On March 5, FDA Commissioner Dr. Scott Gottlieb abruptly announced his resignation, effective in a month.  Since then, it has been announced that Dr. Ned Sharpless, currently head of the National Cancer Institute, will replace Dr. Gottlieb on an “acting” basis.  This is disturbing generally, as Dr. Gottlieb has stood out as a demonstrably competent appointee.  It is also disturbing, to us, as Dr. Gottlieb leaves with a grade of “incomplete” in the area we most cared about when he was originally appointed – moving the FDA’s hidebound policy towards truthful manufacturer communications about off-label uses of FDA-regulated products into the Twenty-First Century.

Since the beginning of the Blog, we have chronicled the crumbling of the FDA’s 1950s-era ban against all truthful off-label communications in the courts, under pressure from the First Amendment.  See, e.g., Sorrell v. IMS Health Inc., 564 U.S. 552 (2011); Thompson v. Western States Medical Center, 535 U.S. 357 (2002); United States v. Caronia, 703 F.3d 149 (2d Cir. 2012); Amarin Pharma, Inc. v. FDA, 119 F. Supp.3d 196 (S.D.N.Y. 2015).

Dr. Gottlieb was on record (something we first noticed in 2007) as opposing this prohibition, which we discussed in some depth here.  Thus, we were hopeful that under Dr. Gottlieb’s leadership, the FDA would finally come around to a more nuanced – and thus more constitutional – approach to truthful off-label communications by regulated manufacturers.  After all, from a public health standpoint, the current muzzling of manufacturer communications makes no sense, since anybody else in the world can post nonsense on the Internet about off-label uses, but the manufacturers, who know more about their products than anybody else, are precluded from debunking the nonsense.

There has been some progress – most notably the recent (2018) FDA recognition that regulated manufacturers could communicate with third-party payors (“TPPs”) about off-label uses and potential new products nearing FDA approval.  There is now a Final FDA Guidance on this subject, “Drug and Device Manufacturer Communications With Payors, Formulary Committees, & Similar Entities − Questions & Answers, available here.  Another step forward was the Agency’s 2018 shelving of a proposal to revamp its archaic “intended use” regulations for drugs (21 C.F.R. §201.128) and devices 21 C.F.R. §801.4).  That proposal started out with some promise, but ended up worse than the original, when just before the change in administrations, the FDA baited and switched its stakeholders with a surprise “Final Rule” (never subjected to proper notice and comment) that would have made things worse. As we stated at the time:

The FDA’s January 9, 2017 proposal reversed course, retained knowledge of off-label use as evidence of intended use, clarified that any relevant source of evidence, whether circumstantial or direct could demonstrate intended use, and ultimately invoked the dreaded “totality of the evidence” standard.  A constitutionally frail regulatory regime looked like it was about to become even worse – even more vague, over broad, and chilling.

At least Dr. Gottlieb put the kibosh on that.

But that’s pretty much it.  The most critical step – recognizing that regulated manufacturers could truthfully discuss off-label uses with health care professionals (usually, but not always, doctors) at least as freely as with TPPs, hasn’t happened yet, at least with the FDA.  We note that industry groups are getting tired of FDA foot-dragging on its unconstitutional position, and that truthful off-label communications with such providers have been declared “ethical” by AdvaMed, the medical device industry’s primary trade association.  The pharmaceutical industry did something similar with its 2016 “Principles on Responsible Sharing of Truthful & Non-Misleading Information about Medicines with Health Care Professionals and Payers.”  If the FDA itself stalls out again, we’d expect the pharmaceutical industry to press forward through its “Medical Information Working Group” and support additional court challenges to FDA restrictions on truthful off-label communications.

We were hoping that Dr. Gottlieb would, as FDA Commissioner, broker a rational, constitutional, solution out of the corner into which the Agency has painted itself.  Now, unfortunately, that is not to be.  Whether one views the off-label communication glass as half-full or half-empty, we’re still only halfway (if that) to an acceptable endpoint.  Still, his incomplete legacy leaves the FDA off-label communication ban, if it can still be called a “ban,” in a very awkward position.  Having declared that it is legal for regulated entities to provide a great deal of truthful information about off-label uses to one professional audience – third party payors – it will now be almost impossible for the FDA to justify under the First Amendment a prohibition against providing the same information in the same manner to the other equivalent audience – physicians and other professional health care providers.

We don’t know much about Dr. Sharpless.  He does not have the favorable public paper trail that Dr. Gottlieb had on off-label communication issues.  We are, however, pleased to read that he comes from the oncology space, and has an entrepreneurial background that includes founding a company involved in cancer treatment.  We say that because, with the possible exception of pediatrics, off-label use has always been more widespread in cancer treatment than in any other area of medicine.  E.g. M. Saiyed, et al., “Off‐Label Drug Use in Oncology: A Systematic Review of Literature,” 42(3) J. Clin. Pharm. & Therapeutics 251 (June 2017); M. Soares, “’Off-Label’ Indications for Oncology Drug Use & Drug Compendia: History & Current Status,” 1(3): J Oncol. Pract. 102 (Sept. 2005); J. Beck & E. Azari, “FDA, Off-Label Use, & Informed Consent: Debunking Myths & Misconceptions,” 53 Food & Drug L.J. 71, 80 (1998).

So Dr. Sharpless has been affiliated with FDA-regulated entrepreneurship in an area of medicine where off-label use has particular importance.  Thus, we remain hopeful, until it is proven otherwise, that Dr. Sharpless appreciates the problems that the FDA’s attempt to prohibit truthful off-label communications cause both manufacturers trying to disseminate such off-label information and medical professionals seeking to access it.  As such, we currently expect that he will follow-through and expand upon Dr. Gottlieb’s initiatives concerning off-label communications.

Skin in the game.  Horse in the race.  Dog in the hunt.  Whatever “it” is – we don’t have “it” in today’s case.  Ansley v. Banner Health Care is a suit brought by plaintiffs who had received damages awards for injuries that required treatment at various hospitals seeking to enjoin those hospitals from enforcing liens against those tort recoveries. 2019 WL 1121374 (Ariz. Ct. Apps. Mar. 12, 2019).  If any pharmaceutical or medical device companies were involved in the original tort claims, their role is over by the time Ansley gets teed up.  But just because we don’t have a seat at the table, doesn’t mean we aren’t interested in what’s being discussed.  Phantom damages.

We’ve written before about the concept of “phantom damages” – plaintiffs seeking recovery for the face value of health care provider bills when they (or their insurers) in fact got huge discounts.  Courts are actually divided on the issue and cases generally go one of three ways — actual payment only; let it all in; billed amount only.  We are fairly enamored of the actual payment only method of computing recovery of medical expenses.  Anything else provides a windfall to plaintiffs.  And that’s really where we have chum in the water.  There should be no windfall in the first place.  Plaintiffs should only recover what they (or their insurers) actually paid out of pocket.

But, in Ansley, we are in a horses already out of the barn situation.  Only, we can’t get the horses back.  We just have to watch the neighboring ranchers fight over who’s going to get them.  Arizona was identified in our earlier post as one of the states allowing plaintiffs to recover this windfall.  Lopez v. Safeway Stores, Inc., 129 P.3d 487, 495 (Ariz. App. 2006) (“plaintiffs are entitled to claim and recover the full amount of reasonable medical expenses charged, based on the reasonable value of medical services rendered, including amounts written off from the bills pursuant to contractual rate reductions”).  So the hospitals tried to collect this windfall for themselves through liens on plaintiffs’ tort recoveries for the face value of their discounted bills.

Each plaintiff was a member of the Arizona Health Care Cost Containment System (“AHCCCS”), Arizona’s Medicaid insurance provider.  Each hospital contracted with AHCCCS agreeing to accept certain rates for hospital care provided to AHCCCS members that was less than the hospitals would charge non-AHCCCS patients.  The hospitals wanted plaintiffs to reimburse them for the difference – the balance – between what they already received from AHCCCS and the face value of the services they provided.  Talk about a windfall.  Absent the underlying tort recovery, the hospitals would have to live with the contractual deal they struck.  But, since there was a tort recovery, the hospitals want to recover the full cost that they were never entitled to.

The court decided the plaintiffs get to keep the windfall.  In a bizarre twist, plaintiffs won by asserting, of all things, federal preemption.  The hospitals based their liens on two state court statutes that (1) allow a health-care provider to file a lien for its “customary” charges against a patient’s tort recovery and (2) allow a hospital to “collect any unpaid portion of its bill from other third-party payors.”  Id. at *1.  However, federal law governs the relationship between state Medicaid agencies and the hospitals they contract with.   Pursuant to 42 C.F.R. § 447.15, “a state may contract only with providers that agree to ‘accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual.’”  Id. at *3.  This is a case of conflict preemption.  Despite state law providing a means to record a lien for recovery of a patient’s tort damages, federal law states that “[b]ecause the patient does not owe the hospital the balance between what AHCCCS has paid the hospital and the hospital’s customary rate, the hospital may not collect that balance by imposing a lien on the patient’s property.”  Id. at *4.

