PointofLaw.com
 Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  
   
 
   

 

February 2008 Archives

Exxon Shipping v. Baker

I did a podcast for the Federalist Society on the Exxon v. Baker oral argument. I was also quoted in Wednesday's Christian Science Monitor about the case. Earlier: Feb. 28.

No Taxation Without Representation

The Virginia Supreme Court has just struck down a state law empowering unelected regional transit authorities to levy taxes, ruling that it violates the state constitution to delegate to them the legislature's power to tax. The court's ruling is a blessing for homeowners, as I explain in my discussion of the case at OpenMarket.org.

Insurance company "record profits"

The usual suspects are complaining that property insurance companies made "record profits," complete with an unironic clip-art of a heavyset plutocrat sitting on a pile of moneybags. It's pointless and dishonest to look at insurance profits for a single year. Insurance companies insure against the risk of rare catastrophes. A bad hurricane wipes out five or ten years of profits. If insurance companies are not allowed to make "record profits" in a year when there are few hurricanes, they will have no money to pay claims in a year when there are severe hurricanes. (This isn't the first time CJ&D releases misleading info.)

Sexual Harassment: A Strange, Vague "Tort"

On Wednesday, I discussed how the courts can be downright hostile to employers in sexual harassment cases, playing a game of bait-and-switch regarding whether sexual harassment is "intentional," in order to first make it easier to hold them liable and then maximize the damages that plaintiffs can collect. (Earlier, I discussed judicial double standards in harassment cases and judges' indulgence towards plaintiffs' lawyers who seek to inflame juries with prejudicial appeals, and noted that harassment law is being used by courts to restrict a wide array of once protected speech.)

Although the language of the civil rights laws, such as 42 USC 1981a, clearly requires a harassment plaintiff to show discriminatory intent to recover damages, court sometimes do just the opposite. For example, the Seventh Circuit recently insisted that no discriminatory intent need be shown in a harassment case, yet simultaneously claimed that harassment is "intentional" because it is tort-like in nature in Huff v. Sheehan, 493 F.3d 893, 902-04 (2007).


The record-setting $2.5 billion punitive damage award against Exxon for an Alaskan oil spill will likely be trimmed, but not eliminated, judging from the oral argument yesterday in Exxon Shipping Co. v. Baker. Michael Krauss, Jacob Sullum, and Ted Boutros argued earlier against the huge award. Exxon argues that maritime law precedent bars the punitive damages.

Presumed Guilty of Child Abuse

After Washington, D.C.'s Child and Family Services agency snatched the baby daughters of Greg and Juliana Caplan, a judge ordered their return, finding no reason to believe that that they had abused their daughters.

But the D.C. Government is still hounding the Caplans, who have already spent their life savings on legal fees, listing them in its child abuse registry. As Marc Fisher of the Washington Post notes, "Even after the court found for the Caplans, the city offered to end its investigation only if the parents submitted to counseling, anger management classes and unannounced visits from social workers. The Caplans declined the deal."

D.C. Attorney General Peter Nickles says that there should be a presumption of guilt in child abuse cases: "It may very well be that the weight of the evidence supports the Caplans' position," he said. "But the law is skewed properly toward the protection of the child."

Nickles assumes that seizing a child from her parents will "protect" the child. But as I noted yesterday, a child can experience devastating psychological harm from being taken from her parents. In Doe v. Lebbos (9th Cir. 2003), Judge Andrew Kleinfeld's dissent described the tragedy that befell a little girl who was seized from her father as a result of false abuse accusations:

"After being bounced around in the agency and foster parent bureaucracy for over a year, Lacey . . . was 'diagnosed with Post-Traumatic Stress Disorder, hearing voices, and suicidal ideation.' She was put on anti-psychotic medication. She had taken to smearing feces and to other abnormal and highly disruptive behavior. . . what the county did to her to "protect' her apparently destroyed her. Something in this experience, perhaps being ripped away from her father for whom she consistently expressed love during the whole miserable period, perhaps having strangers strip her and search her heretofore private parts, perhaps being put with caretakers instead of her father, amounted to a trauma that was too much for her."

In England, the problem is even worse, since social workers who seize children receive adoption bonuses.

Government Child-Snatching

Earlier, Ted Frank wrote about how government social workers have an incentive to overreact to erroneous allegations of child abuse, and take children away from loving parents, because they reasonably fear that they will be fired if a child on their caseload dies, even if the death was unforeseeable. (The problem is even worse in England, fueled by adoption bonuses). Children seized and placed into foster care often experience devastating psychological harm.

Washington, D.C.'s Child and Family Services agency (where 6 case workers were recently fired after a child died) seized the twin baby daughters of Greg and Juliana Caplan after one was taken to the hospital for bleeding behind the eye.

Not a "Pro-Business" Supreme Court

The Supreme Court is not, as the media claims, "pro-business" in discrimination cases, as I pointed out below. That's buttressed by today's decision against employers in Federal Express v. Holowecki. The Age Discrimination in Employment Act (ADEA) bars employees from suing until 60 days after they've filed a charge of discrimination with the EEOC. That's intended both to provide notice to the employer, and make settlement of the case prior to litigation possible. In Holowecki, the employer never received that notice, because the employee merely filled out an EEOC intake questionnaire, not a formal charge of discrimination.

But the Supreme Court, rejecting the view of at least two circuit courts, held that intake questionnaires qualify as a charge of discrimination, even if the employer doesn't receive notice of the claim prior to suit. It did so even though it admitted that "the employer's interests, in particular, were given short shrift, for it was not notified of [plaintiff]'s complaint until she filed suit." And it so ruled even though the EEOC's former chairman, Justice Thomas, dissented, stating that an EEOC intake questionnaire simply is not a charge of discrimination. The Supreme Court's ruling may or may not have been consistent with the language of the statute, but it certainly wasn't pro-business, depriving businesses of notice of potential lawsuits.

On the other hand, at least it doesn't raise potential First Amendment problems, the way the Court's ruling against business in another discrimination case (Burlington Northern v. White (2006)) did.


I've never understood media claims that the current Supreme Court is a "dream court" for business. On employment law, it tends to be neutral or hostile to business.

An example of an even-handed decision that doesn't favor business is the Supreme Court's decision yesterday in Sprint/United Management Co. v. Mendelsohn. That case, as the Washington Post notes, "may aid those charging bias"" by allowing plaintiffs to rely on "me, too" evidence in some cases. ("Me, too" evidence is where employees claim that they, like the plaintiff, were discriminated against by the company). The Court held that some "me, too" evidence is admissible, and some isn't, taking a stance more favorable to plaintiffs than many circuit courts (although not the Tenth Circuit). The decision strikes me as even-handed, but then, I used to bring discrimination suits. Business groups weren't too thrilled with it (they tried but failed to convince the court to categorically bar "me, too" evidence).

Sometimes, the Court can be downright hostile to business in discrimination cases. For example, in Burlington Northern v. White (2006), it adopted a definition of unlawful "retaliation" that was broader than most lower courts' definition. As I explained at Overlawyered, that not only burdened business, but also raised possible First Amendment problems.

Sexual Harassment Bait and Switch

In sexual harassment cases, many courts play a game of bait and switch with employers. When they want to hold the employer liable, they claim that harassment requires no showing of wrongful or discriminatory intent at all, making the employer liable even for conduct that unintentionally offended the plaintiff, such as speech that the plaintiff overhears and is offended by. But when it comes time to impose or collect damages, they suddenly switch positions and claim that harassment is not only intentionally discriminatory, but willful and malicious.

Neither position is consistent with the language of the civil rights laws, which do require an intent to treat an employee differently based on her gender, but do not require a showing of malice or ill-will. Moreover, getting rid of any intent requirement raises serious First Amendment and Equal Protection problems.


At the AEI event Ted discussed earlier, preemption scholar Michael Greve argued that the Supreme Court's recent decision in Riegel v. Medtronic (Feb. 20, 2008) conflicts with two earlier district court rulings upholding state regulations of vehicle greenhouse gas emissions against preemption challenges. I agree.

In Riegel, the Supreme Court preempted all state law rules, even common-law torts, that contain any "requirement" that "relates to the safety or effectiveness" of FDA-approved medical devices above and beyond those prescribed by the FDA in its premarket approval process. It held that federal preemption provisions should be interpreted as broadly as their plain language mandates, and that common law torts "relate" to safety or effectiveness requirements of medical devices even if they are labeled as general principles of tort law not focused on medical devices in particular. It did not require additional or conclusive proof that Congress had a specific intent to preempt state tort law.

By contrast, the district court rulings upholding state vehicle emissions regulations rely on contrary reasoning. In Central Valley Chrysler Jeep v. Goldstene (2007), a judge upheld California emissions regulations that effectively required higher fuel economy standards, even though a federal law (EPCA) states that no state may "adopt or enforce a law or regulation related to fuel economy standards." In order to do so, the judge deliberately construed the federal preemption provision "as narrowly" as possible, applying a strong "presumption against preemption" that required proof that Congress had a "clear and manifest purpose" to preempt state greenhouse gas regulations. Similarly, Vermont greenhouse gas emissions were upheld only because the trial judge rejected a "simple 'plain wording' analysis" rooted in the language of the statute, and instead required proof of an additional "clear and manifest purpose" on the part of Congress to preempt the state law. Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F.Supp.2d 295 (D. Vt. 2007).


Earlier, I discussed how judges in the New York area, such as the Second Circuit Court of Appeals, enforce discriminatory double standards in sexual harassment cases and free speech cases that involve sexually explicit materials.

While the liberal Second Circuit has arbitrary politically-correct biases -- like preferring gay porn to straight porn -- judges in more conservative regions can be biased in the opposite direction, countenancing bias against gay people in sexual harassment cases.

