In Light of Xarelto Lawsuits – Here’s a Refresher on Products Liability Law

Michael GrossmanSeptember 16, 2016 15 minutes

Most people take for granted that when a defectively designed or dangerous product hurts people, the manufacturer can be held accountable for releasing that product into the marketplace. Most people appreciate (and all enjoy) the fact that our country's products laws place a burden on manufacturers to create safe products. Nevertheless, a fairly significant minority of people subscribe to the belief that the market should be ruled by the old doctrine of caveat emptor or "buyer beware."

The law largely comports with the beliefs of the first group, but this is a relatively recent legal innovation, which helps to explain the persistence of the caveat emptor crowd. Regardless of what camp you find yourself in, many people are unaware of why the law treats dangerous goods the way it does and how it came to be. By examining a present day controversy, such as the multi-district litigation (MDL) over the potential dangers of the drug Xarelto (rivaroxaban), we can gain a better insight into how this area of the law works and why we hold manufacturers accountable for dangerous and defective products.

A Brief History of Products Liability Law

Unlike other areas of the law, like wrongful death, premises liability, or contract law, products liability law is a relative newborn. Until the late 19th and early 20th century, products liability law did not exist in its own right, rather it was treated as matter of contract law.

The reason for this treatment may seems strange, but legally speaking, every purchase you make is legally a contract. When you fill up your car, buy shoes, or have dinner in a restaurant, you are contracting with those businesses for goods or services. While it may seem strange today to treat the injuries that arise from these purchases as contract law, without distinct products liability in the common law that it the only legal tool available to the injured.

Pre-20th Century Products Liability Law

For the majority of our nation's history, contract law was the only legal remedy in the event someone was injured by a defective product.

Things went something like this. Cotton would buy whiskey from Ezekiel and if Cotton went blind from Ezekiel's poisonous whisky, he could seek remedy in court, but the case would be pursued as contract law. Under the law, Cotton's standing to bring suit would have rested on what was known at the time as privity of contract.

Viewed through the lens of contract law, Cotton's cause of action would be breech of contract. He would argue that he contracted to purchase goods that were fit for human consumption, therefore the injurious whiskey was misrepresented by Ezekiel. In order to make this claim, Cotton would need privity of contract, or the standing that accrues by the fact that it is he who entered into the contract with Ezekiel. More simply put:

  1. A sale is a contract
  2. Cotton and Ezekiel entered into a contract
  3. Each side obtained rights and obligation because they personally agreed to the contract

Privity of contract was a standard established by an English court in the case of Winterbottom v. Wright. Mr. Winterbottom was a mail carrier who was injured when his carriage suffered a mechanical failure. He sued his employer for the injury, but the court found that the employer didn't make the carriage (although they did purchase it) and therefore was not negligent.

You might think that Mr. Winterbottom would go after the manufacturer, who his employer purchased the carriage from, but under the privity of contract doctrine, the manufacturer didn't owe Mr. Winterbottom a duty, because they never transacted business together. These means that there was no contract between the two parties and it was therefore impossible for the carriage-maker to have made any representations to Mr. Winterbottom.

The court reached this decision because they felt that the stream of commerce was ultimately a potentially infinite number of transactions, which meant that theoretically the person who purchased the carriage from the person who purchased the carriage could have standing under any other rule and they weren't particularly inclined to weigh in on the issue.

Things got more complicated when other parties were involved. Suppose Cotton bought Ezekiel's whiskey and then resold it to Hezekiah and Hezekiah suddenly went blind after drinking the whiskey. Even though Ezekiel was the one who manufactured the whiskey, Hezekiah didn't enter into a contract with Ezekiel, his contract is with Cotton.

In theory, Hezekiah could pursue a claim against Cotton, but as with any other injury case, there is the question of foreseeability. There's really no way Cotton could have foreseen that the whiskey would make Hezekiah go blind, since he didn't make the whiskey.

