We’ll be hitting all the Presidents’ Day sales today, but something tells me we’ll be disappointed because we won’t be able to buy, beg, borrow, or steal a new one.  So we keep trying.

With plaintiffs desperate to find some way to continue pursuing aggravated, aggregated product liability litigation in their favorite venues after Daimler AG v. Bauman, 134 S. Ct. 746 (2014) (“Bauman”), and Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (“BMS”), we thought we’d look at one likely target that we haven’t spent much time on before.  At the tail end of the BMS decision, the Court left open a caveat:

[W]e leave open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.  See Omni Capital International, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 102, n.5 (1987).

BMS, 137 S. Ct. at 1784.  We have offered our opinion that we don’t think there will turn out to be a dime’s worth of practical difference between the two, due to the extent that BMS, a Fourteenth Amendment case relied on Walden v. Fiore, 134 S. Ct. 1115 (2014), which was as federal a cause of action as they come, being a constitutional Bivens action filed in federal court.  We still believe that’s right, but it’s a bit more complicated than we thought at first, a later on in this post.

Let’s start with what “federal court” means.  While we’ve always thought that cases in federal court based on diversity jurisdiction were on the Fourteenth Amendment side of the personal jurisdiction line, we’d never researched it.  It wasn’t hard.  Looking for cases with “diversity,” “Fourteenth Amendment,” and “personal jurisdiction” in the same paragraph was enough.  Too much, actually – since that search produced over two thousand cases – but it didn’t take long to get the answer.  From the first case:

The United States District Court for the Southern District of Florida, sitting in diversity, relied on [a state longarm statute] in exercising personal jurisdiction over a [non-]resident. . . .  The question presented is whether this exercise of long-arm jurisdiction offended “traditional conception[s] of fair play and substantial justice” embodied in the Due Process Clause of the Fourteenth Amendment.

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464 (1985).  Lots of other appellate cases stand for the proposition that cases in federal court on diversity jurisdiction are governed directly by the Fourteenth Amendment.  E.g., Cossart v. United Excel Corp., 804 F.3d 13, 18 (1st Cir. 2015); Philos Technologies, Inc. v. Philos & D, Inc., 802 F.3d 905, 912 (7th Cir. 2015); Creative Calling Solutions, Inc. v. LF Beauty Ltd., 799 F.3d 975, 979 (8th Cir. 2015); Carmouche v. Tamborlee Management, Inc., 789 F.3d 1201, 1203 (11th Cir. 2015); SFS Check, LLC v. First Bank, 774 F.3d 351, 355-56 (6th Cir. 2014); ClearOne Communications, Inc. v. Bowers, 643 F.3d 735, 763 (10th Cir. 2011); Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009); Mullins v. TestAmerica, Inc., 564 F.3d 386, 398 (5th Cir. 2009); Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002); Chung v. NANA Development Corp., 783 F.2d 1124, 1125 (4th Cir. 1986); Steinberg v. International Criminal Police Org., 672 F.2d 927, 930 (D.C. Cir. 1981).

Thus, we think it’s a lock that for the types of cases we typically discuss on this blog, which sound in diversity if they’re in federal court, that Bauman/BMS applies to all personal jurisdiction issues.  Indeed, some of the cases we read indicate (like we think) that there is no difference between the Fifth and Fourteenth Amendments’ Due Process clauses when it comes to personal jurisdiction. See Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 943 n.12 (11th Cir. 1997); Akro Corp. v. Luker, 45 F.3d 1541, 1545 (Fed. Cir. 1995).

This means that, to get around Bauman/BMS, and to assert personal jurisdiction against non-resident defendants, litigation-tourist plaintiffs would have to do the opposite of what they have normally done for decades and instead plead some sort of federal claim if they have any hope of arguing that some hypothetical lesser standard of Due Process applies under the Fifth Amendment.  Even assuming plaintiffs desperate enough to jettison decades of prior practice, there aren’t many of these statutes around.  The False Claims Act is a federal statute that authorizes nationwide service of process, see 31 U.S.C. §3732(a), but by no stretch of the imagination could it apply to the sorts of product liability/consumer fraud claims that are our opponent’s stock in trade.

