Thursday, April 30, 2009

Boring Stuff We Need To Know

Is there anything in product liability litigation as boring as Medicare liens? Putting aside document privilege reviews, or drafting answers to form complaints, that is. Some substantive area of the law?

Substantively, we’d be hard-pressed to think of anything. Back in the day – when such arguments were still possible – we got a bit of a rush arguing (and winning) the proposition that the government had no Medicare as Secondary Payer (Payor? We're still not sure which is right.) (“MSP”) liens against manufacturer defendants. See Thompson v. Goetzmann, 337 F.3d 489 (5th Cir. 2002). But the next year, in a stealth tax increase snuck into the bill that created the Medicare Drug Benefit, Congress enacted changes that allowed HHS to hit up tort defendants for Medicare liens once cases settled or went to adverse verdict:

On December 8, 2003, however, the President signed into law amendments to MSP designed to resolve this dispute. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 301, 117 Stat.2066, 2221 (2003) (hereinafter "MMA"). The amendments to MSP enacted in MMA removed the two elements that had resulted in these conflicting interpretations, i.e., the word "promptly" in subparagraph (A)(ii) and the cross-reference to subparagraph (A) in subparagraph (B)(i). Compare 42 U.S.C. § 1395y(b)(2)(A)(ii), (B)(i) (2000) with 42 U.S.C. § 1395y(b)(2)(A)(ii), (B)(i)-(ii).

Brown v. Thompson, 374 F.3d 253, 258 (4th Cir. 2004). Pretty boring, right? That goes for just about any law with more than two levels of parenthetical subparts.

In any event, the upshot of it all was that, if a product liability defendant paid a Medicare-recipient plaintiff any money (whether by settlement or by satisfying a judgment) and that plainitiff stiffed Medicare, the government could collect from the defendant – and more than once, since there are double-damages penalty provisions in the MSP.

We're here to tell you that it’s only going to get worse.

And it starts tomorrow.

In 2007, Congress passed another legislative mouthful, called the Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”). Under this law, by July 1, 2009, tort defendants (who since 2003 have been self-insured “plans” under the MSP) will also be “responsible reporting entities” (“RREs”) required to register and to provide information about “plan participants” – read, plaintiffs. That’s mostly in §111 of MMSEA, which has been summarized as follows:

Requires any entity serving as an insurer. . .as well as the administrator or fiduciary of any self-insured, self-administered group health plan [that’s tort defendants, folks], to: (1) secure from. . .plan participants information [that’s the plaintiffs] necessary to identifying situations where the group health plan is or has been a primary plan to the Medicare program; and (2) submit such information to the Secretary.

Requires an applicable plan to determine: (1) whether a claimant is entitled to Medicare benefits on any basis; and (2) submit specified information about any entitled claimant to the Secretary. [this means our clients have to file reports]

Establishes civil money penalties for enforcement. [this means they could get fined]

Congressional Research Service Summary of MMSEA §111. For true masochists, the actual text of this section is found at 42 U.S.C. §1395y(b)(7) (for those of you with Westlaw/Lexis), or is available here uncodified.

So what does all this gobbledygook mean? It means that, starting in July, our clients are going to have to: (1) get from plaintiffs in pending litigation (presumably through releases, as set out below) information about their Medicare status, and (2) report that information to the government. 42 U.S.C. §1395y(b)(8)(A). And if our clients don’t do that, they can get fined $1000 a day per plaintiff – above and beyond any and all other MSP penalties. 42 U.S.C. §1395y(b)(7)(B)(i).

So how does one go about determining the Medicare eligibility of, say, 30,000 pharmaceutical mass tort plaintiffs? Well, the only sure way to get that information is from Medicare itself, by getting plaintiffs to sign this release or something equivalent. It’s also possible to get this information from the Centers for Medicare & Medicaid Services (“CMS”) using this release, but we understand that the CMS isn't as accurate, and thus the client won’t be as safe.

What? You mean our clients are being required to report to the government information that they have to get from somewhere else in the government?

That’s right.

Why can’t one government agency just talk to the other?

Because they’re the government, and they don’t have to if they can force someone else to do it for them.

The simple fact is this: As regular practitioners of mass tort litigation on either side of the “v.” know, in case after case, the government has proven utterly incapable in practice of supporting its own demands for MSP payments with evidence of what Medicare paid to which plaintiffs for what procedures.

So in the spirit of bipartisanship, Congress and the Bush Administration agreed to make defendants do the government’s recordkeeping work for it – in return for the princely fee for such services of zero dollars and zero cents.

And our clients have to register to do this.


Registration opens tomorrow (5/1/09) and extends through May and June, 2009.

Then what?

Once a defendant manufacturer has become a registered RRE, it can electronically query a Medicare database (as often as once a month) to determine if a particular plaintiff is eligible to get money from Medicare. The RRE will need either the plaintiff’s social security number of Health Insurance Claim Number and also three of the following: first initial of first name, first six letters of last name, date of birth, and gender. That’s one from column A and three from column B.

Supposedly, the government is to get back with a plaintiff-specific answer in no less than 14 days. Don’t hold your breath. For its part, HHS has promised final regulations for this reporting process by March 31, 2009, and they’re still not there. And we all know how frequently the FDA meets its nominal drug and device approval deadlines under the FDCA.

Our clients can get fined, but not Uncle Sam.

But for now, we’ll assume the government responds. What then?

Our clients have to keep track of the Medicare eligibility status for all plaintiffs in the litigation. Whenever any plaintiff receives money, through settlement or payment of a judgment, the defendant has to report that to the government. 42 U.S.C. §1395y(b)(8)(C). It doesn’t matter when the plaintiff first became eligible for Medicare – defendants are required to check not only at the beginning of the case, but to check again at the end. Failure is subject to the aforementioned fines as well as double damages and all the other sanctions of this lovely piece of legislation.

The question of what to report is more nightmarish, so much so that we're not even going to try. Here’s a link to the HHS reporting website. We understand (we can’t register ourselves, since lawyers aren’t RREs - our clients are more or less on their own) that the CMS now has over 100 categories of information that it can demand depending on the plaintiff and the type of claim.


There's no explicit requirement in MMSEA that a tort defendant establish a set aside account as part of a settlement – as is done in some workers compensation matters – but who knows what the future (or future regulations) might bring.

Further, the MMSEA obligation to report exists despite any denials of liability. Disclaimers do not affect our clients' reporting requirement. Similarly a settlement disclaimer of claims for recovery of medically related special damages (the infamous “no medicals”) does not affect the reporting requirement – as long as the plaintiff included medical expenses in his/her demand in either an original or amended complaint. There are both dollar and claimant age thresholds for reporting, but they are subject to change. A lot of this stuff is discussed in the “User Guide” that CMS has published concerning §111 reporting. Read it and weep (or at least sweat bullets).

If that doesn't put you to sleep, and give you nightmares, you can tackle the CMS overview page for reporting. As we mentioned earlier, formal regulations governing the reporting process have been promised. When they finally appear, they’ll be available here.

So what’s a defense lawyer to do? Here are some practical steps that might help: (1) the necessary plaintiff releases of Medicare information should become part of standard discovery. (2) If the plaintiff has to negotiate lien amounts with CMS, use of some sort of registry or escrow account to protect a defendant’s interests during the interim is a good idea. (3) Settlement releases should not be signed until the client checks the Medicare data base one last time. (4) Settlement releases should include a specific indemnity provision addressing MSP claims (something that we’ve been doing since 2003, but even more essential now). (5) Ideally, the plaintiff should have to provide a release signed by Medicare in favor of the client before getting any money.

And good luck. As of July 1, 2009, our clients are going to need it.

Tuesday, April 28, 2009

Colacicco Decision On Remand!

That headline is correct, except for the exclamation point.

The Third Circuit just issued its decision in Colacicco v. Apotex, on remand from the Supreme Court for reconsideration in light of Wyeth v. Levine.

The Third Circuit decided not to issue a new decision immediately, but instead remanded the cases to the two relevant trial courts to permit the trial judges to think harder in light of the Levine decision.

Here's the entire relevant text of the Third Circuit order:

ORDER (SLOVITER, Authoring Judge, AMBRO and *RESTANI, Circuit Judges) Accordingly, we will vacate our judgment in Colacicco and McNellis and remand the Colacicco matter to the United States District Court for the Eastern District of Pennsylvania and the McNellis matter to the United States District Court for the District of New Jersey for further proceedings consistent with the Supreme Court's decision. The respective parties can raise their arguments before the respective district courts, filed. *Honorable Jane A. Restani, Chief Judge, United States Court of International Trade, sitting by designation.

Solicitor General's Letter in Colacicco On Remand

The Solicitor General just submitted a letter to the Third Circuit in Colacicco v. Apotex giving the government's position on the preemption question in light of the Supreme Court's decision in Wyeth v. Levine.

The SG says that the FDA "has not yet conducted the sort of reexamination of various preemption issues following the Supreme Court's decision in Wyeth that would be necessary to inform a position of the United States in this case." The SG also withdraws the amicus brief previously submitted by the FDA in Colacicco.

Here's a link to the SG's letter.

REMS Preemption

We're so sad: Now that Riegel v. Medtronic and Wyeth v. Levine have been decided, we can no longer bill ourselves as "all preemption, all the time!"

We're forced to write about other stuff.

Not so fast!

One of us was giving a talk a few weeks ago, and an audience member posed a good question: How does the new Risk Evaluation and Mitigation Strategy (or "REMS") provision, added by the Food and Drug Administration Amendments Act of 2007, affect preemption?

The answer, of course, is that only time will tell, because there aren't yet any cases involving drugs that went through the REMS process. But REMS does give defendants a chance to assert a preemption defense.

