It seems that we have posted hundreds of times about attempts to impose liability on the manufacturer of a PMA device that a doctor chose to use off-label.  Recently, a bunch of those have involved Infuse.  Cales v. Baptist Healthcare Sys., Inc., No. 2015-CA-001103-MR, 2017 Ky. App. LEXIS 10 (Ky. Ct. App. Jan. 13, 2017), involves claims against a hospital over alleged off-label use of Infuse by a doctor there.  (The decision gives no indication of a specific alleged injury from the use.)  Why sue the hospital?  Maybe to keep the case against the manufacturer in state court.  Maybe to pursue someone else when the claims against the manufacturer are preempted.  The problem for the plaintiff is that she needs a viable claim against the hospital, at least something that can get by a motion to dismiss.  She offered three claims (two product liability and one medical negligence) premised on the hospital’s alleged knowledge of the possibility of off-label use, and the trial court dismissed them all.

Unfortunately for the hospital, the Kentucky Court of Appeals reversed as to one of the claims.  Product liability claims against the manufacturer of this PMA device have, as the court noted, “been mostly unsuccessful based on federal pre-emption.” Id. at *10.  Plaintiff claimed that preemption does not apply to such claims when made against a healthcare provider.  “This distinction is of no avail.” Id. at *11.  As the court analyzed it, consistent with the majority position, express preemption for PMA devices is based on the device, not how it is used or who uses it.  It stands to reason that strict liability product liability claims about the design and warnings of a PMA device are expressly preempted too.  This may seem obvious, but we think it is the first ruling of its kind in favor of a hospital.  That may be because strict liability claims against hospitals are generally unavailable.

Framing those claims as negligence does not help under the Kentucky Product Liability Act.  Among other things, a distributor or “middleman” is not liable simply based on knowing that there may be off-label use, which is not the same thing as knowing the product is in a defective condition.

Medical negligence predicated on the hospital not telling the plaintiff that her doctor planned to use the device off-label is neither preempted by the MDA—FDA does not regulate the practice of medicine—nor covered by the Kentucky Product Liability Act.  Kentucky law imposes a duty on hospitals to obtain informed consent from patients in connection with procedures to be performed.  In essence, the consent process is supposed to inform the patient of the “procedure[,] acceptable alternative procedures or treatments and substantial risks and hazards inherent in the proposed treatment or procedures.”  In the context of a motion to dismiss, the Cales appellate court viewed that whether there was a need to inform a patient of off-label us was a question of fact to be addressed as the case progresses and resurrected the medical negligence claim.  Not having the complaint in front of us, it is hard to say if there was any allegation of failing to inform the plaintiff of inherent substantial risks and hazards, it is hard to say whether this was a correct result.  We can say, however, as the court acknowledged in its discussion of the product liability claims, that off-label use does not necessarily involve excess risks compared to on-label use.  It may be possible to meet the state law requirements for proper consent without ever mentioning the loaded term “off-label.”  That is why other courts have held that there is no duty to warn of that a planned treatment is off-label.

The United States Supreme Court today granted certiorari in Bristol-Myers Squibb Co. v. Superior Court.  Here is a link to the order.  The California Supreme Court decision in this case was our worst case for all of 2016.  Here is our description of what the Supreme Court has just agreed to review:

Bristol-Myers-Squibb v. Superior Court, 377 P.3d 874 (Cal. 2016). Ultimately (and fortunately) there was not much contest for the worst drug/device product liability decision of the year.  The highest court of the largest state in the country – check.  Direct defiance of United States Supreme Court precedent on a significant constitutional issue – check.  Significant impact on the litigation of mass torts – check.  In Bauman, the Supreme Court condemned “exorbitant exercises” of general jurisdiction that do not “permit out-of-state defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.”  Such “unacceptably grasping” “[e]xercises of personal jurisdiction [are] so exorbitant” that they “are barred by due process.”  The paradigm of such overly “grasping” jurisdiction is that which “would presumably be available in every other State in which a [defendant’s] sales are sizable.”  So the California Supreme Court promptly fashions a theory of “specific” jurisdiction that allows masses of plaintiffs, anywhere in the country, to sue a drug company (and presumably any other large corporation), as long as one Californian (or, here, 86 of 678) is suing over the same conduct.  The reason?  Because the defendant does significant general business in California.  If your reaction is that BMS simply shifted the pre-Bauman “continuous and substantial” jurisdiction standard from general jurisdiction to specific jurisdiction, you would be right.  We haven’t seen such blatant defiance of Supreme Court precedent in our bailiwick since the First Circuit in Bartlett (2012-1), and that one headed up our bottom ten, too.  Here’s hoping for a similar result in the Supreme Court.  We chronicled California sliding to the bottom of the slippery slope here and here.

If our side wins this, then we’ll see a significant reduction in both the size and reach of litigation in all those places where we don’t want to be. We’ll be following this closely.

We’re pretty familiar with most diversity-based removal techniques, so when we see something unusual, we sit up and take notice (as we did with removal before service) – then we blog about it.  Today’s case is Bahalim v. Ferring Pharmaceuticals, Inc., 2017 WL 118418 (N.D. Ill. Jan. 12, 2017).  The unusual aspect of Bahalim is the target of the defendant’s successful fraudulent joinder argument.  As discussed in the opinion, the parties in Bahalim are completely diverse.  Id. at *1.  However, the case would ordinarily be stuck in state court due to the “forum defendant” rule – that even a diverse case isn’t removable where the plaintiff sues the defendant in the defendant’s home state court. Id. at *2.

[T]he forum defendant rule disallows federal removal premised on diversity in cases where the primary rationale for diversity jurisdiction − to protect defendants against presumed bias of local courts − is not a concern because at least one defendant is a citizen of the forum state.

Id. (quoting Morris v. Nuzzo, 718 F.3d 660, 665 (7th Cir. 2013)).

