Tuesday, November 30, 2010

Thank You, ABA Journal

We are honored to announce that the ABA Journal has once again recognized the Drug and Device Blog (that’s us) as one of the top 100 legal blogs of the year. Here's the announcement.

If we're judged by the company we keep, we must be doing pretty well, as once again the ABA Journal has recognized a number of our outstanding colleagues – including some sites we visit daily – for their hard work, insight, and contribution to the discourse. This is a club we don't mind joining.

If we’re judged by what we do, we’re relieved. This is our first year without our blogger emeritus Mark Herrmann, who not only went in house at Aon, but later defected to Above the Law. Good luck to Mark in all his endeavors, but this is about us – we’re pleased to know that yes, we can do the blog thing ourselves.

In what's becoming a December tradition, the ABA Journal is collecting reader votes for the best blog in each of twelve categories – you’ll find us here under “torts.” Voting closes December 30, and if you'd like to vote for us, you can show your support by voting here.

And thanks again to all of you for reading – we appreciate the support, and it's your readership, submissions, comments, and kind words that have kept us going for five years.

Monday, November 29, 2010

Ba-Da Bum Bum Bum ... Another One Bites The Dust

Medtronic wins another PMA-preemption-based dismissal.   The cite:  Walker v. Medtronic, Inc., C.A. No.
2:07-00317, slip op. (S.D.W. Va. Nov. 24, 2010).  The reasoning:  It's a PMA device (an infusion pump), so there's preemption.  There was some discovery on FDA compliance.

The opinion is a nice citator.  It's got footnotes that, while we haven't compared every citation (not even we are that anal), appear to contain a comprehensive collection of PMA preemption cases throwing out strict liability, negligence, and warranty claims.  Slip op. at 10-11, footnotes 2-4.  That can save a lot of research.

The most interesting part was plaintiff claim that the pump failed to meet an FDA "performance standard" that the dosage actually dispensed would be with in 15%, plus or minus, the programmed dosage.  The pump (allegedly anyway) produced a substantial overdose, which in typical plaintiff fashion, was argued as ipso facto proof of a causal FDCA violation.  Slip op. at 12.

Not so fast, the court held.  There were lots of other reasons, stated in the device's warnings that could account for an overdose.  Id.  A performance deviation does not equate to evidence of non-compliance sufficient to oust preemption:
An alleged deviation from manufacturing performance specifications for a device that has received premarket approval is not the same thing as noncompliance with the FDA or its regulations.  To hold otherwise would make a manufacturer an insurer of its product.  Indeed, premarket approval does not guarantee that a device is completely safe.
Slip op. at 12-13 (citations omitted).  That's the good stuff.  With that argument out of the way, the actual preemption rulings - as to negligence, strict liability, and warranty, id. at 15-17, were anticlimactic.

One other thing - The plaintiff also tried to wave around some FDA warning letters, but the court readily saw through that, as the letters had nothing to do with pump at issue in the case.  Slip op. at 3-4 n.1.  We see that a lot on motions to dismiss, but this case was decided on summary judgment.  That plaintiffs, even after discovery, made the same lousy arguments based on irrelevant warning letters says to us that allowing discovery on that issue serves no purpose.  The warning letters are all on the FDA's website and their applicability to a plaintiff's specific device is a yes/no question.  If the plaintiffs are just going to make the same arguments, with or without discovery, let's call it "judicial notice" and get it over with on a motion to dismiss.

Congrats to Dave Gossett over at Mayer Brown for this win, and thanks for passing it along.

Grinding Out Settlements

We recently read an article about plaintiff law firm settlement mills. The article -- Engstrom, Run of the Mill Justice, 22 Georgetown J. Legal Ethics 1485 (Fall 2009) -- presents interesting contrasts and similarities with mass tort litigation. A "settlement mill" is marked by the folllowing characteristics: (1) high volume of cases; (2) high volume of advertising; (3) "entreprenurial legal practices;" (4) few if any cases go to trial; (5) tiered contingency fees; (6) little case screening and, therefore, lots of low value cases; (7) little attorney-client interaction; (8) incentivized settlements via quotas or rewards; (9) quick resolution of cases - usually within two to eight months of the accident; and (10) rare filing of lawsuits.

Some of that sounds familiar to us and some does not. Of course, the article isn't about mass torts. Rather, the cases more often than not involve car accidents. The damages arise from medical bills and the dreaded "soft-tissue injuries." Consequently, the settlements seldom reach five figures.

Engstrom includes case studies of settlement mills. Some of those firms no longer exist. Disbarment isn't exactly foreign to this milieu. Hegel said that quantititative differences after a point become qualitative. When we learn that a settlement mill lawyer will have 300-400 open files on her desk at any time, we're talking about something alien to our experience. How does one handle such an enormous case load with skill and diligence? It isn't pretty. One of the "enterprenurial" innovations is to allow non-lawyers to handle client-screening (of which there really isn't any besides verifying the existence of insurance). Amazingly, non-lawyers sometimes even handle the negotiations with claims adjusters. Those "negotiations" might take all of ten minutes to resolve the case. Meanwhile, the client might not see a lawyer until he or she receives the settlement check. Well, to be more precise, they might not see a live lawyer. Many settlement mills simply plant their clients en masse in a conference room where they watch a videotape of a lawyer "explain" the process.

The settlement mill lawyers just about never investigate the cases, research the law, or draft pleadings. Indeed, most of the cases do not get filed. As one of the settlement mill lawyers admits, "We did nothing legal." The whole game for the settlement mill is to devote about two hours to the case and collect a quick settlement. Lawyers and staffers are measured every month against a quota of aggregated settlements. The individual merits of a case matter not at all And forget about trials. To be sure, trials in these sorts of cases are rare no matter who the lawyers are. Approximately 2.8% of traffic accident cases go to a jury. But settlement mills go to trial something like 0.5% of the time. If a client wants to go to trial, the case gets sent to a real litigator. Or it gets dropped.

Engstrom argues that three facts of life account for the existence of settlement mills. First, legal advertising permits firms to drive up volume and reduce the reputational imperative. Word of mouth (which presupposes some degree of competence and satisfactory results) doesn't matter when tv and billboard ads can reach so many of the unsophisticated and disgruntled. Second, the tiered contingency fee arrangement is a marvellous means of persuading clients to accept a quick settlement, even if the amount is piddling. Here is an example of a tiered, or graduated, contingency fee arrangement: the firm gets one-third of the total recovery in the absence of suit, 40% if a suit is filed, and 50% of the settlement, verdict, or judgment in the event of an appeal. When a firm offers a client 70% of something now, versus 60% or 50% of possibly nothing in the indefinite future, it's no surprise that the client decides to pocket a sum certain now. Third, litigation has become inhospitable. It is slow, expensive, and uncertain. Interestingly, Engstrom shows that plaintiffs usually end up losing or getting very little. The chump change offered by a a settlement mill doesn't look so bad in that environment.

What's the result of this rather bizarre ecosystem? In the classic lawsuit settlement model, the settlement amount should equal the parties' estimate of the likely trial outcome, plus-or-minus cost calculations, then tweaked for uncertainty. But with settlement mills, there is virtually no effort to assess the value of the individual case. Rather, cases are clumped together and are assigned a "going rate." It's done via a grid that doesn't even pretend to take into account the sorts of things that might make a huge difference at trial (e.g., witness credibility/likeability or comparative negligence).

According to Engstrom, settlement mills produce adequate results for plaintiffs with weak, low value cases -- they get just about what you'd expect, and they get it fast. But there's a different story for more meritorious cases. Plaintiffs with better stories, stronger causation, and more profound injuries end up settling for pedestrian amounts. Not surprisingly, insurance companies take advantage of the fact that the settlement mills have no intention of taking cases to trial. (In Engstrom's case studies, it seems that on those very few occasions when the settlement mills do take a case to trial, they do a shockingly poor job. So maybe it's good that they know their limitations.)

The question arises as to why insurance companies play ball with settlement mills as often as they do. Why pay anything for the crummy cases? Why not call their bluff? The answer is that settlement mills are a good deal for insurers. They bundle the scary cases with the weak ones. Overall, they are cheap, fast, and predictable. Insurers and settlement mills act as repeat players and come to rely on each other's consistent methods of doing business. Some insurers try to direct cases to settlement mills.

Now, you can make of this system what you will. It's probably no accident that this article appears in a journal of legal ethics. But we don't mean to adopt a Holier than Thou posture. Perhaps this system works in some contexts. Certainly settlement mills are not wholly alien to mass tort litigation. In mass torts, the stakes are higher. (Not always: we saw a lot of fen-phen plaintiffs walk away with verdicts in the neighborhood of $5000. That wouldn't pay for the plaintiff experts' hotel bills.) The lead plaintiff firms that we confront are perfectly capable of performing wall-to-wall factual investigations, writing artful legal briefs, developing formidable experts, and, of course, doing that voo-doo they do so well in front of juries. But a decent-sized inventory of cases will invariably be in the hands of bottom-feeder firms that operate in a way virtually indistinguishable from settlement firms. (One difference: in mass tort cases they will actually file complaints.) The existence of those settlement mills probably vexes the other plaintiff firms more than the defendant. The settlement mills are free-riders and can help the defendant bundle cases in favorable ways and set low settlement values.

