Keralink International, Inc. v. Stradis Healthcare, LLC ( 2023 )

USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 1 of 22
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-2357
KERALINK INTERNATIONAL, INC.,
Plaintiff - Appellee,
v.
GERI-CARE PHARMACEUTICALS CORPORATION,
Defendant - Appellant,
and
STRADIS HEALTHCARE, LLC; KAREWAY PRODUCT, INC.; INSOURCE,
INC.,
Defendants.
No. 21-2404
KERALINK INTERNATIONAL, INC.,
Plaintiff - Appellee,
v.
STRADIS HEALTHCARE, LLC,
Defendant - Appellant,
and
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 2 of 22
GERI-CARE PHARMACEUTICALS CORPORATION; INSOURCE, INC.;
KAREWAY PRODUCT, INC.,
Defendants.
Appeal from the United States District Court for the District of Maryland, at Baltimore.
Catherine C. Blake, Senior District Judge. (1:18−cv−02013−CCB)
Argued: December 6, 2022 Decided: February 15, 2023
Before HARRIS and QUATTLEBAUM, Circuit Judges, and KEENAN, Senior Circuit
Judge.
Affirmed by published opinion. Judge Keenan wrote the opinion, in which Judge Harris
and Judge Quattlebaum joined.
ARGUED: Danielle D. Giroux, HARMAN CLAYTOR CORRIGAN & WELLMAN,
Glen Allen, Virginia; Kelly Marie Lippincott, GORDON REES SCULLY
MANSUKHANI, LLP, Alexandria, Virginia, for Appellants. John Augustine Bourgeois,
KRAMON & GRAHAM, P.A., Baltimore, Maryland, for Appellee. ON BRIEF: John D.
Perry, HARMAN CLAYTOR CORRIGAN & WELLMAN, Alexandria, Virginia, for
Appellant Geri-Care Pharmaceuticals Corporation. Jonathan A. Barnes, GORDON REES
SCULLY MANSUKHANI, LLP, Alexandria, Virginia, for Appellant Stradis Healthcare,
LLC. B. Summer Hughes Niazy, KRAMON & GRAHAM, P.A., Baltimore, Maryland,
for Appellee.
2
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 3 of 22
BARBARA MILANO KEENAN, Senior Circuit Judge:
In this appeal, we consider whether the district court erred in awarding summary
judgment to plaintiff KeraLink International, Inc. (KeraLink), the former operator of a
national network of “eye banks,” on its claim against two suppliers of contaminated
eyewash used to remove donated eye tissue for future transplant. Upon our review, we
hold that the district court properly awarded judgment to KeraLink on its claim of strict
products liability. Under the facts presented here, neither supplier was entitled to invoke
the sealed container defense, an affirmative defense reserved for only certain types of
sellers. Additionally, the economic loss rule barring liability for solely economic losses in
a tort claim was inapplicable because KeraLink also sought damages for injury to property,
namely, the recovered eye tissue rendered unusable by the contaminated eyewash. We also
hold that the district court did not abuse its discretion under Maryland law in awarding the
plaintiff prejudgment interest. We therefore affirm the court’s award of final judgment for
KeraLink against both defendants, jointly and severally, in the amount of $606,415.49 plus
prejudgment interest.
I.
Plaintiff KeraLink is a non-profit corporation with its headquarters in Baltimore,
Maryland, and operated a network of eye banks in many states. These eye banks recover
corneas and other eye tissue from recently deceased donors for future transplant into
patients who suffer from corneal blindness or other ocular diseases. Although prohibited
3
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 4 of 22
by law from selling recovered tissue, 1 KeraLink collects certain fees for reimbursement of
costs related to the removal, processing, and transportation of such tissue.
To facilitate the recovery of eye tissue, KeraLink purchased from third party
vendors medical equipment and supplies, including “surgical packs” containing “eyewash”
used to irrigate the eye tissue. KeraLink purchased the custom-designed surgical packs at
issue here from defendant Stradis Healthcare, LLC (Stradis), which has its headquarters in
Georgia. KeraLink did not specify any particular brand of eyewash to be included in the
surgical packs. Stradis purchased and placed in each pack a bottle of “GeriCare Eye Wash
– Sterile Eye Irrigating Solution.” Stradis purchased this eyewash from a third-party
wholesaler, which received the eyewash from defendant Geri-Care Pharmaceuticals
Corporation (Geri-Care).
