Tuesday, July 14, 2009

Fraudulent Joinder Of Sales Representatives

We don't call anyone a "loyal reader" of this blog, for fear that that would reflect poorly on them.

But Susan Burnett, of Clark, Thomas & Winters, has ocasionally made the mistake of dropping by the blog, and today she's submitted a guest post. What follows is her work alone; she gets the cheers, she gets the brickbats, and she gets our thanks for having shared this with us:


The argument that sales representative employees of pharmaceutical companies can be personally liable to untold numbers of patients they have never met — that their bank accounts can be seized and their wages garnished — based on these employees’ brief interactions with prescribing physicians is a fiction employed by plaintiffs solely to stay out of federal court. Few products liability cases against pharmaceutical companies actually go to trial with a sales representative defendant still in them. But as the recent Avandia decision (discussed in an earlier Beck and Herrmann post here) shows, the common sense understanding that the suit against the sales representative is a sham doesn’t always translate into a successful fraudulent joinder removal, even when the federal court is skeptical of the plaintiff’s claims. In re Avandia Marketing, Sales Practices, MDL No. 1871, 2009 WL 1708078, * 5 (E.D. Pa. June 18, 2009) (plaintiffs stated a colorable claim against the sales representatives even though “it is difficult to imagine a scenario in which a drug company divulges otherwise secret information about the dangers of its product in training materials or educational sessions given to sales representatives.”).

Here are some thoughts on ways to expose the sham and get to federal court.

Sometimes, the plaintiffs make it easy. Some plaintiffs simply list sales representatives in the caption and introductory paragraphs, but ignore them in the rest of the complaint. In some circuits, that can be a ticket to removal. See Griggs v. State Farm Lloyds, et al., 181 F.3d 694, 699 (5th Cir. 1999) (affirming denial of remand where plaintiffs mentioned the non-diverse employee defendants only in the caption and parties section of the state-court complaint, without ever alleging any specific, actionable facts against those defendants). Or the plaintiff may name random sales representatives who (1) never detailed the drug, (2) never detailed the plaintiff’s prescribing physician, or (3) didn’t detail the drug or plaintiff’s physician until after the plaintiff’s alleged injury. With declarations from the sales representatives to that effect, one can argue that nothing the sales representatives did or did not do could have affected the doctor’s prescribing decision for the plaintiff, and that they therefore are fraudulently joined. See, e.g., Dacosta v. Novartis AG, 180 F. Supp. 2d 1178, 1182-83 (D. Or. 2001); In re Diet Drugs Prods. Liab. Litig., No. 03-20611, 2004 WL 2203712, at *2 (E.D. Pa. Sept. 28, 2004); In re Diet Drugs Prods. Liab. Litig., No. 03-20546, 2004 WL 1535828, at *11 (E.D. Pa. July 6, 2004).

It’s a harder case when the plaintiff names sales representatives who actually detailed the right drug to the right doctor during the right time, and actually pleads a cause of action against them. When the plaintiff asserts only failure to warn or breach of warranty, some courts have agreed that sales representatives cannot be liable under these theories because they are not “sellers” under state law. In re Diet Drugs Prods. Liab. Litig., 220 F. Supp. 2d 414, 425 (E.D. Pa. 2002) (“[S]ales representatives are not considered ‘sellers’ under Mississippi law, but rather, employees of the businesses who are sellers.”); In re Diet Drugs Prods. Liab. Litig., No. 03-20546, 2004 WL 1535828, *10 (“While the product’s ‘seller’ owes the consumer a duty to warn of a product’s dangers, [the pharmaceutical manufacturer], and not the sales representatives, was the ‘seller.’ . . . . Accordingly, the sales representatives owed no independent duty to warn under Texas law.”); see also Restatement (Third) of Torts § 20, cmt. g. (“Persons assisting or providing services to product distributors, while indirectly facilitating the commercial distribution of products, are not subject to liability under the rules of this Restatement.”). That ought to be the result as a matter of law, but it wouldn’t hurt to get a declaration from the sales representative spelling out that he or she didn’t “sell” the drug. See DaCosta, 180 F. Supp. 2d at 1182-83 (“[The sales representative] stated in his Affidavit that he does not sell drugs, does not take or process orders for drugs, and has no ownership interest in the drugs sold by Defendant Novartis Pharmaceuticals.”); Del Bosque v. Merck & Co., Inc., No. C-06-510, 2006 WL 3487400, *2-*3 (S.D. Tex., Dec. 1, 2006) (court assumed that sales representatives could be sellers of drug in the absence of a declaration).

The hardest case is when the plaintiff alleges that the sales representative engaged in intentional misrepresentation or fraud. Even if the plaintiff’s pleadings are sketchy and everybody involved knows that the fraud claim is bogus, if the court (as in Avandia) applies a liberal pleading standard, the defendant is left with the burden of proving that there is no possibility that the plaintiff can recover against the sales representative.

There are two kinds of evidence that might solve this dilemma. First, the sales representative can provide a declaration refuting at least one element necessary to prove fraud. The diet drug MDL court relied on such declarations to deny remand under Florida law. In re Diet Drugs Prod. Liab. Litig., No. 03-20765, 2004 WL 1824357, *4 (Aug. 12, 2004) (“Wyeth has offered sworn testimony that the three defendant sales representatives named in this action had no knowledge of any connection between the diet drugs and valvular heart disease while they were promoting the diet drugs. There is nothing in the record before us to contradict this testimony.”); see also Legg v. Wyeth, 428 F.3d 1317, 1321-25 (11th Cir. 2005) (district court erred in awarding attorneys fees to plaintiff because defendant’s removal, based on declarations of sales representatives denying fraud, was not improvident). The following language, quoted in the Legg court’s opinion, apparently was sufficient to negate the fraud allegations: “I was not aware of any alleged association between Pondimin and/or Redux and valvular heart disease until the time such an allegation was first publicized. I was not aware before that time of any published study, report or other literature which claimed that an association exists between Pondimin and/or Redux and valvular heart disease.” Legg, 428 F.3d at 1321.

Timing is an issue here and it’s safest to obtain the declaration and remove within 30 days of service rather than try to argue that the declaration, especially one from a current employee, constitutes a removal trigger under the second paragraph of 28 U.S.C. § 1446(b) (actions not initially removable).

The second way to get around a fraud allegation is through the prescribing doctor. If the doctor testifies (by deposition, or by declaration if you are allowed to have ex parte contact in your jurisdiction) that he or she did not rely on any communications with sales representatives in deciding to prescribe the drug for the plaintiff, that testimony arguably destroys any causal link between the sales representative’s (fictional) fraud and the doctor’s prescribing decision, making the representative fraudulently joined.

3 comments:

Anonymous said...

What ever happened to good olde fashion Tylenol?? Seriously, sales reps can be just as deceptive in their practices that some people say lawyers are.

Quiact said...

What if internal documents exist authored by pharmaceutical representatives about their interactions with prescribers, and what they said, as well as their customer? How significant is this? Call notes are what they are called, and are being used as evidence more frequently, it seems. For example: "Reminded Dr. Smith about the Plasma TV we put in his office, along with the trip to Florida. We deserve more prescriptions from him". How would that be viewed by the DOJ?

Thanks,

Dan (diohdan@aol.com)

Beck/Herrmann said...

To Quiact:

Outright bribery evidence in call notes (we know what these are) would be of siginficant interest to the DoJ. That's as it should be. The DoJ is entrusted by the FDC Act with exclusive enforcement authority. Conversely, private plaintiffs have no power to enforce FDC Act violations. Hence, it's still fraudulent joinder in a civil case.