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

No Name Calling in My Court: Judge Bans Use of Term “Patent Troll” in Jury Trial

thumbnailTrollThis recent item from Law360 (subscribers only) caught our eye: “Judge Koh Bars Apple From Calling Rival ‘Patent Troll’ At Trial.”

In addition to being referenced regularly at this blog for her food labeling class action rulings, Judge Lucy Koh of the U.S. District Court for the Northern District California has been presiding over a number of high-profile skirmishes in the “Smartphone Patent Wars.”

The case before her is GPNE Corp. v. Apple, Inc. GPNE alleged in its complaint last June that Apple iPads and iPhones infringe patents GPNE holds on data transmission. GPNE’s business model is arguably similar to that of other entities commonly labeled “patent trolls.” It does not practice its patents; rather, it seeks revenue through licensing and litigation. GPNE views the term as prejudicial and urged Judge Koh to prohibit its use before the jury.

In her June 24 Pretrial Order Re: Motions In Limine, Judge Koh dictated:

Apple may not refer to GPNE as a ‘patent troll,’ ‘pirate,’ ‘bounty hunter,’ ‘privateer,’ ‘bandit,’ ‘paper patent,’ ‘stick up,’ ‘shakedown,’ ‘playing the lawsuit lottery,’ ‘corporate shell game,’ or ‘a corporate shell.’

She did, however, permit Apple to use other terms when referring to GPNE:

Apple may refer to GPNE as a ‘non-practicing entity,’ ‘licensing entity,’ ‘patent assertion entity,’ ‘a company that doesn’t make anything,’ or ‘a company that doesn’t sell anything.’ The Court finds that this conclusion strikes the balance between allowing Apple to argue that GPNE’s status as a non-practicing entity is relevant to the calculation of reasonable royalties and to secondary considerations of non-obviousness without unduly prejudicing GPNE or confusing the jury. See Fed. R. Evid. 403.

Judge Koh’s order reflects how this once “inside baseball” term has become part of the broader patent law and technology policy lexicon. “Patent troll” was coined, ironically, in 1999 by an Intel attorney, Peter Detkin.  Detkin left Intel and eventually co-founded Intellectual Ventures, a non-practicing entity which some have called “a patent troll on steroids.”

For years, only those who were narrowly involved with patent licensing and litigation uttered the term. Lately, however it is being utilized in everyday discussions on patents and technology. While President Obama did not specifically use the term is his February 2013 “Fireside Hangout” on Google Plus,  he did accuse entities “that don’t produce anything themselves” of “extort[ing] money” out of technology producers. A document issued by the White House Task Force on High-Tech Patent Issues last June, however, did utilize the term “patent trolls” when discussing the need for reform.

One could argue that “patent troll” has become so widely used that it has lost its “punch” as a pejorative in characterizing those whose singular business is sticking up or shaking down technology-producing companies through opaque demand letters and playing the lawsuit lottery. Obviously, Judge Koh does not see it that way, and declared her courtroom a troll-free zone. Whether that helps GPNE prevail in its claim, however, is uncertain.

Also published at WLF’s Forbes.com contributor page

Pennsylvania High Court Joins Judicial Stampede That’s Trampling State Attorneys-General/Plaintiffs’ Bar Alliances

PA scotusOn June 16, the Pennsylvania Supreme Court rejected the Commonwealth’s arguments that Bristol Myers Squibb (BMS) was liable for fraudulently overcharging state health agencies. The state had sued BMS and 13 other pharmaceutical companies and won a $27 million damage award. In the unanimous ruling, the Court dropped a noteworthy footnote in which it questioned Pennsylvania’s reliance on private contingent-fee lawyers to prosecute the case. The decision is just the latest in a string of costly failures by deputized plaintiffs’ lawyers in state actions against drug companies.

