text:
* Adidas America, Inc. v. Payless Shoesource, Inc., 2007 WL 4482201 (D. Oregon Dec. 21, 2007). This case (1) discusses whether advice of counsel is a defense against willfulness in the trademark context, and (2) concludes that Oregon’s state anti-dilution law is preempted by Bonito Boats.
* Visa Int’l Service Assoc. v. JSL Corp., No. 2:01-CV-00294, 2007 U.S. Dist. LEXIS 95334 (D. Nev. Dec. 27, 2007). The domain name “evisa.com” actually dilutes the Visa brand because it will disappoint people who enter the domain name looking for Visa. That’s SO 1997!
* Salle v. Meadows, 6:07-cv-1089-Orl-31DAB (M.D. Fla. Dec. 17, 2007). A rare case interpreting 15 USC 1129, the law restricting the registration of domain names incorporating a person’s name.
* The “Surf City” USA lawsuit between Huntington Beach and a Santa Cruz retailer has settled.
* I’ve seen this issue come up a few times now. Trademarks 1 and 2 are similar. A Google search for TM1 includes the question “Did you mean: TM2?” How might this prompt affect an infringement analysis?
– First, NSI has admitted that it grabs domain names that people are researching, preventing the potential customers from using any other domain name registrar for 5 days and potentially helping swipers grab the domain name thereafter. NSI’s practice is completely sleazy because of the unique retailing environment for domain names. Domain names are a single-item good that is being simultaneously and competitively sold by multiple retailers (the registrars)–but through this practice, NSI expands its inventory and simultaneously shrinks the inventory of competing retailers before NSI has actually made the sale. ICANN needs to shut down this type of inventory abuse NOW.
– Second, Google has announced that it will not provide AdSense ads (through its domain name parking program) to domain names that may be kited (i.e., repeatedly reregistered during the free 5 day trial period). That’s great, Google, but why don’t you simply say that you won’t display ads on any domain names in the first 5 days of their registration? That policy change would kill domain name tasting, but Google’s foot-dragging here makes me wonder just how much money Google is making from domain name tasting. C’mon Google, I think you can do better.
* Virgin Records v. Thompson (5th Cir. Jan. 4, 2008). Man improperly sued by the RIAA dragnet can’t recover his attorneys’ fees. This turns on the fact that he didn’t respond to the pre-litigation contacts to turn over his adult daughter who did the file-sharing.
* Atlantic Recording Corp. v. Serrano, 2007 WL 4612921 (S.D. Cal. Dec. 28, 2007). The court rejects the trespass to chattels and CFAA claims of a P2P file sharer against the parties investigating him by checking out his share directory.
– The 10th Circuit says that a bogus takedown notice (in this case, an eBay NOCI under its VeRO program) supports jurisdiction in the targeted vendor’s home court. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 2008 WL 217724 (10th Cir. Jan. 28, 2008). See related litigation from the same eBay vendor.
– For a contrary ruling, see Doe v. Geller, 2008 WL 314498 (N.D. Cal. Feb. 4, 2008).
– Colon v. Innovate! is a lawsuit initiated by an eBay seller that claimed an IP owner was misusing eBay’s VeRO program to shut down his auctions (which were priced below the IP owner’s minimum pricing program although the seller wasn’t bound to the program). Innovate made an interesting tactical move (blunder?) to implead eBay into the lawsuit; eBay then countersued Innovate for sending bogus NOCIs.
* In a bizarre press release issued almost 2 months after the applicable ruling, John Dozier of the Dozier Internet Law Firm extolled the ruling in the 43sb.com case (a case the Dozier firm wasn’t involved with) where the court suggested that cease-and-desist letters were copyrightable. This sparked yet another blogswarm on this topic; see, e.g., Paul Levy, Marc Randazza, Eugene Volokh, Frank Pasquale, Joe Gratz, 43sb.com, Ron Coleman, Overlawyered. It’s clear this issue needs a more definitive resolution by the courts or the legislature. Fortunately, a number of people would welcome the opportunity to help Dozier test if his legal theory will fly in court. If you’ve been contacted by John Dozier threatening you for infringing the copyright in his firm’s cease-and-desist letters and would be interested in help arranging an appropriate defense, please contact me.

matches: v. v. v. v. v. v. v. v.


By now Restatement (Second) of Torts §402A (1965) is so old as to be thought of as somewhat antediluvian. The American Law Institute’s unfortunate adoption of “strict liability” (sufficiently unfortunate, the ALI has done away with it except for manufacturing defect) missed a lot of product liability issues – the learned intermediary rule for one – that have become extremely widespread and important in product liability over the last 45 years. To rectify this situation, and deal with all the issues unanticipated in 1965, the ALI in 1997 adopted what amounts to a book in and of itself: the Restatement (Third) of Torts, Products Liability.
There are some products which, in the present state of human knowledge, are quite incapable of being made safe for their intended and ordinary use. These are especially common in the field of drugs. . . . Such a product, properly prepared, and accompanied by proper directions and warning, is not defective, nor is it unreasonably dangerous. The same is true of many other drugs, vaccines, and the like, many of which for this very reason cannot legally be sold except to physicians, or under the prescription of a physician. . . . The seller of such products, again with the qualification that they are properly prepared and marketed, and proper warning is given, where the situation calls for it, is not to be held to strict liability for unfortunate consequences attending their use, merely because he has undertaken to supply the public with an apparently useful and desirable product, attended with a known but apparently reasonable risk.
Restatement (Second) of Torts §402A, comment k (1965) (emphasis added).
Then there’s the question of scope. Comment k says unavoidably unsafe products are “especially common” in the context of prescription medical products (actually, it says “drugs” but “medical devices” weren’t recognized as a separate category of products in the early 1960s – the Medical Device Amendments still being more than a decade in the future). So there’s the question of whether all prescription drugs are unavoidably unsafe, or only some of them. If only some, then there’s the additional question of how much effort the legal system should expend, or force the parties to expend, in sorting one from the other.
We thought we’d explore that question today, and we start by comparing arguably the most pro-plaintiff state in the country – Idaho – on comment k issues with the most pro-defense state – California. Obviously, if we’re calling California conservative and Idaho liberal, then the issues associated with comment k don’t fit well into the usual legal cubby holes.
Idaho, then – holding our noses all the way. In Toner v. Lederle Laboratories, 732 P.2d 297 (Idaho 1987), a vaccine case, the state’s highest court answered some certified questions from a federal court of appeals.
As an aside, we have serious qualms about the psychology of certified questions. They often come without much of a record, and thus seem more like an academic exercise than a real case. For that reason, we think that certified questions tend to tempt courts into more liability-expanding rulings than might occur with a fuller record and messy facts. But again, it might just be our admittedly pro-defense perspective.
Anyway, back to Toner. One important thing to note is that it was a vaccine case, not a drug case. Usually that’s a good thing – because it’s hard to come up with a product that has provided more benefit to the human race than vaccines – but not this time. That’s because a vaccine isn’t a simple chemical compound, like most drugs, but rather a complex biologic made up of a lot of things. As a result, the plaintiff was able to offer a plausible alternative design (albeit one not approved by the FDA). 732 P.2d at 300-01.
By its terms, comment k excepts unavoidably unsafe products from strict liability only where the plaintiff alleges a design defect, and not where the plaintiff alleges a manufacturing flaw or an inadequate warning. Comment k intends to shield from strict liability products which cannot be designed more safely; however, if such products are mismanufactured or unaccompanied by adequate warnings, then the seller may be liable.
Id. at 306 (citation omitted). Thus, it’s even odder that the burden is placed on the defendant, since in most states, and certainly in the Third Restatement, an alternative design is an essential element of a design-related cause of action.
