Roundtable: Product Liability Defence 2011

The International Who’s Who of Product Liability Defence Lawyers has brought together four of the leading practitioners in the world to discuss key issues facing lawyers today.

Participants

MICHAEL BROWN
Reed Smith LLP
USA, CA

STUART CLARK
Clayton Utz
Australia
LUIZ GUILHERME MIGLIORA
Veirano Advogados
Brazil
PETER PLISZKA
Fasken Martineau DuMoulin LLP
Canada, ON

 

Who’s Who Legal: Have there been any recent regulatory changes in your jurisdiction that have affected your practice?

 


Luiz Guilherme Migliora: In the past years, the Brazilian regulatory agency responsible for the regulation of food, beverage, pharmaceuticals and tobacco products among others (Anvisa) have issued or proposed a significant amount of regulation dealing with the presentation, advertising and warnings of products that can cause harm to the health of consumers. This has affected our practice as we have been involved in litigation against the agency, as well as in administrative processes and comments to consultations made related to the proposed regulations.

Peter Pliszka: This question is very timely; on 20 June 2011, the regulation of consumer products in Canada will undergo an historic change. On that date, the new Canada Consumer Product Safety Act will come into force. CCPSA will have dramatic effects for any company – both domestic and foreign – that manufactures or sells consumer products in Canada. In essence, CCPSA will convert Health Canada into the “CPSC of the North”. CCPSA will create new prohibitions, introduce new incident-reporting requirements, equip Health Canada with an arsenal of significant enforcement powers (including, for the first time ever in Canada, the power to order companies to recall consumer products) and permit a range of potential penalties for breach of obligations under CCPSA. CCPSA has already affected the practice of those of us who specialise in product liability and product regulatory law. Over the past several months, a number of Canadian and foreign manufacturers and retailers of consumer products have sought my advice in establishing CCPSA-compliant reporting and other systems, and training their personnel, in preparation for 20 June, when their businesses will become subject to this new regulatory regime.

Stuart Clark: On 1 January 2011, the new Australian Consumer Law came into force. As a consequence Australia now has one national law in relation to consumer protection. This was a watershed moment in Australian product liability and safety law. The new Act included a number of significant changes including provisions in relation to unfair contract terms that impact upon all standard form contracts, statutory guarantees (including a guarantee of acceptable quality), mandatory statements for express warranties and mandatory reporting of certain product-related incidents. It also gave the national regulator, the Australian Competition and Consumer Commission, significant new enforcement powers.

Michael Brown: The current regulatory environment that pharmaceutical and medical device companies are currently facing is one of heightened enforcement and increased disclosure. The US Food and Drug Administration (FDA), along with federal prosecutors and state attorneys’ general are increasing their scrutiny of the industry, resulting in enhanced enforcement and even criminal prosecutions. We are also seeing some of these federal and state regulatory agencies working in concert with, either directly or indirectly, with the plaintiffs’ bar (who may already be handling hundreds or thousands of cases for a particular drug or device) to increase the pressure on companies to resolve the matter through the payment of fines or even pleas on the criminal side and large settlements on the civil side. At the same time, transparency has increased and new tools are available to regulators, and even the public, such as the Inspections Database (see: www.fda.gov/ICECI/EnforcementActions/ucm222557.htm) to review the results of regulatory inspections at a company’s facilities. Many prosecutors and plaintiff’s lawyers regularly access FDA websites in a search for possible new lawsuits.

 

Who’s Who Legal: Some practice areas, such as the pharmaceutical sector, have seen a consolidation of their panel counsel. Is this something which is likely to happen within other sectors and will it result in lawyers becoming even more specialised?

 

Stuart Clark: Consolidation of panel counsel has been a feature of the Australian legal market in common with other parts of the world. This has occurred across all sectors. However, sophisticated clients have continued to instruct firms and individuals in relation to specific matters where those matters have the potential to have a significant impact on their business - particularly in relation to the defence of claims - regardless of other panel arrangements.

