Friday, December 31, 2010

A Happy New Year To Our Readers

On this last day of the 2010, we'd like to wish our readers a happy, healthy, and prosperous new year.  To all our defense side readers, we further wish you success in winning your cases.

Now, because we are the Drug and Device Law Blog, we can't just leave our post just at that.  Two things:

Yesterday the Montana Supreme Court, reaffirmed the learned intermediary rule, although holding that the duty to warn extended to all of the medical personnel - including nurses - who treated the plaintiff.  Stevens v. Novartis Pharmaceuticals Corp., DA 10-0029  slip op., at 30 (Mont. Dec. 30, 2010) ("[w]e concur with authorities who consider the learned intermediary to be the healthcare professional actually responsible for making decisions related to the patient’s care").   It did so, however, in the context of ruling for the plaintiff on limiting the rule to prescribing physicians.

And aside from generally reaffirming the rule, Stevens is a not anything to be happy about this new year.  For one thing, it adopts cross-jurisdictional class action tolling, contrary to all but a couple of states.   That's pretty bad - don't let anybody tell you the Montana Supreme Court is "conservative" on tort issues.  It isn't.


Point #2.  Full-blown chaos has developed in the Pennsylvania federal district courts on the Azzarello/Restatement Third issue - demonstrating, we think, precisely why stare decisis is a good idea.

Since we wrote our last post on the subject back in March, three more cases have been decided.  Two of them, Covell v. Bell Sports, Inc., 2010 WL 4783043 (E.D. Pa. Sept. 8, 2010), and Hoffman v. Paper Converting Machine Co., 694 F. Supp.2d 359 (E.D. Pa. 2010), did the right thing and followed applicable Third Circuit precedent - Covell on the admissibility of industry and governmental standards, 2010 WL 4783043, at *4-7, and Hoffman on feasible alternative designs. 694 F. Supp.2d at 365-66.

Then along comes this stinkeroo, Sweitzer v. Oxmaster, Inc., 2010 WL 5257226 (E.D. Pa. Dec. 23, 2010), where the court admits it's result "may appear to be at odds with certain Third Circuit Court of Appeals case law" - that is to say Berrier v. Simplicity Manufacturing, Inc., 563 F.3d 38, 53 (3d Cir. 2009), where the Third Circuit, after an exhaustive review of Pennsylvania law, predicted that Pennsylvania would adopt the Third Restatement of Torts.

Sweitzer decides to ignore Berrier based upon such profundities as "that result has not materialized" and it has "not found any Supreme Court or Superior Court post-Bugosh decision that has applied the Third Restatement."  Well, duh.  It hasn't materialized - that's why we refer to Erie predictions as "predictions."  And sure, there isn't any Pennsylvania state precedent - we're still waiting on the Supreme Court, and the Superior Court, as a lower court, is bound - just as Sweitzer is supposed to be bound by Berrier.

But Sweitzer ignores the Third Circuit essentially because it's uncomfortable with what the Third Circuit did in Berrier.  It's decision to exclude industry standards evidence, 2010 WL 5257226, at *10-11, puts it in direct conflict with the earlier Covell decision.  Thus, we have chaos.  Despite an on-point Third Circuit decision, we have the spectacle of the Pennslyvania district courts running around like chickens with their heads cut off deciding the same issues willy-nilly based upon personal preferences without regard for binding precedent.

It's obvious from the snide remark in Sweitzer - "Without addressing the question of whether or not Berrier amounts to excessive prognostication under Erie," 2010 WL 5257226, at *4 - that this particular judge doesn't think much of Berrier.  Whether or not Berrier was right, it's binding.  Rather than descending into decisional chaos, however, the jurisprudential thing to do would be to certify the issue for interlocutory appeal.  Then the Third Circuit could kick the issue over to the Pennsylvania Supreme Court (like it tried to do in Berrier), and maybe this time the right court could decide once and for all what Pennsylvania law is.

Albus Dumbledore should have been a federal judge.  Sometimes courts have to choose what is right over what is easy.

So Happy New Year to all - and may the new year be an improvement on the old.

Thursday, December 30, 2010

New Fentanyl Decision A Mixed Bag (But Good Where It Matters Most)

A few weeks ago, a judge for the Southern District of Ohio, applying Ohio law, granted in part the defendants’ summary judgment motion in a fentanyl patch case. Importantly, the court killed the plaintiff’s core failure to warn claim, as well as smacking down a “fraud on the FDA” claim in cursory fashion. Miller v. ALZA Corp., 2010 WL 5287514 (S.D. Ohio Dec. 17, 2010). The decision is strong on warning causation and Buckman preemption, and is notable for those reasons alone. It’s just too bad the court let some other flimsy design defect, manufacturing defect, and fraud claims survive.

Fentanyl patches deliver narcotics to patients with severe chronic pain. Fentanyl is a really, really powerful drug, and doctors know this; it’s about 80 times stronger than morphine. Miller, 2010 WL 5287514, at *1. The plaintiff brought an action under Ohio law as administrator for the estate of a fentanyl patient who died after suffering a fentanyl overdose. The evidence suggested that an excessive amount of fentanyl leaked through the patch, leading to “fentanyl intoxication.”

The core failure to warn claim alleged that the defendants should have warned of the risk of overdose “by leaking or otherwise.” Id. at *3. The plaintiffs proffered a couple of warnings experts – neither of them medical doctors – who opined that the label should have instructed doctors to check for leaks, and should have warned doctors that, even when used “appropriately,” the patches can result in serious consequences, including death. Id. at *3-4. The decedent’s prescribing physician, however, testified that even an allegedly “adequate” warning, along the lines of what the experts recommended, would not have made a difference. The court found that the prescribing physician testified “unequivocally” that he would have prescribed the patch even if specifically warned about leakage or the risk of death, and knowing everything he knows, the doctor still would prescribe the patch to the decedent. Id. at *5-6.

The plaintiff attempted to manufacture a warning causation fact issue by pointing to testimony suggesting that the prescriber “would have more closely monitored” the decedent had there been a more specific warning in the package insert relating to the risk of overdose. Id. at *6. On this point, it was refreshing to see the court’s approach; rather than denying summary judgment in knee-jerk fashion, the court looked critically at the plaintiff’s monitoring argument and concluded that it didn’t add up, for a couple of reasons. First, the doctor testified that he was already generally “monitoring” the decedent “on a daily basis” because of the decedent’s radiation treatment. Second, the doctor testified that the actual fentanyl level in the decedent’s bloodstream was “irrelevant” to the doctor’s treatment decision. Finally, the prescriber testified that he would have never read fentanyl level tables in the package insert. Id. at *6-7. So there you have it: sticks by the decision, wouldn’t do anything different, and wouldn't even read the additional risk information – a veritable triple crown of helpful prescriber testimony, and in Ohio, worthy of summary judgment.

The opinion is also notable for its cursory smackdown of the plaintiff’s “fraud on the FDA” claim, and wholehearted embrace of Garcia v. Wyeth-Ayerst Labs., 385 F.3d 961 (6th Cir. 2004). The plaintiff, of course, said that he was not attempting to assert a Buckman-preempted claim for “fraud on the FDA,” but the Complaint told another story: “Defendants fraudulently and in violation of applicable regulations of the FDA, withheld [information] from the FDA known to be material and relevant to the harm that the claimant allegedly suffered, or misrepresented to the FDA information of that type.” Id. at *13 (alteration in original). That sure does smell like Buckman­ preemption to us, and we’re glad the court wasted no time seeing through the plaintiff’s ruse.

Because the court allowed design defect, manufacturing defect, and fraud claims to survive, the case is more of a solid double than a home run. But those claims are teetering too. The design defect claim survived only because the defendants did not assert that fentanyl is “unavoidably unsafe” and thus entitled to the protection of Ohio’s statutory equivalent of comment K (Ohio’s one of those goofy places where some courts make the “unavoidably unsafe” determination on a case-by-case basis, rather than treating the whole category of prescription drugs under the comment K rubric per se). The manufacturing defect and fraud claims survived because the court found some “circumstantial” evidence propping up those claims, even though there was no direct evidence that the patch malfunctioned, and plaintiff failed to identify any misrepresentations allegedly made by the defendants. Overall, however, the good outweighed the bad in this opinion, and future Ohio defendants will certainly add Miller to their arsenal of good cases on warning causation/fraud on the FDA.

Wednesday, December 29, 2010

Top Ten Best Prescription Drug/Medical Device Decisions Of 2010

We hope all our readers had excellent holidays, didn’t get stranded in the snow (here on the US East Coast), and received lots of desired presents due to what the economic stats we’ve seen are saying has been a better than expected retailing season.  That is, it’s better than expected if you’re a retailer or a recipient.  For those of us who have to pay the bills … well, we won’t go there and ruin the good cheer.

Good cheer it is, too, as today’s post is devoted to our favorite drug/medical device judicial decisions of 2010.  There've been a raft of good decisions, although none from the United States Supreme Court, for all us practitioners on the right (in more ways than one) side of the “v.” to be thankful for.  Indeed, we confess that depending on the day, any of the first three cases could have been ranked as number one.  We’ve changed the rankings ourselves since we first started thinking about this list a couple of weeks ago.

