Company liable for damages caused by tainted eyewash

Where a company sued for allegedly providing contaminated eyewash argued that sophisticated purchasers would not reasonably assume it was the manufacturer, because it was listed on the eyewash bottles only as a “distributor,” that argument failed. The eyewash bottle and packaging listed only the company’s name and logo, and only it registered the product with the Food and Drug Administration.

Background

KeraLink International Inc., the former operator of a national network of “eye banks,” sued two of its suppliers, Stradis Healthcare LLC and Geri-Care Pharmaceuticals Corporation, after they allegedly provided KeraLink with contaminated eyewash used to remove donated eye tissue for future transplant.

The district court held Geri-Care and Stradis liable on the strict products liability claim, as well as on KeraLink’s alternative claim of breach of implied warranty. Additionally, the court held Stradis liable on the alternative claim of breach of express warranty.

Strict products liability

The defendants do not dispute that KeraLink satisfied the elements of its claim of strict products liability but, instead, challenge the court’s judgment imposing liability based on two arguments: (1) the sealed container defense and (2) Geri-Care’s assertion that the economic loss rule bars KeraLink from recovering against Geri-Care in this tort claim.

Under Maryland law, a seller of a defective product in certain circumstances can assert an affirmative defense known as the sealed container defense to shield itself from liability for damages and injury caused by that product. In the district court, both Geri-Care and Stradis sought to invoke this defense as sellers of the eyewash, and each argued that the other qualified as a liable manufacturer.

Geri-Care contends that although it was the only entity named on the eyewash packaging, sophisticated purchasers like Stradis and KeraLink would not reasonably assume that Geri-Care was the manufacturer, because Geri-Care was listed on the eyewash bottles only as a “distributor.” The court disagrees.

There is no basis on which a purchaser, sophisticated or otherwise, could determine from the eyewash bottle and packaging that another entity was a manufacturer of the eyewash. Only Geri-Care’s name and logo appeared on the eyewash bottle and packaging, and only Geri-Care registered the product with the FDA. Although Geri-Care identified itself as a “distributor” and not as a “manufacturer,” a jury could not conclude on this record that purchasers of the eyewash reasonably would have known that Geri-Care was not the eyewash manufacturer.

Turning to Stradis, it included on the surgical pack the description “STERILE: Unless Open or damaged” and chose to place a representation on the insert that the pack contained “sterile eye wash.” These descriptions plainly were made by Stradis and were made separately from Geri-Care’s statement on the eyewash bottles that the contents were sterile. Stradis has not cited, nor has this court identified, any authority holding that a party who “passes on” another company’s warranty through its own, separate representation has not made an express warranty. Accordingly, under Maryland law, which precludes sellers who breach express warranties from relying on the sealed container defense, Stradis was barred from asserting the defense.

Economic loss rule

KeraLink sought recovery in strict products liability for lost service fees relating to the damaged tissue, the cost to replace the unusable eyewash and lost employee time. Geri-Care argues that the fees relating to the damaged tissue were pure economic losses barred by the economic loss rule. Geri-Care further contended that KeraLink did not seek damages related to injury to other property, because the eye tissue was not KeraLink’s property.

The record demonstrates that KeraLink had possessory rights to the donated tissue, having been given the required consent of the donors or legal next of kin. Although Maryland law prohibits parties from selling tissue and prescribes how parties must dispose of donated, unused tissue, these limitations imposed by statute did not eliminate KeraLink’s possessory interests in the tissue and its right to recover, store and transfer the tissue for transplant.

Prejudgment interest

Geri-Care and Stradis argue that the district court’s award of prejudgment interest as a matter of right was error under Maryland law because both liability and any degree of liability were not certain. Assuming, without deciding, that the district court erred in awarding prejudgment interest as a matter of right, its award is affirmed under the court’s discretionary authority.

Affirmed.

KeraLink International Inc. v. Geri-Care Pharmaceuticals Corporation, Case Nos. 21-2357, 21-2404, Feb. 15, 2023. 4th Cir. (Keenan), from DMD at Baltimore (Blake). Danielle D. Giroux and Kelly Marie Lippincott for Appellants. John Augustine Bourgeois for Appellee. VLW 023-2-045. 22 pp.