Why Courts Should Exclude Warning - DRI Today
Why Courts Should Exclude Warning - DRI Today
Why Courts Should Exclude Warning - DRI Today
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The word research may instantly bring many things to mind<br />
for you. Chances are, these thoughts involve lots of reference<br />
searches, surveys and analyzing reams of statistical data.<br />
answers that stand up in court and in the real world. In fact,<br />
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At S-E-A, our staff of researchers, technicians and investigators<br />
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Whether conducting a forensic investigation to establish<br />
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A’s idea of research encompasses a wide range of<br />
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On The Record<br />
Recognizing What Is Important<br />
A Few Things on My Mind<br />
By R. Matthew Cairns, <strong>DRI</strong> Immediate Past President<br />
This column is most often filled with a discussion of the<br />
great benefits and accomplishments of <strong>DRI</strong>, and rightly<br />
so. We are the largest and most visible organization of<br />
defense attorneys in the world for good reason. Similarly,<br />
competitors for our membership seek to emulate our<br />
educational offerings and other benefits because there<br />
are none better. So rather than bore you with another<br />
essay on what you already know because you have made<br />
the informed decision to be part of this great organization,<br />
I want to write my final column as a <strong>DRI</strong> Officer<br />
about a few things that have been on my mind of late.<br />
Civil Discourse<br />
Depending on the time of day, 75 percent of television<br />
commercials in New Hampshire involve the race for<br />
president, and 95 percent of those ads are negative (an<br />
unscientific analysis determined by me and my dog Marcus<br />
while lying on the couch). Local and national politicians<br />
spend more time pointing fingers at each other<br />
than trying to reach consensus on the important issues<br />
to move our nation forward. Judges who rule against<br />
someone or some strongly held position in a case are<br />
suddenly activist judges who deserve to be vilified and<br />
removed from the bench. Clients increasingly expect<br />
lawyers to be attack dog litigators because that is what<br />
they see work on TV. This all needs to change. We need<br />
to model good behavior for our children, our clients,<br />
our opponents, and the rest of the world. Civility does<br />
not mean weakness. I submit that it means doing your<br />
job or behaving in a way that respects the person you are<br />
dealing with and the forum in which you are acting. You<br />
do not need to agree with everyone or everything, and<br />
you should stand up for your beliefs and your client. But<br />
I would hope that we could all do that in a civil way. The<br />
person who behaves civilly may not win every fight, but<br />
will be respected for his or her behavior. And that is a<br />
brand all of us should want to wear.<br />
Mentoring<br />
Recently, I tried three cases in six weeks, against three<br />
very different sets of lawyers. In each, I had the opportunity<br />
to work with different lawyers from my office on our<br />
side of the case and on one with a lawyer from a different<br />
state. It became clear by the third case that young lawyers<br />
who had the good fortune of being associated with<br />
more experienced lawyers were better prepared for the<br />
courtroom and more civil in their dealings with opposing<br />
counsel. Senior lawyers are often very busy with case<br />
strategy, depositions of clients and experts, and business<br />
development. However, from personal experience, we<br />
need to make time for mentoring. First, it is vital to the<br />
future of our law firms. Second, it is vital to creating a<br />
culture of excellent advocacy and civility at the bar. And<br />
third, it is so welcomed and appreciated by the mentees<br />
that you can’t help but feel good afterwards. Justice Paul<br />
De Muniz of Oregon instituted mandatory mentoring for<br />
all new lawyers in Oregon, with training for the mentors.<br />
It has been a resounding success by all reports. <strong>Should</strong>n’t<br />
<strong>DRI</strong> and all of us be doing more mentoring<br />
Fitness<br />
As painful as this might be for many of us, we need to<br />
try to remain (or get) fit. I am not talking about six minute<br />
mile or 200 push-ups or downward facing dog for one<br />
hour fit. I am talking about physically and emotionally<br />
fit. My recent run of trials came right on the heels of a<br />
slight hamstring tear. The tear knocked me out of a halfmarathon<br />
and out of running for almost two months,<br />
and gave me a (bad) excuse for not exercising during<br />
trial. In addition to some added pounds, I found that I<br />
was tired earlier in the day and had less energy for the<br />
late nights that trial requires. I also found that the lack<br />
of energy carried over to not being able to do pleasure<br />
reading (because I would instantly fall asleep) or not<br />
being motivated to do necessary yard work. It became a<br />
downward spiral of fatigue, beating myself up for being<br />
tired and out of shape, and fear of how long it would<br />
take to get back in shape. I have turned that around and<br />
am working on increasing my fitness both physically<br />
and mentally. Fitness of body and mind is like gas in<br />
the tank—when it gets to empty, there is nowhere to go,<br />
but if you keep filling it up, even though it will go down<br />
from time to time, you will be able to get where you want<br />
to go, and then go beyond. Don’t get so focused on the<br />
end point that you forget what you need to do for yourself<br />
to get there.<br />
Love<br />
Narcissism may work for some people, but not for me.<br />
The love of my friends and my family is what keeps me<br />
going throughout the day. And for that, I love them.<br />
Thank you for the opportunity to have served.<br />
For The Defense ■ October 2012 ■ 1
<strong>DRI</strong>—The Voice<br />
of the Defense Bar<br />
Vol. 54, No. 10 October 2012<br />
President<br />
Henry M. Sneath<br />
Pittsburgh, Pennsylvania<br />
Immediate Past President R. Matthew Cairns<br />
Concord, New Hampshire<br />
President-Elect<br />
Mary Massaron Ross<br />
Detroit, Michigan<br />
In This Issue<br />
1 On The Record<br />
Recognizing What Is Important: A Few Things on My Mind<br />
By R. Matthew Cairns, <strong>DRI</strong> Immediate Past President<br />
4 <strong>DRI</strong> News<br />
The <strong>DRI</strong> Center for Law and Public Policy: Defining the Voice of Civil Justice • <strong>DRI</strong><br />
Calendar • Members on the Move • <strong>DRI</strong>’s Southwest Leaders Convene in NOLA<br />
10 Affiliates in Action<br />
Sister Organizations Elect New Leadership for 2012–2013<br />
SLDOs: Checking in with IL, MN and MS<br />
1st Vice President<br />
2nd Vice President<br />
Secretary-Treasurer<br />
Executive Director<br />
J. Michael Weston<br />
Cedar Rapids, Iowa<br />
John Parker Sweeney<br />
Baltimore, Maryland<br />
Laura E. Proctor<br />
Nashville, Tennessee<br />
John R. Kouris<br />
Drug and Medical Device<br />
14 From the Chair<br />
More than Ever We<br />
Need You Involved<br />
By Scott W. Sayler<br />
16 Prescription Medication Cases<br />
The Case Against Negligent<br />
Design Claims<br />
By Geoffrey M. Drake and Victoria C. Smith<br />
34 Anomalies and Implications<br />
The First Amendment and<br />
“Off-Label” Promotion<br />
By Ralph S. Tyler, Thomasina E. Poirot,<br />
Andrea S. Andrews and Bruce R. Parker<br />
39 Some Unsettled Issues Linger<br />
Mensing: Effects and Opportunities<br />
By Edward W. Gerecke and David J. Walz<br />
Deputy Executive Director Tyler Howes<br />
Director of Publications Jay Ludlam<br />
Editor<br />
Michelle Parrini<br />
Production Manager Julia Bergerud<br />
22 Biosimilars<br />
The Next Big Thing<br />
By Henninger S. Bullock and Andrew J. Calica<br />
30 FDA Opinion Letters<br />
<strong>Why</strong> <strong>Courts</strong> <strong>Should</strong> <strong>Exclude</strong> <strong>Warning</strong>,<br />
“Untitled,” and Advisory Letters<br />
By Nancy M. Erfle and Andrew J. Lee<br />
44 A Powerful Tool to Wield Early<br />
How to Argue Medical<br />
Device Preemption<br />
By Andrew Tauber, Max Heerman<br />
and Brian Wong<br />
Contributing Editor<br />
Marge Motluck<br />
Life, Health and Disability<br />
Advertising<br />
Representative<br />
Laurie P. Mokry<br />
For The Defense, October 2012, Vol. 54, No. 10 (ISSN<br />
0015-6884). Copyright ©2012, <strong>DRI</strong>. All rights reserved.<br />
Published monthly by <strong>DRI</strong>, 55 West Monroe Street ~<br />
Suite 2000, Chicago, Illinois 60603. Telephone: (312)<br />
795-1101. Fax: (312) 795-0747.<br />
Periodicals postage paid at Chicago, Illinois, and at<br />
additional mailing offices. Subscription price is $65.00<br />
per year, and, for <strong>DRI</strong> members, is included in the membership<br />
dues. Individual copies are $7.00 for <strong>DRI</strong> members<br />
and $12.00 for non-members, plus postage and<br />
handling.<br />
POSTMASTER: Send address changes to For The<br />
Defense, <strong>DRI</strong>, 55 West Monroe Street ~ Suite 2000, Chicago,<br />
Illinois 60603.<br />
Correspondence and manuscripts should be sent to<br />
the Editor.<br />
All views, opinions and conclusions expressed in this<br />
magazine are those of the authors, and do not necessarily<br />
reflect the opinion and/or policy of <strong>DRI</strong> and its<br />
leadership.<br />
52 From the Chair<br />
Many Accomplishments,<br />
but Continued Growth<br />
By Gary Schuman<br />
54 Who Pressed “Enter,” Anyway<br />
Enforcing Contracts in<br />
an Electronic World<br />
By Michelle Thurber Czapski<br />
and Matthew R. Rechtien<br />
60 The Vexation of Conflicting Claims<br />
Rule and Statutory Interpleaders<br />
in Federal Court<br />
By E. Ford Stephens<br />
65 Social Security Disability Decisions<br />
<strong>Should</strong> Disability Insurers<br />
Be Concerned<br />
By Eric P. Mathisen<br />
and Kimberly A. Jones<br />
70 Discovery in ERISA Cases<br />
Did Amara Change the Landscape<br />
By Kathleen S. Massing and Russell S. Buhite<br />
74 ERISA Section 502(a)(3)<br />
Equitable Defenses and<br />
“Appropriate Equitable Relief”<br />
By Aaron E. Pohlmann<br />
79 How to Apply the Commonality<br />
Requirement<br />
Wal-Mart Stores v. Dukes—<br />
After the Hype<br />
By Michael Kentoff, Robin<br />
Sanders and Dawn Williams<br />
85 Who Is to Blame for<br />
Enrollment Deficiencies<br />
Evidence of Insurability and<br />
Conversion Claims<br />
By Joshua Bachrach, Edna S. Kersting<br />
and Russell Birner<br />
92 Advocates and New Members<br />
2 ■ For The Defense ■ October 2012
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© 2012 Thomson Reuters L-375076/5-12
<strong>DRI</strong> News<br />
<strong>DRI</strong> Services<br />
55 West Monroe Street<br />
Suite 2000<br />
Chicago, Illinois 60603<br />
Phone (312) 795-1101<br />
Fax (312) 795-0747<br />
Internet www.dri.org<br />
E-mail dri@dri.org<br />
Hours<br />
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<strong>DRI</strong> Staff Contacts (direct-dial<br />
numbers in area code 312).<br />
■ Membership Services<br />
■ Change of Address<br />
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and Dismemberment<br />
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Insurance<br />
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e-mail: membership@dri.org<br />
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e-mail: committees@dri.org<br />
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■ Meeting Services<br />
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e-mail: marketing@dri.org<br />
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e-mail: thevoice@dri.org<br />
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The <strong>DRI</strong> Center for Law and Public Policy<br />
Defining the Voice of Civil Justice<br />
By Marc E. Williams<br />
In its more than 50 years of existence, <strong>DRI</strong> has<br />
repeatedly faced issues regarding civil justice that<br />
were the subject of national debate. And for the largest<br />
organization of lawyers engaged in defending the<br />
interests of businesses and individuals in civil litigation,<br />
the question has consistently<br />
been, “What is our role” When I<br />
joined the <strong>DRI</strong> board in 2003, one<br />
of my first assignments was to lead<br />
a discussion at a meeting of the <strong>DRI</strong><br />
state representatives on our position<br />
regarding the tort reform wave that was raging<br />
in Congress and in state legislatures across our country.<br />
The conclusion reached in that discussion, as well<br />
as similar discussions by the <strong>DRI</strong> board, was that it<br />
is difficult to find a consensus among our members<br />
as to the propriety of specific civil justice reform proposals.<br />
But one point was clear: to the extent that <strong>DRI</strong><br />
had a voice in any of these debates, it had to be as an<br />
advocate for the preservation of the civil justice system<br />
and that our focus had to be on reforms that<br />
made the system fairer to all parties. Our guiding<br />
star had to be change that resulted in a better functioning<br />
system of civil justice.<br />
Over the years <strong>DRI</strong> worked on these issues and<br />
put in place programs to identify the issues in the<br />
national debate on civil justice on which we should<br />
be engaged. Ultimately, that effort at outreach led us<br />
to consider whether we should expand our efforts to<br />
become a true “thought leader” on these issues. To<br />
do so, however, would require a significant commitment<br />
from the organization in terms of staff, volunteer,<br />
and financial resources. Under the leadership<br />
of the <strong>DRI</strong> Executive Committee, led by President<br />
Henry Sneath, the decision was made this year to<br />
launch the <strong>DRI</strong> Center for Law and<br />
Public Policy. As Henry described<br />
on these pages last month, the Center<br />
is a consolidation of <strong>DRI</strong>’s public<br />
advocacy efforts, and is intended to<br />
provide a framework for the public<br />
policy discussions that we undertake. I was honored<br />
to be asked to be the first chair of the Center. By combining<br />
the resources of the Public Policy Committee<br />
(chaired by <strong>DRI</strong> Director Bruce Barze), the Amicus<br />
Committee (chaired by Scott Smith, Immediate Past<br />
Chair of <strong>DRI</strong>’s Appellate Advocacy Committee),<br />
and the newly formed Public Education Committee<br />
(chaired by former <strong>DRI</strong> Director Russ Myles), we<br />
have built an organizational structure that will allow<br />
us to review, vet, and consider the propriety of <strong>DRI</strong><br />
speaking out on the myriad of civil justice issues that<br />
percolate up from our members. And once a decision<br />
is made to address an issue, we can utilize resources<br />
from the <strong>DRI</strong> staff and the Public Education Committee<br />
to craft a strategy to optimize the impact on<br />
our members and the public regarding our position.<br />
Additionally, the Center will allow us to maximize<br />
■■<br />
Marc E. Williams is the managing partner in Nelson Mullins Riley & Scarborough’s Huntington,<br />
West Virginia, office. His practice includes experience in the trial and appellate levels of class<br />
actions and other mass torts, as well as complex commercial litigation, employment disputes,<br />
toxic torts, consumer fraud, drug and medical device litigation, intellectual property and trade<br />
secrets, and environmental claims. Mr. Williams is a past president of <strong>DRI</strong> (2008–2009) and chair<br />
of the <strong>DRI</strong> Center for Law and Public Policy.<br />
Diversity and Inclusion in <strong>DRI</strong>: A Statement of Principle<br />
<strong>DRI</strong> is the largest international membership organization of attorneys defending the<br />
interests of business and individuals in civil litigation.<br />
Diversity is a core value at <strong>DRI</strong>. Indeed, diversity is fundamental to the success of the<br />
organization, and we seek out and embrace the innumerable benefits and contributions<br />
that the perspectives, backgrounds, cultures, and life experiences a diverse membership provides.<br />
Inclusiveness is the chief means to increase the diversity of <strong>DRI</strong>’s membership and leadership positions. <strong>DRI</strong>’s<br />
members and potential leaders are often also members and leaders of other defense organizations. Accordingly,<br />
<strong>DRI</strong> encourages all national, state, and local defense organizations to promote diversity and inclusion in their<br />
membership and leadership.<br />
4 ■ For The Defense ■ October 2012
Calendar<br />
Upcoming events<br />
of interest to<br />
<strong>DRI</strong> members and<br />
other defense lawyers<br />
For more information<br />
about any of these events,<br />
call <strong>DRI</strong> Customer Service<br />
at (312) 795-1101,<br />
or visit our website at<br />
www.dri.org.<br />
October 24–28 <strong>DRI</strong> Annual Meeting New Orleans<br />
November 7 Professional Liability 101: FINRA Arbitrations Webcast<br />
Strike First, Strike Fast: Making Injunctions a<br />
Webcast<br />
Part of Your Early Litigation Strategy<br />
November 8–9 Asbestos Medicine Seminar Miami Beach<br />
November 13 Ethics Matters Webcast<br />
November 29 Effectively Defending Rule 30(b)(6) Deponents in Bad Faith Cases Webcast<br />
December 6–7 Insurance Coverage and Practice Symposium New York City<br />
December 6–7 Professional Liability Seminar New York City<br />
2013<br />
November 8<br />
<strong>DRI</strong> Calendar<br />
January 8 Professional Liability 101: Insurance Producer Liability<br />
January 24–25 Fire Science and Litigation Seminar Scottsdale, AZ<br />
January 31– Civil Rights and Governmental Tort Liability Seminar<br />
Phoenix<br />
February 1<br />
February 5 Professional Liability 101: Insurance Coverage<br />
February 28– Toxic Torts and Environmental Law Seminar<br />
New Orleans<br />
March 1<br />
March 14–15 Women in the Law Seminar Miami Beach<br />
March 20–22 Trial Tactics Seminar Las Vegas<br />
March 21–22 Medical Liability and Health Care Law Seminar Miami Beach<br />
April 3–5 Product Liability Conference National Harbor, MD<br />
April 10–12 Insurance Coverage and Claims Institute Chicago<br />
April 24–26 Life, Health, Disability and ERISA Claims Seminar Boston<br />
the impact of our ongoing amicus efforts.<br />
The most frequent way in which <strong>DRI</strong> takes<br />
public positions regarding important civil<br />
justice issues is through our Amicus Committee<br />
filings. Over the last five years, <strong>DRI</strong><br />
has made a significant commitment to<br />
expand our amicus efforts. By bringing<br />
the best appellate advocates in the organization<br />
to the committee, by committing<br />
additional financial resources to the<br />
effort, and by focusing on being a voice in<br />
the cases being argued before the United<br />
States Supreme Court, we have now become<br />
the most frequent amici in SCOTUS cases<br />
among all of the business- and defensefocused<br />
organizations in the country. This<br />
effort has also allowed us to strengthen our<br />
relationships with some of the largest firms<br />
in the country by hiring their Supreme<br />
Court practice groups to prepare our briefs.<br />
As the Center’s first project, we commissioned<br />
the first annual <strong>DRI</strong> National Poll<br />
on the Civil Justice System. This is an independent,<br />
nonpartisan, national telephone<br />
survey conducted in August 2012 among<br />
a scientific random sample of adults. The<br />
poll was conducted by Gary Langer, former<br />
head of polling for ABC News. The<br />
poll was the first effort by <strong>DRI</strong> to identify<br />
juror’s attitudes towards our clients and<br />
our cases. We hoped that the results would<br />
provide a jumping- off point for our educational<br />
efforts in the coming year. Some of<br />
the findings from the survey include:<br />
• 41 percent of Americans are not confident<br />
that the civil law system is fair<br />
and just. Only nine percent are very<br />
confident.<br />
• In a suit pitting a corporation against an<br />
individual, 54 percent would be inclined<br />
to favor individuals. Eleven percent<br />
would favor corporations. And only 23<br />
percent volunteer that they would be<br />
neutral!<br />
• 38 percent of American adults, equivalent<br />
to 90 million people, have been<br />
invited to participate in class action<br />
lawsuits.<br />
• 81 percent of former jurors say the experience<br />
was a positive one.<br />
The full poll results and data analysis<br />
can be found at dri.org. The data revealed<br />
in the poll adds to the pool of knowledge<br />
regarding the civil justice system and may<br />
suggest where reforms or public education<br />
are needed. In order to track the progress<br />
that we make on public education efforts,<br />
and to see how public perceptions change<br />
over time, we intend to continue the poll on<br />
an annual basis.<br />
As we go forward with the Center, we<br />
will be looking for opportunities for <strong>DRI</strong><br />
Stay connected…<br />
For The Defense ■ October 2012 ■ 5
<strong>DRI</strong> News<br />
Members on the Move<br />
The law firm of Gallivan, White & Boyd,<br />
P.A., is pleased to announce that H. Mills<br />
Gallivan has been elected as a senior director<br />
to the board of the Federation of Defense<br />
and Corporate Counsel (FDCC). Mr.<br />
Gallivan will serve a one year term as a senior<br />
director of FDCC, beginning this year.<br />
This election continues Mr. Gallivan’s role<br />
as a leader in the community and the legal<br />
profession. His long list of service includes<br />
president of the South Carolina Defense<br />
Trial Attorneys’ Association; president of<br />
the Upstate S.C. American Inn of Court;<br />
commissioner for City of Greenville Planning<br />
Commission; and president of Rotary<br />
Club of Greenville Foundation. He was also<br />
recently elected president of National Foundation<br />
for Judicial Excellence. Mr. Gallivan<br />
has previously received the <strong>DRI</strong> Exceptional<br />
Performance Citation and was the 2010 recipient<br />
of the South Carolina Defense Trial<br />
Attorneys’ Association’s prestigious Robert<br />
Hemphill Award. He is perennially featured<br />
as one of the Best Lawyers in America and a<br />
South Carolina Super Lawyer. Mr. Gallivan<br />
focuses his practice on alternative dispute<br />
resolution, workplace practices, administrative<br />
law, and negotiation strategies.<br />
Los Angeles lawyer J. Michael Webster, a<br />
member of FDCC and LCA, formerly a partner<br />
with Silver & Freedman APLC, which<br />
closed its doors after 37 years, formed Webster<br />
Kaplan Sprunger LLP in March of 2012<br />
and will serve as the firm’s managing partner,<br />
with offices in Century City and El Segundo,<br />
California. Mr. Webster will head<br />
up the firm’s product liability/risk management<br />
and family law practice groups. The<br />
firm’s other practice areas will be business<br />
and transactions; mergers and acquisitions;<br />
real estate; labor and employment; commercial<br />
litigation; and dispute resolution.<br />
David B. Thomas, Philip J. Combs,<br />
Robert H. Akers and Christopher S.<br />
Dodrill are among 11 attorneys pleased to<br />
announce the formation of Thomas Combs<br />
& Spann, a litigation boutique located in<br />
Charleston, West Virginia, that defends<br />
Goldberg Segalla Receives National Recognition from MCCA for Diversity Initiative<br />
Goldberg Segalla LLP is proud to announce<br />
that it received the George B. Vashon Innovator<br />
Award from the Minority Corporate Counsel<br />
Association (MCCA) in the category of<br />
Pipeline Initiatives. Joseph M. Hanna, a partner<br />
at the law firm and Chair of its Diversity<br />
Task Force, accepted the award at the MCCA<br />
Pathways to Diversity Conference Innovators<br />
Reception, held September 10 at the New<br />
York Marriott Marquis. The Innovator Award<br />
recognized Goldberg Segalla and Mr. Hanna<br />
for spearheading the creation of a diversityfocused<br />
internship program in collaboration<br />
with the Minority Bar Association of Western<br />
New York (MBAWNY) and the University<br />
6 ■ For The Defense ■ October 2012<br />
Joseph M.<br />
Hanna of Goldberg<br />
Segalla<br />
(right) accepts the<br />
George B. Vashon<br />
Innovator Award<br />
from Joseph West,<br />
President and CEO<br />
of the Minority<br />
Corporate Counsel<br />
Association.<br />
(Photo courtesy of<br />
the Minority Corporate<br />
Counsel<br />
Association.)<br />
at Buffalo Law School. The program, begun<br />
in 2011 while Mr. Hanna was president of the<br />
MBAWNY, provides opportunities for minority<br />
UB law students to gain firsthand experience<br />
in the legal system and to develop greater<br />
knowledge, business savvy, and networking<br />
connections that are critical for success.<br />
So far, the program has placed more than 50<br />
students in clerkships in Western New York<br />
courts as well as in several area law firms.<br />
“Our firm was proud to be the first law<br />
firm to welcome minority law clerks through<br />
this program in the summer of 2011, and we<br />
are happy to see how it has grown to benefit<br />
so many in our community,” said Richard<br />
J. Cohen, Goldberg Segalla’s managing<br />
partner. “We are honored by this recognition<br />
and look forward to continuing our efforts to<br />
strengthen diversity in the legal profession.”<br />
Mr. Hanna said, “We are humbled and proud<br />
to receive such an honor from the MCCA for<br />
this program, which would not have been<br />
possible without the critical partnership and<br />
sincere dedication of the Minority Bar Association<br />
of Western New York and the University<br />
at Buffalo Law School. Research shows,”<br />
Mr. Hanna continued, “that minorities are<br />
less likely to receive the often coveted judicial<br />
clerkships or associate positions in law<br />
firms following law school, and they are significantly<br />
less likely to advance to high-level<br />
jobs such as partner or corporate general<br />
counsel. Our hope was to eliminate those<br />
barriers by creating a program that would<br />
arm participants with resources that will help<br />
make their qualifications undeniable and prepare<br />
them for success in the highly competitive<br />
legal job market.”<br />
The mission of the Minority Corporate<br />
Counsel Association is to advance the hiring,<br />
retention, and promotion of diverse attorneys<br />
in legal departments and the law firms<br />
that serve them. MCCA furthers its mission<br />
by publishing research on achieving diversity<br />
and best practices in the legal profession,<br />
honoring innovative diversity programs, and<br />
assisting diverse law students through the<br />
Lloyd M. Johnson, Jr. Scholarship Program.
<strong>DRI</strong> News<br />
product liability, toxic tort, and commercial<br />
litigation. The firm is currently serving<br />
as counsel in the Pelvic Mesh MDL sited in<br />
Charleston, West Virginia.<br />
Keller and Heckman LLP is pleased to<br />
announce that Robert S. Niemann has<br />
joined the law firm as partner in its San<br />
Francisco office. Mr. Niemann practices<br />
civil trial litigation with emphasis in the<br />
areas of commercial and business litigation,<br />
product liability, professional liability,<br />
unfair business practices, intellectual property<br />
and trade secrets, environmental/toxic<br />
torts, premises liability, personal injury,<br />
wrongful death cases, and alternative dispute<br />
resolution.<br />
Jeanne Vos has joined Maraziti, Falcon<br />
& Healey LLP in Short Hills, New Jersey,<br />
as of counsel, specializing in environmental<br />
law and litigation. Ms. Vos is a member<br />
of the <strong>DRI</strong> Toxic Torts and Environmental<br />
Law Committee and a past president of the<br />
New Jersey Defense Association.<br />
Hawkins Parnell Thackston & Young<br />
LLP is pleased to announce the election<br />
of five new partners: Willie C. Ellis, Jr.<br />
(Atlanta); Julia Gowin (Los Angeles); Martin<br />
A. Levinson (Atlanta); Karen M. Volkman<br />
(St. Louis); and Claire C. Weglarz<br />
(Los Angeles). Over the last half century,<br />
Hawkins Parnell Thackson & Young has<br />
grown to include more than 125 lawyers in<br />
seven offices located in California, Georgia,<br />
Missouri, Texas, and West Virginia. HPTY<br />
attorneys represent some of America’s largest<br />
corporations, small local businesses,<br />
and individual clients in high risk litigation<br />
and business disputes across the country.<br />
John C. Trimble, managing partner of<br />
Lewis Wagner LLP in Indianapolis, has<br />
been named Best Lawyers 2013 Indianapolis<br />
Insurance Law Lawyer of the Year.<br />
After more than a quarter of a century in<br />
publication, Best Lawyers is designating<br />
“Lawyers of the Year” in high- profile legal<br />
specialties in large legal communities. Only<br />
a single lawyer in each specialty in each<br />
community is being honored as the “Lawyer<br />
of the Year.” Mr. Trimble maintains a<br />
practice that is dominated by catastrophic,<br />
complex, and class action litigation in the<br />
state and federal courts. He focuses much<br />
of his time on insurance coverage disputes,<br />
bad faith defense, lawyers and insurance<br />
agent malpractice, business litigation, and<br />
catastrophic damages caused by all types<br />
of casualty risks, including transportation,<br />
construction, product liability, and<br />
fires. He has also argued numerous appeals<br />
in the state and federal appellate courts as<br />
counsel for a party and as amicus counsel<br />
for lawyer and trade associations. Through<br />
the years, he has been admitted pro hac<br />
vice in more than 25 jurisdictions, and is<br />
frequently hired by out of state firms to<br />
serve as local counsel in Indiana.<br />
Alabama Governor Robert Bentley has<br />
re-appointed Mark Waggoner, an attorney<br />
in Hand Arendall’s Birmingham office, to<br />
serve on the Red Mountain Greenway and<br />
Recreational Area Commission for a six-year<br />
term. The commission is responsible for providing<br />
oversight for planning and operations<br />
for Red Mountain Park, located in Birmingham,<br />
Alabama. Mr. Waggoner focuses much<br />
of his practice on environmental protection<br />
and employment issues. He chaired the Alabama<br />
State Bar Environmental and Natural<br />
Resources Law Section from 2007–2008,<br />
and was a member of the Birmingham Bar<br />
Association’s Grievance Committee from<br />
2001–2004. He is a member of the <strong>DRI</strong> Employment<br />
and Labor Law Committee. Mr.<br />
Waggoner’s civic involvements have included<br />
serving on the Environmental Committee of<br />
the Birmingham Regional Chamber of Commerce,<br />
on the board of the Alabama Chapter<br />
of the National Multiple Sclerosis Society,<br />
and on the Board of Preschool Partners.<br />
Butler, Snow, O’Mara, Stevens & Cannada<br />
PLLC (Butler Snow) attorney Christy<br />
D. Jones has been inducted into the International<br />
Academy of Trial Lawyers (IATL).<br />
“This is a well- deserved honor for Christy,<br />
Pennsylvania Defense Institute (PDI) President Patrick Sweeney, <strong>DRI</strong> President Henry<br />
Sneath, and PDI Executive Director David Cole.<br />
<strong>DRI</strong> President Henry M. Sneath, a principal<br />
shareholder at the Pittsburgh business litigation,<br />
insurance coverage, and intellectual<br />
property boutique law firm Picadio Sneath<br />
Miller & Norton, P. C., was recently awarded<br />
the 2012 Pennsylvania Defense Counsel of<br />
the Year Award by the Pennsylvania Defense<br />
Institute (PDI at http://www.padefense.<br />
org/) at the organization’s annual meeting.<br />
The award is given annually to a PDI member<br />
who “best exemplifies the qualities of<br />
professionalism, dedication to the practice<br />
of law and promotion of the highest ideals of<br />
justice in the community.” Mr. Sneath’s law<br />
practice specializes in business, intellectual<br />
property, pharmaceutical, toxic tort and<br />
product liability, and insurance coverage litigation.<br />
He has been voted a Super Lawyer in<br />
Business and Intellectual Property Litigation<br />
and is recognized in Best Lawyers in America<br />
in several categories including business,<br />
patent, personal injury defense and legal<br />
malpractice litigation. He is also the editor of<br />
an intellectual property and technology blog<br />
at http://pitiptechblog.com/.<br />
For The Defense ■ October 2012 ■ 7
<strong>DRI</strong> News<br />
and we are very proud of her many accomplishments,”<br />
said Butler Snow chairman<br />
Donald Clark, Jr. “She is a highly respected<br />
and successful trial lawyer who is valued<br />
both by our firm and our clients around<br />
the globe.” Practicing from the Ridgeland,<br />
Mississippi, office, Ms. Jones is chair of the<br />
firm’s Litigation Department and co-chair<br />
of the Pharmaceutical, Medical Device and<br />
Healthcare Industry Team. She focuses her<br />
practice on drug and medical device, product<br />
liability law, and mass torts. Ms. Jones has<br />
served as national trial counsel representing<br />
various multi- national corporations and has<br />
tried numerous bellwether cases throughout<br />
her career. She is a fellow of the American<br />
College of Trial Lawyers and is a past Regent<br />
of Region 6. She is also a Fellow of both<br />
the American Bar Foundation and the Mississippi<br />
Bar Foundation. The International<br />
Academy of Trial Lawyers limits membership<br />
to 500 fellows from the United States.<br />
The academy seeks out, identifies, acknowledges,<br />
and honors those who have achieved<br />
a career of excellence through demonstrated<br />
skill and ability in jury trials, trials before<br />
the court and appellate practice, and invites<br />
only lawyers who have attained the highest<br />
level of advocacy.<br />
J. Carter Thompson, of the law firm<br />
Baker, Donelson, Bearman, Caldwell &<br />
Berkowitz, PC, has been named to the International<br />
Who’s Who of Product Liability<br />
Defence Lawyers 2012. He is among only<br />
five Mississippi attorneys to be selected for<br />
inclusion in this list, which recognizes the<br />
world’s leading product liability defense<br />
lawyers based on feedback from clients<br />
and peer attorneys. A shareholder in his<br />
firm’s Jackson office, Mr. Thompson is<br />
the leader of the Product Liability and<br />
Mass Tort Group and former co-chair of<br />
the Drug, Device and Life Sciences Industry<br />
Group. He concentrates his practice in<br />
the national, regional and local defense of<br />
products liability matters, as well as drug<br />
and medical device, commercial and professional<br />
liability cases. Mr. Thompson is a<br />
fellow of the Litigation Counsel of America,<br />
a member of the Product Liability Advisory<br />
Council, and the program chair of the <strong>DRI</strong><br />
Drug and Medical Device Committee.<br />
Wilkins Tipton, P.A., based in Jackson,<br />
Mississippi, with offices also in Tennessee,<br />
North Carolina, and Alabama, and Adelman<br />
Law Firm PLLC of Memphis, Tennessee, are<br />
8 ■ For The Defense ■ October 2012<br />
pleased to announce the merger of their<br />
firms as part of a greater regional and national<br />
expansion. The merger and formation<br />
of the new firm will be effective January 1,<br />
2013. Wilkins Tipton P.A., through one of its<br />
co-founders, Senith Tipton, traces its roots<br />
back to 1978 and has developed into one of<br />
the premier litigation firms in the Southeast<br />
and beyond in the areas of insurance<br />
defense, workers’ compensation, premises<br />
liability, general negligence defense, product<br />
liability, automobile and trucking accidents,<br />
construction, and insurance coverage<br />
disputes. There has been intense growth in<br />
the past ten years in its medical malpractice<br />
and nursing home/long-term care practice<br />
groups, led by attorneys Carl Hagwood<br />
and Michael Phillips, who have successfully<br />
defended complex litigation throughout the<br />
country. Adelman Law Firm PLLC, founded<br />
by Rebecca Adelman in 2001, represents<br />
regional and national clients in the areas of<br />
insurance defense and business litigation<br />
and offers comprehensive professional liability<br />
services to the health care industry<br />
including nursing homes, assisted living<br />
facilities, hospitals, home health agencies,<br />
physicians, staffing organizations, medical<br />
directors, administrators, nurses and other<br />
providers and their insurers. The merger will<br />
allow the firm to extend its offices in Memphis<br />
and Nashville, Tennessee; Jackson and<br />
Greenville, Mississippi; Birmingham, Alabama;<br />
and Charlotte, North Carolina. Plans<br />
are to expand to Arkansas and to continue<br />
with measured growth to meet the needs of<br />
our diverse client base.<br />
Wilson Elser partner Thomas Tobin<br />
was recently elected northeast regional<br />
vice president of the Nation Association<br />
of Railroad Trial Counsel (NARTC). Mr.<br />
Tobin is co-chair of the firm’s product<br />
piability practice, chair of its railroad and<br />
e- discovery practices, and works in the<br />
firm’s New York metro region. He also<br />
serves on Wilson Elser’s executive committee.<br />
A member of the NARTC nearly 10<br />
years, Mr. Tobin has served on the organization’s<br />
executive committee for the past<br />
two years. In addition to <strong>DRI</strong>, he is a member<br />
of the ABA, the Society of Automobile<br />
Engineers, and the American Short Line<br />
and Regional Railroad Association. He<br />
presents and publishes frequently on a variety<br />
of topics including implied preemption,<br />
positive train control, National Transportation<br />
Safety Board, and Federal Railroad<br />
Administration investigations of rail accidents<br />
and e- discovery.<br />
James P. Hadden, director in the Philadelphia<br />
office of Maron Marvel Bradley<br />
& Anderson LLC was recently appointed<br />
to the board of the North Light Community<br />
Center. North Light Community Center<br />
is a multi- service, community based<br />
non- profit organization founded in 1936.<br />
Its mission is to enable people of all ages in<br />
the community, especially those most in<br />
need, to reach their full potential as productive<br />
and responsible citizens through<br />
initiatives that support and enrich children,<br />
teens and families.<br />
Swanson Martin & Bell LLP partner<br />
Michael W. Drumke has been elected vice<br />
chair of the Tort Trial and Insurance Practice<br />
Section (TIPS) of the ABA for 2012–<br />
2013. His term commences a three-year<br />
leadership track as an ABA section officer.<br />
Mr. Drumke will become TIPS chair-elect<br />
in August 2013 and will serve as TIPS chair<br />
for a one-year term beginning in August<br />
2014. At SM&B LLP, Mr. Drumke focuses<br />
his practice on toxic torts litigation, product<br />
liability, class action defense, and commercial<br />
litigation and business disputes. He<br />
has represented clients in 18 states and the<br />
U.S. Virgin Islands.<br />
Reminger Co. LPA is proud to announce<br />
that William A. Meadows, a partner in the<br />
firm’s Cleveland office, has been honored as<br />
Best Lawyers “2013 Lawyer of the Year” in<br />
Medical Malpractice Law. Lawyers honored<br />
as “Lawyers of the Year” have received particularly<br />
high ratings in these surveys by<br />
earning a high level of respect among their<br />
peers for their professionalism, ability and<br />
integrity. Only a single lawyer in each specialty<br />
in each community is honored as<br />
the “Lawyer of the Year. For more than 25<br />
years, Mr. Meadows has been dedicated to<br />
the defense of hospitals, physicians, nurses,<br />
and virtually every other category of health<br />
care provider. Throughout his career he has<br />
successfully defended hundreds of lawsuits,<br />
mostly involving claims of medical<br />
malpractice and hospital liability. Mr.<br />
Meadows is a frequent speaker on issues<br />
of medical malpractice and risk management.<br />
He also serves as chair of the Reminger<br />
Medical Malpractice Group and is a<br />
member of the firm’s Executive Group.<br />
Marge Motluck
<strong>DRI</strong> News<br />
<strong>DRI</strong>’s Southwest Leaders Convene in NOLA<br />
Attendees of <strong>DRI</strong>’s 2012 Southwest Regional Meeting on the steps of the Windsor Court Hotel in New Orleans.<br />
The Southwest Regional Meeting was held<br />
on August 24–25, 2012, at the Windsor<br />
Court Hotel in New Orleans. The attendees<br />
gathered Friday evening for a networking<br />
reception and dinner at Commanders<br />
Palace. Kevin Driskill, <strong>DRI</strong>’s Southwest<br />
Regional Director, led the meeting. <strong>DRI</strong><br />
President- Elect Mary Massaron Ross was<br />
the officer in attendance. The meeting was<br />
attended by representatives from state and<br />
local defense organizations (SLDOs) in<br />
Arkansas, Louisiana, New Mexico, Oklahoma,<br />
and Texas.<br />
Mr. Driskill began the meeting Saturday<br />
by welcoming everyone to New Orleans<br />
and the meeting. Ms. Massaron Ross provided<br />
the <strong>DRI</strong> Officer’s report on “What’s<br />
New at <strong>DRI</strong>” and she also discussed current<br />
<strong>DRI</strong> initiatives and resources for the<br />
SLDOs. In addition, Ms. Massaron Ross<br />
provided an overview of the National Foundation<br />
for Judicial Excellence and the 2012<br />
<strong>DRI</strong> Annual Meeting. John R. Kouris, <strong>DRI</strong><br />
Executive Director, reported on <strong>DRI</strong>’s new<br />
branding initiative. David E. Chamberlain,<br />
<strong>DRI</strong> National Director, provided an<br />
update on the Center for Law and Public<br />
Policy. Paul M. Lavelle, <strong>DRI</strong> Law Institute<br />
Chair, reported on <strong>DRI</strong> seminars and<br />
webcasts. Bruce A. Cranner, <strong>DRI</strong> Medicare<br />
Secondary Payer Task Force Chair, gave an<br />
update on MSP issues and Carlos Rincon,<br />
<strong>DRI</strong> National Director, talked about <strong>DRI</strong>’s<br />
substantive law committees and how to get<br />
involved in committee activities. Quentin<br />
F. Urquhart, Jr., President of the International<br />
Association of Defense Counsel,<br />
discussed various IADC activities and how<br />
<strong>DRI</strong> and the IADC work together to further<br />
the mission of the defense bar. As is the tradition<br />
at the Southwest Regional Meeting,<br />
<strong>DRI</strong> past president Cary E. Hiltgen provided<br />
“Words of Wisdom.” Mr. Hiltgen<br />
talked about how it is the senior partners’<br />
responsibility to teach their young lawyers<br />
the importance of building relationships<br />
with other lawyers and their clients.<br />
The individual state representatives<br />
reported on the activities of their organizations.<br />
Paul D. Morris, <strong>DRI</strong> Arkansas State<br />
Representative, reported for the Arkansas<br />
Association of Defense Counsel. The<br />
Louisiana Association of Defense Counsel<br />
was the host SLDO for the meeting, and<br />
<strong>DRI</strong> Louisiana State Representative Mark<br />
J. Neal provided the report for the organization.<br />
Brian C. Garcia, <strong>DRI</strong> New Mexico<br />
State Representative, gave the New Mexico<br />
Defense Lawyers Association report. The<br />
Oklahoma Association of Defense Counsel<br />
report was given by OADC President<br />
Nathan E. Clark. Finally, <strong>DRI</strong> Texas State<br />
Representative Greg W. Currey reported<br />
on the activities of the Texas Association<br />
of Defense Counsel.<br />
For The Defense ■ October 2012 ■ 9
Sister Organizations Elect New<br />
Leadership for 2012–2013<br />
Stephen J.<br />
Heine<br />
In April the Association<br />
of Defense Trial Attorneys<br />
(ADTA) held its<br />
annual meeting at the<br />
Royal Sonesta in New<br />
Orleans’ French Quarter.<br />
During the meeting, the organization’s new<br />
leaders for 2012–2013 were introduced.<br />
Stephen J. Heine is now<br />
the president of the ADTA.<br />
Mr. Heine is a partner of<br />
Heyl Royster in Peoria, Illinois,<br />
and has tried cases<br />
throughout the state of Illinois<br />
in the areas of trucking,<br />
railroad, automobile,<br />
professional liability, product<br />
liability, construction,<br />
and first-party property insurance claims.<br />
He served as the president of the Illinois<br />
Association of Defense Trial<br />
Counsel (2004–2005) and as<br />
<strong>DRI</strong> State Representative for<br />
Illinois for several years.<br />
George M. Walker is now<br />
the ADTA’s immediate past<br />
president. Mr. Walker is a<br />
member of Hand Arendall,<br />
LLC, in Mobile, Alabama,<br />
where he has a general civil<br />
litigation practice with emphasis on defense<br />
of product liability and toxic tort cases.<br />
David W. Zizik has risen<br />
from ADTA vice president to<br />
president- elect. Mr Zizik is a<br />
founding member and managing<br />
attorney of Zizik, Powers,<br />
O’Connell, Spaulding &<br />
David W.<br />
Zizik<br />
Lamontagne, P.C., in Westwood,<br />
Massachusetts.<br />
The new ADTA vice president<br />
is F. Daniel Balmert,<br />
managing partner of Vorys,<br />
Sater, Seymour, & Pease LLP<br />
in Akron, Ohio. Mr. Balmert<br />
practices in the areas of<br />
general litigation, product<br />
litigation, employment law,<br />
and workers’ compensation.<br />
Matthew W. Bailey continues<br />
to serve the ADTA as<br />
Affiliates in Action<br />
George M.<br />
Walker<br />
F. Daniel<br />
Balmert<br />
treasurer. Mr. Bailey is the<br />
owner/managing partner of<br />
Walsh and Bailey in Baton<br />
Rouge, Louisiana, where<br />
his areas of practice include<br />
auto/trucking defense, coverage<br />
and bad faith defense,<br />
product liability and premises<br />
liability.<br />
Thomas J. Hurney, Jr.,<br />
Matthew W.<br />
Bailey<br />
of Jackson Kelly PLLC in<br />
Charleston, West Virginia, is<br />
now the organization’s secretary.<br />
Mr. Hurney is the leader<br />
of the firm’s Industrial, Environmental<br />
and Complex Litigation<br />
Practice Group and<br />
his practice involves the litigation<br />
and trial of cases involving serious<br />
personal injury and wrongful death. He is<br />
a past president of the Defense Trial Counsel<br />
of West Virginia.<br />
At their July 2012<br />
annual meeting<br />
in W hist ler,<br />
British Columbia,<br />
Canada, the<br />
Federation of Defense and Corporate<br />
Counsel (FDCC) elected its officers for the<br />
coming year. These officers will serve until<br />
the end of the annual meeting at the Broadmoor,<br />
in Colorado Springs,<br />
Colorado, in 2013.<br />
Edward M. Kaplan of<br />
Sulloway & Hollis PLLC in<br />
Concord, New Hampshire,<br />
is now the FDCC president.<br />
Edward M.<br />
Kaplan<br />
In his practice, Mr. Kaplan<br />
represents corporations,<br />
businesses, school districts,<br />
universities,<br />
and hospitals in all areas of<br />
labor and employment law,<br />
product liability, professional<br />
liability, and related<br />
litigation.<br />
Timothy A. Pratt is<br />
the newly elected FDCC<br />
president- elect. Mr. Pratt<br />
Thomas J.<br />
Hurney, Jr.<br />
Timothy A.<br />
Pratt<br />
is executive vice president and general<br />
counsel of Boston Scientific in Natick,<br />
Massachusetts.<br />
Victoria H. Roberts of<br />
Meadowbrook Insurance<br />
Group in Scottsdale, Arizona<br />
is the FDCC’s new<br />
secretary-treasurer.<br />
Victoria H.<br />
Roberts<br />
The 2011–2012 FDCC president,<br />
Michael I. Neil, senior<br />
trial partner and trial lawyer<br />
with Neil, Dymott, Frank,<br />
McFall & Trexler APLC in<br />
San Diego, now assumes the<br />
position of board chair. Mr.<br />
Neil is a past president of the<br />
Association of Southern California<br />
Defense Counsel and<br />
holds the rank of diplomate<br />
in the American Board of<br />
Trial Advocates.<br />
At its annual<br />
meeting in July,<br />
held at the Grove<br />
Park Inn in<br />
Asheville, North Carolina, the International<br />
Association of Defense Counsel<br />
(IADC) elected Quentin F.<br />
Urquhart, Jr., as president<br />
for the 2012–2013 term. Mr.<br />
Urquhart is a founding partner<br />
of Irwin Fritchie Urquhart<br />
& Moore in New<br />
Quentin F.<br />
Urquhart, Jr.<br />
Michael I.<br />
Neil<br />
Orleans, where his practice<br />
is focused in the areas of<br />
product liability, drug and<br />
medical device, and toxic<br />
tort and environmental litigation, with specific<br />
emphasis on complex<br />
and mass tort litigation.<br />
Molly H. Craig, a partner<br />
of the Hood Law Firm LLC in<br />
Charleston, South Carolina,<br />
is the new IADC president-<br />
elect. Ms. Craig focuses her<br />
trial practice in civil litigation<br />
and the defense of cat-<br />
Craig<br />
Molly H.<br />
astrophic product liability,<br />
professional liability, pharmaceutical<br />
10 ■ For The Defense ■ October 2012
Affiliates in Action<br />
and medical device, nursing home litigation,<br />
and employment litigation matters<br />
throughout the United States.<br />
William J. Perry, senior<br />
partner of Carter Perry Bailey<br />
LLP in London, England,<br />
is now the IADC immediate<br />
past president. Mr. Perry<br />
was the first non-United<br />
William J.<br />
Perry<br />
States lawyer in history to<br />
hold this prestigious position.<br />
His practice centers on<br />
insurance and reinsurance<br />
coverage issues, litigation, and arbitration,<br />
as well as advice on policy wordings.<br />
Pamela<br />
McGovern<br />
Pamela McGovern, general<br />
counsel for Hydro-<br />
Québec in Montreal,<br />
Québec, Canada, and Joseph<br />
E. O’Neil, shareholder of<br />
Lavin, O’Neil, Ricci, Cedrone<br />
& DiSipio in<br />
Philadelphia,<br />
remain IADC<br />
vice president of international<br />
and IADC secretarytreasurer,<br />
respectively.<br />
Connie Lewis Lensing of<br />
Federal Express in Memphis,<br />
Tennessee, is the IADC<br />
Joseph E.<br />
O’Neil<br />
Connie<br />
Lewis<br />
Lensing<br />
vice president of corporate<br />
and Daniel M. Zureich of<br />
Lawyers Mutual Liability<br />
Insurance in Cary, North<br />
Carolina, is vice president of<br />
insurance.<br />
For more<br />
information<br />
about ADTA,<br />
visit http://www.adtalaw.com/;<br />
for FDCC, visit http://www.<br />
thefederation.org; or for IADC,<br />
visit http://www.iadclaw.org/.<br />
Daniel M.<br />
Zureich<br />
SLDOs: Checking in with IL, MN and MS<br />
Illinois<br />
This past year has been a banner year for<br />
the Illinois Association of Defense Trial<br />
Counsel (IDC). With the publication of a<br />
Survey of Law and the White Paper on Cook<br />
County’s “Pilot Project” for Simultaneous<br />
Disclosure of Expert Witness Disclosure,<br />
reorganization of committees, submission<br />
of numerous amicus curiae briefs, the presentation<br />
of outstanding CLE programs,<br />
and so much more, the IDC worked diligently<br />
toward their mission of “ensur[ing]<br />
civil justice with integrity, civility and professional<br />
competence.”<br />
All of this success could not have been<br />
achieved without the countless hours and<br />
dedicated work of IDC’s volunteers. These<br />
busy attorneys work diligently behind<br />
the scenes contributing time and talent<br />
to improve the defense bar and the practice<br />
of law.<br />
In June, members of the IDC gathered<br />
together to recognize the next generation<br />
of leaders and to celebrate the hard work<br />
and accomplishments of the past year. At<br />
the annual meeting, held June 8, 2012, R.<br />
Mark Mifflin of Giffin, Winning, Cohen &<br />
Bodewes, P.C., in Springfield, was elected<br />
2012–2013 IDC Secretary/Treasurer and<br />
to a position on the executive committee.<br />
Mr. Mifflin will move up the Executive<br />
Committee ladder to become president in<br />
June 2016.<br />
Other officers on the executive committee<br />
include President R. Howard Jump<br />
of Jump & Associates, P.C., Chicago;<br />
President- Elect Aleen R. Tiffany of Aleen<br />
R. Tiffany, P.C., Crystal Lake; First Vice<br />
Illinois Association of Defense Trial Counsel (IDC) recognizes the following members: (above left) R. Howard Jump, 2012–2013 President; Charles<br />
H. Cole of Schuyler, Roche & Crisham, P.C., Chicago (with Past President Anne M. Oldenburg); Jennifer B. Groszek of Resolute Management Inc.,<br />
Midwest Division, Chicago; and Eliina Viele Pritzker, Chicago.<br />
For The Defense ■ October 2012 ■ 11
Affiliates in Action<br />
Mississippi Defense Lawyers Association University of Mississippi Scholarship Recipients Justin<br />
Kopf (left) and Whitney Holliday, with Lucius B. Dabney, Jr. (center).<br />
President David H. Levitt of Hinshaw &<br />
Culbertson LLP, Chicago; and Second Vice<br />
President Troy A. Bozarth of HeplerBroom<br />
LLC, Edwardsville.<br />
The following members were elected to<br />
new three-year terms on the IDC Board<br />
of Directors: Joseph A. Bleyer of Bleyer &<br />
Bleyer, Marion; Terry A. Fox of SmithAmundsen<br />
LLC, Chicago; Jennifer B. Groszek<br />
of Resolute Management, Inc., Midwest Division,<br />
Chicago; Al Pranaitis of Hoagland,<br />
Fitzgerald & Pranaitis, Alton; and Tracy E.<br />
Stevenson of Robbins Salomon & Patt, Ltd.,<br />
Chicago. R. Mark Cosimini of Rusin Maciorowski<br />
& Friedman, Ltd., Champaign,<br />
was appointed to fill the director vacancy<br />
when R. Mark Mifflin was appointed to<br />
serve as secretary/treasurer. Bruce Dorn of<br />
Bruce Farrel Dorn & Associates, Chicago;<br />
M. Gerard Gregoire of the Law Office of M.<br />
Gerard Gregoire, Chicago; and Terrence F.<br />
Guolee of Querrey & Harrow, Ltd., Chicago,<br />
were appointed to serve as directors at large.<br />
At the annual meeting awards luncheon,<br />
several members were recognized for their<br />
service. Charles H. Cole of Schuyler, Roche<br />
& Crisham, P.C., Chicago, was recognized<br />
with the Distinguished Member Award and<br />
Eliina Viele Pritzker, Chicago, was recognized<br />
with the Rising Star Award. Jennifer<br />
B. Groszek of Resolute Management Inc.,<br />
Midwest Division, Chicago, was recognized<br />
with the President’s Award and Nicole D.<br />
Milos of Cremer, Spina, Shaughnessy, Jansen<br />
& Siegert LLC, Chicago, was recognized<br />
with the Volunteer of the Year Award.<br />
The Meritorious Service Award was presented<br />
to Linda J. Hay of Alholm, Monahan,<br />
Klauke, Hay & Oldenburg LLC and John P.<br />
Lynch, Jr., of Cremer, Spina, Shaughnessy,<br />
Jansen & Siegert LLC for their service on<br />
the board of directors; Adnan A. Arain of<br />
Aon for his service as editor in chief of the<br />
IDC Survey of Law; and Sarah Condon of<br />
CNA for her service as IDC Quarterly editor<br />
in chief.<br />
The Meritorious Service Award was also<br />
presented to James K. Borcia of Tressler<br />
LLP for his service as chair of the Commercial<br />
Law Committee; Terry A. Fox of<br />
SmithAmundsen, LLC for service as chair<br />
of the Insurance Law Committee; Edward<br />
K. Grassé of Busse, Busse & Grassé, P.C., for<br />
service as chair of the Civil Practice Committee;<br />
Nicole D. Milos of Cremer, Spina,<br />
Shaughnessy, Jansen & Siegert LLC for<br />
service as chair of the Tort Law Committee;<br />
Paul Rettberg of Querrey & Harrow for<br />
his service as chair of the Municipal Law<br />
Committee; Scott D. Stephenson of Litchfield<br />
Cavo, LLP for service as chair of the<br />
Events Committee; Eliina Viele Pritzker for<br />
service as chair of the Young Lawyers Division;<br />
and Aleen Tiffany of Aleen R. Tiffany,<br />
P.C., for service as chair of the Legislative<br />
Committee.<br />
From left: Minnesota Defense Lawyers Association (MDLA) President Lisa Griebel, MDLA past<br />
president Patricia Beety, <strong>DRI</strong> President Henry Sneath, <strong>DRI</strong> Minnesota State Representative Paul<br />
Rajkowski, <strong>DRI</strong> North Central Regional Director Steve Schwegman, and <strong>DRI</strong> past president Marc<br />
Williams at the MDLA 50th Anniversary Celebration.<br />
Minnesota<br />
The Minnesota Defense Lawyers Association<br />
(MDLA) New Defense Lawyers<br />
Committee recently joined forces with the<br />
Minnesota Association for Justice to host<br />
a Young Lawyers Networking Reception.<br />
The group has focused substantial efforts<br />
toward engaging new attorneys and developing<br />
an online presence that communicates<br />
the culture of the MDLA, as well as<br />
useful information for those entering the<br />
field of defense work.<br />
12 ■ For The Defense ■ October 2012
Affiliates in Action<br />
The MDLA also announces a new staff<br />
member on their team. Monte Abeler joins<br />
the organization as assistant account executive<br />
and will work with MDLA Executive<br />
Director Paul J. Hanscom on a number of<br />
projects, namely coordinating the work of<br />
the board of directors and the substantive<br />
law committees.<br />
The MDLA also played host to 135<br />
attendees at its annual Trial Techniques<br />
Seminar and 50th Anniversary Celebration<br />
on August 16–18. The event included a funfilled<br />
reception involving MDLA- related<br />
Jeopardy, led by MDLA member and Alex<br />
Trebek lookalike contestant Michael Will<br />
of Meagher & Geer PLLP, as well as a trial<br />
re- enactment of Frey v. Snelgrove, a key<br />
trial in Minnesota and MDLA history.<br />
Mississippi<br />
The Mississippi Defense Lawyers Association<br />
(MDLA) has selected four secondyear<br />
students for the prestigious Reginald<br />
A. Gray Scholarships. The awards were personally<br />
presented by the MDLA’s Scholarship<br />
Committee chair and distinguished<br />
member, Lucius B. Dabney, Jr., to Mississippi<br />
College School of Law students Samuel<br />
D. Gregory and Anna H. Watson in<br />
Jackson on April 12, 2012, and to University<br />
of Mississippi School of Law students<br />
Justin D. Kopf and Whitney E. Holliday in<br />
Oxford on April 20, 2012.<br />
MDLA also congratulates Mississippi<br />
College School of Law Professor Judith J.<br />
Johnson as recipient of the 2012 MC School<br />
of Law Faculty Award. Professor Johnson<br />
earned her undergraduate degree from the<br />
University of Texas at Austin and attended<br />
law school at the University of Mississippi.<br />
The MDLA is proud to honor these award<br />
recipients and thanks Mr. Dabney for his<br />
service to the MDLA Scholarship Committee<br />
for so many years.<br />
Mississippi Defense Lawyers Association<br />
award and scholarship recipients (at right,<br />
from top): 2012 Mississippi College School<br />
of Law (MC) Faculty Winner Judith Johnson,<br />
flanked by Jim Rosenblatt (left) and Lucius B.<br />
Dabney, Jr.; 2012 MC Scholarship Recipient<br />
Anna Watson; and 2012 MC Scholarship<br />
Recipient Samuel Gregory.<br />
For The Defense ■ October 2012 ■ 13
Drug and Medical Device<br />
From the Chair<br />
More than Ever We<br />
Need You Involved<br />
By Scott W. Sayler<br />
One of our central<br />
purposes is to promote<br />
networking and<br />
communication among<br />
those on the defense side<br />
to counter our opponent’s<br />
increasingly coordinated<br />
tactics and theories.<br />
As we look back on this committee’s accomplishments<br />
over the past 12 months, we realize that the excellent work<br />
product of this committee is the result of hundreds of<br />
hours of effort by numerous committee members and <strong>DRI</strong><br />
14 ■ For The Defense ■ October 2012<br />
■ Scott W. Sayler is a partner of Shook, Hardy & Bacon LLP in Kansas City, Missouri, with over 24 years of litigation experience.<br />
Mr. Sayler’s practice is devoted exclusively to litigation, and he has focused primarily on the representation of product manufacturers<br />
and other defendants involved in product liability and commercial litigation.
staff. As we look forward to our challenges<br />
and opportunities over the coming<br />
year, I hope that you will consider<br />
getting involved in this committee’s ongoing<br />
effort to increase communication<br />
and to share knowledge and ideas among<br />
the drug and medical device defense bar.<br />
In May 2012, the Drug and Medical<br />
Device Committee held its showcase<br />
event, the annual Drug and Medical<br />
Device Litigation Seminar, in New<br />
Orleans. The planning for this event<br />
began almost a year earlier in the summer<br />
of 2011 with weekly planning calls<br />
involving a committee of approximately<br />
15 individuals. The leaders of this planning<br />
committee included Carter Thompson<br />
of Baker, Donelson (program chair),<br />
Sara Gourley of Sidley Austin (program<br />
vice chair), Gail Rodgers of DLA Piper<br />
(marketing chair), and Sheila Boston<br />
(marketing vice chair). Jim Rogers of<br />
Nelson Mullins (committee vice chair),<br />
and Mark Solheim of Larson & King<br />
(Law Institute liaison). Ray Williams<br />
of DLA Piper and Rick Richardson of<br />
GlaxoSmithKline also played important<br />
roles. This group, along with numerous<br />
others too lengthy to mention, were<br />
responsible for putting on an excellent<br />
two-day seminar in New Orleans.<br />
The 2012 seminar included for the<br />
first time a breakout session restricted<br />
to and tailored for in-house counsel.<br />
This session was led by Jeff Kruse of Boston<br />
Scientific, Catherine Levitt of Astellas,<br />
Sarah Padgitt of Baxter Healthcare,<br />
and Rick Richardson of GlaxoSmith-<br />
Kline. This session was well- received,<br />
and we hope that it will serve as another<br />
reason for in-house counsel to attend<br />
future seminars.<br />
The planning committee currently is<br />
very busy preparing for next year’s seminar,<br />
scheduled to be held May 16–17,<br />
2013, in New York City. In addition to an<br />
unparalleled substantive program, this<br />
seminar will include company counsel<br />
meetings, a diversity luncheon, an inhouse<br />
counsel only breakout session, a<br />
young lawyers blockbuster session, and<br />
numerous networking and social opportunities.<br />
If you haven’t already, I hope<br />
you will put this event on your calendar.<br />
This committee’s efforts include making<br />
various publication contributions on<br />
topics of interest to in-house counsel,<br />
outside counsel, and others involved in<br />
the representation of companies responsible<br />
for valuable and lifesaving drugs<br />
and medical devices. A sincere thank<br />
you to Ed Gerecke of Carlton Fields in<br />
Tampa for organizing and chairing this<br />
collection of For The Defense articles.<br />
After the publication of this issue, Ed<br />
will pass the baton after having led this<br />
effort for many years.<br />
This issue of FTD contains the usual<br />
range of excellent and topical articles<br />
on subjects of interest to the defense of<br />
drug and device litigation, including offlabel<br />
promotion, FDA opinion letters,<br />
biosimilars, negligent design claims,<br />
and preemption. We thank all of the<br />
authors for the excellent articles contained<br />
in this issue of FTD.<br />
The Drug and Medical Device Committee’s<br />
publication efforts are further<br />
reflected in our electronically disseminated<br />
committee newsletter, Rx For<br />
the Defense. Anne Talcott of Schwabe<br />
Williamson in Portland, Oregon, has<br />
for several years chaired the publication<br />
of Rx For the Defense. Anne will<br />
soon be passing on the responsibility<br />
for this newsletter to Melissa Tannery<br />
of Troutman Sanders in Richmond,<br />
Virginia. This newsletter is published<br />
two to four times a year and typically<br />
includes approximately eight short and<br />
practical substantive articles, along with<br />
other information of interest. I encourage<br />
you to take the time to check out<br />
the articles in this newsletter. You will<br />
learn something every time. If you are a<br />
committee member, you will receive the<br />
newsletter electronically. If you aren’t a<br />
committee member, please go to <strong>DRI</strong>.<br />
org and join our committee immediately!<br />
Back issues of Rx For the Defense<br />
are available at our committee’s page on<br />
the <strong>DRI</strong>.org website.<br />
The committee is also actively<br />
involved in the preparation and presentation<br />
of webcasts. These webcasts are<br />
an excellent and cost- effective way for<br />
an attorney (or group of attorneys at a<br />
single screen) to see and hear presentations<br />
on hot topics in the area of drugs<br />
and medical devices. Vivian Quinn of<br />
Nixon Peabody in Buffalo, New York,<br />
has done a great job as our webcast<br />
chair, and she has been assisted by and<br />
will soon be succeeded by Mike Miller<br />
of Strong & Hanni in Salt Lake City. Our<br />
most recent webcast, held in July 2012,<br />
included several excellent presentations<br />
under the heading of “FDA & Medical<br />
Products: Practices/Proposals for<br />
Internet & Social Media.” The webcast<br />
committee currently is preparing webcasts<br />
for the latter part of 2012 that will<br />
address topics ranging from the Foreign<br />
Corrupt Practices Act to an update on<br />
decisions handed down in the wake of<br />
Mensing. Please contact Vivian or Mike<br />
or consult the DMD page on the <strong>DRI</strong><br />
website for the latest on webcasts.<br />
Our committee also recently completed<br />
another Drug and Medical Device<br />
Young Lawyers Primer, held September<br />
12, 2012, at Sidley Austin in Chicago.<br />
Led by Dave Geiger of Foley Hoag<br />
in Boston, this annual one-day seminar<br />
is aimed at young lawyers. Attendees<br />
receive an excellent nuts and bolts overview<br />
of drug and device defense from a<br />
faculty comprised of top-flight in-house<br />
and outside defense counsel. This seminar<br />
also provides young lawyers with a<br />
great opportunity to meet other young<br />
lawyers involved in the defense of drug<br />
and medical device litigation.<br />
Perhaps now more than ever, it is<br />
critical that defense counsel—both inhouse<br />
and outside attorneys—increase<br />
their communication and their sharing<br />
of knowledge and ideas with one<br />
another. Our skilled opponents continue<br />
to raise the bar with new procedural tactics<br />
and substantive theories, and they<br />
are increasingly coordinated. One of the<br />
<strong>DRI</strong> Drug and Medical Device Committee’s<br />
central purposes is to increase networking<br />
and communication among<br />
those on the defense side. Please take<br />
advantage of the many opportunities<br />
to get involved in committee activities.<br />
If you want to get involved, I encourage<br />
you to visit our committee’s page on<br />
the <strong>DRI</strong> website, where you will find the<br />
contact information for all those chairing<br />
and leading the committee’s various<br />
activities. Please feel free to contact<br />
me or one or more of those individuals<br />
about getting involved. I wish everyone<br />
all the best and hope you enjoy reading<br />
this edition of For The Defense.<br />
For The Defense ■ October 2012 ■ 15
Drug and Medical Device<br />
Prescription<br />
Medication Cases<br />
By Geoffrey M. Drake<br />
and Victoria C. Smith<br />
The Case Against<br />
Negligent Design<br />
Claims<br />
A multijurisdictional<br />
overview of strict<br />
liability and negligence,<br />
as well as the legal and<br />
public policy arguments<br />
against recognizing<br />
negligent design claims<br />
in the prescription<br />
medication arena.<br />
Prescription medications are different from ordinary consumer<br />
products in many ways. Unlike most consumer<br />
products, for example, medications are developed with the<br />
specific purpose of curing or preventing serious diseases<br />
and alleviating suffering. They, therefore,<br />
play an essential role in protecting the public<br />
health. But medications also inherently<br />
have the capacity to harm people. Perhaps<br />
because of these unique characteristics,<br />
prescription medications are not available<br />
to consumers on demand. Instead, a<br />
licensed health-care provider must prescribe<br />
a medication. That professional has<br />
a legal obligation to ensure that the medication’s<br />
expected benefits outweigh its<br />
potential risks for a patient and to obtain<br />
informed consent.<br />
Additionally, in contrast to an average<br />
consumer product, prescription medications<br />
cost an enormous amount of money<br />
to develop, test, and bring to the market.<br />
Prescription medications are also specific<br />
chemical compounds defined by their<br />
molecular structures. Medications, unlike<br />
other products, do not have “alternative<br />
designs.” If a medication’s chemical composition<br />
is altered, the alteration creates a<br />
different medication entirely, even if it is<br />
intended to treat the same illness.<br />
Because of these unique properties, the<br />
federal government traditionally has regulated<br />
prescription medications differently<br />
than other consumer products. A<br />
comprehensive federal regulatory framework<br />
established by Congress and implemented<br />
by the United States Food and Drug<br />
Administration (FDA) controls the process<br />
for bringing new prescription medications<br />
to the marketplace. Through a series<br />
of complex federal statutes and regulations,<br />
the FDA acts as a “gatekeeper” to the<br />
United States marketplace. The FDA alone<br />
is responsible for reviewing considerable<br />
documents and data concerning the chemical<br />
composition, formulation, manufacturing<br />
process, labeling, safety, and efficacy of<br />
a particular compound. It is the FDA that<br />
is charged with ultimately determining<br />
whether a medication is “safe and effective”<br />
for marketing. The FDA, therefore, main-<br />
16 ■ For The Defense ■ October 2012<br />
■ Geoffrey M. Drake is a senior associate and Victoria Smith is an associate in King & Spalding LLP’s<br />
Atlanta office. Mr. Drake specializes in defending product manufacturers, with an emphasis in representing<br />
pharmaceutical companies in high-stakes personal injury, mass tort, consumer fraud, and class action litigation.<br />
Ms. Smith’s practice focuses on defending product manufacturers in the pharmaceutical, automotive,<br />
and asbestos industries in nationwide product liability and personal injury litigation. Both authors are<br />
members of the <strong>DRI</strong> Drug and Medical Device and Young Lawyers Committees.