[T]he comment contemplates a weighing of the benefit of the product against its risk. Obviously, for comment k to apply, the benefit must outweigh the risk. This weighing process should consider the value of the benefit, the seriousness of the risk, and the likelihood of both. . . . Consequently, the scales must clearly tip in favor of the benefits for comment k to apply.
Toner, 732 P.2d at 306. At least the state of the art at the time of the plaintiff’s use applies – unknown and later discovered risks are irrelevant. Id. at 307 (“strict liability will not attach when an unexpected and unknown risk injures a user”).
But the worst part of Toner is the uncertainty of a case-by-case approach. Each case involves the reweighing of risks and benefits in light of “new information” or a “new . . . safer design.” Id. Thus “[w]e do not believe comment k was intended to provide nor should it provide all ethical drugs with blanket immunity from strict liability design defect claims.” Id. at 308. Rather, “[c]ourts must decide the applicability of comment k case-by-case, and only after taking evidence related to the various factors.” Id. at 309. Such a determination “would require a full evidentiary hearing” – although by a court or a jury the court did not decide. Id. at 308 & n.9. Thus, the Toner decision consistently seems to go out of its way to make the comment k defense as costly and time consuming as possible.
In a general sense, however, the comment k concerns and its required balancing between risks and benefits are similar to those involved in a negligence claim. . . . [T]he determination under comment k that the design of a product is unavoidably unsafe and yet affords benefits outweighing its risks varies little from the determination under negligence law that the designing and marketing of the product was reasonably done. . . . We conclude that the principles of comment k do not literally apply to negligence claims . . . [but] in a general sense, the principles of comment k relate to the negligence concepts.
Toner, 732 P.2d at 310-11 (various citations omitted).
Toner relied heavily on then-California law, as decided by intermediate California courts, especially Kearl v. Lederle Laboratories, 218 Cal. Rptr. 453 (Cal. App. 1985). Toner, 732 P.2d at 305-11 (citing Kearl seventeen times, as well as three other California cases). But when the California Supreme Court took a look at Kearl and the case-by-case approach to comment k, the court recoiled. Brown v. Superior Court, 751 P.2d 470, 477 (Cal. 1988) (specifically “disapprov[ing]” Kearl).
[T]here is a general consensus that, although it [comment k] purports to explain the strict liability doctrine, in fact the principle it states is based on negligence. . . . That is, comment k would impose liability on a drug manufacturer only if it failed to warn of a defect of which it either knew or should have known. This concept focuses not on a deficiency in the product – the hallmark of strict liability – but on the fault of the producer in failing to warn of dangers inherent in the use of its product that were either known or knowable.
Id. at 475-76 (citations omitted). Brown chose between three options: (1) rejecting comment k and allowing strict liability design defect claims generally against prescription drugs; (2) construing comment k to prohibit design defect claims across the board because the prescription-only status of a drug meant it was unavoidably unsafe; or (3) the Kearl/Toner case-by-case approach requiring a unavoidably unsafe determination in every case. Id. at 477.
[A] test, which calls for the balancing of risks and benefits, is inapposite to prescription drugs, according to defendants, because it contemplates that a safer alternative design is feasible. While . . . mechanical devices might be “redesigned” by the addition of safety devices, there is no possibility for an alternative design for a drug like DES, which is a scientific constant compounded in accordance with a required formula. We agree with defendants. . . .
[U]nlike other important medical products (wheelchairs, for example), harm to some users from prescription drugs is unavoidable. Because of these distinctions, the broader public interest in the availability of drugs at an affordable price must be considered in deciding the appropriate standard of liability for injuries resulting from their use. Perhaps a drug might be made safer if it was withheld from the market until scientific skill and knowledge advanced to the point at which additional dangerous side effects would be revealed. But in most cases such a delay in marketing new drugs . . . would not serve the public welfare. Public policy favors the development and marketing of beneficial new drugs, even though some risks, perhaps serious ones, might accompany their introduction, because drugs can save lives and reduce pain and suffering.
[W]e reject plaintiff’s assertion that a drug manufacturer should be held strictly liable for failure to warn of risks inherent in a drug even though it neither knew nor could have known by the application of scientific knowledge available at the time of distribution that the drug could produce the undesirable side effects suffered by the plaintiff.
[W]e know of no means by which this can be accomplished without substantially impairing the public interest in the development and marketing of new drugs, because the harm to this interest arises in the very process of attempting to make the distinction.
[D]ifferent trial judges might reach different conclusions as to whether the same drug should be measured by strict liability principles, because the determination in each case depends on the evidence as well as the subjective determination of the judge regarding such matters as what constitutes an “exceptionally important benefit” of a drug.
A manufacturer . . . might be held strictly liable for harmful side effects because a trial court could decide, perhaps many years later, that in fact another product which was available on the market would have accomplished the same result. Further, the question of the superiority of one drug over another would have to be decided . . . in reference to the plaintiff, since the advantages of a drug cannot be isolated from the condition of a particular patient. Thus, in one case the drug that injured the plaintiff might be the better choice, while this would not be true as to another user.
Thus, the court in Brown broadly rejected design-based liability in the field of prescription drugs, in the absence of manufacturing (drug must be “properly prepared”) or warning defects involving “dangerous propensities that were either known or reasonably scientifically knowable at the time.” Id. at 483.
Bruesewitz, 131 S. Ct. at 1077. The Court also noted that “a large number of courts disagreed with that reading of comment k, and took it to say that manufacturers did not face strict liability for side effects of properly manufactured prescription drugs that were accompanied by adequate warnings.” Id. at 1077 n.41 (collecting cases).
Boldly going where the Supreme Court refused to tread, we thought we’d take a brief look at where the other states fell between these poles.
Alabama applies comment k to all prescription drugs. Stone v. Smith, Kline & French Laboratories, 447 So.2d 1301, 1303 (Ala. 1984) (“[c]omment k provides for drugs and vaccines an exception to the strict liability defined in Section 402A”); see id. at 1304 (“in the case of an ‘unavoidably unsafe’ yet properly prepared prescription drug, the adequacy of the accompanying warning determines whether the drug, as marketed, is defective, or unreasonably dangerous”). Beyond that, Alabama has a somewhat peculiar Alabama Extended Manufacturers Liability Doctrine (“AEMLD”) that has sometimes (but sometimes not) been interpreted as eliminating altogether a separate negligence claim for design defects – that is, not limited to prescription drugs. Wakeland v. Brown & Williamson Tobacco Corp., 996 F. Supp. 1213, 1217-18 (S.D. Ala. 1998) (“no separate action for negligence will lie when a plaintiff claims he is injured by a defective and unreasonably dangerous product [as, under AEMLD,] the strict liability and negligence claims merge”); Veal v. Teleflex, Inc., 586 So.2d 188, 191 (Ala. 1991) (“the fault or negligence of the defendant is that he conducted himself in a negligent manner by placing a product on the market causing personal injury or property damage, when used to its intended purpose . . . This is a claim under the AEMLD, and the trial court did not err in refusing to charge the jury with regard to negligence and wantonness”). However; that’s probably not so any longer.
Alabama remains a common-law state, and therefore common-law tort actions so far as [they are] not inconsistent with the Constitution, laws and institutions of this state shall continue in force, except as from time to time may be altered or repealed by the Legislature. We will not presume to so define the boundaries of the judicially created AEMLD so that it subsumes the common-law tort actions of negligence and wantonness against the retailer defendants.
Tillman v. R.J. Reynolds Tobacco Co., 871 So.2d 28, 34-35 (Ala. 2003) (citations and quotation marks omitted).
We recognize that . . . we are taking a position similar to those jurisdictions which apply comment k to prescription drugs on a case-by-case basis. However, we arrive at this result without specifically relying on comment k.
