Articles Posted in Product Defect

La. R.S. 30:29 (“Act 312”) was in enacted in 2006 and became effective in June of that year. Act 312 provides a procedure for the remediation of oil field sites as well as oil exploration and production sites. Generally, remediation is “the action of remedying something, in particular of reversing or stopping environmental change.” Before the Louisiana legislature enacted Act 312, most remediation requirements were through private party contracts; therefore, Act 312 did not change the normal trial procedures established by the Louisiana Code of Civil Procedure.

The Louisiana Supreme Court recently discussed Act 312 at length, explaining what it did change, in a case involving the Vermilion Parish School Board. The Court explained that Act 312 was enacted because of serious concerns with the state of the land and ground water after an area was used for oil exploration and production. Parties would use the land and ground water under a mineral lease for several years, and leave the property in terrible shape by the time that they were done. Mineral leases allow the parties to contract for only the minerals or the potential oil that is located on that property. The party with the mineral lease, then, does not rent the entire property, but just the ability to find minerals or oil within or upon that property.

Before Act 312, parties could still sue if one party left the land in terrible shape. Occasionally, however, it does not make sense economically to force a party to fix the land they damaged. Instead, the renting party would have to give the “landlord” the difference between the value of the land when they received it and the value of the land when it was returned after the lease, under a tort law theory. However, the person who owned the land, the “landlord,” was not required to use the funds to fix damage done to the land. As a result, property that had serious environmental problems often went without remediation because the landlord was not required to fix it. This creates health and safety concerns for the general public.

Although the law requires that all motorists obtain liability coverage, when pressed with financial difficulty and confronted with rising insurance premiums, some individuals voluntarily accept the risk of large fines and choose to forego liability insurance. Despite all attempts at exercising reasonable care, a fraction of these drivers inevitably end up causing accidents. And when they do, the lack of resources that led them to risk driving without insurance becomes the problem of the other driver who cannot recover for personal injury or property damage resulting from the accident.

This scenario led many states, Louisiana among them, to enact laws designed to encourage motorists to obtain Uninsured/Underinsured Motorist Coverage. The State of Louisiana is among the most aggressive in encouraging uninsured motorist coverage. Louisiana law requires that all policies contain underinsured/uninsured motorist coverage sufficient to pay damages for bodily injuries resulting from an accident. This is known as Uninsured/Underinsured Motorist Bodily Injury Coverage (“UMBI”). In addition to the required UMBI coverage, insurers offer Uninsured/Underinsured Motorist Property Damage Coverage (“UMPD”).

Under Louisiana law, therefore, all policies implicitly contain UMBI coverage unless the insured specifically “rejects” such coverage pursuant to a state-prescribed form. Even in states permitting the insurer to draft the UMBI waiver form, courts have developed a policy of construing these documents strictly against the drafter, in order to promote the public policy of obtaining such coverage.

In a recent case, the Fifth Circuit Court of Appeals reviewed the lower court’s application of the “law-of-the-case” and “waiver” doctrines. Both of these doctrines are important rules that express the ultimate power of an appellate court in reviewing issues of law. Generally, an issue of law is a question regarding the application of law to a case. Therefore, in pursuing any civil suit, it is imperative to understand the implications and ramifications of an appellate court’s power to change the ruling in your case.

In Bayou Steel Corp. v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania, the Fifth Circuit Court reviewed an insurance dispute that concerned the apportionment of liability for a severe leg injury that was suffered by a worker who was unloading steel bundles. In a complicated fact scenario, Ryan Campbell was injured, in 2002, while unloading steel bundles owned by Bayou Steel Corp. on a barge that was owned by Memco Barge Lines, Inc. Shortly before this incident occurred, Bayou Steel Corp. had contracted with Memco to transport the steel from LaPlace, Louisiana, to Chicago, Illinois. At the time of his injury, Ryan Campbell was working for Kindra Marine Terminal, a stevedoring company that was assigned to unload the steel bundles in Chicago. After the suit involving Ryan Campbell was settled, Bayou Steel Corp. brought suit seeking a declaration of coverage and reimbursement from National Union Fire Insurance.

