Two weeks ago we told you that an interesting decision was rendered in Sparks v. Oxy-Health, LLC, et al, Case No. 5:13-cv-649-FL, slip op. (E.D.N.C. Sept. 15, 2015), but we could not talk about it because the opinion had been sealed.  The parties have informed the court that no redactions were necessary and now the order has been unsealed and we are free to blog about it.

We want to start our post by acknowledging that the underlying circumstances of this case are tragic.  It is simply a sad story for the individuals involved.  For that reason, we are going to deal with the legal issues in a very straight forward manner.  From a legal perspective, plaintiffs did not have the evidence required to sustain a products liability or a consumer fraud case under North Carolina law.  It is the import of the judge’s reasoning and the precedential value of the case that we center on and bring to your attention.

The lawsuit was brought by parents on behalf of their deceased son.  Their son was 19 years old and autistic.  The medical device at issue is a portable mild hyperbaric chamber.  Hyperbaric chambers are designed to increase atmospheric pressure.  Sparks, slip op. at 6.  The one at issue in this case was §510k cleared by the FDA for the treatment of “acute mountain sickness” (condition that affects climbers who climb in excess of 8,000 feet).  Id. at 7-8.  In certain medical communities, a recognized off-label use for hyperbaric chambers is the treatment of autism.  Id. at 8.  A prescription is required for this treatment.  Id.  For several years, plaintiffs took their son to clinics where he would receive hyperbaric chamber treatments.  During clinic treatments, plaintiffs’ son was not left alone. Either a family member or a technician monitored and stayed with him throughout the treatment.  Id. at 9.   In 2011, plaintiffs decide to purchase a hyperbaric chamber from the clinic for in-home use.  Id.  The chamber had been in use in plaintiffs’ home for four months before their son’s death.  On the night of his death, decedent was placed in the chamber by his brother who left the room and went to bed.  Id. at 11-12.  Decedent’s father was not home that night and his mother fell asleep downstairs.  Id. at 12.  When she woke, she checked on her son and found the chamber had deflated and that her son had asphyxiated.  It was later discovered that the hose that pumps air into the chamber had become disconnected when a book shelf had depressed the disconnect button on the hose valve.  Id. at 12-13.


Continue Reading Summary Judgment Win Unsealed

This is from the non-Dechert side of the blog.

We do not write too often about tobacco decisions. While FDA has added a Center for Tobacco Products and there are still lots of cases against tobacco manufacturers, we are more likely to talk about some consumer protection or preemption issue from a food case than any issue from a tobacco case.  Rather than discussing the reasons why we typically ignore the tobacco cases in our nearly never-ending search for bloggable cases, we will say what interested us in Berger v. Philip Morris USA, Inc., No. 3:09-cv-141567 (M.D. Fla. Apr. 23, 2015).  First, the decision is a grant of a post-trial motion for partial judgment after essentially the same motion was denied without prejudice at the end of the plaintiff’s case.  For readers who have not gone through this particular emotional roller coaster, it can be analogized to watching your playoff basketball or hockey team be up three games to two, fail to clinch the series in game six, and then take game seven.  You were sure that your team would lose game seven after the earlier missed opportunity.  Then, your relief at the ultimate win is somewhat tempered by the thought that you could have avoided significant progress toward an ulcer. Still, this is much better than taking the loss.  Ask any Caps fan.  Second, it involved a verdict of more than $20 million going away.  And, third, it involved the issue of the plaintiff’s reliance on representations by the defendant—representations that the court had no trouble characterizing in the most damning ways.  Going back to the basic principles of tort law—Palsgraf, anyone?—even decades of an industry-wide “disinformation campaign” does not create liability unless it can be tied to the plaintiff’s use of the product.


Continue Reading Fraud In The Smoke Will Not Do

You may have heard Einstein’s definition of insanity: doing the same thing over and over and expecting different results. Well, if that’s right, then squirrels must be looking for TPP plaintiffs, because they’re nuts at this point if they think they’re going to get a RICO class certified (in the Second Circuit, at least).

We’ve previously reported on the Second Circuit blowing out a putative class in Zyprexa; in fact, it came in number one on our 2010 Top Ten Opinions list. Now we have more good news to report: a Magistrate Judge Report & Recommendation finding class certification inappropriate in a RICO/consumer fraud class action involving Ketek. See Sergeants Benevolent Assn. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, Case No. 1:08-cv-00179-SLT-RER (E.D.N.Y. Feb. 16, 2011) (we’re just going to call it Ketek). Hat-tip to Gary Spahn for sending along the opinion.

Ketek is a prescription antibiotic; plaintiffs were third-party payors (TPPs) who alleged the defendant fraudulently marketed Ketek by misrepresenting its safety and efficacy, and when the “truth” came out, prescriptions of Ketek plummeted. Plaintiffs sued on behalf of a nationwide class of TPPs, alleging claims under RICO, the consumer protection laws of forty-four states, and “unjust enrichment.”

The magistrate’s report and recommendation addressed only the RICO claims and deferred the pendent state claims, as plaintiffs suggested. Slip op. at 8 and n.7. The magistrate, following Zyprexa, found that individual issues predominated and doomed class certification.