We interpret comment K to mean that for experimental drugs, the manufacturer must clearly advise that the drug is experimental, and must warn of known risks and those risks that should be known through the exercise of reasonable care. In the case of prescription drugs (and especially for investigational drugs, which can be prescribed only by selected physician investigators) the manufacturer’s duty to warn is ordinarily satisfied if a proper warning is given to the prescribing physician.
Gaston v. Hunter, 588 P.2d 326, 340 (Ariz. App. 1978).
More recent Arizona federal precedent has followed Restatement (Third) of Torts, Products Liability §6(c) (1998), which allows a design defect claim only in the very limited circumstance where no doctor would prescribe a drug or device to any class of patients. Harrison v. Howmedica Osteonics Corp., 2008 WL 906585, at *21 (D. Ariz. March 31, 2008); Gebhardt v. Mentor Corp., 191 F.R.D. 180, 185-86 (D. Ariz. 1999), aff’d, 15 Fed. Appx. 540 (9th Cir. 2001).
there must be no feasible alternative design which accomplishes the product’s purpose at lesser risk. The evaluation of a purported alternative design and the product’s actual design should focus on: (1) the magnitude of the product’s risk that the alternative avoids; (2) the costs of the two designs; (3) the benefits of the two designs; and (4) the relative safety of the two designs.
In addition, for the [defense] to protect the designer of the product, the benefit of the product must outweigh the risk. This weighing process must consider the value of the benefit, the seriousness of the risk, and the likelihood of both. However, in the weighing process it should be remembered that [the defense] only requires that the balance ‘apparently’ tip toward the benefit of a product at the time of distribution.
West v. Searle & Co., 806 S.W.2d 608, 612-13 (Ark. 1991). See Hill v. Searle Laboratories, a Division of Searle Pharmaceuticals, Inc., 884 F.2d 1064, 1067-68 (8th Cir. 1989) (same; also noting that comment k applies to statutory product liability that subsumes both negligence and strict liability); Bearden v. Wyeth, 482 F. Supp.2d 614, 618 n.5 (E.D. Pa. 2006) (Arkansas “applie[s] comment k to design claims-not manufacturing or warning claims – and only as “an affirmative defense requiring proof that the drug product is indeed unavoidably dangerous”) (applying Arkansas law).
As we’ve already described, California is the poster child for across-the-board application of comment k and the unavoidably unsafe product doctrine. In addition to Brown, see: Carlin v. Superior Court, 920 P.2d 1347, 1358 (Cal. 1996) (“comment k reflects a recognition that imposing strict liability on manufacturers of prescription drugs would harm the public interest by discouraging the development and availability of medications”); Carmichael v. Reitz, 95 Cal. Rptr. 381, 400 (Cal. App. 1971) (“[i]f the vendor has properly prepared the product and has accompanied its sale with proper directions and warnings, he will not be held to strict liability”). There is some goofy dictum, contrary to Brown’s policy-based rationale, suggesting that California might somehow recognize some sort of negligent design defect theory in Artiglio v. Superior Court, 27 Cal. Rptr. 2d 589, 591 (Cal. App. 1994) (“Liability for defective design could not be premised on strict liability, but would require proof of negligence”).
The product’s utility must greatly outweigh the risk created by its use; the risk must be a known one; the product’s benefits must not be achievable in another manner; and the risk must be unavoidable under the present state of knowledge.
Ortho Pharmaceutical Corp. v. Heath, 722 P.2d 410, 415 (Colo. 1986) (quoting Belle Bonfils Memorial Blood Bank v. Hansen, 665 P.2d 118, 122 (Colo. 1983)). Where there is evidence, albeit conflicting, on each of these points, a jury question is created and the defendant is entitled to a comment k jury instruction. Id. at 416. See Hawkinson v. A.H. Robins Co., 595 F. Supp. 1290, 1308 (D. Colo. 1984) (“to rely on comment k, a manufacturer must show that the product was properly prepared, and properly marketed, accompanied by appropriate warnings and directions for use”).
Connecticut has never required an individualized assessment of whether a particular drug qualifies for the unavoidably unsafe product rule and comment k. Hurley v. The Heart Physicians, P.C., 898 A.2d 777, 783 (Conn. 2006) (“[a] manufacturer of an unavoidably unsafe product can avoid strict liability if the product is properly prepared, and accompanied by proper directions and warning”); Vitanza v. Upjohn Co., 778 A.2d 829, 837 (Conn. 2001) (“the policy considerations contained in comment (k) to §402A are persuasive and are in accord with this state’s product liability jurisprudence”); Basko v. Sterling Drug, Inc., 416 F.2d 417, 426 (2d Cir. 1969) (“there is no strict liability under comment k unless the consumer first establishes a breach of the manufacturer’s duty to warn”); Goodson v. Searle Laboratories, 471 F. Supp. 546, 548 (D. Conn. 1978) (under comment k “such a [prescription] drug is neither ‘defective’ nor ‘unreasonably dangerous’ in the §402A sense if the manufacturer gives an adequate warning of the risks involved”).
There’s nothing in Delaware law one way or the other about Restatement (Second) of Torts §402A, comment k (1965).
Federal courts applying D.C. law have not required case-by-case adjudication of the unavoidably unsafe/comment k issue. Dyson v. Winfield, 113 F. Supp. 2d 35, 39-40 (D.D.C. 2000) (summary judgment against “design defect count” because “[c]omment k’s association with strict liability may be misleading. As one court has noted, ‘[m]ost jurisdictions . . . rely on Comment k as authority for applying what is effectively a negligence standard’”), aff’d, 21 Fed. Appx. 2 (D.C. Cir. 2001); Chambers v. G.D. Searle & Co., 441 F. Supp. 377, 380-81 (D. Md. 1975) (“[c]omment (k) is pertinent in this case both as to plaintiff’s claim based on strict liability and to plaintiff’s claim based on negligence” and “as long as proper warnings are given, the manufacturer cannot be held responsible for an illness such as resulted here”) (applying District of Columbia law), aff’d per curiam, 567 F.2d 269 (4th Cir. 1977).
Florida law is somewhat inconsistent. No individualized application of the unavoidably unsafe principle was required in Buckner v. Allergan Pharmaceuticals, Inc., 400 So.2d 820, 823 (Fla. App. 1981). However, several more recent cases have followed a case-by-case approach. Adams v. G.D. Searle & Co., 576 So.2d 728, 733 (Fla. App. 1991) (“Comment k protects manufacturers from strict liability only for design defects”; “a product which is not as safe as current technology can make it should not be protected”); Zanzuri v. G.D. Searle & Co., 748 F. Supp 1511, 1520 (S.D. Fla. 1990) (adopting case-by-case approach based on the drug in question being “(1) incapable of being made safe; (2) properly prepared and marketed; and, (3) accompanied by a proper warning”); Amore v. G.D. Searle & Co., 748 F. Supp. 845, 854 (S.D. Fla. 1990) (same; identical opinion).
There’s conflicting precedent in Georgia, but the case-by-case approach has the advantage. An intermediate Georgia appellate court has required individualized assessment. Bryant v. Hoffmann-La Roche, Inc., 585 S.E.2d 723, 728 (Ga. App. 2003) (adopting “balancing test for unavoidably unsafe analysis and “agree[ing] with the majority of courts that Comment k serves as an affirmative defense and that the defense has no application to claims of manufacturing defect or failure to warn”). By contrast, a federal district court applied comment k without individual balancing. Walker v. Merck & Co., 648 F. Supp. 931, 933 (M.D. Ga. 1986) (in a “products liability suit, involving what may be categorized as an ‘inherently dangerous’ or ‘unavoidably unsafe’ drug, the manufacturer’s duty is to properly prepare and properly market the drug, and to adequately warn about all inherent risks”), aff’d without op., 831 F.2d 1069 (11th Cir. 1987).