After a series of appeals, the district court used the law-of-the-case doctrine to determine that Kindra was not a sub-contractor of Bayou Steel. Therefore, Campbell’s injuries fell within the language of the insurance policy that Bayou Steel held. Thus, the lower court entered summary judgment for National Union Fire Insurance Company of Pittsburgh, Pennsylvania.

According to the law-of-the-case doctrine, “when a court decides upon a rule of law, that decision should continue to govern the same issue in subsequent stages in the same case.” Thus, an issue of law “decided on appeal may not be reexamined by the district court on remand or by the appellate court on a subsequent appeal.” Accordingly, the Fifth Circuit agreed with the district court that that fact that Campbell did not fall within the exclusion in the policy held by Bayou Steel was part of the law of the case and subsequently held that this issue had been resolved on an earlier appeal.

The waiver doctrine “holds that an issue that could have been raised on appeal but is forfeited and may not be revisited by the district court on remand.” Id. Like the law-of-the-case doctrine, the waiver doctrine “serves judicial economy by forcing parties to raise issues whose resolution might spare the court and parties later rounds of remands and appeals.” However, the waiver doctrine “arises as a consequence of a party’s inaction, [and] not as a consequence of a decision on [the part of the Court of Appeals].” Thus, the Court of Appeals agreed that Bayou had waived their argument about the language of the policy by failing to raise it on remand after the first appeal or during the second appeal … “[b]ecause they failed to raise it during that period, the issue could not [have been] revisited by the district court on remand.”

In its decision, the Fifth Circuit ruled that the lower court had properly applied the law-of-the-case and waiver doctrines and that summary judgment in favor of National Union Fire Insurance Company of Pittsburgh, Pennsylvania, was appropriate.

All of these matters are inherently complicated and show that knowledge of the exact law is necessary to reach a successful outcome. While questions and issues of law must be decided by the court, your legal representative should be aware of the foregoing doctrines and should be able to adequately present your case.

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An insurance company found itself on the defending side of a civil claim but not for the reason one might expect. Larry Modicue, a Louisiana man weighing 404 pounds, filed a claim against State Farm Casualty & Fire Insurance and its representative Rose Kennedy when the chair Ms. Kennedy offered him collapsed under his weight. The Fourth Judicial District Court granted the defendants’ motions for summary judgment and the Court of Appeal for the Second Circuit affirmed.

Mr. Modicue alleged that the incident in which his chair collapsed was an example of res ipsa loquitor. This common law phenomenon is found when a court deems that a particular incident or accident is the type that does not occur without negligence on behalf of some actor. Res ipsa loquitor means “the thing speaks for itself” in Latin and is a way for a plaintiff to prove the duty and breach prongs of a negligence case. As a review, a prima facie negligence case requires four essential elements: duty, breach, causation and harm. A plaintiff must prove each of these elements in order for a case to proceed to the trier of fact, whether judge or jury.

The appellate court reviewed the granting of a summary judgment de novo meaning that the appellate court could consider all things that the trial court could have considered in rendering its decision. The appellate court reviewed Louisiana C.C. art. 2317.1 in determining the outcome of this case. This statute places liability on the owner or custodian of a thing when that person knew or should have known through the exercise of reasonable care that a particular condition existed when it is determined that the condition caused damage to a plaintiff and the custodian or owner could have remedied the condition with reasonable care. Liability attaches if that care was not exercised. This statute is a reflection of traditional negligence principles. If a party has exclusive control over an object it is responsible for conditions in that object that cause harm to others. It is interesting to note that this statute goes on to specifically note that nothing in it should be construed to prevent a court from applying res ipsa loquitor. The appellate court found that Ms. Kennedy had no reason to know that this particular chair would give out under Mr. Modicue’s weight since it had held him without incident on a previous occasion.

