You’ve heard the saying – you can run, but you can’t hide.  Well, in Multidistrict Litigation, we could have a saying – you can hide, but only until remand.  It’s no secret that in most mass torts, only a handful of cases are in the spotlight.  The bellwethers.  The intention, usually by all parties and the court, is that if you get through the bellwethers, the next phase will be some sort of compromised resolution.  But, that’s not an absolute certainty.  There can be very legitimate reasons for defendants to prefer remands to settlement.  Often dictated by the number of cases and the rulings achieved during the MDL.  And once remand happens, the spotlight shifts.  The beacon that used to shine only on the defendant and the bellwether plaintiffs cast a very large shadow.  In that shadow hide the remaining plaintiffs.  Doing the bare minimum to survive.  Not drawing any attention to themselves.  Hoping for a return on time spent idle.  But when one of the shadow-dwellers gets remanded, it’s a whole new game.  And, if they don’t adjust to the light quickly, they can face the fate of plaintiff in Atkinson v. Ethicon, Inc., 2019 U.S.  Dist. LEXIS 115224 (W.D. Pa. Jul. 11, 2019).

The remand court in Atkinson turned on the floodlight and plaintiff’s counsel was left blinded.  The case involves injuries allegedly sustained from use of defendant’s transvaginal tape.  The lawsuit was filed in 2013 and was in the MDL for six years.  During that time, pretrial proceedings, including fact and expert discovery and the filing of dispositive motions, took place.  Id. at *1-2.  At remand, it was undisputed that all discovery had been closed in the case for at least seven months and that plaintiff had not served any expert reports.  Id. at *2 & n.1.  The remand court ordered the parties to re-file any pending motions and to do so in accordance with all local rules and the court’s practices and procedures.  Defendant re-filed its motion for summary judgment.  Plaintiff moved for an extension of time to respond because she wanted to prepare an expert report.  No hiding this time, motion denied.  Id. at *3-4.

Apparently, unaccustomed to the limelight, plaintiff’s counsel disregarded that order and submitted a “newly prepared expert report” with her summary judgment response and argued only that the expert report nullifies the summary judgment motion.  Id. at *4.  Defendant moved to strike the expert report and plaintiff, still fumbling in the brightness, didn’t respond.  Id. at *5.

The court swiftly granted the motion to strike because plaintiff “provided no valid basis to justify [her] conduct or explain why such a delay would be harmless.”  Id. at *7.  The court acknowledged that striking the expert report would ultimately require dismissal of the case, but “severe consequences” alone are not enough to overlook lassitude.  Perhaps worse than offering no excuse, plaintiff’s counsel offered a feeble excuse.  Counsel was not receiving docket notifications while the case was in the MDL.  Did counsel think nothing was going on in the case for six years?  Apparently the MDL shadow is darker than we even imagined.  Defendant rightly points out that it was incumbent on plaintiff’s counsel to check the docket and investigate why he wasn’t receiving any notifications.  Defendant also notified plaintiff’s counsel of the deadlines, making the I-didn’t-know excuse even more flimsy.  Id. at *8-9.  Indeed, the court called the excuse “weak” and “tantamount to willful blindness.”  Id. at *10.  Further,

Plaintiff[] caused prejudice to Defendant through inexcusably ignoring the deadlines and docket filings in this case for an extended period, warranting exclusion of [plaintiff’s] late-filed expert report as a sanction. . . . Plaintiffs have shown a lack of diligence, including through their failure to abide by this Court’s rules and the transferor court’s case management deadlines. Rewarding that lack of diligence would create perverse incentives for litigants and would undermine the Court’s ability to manage its cases efficiently.

Id. at *10-11.

Without an expert, plaintiff cannot prove causation warranting dismissal of all claims.  But, as the plaintiff did not substantively address any of defendant’s arguments in its response to the motion for summary judgment, the court was also justified in granting the motion because plaintiff failed to submit any record evidence to support any of her claims.  Id. at *13.

This is an extreme example, but it turns the spotlight on one of the biggest problems with MDLs – the shadow plaintiffs and their lack of engagement in the litigation process that leads to defendants having to spend time and money to get rid of them after they hang around for six years waiting for reward without putting in the work.

Occasionally we feature court decisions that have nothing to do with prescription medical products.  Dalgic v. Misericordia University, 2019 WL 2867236 (M.D. Pa. July 3, 2019), is such a case.  Dalgic involved cross-motions for summary judgment in litigation about an alleged bureaucratic screw up that prevented the plaintiff (an overseas student) from remaining in the United States while finishing certain graduate studies.  The relevant regulations (the numbers are irrelevant) produced this situation:

[A] student must submit his or her [additional studies] application within 30 days of the date the [college] enters the . . . recommendation into the [relevant governmental database].  However, the student cannot submit the application until 90 days before his or her graduation date.  In other words, the earliest the [college] can submit the . . . recommendation is 120 days before the student’s graduation.

Id. at *1 (with jargon explained).  The plaintiff claimed that the defendant college negligently submitted its recommendation too soon, meaning that he could not apply in a timely fashion, and as a result could not qualify for the program.

So what?

How do you go about proving compliance with a complicated governmental program?  Why, with an expert witness of course!  That’s what the defendant did, but the court was having none of it.

And that’s where Dalgic becomes relevant to what we do in prescription medical product-land – because our opponents (often forcing us to follow suit) routinely attempt to use similar regulatory experts to make claims about what the Food, Drug & Cosmetic Act (“FDCA”) requires.

In Dalgic, “[t]he parties’ cross-motions implicate, in large part, the federal regulations pertaining to the [federal program’s] application process.”  Id. at *7.  The defendant “submitted an expert report authored by . . . an attorney practicing immigration law for over twenty-five years.”  Id. at *9.  The attorney did what attorneys (and regulatory experts) do – spouted all kinds of legal conclusions, based primarily on his own interpretation of the relevant legal framework.  Id. at *9-10.  He also opined about what the author (a government employee) of a critical email about the relevant processes must have meant, given the relevant regulatory background.  Id. at *9.

The court tossed him.

First, as to expert’s interpretation of the email, the email itself was hearsay, and the expert’s “opinions” were simply a dodge to introduce and rely upon otherwise inadmissible evidence.  Id. at *12.  How many times have we seen experts used to put inadmissible hearsay before a jury?  More than we can count, so any decision disapproving of the practice is valuable.  The bases for exclusion were:

  • No expert was needed.  The “email (if it were admissible) could be easily read and comprehended without expert assistance.”   Indeed the expert referenced the email’s “plain meaning.”  Id. at *11 (citations and quotation marks omitted).
  • The opinion was ipse dixit.  “[T]here does not appear to be any discernible methodology applied by [the expert] in offering his opinion.”  Id.  at *12.  This is usually the case when the object of the opinion is simply to launder otherwise inadmissible hearsay into evidence.  “[T]he expert may not, however, simply transmit that hearsay to the jury.”  Id. (citation and quotation marks omitted).
  • The opinion was simply a ruse to rely on hearsay.  “Rule 703 was not intended to abolish the hearsay rule and to allow a witness, under the guise of giving expert testimony, to in effect become the mouthpiece of the [hearsay] witnesses on whose statements or opinions the expert purports to base his opinion.”  Id. (citation and quotation marks omitted).

