Effects of Products Liability on Bulk Suppliers of
FREDERICK D. BAKER, ESQ.*
I. INTRODUCTION
It has been widely reported that medical implant manufacturers are unable to pur-chase critical raw materials due to sellers' fears of product liability litigation. This ar-ticle discusses the common law principles that govern the liability of raw material sup-pliers, pending federal legislation, and the impact of this issue on the industry.
II. LIABILITY OF BULK SUPPLIERS UNDER THE COMMON LAW
A. General Principles
If Jones produces a substance and sells it to Smith, who uses it to manufacture a finished implant, is Jones liable to a consumer who claims the implant injured her? The answer depends on a number of factors:
� Does the substance have a wide range of potential applications, or was it designed specifically for use in implants?
� Was the substance inherently nondefective?
� Did Smith combine the substance with other constituents to create an entirely new product, or did the substance reach the consumer essentially unchanged?
� If the substance reached the consumer essentially unchanged, is there credible evi-dence that the substance caused the injury?
� Did Jones know how Smith would use the substance?
� Did Jones test the substance to determine whether it was safe for use in implants?
� If Jones did conduct safety tests, did he fully reveal the results of his research to Smith?
� Did Jones promote the substance as safe for use in implants, and encourage im-plant manufacturers to rely on the safety testing performed by Jones?
� Did Jones know of risks associated with use of the substance in implants? If so, did he inform Smith of those risks?
The answers to these questions have led to different results. Courts generally have held that: (1) if the bulk supplier sells a product that has widespread use in many indus-tries, and he has no specialized knowledge of how the buyer is using the product, and if the buyer substantially alters the product to create a wholly new product, the bulk sup-plier will not be held liable to the ultimate consumer, and (2) if the bulk supplier knows how the buyer will use the product, and knows of risks associated with that use, the supplier may be liable to the ultimate consumer unless he adequately warns the buyer or the buyer has actual knowledge of the risk.
* Mr. Baker is a Partner in the law firm of Sedgwick, Detert, Moran & Arnold, San Francisco, CA.
This article is an updated version of a speech presented at The Food and Drug Law Institute's Medical
Device Update '95, Washington, D.C. (June 26-27, 1995).
455
456 FOOD AND DRUG LAW JOURNAL VOL. 50
B. Illustrative Cases
1. Walker v. Stauffer Chemical Corp.1
Although not a biomaterials case, Walker is typical of what has became known as the "bulk supplier doctrine."2 Stauffer sold sulfuric acid to Fazio, who mixed the acid with other ingredients and marketed the finished product as a drain cleaner. A consumer injured in an explosion sued both Fazio and Stauffer.
The California Court of Appeal affirmed summary judgment in favor of Stauffer. We do not believe it realistically feasible or necessary to the protection of the public to require the manufacturer and supplier of a standard chemical ingre-dient such as bulk sulfuric acid, not having control over the subsequent com-pounding, packaging or marketing of an item eventually causing injury to the ultimate consumer, to bear the responsibility for that injury. The manufacturer (seller) of the product causing the injury is so situated as to afford the neces-sary protection.3
2. Putensen v. Clay Adams, Inc.4
Clay Adams sold polyethylene tubing in 100-foot rolls to hospitals. Doctors used the tubing to manufacture heart catheters, and in doing so modified its characteristics. Patients were injured when the tubing kinked during use. Clay Adams knew that physi-cians were fabricating catheters from the tubing, but did not conduct tests to determine the strength of the tubing walls.5
The court, relying on principles articulated in the Restatement (Second) of Torts,6 held that if it reasonably was certain that the tubing would cause injury if negligently manufactured or designed, and Clay Adams failed to conduct reasonable inspections and tests that would have disclosed that the tubing was not safe for use in fabricating catheters, then Clay Adams could be found liable in negligence to those injured by the catheters.7
[T]he jury could decide that Clay Adams violated its duty to produce a prod-uct reasonably safe for its intended use either on the basis that it could have corrected this deficiency but failed to do so, or, on the basis that if the defi-ciency was not susceptible of correction, Clay Adams failed to warn of the dangerous propensity.8
This was so, said the court, even if the physician had an independent duty to test and 1 19 Cal. App. 3d 669 (1971).