The manufacturer defendant removed anyway, and asserted that the so-called “forum defendant” was fraudulently joined.  Predictably, the plaintiffs claimed that fraudulent joinder couldn’t be used to dismiss a forum defendant.  The defendant responded that it was proper to use fraudulent joinder against a forum defendant because the purposes of the forum defendant rule were not served where a sham forum defendant was sued to keep an out-of-state defendant in state court.

The Seventh Circuit had punted on this question in Morris, but had identified the relevant “policy interests for courts to balance.” Bahalim, 2017 WL 118418, at *3.  They are:

(1) the plaintiff’s right to select the forum and the general interest in confining federal jurisdiction to its appropriate limits, versus (2) the defendant’s statutory right of removal and guarding against abusive pleading practices.

Id.  As to the first, Bahalim held, “improperly joining a forum defendant also lessens a plaintiff’s choice of forum.”  Id.  Any “deference” to the plaintiffs’ choice of forum here was further “weakened” by their being litigation tourists looking for a friendly venue.  Id. (“neither Plaintiff is an Illinois citizen”).  As to the second, the court held that a fraudulently joined forum defendant wasn’t “properly joined” as the removal statute required:

[B]y its own terms, the forum defendant rule precludes removal only when there is a “properly joined and served” resident defendant.  Based on this statutory language, Defendant argues that a fraudulently joined forum defendant is an improperly joined defendant.  The Court agrees.

Id. (citations omitted).  Thus, “the general interest in confining federal jurisdiction to its appropriate statutory limits weighs in favor of Defendants.”  Id.

Bahalim also considered fraudulent joinder of forum defendants to be an “abusive pleading practice.”  Id. at *4.  The policy reasons for the fraudulent joinder doctrine applied equally where a sham forum defendant, rather than a non-diverse sham defendant, prevents the diverse defendant from exercising a “right” of removal that would “otherwise have.”  Id.

Thus, Bahalim answered the question avoided in Morris in the affirmative – fraudulent joinder could be applicable to forum defendants.

The defendant alleged to be fraudulently joined had “never marketed, manufactured, promoted, or distributed” the drug at issue.  2017 WL 118418, at *4.  It had simply been engaged by the manufacturer to undertake certain ministerial aspects of a drug recall.  Id.  As a matter of law (Utah and Texas in this case), such a defendant had no duty to provide drug users with warnings:

Because [the forum defendant] did not manufacture, promote, distribute, or sell [the drug], Plaintiffs cannot bring a product liability-failure to warn claim against [it]. . . .  Plaintiffs’ product liability − failure to warn claims against Defendant . . . have no chance of success.

Id. (citations omitted).  Nor did such a defendant have a duty to warn in negligence:

[The forum defendant’s] conduct in administering the reimbursement program and issuing a check to one of the Plaintiffs in this lawsuit does not establish that [it] owed a duty to “issue a proper and prompt warning” or to take “corrective action.”

Id. at *5.  Nor did plaintiffs allege causation, since the defendant in question “did not manufacture, promote, distribute, or sell” the product.  Id.

So the fraudulently joined defendant was dismissed.  That left out-of-state plaintiffs suing an out-of-state defendant.  Anytime that happens, under the United States Supreme Court’s recent personal jurisdiction cases, there’s a good likelihood that the case will be dismissed on that basis.  And so it was in Bahalim.  Given Bauman, plaintiffs didn’t even try general personal jurisdiction, and they lost on specific jurisdiction.  Simply selling a drug in the forum did not give rise to specific jurisdiction where the plaintiffs neither bought the drug nor suffered injury there.  Bahalim, 2017 WL 118418, at *6.  Nor was the defendant’s hiring of an in-state contractor to conduct the certain ministerial aspects of a drug recall sufficient:

[The defendant retained [the forum defendant] to administer the [drug] Reimbursement Program − not the [drug] recall − and [the forum defendant] never had the authority, responsibility, or ability to recall [the drug].

Id. Further, “it is well-settled that a defendant’s relationship with the forum state for purposes of personal jurisdiction cannot be established via a third-party defendant’s conduct with the forum state.”  Id. (citations omitted).  The same facts that established fraudulent joinder also defeated this argument for personal jurisdiction.  Id.

So the whole case was dismissed. That means it’s appealable.  We’ll watch for a possible appellate decision on this unusual removal issue.

We haven’t digested it yet, so this isn’t a substantive post, but we wanted to make our readers aware that today the FDA made an announcement, which states in pertinent part:

We have also added a document to the docket for the public hearing titled “Memorandum: Public Health Interests and First Amendment Considerations Related to Manufacturer Communications Regarding Unapproved Uses of Approved or Cleared Medical Products,” which provides additional background on the issues the FDA is considering as part of our comprehensive review of our rules and policies relating to firm communications regarding unapproved uses of approved or cleared medical products, including a discussion of First Amendment considerations. We are requesting input on the Memorandum as it relates to the questions set forth in the initial notice of public hearing.

Thus, two days before a new administration takes office, the FDA has released an official document, albeit a “memorandum” with no particular regulatory significance, taking positions on the First Amendment protection (or more likely, lack of same) of truthful off-label speech by regulated entities – breaking literally years of silence.

Here is a link to the actual memorandum.  We haven’t read it yet, but we will – as certainly will many of you.  The timing suggests, rather blatantly, an attempt to put “agency” views on record before the change in administration potentially results in a much different approach.  Since we know from Wyeth v. Levine, 555 U.S. 555 (2009), that changes in FDA position adversely affects the scope of deference granted that position, the memorandum may also be a preemptive attempt to undercut that different approach in court.

We’ll have more to say later.

The FDA released its final Guidance on Postmarket Management of Cybersecurity in Medical Devices during the week between Christmas and New Year. You can link to a full copy here, and we gave you our detailed take on the draft Guidance here. You can also click here to see what our data privacy and security colleagues wrote about the final Guidance on Reed Smith’s Technology Law Dispatch, as they beat us to the presses.