tains exclusive regulatory control over a<br />
prescription medication’s formulation and<br />
composition—its “design.” Indeed, federal<br />
law prohibits a manufacturer from changing<br />
a medication’s formulation or composition<br />
without first obtaining FDA approval.<br />
Recognizing the FDA’s exclusive role in<br />
weighing a prescription medication’s risks<br />
and benefits, many states have carefully<br />
defined which tort claims state laws will<br />
permit against pharmaceutical manufacturers.<br />
For instance, many jurisdictions<br />
have adopted comment k to section 402A<br />
of the Restatement (Second) Torts, which<br />
bars strict liability claims for design defects<br />
against prescription medication manufacturers<br />
but recognizes claims for failing to<br />
warn and for manufacturing defects. At the<br />
same time, some jurisdictions have recognized<br />
claims against manufacturers for the<br />
“negligent design” of prescription medications.<br />
In fact, whether Pennsylvania law<br />
recognizes negligent design claims against<br />
medication manufacturers—even when<br />
that law bars strict liability design defect<br />
claims—is presently before the Supreme<br />
Court of Pennsylvania.<br />
A claim for negligent design against a<br />
prescription medication manufacturer is<br />
no more appropriate than a strict liability<br />
claim for a design defect. In addition to<br />
providing an overview of the state of strict<br />
liability and negligent design defect claims<br />
in jurisdictions around the country, this<br />
article will present legal and public policy<br />
arguments against recognizing negligent<br />
design claims in the prescription medication<br />
arena.<br />
Claims for Strict Liability<br />
Design Defect<br />
Section 402A of the Restatement (Second) of<br />
Torts explains that a product manufacturer<br />
is subject to strict liability if the product is<br />
sold “in a defective condition unreasonably<br />
dangerous to the user or consumer.” Comment<br />
k to section 402A, however, recognizes<br />
that some consumer products, specifically<br />
including prescription medications, are<br />
“unavoidably unsafe,” and thus, should be<br />
exempt from this strict liability rule for a<br />
design defect. Under comment k, a manufacturer<br />
of an FDA- approved prescription<br />
medication cannot be held strictly liable<br />
for an injury caused by its medication as<br />
long as adequate warnings accompanied the<br />
medication and the manufacturer prepared<br />
it properly. Recognizing that all prescription<br />
medications have inherent risks—<br />
risks that the FDA decided the medication’s<br />
benefits outweighed when approving the<br />
medication for marketing—plaintiffs, under<br />
comment k, cannot sustain strict liability<br />
claims based on an allegation that a<br />
manufacturer defectively designed a prescription<br />
medication. As explained by the<br />
Supreme Court of Arkansas in West v. Searle<br />
& Co., 305 Ark. 33, 39, 806 S.W.2d 608, 612<br />
(1991), “[c]om ment k reflects the concern…<br />
that large monetary judgments would deter<br />
drug manufacturers from undertaking<br />
research programs to develop socially<br />
beneficial pharmaceuticals.” Comment k<br />
helps ensure that manufacturers do not<br />
experience “large judgments [that] would<br />
increase the costs of beneficial and necessary<br />
drugs beyond the reach of the people<br />
who need them.” West, 305 Ark. at 39, 806<br />
S.W.2d at 612.<br />
Although the courts of many jurisdictions<br />
have adopted comment k, not all courts<br />
have applied the comment in the same manner.<br />
A considerable number of states have<br />
applied comment k to manufacturers of all<br />
types of prescription medications as a rule,<br />
effectively barring claims for strict liability<br />
design defect against the manufacturer of<br />
FDA-approved medications. See, e.g., N.C.<br />
Gen. Stat. §99B-6(d) (“No manufacturer of<br />
a prescription drug shall be liable in a product<br />
liability action on account of some aspect<br />
of the prescription drug that is unavoidably<br />
unsafe, if an adequate warning and instruction<br />
has been provided.”); Ohio Rev. Code<br />
Ann. §2307.75(D) (“An ethical drug… is not<br />
defective in design or formulation because<br />
some aspect of it is unavoidably unsafe, if the<br />
manufacturer… provides adequate warning<br />
and instruction”); Petty v. United States,<br />
740 F.2d 1428, 1439 (8th Cir. 1984) (applying<br />
Iowa law); Brooks v. Medtronic, Inc.,<br />
750 F.2d 1227, 1230–31 (4th Cir. 1984) (applying<br />
South Carolina law); Davis v. Wyeth<br />
Labs., 399 F.2d 121, 129 (9th Cir. 1968) (applying<br />
Montana law); Reyes v. Wyeth Labs.,<br />
498 F.2d 1264, 1273–74 (5th Cir. 1974) (applying<br />
Texas law); Lareau v. Page, 840 F.<br />
Supp. 920, 923 (D. Mass. 1993), aff’d 39 F.3d<br />
384 (1st Cir. 1994); Hurley v. The Heart Physicians,<br />
P.C., 278 Conn. 305, 315–316, 898<br />
A.2d 777, 783 (2006); Larkin v. Pfizer Co., 153<br />
S.W.3d 758, 762 (Ky. 2004); Carlin v. Superior<br />
Court, 13 Cal. 4th 1104, 1122–23, 920 P.2d<br />
1347, 1358 (Cal. 1996); Hahn v. Richter, 543<br />
Pa. 558, 562, 673 A.2d 888, 891 (Pa. 1996);<br />
Young v. Key Pharmaceuticals, 130 Wash. 2d<br />
160, 166–67, 922 P.2d 59, 63 (Wash. 1996);<br />
Pittman v. Upjohn Co., 890 S.W.2d 425, 428<br />
(Tenn. 1994); Martin v. Hacker, 83 N.Y.2d 1,<br />
8, 628 N.E.2d 1308, 1311 (N.Y. 1993); Grundberg<br />
v. Upjohn Co., 813 P.2d 89, 95 (Utah<br />
1991); Stone v. Smith, Kline, & French Labs.,<br />
447 So. 2d 1301, 1303–04 (Ala. 1984).<br />
On the other hand, some courts have<br />
adopted a “case-by-case” approach to<br />
comment k, treating the standard as an<br />
affirmative defense available to a manufacturer.<br />
A manufacturer in such jurisdictions,<br />
therefore, must demonstrate that<br />
the strict liability rule would not apply<br />
to the prescription medication at issue.<br />
<strong>Courts</strong> in these jurisdictions have certain<br />
factors that they consider when deciding<br />
whether a drug is “unavoidably unsafe.” In<br />
Kociemba v. G.D. Searle & Co., 680 F. Supp.<br />
1293, 1301 (D. Minn. 1988), for instance,<br />
the court rejected the idea that “comment<br />
k was intended to provide all prescription<br />
drugs with blanket immunity from<br />
strict liability claims” and stated that the<br />
elements to examine in determining if<br />
comment k applied were “(i) whether the<br />
product could have been designed in a safer<br />
manner; (ii) whether a safer alternative<br />
product could have been available at that<br />
time to accomplish the same intended purpose…<br />
and (iii) whether the benefits of the<br />
product outweigh the interest in promoting<br />
enhanced accountability.” Similarly,<br />
the Oklahoma Supreme Court explained:<br />
Comment k serves as an affirmative defense<br />
when the product is incapable of<br />
being made safe under present technology,<br />
but the social need for the product<br />
warrants its production. The design must<br />
be as safe as the best available testing and<br />
research permits. There must be… no<br />
feasible alternative design [for the drug].”<br />
Tansy v. Dacomed Corp., 890 P.2d 881, 885<br />
(Okla. 1994). See also Violette v. Smith &<br />
Nephew Dyonics, Inc., 62 F.3d 8, 13 n.3<br />
(1st Cir. 1995) (applying Maine law); Hill v.<br />
Searle Labs., 884 F.2d 1064, 1067–68 (8th<br />
Cir. 1989) (applying Arkansas law); Ehlis v.<br />
Shire Richwood, Inc., 233 F. Supp. 2d 1189,<br />
1191 (D.N.D. 2002), aff’d 367 F.3d 1013<br />
(8th Cir. 2004); Bennett v. Madakasira, 821<br />
So. 2d 794, 809 (Miss. 2002); Freeman v.<br />
For The Defense ■ October 2012 ■ 17
Drug and Medical Device<br />
Hoffman- La Roche, 260 Neb. 552, 552, 618<br />
N.W.2d 827, 831 (2000); Larsen v. Pacesetter<br />
Systems, Inc., 74 Haw. 1, 24–25, 837 P.2d<br />
1273, 1286 (Haw. 1992); Savina v. Sterling<br />
Drug, Inc., 247 Kan. 105, 115–16, 795 P.2d<br />
915, 924 (Kan. 1990); Senn v. Merrell- Dow<br />
Pharma., Inc., 305 Or. 256, 263 n. 4, 751<br />
P.2d 215, 218 n.4 (Or. 1988); Castrignano v.<br />
E.R. Squibb & Sons, Inc., 546 A.2d 775, 781<br />
A claim for negligent<br />
design against a prescription<br />
medication manufacturer<br />
is no more appropriate<br />
than a strict liability claim<br />
for a design defect.<br />
(R.I. 1988); Toner v. Lederle Lab., 112 Idaho<br />
328, 339, 732 P.2d 297, 308 (Idaho 1987).<br />
Finally, it is worth noting that a small<br />
number of courts do not rely on comment<br />
k at all in considering whether a prescription<br />
medication manufacturer can be<br />
held strictly liable for a design defect. See,<br />
e.g., Fisher v. Professional Compounding<br />
Centers of America, Inc., 311 F. Supp. 2d<br />
1008, 1018 (D. Nev. 2004) (applying Nevada<br />
law and rejecting comment k altogether);<br />
Shanks v. Upjohn Co., 835 P.2d 1189, 1197–<br />
98 (Alaska 1992) (rejecting comment k);<br />
Collins v. Eli Lilly & Co., 116 Wis. 2d 166,<br />
197, 342 N.W.2d 37, 52 (Wis. 1984) (“the<br />
rule embodied in comment k is too restrictive<br />
and, therefore, not commensurate with<br />
strict products liability law in Wisconsin”).<br />
Claims for Negligent Design Defect<br />
Some courts have found that strict liability<br />
design claims are the same as those<br />
grounded in negligence, extending comment<br />
k’s rationale as barring negligent design<br />
claims. For example, the Georgia Court<br />
of Appeals noted that a negligent design defect<br />
claim “cannot be treated as a distinct<br />
theory of recovery from the strict liability<br />
claims, as the same risk- utility analysis<br />
applies.” Bryant v. Hoffmann- La Roche,<br />
262 Ga. App. 401, 410 n.5, 585 S.E.2d 723,<br />
18 ■ For The Defense ■ October 2012<br />
730 n.5 (Ga. Ct. App. 2003) (internal citations<br />
omitted). See also Lewis v. White, No.<br />
08 Civ. 7480 (SCR) (GAY), 2010 U.S. Dist.<br />
LEXIS 142567, at *9–*10 (S.D.N.Y. July 1,<br />
2010) (“[F]or the purposes of analyzing a<br />
design defect claim, the theories of strict<br />
liability and negligence are virtually identical.”);<br />
Doe v. Solvay Pharmaceuticals, 350<br />
F. Supp. 2d 257, 266 (D. Maine 2004) (“in<br />
actions based on product design defects,<br />
negligence and strict liability theories overlap<br />
in that under both theories the plaintiff<br />
must prove that the product was defectively<br />
designed thereby exposing the user to an<br />
unreasonable risk of harm”) (internal citations<br />
omitted); Ackley v. Wyeth, No. C-2-86-<br />
107, 1989 U.S. Dist. Lexis 19166, at *10 (S.D.<br />
Ohio Aug. 3, 1989), aff’d 919 F.2d 397 (6th<br />
Cir. 1990) (stating that in the case of a design<br />
defect product liability case, the theories<br />
of strict liability and negligence merge).<br />
Some courts, however, have held that<br />
plaintiffs can pursue claims for negligent<br />
design defects even when a jurisdiction has<br />
adopted comment k to exempt prescription<br />
medications from strict liability design<br />
defect claims. For example, a Utah federal<br />
court decided that comment k is limited<br />
to strict liability, and thus, refused to dismiss<br />
a claim for negligent design defect.<br />
Lake- Allen v. Johnson & Johnson L.P., No.<br />
2:08CV00930DAK, 2009 WL 2252198, at<br />
*2–3 (D. Utah July 27, 2009). The court<br />
explained that when the Utah Supreme<br />
Court adopted comment k, “it clearly noted<br />
that the purpose ‘is to protect from strict<br />
liability products that cannot be designed<br />
more safely.’” Lake-Allen, 2009 WL 2252198<br />
at *3 (internal citations omitted). See also,<br />
e.g., Graham v. Wyeth, 906 F.2d 1399, 1406<br />
(10th Cir. 1990) (applying Kansas law) (“a<br />
plaintiff may proceed on a theory of negligent<br />
design defect where she is prohibited<br />
by comment (k) from proceeding on a strict<br />
liability design defect theory”); Torkie- Tork<br />
v. Wyeth, 739 F. Supp. 2d 895 (E.D. Va.<br />
2010) (generally recognizing a claim for<br />
negligent design defect against a prescription<br />
medication manufacturer); Wright v.<br />
Brooke Group Ltd., 114 F. Supp. 2d 797, 805<br />
(N.D. Iowa 2000) (stating that a strict liability<br />
theory does not replace claims based<br />
on negligence).<br />
This tension between strict liability and<br />
negligent design defect claims involving<br />
prescription medications recently came<br />
to the attention of Pennsylvania’s highest<br />
court. Traditionally, Pennsylvania has<br />
rejected strict liability design defect claims<br />
against manufacturers of all types of prescription<br />
medications. See Hahn, 543 Pa.<br />
558, 673 A.2d 888 (Pa. 1996). In Lance v.<br />
Wyeth, 4 A.3d 160 (Pa. Super. Ct. 2010),<br />
however, a Pennsylvania appellate court<br />
held that the plaintiff could pursue her<br />
claim for negligent design defect against<br />
the manufacturer of a prescription medication.<br />
In Lance, the plaintiff alleged that the<br />
decedent’s use of a diet drug manufactured<br />
by the defendant caused her to develop primary<br />
pulmonary hypertension. The plaintiff<br />
alleged negligence claims sounding in<br />
unreasonable marketing, failure to recall,<br />
and design defect. On the appeal of the trial<br />
court’s grant of a summary judgment for<br />
the defendant on all three causes of action,<br />
the superior court found that Pennsylvania<br />
law did not recognize the marketing<br />
claim or the failure- to- recall claim. Lance,<br />
4 A.3d at 167–69. The court determined<br />
that it could not properly create a common<br />
law claim for failure to recall a drug from<br />
the market because that decision belonged<br />
to the FDA. Id. at 167. As to the unreasonable<br />
marketing claim, the court decided<br />
that it was essentially a cause of action for<br />
negligent failure- to- test, which Pennsylvania<br />
did not recognize. Id. at 168–69.<br />
But regarding the plaintiff’s negligent<br />
design claim, the superior court reversed<br />
the summary judgment. While recognizing<br />
Pennsylvania’s longstanding adoption<br />
of comment k limiting strict liability claims<br />
to claims of manufacturing defect and failure<br />
to warn, the court found that “a negligent<br />
design defect claim is considered to be<br />
distinct from, and not subsumed within, a<br />
strict liability design defect claim.” Id. at<br />
166.The court explained that this difference<br />
is based on the fact that “[s]trict liability<br />
examines the product itself, and sternly<br />
eschews considerations of the reasonableness<br />
of the conduct of the manufacturer”<br />
while “[i]n contrast, a negligence cause of<br />
action revolves around an examination of<br />
the conduct of the defendant.” Id. (internal<br />
citations omitted). The superior court<br />
also cited with approval the reasoning of<br />
the Idaho Supreme Court in Toner, which<br />
rationalized that<br />
[b]y denying plaintiffs recovery based<br />
on the dangerousness of the product
and requiring plaintiffs to prove negligent<br />
conduct on the part of the defendants,<br />
comment k furthers the policy of<br />
encouraging the production and marketing<br />
of useful products. However, to<br />
immunize sellers of products deemed<br />
unavoidably unsafe pursuant to comment<br />
k from negligence claims would<br />
remove needed incentive for safe design.<br />
Id. (internal citations omitted).<br />
The Supreme Court of Pennsylvania<br />
agreed to review this case, and while it<br />
has yet to issue a final pronouncement,<br />
the decision will likely define the scope of<br />
future lawsuits against prescription drug<br />
manufacturers in Pennsylvania, and potentially<br />
beyond.<br />
<strong>Courts</strong> <strong>Should</strong> Reject<br />
Negligent Design Claims<br />
Those jurisdictions that have not expressly<br />
barred claims for negligent design against<br />
prescription medication manufacturers<br />
should do so. The same legal and public<br />
policy reasons that have led numerous<br />
jurisdictions across the country to adopt<br />
comment k and bar strict liability design<br />
defect claims against prescription medication<br />
manufacturers also caution against<br />
recognizing negligent prescription drug<br />
design claims.<br />
The FDA Must Assess Product Design<br />
Allowing negligent design claims to proceed<br />
against prescription medication manufacturers<br />
conflicts with the tradition of<br />
deferring to the FDA’s expert determination<br />
of whether a prescription medication’s benefits<br />
outweigh its risks—that is, whether<br />
the medication is safe and effective for the<br />
public. The FDA, not a lay jury, is in the<br />
best position to make such an important<br />
and complicated determination. A complex<br />
and detailed regulatory framework<br />
under which the FDA has the sole responsibility<br />
for reviewing all of the available data<br />
and exclusively determining whether a prescription<br />
medication is “safe and effective”<br />
for marketing to the public dictates the<br />
process for approving prescription medications.<br />
In approving a medication, the<br />
FDA has determined that the medication<br />
will help some segment of society and that<br />
its benefits outweigh its risks. Indeed, in<br />
adopting comment k and rejecting strict<br />
liability for prescription medication design<br />
defects, courts have acknowledged that<br />
juries are not in the best position to decide<br />
which medications provide valuable health<br />
benefits to patients that outweigh potential<br />
risks. Rather, the FDA must make uniform,<br />
national decisions based on stringent regulatory<br />
procedure.<br />
Recognizing negligent design claims<br />
would only undermine the FDA’s approval<br />
and regulation of prescription medications.<br />
A court or jury does not have the tools to<br />
assess properly whether a drug suffers a<br />
defect due to its composition and formula.<br />
As one court explained, to<br />
determine whether a drug’s benefit outweighs<br />
its risk is inherently complex<br />
because of the manufacturer’s conscious<br />
design choices regarding the numerous<br />
chemical properties of the product<br />
and their relationship to the vast<br />
physiologic idiosyncrasies of each consumer<br />
for whom the drug is designed.<br />
Society has recognized this complexity<br />
and in response has reposed regulatory<br />
authority in the FDA. Grundberg,<br />
813 P.2d at 99.<br />
The experts employed by the FDA have special<br />
skills and qualifications that enable<br />
them to assess a medication’s overall adequacy<br />
and effectiveness. Their technical<br />
expertise provides the agency with the<br />
ability to analyze and judge the safety<br />
and effectiveness of a prescription medication:<br />
“[T]he individuals making the ultimate<br />
judgment [at the FDA] will have the<br />
benefit of years of experience in reviewing<br />
such products, scientific expertise in<br />
the area, and access to the volumes of data<br />
they can compel manufacturers to produce.”<br />
Id. at 98.<br />
Conversely, the average lay juror does not<br />
have the expertise or perspective to question<br />
the correctness of the FDA’s decision<br />
about whether a medication’s benefits outweigh<br />
its risks. A court would instruct jurors<br />
to focus on the discrete issues at hand,<br />
such as whether a drug’s design should<br />
have been altered in a particular way to<br />
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Litigation Management,Inc.<br />
For The Defense ■ October 2012 ■ 19
Drug and Medical Device<br />
prevent the particular injury suffered by a<br />
particular plaintiff. Jurors, therefore, generally<br />
would decide the appropriateness<br />
of a medication’s design without having<br />
the benefit of understanding the greater<br />
context in which it was developed and<br />
approved. <strong>Courts</strong> simply do not ask jurors<br />
to consider “big picture” questions pertaining<br />
to topics such as public health. As one<br />
Recognizingnegligent<br />
design claims would only<br />
undermine the FDA’s<br />
approval and regulation of<br />
prescription medications.<br />
court explained, “[i]t would be difficult for<br />
a jury focused on a single case to take into<br />
account ‘the cumulative systemic effects’<br />
of a series of verdicts.” Brooks v. Howmedica,<br />
Inc., 273 F.3d 785, 797 (8th Cir. 2001),<br />
cert. denied, 535 U.S. 1056 (2002). Moreover,<br />
a jury, unlike the FDA, is “subject to<br />
the inherent limitations of the trial process,<br />
such as the rules of evidence, restrictions<br />
on expert testimony, and scheduling<br />
demands.” Grundberg, 813 P.2d at 98.<br />
Finding a manufacturer liable for negligent<br />
prescription medication design would<br />
mean that the jury has decided that the<br />
manufacturer knew or should have known<br />
to adopt a different, better design. An FDA<br />
approval signifies that experts have already<br />
evaluated the drug’s safety and effectiveness.<br />
It defies logic to require a manufacturer<br />
to use a “better” design than that<br />
approved by the FDA, especially when<br />
experts hired for litigation merely explain<br />
hypothetical ideas when proposing those<br />
designs. Additionally, compliance with<br />
regulatory standards constitutes evidence<br />
of due care in negligence cases. If a drug<br />
has met the FDA’s safety and efficacy standards,<br />
it also logically satisfies the common<br />
law standard for reasonable design.<br />
Recognizing negligent design claims<br />
would increase the role of the courts, allowing<br />
them to regulate prescription medications<br />
through tort liability. This expansion<br />
20 ■ For The Defense ■ October 2012<br />
of power would weaken the FDA’s role in<br />
providing expert regulation of those products.<br />
Rejecting a negligent prescription<br />
medication design defect claim while still<br />
allowing other product liability claims<br />
such as failure to warn and manufacturing<br />
defect claims carefully balances a<br />
state’s interest in providing compensation<br />
to those citizens injured by prescription<br />
drugs and the federal government’s interest<br />
in standardizing decisions about which<br />
drugs should enter the marketplace.<br />
Negligent Design Claims Undermine<br />
the FDA Regulatory Framework<br />
If a jury determined that a prescription<br />
medication had a negligent design, the<br />
manufacturer would face a complicated dilemma.<br />
It would need to consider recalling<br />
and redesigning the drug, or it would risk<br />
having others sue it, alleging similar claims<br />
and also asserting that the manufacturer<br />
owed punitive damages. The manufacturer<br />
could not alter the medication’s composition<br />
or formula without first obtaining<br />
FDA approval through a painstaking and<br />
extensive approval process. See 21 C.F.R.<br />
§314.70 (outlining the procedures for supplementing<br />
or changing an approved drug<br />
application). Suspending manufacturing<br />
and recalling a medication would undermine<br />
the FDA’s established framework for<br />
the approval and change of a medication’s<br />
design. Further, it would call into question<br />
the FDA’s previous determination that a<br />
medication was safe, effective, and thus<br />
marketable. Suspending manufacturing<br />
and recalling an FDA- approved prescription<br />
medication could also adversely affect<br />
the public health. See Wolfe v. McNeil- PPC,<br />
Inc., No. 07-348, 2011 U.S. Dist. Lexis 34714,<br />
at *18–*20 (E.D. Pa. Mar. 30, 2011) (granting<br />
summary judgment on the plaintiff’s<br />
design defect claim, in part, because finding<br />
the defendant liable would require removal<br />
of the drug from the market, which<br />
would be contrary to the public’s interest).<br />
“Safer” Designs Do Not Exist<br />
To prevail on a claim for a design defect,<br />
whether based on a theory of negligence or<br />
strict liability, a plaintiff often must plead<br />
and prove the existence of a safer and feasible<br />
alternative design. See, e.g., Berrier<br />
v. Simplicity Mfg., 563 F.3d 38, 64 (3d Cir.<br />
2009); Woodcock v. Mylan, Inc., 661 F.<br />
Supp. 2d 602, 611–12 (S.D. W. Va. 2009);<br />
Tansy, 890 P.2d at 885–86. A feasible alternative<br />
design is one that reduces the dangers<br />
associated with the product but does<br />
not unduly effect its performance or effectiveness.<br />
Tansy, 890 P.2d at 885–86 (noting<br />
that a safer feasible alternative design is one<br />
that “on balance accomplishe[s] the subject<br />
product’s purpose with a lesser risk”).<br />
Thus, a “negligent design” claim assumes<br />
that the product at issue not only should<br />
but could have been designed differently.<br />
But unlike other consumer products with<br />
designs that manufacturers can alter to reduce<br />
the possibility of injury, simply adding<br />
a feature such as a “safety valve” or making<br />
a minor revision to the composition would<br />
not necessarily render prescription medications<br />
safer. Practically speaking, alternative<br />
designs do not exist to make prescriptions<br />
medications entirely safe. Logically, if a<br />
safer design exists for a particular drug,<br />
the original design would not have rendered<br />
the drug as originally designed “unavoidably<br />
dangerous.” See L. Frumer & M. Friedman,<br />
Products Liability §§8.07[1]–[2], pp.<br />
8-277 to 8-278 (2010) (comment k applies<br />
“only to defects in design,” and there “must<br />
be no feasible alternative design which on<br />
balance accomplishes the subject product’s<br />
purpose with a lesser risk”) (internal quotations<br />
omitted). Since prescription drugs are<br />
by nature unavoidably unsafe, a proposed<br />
alternative design also would have its own<br />
unique safety risks. Thus, someone could<br />
attack even a medication produced according<br />
to an alternate design as negligently designed.<br />
In other words, because prescription<br />
drugs are inherently “unavoidably dangerous,”<br />
a manufacturer could never create an<br />
entirely safe product completely insulated<br />
against negligent design liability. This reality<br />
makes negligent design claims illogical<br />
and impractical.<br />
Moreover, negligent design claims fail<br />
to recognize that to change a drug’s design,<br />
the composition, the formula, or the<br />
ingredients must be changed, which essentially<br />
transforms the medication into an entirely<br />
new and different compound or drug<br />
rather than producing an alternate version<br />
of the present medication. See Cody Labs.,<br />
Inc. v. Sebelius, No. 10-CV-00147-ABJ, 2010<br />
U.S. Dist. Lexis 80118, at *16 (D. Wyo. July<br />
26, 2010) (noting that “[e]ven a change in<br />
an inactive ingredient will render a drug
a ‘new drug’” within the meaning of FDA’s<br />
framework) (internal citations omitted); In<br />
re OxyContin Antitrust Litig., 530 F. Supp.<br />
2d 554, 568 (S.D.N.Y. 2008) (quoting approvingly<br />
the testimony of Dr. Joseph Robinson,<br />
a University of Wisconsin professor<br />
of pharmacy and ophthalmology, that “[t]he<br />
minute you change the drug, the chemical,<br />
the formula, you have changed everything<br />
about that product.”). As one court<br />
explained, “[t]o alter the chemistry of the<br />
[drug] molecule, would be to create a new<br />
compound and a new product. There does<br />
not exist a mixture of ingredients capable of<br />
alternative design.” Sprague v. Upjohn Co.,<br />
No. 91-40035-NMG, 1995 WL 376934, at<br />
*10 (D. Mass. May 10, 1994). Negligent design<br />
claims, therefore, are impractical because,<br />
by definition, “an alternative design<br />
is not reasonable if it alters a fundamental<br />
and necessary characteristic of the product.”<br />
Torkie- Tork, 739 F. Supp. 2d at 900.<br />
The impracticality of a design defect<br />
claim against a prescription medication<br />
manufacturer was demonstrated in a New<br />
York federal court in a recent trial concerning<br />
a jawbone injury allegedly caused<br />
by an osteoporosis medication. In Secrest<br />
v. Merck & Co., No. 1:06-cv-06292-JFK<br />
(S.D.N.Y. 2011), the plaintiff proceeded<br />
to take the case to the jury exclusively<br />
on claims of strict liability and negligent<br />
design defect after the court granted a summary<br />
judgment to her for claims for failure<br />
to warn. Determining that Florida law did<br />
not bar design defect claims against prescription<br />
medication manufacturers, the<br />
court instructed the jury as follows:<br />
A product is defectively designed if…<br />
the risks of the drug outweigh its benefits.<br />
In [making this] determin[ation]…<br />
you should consider the feasibility of an<br />
alternative safer design given the scientific<br />
and technical knowledge that<br />
existed at the time of manufacture….<br />
You should consider not only the benefits<br />
and risks to plaintiff but also the<br />
overall risks and benefits to the public<br />
as a whole.<br />
Arguing that the FDA had erroneously approved<br />
the medication as “safe and effective”<br />
on numerous occasions for a handful<br />
of different indications, the plaintiff’s counsel<br />
declared during closing statements that<br />
“the safer alternative design [to the medication<br />
at issue] is a placebo pill.” In other<br />
words, the plaintiff, unable to offer proof of<br />
a safer alternative design, asked the jury to<br />
second- guess the FDA’s determination that<br />
the benefits outweighed the risks, arguing<br />
that the FDA should never have approved<br />
the medication at issue, or, at least, the medication<br />
should have been recalled once information<br />
arose about its possible risks.<br />
Plaintiffs Cannot Prove Negligent<br />
Design Sufficiently<br />
Even if a plaintiff met his or her burden<br />
of offering proof that a feasible alternative<br />
design existed that did not result in an<br />
entirely new medication, he or she would<br />
then have to prove that the design would<br />
have removed, or at least considerably<br />
diminished, the risk of his or her particular<br />
injury. To do so, the plaintiff must isolate<br />
the precise element of the medication’s<br />
design that harmed him or her. In most<br />
instances, the state of science is not sufficiently<br />
developed to allow this.<br />
After tackling this hurdle, a plaintiff<br />
would have the nearly impossible task<br />
of demonstrating that the alternatively<br />
designed drug has the same level of efficacy<br />
as the medication originally prescribed. A<br />
plaintiff would need expert testimony analyzing<br />
a collection of nonexistent clinical<br />
safety and efficacy data for the alternative<br />
product to satisfy this burden. It is unclear<br />
how a plaintiff and the plaintiff’s expert<br />
could acquire the data for a new, alternatively<br />
designed drug that the FDA never<br />
approved for testing.<br />
A plaintiff would also have to show that<br />
the FDA would approve the proposed alternative<br />
product. Without FDA approval,<br />
an alternative product is not “feasible.” See<br />
Wolfe, 2011 U.S. Dist. Lexis 34714, at *18–<br />
*20 (holding that the defendant did not have<br />
a duty to develop a safer version of the drug<br />
at issue, in part, because no other FDAapproved<br />
forms of that drug existed); Ackley<br />
v. Wyeth Labs., Inc., 919 F.2d 397, 401–02<br />
(6th Cir. 1990) (applying Ohio law) (requiring<br />
FDA approval for a vaccine’s alternative<br />
design to be considered “feasible”). Fulfilling<br />
this requirement would require both a<br />
complete record on the safety and efficacy<br />
of the alternative medication, as well as testimony<br />
from FDA employees about the ultimate<br />
approval determination. Since FDA<br />
officials can only testify in civil trials in limited<br />
circumstances, a plaintiff would have<br />
to overcome obstacles to produce this testimony.<br />
See 21 C.F.R. §20.1 (“No officer or<br />
employee of the [FDA]… except as authorized<br />
by the Commissioner… shall give any<br />
testimony before any tribunal pertaining to<br />
any function of the [FDA] or with respect to<br />
any information acquired in the discharge<br />
of his official duties.”).<br />
Other Legal Deterrents Make Negligent<br />
Design Claims Unnecessary<br />
In many of the states that excuse medication<br />
manufacturers from design defect<br />
claims, injured plaintiffs can still sue medication<br />
manufacturers for failure to warn<br />
or for manufacturing defects. A negligent<br />
design claim would allow a plaintiff to<br />
recover even though the FDA had already<br />
decided that the medication at issue was<br />
safe and effective and the plaintiff’s prescribing<br />
health-care provider was fully<br />
cognizant of all relevant risks and still<br />
determined that the medication’s benefits<br />
for that particular patient outweighed<br />
the risks.<br />
It doesn’t follow that without negligent<br />
design claims drug manufacturers would<br />
somehow have the freedom to engage in<br />
design “misconduct.” Manufacturers must<br />
follow stringent and demanding federal<br />
regulations in designing medications. The<br />
law also establishes civil and criminal punishment<br />
and a variety of lesser sanctions if<br />
they obtain FDA approval of a medication<br />
design through improper means. Hence, the<br />
states do not need to create additional layers<br />
of regulation. Cf., Buckman Co. v. Plaintiffs’<br />
Legal Comm., 531 U.S. 341, 350 (2001)<br />
(holding that the Food Drug and Cosmetic<br />
Act preempts state law fraud-on-the-FDA<br />
claims because those claims “inevitably<br />
conflict with the FDA’s responsibility to police<br />
fraud consistently with the Administration’s<br />
judgment and objectives.”).<br />
Conclusion<br />
Recognizing a claim of negligent prescription<br />
medication design makes no more<br />
sense than recognizing a strict liability<br />
claim for defective design. Given the unique<br />
characteristics of prescription medications<br />
and the vast regulatory framework governing<br />
their market entry, negligent prescription<br />
medication design claims are illogical,<br />
impractical, and unnecessary, and courts<br />
should reject them wholesale.<br />
For The Defense ■ October 2012 ■ 21
Drug and Medical Device<br />
Biosimilars<br />
By Henninger S. Bullock<br />
and Andrew J. Calica<br />
The Next<br />
Big<br />
Thing<br />
Despite the opportunities<br />
presented by this nascent<br />
marketplace, players<br />
in this arena still face<br />
legal, regulatory, and<br />
economic uncertainty.<br />
The individual mandate dominated the headlines before<br />
and after the recent U.S. Supreme Court decision upholding<br />
the Patient Protection and Affordable Care Act.<br />
Though less publicized, that decision also preserved an<br />
equally interesting piece of legislation<br />
aimed at reducing health-care costs—the<br />
Biologics Price Competition and Innovation<br />
Act of 2009 (BPCIA). Biologics Price<br />
Competition and Innovation Act, Pub. L.<br />
No. 111-148, 123 Stat. XXX, (codified at 42<br />
U.S.C. §262). The BPCIA, section 351 of the<br />
Public Health Service Act, 41 U.S.C. 262(i)<br />
(1), signed into law on March 23, 2010, provides<br />
an abbreviated pathway for “biosimilars,”<br />
a generic form of innovative biologic<br />
products, to enter what could become the<br />
next frontier for new drugs and therapies<br />
for patients.<br />
Although conceptually similar to the<br />
Drug Price Competition and Patent Term<br />
Restoration Act of 1984, Pub. L. 98-417,<br />
98 Stat. 1585, referred to as the “Hatch-<br />
Waxman Amendments,” which established<br />
the abbreviated approval pathway<br />
for generic drugs in the small molecule<br />
market, there are important and, in some<br />
instances, still developing, differences in<br />
the language and potential implementation<br />
of the BPCIA that promise to raise critical<br />
legal, economic, and practical issues for the<br />
pharmaceutical industry.<br />
Biologics, defined to include viruses,<br />
therapeutic serums, toxins and antitoxins,<br />
blood and blood components, vaccines,<br />
allergenic products and proteins,<br />
except for chemically synthesized polypeptide,<br />
are typically generated through<br />
the use of the biologic processes of a living<br />
organism, or through biotechnology<br />
such as recombinant DNA technologies.<br />
42 U.S.C. §262(i)(1). Uses for biologics are<br />
varied, with examples including the treatment<br />
of rheumatoid arthritis (Humira,<br />
Enbrel, and Remicade), cancer (Avastin,<br />
Herceptin), and diabetes (Lantus). The<br />
molecular structures of biologics are far<br />
more complex than small molecule drugs;<br />
their molecules can be between 100 and<br />
1,000 times larger. As discussed below, this<br />
scientific and technical complexity presents<br />
unique challenges for the safety, efficacy,<br />
and interchangeability of products,<br />
22 ■ For The Defense ■ October 2012<br />
■ Henninger S. Bullock is a partner and Andrew J. Calica is an associate of Mayer Brown LLP, resident in<br />
the firm’s New York office. Mr. Bullock and Mr. Calica counsel pharmaceutical clients in nationwide product<br />
liability litigation, complex commercial disputes, and internal investigations. Mr. Bullock is a co-leader<br />
of Mayer Brown’s Product Liability and Mass Torts group. James C. duPont, a Mayer Brown LLP associate,<br />
contributed to this article.
and also provides fertile ground for unique<br />
and developing legal issues and strategies.<br />
Biologics are also big business, accounting<br />
for 10–15 percent of the global pharmaceuticals<br />
market. The combined sales<br />
of the top 12 biologics in the United States<br />
reached an estimated $30 billion in 2010,<br />
and one calculation put the worldwide total<br />
for the one year period ending June 2011<br />
at a staggering $148.2 billion. Andrew F.<br />
Bourgoin, What You Need to Know About<br />
the Follow- On Biological Market in the<br />
U.S.: Implications, Strategies, and Impact 5<br />
(Thomson Reuters 2011); Thomas M. Burton<br />
& Jonathan D. Rockoff, FDA Sets Path<br />
for Biotech Drug Copies, Wall St. J., Feb. 10,<br />
2012. The opportunity for generic competition<br />
beckons. Between 2011 and 2015, more<br />
than 30 branded biologics are expected to<br />
lose patent protection in the United States.<br />
Generics and Biosimilars Initiative, Global<br />
Biosimilar Market to Grow to US $3.7 Billion<br />
in 2015, Aug. 4, 2011.<br />
Anticipating the potential for a new frontier,<br />
and perhaps in response to other factors<br />
such as the end of patent exclusivity<br />
for statins and an uncertain drug pipeline,<br />
biotechnology and pharmaceutical companies,<br />
both brand and generic, have engaged<br />
in a flurry of activity including acquisitions,<br />
mergers, and strategic partnerships. Eli Lilly’s<br />
2008 acquisition of ImClone elevated<br />
biologics to nearly half of its drug pipeline.<br />
Pfizer formed a strategic partnership with<br />
Biocon to compete in the recombinant human<br />
insulin market, primarily in emerging<br />
markets, but eventually in the United States<br />
as well. Teva and Lonza have undertaken a<br />
joint venture involving biologics, and Amgen<br />
recently announced a partnership with<br />
Watson Pharmaceuticals aimed at developing<br />
biosimilars to treat cancer.<br />
Despite the opportunity for a new frontier,<br />
as discussed further below, players in this<br />
market still face uncertainty—legal, regulatory,<br />
and economic—at nearly every turn.<br />
The Biologics Price Competition<br />
and Innovation Act<br />
Spurred by a desire to decrease the cost of<br />
expensive biologic therapies and, therefore,<br />
increase patient access to treatment for<br />
often serious and life- threatening conditions,<br />
the BPCIA offers a framework for the<br />
approval of biosimilar products for the first<br />
time in the United States. Under the act, a<br />
so-called 351(k) applicant demonstrates<br />
that its product is biosimilar to a licensed<br />
biological product, the “reference product,”<br />
if its product is “highly similar” to the reference<br />
product and there are “no clinically<br />
meaningful differences” between the two<br />
products in the areas of safety, purity, and<br />
potency. 42 U.S.C. §262(i)(2). Generally, an<br />
applicant must establish that (1) the biosimilar<br />
product uses the same mechanism<br />
of action as the reference product; (2) the<br />
condition of use in the proposed labeling<br />
has been previously approved for the reference<br />
product; (3) the route of administration,<br />
dosage form, and strength are<br />
the same; and (4) the facility for manufacturing,<br />
processing, packing, or holding<br />
meets standards designed to assure<br />
that the product remains safe, pure, and<br />
potent. 42 U.S.C. §262(k)(2)(A)(i). The U.S.<br />
Food and Drug Administration (FDA), in<br />
its discretion, may determine that one or<br />
more of these elements are unnecessary<br />
for a particular application. Id. An applicant<br />
must make the required showing with<br />
data derived from analytical studies, animal<br />
studies, and, notably, its own clinical<br />
studies. Id. Here a 351(k) application begins<br />
to diverge from a traditional Abbreviated<br />
New Drug Application (ANDA) submitted<br />
under the Hatch- Waxman Amendments.<br />
ANDA applicants typically rely exclusively<br />
on clinical studies conducted by the New<br />
Drug Application (NDA) holder.<br />
The FDA anticipates that demonstrating<br />
biosimilarity will be more cumbersome<br />
than demonstrating bioequivalence.<br />
Even slight differences in the structure of<br />
a biologic can produce significant therapeutic<br />
differences. In turn, these therapeutic<br />
differences can affect safety, purity,<br />
or potency. Manufacturing differences and<br />
environmental factors such as light and<br />
temperature can have a similar effect. As a<br />
result, unless the FDA deems them unnecessary,<br />
one or more clinical studies will be<br />
required to demonstrate biosimilarity.<br />
In determining biosimilarity, the FDA<br />
proposes to use a risk-based totality- of- theevidence<br />
approach. The FDA will evaluate<br />
the different information provided by an<br />
applicant—clinical studies, animal studies,<br />
knowledge of human pharmacokinetics—in<br />
reaching an overall assessment on<br />
whether or not a product is biosimilar to a<br />
reference product. The FDA has suggested<br />
that it will not apply a single one-size-fitsall<br />
analysis.<br />
In February 2012, the FDA unveiled<br />
guidance documents informing the industry<br />
that the first step in this approach is to<br />
characterize the structure and function of<br />
a proposed biosimilar and the reference<br />
product and then to compare them. Ctr. for<br />
Drug Evaluation and Research, Ctr. for Biologics<br />
Evaluation and Research, U.S. Dep’t<br />
of Health and Human Services, U.S. Food<br />
and Drug Admin., Guidance for Industry:<br />
Scientific Considerations in Demonstrating<br />
Biosimilarity to a Reference Product 7<br />
(2012). This characterization will be used as<br />
a guide in developing the scope and extent<br />
of animal and human clinical studies necessary<br />
to determine biosimilarity. Id. (“For<br />
example, if rigorous structural and functional<br />
comparisons show minimal or no<br />
difference between the proposed product<br />
and the reference product, the stronger the<br />
scientific justification for a selective and<br />
targeted approach to animal and/or clinical<br />
testing to support a demonstration of<br />
biosimilarity.”). The FDA has noted that an<br />
applicant may be able to demonstrate biosimilarity<br />
even if the biosimilar and the<br />
reference product exhibit “formulation or<br />
minor structural differences,” as long as the<br />
applicant demonstrates that they are not<br />
clinically meaningful. Id. at 8. The agency<br />
further advised that a clinically meaningful<br />
difference could include a difference<br />
in the “expected range of safety, purity,<br />
and potency” of the two products, but that<br />
“slight differences in rates of occurrence of<br />
adverse events between the two products<br />
ordinarily would not be considered clinically<br />
meaningful differences.” Id.<br />
Next, an applicant should consider the<br />
role of animal studies in addressing toxicity<br />
and in developing additional support<br />
for biosimilarity. Id. at 7. In the third step,<br />
the applicant conducts human pharmacokinetics<br />
studies and, when appropriate,<br />
pharmacodynamic studies. Id. Fourth, an<br />
applicant compares the clinical immunogenicity<br />
of the two products. Id. If after these<br />
steps residual uncertainties remain regarding<br />
biosimilarity, an applicant “should then<br />
consider what comparative clinical safety<br />
and efficacy data” may be necessary. Id.;<br />
Rachel E. Sherman, Assoc. Dir. for Medical<br />
Policy, Ctr. for Drug Evaluation and<br />
Research, U.S. Food and Drug Admin.,<br />
For The Defense ■ October 2012 ■ 23
Drug and Medical Device<br />
Biosimilar Biological Products: Biosimilar<br />
Guidance Webinar 13 (2012). As one might<br />
expect, the FDA has encouraged applicants<br />
to consult with the agency in developing a<br />
clinical program after completing the comparative<br />
structural and functional analysis.<br />
Guidance for Industry: Scientific Considerations<br />
in Demonstrating Biosimilarity to a<br />
Reference Product, supra, at 7–8.<br />
Biologics arealso big<br />
business, accounting for<br />
10–15 percent of the global<br />
pharmaceuticals market.<br />
Biosimilarity and Interchangeability<br />
At the end of this process, a product deemed<br />
biosimilar will become eligible for marketing<br />
approval by the FDA. But approval does<br />
not ensure instant market penetration at the<br />
expense of the reference product. Unlike a<br />
classic generic product, a biosimilar product<br />
may not be substituted for a reference product<br />
without the intervention of the prescribing<br />
health-care provider. In other words,<br />
generic substitution laws, enacted in most<br />
states, will not permit pharmacists to substitute<br />
biosimilars for a reference product as<br />
they do in the small molecule market. Once<br />
again, it is the complexity of biologics that<br />
drives this different dynamic.<br />
However, the BPCIA contains a second<br />
designation. Once biosimilarity is established,<br />
the FDA may determine that a product<br />
is “interchangeable” with the reference<br />
product. Interchangeability requires a<br />
determination that (1) the biosimilar can<br />
be expected to produce the same clinical<br />
result as the reference product in any given<br />
patient, and (2) for a biological product<br />
that is administered more than once, that<br />
the risk to the patient in terms of safety or<br />
diminished efficacy of altering or switching<br />
between use of the biosimilar product and<br />
the reference product is not greater than<br />
the risk of not switching. 42 U.S.C. §262(k)<br />
(4). An interchangeable product may be<br />
substituted for the reference product automatically<br />
and without the intervention of a<br />
health-care provider.<br />
24 ■ For The Defense ■ October 2012<br />
Progress Toward Implementation<br />
of the BPCIA<br />
Implementation of the act has been measured.<br />
In February 2012, the FDA issued<br />
three draft guidance documents on biosimilar<br />
product development. First, Scientific<br />
Considerations in Demonstrating Biosimilarity<br />
to a Reference Product, is intended to<br />
assist companies drawing up a 351(k) application<br />
in demonstrating that a proposed<br />
therapeutic product is a biosimilar. This<br />
draft guidance describes the FDA’s totalityof-<br />
the- evidence approach, discussed above.<br />
Second, Quality Considerations in Demonstrating<br />
Biosimilarity to a Reference Protein<br />
Product, details the analytical factors<br />
considered when assessing biosimilarity.<br />
Third, Biosimilars: Questions and Answers<br />
Regarding Implementation of the Biologics<br />
Price Competition and Innovation Act<br />
of 2009, is intended to supply answers to<br />
common questions from applicants. The Q<br />
& A document provides the beginnings of<br />
a roadmap for navigating the application<br />
process. The FDA is now in the process of<br />
receiving and reviewing public comment<br />
on these documents.<br />
As part of its February 2012 rollout, the<br />
FDA reported that it had already received<br />
35 pre- Investigational New Drug (IND)<br />
meeting requests for proposed biosimilar<br />
products corresponding to 11 reference<br />
products, held 21 pre-IND sponsor<br />
meetings, and received 9 INDs. See Sherman,<br />
supra. No biosimilar applications<br />
have yet been received in the United States.<br />
In Europe, the European Medicines Agency<br />
approved its first biosimilar in 2006—Sandoz’s<br />
Omnitrope, used to treat growth hormone<br />
deficiency. Since then, 13 additional<br />
biosimilars have received approval.<br />
The FDA anticipates receiving only two<br />
biosimilar applications annually and only<br />
one application requiring a determination<br />
of interchangeability annually. Agency<br />
Information Collection Activities; Proposed<br />
Collection; Comment Request; General<br />
Licensing Provisions; Section 351(k)<br />
Biosimilar Applications, 77 Fed. Reg. 88,80,<br />
88,82 (Feb. 15, 2012). But these estimates<br />
are based on the FDA’s review of the expiration<br />
dates for patents related to potential<br />
reference products and general market<br />
interest in biological products that could<br />
be candidates for 351(k) applications. Id.<br />
The number of meeting requests and INDs<br />
received in the two years since the act’s<br />
passage may suggest that the FDA has<br />
underestimated the market’s interest in<br />
biosimilar and interchangeable products.<br />
Then again, the requests might signal a<br />
rush to market by key players already well<br />
positioned to enter the fray. Time will tell.<br />
Of note, the FDA has succeeded in<br />
implementing a user fee program to fund<br />
its review of 351(k) applications. Food and<br />
Drug Administration Safety and Innovation<br />
Act of 2012, Pub. L. No. 112-144, XXX<br />
Stat. XXX (codified in scattered sections of<br />
the U.S.C.); Rachel Slajda, FDA User Fee Bill<br />
Keeps Rocketing Through Congress, Law360<br />
(June 20, 2012). The new biosimilar user<br />
fee program is similar to the prescription<br />
drug user fee program but permits the collection<br />
of fees during the pre- application<br />
development phase to generate revenue<br />
in the near term and to enable the FDA to<br />
meet with applicants early in the development<br />
of potential products. 76 Fed. Reg. at<br />
76,425. Within five days of FDA acceptance<br />
of a request for a product development<br />
meeting, or upon the filing of an IND, the<br />
sponsor must pay an initial biosimilar biological<br />
product development fee. Food and<br />
Drug Administration Safety and Innovation<br />
Act, §744H(a)(1)(A). The sponsor must<br />
then pay an annual development fee each<br />
fiscal year thereafter. Id. at §744H(a)(1)(B).<br />
The Food and Drug Administration Safety<br />
and Innovation Act also calls for application<br />
and supplement fees, an annual biosimilar<br />
biologic product establishment fee<br />
to be paid by any facility engaged in the<br />
manufacture of a biosimilar product for<br />
which an application has been approved,<br />
and an annual biosimilar biologic product<br />
fee. Id. at §§744H(a)(2), 744H(a)(3), 744H(a)<br />
(4). Congress has authorized the FDA to<br />
use these fees for all aspects of the review<br />
of applications, including the development<br />
phase and post- marketing surveillance.<br />
The FDA estimates that the burden, in<br />
terms of hours, associated with the review<br />
of a biosimilar application will not differ<br />
from the review of first- generation biologic<br />
products. 77 Fed. Reg. at 88,81. As one<br />
might then expect, biosimilar application,<br />
establishment, and product fees will be<br />
equal to the fees established under the prescription<br />
drug user fee program for human<br />
drug applications, which includes new biological<br />
product applications, for any fiscal
year. Food and Drug Administration Safety<br />
and Innovation Act, §744H(b)(1); 76 Fed.<br />
Reg. at 76,425–26. Fees collected during<br />
the development phase are set at ten percent<br />
of those set for a human drug application.<br />
Id. Finally, the bill commands the<br />
FDA to produce written reports each fiscal<br />
year detailing the FDA’s progress in achieving<br />
established review goals, its implementation<br />
of the user fee program, and how it<br />
used the fees collected during that fiscal<br />
year. Food and Drug Administration Safety<br />
and Innovation Act, §744I(a), §744I(b).<br />
Notwithstanding the above, issues<br />
remain that could interrupt the implementation<br />
of this new regulatory scheme. For<br />
example, in April 2012 Abbott Laboratories<br />
filed a petition with the FDA requesting<br />
that the agency decline approval of any biosimilar<br />
application referencing Humira®, or<br />
any other product whose BLA was submitted<br />
prior to the BPCIA. The petition contends<br />
that approval would work a taking<br />
of the reference product sponsor’s trade<br />
secrets without just compensation. Further,<br />
having reasonably relied upon the<br />
FDA’s specific lack of authority to approve<br />
a biosimilar application, Abbott argued<br />
that the use of information provided to the<br />
FDA as a part of a pre-BPCIA BLA would<br />
frustrate the discreet investment- backed<br />
expectations of reference product sponsors.<br />
This issue, among others, could eventually<br />
result in litigation.<br />
Barriers to Entry<br />
Despite the market opportunities and a<br />
developing framework for seeking approval,<br />
the barriers for biosimilar products remain<br />
high. Some estimates for developing a biosimilar<br />
product are as high as $10 to $40<br />
million, compared to $1 to $2 million for a<br />
traditional generic. Estimates have anticipated<br />
that biosimilar products will involve<br />
higher manufacturing costs than traditional<br />
generics generate. Biologics probably<br />
will also generate higher distribution costs<br />
than small molecule drugs because biologics<br />
are less stable and have shorter shelf<br />
lives. These heightened costs will translate<br />
into a smaller price difference between biosimilars<br />
and reference products than in the<br />
typical brand- generic market. For example,<br />
Sandoz launched Omnitrope in Europe at<br />
only a 20–30 percent discount to its reference<br />
product, Eli Lilly’s Humatrope. Drug<br />
Appraisal: Assessing the Efficacy and Safety<br />
of Omnitrope, 2 Brit. J. Clin. Pharmacology<br />
298, 300 (2010).<br />
Manufacturers of reference products can<br />
also be expected to defend their turf. They<br />
may decide to produce increasingly complex<br />
products to discourage biosimilars or take<br />
aggressive approaches to pricing. Reference<br />
product manufacturers may also seek to develop<br />
second generation products of their<br />
own and encourage physicians to switch to<br />
those products rather than to biosimilars.<br />
Some generic manufacturers will no<br />
doubt seek to leverage their experience<br />
in Europe and other developing markets.<br />
Some generic manufacturers that have<br />
achieved approval for biosimilar products<br />
in other regulated markets have already<br />
started to work toward launch of a U.S.<br />
product, including Teva, Sandoz, Hospira,<br />
and Actavis. For example, Hospira’s biosimilar<br />
for Epogen to treat anemia is in the<br />
clinical trial phase in the United States.<br />
Others now seek strategic partnerships to<br />
shore up product development, technological<br />
innovation, and marketing and distribution<br />
needs.<br />
Still, regulatory and commercial uncertainty<br />
looms large. Combine those pressures<br />
with the reality that it appears that<br />
companies do not have enough potential<br />
biosimilar opportunities to launch new<br />
products continually and some companies<br />
may decide not to pursue biosimilar<br />
development.<br />
Some manufacturers may instead opt to<br />
file a Biologics License Application (BLA),<br />
positioning a drug as a reference product<br />
rather than using the abbreviated pathway<br />
for a biosimilar. The advantages of marketing<br />
a second- generation product, or “biobetter,”<br />
including market exclusivity and<br />
the ability to file at any time, may outweigh<br />
the burdens discussed above. Generics and<br />
Biosimilars Initiative, US Biosimilars Pathway<br />
Unlikely to Be Used, March 18, 2011;<br />
Michael McCaughan, Follow- On Biologics:<br />
Is there a Pathway, In Vivo Blog, May 20,<br />
2010. One report has noted that Sandoz,<br />
which has more biosimilar launches in regulated<br />
markets outside of the United States<br />
than any other company, has opted to file<br />
BLAs in the United States. Bourgoin, supra,<br />
at 5. Teva, the largest generic manufacturer<br />
in the world, also elected to file a BLA for<br />
a granulocyte colony- stimulating factor<br />
called Neutroval shortly before the passage<br />
of the BPCIA, rather than wait for the availability<br />
of the abbreviated pathway. Id. at 5.<br />
Legal Landscape<br />
The BPCIA raises some familiar legal issues<br />
but differs in structure and application from<br />
the Hatch- Waxman Amendments. We endeavor<br />
below to provide a primer on some<br />
of the most pressing issues, although we<br />
acknowledge that there is ample room for<br />
commentary in this still developing field.<br />
Patent Protection and Market Exclusivity<br />
Similar to the Hatch- Waxman Amendments,<br />
the BPCIA uses market exclusivity<br />
and the patent laws together to achieve the<br />
twin aims of fostering new drug innovation<br />
and patient access to lower cost products.<br />
However, once again, the complexity<br />
and variability of biologics has, in part, led<br />
Congress to take a different approach to<br />
exclusivity and patent dispute resolution<br />
regarding biologics.<br />
Reference Product Exclusivity<br />
The BPCIA authorizes a 12-year period of<br />
exclusivity for reference products. Biosimilar<br />
applications may not be submitted until<br />
four years after the date of first licensure of<br />
the reference product. 42 U.S.C. §262(k)(7)<br />
(B). Afterward, the FDA may not approve a<br />
biosimilar application until 12 years after<br />
the date of first licensure of the reference<br />
product. 42 U.S.C. §262(k)(7)(A). The reference<br />
product will enjoy an additional six<br />
months of exclusivity over and above these<br />
four- and 12-year time periods if the FDA<br />
determines that information related to<br />
the use of a biologic product will produce<br />
health benefits in the pediatric population<br />
and the sponsor completes the additional<br />
requested studies for that group. 42 U.S.C.<br />
§262(m)(2), §262(m)(3).<br />
The 12-year exclusivity term received<br />
bipartisan support in Congress, but unsurprisingly,<br />
industry viewpoints varied considerably.<br />
Andrew Pollack, Biologic Drugs<br />
May Get Less Protection, N.Y. Times, Jan.<br />
14, 2010. In 2008, the Biotechnology Industry<br />
Organization proposed a 14-year period<br />
of exclusivity. Bourgoin, supra, at 2 (citing<br />
H. Grabowski, Data Exclusivity for<br />
New Biological Entities, Duke Univ. Dep’t<br />
of Economics Working Paper, June 2007).<br />
Advocates argued that biosimilar produc-<br />
For The Defense ■ October 2012 ■ 25
Drug and Medical Device<br />
ers would market products that would have<br />
similarities to but that would not duplicate<br />
reference products, which would limit the<br />
patent protection of a reference product.<br />
Fed. Trade Comm’n, Emerging Health Care<br />
Issues: Follow- on Biologic Drug Competition<br />
32–33 (2009). Some proponents also<br />
argued that incentivizing innovator firms<br />
to invest in research and development for<br />
The FDA anticipatesthat<br />
demonstrating biosimilarity<br />
will be more cumbersome<br />
than demonstrating<br />
bioequivalence.<br />
new therapies and post- approval research<br />
to develop new uses for existing therapies<br />
required a longer period of market exclusivity.<br />
Id. at 39–41.<br />
In contrast, the Generic Pharmaceutical<br />
Association (GPhA) argued that a<br />
period similar to Hatch- Waxman’s five<br />
years of market exclusivity provided the<br />
incentives necessary to promote innovation<br />
while ensuring timely patient access to less<br />
costly biosimilars. The GPhA was wary of<br />
an absolute shield that would bolster what<br />
it characterized as reference product sponsors’<br />
weaker patents. Press Release, Generic<br />
Pharmaceutical Association, GPhA Statement<br />
on BIO’s Flawed Data Exclusivity<br />
White Paper (Jan. 30, 2009). Other advocates<br />
for a shorter exclusivity period, such<br />
as the Federal Trade Commission (FTC),<br />
argued that because competition in the biosimilar<br />
market was more likely to resemble<br />
brand-to-brand competition than traditional<br />
brand- to- generic competition, the<br />
patent regime would protect developers<br />
sufficiently to spur innovation without<br />
an extended period of exclusivity. Emerging<br />
Health Care Issues: Follow- on Biologic<br />
Drug Competition, at 35–37.<br />
The Obama administration took a position<br />
somewhere in the middle. In a letter<br />
to Representative Henry Waxman,<br />
the White House endorsed an exclusivity<br />
period of seven years. Lisa Richwine, White<br />
26 ■ For The Defense ■ October 2012<br />
House: 7 Years Enough to Shield Biotech<br />
Drugs, Reuters (June 25, 2009). Given the<br />
nascent state of the biosimilar industry in<br />
the United States, exactly how the 12-year<br />
period of exclusivity granted by Congress<br />
will affect the development of the market<br />
remains to be seen.<br />
First Interchangeable Exclusivity<br />
The first biosimilar determined to be interchangeable<br />
with a particular reference<br />
product will enjoy a period of exclusivity<br />
during which time the FDA cannot license<br />
other biosimilar products as interchangeable.<br />
The exclusivity calculus is based on<br />
the date of approval, the date of first commercial<br />
marketing, and certain patent litigation<br />
milestones. The period of exclusivity<br />
ranges in length from a minimum of one<br />
year after the date of the first commercial<br />
marketing of the biosimilar product as interchangeable<br />
with the reference product,<br />
to a maximum of 42 months after the approval<br />
of the first interchangeable biosimilar<br />
product if patent litigation is instituted<br />
and remains ongoing. 42 U.S.C. §262(k)(6).<br />
Opponents of this type of exclusivity<br />
pointed out perceived abuses and anticompetitive<br />
behavior attributed to the corollary<br />
180-day period of exclusivity under Hatch-<br />
Waxman. After the U.S. Court of Appeals<br />
for the District of Columbia Circuit ruling<br />
in Mova Pharmaceutical Corp. v. Shalala, an<br />
ANDA applicant only needed to be the first<br />
to file a Paragraph IV certification with respect<br />
to a particular drug to receive 180-<br />
day exclusivity. Mova Pharmaceutical Corp.<br />
v. Shalala, 140 F.3d 1060, 1076 (D.C. Cir.<br />
1998). Critics argue that this has promoted<br />
a litigation cottage industry in the small<br />
molecule market. They contend that some<br />
generic companies have taken opportunities<br />
to attack brand patents and settle disputes<br />
in exchange for agreements to delay entry<br />
of the generic form to the market, which<br />
they view as a business strategy as lucrative<br />
as the business of manufacturing generic<br />
drugs. Wendy H. Schacht & John R. Thomas,<br />
Cong. Research Serv., RL31379, The “Hatch-<br />
Waxman” Act: Selected Patent- Related Issues<br />
12–13 (2002); Bethany McLean, A Bitter<br />
Pill, Fortune, Aug. 13, 2001. Some were concerned<br />
that this same dynamic could play<br />
out with biosimilars.<br />
Proponents argued that market participants<br />
would be reluctant to invest the substantial<br />
resources necessary to establish<br />
interchangeability without the added certainty<br />
of recouping the costs associated<br />
with development and patent challenges.<br />
Emerging Health Care Issues: Follow- on<br />
Biologic Drug Competition, at 66–67. The<br />
decision to provide a period of exclusivity<br />
for the first product actually approved<br />
as interchangeable, rather than the first<br />
to challenge a reference product’s patents,<br />
applying only to interchangeable products,<br />
as opposed to interchangeable and biosimilar<br />
products, arguably promotes the desire<br />
to incentivize development without engendering<br />
anticompetitive behavior.<br />
The cost and complexity of establishing<br />
interchangeability and the anticipated<br />
narrow price differential between reference<br />
and biosimilar products suggests that this<br />
exclusivity period may not have a substantial<br />
impact on the market. Indeed, the first<br />
interchangeable product may experience<br />
de facto exclusivity as some have projected<br />
that only a few interchangeable products<br />
likely will enter the market. Id. at 67–68.<br />
Disclosure of Competitively Sensitive<br />
Information and Multiple Litigations<br />
The most significant difference between<br />
the small molecule patent dispute resolution<br />
approach and the BPCIA approach<br />
to patent dispute resolution is that the latter<br />
makes information- sharing compulsory<br />
and could lead to multiple litigations.<br />
Within 20 days of receiving a notice from<br />
the FDA that a biosimilar sponsor’s application<br />
has been accepted for review, the<br />
applicant must provide the reference product<br />
sponsor a copy of the application and<br />
additional information describing the process<br />
used to manufacture the proposed biosimilar.<br />
42 U.S.C. §262(l)(2). Although not<br />
explicitly stated, this manufacturing information<br />
will likely consist of what is known<br />
in the small molecule market as chemistry,<br />
manufacturing, and controls, or “CMC”<br />
information.<br />
This information is to be turned over to<br />
the reference sponsor’s in-house and outside<br />
counsel, as long as the attorneys do not<br />
engage in patent prosecution related to the<br />
reference product, for the exclusive purpose<br />
of determining whether a claim of patent<br />
infringement could reasonably be asserted.<br />
42 U.S.C. §262(l)(B)(ii), §262(l)(C), §262(l)<br />
(D). If the reference product sponsor is the
licensee of a particular patent, the information<br />
may be turned over to the licensor<br />
provided that the licensor has retained the<br />
right to assert the patent or participate in<br />
litigation and provided that the licensor has<br />
agreed to be subject to the act’s confidentiality<br />
provisions. 42 U.S.C. §262(l)(B)(iii).<br />
Following this initial disclosure, the biosimilar<br />
applicant and the reference sponsor<br />
are to exchange information and patent<br />
lists in an effort to determine which patents,<br />
if any, should lead to an immediate<br />
infringement action. Sixty days after<br />
the initial disclosure, the reference sponsor<br />
must provide the applicant with a list<br />
of patents for which the reference sponsor<br />
believes it could reasonably assert patent<br />
infringement claims and must identify<br />
which patents the reference sponsor is willing<br />
to license to the applicant. 42 U.S.C.<br />
§262(l)(3)(A). In response, the applicant<br />
must provide the reference sponsor with a<br />
detailed statement that describes the factual<br />
and legal basis of the applicant’s opinion,<br />
on a claim-by-claim basis, that one or<br />
more patents is invalid, unenforceable, or<br />
will not be infringed, or a statement that<br />
the applicant does not intend to market<br />
the product until the patent’s expiration.<br />
42 U.S.C. §262(l)(3)(B)(ii). The applicant<br />
must also list which patents it is willing to<br />
license from the reference sponsor, if any.<br />
42 U.S.C. §262(l)(3)(B)(iii). Finally, the reference<br />
product sponsor must then respond<br />
with a detailed statement specifying the<br />
factual and legal basis of the opinion, on a<br />
claim-by-claim basis, of the reference product<br />
sponsor that one or more patents will be<br />
infringed by the marketing of the biosimilar<br />
product. 42 U.S.C. §262(l)(3)(C).<br />
After this exchange, the parties must<br />
negotiate in good faith to determine which<br />
patents, if any, will be the subject of an<br />
immediate action for infringement. If a<br />
resolution is not forthcoming, provisions<br />
narrowing the number of patents at issue<br />
become applicable. 42 U.S.C. §262(l)(5),<br />
§262(l)(6). First, the biosimilar applicant<br />
decides how many patents it should litigate<br />
in an immediate infringement action; not<br />
which patents it should litigate, but only<br />
how many. 42 U.S.C. §262(l)(5)(A). Within<br />
five days, the reference sponsor and applicant<br />
must simultaneously exchange lists<br />
of patents, containing only the number of<br />
patents previously chosen by the biosimilar<br />
applicant, which each party believes should<br />
become the subject of an immediate action<br />
for infringement. 42 U.S.C. §262(l)(5)(B). If<br />
the biosimilar applicant decides that no patents<br />
should be litigated, the reference product<br />
sponsor may choose one patent to list. 42<br />
U.S.C. §262(l)(5)(B)(ii). The reference product<br />
sponsor must then bring an action for<br />
each patent contained on bothlists within<br />
30 days. 42 U.S.C. §262(l)(6)(B). All told,<br />
this exchange of patent lists and confidential<br />
information can last up to eight months.<br />
All other patents for which the reference<br />
sponsor intends to assert claims would<br />
then be litigated in a second proceeding<br />
after the biosimilar applicant supplies the<br />
reference sponsor with a mandatory 180-<br />
day notice that it intends to market the<br />
product. 42 U.S.C. §262(l)(8)(A). Presumably,<br />
this would not occur until at least 180<br />
days before the expiration of the reference<br />
sponsor’s 12 years of exclusivity. Unless the<br />
biosimilar applicant decides to launch “atrisk,”<br />
immediately on the expiration of the<br />
reference sponsor’s exclusivity, the reference<br />
sponsor’s exclusivity effectively would<br />
lengthen by the period of time that it takes<br />
to resolve the ensuing litigation.<br />
In contrast, an ANDA applicant in the<br />
small molecule context does not have to<br />
make similar disclosures other than in a<br />
particular set of circumstances. ANDA<br />
sponsors must certify, with respect to each<br />
patent listed under the referenced drug in<br />
the “Orange Book,” either that (1) the patent<br />
information has not been filed and listed,<br />
(2) the patent is expired, (3) the applicant<br />
does not intend to market the generic drug<br />
until after the patent’s expiration, or (4) the<br />
patent is invalid or will not be infringed by<br />
the manufacture, use, or sale of the new<br />
drug for which the application is submitted.<br />
21 U.S.C. §355(j)(2)(A)(vii).<br />
If an ANDA applicant elects to challenge<br />
a patent and makes a Paragraph IV<br />
certification, the sponsor must provide<br />
notice to the patent owner, and the holder<br />
of an approved application for the reference<br />
listed drug (RLD) if someone other than the<br />
patent owner, within 20 days of the FDA’s<br />
acceptance of the ANDA. 21 U.S.C. §355(j)<br />
(2)(B). This notice must include a detailed<br />
statement of the factual and legal basis for<br />
the opinion that the patent is invalid or<br />
will not be infringed.” 21 U.S.C. §355(j)(2)<br />
(B)(iv). The owner of the patent or the RLD<br />
holder then will have 45 days to commence<br />
an infringement action or the approval of<br />
the ANDA will take effect immediately. 21<br />