Not that much of mass tort litigation is run-of-the-mill. But why not exploit those bits that are?

Wednesday, November 24, 2010

Interesting Pharma First Amendment Decision

Remember those statutes that some New England states adopted over the last few years (no, not those having to do with gay marriage) that prohibited pharmaceutical companies from using pharmacy prescription data - sold by data miners - for commercial purposes?  Well the Second Circuit just declared Vermont's statute an unconstitutional restriction on commercial speech in IMS Health, Inc. v. Sorrell, Nos. 09-1913-cv(L), 09-2056-cv(CON), slip op. (2d Cir. Nov. 23, 2010).

In doing so, the Second Circuit created a direct circuit split on the issue with the First Circuit, which had earlier affirmed the constitutionality of similar statutes in New Hampshire and Maine. See IMS Health Inc. v. Ayotte, 550 F.3d 42 (1st Cir. 2008) (New Hampshire statute); IMS Health Inc. v. Mills, 616 F.3d 7 (1st Cir. 2010) (Maine statute). This issue could well go to the Supreme Court.

Vermont was quite explicit that its statute was intended to intervene in the informational marketplace in order to put a thumb on the scales againse drug company's marketing of brand name drugs.  It hoped that, by depriving brand name manufacturers of information that helped them identify which doctors were prescribing what drugs, it would make pharmaceutical detailing less effective.  Slip op. at 15-16, 21-22.  Having explicitly stated that the state's intent to reduce the effectiveness of certain commercial speech, the legislature made it was hard for its lawyers later to attempt to pass off the statute as some sort of regulation of mere "conduct".  Slip op. at 18-23.  Didn't work.  The would-be censors couldn't get their pretexts lined up in a row.

The Sorrell court left open the possibility that the regulation may well regulate non-commercial speech because it found that the restriction couldn't even survive the intermediate scrutiny to which commercial speech restrictions are judged.  Slip op. at 28.  That would be a very interesting question if the commercial speech ruling was ever reversed, but for now it's a footnote.

As with promotion of off-label use, we're once again dealing with speech that is undeniably truthful.  The stats concerning physician prescription histories wouldn't have any value if they were false.  That means there's not much to say about part one of the hoary Central Hudson test, and the court didn't.  Slip op. at 28.

On to "substantial interest."  Vermont claimed three:  (1) protecting public health, (2) protecting prescribers' privacy, and (3) reducing health care costs by reducing the sale of expensive brand name drugs.

Sorrell found that these restrictions were a bizarre way of protecting anyone's privacy.  It only bans one of many uses of prescribing data and allows its collection.   If anybody wanted to, it would be perfectly legal under the statute for the New York Times to obtain and publish a story about "who's prescribing what."  Clearly a pretext.  Again, the would-be censors couldn't line their pretexts up straight.  Slip op. at 29-31.  Further, the state's speculation that pharmaceutical manufacturers use the prescribing data to intrude on the privacy of the physician-patient relationship was just that - rank speculation.  Slip op. at 31-32.
Vermont’s own expert was unaware of any instance in which a detailing interaction caused a doctor to prescribe an inappropriate medication. To the extent that the record might suggest PI data has damaged the relationship between doctors and patients, the evidence is either speculative or merely indicates that some doctors do not approve of detailing or the use of PI data in detailing.
Slip op. at 32.  We would go further.  We think this is another example of nanny-statism.  What's really going on is the state trying - very indirectly - to reduce the amount of information doctors get from a particular source (pharmaceutical companies) for the paternalistic reason that they don't trust doctors or patients to use the information wisely.  But that's just us.

Actually, it isn't just us.  Sorrell found the statute blatantly paternalistic, too.  Slip op. at 35-36.  It just waited until prong three to do it.  We sort of write these posts stream of consciousness, and sometimes get ahead of the court.  So be it.  We're glad to have our instincts proven right.

On to the "directly advance" prong of Central Hudson.  Here's where it really starts getting fun, because the state's true motives start being exposed.  The state offered a real Tinker to Evers to Chance sort of justification.  How does preventing pharmaceutical companies from using prescribing information in their marketing save the state money in health care costs?  How does it protect public health?  As the court put it, the statute:
can advance the state interests in protecting public health and reducing health costs only by the following route: the statute prevents PI data from being transferred from data miners to pharmaceutical manufacturers for marketing purposes, who in turn are prevented from using the data in their marketing efforts. Failure to use PI data in marketing results in less effective marketing for brandname prescription drugs, some of which - although not all - are more expensive yet provide no therapeutic advantage over generic alternatives.  Less effective marketing will result in doctors writing fewer prescriptions for brand-name prescription drugs, thereby reducing health care costs and protecting public health by minimizing prescriptions for more expensive or less tested medications.  The state’s own explanation of how [the statute] advances its interests cannot be said to be direct.
Slip op. at 33-34.  The court noted that there is no case, anywhere, in which this indirect approach - achieving some public good indirectly by making some speaker's speech less persuasive or effective - has been upheld.  Id. at 34.  In the court's words "the statute seeks to alter the marketplace of ideas by taking out some truthful information that the state thinks could be used too effectively."  Id. at 35.

Here the court does it's riff on paternalism.  Vermont can't restrict information, especially so indirectly, because it fears that doctors will be too greatly influenced by it.  Slip op. at 36.  Maybe Vermont could ban in-office detailing, maybe not, but it certainly couldn't claim that it was preventing "harassment" of doctors by drug companies.  Id. at 37-38.  "Physicians . . . can always choose to decline to be visited by detailers, even without [the statute."  Id. 38.

Again the state tripped all over its own pretexts.

The concept of reducing health costs by preventing physicians from getting overly persuasive information about brand name drugs was hopelessly indirect:
Because [the statute] is an attempt to influence the prescribing conduct of doctors by restricting the speech of others - namely data miners and pharmaceutical manufacturers - it does not directly advance the state’s interests in protecting public health and reducing health care costs.  Instead, the statute restricts protected speech when uttered for purposes the government does not approve of in order to reduce the effectiveness of marketing campaigns and, ultimately, alter the behavior of prescribers, who are not regulated by the statute.  This route is too indirect to survive intermediate scrutiny.
Slip op. at 38-39.  We note, with interest, that much of the same could be said about the FDA's prohibition of truthful promotion of off-label uses on the basis of patient "safety."

On to the final "more limited restriction" prong of Central Hudson.

The indirect means of pursuing the purported state interests necessarily entailed a blunderbuss approach to commercial speech.  (1) all brand name drugs are affected, even those with no cheaper generic competition; (2) all brand name drugs are affected, even those that aren't supposedly "new" and with less of a safety track record.   Slip op. at 40.  The statute thus restricted way more speech than it's justifications could justify.  Id. at 41.  And there were obvious non-speech alternatives available, such as favoring the prescription of generic drugs where available.  Id. at 42.

The statute's categorical ban on speech that the state found unduly persuasive was not saved by a physician opt in option.  The ban itself, and thus the speech for which opt in was required, still went way beyond anything that could be supported by the cost or safety justifications offered by the state.  Slip op. at 44.

In closing, the court also points out that "the statute restricts speech even with regard to prescriptions of breakthrough brand-name medications for which there are no generic alternatives.  Slip op. at 46.

At this point we would argue (although the court does not), that the statute could affirmatively harm public health in pursuit of it's goal of reducing brand name prescriptions.  Detailing - because it is backed by commercial as well as altruistic interests - is particularly effective in getting the the news out to doctors about such "breakthrough" products.  And "breakthrough" products save lives, that's why they're called "breakthrough."

Basically, we see the whole public health justification as pretextual.  The state's just trying to save medical costs by reducing prescriptions - even if those prescriptions actually help patients (which the overwhelming majority do).

Anyway, good riddance to a bad statute.  And, possibly, hello to the Supreme Court getting another chance to review governmental speech restrictions on pharmaceutical detailing.

Can the off-label promotion ban be far behind?

Tuesday, November 23, 2010

Lone Pine order entered in Avandia litigation

We have written before about the virtues of Lone Pine orders, which require plaintiffs to produce elementary evidence supporting their claims, usually some prima face evidence of exposure, injury, and causation. These orders provide an excellent tool to eliminate the cases filed in any mass tort by people just hoping to cash in without having to prove anything.

A new Lone Pine order was entered last week in the Avandia litigation. In re Avandia Marketing, Sales Practices and Products Liability Litigation, Pretrial Order No. 121, 2010 WL 4720335 (E.D. Pa. Nov. 15, 2010). The order requires each plaintiff and claimant to serve a signed certification from a licensed physician that includes the following information: (1) a determination that the plaintiff used Avandia with a list of the records documenting the usages and the dates of usage; (2) either (a) a determination that the plaintiff suffered from one or more of specified injuries within one year of Avandia usage or (b) a determination that the plaintiff suffered one or more of the specified injuries more than one year after Avandia usage and that the usage caused the injury; (3) an identification of the injury or injuries allegedly caused by Avandia and the records documenting the injuries; and (4) copies of the records supporting (1) and (3).

