalent than ever.[4]  And even though these virtual arguments tend to be more of an annoyance than a liability, reputation-damaging attacks (even those made on the internet) still can run the risk of triggering a costly libel lawsuit.[5] 

The tort of libel is defined by Black’s Law Dictionary as “[a] defamatory statement expressed in a fixed medium, esp[ecially] writing but also a picture, sign, or electronic broadcast.”[6]  The enforcement of libel laws in the United States dates predates the ratification of the Constitution, most notably with the trial of John Peter Zenger, whose 1735 jury acquittal established the idea that someone cannot be charged with libel if the remark is true.[7]  Even today, the accuracy of the allegedly libelous statements continues to be one of key factors for courts to consider in libel cases, with each state setting their own standards for liability.[8]  Another key consideration for courts comes from New York Times v. Sullivan, where the Supreme Court differentiated defamation claims involving public figures and private individuals, holding that any libel suit against a public figure requires the inaccurate statement to be made with “actual malice.”[9]  Actual malice has been defined by the Court as “knowledge that (the statement) was false or with reckless disregard of whether it was false or not.”[10]  Additional protections against libel claims were enacted nine years later, when the Supreme Court limited libel laws to apply only to intentionally false statements of fact, even if a trial court is presented with baseless opinions that are similarly incorrect.[11]

Our ever-increasing move toward a digitalized world raises the question of how these libel laws can be applied to internet publications.  To start, no claim for libel can be made against any social media site, such as Facebook or Twitter, for content posted by a user of that social media site.[12]  This is primarily due to the expansive legal protections given to these “interactive computer services” by Section 230 of the Communications Decency Act of 1996.[13]  That being said, individuals may still be held liable for content that they post on the internet, with each state continuing to apply its own standards for libelous conduct even as information crosses state lines.[14]  When it comes to the question of jurisdiction, the Supreme Court clarified in Keeton v. Hustler Magazine, Inc. that a state can claim jurisdiction over a non-resident when injurious information is intentionally disseminated to its citizens.[15]  Specifically, the Court cited each state’s interest in protecting its citizens from intentional falsehoods as a key consideration in its decision.[16] While online information is disseminated in a different manner than the magazines from Keeton, courts have begun allow jurisdiction for internet libel cases when the online post directly targets one or more residents of the state.[17]

When applying libel laws to online statements, courts have used similar substantive principles to those used for print publications.  In 2009, former musician Courtney Love was sued by her former attorney after tweeting allegedly libelous remarks.[18]  As this was the first reported case to go to a jury decision for remarks made over Twitter, the trial court was left with a case of first impression.[19]  In a landmark decision, the court opted to apply traditional libel laws.  A jury found that Love did not know that the statements were false at the time they were made; she therefore lacked the actual malice required to be considered libel.[20]  

There have also been other cases involving libelous comments made over Twitter.[21]  For example, one such case took place after a tenant complained on her personal Twitter account about her “moldy apartment.”[22]  After seeing the post, the landlord sued the tenant under Illinois libel laws; the case was later dismissed with prejudice because the tweet was too vague to meet the requisite legal standards for libel.[23]  Another lawsuit took place after a mid-game conversation between an NBA coach and a referee was overheard and tweeted out by an AP reporter.[24]  The referee insisted that the reported conversation never took place, and the subsequent lawsuit ultimately resulted in a $20,000 settlement.[25]  Each of these cases present factually unique scenarios, but all together indicate a growing trend: even as the medium for public discourse has been rapidly shifting towards the digital sphere, traditional libel laws still continue to apply.

In addition to substantive treatment, there also remain unresolved legal questions stemming from courts’ application of the single publication rule.  The single publication rule provides that “any one edition of a book or newspaper, or any one radio or television broadcast, exhibition of a motion picture or similar aggregate communication is a single publication” and therefore “only one action for damages can be maintained.”[26]  The justification behind this rule is simple: by aggregating all damages allegedly caused by a publication to a single action, a party would not be perpetually bombarded with litigation long after their active role in publication has ended.[27]  This rule has already been adopted in “the great majority of states” and was implemented within the 4th Circuit in Morrissey v. William Morrow & Co.[28]  However, some academics have proposed that the single publication rule should not always be applied to social media posts, citing the possibility that a publisher could personally solicit shares or retweets and thereby maintain an active role in republishing libelous information.[29]  The issue of continual dissemination by means of retweeting seems primed to be raised in later litigation, but thus far has not been brought before any court.[30]  Still, many circuits have already begun the process of implementing the single publication rule to online posts in general (so far these cases have been litigated over personal blogs rather than Facebook or Twitter posts), so it will be interesting to see how courts handle the issue if eventually raised by litigants down the road.[31]

As the social media presence in our society grows stronger each day, only time will tell if courts will craft separate libel principles for online publications.  There are arguments to be made on both sides, especially now that online mediums are increasingly taking over many of the informational functions previously held by their print counterparts.[32]  For now, at least, courts are continuing to use the same traditional libel laws that have been evolving and changing since John Peter Zenger’s 1735 acquittal. [33]  And while the jury is still out on whether Dave Karpf actually thinks Bret Stephens is a metaphorical bedbug, he can likely rest easy knowing that current libel laws will protect his joke from any future legal trouble.


1. Dave Korpf (@davekorpf), Twitter (Aug. 26, 2019, 5:07 PM), https://twitter.com/davekarpf/status/1166094950024515584.

[2] See Dave Korpf (@davekorpf), Twitter (Aug. 26, 2019, 9:22 PM), https://twitter.com/davekarpf/status/1166159027589570566; Dave Korpf (@davekorpf), Twitter (Aug. 26, 2019, 10:13 PM) https://twitter.com/davekarpf/status/1166171837082079232; see also Tim Efrink & Morgan Krakow, A Professor Called Bret Stephens a ‘Bedbug.’ The New York Times Columnist Complained to the Professor’s Boss, Wash. Post (Aug. 27, 2019), https://www.washingtonpost.com/nation/2019/08/27/bret-stephens-bedbug-david-karpf-twitter/ (summarizing the context of Korpf’s tweet and the resulting controversy).

[3] See Dave Korpf (@davekorpf), Twitter (Aug. 30, 2019, 7:58 PM), https://twitter.com/davekarpf/status/1167587392292892672; Bret Stephens, Opinion, World War II and the Ingredients of Slaughter, N.Y. Times (Aug. 30, 2019), https://www.nytimes.com/2019/08/30/opinion/world-war-ii-anniversary.html.

