Case Analysis: Elisabeth Schmitt v TUV Rheinland LGA Products GmbH

09.05.2017

Introduction
On 26 February 2017, the Court of Justice of the European Union (CJEU) delivered a preliminary ruling in Case C-219/15 which confirms that the purpose of the role of a notified body under the Medical Products Directive 93/42 (the Directive) is to protect end users. However, it leaves the question of whether this gives rise to direct liability to end users, to Member States to decide.
Background
This case is the latest development in the Poly Implant Prothese (PIP) breast implant litigation. Elisabeth Schmitt had PIP breast implants fitted in Germany in 2008. In 2010, it emerged that PIP had been using low-grade industrial silicone in their implants rather than medicinal grade silicone. Ms Schmitt underwent removal of her implants in 2012 and following the insolvency of PIP, brought an action against the notified body TUV Rheinland LGA Products GmbH (TUV), who was responsible for auditing PIP’s quality system for the purpose of EC Certification under the Directive.
Ms Schmitt sought €40,000 for non-material damage and a declaration that TUV was liable for any future material damage, on the basis that it had not fulfilled its obligations under the Directive satisfactorily as the notified body. She maintained that TUV had failed to carry out an adequate inspection of the delivery notes and invoices which would have enabled them to ascertain that PIP had used industrial grade silicon rather than the approved grade.
German Proceedings
Ms Schmitt’s claim was rejected at first instance and at subsequent appeal in Germany on the basis that:
1. The duty to exercise due diligence under the contract in this case fell between the notified body and the manufacturer and therefore fell to be assessed by reference to private law and did not include Ms Schmitt. This reasoning was based on the fact that the intention of TUV’s involvement was to ensure compliance with requirements for placing medical devices on the market and not to protect third parties, i.e. end users.
2. TUV was deemed not to be under any civil liability for the same reason; i.e. that their activity as a notified body was not to protect end users.
3. No fault was found with TUV’s actions in any event, as they had made regular announced inspections which the appeal court deemed sufficient in the absence of any suspicion of improper production practices.
CJEU Referral
Ms Schmitt appealed to the Federal Court of Justice of Germany on a point of law. As it was acknowledged that the resolution of the dispute ultimately rested on the intended purpose of a notified body under the Directive and whether it intended that legal rights be conferred directly on end users in the event of any infringement of those obligations, the German Federal Court referred three questions to the CJEU as follows:
1. Is it the purpose of the Directive that, in case of Class III medical devices, the notified body responsible for auditing the quality system, examining the design of the product and surveillance acts in order to protect all potential patients, may, in the event of a culpable infringement of an obligation, have direct and unrestricted liability towards the patient concerned?
2. Does it follow from Sections [3.3, 4.3, 5.3 and 5.4] of Annex II to the Directive that, in the case of Class III medical devices, the notified body responsible for auditing the quality system, examining the design of the product and surveillance is subject to a general obligation to examine devices, or at least examine them where there is due cause?
3. Does it follow from the aforementioned sections of Annex II to the Directive that, in the case of Class III medical devices, the notified body responsible for auditing the quality system, examining the design of the product and surveillance is subject to a general obligation to examine the manufacturer’s business records and/or to carry out unannounced inspections or at least to do so where there is due cause?
Decision
In relation to the first question, the CJEU observed that the aim of the Directive was not just the protection of health but also to protect the end users of medical devices. They noted that the Directive clearly places obligations to that end on Member States and notified bodies. However they went on to state that “it does not necessarily follow from the fact that a directive imposes surveillance obligations on certain bodies or the fact that one of the objectives is to protect injured parties that the directive seeks to confer rights on such parties in the event that those bodies fail to fulfil their obligations, and that is the case especially if the directive does not contain any express rule granting such rights”. As the Directive does not contain such an express rule, the CJEU concluded that the purpose of the Directive could not be to govern the conditions under which end users could obtain compensation for failures of the notified bodies to fulfil their obligations. However, the CJEU went on to note that the existence of a Directive does not prevent the application of other systems of contractual or non-contractual liability. They determined that whether any direct liability arises is left to be determined by the national courts subject to the principles of equivalence and effectiveness.