RICO also provides for nationwide service of process. 18 U.S.C. §1965(d).  RICO has a major limitation – from the standpoint of a product liability plaintiff – in that the statute does not allow recovery of personal injury damages.  Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979); see, e.g., Safe Streets Alliance v. Hickenlooper, 859 F.3d 865, 886 (10th Cir. 2017); Blevins v. Aksut, 849 F.3d 1016, 1021 (11th Cir. 2017); Williams v. BASF Catalysts LLC, 765 F.3d 306, 323 (3d Cir. 2014); Fiala v. B & B Enterprises, 738 F.3d 847, 853 (7th Cir. 2013); Jackson v. Sedgwick Claims Management Services, Inc., 731 F.3d 556, 565 (6th Cir. 2013) (en banc); Ironworkers Local Union 68 v. AstraZeneca Pharmaceuticals, LP, 634 F.3d 1352, 1364 (11th Cir. 2011); Upper Deck Co., LLC v. Federal Insurance Co., 358 F.3d 608 (9th Cir. 2004); Hughes v. Tobacco Institute, Inc., 278 F.3d 417, 422 (5th Cir. 2001); Hamm v. Rhone-Poulenc Rorer Pharmaceuticals, Inc., 187 F.3d 941, 954 (8th Cir. 1999); Bast v. Cohen, Dunn & Sinclair, PC, 59 F.3d 492, 495 (4th Cir. 1995); Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 241 (2d Cir. 1999).  Even more of a drawback for purveyors of nationwide class actions, is the statute’s causation requirements almost always having precluded reliance on classwide statistical evidence, as we discussed here.

Another possibility would be the Magnuson-Moss Warranty Act, although MMWA also has a number of substantive drawbacks for plaintiffs, not the least of which is prescription medical products not being “consumer” goods.  Kanter v. Warner-Lambert Co., 122 Cal. Rptr.2d 72, 86 (Cal. App. 2002); MHA, LLC v. Siemens Healthcare Diagnostics, Inc., 2017 WL 838797, at *2 (D.N.J. March 2, 2017); In re Minnesota Breast Implant Litigation, 36 F. Supp.2d 863, 876 (D. Minn. 1998); Goldsmith v. Mentor Corp., 913 F. Supp. 56, 63 (D.N.H. 1995); Kemp v. Pfizer, Inc., 835 F. Supp. 1015, 1024 (E.D. Mich. 1993).

In this regard, however, the citation BMS gives to the Omni Capital case is particularly ominous for MMWA plaintiffs.  Omni Capital was a federal question case, alleging violations of several federal securities statutes.  498 U.S. at 99.  The Court held that, even if the Fifth Amendment Due Process Clause did allow Congress to expand personal jurisdiction with a statute providing for nationwide service of process (the footnote cited in BMS was itself a caveat that the Court had “no occasion to consider the constitutional issues raised by this theory”), no jurisdiction existed because Congress had not in fact done so.  “[U]nder Rule 4(e), a federal court normally looks either to a federal statute or to the long-arm statute of the State in which it sits” to determine personal jurisdiction.  Id. at 105.  An “implied” cause of action did not include implied nationwide service of process.  “[W]e would not automatically graft nationwide service onto the implied private right of action.”  484 U.S. at 107.  Nor would the Court in Omni Capital go beyond the limits to service of process expressly provided in Rule 4:

We would consider it unwise for a court to make its own rule authorizing service of summons.  It seems likely that Congress has been acting on the assumption that federal courts cannot add to the scope of service of summons Congress has authorized.  This Court in the past repeatedly has stated that a legislative grant of authority is necessary. . . .

The strength of this longstanding assumption, and the network of statutory enactments and judicial decisions tied to it, argue strongly against devising common-law service of process provisions at this late date for at least two reasons.  First, since Congress concededly has the power to limit service of process, circumspection is called for in going beyond what Congress has authorized.  Second, as statutes and rules have always provided the measures for service, courts are inappropriate forums for deciding whether to extend them.  Legislative rulemaking better ensures proper consideration of a service rule’s ramifications within the pre-existing structure and is more likely to lead to consistent application.

Id. at 109-10 (citations and footnotes omitted).

Thus, unlike the FCA or RICO, MMWA falls into the same category as the securities statutes in Omni Capital – it contains no provision for expanded service of process of any sort.  Alisoglu v. Central States Thermo King of Oklahoma, Inc., 2012 WL 1666426, at *3-4 (E.D. Mich. May 11, 2012); Bluewater Trading LLC v. Fountaine Pajot, S.A., 2008 WL 2705432, at *2-3 (S.D. Fla. July 9, 2008), aff’d, 335 F. Appx. 905, (11th Cir. 2009); Weinstein v. Todd Marine Enterprises, Inc., 115 F. Supp. 2d 668, 671 (E.D. Va. 2000); see Walsh v. Ford Motor Co., 807 F.2d 1000, 1012, 1018-19 (D.C. Cir. 1986) (reversing decision that “veered off course” by “regard[ing] Magnuson-Moss as an Act intended to facilitate nationwide class actions”).  What that means for Magnuson-Moss plaintiffs is:

The end result of Omni is to require a court to apply in federal question cases such as this case where there is no provision authorizing nationwide service of process a personal jurisdiction test very similar to that used in diversity cases:  Where a federal court’s subject matter jurisdiction over a case stems from the existence of a federal question, personal jurisdiction over a defendant exists if the defendant is amenable to service of process under the forum state’s long-arm statute and if the exercise of personal jurisdiction would not deny the defendant due process.

