We’ve blogged a number of times about how litigation funding arrangements collide with various ethical and statutory obligations owed by either the funders or the lawyers they fund.  But when the New York Times reported on the questionable funding arrangements that have occurred in Pelvic Mesh litigation in its 2018 article, “How Profiteers Lure Women Into Often-Unneeded Surgery,” we knew that something more was going on.  Since, as the article revealed, “[p]eople are claiming the Fifth,” then an investigation of possible criminal activity was a definite possibility.

Now that’s happened.

Last month, the United States Attorney’s office in the Eastern District of New York (that’s Brooklyn) dropped a major indictment against a surgeon and a litigation funder concerning some of the misconduct reported in the New York Times.  United States v. Barber, Cr. No. 19-0239 (filed May 23, 2019) (docket on PACER here).

The surgeon allegedly performed procedures on Pelvic Mesh plaintiffs that were solely for the purpose of increasing the settlement value of their lawsuits over their mesh implants.  Indictment ¶¶1, 5(a), 5(c).  The surgeon also “paid kickbacks and bribes in exchange for . . . referral of patients.”  Id. ¶5(d).  The indictment also recites dates, and amount of the payments for, three of the fraudulent surgeries.

The litigation funder allegedly “facilitated the coordination of removal surgeries and purchased and resold [the plaintiffs’] medical debts for profit.”  The funder appears to be the key to how this scheme operated.

First:

[T]he conspiracy facilitated the identification of victims − women throughout the United States who had the mesh insert . . . and might have been willing to undergo removal surgeries and commence lawsuits against the manufacturer of the mesh.

Indictment ¶5(a).  It will be interesting to find out exactly how this “identification” occurred.  Medical records are confidential under federal law (HIPAA), and deliberate violation of this confidentiality could be a whole new area of criminal charges.

Second:

Once the Victims were identified, individuals associated with medical funding facilitators . . . contacted the Victims to determine whether the Victims would . . . undergo removal surgeries.  To entice the Victims to undergo a removal surgery that would lead to a higher settlement payment . . . , the defendants, together with others, falsely and fraudulently (i) described the risks of the [mesh] implants and the need for removal of the [mesh] implants, (ii) strongly implied that the women would need to travel out of state to use pre-selected doctors . . ., and (iii) misled the Victims about their ability (or inability) to rely upon their health insurance to cover any medical expenses associated with the removal surgery.

Id.  So the litigation funders, according to the indictment:  (1) scared these would-be plaintiffs by exaggerating the risk of the mesh, (2) told them that their lawsuits would be worth more with an explant, (3) encouraged them to hide what they were doing from their real doctors and health insurers, and (4) set them up with “pre-selected” surgeons who could be relied on – for a fee − to say what was necessary to maximize the settlement payout.

Third:

[The litigation funders] financed the removal surgeries for the Victims, either through Contingent Loans or by purchasing Medical Debts.  Certain agreements entered into by the Victims included provisions in which the women agreed to repay the costs of the removal surgery plus interest, which accrued at exorbitant rates, if the women ultimately received a settlement or favorable judgment against the mesh manufacturer.  In certain funding arrangements, the Victims were responsible for the medical bills associated with the removal surgeries even if they did not receive a settlement.

Indictment ¶5(b).  Litigation funding by way of usurious “contingent loans”?  Where have we heard that before?  Try Colorado and Kentucky.  Oasis Legal Finance Group, LLC v. Coffman, 361 P.3d 400 (Colo. 2015); Boling v. Prospect Funding Holdings, LLC, ___ F. Appx. ___, 2019 WL 1858506 (6th Cir. April 25, 2019).  See also National Football League Players’ Concussion Injury Litigation, 923 F.3d 96, 112 (3d Cir. 2019) (mentioning “issues of unconscionability, fraud, or usury based on the high effective interest rates in the agreements”).  And these are just the ones we know about.  Litigation funders have fought tooth and nail against disclosure requirements that would prevent this kind dirty deeds (not done dirt cheap) from happening in the first place.

Fourth:

[O]nce surgical funding was secured, the Victims were contacted again and arrangements were made for the women to travel to visit a doctor who would perform the removal surgery (often by traveling hundreds of miles and with very little consultation in advance of the surgery).

Indictment ¶5(c).

These alleged facts give rise to the following criminal charges:  (1) Wire fraud conspiracy – yes, emails count even though “wires” are anachronistic; (2) Wire fraud – three counts, one for each of the “victims” mentioned in the indictment.  (3) Travel Act conspiracy – inducing the “victims” to cross state lines for “unlawful” purposes; and (4) Travel Act violation – the “bribes and kickbacks” paid to facilitate the surgeries.

Really, though, aren’t the mesh manufacturers also “victims”?  There has to be money in the first place, before a “funder” could connive to steal it.  The manufacturers are the ones intended to pay out inflated settlements that provided “money and property” that these alleged crooks ultimately “obtained.”  Id. ¶9.

In addition the government is seeking criminal forfeiture of all “proceeds” of the above criminal activity “obtained directly or indirectly.”  Id. ¶¶12-14.  Apropos of the prior paragraph, if there is to be forfeiture, then any money that litigation funders received that was contingent on a manufacturer settlement ought to be returned to the manufacturers, since they were the ones that the funders’ activities actually cheated.  The supposed “victim” plaintiffs just went along for the ride, hoping for a bigger payout for themselves.

According to the PACER docket, both of the defendants were arrested on May 24, 2019.

To add insult to the public’s injury, the litigation funder now claims to be impecunious and had a public defender appointed.  See PACER Docket #5 (described as “Rule 5(c)(3) documents received”).  Where did all the money mentioned in the New York Times article go?  If we had mandatory disclosure of litigation funding agreements, then we might know, but we don’t.  It will take these criminal proceedings (including forfeiture) to track it down.

Do all litigation funders engage in making usurious loans under false pretenses, as alleged here?  We seriously doubt it.  But, again, without disclosure, nobody can be absolutely sure.  If litigation funding ever hopes to be as “respectable” as ordinary insurers, then that will require the same sort of routine disclosure that, as with insurance, keeps everything on the up and up through the disinfecting power of transparency.

For most of you, it has been a long time since you thought much about criminal law. Do you remember the hypothetical about the murder victim who perished on a desert hike and it was difficult to pinpoint the criminal(s) because one person had poisoned the water in the victim’s canteen, one had replaced the water with sand, and another had drilled a hole in the bottom of the canteen? Is it possible that you have forgotten the doctrines of legal and factual impossibility? Get ready for some law school nostalgia, as we discuss an interesting recent criminal case with rulings on legal impossibility and Due Process/vagueness involving the scope of FDA authority.

We never pass up an opportunity to blog about a criminal case. Criminal cases bring us back to our old prosecutor days. They are also inherently juicier cases. That’s why there are heaps of tv shows and movies about criminal matters, and very few focusing on answering interrogatories. The district court in United States v. Conigliaro, 2019 U.S. Dist. LEXIS 96453 (D. Mass. June 7, 2019), sets up the background nicely: “Once a promising niche drug business, the now defunct New England Compounding Center (NECC) willfully deviated from pharmaceutical industry safety standards in a mad pursuit of profits. Scores died and hundreds were injured when three contaminated batches of injectable methylprednisolone acetate (MPA) triggered a national outbreak of fungal meningitis.” The defendants in this case were employees of NECC who had been convicted of conspiring to defraud the United States in violation of 18 U.S.C. section 371. (We do not know whether the lead defendant was in any way related to the great and tragic Tony C of the Red Sox.)

What exactly was the alleged fraud? The government’s theory was that NECC falsely held itself out as a small-time compounder that was more like a retail pharmacy than a full-scale manufacturer, thereby eluding FDA regulation. The defendants argued that it was legally impossible for the FDA to be defrauded in the manner alleged, because the FDA did not have jurisdiction over compounding pharmacies at the time of the relevant events. That defense of legal impossibility, so goes the argument, saves the day for the defendants even if the defendants uttered false statements in the mistaken belief that the FDA had authority it actually lacked.