Geri-Care had purchased the eyewash from Kareway Products, Inc. (Kareway), after
requesting that Kareway supply eyewash similar to “Bausch & Lomb Advanced Eye Care.”
Geri-Care further requested that the Geri-Care logo be placed on the eyewash bottles.
Kareway obtained the eyewash from another company that originally manufactured the
product in Korea.
Upon receipt of the eyewash from Kareway, Geri-Care did not test the eyewash for
pathogens but relied on Kareway’s accompanying certification that the contents of each
box of bottled eyewash were sterile. Geri-Care registered the eyewash with the United
1
See Md. Code, Est. and Trusts, § 4-513 (prohibiting the sale of tissue but
permitting a person to “charge a reasonable amount of money for the removal, processing,
preservation, quality control, storage, transportation, implantation, or disposal of a part”).
4
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 5 of 22
States Food and Drug Administration (the FDA). The label on the eyewash bottle
displayed Geri-Care’s logo and stated that the eyewash was “distributed by” Geri-Care,
listing its address in New York, and that the eyewash was a “Product of Korea.” There
was no other corporate entity or manufacturer identified on the eyewash bottle or on the
FDA registration.
When the eyewash bottles arrived in Georgia at Stradis’ facility, each bottle was
individually sealed. After ensuring that the plastic seal on the cap of each bottle was secure,
Stradis placed the eyewash bottles into surgical packs for KeraLink. Stradis included in
each surgical pack an insert listing the pack’s contents, including the term “sterile eye
wash.” The insert also included a statement that Stradis had manufactured and distributed
the surgical packs.
In October 2017, the Eye Bank Association of America (EBAA) notified KeraLink
“about a potentially contaminated” eyewash, namely, a certain lot number of the Geri-
Care-brand eyewash. The EBAA instructed eye banks to “pull” this eyewash from their
inventory. After hiring a third party to test the eyewash, KeraLink confirmed the presence
of contaminants in eight of ten bottles tested, and identified certain lot numbers of Stradis
surgical packs containing the potentially contaminated eyewash.
In addition, a surgeon informed KeraLink that the corneas in five of his patients who
had received transplants of KeraLink corneal tissue had tested positive for cultures closely
related to the pathogens identified in the contaminated eyewash. KeraLink confirmed that
it had obtained those five tissues from donors in procedures using the contaminated
5
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 6 of 22
eyewash. Corneal tissue recovered with use of this contaminated eyewash ultimately
occurred in numerous states and the District of Columbia.
KeraLink later filed suit against Stradis and Geri-Care (the defendants) in the United
States District Court for the District of Maryland under the court’s diversity jurisdiction,
28 U.S.C. § 1332(a)(1). KeraLink alleged claims under Maryland law for strict products
liability, breach of implied warranty, and breach of express warranty, seeking damages of
more than $600,000. 2 After discovery, the parties filed cross motions for summary
judgment. KeraLink argued that Geri-Care and Stradis were jointly and severally liable
for damages totaling $606,415.19, based on: (1) a loss of $589,664 in various “service
fees” that KeraLink could not collect based on the unusable, damaged tissue; (2) a loss of
$354.90 for 182 unusable surgical packs that contained potentially contaminated eyewash,
and (3) a loss of $16,396.59 for KeraLink’s employees’ time spent addressing
contamination issues.
The district court granted Geri-Care’s motion for summary judgment with regard to
KeraLink’s claim of breach of express warranty, because Maryland law required privity of
contract for this claim and the parties did not have a contractual relationship. KeraLink
does not challenge this ruling on appeal.
2
KeraLink also alleged ordinary negligence against Geri-Care, but the district court
ruled against KeraLink on that claim. KeraLink does not challenge this ruling on appeal.
Also, Stradis filed a third-party complaint against the wholesaler of the eyewash and
against Geri-Care. Those claims have been resolved in the district court and are not at
issue in this appeal.
6
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 7 of 22
The district court granted KeraLink’s motion with regard to its remaining claims,
awarding summary judgment in KeraLink’s favor. The 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. 3
In awarding judgment to KeraLink on the strict products liability claim, the district
court rejected Geri-Care’s and Stradis’ invocation of the “sealed container defense,” an
affirmative defense available to sellers of defective products under certain conditions. The
court held that Geri-Care was not a “seller” of the eyewash because it “held itself out” as a
manufacturer of the product. The court also held that Stradis could not assert the defense
because it provided an express warranty that the product was sterile, which warranty
excluded Stradis from asserting the sealed container defense. The district court also
rejected Geri-Care’s assertion that the economic loss rule barred liability. The court
concluded that the rule was inapplicable because KeraLink did not seek purely economic
losses but also sought recovery for injury to property.