The FDAAA of 2007 adds a new section, 21 U.S.C. Sec. 355-1, captioned "Risk Evaluation and Mitigation Strategies." For previously approved drugs, the FDA may require a REMS if the FDA becomes aware of new safety information and decides that a REMS "is needed to ensure that the benefit of the drug outweigh the risks." Sec. 355-1(a)(2)(A). Other drugs will be "grandfathered" into having a REMS. (The FDA published a list of 15 such grandfathered drugs in March 2008.)

Once the FDA notifies a manufacturer of the need for a REMS, the manufacturer must submit one. The REMS may include medication guides, patient package inserts, and communications plans (such as letters to health care providers) to mitigate the risk associated with the drug. Sec. 355-1(e)(2)-(3). The FDA will review and approve the REMS, and the manufacturer will effect it. The FDA will then assess the REMS periodically.

What does that have to do with preemption?

Potentially everything.

If the FDA identifies a drug risk, evaluates the drug to be sure that the benefits of the drug outweigh its risks, and works with the manufacturer to provide FDA-approved warnings that give proper notice of the risk, then the FDA has focused squarely on the risk in question.

That administrative record, showing that the FDA considered and acted on a specific risk, may establish preemption under the new framework established by Wyeth v. Levine.

As more drugs go through the REMS process, we'll surely see the preemption defense raised in this context.

We can hardly wait.

Monday, April 27, 2009

On Lexecon Waivers

We've recently been thinking about Lexecon waivers.

(Yeah, yeah: We were thinking about sex, drugs, and Lexecon waivers.)

You know the story: Lexecon v. Milberg Weiss, 523 U.S. 26 (1998), holds that MDL transferee judges lack authority to try cases that originated outside of the transferee court. Thus: The MDL Panel coordinates a bunch of federal cases in Chicago. A plaintiff files a case in federal court in New York. The MDL Panel ships the New York case to Chicago. The MDL transferee court in Chicago has the power to conduct all pretrial proceedings, but the Chicago court can't try the New York case; the case must be sent back to New York for trial.

It occasionally might make sense for the MDL transferee court to try a foreign case, so parties sometimes execute so-called Lexecon waivers: The parties waive their rights to have the case remanded for trial and consent to a trial before the transferee (here, Chicago) judge. That neatly solves one problem: It lets the MDL transferee judge try the case.

But Lexecon waivers may cause a bunch of other problems.

The traditional rules governing venue are not crazy: There are reasons to have cases tried in jurisdictions that have some relationship to the underlying facts. The reasons identified in forum non conveniens case law include, for example:

The cost of obtaining attendance of willing witnesses: Try a New York case in Chicago, and all of those New York-based witnesses have to buy plane tickets and hotel rooms to testify at trial.

Availability of compulsory process to secure attendance of unwilling witnesses: The Chicago court has subpoena power only over third party witnesses who reside in proximity to the Chicago courthouse. The Chicago court can't compel attendance by New York-based witnesses who refuse to attend trial voluntary. That means the Chicago jury will be watching hours of videotaped depositions, rather than seeing live witnesses, and there will be no last-minute additions to testimony to respond to unexpected new factual twists.

Possibility of a view of the premises: No one's flying those Chicago jurors to look at an accident scene in New York.

Imposing jury duty on a community that has no relationship to the litigation: A Lexecon waiver does precisely that.

Having a diversity case tried by a federal court that is familiar with local state law: Same deal.

And so on.

Don't get us wrong: In appropriate circumstances, Lexecon waivers may be appropriate. But courts shouldn't request them, or parties consent to them, reflexively. In some situations, the change of forum effected by a Lexecon waiver can effectively change the result of a trial.

Wednesday, April 22, 2009

Change Coming To Pennsylvania?

This post is about product liability but not particularly about prescription medical products. But since this subject is something Bexis has labored over for so long, we’re invoking the McFadden exception to deviate from drugs and devices for the moment.

But if you’ve got a product liability case of any sort in Pennsylvania or involving Pennsylvania law, we think you’ll be glad we did.

Pennsylvania product liability law has, generally, been rather notorious for its really strict version of strict liability, which precludes any reverence to “foreseeability” or “reasonableness.” E.g., Lewis v. Coffing Hoist Division, Duff-Norton Co., 528 A.2d 590, 591 (Pa. 1987); Azzarello v. Black Brothers Co., 391 A.2d 1020, 1031 (Pa. 1978). Things were so bad that, rather than have his pharmaceutical clients tough it out, Bexis argued (successfully) for “across the board” application of Restatement (Second) §402A, comment k so that strict liability simply doesn’t apply in prescription medical product cases. See Hahn v. Richter, 673 A.2d 888, 891 (Pa. 1996).

Due to the “ne’er the twain shall meet” attitude of Pennsylvania law towards negligence on the one hand and strict liability on the other, “strict liability” became the source of a variety of doctrinal or evidentiary propositions that adversely impacted defendants. Such as:
  • The jury is instructed that a product is “defective” merely if it had, or lacked, “any element” necessary to make it safe/made it unsafe. Azzarello, 391 A.2d at 1027-28.
  • Balancing of risks and utility of alternative designs is not something that juries do (since that would involve “reasonableness”), with the plaintiff bearing the burden of proof. Instead defendants have to bring pre-trial motions, on which they bear the burden of proof, asking that their products be found "not unreasonably dangerous" as a matter of law. Moyer v. United Dominion Industries, Inc., 473 F.3d 532, 538 (3d Cir. 2007).
  • There’s no comparative fault in strict liability that would reduce a verdict where the plaintiff did something stupid. Kimco Development Corp. v. Michael D’s Carpet Outlets, 637 A.2d 603, 606 (Pa. 1993).
  • Heck, you can’t even introduce evidence of a plaintiff’s dumb actions unless you can argue that the plaintiff’s screw-up is the “sole cause” of his/her injuries. Charlton v. Toyota Industrial Equipment, 714 A.2d 1043, 1047-48 (Pa. Super. 1998).
  • Evidence of industry standards is inadmissible in strict liability – it goes to a defendant’s “reasonable care.” Lewis, 528 A.2d at 594.
  • Several decisions hold that a product’s compliance with mandatory government regulations – which means you get fined or go to jail for violations – isn’t admissible in strict liability. E.g., Sheehan v. Cincinnati Shaper Co., 555 A.2d 1352, 1355 (1989).
  • Double heck – even evidence that the design alternative or risk was scientifically unknowable at the time of the accident has been excluded. Carrecter v. Colson Equipment Co., 499 A.2d 326, 330-31 (1985).

Thus, in Pennsylvania it’s commonplace for plaintiffs to dismiss their negligence counts shortly before going to trial – to ensure that defendants are disadvantaged by Pennsylvania's peculiar rules that have grown up in the shadow of the proposition that “negligence principles” have “no place” in strict liability.

For the last decade, Bexis has been hard at work trying to tear down the wall between negligence and strict liability, and thus eliminate these pro-plaintiff rules. In one of his earlier cases, he helped resuscitate, to some extent, the proposition that evidence can be relevant to both strict liability and negligence. Spino v. John S. Tilley Ladder Co., 696 A.2d 1169, 1172 (Pa. 1997) (evidence of lack of similar accidents admissible). Another of his cases saw the Supreme Court narrow the divide between negligence and strict liability. Duchess v. Langston Corp., 769 A.2d 1131, 1144 (2001) (subsequent remedial measures inadmissible in both negligence and strict liability; alternative feasible design an “essential element” in strict liability).

After Duchess, Bexis started filing briefs explicitly advocating that Azzarello strict liability be overturned and replaced by the negligence-based standard for design and warning defects as provided in the Restatement (Third) of Torts. Three justices (you need four for an outright majority) agreed in a concurring opinion in Phillips v. Cricket Lighters, 841 A.2d 1000, 1013 (2003) (Saylor, J. writing). He’s kept it up ever since. The court dodged the issue in Harsh v. Petroll, 887 A.2d 209, 216 n.16 (2005), conceded that strict liability needed “overhaul” in Pennsylvania Dept. of General Services v. U.S. Mineral Products Co., 587 Pa. 236, 253-54, 898 A.2d 590, 601 (2006) (“DGS”), and finally expressly took up the issue in Bugosh v. I.U. North America, Inc., 942 A.2d 897 (2008) (per curium).

But in the meantime, the Third Restatement issue came up in another context before the Third Circuit. This time, it was the plaintiff’s ox being gored. That’s because restrictions on use of “foreseeability” or “reasonableness” don’t always benefit plaintiffs – just most of the time. The flip side is that merely being a “foreseeable plaintiff” or being injured by “foreseeable misuse” aren’t enough under Pennsylvania law. In Berrier v. Simplicity Corp., 413 F. Supp.2d 431, 442 (E.D. Pa. 2005), the court held that, because non-user bystanders were only “foreseeable” plaintiffs, there was no strict liability where the plaintiff was not a user of the product. Because the court also threw out negligence, there was an appealable order. Berrier involved Grampa running over his five-year old grand daughter’s foot in a power mower (yes, this was warned against, but it happened anyway).

Well, a five-year-old can’t be a “user” of a riding lawnmower – so the plaintiff, not the defendant, had to sneak “foreseeability” into strict liability to have a claim. Bexis, in his brief in Berrier, was able to demonstrate quite convincingly that every bystander liability case in the history of mankind employed a “foreseeable plaintiff” rationale. In the meantime, the Pennsylvania Supreme Court pitched in with its holding in DGS that – under traditional Pennsylvania product liability law – “a manufacturer can be deemed liable only for harm that occurs in connection with a product’s intended use by an intended user; the general rule is that there is no strict liability in Pennsylvania relative to non-intended uses even where foreseeable.” 898 A.2d at 600.