At this point, the Conigliaro court offered a mini-treatise on the legal defense of impossibility, breaking the concept down into factual and legal impossibility. The Conigliaro court is even more fond of strange hypotheticals than your criminal law professor was. Typical examples of factual impossibility include trying to pick an empty pocket or pulling the trigger of an unloaded gun. Factual impossibility is not a good defense against charges of inchoate crimes such as attempt or conspiracy. We once prosecuted a case in which actual Sherpas (that was their name) were caught bringing suitcases of heroin into LAX. Their defense? They thought they were smuggling counterfeit money. That was a clever ploy, because the sentence for distributing counterfeit money was much less severe than distributing narcotics. By the way, it didn’t work.

By contrast, legal impossibility applies to cases if facts are as the defendant believes them to be, but the completed act is not legally a crime. For example, someone who sneaks a smoke of marijuana in Massachusetts thinking it illegal when, in fact, it isn’t, cannot be charged with a crime. But the factual-legal impossibility division is hardly neat. It often ends up as a pure matter of semantics. The Conigliaro court almost gleefully takes us through perplexing examples, such as the hapless hunter who shot a stuffed deer out of season (we mean out of actual, live deer season – there is no seasonal restriction on shooting stuffed deer), or the defendant who purchased what he thought was stolen cloth, though the cloth had actually been recovered by the thief, returned to the rightful owner, and then borrowed by the police to set up the buy-bust. These cases often turn on whether the focus is on the defendant’s mens rea or the real world actus reus. (We warned you that we would be tugging you back to law school.). Other examples abound in the Conigliaro case, and the opinion is good reading,

But let’s cut to the chase. With all the doctrinal complexities, the Conigliaro court decided that one cannot be convicted of conspiring to do something that is lawful. The problem in the case was that the FDA’s power to regulate compounders – even big-time operations like NECC, which was not merely doing the compounding on an as-ordered basis – was far from clear. In a way, the Conigliaro court did not so much decide that the impossibility defense worked here; it really decided that it was such a close, murky question that the prosecution was too vague. The issue of whether the FDA could regulate compounders was too vague for the defendants to figure out. It was even too vague for the FDA to figure out. The Conigliaro court cited several instances of high-up FDA officials confessing that the regulatory scheme never anticipated the development of large-scale compounders. Those officials admitted that the line was “blurry,” not “bright.” If the FDA was unsure of the scope of its authority, how could the defendants know for sure? The vagueness of whether what happened was a crime at all, coupled with the lenity principle, meant that the criminal convictions for conspiring to defraud the FDA had to be reversed.

We have blogged before about Due Process in the context of vague and ambiguous FDA statements. When the FDA is confused or confusing about its authority, other people of “common intelligence” are left to guess. Such guesswork should not lead to criminal convictions – or, for that matter, civil liability. Let’s leave it at this: we can think of many other drug and device litigations, some going on right now, where more clarity from the FDA and other agencies could have avoided problems and litigation.

If preemption had a family tree, the drug and device branch would be heavy.  And, as our scorecards and cheat sheets demonstrate, there are obvious sub-branches that sprouted out of major Supreme Court decisions.  We have the Wyeth v. Levine, 555 U.S. 555 (2009) pharmaceutical branch; the Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) medical device branch with its subsequent post- Riegel v. Medtronic, Inc., 552 U.S. 312 (2008) off-shoot; the PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011) generic arm; the Buckman Co. v. Plaintiffs Legal Committee, 531 U.S. 341 (2001) implied preemption/fraud-on-the-FDA limb.  Now we have a post- Merck Sharp & Dohme Corp. v. Albrecht, ___ S. Ct. ___, 2019 WL 2166393 (U.S. May 20, 2019) (“Albrecht”) twig and that twig has its first bud – Delfino v. Medtronic, Inc., 2019 Minn App. Unpub. LEXIS 530 (Minn. Ct. App. Jun. 10, 2019).

Just in case you missed it, Albrecht held, in the context of a branded prescription drug case, that preemption is “a question of law, normally for a judge to decide without a jury.”  Albrecht, 2019 WL 2166393, at *9.  For more on the decision, see here and here.  We should note that Albrecht has its own jurisprudential fork in the road as it not only ruled on the “legal question” issue, but also made some inroads on defining “clear evidence” under Wyeth v. Levine.

But “clear evidence” wasn’t at issue in Delfino.  Delfino is a medical device case involving express PMA preemption.  So, we already have a ruling extending Albrecht beyond drugs and implied preemption.  We certainly read the reasoning of Albrecht to be equally applicable to the resolution of factual disputes in express preemption cases and Delfino shows us we weren’t off-base.

Delfino involved an ICD which had to be removed from plaintiff based on premature battery depletion.  Medtronic discovered the issue with a certain type of ICD, informed doctors and patients of the issue, analyzed the plaintiff’s device after it was removed, and offered a credit towards a replacement device.  Id. at *3-5.  Plaintiff then filed suit alleging claims for strict liability manufacturing defect, breach of express and implied warranties, negligence, and negligent infliction of emotional distress.  Id. at *6.  After the close of discovery, defendant moved for summary judgment on preemption grounds.  Plaintiff argued that her claims were not preempted because they were based on defendant’s violation of requirements of the PMA and that there were genuine issues of material fact regarding those violations that were required to be decided by the jury.  Id. at *7-8.  Plaintiff also submit a report from an expert regarding the purported PMA violations.  Id. at *8-9.

The trial court granted defendant’s motion and this appeal followed.  Without going into all of the technical details specific to this device, at the heart of the dispute was whether the use of copper in the ICD’s capacitor end terminations violated PMA requirements and whether the capacitor therefore also failed to meet PMA requirements for battery leakage and longevity.  The court’s first ruling was that plaintiff’s claimed PMA-violations were in fact not violations at all.  The court documents the undisputed testimony and affidavits of defendant’s employees that the ICD was manufactured in compliance with its PMA-requirements.  Id. at *20-21.  The court went onto examine the specifications cited by plaintiff and determined that they did not prohibit the use of copper as plaintiff claimed.  Therefore, plaintiff had not presented sufficient evidence to show that the specifications were violated.  Id. at *21-23.

Similarly with respect to the battery leakage and longevity alleged violations, the FDA approved warnings and the ICD’s limited warranty were clear that the demands of the human body may reduce the longevity of the device and that defendant did not guarantee the product would last its entire 5-year warranty period.  Id. at *27.  Further, the ICD’s reference manual, which was submitted to the FDA as part of the PMA application, “expressly used the terms, ‘projected service life’ and ‘estimate’ throughout.  Id.  So, plaintiff also lacked sufficient evidence to show a federal violation as to longevity.

Then we move to the Albrecht portion of the decision.  Plaintiff had relied on the Third Circuit’s In re Fosamax decision to argue that fact issues regarding whether defendant believed it had to comply with a certain specification was a question for the jury and therefore precluded summary judgment.  Id. at *24.  But, while the Delfino appeal was still pending, along came Albrecht.  Contrary to plaintiff’s position, Albrecht “held that issues concerning the nature and scope of FDA determinations are questions of law to be decided by a judge.”  Id. at *25.  Leading the Delfino court to hold

that the issue of whether [the specification] constituted a federal requirement is a question of law to be decided by a judge. . . . And, if [the specification] constituted a federal requirement, Medtronic would be required to follow it, regardless of its subjective belief. We, therefore, reject [plaintiff’s] contention that there are factual disputes concerning whether Medtronic believed [the specification] constituted a federal requirement with which it had to comply.

Id. at *25-26.

But the gift of Albrecht didn’t stop there.  The court also used it as a basis for excluding testimony from plaintiff’s purported FDA expert.  The expert’s report primarily consisted of legal conclusions (“the product as manufactured violated the PMA”).  But because “determining compliance with a regulation . . . is a question of law . . . [a]nd expert opinion as to a legal matter is generally inadmissible,” plaintiff’s expert was properly excluded.  Id. at *32-33.  We were hoping that Albrecht would mean limiting experts like Kessler and Parisian to testifying to judges rather than juries, but getting rid of them altogether is even better.