The lawyer-expert’s opinions on the regulatory scheme were also inadmissible, because they were exactly what they purported to be – expert opinions on issues of law:

[An expert’s] understanding of the applicable federal regulations is also not a subject for which expert testimony is proper.  Indeed, the meaning of federal regulations is not a question of fact, to be resolved by the jury after a battle of experts. It is a question of law, to be resolved by the court. . . .  The only legal expert in a federal courtroom is the judge. . . .  An expert should not be permitted to express an opinion that is merely an interpretation of federal statutes or regulations, as that is the sole province of the court. . . .  Thus, [the expert’s] opinion as to the meaning of [the pertinent regulation] and his interpretation of the phrase [in the regulation] is not admissible.

Id. (numerous citations and quotation marks omitted).  Everything stated in Dalgic would be equally applicable to a plaintiff-side oath-helper posing as an “FDA expert” in a prescription medical product case.

And there’s more.  “Relatedly, [the expert’s] opinion improperly states legal conclusions drawn by applying the law to the facts,” which is also a no-no.  Id. at *13 (citation and quotation marks omitted).

[An] expert may not state his or her opinion as to legal standards nor may he or she state legal conclusions drawn by applying the law to the facts.  [O]pinion testimony that states a legal standard or draws a legal conclusion by applying law to the facts is generally inadmissible.”  In particular, [the expert] opines that [the college’s conduct] “was not the proximate cause” of [the] injuries.  This is not proper expert testimony.

Id. (more citations and quotation marks omitted).  “Proximate cause is a question of law for the court to answer[, and] ‘substantial cause’ is a legal term of art that courts commonly hold cannot be the subject of expert testimony.  Id. (citations and quotation marks omitted).  Plaintiffs’ experts also do that all the time in prescription medical product cases, finding “violations” where the FDA has not and opining on substantial factor causation.

Secondarily, the discussion of the “sham affidavit” doctrine in Dalgic is also relevant to what we do.  “Sham affidavits” are something we’ve discussed elsewhere:

A sham affidavit is a contradictory affidavit that indicates only that the affiant cannot maintain a consistent story or is willing to offer a statement solely for the purpose of defeating summary judgment.  A sham affidavit cannot raise a genuine issue of fact because it is merely a variance from earlier deposition testimony, and therefore no reasonable jury could rely on it to find for the nonmovant.  Therefore, if it is clear that an affidavit is offered solely for the purpose of defeating summary judgment, it is proper for the trial judge to conclude that no reasonable jury could accord that affidavit evidentiary weight and that summary judgment is appropriate.

Id. at *14 (quoting Jiminez v. All American Rathskeller, Inc., 503 F.3d 247, 253 (3d Cir. 2007)).  Most notably, Dalgic confirms that “a ‘sham affidavit’ need not directly contradict the earlier deposition testimony if there are other reasons to doubt its veracity, such as its inclusion of ‘eleventh-hour revelations’ that could have easily been discovered earlier.”  Id. at *15 (citation and quotation marks omitted).

The sham affidavit in Dalgic was indeed “an eleventh-hour revelation[] that could have easily been discovered earlier,” since it involved facts that had already been litigated.  Id.  Moreover, it contained statements that contradicted the witness’ prior “I don’t recall” deposition testimony.  Id.  The timing “leads to the conclusion that the Affidavit was written in an attempt to provide factual support for the assumptions made by [the college’s] expert that lack record support.”  Id.  So out it went, as well.

Ultimately, the expert’s opinions were unvarnished and unsupported legal conclusions – similar to those defense counsel in prescription medical product liability litigation encounter on a daily basis:

Virtually all of [the expert’s] testimony whether factual or legal opinion was classic ipse dixit, i.e., I say it is so, so it is so.  His legal opinion had no legal authority and his factual opinions were simply just that.  There was no methodology except to say that the way it was, was the way he said it was. . . .  [The expert] would have one believe that this entire [regulatory] process was whimsical.  The requirements set forth in the Code of Federal Regulations were either meaningless or could be “interpreted” to mean the opposite of what they say. . . .  I have rarely seen testimony so tortured and so tailored to the need of the client when the evidence was plainly contrary to the position advanced in the testimony.

In sum, [the expert’s] testimony was and would be unhelpful to the fact finder.  Moreover, the legal opinions were inappropriate.

Dalgic, 2019 WL 2867236, at *16.

With the Supreme Court’s recent decision in Albrecht that preemption decisions, and their accompanying regulatory complexities, are legal issues for judges, and not factual questions for juries, we look forward to more decisions in the prescription medical product area excluding purported FDA regulatory experts for the same reasons that produced Dalgic – opinions on legal questions, opinions pushing inadmissible hearsay, opinions without any support, and opinions that “torture” and “tailor” the FDCA scheme “to the needs of the client.”

Allow us to wax nostalgic for a moment. Decades ago, an improbable series of events led us to Nashville, where we lived for several years, blissfully holding adulthood (and college) at bay and basking in all that the resident music industry provided. Last week, we had a perfectly joyous reunion with the dearest of friends from that era, complete with plenty of music. Every now and then, in this very complex time, something falls squarely in the category of “good.”

Today’s case is not such a “something;” rather, it is a mixed bag of a personal jurisdiction decision in an Actos case out of the Eastern District of Pennsylvania. In Williams v. Takeda Pharms., 2019 U.S. Dist. LEXIS 107093 (E.D. Pa. June 26, 2019), the plaintiff alleged that he developed bladder cancer after taking Actos for more than a year to treat his type 2 diabetes. He sued three corporations affiliated with the manufacturer’s parent corporation, asserting the usual litany of product liability claims. The defendants moved to dismiss for lack of personal jurisdiction.

The court set the stage by explaining the difference between general and specific jurisdiction, as explained by SCOTUS in BMS. Citing the “consent” provision in Pennsylvania’s jurisdiction statute, 42. Pa. Cons. Stat. Ann. § 5301(a)(2)ii), the plaintiffs argued that two of the defendant corporations had consented to general jurisdiction by registering to do business in Pennsylvania and maintaining a registered agent in Philadelphia. The plaintiffs relied on a pre-Bauman Third Circuit decision, Bane v. Netlink, 925 F.3d 637 (3d. Cir. 1991), holding that registration by a foreign corporation constituted consent to be sued in Pennsylvania’s courts. The defendants countered that, after Bauman, asserting jurisdiction based only on a foreign corporation’s registration would violate the Due Process Clause of the Fourteenth Amendment.

The court disagreed. Noting that the Third Circuit had not changed its view since Bane, the court held that Bauman and BMS did not change the landscape because, through those cases “narrowed the scope of jurisdiction …, neither case addressed consent.” Williams, 2019 U.S. Dist. LEXIS 107093 at *7. In the absence of “any further analysis from the Supreme Court or the Third Circuit,” the court held that “a foreign corporation’s registration to do business in Pennsylvania establishes consent to jurisdiction,” and it denied the motion with respect to the two registered corporations.  This is an extremely controversial position.  As we’ve blogged about before, while most Pennsylvania courts have taken the same position as Williams, there is a strong argument that Bane is inconsistent with Bauman, and this issue is on appeal (or soon will be) in both state and federal courts.

The third corporate defendant is not registered do business in Pennsylvania. The plaintiff asserted that the corporation transacts business and derives revenue in Pennsylvania and is “in the business of researching, designing, formulating, compounding, testing, manufacturing, producing, processing, assembling, inspecting, distributing, marketing, labeling, promoting, packaging and/or advertising” the drug in Pennsylvania, id. at *8, and that these activities are sufficient to confer specific jurisdiction.