Bexis, wanted (as usual) the Third Restatement, although he believed the Pennsylvania Supreme Court was the more appropriate court to make the decision, and said so. Bexis also wanted (as always) the defendant to win. Alternative design is an essential element of liability for design defect under the Third Restatement (yet another reason to like it). The District Court had also ruled that the plaintiff had insufficient evidence of an alternative feasible design. 413 F. Supp.2d at 448. So Bexis could argue that, no matter what standard the court used, the defendant should win. That is, unless the appellate court disturbed the district court’s case-specific finding in this regard – something that Bexis (who as amicus only argued legal propositions, not case-specific facts) didn’t have to defend.

At first, the Third Circuit took the logical way out in Berrier. It certified the Third Restatement question to the Pennsylvania Supreme Court. Berrier v. Simplicity Manufacturing, Inc., 2008 WL 538912 (3d Cir. Jan. 17, 2008). The Pennsylvania Supreme Court, however, having just agreed to hear the same question in Bugosh, declined to accept the certified question. Berrier v. Simplicity Manufacturing, Inc., 959 A.2d 900 (Pa. 2008).

So the question of whether Pennsylvania law should be changed, or alternatively the five-year-old with the mangled foot was out of court, was squarely back in the Third Circuit’s lap. Having tried, but failed, to get the Commonwealth’s highest court to make the decision, the Third Circuit then sat on things for a further six months, presumably expecting the Supreme Court to rule. That didn’t happen either.

It's entirely possible (we don't know) that Berrier had become the oldest case on the Third Circuit's docket while all this was going on.

So the other day, with the same issue still pending in the Pennsylvania Supreme Court, the Third Circuit predicted that the Pennsylvania Supreme Court would overturn the 1977 Azzarello case and instead adopt the negligence-based standard of the Third Restatement of Torts:

We believe that Justice Saylor’s concurring opinion in Phillips foreshadows the Pennsylvania Supreme Court’s adoption of §§1 and 2 of the Third Restatement’s definition of a cause of action for strict products liability.
Berrier v. Simplicity Manufacturing, Inc., ___ F.3d ___, 2009 WL 1054684, slip op. at 36 (3d Cir. April 21, 2009). The Third Circuit did so with full knowledge that it was adopting a negligence-based standard for “strict” liability:

Justice Saylor was correct in recognizing that “[c]entral conceptions borrowed from negligence theory are embedded in strict products liability doctrine in Pennsylvania”. . . . Justice Saylor pointed out: “most courts and commentators have come to realize that in design cases the character of the product and the conduct of the manufacturer are largely inseparable.”

Slip op. at 41-42 (citations to the concurring opinion in Phillips omitted); accord id. at 53 (“We therefore conclude . . . that the time has come for this Court to expressly recognize the essential role of risk-utility balancing, a concept derived from negligence doctrine, in design defect litigation”); 54 (“recogniz[ing]” that the Third Restatement is “generally a negligence standard”).

Thus, at the cost of recognizing bystander liability (which every other state in the country seems to have allowed), we’ve gotten the Third Circuit on record as holding that Pennsylvania will henceforth follow the Third Restatement rather than Azzarello really strict strict liability. We see that as a pretty good trade since: (1) there was already bystander liability in negligence, and (2) Third Restatement “strict liability” is essentially negligence anyway, except for manufacturing defects.

So we’re advising our Pennsylvania colleagues, and any defense lawyer with a case under Pennsylvania law, that everything’s now back on the table. First of all, Berrier suggests to us that the Pennsylvania Supreme Court will be more likely to decide the pending Bugosh case on the merits, since answering this sort of fundamental question of state law (as the Third Circuit realized when it tried certification) is properly within the job description of a state supreme court. There was some discussion at the Bugosh oral argument that the case might not be an appropriate vehicle - that will be less important now. We don’t think the Pennsylvania Supreme Court wants to leave things up in the air for any significant length of time - since the result will be fundamentally different product liability standards being applied in federal versus state courts. Talk about the forum shopping possibilities!

We also think that the Third Circuit’s opinion is well-reasoned, thus we believe that, on the merits, it increases the likelihood that the Pennsylvania Supreme Court will reach the “progressive” result in Bugosh. See Slip op. at 46 (referencing “the more progressive approach adopted by the Third Restatement”) (quoting DGS, 898 A.2d at 616 n.2 (Newman, J. concurring and dissenting)).

But Berrier also means that as long as the Third Restatement question is open – and particularly in the federal courts where it is now recognized as the law of Pennsylvania – we advise preserving every strict liability issue. We recommend, among other things: (1) objecting to the Azzarello “any element” jury charge; (2) instead proposing “reasonable manufacturer” risk utility balancing jury instructions, such as those that are standard in other Third Restatement states; (3) requesting jury charges and verdict forms that include comparative fault; (4) offering plaintiff’s contributory conduct into evidence; (5) offering industry standards into evidence; (7) offering compliance with government regulations into evidence; and (8) offering (where it’s an issue) technological feasibility evidence.

There’s a good likelihood of success. In Berrier, the court indicated that evidence is admissible to “place[] feasibility in issue,” “to show the ‘state of the art’ of safety design at the relevant time,” and that such evidence is “similarly relevant” to “strict liability” as well as negligence. Slip op. at 12-13 n.7.

Now we wait for Bugosh.

Tuesday, April 21, 2009

Suing Business Entrepreneurs For Fraudulently Inducing Medical Treatment

We're not surprised that physicians invest in medical devices companies.

Legendary investor Peter Lynch said, "Buy what you know." Surgeons who implant medical devices know . . . medical devices.

Sometimes those surgeons invent the devices. Sometimes the surgeons simply learn about the devices and believe they're good products.

Not surprisingly, surgeons sometimes choose to invest in companies that manufacture medical devices that the surgeons like and use.

The recent case of Timberlake v. Synthes Spine Co., No. V-08-4, 2009 U.S. Dist. LEXIS 29074 (S.D. Tex. Mar. 31, 2009), grows out of just such a situation -- although it's one step removed from the facts you'd expect. There, the Viscogliosi brothers apparently formed a company, Spine Solutions, to design and ultimately sell a medical device. The Viscogliosis allegedly solicited physicians who had invested in Spine Solutions to conduct clinical trials of the device, and the trials would later be used to seek FDA approval to market the device.

Two plaintiffs underwent surgeries to implant Spine Solutions' artificial spinal disk. Both devices failed, and both plaintiffs underwent second surgeries and allegedly suffered permanent injuries. Plaintiffs sued several defendants, including the Viscogliosis. The Viscogliosis allegedly failed to disclose that doctors and clinics participating in the clinical trials would benefit financially if the FDA approved the device and provided misleading information about the clinical trials.

As to these defendants, this is a funky lawsuit: These guys didn't manufacture or sell the product, so they weren't (and couldn't be) named in traditional product liability claims. And these guys were not the treating physicians, so there's no informed consent issue. Rather, these defendants appear to be only entrepreneurs who started a company to bring a device to market.

The trial court granted the Viscogliosis motion to dismiss the claims brought against them, but the court allowed plaintiffs to amend their pleadings to try to state a claim.

The court first dismissed, for two reasons, the allegations of fraud by nondisclosure. First, the plaintiffs didn't plead where the Viscogliosis allegedly should have disclosed the omitted facts. Second, plaintiffs didn't identify the duty owed by the Viscogliosis to disclose to the plaintiffs the omitted facts. Id. at *10. Although either of those flaws can be fatal to plaintiffs' claims, the second flaw is arguably stronger: If, as seems likely, business entrepreneurs owe no duty to disclose facts to patients undergoing surgery, then, as a matter of law, no patients similarly situated to the Timberlake plaintiffs would ever be able to pursue this type of claim.

The court also dismissed the claim of fraud by affirmative misrepresentation. The court found that plaintiffs adequately pled what misrepresentations had been made to them and plaintiffs' reliance on the misrepresentations. But the plaintiffs had not pled with the requisite specificity (1) where each misrepresentation was made, (2) when each was made, and (3) how each was false. Id. at *16-18. The plaintiffs also failed to distinguish which statement was made by which defendant, pleading only that "Defendants [as a group] made . . . intentional, material misrepresentations." Id. at *21.

We assume that the plaintiffs will try to re-plead their complaint, and we'll watch those later proceedings with interest. We don't know anything about the actual facts of this case, but, as ignorant outsiders, we'd guess that patients aren't usually reading corporate documents to decide whether to undergo surgery. Most of the information about operative risks is presumably provided through treating physicians following the law of informed consent, and the business entrepreneurs are pretty far removed from that process.

The separate question -- what, if any, financial information physicians must disclose to patients as part of the informed consent process -- we'll save for another day.

Monday, April 20, 2009

Off-Label Use And Medical Malpractice

Off-label use -- using a drug or medical device for an indication other than that set forth in the FDA-approved label -- poses tricky legal issues.

Off-label use is entirely legal: The FDA doesn't regulate the practice of medicine, so physicians can use drugs or devices for any appropriate purpose, approved by the FDA or not.

But if the physician is later sued for malpractice, a lay jury may give disproportionate weight to the fact that the use was off-label.

To help combat that problem, one of your humble scribes (Herrmann) teamed up with a co-author (Pearson Bownas, of Jones Day) to publish an article explaining why in cases of mere off-label use (as opposed to, say, making a contraindicated use), the package insert should not be admissible in evidence at trial. That article appears in today's Northwestern University Law Review: Colloquy, the online journal affiliated with the Northwestern Law Review. For those who are interested, here's a link to "Keeping The Label Out Of The Case."

From 510(k) To PMA

About ten days ago, the FDA Law Blog reported on the FDA's order requiring manufacturers of 25 types of Class III "preamendments" devices to submit to the FDA information about those devices, including adverse safety and effectiveness data not already submitted to the Agency. The data is due by August 7, 2009, and is a first step toward putting those preamendments devices through the PMA process.