Hawaii is a case-by-case state for comment k. Larsen v. Pacesetter Systems, Inc., 837 P.2d 1273, 1286 (Haw. 1992) (applying aspects of comment k specifically to product at issue), amended, 843 P.2d 144 (1992).
Idaho is the epitome of the strict case-by-case approach. See Toner, discussed above. There’s no law since.
Illinois follows comment k, Lawson v. G. D. Searle & Co., 356 N.E.2d 779, 783 (Ill. 1976). Both Illinois intermediate appellate courts and federal courts applying Illinois law have adopted a case-by-case approach. Mele v. Howmedica, Inc., 808 N.E.2d 1026, 1042 (Ill. App. 2004 (individualized product information held admissible as relevant to comment k defense); Glassman v. Wyeth Laboratories, 606 N.E.2d 338, 342 (Ill. App. 1992) (“not all prescription drugs per se fall under comment k, and comment k’s applicability must be decided on a case by case basis”); Kunnemann v. Janssen Pharmaceutica Products, L.P., 2008 WL 5101116, at *13 (N.D. Ill. Dec. 2, 2008) (“not all drugs fall within the purview of comment k; rather, the application of comment k must be decided on a case-by-case basis”); Woodbury v. Janssen Pharmaceutica, Inc., 1997 WL 201571, at *5-6 (N.D. Ill. April 10, 1997) (quoting Glassman); Martinkovic v. Wyeth Laboratories, Inc., 669 F. Supp. 212, 216-17 (N.D. Ill. 1987) (“[a]s a precondition to pursuing a comment k defense, however, [defendant] must establish that the vaccine was both ‘properly prepared, and accompanied by proper directions and warning’”).
Some Indiana courts have applied comment k/unavoidably unsafe product without individualized product assessment. Ortho Pharmaceutical Corp. v. Chapman, 388 N.E.2d 541, 545-46 (Ind. App. 1979) (“strict liability is avoided only when the product is accompanied by proper warnings”); First National Bank & Trust Corp. v. American Eurocopter Corp., 378 F.3d 682, 690 n.4 (7th Cir. 2004) (a prescription drug “properly prepared, and accompanied by proper directions and warning, is not defective, nor is it unreasonably dangerous”); In re Eli Lilly & Co., Prozac Products Liability Litigation, 789 F. Supp. 1448, 1453 (S.D. Ind. 1992) (“the court in [Chapman] understood Comment k to apply to all prescription drugs”). However, other Indiana law cases have gone for case by case. Singer v. Sterling Drug, Inc., 461 F.2d 288, 290-91 (7th Cir. 1972) (“there is insufficient evidence in this case to show that [the drug] fell into [the comment k] category of drugs which are exceptions to the strict liability doctrine”); Koehler v. Wyeth Laboratories Division of American Home Products Corp., 1987 WL 47831, at *3 (S.D. Ind. Sept. 8, 1987) (finding , on the basis of facts unique to the vaccine in question, that it was a unavoidably unsafe product within comment k).
Comment k recognizes that some products, such as drugs, are unavoidably unsafe; however, because their benefits outweigh the risks, if properly prepared and accompanied by proper warnings, the product is, by definition, neither defective nor unreasonably dangerous. The swine flu vaccine would thus be classified as a justified, but unavoidably unsafe product.
740 F.2d 1428, 1439 (8th Cir. 1984).
A trial court should take evidence as to: (1) whether, when distributed, the product was intended to confer an exceptionally important benefit that made its availability highly desirable; (2) whether the then-existing risk posed by the product was both ‘substantial’ and ‘unavoidable’; and (3) whether the interest in availability (again measured as of the time of distribution) outweighs the interest in promoting enhanced accountability through strict liability design defect review.
Id. at 925 (quoting Kearl). See Graham v. Wyeth Laboratories, 666 F. Supp. 1483, 1496 (D. Kan. 1987) (same), aff’d in pertinent part, rev’d on other grounds, 906 F.2d 1399 (10th Cir. 1990).
The Kentucky Supreme Court felt no need for Toner-style individualized risk/benefit balancing in the one case it’s had that involved comment k issues. Larkin v. Pfizer, Inc., 153 S.W.3d 758, 762 (Ky. 2004) (“the fact that a particular drug might produce unfortunate side effects makes it ‘unavoidably unsafe’ but not ‘unreasonably dangerous,”’ and strict liability will not obtain if “proper warning is given, where the situation calls for it”) (emphasis original); see Larkin v. Pfizer, Inc., 2001 WL 34065029, at *2-3 (W.D. Ky. Feb. 8, 2001) (also following comment k without drug-specific analysis). Thus, the status of pre-Larkin federal precedent predicting the use of the case-by-case approach, Tobin v. Astra Pharmaceutical Products, Inc., 993 F.2d 528, 540 (6th Cir. 1993); Weiss v. Fujisawa Pharmaceutical Co., 2006 WL 3533072, at *3 (E.D. Ky. Dec. 7, 2006), is doubtful.
As comment k to Section 402A instructs, an unavoidably unsafe product is neither defective nor unreasonably dangerous if such a product is ‘properly prepared, and is accompanied by proper directions and warning. Consequently, the statement requires a seller who has reason to believe that danger may result from a particular use of his product to provide adequate warning of the danger in order that the product’s potential for harm may be reduced. Failure to give such a warning when it is required will itself present a ‘defect’ in the product and will, without more, cause the product to be ‘unreasonably dangerous as marketed.
Kinney v. Hutchinson, 468 So.2d 714, 718 (La. App. 1985) (citation and quotation marks omitted). So has a federal district court applying Louisiana law. Williams v. Ciba-Geigy Corp., 686 F. Supp. 573, 577 (W.D. La.) (“[i]n light of the wise principles embodied in comment k, it is presumptively inappropriate for a jury to apply the pure risk-utility test”), aff’d without op., 864 F.2d 789 (5th Cir. 1988). Williams, as well, did not require product-specific analysis before holding that comment k applied – but only afterwards, in evaluating the product’s warnings. Id. at 577-78. This looks like the across-the-board approach to us.
The only case on comment k under Maine law is a footnote declining to decide the issue but nonetheless implying that Maine would follow a case-by-case approach. Violette v. Smith & Nephew Dyonics, Inc., 62 F.3d 8, 13 n.3 (1st Cir. 1995) (evidence of “an alternative safe method of surgery” defeated unavoidably unsafe claim; “we need not decide” if “comment k accurately reflects Maine common law”). In Doe v. Solvay Pharmaceuticals, Inc., 350 F. Supp.2d 257, 267-68 (D. Me. 2004), aff’d, 153 Fed. Appx. 1 (1st Cir. 2005), the court jumbled together citations to cases applying both case-by-case and across-the-board approaches before dismissing a design defect claim for lack of evidence. On this basis, we put Maine rather wobbly in the case-by-case category.
(1) the nonexistence of any scientific test capable of detecting the viral agent which contaminated the blood at the time of injury; (2) the great utility of the product; (3) the lack of any substitute for the product; and (4) the relatively small risk of the disease being transmitted by the product.
To ensure “legal consistency,” the court treated comment k analysis as a policy-based question of law. Id. at 191. That’s not usually done in case-by-case jurisdictions.
Federal authority in Maryland as to drugs, as opposed to blood products, sounds a lot like across-the-board, but the law can hardly be called settled. Ames v. Apothecon, Inc., 431 F. Supp.2d 566, 573-74 (D. Md. 2006) (“Consumption of [the drug] caused [plaintiff’s] tragic blindness. This does not mean that the drug was defective. Prescription drugs are defective only if the risks are inadequately disclosed.”); Fellows v. USV Pharmaceutical Corp., 502 F. Supp. 297, 300 (D. Md. 1980) (“prescription drugs are not considered unusually dangerous under section 402A, and the manufacturer will not incur liability under that section, unless the manufacturer has failed to provide adequate warnings of the drug’s possible dangers”).