A requirement to provide some prima facie evidence of usage, causation, and injury -- fairly standard stuff, right? But what’s interesting here is the background for this order and one of the court’s justifications for the order. It has been widely reported that GSK has agreed to settle hundreds of Avandia cases (and we know only what we read in the papers, or blogs, about this – we aren’t in this litigation and know nothing about their settlement negotiations). The court’s explanation for the order cited its importance to settlement:

It is now clear to the Court additional support for Plaintiff’s claims is necessary for furtherance of settlement agreements, for the selection of cases for bellwether trials, and for the timely remand of cases to the sending courts for resolution.

Id. at 1. The last two grounds are typical, as courts use Lone Pine orders to weed out the weak cases, which should never be remanded back to their sending courts, and to develop more information that the parties can use to select bellwether cases.

But how do Lone Pine orders further settlement agreements? Isn’t a requirement for proof inconsistent with the idea of settling a case, some may ask? No, not at all. Most defendants have a real problem with paying significant amounts of money in settlements to people who did not take the defendant’s product and did not suffer injuries that arguably could be caused by the product. Before they settle claims, some defendants will insist on some prima facie proof comparable to that required by a typical Lone Pine order. Why? Well, if the plaintiff did not take the defendant’s product or suffer injuries that might have been caused by the product, then the plaintiff’s claim for money in a settlement is, what’s that word plaintiffs throw around like beads at Mardi Gras, a fraud. And defendants hate paying fraudulent claims. A good Lone Pine order will help weed out those claims that don’t deserve any settlement payment.

Predictably, plaintiffs’ counsel in the Avandia litigation resisted the Lone Pine order. We don’t think that’s because they are trying to hide fraudulent claims. They probably just didn’t want to do the work. But we’ll give the court last word, as its response to plaintiffs is the answer to any objection to a Lone Pine order: “The Order issued below merely requires information which plaintiffs and their counsel should have possessed before filing their claims . . . .”

Monday, November 22, 2010

CARE Package for Defense Counsel

We're quite happy when readers pass stuff along to us for the edification of our readership.  This latest CARE Package comes courtesy of Jeff Holmstand of Flaherty Sensabaugh - from a town known as Wheeling West Virginia.  First, he passes along a new medical device preemption decision, Bishoff v. Medtronic, Inc., C.A. No. 1:09CV171, slip op. (N.D.W. Va. Nov. 22, 2010).  Bishoff is best on TwIqbal and negligence per se, holding:
An allegation that a medical device manufacturer failed to comply with FDA regulations, without more, does not satisfy the pleading requirements of Rule 8(a). . . .  In this case, [plaingiff] alleges without any factual support that [defendant] failed to comply with the PMA process and failed to assemble [plaintiff’s] device in the manner required by the FDA’s regulations.  Without specific factual support in her complaint identifying how or why [defendant] failed to comply with the PMA process, however, [plaingiff's] allegations of negligence per se and manufacturing defect fail to state a plausible claim under Rule 8(a).
Slip op. at 6-7.   Bishoff also dismisses express warranty (inadequately pleaded), and breach of implied warranty of fitness for a particular purpose (preempted).  Slip op. at 7-8.

The second goodie in the basket is an article, Jeff (and another attorney, Anthony Sammons of Dinsmore & Shohl (we like seeing counsel at different firms collaborate) wrote about TwIqbal for the DRI.  Here's a copy of that for the good of the order (not the Order of the Phoenix, and not the "greater good").  We particularly enjoyed the part (pp. 70-71) that relies on our one of our posts about the Nuvaring farce concerning MDL master complaints.  They even call us "popular."  Geez, we feel like Galinda.

Sunday, November 21, 2010

Fraudulent Joinder of Minor Characters

As defense lawyers at trial, we usually hit the theme of how a corporation is made up of people -- folks who live in the neighborhood, who work hard for a living, and who try to do the right thing and make good products. We usually make sure that a corporate representative sits in the front row for at least part of the festivities. And nothing is better jury-bait than a company witness who can take the witness stand and come across as caring and competent.

There is another side to all that, of course. In some plaintiff lawyer playbooks, the case commences by hauling corporate representatives into court and turning them into document-delivery devices. The plaintiff lawyer keeps slinging bad paper at the company witness, forcing them either to agree with unfortunate statements (bad), or renounce them (that can also be bad). Maybe we can get the judge to impose reasonable limits on this charming bit of theater. Maybe not.

But it's an entirely different kettle of fish when plaintiffs actually name corporate employees as defendants.

Mind you, we're not talking about criminal prosecutions of corporate officers, the Park doctrine and all that incredibly scary stuff. Heck, the government is now even going after company lawyers. It strikes us (and some of us at one time worked in the government, obtained indictments, and persuaded judges to sentence at the high-end of the guidelines) as heavy-handed, but that's a post for another day. Nor are we talking about civil plaintiffs who genuinely seek to hold corporate employees liable. That's exceedingly rare, because it's a hard case to make out, it creates individual issues that should militate against any sort of aggregation, and it potentially spoils some of the David vs. Goliath myth-making at trial.

Rather, plaintiff lawyers are more likely to drop a corporate employee into the caption to avoid federal diversity jurisdiction. Some prior posts discussed this issue, usually in the context of fraudulent joinder of sales representatives. Most courts have held that sales representatives cannot be liable "in the absence of evidence that [a sales representative] either knew or should have known of [the drug's] allegedly dangerous effects." Legg v. Wyeth, 428 F.3d 1317, 1325 (11th Cir. 2005) (applying Alabama law). Courts have also found lack of a duty because sales representatives are neither "manufacturers" nor "sellers" for purposes of products liability litigation. See In re Diet Drugs MDL, 2004 WL 2203712 at *2 (E.D. Pa. Sept. 28, 2004) (applying Missouri law). The fraudulent joinder "no colorable ground" standard can be a toughie, but application of TwIqbal, along with submission of a declaration by the employee (along the lines of either 'I never heard that the medicine causes X' or 'I never actually sold X') more often than not lets the court see through the sham, and the inevitable effort to remand the case to some state court hellhole jurisdiction is thwarted.

Puricelli v. Genentech, Inc., No. 4:10CV1793-JCH (E.D. Mo. November 15, 2010), is a little bit different, and is certainly a helpful fraudulent joinder precedent for defendants. The plaintiffs in Puricelli brought their suit in the Circuit Court of the City of St. Louis -- not a place in the top ten list of anyone on the right side of the "v." The plaintiffs alleged strict liability, negligence, and negligent misrepresentation against all of the defendants arising from use of Rituxan. The plaintiffs also alleged that the defendants acted so badly that punitive damages were warranted. While two of the defendants were the companies that co-developed Rituxan, one was a Genentech employee. But she wasn't a sales representative. Instead, she was the Senior Oncology Clinical Coordinator.

The plaintiffs claimed that this employee had "marketed Rituxan as a safe and effective treatment for various diseases, including those for which its uses would be 'off-label'; that she knew or should have known that the use of Rituxan presented a risk of extremely serious injury or death; and that, despite this knowledge, she failed adequately to warn of the increased risk...." Slip Op. at 3. But in truth the most important thing about the employee is that her presence in the case defeated diversity.

The plot thickened in the way it usually thickens. The defendants removed the case to federal court and the plaintiff moved to remand. The employee submitted a declaration that she had never sold, marketed, promoted, or tested Rituxan, that she never worked with the relevant treating doctors, and that she never spoke or met with the plaintiff. Slip Op. at 4. In other words, the employee was hardly a major player in this drama.

And now for an indefensible digression. This week's book review sections spilled a lot of ink about the importance of minor characters in books. Salmon Rushdie thinks that The Lord of the Rings endures because Tolkien provided so much background texture, creating endless backstories and fascinating minor characters -- none more fascinating than Gollum. That character reminds us of some of our more pertinacious opponents. Meanwhile, Stieg Larsson, author of the Millennium Trilogy -- The Girl With the Dragon Tattoo, etc. -- wrote e-mails to his editor making plain that he thought his minor characters were the key to creating a realistic universe in the novels. Maybe so, but we find it hard to relate to people who treat sex so casually and coffee so seriously. And speaking of cultural events over the weekend, would Harry Potter be so wildly popular without the likes of Hagrid, Dobby (RIP, friend), Trelawney, or Aunt Marge?

Well, Senior Oncology Clinical Coordinator is an impressive title, but the declaration made it pretty clear that she had no business being a party in the case. What's the plaintiff's response? The plaintiff asserted that, based on Genentech's website, "it is hard to believe as the Senior Oncology Coordinator that [the employee] is not involved in the marketing, administration, and sale of a drug prescribed by oncologists." Slip op. at 4 (emphasis in original). That's pretty weak. That's hardly the stuff of Tolkien, Larsson, or Rowling. What it is, dear readers, is a blatant instance of fraudulent joinder. The court found "no colorable claim against the employee," held that "her citizenship must be ignored for purposes of determining jurisdiction," and denied the remand motion. Slip op. at 4-5. We love happy endings.

Oh, by the way, just in case your sense of self-preservation prompted you to wonder, there is some good law to the effect that attorneys advising manufacturers about product labeling should not be liable to consumers for negligence. See Talton v. Arnall Golden Gregory, LLP, 622 S.E. 2d 589, 591-595 (Ga. App. 2005), cert. denied, (Ga. Feb. 27, 2006).