Given that most commerce was local and conducted face-to-face, this clunky system worked relatively well until the late 19th century. That ushered in the era of mass production and producers increasingly relied on retailers to sell their product to the general public. The larger scale of production also meant that instead of injuring a few people, a bad batch of whiskey or another product could injure hundreds or thousands of people. Changes in the steam of commerce necessitated changes in how the law treated the dangers posed by consumer goods.

MacPherson v. Buick Motor Company (1916) Changes Everything

While the English jurists who decided Winterbottom were little inclined to ponder where the lines of potential manufacturing liability would be drawn, the question sparked a large amount of legal scholarship on both sides of the Atlantic, with American attorneys being particularly interested.

Their labor came to fruition in the case of MacPherson v. Buick Motor Company (1916). The case arose when Donald MacPherson purchased a Buick from a dealership. He was later driving the car when one of the spokes, made of sub-standard wood, disintegrated. In the resulting crash, Mr. MacPherson suffered injuries and filed suit against Buick, the manufacturer of the car.

Under the old doctrine of privity of contract, Mr. MacPherson would not have had a case against Buick, since Buick had no direct dealings with Mr. MacPherson. However, the New York Supreme Court, in a decision written by future Supreme Court Justice Benjamin Cardozo, decided otherwise.

Instead of treating Mr. MacPherson's case as a matter of contract law, as courts had done up until this point, the New York Supreme Court viewed the case as a tort. The significance of this is that unlike contract law, which considers whether or not the duties of a contract are fulfilled, tort law concerns itself not only with duties, but also with negligence. Unlike contract law, the duties that are owed under tort law do not arise by consent of the parties, but exist simply because one party has chosen to undertake an activity.

For example, a car manufacturer, by virtue of getting into the business of making cars, has a duty to ensure that the products they make are properly manufactured and not unreasonably dangerous to consumers. Prior to MacPherson this idea did not have the force of law. The court applied a different area of the law because it reasoned that the manufacturer was in the best position to ensure that a product was safely made.

The key part of the decision reads as follows:

If the nature of a thing is such that it is reasonably certain to place life and limb in peril when negligently made, it is then a thing of danger. Its nature gives warning of the consequences to be expected. If to the element of danger there is added knowledge that the thing will be used by persons other than the purchaser, and used without new tests, then, irrespective of contract, the manufacturer of this thing of danger is under a duty to make it carefully.

Thus was born what is now known as products liability law.

The Maturing Body of Products Liability Law

MacPherson applies the standards of personal injury law to defective products, in the process creating products liability law. Unlike the Winterbottom contract theory that ruled the day previously, MacPherson offers a new way for the law to view dangerous products. Most simply put, it would read:

  1. Manufacturers owe a duty to ensure that their products are safe;
  2. Failing to fulfill this duty is a form of negligence;
  3. When that negligence causes injury, consumers have a legal remedy;
  4. This remedy affords the injured a means to recover damages.

In a nutshell, that formula became how we hold manufacturers accountable for the injuries their products cause.

Today, this form of liability is known as negligence theory of liability. From this two separate, but distinct theories of liability have emerged, breach of warranty and strict liability. Understanding all three forms of liability and their origins is crucial for understanding why the lawsuits, like those against the manufacturer of Xarelto are such a big deal.

Breach of warranty is best thought of as a marriage between contract law and negligence theories of liability. Most of us are familiar with the warranties that come with many of the goods and services that we purchase every day. These warranties are usually found on little sheets of paper that come with whatever product we purchase. The most familiar type of warranty may be the car warranty. It says that the manufacturer promises that certain parts will not fail over a specific time period or distance, and that if they do, the manufacturer will cover the costs of replacement. These are known as express warranties, because, like a contract, they spell out specific duties of the manufacturer to the seller.

Another type of warranty is an implied warranty. These warranties exists because of industry and government standards, as well as common consumer expectations. They differ from express warranties in that they are not specified, but covered by the very nature of the product being sold.

A great example is the Ford Mustang. We all know that Mustangs are relatively fast cars, that purport to offer better speed than a Ford Focus. Suppose you bought a Ford Mustang that for whatever reason could not go faster than 30 mph. There isn't anywhere in the express warranty that Ford offers that says your new Mustang will go faster than 30 mph. If you get a car like this, what's to stop Ford from claiming, "We never said that your Mustang could go faster than 30 mph?"