U.S.C. §355(j)(5)(B)(iii). The ANDA applicant<br />
may not bring a declaratory judgment<br />
action for non- infringement unless the<br />
45-day period has expired without either<br />
the patent owner or the RLD holder bringing<br />
an action for infringement. In addition,<br />
the ANDA sponsor’s notice to the<br />
patent owner or the RLD holder must have<br />
included an offer of confidential access to<br />
the ANDA application so that the owner of<br />
the patent or the RLD holder may determine<br />
whether an action for infringement<br />
should be brought. 21 U.S.C. §355(j)(5)(C)<br />
(i)(I). If an infringement action is brought<br />
within 45 days the approval shall be made<br />
effective 30 months after the date of receipt<br />
of the notice, or a shorter or a longer period<br />
as a court may order because either party to<br />
the action failed to cooperate reasonably in<br />
expediting the action, or because the court<br />
makes a final determination regarding<br />
infringement. 21 U.S.C. §355(j)(5)(B)(iii).<br />
One notable distinction between these<br />
two methods of resolution is that the BP-<br />
CIA does not establish a 30-month stay of<br />
approval of a biosimilar application pending<br />
a judgment on the issue of infringement<br />
as in a small molecule patent infringement<br />
dispute. Michael P. Dougherty, The New<br />
Follow- On- Biologics Law: A Section by Section<br />
Analysis of the Patent Litigation Provisions<br />
in the Biologics Price Competition and<br />
Innovation Act of 2009, 65 Food & Drug L.J.<br />
231, 234 (2010). Another is that the biosimilar<br />
applicant is required to turn over competitively<br />
sensitive information while the<br />
reference product sponsor doesn’t have an<br />
equivalent pre- litigation disclosure obligation.<br />
However, this is balanced by the biosimilar<br />
applicant’s ability to control the<br />
number of patents litigated in an immediate<br />
action and the timing of that litigation<br />
in relation to the expiration of the reference<br />
product sponsor’s market exclusivity.<br />
Though no 351(k) applications have yet<br />
been filed, the patent protection and exclusivity<br />
scheme may make applicants reluctant<br />
to use the abbreviated pathway and<br />
risk dissemination of sensitive information.<br />
Lack of an Orange Book Equivalent<br />
A final, significant difference between the<br />
small molecule scheme and the biosimilar<br />
For The Defense ■ October 2012 ■ 27
Drug and Medical Device<br />
scheme is that the BPCIA does not require<br />
a listing of biosimilar or interchangeable<br />
products and their reference products and<br />
associated patents. Bourgoin, supra, at 3. In<br />
the small molecule market, an NDA must<br />
include information regarding any patent<br />
which claims the drug for which the application<br />
is submitted. 21 U.S.C. §355(b)(1).<br />
This information is published by the FDA<br />
The FDA may establish<br />
more stringent postmarketing<br />
surveillance<br />
requirements for<br />
biosimilars than for classic<br />
generic products.<br />
in the Orange Book. When filing an ANDA,<br />
generic manufacturers can reference patents<br />
covering brand products in the Orange<br />
Book and, as previously noted, must make<br />
a certification regarding each patent listed<br />
in the Orange Book under a particular<br />
drug. Instead of publishing an Orange<br />
Book equivalent, the BPCIA relies on the<br />
exchange of patent information described<br />
above to identify relevant patents. Dougherty,<br />
supra, at 234.<br />
In a letter to the FDA, three pharmacist<br />
trade organizations expressed support<br />
for the development of an FDA- compiled<br />
interchangeability reference list, something<br />
similar to the current Orange Book,<br />
to assist health-care providers. Letter<br />
from Am. Pharmacists Ass’n, Nat’l Ass’n<br />
of Chain Drug Stores, and Nat’l Cmty.<br />
Pharmacists Ass’n to U.S. Food and Drug<br />
Admin. 3 (May 25, 2012). This type of listing<br />
would also aid prospective applicants<br />
to identify patents that might become the<br />
subject of a dispute before filing an application.<br />
Others have expressed concern that<br />
establishing a similar patent listing system<br />
may result in the same kind of anticompetitive<br />
behavior experienced in the<br />
small molecule market, such as the phenomenon<br />
of brand manufacturers delaying<br />
generic entry by “later listing” patents after<br />
28 ■ For The Defense ■ October 2012<br />
an ANDA has been filed. Emerging Health<br />
Care Issues: Follow- on Biologic Drug Competition,<br />
at 57. On the other hand, if the<br />
intent is to encourage follow- on manufacturers<br />
to design around branded manufacturers’<br />
patents, an Orange Book equivalent<br />
could aid in that process.<br />
Potential Litigation Exposure<br />
and Regulatory Scrutiny<br />
Because substitution of a biosimilar for a<br />
reference product requires specific intervention<br />
of a physician—the inverse in<br />
some respects of the “dispense as written”<br />
construct for traditional drugs—some<br />
commentators, and the European experience,<br />
have suggested that biosimilar manufacturers<br />
will be required to engage in<br />
promotional activities to achieve market<br />
penetration. Typically, generic manufacturers<br />
do not employ a sales force to promote<br />
their products, relying instead on<br />
price, timing of market entry, generic substitution<br />
laws, and placement on formularies<br />
to garner market share. Biosimilars<br />
may not enjoy those advantages, and price<br />
alone may not sufficiently motivate physicians<br />
to switch to biosimilars. Deploying<br />
so-called “detail men” may become necessary<br />
to ensure that physicians become<br />
comfortable with prescribing biosimilar<br />
products. Notwithstanding the advances<br />
in corporate compliance measures, operating<br />
a sales force carries inherent risks<br />
that could expose a company to the type<br />
of tort claims and regulatory scrutiny, for<br />
instance, for misbranding or off- label promotion,<br />
traditionally reserved for innovator<br />
companies.<br />
The FDA may establish more stringent<br />
post- marketing surveillance requirements<br />
for biosimilars than for classic generic<br />
products. The FDA draft guidance suggests<br />
that in their post- market monitoring<br />
biosimilar applicants should take into consideration<br />
particular safety concerns associated<br />
with the use of the reference product<br />
and its class. Guidance for Industry: Scientific<br />
Considerations in Demonstrating Biosimilarity<br />
to a Reference Product, at 20.<br />
Biosimilar applicants are further advised<br />
to implement mechanisms to differentiate<br />
between adverse events associated with<br />
their products and those associated with<br />
the reference products, including events<br />
not seen with the reference products. Additional<br />
emphasis is placed on the detection<br />
of rare but potentially serious safety<br />
risks not identified during pre- approval<br />
testing. Biosimilars thus carry the potential<br />
for differing rates of particular adverse<br />
events from the reference products or for<br />
altogether different adverse events. Knowledge<br />
of these events, sometimes thought<br />
to reside only, or to a greater degree, with<br />
brand manufacturers, may instead reside<br />
with generic manufacturers. Biosimilars<br />
could, therefore, become targets for litigation<br />
in a way that small molecule generic<br />
manufactures are not accustomed. Similarly,<br />
Biosimilar manufacturers will have<br />
their own clinical trial experiences and<br />
may find themselves having to in some<br />
instances defend those trials in litigation.<br />
Will Mensing Preempt Failure-to-<br />
Warn Claims Involving Biosimilars<br />
Another outstanding question is whether<br />
plaintiffs will be able to maintain state law<br />
failure- to- warn claims involving biosimilars,<br />
or whether the courts will deem those<br />
claims preempted by federal law. Assuming<br />
for present purposes that the act does<br />
not contain any express preemption provision,<br />
and we haven’t found an obvious preemption<br />
clause, attorneys will fight on the<br />
battleground of implied or conflict preemption.<br />
To be sure, depending on the product<br />
at issue, other regulatory schemes may<br />
affect the biosimilar preemption analysis—<br />
the National Childhood Vaccine Injury Act,<br />
for instance—but we limit the discussion<br />
here to comparing biosimilars to products<br />
approved under Hatch- Waxman.<br />
In Pliva, Inc. v. Mensing, 131 S. Ct. 2567<br />
(2011), the U.S. Supreme Court held that<br />
the federal regulatory scheme governing<br />
prescription drugs preempted state law<br />
failure- to- warn claims. The touchstone<br />
of Mensing- style preemption is an ANDA<br />
holder’s federal duty of “sameness.” To<br />
obtain FDA approval, a generic manufacturer<br />
ordinarily must show that its<br />
drug is bioequivalent to the brand-name<br />
product. As the Court observed, by eliminating<br />
the requirement that generic manufacturers<br />
independently prove the safety<br />
and efficacy of their products, the Hatch-<br />
Waxman Amendments allow manufacturers<br />
to bring generic drugs to the market less<br />
expensively than they could if they had to<br />
undertake independent safety studies. This
analysis is fairly straightforward in the traditional,<br />
small molecule context.<br />
But, as discussed, the BPCIA establishes<br />
two tiers of similarity: biosimilarity<br />
and interchangeability. The first category,<br />
biosimilarity, may seem similar to<br />
bioequivalence, but it has important distinctions.<br />
The FDA draft guidance suggests<br />
that differences may exist in formulation<br />
between a reference product and a biosimilar.<br />
For example, a proposed biosimilar<br />
product may demonstrate biosimilarity<br />
even though it does not contain human<br />
serum albumin, which is part of the reference<br />
product’s formulation. The second<br />
category, interchangeable products would<br />
seem to present the strongest argument<br />
for sameness, or at least most similarity, in<br />
comparison to reference products. Interchangeable<br />
biosimilars may be substituted<br />
for reference products without the intervention<br />
of a prescriber and are expected<br />
to produce the same clinical result in any<br />
particular patient. It remains to be seen<br />
whether courts will treat these tiers differently<br />
in a preemption analysis.<br />
Mensing’s duty of sameness extends to<br />
the product labeling as well. An ANDA<br />
holder cannot initiate labeling changes that<br />
would render its product information different<br />
from that of the NDA holder, or in<br />
some cases, a reference listed drug holder.<br />
Thus, except for small differences, such as<br />
a National Drug Code identifier, a generic<br />
manufacture must use the same label as<br />
the NDA at all times. The FDA has not yet<br />
made clear whether or to what degree this<br />
construct will apply to biosimilars.<br />
All that the act requires is that an application<br />
include information demonstrating<br />
that “the condition or conditions of use<br />
prescribed, recommended, or suggested in<br />
the labeling proposed for a biological product<br />
have been previously approved for the<br />
reference product.” 42 U.S.C. §262(k)(2)(A)<br />
(i)(III). The FDA draft guidance does not fill<br />
in the gaps for industry: “Labeling of a proposed<br />
product should include all the information<br />
necessary for a health professional<br />
to make prescribing decisions…” Guidance<br />
for Industry: Scientific Considerations in<br />
Demonstrating Biosimilarity to a Reference<br />
Product, at 21. Although it would result in<br />
practical difficulties, a case-by-case determination<br />
on labeling is not entirely out of<br />
the question, given the complexity of and<br />
uncertainty involved in biologics. Some<br />
industry groups have raised with the FDA<br />
the possibility that differing effects of biosimilars<br />
on patients could warrant labeling<br />
distinctions. As it currently stands,<br />
biosimilars will have a different naming<br />
convention than small molecule generics,<br />
suggesting another area of potential divergence<br />
from classic ANDA drugs.<br />
Interestingly, the act does include an<br />
exception to the approval process permitting<br />
applicants in certain product classes to<br />
submit their applications under 505 of the<br />
FDCA. 21 U.S.C. §355. Because this application<br />
would fall within the same regulatory<br />
scheme addressed by the Mensing<br />
court, we have good reasons to think that<br />
preemption would apply to the labeling on<br />
these products. The exception is, however,<br />
time limited. Only applications submitted<br />
before approval of the act and those submitted<br />
no later than 10 years after enactment<br />
may be eligible.<br />
Absent labeling sameness, the reasoning<br />
underpinning Mensing arguably will<br />
not translate to the biosimilar context. If<br />
a biosimilar contains its own precautions,<br />
warnings or adverse events, presumably<br />
only the biosimilar manufacturer, can initiate<br />
labeling changes, at least to those<br />
unique sections, setting aside the FDA’s<br />
authority to do so on its own initiative for<br />
a moment.<br />
How, if at all, the courts will apply the<br />
preemption doctrine to biosimilars may<br />
well have implications for manufacturers of<br />
reference products. NDA holders currently<br />
face claims by consumers of ANDA products<br />
that are premised on their ability or an<br />
ANDA’s inability to alter drug labeling and<br />
the medical community’s perceived reliance<br />
on information originating with an<br />
NDA holder. So-called brand or “innovator”<br />
liability is truly a minority position in<br />
the case law, but California courts have recognized<br />
it, for example. If labeling claims<br />
can proceed against biosimilars, litigants<br />
who ingested biosimilar products may not<br />
target reference product manufacturers, or<br />
reference product manufacturers may have<br />
defenses that differ from those available to<br />
innovator companies in the small molecule<br />
litigation.<br />
Even setting preemption aside, reference<br />
product manufacturers may have powerful<br />
arguments in cases involving noninterchangeable<br />
biosimilars. Brand liability<br />
is premised on the notion that (1) an NDA<br />
holder’s warning is addressed to the compound,<br />
not merely its own branded product;<br />
and (2) the substitution of a generic<br />
product by a pharmacy is a foreseeable<br />
event, happenstance, or both, and, therefore,<br />
does not break the causal chain. Neither<br />
premise may operate in the biosimilar<br />
context because each product may contain<br />
unique warnings, and pharmacies may not<br />
substitute biosimilars for reference products<br />
without physician intervention.<br />
Conclusion<br />
The United States is marching toward a biosimilar<br />
world. The opportunities for industry<br />
and the potential benefits for patients<br />
can hardly be ignored. Nonetheless, economic,<br />
regulatory, and legal uncertainty<br />
abounds and promise to shape the contours<br />
of this nascent marketplace. Will biosimilars<br />
indeed become the next big thing Stay<br />
tuned.<br />
For The Defense ■ October 2012 ■ 29
Drug and Medical Device<br />
FDA Opinion Letters<br />
By Nancy M. Erfle<br />
and Andrew J. Lee<br />
<strong>Why</strong> <strong>Courts</strong> <strong>Should</strong><br />
<strong>Exclude</strong> <strong>Warning</strong>,<br />
“Untitled,” and<br />
Advisory Letters<br />
Tips to arm defense<br />
practitioners with<br />
challenges to the<br />
admissibility of these<br />
letters, which judges and<br />
juries should understand<br />
do not determine any<br />
rights or legal obligations.<br />
We’ve recently spent some time with U.S. Food and Drug<br />
Administration (FDA) letters admonishing drug manufacturers<br />
for various alleged regulatory infractions. As<br />
litigators, we’ve seen plaintiffs’ attorneys wave these letters<br />
before judges or jurors to fan the flames of<br />
contempt for our clients. Unfortunately, to<br />
those not steeped in the FDA’s practices—<br />
namely, many judges and most jurors—the<br />
FDA’s name places the letters’ contents beyond<br />
reproach. That is a problem. Certainly,<br />
manufacturers treat these FDA letters seriously<br />
and generally work to meet the FDA’s<br />
demands. But for a variety of business and<br />
political reasons, manufacturers often do so<br />
regardless of the accuracy and substance of<br />
the accusations in the letters. In short, the<br />
letters invite a level of deference that FDA<br />
practice may contradict.<br />
Regrettably, few appellate opinions have<br />
dealt with the admissibility of FDA opinion<br />
letters, and even the opinions that do<br />
exist treat the issue in cursory ways. We<br />
wish to help change that by arming defense<br />
practitioners with challenges to the letters’<br />
admissibility.<br />
A Letter and Its Title or Lack of One<br />
Not surprisingly since appellate courts<br />
haven’t closely examined FDA letter admissibility,<br />
we have found little case law describing<br />
the letters and their limitations. In<br />
fact, the best authority that we’ve found is<br />
a blog posting by James M. Beck and Mark<br />
Herrmann, writing under the pen name<br />
“Bexis,” on Drug and Device Law. See James<br />
M. Beck & Mark Herrmann, You Have Been<br />
Warned—Now Do Something About It,<br />
Drug and Device Law Blog, http://drugand<br />
devicelaw.blogspot.com/2010/04/you-have-beenwarned-now-do-something.html<br />
(posted April<br />
21, 2010 3:03 PM) (discussing Bailey v. Wyeth,<br />
Inc., 424 N.J. Super. 278, 301–02, 37<br />
A.3d 549 (2008)). To summarize—and update<br />
a bit—there are three types of letters<br />
that the FDA may send when confronted<br />
with activities that potentially violate drug<br />
marketing law and regulations:<br />
• <strong>Warning</strong> letters are titled as such and are<br />
intended to be “informal and advisory.”<br />
Various FDA centers or district offices<br />
issue warning letters when, in their<br />
opinion, a manufacturer has engaged<br />
30 ■ For The Defense ■ October 2012<br />
■ Nancy M. Erfle is a shareholder and Andrew J. Lee is a senior counsel in the Portland, Oregon, office of<br />
Schwabe Williamson & Wyatt. Ms. Erfle is chair of the firm’s Product Liability and Business Litigation Practice<br />
Group. She focuses her practice primarily on the defense of major manufacturers and clients involved in<br />
complex business disputes. Mr. Lee’s practice has focused on defending companies in high-stakes personal<br />
injury actions. Both authors are members of <strong>DRI</strong> and the <strong>DRI</strong> Drug and Medical Device Committee.
in activities that “may lead to enforcement<br />
action if not promptly and adequately<br />
corrected.” U.S. Food and Drug<br />
Admin., Regulatory Procedures Manual,<br />
4-1-1, 4-1-10 (2011), available at<br />
http://www.fda.gov/ICECI/ComplianceManuals/<br />
RegulatoryProceduresManual/default.htm (last<br />
visited Sept. 7, 2012) (emphasis added).<br />
• Untitled Letters, as suggested by the<br />
word “untitled,” do not bear a title, do<br />
not relate to a “significant violation,”<br />
and in contrast to warning letters, their<br />
contents do not threaten an enforcement<br />
action. Regulatory Procedures Manual,<br />
supra, at 4-2-1.<br />
• Advisory letters are issued by the new<br />
FDA Office of Prescription Drug Promotion,<br />
referred to as the “OPDP,” in response<br />
to a manufacturer’s submission<br />
of advertising and marketing materials<br />
under the caption “Request for Advisory<br />
Comment” prior to publication; in the<br />
past the FDA Division of Drug Marketing,<br />
Advertising and Communications<br />
issued them. See OPDP Submission of<br />
Proposed DTC TV Ads for Advisory Review,<br />
http://www.fda.gov/AboutFDA/Centers<br />
Offices/OfficeofMedicalProductsandTobacco/<br />
CDER/ucm090159.htm (last visited Sept. 7,<br />
2012) (manufacturer should caption their<br />
pre- publication submissions “Request for<br />
Advisory Comments”); OPDP Frequently<br />
Asked Questions (FAQs), Predistribution<br />
submissions, http://www.fda.gov/AboutFDA/<br />
CentersOffices/ OfficeofMedicalProductsand<br />
Tobacco/CDER/ucm090308.htm (last visited<br />
Sept. 7, 2012, 2012) (“DDMAC provides<br />
opinions on proposed advertisements<br />
and labeling pieces before use upon request<br />
by an applicant.”).<br />
Importantly, none of these letters<br />
embody “FDA findings.” As the Bexis post<br />
notes, the FDA considers even the most<br />
pressing letter type, the warning letter,<br />
“informal and advisory” and an “opportunity<br />
[for the manufacturer] to take voluntary<br />
and prompt corrective action…”<br />
Beck & Hermann, supra; Regulatory Procedures<br />
Manual §4-1-1 (stating same). In<br />
other words, the “FDA does not consider<br />
<strong>Warning</strong> Letters to be final agency action<br />
on which it can be sued.” Id. See also Biotics<br />
Research Corp. v. Heckler, 710 F.2d 1375,<br />
1378 (9th Cir. 1983) (noting that letters<br />
do not “constitute a final decision by the<br />
FDA”); Estee Lauder, Inc. v. FDA, 727 F.<br />
Supp. 1, 6–7 (D.D.C. 1989) (noting that the<br />
FDA letter was not the agency’s “final position.”);<br />
Profls. & Patients for Customized<br />
Care v. Shalala, 847 F. Supp. 1359, 1365<br />
(S.D. Tex. 1994) (noting that letters “merely<br />
establish a dialogue”).<br />
The Bexis post further offers several<br />
reasons why plaintiffs’ attorneys shouldn’t<br />
“drool” over these letters and punitive<br />
damages. Beck & Hermann, supra. In particular,<br />
they note that the FDA’s statutory<br />
authority for addressing alleged regulatory<br />
infraction is limited to situations involving<br />
“minor violations.” Id. (citing 21 U.S.C.<br />
§336). Further, Bexis writes:<br />
FDA’s Regulatory Procedures Manual<br />
makes pretty clear… that warning letters<br />
are “not appropriate” if alleged violations<br />
are “repeated,” “continual,”<br />
“intentional,” “flagrant,” or “willful”; or<br />
if “[t]he violation presents a reasonable<br />
possibility of injury or death.” Id. §4.1.1.<br />
What does that do for us Well, it means<br />
essentially that FDA warning letters<br />
shouldn’t have any significance in a punitive<br />
damages case. That’s because punitive<br />
damages generally are only available<br />
where the defendant’s conduct is all of<br />
the things that the FDA says aren’t properly<br />
addressed in warning letters.<br />
Beck & Hermann, supra (emphasis in<br />
original post) (citing and quoting Regulatory<br />
Procedures Manual §4.1.1, “<strong>Warning</strong><br />
Letters”).<br />
The Bexis post did offer some thoughts<br />
on the letters’ admissibility, noting character<br />
evidence and impeachment issues<br />
in particular. It then concluded by citing<br />
a few cases in which courts had excluded<br />
the letters and a few additional cases about<br />
the prejudicial potential of government<br />
reports generally. Beck & Hermann, supra;<br />
In re Viagra Prods. Liab. Litig., 658 F. Supp.<br />
2d 950, 966 (D. Minn. 2009) (excluding<br />
letter because there was no evidence that<br />
the plaintiffs or the physicians ever saw<br />
the advertising that was the subject of<br />
FDA letters); In re Seroquel Prods. Liab.<br />
Litig., No. 6:06-md-1769-Orl-22DAB, 2009<br />
U.S. Dist. Lexis 124798, at *286 (M.D. Fla.<br />
Jan. 30, 2009) (excluding letters because<br />
the “[p]lain tiffs have not shown that their<br />
prescribing physicians were exposed to<br />
the promotional materials”). In sum, the<br />
Bexis blog post was great piece, but to our<br />
eyes anyway, it did not cover the “nuts and<br />
bolts” of admissibility. That leaves us some<br />
room to construct our own arguments.<br />
A Cautionary Tale<br />
Before turning to the admissibility issues,<br />
it’s worth taking a quick detour to illustrate<br />
the peril posed by the FDA’s position on letters.<br />
According to the FDA Regulatory Procedures<br />
Manual, warning letters set forth<br />
These FDA letterscarry<br />
an aura of authority,<br />
finality, and reliability<br />
that has the potential to<br />
deceive even those trained<br />
to interpret the law.<br />
“the agency’s position on a matter.” Regulatory<br />
Procedures Manual, supra, at §4-<br />
1-1. But a manufacturer is without legal<br />
recourse to challenge those positions. Id.;<br />
Biotics Research Corp., 710 F.2d at 1378; Estee<br />
Lauder, Inc., 727 F. Supp. at 6–7. The FDA<br />
expects “voluntary and prompt corrective<br />
action.” But the FDA refuses to commit itself<br />
to any enforcement action, id., relying<br />
instead on its superior negotiating position.<br />
See, e.g., Regulatory Procedures Manual, supra,<br />
at §4-1-10 (drug and device warning letters<br />
should include statement advising the<br />
manufacturer that other federal agencies<br />
may take the warning letter into account<br />
when considering the award of contracts).<br />
If you sense that the FDA has tried to<br />
have its cake and eat it, too, you’re not alone.<br />
At least one commentator has remarked<br />
that the FDA uses these letters to impose its<br />
will on manufacturers without risking judicial<br />
review: “Most of the FDA’s decisions…<br />
escape… scrutiny, which means that nothing<br />
other than humility and self- restraint<br />
stand in the way of regulatory overreaching.”<br />
Lars Noah, Symposium: U.S. Food and<br />
Drug Regulation in Its First Century and Beyond:<br />
Article: The Little Agency That Could<br />
(Act with Indifference to Constitutional and<br />
Statutory Strictures), 93 Cornell L. Rev. 901,<br />
925 (2008). See also Lars Noah, Administra-<br />
For The Defense ■ October 2012 ■ 31
Drug and Medical Device<br />
tive Arm- Twisting in the Shadow of Congressional<br />
Delegations of Authority, 1997 Wis.<br />
L. Rev. 873. 886–87, 941 (1997) (identifying<br />
the coupling of warning letters with threats<br />
to contracts with the federal government,<br />
“the single largest purchaser of prescription<br />
drugs in this country,” as a practice<br />
that “poses serious concerns about sacrificing<br />
fairness and accountability”) (citations<br />
To a plaintiff’s attorney<br />
an FDA letter is conclusive<br />
proof of a manufacturer’s<br />
wrongful conduct.<br />
32 ■ For The Defense ■ October 2012<br />
omitted). And because the FDA’s positions<br />
escape judicial scrutiny, the letters pose<br />
unique dangers to manufacturers—especially<br />
when the judiciary fails to scrutinize<br />
the scant judicial scrutiny.<br />
In State ex rel. McGraw v. Johnson &<br />
Johnson, 226 W. Va. 677, 704 S.E.2d 677<br />
(2010), the state of West Virginia sued<br />
Johnson & Johnson and Janssen Pharmaceutica<br />
Products, L.P., for alleged violations<br />
of that state’s consumer protection<br />
act based on those companies’ promotional<br />
activities aimed toward health-care<br />
providers. The FDA had issued Janssen two<br />
warning letters regarding its communications<br />
with prescribers about two separate<br />
medications. Id. at 682, 683. In response to<br />
each warning letter, Janssen had provided<br />
to the FDA detailed, scientifically supported<br />
rebuttals to the FDA’s position, but<br />
it also voluntarily complied with the FDA’s<br />
request for corrective actions. Id. at 682,<br />
683. After Janssen completed its corrective<br />
actions, the FDA closed the two matters<br />
without undertaking any enforcement<br />
action. Id. at 682, 683. Fast- forward to West<br />
Virginia’s consumer protection lawsuit. On<br />
the state’s motion, the trial court concluded<br />
that (1) the warning letters evidenced the<br />
FDA’s determination that Janssen’s communications<br />
were false and misleading;<br />
(2) Janssen waived judicial review by failing<br />
to formally contest the FDA’s determination;<br />
and (3) Janssen was collaterally<br />
estopped from disputing that its communications<br />
were false and misleading in the<br />
state’s action against it. Id. at 687.<br />
Fortunately, our cautionary tale has a<br />
happy ending: the Supreme Court of West<br />
Virginia reversed. See id. at 689 (holding that<br />
FDA warning letters do not represent final<br />
agency action and are not adjudicative in that<br />
they do not provide manufacturers with due<br />
process). But the case still teaches that these<br />
FDA letters carry an aura of authority, finality,<br />
and reliability that has the potential to deceive<br />
even those trained to interpret the law.<br />
<strong>Should</strong>n’t Evidence<br />
Evince Something<br />
As we alluded to in our introduction, few<br />
things swell a plaintiff’s attorney’s heart as<br />
does an FDA letter admonishing a manufacturer.<br />
Similar to the West Virginia<br />
trial court judge in McGraw, to a plaintiff’s<br />
attorney an FDA letter is conclusive proof<br />
of a manufacturer’s wrongful conduct. But,<br />
to be blunt, that position is wrong. <strong>Courts</strong><br />
not only should know that the letters are<br />
not conclusive evidence, but they should<br />
not even admit them as evidence.<br />
This discussion by necessity is abstract<br />
because courts assess relevance in light of a<br />
case’s facts and claims, and our article has<br />
neither facts nor a particular jurisdiction’s<br />
law. However, even without delving into the<br />
reasons that an alleged regulatory transgression<br />
may be irrelevant—and there are<br />
many—the jury simply should not consider<br />
an FDA letter. FDA letters engender undue<br />
prejudice and confusion, present inadmissible<br />
hearsay, and offer only the inadmissible<br />
opinions of their authors.<br />
Central to those arguments is the fact that<br />
the FDA itself accords the letters very little<br />
procedural substance. As mentioned earlier,<br />
the FDA treats even warning letters as intermediate<br />
proclamations. This means, that<br />
when a manufacturer that disagrees with<br />
FDA opinions sues the FDA, the FDA contests<br />
the manufacturer’s standing because<br />
“<strong>Warning</strong> Letters fall far short of establishing<br />
a real and immediate threat that FDA<br />
will institute an enforcement action against<br />
them,” and impose no “hardship” on a manufacturer<br />
greater than being “confronted by<br />
an interpretation of a law it dislikes.” FDA<br />
Motion to Dismiss, Holistic Candlers and<br />
Consumer Association v. FDA, No. 10-cv-582<br />
(RJL), 2010 U.S. Dist. Ct. Motions 467839, at<br />
*28–*29 (D.D.C. June 10, 2010) (internal quotation<br />
marks and citations omitted). Indeed,<br />
the FDA admits that even warning letters do<br />
not “represent the consummation of FDA’s<br />
process,” nor “determine any legal rights or<br />
obligations.” FDA Motion to Dismiss, Cody<br />
Labs. v. Sebelius, No. 10-CV-00147-ABJ, 2010<br />
U.S. Dist. Ct. Motions 329611, at *28–*29 (D.<br />
Wyo. July 22, 2010).<br />
The FDA necessarily takes those positions<br />
regarding the letters because they are<br />
not formal advisory opinions. No doubt in<br />
part because the FDA employs more than<br />
11,000 people, many of whom are in constant<br />
communication with public and private<br />
institutions and individuals, the FDA<br />
protects itself from being bound to its<br />
employees’ judgments on specific positions<br />
or actions by regulation:<br />
A statement or advice given by an FDA<br />
employee orally, or given in writing … is<br />
an informal communication that represents<br />
the best judgment of that employee<br />
at that time but does not constitute an<br />
advisory opinion [a term of art under<br />
the code], does not necessarily represent<br />
the formal position of FDA, and does not<br />
bind or otherwise obligate or commit the<br />
agency to the views expressed.<br />
21 C.F.R. §10.85(k) (emphasis added).<br />
While the FDA may undertake enforcement<br />
actions during or after sending a<br />
warning letter, as outlined in the Regulatory<br />
Procedures Manual §4-1-1, it rarely<br />
undertakes enforcement actions to force<br />
corrective actions. See U.S. Food and Drug<br />
Admin., FDA Enforcement Story, Ch. 10<br />
(2009), available at http://www.fda.gov/ICECI/<br />
EnforcementActions/EnforcementStory/default.htm<br />
(last visited Sept. 7, 2012). In 2008, the most<br />
recent year for which the FDA has published<br />
statistics, the FDA issued 445 warning<br />
letters but filed only eight seizures and<br />
five injunctions. Id. But even in the rare<br />
instances that the FDA actually institutes<br />
enforcement actions regarding labeling—<br />
and thus undertakes to prove the positions<br />
in its letters, the “FDA’s belief that a<br />
drug is misbranded is not conclusive,” and<br />
the issue of misbranding is one for a jury.<br />
Wyeth v. Levine, 555 U.S. 555 (2009).<br />
Even if a jury is entitled to hear the<br />
collateral issue of regulatory infractions,<br />
the letters themselves are unduly prejudicial,<br />
misleading, confusing, and timeconsuming<br />
on that issue. As we suggested<br />
at the beginning of this article—and as
alluded in the Bexis post—“there is a real<br />
possibility that the jury [will] give undue<br />
deference to such evidence.” Denny v.<br />
Hutchinson Sales Corp., 649 F.2d 816, 822<br />
(10th Cir. 1981) (excluding a government<br />
report). See also Fowler v. Firestone Tire<br />
& Rubber Co., 92 F.R.D. 1, 2 (N.D. Miss.<br />
1980) (excluding a National Highway Traffic<br />
Safety Administration report under Fed.<br />
R. Evid. 403 because of danger that the<br />
jury would “give the evidence inordinate<br />
weight”). Educating jurors to assign proper<br />
weight to the letters can only “protract an<br />
already prolonged trial with an inquiry<br />
into collateral issues regarding the accuracy<br />
of the [letter] and the methods used<br />
in its compilation.” City of New York v. Pullman,<br />
Inc., 662 F.2d 910, 915 (2d Cir. 1981).<br />
That danger of confusion, the waste of<br />
time, and the prejudice is not speculative.<br />
Returning for the moment to McGraw, the<br />
case in which the trial court collaterally<br />
estopped the manufacturer from contesting<br />
that its communications were false and<br />
misleading, the trial court judge and state’s<br />
attorneys gave the FDA letter undue weight<br />
even after examining the law. Lay jurors<br />
confronting FDA regulations surely will<br />
have even more difficulty according such<br />
a letter proper weight. And even if a manufacturer<br />
could educate jurors to pierce<br />
their unquestioning reliance on the letter’s<br />
author’s opinions, the time is unwarranted<br />
when a jury would still need to decide, in<br />
the first instance, whether the manufacturer<br />
committed a regulatory infraction.<br />
Arguments on behalf of manufacturers<br />
for excluding FDA letters under Federal Rule<br />
of Evidence 403 and state equivalents are<br />
strengthened by voluntary “corrective” actions<br />
in response to receipt of letters. Some<br />
jurisdictions may allow a manufacturer to<br />
exclude the episode as a subsequent remedial<br />
measure under Federal Rule of Evidence 407.<br />
But even when that rule does not apply, you<br />
may still vindicate one of its purpose by relying<br />
on Federal Rule of Evidence 403. As one<br />
court has concluded, “the best rationale for<br />
the application of the [subsequent remedial<br />
measure] rule is that… juries… may overreact”<br />
when faced with evidence of corrective<br />
actions. Krause v. American Aerolights, Inc.,<br />
307 Or. 52, 59, 762 P.2d 1011 (1988) (inference<br />
of fault from corrective action is a “fallacy”).<br />
Additionally, the letters amount to inadmissible<br />
hearsay. Even the sweep of the public<br />
records exception is not broad enough to<br />
encompass FDA letters. Although the public<br />
records exception allows admission of “conclusion<br />
or opinion” under its “factual findings”<br />
prong, articulated in Beech Aircraft<br />
Corp. v. Rainey, 488 U.S. 153, 164 (1988),<br />
the exception does not reach “tentative or<br />
interim reports subject to revision and review.”<br />
Tool v. McClintock, 999 F.2d 1430,<br />
1434–35 (11th Cir. 1993) (holding that proposed<br />
rule published in Federal Register<br />
regarding pre- market approval for siliconegel<br />
filled breast prostheses was not admissible).<br />
And FDA letters are subject to review<br />
by the issuing employee’s superiors merely<br />
upon request. See U.S. Food and Drug Admin.,<br />
Guidance for Industry—Formal Dispute<br />
Resolution: Appeals above the Division<br />
Level, at 1 (Feb. 2000), available at http://<br />
www.fda.gov/downloads/Drugs/GuidanceComplianc<br />
eRegulatoryInformation/ Guidances/ucm079743.pdf<br />
(last visited Sept. 7, 2012) (describing same).<br />
Further, pure legal conclusions—that is, one<br />
of the objects of plaintiffs’ attorneys’ desire<br />
that they seek from FDA letters—do not fall<br />
within the scope of the exception. Sullivan<br />
v. Dollar Tree Stores, Inc., 623 F.3d 770, 777<br />
(9th Cir. 2010) (“Pure legal conclusions are<br />
not admissible as factual findings.”); Hines<br />
v. Brandon Steel Decks, Inc., 886 F.2d 299,<br />
302 (11th Cir. 1989) (“Rule 803(8)(C) does<br />
not provide for the admissibility of the legal<br />
conclusions contained within an otherwise<br />
admissible public report.”).<br />
Finally, even assuming that an FDA letter<br />
could clear the other evidentiary hurdles,<br />
the letter is still, at most, the expression of<br />
the “opinions of the FDA officials who wrote<br />
the letters,” which are not “official position[s]<br />
concerning the labeling of [a manufacturer’s]<br />
products to which [a] court can defer.”<br />
Schering- Plough Healthcare Prod., Inc. v.<br />
Schwarz Pharma, Inc., 547 F. Supp. 2d 939,<br />
946 (E.D. Wis. 2008) (emphasis added). See<br />
also Biotics Research Corp., 710 F.2d at 1378<br />
(“The letters… contain conclusions by subordinate<br />
officials of the FDA… [but] do not<br />
commit the FDA to enforcement action.”).<br />
Those opinions do not belong before a jury<br />
unless you can subject the author to crossexamination.<br />
See Bryan v. John Bean Div.<br />
of FMC Corp., 566 F.2d 541, 546 (5th Cir.<br />
1978) (“[T]o admit the hearsay opinion of<br />
an expert not subject to cross- examination<br />
goes against the natural reticence of courts<br />
to permit expert opinion unless the expert<br />
has been qualified before the jury to render<br />
an opinion.”). In fact, even if you could test<br />
those opinions through cross- examination,<br />
they would still improperly “invade the<br />
province of the court to determine the applicable<br />
law and to instruct the jury as to<br />
that law” and, therefore, “could not have<br />
been helpful to the jury in carrying out its<br />
legitimate functions.” United States v. Scop,<br />
FDA lettersengender<br />
undue prejudice and<br />
confusion, present<br />
inadmissible hearsay, and<br />
offer only the inadmissible<br />
opinions of their authors.<br />
846 F.2d 135, 139, modified, 856 F.2d 5 (2d<br />
Cir. 1988) (issuing the holding, in part, because<br />
witness repeatedly tracked the exact<br />
language of the statutes and regulations<br />
which the defendant had allegedly violated<br />
and used judicially defined terms such as<br />
“manipulation,” “scheme to defraud,” and<br />
“fraud’) (internal quotation marks and citations<br />
omitted).<br />
A Final Thought on Titles<br />
FDA letters are not the consummation of the<br />
FDA process. They do not determine any legal<br />
rights or obligations. Upon receipt of a letter,<br />
a manufacturer is without formal legal<br />
recourse to challenge its author’s opinions.<br />
But these letters do not have titles that make<br />
their limitations apparent to the uninformed<br />
eyes of jurors and judges. We’d like the FDA<br />
to use more descriptive titles for its letters. To<br />
invoke former presidential candidate George<br />
McGovern’s comment, “[t]he longer the title,<br />
the less important the job.” Somehow, it<br />
seems that plaintiffs’ attorneys would greet<br />
FDA letters with less relish if they were titled,<br />
“Letter containing its author’s interim opinion<br />
about a minor violation and which does<br />
not commit FDA to any enforcement action,<br />
even if voluntary corrective actions are not<br />
undertaken,” assuming that a judge would<br />
admit such a letter in the first place.<br />
For The Defense ■ October 2012 ■ 33
Drug and Medical Device<br />
Anomalies and<br />
Implications<br />
By Ralph S. Tyler, Thomasina<br />
E. Poirot, Andrea S. Andrews<br />
and Bruce R. Parker<br />
The federal government<br />
and the medical products<br />
industry have been at war<br />
over off-label promotion<br />
long enough. It is time<br />
to find a solution.<br />
The First<br />
Amendment<br />
and “Off-Label”<br />
Promotion<br />
The now quite familiar headline almost screams: “Drug<br />
Company X Pays Government Many Millions [even billions]<br />
to Settle Off- Label Drug Promotion Case.” Most of<br />
the media stories that accompany such headlines share<br />
certain common themes. First, the government’s<br />
ability to secure a settlement means,<br />
of course, that the government extracted<br />
this large sum from Drug Company X<br />
without the government’s substantiating<br />
at trial, let alone on appeal, the validity of<br />
the underlying legal theory or theories of<br />
the case, and also without the government’s<br />
persuading a trier of fact that its version of<br />
the facts was more probable than whatever<br />
the company’s defenses might have been.<br />
And second, accounts of such settlements<br />
rarely assert that the settling drug<br />
company’s troubles arose because the<br />
company made false or misleading statements<br />
about one of the company’s drugs.<br />
Instead, Drug Company X found itself in<br />
the crosshairs because it made statements<br />
about its drug that were at odds with the<br />
drug’s FDA- approved uses (indications)<br />
and FDA- approved labeling, even if the<br />
statements were factually true and not misleading.<br />
Attorneys involved in representing<br />
companies in the pharmaceutical or<br />
medical device industries, whether as inhouse<br />
counsel or as outside counsel, know<br />
that truthful, non- misleading statements<br />
about uses beyond those that the FDA has<br />
approved and as stated on the label can<br />
place a company in the unenviable position<br />
of being, like Drug Company X, the target<br />
of a False Claims Act case.<br />
The focus of this article is the First<br />
Amendment principles involved in offlabel<br />
promotion cases and some of the<br />
anomalies and implications of those cases.<br />
The anomalies are striking. It is, for example,<br />
not intuitive that it is permissible, if<br />
not required as a matter of the standard<br />
of medical care, for doctors to prescribe<br />
a medication “off- label” (that is, for uses<br />
beyond those that the FDA has approved<br />
■ Ralph S. Tyler and Bruce R. Parker are partners, and Andrea S. Andrews and Thomasina E.<br />
Poirot are associates, of Venable LLP in Baltimore. Mr. Tyler’s practice<br />
concentrates on state and federal regulatory issues. He was<br />
formerly chief counsel for the FDA and held this position while the<br />
Allergan case was pending. Mr. Parker’s practice emphasizes pharmaceutical<br />
and medical devices litigation. He is a past member of<br />
the <strong>DRI</strong> Board of Directors. Ms. Andrews’ and Ms. Poirot’s practices<br />
focus on medical products liability and toxic tort litigation.<br />
34 ■ For The Defense ■ October 2012
as stated on the drug’s label) while, at<br />
the same time, it is impermissible for the<br />
drug’s manufacturer to promote truthfully<br />
the fact that doctors are using the drug offlabel.<br />
Equally peculiar is the fact that it is<br />
entirely permissible for the doctor to promote<br />
his or her off- label use of the drug<br />
(assuming that the doctor is not connected<br />
to or compensated in any way by the drug<br />
company), but, again, the drug company is<br />
precluded from making the same promotional<br />
statements.<br />
The Tension Between the First<br />
Amendment and the Regulation<br />
of Medical Products<br />
An open marketplace of free expression,<br />
with a high tolerance for controversial<br />
ideas, is the core of the First Amendment.<br />
That open market First Amendment framework<br />
is at odds, however, with the tightly<br />
regulated medical product marketplace<br />
(when the term “medical products” is used<br />
in this article, it includes pharmaceuticals<br />
and medical devices). The regulated medical<br />
product marketplace has little tolerance<br />
for commercial speech promoting nongovernmentally<br />
approved uses of a medical<br />
product.<br />
The strictly enforced premise underlying<br />
the First Amendment open marketplace is<br />
that government is precluded from picking<br />
and choosing between the ideas it likes<br />
and the ones it does not. The rationale for<br />
the regulated drug product marketplace,<br />
in sharp contrast to this First Amendment<br />
model, is that only government is competent<br />
to determine which uses of a product<br />
are safe and effective (and thus approved)<br />
and, therefore, government is entitled to<br />
limit economically motivated speech to promote<br />
non- governmentally approved uses.<br />
This clash between First Amendment<br />
and regulatory principles gets played out<br />
in its most graphic (and for industry most<br />
expensive) form because of the close and<br />
inevitable interplay between (a) the government’s<br />
medical product approval/labeling<br />
scheme, (b) the government’s involvement<br />
in paying billions of dollars annually for<br />
health care through Medicare and Medicaid,<br />
and (c) the False Claims Act (FCA).<br />
The government’s position in FCA cases is<br />
that if the sales personnel, for example, of<br />
a medical products company promote the<br />
off- label use of one of the company’s FDA-<br />
regulated products by touting truthfully<br />
off- label uses of the product and if the government<br />
pays for such off- label uses, then<br />
the government has paid a “false claim.”<br />
The statutory penalties for violating the<br />
FCA are stiff. See 31 U.S.C. §3729 (a)(1)(g).<br />
A fair reading of the extraordinarily rich<br />
body of First Amendment case law casts a<br />
long shadow over the government’s theory<br />
in off- label promotion cases in which<br />
truthful statements trigger massive liability.<br />
As the large off- label FCA settlements<br />
confirm, however, the availability of<br />
strong defenses has seemingly made little<br />
difference to either the government or the<br />
companies it has pursued.<br />
For the government, the incentives to<br />
bring these cases include the prospect of<br />
generating significant revenue all in the<br />
name of “fighting healthcare fraud.” For<br />
industry, the incentives to settle and not to<br />
put the government’s legal and factual theories<br />
to the test of full judicial scrutiny include<br />
avoiding the risk of indictment and<br />
avoiding the risk of exclusion from participation<br />
in receiving federal healthcare funds.<br />
A criminal indictment is a very heavy burden<br />
for any company, particularly a publicly<br />
traded company, and exclusion from<br />
the Medicare/Medicaid programs is effectively<br />
the economic death sentence.<br />
There are, however, some contrary<br />
rumblings below the radar of the highly<br />
publicized settlements. These rumblings<br />
involve cases in which the relevant First<br />
Amendment- based arguments have been<br />
advanced. This article will review two of<br />
those cases. From there, we will examine<br />
how these off- label issues impact product<br />
liability tort cases. And finally, we will propose<br />
an approach that seeks to preserve the<br />
integrity of the government’s drug labeling<br />
scheme while also respecting and preserving<br />
the First Amendment right of medical<br />
product companies to make truthful statements<br />
about their products.<br />
The Allergan case<br />
Allergan, Inc. v. United States, Case No.<br />
1:09-cv-01879 (D.D.C.) (“Allergan”), was a<br />
civil declaratory judgment case in which<br />
the plaintiff, a pharmaceutical company,<br />
challenged FDA’s prohibition of truthful,<br />
non- misleading off- label promotion<br />
of drugs. After extensive briefing of crossmotions<br />
for summary judgment, the parties<br />
agreed to dismiss the case as part of a<br />
larger settlement between Allergan and the<br />
government. The arguments in the case are<br />
nevertheless instructive.<br />
Allergan’s Allegations and Claims<br />
Allergan’s products include Botox (onabotulinumotoxinA),<br />
a product that the<br />
FDA has approved for several uses and for<br />
which FDA has approved labeling consistent<br />
with those uses. Allergan alleged that<br />
“[a]l though many health care professionals<br />
frequently use Botox® to treat on- label<br />
conditions, health care professionals use<br />
Botox® even more often to treat off- label conditions.”<br />
Complaint at 55, Allergan, Inc. v.<br />
United States, No. 1:09-cv-01879 (D.D.C.<br />
Oct. 1, 2009) (emphasis added). A significant<br />
example of this “more often” off- label<br />
use is treatment for “various conditions<br />
associated with spasticity, such as poststroke<br />
spasticity in adults and lower-limb<br />
spasticity in pediatric patients with cerebral<br />
palsy.” Id. at 56.<br />
Allergan alleged that it wanted to communicate<br />
with health care professionals<br />
(not directly to consumers) medical information,<br />
including safety and dosage information,<br />
which the company had about the<br />
off- label use of Botox to treat spasticity. Id. at<br />
76–86. Allergan further alleged that it was<br />
afraid of the consequences were it to engage<br />
in its contemplated “wide- ranging communication<br />
plan.” Id. at 83. Specifically, Allergan<br />
alleged that “its planned truthful,<br />
non- misleading scientific speech to physicians<br />
about the use of Botox® to treat spasticity<br />
would lead to criminal prosecution<br />
and severe criminal penalties.” Id. at 88.<br />
Allergan’s challenge focused on FDA’s<br />
labeling and advertising regulations (21<br />
C.F.R. §202.1). Allergan challenged as over<br />
broad and thus overly restrictive of a drug<br />
manufacturer’s speech FDA’s interpretation<br />
of “labeling” as encompassing all materials<br />
distributed and supplied by the manufacturer<br />
containing drug information.<br />
Allergan also challenged as facially invalid<br />
the FDA drug advertising regulation that<br />
provides that a dug is “misbranded” if an<br />
advertisement for it “suggest[s] any use<br />
that is not in the labeling accepted in [the<br />
drug’s] approved new-drug application.” 21<br />
C.F.R. §202.1(e)(4)(i)(a).<br />
The Food, Drug, and Cosmetic Act<br />
(FDCA) makes it unlawful to introduce a<br />
For The Defense ■ October 2012 ■ 35
Drug and Medical Device<br />
drug into interstate commerce for an intended<br />
use absent FDA approval. Allergan<br />
contended that “[t]he FDCA and the FDA’s<br />
regulations prohibit Allergan from speaking<br />
truthfully to health care professionals<br />
about medical issues associated with the offlabel<br />
use of Botox®.” Mem. Supp. Mot. Prelim.<br />
Inj. at 19, Allergan, Inc. v. United States,<br />
No. 1:09-cv-01879 (D.D.C. Oct. 1, 2009).<br />
That contention is based on the way in<br />
which the statute and regulations link a<br />
drug’s approval for specific “indications”<br />
(meaning uses for which the drug has been<br />
proven to be safe and effective) and drug<br />
“labeling” (which FDA interprets to include<br />
advertising). In Allergan’s view, it was unconstitutionally<br />
at risk of prosecution for<br />
“misbranding” by distributing its drug if its<br />
“labeling,” construing that term as Allergan<br />
alleged FDA does, contains a suggestion of<br />
off- label use or adequate directions for use.<br />
Allergan’s First Amendment analysis<br />
involved three steps: (1) FDA’s rules “trigger<br />
First Amendment scrutiny because they are<br />
irretrievably content- based”; (2) “off- label<br />
promotion is protected speech because offlabel<br />
use is lawful”; and (3) “although the<br />
Government has significant interests that<br />
could justify some restrictions of off- label<br />
promotional practices, there is no need<br />
for the Government to choose the drastic<br />
means reflected in FDA’s regulations: the<br />
blanket suppression of off- label speech.”<br />
Mem. Supp. Cross-Mot. Summ. J. and Opp.<br />
Mot. Dismiss or Summ. J. at 18–19, Allergan,<br />
Inc. v. United States, No. 1:09-cv-01879<br />
(D.D.C. Jan. 15, 2010).<br />
36 ■ For The Defense ■ October 2012<br />
The Government’s Response<br />
The government’s First Amendment<br />
defense largely rested on the idea that offlabel<br />
promotion enjoys no First Amendment<br />
protection because the sale of a drug<br />
for an unapproved use is unlawful. See,<br />
e.g., Cent. Hudson Gas & Elec. Corp. v. Pub.<br />
Serv. Comm’n, 447 U.S. 557, 563–64 (1980)<br />
(“[T]here can be no constitutional objection<br />
to the suppression of commercial messages<br />
that do not accurately inform the<br />
public about lawful activity. The government<br />
may ban forms of communication<br />
more likely to deceive the public than to<br />
inform it, or commercial speech related to<br />
illegal activity.”) (citations omitted).<br />
The government argued that Allergan’s<br />
lawsuit was “a frontal assault on the framework<br />
for new drug approval” and that Allergan<br />
was seeking a regulatory regime “in<br />
which FDA’s approval of a drug for one use<br />
would free the manufacturer to promote<br />
the drug for other, unapproved uses without<br />
seeking FDA approval of a drug for such<br />
other uses and without conducting adequate<br />
clinical trials to determine whether<br />
the drug is safe and effective for the unapproved<br />
uses.” Mem. Supp. Mot. Summ. J. at<br />
16, Allergan, Inc. v. United States, No. 1:09-<br />
cv-01879 (D.D.C. Jan. 11, 2010).<br />
The government did not dispute that<br />
FDA treats “advertising or promotional<br />
labeling that expressly or implicitly promotes<br />
a particular use” of a drug “as evidence<br />
that the use is intended.” Id. at 19.<br />
Further, if a drug manufacturer’s “speech<br />
demonstrates, either by itself or in conjunction<br />
with the other circumstances<br />
surrounding the distribution of the drug,<br />
that an unapproved [off- label] use is an<br />
intended use, the manufacturer may not<br />
distribute the drug for that use” without<br />
obtaining FDA’s approval. Id.<br />
In the government’s view, the lawfulness<br />
of a drug manufacturer’s action turns<br />
on whether the activity is “promotional.” If<br />
the manufacturer is “promoting” an unapproved<br />
off- label use of the drug, that is prohibited.<br />
If, however, the manufacturer is<br />
providing health care professionals with<br />
“non- promotional” information about the<br />
drug in an article in a medical journal,<br />
for example, that is permissible, arguably<br />
encouraged.<br />
United States v. Caronia<br />
United States v. Caronia, 576 F. Supp. 2d<br />
385 (E.D.N.Y. 2008), appeal pending No.<br />
09-5006 (2d Cir. 2010), is a criminal case<br />
in which the defendant pharmaceutical<br />
sales representative Caronia challenged on<br />
First Amendment grounds his indictment<br />
for violating the misbranding provisions<br />
of the FDCA as a result of allegedly promoting<br />
the off- label use of a drug (Xyrem).<br />
The district court denied Caronia’s motion<br />
to dismiss the indictment in a thoughtful<br />
opinion that recognized the importance of<br />
the issues. See id. at 393 (“Caronia’s constitutional<br />
attack calls into question America’s<br />
regulatory regime for the approval and<br />
marketing of prescription drugs.”).<br />
The court in Caronia ruled that “promotion<br />
of off- label usage does not promote<br />
unlawful activity [and]… [p]romotion of<br />
off- label uses is not inherently misleading<br />
simply because the use is off- label.” Id. at<br />
397 (emphasis in original) (citations and<br />
quotation omitted). Nevertheless, the court<br />
denied Caronia’s motion to dismiss, concluding<br />
that the government’s interest in<br />
restricting a manufacturer’s promotion of<br />
off- label uses is substantial, restricting promotion<br />
of off- label uses directly advances<br />
this interest, and the FDCA’s restrictions<br />
are no more extensive than necessary to<br />
advance this interest. Id. at 398–99.<br />
After the district court’s decision in<br />
Caronia, but while Caronia’s appeal was<br />
pending in the Second Circuit, the Supreme<br />
Court decided Sorrell v. IMS Health Inc.,<br />
131 S. Ct. 2653, 2659 (2011) (“Speech in aid<br />
of pharmaceutical marketing… is a form<br />
of expression protected by the Free Speech<br />
Clause of the First Amendment.”), a case<br />
that certainly bolsters the defense’s argument<br />
on appeal. Sorrell is discussed further<br />
below.<br />
Off-label Claims in Product<br />
Liability Cases<br />
The government is not alone in seeking<br />
to impose liability on medical products<br />
companies based upon claims of off- label<br />
promotion. Plaintiffs in medical products<br />
tort liability cases often make claims<br />
based on off- label promotion claims. Those<br />
claims rest on various theories, including<br />
negligence, negligence per se, breach of<br />
warranty, strict liability, misrepresentation,<br />
fraud, and unfair or deceptive trade<br />
practices.<br />
The typical complaint alleging off- label<br />
promotion and predicating claims on those<br />
promotional statements will allege that<br />
the statements were false, untrue, misleading,<br />
or fraudulent. While a defendant<br />
may have a First Amendment defense in<br />
such a case, that defense plainly cannot<br />
be asserted successfully at the motion to<br />
dismiss stage when the allegations of the<br />
complaint are taken as true. See Thompson<br />
v. W. States Med. Ctr., 535 U.S. 357, 367<br />
(2002) (no First Amendment protection for<br />
speech that is misleading). In such a case,<br />
the defendant would want to raise the First<br />
Amendment as an affirmative defense in<br />
its answer, conduct fact discovery to establish<br />
the truthfulness of the off- label promotional<br />
statements, and then in a motion for
summary judgment argue that the claim is<br />
barred by the First Amendment.<br />
If a plaintiff were to allege that he or she<br />
was injured by, for example, the consumption<br />
of a drug for a prescribed off- label use<br />
and that the doctor prescribed the drug in<br />
response to a pharmaceutical sales representative’s<br />
truthful, non- misleading promotional<br />
statements about the off- label<br />
use, then a First Amendment defense could<br />
be raised at the motion to dismiss stage.<br />
Whether at the motion to dismiss stage<br />
or later in the case, the first hurdle that must<br />
be overcome is the “state action doctrine.”<br />
As is well understood, the Bill of Rights,<br />
including the First Amendment, limits the<br />
powers of the federal government (and, by<br />
incorporation, the powers of state governments),<br />
not private parties; therefore, to implicate<br />
the First Amendment, there must<br />
be sufficient governmental action. There is<br />
authority for the proposition that the imposition<br />
of tort liability and filing in the<br />
state or federal judicial system is constitutionally<br />
sufficient “state action.” See In re<br />
Factor VIII or IX Concentrate Blood Prods.<br />
Litig., 25 F. Supp. 2d 837, 840–41 (N.D. Ill.<br />
1998) (“The Supreme Court has established<br />
that the imposition of tort liability constitutes<br />
state action which implicates the First<br />
and Fourteenth Amendments… Nothing<br />
in plaintiff’s briefs suggests that imposing<br />
tort liability would not amount to governmental<br />
action.”) (citing New York Times v.<br />
Sullivan, 376 U.S. 254 (1964)). Assuming<br />
that the requisite “state action” nexus can<br />
be established, the question then is whether<br />
the plaintiff’s claim is barred by the First<br />
Amendment.<br />
The court will first determine if the<br />
speech is commercial, utilizing a threefactor<br />
test: (1) whether the expression is an<br />
advertisement; (2) whether it refers to a specific<br />
product and (3) whether the speaker<br />
has an economic motivation for speaking.<br />
The Caronia court determined that off- label<br />
promotional activities were considered to<br />
be speech. From there, the court will utilize<br />
the reminder of the Central Hudson<br />
balancing test to weigh the competing interests<br />
of the commercial speakers versus<br />
the government’s interest in regulation. The<br />
“government interest” (here meaning the<br />
interest being advanced by the plaintiff’s<br />
claim) must be substantial, the restriction<br />
imposed as a result of the plaintiff’s claim<br />
must directly advance this “governmental<br />
interest,” and the restriction may not<br />
be more extensive than necessary to serve<br />
that interest (i.e., that there is a reasonable<br />
fit between the means and ends of the commercial<br />
speech restriction). Thompson v. W.<br />
States Med. Ctr., 535 U.S. at 367 (citing Cent.<br />
Hudson Gas & Elec. Corp., 447 U.S. at 566)).<br />
The significance of the “governmental<br />
interest” will be weighed in light of the Su-<br />
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For The Defense ■ October 2012 ■ 37
Drug and Medical Device<br />
preme Court’s analysis last Term in Sorrell<br />
v. IMS Health, Inc., 131 S. Ct. 2653 (2011).<br />
In Sorrell, the Court invalidated a Vermont<br />
law involving the sale and use of pharmacy<br />
records. Under the Vermont law, “the information<br />
may not be sold, disclosed by pharmacies<br />
for marketing purposes, or used for<br />
marketing purposes, or used for marketing<br />
by pharmaceutical manufacturers.” Id.<br />
at 2659. The state’s conceded significant interest<br />
in protecting privacy interests and in<br />
protecting patients from prescription decisions<br />
not in the patients’ best interest were<br />
not sufficient to sustain the law. The Sorrell<br />
Court made clear the heavy burden that<br />
the Vermont law faced and, by inference,<br />
the heavy burden of “heightened judicial<br />
scrutiny” faced by other laws restricting<br />
the speech of pharmaceutical manufacturers.<br />
Id. Civil tort claims based on truthful,<br />
non- misleading off label promotion claims<br />
should receive similar scrutiny, despite<br />
claims about the significance of the interests<br />
that the plaintiffs are seeking to protect.<br />
Just as Vermont’s law allowed pharmacies<br />
to share prescriber information<br />
with any entity except for marketing purposes,<br />
off- label promotion claims restrict<br />
(prohibit) pharmaceutical marketing with<br />
regard to off- label uses. The Supreme Court<br />
acknowledged that Vermont’s law has the<br />
effect of preventing company sales representatives<br />
from communicating with physicians<br />
and providing them with effective<br />
information. The Court said, “the State<br />
may not seek to remove a popular but disfavored<br />
product from the marketplace by<br />
prohibiting truthful, nonmisleading advertisements<br />
that contain impressive endorsements<br />
or catchy jingles. That the State finds<br />
expression too persuasive does not permit<br />
it to quiet the speech or to burden its messengers.”<br />
Id. at 2671.<br />
Prohibitions of off- label promotion are<br />
defended in part on the ground that the<br />
government is protecting the health of the<br />
public by preventing biased information<br />
from entering the hands of physicians and<br />
influencing their prescribing practices.<br />
Certainly a tort plaintiff would follow this<br />
line of argument, contending that allowing<br />
off- label promotion is likely to result in<br />
bad treatment decisions because, for example,<br />
doctors will be acting in reliance upon<br />
incomplete or inaccurate information. Vermont’s<br />
version of that argument in Sorrell<br />
38 ■ For The Defense ■ October 2012<br />
did not fare well in the Supreme Court: “if<br />
pharmaceutical marketing affects treatment<br />
decisions, it does so because doctors<br />
find it persuasive. Absent circumstances<br />
far from those presented here, the fear that<br />
speech might persuade provides no lawful<br />
basis for quieting it.” Id. at 2670.<br />
Arguably the best case for raising a successful<br />
First Amendment defense is when<br />
the off- label use of a drug or device is common<br />
(if not the standard of care), and when<br />
the government reimburses off- label use<br />
of a drug through federally funded programs<br />
such as Medicare or Medicaid. The<br />
Medicare statute permits reimbursement<br />
for expenses that are “reasonable and necessary<br />
for the diagnosis or treatment of<br />
an illness or injury.” 42 U.S.C. 1395y(a)(1)<br />
(A). The Medicare Benefit Policy Manual<br />
instructs that the Medicare contractors<br />
must determine the use to be “medically<br />
accepted, taking into consideration the<br />
major drug compendia, authoritative medical<br />
literature and/or accepted standards of<br />
medical practice.” Medicare Benefit Manual<br />
50.4.2. This manual should be consulted<br />
when defending these tort claims to<br />
determine if the product or device at issue<br />
is mandated to be reimbursed under the<br />
government’s healthcare system.<br />
Perhaps the greatest challenge in disposing<br />
of an off- label promotion claim in<br />
a tort case on First Amendment grounds<br />
is the difficulty of getting a “clean case” in<br />
which there is no factual dispute regarding<br />
the truthfulness of the allegedly offending<br />
off- label statements. That will be a rare case.<br />
The more common pattern will be that even<br />
post- discovery there will be factual ambiguity<br />
surrounding the truthfulness of the<br />
off- label statements. Were full disclosures<br />
made, for example, regarding relevant risk<br />
information Recollections and testimony<br />
are almost certain to vary on these types of<br />
issues. In that case, the jury will be left with<br />
resolving the factual dispute and the manufacturer<br />
would seek a First Amendment jury<br />
instruction to the effect that if the jury finds<br />
that the off- label statements were truthful<br />
and not misleading, then the defendant is<br />
entitled to judgment on the claim.<br />
Resolving the Conflicting<br />
and Shared Interests of the<br />
Government and Industry<br />
What emerges from this brief review of<br />
both governmental and private off- label<br />
litigation is that litigation is unlikely to<br />
resolve these issues any time soon. Litigation<br />
is a notoriously blunt and highly<br />
imperfect instrument for resolving important<br />
policy issues. Moreover, as noted at the<br />
outset, companies have strong incentives to<br />
pay the money and settle, rather than to litigate<br />
to define more clearly the legal boundaries.<br />
That is not going to change. What<br />
needs to occur, therefore, is for the government,<br />
specifically FDA and the Department<br />
of Justice, and the medical products<br />
industry to come together with a solution,<br />
a solution that recognizes the need to protect<br />
the drug approval process while giving<br />
appropriate latitude for the exercise of First<br />
Amendment rights.<br />
Medical products companies, both pharmaceutical<br />
companies and medical device<br />
companies, have several different types<br />
of interests that need to be reconciled.<br />
First, marketing is “protected by the Free<br />
Speech Clause of the First Amendment”<br />
and companies have an interest in marketing<br />
their products. At the same time, companies<br />
have an interest in strengthening,<br />
not undermining, the federal regulatory<br />
system. Industry’s stake in a strong, credible<br />
FDA regulatory system includes being<br />
able to invoke it as evidence of safety and<br />
efficacy and as an aid in defending product<br />
liability tort suits. In addition, the<br />
FDA regulatory scheme benefits industry<br />
by promoting consumer confidence in<br />
FDA- approved products, Joseph A. Levitt,<br />
Regulation of Dietary Supplements: FDA’s<br />
Strategic Plan, 57 Food Drug L.J. 1, 3 (2002),<br />
and FDA approval is very helpful in defending<br />
product liability lawsuits, sometimes<br />
based upon preemption and sometimes<br />
because the fact of FDA approval has a<br />
positive influence on jurors. See Stephanie<br />
A. Scharf et al., Juror Perceptions of the<br />
FDA That Affect Verdicts in Pharmaceutical<br />
Lawsuits, Products Liability Litigation<br />
43:4 (2012).<br />
Industry also has a desire to engage in<br />
truthful off label communication, free of<br />
the threat of criminal and civil prosecution<br />
hanging over their heads. Industry<br />
has an undeniable economic incentive to<br />
engage in off- label promotion and to sell a<br />
drug for purposes other than or in addition<br />
to the one(s) for which the drug has been<br />
“Off-Label”, continued on page 90
Drug and Medical Device<br />
Some Unsettled<br />
Issues Linger<br />
By Edward W. Gerecke<br />
and David J. Walz<br />
Mensing:<br />
Effects and<br />
Opportunities<br />
Aside from its direct<br />
application to claims<br />
against generic<br />
manufacturers, Mensing<br />
has sparked other less<br />
expected issues that<br />
affect distributors and<br />
dispensers, and alter the<br />
analysis of procedural<br />
matters such as removal<br />
to a federal court.<br />
The United States Supreme Court opinion in PLIVA, Inc.<br />
v. Mensing, 131 S. Ct. 2567 (2011), changed the landscape<br />
for generic manufacturers. The Court ruled that warningrelated<br />
claims conflict with federal law and are preempted.<br />
After Mensing, the weight of authority<br />
holds that federal law preempts claims<br />
related to warnings or information disseminated<br />
by generic manufacturers. Enterprising<br />
plaintiffs’ attorneys have attempted<br />
to make inroads against that authority or<br />
otherwise limit Mensing, but most efforts<br />
have been less than successful. Even when<br />
plaintiffs have gained some traction, they<br />
have achieved results only in the pleadings<br />
stage or in ways specific to particular cases.<br />
Aside from its direct application to<br />
warning- related claims against generic<br />
manufacturers, Mensing has sparked other<br />
less expected issues. These issues have bearing<br />
on claims under theories of liability such<br />
as design defect, affect different defendants<br />
including distributors and dispensers, and<br />
alter the analysis of procedural matters such<br />
as removal to a federal court. This article<br />
will focus on Mensing’s immediate effects<br />
in these particular areas, including the opportunities<br />
Mensing presents in each area.<br />
The Mensing Holding and Reasoning<br />
In Mensing, the Court overruled a string of<br />
lower court cases that restricted preemption<br />
for generic products following Wyeth v.<br />
Levine, 555 U.S. 555 (2009). Mensing’s wellknown<br />
holding requires little elaboration.<br />
Simply put, the Court held:<br />
We find impossibility here. It was not<br />
lawful under federal law for the [m]anufacturers<br />
to do what state law required<br />
of them….<br />
If the [m]anufacturers had independently<br />
changed their labels to satisfy<br />
their state-law duty, they would<br />
have violated federal law. Taking [the<br />
plaintiff’s] allegations as true, state law<br />
imposed on the [m]anufacturers a duty<br />
to attach a safer label to their generic<br />
[drug]. Federal law, however, demanded<br />
that generic drug labels be the same at<br />
all times as the corresponding brandname<br />
drug labels. Thus, it was impossible<br />