[4] Jasmine Garsd, In An Increasingly Polarized America, Is It Possible To Be Civil On Social Media?, NPR (Mar. 31, 2019) https://www.npr.org/2019/03/31/708039892/in-an-increasingly-polarized-america-is-it-possible-to-be-civil-on-social-media.

[5] See id.; Adeline A. Allen, Twibel Retweeted: Twitter Libel and the Single Publication Rule,15 J. High Tech. L. 63, 81 n.99 (2014).

[6]  Libel, Black’s Law Dictionary (11th ed. 2019).

[7] Michael Kent Curtis, J. Wilson Parker, William G. Ross, Davison M. Douglas & Paul Finkelman, Constitutional Law in Context 1038 (4th ed. 2018).

[8] James L. Pielemeier, Constitutional Limitations on Choice of Law: The Special Case of Multistate Defamation, 133 U. Pa. L. Rev. 381, 384 (1985).

[9] 376 U.S. 254, 279–80 (1964); see also Gertz v. Robert Welch, Inc., 418 U.S. 323, 351 (1974) (defining a public figure as either “an individual achiev[ing] such pervasive fame or notoriety” or an individual who “voluntarily injects himself or is drawn into a particular public controversy”).

[10] Sullivan, 376 U.S. at 280.

[11] See Gertz, 418 U.S. at 339 (“[u]nder the First Amendment, there is no such thing as a false idea.”).

[12] See Allen, supra note 5, at 82.  Of course, Facebook and Twitter are not immunized against suits for content that they post on their own platforms.  Cf. Force v. Facebook, Inc., ___ F.3d ___, No. 18-397, 2019 WL 3432818, slip op. at 41 (2d Cir. July 31, 2019), http://www.ca2.uscourts.gov/decisions/isysquery/a9011811-1969-4f97-bef7-7eb025d7d66c/1/doc/18-397_complete_opn.pdf (“If Facebook was a creator or developer, even ‘in part,’ of the terrorism-related content upon which plaintiffs’ claims rely, then Facebook is an ‘information content provider’ of that content and is not protected by Section 230(c)(1) immunity.”).

[13] 47 U.S.C. §230(c)(1) (2017) (“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”).  “Interactive computer service” is defined by the act as “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server”). Id. at §230(f)(2); see also Allen, supra note 5, at 82 n.100 (describing additional protections provided by the Communications Decency Act, including how Twitter falls under its definition of “interactive computer service”).

[14] See Allen, supra note 5, at 84; Pielemeier, supra note 8, at 384.

[15] 465 U.S. 770, 777 (1984); see also Calder v. Jones, 465 U.S. 783, 791 (1984) (holding that personal jurisdiction is proper over defendants who purposefully directed libelous information at the plaintiff’s home state with the intent of causing harm).

[16] Keeton, 465 U.S. at 777.

[17] See, e.g.,Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997); Young v. New Haven Advocate, 315 F.3d 256, 263 (4th Cir. 2002); Tamburo v. Dworkin, 601 F.3d 693, 707 (7th Cir. 2010) (each applying traditional libel tests for personal jurisdiction to online publications, requiring the publication to be intentionally targeted towards citizens of the state). 

[18] Gordon v. Love, No. B256367, 2016 WL 374950, at *2 (Cal. Ct. App. Feb. 1, 2016). The exact language of the tweet in question was “I was fucking devastated when Rhonda J. Holmes, Esquire, of San Diego was bought off @FairNewsSpears perhaps you can get a quote.”  Id.  The tweet was deleted five to seven minutes after it was posted.  Id. at *3.  This was Love’s second time being sued for defamation over comments made on her Twitter account, although the first lawsuit resulted in a $430,000 settlement before trial. Matthew Belloni, Courtney Love to Pay $430,000 in Twitter Case, Reuters (Mar. 3, 2011), https://www.reuters.com/article/us-courtneylove/courtney-love-to-pay-430000-in-twitter-case-idUSTRE7230F820110304.

[19] See Allen, supra note 5, at 81 n.99.

[20] Love, 2016 WL 374950, at *3.  The reason actual malice was required in the case is because Love’s attorney had gained public figure status, which was not disputed at trial. Id.

[21] See Joe Trevino, From Tweets to Twibel*: Why the Current Defamation Law Does Not Provide for Jay Cutler’s Feelings, 19 Sports Law J. 49, 61–63 (2012) (describing a series of libel lawsuits stemming from social media posts).

[22] Id. at 61.

[23] Andrew L. Wang, Twitter Apartment Mold Libel Suit Dismissed, Chi. Trib. (Jan. 22, 2010), https://www.chicagotribune.com/news/ct-xpm-2010-01-22-1001210830-story.html.

[24] Trevino, supra note 21, at 63. 

[25] Lauren Dugan, The AP Settles Over NBA Twitter Lawsuit, Pays $20,000 Fine, Adweek (Dec. 8, 2011), https://www.adweek.com/digital/the-ap-settles-over-nba-twitter-lawsuit-pays-20000-fine/.

[26] Restatement (Second) of Torts § 577A(3–4) (Am. Law Inst. 1977).

[27] Id. at § 577A cmt. b.

[28] 739 F.2d 962, 967 (4th Cir. 1984) (quoting Keeton, 465 U.S. at 777 n.8).

[29] Allen, supra note 5, at 87–88.

[30] See Lori A. Wood, Cyber-Defamation and the Single Publication Rule, 81 B.U. L. Rev. 895, 915 (2001) (calling for courts to define “republication” in the context of internet publications).

[31] See, e.g., Firth v. State, 775 N.E.2d 463, 466 (N.Y. 2002); Van Buskirk v. N.Y. Times Co., 325 F.3d 87, 90 (2d Cir. 2003); Oja v. U.S. Army Corps of Eng’rs, 440 F.3d 1122, 1130–31 (9th Cir. 2006); Nationwide Bi-Weekly Admin., Inc. v. Belo Corp., 512 F.3d 137, 144 (5th Cir. 2007).  But see Swafford v. Memphis Individual Prac. Ass’n, 1998 Tenn. App. LEXIS 361, at *38 (Tenn. App. 1998).

[32] See Allen, supra note 5, at 91 n.157.

[33] See Trevino, supra note 19, at 69.

By Sophia Pappalardo & Kenya Parrish

In re: Murphy-Brown, LLC

In this civil case, the Petitioner requested mandamus relief from a gag order issued by the United States District Court for the Eastern District of North Carolina. The gag order imposed strict requirements on participants and potential participants of interrelated nuisance suits brought against hog farms in North Carolina. The Fourth Circuit found the district court’s order to be defective and granted the petition. Thus, the Fourth Circuit directed the district court to vacate the gag order and allow the parties to begin their suits again under guidelines set forth by the Fourth Circuit, but only if warranted by exceptional circumstances.