The court explained that, to the contrary, specific jurisdiction under BMS “requires an affiliation between the forum and the underlying controversy, principally, an activity or occurrence that takes place in the forum state,” id. at *9 (internal punctuation and citation to BMS omitted), and that the “defendant’s unconnected activities in the State” cannot substitute for such affiliation.   Id. In BMS, the court granted the defendant’s motion to dismiss, holding that the court did not have specific jurisdiction over the nonresident defendant corporation where the plaintiff was not prescribed the defendant’s medication in the forum state and did not ingest the medication or suffer his alleged injuries in the forum state.   Here, the plaintiff similarly was not prescribed Actos in Pennsylvania, did not ingest it in Pennsylvania, and did not suffer his alleged injuries in Pennsylvania.   Though he tried to argue that he “experience[ed] his condition at work in Pennsylvania and during treatment in Pennsylvania,” the court granted the motion to dismiss this defendant, holding that “the relevant conduct giving rise to [the plaintiff’s] claims occurred elsewhere.” Id. (internal punctuation and citation to BMS omitted).

So a truly mixed result. The court was nicely restrictive in its analysis of the forum-related activities of the unregistered defendant, but its reliance on pre-Bauman law to exercise jurisdiction over the other two defendants has the potential to open floodgates to litigation tourists whom Bauman and BMS would turn away.   We hope the Third Circuit rectifies this at some point. We’ll keep you posted.

Reading through Obermeier v. Northwestern Memorial Hosp., __ N.E.3d __, 2019 IL App. (1st) 170553 (Ill. App. Div. June 28, 2019), reminded us of scrolling through television channels in the middle of the day with time to kill. The opinion started off talking about the basic medical facts of the case and we were ready to buzz as our litigation memory twinged with talk of the plaintiff’s regurgitant and prolapsed mitral valve being repaired with an annuloplasty ring back in 2006. The manufacturer of the ring–named after a pioneer in heart valves—was sued, but won summary judgment before trial. As the evidence at trial against the implanting surgeon and hospital was recounted, we were reminded of those game shows where one player describes a person, place, or thing without using proscribed words. Later, as the trial evidence grew stranger and stranger, we thought of the old game shows where the contestant has to determine if an unidentified speaker’s self-description is made up and where actors improvise a scene based on seemingly disconnected prompts. At the end of the opinion—if not the end of the more than a decade long saga (or soap opera)—the defense verdict from trial was affirmed it looks like the good guys won.

As always, our focus is on the issues most relevant to drug and device law, even though there are some interesting evidentiary nuggets in the appellate court’s rulings. The claims pursued at trial against the implanting surgeon and the hospital alleged that plaintiff was injured by the lack of adequate informed consent with regard to the use of the particular annuloplasty ring, called the Myxo ring. Plaintiff contended that the consent was inadequate because she was really in a secret clinical trial for an investigative device because the Myxo ring had not been cleared or approved at the time of surgery. Plaintiff did not contend that the ring was defective in its design or manufacture or that it malfunctioned. After the jury ruled in favor of the defendants, her appeal did not contend that the verdicts were unsupported by admitted evidence or that the trial court had erred in its jury instructions or verdict form. Rather, she contended that pre-trial rulings on motions to dismiss, motions for summary judgment, and motions in limine were in error. The discussion of actual trial evidence mostly provided context for why these rulings were correct or why any error was harmless.

Our somewhat condensed and reorganized summary of the trial evidence is as follows. Plaintiff’s mitral valve regurgitation progressed over the course of more than twenty years to the point where her cardiologist suggested surgery and referred her to a prominent cardiac surgeon, Dr. McCarthy, who agreed that surgery was indicated. He obtained informed consent from plaintiff for the repair of her mitral valve using a medical device called an annuloplasty ring, although which one of the different rings available at the hospital would be used was to be determined in surgery and the plaintiff was not presented with a list of options. Dr. McCarthy chose to use the Myxo ring because he thought it was the best choice for plaintiff. He had also invented the ring based on his view that a “pre-bent ring” would have advantages over existing devices that had to be bent as needed. He worked with the manufacturer to develop prototypes, which was something he had done previously for other annuloplasty rings. The manufacture was responsible for determining and following the regulatory pathway for the device, manufacturing it, and labeling it. By the time of plaintiff’s surgery, Dr. McCarthy considered the Myxo ring a marketed device and did not treat it like he did investigational devices. He and the hospital were familiar with clinical trials and investigational devices, but treated plaintiff’s surgery like clinical care outside of a clinical trial because the Myxo ring was not considered an investigational device. For instance, there was no Investigational Review Board (”IRB”) involvement, although plaintiff was included in a retrospective chart review and “Outcomes Registry.” (Dr. McCarthy published peer-reviewed papers on the Myxo ring, among other aspects of his repair of mitral valves.)

A representative of the manufacturer at trial testified the company did not treat the Myxo ring as an investigational device at the time of plaintiff’s surgery or have a clinical trial set up with Dr. McCarthy on the device. As a Class II device, the Myxo ring was evaluated by the company under the 1997 guidance on “Deciding When to Submit a 510(k) for a Change to an Existing Device.” Based on its analysis, the company used a “Justification to File” for the device rather than submitting a 510(k) application (or something else) to FDA before initial marketing. The representative testified that Dr. McCarthy and the hospital were not parties to its decisions on the regulatory pathway for the device, but stood by them. (Although not discussed in the opinion, there was later interaction with FDA over this device and a subsequent 510(k) application was cleared.)

Plaintiff and the defendants presented dueling experts on whether plaintiff really was in a clinical trial on an investigational device according to FDA regulations and whether the sort of consent seen in clinical trials was required for plaintiff’s surgery. They did agree, however, that the manufacturer is responsible for determining the regulatory pathway for the product and that a surgeon does not have to investigate whether the right pathway has been followed. Plaintiff’s star witness, Dr. Rajmannan, had worked with Dr. McCarthy at the defendant hospital and maintained that there really was a clinical trial on an investigational device without appropriate consent or other measures being followed. She opined that plaintiff might have been injured by the ring pinching an artery or a suture being placed in an artery (as could happen with any annuloplasty). This is where things got interesting. Dr. Rajmannan, who appears to be a cardiologist by training, had no experience with cardiac surgery or any official role with an IRB. She did, however, complain to the hospital about the Myxo ring back in 2007, refuse to participate in the internal investigation, get suspended, and get fired from the hospital. Then she reported Dr. McCarthy to a state board, brought a qui tam action for damages against Dr. McCarthy, contact multiple media outlets, contact the Senate, contact the President, publish blog posts (!!!), and self-publish e-books. All of these apparently focused on advancing essentially the same theory that plaintiff claimed at trial about an improper clinical trial about an investigational device, as opposed to the clinical use of a marketed medical device that the surgeon and hospital assumed had followed the right regulatory path to market.