2 The bulk supplier doctrine says: If a seller provides bulk quantities of an inherently nondefective base chemical to an intermediary who combines the chemical with other ingredients to produce a defective product, the seller will not be liable to those injured by the product absent knowledge that the chemical would be put to a dangerous use.
3 Walker, 19 Cal. App. 3d at 674.
4 12 Cal. App. 3d 1062 (1970).
5 Id. at 1069-71.
6 RESTATEMENT (SECOND) OF TORTS �� 388, 394, 395, 398 (1965). 7 Putensen, 12 Cal. App. 3d at 1076-79.
8 Id. at 1077-79.
457 1995
warn.9
3. Dow Corning Corp. v. Superior Court 10
Dow Corning, in addition to marketing its own silicone gel breast implants, sold silicone gel to other implant manufacturers. Dow Corning shipped the ingredients of the gel in separate containers, which were combined and heated by the manufacturers to achieve the desired viscosity. Dow Corning was sued as the supplier of the gel in cases where others manufactured the implants.
Dow Corning moved for summary judgment, arguing that � under Walker � the company could not be liable because it was a bulk supplier of raw materials that were substantially altered by the purchaser.11 Plaintiffs argued that Putensen controlled, sug-gesting that Dow Corning knew its gel would be used in breast implants, knew or should have known of risks associated with such use, failed to warn the manufacturers or con-duct adequate testing, and that the company's product reached consumers essentially unchanged.12
The California Court of Appeal affirmed the trial court's denial of Dow Corning's summary judgment motion, and found triable issues of fact material as to: (1) whether the manufacturers altered Dow Corning's product in any way meaningful to plaintiffs' claims, (2) the state of Dow Corning's knowledge regarding the safety of silicone as compared to that of the manufacturers, and (3) whether Dow Corning revealed to manu-facturers all it knew about the alleged dangers of silicone on the basis of tests conducted by Dow Corning.13
C. The DuPont/Vitek Litigation
Vitek, Inc. produced temporomandibular jaw (TMJ) implants made of Proplast, a material developed by Vitek. Proplast was comprised of a number of raw ingredients, including DuPont's Teflon. It was alleged that Proplast deteriorated after implantation, causing serious and painful injury, and that the deterioration occurred because Teflon is unsuitable for use in implants.14
Many lawsuits were filed, and Vitek rapidly ran out of both its assets and its insur-ance coverage. After Vitek filed for bankruptcy protection, plaintiffs' attention shifted to the "deep pocket" � DuPont.
Evidence showed that:
[b]efore DuPont agreed to sell [Teflon] to [Vitek's president] Homsy for use in making Proplast, DuPont sent a letter to Homsy advising him that it did not make [Teflon] for medical use and that it had not conducted the necessary detailed long-term studies to determine the suitability of such use. DuPont's letter also advised Homsy of several published reports that indicated that pure [Teflon] when used as a hip replacement had a tendency to mechanically abrade. Accordingly, DuPont agreed to sell Homsy the [Teflon] only if he agreed to 9 Id. at 1079.
10 No. D0223473 (Cal. App. Apr. 13, 1995) (unpublished).
11 Dow Corning's Petition at 31-41.
12 Plaintiffs' Return to Petition at 17-29.
13 Dow Corning, opinion at 8-10.
14 See, e.g., In re TMJ Implants Products Liability Litigation, 880 F. Supp. 1311 (D. Minn. 1995);
Kealoha v. E.I. DuPont de Nemours & Co., 844 F. Supp. 590 (D. Ha. 1994). EFFECTS OF PRODUCT LIABILITY
458 FOOD AND DRUG LAW JOURNAL VOL. 50
employ his own medical judgment as to its safety and only if he signed a waiver to this effect. Homsy signed and returned the waiver.15 It is "undisputed that Teflon is safe for multiple industrial uses and there is no evidence that Teflon is an inherently dangerous or unsafe raw material. Any danger resulted from the manufacture and particular use of the [TMJ] implant as a final product which con-tained DuPont's raw material as a component part."16
For these reasons, virtually every court that has addressed the issue has invoked the principle that a "manufacturer of a nondefective component part has no duty to analyze the design and assembly of the completed product of an unrelated manufacturer to de-termine if the component is made dangerous by the integration into the finished prod-uct"
17 in order to absolve DuPont of liability for Vitek's defective product.