The district court entered final judgment awarding KeraLink damages from Stradis
and Geri-Care, jointly and severally, in the amount of $606,415.49. The court also awarded
prejudgment interest as a matter of right, or, alternatively, in the court’s discretion, in the
amount of $136,362.24, plus $99.68 per day after September 30, 2021 through the date of
3
As we later explain, given our holding on the strict products liability claim, we
need not address KeraLink’s alternative warranty theories of liability. See infra note 8.
7
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 8 of 22
judgment. Geri-Care and Stradis both appealed from the district court’s judgment, and we
later consolidated their appeals.
II.
We first consider the arguments raised by Geri-Care and Stradis challenging the
court’s judgment in favor of KeraLink for strict products liability. We later address the
defendants’ contention that the court erred in awarding prejudgment interest.
A. Strict Products Liability
We review de novo the district court’s award of summary judgment on KeraLink’s
claim of strict products liability. RXD Media, LLC v. IP Application Dev. LLC, 986 F.3d
361, 372 (4th Cir. 2021). Summary judgment is appropriate when “the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a).
Under Maryland law, 4 a plaintiff can prove strict products liability by showing that:
(1) “the product was in [a] defective condition at the time that it left the possession or
4
Geri-Care asserts that the district court erred in applying Maryland law to this
claim because under Maryland’s choice of law rule, lex loci delicti, the last event necessary
for strict products liability, namely, damage to the eye tissue, occurred in many different
states. See DiFederico v. Marriott Int’l, Inc., 714 F.3d 796, 807 (4th Cir. 2013). Thus,
Geri-Care asserts that the law of each state where tissue was damaged should apply or,
alternatively, that the law of Florida should apply because the greatest amount of tissue
damage occurred there. However, the only pertinent difference between Maryland law and
the laws of those other states is that Maryland recognizes an exception to the economic loss
rule when a defective product “creates a substantial and unreasonable risk of death or
personal injury” (the public safety exception). U.S. Gypsum Co. v. Mayor and City Council
of Balt., 647 A.2d 405, 408 (Md. 1994). Because we later hold that that the economic loss
(Continued)
8
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 9 of 22
control of the seller”; (2) the product was “unreasonably dangerous to the user or
consumer”; (3) “the defect was a cause of the injuries”; and (4) “the product was expected
to and did reach the consumer without substantial change in its condition.” Phipps v. Gen.
Motors Corp., 363 A.2d 955, 958 (Md. 1976). 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 contention of both
defendants that the court erred in rejecting their reliance on 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. We address these arguments in turn.
1. Sealed Container Defense
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. Md. Code, Cts. & Jud. Proc. § 5-
405(b). 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.
rule is not applicable on a different ground, namely, that KeraLink had a property interest
in the damaged tissue and, thus, was not seeking recovery of solely economic losses, our
analysis does not rely on Maryland’s public safety exception and the choice of law issue
raised by Geri-Care is immaterial. Sing Fuels Pte Ltd. v. M/V Lila Shanghai, 39 F.4th 263,
271-72 (4th Cir. 2022) (explaining that resolution of choice of law issue not required when
determination would not alter the disposition of a legal question); World Fuel Servs.
Trading, DMCC v. Hebei Prince Shipping Co., 783 F.3d 507, 514 (4th Cir. 2015) (“[W]e
need not resolve the choice-of-law question, as it makes no discernible difference to the
relevant analysis.”).
9
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 10 of 22
A “seller,” as defined by Maryland law, is a “wholesaler, distributor, retailer, or . . .
entity other than a manufacturer that is regularly engaged in the selling of a product.” Id.§ 5-405(a)(5)(i) (emphasis added). A seller can successfully invoke the sealed container
defense by showing:
(1) The product was acquired and then sold or leased by the seller in a sealed
container or in an unaltered form;
(2) The seller had no knowledge of the defect;
(3) The seller in the performance of the duties he performed or while the
product was in his possession could not have discovered the defect while
exercising reasonable care;
(4) The seller did not manufacture, produce, design, or designate the
specifications for the product which conduct was the proximate and
substantial cause of the claimant’s injury; and
(5) The seller did not alter, modify, assemble, or mishandle the product while
in the seller’s possession in a manner which was the proximate and
substantial cause of the claimant’s injury.
