Photo of Stephen McConnell

Antitrust was our favorite course in law school.  That law school was located in the south side of Chicago, city of big shoulders and bigger minds (Posner, Easterbrook, et al.) who weren’t shy about subjecting antitrust law to flinty-eyed analysis.  It was exciting.  It was logical.  It focused on real world results.  Earlier Chicago School antitrust pioneers included Aaron Director, Ronald Coase, and Robert Bork.  You have probably heard of that last fellow.  His nomination to SCOTUS descended into a partisan circus resulting in his rejection, which was due as much to his beard and his lip-smacking over the SCOTUS case inventory “intellectual feast” as to his actual qualifications for the office.  His nomination also resulted in a new verb used for clobbering SCOTUS nominees: to “Bork” someone, especially someone who has a substantial written record.

 

We would hate to be Borked.

 

Applied correctly (i.e., Chicago-ly), antitrust law looks at how things really work and what really makes sense.  It is, in short, quite different from drug and device product liability law, where the realities of science, medical practice, and warnings are submerged in fanciful morality tales.  So it is with some exhilaration that we take this brief summer vacation away from Fosamax, Bausch, and the latest insane talc verdict to consider an antitrust case, Washington County Heath Care Auth., Inc. v. Baxter Int’l Inc., 2018 U.S. Dist. LEXIS 112064 (N.D. Ill. July 5, 2018).  That case is of interest to us because it turns on the real world realities of regulation and recalls.  Spoiler alert:  FDA regulation is extensive and voluntary recalls are not easy. (Nobody on the blog had anything to do with the case.  The opinions herein are wholly/only ours, not the parties’ or their lawyers’.)  

 

In Washington County Health Care Authority, the plaintiffs claimed that  the two largest producers of intravenous saline products violated the Sherman Antitrust Act by colluding to increase prices by initiating a series of bogus voluntary recalls that depleted the saline inventories of health care facilities throughout the nation.  The defendants filed a motion to dismiss, arguing that this theory is implausible.  They cited Twombly.  We on this blog often cite Twombly, but now we are reminded that Twombly was an antitrust case.  The defendants won their motion to dismiss, because the plaintiff’s theory that the defendants maneuvered their way into voluntary recalls was implausible.   Substitute the word “nutty” for “implausible” and you’d be a little closer to the truth.

 

Why was the plaintiffs’ theory nutty?  At different times, the two defendants issued voluntary recalls of IV saline due to leaks and the presence of particulate matter.  So, as an initial matter, you’ve got to believe that manufacturers would intentionally make up a story that their products were defective.  Who does that?  (As a DDL defense hack, we feel the Washington County Health Care Authority case pulling us through the looking-glass.  We’re used to hearing plaintiffs gripe that our clients should have recalled their products.  Can you spell damned-if-you-do-damned-if-you-don’t?) Further, to make out an antitrust case, there must be evidence that the two manufacturers agreed on this plan.  Was there any actual evidence of this agreement?  There was not.  The plaintiffs identified “parallel behaviors,” but those behaviors “are no more probative of an agreement than of independent self interested conduct.”  Moreover, the behaviors weren’t all that parallel. First, the timing was not quite consistent.  Second, one manufacturer recalled eight times as much product as the other.  Why would one conspirator confer such a benefit on its rival? 

 

There is another problem with the antitrust complaint.  Agreement or no agreement, the complaint contained no allegations suggesting that the reasons the manufacturers provided for the recalls were false.  The complaint did not say there weren’t leaks or there weren’t particulates.  Rather, the complaint characterized the defects as “inconsequential” or “technical,” thus permitting the defendants to engage in the recalls “without significant business or reputational risks.”  That contention is facially implausible, but it is also undercut by the FDA’s classification of the recalls as Class I or II, which are the two most serious recall designations.  A Class I recall occurs when “there is a reasonable probability that the use of, or exposure to, a volatile product will cause serious and adverse health consequences or death.”  21 C.F.R. § 7.3(m)(1).  A Class II recall “is a situation in which use of or exposure to, a violative product may cause temporary or medically reversible adverse health consequences or where  the probability of serious health consequences is remote.”  No rational manufacturer would willingly walk into those categories.  

 

Even more basically, and no matter what category is implicated, voluntary recalls “impose high upfront costs and invite FDA scrutiny of the very instrument of the unlawful agreement.”  FDA considers a removal of a product from the market to be a voluntary recall if it “regards the product as involving a violation that is subject to legal action e.g., seizure.” 21 C.F.R. § 7.46(a).  Thus, the court concluded that a complaint “premised on a theory that the defendants intentionally manufactured a public health crisis by orchestrating  bogus product recalls that would, despite the public health crisis and rigorous regulatory oversight of product recalls, escape the FDA’s attention, lacks facial plausibility.”   And then there is a consideration of the practicalities of recalls.  “Product recalls are expensive and draw attention from regulators, especially in the pharmaceutical industry.”  The recalling company must submit a detailed recall strategy for evaluation by the FDA, must actually implement recall notifications, and must vigilantly monitor the recall and provide periodic updates to the FDA (tracking the number of purchasers notified of the recall and their responses, among other things).  21 C.F.R. § 7.42; 21 C.F.R. § 7.53. None of that is cheap or easy. 

 

Finally, it is hard to say that the non-agreement to cook up an expensive, self-inflicted reputational wound succeeded in raising prices.  The complaint acknowledged that in response to the saline solution shortage, the FDA permitted saline to be imported from foreign manufacturers – “another fact that illustrates the implausibility of the plaintiffs’ theory that the defendants colluded in a manner that convinced their regulator to allow imports from foreign competitors.” 

 

Hurray for the Windy City, where smart professors and smart judges are happy to blow away frail antitrust fables.  Now if only those winds could also clear the terrain of silly drug and device cases.   

 

 


Way back in law school we learned that a plaintiff suing for negligence must satisfy four elements:  (1) duty, (2) breach, (3) causation, and (4) injury.  Every one of these elements can be a battleground.  Even what seems like the simplest inquiry – whether the plaintiff was injured – can be controversial.  We have seen cases where a plaintiff alleged increased chance, and consequent  fear, of injury.  Is that enough?  Psychological injuries present a host of difficulties.  Remember the “zone of injury” cases?  Some injury issues manage to be at once both straightforward and intractable.  One of the all-time great movies about litigation, The Fortune Cookie, centered around that great bugaboo of small-time litigation – soft tissue injury.  Not everyone who dons a neck-brace is really hurt. 

 

The element of breach can also be knotty.  Was the defendant insufficiently careful?  How much care is reasonable?  What is the standard of reasonableness?  Reasonable person?  Reasonable riveter?  Reasonable podiatrist?  When we sat on a jury in a med-mal case a couple of months ago, pretty much the only issue in play was whether the doctor had paid close enough attention to his patient’s hemoglobin levels.   Some jurors wanted to throw up their hands, exasperated at the impossibility of knowing what a doctor should do.  Theoretically, the breach element drops out in strict liability cases.  Fault should not matter.  But when the claim is strict liability failure to warn, negligence principles creep back into the case.  It can be hard for a defendant to win summary judgment on breach.  Courts are quick to throw that issue to the jury.  And then, like the jury we sat on, some poor fact-finders will want to throw the issue right back.