D. Implications
Many observers believe that courts recently have adopted a more expansive view of the liability of bulk suppliers and have eroded the protection of the bulk supplier doctrine.18
This is not an accurate assessment of the situation. The rules that govern a supplier's liability � whether the case falls on the Walker or the Putensen end of the spectrum � have been recognized for thirty years.19 The critical distinguishing factors in determin-ing bulk supplier liability are: whether the component was defective at the time it left the seller's control, whether the seller adequately warned of known or knowable risks associated with the buyer's intended use of the component, and whether the component was transformed into an entirely new and different product.20
The current crisis in the availability of biomaterials 21 is due largely to DuPont's well-publicized problems with Vitek. DuPont spent millions of dollars defending itself in litigation, despite the fact that reasonable persons would not conclude that DuPont is liable. This litigation, however, was not due to a change in the law. It was caused by multiple factors, including: (1) the Proplast TMJ implant was a clearly defective prod-uct; (2) plaintiffs sustained serious, painful, and sometimes disfiguring, injuries; (3) Vitek had no funds to compensate plaintiffs; and (4) DuPont has ample funds. If Vitek had sufficient insurance coverage and assets to pay plaintiffs' claims, DuPont would not have been pursued with such vigor.
The principal reaction in the industry to the present litigious climate is that suppli-ers of biomaterials are requiring purchasers to execute strong indemnification agree-ments, in which the purchasers agree to defend and pay all claims brought against the supplier arising out of the use of any product that incorporates the seller's biomaterial. Suppliers also are requiring proof, in advance of sales, that buyers have enough insur-15 Kealoha, 844 F. Supp. at 592.
16 Id. at 595.
17 Id. at 594.
18 See Liability Concerns Threaten Medical Implant Research, 266 SCI. 276 (1994).
19 The principles articulates in the Restatement (Second) of Torts, which define the parameters of supplier liability, were published in 1965.
20 RESTATEMENT (SECOND) OF TORTS, � 388; Putensen, 12 Cal. App. 3d at 1076-79; Walker, 19 Cal. App. 3d at 674-75.
21 A number of biomaterials suppliers, especially producers of polymer-based materials, have refused to sell critical ingredients to the medical implant industry because they fear the cost of defending them-selves in product liability lawsuits will greatly exceed any profits generated by such sales.
459 1995
ance coverage and other assets to honor those agreements. Buyers are required to sign documents attesting that their purchase of biomaterials is not based on any representation, express or implied, that the materials are safe for the buyer's intended use; their purchase is not made in reliance on any testing performed by the seller, and that it is the sole responsibility of the buyer to conduct adequate safety testing; and it is the sole responsibility of the buyer to convey to the consumer of the finished product adequate warning of known or knowable risks.
Those most harmed by this state of affairs are small-implant producers who cannot guarantee the indemnity that suppliers require. Pending federal legislation may allevi-ate this situation somewhat.
III. THE BIOMATERIALS ACCESS ASSURANCE ACT OF 1995
Congress is considering the Biomaterials Access Assurance Act of 1995. 22 Under the Act, a biomaterials supplier 23 is not liable for harm to the consumer of the finished product under the following conditions:
The supplier sells "a manufactured piece of an implant," which term includes material that "has significant nonimplant applications" and that "alone, has no implant value or purpose, but which combined with other component parts and materials, constitute an implant," or a "raw material," defined as a substance which "has a generic use; and may be used in an application other than an implant."24
The buyer produces implants that must be approved by, and registered with, the U.S. Food and Drug Administration pursuant to the Federal Food, Drug, and Cosmetic Act.25 The supplier is not also the device manufacturer.26
The supplier furnishes raw materials or component parts that meet the buyer's contrac-tual requirements or specifications. (The supplier may be liable under the Act if it fails to meet specifications and that failure caused claimant's injury.)27
If a biomaterials supplier is sued (along with the implant manufacturer), the action is subject to dismissal unless plaintiff submits, at the time the action is filed, an affidavit from a qualified expert establishing that the biomaterials supplier's product did not meet contract specifications and that plaintiff was injured as a result. If the plaintiff submits what the court deems to be an adequate affidavit, it may allow discovery lim-ited solely to that issue. If such discovery does not establish a triable issue of fact material to contract compliance, the court must grant the biomaterials supplier's motion to dismiss.
