H. (T.) v. NOVARTIS PHARMACEUTICALS CORPORATIONAmicus Curiae Brief of Product Liability Advisory Council, Inc.Cal.December 15, 2016SUPREME COURT COPY No. $233898 SUPREME COURT In the Supreme Court of CaliforniaF!LED DEC 15 2016 T. H., A Minor,efc., et al., /or9¢ Navarrete Clerk Plaintiffs and Appellants, Deputy VS NOVARTIS PHARMACEUTICALS CORPORATION, Defendant and Respondent. APPLICATION OF PRODUCTLIABILITY ADVISORY COUNCIL, INC. FOR PERMISSION TO FILE AMICUS CURIAE BRIEF AND PROPOSED AMICUS CURIAE | BRIEF SUPPORTING DEFENDANT AND RESPONDENT NOVARTIS PHARMACEUTICALSCORP. © On Review From a Decision in a Published Opinion of the Court Of Appeal, Fourth Appellate District, Division One, No. D067839 David E. Stanley, SBN 144025 Hugh F. Young, Jr. James M. Beck PRODUCTLIABILITY REED SMITH LLP ADVISORY COUNCIL,INC. 355 S. Grand Avenue, 1850 Centennial Park Drive Suite 2900 Suite 510 Los Angeles, CA 90071 Reston, VA 20191-1517 Telephone: 213.457.8085 Facsimile: 213.457.8080 Email: dstanley@reedsmith.com Attorneys for Amicus Curiae RECEIVED Product Liability Advisory Council, Inc. DEC 08 2016 CLERK SUPREME COURT TABLE OF CONTENTS APPLICATION OF THE PRODUCT LIABILITY ADVISORY COUNCIL, INC. FOR PERMISSION TO FILE AMICUS CURIAEBRIEP........ 0... cece c eee cence cc enneeeees I. Issue Presented ....... 0... cece cece cece eee cece eeeeeneeees II. Interest Of Amicus Curiae .............. cece eee ee eee III. How The Proposed Amicus Curiae Brief Will Assist This Court In Deciding The Matter .......... TV. DisclOSUTE.....keeeee ence eee etna ee enas V. CONCLUSION ........ cece cece cece cece cee eeseecuceecceeevees PROPOSED AMICUS CURIAE BRIEF SUPPORTING DEFENDANT AND RESPONDENT NOVARTIS PHARMACEUTICALS CORP............ ccc cece ence ee ee ees I. Introduction... ........ cece cc ceeeneccccceecceceeceeeaececs II. Argument: Manufacturers Should Not Be Liable For Injuries Allegedly Caused By. Competing Products From hich They erived No Economic Benefit. ............. ccc cee cece cece cee v eee nes A. Traditional Product Liability Doctrine Properly And Sufficiently Addresses Inadequate Warning Claims Against Product Manufacturers. ................. cee e eee B. The Potential Liabilit Of Non- Manufacturer Defendants Under Theories Such As Innovator Liability Is Nearly Limitless. ............ ccc ceeccee cee cecececuveceuvess C. Existing Due Diligence Requirements For Corporate Transactions Deter Concealment of PrOduct Risks..... 0... eee cee eee e cece eee ee IIT. Conclusion ..............c cee cece cece ee ee teen ceenenecees WORD COUNT CERTIFICATE..... 2...cece eee ee eae APPENDIX Corporate Membersof the Product Liability Advisory Council .... -j- Page beeee 1 bese 1 Levee I veeee 2 beeee 4 beeee 4 Levee 6 beeee 6 beens 8 beeee 8 19 28 233 1139 la TABLE OF AUTHORITIES Page(s) Cases Anselmo v. Sanofi-Aventis, Inc. USA (D.Kan. Oct. 13, 2014, No. 10-CV-77) 2014 WL 8849464ooocece cece eeee eee e cece ceeeaneeeaeeensesenneseesens 15 Bartlett v. Mutual Pharmaceutical Co. (D.N.H. 2009) 659 F.Supp.2d 279 2.0.0.0... cece eee ne ence ne ene eens 6 Beatrice Co. v. State Bd. ofEqualization (1993) 6 Cal.4th 767.0... 0. c ccc ccc ce cece nee ne eee eee ene eeeeenerneees 33 Bell v. Pfizer, Inc. (8th Cir. 2013) 716 F.3d 1087........... cee eee e ence tence ene eee ees 14 Beutella v. A.H. Robins Co. (D. Utah Dec. 10, 2001, No. 980502372) 2001 WL 35669202 oo. cece cece eee c cc een nec eteeceeeuennescuvcceeeneeeusecseeea 15 Brown v. Superior Court (1988) 44 Cal.3d 1049 oo...eee ee ener eee eee 9,17, 21 Buckman Co. vy. Plaintiffs’ Legal Committee (2001) 531 U.S. 341cccene e ne een cence eeeeeeeeneneeanes 7 Carlin v. Superior Court (1996) 13 Cal.4th 1104.0...cece eee ee ee ees 10, 17, 22 Colas vy. Abbvie, Inc. (N.D.Ill. June 13, 2014, No. 14 C 1452) 2014 WL 2699756....... ccc caeueeeeceueeeeeeceeaunennneeceseuuseauceceseeeeannnnnes 15 Condouris v. Wyeth (N.J.Super.Ct. Law Div. June 26, 2012) 2012 WL 2401776... cece cece nce ene e eee nee ee eee een e eee teeeeeeneeeerees 15 Conte v. Wyeth, Inc. (2008) 168 Cal.App.4th 89 0.0.0.0... cece cece ee eee eee eee 16, 20 -ii- TABLE OF AUTHORITIES (continued) Cravens, Dargan & Co. v. Pacific Indem. Co. (1972) 29 Cal. App.3d 594.0... ..ccccccsececeveeeeeeeeeeenres Cronin v. J.B.E. Olson Corp. (1972) 8 Cal.3d 121 ooeeeee eee e teens Cummiskey v. Superior Court (1992) 3 Cal.4th 1018.0...eeecence anes Daly v. General Motors Corp. (1978) 20 Cal.3d 725 ...cccccccccceceessccceeeeeceeeeeuseeeens In re Darvocet, Darvon, & Propoxyphene Products Liability Litigation (6th Cir. 2014) 756 F.3d 917 ooo.eeeeee ee In re Darvocet, Darvon & Propoxyphene Products Liability Litigation (E.D.Ky. Aug. 21, 2012, MDL No. 2226) 2012 WL 361023700.eeee ene e nett eee e nna e ee been ees In re Darvocet, Darvon & Propoxyphene Products Liability Litigation (E.D.Ky. Sept. 5, 2012, MDL No. 2226) 2012 WL 3842045ooncence eee ee tae eenaee eee enee nates Delgado v. Trax Bar & Grill (2005) 36 Cal.4th 224 .....cccccccccececsceceeceeeeeseesseeee, Demahy v. Schwarz Pharma, Inc. (Sth Cir. 2012) 702 F.3d 177 «0...eeee Eckhardt v. Qualitest Pharmaceuticals, Inc. (Sth Cir. 2014) 751 F.3d 674.00.eee Erlich v. Menezes (1999) 21 Cal.4th 543 oo.eeeeee - iii - Page(s) be veneeeae 18 Levee eens 10 Levene ees 21 bee eneeeeae 9 be seeaeees 14 bee eae eee 15 been e eens 15 be eeeeeeae 19 beet ee eees 14 bev eeeeees 14 be eeee eens 19 TABLE OF AUTHORITIES (continued) Page(s) Finn v. G. D. Searle & Co. (1984) 35 Cal.3d 691.00... ccc cece cece cece nett ree eneeeneee ens 21 Flynn v. American Home Products Corp. (Minn.Ct.App. 2001) 627 N.W.2d 342 20.0... eee eee ences 14 Foster v. American Home Products Corp. (4th Cir. 1994) 29 F.3d 165 2...cece cere nee ee ete eeene es 15 Franklin v. USX Corp. (2001) 87 Cal. App.4th 615 2.0.0... cece cence cence eee eeee eens 33 Franzman v. Wyeth, Inc. (Mo.Ct.App. 2014) 451 S.W.3d 676.......... cece ece cece eee eens 14 Fullington v. Pfizer, Inc. (8th Cir. 2013) 720 F.3d 739 0.0... cece cece e eee ene eee ener ee ees 14 Genesis Merchant Partners, L.P. v. Nery’s USA, Inc. (S.D.Cal. June 30, 2016, No. 11cv1589 JM(WVG)) 2016 WL 3548497 0000... cc nce e cence ene e eee e ene en eens eee enaes 31 Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57 0.0... cece eee eee teen eee e nee ne seen ee ens 6, 8 Guarino v. Wyeth, LLC (11th Cir. 2013) 719 F.3d 1245 oo...cece ee eee eee ees 14 Guvenoz v. Target Corp. (Ill. App.Ct. 2015) 30 N.E.3d 404 ......oeeee ees 14 Huck v. Wyeth, Inc. (lowa 2014) 850 N.W.2d 353.......... cece cence eee ene eee 14, 24 Johnson v. Teva Pharmaceuticals USA, Inc. (5th Cir. 2014) 758 F.3d 605 .......... ccc cece cece ence eect ee ee neees 14 Kazerouni v. De Satnick (1991) 228 Cal.App.3d 871 00...cece eee nce e eee renee es 30 _iv- TABLE OF AUTHORITIES (continued) Page(s) Kesner v. Superior Court (Dec. 1, 2016, $219534, S219919) = Cal.4th __, 2016 WL 7010174 0.0... cece cece cence eee eneeeennanees passim Lashley v. Pfizer, Inc. (Sth Cir. 2014) 750 F.3d 470 2.00... cece cece nee e cence eenes 14 Luque v. McLean (1972) 8 Cal.3d 136 2.0...ccc c cece e ence eee e ene eeenaeenanes 10 Maloney v. American Pharmaceutical Co. (1988) 207 Cal. App.3d 282 0.0.0... ccc cece cece eee eee nee eee ene ees 33 Mensing v. Wyeth, Inc. (8th Cir. 2009) 588 F.3d 603 ....... cece ence een eeeenes 15 Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465 20.0...eeee eee e teen ee renee 3, 10, 20 Mirkin v. Wasserman (1993) 5 Cal.4th 1082 2.0...ccece eee ne ence nee nee eeee eee 28 Monarch Bay II v. Professional Service Industries, Inc. (1999) 75 Cal.App.4th 1213 2.0.0...eeee e eee eee ees 32, 33 Moore v. Regents of University of California (1990) 51 Cal.3d 1200...cece eee ence eee teat ene eee ees 21 Moretti v. Wyeth, Inc. (9th Cir. 2009) 579 F. App’Xx 563...... 