Nodine v. Shiley Incorp.

• Decision Date: 22 January 2001
• Docket Number: No. 99-55611,99-55611
• Citation: 240 F.3d 1149
• Parties: (9th Cir. 2001) JANICE F. NODINE; ROGER D. NODINE, Plaintiffs-Appellants, v. SHILEY INCORPORATED, a California corporation; PFIZER, INC., a Delaware corporation; BRUCE FETTEL; GRINDLEY MANUFACTURING, INC., a California corporation; HOW MEDICA CORP., a Delaware corporation, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1149

240 F.3d 1149 (9th Cir. 2001)

JANICE F. NODINE; ROGER D. NODINE, Plaintiffs-Appellants, v. SHILEY INCORPORATED, a California corporation; PFIZER, INC., a Delaware corporation; BRUCE FETTEL; GRINDLEY MANUFACTURING, INC., a California corporation; HOW MEDICA CORP., a Delaware corporation, Defendants-Appellees.

No. 99-55611

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted October 11, 2000

Filed January 22, 2001

COUNSEL: Graig R. Woodburn, Newport Beach, California, for the appellants.

Aton Arbisser, Los Angeles, California, for the appellees.

Appeal from the United States District Court for the Central District of California Gary L. Taylor, District Judge, Presiding. D.C. No.CV 97-431GLT(SA) Before: A. Wallace Tashima and Richard C. Tallman, Circuit Judges, and William Alsup, District Judge^*

Opinion by Judge Tashima; Dissent by Judge Alsup

OPINION

TASHIMA, Circuit Judge:

Plaintiffs-Appellants Janice F. Nodine ("Nodine") and Roger D. Nodine (collectively "plaintiffs") appeal the district court's grant of summary judgment in favor of Defendants Appellees Shiley Inc.; Pfizer, Inc.; Bruce Fattel; Grindley Manufacturing, Inc.; and Howmedica Corp. (collectively "Shiley") on plaintiffs' fraud claim concerning Nodine's Bjork-Shiley Convexo-Concave artificial heart valve ("BSCC valve"). Summary judgment was granted on two independent grounds: (1) Plaintiffs' claim was time-barred underS 338(d) of the California Code of Civil Procedure; and (2) Plaintiffs failed to raise a triable issue of fact on the reliance element of the claim. We have jurisdiction pursuant to 28 U.S.C. S 1291, and we affirm.

I. BACKGROUND

Nodine was diagnosed with congestive heart failure in July, 1986. Nodine's family doctor referred her to a cardiologist, Dr. Joseph R. Dorchak, who, in turn, referred her to a surgeon, Dr. Joe R. Utley. The doctors told Nodine that she needed to have a heart valve replacement or she would die within three to six months. Dr. Utley discussed various options for artificial valves with Nodine. Dr. Utley had to decide whether Nodine would be implanted with a pig tissue valve, which he opined "would probably have to be replaced within five to ten years," or with the mechanical BSCC valve, which he said would probably last "30 to 40 years or a lifetime." Dr. Utley did not discuss any mechanical valves other than the BSCC valve with Nodine. According to Dr. Dorchak, Nodine expressed no preference regarding which valve to implant.

The BSCC valve was implanted in Nodine's heart on July 24, 1986. The surgery was successful, and there is no evidence that the valve malfunctioned in any way during the time it was implanted. In 1990, plaintiffs learned that some BSCC valves contained a defective outlet strut mechanism. The strut mechanism fractured in a number of valves, resulting, in most instances, in the death of those patients. Allegedly, "[t]hese fractures were the result of both the [BSCC valve ] design and poor manufacturing processes. In particular, the valves [allegedly] suffered from poor welding and poor quality control." Michael v. Shiley, Inc., 46 F.3d 1316, 1320 (3d Cir. 1995), overruled on other grounds by Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996). In September, 1993, plaintiffs participated in a settlement of claims related to anxiety associated with the knowledge of having a possibly defective BSCC valve. The 1993 settlement agreement included the following provision:

Subject to the remainder of this Paragraph, the term "BSCC Claims" shall mean any and all claims of injury, loss, or compensatory or punitive damage deriving from or related to any alleged defect in or alleged representation, misrepresentation, or omission concerning any Bjork-Shiley Convexo-Concave prosthetic heart valve ("BSCC Valve"), including, without limitation, all such claims deriving from or related to implantation, use, replacement or removal prior to the execution hereof, including any alleged loss of consortium related thereto. BSCC Claims do not include any future claims for compensatory or punitive damages injury, loss or damage deriving from or related to personal injuries or death, whatever the legal theory upon which such future claim is based, caused by (a) future mechanical failure (which includes but is not limited to strut fracture, disc fracture, or other valve malfunction) of a BSCC Plaintiff's implanted BSCC Valve (whether due to a previously existing defect or otherwise), other than alleged emotional distress (or claims similar thereto or arising therefrom under any legal theory) relating to fear of fracture of a working valve prior to such failure or removal. "Future" as used in this Para graph means after the date of execution of this Con fidential Master Settlement Agreement.