There does not exist a mixture of ingredients capable of alternative design and, consequently, plaintiff’s claim of negligent design must, as a matter of law, be dismissed [because the drug] is created from a single, active ingredient and only has one possible formulation. Furthermore, under these circumstances, plaintiff’s defective design claim is actually a claim that [the drug] should never have been designed or manufactured at all.
Sprague v. Upjohn Co., 1995 WL 376934, at *1-2 (D. Mass. May 10, 1994). We somewhat wobbly put Massachusetts in the across-the-board category.
There’s not much prescription drug litigation in Michigan anymore, but when there was, Michigan appeared to be an across-the-board state on comment k issues. Nichols v. McNeilab, Inc., 850 F. Supp. 562, 570 (E.D. Mich. 1993) (“Prescriptions drugs . . . are characterized as ‘unavoidably unsafe’ products and a manufacturer can be held liable for their side effects only if the manufacturer failed to supply an adequate warning in light of the information then available”).
One federal court predicted, a fairly long time ago, that Minnesota would apply the unavoidably unsafe product principle/comment k on a case-by-case basis. Kociemba v. G.D. Searle & Co., 680 F. Supp. 1293, 1301 (D. Minn. 1988) (“reject[ing] defendant’s contention that comment k was intended to provide all prescription drugs with blanket immunity from strict liability claims”) (citing Toner).
Factors that must be considered in deciding whether a product is unavoidably unsafe include: (i) whether the product could have been designed in a safer manner; (ii) whether a safer alternative product could have been available at that time to accomplish the same intended purpose as the product in question; and (iii) whether the benefits of the product outweigh the interest in promoting enhanced accountability on the part of the manufacturer.
Id. The court did not decide whether comment k applied to negligent design claims. Id. at 1301 n.5. Without directly addressing the issue, another federal court conducted a product specific comment k analysis in Johnson v. Zimmer, Inc., 2004 WL 742038, at *8-9 (D. Minn. March 31, 2004).
Mississippi adopted the case-by-case approach to comment k in Bennett v. Madakasira, 821 So.2d 794, 809 (Miss. 2002) (comment k “does not provide a blanket immunity from strict liability for prescription drugs, as not all prescription drugs are ‘unavoidably unsafe’”) (citation omitted).
Missouri is a case-by-case state, although its supreme court hasn’t ruled. In Pollard v. Ashby, 793 S.W.2d 394, 400 (Mo. App. 1990), the court held that comment k was an affirmative defense and ruled that, because it wasn’t pleaded it was waived. In Racer v. Utterman, 629 S.W.2d 387, 393-94 (Mo. App. 1981), the court conducted a product-specific analysis of a medical device and held that strict liability “could attach to the [product] because of its flammable nature, in the absence of a warning of the danger.” Federal courts have applied case-by-case analysis to comment k under Missouri law. Hill v. Wyeth, Inc., 2007 WL 674251, at *4-5 (E.D. Mo. Feb. 28, 2007) (“whether a product is within the scope of comment k should be determined on a case-by-case basis”); Lachance v. American Home Products Corp., 2006 WL 89850, at *4-5 (W.D. Mo. Jan. 13, 2006) (submitting comment k issues to jury).
A very early federal case applied comment k without individualized adjudication under Montana law. Davis v. Wyeth Laboratories, Inc., 399 F.2d 121, 129 (9th Cir. 1968) (“[a]s the comment stresses, however, strict liability is avoided in these situations only where sale is accompanied by proper directions and proper warnings”). There hasn’t been a comment k related peep out of Montana since.
The Nebraska Supreme Court has adopted the case-by-case approach to unavoidably unsafe product determinations.
[C]omment k., applies as an affirmative defense to except prescription drug products from strict liability when it is shown that (1) the product is properly manufactured and contains adequate warnings, (2) its benefits justify its risks, and (3) the product was at the time of manufacture and distribution incapable of being made more safe.
Freeman v. Hoffman-La Roche, Inc., 618 N.W.2d 827, 831 (Neb. 2000).
A plurality of the Nevada Supreme Court rejected comment k altogether in Allison v. Merck & Co., 878 P.2d 948, 953-55 (Nev. 1994). A concurring justice would have adopted comment k generally, apparently across the board. Id. at 961 (Rose, C.J., concurring). The dissent would have applied a case-by-case approach to comment k. Id. at 695-96. Allison left Nevada law a mess. In Fisher v. Professional Compounding Centers of America, Inc., 311 F. Supp.2d 1008, 1018 (D. Nev. 2004), the court followed the Allison plurality and refused to consider comment-k-based arguments.
Federal courts have held that New Hampshire would recognize design defect claims against prescription drugs, thus implicitly rejecting an across the board application of comment k. Brochu v. Ortho Pharmaceutical Corp., 642 F.2d 652, 655 (1st Cir. 1981) (“We are unwilling to say that under New Hampshire’s balancing test no drug can ever be classified as unreasonably dangerous”); Bartlett v. Mutual Pharmaceutical Co., 731 F. Supp.2d 135, 150-51 (D.N.H. 2010) (“courts generally place the initial burden of proving the various [comment k] factors on the defendant”; holding plaintiff’s design defect claim survived summary judgment).
Comment k immunizes from strict liability the manufacturers of some products, including certain drugs, that are unavoidably unsafe. However, we see no reason to hold as a matter of law and policy that all prescription drugs that are unsafe are unavoidably so. Drugs, like any other products, may contain defects that could have been avoided by better manufacturing or design. Whether a drug is unavoidably unsafe should be decided on a case-by-case basis; we perceive no justification for giving all prescription drug manufacturers a blanket immunity from strict liability manufacturing and design defect claims under comment k.
The New Jersey legislature, however, responded with a statute providing a rebuttable presumption of non-defectiveness to FDA-approved products, N.J.S.A. §2A:58C-4. Since then, prescription drug cases have been litigated under substantive rubric of the statute rather than comment k. E.g., Perez v. Wyeth Laboratories Inc., 734 A.2d 1245, 1259 (N.J. 1999).
New Mexico swings both ways. The court in Davila v. Bodelson, 704 P.2d 1119, 1127 (N.M. App. 1985), submitted a comment k question to the jury. However, the court in Perfetti v. McGahn Medical, 662 P.2d 646, 650 (N.M. App. 1983), did not rely on any product-specific rationale in holding breast implants to be unavoidably unsafe products. New Mexico law remains uncertain.
New York law cases apply comment k to all prescription medical products simply because that’s what they are. Martin v. Hacker, 628 N.E.2d 1308, 1311 (N.Y. 1993) (“even though its side effects may cause injury, a prescribed drug, accompanied by adequate warnings, is ‘not defective, nor is it unreasonably dangerous’”) (quoting comment k); Wolfgruber v. Upjohn Co., 423 N.Y.S.2d 95, 97 (N.Y. App. Div. 1979) (“[t]he scope of the warning is the key factor in a drug products liability suit because prescription drugs are ‘unavoidably unsafe products’”) (following comment k), aff’d mem., 417 N.E.2d 1002 (N.Y. 1980) (for reasons in lower court opinion); Samuels v. American Cyanamid Co., 495 N.Y.S.2d 1006, 1011 (N.Y. Sup. 1985) (“ethical or prescription drugs, although properly manufactured, may be ‘[u]navoidably unsafe products’, due to potential side effects, but are not considered defective or unreasonably dangerous when accompanied by proper directions for use and adequate warnings”); Bravman v. Baxter Healthcare Corp., 984 F.2d 71, 76 (2d Cir. 1993) (“following majority rule that medical devices that must be prescribed and inserted by a physician are unavoidably unsafe products”); Lindsay v. Ortho Pharmaceutical Corp., 637 F.2d 87, 90 (2d Cir. 1980) (prescription “drugs, aptly described as ‘(u)navoidably unsafe products’, are not deemed defective or unreasonably dangerous so long as they are accompanied by proper directions for use and adequate warnings”) (citing Wolfgruber and comment k); Gensler v. Sanofi-Aventis, 2009 WL 857991, at *6 (E.D.N.Y. March 30, 2009) (“where there is a proper warning, design defect liability is barred”); Larkins v. Glaxo Wellcome, Inc., 1999 WL 360204, at *9 (E.D.N.Y. May 20, 1999) (quoting and following Martin v. Hacker); cf. Militrano v. Lederle Laboratories, 769 N.Y.S.2d 839, 846-847 (N.Y. Sup. 2003) (concluding the Congress intended an across-the-board application of comment k in vaccine cases), aff’d, 810 N.Y.S.2d 506 (N.Y. App. Div. 2006).