0.0... cece cece eeee cence eens 15 Motus v. Pfizer Inc. (Roerig Div.) (9th Cir. 2004) 358 F.3d 659 0.0... cece cece eect ee nee eee eee 18 Murphy v. E. R. Squibb & Sons, Inc. (1985) 40 Cal.3d 672 2.0.0...e cece cece ee tence tne tne e nee e es 22 O’Neil v. Crane Co. (2012) 53 Cal.4th 335 2.0...cece eee cnet e ene passim TABLE OF AUTHORITIES (continued) Page(s) Parsons v. Crown Disposal Co. (1997) 15 Cal.4th 456 20...cececece eet nee tena eens 19 People v. Sarun Chun (2009) 45 Cal.4th 1172.2...0.0cerece este nee e eee ened 21 Perez v. Nidek Co. (9th Cir. 2013) 711 F.3d 1109.00...cececence eee 21 Peterson v. Superior Court (1995) 10 Cal.4th 1185.00...cece nee n eee en ee en eee eens 11 Phelps v. Wyeth, Inc. (D.Or. 2012) 857 F.Supp.2d 1114.00...ccc eee eee eee 15 PLIVA, Inc. v. Dement (Ga.Ct.App. 2015) 780 S.E.2d 735.00... ccc cece e eee e eee eee 14 Price v. Shell Oil Co. (1970) 2 Cal.3d 245 2.0...eee eee e teen ee eee eee nena 8, 10 Rafferty v. Merck & Co. (Mass.Super.Ct. May 23, 2016, No. 2013-04459) 2016 WL 3064255 000... ccc cece eee eee ee ene e tne e tenet enneeeenas 15 Ramirez v. Plough, Inc. (1993) 6 Cal.4th 539...nnent e nee eee es 18 Ray v. Alad Corp. (1977) 19 Cal.3d 22.0...ccceee ee eee eter e teens 9 Rowland v. Christian (1968) 69 Cal.2d 108.200...eeecence tence ee ee enna ees 20 Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953.000.erene nee e eed 17 Schrock v. Wyeth, Inc. (10th Cir. 2013) 727 F.3d 1273 ....... cece cece eee ee eee eens 14 _ vi - TABLE OF AUTHORITIES (continued) Page(s) Schweizer v. Sikorsky Aircraft Corp. (W.D.N.Y. Feb. 8, 2011, No. 10-CV-6547) 2011 WL 542355... ccc ccc cece cece nent eee n eee eee ne eee teense eben eeeeneenas 31 _ Sharp v. Leichus (Fla.Dist.Ct.App. 2007) 952 S0.2d 555....... 0. sees eee e eee eee es 14 Sheeks v. American Home Products Corp. (D.Colo. Oct. 15, 2004, No. 02CV337) 2004 WL 4056060...oeec c cece ence en ne eee e eee ence reese ee eneetaeeeenaeeenes 15 Sindell v. Abbott Laboratories _ (1980) 26 Cal.3d 588 000.0... cece eee nce ne eee eter een eeneeees 9,17 Smith v. Wyeth, Inc. (6th Cir. 2011) 657 F.3d. 420 22...eee c cece e eee e eee 14 Stanley v. Wyeth, Inc. (La.Ct.App. 2008) 991 S0.2d 31.0.0... cece cece eee ee ees 14 Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51...cece ec eee cence tenes cena eeeeeeeeaeeenaes 17 Stratmore v. State Bar (1975) 14 Cal.3d 887.00...cece nce ne een eee ee tne n eras 21 Strayhorn v. Wyeth Pharmaceuticals, Inc. (6th Cir. 2013) 737 F.3d 378 2.0.0... occ eee e cece nee eee eee ne eens 14 Thing v. La Chusa (1989) 48 Cal.3d 644.00.eene nee eee e nee e enna 7,27 Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256.0...ccc cee cece eee e eee e reset eneeenaes 10 Weed Wizard Acquisition Corp. v. A.A.B.B., Inc. (N.D.Ga. 2002) 201 F.Supp.2d 1252 2.0...eeeee 31 - Vii - St A N N E , : TABLE OF AUTHORITIES (continued) Page(s) Wyeth, Inc. v. Weeks (Ala. 2014) 159 So0.3d 649 oo...ccc cence eee een eee ene ees 15 Statutes Ala. Code § 6-5-530(8) ....... cc ccc cece cece teen eee teeeeeaeeeeneeernaes 15 Pub.L. No. 105-304, 112 Stat. 2860 (1998) 0.0.0...eee25 Regulations | 14 C.F.R. § 29.1303 0... cece ccc cece eee ee eee ener eee eee eeeeeeeeaeeenanenes 23 § 29.1413cececece e ee en ee eee nner eres enact nee na sean es 23 21 C.F.R. § 201. S7(C)(O)G).... cece cece cece cece ence renee eres eeneeeeeanenes 21 § 201. 80(€) 0... eeeeee eee ee eee e ence eet eee eneeeenneeeeneenes 21 § 314.94(a)(8)GV)...ccece eee e cee ee ee eneeeneeeeenneeeeee ens 17 29 C.F.R. § 1910.1200 2... ccc ccc cece cece cece cent ee ee ee eeaeeeneeeenneenas 23 49 C.F.R. § B98SLccc cece cece ee cence teen nee e senna ee naeeereeeeenneerenenes 23 § 571.138occence ence eee n cette ene e ene eetnee ee ean enna eens 23 § 571.208 2...enee eee e tenet nee e ene e senses ctnee teen eras 23 Other Authorities 1 Corporate Counsel’s Guide to Acquisitions & Divestitures (Thompson Reuters 2016) § 3:7............... cee ee ee 29 ANSI website, (as of NOV. 27, 2016) 20.0... . ccc ccc ccc e ence eter eee e tees tense tenet ennne nae ens 23 ASTM website, (as of Nov. 27, 2016) 2...ccece cece ee eee eee e nee nee eee e eae e etree sean enes 23 - Vill - TABLE OF AUTHORITIES (continued) Bartlett, Equity Finance (Aspen Pubs. 2d ed. 2013) § 21.16 — Product Liability ..........0eee Bass & Redick, Products Liability: Design & Manufacturing Defects (2d ed. 2016) § 1:29.............. Brown, Grandfathering Can Seriously Damage Your Wealth: Due Diligence in Mergers & Acquisitions of Medical Device Companies (2000) 36 Gonz. L.Rev. BScece cece e eee e ene ee een e eee eres tense een eeene ees Califf, Remarks of the FDA Commissioner: The Food & Drug Law Institute’s 59th Annual Conference (2016) 71 Food & Drug L.J. 201 oo...eee Cunningham, Choosing Gatekeepers: The Financial Statement Insurance Alternative to Auditor Liability (2004) 52 UCLA L.Rev. 413 ...ccccccccccecccceeseeeeeeeees Cunningham, Too Big to Fail: Moral Hazard in Auditing & the Need to Restructure the Industry Before It Unravels (2006) 106 Colum. L.Rev. 1698.... Gitterman, Ethical Issues & Practical Challenges Raised by Internal Investigations in the Life Sciences Industry (2013) 80 Def. Couns. J. 372 .................0.. Hornick, 3D Printing Will Rock the World (CreateSpace 2015) p. 159 ec eeeeececeecesececeeeeseeseessesevsseceveeneee Ibrahim, The Unique Benefits of Treating Personal Goodwill As Property in Corporate Acquisitions (2005) 30 Del. J. Corp. L. 1...eee Kleeman, 3D Printing Your Own Braces Works, Is a Terrible Idea (March 15, 2016) Gizmodo, < http://gizmodo.com/3d-printing-your-own-braces- works-is-a-terrible-idea- 1765059128 > (as of Nov. 27, 2016) 20... eeeeenbetree ene e nee e eens _ ix - Page(s) be teeeeees 28 freeenen 28 be eeee eens 30 be teee eens 13 bees enna 31 beeen eens 31 beeaee eee 29 be eee eens 26 beeeee eas 32 beeeee cease 25 TABLE OF AUTHORITIES (continued) Kunkel, Indifference & Secondary Liability for Copyright Infringement (2016) 33 Santa Clara High Tech. LJ. Livecece cee cece ccneceeeeusuvceens Nicole A. Syzdek, Five Stages of Patent Grief to Achieve 3D Printing Acceptance (2015) 49 U.S.F. L. Rev. 335, 339... cece ccc cece ccc eeeeeeneceeenetennenns Prosser & Keeton, Torts (Sth ed. 1984) § 95 ................ Rest.2d Torts, § 400........... 0. cece cece cece cece cece eee eeeeeees Rest.3d Torts, § 9...............Sec ceueeceeveceeuuvcceuucesteuens Rest.3d Torts, § 14........... ccc cece cece cece cece cece eeeeeeeeees Shecter, Selected Risk Issues in Merger & Acquisition Transactions (1997) 51 U. Miami L.Rev. 719........... Sills, Liability of Name Brand Drug Manufacturerfor Injury or Death Resulting from Use of Prescription Drug’s Generic Equivalent (2010 & Cum. Supp. 2016) 56 A.L.R.6th 161 ooeeeee eee e eee Solow & Israel, Buying Assets in Bankruptcy: A Guide to Purchasers (2000) 10 J. Bankr. L. & Prac. 87....... Tetler, Buying and Selling a Privately Owned Business, § 7.11(e) (Mass. CLE 2d ed. 2012 & Supp. 2016)...... Weeks, Picking Up the Tabfor Your Competitors: Innovator Liability After PLIVA, Inc. v. Mensing (Summer 2012) 19 Geo. Mason L.RevV.................565 Page(s) beet eeeees 25 bet eeaeees 26 bee eeneees 10 bes eeeeees 18 bese eeeees 16 bee eee eens 18 beeeeeeees 30 bee eeeeees 15 be veeeeees 29 bite eeeees 31 bee eneeeees 6 APPLICATION OF THE PRODUCT LIABILITY ADVISORY COUNCIL, INC. FOR PERMISSION TO FILE AMICUS CURIAE BRIEF The Product Liability Advisory Council, Inc. (“PLAC”) hereby applies to the Chief Justice of California for permission to file the attached proposed amicus curiae brief supporting Defendant and Respondent Novartis Pharmaceuticals Corp. I. Issue Presented The issue presented for review is this: May the brand name manufacturer of a pharmaceutical drug that divested all ownership interest in the drug be held liable for injuries caused by another manufacturer’s generic version of that drug sold years later? Il. Interest Of Amicus Curiae PLAC is a nonprofit association whose 94 corporate members are drawn broadly from American and international product manufacturers.' In addition, several hundred leading product liability defense attorneys are sustaining (non-voting) members of PLAC. ' PLAC’s corporate membersare listed in the Appendixtoits brief. PLAC seeks improvement and reform of law affecting product liability in the United States and elsewhere. PLAC’s point of view reflects its members’ experience in diverse manufacturing industries. Since 1983, PLAC has filed almost 1200 briefs as amicus curiae in state and federal courts, including this Court, presenting the broad perspective of product manufacturers seeking fairness and balance in the application of productliability law. PLAC’s interest derives from the Court of Appeal’s dramatic departure from the rationale that this Court espoused when it created modern productliability — that the justification for holding product manufacturers liable for the cost of product-related injuries is, first and foremost, an obligation stemming