Wednesday, October 31, 2012

Qui Tam Off-label Trick or Treat

This week is scary through and through.  We in the mid-Atlantic region have confronted Frankenstorm, which turned our frontyard into a postapocalyptic scene.  We would not be a bit surprised to espy a zombie lurking behind the overturned pink flamingos.  Then there's the new jobs report, slated to come out in a few days.  That could be deadly for one of the presidential candidates. There will be a Million Muppet March on Washington this weekend.  Grover always frightened us.  Plus, as you may have heard, Big Bird has lately been on the warpath.  But we'd rather be pecked to death by Big Bird than endure yet another country music award show, which graces a network's airwaves this week. (Honestly, can we ever go a fortnight without another of those silly congrat-fests with big hair, bad jokes, and twangy jingoism?  Just asking).  And today is Halloween. 

We're not fans of the modern slasher flicks.  But in our tyke-dom we watched the Creature Features on Saturday nights.  The old Universal Pictures monster movies were our favorites.  Frankenstein, The Wolfman, Dracula, etc. offered good, clean, mildly spooky fun.   Improbable terrors threatened and were inevitably defeated, but there was usually a hint at the end that the ghouls might return.  "We belong dead," the monster says at the end of Bride of Frankenstein, but he would visit us many times, even to pal around with Abbott and Costello. Dracula was always arising again from the grave.  And poor Lawrence Talbot would once more stare at the full moon and feel his hair and nails grow lupine.  The Blob, which was filmed in Philly suburbs, transforms the scripted "The End" into a big question mark. 

Today's case is like a near death experience.  The theory of the plaintiff (in a qui tam suit the proper nomenclature is "the relator") in United States ex rel. Watson v. King-Vassel et al, 2012 U.S. Dist. LEXIS 152496 (E.D. Wisconsin Oct. 23, 2012), is that a doctor can be liable under the False Claims Act for prescribing a drug off-label.  The court ends up dismissing the case, but does not quite administer the authoritative stake in the heart we'd like to see.   As with Freddie or Jason, we might not have seen the last of this nasty apparition. 

The relator, Dr. Watson, filed a qui tam action alleging that another doctor, named King-Vassel, violated the federal False Claims Act by prescribing medications off-label.   Dr. Watson also named other medical providers on a respondeat superior theory, though there was not an ounce of evidence to support that theory (more on that later).  The case was initially sealed while the United States and the state of Wisconsin determined whether to intervene.  They decided not to do so, which is usually, though not always, indicative of a weak case.  It certainly was the case here. 

The relator in this case did some, er, interesting things to construct this lawsuit.   He met an attorney through the International Society for Ethical Psychology and Psychiatry.  Remember that "Ethical" part.  Dr. Watson did further research on bringing a qui tam claim through the website  Then the good doctor placed an ad in the Sheboygan newspaper soliciting Medicaid patients who had received certain medications.  A mother of a child-patient responded to the ad.  Dr. Watson then procured medical records for the child via a release stating that the information was "for the purpose of providing psychological services and for no other purpose whatsoever." In reality, Dr. Watson obtained the records "only to bring the immediate suit." Id. at 3-4.  How disappointing. 

The court ultimately granted the defendants summary judgment and dismissed the complaint because the relator did not prove that the defendant doctor "knowingly caused" a false claim.  Oddly, there is no discussion at all about whether the defendant doctor ever uttered a false statement.  We bet she did not. What is pernicious about the current crop of qui tam pharma false claims act cases is that people and companies are being sued even if they never said anything false.  The Watson case is especially frightening because it suggests that a doctor can be prosecuted for practicing good medicine. Off-label use can be, in many circumstances, the standard of care.

Dr. Watson never showed that the defendant doctor received any Medicaid  reimbursement, or that the doctor knew there would be a Medicaid submission.  The relator offered no expert witness and, according to the court, the absence of expert testimony created a "grand mystery between the time of the prescription and the claim being made to Medicaid.  In many ways, that mystery is like a black box - perhaps Dr. King-Vassel's signature on the prescription set off a series of reactions that on the other side of the box resulted in a false claim, but the churning mechanism on the inside is still a mystery." Id. at 20.  The court also pointed out that Dr. Watson did not offer an expert who would testify that the use of the medicine was off-label or not recognized in the drug compendia. 

Of course, finding an expert to supply such testimony would be relatively easy to do.  To take comfort from the Watson holding would be like whistling past the graveyard.  The problem with the opinion is that it does not foreclose any opportunistic person from transforming a malpractice case - even one where is no real malpractice - into a federal qui tam case.  If you log onto the website, you will see that the plan is to do precisely that.  We are not merely witnessing an accidental mangling of legal principles; it is premeditated murder. 

Perhaps the court took what it thought to be the easy way out in the Watson case because it was particularly offended by the conduct of Dr. Watson.  Indeed, the court imposed sanctions on Dr. Watson.   First, Dr. Watson had learned early on that Dr. King-Vassel was an independent contractor, so the respondeat superior theory was untenable.  Nevertheless, Dr. Watson still dragged the corporate defendant through the discovery process and made it file a summary judgment brief before Dr. Watson would give up the ghost on the respondeat superior claim.  That amounted to torture via litigation, wasting party and court resources, and it could easily have been avoided with a decent amount of pre-complaint investigation. Second, the court was mightily irked at how Dr. Watson conjured up the case by obtaining medical records "in a manner that could best be described as borderline-fraudulent." Id. at 27.  Dr. Watson's "attack here on a single doctor's prescriptions to a single patient does not provide the government with substantial valuable  information, as intended by the qui tam statutes. Instead of providing the government with valuable information, Dr. Watson seemingly sought only to cash in on a fellow doctor's attempts to best address a patient's needs."  Id. at 28. 

That conclusion is right as far as it goes. It simply does not go far enough. If the treating doctor really was trying to practice good medicine, she should not be vulnerable to a false claims action, even if the relator lines up a willing expert and offers the expected incantations.  The Watson court dismissed a bad case. But it should have interred a bad theory.