Id. § 405(b). A party qualifies as a “manufacturer” of a product and may not invoke the
sealed container defense under Maryland law when that party is “a designer, assembler,
fabricator, constructor, compounder, producer, or processor of any product or its
component parts,” or is “an entity not otherwise a manufacturer that imports a product or
otherwise holds itself out as a manufacturer.” Id. § 5-405(a)(2) (emphasis added).
Applying these principles, the district court rejected Geri-Care’s argument that it
was a mere seller of the eyewash. The court held that Geri-Care qualified as an apparent
manufacturer because Geri-Care “held itself out as a manufacturer” by identifying itself,
and no other entities, on the label of the eyewash. The court explained that Geri-Care’s
corporate representative testified that the company intended the public to think that Geri-
Care manufactured the eyewash and found that Geri-Care “furthered that goal by” placing
10
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 11 of 22
its logo on the eyewash bottle and by registering the eyewash in Geri-Care’s name with the
FDA. Thus, the court held that Geri-Care was precluded from asserting a sealed container
defense.
With regard to Stradis’ assertion of the affirmative defense, the district court
concluded that, unlike Geri-Care, Stradis was a seller and not a manufacturer of the
eyewash. The court nevertheless held that Stradis was not entitled to invoke the sealed
container defense because an exception to that defense applied, namely, when a seller
makes an express warranty and breaches that warranty, which breach is “the proximate and
substantial cause” of the injury. Id. § 5-405(c)(6). The district court explained that Stradis
made an express warranty that the eyewash was sterile by stating on the list of contents that
the pack included “sterile eye wash.”
Accordingly, the district court held that neither defendant could avail itself of the
sealed container defense to avoid strict products liability. We turn to address each
defendant’s arguments on this issue.
a. Geri-Care
Geri-Care argues that the district court erred in concluding that it was not a seller
entitled to invoke the sealed container defense. Relying on Stein v. Pfizer Inc., 137 A.3d
279 (Md. Ct. App. 2016), 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.” We disagree with Geri-Care’s position.
11
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 12 of 22
Our review of the record demonstrates that the district court did not err in concluding
that Geri-Care held itself out as the eyewash’s manufacturer. In Geri-Care’s agreement
with Kareway, Kareway agreed to provide a private-label eyewash to Geri-Care. Although
the eyewash was manufactured in Korea at the direction of Kareway, the agreement
required the eyewash to carry Geri-Care’s logo. Geri-Care provided Kareway with the
logo and reviewed and made changes to the label. Further, Geri-Care named itself, and no
other company, as the eyewash’s distributor on the label and as the registrant to the FDA.
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. As the district court held, “[t]here was no way for a purchaser of the eyewash
to know that Geri-Care was not the manufacturer.”
Our conclusion is not altered by Geri-Care’s reliance on Stein v. Pfizer Inc., 137
A.3d 279, and Geri-Care’s argument that Stradis and KeraLink were “sophisticated users.”
In Stein, the question presented was whether a “parent company” of a corporation that
manufactured and sold a cement product containing asbestos was an “apparent
manufacturer” and subject to a strict products liability claim. The Maryland court
explained that the proper inquiry was not whether a casual observer reasonably could think
that the parent company was the manufacturer, but what a “reasonable purchaser of
refractory materials,” a non-consumer product, would think. Id. at 296. The court held
that a steel company, which had purchased the product directly from the manufacturing
corporation both before and after the parent company’s acquisition, knew that the parent
12
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 13 of 22
company was not a manufacturer even though both companies’ logos appeared on
marketing materials and invoices. Id. at 281-82, 297.
In contrast, here, 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. We therefore conclude that the district court
properly held that Geri-Care, as an apparent manufacturer, was not entitled to assert
Maryland’s sealed container defense to avoid strict products liability.
b. Stradis
As it argued in the district court, Stradis again asserts on appeal that it did not make
an express warranty to KeraLink about the eyewash’s sterility and that, therefore, Stradis
was entitled to rely on the sealed container defense. Stradis contends that by including the
eyewash in the surgical pack and listing “sterile eye wash” as an item contained in the pack,
Stradis merely repeated Geri-Care’s warranty that the eyewash was sterile. We disagree
with Stradis’ argument.
