# Milovich v. Aziyo Biologics, Inc.

> District Court, D. Oregon · February 24, 2025

URL: https://www.frixlaw.com/law-library/cases/10829068

## Case

- **Court:** District Court, D. Oregon
- **Decided:** February 24, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10829068

## How later opinions describe it (automated extraction)

- holding that the same state interests protect the sale of human musculoskeletal tissue
- recognizing numerous cases which “demonstrate . . . nationwide acceptance” of the policy rationale
- noting that only New Jersey and Vermont lack such a statute

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION
ALLEN and LANI
MILOVICH,
Case No. 1:24-cv-01208-CL
Plaintiffs,
FINDINGS AND
V. RECOMMENDATION
AZIYO BIOLOGICS, INC. doing
business as Elutia Inc., ELUTIA, INC.
formerly known as Aziyo Biologics, Inc.,
MEDTRONIC SOFAMOR DANEK USA,
INC., SPINALGRAFT TECHNOLOGIES, LLC,
DCI DONOR SERVICES, INC., and NEW
MEXICO DONOR SERVICES,

Defendants.

CLARKE, Magistrate Judge.

Allen and Lani Milovich (“Plaintiffs”) bring this action against Aziyo Biologics, Inc.,
Elutia, Inc., Medtronic Sofamor Danek USA, Inc., Spinalgraft Technologies, LLC, DCI Donor
Services, Inc., and New Mexico Donor Services (collectively “Defendants”). Before the Court is
Defendants’ Motion for Partial Dismissal, ECF No. 18. For the reasons below, the Court
recommends the Motion to Dismiss be GRANTED.
LEGAL STANDARD
A Rule 12(b)(6) motion to dismiss will be granted where a plaintiff fails to state a claim
upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). To state a claim for relief, a pleading
must contain “a short and plain statement of the claim showing that the pleader is entitled to

Page | — Findings and Recommendation

relief.” Fed. R. Civ. P. 8(a)(2). It should provide the defendant with fair notice of what the claim
is and the grounds upon which it rests. Bell Adl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
While “detailed factual allegations” are not required, “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009); Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041
(9th Cir. 2010). Facial plausibility exists where the factual allegations allow the court to infer a
defendant’s liability based on the alleged conduct. Iqbal, 556 U.S. at 678. A pleading that offers
mere “labels and conclusions” is insufficient, as is “a formulaic recitation of the elements.” Jd.
In evaluating a motion to dismiss, the court must accept all allegations of material fact as
true and construe those allegations in the light most favorable to the non-moving party. Odom v.
Microsoft Corp., 486 F.3d 541, 545 (Oth Cir. 2007). The court is “not bound to accept as true a
legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. Nor must a court
accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or
unreasonable inferences.” Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010).
BACKGROUND
This personal injury action involves FiberCel. Defendants categorize FiberCel as a
Human Cellular and Tissue Based Product (HCT/P), which consists of processed human bone
tissue.!
Federal regulations define HCT/Ps as “articles containing or consisting of human cells or
tissues that are intended for implantation, infusion, or transfer into a human recipient.” 21 C.F.R.
§ 1271.3(d). Per federal regulations, HCT/Ps must be “minimally manipulated,” which federal

! See FiberCel Instructions for Use (“IFU”), https://elutia.com/wp-content/uploads/2020/07/IFU-
0021-Rev03-FiberCel.pdf. The parties do not dispute the accuracy or authenticity of this publicly
available document. The Court thus takes judicial notice of the FiberCel IFU.
Page 2 — Findings and Recommendation

regulations define as processing that does not alter the relevant biological characteristics of the
cells or tissues. 21 C.F.R. § 1271.3(H)(2).
FiberCel is made from human tissue consisting of cancellous bone particles with
preserved cells, combined with demineralized cortical fiber. Am. Compl. at { 23. FiberCel is
“marketed for use in orthopedic and reconstructive bone grafting procedures with the use of
autologous bone or other forms of allograft bone or alone as a bone graft.” Id. at § 26.
Plaintiff underwent cervical spine surgery on April 1, 2021, in which he was implanted
with FiberCel allograft allegedly contaminated with tuberculosis. Jd. at J 53-55. Plaintiff alleges
that, as a result of the FiberCel implant, he contracted tuberculosis and has been forced to
undergo medical treatment to manage the infection. Jd. at {9 57-61. Plaintiff alleges that Aziyo
developed and manufactured the FiberCel that was implanted during his surgery, which was
subsequently sold, marketed, and distributed by defendant Medtronic Sofamor Danek USA, Inc.
and SpinalGraft Technologies LLC. Id. at | 6, 10, 12.
Plaintiff's Complaint asserts claims against Defendants for negligence (First and Fifth
Cause of Action), strict liability (Second Cause of Action), breach of implied warranty (Third
Cause of Action), breach of express warranty (Fourth Cause of Action), and loss of consortium
(Sixth Cause of Action). Defendants argue the strict liability and breach of warranty claims
should be dismissed for failure to state a claim upon which relief can be granted because Aziyo is
protected from liability under Oregon’s blood and tissue shield statute.
DISCUSSION
I. Oregon’s Blood and Tissue Shield Statute Bars Strict Liability and Breach of
Warranty Claims Relating to FiberCel.
As interpreted by Oregon courts, Oregon’s blood and tissue shield statute precludes strict
liability and breach of warranty claims for injuries arising from blood or tissue injections,

