Product Liability Defence 2015: Roundtable

Who’s Who Legal brings together Leandro Castelli of Marval O’Farrell & Mairal, Peter O’Donahoo of Allens and Quentin Urquhart Jr of Irwin Fritchie Urquhart & Moore to discuss the common sources of defence work, the evolution of the plantiff bar, as well as local regulatory developments.

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Which products have been the most common source of work in your jurisdiction over the past year? Is this a change from previous years or has the type of cases you have seen remained constant?

Leandro Castelli: We have a niche in tobacco litigation. We have also seen an increase in the automobile, pharmaceutical and dairy products’ liability litigation over the past year. Most types of cases have remained constant in recent years, but the increase in the dairy products’ industry litigation may be seen as a change.

Peter O’Donahoo: In Australia, we have seen a continued focus on shareholder class action claims, particularly in respect of breaches of the continuous disclosure regime under the Corporations Act 2001, and the attention of the plaintiff bar has largely been directed to claims of this kind.

Nonetheless, product-related proceedings remain on the agenda, and we have seen a particular focus on drugs, medical devices and implants. Most claims relating to these products have involved either an informational defect (for example, an alleged failure to warn consumers of a risk associated with using a product), or a design defect. Key recent examples are the class actions against DePuy and Johnson & Johnson in relation to the manufacture of allegedly defective hip implants, and Pfizer for failing to warn of side-effects caused by a drug used to treat Parkinson’s disease.

Quentin Urquhart Jr: The primary source of work over the past year continued to be in the pharmaceutical and medical device areas. These include individual products liability claims as well mass tort filings which are many times the subject of consolidation by the Judicial Panel on Multi-District Litigation (JPMDL). We are also continuing to see actions initiated by state attorneys general seeking to recover alleged losses under their Medicare and Medicaid programmes.

Have you found that cases are continuing to take on an increasingly international dimension this year? How does your firm handle cases where similar actions are being brought in other jurisdictions?

Leandro Castelli: Historically, Argentine litigation followed the trend of what happened in the US. Recently, we have found that this is starting to change; Argentina is looking to Latin American for guidance. When similar actions are being brought, we work with the law firms of our network and we coordinate with them on strategy and defences already agreed with the clients.

Peter O’Donahoo: In our experience, product liability litigation has always had a strong international dimension. In particular, the type of claim brought in Australia tends to be influenced by the US in terms of the products or classes of product the subject of the litigation and the extent to which claims have been successful in the US. Further, product liability litigation often involves multinational manufacturers who face similar claims in other jurisdictions.

The international dimension of product liability claims means that it is vitally important for manufacturers to develop and implement a global defence strategy that can be adjusted to fit local jurisdictions.

This involves maintaining strong and consistent communication with colleagues overseas to ensure the coherency of legal arguments being made in different jurisdictions.

Quentin Urquhart Jr: In any litigation where a product is marketed globally, there will be issues concerning its sale and marketing in other countries that may have a significant impact on the conduct of US-based litigation. We expect that those issues will continue to arise as plaintiffs’ counsel attempt to exploit the different regulatory environments in other countries to leverage their positions in tort litigation. When our firm is responsible for overall coordination of litigation involving cross-border claims, we routinely involve local counsel and value the important role they can play in bringing the cases to resolution.

In recent years we have received reports that the plaintiffs’ bar has been developing, with claims becoming more creative and sophisticated. Have you found this to be the case? What factors do you believe are behind this evolution?

Leandro Castelli: The Consumer Protection Law was enacted in 1993. However, for many years the parties to litigation did not quote this law. With the changes in recent years with respect to consumer rights, the CPL became a very important tool. Further, in February 2009 the Federal Supreme Court established the admissibility requirements for class actions for the first time. Since then, many NGOs representing consumers have been created and we have seen more creative and sophisticated claims in recent years.

Peter O’Donahoo: In Australia, the plaintiffs’ bar has undoubtedly been growing strongly, driven fundamentally by the profitability of class actions. There are a number of specific factors that have facilitated this strong growth. On the one hand, both the legislature and the courts are increasingly conscious of the need to improve access to justice. Therefore, reforms to court rules and procedures have been driven by a growing recognition of the role of class actions in facilitating access to justice and as a regulatory tool. On the other hand, relaxed regulation of the field has encouraged additional third party non-lawyer litigation funders to enter the Australian market. In response to this “perfect storm”, plaintiff law firms have concentrated on growing their class action practices, while many other firms have established new plaintiff-focused class action practices and relationships with litigation funders.