To establish a breach of express warranty under Maryland law, a plaintiff must show
that: “1) a warranty existed; 2) the product did not conform to the warranty; and 3) the
breach proximately caused the injury or damage.” Robinson v. Am. Honda Motor Co., 551
F.3d 218, 223 (4th Cir. 2009) (applying Maryland law). “Any description of the goods
13
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 14 of 22
which is made part of the basis of the bargain creates an express warranty that the goods
shall conform to the description.” Md. Code, Com. Law § 2-313(1)(b). “[A]ffirmations
of fact” appearing on a product’s label or on a “package insert” can constitute express
warranties. See Rite Aid Corp. v. Levy-Gray, 894 A.2d 563, 612-13, 623-25 (Md. 2006)
(explaining that a statement on package insert that a prescription drug could be taken with
food or milk formed the basis for a claim of express warranty).
As the district court explained, Stradis 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. Critically, Stradis has not cited, nor have we 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. And finally, the record
shows that Stradis advertised itself as having “expertise in eye banking and corneal
transplantation,” and was aware that KeraLink needed a sterile eyewash for its tissue
recovery. Thus, Stradis’ representation that the eyewash was sterile was made with
knowledge that this protection was critical to KeraLink’s intended use of the product. See
Md. Code, Com. Law § 2-313(1)(b).
14
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 15 of 22
We therefore hold that the Stradis made an express warranty that the eyewash was
sterile. 5 Accordingly, under Maryland Code, Cts. & Jud. Proc. § 5-405(c)(6), which
precludes sellers who breach express warranties from relying on the sealed container
defense, Stradis was barred from asserting the defense.
2. Economic Loss Rule
Under Maryland law, a plaintiff asserting a strict products liability claim generally
may recover damages for three categories of losses: (1) personal injury, (2) physical harm
to property other than the defective product, and (3) economic loss suffered because the
product fails to meet a buyer’s expectations. Morris v. Osmose Wood Preserving, 667 A.2d
624, 631 (Md. 1995); Lloyd v. Gen. Motors Corp., 916 A.2d 257, 265 (Md. 2007)
(describing the second category as “physical harm to tangible things” (citation omitted)).
Under the “economic loss rule,” however, a plaintiff is barred from recovering in tort when
the claimed damages are solely grounded on economic loss. A.J. Decoster Co. v.
Westinghouse Elec. Corp., 634 A.2d 1330, 1332, 1336-37 (Md. 1994); see Dan B. Dobbs,
Paul T. Hayden & Ellen M. Bublick, The Law of Torts § 605 (2d. ed. July 2022 Update)
(describing “stand-alone economic harms or losses” as costs to a plaintiff not arising from
personal injury or “damage to tangible property”). “Economic losses include such things
as the loss of value or use of the product itself, the cost to repair or replace the product, or
the lost profits resulting from the loss of use of the product.” A.J. Decoster, 634 A.2d at
5
Stradis does not challenge the district court’s determination that it breached an
express warranty or that the breach resulted in the damages as asserted by KeraLink.
15
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 16 of 22
1332 (holding that the death of chickens, caused by a defective switch for a power source,
qualified as damage to tangible personal property and was not barred by the economic loss
rule).
The purpose of the rule is to preserve the distinction between tort claims, like the
strict products liability claim here, and contract claims. See E. River S.S. Corp. v.
Transamerica Delaval, Inc., 476 U.S. 858, 866-70 (1986). A defendant typically is not
held responsible in tort for purely economic losses that more properly are addressed in a
contract claim. A.J. Decoster, 634 A.2d at 1332. But a defendant in a tort action may be
liable for physical injuries or property damage caused by a defective product based on the
defendant’s duty to avoid reasonably foreseeable harm. Id. Thus, in a strict products
liability tort claim, the economic loss rule does not bar recovery of economic losses
resulting from damage to “other property” caused by the defective product. 6 Id. at 1336-
37; Morris, 667 A.2d at 631; Dobbs, Hayden & Bublick, supra § 449.
In the district court, 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 argued, as it does on appeal, that the fees relating to the
damaged tissue were pure economic losses barred by the economic loss rule. Geri-Care
See supra note 4 (discussing an exception to the economic loss rule under
6
Maryland law).