The final Guidance resembles the draft, with a few refinements. We see two guiding principles in the final Guidance.  First, the final Guidance continues to follow a risk-based approach.  As we observed before, the FDA could not have taken a different tack.  Medical devices always present both benefits and risks, and the goal of regulators when it comes to cybersecurity is to assess and mitigate risks without overly compromising a device’s benefits.  Second, the FDA recognizes that managing medical device cybersecurity takes a village.  Or, in the Agency’s words, “FDA recognizes that medical device cybersecurity is a shared responsibility among stakeholders including health care facilities, patients, providers, and manufacturers of medical devices.”  Guidance, at 12.

The final Guidance therefore recommends the implementation of cybersecurity risk management programs.  Such  programs would include monitoring reported adverse events under current regulations.  The FDA also recommends incorporating elements consistent with the National Institute for Standards and Technology’s Framework for Improving Critical Infrastructure Cybersecurity.  Guidance, at 14.  We commented in our prior post that the FDA was combining familiar medical device elements with others borrowed from the cybersecurity world.  The citation to NIST’s Framework is a perfect example of the wedding between those two worlds.

More specifically, a cybersecurity risk management program would include:

  • Monitoring cybersecurity information sources for identification and detection of cybersecurity vulnerabilities and risk;
  • Maintaining robust software lifecycle processes;
  • Understanding, assessing and detecting presence and impact of a vulnerability;
  • Establishing and communicating processes for vulnerability intake and handling;
  • Using threat modeling to define clearly how to maintain safety and essential performance of a device by developing mitigations that protect, respond and recover from the cybersecurity risk;
  • Adopting a coordinated vulnerability disclosure policy and practice; and
  • Deploying mitigations that address cybersecurity risk early and prior to exploitation.

Guidance at 13-14. These are mostly the same as in the draft, but the FDA has addressed a couple of points about which we expressed concern.  For example, we expressed some confusion over which “cybersecurity information sources” a manufacturer should monitor.  The FDA has partly addressed this by emphasizing active participation in an “Information Sharing Analysis Organization” or ISAO.  The CDRH has entered into a Memorandum of Understanding with one ISAO, the National Health Information Sharing & Analysis Center, “in order to assist in the creation of an environment that fosters stakeholder collaboration and communication.”  Guidance at 7.  An ISAO would be one, but perhaps not the only, “cybersecurity information source” to monitor.

We also were not sure how deploying mitigations prior to exploitation would work in practice. The FDA added a couple of recommended components that appear aimed at anticipating vulnerabilities—maintaining robust software lifecycle processes and using “threat modeling.”  We don’t know what either of those would look like in practice, but the FDA seems to recognize that anticipating vulnerabilities called for more specific guidance

The most important concept is that, in the FDA’s view, cybersecurity risk management should revolve around assessing the risk of patient harm. That is determined by:  (1) the exploitability of the cybersecurity vulnerability, and (2) the severity of patient harm if the vulnerability were to be exploited.  Guidance at 15.  Risk would be assessed according to these two factors on a sliding scale—a vulnerability that would be difficult to exploit and would pose little impact on health is the lowest risk (or a “controlled risk”).  On the flip side, an easily exploited vulnerability that threatens a significant impact on health is the highest risk (called an “uncontrolled risk”).

The final Guidance doubles down on this two-factor assessment. Here is the key passage:

A key purpose of conducting the cyber-vulnerability risk assessment is to evaluate whether the risk of patient harm is controlled (acceptable) or uncontrolled (unacceptable). One method of assessing the acceptability of risk involves using a matrix with combinations of “exploitability” and “severity of patient harm” to determine whether the risk of patient harm is controlled or uncontrolled.

. . . .

While in some cases the evaluation will yield a definite determination that the situation is controlled or uncontrolled, it is possible that in other situations this determination may not be as distinct. Nevertheless, in all cases, the FDA recommends that manufacturers make a binary determination that a vulnerability is either controlled or uncontrolled using an established process that is tailored to the product, its safety and essential performance, and the situation.

Guidance at 17. The FDA therefore draws a “binary” distinction between “controlled (acceptable)” or “uncontrolled (unacceptable)” risks, but also acknowledges that it will not always be clear which bucket a risk falls into.  The FDA’s illustrative chart even has a large gray swath running down its middle.  Guidance at 18.  This “gray area” is where the guidance will be least helpful.

Measures to address “controlled” risks, such as routine updates and patches, are generally considered “device enhancements” and do not require advance notification or reporting. They are reportable, if at all, only in periodic (annual) reports required for some PMA devices.  Guidance at 19-20.

For an “uncontrolled” risk, the Guidance recommends that remediation be done “as quickly as possible” and reported under 21 CFR part 806 unless (1) there are no known associated serious adverse events, (2) the manufacturer informs its customers and user community about the vulnerability, identifies interim compensating controls, and develops a remediation plan to bring the risk to an acceptable level within 30 days after learning of the vulnerability, (3) the manufacturer validates and distributes a deployable fix within 60 days, and (4) the manufacturer actively participates in an ISAO (see above).  Guidance at 21-22.

Interim measures/controls “should not introduce more risk to the device’s safety and essential performance than the original vulnerability.” Guidance at 22.  This addresses another concern that we expressed—that patients or their doctors would overreact and disable important device functions, thereby placing the patient’s health at greater peril.  On this point, the FDA’s recommendation is clear:  Do not take interim measures that could make the risk worse.

The upshot is that it will not always be clear whether a risk is “controlled” or “uncontrolled,” but the characterization may make a difference in how the FDA will view a detected vulnerability.

Those are the points that we found most important. The Guidance also spells out the recommended content for PMA periodic reports (Guidance at 25), provides criteria for “active participation” in an ISAO (Guidance at 25-26), and includes an appendix called “Elements of an Effective Postmarket Cybersecurity Program,” which tracks the recommended NIST Framework (Identify, Protect, Detect, Respond, and Recover).  (Guidance at 27-30)

We close with our mantra that all medical devices have both benefits and risks. The balance between them must be kept in perspective, including with regard to cybersecurity vulnerabilities.