The court also ruled that the plaintiffs were third-party beneficiaries of the contracts between the hospitals and AHCCCS.  Id. at *10-12.  And there were rulings about the scope of the injunction and attorneys’ fees.  But, those rulings are even more remote to our primary areas of interest.

To quote Alexander Hamilton – actually Lin-Manuel Miranda – “When you got skin in the game, you stay in the game.”  We may not have had any skin on the line in this one, but we’re determined to stay in the game because the game – phantom damages – needs to change.

Every time we think about addressing ghostwriting as a recurrent plaintiff-side jury distraction in drug/device product liability litigation, we get earwormed by “Ghost Riders in the Sky.”  Whether one prefers the Johnny Cash or Outlaws version of the song – or one of who knows how many other covers of the song (originally written by Stan Jones in 1948), it’s hard to stop thinking about it once you start.

The most inveterate ghostwriters are, of course, lawyers themselves. Give us a chance (and a fee) and we’ll ghostwrite anything:  opinions for judges, reports for expert witnesses (e.g., McClellan v. I-Flow Corp., 710 F. Supp.2d 1092, 1118 (D. Or. 2010)), and (most annoyingly) pleadings for supposedly “pro se” parties.  But let a drug/device company provide authorship assistance to a busy doctor or a scientist, and the same plaintiffs’ lawyers who routinely massage (if not outright create) their experts’ opinions start screaming and yelling that something terrible is happening.  And yet, there’s no proof (and often not even an allegation) that any of the actual science in the “ghostwritten” article was misstated.

So-called “ghostwriting” is “a fairly common, but little known practice, with a pejorative name would distract the jury and needlessly consume time.”  Okuda v. Wyeth, 2012 WL 12337860, at *1 (D. Utah July 24, 2012).  Plaintiffs regularly attempt to convince juries that routine “ghostwriting” is something nefarious.  Defendants, just as often, try to keep this smoke-and-mirrors type evidence out.  We haven’t blogged about this issue before, so we thought we’d take a look at decisions excluding ghostwriting allegations.

Perhaps the most notorious ghostwriting testimony was the inflammatory rhetoric initially admitted in In re Prempro Products Liability Litigation, 554 F. Supp.2d 871, 885 (E.D. Ark. 2008), to support punitive damages.  There aren’t many judges – especially MDL judges in bellwether cases – willing to admit they were wrong and reverse a verdict, but this was one.  In Prempro “Dr. Parisian testified that the FDA would not be aware of ghostwriting” but “provided no testimony linking FDA regulations and ghostwriting.”  Id. at 885.  Plaintiffs used these (and other) allegations to bamboozle a jury into awarding punitive damages.  Id. at 889, 893, 897 (“Plaintiff asserted that ghostwriting is ‘exactly the type of conduct that necessitates punitive damages.’”) (footnote omitted).  Holding that ghostwriting testimony should never have been admitted, the court granted a new trial:

[T]here is no evidence that this practice is inappropriate or that [defendant] supported articles that it knew were false or misrepresented the science.  Rather, the articles supported [defendant’s] position on the state of the science.  Additionally, there was evidence that ghostwriting was a common practice in the industry.

Id. at 888 (footnotes omitted).  On appeal, the Court of Appeals affirmed.  In re Prempro Products Liability Litigation, 586 F.3d 547, 571 (8th Cir. 2009) (“we cannot say that the district court abused its discretion”).

The same fact pattern was addressed in Cross v. Wyeth Pharmaceuticals, Inc., 2011 WL 2517211 (M.D. Fla. June 23, 2011).  Cross “exclude[d] as irrelevant evidence of ‘ghostwritten’ articles” because “neither [plaintiff] nor her physician relied on a ‘ghostwritten’ article.”  Id. at *4.  Further, “evidence of “ghostwriting’ carries a substantial risk of misleading the jury.”  Id.  See Okuda, 2012 WL 12337860, at *1 (plaintiff could “not produce[] sufficient evidence that she or her prescribing physicians relied on any ghostwritten article in taking or prescribing the . . . drugs at issue or that the information in the articles is false”); Skibniewski v. American Home Products Corp., 2004 WL 5628157, at *1 (W.D. Mo. April 1, 2004) (evidence of ghostwriting also excluded).

Ghostwriting allegations similarly bit the dust in Bailey v. Wyeth Inc., 37 A.3d 549, 574-75 (N.J. Super. L.D. July 11, 2008). That wasn’t really surprising, since plaintiffs’ own expert “admit[ted] the beneficial contribution of the information contained in at least one article” that was allegedly ghostwritten, characterizing the information “provided to the doctor [a]s essential.”  Id. at 574.  Bailey therefore held:

There is no dispute that the articles were subject to a rigorous peer review process and were factually and medically sound.  The identified articles were published after 1994 and would not have “polluted” the information regarding [the drug] already available to the FDA.  There is no proof that these corporate-initiated articles in any way delayed the implementation of what the FDA requested be in the [drug] labeling or diluted the warnings on these drugs.

Id. at 574-75 (granting summary judgment).  Bailey was affirmed on appeal “substantially on the basis of the well-considered and exhaustive opinion . . . in the Bailey matter, which we have determined to be well supported by the evidence and legally unassailable.”  DeBoard v. Wyeth, Inc., 28 A.3d 1245, 1246 (N.J. Super. A.D. 2011).

Allegations that “ghostwriting” was a form of academic impropriety were raised, and rejected, in United States ex rel. King v. Solvay S.A., 2015 WL 8732010 (S.D. Tex. Dec. 14, 2015), a False Claims Act case.  The court determined that “evidence that [defendant] directed progress and revised the final manuscript [of an article] is not probative.”  Id. at *6.  The ghostwriting allegations were simply a prejudicial sideshow:

Relators additionally contend that as part of [defendant’s] publication strategy it commissioned smaller “investigator initiated” studies and then found “thought leaders” willing to lend their names to articles actually written by the writers who worked for [defendant], known as ghostwriters. . . .  This testimony is not an admission that [an author] merely “lent his name” to an article wholly written by [defendant’s] medical writers.  Moreover, even if it were, [plaintiffs] do not link [the] allegedly ghost-written article to any DrugDex [a compendium of off-label research] entries.  While the court understands [plaintiffs’] theory that [defendant] had a strategy to publish articles on small studies with positive outcomes and even had its own staff members write the articles and that these non-authoritative studies ended up supporting off-label use in DrugDex and other compendia, at this stage [plaintiffs] must have evidence specifically linking [defendant’s] conduct to . . . off-label use.  Innuendo related to small articles that may have been partially ghost-written but did not even end up in DrugDex is not sufficient.

Id. at *6-7 (footnote omitted).  Ghostwriting allegations in the air – not relating to anything that influenced an prescriber’s treatment of the plaintiff – also failed in Romero v. Wyeth Pharmaceuticals, Inc., 2012 WL 13036355, at *4 (E.D. Tex. April 25, 2012) (“[f]or these reasons, . . . marketing practices testimony, including . . . ghostwriting, are excluded”).

Other decisions excluding evidence of ghostwriting allegations are:  Hill v. Novartis Pharmaceuticals Corp., 944 F. Supp.2d 943, 952 (E.D. Cal. 2013) (“[Defendant] moves to preclude [plaintiff] from ‘introduc[ing] testimony or evidence that some or many of the articles . . . were actually ghostwritten by drug companies. . . .’  Having reviewed . . . all competent and admissible evidence submitted, the Court agrees such evidence should be excluded.”); Mahaney v. Novartis Pharmaceuticals Corp., 835 F. Supp.2d 299, 318 (W.D. Ky. 2011) (granting in limine motion to exclude “[t]estimony or evidence that articles were ghostwritten by drug companies”), reconsideration granted on other grounds, 2012 WL 12996015 (W.D. Ky. Jan. 4, 2012).

Finally, accusations of ghostwriting have also been a stock-in-trade of notorious plaintiffs’ “expert” Suzanne Parisian, even though she has no relevant expertise in such matters.  Ironically, in at least one deposition, “Dr. Parisian conceded that she had done ghostwriting on behalf of [a major drug company].”  Prempro, 554 F. Supp.2d at 897.  Parisian’s ghostwriting charges were excluded in a lot of Aredia/Zometa cases.  For instance, in Deutsch v. Novartis Pharmaceuticals Corp., 768 F. Supp. 2d 420, 468 (E.D.N.Y. 2011).

[T]he Court grants [defendant’s] motion to exclude Dr. Parisian’s opinions on the use of ghostwriters. . . .  The Plaintiffs argues [sic] that this testimony is relevant because it goes to [defendant’s] “communication of [relevant] risks to health care providers and the public,” which are required to be “fair and balanced” under 21 C.F.R. § 202.1. . . .  Dr. Parisian does not provided [sic] any foundation beyond her personal opinion that the use of ghostwriters . . . does not provide “fair and balanced” information.