Friday, November 19, 2010

SG Takes Defense Side In Brown Personal Jurisdiction Case

We blogged not too long ago about the two Supreme Court personal jurisdiction cases involving so-called "stream of commerce" jurisdiction.  In the Brown case we pointed out how the lower court had unprecedentedly applied the "stream of commerce" to a case involving general jurisdiction.

Well, today the Solicitor General filed an amicus curiae brief for the United States in Brown, taking the defense side.  Main points:  (1) "stream of commerce"/"purposeful availment" is solely a test of specific jurisdiction and it was error to use it in a general jurisdiction case, SG br. at 16-20; (2) the "continuous and substantial" test requires something close to a corporation maintaining its principal place of business in the state, SG br. at 22-23; (3) in determining general jurisdiction, the residence of the plaintiff (and thus a state's interest in providing a forum to residents) is irrelevant.  SG br. at 29.

We don't beat SCOTUSBlog often in their sweet spot, but this time Bexis got a tip due to his (tangential) involvement in the case.

And Now, For Something Completely Stupid

We thank the folks over at the FDA Law Blog for tossing this bone in our direction.  It seems that a couple of days ago Rep. Bob Filner (D-CA) introduced a bill - thankfully having no co-sponsors - that would overturn the law of 48 states and the District of Columbia, including multiple decisions of the California Supreme Court (see here for details), and abolish the learned intermediary rule.

This bill, H.R. 6421, ironically entitled the "Consumer Protection Act of 2010" (this guy belongs to the Newt Gringrich school of legislation naming) purports to do nothing else.  It's full substantive text, according to Thomas:

(a) In General - It shall not be a defense to any tort claim in any court in the United States that a manufacture of a product has fulfilled that manufacturer's duty of care when the manufacturer provides all of the necessary information to a learned intermediary who then interacts with the consumer of the product.

(b) Definition- In this section--

(1) the term `learned intermediary' means a person, licenced under applicable State or Federal law, to advise a consumer whether or not to use the product in question; and

(2) the term `State' includes the District of Columbia, Puerto Rico, and any other commonwealth, possession, or territory of the United States.
Fortunately, we don't think this bill is going anywhere in the current lame duck session of Congress, at the end of which it should end up in the dustbin of history, along with similarly misguided bills that would abolish medical device preemption or revert to pre-TwIqbal pleading standards.  The next Congress, we expect, will be even less likely to go along with the liability lobby's legislative agenda.

We could say more, but it would probably be ... impolitic.  And it would give this dead fish of a bill more attention than it deserves.

Thursday, November 18, 2010

Collateral Estoppel Bullet Dodged In West Virginia

This just in:  The West Virginia Supreme Court of Appeals today reversed that scary trial court decision that held a drug manufacturer to be bound by, and incapable of disputing, FDA-DDMAC "false and misleading" violation claims in warning letters.  Here's a copy of the opinion, encaptioned, West Virginia v. Johnson & Johnson, No. 35500, slip op. (W. Va. Nov. 18, 2010).

The court held that FDA warning letters were insufficiently final to be a basis for collateral estoppel:
The Appellants contend that the circuit court erred by giving preclusive effect to DDMAC’s determination that their [drug related] statements were false and misleading.  They point out that, pursuant to the FDA’s own guidelines, warning letters are merely "informal and advisory" and do not constitute a final judgment of the FDA.  The Appellants further assert that, despite the circuit court’s finding to the contrary, they did not have the ability to administratively appeal the allegations contained in those warning letters and, thus, were never afforded the opportunity to defend against the FDA’s informal determinations.  This Court agrees
Slip op. at 20.  And again:
Here, no preclusive effect can be given to the FDA’s determination that the statements and omissions in the [defendant's statements] are false and misleading, because the FDA did not render a “final adjudication on the merits” on this issue, nor did the Appellants have an opportunity to fully and fairly litigate the question.
Slip op. at 21.  And yet again:
Clearly, in issuing warning letters, the FDA is not acting pursuant to any adjudicatory authority, nor does it employ any due process procedures similar to those accorded defendants in courts of law.  Rather, in issuing a warning letter, the FDA, acting pursuant to its regulatory authority, attempts to remedy a perceived violation through informal means.  No hearing is provided prior to the issuance of the letters, nor is the recipient notified of the alleged violations.  Indeed, the purpose of the warning letters is to provide such preliminary notification, thereby giving the alleged violator an opportunity to resolve the problem in an informal manner before actual adjudication takes place.  Accordingly, the warning letters cannot be considered quasi-judicial determinations by the FDA and, thus, are not subject to collateral estoppel under West Virginia law.
Slip op. at 24.

The trial court decision in this matter was one of the scariest - and most downright wrong - decisions of recent years.  We on the defense side can breathe a little easier tonight.

Thanks to Phil Combs at Allen, Guthrie for passing this along to us.

TwIqbal Applies To Complaints Removed From State Court

We did a post the other day about, among other things, the applicability of the TwIqbal federal pleading standard in removed cases.  We discussed Maness v. Boston Scientific, 2010 WL 4629984 (E.D. Tenn. Nov. 4, 2010), which held that TwIqbal applies to complaints initially filed in state court but then removed to federal court.

The citations in Maness, however, while nicely bracketing the question whether TwIqbal applies to removed complaints, didn’t exactly address that actual question.  Those cases:  (1) apply pre-TwIqbal federal pleading rules to diversity cases, Minger v. Green, 239 F.3d 793 (6th Cir. 2001); (2) apply TwIqbal to diversity jurisdiction cases filed originally in federal court, Wilkey v. Hull, 366 F. App’x 634 (6th Cir. 2010); and (3) apply federal pleading requirements, generally, to removed complaints; Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423 (1974).

So we ask, how many other cases are there out there like Maness – holding specifically that TwIqbal applies to removed complaints?  We’d consider ourselves exceedingly lucky to have stumbled upon the very first case of its kind.  After all, as addressed at some length in Maness, the federal rules do address this situation.  In Rule 81(c), addressing “Removed Actions,” subsection (1), entitled "Applicability," states “These Rules apply to a civil action after it is removed to federal court.”  Judges explicitly have the power to order “repleading” of removed complaints. Rule 81(c)(2).

We decided to take a look.  Here’s what we’ve found.  Maness isn’t the first court to apply TwIqbal to a complaint originally filed in state court.  In fact, it isn’t even the first drug/medical device product liability decision to do so.  What we can say for Maness is that it contains the most thorough and extensive discussion of the issue – but there are other decisions that come close.

As we expected, most courts hold, as we think they should, that TwIqbal applies to complaints removed from state to federal court.  In Braden v. Tornier, Inc., 2009 WL 3188075 (W.D. Wash. Sept. 30, 2009), a medical device case that we discussed before, the court ruled in no uncertain terms that TwIqbal applied to any complaint removed to federal court:

Contrary to Plaintiffs’ assertions, it is well-settled that the Federal Rules of Civil Procedure apply in federal court, irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.  Accordingly, the Federal Rules of Civil Procedure and the U.S. Supreme Court’s holding regarding pleading requirements announced in [TwIqbal] apply.  The Court understands Plaintiffs’ plight – being held to one pleading standard in state court, where they chose to file their case, and being held to another after the case is removed.  However, the law is clear, Fed. R. Civ. P. 81(c)(1) states that the Federal Rules of Civil Procedure “apply to a civil action after it is removed from a state court.”  This action has now been removed and the federal rules apply.
2009 WL 3188075, at *2 (other citations omitted).

TwIqbal was also applied over the plaintiff’s objection in Wendell v. Johnson & Johnson, 2010 WL 271423 (N.D. Cal. Jan. 20, 2010), a prescription drug product liability case:

The parties disagree as to whether federal or state procedural law applies to this motion. Plaintiffs argue that, because the complaint was filed in state court, California’s pleading rules govern. This is not correct.

A Rule 12(b)(6) motion considers the substantive sufficiency of the pleadings as if the action had never been in state court. . . . Further, Federal Rule of Civil Procedure 81(c) provides, “These rules apply to a civil action after it is removed from state court.” This action has now been removed; therefore, federal law, not state law, governs the specificity that Plaintiffs must plead in order to survive a 12(b)(6) motion.
Id. at *2 (Granny Goose quotation omitted)

In Rockwood Retaining Walls, Inc. v. Patterson, Thuente, Skaar & Christensen, P.A., 2009 WL 5185770 (D. Minn. Dec. 22, 2009), the court rejected the same contention for much the same reason as did Maness – but only devoted a footnote to the issue:

Plaintiffs suggest that the controlling standard is one of state law.  The Court recognizes that the Amended Complaint was filed originally in state court, but once the action was removed, that complaint must satisfy the current federal pleading standard as defined by the U.S. Supreme Court's decisions in Twombly and Iqbal.
Id. at *6 n.6.  Likewise, in Lin v. Chase Card Services, 2010 WL 1265185 (D.N.J. March 26, 2010), the court needed only a footnote to swat away an argument for state law.  Id. at *2 n.2 (“Plaintiff argues that instead of Rule 8(a)(2), the pleading requirements . . . of the New Jersey Rules . . . should apply to his complaint since it was originally filed in state court.  Plaintiff’s assertion is incorrect.”) (citing Rule 81(c)).

