From our days as a prosecutor, we built up a healthy respect for the power of conspiracy claims. They can be a splendid tool for dragging in more defendants, beating the rule against hearsay (coconspirator statement exception), beating the statute of limitations (a continuing conspiracy can bring even old statements up to date), and telling a story. But that story has to make sense, and conspiracy claims have knowledge requirements. That is also true for claims of aiding and abetting.
Some of those dynamics came into play in Angell v. Allergan Sales, LLC, 2019 U.S. Dist. LEXIS 142768 (M.D. Fla. Aug. 26, 2019). Angell is a civil, not criminal, case. The plaintiffs’ main beef was with a couple of plastic surgeons who allegedly performed unnecessary breast implant revision surgeries. Maybe it is because suing doctors is hard and seldom remunerative that the plaintiffs also tried to rope in the deep-pocket manufacturer via aiding/abetting and conspiracy theories. Those theories did not make a whole lot of sense, and that lack of sense likely made it easier for the court to throw out the claims against the manufacturer for failure to plead adequate knowledge.
The plaintiffs claimed that the plastic surgeons drummed up extra business for themselves by falsely telling patients that breast implants had failed and needed replacing. The surgeons exploited the manufacturer’s warranty program, whereby the manufacturer not only paid for the replacement product, but also paid part of the costs of the surgery. Thus, the surgeons could offer what looked like a good deal to the patients. It was not a good deal, because it put the patients through unnecessary surgeries, where bad things could, and occasionally did, happen. It was a good deal for the surgeons, because the scheme put more money in their pockets.
But was it a good deal for the manufacturer? It would seem not. You might even call the claim implausible. The scheme cost the manufacturer money. It also necessarily impugned the reputation of the products. But according to the plaintiffs, the manufacturer played along with the scheme, treating the free product and surgery subsidies as essentially kickbacks to the surgeons, who were high-volume customers.
The manufacturer filed a motion to dismiss the claims against it for aiding and abetting the surgeons’ scheme and for conspiring with them to commit fraud. The crux of the argument for dismissing the claims was that the plaintiffs had not alleged sufficient knowledge on the part of the manufacturer that the surgeons were perpetrating a fraud. The court agreed with the manufacturer and dismissed the claims, because the complaint merely alleged facts showing, at most, that the manufacturer should have known something was hinky. But “should have known” is not the same thing as actual knowledge.
Part of the conditions for FDA approval of the breast implants was that the manufacturer was required to inspect explanted breast implants to look for defects. The breast implants explanted by the defendant surgeons were, by and large, not defective. And yet the manufacturer continued to pay the warranty claims to the unscrupulous surgeons. But all that means is that the manufacturer might have been lax or dumb. Perhaps it should have investigated further. But it was under no duty to do so, and the plaintiffs admitted as much. Saying that the company had everything in its possession to conclude that 2+2=4 is not the same as saying that anyone in the company actually had done the math.
It really does come down to plausibility and our old friends Twombly and Iqbal. The Angell court could not infer that the manufacturer’s approval of the surgeons’ warranty claims “was atypical and indicative of its knowing assistance with the [surgeons’] fraudulent scheme, or merely reflective of a business decision not to scrutinize warranty claims in order to foster goodwill with doctors and patients.”
Thus, the court dismissed the claims against the manufacturer, rejecting the plaintiffs’ effort to drag it in via causes of action for aiding and abetting and conspiracy.