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transfusions, or transplants. The statute does this by declaring that each activity undertaken to
provide a blood or tissue injection, transfusion, or transplant “is not a sales transaction.”
1) The procuring, processing, furnishing, distributing, administering or using of
any part of a human body for the purpose of injecting, transfusing or
transplanting that part into a human body is not a sales transaction covered
by an implied warranty under the Uniform Commercial Code or otherwise.
2) Asused in this section, “part” means organs or parts of organs, tissues, eyes or □
parts of eyes, bones, arteries, blood, other fluids and any other portions of a
human body.
Or. Rev. Stat. § 97.985 (emphasis added). By its plain language, the statute precludes implied
warranty claims. Furthermore, because strict liability and warranties, either implied or express,
arise only from sales transactions, it follows that they cannot arise from one of the activities that
the statute declares “is not a sales transaction. ” See Royer v. Miles Lab'y, Inc., 811 P.2d 644, 647
(Or. App. 1991) (“The main focus of [the blood shield statute, formerly numbered ORS
§ 97.300,] is on declaring that the transactions do not constitute sales. Because strict liability
cannot arise without there having been a sale, defendants could not be strictly liable” for
plaintiff’s injuries stemming from the defendant manufacturer’s tainted blood product). In Royer,
the court noted how “[t]he legislative history [of what is now § 97.985] makes plain that the
legislature intended to preclude liability [for activities described in the statute] without fault,
whatever its nature”—whether framed as warranty liability or strict liability in tort. Id.
(emphasis. added). Accordingly, activities undertaken to manufacture the blood- or tissue-based
products are services, not sales transactions, under the statute, and therefore, the manufacturer
was statutorily exempt from strict liability, even though the statute does not expressly mention
strict liability. Id; cf Brown v. GlaxoSmithKline, LLC, 523 P.3d 132, 141 (Or. App. 2022), aff'd
sub nom., Providence Health Sys. - Oregon v. Brown, 548 P.3d 817 (Or. 2024) (“the legislature
may ... express the intent to exclude certain products or sellers from strict liability by declaring

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that transactions in such products do not constitute sales, as it did in former ORS 97.300 [what is
now § 97.985]”) (emphasis omitted).
Additionally, in Coloplast, the court applied Oregon’s statute to dismiss claims of strict
liability and breach of express warranty against the manufacturer of an implanted transvaginal
surgical mesh made of human collagen, which the plaintiff alleged had caused several medical
complications. Jn re Coloplast Corp. Pelvic Support Sys. Prod. Liab. Litig., No. 2:13-CV-15065,
2017 WL 6417807, at **3—5. Citing Royer the court dismissed the strict liability claim. See id.
Furthermore, the court determined that “[s]imilarly, the plaintiff's claim for express warranty
must also fail” since “[i]t is axiomatic, of course, that breach of express warranty is not available
as a cause of action without a sale, because the essence of warranty is a consensual agreement—
express or implied—arising from contract. Without a sale under contract, there is no consensual
nexus between the parties and thus no warranties may attach.” Jd. at *4 (citation omitted).
Here, like the plaintiffs in Royer and Coloplast, Plaintiffs claim strict liability and breach
of warranty against the manufacturer of a blood- or tissue-based product for damages allegedly
arising from the transfusion or transplantation of that product. Specifically, Plaintiffs claim that
Aziyo manufactured a unit of the tissue product FiberCel from contaminated tissue and that
Plaintiff allegedly contracted tuberculosis after FiberCel was transplanted during a surgical
procedure. See Compl. at |] 60-66. Because the Courts in Royer and Coloplast dismissed similar
claims arising under the same statute, the Court here should do the same.
Plaintiffs argue this case is distinguishable from those discussed above. The Court
disagrees. Plaintiffs suggest this case is distinguishable from Royer because the decision in that
case applied to blood and blood derivatives, but it “is not applicable to highly manipulated and
manufactured products like FiberCel.” ECF No. 19 at p. 11. The Court takes issue with this claim