For example, in Lockard v. Pizza Hut, 162 F.3d 1062 (10th Cir. 1998), the plaintiffs' trial lawyer inflamed an Oklahoma jury by focusing on the sexual orientation of a Pizza Hut manager, even though it was plainly irrelevant. The manager was not accused of sexual harassment himself, but only of failing to prevent harassment of the plaintiff waitress by male customers. The trial court, amazingly enough, allowed this, claiming that the manager's homosexuality was "relevant to his attitude toward sexual harassment and his inattention to [plaintiff's] complaint." (Why being gay would make someone more indulgent towards sexual harassment by heterosexuals is beyond me). The jury then ruled in favor of the plaintiff. The Tenth Circuit Court of Appeals then upheld the jury verdict against the defendant, claiming that it was a harmless error to admit the manager's sexual orientation.

The Tenth Circuit's assertion that the error was harmless was ludicrous, since it occurred in a close case where many courts would have ruled against the plaintiff. The conduct alleged by plaintiff, although disturbing, was less severe than conduct that other courts have found insufficient to support a jury verdict in favor of a plaintiff. The Sixth Circuit reversed a jury verdict based on worse conduct in Barnes v. Montgomery County Board of Education (1997), claiming the conduct was insufficiently severe or pervasive to constitute actionable sexual harassment -- even though that case involved harassment by a supervisor, not mere customers. (The Supreme Court observed in Faragher v. City of Boca Raton (1998) that abusive conduct by a supervisor can create a hostile environment more quickly than the same conduct by a co-worker, given the supervisor's power over his subordinates).


A recent Kaplan survey asked 2,000 potential law school applicants why they want to be lawyers. The conclusion: financial gain and political ambition.

Here's a summary and a link to the Kaplan study, on Paul Caron's TaxProf site.

FDA overwarning

One of the justifications for FDA preemption is the fear of overwarning; warning overload can be counterproductive, causing people to ignore important warnings. Thus, failure-to-warn litigation impedes safety. See "Requirements on Content and Format of Labeling for Human Prescription Drug and Biological Products," 71 Fed. Reg. 3922 (Jan. 24, 2006); Larkin v. Pfizer, Inc., 153 S.W.3d 758, 764 (Ky. 2004).

Further evidence comes from a CNNMoney.com report (Aaron Smith, "Consumers tune out FDA warnings", Feb. 25) suggesting that the FDA's post-Vioxx caution has already caused the agency to be at the point of diminishing returns, as it is averaging 50% more safety alerts a year for 2005-2007 than it did in 2004, the year Vioxx was withdrawn from the market.

I discussed overwarning in other contexts on Overlawyered in Sep. 2006.

Litigating Backwards

The Supreme Court has just declined to hear a challenge to procedures being applied in West Virginia to 700 lawsuits against the tobacco companies. The tobacco companies objected to the West Virginia courts' strange practice of considering punitive damages before any individual smoker has demonstrated liability or a compensable injury.

Warner-Lambert v. Kent argument

I was at the Warner-Lambert v. Kent argument this morning, which found several justices troubled about where to draw the Buckman preemption line--but also finds Justice Breyer remarkably critical of pharmaceutical product liability as a whole, suggesting that the respondents' ability to muddy the waters may lead the court to simply preempt broad swaths of pharmaceutical product liability.  Throughout the argument, the specter of the Wyeth v. Levine case early next term led both sides to punt hard questions as a matter to be resolved down the road.

State Attorney Generals Abuse Their Power

State attorneys general often abuse their power. Mississippi Attorney General Jim Hood's sweetheart deals with campaign donors, which Ted describes, are just one example.

Last year, the Competitive Enterprise Institute issued a study chronicling abuses by state attorneys general called "The Nation's Top Ten Worst State Attorneys General." Ranked as the three worst AGs were Connecticut's Richard Blumenthal, California's Bill Lockyer, and New York's Eliot Spitzer.

Hood narrowly escaped being included in that study's top-ten list (CEI viewed about a dozen other AGs as being even worse than Hood), but perhaps he should have been. Hood's hiring of campaign donors to bring lawsuits in the name of the state in exchange for lucrative contingency fees is a disturbingly common practice among AGs.

The Wall Street Journal suggests that the Democratic Attorneys General Association (DAGA) more or less laundered money for Hood, giving Hood an amount of money strikingly similar to the amount it received from law firms that earlier received lucrative work from Hood's office. "In 2007, law firms that have benefited from Mr. Hood gave the organization $572,000, and in turn the group wrote campaign checks in 2007 to Mr. Hood for $550,000."

Last year, the president issued an executive order banning federal agencies from hiring lawyers on a contingency fee. The abuses by Hood and other AGs, like Rhode Island attorney general Patrick Lynch, demonstrate why that executive order made sense -- and why state legislatures should follow suit in banning such contingency fees.

Such contingency fees not only foster corruption, they also violate state constitutional separation of powers guarantees, result in perverse incentives and overreaching in litigation, and cause conflicts of interest.

Jim Hood

The Wall Street Journal's editorial page:

Add all of this up, and in 2007 alone Mr. Hood received some $790,000 from partners and law firms that have benefited financially from his office. That is more than half of all of Mr. Hood's itemized contributions for 2007.

This kind of quid pro quo is legal in Mississippi and most other states. However, if this kind of sweetheart arrangement existed between a public official and business interests, you can bet Mr. Hood would be screaming about corruption. Yet Mr. Hood and his trial bar partners are fighting even Mississippi's modest attempt to require more transparency in their contracts.

Some solid reporting; read the whole thing.

Guestblogger this week

With a deadline looming for me, I expect to be posting less this week. Fortunately Hans Bader of the Competitive Enterprise Institute will be here to take up the slack, and then some. Hans posts regularly at CEI's blog Open Market.


Recently, Stuart Taylor wrote about sexual double standards at Duke University. Duke paid $3,500 to finance a performance by strippers and prostitutes co-sponsored by the Duke Women's Center at which scatological obscenities were hurled and audience members were exhorted to chant "I take it up the butt." But earlier, Duke administrators denounced the Duke men's lacrosse team, claiming that even if they were guilty of nothing more than hosting strippers at a private off-campus party, that that was an "appalling" act "bad enough" to warrant their condemnation.

This sort of double standard is, unfortunately, common among politically-correct academics and judges in the northeast. A good example is Harvard, my alma mater, which tolerates sexually graphic and insulting speech from women and minorities, even while punishing mildly off-color comments by heterosexual males. Alysse McIntyre, a writer for the Harvard Law Record, alternated in her weekly columns between graphically boasting about her sexual exploits, both with her partners and her vibrator, and condemning men (like Clarence Thomas) who were accused of similarly boasting about their own sexual exploits (she was a big advocate of expanding the reach of sexual harassment law to broadly regulate speech). A gay activist boasted in an undergraduate newspaper about organizing and attending public "jack- and jill-off parties" at which he and other gay activists would publicly masturbate. But straight male undergraduates would receive a stern warning and "counseling" for creating a "hostile educational environment" after being overheard telling relatively tame sexual jokes (akin to the story of the traveling salesman and the farmer's daughter) that were overheard by female students.

This double standard also exists in court. In sexual harassment cases, courts in New York treat sexually offensive materials as harassment based not on whether they are aimed at an employee based on her sex - as the civil rights laws' language requires - but based on the prejudicial factor of whether the accused belongs to a politically correct group. The New York-based Second Circuit Court of Appeals is quick to hold private employers liable for "sexual harassment" when their heterosexual male employees view pornography, as it did in Patane v. Clark, 508 F.3d 106 (2007), where an employee was allowed to sue her New York City employer because the man she worked under often looked at porn in his own office. But when it's gay porn, it's a different story. In Brennan v. Metropolitan Opera, 192 F.3d 310 (1999), the court held that continual public display of gay pornographic depictions of men in the plaintiff's workplace was not sufficiently pervasive to constitute harassment or create a "hostile work environment," even though it admitted that the plaintiff "was exposed to them every working day."


Editorial page editor Mark Tapscott of the Washington Examiner writes in as follows in response to the letter posted earlier today from attorney Sandra Stein of ILEP (the Institute for Law and Economic Policy):

I would advise Ms. Stein that it's not as easy as that. She, Labaton, Lerach and Milberg Weiss all had abundant opportunities to answer my specific questions about ILEP's funding, programs and operations prior to publication, yet refused to respond. Surely she doesn't now expect to be taken seriously by simply tossing out a post-publication ad hominem that what The Examiner published about ILEP is "falsehoods" because Phil Anschutz owns The Examiner. Unless ILEP responds to the specifics of what we published, readers will be fully justified in concluding that it has something to hide.

Judicial seminars: a response from ILEP

Sandra Stein, longtime executive vice president of the Institute for Law and Economic Policy, writes in as follows in response to our Friday posting on the Examiner series:

I'd like to respond to your posting regarding the Washington Examiner's smear campaign against ILEP last week and perhaps answer one of the questions you raise: why mainstream publications have not picked up this story. The answer is because there is no story. As you probably saw, the Examiner ran the series under the tag of "Editorial Commentary," thereby removing any need for journalistic standards or the requirement of legitimate facts.

Please be advised the Washington Examiner has a pro-business, anti-shareholder/investor reputation. The owner of this paper is Philip Anschutz, a billionaire, who also owns Qwest Communications. Philip Anschutz recently settled a shareholder class action suit against Qwest for $400 million, which was filed by the real targets of this smear campaign, Milberg Weiss and Bill Lerach. This smear campaign by the Washington Examiner is based on falsehoods and is motivated by retribution and revenge.