We have just two things to add -- one explanatory and one predictive.

First, the explanation: The Medical Device Amendments to the Federal Food, Drug and Cosmetics Act were enacted on May 28, 1976, and generally required that manufacturers of the highest risk medical devices -- Class III devices -- obtain premarket approval from the FDA before marketing the devices. That requirement, however, would have forced companies to stop selling devices that were already on the market in May 1976. To avoid that result, the Medical Device Amendments permitted manufacturers to continue selling devices that were already being sold at that time -- so-called "preamendments devices"-- until the FDA either required a PMA for the device or took other action.

The FDA is beginning the process of completing the review of 25 of those preamendments devices.

Second, the prediction: The FDA is gathering data about certain preamendments devices. The Agency will presumably be looking closely at the safety and efficacy of those devices and then taking action with respect to them. That regulatory activity may affect whether manufacturers of the preamendment devices can assert a preemption defense.

If the FDA requires the preamendments devices to go through the PMA process, then PMA review plainly triggers preemption. See Riegel v. Medtronic, 522 U.S. __ (2008).

It's possible, however, that the FDA will undertake some other degree of review, more intensive than mere 510(k) clearance, but not quite as rigorous as PMA approval. There isn't much case authority discussing the availability of preemption on those facts, but defense counsel should be alert to the possibility.

Our crystal ball is always cloudy, but the fog here may be that of war: the dust from a new preemption battlefield that the future will bring.

Saturday, April 18, 2009

Words We Never Thought We'd Write: "Must Watch YouTube"

Everybody under 30 has already watched the YouTube clip of Susan Boyle on "Britain's Got Talent." And most people over 30 have seen this on the news or read about it in the paper.

This post (written by Herrmann, alone and way off-topic, on a weekend) is aimed at the two of you who haven't yet seen this.

Go to YouTube. Watch Susan Boyle. (If you're at the office, and YouTube is blocked, go home. Watch Susan Boyle.)

Here's a link: Susan Boyle on YouTube.

If you're near tears when you get to the end, go back to YouTube. Watch Paul Potts (also from "Britain's Got Talent," but from the 2007 season). Here's a link: Paul Potts on YouTube.

There'll be plenty of time for drugs and devices on Monday.

Friday, April 17, 2009

Preemption 2.0 - 2.0

Ask and ye shall receive edition. Within fifteen minutes of mentioning that we hadn't seen the preemption brief that GSK had filed yesterday in Colacicco, we had a copy of it. As indicated previously, it addresses the SSRI facts of repeated FDA rejection of the warning at issue as scientifically unsubstantiated. Leafing through it, we also recommend it for its discussion of the presumption against preemption.

Preemption 2.0

Defense counsel considering whether they still have good preemption arguments in drug product liability matters after Levine would do well to review preemption briefs recently filed by defendants in major product liability litigation. The litigation involves two fact patterns that we have previously mentioned as candidates for preemption even after Levine. FDA regulatory activity on the order of (but not necessarily identical to) what is addressed in these briefs is what defendants will need to advance preemption successfully in drug cases after Levine. We encourage you to compare your regulatory records to what's described in these briefs.

Yesterday, in the Colacicco (SSRI) remand before the Third Circuit, defendant Pfizer filed its preemption brief. It addresses the factual situation where the FDA has (both before and after the injury in the case) considered and rejected the warning that the plaintiff advocated as scientifically unsubstantiated. In addition to addressing these facts, the third argument in the brief deals with the Congressional intent and FDA deference aspects of Levine. We haven't seen the brief filed by the defense (GSK/Apotex) in the other half of Colacicco yet. Full disclosure: Bexis has past (but not present) involvement in the defense of the Colacicco case.

Earlier, in the Seroquel (atypical antipsychotic) MDL litigation, defendant AstraZeneca filed revised, post-Levine preemption briefs (initial and reply). These deal with the factual situation where the FDA undertook its own analysis of several companies' pooled data (data proprietary to each company) and then the FDA undertook to write the warning it considered appropriate as to the risk at issue. In addition, they address a claim that an indication considered and approved by the FDA should have been contraindicated. Full disclosure: Bexis is a member of the team that represents the defense in Seroquel.

Wednesday, April 15, 2009

Medical Monitoring - Another 50-State Survey

We’ve been doing some research in anticipation of the upcoming ALI meeting at which the Principles of the Law of Aggregate Litigation will be voted on (we hope ALI members interested in class actions and the like will come out, debate the issues, and vote), and in the spirit of cross-fertilization, we thought we’d share it with our readers. The only question we have is the format. We were impressed with reader response we had to the 50-state survey we did not too long ago on informal defense communication with treating physicians, so we’ve decided to present the medical monitoring issue in a similar fashion.

The questions before the house are what states have adopted medical monitoring, which have rejected it, and what quirks are there? Our research indicates that at present, the law is all over the lot. We count 13 jurisdictions that recognize medical monitoring, or where federal courts – in violation of what we think are proper Erie principles – have predicted that the jurisdiction would recognize medical monitoring in the absence of present injury. Some of these claims are more or less limited in scope, which we’ll discuss.

Opposing them are the federal common law and 21 other jurisdictions that either do not recognize medical monitoring where the plaintiff isn’t hurt, or where a federal court has made a prediction to that effect.

In the middle are four more states (including a couple of big ones) where different courts have reached different results on the question, and we can’t say with certainty what the answer is.

The remaining jurisdictions, as far as we’ve been able to tell, simply haven’t addressed medical monitoring as a separate cause of action where the plaintiff has no present injury.

As we warned the last time around, you get what you pay for, so don’t even think about using us as the be all and end all on this (or any other) subject. If you do, please see our disclaimer. What we’re doing here is the start, not the end, of relevant research.

Also, if you think we didn’t get your state right, please let us know. Show us that we’ve missed something and we’ll add it.

Federal Common Law

No way, no how. The Supreme Court has spoken on the issue, and medical monitoring without personal injury isn’t a viable theory of liability in those areas (such as railroad law) governed by federal common law. Metro-North Commuter Railroad Co. v. Buckley, 521 U.S. 424, 441-44 (1997); see Norfolk & Western Railway. Co. v. Ayers, 538 U.S. 135, 156-57 (2003) (reaffirming Metro-North in dictum); June v. Union Carbide Corp., 577 F.3d 1234, 1249-51 (10th Cir. 2009) (no medical monitoring with respect to nuclear radiation under Price-Anderson Act);  In re Hanford Nuclear Reservation Litigation, 534 F.3d 986, 1009-10 (9th Cir. 2008) (same); Syms v. Olin Corp., 408 F.3d 95, 105 (2d Cir. 2005) (no medical monitoring as “response costs” under CERCLA). The federal common law doesn’t apply to drugs or devices, except on really unusual facts, but the Supreme Court being the Supreme Court, it’s pretty influential in the substantive policy debate, so we put it first.


The Alabama Supreme Court has spoken, and Alabama does not include any independent claims for medical monitoring. Houston County Health Care Authority v. Williams, 961 So.2d 795, 811 (Ala. 2007); Hinton v. Monsanto Co., 813 So.2d 827, 830-31 (Ala. 2001).


As far as we can tell, no Alaska court has ever ruled on medical monitoring as a separate cause of action.


It’s only an intermediate appellate court, and it’s pretty old, but based on Burns v. Jaquays Mining Co., 752 P.2d 28, 33-34 (Ariz. App. 1987), review dismissed, 781 P.2d 1373 (Ariz. 1989), Arizona permits independent claims for medical monitoring, at least in a case asserting an environmental tort. Burns listed four elements: (1) the “significance and extent of exposure,” (2) the “toxicity of [the substance], [and] the seriousness of the [harm] ... for which the individuals are at risk,” (3) the “relative increase” in risk “in those exposed,” and (4) “monitor[ing] the effects of exposure. . .is reasonable and necessary.” Id. at 33.


In an MDL class certification decision, the court ruled that Arkansas says no.  In re Prempro, 230 F.R.D. 555, 569 (E.D. Ark. 2005).


The California Supreme Court has recognizes medical monitoring as a remedy “when liability is established under traditional tort theories of recovery.” Potter v. Firestone Tire & Rubber Co., 863 P.2d 795, 822-23 (Cal. 1993). So medical monitoring in California doesn’t appear to be a completely independent cause of action. The other elements are: (1) “significance and extent of the plaintiff's exposure”; (2) the substance’s “relative toxicity”; (3) “the seriousness of the diseases for which plaintiff is at an increased risk”; (4) the relative increase in the plaintiff's chances of developing a disease as a result of the exposure” when compared to preexisting risk (both plaintiff’s and background); and (5) “the clinical value of early detection and diagnosis.” Id. at 863 P.2d at 823.


A long time ago, a federal court predicted that Colorado would recognize an independent claim for medical monitoring for environmental torts. Cook v. Rockwell International Corp., 755 F. Supp. 1468, 1477 (D. Colo. 1991). The court listed four elements: (1) “significant[] expos[ure] to a proven hazardous substance through the tortious actions of defendant”; (2) “an increased risk of contracting a serious latent disease”; (3) “increased risk makes periodic diagnostic medical examinations reasonably necessary”; and (4) “procedures exist which make the early detection and treatment of the disease possible and beneficial.” Id. These elements were quoted from another case, so Cook isn’t 100% clear that these are the Colorado elements, but they’re the only ones given in the opinion. On a later appeal the Tenth Circuit avoided the issue. Building &; Construction Dept. v. Rockwell International Corp., 7 F.3d 1487, 1490 n.2 (10th Cir. 1993). That’s it. As far as we know, in 18 years no other Colorado court has followed Cook as a matter of state law.