The answer is the implied warranty. This is 2016, not 1916. Every car that is sold in the United States is expected to be able to faster than 30 mph. This expectation creates an implied warranty.

When dealing with something like a prescription drug, it can be argued that consumers would expect a drug to function like its competitors, or similar to the drug it intends to replace in the marketplace. This will prove crucial when examining the litigation surrounding Xarelto.

The last type of liability, strict liability, is perhaps the most common sense of all forms of liability. Rather than alleging negligence, like in tort law, or a breach of warranty, like in contract law, strict liability argues that a product dangerous or defective in and of itself. As such, the product should have never been on the marketplace.

An example of such a product would be a glass chainsaw. Regardless of how well-made the product is, it's still made of glass, a material unsuited for safely cutting wood. Certainly, most products that are inherently dangerous are not as absurd as a glass chainsaw, but it illustrates the underlying principle that some products can never safely enter the steam of commerce.

Components of strict liability can include manufacturing defects, design defects, and failures to warn. Each of them addresses the intrinsic dangers of an object in their own ways. Sticking with chainsaws for a moment (real ones, not the mythical glass variety), while dangerous machines, they still serve a vital purpose and when properly manufactured can be used in a relatively safe manner. However, if there is a manufacturing defect, a reasonably safe device can be rendered unnecessarily dangerous. Similarly, if a chainsaw is poorly designed it can add unnecessary risks to the user. Lastly, it cannot be assumed that every reasonable person who purchases a chainsaw is familiar with how to properly use one, which given the dangers of associated with the device, necessitates an instruction manual and various warning sticks on the machine itself.

While some may argue that these duties imposed upon manufacturers are burdensome and drive of the costs of goods, what cannot be argued is that every manufacturer is aware of these duties and chooses to assume them by getting into business. It would be akin to saying that agreeing to follow traffic signals, speed limits, and carry insurance is burdensome for drivers. It certainly is, however those burdens are not only the price of driving, but most people agree they make the road a safer place for everyone. Similarly, the standards imposed by products liability law make products safer for all consumers.

Most importantly, the only alternatives to products liability law are a return to caveat emptor, buyer beware, or increased role for the government in the regulation of consumer goods. Oddly, the folks who take the biggest offense at products liability law and suing questionable manufacturers are the same folks who have the biggest reservation about a larger government role in the economy.

While I may be biased, since I work at a law firm, it seems like a much easier proposition to regulate the galaxy of products that are available for sale in the United States through products liability law than to have an army of technocrats trying to tell companies how to properly make each and every one of the hundreds of thousands of products for sale in this country.

This is before even considering that it is individuals who are hurt and deserve compensation for their injuries. A bureaucratic system can never supply the remedies to the people who were actually hurt that our civil justice system can. Can anyone really imagine a system of justice where those who are actually the victims of injustice have no remedy?

Xarelto Lawsuits and Why We Hold Manufacturers Accountable

Perhaps there is no better illustration of all of the different facets of products liability law than the current multi-district litigation involving 6,600 plaintiffs and the makers of the drug Xarelto. In one way or another the plaintiffs' arguments touch on each area of products liability law.

For those unfamiliar with the Xarelto cases, here's a quick synopsis: Xarelto (rivaroxaban) is a prescription blood-thinner developed by Janssen Pharmaceuticals and marketed by Bayer. It is designed to be a safer alternative than warfarin to treat and prevent blood clots. However, unlike warfarin, there is no antidote to Xarelto when an uncontrolled bleeding event occurs. This can result in serious injury or death. There are also questions regarding the safety tests that Janssen conducted in order to gain Food and Drug Administration approval.