N.C. Gen. Stat. §99B-6(d) extends the unavoidably unsafe doctrine to all prescription drugs. “No manufacturer of a prescription drug shall be liable in a product liability action on account of some aspect of the prescription drug that is unavoidably unsafe, if an adequate warning and instruction has been provided.” Id.
A federal court has suggested in dictum that North Dakota would apply comment k on a case-by-case basis. Ehlis v. Shire Richwood, Inc., 233 F. Supp.2d 1189, 1191 (D.N.D. 2002) (“comment k provides an affirmative defense rather than provides absolute immunity”), aff’d, 367 F.3d 1013 (8th Cir. 2004). However, the discussion in Ellis came in the context of strict liability under Restatement §§519-20, rather than §402A.
A tort reform statute, Ohio Rev. Code Ann. §2307.75(D), extends the unavoidably unsafe doctrine to all prescription drugs and medical devices. “An ethical drug or ethical medical device is not defective in design or formulation because some aspect of it is unavoidably unsafe, if the manufacturer of the ethical drug or ethical medical device provides adequate warning and instruction.” Id. The statute reverses Ohio’s previous reliance on a case-by-case approach. See White v. Wyeth Laboratories, Inc., 533 N.E.2d 748, 753 (Ohio 1988); Ackley v. Wyeth Laboratories, Inc., 919 F.2d 397, 399 (6th Cir. 1990).
Comment k serves as an affirmative defense when the product is incapable of being made safe under present technology, but the social need for the product warrants its production. The design must be as safe as the best available testing and research permits. There must be at the time of manufacture and distribution no feasible alternative design which on balance accomplished the subject product’s purpose with a lesser risk.
890 P.2d 881, 885-886 (Okla. 1994) (citations and quotation marks omitted); see Alexander v. Smith & Nephew, P.L.C., 98 F. Supp.2d 1310, 1317 (N.D. Okla. 2000) (under Tansy, “a risk-benefit analysis must be performed before applying cmt. k”).
Oregon has adopted Restatement §402A and its comments by statute. Or. Rev. Stat. §30.920. The Oregon Supreme Court has suggested, in a footnote, that comment k applies on a case-by-case basis. Senn v. Merrell-Dow Pharmaceuticals, Inc., 751 P.2d 215, 218 n.4 (Or. 1988) (citing Toner). Federal courts applying Oregon law have done so. Coursen v. A.H. Robins Co., 764 F.2d 1329, 1337 (9th Cir. 1985) (holding comment k to be an affirmative defense; requiring product specific proof), corrected, 773 F.2d 1049 (9th Cir. 1985); Allen v. G.D. Searle & Co., 708 F. Supp. 1142, 1149 (D. Or. 1989) (comment k requires the defendant to show “that the product is incapable of being made safe for its intended and ordinary use; that the benefits of the product justify its marketing and use despite the unavoidable risks; that the product is properly prepared and marketed; and that the product is accompanied by proper directions and warnings”).
Pennsylvania has always applied comment k and the unavoidably unsafe rationale to all prescription medical products without individualized adjudication. Pennsylvania law is “clear that where the adequacy of warnings associated with prescription drugs is at issue, the failure of the manufacturer to exercise reasonable care to warn of dangers, i.e., the manufacturer’s negligence, is the only recognized basis of liability.” Hahn v. Richter, 673 A.2d 888, 8991 (Pa. 1996).
Incollingo v. Ewing, 444 Pa. 206, 282 A.2d 206, 219-220 (Pa. 1971) (quoting and following comment k); accord Coyle v. Richardson-Merrell, Inc., 584 A.2d 1383, 1385-87 (Pa. 1991) (recognizing general applicability of comment k); Baldino v. Castagna, 478 A.2d 807, 811-12 (Pa. 1984) (“Where warning is given . . . a product bearing such a warning, which is safe for use if it is followed, is not in defective condition nor is it unreasonably dangerous. . . . [T]he Restatement reaches the same conclusion as to drugs which serve a useful purpose notwithstanding a medically recognizable risk.”). However, recently a case we can’t discuss due to our own involvement recognized a negligent design claim – while precluding all forms of strict liability – in a prescription drug case. Lance v. Wyeth, 4 A.3d 160, 165-66 (Pa. Super. 2010). Lance is in front of the Pennsylvania Supreme Court at present.
There’s no comment k law that we know of in Puerto Rico.
Rhode Island is case-by-case, based upon the same sort of certified question that produced Toner. Castrignano v. E.R. Squibb & Sons, Inc., 546 A.2d 775, 781 (R.I. 1988) (“we believe the societal interest in the development and marketing of prescription drugs will be adequately served by extending comment k to prescription drugs on a case-by-case basis”); see Castrignano v. E.R. Squibb & Sons, Inc., 900 F.2d 455, 457 (1st Cir. 1990) (applying Castrignano).
Under South Carolina law, prescription drugs and medical devices “are deemed ‘unavoidably unsafe,’ but are not defective or unreasonably dangerous if they are marketed with proper directions for use or include adequate warnings of potential side effects.” Brooks v. Medtronic, Inc., 750 F.2d 1227, 1230-31 (4th Cir. 1984) (following comment k). That sounds like across-the-board to us.
A federal court applying South Dakota law made an across-the-board sounding statement in McElhaney v. Eli Lilly & Co., 575 F. Supp. 228, 230 (D.S.D. 1983) (prescription drugs “are not deemed defective or unreasonably dangerous so long as they are accompanied by proper directions for use and adequate warnings as to potential side effects”), aff’d without op., 739 F.2d 340 (8th Cir. 1984).
Comment K imposes a well-recognized exception for “unavoidably unsafe products,” such as prescription medical devices. An action in strict liability does not lie against the manufacturer of such a product if the product was properly prepared and accompanied by proper directions and warning. Therefore, to the extent that the plaintiff has a viable strict liability claim, it would arise under a failure-to-warn theory.
Id. at *6 (citations, quotation marks, and footnote omitted).
Texas is a comment k/unavoidably unsafe product across-the-board state. Centocor, Inc. v. Hamilton, 310 S.W.3d 476, 516 (Tex. App. 2010) (comment k “provide[s] a defense to a design defect claim”), app. pending; Schwarz v. Block Drug Co., 180 F.3d 261, 1999 WL 274409, at *1 (5th Cir. 1999) (“Under comment K of the Restatement of Torts (Second) § 402A, a drug manufacturer is responsible in damages only if it failed to warn of a defect of which it knew or should have known.”) (unpublished); Reyes v. Wyeth Laboratories, 498 F.2d 1264, 1273-74 (5th Cir. 1974) (applying unavoidably unsafe standard without individualized assessment); Holland v. Hoffman-La Roche, Inc., 2007 WL 4042757, at *3 (N.D. Tex. Nov. 15, 2007) (“[p]rescription drugs are not susceptible to a design defect claim where, as here, the drug is “accompanied by proper directions and warning”); Carter v. Tap Pharmaceuticals, Inc., 2004 WL 2550593, at *2 (W.D. Tex. Nov. 2, 2004) (“[u]nder Texas law, all FDA-approved prescription drugs are unavoidably unsafe as a matter of law”); Hackett v. G.D. Searle & Co., 246 F. Supp.2d 591, 595 (W.D. Tex. 2002) (“[t]he Court thus holds that under Texas law and comment k of the Restatement, Defendants can only be held strictly liable if the drug was not properly prepared or marketed or accompanied by proper warnings”); cf. Brockert v. Wyeth Pharmaceuticals, Inc., 287 S.W.3d 760, 770-71 (Tex. App. 2009) (affirming summary judgment against design defect claim involving prescription drug on ground of lack of alternative design); Gerber v. Hoffmann-La Roche Inc., 392 F. Supp.2d 907, 922 (S.D. Tex. 2005) (same).