 

More often, it is the causation element that constitutes summary judgment bait.  In this blog, we have spilled a lot of web-ink on the causation issue, whether it be medical causation (did this drug or device hurt the plaintiff?) or warning causation (would a different warning in the label have steered the doctor away from this product?).  If the doctor did not even read the label, our clients win.  Some commentators say that there are five, not four, elements, because causation actually involves separate questions of but-for causation and proximate causation.  That latter item has given rise to quasi-philosophical musings.  Maybe something played a role in the causal chain, but is it so remote or obscure that putting the defendant on the hook for damages would be unfair?  Maybe Donny was a dolt to leave a lit candle on the dresser in his rental apartment, but should he be on the hook if a burglar broke in, knocked the candle onto the rug, and set the place ablaze?  Proximate causation, in the views of some, can boil down to whether it was reasonably foreseeable that the breach of the duty of care would cause this particular harm.  But evaluating foreseeability can almost seem like an epistemological exercise.  Whose perspective counts?  What are the sources of foreseeability?  We’ve always thought that foreseeability was a fuzzy criterion, because it can be altered by so many things – including court opinions.  Now that we know how clumsy burglars can be, thanks to F. Supp. or Law360 or the Philly Inquirer or Eyewitness News, shouldn’t we be extra-careful about leaving lit candles behind?  (Similarly, in Fourth Amendment jurisprudence, the notion of reasonable expectation of privacy seems mercurial.  Don’t SCOTUS pronouncements themselves shape such expectations?  Once we read how cops can identify marijuana grow-rooms via thermal imaging, doesn’t our expectation of privacy somehow diminish?  But we digress.)   

 

If proximate cause turns, at least in part, on foreseeability, so does the first negligence element, duty.   Today’s case, Martinez v. Walgreen Co., 2018 WL 3241228 (S.D. Texas July 3, 2018),  is about the scope of duty.  Maybe the Martinez case will end up being one for the law books.  Even though the defendant in Martinez is not a drug or device company, we feel duty-bound to report on it.  The defendant was a pharmacy, and the claim was the pharmacy dispensed the wrong prescription to its customer.  The medication incorrectly given to the customer allegedly caused the customer to experience hypoglycemia, which adversely affected his ability to drive (blurry vision, dizziness, etc.), which resulted in a series of auto wrecks that killed the occupants of other vehicles.  Those other drivers/passengers happened to be in the wrong place at the wrong time.  The estates of those victims sued the pharmacy for dispensing the wrong drug.  Even assuming that the pharmacy was negligent and that such negligence caused the terrible injuries, and assuming that the pharmacy owed a duty to its own customer to get the prescription right, did the pharmacy owe a duty of care to the people in the cars struck by its customer?    

 

The federal court, applying Texas law, said No, and granted summary judgment to the pharmacy.  In Texas, pharmacists are considered health-care providers and owe their customers a duty of care.  That much is clear.  But Texas courts have not recognized a general common-law duty for health-care providers towards third parties for injuries that may be the result of the provider’s negligence to the patient.  So far, so bad for the plaintiff.  Nevertheless, Texas has recognized a duty for medical professionals towards third parties in very limited circumstances when the breach of a duty to the patient gives rise to a reasonably foreseeable harm to an identifiable person or class of persons as a consequence of that breach.  For example, if a medical facility housing a criminally insane patient – one who presented a clear danger to the public – failed to control that patient and permitted him to shoot someone, the facility could be liable for breach of the facility’s duty to control the patient.  Is that a good analogy to what happened in Martinez?  Perhaps the best case that plaintiffs cited was one in which a Texas court held that a doctor who failed to warn a patient who had a known history of drug abuse not to drive while under the influence of Quaaludes and the patient then drove and injured third party motorists.  Pretty close, right? 

 

But Texas courts over the years have considerably reined in the duty to third parties.  Thus, physicians have no duty to warn epileptic patients not to drive and mental health professionals have no duty to warn third parties about specific threats (the law might be different elsewhere).  Texas courts have also ruled that pharmacists have no duty to warn about the potential side-effects of medication.  Against this not entirely consistent or clear legal backdrop, the Martinez court asked the following question:  “Under Texas law does a pharmacist owe a duty to unconnected third parties for the negligent prescription of medication?”  The court answered that question in the negative because “In order for a third-party duty to arise, the breach of the health-care provider’s duty to the patient must create a reasonably foreseeable consequence to an identifiable party or class.  Here, Plaintiffs are not identifiable third parties.”  The defendant pharmacy had no duty to control its customer’s behavior or to warn him about side effects.  To find a duty to the plaintiffs, the court would have to find that “a pharmacist has a general duty to the public for negligent provision of medication.  The Texas Supreme Court has never held that such a duty exists, and thus, this Court, Erie-bound cannot so find now.”  Well, that sort of respect for Erie is eerily refreshing, isn’t it?

 

The plaintiffs still did not give up.  They argued that the pharmacy’s dispensation of the wrong medicine violated a statute and that, therefore, this was a case of negligence per se.  The negligence per se doctrine simply means that a defendant’s violation of a statute removes the need for a jury to assess whether the defendant was careless.  The statute itself sets the bar for due care.  But what that means is that negligence per se answers the breach question –  “negligence per se does not impose a duty.”  It is the absence of duty in the Martinez case that puts the plaintiff out of court.   It is the absence of duty in the Martinez case that puts that case in our blog. 

 

 

 

Today is our favorite holiday of the year.  It is about BBQ, beach, and conviviality to some extent, but it is chiefly a celebration of the first official public announcement of the Declaration of Independence here in Philadelphia two hundred and forty two years ago.  The delegates of the Second Continental Congress actually approved the Declaration two days earlier.  The vote was twelve in favor of independence, with one abstention (New York – which made it unanimous after the fact).  John Adams predicted that July 2 would become a day of jubilation that would be “solemnized with Pomp and Parade, with shews, Games, Sports, Balls, Bonfires and Illustrations from one end of the Continent to the other from this Time forward forever more.”  Well, aside from being off by two days, Adams turned out to be right.  The announcement date became more important than the vote itself.  Plus, July 4 is the date on the signed document that sits in our National Archives.

 

Adams, by the way, was originally proposed to be the author of the Declaration, but he deferred to Jefferson.   Even so, Adams and other members of the drafting committee (including Benjamin Franklin) edited Jefferson’s draft with a heavy quilled pen.  Jefferson thought that the edits “mangled” his work, but we’d say the document turned out fairly well.  The Declaration was really a legal brief supporting separation from Great Britain.  But its second sentence also set out our country’s mission statement, which perseveres no matter how many times we manage to fall short:  “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among them are Life, Liberty, and the pursuit of Happiness.”  We’ll take that single sentence over the Parthenon, Colosseum, Notre Dame, Tower Bridge, or Great Wall (or any other wall).

 

The Fourth of July is a quintessentially American holiday.  It is hot, loud, and rambunctious.  We meant to order four big pieces of red, white, and blue bunting, but clicked the wrong button and ended up with eight.  No matter.  We climbed a ladder and hung it all over the front porch.  John Philip Sousa would love our house. Meanwhile, the dog trembles in anticipation and terror.  He seems to know that lots of cooked cow and pig and chicken flesh is coming his way, followed by a festival of sparklers,  cherry-bombs, and Roman candles in the backyard.

 

Many other important American historical moments occurred on July 4, some purposefully coinciding with that date, and some being purely accidental.  For example:

 

July 4, 1817 – Construction of the Erie Canal commences.  Some point to the canal as the major reason why New York overtook Philly as the nation’s preeminent metropolis.  Some of us still haven’t gotten over it.  The 2009 World Series didn’t help.

July 4, 1826 – Both Thomas Jefferson and John Adams perish 50 years after the first Independence Day.

July 4, 1827 – Slavery was abolished in New York. It is shocking and sad to think how long slavery lingered even in the northern states that claimed the moral high ground only a few decades later. (One of the edits that Jefferson believed “mangled” the Declaration was deletion of a passage condemning slavery.)

July 4, 1845 – Henry David Thoreau set up house on the shore of Walden Pond.  Why?  We can hardly improve on Thoreau’s explanation:  “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived.”  The book marked another declaration of independence, this time with literary, cultural, economic, and spiritual ambitions.

July 4, 1855 – Walt Whitman published the first edition of Leaves of Grass.  Like America, the book was always a work in progress.  Over the years, it grew in size, greatness, and reputation.

July 4, 1863 – The Confederate Army withdrew from Gettysburg and Vicksburg surrendered.  While the Civil War would wreak carnage and calamity for almost another two years, the conclusion now seemed inevitable.

July 4, 1881 – Tuskegee Institute opened.

