Thursday, July 31, 2014

Court: It's Only Unconstitutional If You, Not We, Do It

A bit of a rant today.

We’ve just read Gibson v. American Cyanamid Co., ___ F.3d ___, 2014 WL 3643353 (7th Cir. July 24, 2014), and we have to say that it’s one of the most constitutionally arrogant decisions we’ve ever read.  Stripped to its essentials, Gibson is the judicial branch thumbing its nose at the supposedly co-equal legislative branch and saying “we can do it but you can’t.”

Gibson involves one of these seemingly one-way legal doctrines that only protects plaintiffs, but for some reason never defendants, the concept of so-called “vested rights.”  Here’s the back-story.

Thirty years ago, the Wisconsin Supreme Court, in a judicial exercise of social policymaking, decided to adopt a peculiar form of an already peculiar doctrine – market share liability.  See Collins v. Eli Lilly Co., 342 N.W.2d 37 (1984).  The court breached a hitherto (mostly) sacrosanct defense – product identification − that a defendant can’t be liable unless the plaintiff first proves that s/he actually used the defendant’s product.  The reason was … well, the usual fuzzy-headed logic that the common law can change and we think it’s better that the plaintiff wins.  Id. at 45 (we can change the common law), 49 (we’re gonna change the law and let the plaintiffs win because of “interests of justice and fundamental fairness”).  Despite the fact that the product was off the market and plaintiffs had taken it many years earlier, the court in Collins had no compunction in extending this new theory of liability retroactively to defendants whose conduct had previously been protected by the product identification defense.

Collins, as most of our readers probably already know, was a DES case.  DES was, for all intents and purposes, the world’s first generic drug.  Its patent had expired, so anybody who wanted to go to the time and effort to do so (this was the pre-1962 FDA, before NDA requirements were made a lot tougher) could set up shop and make the drug.  Scores of companies did, and “DES” became the reference of choice for most doctors and pharmacists.  Given the peculiarly long latency period for the peculiar injury – suffered in utero − in DES cases, product identification was a mess.  Collins decided to let the plaintiffs win anyway by shifting the burden of proof, contrary to decades (at least) of precedent.

At least in Collins there was a real product identification problem.  In the next case (the one ultimately at issue in Gibson), a bunch of class action lawyers decided to gin up a product identification problem.  They wanted to sue on behalf of everybody theoretically injured by lead paint, which had been off the market for a quite a while by the time suit was brought.  Since causation was an individualized issue that could defeat aggregated litigation, they created an impossible ID problem by skipping over the manufacturers of lead paint (some of whom might have been identifiable in building maintenance records) and sued only the bulk suppliers of lead paint pigment.

In Thomas v. Mallett, 701 N.W.2d 523 (Wis. 2005), the Wisconsin Supreme Court blessed this dodge, pushing the envelope of its so-called “risk-contribution” market-share theory retroactively to extend liability even further back in time.  Unlike DES, where exposure necessarily happened, if at all, during a 9-month gestation period, any given building could have been painted with lead paint who-knows-how-many times over many decades.  Also unlike DES, lead paint pigments weren’t really generic.  There were several different types, with differing amounts of lead in their chemical compositions, leading to differing degrees of toxicity.  Finally, unlike the poor DES plaintiffs, these plaintiffs weren’t as poor – they could still sue their landlords.

Full disclosure:  Bexis was involved in Thomas, and he’s still hacked off about it.

“No problem,” said the court in Thomas, these poor plaintiffs (or more specifically their case aggregating lawyers) need to win anyway.  Once again, out came the usual excuses.  Somebody needs to pay for lead paint injuries and removal, and punching an even bigger hole in the product identification defense will provide a “pool of defendants” that can be held liable.  701 N.W.2d at 551.  Because plaintiffs would lose under existing law, a court can “fashion an adequate remedy when one did not exist.”  Id. at 552.  The “remedy” clause in the state constitution is a one-way street, which can expand liability but not contract it.  Id. at 554.  We don’t care about chemical identity either.  The plaintiffs were “innocent” and the defendants shouldn’t have sold their product in the first place – even if they had stopped decades earlier.  Id. at 562.  They could be used for the same purpose, so close enough.  Id.  It’s like fast food, same [you know what], different bun:

[D]efendants can insure themselves against liability, absorb the damage award, or pass the cost along to the consuming public as a cost of doing business.

Id. at 552.  It’s a Johnny-one-note judiciary.  That’s the same excuse for expanding liability that we’ve been seeing for at least fifty years.

The defendants raised constitutional issues – that they couldn’t be stuck with retroactive liability under some new theory for “conduct previously completed.”  701 N.W.2d at 565.  Come back later, said the Thomas court:

First, they [defendants] argue it violates principles governing retroactive liability by attaching new, severe, and unanticipated legal consequences to conduct previously completed.  Second, they argue it violates due process by establishing evidentiary presumptions that are irrational or do not provide a fair opportunity for rebuttal.  Third, they argue that their due process right to a meaningful opportunity to present a defense is violated.