16
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 17 of 22
further contended that KeraLink did not seek damages related to injury to other property,
because the eye tissue was not KeraLink’s property. 7
The district court disagreed with Geri-Care and held that KeraLink’s claim was not
barred by the economic loss rule. The court held that KeraLink had property interests in
the tissue that were impaired by the contaminated eyewash. Relying on the definition of
property as encompassing “real, personal, mixed, tangible or intangible property of every
kind,” Md. Rule 1-202(v), the district court held that the eye tissue was tangible property
and that KeraLink had property rights, though limited, in the tissue. Acknowledging that
under the Maryland Revised Uniform Anatomical Gift Act (the Act), Md. Code, Est. and
Trusts, § 4-513, KeraLink could not sell the tissue, the court nevertheless observed that the
Act permitted KeraLink to charge fees for the services rendered to remove, store, and
transfer the tissue, see id. § 4-513(b). Thus, the court held that KeraLink maintained
limited property rights in the tissue and was seeking recovery for damage to this property
in the form of lost service fees. Accordingly, the court concluded that the economic loss
rule was not applicable because KeraLink had sought damages based on the injury to
property in which KeraLink had limited property rights.
Geri-Care, however, argues on appeal that Maryland courts have not addressed
whether a party can have a property right in human tissue, and that concluding that an entity
7
In framing its economic loss rule challenge, Geri-Care does not address the other
damages sought by KeraLink for employee time expended and the cost to replace the
unusable eyewash. Based on our conclusion that KeraLink sought damages for harm to
other property, we need not separately analyze these other sources of damages.
17
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 18 of 22
can own tissue presents “profound philosophical concerns.” Thus, Geri-Care contends that
because, under the Act, KeraLink cannot sell the tissue and must dispose of unused tissue,
KeraLink does not have dominion over the tissue “in total exclusion” of others’ rights.
Accordingly, Geri-Care contends that KeraLink did “not have a property right” in the
contaminated eye tissue, and that the economic loss rule barred recovery for KeraLink’s
strict products liability claim. We disagree with Geri-Care’s position.
At the outset, we observe that enforcement of the economic loss rule seeks to ensure
that damages sought in a tort claim are based on a cognizable injury. See Lloyd, 916 A.2d
at 265. Application of this rule is not intended to delineate the full contours of a party’s
property rights in other contexts, and does not require a conclusion that a party has full
ownership rights to the property. See Dobbs, Hayden & Bublick, supra § 605 (explaining
that damage to tangible property in the economic loss context must occur to property “in
which the plaintiff has a legally recognized possessory or ownership interest”).
The record demonstrates that KeraLink had possessory rights to the donated tissue
as permitted by the Act, having been given the required consent of the donors or legal next
of kin. KeraLink had a right to remove, store, and implant the tissue in accordance with
the restrictions outlined in the Act. Although the Act 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.
As demonstrated by the record, the contaminated eyewash rendered certain
recovered eye tissue unusable. The physical damage to this “tangible thing,” over which
18
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 19 of 22
KeraLink had dominion and rights of use, formed the basis for KeraLink to recover
damages. See Dobbs, Hayden & Bublick, supra §§ 449, 605. Because KeraLink had a
limited but sufficient property interest in the tissue, the economic loss rule did not bar
recovery for the challenged damages sought by KeraLink in its strict products liability
claim.
* * *
Because we agree with the district court’s determination that neither the sealed
container defense nor the economic loss rule is applicable in this case, we affirm the district
court’s award of summary judgment in favor of KeraLink on its strict products liability
claim against Geri-Care and Stradis. Apart from the failed defenses discussed above,
neither defendant has argued that KeraLink did not establish the elements of its strict
products liability claim. Thus, based on the record before us, we conclude that the court
did not err in awarding KeraLink damages of $606,415.49, jointly and severally against
both defendants. 8
8
Given this conclusion, we need not address Geri-Care’s and Stradis’ arguments
challenging the district court’s judgment (1) holding both of them liable for breach of
implied warranty, or (2) holding Stradis liable for breach of express warranty. These
claims represented alternative theories of liability for the same damages to which KeraLink
is entitled under its strict products liability claim. See U.S. Gypsum Co., 647 A.3d at 408
(describing claims of strict products liability and breach of implied and express warranties
as “alternative theories”); see also Best v. Cyrus, 310 F.3d 932, 936 (6th Cir. 2002)
(declining to address on appeal an alternative theory of liability after holding the defendant
liable on another theory); Craig Outdoor Advert. Inc. v. Viacom Outdoor, Inc., 528 F.3d
1001, 1022 (8th Cir. 2008) (explaining that when a party asserts alternative theories of
recovery for the same injury, the party is entitled only to a single award of compensatory
damages).