So here are our best of 2010 – the decisions that had us happily typing away on “breaking news” and other posts throughout the year.

1. UFCW Local 1776 & Participating Health & Welfare Fund v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010).  Stick a fork in economic loss class actions derivative of supposed product liability defects – they’re done.  That’s what we thought when we first read this widely anticipated decision, which reversed the #2 worst decision of 2008.  Third party payers cannot prove reliance on a classwide basis even under what plaintiffs considered their last, best hope of a theory, RICO.  Try as they might, purveyors of class actions can’t escape the intensely individualized medical decisionmaking process that underlies any prescription of drugs (and presumably medical devices).  Whether it’s called “reliance” or “causation,” allegedly inadequate information must affect a doctor’s prescription decision, and the gambit of using TPPs as proxies doesn’t obscure that fact.  We ultimately put this Zyprexa decision first because of its broad implications for all of our clients, particularly if the result had gone the other way.  Unless the Supreme Court were to change class action law adversely in the pending Dukes case (unlikely), we don’t think there’s much of a future for class actions (economic loss or otherwise) based upon supposed safety defects in drugs.  We discussed the decision as breaking news here and in more detail here.

2. Bryant v. Medtronic, Inc., 623 F.3d 1200 (8th Cir. 2010).  Here, we had to decide whether to go with an industry-specific, or a state-specific case.  Then last week the Seventh Circuit forced our hand by dropping Bausch on us like a humongous lump of coal into our stockings.  That moved Bryant up because, if not for Bryant, the entire post-Riegel preemption model we’ve been advocating for two years might have been knocked down by one adverse circuit decision (shades of Mason).  But with Bryant as the first appellate decision, we’ve got a direct circuit split, with perhaps an avenue to the Supreme Court (and the Medtronic folks must be tearing their hair out watching their competitors mess up the law).  Anyway, Bryant demonstrates the power of preemption, affirming our #7 best case of 2009 and defeating an entire MDL at a stroke.  The opinion is great on preemption principles, particularly the interplay between express and implied Buckman preemption in parallel violation claims – something we’ve consistently advocated on this blog.  Bryant is an absolute must read for any PMA medical device defendant thinking about a preemption motion.  For good measure the Eighth Circuit also trashed the “suspect motives” behind the plaintiffs’ attempt to recuse the judge.  And to think, but for a fortuitously delayed settlementBryant almost never saw the light of day.  We rather gleefully blogged about Bryant here.

3. White v. Wyeth, ___ S.E.2d ___, 2010 WL 5140048 (W.V. Dec. 17, 2010).  Hellhole?  What hellhole?  Our number three case is courtesy of the West Virginia Supreme Court of Appeals – which places two decisions in our top ten this year.  The court first held that any private action under the West Virginia consumer fraud statute required reliance as an element – at least in affirmative misrepresentation cases (the only theory at issue).  That alone would be hugely significant, because reliance is the D's chief bulwark against class actions in consumer fraud cases.  Not stopping there, the court went on to hold that:  (1) “because the consumer can not and does not decide what product to purchase” when a prescription is required, and (2) “the high degree of federal regulation,” by the FDA, prescription medical products are not subject to consumer protection claims at all.  That's right - never.  In addition to its considerable merits, White has a couple of other implications, first the emphasis on the role of the prescribing physician suggests an opportunity for reconsideration of the execrable Karl decision (cited only as “but see”) rejecting the learned intermediary rule.  Second, since White obliterated the legal theory underlying the class action/collateral estoppel case now pending (Smith v. Bayer, 09-1205) in the Supreme Court, might that case now be moot?  We previously discussed White here and here.

4. West Virginia v. Johnson & Johnson, ___ S.E.2d ___, 2010 WL 4709084 (W. Va. Nov. 18, 2010).  Reversing a really scary – and totally erroneous – multi-million dollar trial court verdict, the West Virginia Supreme Court of Appeals held that a company receiving an FDA warning letter is not collaterally estopped from disputing the FDA’s assertions in court.  At quite some length, the court agreed with the position taken by this blog that FDA warning letters, being tentative, preliminary, not final agency action, etc., can’t collaterally estop anybody from contesting anything.  Note the caption.  This was an attorney general action.  We’re frankly shocked that the coercive power of any state would be put behind such a flimsy theory.  That made the case doubly scary.  Thus, we’re doubly pleased to see this “egregious” (the court’s word) theory done away with.  We blogged about this case here.

5. Robinson v. McNeil Consumer Healthcare, 615 F.3d 861 (7th Cir. 2010).  There wasn’t much good preemption news on the prescription drug side in 2010.  Robinson was a searchlight shining in the darkness, and from an unexpected quarter.  The court found – in an OTC drug case – that the FDA’s rejection of a petition to add a warning about the same risk that the plaintiff advocated was “clear evidence” of conflict with the FDA as required by Levine to preclude suit over the warning.  Given how poorly preemption has fared recently, that might not be enough to reach the top ten, but Robinson (yes, it’s Posner) contains a rich vein of other legal nuggets, on choice of law, contributory negligence, causation, overwarning, and warranty.  We discussed the preemption aspect of Robinson here, and mined the other nuggets here.

6. Kilpatrick v. Breg, Inc., 613 F.3d 1329 (11th Cir. 2010).  Kilpatrick is our pick as the best Daubert decision of 2010.  Unlike many cases, this court did not let the plaintiff’s expert get away with anything.  On general causation, the expert cherry picked five articles from the medical literature.  The court examined each article individually and determined that none of them was reliable.  On specific causation, the court tore the expert’s purported “differential diagnosis” to shreds, holding that under Daubert an expert must take idiopathic (that is, unknown cause) occurrences of a disease into account and that a differential diagnosis based upon temporal relationship is unreliable.  We’d like to see more courts engage in Kilpatrick-level critical analysis of junk science.  We blogged acout Kilpatrick here.
7. Wyeth, Inc. v. Blue Cross & Blue Shield of Alabama, 42 So.3d 1216 (Ala. 2010).  This is another important class action decision, albeit since it’s under state law, of less potential scope than UFCW1776.  The court vacated a 2004 nationwide (!!! a pre-CAFA case) class certification of third-party payer claims for economic loss from the withdrawal of a prescription drug from the market.  The court held that, yes, even under an unjust enrichment theory, you can’t certify a class involving the laws of all fifty states.  That’s a given in federal court, but it’s gratifying to have state high courts adopt the same principle.  The decision would have ranked higher, had the court also thrown out the TPP class for lack of standing (the TPPs didn’t lose any money).  We delved into Wyeth v. Blue Cross here, albeit on the standing issue.

8. IMS Health, Inc. v. Sorrell, ___ F.3d ___, 2010 WL 4723183 (2d Cir. Nov. 23, 2010). It’s not product liability, but rather a First Amendment case that combines excellent reasoning with potentially broad implications.  In a transparent attempt to hamstring pharmaceutical marketing, the state of Vermont made it illegal for data miners to sell physician prescribing information to pharmaceutical companies.  Rejecting a prior First Circuit decision – and thereby creating a direct circuit split – the court held that the state had unconstitutionally restricted truthful corporate commercial speech.  The court found the state’s interest speculative (in part), it’s methods indirect, it’s motives pretextual and paternalistic, and its approach overly restrictive of free speech about pharmaceutical products.  The circuit split means the issue might interest the Supreme Court.  Any commercial speech case involving pharmaceutical marketing necessarily implicates the FDA’s ban on truthful promotion of off label use, the demise of which would be a huge development.  We blogged about Sorrell here.

9. Cochran v. Wyeth, Inc., 3 A.3d 673 (Pa. Super. 2010).  How long would trials be if, instead of focusing on the injury allegedly suffered, the plaintiff could also attack warnings about risks that s/he never even encountered?  Well, in Cochran, the labeling warned very explicitly about the injury the plaintiff had, but not about a more common but considerably less serious risk.  The plaintiff claimed that, despite an adequate warning of the actual injury, the prescription would never have happened if the other risk had been mentioned.  Yeah, right - but it may well overcome summary judgment if the theory itself were viable.  This sort of non-injury warning theory is both attenuated and expansive.  Fortunately, Cochran said “no way” and held that “proximate cause,” the policy-based limits to remote causation, barred claims over warnings of injuries that a plaintiff never actually had.  We’re happy and relieved to see this obscure liability theory stay that way.  We discussed Cochran here.

10. O’Connell v. Biomet, Inc., ___ P.3d ___, 2010 WL 963234 (Colo. App. March 18, 2010), review denied, 2010 WL 4851480 (Colo. Nov. 30, 2010).  We like ringing appellate (heck, any) endorsements of the learned intermediary rule, especially in jurisdictions where the high court hasn’t settled the law.  O’Connell was the best of the year by far in that regard.  While it may be stretching things to say that O’Connell is the first Colorado decision ever to “directly” address the learned intermediary rule, it’s certainly the best, not to say the most recent.  Nor did the court clutter its opinion with any discussion of exceptions, whether relevant or otherwise.  As a cherry on top, there’s also a nice “captain of the ship” ruling concerning the presence of a manufacturer’s representative during surgery.  We told readers about O'Connell here.