Alisoglu, 2012 WL 1666426, at *4 (citations and quotation marks omitted) (emphasis added).

While the current version of Rule 4 was amended to address the specific situation presented in Omni Capital – an overseas defendant ostensibly not amenable to service of process in any state (see Rule 4(k)(2)) – plaintiffs who sue defendants (like our clients) that are amenable to suit in some states are subject to state-law limitations on service of process unless a federal statute expressly allows otherwise:

(k) Territorial Limits of Effective Service.

(1) In General. Serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant:

(A) who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located;

(B) [special rules for third party practice − not relevant to personal injury plaintiffs – and indispensable parties – ditto]; or

(C) when authorized by a federal statute.

(Emphasis added).

Thus, under both controlling precedent and the language of Rule 4, our opponents should not be able to utilize federal causes of action to evade Bauman/BMS – unless they can plead into some statute (like the FCA or RICO) that provides nationwide service of process – and those other statutes have attributes that preclude their use in product liability.  Getting back to Walden v. Fiore, this interplay between personal jurisdiction and Rule 4 is what ultimately led to the application of Fourteenth Amendment personal jurisdiction principles in what was a federal question case.  Bivens is an implied right of action (similar to Omni Capital in that respect), thus no statutory expansion of personal jurisdiction was available, and a state long-arm statute subject to the Fourteenth Amendment was the only other option for the plaintiff, even with a federal cause of action involved:

Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.  This is because a federal district court’s authority to assert personal jurisdiction in most cases is linked to service of process on a defendant “who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.”  Fed. Rule of Civ. Proc. 4(k)(1)(A).  Here, Nevada has authorized its courts to exercise jurisdiction over persons “on any basis not inconsistent with … the Constitution of the United States.”  Thus, in order to determine whether the Federal District Court in this case was authorized to exercise jurisdiction over petitioner, we ask whether the exercise of jurisdiction comports with the limits imposed by federal due process on the State of Nevada.

Walden, 134 S. Ct. at 1121 (citations and quotation marks to Bauman omitted).  Walden is Supreme Court precedent demonstrating that Rule 4(k)(1)(A) imports the Fourteenth Amendment’s – and thus Bauman/BMS – Due Process analysis into federal causes of action unless a federal statute expressly provides otherwise.  Thus, plaintiffs can’t get away from Bauman/BMS even by raising federal statutory causes of action like MMWA that don’t authorize nationwide service of process.

Finally, even if plaintiffs somehow grab the BMS-caveat brass ring, and find some federal statute that provides for expanded service (and thus expanded personal jurisdiction), they would run squarely into the principle discussed in Dick Dean’s prescient guest post of a few weeks back – “[j]ust because there is specific jurisdiction over one claim . . ., that is insufficient to find specific jurisdiction over all claims.”  This guest post cites the relevant cases holding that personal jurisdiction must be determined on a claim-by-claim basis, so we won’t repeat them here.

We’ll add only that this claim-by-claim precedent is incompatible with any novel expansion of “pendent jurisdiction” (which has been a subject matter jurisdiction concept) to allow courts to hear otherwise Bauman/BMS-barred claims because one claim somehow squeaks through.  Recent cases rejecting “pendent jurisdiction” as an end run around Bauman/BMS include:  Lexington Insurance Co. v. Zurich Insurance (Taiwan) Ltd., ___ F. Supp.3d ___, 2017 WL 6550480, at *3 (W.D. Wis. Dec. 21, 2017); Greene v. Mizuho Bank, Ltd., ___ F. Supp.3d ___, 2017 WL 7410565, at *4-5 (N.D. Ill. Dec. 11, 2017); Spratley v. FCA US LLC, 2017 WL 4023348, at *7 (N.D.N.Y. Sept. 12, 2017); Famular v. Whirlpool Corp., 2017 WL 2470844, at *6 (S.D.N.Y. June 7, 2017); MG Design Associates, Corp. v. Costar Realty Information, Inc., 224 F. Supp.3d 621, 629 (N.D. Ill. 2016), partially reconsidered on other grounds, 267 F. Supp.3d 1000 (N.D. Ill. 2017); In re Testosterone Replacement Therapy Products Liability Litigation, 164 F. Supp.3d 1040, 1048-49 (N.D. Ill. 2016); In re: Bard IVC, 2016 WL 6393596, at *4 n.4 (D. Ariz. Oct. 28, 2016); In re: Zofran (Ondansetron) Products Liability Litigation, 2016 WL 2349105, at *5 n.5 (D. Mass. May 4, 2016); Demaria v. Nissan, Inc., 2016 WL 374145, at *7-8 (N.D. Ill. Feb. 1, 2016); Tulsa Cancer Institute, PLLC v. Genentech Inc., 2016 WL 141859, at *4 (N.D. Okla. Jan. 12, 2016); Hill v. Eli Lilly & Co., 2015 WL 5714647, at *7 (S.D. Ind. Sept. 29, 2015); In re Plavix Related Cases, 2014 WL 3928240, at *9 (Ill. Cir. Aug. 11, 2014).