 

By: Lanie Summerlin

Henderson v. Bluefield Hosp. Co.

In this civil appeal, the National Labor Relations Board (“NLRB”) appealed the District Court’s refusal to grant preliminary injunctive relief under section 10(j) of the National Labor Relations Act. The NLRB sought preliminary injunctions against two hospitals until NLRB agency adjudication of a complaint filed against the hospitals by the National Nurses Organization Committee (“Union”) was complete. The injunctions would have required the hospitals to bargain with the Union in good faith, and NLRB argued the injunctions were necessary to protect the nurses’ fundamental right to be represented through collective bargaining. The District Court denied these injunctions because it ruled the NLRB failed to prove this type of relief was necessary to preserve the remedial power of the NLRB. The Fourth Circuit affirmed the District Court’s decision and emphasized that the NLRB has the burden of proving irreparable harm absent the injunction. Ultimately, the Fourth Circuit held the NLRB failed to meet this burden because its theories of harm were speculative; the NLRB failed to explain why its own forms of relief available after completion of the agency process would be insufficient.

U.S. v. Bell

In this criminal appeal, Quintin Bell (“Bell”) challenged his convictions of four counts of drug trafficking and one count of illegal possession of a firearm. Bell argued the District Court erred in (1) denying his motion to suppress statements he made to police officers who were executing a search warrant on his residence; (2) admitting evidence of another arrest of Bell under Federal Rules of Evidence Rule 404(b); (3) denying Bell’s motion to disclose the identity of a confidential informant; and (4) enhancing Bell’s sentence to 480 months’ imprisonment due to his prior convictions. The Fourth Circuit held the District Court did not err in denying Bell’s motion to suppress his statements because Bell was not being interrogated at the time the statements were made; the officer’s question was directed to Bell’s wife and Bell voluntarily answered. The Fourth Circuit also held the District Court did not abuse its discretion by admitting evidence of Bell’s other arrest because this evidence’s relevance to Bell’s motive and intent was not substantially outweighed by the risk of unfair prejudice to Bell. In regards to the confidential informant, the Fourth Circuit held the District Court did not err in refusing to disclose the informant’s identity because Bell failed to prove the informant’s identity was necessary to establish his own guilt or innocence. The Fourth Circuit also reviewed Bell’s criminal record and held that his 480 month sentence was appropriate due to the nature of the crimes on his record. Overall, the Fourth Circuit affirmed Bell’s convictions. Judge Wynn dissented; he argued the Fourth Circuit should have remanded the issue of Bell’s statements to police officers to the District Court for a determination of whether Bell perceived himself as being interrogated. Judge Wynn also argued that Bell’s prior convictions do not qualify as predicate convictions to enhance his sentence.

VanDevender v. Blue Ridge of Raleigh

This civil appeal focuses on the District Court’s decisions as to two judgment as a matter of law (“JMOL”) motions filed by Blue Ridge of Raleigh (“Blue Ridge”). Blue Ridge operated a long-term skilled nursing facility in Raleigh, North Carolina, but consistently failed to meet state-mandated staffing levels and supplies requirements. The estates of three deceased ventilator-dependent patients at Blue Ridge brought claims of wrongful death nursing home malpractice against Blue Ridge. The jury awarded compensative and punitive damages to each Plaintiff. However, the District Court granted Blue Ridge’s motion for JMOL as to all three Plaintiffs’ punitive damages awards because it ruled the Plaintiffs had not produced sufficient evidence. The District Court denied Blue Ridge’s motion for JMOL as to Plaintiff Jones’s compensatory damages. Plaintiffs appealed the JMOL as to their punitive damages, and Blue Ridge cross-appealed the denial of JMOL as to Plaintiff Jones’s compensatory damages. The Fourth Circuit held the District Court erred in granting JMOL as to the Plaintiffs’ punitive damages. Based on the record, the Fourth Circuit held that a jury could determine Blue Ridge’s staffing policies and managerial decisions constituted willful or wanton conduct. It held that the District Court erred by requiring the Plaintiffs to prove malice, which is not required for willful or wanton conduct. The Fourth Circuit emphasized that Blue Ridge failed to follow state and federal laws on staffing and intentionally failed to follow its own patient safety policies. Additionally, the Fourth Circuit affirmed the District Court’s denial of Blue Ridge’s JMOL motion as to Plaintiff Jones’s compensatory damages. There was sufficient evidence that Blue Ridge breached the standard of care it owed to Plaintiff Jones by being understaffed without proper supplies. The Fourth Circuit remanded with instructions for the District Court to enter punitive damages for all three Plaintiffs consistent with North Carolina’s statutory limits.

By Mickey Herman

On Thursday, January 17, 2017, the Fourth Circuit issued a published opinion in the civil case Huskey v. Ethicon, Inc. The defendant-appellants, Ethicon, Inc. and Johnson & Johnson (collectively “Ethicon”), appealed the district court’s denial of their post-trial renewed motion for judgment as a matter of law (“JMOL”) or, alternatively, for a new trial. After reviewing the evidence presented to the jury in this products liability action, the Fourth Circuit affirmed the district court’s denial of both motions.

Facts & Procedural History

In 2008, Mrs. Jo Huskey began suffering from Stress Urinary Incontinence. By 2011, her condition had deteriorated such that she underwent surgery to implant a Tension-Free Vaginal Tape-Obturator (“TVT-O”) to alleviate her symptoms. Following the surgery, Mrs. Huskey began experiencing pelvic pain, which her doctor determined was caused by erosion in the TVT-O’s heavy-weight polypropylene mesh. After several non-invasive attempts to relieve her pain failed, Mrs. Huskey again underwent surgery to cover the eroded mesh. Unfortunately, Mrs. Huskey’s pain persisted and she was referred to a specialist who performed a third surgery in an effort to remove the mesh entirely. That procedure too was unsuccessful, as a portion of the mesh was unrecoverable. As a result, Mrs. Huskey suffers from severe pain when engaging in physical activity and sexual intercourse. That pain will last of the rest of her life and she will require medication for pain management.

In 2012, Mrs. Huskey and her husband, Allen, filed suit in the Southern District of West Virginia as part of In Re Ethicon Inc., Pelvic Repair Sys. Prods. Liab. Litig., MDL 2327. Following the district court’s grant of partial summary judgment in favor of Ethicon, the trial proceeded on five claims: strict liability and negligent design defect, strict liability and negligent failure to warn, and Mr. Huskey’s loss of consortium. Mrs. Huskey sought both actual and punitive damages for her claims.