That’s ten, but we find we still have a bunch of smaller, but quite nice, judicial presents under our 2010 tree.  Rather than allow them to go entirely unmentioned, here the next ten in summary form:

Honorable mentions:  (11) Guinn v. AstraZeneca Pharmaceuticals LP, 602 F.3d 1245 (11th Cir. 2010) (good Daubert opinion (temporal/differential diagnosis) affirming our #8 from last year, and helping kill off the Seroquel MDL; see our post here); (12) Ranes v. Adams Laboratories, Inc., 778 N.W.2d 677 (Iowa 2010) (a state supreme court applying its Daubert equivalent rigorously; a welcome change, as we discussed here); (13) Clark v. Pfizer, Inc., 990 A.2d 17 (Pa. Super. 2010) (class decertification affirmed; Pennsylvania really doesn’t like fraud on the market theories; we covered the decision here and here (as a exemplar of fraud on the marked jurisprudence)); (14) Hazlehurst v. HHS, 604 F.3d 1343 (Fed. Cir. 2010)/Cedillo v. HHS, 617 F.3d 1328 (Fed. Cir. 2010) (a bit out our sweet spot, but this pair killed off vaccine-autism litigation – some of the most socially harmful litigation of all time; for Hazlehurst see here, and for Cedillo here); (15) In re Oxycontin II, 908 N.Y.S.2d 239 (N.Y.A.D. 2010) (reversing last year’s #10 worst; forum non conveniens will not be diluted in mass torts; we hailed the decision here); (16) In re Baycol Products Litigation, 596 F.3d 884 (8th Cir. 2010) (good Daubert affirmance and sensible ruling on unjust enrichment (“the drug did it’s job", go away); (17) In re Neurontin Marketing & Sales Practices Litigation, ___ F. Supp.2d ___, 2010 WL 5037005 (D. Mass. Dec. 10, 2010) (dismissing most of long-running off-label promotion litigation on causation/non-reliance grounds; we were all over it, here); (18) In re Digitek Products Liability Litigation, 2010 WL 2102330 (S.D.W. Va. May 25, 2010) (certification of five class actions denied on grounds that pretty much cover the class action waterfront; we dug it, here); (19) In re Trasylol Products Liability Litigation, 709 F.Supp.2d 1323 (S.D. Fla. 2010) (Suzanne Parisian’s legal conclusions and other “expert” testimony excluded; nuff said; we celebrated here); (20) In re Yasmin & Yaz (Drospirenone) Marketing, Sales Practices and Products Liability Litigation, 692 F. Supp.2d 1012 (S.D. Ill. 2010) (we’ve complained before about the Southern District of Illinois' crabbed approach to fraudulent joinder; this Y&Y case forthrightly breaks with those decisions; we blogged about it here).

Looking ahead to next year, there’s a raft of interesting Supreme Court cases on tap.  Foremost from our perspective have to be the two latest FDA preemption cases: the Bruesewitz vaccine case and the Mensing, et al. generic preemption trio.  There’s another non-drug preemption case, Williamson v. Mazda, that bears watching.  Beyond preemption, there are the two Supreme Court personal jurisdiction cases, Brown and Nicastro, and of course the Dukes class action whopper.

Other candidates – barring Supreme Court certiorari grants (notoriously difficult to predict) – are Hamilton v. Centocor (this year’s #4 worst) already in the Texas Supreme Court; Bartlett (#8), a lock for an appeal to the First Circuit; and possibly Lance (#6), with a petition pending in the Pennsylvania Supreme Court.  The various MDL decisions:  Gadolinium (#5), Fosamax (#7), ObTape (#9), and Levaquin (#10), all will require an individual case as an appellate vehicle.  We believe that’s in the works for all, save perhaps the first.  Of the cases we like, only Cochran (#9), with a petition pending, is reviewable at anything below the United States Supreme Court level.

On a more general note, there have been quite a few dismissals recently of cases involving:  (1) PMA preemption, (2) Conte-type theories of name-brand liability in generic cases, and (3) economic loss actions brought by third-party payers.  Given that volume, we would expect 2011 to see important appellate decisions addressing these issues.

Monday, December 27, 2010

It's Not A Wonderful Opinion

As Andy Williams sings, "it's the most wonderful time of the year." This year we made one of those English puddings. We poured cognac over it, set it on fire, and carried it proudly to the table. The flavor was awful (like a barbecued fruit-cake) but the presentation was splendid. Nobody was hurt, putting aside insulted taste-buds. We're at the age now where it's much more fun to give presents than receive them. And when the weather outside really did turn frightful, that just provided an excuse to stay inside, cozy up with family, and watch It's a Wonderful Life for about the 300th time.

On Christmas Eve, our good friends at the Abnormal Use blog mentioned the legal inaccuracies in Miracle on 34th Street. We think It's a Wonderful Life is a much better film and it, too, has a couple of legal aspects to its story. (We're not even taking into account how if George had not intercepted Mr. Gower's poisoned pills, some opportunistic plaintiff lawyer would no doubt have sued both the pharmacist and the drug company.)

But our thoughts were far from drug-and-device law issues. At least they were until we got a peek at the Seventh Circuit's opinion in Bausch v. Stryker Corp., No. 09-3434, slip op. (7th Cir. December 23, 2010). It was like somebody dumped a load of coal under our tree. In Bausch, the plaintiff brought claims under Illinois law alleging negligence and strict liability against the manufacturers, distributors, and sellers of the Trident hip replacement system. The district court held that the claims were preempted under Riegel and dismissed the claims without leave to amend. The Seventh Circuit played Grinch by reversing the district court and offering an "analysis" that is jaw-droppingly bad. The sheer awfulness of the opinion is so vast in scope and depth that it warrants a later, longer post by us, perhaps after we pack up the nutcrackers and take down the icicle lights. But here are a few lowlights to tamp down your holiday exuberance:

- We know things are going to end up badly when the court early on says: "The idea that Congress would have granted civil immunity to medical device manufacturers for their violations of federal law that hurt patients is, to say the least, counter-intuitive."

- The court views Riegel as an inconvenience that must be limited wherever possible. Bausch is one of those parallel claims cases where the plaintiff doesn't specify what the federal violations are that somehow establish negligence per se.

- The court's discussion of Illinois law ignores controlling precedent that rejects FDA-based negligence per se. See Martin v. Ortho Pharmaceutical Corp., 661 N.E.2d 352 (Ill. 1996), which states specifically about the FDCA:

[T]o determine whether a cause of action for a violation of section [an FDA regulation] exists, we examine whether such a cause of action has been recognized by the Federal courts or whether recognizing such a cause of action comports with Federal legislative intent. This inquiry forecloses plaintiff's cause of action. Federal courts have uniformly refused to imply a private cause of action under the Food, Drug and Cosmetic Act (FDCA), under which [this] Federal regulation … was promulgated. . . . [lots of citations omitted]

While plaintiffs concede that Federal courts have held that no private cause of action exists under the FDCA, they suggest that these decisions are irrelevant since plaintiffs rely on the regulation to establish defendant's duty, and do not attempt to bring an action directly under the FDCA or its accompanying regulations. [lengthy discussion of Grove Fresh Distributors, Inc. v. Flavor Fresh Foods, 720 F.Supp. 714 (N.D. Ill. 1989) omitted]

Grove Fresh is of no avail to plaintiffs. The FDA regulation at issue in Grove Fresh was relevant to the issue of whether defendant violated the Lanham Act – an act which, by its express provisions, provided an independent statutory basis for plaintiff’s private cause of action against defendant. In contrast, the instant plaintiffs cannot provide any independent basis for their cause of action, thus rendering Grove Fresh inapplicable.
661 N.E.2d at 355-56. The cause of action envisioned in Bausch does not exist under Illinois law.

- The court acknowledges that "a jury deciding a common law claim might apply those requirements more stringently than the FDA intended," but is willing to live with that risk because the court can interpret federal requirements, such questions of law will be "subject to the usual processes for reconciling conflicting views," [huh?], and the requirement of more specific allegations is "more slippery and less workable than its proponents acknowledge." Apparently there is nothing slippery and unworkable at all in letting plaintiffs plead vapors, followed by boundless discovery.

- Buckman does not dislodge "a traditional state tort law claim for an adulterated product," even if that's not really what plaintiff alleged. Get a load of this gobbledy-gook: "The evidence showing a violation of federal law shows that the device is adulterated and goes a long way toward showing that the manufacturer breached a duty under state law toward the patient." That's not analysis, that's rationalization.

- The court goes with the dissent, not the majority opinion, in In re Medtronic, Inc., Sprint Fidelity Leads Products Liability Litigation, 623 F.3d 1200 (8th Cir. 2010). The main point of that dissent seems to be that plaintiffs need discovery before they can be expected to plead the sort of facts that TwIqbal require. Discovery solves everything. Never mind that crazily expensive discovery was a major reason that TwIqbal demands that plaintiffs plead more than formulaic recitations.