Michael Brown: In the United States, the consolidation of law firms a particular company uses has become more frequent in recent years due to a couple of factors. First, there have been a number of recent mergers of pharmaceutical and medical device companies, necessitating companies to look closely at the number of firms that are providing legal services to the now-merged company. Second, the process of reducing the number of firms a particular company uses predated the recent merger activity. Many companies have engaged in a ‘convergence programme’ to consolidate the vast majority of the legal work among a smaller number of firms. This provides an advantage to the company of having the law firms truly ‘know the business’ and an advantage to those firms selected to be part of the convergence programme of an increased amount of work to the firm. By increasing the amount of work provided to a law firm, the company can also use that fact to obtain additional discounts on pricing. Even with such convergence programmes, there will be situations where the company needs to go outside the panel for certain specialty areas.

Peter Pliszka: The phenomenon, which Michael describes, has occurred in Canada as well. In the context of establishing their list of panel law firms for US litigation, corporations typically select one firm in Canada to be their ‘partner’ for all of their Canadian litigation. Based on our firm’s experience, these convergence or ‘partnering’ arrangements can be a win-win situation for both the client and the law firm. As Michael observes, this process enables law firms to develop greater knowledge of the client’s business, products and internal operations, which usually results in the delivery of more efficient and effective legal services for the client’s benefit.

 

Who’s Who Legal: Have you seen an increase in work in any particular industries or sectors?

 

Luiz Guilherme Migliora: We have seen an increase in legal activity involving the litigation, submissions and legal analysis of the content and legality of regulations and proposed regulations, as well as in the activities of pro-consumer associations engaging in public campaigns and public debates in law schools and judges’ associations. The public prosecutors’ office, with standing to file class actions, has also been active in this specific role. There has been an increase in investigations that end up resulting in litigation or consent decrees to avoid litigation.

Peter Pliszka: Canada and the US have long been each other’s single biggest trading partner. From the perspective of all Canadians, this mutually-beneficial, favourable trading status is a great thing, with one notable exception: much to the chagrin of corporate Canada, America’s single biggest export to Canada seems to have become the class action! Over the past decade, plaintiffs’ counsel have sent class actions across the Canada-US border at an ever-increasing rate, and, largely because predominance of common issues is not a requirement of the Canadian test for certification, product liability class actions have proliferated. Our firm is regularly retained by manufacturers of all types of products to defend them against these class action lawsuits. The industry which appears to have been hit the hardest by the plaintiffs’ assault in recent years is the medical products industry – pharmaceuticals and medical devices.

Stuart Clark: The new Australian Consumer Law (ACL) has led to increase in work across a number of sectors. The introduction of a mandatory reporting obligation of certain product related injuries combined with the regulator, the Australian Competition and Consumer Commission entering into a co-operation Memorandum of Understanding with the Consumer Product Safety Commission earlier this year, has meant that many international brand manufacturers are paying particular attention to their Australian businesses. They are seeking assistance in establishing compliant reporting systems and other SOPs to deal with the new Australian Consumer Law. Corporations that provide express warranties with their products are undertaking reviews of those warranties to ensure they are compliant with the ACL Regulations.

Michael Brown: In the pharmaceutical and medical device field, there has been an increase of dual track litigation involving investigations brought by governmental agencies and ‘mass tort’ litigation brought by the civil plaintiff’s bar. This presents challenges to companies in the coordination of both (and sometimes more) tracks from logistical coordination (presentation of witnesses and production of documents) to strategic coordination. Separately, there has been an uptick in ‘no injury’ consumer class actions based on allegedly misleading advertising.

 

Who’s Who Legal: Have there been any shifts in the nature of the work you do? Are clients looking for advice in relation to risk assessment as well as litigious advice?

 

Luiz Guilherme Migliora: We have seen more work in the regulatory field in addition to the already significant court activity in the product liability area.

Peter Pliszka: Consistent with the Canadian legal developments described in my answers to questions 1 and 3, over the past few years our Product Liability Group has been retained on an ever-increasing basis to assist clients with product regulatory issues and to represent companies that are being sued in class action proceedings in Canada. A very large portion of our work is cross-border in nature, as the vast majority of the product class action lawsuits in Canada are accompanied by parallel MDL proceedings in the US. As a result, my colleagues and I now regularly work closely with our clients’ US outside counsel to ensure that the defences of the claims on either side of the border are conducted strategically in an integrated manner.

