Nodine v. Shiley Inc.

240 F.3d 1149, 2001 Cal. Daily Op. Serv. 585, 2001 Daily Journal DAR 771, 2001 U.S. App. LEXIS 785, 2000 WL 33121746

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 22, 2001
• Docket: No. 99-55611
• Status: Published

Opinions

Opinion by Judge TASHIMA; Dissent by Judge ALSUP.

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 Con-vexo-Concave artificial heart valve (“BSCC valve”). Summary judgment was granted on two independent grounds: (1) Plaintiffs’ claim was time-barred under § 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. § 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 No-dine’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, 116 S.Ct. 2240, 135 L.Ed.2d 700 (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 Plaintiffs 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 Paragraph means after the date of execution of this Confidential 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., 217 Cal.App.3d 848, 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 No-dine’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 CaLRptr. 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 [plaintiffs] 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 representation, 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 § 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., 37 Cal.App.4th 1318, 44 Cal.Rptr.2d 305, 309 (Ct.App.1995).

California courts apply the “discovery rule” to determine when a claim accrues under § 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 that her BSCC valve would have to be explanted, and (2) the delay before the 1997 surgery was “medically and legally reasonable,” the statute of limitations did not begin to run until the explantation. In essence, plaintiffs argue that a whole new fraud took place when the new damages element—the ex-plantation—occurred. This is not the law in California. Rather,

where an injury, although slight, is sustained in consequence of the wrongful act of another, and the law affords a remedy therefor, the statute of limitations attaches at once. It is not material that all the damages resulting from the act shall have been sustained at that time, and the running of the statute is not postponed by the fact that the actual or substantial damages do not occur until a later date.

Spellis v. Lawn, 200 Cal.App.3d 1075, 246 Cal.Rptr. 385, 389 (Ct.App.1988) (internal quotation marks and citations omitted).

The settlement agreement addresses the same tort alleged in this case, albeit additional damages (or injuries) are also alleged here. Plaintiffs, however, cannot revive the statute of limitations by claiming they incurred new damages as a result of the old fraud. See Clark, 100 Cal.Rptr.2d at 228 (“a single tort can be the foundation for but one claim of damages”). Under § 340(3)’s one-year limitations period, therefore, the statute of limitations on plaintiffs’ fraud claim would have run by 1994, at the latest. The fraud claim is thus time-barred.³

Plaintiffs further argue that because the settlement agreement “expressly preserved” claims arising from the “future mechanical failure” or “future removal” of an implanted valve, Shiley necessarily waived future statute of limitations defenses related to such claims. The district court, however, found that the plain language of the agreement merely clarifies that such claims, if brought, would not be precluded by the settlement agreement. It held that the settlement agreement does not exempt those claims from the relevant statute of limitations or waive any other defenses that might be available.

We agree. The language quoted by plaintiffs to support their claim that the settlement agreement “expressly preserved future claims” merely states that “[settled] claims do not include” any future claims. Moreover, the language excluding future claims for valve malfunction or ex-plantation from the settlement agreement does not constitute an implied waiver of the statute of limitations defense in regard to future fraud claims. While the unambiguous language of the settlement agreement expressly preserves product defect and negligence claims resulting from an ex-plantation,⁴ plaintiffs’ fraud claim does not fit within the exempted category defined in the settlement agreement; therefore, it cannot be classified as a future claim. Accordingly, because the settlement agreement could not lead an ordinary person to believe that future fraud claims arising out of valve explantation would be preserved, Shiley did not implicitly waive the statute of limitations defense.⁵

IY. CONCLUSION

Because the applicable statute of limitations for RTwm-type fraud had commenced to run more than one year before the action was commenced, and Shiley did not waive the statute of limitations for fraud claims in the settlement agreement, plaintiffs’ fraud claim is time-barred.⁶

For the foregoing reasons, the judgment of the district court is

AFFIRMED.

1 . The dissent proceeds to analyze the settlement agreement as if product defect claims, including death claims, for “future mechanical failure,” are still a part of this case. As indicated above, they are not and we do not opine on the effect of the settlement agreement on them.

2 . The district court found Appellants’ claim was time-barred under the three-year statute, Cal.Civ.Proc.Code § 338. The California Court of Appeal, however, has recently held that the applicable statute of limitations for fraudulent concealment claims in personal injury actions is Cal.Civ.Proc.Code § 340(3) (one year), not Cal. Civ. Proc. § 338 (three years). See Clark v. Baxter Healthcare Corp., 83 Cal.App.4th 1048, 100 Cal.Rptr.2d 223, 226 (Ct.App.2000). Therefore, although we come to the same conclusion as the district court, we apply the one-year limitations period, rather than the three-year period.

3 . In making its policy argument as to why plaintiffs’ fraud claim should not be barred, the dissent completely ignores governing California law, particularly Khan, 217 Cal.App.3d 848, 266 Cal.Rptr. 106, under which the claim accrued, and was compensated, at the time of the 1993 settlement agreement. For this reason, as explained below, plaintiffs’ fraud claim cannot be a "future” claim as described in the settlement agreement.

4 . A statute of limitations waiver would be superfluous here because the limitations period would not begin to run until the time of the injury when damages were suffered; in this case, at the time of explantation.

5 . The fact that the future claims provision of" the settlement agreement includes the language, "whatever the legal theory upon which such a future claim is based,” is of no significance. Plaintiffs’ fraud claim is not a “future claim” under the settlement agreement. Therefore, because this qualifying language applies only to future claims, it does not preserve plaintiffs’ fraud claim.

6 . Because we find the statute of limitations issue dispositive, we do not reach the reliance issue.