It's not just patent cases that plaintiffs forum-shop into Marshall, Texas. Let us quote from In re Volkswagen of America, Inc., 506 F.3d 376 (5th Cir.2007), earlier discussed here Nov. 27:

Volkswagen moved to transfer venue to the Dallas Division of the Northern District of Texas ("Dallas Division"). Volkswagen asserted that a transfer was warranted as (1) the Volkswagen Golf was purchased in Dallas County, Texas; (2) the accident occurred on a freeway in Dallas, Texas; (3) Dallas residents witnessed the accident; (4) Dallas police and paramedics responded and took action; (5) a Dallas doctor performed the autopsy; (6) the third-party defendant lives in Dallas County, Texas; (7) none of the plaintiffs live in the Marshall Division; (8) no known party or significant non-party witness lives in the Marshall Division; and (9) none of the facts giving rise to this suit occurred in the Marshall Division.

The district court refused to transfer to the Northern District, VW sought mandamus, and got it on the second try, with the Fifth Circuit ordering transfer. (See also John Council, "5th Circuit Restricts Trial Courts' Discretion in Venue Motions", Texas Lawyer, Nov. 5; John Council, "5th Circuit Case Could Reduce Product Liability Caseload in Texas' Eastern District", Texas Lawyer, Aug. 7). Michael C. Smith, the plaintiffs' attorney in the case, announces on his blog that last week the Fifth Circuit vacated the decision and granted an en banc rehearing, which will decide how much deference a forum-shopping decision will get in the Fifth Circuit when a defendant shows good cause for transfer under 28 U.S.C. § 1404(a). (h/t A.S.)

Richard Epstein on Riegel v. Medtronic

The Federalist Society has him on podcast discussing the new pre-emption decision, as well as his comments at the time of oral argument. A podcast (and also videocast) of the joint Federalist-AEI panel discussion on the same topic is here, with panelists Michael Greve (AEI), Catherine Sharkey (NYU), Daniel Troy (Sidley Austin), and Brian Wolfman (Public Citizen), moderated by our own Ted.

The Patent Reform Act of 2007

My latest Liability Outlook is on the Patent Reform Act of 2007:

Despite some in the media calling patent reform dead, on January 24, 2008, the Senate placed S. 1145, the Patent Reform Act of 2007, on the general calendar. The next few weeks will be critical to the legislation, which the House passed in September. Although much of the discussion has focused on the different perspectives and concerns that the high tech and the biotech/pharma industries have about the legislation, the fact remains that the patent litigation system is broken. Congress should make every effort to fix it by writing into this legislation reasonable formulas for damage awards and venue rules that discourage forum-shopping. ...

Affiliates of Erich Spangenberg's Plutus IP have sued 476 different defendants in 42 lawsuits. The vast majority of those lawsuits allege infringements of patents that Plutus IP purchased for $1,000. The use of invalid patents in litigation is more than theoretical. Philip Jackson sued his attorneys, Chicago plaintiffs firm Niro, Scavone, Haller & Niro, for malpractice after his $12.1 million jury verdict against Glenayre Electronics Inc. was reduced to under $3 million; Niro challenged the malpractice suit by claiming that th e patent Jackson had successfully enforced was invalid. In 2006, approximately 6,000 defendants were sued in 2,800 patent cases; in 2007, the six thousand mark was reached in early October, implying a 30 percent increase in patent litigation in a single year. Such litigation stifles substantial technological innovation. Patent trolls claim to block entire fields, and one cannot hope to innovate in these areas without the financial capital to handle the threat of patent litigation. IBM has 370 corporate patent attorneys, not just to avoid the pitfalls of infringement, but to create a patent portfolio that can provide counterclaims (or cross-licensing opportunities) if a commercial entity were to sue them for infringement. Since the late 1990s, patent litigation costs have outstripped patent profits.

Milberg's judicial seminars

Earlier this month the Examiner ran a three-part series on a topic that had been the subject of virtually no previous press attention: the Institute for Law and Economic Policy, a decade-old think tank intended to provide a voice for the securities class-action plaintiff's bar, which runs annual conferences at high-end resorts bringing together sympathetic academics with judges and participating lawyers. The article quotes me as saying, "If Milberg Weiss and Bill Lerach wanted to cultivate favorable opinion among law professors, opinion makers, and judges, they seem to have found the perfect vehicle in ILEP." Surprisingly or otherwise, the series has prompted virtually no follow-up coverage elsewhere in the press, at least none that can be found on a Google News check.


In Allison Engine Co. v. United States ex rel. Sanders, the high court is being asked to expand the coverage of the bounty-hunting statute from contractors paid by the federal government to the potentially much larger class of contractors paid with federal money -- e.g. by state governments, universities, etc. carrying out federally supported programs. Jenner & Block's Linda Listrom writes that the case "could extend the False Claims Act to almost any company in any industry". Sen. Grassley, inevitably, is waiting in the wings with new legislation to help out the whistleblower/qui tam bar should they lose this one. More coverage: Cincinnati Enquirer.

Med-mal in the Upper Midwest

The lowest medical malpractice insurance rates are found in Minnesota, Wisconsin, Iowa and the Dakotas. Why is that? Probably not because doctors there have managed to achieve anything resembling error-free practice; and probably not because the five states, taken as a whole, are distinguished by any unusually pro-defendant set of tort laws. MedInnovationBlog takes up the question here and here, and speaks with a mutual insurer executive in search of explanations, which may include (among others) a "culture of collegiality among doctors and society as a whole", a hard line against doubtful claims, and a paucity of giant verdicts of the John Edwards variety.

Vioxx litigation update, February 21

  • New Jersey got around to issuing its own put-up-or-shut-up order to plaintiffs opting out of the settlement, requiring expert reports demonstrating causation to be filed by this summer, and threatening dismissal of any cases without such expert reports.
  • Chris Seeger (Seeger & Weiss, PSC), Howard Erichson (Seton Hall), and Kathleen O'Connor (Dechert) will discuss the Vioxx settlement at an event at Cardozo March 11, "The Vioxx Story: Mass Settlements Without Class Actions."
  • A court in Saskatchewan has certified a personal-injury class action against Merck over Vioxx, something no American court would do. The Canadian Merck affiliate has said it will appeal. The opinion does not appear to be online.
  • The only substantive matter on the agenda in today's hearing at the MDL was the motion of Florida plaintiffs to modify the settlement to include them. No press reports have yet come from New Orleans on what has happened today. (Update, Feb. 22: AP reports Brown & Greer reports 30,000 people have enrolled in the settlement so far; the Feb. 29 enrollment deadline has been split into two parts to ease processing of the packages of medical data—the Jeffrey Lowe group had filed a motion saying they were unable to process their thousands of clients by March 30.)
  • Daniel Fisher has a good piece in the March 10 Forbes on the upcoming preemption cases in the Supreme Court, noting that the failure of courts to recognize preemption defenses was in large part responsible for Merck being forced to settle Vioxx litigation for $4.85 billion, notwithstanding the existence of cardiovascular risk warnings on the label.


Yours truly has a guest editorial in Thursday's Investors' Business Daily, describing the Oregon-USSC showdown over punitive damages.

Riegel v. Medtronic

A phenomenally good 7-2 or 8-1 decision (depending on how one reads Stevens's concurrence) in Riegel v. Medtronic (Nov. 2) bodes well for the cause of federal preemption in the pending Warner-Lambert v. Kent and Wyeth v. Levine cases. Beck and Herrmann have a comprehensive take; see also SCOTUSblog.

AEI is holding a panel tomorrow
afternoon discussing Riegel and the other pending preemption cases, featuring Michael Greve (AEI), Dan Troy (Sidley), Cathy Sharkey (NYU), and Brian Wolfman (Public Citizen).


In an 8-1 decision, the Supremes rejected design and warning claims that were held to conflict with federal law. Herewith the synopsis of the decision:

The Medical Device Amendments of 1976 (MDA) created a scheme of federal safety oversight for medical devices while sweeping back state oversight schemes. The statute provides that a State shall not "establish or continue in effect with respect to a device intended for human use any requirement-... (1) which is different from, or in addition to, any requirement applicable under [federal law] to the device, and ... (2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under" relevant federal law. 21 U. S. C. §360k(a). The MDA calls for federal oversight of medical devices that varies with the type of device at issue. The most extensive oversight is reserved for Class III devices that undergo the premarket approval process. These devices may enter the market only if the FDA reviews their design, labeling, and manufacturing specifications and determines that those specifications provide a reasonable assurance of safety and effectiveness. Manufacturers may not make changes to such devices that would affect safety or effectiveness unless they first seek and obtain permission from the FDA.
Charles Riegel and his wife, petitioner Donna Riegel, brought suit against respondent Medtronic after a Medtronic catheter ruptured in Charles Riegel's coronary artery during heart surgery. The catheter is a Class III device that received FDA premarket approval. The Riegels alleged that the device was designed, labeled, and manufactured in a manner that violated New York common law. The District Court held that the MDA pre-empted the Riegels' claims of strict liability; breach of implied warranty; and negligence in the design, testing, inspection, distribution, labeling, marketing, and sale of the catheter, and their claim of negligent manufacturing insofar as the claim was not premised on the theory that Medtronic had violated federal law. The Second Circuit affirmed.
Held: The MDA's pre-emption clause bars common-law claims challenging the safety or effectiveness of a medical device marketed in a form that received premarket approval from the FDA. Pp. 8-17.

This is the most momentous Supreme Court product liability decision in some time -- covering not only warnings but also design defects for FDA approved devices (at least, perhaps, for Class III devices). Justice Ginsburg, dissenting, vigorously defended state common law's survival in the face of FDA regulations, but was unable to muster other states' rights supporters in the face of a hard-to-get-around literal interpretation of the regulations' meanings.

Spitzer and the bond insurers

Holman Jenkins in today's WSJ wonders whether state officials can wave a coercive wand over the troubled institutions and thus immunize them from charges of fraudulent conveyance should their mortgage clients suffer and their municipal clients walk away whole.