We know of only a couple of cases that have allowed “experts” to testify on the subject of punitive damages.  First, in the Actos litigation, the court allowed a so-called “ability to pay” expert opinion to be presented to the jury.  In re Actos (Pioglitazone) Products Liability Litigation, 2013 WL 6383104, at *5 (W.D. La. Dec. 4, 2013).  What’s that?  We can only offer the description found in the opinion:

[The expert] provided a report that describes the methodology by which economists determine how large a payment a company can make without significantly interrupting its business operations.  The report . . . discuss[es ] the two-step process that economists use to evaluate financial information and to determine whether a company has the wherewithal to make a large payout of whatever nature.  Finally, [the expert] explains how economists use financial information to determine whether or not a company will be impacted by the obligation to make a large payment.

Id. at *2 (footnotes omitted).

Then, in the Pinnacle Hip litigation, plaintiffs were twice allowed to introduce punitive damages experts.  First, in In re DePuy Orthopaedics, Inc. Pinnacle Hip Implant Products Liability Litigation, 2014 WL 3557345 (N.D. Tex. July 18, 2014), they were allowed to present expert “calculations” that opined on “the amount that Defendants could afford to pay before being adversely affected.”  Id. at *9-10.  Essentially the same thing happened two years later, in In re DePuy Orthopaedics, Inc., 2016 WL 6271474 (N.D. Tex. Jan. 5, 2016), with a different expert permitted to opine on the defendant’s “ability to run its business” despite punitive damages and “what constitutes a significant change in [defendant’s] market value.”  Id. at *9.  This expert made “calculations of figures which would not affect [defendant’s] day-to-day operations.  Id.

So, how did that work out?

Well in Actos, the jury that heard the opinion brought back a punitive damages award of $9 billion against two defendants.  In re Actos (Pioglitazone) Products Liability Litigation, 2014 WL 5461859, at *7 (W.D. La. Oct. 27, 2014).  Because the accompanying compensatory award was $1.475 million, id. at *46, the punitive damages award was blatantly unconstitutional (ratios of 5424/1 and 8136/1).  Consequently, it was reduced by over 99% to a still outrageously excessive (ratio of 25/1) $36.875 million.  Id. at *55.  The case settled on appeal, so the constitutionality of even the reduced amount was never decided.

In Pinnacle Hip, the jury in 2016 awarded $60 million in punitives.  Aoki v. DePuy Orthopaedics, Inc., 2016 WL 10828742, at *1 (N.D. Tex. July 5, 2016), reversed, 888 F.3d 753 (5th Cir. 2018) (awarding new trial for reasons unrelated to punitive damages).  That award was illegal under Texas law, which capped punitive damages.  See Tex. Civ. Prac. & Rem. Code § 41.008(b).  Thus the punitive damages award was reduced to $1.834 million – a reduction of 97%.  Aoki, 2016 WL 10828742, at *1.  Because of the Texas statute, the original award’s constitutionality did not have to be decided.  We didn’t find any further discussion of punitive damages in Pinnacle Hip in 2014, so that must have been the trial the defendants won, so the punitive damages expert never actually testified.

Based on that small sample, it seems undeniable that this kind of punitive damages-related expert testimony should never be allowed.  Its sole purpose is to induce the jury to return verdicts that are either illegal, unconstitutional, or both.  Expert testimony that causes the jury to act unlawfully cannot possibly “help the trier of fact” as required by F.R. Evid. 702(a).  Or, as the Advisory Committee pointed out, when the Rules of Evidence were first adopted:

Under Rules 701 and 702, opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time.  These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach, somewhat in the manner of the oath-helpers of an earlier day.  They also stand ready to exclude opinions phrased in terms of inadequately explored legal criteria.

1972 Advisory Committee Notes to F.R. Evid. 704.

Actos and Pinnacle Hip deviated from had previously been an virtually unanimous rule that “expert testimony on punitive damages is neither desirable nor necessary, and indeed, would invade the sacrosanct role of the jury.”  Voilas v. General Motors Corp., 73 F. Supp.2d 452, 468 (D.N.J. 1999).  Except for expert testimony limited to the amount of a defendant’s net worth, expert testimony has – quite properly – been excluded as to punitive damages.

[T]he Court finds there are no credentials that could qualify an individual as a punitive damages expert, primarily because the area of assessing punitive damages, implicative of various societal policies and lacking any basis in economics, rests strictly within the province of the jury and, thus, does not necessitate the aid of expert testimony. . . .  Under the guise of providing guidance to the jury, [the expert’s] report in effect thwarts the jury’s broad discretion by suggesting three approaches to ascertaining punitive damages and by calculating actual ranges of awards under each approach.  The Court has no reason to believe [this expert], or any other expert for that matter, is more qualified than the average juror to make a straightforward determination whether to punish [defendant] and if so, to what extent.

Id. at 464 (citation and footnote omitted).  See Lopez v. Geico Insurance Co., 2013 WL 9720887, at *2 (D.N.M. Oct. 9, 2013) (“punitive damages are entirely within the purview and ability of a jury to determine because they involve social, rather than economic concerns, and the assessment of those damages does not require any particular expertise”); Salinas v. State Farm Fire & Casualty Co., 2012 WL 5187996, at *5 (S.D. Tex. Feb. 23, 2012) (“punitive damages expert testimony “impermissible”; the “methods and calculations are merely a way to suggest a specific amount of punitive damages to the jury”); In re Welding Fume Products Liability Litigation, 2010 WL 7699456, at *49, 74 (N.D. Ohio June 4, 2010) (“an expert may not suggest the amount of an appropriate punitive damages award”: expert “may not opine that a defendant could or should pay an amount in punitive damages within a certain range”) (footnote omitted); Dering v. Service Experts Alliance LLC, 2007 WL 4299968, at *9 (N.D. Ga. Dec. 6, 2007) (“expert opinion on the amount of punitive damages is improper”; “[t]he amount of punitive damages is to be determined by the enlightened conscience of an impartial jury”); Anderson v. Boeing Co., 2005 WL 6011245, at *2 (N.D. Okla. Aug. 2, 2005) (no expert “is more qualified than the average juror to make a determination whether the proof merits punitive damages, and if so, to what extent”); Hayes v. Wal-Mart Stores, Inc., 294 F. Supp.2d 1249, 1250-51 (E.D. Okla. 2003) (testimony on amount of punitive damages that would “have no effect on the financial status of the” defendant” “would invade the province of the jury and would not be helpful”).

In prescription medical product liability litigation, other courts have excluded the type of testimony that contributed to the illegal/unconstitutional verdicts in Actos and Pinnacle Hip.  In a hormone therapy case, Lea v. Wyeth LLC, 2011 WL 13193321 (E.D. Tex. Sept. 16, 2011), the court excluded an expert’s “opinion on potential methods of measuring punitive damages.”  Id. at *1.  The testimony was both “problematic” and “prejudicial”:

The more problematic issues are whether [the expert] is qualified to proffer an opinion on potential methods of measuring punitive damages and whether that opinion will assist the jury.  [He] opines that punitive damages in this case may be measured in a manner equivalent to an SEC fine, an antitrust violation, or a $100 speeding ticket.  The SEC metric would result in a range of punitive damages between $6.4 billion and $7.1 billion, the metric for an antitrust violation would yield a range of punitive damages between $19.1 billion and $21.3 billion, and the speeding-ticket metric would yield $168 million or $1.13 billion in damages. . . .

Even if these metrics would assist the jury, which the court need not decide, the court finds that the amounts proffered are wholly prejudicial to the extent that they are listed as part of a potential range of punitive damages.

Id. at *4 (citations omitted).

The same testimony was excluded in a second hormone therapy case.  Baldonado v. Wyeth, 2012 WL 1520331 (N.D. Ill. April 30, 2012).  The same expert purported to “extrapolate” from “SEC fines, antitrust violations, and speeding fines” to arrive at the supposed “proper level.”  Id. at *3.  Didn’t happen.  The testimony itself “not proper.”  Id.  “The amount, if any, is for the jury to decide based on the facts of this case and the applicable punitive damages law.  Such expert testimony would invade the province of the jury.”  Id.

