Photo of Bexis

What follows is from the non-Dechert side of the blog.

The history of the Zantac MDL has been one novel claim after another from the plaintiffs’ side.  Fortunately, the vast majority of those ideas have gotten nowhere.  That’s what most recently happened in In re Zantac (Ranitidine) Products Liability Litigation, ___ F.R.D. ___, 2023 WL 1797264 (S.D. Fla. Feb. 7, 2023).  The plaintiffs filed something entitled “Expedited Motion to Permit Multi-Plaintiff Complaints for Registry Claimants.”  This was the plaintiffs’ attempt to avoid paying filing fees for around 58,000 “registry claimants” − who are now obligated to make up their minds and file their complaints – or forever hold their peace.

Continue Reading Zantac MDL Zaps Crazy Consolidation Claims
Photo of Bexis

A couple of our recent posts have mentioned the alternative compensation system created by the 1986 National Childhood Vaccine Injury Act (“Vaccine Act”), 42 U.S.C. §§300aa-10, et seq.

This Vaccine Program is the Act’s alternative to tort litigation, which addresses alleged injuries resulting from vaccines covered by the Vaccine Act.  The legal aspects of the Vaccine Program are administered by the Department of Justice, and here’s a link to government’s description of the program

For decades, the Vaccine Program has been successful in protecting the nation’s childhood vaccine supply, and stands as one of Congress’ most effective limits on the destructive use of mass tort litigation.  The other side, which opposes any restraints on tort litigation, would love to see it fail.  Our recent posts have detailed their attempts to do just that through exposing the Vaccine Program to mass tort litigation tactics that the program, with its statutory limit of “not more than 8 special masters,” 42 U.S.C.A. §300aa-12(c)(1), is ill-equipped to withstand.

But ill-equipped does not mean unequipped, and that’s what this shameless plug is about.

The U.S. Department of Justice, which defends Vaccine Act claims in the Court of Federal Claims, is hiring.  If any blog reader is interested in defending both vaccines and the Vaccine Program, then we encourage you to think about applying.

The Office of Vaccine Litigation recently posted for a whopping twelve positions to –according to the posting − “address workload created by an increase in cases filed under the Vaccine Act.”  The posting is available on DOJ’s website and at USA JOBS.  These are GS 12-14 positions with starting pay (depending on experience and seniority) between $94,199 and $172,075 per year.  Promotions to the GS 15 pay level are common.

These positions are a great fit for anyone who has practiced mass tort defense, and in particular those who love digging into the science, working with expert witnesses, and actually presenting cases to the special masters who try them.  The job descriptions also point out that the DoJ attorneys in the Vaccine Program typically get to handle all program-related appeals to the Federal Circuit.  So hands-on appellate experience comes with these jobs, too.

We think that these specialty DoJ positions would be an excellent fit for younger, defense-oriented attorneys who enjoy defending products like vaccines, but who would like more hands-on and in-court experience than big firms like ours are often able to provide.

Photo of Rachel B. Weil

We’ve started thinking that it might be fun to run for a seat on our county’s (elected) trial court bench, when we retire from our law firm.  (Our current campaign is for our township’s school board.  If we succeed, our term will take us just about to the point at which we plan to retire).  Cases like today’s strengthen our resolve.  In a world filled with COVID, mass shootings, melting glaciers, and MAGA rumblings, a touch of the absurd goes a long way to pass the time.  We confess that we looked to see if the plaintiff in today’s case was proceeding pro se – that’s how little sense any of it made.  And we kept thinking how much fun we would have had writing the opinion. 

In Atoe v. Orthopediatric United States Distrib. Corp., 2023 U.S. Dist. LEXIS 26983 (W.D. La. Jan. 26, 2023), the plaintiff filed suit in state court, alleging claims on behalf of her minor child for injuries she alleged the child sustained as a result of an orthopedic surgical procedure she underwent.  The plaintiff claimed that the child’s injuries were caused by a defective medical device and by medical malpractice, and she sued the hospital and a doctor along with defendants in the device’s supply chain.  At about the same time, she went before a medical review panel that considered her medical malpractice claims against the medical defendants named in her suit along with one other doctor.  Once the panel was convened, the plaintiff dismissed the medical defendants from the lawsuit, “presumably,” according to the court, “to allow for exhaustion of the claims against those malpractice defendants through the medical review panel process.”  Atoe, 2023 U.S. Dist. Lexis 26983 at *1-2.  That’s how medical malpractice works in Louisiana.  The remaining defendants removed the case to federal court, asserting diversity jurisdiction.  The defendants filed their answer in federal court, and the court entered a scheduling order that included a trial date. 

Meanwhile, the medical review panel rendered its decision, so the plaintiff was able to file suit on her previously-dismissed malpractice claims against the hospital and the doctors.  But she did not amend her complaint to add those defendants; instead, she filed a separate suit in state court against them.  Once that suit was filed, the plaintiff moved to remand the federal proceeding (against the product liability defendants), arguing that the court no longer had diversity jurisdiction because of the separate lawsuit.  We kid you not. 