Stranger than fiction, but why are we posting on it? Buckman and the lack of a private cause of action for violation of FDA regulations, of course. After plaintiff lost with the jury, some of her appeal focused on the claims against the manufacturer. As an initial matter, her claims for battery against the manufacturer and for lack of consent and battery against the hospital were estopped because the jury had rejected that any inadequate consent had caused plaintiff any injury. There is a practice point in here about how plaintiff’s election to have a general verdict rather than detailed jury interrogatories worked against her on appeal. There is also a discussion of Illinois law on when a hospital owes a duty to get a patient’s consent, because the court went to the merits despite the estoppel. The battery claim against the hospital—remember from law school or the bar that battery is an intentional offensive contact without the consent of the other party—did not work because the plaintiff consented to the operation, including an operation that would use some annuloplasty ring, and the failure to specify the ring that would be used did not make it unauthorized. For the battery claim against the manufacturer, the plaintiff contended that it was responsible for “registering the Myxo ring with the FDA and for ensuring that it was properly cleared or approved by FDA,” such that the failure to do so made all subsequent uses a battery on the patient. A creative theory, but it was premised on a violation of the FDCA. The U.S. enforces FDCA violations under 21 U.S.C. § 337(a). And Buckman “conclusively determined that a private litigant may not sue a medical-device manufacturer for violating the FDCA.” Short and sweet.

After addressing whether the manufacturer could be liable under a strict liability theory if Dr. McCarthy was its agent—it cannot because, among other things, agency requires control—the court returned to Buckman. Plaintiff framed a failure to warn claim against the manufacturer based solely on the failure to disclose that the device was allegedly investigational and was on the market as a result of the violation of FDA regulations.

Plaintiff’s argument appears to be that. Regardless of whether the Myxo ring was defective in any way, Edwards had a duty to warn patients that it had not been properly cleared by the FDA. To allow plaintiff to recover on her failure to warn claim without any allegation that the Myxo ring was defective would amount to creating a cause of action for violation of the FDCA, which, as described above, is precluded under Buckman, 531 U.S. 341, 349 n.4 (2001).

Accordingly, summary judgment on that claim was affirmed.

The rest of the opinion concerns certain documents relating to peer review the court had held to be privileged and the court’s denial of certain motions in limine plaintiff filed on the cross of Dr. Rajmannan and Dr. McCarthy’s testimony about royalties. We will not discuss those rulings except to note that plaintiff’s contention that her star witness’s own history of allegations and statements did not go to bias fit right in with the wackiness of the facts of this case.

 

Judges should … judge. They should decide legal issues. But some judges think their primary role is to “manage” litigation. It turns out that such management often means strong-arming parties into settlement. Is that appropriate? We wondered about that. We wondered it aloud. We wondered it in the presence of one of our Summer associates, Catherine Houseman (Temple 2020). She came up with research that we thought was interesting, so we will now share it with you. (We have edited it very slightly, not to alter or improve the substance, but to add the flippant tone so many of you have come to expect from us. Oh, and the screed at the end is entirely ours.)

I. Rule 16 and the Code of Conduct

Sometimes the judicial jaw-boning in favor of settlement begins as early as the Fed. R. Civ. P. 16 pretrial conference. But the Advisory Committee Notes on Rule 16 provide that the purpose of this provision is not to “impose settlement negotiations on unwilling litigants,” but rather “it is believed that providing a neutral forum for discussing [settlement] might foster it.”

According to the Code of Conduct for United States Judges Canon 3A(4), a judge “may encourage and seek to facilitate settlement but should not act in a manner that coerces any party into surrendering the right to have the controversy resolved by the courts.” Canon 3C(1) provides that a “judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned.” Further, Canon 4A specifies that a “judge should not act as an arbitrator or mediator or otherwise perform judicial functions apart from the judge’s official duties unless expressly authorized by law.”

In 2009, the Judicial Conference’s Committee on the Code of Conduct interpreted the Code’s settlement provision in an advisory opinion. The Committee noted that there is no per se impropriety in a judge’s participation in settlement discussions or in a judge’s conducting of a trial following his or her participation in settlement discussions. However, there are local rules in some jurisdictions that explicitly prohibit judges from handling both settlement talks and trials. See, e.g., D. Idaho. Civ. R. 16.4(b)(2)(B) (“As a general rule, the presiding judge assigned to the matter will not conduct the judicial settlement conference.”); W.D.N.C. Civ. R. 16.3(d)(3) (“[A]ny judicial officer of the district other than the judicial officer to whom the case is assigned for disposition may preside over a judicial settlement conference convened by the Court.”); M.D. Tenn. R. 16.04(a) (“Settlement conferences will ordinarily be conducted by a Magistrate Judge other than the Judge to whom the case is assigned.”). In the absence of a local rule, the Committee emphasized that whether ethical concerns arise in a particular proceeding depends on the specific nature of the judge’s actions and whether his or her impartiality is called into question. The Committee highlighted that ethical concerns are more likely to arise in nonjury trials, especially in instances where a judge probes the parties’ assessments of the value of the case, reviews their settlement offers and possibly suggests specific settlements amounts, and then tries the case and awards damages when settlement talks fail.

In conclusion, the Committee provided that while a “trial judge’s participation in settlement efforts is not inherently improper under the Code,” settlements must be “examined on a case-by-case basis to determine their ethical propriety.” Therefore, certain factors must be taken into account: whether the case will be tried by a judge or a jury, whether the parties themselves or only counsel are involved in settlement discussion, and whether parties have consented to settlement discussions or a subsequent trial by the same judge who presided over the settlement discussions.

II. Case Law

a. Bias

Title 28 of the U.S. Code section 455(a) provides that a judge shall disqualify himself or herself “in any proceeding in which his or her impartiality might reasonably be questioned.” A judge can disqualify himself or herself under this section sua sponte. Section 455(b), on the other hand, provides that a judge must recuse himself or herself where he or she “has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding.” Recusal under this subsection requires the filing of a motion.

In Johnson v. Trueblood, the Third Circuit determined whether a district court judge’s comments during settlement negotiations amounted to extrajudicial bias and justified his recusal. 629 F.2d 287, 291 (3d Cir. 1980) “Extrajudicial bias” refers to bias that is not derived from the evidence or conduct of the parties that the judge observes in the course of the proceedings. Id. at 291. In this case, the plaintiffs argued that the judge’s comments that the lawsuit was a “personal tragedy for the defendants” who were “honest men of good character” showed extrajudicial bias. In his opinion denying the motion to recuse, the judge asserted that his remarks were based on his perception of the case and were his attempt at getting the parties to settle. Id.

The Third Circuit determined that the judge’s comments at the settlement conference did not amount to extrajudicial bias. In making this determination, the court stated that the relevant inquiry was whether the judge’s pretrial comments were linked to his evaluation of the case based on the pleadings and other material outlining the nature of the case, or whether they were based on purely personal feelings towards the parties and the case. Id. Specifically, the court reasoned that his comments “may have been a form of judicial coloration in an overzealous effort to settle what obviously would be a lengthy and complicated case to try.” Id. The Third Circuit emphasized that while the “settlement fever” in this case was not enough to warrant recusal, judges “must not permit their role as negotiator to obscure their paramount duty to administer the law in a manner that is both fair in fact and has the appearance of fairness.” Id. at 292.

The Tenth Circuit expressed a similar caution in Franks v. Nimmo, where the trial judge attempted to persuade the plaintiff to accept the defendant’s settlement offer. 796 F.2d 1230 (10th Cir. 1986). Specifically, the judge privately met with the plaintiff and told him “these matters never work out for a plaintiff unless they are settled, and that he ought to settle because the judge could not rule in his favor.” Id. at 1233. The court found that the comments did not show any bias on behalf of the judge because his attempt to settle the case was “clearly beneficial” to the plaintiff. Id. at 1234.