These constitutional issues are not ripe.  As this case is before us on summary judgment, and as many material facts are in dispute, we remand this case for trial.

Id. (footnote omitted).

The Wisconsin Supreme Court never accepted that later case – no great surprise.
The identical issue arose in a federal district court, however, in Gibson v. American Cyanamid Co., 750 F. Supp.2d 998 (E.D. Wis. 2010).  We pounced on Gibson when it was decided because, for once, defendants had received the same solicitude as plaintiffs when expansive new theories are created that retroactively do away with common law defenses  We described Gibson in the trial court thusly:

Well, wonder of wonders!  In Gibson the court discovered that defendants have due process rights, too – and the defendants’ rights under the federal constitution trump (dare we whisper, “preempt”) the weird universal right to recover that Thomas extracted from the poor, mistreated Wisconsin constitution.

In Gibson the court concluded that defendants are protected by Due Process from excessive retroactive tinkering with the law. . . .

*          *          *          *

Gibson proceeds to sweep Thomas away.  The expansion of market share liability was undoubtedly retroactive – imposing unprecedented liability for products that had been sold many decades earlier, with no maximum limit.

Actually, we said a lot more, but that’s enough for now.  Anyone interested can read the earlier post.

Gibson wasn’t all that happened.  Tort reform happened in 2011.  One of the things that you can find in our earlier post is our assessment of the chances for tort reform:  “not likely in Wisconsin.”

We were quite publicly wrong.

Sometimes we don’t mind being wrong.  We didn’t that time, and we told our readers all about it, including:

Product identification – in most cases against manufacturers, plaintiffs must prove that the defendant actually manufactured the injury-causing product. This is intended to limit the effect of Thomas v. Mallett, 701 N.W. 2d 523 (Wis. 2005)

The legislature really didn’t like Thomas (or Collins either, since tiny legislative exception requires labeling that doesn't identify the product, which effectively exempts drugs). That branch of government didn’t think that the courts should ever have created such cockamamie theories to begin with, so it abolished them – retroactively – just as retroactively as courts had created them.

After the legislature did its thing, Gibson reached the Seventh Circuit.  Now it was the plaintiffs – who had benefitted from the Wisconsin Supreme Court’s retroactive creation of novel liability – arguing that the legislature can’t take it away in the same retroactive fashion.

And the Seventh Circuit says they’re right.  First, the minute any common-law court creates any new theory of liability, no matter how extreme, and isn’t reversed by another court, the plaintiffs get a Due Process “vested right” in the perpetuation of such liability that only another court, and not the legislature can take away.  “[A] plaintiff's interest in a common-law claim is a protected vested interest.”  Gibson, 2014 WL 3643353, at *5.

In other words, the legislature cannot retroactively abolish a legal theory.  “Wisconsin Supreme Court precedent demands holding that §895.046 [abolishing Thomas-based liability] violates state due-process principles by trying to extinguish Gibson's vested right in his negligence and strict-liability causes of action.”  Id..  So while courts can create liability retroactively by calling it “common law,” the supposedly co-equal legislative branch of government doesn’t have the same power to abolish what the courts have taken it upon themselves to create, because of “due process.”

§895.046 was enacted to serve the public interest in permitting businesses to operate in Wisconsin without fear of products-liability litigation in the indefinite future based on risk-contribution theory. And, of course, §895.046 serves this purpose by extinguishing risk-contribution theory altogether.  But the competing private interest is significant. . . .  Without risk-contribution theory, [plaintiff] (and similarly situated plaintiffs) cannot prove causation-in-fact as to a particular manufacturer and thus will likely recover nothing. . . .  Here, [plaintiff] would likely have no remedy at all.  As interpreted by the Wisconsin Supreme Court, the state constitution’s due-process guarantee prohibits retroactive application of §895.046.

Id. at 6.

We want to break that down a bit.  This risk-contribution theory was created retroactively.  It deprived the defendants of their product identification defenses that had been part of the common law since time immemorial.  Do defendants have a “vested right” in their defenses?  The Wisconsin Supreme Court dodged the question in Thomas, and said “come back later.”

Now we have the Seventh Circuit, sitting in diversity jurisdiction, so they are predicting Wisconsin law – essentially standing in the shoes of the Wisconsin Supreme Court.  Now the shoe is on the other foot.  Plaintiffs are complaining that their supposed “right” to recovery, created retroactively by a court, cannot be equally retroactively taken away by the legislature.

Gibson’s take on Wisconsin state Due Process law is, in a word, “no.”  The legislature is subordinated to the judiciary.  The legislature cannot undo what the courts do to the extent that courts can.  At most legislation can clean up a judicially inspired liability mess non-retroactively, but everybody who is already taking advantage of the retroactively created mess gets a free pass to keep going.

That’s the imperial judiciary at work.  Presumably a court could say “we think what we did is a bad idea” and abolish a cause of action retroactively, just like they abolished these defendants’ defenses retroactively.