Monday, October 29, 2012

Food Preemption, and Frankenstorm's Coming

The outdoor furniture is in the garage.  So are the potted plants.  The basketball net, with its 10-foot metal pole and base full of sand, has been pulled down and laid on its side.  Dozens of candles are at the ready, and the bathtubs are filled with water.  The power goes out in this town when it drizzles, and this won’t be drizzle.  So it’s only a matter of time before we'll need those candles.  Frankenstorm is coming. 
So we hope you’ll forgive us for a short post today.  It’s kind of appropriate, though, because the court’s opinion n Lateef v. Pharmavite LLC, 2012 U.S. Dist. LEXIS 152528 (N.D. Ill. Oct. 24, 2012), was very short.  It didn’t take long for the court to apply preemption. 
The plaintiff was an adherent to religious dietary restrictions that prohibited her from eating pork and pork byproducts.  She bought a bottle of Vitamin D tablets whose label mentioned no animal byproducts.  The tablets, however, did contain small amounts of gelatin, which is made from byproducts of animals, including pig.  So the plaintiff sued, filing a class action complaint asserting breach of warranty, unjust enrichment and violations of Illinois’s Consumer Fraud and Deceptive Business Practices Fraud Act. 
So where does the preemption come from?  Well, the FDCA was amended in 1990 by the Nutritional Labeling and Education Act (NLEA), which does just was it says.  It regulates nutrition content claims on food labels.  And it says that “incidental additives,” like the gelatin used in the Vitamin D tablets, which are present in small amounts and provide no technical or functional effect, are exempted from labeling.  Id. at *7-8. 
The NLEA also contained an express preemption clause:
. . .  no State or political subdivision of a State may directly or indirectly establish under any authority or continue in effect as to any food in interstate commerce—(1) any requirement for a food which is the subject of a standard of identity established under section 341 of this title that is not identical to such standard of identity or that is not identical to the requirement of section 343(g) of this title . . . .
21 U.S.C. §343-1(a)(1) (emphasis added). 
That’s about as strong as statutory preemption language gets.  So strong, in fact, that the plaintiff conceded that her claims related to labeling of the gelatin were preempted.  Id. at *9. 
Whew!  That was easy. 
Well, sort of.  The plaintiff took a shot at saving her complaint.  She asserted that defendant stated on its website that consumers can trust it to identify every ingredient of its products.  Id. at *3-4, 8.  These statements, she claimed, were false, and claims based on them are not preempted because they had nothing to do with the label. 
The argument went nowhere.  The court explained that, even though the plaintiff was now pointing to the website, her claim was still based on the fact that the defendant didn’t disclose the gelatin on its label.  Id. at *8-9.  So it was still preempted.  Moreover, the website argument had nothing to do with the plaintiff.  She never said in her complaint that she ever visited, no less than read, the website.  In other words, she had no standing to assert this claim.  Id. at *9-10.  Complaint dismissed.
That was a pretty tidy decision.
Things around here, on the other hand, are not looking so tidy.  The wind is whipping around now.  And the lights have blinked ominously a couple of times.  It’s on its way.  We’re going to pack up the laptop and turn our attention to Frankenstorm.  We’ll see you on the other side.

Friday, October 26, 2012

A Sliver of Impossibilty, Perhaps?

What follows is a guest post by Dick Dean and Corena Larimer at Tucker Ellis, which (other than our home firm) has more subscribers to the Blog than any other.  As usual all the credit (and any blame) for this post belongs to them, and them alone.
The Blog's recent discussion of the recent In re Darvocet, Darvon & Propoxyphene Products Liability Litigation decision, which applied PLIVA, Inc. v. Mensing’s impossibility preemption rationale to a branded manufacturer, had us thinking back to a decision in another Reglan®/metoclopramide case that involved both brand-name and generic manufacturers: Lyman v. Pfizer, Inc., No. 2:09-cv-262, 2012 WL 2970627 (D. Vt. July 20, 2012). Bexis covered much of the decision in an earlier post, but in the wake of the Darvocet decision it’s worth noting Lyman’s support for applying implied “impossibility” preemption to brand-name drug manufacturers. 

In Lyman, the district court in Vermont issued a lengthy decision granting summary judgment for the brand manufacturers and one of the generic manufacturers. Tucked into that decision was a little Mensing nugget for branded manufacturers, though the court didn’t spell it out. (Recall that this is the court that brought Conte innovator liability to Vermont, so don’t expect it to make anything too easy for branded manufacturers.)  

The case revolved around Reglan® and its generic equivalent (metoclopramide). One of the defendants, Wyeth, manufactured brand-name Reglan® at one time but had transferred its rights to Reglan® to another manufacturer back in 2001—several years before the plaintiff began taking the drug.

Of course, that lengthy time gap didn’t stop the plaintiffs from suing Wyeth. They alleged, among other things, that Wyeth was “negligent in its initial design of Reglan as a drug used to treat chronic conditions and incorporating false information into the drug’s label.” Id. at *16. In other words, the plaintiffs argued that Wyeth should have altered Reglan®’s design or label to make the drug safer.

But how could Wyeth have changed the design or label of a drug it no longer had any rights to?

That would be . . . impossible. (Sound familiar?)

Well, that’s exactly what Wyeth told the court. Arguing Mensing, Wyeth pointed out that by the time the plaintiff started taking the drug, Wyeth could no longer change the label independently or unilaterally—the test articulated by Mensing—because it had sold those rights long ago. See PLIVA, Inc. v. Mensing, 131 S. Ct. 2567, 2579 (2011) (“The question for ‘impossibility’ is whether the private party could independently do under federal law what state law requires of it.”).

 The court agreed, though not in so many words. Essentially, the court adopted Wyeth’s Mensing argument without citing Mensing, holding that “by 2001 when Wyeth transferred to Schwarz all of its rights and responsibilities regarding Reglan® tablets, Wyeth lost any ability to change the design of Reglan® or its label. Long before [the plaintiff] received her first dose of metoclopramide, Wyeth could not have delivered a stronger warning regarding the drug, or have changed its design in any way.” 2012 WL 2970627, at *16 (emphasis added). The court went on to find that the plaintiffs also could not prove proximate cause, given the remoteness of Wyeth’s involvement.

 While we would have loved a full-blown discussion of Mensing (or at least a passing nod to it), we read this as the Vermont court’s implicit acceptance that sometimes even a branded manufacturer cannot “independently” comply with both state and federal law. In other words, even claims against brand-name manufacturers can be subject to impossibility preemption, given the right circumstances.

Recent Pennsylvania Forum Non Conveniens Wins

If you’re a defendant, you don’t want to be in the Philadelphia Court of Common Pleas – for well-known reasons.  One of those reasons is blatant, plaintiff-friendly forum shopping.  As ATRA’s latest report states:

Forum Shopping: The Philly Phenomenon

Pennsylvania law provides significant flexibility to plaintiffs’ lawyers as to where to file their cases.  For example, Pennsylvania law permits claims against businesses anywhere in the state that they conduct more than incidental or isolated business activity. In a 2009 ruling, a Pennsylvania court candidly acknowledged that “Pennsylvania does not forbid ‘forum shopping’ per se – to the contrary, our venue rules give plaintiffs various choices of different possible venues, and plaintiffs are generally free to ‘shop’ among those forums and choose the one they prefer.”  While courts can transfer or dismiss cases “for the convenience of parties and witnesses,” Pennsylvania judges place a heavy burden on the defendant to present detailed information proving that the plaintiff’s choice of court is “oppressive or vexatious.”  Such requests are often denied, even when there is little or no connection between the lawsuit and the county in which it is filed.

A couple of recent cases buck this trend, so we thought we’d tell you about them.  The most notable case is Stoner v. Penn Kleen, Inc., ___ A.3d ___, 2012 WL 4748204 (Pa. Super. Oct. 5, 2012).  One reason it’s notable is that it’s by the Pennsylvania Superior Court, source of most of the pro-plaintiff forum non conveniens rulings (Philly trial judges have repeatedly tried and largely failed to evict the litigation tourists) that ATRA was complaining about in the first place.  See Zappala v. James Lewis Group, 982 A.2d 512, 520 (Pa. Super. 2009) – source of the quote in the ATRA piece.