Page 5 — Findings and Recommendation

two reasons. First, nothing in the opinion of Royer indicates the holding should be limited to
pure blood and blood derivatives as opposed to more manipulated or manufactured products.
Second, even if this distinction were made, it would be irrelevant as courts have consistently
found FiberCel within the protections of blood and shield statutes despite its processing (see
discussion below).
Plaintiffs also argue this case is distinguishable from Coloplast. To start, the Court would
like to point out that Plaintiffs are not referring to the same Coloplast case as Defendants. The
Coloplast cases are part of multidistrict litigation. In the case cited by Defendants, Oregon’s
statute is applied, while in the case cited by Plaintiffs, Ohio’s statute is applied. This Court limits
its focus to the case cited by Defendants involving Oregon’s statute. Coloplast involves the same
statute, a similar tissue-based product, and the same reasoning that this Court advances. Thus, the
Court finds the holding and analysis in Coloplast applicable here.
Furthermore, courts in other jurisdictions have applied their state’s blood and tissue
statute to the very FiberCel material at issue here and determined that attendant claims of strict
liability and breach of warranty were barred. For instance, in Dorota Zydek v. Aziyo Biologics,
Inc., et al., the United States District Court for the Northern District of Illinois, noted that
Illinois’ blood and tissue statute, similar to Oregon’s statute, defines the processing and
distribution of human tissue as the rendition of a service by every person, firm, or corporation
participating therein. See Zydek v. Aziyo Biologics, Inc., No. 23 C 3016, 2024 WL 197264, at *2
(N.D. Ill. Jan. 18, 2024). In holding that the Illinois statute barred strict liability and breach of
warranty claims against Aziyo, the court determined that, irrespective of the FDA’s and NIH’s
definition of FiberCel as a “product,” it was “clear and straightforward” that the Illinois statute
applied to FiberCel since it was made from human tissue for transplantation. Jd. Therefore, the

Page 6 — Findings and Recommendation

processing and distribution of FiberCel was a service under the statute, and the court dismissed
the plaintiff’s strict liability and breach of warranty claims against Aziyo. Jd. Other courts
applying blood and tissue shield statutes to FiberCel claims have followed suit. See Lokkart v.
Aziyo Biologics, Inc., No. 2:23-CV-01961-HDV-E, 2024 WL 3057364, at *4 (C.D. Cal. May 29,
2024) (California’s blood and tissue shield statute barred plaintiff ’s strict liability and breach of
implied warranty claims against Aziyo as to FiberCel); Sherrill v. SpinalGraft Techs., LLC, No.
5:21-CV-00172-KDB-SCR, 2024 WL 1979452, at *2 (W.D. N.C. May 3, 2024) (the blood and
tissue shield statute in North Carolina [a state that does not recognize strict liability claims]
barred breach of warranty claims against Aziyo as to FiberCel).
To the extent that Plaintiff’s Complaint attempts to plead around Oregon’s blood and
tissue statute by asserting that human tissue is combined with other materials to make FiberCel
(see e.g., Compl. J§ 24, 26), courts in the FiberCel cases cited above have already rejected that
contention. In Sherrill, the court rejected the plaintiffs’ argument that processing bone tissue into
FiberCel renders FiberCel a “product” outside the scope of the statute’s protection and held that
the processing and sale of FiberCel constituted a “service,” because North Carolina’s law
“protects from liability any participating person or institution involved in the ‘processing’ of
human tissues, including bones, as long as the ultimate purpose is to inject, transfuse, or
transplant that tissue into the human body.” Sherrill, 2024 WL 1979452 at *2-3. In Lokkart, the
court noted, “[Plaintiffs] attempt to sidestep their own allegations cannot be squared with the
plain language of the statute.” Lokkart, 2024 WL 3057364 at *3. The Court observed that the
inclusion of “processing” within California’s blood and tissue shield statute contemplated that
the processing or altering of human tissue into an allograft product did not remove FiberCel from
the definition of “human tissue.” Jd. The court also noted that FiberCel’s status as an HCT/P