The Court’s unanimous Commonwealth v. TAP Pharmaceutical Products decision turned on whether the Pennsylvania agencies suffered any financial loss when taking into account the value of rebates that BMS provided the state for drug purchases. The state claimed that BMS took advantage of the complex “average wholesale price” (AWP) formula to artificially increase its profits from sales to health agencies. BMS denied those charges, and argued that even if the agencies were overcharged, the rebates offset the alleged financial harm. Despite testimony from state officials that they did take rebates into consideration when assessing drug payments, Pennsylvania excluded rebates when formulating its damages claim. The trial court bought the state’s justification for this contradictory stance, as did the Commonwealth Court on appeal.

The justices seemed shocked by the lower courts’ unquestioned acceptance of Pennsylvania’s stance on rebates. Justice Saylor wrote, “[T]his Court is not in need of a body of evidence to apprehend that a rebate operates to reduce the net price of a commodity.” The Supreme Court found it “astonishing” that the Commonwealth Court would allow the state to collect “a billion dollars in rebates relative to social welfare reimbursements while giving no credit to the payers.” Continue reading

Quick Take: Some Possible Impacts of SCOTUS’s POM Wonderful Decision on State-law Food Labeling Class Actions

food-courtIn some of our commentaries on food labeling class actions (collected under the “Food Court” tag), we have lamented how such lawsuits end-run the federal Food Drug and Cosmetic Act’s (FDCA) prohibition on private enforcement. Defendants have argued that the FDCA preempts lawsuits brought under laws such as California’s Sherman Law or Unfair Competition Act. Regrettably, judges have rejected this argument, and have found preemption only if a lawsuit would impose labeling requirements beyond what Food and Drug Administration (FDA) regulations would require.

Plaintiffs and defendants in these suits expressed significant interest when the U.S. Supreme Court agreed in January to review a U.S. Court of Appeals for the Ninth Circuit decision, POM Wonderful LLC v. Coca-Cola Co. There, the Ninth Circuit ruled that the FDCA precluded POM’s federal Lanham Act suit charging that a Minute Maid Blueberry Pomegranate juice’s name and label were misleading. While POM Wonderful involved the interplay between two federal statutes, rather than between federal and state statutes, some opined that a broadly written Supreme Court opinion could either help state-law food labeling suit defendants defeat those claims or add powerful credence to plaintiffs’ arguments that the FDCA does not impede their private enforcement actions.

The High Court decided POM Wonderful on June 12. In an opinion authored by Justice Kennedy, the Court unanimously reversed the Ninth Circuit. While the ruling could inspire more Lanham Act lawsuits between  competitors, it is unlikely to have a major impact on the types of class actions being filed in The Food Court and elsewhere.

Justice Kennedy stated baldly that “this is not a pre-emption case,” and thus “the state-federal balance does not frame the inquiry.” POM Wonderful therefore will not impact arguments that the FDCA preempts state-law class actions challenging food labels. Justice Kennedy also observed “this is a statutory interpretation case,” and focused the Court’s analysis on whether the FDCA and the Lanham Act were complementary or conflicting. Continue reading

Update: Two Food Labeling Suits Settle after Judge Certified Narrowed Classes

kellogg'sLast November, while assessing several losses by plaintiffs in “all natural” food labeling class actions, we discussed two opinions issued by the same Southern District of California judge (Marilyn Huff) on the same day (July 30, 2013). Both opinions certified far narrower classes of plaintiffs than the lawyers in each case sought.

The defendants in these cases—Bear Naked and Kashi (both owned by Kellogg’s)—unsuccessfully sought the U.S. Court of Appeals for the Ninth Circuit’s permission to immediately appeal Judge Huff’s certification orders. With Kellogg’s facing trial in both cases, albeit against smaller classes of plaintiffs, it entered into negotiations which resulted in proposed settlements to be presented to Judge Huff in consecutive hearings on May 27. We describe the proposed settlements below and offer some thoughts on them.

Astiana v. Kashi Company. Frequent plaintiff Skye Astiana, who complained in a suit against Ben & Jerry’s that the company’s alleged mislabeling of its ice cream “disrupted my vibe,” will be $4,000 richer thanks to the proposed settlement’s “incentive award” for the named plaintiffs. The company is creating a settlement fund of $5 million, out of which the incentive awards will be paid, as will the $1,250,000 in attorneys’ fees and costs. What will the “absent” class members recover? That depends on the proof they offer. Those with proof of purchase can recover $.50 for each item, with no limit on the total amount of recovery as long as receipts are presented. Those with no proof of purchase can file claims for $.50 per item with a maximum recovery of $25. In addition, Kashi will remove from certain products’ labels and advertisements the terms “All Natural” and “Nothing Artificial.”