In practice that rarely happens, since the applicable rule of law for plaintiffs is “what’s mine is mine; what’s yours is negotiable.”  But some obscure causes of action, such as alienation of affections, have been judicially abolished.  Ordinarily, common-law decisions retroactively apply to matters then pending either on appeal or in the trial courts, unless the judge doing the abolishing decides, in the exercise of discretion, to specify prospective application only.

But Gibson refuses to give the legislative branch the same freedom of action that courts routinely give themselves.  Judges look out for other judges, after all.

So let’s go on to the second part of Seventh Circuit’s Gibson decision, which is to pass upon the District Court’s 2010 decision that defendants have Due Process rights against retroactive liability.

Having, in the first half of Gibson, decided that plaintiffs have a “vested right” against retroactive reduction of liability, one would expect that defendants have the same right – all that imagery of the “scales of justice” and all – right?


Our imperial judges are also imperially pro-plaintiff – and result-oriented, to boot.  Defendants don’t get Due Process protection against liability due to retroactive abolition of their defenses.


[W]e start with the proposition that the federal Constitution gives a wide berth to state (and local) laws, allowing state legislatures to enact laws unless a specific constitutional bar prevents it.

Gibson, 2014 WL 3643353, at *12.

What?  “Legislation?”  But didn’t you just hold…?  Maybe some differenceexists between “state” Due Process and “federal” Due Process.  If so, the opinion doesn’t say that explicitly.

That being said, after the extensive discussion of the “public health problem” that the “policy” of  Thomas was addressing, id. at *8-11, the analogy to “legislation” – that is judicial legislation – is actually fairly apt – or would have been if Gibson hadn’t just declared real “legislation” unconstitutional for reasons of retroactivity.

The next eight pages or so of Gibson (*11-18) are spent deconstructing the fractured United States Supreme Court decision that was the primary basis of the district court’s opinion that defendants as well as plaintiffs could assert Due Process against retroactive takings.  We’re not all that interested because, after all that, “we are back to where we started,” id. at *18, that is, do defendants have the same Due Process rights against the imposition of retroactive liability as do plaintiffs against its retroactive abolition?

No −  because while plaintiffs have “vested rights,” defendants have only “economic” interests.  Judicial “economic legislation” gets the same constitutional deference (“arbitrary and irrational” standard) as does economic legislation actually passed by a legislature.  Id. at *18.

Wait, that’s not right either.  Here comes the next round of the imperial judiciary at work.  Judicial legislation through the common law (even though it used to be said that courts aren’t supposed to “legislate”) should receive even more constitutional deference than the branch formally charged with legislative powers:

[W]hile we have been setting out the deferential standard for reviewing state legislation, even more deference is owed to judicial common-law developments, which by their nature must operate retroactively on the parties in the case.  The development of state common law is a fundamental feature of our legal system. And, in turn, the foundation of the common law system” is “the incremental and reasoned development of precedent. . . .

Gibson, 2014 WL 3643353, at *18-19 (emphasis original) (citations and quotation marks omitted).  And so on and so forth, blah, blah, blah.

You get the picture.  These are judges deciding cases.  They have just declared their superiority to legislators.  Judicial "incremental and reasoned" decisions are better.  And the bottom line:  because judges decide how much “deference” to accord their own decisions, neither the legislature nor other judges (through "deference") an touch those decisions.

The Gibson decision can gussy it up all it swant with paeans to how great courts are, but at bottom, Gibson is the imperial judiciary at its most arrogant.  Having for reasons of Due Process just denied the legislative branch the right to abolish liability retroactively, the judges confer this same power on their own branch.  “[We] decline[] to apply to courts the same ex post facto standard applicable to legislatures.”  Gibson, 2014 WL 3643353, at *19.  The hubris of such statements is unmistakeable.
Gibson offers two excuses:  (1) that “judicial interpretations” present “less danger” (tell that to defendants facing massive liability under “risk contribution” market share liability; tell that to the Actos defendants); and (2) “the need to allow for common-law developments.”  Id.  This second reason:  based on courts’ “only” being able to “act in construing existing law in actual litigation,” is just arrogance repackaged – another way of saying the we, the judges, need cases in which to “act,” so we have determined that our “developments” deserve more deference than legislative ones.

What’s worse, Due Process works only in one direction – against the rights of defendants to keep their money and in favor of the rights of plaintiffs to try to take it away.  While “most states for most types of claims continue to apply a strict causation-in-fact requirement,” the Wisconsin judiciary is free to limit or abolish common-law causation requirements as it sees fit because – well, it’s a court − and because it had done the same thing once before (in Collins), so it’s free to do it again:

[S]tates that have chosen to develop their common law to permit recovery on a theory of culpable contribution to the risk of injury have [not] made an irrational or arbitrary choice . . . .  The Wisconsin Supreme Court’s decision was not an “unexpected and indefensible” break from Wisconsin's prior common law. . . .  By the time that Thomas was decided, Collins had been part of the state's common law for twenty years.