from the profits they earn from selling their products. Product manufacturers also control the condition of the products they make, and are thusis in the best position to reduce product risks. The Court of Appeal’s decoupling of liability for product-related injuries from these social policies, reiterated by this Court as recently as O’Neil v. Crane Co. (2012) 53 Cal.4th 335, raises fundamental jurisprudential concerns. Iil. How The Proposed Amicus Curiae Brief Will Assist This Court In Deciding The Matter This amicus curiae brief is respectfully submitted to the Court to address the public importance of these issues apart from and beyond the immediate interests of the parties to this case. The Court of Appeal reachedits result by placing form — the “negligence” label on the complaint - over substance - Plaintiffs’ typical allegations of inadequate drug labeling. Although the claim against Novartis was substantively indistinguishable from a strict liability inadequate labeling claim, the Court of Appeal gave “negligence” a talismanic effect that exempted it from the bedrock product liability principle that liability follows the profits from product manufacture or marketing. Such a departure, however, was precluded by this Court’s holding in Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 478, that limitations on “product liability” actions cannot be evaded simply by “recasting” a product liability claim as somethingelse. Nor is liability necessary here to fill some gap in corporate governance. Imposing liability on a branded, or 9“innovator,” company purportedly to prevent such companies from concealing product risks during corporate transactions is unnecessary. The “due diligence” routinely undertaken in such transactions, together with existing legal liability for misleading would-be buyers, avoids any need for the open-ended expansion of liability sought here. PLAC’s brief addresses the broader policy issues implicated by Plaintiffs’ expansive liability theory on products other than prescription drugs, such as asbestos, motor vehicles, and high technology. IV. Disclosure No party, and no counsel for a party, in the matter pending before this Court has authored the proposed amicus curiae brief in whole or in part. Neither has any party, or any counsel for a party, in the pending matter made any monetary contribution intended to fund the preparation or submission of the brief.* No person or entity has made a monetary contribution intended to fund the preparation or submission of the brief, other than PLAC,its members, or its counsel in the pending matter. V. Conclusion For these reasons, PLAC respectfully requests permission to file the attached proposed amicuscuriaebrief. 2 Novartis, a member of PLAC since 2001, pays the same annual dues as any other PLAC member. DATED: December 7, 2016 Respectfully submitted, y David E. Stanley Attorneys for Amicus Curiae Product Liability Advisory Council PROPOSED AMICUS CURIAE BRIEF SUPPORTING DEFENDANT AND RESPONDENT NOVARTIS PHARMACEUTICALS CORP. I. Introduction The novel “innovator liability” theory — that the cost of injuries caused by generic drugs should be borne by companies holding FDA-approved New Drug Applications (“NDAs”) for bioequivalent branded products> — as accepted by the Court of Appeal, is: 1. Contrary to foundational product liability principles dating back to the holding in Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, that liability follows from the profits made through the manufacture and sale of products to the public; > Because Plaintiffs’ theory transfers liability for product-related injuries from generic manufacturers to entities that conducted the initial scientific research required to obtain FDA approval of the original new drug (or who acquired an NDA), it has cometo be known as “innovator liability.” See Bartlett v. Mutual Pharmaceutical Co. (D.N.H. 2009) 659 F.Supp.2d 279, 308 fn. 40 (coining “innovator liability”; noting that “brand-name” liability “for defects in [the] generic equivalent” is “rejected” by “[t]he vast majority of courts”); Weeks, Picking Up the Tab for Your Competitors: Innovator Liability After PLIVA, Inc. v. Mensing (Summer 2012) 19 Geo. Mason L.Rev. 1257, 1258 fn. 9 (discussing Bartlett). 2. Rejected by the overwhelming majority of courts nationwide, and bythe latest Restatement of Torts; 3. Adopted without consideration of the policy and jurisprudential implications of expanding tort duties; and 4, An unpredictable and open-ended penalty upon research and innovation in development of new products that cannot be avoided even whenthe relevant product line has been sold. The facts are fully described in the parties’ briefs and the Court of Appeal’s opinion. Briefly, Plaintiffs allege in utero exposure to a generic prescription drug, terbutaline, in 2007. Before divesting the NDA in 2001, defendant-respondent Novartis made the branded version, “Brethine,” of the same drug. Plaintiffs’ | mother took terbutaline, not Brethine, to prevent preterm labor. That was an “off-label use” — not listed on the FDA-approved label. Also in 2001, the United States Supreme Court recognized off-label use as legal, “appropriate,” and “generally accepted” medical practice.* “[T]here are clear judicial days on which a court can foresee forever... .” Thing v. La Chusa (1989) 48 Cal.3d 644, 668 (Thing). It was error for the Court of Appeals to do so here. * Buckman Co. v. Plaintiffs’ Legal Committee (2001) 531 U.S. 341, 350-351 (fn. omitted). Il. ARGUMENT: MANUFACTURERS SHOULD NOT BE LIABLE FOR INJURIES ALLEGEDLY CAUSED BY COMPETING PRODUCTS FROM WHICH THEY DERIVED NO ECONOMIC BENEFIT. A. Traditional Product Liability Doctrine Properly And Sufficiently Addresses Inadequate Warning Claims Against Product Manufacturers. This Court created modern product liability - not just for California but for the nation - nearly fifty years ago in Greenman v. Yuba Power Products (1963) 59 Cal.2d 57 (Greenman). Greenman cited a core principle of social responsibility to justify its creation of what it called “strict liability”: The purpose of such liability is to insure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market... . 59 Cal.2d at p. 63. In other words, manufacturers profit from the sale of their products. Therefore, it is just for them to answer for injuries caused by defects in those products. Ever since Greenman, liability for injuries caused by allegedly defective products has been guided by this “paramount policy.” Price v. Shell Oil Co. (1970) 2 Cal.3d 245, 251 (Price). e “(T]he risk of injury can be insured by the manufacturer and distributed among the public as a cost of doing business.” Ray v. Alad Corp. (1977) 19 Cal.3d 22, 31. “Regardless of the identity of a particular defendant or of his position in the commercial chain the basis for his liability remains that he has marketed or distributed a defective product” Daly v. General Motors Corp. (1978) 20 Cal.3d 725, 739. A “manufacturer is in the best position to discover and guard against defects in its products and to warn of harmful effects; thus, holding it liable for defects and failure to warn of harmful effects will provide an incentive to product safety.” Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, 611 (Sindeill). “(T]he fundamental reasons underlying the imposition of [product] liability are to deter manufacturers from marketing products that are unsafe, and to spread the cost of injury from the plaintiff to the consuming public... .” Brown v. Superior Court (1988) 44 Cal.3d 1049, 1062 (Brown). “[W]e have consistently adhered to the Greenman formulation requiring proof that the plaintiff suffered injury caused by a defect in the defendant’s own product. §¢ .... § It is fundamental that the imposition of liability requires a showing that the plaintiff's injuries were caused by an act of the defendant or an instrumentality under the defendant’s control.” O’Neil v. Crane Co. (2012) 53 Cal.4th 335, 348- 349 (O’Neil).° Contrary to the Court of Appeal, this Court has also recognized that “product liability” includes every legal theory implicating the social policies that underlay the doctrine’s creation. In Merrill v. Navegar (2001) 26 Cal.4th 465 (Merrill), the Court viewed a negligent entrustment claim as a form of “product liability” because plaintiffs sought damages for product-related personal injuries from product manufacturers. “Product liability” is no more — and no less - than “‘the liability of those who supply goods or products for the use of others ... for losses of various kinds resulting from so-called defects in those products.’” 