Also, in Burton v. Wyeth-Ayerst Laboratories Div., 513 F. Supp. 2d 708, 717 (N.D. Tex. 2007), a fen-phen case, the court found such testimony “wholly prejudicial.”  Neither a “suggestion of a range of jury awards” nor an “opinion on the potential economic impact of a specific punitive damage award” was admissible.  Id. at 719.  “The court cannot allow such random speculation to be presented to the jury under the guise of expert testimony.”  Id. at 717.

Thus, the general rule has always been that “punitive damages experts” are an oxymoron.  Legitimate “experts” on punitive damages do not exist, except for the limited purpose of calculating a defendant’s net worth, as the assessment of punitive damages is for the jury alone.  Yes, a couple of notorious MDLs deviated from that rule in recent years.  But the outcomes in Actos and Pinnacle Hip speak for themselves.  Those results were predictably disastrous.  Even those judges − whose mistaken decisions to allow such testimony had caused the problem in the first place − had to declare those punitive damages verdicts illegal (Pinnacle Hip) or unconstitutional (Actos).  Thus, those deviations only reinforce the correctness of the general rule that excludes “experts” on punitive damages from testifying.

Today’s guest post is by Camille L. Fletcher and Joshua Kipnees, both with Patterson Belknap.  We actually sought out this guest post, which is rare.  We first saw it on one of Patterson’s in-house firm blogs, and it was one of those rare law firm posts that did more than describe a case, offer a couple of obvious observations, and end with an invitation to “contact your [fill in name of firm] lawyer for more information.”  Rather, this post contained what we like – good, solid legal research.  Since it also covered a topic, FDA warning letters, of interest to our readers, we invited the authors to send us a version as a guest post, and they graciously agreed. So here it is.  As always our guest posters deserve 100% of the credit (and any blame) for what they write.

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Consumer class actions involving goods regulated by the Food and Drug Administration (“FDA”) coexist in parallel with FDA enforcement efforts.  Consumers have no private right of action to enforce the Food, Drug, and Cosmetics Act (“FDCA”)—the statute the FDA is charged with implementing—and attempts to use state consumer protection laws that interfere with the FDA’s regulatory regime are preempted.  Even so, private litigants often invoke FDA guidance, rules, and statements regarding labeling practices as evidence that a manufacturer’s marketing claims are—or are not—susceptible to challenge as deceptive advertising under state law.

Parties and courts in consumer class actions often rely on FDA warning letters for guidance on FDA interpretation of its rules and regulations.  FDA field offices issue warning letters to manufacturers it believes have violated the FDCA or its implementing regulations.  [Ed. note:  As discussed here, FDA warning letters are not even pre-reviewed by an FDA lawyer]  Issuance of a warning letter is not an enforcement action in and of itself; it is a predicate to the FDA’s enforcement process that affords the manufacturer a chance to comply voluntarily before action is taken.  When citing a manufacturer for advertising or labeling related-violations, the FDA will typically list in the warning letter examples of claims it identified, through its review of the manufacturer’s marketing, as improper.  Employing precatory language, the FDA advises the manufacturer that it “should take prompt action” to correct the violation, and that its failure to do so “may result” in regulatory action without further notice.  The FDA may ultimately take no further action, even if the manufacturer’s response to the warning letter is deficient; in fact, according to a 2013 analysis of the FDA’s enforcement activity, warning letters rarely precipitate further action on the FDA’s part.  See Jennifer L. Pomeranz, A Comprehensive Strategy to Overhaul FDA Authority for Misleading Food Labels, 39 Am. J.L. & Med. 617, 631-34 (2013).  Even the FDA’s own Guidelines recognize that such letters are only “informal and advisory” and “do[] not commit FDA to taking enforcement action.”  FDA Regulatory Processes Manual, § 4-1-1 (Apr. 2019).

For these reasons, courts have repeatedly held that FDA warning letters are too preliminary and informal for manufacturers to challenge in court.  See Holistic Candlers & Consumers Ass’n v. Food & Drug Administration, 664 F.3d 940, 944 (D.C. Cir. 2012); Cody Labs., Inc. v. Sebelius, 446 Fed. Appx. 964, 969 (10th Cir. 2011) (collecting cases and noting that every court to consider the question has held that an FDA warning letter does not constitute “final agency action” subject to judicial review).  [Ed. note:  see our prior posts on Holistic Candlers here and here]

But in suits between private litigants, parties often invoke FDA warning letters as bellwethers for the FDA’s stance on a particular type of labeling claim.

Several courts have found that the fact that the FDA has issued warning letters regarding the same or similar claims to support a preemption or primary jurisdiction defense, because it indicates the FDA’s intent to regulate a particular labeling practice.  E.g., Kelley v. WWF Operating Co., 2017 U.S. Dist. LEXIS 86971, *8-*18 (E.D. Cal. June 5, 2017) (finding that while positions the FDA had taken in its warning letters regarding soymilk labeling lacked coherence, the fact that FDA had issued them supported referral of the issue to the FDA on primary jurisdiction grounds); Hood v. Wholesoy & Co., 2013 U.S. Dist. LEXIS 97836, at *17 (N.D. Cal. July 12, 2013) (dismissing case on primary jurisdiction grounds because FDA issuance of warning letters and draft guidance helped to demonstrate the labeling claim at issue was “committed to the FDA’s expertise,” even though the FDA’s position was still “not settled”).  Reliance on FDA warning letters for this limited purpose is sensible and does not require giving weight to its analysis; that the FDA has chosen to speak on the issue is more germane than what it specifically has said.

On the other hand, some courts have construed statements in warning letters to reveal the FDA’s substantive position on the propriety of certain labeling claims.

For instance, in Reid v. Johnson & Johnson, 780 F.3d 952 (9th Cir. 2015), the plaintiffs alleged that the defendant had falsely labeled its vegetable oil-based buttery spread as containing “no trans fat,” when its product did contain some trans fat.  Only two years earlier, the Third Circuit—the only other US Court of Appeals to have considered the issue—had concluded, with respect to the very same product, that FDA regulations permit “no trans fat” labeling claims, even when a small amount of trans fats per serving is present; therefore, such claims were not misleading and, because they were preempted, could not be challenged as such.  Young v. Johnson & Johnson, 525 Fed. Appx. 179, 182-83 (3d Cir. 2013).

Yet the Ninth Circuit in Reid reached a different result, relying in large part on FDA warning letters issued to manufacturers not involved in the litigation for labeling their products as “no trans fats” and “trans-fat free.”  Reid, 780 F.3d at 962.  The panel regarded the FDA warning letters as “materials establishing the legal principles governing [the] case,” which it found it could consider without taking judicial notice of their contents.  Id. at n.4.  Although acknowledging that the warning letters were “informal and advisory,” the panel announced it would “defer to the FDA’s interpretation of its own rules, even if the product of an informal and non-final process, unless its interpretation is clearly erroneous.”  Id. at 962.  Accordingly, the panel reasoned, “given that the FDA has indicated in warning letters that claims like ‘No Trans Fat’ are not authorized,” the defendant could not “shield itself from liability with the FDA’s regulations.”  Id. at 967.

The Ninth Circuit recently reaffirmed Reid in Hawkins v. Kroger, 906 F.3d 763, 771 (9th Cir. 2018), holding that “0g trans fats” was interchangeable with a “no trans fats” claim, and therefore, was an unauthorized nutrient-content claim.  Despite reciting Reid’s analysis at length and opining that “Reid squarely controls here,” the Kroger panel noticeably omitted any mention of FDA warning letters addressing “no trans fat” claims and their influence on the outcome in Reid.  Id. at 771-72.