The court commented: 

Plaintiffs in cases that involve products liability and medical malpractice often file suit against the products defendants first.  Those defendants are usually from out of state, so the case is filed in or removed to federal court based on diversity jurisdiction.  After the medical review process is completed, the plaintiff will seek leave to amend the complaint and add the malpractice defendants to the case.  That often results in the destruction of diversity because the plaintiff/patient and physician/hospital are typically citizens of the same state.  But that is not the case here. 

Id. at *4.  In this case, even joinder would not have destroyed diversity, because complete diversity existed between the plaintiff and the medical defendants.  But that is neither here nor there.  Obviously, the malpractice defendants, in their own state court proceeding, could not destroy diversity jurisdiction in the federal lawsuit, because IT WASN’T THE SAME CASE.  The court postulated that, given the diversity between the plaintiff and the malpractice defendants, the plaintiff was likely thinking of the forum defendant rule.  One of the malpractice defendants was a Louisiana resident, so the case would not have been removable while that “forum defendant” remained joined.  But that individual’s citizenship in the forum state was not relevant BECAUSE HE WAS NOT A PARTY TO THE FEDERAL LAWSUIT.  Nor did the court credit the plaintiff’s argument that it would be more efficient for the court to remand the federal case so both cases could be litigated together in state court.  As the court emphasized, concerns of judicial efficiency “do not allow for remand,” as “[f]ederal courts have a virtually unflagging obligation to exercise their jurisdiction.”  Id. at *6 (internal punctuation and citations omitted.).  Finally, the plaintiff could not take advantage of “abstention” to seek a stay the federal case, because that doctrine applies only to cases involving the same parties and the same issues.  Here, the state and federal complaints named different parties and asserted different legal theories.

To this point, the court was fairly restrained, though we could imagine the inevitable eye rolling and chuckling.  To wit, the court stated, “Plaintiff can file all the additional lawsuits she wants in state court and it will never destroy diversity in this case.”  Id. at *7.  Why?  BECAUSE THEY WILL NOT BE THIS CASE – THEY WILL BE SEPARATE LAWSUITS.  The court continued, “If plaintiff believed that it was more efficient to try the products liability and medical malpractice claims in a single forum, she should have attempted to join the medical malpractice defendants in this case.”  Id, BUT SHE DIDN’T!!

Concluding that “none of the arguments made by Plaintiff require[s] or allow[s] for remand,” the court (obviously) denied the motion.  We got a little lift from reading Atoe – not sure what that says about us.  But we’ll take it.  Stay safe out there.

Photo of Eric Alexander

When we started seeing a smattering of cases over long-term contraceptive devices used in connection with tubal ligation surgery, we were not surprised.  Plaintiff lawyers have targeted a wide range of contraceptive drugs and devices for decades.  Commentators beyond this Blog have described how this bent affects contraceptive choice and public health.  When we saw the results of decisions on motions to dismiss these cases out of federal courts in Alabama and North Carolina, we were pleased to see that claims against these Class III devices were preempted.  They came with the bonus that some of the standard arguments for specific personal jurisdiction over parent companies were rejected.

The recent decision in Blevins-Ellington v. CooperSurgical, Inc., No. 1:22-CV-00197-LMM, 2023 WL 2111346 (N.D. Ga. Jan. 17, 2023), however, left us scratching our heads.  It actually came out between the two district court decisions above and was rejected by the later one.  Focusing just on its rulings on personal jurisdiction and preemption, Blevins-Ellington leaves quite a bit to be desired.  The facts it sets out are scant, starting with why the claims of three different plaintiffs (plus a consortium plaintiff) are together in one case.  Plaintiffs alleged that they had these contraceptive devices implanted between 2011 and 2013 (presumably in Georgia), and later suffered some combination of a wide range of symptoms that they attributed to “migration” of the device.  Three of the four defendants appear to have been parent or affiliated companies of the fourth company, which is the one that sold the devices plaintiffs had implanted.  Pertinent to our discussion here, those three sought dismissal on personal jurisdiction and all four sought dismissal based on preemption.

The playing field for personal jurisdiction has changed quite a bit over the last nine years.  In the same month in 2014, the Supreme Court issued the Bauman decision on general personal jurisdiction and the Walden case on specific personal jurisdiction.  Bauman was a sea change in how it narrowed general personal jurisdiction to one or two states for pretty much every defendant and made clear that parent companies were not necessarily subject to the same personal jurisdiction as their subsidiaries.  See here, here, and here, among many posts on the subject.  Walden focused the need for a claim-by-claim analysis of the relationship between the allegedly actionable conduct and the defendant’s contact with the state seeking to exercise personal jurisdiction over it.  In the coming years, the battleground shifted to attempts by the plaintiffs’ bar to expand specific personal jurisdiction so that it would be as broad as general personal jurisdiction used to be, broad enough to allow the continuation of the litigation tourism industry.  The Supreme Court pretty much put the kibosh on this in 2017 in its Bristol-Myers Squibb decision.  The application of specific personal jurisdiction remained a bit unclear, so the Supreme Court weighed in on the “related to” requirement in Ford v. Montana in 2021. In terms of the Supreme Court, four decisions on personal jurisdiction in less than seven years is a veritable flurry of activity.