Stoner was – surprise! – a product liability case, but not a drug case; it involved a "pressure washer."   The plaintiff, from York County (mostly Amish country rural and conservative) sued a supposed Adams (next to York) County intermediate supplier along with product liability defendants from North Carolina, Minnesota, Arizona, and Denmark.  Legally, the suit was bogus – the plaintiff, a junk yard employee allegedly “was injured by an explosion which occurred during the course of his disassembly” of the product.  Stoner, 2012 WL 4748204, at *1.  Disposal/recycling of a product after it has worn out and been thrown away is not, as a matter of law, an “intended use” of the product under Pennsylvania law.  Milesco v. Norfolk Southern Corp., 2010 WL 55331, at *5 (M.D. Pa. Jan. 5, 2010) (“as a matter of law, the recycling of a product after the end of its useful life is not a use of the product reasonably foreseeable to the manufacturer”); U.S. v. Union Corp., 277 F. Supp.2d 478, 493 (E.D. Pa. 2003) (“the dismantling and processing of junk electrical components was not a reasonably foreseeable use”); Kalik v. Allis–Chambers Corp., 658 F. Supp. 631, 635 (W.D. Pa. 1987) (product recycling not an intended/foreseeable use).  To maximize its chance of survival, this bogus lawsuit gets filed in Philadelphia, thus sticking Philadelphia taxpayers (such as some of us) with the costs of litigation completely unrelated to Philadelphia.

But not so fast.  At the request of the Pennsylvania distributor (not the product manufacturer defendants), a brave Common Pleas judge (unfortunately not acknowledged in the opinion) ordered a transfer to Adams County (where the Battle of Gettysburg was fought).  That’s an appealable order, and for once the Superior Court affirmed the transfer:

[Defendant] averred that each of the fact witnesses was located in Adams County, where the accident took place, and that the employees of [defendant] work and reside only in York County.  Second, [defendant] presented affidavits and other submissions which established that venue in Philadelphia would not merely be inconvenient to itself and the witnesses, but that it was a substantial burden.

Stoner, 2012 WL 4748204, at *3.  That’s good, but before anybody gets to celebrating too much, here’s what those affidavits said:

[Defendant] submitted an affidavit from [its] President . . ., who stated that venue in Philadelphia County would cause him to have to shut down the business during the course of the trial, resulting in loss of income.  These statements were corroborated by the affidavits of [defendant’s] employees, who determined that travel to Philadelphia would take in excess of three-and-a-half hours, involve at least 200 roundtrip miles, and impose significant costs.  At the same time, these employees noted that travel to Adams County would involve only 31 to 75 miles' travel, and would not involve the same tolls or parking fees.

Id. (emphasis added).  While non-Philadelphia corporate defendants could probably adduce similar – or better – travel cost evidence, it’s doubtful that any significant sized business could make the same sort of business shut down argument.  So, while Stoner is a useful first step, it in no way gets us out from under all that bad law mentioned by ATRA.

But if a defendant can get the case removed to federal court, then things look up quite a bit.

That’s the lesson of McLaughlin v. Glaxosmithkline, LLC, 2012 WL 4932016 (E.D. Pa. Oct. 17, 2012) (Buckwalter, J.).  The plaintiff in McLaughlin was another litigation tourist, this time from outside Pennsylvania – from Louisiana.  Another feature that McLaughlin shares with Stoner is that the case is bogus on the merits.  The plaintiff took only a generic drug.  Oops, Mensing preemption.
So the plaintiff also sued the maker of the bioequivalent branded drug she didn’t take.  But that theory’s just about as dead as dead can be in Louisiana.  See Stanley v. Wyeth, Inc., 991 So.2d 31, 33-35 (La. App. 2008); Demahy v. Schwarz Pharma, Inc., ___ Fed. Appx. ___, 2012 WL 5261492, at * 3-4 (5th Cir. Oct. 25, 2012); Morris v. Wyeth, Inc., 2011 WL 4975317, at *3-4 (W.D. La. Oct. 19, 2011); Cooper v. Wyeth, Inc., 2010 WL 4318816, at *2-3 (M.D. La. Oct. 26, 2010); Craig v. Pfizer, Inc., 2010 WL 2649545, at *2-4 (Mag. E.D. La. May 26, 2010), adopted, 2010 WL 2649544 (W.D. La. June 29, 2010); Morris v. Wyeth, Inc., 2009 WL 4064103, at *4-6 (W.D. La. Nov. 23, 2009); LeBlanc v. Wyeth, Inc., 2006 WL 2883030, at *5-6 (W.D. La. Oct. 5, 2006); Possa v. Eli Lilly & Co., 2006 WL 6393160, at *1, (M.D. La. May 10, 2006); Tarver v. Wyeth, Inc., 2005 WL 4052382, at *2 (Mag. W.D. La. June 7, 2005), adopted, 2006 WL 1517546, at *2-3 (W.D. La. Jan. 26, 2006).  So once again, we in Pennsylvania get stuck with having to entertain a litigation . . . in this case more of a “refugee” than a “tourist.”

But like Stoner the plaintiff in McLaughlin got sent packing (back to Louisiana) under the federal forum non conveniens statute, 28 U.S.C. § 1404(a).  This time the grounds are more generally applicable.  Plaintiff was a Louisiana resident, where all the operative facts occurred, so her choice of an out-of-state forum is entitled to less weight.  McLaughlin, 2012 WL 4932016, at *3.  The defendant prefers the Louisiana forum even though headquartered in Pennsylvania.  Id.  The “operative facts” of a products liability action are deemed to occur where the allegedly defective product was used and injury occurred, which was Louisiana.  Id. at *4.  Witnesses from Louisiana could not be compelled to come to Pennsylvania whereas the defendant’s employees may be subpoenaed to come to Louisiana.  Id.  In this electronic age, nobody gives a damn any longer about the location of books and records.  Id. at *5. There is no difference in the enforceability of a judgment.  Id.  The location of many witnesses exclusively in Louisiana was a practical consideration supporting transfer.  Id. at *6.  The per-judge docket in the Western District of Louisiana was a third the burden shouldered by judges in the Eastern District of Pennsylvania.  Id.  And finally, controversies should be decided where they arise, in this case here Louisiana, and a Louisiana judge will be more familiar with Louisiana law.  Id. at *7.

Under those facts, forum non conveniens transfer to Louisiana (and to probable dismissal with prejudice) was granted.  Significantly, the facts in McLaughlin are likely to be replicated in just about any litigation tourism case.  So if the defendant can get into federal court (often a big “if”) then transfer under the principles set out in McLaughlin is likely to be available.

So, to all you litigation tourists in federal court– see y’all later.

Thursday, October 25, 2012

A Step Beyond – Due Process and the FDA

Bexis had been on the road a lot lately – it seems blogging attract speaking engagements – and at both the recent PLAC fall meeting and the ACI’s FDA Boot Camp, speakers discussed the recent Supreme Court decision in FCC v. Fox Television Stations, Inc., 132 S. Ct. 2307 (2012), as having implications for product liability actions involving regulatory allegation claims.  We’d particularly like to thank Mike Walsh from Strassburger for sharing his thoughts (and some nice powerpoint slides) on this issue.

Fox Television is a Due Process case, and the way Due Process intersects with product liability, at least in this context, is whether there are Due Process constraints on plaintiffs ginning up FDA (or, indeed, other federal) regulatory violation claims based on weird interpretations by paid FDA “experts.”

Can you say “parallel violation” claims?

What do we learn from Fox Television?  The case involved the regulation of purported “indecency” on television – no, it doesn't involve Quentin Tarantino movies, but rather a far more serious problem than blood-soaked megadeath.  We mean “fleeting expletives.”  On prime time, broadcasters can show as much killing as they want, but the actors can’t swear as they get killed (or about anything else).  So the FCC has decreed – but not very well, the Supreme Court held.

The FCC held that an unscripted f-bomb on live TV was a no-no (ditto fleeting nudity (not the Superbowl wardrobe malfunction; that was another case)) and fined the TV networks.  This was something of a regulatory flip-flop, so the networks sued alleging that their Due Process rights were violated by the arbitrary and capricious actions of the FCC.  The Supreme Court agreed, sort of.