Last year, a federal judge in the Southern District of New York—the first court in the Second Circuit to address the question—followed Reid in holding that state law claims based on “no trans fat” statements were not authorized by the FDA, and thus, not preempted.  Bowling v. Johnson & Johnson, 2018 U.S. Dist. LEXIS 52142, at *4-*13 (S.D.N.Y. Mar. 28, 2018).  Unlike in Reid, the Bowling court appeared to recognize that it could only consider FDA warning letters regarding “no trans fat claims” if it could properly take judicial notice of their contents, thus implicitly rejecting Reid’s determination that the letters articulated “‘legal principles governing [the] case’” available for consideration on a motion to dismiss.  Bowling, 2018 U.S. Dist. LEXIS 52142, at *9 n.3 (quoting Reid, 780 F.3d at 962 n.4).  But despite acknowledging that, ordinarily, “’communications with the FDA are not public records of agency actions’” subject to judicial notice, the Bowling court construed the warning letters as “publicly available evidence of agency actions” and took notice of their contents.  Bowling, 2018 U.S. Dist. LEXIS 52142, at *12.  Accordingly, the court relied on these letters as “support” for its conclusion that the FDA’s “regulations do not authorize ‘no trans fat’ claims.”  Id. at *13.

It is curious that a court’s determination of the lawfulness of a manufacturer’s labeling under FDA regulations should turn on isolated FDA warning letters to other companies, which may have resulted in no actual enforcement action.  Indeed, given courts’ recognition that warning letters merely contain “conclusions by subordinate officials of the FDA” and that the positions taken in such letters may subsequently be revoked or modified through the administrative process, there is little justification to imbue them with the force of law – much less as “governing” legal principles that dictate the interpretations of FDA rule on a motion to dismiss.  Biotics Research Corp. v. Heller, 710 F.2d 1375, 1378 (9th Cir. 1983).  And it is a particularly unfair result that manufacturers should be bound by the contents of warning letters when they are simultaneously told such letters are too informal to challenge in court.

Judicial reliance on FDA statements in warning letters is far from universal, and several courts, unlike Reid and Bowling, have declined to infer a labeling claim is unlawful merely because it has been identified in a warning letter.  See Caudill Seed & Warehouse Co. v. Jarrow Formulas, Inc., 2017 U.S. Dist. LEXIS 160827, at *29-*33 (W.D. Ky. Sep. 29, 2017) (finding that the FDA warning letter was not entitled to deference because it was “informal and advisory and not a final statement of an agency as to legality”); Craig v. Twining N. Am., 2015 U.S. Dist. LEXIS 14839, at *17-*19 (W.D. Ark. Feb. 5, 2015) (declining to defer to FDA’s statements in warning letter issued to different manufacturer regarding similar claim because, in part, warning letters “do not mark the consummation of the FDA’s decision making”); Gitson v. Trader Joe’s Co., 2013 U.S. Dist. LEXIS 144917, at *23-*24 (N.D. Cal. Oct. 4, 2013) (finding that plaintiffs “place too much reliance on the FDA warning letters” as evidence that soymilk labeling statement is false and misleading and “simply do not bear weight” on whether a reasonable consumer would be deceived).  [Ed. note:  see our own (less current) case list, here]  This approach, in our view, more faithfully corresponds with the limited role and significance of warning letters in the FDA’s enforcement process.   According only minimal weight to such letters, commensurate with their purpose as informal advisory tools, not only removes a thumb on the scale against manufacturers in class actions, it also shows due regard for the FDA’s jurisdiction and rulemaking process by declining to attribute to the FDA a formal position it did not necessarily intend to assume.  The FDA should be taken at its word that it considers its letters to be “informal and advisory,” and nothing more.

It is a fairly common situation.  A company is facing an issue that someone thinks the board of directors ought to know about, so general counsel retains outside counsel to provide advice.  Maybe outside counsel prepares a memo.  Maybe he or she appears at a board meeting to give a presentation with others from the company.  Later on, someone asks for those materials—the memorandum and the presentation, as recorded in meeting minutes or PowerPoint slides.

Are the presentation to the board and related materials protected by the attorney-client privilege or the attorney work product doctrine, or both?

The answer is probably both, but it is not automatic.  A recent order in the Birmingham Hip Resurfacing MDL is worth a read on these points because it lays out the rules and correctly found that such documents were protected.  The documents at issue were (1) a 62-page document prepared for the board regarding “current and anticipated litigation issues” (the “Briefing Document”); (2) minutes from three board meetings that “reflect legal presentations” by the company’s Chief Legal Officer and “summarize a presentation . . . related to the Briefing Document”; and (3) multiple copies a “PowerPoint summary of certain aspects of the Briefing Document.”  In re Smith & Nephew Birmingham Hip Resurfacing Hip Implant Prods. Liab. Litig., No. 1:17-md-2775, 2019 U.S. Dist. LEXIS 91795, at *26-*28 (D. Md. May 31, 2019).

We put the description of these documents largely in quotes because, in describing the documents in the way that it did, the district court tipped its hand.  Sure, there were three sets of documents at issue, but as the district court saw them, the meeting minutes and PowerPoint slides were derived from (“summarized”) the Briefing Document, which itself related to “current and anticipated litigation issues.”  Id.  When reading the Background section of the order, it is not difficult to predict that the district court will find the documents protected and not discoverable.

And, the district court delivered.  We start with the ground rules.  The work product doctrine—called a “privilege” in some places and “protection” in others—means what it says.  It protects an attorney’s work in preparation for litigation, lest one side gain an unfair advantage by appropriating the results of the other side’s efforts:

“The work-product privilege protects from discovery ‘an attorney’s work done in preparation for litigation.’”  In re Grand Jury Subpoena, 870 F.3d 312, 316 (4th Cir. 2017) . . . .  The protection extends to both “‘fact’ work product and ‘opinion’ work product,” though opinion work product is afforded “greater protection” than fact work product, Grand Jury Subpoena, 870 F.3d at 316.  Opinion work product “represents the actual thoughts and impressions of the attorney,” and “can be discovered only in very rare and extraordinary circumstances.”  Id. (citing In re John Doe, 662 F.2d 1073, 1080 (4th Cir. 1981)).  Fact work product, on the other hand, “is a transaction of the factual events involved and may be obtained upon a mere showing of both a substantial need and an inability to secure the substantial equivalent of the materials by alternate means without undue hardship.”

Id. at *28-*29 (some citations omitted).  The attorney-client privilege is different from work product mainly because it protects attorney-client communications, but it often overlaps.  The district court in Birmingham Hip applied the “classic test” for attorney-client privilege:

The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.

Id. at *29-*30 (citations omitted).

Applying these rules, the district court concluded that all the documents were privileged and protected by the work product doctrine, and it found that neither protection was waived.  With regard to the Briefing Document, outside counsel spearheaded the creation of the document, and the document’s “primary aim” was to give legal advice to the board of directors.  We again are using quotes around “primary aim” because the characterization of the document is important.  The memo included factual material.  Most memos do, or else they would be little more than mini-treatises.  The point is that including facts in legal communications does not negate the privilege.

As the district court observed, “The factual information informs the legal strategy and was likely compiled in order to assist in the provision of legal advice and to provide context to facilitate the Board of Director’s understanding of the legal advice.”  Id. at *31.  Thus, because the “primary purpose” was to provide legal advice, the Briefing Document was privileged; and because it set forth a litigation strategy for both pending and anticipated litigation, it was work product, too.  Id. at *31-*32.

The district court applied similar analyses to the meeting minutes and PowerPoint presentations.  The PowerPoint slides similarly were “developed to facilitate the presentation of the Briefing Document to the Board,” and the minutes summarized the presentation and detailed the status of litigation.  Id. at *32-*33.

The documents therefore were protected, and defendant did not waive any privilege or protection by inadvertently producing copies of the slides or by sharing the slides with a non-lawyer consultant.  Here, the district court followed Federal Rule of Evidence 502(b), which states that disclosure does not operate as a waiver if (1) the disclosure is inadvertent, (2) the holder of the privilege or protection took reasonable steps to prevent disclosure, and (3) the holder promptly took reasonable steps to rectify the error.  Id. at *34-*35.

The parties did not dispute that the disclosure was inadvertent, and the defendant had retained a document vendor, who “implemented quality control measures to safeguard against the inadvertent disclosure of documents,” including training and a second-level review.  Id. at *35-*36.  This might be the takeaway of this order—that quality control in document production is important as a general matter, but also specifically to make a Rule 502(b) showing in the event you need to.  The district court’s finding that the defendant “promptly clawed the documents back” closed the “no waiver” loop.  Finally, sharing the PowerPoint slides with a consultant did not operate as a waiver because the consultant was retained to assist with a presentation to the FDA and thus had a common interest.  Id. at *35-*37.