July 4, 1910 – Jack Johnson knocked out Jim Jeffries.

July 4, 1939 –A stricken Lou Gehrig told a Yankee Stadium crowd that he was “the luckiest man on the face of the earth.”

July 4, 1966 – LBJ grudgingly signed the Freedom of Information Act into law.

 

The Fourth of July also witnessed the birth of people who exemplified the American character in various ways:  Stephen Foster (1826) began the American songbook, Rube Goldberg (1883) conjured up crazy, convoluted machines to perform simple tasks, thereby giving rise to a wonderful adjective (“Goldbergian”), and George Steinbrenner (1930) contributed to that pesky New York dominance alluded to above.  (Grrrr.)

 

Whether or not you manage to make history today, we hope you manage to make merry with loved ones.  If it is too hot outside, take in a “shew.”  If you light any fireworks or bonfires, by all means be careful! Go ahead and pursue happiness.  Maybe you’ll even catch it.

 

 


We’re not fans of dinner party chatter, especially when we’re berated for defending alleged corporate deviltry against widows and orphans.  We’d just as soon find another corner of the room and another stiff pour of Lagavulin.  But there is a point that seems to register with even our most self-righteous accusers: for every meritorious case, there are many, many more that are made-up money grabs.  The chattering classes agree that plaintiff lawyers are at least as greedy as occupants of the C-suites, and are, if anything, more prone to playing fast and loose with the facts.  Plaintiff lawyers overreach.  Everyone knows that.  Do courts?

 

Yes, at least some do.  A recent example can be found in Carroll v. E One Inc., et al, 2018 WL 3040757 (3d Cir. June 20, 2018).  Carroll is not a drug or device case, but it contains useful language about plaintiff lawyers who fail to do the minimal homework as to whether their clients actually have a case.  The plaintiffs in Carroll were firefighters who sued the manufacturer of fire sirens, alleging that they suffered occupational hearing loss due to the “omni-directional design” of the sirens, which “unnecessarily exposed the firefighters to dangerous levels of sound.”  This lawsuit was one of several filed around the country, all involving the same plaintiff lawyers, same defendant, and same theories. Results varied in those other cases. The plaintiffs won some, lost some, and dismissed some after it became clear that the cases were flat-out losers.  It became pretty clear pretty early in the Carroll case that it was in the loser category.  First, early discovery revealed the firefighters’ lawsuit to be time-barred. Since the 1990’s, the plaintiffs’ fire department conducted routine annual audiological screenings of all of its firefighters. Nearly all of the plaintiffs in this suit had been advised many years earlier that they had hearing loss that was very probably caused by the loud noises to which they were exposed on the job and that they should be wearing hearing protection. Consequently, the plaintiffs’ claims were “obviously” time-barred when they filed in or around January 2015. Second, one firefighter had not even suffered hearing loss attributable to noise exposure. Oops. As the district court observed, “had Plaintiffs’ counsel spoken with the individual plaintiffs or conducted any other type of investigation prior to commencing this litigation, [counsel] would have learned these facts.”

 

How could the plaintiff lawyers miss the obvious flaws in the case?  Let’s now perform a cinematic flashback and look at how the plaintiff counsel collected their plaintiffs. The firefighters received a notice at their fire departments either on a physical or web-based bulletin board that free hearing screening was being offered at the union hall. Many of those notices were prepared by the plaintiff counsel’s law firm.  Firefighters who decide to avail themselves of the free hearing test went to the union hall, then into a certain room, sometimes two firefighters at a time, where an audiologist puts headphones on them, played tones and directed the firefighters to raise their hands or push a button when they heard the sounds. You have probably heard of such tests before.  The firefighters were not informed of test results until months or sometimes years later, after they became part of a lawsuit. The firefighters were not referred to a doctor or advised to wear hearing protection.  Frequently the first contact a firefighter plaintiff had with someone from the plaintiffs’ counsel law firm was just before or even at their deposition. You have probably heard of this sort of thing before, too. 

 

So maybe it’s not such a surprise that the plaintiff lawyers took a while to catch on to the fact that their clients had no viable case.  Call those lawyers willfully deaf.  Nevertheless, even after learning the truth – and certainly well after they should have learned of the truth — the plaintiff lawyers pressed on.  They did so even after the defendant patiently laid out the defects in the case and invited the plaintiffs to dismiss before undue work was done (e.g., depositions) and undue expenses were incurred.  The plaintiffs said No thanks.  More work was done and more money was spent.  Then the plaintiff lawyers said, Never mind.  They grudgingly agreed to dismiss.  The defendant said Fine, but only if the plaintiffs paid appropriate attorney fees for all the waste.  The plaintiffs’ counsel ignored the counter-offer, and—without seeking leave from the district court—filed a “Notice of Dismissal,” asking the Clerk of Court to “mark the claims of all Plaintiffs as being dismissed without prejudice to all parties in this action.”  Nice try.  This “Notice of Dismissal” was improper under Federal Rule of Civil Procedure 41(a).  By that point, discovery had closed and the complaint had been answered.  The parties had not agreed to a stipulation of dismissal.  Accordingly, the defendant filed a motion seeking fees and costs and contested the plaintiffs’ counsel’s ability to “voluntarily” dismiss the firefighters’ claims without prejudice. The plaintiffs’ counsel continued to back-pedal, consenting to dismissal with prejudice, but still opposing the defendant’s request for fees and costs.

 

And now, we offer a brief primer on basic civil procedure law.  Under Federal Rule of Civil Procedure 41(a)(1), unilateral, voluntary dismissal is available only before the opposing party serves either an answer or motion for summary judgment. It was clearly too late for that in the Carroll case.  Thus, the plaintiffs’ effort to dismiss fell under Rule 41(a)(2), which allows an action to be “dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.” Exercising that broad grant of discretion in the Carroll case, the district court concluded that its terms would include an award of attorneys’ fees and costs. The district court recognized the “general rule [that] defendants are not permitted to recover fees when a plaintiff dismisses an action with prejudice absent exceptional circumstances.”  The plaintiffs’ counsel was banking on that general rule to shield them from attorney’s fees.  But as the district court put it, “this case is unusual and it therefore calls for an unusual solution.” 

 

What was unusual about the Carroll case?  The district court conducted an evidentiary hearing regarding the fee request.  A defense attorney testified.  The plaintiffs put on no evidence.  The district court ended up pointing to the complete failure on the part of plaintiffs’ counsel to spot the weaknesses in their case.  The district court also took into account that the selfsame plaintiffs’ counsel had been similarly asleep at the wheel or indifferent to reality in other cases around the country.  The plaintiff lawyers felt aggrieved by the fee award, so they appealed to the Third Circuit.  They lost. 

 

The Third Circuit acknowledged that attorneys’ fees and costs are typically not awarded when a matter is voluntarily dismissed with prejudice.  But such an award may be granted when “exceptional” circumstances exist. Exceptional circumstances include pushing a case forward with utter indifference as to whether there is any there there.  The plaintiffs’ counsel argued that they were not put on notice of the time-barred nature of their clients’ claims until the deposition of a medical director of the police and fire clinic that provided annual hearing tests to the plaintiff firefighters.  But that evidence turned out to be more damning than exculpatory.  All it did was provide “further evidence of counsel’s failure to conduct a meaningful pre-suit investigation.” The plaintiff lawyer “could simply have asked his clients during a routine interview when they had first discovered that they were suffering from hearing loss attributable to their jobs as firefighters.”  Then came the quote that any decent defense hack might want to tack on the wall for future use: 

“It highlights the importance that counsel treat each individual case in this aggregate litigation as just that, its own individual case.”   

 

Save room on the wall.  There’s more:  

“[T]his case is an example of some of the excesses of modern mass tort litigation – when attention to an individual case is sacrificed for the sake of pursuing mass filings.” 

 

As our nerd friends would say, that sacrifice of paying attention to an individual case is not a bug in the mass tort system in this country, it is a feature.