26 Cal.4th at p. 478.° “Reformulating” product claims so that they sounded in “negligence” did not make them any less a form of “productliability”: [T]his is a products liability action based on negligence, which asserts that the [product] was defective in design. ... [I]mplicit in both the negligence andstrict > Accord, Carlin v. Superior Court (1996) 13 Cal.4th 1104, 1110 (Carlin) (following Greenman); Cronin v. J.B.E. Olson Corp. (1972) 8 Cal.3d 121, 133 (same); Luque v. McLean (1972) 8 Cal.3d 136, 145 (same); Price, supra, 2 Cal.3d at p. 251 (same); see also Vandermark vy. Ford Motor Co. (1964) 61 Cal.2d 256, 262-263 (retailers subject to product liability because “[t]hey are an integral part of the overall producing and marketing enterprise that should bear the cost of injuries”). ° Quoting Prosser & Keeton, Torts (Sth ed. 1984) § 95, at p. 677. -10- liability theories of products liability is that the defendant manufacturer was engaged in the business of distributing goods to the public.... [The plaintiffs’ claim] is therefore simply a reformulated claim that the [product], as designed, fails the risk/benefit test [for defective design]. Id. at p. 481 (citations and internal quotation marks omitted). Consistently, in Peterson v. Superior Court (1995) 10 Cal.4th 1185, this Court overruled prior precedent and rejected an analogy between product liability and real estate because an owner of property was “not a part of the manufacturing or marketing enterprise of the allegedly defective product that caused the injury in question.” Jd. at p. 1188. The existence of “‘a continuous course of business [is] a condition to application of’” product liability. Jd. at p. 1207 (citation omitted). Otherwise the “primary justification for shifting accident costs” is inapplicable. Jd. | The Court recently revisited premises (and employer) liability in the asbestos context in Kesner v. Superior Court (Dec. 1, 2016, S219534, S219919) ——s- Cal.4th = [2016 WL 7010174} (Kesner). In Kesner the Court held that “commercial users of asbestos” that “benefitted financially from their use” of itshould have foreseen the exposure of household members to fibers brought home on the persons of heavily exposed workers. 2016 WL 7010174, at *7. The cost of reasonable precautions (required by -ll1- existing standards’) was neither “unreasonably expensive” nor “impeded ... an[y] activity with significant social utility.” Jd. at *8. The Court distinguished Kesner from cases involving product liability defendants that “have no control over” exposure to their products “once the products containing those fibers are sold.” Kesner, supra, 2016 WL 7010174, at *14. The duty analysis “differ[s] significantly [from] product liability cases” because ofthis lack of “control”: [E]mployers or premises owners ... had direct knowledge as to how fibers were being released and circulated within their facilities and failed to prevent those employees from leaving workplaces owned or controlled by the defendants . . . Id. (italics in original). The duty sought here, by contrast, is even more attenuated than the typical product liability situation found “inapposite” in Kesner, supra, 2016 WL 7010174 at * 14. Here, the drug in question was not even Novartis’ product. Branded manufacturers never have the requisite ownership or control over their competitors’ generic products, or over their competitors’ 7 At the time of exposure, governmental and industry standards required precautions to “prevent employees . . . from contaminating their families.” Kesner, 2016 WL 7010174, at *4-5. -12- marketing methods. Nor could Novartis, once it left the market, lawfully supplement the FDA-approved labeling provided to physicians who were prescribing drugs made by others. The absence of a duty here is a fortiori from every distinction that Kesner drew between productliability and the liability of premises and employer defendants. The sort of “supervisory control” that drove the duty analysis in Kesner[id. at *13-14], is entirely absent here. Also unlike Kesner is any basis for confining liability to a “circumscribed category of potential plaintiffs” [Kesner, supra, 2016 WL 7010174, at *1], short of the everyone who uses generic drugs [see id. at *9-10 (limiting scope of duty)]. Plaintiffs allege in utero exposure, and thus were not even prescription recipients. According to the FDA, “over 90 percent of prescriptions in the US are now generics.”® Thus, to accept Plaintiffs’ theory would beto impose liability for 90 percent-plus of all prescription drugs upon the remaining less than 10 percent that neither made, nor profited from, the generic drugsat issue. The present misapplication of the tort of “negligence” to drug warnings should be viewed accordingly. In Kesner, supra, courts in other jurisdictions “ha[d] reached the same conclusion we ® Califf, Remarks of the FDA Commissioner: The Food & Drug Law Institute’s 59th Annual Conference (2016) 71 Food & Drug L.J. 201, 204. _13- do... .” 2016 WL 7010174, at *14. Although innovatorliability is also a matter of first impression in this Court, many courts across the country have addressed this precise question, in this precise context, and they overwhelmingly reject liability of branded drug manufacturers for injuries caused by generic competitors. A 9“mountain of authority”” — literally dozens of appellate courts considering the same issue'® — rejects innovator liability, with the ° Guarino v. Wyeth, LLC (1ith Cir. 2013) 719 F.3d 1245, 1253 (Guarino). '0 State Courts: Huck v. Wyeth, Inc. (lowa 2014) 850 N.W.2d 353, 369-381; PLIVA, Inc. v. Dement (Ga.Ct.App. 2015) 780 S.E.2d 735, 743, cert. granted (Ga. Sept. 6, 2016); Guvenoz v. Target Corp. (Ill.App.Ct. 2015) 30 N.E.3d 404, 409 fn. 1, 416; Franzman v. Wyeth, Inc. (Mo.Ct.App. 2014) 451 S.W.3d 676, 689-692 (applying Kentucky law); Stanley v. Wyeth, Inc. (La.Ct.App. 2008) 991 So.2d 31, 33-35; Sharp v. Leichus (Fla.Dist.Ct.App. 2007) 952 So.2d 555, 555 (per curiam); Flynn v. American Home Products Corp. (Minn.Ct.App. 2001) 627 N.W.2d 342, 350. Federal Courts: In re Darvocet, Darvon, & Propoxyphene Products Liability Litigation (6th Cir. 2014) 756 F.3d 917, 938-939, 941-954 (applying Arkansas, Connecticut, Florida, Georgia, [linois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Nebraska, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Washington, and West Virginia law); Eckhardt v. Qualitest Pharmaceuticals, Inc. (Sth Cir. 2014) 751 F.3d 674, 681 (applying Texas law); Lashley v. Pfizer, Inc. (Sth Cir. 2014) 750 F.3d 470, 476-478 (applying Mississippi and Texas law); Johnson v. Teva Pharmaceuticals USA, Inc. (Sth Cir. 2014) 758 F.3d 605, 614-616 (applying Louisiana law); Strayhorn vy. Wyeth Pharmaceuticals, Inc. (6th Cir. 2013) 737 F.3d 378, 403-405 (applying Tennessee law); Schrock v. Wyeth, Inc. (10th Cir. 2013) 727 F.3d 1273, 1281-1284 (applying Oklahoma law); Fullington v. Pfizer, Inc. (8th Cir. 2013) 720 F.3d 739, 744 (applying Arkansas law); Guarino, supra, 719 F.3d at pp. 1251-1253 (applying Florida law); Bell v. Pfizer, Inc. (8th Cir. 2013) 716 F.3d 1087, 1092-1093 (applying Arkansas law); Demahy v. Schwarz Pharma, Inc. (Sth Cir. 2012) 702 F.3d 177, 183-184 (applying Louisiana law); Smith (footnote continued on following page) _14- only outlier being immediately overruled by legislation.'! Trial court authority rejects innovator liability in several more states.” (footnote continued from previous page) v. Wyeth, Inc. (6th Cir. 2011) 657 F.3d. 420, 423-424 (applying Kentucky law); Mensing v. Wyeth, Inc. (8th Cir. 2009) 588 F.3d 603, 612-614 rev’d on other grounds (2011) 564 U.S. 604, reaffirmed in pertinent part (8th Cir. 2011) 658 F.3d 867 (applying Minnesota law); Moretti v. Wyeth, Inc. (9th Cir. 2009) 579 F. App’x 563, 564-565 (applying Nevada law); Foster v. American Home Products Corp. (4th Cir. 1994) 29 F.3d 165, 168-171 (applying Maryland law). '! Wyeth, Inc. v. Weeks (Ala. 2014) 159 So.3d 649, 670-677. Within weeks, Weeks was a dead letter. See Ala. Code § 6-5-530(a) (a defendant’s marketing of “the particular product the use of which is alleged to have caused the injury” declared an element of any personal injury claim). 