"Obama Comedown Syndrome"

David Brooks: "Does The Changemaker have the guts to take on the special interests in his own party -- the trial lawyers, the teachers' unions, the AARP?" Early signs: Outlook not so good.

Foreclosures: clueless in Providence

Providence, Rhode Island Mayor David Cicilline last month, per Boston Globe coverage, "submitted an ordinance to the city council that would fine the owner 10 percent of a building's value if it remained vacant a year after receiving a warning from the city. The punitive fine is intended to upend the traditional economic equation by making it cheaper to sell a vacant building, even for a loss, than to hold it and pay the tax." Part of the idea behind the proposal, politically, is to reassure non-foreclosed homeowners who worry about the undoubtedly depressing effects of boarded-up vacancies in dicey Providence neighborhoods.

How obvious is the folly in a measure of this sort? Pretty obvious, you'd think. Assuming the threat works, its effect would be throw an unnaturally large volume of properties onto the market sooner rather than later. As the warning year ticks by and nears its end, something akin to panic selling might even result. The current bad slump in real estate prices might turn into an outright crash. And many of the remaining owner-occupiers in those neighborhoods could then start getting calls from their lenders demanding that they put up more money because their loans are now underwater with the further decline in observed prices.

If that happens, one hopes Mayor Cicilline is still on the scene to pay the political consequences.

Preemption responsible for mortgage crisis?

Comptroller of the Currency John C. Dugan refutes Governor Spitzer:

Almost everyone who has paid attention to the subprime lending crisis has concluded that OCC-regulated national banks were not the problem. Instead, the worst abuses came from loans originated by state-licensed mortgage brokers and lenders that are exclusively the responsibility of state regulators.

However, comments from today assert that the OCC and national bank preemption have prevented the states from taking action against predatory or abusive lenders. That's just plain wrong.

The OCC extensively regulates the activities of national banks, including mortgage lending. The OCC established strong protections against predatory lending practices years ago, and has applied those standards through examinations of every national bank. As a result, predatory mortgage lenders have avoided national banks like the plague. The abuses consumers have complained about most -- such as loan flipping and equity stripping -- are not tolerated in the national banking system. And the looser lending practices of the subprime market simply have not gravitated to national banks: They originated just 10% of subprime loans in 2006, when underwriting standards were weakest, and delinquency rates on those loans are well below the national average.

Nothing the OCC has done has prevented the states from regulating and preventing abuses among the lenders that they license - lenders that are the source of most of today's problems. The states have ample authority - as well as clear responsibility - to set standards for these lenders and enforce them. It defies logic to argue that preemption was an impediment. National banks are bound to obey the strict standards enforced by the OCC everywhere they operate - even in states that had far less rigorous standards. The states should have applied equally rigorous standards to the non-bank lenders that were responsible for the bulk of the problems.

What was she thinking? cont'd

More on Hillary Clinton and the mortgage market, from Megan McArdle and Dan Gross (earlier).

Trasylol: what 60 Minutes didn't tell you

We got a free preview of plaintiffs' opening statement when "60 Minutes," following its victims-and-villains storyline, makes much of the fact Bayer didn't reveal the existence of an unfavorable Trasylol study to the FDA at a September 21 advisory committee meeting. Leave aside that "60 Minutes" fictionally envisions that the drug, which did only 250 million Euros of business in 2005, would have been a billion-dollar-a-year drug, though it had been on the market for ten years. Leave aside that heart surgeries that used to take three hours are now taking ten hours because Trasylol sales are suspended (though the FDA, as of January, does continue to permit Trasylol use in special circumstances). But 60 Minutes reports that Dr. Alexander Walker "bl[e]w the whistle," when in fact, Bayer self-reported the existence of the i3 study on September 27—only six days late. Because the i3 study did not meet FDA methodological criteria, the FDA did not act when it received the study. (Compare: when the preliminary results for BART, a study with the appropriate prospective methodology, were released, the FDA suspended Trasylol sales within ten days.)


Sandra Johnson (Saint Louis University) in the Minnesota Journal of Law, Science & Technology:

Over half of the FDA-approved prescription medications taken by patients are prescribed for a different purpose, in a higher or lower dose, for a discrete population, or over a longer period of time than that for which the drug was approved. Safety and efficacy concerns attract the most attention; but critical benefits in fostering innovation and providing patients with medications that may be uniquely effective for them are often overlooked.

The current dominant public policy response to off-label prescribing addresses this practice as a particular breed of financial conflicts of interest in which pharmaceutical firms pollute medical judgment by appealing to the financial self-interest of physicians. This conflicts-of-interest approach, however, including that embodied in the current campaign of False Claims Act litigation, relies on untenable assumptions concerning clinical knowledge. It mistakenly assumes that once the polluting factor is eliminated, a purer environment with adequate information for prescribing will remain.

This article begins by examining the literature on physician learning and how learning patterns affect off-label prescribing and weaken demand for post-approval clinical trials. It then describes deficiencies in contemporary clinical research and analyzes how they reinforce skepticism toward research on the part of physicians and hamper regulators in determining whether off-label prescriptions are appropriate. Finally, this article uses landmark False Claims Act litigation, which resulted in a $455 million settlement paid by a manufacturer for marketing, education and research activities relating to off-label use of a single approved drug, as a lens to illustrate the inherent limitations of the conflicts-of-interest approach.

Anticonvulsants and suicidality, cont'd

Beck and Herrmann, blogging on the same New York Times story we did, raise a fascinating point about the possible tendency of drug trials to generate false positives as to a risk of suicidality. No matter what a drug's actual effects, they say, there may be reason to "expect more reports of suicidal behavior in the drug group than in the placebo group".

Around the web, February 19

  • Does Kline & Specter have a Mad Lib mass-tort-ad generator? [Childs on Botox]
  • Judges taking harder link against lawyer misconduct lately [Lammi/WLF, PDF]
  • Despite shock over cuts, Oregon lawmakers in no hurry to respond to state high court's ruling striking down damage limits at public teaching hospital OHSU [Oregonian via Chamber ILR]
  • Even in relatively sane Michigan, "doctors are getting out of the field at (age) 55 instead of at 70" [Livingston County News]
  • Sykes family, prominent in agitating vaccines-cause-autism theory, encounters a rocky road for its claims in court [Seidel]
  • 2002 California legislation was meant to reduce state's endemic construction-defect litigation. And since? [L.A. Times]
  • Jury in Stanford, Connecticut awards $38 million in cerebral palsy suit [AP/Newsday via Perlmutter/Schuelke, Stamford Advocate]

"Why Torts Trumped Terrorism"

Robert Novak in today's Washington Post:

Pelosi could have exercised leadership prerogatives and called up the FISA bill to pass with unanimous Republican support. Instead, she refused to bring to the floor a bill approved overwhelmingly by the Senate. House Democratic opposition included left-wing members typified by Rep. Dennis Kucinich, but they were only a small faction of those opposed. The true reason for blocking the bill was Senate-passed retroactive immunity to protect from lawsuits private telecommunications firms asked to eavesdrop by the government. The nation's torts bar, vigorously pursuing such suits, has spent months lobbying hard against immunity.

The recess by House Democrats amounts to a judgment that losing the generous support of trial lawyers, the Democratic Party's most important financial base, would be more dangerous than losing the anti-terrorist issue to Republicans. Dozens of lawsuits have been filed against the phone companies for giving individuals' personal information to intelligence agencies without a warrant. Mike McConnell, the nonpartisan director of national intelligence, says delay in congressional action deters cooperation in detecting terrorism.

Big money is involved. Amanda Carpenter, a Townhall.com columnist, has prepared a spreadsheet showing that 66 trial lawyers representing plaintiffs in the telecommunications suits have contributed $1.5 million to Democratic senators and causes. Of the 29 Democratic senators who voted against the FISA bill last Tuesday, 24 took money from the trial lawyers (as did two absent senators, Hillary Clinton and Barack Obama). Eric A. Isaacson of San Diego, one of the telecommunications plaintiffs' lawyers, contributed to the recent unsuccessful presidential campaign of Sen. Chris Dodd, who led the Senate fight against the bill containing immunity.

Today's Examiner is similarly critical of the House's actions. In September, I asked in Liability Outlook whether trial lawyers should make terror policy.

Update, Feb. 19 Wall Street Journal editorial: "What we have here is a remarkable display of the anti-antiterror minority at work. Democrats could vote directly to restrict wiretapping by the executive branch, but they lack the votes. So instead they're trying to do it through the backdoor by unleashing the trial bar to punish the telephone companies. Then if there is another terror attack, they'll blame the phone companies for not cooperating."

"We're compensating the wrong patients..."

Pacific Northwest emergency room physician/blogger Shadowfax:

...So I practice defensively, admit more people than really need it, order a lot of tests just in case, and, most importantly, chart incredibly defensively, especially with anyone I am sending home.

It sucks, and it sucks all the more because I don't have any confidence that when I do get sued (it will happen, odds are) there is no reason for me to assume that the quality of the care I gave will have any bearing on the ultimate outcome.

What I want, both as a practicing physician and as the manager of a large medical group, is for a system that accurately relates "bad care" and financial liability. It's not personal, to me. Our group takes care of over 150,000 patients annually, and in a high-acuity environment like ours, staffed by fallible human beings, mistakes are going to happen. So compensating injured patients is and ought to be just a cost of doing business.

But the problem is that it's not predictable, or rather that it is predictable for the wrong reasons. A sympathetic plaintiff is a potent threat, and I can recall several cases which we settled despite excellent care, because the risk of a huge judgment was too high. On the other hand, I have seen a number of cases where the care was, let's say "debatable," but our attorneys play the game well and the lawsuit went away. Certainly we win more than we lose, so if some contend the system is rigged in our favor I wouldn't necessarily disagree, and we can tell a case that is a potential loser, so there is some predictability.