 

The Third Circuit had no problem with the district court’s consideration of “circumstances that extended beyond the geographic boundaries that make up the Eastern District of Pennsylvania.”  Last minute dismissal of frail cases was arguably part of the plaintiff counsel’s modus operandi in this litigation.  The plaintiff counsel complained that the district court had “appoint[ed] itself the policeman of this nationwide litigation” by “unilaterally usurp[ing] the powers of the other courts.” The Third Circuit put the “overheated rhetoric,” and concluded that the district court had not abused its discretion when it explicitly considered the entirety of the nationwide litigation.  Rather, the district court “properly took notice of how the case before it fit within the larger network of cases brought by Plaintiffs’ counsel throughout the country.”  This pattern and practice of failure “to perform a meaningful pre-suit investigation, and a repeated practice of bringing claims and dismissing them with prejudice after inflicting substantial costs on the opposing party and the judicial system,”  with such failure and infliction of costs being especially egregious and unnecessary in the Carroll case, constituted the sort of “exceptional” circumstances that called for an award of attorney fees even in the wake of a voluntary dismissal with prejudice.

 

Chalk it up as a nice win for the defense.  Nevertheless, a question gnaws at our defense hack noggin:  what if the plaintiff lawyers’ failure to pre-screen the cases for merit really is not so “exceptional”?

 

 

 

On this date 46 years ago, President Nixon and his aides had a conversation about the Watergate break-in and cover-up.  What did they say?  We do not fully know, because the tape of the conversation has an 18 and ½ minute gap.  That gap was one of the more mysterious aspects of an ugly saga that culminated in Nixon’s resignation two years later.  There is a lot to the legacy of Watergate, including the insistence on appending “-gate” to every scandal (e.g., Billygate, Bountygate, Bridgegate, Debategate, Deflategate, Emailgate, Koreagate, Nannygate, Pizzagate, Travelgate, and Wienergate), but there is no doubt that the greatest impact of Watergate was on the public’s mistrust of government.  One manifestation of that growing mistrust was the 1974 enactment of the Privacy Act amendments to the Freedom of Information Act (FOIA).  Gerald Ford, the man who succeeded to the Presidency after Nixon’s fall (and the man who pardoned Nixon), initially wanted to sign the FOIA-strengthening amendments, but a couple of movers and shakers from whom we would later hear a lot — Chief of Staff Donald Rumsfeld and deputy Dick Cheney – opposed the amendments because of potential leaks.  Another guy who would become a bit more famous — Assistant Attorney General for the Office of Legal Counsel Antonin Scalia — advised that the bill was unconstitutional and even telephoned the CIA asking them to lobby the White House staff against it.  That lobbying worked.  President Ford vetoed the bill.  But Congress overrode President Ford’s veto, giving the United States the core Freedom of Information Act still in effect today, with judicial review of executive secrecy claims.  But Scalia was like a dog with a bone.  Years later, he called the 1974 amendments “the Taj Mahal of the Doctrine of Unanticipated Consequences, the Sistine Chapel of Cost-Benefit Analysis Ignored.”  Worst of all, in Scalia’s view, was the provision for judicial review:  “an agency denies a freedom of information request, shazam!—the full force of the Third Branch of the government is summoned to the wronged party’s assistance.”

 

But sometimes the agency wins.  That is what happened in Henson v. Department of Health and Human Services, 2018 WL 2994878 (7th Cir. June 15, 2018).  The plaintiff submitted a FOIA request to the Food and Drug Administration (FDA) seeking documents related to the premarket approval process for a glucose monitoring system. The agency produced many responsive documents, but not enough to suit the plaintiff.  He resorted to the judicial review provisions of FOIA – the ones Scalia decried — naming the agency and the two agency employees as defendants. On the defendants’ motion, district judge Herndon (someone we in the DDL world know well) dismissed the two agency employees from the case, concluding that FOIA “does not create a cause of action for a suit against an individual employee of a federal agency.” A magistrate judge then granted the agency’s request for a stay of discovery because cases under FOIA generally proceed to discovery only after a plaintiff’s case survives a motion for summary judgment.  The agency supplied the plaintiff with a Vaughn index—a list of each redacted or withheld document cross-referenced with the exemption that the agency asserts is applicable.  The FDA moved for summary judgment, arguing that it had conducted a reasonable search for all documents responsive to the FOIA requests and that it had properly withheld and redacted documents pursuant to FOIA exemptions for trade secrets, agency deliberative documents, and patient and employee private information.  Judge Herndon granted summary judgment for the defendants.

 

On appeal, the plaintiff raised three challenges: (1) that the district court should not have dismissed one of the agency employees as a defendant; (2) that entry of a stay pending summary judgment was improper, and (3) the district court erred on the merits.  The first two issues were easy.  First, the Seventh Circuit fell into line with the D.C., Fifth, and Ninth Circuits in holding that a plaintiff may not sue an individual agency employee for violating FOIA.  Second, entry of a stay pending summary judgment was well within the court’s “considerable discretion to manage the court’s docket to ensure the ‘just, speedy, and inexpensive’ resolution” of the case. 

On to the merits. 

The Seventh Circuit held that the undisputed facts showed that the FDA’s search for responsive documents was reasonable.  The agency searched its database.  The agency also had the recipients of the plaintiff’s letters and those representatives with whom the plaintiff had met search their files for responsive documents.  That was enough.  (We would be well-pleased if courts would follow Judge Herndon’s exquisite sense of reasonableness when assessing our client’s responses to discovery requests.)  The main issue in play was the applicability of the FOIA exemptions.  Here there was a procedural problem.  The plaintiff had the agency’s Vaughn indices yet did not point to specific claims of exemption with which he disagreed.  Nor did he file the Vaughn indices on appeal.  The Seventh Circuit was annoyed.  It advised future litigants to file such indices on appeal.  Meanwhile, the Henson appellate record was bereft of the sort of record that might permit the court to overturn the lower court’s decision.  In any event, the lower court’s decision seemed correct with respect to all applicable exemptions. There was certainly no clear error.

Exemption 4 under FOIA protects from disclosure “matters that are … trade secrets and commercial or financial information obtained from a person and privileged or confidential.”  That exemption, like the things defendants try to protect in standard confidentiality orders, applies when disclosing the contested information would cause “substantial competitive harm to the firm that owns the information.”  One of the document categories the FDA refused to produce was information regarding the raw materials used by the manufacturer of the glucose monitor.  That information was never publicly disclosed by the manufacturer, “nor is there evidence that the raw materials do not have economic value by virtue of remaining confidential.” 

Exemption 5 allows an agency to withhold “inter-agency or intra-agency memorandums or letters that would not be available by law to a party other than an agency in litigation with the agency.”  In withholding information pursuant to exemption 5, the FDA detailed “on an individual basis the topics discussed by the agency’s employees and the purposes for the communications.”  The plaintiff did not contradict any of the agency’s representations.  There was no showing of error, much less clear error.

Finally, exemption 6 excuses the disclosure of “personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.”  The Seventh Circuit held that the “revelation of personal identifying information tips the scales in favor of non-disclosure.”  Hearkening back to the Watergate-era concerns animating the Privacy Act amendments, the Henson court observed that FOIA “requires transparency from the government – not the manufacturer’s patients and employees.”

 

 

Not so long ago the Philadelphia Court of Common Pleas emitted a malodorous opinion exercising personal jurisdiction over a foreign corporation because one of its materials suppliers was in Pennsylvania, even though the quality of that supplied material seemed to have nothing much to do with the injury, which occurred outside Pennsylvania.   That opinion seems to have mislearned the teaching of the SCOTUS BMS opinion.  Beyond that, the less said about it, the better.  But it was interesting to us how that rotten opinion did not address the plaintiff’s alternative argument that the corporate defendant’s registration to do business in Pennsylvania constituted consent to general personal jurisdiction.   Perhaps the court realized it had done enough damage by stretching specific personal jurisdiction beyond the bounds of reason.

