Don’t stop us if you’ve heard this before, because you have. A plaintiff brings an lawsuit over injuries allegedly from a medical device, sues not only the company that made and marketed the device but also a parent company that did not make or market the device, said parent moves for dismissal for want of personal jurisdiction, and the court grants the motion. That is what happened in Marcovecchio v. Wright Med. Grp., 2019 U.S. Dist. LEXIS 54414 (D. Utah, March 28, 2019). You might wonder whether there is anything to learn from this case, except that some plaintiff lawyers never learn. So at least learn this: when you consider your response to a complaint, don’t assume that the complaint was drafted with any degree of respect for even the most fundamental precedents. Consider a wide variety of motions, including jurisdictional ones. File the ones that look strong, make the other side do some work, and maybe the court will cut back the case to something coherent and manageable.
The plaintiff in Marcovecchio was a Utah resident who brought a lawsuit in Utah alleging personal injuries arising out of a hip replacement system. There were causes of action for strict products liability, negligence, breach of express and implied warranties, fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, and punitive damages. The plaintiff sued both the company that manufactured, marketed, and sold the hip system throughout the United States, including in Utah, as well as the parent company, which acted as a parent and holding company for various entities. Neither company was incorporated in or “at home” in Utah.
Utah is a lovely place, but the parent company wanted out. It supplied an affidavit establishing that the parent holding company and the manufacturing company were separate entities with separate accounting and banking records. The parent company had no contacts with Utah and did not manufacture, market, or sell the hip system. Rather, the parent was simply the sole shareholder of the manufacturer. It did not even have any employees. For these reasons, the parent had a strong argument that the court lacked personal jurisdiction over it.
The plaintiff went to the plaintiff playbook and responded with excerpts from the parent’s public SEC filings and press releases in which the parent, according to the plaintiff, publicly identified itself as a company that “specializes in the design, manufacture and marketing of reconstructive joint devices” and claimed the hip replacement products “as its own.” For example, in its 2001 10-K filing, the parent described itself as “a global orthopedic device company specializing in the design, manufacture and marketing of reconstructive joint devices …” that “offers a comprehensive line of products for hip joint reconstruction[.]”
Believe it or not, other plaintiffs have made this exact same argument before against this exact same parent company, citing the exact same documents in support of personal jurisdiction. And it never works. The Marcovecchio court held that these statement are insufficient to establish the parent’s role in the design of the hip system. The filings were outdated and the plaintiff cherry-picked phrases out of them to support his position. Plus, annual reports typically involves this sort of bloviation in characterizing the business of a parent and its subsidiaries. [Note to our transactional colleagues: couldn’t more precise draftsmanship avoid this issue completely?]. Even if the filings are not perfectly clear about separating the roles of parents and subsidiaries, the Marcovecchio court was clear that the filings were not necessarily discussing the activities of the parent as opposed to the subsidiary. Any pufferies in the filings certainly were not enough to contradict the parent’s sworn testimony.
We’re not done. There is a part two to the plaintiff’s jurisdictional playbook, just as ineffective as part one. The plaintiff in Marcovecchio argued that the subsidiary’s contacts with Utah (which were undisputed) could be imputed to the parent. Uh, no. A parent corporation is not subject to personal jurisdiction in a forum solely based on the subsidiary‘s contracts with the forum absent an allegation that either 1) the subsidiary was an agent of the parent, or 2) that the two companies are so intertwined as to be the other’s alter ego. Here, the plaintiff’s conclusory statement that each of the defendants was the “representative, agent … or alter ego of … the other” was not sufficient to establish personal jurisdiction under either an agency theory or an alter ego theory. Farewell, dear parent.
The manufacturing company was stuck in the lawsuit, but it also had a few beefs with the complaint. For example, the manufacturing defect claim contained nothing but conclusory statements. The plaintiff alleged that the hip system had “a tendency to (a) detach, disconnect and/or loosen from a Patient’s acetabulum, (b) generate dangerous and harmful metal debris …; (c) cause pain, (d) inhibit mobility; and (e) require revision surgery.” As the court pointed out, these allegations all identify harms caused by the hip system, not the actual manufacturing flaw that caused the harm. The court put it nicely: “Plaintiff alleges that because he was injured, there had to be a flaw.“ Because the plaintiff never identified the actual flaw in the manufacturing process that caused the hip system to differ from the design, he had failed to state a claim for manufacturing defect.
The plaintiff also failed to state a claim for failure to recall. The Marcovecchio court refused to entertain such a claim unless “(1) a governmental directive issued pursuant to a statute or administrative regulation specifically requires the seller or distributor to recall the product; or (2) the seller or distributor, in the absence of a recall requirement … undertakes to recall the product, and the seller or distributor fails to act as a reasonable person in recalling the product.” The complaint satisfied neither requirement. Instead, the plaintiff alleged only that the defendant failed to recall the product, which is insufficient to state a claim. (Over a decade ago, we wrote about a similar recall issue with a similar analysis here.)
The claim for breach of express warranty was also hobbled by bare-bones pleadings. Reliance is necessary to establish a cause of action for express warranty, and the plaintiff needed to allege that the product descriptions were communicated to him or his doctor and became the basis of the bargain. The plaintiff generally alleged that “express representations” were made “to healthcare providers and patients, including Plaintiff and Plaintiff’s healthcare providers,” but the plaintiff failed to allege how those warranties became a basis of the bargain. The court tossed the claim because “[m]ere recitations that Plaintiff relied are not enough to state a claim for breach of express warranty.”
Finally, there was the suite of deceit claims: fraudulent misrepresentation, fraudulent concealment, and negligent misrepresentation. The complaint referenced misrepresentations “to the medical community and the general public,” and also referenced misrepresentations in the 510(k) application submitted to the FDA. That last bit implicates Buckman preemption. The Marcovecchio court dodged the preemption issue by bouncing the active misrepresentation claims for failure to plead either the allegedly fraudulent statements or the plaintiff’s reliance with the requisite specificity. The concealment claim was allowed to stand (courts are a little too lenient on such claims), but there was a lot less left to the case than existed before the defendants filed their motions.