Watkins v. OMNI LIFE SCIENCE, INC.

• Decision Date: 09 March 2010
• Docket Number: Civil Action No. 09-10857-RGS.
• Citation: 692 F. Supp.2d 170
• Parties: Otis WATKINS, and McKinlee Pruett, Individually and as Representatives of a Proposed Class v. OMNI LIFE SCIENCE, INC., Successor to Apex Surgical, LLC.
• Court: U.S. District Court — District of Massachusetts

692 F. Supp.2d 170

Otis WATKINS, and McKinlee Pruett, Individually and as Representatives of a Proposed Class v. OMNI LIFE SCIENCE, INC., Successor to Apex Surgical, LLC.

Civil Action No. 09-10857-RGS.

United States District Court, D. Massachusetts.

March 9, 2010.

Ingrid M. Evans, Waters, Kraus & Paul, San Francisco, CA, Marilyn T. McGoldrick, Thornton & Naumes, LLP, Boston, MA, Charles S. Siegel, Water & Kraus LLP, Dallas, TX, for Plaintiffs.

Brian C. Carroll, James J. Dillon, Foley Hoag LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS

STEARNS, District Judge.

Plaintiffs Otis Watkins and McKinlee Pruett are recipients of the Apex Model Replacement Hip (Apex Hip), designed, marketed, and sold by defendant Omni Life Science, Inc. (Omni), the successor to Apex Surgical, LLC (Apex). Although neither plaintiff alleges an Apex Hip malfunction, they claim that the relatively high rate of failure of the Apex Hip places them and members of the proposed class at serious risk of future harm.¹ The failure rate is also alleged to have diminished the market value of their hip implants and those of the putative class members. Plaintiffs claim they "would not have selected the Defective Hip over other alternative devices but for the uniform representations made by Defendant." Compl. ¶¶ 51, 54. Based on the alleged Apex Hip defects and Omni's sales representations, plaintiffs assert claims for breach of implied warranty (Count I), breach of contract (Count II), unjust enrichment and constructive trust (Count III), violations of the Massachusetts consumer protection statute, Mass. Gen. Laws ch. 93A (Count IV), and violations of the consumer protection laws of all other states (Count V).² On July 24, 2009, Omni filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). A hearing on the motion was held on November 9, 2009.

BACKGROUND

The facts, viewed in the light most favorable to plaintiffs as the non-moving parties, are as follows. The Apex Hip was first marketed in 2000. Failures of the Apex Hip began to be reported in 2004. Plaintiffs identify the following defects in design as the explanation for the failures:

a) the use of a plug instead of a bolt to connect the stem to the neck; and b) the use of an alignment pin with too small of a diameter (.125"). When used as directed, such defects in the Apex Modular Hip Stem caused the product to have insufficient torsion strength due to a shearing of the alignment pin, leading to a deficient modular connection.

Compl. ¶ 34. In 2005, Apex was acquired by Omni. By 2006, Omni personnel had redesigned the Apex Hip in response to the reports of failure.

Before the Apex Hip was redesigned, 1,568 patients received an Apex Hip implant. Among these 1,568 recipients, sixty-five Apex Hips (to date) have failed (a failure rate of 4.15 percent). According to plaintiffs, this rate is sixteen times higher than the 0.27 percent failure rate of other replacement hips.³See Opp'n at 16. However, plaintiffs' Apex Hip replacements (and those of the members of the proposed class) have not failed or experienced other problems.

DISCUSSION

To survive a motion to dismiss, a complaint must allege "a plausible entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), disavowing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). "While a complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555, 127 S.Ct. 1955 (internal citations and quotations omitted). See also Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir.2007). Dismissal for failure to state a claim will be appropriate if the pleadings fail to set forth "`factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.'" Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.1997), quoting Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988). In deciding a Rule 12(b)(6) motion, the court may also look to documents, the authenticity of which are not disputed by the parties, to documents central to the plaintiffs' claims, and to documents referenced in the complaint. Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993).

