By Brendan Pierson,

Tuesday, Jan 01, 2008 --- Historically, election years haven’t been the best for passing sweeping new legislation. But 2008 could still see changes in policy in the product liability arena, experts say. This means not just new laws, but new regulations from federal agencies, more aggressive enforcement of existing ones, and, possibly, new consequences for older laws.

The single area most likely to see substantive new policy in 2008 is the regulation of imported products, as the Bush administration, federal regulators and Congress react to the spate of imported product recalls, mostly lead-contaminated toys, in 2007. “

What we are likely to see in 2008 is a continuation of trying to contain the effects of the Chinese recalls,” said Ken Kliebard, a partner at Howrey LLP. “I think we’ll see more legislation or treaties.”

The Bush administration made a move in that direction in November, when it unveiled an aggressive prevention-based action plan that would target risky imports by boosting regulatory authority and improving information gathering.

The plan, issued by a 12-member panel of cabinet officials known as the Interagency Working Group on Import Safety, contains 14 broad recommendations and 50 action steps that provide a road map for protecting American consumers and enhancing the safety of the increasing volume of imports entering the United States.

Highlights of the plan’s recommendations include creating a stronger certification process in order to foster compliance with U.S. safety standards while facilitating trade, and cooperating with other nations to share information on product safety.

Under the plan, the U.S. Food and Drug Administration would have the authority to require that producers of certain high-risk foods in a particular country, under an agreement with that country, certify that their products meet the agency’s standards in order to export to the U.S., helping to better utilize resources on the greatest threats.

In addition, voluntary certification would be encouraged for foreign manufacturers of other products, and products certified as meeting U.S. safety standards could receive expedited entry.

The plan also recommends the adoption of best practices to improve import safety and benefit consumers by providing incentives to importers to maintain the highest safety practices for products that carry greater risks.

Under the plan, the names of certified producers and importers of record that import products only from certified producers could be made public so that consumers and distributors can make more informed decisions about product safety.

Concern over toxic imports likely won’t be limited to administration in the coming year, according to Edward Martin, a professor at Samford University.

“I think this is going to be an area that Congress is going to want to look at,” he said.

In fact, Congress has already gotten into the act, considering a bill that would strengthen oversight by placing U.S. Food and Drug Administration and Consumer Product Safety Commission inspectors directly at sites in China where goods are produced for export to the U.S.

In addition, the bill would also increase the liability of U.S.-based importers of goods that prove to be defective.

Jim O’Neal, a partner at Faegre & Benson LLP, said he thought there was a good chance these efforts would prove fruitful.

“I think we may very well see action on diplomatic and legislative fronts,” he said.

Frank Vandall, a professor at Emory University, offered a dissenting view, noting that Mattel had issued an apology to China in which it took much of the blame for the contaminated products.

Mattel’s apology “makes it crystal clear that Mattel was seeking low manufacturing costs, and had a hand in designing the products, and therefore the problem is with Mattel, not China,” he said.

Vandall said he hoped Congress would not be swayed by alarmist news reports that overplayed the danger of Chinese products, and refrain from passing unnecessary legislation.

Whatever Congress does decide to do, any regulatory crackdown will almost certainly go hand in hand with new rules, and tighter enforcement, from the Consumer Product Safety Commission. To make that happen, experts expect that Congress will give the CPSC some extra funding.

“In order for the CPSC to function in the way its critics expect, it would need additional funding,” Kliebard said.

“There's tremendous pressure for Congress to do something about the funding and scope of authority of the Consumer Product Safety Commission,” agreed Kurt Stitcher, a partner at Levenfeld Pearlstein LLC.

Just before adjourning for the holidays, the U.S. House of Representatives responded to that pressure, unanimously signed off on legislation that would give a much-needed shot in the arm to the faltering federal watchdog that polices consumer goods.

The widely backed bill, introduced in the House in November, would allow the CPSC to receive $80 million in funding in 2009, $90 million the following year and $100 million in 2011. The watchdog would then get an additional $20 million tagged specifically for renovations, repairs, new equipment and other improvements over those three years.

Stepping up protection for children’s products, the bill forbids items that contain anything more than a tiny amount of lead from ever reaching the market. In addition, it requires that independent third parties test the children’s products before they go on sale. Product manufacturers would also have to place distinguishing marks on the items’ labels so that they can track where and when they are sold.

The CPSC isn’t the only product-regulating agency expected to extend its reach in the coming year.