for the [m]anufacturers to comply<br />
■ Edward W. Gerecke and David J. Walz are shareholders in the Tampa, Florida, office of Carlton Fields. Mr.<br />
Gerecke’s practice involves product liability and mass tort litigation with a particular focus on pharmaceutical<br />
and medical device litigation. He is a member of the <strong>DRI</strong> Drug and Medical Device Committee Steering<br />
Committee. Mr. Walz focuses on the defense of actions involving prescription and generic drugs, medical<br />
devices, and over- the- counter medical products. He is a member of the <strong>DRI</strong> Drug and Medical Device, Product<br />
Liability, and Trial Tactics Committees, along with various other professional and defense organizations.<br />
For The Defense ■ October 2012 ■ 39
Drug and Medical Device<br />
with both their state-law duty to change<br />
the label and their federal law duty to<br />
keep the label the same.<br />
Mensing, 131 S. Ct. at 2577–78 (citing 21<br />
C.F.R. §314.150(b)(10)).<br />
In other words, the key “question for<br />
‘impossibility’ is whether the private party<br />
could independently do under federal law<br />
what state law requires of it.” Id. at 2579<br />
Nothingin Mensing limits its<br />
impossibility reasoning and<br />
application of preemption to<br />
generic manufacturers or to<br />
manufacturers generally.<br />
(emphasis added). As the Court elaborated,<br />
“when a party cannot satisfy its state duties<br />
without the Federal Government’s special<br />
permission and assistance, which is<br />
dependent on the exercise of judgment by<br />
a federal agency, that party cannot independently<br />
satisfy those state duties for preemption<br />
purposes.” Id. at 2581.<br />
The Mensing reasoning was based on the<br />
unique regulatory environment for generic<br />
drugs under the Hatch- Waxman amendments<br />
to the Food, Drug and Cosmetic Act<br />
(FDCA), formally titled the “Drug Price<br />
Competition and Patent Term Restoration<br />
Act of 1984.” Unlike brand-name products,<br />
generic drugs “gain FDA approval simply<br />
by showing equivalence to a [brand-name]<br />
drug that has already been approved by the<br />
FDA.” Id. at 2574 (citing 21 U.S.C. §355(j)(2)<br />
(A)). See also 21 C.F.R. §314.127(a)(7).<br />
That showing of equivalence includes<br />
all labeling information. The generic<br />
manufacturer’s obligation is only the<br />
“responsib[ility] for ensuring that its warning<br />
label is the same as the brand name’s.”<br />
Id. at 2574 (citing 21 U.S.C. §355(j)(2)(A)<br />
(v), §355(j)(4)(G); 21 C.F.R. §314.94(a)(8),<br />
§314.127(a)(7)). As a result, “generic drug<br />
manufacturers have an ongoing federal<br />
duty of ‘sameness.’” Id. at 2575.<br />
Because the Court analyzed and<br />
answered the issue under that regulatory<br />
framework, little question remains<br />
40 ■ For The Defense ■ October 2012<br />
about many warning- related claims against<br />
generic manufacturers. Mensing and the<br />
requirement of “sameness” seal their likely<br />
fate. Questions about other claims and<br />
other defendants, however, remain for the<br />
lower courts, and possibly the Supreme<br />
Court again. The resulting answers will<br />
affect generic manufacturers, of course,<br />
but they will also affect brand-name manufacturers<br />
and distributors and pharmacists<br />
as well.<br />
Effects on Generic Manufacturers<br />
for Design Claims<br />
While warning- related or informationbased<br />
theories of liability proceed on new<br />
terrain under Mensing, it appears unclear<br />
how courts will apply Mensing to designbased<br />
claims. One notable outlier, a federal<br />
appellate court decision, Bartlett v.<br />
Mut. Pharm. Co., 678 F.3d 30 (1st Cir. 2012),<br />
highlights this uncertainty.<br />
In Bartlett, the First Circuit refused to<br />
apply Mensing to preempt design- defect<br />
claims against a generic drug. Instead,<br />
the court treated Mensing as only a narrowly<br />
defined “exception” to the “general<br />
no- preemption rule” established in Wyeth<br />
v. Levine, 555 U.S. 555 (2009). Bartlett, 678<br />
F.3d at 37–38. Thus, while the Levine “holding<br />
was technically limited to failure- towarn<br />
claims, its logic applies to design<br />
defect claims as well.” Id. at 37.<br />
Having decided that Levine controlled<br />
as the general rule, the court seemed to<br />
acknowledge the critical point for design<br />
defect: the generic manufacturer “cannot<br />
legally make [the product] in another composition.”<br />
Id. Nonetheless, preemption did<br />
not apply because another source of liability<br />
existed. According to Bartlett, the<br />
manufacturer “certainly can choose not to<br />
make the drug at all; and the FDCA might<br />
permit states to tell [the manufacturer] it<br />
ought not be doing so if risk- benefit analysis<br />
weights against the drug, despite what<br />
the Supreme Court made of similar arguments<br />
in the labeling context.” Id. Using<br />
that reasoning, the court affirmed the jury<br />
verdict on design defect and left it “up to<br />
the Supreme Court to decide whether [the<br />
Mensing] exception is to be enlarged to<br />
include design defect claims.” Id. at 38.<br />
Bartlett is problematic. Widespread<br />
application will undermine Mensing, especially<br />
if liability arises from not only a<br />
design- specific defect but from a product<br />
simply remaining on the market because<br />
the manufacturer chose not to withdraw<br />
it. Bartlett suffers from several weaknesses,<br />
though, that allow avenues to defend<br />
against its expansion.<br />
Opportunities on Design Claims<br />
As a starting point, the decision to apply<br />
Levine, 555 U.S. 555 (2009), as the general<br />
framework for an analysis instead of<br />
Mensing is flawed. Levine did not establish<br />
a general preemption principle for<br />
both brand-name and generic drugs, including<br />
for design claims. Given that it<br />
involved neither a generic drug nor a<br />
design claim, it could not create such a<br />
principle. Instead, Levine focused on the<br />
manufacturer’s “responsibility for the content<br />
of its label.” Levine, 555 U.S. at 570–71.<br />
Even under Bartlett’s premise that Mensing<br />
applies only to warning claims, Levine is<br />
no more directly applicable than Mensing.<br />
On the contrary, considering that Mensing<br />
actually analyzed generic products and the<br />
relevant regulatory scheme, Mensing is if<br />
anything more on-point than Levine.<br />
Also, the Supreme Court did not treat<br />
the Mensing holding as an exception and<br />
did not recognize Levine as a general rule.<br />
Rather, in Mensing, the Court recognized<br />
that Levine “was not to the contrary” and<br />
depended upon the holding “that the lawsuit<br />
was not pre- empted because it was<br />
possible for… a brand-name drug manufacturer,<br />
to comply with both state and<br />
federal law” through the “changes being<br />
effected” (CBE) regulation. Mensing, 131<br />
S. Ct. at 2581. That conclusion bears no relationship<br />
to the impossibility conclusion for<br />
generic products.<br />
Aside from questionably applying<br />
Levine, the reasoning and result in Bartlett<br />
also fundamentally conflict with the relevant<br />
FDCA provisions and FDA regulations.<br />
The FDCA requires “that the active<br />
ingredients of the [generic] drug are of the<br />
same pharmacological or therapeutic class<br />
as those of the [brand-name] drug.” 21<br />
U.S.C. §355(j)(2)(A)(iv). FDA regulations<br />
require rejection of an Abbreviated New<br />
Drug Application (ANDA) if it “is insufficient<br />
to show that the active ingredient<br />
is the same as that of the [brand-name]<br />
drug.” 21 C.F.R. §314.127(a)(3)(i). See 21<br />
C.F.R. §314.127(a)(3)(ii) (applying the same
standard to products with more than one<br />
active ingredient).<br />
Moreover, no FDA regulation allows unilateral<br />
changes to generic drug design. Cf. 21<br />
C.F.R. §314.70(c)(6)(iii) (covering changes to<br />
brand-name drug “labeling to reflect newly<br />
acquired information”); 21 C.F.R. §601.12(f)<br />
(2) (biologic products); 21 C.F.R. §814.39(d)<br />
(2) (medical devices). To the contrary, the<br />
regulation applicable to brand-name design<br />
changes “requir[es] supplement submission<br />
and approval prior to distribution”<br />
for “changes in the qualitative or quantitative<br />
formulation of the drug product.” 21<br />
C.F.R. §314.70(b)(2)(i) (emphasis added).<br />
Even Mensing defined “generic drugs” as<br />
“designed to be a copy of a reference listed<br />
drug… and thus identical in active ingredients,<br />
safety, and efficacy.” Mensing, 131<br />
S. Ct. at 2574 n.2 (emphases added). Essentially,<br />
the impossibility implications of the<br />
“sameness” requirement are the same for<br />
design claims as for labeling claims.<br />
In that light, many other courts unsurprisingly<br />
reject design- defect claims under<br />
the Mensing preemption holding, regardless<br />
of Bartlett. Those courts hold that<br />
“Mensing’s reasoning warrants dismissal<br />
of [design] claim[s] as well,” reasoning, for<br />
instance as follows:<br />
In Mensing, the Supreme Court noted<br />
that a generic drug manufacturer has a<br />
duty of sameness, and federal law specifically<br />
requires a generic drug to be the<br />
bioequivalent of its name-brand counterpart.<br />
Therefore, [d]efendant could<br />
not alter the design of the drug without<br />
violating federal law and this duty<br />
of sameness, making it impossible for<br />
[d]e fend ant independently to comply<br />
with both federal and state law.<br />
Aucoin v. Amneal Pharm., LLC, No. 11-<br />
1275, 2012 WL 2990697, at *9 (E.D. La. July<br />
20, 2012).<br />
The Accutane MDL court summed up<br />
the reasoning from the favorable design<br />
preemption cases, before and after Bartlett,<br />
holding that it “agrees with this reasoning,<br />
which accords with the great weight<br />
of authority and Mensing.” In re Accutane<br />
Prods. Liab., No. 8:04MD-2523-T-30TBM,<br />
2012 WL 3194952, at *2–*3 (M.D. Fla. Aug.<br />
7, 2012). The court cited two other MDL<br />
courts that concluded similarly: “the ‘duty<br />
of sameness’ also applies in the context of<br />
generic drug design.” In re Pamidronate<br />
Prods. Liab. Litig., 842 F. Supp. 2d 479, 484<br />
(E.D.N.Y. 2012); In re Fosamax Prods. Liab.<br />
Litig. (No. II), MDL No. 2243, 2011 WL<br />
5903623, at *6 (D.N.J. Nov. 21, 2011).<br />
Overall, Bartlett is a stark outlier. As<br />
an appellate decision, that position alone<br />
bestows it with greater weight. Nonetheless,<br />
Bartlett’s solitary position, along with<br />
its questionable choice to follow Levine over<br />
Mensing and fundamental inconsistencies<br />
with the relevant FDA regulations, should<br />
limit its expansion to design claims. This<br />
issue will continue to develop, however,<br />
including perhaps through Bartlett itself<br />
before the Supreme Court where, as of July<br />
31, 2012, a petition for writ of certiorari<br />
remained pending.<br />
Effects on Parties Other<br />
than Manufacturers<br />
Nothing in Mensing limits its impossibility<br />
reasoning and application of preemption<br />
to generic manufacturers or to manufacturers<br />
generally. Instead, the principles<br />
in Mensing apply just as well, if not better,<br />
to other types of defendants in many<br />
circumstances involving failure to warn<br />
claims. The first courts to consider this<br />
point wholeheartedly agreed.<br />
In Stevens v. Community Health Care,<br />
Inc., No. ESCV20070280, 2011 WL 6379298,<br />
at *1 (Mass. Super. Ct. Oct. 5, 2011), the<br />
court applied Mensing to claims against a<br />
distributor of a generic product and granted<br />
summary judgment. The court expressly<br />
equated the distributor’s position with the<br />
generic manufacturer’s position. First, the<br />
court noted that “generic manufacturers<br />
have no power to effectuate a label change.”<br />
Id. The court wrote that “[r]ather, brand<br />
name manufacturers are the only entity<br />
able to initiate a label change with the FDA.”<br />
Id. The court then held that the protections<br />
afforded to the generic manufacturer by<br />
Mensing applied equally to the distributor:<br />
“As a distributor,… [it] had no ability to<br />
change labeling or warnings and thus, like a<br />
generic manufacturer, [it] cannot be subject<br />
to liability in connection with a state law<br />
claim premised on a ‘failure to warn.’” Id.<br />
Shortly thereafter, the Accutane MDL<br />
court did not draw a distinction between<br />
warning- related claims against a generic<br />
manufacturer and the dispensing pharmacy<br />
on a motion for judgment on the pleadings.<br />
The claim against the pharmacy “allege[d]<br />
that [it] sold a product that was not fit for<br />
the purposes intended and did not conduct<br />
a proper investigation.” In re Accutane Prods.<br />
Liab., No. 8:04MD-2523-T-30TBM, 2011 WL<br />
6224546, at *1 (M.D. Fla. Nov. 9, 2011). The<br />
court dismissed both defendants without<br />
noting any difference in Mensing’s applicability.<br />
To the contrary, the court took a broad<br />
position that covered the defendants and<br />
summarized: “In short, any state-law claim<br />
involving a generic drug label or warning is<br />
preempted and must be dismissed with prejudice<br />
under Mensing.” Id. at *2.<br />
While the reasoning in Stevens and Accutane<br />
involved defendants that that had<br />
some relationship to generic products as<br />
a distributor or a dispensing pharmacy, a<br />
subsequent case offers an important expansion.<br />
In re Fosamax Products Liability Litigation<br />
(No. II), No. 2243 (JAP-LHG), 2012<br />
WL 181411 (D.N.J. Jan. 17, 2012), extends the<br />
Mensing reasoning to a brand-name distributor.<br />
A plaintiff in Fosamax alleged that one<br />
of the “Generic Defendants” was “the authorized<br />
distributor of branded Fosamax” and<br />
“marketed and sold the drug under branded<br />
name Fosamax.” Id. at *1. After initially denying<br />
that defendant’s motion for judgment<br />
on the pleadings, the court reconsidered.<br />
The court rejected the plaintiffs’ position<br />
that preemption under Mensing applied<br />
only to generic- related parties and products.<br />
In particular, the court rejected the<br />
argument that, as a distributor of “branded<br />
Fosamax,” the defendant “stands in the<br />
shoes of [the brand-name manufacturer]<br />
and has the ability to change the Fosamax<br />
labeling.” Id. at *3.<br />
Instead, even if the defendant distributed<br />
the brand-name product, that distributor<br />
faces the same prohibitions against<br />
changing the product that a generic manufacturer<br />
faces under the principles applied<br />
in Mensing: “As a distributor of Fosamax,<br />
[the defendant] has no power to change<br />
Fosamax labeling. That power lies with the<br />
applicant who filed the New Drug Application<br />
(NDA) seeking approval to market<br />
Fosamax.” Id. (discussing, among others,<br />
the “changes being effected” (CBE) regulations).<br />
While certain regulations allow<br />
the applicant to initiate changes, “[n]either<br />
of these procedures involve[d] a distributor.”<br />
Id. The distinction between brand and<br />
generic mattered less than the defendant’s<br />
role relative to the NDA holder:<br />
For The Defense ■ October 2012 ■ 41
Drug and Medical Device<br />
As a result of the scheme set forth by the<br />
FDCA, [the distributor] has no authority<br />
to initiate a labeling change of Fosamax.<br />
That authority lies with the FDA and/or<br />
with [the brand-name manufacturer].<br />
Even taking the allegation [] as true, a<br />
contractual relationship between [the<br />
distributor and the brand-name manufacturer]<br />
cannot change the fact that [the<br />
distributor] is not the NDA holder. Consequently,<br />
[the distributor] has no power<br />
to unilaterally change Fosamax labeling.<br />
Because [the distributor] could not “independently<br />
do under federal law what<br />
state law requires of it,” the state law<br />
claims brought against it are preempted.<br />
Id. at *4 (quoting Mensing, 131 S. Ct. at<br />
2579).<br />
Opportunities for Distributors,<br />
Dispensers, Sellers<br />
Under these applications of Mensing preemption,<br />
distributors and other parties<br />
that haven’t actually manufactured brandname<br />
or generic products have a winning<br />
defense as long as the basis for the claims<br />
against them lies in some deficiency that<br />
they cannot change or control because they<br />
do not hold the NDA. In other words, a defendant<br />
that cannot hold an NDA cannot<br />
possibly “independently” or “unilaterally”<br />
make changes to a product.<br />
Although the cases do not examine the<br />
FDA regulations in-depth, their reasoning<br />
is entirely consistent with the requirements<br />
for brand-name and generic applicants,<br />
both before and after approval of an NDA or<br />
an ANDA. Before approval, only the applicant<br />
may amend, supplement, or withdraw<br />
an NDA or an ANDA. 21 C.F.R. §314.60(a)<br />
(“the applicant may submit an amendment<br />
to an application…”); 21 C.F.R. §314.65 (“An<br />
applicant may at any time withdraw an application….”);<br />
21 C.F.R. §314.96(a)(1) (“An<br />
applicant may amend an abbreviated new<br />
drug application….”).<br />
The same holds true for supplements<br />
and other changes after NDA or ANDA<br />
approval. 21 C.F.R. §314.70(a)(1)(i), 21<br />
C.F.R. §314.71(a) (“Only the applicant may<br />
submit a supplement to an application.”);<br />
21 C.F.R. §314.97 (“The applicant shall<br />
comply… regarding the submission of supplemental<br />
applications and other changes<br />
to an approved abbreviated application.”).<br />
After approval, the responsibility for<br />
42 ■ For The Defense ■ October 2012<br />
post- marketing monitoring also falls upon<br />
the applicant. 21 C.F.R. §314.80 (brandname<br />
reporting); 21 C.F.R. §314.98 (generics).<br />
This responsibility includes review<br />
and reporting of adverse drug experiences,<br />
information from scientific literature,<br />
and post- marketing studies. 21 C.F.R.<br />
§314.80(b)–(e). To the extent that a “nonapplicant”<br />
bears any reporting responsibility<br />
under 21 C.F.R. §314.80(c)(1)(iii), it<br />
is limited to those “whose name appears<br />
on the label of an approved drug product<br />
as a manufacturer, packer, or distributor.”<br />
Even then, however, the nonapplicant<br />
may meet its obligation by passing along<br />
“all reports… to the applicant” for submission<br />
in “compl[iance] with the requirements”<br />
for applicants. Id. If handled in this<br />
“pass-along” manner, nothing about nonapplicant<br />
reporting places a party serving<br />
in a distributing capacity, for instance,<br />
in a position that Mensing would not protect<br />
through preemption because the party<br />
wouldn’t have the ability to act independently<br />
under federal law.<br />
It also bears noting that Mensing dealt<br />
with and held preempted such pass-along<br />
claims. The Court analyzed circumstances<br />
involving “possible actions by the FDA and<br />
the brand-name manufacturer” based on<br />
information submitted by generic manufacturers,<br />
including when the federal<br />
requirements for other than the brandname<br />
manufacturer could change “if, and<br />
only if, the FDA and the brand-name manufacturer<br />
changed the brand-name label.”<br />
Mensing, 131 S. Ct. at 2578. The Court<br />
rejected liability arising from submitting<br />
information that might “have started a<br />
Mouse Trap game that eventually led to”<br />
changes. Id. In other words, federal law<br />
preempts claims arising from the ability to<br />
pass-along information when they “depend<br />
on the actions of the FDA and the brandname<br />
manufacturer.” Id.<br />
While Mensing reached this conclusion<br />
for generic manufacturers, the same reasoning<br />
applies to nonapplicants. Even a<br />
nonapplicant subject to reporting under 21<br />
C.F.R. §314.80(c)(1)(iii) may protect itself by<br />
submitting reports of adverse drug experiences<br />
to the applicant. Doing so is only the<br />
first step in the “Mouse Trap game” and<br />
does not permit the nonapplicant independently<br />
to “satisfy its state duties without the<br />
Federal Government’s special permission<br />
and assistance, which is dependent on the<br />
exercise of judgment by a federal agency.”<br />
Mensing, 131 S. Ct. at 2581.<br />
Overall, parties other than manufacturers<br />
have sound footing to contest and defeat<br />
liability at the motion stage, especially on<br />
warning- based claims. While the initial<br />
cases focus on labeling, the same reasoning<br />
should apply to any other claim, including<br />
design and manufacturing, as long as the<br />
alleged basis for liability is not specific to<br />
the distributor or dispenser.<br />
Effects on Removal<br />
The substantive success enjoyed by parties<br />
other than manufacturers has not translated<br />
yet to procedural success. <strong>Courts</strong><br />
have rejected early efforts to use Mensing<br />
as a basis for fraudulent joinder of nondiverse<br />
defendants. The removal arguments<br />
track those that have produced dismissals<br />
and summary judgments for distributors<br />
or dispensers, but these initial cases have<br />
remanded claims involving generic manufacturers,<br />
generic distributors, and brandname<br />
distributors. The reasoning for the<br />
remands varies, but includes deference to<br />
state courts, the common defense rule,<br />
strict liability arising from the chain of distribution,<br />
and distinctions between design<br />
and warning claims.<br />
For a generic manufacturer, one court refused<br />
to venture into what it described as “a<br />
legal issue… that can be addressed by a state<br />
court.” Hughes v. Mylan Inc., No. 11-5543,<br />
2011 WL 5075133, at *6 (E.D. Pa. Oct. 25,<br />
2011). Using a difficult test by even fraudulent<br />
joinder standards of “practically ‘a clear<br />
legal impossibility,’” the court held that although<br />
the generic manufacturer “may ultimately<br />
win the war,” it was “stuck fighting<br />
on the turf [p]laintiffs selected.” Id. In addition<br />
to deferring to the state court, the order<br />
focused on the negligent design claim that<br />
the court viewed separately from Mensing.<br />
Distributors of brand-name and generic<br />
products have fared no better. Another<br />
court also emphasized the design issue and<br />
cited Bartlett to grant remand because “it<br />
is not obvious that Mensing impossibility<br />
preemption would apply to a design defect<br />
claim.” Caouette v. Bristol- Myers Squibb<br />
Co., No. C-12-1814 EMC, 2012 WL 3283858,<br />
at *4 (N.D. Cal. Aug. 10, 2012). Yet another<br />
court granted remand under the common<br />
defense rule when the Mensing argu-
ment applied equally to the manufacturer<br />
and nonmanufacturer. Fraudulent joinder<br />
did not exist because the “claims against<br />
diverse and non- diverse defendants suffer<br />
from the same alleged flaw.” In re Darvocet,<br />
Darvon & Propoxyphene Prods. Liab. Litig.,<br />
No. 2:11-md-2226-DCR, 2012 WL 2562245,<br />
at *4 (E.D. Ky. July 2, 2012).<br />
Finally, a different court avoided the<br />
issue of Mensing’s reach by limiting its<br />
analysis to the nature of strict liability<br />
arising from the chain of distribution. The<br />
court rejected the argument that a namebrand<br />
distributor was fraudulently joined<br />
“because, as a distributor, it had no authority<br />
or duty to alter the allegedly defective<br />
design.” Halperin v. Merck, Sharpe<br />
& Dohme Corp., No. 11 C 9076, 2012 WL<br />
1204728, at *3 (N.D. Ill. Apr. 10, 2012).<br />
Instead, the court focused on the distributor’s<br />
role and the general proposition that<br />
“[s]trict liability attaches to all links in<br />
the distributive chain, without regard to<br />
a particular link’s knowledge or culpability.”<br />
Id. As a result, the distributor’s fault<br />
or faultlessness was inconsequential to the<br />
removal analysis. The distributor might “be<br />
liable to [p]laintiffs based on [the] alleged<br />
design defect despite the fact that it had no<br />
role in the actual design process.” Id.<br />
On their face, these cases appear difficult<br />
to reconcile with the substantive victories<br />
for parties other than manufacturers.<br />
The difficult fraudulent- joinder standard<br />
might explain some of the difference in<br />
results. Given the Bartlett- driven conflict<br />
on design defect, along with procedural<br />
hurdles such as the common defense<br />
rule, courts seem less willing to dispose of<br />
claims at the removal stage than they might<br />
at the dispositive- motion stage.<br />
Opportunities for Removal<br />
Mensing wins on fraudulent joinder may<br />
happen more often in jurisdictions that<br />
apply a “no reasonable basis” standard than<br />
a “no possibility” basis for showing fraudulent<br />
joinder. Likewise, other jurisdictionspecific<br />
law or practices such as how a<br />
circuit applies the common defense rule or<br />
how state law handles strict liability relative<br />
to fault may also be crucial. For example,<br />
even in courts that apply the common<br />
defense rule, it should prove less troublesome<br />
in cases involving brand-name products<br />
because Mensing will not provide a<br />
defense for the brand-name manufacturer.<br />
Or, when state law links nonmanufacturer<br />
liability to a “knew or should have known”<br />
standard rather than distribution- based<br />
strict liability, then any “theory of non-<br />
manufacturing seller liability also depends<br />
on a failure to warn” and “is preempted as<br />
well.” Whitener v. PLIVA, Inc., No. 10-1552,<br />
2011 WL 6056546, at *2, *4 (E.D. La. Dec. 6,<br />
Mensing, continued on page 90<br />
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For The Defense ■ October 2012 ■ 43
Drug and Medical Device<br />
A Powerful Tool<br />
to Wield Early<br />
By Andrew Tauber,<br />
Max Heerman<br />
and Brian Wong<br />
How to Argue<br />
Medical Device<br />
Preemption<br />
A roadmap to express<br />
and implied preemption,<br />
as well as “best practices”<br />
found to be effective,<br />
and pitfalls to avoid.<br />
Federal preemption can be a powerful weapon in the<br />
defense practitioners’ arsenal. An early win on preemption<br />
can dispose of a case at the threshold, thereby avoiding the<br />
burdens and costs of discovery and trial. And a preemp-<br />
tion defense, if it is effective, can secure<br />
dismissal as a matter of law in the face of<br />
unfavorable facts and sympathetic plaintiffs,<br />
regardless of whether the underlying<br />
claims are meritorious as a matter of state<br />
law. In the medical device context, courts<br />
have found preempted all sorts of state law<br />
claims, including design defect, manufacturing<br />
defect, failure to warn, breach of implied<br />
warranty, breach of express warranty,<br />
fraud, and consumer protection act claims.<br />
Any attorney defending a product liability<br />
action brought by someone who<br />
■ Andrew Tauber is a partner and Brian<br />
Wong is an associate at Mayer Brown LLP in<br />
Washington, D.C. Mr. Tauber is co-leader of<br />
the firm’s Supreme Court & Appellate Practice<br />
and focuses on federal preemption. Mr.<br />
Wong focuses on representing corporate clients<br />
in courts nationwide. Max Heerman<br />
is principal litigation counsel at Medtronic<br />
in Minneapolis, where he supervises both<br />
medical device and general business<br />
litigation. Daniel Ring, a partner<br />
in Mayer Brown LLP’s Chicago<br />
office, and Kristina Portner, an associate<br />
in the firm’s Washington, D.C.,<br />
office, assisted in the preparation of<br />
this article.<br />
claims to have been injured by a medical<br />
device should therefore evaluate the viability<br />
of express preemption and implied<br />
preemption arguments early. These preemption<br />
doctrines can be complex and<br />
are the subject of an ever- evolving and<br />
expanding body of decisional precedent.<br />
This article offers a brief roadmap to these<br />
doctrines. It also describes both “best practices”<br />
that we’ve found to be effective, and<br />
some of the potential pitfalls we’ve learned<br />
to avoid, when arguing that federal law<br />
preempts state law claims asserted against<br />
medical device manufacturers.<br />
The Basics of Express and Implied<br />
Preemption for Medical Devices<br />
Federal preemption is nothing more—<br />
and nothing less—than the Constitution’s<br />
Supremacy Clause in action. The Supremacy<br />
Clause declares that all constitutionally<br />
valid federal laws “shall be the supreme<br />
law of the land” and that “the judges in<br />
every state shall be bound thereby, anything<br />
in the constitution or laws of any<br />
state to the contrary notwithstanding.” In<br />
other words, federal law trumps—or preempts—state<br />
law.<br />
There are two types of preemption:<br />
express preemption and implied preemption.<br />
Express preemption arises when<br />
44 ■ For The Defense ■ October 2012
Congress has adopted a statute that explicitly<br />
displaces state law. Implied preemption<br />
arises, whether or not Congress has<br />
explicitly displaced state law, when federal<br />
law occupies the entire regulatory<br />
field, leaving no place for state law, or when<br />
state law would conflict with federal law,<br />
either because simultaneous compliance<br />
with federal and state law is impossible or<br />
because state law thwarts the federal statutory<br />
scheme.<br />
Both types of preemption are relevant<br />
in the medical device context. The Medical<br />
Device Amendments (MDA) to the Food,<br />
Drug, and Cosmetic Act (FDCA) contain<br />
an express preemption provision, 21 U.S.C.<br />
§360k(a), which was authoritatively construed<br />
by the Supreme Court in Riegel v.<br />
Medtronic, Inc., 552 U.S. 316 (2008). The<br />
FDCA also contains a no- private- rightof-<br />
action clause, 21 U.S.C. §337(a), which,<br />
the Supreme Court held in Buckman Co.<br />
v. Plaintiffs’ Legal Committee, 531 U.S.<br />
341 (2001), impliedly preempts state law<br />
actions that attempt to enforce provisions<br />
of the FDCA.<br />
Express Preemption: §360k(a) and Riegel<br />
Let’s begin with §360k(a). The MDA,<br />
enacted in 1976, granted the FDA authority<br />
to regulate medical devices, and created a<br />
comprehensive “regime of detailed federal<br />
oversight.” Riegel, 552 U.S. at 316. Congress<br />
sought to ensure that safe and effective<br />
innovative medical devices would be readily<br />
available to treat patients in need of<br />
life- saving or disability- averting care. Specifically<br />
recognizing the “undu[e] burden[]”<br />
imposed by differing state regulation, Congress<br />
adopted a general “prohibition on<br />
non- Federal regulation” of medical devices<br />
by incorporating an express preemption<br />
clause into the Medical Device Amendments.<br />
H.R. Rep. No. 94-853, at 45 (1976).<br />
That provision, §360k(a), expressly preempts<br />
any claim that imposes a state law<br />
“requirement” with respect to a medical<br />
device that is “different from, or in addition<br />
to” a federal requirement imposed by<br />
the FDA.<br />
Because it preempts all claims that<br />
would impose state law requirements<br />
“different from, or in addition to” the<br />
applicable federal requirements, and not<br />
merely those that would impose state law<br />
requirements that conflict with the federal<br />
requirements, §360k(a) has broad preemptive<br />
force. That said, it is important<br />
to note that §360k(a) does not apply to all<br />
medical devices. Rather, as interpreted by<br />
the Supreme Court in Riegel and an earlier<br />
case, Medtronic, Inc. v. Lohr, 518 U.S.<br />
470 (1996), §360k(a) applies only to devices<br />
designated as “Class III” devices under 21<br />
U.S.C. §360c—i.e., those that support or<br />
sustain human life or otherwise present a<br />
potentially unreasonable risk of illness or<br />
of injury—and more specifically to only<br />
those Class-III devices that have received<br />
Premarket Approval (PMA) pursuant to<br />
21 U.S.C. §360e. By contrast, §360k(a) does<br />
not preempt claims made with respect to<br />
Class-III devices marketed pursuant to the<br />
so-called §510k process.<br />
In what follows, then, we’ll deal exclusively<br />
with Class-III devices that have Premarket<br />
Approval—what we’ll refer to as<br />
PMA- approved medical devices. Only a<br />
small fraction of the Class-III medical<br />
devices that enter the market each year are<br />
approved through the PMA process. Riegel,<br />
552 U.S. at 317. Such medical devices are<br />
subject to a rigorous “federal safety review”<br />
by the FDA before being sold. Id. at 323. As<br />
the U.S. Supreme Court explained in Riegel,<br />
“[t]he FDA spends an average of 1,200<br />
hours reviewing each [premarket approval]<br />
application and grants premarket approval<br />
only if it finds there is a ‘reasonable assurance’<br />
of the device’s ‘safety and effectiveness.’”<br />
Id. at 318 (internal citation omitted).<br />
To obtain FDA approval for a device via<br />
the PMA process, a manufacturer must<br />
typically submit a multi- volume application<br />
that includes “full reports of all studies<br />
and investigations of the device’s safety<br />
and effectiveness”; a “full statement of<br />
the device’s components, ingredients, and<br />
properties and of the principle or principles<br />
of operation”; “a full description of the<br />
methods used in, and the facilities and controls<br />
used for, the manufacture, processing,<br />
and, when relevant, packing and installation<br />
of, such device”; and “samples or<br />
device components required by the FDA[]<br />
and a specimen of the proposed labeling.”<br />
Id. at 317–18. The FDA closely scrutinizes<br />
each premarket approval application,<br />
“‘weig[hing] any probable benefit to health<br />
from the use of the device against any probable<br />
risk of injury or illness from such use.’”<br />
Id. at 318 (quoting 21 U.S.C. §360c(a)(2)(C)).<br />
Once a device has received Premarket<br />
Approval, the manufacturer is forbidden<br />
“to make, without FDA permission,<br />
changes in design specifications, manufacturing<br />
processes, labeling, or any<br />
other attribute, that would affect safety<br />
or effectiveness.” Riegel, 531 U.S. at 319.<br />
This means that a PMA- approved medical<br />
device is subject to device- specific federal<br />
requirements and that any claim is therefore<br />
expressly preempted under §360k(a) if<br />
it relies upon or seeks to impose a state law<br />
“requirement” that is “different from, or<br />
in addition to” those federal requirements.<br />
As the Supreme Court made clear in Riegel,<br />
state law tort claims, as well as explicit<br />
state regulation, can be said to impose<br />
“requirements.” The Court’s reasoning was<br />
straightforward: A state’s “requirements”<br />
include the duties imposed by its tort law,<br />
because liability in tort is “premised on<br />
the existence of a legal duty,” and a tort<br />
judgment against a medical device manufacturer<br />
necessarily establishes that the<br />
manufacturer has violated a state law obligation<br />
with respect to the device. Riegel,<br />
522 U.S. at 324. Riegel confirmed that, by<br />
enacting §360k(a), Congress expressly preempted<br />
any state law claim that challenges<br />
the design, manufacturing, testing, marketing,<br />
or labeling of a PMA- approved<br />
medical device that complies with the<br />
terms of its PMA approval because success<br />
on such a claim would require a jury to<br />
determine that the device at issue should,<br />
as a matter of state law, have been designed,<br />
manufactured, tested, marketed, or labeled<br />
in a manner that either adds to, or differs<br />
from, the manner required by federal law.<br />
Id. at 326–27.<br />
The takeaway point is that express preemption<br />
under §360k(a), as authoritatively<br />
construed by the Supreme Court in Riegel,<br />
is a powerful, broad doctrine. Congress<br />
determined that PMA- approved medical<br />
devices should not be subject to either differing<br />
or additional state law requirements.<br />
And by virtue of the Supremacy Clause,<br />
§360k(a)’s command must be obeyed by all<br />
courts, state and federal.<br />
Implied Preemption: §337(a)<br />
and Buckman<br />
Even when a state law claim against the<br />
manufacturer of a medical device isn’t<br />
expressly preempted because it doesn’t seek<br />
For The Defense ■ October 2012 ■ 45
Drug and Medical Device<br />
Congress determined<br />
that PMA- approved<br />
medical devices should<br />
not be subject to either<br />
differing or additional<br />
state law requirements.<br />
to impose any different or additional state<br />
law requirements on the device, it still<br />
might be impliedly preempted by federal<br />
law. The Supreme Court has held that an<br />
express preemption provision does not<br />
“bar the ordinary working of conflict preemption<br />
principles.” Geier v. American<br />
Honda Motor Co., 529 U.S. 861, 869 (2000).<br />
In the specific context of the federal regulatory<br />
scheme governing medical devices,<br />
there’s a statutory provision that provides<br />
a “hook” for implied preemption, 21 U.S.C.<br />
§337(a). Section 337(a) specifies that all proceedings<br />
to enforce the Food, Drug, and<br />
Cosmetic Act, of which the Medical Device<br />
Amendments are a part, “shall be by and<br />
in the name of the United States.” As the<br />
Supreme Court has stated, §337(a) “leaves<br />
no doubt that it is the Federal Government<br />
rather than private litigants who are authorized<br />
to file suit for noncompliance with the<br />
medical device provisions” of federal law.<br />
Buckman, 531 U.S. at 349 n.4.<br />
Section 337(a)’s prohibition against private<br />
enforcement actions reflects Congress’s<br />
intent that the Medical Device<br />
Amendments (and the Food, Drug, and<br />
Cosmetic Act more generally) be enforced<br />
exclusively by the federal government. The<br />
FDA has the authority to investigate violations<br />
of the Act and “has at its disposal a<br />
variety of enforcement options that allow<br />
it to make a measured response” to any<br />
wrongdoing that it uncovers. Buckman,<br />
531 U.S. at 349. Those remedies include<br />
“injunctive relief, 21 U.S.C. §332, and civil<br />
penalties, 21 U.S.C. §333(f)(1)(A); seizing<br />
the device, [21 U.S.C.] §334(a)(2)(D); and<br />
pursuing criminal prosecutions, [21 U.S.C.]<br />
§333(a).” Id. Thus, as the Supreme Court<br />
46 ■ For The Defense ■ October 2012<br />
recognized in Buckman, “the federal statutory<br />
scheme amply empowers the FDA to<br />
punish and deter” violations of the FDCA.<br />
531 U.S. at 348 (emphasis added).<br />
Not only does the FDA have significant<br />
enforcement power, but it also has<br />
“complete discretion” in deciding “how<br />
and when [its enforcement tools] should<br />
be exercised.” Heckler v. Chaney, 470 U.S.<br />
821, 835 (1985). That administrative discretion<br />
is an important aspect of the federal<br />
regulatory scheme because the agency<br />
must use its authority “to achieve a somewhat<br />
delicate balance of statutory objectives.”<br />
Buckman, 531 U.S. at 348. Thus, as<br />
the Supreme Court recognized in Buckman,<br />
state law claims that seek to enforce<br />
the FDCA and its implementing regulations<br />
are impliedly preempted because they<br />
would usurp the FDA’s exclusive enforcement<br />
authority under §337(a) and thereby<br />
conflict with the federal regulatory scheme.<br />
Taken together, express preemption and<br />
implied preemption can serve as a one-two<br />
punch knocking out plaintiffs’ state law<br />
claims. As the Eighth Circuit put it, “Riegel<br />
and Buckman create a narrow gap through<br />
which a plaintiff’s state law claim must fit<br />
if it is to escape express or implied preemption.”<br />
Bryant v. Medtronic, Inc., 623 F.3d<br />
1200, 1204 (8th Cir. 2010). We’ll have more<br />
to say later about that “narrow gap,” and<br />
about how preemption arguments are most<br />
effectively presented to courts.<br />
Practice Pointers for the Express-<br />
Preemption Argument<br />
Preemption makes many courts uncomfortable.<br />
They see preemption as a way for<br />
defendants to avoid liability, often in cases<br />
involving sympathetic plaintiffs. They<br />
fear a regulatory void, where without the<br />
threat of jury verdicts, manufacturers will<br />
run wild, designing unsafe products that<br />
are manufactured shoddily and marketed<br />
recklessly.<br />
Therefore, when asserting a preemption<br />
defense, defendants should educate the<br />
court on the nature and challenges of Class<br />
III medical devices that, by definition,<br />
come with an inherent risk of failure and<br />
a potentially “unreasonable risk of injury.”<br />
In short, defendants must establish that in<br />
the context of Class III medical devices,<br />
failure and even serious injury does not<br />
equate to an actionable product “defect.”<br />
Further, defendants should reassure the<br />
court that preemption neither absolves<br />
device manufacturers of accountability for<br />
their conduct nor jeopardizes public health<br />
by allowing unduly dangerous products to<br />
be sold. This can be done, in part, by explaining<br />
the federal government’s extensive<br />
civil and criminal enforcement powers. Defendants<br />
should also take pains to emphasize<br />
that PMA- approved medical devices<br />
aren’t like most products on the marketplace.<br />
They’re subject to a rigorous approval<br />
process by the FDA, which creates detailed<br />
federal requirements as to the design, manufacture,<br />
and labeling of such devices.<br />
Accordingly, to say that the plaintiff can’t<br />
proceed with his or her state commonlaw<br />
tort claims because they’re preempted<br />
under §360k(a) isn’t to give the device manufacturer<br />
a free pass. Rather, it is to say<br />
that a manufacturer who passes through<br />
one crucible (PMA approval) need not also<br />
pass through a second (state tort law). The<br />
express preemption provision in the Medical<br />
Device Amendments just reflects Congress’s<br />
considered judgment that the FDA’s<br />
federal safety review and the uniform federal<br />
regulatory regime should be the exclusive<br />
means of imposing requirements on<br />
such complex, innovative, and life- saving<br />
medical devices.<br />
Regardless of the court’s policy preferences,<br />
this reflects Congress’s enacted policy,<br />
which courts are bound to respect. But<br />
it is also helpful to point out that this congressional<br />
policy advances public health.<br />
Before it grants Premarket Approval to a<br />
device, the FDA engages in a cost- benefit<br />
analysis in which it weighs the potential<br />
benefits of a device against its potential<br />
risks. As the Supreme Court explained<br />
in Riegel, juries are ill-equipped to perform<br />
the cost- benefit analysis because they<br />
“see[] only the cost[s]” of a device—that is,<br />
its potential to cause harm—and are “not<br />
concerned with its benefits” because “the<br />
patients who reaped those benefits are not<br />
represented in court.” 552 U.S. at 325.<br />
With that preliminary observation out<br />
of the way, here’s some practical advice for<br />
presenting the express- preemption argument<br />
in a streamlined and effective way.<br />
The Basic Structure<br />
One simple but effective way to organize<br />
the express preemption argument in a brief
is to start by setting forth the basic test for<br />
determining if a given state law claim is<br />
preempted, and then proceed to demonstrate<br />
that each specific claim is preempted<br />
under that test.<br />
Begin by explaining that §360k(a) establishes<br />
a two-step procedure for determining<br />
if a state law claim is preempted. It’s<br />
often effective to break out the two-part<br />
test under separate headings, especially<br />
for a court that is unfamiliar with preemption;<br />
doing so pins the plaintiff down and<br />
limits what the plaintiff can dispute without<br />
seeming foolish.<br />
• First, the court must determine whether<br />
“the Federal Government has established<br />
requirements applicable to” the<br />
particular medical device. Riegel, 552<br />
U.S. at 321. The key point here is that<br />
the Supreme Court has held that claims<br />
involving a medical device that has<br />
received Premarket Approval from the<br />
FDA automatically satisfy the first condition<br />
of this test for preemption. See<br />
Riegel, 552 U.S. at 322–23; Walker v.<br />
Medtronic, Inc., 670 F.3d 569, 577 (4th<br />
Cir. 2012); Wolicki- Gables v. Arrow Int’l,<br />
Inc., 634 F.3d 1296, 1300–01 (11th Cir.<br />
2011).<br />
• Second, the court must determine<br />
whether the state law claim would<br />
impose “requirements with respect to<br />
the device that are ‘different from, or<br />
in addition to’” Riegel, 552 U.S. at 322<br />
(quoting 21 U.S.C. §360k(a)(2)). The key<br />
point here is that the Supreme Court<br />
has held that state-law claims—whether<br />
statutory or common law—do impose<br />
requirements “with respect to devices”<br />
for purposes of this express- preemption<br />
provision. Riegel, 552 U.S. at 327.<br />
The crucial point to convey is that Riegel<br />
stands unequivocally for the proposition<br />
that §360k(a) expressly preempts any state<br />
law cause of action that would impose a<br />
requirement on a PMA- approved device<br />
that is “different from, or in addition to”<br />
the federal requirements imposed by the<br />
FDA.<br />
Having established this fundamental<br />
point, the brief should go on to reassure<br />
the court that it would be doing nothing<br />
remarkable if it were to hold that each<br />
of the plaintiff’s claims are preempted.<br />
As one court stated, since Riegel, “courts<br />
across the country have applied Section<br />
360k(a) broadly, preempting all manner<br />
of claims from strict products liability<br />
and negligence, to breach of warranty, to<br />
failure to warn and manufacturing- and<br />
design- defect, to negligence per se.” In re<br />
Medtronic, Inc. Sprint Fidelis Leads Prods.<br />
Liab. Litig., 592 F. Supp. 2d 1147, 1152 (D.<br />
Minn. 2009) (citations omitted), aff’d, Bryant<br />
v. Medtronic, Inc., 623 F.3d 1200 (8th<br />
Cir. 2010). We’ve found that a string-cite of<br />
favorable authority from across the country,<br />
coupled with a more expanded discussion<br />
of the one or two best cases from the<br />
relevant jurisdiction, sets the stage well.<br />
At this point, we typically march<br />
through each state law claim advanced by<br />
the plaintiff and cite to other cases where<br />
the same type of claim has been dismissed<br />
as expressly preempted, focusing especially<br />
on authority from the same jurisdiction.<br />
There are plenty of good cases. The<br />
biggest challenge often is making sense of<br />
the plaintiff’s pleadings and breaking the<br />
complaint down into discrete pieces that<br />
can be attacked.<br />
Incidentally, we’ve found that it generally<br />
isn’t helpful to accept a plaintiff’s categorization<br />
of claims as “strict liability”<br />
or “negligence” claims. The constituent<br />
aspects of each such claim—e.g., design<br />
defect, manufacturing defect, failure to<br />
warn—should be addressed separately,<br />
even if that requires reframing or recharacterizing<br />
the plaintiff’s complaint.<br />
Anyway, let’s move on the commonly<br />
asserted claims and recent authority finding<br />
each claim preempted:<br />
• Design defect. Such claims are squarely<br />
foreclosed because, in order to prevail,<br />
the plaintiff necessarily would have<br />
to establish that the medical device<br />
should have a design different from that<br />
approved by the FDA through the PMA<br />
process. See, e.g., Riegel, 552 U.S. at 320;<br />
Walker, 670 F.3d at 580–81.<br />
• Manufacturing defect. Putting aside parallel<br />
claims (which we discuss below),<br />
claims that a device was defectively<br />
manufactured are preempted because<br />
the plaintiff would have to prove that<br />
the device should have been manufactured<br />
in a manner different from that<br />
approved by the FDA through the PMA<br />
process. See, e.g., Riegel, 552 U.S. at 328;<br />
Wolicki-Gables, 643 F.3d at 1302; Bryant,<br />
623 F.3d at 1207.<br />
• Failure to warn. Because the labeling for<br />
a medical device is approved by the FDA<br />
through the PMA process, claims for<br />
failure to warn are preempted because<br />
they would require a finding that the<br />
medical device manufacturer should<br />
have provided different or additional<br />
warnings from those approved by the<br />
FDA. See, e.g., Riegel, 552 U.S. at 329;<br />
Taken together, express<br />
preemption and implied<br />
preemption can serve as a<br />
one-two punch knocking out<br />
plaintiffs’ state law claims.<br />
Wolicki-Gables, 643 F.3d at 1302; Bryant,<br />
623 F.3d at 1205. As a practical matter,<br />
we have found it helpful to lump failureto-<br />
warn, fraud, and misrepresentation<br />
claims together in the preemption analysis,<br />
dropping a footnote (where applicable)<br />
to note that the claims sounding in<br />
fraud also fail because they have not been<br />
pleaded with sufficient particularity.<br />
• Breach of warranty. Plaintiffs often assert<br />
express and implied warranty claims,<br />
alleging that a manufacturer breached<br />
promises that its device was safe and<br />
effective to use. Such claims (in contrast<br />
to express warranty claims based, for<br />
example, on a manufacturer’s promise<br />
to pay a patient’s unreimbursed medical<br />
costs in the event of a device malfunction)<br />
are preempted because they would<br />
require a finding that the device was not<br />
safe and effective—a finding that would<br />
contradict the FDA’s conclusive determination<br />
during the PMA process that<br />
the there is “a ‘reasonable assurance’ of<br />
the device’s ‘safety and effectiveness.’”<br />
Riegel, 552 U.S. at 318 (quoting 21 U.S.C.<br />
§360e(d)). See, e.g., id. at 320; Bass v.<br />
Stryker Corp., 669 F.3d 501, 515–16 (5th<br />
Cir. 2012); Williams v. Cyberonics, Inc.,<br />
388 F. App’x 169, 171 (3d Cir. 2010).<br />
• Derivative claims. Derivative claims, such<br />
as those for loss of consortium, negligent<br />
infliction of emotional distress, and<br />
For The Defense ■ October 2012 ■ 47
Drug and Medical Device<br />
conspiracy, all of which depend on the<br />
success of a underlying claim, are also<br />
preempted. See, e.g., Riegel, 552 U.S. at<br />
321; Kemp v. Medtronic, Inc., 231 F.3d<br />
216, 237 (6th Cir. 2000).<br />
Debunking Plaintiff’s Arguments<br />
The Supreme Court’s decision in Riegel<br />
doesn’t give plaintiffs much room to<br />
Defendants must<br />
establish that in the context<br />
of Class III medical devices,<br />
failure and even serious<br />
injury does not equate to an<br />
actionable product “defect.”<br />
argue that claims asserted against medical<br />
device manufacturers aren’t preempted.<br />
But they still try. Here are seven arguments<br />
that plaintiffs like to make, and effective<br />
responses to each.<br />
Plaintiffs Might Invoke Pre-Riegel Caselaw<br />
Plaintiffs may rely on pre- Riegel caselaw—especially<br />
cases from state courts—<br />
to deny that Premarket Approval imposes<br />
federal requirements. Or they might say<br />
that state common- law causes of action<br />
do not impose state law “requirements.”<br />
The effective—and completely dispositive—response<br />
is that the Supreme Court<br />
squarely held otherwise in Riegel, and it’s<br />
the duty of all courts to apply that precedent<br />
faithfully.<br />
48 ■ For The Defense ■ October 2012<br />
Plaintiffs Might Try to Use Preemption<br />
Caselaw from Other Fields<br />
Plaintiffs sometimes cite to express preemption<br />
cases decided under different statutory<br />
schemes. But express preemption<br />
depends on the precise language of the<br />
relevant statute, which, in the medical<br />
device context, is §360k(a), a provision that<br />
has been authoritatively construed in Riegel.<br />
That said, cases interpreting identical<br />
express preemption provisions, i.e., those<br />
that employ the “different from, or in addition<br />
to” language, can sometimes be helpful<br />
for bolstering defendants’ arguments.<br />
We’ll talk more about this below.<br />
Plaintiffs Might Deny that the Device<br />
Received Premarket Approval<br />
Sometimes the complaint doesn’t say anything<br />
about whether the device that the<br />
plaintiff received is PMA- approved, and<br />
sometimes the plaintiff erroneously alleges<br />
that the device is not PMA- approved. Happily,<br />
the FDA’s decision to grant Premarket<br />
Approval to a medical device is a matter<br />
of public record. In fact, the FDA even<br />
maintains an online database of premarket<br />
approvals. Therefore, defendants can easily<br />
correct plaintiffs’ errors without discovery,<br />
and it’s entirely appropriate for a court to<br />
take judicial notice of a device’s Premarket<br />
Approval. See, e.g., Funk v. Stryker Corp.,<br />
631 F.3d 777, 783 (5th Cir. 2011).<br />
Plaintiffs Might Claim that the Specific<br />
Component of a Device That Failed Did<br />
Not Receive Premarket Approval<br />
Medical devices often have complicated<br />
regulatory histories. For example, a component<br />
of the device might previously have<br />
been approved by the FDA through something<br />
other than the Premarket Approval<br />
process. Plaintiffs might say that this component<br />
wasn’t PMA- approved, and that<br />
therefore preemption doesn’t apply. The<br />
response is that the FDA considers a device<br />
as a whole when reviewing a Premarket<br />
Approval application, and that Premarket<br />
Approval, once granted, applies to all<br />
aspects and components of the device. See,<br />
e.g., Gross v. Stryker Corp., F. Supp. 2d<br />
, 2012 WL 876719, at *14–15 (W.D. Pa.<br />
Mar. 14, 2012). This is true, for example,<br />
“even where a component of a premarketapproved<br />
device had previously been<br />
approved through the §510(k) process.”<br />
Duggan v. Medtronic, Inc., 840 F. Supp. 2d<br />
466, 471 (D. Mass. 2012). Plaintiffs cannot<br />
avoid express preemption by isolating individual<br />
components of the device.<br />
Plaintiffs Might Invoke the<br />
“Presumption Against Preemption”<br />
Although often invoked by plaintiffs, the<br />
“presumption against preemption” is a red<br />
herring. While this presumption might<br />
apply in some contexts, it does not apply to<br />
state law claims that fall within the scope<br />
of §360k(a). “When a federal law contains<br />
an express preemption clause,” courts must<br />
“‘focus on the plain wording of the clause,<br />
which necessarily contains the best evidence<br />
of Congress’ preemptive intent.’”<br />
Chamber of Commerce of U.S. v. Whiting,<br />
131 S. Ct. 1968, 1977 (2011) (quoting CSX<br />
Transp., Inc. v. Easterwood, 507 U.S. 658,<br />
664 (1993)). In the medical device arena,<br />
Congress has spoken with utmost clarity:<br />
State law may not impose requirements<br />
that are “different from, or in addition to”<br />
the requirements imposed by federal law.<br />
Given this unambiguous language, it is not<br />
surprising that Riegel, the Supreme Court’s<br />
authoritative interpretation of §360k(a),<br />
doesn’t even mention the presumption.<br />
Plaintiffs Might Conflate Express<br />
Preemption with Conflict Preemption<br />
Once a device has received Premarket<br />
Approval, the manufacturer generally can’t<br />
make any changes to its design specifications,<br />
manufacturing processes, or labeling<br />
without seeking approval from the<br />
FDA. But plaintiffs will sometimes point<br />
out that, under certain circumstances, federal<br />
law does permit manufacturers to<br />
strengthen warnings pending approval of<br />
a proposed change to an earlier approved<br />
warning. 21 C.F.R. §814.39. Based on this<br />
possibility, plaintiffs will sometimes argue<br />
that a state failure- to- warn claim does not<br />
conflict with federal law because federal<br />
law does not absolutely prohibit a manufacturer<br />
from changing a device’s labeling.<br />
Yet the absence of a conflict between federal<br />
and state law is irrelevant to express<br />
preemption under §360k(a), which prohibits<br />
all state law requirements that are different<br />
from or in addition to the federal<br />
requirements, including state law requirements<br />
that do not conflict with the federal<br />
requirements. If state law requires something<br />
that federal law only permits, such as<br />
the issuance of a stronger warning, it is an<br />
additional requirement that is plainly preempted.<br />
See McMullen v. Medtronic, Inc.,<br />
421 F.3d 482, 489 (7th Cir. 2005).<br />
In this connection, it is effective to point<br />
the court to the Supreme Court’s recent<br />
decision in National Meat Association v.<br />
Harris, 132 S. Ct. 965 (2012), which—interpreting<br />
the Federal Meat Inspection Act’s<br />
similarly worded express preemption provision—held<br />
that a state law claim is pre-
empted if it converts a federal “may” into a<br />
state law “must.” Id. at 970.<br />
Plaintiffs Might Point Out that the<br />
Device Has Been Recalled<br />
Saying that a device has been recalled by the<br />
FDA conjures up images of a defective product—and<br />
importantly for preemption purposes,<br />
suggests (incorrectly) that the FDA<br />
has revoked the device’s Premarket Approval.<br />
For a defendant, it’s important not<br />
to run from a product recall—maybe even<br />
take it head-on in the opening brief—since<br />
it’s irrelevant for preemption purposes. A<br />
recall neither invalidates a device’s Premarket<br />
Approval nor negates the federal<br />
requirements applicable to a device with<br />
such approval. As a result, courts have repeatedly<br />
dismissed state law claims on<br />
preemption grounds in product liability<br />
cases involving recalled medical devices.<br />
See, e.g., Bryant, 623 F.3d at 1205 n.4; Erickson<br />
v. Boston Scientific Corp., 846 F.<br />
Supp. 2d 1085, 1093 (C.D. Cal. 2011). Moreover,<br />
it is helpful to educate the court about<br />
what a medical device “recall” actually is.<br />
Rarely, if ever, does a “recall”—which is often<br />
referred to by regulators and medical<br />
device companies as a “correction,” a “removal,”<br />
or a “field action”—require that implanted<br />
PMA- approved medical devices be<br />
explanted from patients and sent back to the<br />
manufacturer, as the term “recall” implies.<br />
Defanging the “Parallel Claim”<br />
Riegel recognized but did not analyze a narrow<br />
exception to express preemption for<br />
state law claims that genuinely “‘parallel,’<br />
rather than add to, federal requirements.”<br />
552 U.S. at 330. And unsurprisingly, plaintiffs<br />
have tried mightily to cast their claims<br />
as “parallel” ones. It’s a judgment call<br />
whether and to what extent to anticipate<br />
a parallel claim argument in an opening<br />
brief. But if there’s a chance that the plaintiff<br />
will make the argument, we usually<br />
think it’s better to anticipate the issue and<br />
thereby frame the terms of the discussion.<br />
As is often the case, the best place to<br />
start is the U.S. Supreme Court’s decisions,<br />
which explain that a state law requirement<br />
must be “identical” (Lohr, 518 U.S. at 495),<br />
or at least “genuinely equivalent” (Bates v.<br />
Dow Agrosciences LLC, 544 U.S. 431, 454<br />
(2005)), to a pre- existing federal requirement<br />
to be considered “parallel.”<br />
One thing to keep in mind is that, contrary<br />
to what plaintiffs sometimes argue, a<br />
state law requirement is not parallel to the<br />
federal requirements merely because it is<br />
“consistent” with the federal requirements.<br />
Although the absence of a conflict is relevant<br />
to an implied preemption analysis, it is<br />
irrelevant to the express preemption analysis<br />
because any state law requirement that<br />
is neither identical nor genuinely equivalent<br />
to a federal requirement is “different<br />
from, or in addition to” the federal requirements,<br />
even if it is “consistent” with those<br />
requirements.<br />
It can be helpful to provide the court<br />
with an example of a valid parallel claim,<br />
so as to reassure the court that device<br />
manufacturers aren’t looking for blanket<br />
immunity. For example, if the Premarket<br />
Approval for, say, a catheter requires that<br />
the catheter be 0.25 inches in diameter,<br />
but, because of a manufacturing defect, the<br />
particular catheter implanted in the patient<br />
is only 0.1 inches in diameter, the claim<br />
would not be expressly preempted under<br />
the Medical Device Amendments and the<br />
plaintiff may be able to successfully plead<br />
a parallel claim (assuming, of course, that<br />
the narrowness of the catheter was what<br />
caused his or her injury, and that there is a<br />
genuine state law basis for the claim).<br />
At any rate, after defining a parallel<br />
claim and giving an example of one, we’ve<br />
found it useful in our briefs to provide a<br />
crisp statement of what, in our view, are<br />
the requisite elements of a properly alleged,<br />
non- preempted parallel claim. The precise<br />
formulation will of course vary with the<br />
jurisdiction, but we think a sound default<br />
position—backed by the weight of federal<br />
appellate authority—is that the plaintiff<br />
must (1) identify a specific federal requirement<br />
applicable to the device; (2) show<br />
that the device did not comply with that<br />
specific federal requirement; (3) identify<br />
a pre- existing state cause of action that<br />
makes actionable that non- compliance;<br />
and (4) show that the deviation from the<br />
federal requirement caused his or her injuries.<br />
See, e.g., Walker, 670 F.3d at 580–81;<br />
Wolicki- Gables, 634 F.3d at 1301; Funk, 631<br />
F.3d at 782; Bryant, 623 F.3d at 1207. And<br />
of course, each of these elements has to<br />
be alleged with the specificity and factual<br />
elaboration required under the applicable<br />
pleading standards.<br />
Some defendants miss opportunities to<br />
push back against a plaintiff’s attempt to<br />
allege a parallel claim. At a minimum, we<br />
suggest that defendants run through the<br />
following check-list:<br />
• Has the plaintiff actually identified a<br />
specific federal requirement (and not<br />
merely non- binding or discretionary<br />
guidance)<br />
It’s importantnot to run<br />
from a product recall—<br />
maybe even take it head-on<br />
in the opening brief—<br />
since it’s irrelevant for<br />
preemption purposes.<br />
• When the plaintiff does try to establish<br />
a deviation from a federal requirement,<br />
it’s important to carefully scrutinize the<br />
evidence cited by plaintiff. For example,<br />
does the evidence presented by the<br />
plaintiff—say, a warning letter related<br />
to a facility inspection—actually relate<br />
to the plaintiff’s device We’ve seen<br />
plaintiffs cite warning letters that concern<br />
facilities that were not involved in<br />
the production of the plaintiff’s device;<br />
batches or lots that did not contain<br />
plaintiff’s device; and time periods other<br />
than when the plaintiff’s device was constructed.<br />
Remember, plaintiff’s counsel<br />
often throw everything against the<br />
wall, hoping that something will stick.<br />
It’s the defendant’s job to demonstrate<br />
that nothing sticks.<br />
• Consider also whether the state law<br />
requirement underlying a particular<br />
claim is in fact identical to the federal<br />
requirement allegedly violated by the<br />
manufacturer. For example, because<br />
a state law duty to warn consumers or<br />
doctors is not identical to the federal<br />
requirement that a manufacturer file<br />
certain reports with the FDA, a violation<br />
of the federal reporting requirement<br />
does not properly support a state<br />
law failure- to- warn claim. See Heisner<br />
For The Defense ■ October 2012 ■ 49
Drug and Medical Device<br />
v. Genzyme Corp., 2010 WL 894054, at<br />
*3 (N.D. Ill. Mar. 8, 2010); cf. Pliva, Inc.<br />
v. Mensing, 131 S. Ct. 2567, 2576 (2011).<br />
• Consider whether there is a pre- existing<br />
state law duty or claim or whether<br />
plaintiff is simply seeking to enforce a<br />
requirement that exists only by virtue<br />
of federal law. If there is no pre- existing<br />
state law duty or claim, then there can<br />
be no parallel claim.<br />
• Has the plaintiff sufficiently tied the<br />
alleged federal violation to the harm that<br />
he or she allegedly suffered<br />
Finally, don’t forget that discretion is<br />
sometimes the better part of valor. If the<br />
complaint really does do a thorough job<br />
alleging a parallel claim—and therefore<br />
the judge might be tempted to let the complaint<br />
survive a motion to dismiss—consider<br />
whether it might be better to defer<br />
the preemption arguments for a motion<br />
for summary judgment, following limited<br />
or staged discovery, where the record will<br />
be better developed. As medical device<br />
defense counsel, we should be careful not<br />
to create bad law that the rest of us will have<br />
to deal with!<br />
50 ■ For The Defense ■ October 2012<br />
Practice Pointers for the Implied-<br />
Preemption Argument<br />
When litigating preemption in the medical<br />
device context, it’s important not to forget<br />
about implied preemption. The mere fact<br />
that Medical Device Amendments contain<br />
an express- preemption provision, 21<br />
U.S.C. §360k(a), does not preclude operation<br />
of implied- preemption principles<br />
where appropriate. See Geier, 529 U.S. at<br />
869. After all, there is both statutory and<br />
decisional authority that supports implied<br />
preemption. See 21 U.S.C. §337(a); Buckman,<br />
531 U.S. 341. Thus, even if a claim<br />
is not expressly preempted, it might be<br />
impliedly preempted.<br />
As previewed above, the U.S. Supreme<br />
Court held in Buckman that there is no<br />
“doubt that it is the Federal Government<br />
rather than private litigants who are authorized<br />
to file suit for noncompliance with the<br />
medical device provisions” of federal law.<br />
531 U.S. at 349 n.4. As a result, taken together,<br />
“Riegel and Buckman create a narrow<br />
gap through which a plaintiff’s state<br />
law claim must fit if it is to escape express<br />
or implied preemption.” Bryant, 623 F.3d at<br />
1204. In order to avoid dismissal, a “plaintiff<br />
must be suing for conduct that violates<br />
the FDCA (or else his claim is expressly preempted<br />
by §360k(a)), but the plaintiff must<br />
not be suing because the conduct violates<br />
the FDCA ([because] such a claim would<br />
be impliedly preempted under Buckman).”<br />
Bryant, 623 F.3d at 1204 (internal quotation<br />
marks omitted). In other words, “[f]or<br />
a state-law claim to survive the claim must<br />
be premised on conduct that both (1) violates<br />
the FDCA and (2) would give rise to<br />
a recovery under state law even in the absence<br />
of the FDCA.” Riley v. Cordis Corp.,<br />
625 F. Supp. 2d 769, 777 (D. Minn. 2009).<br />
The most strategically significant use of<br />
implied preemption is knocking out the<br />
sorts of claims that are least vulnerable to<br />
express preemption, because they are premised<br />
on asserted violations of federal law.<br />
But implied preemption can also be used<br />
as a second basis for dismissing a state law<br />
claim, to give the presiding judge added<br />
comfort that his or her decision is correct<br />
and will not be reversed on appeal.<br />
Consider a breach-of-implied-warranty<br />
claim that challenges the safety and effectiveness<br />
of a medical device with Premarket<br />
Approval. Such a claim is expressly<br />
preempted because success on this claim<br />
depends on a jury’s finding that the device<br />
was not, in fact, safe and effective. That is,<br />
state law would require the manufacturer<br />
to have done something different from<br />
or in addition to the federally imposed<br />
requirements in order to honor the safetyand-<br />
effectiveness warranty—be that provide<br />
additional warnings or use a different<br />
design.<br />
This claim also is impliedly preempted.<br />
The FDA conducts a “time- consuming<br />
inquiry into the risks and efficacy of each<br />
device.” Buckman, 531 U.S. at 348. The<br />
jury’s finding of liability on an impliedwarranty<br />
invariably would contradict<br />
the FDA’s conclusive determination, via<br />
the Premarket Approval process, that the<br />
device was safe and effective, and would<br />
“[a]lter[] the balance struck by the FDA” by<br />
imposing a state law requirement “to protect<br />
safety to a greater degree” than determined<br />
to be appropriate by the agency.<br />
Farina v. Nokia Inc., 625 F.3d 97, 126 (3rd<br />
Cir. 2010) (citing Buckman, 531 U.S. at<br />
350–51). As the Third Circuit recognized,<br />
“[a]l low ing juries to perform their own<br />
risk- utility analysis and second- guess the<br />
[agency’s] conclusion would disrupt the<br />
expert balancing underlying the federal<br />
scheme.” Id.<br />
Loose Ends<br />
Finally, defendants shouldn’t forget about<br />
traditional state law bases for dismissal<br />
just because they have a strong federal preemption<br />
argument. All too often, we see<br />
motions to dismiss that leave these arguments<br />
on the table—even when many of<br />
them complement preemption nicely. You<br />
might consider, for example:<br />
• Is there a valid statute of limitations or<br />
statute of repose defense<br />
• Are there any relevant standing requirements<br />
Consumer protection statutes,<br />
for example, sometimes require that the<br />
product be purchased by the plaintiff for<br />
household use.<br />
• Are strict liability and implied warranty<br />
claims barred by Restatement (Second)<br />
of Torts Section 402A, cmt. k, Restatement<br />
(Third) of Torts: Products Liability<br />
Section 6(c), or any equivalent doctrine<br />
regarding “unavoidably unsafe” products<br />
as a matter of state law<br />
• Do warranty claims in this jurisdiction<br />
require a showing of privity<br />
• Have alleged misrepresentations or<br />
a purported express warranty been<br />
pleaded with sufficient particularity<br />
• Are there state law limitations on negligence<br />
per se For example, state law<br />
might not recognize negligence per se<br />
claims based on violations of regulations<br />
(as opposed to statutes) or might contain<br />
a doctrine analogous to Buckman (i.e.,<br />
to the effect that negligence per se isn’t<br />
recognized when it would amount to an<br />
end-run around the absence of a private<br />
right of action).<br />
Conclusion<br />
Given the powerful defense tool that federal<br />
preemption can be in a medical device<br />
product liability action, it’s important to<br />
consider the availability of express preemption<br />
and implied preemption arguments<br />
early on in the case assessment process. But<br />
no matter how strong the preemption arguments<br />
seem, don’t leave traditional state<br />
law defenses on the table. Together, federal<br />
preemption and traditional state law<br />
defenses can often successfully knock out<br />
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Life, Health and Disability<br />
From the Chair<br />
By Gary Schuman<br />
Many<br />
Accomplishments,<br />
but Continued Growth<br />
New, as well as existing,<br />
subcommittees provide<br />
excellent opportunities for<br />
members to participate<br />
in our committee’s<br />
growth and success.<br />
52 ■ For The Defense ■ October 2012<br />
■ Gary Schuman is chair of <strong>DRI</strong>’s Life, Health and Disability Committee. Mr. Schuman is Senior Counsel–Litigation for Combined<br />
Insurance Company of America, in Glenview, Illinois. He is responsible for providing legal advice to the company’s claims, underwriting,<br />
and policyholder service departments, as well as managing nationwide life, health, and disability insurance contract and<br />
bad faith litigation. Mr. Schuman lectures frequently and is widely published on a variety of related topics.