Following the Huskey’s case, Ethicon moved for JMOL pursuant to Fed. R. Civ. P. 50(a). The district court granted the motion as to punitive damages; it otherwise deferred ruling on the motion. After Ethicon renewed the motion following its case, the district court again deferred and submitted the case to the jury. After the jury returned a unanimous general verdict for the Huskeys on all five claims, Ethicon renewed its motion for JMOL pursuant to Fed. R. Civ. P. 50(b) and, alternatively, requested a new trial under Fed. R. Civ. P. 59(a)(1)(A). The district court denied both motions. Ethicon appealed.

Denial of JMOL Motion

Ethicon first argued that the district court improperly denied its motion for JMOL. Noting that it reviews such denials de novo, the Fourth Circuit stressed that JMOL is appropriate only if “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.” Fed. R. Civ. P. 50(a). Because the jury returned a general verdict, the Fourth Circuit emphasized that reversal was only appropriate if the Huskeys failed to prove both their design defect and failure to warn claims.

The Fourth Circuit turned first to the Huskey’s design defect claims. Pursuant to Illinois law (under which the Huskeys, Illinois residents, brought their claims), “[t]o prevail [on those] claims, the Huskeys had to demonstrate: 1) that a certain condition of the TVT-O resulted from Ethicon’s design, 2) that this condition made the product unreasonably dangerous, 3) that the dangerous condition existed when Mrs. Huskey’s TVT-O left Ethicon’s control, and 4) that the dangerous condition in the TVT-O proximately caused harm to Mrs. Huskey.” Ethicon argued that the Huskeys not only “failed to prove a specific flaw in the TVT-O’s design” but that Restatement (Second) of Torts § 402(a) comment k shielded the company from liability.

Addressing Ethicon’s first argument, the Fourth Circuit determined that the testimony of four of the Huskey’s expert witnesses—each of whom asserted that the design of the mesh was to blame—constituted sufficient evidence from which a reasonable jury could find that Ethicon’s mesh caused Mrs. Huskey’s injuries and subsequent pain.

Considering Ethicon’s second argument, the Fourth Circuit analyzed the text of comment k, which “recommends that [unavoidably unsafe products], ‘with the qualification that they are properly prepared and marketed, and proper warning is given,’ not trigger strict liability.” Restatement (Second) of Torts § 402(a). Because whether a product is unavoidably unsafe is a question of fact, the Fourth Circuit made clear that “[i]f a reasonable jury could find that the TVT-O did not meet comment k’s parameters, Ethicon’s reliance on comment k fails.” Relying again on the Huskey’s experts’ testimony that the mesh’s design was, in fact, defective, the Fourth Circuit concluded that a reasonable jury could so find and, thus, Ethicon’s comment k argument fails.

Because it could affirm the district court’s denial of Ethicon’s JMOL on these grounds alone, the Fourth Circuit did not address the failure to warn claims.

Denial of New Trial Motion

The Fourth Circuit next turned to Ethicon’s assertion that the district court erred by denying its motion for a new trial. Pursuant to Fed. R. Civ. P. 59(a)(1)(A), a new trial is warranted where “the verdict is contrary to the clear weight of the evidence, rests upon false evidence, or will cause a miscarriage of justice.” The denial of such motions is reviewed for abuse of discretion.

Ethicon first argued that it was entitled to a new trial because the district court, by failing to clarify comment k’s policy rationale, improperly instructed the jury on comment k. Only where a jury instruction “fails to inform the jury of the controlling legal principle,” such that the challenging party suffers prejudice, is a new trial warranted. After comparing the language of comment k to the instruction given, the Fourth Circuit determined that, although the instruction failed to explain that comment k shifts the burden of proof to the defendant, that deficiency did not prejudice Ethicon. Furthermore, it concluded that because comment k requires a “case by case” analysis, its underlying policy was irrelevant and could be omitted without prejudice to Ethicon.

Ethicon next argued that it was entitled to a new trial because the district court improperly excluded four pieces of evidence concerning the FDA’s approval of the mesh used in the TVT-O. Evidentiary exclusions are reviewed for an abuse of discretion and a new trial is appropriate only where there exists “a high probability that the error . . . affect[ed] the judgment.” Reviewing each piece of evidence in turn, the Fourth Circuit concluded that they were properly excluded under Fed. R. Evid. 403 because their probative value was outweighed both by a risk of confusion and wasted time, as well as because of their needlessly cumulative nature.

Thus, because the Fourth Circuit determined that the district court did not abuse its discretion with respect to the contested jury instructions and exclusion of evidence, it held that Ethicon was not entitled to a new trial.

Conclusion

Determining that sufficient evidence supported the jury’s verdict in favor of the Huskeys, the Fourth Circuit affirmed the district court’s denial of Ethicon’s motion for JMOL. Furthermore, because it concluded that district court did not abuse its discretion in instructing the jury and excluding evidence, the Fourth Circuit affirmed the district court’s denial of Ethicon’s alternative motion for a new trial.

hamburg-1568842_1920

By M. Allie Clayton

On November 1, 2016, in the civil case of Ripley v. Foster Wheeler, LLC, a published opinion, the Fourth Circuit established that the government contractor defense is available in failure to warn cases. The Fourth Circuit reversed and remanded to the Eastern District of Virginia to determine if the government contractor presented sufficient proof to warrant removal under U.S.C. § 1442.

Facts and Procedural History

For over four years in and around the 1970s, Mr. Bernard Ripley worked as a boilermaker at the Norfolk Naval Shipyard. In 2014, when Mr. Ripley was diagnosed with malignant mesothelioma, he and his wife, Deborah Ripley, filed suit in Newport News Circuit Court, a Virginia state court. The Ripleys allege that Mr. Ripley was exposed to asbestos due to products that Foster Wheeler, LLC and Foster Wheeler Energy Corp. (“Appellants”) manufactured for the Navy, and that Appellants are liable for failing to warn Mr. Ripley of the asbestos hazards.

Appellants filed a Notice of Removal and removed the case to the United States District Court for the Eastern District of Virginia. Appellants asserted a government contractor defense, arguing that the suit stemmed from Appellant’s contract with the Navy, thus allowing removal pursuant to the federal officer removal statute 28 U.S.C. § 1442(a)(1). The government contractor defense allows a company that contracts with the military to avoid liability under state-law tort claims for design defects. When the Ripleys moved for remand, the district court granted the motion due to a decades-old practice in the district that denies the government contractor defense in failure to warn cases. Because the federal defense did not apply, according to the District Court, the federal courts had no subject matter jurisdiction. Appellants appealed the grant of the motion for remand.