It would be nigh on impossible to decide a personal jurisdiction challenge in 2023 without citing any of these decisions.  Of these, Blevins-Ellington cites Bauman only, but plaintiffs agreed general personal jurisdiction did not apply to any of the defendants.  In deciding specific personal jurisdiction, it relied almost exclusively on pre-Bauman/Walden authority, much of which is probably not good law anymore.  It is hard to get the analysis right when you apply the wrong standard.  As to one defendant, the court looked solely to whether plaintiffs’ claims “arise out of or relate to” contacts with Georgia that began in 2019, even though the implants were in 2011 to 2013.  That should not pass the smell test, but the court did not analyze (sniff?) as to each claim by each plaintiff.  Instead, without considering any substantive Georgia law, the court found that the claims for “negligence, gross negligence, and consumer protection law violations for deceptive conduct relating to the marketing and promotion” bestowed jurisdiction over the whole case because the defendant began its forum contacts “before Plaintiffs discovered their injuries resulting from the” device.  2023 WL 2111346, *6.  But BMS and Walden both hold that a plaintiff’s actions cannot qualify as a defendant’s contacts.  The Blevins-Ellington court doubled down on the faulty reasoning about post-implant conduct with the conclusion that recent online advertising constituted purposeful availment in Georgia that related to plaintiff’s claims, which concern misleading promotions about [the device’s] safety.”  Id. at *7.  (Stick a pin in that last clause for later.)

As to two other defendants, plaintiffs were allowed to seek jurisdictional discovery.  As to one defendant, the discovery is directed at whether it was the alter ego of the entity with actual relevant contacts to Georgia.  As to other, a UK company, the discovery apparently relates to the extent of its contacts with Georgia.  The court’s focus on what plaintiffs claim the UK company did not dispute—including that it profited from sales in Georgia and it did not “prevent[] its products from reaching Georgia”—suggest a continuing misunderstanding of the current law on specific personal jurisdiction.  Id. at *10.

The preemption analysis was also flawed.  Because this is a Class III device, the only claims that should get by preemption are those grounded in state law that are parallel to requirements imposed by federal law.  The court’s recitation of preemption law, which was largely based on the good Eleventh Circuit decision in Mink, identified the “narrow gap” between express preemption under Riegel and implied preemption under Buckman.  The first step in the analysis should have been identifying which cognizable state law claims had been pleaded based on factual allegations (under TwIqbal).  In Blevins-Ellington, the only Georgia law considered was it permitting “negligence and strict liability claims against manufacturers, which rest on common law duties owed to individuals.”  Id. at *13.  That is very general and not a substitute for the claim-by-claim analysis that should have occurred.  (There was nothing like an Erie prediction undertaken on would have involved extensions of state law.) The claim-by-claim analysis should have also considered whether those state law claims imposed duties “different than or in addition to” requirements imposed by federal law through the PMA approval of the device.  That analysis was also missing.  Instead the court found in general terms that plaintiffs sought to “hold Defendants liable for violations of existing federal requirements.”  Id. at *14

Here, Plaintiffs specifically allege that Defendants violated FDA requirements regarding their ongoing duty to report to the FDA; their duty of truthfulness to the FDA and the obligation to receive FDA approval for any changes to the device; and their failure to comply with FDA manufacturing regulations.  These allegations are sufficiently specific to avoid preemption, especially at this stage of litigation and without the benefit of discovery.

Id. (internal citation omitted).  Of these, only the one about manufacturing would be a duty under Georgia law, a requirement for a parallel claim.  Whether three separate plaintiffs had each properly alleged a manufacturing defect—that is, a unit-specific deviation from the specifications for the device approved via the PMA—was certainly not addressed.  Thus, there should have been a dismissal of all claims other than the manufacturing defect claim, at a minimum.

Perhaps even stranger was the court’s treatment of implied preemption as an issue defendants did not raise in their motion.  An argument whether a complaint presents parallel claims that fit through that narrow gap is going to implicate both express and implied preemption, which establish the “narrow” boundaries of that “gap” (which necessarily has two sides).  Regardless, the court brushed aside Buckman with the unsupported statement that “The Eleventh Circuit has consistently held that the MDA does not preempt state tort claims like Plaintiffs’, especially at the pre-discovery dismissal stage.”  Id. at *16.  When the tort claims are grounded in federal law without a corresponding state law duty, the Eleventh Circuit has found those preempted on several occasions, including in Mink itself.

Given that Blevins-Ellington has already been rejected by another court considering similar arguments in a case over the same device, maybe it will not be persuasive authority in future battles over personal jurisdiction and preemption.  It certainly does not deserve to be.