Id. at 468.  Accord Kruszka v. Novartis Pharmaceuticals Corp., 28 F. Supp.3d 920, 935 (D. Minn. 2014) (“opinions that [defendant] convinced doctors to write publications favoring [its drugs] under the guise of independent reporting, or ‘ghostwriting,’ are outside the realm of Dr. Parisian’s expertise”); Lemons v. Novartis Pharmaceuticals Corp., 849 F. Supp.2d 608, 615 (W.D.N.C. 2012) (“the Court is not allowing Dr. Parisian to offer testimony regarding . . . ghostwriting”); In re Fosamax Products Liability Litigation, 645 F. Supp.2d 164, 191 (S.D.N.Y. 2009) (Parisian ghostwriting testimony excluded after “she could not name any standard that prohibits such a practice, as long as the information presented is accurate”); Bartoli v. Novartis Pharmaceuticals Corp., 2014 WL 1515870, at *6 (M.D. Pa. April 17, 2014) (“her testimony regarding ghostwriting . . . is inadmissible because she opines, without foundation, that employing such practices does not provide ‘fair and balanced’ information and that it must be disclosed); Earp v. Novartis Pharmaceuticals Corp., 2013 WL 4854488, at *4 (E.D.N.C. Sept. 11, 2013) (“[t]o the extent she also seeks to opine on . . . industry ghostwriting . . . that would unduly prejudicial, irrelevant, or outside the scope of her expertise, [and] the court will not allow her to do so”); Hill v. Novartis Pharmaceuticals Corp., 2012 WL 5451809, at *2 (E.D. Cal. Nov. 7, 2012) (“Defendant’s motion to exclude Dr. Parisian’s testimony regarding ghostwriting . . . is GRANTED”); Georges v. Novartis Pharmaceuticals Corp., 2012 WL 9064768, at *14 (C.D. Cal. Nov. 2, 2012) (“exclud[ing] Dr. Parisian’s testimony regarding ghostwriting”); Zimmerman v. Novartis Pharmaceuticals Corp., 2012 WL 13009101, at *1 (D. Md. Sept. 25, 2012) (“Dr. Parisian may not offer opinion testimony on . . . Ghostwriting”); Winter v. Novartis Pharmaceuticals Corp., 2012 WL 827245, at *3 (W.D. Mo. March 8, 2012) (“Motion to exclude evidence that articles concerning [the class of drugs] in medical journals were actually ‘ghostwritten’ by companies, including [defendant], is granted consistent with prior rulings”); Mahaney v. Novartis Pharmaceuticals Corp., 2011 WL 13209814, at *2 (W.D. Ky. Nov. 15, 2011) (“exclud[ing] Parisian’s testimony on ghostwriting”).

Sharp-eyed readers will note that all of these decisions, except for the King False Claims Act ruling, were issued in the decade between 2004 and 2014 – which we are wont to call the “coprolitic age” of ghostwriting allegations, powered mainly by the aforementioned Suzanne Parisian.  We hope that the other side drew back a nub enough times on this issue that it’s no longer worth the candle to develop.  After all, who knows how many of those expert opinions were ghostwritten by plaintiffs’ counsel?  We’d like the issue to stay dead, so for the good of the order we have compiled all of the favorable precedent here.

Child:  “Can I have ice cream before dinner?”

Parent:  “No”

Child:  “What if it’s strawberry ice cream?”

Parent:  “Still, no”

Child:  “What if my teacher told me I had to eat ice cream for homework?”

Parent: “Still, no”

Child:  “What if a monster ran in here right now and said I had to eat ice cream or he’d take me away to his evil lair forever?”

Parent:  “…..”

Child:  “Well”

Parent:  “Give me a minute, I’m thinking.”

            That’s the “What if” game.  If you’ve been a parent, you’ve played it in some form.  It’s a close cousin of the “Why” game or the “But” game.  It’s also possible that you played What If” during a late-night college cram session that led to a serious conversation about a zombie apocalypse.  Come to think of it, late-night camping, late-night tequila, or late-night horror movies are all stimuli for the zombie apocalypse “What If” game.

In the recent case of McDonald v. Schriner, 2019 U.S. Dist. LEXIS 34514 (W.D. Tenn. Mar. 5, 2019), the court allowed plaintiff to play the “What If” game on a motion to dismiss.  In this context, it’s probably more appropriately titled the “Assuming Arguendo” game.  This is how it went.

Plaintiff:  “Can I keep my claim?”

Court:  “No, you don’t have subject matter jurisdiction.”  Plaintiff’s complaint failed to allege the place of incorporation or principal place of business for any defendant, but rather only provided the address of their registered agents.  Id. at *7.  Because that doesn’t establish the residence of any defendant, the court could not determine if the parties were diverse and could not just assume they were.  Id.  Case dismissed.

Plaintiff:  “Assuming, arguendo, I fixed that and showed you there was diversity, can I keep my claim?”

Court:  “Still dismissed because you also don’t have personal jurisdiction.”  The court shot down general jurisdiction, but we don’t need to cover that since post  Daimler AG v. Bauman, 571 U.S. 117 (2014) we know “merely doing business” isn’t sufficient for general jurisdiction.  McDonald, 2019 U.S. Dist. LEXIS 34514, *10-12.  As to specific jurisdiction – jurisdiction only over claims that arise out of or relate to the defendant’s contacts with the forum – plaintiff couldn’t satisfy the first prong of the test, showing that defendant purposefully availed itself of acting in the forum.  Id. at *12.  In the Sixth Circuit, courts use a “stream of commerce plus” approach to determine purposeful availment.  Id. at *13.  The “plus” concerns things like the amount of control a defendant had over the flow of the product into the state or the quantity sold in the state.  But all plaintiff’s complaint alleged was the drug was sold in Tennessee.  Not enough.  Case dismissed.

Plaintiff:  “Assuming, arguendo, I added more allegations that satisfied the purposeful availment test, can I keep my claim?”

Court:  “Still dismissed because you’ve also failed to state a claim.”  In addition to the manufacturers of the drug at issue, plaintiff sued the pharmacy where he filled his prescriptions.  But claims against pharmacies in Tennessee are governed by the Tennessee Health Care Liability Act (“THCLA”) which requires both that plaintiff provide pre-suit notice and a certificate of good faith – neither of which plaintiff did.  Id. at *16-17.  Pharmacy case dismissed.

Plaintiff’s claims against the manufacturer are governed by the Tennessee Products Liability Act (“TLPA”).  First and foremost, the TLPA provides that FDA-approved products are “presumptively not defective or unreasonably dangerous.”  Id. at *17.  But plaintiff’s only allegation of defect was a conclusory statement that the drug used to treat his restless leg syndrome induced his gambling.  That wasn’t enough to rebut the presumption or to show that the alleged defect existed at the time the drug left the manufacturer’s control.  Id. at *18.  Plaintiff also failed to state a claim for failure to warn.  He didn’t allege any facts about the warnings.  In fact the complaint only included a conclusory allegation that his losses were caused by a failure to warn.”  Id. at *19.  Manufacturer case dismissed.

But, there was one last “What if.”  Plaintiff never bothered to respond to defendants’ motions to dismiss.  Instead, only after the magistrate issued his report and recommendations and after the time allowed for objections to the magistrate’s findings did plaintiff file an objection.  Id. at *20.  So,

Plaintiff:  “Assuming, arguendo, I had timely raised any of my responses or objections, would I get to keep my case?”

Court:  “Still dismissed.”  In fact, the only new facts plaintiff’s objections added was that he couldn’t remember any effective warnings.  What he still didn’t allege was that he read or attempted to read the warnings when they were provided to him.  Id. at *22.  So, plaintiff’s claims failed for lack of proximate cause.

Having running out of “assuming, arguendo” propositions, the Court had the last words:  “Dismissed with prejudice.”

We have two things in common with the petitioner in Mancini v. Commissioner of Internal Revenue, No 16975-13, 2019 Tax Ct. Memo LEXIS 16 (U.S. Tax Ct. Mar. 4, 2019).  First, we both will be filing our 2018 tax returns in about a month from now, unless of course Mr. Mancini is more on top of things than we are and has already filed.  Second, neither of us will be deducting our net gambling losses, but for different reasons.  For our part, we don’t have any gambling losses of which to speak.  For Mr. Mancini, he will not be deducting net gambling losses for 2018 or any other year because the Tax Court has ruled that his gambling losses are not a “casualty loss” that would be fully deductible under the U.S. Tax Code.

Yes, you read that correctly.  We are blogging about a tax case, which might amuse our tax attorney colleagues, but may leave our faithful readers in the drug and medical device world scratching their heads.  There is, however, a compelling tie in:  The petitioner in Mancini was trying to deduct his gambling losses as a “casualty loss” under the Tax Code because they alleged resulted from compulsive gambling caused by his treatment with Parkinson’s disease medication.