There is a case out of the Seventh Circuit, Ghevas v. Ghosh, where the court reached a similar conclusion: “A judge may not coerce a party into settling. Coercion occurs when a judge threatens to penalize a party that refuses to settle. But a judge may encourage settlement, and he or she is not prohibited from expressing a negative opinion of a party’s claim during discussions as a means to foster an agreement.” 566 F.3d 717, 719-20 (7th Cir. 2009). See also Cantu v. U.S., 908 F.Supp.2d 146, 151 (D.D.C. 2012) (“[A] trial judge may convey his views about a settlement offer to the litigants’ counsel who are free to accept or reject the judge’s views, so long as the judge does not in any way bring pressure on the parties to settle.”).

b. Coercion

In Kothe v. Smith, the Second Circuit vacated the lower court’s judgment because the judge coerced the parties into settling. 771 F.2d 667 (2d Cir. 1985). The judge specifically recommended that the case be settled between a certain dollar amount and warned the parties that if they settled for a comparable figure after the trial had begun, he would impose sanctions—which he did. The court held that the judge’s conduct amounted to an abuse of discretion and observed: “[P]ressure tactics to coerce settlement simply are not permissible. The judge must not compel agreement by arbitrary use of his power and the attorney must not merely submit to a judge’s suggestion, though it be strongly urged. [Rule 16] was not designed as a means for clubbing the parties . . . into an involuntary compromise. Id. at 669.

In Goss Graphics Sys. v. Dev Indus., the Seventh Circuit reassigned a case to a different judge because the original judge dismissed the case when the plaintiff refused to settle. 267 F.3d 624 (7th Cir. 2001). The court highlighted, “if parties want to duke it out, that’s their privilege. Maybe the plaintiff was less than forthcoming in settlement negotiations than it should in some abstract sense have been, but that was its right.” Id. at 628. In another case, Cabrera v. Esso Std. Oil Co. P.R., the First Circuit concluded that the trial court abused its discretion by factoring the plaintiff’s refusal to settle into its decision to dismiss the case. 723 F.3d 82 (1st Cir. 2013). The court chastised the lower court for “permit[ing] the information gleaned through its involvement with the settlement talks to exert undue influence over its disposition of appellant’s motion.” Id. at 89. The court further noted that while the court’s desire to aid the settlement process was commendable, it became too involved in settlement discussions by obtaining information about the parties’ positions that unduly influenced its ruling. Id. at 90.

c. Jury Trial vs. Bench Trial

Another factor considered in determining whether a judge is too involved in settlement discussions is whether the case is a jury trial. In U.S. v. Pfizer, the Eighth Circuit reasoned that while a judge presiding over a jury trial may make settlement comments merely giving the parties his or her educated guess on the jury’s finding, a judge presiding over a bench trial who expresses his views on settlement may be guilty of prejudgment and bias. 560 F.2d 319 (8th Cir. 1977). The court reasoned that because of this difference, when the judge is the trier-of-fact, he or she should avoid recommending a settlement figure. Id. at 323.

Notably, a local rule in Texas explicitly prohibits the assigned judge from discussing settlement figures with the parties in bench trials without the express consent of the parties. N.D. Tex. R. 16.3(b).

III. Conclusion

What is our takeaway from this brief tour of the rules and the cases? The principles set forth by appellate courts are reasonably clear, even if enforcement of those principles can seem lax or erratic. Judges should resist the temptation to immerse themselves in details of settlement negotiations. That much seems obvious. What is, or should be, even more obvious, is that judges should not ignore or mangle their judicial duties in order to coerce settlement. We used to labor in front of a judge (many of you will know who we mean) who would constantly badger mass tort defendants to settle cases. If they settled cases, she would reward them by not scheduling trials for the next month or so. If they didn’t settle, she would line up the trials, creating a thoroughly unworkable schedule. Is that a dispensation of judicial grace or a form of coercion? To our eyes, it looks like the law as cat’s paw. It is also the sort of thing that virtually never gets scrutinized by any appellate court. Every day, in courthouses throughout the land, lawyers encounter settlement coercion. Maybe it happens when a judge tinkers with rulings, or the timing of rulings, to create an in terrorem effect that is designed to induce settlement. Pardon us if we do not applaud such “management.” Why can’t we get fair rulings, and let the parties decide whether settlement makes sense for them? We are entitled to expect justice, not coercion. We should not settle for less.

We are going to take today’s decision a little out of order because we think the outcome is fairly easily surmised from our title – plaintiff couldn’t sustain his claim because he didn’t have admissible expert testimony.  But before we get to the substance of the opinion, at the end the court was called on to decide plaintiff’s motion to re-open discovery to depose another doctor, presumably so plaintiff could try to get the needed expert testimony.  In support of the request, plaintiff’s counsel “blamed” their expert’s “attitude” and “his lack of preparation” for his deposition as the reason he was excluded.  Carrozza v. CVS Pharmacy, Inc., — F.Supp.3d–, 2019 WL 2913987, at *9 (D. Mass. Jul. 8, 2019).  Counsel tossed their own expert right under the bus.  That’s a worse excuse than “the dog ate my homework.”  It’s like saying “I ate my homework.”  Whose job was it to prepare the expert for his deposition?  To cross-examine him to make sure he knew how to handle himself in a deposition?  To review all the medical records and facts with him so that he was well-versed and his opinions fully supported?  Counsel.  It’s a poor excuse that says more about counsel than about the expert and it wasn’t reasonable grounds for re-opening discovery.

While that was the end of the decision, it was the start of plaintiff’s problems.  Plaintiff was prescribed levofloxacin, the generic equivalent of Levaquin, a quinolone antibiotic.  When the pharmacist went to fill the prescription, a “hardstop” warning in the pharmacy’s computer said that plaintiff was allergic to quinolone drugs.  But, when the pharmacist researched the “hardstop,” plaintiff’s patient profile showed other filled prescriptions for quinolone drugs and a denial from plaintiff that he had a quinolone allergy.  Based on this, the pharmacy’s policy is to allow the pharmacist to make the decision whether to fill the prescription.  Id. at *1-2.  Plaintiff got the medication and had an allergic reaction.  He developed rash symptoms that may have been a mild case of SJS.  Id. at *2.

Plaintiff had two experts.  He failed to timely serve the expert report from one and the expert was therefore excluded.  Id.  The expert report for the other, an allergist/immunologist, opined that the pharmacist had breached his standard of care and that the drug was the likely cause of plaintiff’s SJS.   Id.  But, at his deposition, the expert testified that he didn’t know the applicable standard of care for the pharmacist and didn’t know enough to be able to form an opinion as to whether plaintiff actually had SJS.  Id.  We guess this was the “lack of preparation” plaintiff’s counsel complained about.  More like a general lack of expertise.

If you want a full list of all the things plaintiff’s expert didn’t know, we refer you to the decision.  Id. at *3.  But, for a few highlights:  he had never diagnosed or treated SJS; he hadn’t read the medical records; he didn’t know plaintiff had been prescribed the drug before; and he didn’t know the standard of care for pharmacists in cases of “hardstops.”  Id.  Perhaps all things that should have been known before he was deposed – before he ever authored his report.

Not surprisingly, defendant moved to preclude plaintiff’s expert. After a thorough recitation of the Daubert standard, the court concluded

It is manifestly clear that [plaintiff’s expert] is not qualified to offer an expert opinion on either the appropriate standard of care for a pharmacist or whether [plaintiff’s] consumption of Levaquin caused his injuries, particularly the alleged SJS.