Or perhaps the Philly court did not buy the consent argument.  And now we know that is the case because the same court and same judge issued an opinion rejecting the consent via corporate registration argument.  Mallory v. Norfolk So. Ry. Co., No. 1961 8-2 EDA, slip op. (Phila. C.C.P May 30, 2018), is actually a very good personal jurisdiction opinion.  Let’s pause, rub our eyes, take that in, and celebrate.

The plaintiff in Mallory was a railway carman in Virginia. He sued his railway employer, which was incorporated and had its principal place of business in Virginia, alleging that exposure to carcinogen caused him to suffer colon cancer.  The defendant was definitely not “at home” in Pennsylvania.  The exposure and injury did not occur in Pennsylvania.  So why was the case in Philadelphia?  Could it be the reputation Philadelphia juries enjoy for flipping million dollar verdicts around like nickels?  Yes, Virginia plaintiffs, there is a Santa Claus, and he sits on a jury in Philadelphia’s City Hall.  Virginia courts and juries, of course, have a very different reputation.

But even putting aside mere predilection, what could possibly be the basis for a Virginia plaintiff to sue a Virginia defendant in Philadelphia for injuries having nothing to do with Philadelphia?  The plaintiff hung jurisdiction on the defendant’s registration to do business in Pennsylvania.  The plaintiff was not merely engaged in wish fulfillment.  Section 5301 of the Pennsylvania Judiciary Act does, unfortunately, provide that qualification as a foreign corporation in Pennsylvania constitutes a sufficient basis for general personal jurisdiction.

The question, then, is whether exercising personal jurisdiction over a corporation that registered to do business in Pennsylvania, without more, comports with due process.  Put another way, whatever the statute says, does foreign corporate registration equal true consent – the kind of consent that can waive constitutional rights?

The Mallory court’s answer seems altogether obvious but, at the same time, remarkable given the court that is doing the answering.  It is actually a rather brave, as well as wise, decision.  The court reviews the Pennsylvania statutory scheme and concludes that the “Defendant’s consent to jurisdiction was not voluntary.”  If a foreign corporation does not register with the Commonwealth, it cannot do business in Pennsylvania.  Moreover, it would be prohibited from seeking any redress with the Commonwealth’s courts (you know – in cases where Pennsylvania jurisdiction actually made sense).  As the Mallory court reasons, “the Legislature imposed a punitive sanction upon those foreign corporations; it matters not if such a sanction is characterized as a carrot rather than a stick, the punitive result is the same.”  Put simply, foreign corporations have no choice but to register in Pennsylvania.  Having no choice is the antithesis of giving consent.  The Mallory court held that a state’s securing of general personal jurisdiction over a foreign corporation via what is essentially mandatory registration is an exercise of coercive power at odds with the SCOTUS BMS decision and due process.

To be sure, there are some old legal chestnuts out there that permitted “state courts to obtain personal jurisdiction over  foreign corporations via mandatory registration statutes” (e.g., Pennsylvania Fire Ins. Co. (1917)), but those cases “are relics of the Pennoyer era, in which a bright-line rule prohibited courts from exercising personal jurisdiction over persons or corporations outside the geographic boundary of the court.”  They have been effectively overruled.  And good thing, too.

By contrast to the Philadelphia court’s crabbed reading of the recent SCOTUS BMS case when it came to specific personal jurisdiction, the Mallory court’s reading of recent SCOTUS precedents on general jurisdiction is insightful and on the mark.  The Mallory court interprets recent SCOTUS cases as teaching that “federalism prevents this Court from exercising general jurisdiction over Defendant simply because Defendant does business in Pennsylvania.”  Thus, “[b]y requiring foreign corporations to submit to general jurisdiction as a condition of doing business here, Pennsylvania’s statutory scheme infringes upon our sister states’ ability to try cases against their corporate citizens.”  Yes, hurray for those sister states, with damages caps and parsimonious jurors.

The reasoning of Mallory in rejecting the consent argument is sound, it should apply to all Pennsylvania cases and, for that matter, cases anywhere.  Indeed, Mallory’s reasoning on the issue far exceeds that of several federal district courts in Pennsylvania, which have fallen for arguments that the Pennsylvania statute could somehow overcome constitutional restraints on general personal jurisdiction.

Now if only the courts here could screw their heads on right about specific jurisdiction.

Last week we discussed a federal court’s holding that mere fear of injury was not an actionable tort. In the run-up to the description of the case, we reminisced about the diet drug litigation, where many plaintiffs alleged heart valve injuries that had not yet manifested any physical symptoms. Those plaintiffs claimed they feared sudden death or open-heart surgery.  Would those scary things happen?  When?  Those cases produced wildly inconsistent results.  On essentially the same facts, some cases were dismissed by courts, some made it to a jury that would award zero or minimal damages (perhaps the cost of antibiotics for dental visits) and we can think of one trial that culminated in two verdicts of over $100 million because the Philadelphia trial judge permitted the plaintiff lawyers to make the case about the company’s funding of studies (where the studies were entirely legitimate and the company’s connection was disclosed, mind you) rather than about the particular plaintiff.  Not to put too fine point on it, but the diet drug litigation was not one of the glorious episodes in American jurisprudential history.

 

That is an understatement. It turns out that there were plenty of plaintiffs who did not even have actual heart valve injury.  The diet drug mass tort mostly settled, under threat of class certification (something that, thankfully, doesn’t happen anymore).  There were opt-outs, to be sure, but lots of plaintiffs signed onto a settlement process where plaintiffs’ payments depended on their placement on a grid, with extent of injury being the key factor.  How to determine extent of injury?  Ah, there’s the rub.  It turns out that some doctors working with/for some plaintiff lawyers sold their integrity and purposely misinterpreted echocardiograms to call valvular regurgitation moderate or severe when it was actually mild or did not even exist at all. That was fraud, it was ultimately found out, and medical licenses were lost.  Pretty bad, right?

 

Wouldn’t you know it that the day after our post last week the Sixth Circuit issued a decision, McGirr v. Rehme, ___ F.3d ___, No. 17-3519, 2018 WL 2437184 (6th Cir. May 31, 2018), that reminded us of another fraud associated with the diet drug mass tort litigation – this time involving the legal profession in a very ugly way.  The case was an effort by diet drug plaintiffs to recover money from a plaintiff lawyer who had stiffed them.  Their entitlement to the money had already been established.  The problem was collecting on the judgment, because the plaintiff lawyer was doing a nifty job of moving his assets around.  Because any further characterization by us will likely elicit accusations of schadenfreude on our part, we will rely on direct quotes from the Sixth Circuit’s opinion as much as possible.

 

Here is how the opinion begins:  “For years, plaintiffs’ attorney Stanley Chesley appears to have been orchestrating a high-stakes shell game in an effort to escape a long overdue multi-million dollar judgment. In the process, he has defrauded hundreds of judgment creditors, many of whom are plaintiffs here.”  2018 WL 2437184, at *1.  And we’re off.

 

What had happened? A diet drug settlement in 2001 gave the plaintiff lawyers $200 million, with the defendant leaving it to the plaintiff lawyers “to divvy up the settlement among the class members as they saw fit.  Trusting the attorneys with such a task proved to be a mistake.” Id. at *2.

 

Another understatement. Plaintiff lawyers told their clients they had received a settlement in a certain amount, but then reported a significantly higher amount to the defendant, and the plaintiff “lawyers kept the difference.” Id. In the end, clients received a total of $75 million when they should have received $134 million. Id. Easy money, but not an especially clever scheme.  Indeed, the Kentucky Bar authorities smelled something foul. To cover their tracks, the plaintiff lawyers found a compliant Kentucky judge who retroactively altered the terms of the fee deal and then sealed the record.  That judge also was set up as a director of a charitable organization created by the new fee deal.  That judge pocketed over $48,000 from the arrangement.  That judge has since been “permanently disbarred.” Id. at *3.

 

So far, clients were cheated and the judiciary was corrupted. But wait, there’s more.