Quentin Urquhart Jr: I will never underestimate the creativity of the plaintiffs’ bar and their efforts to expand the transfer of wealth from corporate defendants in the most efficient manner possible. Today, the greatest percentage of corporate wealth is found in technology companies whose services are based on the creation, analysis and sharing of electronic data. The plaintiffs’ bar will migrate to where the money is and I expect that those companies will become significant targets of future actions based on how that data is managed and stored.

Have there been any regulatory developments in your jurisdiction over the past year? Which industry sectors have been most affected by these changes? Has this had an effect on the nature of the work you do for clients?

Leandro Castelli: Law 26,993 has recently created a new Conflict Resolution System for Consumer Relations. The purpose of this law is to provide effective solutions for the consumers’ problems, by creating two new administrative agencies (the Mandatory Conciliation Service for Consumer Relations, and the Auditor for Consumer Relations) and a special judicial forum for consumer relations. Such law also provides for a fast-track oral proceeding with limited means of evidence for the individual consumer small claims (ie, where the amount does not exceed the equivalent value of 55 index-linked minimum wages (260,000 pesos).

At present, the COPREC is the only operative agency while the Auditor and the special judicial forum are being created. For that reason, we do not yet have information on which industry sectors will end up being the most affected by these changes.

However, we have faced many clients’ requests for advice on the impact this regulatory development will have on their product liability litigation and instructed us to work in advance on the strategy and defences to repel these types of cases.

Peter O’Donahoo: We have not seen any major regulatory developments in Australia over the past year. However, in future years, we anticipate increased regulation of two industries: the litigation funding industry and the food industry. In relation to the litigation funding industry, in December 2014, the Productivity Commission released a report recommending that the Australian government establish a licensing system for third-party litigation funding companies. Under the proposal, a licence would only be available to companies that can demonstrate their capital adequacy. We expect that the regulation of litigation funders will receive more attention in coming months.

In relation to the food industry, we expect to see increased regulation concerning both the nutritional value and country of origin of food products, particularly in light of some high-profile incidents during the last 12 months. In June 2014, state and federal ministers adopted the voluntary Health Star Rating System for certain foods. In March 2015, Industry Minister Ian McFarlane and Agriculture Minister Barnaby Joyce made a proposal to Cabinet that Australia adopt a country of origin labelling scheme. In light of mounting political pressure, we expect that the introduction of new mandatory food labelling laws is simply a matter of time. The impact of tighter regulation on product liability claims remains to be seen.

Quentin Urquhart Jr: There have been no significant regulatory changes in my home state of Louisiana over the past year but we have passed legislation that will make it significantly more difficult for our state Attorney General to retain plaintiffs’ counsel on a contingency fee basis to prosecute claims against corporate defendants. At a national level, it appears that important changes to the Federal Rules of Civil Procedure will take effect in December 2015 which should better define the scope of permissible discovery and give clearer guidance to courts on the very limited circumstances when sanctions may be warranted for the unintentional destruction of documents and data.

Have you seen an increase in clients settling cases? Are economic considerations a factor in difficult trading conditions? What other factors contribute to the decision to defend or settle cases?

Leandro Castelli: We have not seen an increase in clients settling cases. Economic consideration plays an important role in the decision of settling cases taking into consideration that many cases in Argentina are created by lawyers. In view of this, our clients try to prevent frivolous litigation by weighing the value of settlement on a case-by-case basis.

Peter O’Donahoo: In our experience, the decision of whether to settle is always a case-by-case proposition. Economic factors are critical, regardless of whether a company is facing difficult trading conditions. For large companies that operate in multiple jurisdictions, a major economic factor is whether settling in one jurisdiction will have a “floodgates effect”, by encouraging potential claimants in other jurisdictions to commence a class action against the company. A major non-economic factor in the decision to settle is the involvement of regulators, such as the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission. In particular, a company may decide to settle a case, or to run a case differently, if the subject matter of the claim is of interest to a regulator.

Quentin Urquhart Jr: We have not observed an increase in settlements in the past year but the overall “trend” has clearly been towards fewer cases going to trial. Economics certainly brings about more settlements as the cost of litigating a case through to trial may be significantly greater than its disposition value. At my firm, we have continued to find ways to drive down this transactional cost so that our clients can make strategic decisions that are based primarily on the merits of the dispute.

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