Connecticut allows injury-free medical monitoring only in workers compensation. Doe v. City of Stamford, 699 A.2d 52, 55 &; n.8 (Conn. 1997). Medical monitoring has not been recognized in other areas under Connecticut law. Bowerman v. United Illuminating, 1998 WL 910271, at *10 (Conn. Super. Dec. 15, 1998) (rejecting medical monitoring common law claim); cf. Martin v. Shell Oil Co., 180 F. Supp.2d 313, 323 (D. Conn. 2002) (commenting that issue is unresolved).


The law in Delaware is confused. The Delaware Supreme Court refused to permit an asbestos-related medical monitoring claim in Mergenthaler v. Asbestos Corp., 480 A.2d 647, 651 (Del. 1984), but did not categorically shut the door.  Accord In re Asbestos Litigation, 1994 WL 16799797 (Del. Super. Aug. 5, 1994).  More recently a non-Delaware federal court predicted that Delaware would allow medical monitoring under an unusual set of facts – seemingly by estoppel – where a defendant had admitted that monitoring was appropriate. There was neither an underlying tort, nor were any elements of medical monitoring discussed.  See Guinan v. A.I. duPont Hospital for Children, 597 F. Supp.2d 517, 536-40 (E.D. Pa. Feb. 6, 2009) (applying Delaware law); Hess v. A.I. Dupont Hospital for Children, 2009 WL 595602, at *12-13 (E.D. Pa. March 5, 2009) (applying Delaware law). We blogged about the problems with Guinan here.

District of Columbia

The very first court to permit medical monitoring absent actual injury was a federal “prediction” of District of Columbia law. Friends for All Children, Inc. v. Lockheed Aircraft Corp., 746 F.2d 816, 837-38 (D.C. Cir. 1984) (recognizing equitable remedy). Subsequently, the court in Witherspoon v. Philip Morris Inc., 964 F. Supp. 455, 467 (D.D.C. 1997), refused to extend medical monitoring to product liability actions.


Medical monitoring without present injury is recognized under Florida law as available in negligence, but not in strict liability. Petito v. A.H. Robins Co., 750 So.2d 103, 106-07 (Fla. App. 1999); Zehel-Miller v. Astrazenaca Pharmaceuticals, LP, 223 F.R.D. 659, 663-64 (M.D. Fla. 2004) (dismissing strict liability claim). The elements are: (1) exposure “greater than normal background levels”; (2) “to a proven hazardous substance”; (3) “caused by the defendant’s negligence”; (4) the “plaintiff has a significantly increased risk of contracting a serious latent disease”; (5) “a monitoring procedure exists that makes the early detection of the disease possible”; (6) that monitoring “is different from that normally recommended in the absence of the exposure”; and (7) the monitoring “is reasonably necessary according to contemporary scientific principles.” Petito, 750 So.2d at 106-07.


The law in Georgia is limited to a federal court’s prediction that Georgia law would not allow independent medical monitoring claims. Parker v. Brush Wellman, Inc., 377 F. Supp.2d 1290, 1302 (N.D. Ga. 2005), aff’d in pertinent part, 230 Fed. Appx. 878, 883 (11th Cir. 2007).


A federal court predicted that Guam would recognize an independent claim for medical monitoring. Abuan v. General Electric Co., 3 F.3d 329, 334 (9th Cir. 1993). There have been no further developments in the ensuing decade and a half.


Hawaii is like Alaska. To our knowledge, no Hawaii court has ever ruled on medical monitoring as a separate cause of action.


Idaho’s even more like Alaska. There’s no medical monitoring precedent either way in Idaho either.


Courts in Illinois are all over the lot, and the state's supreme court has not yet resolved the issue. Several federal district court opinions (not all in Illinois) have concluded that Illinois would recognize independent claims for medical monitoring. Stella v. LVMH Perfumes & Cosmetics USA, Inc., 564 F. Supp.2d 833, 836 (N.D. Ill. 2008); Gates v. Rohm & Haas Co., 2007 WL 2155665, at *4-5 (E.D. Pa. July 26, 2007) (applying Illinois law); Muniz v. Rexnord Corp., 2006 WL 1519571, at *6-7 (N.D. Ill. May 26, 2006); Carey v. Kerr-McGee Chemical Corp., 999 F. Supp. 1109, 1119 (N.D. Ill. 1998). State courts, on the other hand, have been quite a bit more hesitant. See Jensen v. Bayer AG, 862 N.E.2d 1091, 1100-1101 (Ill. App. 2007) (medical monitoring claims “lack merit”); Lewis v. Lead Industries Ass’n, Inc., 793 N.E.2d 869, 877 (Ill. App. 2003) (declining to permit a medical monitoring remedy as an independent equitable claim); Campbell v. A.C. Equipment Services Corp., 610 N.E.2d 745, 748 (Ill. App. 1993) (cautioning that this decision “should not be construed as recognizing” medical monitoring); see also Guillory v. American Tobacco Co., 2001 WL 290603, at *7 (N.D. Ill. 2001) (rejecting medical monitoring).


Indiana law is also split. In Hunt v. American Wood Preservers Institute, 2002 WL 34447541, at *1 (S.D. Ind. July 31, 2002), and Johnson v. Abbott Laboratories, 2004 WL 3245947 (Ind. Cir. Dec. 31, 2004), the courts rejected independent medical monitoring claims. On the other hand, in Allgood v. General Motors Corp., 2005 WL 2218371, at *6-8 (S.D. Ind. Sept. 12, 2005), the court denied a motion to dismiss the same kind of claim. Needless to say, there’s been no definitive resolution in the state.


There’s more law on gay marriage in Iowa than on medical monitoring. No Iowa court has recognized the latter (or rejected it).


A federal court predicted that Kansas would not recognize an independent claim for medical monitoring in a product liability case. Burton v R.J. Reynolds Tobacco Co., 884 F. Supp. 1515, 1523 (D. Kan. 1995).


The Kentucky Supreme Court has rejected independent claims for medical monitoring absent present personal injury. Wood v. Wyeth-Ayerst Labs, 82 S.W.3d 849, 859 (Ky. 2002).


After the Louisiana Supreme Court recognized no-injury medical monitoring claims in Bourgeois v. A.P. Green Industries, Inc., 716 So.2d 355, 360 (La. 1998), the legislature stepped in and passed a statute that prohibits such claims – requiring that damages be “directly related to a manifest physical or mental injury or disease.” La. Civ. Code Ann. art. 2315 (1998).


No Maine court, to our knowledge, has ever decided whether or not independent medical monitoring claims are actionable in the absence of present injury.


The Maryland Court of Appeals, the state’s highest court, affirmatively decided not to decide whether to recognize medical monitoring claims without actual injury in Philip Morris Inc. v. Angeletti, 752 A.2d 200, 251 (Md. 2000) (declining to determine whether a “novel tort theory” of medical monitoring would be adopted in Maryland). Since Angeletti no other Maryland court has boldly gone where Angeletti declined to go.


Although there's some linguistic quibbling about "physiological" injuries, Massachussetts effectively adopted medical monitoring in Donovan v. Philip Morris USA, Inc., 914 N.E.2d 891 (Mass. 2009).


Michigan is the opposite of Massachusetts. In Henry v. Dow Chemical Co., 701 N.W.2d 684, 686 (Mich. 2005), the Michigan Supreme Court rejected any independent, no-injury claim for medical monitoring.


The Supreme Court hasn’t ruled, but several other courts have held that Minnesota law does not permit independent claims for medical monitoring without present injury. Bryson v. Pillsbury Co., 573 N.W.2d 718, 721 (Minn. App. 1998); Thompson v. American Tobacco Co., 189 F.R.D. 544, 551-52 (D. Minn. 1999), Paulson v. 3M Co., 2009 WL 229667 (Minn. Dist. Jan. 16, 2009); Palmer v. 3M Co., 2005 WL 5891911 (Minn. Dist. April 26, 2005).


Mississippi also says “no”. The state’s supreme court determined that independent claims for medical monitoring would not be permitted in Paz v. Brush Engineered Materials, Inc., 949 So.2d 1, 3-6, 9 (Miss. 2007).


Missouri says “yes” – at least sometimes. In Meyer v. Fluor Corp., 220 S.W.3d 712, 717-18 (Mo. 2007), the supreme court permitted non-injury medical monitoring claims in environmental actions. There’s no specific list of elements, but the court allowed the claim where “the plaintiff has a significantly increased risk of contracting a particular disease relative to what would be the case in the absence of exposure,” and if “to a reasonable degree of medical certainty, [it is] necessary in order to diagnose properly the warning signs of disease.” Id. at 718. Shortly thereafter, in Ratliff v. Mentor Corp., 569 F. Supp.2d 926, 929 (W.D. Mo. 2008), a federal court determined that similar medical monitoring claims were not allowed in product liability actions.


There’s nothing we could find addressing no-injury medical monitoring in Montana. However, we saw a couple of law review articles citing an unavailable trial court slip opinion, Lamping v. American Home Products, Inc., No. DV-97-85786 (Mont. 4th Dist. Feb. 2, 2000), as permitting a claim. We haven’t called any state solely on the basis of an unpublished trial court opinion – let alone one that we can’t even review – so under the "thin gruel" rule, we’re leaving Montana in the “undecided” category.


Several federal courts have predicted that Nebraska wouldn’t permit independent claims for medical monitoring absent present injury. Trimble v. Asarco, Inc., 232 F.3d 946, 962-63 (8th Cir. 2000) (applying Nebraska law) (later abrogated on unrelated procedural grounds); Schwan v. Cargill, Inc., 2007 WL 4570421, at *1-2 (D. Neb. Dec. 21, 2007); Avila v. CNH America LLC, 2007 WL 2688613, at *1-2 (D. Neb. Sept. 10, 2007). The state courts are silent.


