‘Ready-Made Lawsuit’: Lawyers Discuss Why Some Product Recalls Lead to Litigation and Others Don’t

Aug 31, 2021

Recent recalls of benzene-laced sunscreen and defective breathing machines have spurred massive interest among the plaintiffs bar, with dozens of lawsuits already filed. But when Peloton recalled its treadmills, there were hardly any lawsuits.

So, when exactly does a recall lead to lawsuits?

It’s complicated, lawyers say. A lot depends on the product at issue, the details of the recall and the defendant’s market capitalization. But there’s no doubt that when companies announce a recall, plaintiffs lawyers pay attention.

“It is an admission. It’s like raising a flag to lawyers to say, ‘here’s something to look at it,’” said R. Jason Richards, of Aylstock, Witkin, Kreis & Overholtz in Pensacola, Florida. “Because every time there’s a recall we look at it. Recalls get our attention, and they know it will get our attention.”

And while not all recalls lead to lawsuits, companies are more than aware that they are possible.

“Companies are much more open to doing recalls than they used to be,” said Jonathan Judge, a partner at Schiff Hardin in Chicago. “They see it as an unfortunate but necessary aspect of doing business.”

More than a dozen lawsuits have been filed against Johnson & Johnson over its July 14 recall of five aerosol spray sunscreen products under the Aveeno and Neutrogena brands that were found to contain benzene, a known carcinogen.

Another 50 lawsuits have been filed against Philips USA over its June 14 recall of ventilation and sleep apnea machines, which have sound abatement foam that could cause a host of health risks.

Lawyers are moving to create multidistrict litigation in both cases, which are anticipated to be large mass torts for the plaintiff bar.

“None of these litigations, they’re not one-off cases,” said Richards, who filed some of the sunscreen lawsuits and spoke about the litigation at an Aug. 27 conference. “If you have a significant amount of cases with the same injury, same defendant and same thing, it’s going to be a mass tort and likely turn into multidistrict litigation.”

Missing from the docket are lawsuits against Peloton, which on May 5 recalled 125,000 treadmills after a 6-year-old died, and hundreds of children and pets were injured, from being trapped underneath. Some parents of the injured children have filed lawsuits, but there was only only one consumer class action.

The recent cases reflect the seemingly arbitrary nature of lawsuits that follow product recalls. Even lawyers don’t have a fixed idea of which lead to lawsuits, and which don’t.

“Unless it’s a very high-profile company, getting a lot of bad press, which is the understandable risk of a class action, for your midsized to substantial-sized publicly traded companies, it often feels like a bolt of lightning,” Judge said of recall-related class actions. “It’s still a surprise if one even shows up.”

Plaintiffs lawyers aren’t always prepared for the next recall, either.

“Sometimes, they’re on our radar, and we just wait for the shoe to drop—we wait for the FDA to mandate something,” Richards said. “Sometimes, this catches us completely off guard.”


‘Almost a Ready-Made Lawsuit’

Many recalls, such as those involving drugs, like the heartburn medication Zantac, alert the plaintiffs bar to a potentially large number of consumers, some of whom may have actually been injured. Plaintiffs firms already are advertising for consumers who believe they got cancer from their sunscreen, and the potential for large numbers of injury cases is a big part of the interest behind the litigation, as well as in those involving the Philips breathing machines.

“A lot of lawyers are hoping they will also be able to identify potential personal injury claims, wrongful death claims, more significant claims, arising from any class action,” said Alan Feldman, of Philadelphia’s Feldman Shepherd Wohlgelernter Tanner Weinstock Dodig. “There’s an incentive for lawyers to file class actions because it can potentially be successful and can identify other, more serious cases, as well.”

But injury cases take time and the expense of hiring experts. Class actions, on the other hand, usually focus on the economic harm to consumers who purchased the product.

When a recall recommendation comes from the U.S. Consumer Product Safety Commission, which has increasingly been aggressive in its enforcement measures, it results in “almost a ready-made lawsuit,” said Terry Henry, a partner at Blank Rome in Philadelphia who counsels companies on recalls.