Photo of Stephen McConnell

Keralink Intl., Inc. v. Geri-Care Pharmaceuticals  Corp., 2023 WL 2000999 (4th Cir. Feb. 15, 2023), is unusual because it is an affirmance of summary judgment in favor of the plaintiff.  

Many years ago, we won a summary judgment on behalf of our big bank client, which was suing another big bank for failure to fulfill its loan servicing duties.  The case turned on contractual interpretation, the judge read the contract to favor our side, and our client walked away with a share of a multi-billion dollar judgment.  It was a heady time, and it was our last case before we joined the U.S. Attorney’s Office and devoted half a decade to prosecuting crimes involving narcotics, counterfeiting, bank robberies, and major frauds. Then we returned to private practice, and every summary judgment motion we have filed over the last 30 years has been on behalf of a defendant.  So the Keralink case is a curiosity for us. 

Keralink is a product liability case, but not the sort that we typically encounter. The plaintiff  Keralink is a non-profit operator of a national network of eye banks.  It claimed that contaminated eyewash rendered transplanted eye tissue unusable.  Although prohibited by law from selling recovered tissue, Keralink collects certain fees for reimbursement of costs related to the removal, processing, and transportation of the eye tissue. 

The plaintiff brought claims against two suppliers of the eyewash for, inter alia, strict product liability and breach of warranty.  The eyewash suppliers did not dispute that the plaintiff had made out the elements of those claims, but argued that those claims nonetheless ran aground on (1) Maryland’s sealed container defense, and (2) the economic loss doctrine.  Unfortunately for the defendants, the Maryland district judge did not see any merit in the defendants’ arguments, and neither did the Fourth Circuit.  

Sealed Container defense

The Keralink decision informs distributors what not to do if they want to invoke the sealed container affirmative defense.  The defense is available to a “seller” under certain circumstances (yes, you guessed it: the product must remain in a sealed container, plus the seller was unaware of the defect and could not reasonably have discovered it, etc).  A “seller” is defined in the Maryland statute as “a wholesaler, distributor, retailer, or entity … other than a manufacturer that is regularly engaged in the selling of a product”.  In Keralink, the two distributor defendants each invoked the sealed container defense, each claimed to be a “seller” of the eyewash, and each argued that the other qualified as the liable manufacturer.  Good times for the plaintiff. 

The Maryland statute requires that the intermediate distributor asserting the defense not hold itself out as the product’s manufacturer.  One of the defendants had placed its logo on eyewash manufactured by someone else (the contaminated product appears to have originated in Korea), which deprived it of the defense.  A defendant contended that “sophisticated” purchasers would understand that the defendant was only a distributor.  But that defendant required its name be added to the label and did not list anyone else as the manufacturer in its FDA filings.  Consequently, that defendant was the “apparent manufacturer” and could not wrap itself up in the sealed container defense. Perhaps there is a lesson in there somewhere. If so, it was learned at great expense. 

The other defendant distributor in the chain lost the sealed container defense when it described the contents of what it shipped as “sterile,” thereby creating an express warranty, which triggered another exception to the defense. The product description of “sterile eyewash” was enough to create a warranty under the UCC.  Restating someone else’s product description is sufficient.  Express warranties are not “passed on” without the passer also being liable.  So long, sealed container defense. 

Economic Loss rule

Maryland law is similar to most jurisdictions in limiting strict liability damage recoveries to three categories: (1) personal injury; (2) physical harm to property other than the defective product; and (3) economic loss suffered because the product fails to meet the buyer’s expectations.  Maryland law is also similar to most jurisdictions in applying an “economic loss rule,” which bars plaintiffs from recovering in tort when the claimed damages are solely grounded in economic loss.  The purpose of the rule is to preserve the distinction between tort claims, like the strict product liability claim here, and contract claims. 

The plaintiff sought recovery for lost service fees relating to the damaged tissue, the cost to replace the unusable eyewash, and lost employee time. One of the defendants argued that Keralink’s asserted damages constituted strictly economic loss because Keralink “did not seek damages related to injury to other property, because the eye tissue was not Keralink’s property.”

The court held that the economic loss rule did not bar recovery in Keralink because the plaintiff had “possessory rights to the donated tissue” – even if it was statutorily barred from “selling” it.  That the tissue became unusable due to the contamination from the eyewash was a damage to the plaintiff’s interest in the tangible “other property” that falls within an economic loss rule exception. The court concluded that “[b]ecause Keralink had a limited but sufficient property interest in the tissue, the economic loss rule did not bar recovery for the challenged damages sought by Keralink in its strict products liability claim.”

The Keralink case supplies ocular proof that plaintiffs can win on summary judgment, but it might also supply guidance to sellers as to how to ensure they look like sellers rather than manufacturers. 