The Nevada Supreme Court has rejected independent claims for medical monitoring in the absence of present injury. Badillo v. American Brands, Inc., 16 P.3d 435, 438-39 (Nev. 2001).

New Hampshire

There is no law we could find either way on independent, no-injury claims for medical monitoring in New Hampshire.

New Jersey

New Jersey was one of the first states to recognize a no-injury medical monitoring cause of action in an environmental actions, where:

the proofs demonstrate, through reliable expert testimony predicated upon the significance and extent of exposure to chemicals, the toxicity of the chemicals, the seriousness of the diseases for which individuals are at risk, the relative increase in the chance of onset of disease in those exposed, and the value of early diagnosis, that such surveillance to monitor the effect of exposure to toxic chemicals is reasonable and necessary.

Ayers v. Township of Jackson, 525 A.2d 287, 312 (N.J. 1987). It still does. E.g., Mauro v. Raymark Industries, Inc., 561 A.2d 257, 264 (N.J. 1989) (asbestos product liability); (environmental). New Jersey also has a product liability statute that requires present injury. Thus medical monitoring is not available in product liability actions that don’t also qualify as environmental torts. Sinclair v. Merck & Co., 948 A.2d 587, 595 (N.J. 2008).

New Mexico

We couldn’t find any law, pro or con, concerning independent, no-injury medical monitoring claims in New Mexico.

New York

New York’s highest court has never addressed no-injury medical monitoring, and it shows. The lower courts have split into three warring camps. One group generally recognizes independent medical monitoring claims without any injury requirement. Allen v. General Electric Co., 821 N.Y.S.2d 692, 694-95 (N.Y. A.D. 2006); Askey v. Occidental Chemical Corp., 477 N.Y.S.2d 242, 247 (N.Y. A.D. 1984) (as a remedy only); Acevedo v. Consolidated Edison Co., 572 N.Y.S.2d 1015, 1018 (N.Y. Sup. 1991); Gerardi v. Nuclear Utility Services, Inc., 566 N.Y.S.2d 1002, 1004 (N.Y. Sup. 1991); Abbatiello v. Monsanto Co., 522 F. Supp.2d 524, 538-39 (S.D.N.Y. 2007); Patton v. General Signal Corp., 984 F. Supp. 666, 674 (W.D.N.Y. 1997); Gibbs v. E.I. duPont de Nemours & Co., 876 F. Supp. 475, 478-790 (W.D.N.Y. 1995). Another body of law imposes a test that requires a “clinically-demonstrable presence of a toxin in the plaintiff’s body, or some other indication of a toxin-induced disease.” DiStefano v. Nabsico, Inc., 767 N.Y.S.2d 891, 891 (N.Y. A.D. 2003); Major v. Astrazeneca, Inc., 2006 WL 2640622, at *7 (N.D.N.Y. Sept. 13, 2006). Finally, another appellate New York court simply rejected an independent claim for medical monitoring. Abusio v. Consolidated Edison Co., 656 N.Y.S.2d 371, 372 (N.Y. A.D. 1997).

North Carolina

An appellate court in North Carolina refused to recognize an independent medical monitoring claim in an environmental contamination case, because that was “a task within the purview of the legislature and not the courts.” Curl v. American Multimedia, Inc., 654 S.E.2d 76, 81 (N.C. App. 2007); accord Carroll v. Litton Systems, Inc., 1990 WL 312969, at *51 (W.D.N.C. Oct. 29, 1990).

North Dakota

A federal court predicted that North Dakota would not recognize independent no-injury claims for medical monitoring. Mehl v. Canadian Pacific Railway Ltd., 227 F.R.D. 505, 518 (D.N.D. 2005).


There’s surprisingly little law for such a big state. We know of one federal court predicting that Ohio law would recognize an independent claim for medical monitoring, but that was a while ago. Day v. NLO, Inc., 851 F. Supp. 869, 880-81 (S.D. Ohio 1994). Fifteen years later, no Ohio court has since squarely faced the issue.


Stop the presses! A federal district court has just ruled that Oklahoma would not recognize medical monitoring because of the state’s present injury requirement. Cole v. ASARCO, Inc., 2009 256 F.R.D. 690, 695 (N.D. Okla. 2009).


Of all the states whose supreme courts refuse to recognize independent claims for medical monitoring, Oregon is the most recent. Lowe v. Philip Morris USA Inc., 183 P.3d 181, 186-87 (Or. 2008).


Pennsylvania allows independent claims for medical monitoring in negligence, but not strict liability. Redland Soccer Club v. Deartment of the Army, 696 A.2d 137, 145 (Pa. 1997). The elements are: (1) exposure to “greater than normal background levels”; (2) the substance is “proven hazardous”; (3) exposure “caused by the defendant’s negligence”; (4) exposure caused “a significantly increased risk of contracting a serious latent disease”; (5) “a monitoring procedure exists that makes the early detection of the disease possible”; (6) the monitoring “is different from that normally recommended in the absence of the exposure”; and (7) the monitoring “is reasonably necessary according to contemporary scientific principles.” Id. at 145-46. Other Pennsylvania courts have held that Pennsylvania law does not permit medical monitoring claims in strict liability. Brown v. Dickinson, 2000 WL 33342381, at *1 (Pa. C.P. March 9, 2000); Barnes v. American Tobacco Co., 989 F. Supp. 661, 664 (E.D. Pa. 1997); (both requiring a “negligent” act); see also In re Orthopedic Bone Screw Products Liability Litigation, 1995 WL 273597, at *9-10 (E.D. Pa. Feb. 22, 1995) (finding medical monitoring inappropriate in a product liability action not involving exposure to a toxic substance).

Puerto Rico


Rhode Island

A Rhode Island trial court has rejected medical monitoring claims by uninjured plaintiffs.  Miranda v. DaCruz, 2009 WL 3515196 (R.I. Super. Oct. 26, 2009).

South Carolina

Not much law. One federal district court has predicted that South Carolina law would refuse to recognize independent claims for medical monitoring. Rosmer v. Pfizer, Inc., 2001 WL 34010613, at *5 (D.S.C. March 30, 2001).

South Dakota

Even less law. There’s no South Dakota precedent one way or the other concerning no-injury medical monitoring. No case applying South Dakota law has ever mentioned this type of cause of action.


Tennessee state courts haven’t addressed medical monitoring. Two federal courts have predicted that Tennessee law would not recognize an independent claim for medical monitoring. Bostick v. St. Jude Medical, Inc., 2004 WL 3313614, at *14 (W.D. Tenn. Aug. 17, 2004); Jones v. Brush Wellman, Inc., 2000 WL 33727733, at *8 (N.D. Ohio 2000) (applying Tennessee law). In Sutton v. St. Jude Medical S.C., Inc., 419 F.3d 568, 575 n.8 (6th Cir. 2005), the court dropped a footnote that Tennessee medical monitoring law was “murky” but some precedent (which doesn’t mention medical monitoring) “at least suggest[ed]” that such claims might be allowed. We don’t think so, because the Tennessee Supreme Court unanimously reaffirmed the present injury requirement after the cases cited in the Sutton footnote. Carroll v. Sisters of Saint Francis Health Services, Inc., 868 S.W.2d 585, 593-94 (Tenn. 1993).


Like Ohio, surprisingly little law for a big state. There’s one pretty recent federal district court decision predicting that Texas would not recognize an independent, no-injury claim for medical monitoring. Norwood v. Raytheon Co., 414 F. Supp.2d 659, 664-68 (W.D. Tex. 2006).


The Utah Supreme Court recognizes independent claims for no-injury medical monitoring in negligence. Hansen v. Mountain Fuel Supply Co., 858 P.2d 970, 978-80 (Utah 1993). The elements are: (1) “exposure”; (2) to a “toxic substance;” (3) that was “caused by the defendant's negligence”; (4) and results in “increased risk”; (5) of “serious disease, illness, or injury”; (6) where “a medical test for early detection exists”; (7) “early detection is beneficial” in that “a treatment exists that can alter the course of the illness”; and (8) monitoring “has been prescribed by a qualified physician according to contemporary scientific principles.” Id. Utah currently holds the record for essential elements with eight.


Almost twenty years ago, a federal court predicted that Vermont law would recognize an independent, no-injury claim for medical monitoring. Stead v. F.E. Myers Co., 785 F. Supp. 56, 57 (D. Vt. 1990). That’s all we know.


A federal court of appeals held quite a while ago that Virginia would not recognize an independent claim for medical monitoring. Ball v. Joy Technologies, Inc., 958 F.2d 36 (4th Cir. 1991) (applying Virginia law). So far it hasn’t.

Virgin Islands

Virgin Islands law doesn’t recognize an independent claim for medical monitoring. Louis v. Caneel Bay, Inc., 2008 WL 4372941, at *5-6 (V.I. Super. July 21, 2008); Purjet v. Hess Oil Virgin Islands Corp., 22 V.I. 147, 153-54, (D.V.I. Jan. 8, 1986).


A few years back, a federal district court predicted that Washington would not allow independent claims for medical monitoring. Duncan v. Northwest Airlines, Inc., 203 F.R.D. 601, 608-09 (W.D. Wash. 2001).