The Court of Appeal went on to dismiss the plaintiff’s allegation that res ipsa loquitor applied to this situation. The court noted that Harper v. Advantage Gaming, 880 So. 2d 948 clarifies the situations in which res ipsa loquitor applies. That case required a court to find unusual circumstances such that, in the absence of other evidence, there was an inference of negligence on the part of the defendant. In conjunction with this the defendant must have had exclusive control over the object that caused the injury. These circumstances must lead to the finding that the only reasonable conclusion is that the defendant breached a duty to the plaintiff and that this was the cause of the plaintiff’s injuries.

The court in this case found that due to Mr. Modicue’s weight, there was more than one potential explanation for the chair’s failure. The court went on to explain that Mr. Modicue had not provided enough evidence to get the issue of the defendants’ negligence to the jury. As such, the defendants were entitled to a summary judgment as a matter of law. Mr. Modicue’s reliance on res ipsa loquitor caused his negligence claim to fail. Had he offered evidence of all four elements of negligence, it is possible that he would have succeeded, though it is unclear if this evidence existed.

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The case of American Zurich Insurance v. Caterpillar arose from a truck fire that took place in Natchitoches Parish on April 7, 2010. American Zurich insured the truck and Caterpillar manufactured the truck’s engine. American Zurich opened up a loss file on the truck the day of the fire. American Zurich paid out almost $77,000 dollars to the insured. On April 26, 2010, Zurich was informed of a possible defect in the engine by an inspection agency they hired to look into the claim. A year later, on April 26, 2011 American Zurich filed suit against Caterpillar in West Baton Rouge Parish seeking reimbursement for the costs they incurred, but the case was subsequently moved to Natchitoches Parish in June 2011. On November 10, 2011, the trial court granted Caterpillar’s peremptory exception of prescription and their motion for summary judgment and dismissed American Zurich’s claims. American Zurich appealed the trial court’s decision and the case made its way to the Third Circuit Court of Appeal. While you read the rest of this case summary keep the dates mentioned above in mind.

So why does keeping these dates straight in our minds matter, and what is a peremptory exception of prescription? Actions brought under the Louisiana Products Liability Act, or LPLA, must be filed within one year “from the day injury or damage is sustained.” This one year time period is known as a prescriptive period. A peremptory exception of prescription is a defense motion arguing that the plaintiff has no case because they failed to file their case in the required prescriptive period of time. So one of the major issues in this case became on what date did that prescriptive period begin? Caterpillar claimed it started on April 7, 2010, the day of the fire. American Zurich claimed it began on April 26, 2010, which was the day their investigators told them about the engine defect.

The court noted that “prescription begins to run when the defect manifests itself, not on the date the underlying cause of the defect is found.” In other words, the court said that the one year prescriptive period began on the day of the fire, April 7, 2010. The court points out that American Zurich knew about the fire the day it occurred, and therefore, American Zurich had no basis for arguing that the prescriptive date should have started on April 26, 2010. Thus the court holds that American Zurich did not file their case within the one year prescriptive period required under the LPLA which ran out on April 7, 2011.

Injuries can happen anywhere but do not always lead to successful legal suits. Larry Modicue was directed by Rose Kennedy, an insurance agent for State Farm Fire & Casualty Co. in West Monroe, Louisiana, to have a seat in her office, which resulted in the chair collapsing. Modicue is a 404-pound man who has sat in this same chair with no prior injuries or incidents but suffered a shoulder injury in the fall, requiring medical assistance.

Modicue sought relief for his injuries and brought suit against Kennedy and State Farm. Kennedy and State Farm’s, in turn, filed a motion for summary judgment. Summary judgment is a maneuver used by one party to have the court make a decision on part or the whole dispute without going to trial. For a motion for summary judgment to be granted there must be no disputes on material fact, showing that one party is entitled to judgment. The summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action and is favored by the courts and construed to accomplish these ends. In this case, Kennedy and State Farm’s motion for summary judgment was granted due to the fact that the court found no genuine issue of material fact.

