Northwest Business Litigation

Vioxx maker answers with defense verdict: Score--Merck 10, Plaintiffs 5

Just weeks after Merck was hit with a multi-million dollar verdict in another Vioxx case in New Jersey, a jury this week in the otherwise plaintiff-friendly Madison County, Illinois court handed the plaintiff a defense verdict after deliberating less than 6 hours.  Plaintiff Frank Schwaller sued the maker of the Cox-2 Inhibitor for the death of his wife.  After taking Vioxx for about a year and a half, in 2003, Patricia Schwaller died of a heart attack.  The jury may have been persuaded that Ms. Schwaller's heart attack was not caused by her prescription medication as she also suffered from high cholesterol, high blood pressure and obesity.  Merck continues to fight the Vioxx cases one-by-one.  As jury trials go in these kinds of high profile pharmaceutical cases, the company is doing pretty well.  The score now?  Merck 10, Plaintiffs 5.

Pro-defendant securities fraud statute gets Supreme Court scrutiny

The U.S. Supreme Court on Wednesday takes on a 1995 federal statute that makes it harder for plaintiffs to pursue securities fraud lawsuits.  The Private Securities Litigation Reform Act requires plaintiffs in such cases to state facts sufficient to support a "strong inference" that  defendants acted with a culpable state of mind.  Plaintiffs who can't meet that high standard at the outset are left without a remedy.  In Telllabs, Inc. v. Makor Issues and Rights, Ltd., the issue is whether the Seventh Circuit Court of Appeals properly applied that pleading requirement.

See further coverage of the case here, here, here, and here.

Securities regulation and antitrust law slug it out before the U.S. Supreme Court

On Tuesday the U.S. Supreme Court will hear this week's second high-profile business law case.  In Credit Suisse First Boston Ltd. v. Billing, the issue is whether the highly-regulated securities industry is exempt from antitrust liability.  Plaintiffs allege that, in the 1990s, investment banks and institutional investors manipulated the aftermarket prices of a large number of IPOs in violation of antitrust law.  The court will decide whether antitrust principles must bow out, given the extensive regulation of the securities market by the SEC.

See detailed coverage of the case here, here, and here.

U.S. Supreme Court re-thinks the rule on setting resale prices

This week the U.S. Supreme Court will hear oral arguments in a group of significant business law cases.  First up on Monday will be a case that could, for the first time in nearly 100 years, allow manufacturers to dictate the prices at which distributors and retailers re-sell their products.  Since the 1911 case of Dr. Miles Medical Co. v. John D. Park & Sons Co., resale price maintenance has been illegal under the antitrust laws.  While manufacturers have been allowed to "suggest" retail prices (hence the common term "manufacturer's suggested retail price," or MSRP), toeing the line between suggesting a price and setting a price has been a struggle for manufacturers.

The case the court will hear on Monday is Leegin Creative Leather Products, Inc. v. PSKS, Inc.   A number of parties have weighed in with briefs to the court, some pointing out that economists have long criticized the rule of the Dr. Miles case, and others contending that the rule has been beneficial in allowing discounters to thrive.

For other law blog coverage of the case, see here and here.

Ignore USDC Local Rules at your peril

   Last week the Ninth Circuit affirmed a million-dollar default judgment against three parties who failed to adhere to some basic local court rules.  In Employee Painters' Trust v. Ethan Enterprises, Inc., filed in the Western District of Washington, two pro se defendants failed to update their mailing addresses with the court in violation of a local rule.  When plaintiffs could not serve those defendants at the addresses on file with the court, the District Court properly entered default.  (The District of Oregon Local Rule 83.12 similarly states that if mail is undeliverable at a last known address, and a party or attorney fails to provide an updated address, the court may enter default or dismiss the action.)

And the third defendant, a corporation, failed to retain replacement counsel when its attorney withdrew, in violation of another local rule.  It, too, was subject to a default judgment as a result.

Contraception as an Employee Benefit

ERISA does not mandate that any health care plan provide any level of benefits. Instead, ERISA leaves benefit decisions to the plan sponsor. Does that mean an ERISA plan sponsor can adopt a health plan that provides benefits in a way that arguably discriminates against women? A recent case from the 8th Circuit (covering Arkansas north to the Dakotas) discusses whether an ERISA health plan violates the Pregnancy Discrimination Act (PDA) by excluding coverage for contraception.

In Union Pacific Railroad Employment Practices Litigation, Union Pacific’s plan excluded from coverage “both male and female contraceptive methods, prescription and non-prescription, when used for the sole purpose of contraception." A class of 1500 female plan participants sued, claiming the exclusion violated the PDA. The District Court agreed, finding that the plan violated Title VII, the foundation of federal anti-job discrimination laws, as amended by the PDA. The court reasoned that the plan “treats medical care women need to prevent pregnancy less favorably than it treats medical care needed to prevent other medical conditions that are no greater threat to employees’ health than is pregnancy.” Although no Courts of Appeal had directly addressed this issue, a 2001 decision from a federal court in Washington required a health plan to provide prescription contraceptives to female participants or beneficiaries.