Gibson, 2014 WL 3643353, at *21.  That's called using stare decisis to justify departing from stare decisis.
Because the court in Thomas had ex cathedra declared that it was acting “reasonably,” id. at *22 (quoting Collins, 432 N.W.2d at 52), Gibson credited this statement.  Id. (declaring, on the basis of Collins’ say-so) that the further expansion of “risk contribution” is necessarily “rational.”  Id.

There are four take-aways from the judicial tour-de-farce in Gibson:

(1) Plaintiffs have “vested” Due Process rights in liability the instant a new common-law theory is created; defendants have no Due Process rights, “vested” or otherwise, in longstanding common-law defenses that prevent liability.

(2) Courts are free to create or destroy liability retroactively; legislatures have no such power.

(3) Courts have “substantial leeway . . . to develop the common law” through judicial legislation, 2014 WL 3643353, at *22; legislative legislation (what state and federal constitutions contemplated) get no such “leeway.”

(4) The imperial judiciary is more solicitous of the Due Process rights of plaintiffs than of the Due Process rights of defendants because the judiciary needs "cases" in which to "act" – more plaintiffs means more litigation, and more litigation provides the judiciary more opportunities to “act,” and thus to augment judicial power.
The last point may be the most important in the long run.  It seems like nothing gets accomplished these days via either legislation or executive action, without some court having to bless it first.  Geez, now we have the spectacle of the Speaker of the House jockeying to sue the President of the United Statees.  More cases means ever more fodder to feed our imperial judiciary.

Finally, while we hope that the Supreme Court takes Gibson, given the decision's plain implications for the relationship between two branches of government that the constitution declares to be co-equal.  However, given the inherent conflict of interest in asking judges (especially the most powerful judges in the land) to rein in the power of the imperial judiciary, we’re not holding our breath.

Wednesday, July 30, 2014

More Maya

The other day ESPN’s Sportscenter ran a teaser entitled “Less of Maya Moore.”  WNBA player Maya Moore had what was for her a less than stellar night, but her teammates on the Minnesota Lynx picked up the slack and they won anyway.  Maya Moore is a fantastically gifted basketball player with the resume to prove it.  She has won team championships and MVP trophies on the collegiate and professional levels.  A scientist has measured Moore’s reflexes to approximate those of a striking rattlesnake.  Moore has also donned makeup to look like an old lady and, along with Kyrie Irving dressed up as Uncle Drew, scammed some recreational ballers on a neighborhood hoops court.  The video is here


          Maya Moore is very, very good at what she does.


By contrast, the Maya litigation in our fair city is very, very bad.  First, there was the trial here in the Philly Court of Common Pleas, where the plaintiff won a $10 million verdict when a jury found that the defendant failed to warn that over-the-counter Motrin could cause SJS/TEN (a rare but life-threatening disease that causes severe blistering and sloughing off of skin, together with serious damage to the mouth, eyes, throat and esophagus).


Bexis wrote a post here, laying out Five Uneasy Theses - important areas where the Maya trial court got things horribly wrong:


-              Waiver for preserving too many issues

-              Applying Pennsylvania liability law to a plaintiff from another jurisdiction

-              Muddling strict liability and negligence

-              Reference to risks/calculations not suffered by plaintiff

-              Misapplication of the Frye test for expert opinions


That first issue – preserving too many appellate issues – is a howler.  Our career has been pockmarked by long trials where crazy rulings, usually prompted by bloodthirsty attorneys, visited the courtroom every day.  As a result, if you took the pages of the trial transcript and laid them out all over a five acre field, and then tossed a dart in any direction, it would surely land on reversible error.  We suspect the same is true with Maya


But the Superior Court did not see things that way.  Last week, it affirmed the verdict.  Maya v. Johnson and Johnson, 2014 PA Super 152 (July 22, 2014).  The Maya decision makes for fairly (or unfairly) depressing reading.  The reader right away picks up a whiff of defensiveness and desperation when the appellate court announces at the outset that it has engaged in a “ careful review.”  Why say that?  Do appellate courts ever engage in a careless review?  We are racking our brain, but cannot come up with an instance where brilliant judges (e.g., Marshall, Story, Brandeis, Hand, Posner, Kozinski, Boggs) ever felt the need to describe their analysis as “careful.”  In the Maya appellate opinion, we are treated to an analysis that seems anything but careful, with the bottom line feeling very much like this:  the Maya case was a marathon (nine weeks) and a mess, anyone would feel enormous sympathy for the plaintiff, and, therefore, the harmless error standard will be applied like a bludgeon to prevent any sort of do-over.  (That being said, at least the appellate court did not find waiver because the defendant had appealed on so many grounds.  The record was voluminous, the issues were complex, and the defendant winnowed down the number of issues actually argued on appeal.  Oh, and the record below was a tragicomedy.)   


