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Is there a more misused statute than RICO?  Or one that more convincingly shows the weakness of the textualist position, which wads up any evidence of legislative intent and tosses it into the trash bin?  RICO was clearly intended to address organized crime, but its broad and vague language has been held to reach all sorts of commercial disputes and garden variety litigations where no hit-men, shake-down schemes, or cement shoes are in sight.  It’s easy to see why plaintiff lawyers love to lob RICO claims into their complaints – getting treble damages for labeling your opponent a racketeer is a good business model.  We’ve said all this before, of course.

The godfather of RICO was Notre Dame Law Professor G. Robert Blakey.  While in law school, Blakey authored a law review note about the inability of prosecutors to affix criminal liability to the attendees of the notorious Apalachin organized crime meeting in 1957.  Later, he worked on a bill that would take care of that problem.  President Nixon signed RICO into law in 1970 and, like a lot of what Nixon did, it created more problems than it solved.  Another law came into play – the law of unintended consequences.  The malleability of RICO didn’t merely suit plaintiff lawyers down to the ground; Blakey also seemed to enjoy the surprising scope and relevance of his baby.

When we were a young litigator we attended an all-day CLE conference in NYC on business litigation.  The moderator was a sharp litigator from the Mudge Rose firm named Jed Rakoff.  He is now one of the two or three smartest and scariest judges in the country.  The star speaker was Blakey, who held forth on how RICO was the cure for whatever ailed any wannabe plaintiff.  He probably never envisioned that RICO would result in his occupation of a Waldorf Astoria podium in front of 300 white-shoed lawyers.  But there he was.  The audience peppered Blakey with questions about the reach of RICO.  Would X fall within RICO’s grasp?  Yup.  Would Y?  Of course.  We went up to Blakey after the talk and poured into his ear a complex fact scenario we were defending.  Is that a RICO violation?  Sure.


Blakey must have been ecstatic about what happened in the District of Massachusetts Neurontin litigation, where allegations of off-label promotion and other marketing malfeasances supported RICO claims and, consequently, huge settlements.  RICO had been stretched up to (we would say past) its breaking point on issues such as causation, injury, and damages.  It was, in our judgment, one of this country’s enormous wrong turns in drug and device litigation.  D. Mass. prosecutors showed up at CLE conferences, crowing about their success and ominously hinting at more to come.  But their legal theories rang hollow and the showmanship looked cheesy.  Having prosecuted federal cases ourselves, we have a knee jerk reflex to assume the good faith and validity of USAO actions and policies.  Not so here.  It smelled like overreaching. We think history will vindicate our position.  It is not as if the history of Mass. litigation is a history of getting things right.  Ever heard of the Salem Witch trials?  Lizzy Borden?  Roberts v. Boston (which invented the separate but equal doctrine later embraced in Plessy v. Ferguson)? Sacco and Vanzetti?   A Civil Action? Reckis v. Johnson & Johnson (a Mass. Supreme Court decision that we listed as the single worst drug/device decision of 2015)? Anyway, maybe even the folks in Boston are starting to rethink the use of RICO to police the marketing of medicines.

Imagine our dread when we heard that the Celexa and Lexapro MDL in good old D. Mass. included RICO class action claims by third party payers (TPPs).   But imagine our delight when we saw that the court refused to certify the RICO class because the causation, injury and damages allegations floundered.  In re Celexa and Lexapro Marketing and Sales Practices Litigation, 2016 WL 3102004 (D. Mass. June 2, 2016), is a good read – certainly more comforting than the organized crime accounts penned by Blakey or Puzo.  The plaintiffs alleged that the defendants violated RICO and various Minnesota consumer fraud and unfair trade statutes by misrepresenting and concealing material information about the efficacy of Celexa and Lexapro (SSRI anti-depressants) in pediatric patients.  The TPPs claimed that they suffered injuries in the form of economic costs incurred when they paid for additional prescriptions for Celexa and Lexapro for pediatric use.  At issue was the plaintiffs’ motion to certify a class.

The crux of the dispute was whether the plaintiffs satisfied the predominance requirement that “questions of law or fact common to class members predominate over any questions affecting only individual members.”  Fed. R. Civ. P. 23(b)(3).  The court did not require the TPPs to present individualized proof first-party reliance.  Too bad.  Instead, the plaintiffs could supply some sort of common proof of injury.  Uh oh.  Here we go.  The plaintiffs claimed that they could establish but-for causation with common proof that the TPPs in the class paid for “induced off-label prescriptions” as a natural consequence of the defendants’ fraudulent conduct.  The plaintiffs contended that the TPPs would have paid for fewer off-label prescriptions for pediatric use but for the fraudulent promotions.

The plaintiffs’ proof of common injury was based on an expert witness who performed an econometric “regression analysis” of the alleged fraudulent promotions and the allegedly resulting fraudulent prescriptions.  That expert was Dr. Meredith Rosenthal, who also supplied a causation report in the Neurontin litigation.  This has all the makings of very ugly de ja vu.  In Neurontin, the First Circuit had blessed Rosenthal’s regression analysis as sufficient evidence of but-for causation and declared, in general, that plaintiffs with RICO claims of fraudulent pharmaceutical marketing could use such aggregate evidence to show causation.  And at this point any defense lawyer starts to feel like an Eagle cornerback running backwards while Tom Brady grasps an underinflated football, waiting for Gronk to bull his way into a seam in the secondary.

But there was a “fundamental flaw” in Rosenthal’s but-for approach in the Celexa/Lexapro case.  Rosenthal assumed that the relationship between all promotions and all sales is a “reasonable proxy” for the relationship between fraudulent promotions and fraudulently induced sales.  The court rejected that assumption:  “Literature does not specifically suggest that such a correlation is a ‘reasonable proxy’ for the relationship between fraudulent promotions and fraudulently induced sales.”  Thus, the plaintiffs simply had not shown that they could establish but-for causation without individualized determinations predominating over common ones.  Goodbye class certification.

And good bye for more than one reason.  The court also concluded that adjudication of the efficacy issues would require individualized assessments of the utility of the medicines for each patient based upon particular medical circumstances.  Damages also were not susceptible to class-wide treatment.  Again, the plaintiffs depended on the Rosenthal report for laying out damages (to the tune of over $300 million – a third of which makes a nice round figure for the lawyers, doesn’t it?), and that report still suffered from the absurd assumption that the relationship between all promotions and all sales is a “reasonable proxy” for the relationship between fraudulent promotions and fraudulently induced sales.

Finally, mirabile dictu, there actually is a statute of limitations for civil RICO claims: four years after the plaintiff discovers or should have discovered the injury.  The defendants’ statute of limitations defense would necessarily involve TPP-specific evidence and predominating, individualized inquiries as to when each TPP knew or should have known, based upon its access to information, that it had paid for potentially ineffective prescriptions.

The only thing more wicked (it is a Mass. mass action, after all) than a RICO action is a RICO class action.  The D. Mass court at least halted that abomination. So sometimes justice does arrive in Mass. courtrooms.  Suddenly we remember  the counter narratives:  Rex. V. Wemms (John Adams’s heroic defense of a Boston Massacre defendant), The Verdict, and Denny Crane.