Id. at *5.  Plaintiff argued that this expert based his causation opinion on the precluded affidavit of plaintiff’s untimely expert, citing precedent that an expert is allowed to rely on otherwise inadmissible evidence if it is of the type commonly relied on in the field.  Id.  However,

A witness who has no relevant expertise or familiarity with a subject matter may not, [ ] simply parrot the conclusions of an expert who does. At a minimum, to allow such testimony would effectively permit a party to evade the disclosure requirements of Rule 26 and would preclude meaningful cross-examination.

Id.  Since the expert was simply speculating, he was excluded — leaving plaintiff with no expert testimony.  Which brings us to defendant’s motion for summary judgment which was largely based on the lack of expert testimony.  Plaintiff tried to argue that the main issue was a “common sense decision” whether to prescribe.  But, actually the question that had to be answered by the jury was whether the pharmacist had breached the standard of care when he decided to prescribe, a decision that involved professional and technical judgment beyond the lay experience of the jurors.  This is the first Massachusetts court to hold that expert testimony is required to support allegations of pharmacist malpractice.  Id. at *6.

Plaintiff had no expert on the appropriate standard of care, but he also had no expert evidence on causation.  So plaintiff also couldn’t prove the drug caused his injuries or that he actually suffered his alleged injuries.  Id.  That alone defeated all of plaintiff’s causes of action — negligence, products liability, and unfair trade.  But plaintiff’s products liability claim also failed under Massachusetts law for an independent reason.

In Massachusetts, the only products liability claim is one under the U.C.C. for breach of warranty.  But the U.C.C. only applies to contracts for the sale of goods.  Pharmacists do more than sell goods, they offer services.  And the court determined that since pharmacists predominately offer a service, the U.C.C. does not apply.  Id. at *7-8.  Plaintiff tried to save this claim by turning it into a failure to warn claim, but since that wasn’t alleged in the complaint he wasn’t allowed to raise it at summary judgment.  He also tried to turn it into a defective design claim – which would fail for lack of expert testimony and so was futile anyway.  Id. at *8.

This case was fraught with problems and the plaintiff’s counsel’s blame game may have been only one of them, but it was the worst in our eyes.

We might not have even read the Supreme Court’s recent – and long and convoluted − agency deference decision, Kisor v. Wilkie, ___ S. Ct. ___, 2019 WL 2605554 (U.S. June 26, 2019), except that it tripped several of our automatic searches by citing both Riegel v. Medtronic, Inc., 552 U.S. 312 (2008), and PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011).  See Kisor, 2019 WL 2605554, at *5 n.2.  Kisor, after all, has nothing to do with prescription medical product liability litigation, it being an appeal from a denial of government benefits.

But Kisor cited Riegel and Mensing as part of a string citation for the proposition, “we have referred to that doctrine as Auer deference, and applied it often.”  Id.  Seeing the Court’s mention of two of our favorite preemption cases as examples of the application of agency deference also brought to mind the fact that the worst decision since the DDL Blog has been in existence − Wyeth v. Levine, 555 U.S. 555 (2009) – was also a prime example of the Court refusing to defer to the FDA’s position.

Because, in these three instances, preemption and agency deference had risen or fallen together, we decided to fight our way through Kisor, all 45 Westlaw headnotes and two concurring opinions of it.

The first thing that’s apparent to even a preemption neophyte is that this phenomenon of preemption and agency deference rising or falling together is not the view of the Court.  Several of the justices who are the most reliable supporters of tort preemption (Alito, Gorsuch, and Kavanaugh) are agency deference skeptics, while all of the justices who usually oppose tort preemption (Ginsburg, Breyer, Kagan, and Sotomayor) are proponents of agency deference.  Chief Justice Roberts likes both agency deference (in this context, anyway) and preemption, whereas Justice Thomas hates the former and is idiosyncratic on the latter.  So we have the liberal-conservative Supreme Court split working at cross purposes.

Indeed, it turns out that the Riegel and Mensing citations were not even in a part of the Kisor opinion that commanded a majority of the Court.  Part II-A did not have the Chief’s joinder.  It’s another example, like the recent Albrecht decision, of the anti-preemption side of the Court discussing preemption.  This section also uses an example of judicial deference to the FDA, but not (as might be expected) in a preemption context:

An FDA regulation gives pharmaceutical companies exclusive rights to drug products if they contain “no active moiety that has been approved by FDA in any other” new drug application.  Has a company created a new “active moiety” by joining a previously approved moiety to lysine through a non-ester covalent bond?

Kisor, 2019 WL 2605554, at *5 (citations omitted).  Primarily, this example is used (and cited elsewhere in the opinion) of an paradigm of the often recondite nature of agency regulation, which is advanced as a basis for having agency deference.  “If you are a judge, you probably have no idea of what the FDA’s rule means, or whether its policy is implicated when a previously approved moiety is connected to lysine through a non-ester covalent bond.”  Id. at *6.

Probably the core of Kisor – and a part that is a majority opinion − is its discussion of the hoops that courts must jump through before they can defer to an agency’s interpretation.  To the extent that preemption turns on agency deference, that’s a significant issue:

  • “[A] court should not afford Auer deference unless the regulation is genuinely ambiguous.”
  • “[B]efore concluding that a rule is genuinely ambiguous, a court must exhaust all the ‘traditional tools’ of construction.”
  • “[T]he agency’s reading must . . . be ‘reasonable.’”
  • “[A] court must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight.”

Kisor, 2019 WL 2605554, at *8-9 (citations omitted).

One of the “important markers” for when agency deference is appropriate is something we have seen recently in the preemption context:

[T]he regulatory interpretation must be one actually made by the agency.  In other words, it must be the agency’s “authoritative” or “official position,” rather than any more ad hoc statement not reflecting the agency’s views. . . .  [T]he requirement of “authoritative” action must recognize a reality of bureaucratic life:  Not everything the agency does comes from, or is even in the name of, the Secretary. . . .  But there are limits.  The interpretation must at the least emanate from those actors, using those vehicles, understood to make authoritative policy in the relevant context.

Kisor, 2019 WL 2605554, at *9 (citations omitted).

Recall the “force of law” discussion in Albrecht only a couple months ago:

[T]he only agency actions that can determine the answer to the pre-emption question, of course, are agency actions taken pursuant to the FDA’s congressionally delegated authority. . . .  Federal law permits the FDA to communicate its disapproval of a warning by means of notice-and-comment rulemaking setting forth labeling standards, by formally rejecting a warning label that would have been adequate under state law, or with other agency action carrying the force of law.  The question of disapproval “method” is not now before us . . . [but] whatever the means the FDA uses to exercise its authority, those means must lie within the scope of the authority Congress has lawfully delegated.

Albrecht, 139 S. Ct. at 1679 (citations omitted).

Reading these two analyses together, it seems like a variety of lesser FDA actions are now of questionable relevance.  Various FDA enforcement letters and all forms 483 are simply the view of one FDA official, and as we’ve pointed out, need not even be reviewed by an FDA legal officer before being issued.  They are owed no judicial deference, and thus have no basis being used in any preemption discussion – particularly as a basis for purported “parallel claims.”  The same would seem to be true of FDA guidance and “draft” guidance documents – unless an authoritative FDA decision with force of law happens to incorporate one.  That sometimes happens with final approval letters.