         The jury found for the plaintiff on the failure to warn claim, and for the defendant on negligent design and punitive damages.  The appellate court repeatedly cites that mixed verdict as evidence that the trial was fair and that any errors did not make a difference, but one does not follow from the other.  Yes, the verdict could have been even worse, but that hardly excuses some of the more egregious rulings and instructions by the trial court. 


So that we cannot be penalized by a Pennsylvania judge for raising too many errors, we will confine ourselves to only a few lowlights.  The defendant quite rightly asked the court for an instruction to the effect that the jury could not consider drugs other than ibuprofen, or the conduct of other drug manufacturers, in arriving at a verdict.  Amazingly, the trial judge forgot to include the word “not”.  Afterwards, the trial court claimed that it gave the requested instruction verbatim, but even the appellate court was compelled to disagree, reasoning that defense counsel had objected and that it would make no sense for the defendant to ask for an instruction so clearly against its interest:  “Why would McNeil ask the trial court to instruct the jury that they can consider the conduct of other drug manufacturers, or what happened with other drugs besides ibuprofen, such as drugs being pulled off the market, when evaluating McNeil’s conduct in this case?”  Why, indeed. But no harm no foul.  The appellate court concludes that the defendant “was not prejudiced by the trial court’s alleged mistake.”  The court ruled that the instruction pertained only to the negligent design and punitive damages claims, which the defendant won anyway.  Wow.  That conclusion rather conveniently ascribes to jurors the exquisite reasoning powers of Descartes and Spinoza.    


The trial court also let in evidence of risks and/or adverse effects of Motrin other than the SJS/TEN actually suffered by the plaintiff.  This time the appellate court does not even resort to harmless error; the court held it was not error at all to admit this evidence of harms absent from the case, because such evidence was relevant to plaintiffs’ negligent design defect claim, as well as punitive damages, because it showed that the defendant “had knowledge of other adverse reactions and side effects and failed to warn consumers.”  Even assuming there is some probative force to that, how is it not mightily outweighed by the sheer prejudice?  We do not know how that balancing was done by the trial and appellate courts, or if it was done at all, because we see no such balancing in the opinion.    


The trial court also let in reports of adverse events that occurred after the plaintiff’s injuries.  According to the appellate court, that is a-okay because the “trial court specifically instructed the jury that they were not to consider AERs as evidence of causation, only notice.”  Why would such after-the-fact notice be relevant?  The mind reels.   


The trial court also allowed the plaintiff to present evidence regarding possible warnings that the FDA actually rejected, including references to SJS, TEN, or “life-threatening” diseases or reactions in the OTC Children’s Motrin label.  But that’s okay, because the trial court turned the issue over to the jury as a fact issue, leaving it up to the jury to decide whether the FDA had actually rejected the labeling.  Was it really a factual issue at all?  Was there any dispute?  Or did the plaintiff get another freebie, parading prejudicial arguments and evidence in front of the jury to create a nine week simmering stew of anger? 


The trial court also allowed the plaintiff lawyer to question the plaintiff about an advertisement about which there was no evidence of reliance.  The trial court acknowledged that the admission of this evidence was contrary to its earlier pre-trial ruling on the defendant’s motion in limine.  Oops.  But never mind, no prejudice.   


Nor was the defendant prejudiced when the plaintiff’s expert held forth on how “it was unfair American patients did not receive the identical warnings” as in some other countries.  After all, the expert had not gone into detail about those other warnings.  Nope, the expert merely tossed the skunk into the jury box; because he did not explain the exact olfactory mechanics for how the skunk stank, it could not have affected the jury.  Besides there was a curative instruction.  (At this point, one has to wonder what percentage of the final jury instructions were curative.  25%?  50%?  60%?)  We have long thought that the inadmissibility of foreign regulations was well-settled.  See: we say so here


Then there was the issue of how the plaintiff’s lawyer repeatedly disregarded the trial court’s rulings, referenced the defendant’s wealth and its “army of attorneys,”  and framed the case explicitly as “David and Goliath” battle.  Neither the trial nor appellate court denied that such conduct was improper.  But the trial court threw up its hands and complained that “an exorbitant amount of patience was required to control all counsel throughout the entire trial,” not just plaintiffs’ counsel. 




The appellate court again references the fact that the defendant prevailed on two of the three claims, which is sort of like acquitting a burglar because he stole the tv and jewelry, but not the silverware.  Then we get this:  “The trial court, which presided over this nine-week trial and observed the actions of all counsel, has thoroughly examined each allegation of misconduct and determined that a new trial was not warranted.”  That “thoroughly” word, like the “careful” word at the beginning of the opinion, is more wishful than accurate.


Look, we think we have a pretty good idea what actually happened here.  A hyper-aggressive plaintiff attorney pushed the envelope at every opportunity.  Sometimes the judge shut him down, sometimes not.  Even when the court did shut the plaintiff lawyer down, when the sun would rise on a new day, the lawyer would try again.  Persistence, even persistent disregard of a court’s rulings, can pay off.  And then as the case heads into a fourth and fifth week, or an eighth and ninth week, the court knows that it does not want to declare a mistrial or do something that will mean that all that time was spent in vain.  Not only does the court know this, but the plaintiff lawyer knows this.  Things go from bad to worse. 


