Cryolife, Inc. v. Superior Court

• Decision Date: 25 July 2003
• Docket Number: No. H024960.,H024960.
• Citation: 2 Cal.Rptr.3d 396,110 Cal.App.4th 1145
• Court: California Court of Appeals Court of Appeals
• Parties: CRYOLIFE, INC., Petitioner, v. The SUPERIOR COURT of Santa Cruz County, Respondent, Alan J. Minvielle, Real Party in Interest.

2 Cal.Rptr.3d 396 110 Cal.App.4th 1145 CRYOLIFE, INC., Petitioner,
v.
The SUPERIOR COURT of Santa Cruz County, Respondent, Alan J. Minvielle, Real Party in Interest. No. H024960. Court of Appeal, Sixth District. July 25, 2003. Review Denied October 22, 2003.

[2 Cal.Rptr.3d 397]

[110 Cal.App.4th 1147]

Moore, Winter, Skebba & McLennan, Raymond B. Moore, Matthew, R. Rungaitis, Glendale, for Petitioner Cryolife, Inc.

No appearance for respondent Santa Cruz County Superior Court.

Law Offices of G. Dana Scruggs, G. Dana Scruggs, III, Santa Cruz, Nathan C. Benjamin, for Real Party in Interest Alan J. Minvielle.

PREMO, Acting P.J.

I. INTRODUCTION

In this original proceeding, defendant Cryolife, Inc. (Cryolife) petitions for extraordinary relief from the orders of respondent court overruling Cryolife's demurrer to the cause of action for strict products liability and denying Cryolife's motion to strike the punitive damages claim. Petitioner contends, as a matter of first impression, that real party in interest Alan J. Minvielle cannot state a cause of action for strict products liability because Cryolife is a

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tissue bank that as a matter of law provided a service, not a product, when it supplied an allegedly infected cadaver tendon for real party in interest's knee surgery. Petitioner also argues as a matter of first impression that because it is a tissue bank, it is a health

2 Cal.Rptr.3d 398

care provider within the meaning of Code of Civil Procedure section 425.13,¹ and therefore a claim for punitive damages cannot be asserted in the absence of an order granting leave to amend the complaint. We agree with both of petitioner's arguments, and therefore we will issue a peremptory writ of mandate directing respondent court to vacate its orders overruling the demurrer to the strict liability cause of action and denying the motion to strike the punitive damages claim.

II. FACTUAL AND PROCEDURAL BACKGROUND

A The First Amended Complaint

According to the allegations of the first amended complaint, this action arises from knee surgery performed on Alan J. Minvielle (Minvielle or plaintiff). The knee surgery involved a surgical graft procedure that utilized an allograft consisting of a patellar tendon obtained from a human cadaver. The allograft was supplied by defendant Cryolife, a tissue bank in the business of harvesting, preserving and distributing products derived from human tissue for medical use. Minvielle's knee pain increased after the surgery, and, two months later, the allograft was removed because it was infected with bacteria.

Cryolife allegedly represented in its marketing and promotional materials that its orthopedic tissue products were safe, sterile and uncontaminated. However, according to plaintiff, the truth was that Cryolife's tissue acquisition and processing methods were inadequate to protect patients from the risk of bacterial infection. Cryolife failed to warn the medical profession of the risk of using Cryolife's products and also failed to establish an adequate system for reporting adverse reactions to its products. Based on these allegations, plaintiff asserted causes of action against Cryolife for negligence, strict liability, fraud, and negligent misrepresentation. He also sought compensatory and punitive damages.

In the strict liability cause of action, plaintiff alleged in more detail that Cryolife's allograft products were not fit for their intended use of implantation in humans and that Cryolife had failed to warn either plaintiff or his health care providers of the risk of using Cryolife's potentially contaminated tissue. Also, plaintiff stated that Cryolife had "procured, harvested, evaluated,

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preserved, tested, promoted, sold, supplied, distributed and labeled the allograft products that were defective ... [11] [and] knew that its products, and specifically the allograft implanted in Plaintiffs left knee, were to be purchased and used without inspection for defects by Plaintiff." Plaintiff further asserted that Cryolife intentionally and/or in conscious disregard of plaintiffs safety inadequately tested and treated its donor tissue products, misled plaintiff and health care providers regarding the safety of its products, and maliciously denied that an infection could be caused by its products.