Page 7 — Findings and Recommendation

required that FiberCel be “minimally manipulated” and subjected to “processing that does not
alter the relevant biological characteristics of the cells or tissues.” Jd. As the court ultimately
stated, “[g]iven this standard, the Court must reject [Plaintiffs’] hypothetical argument that
FiberCel no longer qualifies as ‘a group of [human] cells.’” Jd. (brackets around “human” in
original).
This Court, for the reasons cited above, does not believe additional discovery would
change the outcome of its ruling on this motion. Thus, Defendants’ motion should be granted.
i. Oregon’s Blood and Tissue Shield Reflects a Nationwide Public Policy Rationale in
Favor of Protecting Human Tissue Products from Strict Liability and Breach of
Warranty Claims.
Oregon’s blood and tissue shield statute mirrors similar blood and tissue shield statutes
which have been enacted in virtually every state. See, e.g., Palermo v. LifeLink Found,, Inc., 152
So.3d 1099, 1103 (Miss. 2014) (noting that only New Jersey and Vermont lack such a statute).
The court in Coloplast also noted that there is a “nationwide policy against applying strict

liability to the distribution of human tissue.” Jn re Coloplast, 2017 WL 6417807 at *4.
Decisions in the FiberCel cases cited in the section above clearly reflect the public policy
rationale which underlies not only Oregon’s blood and tissue shield statute, but similar blood and
tissue shield statutes across the country: the availability of human blood and tissue for
therapeutic purposes should be encouraged by protecting the procurement, processing, and
distribution of blood and tissue from no-fault legal liabilities. As the California Court of Appeals
noted in Cryolife, Inc. v. Superior Court:
[L]egislatures have determined that the production and use of human blood and its
derivatives for therapeutic purposes should be encouraged; and for this purpose
those who provide these products, and who themselves are free from fault, should
not be required to bear the economic loss which might otherwise be imposed under
the rules of strict liability which are applicable to sellers of commercial products
generally.

Page 8 — Findings and Recommendation :

110 Cal. App. 4th 1145, 1156 (2003) (holding that the same state interests protect the sale of
human musculoskeletal tissue) (emphasis in original).
Language in an Illinois statute demonstrates the public policy rationale underlying the
statutory exemption of no-fault liability claims for blood and tissue products:
The availability of scientific knowledge, skills and materials for the purpose of
injecting, transfusing, or transplanting human whole blood, plasma, blood products,
blood derivatives and . . . other human tissue is important to the health and welfare
of the people of this State. The imposition of legal liability without fault upon the
persons and organizations engaged in such scientific procedures inhibits the
exercise of sound medical judgment and restricts the availability of important
scientific knowledge, skills, and materials.
745 Ill. Comp. Stat. 40/1; see also Poole v. Alpha Therapeutic Corp., 698 F. Supp. 1367, 1370
(N.D. Ill. 1988) (recognizing numerous cases which “demonstrate . . . nationwide acceptance” of
the policy rationale).
Under this same rationale, courts nationwide have barred liability theories against blood
and tissue suppliers. As the District of Utah noted in onan v, Musculoskeletal Transplant
Foundation, “[n]o court has ever applied strict liability to the distribution of human tissue.”
208F. Supp. 2d 1226, 1229 (D. Utah 2002); see also Palermo v. LifeLink Found, Inc., 152 So.3d
1177, 1181 (Miss. Ct. App. 2014), aff’d, 152 So.3d 1099 (Miss. 2014) (‘The case law reflects
that there is a nationwide antipathy over applying products-liability or strict-liability concepts to
body parts such as blood and tissue”).
Furthermore, Oregon’s blood and tissue shield statue applies to both nonprofit and for-
profit organizations. Plaintiffs argue the statute applies only to nonprofit entities, thus rendering

it inapplicable here. In support of this claim, Plaintiffs cite to several cases from other states
where the applicable blood and tissue shield statues did not apply to for-profit organizations.
These cases, however, have no bearing on the application of the statute in this case. The Oregon
Court of Appeals has explicitly rejected the idea that Oregon’s blood and tissue shield statute
Page 9 — Findings and Recommendation

