Category Archives: Criminalization of Free Enterprise

by

Finger on the Pulse: From Our Blogroll and Beyond

  • Supreme Court’s Already ruling has ramifications for standing to sue (On the Case) (More info: WLF’s On the Merits on Already)
  • The highest punitive damage awards in 2013 in California and nationally (California Punitive Damages)
  • What can be concluded from EPA’s 2012 enforcement statistics? (Corruption, Crime & Compliance)
  • Second Circuit agrees with the 4th, 7th, and 9th, and disagrees with 5th, on whether state attorney general suits are removable to federal court under CAFA (Drug & Device Law) (Legal Pulse blog on 5th Cir. ruling)
  • 9th Circuit finds no federal preemption for state medical device liability suit (The Recorder) (More info: WLF Legal Backgrounder)
  • Manufacturer of texting system for truckers not liable for auto accident injuries for failure to make an “accident free” system (Mass Tort Defense)
  • The fascinating story behind the Standard Fire v. Knowles class action case argued in the Supreme Court last Monday (CNN Money/Forbes)
  • U.S. Court of Appeals for the Federal Circuit issues important en banc ruling on patent trolls and the International Trade Commission (Patently-O)
by

Finger on the Pulse: From Our Blogroll and Beyond

  • Supreme Court denial of cert in “reverse payment” patent settlement case injects twist into pending “no authorized generics” lawsuit in New Jersey (On the Case)
  • Federal government False Claims Act enforcement hauls in nearly $5 billion in 2012 (Corruption, Crime & Compliance)
  • Great roundup on Caronia off-label speech decision by Jim Beck (Drug & Device Law)
  • SEC and DOJ statements about only pursuing “important” Foreign Corrupt Practices Act cases aren’t in line with their past actions (FCPA Professor)
  • U.S. Court of Appeals for the Federal Circuit rejects constitutional challenge to law that put bounty-hunter “patent marking” lawsuits out of business (Patently-O)
  • The latest developments in the six-year-and-still-going Florida tobacco litigation known as “Engle” (Point of Law)
by

State Attorneys General Step to the Fore on Off-Label Drug “Promotion”

Cross-posted at WLF’s Forbes.com Contributor blog

With their law enforcement counterparts at the federal level raking in prodigious financial settlements, it’s no surprise that state attorneys general (“state AGs”) want a bigger piece of the action on off-label drug “promotion” regulation. The $181 million settlement reached August 29 between 36 attorneys general and a drug maker confirmed that state AGs must indeed be reckoned with on off-label issues. What will get medical product companies’ attention is not the financial settlement, though. The real eye-opener was the precision of the settlement’s conduct requirements, most notably one restraint on speech which goes beyond the dictates of federal law.

The settlement arose from “deceptive marketing” suits filed by state AGs throughout the country involving Ripersdal. Some of those suits resulted in verdicts imposing six- or seven-figure damages on the defendant, Janssen Pharmaceuticals. Janssen and its parent company, Johnson & Johnson (J&J), had appealed those verdicts, but the cost-benefit calculus of fighting vs. settling likely led the companies to resolve the claims on a global basis (much like the tobacco companies did with the state AGs).

In addition to the monetary settlement, Janssen and J&J agreed to conditions and limitations on how they share information about Ripersdal with medical professionals. As noted above and emphasized by former FDA associate chief counsel Arnie Fried in a Pharmalot interview, such behavior-changing dictates were what the AGs were really after here. Continue reading →

by

Time for Supreme Court Review of Corporate “Status Crime” Legal Doctrine

Cross-posted by Forbes.com at WLF contributor site

Two weeks ago in Friedman v. Sebelius, a divided U.S. Court of Appeals for the District of Columbia Circuit largely upheld what amounts to the lifetime exclusion of three senior pharmaceutical executives from any further involvement in the industry.  Their offense:  pleding guilty to misdemeanor charges that they were executives of Purdue Frederick Co., at a time when (unbeknownst to them) some company employees engaged in the improper promotion of Purdue Frederick drugs.