On the other hand, Citizen’s Petitions are a different animal.  Pursuant to 21 C.F.R. §10.30(e), such petitions must be decided by the “Commissioner.”  Actions on such petitions are considered “agency action” and published in the Federal Register.  Id. §§10.30(e)(2)(i), (e)(4).  They produce a formal “record.”  Id. § 10.30(i).  To the extent that both preemption and judicial deference depend on something being “authoritative” “official,” or “carrying force of law,” FDA responses to Citizen’s Petitions would seem to qualify.

Another interesting discussion is found in footnote 6 (also part of the Kisor majority opinion), concerning agency briefs.  The “general rule . . . is not to give deference to agency interpretations advanced for the first time in legal briefs.”  Kisor, 2019 WL 2605554, at *10 n.6.  But amicus curiae briefs are different.  Since an agency appearing as amicus is “not a party to the litigation . . . there [is] simply no reason to suspect that the interpretation [does] not reflect the agency’s fair and considered judgment.”  Id. (citations and quotation marks omitted).  This aspect of Kisor is significant because the FDA is often asked to provide views on preemption as an amicus.

Given the focus in Albrecht on “force of law” as a prerequisite to preemption, the discussion in Kisor (this part not an opinion of the Court) on “interpretive” agency rules is significant:

[T]he section allows agencies to issue “interpret[ive]” rules without notice and comment.  A key feature of those rules is that (unlike legislative rules) they are not supposed to have the force and effect of law. . . .  Instead, interpretive rules are meant only to advise the public of how the agency understands, and is likely to apply, its binding statutes and legislative rules. . . .  [I]nterpretive rules, even when given Auer deference, do not have the force of law.

Kisor, 2019 WL 2605554, at *12 (citations and quotation marks omitted).  We’re not administrative lawyers, so we don’t know the extent to which the FDA issues non-notice-and-comment rules, but to the extent the FDA does, Albrecht’s force-of-law discussion calls their preemptive effect into question.

Finally, the opinion of the court part of Kisor concludes with a paean to stare decisis, pointing out that the Court has employed deference to administrative agencies “dozens” of times, and other courts have “thousands” of times.  Id. at *13.  As mentioned at the outset, those instances include Riegel and Mensing.  We find this somewhat ironic, as four of the five justices joining in this part of the opinion, have refused – so far, at least − to accord Mensing the dignity of stare decisis.  Since “deference decisions are balls tossed into Congress’s court,” id. at *14, then perhaps the deference that the Court in Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), gave to the FDA’s questionable interpretation (but through notice and comment rulemaking) of 21 U.S.C. §360k(a), should be reconsidered – given that Congress has since responded with the Safe Medical Devices Act that, as we discussed here, applies the same safety and effectiveness standards to both PMA and 510(k) devices.  We note, however, that as Chief Justice Roberts’ short concurrence points out (2019 WL 2605554, at *15), deference to agency statutory interpretations is governed by Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and is not something that Kisor “touch[es] upon.”

We continue to scratch our heads over consumer class actions seeking monetary compensation when the customers received exactly what they paid for.  We see them from time to time in the pharmaceutical space, where patients claim monetary compensation even though the prescription drugs they used worked like they were supposed to with no adverse reactions.  That last point is worth repeating—no adverse reactions, as in no injury incurred or even alleged.  These kinds of money-for-nothing lawsuits often do not survive, as we reported here and here.

Many, however, are filed in California, where the state’s permissive consumer fraud laws erect a low bar.  One example is a very long-running hormone replacement therapy case called Krueger v. Wyeth, Inc., No. 3:03-cv-2496, 2019 WL 2743942 (S.D. Cal. July 1, 2019), where the district court certified a class of HRT patients several years ago, and recently denied the defendants’ motion for summary judgment in part, thus allowing a class of uninjured patients to claim hundreds of millions of dollars in so-called “restitution.”

Restitution of what?  Since the class members disavowed any personal injury and admitted that the drug provided benefits, what could they possibly be claiming?  Well, let’s dig a little deeper on that.  The case is styled as a consumer class action under California’s Unfair Competition Law (“UCL”) and Consumer Legal Remedies Act (“CLRA”), and it is brought on behalf of “all California consumers who purchased [the HRT products] for personal consumption between January 1995 and January 2003, and who do not seek personal injury damages.”  Id. at *1, *8.  These uninjured patients allege that the drug manufacturer did not adequately disclose certain risks prior to 2003 and, had they been fully informed, they would not have purchased the drug.  Id. at *7.

In allowing a restitution claim to go forward, the district court addressed three issues:  Standing, damages, and restitution.  On standing, the defendant justifiably argued that the plaintiff had not produced evidence of injury or reliance by class members on the alleged misrepresentations and omissions.  Id. at *5.  As a matter of substantive California law, the district court ruled that reliance can be presumed under the UCL and the CRLA “when the facts show that material misrepresentations were made to the entire class.”  Id.  We are aware of the cases that say that, and we don’t like them because they unacceptably weaken a fundamental requirement for proving fraud—that the alleged misrepresentation actually had an impact.  Regardless, because the plaintiff was claiming that the defendants “employed a standardized pervasive marketing campaign” that was misleading [id. at *1], the district court presumed reliance.  Id. at *5.

Article III standing was a more difficult question, but with the same result.  The district court adopted a two-step analysis:  “(1) ensuring that individual standing of the named plaintiff is supported by competent evidence and (2) examining the class definition to ensure that anyone within it would have standing.”  Id. at *6.  The first step was satisfied by the plaintiff’s contention that she would not have purchased the drugs “but for” the defendants’ alleged conduct; and the second step was satisfied by a presumption of reliance and causation in the case of a material fraudulent omission (recall that purportedly “standardized pervasive marketing campaign”).  Id. at *8.  The district court therefore ruled that the class of all uninjured purchasers had standing, but based only on a presumption.

On damages and restitution, the defendants argued that the plaintiff could prove neither because none of the models that her expert offered took into account the value that the class members received.  The named plaintiff herself testified that the product “alleviated hot flashes, reduced symptoms of insomnia, and improved memory and everyday functioning”; and her expert held the opinion that hormone therapy confers “significant benefits.”  Id. at *13.  In other words, the plaintiff got what she paid for, yet the plaintiff’s damages expert gave the defendant zero credit for that value conferred.

That gap was the death knell for actual damages under the CLRA:

Although Plaintiff argues that she would not have purchased HRT “but for” [the] deceptive conduct, when calculating actual damages, the Court must look to what actually occurred, taking into consideration that which Plaintiff did, in fact, receive and the market value of the product (both with and without the misrepresentation).

. . . .

Plaintiff offers no evidence of the monetary effect of the alleged misrepresentations or omissions on the market price of the Defendants’ products.

Id. at *11.  Because the district court was missing evidence necessary to calculate actual damages, it granted summary judgment as to those claims.  Id.

Although the analysis should have been the same or similar for restitution under the UCL, the district court denied summary judgment on that claim.  The court acknowledged that restitution is “broadly designed to ‘restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest,” and it further acknowledged that restitution has two purpose:  “to restore the defrauded party to the position he would have had absent the fraud,” and “to deny the fraudulent party any benefits . . . which derive from his wrongful act.”  Id. at *12.

The court concluded, however, that it could measure restitution without accounting for the benefit that the drugs undisputedly conferred on the plaintiff and the class.  According to the court, the class members’ out-of-pocket expenses and the defendants’ profits (as calculated by the plaintiff’s expert) provided reasonable bases to calculate “restitutionary disgorgement.”  Id. at *12-*16.