The CJEU also commented that although the Directive requires notified bodies to take out civil liability insurance this is not sufficient to conclude that Member States must provide end users a right to turn to those bodies for compensation. Given the CJEU’s finding that there is no direct or unrestricted liability towards end users conferred by the Directive, the CJEU did not find it necessary to answer the request made by Ireland that the temporal effects of the judgment be limited.
Turning to the second and third questions, the CJEU considered that notified bodies should be allowed an appropriate degree of discretion as to how to discharge their functions, subject to a general obligation to act with all due diligence. However, they considered that they were not under a general obligation to carry out unannounced inspections, to examine devices and/or to examine manufacturer’s business records. Where evidence existed to suggest non-compliance of a particular device, the CJEU confirmed that the notified body is under a duty to take all steps necessary to ensure compliance with the Directive.
Conclusion/Discussion
While the CJEU’s decision is important in that it has clarified that a notified body’s role is to protect the end user, the CJEU arguably missed an opportunity to really properly define the obligations and role of notified bodies. The CJEU’s decision notably falls short of the view previously expressed by Advocate General Sharpston in her Opinion in this case. AG Sharpston was of the opinion that notified bodies may be liable to patients and users for a culpable failure to fulfil their obligations resulting from EU product safety rules, provided that the principles of equivalence and effectiveness are respected. However, the CJEU on one hand state quite clearly that notified bodies are obliged to protect end users, yet on the other hand they shy away from placing liability at their door. While of course the CJEU could not trespass into domestic law, it does leave the situation rather ambiguous and with Member States’ discretion, it is likely that there will not be a uniform approach throughout Europe. In the context of the pan European PIP litigation, this unfortunately, could mean compensation for some patients and none for others.
The position is not likely to be altered in the near future either. While the new Medical Devices Regulation maintains the requirement on notified bodies to have civil liability insurance in place it does not explicitly impose civil liability on notified bodies to end users either. Therefore, a consumer will not have an explicit remedy under EU legislation against a notified body and unless domestic laws provide a potential avenue of redress against the notified bodied, injured consumers could very well find themselves with no legal remedy in circumstances where the manufacturer is insolvent. This is clearly an unfortunate lacuna in the existing legislative framework.
Interestingly, the timing of the CJEU’s decision came one month after a French Court ordered TUV to pay €60 million in damages to 20,000 patients who had suffered as a result of the PIP fraud. TUV was ordered to make a provisional payment of 3,000 euros to each plaintiff for certifying that implants made by PIP met safety standards. Whether this decision is upheld on appeal, particularly in light of the CJEU’s decision in this case remains to be seen. The Toulon court in 2013 also ordered TUV to pay 53 million euros to six foreign distributors of the implants as well as 1,600 users. However, this was later overturned by the appeal court who held that TUV had fulfilled its obligations as a notified body and could not be held responsible for failing to detect PIP’s cover-up.
How the national courts decide to implement the CJEU judgment remains to be seen. National courts will have to determine firstly whether a notified body is culpable and if so established, then the notified body’s purpose to protect the end user may well affect the national courts’ approach when considering liability under domestic laws. The CJEU’s decision is probably less likely to affect the interpretation of contractual rights, however, national courts may determine that it gives rise to direct civil liability on the basis of general negligence principles or on the basis of the infringement of a rule conferring legal protection. Given that the German Courts’ decision in Ms Schmitt’s case appears to be largely based on interpretation of the Directive, it remains to be seen whether the decision of the CJEU will yield a different outcome to that at first instance and the Court of Appeal.
At minimum, the decision certainly provides domestic claimants with another avenue of argument which may assist in ultimately establishing liability against a notified body, particularly where the manufacturer is insolvent. However, there is nothing in the CJEU decision to dissuade the national courts of the approach adopted by Germany to date. In fact, in confirming the vital purpose of the notified body in protecting end users and at the same time noting that the Directive does not expressly give rise to liability, it could be interpreted that the CJEU endorses the approach of the German courts to date.