2 Arizona: In re Darvocet, Darvon & Propoxyphene Products Liability Litigation (E.D.Ky. Sept. 5, 2012, MDL No. 2226) 2012 WL 3842045, at *7-8 Un re Darvocet), aff’d on other grounds (6th Cir. 2014) 756 F.3d 917; Colorado: Sheeks v. American Home Products Corp. (D.Colo. Oct. 15, 2004, No. 02CV337) 2004 WL 4056060, at *1-2; Kansas: Anselmo vy. Sanofi-Aventis, Inc. USA (D.Kan. Oct. 13, 2014, No. 10-CV-77) 2014 WL 8849464,at *2-3; Massachusetts: Rafferty v. Merck & Co. (Mass.Super.Ct. May 23, 2016, No. 2013-04459) 2016 WL 3064255, at *4-5 (discussing prior precedent); Missouri: In re Darvocet, Darvon & Propoxyphene Products Liability Litigation (E.D.Ky. Aug. 21, 2012, MDL No. 2226) 2012 WL 3610237, at *2 & fn. 7, aff'd on other grounds (6th Cir. 2014) 756 F.3d 917; New Hampshire: In re Darvocet, 2012 WL 3842045, at *7; New Jersey: Condouris v. Wyeth (N.J.Super.Ct. Law Div. June 26, 2012) 2012 WL 2401776 (discussing prior precedent); Oregon: Phelps v. Wyeth, Inc. (D.Or. 2012) 857 F.Supp.2d 1114, 1120-1121; Utah: Beutella v. A.H. Robins Co. (D. Utah Dec. 10, 2001, No. 980502372) 2001 WL 35669202, at *2-3; Virginia: Colas v. Abbvie, Inc. (N.D.Ill. June 13, 2014, No. 14 C 1452) 2014 WL 2699756, at *2 (applying Virginia law). See generally Sills, Liability of Name Brand Drug Manufacturerfor Injury or Death Resulting from Use of Prescription Drug’s Generic Equivalent (2010 & Cum. Supp. 2016) 56 A.L.R.6th 161 (collecting cases). -15- As Novartis points out, OBOM at 32-33, many of these courts considered and disapproved Conte v. Wyeth, Inc. (2008) 168 Cal.App.4th 89 (Conte) by name. All in all, judicial or statutory authority in 36 states rejects innovatorliability in the precise context of generic/branded drugs. “[H]armony with other courts” [Kesner, supra, 2016 WL 7010174, at *16], can only be maintained by rejecting the expansionof liability that Plaintiffs advocate. The black letter of the Restatement Third of Torts is also incompatible with innovator liability. The Restatement considers all types of product-related misrepresentation (negligent or otherwise) a subset of product liability. For product-related physical harm, the Restatement recognizes the liability of “[o]ne engaged in the business of selling or otherwise distributing products” for a misrepresentation made “in connection with the sale of a product.” Rest.3d Torts, § 9.1% Like the common law, this section of the Restatement does not admit ofliability for alleged misrepresentations made at any time, or in any place, by non-manufacturers, and thus rejects the proposition that liability for allegedly erroneous product- related information extends to those not in the chain of sale of the defendant’s product. The sort of “foundational” analysis conducted in Kesner, O’Neil, and Merrill is precisely what the Courts of Appeal 13 Accord, id. at com. a (§ 9 “appl[ies} to commercial product sellers”). - 16 - decisions here and in Conte lack. Just as putting lipstick on a pig does not alter the animal’s porcine nature, calling a run-of-the-mill inadequate warning claim’* an action for “negligence” does not make it any less a productliability allegation. Nor does the particular context in which the issue arises warrant a departure from the policy-based tenet that “[i]n the context of products liability actions, the plaintiff must prove that the defective products supplied by the defendant were a substantial factor in bringing about his or her injury.” Rutherford v. Owens- Illinois, Inc. (1997) 16 Cal.4th 953, 968. Only where, due to latency of injury and the inherent nature of the product, it was impossible to identify the manufacturer through no fault of the plaintiff has this requirement been relaxed in any product liability case brought under any theory. See Sindell, supra, 26 Cal.3d at p. 611.'° Even in a Sindell situation, however, the Court has limited a defendant’s liability to “responsibility for the injuries caused by its own products.” Jd. at p. 612. Innovatorliability here, and in Conte - '* The claimed negligence is Novartis’s failure “to revise the drug label ... to include warnings” that Plaintiffs claim were required. Opn. at 13. Allegations that drug labeling understates or omits risks are routinely brought as product liability actions. E.g., Carlin, supra, 13 Cal.4th at pp. 1109-1110; Brown, supra, 44 Cal.3d at p. 1055; Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 58. 'S FDA regulations require identification of the manufacturer on all generic products, 21 C.F.R. § 314.94(a)(8)(iv), thus Sindell product identification issues are not implicated here. -17- before it, wildly transgresses the traditional boundaries of product- related liability. Federal law obligates generic manufacturers to adopt as their own the labeling originally created by branded/innovator manufacturers. Preemptive federal law does not, however, justify shifting the liability of generic drug manufacturers to their innovator competitors. Quite the contrary. Under established law, a defendant’s adoption of someoneelse’s allegedly inadequate labeling is “passing off,” another basis for liability against the actual product manufacturer. See Cravens, Dargan & Co. v. Pacific Indem. Co. (1972) 29 Cal.App.3d 594, 599 (“[o]ne who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer”) (quoting Rest.2d Torts, § 400, p. 1086); Rest.3d Torts, § 14. Once again, the common law follows the fundamental proposition that liability followsprofit. Existing common law thus readily accommodates claims involving generic drug labeling. Plaintiffs claiming injury from generic drugs should notbe better off — with an additional cause of action against non-manufacturing branded/innovator companies - than an identical plaintiff who took a branded drug. Cf. Ramirez v. Plough, Inc. (1993) 6 Cal.4th 539, 555-556; Motus v. Pfizer Inc. (Roerig Div.) (9th Cir. 2004) 358 F.3d 659, 661 (both affirming summary judgment in branded drug cases where, as here, the physician did not read the defendant’s allegedly defective warning). _ 18 - Plaintiffs here, who cannot establish a causal relationship to the warnings for the product that allegedly caused their injuries, should lose - as would any other plaintiff in any other product liability action whose prima facie warning case was similarly lacking essential causation evidence. Underthese facts, in the usual prescription drug product liability case, Plaintiffs would have been out of court. However, federal law mandates that generic manufacturers use verbatim the labeling initially prepared by the inventor of the drug - here, Novartis. Thus, Plaintiffs received a second bite at the apple against Novartis, even though they indisputably were never exposed to that drug, and Novartis no longer even manufacturedit. B. The Potential Liability Of Non-Manufacturer Defendants Under Theories Such As Innovator Liability Is Nearly Limitless. “‘TFJoreseeability alone is not sufficient to create an independent tort duty.’” Kesner, supra, 2016 WL 7010174, at *6 (quoting Erlich v. Menezes (1999) 21 Cal.4th 543, 552). Rather than 20/20 hindsight, legal foreseeability is a “sliding-scale balancing formula.” Delgado v. Trax Bar & Grill (2005) 36 Cal.4th 224, 237, 243 & fn. 24. The “mere presence” of foreseeability does not confer liability. Rather, “social policy must at some point intervene to delimit liability even for foreseeable injury ... .” Parsons v. Crown Disposal Co, (1997) 15 Cal.4th 456, 476 (citation and internal quotation marks omitted). _19- In holding branded/innovator manufacturers liable in negligence for injuries caused by generic manufacturers’ competing products, the Court of Appeal gave only passing attention to this Court’s longstanding test for negligence duty set out in Rowland v. Christian (1968) 69 Cal.2d 108 (Rowland)— merely making reference to the discussion of those factors in Conte. See Opn.at 17. However, Conte’s duty analysis under Rowland was equally scanty, inflating one of the Rowland factors, “foreseeability of harm,” almost beyond recognition, while altogether refusing to address others. Rowland, supra, 69 Cal.2d at p. 113.'