Thurston v. Bear Naked. The proposed settlement terms in Thurston largely mirror those in Astiana. The named plaintiffs are to receive $2,000 incentive awards. The settlement fund is $325,000. Absent class members with receipts can receive $.50 for each product with no maximum recovery limit. Those who can’t prove they purchased the supposedly offending Bear Naked products can claim $.50 for each item with a $10 maximum. Bear Naked agrees to remove “100% Natural” and “100% Pure and Natural” from its labels and ads. And the attorneys’ fees? The Class Counsel will only be seeking “an award of reasonable, actual out-of-pocket expenses.” Why so modest? Many of the same law firms which sued Bear Naked were also counsel to the Astiana class. Because Thurston and Astiana involved nearly identical issues, it’s doubtful that Judge Huff would award substantial fees for the law firms’ work in Thurston. Continue reading

Third Circuit’s Denial of Rehearing in Class Action Strengthens “Ascertainability” Criterion

Third Circuit_LS_option1_1In a February 21, 2014 post we discussed a U.S. Court of Appeals for the Third Circuit decision, Carrera v. Bayer Corp. The court denied certification to a class of multivitamin purchasers because the plaintiffs offered no reliable and administratively feasible way to prove they had purchased the targeted product (and were thus members of the class). 

On May 2, the Third Circuit denied rehearing en banc in Carrera. The written opinions accompanying the court’s denial of rehearing reflect the rancor this issue can inspire among federal judges.

Denial of Rehearing Opinion. Nine judges voted to deny rehearing. Judges Smith, Chargares, and Scirica, all of whom sat on the panel that decided Carrera last August, signed an “Opinion Sur Denial of Panel Rehearing.” The opinion reiterated that Carrera failed to meet his ascertainability burden. The judges also noted that the panel remanded the case to the district court where Carrera would have an opportunity to “submit a screening model specific to this case that can reliably distinguish between accurate affidavits and fraudulent or inaccurate ones.”

Dissent from Denial of Rehearing. Judges Ambro, Rendell, Fuentes, and Chief Judge McKee voted to rehear Carrera. Judge Ambro penned an “Opinion Dissenting Sur Denial.” Judge Ambro was the author of a 2012 opinion, Marcus v. BMW of NA, on which Carerra relied. In his dissent from rehearing denial, Judge Ambro stated that “Carerra goes too far” in applying the principles laid out in Marcus. He contrasted the “prolix” parameters of the Marcus class with the “simple” class definition in Carerra, implying that simplicity eases the ascertainability burden.

Judge Ambro was also troubled that because Bayer did not sell its multivitamins directly to consumers (which he termed “a fortuity”), it would not have sales records. He explained that in situations where “the defendant’s actions—a defendant’s lack of records and business practices,” as the judge put it—”cause the difficulty, we should be flexible with our application” of ascertainability requirements. This is quite at odds with the Third Circuit’s rationale in another August 2013 class-action decision, Hayes v. Wal-Mart. Judges Ambro, Fuentes, and Scirica presided over that appeal. In remanding the case back to the district court to determine ascertainability, Judge Scirica wrote, “the nature or thoroughness of a defendant’s recordkeeping does not alter the plaintiff’s burden to fulfill Rule 23’s requirements.” Judge Ambro did not dissent in Hayes.

Call for Judicial Conference Review. In addition to calling for rehearing en banc in Carrera, Judge Ambro urged the Judicial Conference’s Committee on Rules of Practice and Procedure to “look into . . . how easy (or hard) must this identification [i.e. if class members can be reasonably ascertained] be?” Continue reading

Federal Regulators Shove First Amendment Down Slippery Slope with School Ad Ban Proposal

high-school-cafeteria-coloradoThink of the children!