Continue Reading Another TPP RICO Class Cert Denial

On Friday we supplied you with the key takeaways — that the West Virginia Supreme Court of Appeals decided: (1) that an action under the West Virginia Consumer Credit and Protection Act alleging affirmative misrepresentation requires proof of reliance, and (2) that a private cause of action under that statute does not extend to prescription

Last Friday, we promised you more on the Second Circuit’s reversal of Judge Weinstein’s Zyprexa class certification decision. Well, here’s more (and the Westlaw cite to boot).

First, the background: A bunch of third-party payors (“TPP”) sued Eli Lilly and Company, claiming that Lilly had misrepresented Zyprexa’s efficacy and side effects. UFCW Local 1776 and

We’ve written about the Actimmune off-label marketing litigation before (here and here). Hey, we even named a prior Actimmune decision Honorable Mention in our Top Cases of 2009 post. And now, it seems the Actimmune litigation has finally met its demise. You can get more detail about the backstory from our prior posts, but here’s the quick synopsis: the plaintiffs filed consumer and third-party payor (TPP) class actions against InterMune and others, alleging that the defendants illegally marketed the drug Actimmune off-label for treatment of idiopathic pulmonary fibrosis (IPF), a nasty lung disease, when Actimmune was ineffective to treat IPF. Originally, the plaintiffs raised a host of fraud-based claims, which the court blew out for failure to plead with particularity. In a bit of deja vu, the plaintiffs took another hack at stating a viable claim, but the court dismissed all fraud-based claims with prejudice.

Which brings us to take three. This time, the plaintiffs tried to state a claim under California’s Unfair Competition Law (UCL), and the TPP plaintiffs also tried to assert a claim under Missouri’s Merchandising Practices Act (MMPA). Again, the court dismissed all claims. With prejudice. See In re: Actimmune Marketing Litig., 2010 U.S. Dist. LEXIS 90480 (N.D. Cal. Sept. 1, 2010). See ya, Actimmune litigation.

Taking apart the UCL claim, the court noted that the plaintiffs had one more shot to plead a non-fraud UCL claim, under the UCL’s “unlawful” and “unfair” prongs. Id. at *16. But the plaintiffs failed to plead such a claim consistent with their TwIqbal obligations. The plaintiffs pointed to alleged off-label marketing as “evidence” that the defendants’ conduct was “unlawful” under the UCL. Id. at *17. Unfortunately for the plaintiffs, they forgot that it is not enough to allege unlawful conduct “in the air” – you also have to establish that the alleged violation caused harm. Id. at *18 (statute requires showing of injury “as a result of” the alleged violation). And here’s the best part: the UCL’s causation element requires proof of “actual reliance.” Id. at *24-25. In other words, “the ‘as a result of’ language places the burden on plaintiffs to establish that they actually relied upon the representations delivered through defendants’ off-label marketing.” Id. at *23.


Continue Reading One, Two, Three Strikes You’re Out

Most lawyers’ eyes light up when they talk about the big, bold, flashy pieces of judicial work. Justice Scalia’s opinions, especially his dissents. Judge Posner’s exercises in legal scholarship. Judge Kozinski’s witty amalgamations of law and pop culture.

We like those works well enough, but we also appreciate finely tuned but less flashy opinions that

As we said last week, because it’s a Dechert case, we can’t comment directly on Clark v. Pfizer, Inc., 2010 WL 163583, slip op. (Pa. Super. Jan. 19, 2010).  However, we were sufficiently inspired by what’s in the opinion that we thought this would be a good time to put in our two cents worth about one of the theories that the Clark plaintiffs pursued:  “fraud on the market.”

As defense lawyers, we want to do our part in killing off this pernicious import from federal securities law.  So we decided to take an in-depth look at all of the the precedent that rejects application of a “fraud on the market” reliance presumption to state-law claims.

Just to make sure that everyone’s with us, briefly “fraud on the market” is a doctrine that waters down fraud (and, plaintiffs would like to say, other liability theories based on claimed misinformation) by presuming reliance in certain limited circumstances. See Basic, Inc. v. Levinson, 485 U.S. 224 (1988) (4 justice majority of 7-justice court).  It’s not a state law claim – the Supreme Court has never applied a “fraud on the market” presumption to state law even in securities cases.

The presumption arose because the Supreme Court bought a questionable proposition – that securities markets are “efficient” and “developed.” in other words, because there are so many participants in national stock markets, and those participants have such a voracious appetite for information, then anything about a particular stock is essentially instantaneously reflected in that stock’s price. Because of that (rather questionable) conclusion, any plaintiff in a securities fraud suit is “presumed” to rely on any material disinformation.

That’s the theory.  In practice, however, what “fraud on the market” is really all about is class actions – reliance is ordinarily considered an individualized issue that’s kryptonite to the supposed “superman” of class actions . Without “fraud on the market,” there probably wouldn’t be very many securities class actions. Conversely, if plaintiffs could import the “fraud on the market” presumption of reliance into non-securities contexts – such as consumer fraud/common-law fraud/warranty litigation against our drug/device clients – an invasion of class actions would follow like night follows day.


Continue Reading No State-Law Market For “Fraud On The Market”