Modicue appealed this decision arguing that the court erred in granting summary judgment. His reasoning was that 1) a Louisiana business owner has a duty to provide seating which is adequate for the general public, and 2) the facts of the case permit the application of res ipsa loquitor.

The court disagreed with Modicue. According to the Louisiana C.C. art. 2317.1, an owner is only responsible for damage of the object is if 1) he knew about a ruin, vice, or defect which caused the damage, or 2) he should have known of the ruin, vice, or defect, 3) the damage could have been prevented if he exercised reasonable care, and 4) that he failed to exercise reasonable care.

Modicue failed to show that there was prior knowledge on the part of Kennedy and State Farm of the chair being defected. There was also no reasonable belief that the chair was defected and could not support Modicue because he had sat in the same chair before without any injury or incident. The chair also did not contain any warning about the capacity at which it could hold.

Res ipsa loquitor, a rule of circumstantial evidence that applies when the facts suggest that the negligence of the defendant is the most plausible explanation of the injury, did not apply either. According to Harper v. Advantage Gaming, it is applicable when 1) the circumstances of the accident are so unusual that, in the absence of other evidence, there is an inference of negligence by defendant; 2) defendant had exclusive control over the thing causing injury; and, 3) the only reasonable conclusion is that defendant’s breach of duty caused the accident.

The original ruling in favor of Rose Kennedy and State Farm Fire & Casualty Co. was upheld due to Modicue’s failure to produce sufficient evidence showing the negligence of Kennedy and State Farm.

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Both trial and appellate courts found Janssen Pharmaceutica liable for damages under the Louisiana’s Medical Assistance Programs Integrity Law (MAPIL). The issue was whether the Attorney General could bring this action without alleging actual damages, as MAPIL requires. The courts considered the legislative intent behind the law to determine that Janssen was still liable.

The Attorney General of Louisiana filed suit against Janssen Pharmaceutica for violating the MAPIL, which prohibits people from presenting false or fraudulent claims or misrepresentations to the state medical assistance program funds. The jury concluded that Janssen had violated the law over 35,000 times, resulting in a fee of over $257 million.

The appellate court upheld the trial court’s decision. It would only be able to overturn the trial court if it found the trial court had abused its discretion. In other words, if the trial court’s interpretation of the statute was not reasonable, the appellate court could reverse it. However, this is a very high standard. Previous Louisiana case law required the court to read the relevant subsection of the statute in the context of the remainder of the MAPIL legislation, and the appellate court found that the trial court had done this, and its interpretation was reasonable. Thus, it was reasonable to interpret the statute to mean that if the Attorney General could prove false, misleading, deceitful statements, Janssen would be liable for civil penalties.

The “New York Convention” (9 U.S.C. §§ 201 et seq.) gives a U.S. court the ability to enforce a foreign arbitration award if there is personal jurisdiction over the defendant. Personal jurisdiction is when the defendant can expect to appear in a foreign country’s court because the defendant has minimum contacts with the country. First Inv. Corp. v. Fujian Mawei Shipbuilding, Ltd. reaffirms that personal jurisdiction is necessary when a plaintiff is trying to confirm an arbitration award.

In First Inv. Corp., a Marshall Islands corporation and Chinese shipbuilding company entered into a contract that had an arbitration clause. The Marshall Islands is a presidential republic of the United States. The U.S. provides defense, funding, social services, and its currency for use to the republic. The arbitration clause required all disputes to be resolved in neutral territory under the London Maritime Arbitrators Association rules. The English arbitration panel found for the Marshall Islands corporation, but China refused to enforce the award against the defendant because not all the arbitrators on the panel had seen the final draft of the decision. Instead of resolving the matter in either the country of arbitration or the defendant’s country, First Inv. Corp. commenced action in the U.S. District Court for the Eastern District of Louisiana. The case eventually appeared before the Fifth Circuit Court of Appeals.

