FDA Advisory Committee Not Rife with Conflicts of Interest? — “Please!” Quips Federal Judge

FDAIn order to achieve results that it believes are vital to public health, the Food and Drug Administration (FDA) has demonstrated time and again that it’s not afraid to trample laws and constitutional rights along the way. Occasionally, judges reintroduce FDA to the Rule of Law. We applaud one such recent rebuke by Judge Richard Leon, whose July 21 Lorillard v. FDA decision reminded FDA that it cannot stack a science advisory panel with members who will tell the agency what it wants to hear.

FDA tobacco control. After the U.S. Supreme Court rejected the agency’s attempt to seize regulatory oversight of tobacco products in 2000 (FDA v. Brown & Williamson), Congress granted FDA the authority it coveted in 2010. Banning or severely restricting the use of menthol in cigarettes has long been a goal of FDA’s friends in the anti-tobacco movement. FDA created a science advisory panel, the Tobacco Products Scientific Advisory Committee (TPSAC) to study menthol. The TPSAC concluded in 2011 that menthol had a negative effect on public health. Two companies filed suit in Febuary 2011, charging that FDA violated federal law by appointing members to the TPSAC who had clear conflicts of interest. The plaintiffs asked the court to strike the TPSAC’s report from the regulatory record.

Judge Leon’s opinion. The TPSAC members in question had ongoing contracts to testify as expert witnesses for plaintiffs in suits against tobacco companies. They also served as consultants to manufacturers of tobacco cessation products. FDA didn’t feel such relationships conflicted with their duties on the TPSAC. Judge Leon was quite flabbergasted by FDA’s decision. “Please!” he exclaimed, adding, “This conclusion defies common sense.” With regard to the members’ work with plaintiffs’ lawyers, Judge Leon explained that they had a financial incentive not to make any recommendations that would compromise the lawsuits in which they would testify. On the product consulting work, the judge noted that any FDA regulation of menthol would likely inspire more smokers to quit, potentially with the assistance of cessation products. Thus the TPSAC members also had a financial incentive to offer advice that would encourage a ban or restrictions on menthol. Judge Leon concluded that such blatant disregard for obvious conflicts violated federal law, and he enjoined FDA from utilizing the report in its assessment of menthol. Continue reading

Move by Biotech Company Tees Up Court Consideration of Attorneys’-Fee Clause in Corporate Bylaws

DelawareThe Wall Street Journal Law Blog reported today that Philadelphia-based (but Delaware-incorporated) biotechnology company Hemispherx BioPharm Inc. has injected itself into the middle of a growing dispute over attorneys’ fees in shareholder class action lawsuits. (A hat-tip to the Institute for Legal Reform, whose must-read daily email referenced the WSJ Law Blog piece) Prompted by a May 14 Delaware Supreme Court decision, ATP Tour, Inc. v. Deutscher Tennis Bund, et al., Hemispherx earlier this month adopted a provision in its corporate bylaws that shareholder plaintiffs must pay the company’s legal fees if Hemispherx prevails in a shareholder-initiated lawsuit. The provision applies retroactively to pending suits, and lawyers for shareholders in a class action against Hemispherx have asked the Delaware Chancery Court to invalidate the bylaws.

A July 11 Washington Legal Foundation Legal Backgrounder, Is Delaware High Court Ruling an Ace for Merging Companies Served with Shareholder Suits?, discussed the ATP Tour decision and assessed how it could be applied to deter frivolous shareholder class actions. Authored by Snell & Wilmer LLP attorneys Greg Brower and Casey Perkins, the paper explains that ATP Tour involved not a public company, but a private membership corporation which included in its bylaws a fee-shifting provision. The Delaware Supreme Court, answering a question certified to it by the U.S. Court of Appeals for the Third Circuit, held that the fee-shifting provision was a matter of private contract, and nothing in the state’s corporate law prohibited its inclusion in ATP’s bylaws.

The authors went on to examine whether Delaware statutory or common law would permit public companies to include such a fee-shifting mechanism in their bylaws. They found that a recent Delaware Chancery Court case, Boilermakers Local 154 Retirement Fund, et al. v. Chevron Corporation, et al., strongly supported the legality of fee-shifting through bylaws.  Brower and Perkins concluded:

Chevron and ATP Tour together make it clear that Delaware law is intended to give broad leeway to corporations, private and public, to adopt bylaws not otherwise prohibited by law, and that duly adopted bylaws are presumed to be part of the contract between the company and the member or shareholder. This means that publicly-traded companies and their shareholders ought to be able to freely contract for the details of their relationship, including details such as where disputes between them will be litigated, and whether the losing party in such litigation should have to pay the legal fees of the prevailing party. Such contracts are part of the fundamental structure of the corporate law of Delaware—or, it seems, of any other state for that matter.