Notably, most of these rejections of pendent jurisdiction come in the context of unsuccessful attempts to maintain nationwide class actions after Bauman/BMS.  The jurisdictional noose is tightening around litigation tourists.  It is important that they not  be given any wiggle-room by virtue of the “federal court” caveat in BMS.

Disclaimer:  Any resemblance between the substance of this post and that of a certain recent, wrongly-decided case out of the Northern District of California is purely intentional.

We have always thought that the False Claims Act resides in some sort of alternate universe when it comes to pharmaceutical products. The central concept behind the FCA is easy:  The FCA penalizes anyone who presents, or causes to be presented, to the federal government “a false or fraudulent claim for payment or approval.”  31 U.S.C. § 3729(a)(1).  In other words, you can’t swindle the government.  That is the basic point you need to know to understand the Act, but if you want more detail you can review our recent FCA primer here.

It starts to get fuzzy when a plaintiff (or more accurately the “relator” under the FCA) tries to append the FCA to allegations of off-label promotion of prescription drugs. In the case of truthful off-label promotion, there is no falsity.  And, the defendant drug manufacturer has usually made no claim to the government for payment.  So where is the eponymous “false claim”?  Add to that the increasingly common practice of applying Rule 9(b)’s particularized pleading standard to FCA allegations across the board, and you see an increasing number of opinions holding that plaintiffs cannot use off-label promotion as the basis for their FCA claims.

That is what a divided Sixth Circuit panel decided in United States ex re. Ibanez v. Bristol-Myers Squibb Co., No. 16-3154, 2017 U.S. App. LEXIS 21328 (6th Cir. Oct. 27, 2017).  In Ibanez, two former sales representatives brought a qui tam action on behalf of the government alleging that the defendants “engaged in a complex, nationwide scheme” to improperly promote the prescription drug Abilify through off-label promotion and illegal kickbacks to physicians. Id. at *2.  Their claims failed, however, for the same reason that most FCA claims fail in this context:  The relators could not allege with particularity a connection between the manufacturers’ alleged conduct and a claim for payment made to the government.  The court’s synopsis of the pleading standard highlights how a relator has to allege facts linking it all together:

A claim under [the FCA] “requires proof that alleged false or fraudulent claim was ‘presented’ to the government.” At the pleading stage, this requirement is stringent:  “where a relator alleges a ‘complex and far-reaching fraudulent scheme,’ in violation of [the FCA] it is insufficient to simply plead the scheme; [s]he must also identify a representative false claim that was actually submitted to the government.”

. . . . Rule 9(b) requires relators to adequately allege the entire chain—from start to finish—to fairly show defendants caused false claims to be filed.

Id. at *9-*10 (citations omitted, emphasis added). When applied to alleged improper promotion of prescription drugs, the causal chain gets sketchy:

First, a physician to whom [the manufacturers] improperly promoted Abilify must have prescribed the medication for an off-label use or because of improper inducement. Next, that patient must fill the prescription.  Finally, the filling pharmacy must submit a claim to the government for reimbursement on the prescription.

Id. at *10. According to the Sixth Circuit, this chain “reveals just what an awkward vehicle the FCA is for punishing off-label promotion schemes.” Id.

“Awkward vehicle.” Those are the Sixth Circuit’s words, not ours, but the description is apropos.  These relators were unable to allege a single representative false claim, because they could not allege the causal chain from beginning to end.  Although they alleged that the defendants made false statements in order increase Abilify prescriptions, they could not allege any connection between the alleged statements and any claim to the government. Id. at *14.  They could not allege a conspiracy to violate the FCA either because having a plan to increase prescriptions through improper promotion “may be condemnable,” but it does not amount to an agreement “made in order to violate the FCA.” Id. at *16 (emphasis in original).  The court acknowledged an exception to this stringent pleading requirement—the so-called Prather exception—where a relator has personal knowledge directly related to billing practices, supporting a “strong inference that a false claim was submitted.” Id. at *11-*12.  But these relators were former sales representatives with no involvement in government billing.  The majority held that their lack of personal knowledge negated the Prather exception, although the dissenting judge disagreed. Id. at *13, *34-*37.