Although the Tax Court rejected the petitioner’s attempt to recharacterize his gambling losses, impulse control disorders such as compulsive gambling, compulsive shopping, and hypersexuality are diagnosable conditions that are more common than you might think.  Be that as it may, the petitioner rolled snake eyes.  He was diagnosed with Parkinson’s disease and was treated with increasing doses of Pramipexole, a dopamine agonist used to treat the condition.  While on a relatively high dose, the petitioner started gambling more and more, resulting in substantial losses.  When his wife and daughter eventually intervened, his neurologist discontinued the medication, and his gambling diminished, except to a “limited extent.”  Id. at **2-**3.  He later tried to deduct his losses, but rather than limit his gambling loss deductions to his gambling winnings, he called them “casualty losses” and tried to deduct them in their entirety.

A casualty loss is a non-business loss that arises “from fire, storm, shipwreck, or other casualty, or from theft.”  You know, like when a tree falls on your house during a storm.  The petitioner claimed that his gambling losses were an “other casualty” because his compulsive gambling “manifested abruptly once his dosage reached a certain level, it was unexpected . . . , and it was unusual, even for Pramipexole takers.”  Id. at **18.

The Tax Court ultimately rejected the deduction, but in the part of the order that we find most noteworthy, the Court ruled (1) that Pramipexole was capable of causing compulsive gambling and (2) that it had actually caused compulsive gambling in the petitioner.  The Tax Court discussed these concepts in terms of “framework evidence” and “diagnostic evidence, but we know them more commonly as “general causation” and “specific causation.”

Whatever you call them, the Tax Court’s ruling was based on the slimmest of scientific evidence.  On general causation, the Tax Court relied on the plaintiff’s expert, whose “knowledge comes from reading published studies—he even directly cited one during his testimony.”  Id. at **12.  Significantly, the government did not offer contrary evidence, leaving the expert’s opinion on that Pramipexole could cause impulse control disorders essentially uncontested in a forum where the etiology of alleged drug side effects is rarely, if ever, considered.  If the government had dug into the published studies, we expect it would have found a considerably more nuanced situation, but the Tax Court will never know.

On specific causation, the same expert drew his conclusion from the petitioner’s medical records, which showed that his compulsive gambling occurred while he was on his peak dose.  Id. at **14-**15.  We know this as “challenge and de-challenge,” where the onset of a complication coincides with the beginning of therapy and the complication abates when therapy is discontinued.  The problem with drawing causation opinions from “challenge and de-challenge” is that it relies solely on temporal correlation and ignores other potential causes and/or risk factors.  Did the petitioner have more free time and access to gambling?  Did he experience a “big win” or a “near miss,” both well known risk factors for compulsive gambling?  Did the court take into account his family’s intervention, which can have a powerful impact on gambling behavior?  It appears other potential causes were neither raised nor considered, which causes us to question the Tax Court’s finding of a causal relationship.

In the end, the petitioner lost his deduction because he did not suffer a “casualty loss,” regardless of the cause of his compulsive gambling.  For one thing, there was no physical damage to property, which is required under “sixty-odd years of caselaw.”  Id. at **18-**21.  Further, the losses were not “sudden” or “immediate,” like a tree falling on your house.  As the Court put it, “These losses were necessarily the result of dozens or hundreds of individual gambling sessions and probably thousands of separate wagers.”  Id. at **23.

The upshot is that the Tax Court’s questionable conclusion on causation wound up being superfluous.  One footnote is that the petitioner did try to sue the drug manufacturer in a product liability lawsuit, but was found to be time barred.  Id. at **5.  Perhaps his tax strategy was his fallback position, and we don’t blame him for trying to manage his tax burden within the limits of the law.  I guess that makes three things we have in common.

Bexis recently filed a personal jurisdiction amicus brief in Pennsylvania – ground zero in the battle over general jurisdiction by “consent” due to a foreign corporation’s registration to do business in the state (technically, commonwealth).  As is readily apparent from our 50-state survey on general jurisdiction by consent, most states reject such an expansive reading of corporate domestication statutes.  But those states that don’t rely on a hoary United States Supreme Court decision, Pennsylvania Fire Insurance Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), from deep within the old “territorial” age of personal jurisdiction, an age that ended over 70 year ago when International Shoe Co. v. Washington, 326 U.S. 310 (1945), supplanted Pennoyer v. Neff, 95 U.S. 714 (1877).

In Pennsylvania, where Bexis filed, that reliance has a Tinker to Evers to Chance flavor to it.  Webb-Benjamin, LLC v. International Rug Group, LLC, 192 A.3d 1133 (Pa. Super. 2018), followed Bors v. Johnson & Johnson, 208 F. Supp.3d 648 (E.D. Pa. 2016), which we blogged about here.  Bors, in turn, refused to “ignore” (208 F. Supp.3d at 652) the pre-Bauman Third Circuit decision in Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991).  Bane had this to say about general jurisdiction by consent back in 1991:

[Defendant’s] application for a certificate of authority can be viewed as its consent to be sued in Pennsylvania under section 5301(a)(2)(ii), which explicitly lists “consent” as a basis for assertion of jurisdiction over corporations. Consent is a traditional basis for assertion of jurisdiction long upheld as constitutional.  See Hess v. Pawloski, 274 U.S. 352, 356-57 (1927).

Id. at 641 (other citation omitted).  Those three sentences are the entirety of the discussion of “consent” in Bane.  Right now, you could say those three sentences are the bane of our existence.

Hess, finally, relied on Pennsylvania Fire:

The mere transaction of business in a state by nonresident natural persons does not imply consent to be bound by the process of its courts.  The power of a state to exclude foreign corporations, although not absolute, but qualified, is the ground on which such an implication is supported as to them.  Pennsylvania Fire Insurance Co. v. Gold Issue Mining Co., 243 U. S. 93 [(1917)].

274 U.S. at 355 (other citation omitted).  See also Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196, 1198 (8th Cir. 1990) (also relying on Hess for the proposition “[t]:he doing of various acts within the State . . . was equated, by statute, with consent or submission to the jurisdiction, even by nonresidents”).

Other courts in the post-Bauman minority rely on Pennsylvania Fire much more directly.  For example, take a look at the only other post-Bauman appellate decision allowing general jurisdiction by consent:

In this appeal, we consider whether [defendant] consented to general personal jurisdiction in New Mexico courts when it registered to do business here.  To answer this question, we must determine whether the United States Supreme Court’s decision in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917) . . . remain binding precedent in light of the evolution of general jurisdiction jurisprudence. . . .  We recognize the tension between the two lines of cases.  Nevertheless, because we conclude that . . . Pennsylvania Fire . . . [is] are still binding, we conclude that [defendant] consented to general jurisdiction in New Mexico.

Rodriguez v. Ford Motor Co., ___ P.3d ___, 2018 WL 6716038, at *1 (N.M. App. Dec. 20, 2018).

The rigor of briefing an issue – rather than writing blogposts – required Bexis to go back and actually read a number of the foundational Supreme Court personal jurisdiction decisions for the first time, probably, since law school.  It was a useful exercise, one that led him to conclude that, not only is Pennsylvania Fire no longer good law in light of Bauman, as so many recent decisions in our 50-state survey have concluded, but that Pennsylvania Fire has already been expressly overruled – more than 40 years ago.  The United States Supreme Court just didn’t overrule it by name.

We start with International Shoe Co. v. Washington, 326 U.S. 310 (1945), which discussed the demise of the “fictional” concept of corporate “presence” in a state under the new non-territorial version of Due Process.

Since the corporate personality is a fiction . . . it is clear that unlike an individual its “presence” without, as well as within, the state of its origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it.  To say that the corporation is so far “present” there as to satisfy due process requirements . . . is to beg the question to be decided.  For the terms “present” or “presence” are used merely to symbolize those activities of the corporation’s agent within the state which courts will deem to be sufficient to satisfy the demands of due process.  Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there. . . .

Id. at 316-17 (citations omitted) (emphasis added).  Indeed, the concept of “consent” was no longer needed for the exercise of what becomes known as “general” personal jurisdiction.

“Presence” in the state in this sense has never been doubted when the activities of the corporation there have not only been continuous and systematic, but also give rise to the liabilities sued on, even though no consent to be sued or authorization to an agent to accept service of process has been given.

Id. at 317 (citation omitted) (emphasis added).  Likewise, “consent” is not essential to what becomes known as “specific jurisdiction.  As to “the commission of some single or occasional acts of the corporate agent in a state”:

True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit. . . .  But more realistically it may be said that those authorized acts were of such a nature as to justify the fiction. . . .  Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure.

Id. at 318-19 (citations omitted) (emphasis added).  “Consent” in the context of corporate activity, was thus repeatedly denounced in International Shoe as a “fiction,” while what was henceforth determinative was the “quality and nature of the [corporation’s] activity.”