Photo of Michelle Yeary

That seems like it should be an obvious statement.  FDA regulations draw important distinctions between brand drugs and generic drugs.  A manufacturer seeking FDA approval of a new drug must prove safety and efficacy involving expensive and lengthy clinical trials.  Once approved, that drug becomes the reference list drug.  If a manufacture wants to market a generic version of the drug, it need only prove the drug is equivalent to the reference list drug.  Further, while the manufacturer of the brand or reference list drug is responsible for ensuring the adequacy and accuracy of the drug’s warning label, the generic manufacturer is only responsible for ensuring that the generic label is the same as the brand’s.  Therefore, only brand manufacturers have the ability, in certain circumstances, to change the drug’s label without the need for prior FDA approval under the Changes Being Effected (“CBE”) regulations.  This key distinction led to the Supreme Court’s decision in PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011).  Because generic drug manufacturers are prohibited from modifying a drug’s warnings except to match the brand’s warnings, failure to warn claims against generic manufacturers are barred by impossibility preemption—it is impossible for a generic manufacturer to comply with both the FDA’s requirements that the label remain the same and a state law requirement to make the label different.

But the plaintiff in Swinney v. Mylan Pharmaceuticals, Inc., 2023 WL 2090702 (N.D.Ga. Feb. 17, 2023) wanted the court to change the Mensing rules in cases where the brand manufacturer has opted to stop selling the branded drug.  Defendant manufactured a generic version of a birth control medication that was prescribed to plaintiff’s wife.  Plaintiff alleged that defendant’s drug caused his wife to suffer a fatal blood clot and that the drug’s label did not adequately warn of the increased risk for blood clots for women with a BMI over 30.  Id. at *1.  Plaintiff conceded that all of his claims were based on an alleged breach of the state-law duty to warn and that in most circumstances would be preempted by Mensing.  In this case, however, the brand drug was no longer on the market.  So, plaintiff argued that when the brand manufacturer leaves the market, the generic manufacturer must “assume” responsibility for the adequacy and accuracy of the warnings.  Plaintiff cited no support for this position that a generic drug’s status changes if the brand is withdrawn from the market.  Because there is none.  Moreover, plaintiff did not claim that the generic manufacturer could unilaterally change the drug’s warnings using CBE regulations.  Because it can’t.  The generic drug remains a generic drug and the generic drug manufacturer remains a generic drug manufacturer with no ability to change the drug’s label without prior FDA approval.  Id. at *3.  Therefore, Mensing’s “broad” preemption still applies. 

Plaintiff tried a second end-run around preemption by arguing that under Georgia law the generic manufacturer, knowing the brand manufacturer had left the market, owed a duty to provide safety data concerning the drug to the FDA.  Id. at *4.   Plaintiff argued that by providing information to the FDA, defendant could have complied with both federal and state law.  But while trying to dodge the “conflict,” plaintiff ran right into the “Mouse Trap game” Mensing prohibits.  Assuming defendant did provide the FDA with information, that only begs more questions.  The FDA may have decided the brand label needed to be changed, which may have led to a change in the generic label, which may have caused plaintiff’s prescribing physician not to prescribe the drug, which may have prevented her injury.  Id.  The causal link is simply too attenuated. 

Further, Georgia does not recognize a failure to warn claim premised on a failure to report to the FDA.  “Plaintiff identifies no state law duty to report safety information or take other steps to change a product’s label, whether independent or subsumed by the duty to warn.”  Id. To prove a failure to warn claim in Georgia requires proving that a stronger warning would have prevented plaintiff’s injury, which requires defendant change the drug’s warning which FDA regulations prohibit.  We end up right back at Mensing preemption. 

Of course, defendant also argued that plaintiff’s “failure to report” claim was barred by Buckman preemption.  And the court agreed citing both Eleventh Circuit and federal Georgia precedent.  Id. at *5.  Plaintiff tried to argue a “parallel” claim exception, but the court found no independent state duty to report and therefore, no claim for the federal requirements to run parallel to.  More important, however, was this ruling:  “There is no exception for parallel claims to the doctrine of impossibility preemption, which is grounded in the Supremacy Clause.”  Id. at *7n.5 (citing Lashley v. Pfizer, Inc., 750 F.3d 470, 476 (5th Cir. 2014)).   So-called “parallel claims” can exist only within the express preemption context, where the relevant question is whether state law is imposing a requirement “different from or in addition to” federal requirements.  It has no place in implied preemption, which is what is at issue here.  When dealing with the Supremacy Clause, the question is not whether there is a “parallel” claim that may not conflict with a federal statute, but rather whether the state law claim is impliedly preempted.  Just like the distinction between brand and generic drugs is important, so is the distinction between express and implied preemption.

Finally, the court ruled on defendant’s argument that preemption aside, plaintiff’s claims failed because he did not plead learned intermediary causation.  Georgia law requires a plaintiff allege that the prescribing physician “would have made a different decision had Defendants provided stronger warnings.”  Id. at *6.  While plaintiff alleged defendant failed to warn his wife, he failed to allege that defendant should have but did not warn her physician.  The complaint also lacked any allegations as to what warning should have been given.  Therefore, plaintiff’s pleading deficiencies were another ground for dismissal.

