The Latest: More Than 550 Legal Actions from 2018 Pacific Fertility Tank Failure
By: RON SHINKMAN
March 4, 2018 was a day that shook U.S. reproductive medicine in a way few others have.
That Sunday, a seal in a cryogenic tank at the Pacific Fertility Center in San Francisco failed. That caused the liquid nitrogen inside to vaporize and the tank’s temperature to rise above the optimal temperature for storing eggs and embryos. Its contents – some 4,000 eggs and embryos belonging to approximately 600 clients – were soon ruined.
The first lawsuit over the failure was filed just nine days after the crack was discovered – and only two days after Pacific Fertility had informed its clients of the issue, court records show. That first suit was filed by a client known only as a female San Francisco resident who is referred to by the initials “S.M.” Virtually all of the subsequent suits were filed by plaintiffs who did not reveal their identities. Pacific and its parent Prelude Fertility were accused of negligence in that first suit for failing to monitor the liquid nitrogen tanks more closely.
That initial legal volley was a mere preview of a flood of litigation in both state and federal court, as well as in private arbitrations – more than 550 cases in total, according to court records.
The legal battles have also embroiled collateral parties. Chart Industries, the Georgia-based manufacturer of the tank that cracked, was added to the initial lawsuits after they were filed. According to court records, the failed tank was manufactured by a Chart subsidiary company in 2012. Chart’s warranty guaranteed the tank would perform without issue for at least a decade. Altogether, that company is trying to resolve some 217 state and federal lawsuits in total, according to a report the company filed in January with the Securities and Exchange Commission.
Chart also disclosed to the SEC that it is “in ongoing discussions in an effort to establish a settlement framework for the various lawsuits” and that it would be in place as early as the first quarter of 2023. Chart also said it has set aside $305.6 million to fund settlements, or about $1.4 million per case. However, records indicate that only one case in federal court has been settled. Chart did not respond to a query seeking comment.
Chart also filed suit against Navigators Specialty Insurance Co. in February 2019, claiming it refused to provide a high enough payout to cover some costs for its legal counsel. Chart dropped that suit last March and agreed not to refile it, also suggesting a settlement was reached.
Law Firms Involved
Chart has been represented by Zenere Cowden and Stoddard of Santa Clara, Calif.; the Chicago law firm Swanson Martin & Bell; and until May 2020, Morgan Lewis & Bockius in Los Angeles. Pacific Fertility has been represented by San Francisco-based law firm Morrison & Foerster and another Northern California firm, Galloway, Lucchese, Everson & Picchi, court records show.
More than four-dozen plaintiffs in the state lawsuits are represented by Lieff Cabraser Heimann & Bernstein in San Francisco. Another San Francisco firm, Walkup, Melodia, Kelly & Schoenberger, represents 33 state case plaintiffs. Five other firms represent between two and four plaintiffs apiece.
Among the federal cases, where multiple law firms are often representing a single client, the Gibbs Law Group of Oakland, Calif. is representing 39 plaintiffs, while Girard Sharp of San Francisco is representing 36. Lieff Cabraser is representing eight clients, while New Orleans-based Peiffer Wolf Carr Kane & Conway is representing seven. Two other firms are representing a handful of other plaintiffs. Pennsylvania-based Sauder Schelkopf is representing three plaintiffs, while the Clarkson Law Firm in Malibu is representing a single plaintiff jointly with Gibbs, Girard Sharp and Lieff Cabraser.
Cases Consolidated
The litigation surrounding the tank failure has been so large and complex “due to the sheer size and how many people were affected” by the incident, said Rob Marcereau, an attorney and founder of the Fertility Law Group, a firm in Irvine, Calif. that often represents fertility clients in malpractice suits. And while a large number of the 600 clients were California residents, many were not. That led to litigation in both state and federal court.
Eventually, the number of lawsuits became so voluminous – more than 60 filed in state court alone – that those were mostly consolidated into a single case. The state cases were settled in late 2021 for an undisclosed sum, court records show. Most of the nearly 150 federal suits have yet to be resolved.
Pacific Fertility Benefited From Contract Terms, >340 Cases Arbitrated
Pacific Fertility eventually scored legal victories. Most of its contracts with its clients contained an arbitration clause. In March 2019, it obtained a court ruling forcing most of the state lawsuits into arbitration. The process is intended to work much more swiftly – and less expensively – than a lawsuit. A retired judge usually hears the case, and their rulings are binding and almost always private. Court records indicate that Pacific Fertility has arbitrated more than 340 cases to date.
However, Chart – which did not have direct contracts with the affected clients – could not move its cases to arbitration. Along with the state lawsuits, there have been at least 140 cases filed in federal court against Chart, records show.
To give breadth and scope to the federal litigation, a case involving just five Pacific Fertility clients contained more than 1,000 docket entries – individual motions and other documents pertinent to the case. Nevertheless, the lawsuit moved fairly quickly for a federal civil case, which can take five years or more to get to trial. In June 2021, a jury awarded the five clients $14.975 million. The jury also decided that Chart and its manufacturing defect was 90% responsible for the damages. Pacific Fertility was found 10% liable.
“This is an important and emotional ending for our clients who have been through so much pain and hardship since the 2018 tank failure,” said Amy Zeman, a partner with the Gibbs Law Group, after the verdict was delivered.
It didn’t end there, however. Chart and Pacific appealed the verdict. Nearly two years into the appellate process and just days before oral arguments were scheduled in front of the U.S. Ninth Circuit Court of Appeals, the plaintiffs agreed to settle the case last March for an undisclosed sum, the Washington Post reported. The Gibbs attorney who handles media inquiries on the case did not respond to a request seeking comment.
Chart Inc Files Suits of Its Own Against Associates
The episode also embroiled Chart in litigation with its insurers. It was sued in June 2022 by its primary liability insurer, Starr Indemnity & Liability. The carrier asked the court to declare that Chart’s claim for excess liability insurance payouts of up to $231.9 million should not be honored. Chart quickly countersued Starr, accusing it of engaging in a “classic insurance company preemptive strike” to try and get out of paying a claim. Starr and Chart dismissed their lawsuits in March and April, respectively, suggesting a settlement was reached.
And even as Chart is moving to settle all the lawsuits against it, it is also suing other parties it believes contributed to the tank failure.
Chart filed a lawsuit in federal court in Ohio against electronics manufacturer Extron, accusing it of supplying a faulty control panel that did not provide accurate pressure and temperature levels for the tank, which it claims contributed to its failure. It is seeking reimbursement from Extron for all liability payments it must make connected to the tank failure.
Whether Chart will prevail in that case remains to be seen. In the 2021 federal trial, the jury found that Chart was aware of potential defects in the tank’s electronics but took no steps to repair or recall them.
An Extron executive did not respond to a request seeking comment.
Litigators Call For More Regulation
Despite all the ramifications from this single tank failure, the incident did not lead to tighter regulations for egg and embryo storage at either the state or federal levels, according to Marcereau.
“There should be basic, uniform requirements in place for cryogenic storage of embryos or eggs, but sadly there aren’t,” he said. “Until state or federal laws mandate it, many fertility clinics will continue to cut corners – even in the wake of this litigation.”
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