U.S. ex rel. Rose v. Stephens Institute: The Ninth Circuit Considers Escobar and its Materiality Mandate

Stephen_Wood_03032014Featured Expert Contributor, False Claims Act

Stephen A. Wood, Chuhak & Tecson, P.C.

Ed. Note: This is Mr. Wood’s inaugural post as the WLF Legal Pulse‘s latest Featured Expert Contributor. Mr. Wood is a Principal in Chuhak & Tecson’s Chicago, IL office and chairs the litigation practice group. He has authored numerous WLF publications over the past five years on the False Claims Act and other complex litigation matters.

Ever since the Supreme Court issued its opinion in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), the lower courts have wrestled with the interpretation and application of the Supreme Court’s holding. The United States Court of Appeals for the Ninth Circuit became one of the latest reviewing courts to consider Escobar and its effect on that Circuit’s existing False Claims Act precedent.  The result in United States ex rel. Rose v. Stephens Institute, No. 17-15111, 2018 WL 4038194 (9th Cir. Aug. 24, 2018) was mixed.  The Court of Appeals held that Escobar overruled one precedent, but, in a sharply divided opinion, not another, thus demonstrating that Escobar continues to divide courts, especially over the element of materiality, foreshadowing further Supreme Court involvement in False Claims Act jurisprudence.  That involvement could come soon given that a petition for writ of certiorari is pending based on the Ninth Circuit’s decision in United States ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d 890 (9th Cir. 2017), a case that also turned on whether the defendant’s claimed violations were material.  Continue reading U.S. ex rel. Rose v. Stephens Institute: The Ninth Circuit Considers Escobar and its Materiality Mandate”

Cleaning Up the Asbestos Litigation Mess: A Role for DOJ?

DOJAsbestos—the heat-resistant, naturally occurring silicate mineral—disappeared from the manufacturing marketplace over 40 years ago. In those four decades, litigation involving asbestos has been as impervious to resolution as the mineral itself is to high temperatures. When we’ve asked mass-tort litigators “what’s the next asbestos?” some have answered—not entirely in jest—”asbestos.”

The reasons for asbestos litigation’s endurance are many, but defendants, judges, and public officials have started to spotlight the role of bankruptcy trusts and plaintiffs’ lawyers’ use of them as both shield and sword. Numerous voices, including state attorneys general and Members of Congress, have called on the U.S. Department of Justice (DOJ) to investigate misconduct and potential fraud. DOJ has a number of potent oversight and enforcement options at its disposal, some of which are discussed below. Continue reading “Cleaning Up the Asbestos Litigation Mess: A Role for DOJ?”

Update: Ninth Circuit Affirms End of Iced-Coffee Serving-Size Class Action

Food Court Follies—A WLF Legal Pulse Series

In a September 7, 2016 post, we enthusiastically applauded a Central District of California judge’s decision to dismiss, with prejudice, a truly outrageous lawsuit filed against Starbucks. The plaintiff claimed Starbucks misled him into believing that a 12-ounce iced tea or coffee should contain 12 ounces of liquid, and that the ice should not factor into the drink size. The jilted consumer appealed to the U.S. Court of Appeals for the Ninth Circuit which, on March 12, 2018, finally affirmed the trial court in a three-page unpublished opinion. Forouzesh v. Starbucks Corp.

iced coffee
Misleading?

The three-judge panel agreed with the lower court that no reasonable consumer would be misled in the way Forouzesh claimed to have been, and thus he could not sustain claims under California consumer-protection laws. He also could not prevail in his fraud claim because he could not prove he justifiably relied upon Starbucks’ supposedly misleading product representations. Finally, the trial judge did not abuse his discretion when he dismissed the suit with prejudice, as any amendment Forouzesh made of his complaint would have been futile.

We trust that courts in other jurisdictions entertaining similar (and similarly bogus) claims against Starbucks and other beverage providers will take notice of the outcome, as will elected officials in other states that are reviewing permissive consumer-protection laws.

DOJ Memo and Court Opinion Show Trend in Damming Flood of False Claims Act Suits

11th CircuitBusinesses that routinely contract with the government know that while the relationship comes with high financial rewards, it also can expose those companies to massive civil liability.  Under the False Claims Act (FCA), government contractors can find themselves sued for hundreds of millions of dollars based on mere technical violations of complex regulatory schemes.