applies only to nonprofit organizations. Royer, 811 P.2d at 647 (“Plaintiff argues that, if we hold
that the statute precludes strict liability, we should limit that holding to nonprofit organizations,
thus keeping defendant Miles potentially liable. There is no basis in the statute for that
distinction.” (emphasis added)).
The explicit legislative intent of the Statute was to “ensure that the blood and tissues...
should not be considered to be within the concept of a thing to be sold” and to shield against
strict liability arising out of the procurement, processing, distribution, or use of human tissue for
purposes of transplant /d. at 114, 117 (discussing legislative history behind enactment of
Oregon’s blood and tissue shield statute). Plaintiffs now seek to undercut that intent by inserting
restrictions to the application of the Statute which do not exist within the Statute’s plain language
or its legislative history. This Court will not rewrite a law the Legislature drafted and “passed
without any substantial controversy.” Jd. at 117.
Il. Even if FiberCel were a “medical device,” Plaintiffs’ strict liability claims are still
barred by Oregon law.
Even if this Court were to accept Plaintiffs’ contention that “processing” human tissue
renders that tissue a “designed, developed, manufactured, branded and marketed medical
product,” Plaintiffs’ strict liability claims are still barred under Oregon law. Oregon has adopted
the Restatement (Second) of Torts, § 402A Comment k, which precludes liability for
manufacturers of prescription medical devices under a theory of strict products liability. Or. Rev.
Stat. § 30.920(3) (specifically adopting the Restatement (Second) of Torts § 402A, Comments a
through m for product liability cases); Senn v. Merrell-Dow Pharmaceuticals, Inc., 751 P.2d 215,
217 (Or. 1988) (ORS 30.920 “adopts Restatement (Second) of Torts § 402A and its attendant
comments as the law of the state”). Comment k states:

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There are some products which, in the present state of human knowledge, are quite
incapable of being made safe for their intended and ordinary use. These are
especially common in the field of drugs. An outstanding example is the vaccine for
the Pasteur treatment of rabies, which not uncommonly leads to very serious and
damaging consequences when it is injected. Since the disease itself invariably leads
to a dreadful death, both the marketing and use of the vaccine are fully justified,
notwithstanding the unavoidable high degree of risk which they involve. Such a
product, properly prepared, and accompanied by proper directions and warning, is
not defective, nor is it unreasonably dangerous. The same is true of many other
drugs, vaccines, and the like, many of which for this very reason cannot legally be
sold except to physicians, or under the prescription of a physician. It is also true in
particular of many new or experimental drugs as to which, because of lack of time
and opportunity for sufficient medical experience, there can be no assurance of
safety, or perhaps even of purity of ingredients, but such experience as there is
justifies the marketing and use of the drug notwithstanding a medically
recognizable risk. The seller of such products, again with the qualification that they
are properly prepared and marketed, and proper warning is given, where the
situation calls for it, is not to be held to strict liability for unfortunate consequences
attending their use, merely because he has undertaken to supply the public with an
apparently useful and desirable product, attended with a known but apparently
reasonable risk.
Restatement (Second) of Torts, § 402A Comment k (emphasis added).
Comment k exempts “unavoidably unsafe products,” like prescription medical devices,
from strict liability claims based on the recognition that such products have inherent risks that
are incapable of being designed away. Because it contains live human tissue, the risk of disease
transmission inherent to FiberCel—or any other live tissue product—can never be designed
away. (See ECF No. 19 at p. 8 (citing 6A American Law of Torts § 18:443 for the premise that
“there are not now, and realistically there may never be, tests that can guarantee with absolute
certainty that the donated blood is uncontaminated with certain viruses or other contaminants.”)).
Indeed, the FiberCel IFU expressly warns that “[c]urrent technologies may not preclude the
transmission of infectious agents or disease, including hepatitis and HIV.” See IFU.
If—as Plaintiffs allege in their Amended Complaint—FiberCel is made from human
tissue, Plaintiffs’ claims are barred by the blood and tissue shield statute. If—as Plaintiffs allege
in their answering brief, ECF No. 19—FiberCel is a medical device, Plaintiffs’ claims are barred
Page 11 — Findings and Recommendation

by Oreogn’s adoption of Section 402A. Thus, while the Court agrees with Aziyo that FiberCel is
made from human tissue under the blood and tissue shield statute, even if FiberCel were a
“medical device,” Plaintiffs’ strict liability and breach of warranty claims would still warrant
dismissal under Oregon law.
RECOMMENDATION
For the reasons above, Defendants’ Motion for Partial Dismissal, ECF No. 18, should be
GRANTED. Plaintiff’s strict liability and breach of warranty claims should be dismissed.
This Findings and Recommendation will be referred to a district judge. Objections to this
Findings and Recommendation, if any, are due fourteen (14) days from today’s date. If
objections are filed, any response is due fourteen (14) days from the date of the objections. See
Fed. R. Civ. P. 72, 6. Parties are advised that the failure to file objections within the specified
time may waive the right to appeal the district court’s order. Martinez v. YIst, 951 F.2d 1153 (9th
Cir. 1991), This Recommendation is not an order that is immediately appealable to the Ninth
Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure
4(a)(1) should not be filed until entry of the district court's judgment or appeatable order.

DATED this 2 day ZZ □

AAARK Dz. Z
United States Magistrate Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10829068. Public record. Not legal advice.