The 4th U.S. Circuit Court of Appeals has affirmed a products liability and warranty judgment obtained by a non-profit eye bank against two suppliers of eyewash that was later revealed to be contaminated, rendering any recovered tissue unusable.
The district court rejected the suppliers’ arguments — one said it was merely a “distributor” rather than a manufacturer, while the other claimed it was simply repeating the other’s warranty — and found them jointly and severally liable for more than $600,000.
Senior Circuit Judge Barbara Milano Keenan of the Fourth Circuit upheld the ruling, noting that the eyewash bottle and packaging listed only the supplier’s name and logo, and only it registered the product with the Food and Drug Administration.
“Although [one supplier] 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 [it] was not the eyewash manufacturer,” she wrote.
Keenan was joined by Judges Pamela A. Harris and A. Marvin Quattlebaum Jr. in KeraLink International Inc. v. Geri-Care Pharmaceuticals Corporation (VLW 023-2-045).
KeraLink International is a non-profit corporation that operated a national network of “eye banks” in several states. Eye banks recover corneas and other eye tissue from recently deceased donors for future transplant.
While eye banks are prohibited from selling recovered tissue, they may collect certain fees for reimbursement of costs related to the removal, processing and transportation of such tissue. To facilitate the process, KeraLink bought medical supplies and equipment from various third-party vendors, including “surgical packs” that contained “eyewash” used for irrigating eye tissue.
Of relevance to this case are custom-designed surgical packs KeraLink bought from Stradis Healthcare. KeraLink didn’t specify any particular brand of eyewash; Stradis bought eyewash from a third-party wholesaler who got it from Geri-Care Pharmaceuticals Corporation.
Geri-Care got their eyewash from another company — Kareway Products Inc. — and requested a product similar to “Bausch & Lomb Advanced Eye Care.” Geri-Care asked that its logo be placed on the bottles.
Kareway got eyewash from another company that originally made the product in Korea. Rather than test the eyewash for pathogens, Geri-Care relied on the supplier’s certification that each bottle was sterile.
Geri-Care registered the eyewash with the Food and Drug Administration. The label showed Geri-Care’s logo, said the eyewash was “distributed by” Geri-Care and that it was a “Product of Korea.” No other company was identified on the eyewash bottles or on the FDA registration.
Stradis received individually sealed bottles at its facility. After checking that the plastic seal on each cap was secure, Stradis placed the bottles in the surgical packs with an insert listing the contents, including “sterile eye wash.” The insert also stated that Stradis manufactured and distributed the packs.
The Eye Bank Association of America notified KeraLink in 2017 that some Geri-Care eyewash was potentially contaminated and told them to pull it from their inventory.
When lab testing verified that contaminants were present, KeraLink identified certain lots of Stradis surgical packs with the potentially tainted eyewash. It was later reported that corneal transplant recipients had tested positive for the pathogens after using KeraLink’s surgical packs.
KeraLink sued Stradis and Geri-Care in the Federal District of Maryland seeking joint and several liability for strict products liability and breach of express and implied warranty. They calculated damages of $606,415.19 based on their loss of service fees, unusable surgical packs and employee time wasted.
The district court granted summary judgment to KeraLink against both defendants for product liability and breach of implied warranty, while saying only Stradis was liable for breach of express warranty.
Both defendants relied on the “sealed container defense,” an affirmative defense available to sellers of defective products under certain conditions. Neither succeeded.
The court said Geri-Care “held itself out” as a manufacturer, not a seller. Stradis, meanwhile, had provided an express warranty that the product was sterile.
The court also rejected arguments that the economic source rule barred recovery, and found both defendants liable for the damages asserted by KeraLink.
This appeal followed.
Neither defendant challenged that KeraLink failed to satisfy the elements of its strict products liability claim, but instead relied on the sealed container defense and the economic source rule to bar liability.
Keenan explained that Maryland’s sealed container defense shields sellers from defective product liability with a showing that they acquired the sealed products without knowledge of defects and that they neither manufactured nor modified the product.
“A party qualifies as a ‘manufacturer’ of a product and may not invoke the sealed container defense under Maryland law when that party is … ‘an entity not otherwise a manufacturer that imports a product or otherwise holds itself out as a manufacturer,’” the judge continued.
Geri-Care said sophisticated purchasers like Stradis and KeraLink wouldn’t reasonably assume it was the manufacturer since it was listed only as a “distributor” on the bottles.
“Geri-Care named itself, and no other company, as the eyewash’s distributor on the label and as the registrant to the FDA,” she explained. “By placing its logo on the eyewash bottle and by registering the eyewash in Geri-Care’s name with the FDA, Geri-Care intended the public to think that Geri-Care manufactured the eyewash.”
Nor was the judge persuaded by Geri-Care’s appeals to case law that focused on whether a reasonable purchaser of a non-consumer product would identify its manufacturer.
“[T]here 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,” she said.
Keenan also rejected Stradis’ sealed container defense.
The descriptions Stradis included — “STERILE: Unless Open or damaged” on the packaging and “sterile eye wash” on the insert — were made separately from Geri-Care’s statements that the contents were sterile.
“Critically, 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,” she explained.
Finally, Keenan agreed with the district court’s ruling that neither the economic loss rule nor the sealed container defense applied here, affirming summary judgment in favor KeraLink on its strict products liability claim against both defendants.