 

The plaintiffs won a lawsuit in Kentucky and got a judgment in 2007 against their lawyers (and Chesley as a co-conspirator) in the amount of $42 million. Id. In 2011, the Kentucky Bar held that Chesley violated “eight separate rules of professional conduct and recommended his permanent disbarment” and the Kentucky Supreme Court upheld that decision.    Id. (footnote omitted). “Chesley’s time as an attorney in Kentucky had come to an end.” Id. Chesley’s home jurisdiction of Ohio “would likely impose reciprocal discipline” but it never got the chance because Chesley retired from the practice of law in 2013. Id.  He then executed a “wind-up” agreement with his law firm that “served as a vessel through which Chesley could move his assets.” Id.

 

The Kentucky plaintiffs, looking to execute on their judgment, “came knocking,” but Chesley found a helpful judge in Ohio who kept entering “unusual” orders that frustrated the execution efforts of the Kentucky plaintiffs. Id. at *3-4.  “This kicked off a jurisdictional turf war on either side of the Ohio River.” Id. at *4.  In 2015, the Kentucky judge ordered Chesley to cross the river and justify his noncompliance with the court’s order, but Chesley did not show, so an arrest warrant was issued.  No matter, because that helpful Ohio judge granted an injunction “preventing Chesley’s arrest.” Id.

 

This all happened in the United States of America.

 

Speaking of the United States, the plaintiffs got the bright idea to turn to the federal courts. They brought an action in S.D. Ohio “to get an order recognizing Chesley’s recent transfer transfers (including the wind-up agreement) as fraudulent and to unwind those transfers.” Id. The plaintiffs asked the Ohio federal court to enter “a preliminary injunction that would freeze Chesley’s assets to prevent him from moving those assets outside the court’s jurisdictional reach.” Id. at *5.  Before the court could enter any injunction, the assets moved yet again, via a maneuver in Ohio state probate court. The district court found the new transfer malodorous and issued a TRO, later converted to the preliminary injunction sought by the plaintiffs. Id. (This must have all seemed awkward to the court, as Chesley’s wife was a federal judge in the same courthouse.  Yikes.) The Ohio Supreme Court “validated the district court’s suspicions” and found the asset transfer to be fraudulent and an abuse of process. Id.

 

Meanwhile, the preliminary injunction was in place, and went up on appeal to the Sixth Circuit.   Because of the asset transfers, Chesley was not a party to the appeal.  This case was about following the money.  After reciting this sordid story, the Sixth Circuit applied the standard factors for assessing a preliminary injunction: (1) the movant’s likelihood of success on the merits, (2) whether the moving would suffer permanent harm absent an injunction, (3) whether the injunction would harm third parties, and (4) whether the injunction would serve the public interest. Id.

 

This was not a hard case. The Sixth Circuit concluded that the questionable asset transfer checked “virtually all of the … boxes” for the Ohio statute on fraudulent conveyances. Id. at *6.  The Ohio Supreme Court’s decision finding a transfer fraudulent made an easy decision even easier regarding the merits of the plaintiff’s action.  This blog is not about fraudulent conveyance law, so let’s leave it at this:  there was ample evidence of transferring assets to an insider, of Chesley’s retention of actual control of the money, of concealment, and of convenient timing.  Chesley and the other defendants offered explanations, of course.  But the Sixth Circuit kept its eyes on the big picture: “In the mid-2000s, after helping to steal millions of dollars from the Guard case plaintiffs, Chesley felt the walls closing in on him.  In 2005, his ex-clients used him.  In 2006, a Kentucky court found his accomplices liable.  In 2007, the same court entered a $42 million judgment against them.  All the while, the Kentucky Bar was investigating him.  Shortly after, Chesley began to move the majority of his assets around. Id. at *7-8.  This evidence suggests that Chesley has been carefully keeping his money just out of the plaintiffs’ reach, in the event that he was also found liable for the $42 million he had stolen.” Id. at *8.

 

As we said, this was an easy case.

 

Irreparable harm was obvious. The continuing shell game, if successful, would keep the money out of the plaintiffs’ hands.  The probate action “was just another move in that game.” Id..  Only the injunction could put an end to the game.  By contrast, Chesley could not demonstrate actual harm to other creditors. Id.  But it is the public interest prong where the Sixth Circuit opinion really sings.  The litigation “has been lumbering through federal and state courts for two decades.  In its wake, officers of the court have been disbarred and imprisoned; Kentucky and Ohio state courts have been pitted against each other; and Chesley has forced the federal courts to use judicial resources to try to stop it all.  There is a fundamental public interest in ending such abuse of the judicial system, in conserving judicial resources, and in preventing further confusion and disruption in this litigation.” Id. at *9.

 

The Sixth Circuit affirmed the district court’s entry of a preliminary injunction.

 

What are we to make of this concatenation of depressing facts? One could mutter a platitude about how the case offers a cautionary tale.  Fine. What is the caution?  Don’t cheat clients?  Don’t corrupt judges?  Any lawyer who really needs to hear those things is probably too far gone anyway.  No, the true caution is this: mass torts offer opportunities for massive frauds.  That is so not only because the large amounts of money are tempting and the large number of plaintiffs permits gamesmanship, but also because courts too often treat mass torts as settlements waiting to happen.  The litigation becomes a sausage grinder. The system grinds away, doing everything possible to encourage, or force, settlement.  But some cases shouldn’t be settled.  And the assumption that the plaintiff side is a good-guy David while the defendant side is a greedy malefactor Goliath is ridiculous and unfair.

 

It would be wrong to write off this case as an outlier. First, you have certainly heard of other mass tort settlement schemes that ended up being wracked with fraud.  Just in the past week we’ve read about allegations of questionable plaintiff-side conduct in both the NFL concussion and State Street foreign exchange mass/class litigations.  Second, what about the frauds you haven’t heard about?  Once a mass tort becomes a settlement waiting to happen, it becomes a fraud waiting to happen.  Rather than await the next awful morality tale that shames the legal profession and the judiciary, could we perhaps step back and check some of the assumptions plaguing the system?

Is fear of injury the same thing as injury?  The question answers itself.  At least it should.  They are not the same, and there are strong jurisprudential reasons for courts to throw out cases alleging mere fear of injury.  We have a No Injury scorecard documenting a pretty clear court consensus that fear of injury should not be enough to get a case to the jury.  Think of diet drug cases where the claim was an increased risk of heart valve injury.  Most courts concluded that such fear did not amount to actionable injury.  Considerations of Article III case or controversy or standing or ripeness usually persuaded courts that fear of physical injury simply did not cut it.  But not always.  So it is good that today’s case, Perez v. B. Braun Medical, Inc., 2018 WL 2316334 (S.D.N.Y. May 9, 2018), gets added to the defense side of the ledger.  In 2010, the plaintiff had been implanted with an IVC filter to treat her pulmonary embolism (PE) and deep vein thrombosis (DVT).  The implant was intended to be permanent.  In subsequent years there were reports of IVC filters causing problems via misalignment and migration.  In 2014, the FDA urged doctors to remove IVC filters within one to two months after the danger of PE subsides.  The plaintiffs alleged that the defendants in this case continued to market their IVC filter for long-term use — according to the court, the complaint alleged that the defendants were “defying the FDA’s general recommendations.”  Meanwhile, no doctor recommended that the plaintiff remove the IVC filter, even though in 2016 a CT scan showed that the tip of the IVC filter possibly had tilted.  That tipping point was apparently not enough to remove the filter, but was enough to file a lawsuit.  The complaint alleged that the IVC filter was defective and increased the risk that the plaintiff would suffer a serious injury. The plaintiff also referenced unspecified economic and psychological damages. The defendants moved to dismiss the complaint for failure to state a claim upon which relief can be granted, arguing that the complaint did not adequately allege that the plaintiff had suffered any cognizable injury.  The court granted the motion to dismiss.  It analyzed the personal injury, warranty, fraud, and New York Business law claims separately, so we will do likewise.