The Court returned to the “fiction” of corporate “consent” in Shaffer v. Heitner, 433 U.S. 186 (1977), rejecting “statutory presence” of intangible property (corporate securities) as a basis for personal jurisdiction.  The Court expressly abandoned “the fiction[] of implied consent to service on the part of a foreign corporation” in favor of “ascertain[ing] what dealings make it just to subject a foreign corporation to local suit.”  Id. at 202-03

Shaffer also observed that Pennoyer had “approved the practice of considering a foreign corporation doing business in a State to have consented to being sued in that State.”  433 U.S. at 201 (citing 95 U.S. at 735-36).  However, this “consent” theory was difficult to administer in practice:

[B]oth the fictions of implied consent to service on the part of a foreign corporation and of corporate presence required a finding that the corporation was “doing business” in the forum State.  Defining the criteria for making that finding and deciding whether they were met absorbed much judicial energy.

Id. at 202 (citations omitted).

International Shoe drastically changed all that:

Thus, the inquiry into the State’s jurisdiction over a foreign corporation appropriately focused not on whether the corporation was “present” but on whether there have been “such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there.”  Mechanical or quantitative evaluations of the defendant’s activities in the forum could not resolve the question of reasonableness.

Id. at 203-04 (quoting International Shoe, 326 U.S. at 317).

Now we get to the good part.  Shaffer went on to bring the jurisdictional rules for in rem actions into line with International Shoe’s dramatic change[s],” id. at 205, to in personam personal jurisdiction.  Id. at 205-10.  The state statute before the court had “the express purpose . . . to compel the defendant to enter a personal appearance.”  As such, it was unconstitutional:

In such cases, if a direct assertion of personal jurisdiction over the defendant would violate the Constitution, it would seem that an indirect assertion of that jurisdiction should be equally impermissible.  The primary rationale for treating the presence of property as a sufficient basis for jurisdiction to adjudicate claims over which the State would not have jurisdiction if International Shoe applied. . . .

Id. at 209.

With that, the Court in Shaffer held that a state statute that sought to create a jurisdictional basis “to adjudicate claims over which the state would not have jurisdiction” under International Shoe Due Process was unconstitutional.  That’s exactly what the “general jurisdiction” language in the Pennsylvania Long Arm Statute does.  Critically, Shaffer reinforced its point by expressly overruling all contrary Pennoyer-era precedent:

We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.39

39 It would not be fruitful for us to re-examine the facts of cases decided on the rationale[] of Pennoyer . . . to determine whether jurisdiction might have been sustained under the standard we adopt today.  To the extent that prior decisions are inconsistent with this standard, they are overruled.

Id. at 212 & n. 39 (emphasis added).  That’s the 40+ years ago.  And we think “all” does mean all.

Given what the Court had already held in Shaffer about:  (1) the “fiction” of corporate “consent”; (2) its origins in Pennoyer; (3) that state statutes couldn’t gin up jurisdiction that doesn’t exist under International Shoe; and (4) that “all assertions” of personal jurisdiction must accord with International Shoe, there should be no doubt that Pennsylvania Fire (and its lesser-known adjunct Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd., 308 U.S. 165 (1939)), is among the prior “inconsistent” decisions that Shaffer expressly overruled.

We could end this post here, but we didn’t stop reading there, either.  So we find the overruling of Pennsylvania Fire is further bolstered by what the Supreme Court has done since.  We start with the admonition in Bauman itself that Pennoyer-era cases “should not attract heavy reliance today.”  Daimler AG v. Bauman, 571 U.S. 117, 138 n.18 (2014).  But the Supreme Court has said considerably more related specifically to general jurisdiction by consent.  That includes Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 445 (1952), which has since became Bauman’s “exceptional” case.  Perkins also rejected ipso facto personal jurisdiction based on a corporation’s “secur[ing] a license and [] designat[ing] a statutory agent upon whom process may be served” – those actions only “provide[] a helpful but not a conclusive test” for specific jurisdiction.  Id. at 445.  Ditto for McGee v. International Life Insurance Co., 355 U.S. 220 (1957):

[W]here this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations.  In a continuing process of evolution this Court accepted and then abandoned ‘consent,’ ‘doing business,’ and ‘presence’ as the standard for measuring the extent of state judicial power over such corporations.

Id. at 222 (citations and quotation marks omitted) (emphasis added).

The Court’s most comprehensive, relatively recent, analysis of consent jurisdiction took place in Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982) (“ICI”).  Each and every one of the “variety of legal arrangements” recognized as “consent” in ICI were grounds for case specific – not general − jurisdiction:

  • “[S]ubmi[ssion] to the jurisdiction of the court by appearance”;
  • “[P]arties to a contract may agree in advance”;
  • “[A] stipulation entered into by the defendant”;
  • “[C]onsent [is] implicit in agreements to arbitrate”;
  • “[C]onstructive consent to the personal jurisdiction of the state court [inheres] in the voluntary use of certain state procedures;”
  • “[W]aive[r] if not timely raised”; and
  • “[F]ail[ure] to comply with a pretrial discovery order.”

Id. at 704-06 (citations and quotation marks omitted).  These are all actions that take place on a one-off basis in particular cases.

The only item on the ICI list that could possibly encompass general jurisdiction by consent – “constructive consent” due to “voluntary use of certain state procedures – really doesn’t.  The ICI Court gave two examples of what it was describing, both of which were likewise specific to individual cases.  See Adam v. Saenger, 303 U.S. 59, 67-68 (1938) (non-resident plaintiff consents to counterclaims); Chicago Life Insurance Co. v. Cherry, 244 U.S. 25, 30 (1917) (“filing a plea in abatement, or taking the question to a higher court”).  Those are the kind of things that parties decide to do (or not) on a case-by-case basis.  Thus, while there is reason to believe that Adams and Chicago Life are not victims of Shaffer’s global overruling of Pennoyer-era precedent, conversely, there is no basis for saving Pennsylvania Fire.  In accordance with Shaffer, ICI did not even recognize corporate registration as a modern form of “consent.”

Then, in Burnham v. Superior Court, 495 U.S. 604 (1990), similarly to Shaffer, the Court again expressly “cast aside” “consent” arguments for general jurisdiction as “purely fictional”:

We initially upheld [corporate registration] laws under the Due Process Clause on grounds that they complied with Pennoyer’s rigid requirement of either “consent,” or “presence.”  As many observed, however, the consent and presence were purely fictional.  Our opinion in International Shoe cast those fictions aside. . . .

Id. at 617-18 (citations omitted) (plurality opinion).

Finally, the fate of general jurisdiction by consent is also discussed in the “stream of commerce” case, J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873 (2011).  The plurality listed “consent” as one of four possible bases of jurisdiction.  Id. at 880-81.  Absent consent, “those who live or operate primarily outside a State have a due process right not to be subjected to judgment in its courts.”  Id. at 881.  “Purposeful availment” was a basis for the “more limited form,” specific jurisdiction, only.  Id.  Interestingly, in Nicastro, the more pro-jurisdiction dissenters were even less kind to notions of “consent”:

Finally, in International Shoe itself, and decisions thereafter, the Court has made plain that legal fictions, notably “presence” and “implied consent,” should be discarded, for they conceal the actual bases on which jurisdiction rests. “[T]he relationship among the defendant, the forum, and the litigation” determines whether due process permits the exercise of personal jurisdiction . . ., and “fictions of implied consent” or “corporate presence” do not advance the proper inquiry. . . .  [C]onsent [a]s the animating concept draws no support from controlling decisions of this Court. Quite the contrary, the Court has explained, a forum can exercise jurisdiction when its contacts with the controversy are sufficient; invocation of a fictitious consent, the Court has repeatedly said, is unnecessary and unhelpful.

Id. at 900-01 (citations omitted) (Ginsburg +2, dissenting). Thus, even the justices who were inclined to interpret personal jurisdiction more expansively in Nicastro weren’t willing to endorse the “consent” notions that animated Pennsylvania Fire.

Based on the above analysis, we think it is entirely proper, not only for defendants in general-jurisdiction-by-consent cases to argue that Pennsylvania Fire should not be followed because it is obsolete and inherently inconsistent with Bauman, but to go further and argue that Pennsylvania Fire – and thus the entire concept of general jurisdiction by consent – was already expressly overruled on its jurisdictional holding in Shaffer.  Overruling Pennsylvania Fire 40+ years ago is entirely consistent with how the United States Supreme Court has since treated that decision and the “consent” concept.  First, International Shoe and Shaffer thoroughly trashed the notion of “consent” as a basis for general jurisdiction.  Second, Pennsylvania Fire has not been cited for any jurisdictional proposition whatever since Shaffer (as opposed to its holding about the Full Faith and Credit clause, 243 U.S. at 96-97, which appears to remain valid).  Third, every Supreme Court case since Shaffer has treated “consent” jurisdiction generally as a factor for resolving specific jurisdiction, not general jurisdiction.