In another case of Minnesota origin, the defendant removed the case from a state court that did not require formal pleadings at all.  Once the case was in federal court, however, a formal, TwIqbal-compliant complaint (those two words are spelled quite similarly) was required:

[Plaintiff’s] opposition to [defendant’s] motion to dismiss is confined to the argument that the motion “is specious because there is no complaint,” that is, because under Minnesota law its conciliation courts “should not be ‘burdened with rules and traditions which are applicable to courts more formally convened.’”  Granted, the pleading removed to this Court originated in Minnesota Conciliation Court, which requires only a short statement of “what happened and when it happened.”

But now that the action is proceeding in federal court, the pleadings must conform with the applicable federal rules as interpreted by the federal courts.  See Willy v. Coastal Corp., 503 U.S. 131, 134-35 (1992) (noting that under Rule 81(c), the federal rules “‘apply to civil actions removed . . . from the state courts and govern procedure after removal’”).  See generally 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper & Joan E. Steinman, Federal Practice and Procedure §3738 (4th ed. 2009) (noting settled rule that removed actions “will be governed by the Federal Rules of Civil Procedure and all other provisions of federal law relating to procedural matters”).
Smith v. Local Union No. 110, International Brotherhood of Electrical Workers, 681 F. Supp.2d 995, 1006 (D. Minn. 2010).

The same thing happened in Rankin v. Mattamy Homes Corp., 2010 WL 3394036 (M.D.N.C. Aug. 26, 2010).  The court applied TwIqbal to a removed complaint over the plaintiff’s reliance upon looser state pleading standards:

Plaintiff also argues that because she first brought this case in state court, and it was removed to federal court, she should somehow be excused from federal pleading standards. I do not agree. Plaintiff is not absolved of the pleading requirements under the federal rules and Twombly and Iqbal simply because the action was first filed in state court.
Id. at *3.  Accord Jackson v. Mecklenburg Co., 2008 WL 2982468, at *2 (W.D.N.C. July 30, 2008) (applying TwIqbal; state “pleading requirements, so far as they are concerned with the degree of detail to be alleged, are irrelevant in federal court”).

The argument that state law trumps TwIqbal in a removed action was found “completely without merit” in Heffley v. Acme Markets, Inc., 2009 WL 1090660 (D.N.J. April 20, 2009):

Plaintiff’s only opposition . . . argu[es] that the since the Complaint was initially filed in state court it should not be held to federal pleading standards.  This argument, however, is completely without merit.  It is axiomatic that the Federal Rules of Civil Procedure apply to actions after they are removed from state court.
Id. at *2 (citing Rule 81(c)).

And again, in Davenport v. Sugar Mountain Retreat, Inc., 2009 WL 3415240 (N.D. Okla. Oct. 16, 2009), the court also rejected the applicability of state pleading standards to a removed complaint:

Plaintiff argues that his amended complaint “was more than sufficient in the standards applicable in Oklahoma courts where this matter was originally filed before removal.”  However, the case was removed to federal court and this Court must apply Rule 12(b)(6), as interpreted in Twombly, to determine if plaintiff's amended complaint states a claim.
Id. at *2.

Before that, in Stearns v. Select Comfort Retail Corp., 2008 WL 4542967 (N.D. Cal. Oct. 1, 2008), also rejected a plea to apply looser state law to a removed complaint.

The parties disagree as to whether federal or state procedural law applies to this motion.  [Defendant] points out that the action was removed properly to this Court . . ., and after that, accordingly, pursuant to the Class Action Fairness Act, federal law applies. . . .  The Court agrees with [defendant] that federal procedural law applies here.  As Rule 81(c)(1) of the Federal Rules of Evidence plainly states, “[t]hese rules apply to a civil action once it is removed from state court.”
Id. at *2-3 (other citations omitted). Another, even earlier, post-Twombly decision out of California agrees, pointing out:

Whether Plaintiff's allegations are sufficient under state-law pleading requirements is inapposite.  Although Plaintiff initially filed his complaint in state court, his case was removed to federal court and is subject to federal pleading requirements under Fed. R. Civ. Proc. 8.  Thus, that Plaintiff’s complaint was originally filed in state court and that such complaint might have been sufficient under state law does not absolve him from complying with federal pleading requirements now that he is in federal court.
Provencio v. Armor Holdings, Inc., 2007 WL 2814650, at *2 (E.D. Cal. Sept. 25, 2007) (citing Rule 81(c) and Granny Goose).

In addition, we found quite a few cases that applied TwIqbal to removed complaints in situations where the plaintiff – there are some who are reasonable – did not contest the applicability of the federal pleading standard under Rule 81(c).  Muth v. State Farm Fire & Casualty Co., 2010 WL 3805386, at *1 n.1 (M.D. Pa. Sept. 22, 2010); HSBC Bank Nevada, N.A. v. Murungi, 2010 WL 3170736, at *2-3 (E.D. La. Aug. 11, 2010); Nordby v. Wells Fargo Home Mortgage, 2010 WL 1539829, at *1 (E.D. Cal. April 16, 2010); Blake v. Cree, Inc., 2010 WL 302790, at *2 (M.D.N.C. Jan. 19, 2010; IndyMac Venture, LLC v. Silver Creek Crossing, LLC, 2009 WL 3698513, at * 3 (W.D. Wash. Nov. 3, 2009); Hostway Corp. v. JPMorgan Chase Bank, N.A., 2009 WL 2601359, at *5 (N.D. Ill. Aug. 24, 2009); Bernegger v. Morrissette, 2009 WL 911394, at *4 (E.D. Wis. March 31, 2009); Ruth v. Unifund CCR Partners, 2009 WL 585847, at *3 (N.D. Ohio, March 6, 2009); Spence v. Brownsville Area School District, 2008 WL 2779079, at *2 (W.D. Pa. July 15, 2008); Himmelheber v. EV3, Inc., 2008 WL 360694, at *1 (W.D. Ky. Feb. 8, 2008).

After all our research, the only case we’ve found that went the other way remains that strange little Avandia decision that we blogged about before, – In re Avandia Marketing, Sales Practices & Products Liability Litigation, 2009 WL 1708078 (E.D. Pa. June 17, 2009), having now done all this research, we went back to see what the Avandia judge considered to be contrary authority.  The answer is nothing.  The court just jumped over Rule 81(c) without even mentioning it and went straight to New Mexico pleading rules:

[Defendant] contends these allegations are inadequate because they do not include facts that would explain how [defendant’s employee] knew or should have known of Avandia’s purported defects.  In other words, [defendant] argues that it is not enough under New Mexico pleading law for Plaintiffs merely to allege that [the employee] knew or should have known of Avandia's defects.  Defendant's position is that Plaintiffs must allege facts establishing the basis for such knowledge or responsibility.  [Defendant] does not reference the pleading standards of New Mexico or cite a case applying New Mexico law that directly supports its position.
Id. at *5.   See also Id. (“[defendant’s] argument is unavailing because it requires a specificity in pleading that is not required under New Mexico’s notice pleading standard”).

Having now studied the issue, we’re more convinced than ever that the court simply messed this up.  We note that Avandia was trying to decide whether a claim existed based upon a fraudulent joinder standard, and that may be the source of the confusion.  We agree that under fraudulent joinder a claim must have no “possibility” of success, and the elements of state-law claims are determined by state law.  TwIqbal doesn’t change that.  Hidalgo v. YRC Logistics Services, Inc., 2010 WL 4366121, at *2 (C.D. Cal. Oct. 28, 2010).

However, there’s no authority that we know of – and certainly nothing capable of overcoming both Rule 81(c) and Supreme Court cases such as Granny Goose and Willy – that fraudulent joinder requires evaluating removed cases under state-law procedural standards for sufficiency of the pleadings.  That’s the realm of Rule 81(c) and TwIqbal, and if the complaint isn’t “plausible” then the claim should be dismissed.  Since the Avandia court didn’t seem to think it was, see 2009 WL 1708078, at *5 (“it is difficult to imagine a scenario in which a drug company divulges otherwise secret information about the dangers of its products in training materials or educational sessions given to sales representatives”), that should have been the end of it under TwIqbal, unless those particular plaintiffs could amend their complaint to state facts as to why their "difficult to imagine" allegations were in fact plausible.

Now that we’ve killed this issue research-wise, it’s clear to us that, when Avandia relied – not on state substantive law, but on state pleading standards to allow a claim that even it did not think was plausible to evade TwIqbal and trigger a remand, the court blew it.

* * * *

Whenever we run a search this broad, we find related cases that we think might be of interest to our readers. Here are a couple more TwIqbal propositions that we discovered.

(1) The TwIqbal pleading standard seems to apply to notices of removal.  Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 199-200 (4th Cir. 2008); Martin v. Wal-Mart Stores, Inc., 709 F. Supp.2d 345, 349 (D.N.J. 2010).  We hadn’t thought about that.

(2) TwIqbal also applies to complaints in actions removed to federal bankruptcy court.  In re Stonebridge of Mint Hill, LLC, 2010 WL 3943764, at *2-3 (Bkrtcy. W.D.N.C. Oct. 7, 2010); In re GTI Capital Holdings, LLC, 420 B.R. 1, 9 (Bkrtcy. D. Ariz. 2009).