Criminal prosecution of corporate executives not shown to have a guilty state of mind (or even to have acted negligently) has long been controversial.  Such prosecutions—under what is known as the “Responsible Corporate Officer” (RCO) doctrine—have twice survived constitutional challenges in the Supreme Court by razor-thin 5-4 margins in 1943 and 1975.  The Supreme Court reasoned that the RCO doctrine allows society to make a strong statement regarding its disapproval of corporate misbehavior without unduly punishing largely blameless senior executives, because penalties in RCO cases “commonly are relatively small, and conviction does no grave danger to the person’s reputation.”  Morisette v. United States.  There is serious reason to question whether the lifetime exclusion largely upheld by the D.C. Circuit fits the Supreme Court’s definition of a “relatively small” penalty.  In light of federal officials’ determination to bring more such prosecutions, the Supreme Court ought to revisit the RCO doctrine and decide whether it is being applied in a manner that comports with due process of law. Continue reading →

by

Finger on the Pulse: From Our Blogroll and Beyond

  • Prominent former general counsel calls on government to expand leniency programs for corporations with effective compliance programs (law.com)
  • Trial judge issues ruling in closely watched case involving “standard essential” patents (Alison Frankel’s On the Case)
  • FTC Commissioner objects to Senate effort to label branded company’s refusal to sell generic company its drugs as anticompetitive (FDA Law Blog)
  • 18-year term limit for Supreme Court justices? (Slate via How Appealing)
  • Federal district court limits reach of False Claims Act in qui tam suit vs. health care company (Original Source)
  • Is the EPA deploying drones to do aerial, unannounced searches of cattle feeding areas? (Business Rights Center)
  • 9th Circuit judge invokes Gulliver’s Travels, Dante’s Inferno in scathing dissent in environmental case (Environmental Appeal Court)
  • Will NYC mayor’s proposed big soda portion ban inspire more litigation against soda makers? (Product Liability Monitor)
by

DOJ-Antitrust Out of Step on Awarding Credit for Compliance Programs

Guest Commentary

Katie Owens, a 2012 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

According to the Antitrust Division of the U.S. Department of Justice, no corporate compliance program is worthy of credit when considering punishment of corporations.  The U.S. Sentencing Commission should correct this outlier policy.

 

At the Department of Justice (“DOJ”), corporate compliance programs are not treated equally among the agencies various divisions. The U.S. Attorney’s Manual expressly “recognizes that no compliance program can ever prevent all criminal activity by a corporation’s employees.” All but one of DOJ’s divisions applies this principle. The Antitrust Division believes that an antitrust violation directly correlates to a “failed” compliance program, one not deserving of credit under the Federal Sentencing Guidelines (“Guidelines”).

DOJ-Antitrust reserved a carve-out from the Guidelines specifically for antitrust violations based on its stance that these violations go to “the heart” of a company’s activities. Note that this carve out applies to antitrust violations only, meaning that all other crimes, including fraud, bribery, and environmental harm, may receive credit for maintaining an effective compliance program. Furthermore, this antitrust rule is an absolute with no exceptions. No compliance program, no matter how diligent, will be considered, because the program is deemed a “failure” by the Division if there is any antitrust law violation.

Rather than rewarding compliance efforts as a means of overall prevention of antitrust violations, the Division focuses instead on amnesty as a means of enforcement. Under this idiosyncratic approach, the first member of a cartel to admit wrongdoing receives amnesty from prosecution, regardless of guilt. The reporting company is then required to do nothing, while in other contexts, violations reported to the Criminal Division of the DOJ require violators to implement compliance programs or to improve existing ones. As commentator Joe Murphy observed, this policy could potentially lead a company to not “worry about compliance, but instead to devote its attention to making sure that it was always the first one to confess to the government if a cartel was about to be discovered. It could then keep most of its excess cartel profits, since it would not be responsible for large fines, and its plea would limit its civil exposure to single damages.” Continue reading →

