The major sporting event this time of the year is the NCAA basketball tournament.  Our money is on Villanova University, because that is where we sent a lot of our money over the last four years, funding the education of the Drug and Device Law Son.  Even if we didn’t have a Villanova graduate in the family, we’d probably root for that school, because it is just down the road from where we live, it runs an athletic program that manages to be both excellent and clean, and we know many extremely fine people associated with the University.  Our money is also on Jalen Brunson as the tournament Most Valuable Player (MVP).  [That being said, there is a lot to like in all of the Final Four teams.  In particular, the amazing run of Loyola of Chicago, with chaplain Sister Jean, is a  great sports Cinderella tale.  Plus, the smartest guy in our law school class went to Loyola-Chicago, and is probably right now bragging to his students at USC Law about the inevitability of the Ramblers cutting down the nets at the end.]

 

If we had to pick an MVP for the area of law in which we practice, we’d choose causation.  It is a powerful concept we learned back in our first year of law school, and it probably plays a bigger role in deciding cases than anything else, including duty, breach, damages, or Bexis’s beloved preemption.  Even when dealing with statutes that do their best to erode such tried and true defenses as reliance, causation can ride in to save the day for our clients.  If no other defense seems available, do not give up on causation.  It poses fundamental questions of “so what?” “what if?” “but for?” “why?” and “huh?” — and there are lots of plaintiffs who can never answer those questions satisfactorily.

 

Today’s case, United States v. Chin, 2018 WL 1399297 (D. Mass. March 20, 2018), is a criminal case, which (1) might seem a bit far afield from the heartland of what we – and here the royal “we” encompasses most of our readers as well as ourselves – do, (2) explains why today’s post was penned by this particular ink-stained wretch, as ex-AUSAs are always quick to glom onto any case where the first listed party is the United States of America, and (3) turns on the all-powerful notion of causation.  The defendant was convicted for mail fraud racketeering (RICO), conspiracy, and violations of the federal Food, Drug, and Cosmetic Act.  The underlying conduct involved the notorious national spinal meningitis epidemic traced to defective doses of injectable methylprednisolone acetate manufactured by the New England Compounding Center (NECC). The defendant was a supervising pharmacist at NECC.  Now it was time for sentencing.  The government sought $82 million in restitution to be paid to the families of the deceased and the survivors.   

 

The court observed that “[r]eality casts a cold light on the $82 million request.”  The defendant was destitute and would never-ever be in a position to pay even a small fraction of the amount sought.  The government conceded at oral argument that “any restitution award would be no more than a symbolic gesture.”  Indeed.  This selfsame scenario played out in many courts when we represented the United States.  The statutes and sentencing guidelines made restitution a component of sentencing, and the standard presentence report would include a recommendation of restitution. But the standard joke in our office was that we would go out onto the roof of the courthouse and shoot off fireworks if a defendant ever actually paid any restitution. As the government said in Chin, an order of restitution amounts to a mere gesture.

 

Nevertheless, courts take restitution seriously, as they should.  Restitution is required by the Mandatory Victim Restitution Act (MVRA), 18 U.S.C. section 3663A(c)(1)(A)(ii).  Restitution is paid to victims, so the Chin court begins with the MVRA’s definition of “victim”: “a person directly and proximately harmed as a result of the commission of an offense.”  When we see words such as “directly,” “proximately,” and “as a result of” we think causation.  So did the Chin court.  “Directly” and “proximately” signal efforts to cabin the causation concept in some reasonable, predictable fashion.  Any law school graduate can think back to the ancient Palsgraf v. Long Island R.R., (1928) case, where New York’s high court (per future SCOTUS Justice Cardozo) tried to limit proximate cause via the requirement of foreseeability.  Then again, we are also all familiar with how courts over the intervening years have stretched foreseeability to the breaking point, so much so that, as we have said with respect to some decisions, on even a not-so-clear day some judges can foresee forever.   But the Chin court actually drew a pretty tight circle around causation.  It held that “a loss for restitution purposes must be causally tied to the underlying offense of conviction, in Chin’s case, mail fraud and racketeering conspiracy based on predicate acts of mail fraud.”  The government’s calculation of an $82 million restitution award was based on a tabulation of the medical expenses, costs for physical and occupational therapy, lost income, burial expenses, and other expenditures compiled by patients who were injected with  the contaminated drugs.  But NECC “made no representations to end-users and patients for the purposes of obtaining property (money); rather, it made those misrepresentations … to the hospitals and clinics that purchased the drugs.”  The government suggested at oral argument that the word “sterile” on the syringes in question, if seen by a patient prior to injection, would potentially constitute a misrepresentation for mail fraud purposes, there is  no evidence in the record to suggest that this ever occurred. 