But it's still broken. We're compensating the wrong patients, and not compensating those that should be....

Read the whole thing.

WSJ on alien-hiring RICO

A weekend WSJ editorial picks up on the dismissal of the Tyson case which we've been covering for a long while (and on which we commented Thursday):

...Six of the eight plants named in the suit were unionized, which means that Tyson didn't "set" wages. It negotiated them....

Conservatives normally have little tolerance for civil justice abuse and government harassment of business. Nevertheless, Howard Foster, the plaintiffs lawyer who filed the class action against Tyson and has filed similar suits against other companies, has strangely become something of a hero on the nativist right.


Larry Ribstein is fairly appalled:

The New York Court of Appeals has decided that New York does allow LLC derivative suits despite the minor detail that the legislature quite deliberately omitted derivative suits from the LLC statute as part of a compromise to get the act passed....

The decision would be at least highly questionable even if the court had come up with cogent policy reasons for its result.... The skillful and outraged dissenting opinion, in addition to showing that the majority is "judicially legislating a cause of action that was rejected by the Legislature," demonstrates that permitting LLC derivative suits is very much a debatable issue.

Clemens Throws Legal Curveball

Apparently, it's not just the masses who file wince-worthy lawsuits. Multimillionaire former sports heroes can play too. USA Today reports that embattled pitcher Roger Clemens has sued his former trainer, Brian McNamee, for defamation. Clemens is a public figure, of course, so to prevail under New York Times v. Sullivan he'd have to prove that McNamee accused him of illegal doping - not just falsely - but with "actual malice" or "reckless disregard" for the truth. Color me sceptical, but it looked to me like Clemens, not McNamee, was sweating bullets before the cameras this week. Say it ain't so, Roger.

Vioxx settlement: February 15 update

Little is docketed for argument Thursday's hearing, the last before the February 29 enrollment deadline, where most Vioxx plaintiffs are expected to enroll in the settlement. No surprise, as predicted, Merck has objected in Docket No. 13379 to the Florida plaintiffs' motion to expand the settlement:

First, the Settlement Agreement is a private agreement entered into by the parties. Therefore, the Court is without authority to bind any parties to modified terms - essentially creating a different agreement from the one reached by the parties.
Second, the language of the Settlement Agreement does not, as plaintiffs contend, allow for the type of substantial modification plaintiffs seek. Rather, the Settlement Agreement merely provides that the Court may make minor changes where a modification would allow the provision in question to be enforceable in some form, which is certainly not the case here. ...

Reasonable and customary

Health care insurers should pay more than they do for "out of network" services, thinks AG Cuomo. So he's suing UnitedHealth over the database maintained by its subsidiary Ingenix. Some useful questions and comments at WSJ Law Blog (requires tunneling through the usual slough of worthless and unmoderated comments) and Managed Care Matters.


I wonder what the figure is for New York?

Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says [University of Washington economics professor] Theo Eicher -- twice the financial impact that regulation has had on other major U.S. cities.

"In a nationwide study, it can be shown that Seattle is one of the most regulated cities and a city whose housing prices are profoundly influenced by regulations," he says....

More: SoundPolitics and (an opposing view) The Stranger "Slog". And Virginia Postrel in the November Atlantic (h/t Ted) has a compelling look at the nationwide differences between localities where the right to build is costly, such as Los Angeles, and those where it is cheap, such as Dallas (examples which illustrate why terms such as "Sunbelt" unhelpfully elide broad divides in regulatory approach and economic outcome).

Florida three strikes, cont'd

Our item yesterday on the scarcity of neurosurgeons in Florida following that state's passage of a trial-lawyer-backed "three strikes" measure (providing for the yanking of doctors' license to practice if they lose three malpractice suits) drew the following response from one correspondent:

Thank you so much for that post. I am one of the many physicians in Florida who left as a result of the new provision. Many of us had started practice in Florida hoping that reforms would occur and instead it became worse. After the "three strikes" policy was voted in, many of us chose to leave. The simple reason was this. In our town one of our cardiologists on call took care of three acute heart attacks. All went to the cath lab and had excellent outcomes. A local attorney contacted the patients and told them that they should have been in the cath lab sooner and advised them to file suit as they "might not know how much heart they lost". The attorney then told the cardiologist that he should immediately settle the cases as he could not risk a decision against him because of "three strikes". The cardiologist decided enough was enough and quit medicine. The same tactic was then used against a general surgeon and our only remaining neurosurgeon.

This opened the door to every bogus lawsuit possible. With the sense that we all had bulls-eyes on our back, we left.

Our correspondent asks not to be named "since I still am paying a huge tail insurance for having practiced in Florida".

DC Gun Case: Et Tu, Paul Clement?

My good friend and former student, Bob Levy, has penned a short op-ed on the Solicitor General's recent betrayal of those who favor individual rights.

Florida neurosurgeons

The fraudulent William Lenahan malpractice lawsuit (featured on Oprah Winfrey's show) wasn't enough to discourage Dr. Douglas Martin from practice, but the trial-lawyer-backed "three strikes" ballot measure did the trick.

Employment at will in New York


After six years, a very bad lawsuit finally gets tossed. The lawsuit by four workers claimed that the poultry operator's allegedly knowing employment of illegal aliens amounted to racketeering and injured them because it would have been constrained to offer them higher wages if not for the aliens' availability.

The judge's order said "plaintiffs failed to demonstrate Tyson was harboring or concealing illegal aliens" at its plants in Shelbyville, Tenn.; Ashland, Gadsden and Heflin in Alabama; Center, Texas; Glen Allen, Va. and Sedalia, Mo. The order said plaintiffs provided evidence that could have been presented to a jury to show Tyson was concealing unauthorized employees at its Corydon, Ind., facility but failed to show that Tyson's violations "caused their injuries." ...

[Washington, D.C. attorney Tom] Green and other Tyson attorneys had argued that if the company hired illegal workers, it was because of the underground market for phony immigration papers and the government's flawed system of screening immigrants.

Earlier here and here.

The fortunes in asbestos law

Paging Prof. Brickman: An outside observer would in no way have described the law firm of Michael Kelley and James Ferraro in Cleveland, Ohio, as among the nation's higher-profile personal injury practices, though its principals did throw around a lot of political donations. In 2003, however, a local magazine referred to its "billion-dollar asbestos practice", and following Kelley's sudden death in 2006 of a heart attack, an ugly dispute has broken out between his widow and Ferraro over the distribution of firm assets whose value at its peak is estimated by Mrs. Kelley's lawyer at $3.5 billion. (Ferraro also has a thriving Florida practice.) That might help explain the three jets, the ownership of the arena football team, the Las Vegas Gladiators, slated to move to Cleveland, and the mansions, including Ferraro's "21,000-square-foot, 14-bedroom compound in Martha's Vineyard". (National Law Journal, ABA Journal, South Florida Lawyers).

State AGs and individual gun rights

If you think the posture of hostility to gun rights adopted by AGs like Cuomo (N.Y.), Coakley (Mass.) and Gansler (Md.) is typical of their colleagues around the country, think again (via Kopel).

Alabama v. AstraZeneca

Veteran tort lawyer Jere Beasley got himself hired to represent the state, and is demanding $40 million plus punitives over alleged violations of Medicaid pricing regs.

Sarbox whistleblower law _sans frontieres_

Lerach sentencing

I've got some further thoughts and links at my other site.


An amendment to the federal judicial pay raise bill (S.1638), proposed by Senator Feingold (D., Wis.), is said to be prompted by a desire to ban junkets for judges. Instead it does exactly the opposite. It bans educational programs for judges while permitting them to attend junkets.

Section 5(a)(2) of the amendment would prevent judges from accepting reimbursement from a law school for attending a program, "a significant purpose of which is the education of United States Federal or state judges." Should a law school invite judges to a weekend golf tournament, no problem. But let them hear a lecture on the Founders or on John Locke, and the amendment would ban reimbursement. Junkets are fine. It's education that appears to bother Senator Feingold.

And just what kind of education upsets Senator Feingold? The bill is drafted narrowly to exclude programs with which the Senator is likely to agree. Judges would be permitted to attend Aspen Institute programs, for example, since they would be a minority of attendees. Programs sponsored by American Lawyers for Justice (formerly ATLA) would arguably be permitted, since that special interest group would seem to be a "subject matter bar association." ABA programs are also permitted. So too are university programs such as the Harvard Law and Society program for judges, because they are held under the auspices of the Federal Judicial Center.

What that leaves, as the principal object of Senator Feingold's wrath, is essentially one thing: the George Mason Law & Economics Center, an integral part of George Mason School of Law, where I have the honor to be a faculty member. Since the LEC's inception in 1974, its programs have always been rigorous and taught by the finest scholars. For a five-day program, participants are required to read and discuss 500-600 pages of material, with 21 hours of seminars. There are no entertainment events, and no reimbursement of expenses is offered for spouses. Presentations are academic and theoretical, and lecturers assiduously avoid discussing "hot" topics such as asbestosis, abortion and affirmative action (even though there is much to say about each of these!). Recent programs examined The Idea of America, Skepticism, and Economics. No participant has ever found George Mason programs to be slanted, and no one has ever found fault with our readings, which are posted on the George Mason School of Law web site for all to see. Check them out. I have taught at these programs and can personally vouch that judges, equally representing both major political parties, are united in praising their high quality.

Our programs are held at comfortable hotels, but not at the Ritz. For our six-night programs, total travel, food and hotel reimbursement amounts to between $2500 and $2700. Our programs thus run afoul of Section 5(a)(1) of the amendment, which carefully caps reimbursement at $2,000 per event. $2000 is, to be sure, a generous figure for a one- or two-day event; but if the program seeks to get participants over the intellectual hurdle of a novel field, this requires a lengthier program which bumps into Sen. Feingold's cap. The monetary ceiling therefore interferes with truly educational programs, while permitting programs on less rigorous materials more easily handled in a day.