Some bloggers on this site have openly admitted to being swayed by the length of an opinion in choosing whether to blog about it. Shorter decision, shorter post. Less words, less work. In all honesty, a 56-page summary judgment opinion does tend to elicit a slight groan or at least an audible sigh. But sometimes, if you can manage to push through, you find that 16,000 words can be summed up very succinctly – preemption, preemption, preemption.

That’s not to say that the 15,999 other words in Babayev v. Medtronic, Inc., 2017 WL 90403 (E.D.N.Y. Jan. 5, 2017) are not important or interesting but there is a lot of case specific detail and a fairly lengthy recitation of preemption law, including the division among the circuits and within the Second Circuit as to the scope of implied preemption in the context of parallel violation claims. Id. at *14-20. We’ve covered this history in significant detail and anyone with even a passing familiarity with our blog knows well our feeling that the Eighth Circuit’s interpretation of the interplay between Riegel and Buckman gets it right – that there is only “a narrow gap through which a plaintiff’s state-law claim must fit if it is to escape express or implied preemption.” In re Medtronic, Inc., Sprint Fidelis Leads Products Liab. Litig., 623 F.3d 1200, 1204 (8th Cir. 2010). Babayev goes on to lay out the split in the circuits on the issue of whether Current Good Manufacturing Practices (CGMPs) are specific FDA regulations on which a parallel violation claim can be based. Babayev, at *22-23. Again, we align with the Eighth Circuit’s conclusion that CGMPs, which apply to all devices, not just PMA-devices, are too general to give rise to a parallel violation claim. Rather, a parallel claim that survives preemption must be based on an alleged violation of a PMA, device-specific requirement. Id. at *22.   While Babayev doesn’t go quite as far as the Eighth Circuit, it went far enough to reach the right result here – the federal violations alleged by plaintiff aren’t specific enough to warrant surviving preemption.

Babayev involved an implanted neurostimulator. Following surgery, a technician employed by the manufacturer assisted in testing the device and making sure it was functioning. As plaintiff prepared to leave the hospital he connected the device as instructed and received a shock that caused him to spasm and jump. Plaintiff did not fall. Id. at *6. The device was disconnected and plaintiff was sent home. He returned to the hospital in pain and the leads were removed. Over one week later it was discovered that plaintiff had a fractured hip which he alleged he suffered during the shock incident. Id. at *6-7.

Plaintiff brought causes of action for strict liability, negligence, breach of implied warranty, breach of express warranty, and failure to warn. To the extent any of the claims are premised on allegations that the FDA-approved design, manufacturing process, or labeling are defective, those claims are preempted. Id. at *20. To the extent plaintiff attempted to state any alleged parallel violation claims, he did not. On both strict liability and breach of implied warranty, plaintiff “conclusorily alleges” the device was defective or adulterated, but provides not plausible facts to support either allegation. Id. But this is a summary judgment motion, so the court looked beyond the pleadings and still found nothing. Plaintiff offered no evidence (rather arguing a spoliation claim that the court rejected) to contradict the evidence offered by defendant that the device was manufactured, tested, and labeled in accordance with its PMA requirements. Id. at *21. Plaintiff’s failure to warn claim failed for the same reasons – only conclusory allegations of adulteration and no facts to support that defendant violated installation procedures. Id. at *26.

Plaintiff alleged that defendant breached an express warranty by representing the device was safe and effective for its intended purpose. The court found this was actually another implied warranty that suffered the same fate as the one described above. To the extent plaintiff was actually alleging an express warranty, he failed to establish any of the elements required under New York law (such as a material statement and reliance). Id. at *21.

This leaves only plaintiff’s negligence claim; the only claim that “contains more than conclusory allegations.” Id. But that wasn’t enough for it to survive. Plaintiff alleged defendant violated two CGMPs. The first requires manufacturers to establish a process for receiving, reviewing and evaluating complaints. Id. The second requires manufacturers of devices requiring installation to establish adequate installation instructions and that the person installing the device adhere to those instructions. Id. at *22. While the court was unwilling to go as far as to say a parallel violation claim can never be based on a CGMP, it did conclude that neither cited by plaintiff were specific enough. The court distinguished these open-ended guidances from the manufacturing-based CGMPs used to form the basis of manufacturing defect claims in other cases. While we dispute even those manufacturing CGMPs are sufficient for a parallel violation claim, we are happy to see it being at least limited and certainly not extended. After all, what do the CGMPs cited by plaintiffs here really say – that manufacturers have to establish processes and procedures. But they don’t provide any specifics for what those processes and procedures should include. “Accordingly, state-law claims premised on a violation of these CGMPs have the potential to create varying standards that would be different from, or in addition to’ those required by the federal scheme, and are therefore preempted.” Id. at *24 (citations and quotations marked omitted).

The court also examined whether if these claims were allowed, plaintiff had adduced any evidence to support that they were violated or that any violation was related to plaintiff’s injury. As to the requirement to receive and investigate complaints, plaintiff alleged that was violated because the defendant didn’t report the incident, which occurred in February 2007, to the FDA until April 2010. But the facts are that plaintiff never reported his hip fracture to defendant until filing his lawsuit in February 2010. Id. As to the second CGMP, there was no dispute that the defendant had installation instructions, plaintiff alleged that they were not followed. But in this instance, it was plaintiff’s physicians not the manufacturer who installed the device. While the defendant’s representative may have been present, “there is no evidence that he was consulted with respect to any of these issues.” Id. Nor was there any evidence the installation instructions weren’t followed. Nor any evidence that any deviation of the instructions caused plaintiff’s injury. Id. at *25. And so on, and so on.

Bottom line – plaintiff’s claims were preempted, and even if they hadn’t been, plaintiff had no facts to support his allegations. Complicated facts, simple result.