Wednesday, November 17, 2010

More FDA Musings On Generic Preemption

A couple weeks ago, we took a look at the brief submitted by the Solicitor General in the Mensing generic preemption case. If you didn’t have time to read that brief, or our slightly shorter post summarizing that brief, here’s an even shorter recap of the government’s position: the 8th Circuit was right to reject the generic manufacturers’ preemption arguments in Mensing, and there’s no need for Supreme Court to take certiorari.

Now, for your reading pleasure, we present the amicus brief submitted by the government in another generic preemption case – Morris v. Wyeth – pending in the 6th Circuit. We won’t go page-by-page, because we don’t need to: the government says its Mensing brief “reflect[s] the same position on the preemption question as this brief.” Amicus Br. at 12 n.5. In fact, it’s pretty much the same brief verbatim, but we provide it here just in case you’re interested (or you are an avid collector of FDA briefs).

More on E-Discovery for Defendants

Folks, before asking for it, make sure you can articulate how discovery into the plaintiff's use of social networking sites is "reasonably calculated to lead to the discovery of admissible evidence."

That's the lesson of this new New York appellate case, McCann v. Harleysville Insurance Co., CA 10-00612, slip op. (N.Y.A.D. 4th Dept. Nov. 12, 2010).   Don't be like the (because we're a defense-side blog, we'll omit the adjectives we're tempted to type) defendant in McCann, and just rotely demand a blanket “authorization for plaintiff’s Facebook account.”  Slip op. at 1.  You might well get back one of these:
We conclude . . . that the Supreme Court properly denied defendant’s motion "as overly broad," without prejudice "to service of new, proper discovery demands.”

Why?  Well, courts still aren't comfortable with how to treat all this new-fangled stuff.  We don't think it's any different than a plaintiff keeping a diary and letting other people read it.  But courts might, so be careful out there - Facebook isn't (yet) like a plaintiff's medical records where relevance and discoverability is presumed.  A defendant can get back the same type of "fishing expedition" objection that our side makes (or would like to make) in personal injury litigation:
Indeed, defendant essentially sought permission to conduct “a fishing expedition” into plaintiff’s Facebook account based on the mere hope of finding relevant evidence.
Slip op. at 1-2 (this is one of the N.Y.A.D.'s typically cryptic memorandum opinions; we're doing the best we can).

Still, even for a defendant caught out not being able to justify an overly ambitious discovery request, all was not lost.  The McCann court vacated a protective order that the trial court (that's a "Supreme Court" in New York's peculiar parlance) had entered.  Facebook material is not categorically exempt from discovery, once a defendant is able to articulate a plausible reason:  "Under the circumstances presented here, the court
abused its discretion in prohibiting defendant from seeking disclosure of plaintiff’s Facebook account at a future date."  Slip op. at 2.

That really shouldn't be too hard to do, if a defendant in a serious personal injury action simply takes the time to look at the public portions of the account - as a more diligent defendant did in the McMillan case we recently discussed.  If the plaintiff is posting about, for example, anything that arguably concerns some activity that the complaint claims s/he's no longer able to do as well as before - that should be all that's necessary.  But as McCann reminds us, ya gotta bring something to the table.

Tuesday, November 16, 2010

Medicare reporting deadline postponed

We have reported to you occasionally, but not consistently or reliably or intelligibly, about the new obligation of product liability defendants and others to report settlements and other payments on personal injury claims to Medicare authorities. See, for example, our posts titled Boring Stuff We Need to Know and More Boring Stuff We Need to Know. The reporting obligation has been extended several times and was scheduled to kick in starting on January 1, 2011 – an extension we did not tell you about. We told you we are not reliable chroniclers of boring stuff. What can we say? We'd rather write about preemption or Daubert or TwIqbal.

Last week, the Centers for Medicare & Medicaid Services, which goes by the confusing acronym CMS instead of the more logical CMMS, announced that the reporting deadline for some but not all entities and some but not all settlements has been postponed for one full year. The CMS alert states: “The required submission of liability insurance (including self-insurance) initial claim reports has been changed from the first calendar quarter of 2011 to the first calendar quarter of 2012 for all liability insurance (including self-insurance) TPOC amounts with no ORM involvement. Liability insurance (including self-insurance) ORM reporting is not subject to this delay.”

We speak bureaucratese about as well as we speak jive (R.I.P., Barbara Billingsley). Here is a rough translation: The deadline for reporting personal injury settlements and other payment obligations (that’s TPOC) has been extended for one year, until the quarter starting January 1, 2012, but only for settlements or other payments paid by liability insurance or the defendant itself (that’s self-insurance) and not for no-fault insurance and workers’ compensation. The extension does not apply to settlements or other payment obligations that include an ongoing responsibility for paying the injured party’s medical bills (that’s ORM).

This is complicated stuff that is very important to our clients, so if you have an issue in this area, please read the CMS alert and consult with professional translators of CMS bureaucratese.

Monday, November 15, 2010

The Curmudgeonator Is "Bock" - We Think.

This is for all of you out there missing (as we do) the wit and wisdom of our blogger emeritus Mark Herrmann.  Well, he's back ... er bock.  We think, anyway.

We've heard it from the horse's ... OK, we'll say mouth ... that Mark will be returning in the near future as a part-time guest blogger (Mondays and Thursdays) - on in-house counsel issues - at Above the Law.  We just went looking for the formal announcement, but didn't see one.

We still believe it's coming.  When we get it, we'll supply a link (if Mark rates a separate sub-URL at ATL).  Here we are, Mark, entertain us.

Sunday, November 14, 2010

Spoiler Alert: TwIqbal Applies to Removed Case

That spoiler alert is tongue-in-cheek. It seems perfectly obvious to us that TwIqbal would apply to a case that was removed to federal court. Law school was a long time ago, but we seem to recall the Supreme Court saying that federal procedural rules govern cases in federal court. Hanna v. Plumer, 380 U.S. 460 (1965), is still good law, right? And it's not as if the issue hasn't surfaced before. In Braden v. Tornier, Inc., 2009 WL 3188075 (W.D. Wash. Sept. 30, 2009), the court had no problem applying the federal pleading standard to a removed case. Then again, at least one federal court discussed state pleading standards, leaving us to scratch our cyberheads. See In re Avandia, 2009 WL 1708078 (E.D. Pa. June 17, 2009).

So the clear reasoning in Maness v. Boston Scientific, et al., 2010 U.S. Dist. LEXIS 118748 (E.D. Tenn. Nov. 4, 2010), comes as welcome relief. The plaintiff sued Boston Scientific and other plaintiffs, alleging that an implanted spinal cord simulation system caused her "much pain and suffering and massive infection." Maness, 2010 U.S. Dist. LEXIS 118748 at *4. The plaintiff brought the case in Tennessee state court, and the defendants subsequently removed the case to federal court on diversity grounds. The issues were whether TwIqbal applied and, if so, whether the complaint met the TwIqbal standard. The answers, according to the court, were Yes and No, respectively.

The court didn't even get into the old Hanna v. Plumer chestnut. Instead, it took a simpler approach. First, Iqbal held that the Twombly pleading standard applies to all civil cases in federal court. Ashcroft v. Iqbal, 129 S. Ct 1937, 1953 (2009). Second, other cases in the Sixth Circuit had applied Twombly to to federal diversity cases. See, e.g., Wilkey v. Hull, 366 App'x 634, 637 (6th Cir. 2010). Third, the Supreme Court long ago held that the Fed. R. Civ. P. govern proceedings in federal court after removal. Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70, 415 U.S. 423, 438 (1974). Therefore, "[i]t does not matter whether Plaintiff's claims are based on state law or federal law: all claims, once removed to federal court, are subject to federal pleading requirements." Maness, 2010 U.S. Dist. LEXIS 118748 at *8-9.

On the merits Maness is a case that product liability defendants will want to cite.

The complaint in Maness flunked those federal pleading requirements badly. The plaintiff thought it sufficent that the complaint put the defendants on notice that it was "a product liability case, that the Defendant[s] are the maker of a defective product, and that this defective product had to be removed from the Plaintiff's body." Id. at *11. Not even close, at least not under TwIqbal.

Most notably, the court considered the complaint allegation that the spinal implant was "defective" to be nothing more than a legal conclusion. "Plaintiff must allege facts for the Court to infer that the Device was 'defective' or 'unreasonably dangerous' at the time it left the control of the manufacturer." Id. at *12. Nothing like that exists in the complaint. The court required facts regarding the specific problems with the product such as, for example, that tests showed the product was out of specification in a way that interfered with its intended characteristics. Id. at 20-21.

Even if there were an adequate factual allegation of defect, the complaint "did not allege facts for the Court to infer that the condition of the Device -- based upon an alleged design or manufacturing defect - caused her alleged injuries." Id. at *22. It was not enough for the plaintiff to allege that the device caused her pain. "The relevant question is not whether the Device caused her pain; the issue is whether the alleged defective design or manufacturing of the Device caused her pain." Id. Again, the complaint did not include such factual allegations. Thus, because the complaint offered only labels, conclusions, and formulaic recitations, it was dismissed puruant to TwIqbal.

How many product liability complaints have we seen that are no better than the one thrown out in Maness? A lot more than any other kind. This is good stuff.

Now we can already hear some suggesting that there is something unfair about applying TwIqbal to a complaint that the plaintiff filed in state court. How could the plaintiff know that it must comply with the more stringent state standard? That whining reminds us of George Costanza's response on being fired for having - ahem - inappropriate relations with the cleaning lady on his desk at work. "Was that wrong? Should I not have done that? I tell you, I gotta plead ignorance on this thing, because if anyone had said anything to me when I started that that sort of thing was frowned upon...."