The Fifth Circuit affirmed the district court’s decision that the U.S. lacks personal jurisdiction over a Chinese shipbuilding company that has no contacts with the U.S. The Chinese company did not distribute products, conduct any transactions, or maintain property on American soil. However, the Marshall Islands plaintiff argued that since the defendant did not have any contacts with the U.S., the defendant should not be afforded the right of due process stemming from personal jurisdiction. The Fourteenth Amendment of the U.S. Constitution forbids states from depriving “any person of life, liberty, or property, without due process.” In the district court trial, the plaintiff argued that as a corporation controlled by the Chinese government, the defendant was not entitled to due process. Ultimately, the trial court rejected the plaintiff’s argument because it would undermine the “minimum contacts” test set by the U.S. Supreme Court because a confirmation of the award would suggest that a court can exercise personal jurisdiction over a defendant with no contacts in the U.S. The Fifth Circuit followed up by citing cases affirming due process protection for foreign corporations.

The plaintiff then argued that a confirmation of the arbitration would not affect the defendant’s “substantive rights” or fundamental protections afforded by the U.S. Constitution. The Fifth Circuit disagreed because a confirmation of the arbitration award would allow the plaintiff to enforce the judgment in Britain.

First Inv. Corp. shows how significant it is for parties to understand U.S. legal procedures when seeking to enforce foreign arbitration awards.

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The Louisiana Supreme Court has recently undertaken a case deciding whether arbitration clauses in attorney-client retainer agreements are appropriate. In the past, Louisiana has favored the enforcement of arbitration clauses in written contracts. Arbitration avoids taking a case to trial and is a thrifty and efficient way to conduct the resolution of disputes outside of the courts. During arbitration, each party refers its dispute to an arbitrator, who then imposes a decision that is legally binding for both sides. However, Louisiana law also imposes a fiduciary duty requiring attorneys to act with the utmost fidelity and forthrightness in their dealings with clients and any contractual clause, which may limit the client’s rights against the attorney is subject to the upmost scrutiny.

According to the Louisiana Supreme Court in Hodges v. Reasonover, there is no per se rule against such binding arbitration clauses, provided that they are fair and reasonable to the client. In Hodges v. Reasonover, Jacqueline Hodges, the founder, sole shareholder, and CEO of Med-Data Management, Inc., hired Kirk Reasonover of the law firm of Reasonover & Olinde to sue a company known as MedAssets, Inc. in federal court in Atlanta, Georgia. In the retainer agreement between Hodges and Reasonover there was an arbitration clause, which essentially provided that any dispute shall be submitted to arbitration in New Orleans, Louisiana and that such arbitration shall be submitted to the American Arbitration Association (AAA).

Hodges was ultimately unsuccessful on her suit against MedAssets, Inc., which led her to file suit for legal malpractice against Reasonover. According to the Louisiana Supreme Court, Courts must closely scrutinize attorney-client agreements for signs of unfairness or overreaching by the attorney. Further, Louisiana Rule of Professional Conduct 1.8(h)(1) prohibits a lawyer from “prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement.”

Settling with an insurance company out of court is commonplace in the legal world. However, entering into a “High/Low” agreement prior to trial can come back to hurt a plaintiff and should be carefully worded and considered before executed. The cost of this kind of failure is exemplified in Soileau v. Smith True Value and Rental.

In November 2007, plaintiff Mary Solieau sustained serious injuries when a John Deere front-end loader detached from a John Deere tractor and shattered her leg while she was supervising the cleaning out of canals for the Town of Mamou. The tractor was rented from Smith’s Hardward, insured by Defendant Hartford Insurance Company.

Before proceeding to trial, Solieau entered into a “high/low” agreement with Hartford, capping Hartford’s liability at its policy limit of $2,500,000 and further releasing the Smiths of any personal obligation. At trial, Solieau moved to dismiss the Smiths, which led to Hartford filing for a directed verdict based on the language of its policy, which obligated Hartford to pay only those sums that its insured becomes legally obligated to pay. The trial court denied the motion.

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