Xarelto and Negligence

One of the strongest arguments that the plaintiffs have in their arsenal is a negligence argument based upon the fact that their is no antidote to Xarelto. The effects of warfarin, the standard blood-thinner over the past 60 years, can be reversed during an emergency bleeding event by administering a dose of vitamin K. The need for an antidote was understood by Janssen before Xarelto was ever on the market, as development for an antidote began before that time. A similar drug Pradaxa, which has already settled a similar lawsuit, has seen an antidote developed and approved within the past year. With regards to Xarelto, it's not even a question of whether Janssen should have been able to foresee a problem, their own behavior shows they did.

The lack of an antidote dovetails into a breach of warranty argument, which we'll tackle a bit later

The most potentially damning negligence argument involves allegations that Janssen manipulated their test subject group to gain FDA approval. Some plaintiffs allege that Janssen chose test groups, which skewed younger and healthier than the people who were likely to be the drug's biggest users. This could give the drug the appearance of being far safer than it actually is. If it was done intentionally, it could add a civil conspiracy cause of action to the plaitniffs' cases, but even if a jury gives Janssen the benefit of the doubt, poorly designed safety studies would at the very least amount to negligence.

Such an argument would likely come down to a battle of experts, since pharmaceutical safety and efficacy studies are carefully designed and their is little reason to doubt that Janssen did not have its reasons for choosing the study group in the manner that it did.

What makes this argument so powerful is that it very likely crosses the line from regular negligence, to gross negligence. This could make potential Xarelto cases some of the rare cases where it is possible that plaintiffs will be able to obtain punitive damages. This could greatly increase the compensation that plaintiffs receive, while providing a powerful incentive for pharmaceutical companies to behave more ethically in the future.

Xarelto and Breach of Warranty

Some of the most serious allegations in the Xarelto lawsuits involve breach of warranty claims. The most serious of these revolve around the lack of an antidote. Plaintiffs can argue that the lack of an antidote is not only an act of negligence, but both a violation of the express warranty and the implied warranty. This may strike some as odd, but when you dig into products liability law, it makes sense.

As we mentioned before, express warranties are generally like your car warranty, with the benefits spelled out. However, an express warranty can also comes into being in situations where not saying something creates a false impression in the consumer's minds. Again, we return to the lack of an antidote for Xarelto. To this day, Xarelto advertisements merely mention uncontrolled bleeding events. Similar events occur with other medicines like warfarin and Pradaxa, but they can be brought under control and the damage and risk of death that accompany these events can be mitigated.

Here is where the express and implied warranties of Xarelto merge. It is a common market expectation that blood thinners have antidotes that can be used in emergencies. A reasonable reading of the Xarelto warning label, even by a medical professional would not alert anyone that this is not the case. If a label can fool a doctor, what chance does the average consumer have?

Another breach of warranty claim against the makers of Xarelto stems from their claim that Xarelto doesn't require dosage adjustments or monitoring like other blood thinners. There is reason to believe that this assertion is patently false. For starters, Xarelto comes in two different doses. That in and of itself implies the potential for a dosage adjustment.

While it is harder to prove, there is significant evidence that suggests it is still necessary to monitor patient's response while they are on Xarelto. In fact, it's just good common sense that a doctor shouldn't just prescribe a treatment and not monitor its progress. This claim may have lead to improper monitoring of hundreds of patients, leading to more severe health consequences when a bleeding event occurred.

While this is not a complete list of the breach of warranty allegations made by Xarelto plaintiffs, it does cover the most serious claims.

Xarelto and Strict Liability

Strict Liability is perhaps both the trickiest argument alleged by Xarelto plaintiffs. There are several different ways that this argument could have merit. The first is what is known as a design defect, or a product which could have been produced more safely given available technology. The most obvious design defect with Xarelto is perhaps the lack of an antidote.

Blood-thinner manufacturers know that uncontrolled bleeding is a real and serious potential side effect of treatment. The fact that warfarin has an antidote and Pradaxa later developed one, both illustrate that this was a known problem with the drug. That Janssen put this problem on the market before they had developed an antidote, one that was already in development, shows that Janssen understood just how dangerous this drug can be, but proceeded to the market anyway.

