Case Briefing

Attorney/Client Privilege Not Extended to 'Affiliate'

The U.S. District Court for the District of New Hampshire refused to suppress evidence contained in an attorney's letter to an affiliate of defendants', as defendants could offer no evidence that the affiliate was part of their corporate entities such that communications to it should be covered by the attorney/client privilege. Moore v. Medeva, 2003 DNH 60, 2003 U.S. Dist. LEXIS 5960, Civ. No. 01-311-M (4/9/03).

After receiving a flu vaccine allegedly manufactured, distributed, and sold by defendant pharmaceutical companies, plaintiff Linda Moore said she contracted a paralytic ailment known as Guillain-Barre Syndrome. The question presently before the court was whether a letter sent by defendants' attorney to another manufacturer and inadvertently given to plaintiff during discovery should be excluded from evidence and ordered returned to defendants.

Defendants claimed that the three-page opinion letter in question was protected by the attorney/client privilege because although the corporate entity to which it was sent, Evans Medical Ltd., was not controlled by any of the defendant corporations, it was one of defendants' “affiliates” that manufactured the influenza vaccine. Plaintiffs, on the other hand, said defendants lacked standing to assert that the document in question was privileged, since it was addressed to another corporate entity.

The court here found that defendants' assertion that Evans was one of its “affiliates” was simply insufficient to carry its burden. The court stated that defendants' “memorandum and supporting documentation is devoid of any evidence describing the nature or depth of that 'affiliation.' ” For instance, defendants had brought no evidence to show that at the time the letter was sent, any of defendants owned a controlling share of Evans.

Inequitable Conduct During Patent Prosecution

The Federal Circuit affirmed the District Court's judgment that a patent for a semi-synthesis of taxol was unenforceable. Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer Inc., 2003 U.S. App. LEXIS 7103, Case Nos. 02-1280 and 02-1281 (Fed. Cir. 4/15/03).

The Federal Circuit held that the District Court had not abused its discretion when it determined that the patent was unenforceable due to inequitable conduct, because the inventors intentionally withheld material information during the patent prosecution.

Discounts Only to Hospitals and HMOs: Issue of Material Fact

Defendant drug manufacturers' motion for summary judgment in a price discrimination lawsuit was denied, as plaintiff drug stores had raised a genuine issue of material fact as to the reasons certain purchasers were favored. Rite Aid Corp. v. American Home Products Corp. N.Y.L.J. Vol. 229, pg. 17, col. 3, 4/24/03.

Plaintiffs are a group of 19 drug store chains and independent pharmacies claiming damages resulting from alleged price discrimination where manufacturers of brand name pharmaceuticals charged retail pharmacies one price while offering discounts to hospitals and HMOs. Defendants Abbot Laboratories, Merck & Co., G.D. Searle & Co., and Zeneca, Inc. (the Manufacturer Defendants) moved for summary judgment in 1995 before Judge Charles P. Kocoras in the Northern District of Illinois (before whom these cases and numerous others had been consolidated for pre-trial management), but their motions were denied in early 1996. In 2000, a motion to renew those motions was denied.

Manufacturer defendants moved here to renew their summary judgment motion, arguing that an Illinois judge denied summary judgment based on his view that four different evidentiary bases existed to support the inference that the manufacturers had conspired (namely, 1) the Manufacturer Defendants' parallel conduct toward plaintiffs, 2) the interdependence among the Manufacturer Defendants, 3) the creation and maintenance of a chargeback system to ensure compliance with the pricing scheme, and 4) the Manufacturers Defendants' opportunity to conspire. See In re Brand Name Prescription Drugs Antitrust Litig., 1996 WL 167350, at *6). Defendants contended, among other things, that newly available evidence severely undermines the existence of any factual dispute. The instant court denied defendants' motion, noting that the previous court found that defendants' purported reason for offering discounts only to hospitals and HMOs — namely, that only those favored purchasers could steer patients to discounted drugs — was sufficiently disputed by plaintiffs' evidence to raise a genuine issue of material fact for trial.

Fraud Suit Reinstated

The U.S. Court of Appeals for the Second Circuit has reinstated a fraud suit brought by health insurance companies over the anti-diabetes drug Rezulin, finding that the plaintiff companies adequately stated a claim that they were the direct victims of fraudulent marketing. Louisiana Health Services Indemnity Co. v. Warner-Lambert Co., No. 01-9318, 2003 U.S. App. LEXIS 7418, (2d Cir., 4/18/03).

Warner-Lambert marketed Rezulin as a treatment for Type II diabetes. Plaintiffs alleged that it failed to adequately warn consumers and physicians of evidence it had that the drug caused liver damage. The drug was eventually pulled from the market. Plaintiffs brought suit for fraudulent marketing.

At the district court level, Judge Lewis A. Kaplan of the Southern District of New York dismissed the case, holding that plaintiffs had failed to show causation between their financial injuries and the marketing of the product. He based his ruling in part on a Second Circuit case, Laborers Local 17 Health and Benefit Fund v. Phillip Morris Inc., 191 F.3d 229 (2d Cir. 1999) in which a cigarette manufacturer was found not liable to an insurer under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.S. ' 1961 et seq., for claims arising from cigarette-smoking injuries to its insureds because, under that statute, a plaintiff cannot state a claim without showing the relatively narrow direct injury requirements applied by federal courts in RICO.