Choice-of-Law

As a preliminary matter, the parties disagree about the applicable state law. A federal court sitting in diversity applies the choice-of-law framework of the forum state. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under Massachusetts choice-of-law rules, tort claims are governed by the law of the state in which the injury occurred, unless another state has a more significant relationship to the underlying cause of action. Bergin v. Dartmouth Pharm., Inc., 326 F.Supp.2d 179, 183 (D.Mass.2004), citing Dunfey v. Roger Williams Univ., 824 F.Supp. 18, 21 (D.Mass.1993). See Cohen v. McDonnell Douglas Corp., 389 Mass. 327, 333-334, 450 N.E.2d 581 (1983) (citation omitted) ("The place where the injury occurred is the place where the last event necessary to make an actor liable for an alleged tort takes place."). See also Pevoski v. Pevoski, 371 Mass. 358, 359-360, 358 N.E.2d 416 (1976) ("There also may be particular issues on which the interests of lex loci delicti are not so strong . . . and another jurisdiction may sometimes be more concerned and more involved with certain issues than the State in which the conduct occurred.").

Omni argues that the court should apply Oklahoma rather than Massachusetts law because the named plaintiffs are Oklahoma residents and all of the relevant transactions and occurrences took place in Oklahoma where plaintiffs underwent their hip replacement surgery. Omni also claims prejudice in the fact that Oklahoma law requires a showing of an "actual injury," while Massachusetts law is arguably "unsettled" on the point. Omni finally asserts that Massachusetts and Oklahoma would apply different statutes of limitations to plaintiffs' claims (although it makes no argument that plaintiffs' claims would be time-barred under the laws of either state).

Plaintiffs respond that under either Massachusetts or Oklahoma choice-of-law principles, Massachusetts law applies.⁴ In a product defect class action, plaintiffs argue that the deciding factor is the manufacturer's location because it provides a hub linking the spokes of the proposed class. Here, Omni is incorporated in Massachusetts where it also has its headquarters and principal place of business. See Hertz Corp. v. Friend, ___ U.S. ___, 130 S.Ct. 1181, 1192, ___ L.Ed.2d ___ (2010) ("`Principal place of business' is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's `nerve center.'"). Plaintiffs also cite a recent Oklahoma Supreme Court case, Cuesta v. Ford Motor Co., 209 P.3d 278, 285 (Okla.2009), that holds that the law of the domicile state of the manufacturer is controlling in a defective product class action. Finally, plaintiffs argue that the locus of the tort is properly Massachusetts as it is the forum where the design and manufacture of the allegedly defective Apex Hip took place.

The court need not probe too deeply into the differences—such as they are—between the law of Oklahoma and Massachusetts on the subject because it is as plain as a pikestaff that Massachusetts' interest in regulating the conduct of businesses operating under its laws trumps any interest that Oklahoma might have. If this case were to achieve class action status, some 1,500 class members representing all fifty states would be affected. It stands to reason that among this geographically diverse group, Massachusetts is the only state that would have a substantive tie to all of the class members. See Cuesta, 209 P.3d at 285 ("We find that the law of Michigan, the state of Ford's principal place of business as manufacturer which controlled the specifications, requirements and testing for the pedals, has a greater `intensity of interest' than any other state involved. Its law should be applied.").

The Element of Injury

"Purely economic losses are unrecoverable in tort and strict liability actions in the absence of personal injury or property damage." FMR Corp. v. Boston Edison Co., 415 Mass. 393, 395, 613 N.E.2d 902 (1993). Count II alleges that Omni breached contracts between it and the purchasers of the Apex Hip; contracts of which plaintiffs claim to be the intended, third-party beneficiaries. While Count II is styled as a contract claim, "couching tort allegations in terms of breach of contract . . . does not change the prohibition." Id. at 396, 613 N.E.2d 902 (citations omitted).⁵

Omni argues that all Counts of the Complaint should be dismissed because no legally cognizable injury is pled in any of plaintiffs' claims. See Rule v. Fort Dodge Animal Hosp., Inc., 604 F.Supp.2d 288, 304 (D.Mass.2009) (Woodlock, J.) ("It is necessary for a private plaintiff to show that the defendants' deceptive act caused some form of compensable loss. . . . Plaintiffs have already received the full benefit of the bargain they anticipated when they purchased the product. . . ."). The rule of Rule applies with the same force in consumer protection actions as it does in breach of warranty cases. See Iannacchino v. Ford Motor Co., 451 Mass. 623, 634, 888 N.E.2d 879 (2008) ("As is true of a claim under G.L. c. 93A, a claim of breach of warranty requires plaintiffs to show that a defendant's conduct has caused them a loss or injury.").

Plaintiffs' stopgap argument is based on a benefit of the bargain theory. Citing Iannacchino, plaintiffs...