The order lays out the law well and applies it correctly.  We recommend it.

Missouri courts keep showing us surprisingly good things on the personal jurisdiction front. In Mitchell v. DePuy Orthopaedics, Inc., 2019 U.S. Dist. LEXIS 92621 (W.D. Missouri June 3, 2019), the plaintiff twice had a knee replacement implant while she lived in Kansas, then sued in Missouri, claiming that, after she moved there, that is where she suffered injuries and where she sought treatment for her injuries. She alleged negligence, strict liability, breach of warranty, misrepresentation, fraud — all based on the defendants’ design, license, manufacture, distribution, sale, and marketing of the medical devices. The defendants moved to dismiss for lack of personal jurisdiction, contending that all of the plaintiff’s claims arose out of events that took place in Kansas, not Missouri.

If any of this sounds familiar, it should. Less than a month ago we reported on another Missouri case where the plaintiff had moved in from out of state. And if it occurs to you that this is two days in a row of personal jurisdiction cases – well, congrats, you are one of our truly loyal and attentive readers.

The plaintiff in Mitchell conceded that the Missouri court lacked general jurisdiction over the defendants, but argued that specific jurisdiction existed because the plaintiff suffered injuries in Missouri, plus the defendants did plenty of marketing and selling of knee replacements in Missouri. The first point isn’t wholly silly (though it still loses), but the second one is, at least for anyone who has kept up with specific jurisdiction case law over the last five years.

The Mitchell court began by reciting the Int’l Shoe “minimum contacts” and Burger King “purposeful directing activities toward forum residents” standards. Those old standards take one only so far. But the Mitchell court also invoked a couple of more recent tests that end up deciding this case:

1. In Walden v. Fiore, 571 U.S. 277 (2014), SCOTUS held that contacts “that the defendant himself creates with the forum State serve as a basis for jurisdiction, … but contacts formed by the mere unilateral activity of those who claim some relationship with a non-resident do not.”

2. In Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (207), SCOTUS held that specific jurisdiction does not exist when the defendant’s contacts with the forum lack a connection to “the specific claims at issue.”

Armed with these precedents, the Mitchell court held that the plaintiff’s move to neighboring Missouri did not create specific personal jurisdiction. Those were the unilateral acts of the plaintiff. The defendant’s Missouri registration, advertising, and product sales were irrelevant because they bore no relationship to plaintiff’s injuries. Moreover, the plaintiff never saw the claimed advertising.

The plaintiff endeavored to evade the recently clarified specific jurisdiction doctrine by arguing that a “short drive” across a state border “should not preclude jurisdiction because, given defendants’ contacts in Missouri,” the plaintiff’s claim “could just as easily have arisen out of defendants’ activities in Missouri, rather than Kansas.” That is not a principle; it is a whine. The Mitchell court pointed out that under the plaintiff’s ‘logic,’ a national company could be sued by any resident of any state in any state. That would not only be a world without the Walden and Bristol-Myers cases, it would be a world without fair play and due process. Accordingly, the court transferred the action to Kansas. (That was the the plaintiff’s suggested alternative to flat-out dismissal, and the defendants did not oppose it.)

That is good news for the defendant, because the law in Kansas is more defense-friendly, and some would say the same about the judges and juries. It is actually good news for everyone, because as good as the barbecue is in Kansas City, Missouri, there is a place just a “short drive” to the other side of the river that is even better.

Personal jurisdiction being a key issue for us here at DDL Blog, we’ve talked a lot about the “minimum contacts” needed to establish jurisdiction over an out-of-state defendant.  Not many cases, however, analyze the two specific jurisdictional tests for minimum contacts.  That’s likely because in most cases, it doesn’t make a difference whether you use the “but for” or the “proximate cause” test.  Except when it does.

Lynch v. Olympus America, Inc., 2019 WL 2372841 (D. Col. Jun. 5, 2019) is such an exception.  The court was ruling on the Japanese defendant’s motion to dismiss for lack of personal jurisdiction and all defendants’ motions to dismiss for failure to state a claim.  This is the second go-round on these motions.  The first set of motions on the original complaint were granted seven months ago, with leave to amend.  Following the filing of an amended complaint and some limited jurisdictional discovery, defendants renewed their motions and this time they were denied.

Plaintiff underwent an endoscopy for which her doctor used defendants’ scope.  Following surgery, plaintiff developed an infection.  She alleges the scope was defective because as designed it could not be cleaned properly to eliminate contaminates from prior procedures.  Id. at *1.  The amended complaint also now alleges that (i) Olympus Medical, the Japanese defendant, had contact with a Colorado doctor who served as an evaluator of defendant’s prototype devices, (ii) plaintiff’s doctor was invited to and visited Olympus Medical in Japan, (iii) Olympus Medical’s representatives traveled from Japan to Colorado and met with plaintiff’s doctor and others to “enhance the doctors’ loyalty” and “boost sales,” and (iv) an Olympus Medical employee attended a seminar in Colorado where its products were demonstrated.  Id. at *6.

The personal jurisdiction question before the court was whether those allegations satisfied the minimum contacts requirements – did they demonstrate that the defendant “purposefully directed its activities at residents of the forum state” and did “the plaintiff’s injuries [ ] arise out of the defendant’s forum-related activities.”  Id. at *6.  The allegations show activities directed to Colorado residents.  At issue was “whether those contacts are adequately related to the claims at issue, whether [p]laintiff’s injuries arose from those contacts.”  Id. at *7.  There are two different tests that courts use when faced with this issue.  “Proximate cause” is the more stringent of the two tests requiring a plaintiff to establish both cause in fact (“but for” cause) and legal cause – that the defendant’s contacts with the state “gave birth to the cause of action.”  Id.  “The proximate cause test is just what it sounds like – a requirement that defendant’s contacts with the forum are the proximate cause of the resulting harm.  Id. at *7.  Where the “but for” test only requires a showing that “but for defendant’s contacts with the forum, plaintiff would have suffered the injury at issue.”  Id. at *6.  “[A]ny event in the causal chain leading to the plaintiff’s injury is sufficiently related to the claim to support the exercise of specific jurisdiction.”  Id. at *8.

In addressing what test to use for this analysis, the Tenth Circuit specifically left the question open, finding that in the cases before it it was unnecessary to decide the issue.  Id. at * 6.  Not so for the Lynch court.  Starting with proximate cause, the court applied the facts (as alleged).  Of the four “contacts” enumerated above, the court found that item (ii) was not to be considered for personal jurisdiction because traveling to Japan was an “out of state” contact.  The contact must be with the forum itself, not with people who reside there.  Id. at *8.  With respect to the rest of the in-state contacts, none were tied to the alleged design defect at issue in the case.  Therefore, plaintiff’s injury did not arise out of Olympus Medical’s contacts with Colorado and personal jurisdiction could not be found under the proximate cause test.  Id.

But, the “but for” test is “significantly less demanding.”  Id.

The less restrictive but-for standard permits the court to focus not on the issue of whether Olympus Medical’s Colorado contacts were proximately related to the challenged design of the scope, but rather on the issue of whether Olympus Medical’s actions directed at Colorado were for the purposes of developing and promoting the use [of the scope] by physicians and patients in Colorado.

Id.  The court found plaintiff’s allegations sufficient to demonstrate that Olympus Medical’s contacts with Colorado were for the purposes of promoting its devices, including the one at issue, and “cultivating the relationship” with doctors, including plaintiff’s own physician.  Id. at *9.  That showing was sufficient to satisfy the “but for” test and establish personal jurisdiction.

Interestingly, the court never directly decides which test should be applied.  Instead, it concludes that because “there are sufficient minimum contacts to support personal jurisdiction under at least one of the available tests,” that is enough.  Id. at *10 (emphasis added).  But isn’t that like starting with the answer you want – sufficient contacts – and working backwards to find the question that gets you there?  Or, doesn’t it simply negate the proximate cause test?  If failing the harder test and passing the easier test means you pass – why use the harder test at all?  And it’s not like if you fail “but for” you are somehow going to pass “proximate cause.”  We don’t see Lynch as really clearing up the fundamental question of which test should be applied.