It wasn’t so much the regulatory flip-flop that the Court condemned, but the government’s failure to give notice of what was supposedly illegal.  “A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required.”  Fox Television, 132 S. Ct. at 2371 (lots of nifty cites and quotes omitted).  This wasn’t just a free speech issue:

Even when speech is not at issue, the void for vagueness doctrine addresses at least two connected but discrete due process concerns:  first, that regulated parties should know what is required of them so they may act accordingly; second, precision and guidance are necessary so that those enforcing the law do not act in an arbitrary or discriminatory way.  When speech is involved, rigorous adherence to those requirements is necessary to ensure that ambiguity does not chill protected speech.

Id. (emphasis added).  But remember, in this context, that Sorrell v. IMS Health, Inc., 131 S.Ct. 2653, 2664 (2011), held that pharmaceuticaldetailing is First Amendment protected speech.

In Fox Television the FCC’s actual indecency “guidelines” (apparently not even amounting to regulations) limited enforcement to situations where a broadcast “dwells or repeats at length” on sex or cursing (but not blood and gore).  However, the FCC informally adopted a “new policy” through a published “decision” that even “fleeting” references were violations.  Id. at 2314-15.

Then it tried to apply that decision retroactively.  Id. at 2315.

The Supreme Court held that the government couldn’t do that consistently with Due Process.

This regulatory history, however, makes it apparent that the Commission policy in place at the time of the broadcasts gave no notice. . . .  The [agency’s] lack of notice . . . that its interpretation had changed . . . failed to provide a person of ordinary intelligence fair notice of what is prohibited.  This would be true with respect to a regulatory change this abrupt on any subject, but it is surely the case when applied to . . . the regulations in question, regulations that touch upon “sensitive areas of basic First Amendment freedoms.

Id. at 2381 (citations and quotation marks omitted) (emphasis added).  Thus, Fox Television’s Due Process argument also applies to, say, the FDA.

The agency also argued that, because it didn’t fine the broadcasters, they hadn’t been injured, and the case was moot.  The Court held that “reputational” injury was enough to support the constitutional violation:

[T]he due process protection against vague regulations does not leave regulated parties at the mercy of [governmental] noblesse oblige. . . .  [R]eputational injury provides further reason for granting relief. . . .  [F]indings of wrongdoing can result in harm to a broadcaster’s reputation . . . given that the challenged orders, which are contained in the permanent [administrative] record, describe in strongly disapproving terms the [plaintiff’s alleged conduct]. . . .  [Government] sanctions on broadcasters for indecent material are widely publicized.

Id. at 2318-19.  Everything that the Court said about the FCC’s orders could also be said about FDA warning letters and a variety of other adverse, informal, but publicly announced FDA enforcement actions - which are often featured prominently in plaintiffs' complaints.

We then add to Fox Television the Supreme Court’s decision three days earlier in Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156 (2012), rejecting the Department of Labor’s reclassification of pharmaceutical detailmen.  The Court held that lack of prior notice was grounds not to defer to the government’s changed policy:

[Plaintiffs] invoke the [agency’s] interpretation of ambiguous regulations to impose potentially massive liability on respondent for conduct that occurred well before that interpretation was announced.  To defer to the [this] interpretation . . . would result in precisely the kind of unfair surprise against which our cases have long warned. . . .  Our practice of deferring to an agency’s interpretation of its own ambiguous regulations . . . creates a risk that agencies will promulgate vague and open-ended regulations that they can later interpret as they see fit, thereby frustrating the notice and predictability purposes of rulemaking. . . .  It is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.

132 S. Ct. at 1367-68 (citations and quotation marks added) (emphasis added).

So what might these two recent Supreme Court cases do for us?

What they tell us is that no federal agency, including the FDA, can change its interpretation of regulations that have more than one possible interpretation (which would be almost all of them) without prior notice.  That’s good because the FDA has been known to do that on occasion.

But better than that, consider plaintiffs and “parallel violation” claims, whether or not  raised in the context of preemption (although non-identical claims should be preempted as well).  The plaintiffs are essentially putting themselves – or, more properly, their experts − in the position of the FDA (which they shouldn’t be allowed to do either).  Thus, if plaintiffs make up unprecedented interpretations of FDA regulations, guidances, etc. and attempt to apply them retroactively to conduct that took place before the interpretation existed, we could argue that it is constitutionally barred, under the Fox Television and Christopher precedents.  If successful the argument would apply to all product liability claims since, by their nature, they involve retroactive application of litigation inspired expert opinions to pre-litigation facts.

How much these arguments are worth, we can’t say.  There are a lot of other better established defenses – Buckman preemption for one.  But getting the defense bar thinking about new defenses is one thing we like doing.  So noodle it, dear readers, and perhaps there’s something here that might be worth considering in a case where a plaintiff’s expert is offering some never-before-seen interpretation of an FDA regulation as the supposed standard of care.

Demahy's Done

Breaking news, sort of.  The plaintiff in the Demahy half of what was Mensing in the Supreme Court is nothing if not persistant.  Now she's just nothing.  She tried to get the Fifth Circuit to reconsider the other half of that opinion - state-law claims asserting that a branded manufacturer could be liable to her despite her using only the branded product (that is, Conte) - on the ground that Mensing preemption somehow changed Louisiana common law.  Well, today the Fifth Circuit, in an unpublished opinion (our reason for the "sort of") said "no."  Here's a link to the opinion.  The main argument rejected was that Mensing undermined the older Fourth Circuit opinion in Foster v. American Home Products Corp., 29 F.3d 165 (4th Cir. 1994 (applying Maryland law).  But it didn't:

We do not view Mensing as overruling Foster because the court in Foster did not reach its holding by relying on the ability of a plaintiff to sue generic manufacturers.  Instead, the court’s holding was based on its interpretation of Maryland law and the conclusion that a name-brand manufacturer has no duty of care to consumers that are not using the manufacturer’s product.  The Foster court’s opinion in dicta on the viability of suits against generic manufacturers was proved wrong, but this fact does not impose on name-brand manufacturers a duty of care to customers using generic products.  Likewise, decisions that relied upon Foster to create a similar rule in Louisiana remain valid.

Demahy, slip op. at 8.  Moreover, the court held that even if Foster were undercut, that was a Maryland law decision, and Louisiana law wouldn't allow the claims anyway.  Id. at 8-9.

The court also addressed generic preemption (yet again), but mostly on the "mandate rule" that plaintiff didn't have any other claims before - so go away, plaintiff.  Nonetheless, to cover all its bases, the court said that all the purported "other" claims were either disguised warning claims (preempted) or design claims (which are also preempted). Demahy, slip op. at 12-13 (with nice string-cite footnotes).

Stick a fork in Demahy - it's done.

Wednesday, October 24, 2012

Beating a Pro Se Plaintiff is Not Always Prosaic

Ask 100 federal prosecutors if there is any part of the job they do not like, and at least 99 of them will mention responding to prisoner habeas corpus petitions.  First, they are written incoherently, so it is hard figuring out what the petitioner is asking for and on what grounds.   Then you have the obligation of explaining to the court what the prisoner wants, presuming that the prisoner is making the best arguments in the best possible way.  Only then do you get to the fun part of demolishing the arguments that you were forced to construct.  And even then some judges bend over backwards to give the petitioner every benefit of the doubt, if only for the want of a juris doctor degree.  We remember not so fondly one time when a magistrate judge made us jump through a series of ever higher hoops (including retention of an expert witness) to prove the validity of a positive drug test showing that a prisoner who had been incarcerated for four months must have imbibed whilst in stir (resulting in discipline), as opposed to before imprisonment (no additional discipline). 