B. Cryolife's Demurrers

Cryolife demurred to the causes of action for strict products liability, fraud, and negligent misrepresentation, on the ground that the complaint failed to state sufficient facts for any cause of action. As to the strict products liability cause of action, Cryolife argued that the alleged facts were insufficient because strict products liability does not apply to services, and, as a tissue bank, Cryolife provides a

2 Cal.Rptr.3d 399

service, not a product. Cryolite relied on Health and Safety Code² sections 1635 and 1635.2, which Cryolife asserted showed the Legislature's intent that the collection, processing, storage, and distribution of human tissue for the purpose of transplantation be deemed a service.³

Cryolife also relied on the decision in Shepard v. Alexian Brothers Hosp. (1973) 33 Cal.App.3d 606, 109 Cal.Rptr. 132, which held that strict products liability does not apply to blood banks because the Legislature expressly provided in section 1606 that the processing, distribution and use of blood products is construed to be a service for all purposes. Cryolife argued that the decision in Shepard v. Alexian Brothers Hosp. was dispositive of plaintiffs strict liability cause of action, because the public policy rationale favoring an adequate supply of blood over the application of the doctrine of strict liability in tort to the transfusion of blood and blood products applied with equal force to tissue used for tissue transplantation surgeries.

In his opposition to the demurrers, plaintiff responded that the complaint stated sufficient facts for a strict products liability cause of action because it was alleged that Cryolife manufactures tissue products and places them on

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the market knowing the products may cause serious injury. Plaintiff compared Cryolife's activities to a company that removes, repairs, reconditions, and sells used car parts. As additional support for his contention that Cryolife supplies a product, plaintiff noted that the Code of Federal Regulations, at 21 C.F.R. 1271 et seq., defines human tissue intended for transplantation into another human as a "`tissue-based product.'"

Plaintiff also disputed Cryolife's contention that section 1635.2 provides tissue banks with statutory immunity from strict products liability. According to plaintiff, the language of section 1635.2 makes clear that the Legislature intended only to make the sales provisions of the Uniform Commercial Code inapplicable to tissue banks. Further, plaintiff argued that Cryolife's reliance upon an analogy between tissue banks and blood banks with respect to statutory immunity was misplaced, because the language of the blood bank statute, section 1606, differs significantly from the language of the tissue bank statute, section 1635.2. Finally, plaintiff argued that the public policy rationale for providing immunity from strict products liability for the lifesaving products of the nonprofit blood industry did not apply to tissue products manufactured for use in elective surgeries by the for-profit tissue bank industry.

C. Cryolife's Motion to Strike

In its motion to strike, Cryolife sought to eliminate the punitive damages claim from the first amended complaint, on two grounds. First, Cryolife argued that the allegations regarding punitive damages were insufficient under Civil Code section

2 Cal.Rptr.3d 400

3294 because there were no allegations that the corporation's misconduct was on the part of an officer, director or managing agent. Second, Cryolife argued that the punitive damages allegations must be stricken because plaintiff had failed to comply with section 425.13, which requires a plaintiff to establish by motion that there is a substantial probability that he or she will prevail on a claim for punitive damages in order to obtain leave to amend the complaint to allege punitive damages against a health care provider. Cryolife again relied upon an analogy to blood banks in asserting that a tissue bank is a health care provider within the meaning of section 425.13, based on the decision in Coe v. Superior Court (1990) 220 Cal.App.3d 48, 269 Cal.Rptr. 368, that a blood bank is a health care provider as defined by MICRA (Medical Injury Compensation Reform Act; Statutes 1975, 2d Ex.Sess., 1975, ch. 2, § 12.5, p. 4007).

In his opposition to the motion to strike, plaintiff contended that the allegations of the complaint were sufficiently specific for a viable punitive damages claim against a corporate defendant. Additionally, plaintiff argued that section 425.13 did not apply, because Cryolife is not a health care

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provider which provided professional services to him. According to plaintiff, health care providers covered by MICRA include only clinics, health dispensaries, or health facilities licensed under Division 2 of the Health and Safety Code. Plaintiff asserted that Cryolife, as a manufacturer of medical products, was not a clinic, health dispensary, or health facility, and therefore Cryolife was not a health care provider within the meaning of MICRA or for purposes of section 425.13. Accordingly, plaintiff maintained that he could assert a claim for punitive damages without bringing a motion for leave to amend under section 425.13.

D. The Trial Court's Orders

The trial court overruled Cryolife's demurrers to the causes of action for strict products liability, fraud, and negligent misrepresentation, and denied the motion to strike the punitive damages portion of the complaint. During the hearing, the trial court indicated that its order overruling the demurrer to the...