- The court relies on Hofts v. Howmedica Osteonics Corp., 597 F. Supp. 2d 830 (S.D. Ind. 2009), a case so bad it made our ten worst of 2009 list. Remember who wrote Hofts? District Court Judge David Hamilton. He was later elevated to the Seventh Circuit. Want to guess who wrote the Bausch opinion? Oh, and want to guess whether we would have included Bausch to our ten worst of 2010 list if it had come out just a wee bit sooner?

Bausch is, in short, a tour de force of bad drug-and-device jurisprudence. It takes some doing to get Riegel, Buckman, and TwIqbal so utterly wrong. Let's turn away from it for now, shake off the dust of that crummy opinion, and wander back to Bedford Falls.


It's a Wonderful Life hit the screens in December 1946. That meant it had to compete for Best Picture with The Best Years of Our Lives. It didn't win. But it did make more money in 1947 than Miracle on 34th Street. So it's got that going for it, which is nice. Over time, it has become one of the best loved pictures ever. And to think it almost starred Cary Grant or Henry Fonda instead of Jimmy Stewart, almost starred Ginger Rogers instead of Donna Reed, and almost starred Edward Arnold (no, not the guy from Green Acres) instead of the great Lionel Barrymore. It's been sent up by the Muppets (who did, after all, filch the Bert and Ernie names from the film) and the Simpsons.

It's a Wonderful Life used to be replayed endlessly on television in December, because the film had not renewed its copyright and fell into the public domain. But some sharp lawyers ended up successfully enforcing a derivative copyright for the film (based on the underlying story by Philip Van Doren Stern), so now NBC shows it only twice. Lots of us own the dvd, but somehow we crave the communal experience of knowing that millions of people around the country are all at the same time sharing a red letter day with the Baileys, glowering at Mr. Potter, and dabbing their eyes at the end.

About that ending: it was almost quite different. Capra wrote one alternative ending where Uncle Billy remembered how he had mistakenly handed the Building & Loan money to Mr. Potter, who then gets his comeuppance. When you think about it, Mr. Potter should go to jail for keeping that money. But Capra decided to end on a high note.

Every year we sit and watch the movie with the family. Every year something gets into our eye just as George's brother pronounces George to be the "richest man in town." And every year we tick everybody off by saying that Pottersville seems more fun than Bedford Falls, and that George Bailey would still be in serious legal trouble even though the townspeople came forward to donate money to make up for the shortfall. Any prosecutor will tell you that paying money back might help you with the sentence, but it doesn't change the fact that you committed the crime. Yes, that's a very Potter-esque point for us to make. No sentimental hogwash for us.

Oh, who are we kidding? We love sentimental hogwash. We're going to make a donation to the Jimmy Stewart Museum in Indiana, Pennsylvania (which is in serious financial trouble), we're going to ring a few bells and hand out angels' wings, and we're going to take a day or two off from bogus parallel violations, spurious minimizations of preemption, and absurd evasions of TwIqbal.

Thursday, December 23, 2010

Pennsylvania Supreme Court Appears Ready to Reconsider Its Unique Total Offset Method

In almost every jurisdiction in the U.S., an award of damages to compensate an injured plaintiff for wages the plaintiff would have earned in the future must be discounted to present value. In oversimplified form, the basic idea is clear: if you give someone in one lump sum the total amount of wages that the person would have earned over the next 20 years and the person invests it conservatively, that person will have more money after 20 years than the person who worked for 20 years, because the recipient of the lump sum will earn interest in excess of inflation. If you want to compensate the person accurately and put the person in the same position he or she would have occupied after working for 20 years, then you must give the person less than the total of 20 years of wages. If not, the person receives a windfall.

Pennsylvania marches to the beat of a different drummer in many ways, which we have chronicled repeatedly. This is one of them. For 30 years, Pennsylvania has followed its own unique rule called the “total offset method.”

Under the total offset method, a court does not discount the award to its present value but assumes that the effect of the future inflation rate will completely offset the interest rate, thereby eliminating any need to discount the award to its present value. . . . Since over the long run interest rates, and, therefore, the discount rates, will rise and fall with inflation, we shall exploit this natural adjustment by offsetting the two factors in computing lost future earning capacity.
Kaczkowski v. Bolubasz, 421 A.2d 1027, 1036-38 (Pa. 1980). The rule has the virtue of simplicity, but simplicity is not the highest virtue, or else Sarah Palin would be Pope.

We could be charitable and say that Kaczkowski made sense in 1980, when the inflation rate was 13.5%. After all, the Captain and Tennille and leisure suits made sense in 1980 to some people. But in fact, Kaczkowski was criticized from the moment it was decided. See, e.g., Michael T. Brody, Inflation, Productivity, and the Total Offset Method of Calculating Damages for Lost Future Earnings, 49 U. Chi. L. Rev. 1003 (1982). The comments from people who actually know something about the relationship between inflation and interest rates have been particularly biting: “Untroubled by economic theory, and characterized by spectacular award error rates, Kaczkowski epitomizes junk science in the courtroom.” Robert F. Pelaez, Pennsylvania’s Offset Rule: Fantasy Masquerading as Economics, 5 J. Legal Econ. 1 (Winter 1995). And, of course, the total offset rule totally overcompensates plaintiffs. One study found that the overcompensation to a young plaintiff with many years of lost wages could approach 100%. Id.

What Kaczkowski did was take a momentary economic blip – the “oil shock” generated inflation spike of 1979-80 – and cast it in the stone of stare decisis. The economic history of the next thirty years demonstrates that the economic assumptions in Kaczkowski are, with all due respect, 100% hogwash. A real interest rate does, in fact, exist. If it didn’t, that is, if inflation always equaled return on investment, then nobody would have much incentive to invest and the economy would have collapsed long ago.

All of this brings us to Helpin v. Trustees of University of Pennsylvania, Nos. 36 & 37 EAP 2009 (Pa. Dec. 21, 2010). Helpin was a breach of contract case brought by a doctor against Penn, and the doctor won an award of lost future income from the profits of a business. For whatever reason (it seems odd to us, but we are loath to second-guess counsel’s litigation strategy without knowing more than what is stated in the opinions), Penn did not ask the Pennsylvania Supreme Court to overturn Kaczkowski. Majority op. at 10 n.3, 17 n.6. Instead, Penn argued that Kaczkowski applied only to lost wages and not to lost profits. The Court rejected that argument and affirmed the damage award. Majority op. at 13-17.

That’s not what’s fascinating about Helpin. What’s far more interesting from our perspective is the dissent.

Even though Penn had purposely refrained from attacking Kaczkowski frontally, three Justices (out of seven on the Court) joined a dissenting opinion that eviscerated Kaczkowski and concluded that “lump-sum awards based on lost future income should be discounted to present value.” Dissent at 1. The dissent noted that most everyone agrees that the inflation rate actually does not totally offset rates on safe investments: “simply because the two rates ‘rise and fall’ together, it does not follow that they are numerically identical.” Id. at 3. The dissent also found that the total offset method was “overly compensatory,” widely criticized, and not required in any other jurisdiction. Id. at 6.

The majority responded to the dissent’s criticisms of the total offset method in a final footnote. Majority Op. at 17 n.6. The majority reiterated that the only question before the Court was whether Kaczkowski should be applied in this context, not whether it should be overturned. Id. The majority stressed that “[t]he instant case does not present an appropriate forum for a consideration of whether Kaczkowski was wrongly decided and ultimately should be overturned.” Id. The majority also noted that Kaczkowski’s flaws were not argued or ruled on below. “Thus, in the absence of any testimony or other evidence of record, it would be imprudent to conclude here that Kaczkowski’s theoretical underpinnings are weak and its basic assumptions are unsupportable.” Id.

In other words, even the majority did not say Kaczkowski was right, only that the issue was not properly presented. That does not bode well for the poor sap who will defend Kaczkowski after all these years when the issue is properly presented.

Here’s what this case means for defense lawyers handling personal injury cases governed by Pennsylvania law: now is the time to ask the Pennsylvania Supreme Court to overturn Kaczkowski. The three dissenting Justices appear poised to reverse this relic from 1980. Reading between the lines of footnote 6 of the majority opinion, one or more Justices in the majority might entertain reconsidering the total offset method if the question were properly presented. Although the ideal case would follow the majority’s suggestion to have “testimony or other evidence of record” showing that “Kaczkowski’s theoretical underpinnings are weak and its basic assumptions are unsupportable,” majority op. at 17 n.6, at least three Justices apparently would not require such a record. If an objection to the total offset method were lodged in the trial court and properly preserved, the basic economic facts that interest rates do not cancel out inflation rates can be established from many sources that the Court should accept.

So, Pennsylvania lawyers, eat your roast beast and figgy pudding or Chinese food, and then come back after the holidays and begin the assault on Kaczkowski. It is time to bring this outdated slice of Pennsylvania law into line with economic reality.

