Dechert Re:Torts is a monthly newsletter covering news and developments related to product liability and mass torts litigation.

Inside this issue:

• Testing the Waters: The Implications of Loper Bright on EPA’s New PFAS Regulations
• AI Misfires Again: Lawyers Caught in the Web of Fictitious Cases as ABA Weighs In
• Third Circuit Affirms Use of Lone Pine Order to “Winnow Non-Compliant Cases from MDL”
• Michigan Supreme Court Asked to Determine Learned Intermediary Doctrine

Regulatory Review

Testing the Waters: The Implications of Loper Bright on EPA’s New PFAS Regulations

In the past year, the U.S. Environmental Protection Agency (“EPA”) finalized several significant rules to regulate per- and polyfluoroalkyl substances (“PFAS”). Among the most notable, EPA established Maximum Contaminant Levels (“MCLs”) for six PFAS and designated Perfluorooctanoic acid (“PFOA”) and Perfluorooctanesulfonic acid (“PFOS”) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). The new regulation has already been subjected to legal challenges. See, e.g., Am. Water Works Ass’n v. EPA, No. 24-1188 (D.C. Cir.) (consolidating petitions for review). The U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), in June, potentially bolstered those challenges by eliminating an advantage that administrative agencies have used often to defend against regulatory challenges for the past four decades.

In Loper Bright, the Court overturned Chevron v. Natural Resources Defense Council, 467 U.S. 837 (1984). Under Chevron and subsequent cases, courts afforded binding deference to “permissible” agency interpretations of ambiguous statutory provisions. Id. at 843. Notwithstanding this forty-year-old precedent, the Loper Bright Court held that the Chevron doctrine was contrary to the traditional role of judges and the express provisions of the Administrative Procedure Act. The overturning of Chevron reflects a trend to limit agency authority – the Supreme Court had not applied Chevron deference since 2016. Loper Bright, 144 S. Ct. at 2269. Still, the precise impact of Loper Bright remains uncertain and may not become apparent for some time. Although the Court’s decision does not invalidate prior agency actions that were upheld by courts applying Chevron, it did not preclude future challenges to agency regulations and actions to enforce them. And the decision both expanded the grounds for mounting such challenges and increased the likelihood of their success.

Given the multiple pending challenges to EPA’s recent rulemakings, there is strong incentive and opportunity to test the agency’s interpretive authority. Certain pending challenges may use Loper Bright to establish that EPA exceeded its authority to promulgate the CERCLA and MCL regulations. Yet the strength of any challenge to EPA’s interpretation of its statutory authority may still “‘depend upon the thoroughness evident in [the agency’s] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade.’” Loper Bright, 144 S. Ct. at 2259 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)). Thus, while Loper Bright could strengthen challenges to agency rulemakings, it does not guarantee their success.

Takeaway: Post Chevron, it will be important to monitor (1) efforts to leverage Loper Bright and fold it into regulatory challenges, (2) the extent to which agencies adapt their approaches to rulemakings or alter their regulatory agendas, (3) the emerging frameworks by courts to review rulemakings, and (4) Congress’s response to renewed pressure to use more precise language in legislation.

Hot Topics

AI Misfires Again: Lawyers Caught in the Web of Fictitious Cases as ABA Weighs In

As the legal community increasingly adopts generative artificial intelligence (“AI”) tools, the need for caution and accountability becomes more critical. We previously observed growing concerns surrounding the misuse of generative AI tools and highlighted instances where reliance on such tools resulted in the citation of non-existent cases and suspensions from practice.

The potentially problematic use of generative AI continues to unfold. A federal judge in Virginia recently ordered a plaintiff’s lawyers to show cause why they should not be sanctioned or reported to their state bars for apparently citing fictitious legal authority in a court filing. The controversy centers on two cited cases that do not seem to exist, along with fabricated quotes purportedly from U.S. Supreme Court and Fourth Circuit opinions. Defense counsel highlighted these discrepancies in an opposition brief, describing them as “ChatGPT run amok.” Instead of explaining the origin of the “seemingly manufactured citations and quotations,” as the judge emphasized in his opinion, the plaintiff’s lawyers filed a statement of supplemental authority. The judge described the attorneys’ silence on the matter as “deafening,” which led to the order to determine their accountability.