Finally, we’d also recommend that our readers share this post with anyone in their firms who is engaged in asbestos litigation.  While defeating general jurisdiction by consent is important to our drug/device clients, it is absolutely critical in asbestos litigation.  Asbestos plaintiffs typically sue dozens of corporate defendants, so that litigation requires a general, not specific, jurisdiction theory to continue aggregating cases in plaintiff-friendly places where plaintiffs don’t reside.  Defeating general jurisdiction by consent in asbestos cases will force asbestos plaintiffs to stay home, where they can assert specific jurisdiction over most (if not all) of their defendants.  Otherwise, asbestos litigation tourists should stand to lose 95% or so of the defendants they sue to personal jurisdiction defenses.

 

We know that most of our clients, manufacturers of prescription medical products (for purposes of this post), if they have insurance at all, have coverage that is subject to large self-insured retentions (“SIRs”). While the Blog doesn’t usually follow insurance matters, the decision discussed in this guest post is very good news for insureds with SIRs, and appears to be a matter of first impression. Thus, we invited David Weiss, Cristina Shea, and Connor O’Carroll from Reed Smith’s Insurance Recovery Group (who were writing the case up anyway) to provide this guest post. If this case starts a trend, pharmaceutical and medical device insureds (like many other insureds) will be much better off.

**********

In Deere & Co. v. Allstate Ins. Co., ___ Cal. Rptr.3d ___, 2019 WL 912151 (Cal. Ct. App. Feb. 25, 2019), a California Court of Appeal recently held that an insured’s SIR was considered part of the policy’s underlying limit of liability, and thus only had to be satisfied once.  SIRs are similar to deductibles, in that they represent a sum of money that the insured must pay before it is able to access its coverage.  The insurers’ rejected position in Deere was that the SIR had to be satisfied again and again to access each layer of excess insurance.  This case represents another example of the California appellate courts shooting down insurance companies’ attempts to overreach.  Deere is only binding in California, so insurance companies will continue to argue for multiple SIRS in other states to avoid providing the coverage they contracted to provide.  Policyholders must always be vigilant.

This particular dispute arose over insurance coverage for several asbestos personal injury claims made against manufacturer Deere & Company (“Deere”) arising from products it manufactured from 1958 through 1986.  For that period of time, Deere had coverage in place via a series of first-layer umbrella policies (providing primary coverage) for personal injury claims; above which were several layers of excess insurance that provided additional coverage.  In all, 49 policies were at issue representing $200 million in contracted for coverage.  Every one of Deere’s its first-layer umbrella polices required it to pay an SIR before the coverage would be available.  Deere’s excess policies “followed form” to the first-layer policies, except for the excess policies’ different limits of liability.

The excess insurers argued that “follow form” meant that their higher-layer excess coverage was also conditioned on Deere paying an additional SIR before each level of their excess coverage attached.  Thus, the excess insurers sought to treat Deere effectively as an underlying self-insurer or else to treat its SIR for the underlying policies as “insurance” that must be exhausted a second time to invoke coverage, even though Deere had already paid the full SIR to trigger the first-layer policies.  At trial, the excess insurers’ position prevailed.  The trial court reasoned that, although the SIR was not “limits of liability,” it could be considered a part of the underlying limit of liability such that it necessitated repayment to reach excess coverage.

The appellate court reversed.  It found the trial court’s reasoning “enigmatic.”  Instead, it held that SIRs are not insurance, but “the antithesis of insurance” because the essence of insurance is shifting risk away from the insured.  Further, after rejecting the trial court’s articulation of the issue, the reframed issue became:  to determine whether coverage under Deere’s higher-layer excess polices was triggered after the aggregate underlying limits have been satisfied—without Deere paying additional SIRs for all subsequent claims submitted.  The appellate court answered affirmatively.

Assum[ing] that a certain first-layer policy provides coverage to Deere in excess of $5,000 (SIR) and up to $200,000, with a $20,000 per occurrence limit; the second layer would kick in once the $200,000 had been expended.  Assume further, that numerous claims have been lodged against Deere.  For each claim, Deere pays $5,000, with the first layer paying $20,000 per occurrence.  After 10 claims, the first layer’s $200,000 aggregate limit would be exhausted, and the aggregate limits of the higher excess policies would be triggered.  The issue is whether for the eleventh claim Deere must pay another $5,000 before the higher levels are triggered.  The answer to this question is no.

Deere, 2019 WL 912151, at *8.

The appellate court reasoned that when Deere paid its SIR, it triggered coverage for its first-layer polices’ coverage.  The triggering event for the excess layers was not Deere’s payment of any SIR, but rather exhaustion of the first-layer policies.  The Court of Appeal held that, although the excess policies followed form to the first-layer policies, the excess policies had different limits of liability.  The court ruled that SIRs are written in terms of limits of liability, and therefore, they are not encompassed by the follow form provisions in the excess policies.  Deere cited analogous precedent from California and elsewhere in reaching this result, but none of these other cases involved excess insurance.  Thus, Deere appears to be a matter of first impression as to the type of insurance most commonly held by prescription medical product manufacturers.

In sum, Deere reaffirms that there is no basis in insurance contracts or insurance law to conclude that an insured’s SIR obligations survive the exhaustion of its first-layer of coverage to be incorporated into higher-layer policies.  Every company with an SIR and excess insurance stands to benefit from this decision by the Court of Appeal.

By now, the learned intermediary rule is so well established that new opinions addressing core learned intermediary issues, as opposed to applying the rule to specific fact patterns, are relatively uncommon. The last one of those we covered was the Seventh Circuit’s prediction that Wisconsin would adopt the learned intermediary rule, almost a year ago in In re Zimmer, NexGen Knee Implant Products Liability Litigation, 884 F.3d 746 (7th Cir. 2018).

We’ve got another.

In Ideus v. Teva Pharmaceuticals USA, Inc., ___ F. Supp.3d ___, 2019 WL 912121 (D. Neb. Feb. 19, 2019), the court, applying Nebraska law, held that the learned intermediary rule applied to a copper intra-uterine device (“IUD”).  The foundational learned intermediary question in Nebraska was decided in Freeman v. Hoffman-La Roche, Inc., 618 N.W.2d 827, 841 (Neb. 2000), adopting the rule as enunciated in Restatement (Third) of Torts, Products Liability §6(d) (1998), but the plaintiff in Ideus invoked purported “exceptions” in an attempt to avoid the rule.  The most on-point of those exceptions was “for prescription contraceptives.”  2019 WL 912121, at *2.

Ideus thoroughly trashed that supposed exception, pointing out that the Eighth Circuit got it wrong thirty years ago in Hill v. Searle Laboratories, 884 F.2d 1064, 1070 (8th Cir. 1989), when it predicted that Arkansas would adopt such an exception.  But in West v. Searle Co., 806 S.W.2d 608, 614 (Ark. 1991), the Arkansas Supreme Court rejected the West prediction and the purported contraceptive exception.  2019 WL 912121, at *3.  This discussion reminds us of what recently happened in Arizona, with the en banc Ninth Circuit getting “Spalding” embossed in its collective forehead from the Arizona Supreme Court’s forceful (and unanimous) rejection of its mythical tort “duty to report” to the FDA.

So, with West both non-binding (being a different state’s law) and discredited even in that state, Ideus followed the clear majority rule, and overwhelming recent trend, and rejected the idea of a “contraceptive exception” to the learned intermediary rule. First, “determining what contraceptive fits [a patient’s] particular criteria necessarily requires the knowledge and advice of a physician.” 2019 WL 912121, at *4. Therefore, there was “no reason to distinguish between a patient’s final choice to use a particular contraceptive and a patient’s final decision relating to any other course if treatment.” Id.

[T]he fact that the patient makes the final choice among suggested contraceptives (or decides not to use any at all) does not constitute a distinction which makes the [learned intermediary] rule inapplicable.  [The Court] can readily conceive of situations in which a physician gives the patient a choice of courses to follow.  There is, for example, a patient’s choice between continuing to endure a physical ailment or submitting to surgery or some other course of treatment; an obese person’s choice among diets suggested by the doctor; and a surgery patient’s choice of anesthesia. . . .

In any such situation which may come to mind, the patient is expected to look to the physician for guidance and not to the manufacturer of the products which he may use or prescribe in the course of treatment.

Id. (quoting Terhune v. A.H. Robins Co., 577 P.2d 975, 978 (Wash. 1978)).  Nothing inherent in contraceptives justified singling them out for an exception to the learned intermediary rule:

[W]hatever differences there may be between contraceptives and “typical” prescription drugs, they have one important thing in common:  both are always prescribed by a physician or through the services of a physician.  And when a patient relies on the skill and knowledge of a physician in any particular method of treatment, the learned intermediary doctrine ought to apply.  This is no less true for prescription contraceptives as for any other prescription medication.

Id. (citation omitted).