1. Personal Injury Claims

The plaintiff alleged that her physical injuries were the post-implant likely tilting of the IVC filter, psychological trauma of living with a defective product implanted in her body, and the increased risk of future injuries due to the IVC filter.  The problem for the plaintiff was that New York law is reasonably clear that a mere threat of future harm is insufficient to impose liability against a defendant in a tort context.  To be sure, the complaint also alleged that the plaintiff “sustained serious personal injuries,” “serious physical injuries,” and “severe injuries,” that she suffered “loss of enjoyment of life, disability, and other losses,” and that she “incurred substantial medical costs and expenses to treat and care for Plaintiff’s injuries described herein.”  But those are more rote formulas than factual allegations.  The complaint certainly never described the nature of the injuries.  New York law does recognize claims for emotional distress, but such claims must be premised on truly outrageous conduct, and nothing like that resided in the complaint.  Perhaps the best thing that the plaintiff had was an allegation that the defendants marketed permanent filters even after the “FDA warnings that caution generally against long-term implantation of IVC filters.” But because those warnings, whether or not they said what the plaintiff alleged, did not happen until after the plaintiff’s implant, they could not preserve the plaintiff’s claims.

2. Breach of Warranty Claims

The defendants had a strong statute of imitations argument, because the clock on warranty claims usually starts at the time delivery, which was in 2010, more than seven years before the complaint was filed.  New York’s statute of limitations for warranty claims is four years.  The plaintiff trued to dodge the statute of limitations by arguing that the warranty explicitly extended to future performance, and that existed here because the defendants had stated that the IVC filters were safe and effective for permanent implantation.  But the complaint did not explain how the plaintiff’s particular IVC filter had fallen short.  Again, the mere tilting of the IVC filter, even with a risk of future harm, did not equate to a cognizable injury,  New York courts (like most courts on planet Earth) have acknowledged a policy of protecting court dockets from “being clogged with frivolous and unfounded claims.”  Warranty claims often seem like add-ons in product liability cases, and here they were frail add-ons to already frail claims.

3. Fraud Based Claims

Fed. R. Civ. P. 9(b) requires that fraud claims be pleaded with specificity, and the Perez complaint did not come close to meeting this standard.  Again, the plaintiff leaned on the defendants’ representations that the IVC filters were safe and effective for their intended and reasonably foreseeable use.  But the plaintiff never explained why those statements are fraudulent. After all, the the complaint admitted that IVC filters can be used to reduce the risk of PE and DVT, and it nowhere alleges that the plaintiff’s filter performed in a manner different from how the defendants describe.  Whatever the complications and injuries that the defendants failed to warn the plaintiff about, the complaint did not specifically describe them, and could not allege that the plaintiff had sustained any such complications and injuries.  Moreover, the complaint lacked any facts showing that the alleged omissions were made with an intent to deceive.  The plaintiff simply had not made out a case for fraud.

4. New York General Business Law Claim

The complaint’s final count alleged that the defendants engaged in consumer fraud in violation of New York General Business Law Sections 349 and 350<http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000081&cite=NYGBS350&originatingDoc=Ib48241005e2b11e89868e3d0ed3e7ebe&refType=LQ&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.FindAndPrintPortal)>. Section 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” Section 350 prohibits “[f]alse advertising.”  As with the plaintiff’s breach of warranty and fraud based claims, the New York Business Law claims failed to show what materially misleading representations the defendants made. That there are side effects associated with IVC filters that are implanted long-term, does not mean that the plaintiff’s IVC filter “had not been effective for implantation into the IVC to prevent PE and DVT for which it was designed or that it is not safer than the alternative.”

What is interesting about the Perez case is how the lack of a real injury did not just undermine the personal injury claims (seems obvious enough), but also undermined the representational claims.  What is doubly interesting about the Perez case is that the no-injury defense worked with respect to an implanted device.  Most of the good cases on our no injury scorecard involved drugs.  Arguably, a plaintiff has a little more to work with when there is a device implanted in the body.  There is a continuing exposure.  Nevertheless, mere fear of injury could not overcome the court’s fear of frivolous claims.

When we were on a jury last month we were warned not to consult any outside sources.  And we didn’t.  When we were in high school last century and studied the works of Eliot, Lawrence, Joyce, Waugh, and (another) Eliot, we were instructed not to consider extraneous issues, such as biography or social conditions.  Our teachers were still in the grip of the New Criticism and, therefore, so were we. 

 

But we found today’s case, Lynch v. State, 2018 Conn. Super. LEXIS 851 (Conn. Superior Ct. April 17, 2018), tough sledding without doing some research beyond the four corners of the opinion.  The case is about a plaintiff who was inseminated by a sperm bank donor, came down with a cytomegalovirus (CMV), and gave birth to children with serious injuries.   What we learned courtesy of the internet is that CMV is fairly common and usually doesn’t cause terrible maladies.  The problem is that if a CMV-negative woman gets infected with CMV during pregnancy, there is a possibility of birth defects.  That is what happened here.  The plaintiff had been CMV negative.  That is something she knew and her doctor knew, but the sperm bank did not know it.  The sperm donor tested as CMV-positive, though he no longer actively suffered from CMV.  The sperm bank accurately disclosed the CMV-positive status of the sperm.  What the sperm bank did not do was tell the plaintiff that if she was CMV-negative, then CMV-positive sperm could pose a risk.  But, presumably, the plaintiff’s doctor would know that.  We know it from reading a Wikipedia article.  We never attended medical school, not even for ten seconds.  Call us a semi-learned, blogging defense hack.

 

The sperm bank moved for summary judgment, arguing that it did not owe the plaintiff a duty of care because a sperm bank does not have a duty to inquire into its clients’ CMV status, nor is it obligated to engage in an informed consent discussion with clients regarding the clients’ CMV status.  The Connecticut court agreed with the sperm bank and dismissed the case.  How is this a drug or device case?  It isn’t, but the scope of duty to warn and the relevance of the learned intermediary doctrine both poke their way into this case, and that is enough for us to stand up and take notice.    

 

Pursuant to the regulations, sperm banks are required to test their donors for certain diseases, including CMV. But the regulations do not impose on sperm banks an obligation to discuss the implication of the tests they run with the purchasers.  The evidence here showed that the sperm bank fulfilled its obligation to test for the sperm donor’s CMV status and to report the results accurately.  The results indicated that the donor was fully recovered and immunized from the virus, and that he was not actively infected with CMV at the time of the donation. Due to these test results, the defendants reported that the donor was CMV-positive.  The evidence did not show any knowledge on the part of the sperm bank that the plaintiff was CMV-negative.  The only duty the sperm bank had to the plaintiff was to conduct the required testing on the donor and to report the results of the tests, which it did.

 

The Connecticut court analogized to the duties that a pharmacy owes to its customers.  A previous Connecticut court applied the learned intermediary doctrine to pharmacists. Yay for the Nutmeg State. The court held that imposing a general duty on pharmacies and pharmacists to investigate and evaluate all of the medications that their customers’ physicians prescribed would impose a burden outside the scope of their normal duties, as the main job of pharmacists is to dispense the medications that their customers’ physicians prescribe. The learned intermediary doctrine makes sense in the pharmacist context given the fact that physicians have more knowledge than pharmacists about their patients’ needs and proclivities. Holding otherwise would put pharmacists between the physician-patient relationship.  The sperm bank is like a pharmacist.  (That’s a sentence we never thought we would write, but there it is.) The plaintiff’s doctor testified that he would typically advise CMV-negative patients to choose CMV-negative sperm. (The opinion does not make clear why that did not happen here.)  The court reasoned that holding that the sperm bank “had a duty to inform the plaintiff parents about the risks that CMV posed would also put the sperm bank in the middle of the physician-patient relationship.” 