The 8th Circuit reversed the District Court in a 2-1 decision, finding that “contraception” is not “related to” pregnancy for PDA purposes because the two are mutually exclusive: “contraception is not a medical treatment that occurs when or if a woman becomes pregnant; instead, contraception prevents pregnancy from even occurring.”

The dissent argued otherwise:

When one looks at the medical effect of Union Pacific’s failure to provide insurance coverage for prescription contraception, the inequality of coverage is clear. This failure only medically affects females, as they bear all of the health consequences of unplanned pregnancies. An insurance policy providing comprehensive coverage for preventative medical care, including coverage for preventative prescription drugs used exclusively by males, but fails to cover prescription contraception used exclusively by females, can hardly be called equal. It just isn't so.

Expect more decisions on the collision of federal anti-discrimination statutes and ERISA plan benefits in the future. Although an ERISA plan is not subject to state-mandated benefits, it is subject to other federal laws. That provides an opportunity for plaintiff’s attorneys to argue for an expansion of benefits beyond what the plan sponsor intended to offer.

Ninth Circuit tightens crime-fraud exception

The attorney-client privilege is not as iron-clad as some clients would like to believe.  Communications between a lawyer and client can be subject to discovery and used as evidence under the "crime-fraud exception," which eliminates the privilege for communications made in furtherance of a client's criminal or fraudulent scheme.

The on-going Napster copyright litigation has now spawned a Ninth Circuit opinion that makes it a bit more difficult to destroy the privilege via the crime-fraud exception.  Yesterday in In re Napster, Inc. Copyright Litigation, the court observed that the procedures for applying the crime-fraud exception in the federal courts are "surprisingly unclear."  The court sought to bring clarity the process, holding that (1) both the party seeking discovery of the communications and the party seeking to preserve the privilege must be allowed to present relevant evidence to the trial court, and (2) the burden of proof on the party seeking discovery is preponderance of the evidence.  Formerly, courts had held that the party seeking to enforce the privilege had no right to present evidence on the subject, and that the burden on the moving party was a hard-to-define "prima facie" test.

The copyright plaintiffs had claimed that Bertelsmann AG had made a "sham" loan to Napster, and sought to obtain attorney-client communications relating to that loan under the crime-fraud exception.  The Ninth Circuit held that plaintiffs failed to prove that the exception applied to what was apparently a routine business transaction.

See other law blog discussion of the case here and here.

Vioxx plaintiff hits homerun; Score: Merck 9, Plaintiffs 5

In a setback for Merck, the maker of Vioxx, a New Jersey jury today awarded plaintiff $20 million in compensatory and $27 million in punitive damages to a 61-year-old mail carrier who suffered a heart attack allegedly caused by his prescription Vioxx.  The pharmaceutical company has won nine of the fourteen Vioxx cases it has tried.  For more on the case, see here.

Proposed legislation would add a judgeship to relieve Ninth Circuit caseload

The Senate Judiciary Committee has approved legislation that would add one judgeship to the Ninth Circuit Court of Appeals, helping to relieve that court's extraordinarily high per-judge caseload.  The proposal would transfer a judgeship from the District of Columbia Circuit to the Ninth Circuit, reducing the number of DC Circuit judges to 11 while increasing the number of active Ninth Circuit judges to 29.  Last year the Ninth Circuit saw 523 appeals filed per judge, while in the DC Circuit there were 107 appeals filed per judge.

The legislation now goes to the full Senate for a vote.  See coverage of the proposal, and press releases by sponsoring Sens. Dianne Feinstein and Jon Kyl.

See the Oregon Business Litigation blog's coverage of earlier proposals to split the Ninth Circuit here and here.

Patent trolls (and others) get the Supreme Court's goat

By James G. Stewart and Rick Boyd

Last May, an arguably ancillary statement in the Supreme Court’s Ebay v. MercExchange ruling provided ample fodder for patent bloggers, and a warning to 'patent trolls.'  As its central holding, the Court simply clarified the discretionary powers of trial courts to issue permanent injunctions for patent infringement on a case-by-case basis.  In short, the Court concluded there is no presumptive eligibility for a permanent injunction against a patent infringer. 

However, what really caught bloggers’ attention may have been dicta in a plurality concurrence.  Wrote Justice Kennedy, “When the patented invention is but a small component of the product the [defendant] companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement”.  Some observers read a ‘working requirement’ into this statement -- i.e., that to receive the full range of patent remedies, plaintiff must actively use the patent it seeks to enforce.  This inference is consistent with growing concerns that the public is not getting the full benefit of the burden of patents on the advancement of the arts and sciences, especially in the protection of so-called business methods.

Broadly speaking, this statement might be a warning shot across the bow for opportunistic patent enforcers, disparagingly referred to as 'patent trolls.'  Such companies typically do not practice ('work') their patented inventions.  Rather, their business models focus on securing licensing revenue from infringing companies, often by or under the threat of (previously) presumptively automatic injunctions.  Under a 'working requirement,' non-patent-practicing companies would lose substantial leverage for negotiating patent licenses.

The Court’s majority opinion should assuage these concerns to some extent, suggesting that a universally applied 'working requirement' would injure "university researchers or self-made inventors."  However, it remains to be seen whether lower Courts, using their equitable powers, may selectively fold a 'working requirement' into permanent injunction analysis based on the characteristics of the litigants.