Wednesday, December 22, 2010

Bottom Ten Worst Prescription Drug/Medical Device Decisions Of 2010

We’re doing it again. At the end of the year, we like to look back over where we’ve been for the past twelve months.  As always, that long and winding road had a few bumps along the way.  It’s the jarringness of those bumps that we’re rating today.  That’s right, just as we’ve done for the past three years, we’re rating the ten worst prescription medical product liability decisions of 2010.  These lumps of coal in our stocking come from all over – from federal and state courts, from hellhole jurisdictions and from hellhole wannabes.

Sure, there’s a week and a half left for the other side to play “Can You Top This,” and a bad Supreme Court decision to finish off the year could throw everything that follows into a cocked hat, but that’s life in the blogosphere.  We always reserve the last week of the year for something more fun, specifically celebrating the top ten best decisions.

But to get to the best, we have to get through the worst.  So let’s get it over with – here are the ten bumpiest bumps in the road, or lumpiest lumps in our stockings – our bottom ten worst judicial drug and device decisions of 2010.

1. Wimbush v. Wyeth, 619 F.3d 632 (6th Cir. 2010).  In the wake of Wyeth v. Levine, 129 S. Ct. 1187 (2009) (last year’s #1 worst), we've endured a lot of bad preemption decisions in prescription drug cases.  Some we pretty much expected.  Some we didn’t.  Wimbush is one we didn’t, because the claim in question wasn’t anything resembling the warning claim that the Supreme Court said it was reviewing in Levine.  Instead, Wimbush (known as “Longs” in the district court) involved – and we quote – “claims that [the defendant] was negligent for bringing [the drug] to market at all.”  619 F.3d at 641.  In other words, the claims at issue had nothing to do with warnings, and everything to do with a direct challenge to the FDA’s decision to approve a drug in the first instance.  That wasn’t Levine.  If anything, those claims were closer to the claim of “duty to contraindicate” an FDA approved drug use that the Levine Court specifically stated it wasn’t deciding (presumably because it couldn’t muster an anti-preemption majority).  129 S. Ct. at 1194.  In a decision that permits a direct conflict between a state law claim (you should never have sold the product at all) and the FDA approval that was in force at the time of the plaintiff’s prescription, Wimbush folded, spindled, and mutilated both Levine and the FDA, holding that there was no preemption even in a raw conflict (yes vs. no) situation.  619 F.3d at 644-45.  All we can do now is hope that the Supreme Court grants review of the inevitable certiorari petition, as the Sixth Circuit denied en banc review on October 14, 2010.  We've previously decried Wimbush in greater detail here.

2. Wyeth v. Rowatt, ___ P.3d ___, 2010 WL 4812919 (Nev. Nov. 14, 2010).  As we mentioned before, we’re limited on what we can say about the substance of Rowatt because we do hormone therapy defense, too.  Rowatt takes #2 because it’s an extremely adverse decision by a state supreme court.  It’s not so much the issues that the opinion decided, although they’re bad enough (especially the holding that a defendant can be liable for punitive damages despite complete compliance with the FDA’s detailed regulatory scheme, id. at *13-14), but the sheer amount of error that was waved off in order to affirm a huge (almost $58 million) verdict.  There are at least four places where the Rowatt court found that the trial court erred (improper causation instruction, id. at *11-12; misleading life expectancy instruction, id. at *13 n.9; inflammatory closing argument, id. at *17 n.11; the jury deliberating, and awarding, punitive damages, in the compensatory phase of trial, without any instructions from the trial court, id. at *15, 20-21).  Didn’t matter; all harmless.  That last point, the runaway jury awarding punitive damages on its own volition, particularly troubles us, because in Phillip Morris USA v. Williams, 549 U.S. 346, 357 (2007), the Court held that proper jury instructions concerning “third party injury” evidence are constitutionally required.  For a jury to decide punitive damages without any instructions at all (regardless of then returning almost identical numbers during a do-over), seems to us to be a per se violation of Williams. This is another case where a certiorari petition is now the defendant’s only hope.  Following the adage that, if you can’t say anything nice (and are prevented from doing the opposite), don’t say anything at all, we haven’t blogged before about Rowatt.

3. Mason v. SmithKline Beecham Corp., 596 F.3d 387 (7th Cir. 2010).  Another truly awful prescription drug preemption decision in the wake of Wyeth v. Levine.  It’s not quite as bad as Wimbush because at least Mason involved a warning claim.  But it’s still pretty bad because Mason was the first post-Levine appellate decision involving SSRIs and suicidality – an issue that the FDA looked at many times and (as to adults, anyway) has always concluded that the scientific evidence was insufficient to warrant the warning the plaintiffs demanded.  In fact, these SSRI cases were what bothered the FDA (back when Clinton was president) enough that it got involved with the preemption issue to start with.  It’s not just losing preemption in Mason that bothers us (although that does sting), but the intellectual dishonesty of the decision.  To rule against preemption, Mason took the result in Levine and then added to it the Levine facts as found by the Levine dissent, which of course considered those same facts to weigh favor of preemption.  596 F.3d 392-93.  Only by thus creating a legal chimera, could the decision hold that the outcome of nearly a decade of FDA review of the precise risk at issue wasn’t preemptive.  We made these points (and more) about Mason here.

4. Centocor, Inc. v. Hamilton, 310 S.W.3d 476 (Tex. App. 2010).  The most pro-plaintiff court of appeals (so we’ve been told) in Texas reached way out to hold that Texas would become the second state in the country (after New Jersey over a decade ago) to recognize a blanket exception to the learned intermediary rule for direct-to-consumer advertising.  Id. at 504-07.  The decision is a reach, first, because every other Texas case to consider a DTC exception (admittedly not a whole bunch) had trampled it underfoot.  But Hamilton is even more of a stretch because … it’s not even a DTC advertising case.  The allegedly inadequate material was sent to doctors – not patients.  Id. at 486 (plaintiff only received video after the prescription had “already been made”).  There was no non-physician-mediated contact at all between the plaintiff and the defendant manufacturer.  Hamilton lunged for the DTC exception because all the doctors treating the plaintiff were well aware of the risk at issue, id. at 483-86, so something new was necessary to side-stepp prescriber knowledge that would otherwise be fatal to a nearly $5 million verdict.  We pointed out these flaws in Hamilton here, and we’re pleased to note that, as of this writing, it appears likely that the Texas Supreme Court will hear a further appeal.

5. In re Gadolinium-Based Contrast Agents Products Liability Litigation, 2010 WL 1796334 (N.D. Ohio May 4, 2010).  We’ve already described this error-fest here.  To recap, the decision:  (1) applied radically different degrees of scrutiny to expert opinions, depending on which side offered them, compare id. at *6-7, *18-19, *22-23, with, id. at *26-31; (2) allowed plaintiff’s experts to discount “unknown” causation mechanisms, id. at *3-4; (3) let in a variety of junk science (in vitro, in vivo, etc.) when the plaintiffs offer it, id. at *7; (4) allowed use of ADEs as evidence of causation, despite the FDA saying they’re useless for this purpose, id. at *9-11; (5) let plaintiffs’ experts offer legal opinions, particularly about preempted fraud on the FDA issues, id. at *11-17; (6) allowed testimony about foreign regulatory actions under different administrative schemes; id. at *17; and (7) precludes defense witnesses from offer legal opinions opposed to the plaintiff’s experts because the court disagrees with them on the merits.  Id. at *30-31.  To top it off, despite a second chance to reconsider its rulings – the court instead kept digging.  See 2010 U.S. Dist. Lexis 122797 (N.D. Ohio June 18, 2010) (denying reconsideration).  We called it “spherical error” then. We call it #5 now.

6. Lance v. Wyeth, 4 A.3d 160 (Pa. Super. 2010).  We’ve become involved in this case since the Superior Court decided it, so once again we find we’re limited in what we can say.  Lance is another example of the disturbing trend in post-Levine cases for plaintiffs to push for – and, worse, for courts to allow – “design” related claims against prescription drugs that are really frontal assaults on FDA drug approval decisions.  Here, the claim was “negligent design,” which had never before been recognized in a prescription drug product liability case in Pennsylvania.  4 A.3d at 165-66.  Disturbingly, the opinion does not discuss the requirement, imposed in negligent design cases involving other products, that the plaintiff must prove the existence of a safer alternative design.  Compounding matters, Lance also included gratuitous dictum suggesting that a post-sale duty to warn may exist in prescription drug cases, id. at 167-68 – despite that theory being a form of strict liability, which Pennsylvania doesn’t recognize at all in prescription medical product litigation.  If not for other, favorable, aspects of Lance (rejecting the “unreasonably dangerous product theory allowed in Wimbush and also failure to test or to recall), Lance might rank even higher/lower.  We discussed Lance here. An appeal to the Pennsylvania Supreme Court is pending.