“If you don’t have a lot of injured plaintiffs because of a recall, you certainly have a lot of people who bought a product who could have a consumer fraud lawsuit,” he said. “You really can’t head it off.”

There are ways, however, to cripple class actions over recalls. One of the most effective is to offer refunds.

“These lawsuits all seek one thing: They want refunds,” Judge said. “They want refunds because they’re enormously expensive, generate a huge corporate recovery and allow lawyers to take a big percentage of this. If you want to prevent class action lawsuits, you agree up front there’s a refund.”

Peloton’s recall provided full refunds through Nov. 6, 2022, and software updates to the treadmills, which it offered to move to a safer room in a consumer’s house. Peloton also waived subscription fees for three months.

‘Panoply of Remedies’ v. ‘Complete Waste of Time’

In the sunscreen cases, an independent pharmacy, Valisure LLC, filed a citizen petition with the U.S. Food and Drug Administration after finding benzene in 78 products. The manufacturers immediately began doing their own testing and, in the case of Johnson & Johnson, found benzene in some of their products. As part of its recall, Johnson & Johnson is offering refunds.

“Especially in class cases, like sunscreen litigation, if our remedy is a refund, the manufacturers are proactive, pull products from shelves, and then initiate a refund themselves consumers can go to and get reimbursed,” Richards said. “That, in a sense, cuts the legs out of the class action. One of the remedies we would be seeking is gone because the company voluntarily has done it.”

But lawyers still have a “panoply of remedies” they can seek, he said.

The sunscreen cases ask for injunctive relief—specifically, what the company plans to do to avoid future recalls, Robert said. Consumers also note that there are other products still on store shelves that Verisure found contained benzene.

Lawsuits also question when the company first learned of the problem and how long it took to notify consumers. And many of the lawsuits add medical monitoring claims, which allege the defendant must pay for diagnostic tests so that consumers know whether they are sick from its product.

Judge called those types of claims “a complete waste of time.”

“My sense has always been that they throw those things in as afterthoughts but don’t really expect to recover from them,” Judge said. “It’s sort of like asking for a pony. It isn’t something you should expect to prevail on.”

But there are other factors at issue in deciding to sue over a recall. Lawyers also consider the significance of the potential injuries, and the studies and research behind the recall, as well as how many people used the product. If the recall involves a product used by only 2,000 people and made by a small company, it might not be worth a lawsuit. In fact, the lawsuits could bankrupt the company.

Although Philips is not offering refunds through its recall, it is offering replacements and repairs on more than 3 million breaching machines.

Then, there’s the size of the defendant.

“Does it have much market share and may not be financially viable if they’re sued?” Richards said. “Or is it a large company that’s funded? Is it Pfizer or a Merck that has the financial resources to handle a litigation if it becomes a litigation? You look at the defendant and the market share of what’s being recalled.”


When the Recall Doesn’t Suffice

At times, the lawsuits are about the recall itself. In the sunscreen cases, for instance, Richards said some clients feel shortchanged about the number of bottles they can claim for a refund.

In a class action over recalled dressers that tipped over, injuring or killing children, plaintiffs lawyers won an April 19 ruling concluding that consumers had standing to sue Ikea for failing to notify all consumers through its recalls.

“The standard operating procedure is there will be a recall and because it’s a recall that doesn’t offer 100% complete relief, lots of lawyers will then file class actions, piling on the recall and saying the manufacturer should do more than what they agreed to do,” said Feldman, plaintiffs attorney in the Ikea case. “But the Ikea case has a different premise: it’s all about the recall itself and whether or not the recall was carried out and implemented in a reasonable fashion.”

In many consumer cases, especially involving lower-cost items for which consumers don’t keep receipts, the recall is announced through a media announcement, not sent to the homes of consumers. That leads to much lower response rates, he said, which is why many Ikea consumers didn’t know about the dresser problems.

“It isn’t simply what a manufacturer chooses to do,” Feldman said. “There needs to be a guidepost and criteria for what constitutes a reasonable recall.”

Source: Law.com

Author: Amanda Bronstad