Then the defense does the best it can to preserve issues for appeal.  This necessary and appropriate maneuver angers the trial judge, who is no-way-no-how going to undo or rein in the jury’s verdict.  So then it is up to the appellate court to correct this abomination.  Or it can take the easy way out.  That is bad enough for the particular case, but it is even worse in terms of how it emboldens lawyers to punch a hole in the next envelope.    



Tuesday, July 29, 2014

Lack of Specificity OK in Kentucky

            When a decision says the Court finds much of the reasoning in Bausch, Stengel, and Hughes particularly persuasive, you don’t have to be the Amazing Kreskin to guess that we aren’t going to like the ruling.  You just need to be a regular reader of this blog.

            Unfortunately, that’s precisely what Waltenburg v. St. Jude Medical, Inc., 2014 U.S. Dist. LEXIS 98369 at *35, *56 (W.D. Ken. Jul. 18, 2014) does say.  We’ll give the opinion some credit for a fairly thorough discussion of the relevant case law going both ways on preemption and TwIqbal – but it loses most of its appeal by landing at the wrong end of the spectrum.

            The case involves an implantable cardioverter defibrillator (ICD).  Plaintiff alleges that certain of the wires (or leads) have eroded causing the ICD to inappropriately administer electrical shocks to plaintiff.  Id. at *1-3.  The ICD is a Class III, PMA medical device.  Defendant moved to dismiss the complaint based on preemption and TwIqbal. 

            The court examined the sufficiency of the pleadings first, framing the question as

is it sufficient to allege that the Defendants violated FDA regulations by deviating from the FDA-approved processes and procedures in the PMA or, instead, must the Plaintiffs identify the particular FDA regulations and set forth facts pointing to the particular PMA requirements that are alleged to have been violated?

Id. at *25.  We believe the latter is the appropriate standard and the court acknowledged it is one that has been adopted by many courts.   Persuaded by Bausch, however, the court employed the former.  The former sounds to us a lot like “magic words” pleading that doesn’t meet the TwIqbal “plausible on its face” requirement.  This blog is loaded with decisions that say referencing violations of FDA regulations in the abstract without identifying the particular regulation and violation isn’t enough for Rule 8 or for preemption.  Here, the court acknowledges that the complaint doesn’t identify the specific PMA requirements allegedly violated, but then concludes that “the absence of such details can hardly provide a solid basis for dismissing their claims at this stage.”  Id. at *35.  Isn’t that precisely what TwIqbal says?  The allegations in a complaint must rise above the speculative level.        

            Having decided that the complaint need not identify the specific regulations allegedly violated, the court also found that plaintiff Waltenburg’s complaint wasn’t as bad as others that had been dismissed.  From the opinion, we gather that the complaint did contain some “allegations as to how Defendants deviated from the specifications in the PMA.”  Id. at *34, *38-40.  Still doesn’t look like much meat on the bones, but it does appear to contain a bit more than we are used to seeing.

            Moving on to preemption, the court’s analysis is hamstrung by its ruling that the non-specific allegations were sufficient.  One bad decision begets another.  Defendant argued that plaintiff’s strict liability and negligent manufacturing defect claims were expressly preempted because they were not parallel to the PMA requirements for the device.  Id. at *40.   The court essentially says we don’t know if the claims are parallel or not because there isn’t enough detail in the complaint, so we’ll let the claims stand.  Id. at *45-48.  And we’re right back to the purpose of Twiqbal in the first place.  If there aren’t enough well-documented and well-supported facts in the complaint to allow the court “to draw a reasonable inference that the defendant is liable,” the claim should be dismissed.  Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).   Instead, the court ruled that because it was not requiring plaintiff to allege specific violations, the court “is unable to compare the particular state and federal requirements at issue.”  Waltenburg, 2014 U.S. Dist. LEXIS 98369 at *46.  We can think of a way this could be achieved.  Dismiss the complaint and require plaintiff to re-file one that meets federal pleadings standards.  Rather, the court invites defendant to re-raise preemption at the summary judgment stage, after expensive and time-consuming discovery.

            Unfortunately, Bausch wasn’t the only case this court found persuasive.  It also decided to take a page from Stengel and Hughes and allow plaintiff to assert a failure to warn claim based on failure to report adverse events to the FDA.  Id. at *52-57.  The court found that plaintiff’s failure to report claim is “based on Defendants’ failure to comply with FDA regulations” and therefore not preempted.  Id. at *56-57.  Adhering to the Stengel and Hughes misapplication of Buckman, the court also concluded that the claim was not impliedly preempted.  And, like those other courts, the Waltenburg court also glosses over defendant’s very legitimate argument that there is no state law duty to report to the FDA.