° Plaintiffs seek to impose negligence liability for alleged inadequate product warnings - a theory typical of productliability litigation. See Merrill, 26 Cal.4th at 478 (“a plaintiff may seek recovery in a ‘products liability case’ either ‘on the theory of strict 999liability in tort or on the theory of negligence’”) (citation omitted). Thus, the most “[Japposite” precedent for Rowland analysis is that involving productliability theories sounding in negligence. Kesner, supra, 2016 WL 7010174, at *14. O’Neil, supra, 53 Cal.4th 535, the most important and most recent such decision, is discussed extensively in Novartis’ papers [OBOM at 18-20; RBOMat 14-17], 16 Aside from foreseeability, Conte refused to “assess” most other Rowland factors on grounds that the record was insufficient. Conte, supra, 168 Cal.App.4th at pp. 106 (moral culpability, preventing future harm), 107 (consequences to the community). Conte also spent less than a paragraph on the Rowland closeness of connection factor. Id. at p. 106. 20 - and PLAC will not repeat that argument.'’ The sameis true of the overriding policy considerations that attach to prescription drugs, given their unique life-saving attributes and their dependence upon extensive scientific research and continual innovation.’® These concerns are also addressed at length in Novartis’ papers. OBOM at 21-22; RBOMat 29-33. Because it bears on relevant public policies, PLAC does point out that, under the FDA’s regime, off-label use is a physician’s prerogative, not a drug manufacturer’s. E.g., Perez v. Nidek Co. (9th Cir. 2013) 711 F.3d 1109, 1115. Manufacturers cannot add warnings about risks of off-label use to their labels unless and until such warnings are “required” by the FDA. See 21 C.F.R. § 201.80(e) (governing drugs approved before 2001).”” '’ The Court of Appeal’s attempt to distinguish O’Neil’s extensive reasoning is unpersuasive. While O’Neil did not mention Conte [Opn. at 22], this Court has long recognized that its decisions can impliedly, as well as expressly, overrule prior precedent. E.g., People v. Sarun Chun (2009) 45 Cal.4th 1172, 1198-1199; Cummiskey v. Superior Court (1992) 3 Cal.4th 1018, 1028; Stratmore v. State Bar (1975) 14 Cal.3d 887, 890. '8 See Brown, supra, 44 Cal.3d at pp. 1058-1064; accord, Moore v. Regents of University of California (1990) 51 Cal.3d 120, 146; Finn v. G. D. Searle & Co. (1984) 35 Cal.3d 691, 700-701. '? A prior FDA requirement is likewise necessary for off-label risk warnings in post-2001 approved drugs. 21 C.F.R. § 201.57(c)(6)(@). _21- Nor does the law encourage patients to look beyond their doctors and makers of the drugs they actually take for drug- related information. “[I}n the case of prescription drugs, the duty to warn runs to the physician, not to the patient.” Carlin, supra, 13 Cal.4th at p. 1116. Thus, even pharmacists who perform the generic substitution at the core of the Court of Appeal’s foreseeability analysis are not subject to liability merely for failure to warn. Otherwise, pharmacists “might restrict availability by refusing to dispense drugs which pose even a potentially remote risk of harm ....” Murphy v. E. R. Squibb & Sons, Inc. (1985) 40 Cal.3d 672, 680-681. [I]n order to assure that a pharmacy receives the maximum protection in the event of suit for defects in a drug, the pharmacist may select the more expensive product made by an established manufacturer when he has a choice of several brands of the same drug. Id. at p. 681. The Rowland duty analysis is concerned both with “<“the closeness of the connection between the defendant’s conduct and the injury suffered”’” and with ability to “prevent[] future harm” by “ensur[ing] that those ‘best situated’ to prevent such injuries are incentivized to do so” Kesner, supra, 2016 WL 7010174, at *5, *7, *9 (citations omitted). It would be anomalous in the extreme to impose liability on an ex-manufacturer of a different product a duty to warn users of generic drugs while at the 22 - same time exempting from such a duty the entire actual chain of distribution of the generic drug actually prescribed to Plaintiffs. More broadly, any time that product liability diverges from product manufacturing, significant misallocation of responsibility can occur. Negligent disclosure can be alleged against any product. Competing product manufacturers would thus risk liability whenever uniform, shared product standards are imposed 1 and chemicals”upon them -— as with motor vehicles,” airplanes, 7 — or when voluntarily shared industry standards result in identical product warnings. The American Society for Testing and Materials (“ASTM”) and the American National Standards Institute (“ANSI”) promulgate literally thousands of voluntary product safety standards that industry has adopted.”? 70 E.g., 49 C.F.R. § 571.208 (seatbelt and airbag-related warnings in passenger cars); 49 C.F.R. § 393.51 (pressure warnings for hydraulic brakes in commercial vehicles); 49 C.F.R. § 571.138 (low tire pressure warnings in commercial vehicles). *! The Federal Aviation Administration mandates uniform warnings for many aspects of aircraft operation. E.g., 14 C.F.R. § 29.1303 (airspeed and other flight warnings); 14 C.F.R. § 29.1413 (seatbelt warnings). 2 OSHA hazard communication regulations mandate uniform safety data sheets for many types of potentially toxic substances. See 29 C.F.R. § 1910.1200. °3 Searching the ASTM and ANSI websites can provide the Court with an understanding of the scope and extent of voluntary, uniform product safety standards in the United States and around the world. See ASTM website, (as of Nov. 27, 2016); ANSI website, (as (footnote continued on following page) 23 - For example, a single family may own different makes of cars, and in recent years automobile manufacturers have occasionally gone bankrupt or out of business altogether. May a plaintiff claim reliance on one company’s inadequate airbag, tire inflation, or infant car seat installation warnings with respect to a different car? The Court of Appeal’s negligence theory could create liability for non-manufacturers for injuries suffered in connection with cars that they did not make. Surviving companies that manufacture many kinds of products would be subject to unpredictable liability for products made by competitors that, for one reason or another, are later considered judgment proof. The Iowa Supreme Court articulated precisely these concernsin rejecting innovatorliability: [W]e decline [plaintiff's] invitation to step onto the slippery slope of imposing a form of innovatorliability on manufacturers for harm caused by a competitor's product. Where would such liability stop? If a car seat manufacturer recognized as the industry leader designed a popular car seat, could it be sued for injuries sustained by a consumer using a competitor’s seat that copied the design? Why not, under[plaintiff’s] theory, if it is foreseeable others will copy the design? Huck v. Wyeth, Inc. (lowa 2014) 850 N.W.2d 353, 380. (footnote continued from previous page) of Nov. 27, 2016). In any instance of uniform product warnings, a court following the pure foreseeability standard applied here could find someone’s reliance on a competing manufacturer’s identical warnings sufficiently predictable to imposeliability. 24 - Non-manufacturer theories of liability for product- related injuries could also inhibit innovation in high-technology industries. The high-tech sector has notoriously been plagued by piracy and reverse engineering of electronic hardware and software by unscrupulous competitors. It is certainly “foreseeable” — in the way the Courts of Appeal here and in Conte have misconstruedthis concept — that many people will utilize counterfeit copies of devices and applications that falsely attribute their origin to major manufacturers. Obviously, such manufacturers can neither profit from the theft of their intellectual property nor can they control the quality of pirated items. Just as “foreseeably,” however, some people will be injured by such products, either economically through viruses and other lurking malware, or physically when products of questionable origin malfunction. This situation can only become more acute as additive manufacturing (colloquially termed “3D printing”) allows individual consumers to manufacture actual products, even sophisticated medical devices,” on privately-owned printers using computer *4 “Online infringements ... have been rampant for decades and shows no signs of abating.” Kunkel, Indifference & Secondary Liability for Copyright Infringement (2016) 33 Santa Clara High Tech. L.J. 1, 1. Widespread copying of electronic information led to the enactment of the Digital Millennium Copyright Act in 1998. See Pub.L. No. 105-304, 112 Stat. 2860 (1998) (codified in scattered sections of 17 U.S.C.). 