As the chair of <strong>DRI</strong>’s Life, Health and Disability (LHD)<br />
Committee, it is a privilege to write this introduction to<br />
the following collection of articles written by members of<br />
our committee. My two-year term is nearly over, and I’m<br />
proud to report our committee has made<br />
many accomplishments.<br />
The LHD Committee focuses on issues<br />
affecting life and health insurance, including<br />
underwriting, claims, regulatory,<br />
and compliance matters under the various<br />
state laws, as well as ERISA issues. Our<br />
members consist of more than 500 outside<br />
and in-house counsel, as well as claims professionals<br />
employed by or representing this<br />
industry.<br />
Our committee continues to be the leading<br />
resource for LHD attorneys seeking to<br />
maintain and update their industry knowledge<br />
and contacts. If you practice in this<br />
area, I welcome and encourage you to join<br />
our committee now and enjoy the many<br />
benefits of membership.<br />
The LHD Committee contributes to <strong>DRI</strong><br />
in many ways. This issue of For The Defense<br />
represents one of the many ways we reach<br />
out to our members as well as the <strong>DRI</strong><br />
community. Examples include our annual<br />
ERISA litigation compendium; two newsletters<br />
dedicated to general life, health, and<br />
disability issues as well as ERISA, namely<br />
Life, Health and Disability News and <strong>DRI</strong><br />
ERISA Report; a compendium on federal<br />
court removal; periodic webcasts and web<br />
news flashes; and a new one-day seminar<br />
for new lawyers, which was held last<br />
November.<br />
The committee’s showcase event is our<br />
tremendously successful annual LHD/<br />
ERISA Claims Seminar, this year held in<br />
Chicago drawing a record attendance of<br />
more than 500 attorneys and claims professionals.<br />
This seminar not only provided<br />
plenary programs of interest presented by<br />
national experts and a federal magistrate<br />
judge, but also breakout sessions for those<br />
attendees interested in specific areas of the<br />
law such as ERISA, health care, and life<br />
insurance.<br />
Membership continues to grow and we<br />
want to provide our members with a wide<br />
range and variety of information and services<br />
relevant to LHD. In fact, 2012 already<br />
has been a very exciting year for our committee.<br />
We have a number of very active<br />
subcommittees and their work for the<br />
year is well underway. We have added a<br />
new Social Media Law Subcommittee as it<br />
relates to LHD. At least two webinars are<br />
being planned for presentation later this<br />
year by our Life Insurance Subcommittee,<br />
and we just completed a webinar on<br />
the recent U.S. Supreme Court decision on<br />
health care.<br />
These new, as well as our existing, subcommittees<br />
provide excellent opportunities<br />
for new and current members to<br />
participate in our committee’s growth and<br />
success. I strongly encourage anyone interested<br />
to become actively involved in one of<br />
these subcommittees. This will not only<br />
permit you to enhance your knowledge<br />
in this very interesting area of the law but<br />
also to network and to interact with the<br />
industry’s best and brightest practitioners<br />
throughout the country.<br />
Our committee has had many successes.<br />
We must continue to grow through the production<br />
of timely programs and publications<br />
with information important to our<br />
members as well as <strong>DRI</strong>.<br />
I want to personally thank all our current<br />
members for their many and varied<br />
contributions. I also want to extend a welcome<br />
to all of you who are considering joining<br />
our committee. It has been a privilege<br />
and pleasure to chair this committee.<br />
For The Defense ■ October 2012 ■ 53
Life, Health and Disability<br />
Who Pressed<br />
“Enter,” Anyway<br />
By Michelle Thurber Czapski<br />
and Matthew R. Rechtien<br />
Enforcing<br />
Contracts in an<br />
Electronic World<br />
A brief review of the<br />
scope, applicability,<br />
and construction of<br />
the Uniform Electronic<br />
Transactions Act, as well<br />
as how courts have used it<br />
in determining identity.<br />
On any given day the average American may buy a few<br />
items online, do some Internet banking, book a plane<br />
ticket with his or her smart phone, and check or change<br />
insurance coverage on his or her home computer. All of<br />
these activities now seem very normal to<br />
consumers, but it is a new era for practitioners<br />
involved in disputes about these<br />
transactions.<br />
Conducting business online when parties<br />
form contracts electronically presents<br />
many issues, including how and when businesses<br />
can enforce them, how the familiar<br />
rules govern concepts such as offer and<br />
acceptance for these transactions, or how<br />
they stand legally as evidence.<br />
These issues can become even more<br />
acute in the context of life insurance<br />
because disputes most often arise after one<br />
of the contracting parties is no longer alive<br />
to explain his or her intentions or even<br />
whether he or she “signed” an electronic<br />
insurance contract document at all. In<br />
this scenario, it is easy to understand why<br />
courts may force insurers and other companies<br />
that engage in electronic commerce<br />
to show who pressed “enter,” anyway.<br />
Fortunately, the National Conference<br />
of Commissioners on Uniform State Laws<br />
(NCCUSL), informally known as the Uniform<br />
Law Commission, has stepped into<br />
the electronic arena to provide some guidance<br />
with the Uniform Electronic Transactions<br />
Act (UETA). Now adopted in most<br />
states, the UETA provides basic rules and<br />
guidelines for courts and practitioners to<br />
follow in evaluating the efficacy of electronic<br />
transactions. The UETA rules on<br />
attribution and the handful of opinions<br />
construing it also can guide a business in<br />
determining when and how it will accept<br />
an electronic symbol as a “signature” so<br />
that it can have assurance that the person<br />
purporting to do business with it really is<br />
that person.<br />
This article briefly will review the history<br />
of the UETA, explain its scope, applicability,<br />
and construction, and how you<br />
can use it to sort out the identity of someone<br />
doing business electronically, as well<br />
as how courts have used it in determin-<br />
54 ■ For The Defense ■ October 2012<br />
■ Michelle Thurber Czapski is a partner and Matthew R. Rechtien is an associate in Bodman PLC’s Detroit<br />
office. Ms. Czapski chairs the firm’s Insurance Industry Team and specializes in life, health, disability, and<br />
insurance coverage disputes, complex commercial litigation, and class actions. She is the marketing chair of<br />
the <strong>DRI</strong> Life, Health and Disability Committee and vice chair of the Class Action SLG of the Commercial Litigation<br />
Committee. Mr. Rechtien specializes in commercial litigation, insurance, and construction law. He is a<br />
licensed professional engineer in Michigan and Washington.
ing identity. We also offer some practical<br />
tips for navigating the electronic seas as<br />
smoothly as possible.<br />
The History of the UETA<br />
The UETA was promulgated by the NCCUSL<br />
in 1999 to “establish[] the legal equivalence<br />
of electronic records and signatures with<br />
paper writings and manually- signed signatures,<br />
removing barriers to electronic commerce.”<br />
See Unif. Electronic Transactions<br />
Act (1999), http://www. uniformlaws.org/shared/<br />
docs/electronic%20transactions/eta1299.pdf.<br />
As of this writing, 47 states, the District<br />
of Columbia, and the Virgin Islands have<br />
enacted the UETA in some form or another.<br />
Of the jurisdictions that the NCCUSL<br />
tracks, only New York, Washington, Illinois,<br />
and Puerto Rico have abstained, and<br />
Washington has legislation pending and<br />
probably will become the forty- eighth state<br />
to enact the UETA. Of course, the various<br />
state enactments often depart from the<br />
UETA to one degree or another, but the<br />
variations are minor, and this article will<br />
not attempt to catalog them.<br />
In terms of timing, two jurisdictions had<br />
enacted the UETA as early as 1999, California<br />
and Pennsylvania. Georgia was the last<br />
jurisdiction to enact it, in 2009. Other than<br />
a smattering of jurisdictions that enacted<br />
the UETA during the period beginning<br />
in 2002 through 2004—Wisconsin, Colorado,<br />
Connecticut, the Virgin Islands,<br />
South Carolina, Missouri, Massachusetts,<br />
and Alaska—all of the other UETA jurisdictions<br />
had enacted it by 2001.<br />
As conceived, the UETA was a landmark<br />
model statute, the first “comprehensive<br />
effort to prepare state law for the electronic<br />
commerce era.” Unif. Electronic Transactions<br />
Act (1999) (URL above). Indeed,<br />
although when it was promulgated “[m]<br />
any states ha[d] already adopted legislation<br />
pertaining to such matters as digital<br />
signatures,” the UETA represented “the<br />
first national effort at providing some uniform<br />
rules to govern transactions in electronic<br />
commerce that should serve in every<br />
state.” Id.<br />
Scope, Applicability, and Construction<br />
The UETA does not apply to every electronic<br />
signature or record. Section 3 of the<br />
UETA defines its scope, specifying that<br />
it applies to “electronic records and electronic<br />
signatures relating to a transaction,”<br />
subject to express exceptions, and<br />
section 2(16) defines a “transaction” as “an<br />
action or set of actions occurring between<br />
two or more persons relating to the conduct<br />
of business, commercial, or governmental<br />
affairs.”<br />
The UETA does not apply to transactions<br />
“to the extent” that they are “governed by”<br />
(1) the law governing the creation and the<br />
execution of wills and testamentary trusts;<br />
(2) the Uniform Commercial Code, other<br />
than sections 1-107 and 1-206, article 2,<br />
and article 2A; (3) the Uniform Computer<br />
Information Transactions Act (UCITA);<br />
or (4) other laws specifically identified by<br />
an enacting state. Unif. Electronic Transactions<br />
Act §3 (b). For example, Oklahoma<br />
has carved out an exception for any<br />
transaction governed by certain consumer<br />
protection laws. 12A Okla. Stat. Ann. §15-<br />
103(b)(4).<br />
Insurers will want to note that although<br />
the UETA does not apply to transactions<br />
related to wills and testamentary trusts,<br />
it does apply to life insurance policies. So<br />
in the case of an insured who made policy<br />
changes online before dying, his or her<br />
state’s version of the UETA would govern<br />
the validity of those changes if he or she<br />
was in a jurisdiction that had enacted it.<br />
The UETA does apply to electronic<br />
records or signatures “otherwise excluded<br />
from application of” the act as “specified”<br />
under section 3 (b) “to the extent” that laws<br />
“other than those specified” in section 3<br />
(b) govern those transactions. Unif. Electronic<br />
Transactions Act §3(c). Section 3(b)<br />
outlines broad exceptions; we discussed<br />
them above. Importantly, the UETA does<br />
not necessarily displace other laws governing<br />
an underlying transaction: “A transaction<br />
subject to [the UETA] is also subject<br />
to other applicable substantive law.” Unif.<br />
Electronic Transactions Act §3(d).<br />
And section 5 of the UETA allows parties<br />
to opt out of it altogether. Indeed, nothing<br />
in the UETA “require[s] a record or<br />
signature to be created, generated, sent,<br />
communicated, received, stored, or otherwise<br />
processed or used by electronic means<br />
or in electronic form.” Unif. Electronic<br />
Transactions Act §5(a). The UETA applies<br />
only to “parties each of which has agreed to<br />
conduct transactions by electronic means,”<br />
a fact “determined from the context and<br />
surrounding circumstances, including the<br />
parties’ conduct.” Unif. Electronic Transactions<br />
Act §5(b). Consistent with this, “the<br />
effect of any of [the UETA] provisions may<br />
be varied by agreement….” Unif. Electronic<br />
Transactions Act §5(d).<br />
The UETA instructs that it be “construed<br />
and applied” so that it would “facilitate<br />
electronic transactions consistent<br />
with other applicable law… consistent<br />
with reasonable practices concerning electronic<br />
transactions and with the continued<br />
expansion of those practices… to effectuate<br />
its general purpose to make uniform<br />
the law with respect to the subject of [the<br />
UETA] among States enacting it.” Unif.<br />
Electronic Transactions Act §6.<br />
Substance in General<br />
The operative language of the UETA containing<br />
instruction on how to handle electronic<br />
transactions from a legal perspective<br />
appears in section 7:<br />
(a) A record or signature may not be<br />
denied legal effect or enforceability<br />
solely because it is in electronic<br />
form.<br />
(b) A contract may not be denied<br />
legal effect or enforceability solely<br />
because an electronic record was<br />
used in its formation.<br />
(c) If a law requires a record to be in<br />
writing, an electronic record satisfies<br />
the law.<br />
(d) If a law requires a signature, an electronic<br />
signature satisfies the law.<br />
Section 7 elevates electronic records and<br />
signatures to a level on par with paper and<br />
manual signatures. Section 13 of the UETA<br />
does the same for evidence: “In a proceeding,<br />
evidence of a record or signature may<br />
not be excluded solely because it is in electronic<br />
form.”<br />
Notably, however, these provisions “do[]<br />
not attempt to create a whole new system of<br />
legal rules for the electronic marketplace”<br />
but only attempt “to make sure that transactions<br />
in the electronic marketplace are as<br />
enforceable as transactions memorialized<br />
on paper and with manual signatures….”<br />
See Unif. Law Comm’n, Electronic Transactions<br />
Act Summary, http://uniformlaws.org/<br />
ActSummary.aspxtitle=Electronic%20Transactions<br />
%20Act (last visited Aug. 22, 2012).<br />
Recognizing these principles, one court<br />
observed that while “evidence of a record<br />
For The Defense ■ October 2012 ■ 55
Life, Health and Disability<br />
As conceived,the<br />
UETA was a landmark<br />
model statute, the first<br />
“comprehensive effort to<br />
prepare state law for the<br />
electronic commerce era.”<br />
56 ■ For The Defense ■ October 2012<br />
or signature shall not be excluded solely<br />
because it is in electronic form… such<br />
records may be excluded on other evidentiary<br />
bases” because the UETA does not<br />
“alter the requirement that an electronic<br />
record must satisfy evidentiary rules otherwise<br />
applicable to a document[,]” and<br />
a party “must still establish the proper<br />
foundation for admissibility….” Springborn<br />
v. Allstate Ins. Co., No. 292064 (Mich.<br />
Ct. of App. Oct. 7, 2010) (per curiam)<br />
(unpublished).<br />
As the Uniform Law Commission has<br />
explained, “[a]lmost all of the other rules in<br />
[the] UETA [other than the four basic rules<br />
in section 7 discussed above] serve the fundamental<br />
principles set out in Section 7,<br />
and tend to answer basic legal questions<br />
about the use of electronic records and signatures.”<br />
See Unif. Law Comm’s, Electronic<br />
Transactions Act Summary, supra. Stated<br />
differently, the remainder of the UETA puts<br />
the meat on section 7’s skeleton.<br />
For example, section 2 defines key terms<br />
used in section 7 and elsewhere in the<br />
UETA such as “record,” “contract,” “electronic,”<br />
“electronic signature,” and “electronic<br />
record.” Section 10 deals with when<br />
“a change or error in an electronic record<br />
occurs in a transmission between parties<br />
to a transaction.” Section 11 addresses the<br />
application of notarization requirements to<br />
electronic records.<br />
Section 12 generally allows the entities<br />
that it covers to satisfy document retention<br />
laws by retaining electronic records.<br />
Section 8 similarly allows parties to satisfy<br />
laws requiring a “person to provide,<br />
send, or deliver information in writing to<br />
another person” by supplying this information<br />
with electronic records. Section<br />
14 deals with “automated transactions,”<br />
meaning transactions occurring between<br />
“electronic agents of the parties.”<br />
Section 15 is the modern analog to<br />
the ubiquitous “mailbox” rule and governs<br />
when information is legally “sent”<br />
or “received” in electronic form. Finally,<br />
section 16 addresses the treatment of<br />
electronic “transferable records,” meaning<br />
negotiable instruments such as notes<br />
and documents of title under the Uniform<br />
Commercial Code in paper form.<br />
Electronic Signatures<br />
Section 9 is crucial to accomplishing the<br />
main purpose of the UETA. Section 9<br />
fleshes out when the law will consider an<br />
electronic signature attributable to a person,<br />
or, from the point of view of a company<br />
offering to conduct business with its<br />
customers in this way, when the company<br />
can rely upon an electronic expression as<br />
assent to a business agreement.<br />
Given the ever- presence of cybersecurity<br />
and identity theft threats and the<br />
difficulty involved in ascertaining identity<br />
when individuals conduct so many transactions<br />
over the Internet, electronic signature<br />
enforceability has become critical to<br />
a smooth functioning economy. Indeed,<br />
establishing the authenticity and the effect<br />
of an “electronic signature” can present<br />
thorny questions never envisioned when<br />
we simply used paper and ink. Accordingly,<br />
the UETA answers key questions such as<br />
what is an “electronic signature,” to whom<br />
does it belong, and what is its legal effect<br />
In answer to the first question, what is<br />
an electronic signature, section 2 of the<br />
UETA defines an “[e]lectronic signature”<br />
as an “electronic sound, symbol, or process<br />
attached to or logically associated with a<br />
record and executed or adopted by a person<br />
with the intent to sign the record.” (emphasis<br />
added).<br />
In answer to the second question, to<br />
whom does an electronic signature belong,<br />
section 9 of the UETA specifies that “[a]n<br />
electronic record or electronic signature<br />
is attributable to a person if it was the act<br />
of the person.” (emphasis added). Section 9<br />
continues: “The act of the person may be<br />
shown in any manner, including a showing<br />
of the efficacy of any security procedure<br />
applied to determine the person to which<br />
the electronic record or electronic signature<br />
was attributable.”<br />
In short, one, but not the only way to<br />
prove that an “electronic signature” is “the<br />
act of the person” to whom it is attributed<br />
is through proving the “efficacy” of<br />
the security procedures associated with its<br />
generation.<br />
In answer to the final question, what is<br />
the electronic signature’s effect, section 9 of<br />
the UETA answers as follows: “[t]he effect<br />
of an electronic record or electronic signature<br />
attributed to a person… is determined<br />
from the context and surrounding<br />
circumstances at the time of its creation,<br />
execution, or adoption, including the parties’<br />
agreement, if any, and otherwise provided<br />
by law.”<br />
Caselaw on the Attribution of<br />
Electronic Signatures<br />
Although the UETA in some form has<br />
been on the books in at least 39 jurisdictions<br />
since 2001, a nationwide survey of the<br />
UETA- related reported opinions suggests<br />
that the law has not generated much controversy.<br />
Of the few court opinions to construe<br />
the statute a number have focused on<br />
the electronic signature, the critical transaction<br />
element, and provide a glimpse of<br />
the issues likely to arise in litigation.<br />
What Constitutes an<br />
“Electronic Signature”<br />
One of the signature- related issues to have<br />
reached appellate review is what constitutes<br />
an electronic signature. Think of your<br />
last electronic transaction. Which of your<br />
various mouse clicks meant that you had<br />
“signed” a contract How does the law<br />
interpret sending an e-mail Is an e-mail<br />
confirmation sufficient<br />
Cunningham v. Zurich American Ins.<br />
Co., 352 S.W.3d 519, 529–31 (Tex. App.<br />
2011), considered whether an insurance<br />
carrier’s attorney’s e-mail to a medical malpractice<br />
plaintiff formed a binding settlement<br />
contract. The e-mail contained the<br />
essential terms of a settlement agreement,<br />
but obviously, it did not have a manual signature,<br />
and under Texas law, settlement<br />
agreements between attorneys or parties<br />
in a pending lawsuit must be in writing<br />
and signed.<br />
Applying Tex. Bus. & Com. Code<br />
§322.002 and §322.009, which correspond
to sections 2 and 9 of the UETA, Cunningham<br />
held that the attorney’s e-mail “signature<br />
block” containing the attorney’s name<br />
and contact information did not constitute<br />
an “electronic signature ” attributable<br />
to the sender without other evidence that<br />
the sender intended the block to serve as<br />
a signature.<br />
Cunningham rested on the UETA<br />
requirements that an “electronic signature”<br />
be “executed or adopted by” the attorney,<br />
“with the intent to sign the record,”<br />
and the electronic signature be “the act of<br />
the” attorney. In citing this language, the<br />
court noted that evidence didn’t exist that<br />
the attorney actually typed the signature<br />
block, or agreed or intended it to serve as<br />
a signature and further observed that “[t]<br />
here is nothing to show that the signature<br />
block was… not generated automatically<br />
by her email client.” The court also emphasized<br />
that even if the attorney had typed the<br />
block, “nothing in the email suggests that<br />
she did so with the intention that the block<br />
be her signature….”<br />
Accordingly, the court declined<br />
to hold that the mere sending by [the<br />
attorney] of an email containing a signature<br />
block satisfies the signature<br />
requirement when no evidence suggest<br />
that the information was typed purposefully<br />
rather than generated automatically,<br />
that [the attorney] intended<br />
the typing of her name to be her signature,<br />
or that the parties had previously<br />
agreed that this action would constitute<br />
a signature.<br />
When Is an “Electronic<br />
Signature” Attributable<br />
The second question noted above is, assuming<br />
that an “electronic signature” does<br />
exist, when have you established attribution<br />
sufficiently In other words, how do<br />
you know that the person with whom you<br />
have concluded a transaction is really that<br />
person<br />
This is a question addressed by the recent<br />
decision in Zulkiewski v. American General<br />
Life Insurance Company, No. 299025<br />
(Mich. Ct. App. June 12, 2012) (per curiam)<br />
(unpublished). Zulkiewski involved an insured<br />
physician who, shortly before committing<br />
suicide, purportedly accessed his<br />
life insurer’s “eService” system, signed up<br />
to do business electronically, and electronically<br />
changed the beneficiary designation<br />
from his parents to his new bride.<br />
After the insured’s death, the widow,<br />
who was the beneficiary of record, claimed<br />
entitlement to the proceeds. However, so<br />
did the insured’s parents, who claimed that<br />
the insured did not actually make the electronic<br />
beneficiary change, and therefore, it<br />
was invalid. Before the insurer could file<br />
an interpleader action, the widow sued<br />
the insurer, seeking the proceeds of the<br />
policy. The insurer answered and filed a<br />
third-party interpleader complaint and<br />
counterclaim against the widow and the<br />
parents. The parents answered and countersued<br />
the insurer for breach of the insurance<br />
contract.<br />
So the parents jointly and the widow of<br />
the deceased separately sued the insurer<br />
even though it filed a complaint for interpleader<br />
in which it offered to deposit the<br />
entire policy proceeds with the court. Both<br />
the widow and the insurer promptly moved<br />
for summary judgment, both of which<br />
Care Facility Administration<br />
Lisa A. Thorsen, Ed.D., C.R.C., C.P.S.I.<br />
Care Facility Administration<br />
the trial court granted after finding the<br />
absence of a genuine issue of fact about<br />
whether the beneficiary change was attributable<br />
to the deceased.<br />
The parents appealed, arguing that<br />
even though they did not have proof that<br />
an imposter had changed the beneficiary<br />
designation, the insurer nevertheless<br />
owed them the benefit. The parents further<br />
argued that the insurer had presented<br />
insufficient evidence about the security<br />
of its “eService” system as was required<br />
to prove attribution under Mich. Comp.<br />
Laws §450.839(1), corresponding to section<br />
9 of the UETA, or that the decedent actually<br />
made the change. The Zulkiewski court<br />
rejected this argument, holding that showing<br />
the efficacy of a security procedure was<br />
not a requirement but merely “one method<br />
by which to show attribution,” and the<br />
insurer had presented sufficient evidence to<br />
avoid a genuine issue of whether the change<br />
“was the act of the [deceased]” as required<br />
by Mich. Comp. Laws §450.839(1).<br />
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For The Defense ■ October 2012 ■ 57
Life, Health and Disability<br />
In particular, the court pointed out the<br />
“safeguards” built into the insurer’s “eService”<br />
system for “subsequent beneficiary<br />
change[s][,]” including requiring knowledge<br />
of the insured’s policy number, social<br />
security number, mother’s maiden name,<br />
and e-mail address, and its transmission<br />
of related notifications to the insured by<br />
both regular mail and by e-mail. Finally,<br />
One of the signaturerelated<br />
issues to have<br />
reached appellate review<br />
is what constitutes an<br />
electronic signature.<br />
the court relied on the affidavit of the<br />
widow—the implied imposter—in which<br />
she “den[ied] her… involvement in making<br />
the disputed change” and stated “ that<br />
[the] decedent was highly computer- literate<br />
and had also made [her] the beneficiary of<br />
other insurance policies.”<br />
Holmes v. Air Liquide USA LLC, 2012<br />
WL 267194, at *3 (S.D. Tex. Jan. 30, 2012),<br />
dealt with similar issues. In Holmes, a<br />
plaintiff claimed not to remember “giving<br />
her assent” to what indisputably qualified<br />
as an “electronic signature” to an<br />
agreement to arbitrate and argued that<br />
“the Court simply cannot know for sure<br />
whether [her] computer- generated acceptance<br />
of the [arbitration] agreement represents<br />
her signature.” The court gave the<br />
plaintiff’s overly rigorous standard short<br />
shrift, pointing out that “the inability to<br />
be 100 percent certain is not unique to<br />
electronic signatures” and the burden of<br />
proving attribution under the UETA, corresponding<br />
here to Tex. Bus. & Com. Code<br />
§322.001 to §322.021, is lower.<br />
This is, of course, consistent with the<br />
UETA goal of putting the electronic on par<br />
with the physical. The court attributed the<br />
signature to the plaintiff based on proof<br />
that whoever created the electronic signature<br />
on the arbitration agreement would<br />
have to have had the plaintiff’s “unique log<br />
in information to access her computer, her<br />
58 ■ For The Defense ■ October 2012<br />
email, her eHR site.” Such measures, the<br />
court wrote, made it “highly unlikely” that<br />
the assent was that of anyone other than<br />
the plaintiff. Indeed, the court held “that<br />
[the] Defendants have met their burden of<br />
establishing, by a preponderance of evidence,<br />
that a valid agreement to arbitrate<br />
exists between the parties.”<br />
The attribution of an electronic signature<br />
was also disputed in Martyn v. J.W.<br />
Korth & Co., 2011 WL 2144618, at *2–3<br />
(W.D. Mich. June 1, 2011). In Martyn, the<br />
court attributed a signature on an agreement<br />
to arbitrate to the plaintiff for numerous<br />
reasons. First, after undertaking a<br />
“cursory inspection of the [agreement]<br />
Form” the court concluded that the plaintiff’s<br />
“signature appear[ed] on the document.”<br />
Second, the plaintiff failed to proffer<br />
proof to dispute that he signed the document<br />
electronically. Third, the defendant<br />
established that the plaintiff would have<br />
had to sign the form to ply his trade as a<br />
FINRA- registered broker. Fourth, the defendant<br />
offered other extrinsic evidence,<br />
such as e-mail and fax exchanges, indicating<br />
that the plaintiff had executed the<br />
document.<br />
Furthermore, the form used in Martyn<br />
contained a section titled, “Individual/Applicant’s<br />
Acknowledgement and<br />
Consent,” which stated that the “Applicant<br />
or applicant’s agent has typed applicant’s<br />
name under this section to attest<br />
to the completeness and accuracy of this<br />
record” and “[t]he applicant recognizes<br />
that this typed name constitutes, in every<br />
way, use or aspect, his legally binding signature.”<br />
Additionally, the court noted that<br />
the plaintiff’s typed name appeared below<br />
those statements and directly below text<br />
that read “Signature of the Applicant.” As<br />
in Holmes, the court rejected out of hand<br />
the plaintiff’s argument that he “‘ha[d] no<br />
recollection of signing this contract,’” citing<br />
a mountain of authority holding that<br />
this was not a defense that courts would<br />
accept when it came to manual signatures,<br />
again reflecting the UETA’s elevation of<br />
electronic signatures to the same level.<br />
The enforceability of an electronically<br />
signed arbitration agreement was again<br />
disputed in Adams v. Superior Court, 2010<br />
WL 602515, at *3–5 (Cal. Ct. App. Feb. 22,<br />
2010). This time, the court, relying on the<br />
UETA, agreed with a plaintiff’s argument<br />
that the defendant did not present evidence<br />
to demonstrate that “she typed in the electronic<br />
evidence and, even if she did, there<br />
is no evidence she actually agreed to arbitrate.”<br />
Relying on Cal. Civ. Code §1633.9,<br />
which corresponds to the UETA section 9,<br />
the court in Adams would not attribute a<br />
signature to a plaintiff to enforce the agreement<br />
because some fields in the agreement<br />
“were filled in by someone other than [the<br />
plaintiff] before the form was sent to her<br />
for editing.” Explaining the decision further<br />
the court also noted that the plaintiff<br />
did not create a login, numerous people<br />
“could have… edited” the agreement, and<br />
there was “no electronic record of when [the<br />
plaintiff’s] full legal name was entered in the<br />
space following the arbitration agreement.”<br />
In short, the court concluded that without<br />
“affirmative evidence” that the plaintiff<br />
had “filled in her full legal name on the<br />
form” the defendant had failed to prove<br />
attribution by a preponderance of the evidence.<br />
The Adams court noted that the only<br />
“evidence offered to contradict [the plaintiff’s]<br />
denial was… testimony that [the<br />
plaintiff] had to scroll all the way to the<br />
bottom of the form and click on ‘save’ to<br />
exit the form and” transmit it, which simply<br />
was “not evidence that she typed in her<br />
full legal name.” The court also commented<br />
that the form’s “security procedure did not<br />
operate here to make it more likely than not<br />
[that] it was [the plaintiff] who typed in the<br />
electronic signature.”<br />
Finally, burying the lead, the court noted<br />
that even if the electronic signature had<br />
belonged to the plaintiff, the court would<br />
not have enforced the arbitration agreement<br />
for apparently paternalistic reasons:<br />
“This is another example of an employer<br />
burying a predispute arbitration agreement<br />
in paperwork that does not facilitate<br />
an informed choice on the part of the<br />
employee.”<br />
When Is an “Electronic<br />
Signature” Effective<br />
Although section 7 of the UETA is quite<br />
definitive about the effect of an “electronic<br />
signature,” specifying that “…[a] signature<br />
may not be denied legal effect or enforceability<br />
solely because it is in electronic<br />
form,” parties do occasionally challenge<br />
that rule. Indeed, the plaintiff in Martyn,<br />
2011 WL 2144618, at *2–3 (W.D. Mich. June
1, 2011), did just that. In Martyn, the court<br />
granted a defendant’s motion to compel<br />
arbitration. The Martyn court cited both<br />
Mich. Comp. Laws §450.837, modeled after<br />
the UETA, and federal law, 15 U.S.C. §7001,<br />
to hold that the plaintiff’s typed name on<br />
an electronic document that stated that the<br />
“applicant recognizes that this typed name<br />
constitutes, in every way, use or aspect, his<br />
legally binding signature,” sufficiently permitted<br />
the court to enforce the agreement.<br />
In re Piranha, Inc., 83 F. App’x 19, 22–23<br />
(5th Cir. 2003), involved a more nuanced<br />
argument concerning the “effect” of an<br />
“electronic signature attributed to a person.”<br />
In Piranha, the Fifth Circuit affirmed<br />
the Bankruptcy court’s refusal to enforce<br />
the electronic signature of a person who<br />
contended that he filed the signaturebearing<br />
form in error three hours after<br />
it was forwarded to him by e-mail by the<br />
bankrupt party’s legal department. Relying<br />
on the language of UETA section 9(b)<br />
as enacted in 6 Del. Code Ann. §109(b),<br />
the court declined to fault the Bankruptcy<br />
court’s consideration of that context, meaning<br />
the person’s mistake, in not enforcing<br />
the electronic signature.<br />
The court rejected the counterargument,<br />
which centered on section 6 Del. Cod. Ann.<br />
§107(a), which dictated that “‘[a]… signature<br />
may not be denied legal effect or<br />
enforceability solely because it is in electronic<br />
form,’” noting that the person did<br />
not “attempt to deny the legal effect of his<br />
signature ‘solely because it is in electronic<br />
form,’ but because he did not ‘execute[],<br />
adopt[][,] or authorize[]’ it….”<br />
A Word About the Electronic<br />
Signatures in Global and<br />
National Commerce Act<br />
On June 30, 2000, the United States Congress<br />
enacted the Electronic Signatures<br />
in Global and National Commerce Act<br />
(ESIGN), codified at 15 U.S.C. §7001 et<br />
seq., which, similar to the UETA, supports<br />
using electronic records and signatures<br />
in interstate and foreign commerce by<br />
placing them on equal footing with paper<br />
records and manual signatures. ESIGN covers<br />
ground that has some relationship to<br />
the UETA. At core, ESIGN specifies that a<br />
contract or signature “may not be denied<br />
legal effect, validity, or enforceability solely<br />
because it is in electronic form.”<br />
Nevertheless, the UETA and ESIGN are<br />
not identical in scope or in substance. NC-<br />
CUSL, for one, takes the position that the<br />
UETA is “more comprehensive” than ESIGN<br />
in that it “include[s] subjects not addressed”<br />
by ESIGN, and the UETA addresses various<br />
issues differently. In terms of scope, for example,<br />
while the UETA addresses attribution,<br />
ESIGN does not.<br />
ESIGN also lacks provisions to deal with<br />
the admissibility of electronic records,<br />
party agreements concerning the use of<br />
electronic media, electronic records transmission<br />
timing questions, mistakes or<br />
errors in electronic communications, and<br />
the scope of transferable records. Therefore,<br />
although ESIGN may bolster a litigant’s<br />
effort to enforce electronic transactions,<br />
the UETA will provide the support that the<br />
litigant will need to address signature attribution<br />
and legal effect successfully.<br />
Practical Pointers<br />
Although you cannot offer your client an<br />
iron-clad guarantee that the client can<br />
enforce an electronic transaction as written<br />
(or a paper transaction, for that matter),<br />
here are some suggestions for dealing<br />
with the realities of today’s Internet business<br />
environment so that the UETA won’t<br />
trip up your client.<br />
• The more security hurdles associated<br />
with an electronic signature, the better.<br />
Obviously, security measures should<br />
make it as difficult as possible for anyone<br />
other than the person to whom your client<br />
would need to attribute a signature<br />
to have created the signature. As Zulkiewski<br />
shows, whoever creates an electronic<br />
signature should have to know<br />
things that only the real contracting<br />
party would have known. Zulkiewski,<br />
No. 299025 (Mich. Ct. App. June 12,<br />
2012) (per curiam) (unpublished). See<br />
also Holmes, 2012 WL 267194, at *3 (S.D.<br />
Tex. Jan. 30, 2012).<br />
• Create, save, and keep screen shots of<br />
electronic signatures.<br />
• Just as would happen with a manual signature,<br />
having other forms of confirming<br />
evidence—paper correspondence<br />
reflecting the contract or an affidavit<br />
from the most likely imposter—would<br />
help. Zulkiewski, No. 299025 (Mich.<br />
Ct. App. June 12, 2012) (per curiam)<br />
(unpublished). See also Martyn, 2011<br />
WL 2144618, at *2–3 (W.D. Mich. June<br />
1, 2011).<br />
• The “I don’t remember” defense will lose<br />
when someone tries to use it to deny an<br />
electronic signature’s legitimacy.<br />
• When electronic transactions involve<br />
“consumer protection” issues—adhesion<br />
contracts and vast discrepancies in<br />
bargaining power—a court may go further<br />
to avoid attribution. See Adams,<br />
2010 WL 602515, at *3–5 (Cal. Ct. App.<br />
Feb. 22, 2010).<br />
• Use very explicit language on e-forms:<br />
“Applicant [name] has typed applicant’s<br />
name under this section to attest to<br />
the completeness and accuracy of this<br />
record”; “Applicant recognizes that this<br />
typed name constitutes, in every way,<br />
use or aspect, his legally binding signature”;<br />
and “Signature of the Applicant.”<br />
See Martyn, 2011 WL 2144618, at *2–3<br />
(W.D. Mich. June 1, 2011).<br />
• Your client can become the master of<br />
its transactions. A client can agree to a<br />
modified version of the UETA for electronic<br />
transactions, or a client can opt<br />
out of the UETA and agree to other, more<br />
specific rules of engagement, especially<br />
in business- to- business transactions.<br />
• In addition, if you or a client mistakenly<br />
signs something electronically, attempt<br />
to retract it as soon as possible.<br />
Conclusion<br />
We undeniably have entered an electronic<br />
age. Business is moving inexorably toward<br />
a paperless environment. As practitioners<br />
and counselors we must stay abreast of the<br />
types of activities that courts will uphold<br />
as valid electronic actions and which types<br />
they will not. In most circumstances, a signature<br />
as the key to an electronic transaction<br />
is the most vulnerable to attack.<br />
However, with proper security measures<br />
and confirmatory activities, your client can<br />
protect electronic signatures.<br />
While the UETA offers guidance, we will<br />
not know its precise legal contours until<br />
more courts rule on its terms. Meanwhile,<br />
put yourself in your client’s shoes: have<br />
you done all that you can to make sure that<br />
your client’s customers “are who they say”<br />
and “mean what they’ve clicked” when they<br />
press “enter”<br />
For The Defense ■ October 2012 ■ 59
Life, Health and Disability<br />
The Vexation of<br />
Conflicting Claims<br />
By E. Ford Stephens<br />
Rule and Statutory<br />
Interpleaders in<br />
Federal Court<br />
At the end of the day,<br />
interpleader remains<br />
a valuable tool for<br />
stakeholders to avoid<br />
the expense of double<br />
litigation and the risk<br />
of double liability.<br />
Entities such as banks, escrow agents, and insurers that<br />
hold assets or proceeds on behalf of others can find themselves<br />
dealing with claimants competing for the same<br />
funds. An interpleader allows a stakeholder that “fears the<br />
prospect of multiple liability to file suit,<br />
deposit the property with the court, and<br />
withdraw from the proceedings.” Metropolitan<br />
Life Ins. Co. v. Price, 501 F.3d 271,<br />
275 (3d Cir. 2007).<br />
The typical interpleader action has<br />
two distinct stages. A court determines<br />
whether the interpleader action is proper<br />
and whether to discharge the filing party,<br />
known as the stakeholder, from liability.<br />
Then, the court determines the rights of<br />
the claimants, who the stakeholder names<br />
as defendants in the action. This article<br />
focuses on the first stage of federal interpleader<br />
actions.<br />
There are two types of interpleaders in<br />
the federal courts. Perhaps the more commonly<br />
known interpleader is provided by<br />
Federal Rule of Civil Procedures 22 and<br />
known as “rule interpleader.” The other is<br />
authorized by 28 U.S.C. §1335, and known<br />
as “statutory interpleader.”<br />
These interpleaders share some of the<br />
same characteristics, such as the circumstances<br />
under which a stakeholder may file<br />
an action. However, they differ significantly<br />
regarding subject matter jurisdiction, personal<br />
jurisdiction, and service of process.<br />
Similarities exist between the two types<br />
of interpleaders when it comes to claimant<br />
counterclaims, possible reimbursement for<br />
costs and attorneys’ fees, and discharging a<br />
stakeholder from further liability.<br />
Fear of Exposure to Double Liability<br />
or the Vexation of Conflicting Claims<br />
As reflected in both rule interpleader and<br />
statutory interpleader, a stakeholder facing<br />
competing claims may bring an action<br />
against the claimants to require them to<br />
interplead their claims in one action. See<br />
Fed. R. Civ. P. 22 (“Persons with claims that<br />
may expose a plaintiff to double or multiple<br />
liability may be joined as defendants and<br />
required to interplead”); 28 U.S.C. §1335<br />
(authorizing an interpleader when “[t]wo<br />
or more adverse claimants, of diverse citizenship<br />
as defined in subsection (a) or (d)<br />
60 ■ For The Defense ■ October 2012<br />
■ E. Ford Stephens is a partner at Christian & Barton, LLP, in Richmond, Virginia, focusing on insurance litigation and appeals.<br />
He has handled insurance- related appeals in the Fourth Circuit, the Fifth Circuit, and the Supreme Court of Virginia. Mr. Stephens<br />
is listed in Virginia Super Lawyers Magazine for business litigation, and is a frequent speaker and author on insurance<br />
topics. He is active in several <strong>DRI</strong> committees, recently having been named as vice chair of the Life, Health and Disability Committee,<br />
and is a member of the International Association of Defense Counsel.
