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Lord, Bissell & Brook LLP Featured News
Featured articles from the Lord, Bissell & Brook LLP Newsstand

• Client Alert: California Supreme Court Adopts “Sophisticated User” Doctrine In Product Liability Failure To Warn Cases
  On April 3, 2008, the California Supreme Court issued its decision in William Keith Johnson v. American Standard, Inc. et al., No. S139184, and adopted the “sophisticated user” doctrine as a defense to negate a manufacturer’s duty to warn of a product’s potential danger when the plaintiff has (or should have) advance knowledge of the product’s inherent hazards. The Court held that “the defense is specifically applied to plaintiffs who knew or should have known of the product’s hazards, and it acts as an exception to manufacturers’ general duty to warn consumers.” Significantly, the Court adopted a broad application of the “sophisticated user” defense and held that it applies to both negligence and strict liability causes of action.
  
  Factual And Procedural Background
  
  The plaintiff in the Johnson case was a trained and certified heating, ventilation and air conditioning (HVAC) technician who sued various chemical and equipment manufacturers and suppliers in Los Angeles County Superior Court for bodily injury he allegedly suffered as a result of exposure to hydrofluorocarbon refrigerant (R-22 refrigerant) and phosgene gas. Phosgene gas may cause various health problems and the undisputed facts were that manufacturers and HVAC technicians have generally known of the dangers this exposure could cause since as early as 1931. Moreover, it was undisputed that under federal law HVAC technicians must be certified by the EPA with universal certification, which is granted after an exam, and that most technicians have some kind of professional training.
  
  Defendant moved for summary judgment on grounds that it had no duty to warn about the potential hazards of R-22 because it could assume that the group of trained professionals to which plaintiff belonged, and plaintiff himself, were aware of those risks. The court granted defendant’s motion for summary judgment and the Appellate Court affirmed. more...

   

• Client Alert: Covenant Not To Sue Does Not Divest Court Of Jurisdiction Over Declaratory Judgment Action
  

  In Caraco Pharmaceutical Labs., Ltd. v. Forest Labs., Inc., 2008 WL 850330, Case No. 2007-1404 (Fed. Cir. April 1, 2008), the Federal Circuit held that a court has jurisdiction to entertain a declaratory judgment action by an Abbreviated New Drug Application (“ANDA”) applicant to obtain an adjudication of an Orange-Book-listed patent despite the fact the patentee had granted the ANDA applicant a “covenant not to sue” on the patent. The Federal Circuit held that a generic company whose ANDA approval was being delayed under the Hatch-Waxman Act due to the 180-day exclusivity of a first-filer had jurisdiction to bring a declaratory judgment suit to resolve its patent disputes so that it could attempt to expedite FDA approval.
  
  The All Circumstances Test For Declaratory Judgment Jurisdiction
  
  The Federal Circuit’s holding in Caraco is the most recent in a series of cases which over the last year have reshaped the jurisdictional requirements for declaratory judgment suits related to patent noninfringement, invalidity and/or unenforceability. In MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007), the Supreme Court rejected the “reasonable apprehension of suit test” previously applied by the Federal Circuit and instead adopted the “all the circumstances” test, which requires that “there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, 127 S. Ct. at 771. Shortly after MedImmune, the Federal Circuit ruled that the “all the circumstances” test applied to declaratory judgment actions in the Hatch-Waxman context. more...

• Client Alert: U.S. Supreme Court Rules that Federal Arbitration Act Provides the Exclusive Grounds for Vacating or Modifying Arbitration Awards
  The United States Supreme Court recently addressed an important question of federal arbitration law: Whether private parties to an arbitration agreement may expand a court’s scope of review of an arbitral award. On March 25, 2008, the Court held that Sections 10 and 11 of the Federal Arbitration Act (FAA) establish the exclusive grounds for vacating or modifying arbitration awards, and that parties to an arbitration agreement cannot expand these grounds in their contract. Hall Street Associates L.L.C. v. Mattel, Inc., No. 06-989, Mar. 25, 2008. http://www.supremecourtus.gov/opinions/07pdf/06-989.pdf
  
  The basis of the dispute was a commercial lease between Hall, the landlord, and Mattel, the tenant. At issue was Mattel’s right to terminate the lease and its obligation for certain environmental clean-up costs resulting from the manufacturing activities of a former tenant. The lease did not contain an arbitration clause.
  
  Hall filed suit against Mattel in the United States District Court for the District of Oregon, contesting Mattel’s right to terminate and seeking indemnification for clean-up costs. Following a bench trial, the District Court ruled that Mattel had the right to terminate the lease. The parties then proposed to submit the issue of Mattel’s obligation to pay clean-up costs to arbitration. The District Court agreed, and the parties drafted an arbitration agreement which the court approved and entered as an order. The agreement provided that, following the arbitration, “the Court shall vacate, modify or correct any award: (i) where the arbitrator’s findings of fact are not supported by substantial evidence, or (ii) where the arbitrator’s conclusions of law are erroneous.” more...
  
  

   

• Client Alert: Treasury Blueprint for Regulatory Reform
  

  On March 31, 2008, Treasury Secretary Henry Paulson unveiled a Blueprint for a Modernized Financial Regulatory Structure. The document reflects the comments received in response to the advance notice of proposed rulemaking issued in the fall of 2007 soliciting input on a wide range of structural and substantive issues involving the current and optimal organization of the financial services regulators. Further, the document reflects suggested changes to the structure of the regulatory agencies as a result of the problems in the mortgage market and investment banking industry in the past nine months. A final impetus to the study was the desire by Treasury and the Administration to address the global competitiveness of the US financial markets.
  
  The Blueprint contains recommended actions that can be accomplished in the short term and additional recommendations for longer term action. The recommendations for short term actions respond to the current market situation and specially address concerns about the mortgage market and the ongoing liquidity functions of the Federal Reserve. The medium and long term recommendations address possible structural and organizational changes to the financial services regulatory scheme as it currently exists.
  
  The following are some of the highlights of the Blueprint.
  
  Short Term Recommendations

  • Adoption of consistent national standards and enforcement for mortgage originators. The establishment of a Mortgage Origination Commission, a federal commission that would develop uniform minimum qualifications for state mortgage market participant licensing (including mortgage brokers) is recommended. Treasury also recommends that state agencies be given clear authority to enforce compliance with the Truth in Lending Act and that the Federal Reserve retain the authority to promulgate regulations implementing national mortgage lending laws. more...
• Client Alert: Texas Supreme Court Allows Coverage of Punitive Damages for Gross Negligence in Workers Compensation Case
  

  On February 15, 2008, the Texas Supreme Court issued its opinion in Fairfield Insurance Co. v. Stephens Martin Paving, LP, No. 04-0728, 2008 WL 400397, in which it held, in a workers’ compensation setting, that Texas public policy did not prohibit insurance coverage for “exemplary” damage1 resulting from an employer’s gross negligence. This opinion, issued in response to a certified question from the Fifth Circuit Court of Appeals, is the first time the Texas Supreme Court has addressed the issue, and is consistent w