7. In re Fosamax Products Liability Litigation (Boles), 2010 WL 3955814 (S.D.N.Y. Oct. 4, 2010).  By the numbers:  (1) The first trial ended in a hung jury.  (2) On retrial the plaintiff’s counsel “antics,” were (in the words of the judge) “outrageous,” and “unprofessional.”  Id. at *14-16.  (3) Plaintiff’s closing included “a roundabout attempt to put the issue of punitive damages [which had been dismissed] before the jury.”  Id. at *18.  (4) The jury then returned a multimillion dollar verdict – considerably larger than even plaintiff had requested.  Id.  Then, that verdict is … sustained?  Id. at *17-18.  Unbelievable.  For this reason alone Boles would warrant consideration for our bottom ten.  We’re sorry, but no remittitur can cure a verdict created in this fashion.  But Boles is even worse.  It’s yet another example of the post-Levine plaintiffs’ frontal assault on FDA drug approvals, as the prevailing theory was that the drug “is unreasonably dangerous in that its risks outweigh its benefits.”  Id. at *6.  The opinion found the jury’s rebalancing of the FDA’s risk/benefit determination not preempted.  Id. at *10-11.  Just to permit this claim under state (Florida) law, the decision cast aside both a section of the Third Restatement and a state statutory presumption of product adequacy from FDA compliance.  Id. at *7-8.  The decision then held that the risk in question (never before mentioned in the scientific literature at the time of plaintiff’s use) was “foreseeable” by piling rubbish (anecdotal ADEs that didn’t mention the risk either) atop junk science (animal studies).  Id. at *9-10.  We blogged about this peculiar result here and here.

8. Bartlett v. Mutual Pharmaceutical Co., 2010 WL 2765358 (D.N.H. July 12, 2010).  As in Lance, there are other rulings in this decision that keep it from being a total downer, meaning that it doesn’t rank higher on our list.  What puts our teeth on edge is, once again, that the decision allows a “design defect” claim against an FDA-approved prescription drug – and holds that the plaintiff doesn’t even have to prove an alternative design.  Id. at *9-10.  Ouch.  That means that the plaintiff automatically  gets to have the jury second-guess the FDA’s balancing of risks and benefits, something we think is bad law and worse policy. We blogged about this opinion here, and about the $21 million verdict that this pure risk/benefit theory later produced here.  An appellate result in Bartlett thus has a significant chance of making our good or bad lists in 2011.

9. The Obtape trilogy.  It took the Obtape MDL three opinions to reach legal depths that Gadolinium achieved in a single bound.  These were:  (1) In re Mentor Corp. ObTape Transobdurator Sling Products Liability Litigation, 2010 WL 1664965 (M.D. Ga. Apr. 22, 2010), allowing expert opinion piled high with anecdotal evidence; (2) In re Mentor Corp. ObTape Transobdurator Sling Products Liability Litigation, 2010 WL 1734638 (M.D. Ga. Apr. 23, 2010), admitting preempted fraud on the FDA evidence; and (3) In re Mentor Corp. ObTape Transobdurator Sling Products Liability Litigation, 2010 WL 1727828 (M.D. Ga. Apr. 27, 2010), letting in junk science (animal studies), and allowing expert testimony on questions of law.  We rate this train wreck a few notches lower than Gadolinium, because it lacks the rampant pro-plaintiff bias in its expert rulings (if only because plaintiffs' motions were not also decided).  We blogged about these decisions here.

10. In re Levaquin Products Liability Litigation, 2010 WL 4882595 (D. Minn. Nov. 24, 2010).  This is an absolutely terrible evidentiary ruling out of an MDL plagued with such rulings.  Rule 407 says that subsequent remedial measures are inadmissible – period – to prove defect or negligence.  But Levaquin ignores the plain language of the rule, which had already been amended once to dispose of a similar judge-made loophole, and holds that because FDA label changes are “mandatory,” the “policy” of the rule to encourage voluntary safety improvements isn’t applicable.  2010 WL 4882595, at *1.  The decision adopted this view despite the ruling in Wyeth v. Levine, that label changes can be made voluntarily without FDA preapproval.  For replacing the terms of Rule 407 with a whole-cloth “heads you lose, tails I win” exception admitting subsequent changes to FDA-approved labels, this decision takes the final spot on our list.  We complained about it earlier, here.

Phew!  Glad that’s over.

We even had to cut a few:  Demahy v. Actavis, Inc., 593 F.3d 428 (5th Cir. 2010) (because Mensing (see 2009) got there first, and we’re not sure how we feel about generic preemption after Levine); Hunter v. Shire, Inc., 992 A.2d 891 (Pa. Super. 2010) (one of those terrible forum non conveniens decisions that contributed to Philly (we’d say rather unfairly) being named the #1 hellhole jurisdiction); and Tenuto v. Lederle Laboratories, 2010 WL 625223 (N.Y. Sup. Feb. 17, 2010) (defendant liable for not warning of a 1 in a million risk).

Don’t worry too much about us, though – we’ll be fine after a nice shower and a stiff drink.  After all, from last years bottom ten, two of them (Nos. 4 (Guinan v. A.I. duPont Hospital for Children, 597 F. Supp.2d 485 & 517 (E.D. Pa. 2009)); and 10 (In re OxyContin II, 881 N.Y.S.2d 812 (N.Y. Sup. 2009)) have already been reversed, and a third (No. 6 (Mensing v. Wyeth, Inc., 588 F.3d 603 (8th Cir. 2009) just had certiorari granted by the Supreme Court.

Things will be better next week, we promise, when we present our list of the top ten best drug/device decisions of 2010.

Tuesday, December 21, 2010

Our Ears Are Burning....

Our esteemed blogger emeritus, Mark Herrmann, has some things to say about blogging as a business tool, over at his in-house counsel blog on Above The Law.  Needless to say he uses us as an example.  We're not going to get into personal details (we'll leave that to Mark), but after reading his post - which would be hilarious if it weren't so accurate - we'd have to say that we've done marginally better on the practice development side and marginally worse on the press appearance side (we haven't been on TV).

Thanks Mark - we think.

Hurricane Settlement An Imperfect Storm

Twenty-one million dollars is an awful lot of moola.  Sure, it probably won't even buy you one (at least towards the end of that contract) year of Cliff Lee befuddling opposing batters (yeah, we’re still feeling good about that).  But in almost any situation, $21 million would seem like a pretty significant chunk of change. 

But context is everything.

So we think everyone would agree with us, that $21 million seems like a relatively tiny sum compared to the catastrophic devastation wrought by Hurricanes Katrina and Rita a few years ago.  Yet $21 million was the insurance policy limit for a group of defendants in Katrina-related litigation.  And, not coincidentally, $21 million was the amount to be paid to proposed class members pursuant a “limited fund” class that was just bounced by the Fifth Circuit.  See In re Katrina Canal Breaches Litig., No. 09-31156, slip op. (5th Cir. Dec. 16, 2010).

Our skepticism meters zoom whenever we hear "limited fund" in the same sentence as "mass tort."  It all goes back to the Bone Screw Litigation, where the fix was in over a supposed "limited fund" class action involving one of our co-defendants.  The trial court let both sides get away with it, see In re Orthopedic Bone Screw Products Liability Litigation, 176 F.R.D. 158 (E.D. Pa. 1997), and any objectors were either bought off or scared off.  Within a week of the settlement becoming final - guess what happened?  The supposed "limited fund" company was sold for three times the amount of the [fill in adjective] limited fund.  We concluded then that limited fund settlements in mass torts are rife with potential for abuse, and in Katrina Canal, the court of appeals pretty much agreed with us.

The decision provides valuable lessons, not only for parties trying to craft “limited fund” settlement classes, but for lawyers settling any kind of class or mass action requiring judicial approval.

The Katrina Canal appellants were objecting members of a proposed settlement class of New Orleans plaintiffs who alleged damage as a result of the hurricanes.  A gaggle of cases related to this national tragedy were filed and consolidated in the Eastern District of Louisiana - to the lasting benefit of the New Orleans legal industry.  This proposed settlement class involved a subset of those cases specifically focusing on the failure of certain New Orleans area levees and floodwalls in the aftermath of the hurricanes.  The District Court certified a “limited fund” mandatory class pursuant to Rule 23(b)(1)(B), on the questionable assumption that the defendants had no assets beyond their insurance (or at least that they were willing to pay).

In the settlement the class would receive the policy limit of $21 million in exchange for releasing all hurricane-related claims against the settling defendants.  The agreement also provided that class counsel would not seek attorneys’ fees, and would object if other class attorneys sought fees.  But what the bold-faced print giveth, the fine print tooketh away - class counsel reserved the right to seek both "costs" and “enhanced costs.” Slip op. at 5-7.

Yeah, right.

That was the Fifth Circuit's reaction as well.  Applying Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) - decided two years after the Fanning farce - the Fifth Circuit held that the proposed settlement class suffered from two fatal defects:  (1) there was no procedure in place to equitably distribute settlement funds among the class members; and (2) the parties failed to show that the class members would actually receive some benefit from participating in the mandatory settlement class.  Slip op. at 5.