We do not often face pro se adversaries these days, but when we do they frequently find ways to vex us.  Right now we are dealing with a plaintiff who has pretty much acknowledged that he has no evidence that our client's medical device was defective in any way, yet he insists on a nuisance payment to make him go away.  We seldom see that sort of mendacity and pettiness from even the most scurvy-minded plaintiff lawyers.  What's worse is that if we do come to blows-via-pleadings with this pro se plaintiff, there is a good chance that some judge will treat that plaintiff with kid gloves.

For that reason, we do not underestimate the defendant's recent victory in Ohuche v. Merck & Co., 2012 U.S. Dist. LEXIS 147483 (S.D.N.Y. Oct. 12, 2012).  At the same time, the case shows how courts occasionally give breaks to pro se plaintiffs that make no sense.  The plaintiff alleged injuries from a Zostavax vaccine for prevention of shingles.  The label for Zostavax lists several possible side effects, and it is not clear what the plaintiff thinks should have been in the label that was not there.   In any event, the doctor never read the label. In any event, the doctor already knew the risks.  In any event, "the medical records for Ohuche include notations inconsistent with her allegation that she developed shingles-like symptoms shortly after receiving the Zostavax vaccine." 2012 U.S. Dist. 147483 at *7.  Easy case, right?

In the end, yes it was.   But the court (and we are talking about an exceedingly important and intelligent judge, Scheindlin) made getting there a wee bit more sticky than we like, and certainly more so than was necessary.   Here is how the court begins the Discussion section:  "Because plaintiff's Complaint does not state any particular causes of action, it must be construed to raise the strongest arguments possible." Id. at **14-15.  As Homer Simpson would say, "D'oh!".

And then the way this principle (of what?  Leniency?  Fiction?) gets applied to the issue of medical causation is scarier than a Stephen King novel, an episode of American Horror, the prospect of a new Adam Sandler movie, or having to read the latest Parisian expert report.  Plaintiff Ohuche appears to have had no expert witness on medical causation.  In some courts, that would end the case.  Moreover, the facts regarding the timing of the plaintiff's symptoms were sketchy.  Nevertheless, the court finds an issue of disputed fact on medical causation based on the existence of medical literature documenting that the vaccine can cause the side effects, "coupled with the allegedly close temporal proximity between the date of the vaccine and the onset of symptoms." Id. at *18.   Double D'oh!

We could wheel out scads of precedents refuting this nonsense, including the Eleventh Circuit Guinn case that some of us here worked on and that we mention at the drop of a hat or a hint of bad reasoning on Daubert and medical causation issues. But calm down (so we say to ourselves), because this bad bit on medical causation is pure dicta.  It is unnecessary to the opinion, because the court goes on to dismiss the plaintiff's complaint for "lack of proximate causation."  Id.

New York applies the learned intermediary rule.  Thus, the issue was whether the treating doctor was adequately warned.  The doctor testified that she was aware of the adverse reactions associated with the vaccine despite not reading the relevant literature.  The vaccine manufacturer "completely fulfilled it's obligation to disclose the risks, side effects and contraindications associated with Zostavax." Id. at *20.  The court concludes that if the plaintiff has a viable claim against anyone, it is for malpractice against the doctor.  (Come to think of it, that is more dicta, isn't it?). The claims against Merck were dismissed.

So, in the end, it is a good result.  But because the court seemed to want to toss a few bones to a pro se plaintiff, we experienced a side effect from an otherwise decent opinion.  In South Philly it's called agita.   Can we sue for that?

Tuesday, October 23, 2012

Buckman Preemption – Fraud on the Coast Guard

            Don’t roll your eyes at us the way a daughter does when her mother is about to tell a story about the mother’s college years for the sixth, seventh . . . OK 100th time.  Our regular readers are all well aware of our affinity for, involvement with (Bexis and Yeary) and therefore abiding interest in Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001).  So, even if beyond the usual scope of this blog, we can’t help but get excited when we see Buckman applied outside the context of the FDA. 
We have always strongly encouraged a reading of Buckman that was not statute specific and therefore supported the conclusion that agency fraud claims involving any federal agency should be preempted under the same rationale.  In fact, there are several decisions that say just that and Offshore Service Vessels, L.L.C. v. Surf Subsea, Inc., 2012 U.S. Dist. LEXIS 150103 (E.D. La. Oct. 17, 2012) – fraud-on-the-Coast Guard – is just the most recent to come to our attention. 
While not about drugs and devices, these cases do provide us an opportunity to remind everyone what Buckman – in its simplest form – was all about. 
  • First of all, “the relationship between a federal agency and the entity it regulates is inherently federal in character.”  Buckman, 531 U.S. at 347.  That means, among other things, that there’s no presumption against preemption, id., because such a presumption (assuming it exists at all) is enjoyed only by “traditional state tort law principles” and not “any sort of fraud-on-the-agency theory.”  Id. at 352.  See Offshore Service, 2012 U.S. Dist. LEXIS 150103 at *27.
  • Claims asserting fraud on the FDA inherently “conflict with, and are therefore impliedly pre-empted by” the “ample” powers the FDA has to combat fraud itself.  351 U.S. at 348.
  • Conflict preemption also arises because the “balance” among the regulatory objectives that the FDA seeks “can be skewed by allowing fraud-on-the-FDA claims under state tort law.”  Id.  One way the “balance” can be upset, is for tort claims to encourage regulated entities to supply more information than the FDA decides that it wants.  Id. at 348-49.  The FDA's "flexibility is a critical component of the statutory and regulatory framework.”  Id. at 349.  Offshore Service, at *27-28.
  • “State-law fraud-on-the-FDA claims inevitably conflict with the FDA’s responsibility to police fraud consistently with the [FDA's] judgment and objectives.  As a practical matter, complying with the FDA’s detailed regulatory regime in the shadow of 50 States’ tort regimes will dramatically increase the burdens facing potential applicants-burdens not contemplated by Congress in enacting the FDCA and the MDA.”  351 U.S. at 350; Offshore Services, at *28-29.
  • The increased administrative burden of particular concern in Buckman was “fear” of an entity’s FDA submissions being second-guessed (“judged insufficient”) by state juries, which creates “an incentive to submit a deluge of information that the Administration neither wants nor needs.”  351 U.S. at 351; Offshore Services, at *29.
  • “[F]raud claims [that] exist solely by virtue of the FDCA disclosure requirements” are different from claims involving “alleged failure to use reasonable care” that only happen to “parallel federal safety requirements.”  351 U.S. at 353; Offshore Services, at *30.
  • Finally, Buckman found “clear evidence that Congress intended that the MDA be enforced exclusively by the Federal Government.”  Id. at 352 (citing 21 U.S.C. §337(a)).
While all that was said in the context of the FDA, FDCA and MDA, courts since Buckman, like this most recent case involving the Coast Guard, have recognized that the rationale of Buckman preemption applies to any sort of fraud-on-the-agency theory because:  (1) the relationship of a federally regulated entity with its federal regulator is none of the states’ business, (2) state-law second-guessing of submissions to the federal agency “inevitably” encourages a “deluge” of unnecessary information that the agency neither wants nor needs, and (3) state-law claims with federal regulatory violations as a "critical element" “interfere with the [agency’s] role in making important regulatory decisions as intended by Congress.”  Offshore Service, at *45-46.  Indeed, in the case of the FDCA, such claims violate the statute’s express provision for “exclusive” federal enforcement.
So, we celebrate the continued expansion of Buckman beyond the FDA, in part because we enjoy its lasting vitality and in part because there are other agencies, such as the Drug Enforcement Agency, whose jurisdiction may touch upon our clients’ products.  If you find yourself needing to argue Buckman outside the context of the FDA, here are some more helpful cases to get you started:

Fraud on the Environmental Protection Agency:  Ramirez v. E.I. Dupont De Nemours & Co., 2010 WL 3529509 at *2 (M.D. Fla. Sept. 3, 2010); Nathan Kimmel, Inc. v. DowElanco, 275 F.3d 1199, 1204-1206 (9th Cir. 2002); Beck v. Koppers, Inc., 2006 WL 2228910, at *1 (N.D. Miss. April 7, 2006); Hill v. Brush Engineered Materials, Inc., 383 F. Supp.2d 814, 822 (D. Md. 2005); Williams v. Dow Chemical Co., 255 F. Supp.2d 219, 232 (S.D.N.Y. 2003); Redelmann v. Alexander Chemical Corp., 2002 WL 34423377 (Ill. Cir. July 26, 2002).
Fraud on the Federal Communications Commission:  Murray v. Motorola, Inc., 982 A.2d 764, 770 n.6 (D.C. 2009).

Fraud on the National Highway Traffic Safety Administration: Zavala v. TK Holdings Inc., 2004 WL 2903981, at *8 (Cal. App. Dec. 16, 2004); Zwiercan v. General Motors Corp., 2002 WL 31053838, 58 Pa. D. & C.4th 251, 266 (Pa. C.P. Philadelphia Co. 2002).

Fraud on the Occupational Safety & Health Administration: Hill, 383 F. Supp.2d at 822.

Fraud on the Federal Energy Regulatory Commission: Transmission Agency of Northern California v. Sierra Pacific Power Co., 295 F.3d 918, 932 n.10 (9th Cir. 2002).

Fraud on the Department of Energy: Morgan v. Brush Wellman, Inc., 165 F. Supp.2d 704, 722 (E.D. Tenn. 2001).

Fraud on the Health Care Financing Administration: McCall v. Pacificare, Inc., 21 P.3d 1189, 1199 n.9 (Cal. 2001) (dictum).

Monday, October 22, 2012

Another Way to Lose Your Shirt . . .

It keeps getting worse for Lance Armstrong.  Another cycling association or agency or union or whatever has just weighed in.  And this one really seems to matter.  It’s goodbye to Armstrong’s seven Tour de France titles.  Armstrong gambled and lost his shirt – er, yellow jersey.  It’s been a very sad story to watch unfold.  But that’s not why we’re mentioning it.  We just want to use it for the segue. 
That’s because in Hathaway v. Cintas Corp. Servs., 2012 U.S. Dist. LEXIS 146233 (N.D. Ind. Oct. 11, 2012), one of the defendants, Cintas, lost its shirt.  Cintas manufactured work shirts and provided them, along with laundering and repair services, to a welding/cutting company.  Id. at *1-2.  While one of the welding/cutting company’s employees was operating a plasma cutter, a spark flew, and his Cintas-made shirt caught on fire, injuring him.  Id.  He and his wife filed warranty, product liability and negligence claims against Cintas, who ultimately moved for summary judgment.  Cintas won for the most part. 
But what’s interesting is not the claims on which Cintas won – warranty and product liability claims.  Those wins were typical.  The warranty claim was subsumed under Indiana’s Product Liability Act (IPLA) because plaintiffs were seeking tort damages, not economic loss damages.  Id. at *5-8.  Plaintiffs had no evidence to support a manufacturing defect claim, and no evidence of a cost-effective alternative design to support a design defect claim.  Id. at *9-15.  And Cintas had a good “sophisticated intermediary” defense to plaintiffs’ failure to warn claim, given that Cintas warned the welding/cutting company about the flammability of the shirts and said that the warning should be conveyed to employees  Id. at *15-22. 
It’s the analysis related to the claim on which Cintas lost – common law negligence – that we find interesting.  Now, you’d think that this claim like the warranty claim would also be abrogated by or subsumed under the IPLA. 
Not so fast.  This is where Cintas lost its shirt.  The shirt became a service.  Or at least it might become a service.  And the IPLA applies only to goods.  So, if a jury decides that Cintas was providing a service, plaintiffs’ common law negligence claims will not be abrogated by the IPLA. 
We can imagine cases in which the defendant would want the IPLA to apply and cases in which it would not.  So we’re looking at this case mostly out of pure interest. 
Here’s what the court thought.  The IPLA doesn’t apply to a transaction that involves “wholly or predominantly a service.”  Id. at *23 (citing Ind. Code § 34-6-2-114.)  And the agreement between Cintas and the welding/cutting company was not just for the shirts.  It was also for shirt repairs and laundering – i.e., services.  So was Cintas providing predominantly a good or a service?
Well, it was definitely providing shirts.  That’s a good.  It’s something that Cintas manufactured.  It’s something that the plaintiff was able to wear.  It’s something that could catch fire.  And, when considering predominance, it’s something that’s necessary for there to be any laundering or repairs.  So the predominant component of the relationship sure seems like shirts. 
But, unfortunately for Cintas, some of the evidence that it presented might have ricocheted.  The court noted that “Cintas put forth evidence outlining the extensive process that the clothing [that the welding/cutting company] employees used went through after being returned to Cintas each week.”  Id. at *27-28.  This lead the court to conclude that the repair and laundering services were not “incidental” and “made up a substantial portion of the relationship.”  Id. at *28.  That was enough for the court to leave for the jury the determination of whether the relationship was “predominantly” a service. 
The court didn’t go into much more factual detail.  Maybe Cintas’s motion would have been helped by facts showing the importance of the shirts to the relationship, or showing that Cintas has other relationships that involve only shirts but no or fewer relationships that involve only the services.  Maybe a comparison of the cost charged for the shirts versus the laundering/repairs would have helped.  Or testimony from representatives of the welding/cutting company on the importance of the shirts to the relationship.  Of course, it’s possible that some or all of this evidence wasn’t available, or that it was presented but the court discounted it. 
The court, however, had been very willing to grant Cintas summary judgment on certain other of plaintiffs’ claims.  And it cited to a couple of precedent opinions – i.e., Great Northern Ins. Co. v. Buddy Gregg Motor Homes, 2002 U.S. Dist. LEXIS 7830 (S.D. Ind. Apr. 29, 2002) and Hill v. Rieth-Riley Constr. Co., 670 N.E. 2d 940 (Ind. Ct. App. 1996) – in which Indiana courts had determined on summary judgment that a particular relationship involved a service.  Yet the court wasn’t so inclined in this case for this particular claim.  Who knows?  Maybe the court was influenced by the fact the words “Cintas” and “Corporate” in Cintas’s corporate name are followed by the word “Services.” 
And so the defendant lost its shirt.  Maybe it can find it again in front of the jury. 

Friday, October 19, 2012

How Far Does An Erie Prediction Extend?