The Issue

Does the government contractor defense apply to failure to warn cases? If it does, can Appellants, under the federal officer removal statute, remove to the federal district court in order to establish the defense?

The Federal Officer Removal Statute

The federal officer removal statute is an exception to the well-pleaded complaint rule. It allows a defendant to remove a case if the defendant establishes:

  • (1) it is a federal officer or a “person acting under that officer,” 28 U.S.C. §1442(a)(1);
  • (2) a “colorable federal defense”; and
  • (3) the suit is “for a[n] act under color of office,” which requires a causal nexus “between the charged conduct and asserted official authority.” Jefferson Cty., Ala. v. Acker. (alteration and emphasis in original).

The Federal Officer Removal Statute—As Applied

Appellants sought removal based on the government contractor defense as explained under Boyle v. United Technologies Corp.. In Boyle, the Supreme Court held that the government contractor defense applied to design defect cases. The reasons for applying the defense to defect cases were two-fold: (1) separation of powers suggested that the judiciary should be hesitant to intervene in matters of military procurement contracts; and (2) a higher risk of liability for contractors would increase costs to the government and decrease the supply of contractors.

The Eastern District of Virginia in McCormick v. C.E. Thurston & Sons, Inc. had previously held that the government contractor defense was “not available in failure to warn cases.” However, the Fourth Circuit found that most other jurisdictions, including the Second, Fifth, Sixth, Seventh, Ninth, and Eleventh Circuits, that have considered this issue held that the defense does apply to failure to warn cases. The Fourth Circuit further found that the reasons for applying the defense to defect cases were equally applicable in the failure to warn cases. The separation of powers consideration was still relevant due to the fact that it was a military contract. Also, the increased costs to the governments due to the increase risk of liability and the decreased supply of contractors was equally relevant in the general failure to warn context, beyond asbestos. Due to the overwhelming amount of opposing precedent and the valid rationales supporting the application of the defense, the Fourth Circuit “join[ed] the chorus and h[e]ld that the government contractor defense is available in failure to warn cases.”

Disposition

The Fourth Circuit went against precedent that the District Court relied on in remanding the case back to the state court. Because of this shift in doctrine, the Fourth Circuit reversed and remanded the case to the District Court to determine if the Appellants have presented enough proof to warrant removal pursuant to 28 U.S.C. § 1442.

peanuts

By Malorie Letcavage

On December 2, 2015, the Fourth Circuit issued its published opinion in Severn Peanut Co., Inc. v. Industrial Fumigant Co. In this case, appellant Severn Peanut Co. (“Severn”) asked the Fourth Circuit to overturn the lower court’s grant of summary judgment for appellee, Industrial Fumigant Co. (“IFC”) on both the breach of contract and the negligence claim. The Fourth Circuit ultimately affirmed the grant of summary judgment because the consequential damages provision in the contract overcame the breach of contract claim and North Carolina law does not allow a plaintiff to pursue a tort claim under the guise of a contract claim.

Background

Severn entered into an agreement with IFC to apply a pesticide, phosphine, to its peanut storage dome. The parties signed a Pesticide Application Agreement (“PAA”) which detailed that Severn would pay IFC $8,604 for the pesticide services. The contract specified that the sum excluded IFC assuming any risk of “incidental or consequential damages” to Severn’s “property, product, equipment, downtime, or loss of business.” It also stipulated that the pesticide would be applied according to the instructions on its label.

The label on the phosphine requires the user to avoid the pesticide tablets from piling up because this could lead to fire or an explosion. Despite this warning, IFC dumped 49,000 tablets of the pesticide into the peanut dome through a single hatch. The pile up of the tablets caused a fire and an explosion. Severn’s insurer paid to cover Severn’s loss of peanuts, business income, and the damage to the peanut dome. Severn filed against IFC for breach of contract and negligence. The District Court granted partial summary judgment for IFC on the breach of contract claim because it found that the consequential damages clause in the PAA excluded a claim for breach of contract. It also found Severn to be contributorily negligent, and thus granted summary judgment in favor of IFC on the negligence claim.

Breach of Contract Claim

The Court examined the consequential damages limitations in North Carolina. It found that this doctrine allows parties the freedom to contract. It strongly stressed that it would not overhaul a valid enforceable contract that both parties agreed to and signed. It held that the consequential damages doctrine may only be limited if the clause is unconscionable. The Court found that overall the doctrine is a widely used tool for completing business.

In application to Severn’s case, the Court held that the language of the PAA established a valid consequential damages clause, and the items damaged fell within this language. It also found that the clause was not unconscionable. A clause is unconscionable when no reasonable person would view the contract’s result without feeling injustice. However, this clause was conscionable because it was between two experienced business parties who contracted specifically to include the provision; it was a fair result according to the contract.

The Court also rejected Severn’s argument that the clause was a violation of public policy. The Court refused to find consequential damage clauses against public policy without a clear indication from the North Carolina courts, of which there was none. It held that North Carolina law provides other criminal and civil penalties for the misapplication of the pesticide, so there was no reason to hold private liability as the only means of enforcement. Thus, the Court affirmed summary judgment on the breach of contract claim because the contract was an agreement between two sophisticated commercial entities who should be held to the terms of the contract they signed.

Negligence Claim and Economic Loss Doctrine

While the Court agreed with Severn’s argument that the ruling of contributory negligence ignored material facts, it still affirmed the grant of summary judgment for IFC because of the economic loss doctrine. The Court found that the negligence claims would not survive the assent to the consequential damages limitation. The economic loss doctrine “prohibits recovery for purely economic loss in tort when contract…. operates to allocate the risk.” The doctrine encourages parties to allocate the risk of loss themselves, as they are in the best position to do so.

In this case, Severn wanted to claim a remedy in tort for IFC’s breach of duty to apply the pesticide according to the label, which is the same source as their breach of contract claim. Yet since Severn bargained to limit consequential damages caused by breach of contract they cannot be allowed to try to undo that bargain using tort law. Additionally, the Court found that the storage dome and peanuts were not outside of the contract, and were not exempt from the economic loss doctrine.

Summary Judgment Affirmed

Thus, the Fourth Circuit affirmed the lower court’s grant of summary judgment for IFC on both the breach of contract and the negligence claim.

 

By Elizabeth DeFrance

In an opinion for the civil case, Marks v. Scottsdale Ins. Co., published June 29, 2015, the Fourth Circuit Court of Appeals held that a general liability insurer for a hunt club had no duty to indemnify or defend a club member who accidentally shot a passing driver while hunting on land the club leased.