The settlement agreement contains no language that expressly preserves or waives defenses to future suits, including statute of limitations defenses.

Nodine remained anxious about her BSCC valve after the 1993 settlement. She repeatedly visited her doctors to discuss information she had heard about problems with the BSCC valve. Nodine subsequently decided to have the BSCC valve explanted. Dr. Steven Leyland testified that "emotional issues were ultimately the swaying factor, . . . in deciding surgery," and that he would categorize Nodine's valve replacement as elective. Nodine's surgery took place on January 15, 1997, and the explantation was successful. Plaintiffs filed this lawsuit shortly thereafter.

Plaintiffs' complaint included claims for negligence, breach of express and implied warranty, strict liability, loss of consortium, and fraud and deceit. Unfortunately, the BSCC valve disappeared on the way to a metallurgist for testing and has never been recovered. As a result, the district court ruled that the BSCC valve could not be offered as evidence at trial. Because of the loss of the valve, plaintiffs conceded that they were unable to prove their product defect claims. See Khan v. Shiley Inc., 266 Cal. Rptr. 106, 110 (Ct. App. 1990) ("[P]roof that the product has malfunctioned is essential to establish liability for an injury caused by [a] defect."). Accordingly, summary judgment was entered against plaintiffs on all product defect claims. Plaintiffs do not challenge that ruling on appeal.¹

Plaintiffs' fraud claim was also hampered by events beyond their control. Dr. Utley, the surgeon who implanted Nodine's BSCC valve in 1986 and who was also the primary decisionmaker regarding its selection, became seriously ill and, as a result, could not be deposed. The district court inquired into whether Dr. Utley might be able to testify later, if the case were stayed. Ultimately, however, it declined to stay the action because it found other issues to be dispositive and granted summary judgment for Shiley on the alternative grounds that the fraud claim was time-barred and that plaintiffs had failed to show reliance.

II. STANDARD OF REVIEW

A grant of summary judgment is reviewed de novo. See Wright v. Riveland, 219 F.3d 905, 919 (9th Cir. 2000). "Our review is governed by the same standard used by the trial court under Federal Rule of Civil Procedure 56(c). " Adcock v. Chrysler Corp., 166 F.3d 1290, 1292 (9th Cir. 1999). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. See Wright , 219 F.3d at 919. Summary judgment is not proper if material factual issues exist for trial. See B.C. v. Plumas Unified Sch. Dist., 192 F.3d 1260, 1264 (9th Cir. 1999).

III. DISCUSSION

California allows a cause of action for fraud when a manufacturer of a product conceals material product information from potential users regardless of whether the product has yet malfunctioned. See Khan, 266 Cal. Rptr. at 112. In a heart-valve case, such a claim is possible even where the valve in question is not available as evidence:

For purposes of establishing fraud, it matters not that the valve implanted in [plaintiff's] heart is still functioning, arguably as intended. Unlike the other theories, in which the safety and efficacy of the product is assailed, the fraud claim impugns defendants' conduct.

The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false rep resentation, concealment or nondisclosure); (b) knowledge of falsity (or "scienter"); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.

Id. (internal quotation marks and citation omitted).

Plaintiffs' fraud claim is subject to a one-year statute of limitations.² See Cal. Civ. Proc. Code S 340(3). Under California law, the statute of limitations ordinarily begins to run on tort actions when the last element essential to a cause of action occurs. See San Francisco Unified Sch. Dist. v. W.R. Grace & Co., 44 Cal. Rptr. 2d 305, 309 (Ct. App. 1995).

California courts apply the "discovery rule" to determine when a claim accrues under S 340(3). See Clark, 100 Cal. Rptr. 2d at 227. "Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her." Id. (emphasis omitted).

In this case, plaintiffs previously settled claims for misrepresentations and omissions connected with the BSCC valve in 1993. At that time, plaintiffs not only had sufficient notice of the fraud to file suit, but also incurred damages sufficient to induce Shiley to enter into the settlement agreement. Although these damages may not have accounted for the explantation itself, they arose from the same alleged acts of fraud upon which plaintiffs' claim is now based. The discovery rule is thus satisfied.

Plaintiffs, however, argue that because (1) Nodine did not know at the time of the settlement agreement...