Yesterday we threw up a “breaking news” post on the Third Circuit’s latest reiteration of its prediction that Pennsylvania would move from the Restatement (Second) – or more precisely from its unique and peculiar interpretation of §402A – to the Third Restatement in product liability cases.

In response we received a comment/question from NedMadeira at Pepper, Bexis’ very first mentor way back when (1982) Bexis first became a lawyer.  Ned queried whether a federal court in another circuit (say, an MDL judge in California or Illinois) would be obligated (as Third Circuit district judges are) to follow the Third Circuit’s prediction of Pennsylvania law.

Our gut reaction was “no,” since the scope of the stare decisis effect (as opposed to the persuasive value) of a court of appeals’ decision does not extend beyond that particular circuit.  We qualified that with our further view that a circuit court’s prediction of the law of a state in that circuit would likely prove extremely persuasive to other federal courts necessarily less familiar with that state’s law.

But that was just our gut reaction.

We figure, though, when a lawyer with as much experience as Ned Madeira asks a question, there are probably a lot of lawyers out there who don’t know the answer.

Not only that, by accident we ran across a case today concerning whether the California UCL (that state’s notorious consumer fraud statute) applies a discovery rule in the statute of limitations context.  Buckley v. DJO Surgical, 2012 WL 4849368, at *3 (S.D. Cal. Oct. 11, 2012).  Buckley said “no”, and in the course of saying “no” pointed out that while the California Supreme Court had never ruled on the question, the Ninth Circuit had provided the same “no” answer in Karl Storz Endoscopy-America, Inc. v. Surgical Technologies, Inc., 285 F.3d 848, 857 (9th Cir. 2002).

That’s ten years ago, and if there’s any state-law subject more widely litigated than the California UCL, we don’t know what that is.

It struck us that the UCL/discovery rule might be a good place to start looking for an answer to Ned’s question.

We weren’t disappointed, either.  It seems that a New Jersey federal court recently decided that (in light of more recent intermediate appellate authority in California) it didn’t want to follow the Ninth Circuit’s prediction of California law.  The court explained:

The Ninth Circuit’s interpretation of California state law is only persuasive, not binding, on this Court. . . .  When the Court sits in diversity jurisdiction, it must predict how a state’s highest court would resolve a state issue of law, and decisions of state intermediate appellate courts should be accorded significant weight in the absence of an indication that the highest state court would rule otherwise.  Therefore, the Court turns to the relevant precedent under California law.

Clark v. Prudential Insurance Co., 736 F. Supp.2d 902, 921 (D.N.J. 2010) (emphasis added).  Not a bad guess for us, it appears, however, Clark didn’t cite anything to support the bolded statement – so maybe that court was guessing, too.

We also note that, on the Pennsylvania Second/Third Restatement issue, the Third Circuit was predicting a change in the law.  Thus, it wouldn’t accomplish very much to look at intermediate state courts as in Clark.  Under their own rules of stare decisis, all lower Pennsylvania state courts are still obligated to follow Pennsylvania Supreme Court precedent from the 1960s and 1970s (before there ever was a Third Restatement) adopting the Second Restatement.

So we kept looking even after that shortcut.  It took us a while but we found some more authority.  In Factors Etc., Inc. v. Pro Arts, Inc., 652 F.2d 278 (2d Cir. 1981), the court stated the precise question at issue:  “whether, and under what circumstances, a ruling by a court of appeals, interpreting the common law of a state within its circuit, should be regarded as authoritative by the other federal courts of the nation.”  Id. at 282.  The Factors court recognized strong jurisprudential reasons why multiple, dueling court of appeals answers to the same state-law question was a bad idea:

[T]he opportunities for federal court departure from the normal paths of state law development should be held to a minimum, for the benefit of both the orderly development of state law and fairness to those subject to state law requirements.  Both values are served by recognizing, within the federal system, the authoritativeness of decisions on the law of a particular state rendered by the court of appeals for the circuit in which the state is located. . . .  Fairness to the public is promoted by making clear that there is a single, authoritative answer to the particular state law issue, instead of leaving the matter subject to the varying interpretations of the courts of appeals for the several circuits. . . .   Diversity jurisdiction, especially in its post-Erie incarnation, should not create needless diversity in the exposition of state substantive law.

Id.  But can the courts of appeals keep the decisional toothpaste in the tube?  The Factors court admitted it couldn’t.  “We need not and do not conclude that the state law holding of the pertinent court of appeals is automatically binding upon the federal courts of all the other circuits.”  Id. at 283.  So Factors admitted that it didn’t have the raw power to enforce uniformity.  There is no hierarchy among the various courts of appeals.  None outranks the other.

However, Factors also went on to articulate the second aspect of our speculation – that Erie predictions by the court of appeals of the circuit that encompasses the state in question should be viewed as very persuasively by the rest of the federal system:

Where, as here, the pertinent court of appeals has essayed its own prediction of the course of state law on a question of first impression within that state, the federal courts of other circuits should defer to that holding, perhaps always, and at least in all situations except the rare instance when it can be said with conviction that the pertinent court of appeals has disregarded clear signals emanating from the state's highest court pointing toward a different rule.

652 F.2d at 283.  Thus, as the same court more recently put it, the first choice, of course, is state law, but where state law is inconclusive, “our general practice is to look next to the law of the circuit in which the state is located.”  Casey v. Merck & Co., 653 F.3d 95, 101 (2d Cir. 2011).

Most other federal courts have signed on to some version of this rule – recognizing that they aren’t strictly bound to respect a different circuit’s interpretation of one of that circuit’s states’ law, but recognizing that a great degree of deference to such decisions is a good idea.  See Schwartz v. Rent A Wreck America Inc., 468 Fed. Appx. 238, 250 (4th Cir. 2012) (following Factors).  Dawn Equipment Co. v. Micro-Trak Systems, Inc., 186 F.3d 981, 989 n.3 (7th Cir. 1999) (“normally” court “defers” to home court of appeals prediction); Mellon Bank, N.A. v. Ternisky, 999 F.2d 791, 796 (4th Cir. 1993) (adopting Factors); Jones Truck Lines v. Transport Insurance Co., 1989 WL 49517, at *5 (E.D. Pa. May 10, 1989) (adopting Factors).

Some cases, however, honor the deference rule mostly in the breach.  Independent Petrochemical Corp. v. Aetna Casualty & Surety Co., 944 F.2d 940, 944 (D.C. Cir. 1991) (recognizing that “potential for forum-shopping within the federal judicial system caused by intercircuit conflicts over the meaning of state law, and the assumption of expertise on the part of the home circuit, have led us to conclude that a home circuit's view of state law is entitled to deference” but holding that Eighth Circuit had misapplied Missouri law); United States v. Maness, 23 F.3d 1006, 1008-09 (6th Cir. 1994) (recognizing “deference” as ordinary rule; concluding that Fourth Circuit decision had overlooked a relevant state supreme court decision).  And then there’s Zahn v. Yucaipa Capital Fund, 218 B.R. 656 (D.R.I. 1998), which as far as we can tell didn’t give any deference at all to a Ninth Circuit prediction of California law:

Binding interpretations of state laws are made by state supreme courts, not by federal circuit courts.  Thus, while the Ninth Circuit cases may be the controlling interpretation of California law in the federal courts of the Ninth Circuit, they are not controlling anywhere else.  Rather, they represent merely the Ninth Circuit’s prediction of how the California Supreme Court would decide the questions at hand.  This Court, sitting outside the Ninth Circuit, is not bound by Ninth Circuit precedent, but instead must make an independent determination of whether the California . . . supreme court[s] would adopt the reasoning and rule of the Ninth Circuit cases.