Marks Accidentally Hit by Pellets When Deer Hunter Shot Towards Public Road

Plaintiff Timothy B. Johnson (“Johnson”), a member of the Northumberland Hunt Club (“Hunt Club” or “Club”) was hunting deer on land leased by the Club when he took a shot that traveled towards an adjacent public highway. Pellets from Johnson’s gun struck Plaintiff-Appellant Danny Ray Marks, Jr. (“Marks”) in the head as he was driving. Marks filed a negligence claim against Johnson in Virginia state court, alleging that because Johnson was experienced with firearms and the location, he should have known his actions posed a risk to drivers on the highway. Marks also filed a negligence claim against the Hunt Club, alleging they failed to promulgate rules to protect the public. In a second complaint filed in Virginia state court, Marks sought a declaration that the Hunt Club’s insurer, Scottsdale Insurance Company (“Scottsdale”) had a duty to indemnify and defend Johnson due to an endorsement provision in the Club’s insurance policy. Scottsdale removed to federal court based on diversity jurisdiction and filed a counterclaim seeking an endorsement stating it does not have a duty to indemnify or defend Johnson. Johnson joined the district court litigation and the parties agreed to have a magistrate adjudicate the matter. On cross motions for summary judgment, the magistrate held that Scottsdale did not owe a duty to indemnify or defend Johnson, and granted Scottsdale’s motion.

Scottsdale issued a commercial general liability policy to the Hunt Club, establishing its duty to indemnify for “those sums that the insured becomes legally obligated to pay for damages from bodily injury or property damage to which this insurance applies,” and to defend the Club in such suits. The policy also included an endorsement that modified its coverage “to include as an insured any of your members, but only with respect to their liability for your activities or activities they perform on your behalf.” “You” and “your” are defined as “the Named Insured.”

The Court Applied Contract Principles to Determine the Scope of the Policy’s Coverage

To determine whether Johnson was an “insured” under the policy’s endorsement, the Court looked to the plain meaning of the language. Under Virginia common law, ambiguous policy language is to be construed against the insurer. However, a term is only deemed ambiguous if it is “capable of more than one reasonable meaning.” An insurer only owes a duty to indemnify and defend if the allegations in the complaint come within the scope of the policy’s coverage.

Language of the Endorsement is not Ambiguous

The Court analyzed the language of the two clauses in the endorsement to determine the scope the coverage. The first clause insured “any of [the Club’s] members, but only with respect to [member] liability for the Club’s activities.” Johnson argued that the language was clear, and that his actions were covered under this clause because he was hunting at the time of the incident and hunting is one of the Club’s activities. In the alternative, he argued that the language was ambiguous and should be construed in his favor. The Court disagreed, reasoning that the language was clear, and that this clause “restricts coverage to situations involving a member’s alleged vicarious liability for the activities of the Club as an entity, not for torts allegedly committed by members during a Club activity.

Johnson conceded that the second clause in the endorsement, covering “activities [members] perform on [the Club’s] behalf,” did not apply to him in this situation.

The Court reasoned that Johnson’s proposed interpretation of the first clause was flawed when the language of the endorsement was examined as a whole. The court determined that the first clause covered actions taken by the Club that a member might be held vicariously liable for, and the second clause covered actions taken by an individual on behalf of the Club. However, under Johnson’s interpretation, the second clause becomes redundant because all member actions in connection with the Club would be covered under the first clause.

Once the scope of coverage was established, the court looked to Marks’s complaint to determine if the allegations against Johnson came within the scope of the policy’s coverage. The court reasoned that because the complaint only alleged that Johnson was a member of the club and on land leased by the club when he shot Marks, the complaint rested only on “the recreational pursuits indulged in by members,” not on Johnson’s vicarious liability for the Club’s activities.

Scottsdale has No Duty to Indemnify or Defend Johnson

Because Scottsdale was not be liable for any of the allegations against Johnson in the complaint, Scottsdale did not have a duty to indemnify or defend Johnson. The Court affirmed the judgment of the magistrate judge.

By Mikhail Petrov

In the civil case of Dan Ryan Builders, Inc. v. Crystal Ridge Development, Inc., Plaintiff, Dan Ryan Builders Inc., (“Ryan”) appealed the decision of the US District Court for the Northern District of West Virginia and sought additional damages from Defendant, Lang Brother’s Inc. (“Lang”). The Fourth Circuit affirmed the decision of the district court, finding that the “gist of the action” doctrine was properly applied and Plaintiff was not entitled to additional damages. The case was argued on December 10, 2014, and the decision was released on April 20, 2015.

The Facts of the Case

The events of this case took place in West Virginia. Lang sought to build a housing development, Crystal Ridge, on a seventy acre tract of land. In 2005, pursuant to a Lot Purchase Agreement (“LPA”), Lang subdivided the land and contracted to sell all 143 lots to Ryan, a Maryland corporation. The LPA detailed the responsibilities of each party. The parties also entered into a number of other written contracts, including a contract to do a “fill of slope.” Lang was responsible for all of the infrastructure, including the fill slope, which was done by an independent contractor. In March 2007, cracks appeared in the basement slab and the foundation walls of a partially constructed house. Ryan contracted an engineering firm to fix the issue – but the relationship between Lang and Ryan had soured after the incident and the parties “divorced.” In December 2007, the slope behind the lot that had exhibited cracks in the foundation began sliding downhill towards a nearby highway. A geotechnical study concluded that the slope had failed due to its natural composition as well as poor construction. Ryan also experienced other difficulties with the development, including the storm water management system, the development permits, and the entrance drive.

At the District Court

In December 2009, Ryan filed a lawsuit against Lang seeking monetary damages. Ryan asserted three causes of action. First, negligence on the part of Lang in connection to the construction of the fill slope. Second, a breach of several contractual duties stated in the LPA and a subsequent amendment to the LPA made after the parties had “divorced.” Third, fraudulent misrepresentation. The third and final cause of action was abandoned at trial. The court held a five-day bench trial and awarded Ryan $175,646.25 in damages and $77,575.50 in pre-judgment interest for breach of contract with respect to repairs of the road leading to Crystal Ridge. Ryan failed to carry its burden of proof with other asserted breaches, including the entrance easement, storm water management, and the erosion control system. Lastly, the court rejected Ryan’s negligence claim because it failed under West Virginia’s “gist of the action” doctrine, which bars recovery in tort when the duty that forms the basis of the asserted tort claim arises solely from a contractual relationship. It requires plaintiffs seeking relief in tort to identify a non-contractual duty breached by the alleged tortfeasor. Ryan appealed.

Standard of Review

The Fourth Circuit used a mixed standard of review following a bench trial. Factual findings may only be reversed if clearly erroneous. Conclusions of law, including contract construction, are examined de novo.