of [28 U.S.C. §1332], are claiming or may<br />
claim to be entitled to such money or property,<br />
or to any one or more of the benefits<br />
arising by virtue of any note, bond, certificate,<br />
policy or other instrument, or arising<br />
by virtue of any such obligation”). <strong>Courts</strong><br />
may entertain an interpleader even though<br />
the titles or claims of the conflicting claimants<br />
do not have a common origin, or are<br />
not identical, but are adverse to and independent<br />
of one another. Id.<br />
The “purpose of an interpleader bill is as<br />
much to protect a stakeholder from the expense<br />
of double litigation, however groundless,<br />
as it is to protect him from the risk of<br />
double liability.” Metropolitan Life Ins. Co.<br />
v. Segaritis, 20 F. Supp. 739, 741 (E.D. Pa.<br />
1937). As a result, courts typically describe<br />
the threshold for bringing such an action<br />
this way: “So long as there exists a ‘real and<br />
reasonable fear of exposure to double liability<br />
or the vexation of conflicting claims,<br />
jurisdiction in interpleader is not dependent<br />
upon the merits of the claims of the parties<br />
interpleaded.’” The Union Central Life Ins.<br />
Co. v. Hamilton Steel Products, 448 F.2d<br />
501, 504 (7th Cir. 1971) (quoting Bierman<br />
v. Marcus, 246 F.2d 200, 202 (3d Cir. 1957),<br />
cert. denied sub nom., Milmar Estate, Inc.<br />
v. Marcus, 356 U.S. 933 (1958)).<br />
This holds true even when a stakeholder<br />
believes that only one of the competing<br />
claims is meritorious, assuming that the<br />
stakeholder acts in good faith. Hunter v.<br />
Federal Life Ins. Co., 111 F.2d 551, 556 (8th<br />
Cir. 1940); National Life Ins. Co. v. Alembik-<br />
Eisner, 582 F. Supp. 2d 1362, 1367 (N.D. Ga.<br />
2008) (“The fact that one claimant eventually<br />
disclaimed any right to the proceeds<br />
did not make the interpleader action<br />
inappropriate.”).<br />
Moreover, at least one treatise has<br />
stated that “courts should not dismiss an<br />
interpleader action simply because the<br />
claims confronting plaintiff have not been<br />
asserted.” 7 Charles Alan Wright, Arthur<br />
R. Miller & Mary Kay Kane, Federal Practice<br />
& Procedure §1701 (2001). See also<br />
Alembik- Eisner, 582 F. Supp. 2d at 1366<br />
(“an actual claim need not exist but rather<br />
only the possibility that more than one person<br />
will claim”). Finally, a stakeholder can<br />
file an interpleader even if it asserts some<br />
interest in the res or denies liability in<br />
whole or in part to any or all of the claimants.<br />
Fed. R. Civ. P. 22; Reliance National<br />
Ins. Co. v. Great Lakes Aviation, Ltd., 430<br />
F.3d 412, 417 (7th Cir. 2005).<br />
Yet, some courts have defined an outer<br />
limit for filing an interpleader, as when an<br />
“adverse claim may be so wanting in substance<br />
that interpleader may not be justified.”<br />
Bierman v. Marcus, 246 F.2d 200, 202<br />
(3d Cir. 1957) (dismissing an interpleader<br />
complaint as not predicated upon any bona<br />
fide fear of vexatious conflicting claims). In<br />
addition, a stakeholder typically cannot file<br />
an interpleader after it already has paid the<br />
funds at issue. See Lincoln National Life Ins.<br />
Co. v. Barton, 250 F.R.D. 388 (S.D. Ill. 2008).<br />
In sum, if a stakeholder has contested<br />
assets or funds in its possession and it can<br />
articulate a reasonable fear of exposure to<br />
double liability or the vexation of conflicting<br />
claims to such funds, it typically can<br />
file an interpleader.<br />
Key Differences Between Rule<br />
and Statutory Interpleaders<br />
When it comes to subject matter jurisdiction,<br />
personal jurisdiction, and service of<br />
process, significant differences exist between<br />
rule interpleader and statutory interpleader.<br />
Practitioners not familiar with the<br />
latter type of interpleader may be pleasantly<br />
surprised by the advantages that it offers.<br />
An interpleader action based upon Federal<br />
Rule of Civil Procedure 22 “does not<br />
provide an independent basis for jurisdiction….”<br />
Correspondent Services Corp.<br />
v. First Equities Corp. of Florida, 338 F.3d<br />
119, 124 (2d Cir. 2003). To exercise its powers<br />
under rule interpleader, a federal court<br />
must first have subject matter jurisdiction,<br />
such as diversity jurisdiction under<br />
28 U.S.C. §1332. In other words, without a<br />
federal question, a stakeholder must establish<br />
diversity jurisdiction; i.e., complete<br />
diversity of citizenship between it and the<br />
claimants, and that the amount in controversy<br />
exceeds the sum or value of $75,000,<br />
exclusive of interest and costs. See, e.g., St.<br />
Louis Union Trust Co. v. Stone, 570 F.2d 833,<br />
835 (8th Cir. 1978).<br />
On the other hand, as explained below,<br />
statutory interpleader (1) has a lower<br />
threshold for the amount in controversy;<br />
(2) requires only “minimal” diversity<br />
among the claimants; (3) requires a stakeholder<br />
to deposit the funds at issue or a<br />
bond with the court; and (4) allows nationwide<br />
service of process.<br />
First, with statutory interpleader, the<br />
amount in controversy can be less than<br />
$75,000; the res can be as small as $500. 28<br />
U.S.C. §1335(a).<br />
Second, a stakeholder does not need<br />
to establish complete diversity for statutory<br />
interpleader. There need be only two<br />
adverse claimants of diverse citizenship<br />
as defined in 28 U.S.C. §1332, who are<br />
claiming or may claim to be entitled to the<br />
funds at issue. 28 U.S.C. §1335(a)(1). This<br />
is referred to as minimal diversity, “[t]hat<br />
is, diversity of citizenship between two or<br />
more claimants without regard to the circumstances<br />
that other rival claimants may<br />
be cocitizens.” State Farm Fire & Casualty<br />
Co. v. Tashire, 386 U.S. 523, 530 (1967).<br />
Indeed, courts have noted that there need<br />
not be diversity between the stakeholder<br />
and all of the claimants as long as minimal<br />
diversity exists between at least two of<br />
the claimants. See, e.g., Blue Cross & Blue<br />
Shield v. Nooney Krombach Co., 170 F.R.D.<br />
467, 471 (E.D. Mo. 1997).<br />
Third, a prerequisite for jurisdiction under<br />
28 U.S.C. §1335(a)(2) is that a stakeholder<br />
must deposit with the court either<br />
the funds at issue or a bond payable to the<br />
clerk of the court in such amount and with<br />
surety as required by the court. It creates<br />
a jurisdictional defect when a stakeholder<br />
fails to deposit the funds in question into<br />
the registry of a court, but the stakeholder<br />
can cure that defect. Lincoln Gen’l Ins. Co.<br />
v. State Farm Mut. Auto. Ins. Co., 425 F.<br />
Supp. 2d 738, 742 (E.D. Va. 2006). This simultaneous<br />
deposit requirement can present<br />
a bit of a “chicken and egg” situation; the<br />
funds must be deposited into the court, 28<br />
U.S.C. §1335(a)(2), for the court to have jurisdiction,<br />
but Federal Rule of Civil Procedure<br />
67, which governs the deposit of funds<br />
into court, requires that the party making<br />
such a deposit provide “notice to every other<br />
party” and secure “leave of court.”<br />
One way to deal with this situation is to<br />
file, along with a complaint for interpleader,<br />
a draft order to deposit the funds as well as<br />
the funds themselves. Counsel should consider<br />
contacting the clerk’s office before filing<br />
to make sure that the draft order has the<br />
necessary language about how the court<br />
will hold the funds. Also, if the court’s local<br />
rules do not require a separate motion<br />
and supporting brief under Federal Rule of<br />
Civil Procedure 67, counsel should consider<br />
For The Defense ■ October 2012 ■ 61
Life, Health and Disability<br />
explaining the deposit requirement of 28<br />
U.S.C. §1335 in the cover letter to the court<br />
when filing the complaint. It also may be a<br />
good idea for the stakeholder to serve copies<br />
of the pleadings regarding the deposit of<br />
the funds on the claimants along with copies<br />
of the complaint.<br />
The fourth difference between rule<br />
interpleader and statutory interpleader is<br />
Once the… defendants<br />
are before a court, it is time<br />
for the stakeholder to begin<br />
making its exit from the case.<br />
nationwide service. As noted above, a district<br />
court may issue its process, which<br />
“shall be addressed to and served by the<br />
United States marshals for the respective<br />
districts where the claimants reside or may<br />
be found.” 28 U.S.C. §2361.<br />
As one court has noted, “28 U.S.C. §1335,<br />
and the nationwide service of process provision<br />
of 28 U.S.C. §2361, empowers federal<br />
district courts to entertain interpleader<br />
actions irrespective of an individual claimant’s<br />
contacts (or lack of contacts) with the<br />
forum state.” McGuckin v. Metropolitan<br />
Life Ins. Co., 1996 U.S. Dist. Lexis 2826,<br />
at *3 (E.D. Pa. 1996). See also The Equitable<br />
Life Assur. Society v. Miller, 229 F. Supp.<br />
1018, 1020 (D. Minn. 1964) (“The availability<br />
of nationwide service of process under<br />
the Federal interpleader (28 U.S.C. §2361)<br />
provides a party who may be subjected to<br />
multiple liability with a remedy in Federal<br />
courts which would be otherwise unavailable<br />
to him in any State court”). Whereas a<br />
stakeholder might have difficulty rounding<br />
up the claimants if it were to rely solely on<br />
a state long arm statute or state law means<br />
of service, it should have no such difficulty<br />
with a statutory interpleader in a federal<br />
court under 28 U.S.C. §2361.<br />
Service under 28 U.S.C. §2361 probably<br />
can be made through a waiver of<br />
service of summons. The statute provides<br />
that defendants are to be served by “the<br />
United States marshals for the respective<br />
districts where the claimants reside or may<br />
62 ■ For The Defense ■ October 2012<br />
be found.” Id. This is not the typical means<br />
of service under Federal Rule of Civil Procedure<br />
4. See, e.g., Fed. R. Civ. P. 4(c)(3)<br />
(service by U.S. marshal is only allowed<br />
by court order). However, under Federal<br />
Rule of Civil Procedure 4(k)(1)(C), “filing a<br />
waiver of service establishes personal jurisdiction<br />
over a defendant… when authorized<br />
by federal statute.” Id. As one court<br />
has explained:<br />
[U]nder the Rules Enabling Act [28<br />
U.S.C. §2072], all federal statutes that<br />
are inconsistent with the Federal Rules<br />
of Civil Procedure are to be considered<br />
modified to the extent necessary to harmonize<br />
the two. Thus, when the federal<br />
interpleader statute provides for service<br />
by a U.S. Marshal, “that statute should<br />
be considered modified by the 1983 revision<br />
of Federal Rule of Civil Procedure 4<br />
to authorize service by adult nonparties<br />
under Rule 4(c)(2)(A)… by mail under<br />
Rule 4(c)(2)(C)(ii).”<br />
McGuckin, 1996 U.S. Dist. Lexis 2826,<br />
at *4–5 (citations omitted). As a result,<br />
according to Federal Rule of Civil Procedure<br />
4(d)(4), when an interpleader stakeholder<br />
as plaintiff files a waiver executed by<br />
a defendant, proof of service should not be<br />
required, and the federal rules should apply<br />
as if a summons and complaint had been<br />
served at the time of the filing of the waiver.<br />
The Responses—Answers,<br />
Counterclaims, and Defaults<br />
Once they have been served as defendants<br />
in either a rule interpleader or a statutory<br />
interpleader, claimants typically file<br />
answers asserting their claims over the<br />
funds in dispute.<br />
Sometimes claimants also assert counterclaims<br />
against the stakeholder. Fortunately,<br />
the interpleader process can offer<br />
a stakeholder some protection from affirmative<br />
claims if they are based on a claimant’s<br />
assertion that the stakeholder should<br />
have paid him or her as opposed to the<br />
other claimants.<br />
For instance, in The Prudential Ins. Co.<br />
of Am. v. Hovis, 553 F.3d 258 (3d Cir. 2009),<br />
the Third Circuit held that bringing a valid<br />
interpleader action can shield a stakeholder<br />
from further liability to the claimants, not<br />
only with respect to the amount owed, but<br />
also with respect to counterclaims when<br />
the stakeholder bears no blame for the existence<br />
of the ownership controversy and<br />
the counterclaims are directly related to the<br />
stakeholder’s failure to resolve the underlying<br />
dispute in favor of one of the claimants.<br />
As the court observed, “[t]o allow [the<br />
insurer] to be exposed to liability under<br />
these circumstances would run counter to<br />
the very idea behind the interpleader remedy—namely,<br />
that a ‘stakeholder should not<br />
be obliged at his peril to determine which<br />
claimant has the better claim.’” Id. at 265.<br />
The Third Circuit went on to explain:<br />
“Put another way, where a stakeholder is<br />
allowed to bring an interpleader action,<br />
rather than choosing between adverse<br />
claimants, its failure to choose between<br />
the adverse claimants (rather than bringing<br />
an interpleader action) cannot itself<br />
be a breach of a legal duty.” Id. at 265 (citations<br />
omitted). See also Lexington Ins. Co.<br />
v. Jacobs Industrial Maintenance Co., 435<br />
F. App’x 144, 149 (3d Cir. 2011) (“counterclaims<br />
[that] merely recapitulate the<br />
ownership dispute… fall within the discharge<br />
of liability”). If a stakeholder properly<br />
brings an interpleader, the stakeholder<br />
should enjoy some protection from counterclaims<br />
based on an assertion by one<br />
claimant that the stakeholder should have<br />
paid him or her in the first place.<br />
Yet the interpleader process is less likely<br />
to afford a stakeholder protection if a<br />
claimant asserts a claim that is based on<br />
liability other than a contention that the<br />
stakeholder should have made a decision<br />
to pay him or her. For example, in United<br />
States of America v. High Technology Products,<br />
Inc., 497 F.3d 637 (6th Cir. 2007), the<br />
Sixth Circuit concluded that although the<br />
United States had properly brought an<br />
interpleader seeking the determination of<br />
which claimant owned certain isotopes in<br />
its custody, the court held that the interpleader<br />
process did not shield the United<br />
States from a claim by one of the defendants<br />
that the isotopes had been damaged<br />
while in its possession.<br />
Although less likely, in some instances,<br />
especially when the amount in controversy<br />
is low or the claimants are pro se, the<br />
claimants might not file any responses at<br />
all. As the Fourth Circuit has noted, “[i]t is<br />
presumably not often that every named defendant<br />
to an interpleader action declines<br />
to appear and accept his share of a fund<br />
incontestably put at his disposal.” Nation-
wide v. Eason, 736 F.2d 130, 132 (4th Cir.<br />
1984). In Eason, the court noted that one<br />
possible disposition of the insurance funds<br />
in that case might have been as abandoned<br />
property that would escheat to the state. Id.<br />
at 134. The court would not order returning<br />
the funds to the insurer because the insurer<br />
had disclaimed interest in them when it<br />
filed the interpleader. Id.<br />
(noting the following as the relevant factors<br />
to consider: “1) whether the case is simple,<br />
2) whether the interpleader- plaintiff<br />
performed any unique services for the<br />
claimants or the court, 3) whether the<br />
interpleader- plaintiff acted in good faith<br />
and with diligence, 4) whether the services<br />
rendered benefitted the interpleaderplaintiff,<br />
and 5) whether the claimants<br />
improperly protracted the proceedings.”).<br />
Reimbursement of the<br />
Stakeholder, Amount of Such<br />
Awards, and Dismissal<br />
Once the claimant defendants are before a<br />
court, it is time for the stakeholder to begin<br />
making its exit from the case. Unless it<br />
brought the interpleader under 28 U.S.C.<br />
§1335, the stakeholder would need to<br />
deposit the contested funds with the court<br />
as specified by Federal Rule of Civil Procedure<br />
67. The stakeholder may want to seek<br />
reimbursement of its interpleader costs and<br />
expenses from the funds.<br />
Although neither Federal Rule of Civil<br />
Procedure 22 nor 28 U.S.C. §1335 contains<br />
an express provision authorizing the<br />
reimbursement of interpleader costs and<br />
expenses, most courts recognize that they<br />
have the discretion to do so. See, e.g., Trustees<br />
of the Plumbers & Pipefitters Nat’l Pension<br />
Fund v. Sprague, 251 F. App’x 155, 156<br />
(4th Cir. 2007) (“federal courts have held<br />
that it is proper for an interpleader plaintiff<br />
to be reimbursed for costs associated with<br />
bringing the action forward”).<br />
<strong>Courts</strong> reimbursing stakeholders have<br />
done so for several reasons. Some courts<br />
have recognized that a stakeholder “by<br />
seeking resolution of the multiple claims<br />
to the proceeds, benefits the claimants,<br />
and should not have to absorb attorneys’<br />
fees in avoiding the possibility of multiple<br />
litigation.” Sun Life Assur. Co. of Canada<br />
v. Bew, 530 F. Supp. 2d 773, 775 (E.D.<br />
Va. 2007) (citation omitted). Similarly, an<br />
interpleader is “brought for the benefit of<br />
resolving the dispute between the claimants<br />
and Plaintiff is a disinterested party.”<br />
Jefferson Pilot Fin. Ins. Co. v. Buckley, 2005<br />
U.S. Dist. Lexis 44067, at *6 (E.D. Va. 2005).<br />
Other courts have cited these reasons,<br />
as well as others, in forming a test that<br />
they use to determine whether reimbursing<br />
costs and fees is appropriate. See, e.g.,<br />
Prudential Ins. Co. v. Robinson- Downs,<br />
2011 U.S. Dist. Lexis 30563 (M.D. La. 2011)<br />
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For The Defense October 2012 ■ 7/15/11 2:4563<br />
■ PM
Life, Health and Disability<br />
Lawyers representing a stakeholder seeking<br />
reimbursement should emphasize the<br />
stakeholder’s good faith in bringing an<br />
interpleader and the benefits that the process<br />
affords to the claimants.<br />
Other courts have declined to reimburse<br />
a stakeholder when they have found that<br />
the expenses to interplead funds are the<br />
ordinary cost of doing business. See, e.g.,<br />
Travelers Indem. Co. v. Israel, 354 F.2d 488,<br />
490 (2d Cir. 1965) (“We are not impressed<br />
with the notion that whenever a minor<br />
problem arises in the payment of insurance<br />
policies, insurers may, as a matter of<br />
course, transfer a part of their ordinary<br />
cost of doing business of their insureds by<br />
bringing an action for interpleader.”).<br />
Rather than benefiting the claimants by<br />
filing an interpleader, some courts view<br />
stakeholders as having benefited themselves.<br />
See, e.g., Companion Life Ins. Co.<br />
v. Schaffer, 442 F. Supp. 826, 830 (S.D.N.Y.<br />
1977) (“[c]onflicting claims to the proceeds<br />
of a policy are inevitable and normal risks<br />
of the insurance business. Interpleader<br />
relieves the insurance company of multiple<br />
suits and eventuates in its discharge.<br />
Accordingly the action is brought primarily<br />
in the company’s own self- interest.”).<br />
Accord, N.Y. Life Ins. Co. v. Apostolidis, 2012<br />
U.S. Dist. Lexis 7995 (E.D.N.Y. 2012); Unum<br />
Life Ins. Co. of Am. v. Scott, 2012 U.S. Dist.<br />
Lexis 8869 (D. Conn. 2012). These cases<br />
tend to involve insurance companies as<br />
stakeholders, as opposed to other entities.<br />
If a court reimburses a stakeholder, an<br />
award typically does not involve a great<br />
deal of money because “all that is necessary<br />
is the preparation of a petition, the deposit<br />
in court or posting of a bond, service<br />
on the claimants, and the preparation of an<br />
order discharging the stakeholder.” Federal<br />
Practice and Procedure, §1719. <strong>Courts</strong><br />
have also noted that “there is an important<br />
policy interest in seeing that the fee award<br />
does not deplete the fund at the expense of<br />
the party who is ultimately deemed entitled<br />
to it.” Trustees of Directors Guild of America-<br />
Producer Pension Benefits Plans v. Tise, 234<br />
F.3d 415, 426 (9th Cir. 2000). As a result,<br />
some courts have reduced the fees requested.<br />
See Allianz Life Ins. v. Agorio, 2012 U.S. Dist.<br />
Lexis 16949 (N.D. Cal. 2012) (granting only<br />
$3,581 of a request for $45,111.24, basing the<br />
award on reductions of both the requested<br />
rate and the amount of time expended).<br />
64 ■ For The Defense ■ October 2012<br />
Sometimes courts will expressly limit<br />
awards to a percentage of the funds at<br />
issue, even if the stakeholder’s actual fees<br />
and costs were higher. Robinson- Downs,<br />
2011 U.S. Dist. Lexis 30563, at *4 (noting<br />
that the request was about one-third of the<br />
amount in controversy and reducing it to<br />
25 percent of the amount). On the other<br />
hand, courts have awarded the full amount<br />
requested when the case was not simple,<br />
the insurer acted in good faith, and a claimant’s<br />
counterclaim protracted the litigation.<br />
See Alembik- Eisner, 582 F. Supp. 2d, at<br />
1372 (awarding the full request of approximately<br />
$48,000 in costs and fees incurred<br />
by the insurer).<br />
Instead of immediately seeking to litigate<br />
the issue of reimbursement, a stakeholder’s<br />
counsel first should consider seeking<br />
an agreement with the claimants’ lawyers<br />
regarding an award. Counsel should document<br />
whatever added costs were incurred<br />
because of the actions of claimants in litigation,<br />
such as filing a counterclaim that<br />
merely recapitulated the ownership dispute.<br />
Yet, stakeholders should consider<br />
reducing the amount of their requests if the<br />
costs and fees exceed 25–30 percent of the<br />
contested funds.<br />
The benefits for a stakeholder’s counsel of<br />
approaching opposing counsel first are that<br />
it can save on the costs and fees of moving<br />
for an award, and the stakeholder may find<br />
that “a bird in hand is worth more than two<br />
in the bush.” Likewise, the claimants may<br />
realize that reaching an agreement has advantages.<br />
Not only would an agreement<br />
stop the stakeholder from incurring more<br />
potentially reimbursable costs and fees, the<br />
claimants also would save fees and costs associated<br />
with litigating the reimbursement<br />
issue. The parties can include such an agreement<br />
in a consent order, which would also<br />
dismiss the stakeholder.<br />
The last step is for a court to dismiss the<br />
stakeholder from the interpleader, which<br />
concludes the first stage of an interpleader<br />
action. A court “‘may issue an order discharging<br />
the stakeholder, if the stakeholder<br />
is disinterested, enjoining the parties from<br />
prosecuting any other proceeding related to<br />
the same subject matter, and directing the<br />
claimants to interplead….’” United States of<br />
America v. High Technology Products, Inc.,<br />
497 F.3d 637, 641 (6th Cir. 2007) (citation<br />
omitted). Under 28 U.S.C. §2361, a dismissal<br />
can include a discharge of the stakeholder<br />
from further liability and an order permanently<br />
“restraining [the claimants] from<br />
instituting or prosecuting any proceeding<br />
in any State or United States court affecting<br />
the property, instrument or obligation<br />
involved in the interpleader action….” Id.<br />
One final note, the dismissal of the<br />
stakeholder will not likely disturb a court’s<br />
jurisdiction under 28 U.S.C. §1335 because<br />
it is based on the minimal diversity of<br />
the claimants. Similarly, under rule interpleader,<br />
a court typically can dismiss a<br />
stakeholder without destroying the court’s<br />
diversity jurisdiction. See, e.g., Leimbach<br />
v. Allen, 976 F.2d 912, 917 (4th Cir. 1992)<br />
(“We know of no reason not to follow the<br />
standard rule in diversity cases that if jurisdiction<br />
is present when the case is filed,<br />
a change in citizenship will not destroy<br />
jurisdiction. We think the dismissal of the<br />
insurers in this case should have no greater<br />
effect….”).<br />
Conclusion<br />
Interpleaders in the federal courts can offer<br />
relief to stakeholders as long as the stakeholders<br />
can articulate a reasonable fear of<br />
exposure to double liability or the vexation<br />
of conflicting claims. Between rule interpleader<br />
and statutory interpleader, the latter<br />
offers the advantages of a lower amount<br />
of the res, minimal diversity, and nationwide<br />
service. The one potentially complicating<br />
factor of statutory interpleader is the<br />
need to deposit the contested funds with<br />
the court immediately upon filing the action,<br />
but counsel can address that by simultaneously<br />
filing a motion to deposit and a<br />
supporting brief or a motion to deposit and<br />
a cover letter to explain why the proceeds<br />
have accompanied the complaint.<br />
Once in a stakeholder has filed an interpleader,<br />
it typically is protected from counterclaims<br />
based on a claimant’s contention<br />
that the stakeholder should have conveyed<br />
the contested assets to him or her. Most<br />
courts will reimburse a stakeholder for the<br />
costs and fees associated with filing an interpleader,<br />
but the reimbursement can amount<br />
to less than the total that a stakeholder actually<br />
incurred. At the end of the day, even<br />
without full reimbursement, interpleader<br />
remains a valuable tool for stakeholders to<br />
avoid the expense of double litigation and<br />
the risk of double liability.
Life, Health and Disability<br />
Social Security<br />
Disability Decisions<br />
By Eric P. Mathisen<br />
and Kimberly A. Jones<br />
<strong>Should</strong> Disability<br />
Insurers Be<br />
Concerned<br />
An overview of the<br />
caselaw and practical<br />
advice to keep in mind,<br />
including the potential<br />
implications of Social<br />
Security disability benefits<br />
awards, to help you<br />
litigate ERISA disability<br />
matters effectively.<br />
<strong>Should</strong> disability insurers have concerns about Social<br />
Security disability benefits decisions The short answer to<br />
the question is “yes.” Disability benefits are one of the most<br />
frequently litigated employee benefit claims under the<br />
Employee Retirement Income Security Act<br />
of 1974, as amended (ERISA). 29 U.S.C.<br />
§1001 et seq. These claims usually involve<br />
an employer- sponsored long-term disability<br />
plan that places a burden on the claimant<br />
to prove that he or she is disabled under<br />
the terms of the plan.<br />
Long-term disability claimants often<br />
also apply for Social Security disability<br />
benefits, and claimants who receive them<br />
inevitably argue that the determination<br />
for these benefits should result in awards<br />
of disability benefits under ERISA plans. To<br />
litigate ERISA disability matters effectively,<br />
it is important to recognize the potential<br />
implications of Social Security disability<br />
benefits awards. This article offers an overview<br />
of the case law and practical advice to<br />
keep in mind during litigation.<br />
<strong>Courts</strong>’ Perceptions of Social<br />
Security Disability Benefits Awards<br />
The circuit courts of appeals are fairly<br />
uniform in holding that although a favorable<br />
Social Security disability benefit decision<br />
may be instructive and may provide<br />
some evidentiary guidance in determining<br />
whether an ERISA disability benefit determination<br />
is arbitrary and capricious, an<br />
ERISA plan claim administrator does not<br />
need to abide by a Social Security disability<br />
benefit decision and doesn’t have an obligation<br />
to assign additional weight to it. On<br />
the other hand, an ERISA plan administrator<br />
cannot entirely ignore the determination<br />
because courts will scrutinize whether<br />
an ERISA plan administrator considered a<br />
favorable Social Security disability benefit<br />
award in making a long-term disability decision.<br />
See, e.g., Paramore v. Delta Air Lines,<br />
129 F.3d 1446, 1452, n.5 (11th Cir. 1997).<br />
For instance, the Ninth Circuit has found<br />
that “complete disregard” for a Social Security<br />
disability benefit decision in making<br />
an unfavorable ERISA plan decision<br />
without any explanation indicates that the<br />
denial may not have resulted from a principled<br />
and deliberative reasoning process.<br />
■ Eric P. Mathisen is a shareholder with Ogletree Deakins Nash Smoak & Stewart PC, working from the<br />
firm’s offices in Chicago, Illinois, and Valparaiso, Indiana. Mr. Mathisen represents insurers, employers,<br />
and plan administrators in class action and single plaintiff employee benefit litigation throughout the United<br />
States. Kimberly A. Jones is an associate and a member of the Employee Benefits Litigation Practice Group<br />
in the firm’s Chicago office.<br />
For The Defense ■ October 2012 ■ 65
Life, Health and Disability<br />
ERISA litigatorsshould…<br />
recognize that a favorable<br />
Social Security decision<br />
generally is not admissible if<br />
it was not submitted during<br />
the ERISA claim process.<br />
Montour v. Hartford Life & Acc. Ins. Co.,<br />
588 F.3d 623, 635 (9th Cir. 2009). Additionally,<br />
the Fifth Circuit has noted an exception<br />
to the general rule, under which an<br />
ERISA plan administrator doesn’t need to<br />
accept a Social Security disability determination<br />
as the final word on disability,<br />
finding a Social Security disability benefit<br />
decision relevant to a claim administrator’s<br />
decision if the claim administrator’s<br />
general policy is to follow the Social Security<br />
decision when determining eligibility.<br />
Moller v. El Campo Aluminum Co., 97 F.3d<br />
85, 87–88 (5th Cir. 1996).<br />
ERISA litigators should also recognize<br />
that a favorable Social Security decision<br />
generally is not admissible if it was not<br />
submitted during the ERISA claim process.<br />
<strong>Courts</strong> examining an ERISA disability<br />
benefit determination under a deferential<br />
review standard generally are limited to reviewing<br />
the evidence and information that<br />
was before the plan administrator at the<br />
time of the final decision. A Social Security<br />
disability benefit award that a claimant did<br />
not submit to an ERISA plan administrator<br />
until after the final ERISA plan determination<br />
concludes is not part of the ERISA<br />
plan administrative record and, therefore,<br />
generally is not considered in determining<br />
whether to uphold the ERISA benefit determination.<br />
See, e.g., Rugby v. Unum Life Ins.<br />
Co. of Am., 391 F. App’x 579 (8th Cir. 2010).<br />
Since Social Security disability benefits<br />
decisions can often take months or<br />
years, claimants frequently submit a determination<br />
well after a plan administrator<br />
has made an ERISA disability determination.<br />
Defense attorneys should, therefore,<br />
object when claimants want to submit<br />
66 ■ For The Defense ■ October 2012<br />
Social Security disability benefit evidence<br />
on the ground that it is irrelevant in determining<br />
the reasonableness of a long-term<br />
disability decision when the plan administrator<br />
never had it to consider.<br />
ERISA Plans Do Not Need<br />
to Abide by Social Security<br />
Disability Benefits Awards<br />
<strong>Courts</strong> generally do not view Social Security<br />
disability benefits awards to oblige ERISA<br />
claim administrators to make the same decisions<br />
as the Social Security Administration<br />
because of the unique rules and proceedings<br />
underlying Social Security disability benefits<br />
determinations. See, e.g., Ladd v. ITT<br />
Corp., 148 F.3d 753, 755–56 (7th Cir. 1998).<br />
Identifying the distinctions between a<br />
Social Security disability benefit decision<br />
and an ERISA disability determination for<br />
a reviewing court is imperative when litigating<br />
an ERISA disability claim because the<br />
basis for a Social Security disability benefit<br />
decision could be entirely immaterial to the<br />
plan terms guiding an ERISA claim administrator’s<br />
decision. Simply put, one disability<br />
determination does not beget the other.<br />
No Treating Physician Rule<br />
The Supreme Court pointed out some of<br />
these major differences in Black & Decker<br />
Disability Plan v. Nord, 538 U.S. 822 (2003),<br />
holding that the treating physician rule<br />
that applies in Social Security cases, which<br />
emanates from 20 C.F.R. §404.1527(d)(2)<br />
and requires administrative law judges to<br />
assign extra weight to the opinions of treating<br />
physicians, did not apply to ERISA disability<br />
determinations for several reasons.<br />
The Court focused on the fundamental<br />
differences in the regulatory scheme<br />
and purpose of the two federal acts. Social<br />
Security disability is an obligatory and<br />
nationwide program, but ERISA disability<br />
plans are voluntary, flexible, employersponsored<br />
programs.<br />
To administer a large benefits system<br />
efficiently, the commissioner of Social<br />
Security published detailed regulations<br />
governing benefit adjudications, including<br />
regulations formally implementing the<br />
treating physician rule to create the necessary<br />
“uniformity and regularity” in<br />
Social Security disability benefits decisions<br />
among administrative law judges throughout<br />
the country. In contrast, ERISA benefits<br />
plans involve private contracts. ERISA<br />
plan sponsors have significant leeway to<br />
design their benefits plans as they see fit,<br />
and ERISA does not mandate the type of<br />
benefits that employers must provide when<br />
they choose to offer plans. Therefore, while<br />
an administrative law judge must use a<br />
uniform set of federal criteria to determine<br />
a Social Security claimant’s disability status<br />
for benefit purposes, an ERISA claimant’s<br />
disability determination depends on<br />
the express terms of the particular plan.<br />
Considering all of these factors, the Supreme<br />
Court reasoned in Nord that nothing<br />
in ERISA, the U.S. Department of Labor regulations,<br />
or the U.S. secretary of Labor guidance<br />
required ERISA plans to defer especially<br />
to treating physicians’ opinions. The Court<br />
expressly rejected the application of the treating<br />
physician rule in ERISA cases, specifying<br />
that courts cannot require claim administrators<br />
“to accord special weight” to a treating<br />
physician’s opinion and cannot “impose a<br />
discrete burden of explanation” when a claim<br />
administrator credits evidence that contradicts<br />
a treating physician’s opinion.<br />
The distinction that requires applying<br />
the treating physician rule to a Social Security<br />
disability claim decision but not to an<br />
ERISA disability benefit decision is important<br />
when an ERISA disability claim decision<br />
is at odds with the conclusion of a<br />
claimant’s treating physician. If a claimant<br />
submits a favorable Social Security disability<br />
benefit decision as evidence of disability,<br />
but that decision was based primarily on<br />
the opinion of a treating physician, a court<br />
should not view the favorable Social Security<br />
award as persuasive evidence, especially<br />
if the ERISA plan administrator has<br />
reasonably explained its grounds for disagreeing<br />
with the treating physician.<br />
ERISA claim administrators are not required<br />
to accept treating physician opinions<br />
blindly, and defense lawyers need to make<br />
sure that a reviewing court understands<br />
this. With that said, it bears repeating that<br />
lawyers who advise claim administrators<br />
should warn them against ignoring a Social<br />
Security disability benefit award or a<br />
treating physician’s opinion because the Supreme<br />
Court in Nord also held that a claim<br />
administrator may not arbitrarily refuse to<br />
credit a claimant’s reliable evidence, which<br />
includes the opinion of a treating physician.<br />
Nord, 538 U.S. at 833.
Different Rules, Definitions,<br />
and Evidence<br />
Another reason courts generally refuse to<br />
find that a favorable Social Security disability<br />
award compels an ERISA plan disability<br />
award is because the other Social Security<br />
Administration proceedings and rules, in<br />
addition to those governing the treating<br />
physician rule, differ from those governing<br />
an ERISA claim. As the Tenth Circuit<br />
pointed out, a Social Security determination<br />
does not mandate a similar ERISA<br />
plan decision because “those [Social Security]<br />
proceedings are entirely different and<br />
separate from a claim under ERISA, with<br />
different parties, different evidentiary<br />
standards, and different bodies of law governing<br />
their outcomes.” Wagner-Harding v.<br />
Farmland Indus. Inc. Emp. Ret. Plan, 26 F.<br />
App’x 811, 817 (10th Cir. 2001).<br />
For instance, Social Security adjudicators<br />
often make their decisions based on<br />
entirely different medical evidence than<br />
the evidence compiled and submitted during<br />
an ERISA claim review. For example, in<br />
Ray v. Sun Life & Health Ins., 752 F. Supp.<br />
2d 1229 (N.D. Ala. 2010), one reason that<br />
the Social Security decision did not settle<br />
the claimant’s disability status under the<br />
ERISA plan was because neither the court<br />
nor the plan administrator had access to<br />
the Social Security Administration record,<br />
so they could not analyze the information<br />
used by the federal agency to make a decision,<br />
a record which “presumably was different<br />
from” the ERISA plan record, the<br />
Ray court reasoned.<br />
<strong>Courts</strong> have found that Social Security<br />
disability benefits decisions based on evidence<br />
not presented to ERISA administrators<br />
are not helpful in reviewing ERISA<br />
plan-related decisions. See Madden v. ITT<br />
Long Term Disability Plan for Salaried<br />
Emps., 914 F.2d 1279, 1286 (9th Cir. 1990)<br />
(stating that “if [this] argument were correct,<br />
ERISA fiduciaries would be stripped of<br />
all administrative discretion, as they would<br />
be required to follow the Department of<br />
Health and Human Services’ decisions<br />
regarding social security benefits, even<br />
where the Plan determines benefits under<br />
different standards or the medical evidence<br />
presented is to the contrary”), cert. denied,<br />
498 U.S. 1087 (1991); Block v. Pitney Bowes,<br />
Inc., 952 F.2d 1450 (D.C. Cir. 1992).<br />
Indeed, the criteria for determining disability<br />
under the Social Security Act are<br />
rarely the same as the criteria for a specific<br />
ERISA disability plan. <strong>Courts</strong> have<br />
acknowledged this distinction as another<br />
reason why a Social Security award cannot<br />
have a controlling weight. Pari- Fasano<br />
v. ITT Hartford Life and Acc. Ins. Co., 230<br />
F.3d 415, 420 (1st Cir. 2000) (finding that a<br />
Social Security disability benefit decision<br />
should only have a controlling weight in<br />
the “rare case in which the statutory criteria<br />
are identical to the criteria set forth in<br />
the insurance plan”); Smith v. Cont’l Cas.<br />
Co., 369 F.3d 412, 418–19 (4th Cir. 2004)<br />
(holding that using Social Security procedures<br />
for purposes of evaluating a disability<br />
claim under an employer- sponsored<br />
plan was an error); Raskin v. Unum Provident<br />
Corp., 121 F. App’x 96 (6th Cir. 2005)<br />
(recognizing that benefits determinations<br />
under the Social Security Administration<br />
follow a different set of procedures from<br />
ERISA claims because the Social Security<br />
Administration procedures are designed to<br />
meet the need of efficiently and uniformly<br />
administering a large system).<br />
Under Social Security disability rules,<br />
a claimant is disabled if he or she cannot<br />
perform “any substantial gainful activity,”<br />
but a claimant can satisfy this definition<br />
in many ways. For instance, Social Security<br />
regulations automatically view a claimant<br />
as disabled due to his or her age, or if he<br />
or she has certain medical conditions, and<br />
without first evaluating associated restrictions<br />
and limitations. Under the Social<br />
Security medical- vocational “grid rules,”<br />
the rules automatically may deem a claimant<br />
“disabled” based on age, even if he or<br />
she has the functional capacity to perform<br />
sedentary or even light work.<br />
In contrast, most ERISA plans focus on<br />
an individual’s ability to perform the material<br />
and substantial duties of his or her<br />
own occupation, or any gainful occupation.<br />
Clearly, when an ERISA plan has a distinct<br />
test or process for deciding disability status,<br />
a Social Security disability benefit determination<br />
based on “medical listings” or<br />
“grid rules” cannot oblige the ERISA claim<br />
administrator to reach the same conclusion.<br />
See Pepe v. Newspaper & Mail Deliverers’-<br />
Publishers’ Pension Fund, 559 F.3d 140, 149<br />
(2d Cir. 2009) (finding that the Social Security<br />
Administration determination of disability<br />
did not satisfy the plan requirement<br />
that the claimant must be found “totally and<br />
permanently disabled” by a medical examiner<br />
appointed by the trustees); Jenkins v.<br />
Price Waterhouse Long Term Disability Plan,<br />
564 F.3d 856 (7th Cir. 2009) (finding that private<br />
disability determinations must be analyzed<br />
separately because the Social Security<br />
Administration uses various shortcuts that<br />
private insurers do not use); Smith v. A. T.<br />
Massey Coal Co., 2006 WL 285985, at *7 (S.D.<br />
W. Va. Feb. 3, 2006); Gannon v. Metro. Life<br />
Ins. Co., 360 F.3d 211, 215 (1st Cir. 2004).<br />
Since ERISA plan- related and Social Security<br />
Administration definitions and rules<br />
vary greatly it is essential to read a Social<br />
Security disability benefit decision submitted<br />
by a claimant carefully because it may<br />
undercut his or her ERISA disability claim.<br />
Likewise, carefully reviewing a Social<br />
Security disability benefit decision may<br />
reveal that the Social Security Administration<br />
found the claimant disabled due<br />
to an entirely different medical condition<br />
than that for which he or she sought benefits<br />
under an ERISA plan. An attorney certainly<br />
should emphasize these differences<br />
noted by the ERISA claim reviewer during<br />
the claim review process during litigation<br />
so that the adjudicator doesn’t assign<br />
undue weight to the Social Security decision.<br />
See Gilbertson v. Allied Signal, Inc.,<br />
172 F. App’x 857, 862 (10th Cir. 2006).<br />
A defense attorney should also carefully<br />
read an ERISA plan before arguing<br />
that a favorable Social Security disability<br />
benefit decision is irrelevant to the ERISA<br />
plan administrator’s decision. Some ERISA<br />
plans require the administrator to treat a<br />
Social Security determination as “proof”<br />
of disability, which will almost certainly<br />
mean that the ERISA plan will need to<br />
make a similar decision to the Social Security<br />
Administration decision. See, e.g., Wilcott<br />
v. Matlack, Inc., 64 F.3d 1458, 1461<br />
(10th Cir. 1995).<br />
Evidence of Conflict of Interest<br />
Since the Supreme Court decision in Metropolitan<br />
Life Insurance Co. v. Glenn, 554 U.S.<br />
105 (2008), claimants now regularly attempt<br />
to use to a favorable Social Security disability<br />
benefit decision as evidence of an ERISA<br />
claim administrator’s conflict of interest.<br />
In Glenn, the Supreme Court found that<br />
the handling of a Social Security disability<br />
award was evidence that the insurer’s struc-<br />
For The Defense ■ October 2012 ■ 67
Life, Health and Disability<br />
tural conflict of interest as both the payor<br />
and the decider of benefits had affected its<br />
benefit determination. The Court found it<br />
troubling that the ERISA claim administrator<br />
had encouraged the claimant to apply for<br />
Social Security benefits, had benefitted financially<br />
by offsetting the Social Security<br />
disability benefit amount from the longterm<br />
disability benefit, but had ignored the<br />
Social Securityadjudicators<br />
often make their decisions<br />
based on entirely different<br />
medical evidence than<br />
the evidence compiled<br />
and submitted during an<br />
ERISA claim review.<br />
68 ■ For The Defense ■ October 2012<br />
Social Security disability finding entirely in<br />
denying long-term disability benefits.<br />
Plaintiffs’ attorneys now regularly use<br />
the reasoning from Glenn to bolster a<br />
claimant’s argument that a claim administrator’s<br />
decision was tainted by conflict<br />
of interest. The scenario identified in Glenn<br />
is not unusual because many ERISA plans<br />
require claimants to apply for Social Security<br />
disability benefits and may even provide<br />
legal assistance to claimants to pursue<br />
them. In these situations, if an ERISA claim<br />
administrator later decides to deny longterm<br />
disability benefits, it must be careful<br />
to reconcile the Social Security determination<br />
with the ERISA plan denial. The Social<br />
Security decision cannot be ignored.<br />
Indeed, since Glenn, numerous courts<br />
have found an ERISA plan’s disregard of a<br />
Social Security disability benefit decision a<br />
relevant factor that a court should consider in<br />
determining whether an administrator’s denial<br />
of benefits was arbitrary and capricious,<br />
particularly after prompting or requiring a<br />
claimant to apply for Social Security disability,<br />
without some explanation by the claim<br />
administrator of its reasoning. Holmstrom v.<br />
Metropolitan Life Ins. Co., 615 F.3d 758 (7th<br />
Cir. 2010); McGahey v. Harvard Univ. Flexible<br />
Benefits Plan, 685 F. Supp. 2d 168, 178 (D.<br />
Mass. 2009); Winebarger v. Liberty Life Assur.<br />
Co. of Boston, 571 F. Supp. 2d 719, 725 (W.D.<br />
Va. 2008); Hackett v. Standard, 559 F.3d 825<br />
(8th Cir. 2009); Brown v. Hartford Life Ins.<br />
Co., 301 F. App’x 772, 776 (10th Cir. 2008).<br />
While other courts have not found<br />
inconsistency in encouraging a claimant<br />
to seek Social Security disability benefits<br />
and, at the same time, denying ERISA disability<br />
benefits, it is wise to advise ERISA<br />
claim administrators to address a favorable<br />
Social Security decision as specifically<br />
as possible and to explain why the Social<br />
Security disability benefit decision was not<br />
compelling in deciding whether a claimant<br />
was entitled to disability benefits under an<br />
ERISA plan. Piepenhagen v. Old Dominion<br />
Freight Line, Inc., 395 F. App’x 950, 2010<br />
WL 3623225 (4th Cir. 2010).<br />
Other Unique Issues<br />
A defense attorney has several other issues<br />
to beware of when defending an ERISA<br />
disability denial that involves a favorable<br />
Social Security disability benefit determination.<br />
First, an attorney should pay<br />
attention to when the Social Security<br />
Administration awarded disability benefits<br />
and, moreover, when the claim administrator<br />
became aware of that decision. As<br />
mentioned above, generally courts will not<br />
consider a favorable Social Security disability<br />
benefit decision as evidence if it was not<br />
submitted to the ERISA plan administrator<br />
before the administrator made a final decision,<br />
especially when a deferential standard<br />
of review would apply. See, e.g., Rugby v.<br />
Unum Life Ins. Co. of Am., 391 F. App’x 579<br />
(8th Cir. 2010); Barker v. Retirement Plan<br />
of Internat’l Paper Co., 804 F. Supp. 2d 501,<br />
507 n.1 (D.S.C. 2011) (“Because the award<br />
was not presented to the administrator for<br />
consideration, this court will not consider<br />
the award in its analysis.); Miller v. Mellon<br />
Long Term Disability Plan, 2011 WL<br />
4345813 (W.D. Pa. Sept. 15, 2011).<br />
Some courts have considered a favorable<br />
Social Security disability benefit award that<br />
an administrator learned about late in the<br />
game under certain circumstances. In Arnold<br />
v. Oneok, Inc. Long Term Disability<br />
Plan, 782 F. Supp. 2d 1288, 1290 (N.D. Ok.<br />
2001), the court considered a Social Security<br />
decision finalized after the ERISA plan administrator<br />
had made a long-term disability<br />
decision, finding that although it “normally<br />
confines its review to the materials in the<br />
Administrative Record, it may consider new<br />
evidence that is 1) necessary, 2) could not<br />
have been submitted during the administrative<br />
appeal process, 3) is not cumulative,<br />
and 4) is not simply better evidence than<br />
that submitted during the claims review.”<br />
When seeking to bar a claimant’s attorney<br />
from admitting information about a<br />
favorable Social Security disability benefit<br />
approved after an ERISA plan administrator<br />
has already made a decision, referring<br />
to the ERISA statute and U.S. Department<br />
of Labor claim regulations can help.<br />
Both anticipate a two-step review process:<br />
(1) consideration of a claim for benefits<br />
and, if denied in whole or in part, (2) a full<br />
and fair review of the decision.<br />
Neither the statute nor the regulations<br />
anticipate a process that remains perpetually<br />
open to consider new evidence after<br />
an ERISA claim administrator has rendered<br />
a final decision. Among other things,<br />
the regulations specifically allow ERISA<br />
plans to adopt various deadlines for filing<br />
administrative appeals. Keeping a claim<br />
perpetually open and allowing a claimant<br />
to submit new evidence at any time would<br />
render these deadlines meaningless.<br />
Defense practitioners in the Fifth Circuit<br />
should know that the Fifth Circuit hasn’t settled<br />
whether or not a claimant’s attorney can<br />
add new evidence to the ERISA claim record<br />
after the administrator has made a final disability<br />
benefit decision as litigation evidence<br />
as long as the attorney does it before filing<br />
a lawsuit, or if a court can only consider the<br />
evidence in the record that the administrator<br />
had before making a final disability<br />
benefit decision. Vega v. National Life Ins.<br />
Services, Inc., 188 F.3d 287 (5th Cir. 1999);<br />
Keele v. JP Morgan Chase Long Term Disability<br />
Plan, 221 F. App’x 316 (5th Cir. 2007).<br />
Unlike ERISA plans, the Social Security<br />
Administration rarely revisits eligibility<br />
for Social Security disability benefits once<br />
it awards benefits. Therefore, when defending<br />
ERISA claims decisions, an attorney<br />
may encounter an ERISA claim denial<br />
that includes evidence of a Social Security<br />
disability benefit award from the very<br />
remote past. The Social Security Administration<br />
could not have had the same information<br />
that was available to the ERISA<br />
plan administrator if the Social Security
Administration reviewed the Social Security<br />
disability claim many years earlier. A<br />
defense attorney should bring this information<br />
to a court’s attention and should<br />
explain why a Social Security disability<br />
benefit award from the very remote past<br />
doesn’t constitute persuasive evidence that<br />
a claimant had a disability when the ERISA<br />
plan administrator reviewed the claimant’s<br />
more recent ERISA claim.<br />
<strong>Courts</strong> typically have not imposed a duty<br />
on a claim administrator to gather additional<br />
Social Security information such as<br />
determination letters or evidence relied on<br />
by the Social Security Administration when<br />
a claimant fails to provide the information.<br />
Pinto v. Reliance Standard Life Ins. Co., 214<br />
F.3d 377, 394 n.8 (3d Cir. 2000), overruled<br />
on other grounds by Metropolitan Life Ins.<br />
Co. v. Glenn; Ciarlone v. Lincoln Nat’l Life<br />
Ins. Co., 2009 WL 1010849 (D. Mass. Apr.<br />
16, 2009) (refusing to consider the Social Security<br />
disability benefit award because the<br />
claimant never submitted it, and Lincoln<br />
was not required to assume the claimant’s<br />
responsibility for fact gathering).<br />
However, it appears that in the last few<br />
years some courts have imposed a duty on<br />
ERISA plan administrators to inquire and<br />
seek additional evidence if an administrator<br />
has been made aware that a favorable Social<br />
Security decision was made. This particularly<br />
happens when a plan administrator<br />
maintains that it didn’t have adequate evidence<br />
to make a determination, or when<br />
a firm retained by the plan administrator<br />
handles the claimant’s Social Security claim.<br />
See Timmerman v. Hartford Life & Acc. Ins.<br />
Co., 2010 WL 412553 (D.S.C. Jan. 28, 2010).<br />
While it is well established that ERISA<br />
plans may offset the amount of Social Security<br />
disability benefits, plaintiffs’ attorneys<br />
recently have challenged the right to<br />
offset Social Security disability benefits<br />
awarded to dependents. In Schultz v. Aviall,<br />
Inc. Long Term Disability Plan, 670 F.3d<br />
834 (7th Cir. 2012), the plaintiffs’ attorneys<br />
argued that Prudential should not have offset<br />
the dependent benefit because the plan<br />
only allowed offsets for “loss of time disability”<br />
benefits. The plaintiffs’ counsel<br />
argued that a child’s Social Security benefit<br />
was based on his or her parent’s disability,<br />
not on his or her own loss of time.<br />
The Seventh Circuit disagreed, holding<br />
that the dependent benefits compensated<br />
the households for loss of income that they<br />
had suffered due to the disability of one<br />
of their breadwinners. A child receives<br />
Social Security “by reason of the parentemployee’s<br />
disability, [and] those benefits<br />
are disability benefits based on the employee’s<br />
“loss of time.” Id. at 838.<br />
Although Prudential’s interpretation<br />
of its plan language prevailed, plaintiffs’<br />
attorneys will continue to attack these offsets.<br />
Therefore, attorneys should remind<br />
clients drafting disability plans that they<br />
need to write clear and concise offset provisions.<br />
ERISA plans are entitled to a great<br />
deal of leeway to design the plans, and they<br />
should use this freedom to their benefit.<br />
Practice Pointers<br />
The most important takeaway for practitioners<br />
advising ERISA plan administrators<br />
or defending clients that have made<br />
adverse claim decisions is that they should<br />
not disregard a favorable Social Security<br />
disability award. <strong>Courts</strong> recognize that in<br />
most situations a favorable Social Security<br />
Administration decision does not dictate<br />
an ERISA plan administrator’s decision,<br />
but ERISA plan administrators continue<br />
to run into trouble when they completely<br />
ignore a favorable decision altogether—<br />
especially after receiving a financial benefit<br />
from the decision.<br />
As the Second Circuit noted in Hobson<br />
v. Metropolitan Life Ins. Co., 574 F.3d 75<br />
(2d Cir. 2009), ERISA plan administrators<br />
that deny benefits are encouraged simply<br />
to explain why they reached different decisions<br />
than the Social Security Administration.<br />
See also Calvert v. Firstar Fin., Inc., 409<br />
F.3d 286, 295 (6th Cir. 2005) (“the failure of<br />
a plan administrator to discuss a disability<br />
determination by the [Social Security Administration]<br />
may be considered as a factor<br />
in determining the arbitrariness of the<br />
plan’s decision to deny benefits”).<br />
When defending an ERISA plan administrator’s<br />
decision to deny benefits despite<br />
a favorable Social Security disability benefit<br />
decision, an attorney should pay attention<br />
to exactly what a claimant submitted<br />
to the ERISA plan administrator. If a claimant<br />
only submits a notice of a Social Security<br />
disability benefit award with basic<br />
information such as the award date and<br />
amount of the benefit, a defense attorney<br />
must point out that such limited information<br />
is insufficient to cast doubt on the<br />
ERISA plan’s decision.<br />
When more substantial information<br />
from the Social Security Administration is<br />
available in the record, highlight the rationale<br />
for the Social Security Administration<br />
disability finding and how it differs from<br />
the issues involved in the ERISA disability<br />
determination. As detailed above, the<br />
Social Security Administration may find<br />
someone disabled even though that person<br />
can perform sedentary work, or based on a<br />
different medical condition than the condition<br />
for which the claimant has sought<br />
ERISA benefits. It is also important to<br />
emphasize limitations in an ERISA plan,<br />
such as pre- existing conditions, mental illness,<br />
self- reported symptoms, fibromyalgia,<br />
and alcohol or substance abuse, which<br />
may not apply to a Social Security disability<br />
benefit determination.<br />
For example, when an ERISA plan’s<br />
mental illness limitation may be at issue, a<br />
claimant may try to avoid that limitation by<br />
arguing that he or she has a physical condition.<br />
But reviewing that claimant’s Social<br />
Security Administration decision and file<br />
may reveal that the disability award was<br />
based solely on a mental illness. In such a<br />
case, the Social Security Administration<br />
evidence may directly support denying<br />
benefits under the ERISA plan.<br />
Despite the Supreme Court emphasis in<br />
Nord regarding the differences between Social<br />
Security and ERISA disability determinations,<br />
and despite the well- established<br />
principle that Social Security Administration<br />
decisions do not dictate ERISA plan<br />
administrators’ decisions, claimants continue<br />
efforts to focus the courts’ attention<br />
on favorable Social Security Administration<br />
decisions. Defense attorneys should<br />
remind their clients not to ignore reliable<br />
evidence, particularly given how frequently<br />
claimants’ attorneys focus litigation on favorable<br />
Social Security disability decisions.<br />
Someone defending an ERISA longterm<br />
disability claim denial that involves<br />
a favorable Social Security Administration<br />
decision will need to point out the ERISA<br />
plan administrator’s explanation in the<br />
administrative record to clarify why the<br />
results differ. A well- reasoned and carefully<br />
explained ERISA decision will likely<br />
survive judicial review and will help bolster<br />
favorable decisions in the future.<br />
For The Defense ■ October 2012 ■ 69
Life, Health and Disability<br />
Discovery in<br />
ERISA Cases<br />
By Kathleen S. Massing<br />
and Russell S. Buhite<br />
Did Amara<br />
Change the<br />
Landscape<br />
The boundaries of<br />
discovery in ERISA cases<br />
may now be pushed even<br />
further, bringing new<br />
concerns to defendants,<br />
changing how ERISA<br />
cases will look, and<br />
creating challenges<br />
for attorneys advising<br />
clients on potential<br />
discovery and costs.<br />
The Supreme Court issued its opinion in Cigna Corp. v.<br />
Amara, 131 S. Ct. 1866, on May 16, 2011. In Amara, the<br />
employer, Cigna, had replaced its traditional defined benefit<br />
pension plan with a cash balance plan in 1998.<br />
Under the new plan, upon retirement<br />
an existing participant would receive the<br />
greater of the value of the old benefit as of<br />
December 31, 1997, or the new benefit at the<br />
point of retirement. Communications to<br />
participants about the conversion did not<br />
include information detailing certain differences<br />
between the old plan and the new<br />
plan. Id. at 1871.<br />
The district court held that the new summary<br />
plan description was misleading and<br />
that an Employee Retirement Income Security<br />
Act (ERISA) §204(h) notice about the<br />
prospective reduction in the old plan’s benefits<br />
was insufficient. The court concluded<br />
that the misleading communications had<br />
caused plan participants “likely harm” and<br />
addressed potentially appropriate ways to<br />
remedy the Cigna violations. Id. at 1875.<br />
Relying on ERISA §502(a)(1)(B), the district<br />
court granted relief to plan members<br />
by reforming the plan and ordering Cigna<br />
to provide benefits in accordance with the<br />
reformed plan. Id. The Second Circuit summarily<br />
affirmed the district court decision.<br />
Certification was granted by the<br />
Supreme Court on whether the “likely<br />
harm” standard employed by the lower<br />
court was the correct standard to apply to<br />
the plaintiffs’ claims. Justice Breyer, delivering<br />
the opinion of the Court, held that<br />
ERISA §502(a)(1)(B) did not authorize the<br />
court to reform the plan, though it did<br />
authorize the court to enforce the terms of<br />
an existing plan as relief. The Court further<br />
held that summary plan description terms<br />
are not plan terms but rather “provide communication<br />
with beneficiaries about the<br />
plan, but… their statements do not themselves<br />
constitute the terms of the plan for<br />
purposes of §502(a)(1)((B).” Id. at 1878.<br />
However, the Court did not stop there<br />
with an analysis of the claims made by<br />
the plaintiffs under ERISA §502(a)(1)(B),<br />
but instead reviewed ERISA §502(a)(3) to<br />
determine if it would make “appropriate<br />
70 ■ For The Defense ■ October 2012<br />
■ Kathleen S. Massing is an associate and Russell S. Buhite is a shareholder in the Tampa, Florida, office<br />
of Marshall Dennehey Warner Coleman & Goggin PC. Ms. Massing is a member of the Professional Liability<br />
Department. She focuses her practice on coverage litigation, with a particular emphasis on ERISA benefit<br />
claims and insurance disputes. With more than 20 years of experience, Mr. Buhite focuses his practice on<br />
life, health, and disability insurance coverage litigation in state and federal courts, as well as handling a myriad<br />
of ERISA and other employee benefit matters for corporate clients.
equitable relief” available to the plaintiffs.<br />
Id. In a lengthy analysis, which Justice Scalia’s<br />
dissent noted largely consists of dicta,<br />
the Court went on to state that the “appropriate<br />
equitable relief” contemplated under<br />
ERISA §502(a)(3) included all categories<br />
of relief that “were typically available in<br />
equity” before law and equity merged.<br />
Id. The Court explained that based on the<br />
claims at issue in Amara, equitable remedies<br />
could include reformation, equitable<br />
estoppel, and surcharge. Id. at 1878.<br />
The Court explained that courts cannot<br />
use the “likely harm” standard to analyze<br />
a claim under ERISA §502(a)(3) because<br />
the ERISA notice provisions did not identify<br />
a standard; therefore, the standard that<br />
courts must use must come from the law<br />
of equity, which ultimately depends on the<br />
type of equitable relief sought. As stated in<br />
the majority opinion in Amara, “[L]ooking<br />
to the law of equity, there is no general<br />
principle that ‘detrimental reliance’ must<br />
be proved before a remedy is decreed. To<br />
the extent any such requirement arises, it is<br />
because the specific remedy being contemplated<br />
imposes such a requirement.” Id. at<br />
1881. The Court vacated the district court<br />
decision and remanded the matter for the<br />
lower court to determine whether it appropriately<br />
could exercise its discretion under<br />
ERISA §502(a)(3).<br />
Amara has arguably clarified what<br />
“appropriate equitable relief” in ERISA<br />
§502(a)(3) means, which may include not<br />
only those types of remedies traditionally<br />
thought of as “equitable,” such as reformation<br />
and estoppel, but also monetary damages—traditionally<br />
unavailable to ERISA<br />
plaintiffs—in the form of “surcharge”<br />
claims.<br />
Clarifying the equitable relief available<br />
to plaintiffs asserting ERISA §502(a)(3)<br />
claims, and in particular making monetary<br />
relief available, unintentionally makes<br />
this ERISA “catchall” provision, §502(a)<br />
(3), that much more attractive to plaintiffs’<br />
counsel by perhaps leading them to couple<br />
their traditional ERISA §502(a)(1)(B) benefit<br />
claims with claims for equitable monetary<br />
relief under ERISA §502(a)(3) breach<br />
of fiduciary duty claims.<br />
But how will these two recovery provisions<br />
affect ERISA litigation How will<br />
courts grapple with the very different discovery<br />
issues and standards associated<br />
with a claim for benefits as opposed to a<br />
claim for equitable relief for a fiduciary<br />
breach<br />
Following the Supreme Court holding in<br />
MetLife v. Glenn, 554 U.S. 105 (2008), which<br />
plaintiffs’ attorneys have generally used<br />
to bolster arguments in favor of expanding<br />
discovery in ERISA cases, Amara may<br />
press the boundaries of discovery in ERISA<br />
cases even further, bringing new concerns<br />
to defendants, changing how ERISA cases<br />
will look, and creating challenges for attorneys<br />
advising clients on potential discovery<br />
and costs. The holding in Amara may<br />
even interfere with the fundamental purpose<br />
of ERISA—to provide protection to<br />
employees while at the same time limiting<br />
the complexity and expense associated<br />
with benefit plans for employers.<br />
Breach of Fiduciary<br />
Discovery Under ERISA<br />
Federal courts interpreting ERISA must<br />
take into account the competing interests<br />
of Congress’s desire to offer employees<br />
enhanced welfare benefits protection, on<br />
the one hand, and the desire to avoid a system<br />
that is so complex that administrative<br />
costs or litigation expenses unduly discourage<br />
employers from offering welfare benefit<br />
plans in the first place. Varity Corp. v.<br />
Howe, 516 U.S. 489, 497 (1996).<br />
In balancing these competing interests,<br />
judicial review of claims for benefits<br />
arising under ERISA §502(a)(1)(B)<br />
was traditionally limited to reviewing the<br />
administrative record. <strong>Courts</strong> typically did<br />
not allow discovery that ventured beyond<br />
the record. With some exception, courts<br />
typically held that discovery beyond the<br />
administrative record would circumvent<br />
the ERISA rules requiring development of<br />
the record through exhaustion of administrative<br />
remedies.<br />
The landscape of discovery under<br />
ERISA claims for benefit denials alleged<br />
under ERISA §502(a)(1)(B) changed with<br />
the Supreme Court holding in Glenn. In<br />
Glenn, the Court held that conflicts are but<br />
one factor among many that a reviewing<br />
judge must take into account to determine<br />
whether a plan administrator’s conflict of<br />
interest factored into a decision to deny<br />
a claim for benefits. 554 U.S. at 116. The<br />
Court went on to note that a conflict of<br />
interest may be of particular importance if<br />
a plan administrator had a history of biased<br />
claims administration. Id.<br />
Due to the Glenn holding, and in particular,<br />
recognition by the Court that a history<br />
of claim denials may be particularly<br />
relevant in some instances, courts have<br />
expanded discovery regarding an administrator’s<br />
conflict in claim determination.<br />
The federal circuit courts of appeals have<br />
applied Glenn to varying degrees. Most<br />
have allowed limited discovery on issues<br />
related to an apparent or an alleged conflict<br />
of interest of the plan administrator. While<br />
a plaintiff’s opportunity to explore discovery<br />
may, in some instances, have expanded<br />
under Glenn, few courts have extended the<br />
opportunity to a plaintiff to explore “full<br />
discovery” as they might in other types of<br />
disputes.<br />
Conversely, courts traditionally have<br />
viewed ERISA claims for breach of fiduciary<br />
duty arising under ERISA §502(a)(3)<br />
in a very different light. ERISA §502(a)(3)<br />
specifies that<br />
[a] civil action may be brought—<br />
…<br />
(3) by a participant, beneficiary, or fiduciary<br />
(A) to enjoin any act or practice<br />
which violates any provision of this subchapter<br />
or the terms of the plan or (B) to<br />
obtain other appropriate equitable relief<br />
(i) to redress such violation or (ii) to<br />
enforce any provisions of this subchapter<br />
or the terms of the plan;<br />
29 U.S.C. §1132(a)(3).<br />
Sometimes referred to as a “catch-all”<br />
provision, ERISA §502(a)(3) remedies<br />
become unavailable when the act elsewhere<br />
provides adequate relief for a beneficiary’s<br />
injury. Furthermore, traditionally courts<br />
generally did not consider monetary damages<br />
as available equitable damages, making<br />
claims pursued under this provision,<br />
ERISA §502(a)(3), somewhat less appealing<br />
to plaintiffs’ counsel.<br />
While courts must defer to the decision<br />
of a plan administrator or fiduciary<br />
when an ERISA plan confers discretionary<br />
authority to the plan administrator to<br />
determine eligibility for benefits when the<br />
courts review claims asserted under ERISA<br />
§502(a)(1)(B), courts do not need to defer<br />
to a plan administrators or fiduciary in an<br />
ERISA §502(a)(3) action.<br />
Accordingly, courts typically have held<br />
that the law doesn’t require them to limit<br />
For The Defense ■ October 2012 ■ 71
Life, Health and Disability<br />
judicial review to the administrative record<br />
before the plan administrator or fiduciary<br />
in a case involving an ERISA §502(a)(3)<br />
claim. Jensen v. Goff, 520 F. Supp. 2d 1349,<br />
1355 (D. Wyo. 2007). See also Pennsylvania<br />
Chiropractic Assoc. v. Blue Cross Blue<br />
Shield Assoc., 2012 U.S. Dist. Lexis 7257,<br />
at *19 (D. Ill. Jan. 23, 2012) (allowing discovery<br />
to venture beyond the administrative<br />
record with respect to the plaintiffs’<br />
§502(a)(3) claims, explaining that when a<br />
party does not ask for judicial review of<br />
an underlying decision, denying benefits<br />
limiting evidence to that provided in the<br />
administrative record is not warranted<br />
under ERISA).<br />
Because of the fundamental difference<br />
between claims asserted under ERISA<br />
§502(a)(1)(B) and §502(a)(3), courts typically<br />
have allowed discovery in the latter.<br />
See Jensen v. Goff, 520 F. Supp. 2d at 1356.<br />
In Kukarni v. Metropolitan Life Ins. Co.,<br />
187 F. Supp. 2d 724, 728–29 (D. Ky. 2001),<br />
the court denied the defendants’ motions<br />
for a summary judgment regarding the<br />
plaintiff’s 29 U.S.C. §1132(a)(3) claim, explaining<br />
that summary judgment was<br />
inappropriate when a plaintiff had not yet<br />
had the opportunity to conduct discovery.<br />
The court stated that confining its review<br />
of the claim to the administrative record<br />
would amount to denying due process. Id.<br />
While courts largely will limit judicial<br />
review of denied benefit claims to the<br />
administrative record, and generally will<br />
tailor discovery in these cases to the issue<br />
of conflict of interest, courts have shown a<br />
clear willingness to allow broader discovery<br />
to proceed when they review ERISA<br />
§502(a)(3) claims, even when a plaintiff’s<br />
attorney has coupled one with a benefit<br />
claim asserted under §502(a)(1)(B).<br />
In Manieri v. Board of Trustees of the<br />
Operating Engineer’s Local 825 Pension<br />
Fund, 2008 U.S. Dist. Lexis 71247, at *9–10<br />
(D.N.J. 2008), the court denied the defendants’<br />
request to limit the scope of discovery<br />
to the administrative record. The plaintiff<br />
had requested limited discovery, including<br />
depositions of certain individuals<br />
involved in administering the plan, with<br />
respect to the asserted breach of fiduciary<br />
duty claims.<br />
The court explained that discovery concerning<br />
a breach of fiduciary duty claim<br />
under ERISA did not fall prey to the same<br />
72 ■ For The Defense ■ October 2012<br />
limitations and restrictions that governed<br />
claims regarding benefit denials. Id. at<br />
*13. The court further rejected the defendants’<br />
argument that the plaintiff sought<br />
to circumvent the limitations on discovery<br />
imposed in denial of benefit actions<br />
by securing discovery under a breach of<br />
fiduciary duty claim, explaining that the<br />
fact that the district courts could choose<br />
which facts to consider when addressing<br />
each claim limited the potential for abuse.<br />
Id. at *14.<br />
<strong>Courts</strong> in other jurisdictions have, like<br />
the court in Manieri, held that discovery<br />
restrictions under ERISA do not apply to<br />
ERISA fiduciary duty claims. See generally<br />
Fowler v. Aetna Life Ins. Co., 615 F. Supp.<br />
2d 1130, 1136 (9th Cir. 2009) (allowing<br />
tailored discovery of a conflict of interest<br />
when the plaintiff had alleged claims under<br />
both ERISA §502(a)(1)(B) and §502(a)(3));<br />
Hamilton v. Allen- Bradley Co., 244 F.3d 819,<br />
827 n.1 (11th Cir. 2001) (allowing a deposition<br />
to explore whether a plan fiduciary had<br />
fulfilled its fiduciary obligations).<br />
Discovery After Amara<br />
With Amara arguably clarifying what<br />
“appropriate equitable relief” means under<br />
ERISA, and with the availability of equitable<br />
remedies such as estoppel, reformation,<br />
and monetary relief in the form of surcharge,<br />
defense attorneys can expect that<br />
plaintiffs’ attorneys will attempt to use this<br />
provision of ERISA even more, initiating<br />
ERISA claims that may broaden the scope<br />
of allowable discovery for ERISA §502(a)<br />
(3) claims.<br />
Although a split exists among the circuits,<br />
it appears that most courts, in the<br />
wake of Amara, and in interpreting Variety<br />
Corp. v. Howe, 516 U.S. 489 (1996), have<br />
held that a plaintiff may simultaneously<br />
pursue claims for benefits under ERISA<br />
§502(a)(1)(B) and for breach of fiduciary<br />
duty under ERISA §502(a)(3). See, e.g., Lipstein<br />
v. United Healthcare Ins. Co., 2011<br />
U.S. Dist. Lexis 135202, at *3 (D.N.J. 2011)<br />
(holding that before discovery, plaintiffs<br />
should not be forced to choose between<br />
their claims for benefits and their claims<br />
for equitable relief); Younger v. Zurich Am.<br />
Ins. Co., 2012 U.S. Dist. Lexis 42190, at *8<br />
(S.D.N.Y. Mar. 26, 2012) (denying the defendant’s<br />
motion to dismiss the plaintiff’s<br />
claims, holding that claims brought under<br />
ERISA §502(a)(3) did not duplicate benefit<br />
claims brought under ERISA §502(a)(1)<br />
(B)). This should concern ERISA defense<br />
practitioners.<br />
As the defendants in Mainieri noted, a<br />
litigant can legitimately argue that plaintiffs’<br />
attorneys will attempt to circumvent<br />
discovery limitations in benefit denial<br />
claims by also pursuing claims under<br />
ERISA §502(a)(3), which permits much<br />
broader discovery. Discovery regarding<br />
the drafting of summaries of plan descriptions,<br />
notices, and plans likely will become<br />
relevant to these equitable causes of action.<br />
Similarly, documents and deposition evidence<br />
related to plan changes may become<br />
discoverable.<br />
A limited survey of ERISA attorneys<br />
representing claimants reveals that since<br />
Amara they have expanded somewhat the<br />
discovery that they seek in ERISA litigation.<br />
For example, one Eleventh Circuit<br />
practitioner takes the position that<br />
Amara overrules that circuit’s jurisprudence<br />
regarding judicial consideration of<br />
all the plan documents with respect to a<br />
court’s interpretion of what constitutes an<br />
ERISA plan. As a result, he contends that<br />
this requires undertaking more discovery<br />
designed to determine what constitutes the<br />
plan documents and taking a closer look at<br />
the communications to plan participants.<br />
Other practitioners have opined that<br />
the Amara decision likely will increase the<br />
attractiveness of ERISA class actions, particularly<br />
in the context of stock-drop cases,<br />
by making available a wide range of equitable<br />
remedies, including monetary relief,<br />
which would certainly lead to increased<br />
discovery for both plan participants and<br />
plan providers seeking to establish, or to<br />
defeat, class certification.<br />
However, as noted by Justice Scalia in<br />
his Amara dissent, bringing a claim for<br />
class relief under ERISA §502(a)(3) may<br />
be inappropriate, as many equitable remedies<br />
contemplate individualized reliance<br />
or individualized harm. Cigna v. Amara,<br />
131 S. Ct. at 1885. See also Churchill v. Cigna<br />
Corp., 2011 U.S. Dist. Lexis 90716, at *21 (D.<br />
Pa. 2011) (citing Newton v. Merrill Lynch,<br />
Pierce, Fenner & Smith, Inc., 259 F.3d 154,<br />
172 (3d Cir. 2001) (“[I]f proof of the essential<br />
elements of the cause of action requires<br />
individual treatment, then the class certification<br />
is unsuitable.”)).