Photo of Bexis

We’ve chronicled the path of the 2023 amendments to Fed. R. Evid. 702 pretty much from the beginning.  As we’ve discussed, those amendments reiterate what had always been (at least since 2000) the Rule’s requirements for analyzing the admissibility of expert witness testimony.  But courts had been ignoring critical elements – such as the burden of proof – that had been in comments rather than the black letter of Rule 702 itself.  So, as of December 2023, Rule 702 will provide that the proponent of expert testimony must meet all of the Rule’s substantive standards for admissibility by a preponderance of the evidence, and in particular that an adequate basis for such testimony is a prerequisite to admissibility. 

Continue Reading Don’t Wait – The Rule 702 Amendments Can Be Used Now
Photo of Steven Boranian

The federal government cannot compel pharmaceutical manufacturers to sell prescription drugs at a discount to unlimited numbers of pharmacies.  That is the takeaway from the Third Circuit’s recent opinion in Sanofi Aventis U.S. LLC v. United States Department of Health and Human Services, No. 21-3167, 2023 WL 1098017 (3d. Cir. Jan. 30, 2023) (to be published in F.4th).  We see two interesting angles.  First, the government can and does overstep its power at times, and HHS did so here.  Not so fast.  Second, HHS’s mandate threatened to undermine FDA-required Risk Evaluation and Mitigation Strategy (or REMS) programs, which can be key to controlling liability arising from drugs with particular risks.  HHS had to give way. 

So what happened?  The federal government pays for something like half of all prescription drugs through Medicare and Medicaid, and if drug manufacturers want a piece of that pie, they have to offer their drugs at a discount to certain healthcare providers—called “covered entities.”  There are compelling policy reasons supporting this exercise of market power.  Covered entities typically care for low-income and rural populations, and the HHS-required discounts allow covered entities to provide prescription drugs to uninsured patients at little to no cost.  The discounts also allow covered entities to turn a larger profit with insured patients, whose carriers reimburse at full price.  We have no problem with supporting care for people who otherwise might go without.

There are, however, limits.  When Congress first enacted the governing statute, known as Section 340B, few covered entities had in-house pharmacies.  HHS therefore issued a guidance allowing each covered entity to use one external contract pharmacy.  Sort of a discount by proxy.  The covered entity was able to acquire drugs at a discount, and it was allowed to designate a dispenser where its patients could get their meds.  Makes perfect sense. 

But then the Affordable Care Act came along.  In a guidance issued at the same time the Act was enacted, HHS said that covered entities could use an unlimited number of contract pharmacies, which caused the use of contract pharmacies to increase twentyfold.  That is a huge increase in what was already a large market, and it created problems well beyond the bottom line.  First, the much larger number of contract pharmacies receiving Section 340 discounts increased the risk that covered entities were also receiving other rebates—i.e., duplicate discounts, which Second 340B forbids.  Second, the risk of drug diversion through doctor shopping and other means increased. 

Several drug manufacturers therefore imposed their own pharmacy limits, which generally allowed covered entities to use (1) one contract pharmacy or (2) multiple contract pharmacies under certain conditions.  In response, HHS doubled down and issued an Advisory Opinion purporting to mandate that drug manufacturers deliver Section 340B drugs to an unlimited number of contract pharmacies.  After HHS sent multiple Violation Letters, several manufacturers sued.  One of them prevailed in Delaware, causing the HHS to rescind the Advisory Opinion.  Two others lost in New Jersey, where the district court found their lawsuits moot.  

On a “flurry of appeals,” the Third Circuit has ruled that the HHS exceeded its power.  To begin with, the manufacturers’ challenges were not moot.  Although HHS fecklessly “rescinded” the Advisory Opinion after losing in Delaware, it still held the position that manufacturers had to deliver Section 340B drugs to an unlimited number of contract pharmacies.  The specter of enforcement actions still loomed.  2023 WL 1098017, at *3. 

On the merits, Section 340B did not authorize HHS to mandate delivery to unlimited numbers of dispensers.  The statute requires price caps for drugs “purchased by” covered entities, and it states that manufacturer must “offer” drugs to cover entities at or below that cap.  But the act is silent on delivery, and it does not mention contract pharmacies anywhere.  The manufacturers’ limits therefore complied with the statute, and HHS had no authority to rewrite the law on the covered entities’ behalf.  As the Third Circuit observed, “[W]hen Congress’s words run out, covered entities may not pick up the pen.”  Id. at *4.  The question was whether Section 340B prohibited drug manufacturers from limiting the number of contract pharmacies to which they delivered discounted drugs, and the statute “contains no such prohibition.”  Id. at *5. 