More than 4000 judges, including about 40% of the entire Federal bench, have attended a George Mason program or one where we supplied academic content. The content of our programs is determined solely by law school academics. The programs are supported by about 180 donors. Corporate sponsorship amounts to less than 10 percent of the budget.

George Mason programs are a valuable service in the public interest. The Code of Conduct Committee of the Federal Bench has noted that "[t]he education of judges in various academic and law-related disciplines serves the public interest" (Advisory Opinion 67). This policy was reiterated by the Federal Judicial Conference in September 2006. The conference "recognizes that judges need to enhance their understanding of law, science, history, economics, sociology, philosophy, and other disciplines.... Without such knowledge of the world around them, judges would be ill-prepared to make informed and fair decisions."


Quite apart from our programs, the Feingold amendment would also make it difficult for other law schools to offer programs for judges. One cannot say what such programs would look like; but we would welcome the competition.


"It turns out that the legal system is a lot tougher on shareholder lawyers than it appears to be on Wall Street executives," [lamented Bill Lerach in a statement that, incredibly, purported to take personal responsibility]. We doubt WorldCom's Bernie Ebbers, serving not two but 25 years, agrees." See the full editorial here. [subscription required]

Avandia: not so harmful after all

Silverman:

The results of the ACCORD trial, which was designed to determine whether treating diabetes would reduce heart disease, found that no particular drug was responsible for serious cardiovascular problems. This would appear to contradict the controversial meta-analysis published last spring in the New England Journal of Medicine, which contended Avandia increased the risk of heart attacks and strokes by 43 percent. ...

"We found no link," William Friedewald of Columbia University in New York, one of the directors of the trial, says in a statement. "Extensive analyses by ACCORD researchers have not determined a specific cause for the increased deaths among the intensive treatment group. Based on analyses conducted to date, there is no evidence that any medication or combination of medications is responsible," adds the NHLBI, which did its own analysis.

See also NIH and Glaxo on the subject. Whether NEJM will retract its politicized editorial remains to be seen.

History shows that this new data cannot be expected to deter the original flood of litigation, since drug litigation is about trial lawyer profits, rather than public health. Indeed, a Google search for Avandia turns up eight or nine Google ads from trial lawyers (including one from Erin Brockovich) asking people to blame Avandia for their heart attack and inviting them to sue. And how many people stopped taking useful medication because of trial-lawyer advertising over Avandia? As Victor Schwartz and Tiger Joyce note in the January 25 Providence Journal, lawyers' solicitations can be hazardous to your health. For more on the dangers of attorney advertising in drug litigation, see June 14.

Update: the Madison Record reports that, notwithstanding the existence of MDL No. 1871 in the Eastern District of Pennsylvania, there are only about fifty Avandia lawsuits to date, though it is unclear how many plaintiffs are represented in those cases, as attorneys have learned to reduce filing fees by including multiple claimants in a single case, making statistical analysis of counting cases difficult.

"The Dirty Dozen"

In the mail: Robert Levy of Cato and William Mellor of the Institute for Justice are out in May with a new book whose subtitle is "How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom". A highlight is a foreword by Richard Epstein (which, with characteristic Epstein independence, takes issue here and there with the authors' selection of worst-ever cases). Not listed among the twelve is my own sentimental favorite, 1968's Jones v. Mayer, which took creative statutory interpretation to a new level by holding that Congress had long before, in the 1866 civil rights act, in fact passed a broad-ranging ban on private racial discrimination, this revolutionary step having gone essentially unnoticed in the intervening century. (I discuss Jones in The Excuse Factory, as does Prof. Gerhard Casper in this fee-access 1968 law review article). Levy and Mellor's hit list, however, does include such notable milestones of badness as Home Building & Loan Association v. Blaisdell (1936), in which the New Deal Court decided that when the Constitution's Article I, Section 10, declares "No State shall ... pass any ... Law impairing the Obligation of Contracts", it meant approximately the reverse of what it said.

Correction 2/14: Gregory Koster points out that "New Deal" above is inaccurate since FDR did not get his first appointment until Hugo Black came on board in the 1937 term; Blaisdell was a "Nine Old Men" decision.

The FDA's warning letter on Vioxx

On September 17, 2001, the FDA issued a warning letter on Merck's marketing of Vioxx. Does this demonstrate liability is appropriate?

Not when read in the appropriate context.

When faced with a violation, the FDA has discretion for engaging in an enforcement action or issuing a "warning letter" for a "minor violation." See 21 U.S.C. § 336. This is an unreviewable decision of prosecutorial discretion. See Heckler v. Chaney, 470 U.S. 821, 837-38 (1985). The FDA is very strict about what pharmaceutical companies can say, sometimes even penalizing them for prematurely repeating scientifically-true facts that are published in medical journals before the FDA signs off on the principle. If plaintiffs are allowed to seek civil damages on the basis of a warning letter, which was issued because Merck committed only a minor violation, it completely disrupts the entire regulatory structure. "This flexibility is a critical component of the statutory and regulatory framework under which the FDA pursues difficult (and often competing) objectives." Buckman v. Plaintiffs Committee, 531 U.S. 341, 349 (2001).

The letter further demonstrates that there is no failure-to-warn problem: Merck was required to send a "Dear Healthcare Provider" letter (p. 7) and did so in April 2002. Doctors knew everything Merck did about the possibility of pro-thrombotic risk. The claim that Merck hid something is a claim that Merck had perfect foresight that it did not share.


I'm quoted in today's Mother Jones about the nomination of trial lawyer Richard H. Honaker, the former president of the Wyoming Trial Lawyers Association, to the District Court in Wyoming; the nomination was in March, and the Judiciary Committee hearing is tomorrow.

Being a trial lawyer doesn't inherently disqualify one from a lifetime appointment to the district court, but one hopes that the White House vetted Mr. Honaker for more than just Senator Craig Thomas's say-so before being nominated for the District Court of Wyoming, especially when the administration has been so slow to fill other open seats. It's not encouraging that Mr. Honaker wrote an article (titled "Tort Reform") in the April 2003 Wyoming Lawyer that repeated the fictional trial-lawyer talking point claiming that caps don't reduce insurance rates. Honaker has represented plaintiffs in fen-phen and Vioxx litigation; fen-phen litigation in particular has been riddled with fraud by the trial bar, and I wonder if a senator has the courage to ask at the February 12 hearing how Honaker's client submissions have performed in the fen-phen litigation audits.

On the plus-side, Honaker is being attacked by leftist groups for being a member of the Federalist Society; so long as Honaker subscribes to that organization's principle that "the province and duty of the judiciary to say what the law is, not what it should be," then what matters is his legal acumen and his willingness to adhere to binding precedent, rather than his personal opinions or the clients he represented. To that extent, the groups that are criticizing Honaker for his legislative record drastically misunderstand the role of the judiciary. As Victor Schwartz notes in the Mother Jones article,

"The Supreme Court has laid down the law on abortion. District court judges have no power to change that," Schwartz says. Opposing a judge because of his views on abortion, he says, "would be like objecting to a painter because he opposes Roe v. Wade. What matters whether he can paint a wall."

Meanwhile, Peter Keisler's nomination, first made over 590 days ago, has yet to be scheduled for a Senate Judiciary Committee hearing, despite his "well qualified" rating from the ABA. Senator Arlen Specter comments at the WSJ. The 51-49 Senate has confirmed only 6 Bush nominees to the appellate courts in the last thirteen months, compared to 15 Clinton nominees confirmed in the last two years of Clinton's term with a 55-45 Republican Senate, with a 16th Clinton choice renominated by President Bush to the Fourth Circuit in 2001.

Philip Morris and punitives

The tobacco company's victory at the U.S. Supreme Court level has done it surprisingly little good in fending off the underlying $70 million-plus Oregon award, writes Howard Bashman: "For better or worse, the Supreme Court of Oregon's recent ruling [upholding the award] has likely transformed this case into an unattractive vehicle for U.S. Supreme Court review on the substantive due process question of the unconstitutional excessiveness of punitive damages."


"A prominent class-action lawyer facing sentencing today for secretly paying plaintiffs to file securities lawsuits, William Lerach, is suggesting that the under-the-table practice was widespread and was not isolated to the firm he helped run for decades, Milberg Weiss. ... Despite the highly publicized travails of what was once America's leading class-action law firm, there has been little public discussion of whether other firms may have emulated the secret payment scheme Lerach and other Milberg lawyers devised." Notwithstanding a request by Lerach's lawyers that the letters from his friends and supporters asking clemency be sealed from public inspection, most of the letters have become public, revealing the identities of such entirely unsurprising Lerach backers as Ralph Nader (who in this one particular case did not favor prison for white-collar criminality) and Ben Stein, known to readers of these pages (though apparently not to many readers of his New York Times column) as an expert witness hired repeatedly by Lerach to help portray sued companies' conduct in the harshest possible light. (Josh Gerstein, "Lerach Says Payoffs Were Widespread", New York Sun, Feb. 11). Another letter writer: Sen. Carl Levin (D-Mich.) And the list of letter-writers (PDF) includes "two redacted names in between Gordon Churchill and Charles Cohen", leading to speculation that one or both surnames might be "Clinton". It seems unlikely, though, that either prominent ex-White House resident would have risked the sort of negative publicity involved even as a gesture to acknowledge Lerach's past favors. (CalLaw "Legal Pad", Feb. 8)(cross-posted from Overlawyered)(corrected shortly after posting to reflect release of most letters by stipulation of parties, not judicial order). Update 4 p.m. EST: sentence is 24 months.