In their show cause response, the plaintiff’s lawyers embraced the transformative use of generative AI and their cost efficiencies. See Resp. to Order to Show Cause and Decl. of Thad M. Guyer, Iovino v. Michael Stapleton Assocs., Ltd., No. 21-00064 (W.D. Va. Aug. 26, 2024), ECF [191] & [191-1]. Among other things, they argued that “unrelenting sales forces” promote Generative Pre-trained Transformers, that the miscited cases exist, that the legal propositions were “misquot[ed]” but “accurate,” and that defense counsel should have notified them of the errors informally. The lawyers also argued that their mistakes, while serious, did not warrant sanctions, and urged the court to consider the absence of bad faith and the corrective actions they implemented, namely “additional electronic review processes” combined with human oversight.

Coincidentally, less than a week after the show cause order, the American Bar Association issued its first formal opinion on the ethical use of AI tools. The opinion reaffirms the lawyer’s duty to meet the standards in Model Rule 1.1 concerning competent representation and stresses continuous education on AI developments, proper verification of AI-generated information, and the ethical imperatives to avoid making false statements in court or engaging in misrepresentations. It also examines confidentiality under Model Rule 1.6, highlighting the necessity to evaluate risks when inputting client data into AI tools to prevent unauthorized disclosures.

These two events are stark reminders that while generative AI tools can offer significant efficiencies and benefits, they also demand oversight and accountability. Lawyers must not only embrace AI responsibly but also take full responsibility for its output.

Takeaway: The ABA’s recent opinion on the ethical use of AI, amidst yet another controversy involving fictitious legal citations, serves as a crucial reminder of the importance of competent representation, continuous education, and proper verification of AI-generated information.

MDL Minute

Third Circuit Affirms Use of Lone Pine Order to “Winnow Non-Compliant Cases from MDL”

The Third Circuit recently affirmed the dismissal with prejudice of 1,189 cases in a multidistrict litigation alleging that Zostavax, Merck & Co Inc.’s shingles vaccine, caused plaintiffs to develop shingles. In affirming the dismissal, the Third Circuit held that the District Court did not abuse its discretion in issuing a Lone Pine order requiring plaintiffs to provide medical tests to support their claims. See In re: Zostavax (Zoster Vaccine Live) Prods. Liab. Litig., 2024 WL 3423709 (3d Cir. July 16, 2024).

Defendant Merck previously sought a Lone Pine order requiring plaintiffs to produce PCR tests as prima facie evidence of specific causation. Id. at *2. The District Court granted the motion, citing “compelling medical authority” suggesting that a PCR test “is the only way” to establish specific causation. Id. After 1,189 plaintiffs did not submit PCR tests and therefore failed to comply with the order, the District Court dismissed the claims with prejudice. Id.

In affirming the District Court’s decision, the Third Circuit explained that a Lone Pine order requires plaintiffs to “produce threshold prima facie support for their claims,” to “streamline litigation in mass tort cases.” Id. at n.16 (citing Lore v. Lone Pine Corp., 1986 WL 637507, at *4 (N.J. Super Ct. Nov. 18, 1986)). “[A]n MDL court,” therefore, “needs to have broad discretion to enter Lone Pine orders that drive disposition on the merits” and fulfill its case management function. Id. at *3 (citation omitted).

The Third Circuit rejected plaintiffs’ argument that the District Court’s order was improper because the evidence was impossible to produce, as none of the plaintiffs had ever been PCR tested. Id. at *2-3. The Court explained, “if a Lone Pine order could only require the production of evidence that already exists or can be created, it would fail to serve” the “express goal of a Lone Pine Order” which is “to winnow non-compliant cases from an MDL.” Id. at *3 (citation omitted).