Thanks to John Lavelle at Morgan Lewis for tipping us off about this decision.


We’ve previously written several posts (not recently) on Medicare secondary payer (“MSP”) issues – which we characterized as “boring.”  The recent MSP decision, Humana Insurance Co. v. Paris Blank LLP, 2016 WL 2745297, 187 F. Supp.3d 676 (E.D. Va. 2016), is a lot less boring.  That’s because of the defendant – a plaintiff-side law firm.

And the law firm lost.

What’s going on? To start with, in addition to the government itself, certain private entities, “Medicare Advantage Organizations” (“MAO”) (abbreviations are ubiquitous in this area) are allowed to bring suits to recover as MSPs (that was what one of our earlier posts was about).  The MSP statute is quite broad as to who can be legally liable for not ensuring that Medicare is treated as a secondary payer:

any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan.

42 U.S.C. §1395y(b)(2)(A)(iii). Recovery in an amount double the actual Medicare outlay is available in litigated cases. Id.

In our neck of the woods (PA & NJ, anyway), a MAO’s ability to sue as if it were the government is already established. In re Avandia Marketing, Sales Practices, & Products Liability Litigation, 685 F.3d 353 (3d Cir. 2012).  (We note that our CA blogger would view this issue differently, see Parra v. PacifiCare of Arizona, Inc., 715 F.3d 1146, 1154 (9th Cir. 2013)).  So the fact that Humana held that an MAO had standing to sue, 2016 WL 2745297, at *4, would not have resulted in this post.

What interests us is the holding that a lawyer and his law firm – thankfully, a plaintiff law firm − can be an “entity” “responsible (directly . . . or otherwise)” for making a MSP payment.  The allegations in Humana were not kind to the defendants.  They represented a plaintiff in an auto accident.  Supposedly, they received a one settlement check made out jointly to it and the plaintiff MAO, but “ultimately deposited the check without [the MAO’s] endorsement.”  Id. at *2.  Allegedly, certain other settlement checks “from several insurance companies” were also received and deposited, without joint the joint payor issue. Id. All told, the settlements totaled $475,600.  Id.

The MAO sued for unreimbursed medical costs (called “conditional payments”) of almost $200,000.  Id.  The lawyer/law firm claimed that they were not proper defendants under the MSP statute.  The court held that law firms may be defendants under the MSP statute:

Contrary to Defendants’ position, the law does not carve out exceptions for attorneys and law firms. . . . Much like who may bring an action pursuant to the statute, the plain language fails to limit the parties against whom suit may be maintained.

Id., 2016 WL 2745297, at *5.  Rather, under a regulation, the government (and any entity, like an MAO, allowed to stand in the government’s shoes) can seek MSP recovery “from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.”  42 C.F.R. §411.24(g) (emphasis added).  Because the defendant lawyer and law firm allegedly “received a primary payment” when they cashed those settlement checks from the insurance companies, the MAO “may maintain suit against Defendants for recovery of conditional payments.”  2016 WL 2745297, at *5.  Again, double damages are recoverable.

While Humana did not cite any authority for its holding, an identical result was reached in United States v. Harris, 2009 WL 891931 (N.D.W. Va. Mar. 26, 2009), aff’d, 334 F. Appx. 569 (4th Cir. 2009) (on basis of district court opinion).  It is unclear in Harris why the plaintiff/claimant’s attorney failed to discharge his client’s MSP obligation in the course of a product liability settlement that was actually reported to the government, but in any event the government was never paid.  Id. at *1.  The government received summary judgment on its MSP claim against the attorney who “received” settlement funds:

This Court finds that the government is entitled to judgment as a matter of law. In this case, the [Medicare recipient] and the defendant [attorney] received a $25,000.00 settlement. . . .  Furthermore, this Court holds that [the attorney] is individually liable for reimbursing Medicare in this case because the government can recover “from any entity that has received payment from a primary plan,” including an attorney.

Id. at *3 (quoting § 411.24(g)) (emphasis original). Accord United States v. Harris, 2008 WL 4900569, at *3 (N.D.W. Va. Nov. 13, 2008) (denying motion to dismiss on same grounds in same litigation).

Analogously, in Haro v. Sebelius, 747 F.3d 1099 (9th Cir. 2014), a class action on behalf of both personal injury plaintiffs and their attorneys challenged the government’s enforcement of §411.24(g) against them:

The [government] has interpreted “entity that receives payment from a primary plan” in accordance with the statute’s enabling regulations. 42 C.F.R. § 411.24(g) provides that the Secretary “has a right of action to recover its payments from any entity, including a beneficiary … [or] attorney … that has received a primary payment.” (emphasis added).  And 42 C.F.R. §411.24(h) states that “[i]f the beneficiary or other party receives a primary payment, the beneficiary or other party must reimburse Medicare within 60 days.”

Id. at 1115 (emphasis original).  The court upheld the government’s actions.  It was “rational” and “consistent with the purpose” of the MSP statute for the government to seek recovery from attorneys who “received” settlement funds.

The [government’s] demand that attorneys who have received settlement proceeds reimburse Medicare before disbursing those proceeds to their clients certainly increases the likelihood that proceeds will be available for reimbursement. Therefore, the [government’s] interpretation of the reimbursement provision is consistent with the general purpose of the secondary payer provisions.

*          *          *          *

We conclude the [government’s] interpretation of the reimbursement provision is rational and consistent with the statute’s text, history, and purpose, therefore it is reasonable.

Id. at 1117.  Haro, however, did not address the issue decided in Humana – whether the government could sue “an attorney who has disbursed the proceeds” for MSP recovery.  Id.