We agree with Brown that the case-by-case method first articulated in Kearl is unworkable, even in light of Toner’s refinement of the test. We find the Brown result more in line with the public policy considerations in the important area of pharmaceutical product design. We do not agree, however, with the Brown court’s apparent attempt to use the plain language of comment k as the vehicle for exempting all prescription drugs from strict liability rather than relying on the policies underlying that comment. . . .
We agree with the principle comment k embodies, that manufacturers of unavoidably dangerous products should not be liable for a claim of design defect. We are persuaded that all prescription drugs should be classified as unavoidably dangerous in design because of their unique nature and value, the elaborate regulatory system overseen by the FDA, the difficulties of relying on individual lawsuits as a forum in which to review a prescription drug’s design, and the significant public policy considerations noted in Brown.
813 P.2d at 95. See Schaerrer v. Stewart’s Plaza Pharmacy, Inc., 79 P.3d 922, 928 (Utah 2003) (“under Utah law, comment k shields manufacturers and sellers of prescription drugs from strict liability based on allegations of a design defect”); Stanley v. Mylan Inc., 2010 WL 3718589, at *5 (D. Utah Sept. 17, 2010) (“the Court will allow the case to proceed on the understanding that Plaintiffs will not press for a strict-liability design-defect claim”). Nevertheless, a federal court refused to dismiss a negligent design claim in Lake-Allen v. Johnson & Johnson L.P., 2009 WL 2252198, at *2-3 (D. Utah July 27, 2009), finding comment k “limited to strict liability.” Given the policy-based thrust of Grundberg, we think that ruling’s mistaken.
There’s nothing about comment k in Vermont.
Virginia’s never adopted any part of Restatement (Second) of Torts §402A (1965), and rejects strict liability altogether, so it’s also not adopted comment k. Abbot v. American Cyanamid Co., 844 F.2d 1108, 1115 (4th Cir. 1988).
There’s no comment k law in the Virgin Islands that we know of.
Washington was an early across-the-board state for comment k, and has remained so. Young v. Key Pharmaceuticals, Inc., 922 P.2d 59, 63 (Wash. 1996) (under comment k, a prescription drug manufacturer is liable “only if it failed to warn of a defect of which it either knew or should have known . . . it is liable in negligence and not in strict liability”); Terhune v. A.H. Robbins Co., 577 P.2d 975, 977-78 (Wash. 1978) (“the duty of the manufacturer to warn of dangers involved in use of a product is satisfied if he gives adequate warning to the physician who prescribes it”); Transue v. Aesthetech Corp., 341 F.3d 911, 916 (9th Cir. 2003) (“comment k provides a blanket exemption from strict liability for design defect claims on all prescription medical products”); Adams v. Synthes Spine Co., 298 F.3d 1114, 1117 (9th Cir. 2002) (“Washington applies this [comment k] rule not only to such medical products as vaccines for deadly diseases, but . . . much more broadly, to medical products where the physician acts as a learned intermediary”); Dalke v. Upjohn Co., 555 F.2d 245, 247 (9th Cir. 1977) (under comment k “unavoidably unsafe products are not defective or unreasonably dangerous if properly prepared and accompanied by adequate directions and warnings”).
Federal courts predicting West Virginia law opted for the case-by-case approach to comment k, at least in vaccine cases where plaintiffs asserted an alternative design. Smith v. Wyeth Laboratories, Inc., 1986 WL 720792, at *5 (S.D.W. Va. Aug. 21, 1986) (“courts have recognized that not all prescription drugs should be considered “unavoidably unsafe products”); see Rohrbough v. Wyeth Laboratories, Inc., 719 F. Supp. 470, 476-77 (N.D.W. Va. 1989) (placing burden to prove comment k on defendants; plaintiff created a jury question as to alternative design), aff’d mem., 916 F.2d 970 (4th Cir. 1990).
Wisconsin doesn’t follow comment k at all. Collins v. Eli Lilly & Co., 342 N.W.2d 37, 52 (Wis. 1984) (“rule embodied in comment k is too restrictive and, therefore, not commensurate with strict products liability law in Wisconsin”). However Wisconsin recently passed a statute completely rejiggering of the fundamentals of design defect liability, so that might at some point lead to a change of heart on comment k.
Wyoming applies comment k without individualized adjudication. Jacobs v. Dista Products Co., 693 F. Supp. 1029, 1031 (D. Wyo. 1988) (“manufacturers of prescription drugs cannot be held accountable under a strict liability theory for injuries which might result from their use so long as adequate warnings are provided to enable a prescribing physician to weigh on a patient-by-patient basis the benefits of a drug’s use against the attendant risks”).


A number of developments unfavorable to tax planning during this first decade of the 21st Century have tempered and challenged state corporate income tax planning. From tax shelter regulation and new penalties to legislative loophole closing, judicial challenges, and accounting changes, tax planning has been curtailed. Still, some recent developments show that taxpayers should persevere.
This article addresses two recent court decisions and one tax agency ruling that uphold (or guide) state tax planning involving investment companies, limited partnerships, royalties, and interest expense allocations. The article also touches on some of the possible planning implications. The developments also demonstrate that planning includes proactive assertion of tax-favorable return positions (or refund claims) based on the guidance that courts and state tax agencies provide, as well as structural planning.
Before Texas amended its franchise tax effective for years on and after January 1, 2008, the Texas limited partnership was another old stand-by strategy of state corporate income tax planning. Those days are over in Texas and a few other states. However, a decision this summer from the New Jersey Tax Court may provide similar opportunities.
In BIS LP, Inc. v. Division of Taxation, No. 007847-2007 (N.J. Tax Ct. July 30, 2009), a subsidiary holding company, “S”, held a 99% limited partnership interest in a New Jersey limited partnership (LP). The 1% general partner was S’s parent corporation, “P”. S did not, and had no right to, participate in the management of LP. S did not conduct any other activities and independently performed no activities in New Jersey. The New Jersey Tax Court held that S’s interest in LP was an investment contract and did not provide substantial nexus for S in New Jersey.
New Jersey provides a Corporation Business income Tax (CBT) benefit to an “investment company.” If a corporation qualifies as a New Jersey investment company, the company’s CBT is measured by 40% of the company’s entire net income. N.J.S.A. § 54:10A-5(d). The Tax Court first held that S’s limited partnership interest constituted an investment contract and a qualifying asset as an “other security” for purposes of New Jersey’s investment company tax benefit prior to the Division of Taxation’s (Division) amendment of its regulation, N.J.A.C. § 18:7-1.15. Effective August 7, 2006, the Division amended the regulation to eliminate from the definition of a “qualified investment asset” an investment in a non-publicly traded pass-through entity. However, based on Praxair Technology, Inc. v. Director, Div. of Taxation, 404 N.J. Super. 287 (App. Div. 2008), cert. granted, 199 N.J. 130 (2009), the Tax Court ruled the regulatory amendment must be applied prospectively. As a result, S would have qualified as an investment company for the years at issue in BIS LP.