The Third Circuit also rejected plaintiffs’ argument that dismissal at this stage was inappropriate. According to the Court, “[i]t would have been pointless to allow the [] cases to proceed to summary judgment because plaintiffs failed to explain how they could prove specific causation without PCR tests.” Id. at *4. Moreover, the cases had been “at a standstill for over a year with nothing to indicate they could ever succeed on the merits” and “[c]ontinuing to carry 1,189 non-meritorious cases on the MDL docket would be severely prejudicial to Merck.” Id. at *5 (citation omitted). Therefore, it was within the District Court’s case management role to dismiss the cases for non-compliance with its order under Rule 41(b).

Takeaway: Lone Pine orders can be an effective case management tool in large MDLs to dismiss cases that do not comply with threshold requirements to make a prima facie showing of causation. Defendants should consider opportunities to seek similar orders to winnow down ever-growing MDL dockets.

Jurisdictional Jabber

Michigan Supreme Court Asked to Determine Learned Intermediary Doctrine

A Michigan federal court recently declined to dismiss a failure-to-warn claim in a medical device case based on the learned intermediary doctrine pending a response to questions certified to the Michigan Supreme Court. Osos v. NuVasive, Inc., 2024 WL 3585092, at *5 (E.D. Mich. July 30, 2024). This doctrine generally provides that the manufacturer of a prescription pharmaceutical or device has a duty to warn the prescribing physician of the risks of the product—but not the patient.

Relying on Brown v. Drake-Willock International, Ltd., 530 N.W.2d 510 (Mich. Ct. App. 1995), the defendant-manufacturer argued that the learned intermediary doctrine applied under Michigan law. Osos, 2024 WL 3585092, at *3. However, Brown is one of several cases where Michigan’s Court of Appeals relied on dictum in Smith v. E. R. Squibb & Sons, Inc., 273 N.W.2d 476 (Mich. 1979) that “[a] manufacturer of a prescription drug has a legal duty to warn the medical profession, not the patient, of any risks inherent in the use of the drug which the manufacturer knows or should know to exist.” See Osos, 2024 WL 3585092, at *3. Because Smith left federal courts “unsure of whether the doctrine applies in Michigan,” the learned intermediary question was first certified to the Michigan Supreme Court in 1984. Id. at *4. But the Court avoided the question, explaining that Smith “did not establish or represent a rule of law” and that “the Legislature [was] in a better position to allocate those duties.” In re Certified Questions from U.S. Dist. Ct. for E. Dist. of Mich., 358 N.W.2d 873 (1984). Forty years later, the Michigan Supreme Court is once again faced with this question.

At least fourteen other state supreme courts have not weighed in on whether the learned intermediary doctrine applies, and application of the doctrine remains ambiguous in several states. However, Osos is not the only recent example of state supreme courts clarifying the learned intermediary doctrine. For instance, while the California Supreme Court has definitively adopted the doctrine, the United States Court of Appeals for the Ninth Circuit recently asked that Court whether a plaintiff could establish causation by showing that the physician would have informed the plaintiff of a stronger warning and that a prudent person in the patient’s position would have declined treatment. See Himes v. Somatics, LLC, 16 Cal. 5th 209, 219 (2024). In June, the California Supreme Court held that “[a] plaintiff is not required to show that a stronger warning would have altered the physician’s decision” and “may instead establish causation by showing that the physician would have communicated the stronger warning to the patient and an objectively prudent person in the patient’s position would have thereafter declined the treatment notwithstanding the physician’s continued recommendation of the treatment.” Id. at 235–36. The Himes court also rejected the plaintiff’s argument that “if a manufacturer fails to provide an adequate warning to the physician, then the doctrine is rendered inapplicable, and the manufacturer must warn the patient directly.” Id. at 224.

Takeaway: A Michigan federal court has referred questions about the learned intermediary doctrine to Michigan Supreme Court. This development mirrors other state courts addressing this legal principle, as Michigan’s highest court is now tasked with determining whether the doctrine exists under state law and, if so, under what circumstances it applies.