In United States v. Stricker, 524 F. Appx. 500 (11th Cir. 2013), the court affirmed a judgment dismissing a MSP recovery action against the proceeds of a mass tort settlement as barred by the statute of limitations.  The decision described the regulatory scope of the government’s enforcement powers:

In relevant part, 42 C.F.R. §411.24(e) gives the government “a direct right of action to recover from any primary payer,” defined for our purposes as “any entity that is or was required or responsible to make payment with respect to an item or service (or any portion thereof) under a primary plan.” 42 C.F.R. §411.21. The government also has a “right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.” 42 C.F.R. §411.24(g).

Id. at 507.  Recoverability of such payments from attorneys who “received” portions of the settlement sum was not at issue in Strickler.

In another MSP recovery case, even more recent than Humana, the government came after the executor of an estate to collect Medicare payments from the settlement of a lawsuit against a pharmacy for incorrectly filling a prescription.  The estate lost, as the court held:

Medicare is authorized to seek reimbursement from a person who received payment from a primary payer, such as a beneficiary or attorney who received settlement funds from a tortfeasor or a tortfeasor’s insurer.

Trostle v. Centers for Medicare & Medicaid Services, 2016 WL 6082131, at *5 (M.D. Pa. Oct. 17, 2016) (citing the same regulation).

A number of other courts that have cited to the regulation’s language about recoveries from “attorney[s]” that “ha[ve] received a primary payment” – in cases where MSP recovery from attorneys was not actually sought.  Section 411.24(g) “allows the United States government to pursue the personal assets of the recipient as well as the personal assets of the recipient’s attorney.”  Zaleppa v. Seiwell, 9 A.3d 632, 638 (Pa. Super. 2010) (personal injury litigation).  See Joerg v. State Farm Mutual Automobile Insurance Co., 176 So.3d 1247, 1254 (Fla. 2015) (Medicare benefits as collateral source payments); Karpinski v. Smitty’s Bar, Inc., 201 Cal. Rptr.3d 148, 153 (Cal. App. 2016) (settlement enforcement litigation); McKim v. Southern Illinois Hospital Services, 2016 WL 915533, at *3 (Ill. App. March 9, 2016) (lien litigation); Ethridge v. Recovery Management Systems, Inc., 326 P.3d 297, 300 n.9 (Ariz. App. 2014) (Medicare preemption); Hearn v. Dollar Rent A Car, Inc., 726 S.E.2d 661, 667 (Ga. App. 2012) (settlement enforcement litigation); Sexton v. Medicare, ___ F. Supp.3d ___, 2016 WL 3821547, at *4 (E.D.N.Y. July 11, 2016) (MSP recovery sought from litigation plaintiff); Mackrides v. Marshalls, 2013 WL 1755216, at *4 (E.D. Pa. April 24, 2013) (settlement enforcement litigation); Porter v. Farmers Insurance Co., 2012 WL 256014, at *19 (N.D. Okla. Jan. 27, 2012) (insurance bad faith litigation), aff’d, 505 F. Appx. 787 (10th Cir. 2012); Frazer v. CNA Insurance Co., 374 F. Supp.2d 1067, 1073 (N.D. Ala. 2005) (litigation brought by Medicare claimant).

After this review, it is pretty clear to us that any plaintiff-side lawyer who cashes a settlement check from which s/he deducts a contingent (or other) fee has “received” a payment within the meaning if the MSP statute and accompanying regulations.  If the government’s Medicare expenses are not satisfied from the settlement proceeds, the government has the power to seek double damages from the attorney via litigation.  As for defense counsel – this potential liability is yet another good reason not to become an intermediary in the disbursement of settlement funds.


Court Finds Fraudulent Joinder by Relying on a Sales Rep’s Affidavit and Common Sense

Buckles v. Coombs, 2016 U.S. Dist. Ct. LEXIS 180784 (S.D. Fla. Jan. 4 2017), is a decision that illustrates how a defendant’s proper introduction of facts via an affidavit and a court’s introduction of common sense into its decision process can come together to result in the denial of a plaintiff’s motion to remand an action to state court.

In Buckles, the plaintiff alleged that she was injured due to an allegedly defective cutting device used in her knee replacement. In her state-court complaint, she sued not only the diverse manufacturer, Howmedica, but its non-diverse sales rep. The defendants, having seen that move before, claimed fraudulent joinder of the sales rep and removed the action to federal court based on diversity jurisdiction.

Plaintiff moved to remand the action back to state court. Plaintiff argued that the sales rep was, in fact, a proper defendant because he had been negligent in promoting, marketing, testing and warning about the device—and so on. She supported these arguments with nothing more than the allegations in her complaint, which were fairly broad and conclusory. That was her mistake.

The court made clear that the proper standard under which a court should determine whether a non-diverse defendant has been fraudulently joined is like that applied to summary judgment motions, not the standard for motions to dismiss: “A district court’s process for resolving a claim of fraudulent joinder is similar to that used for ruling on a motion for summary judgment.” Id. at * 5 (citing Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997). And the defendants were relying on more than the general allegations in the complaint. They offered facts from the sales rep himself in an affidavit in which he specifically refuted the general allegations of the complaint:

As set forth in [the sales rep’s] affidavit, however: (1) he was present during [plaintiff’s] surgery “only to facilitate bringing the implants to the operating room and for no other purpose” (2) he did not call on [plaintiff’s] surgeon at any time prior to her surgery on August 21, 2012, or anytime thereafter (3) he did not “promote, advertise, represent, recommend or sell” the Cutting Guide used during [plaintiff’s] surgery; (4) he had no involvement in the preoperative imaging for [plaintiff’s] Cutting Guide and had no other involvement in the planning of her surgery; and (5) he has no medical training, but rather, relies on the materials and information provided to him by Howmedica in carrying out his job duties.

Id. at *8.

The complaint’s allegations stood no chance in the face of the sales rep’s detailed affidavit:

[I]t is well-established by the U.S. Court of Appeals for the Eleventh Circuit that when a defendant’s affidavit is undisputed by a plaintiff, the court cannot then resolve the facts in the plaintiff’s favor based solely on the unsupported allegations in the complaint. In such instance, the defendant’s undisputed evidence is fatal to the plaintiff’s claim.