The relators therefore failed to state a claim, and the Sixth Circuit also rejected their proposed amended complaint because it had all the same problems as the former complaint: The relators alleged that various pharmacies submitted claims to Medicaid for Abilify prescriptions, but they could not identify the prescribing physicians or otherwise connect the claims to the defendants’ alleged conduct. Id. at *23-*24.  They alleged that certain physicians prescribed Abilify covered by Medi-Cal, but could not allege that the prescriptions were off label or resulted from any improper promotion. Id. at *24.  They alleged that a certain patient was prescribed Abilify off label, but they could not allege that the prescription was presented to the government for payment or was connected to the alleged improper promotion. Id. at *24-*26.

The proposed conspiracy claim in the amended complaint failed for similar reasons: The claims were not adequately tied to any allegedly false statements made by the defendants.  “Thus, the connection between the false statements and claims submitted to the government remains ‘too attenuated to establish liability.’” Id. at *27-*28.

There are other wrinkles in the opinion, but we have covered the essentials. If there is one takeaway from the opinion (and this blogpost), it is this:  An FCA claim based on improper promotion of prescription drugs will almost always fail because there are too many links in the causal chain leading from the alleged promotional activity to a claim for payment submitted to the government.  The first link may be the most difficult.  Physicians exercise their independent medical judgment in writing prescriptions every day, including prescribing drugs for off-label uses.  Who is say whether any one decision was actually influenced by off-label promotion?  When adding in the patient’s decision to fill the prescription and the pharmacy’s decision to submit a claim for government reimbursement, the connection becomes “too attenuated.”  Or, as the Sixth Circuit put it, awkward.

Happy birthday to Stan Lee, the main man behind Marvel Comics. He wrote the stories for The Amazing Spider Man which, when we were 10 years old, we read with a good deal more enthusiasm than we presently feel when encountering the deathless prose in (a) a plaintiff motion to compel, or (b) pretty much any opinion out of the Missouri state courts. When we were at Comic Con in San Diego last Summer, the only autograph we wanted was Stan Lee’s. But the line was indecently long. Hundreds of Thors, Daredevils, and X-men stood between us and the object of our adoration. We knew any hope of meeting our hero was pure fantasy. Anyway, if our friends at the Abnormal Use blog do not have a picture of a Marvel comic at the top of today’s post, we will be very much disappointed.

Happy birthday, also, to Denzel Washington. Most of you probably know him from his movies, such as Glory, Malcolm X, Training Day, and, currently, Fences. But we first laid eyes on Washington when he appeared in the very fine television show, St. Elsewhere. That program was set in a Boston hospital. It ran from 1982 to 1988. Denzel Washington was in the cast all six years. The entire cast was superb, and the writing was inventive. It is possible that the ending of St. Elsewhere (cleverly titled “The Last One”) was a little too inventive. It turned out that everything that happened in the series was the fantasy of an autistic child. To our eyes, it seemed a bit of a cheat. But maybe it was a commentary on art. Art is artifice. It is a lie in service of some bigger truth. It is a fine falsehood.

So fantasy and falsehood seem to be our themes for the day. Massachusetts has an interesting history of falsehoods in legal history. The Salem Witch trials had their origin in a silly girl’s lies. It is easy to read the trial transcripts of the Sacco and Vanzetti trial, or the trial of Lizzy Borden, and conclude that great injustices were done. More recently, and more to the point for the sort of law we practice, the history of False Claim Act cases against drug and device companies in the Bay State has been inglorious. Cases have marched forward and cost companies many millions of dollars in the absence of any actual falsehoods. We are even more dismayed when we consider the overly aggressive and incoherent positions sometimes adopted by our former employer, the Department of Justice. But maybe, just maybe, courts in the Bay State are starting to exercise some control over, and impose reasonable limits on, False Claims Act cases.

Continue Reading First Circuit Affirms Dismissal of False Claims Act Case

Ever since Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), held that state-law claims alleging fraud on the FDA are preempted, plaintiffs have been attempting to find some other way of bringing claims that attribute FDA actions to a defendant’s false pretenses.  Since preemption is based on the Supremacy Clause, and the constitutional relationship between the federal and state legal systems, the doctrine doesn’t apply where recovery is sought under a federal statute.  Since the False Claims Act (“FCA”) is a federal statute, sporadic attempts have been made to bring private fraud-on-the FDA-claims under that statute.  Bexis, who invented what became the Buckman fraud-on-the-FDA/implied-preemption defense in the Bone Screw litigation, even worked on an amicus brief in one such case, United States ex rel. Gilligan v. Medtronic, Inc., 403 F.3d 386 (6th Cir. 2005), that was ultimately decided (favorably to the defense) on other grounds.