West Virginia

The West Virginia Supreme Court has recognized independent claims for medical monitoring, not limited to negligence. In re West Virginia Rezulin Litigation, 585 S.E.2d 52, 72-73 (W.Va. 2003); Bower v. Westinghouse Electric Co., 522 S.E.2d 424, 427 (1999). The elements are: (1) plaintiff has been “significantly exposed” “relative to the general population”; (2) to a “proven hazardous substance”; (3) by reason of “tortious conduct” (not just negligence) by the defendant; (4) which exposure has created “an increased risk of contracting a serious latent disease”; (5) which “makes it reasonably necessary for the plaintiff to undergo periodic diagnostic medical examinations different from what would be prescribed in the absence of the exposure”; and (6) monitoring “exist[s] that make the early detection of a disease possible.” Bower, 522 S.E.2d at 426 (syllabus at 3).


There’s no Wisconsin law on medical monitoring that we’ve been able to find.



To sum up:

Jurisdictions allowing no-injury medical monitoring claims: AZ, CA, CO, DC, FL, GM, MA, MO, NJ, OH, PA, UT, VT, WV.

Jurisdictions not allowing no-injury medical monitoring claims: Federal, AL, AR, CT, GA, KS, KY, LA, MI, MN, MS, NE, NV, NC, ND, OK, OR, RI, SC, TN, TX, VA, VI, WA.

Jurisdictions with no law on no-injury medical monitoring claims: AK, HI, ID, IA, ME, MD, MT, NH, NM, PR, SD, WI, WY.

Jurisdictions with divided law on no-injury medical monitoring claims: DE, IL, IN, NY.

Tuesday, April 14, 2009

On The "Custom Device" Exemption

We posted nearly a year ago about the trial court decision in United States v. Endotec.

The Eleventh Circuit has deemed it time for an update. United States v. Endotec, __ F.3d __, 2009 WL 804399 (11th Cir. Mar. 30, 2009).

We confess that we'd forgotten all about this puppy, so you probably need a refresher on the facts, too.

The case involved a small manufacturer of medical devices that was apparently struggling to market products despite its inability to obtain the necessary PMA or 510(k) approvals. The company failed six times to obtain 510(k) clearance of an ankle device, but it did have an IDE to conduct a clinical trial. The company fully enrolled the clinical trial and then continued to sell devices outside of the clinical trial, insisting that those were sales of "custom devices."

Endotec also sold its knee devices to only one surgeon, maintaining that all of the sales were manufactured to the particular needs of specific patients, and so were permissible sales of "custom devices."

And Endotec distributed most of its jaw devices (TMJ implants) as part of a clinical trial, but it sold one implant to a doctor for use in one particular patient who was missing a large piece of bone in his jaw as a result of a tumor.

The government filed a civil action against Endotec and its two owners, alleging that they violated the Federal Food, Drug & Cosmetic Act in assorted ways. The trial court prohibited Endotec from selling the knee devices, but rejected the government's requests to stop sales of the ankle and jaw devices.

The Eleventh Circuit affirmed the trial court decision on the knee and jaw devices -- so the knees could not be sold, and the jaws could -- and reversed the trial court's decision as to the ankles. The appellate court held that the ankle implants were neither "custom devices" nor protected by the IDE exemption and so could not be sold.

The Eleventh Circuit noted that Endotec was trying to take advantage of exceptions (the custom device and IDE exemptions) to the usual rule that a company must have premarket approval to sell a device. Since Endotec was claiming an exception to the general statutory rule of prohibition, Endotec bore the burden of proof.

The Eleventh Circuit criticized a couple of aspects of the trial court's reasoning. First, the trial court thought it relevant that the FDA didn't allege that the medical devices hurt anyone or that distribution of the devices posed any risk. The appellate court begged to differ: "First, by requiring the Government to show dangerousness or actual harm, the district court effectively shifted the burden of persuasion as to the custom device exemption from [Endotec] to the Government. And second, . . . the custom device definition does not require any showing of dangerousness or actual harm from the Government."

Thus, although the ankle devices may not have been dangerous or hurt anyone, advertisements offering the devices for commercial distribution violated the FDCA. Endotec couldn't claim the benefit of the custom device exception.

Endotec also couldn't claim the benefit of the IDE exemption. Like "the custom device exemption, neither the statute providing for the IDE exemption nor the applicable regulations require the Government to allege, much less to prove, that a device (alleged to exeed the scope of an IDE) is 'unsafe' or 'dangerous.'" Moreover, the trial court was wrong to assess whther the FDA's interpretation of the IDE exemption would stifle medical innovation: "It is not within the province of the district court (or this Court, for that matter) to weigh the medical pros and cons of a certain medical device -- that is best left to the FDA." (If this were a preemption decision, folks would be salivating over that sentence. Somehow, in the context of a governmental enforcement action, the words take on an entirely different meaning.)

The court thus reversed the trial court decision as to the ankle devices, and it routinely affirmed the trial court's decisions as to the knee and jaw devices.

If you're ever litigating a custom device case, this expansive decision from the Eleventh Circuit is a pretty good place to start your research.

Monday, April 13, 2009

Don't Mess With Bexis!

This post was written by Herrmann alone. I'm coming to the defense of my co-conspirator, Bexis.

As soon as the Supreme Court decided Wyeth v. Levine, we published a post analyzing the implications of the case. We represent drug companies in product liability cases, so we naturally weren't delighted by the result. We did, however, explain the circumstances in which the preemption defense would still be available despite the Supreme Court's rejection of the defense on the particular facts of Levine. And, as any regular reader of this blog knows, we presented the defense point of view with our usual passion.

We objected to the Supreme Court majority's characterization of the facts in Levine: "there are the 'facts' concerning Phenergan. We put quotation marks around the word facts because we don’t agree particularly with the majority’s view of them." We explained that preemption will still be available if defendants "prove, in as much detail as possible, that the FDA gave serious consideration and review to not only the particular drug, but to the particular risk as well. Given how the majority chose to frame the question (probably to keep itself together) this drug-specific and case-specific door has not been shut on implied conflict preemption."

We concluded that the Supreme Court's "manner of restating the defense argument further demonstrates that the majority in Levine wasn’t willing to rule out preemption in other, more limited, circumstances," and we explained what some of those circumstances might be.

In particular, we explained that the preemption defense would remain available if "the FDA affirmatively conduct[ed] its own investigation and arrive[d] at its own warning – a warning contrary to what the plaintiff demands[.] Affirmative, contrary FDA action is the best scenario left for preemption in litigation involving prescription drugs."

In the pending litigation involving Seroquel, the preemption defense is awfully strong. The FDA did exactly what we suggested in the bolded language three sentences back: The agency ordered a bunch of companies to provide data to it, independently analyzed that data, and then drafted its own warnings that it required the companies to use. That's exactly the situation that we said would support preemption.

But -- wouldn't you know it? -- plaintiffs' counsel took our earlier post and stuck a bunch of ellipses in it, deleting the sentence suggesting that preemption would continue to exist in that situation. Plaintiffs' counsel then used a distorted version of what we wrote to suggest that we think there wouldn't be preemption in that context. And they did that in a case in which Bexis's firm represents the defense.

Now, look: Don't mess with Bexis!

Don't quote us out of context; if you want to quote from this blog, please quote enough to give a court a true sense of what we wrote. In particular, don't delete the sentence that squarely supports the defense position in your case, and suggest that we wrote in favor of the plaintiff.

If you don't, we'll have to get mean!

We'll show the court (and the world) that we in fact support the defense point of view! We'll start articulating defense-side positions, which might gain some traction in the world and help our clients! We'll publish articles explaining the logic behind industry's position in legal journals and in the popular press! We'll . . . wait a minute. We already do all that stuff. Maybe we've already used all of our bullets.

Well, heck -- maybe we're powerless in this situation. But we trust this incident will make readers understand why we watch so carefully the things we say here. Even when we say things that in fact help our clients' cause, we can still be taken out of context and our words used against us.

We'll just hope that enough people are putting our words to their intended uses to make up for the few bad actors.

NYU Preemption Symposium Available Online

We've previously shared with you snippets from NYU's 2009 Annual Survey of American Law Symposium on "Tort Law in the Shadow of Agency Preemption."

We can do even better now. NYU videotaped the day's events and has posted the videos online. To see Judge Guido Calabresi's keynote address, or Peter Schuck and Richard Nagareda (and others) on comparative institution competence between courts and agencies, or a panel on issues of federalism, or Elizabeth Cabraser, Richard Daynard, Alison Zieve and one of your humble scribes on "preemption in the trenches," just click here.

Judge Calabresi's keynote address runs about a half hour; each of the panels runs about 90 minutes.


Thursday, April 09, 2009

Non-Prescribed Plaintiffs, In Pari Delicto, And Duty

As far as pharmaceutical mass torts go, the fen-phen litigation has been around for as long as any. But just because it’s mature litigation doesn’t mean that the old dog can't do new tricks. Last month a fen-phen case produced the first post-Levine decision recognizing implied preemption, as we discussed here. This month we’ve got Crowe v. Wyeth (a/k/a “In re Diet Drugs (Phentermine/Fenfluramine/Dexfenfluramine) Products Liability Litigation” – it's obvious why we prefer to call it “Crowe”), 2009 WL 902351 (E.D. Pa. April 2, 2009), raising the in pari delicto defense.

The what?

Gotta love that legal Latin. In pari delicto is lawyer jargon for the rule that public policy won’t permit a tort plaintiff to recover if the plaintiff’s illegal activity was the reason the plaintiff got hurt in the first place. We discussed this concept once before, here, in the context of plaintiffs who were drug addicts and were injured through illegal abuse of prescription drugs. The Restatement puts it this way:

[I]f the injured person has violated a statute designed to prevent a certain type of risk, he is barred from recovery for harm caused by violation of the statute if, but only if, the harm resulted from a risk of the type against which the statute was intended to give protection.
Restatement (Second) of Torts §889, comment b (1979). If you’re interested in more about in pari delicto generally, see the discussion in our prior post. Today. we're only discussing the doctrine's application to a specific set of facts.