The Third Circuit had other reasons, and one stands out in the product liability context.  For some drugs with particular risks, the FDA requires REMS programs for their safe use.  Drug manufacturers often comply with these requirements by limiting distribution to pharmacies that are specially trained on the drugs’ risks and best practices for dispensing.  HHS’s Advisory Opinion essentially ruled that those limits were illegal, by mandating that drug manufacturers had to delivery Section 340B drugs to unlimited numbers of pharmacies.  This “legal bind” was yet another strike against HHS’s interpretation. Id. at *5. 

It is good public policy to make prescription drugs more widely available to low-income and rural populations, but the pharmaceutical manufacturers here were doing that, and they were doing it consistent with the governing law.  HHS overreached on this one. 

Photo of Eric Alexander

Stop us if you have heard this before.  One of the big problems with MDLs in the era of unchecked lawyer advertising, litigation funding, and the focus of MDL judges on mass settlement is that a high percentage of plaintiffs never have to do any heavy lifting between filing their cases and participating in some group settlement.  One of the consequences of this dynamic, absent reasonable Lone Pine orders or other meaningful requirements imposed on all plaintiffs, is that lots of plaintiffs’ cases remain pending in an MDL when they would not if they were being litigated as individual cases.  We all have experience with deceased plaintiffs (without a motion to substitute or other notice), plaintiffs who did not know they had a lawsuit, plaintiffs with multiple lawsuits, plaintiffs whose counsel have no idea how to reach them, plaintiffs who are now incarcerated, and a range of other fact patterns that should typically end a case.  In MDLs, however, plaintiffs’ counsel remain ignorant or intentionally silent about these issue while settlement negotiations count these cases as if they were legitimate.  That is pretty messed up.  What is maybe even more messed up is how often it seems that MDL courts forgive plaintiffs for these issues and noncompliance with court orders.

Well, there is apparently a level of flouting of deadlines and orders that even one of the most notorious, at least on this Blog, of MDL judges cannot tolerate.  (Some examples include here, here, here, and here.)  Diaz v. Ethicon, Inc., No. 2:18-cv-00893, 2023 U.S. Dist. LEXIS 23016 (S.D.W. Va. Feb. 10, 2023), comes from one of the remaining pelvic mesh MDLs, all overseen by the same judge and the subject of many prior posts.  With a few exceptions (like here), the decisions from these MDLs have been quite plaintiff-friendly, shall we say.  Back when there were five pending MDLs before the same judge with approximately 100,000 pending cases between them, the number of dismissals for failure to comply with court orders or due to basic hurdles like statutes of limitations or repose were fleetingly few.  Whereas some MDLs have been willing to let counsel withdraw after a plaintiff rejects settlement urged by her counsel, which usually results in a dismissal when the plaintiff cannot find new counsel by a specified deadline, this judge did not.  The result was that there were many plaintiffs whose counsel remained in the case against their will and, perhaps, gave less than complete attention to prosecuting the case than they might have otherwise.

In Diaz, we see nothing about fallout between plaintiff and her counsel.  Instead, plaintiff’s counsel left his law firm nine months after her case was filed in the MDL.  That was also one month after the case was listed on a wave discovery order establishing a number of deadlines for her case.  Twenty-months later, after blowing all the deadlines, a show cause order was entered, which gave plaintiff a month to justify why her case should not be dismissed without prejudice.  (Yes, the default for an involuntary dismissal under Fed. R. Civ. P. 41(b) is with prejudice, so even this order was on the lenient side.)  Plaintiff did nothing and her case was dismissed.  Her original attorney remained counsel of record and received all three of these orders.  Five months after the entry of the wave order, the law firm where her counsel of record used to work tried to settle her case.  Almost two years after her case was dismissed, plaintiff filed a motion under Fed. R. Civ. P. 60(b)(6) to have the judgment undone, offering a number of somewhat contradictory excuses for why her lawyers—counsel of record and his former firm—failed to prosecute her case.

In case the title and lead in to this post left some question, the Diaz court was not inclined to grant extraordinary relief because of extraordinarily bad—but maybe not extraordinarily rare—lawyering.  Plaintiff failed the three “threshold requirements” that the court analyzed and probably would have failed others if analyzed.  First, the motion was untimely because it was not brought “within a reasonable time.”  2023 U.S. Dist. LEXIS 23016, *5.  (It is a quirk of Rule 60(b) that a motion under subsections (1), (2), or (3) must be brought within a year, but the rest have the fuzzier deadline.)  Plaintiff’s counsel claimed to have only learned of the orders “recently,” presumably late 2022, which the court deemed “either entirely false or, if true, it is unacceptable, as any reasonable attorney should have been aware of the circumstances.”  Id.  This is not something any lawyer wants to see in a court order.  After running through some of the facts above—we could add more given some of the standing orders and practices in these MDLs—the court added that, “while Ms. Diaz’s attorneys were careless, Ms. Diaz also could have been more diligent in inquiring into the status of her case between 2020 and 2022.”  Id. at *6.  We have not seen many courts impose such a duty on a represented party, but it makes sense in this context.

