What You Need To Know About The Rise Of Civil Litigation By State Attorneys General This brown bag is brought to you by the Healthcare Liability and Litigation (HC Liability) Practice Group April 18, 2011 12:00-1:00 pm Eastern Speaker Steven F. Barley Hogan Lovells US LLP Baltimore, MD Moderator Jay A. Martus Sheridan Healthcare INC Sunrise, FL
The States are coming, the States are coming! What you should know about the rise of civil litigation by state attorneys general www.hoganlovells.com 2
Overview This webinar will address 3 questions relating to the increase in AG civil litigation activity: 1. What is behind the rise in AGs pursuing consumer protection claims against the healthcare industry? 2. How does this litigation differ from traditional civil litigation? 3. What should you do about it? www.hoganlovells.com 3
What is behind the increase in this litigation? 1. The price is right 2. The hurdles are low 3. The potential recoveries are high 4. Political motivations 5. A desire to regulate conduct www.hoganlovells.com 4
What is behind the increase in this litigation? 1. The price is right: The cost of bringing cases can be relatively minimal. AGs can reduce costs by: Use of outside counsel retained on contingency Use of existing resources within the AG s office Combining resources: NAAG NAMFCU Federal government www.hoganlovells.com 5
What is behind the increase in this litigation? 2. The hurdles are low Potentially low liability thresholds. Liability can be triggered for conduct that is: unfair false deceptive unconscionable AG may not need to show causation or reliance AG may not need to show damage www.hoganlovells.com 6
What is behind the increase in this litigation? 3. The potential recoveries are high Cash-strapped states, particularly Medicaid programs, are increasingly focused on revenue sources Consumer protection/deceptive trade practice statutes can provide for outsized awards Penalties, fines and/or forfeitures may be available and typically are awarded on a per violation basis Examples of damages increased substantially by fines, penalties, or forfeitures: GSK: (Kentucky pharmaceutical pricing litigation): damages = $661,000/penalties = $5,828,5000. Pharmacia: (Wisconsin pharmaceutical pricing litigation): damages = $9 million/forfeitures, etc. = $13+ million. J&J: Risperdal marketing actions. www.hoganlovells.com 7
What is behind the increase in this litigation? 4. Political motivations AG = Aspiring Governor Potentially strong upsides to pursuing litigation: AG seen as consumer friendly Positive media coverage Seen as confronting abusive corporate conduct Seen as watchdog over state expenditures/protection of taxpayer money Little downside to pursuing litigation: Minimal potential risk or cost Anti-business tag Potential loss of litigation www.hoganlovells.com 8
What is behind the increase in this litigation? 5. A desire to regulate conduct Can seek to fill voids left by federal agencies Can move aggressively and quickly, unrestrained by regulatory process and requirements The threat of a lawsuit can be used to pressure changes in conduct Settlements may incorporate provisions impacting conduct Some pharmaceutical settlements have required certain types of price reporting in addition to statutory or regulatory requirements Recent AstraZeneca consent decree in Texas AG settlement: AstraZeneca s systems and controls shall: 1) be designed to ensure that financial incentives do not motivate AstraZeneca Marketing and/or Sales personnel to engage in improper promotion, sales and marketing of Seroquel; and 2) include mechanisms to exclude from incentive compensation sales that may indicate Off-Label promotion of Seroquel www.hoganlovells.com 9
How does civil litigation with AGs differ from traditional civil litigation? 1. Consumer protection statutes are broad 2. Liability thresholds can be low 3. The relief can be wide-ranging 4. The AG often picks the venue 5. Some otherwise good defenses may not be available 6. Burdens can be one-sided 7. The state may not be treated the same as a private litigant www.hoganlovells.com 10
How does civil litigation with AGs differ from traditional civil litigation? 1. Consumer protection statutes are broad Broad statutory language Generalized prohibitions on conduct that is unfair, unconscionable, or deceptive per se violations for specific types of conduct Loose standing requirements Direct/Indirect standing A consumer is not always a consumer AG Standing Statutory enforcement power Parens Patriae www.hoganlovells.com 11
How does civil litigation with AGs differ from traditional civil litigation? 2. Liability thresholds can be low Statutes may have lower thresholds for imposing liability as compared to fraud or even negligence Example: Recent BMS Pennsylvania AG action: Jury found for BMS on fraud, civil conspiracy and negligent misrepresentations claims Judge nevertheless imposed liability under the State Unfair Trade Practices and Consumer Protection Statute, finding that BMS engaged in unfair or deceptive practices May not need to demonstrate causation or reliance Some statutes do not require them at all Other statutes it is a factor to be considered, but may be disregarded in an action brought in the public interest Causation or reliance may not be required for injunctive relief because the injunction is aimed at stopping the defendant s conduct May not need to demonstrate damage To obtain Injunctive Relief To recover Penalties and Fines based on violations, even if no damage caused by conduct www.hoganlovells.com 12