            With an abundance of precedent going the other way, it is disappointing to see a court swayed by some of our least favorite decisions.  While the decision leaves the door open to re-visiting these issues after discovery that’s a step back from the heightened TwIqbal pleading standards that we aren’t happy to see.  Maybe one of Kreskin’s New Year’s Day predictions for 2015 will be the demise of Bausch, Stengel, and Hughes.  We can dream.   

Monday, July 28, 2014

Privacy of Medical Information: Still No Harm, Still No Foul

We expanded our practice into data privacy and security out of practical necessity.  Expectations surrounding privacy of personal information are evolving, and the laws that regulate data privacy change every day, generally to expand protection for private information.  Another thing that has changed is that we used to say that drug companies and medical device manufacturers are typically not HIPAA-covered entities.  While this still may be generally true, we have come to find that many drug and medical device companies, if not HIPAA-covered entities themselves, have subsidiaries that are.  Regardless, whether HIPAA covered or not, drug and medical device manufacturers increasingly have possession of private personal health information for the patients who are treated with their products. 
Our collective interest in data privacy led us to give you our gloss on Regents of the University of California v. Superior Court, 220 Cal. App. 4th 549 (2013), which involved claims under California’s Confidentiality of Medical Information Act.  Unlike HIPAA, the CMIA permits a private right of action and allows for the recovery of substantial statutory damages.  The case involved the theft of a hard drive containing medical records, and the California Court of Appeal held that a plaintiff cannot sue where private information was lost, but there is no evidence (or even an allegation) that anyone ever viewed it.  The vast majority of data privacy cases, all of them class actions, do not and cannot allege any actual harm to the plaintiffs.  The Regents case was no exception, and the California court came absolutely to the correct conclusion:  No harm, no foul. 
The Court of Appeal has now followed that opinion with another that got it right, but for slightly different reasons that should help put an end to this kind of wasteful litigation.  In Sutter Health v. Superior Court, No. C072591, 2014 WL 3589699 (Cal. Ct. App. July 21, 2014), a thief again stole computer media that contained medical records.  As in Regents, no one knows what happened to the information:  For all anyone knows, the thief took the stolen computer apart, wiped it clean, and sold it in pieces.  Maybe he is using the hard drive as a door stop.  Nobody knows, and the plaintiffs could not and did not allege that anyone ever viewed their medical information. 
The earlier Regents opinion had reasoned that because no one ever viewed the medical information, no “release” of confidential information had occurred, as required to state a CMIA claim.  A conclusion with which we wholeheartedly agree.  The Court of Appeal in Sutter Health went one step further and held that there was no alleged “breach” of confidential information in the first place.  Sure, confidential information changed hands.  But the harm against which the statute protects is the breach of confidentiality.  A mere change of possession does not amount to a breach and thus does not invoke the statute’s remedies.  As the court observed,

No breach of confidentiality takes place until an unauthorized person views the medical information.  It is the medical information, not the physical record (whether in electronic, paper, or other form), that is the focus of the Confidentiality Act.  While there is certainly a connection between the information and its physical form, possession of the physical form without actually viewing the information does not offend the basic public policy advanced by the Confidentiality Act. . . .  This change of possession increased the risk of a confidentiality breach.  But the Confidentiality Act does not provide for liability for increasing the risk of a confidentiality breach.
Sutter, at *6.  We like this statement because it makes so much sense.  It is also the counter statement to the absurdity that otherwise would prevail:  If the mere change of possession, and nothing more, were sufficient to state a claim, plaintiffs could force expensive litigation and potentially recover statutory damages when nothing actually happened to them.  As the court said, “We cannot interpret a statute to require such an unintended result.”  Id at *7. 

Unintended?  We suppose we agree with that, but other words come to mind.  Such as unfair.  Or unjust.  Or “you gotta be kidding me.”  Choose your own term, and bear in mind that data privacy issues will not go away anytime soon.  The CMIA is not the cash cow that the plaintiffs' bar thought it might be, but they will keep trying to find something else. 

Friday, July 25, 2014

Guest Post - Another Third Party Payor Case Is Shown The Door

Today we have this guest post from Reed Smith's Andrew Stillufsen about a recent defense win in a third party payer (or is it"payor"?) case here in the Eastern District of Pennsyvania.  We hope you find it as interesting as we did.  As usual all credit and/or blame belong to the guest poster.


Travelers Indemnity Co. v. Cephalon, Inc., is a third party payor case where plaintiffs – workers compensation insurers – claimed that they were injured by paying for prescriptions for defendant drug company’s  pain medications which were written as a result of its alleged off-label marketing of the drug.  2014 U.S. Dist. Lexis 95075 (E.D. Pa. July 14, 2014).  SPOILER ALERT:  as with similar cases, even after extensive discovery and an amended complaint, plaintiffs still failed to allege facts sufficient to establish standing or to support any of their fraud claims.  Motion to dismiss granted.