Id. at *8-9 (citing Legg v. Wyeth, 428 F.3d 1317, 1323 (11th Cir. 2005).) Accordingly, the court dismissed the claims against the sales rep thereby creating diversity between the parties. Id. at *9.

Undaunted—well, maybe a bit daunted—plaintiff argued that the case nonetheless did not meet the jurisdiction threshold of having more than $75,000 in controversy because her complaint stated only that she was seeking more than $15,000 in damages. Id. at *10. That may be true. But the complaint alleged a laundry list of serious damages—revision surgery, permanent and continuing damages, past and future medical expenses, pain, disability, disfigurement, suffering, and mental anguish. Id. at *11.

Boy, that sure does sound like way more than $75,000 was in controversy. And that’s precisely how the court saw it: “Courts need not ‘suspend reality or shelve common sense in determining whether the face of a complaint . . . establishes the jurisdictional amount.’” Id. at *11 (citing Roe v. Michelin N. Am., Inc., 613 F.3d 1058, 1062 (11th Cir. 2010).) Applying that common sense along with its own judicial experience, the court held that plaintiff’s own allegations were enough to satisfy the jurisdiction threshold. Id. (citing Gebbia v. WalMart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000).) Finding that all the requirement for diversity jurisdiction had been met, the court then denied plaintiff’s motion to remand.

This decision is a good reminder of how to properly use affidavits to show fraudulent joinder and even how sometimes you can rely on the court’s own common sense.

What follows is a post authored by Jaclyn Setili, a Reed Smith associate.  She is discussing what we believe is the first extension of Mensing/Bartlett preemption to claims involving pharmacies – something we’ve previously proposed as theoretically possible, but had yet to see.  As always, our guest posters are entitled to 100% of the credit (and any blame) for their blogposts.


As a Mitten native (that’s Michigan for the uninitiated), this guest blogger is regularly on the lookout for good news connected with her home state.  Typically this involves events of the sporting championship variety, but cause for celebration has been scarce of late on that front (see, e.g., Michigan football, an impressive early season dominance culminating in two close late season losses and a devastating defeat in the Orange Bowl; the Red Wings, currently sitting in last place in their division and slipping progressively further away from a Stanley Cup title since their last championship win in 2008; and the Lions, every year, forever). Even reports of Detroit’s flourishing restaurant scene and a slot in the New York Times’ 52 Places to Go in 2017 fail to inspire much collective awe from this guest blogger’s big-coastal-city friends and colleagues.

As it turns out, however, we need only look a few months back to the In re Lipitor MDL (which we have blogged about before, most recently here, and in which all but one of the cases have now been dismissed) for such news.  In In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation, 2016 WL 7368203 (D.S.C. Nov. 1, 2016), the district court ultimately granted plaintiffs’ motions to remand, but in the process became the first court ever (as far as we know) to apply impossibility preemption to bar warning claims against a pharmacist selling a branded drug.

The details: The two actions at issue were originally filed in Michigan state court; each plaintiff alleged that Lipitor caused her to develop Type II diabetes, and that the manufacturer failed to properly disclose the risks associated with the drug.  That defendant removed both cases to the Eastern District of Michigan based on diversity jurisdiction; from there the cases were transferred to the MDL court.  Plaintiffs named a local pharmacy in order to destroy diversity.  While the parties agreed that the pharmacy and at least one named plaintiff in each case were residents of Michigan, defendants claimed that the pharmacy was fraudulently joined and that the non-Michigan plaintiffs were fraudulently misjoined.  Plaintiffs moved to remand.

As we and the MDL court know all too well, to establish that a nondiverse defendant has been fraudulently joined, a removing party in the Fourth Circuit must show either:  (1) “outright fraud” in plaintiff’s pleading of jurisdictional facts, or (2) that there is no possibility that plaintiff would be able to establish a cause of action against the in-state defendant in state court.  2016 WL 7368203, at *1 (emphasis added).  That is always an uphill battle.  Here, defendants argued that there was no possibility that plaintiffs could state a claim against the pharmacy where plaintiffs allegedly purchased the drug under Michigan law for four reasons:  (a) their claims were preempted by federal law, (b) Michigan’s seller immunity statute bars pharmacy claims, (c) the pharmacy had no duty to warn plaintiffs, and (d) the learned intermediary theory further barred plaintiffs’ claims.

Of primary importance for our purposes is the court’s analysis of the first ground, preemption.  The court first noted plaintiffs’ admission that they “may not have a claim regarding labeling with respect to . . . a pharmacy.”  Id. at *2.  The court swiftly concluded that even if it were possible to state such a claim, it would be preempted by federal law because, under the Federal Drug and Cosmetic Act, “a pharmacy has no authority to unilaterally change a drug’s label.”  Id.  Thus, any claims based on labeling were preempted under PLIVA, Inc. v. Mensing, 131 S. Ct. 2567, 2571 (2011).  In other words, the court concluded that there was no possibility that plaintiffs could establish a cause of action against a pharmacist based on labeling.  That result is a first, and could be a big deal.

Claims based on alleged advertising and marketing, beyond the scope of regulated labeling, were not preempted.

Also interesting was the court’s analysis of the seller immunity statute and the duty to warn.  Under Michigan’s seller immunity statute, a seller other than a manufacturer cannot be liable for harm caused by a product except when the seller fails to exercise reasonable care, or when the product fails to conform to an express warranty.  Mich. Comp. Laws Ann. § 600.2947(6).  Thus, the court found there was no possibility that plaintiffs could establish a strict liability cause of action against the pharmacy under Michigan law – a result that also applies to manufacturers themselves, so long as the drug was in compliance with FDA approved labeling at the time of sale, and in practice forecloses most product liability claims in Michigan under § 600.2947(5)).