Luckily, as highlighted in several of our previous posts, the U.S. Supreme Court has recently reinforced the high evidentiary threshold FCA plaintiffs need to meet to bring a successful claim under the most common theory of FCA liability.  A recently disclosed U.S. Department of Justice (DOJ) memo and a recent opinion from the U.S. Court of Appeals for the Eleventh Circuit might similarly lead to fewer baseless claims against government contractors. Continue reading “DOJ Memo and Court Opinion Show Trend in Damming Flood of False Claims Act Suits”

Federal Preemption Ruling Flushes Another Eye-Drop Class Action

eyedropAnyone who’s ever used eye drops has experienced solution overflow. You tilt your head back, pry your eye open, hold the dispenser close to your eyeball, and even though you squeeze very gently, some of the liquid flows onto your cheek. What is your logical next move? Is it to grab a tissue and dab up the excess, or reach for the phone and call your lawyer? As readers of the WLF Legal Pulse learned from a March 31, 2017 post, some overflow sufferers have actually done the latter.

That March 31 commentary recounted the U.S. Court of Appeals for the Seventh Circuit’s dismissal of a class action against nine eye-drop makers alleging that consumers suffered economic harm from a needlessly oversized drop of medicine. A decision in another eye-drop-overflow suit filed in Massachusetts, Gustavesen v. Alcon Laboratories, et. al, recently came to our attention (HT to our friends at the indispensable FDA Law Blog).

The outcome of this suit was the same as the Eike v. Allergan, Inc. in the Seventh Circuit—class dismissed. Unlike Judge Posner’s typically curt, fanciful opinion in Eike, which tossed out the claims for lack of constitutional standing, District of Massachusetts Judge Mark Wolf found that federal regulation of the prescription eye drops preempted the state-law fraud claims. Judge Wolf’s thorough analysis is worth a careful read. Continue reading “Federal Preemption Ruling Flushes Another Eye-Drop Class Action”

Food-Court Follies: Judge Grates Parmesan-Cheese Multidistrict Litigation

parma cheeseThanks to America’s regrettably litigious nature, the “Reasonable Person” is always busy. This prototypically average, ordinary human being is routinely called upon in legal disputes governed by common-law tort principles and asked: What would you think or do in this situation? One strain of litigation—consumer-fraud class actions—has kept the Reasonable Person especially occupied in recent years.

A recent court case asked the Reasonable Person to put on her “reasonable consumer” hat and determine the meaning of the term “100% Grated Parmesan Cheese” as it appears on containers of shelf-stable, processed shaky cheese.

In February 2016, inspired by overblown media stories, 15 lawsuits were filed in 6 different courts against 7 defendants (Kraft Heinz Co., Albertsons Cos., Target Corp., Wal-Mart Stores, ICCO-Cheese Co., and Publix Super Markets) alleging common-law and statutory violations for those companies’ false or misleading use of that statement. Continue reading “Food-Court Follies: Judge Grates Parmesan-Cheese Multidistrict Litigation”

FCA “Qui Tam” Relator Sanctioned for Lawyers’ Scheme to Manufacture Evidence

ethicsBy Bailey McGowan, a 2017 Judge K.K. Legett Fellow at Washington Legal Foundation who will be entering her third year at Texas Tech University School of Law in the fall.

A double agent, an undercover operation, and deceit: No, these aren’t the well-worn plot elements of the latest James Bond movie. They are some of the tactics in a law firm’s scandalous attempt to manufacture the proof needed to survive a motion to dismiss in a False Claims Act (FCA) case, Leysock v. Forest Laboratories. The elaborate scheme exhibits the lengths to which deputized FCA plaintiffs and their lawyers will go to pursue their cut of a qui tam lawsuit’s routinely lucrative recovery. The federal court’s sanction for such behavior—barring the use of information fraudulently obtained in the plaintiff’s opposition motion—was an appropriate and laudable response, one that should embolden inspire other judges overseeing big-money litigation to take similar action against such blatant misconduct. Continue reading “FCA “Qui Tam” Relator Sanctioned for Lawyers’ Scheme to Manufacture Evidence”