Given the financial implications for the securities fraud class action bar and the promise such provisions hold for public companies, the Hemispherx case is likely just the first skirmish in what will be a drawn-out, intense battle over fee-shifting through corporate bylaws.

Noel Canning: A Triumph of Judicial Restraint Over Originalism

noelIn its late June decision in NLRB v. Noel Canning, the U.S. Supreme Court unanimously invalidated President Obama’s efforts to make three recess appointments to the National Labor Relations Board.  The Court was sharply divided, however, on the rationale for its decision.  Five justices joined Justice Breyer’s majority opinion, which rejected the most sweeping challenges to the recess appointments and ruled against the Administration on the much narrower ground that the Senate was not, in fact, in recess at the time that the appointments were made.  As a long-time advocate of judicial restraint, I applaud the narrow approach adopted by Justice Breyer.  Justice Scalia’s opinion concurring only in the judgment would have had the effect of preventing future Presidents from making recess appointments except in the rarest of circumstances.  To me, it illustrates the shortcomings of originalism as a means of ensuring judicial restraint.

Article II of the Constitution mandates that the President ordinarily must obtain “the Advice and Consent of the Senate” before appointing an officer of the United States.  The Recess Appointments Clause creates a limited exception to that requirement by authorizing the President, on a temporary basis, “to fill up all Vacancies that may happen during the Recess of the Senate.”  Noel Canning forced the Court to construe the meaning of two phrases contained in the clause.

First, what is meant by “the Recess of the Senate?”  Those challenging the NLRB appointments claimed that the phrase refers only to an inter-session recess, i.e., a break between formal sessions of Congress.  On the other hand, President Obama asserted (as have all recent Presidents) that the phrase also encompasses an intra-session recess, such as a summer recess in the midst of a session.  The NLRB appointments would have been improper under the challengers’ interpretation because the Senate indisputably was not on an inter-session recess at the time of the appointments.

Second, what is the scope of the phrase “Vacancies that may happen?”  The challengers asserted that the phrase refers only to vacancies that first come into existence during a recess.  President Obama (and his predecessors dating back for at least a century) urged a broader reading that would also encompass vacancies that arise prior to a recess but continue to exist during that recess.  The NLRB appointments would have been improper under the challengers’ interpretation because they were made to fill offices that first became vacant before the start of the recess in question.

Continue reading

Alameda County, California Drug Disposal Ordinance Should Take a Hike

packAs an avid hiker in our National Parks, I am familiar with the saying “Pack It In, Pack It Out.” When it comes to minimizing our impact on Mother Nature, this slogan reminds us to carry out of the backcountry any food or other material we brought in with us.

Not only does this practice reduce litter and preserve natural beauty, but it also promotes personal responsibility. Following this ethic—and teaching it to our kids—leads hikers not to take more with them than they need, and it puts the onus for reducing and removing waste on the very people who created the waste in the first place.

Yet, when it comes to cleaning up prescription drugs and other unused medicines, elected officials in Alameda County (and elsewhere in California) seem to think that drug companies should do it for us. The U.S. Court of Appeals for the Ninth Circuit (in San Francisco) will hear oral arguments tomorrow in a challenge to Alameda County’s Safe Drug Disposal Ordinance (PhRMA vs. Alameda Co., California).

The lawsuit contests the ordinance’s constitutionality, not its wisdom as a policy matter. However, it’s important to recognize that if the Court strikes down this program as unconstitutional—as it will if it heeds WLF’s amicus brief—no one who cares about the problem of unused drugs should mind. Rather, such a ruling will clear the way for thinking about real solutions to the disposal challenge.