Look, why not include basic facts about product defect and causation in the complaint, no matter what the jurisdiction? Isn't it better to tell the story? Was it really so hard to foresee the probability of removal? It turns out not to matter, because the federal court's dismissal was with leave to amend. The plaintiff can take her best shot at complying with TwIqbal. Unlike Frasier Crane in one of our favorite episodes of Cheers, we're in no position to issue a spoiler on how it all ends.

Friday, November 12, 2010

Defense Personal Jurisdiction Briefs Filed

We blogged before about the two "stream of commerce" personal jurisdiction briefs that are currently before the Supreme Court.  In both cases the defendants (foreign corporations) are the petitioning party, so their briefs are due first.  They've been filed.  For those readers interested in such questions, here are links:

(1) the defendant/petitioner's merits brief in Goodyear v. Brown.
(2) the defendant/petitioner's merits brief in J. McIntyre Machinery v. Nicastro.


Guest Post - False Claims and Purportedly "Defective" Medical Devices

We're hosting a guest post today - the long title of which is "Can a Manufacturer Be Held Liable Under the False Claims Act if It Delivers Defective Medical Devices to the Government?"  This post was contributed by Antonia Guiliana, a partner at Kelly Drye, who, from her online resume knows a lot about qui tam actions and how to defeat them.  If you've got complements or criticisms, please direct them to her, since what follows is 100% hers.


The False Claims Act (or the “FCA”) is being used with increasing frequency and vigor against the drug and device industry. Here are some statistics:

• In 2010 alone, the federal government has already collected $3.1 billion in FCA cases. Eighty percent (80%) of these proceeds came from health care companies, including insurers and hospitals.

• Pharmaceutical companies made up 8 of the 10 largest FCA settlements in 2010.

• Ten of the world’s top twelve pharmaceutical companies have entered into corporate integrity agreements (“CIAs”) with the federal government in connection with large scale FCA settlements.

The False Claims Act, which was enacted in 1863 during the height of the Civil War to penalize vendors who sold nonfunctional gunpowder, unhealthy mules, rancid food, and faulty guns to the Union Army, and lay relatively dormant until 1986, is now, according to the plaintiffs’ bar, “the principal weapon in the government's arsenal to combat healthcare fraud.”  How this happened is a story for another day, but for purposes of this post, all one needs to know about the FCA is this:  The FCA, as originally enacted, and as it stands today, contains qui tam provisions which enable private citizens (known as “whistleblowers” or “relators”) to bring civil actions for violations of the Act on the government’s behalf.  The financial rewards available to whistleblowers make qui tam litigation very attractive to relators and their counsel, especially in actions against large health care institutions where a single settlement or judgment can exceed tens, if not hundreds, of millions of dollars.  The relator’s “cut” is typically between 15-30% of the proceeds recovered in the action.

Since the mid-late 1990s, plaintiffs have been testing the limits of the FCA in health care litigation and have been asserting increasingly creative and far-fetched theories of liability against drug and device companies for various types of alleged conduct, including deceptive marketing practices, off-label marketing, failure to pay the appropriate Medicaid rebate, and inflated published prices.  The recent $750 million GSK settlement indicates that a new theory of liability is in play – the violation of Good Manufacturing Practices in the production of drugs and devices.

And then this [ed. note - now "last"] week, in United States ex rel. Steury v. Cardinal Health, Inc., 2010 WL 4276073 (5th Cir. Nov. 1, 2010), the Fifth Circuit rendered a decision that brings yet another potential theory of FCA liability into play – whether the FCA is violated if a company sells the government medical equipment that the company knew was defective and unsafe.

Why would a plaintiff want to bring an FCA action when it can simply file a products liability suit to address such conduct? There are two principal reasons for this.  First, an FCA plaintiff does not need to establish that it was injured by a product defect to bring a claim.  Rather, an FCA plaintiff must simply be aware of an alleged fraud committed against the government and then establish that the allegations in the qui tam complaint were not previously publicly disclosed, or if they were, that the plaintiff is the original source of the information.  Second, the damages in an FCA case can be huge.  Once FCA liability is established, the plaintiff is entitled to treble damages and penalties which can range from $5,000 - $10,000 or more per violation.  As discussed above, the relator’s “cut” ranges between 15-30% of the recovery, which can be huge in a case against a major drug or device manufacturer.  In the recent GSK settlement, a the whistleblower received $96 million, which is reported to be the largest FCA payout to a single individual in history.

And now on to Steury’s story…

At issue in Steury was whether the knowing delivery of defective products to the government violated the FCA.  Leslie Steury, the relator in the action, worked for Alaris Medical Systems as an account consultant.  As an account consultant, Steury marketed medical devices, including Signature Edition Infusion Pumps (“infusion pumps”) to hospitals, including children’s hospitals and hospitals operated by the Veteran’s Administration, from March 1996 until her termination in late September 2001.  The infusion pumps were electrical devices designed to regulate the rate at which intravenous fluids flow into patients.  Alaris started selling the infusion pumps nationwide in 1996 but stopped doing so in August 2006 after 1,300 of the products were seized by the FDA for an unrelated problem.  In her FCA complaint, Steury alleged that the infusion pumps had a dangerous defect that could cause air bubbles to accumulate and release into a patient’s intravenous line, potentially causing serious injury or death.  She alleged that she first became aware of this defect in October 2000 when a pediatric anesthesiologist at a children’s hospital in Akron informed another Alaris employee that an infusion pump had injected air into his patient’s intravenous line and that a similar problem had been reported at a children’s hospital in Philadelphia.  Seven months later, in May 2001, Steury allegedly met with Alaris’s area manager and nurses from the Akron children’s hospital to discuss concerns about the infusion pumps.  During this meeting, Alaris’s area manager allegedly discredited a nurse’s report of an infant mortality related to an intravenous air bubble.  One month later, in June 2001, Alaris’s area manager informed Steury that Alaris had temporarily suspended shipments of the infusion pumps while it reviewed the air bubble defect, but nonetheless directed Steury to continue marketing the infusion pumps.  Steury was terminated in September 2001 before she received an answer about the company’s review of the alleged defect.

Almost six years later, in May 2007, Steury filed an qui tam complaint under seal against Cardinal Health (Alaris’s successor) alleging violations of the federal FCA and a number of state FCAs.  In January 2008, the United States filed a notice that it declined to intervene in the suit (which is typically a sign that the government believes the merits of the case are weak, the damages are small, or both).

In the Fifth Circuit, to state a claim under the FCA, a plaintiff must allege: (1) a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that is presented to the Government.  Two key allegations in Steury’s complaint attempt to establish FCA liability.  First, she alleged that a “claimant submits a false or fraudulent claim within the meaning of the FCA when he submits a claim for payment for the Government for products that contain defective parts.” (Am. Compl. ¶ 51).  Second, she alleged that by “accepting payment from the federal Government or one of its agencies for the SE infusion pumps, Cardinal Health knowingly misrepresented that the SE infusion pumps were safe, reliable and quality-assured.” (Am. Compl. ¶ 52).

Cardinal Health moved to dismiss the complaint pursuant to Rules 9(b) and 12(b)(6).  The district court agreed and dismissed the case, and for reasons unclear from the opinion, declined to give Steury an opportunity to amend the complaint to try to cure the pleading defects.

In an effort to “streamline” the appeal, Steury pressed only one substantive contention: that Cardinal Health made a false certification (i.e., a false statement) to the Veteran’s Administration that the infusion pumps complied with the warranty of merchantability.  Steury did not assert that Cardinal Health actually made this certification.  Rather, Steury alleged that Cardinal Health, impliedly, and falsely, certified compliance with the warranty of merchantability simply by requesting payment for the infusion pumps.

Before we go any further, we need to talk a little bit about the express and implied certification theories of liability under the FCA.  A plaintiff may establish a false statement under the FCA (element #1) by alleging that when the government expressly conditions payment of a claim upon a claimant’s certification of compliance with a statute or regulation, a claimant submits a false claim when he falsely certifies compliance with that statute or regulation.  This is known as “express certification” and is recognized in many Circuits. Fewer Circuits (specifically, the Second, Sixth, Ninth, Tenth, and Eleventh Circuits) also recognize something called “implied certification” as a basis for establishing a false statement under the FCA.  The implied certification theory of liability “is based on the notion that the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are a precondition to payment.”  Mikes v. Straus, 272 F.3d 687, 699 (2d Cir. 2001).

In Steury’s case, the Fifth Circuit observed that it had not yet recognized the implied certification theory, but did not yet have to resolve the issue because the allegations in Steury’s complaint provided no basis for implying a false certification.  The court observed that “a false certification of compliance, without more, does not give rise to a false claim for payment unless payment is conditioned on compliance.”  Applying this principle to Steury’s case, the court found “no indication that the Government conditioned payment for the Signature pumps on a certification that the Signature pumps complied with the warranty of merchantability.”