19
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 20 of 22
B. Prejudgment Interest
Finally, we address Geri-Care’s and Stradis’ joint argument that the district court
erred in awarding prejudgment interest against both defendants. We observe at the outset
that the defendants do not challenge the district court’s application of Maryland law to this
issue. See Bilancia v. Gen. Motors Corp., 538 F.2d 621, 623 (4th Cir. 1976) (explaining
that failure to assert that another jurisdiction’s law applied resulted in forfeiture of that
argument); see also Parkway 1046, LLC v U.S. Home Corp., 961 F.3d 301, 306 (4th Cir.
2020) (applying Maryland law to the award of prejudgment interest in a case invoking the
court’s diversity jurisdiction).
Applying Maryland law, the district court held that the value of the unusable tissue,
unusable surgical packs, and lost employee time was “readily ascertainable.” And the court
observed that the amount of damages sought by KeraLink was consistent throughout the
litigation. The court held that “[w]hether as a matter of right, or in the court’s discretion,”
KeraLink was entitled to prejudgment interest to fully compensate its known and certain
losses. The court further observed that KeraLink attempted to resolve the case at an early
stage and bore no responsibility for the excessive filings by the defendants, principally by
Geri-Care. Thus, the court entered a joint and several award of prejudgment interest against
both defendants and in favor of KeraLink in the amount of $136,362.24, plus $99.68 per
day after September 30, 2021 through the date of judgment.
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
20
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 21 of 22
liability were not certain. The defendants similarly argue that the district court erred in its
alternative ruling, awarding prejudgment interest under its discretionary authority.
We will assume, without deciding, that the district court erred in awarding
prejudgment interest as a matter of right, but nevertheless affirm the award under the
court’s discretionary authority. The purpose of prejudgment interest is to compensate a
prevailing party for the loss of a liquidated amount due and the income that the prevailing
party could have derived from the use of those funds. Selective Way Ins. Co. v. Nationwide
Prop. & Cas. Ins. Co., 219 A.3d 20, 52 (Md. Ct. Spec. App. 2019). Under Maryland law,
prejudgment interest
is allowable as a matter of right when the obligation to pay and the amount
due had become certain, definite, and liquidated by a specific date prior to
judgment so that the effect of the debtor’s withholding payment was to
deprive the creditor of the use of a fixed amount as of a known date.
Ver Brycke v. Ver Brycke, III, 843 A.2d 758, 777-78 (Md. 2004) (citation and internal
quotation marks omitted). However, when there is “a legitimate dispute as to the obligation
to pay,” a claimant no longer has “an absolute right to interest” and the decision whether
to award such interest rests within the discretion of the factfinder. Gordon v. Posner, 790
A.2d 675, 698 (Md. App. 2002); see also Ver Brycke, 843 A.2d at 777 (explaining that
“[w]hether a party is entitled to pre-judgment interest generally is left to the discretion of
the fact finder” (citation omitted)).
To show that a district court abused its discretion in awarding prejudgment interest,
a defendant must establish that “according to the equity and justice appearing between the
parties on a consideration of all the circumstances of the particular case,” the district court
21
USCA4 Appeal: 21-2404 Doc: 41 Filed: 02/15/2023 Pg: 22 of 22
“worked an injustice” to the defendant. I. W. Berman Props. v. Porter Bros., Inc., 344
A.2d 65, 76 (Md. 1975). An appellate court will not disturb such a discretionary judgment
of a trial court “unless there is grave reason for doing so.” Id.Our review of the record reveals no injustice or serious fault in the court’s
discretionary decision to award prejudgment interest. The court held the defendants liable
as a matter of law after rejecting their asserted defenses to KeraLink’s claim of strict
products liability. As explained above, we easily affirm that ruling. Moreover, the
defendants do not dispute the amount of damages calculated by the court or the court’s
finding that the defendants partly were responsible for prolonging the proceedings in the
district court. Thus, on this record, we conclude that the district court did not abuse its
discretion in awarding prejudgment interest.
III.
For these reasons, we affirm the district court’s award of summary judgment against
both defendants in favor of KeraLink, and the court’s discretionary award of prejudgment
interest.
AFFIRMED
22