Finally, Ideus relied upon Nebraska’s adoption of the Third Restatement §6(d)’s version of the learned intermediary rule, which did not recognize any exception for contraceptives.

[T]hat section of the Restatement acknowledges circumstances under which the doctrine might not be applicable. . . .  [N]othing in the record or the parties’ arguments . . . suggest[s] with respect to contraceptives in general . . . that a health care provider is not in a position to reduce the risk of any foreseeable harm to the patient.  In other words, the Nebraska Supreme Court did acknowledge the possibility of exceptions to the learned intermediary doctrine, when it expressly adopted § 6(d) of the Restatement − but nothing suggests that such an exception should be recognized here.

2019 WL 912121, at *5 (citations and quotation marks omitted).

Thus, Ideus predicted that “the Nebraska Supreme Court would following the overwhelming majority of decisions that have applied the learned intermediary doctrine to cases involving contraceptives.”  Id.  The court followed with an impressive string citation to well over a dozen cases applying the learned intermediary rule to contraceptives of various types.  Id.  This being the DDLaw Blog, however, we will provide our own, even more extensive, list of such cases:

State Supreme Court Cases:

Martin v. Ortho Pharmaceutical Corp., 661 N.E.2d 352, 356-57 (Ill. 1996); Shanks v. Upjohn Co., 835 P.2d 1189, 1200 (Alaska 1992); West v. Searle & Co., 806 S.W.2d 608, 613-14 (Ark. 1991); Humes v. Clinton, 792 P.2d 1032, 1039-41 (Kan. 1990); Lacy v. G.D. Searle & Co., 567 A.2d 398, 400-01 (Del. 1989); Tetuan v. A.H. Robins Co., 738 P.2d 1210, 1228 (Kan. 1987); Wooderson v. Ortho Pharmaceutical Corp., 681 P.2d 1038, 1052 (Kan. 1984), McKee v. Moore, 648 P.2d 21, 25 (Okla. 1982); Seley v. G.D. Searle & Co., 423 N.E.2d 831, 839-40 (Ohio 1981); Terhune, 577 P.2d at 978; Vaughn v. G.D. Searle & Co., 536 P.2d 1247, 1248 (Or. 1975); McEwen v. Ortho Pharmaceutical Corp., 528 P.2d 522, 528 (Or. 1974).

Other State Cases:

Wyeth-Ayerst Laboratories Co. v. Medrano, 28 S.W.3d 87, 91 (Tex. App. 2000); Plenger v. Alza Corp., 13 Cal. Rptr.2d 811, 819 n.6 (Cal. App. 1992); Taurino v. Ellen, 579 A.2d 925, 928 (Pa. Super. 1990); Brecher v. Cutler, 578 A.2d 481, 485 (Pa. Super. 1990); Rhoto v. Ribando, 504 So.2d 1119, 1123 (La. App. 1987); Eiser v. Feldman, 507 N.Y.S.2d 386, 387-88 (N.Y. App. Div. 1986); Taylor v. Wyeth Laboratories, Inc., 362 N.W.2d 293, 297 & n.11 (Mich. App. 1984); Cobb v. Syntex Laboratories, 444 So.2d 203, 205 (La. App. 1983); Reeder v. Hammond, 336 N.W.2d 3, 5 (Mich. App. 1983); Ortho Pharmaceutical Corp. v. Chapman, 388 N.E.2d 541, 548-49, 553, 557 (Ind. App. 1979); Hamilton v. Hardy, 549 P.2d 1099, 1110 (Colo. App. 1976), overruled on other grounds, State Board of Medical Examiners v. McCroskey, 880 P.2d 1188 (Colo. 1994); Leibowitz v. Ortho Pharmaceutical Corp., 307 A.2d 449, 457 (Pa. Super. 1973); Carmichael v. Reitz, 95 Cal. Rptr. 381, 400-01 (Cal. App. 1971) (contraceptive prescribed for other purpose); Hayes-Jones v. Ortho-McNeil Pharmaceutical, 2012 WL 3164558 (N.J. Super. Law Div. Aug. 3, 2012) (applying Virginia law).

Federal Courts of Appeals:

Yates v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., 808 F.3d 281, 292-93 (6th Cir. 2015) (applying New York law); In re Norplant Contraceptive Products Litigation, 165 F.3d 374, 379 (5th Cir. 1999) (applying Texas law); Odom v. G.D. Searle & Co., 979 F.2d 1001, 1003-04 (4th Cir. 1992) (applying South Carolina law); Beyette v. Ortho Pharmaceutical Corp., 823 F.2d 990, 992-93 (6th Cir. 1987) (applying Michigan law); Brochu v. Ortho Pharmaceutical Corp., 642 F.2d 652, 656 (1st Cir. 1981) (applying New Hampshire law); Lindsay v. Ortho Pharmaceutical Corp., 637 F.2d 87, 91 (2d Cir. 1980) (applying New York law).

Federal District Courts:

Lussan v. Merck Sharp & Dohme Corp., 2017 WL 2377504, at *3 (E.D. La. June 1, 2017); Gonzalez v. Bayer Healthcare Pharmaceuticals, Inc., 930 F. Supp.2d 808, 813 (S.D. Tex. 2013); Hanhan v. Johnson & Johnson, 2013 WL 5939720, at *3 (N.D. Ohio Nov. 5, 2013) (applying California law); James v. Ortho-McNeil Pharmaceutical, Inc., 2011 WL 3566844, at *3 (N.D. Ohio Aug, 12, 2011) (applying Louisiana law); In Re Yasmin & Yaz (Drospirenone) Marketing, Sales Practices & Products Liability Litigation, 692 F. Supp.2d 1025, 1033-34 (S.D. Ill. 2010), aff’d, 643 F.3d 994 (7th Cir. 2011); Mendez Montes De Oca v. Aventis Pharma, 579 F. Supp.2d 222, 228 (D.P.R. 2008); In re Norplant Contraceptive Products Liability Litigation, 215 F. Supp.2d 795, 809-10 (E.D. Tex. 2002) (applying law of all fifty states); Nelson v. Dalkon Shield Claimants Trust, 1994 WL 255392, at *4 (D.N.H. June 8, 1994); MacPherson v. Searle & Co., 775 F. Supp. 417, 424-25 (D.D.C. 1991); Reaves v. Ortho Pharmaceutical Corp., 765 F. Supp. 1287, 1291 (E.D. Mich. 1991); Zanzuri v. G.D. Searle & Co., 748 F. Supp. 1511, 1514-15 (S.D. Fla. 1990); Amore v. G.D. Searle & Co., 748 F. Supp. 845, 849-50 (S.D. Fla. 1990); Allen v. G.D. Searle & Co., 708 F. Supp. 1142, 1147-48 (D. Or. 1989); Spychala v. G.D. Searle & Co., 705 F. Supp. 1024, 1032 (D.N.J. 1988); Kociemba v. G.D. Searle & Co., 680 F. Supp. 1293, 1305-06 (D. Minn. 1988); Dupre v. G.D. Searle & Co., 1987 WL 158107, at *4 (D.N.H. April 28, 1987); Skill v. Martinez, 91 F.R.D. 498, 507 (D.N.J. 1981), aff’d per curiam, 677 F.2d 368 (3d Cir. 1982); Steinmetz v. A.H. Robins Co., 1981 U.S. Dist. Lexis 14314, at *3-5 (D. Or. Aug. 27, 1981); Goodson v. Searle Laboratories, 471 F. Supp. 546, 548 (D. Conn. 1978); Dunkin v. Syntex Labs, Inc., 443 F. Supp. 121, 123 (W.D. Tenn. 1977); Chambers v. G. D. Searle & Co., 441 F. Supp. 377, 381 (D. Md. 1975), aff’d per curiam, 567 F.2d 269 (4th Cir. 1977) (applying District of Columbia law).

Secondarily, the plaintiff in Ideus tried to assert the so-called “direct to consumer” advertising exception to the learned intermediary rule.  The decision disposed of that contention in a footnote:

For the same reason, to the extent that [plaintiff] claims the direct consumer marketing exception to the learned intermediary doctrine applies, that argument has no merit.  If anything, it further supports the Court’s conclusion the contraceptives and other prescription drugs are not actually distinguishable.