Id. at 666 n.11 (emphasis added).

So to summarize things, the rule seems to be that no, the Third Circuit’s predictions of Pennsylvania law aren’t binding in the strict sense because there’s no hierarchical structure constraining courts outside of this circuit.  However, as a practical matter, federal courts (most of them, anyway) outside of the Third Circuit will be inclined to give great deference to the conclusions of the Third Circuit on Pennsylvania law.

Finally, we also came across some other stuff we liked while writing this piece.  We include it because it supports our underlying point in prior posts about Pennsylvania district courts being obligated to follow the Third Circuit’s Pennsylvania law predictions, even if they don’t like them.  Not too long ago, the Seventh Circuit similarly had to put its foot down to quash similar reluctance by one of its district courts to follow one of its Erie predictions:

By treating [our Erie prediction] as having no more than persuasive force, the district court made a fundamental error.  In a hierarchical system, decisions of a superior court are authoritative on inferior courts. . . .  [D]istrict judges must follow the decisions of this court whether or not they agree.  A decision by a state's supreme court terminates the authoritative force of our decisions interpreting state law, for under Erie our task in diversity litigation is to predict what the state’s highest court will do.  Once the state's highest court acts, the need for prediction is past.  But decisions of intermediate state courts lack similar force; they, too, are just prognostications.  They could in principle persuade us to reconsider and overrule our precedent; assuredly they do not themselves liberate district judges from the force of our decisions.

Reiser v. Residential Funding Corp., 380 F.3d 1027, 1029 (7th Cir. 2004); see 17A Moore’s Federal Practice, §124.22[4] (3d ed. 2010) (“When a higher federal court has ruled on a particular point of state law, a lower court must ordinarily follow that decision in the absence of an intervening authoritative state decision.”).

And that, at least, is as it should be.

Thursday, October 18, 2012

Consolidation Request Backfires On Plaintiffs

Sometimes bad enough should just be left alone.  That’s what a bunch of plaintiffs (and/or their lawyers) found out the other day from the Seventh Circuit in Abbott Laboratories, v. Alexander, Nos. 12-8020, et al., slip op. (7th Cir. Oct. 16, 2012).  Even when actions are filed in notoriously pro-plaintiff jurisdictions plaintiffs can’t get away with anything and everything – although they sure tried in Alexander.

Here’s what happened.  In 2010 and 2011 said bunch of plaintiffs – “several hundred” according to the court (id. at 2) – filed ten identical actions in three Illinois counties against the same defendant concerning the same drug.  Apparently plaintiffs are allowed to get away with such mass-misjoinders in Illinois.  See Anderson v. Bayer, 610 F.3d 390, 393 (7th Cir. 2010).  Can you guess the three Illinois counties where these filings occurred?  We sure could:


St. Clair.


That kind of huge misjoinder, barred in most places, was bad enough, but then the plaintiffs decided to prejudice the defendant even more by seeking consolidation of their prior complaints (with at minimum dozens of plaintiffs each) into one big unhappy monster:

Plaintiffs asked for consolidation of their lawsuits in St. Clair County because the cases “present common questions of fact . . . as well as common questions of law. . . .”  In the memorandum in support of their motion, plaintiffs said they were requesting consolidation of the cases “through trial” and “not solely for pretrial proceedings.”

Alexander, slip op. at 3 (document citations omitted).

Oops.  Pigs get fat, but hogs get slaughtered (or is it vice versa).  That was a bit much even for pro-plaintiff venues.  Plaintiffs – very unintentionally, we’re sure − triggered the “mass action” provision of CAFA by requesting such a consolidation.

Removal to federal court thus followed.

Plaintiffs moved to remand, but thankfully Cook County is in a different judicial district (Northern rather than Southern District of Illinois).  As we’ve commented before, federal courts in the Southern District of Illinois have tended to stretch the law to prevent cases from their local what-ATRA-calls thems from landing on their dockets.  That’s apparently not the case in the Northern District, because while some of the Anderson plaintiffs got their desired remands in Little Egypt, the Northern District ruled that CAFA had been triggered and denied remand.  Alexander, slip op. at 4-5.

Why is that critical?  Well, it’s ordinarily really, really hard to get appellate review of decisions ordering the remand of cases to state courts, but flatly contradictory decisions by two different district courts on the effect of the same consolidation motion justifiably attracted the attention of the Seventh Circuit.

The Court of Apeals ruled that once plaintiffs sought consolidation “through trial” and “not solely for pretrial,” they were, at least “implicitly” (we’d say explicitly) “proposing” a joint trial within the meaning of CAFA (28 U.S.C. §1332(d)(11)(B)(i)):

[A] proposal for a joint trial can be implicit, particularly where the assumption would be that a single trial was intended. . . .  [A] joint trial does not have to encompass relief. . . .  [These] plaintiffs requested consolidation of their cases “through trial” and “not solely for pretrial proceedings.” They further asserted that consolidation through trial “would also facilitate the efficient disposition of a number of universal and fundamental substantive questions”. . . .  [I]t is difficult to see how a trial court could consolidate the cases as requested by plaintiffs and not hold a joint trial or an exemplar trial with the legal issues applied to the remaining cases.

Alexander, slip op. at 7-8 (emphasis added).  Under CAFA, a mass trial only need be “proposed” – no court need have ordered it.  Id. at 8.  That’s the key.  Once 100 or more plaintiffs so much as seek, even “implicitly” a mass trial, BOOM! the action is CAFA removable.  Sharp eyes are essential, and given the stakes, they can save our clients who knows how many millions of dollars.

Finally, the plaintiffs tried to take advantage of their own procedural error to avoid CAFA removal.  They claimed that they filed their consolidation petition in the wrong court under state rules.  The Seventh Circuit said “so what” − the court they asked could have done it, even if the procedure wasn’t 100% regular:

Here, plaintiffs filed their motion to consolidate with the Supreme Court of Illinois, which has the power not only to consolidate plaintiffs’ cases through trial but also to decide where plaintiffs’ cases will ultimately be.

Alexander, slip op. at 9.  Thus federal jurisdiction under CAFA was appropriate.

Frankly, we weren’t 100% sure whether to post on Alexander because we thought at first that, surely, it was a one-off case – that once having gotten burned by CAFA removal in this fashion, plaintiffs would never use this kind of loose language again.  But according to the opinion, this is at least the third time this kind of thing has happened, just in the Seventh Circuit.  See Koral v. Boeing, Co., 628 F.3d 945, 947 (7th Cir. 2011) (plaintiffs came “just short” of proposing mass trial in opposing motion to dismiss); Bullard v. Burlington Northern Santa Fe Railway Co., 535 F.3d 759, 762 (7th Cir. 2008) (plaintiffs “implicitly” proposed a mass trial in complaint).  Thus, the broader lesson of Alexander is that defendants need:  (1) to know how the “mass action” part of CAFA works, and (2) to watch for this kind of thing (“implicit” mass trial proposals), and (3) pounce when it happens.  The situation potentially arises any time we’re faced with more than 100 plaintiffs in state court who are attempting to coordinate their purportedly separate actions while still trying to fly under CAFA’s radar.

Alexander happened because the defendants in this instance litigated smarter than the plaintiffs.  It’s the job of this blog to make sure that this happens as often as possible.