Regardless, the Tax Court also ruled that S did not have substantial nexus with New Jersey. The court found that S and P were separate entities. The Division’s regulation that defines “doing business” in New Jersey includes “deriving receipts from sources within” New Jersey. N.J.A.C. § 18:7-1.6(a)2.vii. Even if S’s distributive share of income from LP was a “business receipt,” as argued by the Division, the Court held that S still did not have business activity in New Jersey sufficient for substantial nexus.
By regulation, New Jersey also characterizes a corporate limited partner as doing business in New Jersey if the limited partner is also a general partner, the limited partner takes an By regulation, New Jersey also characterizes a corporate limited partner as doing business in New Jersey if the limited partner is also a general partner, the limited partner takes an active part in the control of partnership business, the limited partner is otherwise doing business in New Jersey in its own right, or the business of the partnership and the limited partner are “integrally related.” N.J.A.C. § 18:7-7.6(c). The Court had already ruled that the second and third requirements were not satisfied, and S was not also a general partner. Therefore, S could only have been doing business in New Jersey if its business and the business of LP were integrally related, and the Tax Court held that the businesses were not. The Court found S was a passive investor, since it had no right to participate in the management of LP and had no control or potential to control LP. S was not in the same line of business as LP; it was a holding company, and LP was in the data processing business. The court also relied on an example in the regulation – N.J.A.C. § 18:7-7.16, example IV – that stated a “true limited partner” who was not unitary with the limited partnership was not subject to CBT.
Thus, S was not carrying on New Jersey business activity and did not have substantial nexus with New Jersey to justify the imposition of CBT.
The planning implications are obvious, although taxpayers also should not lose sight of the investment company holding for open years prior to August 7, 2006. Nonetheless, the Division has filed a notice of appeal, and this case should be monitored as the appeal proceeds.
In New York, royalties from the use of patents or copyrights in New York State are sourced to the New York receipts factor numerator. 20 N.Y.C.C.R. § 4-4.4(c). The regulation simply declares that a “patent or copyright is used in New York State to the extent that the activities thereunder are carried on in New York State.” Id. Any other business receipts not described in regulations, including receipts from intellectual property that is not copyrighted, trademarked, or patented, are sourced to where the receipts are earned. 20 N.Y.C.R.R. § 4-4.6(a). But the regulation does not define where such receipts are earned.
In Advisory Opinion, TSB-A-09(14)C (Aug. 5, 2009), the New York Department of Taxation and Finance (Department) considered a taxpayer who owned copyrighted and trademarked artistic and literary intellectual property (IP). Some of its IP was not copyrighted or trademarked (non-protected IP), and the taxpayer licensed its IP and non-protected IP to businesses that manufacture, distribute, and sell consumer products. Licensees paid the taxpayer royalties based on their net sales and a minimum royalty guarantee.
The Department acknowledged in the Advisory Opinion that no Department regulation defines when the use of protected IP occurs in New York State or when receipts from non-protected IP are earned in New York State. The Department relied on Matter of Disney Enterprises, Inc., No. 818378 (N.Y. Div. of Tax Apps., Feb. 12, 2004), and applied the sourcing rule used in that case for the royalties from licenses of trademarked and copyrighted IP.2 The Department ruled that the taxpayer’s IP was used where the activity that generates the royalty or licensing fee occurs. Under the facts, this was where the sales of the licensees occurred because the royalty was determined based on a percentage of their net sales. Likewise, receipts from licenses of non-protected IP were also sourced to where the licensees’ sales occurred, as the Department concluded that was where the receipts were earned.
Second, the Advisory Opinion is silent as to how the minimum guaranteed royalty amount should be sourced. The activity generating this royalty would not appear to occur where sales of the licensees occurred.
Licensors of trademarked, copyrighted, patented IP and non-protected IP should study this Advisory Opinion and how it applies to your licensing arrangements to determine if royalties have been properly sourced for open audit years in order to identify tax exposure or refund opportunities. Favorable results from the Advisory Opinion should be considered for current filing positions and structure.
Michigan’s former Single Business Tax (SBT) base, which was repealed effective December 31, 2007, was determined by starting with a taxpayer’s federal taxable income (FTI). As a modified value-added tax, certain items that do not increase or decrease value added to a product, such as interest expense or income, are added-back to (for the payor of interest), or deducted from ( for the recipient of interest), FTI in arriving at the SBT tax base.
Interest expenses were added back to federal taxable income if they were deducted in arriving at FTI. M.C.L. § 208.9(4)(f). Interest income was subtracted from FTI if it was included in FTI. M.C.L. § 208.9(7).
The parent corporation-taxpayer in Aramark Service also appears to have filed its Michigan SBT tax returns on a separate entity basis. Separate reporting was the standard, required filing option of the Michigan SBT unless the taxpayer was permitted or required to file a Michigan combined return.
The parent attached to its federal consolidated return pro forma separate federal income tax returns for itself and all of its subsidiaries. The subsidiaries’ pro forma returns reflected the parent’s third party interest expense allocation to the subsidiaries as their payment of the interest expense. The parent’s pro forma return showed the total interest allocation as its interest income.
The court focused on the interest expense add-back statute’s language that add-back was required “to the extent deducted in arriving at federal taxable income.” Since the parent did not deduct interest expense in arriving at its federal taxable income as reported on the separate company pro forma federal tax return, the court concluded there was no interest expense to be added back to its FTI in arriving at its SBT base. The court found the statutory language was clear and unambiguous. (The subsidiaries were the parties to add-back interest expense, but they presumably were not Michigan taxpayers.) Plus, although not clear from the decision, it also appears that, since the parent included the interest allocation as its interest income on its pro forma federal return, the parent could deduct the interest income in determining its SBT tax base.
Intercompany interest expense allocations are a common corporate management and tax planning tool. The result in Aramark could extend beyond Michigan, including arrangements where affiliates may be joint obligors on parent debt. For Michigan taxpayers, open year Michigan SBT returns should be studied for potential refund claims.
States have increased their sophistication in examining corporate income tax planning, and their current grim fiscal situation only increases their aggressiveness and need for revenue. Still, the developments profiled in this article should encourage corporate taxpayers that valid planning implemented with the proper motives and substance remains a legal means to reduce taxes.


In order for his license or certificate to be operative, any person licensed as a private security services business under subsection A of § 9.1-139 or certified as a private security services training school under subsection B of § 9.1-139 shall file with the Department evidence of a policy of liability insurance in an amount and with coverage as fixed by the Department. The liability insurance shall be maintained for so long as the licensee or certificate holder is licensed or certified by the Department.
Every personal protection specialist and private investigator who has been issued a registration by the Department and is hired as an independent contractor by a licensed private security services business shall maintain comprehensive general liability insurance in a reasonable amount to be fixed by the Department, evidence of which shall be provided to the private security services business prior to the hiring of such independent contractor pursuant to subsection C of § 9.1-139.
1976, c. 737, § 54-729.31; 1988, c. 765, § 54.1-1905; 1992, c. 578, § 9-183.6; 1998, cc. 122, 807; 2001, c. 844; 2015, c. 202; 2018, c. 214.


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Cuevas P. Troicki V. live score (and video online live stream*) starts on 18.4.2019. at 11:30 UTC time at Central court stadium, Tunis, Tunisia in Tunis, Tunisia - Challenger. Here on SofaScore livescore you can find all Pablo Cuevas vs Viktor Troicki previous results sorted by their H2H matches. Links to Cuevas P. vs. Troicki V. video highlights are collected in the Media tab for the most popular matches as soon as video appear on video hosting sites like Youtube or Dailymotion. We're not responsible for any video content, please contact video file owners or hosters for any legal complaints.
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NAME: Cuevas P. - Troicki V.
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