2° In 2016, a college student 3D printed his own orthodontic braces. See Kleeman, 3D Printing Your Own Braces Works, Is a Terrible Idea (March 15, 2016) Gizmodo, (as of Nov. 27, 2016). 26 “TA] 3D scanner can instantly create a CAD design by using lasers and cameras to scan the contours of an object.... Once created, a CAD file can be widely distributed like any other computerfile... .” Nicole A. Syzdek, Five Stages of Patent Grief to Achieve 3D Printing Acceptance (2015) 49 U.S.F. L.Rev. 335, 339 (fns. omitted). 77 Hornick, 3D Printing Will Rock the World (CreateSpace 2015) p. 159. 26 - product-related injuries caused by counterfeited imitations of questionable quality. The demand for innovator liability in such cases would be driven, not by preemption, nor by bankruptcy, but by plaintiffs’ sheer inability to litigate successfully against fly-by- night Internet-based entities located overseas. For good reason, this Court in Thing, supra, 48 Cal.3d at p. 668, refused to allow courts to “foresee forever,” and in O’Neil clipped the wings of the almost limitless “foreseeability” concept specifically as to product-related injuries. Product safety does not improve where “a manufacturer cannot be expected to exert pressure on other manufacturers to make their products safe.” O’Neil, supra, 53 Cal.4th 335 at p. 363. Logical risk-spreading would not be advanced, since non-manufacturers “will not be able to share the costs of ensuring product safety with these other manufacturers.” Id. Thus, as in O’Neil, “impos{ing] on manufacturers the responsibility and costs of becoming experts in other manufacturers’ products. . . . would impose an excessive and unrealistic burden.” Jd. (citation omitted). The novel negligence cause of action permitted by the Court of Appeal is fundamentally at odds with prior California precedent, runs roughshod over the policies that underlie the creation of product liability, and strips away time-tested limitations upon what is, at bottom, an action against a product manufacturer over warnings about a product-related risk. Unmooring liability for product-related injuries from a half-century of settled Jurisprudence 27 - could give rise to many unanticipated and unwanted consequences. This is precisely the sort of decision that should be made,if at all, by the Legislature, not the courts: Courts should be hesitant to impose new tort duties when to do so would involve complex policy decisions, especially when such decisions are more appropriately the subject of legislative deliberation and resolution. Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1104-1105 (citations and internal quotation marks omitted). C. Existing Due Diligence Requirements For Corporate Transactions Deter Concealment of Product Risks. Plaintiffs cannot validly argue that innovator liability serves to prevent predecessor companies from concealing potential product liability during the sale of corporate assets. This argument — unsupported by facts — is as unjustified as it is unprecedented. Current legal due diligence requirements already deter the possibility of concealment of product defects or adverse product events in connection with the sale of rights to such products. “[D]ue diligence is at a premium wheneverproductliability possibilities are suspected.” Bartlett, Equity Finance (Aspen Pubs. 2d ed. 2013) § 21.16 — Product Liability. “[A] comprehensive due diligence review of a manufacturing company must include an assessment of the company’s potential product liability exposure.” Bass & Redick, Products Liability: Design & Manufacturing Defects (2d ed. 2016) _ 28 - § 1:29. Buyers of corporate assets “must perform extensive due diligence and must investigate past environmental, labor and 2products liability actions of the seller . Solow & Israel, Buying Assets in Bankruptcy: A Guide to Purchasers (2000) 10 J. Bankr. L. & Prac. 87, 101.7% Thus, product manufacturers routinely “conduct internal investigations in response to allegations raised in product liability ... and in the performance of due ”diligence in connection with mergers and acquisitions.” Gitterman, Ethical Issues & Practical Challenges Raised by Internal Investigations in the Life Sciences Industry (2013) 80 Def. Couns. J. 372, 374-375 (fn. omitted). Corporate managers and officers are required to exercise due diligence in the management of corporate affairs. In the context of a merger or acquisition, due diligence refers to the analysis and investigation of the target company managers of the prospective acquirer are expected to carry out. In other words, due diligence is the research and analysis the acquirer must conduct to obtain all relevant information necessary to make an informed and reasoned decision about the desirability of the acquisition. 78 “Due diligence” investigation of product liability exposure includes: (a) liability potential; (b) contractual protection from liability; (c) product liability insurance; (d) pending and threatened litigation; (e) resolved claims; (f) studies of productliability risk; (g) product recalls; (h) successor corporation liability. See 1 Corporate Counsel’s Guide to Acquisitions & Divestitures (Thompson Reuters- 2016) § 3:7 (comprehensive checklist for acquisition or divestiture). 29 . Brown, Grandfathering Can Seriously Damage Your Wealth: Due Diligence in Mergers & Acquisitions of Medical Device Companies (2000) 36 Gonz. L.Rev. 315, 338 (fns. omitted). Product liability exposure is precisely the sort of “contingent liability” subject to due diligence in corporate acquisitions. /d. at pp. 343-344. As in other areas, those acquiring product lines may seek recovery from their sellers should product liability risks be inaccurately disclosed. Should a corporate seller fail to disclose known or suspected product liability risks in connection with a transaction, the buyer, under either contractual provisions or long- standing common-law indemnity principles, may seek recovery ofits losses from the seller. See Kazerouni v. De Satnick (1991) 228 Cal.App.3d 871, 873 & fn. 3 (purchaser of business in reliance on seller’s warranty may recoverforits breach). The value of an indemnity — a promise to pay for the correction of any future problems or settlement of claims — from the seller relates directly to the availability of the assets backing the promise .. Problems which have been identified in due diligence, but have not yet been asserted as claims or demands, are problems which mayripen into claims. . Shecter, Selected Risk Issues in Merger & Acquisition Transactions (1997) 51 U. Miami L.Rev. 719, 757. Thus, the threat of litigation already deters tortious behavior in the context of corporate transactions, making it unnecessary to create novel negligence duties - 30 - owed to remotely situated individuals such as purchasers of products manufactured long after the transaction at issue.” Furthermore, liability for inaccurate representations and warranties made by sellers to buyers in the context of corporate acquisitions is insurable. “[R]epresentations and warranties insurance [is] increasingly used in private mergers and acquisitions.” Cunningham, Too Big to Fail: Moral Hazard in Auditing & the Need to Restructure the Industry Before It Unravels (2006) 106 Colum. L.Rev. 1698, 1744 (fn. omitted). Such insurance “is used in acquisition agreements to allocate risks from breaches of representations or warranties,” similar to title insurance in the real estate market. Cunningham, Choosing Gatekeepers: The Financial Statement Insurance Alternative to Auditor Liability (2004) 52 UCLA L.Rev. 413, 447 fn. 134. The “insurer’s underwriting consists of reviewing the due diligence process, though not repeating it.” Id.*° 9 Since 2000,litigation over productliability-related disclosures in corporate transactions includes: Genesis Merchant Partners, L.P. v. Nery’s USA, Inc. (S.D.Cal. June 30, 2016, No. 1lcv1589 JM(WVG)) 2016 WL 3548497, at *2 fn. 3; Schweizer v. Sikorsky Aircraft Corp. (W.D.N.Y. Feb. 8, 2011, No. 10-CV-6547) 2011 WL 542355, at *2; Weed Wizard Acquisition Corp. v. A.A.B.B., Inc. (N.D.Ga. 2002) 201 F.Supp.2d 1252, 1259. 