Around the web, February 11

  • New York officials move to ban unlicensed private ownership of chemical/radiological detection equipment [Volokh, Village Voice]
  • Insurance coverage litigation highlights of 2007 make a better read than anyone had a right to expect [Maniloff/Lexis via Rossmiller, also podcast]
  • Heartburn after a hot-chili meal, or cardiac distress? Better to err on the side of an ER referral [Starr/Cortlandt Forum via KevinMD]
  • There's a time for the Supreme Court to weigh policy considerations in securities law, and a time for it not to [Bainbridge]
  • PBS airing "Kingdom", series on small-town British lawyer [Cathy Gellis]
  • "Incoherent mess", "easy-to-spot falsehoods and silly exaggerations": Felix Salmon tells us exactly what he thinks of Ben Stein's latest [Portfolio]

O'Connell papers on early offers

Prof. Jeffrey O'Connell of the University of Virginia, long associated with "early-offer" proposals to encourage prompt settlement of tort disputes, has two recently posted papers on SSRN on the topic. In "An Empirical Assessment of Early Offer Reform for Medical Malpractice" O'Connell is joined by co-authors Joni Hersch and W. Kip Viscusi of Vanderbilt:

The early offer reform proposal for medical malpractice provides an option for claimants to receive prompt payment of all their net economic losses and reasonable attorney fees. Using a large sample of closed individual medical malpractice claims from Texas supplemented by data from Florida, this article provides an empirical assessment of the consequences of the early offer reform. Non-economic damages comprise about two-thirds of paid claim amounts. The minimum payment amount for serious injuries will affect the magnitude of insurer savings and claimant compensation. Payments to claimants will be expedited by two years by the early offer reform, and litigation costs will be reduced by an average of $100,000 to $200,000 per claim.

And in "Binding Early Offers versus Caps for Medical Malpractice Claims?" O'Connell writes:

Like damages caps, early offer reform promises reduction in the costs of medical liability cases. In contrast to damages caps, early offer reform offers advantages to both claimant and defendant. Under early offer, the defendant would have the option to offer an injured patient periodic payments for the patient's net economic losses as they accrue, but not payments for noneconomic losses (pain and suffering). If an early offer were made and accepted, that would settle the claim. This commentary explains how an early offer reform might work and summarizes data from a recent closed claim study of medical malpractice cases in Texas and Florida. The data show widespread opportunities for successful early offers and provide evidence that substantial per case savings would result.

Earlier here.

Denmark introduces class actions

Werner Kranenburg has details (see also).

How Mass Torts Are Born

The FDA warned today that the popular anti-wrinkle drug Botox has been linked to "dangerous botulism symptoms in some users, cases so bad that a few children given the drugs for muscle spasms have died," the New York Times reports. No deaths are reported in connection with the tiny doses used for cosmetic purposes, although a lone wrinkle patient was apparently hospitalized following her Botox injections.

The announcement is sure to cause furrowed brows throughout the legal department of Botox maker Allergan, Inc. Allergan may be particularly vulnerable because the Vioxx litigation appears to be winding down, freeing-up time in the schedules of some of the nation's most capable pharma litigators.


A defense attorney argues that the loss of Milberg Weiss has resulted in a loss of collegiality in litigation:

[T]he new lawyers are importing tactics from product liability cases, resulting in "an increasing inexorable tide of nastiness and incivility." In particular, he referred to tactics such as filing discovery sanction motions, noting that while good-intentioned people on the defense side are trying to find "millions of pieces of paper," they are being accused of "all sorts of high crimes and misdemeanors" by these younger attorneys who are "hijacking" the litigation process.

Alexandra Lahav is unimpressed:

Sometimes aggressive litigation is what addresses the merits, as compared with, say, just settling all cases in some smokey back room. I'm not saying that is what lawyers were doing before the entry of these over-caffeinated folks. But I'm also not against a cup or two if you're a bit slow in the morning. How do you determine the "merits" in the absence of litigation?

But aggressive litigation that concocts fictional discovery violations and sanctions is exactly the opposite of litigating on the merits. It's about trying to win a case on grounds other than the merits (see, for example, the Sunbeam case or John Edwards's infamous Valerie Lakey victory; see also March 2006 and October 2005) or to make life so miserable for opposing counsel that they have conscious or subconscious bias to settle a case that should be litigated.

There's also some false nostalgia going on if someone is claiming that Lerach et al. weren't engaged in nasty scorched-earth litigation themselves. Just ask Daniel Fischel.

Jim Hood deposed

PoL contributor David Rossmiller has a series of posts summarizing yesterday's dramatic developments in the Scruggs-related dispute between the Mississippi attorney general and State Farm, which culminated in a confidential settlement (is that something state AGs are supposed to enter into?)

More: Roger Parloff has a must-read account at his Fortune blog.


The Seattle school district that denied a pupil a school placement because of his race is arguing that its opposing counsel, Davis Wright Tremaine, should not be entitled to nearly $1.8 million in attorney fees because it took the case pro bono.

"Davis Wright Tremaine is a large law firm. They have a big name and blue chip clients," said Shannon McMinimee, assistant general counsel of Seattle Public Schools. "They definitely don't need to rely on their pro bono cases to make them money to sustain the law firm."

Gee, I guess that when you use racist criteria to deny someone equal access to public schools you should realize that lawyers' fees may be shifted, even if the law firm used by the aggrieved party is not an improverished one. That said, here's hoping Davis Wright donates its fee to charity: maybe to the Center for Equal Opportunity, for example.

Site down later this afternoon

We're upgrading to a newer version of Movable Type and expect the site to be down for part of this afternoon. Back before long, absent some problem. Update: back up now.

History of NYC law department

The New York Law Journal and the New York City Law Department have collaborated to publish a new book entitled "Fighting for the City: A History of the New York City Corporation Counsel" by William E. Nelson, which traces the history of the city's law department from its origins in 1686. It's available (search on title or author) through NYC's CityStore or American Lawyer Media's LawCatalog.com. (P.S. Clyde Haberman has more in Friday's Times).

Point of Law's page on New York-related legal matters is here. And our recent column exclusive, in which Alvin Lurie recounts from the inside some of the lawyering that went on during the city's 1975 fiscal crisis, may be of particular interest to historians of city law.

Around the web, February 7

  • This Saturday Duke Law hosts a conference, "The New European Choice-of-Law Revolution"; field "in crisis in the U.S." but "thriving in Europe" [info; note paper by PoL contributor Larry Ribstein]
  • Medical coincidence? Thirty-three Brent Coon clients who worked at or near a Chicagoland locomotive factory filed simultaneous asbestosis and silicosis claims [MC Record]
  • Suggested Mississippi bumper sticker: "Real Lawyers Don't Bribe Judges" [Rossmiller]
  • Marie Gryphon's post on the question of why contingency fees are so uniform draws much attention [Beck & Herrmann, Robinette @ TortsProf, Steir @ Mass Tort Lit, Blawgletter]
  • Wisconsin high court joins trend toward rejecting "attractive advertising" suits blaming marketing for underage drinking [Rebecca Schwartz, Shook Hardy & Bacon, for WLF -- PDF]
  • West Virginia courts defended in a study by two professors from that state [State Journal]

Suicide risk of anticonvulsants?

The scare was in the papers this week and might scare some epileptics and other patients off drugs like Depakote, Lyrica and Neurontin. Where did it originate? The Last Psychiatrist says a personal injury lawyer from New York has been campaigning for years to forward adverse event reports to the FDA with the aim of establishing such a link; it's still early to draw any conclusions, though, the numbers at the moment being thin and hard to interpret.

Dann rebuked in foreclosure activism

Ohio Attorney General Marc Dann grabbed headlines when he announced a initiative to throw sand in the legal gears of the foreclosure process. On Monday, however, "Common Pleas Court Magistrate Michael Bachman rejected Dann's argument. He further said Dann was acting against the interests of his clients -- the taxpayers of Ohio -- by moving to dismiss foreclosure cases in which the state has liens against the properties."

GOP candidates on judicial philosophy

The Federalist Society invited contenders of both parties to explain their views, and the Wall Street Journal prints the results of those who've responded so far -- McCain, Romney, Paul and Huckabee -- here. More: Althouse.

Update: Cates loses judicial bid

Judy Cates, known to readers of this site for her role in the controversial Publishers Clearing House class action settlement and thereafter for suing a columnist who wrote critically about the pact, yesterday narrowly lost (in the Democratic primary) her bid for a judgeship in southern Illinois. Cates is a former head of the Illinois Trial Lawyers Association. (Ann Knef, "Wexstten defeats Cates", Madison County Record, Feb. 5; earlier). Bill McClellan, the St. Louis Post-Dispatch columnist sued by Cates and her brother Steven Katz, has written another amusing column on the topic ("For potential Judge Judy, millions have been served", Feb. 1)(cross-posted from Overlawyered).

Hillary's "disastrous" mortgage scheme

Legal expenses insurance

Relatively obscure in the United States, this form of insurance is well established in the major loser-pays jurisdictions, where it typically (among other functions) helps protect individuals against the risk of owing a fee as a losing plaintiff at trial. That it (like other forms of insurance) might not be immune to gamesmanship and angle-playing, however, is suggested in this post from the popular U.K. fictional law blog, Baby Barista.

A milestone in curbing discovery abuse?

Last month, to quote the Law.com summary, "U.S. Magistrate Judge Barbara Major sanctioned five attorneys from Day Casebeer Madrid & Batchelder and one from Heller Ehrman for their roles in 'monumental' discovery violations in a patent infringement case between Qualcomm Inc. and Broadcom Corp." David McGowan at Legal Ethics Forum sums up the ruling (PDF) here and here, and both John Steele and the NLJ's Solovy & Byman predict that it foreshadows a more serious crackdown on discovery abuse in federal litigation. More links here. Update April 2010: judge lifts sanctions.