What happened (or supposedly happened) in Crowe was that the person allegedly injured by fen-phen was never prescribed the drug - ever. Instead, the spouse had a prescription, but didn’t use it. Instead, the injured person had taken the spouse’s left over pills. Years later, there was a diagnosis of primary pulmonary hypertension, which was eventually fatal. 2009 WL 902351, at *1. A wrongful death action was filed by the surviving spouse – ironically the very person who had originally allowed the decedent to take fen-phen illegally without a prescription.

Or so the plaintiff claimed. There’s a pointed footnote in the opinion pointing out that all the contemporaneous medical records affirmatively stated that the decedent “did not have exposure to appetite suppressants.” Id. at *1 n.3. So this could well be a claim that, like so much of the fen-phen litigation, is simply fraudulent.

These peculiar facts lead, first, to the interesting point of how to apply the learned intermediary rule to somebody who never had a prescribing physician to begin with. Predictably, the plaintiff argued that the learned intermediary rule shouldn’t apply at all. Id. at *2. Talk about trying to profit from criminal conduct. Thankfully, the court didn’t let the plaintiff get away with that and applied the rule (under Missouri law) to “bar[] those claims whose gravamen is failure to warn.” Id.

Having dispatched the warning claims, the defendant also went after the remaining, design-based claims. The dispute became whether the in pari delicto doctrine, in it’s Missouri iteration, was contingent on a balance of the parties’ relative culpability. Ultimately the court held that it did and found the issue to be one for the jury:

The doctrine of in pari delicto prohibits a plaintiff from maintaining an action when, in order to establish his cause of action, he must rely, in whole or in part, on an illegal or immoral act or transaction to which he is a party. Missouri courts have weighed the relative culpability of the parties when applying its equitable counterpart, the doctrine of unclean hands.

[Defendant] argues that it is inappropriate to balance the relative culpability of the parties in legal actions where damages are sought. . . . However, none of [its] cases states that it is inappropriate to balance the relative culpability of the parties. . . . Here, we cannot say that, as a matter of law, plaintiffs are barred from relief. This is a question for the jury to decide. The Latin phrase “in pari delicto” literally means “in equal fault.” We simply cannot conclude at this stage of the case that [the decedent], who took his wife's prescription drugs, was in pari delicto or in
equal fault with [defendant].
Id. at *3-4 (citations, quotation marks and other stuff omitted). The court did not follow either non-drug cases from Missouri, which had held that the doctrine barred recovery as a matter of law, id. at *3, or drug cases from other jurisdictions that had applied the doctrine without balancing the defendant’s fault with the plaintiff’s criminal acts. Id. at *4 n.7 (all these drug-related cases are discussed in our prior post).

Oddly the Crowe opinion does not address the most relevant of the out of state cases, Perotti v. Johnson & Johnson Vision Products, Inc., 2004 WL 3016092 (Ohio App. Dec. 30, 2004), although the court cited it for a much more minor point. See Crowe, 2009 WL 902351, at *2 (citing Perotti as a “cf.” for the proposition that the learned intermediary rule applies). In fact, Perotti held a lot more than that. It affirmed dismissal as a matter of law of another claim brought by a plaintiff injured while using a product prescribed for someone else.

In Perotti the plaintiff was injured while wearing contact lenses that were never prescribed for him, but rather for his spouse. Id. at *1 (“plaintiff borrowed and wore his wife’s prescribed. . .contact lenses to bed”). Perotti held that the manufacturer owed no duty to anybody who is not prescribed its product:

[T]he threshold question is whether plaintiff is a foreseeable user of defendants’ product. In other words, does plaintiff come within the circle of those persons to whom injury should have been reasonably anticipated by defendants. Do defendants owe plaintiff a duty of care. . .?

The uncontested evidence establishes that the [contact] lenses plaintiff wore. . .were prescribed not for him, but only for his wife. During deposition, plaintiff admitted that he has been wearing contact lenses since 1995. He acknowledged that his own contact lenses were specifically prescribed for him. Plaintiff admits that prescribed contact lenses are fitted for each person's eyes and that they are prescribed according to particular sizes and strengths. . . . On this record, we find no evidence to establish that plaintiff falls within the circle of persons defendants should have anticipated would use their prescription. . .contact lenses. To the contrary, the undisputed evidence establishes that defendants did not owe plaintiff a duty because they could not have foreseen him as a potential user of his wife’s prescription [contact] lenses.

Id. at *2-3 (various affidavits and other factual stuff omitted). Why the plaintiff was wearing contact lenses – let alone somebody else’s – just to go to bed is not is not addressed.

Finally, if as in Crowe the applicability of in pari delicto is going to hinge on a balancing of the relative fault of the manufacturer and the criminal conduct of the plaintiff, then why not bring into the mix the fault of the remaining culpable party – the person who was originally prescribed the product, but who illegally gave it to the plaintiff to use? In other words join as co-defendants the spouses in Crowe or Perotti? Let the jury determine their fault as well. Such a claim was approved in Gipson v. Kasey:

Several [state] statutes prohibit the distribution of prescription drugs to persons lacking a valid prescription. . . . [Unlike social host situations] no recognized social benefit flows from the illegal distribution of prescription drugs. . . . [Defendant] additionally argues that because his act of providing pills to [persons for whom they were not prescribed] was not sufficient by itself to cause harm to [plaintiff], no duty was owed. We reject the suggestion that no duty can exist if the plaintiff’s conduct contributed to his injury. Whether the plaintiff’s conduct constituted an intervening (or even a superseding) cause of the harm suffered is a question of fact and does not determine whether a duty exists. . . . [Plaintiff’s] own actions may reduce recovery under comparative fault principles or preclude recovery if deemed a superseding cause of the harm, but those are determinations to be made by the factfinder.
150 P.3d 228, 233-34 (Ariz. 2007) (various citations and other stuff omitted).

After all, if a court is going to stretch the concept of duty to find that the manufacturer of a prescription drug or medical device can be liable to someone who illegally used the product without a prescription, then a fortiori (there’s more legal Latin for you) there should be a duty owed by the not-so-learned intermediary – the person having the prescription who illegally gave the drug/device to injured person. In this situation, of the three: the plaintiff, the person prescribed the product, and the manufacturer, the only person who did not act criminally was the manufacturer.

Tuesday, April 07, 2009

The Web On Wyeth v. Levine

In his regular column, Professor Anthony Sebok writes that Wyeth v. Levine can be read either of two ways: Preemption might exist if a drug company (1) "had submitted to the FDA exactly the warning required by the Vermont jury," or (2) "had proven that the FDA rejected the reasoning behind the warning required by the Vermont jury."

Happily, he concludes that "the actual warning test for impossibility is unrealistic." Thus, Sebok hopes "that the Third Circuit distinguishes Colacicco and Levine on their facts" and that the Third Circuit finds in favor of preemption in Colacicco.

We, of course, hope so, too.

A less analytic, and more newsy, description of Wyeth v. Levine appears at Wisconsin Law Journal.

Hat tip to Point of Law for alerting us to those two items.

Beyond that, Dorsey & Whitney published a short commentary on the case here, and Thompson Hine's contribution to the "law firm brochure" genre is here.

FAS 5 Update: Report On FASB Roundtable

We've posted before about the Financial Accounting Standard Board's proposal to revise how the accounting rules deal with loss contingencies, such as pending litigation.

The FASB held its roundtable regarding the proposal to revise FAS 5 on Friday, March 6. Although neither of your humble scribes attended that meeting, we've seen a report about that meeting. We sanitized that report slightly, and cribbed from it aggressively, to offer this description:

The Roundtable did not bog down into discussion of attorney-client privilege or prejudice to issuers that might arise from disclosing more details about pending litigation. FASB staff seemed to appreciate that the proposal called for disclosures that would be prejudicial. The roundtable participants discussed their views of good disclosure and less fulsome disclosures. Some noted that more fulsome disclosures are often made after courts have already ruled on key issues regarding liability in a lawsuit or the measure of damages. The more difficult disclosure issues are presented at an earlier stage of litigation.

There was also some discussion suggesting that the "problem" is not that FAS 5 is broken, but that there is either a lack of SEC guidance on appropriate disclosures relating to litigation, or lack of enforcement surrounding poor litigation disclosures -- or both. The SEC participated in the roundtable, although providing guidance about FAS 5 may not be at the top of the SEC's busy agenda these days. There was no indication that the FASB or its staff would defer to the SEC rather than adopting a rule change.

Several points seemed to garner the beginnings of consensus. At least one "user" of financial statements acknowledged that certain quantitative disclosures could be harmful to the preparer, and this acknowledgement was well received. There was also considerable discussion and seeming agreement among the accountants and the auditors that the disclosure of contentions of the parties to litigation, as opposed to predictions of outcomes, would help investors without unduly prejudicing the preparers. This led to a discussion of a "sliding scale" of disclosure based on the relative size, or risk, of the claims at issue as the litigation progresses toward a final outcome. It is not possible to predict with any precision what the next draft will include, but the apparent broad conceptual agreement on these points may shape the FASB's deliberations. Of course, the devil will be in the details.

FASB did not make any statements about the anticipated effective date of any final standard. The determination of an effective date is likely to be driven by the form and content of the revisions to the proposal. If the next draft that will be discussed at the FASB meetings in the next several months fairly closely follows the prior exposure draft but simply incorporates suggestions from commenters, then the FASB could theoretically adopt a new proposal to be effective this year. On the other hand: (1) If the principles mentioned above are incorporated into a substantially revised exposure draft, the FASB would be likely to "re-propose" the next draft for comment. (2) If the FASB's deliberations on the next draft continue into the late summer or early fall, there would be little time left in the year to consider related auditing standards and whether the ABA Treaty would need related revisions.