A little less than a year ago we reported on an excellent FCA result in United States ex rel. D’Agostino v. EV3, Inc., 153 F. Supp.3d 519 (D. Mass. 2015).  Ever since we’ve been holding our breath, because the First Circuit has been known for pro-plaintiff rulings in cases against our drug and medical device clients.  Indeed, the First Circuit once led our list the worst drug/medical device cases of the year for two years running – in 2012 and 2013.  Whether something’s changed since then in the First Circuit, we can’t say.  But we can report that the district court’s dismissal of fraud-on-the-FDA-based FCA claims in D’Agostino has just been affirmed with an excellently reasoned decision.  See D’Agostino v. EV3, Inc., ___ F.3d ___, 2016 WL 7422943 (1st Cir. Dec. 23, 2016).

The facts in D’Agostino were thoroughly explained in our prior post.  Briefly, the relator (a fired sales rep) alleged that the defendants pulled fast ones on the FDA with respect to the approvals/supplemental approvals of two medical devices, one called “Onyx” and the other “Axium” (these defendants evidently like “x” as much as did the former Standard Oil of New Jersey).  The relator-plaintiff claimed that the defendants:  (1) sought approval of Onyx for a narrow indication, but intended to promote it more broadly off-label (exactly the claim in Buckman); (2) failed to live up to promises made to the FDA concerning extensive surgeon training in using Onyx (also a form of fraud on the FDA); (3) concealed the failure of Onyx’s active ingredient in a different device (ditto); and (4) failed to recall earlier versions of Axium after obtaining FDA approval (not fraud on the FDA, but a theory that could dangerously penalize innovation).  See D’Agostino, 2016 WL 7422943, at ??? (for some reason WL has omitted star paging, so we’ll also cite to the slip opinion), slip op. at 4-8.  Critically, although the FDA was informed of all of these claims, the Agency never instituted any enforcement action, nor did the government elect to join the D’Agostino FCA action.  Id. at 9, 15.  As discussed in the prior post, the district court dismissed all of these claims with prejudice as futile.

Continue Reading Fraud on the FDA Doesn’t Fly Under the FCA Either

It took us a long time to understand how off-label promotion of prescription drugs had anything to do with the False Claims Act, and we’re still not so sure that the two are a fit. The FCA penalizes anyone who presents, or causes to be presented, to the federal government “a false or fraudulent claim for payment or approval.”  31 U.S.C. § 3729(a)(1).  Easy, right?  As we explained just last month in this quick primer on the FCA, Congress enacted the FCA after the Civil War to curb abuses in government procurement.  That part we get.  If you sell the Army 1,000 horses and send them a bill for 2,000 horses, that’s a false claim.

We’re writing about this today because the First Circuit issued an opinion last month that comes to the correct result and also illustrates how FCA claims are alleged in connection with off-label promotion—and how they fail. In Lawton v. Takeda Pharmaceuticals Co., No. 16-1382, 2016 U.S. App. LEXIS 20943 (11th Cir. Nov. 22, 2016), a patent lawyer filed a qui tam action against the manufacturer of a prescription diabetes medication.  He did not actually use the medication, nor did he buy or sell it.  So what did he allege?  He alleged that the manufacturer engaged in an elaborate scheme to promote the drug for un-approved uses—off-label promotion—and that the manufacturer thereby induced medical providers to make allegedly false claims for reimbursement to Medicare and Medicaid. Id. at **4-7.

It’s a two-step process. The manufacturer did not itself make a false claim, but rather engaged in alleged conduct that induced someone else to make a claim, whether the claimant knew it was false or not.  The problem for the plaintiff (or more accurately, the “relator”) is that he alleged neither falseness nor a claim.  We call that a double whammy.  Or maybe it’s a double fault.

Continue Reading This Is How A False Claims Act Case Works—And Fails

People supplement a lot of things. You can supplement your diet with a multivitamin. You can supplement your income with a part-time side job. On the DDL Blog, we are always supplementing our scorecards and cheat sheets. Generally speaking, supplement is a pretty common word and has a fairly universally accepted definition. A supplement is an add-on. Something you do to make something more complete. Does the food you eat contain vitamins and minerals? Sure. But that multivitamin adds to it. It’s a boost.

In litigation too, we do a lot of supplementing. In fact, we are required to do so. Federal Rule 26(e) requires a party to supplement its discovery responses if it “learns that in some material respect the disclosure or response is incomplete or incorrect.” This duty to supplement extends to expert reports as well. Fed.R.Civ.P. 26(e)(2). But what does it mean to “supplement” an expert report? And when does supplementing to make a correction or completion go too far?

Plaintiffs got the answer to that question in U.S. ex. rel. Brown v. Celgene Corp., 2016 U.S. Dist. LEXIS 156826 (C.D. Cal. Aug. 23, 2016). Plaintiff-Relators brought a False Claims Act and Medicare Anti-Kickback Statute case against defendant alleging it illegally marketed Thalomid and Revlimid off-label and paid kick-backs to physicians for prescribing off-label. Id. at *6. The court set a deadline for the expert reports and relators timely served a report from their damages expert. Shortly thereafter, however, relators sought leave to supplement that expert report based on late produced Medicare data. Id. at *6-8. Relators wanted to time to analyze the data and supplement the report with that analysis. Relators also represented that while the supplement would be based on new data, the opinions were not expected to differ significantly. Id. at *8. The court granted the leave requested. Defendant was likewise given an opportunity to amend its expert reports in rebuttal and relators’ expert was deposed after his supplemental report was served. Id. at *11.