As to the duty to warn, while Michigan law strictly states that a pharmacy has no duty to warn the patient of possible side effects of a prescribed medication where the prescription is proper on its face and neither the physician nor manufacturer has required that any warning be given to the patient by the pharmacist, a pharmacy might (at least under the “no possibility” standard for fraudulent joinder) be liable under Michigan law where it “voluntarily assume[s] a function that it was under no legal obligation to assume.”  Id. at *3.  For such a claim to exist, the pharmacy defendant must take some voluntary, affirmative action, such as “through advertising or telling a patient about side effects.”  Id.  Where such affirmative action occurs, a pharmacy possibly has a duty of care in the warnings issued.

The court acknowledged that a Michigan court may hold that plaintiffs here ultimately failed to state such a claim; however, the standard to be applied in the Fourth Circuit (where the MDL is situate) is whether there is any possibility that plaintiffs could establish such a claim under state law.  For this reason, and others, the Court therefore granted plaintiffs’ motions to remand to Michigan state court, acknowledging that plaintiffs still had a “glimmer of hope” of establishing a cause of action based on an assumed duty to warn.

While this result does not seem intuitively defense-friendly, we think the preemption decision deserves mention—even with the lax “any possibility” standard, the court reasoned that the labeling claims were preempted.  This guest blogger will chalk it up as a Michigan win, and continue to harbor her own “glimmer of hope” for the Tigers’ 2017 season.

We typically write about product liability cases, not medical malpractice actions. But the two are not mutually exclusive, and similar issues arise in those cases. Medical causation is an issue we often see in both. Capacity to execute a release is not.

The facts in Bentley v. Highlands Hospital Corp., et al., 2016 U.S. Dist. LEXIS 178688 (E.D. Kentucky Dec. 27, 2016), are sad and scary. The plaintiff showed up in a hospital emergency room, complaining of nausea, back pain, and a tingling sensation in the legs. A CT scan showed no serious problems, and the plaintiff was discharged, with instructions to follow up with her family doctor. Her condition deteriorated significantly. The next day, she went to another hospital, where an MRI was performed. The radiologist, it is alleged, missed a shadow in the image of the spinal cord. The plaintiff’s conditions got steadily worse, and she was sent to another hospital. Ultimately, she was permanently paralyzed from the chest down. It turned out that she had suffered serious inflammation of the spinal cord. The triggering event might have been a bout of strep throat a week earlier.  We are told that the strep throat “tricked” the plaintiff’s immune system into attacking nerve cells in her spinal cord, and that the resulting inflammation “climbed up both sides of her lower spinal cord, destroying the myelin sheathing on her nerve cell fibers, and disrupting communication between her spinal cord and the remainder of her central nervous system.”

To support her malpractice action, the plaintiff retained three medical experts who opined that one of the hospitals could have stopped the progression of the plaintiff’s paralysis if it had administered steroids when she still had motor control and sensation in her legs. These experts also opined that the plaintiff was cognitively impaired when she signed a hospital release form because she was on central nervous system depressant and an opioid painkiller at the time.

The defendant hospital moved to exclude these expert opinions. There was no issue as to whether the opinions were relevant to issues in the case. They were. There was also no issue as to the experts’ qualifications. The only dispute was whether the expert opinions were sufficiently reliable as to pass Fed. R. Evid. 702 and the Daubert test. The court applied the Daubert test conscientiously, recognized that the plaintiff bore the burden of proving by a preponderance of the evidence that the opinions were admissible, and concluded that the plaintiff carried that burden for the medical causation opinions, but not for the mental capacity opinions.

Here is why the Bentley court held that the medical causation opinions made the grade:

1. The experts explained how the inflammatory process works and how steroids can arrest that process.
2. The experts cited evolving literature on inflammatory conditions of the central nervous system. Observational studies demonstrated that early steroid intervention improved neurological outcomes in patients with spinal inflammation.
3. The experts’ own clinical experiences confirmed the power of steroids to combat neurological decline in patients with inflammatory myelopathies.
4. The course of the plaintiff’s own treatment was probative. Steroids actually did help her, even if that help came too late to save much of her neurological function.

The defendants argued that the plaintiff experts had misread some of the medical records, but the court deemed that a factual dispute best sent to the jury. The defendants also argued that the scientific literature was insufficiently strong to support the plaintiff’s position. The American Academy of Neurology concluded in 2011 that there was insufficient evidence to determine the utility of steroids in alleviating the condition suffered by the plaintiff in Bentley.  Reading between the lines, it seems to us that the gravamen of the plaintiff’s complaint in Bentley was that a hospital had committed medical malpractice by failing to resort to an off label use.  To our defense hack eyes, this is rich stuff, given how many cases we encounter where plaintiffs assail our clients for supposedly supporting off label uses of their products.

Off label or not, the court had no problem with the plaintiff’s position or the expert opinions. The court acknowledged that there are no double-blind studies or epidemiological evidence that firmly made the case. But the court reasoned that the defendants’ concerns were “overblown,” that the defendants were raising the bar too high, that the plaintiff experts had accounted for any gaps in the literature, and that those experts had reinforced their reading of the literature by looking to clinical experience and the particular experience of the plaintiff herself. Moreover, to the extent the plaintiff experts had extrapolated from other literature, such extrapolation seemed logical. Finally, it was significant that the plaintiff experts’ opinions did not seem litigation-driven; at least one of those experts had been taking a similar position for years prior to this case.

The court allowed that the jury might end up disagreeing with the plaintiff experts. But it was convinced that the jury should at least hear them.

By contrast, the Bentley court held that the jury should not hear the plaintiff expert opinions that the medications taken by the plaintiff could cause “mental fogginess and fatigue” such as to invalidate her execution of the hospital release. The experts could testify about possible side effects from those medications. But only a minority of patients taking those medications suffer such side effects, and the experts simply lacked a basis to “explain how they know that these effects would have been so severe as to deprive [the plaintiff] of the mental capacity necessary to exercise independent and informed judgment.”