Stuart Clark: With the recent introduction of the Australian Consumer Law, our clients are giving renewed attention to issues relating to consumer protection, product liability, warranties and guarantees and product safety. We have spent much time during the last six months developing mandatory reporting SOPs and reviewing express guarantees to ensure clients to meet their legal obligations. Australia continues to experience an increase in the incidence of class actions, with the availability of litigation funding from commercial organisations continuing to encourage new proceedings being brought, both in the product liability (in particular drug and medical devices) and financial services sectors.

Michael Brown: We are seeing increased interaction between government investigations and product liability and when those are going on at the same time, it requires careful management. We are also seeing in the ‘mass tort’context, an increased amount of activity in the pharmaceutical and medical device field of actions, particularly class actions, being brought in other countries, such as Canada, Australia and to a lesser extent, the United Kingdom.

 

Who’s Who Legal: As emerging economies develop there is a corresponding increase in consumer awareness. How important is it to keep informed of global developments to protect your client’s interest?

 

Luiz Guilherme Migliora: Consumer awareness in Brazil has been very high and is expected to continue. This is a result of the Consumer Defence Code enacted in 1990, and of very active governmental and non-governmental consumer agencies and associations. There is currently a task force to propose amendments to the Consumer Defence Code and the tendency of this task force is to increase the protection to consumers. Also, there is a bill of law in congress aiming at amending the Civil Procedure Code containing provisions that can affect product liability litigation in a manner that can be very adverse to the product suppliers.

Peter Pliszka: Although this phrase has been repeated so often that it has become a cliché, the world in which our clients conduct business now truly is a global village. Our clients are not just entering developing economies; they are already there, and they are fully immersed in those economies. Our clients have shifted much of their manufacturing to those countries, and sales to consumers within those countries are growing exponentially. These phenomena are having significant effects for our clients and us – the lawyers in the ‘mature economies’ who advise them. For example, the outsourcing of manufacturing to off-shore suppliers has raised serious risk management and loss-transfer issues which are having real effects on lawsuits taking place here in North America. Similarly, the rapid development of burgeoning consumer classes in developing economies with legal systems that may be materially different from the various common law legal systems with which we are familiar, presents new and uncharted potential legal exposure for our clients. In order to be able to advise our clients about that exposure, it is essential that we remain abreast and knowledgeable of these legal developments.

Stuart Clark: As Australian lawyers we are have a specific focus on and interest in developments in the Asia Pacific region. Over the last 20 years there has been on-going consumer and product liability law reform throughout the region. For example, the European Commission Product Liability Directive, 1985 has been a major influence in many jurisdictions, being the basis for legislation in Australia, Japan, Taiwan, Thailand, Malaysia, Indonesia, Korea and the Philippines. As a result of Portugal’s legislation implementing the EC Directive, the Directive is also in force in Macau. This has had a significant impact on consumer awareness and the consequences that flow from that increased awareness. Three years ago Clayton Utz surveyed the effect of these changes in the Asia Pacific region. Not surprisingly we found that, in countries where there had been no law reform, the expectation was that the incidence of litigation would remain the same. In countries that had introduced consumer protection or product liability reform there was an expectation that the levels of litigation might increase in the future. There are indications that this is starting to occur.

Michael Brown: It is important to keep abreast of global developments to protect your clients’ interests. As companies begin to do more and more business in emerging markets, a host of legal issues arise and global lawyers need to be aware of them, whether it be data privacy issues and making sure your client is compliant with various countries’ regulations to sourcing and pricing issues for US federal government contracts, to appropriate codes of conduct and making sure your client is not running a foul of the Foreign Corrupt Practices Act (FCPA). As the legal and regulatory systems in emerging markets start to evolve and mature, there will continue to be uncertainty and companies must be prepared to be flexible and to adapt.

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