Continue Reading Plaintiffs Learn Supplementing Isn’t a Second Bite at the Apple

People send us things to consider discussing in our posts. Usually, those things are court decisions in drug and device cases.  Sometimes, they are so far afield from our comfort zone that we do not give them much consideration.  This week, we received a motion from a False Claims Act case that we thought was interesting enough to enlist a colleague to add some subject matter expertise while we fretted about the election, work, the election, and some other stuff (i.e., the election).  Much of the credit for this post goes to Andy Bernasconi, a fine lawyer for a crazy Red Sox and Patriots fan.

While we do dabble in the FCA on this blog, we lean on Andy for a quick primer on the FCA’s provisions.  Congress originally passed the FCA in 1863 as a way to deter and punish government contractors’ fraud against the U.S. and Union troops during the Civil War.  The statute (as amended) generally creates liability for any person who knowingly submits a materially false claim demanding payment from the United States. See 31 U.S.C. § 3729(a)(1). An FCA violation is punishable by treble damages, civil penalties of up to $21,563 for each false claim, and an award of attorneys’ fees. Id. §§ 3729(a)(1) &(3); id. § 3730(d)(1); 81 Fed. Reg. 42491 (June 30, 2016).

One of the most notable aspects of the FCA is that it contains unique qui tam provisions that permit a private whistleblower, also known as a “relator,” to file FCA claims on behalf of the federal government. Id. § 3730(b)(1). In doing so, the relator files the case under seal, at which point the Justice Department investigates the allegations and decides whether the government will intervene and take over the case to litigate for itself. Id. §§ 3730(b)(2), (4).  If the government declines to intervene in the case, the relator may litigate the case in the name of, and on behalf of, the government. Id. § 3730(c)(3).

Continue Reading Putting the False in False Claims Act Cases

Recently, we noted that one of the first decisions we wrote a post about had been affirmed by the Second Circuit.  Of the district court decision, we had penned “It is nice to see a judge with a proper understanding of how drug labels, FDA, and cockamamie theories about off-label marketing should fit together.  We would like to see more of the judges handling product liability cases with similar issues follow the lead of the judges handling FCA cases and dismiss complaints premised on nonsensical interpretations of labels and regulations.”  In discussing U.S. ex rel. Polansky v. Pfizer, Inc., No. 14-4774,  2016 U.S. App. Lexis 8974 (2d Cir. May 17, 2016), we could be lazy and swap in “a panel” for “a judge” in the preceding quote.  That would be true, but it would be incomplete.  A few weeks after the district court’s decision in Polansky, the Second Circuit decided U.S. v. Caronia, 703 F.3d 149 (2d Cir. 2012), where it vacated the conviction (conspiracy to sell a misbranded drug under 21 U.S.C. §§ 331(a) and 333(a)(1)) of a sales representative for promoting a prescription drug for off-label use.  Then, a few months before the Polansky appeal was argued, the Southern District of New York enjoined the FDA from prohibiting a manufacturer’s truthful off-label promotion concerning a (generic) prescription drug.  Next, a few months later, FDA reached a well-publicized settlement with that manufacturer, preserving that “Amarin may engage in truthful and non-misleading speech promoting the off-label use” of its drug without risking prosecution for misbranding.  While there are still decisions like Neurontin out there and many cases still seek to impose liability under the FCA or other statutes for truthful off-label promotion, the off-label landscape has clearly changed.

With that in mind, we turn back to Polansky.  For eight years and through multiple amended complaints, the plaintiff pursued a FCA claim that Pfizer’s promotion of Lipitor for use within the approved indications was actually off-label—and therefore allegedly led to false claims for Medicare and Medicaid reimbursement—because of references in the label to the National Cholesterol Education Program Guidelines.  We will be blunt—shocking to our readers, we know—this was always a dubious claim because any common sense reading of the label does not come close to supporting the contention that the Guidelines narrowed what was “on-label” compared to the five indications that were approved and described in the label.