While the court closed one door on Steury, it opened another when it stated later in the opinion:

We do not suggest, however that a knowing delivery of defective goods to the Government will never implicate the FCA.  Particular government contracts may specifically condition payment on a certification of compliance with the warranty of merchantability.  Other courts have suggested that the knowing provision of ‘worthless’ goods or services to the Government may violate the FCA. (citations omitted).  Steury has not yet pursued or briefed these theories, however, so we need not address them here.  Finally, although we have held that a knowing attempt to deceive the Government about the nature of commercial items may violate the FCA, the district court was correct in concluding that Steury has so far failed to allege this type of claim with particularity.

The Fifth Circuit then remanded the case to the district court with instructions to permit Steury to amend her complaint as “we cannot say that the defects in Steury’s complaint are necessarily ‘incurable’ or that amendment would be futile.”

It will be interesting to see if Steury can follow the Fifth Circuit’s guidance and file an amended complaint that can withstand dismissal under Rules 9(b) and 12(b).

Thursday, November 11, 2010

Ready for Redhibition

We were dealing recently with a case from Louisiana and we found ourselves once again confronted with that peculiar cause of action, “redhibition.”  A redhibition claim is something like an implied warranty claim, see Gomez v. St. Jude Medical Daig Division Inc., 442 F.3d 919, 931 (5th Cir. 2006) (describing redhibition as “Louisiana's equivalent to a breach of implied warranty”), and a little like a consumer fraud action, but not really either.  It’s neither fish nor fowl. Hence our reaction when, over a decade ago we first encountered this type of claim – whiskey tango foxtrot?

Redhibition is a Louisiana peculiarity (like the Napoleonic Code, elections that ignore political parties, and parasol twirling football fans shouting "who dat?"), and the folks way down yonder liked it enough that they excepted redhibition from the Louisiana Product Liability Act, which subsumes just about every other product liability cause of action known to man (and some - "unreasonably dangerous per se" - that aren't).  See La. Rev. Stat. §9:2800.53(5) (defining “damage” to include economic loss except for amounts recoverable as “redhibition”); Aucoin v. Southern Quality Homes, LLC, 984 So.2d 685, 691 n.8 (La. 2008) (redhibition survives LPLA).  However, redhibition survives only as to economic losses in products cases.  Pipitone v. Biomatrix, Inc., 288 F.3d 239, 251 (5th Cir. 2002) (LPLA “preserve[es] redhibition as a cause of action only to the extent the claimant seeks to recover the value of the product or other economic loss”) (applying Louisiana law); Nelson v. Mylan Pharmaceuticals, Inc., 2010 WL 3339274, at *3 (W.D. La. Aug. 3, 2010) (same).

Redhibition is one of those claims that’s often pleaded (at least in Louisiana) but rarely pursued or proven in prescription medical product cases.  But every so ofteh, one must vote for the crook, it's important.

Since others are no doubt in the same boat, we thought we’d offer a little primer on redhibition.  First of all, redhibition is a form of statutory warranty that effectively cancels a sale for “redhibitory defects”:

The seller warrants the buyer against redhibitory defects, or vices, in the thing sold.

A defect is redhibitory when it renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect. The existence of such a defect gives a buyer the right to obtain rescission of the sale.
A defect is redhibitory also when, without rendering the thing totally useless, it diminishes its usefulness or its value so that it must be presumed that a buyer would still have bought it but for a lesser price. The existence of such a defect limits the right of a buyer to a reduction of the price.
La. Civ. Code. Ann. art. 2520.

Thus, the product must not only be “defective” in the product liability sense (of being unreasonably dangerous), but must also be totally or partially useless.  Sheridan v. Merck & Co., 2003 WL 22902622, at *3 n.3 (E.D. La. Dec. 8, 2003).  The plaintiff has the burden of proving a redhibitory defect.  Grenier v. Medical Engineering Corp., 243 F.3d 200, 207 (5th Cir. 2001) (applying Louisiana law).  Failure to distinguish between a product liability defect and a redhibitory defect is grounds for reversal of a redhibition verdict.  Safeco Insurance Co. v. Chrysler Corp., 834 So.2d 1026, 1044 (La. App. 2002).

The statute describes a contract, not a tort, cause of action.  Nelson Radiology Associates, LLC v. Integrity Medical Systems, Inc., 16 So. 3d 1197, 1210 (La. App. 2009).  Despite the nature of the redhibition action, there’s no requirement of contractual privity.  Aucoin, 984 So.2d at 692.  Because it’s a contractual action, redhibition is essentially a form of strict liability.  Nelson, 16 So. 3d at 1209 (“manufacturer of product with redhibitory defects is “conclusively presumed to have knowledge of defects in the object it produces,” and is “deemed to be in bad faith in selling a defective product”).

Like strict liability, a plaintiff who did not use the product has no redhibition claim.  Leblanc v. Wyeth, Inc., 2006 WL 2883030, at *4 (W.D. La. Oct. 5, 2006).  Also like strict liability, a redhibition plaintiff has the burden of proving causation.  In re Vioxx Products Liability Litigation, 2010 WL 2649513, at *21 (E.D. La. June 29, 2010); Maurer v. Heyer-Schulte Corp., 2002 WL 31819160, at *5 (E.D. La. Dec. 13, 2002).

The legal elements that the courts have developed for a redhibition claim largely track the statute but add a notice and opportunity provision.

(1) the thing sold is absolutely useless for its intended purposes, or that he would not have bought it had he known of the defect; (2) that the defect existed at the time that he purchased the thing, but was neither known nor apparent to him; and (3) that the seller was given the opportunity to repair the defect.
Alston v. Fleetwood Motor Homes of Indiana, 480 F.3d 695, 699 (5th Cir. 2007) (applying Louisiana law).  The defect at the time of sale requirement was applied in a device case in Zachary v. Dow Corning Corp., 884 F. Supp. 1061, 1067 (M.D. La. 1995).

By the way, the “absolutely useless” language sounds something like the design defect claim for prescription medical products that was recognized by the Restatement (Third) of Torts, Products Liability §6(c) (1998) (no “reasonable health-care provider” would prescribe “for any class of patients”), although we haven’t seen any cases making that analogy.

Why else do plaintiffs like redhibition?  Importantly, uselessness/reduction in worth is determined by an objective reasonable man standard divorced from any particular buyer.  “[T]he inquiry under a redhibition claim does not involve the buyer’s subjective knowledge or reliance, but rather is an objective inquiry into the deficiency and whether it diminishes the product’s value or renders it so inconvenient that the reasonable buyer would not have purchased it had he known of the deficiency.” Mire v. EatelCorp., Inc., 849 So.2d 608, 614 (La. App. 2003).  Thus, it has potential as a basis for class actions, since it’s an economic loss cause of action.  But if the product isn’t totally useless a “seller may be allowed credit” for the value that was provided. La. Civ. Code Ann. art. 2545.  Since most drugs and medical devices aren’t totally useless – demonstrated over and over again in other economic loss contexts – the availability of an individualized credit works against class actions.

Not only that, but like a consumer fraud statute, redhibition allows recovery of “attorney fees, in addition to the purchase price and expenses occasioned by the sale.”  Nelson, 984 So.2d at 1211.  Fortunately, attorneys’ fees are recoverable only “insofar as those fees relate to the recovery of purely economic loss.”  Id.  Because manufacturers of products with redhibitory defects are deemed to be in bad faith, the plaintiff may also recover loss of income as an element of damages.  Gaston v. Bobby Johnson Equipment Co., 771 So. 2d 848, 854-55 (La. App. 2000).

As far as defenses, we can tell you that the learned intermediary rule applies in warning-based redhibition cases.  Cobb v. Syntex Laboratories, Inc., 444 So.2d 203, 205-06 (La. App. 1983).  Redhibition claims are expressly preempted in cases involving PMA medical devices.  Gomez, 442 F.3d at 931; Lemelle v. Striker Orthopaedics, 698 F.Supp.2d 668, 674-78 (W.D. La. 2010).  A feasible alternative design requirement has been imposed in design-based redhibition claims.  Brown v. Brown & Williamson Tobacco Corp., 479 F.3d 383, 390-91 (5th Cir. 2007) (applying Louisiana law).

Makers of non-defective component parts are not liable for redhibitory defects in a finished product.  Longo v. E.I. Dupont De Nemours & Co., 632 So.2d 1193, 1197 (La. App. 1994) (TMJ implant case); Klem v. E.I. DuPont De Nemours & Co., 19 F.3d 997, 1003 (5th Cir. 1994) (applying Louisiana law) (same).

The statute of limitations (known in Louisiana as “prescription”) for redhibition is “one year from the day the defect was discovered by the buyer.”  La. Civ. Code Ann. art. 2534(B); Lanzas v. American Tobacco Co., 46 Fed. Appx. 732, 733 (5th Cir. 2002) (applying Louisiana law).

Sharp-eyed readers may note that we haven’t mentioned punitive damages. That has nothing to do with redhibition, as such.  Rather, Louisiana does not allow punitive damages generally, unless statutorily provided – which is not the case with redhibition.  Ivory v. Pfizer Inc., 2009 WL 3230611, at *8 (W.D. La. Sept.30, 2009); Cheeks v. Bayer Corp., 2003 WL 1748460, at *1 (E.D. La. March 28, 2003).  Punitive damages?  Who dat?

Anyway, after four years, we've finally managed to write a post on a Louisiana topic.  Laissez les bon temps rouler.