 

Moreover, in an interesting way, the learned intermediary relationship played a role in cutting off causation in the Chin case.  To the extent that patients may have implicitly relied on NECC’s representations by relying on their doctors as learned intermediaries, this additional layer of insulation between NECC and the patient further renders any such reliance “too attenuated” to satisfy the “direct causation” standard of the MVRA.  Consequently, the Chin court calculated the total restitution award as the loss suffered by the hospitals and clinics that purchased lots of degraded or defective drugs during the life of the racketeering enterprise.

 

In sum, the Chin case demonstrates the continuing force of the causation requirement. This was a criminal case, and the issue of restitution was at the center.  The Chin court’s analysis of proximate causation is better and tighter than we typically see in civil cases, and we can, ahem, foresee some litigant attempting to distinguish away Chin on those grounds.  But why should there be any difference in the causation analysis?  We intend to have the Chin causation analysis in our pocket the next time we litigate the issue, especially if we are in the sometimes challenging First Circuit.     

 

 

 

Today we are talking about a case that is not exactly in the heartland of what we generally examine.  It is not a product liability or mass tort case.  But it is reasonably close.  It is kind of an off label promotion/False Claims Act case.  Okay, let’s admit what it really is: a wrongful discharge/employment case.   The plaintiff alleged that she was constructively discharged because she blew the whistle on what she perceived to be unlawful off label promotion.  The notion of causation is front and center.  The causation issue is always near and dear to our defense hearts.

And yet.  And yet.  Not so long ago we watched a mock jury reach agreement that whether or not the product caused the plaintiff’s injury, the mock jurors were hell-bent on awarding damages.  The jury decided that there were things about the company’s conduct that could be improved, and their verdict would set such improvements in motion.   Swell.  The mock jurors were essentially mocking the jury instructions.  Causation-schmausation.  We shudder at the realization that real, not mock, jurors also do this.  Every. Damned. Day.

Today’s case is also literally near to us, because it was authored by the Third Circuit, which is just down the street from several of us DDL blogsters.  It is also apparently a decision of first impression on the appellate level — that a “but for” (and not a lesser “motivating factor”) causation standard is necessary for FCA retaliatory discharge claims.  So sit back and take in this DDL-adjacent blogpost, wherein we lay out a significant ruling on a significant issue by a significant court.

The case is DiFiore v. CSL Behring, LLC, 2018 U.S. App. LEXIS 92 (3d Cir. Jan. 3, 2018), and is primarily focused on the federal False Claims Act (FCA) anti-retaliation provision protecting employee-whistleblowers who engage in activity protected by the FCA.The district court granted summary judgment in favor of the employer on the wrongful discharge claim because the plaintiff had failed to show constructive discharge as a matter of law. Then the FCA retaliation claim proceeded to trial. The judge instructed the jury that the FCA retaliation provision required that protected activity be the “but-for” cause of adverse actions against the employee. In the jury instruction, the judge listed some, but not all, of the alleged adverse actions.  The jury found in favor of the employer.  On appeal, the employee raised three arguments:  (1) the court improperly granted summary judgment on the state law wrongful discharge claim; (2) the but-for causation standard for retaliation was too exacting; and (3) the court erred by not listing all the alleged adverse actions in its jury instruction.  That middle issue is the reason you are reading about the DiFiore case on the DDL.  Otherwise, you’d have to run to an Employment Discrimination Law (EDL) blogpost to find out about it.