The NCEP Guidelines, which came out of NIH and were expressly not intended to trump clinical judgment, set out an algorithm for  recommendations for the general type of treatment (e.g., just lifestyle modifications) depending on risk categories derived from lab results and clinical history.  2016 U.S. App. Lexis 8974, **7-9.  The Indications section in the pre-Physician Labeling Rule label referenced the Guidelines in conjunction with stating that lipid-altering agents should be used only when response to diet and other lifestyle modifications “has been inadequate” and included a summary of the Guidelines. Id. at **10-11.  When PLR changes went into effect in 2009, the reference and summary were omitted, which suggested something about the relative importance of these references. Id. at *9.  Both before and after PLR, the Dosage section of the label had a cite to the Guidelines when stating, for one subcategory of patients, that “The starting does and maintenance doses of Lipitor should be individualized according to patient characteristics such as goal of therapy and response.” Id. at *11.

Continue Reading A Blow Against False Claims Act Liability For Off-Label Promotion

Today’s guest post is courtesy of Reed Smith’s Lindsey Harteis. She’s been following the big-deal UHS v. Escobar False Claims Act that the Supreme Court could decide any day now (or could wait until the end of June), which involves the existence and (perhaps) extent of the so-called “implied certification” theory of FCA liability.

As always our guest posters deserve all the credit, and any blame, for the contents of their posts.

Finally – be sure to read the IMPORTANT ANNOUNCEMENT at the end of this post. DDLaw blog is getting ready to move, and that means you’ll have to resubscribe to continue getting our posts. But don’t worry, it’s easy.

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We spent this past weekend chasing our ten-week old Samoyed puppy around the backyard, where he ventured “down in the weeds” more than a few times. This caused the OCD in us to go over him multiple times with a fine-toothed comb: We reasoned that he was bound to pick up some ticks. Lucky for us, he didn’t. But it got us thinking that when courts go down in the weeds like our dog did, they are bound to pick up a few nasty buggers themselves. In the oral argument for the appeal in United Health Services v. Escobar, 780 F. 3d 504 (1st Cir. 2015), the Court definitely took a run through the weeds. (We blogged briefly on the case here). We’re taking our fine tooth comb through the oral argument to look for ticks, and we fear we’re bound to find in this ruling another “corpus juris festooned with various duties.”

That’s a quote from a Justice we missed dearly while listening to the oral argument in this case. Justice Scalia used it in his concurring opinion in Skilling v. United States, 561 U.S. 358 (2010), which limited a fraud statute in the criminal context due to vagueness and via the 5th Amendment Due Process route.

Skilling reminds us of United Health Services for a couple of reasons: (1) It dealt with defining the contours of a sort of fraud – honest services fraud – for which the lower courts took an expansive view that wasn’t foreseeable based on the plain language in the statute; (2) Scalia was accusing the Courts of Appeals of invention of law rather than interpretation in their rulings on what constituted honest services fraud; and (3) the case involved a fusion of Restatement and black letter law in an unrelated area (Agency and Trusteeship) but was a criminal case.

Continue Reading Guest Post − Implied Certification: An Eradicated Pest or Here to Stay?

How much is “enough?” Will we have enough money to retire someday? Did the Drug and Device Law College Sophomore study enough for her computer science midterm? Is there enough salt in the matzo ball soup? In the realm of summary judgment, we who represent defendants are painfully familiar with courts that dodge this question, allowing claims to proceed and avoiding the complicated issues of admissibility that determine whether a plaintiff has presented enough evidence to create a genuine issue of material fact.

Not so in United States of America ex rel. John King and Tammy Drummond, et. al. v. Solvay S.A., et al.. 2016 U.S. Dist. LEXIS 43133 (S.D. Tex. Mar. 31, 2016). In King, a False Claims Act case, the Relators claimed that the defendant promoted three drugs for off-label uses, and that the off-label promotion resulted in false claims being submitted for prescriptions paid for by government health care programs. King, 2016 U.S. Dist. LEXIS at *5. The defendants moved for summary judgment on these claims, arguing that the relators did not have any admissible evidence of false claims. Specifically, the defendants argued that the Relators relied on inadmissible Texas and New York claims data to create summary charts of supposed false claims and didn’t disclose who created the charts or explain how they were created. Further, the defendants objected to the Relators’ reliance on sales representatives’ “call notes,” arguing that the call notes contained hearsay and lacked foundation. Id. at *8-9.

New York Claims Data

The Relators claimed that the New York claims data was self-authenticating because it was produced in response to a subpoena. The court disagreed, holding, “. . .[W]hile certainly Relators’ assertion that the State of New York produced the New York Claims Data pursuant to a subpoena must be what was requested in the subpoena,” documents produced pursuant to a subpoena are not always self-authenticating. Id. at *13. In contrast to a case cited by the Relators, which involved documents that were going to be used against that producing party, the Relators, who sued on behalf of the State of New York, were using the documents to benefit New York. The court concluded that the New York claims data was not self-authenticating “simply because it was produced pursuant to a subpoena.” Id. at *13-14.

Continue Reading Summary Judgment for Defendants in FCA Action: No Admissible Evidence of False Claims