The truck-sized hole through this conclusion is that these models of “restitutionary disgorgement” do not restore the status quo.  Instead, they place the plaintiff and class members in a better position because they get all their money back plus they keep the benefit they derived from taking a useful and helpful prescription drug without any adverse reaction.  That is not restitution.

So it goes.  Patients who received the beneficial prescription medication that they paid for and experienced no adverse impact whatsoever are in a position to claim hundreds of millions in “restitution.”  The law should not allow that.  Money for nothing.

We’ll get right to the point.  In Merck & Co. v. United States Department of HHS, ___ F. Supp.3d ___, 2019 WL 2931591 (D.D.C. July 8, 2019), the court held that the direct-to-consumer pricing regulation proposed by the Centers for Medicare & Medicaid Services (“CMS”) – on which we’ve commented here, and here – was an ultra vires exercise of nonexistent regulatory power.  Here are the key rulings:

As to the existence of statutory authorization – nope.  “The plain statutory text simply does not support the notion − at least not in a way that is textually self-evident − that Congress intended for the Secretary [of HHS] to possess the far-reaching power to regulate the marketing of prescription drugs.”  Id. at *7.  “[T]he delegation of authority that HHS says allows it ‘to speak with the force of law’ on the marketing of prescription drugs is nowhere to be found in the vast statute that is the SSA [Social Security Act].”  Id. at *8 (citation omitted).

As to general regulatory power being enough – nope, again.  “An agency’s general rulemaking authority plus statutory silence does not, however, equal congressional authorization.”  Id.  “[T]he SSA’s absence of an express limitation does not enable HHS to arrogate to itself the power to regulate drug marketing as a means of improving the efficiency of public health insurance programs.” Id.  “An agency cannot appropriate the power to regulate simply because Congress has not explicitly taken that power away.”  Id. at *9.

Because the court voided the regulation on administrative law grounds, it had no occasion to reach the First Amendment arguments that the drug company plaintiffs made (and we discussed in our prior ports).

Our initial post was entitled “The CMS DTC Drug Pricing Rule – FDA v. Brown & Williamson All Over Again?” – and indeed that was the case.  The first case involving an “other statute” that the Merck court cited was, indeed, FDA v. B&W:

In Brown & Williamson, the Supreme Court instructed that when “determining whether Congress has specifically addressed the question at issue, a reviewing court should not confine itself to examining a particular statutory provision in isolation.”  529 U.S. at 132.  Other statutes may bear on Congress’s intent.  “[T]he meaning of one statute may be affected by other Acts, particularly where Congress has spoken subsequently and more specifically to the topic at hand.”  Id. at 133.  That principle applies in this case.

Merck, 2019 WL 2931591, at *10.  If anybody has (and we don’t think so for the First Amendment reasons we discussed previously) the power to regulate prescription drug advertising in this way, it would be the FDA.  “Congress also has enacted specific legislation pertaining to television advertising of drug products” in “21 U.S.C. § 353c.”  Id.

Congress deliberately and precisely legislated in the area of drug marketing under the FDCA.  Such purposeful action demonstrates that Congress knows how to speak on that subject when it wants to.  It is therefore telling that the SSA contains no provisions concerning drug marketing.

Id. at *11.

Also quoting B&W, “[c]ourts ‘must be guided to a degree by common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and political magnitude to an administrative agency.’”  Id.  CMS was fifty years late to the party:

Common sense dictates that Congress would not have authorized such a dramatic seizure of regulatory power based solely on general rulemaking authority under the SSA.  Further, it is not lost on the court that HHS has never before attempted to use the SSA to directly regulate the market for pharmaceuticals. . . .  [W]hen, as here, an agency claims to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy, courts should greet its announcement with a measure of skepticism.

Id. (citations and quotation marks omitted).

[T]he agency’s incursion into a brand-new regulatory environment, and the rationale for it, . . . make the Rule so consequential.  To accept the agency’s justification here would swing the doors wide open to any regulation, rule, or policy that might reasonably result in cost savings to the Medicare and Medicaid programs, unless expressly prohibited by Congress.  Indeed, the agency identifies no limiting principle, aside from an express statutory withholding of authority.

Id. at *12.  We always thought this was a lawless regulation, and now the first court to examine it has agreed.  We think CMS knows it, too, and is cynically pursuing a doomed strategy more to be perceived as “doing something” about drug prices, than actually expecting to accomplish anything.

 

You cannot get too much of a good thing, so let’s celebrate another good jurisdiction case out of Missouri. (Prior examples can be found here and here, among others.) In Timpone v. Ethicon, 2019 WL 2525780 (E.D. Mo. June 19, 2019), the plaintiff lawyers cobbled together 99 plaintiffs (a pure CAFA evasion) to file a complaint in Missouri state court alleging injuries from vaginal mesh. To be more specific, the complaint was filed in City of St. Louis Circuit Court, which can legitimately claim bragging rights for being the most pro-plaintiff court in our litigious land. The defendants were not citizens of Missouri. They were not “at home” in Missouri, under the Bauman SCOTUS case. Nor were 96 of the 99 plaintiffs at home in Missouri. Those 96 were citizens of other states. They were mere litigation tourists in Missouri. Perhaps they wanted a summer vacation in Branson. Perhaps their lawyers were opportunists who read more St. Louis verdict sheets than SCOTUS opinions – or at least read them more carefully.

The defendants removed the case to Missouri federal court. Then we are off to the races with competing jurisdictional motions. The plaintiffs moved to remand on the theory that some of those non-Missouri plaintiffs shared citizenship with the defendants, thereby depriving the federal court of diversity jurisdiction. The defendants moved to dump the non-Missouri plaintiffs for lack of personal jurisdiction over the defendants with respect to the non-Missourian claims.

It could matter a great deal which motion gets decided first. The plaintiffs were certainly hoping that the federal court would first decide lack of diversity jurisdiction, then remand the case to a state court that might not be so punctilious when it comes to the recent tightening of personal jurisdiction. By contrast, the defendants wanted the federal court to take a look at personal jurisdiction first, send the non-Missourians packing, then keep the case between the Missouri plaintiffs and the non-Missouri defendants.

Luckily for the defendants, after the Bristol-Myers Squibb SCOTUS case, judges in the Eastern District of Missouri have consistently held that the issue of personal jurisdiction is more straightforward than subject matter jurisdiction, so it goes first. And it really is straightforward in the Timpone case. The complaint contained no allegations that any of the non-Missourians’ injuries arose out of the defendants’ actions in Missouri. Sure, the defendants sold product in Missouri, but even such “regular and sustained” business does not create general personal jurisdiction over a defendant. Thus, the personal jurisdiction issue comes down to specific jurisdiction and, in the wake of Bristol-Myers Squibb, that is an obvious loser for the non-Missourians. It was certainly obvious to the Missouri federal judge. If the non-Missourians really were injured by the defendants, they weren’t injured by anything the defendants did in Missouri. The judge held that he lacked personal jurisdiction with respect to the claims by the 96 non-Missourians, and was required to dismiss the claims by those plaintiffs. The remaining three Missouri plaintiffs were diverse to the defendants, so the Timpone court had jurisdiction over those claims. That is a good result for the defendant and, as we said, it was perfectly obvious.

Why wasn’t this result obvious to the plaintiff lawyers? Do they not read? Or not care? Is it ignorance or defiance?