Recognizing the difficulty, and perhaps<br />
improbability, of certifying a class for<br />
which the essential elements of the cause<br />
of action call for individualized treatment<br />
of the claims, the Supreme Court handed<br />
down the decision in Wal-Mart Stores Inc.<br />
v. Dukes, 131 S. Ct. 2541 (2011), just one<br />
month after deciding Amara.<br />
In Dukes, the Court overturned certification<br />
of a class of Wal-Mart employees<br />
alleging violations of Title VII by discrimination<br />
against female employees.<br />
The plaintiffs sought both injunctive and<br />
declaratory relief, including an award of<br />
back pay. Id. at 2547.<br />
The Court, in examining the class certification<br />
approved by both the district and<br />
circuit courts, explained that the “commonality”<br />
requirement for a class action<br />
requires that the plaintiffs demonstrate<br />
that the class members suffered the same<br />
injury that litigation can resolve class wide<br />
and that their claims depend upon a common<br />
contention. Id. at 2551. Ultimately<br />
holding that “commonality” did not exist<br />
in the claims asserted, the Court explained<br />
that the plaintiffs had failed to demonstrate<br />
“significant proof” that Wal-Mart operated<br />
under a general policy of discrimination so<br />
that the Court could not discern even a single<br />
common question to support class certification.<br />
Id. at 2556.<br />
Further, the Court went on to explain<br />
that while Federal Rule of Civil Procedure<br />
23(b)(2) contemplates requests for<br />
monetary relief, it does so only when such<br />
requests are incidental to the injunctive or<br />
declaratory relief sought. Id. at 2557. The<br />
Court explained that Rule 23(b)(2) contemplates<br />
relief to the class as a whole, but<br />
it does not authorize class certification<br />
when each class member would be entitled<br />
to an individualized award of monetary<br />
damages. Id. The Court explained that<br />
permitting the combination of individualized<br />
and class wide relief in a Federal Rule<br />
of Civil Procedure 23(b)(2) claim is inconsistent<br />
with the structure of the rule, as<br />
classes certified under this provision share<br />
the most traditional justifications for class<br />
treatment—that individual adjudications<br />
would be impossible or unworkable.<br />
The Court concluded that plaintiffs cannot<br />
pursue individualized monetary claims<br />
under Federal Rule of Civil Procedure 23(b)<br />
(2); plaintiffs must pursue these claims<br />
under Federal Rule of Civil Procedure 23(b)<br />
(3), which would offer procedural protections<br />
appropriate for the claims and allow<br />
individual plaintiffs to opt out of litigation<br />
if they so chose. Id. at 2558.<br />
The effect that Dukes and Amara will<br />
have on the scope of class actions and class<br />
action discovery in the ERISA context is<br />
not yet known. In Merrimon v. Unum Life<br />
Ins. Co. of Am., 2012 U.S. Dist. Lexis 15516<br />
(D. Me. Feb. 13, 2012), the court analyzed<br />
a request to certify an ERISA class consisting<br />
of plaintiff beneficiaries under ERISA<br />
plans insured by Unum, which provided<br />
and offered retained asset accounts for beneficiaries<br />
of the plans’ life insurance policy,<br />
which the plaintiffs argued failed to<br />
account for interest to funds held for disbursement<br />
adequately. Id. at *36.<br />
Over Unum’s objection to certification<br />
on the ground that the claims of each individual<br />
class member would turn on unique<br />
facts, including the knowledge and the<br />
motivation of the class members to maintain<br />
the benefits in the particular fund<br />
at issue, the court granted the plaintiffs’<br />
request for class certification. Id. at *40.<br />
The court, recognizing the Supreme Court’s<br />
holding in Dukes, explained that the commonality<br />
of the claims did not rest on the<br />
plaintiffs’ varying motivations for leaving<br />
money in the accounts at issue, but<br />
rather, on allegations concerning Unum’s<br />
own decision to maintain the fund for its<br />
own interest and benefit, rather than for<br />
the benefit and interest of its beneficiaries.<br />
Id. at *41.<br />
Clearly, the holding in Amara, which<br />
opens the door to additional equitable<br />
relief, and perhaps alternative theories<br />
for obtaining relief, has the potential<br />
to increase the costs of ERISA litigation<br />
greatly and to circumvent ERISA’s purpose<br />
wholly of creating a system of employee<br />
benefit protection that is not so complex<br />
that it unduly discourages employers from<br />
offering benefit plans. Varity Corp. v. Howe,<br />
516 U.S. at 497.<br />
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For The Defense ■ October 2012 ■ 73
Life, Health and Disability<br />
ERISA Section<br />
502(a)(3)<br />
By Aaron E. Pohlmann<br />
Equitable Defenses<br />
and “Appropriate<br />
Equitable Relief”<br />
While the Supreme Court<br />
considers McCutchen<br />
this term, practitioners<br />
should keep abreast of<br />
the mercurial landscape<br />
surrounding this section<br />
of ERISA and, if called<br />
upon to address it,<br />
carefully consider the<br />
factual and analytical<br />
nuances differentiating<br />
various cases.<br />
In this challenging economic climate, Employee Retirement<br />
Income Security Act (ERISA) health plan subrogation<br />
and reimbursement claims have gained significant<br />
attention. Employers and insurers seeking to protect finite<br />
health plan assets, injured employees, and<br />
plaintiffs’ personal injury attorneys strenuously<br />
litigate subrogation and reimbursement<br />
claims. Consequently, the law in this<br />
area is rapidly evolving.<br />
On June 25, 2012, the Supreme Court<br />
granted certiorari to review U.S. Airways,<br />
Inc. v. McCutchen, 663 F.3d 671 (3d Cir.<br />
2011), presumably to resolve a circuit split<br />
regarding “equitable limitations” on ERISA<br />
section 502(a)(3), 29 U.S.C. §1132(a)(3),<br />
claims for reimbursement from third-party<br />
tort recoveries.<br />
The Third and Ninth Circuits have held<br />
that equitable principles such as unjust<br />
enrichment and the common law “makewhole”<br />
and “common- fund” doctrines<br />
can curtail reimbursement recoveries,<br />
despite express plan language disclaiming<br />
their application. See U.S. Airways, Inc. v.<br />
McCutchen, 663 F.3d 671 (3d Cir. 2011); CGI<br />
Techs. & Solutions v. Rose, 2012 U.S. App.<br />
Lexis 12556 (9th Cir. June 20, 2012).<br />
These courts disagreed with the Eleventh,<br />
Eighth, Seventh, Sixth, and Fifth Circuits<br />
to the extent that they “categorically<br />
excluded” application of such doctrines<br />
when a plan specifically disavows them.<br />
See Zurich Am. Ins. Co. v. O’Hara, 604 F.3d<br />
1232 (11th Cir. 2010); Longaberger Co. v.<br />
Kolt, 586 F.3d 459 (6th Cir. 2009); Administrative<br />
Comm. of Wal-Mart Stores, Inc.<br />
Assocs.’ Health & Welfare Plan v. Shank,<br />
500 F.3d 834 (8th Cir. 2007); Administrative<br />
Comm. of Wal-Mart Stores, Inc. Assocs.’<br />
Health & Welfare Plan v. Varco, 338 F.3d<br />
680 (7th Cir. 2003); Bombadier Aerospace<br />
Employee Welfare Benefits Plan v. Ferrer,<br />
Poirot and Wansbrough, 354 F.3d 348 (5th<br />
Cir. 2003); Wal-Mart Stores, Inc. Assocs.’<br />
Health and Welfare Plan v. Wells, 213 F.3d<br />
398 (7th Cir. 2000).<br />
How the Supreme Court will weigh such<br />
common law and equitable limitations<br />
against the policies underlying ERISA and<br />
strict enforcement of the terms of ERISA<br />
plans may significantly affect claims for<br />
“appropriate equitable relief” under ERISA<br />
74 ■ For The Defense ■ October 2012<br />
■ Aaron E. Pohlmann is a partner in the Atlanta office of Smith Moore Leatherwood LLP. Since completing a federal judicial<br />
clerkship, Mr. Pohlmann has dedicated his practice to representing insurers, employers, and third-party administrators in<br />
ERISA and life, health, and disability insurance litigation. He has authored numerous articles and contributed to several books<br />
on ERISA, has held a number of leadership positions in the American Bar Association, and is an active member of the <strong>DRI</strong> Life,<br />
Health and Disability Committee.
section 502(a)(3). To resolve the circuit split,<br />
the Court may address a question that it<br />
declined to consider in Sereboff v. Mid Atl.<br />
Med. Srvs., Inc., 547 U.S. 356 (2006), namely<br />
whether a claim for ERISA plan reimbursement<br />
constitutes “appropriate” equitable<br />
relief if it “contravene[s] principles like the<br />
make-whole doctrine.” Id. at 368.<br />
ERISA Plan Reimbursement Claims<br />
A typical ERISA reimbursement claim<br />
involves facts similar to the following.<br />
An employer offers a group health plan<br />
for the benefit of its employees, generally<br />
funded in part by employee contributions.<br />
An employee, a participant in the<br />
plan, is injured in a non-work related accident,<br />
often a motor vehicle accident. The<br />
plan pays the medical expenses resulting<br />
from the employee’s accident- related injuries,<br />
and often, the employee pays very<br />
little of the expense him- or herself. The<br />
employee sues the at-fault tortfeasor in a<br />
personal injury lawsuit and claims medical<br />
expenses, including all of the expenses<br />
paid by the plan, as an element of his or her<br />
“damages.” The employee either settles the<br />
lawsuit or obtains a judgment, which generally<br />
takes into account all of his or her<br />
alleged damages, including all the medical<br />
expenses that the employer paid on his<br />
or her behalf.<br />
The plan authorizes the employer to<br />
obtain full reimbursement of benefits paid<br />
for an employee’s injuries from any monies<br />
recovered through an Employee’s lawsuit<br />
against a third-party tortfeasor. This plan<br />
reimbursement intends to ensure the plan’s<br />
solvency to the benefit of all employees<br />
and to reduce the costs to all employees by<br />
keeping contribution levels as low as possible.<br />
To further these goals, the health plan<br />
expressly allows first priority reimbursement<br />
from settlement funds or judgments,<br />
irrespective of whether an employee has<br />
been fully compensated or “made whole”<br />
by a settlement or a judgment, and regardless<br />
of an employee’s responsibility for paying<br />
personal injury attorney’s fees.<br />
The employee and his or her personal injury<br />
attorney in this hypothetical situation<br />
resist the employer’s reimbursement claim,<br />
asserting among other things, (1) that the<br />
employee will not be “made whole” if the<br />
plan is reimbursed from the third-party<br />
tort recovery, invoking the make-whole<br />
doctrine; and (2) that the employee’s attorney’s<br />
fees should be deducted from the<br />
reimbursement amount since the thirdparty<br />
tort recovery secured reimbursement<br />
for the plan in the first place, invoking the<br />
common-fund doctrine.<br />
A plan fiduciary ultimately sues to<br />
recover the plan benefits under section<br />
502(a)(3) of ERISA, which authorizes a plan<br />
“participant, beneficiary, or fiduciary (A) to<br />
enjoin any act or practice which violates<br />
any provision of [ERISA] or the terms of<br />
the plan, or (B) to obtain other appropriate<br />
equitable relief (i) to redress such violations<br />
or (ii) to enforce any provisions of [ERISA]<br />
or the terms of the plan….” 29 U.S.C. §1132<br />
(a)(3). Among the “appropriate equitable<br />
relief” that a plan fiduciary may seek is an<br />
equitable lien, a constructive trust on plan<br />
benefits, or both, that equitably ought to be<br />
returned to the plan for the benefit of all<br />
plan participants and beneficiaries.<br />
The Supreme Court Analysis<br />
of Section 502(a)(3)<br />
Between 1993 and 2011, the Supreme Court<br />
analyzed claims for relief under ERISA<br />
section 502(a)(3) no fewer than six times.<br />
See Mertens v. Hewett Assoc., 508 U.S.<br />
248 (1993); Varity Corp. v. Howe, 516 U.S.<br />
489 (1996); Harris Trust & Sav. Bank. v.<br />
Salomon Smith Barney, Inc., 530 U.S. 238<br />
(2000); Great-West Life & Annuity Ins.<br />
Co. v. Knudson, 534 U.S. 204 (2002); Sereboff<br />
v. Mid Atl. Med. Srvs., Inc., 547 U.S.<br />
356 (2006); Cigna Corp. v. Amara, 131<br />
S. Ct. 1866 (2011). Primarily, the scope of<br />
“appropriate equitable relief” has occupied<br />
the Court’s attention, but importantly, the<br />
Court has not yet addressed how “appropriate”<br />
qualifies “equitable relief.”<br />
In Knudson and Sereboff, the Court<br />
addressed health plan reimbursement<br />
claims under ERISA section 502(a)(3), discussing<br />
whether claims seeking to recover<br />
health benefits from third-party tort recoveries<br />
were “legal” or “equitable.” Previously,<br />
in Mertens, the Court “construed<br />
[ERISA §502(a)(3)] to authorize ‘those categories<br />
of relief that were typically available<br />
in equity,’ and thus rejected a claim that<br />
[the Court] found sought ‘nothing other<br />
than compensatory damages.’” Sereboff,<br />
547 U.S. at 361 (quoting Mertens, 508 U.S.<br />
at 255–56). In Knudson, the Court “elaborated<br />
on this construction,” and determined<br />
that Great-West’s ERISA section<br />
502(a)(3) reimbursement claim “was ‘not<br />
equitable—the imposition of a constructive<br />
trust or equitable lien on particular<br />
property—but legal—the imposition<br />
of personal liability for the benefits that<br />
[Great-West] conferred upon [Knudson].’”<br />
Sereboff, 547 U.S. at 362 (quoting Knudson,<br />
534 U.S. at 214). The Court reached this<br />
Between 1993 and 2011,<br />
the Supreme Court analyzed<br />
claims for relief under<br />
ERISA section 502(a)(3)<br />
no fewer than six times.<br />
conclusion because the Knudsons never<br />
possessed their personal injury settlement<br />
funds, and therefore, they did not “hold<br />
particular funds that, in good conscience,<br />
belong[ed] to” Great-West. Knudson, 534<br />
U.S. at 214.<br />
In Sereboff the Court wrote that the<br />
“impediment to characterizing the relief as<br />
equitable in Knudson is not present here”<br />
because “the portion of the tort settlement<br />
due to” the plan was in the Sereboffs’<br />
“investment accounts.” Sereboff, 547 U.S.<br />
at 363. The Court held that the reimbursement<br />
provisions of the ERISA plan created<br />
an “equitable lien by agreement,” which<br />
allowed the plan administrator to “follow<br />
a portion of the recovery into the Sereboffs’<br />
hands as soon as the settlement fund was<br />
identified, and impose on that portion a<br />
constructive trust or equitable lien.” Id. at<br />
364–65 (internal quotations omitted).<br />
The Court briefly noted the Sereboffs’<br />
argument that certain “equitable defenses,”<br />
such as “the defense that subrogation may<br />
be pursued only after a victim had been<br />
made whole for his injuries,” should apply.<br />
Id. at 368 & n.2. The Court held that these<br />
alleged “equitable defenses” were “beside<br />
the point” in actions to “enforce an equitable<br />
lien by agreement” and declined to consider<br />
whether a reimbursement claim was<br />
“appropriate” equitable relief under ERISA<br />
section 502(a)(3) if it “contravened princi-<br />
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Life, Health and Disability<br />
ples like the make-whole doctrine” because<br />
that issue was not raised below. Id. at 368.<br />
Most recently, in Amara, the district<br />
court found that Cigna failed to disclose<br />
detrimental features of changes to a<br />
defined pension benefit plan and that Cigna’s<br />
“descriptions of the plan were incomplete<br />
and inaccurate” and “intentionally<br />
misled its employees.” 131 S. Ct. at 1874.<br />
In the wake of Knudson,<br />
Sereboff, and Amara,<br />
the circuits have taken<br />
contrasting views of<br />
“appropriate equitable<br />
relief” under ERISA<br />
section 502(a)(3).<br />
Invoking ERISA section 502(a)(1)(B), the<br />
district court ordered and the Second Circuit<br />
affirmed that (1) a court could reform<br />
the terms of the plan, (2) Cigna must<br />
enforce the plan as reformed, and (3) Cigna<br />
must pay retired beneficiaries money owed<br />
under the plan as reformed. Id. at 1879–80.<br />
The Supreme Court held that ERISA<br />
section 502(a)(1)(B) did not authorize<br />
this relief, but section 502(a)(3) may have<br />
because the remedies “resemble[d] traditional<br />
forms of equitable relief,” namely,<br />
reformation, estoppel, and surcharge. Id.<br />
The Court vacated and remanded, stating<br />
that whether “the general principles [that<br />
it had] discussed [were] properly applicable<br />
in this case is for [the district court] or the<br />
Court of Appeals to determine in the first<br />
instance.” Id. at 1882.<br />
In the wake of Knudson, Sereboff, and<br />
Amara, the circuits have taken contrasting<br />
views of “appropriate equitable relief”<br />
under ERISA section 502(a)(3). The disagreement<br />
centers on whether “equitable<br />
limitations” or “federal common law,” such<br />
as the make-whole and common- fund doctrines,<br />
can limit ERISA plan reimbursement<br />
recoveries when they are expressly<br />
disclaimed by a plan.<br />
76 ■ For The Defense ■ October 2012<br />
A number of issues are at play, including<br />
(1) whether the Supreme Court analysis of<br />
the scope of equitable relief under ERISA<br />
section 502(a)(3) necessarily implies that<br />
these doctrines should apply even if a plan<br />
purports to invalidate them; (2) whether<br />
the doctrines constitute true “equitable<br />
defenses” or are merely common law<br />
“interpretive” gap- fillers that plans can<br />
expressly reject; (3) whether the policies<br />
underlying ERISA and the primacy of the<br />
terms of ERISA plans should prevail over<br />
alleged equitable considerations of perceived<br />
“fairness” to plan participants and<br />
their personal injury attorneys; (4) whether<br />
courts evaluating ERISA reimbursement<br />
claims based on settlements of underlying<br />
tort actions should routinely conduct<br />
“mini- trials” of liability and damages that<br />
the personal injury actions never tried; and<br />
(5) if these doctrines do apply despite plan<br />
language to the contrary, whether the federal<br />
courts nevertheless have the discretion<br />
to order full reimbursement to a plan after<br />
weighing the equities of a case.<br />
Zurich American v. O’Hara<br />
Zurich Amer. Ins. Co. v. O’Hara, 604 F.3d<br />
1232 (11th Cir. 2010), epitomizes the<br />
majority of circuit court opinions, holding<br />
that the make-whole and commonfund<br />
doctrines should not apply when a<br />
plan expressly disclaims them. See also<br />
Shank, 500 F.3d at 839 (“[n]othing in the<br />
statute suggests Congress intended that<br />
section 502(a)(3)’s limitation of the [plan’s]<br />
recovery to ‘appropriate equitable relief’<br />
would upset these contractually- defined<br />
expectations [such as a make-whole doctrine<br />
disclaimer]. Indeed, ERISA’s mandate<br />
that ‘[e]very employee benefit plan shall be<br />
established and maintained pursuant to<br />
a written instrument,’ 29 U.S.C. §1102(a)<br />
(1), establishes the primacy of the written<br />
plan”); Varco, 338 F.3d at 691–92 (“it<br />
is inappropriate to fashion a common law<br />
rule that would override the express terms<br />
of a private plan unless the overridden plan<br />
provision conflicts with statutory provisions<br />
or other policies underlying ERISA….<br />
Those cases which have applied the federal<br />
common fund doctrine in the favor of<br />
individual ERISA participants have done<br />
so, correctly, only in the absence of controlling<br />
plan language”); Bombadier, 354<br />
F.3d at 361 (“neither the federal nor Texas<br />
common fund doctrine may be invoked<br />
to prevent or reduce the Plan’s recovery of<br />
the funds that it advanced to [the beneficiary]<br />
up to the full amount of his recovery<br />
from the tortfeasor”); Wells, 213 F.3d at 402<br />
(suggesting that in an action under ERISA<br />
§502(a)(3), the parties to an ERISA plan<br />
could alter the “background of commonsense<br />
understandings and legal principles<br />
[such as the common- fund doctrine]<br />
that… operate as default rules to govern in<br />
the absence of a clear expression of the parties’<br />
intent that they not govern”).<br />
In O’Hara, Zurich sued an employee,<br />
O’Hara, to recover $262,611.92 in selffunded<br />
health plan benefits from a settlement<br />
fund of $1,286,457.11. O’Hara had<br />
been injured in a head-on motor vehicle accident.<br />
The ERISA plan language expressly<br />
allowed Zurich to obtain full reimbursement<br />
of plan benefits and also specified that<br />
“no court costs or attorneys’ fees may be<br />
deducted from the Plan’s recovery without<br />
the Plan’s express written consent; any socalled<br />
‘Fund Doctrine’ or ‘Common Fund<br />
Doctrine’ or ‘Attorney’s Fund Doctrine’<br />
shall not defeat this right….” 604 F.3d at<br />
1234. The plan further established that “regardless<br />
of whether a covered person has<br />
been fully compensated or made whole, the<br />
Plan may collect from covered persons the<br />
proceeds of any full or partial recovery that<br />
a covered person or his or her legal representative<br />
obtain, whether in the form of a<br />
settlement or judgment….” Id.<br />
O’Hara argued that enforcing the plan’s<br />
reimbursement provisions was not “appropriate”<br />
because “he was not made whole by<br />
his third-party recovery.” Id. at 1236. Specifically,<br />
O’Hara argued that<br />
as a matter of equity and in order to<br />
effectuate ERISA’s policy of protecting<br />
plan beneficiaries, the make-whole<br />
rule must be applied because allowing<br />
Zurich to recoup the medical expenses<br />
it paid on his behalf unduly punishes<br />
him [O’Hara] by requiring him to forfeit<br />
a substantial portion of the compensation<br />
he received for his other losses,<br />
including future wages and bodily integrity,<br />
and unjustly enriches Zurich. Id.<br />
Citing Eleventh Circuit precedent, the<br />
court held that “the make-whole doctrine<br />
is a default rule that applies only in the<br />
absence of specific and unambiguous language<br />
precluding it.” Id. (citing Cagle v.
Bruner, 112 F.3d 1510 (11th Cir. 1997)). The<br />
court observed that “[a]pplying federal<br />
common law to override the plan’s controlling<br />
language, which expressly provides<br />
for reimbursement regardless of whether<br />
O’Hara was made whole by his third-party<br />
recovery, would frustrate, rather than<br />
effectuate, ERISA’s purpose to protect contractually<br />
defined benefits.” Id. at 1237.<br />
Moreover, the court held that “[a]pplying<br />
federal common law to deny an employer<br />
its right to reimbursement pursuant to a<br />
written plan would also frustrate ERISA’s<br />
purposes by discouraging employers from<br />
offering welfare benefit plans in the first<br />
place.” Id.<br />
The court emphasized that “[a]lthough<br />
O’Hara himself will be in a better position<br />
if the subrogation provision is not enforced,<br />
plan fiduciaries must ‘take impartial<br />
account of the interests of all beneficiaries.’”<br />
Id. Regarding the “equities” of the<br />
case, the court emphasized that it would<br />
be unfair to allow O’Hara to “partake of the<br />
benefits of the Plan and then after [he] had<br />
received a substantial settlement, invoke<br />
common law principles to establish a legal<br />
justification for [his] refusal to satisfy [his]<br />
end of the bargain.” Id. at 1238 (quoting<br />
Ryan v. Federal Express Corp., 78 F.3d 123,<br />
127–28 (3d Cir. 1996)).<br />
Although O’Hara did not challenge the<br />
district court’s finding that the plan precluded<br />
deducting O’Hara’s attorney’s fees<br />
from Zurich’s recovery, the court nevertheless<br />
held that “because the Plan clearly and<br />
unambiguously disclaimed the ‘common<br />
fund doctrine,’ the district court correctly<br />
found that Zurich was owed the entire<br />
amount it paid on O’Hara’s behalf without<br />
a deduction of attorney’s fees.” Id. at n.4.<br />
The Court concluded that<br />
[b]ecause full reimbursement according<br />
to the terms of the Plan’s clear and<br />
unambiguous subrogation provision is<br />
necessary not only to effectuate ERISA’s<br />
policy of preserving the integrity of<br />
written plans but to protect the interests<br />
and expectations of all plan participants<br />
and beneficiaries, such relief is<br />
both ‘appropriate’ and ‘equitable’ under<br />
ERISA §502(a)(3).<br />
U.S. Airways v. McCutchen<br />
In U.S. Airways, Inc. v. McCutchen, 663<br />
F.3d 671 (3d Cir. 2011), U.S. Airways sued<br />
McCutchen, a plan participant, seeking<br />
reimbursement of $66,866 in medical<br />
benefits paid on McCutchen’s behalf.<br />
McCutchen settled his personal injury<br />
lawsuit for $10,000 and obtained another<br />
$100,000 in underinsured motorist benefits<br />
for a total third-party recovery of<br />
$110,000. After paying a 40 percent contingency<br />
fee, McCutchen’s net recovery was<br />
less than $66,000. Nevertheless, U.S. Airways<br />
demanded full reimbursement of the<br />
plan benefits paid for McCutchen’s injuries,<br />
based on the express reimbursement provisions<br />
of the plan. 663 F.3d at 673.<br />
McCutchen argued that “it would be<br />
unfair and inequitable to reimburse U.S.<br />
Airways in full when he [McCutchen] has<br />
not been fully compensated for his injuries,<br />
including pain and suffering,” and<br />
“U.S. Airways, which made no contribution<br />
to his attorneys’ fees and expenses,<br />
would be unjustly enriched if it were now<br />
permitted to recover from him without<br />
any allowance for those costs, in essence to<br />
reap what McCutchen has sown.” Id. at 673.<br />
The court observed that “if legal costs are<br />
not taken into account, U.S. Airways will<br />
effectively be reaching into its beneficiary’s<br />
pocket, putting him in a worse position<br />
than if he had not pursued a third-party<br />
recovery at all.” Id. The court noted that<br />
the case “squarely present[ed] the question<br />
that Sereboff left open: whether §502(a)(3)’s<br />
requirement that equitable relief be ‘appropriate’<br />
means that a fiduciary like U.S.<br />
Airways is limited in its recovery from a<br />
beneficiary like McCutchen by the equitable<br />
defenses and principles that were ‘typically<br />
available in equity.’” Id. at 675–76.<br />
The court held that “applying the traditional<br />
equitable principle of unjust<br />
enrichment,… the [district court] judgment<br />
requiring McCutchen to provide full<br />
reimbursement to U.S. Airways constitutes<br />
inappropriate and inequitable relief.”<br />
Id. at 679. The court emphasized that “the<br />
amount of the judgment exceed[ed] the net<br />
amount of McCutchen’s third-party recovery,<br />
[and left] him with less than full payment<br />
for his emergency medical bills, thus<br />
undermining the entire purpose of the<br />
Plan.” Id.<br />
The court also commented that full<br />
reimbursement “amounts to a windfall<br />
for U.S. Airways, which did not exercise<br />
its subrogation rights or contribute to the<br />
cost of obtaining the third-party recovery.<br />
Equity abhors a windfall.” Id. The court<br />
expressly disagreed with O’Hara and other<br />
circuit court opinions, which, according to<br />
the Third Circuit, have found reimbursement<br />
claims under ERISA §502(a)(3) to<br />
seek “equitable” relief without then asking<br />
whether the relief sought was “appropriate.”<br />
Id. at 678.<br />
The court analyzed Mertens, Knudson,<br />
and Sereboff to support that “‘appropriate<br />
equitable relief’ must be something<br />
less than all equitable relief,” and further<br />
that “[r]emedies that peculiarly belong to<br />
traditional categories of equitable relief<br />
would typically have been defeated by<br />
equitable principles and defenses.” Id. at<br />
676. Additionally, the court opined that<br />
Amara reflected the Supreme Court view<br />
that “when courts were sitting in equity<br />
in the days of the divided bench (or even<br />
when they apply equitable principles today)<br />
contractual language was not as sacrosanct<br />
as it is normally considered to be<br />
when applying breach of contract principles….”<br />
Id. at 678–79. Thus, the court disagreed<br />
“with those circuits that have held<br />
it would be pioneering federal common law<br />
to apply equitable limitations on an equitable<br />
claim.” Id. The court did not decide<br />
what would constitute “appropriate equitable<br />
relief,” but it remanded the case to the<br />
district court to make that determination.<br />
The court did not specifically address<br />
application of the “make-whole” doctrine,<br />
which it described as an “equitable doctrine,”<br />
because McCutchen did not raise the<br />
issue on appeal. Id. at 676 n.2. However, the<br />
Ninth Circuit has agreed with McCutchen,<br />
holding that “notwithstanding the express<br />
terms of the Plan disclaiming the application<br />
of the make whole doctrine and the<br />
common fund doctrine, it is within the district<br />
court’s broad equitable powers under<br />
§502(a)(3) not to give those provisions controlling<br />
weight in fashioning ‘appropriate<br />
equitable relief.’” CGI Techs. & Solutions,<br />
Inc. v. Rose, 2012 U.S. App. Lexis 12556, at<br />
*28–29 (9th Cir. June 20, 2012).<br />
Comparing O’Hara with McCutchen<br />
O’Hara and McCutchen appear to conflict<br />
irreconcilably on whether common<br />
law equitable principles can limit ERISA<br />
reimbursement recoveries when a plan<br />
expressly and unambiguously disclaims<br />
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Life, Health and Disability<br />
their application. Both cases balance the<br />
policies underlying ERISA and the relative<br />
equities, and yet, reach different conclusions.<br />
The most obvious factual distinction<br />
is that in McCutchen the plan’s reimbursement<br />
amount exceeded the net sum of<br />
the employee’s third-party recovery. The<br />
Third Circuit opinion in McCutchen was<br />
influenced by the perceived “inequity” of<br />
One issuethat the<br />
Supreme Court may address<br />
is whether the makewhole<br />
doctrine is even an<br />
“equitable defense” at all.<br />
that situation, which the court described<br />
as “unprecedented” in its case law. Id. at<br />
272 n.3.<br />
In O’Hara, the Eleventh Circuit emphasized<br />
that reimbursement of plan assets<br />
“inures to the benefit of all participants<br />
and beneficiaries by reducing the total cost<br />
of the Plan.” 604 F.3d at 1238. If the plan<br />
did not recover the medical benefits, “the<br />
cost of those benefits would be defrayed<br />
by other plan members and beneficiaries<br />
in the form of higher premium payments.”<br />
Id. Moreover, plan fiduciaries must “ensure<br />
that the assets of employee health plans<br />
are preserved in order to satisfy present<br />
and future claims.” Id. The Eleventh Circuit<br />
reasoned:<br />
Because maintaining the financial viability<br />
of self-funded ERISA plans is often<br />
unfeasible in the absence of reimbursement<br />
and subrogation provisions like<br />
the one at issue in this case… denying<br />
[the plan] its right to reimbursement<br />
would harm other plan members<br />
and beneficiaries by reducing the funds<br />
available to pay those claims.<br />
Id. In the Eleventh Circuit’s view, these<br />
considerations conformed most congruously<br />
with ERISA’s “repeatedly emphasized<br />
purpose to protect contractually defined<br />
benefits.” Id. at 1237 (quoting Massachusetts<br />
Mut. Life Ins. Co. v. Russell, 473 U.S.<br />
134, 148 (1985)). In an amicus brief in<br />
78 ■ For The Defense ■ October 2012<br />
support of U.S. Airways, three industry<br />
groups, the National Association of Subrogation<br />
Professionals, the Self- Insurance<br />
Institute of America, Inc., and the Western<br />
Pennsylvania Teamsters and Employers<br />
Welfare Fund, made similar arguments.<br />
See 2012 WL 1957772 (May 25, 2012).<br />
McCutchen, in contrast, emphasized<br />
that the Third Circuit viewed it as “unjust”<br />
to require a plan participant to reimburse<br />
a health plan fully when the amount of the<br />
reimbursement exceeded the net amount of<br />
the participant’s third-party recovery, and<br />
further, full reimbursement constituted a<br />
“windfall” to the plan. On the first point,<br />
it is not clear whether the Third Circuit<br />
would find full reimbursement “unjust” if<br />
a plan paid significantly less benefits than<br />
an employee received from a third-party<br />
recovery. That factual distinction would<br />
exist in many, if not most reimbursement<br />
cases.<br />
Second, the “windfall” argument seems<br />
misplaced given that the reimbursement<br />
claim enforces a contractual right that<br />
protects plan assets. See Schwade v. Total<br />
Plastics, Inc., 2012 U.S. Dist. Lexis 37091,<br />
at *25 (M.D. Fla. Feb. 22, 2012). It rings<br />
particularly hollow when a plan participant<br />
can recover or has recovered “medical<br />
expenses” as an element of damages<br />
in an underlying tort case, even when a<br />
health plan has paid them fully. If a plan<br />
member can keep that money, which equitably<br />
ought to return to the plan, he or she<br />
obtains a “windfall.”<br />
One issue that the Supreme Court may<br />
address is whether the make-whole doctrine<br />
is even an “equitable defense” at<br />
all. While McCutchen assumes that it is,<br />
many courts have determined that “[t]he<br />
make-whole doctrine is not an equitable<br />
defense.” Aetna Life Ins. Co. v. Kohler, 2011<br />
U.S. Dist. Lexis 54887, at *11–12 (N.D. Cal.<br />
May 23, 2011). Arguably, “[a]t most, the<br />
make whole doctrine operates as a default<br />
rule” of contract construction, that has not<br />
been adopted by all federal circuits. Cagle,<br />
112 F.3d at 1521. Compare Bash v. State<br />
Farm Mut. Auto. Ins. Co., 2010 U.S. Dist.<br />
Lexis 39956, at *21 (E.D. Mich. Apr. 23,<br />
2010) (stating that the make-whole doctrine<br />
“itself is simply a default rule of construction<br />
‘that an insurer cannot enforce its<br />
own subrogation [or reimbursement] rights<br />
unless and until the insured has been made<br />
whole by any recovery’”), with Paris v. Iron<br />
Workers Trust Fund, Local No. 5, 2000 U.S.<br />
App. Lexis 6883, at *7–8 (4th Cir. Apr. 17,<br />
2000) (“[a]pplying the same doctrines and<br />
rules of construction to ERISA contracts<br />
that generally apply to insurance contracts,<br />
such as the make-whole doctrine or the<br />
rule requiring courts to construe insurance<br />
contracts strictly against their drafters,<br />
would frustrate the purposes of ERISA.”).<br />
Cutting v. Jerome Foods, 993 F.2d 1293<br />
(7th Cir. 1993), addressed the distinction<br />
between substantive and remedial rights<br />
under ERISA versus an “interpretive principle”<br />
such as the make-whole doctrine:<br />
As it happens, the so-called universal<br />
[make-whole] rule of subrogation for<br />
which the Cuttings contend is a rule<br />
of interpretation. No one doubts that<br />
the beneficiary of… an employee welfare<br />
or benefits plan can if he wants sign<br />
away his make-whole right. The right<br />
exists only when the parties are silent.<br />
It is a gap filler. We need not consider<br />
the judges’ power to impose substantive<br />
or remedial, as distinct from merely<br />
interpretive, common law principles, on<br />
ERISA plans; need not consider, that is,<br />
the extent to which common law reasoning<br />
can be used to enlarge (or contract)<br />
the rights of an ERISA beneficiary<br />
or participant. The scope of that power<br />
is uncertain,… because of the possibility<br />
of conflict between a specific substantive<br />
or remedial principle, such as<br />
equitable estoppel, and the substantive<br />
or remedial principles set forth in<br />
ERISA itself, such as the requirement<br />
(with which equitable estoppel might be<br />
thought inconsistent) that all plan benefits<br />
be in writing. We are dealing only<br />
with an interpretive principle.<br />
Id. at 1297 (citations omitted).<br />
Conclusion<br />
The Supreme Court will consider<br />
McCutchen in the October 2012 term. How<br />
many issues the Court will resolve that<br />
now percolate among the circuits remain<br />
unknown. In the meantime, ERISA practitioners<br />
should keep abreast of the mercurial<br />
legal landscape surrounding ERISA<br />
section 502(a)(3) claims, and if called upon<br />
to address it, carefully consider the factual<br />
and analytical nuances differentiating the<br />
various cases.
Life, Health and Disability<br />
How to Apply<br />
the Commonality<br />
Requirement<br />
By Michael Kentoff,<br />
Robin Sanders<br />
and Dawn Williams<br />
Wal-Mart Stores<br />
v. Dukes—<br />
After the Hype<br />
Dukes’ real-life scope and<br />
effect on litigation will<br />
only gradually be revealed<br />
with time, decisionby-decision,<br />
but it does<br />
appear that in some<br />
critical ways the rules of<br />
engagement have changed.<br />
Commentators have hailed and denounced the U.S.<br />
Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes,<br />
131 S. Ct. 2541 (2011), as “historic,” “stunning,” a “watershed<br />
decision,” “way wrong,” “hardly a revolutionary deci-<br />
sion,” and having, for better or worse, “revolutionized<br />
federal class action practice.”<br />
The defense bar generally views it as part<br />
of a gradual realignment of the class action<br />
process—perhaps in the spirit of the Private<br />
Securities Litigation Reform Act of<br />
1995 and the 2005 Class Action Fairness<br />
Act legislation—conceivably leading to a<br />
more equitable and principled system, even<br />
as disfavoring the plaintiffs’ bar and discouraging<br />
class action lawsuits.<br />
It is, of course, characterized by some as<br />
representing a vindication of big business<br />
■ Michael Kentoff, Robin Sanders, and Dawn<br />
Williams are members of Jorden Burt’s<br />
National Trial and Class Action Practice<br />
Teams, practicing from the firm’s Washington,<br />
D.C., office. Their practices are focused<br />
on class action and complex litigation on<br />
behalf of the financial services industry. All<br />
are members of the <strong>DRI</strong> Life, Health and Disability<br />
Committee, with Ms. Sanders and Ms.<br />
Williams being active members within<br />
the committee’s leadership. Ms.<br />
Sanders is also the chair of the ABA-<br />
TIPS Life Insurance Law Committee.<br />
The authors wish to thank Christine<br />
Stoddard for providing assistance<br />
with this article.<br />
interests over individual rights and others<br />
as no less than the “death knell” of the<br />
nationwide class action lawsuit.<br />
Whether Dukes represents a seismic<br />
shift in class action jurisprudence or simply<br />
confirms or clarifies long-held federal<br />
law, two portions of Justice Scalia’s decision<br />
caused the biggest ripples among class<br />
counsel, courts, and the press.<br />
First, the decision’s focus on the “commonality”<br />
prong of Federal Rule of Civil<br />
Procedure 23(a)(2), and the accompanying<br />
“heightening” of that standard, pushed<br />
an ordinarily quiet, seemingly reticent<br />
class certification requirement into the<br />
spotlight.<br />
Second, Dukes’ emphasis on the need for<br />
district courts to examine a lawsuit’s merits<br />
when determining whether a common<br />
contention is answerable on a class-wide<br />
basis may have resolved, once and for all,<br />
a nearly 40-year-old debate. Depending on<br />
point-of-view, Dukes either eviscerates or<br />
clarifies previous Supreme Court precedent<br />
as expressed in Eisen v. Carlisle & Jacquelin,<br />
417 U.S. 156, 177 (1974), that “nothing<br />
in either the language or history of Rule<br />
23… gives a court any authority to conduct<br />
a preliminary inquiry into the merits of a<br />
suit in order to determine whether it may<br />
be maintained as a class action.”<br />
For The Defense ■ October 2012 ■ 79
Life, Health and Disability<br />
On the surface, we cannot entirely<br />
predict just how class action procedure<br />
will differ moving forward in light of the<br />
Court’s June 2011 holding in Dukes. After<br />
all, trial courts have long shouldered the<br />
burden of performing a “rigorous analysis”<br />
to determine if plaintiffs have met<br />
each requirement for class certification<br />
under Federal Rule of Civil Procedure 23.<br />
The wordmost often<br />
used to characterize<br />
the commonality<br />
requirement after Dukes<br />
is “reinvigorated.”<br />
80 ■ For The Defense ■ October 2012<br />
See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S.<br />
147, 161 (1982) (holding that a class action<br />
“may only be certified if the trial court is<br />
satisfied, after a rigorous analysis, that the<br />
prerequisites of Rule 23(a) have been satisfied”).<br />
However, in Dukes, the Supreme<br />
Court articulated a more exacting commonality<br />
requirement and answer to the<br />
Eisen riddle that has reshaped, or at least<br />
provided more definition, to the task that<br />
a district court has before it when called<br />
upon to determine class certification.<br />
Significantly, the decision in Dukes is<br />
grounded largely in the due process “right<br />
of the defendant to present facts or raise<br />
defenses that are particular to individual<br />
class members[.]” Thorn v. Jefferson- Pilot<br />
Life Ins. Co., 445 F.3d 311, 318 (4th Cir.<br />
2006). Emphasizing the primacy of procedural<br />
due process, the Court pointed out<br />
that this right is, and always has been, protected<br />
by the Rules Enabling Act, which<br />
states that application of the federal rules,<br />
including Federal Rule of Civil Procedure<br />
23, “shall not abridge, enlarge or modify<br />
any substantive right.” Dukes, 131 S. Ct. at<br />
2561 (quoting 28 U.S.C. §2072 (2006)). This<br />
emphasis on procedural due process has<br />
already started to find its way into analyses<br />
by federal as well as state trial courts.<br />
This article will briefly discuss these<br />
and other key lessons from the Dukes decision.<br />
A large part of the post-Dukes analysis<br />
involves trying to discern the decision’s<br />
meaning and significance to both class<br />
action procedure and, for purposes of this<br />
article, future life, health, and disability<br />
insurance class actions.<br />
Commonality Makes Some Noise<br />
The word most often used to characterize<br />
the commonality requirement after Dukes<br />
is “reinvigorated.” In describing the necessary<br />
ingredients of a “rigorous analysis”<br />
of the commonality requirement of<br />
Federal Rule of Civil Procedure 23(a)(2),<br />
the Dukes court seems to have given the<br />
requirement new life. Of course, someone<br />
might question whether the commonality<br />
requirement was ever flush with vigor<br />
in the first place since historically, it has<br />
been thought of, by courts and litigants, as<br />
easy to satisfy—almost an after- thought,<br />
especially in the context of Federal Rule of<br />
Civil Procedure 23(b)(3) class actions for<br />
which a showing of the predominance of<br />
common issues was usually the class certification<br />
game. Perhaps a more accurate<br />
characterization of the post-Dukes commonality<br />
requirement would simply be<br />
“invigorated.”<br />
Before Dukes, a plaintiff class met the<br />
commonality test “when there [was] at least<br />
one issue, the resolution of which [would]<br />
affect all or a significant number of the<br />
putative class members.” Lightbourn v.<br />
Cnty. of El Paso, 118 F.3d 421, 426 (5th Cir.<br />
1997) (citing Forbush v. J.C. Penney Co., 994<br />
F.2d 1101, 1106 (5th Cir. 1993)). Frequently,<br />
in discussing this test, courts and litigants<br />
repeated the mantra, “the commonality<br />
hurdle is not particularly high,” which was<br />
a nice way for everyone to agree that spending<br />
much time discussing commonality<br />
was unnecessary.<br />
In consumer fraud class actions, plaintiffs<br />
often addressed the commonality<br />
requirement by raising common questions<br />
that tended to focus solely on the conduct<br />
of the defendant rather than on the experiences<br />
or actions of the consumers. Because<br />
courts customarily had paid scant attention<br />
to the commonality requirement anyway,<br />
this tactic often worked, even when<br />
the putative class might fail another, more<br />
stringent Federal Rule of Civil Procedure<br />
23 requirement such as predominance.<br />
In Dukes, however, the commonality<br />
requirement was the center of attention.<br />
The Court held that the “common contention”<br />
required under Federal Rule of Civil<br />
Procedure 23 “must be of such a nature that<br />
it is capable of classwide resolution—which<br />
means that determination of its truth or<br />
falsity will resolve an issue that is central to<br />
the validity of each one of the claims in one<br />
stroke.” Dukes, 131 S. Ct. at 2551 (emphasis<br />
added). Confusion surrounding the application<br />
of this heightened standard has<br />
resulted in conflicting district court class<br />
certification decisions and, not surprisingly,<br />
an increase in interlocutory appellate<br />
review. The Seventh Circuit Court of<br />
Appeals observed that commonality issues<br />
after Dukes “cr[y] out for a 23(f) appeal.”<br />
See McReynolds v. Merrill Lynch, 672 F.3d<br />
482, 488 (7th Cir. 2012).<br />
One such Federal Rule of Civil Procedure<br />
23(f) appeal offers a view of how<br />
the circuits may treat the commonality<br />
requirement in light of Dukes. In M.D. ex<br />
rel. Stukenberg v. Perry, 675 F.3d 832 (5th<br />
Cir. 2012), plaintiffs alleged that the State<br />
of Texas subjected all of the children in the<br />
state Permanent Managing Conservatorship<br />
to various harms, including depriving<br />
them of a number of rights in violation<br />
of Texas law.<br />
Although the district court found that<br />
the class raised common questions of both<br />
fact and law, on appeal, the Fifth Circuit<br />
Court of Appeals stated that the analysis<br />
had been insufficient under Dukes, even<br />
though it previously may have been reasonable<br />
under Fifth Circuit precedent. The district<br />
court, in the Fifth Circuit’s view, had<br />
failed to conduct a rigorous analysis, which<br />
would have had some overlap with the merits,<br />
and did not explain how a determination<br />
of common questions would resolve<br />
an issue central to every class member. Id.<br />
at 839–42.<br />
According to the court of appeals, in<br />
finding that allegations of “systemic deficiencies”<br />
in the state’s administration of<br />
the Permanent Managing Conservatorship<br />
raised common questions of fact, the<br />
district court failed to analyze adequately<br />
whether individual differences among<br />
class members would preclude a finding<br />
of commonality, and, due to that failure,<br />
a class-wide proceeding could not “generate<br />
common answers apt to drive the resolution<br />
of the litigation.” Id. at 841 (quoting<br />
Dukes, 131 S. Ct. at 2551).