Second, letting plaintiff undo her dismissal would be unfairly prejudicial to the defendant, which “relied on the finality” of the dismissal for lack of prosecution.  Id. at *8.  We might quibble with expecting finality from a dismissal without prejudice, but we have also seen many courts blow past the idea that a defendant in an MDL or serial litigation is prejudiced by reviving one more case.  As we noted recently, the rights of parties are not supposed to be different just because their case is in an MDL, but that is not always how it seems.

Third, plaintiff clearly did not show that “exceptional circumstances exist that would justify vacating” the judgment.  The general rule that “a lawyer’s ignorance or carelessness” is not enough applied, but the occasional exception where the lawyer completely abandons the case did not.  Id. at *8-9.

[Plaintiff’s counsel’s] conduct is better characterized as disorganized or careless, rather than abandonment.  While I am sympathetic to Ms. Diaz’s predicament, she selected her attorneys and must live with the consequences of their representation.

Id. at *9.  Our reaction to reading that was a little like this.  Without saying the magic word, the court also nudged plaintiff toward bringing a malpractice suit against her counsel.  That is an unusual nudge and, as we have seen, a malpractice suit could end up back in the same MDL.  Hopefully, such a case would not end up dragging the manufacturer back in.

Photo of Michelle Yeary

Last year we wrote a post about Froman v. Coopersurgical, Inc., 2022 US Dist LEXIS 120725, *2-3 (N.D.AL Jul. 8, 2022), calling it trifecta Tuesday because the case was dismissed on the grounds of personal jurisdiction, pleadings deficiencies, and preemption. Today’s case involves the same product, the same defendants, and the same conclusions on personal jurisdiction and preemption.

As in Froman, the plaintiff in Watters v. Coopersurgical, Inc., 2023 WL 1982347 (E.D.N.C. Feb. 13, 2023), alleges that she suffered an injury when a device implanted during her tubal ligation surgery migrated requiring explantation nearly nine years later.  She sued multiple parent/subsidiary companies, certain of which appear to be the companies that manufactured the device at the time it was implanted and others seem to be subsequent sellers of the product.  All four defendants moved to dismiss on preemption grounds and three defendants moved to dismiss for lack of personal jurisdiction.

Plaintiff conceded that court did not have general jurisdiction over the three defendants but as to two of them argued that specific jurisdiction existed based on defendants marketing and distributing the device in North Carolina, even if those activities did not take place until after Plaintiff’s 2013 surgery.  Plaintiff argued the timing of the marketing did not matter; that having marketed the device in North Carolina at all the defendants “purposefully availed” themselves of the forum and were therefore subject to jurisdiction.  Id. at *3.   The court disagreed noting that Plaintiff’s argument ignored the requirement that the “facts establishing personal jurisdiction must be tied to the same underlying controversy that gave rise to the lawsuit.”  Id.  Plaintiff’s alleged injury could not “arise out of or relate to” activities by the defendants that post dated her surgery by several years.  Moreover, the clip implanted in plaintiff was developed by a different company before these defendants entered the market.  The actions of their competitors could not provide a basis for personal jurisdiction against these defendants.

As to the third defendant, plaintiff argued that it sold the device to a distributor, the fourth defendant, to whom it gave permission to sell the device throughout the United States and that distributor did in fact sell the device in North Carolina.  But that argument essentially means defendant would subject to personal jurisdiction everywhere, which the court and ample Fourth Circuit precedent rejected.  If a manufacturer sells a product to a distributor with no direct purpose that the product be sold in a particular state, that is not enough to establish specific personal jurisdiction.  Because the distributor controlled where and to whom to sell the device, its activities could not be imputed to the manufacturer. *4-5.

All four defendants also moved to dismiss the case as preempted. The device at issue is a Class III medical device that went through the FDA’s Pre-Market Approval process.  Therefore, Riegel and Buckman leave only a “narrow gap” through which a case may slip by preemption.  The claims must be parallel to federal requirements (to avoid express preemption) but cannot be based solely on federal violations (to avoid implied preemption).  All of plaintiff’s claims were based on allegations that defendants failed to accurately and fully report adverse events to the FDA.  And while adverse event reporting is a federal requirement, “North Carolina law does not recognize a parallel duty on manufacturers to report to the FDA.”  Id. at *7.  Further, since the crux of plaintiff’s claim is that had defendants reported different information to the FDA, the FDA would have taken different action, the claim is a preempted fraud-on-the-FDA claim.  Id. Any other claims based on allegations that defendants owed plaintiff or her doctors a duty, would serve to impose different or additional state-law obligations and thus are also expressly preempted. 

Finally, where the court pointed out that plaintiff failed to identify which specific regulations were allegedly violated, plaintiff asked for the right to take discovery “to uncover” the regulations that could possibly apply.  Absent some argument that defendants had information that was solely in their possession, the court “decline[d] to conscript defendants to find regulations for [plaintiff] to plead on her own behalf.”  Id.  Sending plaintiff back to do her own homework, the case was dismissed as to all four defendants without prejudice.