The court began (echoes of Wyeth v. Levine) by telling us all that it was not deciding the fundamental question of whether it is ever constitutional to certify a mandatory limited fund class in the mass tort context.  Slip op. at 9.  This was the question that Ortiz – an asbestos case – left open, although the Supreme Court’s decision explicitly raised serious Seventh Amendment and Due Process concerns.  Id.  These concerns did not lead to a per se ban on limited fund mass tort classes, but Ortiz counseled in favor of rigorous and narrow application of Rule 23(b)(1)(B) in the mass tort context.  Id. at 10.

Perhaps all those levees were actually knocked down by weakly interacting massive particles.

Having avoided the big question, the analysis in Katrina Canal focused on Ortiz’s Rule 23(b)(1)(B) touchstones – particularly the requirement that “the claimants identified by a common theory of recovery [are] treated equitably among themselves.”  Slip op. at 10 (quoting Ortiz, at 839).  In some ways, the Katrina Canal class was less fractured than the proposed class in Ortiz; most significantly, there was no intra-class “temporal conflict,” where some class members sought compensation for present/past injury, and others wanted an ample fund established for future injury.

But in other ways, the Katrina Canal class was just as badly split.  Most significant, the class was a grab bag of various and sundry injuries.  It lumped together property damage, personal injuries of all kinds, and even death.  Compounding that problem, the settlement did not even attempt to delineate a method for distinguishing the claims of these different plaintiffs from each other.  Slip op. at 12.  This vortex of raging ambiguity gave the District Court pause, but not enough to stop it from moving this messy litigation towards resolution.  The Fifth Circuit said, "whoa!"  It found a fatal flaw because, although a class certification expert (paid by the conspiring ... er ... settling parties) testified at the fairness hearing that the administrator could use a grid or matrix to account for different types and degrees of damage, there t'aint any such animal.  Rather, the settlement lacked any structure for creating, or even outlining, this supposed grid, other than providing for the appointment of a “special master.”  Id. at 12-13.  "Trust us" didn't hack it under Rule 23(b)(1)(B).

Equally troubling, the same expert admitted that the administrative complexities inherent in such a goulash settlement could generate costs that consumed the entire limited fund, which might lead the trial court to ditch any pretense of an actual distribution and decide a cy pres distribution provided greater benefit to the class.  Slip op. at 13.

Ah yes, cy pres - the last refuge of a class action settlement scoundrel.  For more on our extremely negative opinion of the entire concept of cy pres, see here.  To us, any reference to "cy pres" is a dead giveaway that whatever the litigation is, it should never have been brought in the first place, because the plaintiffs can't even prove their own damages - let alone causation.  Someday the Supreme Court....  But we digress.

The Fifth Circuit didn't have to decide that question either, because the deficient settlement agreement didn't address this issue in any concrete fashion.  Once again, this minor detail (whether anybody would actually get anything) was turned into a fudge factor - left to the discretion of the special master and the court down the road.  Slip op. at 13.  That made things easy.  Katrina Canal thus held that the settlement class as structured failed to satisfy (or even really address) Ortiz’s constitutional concerns.  The court quite accurately concluded,
This arrangement simply punts the difficult question of equitable distribution from the court to the special master, without providing any more clarity as to how fairness will be achieved.  The lack of any ‘procedures to resolve the difficult issues of treating such differently situated claimants with fairness as among themselves,’ leads us to reverse the district court’s order certifying this class.
Slip op. at 13 (quoting Ortiz, 527 U.S. at 856).  The Katrina Canal court was satisfied with expressing its Rule 23(e) concerns that the potential cy pres plan was wholly lacking in specifics, making it impossible to determine whether the class would benefit in any way from such an award.  Id. at 17.

A second fudge factor built into the settlement also led the Fifth Circuit to reverse the district court’s Rule 23(e) fairness determination that the proposed settlement class provided a benefit to all class members.  Nope.  “[T]here has been no demonstration on the record below that the settlement will benefit the class in any way, either through the disbursement of individual checks or through a cy pres distribution.”  Slip op. at 14 (our emphasis).  What happened?

Remember that we mentioned at the outset, the saga of the $21 million and the various “costs.”  Well, the Fifth Circuit read the fine print.  First, the settlement contemplated that the $21 million would be reduced to account for administrative costs, including notice costs, special master costs, disbursing agent costs, escrow costs, “and other costs, fees, and expenses incurred in the implementation of the Class Settlement Agreement.”  Slip op. at 15.


Just what did those “other costs” include?  Like just about everything else in this settlement of woeful countenance, it’s not really clear, although the agreement stated that "costs" could include payment of  both sides’ class experts, in the defendants’ discretion.  Id.  How much was that?  Don't know.  The settlement didn't say, and the District Court wasn't very reassuring, even in approving the deal, “[i]t is a reasonable fear that the mere cost of adjudicating individual claims may swallow the entire settlement.”  Slip op. at 15 (quoting In re Katrina Canal Breaches Consol. Litig., 263 F.R.D. 340, 358 (E.D. La. 2009)).

Approvals that tepid don't stand up well on appeal.
Class counsel’s ability to recover not only "costs," but unspecified “enhanced costs” - fudge factor #3 - caused further problems for the settlement class.  Once again, the agreement was suspiciously vague.  Nothing in the record said what either the costs or “enhanced costs” might entail.  At the fairness hearing, counsel conceded that they couldn't even estimate recoverable costs, allowing that the litigation had been “expensive,” and nobody knew what the plaintiffs’ lawyers would seek.  Slip op. at 16 (“a lot of depositions have been taken, a lot of costs have been incurred").

Sounds ominous.

Even more ominous, at least for the class lawyers, was the Fifth Circuit's response.  It rather quickly concluded that the “enhanced costs” provision was a sham - little more than a disguised request for attorney fees.
We agree with Appellants that any “enhancement” of costs is the functional equivalent of a fee.  We have repeatedly held that a district court abuses its discretion if it approves a class action settlement without determining that any attorneys’ fees claimed as part of the settlement are reasonable and that the settlement itself is reasonable in light of those fees.
Slip op. at 17-18.  Because this disguised attorneys’ fee request had not been specifically approved as reasonable by the district court, it ran afoul of Rule 23(e) requirements.

For good measure, Katrina Canal rejected the class notice as insufficient to satisfy Due Process.  That's not really surprising, as the source of the same structural problems that sank the settlement doomed the notice as well.  The Fifth Circuit found the notice misleading in two ways.  First, the notice failed hid the possibliity of cy pres distribution from the class members.  That was important, because cy pres effectively deprives individual plaintiffs of some or all of their recovery.  The further failure to estimate the costs and administrative fees associated with the settlement exacerbated the court's concern that the notice concealed the possibility that the settlement might well be worth zero to any of the class members.  Slip op. at 20.  Second, the court zeroed in on the - we'll be nice and use the court's adjective, "inaccurate" - notice language regarding attorneys’ fees:
Class counsel will not request any attorneys’ fees from the settlement fund. However, Class Counsel may ask the Court for reimbursement of their costs and expenses out of the settlement fund. Other counsel for settlement class members may also request costs and expenses.
Slip Op. at 21.  This language, the court held, failed to tell class members that their attorneys may seek hidden fees in the guise of “enhanced costs,” and failed to tell class members that, although lead counsel was not requesting fees qua fees, other attorneys may seek fees, as opposed to mere “costs and expenses.”  Id.

So what are the lessons learned?

First, if possible at all, it's really, really hard to certify a mandatory class in the mass tort context, because effectively denying an individual his or her right to seek individualized redress seems, well, un-American.  This is especially true because – as defense-minded jurists and lawyers constantly say – individual differences among tort plaintiffs make a class action an impractical and unfair solution, for both plaintiffs and defendants.  In your traditional personal/property injury case, mass tort plaintiffs are snowflakes, just like the rest of us: every one is different.  A mandatory class is like a glacier, erasing those differences in a giant mass that seeks to crush everything before it.

Second, in those rare situations (if any) where a limited fund settlement may be the only solution, any settlement has to take into account and address those differences up front.  The can can't be kicked down the road to some special master or an “administrator” to gin up some way to dole out the limited pool of money.  Instead, come into court with a concrete plan that makes a good faith effort to take into account the individual class members' situations, and equitably distributes the limited fund accordingly.  In the drug/device context, we've seen plenty of  “grids” and “matrices” that attempt, with varying degrees of success, to sort the more injured from the less injured.  The Fifth Circuit’s opinion strongly suggests that a limited fund settlement class without these features is doomed to fail.

Third, beware hidden costs – don't try to hide them.  That’s just a good rule in everyday life, but is even more important in limited fund settlements.  It wasn’t enough in Katrina Canal for plaintiffs’ lead class counsel to forego attorneys’ fees, because the ruse was transparent.  It left open the possibility of undefined costs, including “enhanced costs” (a good title for a history of baseball's recent home run era).  Those enhanced costs may have been legit, or, as the Fifth Circuit found, another name for hidden attorneys’ fee awards, which require judicial approval.  In any event, any settlement, especially of the limited fund variety, needs to at least guesstimate the range of costs at play, give the basis for those costs, and any reasons they may be higher or lower.  When you’re dealing with a pot that's obviously far short of an amount that would compensate the putative class for personal and property losses (questionable in a class context to begin with) – beware including settlement terms that threaten to eat up a significant and uncertain amount of that pot as “costs.”  This goes double in any settlement that contemplates so much additional “administration” down the road.