Similarly, some of the arguments for breach of warranty are re-purposed in the Xarelto lawsuits to make the case for a failure to warn. Specifically, the claims that a patient does not need to have blood monitoring while on the drug are problematic for the defendants. It is likely that many people would have offered for a different form or treatment, or that their injuries would not have occurred with proper monitoring.

The failure to warn case is bolstered by an FDA letter regarding early Xarelto advertisements. In those ads, the side-effects of the drug were listed on the back of adds and far less prominent than the supposed benefits of the drug. Such ads violate federal guidelines, which provided the impetus for the FDA's warning letter. Similarly, early ads also described uncontrolled bleeding events, which can lead to injury or death in much milder terms, failing to convey the full severity of the dangers associated with Xarelto.

It may seem strange to see facts of the case re-purposed in order to make different arguments, but since test cases are now just starting to make it to trial, a good products liability attorney will attempt to litigate as many arguments as a judge will permit in order to obtain compensation for their clients. Only one argument has to stick in order for those who are injured to be eligible for compensation. While there is a risk of making too many arguments and confusing a jury, there is also the benefit that one line of argument resonates better with a jury than another. Since it is impossible to know, which line of argument resonates best ahead of time and because each jury is unique, the only responsible way for an attorney to proceed is by making as many arguments at the evidence supports.

What the Xarelto Lawsuits Mean

One of the biggest problems that the legal profession has is its inability to explain the workings of the law to the general public. When the average person sees a large jury verdict in the news, it rarely comes with an explanation of the law, any facts about the case, or any real context that would allow someone to judge the merits of the verdict. Instead people are simply gob-smacked by a large number.

For instance, if you asked most people who makes more money, baseball players or teachers, they would answer baseball players. The real answer, of course, is it depends. Individual baseball players at the highest levels make more than teachers, but players at the lowest level make far less. Further, the sum total of wages for teachers is much higher, because there are millions of teachers, compared to thousands of baseball players. As a result, there are many people who feel that their is something wrong with our country when the highest paid baseball players makes 100 times more than the average teacher (Oddly, when you compare the highest paid baseball player to the highest paid teacher, the baseball player only makes 7 times as much, since the highest paid teacher, a college professor reportedly earns $4.33 million per year.)

When those same people hear about Xarelto lawsuits, they only see the damages sought. They don't see a company that makes billions of dollars every quarter selling the drug. They rarely hear about the duties that a manufacturer assumes by entering into the market place. They just see large numbers floating in the ether.

Into this vacuum step groups who then propose to limit the amount of damages, or restrict a plaintiff's ability to file lawsuits. The same folks who will rally around the flag when it comes to whatever amendment in the Bill of Rights rests nearest to the cockles of their hearts, launch assaults on the 7th amendment guarantee to a trial by jury in civil matters, armed with incomplete information.

Currently, two extremes populate our country, people who believe that all corporations are evil and that they should be legislated out of existence, opposed by people who believe that uncompensated victims are just the price we have to pay for a vibrant economy. Both sides tug and pull at people who have better things to do with their lives than worry about products liability law. They are caught in a tug of war over the question, "What obligation do manufacturers have to consumers?"

At Grossman Law Offices, we believe the answer to that question lies in our civil legal system, specifically products liability law. The Xarelto case is a great example why we believe what we believe. Thousands of people allege serious wrong-doing by a large corporation. While we respect the gravity of their charges, we also respect the right of Janssen Pharmaceuticals and Bayer to defend themselves against this allegations. While they could not have known it 200 years ago, those who founded our country believed that the best tool to justly settle this controversy is a jury of citizens. They will hear all the evidence from both sides and render their verdict. It frees Janssen from onerous regulations, while at the same time ensures that those who have been wronged get compensation for the ill that was done to them.

Is it a difficult system? Does it take time? Are there things that these people and Janssen would rather be doing other than litigating? Yes, yes, and yes. At its most primal level, everything we see around us comes at a cost. The only question is who will bear those costs. People may argue that lawsuits cost jobs, but I would counter that absent those lawsuits, the price of a job is paid not in money, but in blood. Is that really the kind of world we want to live in? If the answer is no, then you know why we hold manufacturers accountable for defective products.