Reasoning

Ryan offers two reasons why the district court erred in the “gist of action” holding. The court considered both of them separately.

Reason One – Principles of Party Presentation

Ryan contends that the “principles of party presentation” ought to have prevented the district court from relying on the “gist of the action” doctrine. The party presentation principle cautions a federal court to consider only the claims and contentions raised by the litigants before it – and neither Ryan nor Lang raised the “gist of action” doctrine in district court. The Fourth Circuit rejected this argument, stating that a party’s failure to identify the applicable legal rule does not diminish a court’s responsibility to apply that rule. Additionally, the Supreme Court has long recognized that “a court may consider an issue ‘antecedent’ to … and ultimately ‘dispositive of’ the dispute before it, even an issue the parties fail to identify and brief.”  U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc. 508 U.S. 439, 447 (1993). Here, the “gist of the action” doctrine is just such an “antecedent” and “dispositive” issue since it goes to the duty element of any West Virginia tort claim. Therefore, Ryan’s contention that the party presentation principle barred the district court is rejected.

Reason Two – Gist of the Action

The Fourth Circuit found that the district court did not err in its application of the “gist of the action” doctrine. Because Ryan’s tort claim rests on Lang’s asserted negligence in performing the two contracts, the LPA and its Amendment, and not on any duty independent of those contracts, the “gist of action” doctrine bars the claim. The Fourth Circuit found that this is precisely the type of simple breach of contract claim that is masqueraded as a tort claim. Therefore, the court found that Ryan’s negligence claim fails as a matter of law.

Ryan’s New Claim

Alternatively, Ryan sought damages under claims he had not alleged at the district court level. Specifically, he alleges that he should have been awarded damages for the “fill of slope” contract. The Fourth Circuit found that the district court is not responsible for searching through the case in pursuit of potential basis for awarding relief. In fact, The Fourth Circuit stated that the district court did an excellent job of identifying Ryan’s meritorious claims.

Holding

The Fourth Circuit affirmed the decision of the district court. The Fourth Circuit did not agree with Ryan on either of his two arguments about the district court’s application of the “gist of the action” doctrine. Additionally, the Fourth Circuit rejected Ryan’s contention that he should have been awarded damages for the “fill of slope” contract. Arguing that Ryan should have been able to recover for the “fill of slope” contract, Circuit Judge Gregory dissented in part.

By Patrick Southern

On March 25, the Fourth Circuit released a published opinion in the civil case of Johnson v. American Towers, LLCIn its decision, the court affirmed a ruling from the District of South Carolina, declaring that court had properly determined it had jurisdiction over the matter on multiple grounds and had also properly dismissed the claim on the merits.

Plaintiff Was Brutally Attacked In His Home

Plaintiff Robert Johnson worked as a prison guard. He was attacked in his home and shot six times. He survived the attack, and a subsequent investigation revealed that the attack was ordered by an inmate at the prison where he worked, using a contraband cell phone.

The Johnsons sued several cellular phone service providers and owners of cell phone towers (including American Towers), seeking to recover under state law negligence and loss of consortium theories. The defendants fell into two groups: wireless service providers and owners of cellular towers. According to the Johnsons, these defendants were liable for Mr. Johnson’s injuries because they were aware that their services facilitated the illegal use of cellphones by prison inmates and yet failed to take steps to curb that use.

The defendants removed the case to federal court, citing federal question jurisdiction under 28 U.S.C. § 1331 and complete diversity under 28 U.S.C. § 1332. The Johnsons moved to remand to state court, and the District of South Carolina denied the motion on two grounds: (1) that federal question jurisdiction existed because the Federal Communications Act preempted their state law claims, and (2) that diversity jurisdiction existed because the only non-diverse defendants were fraudulently joined and the amount in controversy exceeded $75,000.

The defendants subsequently moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(6). The District Court granted the motion on three grounds: (1) that the Johnsons’ claims were barred by express and conflict preemption; (2) South Carolina law did not impose a duty on the defendants to prevent inmates from illegally using their cell phone services; and (3) the Johnsons’ claims were implausible and so did not meet pleading standards. The Johnsons appealed to the Fourth Circuit.

On Appeal, Plaintiffs Argued on Jurisdictional Grounds In Addition to the Merits of Their Claims

The plaintiffs brought forth two issues the Fourth Circuit considered on appeal.

First, they asked if the District Court had erred in concluding it had federal jurisdiction over the Johnsons’ state law claims. If the Fourth Circuit found federal jurisdiction was proper, they further argued the District Court had improperly dismissed the plaintiffs’ claims on the merits.

The District Court Erred in Finding Federal Question Jurisdiction

The District Court had found federal question jurisdiction existed because the plaintiffs’ state law claims were preempted by the Federal Communications Act. On appeal, the Fourth Circuit noted that this “complete preemption” is rare, and indeed there is a presumption against such preemption. The presumption exists because, in the court’s view, the principles of federalism dictate the judiciary should be careful to not draw an inference that Congressional actions are intended to wipe out wide swaths of state law (at least without some explicit statement as such from Congress).

While the court said the language of the Federal Communications Act constituted “ordinary preemption” it also noted that was not sufficient to create federal subject matter jurisdiction. Only complete preemption can do so. For complete preemption to exist, the preempting statute must provide the exclusive cause of action for claims in the area the statute preempts.

The Fourth Circuit said the Federal Communications Act does not provide the exclusive cause of action in this area, since that statute only permits recovery against common carriers, and the tower owners are not considered common carriers (since they do not provide wireless service). Even though the wireless providers can be sued under the Federal Communications Act, the court noted there was nothing in the Act that indicated Congress intended it to be the exclusive remedy for state law claims against such providers. Indeed, the language of the Act suggests the opposite — that it was not intended to supplant common law and state law remedies.

But Diversity Jurisdiction Allowed the District Court to Hear the Case

With respect to diversity jurisdiction, the Johnsons’ original complaint had named two non-diverse defendants. However, under the “fraudulent joinder doctrine” the District Court was free to remove those defendants and retain jurisdiction over the case. But to do so, there must be a showing that there could not be a claim against the defendants in question even if all questions of law and fact were resolved in plaintiffs’ favor. The standard is obviously plaintiff friendly — if even a “glimmer of hope” of recovery against the defendant at issue is found, it cannot be removed.

But these defendants met that lofty standard. One did not operate towers in the area of South Carolina in question, and so it could not have been found liable for any damages to Mr. Johnson. With regard to the other non-diverse defendant, the Fourth Circuit found that the Federal Communications Act preempted the Johnsons’ claims against it.  Thus, it was also removed properly, and diversity jurisdiction was proper.