After resolving the minimum contacts question, the court did go on to address “fair play and substantial justice.”  Defendant argued that the burden Olympus Medical would face litigating in Colorado offended those concepts.  Id. at *10.  But the most significant burden the court identified was the expense of translating documents – and that’s a burden for plaintiff, not defendant.  Id. at *12.  So, that’s a little silver lining for defendants.  If you’re interested in more on translation burden, see our post here.

As we mentioned earlier in this post, all of defendants’ substantive motions were also denied.  The amended complaint states claims for design defect, warning defect, fraud and misrepresentation.  Id. at *11-18.  We won’t belabor those rulings here.  But we do note that the court applied the learned intermediary rule to medical devices.  Id. at *14.  And, in dictum, suggested that Colorado’s heeding presumption may not apply to medical devices.  Id. at *18n.7.

Bexis vividly remembers how he first learned of 21 U.S.C. §337(a).  It was early 1995, and he had just joined the Danek Medical legal team in the early going of the Orthopedic Bone Screw MDL.  The plaintiffs’ complaints went on and on about “negligence per se” and purported violations of the FDCA.  Bexis figured that he better learn all he could about negligence per se as fast as he could.  He had already (since 1987) been churning out internal monthly memos to the firm product liability group about new developments in Pennsylvania personal injury law, and some of those cases involved negligence per se.  So he searched for the term.  That produced a couple of intriguing (and then relatively recent) OSHA cases, Ries v. National Railroad. Passenger Corp., 960 F.2d 1156 (3d Cir. 1992), and Rolick v. Collins Pine Co., 975 F.2d 1009 (3d Cir. 1992) – and Third Circuit law governed where the just-being-established Orthopedic Bone Screw MDL was situated.

OSHA has a provision, 29 U.S.C. §653(b)(4), that provided, in relevant part “Nothing in this chapter shall be construed . . . to enlarge or diminish or affect in any other manner the common law. . . .”  Both Rolick and Ries had held that that provision meant that “a violation of an OSHA regulation could not constitute negligence per se.”  Rolick, 975 F.2d 1015 (quoting Ries, 960 F.2d at 1165.  That seemed pretty good, so Bexis pulled out the maroon colored statute book that contained the FDCA and read it from beginning to end, looking for anything analogous that he could argue did the same for tort claims based on the FDCA.  He found §337(a), which provides:  “all such proceedings for the enforcement, or to restrain violations, of this chapter [the FDCA] shall be by and in the name of the United States.”

That seemed pretty good, even better than the OSHA language in some respects.  There wasn’t much law, and nothing in the product liability field, but it was “run whatcha brung.”  With plaintiffs trying to create new causes of action, it was up to our side to create new defenses.  So Bexis ran (some would say amok) with §337(a) throughout the Bone Screw MDL litigation – eventually all the way to the Supreme Court where, in a Bone Screw appeal, the Supreme Court agreed.  “The FDCA leaves no doubt that it is the Federal Government rather than private litigants who are authorized to file suit for noncompliance with the medical device provisions.”  Buckman Co. v. Plaintiffs Legal Committee, 531 U.S. 341, 349 n.4 (2001) (quoting §337(a)).

That, in a nutshell, is how Buckman came to be.

And Buckman (and §337(a)) is the gift that keeps on giving, most recently in Amarin Pharma, Inc. v. International Trade Comm’n, 923 F.3d 959 (Fed. Cir. 2019).  Yes, that’s the same Amarin.  Amarin v. ITC, involved completely different claims concerning the same drug, Vascepa, that several years ago produced the landmark First Amendment decision in Amarin Pharma, Inc. v. FDA, 119 F. Supp.3d 196 (S.D.N.Y. 2015).  This time Amarin asserted Lanham Act claims that competing products containing the same active ingredient were “deceptively” labeled and advertised as “dietary supplements” when they were really illegal “new drugs” that had never received proper FDA approval.  923 F.3d at 961-62.  It filed a statutory action (under the Tariff Act of 1930) with the International Trade Commission, seeking to bar importation of those “supplements.”  Id. at 961.

The FDA, however, had reached no such conclusion, and let the ITC know about it:

[T]he FDA submitted a letter urging the Commission not to institute an investigation and instead to dismiss Amarin’s complaint.  In the FDA’s view, the FDCA prohibits private enforcement actions, including unfair trade practice claims that seek to enforce the FDCA.

Id. at 962 (record cites omitted).  The ITC agreed with the FDA, “declining to institute an investigation and dismissing the complaint.”  Id.  Amarin appealed.

Amarin’s main argument was that a more recent Supreme Court decision, POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014), which we blogged about here and here, meant that §337(a) was a dead letter in the Lanham Act context and that it could therefore challenge the FDA classifications of products – here, dietary supplement versus prescription drug – in a private action.  Once again, the FDA intervened, filing an amicus brief through the Department of Justice in Amarin v. ITC.  The FDA liked Buckman and §337(a) in a big way:

“The FDCA leaves no doubt that it is the Federal Government rather than private litigants who are authorized to file suit for noncompliance with” the FDCA.  Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 349 n.4 (2001).  Private parties are expressly prohibited from bringing “proceedings for the enforcement, or to restrain violations, of ” the FDCA.  21 U.S.C. §337(a).  Yet that is precisely what Amarin seeks to do here. Amarin’s claims, though nominally brought under the Tariff Act, attempt to enforce or restrain violations of the FDCA because they seek − as a necessary component of the stated cause of action − to prove FDCA violations and compel obedience to the FDCA through the remedies provided by that statute. For that reason, the International Trade Commission correctly concluded that Amarin’s claims are precluded by the FDCA.

Amarin v. ITC, FDA amicus brief at 1 (now also available at 2018 WL 8459460).

And again:

The FDCA prohibits private proceedings “for the enforcement, or to restrain violations, of” that statute.  21 U.S.C. §337(a).  The FDCA instead commits enforcement exclusively to the federal government to ensure that complex enforcement decisions are made with the benefit of FDA’s scientific and regulatory expertise.  As a consequence, private parties . . . may not initiate proceedings in a court or administrative agency to remedy alleged violations of the FDCA.  Nor can private parties circumvent that prohibition by wrapping their FDCA enforcement claims inside some other cause of action.  The FDCA prohibits “all” private proceedings to enforce or restrain violations of the FDCA, id., including private claims that are nominally brought under another statute but seek to prove violations of the FDCA.

Id., FDA amicus brief at 7 (emphasis original).

There’s still more:

Centralizing FDCA enforcement authority within FDA ensures that FDA’s expertise will inform often-difficult factual and legal determinations, such as which requirements apply to particular articles and whether an article is being distributed in violation of the FDCA.  It also ensures that discretionary determinations − like whether enforcement measures should be pursued for a violation, and if so, which remedies are appropriate − will be made by policymakers, not private parties.  And it promotes uniformity. . . .  Congress deliberately chose to centralize within FDA the crucial decision whether to seek to prove and redress alleged violations of the FDCA.  Doing so maximizes the benefits of centralized enforcement.

The FDCA’s prohibition on private “proceedings for the enforcement, or to restrain violations, of” the Act, 21 U.S.C. §337(a), means that private parties may not bring suit under the FDCA itself to remedy what they allege to be violations of the Act.  It also means that private parties may not circumvent this straightforward prohibition by invoking some other cause of action, under another federal statute, in order to bring what is, at bottom, still an action “for the enforcement” or “to restrain violations” of the FDCA. See Buckman, 531 U.S. at 353 (preempting state fraud claims that “exist solely by virtue of the FDCA”).

Id., FDA amicus brief at 9-10 (other citations omitted) (emphasis original).  We particularly like these last two quotes because the twice-emphasized “other” places the government on record squarely on the defense side of the ledger with respect to the “Buckman is nothing more than fraud on the FDA” rationale of a Second Circuit panel back in Desiano v. Warner-Lambert & Co., 467 F.3d 85 (2d Cir. 2006), aff’d by equally divided court, 552 U.S. 440 (2008).