How does civil litigation with AGs differ from traditional civil litigation? 3. The relief can be wide-ranging Non-traditional, statutory damages available Penalties, fines, forfeitures, restitution, attorneys fees and costs Doubling/trebling of damages awards May provide enhanced awards for activity directed at certain groups, such as the elderly Per violation fines and penalties Injunctive Relief Can interfere with ongoing business practices and strategies Can be imposed by court that is ill-equipped or ill-informed Can permit aggregated relief without regard to class action considerations www.hoganlovells.com 13
How does civil litigation with AGs differ from traditional civil litigation? 4. The AG often picks the venue Careful drafting of complaint by AG may defeat removal to federal court Cases frequently filed in plaintiff-friendly state venues with: Friendly juries Friendly judges www.hoganlovells.com 14
How does civil litigation with AGs differ from traditional civil litigation? 5. Some otherwise good defenses may not be available A statute of limitations defense is rarely available. This can impose significant litigation burdens in cases involving older conduct: Stale knowledge Former employees Document/ESI complications Causation may not be required Lack of need to demonstrate damage to obtain injunctive relief or fines May permit the aggregation of claims without class action procedural safeguards Pointing to the government s own knowledge or conduct may not matter: The Court acknowledges the jury verdicts finding neither negligent misrepresentation nor fraudulent misrepresentation. The Court concludes, however, that the standard to be applied in a UTPCPL enforcement action is different. Pursuant to this conclusion, the Court determines that a plaintiff s knowledge of the inaccuracy of a representation and a plaintiff s lack of reliance, while factors to be considered, are not necessarily complete defenses in an enforcement action brought in the public interest under... the UTPCPL. BMS Pennsylvania Opinion (citations omitted). www.hoganlovells.com 15
How does civil litigation with AGs differ from traditional civil litigation? 6. The burdens can be one-sided Discovery burdens are often one-sided State s sharing of resources State s outsourcing of risk and cost to plaintiffs contingency fee counsel www.hoganlovells.com 16
How does civil litigation with AGs differ from traditional civil litigation? 7. The state may not be treated the same as a private litigant The AG may lament a lack of resources and get away with it The AG may use the court of public opinion via an often receptive media Judges tend to be more lenient on the state www.hoganlovells.com 17
What should You do? 1. Recognize the risks 2. Pay attention to the political landscape 3. Be proactive 4. Assemble a multi-disciplinary team www.hoganlovells.com 18
What should You do? 1. Recognize risks early AG activity often follows other events: Federal litigation/settlements/publicly commenced investigations Product recalls High-profile matters of media interest Private plaintiff class actions Pay particular attention to issues impacting: A significant number of consumers State or federal expenditures (e.g. Medicaid) www.hoganlovells.com 19
What should You do? 2. Pay attention to the political landscape Use the Media, if appropriate, to fight back Use back door resources Investigate whether there are divisions within the State over the case that can be exploited (i.e., AG vs. Governor, Agency v. AG, etc.) Get involved in legislative process www.hoganlovells.com 20
What should You do? 3. Be proactive Meet with the AG, if advisable, to: To better understand the asserted basis for the case To ascertain the AG s goals To educate the AG about your side of the case Conduct an objective early case evaluation Understand and investigate the conduct Understand the unique aspects of the state CPA statute that are good or bad for you Retain experts early to assess exposure Determine if outside counsel s retention is proper In appropriate cases, consider early non-traditional methods of gathering information Open records requests State archive reviews Develop your defense themes early Form joint defense groups to pool resources and information www.hoganlovells.com 21
What should You do? 4. Assemble multi-disciplinary teams Involve knowledgeable regulatory counsel to provide: Assistance with merits Assistance with resolution, especially if involves a CIA Consult experienced civil and white collar counsel Engage well-connected local counsel Retain knowledgeable experts www.hoganlovells.com 22
QUESTIONS www.hoganlovells.com 23
Steven F. Barley, Partner Baltimore A Fellow of the American College of Trial Lawyers, Steve Barley is an experienced courtroom lawyer who represents diverse clients in a range of complex civil matters, with an emphasis on complex commercial litigation. He has significant experience in consumer litigation, securities litigation, class action litigation, and litigation involving claims of breach of fiduciary duty and fraud. Steve has extensive bench and jury trial experience in courts and before arbitration panels and has obtained many favorable jury verdicts and arbitration awards for his clients. His cases have been highlighted in several publications, including a case that was cited as a "Defense Verdict of the Year" by the National Law Journal. Steven F. Barley [TEAM ROLE] Partner, Baltimore T +1 410 659 2724 steve.barley@hoganlovells.com Complex Commercial Litigation Consumer Protection Defense Class Action Litigation Securities Litigation Chambers USA, America s Leading Lawyers for Business 2008, describes Steve as "precise, smart, and well-liked by judges." According to Benchmark, America's Leading Litigation Firms and Attorneys 2008, peers characterize Steve as "an all purpose trial lawyer who can try anything imaginable." www.hoganlovells.com 24
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