That phrase is a “tried-and-true debate stopper,” ethicist Jack Marshall writes, “because of its ability to inhibit rational thought.” It’s no wonder, then, that professional activists and government regulators often cloak actions which might otherwise be highly questionable (and unconstitutional) in the appealing mantle of safeguarding America’s youth.

For instance, government routinely invokes protection of children as a justification for restricting commercial speech. Three years ago, a triumvirate of federal agencies tried to limit kids’ exposure to food and beverage ads through an informal guidance document. Thankfully, that effort fell flat. But Washington’s appetite for limiting “disfavored” speech—in the interest of those ubiquitous children—is never sated, as a recently proposed U.S. Department of Agriculture (USDA) regulation reminds us.

The February 26 proposal dictates how local education agencies (i.e. school boards) are to devise “local school wellness policies.” The USDA Secretary, joined by First Lady Michelle Obama, announced the rule at a White House event and proudly touted the proposal’s unprecedented prohibition of advertising for selected foods and beverages on school property. That part of the proposal violates the First Amendment, a conclusion which WLF shared with USDA last week in its formal comments to the agency. Continue reading

FDA’s Proposed Regulation of Brewers’ Spent Grains is All Wet

spent brewing grains

spent brewing grains

During his February 5, 2014 appearance at a House Energy and Commerce Committee hearing, Food and Drug Administration (FDA) Deputy Commissioner Michael Taylor stated that “the whole goal of [the Food Safety Modernization Act (FSMA)] is to achieve the food safety goal without imposing regulations, just for the sake of regulation.” Dr. Taylor must have been unaware of his agency’s proposal to require that brewers, distillers, and vintners develop extensive hazard analysis and control plans before selling or donating their spent grains or grape pomace to farmers for livestock feed. This proposal seems to be the epitome of regulating for the sake of regulating.

Farmers have been procuring and feeding their livestock spent brewing grains and grapes for centuries. These livestock “happy hour” arrangements advance environmental sustainability, engender bonds among local businesses, and financially benefit both parties. Farmers get low cost whole grain feed packed with fiber, protein, and, of particular importance to livestock in arid climates, moisture. Alcohol makers save millions by not having to landfill the by-products.

FSMA Section 116 exempts activities at facilities which “relateto the manufacturing, processing, packing, or holding of alcoholic beverages.” In a proposed animal food safety regulation, FDA essentially nullifies this statutory exemption. The agency “tentatively concludes” that when brewers or distillers go through the “mashing” process—soaking grains in hot water—and then offer the by-product to farmers, they suddenly become food producers. The same goes for winemakers and their grape pomace. FDA’s conclusion has sparked a deserved firestorm of opposition from the affected industries as well as members of Congress. Continue reading

Federal Workplace Police Have a Tough Week in Court

6th CircuitIf anyone doubts our democracy’s need for an independent judiciary to check the executive and legislative branches, consider two federal court opinions issued last week. Federal workplace police at the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL) each received a thorough (and richly deserved) judicial slapdown for arrogantly flouting the rule of law.

EEOC v. Kaplan Higher Education Corp. The unanimous U.S. Court of Appeals for the Sixth Circuit panel set the tone of this seven-page opinion by declaring, “In this case the EEOC sued the defendant for using the same type of background check that the EEOC itself uses.”

Kaplan implemented vigorous screening of job applicants, including the use of credit checks, in response to several instances of employee theft. Such increased self-policing earned the company an EEOC legal action. The Commission argued that Kaplan’s credit checks had a disparate impact on minorities.

To support its case, EEOC hired a psychologist to perform statistical studies using Kaplan’s applicant data. The “expert” filed numerous reports with the trial judge, most of which were either late or contrary to the judge’s demand that he cease providing reports. The judge found that the psychologists’ reports were unreliable under Federal Rule of Evidence 702 and dismissed EEOC’s case.