3° See Tetler, Buying and Selling a Privately Owned Business, § 7.11(e) (Mass. CLE 2d ed. 2012 & Supp. 2016) (such insuranceis written “on an occurrence basis” if carried by the seller, “on a claims-made basis,” if carried by the buyer, and may include (footnote continued on following page) - 31 - By contrast, innovator liability as urged by Plaintiffs is inherently uninsurable, as it involves other manufacturers’ products. O’Neil, supra, 53 Cal.4th at p. 365; cf. Kesner, supra, 2016 WL 7010174, at *8 (risk insurable at the time). A corporate “seller’s current insurance policies will neither apply to buyer post- acquisition, nor cover the specific risks of concern to buyer.” Ibrahim, The Unique Benefits of Treating Personal Goodwill As Property in Corporate Acquisitions (2005) 30 Del. J. Corp. L. 1, 41 (fn. omitted). Innovator liability, as it arises from events involving unaffiliated corporations, is extraneous to corporate transactions and thus totally unpredictable. Predictability is vital in the corporate field. Unforeseeable alterations in successor liability principles complicate transfers and necessarily increase transaction costs. Major economic decisions, critical to society, are best made in a climate ofrelative certainty and reasonable predictability. |The imposition of successor liability on a purchasing company long after the transfer of assets defeats the legitimate expectations the parties held during negotiation andsale. Monarch Bay II v. Professional Service Industries, Inc. (1999) 75 Cal.App.4th 1213, 1218 (Monarch Bay II) (citation and internal quotation marks omitted). Innovatorliability thus cannot be justified (footnote continued from previous page) “special polic[ies] relating only to products manufactured by the seller prior to the closing”). -32- aS a measure that would maintain the integrity of corporate transactions.*! YI. Conclusion For the reasons stated above, and for the reasons stated in Novartis’ Opening Brief on the Merits and Reply Brief on the Merits, this Court should accordingly reverse the judgment of the Court of Appeal to the extent that it reversed the judgment of the Superior Court in Novartis’ favor. 31 Analogously, the strict liability concept of “product line liability” — successor liability for defective products made by a corporate successor — has never been extended beyond the “narrow circumstances” ofstrict liability. E.g., Beatrice Co. v. State Bd. of Equalization (1993) 6 Cal.4th 767, 779 (refusing to extend product line exception to contractual obligations); Franklin v. USX Corp. (2001) 87 Cal.App.4th 615, 628-629 (same, premises liability); Monarch Bay IT, supra, 75 Cal.App.4th at pp. 1217-1218 (same; professional negligence); Maloney v. American Pharmaceutical Co. (1988) 207 Cal.App.3d 282, 289-290 (same; negligent manufacture of a drug). - 33 - DATED: December 7, 2016 Respectfully submitted, Hugh F. Young,Jr. PRODUCT LIABILITY ADVISORY COUNCIL, INC. REED S By David%. Stanley James M. Beck Attorneys for Amicus Curiae Product Liability Advisory Council _ 34 - CERTIFICATE OF WORD COUNT PURSUANT TO RULE8.520(c) The foregoing Proposed Amicus Curiae Brief contains 6,535 words (including footnotes, but excluding tables and this certificate). In preparing this certificate, I have relied on the word count generated by Microsoft Office Word 2010. I declare under penalty of perjury that the forgoing is true and correct and that this declaration is executed on December7, 2016, at Los Angeles, California. David E. fanley _ 35 - Corporate Membersof the Product Liability Advisory Council as ofNovember 4", 2016 3M Altec, Inc. Altria Client Services LLC Astec Industries Bayer Corporation BIC Corporation Biro Manufacturing Company, Inc. BMWofNorth America, LLC The Boeing Company Bombardier Recreational Products, Inc. Boston Scientific Corporation Bridgestone Americas, Inc. Bristol-Myers Squibb Company C. R.Bard, Inc. Caterpillar Inc. CC Industries, Inc. Celgene Corporation Chevron Corporation Cirrus Design Corporation Continental Tire the Americas LLC Cooper Tire & Rubber Company Cordis Corporation Crane Co. Crown EquipmentCorporation Daimler Trucks North America LLC Deere & Company Delphi Automotive Systems The Dow Chemical Company E.I. duPont de Nemours and Company EmersonElectric Co. Exxon Mobil Corporation FCA US LLC Ford Motor Company Fresenius Kabi USA, LLC la General Motors LLC Georgia-Pacific LLC GlaxoSmithKline The Goodyear Tire & Rubber Company Great Dane Limited Partnership Hankook Tire America Corp. Harley-Davidson Motor Company The Home Depot Honda North America,Inc. Hyundai Motor America Illinois Tool Works Inc. Intuitive Surgical, Inc. Isuzu North America Corporation Jaguar Land Rover North America, LLC Jarden Corporation Johnson & Johnson Kawasaki Motors Corp., U.S.A. KBR,Inc. Kia Motors America,Inc. Kolcraft Enterprises, Inc. Lincoln Electric Company MagnaInternationalInc. Mazak Corporation Mazda Motor of America, Inc. Medtronic, Inc. Merck & Co.,Inc. Meritor WABCO Michelin North America, Inc. Microsoft Corporation Mitsubishi Motors North America,Inc. Mueller Water Products Novartis Pharmaceuticals Corporation Novo Nordisk,Inc. Pella Corporation Corporate Membersof the Product Liability Advisory Council Pfizer Inc. Polaris Industries, Inc. Porsche Cars North America, Inc. RJ Reynolds Tobacco Company Robert Bosch LLC SABMiller Plc The Sherwin-Williams Company St. Jude Medical, Inc. Stryker Corporation Subaru of America, Inc. Takeda Pharmaceuticals U.S.A., Inc. TAMKOBuilding Products, Inc. Teleflex Incorporated Toyota Motor Sales, USA,Inc. Trinity Industries, Inc. U-HaulInternational The Viking Corporation Volkswagen Group ofAmerica, Inc. Volvo Cars ofNorth America, Inc. Wal-Mart Stores, Inc. Western Digital Corporation Whirlpool Corporation Yamaha Motor Corporation, U.S.A. Yokohama Tire Corporation ZF TRW Zimmer Biomet 2a PROOF OF SERVICE I am a resident of the State of California, over the age of eighteen years, and not a party to the within action. My business address is REED SMITH LLP, 355 South Grant Avenue, Suite 2900, Los Angeles, CA 90071-1514. On December 7, 2016, I served the following document(s) by the method indicated below: APPLICATION OF PRODUCTLIABILITY ADVISORY COUNCIL, INC. FOR PERMISSION TO FILE AMICUS CURIAE BRIEF AND PROPOSED AMICUS CURIAE BRIEF SUPPORTING DEFENDANT AND RESPONDENT NOVARTIS Xx PHARMACEUTICALS CORP. by placing the document(s) listed above in a sealed envelope with postage thereon fully prepaid, in the United States mail at Los Angeles, California addressed as set forth below. I am readily familiar with the firm’s practice of collection and processing of correspondence for mailing. Under that practice, it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if the postal cancellation date or postage meter date is more than one day after the date of deposit for mailing in this Declaration. I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on December 7, 2016, at Los Angeles, Ne, LLL wv . Veronica Barrega T.H., A Minoretc., et al. v. Novartis Pharmaceuticals Corporation California Supreme Court Case No. $233898 Court of Appeal, Fourth Appellate Dist., Div. One, Case No. D067839 SERVICE LIST Benjamin I. Siminou Kevin F. Quinn Thorsnes, Bartolotta, McGuire LLP 2550 Fifth Avenue, 11th Floor San Diego, CA 92103 Tel: 193 236-9363 Fax: (619) 236-9653 Attorneys for Plaintiffs and Appellants, T.H., a Minor, et al. Leslie A. Brueckner Public Justice PC 555 12th Street, Suite 1230 Oakland, CA 94607 Tel: 213} 622-8150 Fax: (510) 622-8155 Attorneys for Plaintiffs and Appellants, T.H., a Minor, et al. Erin M. Bosman Julie Y. Park Morrison & FoersterLLP 12531 High Bluss Drive San Diego, CA 92130 Tel: 28) 720-5100 Fax: (858) 720.5125 Attorneys for Defendant and Respondent,Novartis Pharmaceuticals Corporation Eric G. Lasker Joe G. Hollingsworth Hollingsworth LLP 1350 I Street NW Washington, D.C. 20005 Tel: (202) 898-5800 Fax: (202) 682-1639 elasker@hollingsworthllp.com Attorneys for Defendant and Respondent, Novartis Pharmaceuticals Corporation Clerk of the Court of Appeal Fourth Appellate District Division One 750 B Street, Suite 300 San Diego, CA 92101 Appellate Court Case No. D067839 Clerk, for the Hon. Joan M. LewisSan Diego County Superior Court330 West Broadway, Dept 65San Diego, CA 92101 Trial Court