Before the court could address plaintiffs’ substantive claims, it first had to determine whether the allegations were sufficient to establish standing.    To establish standing, the plaintiff must show that they suffered a cognizable injury. Id. at *16-18.   “The contours of the injury-in-fact requirement, while not precisely defined, are very generous, requiring only that the claimant allege some specific, identifiable trifle of injury.”  Id. at *17.  (citations and internal quotations omitted).  Under the now-familiar TwIqbal analysis, plaintiffs failed to allege sufficient facts to show even a mere “trifle.” 

In this case, plaintiffs essentially alleged two theories of injury.  First, they claimed they were injured because “they did not get what they paid for,” as plaintiffs paid for drugs that were not safe or effective due to defendant’s alleged fraudulent off-label marketing.  Second, but for the alleged off-label marketing, plaintiffs  claimed they were injured when they paid for more expensive drugs when less-expensive drugs were available.  Id. at *18-19.

To support their first theory, plaintiffs pointed to the labeling and FDA-mandated “dear-doctor” letters stating the drugs were contraindicated for certain users.  In addition, plaintiffs claimed that the medications had never been proven safe and effective for any use other than the approved indication.  However, the court warned that “the liberal use of conclusory adjectives such as ‘ineffective’ will not establish standing without factual allegations to show that the plaintiffs themselves were injured by paying for the drugs.”  Id. at *19.  Major point one:  Furthermore, “[t]he absence of data or evidence affirmatively proving that a drug is safe and effective in treating a particular condition, without more, does not support the conclusion that the drug is actually ineffective or unsafe for the use.”  Id. at *21.  (citation omitted).  In addition, the court noted that “[t]he fact that a drug poses even a significant possibility of harm does not, by itself, establish injury-in-fact to the party paying for the drug.”  Id. at 24 (emphasis added).  As Carl Sagan would say, “absence of evidence is not evidence of absence.”

Looking at these allegations through the TwIqbal lens,  the court held that plaintiffs did not plead sufficient facts “to show that they paid for an ineffective drug, or that the drug’s safety risks resulted in some expenditure by the plaintiffs themselves.”  Id. at *24-25.  Therefore  plaintiffs’ first theory – that they did not get what they paid for – failed.

Plaintiffs’ second theory - that they paid for more expensive drugs when less expensive ones were available - suffered the same result.  Major point two:  The court lucidly noted that “[a] plaintiff is not injured simply because it paid for a more expensive drug. If this were so, then any successful marketing campaign  - no matter how truthful – that induced a consumer to purchase the more expensive of competing products would cause economic injury.”  Id. at *25 (quotations omitted).  Plaintiffs “must also plead facts to show that the drug was prescribed or purchased in reliance on untrue statements or misrepresentations about the drug’s attributes.”  Id. at *28. 

Once again, plaintiffs could not meet their burden.  Somewhat nonsensically, plaintiffs pointed to defendant’s price reductions, made to compete with generic competitor and to maintain market share, as evidence.  The court was not impressed.  It held that plaintiffs not only failed to “name any equally effective, safer, less expensive drug that doctors might have prescribed,” but they also did not “identif[y] any demonstrably false statement or material omission by the defendants about the safety or efficacy” of the medications.  Id at *28-29.  Therefore, no cognizable injury, no standing, motion granted, complaint dismissed. 

In some helpful dicta, the court also booted plaintiffs’ substantive claims.  Since the amended complaint contained numerous allegations that the alleged off-label marketing campaign was intentionally deceptive, plaintiffs’ intentional and negligent misrepresentation claims “sounded in fraud.”  Therefore, these claims were subject to Rule 9(b)’s “heightened pleading requirements.”  Id. at 32. 

On this count, plaintiffs again failed to meet their burden, as they “fail[ed] to identify a single false statement, misrepresentation or deliberate material omission” by defendants.  Id. at 34.  Major point three:  Plaintiffs’ argument that off-label promotion “is ipso facto fraudulent” was simply incorrect, as “[c]ourts have consistently held that off-label promotion is not inherently deceptive, and does not support a private action for fraud or negligent misrepresentation unless the promotion includes an untruthful or misleading statement about the safety or efficacy of the drug itself.”  Id. (emphasis added). 

A similar fate befell plaintiffs’ state unfair competition laws.  “State consumer protection statutes do require that a plaintiff have suffered an ascertainable loss or injury as a result of a defendant’s alleged wrongdoing.”  Id. at *44.  Since the court had already found that plaintiffs failed to allege sufficient facts to show a cognizable injury, they couldn’t satisfy this requirement either.  Plaintiffs’ unjust enrichment claim was also dismissed, as plaintiffs failed to show a cognizable loss or that defendant engaged in  fraudulent behavior.  Id. at 48. 

In sum, this decision falls squarely in line with previous third party payor decisions.  While making splashy allegations about off-label promotion may look good on paper, courts will show  the door to these claims without particularized allegations about what the defendant did and how it hurt plaintiff.