The Commission fared just as poorly on appeal. The Sixth Circuit agreed with the lower court’s conclusion that EEOC’s “expert” and his methodology failed every factor that courts utilize to assess expert testimony under the Supreme Court’s Daubert v. Merrell Dow opinion. The judges agreed that a court could neither test the psychologist’s technique, nor could it evaluate the test’s error rate. EEOC argued that its “expert’s” theory did not have to be subject to peer review. The Sixth Circuit found the argument “meritless.” As for the other Daubert factors, EEOC essentially argued that the burden fell on Kaplan to prove they had been met. The court pointedly retorted, “The law says to the contrary.”

The opinion ended as sharply as it began:

We need not belabor the issue further.  The EEOC brought this case on the basis of homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.

Gate Guard Services v. Perez. Here, the Department of Labor lost more than just a case.  Because of its antics, American taxpayers had to shell out $565,527.61 in attorneys’ fees to the enforcement target.

DOL accused Gate Guard Services (GGS) of misclassifying gate sentries as independent contractors. GGS counter-sued and sought a declaratory judgment. In February 2013, U.S. District Court for the Southern District of Texas Senior Judge John Rainey granted GGS summary judgment and dismissed DOL’s claims against the company. GGS then sought attorneys’ fees under the Equal Access to Justice Act (EAJA).

Under that statute, the government must prove that its position in a lawsuit had a reasonable basis in both fact and law (“substantially justified”) at every stage of the action. Judge Rainey agreed with GGS that DOL’s lead investigator departed from DOL enforcement procedures when he destroyed interview notes and assessed a $6 million fine after he had interviewed only three gate sentries.

“Had the DOL interviewed more than just a handful of GGS’s roughly 400 gate attendants,” Judge Rainey wrote, “it would have known [they] were not employees.” He listed ten different factors that DOL failed to reasonably consider, including “the federal government itself, via the ACE [Army Corps of Engineers] uses the services of gate attendants at federal parks and classifies these individuals as independent contractors.”

The court concluded that DOL’s actions both before and during the suit were not substantially justified and awarded fees to GGS.

Checked and Balanced. But for an independent judiciary, the executive branch would be free to engage in the type of hypocrisy and disrespect for rules that were on display in these two cases. It might routinely label employers’ credit checks discriminatory while utilizing the very same screening method, or it could categorize a company’s gate sentries “employees” while other federal agencies consider similarly situation workers “independent contractors.” Agencies would prosecute businesses for destroying internal documents while permitting federal investigators to freely do the same.

We should all be grateful that our federal courts did not tolerate such behavior from EEOC and DOL, and instead reminded them of principles most of us learned in kindergarten: play by the rules and live by the same rules you expect others to abide by.

Also posted at WLF’s Forbes.com contributor page

Behavior of Plaintiffs’ Lawyers in Food “Misbranding” Class Actions Called into Question

scalesOver the last two years at The Legal Pulse, we’ve expended a lot of digital ink on food labeling class action lawsuit rulings from the Northern District of California (aka “The Food Court”). Our focus here shifts to similar suits from the Central District of California. Two recent decisions from that jurisdiction spotlight some questionable behavior by plaintiffs’ lawyers.

Jovel v. Boiron, Inc. Plaintiff Jovel alleged in a class action suit that the non-pharmaceutical flu remedy he purchased at GNC, Oscillo, did not relieve his flu-like symptoms as the product label claimed it would. Boiron opposed Jovel’s motion for class certification on a number of grounds, including that Jovel was not an adequate representative of the class under Federal Rule of Civil Procedure 23(a).

What was it that made Jovel inadequate? During his deposition, Boiron’s counsel asked Jovel when he first read the flu-relieving claims on the product label. He stated that he hadn’t read it until after he finished the entire box—a week  after purchase. That fact is, of course, rather important in a case where the plaintiff must prove he relied on the label’s claims to make his purchase.

After a break in the deposition, Jovel’s story had changed. He said he had read the label before buying the Oscillo. Boiron’s counsel then asked:

Counsel: “Did you have a discussion with your counsel that refreshed your recollection about when you read the box?”

Jovel: “Yes”

Judge Stephen Wilson held that such “inconsistency” in his testimony on a material issue in the case reflected poorly on Jovel’s credibility, and he denied class certification on that basis. Continue reading