So, almost as much as we liked Amarin winning on the First Amendment, we were rooting against it in Amarin v. ITC.  And that’s what happened.  Private FDCA enforcement – under the Lanham Act or anywhere else – took it on the chin.  As a matter of law, a complaint about the FDA’s failure to act could not be “unfair competition” under either the Tariff Act, the Lanham Act, or seemingly anything else.

First, as the Supreme Court recognized in the aforesaid POM Wonderful decision, “The FDCA provides the United States with ‘nearly exclusive enforcement authority.’”  Amarin v. ITC, 923 F.3d at 966 (quoting POM Wonderful, 573 U.S. at 109).  Under both Buckman and POM Wonderful, “[p]rivate parties may not bring suits to enforce the FDCA.  Id.  Amarin v. ITC discussed various decisions that had examined the relationship between the Lanham Act and the FDCA, particularly PhotoMedex, Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010); Alpharma, Inc. v. Pennfield Oil Co., 411 F.3d 934 (8th Cir. 2005), and Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222 (3d Cir. 1990).  Analyzing them, and POM Wonderful, Amarin v. ITC concluded:

[T]he FDA has not provided guidance as to whether the products at issue in this case should be considered “new drugs” that require approval.  Given this lack of guidance . . .  a complainant fails to state a cognizable claim under §337 where that claim is based on proving violations of the FDCA and where the FDA has not taken the position that the articles at issue do, indeed, violate the FDCA. Such claims are precluded by the FDCA.

923 F.3d at 968.  Only if the FDA concluded that the products in question violated the FDCA, could the plaintiff go back to the ITC.  Id. (“Amarin is free to file a new complaint once the FDA issues sufficient guidance with respect to the accused products such that the Commission is not required to interpret the FDCA in the first instance”).  The court thus did not reach the amicus position of the United States (discussed above) that “that all such claims are precluded regardless of whether the FDA has provided guidance.”  Id. (emphasis original).

But having the government on record is a good thing.

In the final holding of significance to blog readers, the court held that POM Wonderful did not expand the traditional role of the Lanham Act with respect to FDCA matters.  Nothing in the Supreme Court’s decision authorized private plaintiffs to usurp the role of the FDA in deciding, in the first instance, whether any given conduct violated the FDCA:

[Plaintiff] views POM Wonderful as rejecting the view that the FDCA precludes Lanham Act claims.  But this reads POM Wonderful too broadly.  Although POM Wonderful held that the FDCA does not categorically preclude a Lanham Act claim . . ., the court did not open the door to Lanham Act claims that are based on proving FDCA violations.  The allegations underlying the Lanham Act claim in POM Wonderful did not require proving a violation of the FDCA itself.  This stands in stark contrast to the allegations in our case, which are based solely on alleged violations of the FDCA’s requirements.

923 F.3d at 969 (POM Wonderful citations omitted).  By the way, there was a dissent in Amarin v. ITC, but only on an issue of appealability, and the dissent did not address the substantive rationale discussed this post.

Thus, Amarin v. ITC is helpful to our side in at least two ways.  First, definitively rejects post-POM Wonderful attempts to pursue new FDCA violations that the FDA has not found, relying on a strong reading of Buckman and §337(a).  Second, the litigation has resulted in a useful explication of the FDA’s current views regarding private FDCA enforcement, which turns out to be at least as strong as anything that the Court held in Buckman itself – and utterly inconsistent with plaintiff-side attempts to hide attacks upon the sufficiency of submissions to the FDA behind the smokescreen of some “other” cause of action.  Particularly given the Supreme Court’s recent comments in Albrecht, 2019 WL 2166393, at *7, about the FDA being “fully informed,” it is a very good thing to have another decision like Amarin v. ITC on the books for the proposition that whether the FDA is fully informed about any particular matter is something for the FDA to decide in the first instance.

Our days of the week are mostly named based on Norse mythology, but our months are firmly Roman. May is named after the deity Maia, whose Roman version was honored for her role in the growth of plants. Her cousin Juno, the queen of the Roman gods, gave us the name for June. In their rituals, the Romans offered up a variety of burnt animals depending on the time of year, deity being honored, and purpose of the offering. Maia might get a pregnant sow consigned to flames, while Juno might get a bull. The growth of greenery in our area and our more controlled use of flames over the last month made us think of these rituals. (Not really, but play along.) The Romans did not eat their sacrifices. Nor did they sacrifice turkeys. They definitely did not slow cook a turkey over smoking embers.

So, what is with the convoluted intro here? Well, the day after last Thanksgiving, we wrote a post that predictably talked about leftover turkey. The case, Cantwell, involved the attempt to plead a claim under Oklahoma law for per se negligence based on an alleged violation of FDA law or regulation in connection with the alleged off-label use of the PMA device at issue. The turkey was the Oklahoma Supreme Court’s decision in Howard that endorsed such a claim in the abstract. When the Cantwell court held that plaintiffs had not come close to pleading the elements of such a claim, it gave the plaintiffs a chance to cure with an amended complaint. We predicted “plaintiffs will try again. If they do, then we would not be surprised if Justice Gorsuch’s former colleagues on the Tenth Circuit get another chance to weigh in on express preemption with a re-heated version of Howard.” About six months later, plaintiffs tried again and we are back with Cantwell and its fowl history. Cantwell v. De La Garza, No. CIV-18-272-D, 2019 WL 2166541 (W.D. Okla. May 17, 2019).

Plaintiffs’ amended complaint re-urged constructive fraud and negligence per se with minor changes and added claims for lack of informed consent and breach of implied warranty. Constructive fraud fell for the same reasons it did before, the manufacturer had no duty to obtain informed consent with a prescription medical device, and plaintiff failed to alleged facts establishing an implied warranty was made.

That leaves us with the re-packaged negligence per se claim. Anticipating the express preemption issue that had not been addressed as to the prior complaint, plaintiffs argued that fifteen paragraphs of the current complaint “are very clear with respect to the protection provided to a consumer of a medical device and the parallel state law enactments applicable to this cause of action.” Id. at *2 (emphasis added). Those paragraphs now included references to the Oklahoma Public Health Code, including its provisions prohibiting the adulteration and/or misbranding of drugs and devices. Id. & n.4. They also alleged that the device was designed and marketed for a specific use different than how it was approved and labeled, citing parts of the FDCA and unspecified “parallel state laws.” Id.

Regarding Ulrich’s conduct in relation to these statutes, Plaintiff alleges only that “Ulrich’s violations during FDA’s premarket approval process and subsequent misrepresentation of its product in advertisements and to its patients constitutes [sic] violations of the abovementioned Federal and State laws, regulations and statutes.”

Id. We threw that in a block quote mostly to point out that a court calling you out with a “[sic]” is often not a favorable sign on how it will rule.

While Plaintiffs were required to identify the particular statute or regulation violated to allow for evaluation of express preemption, “federal statues cited in the Amended Complaint encompass multiple subject areas and broad categories of conduct (21 U.S.C. § 331) and mandate the process for premarket approval of certain medical devices (21 U.S.C. § 360e).” Id. Plaintiffs also argued that the manufacturer “manipulated the preapproval process,” while disclaiming that she was pursuing a claim based on fraud on FDA. Id. Thus, the court could not identify from the amended complaint the statute or regulation alleged breached by the alleged misconduct of “designing and marketing its device for an off-label use.” Id. at *3. In attempting to avoid express preemption under the FDCA and implied preemption under Buckman—they stated “federal law does not supply any elements of the claim” and disclaimed “attempt[ing] to enforce any FDA regulation”—plaintiffs were left with nothing supporting a “plausible claim of negligence per se.” Id.

Thus, the court smoked plaintiffs’ claims against the manufacturer and dismissed them with prejudice. Preemption, while providing the indirect heat here, was not directly decided. So, while we would like to claim prescience in November’s augury, it does not look like that issue will be before the Tenth Circuit should plaintiffs pursue a bird-brained appeal.