by

Finger on the Pulse: From Our Blogroll and Beyond

  • Fascinating and troubling fight emerges between two corporate law firms over one firm’s representation of a state attorney general in suit vs. corporate defendant (Alison Frankel’s On the Case)
  • Are claims of copyright abuse online exaggerated? (Copyhype)
  • U.S. DOJ ramps up criminal prosecutions of companies accused of violating environmental laws’ recordkeeping requirements (Corruption, Crime & Compliance)
  • Minnesota high court says attorney general can prevent copycat plaintiffs’ suits when defendant settles consumer protection charges with state (Drug & Device Law)
  • Before going through with his proposed ban on certain portion sizes of beverages, NYC Mayor Bloomberg should read this study about limiting varieties of food (Reuters, h/t FDA_Track®)
  • SoBe drink makers win dismissal of another “all-natural” consumer fraud class action suit (Mass Tort Defense)
  • Plaintiffs in state court suit alleging hydraulic fracturing-related harm fail to prove causation (Product Liability Monitor)
  • What does it mean when one of the brightest appeals court judges on the federal bench appoints an independent expert in a patent case (Truth on the Market)
by

Update: Further Scholarship on Antitrust as “Crime of Moral Turpitude”

Two years ago, The Legal Pulse featured a guest commentary by White & Case LLP partner Eric Grannon, who is also a member of Washington Legal Foundation’s Legal Policy Advisory Board, entitled Is an Antitrust Violation a “Crime Involving Moral Turpitude”? DOJ Thinks So. In the post, Mr. Grannon described a “Memorandum of Understanding” that subjects foreign business executives to exclusion or deportation from the U.S. if they are convicted of a criminal violation of U.S. antitrust laws.

Mr. Grannon and his White & Case colleague Nicolle Kownacki have authored a more extensive analysis of the Memorandum for the April 2012 issue of The Champion, published by the National Association of Criminal Defense Lawyers. Even though, as the article explains, the Memorandum has never been subjected to judicial scrutiny or gone through any public comment process, the Justice Department routinely uses it as a “carrot” to encourage foreign executives to plead guilty to antitrust violations. In each of the 50 cases where foreign executives entered plea agreements with the Antitrust Division, DOJ granted the defendants a waiver from the moral turpitude memo.

Grannon and Kownacki lay out a very convincing case in the article that criminal violations of the Sherman Act are not acts of moral turpitude, citing to compelling case law which supports their argument.

One would hope that at some point in the near future, a Justice Department which claims to respect civil liberties will take a second look at this Memoradum and either eliminate it or make substantial changes.  Grannon and Kownacki’s article certainly provides the intellectual basis for doing just that.

by

Finger on the Pulse: From Our Blogroll and Beyond

  • Some suggestions for DOJ’s impending Foreign Corrupt Practices Act guidelines (Corruption, Crime & Compliance)
  • Genetically-enhanced foods: to label or not label? (Consumer Advertising Law)
  • Activists ponder suing SEC to force release of disclosure rules on oil companies’ payments overseas (The Hill E2 Wire)
  • Will FDA ever offer guidance on how regulated entities can safely use social media? (Digital Health Coaliton)
  • ITC Administrative Law Judge sanctions company in closely watched patent dispute (Law.com)
  • First Circuit weighs in on federal judges using “cy pres” authority to hand out leftover money from lawsuit settlements (On the Case)
by

Plight of WLF Supreme Court Client Noted In Wall St. Journal Article

A long anticipated story in this morning’s Wall Street Journal regarding the federal government’s use of a “false statements” criminal statute noted the plight of a Washington Legal Foundation client, Cory King (story here, subscription required). A petition is currently pending before the U.S. Supreme Court asking the Justices to review a U.S. Court of Appeals for the Ninth Circuit ruling that upheld guilty verdicts under the federal Safe Drinking Water Act and 18 U.S.C. § 1001, the so-called “false statements” law. As the Journal article states:

Critics across the political spectrum argue that 1001, a widely used statute in the federal criminal code, is open to abuse. It is charged hundreds of times a year, according to court records and interviews with lawyers and legal scholars.”

WLF’s petition urging a reversal of Mr. King’s conviction argues that the federal false statements statute does not apply because his statement about where a valve on his Idaho farm sent water was made to a state agricultural official with no connection to the U.S. government.  In late February, SCOTUSblog featured WLF’s petition on Mr. King’s behalf as a “Petition of the Day,” a feature the blog’s experts use to highlight cases with a better than average chance of being granted review.