The District Court Properly Dismissed the Claims on Their Merits

On three different grounds, the Fourth Circuit agreed with the decision of the District Court to dismiss the Johnsons’ claims.

First, it found that the Communications Act’s express language preempted the Johnson’s claims. The court indicated that the existence of a common law tort duty would obstruct or burden a wireless service provider’s ability to provide coverage. The providers would have to actively monitor their networks to prevent calls coming from inside South Carolina prisons, which would limit their ability to offer wireless service in those areas.

Second, it found the Johnsons’ claims were barred by conflict preemption. Conflict preemption applies to state law “when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” The court found that a state law obligation to block calls from inside South Carolina prisons would conflict with parts of the Communications Act which bar actions to block cell phone signals. The provision in question says that no person shall interfere with any radio communications, including his or her own. Thus, a state law obligation to block the signals inside of prisons would directly conflict with the federal law, making compliance with both impossible.

Finally, it found the Johnsons’ claims were implausible. The court indicated the allegations were “speculative” in nature. The Johnsons’ complaint merely asserted that “an inmate at the prison using a cellphone ordered a coconspirator outside of the prison to kill Captain Johnson.” The Fourth Circuit said the Johnsons failed to offer any further facts to support their claims. Their complaint did not identify the wireless service provider who carried the alleged call, or even when the alleged call occurred. Without more factual allegations, the Fourth Circuit said it would be impossible for a district court to assess the Johnsons’ claims.

By Patrick Southern

Today, in Beyond Systems, Inc. v. Kraft Foods, Inc., the Fourth Circuit held in a published decision that the established tort doctrine of volenti non fit injuria (“to a willing person it is not a wrong”) applies to internet service providers (an “ISP”) who set “spam traps” solely for the purpose of raising claims against those who send certain types of spam e-mails. The appellate court affirmed the decision of the District of Maryland in this civil case.

Defendants Argue The Claim Is Barred

Defendant Kraft Foods argued successfully at the District Court level that the claims of plaintiff Beyond Systems and third-party plaintiff Hypertouch were barred because the plaintiffs’ actions before the filing of the action constituted consent. The plaintiffs appealed this issue in the hopes of receiving a new trial, since the District of Maryland never so much as reached the question of damages in this tort action.

Plaintiffs Have a History of Claims Under Anti-Spam Statutes

Spam e-mail became an issue in the 1990s and 2000s, and 35 states responded by 2004 in passing legislation providing for a private right of action for ISPs for violations of provisions related to the sending of spam.

The plaintiff in this case, Beyond Systems, is a Maryland-based corporation which used certain tactics referred to as “spam traps.” In the code of various web sites, it hid e-mail addresses in a way that could not be seen by the typical end user, but instead were only visible to “spam crawlers” (programs which are used by spammers to look for e-mail addresses and subscribe them to e-mail lists). Beyond Systems did nothing to filter or block spam e-mails on the accounts in question, and actually increased its storage capacity to archive these e-mails and retain them for use in litigation.

The third-party plaintiff, Hypertouch, is a California-based corporation owned by the brother of the owner of Beyond Systems. It had engaged in similar tactics and sued Kraft Foods in 2005 over certain e-mails. The claim resulted in a settlement, which provided in part that Hypertouch agreed to cooperate with Kraft in identifying future e-mails that may violate California law. Such lawsuits were big business for both companies, accounting for 90 percent of Beyond Systems’ income in recent years.

In 2008, Beyond Systems sued Kraft and another company, Connexus, in the District of Maryland, bringing both Maryland and California state law claims. Many of the e-mails in question were the same ones that formed the basis for the Hypertouch suit in 2005. Partial summary judgment was granted on e-mails that had been part of the Hypertouch suit, e-mails in which Hypertouch did not notify Kraft of the violations in accordance with the settlement agreement, and (because of the applicable statute of limitations) e-mails which were sent more than one year before the suit.

The District Court bifurcated the trial into a “liability” proceeding and a “damages” proceeding. There were two phases to the liability proceeding: in the first, the court had to determine if Beyond Systems met the Maryland state law standard for being classified as an ISP; in the second, it then had to determine if it was a “bona fide” ISP. The jury found that Beyond Systems met the state law standard, but said because of its litigation activities and relationship to Hypertouch, it was not a “bona fide” ISP. It held that Beyond Systems had invited its own injury and was thus barred from recovery.

The Tactics Utilized by Plaintiffs Constituted Consent

While the cause of action in this case is derived from state statutes, it is rooted deeply in the tort law tradition. Thus, common law rules are applicable in such cases. The Fourth Circuit held, accordingly, that the common law principle that one cannot recover damages flowing from conduct he consents to barred Beyond Systems from any recovery in this case. The appellate court agreed with the trial court that the actions of Beyond Systems constituted consent.

 Claims Based on State Statutes Viewed Through The Lens of Tort Law

The Maryland and California laws at issue in this case exist only as a result of an exception to the federal law which precluded many such statutes, the CAN-SPAM Act (15 U.S.C. § 7701(a(11) et seq.). The federal law allowed certain state laws to continue in operation so long as they were aimed at prohibiting “falsity or deception” in such spam e-mails. Both the Maryland and California laws fall into that category, but since they are primarily concerned with falsity and deception, the Fourth Circuit indicated they fall “into the vein of tort.”

It is a general maxim of tort law that “no wrong is done to one who consents.” In other words, one who consents to conduct of another cannot recover in an action of tort for the conduct or for harm resulting from it. Maryland and California courts have recognized that “[t]hose who, with full knowledge, assent to the invasion of their interests may not complain.”

The Fourth Circuit held that in this case, there was “overwhelming” evidence that Beyond Systems consented to the harm it claims it suffered. It created fake e-mail addresses solely to gather spam, embedded those e-mail addresses in web sites in a way in which they could only be discovered by “spam crawler” programs, and even increased storage capacity to hold more spam e-mails.

But the distinction here is admittedly a thin one. In a footnote, the court made clear it is not barring all claims from a plaintiff ISP whose legitimate business is impacted by deceptive spam and gathers e-mails to have evidence for a suit. The case here turned on the nature of Beyond Systems as a company (its substantial revenue stream from claims related to spam e-mail), and the court said that this plaintiff “gratuitously created circumstances which would support a legal claim and acted with the chief aim of collecting a damage award.”

The Judgment of the District of Maryland Is Affirmed

The Fourth Circuit agreed with the District Court that Beyond Systems had consented to receive the spam e-mails in question in this case, and thus it was barred from any potential recovery.