Vioxx settlement: February 4 update

  • Judge Fallon denied the motion of Florida plaintiffs to expedite a hearing on their inclusion into a settlement when they did not even bring suit (Jan. 30). Merck and the PSC are required to respond Feb. 15, and the hearing will be Feb. 21, where one can expect the motion to be denied.

Around the web, February 4

  • Lots of amicus activity in Rhode Island lead paint appeal [ProJo, Genova]
  • Trial lawyers "in complete control" of Kentucky lower house, laments president of state senate [Lexington Herald-Leader]
  • Usually it's corporate defendants tripped up by charges of failing to produce discovery docs, but look what happened to Milberg Weiss [NLJ]
  • Speaking of which, official Mel Weiss bio still lists him as vice chair of lefty Drum Major Institute, though DMI seems to have dropped him into memory hole [ShopFloor; more on Milberg-DMI connection]
  • Duck for cover, New York AG Cuomo talks of using brass-knuckled Martin Act against Wall Street [DealBreaker]
  • Some lawyers believe women on juries judge women more harshly. True? [Reed]

Parade of new blogs

Attorneys at the well-known West Coast appellate boutique Horvitz & Levy LLP have launched California Punitive Damages, a weblog which despite its name tracks punitive-damage developments far beyond the borders of California. Its slogan is "An Exemplary Blog". The University of Pittsburgh and University of Washington law schools collaborate on "Legal Scholarship Blog -- Law-Related Calls for Papers, Conferences, and Workshops". And Kenneth Silber, known for his writing on economics, science and public policy generally, now has a blog by the name of QuickSilber.


One aspect that lends strength to the New Hampshire law (see earlier report) is that a unanimous screening panel finding can be introduced as evidence at a later trial, which may have contributed to a defense verdict recently in the trial of a neurologist in Nashua. Kevin Pho and commenters discuss.


An editorial says Marie Gryphon's post "brilliantly summarized the nightmare" of a John Edwards attorney-generalship.

Contentious Contingent Fee Research

Why do plaintiffs with assets opt for contingent fees over hourly rates? Why are contingent fees so uniform? And if contingent fees are so attractive to plaintiffs, why haven't defendants demanded similar arrangements?

Israeli behavioral economists Eyal Zamir and Ilana Ritov released a working paper ten days ago which aims to answer these questions and more: Neither Saints nor Devils: A Behavioral Analysis of Attorneys' Contingent Fees. Zamir and Ritov rely on the results of experiments on both students and seasoned tort lawyers.

One interesting result: participants were willing to pay attorneys fees with twice the expected value of hourly rates in order to insulate themselves against any risk of loss. The authors explain these results by pointing the the phenomenon known to behavioral economists as "loss aversion." Because we intuitively hate losing what we have, the logic goes, we are willing to give up large prospective gains to turn a mixed gamble ("you win some, you lose some") into a pure positive gamble ("heads I win, tails let's call it even"). Thus, even affluent trial lawyers participating in the experiment as imaginary plaintiffs opted for contingent fee representation.

The other really interesting section of the paper addresses the question of why contingent fees are uniform across cases and attorneys: plaintiffs expect to pay just about 33% whether they have a great case or an iffy one, and whether they have a great lawyer or, well, an iffy one. Tort reformers are wont to cry "market failure" here, and not without some evidence.

But Zamir and Ritov offer an alternative explanation grounded, again, in behavioral economics: people become strongly attached to status quo practices, especially when bargaining is very costly. Does this uniform pricing mean that the market is inefficient? Maybe not! Zamir and Ritov offer an alternative hypothesis that I have been, frankly, trying to develop this spring myself:

[T]he standard rate endures in the market thanks to a process of assortive matching, that is, the process through which the plaintiffs with very strong cases contract with the very best lawyers, second-best cases are handled by second-best attorneys, and so forth.

If Zamir and Ritov are correct, then contingent fees don't actually have a market effect similar to price-fixing. Rather, the most effective lawyers get the highest effective hourly rates because they can attract the best cases.

I plan to explore the proposition that, conversely, the worst lawyers file the worst cases, more commonly known as nuisance suits. Do we have a separate, identifiable class of nuisance lawyers out there? That, it seems to me, is the right follow-up question.


After being reversed twice by the U.S. Supreme Court, including in last term's Philip Morris v. Williams case (Oct. 26, 2006; Feb. 20, 2007; much more), the Oregon Supreme Court has once again reaffirmed the $79.5 million punitive damages award. Steenson has details. SCOTUS avoided addressing the issue of excessiveness of damages, so the Oregon Supreme Court's decision is a direct challenge to that jurisprudence. The Court is going to be faced with the need to write a "No, this time we really mean it" reversal, or effectively undo its precedents in the area. (Update: Turkewitz suggests the latter outcome is likely.)


Ah, the hypocritical irony: Bill Lerach moves to keep his sentencing documents for the Milberg Weiss kickback scandal under seal, perhaps to protect the identities of the 150 people who wrote on his behalf. [NY Sun] Any politicians we should know about? Portfolio has the briefing; the DC Examiner comments. Prosecutors have asked for 24 months (out of a possible 33-month maximum under the Guidelines); sentencing is February 11.


As always, they do interesting empirical work:

Using claim-level data, we simulate the effect of Texas's 2003 cap on non-economic damages on jury verdicts, post-verdict payouts, and settlements in medical malpractice cases closed during 1988-2004. For pro-plaintiff jury verdicts, the cap affects 47% of verdicts, and reduces mean allowed non-economic damages, mean allowed verdict, and mean payout by 73%, 37%, and 26%, respectively. In total, the non-econ cap reduces adjusted verdicts by $156M, but predicted payouts by only $60M. The impact on payouts is smaller because a substantial portion of the above-cap damage awards were not being paid to begin with. In cases settled without trial, the non-econ cap affects 18% of cases; and reduces predicted mean payout for non-economic damages (predicted mean total payout) by 38% (18%). The non-econ cap has a smaller impact on settled cases than tried cases because settled cases tend to involve smaller payouts.

The impact of the non-econ cap varies across plaintiff categories. Deceased, unemployed, and elderly plaintiffs suffer a larger percentage reduction in payouts than living, employed, and non-elderly plaintiffs, these differences are statistically significant for the first two comparisons.

We also simulate the effects of different caps, and find substantial differences in cap stringency across states. Different caps reduce aggregate payouts in tried cases (all cases) by between 16% and 65% (7% and 42%). Caps on total damages have especially large effects.

Available at SSRN.

Federal grand jury in Vioxx case

I've previously discussed in passing the problem of federal criminal enforcement of drug marketing laws: the laws are so vaguely written, and the penalties so severe, that even a company that firmly believes it is in the right is likely to settle criminal litigation in order for huge sums to get charges knocked down to a misdemeanor:

Thus every investigation into pharma in the last decade by ambitious federal prosecutors has eventually led to a plea bargain on lesser charges... Prosecutors get a scalp and good headlines without having to risk a loss at trial, and corporate defendants pay the extortion.

Drug companies are reluctant to speak out for fear of being targeted. The District of Massachusetts Health Care Fraud Unit is especially notorious for overreaching: they bullied TAP Pharmaceuticals into a settlement for $885 million, but when they brought individual cases on the same allegations, all ten of the defendants were acquitted, including two from the bench. (Shelley Murphy and Alice Dembner, "All acquitted in drug kickbacks case", Boston Globe, Jul. 15, 2004; Harvey A. Silverglate, "Beantown Shakedown", WSJ, Jun. 24, 2005).

Thus, the news that that same unit has Merck before a federal grand jury investigating sales and marketing practices (WSJ; Pharmalot) is clearly not good news for Merck, whose investors can expect to be shaken down for nine or ten digits. Merck has already turned over every scrap of paper relating to sales and marketing in discovery in the civil case, however, so it is extraordinarily unlikely that the handful of federal prosecutors working on the case have seen something the hundreds of plaintiffs' attorneys reviewing the same documents have not; the effect on the civil cases will be more in terms of bad publicity than in substance.

(Similarly: Eli Lilly and Zyprexa [NY Times via Burch])

Update: Joan McPhee comments in the January 21 National Law Journal:

The government's recent aggressive campaign to prosecute and punish the dissemination of truthful, nonmisleading off-label information by pharmaceutical manufacturers provides a stark illustration. Not content to limit its prosecutions to false or misleading statements or other inherently wrongful conduct, the government has extended its theory of criminal wrongdoing to reach truthful, nonmisleading speech about a lawful activity that physicians routinely and responsibly engage in on a daily basis throughout the country � namely, off-label prescribing, often in circumstances in which the off-label use is not only medically accepted, but also the "standard of care" in the treatment of life-threatening illnesses such as cancer. This truthful, nonmisleading speech includes the dissemination of peer-reviewed journal articles and other scientific and medical research.

There is no one sitting in jail for being convicted of talking about potentially beneficial new medical therapies, and there is a dearth of legal precedent to support the government's overbroad theory of criminality. And yet, while there are strong legal and constitutional defenses to the government's attempted criminalization of truthful, nonmisleading off-label dissemination, there is no available avenue for targeted corporations to gain access to a judge or jury without risking corporate death akin to that of Arthur Andersen. And so they plead and pay, and the public shareholders and other corporate stakeholders pay the price, without benefit of anything even approaching the due process upon which we rightly rely for the fair resolution of legal disputes.

See also Tracy Miner in the Legal Times.

"Patents on legal methods? No way!"

Wachtell, Lipton associate Andrew A. Schwartz, writing in Sidebar, a newly launched informal companion to the Columbia Law Review:

There is something deeply disturbing about granting a private citizen a monopoly, enforceable by the courts, over a method of complying with the tax code or, for that matter, any other law. Moreover, no attorney wants to pause before advising a client in order to run a patent search to make sure that no one owns the advice she is about to give. And what client wants to pay extra to their lawyer to cover licensing fees?

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.