This reasoning seems well-suited to<br />
certification analysis in insurance class<br />
actions. For instance, in Corwin v. Lawyers<br />
Title Ins. Co., 276 F.R.D. 484 (E.D. Mich.<br />
2011), the plaintiff brought a putative class<br />
action against a title insurer, alleging that<br />
discounts were not provided to purchasers<br />
who had previously been issued a title<br />
policy in connection with the same property.<br />
Id. at 485. In support of its motion for<br />
class certification, the plaintiff identified a<br />
series of common questions related to the<br />
defendant’s conduct and obligations. Id. at<br />
489–90.<br />
The court denied class certification<br />
because an absent class member would<br />
be unable to recover “unless he or she<br />
[could] establish that there was a previous<br />
title policy issued on the specific property<br />
in question.” Id. at 490. After discussing<br />
the Dukes holding on the commonality<br />
requirement, the court found that “[s]uch<br />
proof is uniquely individualized; it cannot<br />
be established on a classwide basis…<br />
instead of liability being established ‘in one<br />
stroke,’ it would take an assessment of each<br />
transaction to determine if the absent class<br />
member qualified for the discount rate.” Id.<br />
See also Scott v. First Am. Title Ins. Co., 276<br />
F.R.D. 471, 478 (E.D. Ky. 2011) (holding that<br />
the question of “whether the Class was entitled<br />
to the discounted [title insurance] rates<br />
on file [or]… whether First American was<br />
unjustly enriched… cannot be determined<br />
in ‘one stroke’ for all class members without<br />
inspection of individualized proof.”).<br />
Conversely, a showing that the challenged<br />
conduct of the insurer is somehow<br />
universal can, in some instances, keep the<br />
inquiry squarely focused on the defendant’s<br />
challenged conduct. In Churchill v.<br />
Cigna Corp., 2011 WL 3563489 (E.D. Pa.<br />
Aug. 12, 2011), for example, the plaintiffs<br />
alleged improper denial of health insurance<br />
claims seeking treatment for autism<br />
known as applied behavior analysis and<br />
early intensive behavioral treatment (collectively<br />
“ABA”). Id. at *1–2. Cigna denied<br />
these claims under an experimental or<br />
investigative treatment exclusion, which it<br />
allegedly did as part of an overarching, universal<br />
policy. Id. at *4.<br />
The district court found that the plaintiffs<br />
had satisfied the commonality requirement<br />
articulated in Dukes because, in<br />
contrast to the discretion that Wal-Mart<br />
gave store managers over employment decisions,<br />
“Cigna indisputably has a national<br />
policy of denying coverage for ABA to treat<br />
ASD [autism spectrum disorder].” Id. Thus,<br />
the court concluded, “the central question<br />
here is whether Cigna’s denial of medical<br />
coverage for ABA as a treatment for ASD<br />
on the basis that such treatment is investigative<br />
or experimental was proper, and the<br />
answer to this question will resolve each<br />
class member’s individual claim.” Id.<br />
At this early stage, the critical difference<br />
between claims that satisfy the commonality<br />
requirement of Dukes and those that<br />
do not appears to depend on the degree to<br />
which the plaintiff can portray the allegedly<br />
harmful conduct as standard and<br />
pervasive. For instance, the Eighth Circuit<br />
Court of Appeals has found that Dukes was<br />
factually distinguishable from a case in<br />
which the plaintiffs asserted warranty and<br />
negligence claims and alleging an inherent<br />
universal product defect. See Zurn Pex<br />
Plumbing Prods. Liab. Litig. v. Zurn Pex,<br />
Inc., 644 F.3d 604 (8th Cir. 2011).<br />
While class certification decisions interpreting<br />
Dukes in life, health, and disability<br />
insurance class actions are at a relatively<br />
nascent developmental stage, the recent<br />
denial of class certification in Rowe v. Bankers<br />
Life and Cas. Co., 2012 WL 1068754<br />
(N.D. Ill. Mar. 29, 2012), demonstrates that<br />
simply alleging a broad, universal scheme<br />
in a series of common questions may no<br />
longer sufficiently meet the commonality<br />
requirement after Dukes. In Rowe, the<br />
plaintiffs alleged that Bankers engaged in<br />
a common scheme “through standardized<br />
misrepresentations and omissions as to<br />
the essential characteristics and true costs<br />
of its equity- indexed deferred annuities.”<br />
Id. at *7. And, in doing so, Bankers violated<br />
RICO and several California statutes,<br />
breached its fiduciary obligations, and was<br />
unjustly enriched. Id. at *3.<br />
As to the RICO claims, the court agreed<br />
with the representative plaintiff that<br />
whether Bankers participated in the “conduct”<br />
of the alleged enterprise’s affairs, was<br />
part of a RICO “enterprise,” and engaged in<br />
activity that amounted to a “pattern,” all<br />
qualified as common questions capable of<br />
class-wide resolution. Id. at *7. But the court<br />
found the failure to identify “any uniform<br />
misrepresentations or omissions made to<br />
each potential member of the nationwide<br />
class,” relying instead on the “bald assertion<br />
that each potential member… received<br />
the same disclosure form” fatal to the commonality<br />
and predominance requirements<br />
under Dukes, especially in light of a declaration<br />
submitted by Bankers contradicting<br />
any such “factual” assertion. Id. at *8.<br />
In Thao v. Midland Nat’l Life Ins., 2012<br />
WL 1900114 (E.D. Wis. May 24, 2012), the<br />
representative plaintiff put forward a theory<br />
of liability challenging an insurer’s<br />
alleged common interpretation of its policy<br />
provisions—in this case, a breach of<br />
contract claim challenging a life insurer’s<br />
ability to set its discretionary cost of insurance<br />
rates for universal life insurance products—and<br />
assiduously avoided claims that<br />
might implicate factual inquiries. Nonetheless,<br />
the district court, citing Dukes, subjected<br />
the merits of the plaintiff’s theory to<br />
a “rigorous analysis” and denied certification<br />
because different pricing preferences<br />
among policyholders meant that there was<br />
no “common grievance” appropriate for<br />
certification. See id. at *9–10.<br />
The holdings in Rowe and Thao reveal<br />
that for some courts the commonality<br />
requirement articulated by Dukes has<br />
stirred them to dig deeply into the facts and<br />
to review plaintiffs’ theories of liability at a<br />
merits level.<br />
Digging for “Significant Proof”<br />
Litigants on both sides of the aisle, attempting<br />
to parse the language of the Dukes<br />
decision to pick and choose those bullet<br />
points that best suit their particular circumstances,<br />
would be wise to remember that the<br />
Supreme Court did not issue the decision<br />
in a vacuum. Rather, the Court in Dukes<br />
weighed the expert, statistical, and anecdotal<br />
evidence submitted to the trial court<br />
and ultimately opined that the plaintiffs<br />
had failed to adduce “‘significant proof’ that<br />
Wal-Mart ‘operated under a general policy<br />
of discrimination.’” Dukes, 131 S. Ct. at<br />
2554 (quoting Falcon, 457 U.S. at 159 n.15).<br />
This pronouncement leaves a number of<br />
questions unanswered, including whether<br />
“significant proof” is the standard that<br />
plaintiffs must satisfy, whether a court may<br />
review the merits in determining whether<br />
plaintiffs have met that standard, what<br />
types and quantum of evidence suffice,<br />
and whether damages are measured in the<br />
same way.<br />
For The Defense ■ October 2012 ■ 81
Life, Health and Disability<br />
Is “Significant Proof” the<br />
Proper Standard<br />
The Court noted that Federal Rule of Civil<br />
Procedure 23 “does not set forth a mere<br />
pleading standard. A party seeking class<br />
certification must affirmatively demonstrate<br />
his compliance with the Rule—that<br />
is, he must be prepared to prove that there<br />
are in fact sufficiently numerous parties,<br />
The holdingsin Rowe and<br />
Thao reveal that for some<br />
courts the commonality<br />
requirement articulated by<br />
Dukes has stirred them to<br />
dig deeply into the facts and<br />
to review plaintiffs’ theories<br />
of liability at a merits level.<br />
common questions of law or fact, etc.”<br />
Dukes, 131 S. Ct. at 2551. In the particular<br />
context of Dukes, the plaintiffs were<br />
required to present “significant proof” that<br />
the common contention was answerable on<br />
a class-wide basis. Id. at 2553–54.<br />
Since Dukes specifically addressed the<br />
plaintiffs’ Title VII claims, courts have unsurprisingly<br />
applied the “significant proof”<br />
requirement uniformly in discrimination<br />
cases. See generally Ellis v. Costco Wholesale<br />
Corp., 657 F.3d 970, 982–83 (9th Cir.<br />
2011). <strong>Courts</strong> have echoed the “significant<br />
proof” standard in other types of cases as<br />
well, though often with little analysis. See,<br />
e.g., DL v. District of Columbia, 277 F.R.D. 38,<br />
46 (D.D.C. 2011) (assuming that “significant<br />
proof” was required, plaintiffs met that burden<br />
in an Individuals with Disabilities and<br />
Education Act lawsuit); Jermyn v. Best Buy<br />
Stores, L.P., 276 F.R.D. 167, 172–73 (S.D.N.Y.<br />
2011) (plaintiffs adduced “significant” and<br />
“substantial” evidence in a consumer protection<br />
claim); Ramos v. SimplexGrinnell LP, 796<br />
F. Supp. 2d 346, 356 (E.D.N.Y. 2011) (plaintiffs<br />
provided “significant proof” of labor law<br />
violations in a statutory claim action). Some<br />
82 ■ For The Defense ■ October 2012<br />
state courts have even required “significant”<br />
proof of commonality. See Price v. Martin, 79<br />
So. 3d 960, 970–71 (La. 2011) (tort claims).<br />
In a putative class action involving supplemental<br />
health insurance policies, the<br />
Sixth Circuit’s recent adherence to the “rigorous<br />
analysis” standard in Gooch v. Life<br />
Investors Ins. Co. of Am., 672 F.3d 402 (6th<br />
Cir. 2012), is notable. The district court<br />
in Gooch had conducted a “limited factual<br />
inquiry” into the plaintiffs’ class allegations,<br />
a standard that the Sixth Circuit<br />
determined was “clearly wrong.” Id. at 417.<br />
Although the Sixth Circuit recognized that<br />
other circuits apply a preponderance of the<br />
evidence standard to resolve factual disputes<br />
related to class certification, the court<br />
concluded that applying the “rigorous analysis”<br />
standard was sufficient. Id. at 418 n.8.<br />
In finding that it had “no occasion to<br />
decide the evidentiary standard for factual<br />
findings during class certification,”<br />
the court explained that it saw “no reason<br />
to superimpose” a standard any more specific<br />
than the existing “rigorous analysis”<br />
requirement, particularly given that the<br />
Supreme Court recently had used the same<br />
requirement in Dukes. Id.<br />
Conversely, courts in the Second,<br />
Third, and Seventh Circuits continue to<br />
apply their pre-Dukes requirement that<br />
to achieve class certification a class must<br />
establish each element of Federal Rule of<br />
Civil Procedure 23 by a preponderance of<br />
the evidence. See Behrend v. Comcast Corp.,<br />
655 F.3d 182, 190 (3d Cir. 2011); Messner v.<br />
Northshore Univ. Health Sys., 669 F.3d 802,<br />
811 (7th Cir. 2012); Romero v. H.B. Auto.<br />
Grp., Inc., 2012 WL 1514810, at *17 (S.D.N.Y.<br />
May 1, 2012). Moreover, at least two district<br />
court cases use these burden of proof standards—“significant<br />
proof” and “preponderance<br />
of the evidence”—interchangeably.<br />
See Romero, 2012 WL 1514810, at *17–<br />
19; White v. W. Beef Prop., Inc., 2011 WL<br />
6140512, at *3–6 (E.D.N.Y. Dec. 9, 2011).<br />
Thus, while courts always undertake a<br />
“rigorous analysis,” the additional hurdles<br />
that plaintiffs must clear before a court will<br />
certify a class depend on the circuit and<br />
may also depend on the subject matter of<br />
the litigation.<br />
Merits Analysis at the Class<br />
Certification Stage<br />
Regardless of which standard a court uses<br />
to evaluate plaintiffs’ evidence, how closely<br />
a court may assess the merits of plaintiffs’<br />
claims has continued to nag nearly every<br />
judge to consider class certification over<br />
the last 40 years. Addressing the earlier<br />
language in Eisen, the Dukes court noted<br />
that frequently a “‘rigorous analysis’ will<br />
entail some overlap with the merits of the<br />
plaintiff’s underlying claim. That cannot be<br />
helped.” Dukes, 131 S. Ct. at 2551. See also<br />
Jamie S. v. Milwaukee Pub. Sch., 668 F.3d<br />
481, 493 (7th Cir. 2012) (same).<br />
Liberated from Eisen’s nebulous limitation<br />
on merits review, courts have interpreted<br />
this passage from Dukes to mean<br />
that (1) a court must consider the merits if<br />
they overlap with the Federal Rule of Civil<br />
Procedure 23 requirements, Ellis, 657 F.3d<br />
at 980–81; (2) a court cannot review the<br />
merits if making a Federal Rules of Civil<br />
Procedures 23 determination doesn’t call<br />
for it, Behrend, 655 F.3d at 190; and (3) “a<br />
court may not decline to certify a class<br />
merely because it believes the class’s claims<br />
will fail on the merits.” Messner, 669 F.3d at<br />
823. See also Ellis, 657 F.3d at 983 n.8.<br />
Although a trial court must resolve the<br />
factual disputes necessary to analyze class<br />
certification, “the court should not turn the<br />
class certification proceedings into a dress<br />
rehearsal for the trial on the merits.” Messner,<br />
669 F.3d at 811. Additionally, “findings<br />
for the purpose of class certification ‘do not<br />
bind the fact-finder on the merits.’” Behrend,<br />
655 F.3d at 190 (quoting In re Hydrogen<br />
Peroxide Antitrust Litig., 552 F.3d 305,<br />
311, 318 (3d Cir. 2008)).<br />
Expert Testimony: Is a Daubert<br />
Analysis Required<br />
The Dukes plaintiffs relied on statistical<br />
evidence, anecdotal reports, and expert<br />
testimony about Wal-Mart’s vulnerability<br />
to discriminatory practices, although<br />
the Court found that the evidence did not<br />
satisfy Federal Rule of Civil Procedure 23.<br />
Dukes, 131 S. Ct. at 2549. In analyzing the<br />
sufficiency of the evidence, the Court evaluated<br />
each of the three types of evidence<br />
separately.<br />
The Supreme Court expressed “doubt”<br />
about the district court’s conclusion that<br />
“Daubert did not apply to expert testimony<br />
at the certification stage of classaction<br />
proceedings.” Id. at 2554 (citing<br />
Daubert v. Merrell Dow Pharm., Inc., 509
U.S. 579 (1993)). That “doubt” has left the<br />
lower courts ample room to craft their own<br />
responses, most of which do not require a<br />
full Daubert analysis.<br />
Two circuit courts have since affirmatively<br />
rejected a full Daubert investigation<br />
as part of the class certification analysis.<br />
The Third Circuit interpreted the Supreme<br />
Court’s<br />
observation to require a district court to<br />
evaluate whether an expert is presenting<br />
a model which could evolve to become<br />
admissible evidence, and not requiring<br />
a district court to determine if a model is<br />
perfect at the certification stage. This is<br />
consistent with our jurisprudence which<br />
requires that at class certification stage,<br />
we evaluate expert models to determine<br />
whether the theory of proof is plausible.<br />
Behrend, 655 F.3d at 204 n.13.<br />
Similarly, the Eighth Circuit uses a “tailored”<br />
Daubert analysis, requiring district<br />
courts to resolve expert disputes only to the<br />
extent “necessary to determine the nature<br />
of the evidence that would be sufficient,<br />
if the plaintiff’s general allegations were<br />
true, to make out a prima facie case for the<br />
class.” Zurn Pex, 644 F.3d at 611.<br />
Conversely, the Seventh Circuit has<br />
followed its earlier precedent to reaffirm<br />
requiring a full Daubert analysis if an<br />
expert opinion is “critical” to class certification.<br />
Messner, 669 F.3d at 812. Although<br />
the Seventh Circuit viewed the expert opinion<br />
at issue in Messner as “critical,” the<br />
court noted that an expert opinion would<br />
not qualify as critical if a court would make<br />
a decision about a class certification motion<br />
based “on grounds not addressed by the<br />
witness.” Id. at 814.<br />
To add to the confusion, the Ninth Circuit<br />
in Ellis mentioned in passing that “[i]<br />
n its analysis of Costco’s motions to strike,<br />
the district court correctly applied the evidentiary<br />
standard set forth in Daubert.”<br />
657 F.3d at 982. Some district courts have<br />
interpreted that comment to require a<br />
Daubert review. See Stone v. Advance Am.,<br />
278 F.R.D. 562, 566 (S.D. Cal. 2011). See also<br />
Tietsworth v. Sears, Roebuck & Co., 2012<br />
WL 1595112, at *7 (N.D. Cal. May 4, 2012).<br />
Others have decided that Ellis does<br />
not address the issue directly and have<br />
adopted the Eighth Circuit method. See<br />
Bruce v. Harley- Davidson Motor Co., 2012<br />
WL 769604, at *4 (C.D. Cal. Jan. 23, 2012)<br />
(applying a “‘tailored’ or ‘focused’ inquiry<br />
by which it assessed whether the experts’<br />
opinions, based on their areas of expertise<br />
and the reliability of their analysis of the<br />
available evidence, should be considered<br />
in deciding the issues relating to class certification”);<br />
Fosmire v. Progressive Max Ins.<br />
Co., 277 F.R.D. 625, 628–29 (W.D. Wash.<br />
2011). And yet other courts have declined to<br />
address the issue. See Smith v. Ceva Logistics<br />
U.S., Inc., 2011 WL 3204682, at *6–7<br />
(C.D. Cal. July 25, 2011) (declining to decide<br />
whether to apply Daubert and observing<br />
that “[t]he appropriate scope of the Court’s<br />
inquiry into an expert’s testimony at the<br />
class certification stage is murky.”).<br />
In theory, a more stringent standard<br />
benefits the opponent of expert testimony—often<br />
the defendant in a life, health,<br />
and disability case, which will attempt<br />
to argue that plaintiffs seek certification<br />
of a class by presenting “junk” science or<br />
implausible expert theories. In practice,<br />
however, the technical “standard” used<br />
may not determine the outcome in the<br />
post-Dukes cases. Compare, e.g., Bruce,<br />
2012 WL 769604, at *5 (applying a more<br />
lenient standard to disqualify the expert),<br />
with Stone, 278 F.R.D. at 567–68 (denying<br />
a motion to exclude expert testimony after<br />
conducting s Daubert analysis).<br />
Can Plaintiffs Prove Damages<br />
on an Aggregate Basis<br />
After dispensing with plaintiffs’ attempts<br />
to prove that they could establish liability<br />
with common evidence, the Dukes<br />
court then rejected the plaintiffs’ proposed<br />
method of calculating what they characterized<br />
as “equitable” monetary relief. See<br />
131 S. Ct. at 2560–61. The plaintiffs suggested<br />
that the trial court sample class<br />
members and extrapolate their entitlement<br />
to back pay to the entire class. See 131<br />
S. Ct. at 2550 (citing Hilao v. Estate of Marcos,<br />
103 F.3d 767, 782–87 (1996)). But the<br />
Court labeled that method “trial by formula”<br />
and pronounced that Wal-Mart was<br />
entitled to “individualized determinations<br />
of each employee’s eligibility for backpay.”<br />
Id. at 2561.<br />
The U.S. District Court for the Eastern<br />
District of New York synthesized the holding<br />
as follows:<br />
Wal-Mart’s rejection of “Trial by Formula”<br />
means that the underlying substantive<br />
law determines whether<br />
individual proceedings are required;<br />
a litigant may not convert an individual<br />
question into a common question<br />
by concocting a method of classwide<br />
proof that subverts rights created by the<br />
underlying substantive law. When determining<br />
whether a question is common<br />
to the class, the court must look to the<br />
underlying substantive law to determine<br />
whether the proposed method of classwide<br />
proof prevents the party opposing<br />
class certification from asserting its substantive<br />
rights.<br />
United States v. City of New York, 276 F.R.D.<br />
22, 37 (E.D.N.Y. 2011) (rejecting certification<br />
of a class seeking non- economic<br />
damages because those amounts would<br />
have to be determined on an individual<br />
basis). See also Stone, 278 F.R.D. at 566<br />
n.1 (“The Supreme Court’s disapproval<br />
of the Hilao method largely eliminates a<br />
‘trial by formula’ approach to use statistics<br />
to extrapolate average damages for an<br />
entire class, at least when the statute contains<br />
an individualized defense”); Barnes v.<br />
District of Columbia, 278 F.R.D. 14, 20–22<br />
(D.D.C. 2011) (allowing statistical sampling<br />
to determine “general” damages for “the<br />
injury to human dignity that is presumed<br />
when a person is strip searched or overdetained,”<br />
but decertifying the class for “special”<br />
damages, such as emotional distress<br />
or lost wages).<br />
Since the Dukes Court’s characterization<br />
of plaintiffs’ proposed method of calculation<br />
as “trial by formula” arose in a<br />
case seeking back pay for a Federal Rule of<br />
Civil Procedure 23(b)(2) class, some courts<br />
have refused to apply the Court’s reasoning<br />
to Federal Rule of Civil Procedure 23(b)(3)<br />
classes. One court opined that Dukes does<br />
not “prevent Plaintiffs from seeking certification<br />
of a Rule 23(b)(3) class—as opposed<br />
to a Rule 23(b)(2) class—where the amount<br />
of damages for each class member may<br />
depend on an individualized analysis.”<br />
Troy v. Kehe Food Distribs., Inc., 276 F.R.D.<br />
642, 657 (W.D. Wash. 2011).<br />
Yet other decisions note that even if<br />
plaintiffs cannot use statistical sampling<br />
to calculate individual damages, that shortcoming<br />
will not preclude class certification<br />
in circuits where differing damages do not<br />
defeat certification. See Jimenez v. Allstate<br />
Ins. Co., 2012 WL 1366052, at *15, 21 (C.D.<br />
For The Defense ■ October 2012 ■ 83
Life, Health and Disability<br />
Cal. Apr. 18, 2012); Johnson v. Gen. Mills,<br />
Inc., 276 F.R.D. 519, 524 (C.D. Cal. 2011)<br />
(individualized damages do not defeat class<br />
certification when plaintiffs can show liability<br />
with common proof). Thus, while<br />
life, health, and disability insurers attorneys<br />
should argue that the necessity of<br />
individualized damage determinations<br />
militates against class certification—for<br />
due process, manageability, and other reasons—attorneys<br />
cannot know with certainty<br />
if that argument will prevail.<br />
State <strong>Courts</strong> React<br />
Although Dukes promises to impact federal<br />
class action proceedings profoundly,<br />
it may similarly affect state court actions<br />
since many states closely model their class<br />
certification rules after Federal Rule if<br />
Civil Procedure 23 and often look to federal<br />
court class certification decisions for<br />
guidance. While the state courts have not<br />
issued a torrent of insurance- related class<br />
certification decisions since Dukes, those<br />
courts that have had the opportunity have,<br />
at a minimum, cited Dukes in their class<br />
certification analyses.<br />
Notably, how these states have relied<br />
on the Dukes decision has varied significantly.<br />
Some courts explicitly have recognized<br />
that Dukes has “reinvigorated” the<br />
commonality element of a usual class certification<br />
analysis, while others seem to have<br />
distanced themselves from Dukes to such<br />
an extent that it seems that the state policy<br />
favors class certification.<br />
To date, the most notable post-Dukes<br />
state court class certification decisions have<br />
come from Colorado. On October 31, 2011,<br />
the Colorado Supreme Court issued two<br />
en banc decisions outlining numerous elements<br />
regarding Colorado’s class certification<br />
standards: Jackson v. Unocal Corp.,<br />
262 P.3d 874 (Colo. 2011), and State Farm<br />
Mut. Auto. Ins. Co. v. Reyher, 266 P.3d 383<br />
(Colo. 2011). In these decisions, the Colorado<br />
Supreme Court noted the differences<br />
between the Colorado class certification<br />
rule and its federal counterpart, while also<br />
implicitly rejecting Dukes by easing the<br />
standards for Colorado state court class<br />
certification.<br />
The Jackson decision, in particular, is<br />
significant because, among other things,<br />
it addressed the burden of proof necessary<br />
for those seeking class certification and,<br />
84 ■ For The Defense ■ October 2012<br />
in doing so, explicitly rejected those decisions<br />
from federal courts applying a preponderance<br />
of the evidence standard. 262<br />
P.3d at 882–84. The court also concluded<br />
that certifying courts did not need to subject<br />
expert opinions proffered as part of<br />
class certification briefing to the Colorado<br />
equivalent of a Daubert investigation. Id. at<br />
885–87. Ultimately, the court adopted an<br />
amorphous standard of proof, stating that<br />
the Colorado class certification rule “is a<br />
case management tool and neither the rule<br />
nor our caselaw imposes a specific burden<br />
of proof on the trial court’s certification<br />
decision.” Id. at 881.<br />
Thus, while the court recognized that<br />
even under the Colorado class certification<br />
rule, courts must undertake a “rigorous<br />
analysis” when making class certification<br />
decisions, it took a pass on defining the<br />
standard by which Colorado courts should<br />
accomplish this analysis and ignored the<br />
substantive effect that the class certification<br />
rule has on a case and its parties by<br />
describing the rule simply as a “case management<br />
tool.” Id. at 881–82. Finally, to<br />
further distance the Colorado class certification<br />
rule from its federal counterpart,<br />
the court contrasted Colorado practice to<br />
that of federal courts that have adopted a<br />
preponderance of the evidence burden of<br />
proof in keeping with “a policy limiting<br />
class actions.” Id. at 883 n.7. And it further<br />
explained that the Colorado policy is to<br />
“liberally constru[e] C.R.C.P. 23 in favor of<br />
class certification.” Id. at 883–84.<br />
In contrast to Colorado, other states, including<br />
California, Connecticut, Florida,<br />
Georgia, Louisiana, and Missouri, appear<br />
much more prepared to adopt and follow<br />
the standards articulated in Dukes. Of note,<br />
a Florida circuit court recently denied class<br />
certification in Schirmer v. Citizens Prop.<br />
Ins. Corp., 2012 WL 781878 (Fla. Cir. Ct.<br />
Mar. 2, 2012), due to, among other reasons,<br />
the plaintiffs’ failure to satisfy Dukes’ articulation<br />
of the commonality element found<br />
in Federal Rule of Civil Procedure 23, as<br />
well as the Florida counterpart to the federal<br />
rule.<br />
The claim in Schirmer was breach of<br />
contract based on the interpretation of an<br />
insurance policy claims settlement provision,<br />
and the trial would consider whether<br />
the defendant insurer breached its contract<br />
with the putative class members, if the class<br />
achieved certification, by not incorporating<br />
general contractor overhead and profit into<br />
certain claims payments. Schirmer, 2012<br />
WL 781878, at *1–2.<br />
In denying class certification, the court<br />
examined the type of evidence that the<br />
plaintiffs would present to demonstrate<br />
the “common answers” necessary for the<br />
commonality element and held that “the<br />
answers to the putative ‘common’ questions…<br />
would depend on the individual<br />
facts and each individual’s claim. The<br />
‘answers’ [that the representative plaintiff]<br />
would provide to prove his own claim<br />
would not resolve any issue that is ‘central<br />
to the validity of each one of the [putative<br />
class members’] claims in one stroke.’” Id.<br />
at *16 (citing Dukes, 131 S. Ct. at 2551). See<br />
also Duran v. U.S. Bank Nat’l Ass’n, 137<br />
Cal. Rptr. 3d 391, 429 (Cal. Ct. App. 2012);<br />
Price v. Martin, 79 So. 3d 960, 969–72 (La.<br />
2011); Rite Aid of Georgia v. Peacock, 2012<br />
WL 954650, at *2–4 (Ga. Ct. App. Mar.<br />
22, 2012); Smith v. Missouri Highways and<br />
Transportation Comm., 2012 WL 1511751,<br />
at *4 (Mo. Ct. App. Apr. 30, 2012).<br />
Moreover, we may be able to gauge the<br />
Dukes holding’s effect on future state court<br />
class certification decisions from how the<br />
Schirmer court viewed the representative<br />
plaintiff’s proposal to accept the defendant’s<br />
standardized damages estimates<br />
when determining whether the plaintiff<br />
had satisfied the predominance element:<br />
the Schirmer court rejected the proposal<br />
because using such estimates would implicate<br />
the due process rights of the putative<br />
class members individual claims and damages.<br />
Schirmer, 2012 WL 781878, at *15.<br />
As reflected by both the federal and<br />
the state court decisions discussed above,<br />
courts and counsel have not yet come to<br />
terms with how to interpret, analyze, and<br />
apply, or distinguish Dukes. As Colorado’s<br />
Jackson decision makes plain, however,<br />
state courts may in the coming years interpret<br />
Dukes as permitting them to further<br />
their states’ policies of either promoting or<br />
deterring class action litigation.<br />
If this judicial policy making becomes<br />
prevalent, practitioners will have to wait to<br />
find how the other branches of government<br />
will respond, if they respond at all. Just as<br />
state attorneys general filed more quasisovereign<br />
lawsuits in the wake of the Class<br />
Dukes, continued on page 90
Life, Health and Disability<br />
Who Is to Blame<br />
for Enrollment<br />
Deficiencies<br />
By Joshua Bachrach,<br />
Edna S. Kersting<br />
and Russell Birner<br />
Evidence of<br />
Insurability and<br />
Conversion Claims<br />
<strong>Courts</strong> continue to reject<br />
claims for benefits that<br />
contradict the plain<br />
language in life insurance<br />
policies, and have also<br />
refused to create special<br />
duties under ERISA<br />
to find coverage.<br />
Many employers make life insurance available as a benefit<br />
of employment under plans governed by the Employee<br />
Retirement Income Security Act of 1974 (ERISA). This<br />
coverage, however, usually comes with certain restrictions.<br />
For example, the policy and benefit plan<br />
might limit the amount of coverage or<br />
when a claimant may enroll. Coverage<br />
above a “basic” amount or outside of an<br />
open enrollment period may require submission<br />
of evidence of insurability, also<br />
referred to as “proof of good health,” by the<br />
applicant and acceptance of the evidence of<br />
insurability by the insurer.<br />
When a person’s individual coverage terminates<br />
under a group policy, the policy<br />
may allow the person to obtain an individual<br />
“conversion” policy. Someone usually<br />
must apply for and pay the first premium<br />
■ Joshua Bachrach is a partner in Wilson<br />
Elser’s Philadelphia office, representing clients<br />
nationwide in ERISA and other disputes<br />
over disability, life, and health coverage, and<br />
pension benefits. Edna S. Kersting is a partner<br />
in Wilson Elser’s Chicago office. She<br />
practices in the area of ERISA litigation, representing<br />
clients in life, health, and disability<br />
matters in state and federal courts<br />
nationwide. Russell H. Birner is of<br />
counsel in Wilson Elser’s Philadelphia<br />
office and represents clients in<br />
insurance- related litigation. All three<br />
are active members of the <strong>DRI</strong> Life,<br />
Health and Disability Committee.<br />
for a conversion policy within 31 days after<br />
the individual coverage terminates. Claims<br />
arise when the procedures described above<br />
are not followed.<br />
In the case of coverage requiring proof of<br />
good health, an employer might simply pay<br />
premiums without obtaining the required<br />
evidence of insurability. Since an employer<br />
usually has responsibility for enrollment of<br />
employees in an employer- offered plan, the<br />
insurer would not have a way to know that<br />
it has received premiums for someone who<br />
has not met the requirements for proper<br />
enrollment.<br />
An employer also, for example, could<br />
continue to pay premiums for a person who<br />
is no longer eligible for coverage under the<br />
group policy, such as someone who no longer<br />
meets the policy’s active work requirement.<br />
Sometimes a person who could have<br />
applied for conversion coverage fails to<br />
do so, for various reasons. Unfortunately,<br />
when this happens the person does not<br />
discover the problem until after the time<br />
allowed under the policy to apply for conversion<br />
coverage has expired.<br />
Claimants seeking benefits under these<br />
scenarios generally argue, without much<br />
success, that an insurer is estopped from<br />
denying coverage. More recently, following<br />
the Supreme Court decision in Cigna<br />
For The Defense ■ October 2012 ■ 85
Life, Health and Disability<br />
v. Amara, 131 S. Ct. 1866 (2011), claimants<br />
have based asserted breach of fiduciary duty<br />
under section 502(a)(3) of ERISA. They have<br />
not achieved much more success, however.<br />
As explained below, courts continue to<br />
reject claims for benefits that contradict the<br />
plain language in the policy. <strong>Courts</strong> have<br />
also refused to create special duties under<br />
ERISA to find coverage.<br />
ERISA Law<br />
ERISA provides the exclusive remedies<br />
to a claimant seeking benefits under an<br />
ERISA plan. Under section 502(a)(1)(B) of<br />
ERISA, 29 U.S.C. §1132(a)(1)(B), a claimant<br />
may only seek benefits under the terms<br />
of the plan or a declaration of coverage.<br />
ERISA section 502(a)(2), 29 U.S.C. §1132(a)<br />
(2), only permits a claim on behalf of the<br />
plan as a whole and will not apply under<br />
the circumstances described in the unfortunate<br />
scenarios above. Finally, a claimant<br />
may only seek “other appropriate equitable<br />
relief” under ERISA section 502(a)(3),<br />
29 U.S.C. §1132(a)(3), based on a breach of<br />
fiduciary duty.<br />
A claim for benefits under ERISA section<br />
502(a)(1)(B) based on the scenarios<br />
presented here must fail. As explained<br />
by the Supreme Court in Kennedy v. Plan<br />
Adm’r for DuPont Sav. & Inv. Plan, 129<br />
S. Ct. 865, 875 (2009), a plaintiff’s claim<br />
under this section of ERISA “stands or<br />
falls by the terms of the plan,… a straightforward<br />
rule of hewing to the directives of<br />
the plan documents….” The requirement<br />
of proof of good health, or in a conversion<br />
case a timely application for a conversion<br />
policy, are stated terms of a plan. Therefore,<br />
a court cannot ignore them.<br />
Evidence of Insurability Cases<br />
As previously explained, in these cases<br />
coverage requires the individual seeking<br />
coverage to submit evidence of insurability,<br />
and the plan insurer must approve<br />
the application. <strong>Courts</strong> have consistently<br />
rejected coverage claims that do not establish<br />
these facts since doing otherwise<br />
would diverge from the terms of the plan<br />
documents.<br />
One of the more recent cases involving<br />
failure to provide evidence of insurability<br />
is Flynn v. Sun Life Assur. Co., 809 F. Supp.<br />
2d 1175 (C.D. Cal. 2011). In Flynn, the plaintiff<br />
did not submit evidence of insurability<br />
86 ■ For The Defense ■ October 2012<br />
in seeking coverage in excess of the guaranteed<br />
issue amount. The plaintiff relied<br />
on an election form in which the employee<br />
elected the higher amount of insurance.<br />
While the employee subsequently waived<br />
the life coverage and received extra compensation<br />
for doing so, in the end the<br />
court only needed to rely on the language<br />
in the policy to deny the claim. Because<br />
the employee never submitted evidence<br />
of insurability as the policy required, the<br />
employee legitimately could not receive<br />
coverage for the amount claimed.<br />
At times, a claimant might submit evidence<br />
of insurability that is incomplete.<br />
This is what happened in Rubio v. Sun Life<br />
Assur. Co. of Canada, 2009 U.S. Dist. Lexis<br />
122383 (E.D. La. Dec. 13, 2009). There,<br />
the employee submitted an evidence of<br />
insurability application, and the employer<br />
remitted premiums to the insurer. Unfortunately,<br />
some necessary information was<br />
missing from the application. Upon receipt<br />
Sun Life wrote to the applicant asking for<br />
the missing information.<br />
Before the applicant could provide the<br />
information, the person was killed in an<br />
accident. Although the insurer had continued<br />
to accept premiums, the court recognized<br />
that it was obligated to enter a<br />
judgment in favor of the defendant. Based<br />
on Fifth Circuit law, the court could not<br />
find coverage because the terms of the plan<br />
dictated the coverage and finding otherwise<br />
would contradict the plan terms.<br />
In numerous other cases involving similar<br />
facts, courts have refused to find coverage<br />
when the requirements stated in<br />
the plan for evidence of insurability were<br />
not met. Wagner v. Unison Admin. Servs.,<br />
2009 U.S. Dist. Lexis 26568 (W.D. Pa. Mar.<br />
31, 2009) (“Plaintiff cannot maintain an<br />
ERISA claim to recover benefits because,<br />
quite simply, there are no benefits due to<br />
him.”); Tiffany v. Unum Life Ins. Co. of<br />
Am., 250 F.R.D. 314 (E.D. Mich. 2008) (dismissing<br />
the complaint and denying leave<br />
to amend as futile because the insured<br />
failed to submit proof of good health, contrary<br />
to the plain language in the policy);<br />
Kehoe v. Ryder Truck Rental, Inc., 2006 U.S.<br />
Dist. Lexis 62697 (E.D. La. Aug. 17, 2006)<br />
(describing the plan’s approval of evidence<br />
of insurability as a “condition precedent” to<br />
obtaining the insurance coverage); Karl v.<br />
Guardian Life Ins. Co. of Am., 790 F. Supp.<br />
569 (Md. 1992) (the decedent’s “subjective<br />
belief and expectation” that he was insured<br />
did not entitle the plaintiff to relief due to<br />
the unambiguous plan language).<br />
At least one court in an insurance case<br />
that did not involve ERISA also has refused<br />
to find coverage when evidence of insurability<br />
was not provided as required under<br />
the terms of the policy. See May v. Mutual<br />
Benefit Life Ins. Co., 124 A.D. 2d 566 (N.Y.<br />
App. Div. 1986). In May, the decedent had<br />
applied for term life coverage and submitted<br />
the premiums for the first two months. The<br />
application stated that “any insurance for<br />
which evidence of insurability is required<br />
will not become effective until the date such<br />
evidence is furnished to and found to be satisfactory<br />
by Mutual Benefit Life.”<br />
Following the applicant’s death, the<br />
claim for life insurance benefits was<br />
denied because the coverage was never<br />
approved. Because the application “clearly<br />
and unequivocally” stated that insurance<br />
would not become effective until evidence<br />
of insurability was approved by the insurer,<br />
the court held that it was “clearly proper<br />
for the defendants to deny the plaintiff’s<br />
request for payment of proceeds under the<br />
group policy since her decedent was never<br />
effectively covered [by] it.”<br />
One creative attorney argued that the<br />
insurer still had the responsibility to pay<br />
benefits when evidence of insurability<br />
was not submitted, based on the allegation<br />
that the insurer failed to train the<br />
employer properly in enrollment procedures.<br />
In Hird v. Bostrom Seating Inc.,<br />
147 F. Supp. 2d 1190 (N.D. Ala. 2001), the<br />
employer erroneously told the employee<br />
that he was eligible for $120,000 in coverage,<br />
and corresponding premiums were<br />
submitted to the insurer. When the claim<br />
was denied, the plaintiff argued that the<br />
insurer shared the blame for failing to<br />
train the employer properly. The district<br />
court rejected the argument, concluding<br />
that the plaintiff had failed to prove that<br />
the insurer owed a fiduciary duty to train<br />
and supervise the employer in that the<br />
plaintiff had failed to offer evidence that<br />
the insurer was aware of any enrollment<br />
problems with the employer.<br />
Conversion Cases<br />
The typical group life insurance policy<br />
allows a person to obtain an individual
conversion policy when coverage under<br />
the group policy terminates. Someone usually<br />
must apply for this conversion policy<br />
within 31 days after the person’s group<br />
coverage ends, and the first premium also<br />
must be submitted within that time frame.<br />
Problems arise when someone does not<br />
request a conversion policy in time. In<br />
many of these cases, a claimant will argue<br />
that the former insured was not aware of<br />
the conversion right, and the insurer owed<br />
a duty to notify the person of the right once<br />
the group coverage ended. <strong>Courts</strong> have<br />
rejected these arguments as well.<br />
In Stocks v. Life Ins. Co. of N. Am., 2012<br />
U.S. Dist. Lexis 30737 (E.D. Wis. Mar. 8,<br />
2012), it was alleged that the defendant<br />
breached its fiduciary duty by failing to<br />
notify the decedent of the conversion<br />
privilege for life insurance. The court<br />
held that the defendant did not owe such<br />
a duty and entered judgment in favor of<br />
the defendant.<br />
The same conclusion was reached in<br />
Bicknell v. Lockheed Martin Group Benefits<br />
Plan, 410 F. App’x 570, 575 (3d Cir. 2011). In<br />
Bicknell, the plaintiff argued that the plan<br />
insurer was required to notify him of the<br />
conversion privilege at the time that the dependent’s<br />
eligibility under the group policy<br />
ended. The court rejected the argument,<br />
holding that the plan documents, which explained<br />
the conversion right, “were the only<br />
notice required by the [ERISA] Statute.”<br />
In both evidence of insurability and<br />
conversion cases, plaintiffs’ attorneys frequently<br />
argue that an insurer owes a duty<br />
to provide individual notice of the plan<br />
requirements to an employee. This argument<br />
must fail on many levels. The duty<br />
of disclosure under ERISA only applies to<br />
the plan administrator. 29 U.S.C. §1021(a).<br />
The plan insurer is almost never the plan<br />
administrator. Moreover, the duty of disclosure,<br />
when applicable, generally does<br />
not require individualized notice. Instead,<br />
it only requires that a plan distribute documents<br />
to participants that describe the<br />
terms of the plan. 29 U.S.C. §1021(a).<br />
<strong>Courts</strong> have rejected claims that a fiduciary<br />
was required to provide individualized<br />
notice to employees without a specific<br />
request from a participant. See Griggs v. E.I.<br />
Dupont de Nemours & Co., 237 F.3d 371,<br />
380–81 (4th Cir. 2001) (holding that the<br />
duty to inform did not extend to “individualized<br />
notice”); Chojnacki v. Georgia- Pacific<br />
Corp., 108 F.3d 810, 817–18 (7th Cir. 1997)<br />
(“ERISA does not require Plan Administrators<br />
to investigate each participant’s<br />
circumstances and prepare advisory opinions<br />
for literally thousands of employees”);<br />
Childers v. Northwest Airlines, Inc., 688 F.<br />
Supp. 1357, 1361 (D. Minn. 1988) (under<br />
ERISA, a fiduciary does not have a duty<br />
to provide individualized notice about the<br />
effect that a specific event may have on the<br />
eligibility of a participant or beneficiary to<br />
receive benefits).<br />
In Kerns v. Benefit Trust Life Ins. Co., 790<br />
F. Supp. 1456 (E.D. Mo. 1992), the court<br />
concluded that a fiduciary does not have a<br />
duty to notify beneficiaries with individualized<br />
information since this would impose<br />
an enormous burden on the plan administrator.<br />
A useful discussion of many of these<br />
cases is included in Bernstein v. Metro.<br />
Life Ins. Co., 453 F. Supp. 2d 554 (D. Conn.<br />
2006). Moreover, as stated by the Third Circuit,<br />
as long as a plan has complied with its<br />
duty to disclose, “participants have a duty<br />
to inform themselves of the details provided<br />
in their plans.” Jordan v. Fed. Express<br />
Corp., 116 F.3d 1005, 1016 (3d Cir. 1997).<br />
It is also worth noting that Congress did<br />
enact a provision in ERISA that requires<br />
an employer to provide notice to participants<br />
of their right to continue health coverage<br />
for a period of time after it otherwise<br />
would terminate by paying the premiums.<br />
29 U.S.C. §1161(a). However, this notice<br />
under the Consolidated Omnibus Budget<br />
Reconciliation Act (COBRA) only applies<br />
to health coverage.<br />
<strong>Courts</strong> uniformly have concluded that<br />
COBRA notice does not apply to other types<br />
of employee benefits plans, including life insurance.<br />
See Robin v. Metro. Life Ins. Co., 147<br />
F.3d 440, 442 n.4 (5th Cir. 1998) (“ERISA<br />
was amended in part by [COBRA] without,<br />
however, affecting life insurance”); Austell<br />
v. Raymond James & Assocs., 120 F.3d 32,<br />
33 (4th Cir. 1997) (rejecting the argument<br />
that COBRA applies to disability policies,<br />
reasoning that “the continuation requirement<br />
of COBRA is designed to focus on the<br />
provision of health care coverage”); Weeks<br />
v. Western Auto Supply Co., 2003 U.S. Dist.<br />
Lexis 10977, at *14 (W.D. Va. June 25, 2003)<br />
(“[T]he plain language of these provisions<br />
makes clear that the post- termination notice<br />
requirements apply to a ‘group health<br />
plan,’ defined as a ‘plan providing medical<br />
care,’ and not to a life insurance plan.”).<br />
Rejection of Estoppel Claims<br />
The elements of an estoppel claim under<br />
ERISA may vary slightly from circuit to<br />
circuit, but generally are (1) conduct or<br />
language amounting to a representation<br />
of material fact; (2) awareness of the true<br />
facts by the party to be estopped; (3) an<br />
intention on the part of the party to be<br />
estopped that the representation be acted<br />
on; (4) unawareness of the true facts by the<br />
party asserting the estoppel; and (5) detrimental<br />
and justifiable reliance by the party<br />
asserting estoppel.<br />
Several circuit courts have refused to<br />
find coverage under estoppel theories<br />
based on an insurer’s receipt of premiums.<br />
While the context of the claims is different,<br />
the holdings should also apply to claims<br />
involving the failure to provide evidence<br />
of insurability.<br />
In Sippel v. Reliance Standard Life Ins.<br />
Co., 128 F.3d 1261 (8th Cir. 1997), the<br />
decedent ended his employment with the<br />
policyholder but did not apply for conversion<br />
coverage before he died. The plaintiff<br />
argued that the defendant was estopped<br />
from denying coverage under a conversion<br />
policy because premiums were deducted<br />
by the employer. The court refused to recognize<br />
estoppel under these facts because<br />
it would create coverage contrary to the<br />
policy terms. The same conclusion applies<br />
when plaintiffs’ attorneys attempt to rely<br />
on when a plaintiff never submitted evidence<br />
of insurability or an insurer never<br />
approved the application.<br />
The Fourth Circuit also rejected an estoppel<br />
claim based on an insurer’s receipt<br />
of premiums. See White v. Provident Life &<br />
Accident Ins. Co., 114 F.3d 26 (4th Cir. 1997).<br />
The facts in White were even more favorable<br />
to the insured, but the court still concluded<br />
that the receipt of premiums did not prevent<br />
the insurer from denying coverage.<br />
In that case, the insurer not only<br />
accepted premiums but also erroneously<br />
issued a conversion policy. Four years later<br />
it discovered that the person was not eligible<br />
for individual conversion coverage<br />
because he was still insured under the<br />
group policy under the waiver of premium<br />
provision. The court refused to recognize<br />
federal common law claims of estoppel<br />
For The Defense ■ October 2012 ■ 87
Life, Health and Disability<br />
or waiver, discussed under the next heading<br />
below, under ERISA since the written<br />
terms of the plan could not be modified.<br />
A universally recognized element of estoppel<br />
is a person’s reasonable reliance.<br />
<strong>Courts</strong> have recognized that reliance can<br />
never be reasonable when the interpretation<br />
or representation that someone has relied<br />
on conflicts with unambiguous policy<br />
language. See, e.g., Mello v. Sara Lee Corp.,<br />
431 F.3d 440, 444 (5th Cir. 2005); Sprague<br />
v. Gen. Motors Corp., 133 F.3d 388, 404 (6th<br />
Cir. 1998) (en banc); Pisciotta v. Teledyne Indus.,<br />
Inc., 91 F.3d 1326, 1331 (9th Cir. 1996).<br />
Rejection of Waiver as a<br />
Basis for Recovery<br />
Unlike a claim based on estoppel, waiver<br />
does not require detrimental reliance.<br />
Instead, it requires the deliberate relinquishment<br />
of a known right. In addition<br />
to the Fourth Circuit in White, discussed<br />
above, the Second Circuit also has declined<br />
to apply waiver in ERISA cases. Juliano v.<br />
Health Maintenance Org. of N.J., Inc., 22 1<br />
F.3d 279, 288 (2d Cir. 2000).<br />
Other circuits equally have questioned<br />
the applicability of waiver in ERISA cases.<br />
They have expressly refused to apply waiver<br />
when the issue concerns coverage. Thomason<br />
v. Aetna Life Ins. Co., 9 F.3d 645, 647–<br />
48 (7th Cir. 1993) (declining to apply waiver<br />
when the insurer denied coverage after<br />
mistakenly notifying the plaintiff that the<br />
coverage was extended without cost); Glass<br />
v. United of Omaha Life Ins. Co., 33 F.3d<br />
1341, 1347–49 (11th Cir. 1994) (holding<br />
that the insurer did not waive the eligibility<br />
requirements of its plan when it enrolled<br />
the decedent in the insurance program,<br />
accepted premiums, and converted his life<br />
policy even though he was ineligible for the<br />
coverage under the policy).<br />
Only the Fifth Circuit has applied waiver<br />
to find coverage when an insurer accepted<br />
premiums. Pitts v. Am. Sec. Life Ins. Co., 931<br />
F.2d 351, 357 (5th Cir. 1991). However, the<br />
Fifth Circuit reached this conclusion not<br />
only because the insurer accepted premiums<br />
but also because the insurer paid some<br />
of the disputed claims under a health policy<br />
after learning that the terms of the policy<br />
had been breached. The facts presented<br />
in Pitts will rarely occur in a case involving<br />
evidence of insurability or conversion<br />
coverage.<br />
88 ■ For The Defense ■ October 2012<br />
Claims for Breach of Fiduciary Duty<br />
ERISA section 502(a)(3) permits an action<br />
for breach of fiduciary duty “to obtain other<br />
appropriate equitable relief.” 29 U.S.C.<br />
§1132(a)(3). A claimant seeking benefits is<br />
not requesting “equitable relief,” therefore,<br />
a breach of fiduciary duty claim must fail.<br />
Great-West Life & Annuity Ins. Co. v. Knudson,<br />
534 U.S. 204, 210 (2002). Numerous<br />
courts have rejected claims for “equitable<br />
relief,” which in fact sought plan benefits,<br />
including Amschwand v. Spherion Corp.,<br />
505 F.3d 342, 343 (5th Cir. 2007).<br />
In Amschwand, the employer switched<br />
plan insurers while the plaintiff was on<br />
medical leave for cancer. Under the new<br />
policy, coverage would not begin until<br />
the employee returned to work for one<br />
full day. The employer “confirmed” that<br />
the employee remained covered under the<br />
new policy; however, this was inaccurate.<br />
After the employee died, the wife sued<br />
the employer under 29 U.S.C. §1132(a)(3),<br />
seeking equitable relief. The Fifth Circuit<br />
rejected the “make whole” claim for benefits<br />
and upheld the district court’s grant<br />
of a summary judgment to the defendants.<br />
The breach of fiduciary duty claim was<br />
also rejected in Callery v. U.S. Life Ins. Co. in<br />
the City of New York, 392 F.3d 401, 405–06<br />
(10th Cir. 2004). There the plaintiff sought<br />
“equitable relief providing for payment of<br />
the insurance” benefits for her ex- husband.<br />
The plaintiff argued that she never received<br />
a copy of the policy or the summary plan<br />
description, both of which stated that coverage<br />
terminated upon divorce. Unaware of<br />
this language, the ex-wife continued to pay<br />
life insurance premiums for coverage for<br />
her ex-husband.<br />
The Tenth Circuit upheld the dismissal<br />
of the breach of fiduciary duty claim, concluding<br />
that the relief sought—the recovery<br />
of benefits under the policy—was “compensatory<br />
and not typically available in equity.”<br />
Similar claims were rejected in two<br />
Eighth Circuit decisions. Pichoff v. QHG of<br />
Springdale, Inc., 556 F.3d 728, 732 (8th Cir.<br />
2009) (holding that §1132(a)(3) does not allow<br />
a plaintiff to recover benefits that would<br />
have been paid to his estate had his policy<br />
not lapsed); Knieriem v. Group Health Plan,<br />
Inc., 434 F.3d 1058, 1063–64 (8th Cir. 2006)<br />
(rejecting argument that “surcharge” constitutes<br />
“appropriate equitable relief” under<br />
§1132(a)(3) when defendant held no funds<br />
or property belonging to plaintiff to form<br />
the basis of a constructive trust).<br />
The more recent Supreme Court decision<br />
in Cigna Corp. v. Amara, 131 S. Ct. 1866<br />
(2011), which some plaintiff attorneys have<br />
argued expands the scope of equitable relief,<br />
also would not permit coverage in these evidence<br />
of insurability and conversion cases.<br />
Briefly, Amara involved the employer’s conversion<br />
of its traditional defined benefit<br />
pension plan to a cash balance pension plan.<br />
The participants challenged the change, arguing<br />
that they did not receive “proper notice<br />
of changes to their benefits, particularly<br />
because the new plan in certain respects<br />
provided them with less generous benefits.”<br />
131 S. Ct. at 1870. Before the change, Cigna<br />
issued a newsletter describing the new pension<br />
plan and later published a summary of<br />
the material modifications to explain the<br />
conversion. Id. at 1871–72.<br />
The district court determined that “CIG-<br />
NA’s initial descriptions of its new plan<br />
were significantly incomplete and misled<br />
its employees.” Id. at 1872, 1875. In<br />
the majority decision, the Court discussed<br />
the possibility of relief in the form of a<br />
surcharge against the plan. Justice Scalia<br />
described this discussion as “blatant dictum,”<br />
however.<br />
Amara can be distinguished from these<br />
cases in many ways. In Knudson, 534 U.S.<br />
at 213, the Supreme Court held that a monetary<br />
remedy is equitable only when the<br />
money sought by the plaintiff is clearly<br />
traceable to funds in the defendant’s possession.<br />
In a case seeking plan benefits, a set<br />
fund does not exist to pay benefits, unlike<br />
the funded benefit plan in Amara. The life<br />
insurance payments come from a company’s<br />
general assets. Therefore, a beneficiary<br />
cannot meet the strict tracing requirements,<br />
and the decision in Amara does not support<br />
a claim for breach of fiduciary duty.<br />
Conclusion<br />
Participants and beneficiaries claiming<br />
benefits under the scenarios described<br />
above generally cannot prevail on their<br />
claims. When responding to these claims,<br />
defense attorneys should cite not only the<br />
plan language that was not satisfied but<br />
also the numerous cases that have rejected<br />
similar claims and theories.
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12.0344
Mensing, from page 43<br />
2011) (analyzing non- manufacturing seller<br />
claims relative to the Louisiana Products<br />
Liability Act).<br />
Defense attorneys also might consider<br />
focusing on jurisdictions with clear<br />
authority supporting affirmative defenses<br />
as a basis for fraudulent joinder. If “fraudulent<br />
joinder may exist when the plaintiff<br />
cannot establish a claim against the nondiverse<br />
defendant because of an affirmative<br />
defense,” then Mensing should apply<br />
to “preclude[] the cause of action against<br />
the non- diverse defendant.” In re Accutane<br />
Prods. Liab., No. 8:04MD-2523-T-30TBM,<br />
2012 WL 3194951, at *2 (M.D. Fla. July 31,<br />
2012). Cases in different jurisdictions finding<br />
fraudulent joinder under affirmative<br />
defenses such as the statute of limitations<br />
or prelawsuit screening requirements for<br />
medical negligence claims may serve as<br />
analogous examples to support Mensing’s<br />
application.<br />
Ultimately, case identification and court<br />
selection may prove critical to extending<br />
Mensing to fraudulent joinder arguments.<br />
<br />
Dukes, from page 84<br />
Action Fairness Act, practitioners will be<br />
on the alert as to whether the state courts<br />
will experience a corresponding uptick in<br />
such actions or state regulatory investigations<br />
initiated by those who view Dukes as<br />
“limiting class actions” in contravention<br />
of their policy goals. See Jackson, 262 P.3d<br />
at 883–84.<br />
After the Hype<br />
However practitioners view Dukes, its<br />
background, and historical significance,<br />
the real-life scope and effect on litigation<br />
will only gradually be revealed with time,<br />
decision by decision. Does the Dukes holding<br />
with its various conclusions truly alter<br />
the balance of power on the class action<br />
battlefield Will small regional class action<br />
lawsuits increase Will attorneys general<br />
become more engaged in class actions<br />
Will plaintiffs’ attorneys seek discovery<br />
more aggressively, or will class actions<br />
involve more commonality challenges than<br />
in the past What Dukes portends strategically,<br />
we cannot predict. It does seem, however,<br />
that in some critical ways the rules of<br />
engagement have changed.<br />
“Off-Label”, from page 38<br />
approved. Obtaining FDA approval for each<br />
safe and effective use is costly and the costbenefit<br />
tradeoff is unfavorable when the<br />
potential patient population for the new<br />
(unapproved) use is small.<br />
The federal government should likewise<br />
find the present situation highly unsatisfactory,<br />
even if it produces some revenue and<br />
occasional media stories about “fighting<br />
healthcare fraud.” To begin with, a perverse<br />
consequence of the present system in which<br />
companies are at risk in false claims cases<br />
Statement of Ownership, Management, and Circulation<br />
(All Periodicals Publications Except Requester Publications)<br />
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8. Complete Mailing Address of Headquarters or General Business Office of Publisher (Not printer)<br />
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90 ■ For The Defense ■ October 2012<br />
is that the Department of Justice, including<br />
United States Attorney’s Offices, not FDA,<br />
is de facto the primary regulator of drug<br />
company conduct, particularly in the areas<br />
of advertising, promotion, and sales. Congress<br />
never intended that arrangement and<br />
the government should not want that to be<br />
the arrangement.<br />
In addition, one part of the federal government<br />
(the Center for Medicare & Medicaid<br />
Services) is willing to pay for medically<br />
necessary and appropriate off- label uses of<br />
prescription drugs, while another agency<br />
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22,736 22,840<br />
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Publication not required.<br />
of the same government (the Department<br />
of Justice) seeks huge sums of money from<br />
companies for promoting the same offlabel’s<br />
uses of the drug for which the government<br />
finds it appropriate to pay. This<br />
is a hardly orderly, let alone symmetrical,<br />
regulatory approach.<br />
How, then, might these various interests<br />
be reconciled First, FDA needs to abandon<br />
its present approach of distinguishing<br />
between “promotional activity” (impermissible)<br />
and “non- promotional activity”<br />
(permissible). This distinction is neither<br />
logical nor tenable. Because companies are<br />
in the business of selling their products,<br />
any statements they make potentially put<br />
them at risk for “promoting” their products.<br />
Further, given that it is lawful and sometimes<br />
the standard of care for a physician to<br />
prescribe a drug off- label, the off- label promotion<br />
of drugs to physicians with truthful,<br />
non- misleading information should<br />
be permissible. FDA’s regulations should<br />
be narrowed and clarified to make explicit<br />
that off- label promotion to physicians with<br />
truthful, non- misleading statements is<br />
permissible.<br />
And finally, there should be statutory<br />
changes to bar criminal, civil false claim,<br />
or tort actions based upon truthful, nonmisleading<br />
off- label statements about a<br />
drug when such statements are made to<br />
medical professionals. The government’s<br />
legitimate interest in punishing these types
of statements is doubtful, assuming it is<br />
constitutional, and such statements should<br />
not be fodder for private tort litigation.<br />
On the other hand, the government has<br />
an altogether legitimate interest in preventing<br />
generalized off- label promotional activities<br />
being aimed at other than medical or<br />
scientific professionals. If industry were<br />
allowed to “pitch” its unapproved product<br />
wares to consumers, that would do great<br />
and ultimately irreparable damage to the<br />
drug review, approval, and labeling system.<br />
Thus, any clarification of the statutes and<br />
regulations to permit off- label promotional<br />
activities directed to medical or scientific<br />
professionals should be accompanied by<br />
counterpart rules making clear that any<br />
such promotional activities directed over<br />
the heads of medical professionals to consumers<br />
would trigger liability and carry<br />
appropriately stiff penalties.<br />
The explosion of social media poses some<br />
special problems. Suppose, for example, a<br />
patient is, pursuant to a doctor’s prescription,<br />
taking a drug off- label and that patient<br />
asks the pharmaceutical company for safety<br />
data on that off- label use. The rules need to<br />
allow latitude to permit the pharmaceutical<br />
company to respond honestly to such an<br />
inquiry without being at risk for unlawful<br />
off- label promotion of the drug.<br />
Conclusion<br />
The federal government and the medical<br />
products industry have been at war over<br />
off- label promotion long enough. It is time<br />
to find a solution. Government must recognize<br />
that the direction of First Amendment<br />
law is against it. The Supreme Court’s decision<br />
last Term in Sorrell emphasizes this<br />
point. Industry, for its part, must recognize<br />
that it has too much invested in preserving<br />
the reality and the perception of a<br />
strong and effective FDA regulatory system<br />
to push to the limit an absolutist First<br />
Amendment off- label promotion position.<br />
Litigation is not the answer to this problem.<br />
The answer will come through a negotiated<br />
consensus that then serves as the basis for<br />
balanced statutory and regulatory changes.<br />
<br />
Recent additions to<br />
The Defense Library Series<br />
Trade Secrets and Non-Competes<br />
A Compendium of State Law<br />
This second edition addresses changes to the laws surrounding trade secrets and restrictive<br />
covenants that have occurred since the first edition was published in 2008. Since that time,<br />
a number of states have seen significant changes to their laws and the issuance of case<br />
decisions that impacted their laws.<br />
A project of the <strong>DRI</strong> Commercial Litigation Committee, this valuable resource is authored<br />
by lawyers who regularly practice in the two closely related areas, advising employers in<br />
their states as they draft non-competes and seek protection for the secrets the employers<br />
have developed over the years.<br />
Product Liability<br />
<strong>Warning</strong>s, Instructions, and Recalls<br />
For decades, the pre-sale duty to warn and instruct has been and continues to be the basis of<br />
much consternation by manufacturers and product sellers and the bane of many defense<br />
lawyers trying to defend the myriad of cases alleging a failure to warn. Failing to comply<br />
with the post-sale duty to warn, on the other hand, has served as the basis of most punitive<br />
damage awards and has been recognized by experts in the area for its expansive nature in<br />
the realm of product liability law. This publication provides a comprehensive summary of<br />
the current U.S. common law, as well as international common, civil, and regulatory law, in<br />
both of these areas—pre-sale warnings and post-sale duties to warn or fix a defective<br />
product—and to demonstrate how the two areas are inextricably intertwined.<br />
The Collateral<br />
Source Rule<br />
A Compendium of<br />
State Law<br />
A product of <strong>DRI</strong>'s Trial Tactics Committee,<br />
this compendium is designed to provide a<br />
resource for in-house counsel, claims<br />
representatives, and counsel practicing in<br />
American jurisdictions on the law governing<br />
monetary awards for past medical<br />
expenses in personal injury actions. The<br />
compendium will provide practitioners<br />
with the authority they need from around<br />
the country to fight for legal improvements<br />
that will compensate only actual medical<br />
economic loss, rather than "billed" amounts<br />
that bear no resemblance to the actual cost<br />
of medical services.<br />
Visit the Bookstore at www.dri.org or call 312.795.1101.<br />
For The Defense ■ October 2012 ■ 91
Advocates<br />
R. Bruce Barze, Jr.,<br />
Birmingham, AL<br />
John W. Bell, Chicago, IL<br />
Denise B. Bense,<br />
West Conshohocken, PA<br />
Mark E. Bialick,<br />
Oklahoma City, OK<br />
Floyd P. Bienstock,<br />
Phoenix, AZ<br />
Sonja E. Blomquist,<br />
San Francisco, CA<br />
Cheryl L. Blount, Houston, TX<br />
John J. Bogdanski,<br />
Hartford, CT<br />
Richard A. Braden,<br />
Buffalo, NY<br />
Ashley Kamphaus<br />
Brathwaite, Raleigh, NC<br />
Jack P. Burden, Las Vegas, NV<br />
Steven G. Carlson,<br />
Milwaukee, WI<br />
Rina Carmel, Los Angeles, CA<br />
Charles H. Cassis,<br />
Prospect, KY<br />
James M. Celentano,<br />
Westport, CT<br />
Johanna W. Clark,<br />
Orlando, FL<br />
Chad Colton, Portland, OR<br />
Anthony D. Danhelka,<br />
Chicago, IL<br />
Evelyn Fletcher Davis,<br />
Atlanta, GA<br />
Virginia Yoder Dodd,<br />
Baton Rouge, LA<br />
Walter W. Dukes, Gulfport, MS<br />
Aaron D. French,<br />
Saint Louis, MO<br />
Alan J. Fumuso,<br />
Hauppauge, NY<br />
Mark V. Gende, Columbia, SC<br />
Steven Gerber, Wayne, NJ<br />
Holli L. Hartman, Denver, CO<br />
Stephen J. Heine, Peoria, IL<br />
Michele Kendus,<br />
Baltimore, MD<br />
Glen D. Kimball,<br />
Philadelphia, PA<br />
Mary Re Knack, Seattle, WA<br />
John F. Kuppens,<br />
Columbia, SC<br />
Michael J. Leegan,<br />
Princeton, NJ<br />
Heidi EC Leithead,<br />
Salt Lake City, UT<br />
Stephen J. Lieb, New York, NY<br />
Thomas E. Liptak,<br />
Buffalo, NY<br />
Minton Phillip Mayer,<br />
Memphis, TN<br />
92 ■ For The Defense ■ October 2012<br />
Advocates and New Members<br />
Each month, <strong>DRI</strong> welcomes new members from the United States and Canada and abroad. Some of these new<br />
members have been recommended by current members actively involved in advancing goals shared by <strong>DRI</strong>. Any<br />
individual who recommends a new member is recognized as an “Advocate” for <strong>DRI</strong>.<br />
Michael J. Mazurczak,<br />
Boston, MA<br />
Terrence R. McInnis,<br />
Irvine, CA<br />
Douglas R. McSwane, Jr.,<br />
Tyler, TX<br />
Michele Ballard Miller,<br />
San Francisco, CA<br />
Frances M. O’Meara,<br />
Los Angeles, CA<br />
Perry W. Oxley,<br />
Huntington, WV<br />
Steven M. Puiszis,<br />
Chicago, IL<br />
Steven J. Rice, New York, NY<br />
Peter W. Rietz, Dillon, CO<br />
Brett A. Ross,<br />
Birmingham, AL<br />
Keith R. Rudzik, Hartford, CT<br />
Timothy R. Smith,<br />
Pittsburgh, PA<br />
Lise T. Spacapan,<br />
Chicago, IL<br />
Vincent P. Spagnuolo,<br />
East Lansing, MI<br />
Sandra Tvarian Stevens,<br />
Washington, DC<br />
Jeffrey W. Van Wagner,<br />
Cleveland, OH<br />
Michael L. Vittori, Chicago, IL<br />
Natasha L. Wilson,<br />
Atlanta, GA<br />
Kippy L. Wroten, Irvine, CA<br />
Jason Michael Yacuk,<br />
Houston, TX<br />
New Members<br />
Alabama<br />
Robert E. LeMoine,<br />
Birmingham<br />
Jennifer W. Pickett,<br />
Birmingham<br />
Stephen K. Pudner,<br />
Birmingham<br />
Pamela D. Springrose,<br />
Birmingham<br />
Richard K. Vann, Birmingham<br />
Ginny B. Willcox, Birmingham<br />
Kasee Sparks Heisterhagen,<br />
Mobile<br />
Scott D. Stevens, Mobile<br />
John G. Smith, Montgomery<br />
Arizona<br />
Clifford Andrew Campbell,<br />
Mesa<br />
Kevin R. Fincel, Phoenix<br />
Suzanne Ogden, Phoenix<br />
Christa D. Torralba, Phoenix<br />
Travis M. Wheeler, Phoenix<br />
Arkansas<br />
William F. Clark, Fayetteville<br />
Colin M. Johnson,<br />
Fayetteville<br />
Joshua D. McFadden,<br />
Fayetteville<br />
California<br />
Greg Giesler, Glendale<br />
Peter A. Karlin, Glendale<br />
Ryan J. Anderson, Irvine<br />
Lynn A. O’Leary, Los Angeles<br />
Rina Spiewak, Los Angeles<br />
Rima Badawiya,<br />
San Bernardino<br />
Margaret M. Craig,<br />
San Diego<br />
Kimberly Rhea Gosling,<br />
San Diego<br />
Tyrone Matthews, San Diego<br />
Lynn Ann Combs,<br />
San Francisco<br />
Jennifer R. Cotner,<br />
San Francisco<br />
Guy W. Stilson, San Francisco<br />
Joshua Sable, West Hollywood<br />
Paul V. Ash, Woodland Hills<br />
Colorado<br />
Brandon Luna, Delta<br />
Anthony C. Barbe, Denver<br />
Stephen E. Baumann,<br />
Denver<br />
Jamie A. Bosten, Denver<br />
Daniel J. Bristol, Denver<br />
Paul Stephen Enockson,<br />
Denver<br />
Geoffrey Frazier, Denver<br />
Bree Gorynski, Denver<br />
Brandon P. Hull, Denver<br />
Michael Paul, Denver<br />
Benjamin P.<br />
Swartzendruber, Denver<br />
Tanner Walls, Denver<br />
Kimberly A. Viergever, Dillon<br />
Thomas H. Falivene,<br />
Englewood<br />
R. Scott Fitzke, Englewood<br />
Chad Lieberman, Englewood<br />
Jane Bendle Lucero,<br />
Englewood<br />
Benjamin M. Wegener,<br />
Grand Junction<br />
Jeffrey Garcia,<br />
Greenwood Village<br />
Katie B. Johnson, Littleton<br />
Connecticut<br />
Kevin W. Hadfield, Hartford<br />
Brian Charles Hoeing,<br />
Hartford<br />
Delaware<br />
Timothy Sullivan, Wilmington<br />
District of Columbia<br />
Steven W. McNutt,<br />
Washington<br />
Kevin E. Stern, Washington<br />
Florida<br />
Gregg Breitbart, Boca Raton<br />
Daniel Diaz Leyva,<br />
Coral Gables<br />
William E. Peters,<br />
Fort Lauderdale<br />
Veronica de Zayas, Miami<br />
Kristina Delgado, Miami<br />
Jerome A. Pivnik, Miami<br />
Ari C. Shapiro, Miami<br />
Clinton D. Flagg, Naples<br />
B. Todd Parnell, Orlando<br />
Jay W. Pearlman, Tallahassee<br />
John Hallisey, Tampa<br />
Ryan S. Cobbs,<br />
West Palm Beach<br />
Michael Lawrence<br />
Schwebe, West Palm Beach<br />
Georgia<br />
Benjamin McCulloh Byrd,<br />
Atlanta<br />
William W. Fagan, Atlanta<br />
David Hayes, Atlanta<br />
Jonathan J. Kandel, Atlanta<br />
Nicole C. Leet, Atlanta<br />
Keshia A. McCrary, Atlanta<br />
Keith M. Hayasaka, Macon<br />
David A. Pope, Macon<br />
Timothy F. Callaway,<br />
Savannah<br />
Peter D. Muller, Savannah<br />
Idaho<br />
Leslie M. Hayes, Boise<br />
Andrea J. Rosholt, Boise<br />
Illinois<br />
Melissa A. Anderson, Chicago<br />
Alexandria Lyubov Bell,<br />
Chicago<br />
Kaitlyn Chenevert, Chicago<br />
Robert P. Conlon, Chicago<br />
David Macknick, Chicago<br />
Marcos Reilly, Chicago<br />
Edward Spacapan, Chicago<br />
Michael E. Zidek, Chicago<br />
Indiana<br />
T. Michael Pangburn, Elkhart<br />
David G. Field, Indianapolis<br />
Jamie Marie Oss,<br />
Michigan City<br />
Iowa<br />
Julie Tomka Bittner,<br />
West Des Moines<br />
Kentucky<br />
Deborah R. Lewis, Hazard<br />
Casey Wood Hensley,<br />
Louisville<br />
Jonathan Ohlsen, Louisville<br />
Kelley M. Rule, Louisville<br />
Louisiana<br />
Laranda Moffett Walker,<br />
Baton Rouge<br />
Nancy Butcher, Covington<br />
Jennifer Cortes Poirier,<br />
Covington<br />
Charles E. Rothermel,<br />
New Orleans<br />
Robert T. Vorhoff,<br />
New Orleans<br />
Katie E. Giroir, Thibodaux<br />
Maryland<br />
Lucas W.B. Chrencik,<br />
Baltimore<br />
Kraig Betner Long, Baltimore<br />
Andrew T. Stephenson,<br />
Baltimore<br />
Massachusetts<br />
Jesse G. Ainlay, Boston<br />
Erin McCoy Alarcon, Boston<br />
John Felice, Boston<br />
Brian D. Gross, Boston<br />
Terence G. Kenneally,<br />
Boston<br />
Cynthia Kopka, Boston<br />
Brian D. Lipkin, Boston<br />
Jennifer Pierce, Boston<br />
Joni Katz Mackler, Wellesley<br />
Michigan<br />
Olivia Nikolic Keuten, Detroit<br />
Christian G. Ohanian, Detroit<br />
Lindsay Dangl, East Lansing<br />
Minnesota<br />
Annie M. Davidson,<br />
Minneapolis<br />
Christopher P. Malone,<br />
Minneapolis<br />
Perssis Meshkat,<br />
Minneapolis<br />
Steven A. Bader, Saint Cloud<br />
Mississippi<br />
Stacy Neames, Columbia<br />
Matthew M. Williams,<br />
Gulfport<br />
Lilli Evans Bass, Jackson
Christy V. Malatesta,<br />
Jackson<br />
Andrew D. Sweat, Jackson<br />
Joseph Luke Benedict,<br />
Oxford<br />
Catherine Ashburn Hester,<br />
Oxford<br />
Missouri<br />
Becki J. Kanjirathinkal,<br />
Saint Joseph<br />
Yvette M. Boutaugh,<br />
Saint Louis<br />
Melissa Marglous Merlin,<br />
Saint Louis<br />
Timothy O’Leary, Saint Louis<br />
Nebraska<br />
Emily R. Cameron, Lincoln<br />
Nevada<br />
Andrew R. Muehlbauer,<br />
Las Vegas<br />
New Jersey<br />
Philip J. Anderson, Princeton<br />
Caroline J. Berdzik, Princeton<br />
Gregory McGroarty, Warren<br />
Jeffrey A. Bartolino,<br />
West Trenton<br />
New Mexico<br />
Sean E. Garrett, Albuquerque<br />
Michael E. Kaemper,<br />
Albuquerque<br />
Erica R. Neff, Albuquerque<br />
Fernando C. Palomares,<br />
Albuquerque<br />
Carlos E. Sedillo, Albuquerque<br />
Carla A. Neusch Williams,<br />
Roswell<br />
New York<br />
Georgia Tsismenakis,<br />
Brooklyn<br />
Christopher A. Johnson,<br />
Buffalo<br />
Scott Christesen, Hauppauge<br />
Jesse D. Capell, New York<br />
Gil M. Coogler, New York<br />
Bryan Goldstein, New York<br />
David Y. Loh, New York<br />
Andrew L. Margulis, New York<br />
Michele K. Snyder,<br />
Orchard Park<br />
William J. Garry, Uniondale<br />
Melinda B. Margolies,<br />
Valhalla<br />
North Carolina<br />
Leigha B. Sink, Charlotte<br />
Christa E. Pletcher,<br />
Winston Salem<br />
North Dakota<br />
Christopher S. Pieske,<br />
Bismarck<br />
Ohio<br />
Stephen R. Fogle, Cincinnati<br />
Sarah K. Rathke, Cleveland<br />
Paul M. Bernhart, Columbus<br />
Catherine F. Lacho,<br />
Columbus<br />
Oklahoma<br />
Robert Ryan Deligans,<br />
Oklahoma City<br />
Erh Perng, Oklahoma City<br />
Oregon<br />
Lawson Fite, Portland<br />
Elizabeth D. Wright,<br />
Portland<br />
Pennsylvania<br />
Laurie R. Kleinman,<br />
Philadelphia<br />
Richard S. Schlegel,<br />
Philadelphia<br />
Raymond R. Wittekind,<br />
Philadelphia<br />
Charles A. Lamberton,<br />
Pittsburgh<br />
Christopher J. McCabe,<br />
Pittsburgh<br />
John J. Barr, Willow Grove<br />
Puerto Rico<br />
Rosa Maria Cruz-Niemiec,<br />
Hato Rey<br />
South Carolina<br />
Jana B. Baker, Charleston<br />
Adriane Malanos Belton,<br />
Charleston<br />
William T. Dawson,<br />
Charleston<br />
Ryan Gilsenan, Charleston<br />
John B. Hagerty, Charleston<br />
John C. Hawk, Charleston<br />
Melissa Kay Hazell,<br />
Charleston<br />
Ryan E. Huntley, Charleston<br />
Dana Woodrum Lang,<br />
Charleston<br />
Eli A. Poliakoff, Charleston<br />
Harrison M. Trammell,<br />
Charleston<br />
William R. Warnock,<br />
Charleston<br />
Sarah Elizabeth Wetmore,<br />
Charleston<br />
Joshua S. Whitley,<br />
Charleston<br />
Glen Paul Caulk, Columbia<br />
Johnston Cox, Columbia<br />
Gus Dixon, Columbia<br />
Benson H. Driggers,<br />
Columbia<br />
Jennifer J. Hollingsworth,<br />
Columbia<br />
Cory E. Manning, Columbia<br />
Shunta H. Grant, Greenville<br />
Robert Green, Greenville<br />
Jonathan Hammond,<br />
Greenville<br />
Jared M. Pretulak, Greenville<br />
Robert Charles Rogers,<br />
Greenville<br />
Mark B. Goddard,<br />
Myrtle Beach<br />
Lindsey Hendrick,<br />
Myrtle Beach<br />
South Dakota<br />
Dave Grennan, Sioux Falls<br />
Texas<br />
James F. Haley, Austin<br />
Mandi M. Akens, Dallas<br />
Rebecca E. Bell, Dallas<br />
David Brickman, Dallas<br />
Deborah Faye Malveaux,<br />
Dallas<br />
J.B. Henderson, Houston<br />
Ashley Rose Kempenski,<br />
Houston<br />
Arfeo Villaluz Yllana,<br />
Houston<br />
Ashley Nichole Pate, Tyler<br />
Utah<br />
Bentley J. Tolk,<br />
Salt Lake City<br />
Virgin Islands<br />
Joseph F. Breen,<br />
Saint Thomas<br />
Washington<br />
Zackary A. Paal, Seattle<br />
Allison Bungard, Charleston<br />
Max L. Corley, Charleston<br />
Jan L. Fox, Charleston<br />
Jennifer J. Hicks, Charleston<br />
Katie MacCallum Nichols,<br />
Charleston<br />
Kiersan C. Smith, Charleston<br />
Jeffrey Alan Foster,<br />
Huntington<br />
Stacey L. Minigh, Huntington<br />
Wisconsin<br />
Melinda S. Giftos, Madison<br />
Nathan S. Fronk, Milwaukee<br />
Ryan Gehrke, Milwaukee<br />
Canada<br />
Alberta<br />
Alexander Yiu, Edmonton<br />
British Columbia<br />
John A. Vamplew, Vancouver<br />
Ontario<br />
Viktoria Uretsky, Toronto<br />
Japan<br />
Shinobu Sasaki, Yokohama<br />
Need a new<br />
logo for your<br />
bio and<br />
firm website<br />
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tschorle@dri.org or<br />
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