Ideus, 2019 WL 912121, at *4 n.3 (citations omitted).  We don’t have to provide a list of cases here, because we’ve thoroughly addressed the almost universal rejection of the direct-to-consumer exception before.  That post was in January, 2011. However, for the sake of completeness, here are more recent cases also rejecting any direct to consumer exception:

Watts v. Medicis Pharmaceutical Corp., 365 P.3d 944, 950-51 (Ariz. 2016); Centocor, Inc. v. Hamilton, 372 S.W.3d 140, 159-64 (Tex. 2012) (reversing lower court adoption); Shah v. Forest Laboratories, Inc., 2015 WL 3396813, at *6 (N.D. Ill. May 26, 2015); Thomas v. Abbott Laboratories, 2014 WL 4197494, at *6 (C.D. Cal. July 29, 2014); McKay v. Novartis Pharmaceuticals Corp., 934 F. Supp.2d 898, 910 (W.D. Tex. 2013), aff’d, 751 F.3d 694 (5th Cir. 2014); In re Avandia Marketing, Sales Practices & Products Liability Litigation, 2013 WL 3486907, at *2 (E.D. Pa. July 10, 2013); Calisi v Abbott Laboratories, 2013 WL 5462274, at *3 (D. Mass. Feb. 25, 2013); DiBartolo v. Abbott Laboratories, 914 F. Supp.2d 601, 614-15 (S.D.N.Y. 2012); Swoverland v. GlaxoSmithKline, 2011 WL 6001864, at *2 (D. Conn. Oct. 5, 2011); James, 2011 WL 3566844, at *3.

Why the plaintiff in Ideus was desperate to avoid the learned intermediary rule was obvious from the rest of the opinion – the defendant’s warning was adequate as a matter of law because it warned physicians of exactly the risk that plaintiff blamed for her injuries.  Her only hope was to require a manufacturer warning directly to her (which wasn’t given):

[Plaintiff] has not even named the physician who prescribed and placed her IUD − much less demonstrated that had that physician been given the proper warning, she would not have placed [the device]. . . .  [T]he package insert expressly warned about the possibility of breakage, embedment, and the difficulties of removing [device], making the warning adequate as a matter of law.  A warning is adequate if it accurately and unambiguously coveys the scope and nature of the risk to the prescribing physician.

2019 WL 912121, at *6 (citations omitted).

Astute readers will note that many of the cases in our (and Ideus’) string cites are pretty old – more from the 1970s to 1990s than afterwards.  It’s a stroll down memory lane, and we hope it will stay that way.  As Bexis’ book points out, concerning this erstwhile exception to the learned intermediary rule, “The trend of judicial decisions has shown little acceptance of this exception . . ., and several of the decisions that initially recognized it are now of questionable validity.”  Beck & Vale, “Drug and Medical Device Product Liability Deskbook” §2.03[3][e], at 2.03-70 (2018).  Indeed, subtracting the “questionable” jurisdictions, leaves only one – Massachusetts – definitely still following it.  So it’s no more widely accepted nowadays than the direct to consumer exception peculiar to New Jersey.

First of all, in response to some comments on our last post, we wanted to close the loop on our dog show narrative. We liked the Wirehaired Fox Terrier, though we have no explanation for the inordinate number of times this breed has won Best in Show (twenty-two, we think we heard). Truth be told, once a dog has won over all of the other entries in its breed, and all of the other breed winners in its group, it is pretty hard for there to be a “wrong” choice. We will say that the Dachshund and the flashy Boxer bitch (featured, by the way, in Netflix’s “7 Days Out” segment on Westminster) showed their hearts out, whereas the Wire seemed a little tired to us. But, unless there is a Standard Poodle (the breed of our heart) among the final seven, we are always happy for whichever gorgeous example of its breed takes the top honor.

In today’s case, federal law takes the top honor. In the Eleventh Circuit’s unpublished decision in Markland v. Insys Therapeutics, Inc., — Fed. Appx. —. 2018 WL 6666385 (11th Cir. Dec. 19, 2018), the plaintiff’s decedent died after being administered the defendant’s pain medication for an allegedly off-label use. The plaintiff filed a wrongful death suit, asserting a single claim for “negligent marketing.” The plaintiff alleged that the defendant engaged in “fraudulent” and “unlawful” marketing to convince doctors to prescribe the drug for off-label uses.

Explaining that, under the FDCA and Buckman, only the United States government may enforce the FDCA’s provisions, the court emphasized that state law tort claims are preempted to the extent that they “seek to privately enforce a duty owed to the FDA.” Markland, 2018 WL 6666385 at *2 (citation omitted).  While the plaintiff in Markland styled his claim as one for “negligent marketing,” the court explained that that is not a recognized tort under Florida law. The plaintiff’s complaint included the allegation that the defendants had “intentionally violated requirements imposed by the FDA” regarding the proper use of the drug.  Id.

The district court had held that the substance of the plaintiff’s complaint was an allegation that the defendant had violated the FDCA, and the Eleventh Circuit agreed. The court held, “A critical premise of [the] complaint is that [the defendant’s] promotion of off-label uses was improper, a proposition that can only be established by pointing to federal law.”  Id.  Moreover the plaintiff did not “point[] to any traditional state-law duty owed by [the defendant] to [the plaintiff’s decedent] that was breached by the company’s marketing of [the drug] for off-label use.”  The court concluded, “It is only because of the FDCA and FDA enforcement decisions that the promotion of off-label uses is prohibited.  Indeed, the very concept of a drug use being ‘off-label’ is derived from the FDCA and FDA policymaking decisions. . . . As with the Buckman plaintiffs, Markland seeks to enforce a duty that exists solely by virtue of the FDCA.  That kind of claim is preempted.”  Id. (internal punctuation and citation to Buckman omitted).

Hornbook stuff, and we like it that way.

If we were to recap briefly our reactions to the Levine decision and ten years of decisions attempting to apply it, then we might say something like this. The Court’s creation of a clear evidence standard for conflict preemption in the context of warnings claims for branded drugs was both novel and misguided. The Court gave more credence to the CBE mechanism as a way to change the label, at least temporarily, without FDA approval than FDA ever had. Over time, courts took baby steps to recognizing that some warnings claims—even the fundamental claims underlying a litigation—should not proceed where the label plaintiffs wanted would not have passed muster with FDA at the time. Facts like FDA’s rejection of the same proposed label, FDA’s statements about the lack of an association with the risk at issue, the lack of new evidence to justify submitting a CBE, and FDA’s pronouncements that a CBE could not be used for a certain type of labeling change allowed courts to find that the high standard had been met. The endorsement of complimentary conflict preemption principles in some Supreme Court cases and rejection of the presumption against preemption in others helped emboldened courts to find warnings claims preempted. This trend might have peaked in a series of Fosamax decisions out of the District of New Jersey, which we touted not too subtly. Then the Third Circuit reversed, essentially holding that summary judgment cannot be granted for defendants under a Levine analysis because juries have to decide whether the clear evidence bar was met. We sharpened our proverbial pens to decry the reasoning of that decision, its impact on litigation, and its invitation for juries to second-guess FDA.

We have, of course, tracked the appeal of Fosamax to the Supreme Court, including the amicus brief of the Solicitor General and the oral argument. The Solicitor’s brief advocated that judges should decide preemption under Levine when interpreting the scope of an agency decision is required for the decision. Drawing on the Administrative Procedures Act, the brief argued that “[n]o sound reason exists for treating the meaning and effect of an FDA administrative determination differently” than other federal agency decisions, which are questions of law. Drawing on Supreme Court authority in the patent context, the brief reasoned that “[t]o the extent extrinsic evidence may sometimes be relevant in litigation between private parties to determine the meaning and effect of FDA’s agency action, the court’s evaluation of such subsidiary facts does not alter the ultimate legal character of the inquiry or the court’s exclusive authority to resolve it.” Cases are not exactly on hold while the Supreme Court mulls over what to do with the Fosamax appeal, so we were intrigued by the question certified on appeal in Rinder v. Merck Sharpe & Dohme Corp., — N.E. 3d –, 2019 IL App. (1st) 171969 (Ill. App. Jan. 23, 2019):

Under [Levine] federal law preempts state-law failure to warn claims related to the use of a prescription drug if there is “clear evidence” that the FDA would not permit the manufacturer to include the plaintiff’s requested warning in the drug’s labeling. Is the question whether the defendant has presented the necessary “clear evidence” one for resolution by the court or jury?

We will skip over the underlying facts of the case, but we can say there are multiple FDA decisions to be interpreted, it was pretty to clear to us that FDA would have rejected the label plaintiff wanted when they wanted it, and the plaintiff’s arguments seemed to hinge on after-the-fact evidence of causation. But here is where we come back to Fosamax. Although most published decisions involved the court deciding whether there was the clear evidence in the record required by Levine, the court identified Fosamax as the only relevant federal circuit decision and proceeded to follow it in rejected each of defendant’s arguments for why the court should decide the issue and find it was impossible to the defendant to have the label that plaintiff wanted. In essence, the Rinder court ruled that “the issue presented by the [Levine] inquiry is simply a particular application of the task juries regularly perform in tort cases, determining what the evidence shows probably would have happened if the allegedly wrongful conduct had not occurred.” Therefore, substantive Illinois law would require a jury to consider the defense of conflict preemption and summary judgment would be impossible in cases where plaintiff could come up with some arguments against defendant’s urged interpretation of the FDA’s decisions. Until Fosamax is reversed or at least rejected by other circuit courts, this is the sort of facile decision we will keep seeing.