The Third Circuit rejected these arguments and affirmed the decisions below.  We will get to the Third Circuit’s analysis momentarily, but let’s first supply a bit more background.  The plaintiff in DiFiore had risen to Director of Marketing. That’s a pretty high position for a whistle-blower.  The plaintiff took issue with what she saw as off-label marketing strategies, such as reference to off label sales in forecasts.  The plaintiff expressed her concerns to her supervisors, and she claimed in her lawsuit that the company initiated a third-party compliance audit in part because of her complaints.  So far so good.  But the plaintiff contended that, as a consequence of her protected conduct, she suffered several adverse employment actions, including warning letters about her interactions with other employees and failure to pay off her company credit card charges, an uncharacteristically poor performance review, deteriorating relationships with supervisors, diminution of duties, removal from a committee, and a Performance Improvement Plan (PIP) that she interpreted to be a death knell.  The PIP required improvement the designated areas within 45 days or she could be subject to discipline up to and including termination.  According to the plaintiff, most employees hit with a PIP were eventually terminated.  After receiving the PIP, the plaintiff reached out to a supervisor and an HR employee and requested a meeting to discuss an amicable separation.  The meeting was canceled for unspecified reasons.  Then the plaintiff resigned.  Then the plaintiff sued.

1.  Wrongful discharge

The plaintiff in DiFiore was not actually fired, so she needed to allege constructive discharge.  Under Pennsylvania law, constructive discharge occurs when working conditions “are so intolerable that a reasonable employee is forced to resign.”  The court concluded that while the plaintiff might have been subjected to difficult or unpleasant working conditions, those conditions fell well short of being unbearable. You might (certainly a plaintiff lawyer would) suggest that the difference between unpleasant and unbearable could be a jury question.  But the court emphasized that the plaintiff “did not sufficiently explore alternative solutions or means of improving her situation. She made no attempt to comply with the PIP.”  She chose to resign rather than reschedule the canceled meeting.  None of that was disputed. Based on those facts, the court held that no reasonable jury could find constructive discharge.

2. But-for Causation for Retaliation

This is the issue that most interests us.  We more than occasionally noodle over False Claims Act cases, off label promotion, and a little thing called causation.  Under the FCA’s anti-retaliation provision, an employee is entitled to relief if she was “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts” conducted in furtherance of an FCA action. 31 U.S.C. § 3730(h)(1).  The district court (we are in an Inn of Court with this Judge, and he is lightning smart and relentlessly fair, by the way) ruled that the plaintiff was required to show that her protected activity was the “but-for” cause of an adverse action.  Thus, that standard found a home in the jury instructions.  The plaintiff in DiFiore argued that a lower standard applies and she should have been required to prove only that her protected activity was a “motivating factor” in the adverse actions taken by the employer.  That “motivating factor” resides as dicta in an earlier Third Circuit decision, but in the meantime SCOTUS came out with a pair of decisions interpreting identical “because of” language in similar statutes (ADEA and Title VII) to require that illegal motive (age-ism or retaliation) be the “but-for” cause of the employer’s adverse action. Even if the earlier Third Circuit “motivating factor” language was not mere dicta, the intervening SCOTUS precedents controlled (there was no need for an en banc call), so the district court got it right.  The jury was properly instructed, and the defense verdict was affirmed.  Lesson for DDL practitioners: even if you do not do much employment work, remember that statutory “because of” language translates into a but-for standard.

3. Listing of adverse employer actions

The plaintiff contended that the district court’s inclusion of only four of the alleged adverse employer actions in the jury instructions—the two warning letters, the mid-year performance review, and the PIP—may have confused the jurors and led them to believe that they were not permitted to consider evidence of other incidents beyond those four events. But the Third Circuit took in the totality of the circumstances below, including that the district court correctly instructed the jury that its determination should take into account the totality of the circumstances. The district court instructed the jury that the four events occurred “among other things.” The district court’s list was, on its face, illustrative, not exhaustive.  It is hard to say that the district court got it wrong, and it is impossible to say that the omission of certain examples was prejudicial.  The district court’s failure to follow the plaintiff’s list exactly could not be a basis for reversal.