 

Most of the Lynch opinion contains a discussion of the scope of duty.  There is a lot about foreseeability. (It throws us back to first year in law school, when we sat in the last row, next to the guy who always added to the seating chart a space for “Garth, the Most Savage Troll of All.”  Only one teacher ever had the temerity to call upon Garth.)  Even beyond foreseeability, the court asked whether the sperm bank might have assumed a duty to the plaintiff because either its failure to exercise care increased the risk of harm or the harm was suffered because of the plaintiff’s reliance upon the defendant’s undertaking. No and no.  First, the information that the sperm bank made available on its website about sperm CMV status did not appear to increase the risk of the type of harm that the plaintiff allegedly suffered. Although the website did arguably give some medical advice by saying that the risk of acquiring CMV from donor sperm is low, the website also informed its customers that this is a medical issue that clients should discuss with their physician. This language “clearly suggests that the sperm bank’s customers should not rely on the information provided on the website and that they should ask their physicians about CMV.”  Back to the learned intermediary.  Second, there is no evidence that the plaintiff relied on this information when selecting the donor’s sperm. The plaintiff testified that she did not discuss her or her donor’s CMV status with any representative from the defendant sperm bank, and there is no indication that she saw the page on the website that allegedly created a duty.  The Lynch court went back to the pharmacy example.  It is possible for a pharmacy or pharmacist to assume a duty when they have “specific knowledge of potential harm to specific persons in particular cases.”  But here, “this exception is not applicable because the defendant sperm bank had no knowledge of the plaintiff mother’s CMV status.” 

 

Applicable federal regulations did not help the plaintiff’s case.  Test results will show that a donor is CMV-positive even if the donor had contracted and then subsequently recovered from the virus. FDA regulations provide that a sperm donor who is actively infected with CMV is ineligible to donate. Here, the sperm bank tested the donor and determined that he was CMV-positive, but that he had fully recovered from the virus and was not actively infected with it at the time of his donation.  There was no violation of the regulations.

 

Finally, there was the usual argument from a plaintiff that summary judgment should be denied until discovery is complete.  But a party requesting more time to conduct discovery bears the burden of establishing a valid reason why the motion should be denied, including some indication as to what steps the party has taken to secure facts necessary to defeat the motion. That burden was not met here.  Thus, the court granted the defendant summary judgment.

Last week at the DRI conference in New York an especially talented lawyer delivered an especially interesting address.  Everything about the speech was riveting and splendid, until she deployed the word “fulsome” in the increasingly popular, albeit wrong, fashion, as a synonym for full or complete. About twenty heads spun around to look at us with glee, knowing we had recently railed against this misuse.  How is “fulsome” superior to the simpler, correct words?  The interesting, specific meaning of fulsome is being diluted by foolish pomposity.  Still, the message conveyed to us by this event was not so much about the increasing misuse of “fulsome” but more about our increasing reputation for crankiness.  It is a curse.  When someone hands us a draft for editing, we must pass through it at least twice. Only after clearing away the grammatical wreckage can we review for substance.  It is undeniably a weakness on our part. A misplaced “only” will throw us off and make us want to drop the draft in the trash bin.  It would be wrong to say we “only threw three fits over confusions between ‘uninterested’ and ‘disinterested’ yesterday.”  That “only” belongs next to the word it is modifying, which is “three,” not “threw.” When someone writes that the court “found” something, if the reference is to a legal holding rather than a finding of fact, we reach for the red pen and mutter about the decline of the West.  The Third Circuit “held,” not “found,” that Levine preemption is a fact issue. Of course, the pernicious thing about the Third Circuit’s Fosamax ruling is that it transformed what should be a holding into a finding.  You have probably heard all this before.

 

Are we fretting too much over silly mistakes?  Maybe.  Are we being more than a bit pompous?  Maybe.  Nobody’s perfect.  There are probably no fewer than five dopey mistakes in this post. 

 

Mistakes are not always a big deal.  That is the lesson of a recent Third Circuit ruling in Estate of Goldberg v. Nimoityn et al., No. 17-2870 (3d Cir. April 13, 2018) (not precedential).  The case was a wrongful death med-mal case.  The plaintiff claimed that the doctors and hospital erred in delaying placement of a feeding tube.  The defendants hired an expert witness doctor who opined that the delay in placing the feeding tube was appropriate.  But in that expert’s report there was a mistaken assumption that pneumonia was a factor prompting delay on a certain date when, in fact, the pneumonia diagnosis did not occur until a later date.  At trial, the defense counsel fronted the error with the expert and elicited the expert’s testimony that the mistake was a typo and did not, in any event, affect his ultimate opinion that the delay in placing the feeding tube made sense.  The plaintiff lawyer objected and explained at sidebar that the fronting of the mistake and the explanation by the expert should be precluded because such testimony wandered beyond the scope of the expert report.  The plaintiff lawyer had been salivating over the mistake.  He told the court that he had considered raising the issue before trial.  But surprise seemed more appetizing.  It would no doubt make for a devastating cross.  The problem was that the defense lawyer had surprised the plaintiff by ruining the surprise.  The district court permitted the defense expert to ruin the surprise, reasoning that the ultimate opinion was the same and there was no material surprise.  The case went to the jury, which returned a verdict for the defense.  The plaintiff asked for a new trial, again arguing that the defense expert should not have been allowed to fix his mistake and, furthermore, that the expert’s attribution of the mistake to a typo was perjury.  The district court agreed that the typo explanation was “disingenuous at best,” but continued to believe that there was no prejudicial surprise.  The district court denied the motion for a new trial.  The plaintiff appealed to the Third Circuit.

 

The plaintiff’s main argument on appeal was that the district court erred in failing to exclude the defense expert’s testimony under Federal Rule of Civil Procedure 37(c) (Failure to disclose, to supplement an earlier response, or to admit).  The defense expert never supplemented his expert report.  The expert’s repair of the mistake in his report landed like a sandbag on plaintiff counsel’s head.  So the argument goes.  The Third Circuit reviewed the district court’s decision to admit the expert’s testimony  under the abuse of discretion standard.  The issues were whether the plaintiff was surprised/prejudiced, whether there was an opportunity to cure any prejudice,  and whether the defense exhibited any bad faith.  The plaintiff lawyer acknowledged that he knew about the mistake, so the surprise element was frail.  He was more frustrated than surprised. Further, the plaintiff lawyer did have the opportunity to cross-examine the expert and force him to admit that one of the major bases for his original opinion was a pneumonia diagnosis that did not actually exist.  The point was scored, albeit with less drama than the plaintiff lawyer desired.  The point is that any prejudice was largely cured.  Finally, there was no evidence that the defense acted in bad faith by failing to supplement the report.  The mere passage of two years time between issuance of the expert report and the trial testimony did not, by itself, establish a nefarious plan.

 

The Third Circuit also agreed with the district court that the defense expert’s reference to a typo was implausible, but not clearly perjurious.  The plaintiff expert had, after all, admitted the key fact that the pneumonia diagnosis did not yet exist when he thought it had.  The expert got an important fact wrong and confessed as much.  The opinion does not mention whether the plaintiff lawyer had more than a little fun at cross-examination with the typo whopper.  He certainly could have.  As has been said more than once, and as we seem to be hearing every day now, the cover-up is often worse than the original offense.  Be that as it may, there was no reason to order a new trial just so that the impeachment could have played put just the way the plaintiff lawyer wanted.          

 

There is a certain amount of cleverness in the plaintiff’s argument.  But clever is not the same as right.  One additional fact that makes us sure the Third Circuit is right in Nimoityn is that the Third Circuit was affirming a decision by district court Judge McHugh.  Before he became a judge, Gerald McHugh was one of the preeminent litigators in Philadelphia.  We never were in a case with him, and that is probably a good thing, because McHugh probably would have been on the other side of the v, and even more probably would have beaten our brains out.  We’ve been in the Penn Inn of Court with Judge McHugh for many years, and his contributions during the question periods have been invariably insightful.  Judge McHugh possesses a superabundance of intelligence, integrity, and – well – judgment.  He does not make many mistakes.  (We cannot think of any.)  He did not make one here, and the Third Circuit did not make one in affirming his ruling.