Alameda’s ordinance requires prescription drug manufacturers whose products enter Alameda County to establish programs (individually or jointly) to collect and safely dispose of all unused prescription medicines in the county. Local pharmacies are explicitly excluded from the producers who must contribute, and the producers are forbidden from charging a collection fee or imposing a fee on the sale of drugs in the county to cover these costs. In other words, the drafters of this ordinance went out of their way to ensure that the purchasers of the medicine (who generate the waste) do not have any responsibility to pay for its disposal. Continue reading

Class Actions Alleging Injuries from Data Breaches Continue to Wither in Face of Standing Challenges

securityGuest Commentary

by Jennifer Wissinger, a 2014 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

Data-breach cases were supposed to be a new, lucrative litigation frontier for plaintiffs’ attorneys. Some experts speculated a wave of class-action suits would emerge against companies victimized by unauthorized access of customer data. Media reports of lawsuits filed in the immediate aftermath of high-profile data breaches, like the one that befell Target last December, have created the impression that these cases are proliferating rapidly. Reality belies such perceptions of success, however. Trial courts in fact have routinely dismissed data-breach lawsuits because plaintiffs cannot answer the American legal system’s most fundamental threshold question: have you actually been harmed? As a series of U.S. Supreme Court cases construing the constitutional standing-to-sue requirement dictate, mere fear of possible future harm does not suffice. In many data-breach cases, fear of future harm is the most plaintiffs can prove.

As The Legal Pulse has discussed, the Supreme Court most recently addressed standing two years ago in Clapper v. Amnesty International. Since 2012, federal and state trial courts have consistently applied Clapper’s reasoning to dismiss data-breach cases for lack of standing. In the last two months, three more courts have thrown out data-breach cases because the plaintiffs failed to show that the expected injury was at least “certainly impending.”

Galaria v. Nationwide Mutual Insurance Co. After Nationwide’s computer systems were hacked, the company notified its customers and advised them to safeguard their personally identifiable information (PII). Even though Nationwide offered its customers free credit monitoring for a year, the plaintiff in Galaria sued alleging violations of the federal Fair Credit Reporting Act (FCRA) and unlawful invasion of privacy under Ohio common law. Continue reading

There’s Nothing “New” about “Lone Pine” Orders for Active Case Management

faulkFeatured Expert Column − Complex Serial and Mass Tort Litigation

by Richard O. Faulk, Hollingsworth LLP*

To listen to the plaintiffs’ bar, you’d think that “Lone Pine” orders were a novelty recently conjured out of “thin air” by creative defense lawyers—or a device unsupported by any significant precedents. But although those orders may seem new to the uninitiated, they have deep roots in the history of active case management.

Many lawyers know—or have learned the hard way—why these case management tools are called “Lone Pine” orders, and what they are intended to accomplish. In Lore v. Lone Pine Corporation, No. L-03306-85, 1986 WL 637507 (N.J. Sup.Ct. Nov. 18, 1986), the plaintiffs claimed injuries resulting from contamination allegedly coming from a landfill. When the defendants presented a government investigation that found no offsite contamination, the court required the plaintiffs to make a preliminary showing of exposure, injury, and causation before allowing full discovery to proceed. This ruling led to other cases which recognized the propriety of “Lone Pine” orders when doubt existed “over what medical condition or disease, if any, can be causally related to the toxic agent exposure alleged by each plaintiff.”2 Lawrence G. Cetrulo, Toxic Torts Litigation Guide § 13:49 (2013). Since then, “Lone Pine” order have proliferated, not only in toxic tort litigation, but also in other types of cases.See generally, David B. Weinstein and Christopher Torres, Managing the Complex: A Brief Survey of Lone Pine Orders, 34 Westlaw Envt’l J. 1 (Aug. 21, 2013) (providing extensive list of categorized cases). Continue reading

The California Supreme Court’s Iskanian Opinion: Two Steps Forward, One Step Back

jenkinsGuest Commentary

by Kirk C. Jenkins, Sedgwick LLP*

On June 26, 2014, the California Supreme Court issued its long-awaited opinion in Iskanian v. CLS Transportation Los Angeles LLC. The decision was something of a mixed bag for the defense bar: two major steps forward in the California Supreme Court’s class action jurisprudence, but one step back of uncertain significance.

The plaintiff in Iskanian worked as a driver for the defendant in 2004 and 2005. Halfway through his employment, he signed an agreement providing that “any and all claims” arising out of his employment would be submitted to binding arbitration before a neutral arbitrator. The plaintiff agreed not to bring a representative action either in court or before the arbitrator.

A year after leaving his employment, the plaintiff filed a putative class action complaint, alleging failure to pay overtime, provide meal and rest breaks, reimburse business expenses and various other violations of the Labor Code. The defendant moved to compel arbitration and the trial court granted the motion. But while the matter was pending before the Court of Appeal, the California Supreme Court decided Gentry v. Superior Court, holding that most class action waivers were unenforceable in employment cases. The defendant dropped its motion to compel. Continue reading