The Biomaterials Access Assurance Act also would expressly preempt all tort claims brought in state or federal courts.28
If the Act becomes law, it should effectively protect biomaterials suppliers from liability in the majority of cases. Had the Act been passed earlier, for example, DuPont could have extricated itself (assuming the company would have been sued at all) from the Vitek litigation relatively quickly and cheaply.
22 S. 454, 104th Cong., 1st Sess. �� 121-131 (1995).
23 The Act defines "biomaterials supplier" as "an entity that directly or indirectly supplies a compo-nent
part or raw material for use in the manufacture of an implant." Id. � 123(1)(A).
24 Id. � 125.
25 Pub. L. No. 75-717, � 510, 52 Stat. 1040 (1938), as amended 21 U.S.C. � 360
(1988). 26 S. 454, � 125(b).
27 Id. � 125(a)(2)(C); (d).
28 Id. � 124.
EFFECTS OF PRODUCT LIABILITY
460 FOOD AND DRUG LAW JOURNAL VOL. 50
Whether such statutory protection will be sufficient to entice bulk suppliers to re-turn to the medical device market, with or without onerous indemnification agreements, remains to be seen.
IV. CONCLUSION
It remains to be seen whether the Biomaterials Access Assurance Act will be en-acted into law. Even if it is, it is likely that: (1) there will be a shift in biomaterials suppliers from large multinational corporations (for whom profits from this market may be negligible) to smaller producers; and (2) stringent indemnification provisions will become standard in all supply contracts to the medical implant industry. It has been suggested that indemnification requirements may change the face of the medical im-plant industry, as smaller companies who cannot demonstrate the financial strength to honor indemnification agreements are absorbed by larger companies who can. It will be some time before it is known how these market forces and legislative reforms (if en-acted) will effect in the industry.
Copyrighted By Angels United On TMJ!
Can not be placed on any other web site or any support groups without:
the written permission of ANGELS UNITED ON TMJ!
"COPYRIGHT Feb. 2001" By Angels United On TMJ!
ANGELS UNITED IS UN-COVERING THE TRUTH ON TMJ!
 |
WE ARE ANGELS UNITED ON TMJ!
TMJD_SAFE_HAVEN_4_LIFE_ISSUES · TMJ SUPPORT GROUP
This TMJD Support Group is intended to be a Safe Haven and provide a place where people with TMJ pain can come and offer and receive support from people who know what they are going through. This is not a medical group and we do not have medical degrees or medical backgrounds. However, with the variety of members in here, there is bound to be someone who has been there and done that and can answer your questions.
This group is in memory of Debbie Ward whom suffered from TMJD & died of unknown causes.
There are many types of members with TMJD. Some have been treated medically, some treated with various splint therapies and physical therapies as well as some with surgical treatments ranging from Arthroscopy to full jaw joint replacements. Everyone with any degree of TMJD or has a family member that deals with it is welcome to join and offer and receive support that we all so badly need to get through each day with the pain we have to live with.
It is YOUR place to cry, scream or vent on the pain you are dealing with and how it is affecting your life and the lives of your loved ones. The group is MODERATED to avoid the unsolicited advertisements and spam. We are all in pain and do not need to have to deal with that too.
TMJ SURGERY FAMILY!.
A Great Place to Share Information! This site is for sharing and is not a substitute for the advise of your physician/oral surgeon. Please consult with your health care professional.
| 
|