Another law that lawyers expect to have a big impact on product liability law this year was passed in September, when President Bush signed the so-called FDA Amendments Act. The law renews the U.S. Food and Drug Administration's ability to charge fees for considering drugs for approval, alters the citizen petition process for generic drugs and strengthens drug safety.

The bill gives the FDA new authority, such as the ability to warn of newly discovered potential harms after the drugs go on sale and to order the completion of post-approval studies of pharmaceuticals. Companies that do not comply with FDA safety directives could be fined.

It also calls for a five-year extension and increase of fees that the health care industry would need to pay to fund product reviews. Pharmaceutical and medical device manufacturers are expected to pay nearly $393 million in fiscal year 2008, up $87 million from fiscal year 2007.

Drug companies would then pay an additional $225 million over five years for FDA safety monitoring once the drugs are sold to the public, as well as post all clinical trials, with the exception of preliminary studies, in a public database. The bill was welcomed by consumer and industry groups alike.

The question this year will be what regulations the FDA will pass with its new authority. In order to enforce the mandate the new law gives it, the FDA will have to expand its regulatory scheme.

“The FDA has to write any number of new regulations,” said Jim Beck, a partner at Dechert LLP.

“We don't exactly know how [the new regulations] going to play out,” said Jason Leckerman, an associate at Ballard Spahr Andrews & Ingersoll LLP. “We've given the FDA a significant amount of power, and we'll have to see how it's going to use it.”

Beck said the FDA would probably pass new regulations dealing with post-market regulation, study and clearance for direct-to-consumer advertising. This could change the process by which drug companies get their drugs and advertising approved.

For all the potential for change in consumer product regulation, the real elephant in the room for product liability lawyers is the still-undecided question of regulatory preemption. And while that issue will be decided first in the courts, some observers speculate that Congress may step in, too.

If the courts decide that FDA approval insulates products from state law liability claims, it will effectively end product liability suits over drugs and medical devices. If it doesn’t, it will rob pharmaceutical companies of a defense that has often been successful. Either way, lawmakers may decide they don’t like the outcome — and reverse it with federal law.

“I would not be surprised if, whichever way the courts rule, the side that sees itself as disadvantaged will try to take legislative action,” O’Neal said.

“I think that, while there is a Republican administration still in office, you may see some efforts to get caps on damages,” said Stephen Archer, a partner at Robbins Kaplan Miller & Ciresi LLP. “I think it's been one of the goals of the Bush administration for years. They've been trying to do it in a lot of different ways.”

Kliebard agreed that a law on preemption is “definitely possible.”

Martin was more skeptical, noting that a federal law on product liability would be almost unprecedented.

Finally, experts say that the 2008 may see older laws revealing new, potentially unforeseen effects.

One of these could be the Class Action Fairness Act of 2005. The Act addressed the certification of diverse classes in state courts that would prove unfair to out-of-state defendants.

“The thing to watch in 2008 is the Class Action Fairness Act,” said Randal Craft, an attorney with Holland & Knight LLP. “It’s not easily understood how it’s going to work.”

Under CAFA, if at least one plaintiff and one defendant reside in differentstates, the case can be removed to federal court. Cases of this type sometimes lead to huge mega-classes representing employees from national companies that can number in the thousands, hundreds of thousands, or even millions — but federal courts are less likely to grant class certification than state courts.

Defense attorneys welcomed CAFA. If a defendant can get a proposed nationwide mega-classes’ certification denied, there’s a good chance that any potential settlement paid by the employer will be much lower.

2008 might see American courts reveal some as-yet-unforeseen implications of CAFA, Craft said. As an example, he noted, it is not yet clear whether CAFA will have an effect on the courts approach to the doctrine of superiority — that class certification requires a class action to be obviously superior to other ways of handling a case — or to the doctrine of forum non conveniens.

State tort reform laws may also come under fire this year, Vandall said. Many states have passed laws over the last several years to reduce the cost of tort litigation —f or example, by putting caps on damages.

“What I’ve heard is that they’re not working that well,” Vandall said. “They’re too draconian.”

Vandall speculated that states with especially low damages caps might see them lifted, either by courts or by state legislatures.

While experts are hard-pressed to predict exactly how all of these issues will be resolved, it’s clear that they could have a profound effect on American product liability law.

“It'll be an interesting year, I'll tell you that,” Leckerman said.

--Additional reporting by Shannon Henson, Elaine Chow, Erin Daly, Sara Stefanini and Amanda Ernst