Fourth, cy pres ain’t a magic word, and may not be proper at all. Sure, plaintiffs’ class lawyers love to throw it around as a panacea – “don’t worry, judge, we trust you to put the money to good use.”  But there can be real problems with a settlement plan that includes an ill-defined or undefined cy pres component, especially where the total pot is small enough that it is unclear the class is getting a benefit at all.  An agreement must:  (1) be honest about the likelihood of a cy pres distribution, and (2) contain safeguards to prevent the money from going to class counsel's law school or some junk science mill.

Fifth, class notice must specifically apprise class members of their rights.  Even - especially - in a mandatory limited fund context, class members have the right to object, as happened here, and a good class notice satisfies Due Process.  If there's a zero option, don't hide it.  When it comes time to talk about what class members may (or may not) receive, and what class lawyers may (or may not) receive in the settlement, it is even more important to use as much precision as possible.

Sixth, these rules are important for both sides of the class settlement dance.  Often, when working on a proposed settlement class, one side or the other (or both) may be tempted to let some issues hang because it's too hard to reach consensus, or too hard, if not impossible, to craft a settlement that's equitable to the settling parties without cratering the settlement.  Putting together an agreement that won't pass judicial muster just wastes a lot of lawyer time and money.  The stakes are heightened in a limited fund case, and so is the level of judicial scrutiny.  In those situations, and really, in any class settlement context, it is prudent for defense lawyers to examine the issues arising from intra-class settlement distribution plans, plaintiff-side legal fees, and administrative costs, rather than throwing up their collective defense-minded hands and saying, “here’s the total amount we’re paying, you figure out how to chop up the money.”  If the settlement falls apart, or is torn apart as in Katrina Canal, defense side aquiescence in leaving tough issues for some later time and place doesn't do our clients any favors.

Seventh, it would be a good idea for the parties in Katrina Canal to become familiar with the ALI's "Principles of the Law of Aggregate Litigation" §3.08 (2010), which addresses what procedures should be followed when a proposed settlement is rejected.

Monday, December 20, 2010

Christmas Comes Early - Great Result in West Virginia

On Friday we supplied you with the key takeaways -- that the West Virginia Supreme Court of Appeals decided: (1) that an action under the West Virginia Consumer Credit and Protection Act alleging affirmative misrepresentation requires proof of reliance, and (2) that a private cause of action under that statute does not extend to prescription drug purchases. White v. Wyeth, No. 35296 (W.V. Dec. 17, 2010). How the court got to that result is sort of interesting, though it also might be an example of not wanting to know how sausages get made.

The plaintiffs brought a class action (never certified) alleging that the defendants used unfair and deceptive practices promoting hormone therapy prescription drugs. Wyeth filed a motion for dismissal or, in the alternative, summary judgment on the grounds that the plaintiffs lacked standing because they couldn't show any causal connection between their claims and any alleged unfair or deceptive practices attributed to Wyeth. The trial court denied Wyeth's motion, but certified the following question to the West Virginia Supreme Court:

Does the 'as a result of' language in Section 46[A]-6-106(a) of the West Virginia Consumer Credit and Protection Act require a plaintiff, in a private cause of action under the Act, to allege and prove that he or she purchased a product because of and in reliance upon an unlawful deceptive act?

The lower court said No. The West Virginia Supreme Court, in an early Christmas present to the defense bar and the forces of common sense, said Yes.

The Product Liability Advisory Council filed an amicus brief to support the defense (the Yes) side, while the West Virginia Association for Justice (guess who they are) and the West Virginia Attorney General (color us unsurprised, though still disappointed) filed amicus briefs supporting the crazy, business-killing (No) side.

Our bias here is extreme (almost as if we were permitted to do replay reviews at an Eagles-Cowboys game), but it just seems obvious that reliance is required. Here is what the West Virginia statute says in pertinent part:

Any person who purchases … goods … and thereby suffers any ascertainable loss of money or property … as a result of the use or employment by another person of a method, act or practice prohibited or declared to be unlawful by the provisions of this article [entitled General Consumer Protection] may bring … [a civil] action … to recover actual damages or two hundred dollars, whichever is greater.

Slip op. at 2, quoting West Virginia Code section 46A-6-106(a).

If the loss must be "a result of the use or employment" of the unfair or deceptive practice, doesn't that mean that the unfair or deceptive practice must have caused the loss? Don't results come from causes? Or have we ceased to understand the English language?

Well, there is one sticking point. When the West Virginia Code defines "unfair or deceptive acts or practices," it includes the following:

(M) The act or employment by any person of any deception, fraud, false pretense, false promise or misrepresentation, or the concealment, suppression or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any goods or services, whether or not any person has in fact been misled, deceived or damaged thereby.

Slip op. at 8-9, quoting West Virginia Code section 46A-6-102(7)M). Ouch - that last clause is ugly. It seems to say that reliance is unnecessary. But the lower court concluded that the more specific "result" language takes precedence over the general definitional provision. Yay. So how does the lower court arrive at the wrong result?

"Based upon the remedial nature" of the statute, the lower court decided that there was no reliance requirement. Slip op. at 6. Huh? One is reminded of Truman Capote's criticism of Jack Kerouac: "That's not writing, that's typing." Lots of statutes have a "remedial purpose." Does that mean that language loses all meaning? Does it mean that plaintiffs must win every argument? Even if you think that "remedial purpose" means that a tie goes to the plaintiff, this isn't a tie. As we said in another context, courts should not disregard the letter of a statute under the pretext of pursuing its spirit. Same here.

The West Virginia Supreme Court of Appeals gets to the right result and overturns the lower court. But it goes through some unnecessary gyrations to get there. Since we've already thrown one literary criticism quote at you, we'll throw another. We reacted to the the court's analysis the way one wag reacted to a Henry James novel: it chewed more than it bit off. A "result" comes from a cause. If somebody would have taken hormone therapy whether or not the allegedly unfair or deceptive act took place, then the usage did not result from the unfair or deceptive act. What's hard about that?

But the court unnecessarily worries about how someone could rely on an omission and ends up deciding that reliance is required only where an "affirmative misrepresentation" is alleged. The court says that when "concealment, suppression or omission is alleged … proving reliance is an impossibility." Slip op. at 17. That's silly. If the plaintiff alleges an omission, then the plaintiff needs to allege -- and eventually prove -- that the plaintiff would have acted differently if the disclosure had been made. That’s standard warning/causation fare. It happens all the time in personal injury cases involving allegedly inadequate warnings. It’s what causation and reliance mean: did the defendant's alleged conduct make any difference? If it didn't, the plaintiff has no business complaining about such conduct.

Let's not look a gift horse in the mouth. The West Virginia Supreme Court of Appeals produces (causes?) the right result in this case and announces an extremely important and useful rule. Affirmative misrepresentations were alleged in the case at hand, so the reliance requirement bites hard on the plaintiffs. And then the West Virginia Supreme Court explains that it does not believe "that a causal connection exists within the context of prescription drug purchases." Slip op. at 18. Why is that? "[B]ecause the consumer can not and does not decide what product to purchase." Id. Prescription drugs are subject to a "high degree of federal regulation" and the physician must "exercises judgment whether or not to prescribe a particular medication." Id. Could it be? Yes, West Virginia, there is a learned intermediary. Those two words do not appear in the opinion, but that's clearly part of what animates the court's opinion. The public policy behind consumer protection acts was to "fill a gap by protecting consumers where product safety was not already closely monitored and regulated by the government." Id. at 19, quoting Victor E. Schwartz, Cary Silverman, Christopher E. Appel, "That's Unfair! Says Who - The Government or the Litigant? Consumer Protection Claims Involving Regulated Conduct, 47 Washburn L.J. 93, 119 (2007).

And so the West Virginia Supreme Court ruled that its consumer protection act "does not extend to prescription drug purchases." Id. at 20. We feel like that kid on YouTube who found exactly the right present under the tree.

Friday, December 17, 2010

Excellent WV Consumer Protection Decision

We'll have a full report on Monday, but the decision of the West Virginia Supreme Court of Appeals in White v. WyethNo. 35296, slip op. (W.V. Dec. 17, 2010), is sufficiently important that we had to throw something up today.  The two most important syllabus points say it all:
5. A private cause of action brought pursuant to the provisions of West Virginia Code § 46A-6-106(a) (2005) of the West Virginia Consumer Credit and Protection Act must allege: (1) unlawful conduct by a seller; (2) an ascertainable loss on the part of the consumer; and (3) proof of a causal connection between the alleged unlawful conduct and the consumer’s ascertainable loss. Where the alleged deceptive conduct or practice involves affirmative misrepresentations, reliance on such misrepresentations must be proven in order to satisfy the requisite causal connection.

6. The private cause of action afforded consumers under West Virginia Code § 46A-6-106(a) (2005) does not extend to prescription drug purchases.
A most deserving hat tip goes to Tom Hurney at Jackson Kelly.