On appeal, the Second Circuit reversed, finding that Laborers Local was not precedential in this case because New Jersey common law was the appropriate authority for determining a threshold showing of proximate cause, as the action arose in that state. Here, plaintiffs had alleged a direct injury to themselves – namely, that they had paid three-times as much for Rezulin as they would have paid for different comparable drugs that they would have chosen had they known of the dangers Rezulin posed — so their claims were not merely derivative.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.

Attorney/Client Privilege Not Extended to 'Affiliate'

The U.S. District Court for the District of New Hampshire refused to suppress evidence contained in an attorney's letter to an affiliate of defendants', as defendants could offer no evidence that the affiliate was part of their corporate entities such that communications to it should be covered by the attorney/client privilege. Moore v. Medeva , 2003 DNH 60, 2003 U.S. Dist. LEXIS 5960, Civ. No. 01-311-M (4/9/03).

After receiving a flu vaccine allegedly manufactured, distributed, and sold by defendant pharmaceutical companies, plaintiff Linda Moore said she contracted a paralytic ailment known as Guillain-Barre Syndrome. The question presently before the court was whether a letter sent by defendants' attorney to another manufacturer and inadvertently given to plaintiff during discovery should be excluded from evidence and ordered returned to defendants.

Defendants claimed that the three-page opinion letter in question was protected by the attorney/client privilege because although the corporate entity to which it was sent, Evans Medical Ltd., was not controlled by any of the defendant corporations, it was one of defendants' “affiliates” that manufactured the influenza vaccine. Plaintiffs, on the other hand, said defendants lacked standing to assert that the document in question was privileged, since it was addressed to another corporate entity.

The court here found that defendants' assertion that Evans was one of its “affiliates” was simply insufficient to carry its burden. The court stated that defendants' “memorandum and supporting documentation is devoid of any evidence describing the nature or depth of that 'affiliation.' ” For instance, defendants had brought no evidence to show that at the time the letter was sent, any of defendants owned a controlling share of Evans.

Inequitable Conduct During Patent Prosecution

The Federal Circuit affirmed the District Court's judgment that a patent for a semi-synthesis of taxol was unenforceable. Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer Inc., 2003 U.S. App. LEXIS 7103, Case Nos. 02-1280 and 02-1281 (Fed. Cir. 4/15/03).

The Federal Circuit held that the District Court had not abused its discretion when it determined that the patent was unenforceable due to inequitable conduct, because the inventors intentionally withheld material information during the patent prosecution.

Discounts Only to Hospitals and HMOs: Issue of Material Fact

Defendant drug manufacturers' motion for summary judgment in a price discrimination lawsuit was denied, as plaintiff drug stores had raised a genuine issue of material fact as to the reasons certain purchasers were favored. Rite Aid Corp. v. American Home Products Corp. N.Y.L.J. Vol. 229, pg. 17, col. 3, 4/24/03.

Plaintiffs are a group of 19 drug store chains and independent pharmacies claiming damages resulting from alleged price discrimination where manufacturers of brand name pharmaceuticals charged retail pharmacies one price while offering discounts to hospitals and HMOs. Defendants Abbot Laboratories, Merck & Co., G.D. Searle & Co., and Zeneca, Inc. (the Manufacturer Defendants) moved for summary judgment in 1995 before Judge Charles P. Kocoras in the Northern District of Illinois (before whom these cases and numerous others had been consolidated for pre-trial management), but their motions were denied in early 1996. In 2000, a motion to renew those motions was denied.

Manufacturer defendants moved here to renew their summary judgment motion, arguing that an Illinois judge denied summary judgment based on his view that four different evidentiary bases existed to support the inference that the manufacturers had conspired (namely, 1) the Manufacturer Defendants' parallel conduct toward plaintiffs, 2) the interdependence among the Manufacturer Defendants, 3) the creation and maintenance of a chargeback system to ensure compliance with the pricing scheme, and 4) the Manufacturers Defendants' opportunity to conspire. See In re Brand Name Prescription Drugs Antitrust Litig., 1996 WL 167350, at *6). Defendants contended, among other things, that newly available evidence severely undermines the existence of any factual dispute. The instant court denied defendants' motion, noting that the previous court found that defendants' purported reason for offering discounts only to hospitals and HMOs — namely, that only those favored purchasers could steer patients to discounted drugs — was sufficiently disputed by plaintiffs' evidence to raise a genuine issue of material fact for trial.

Fraud Suit Reinstated

The U.S. Court of Appeals for the Second Circuit has reinstated a fraud suit brought by health insurance companies over the anti-diabetes drug Rezulin, finding that the plaintiff companies adequately stated a claim that they were the direct victims of fraudulent marketing. Louisiana Health Services Indemnity Co. v. Warner-Lambert Co., No. 01-9318, 2003 U.S. App. LEXIS 7418, (2d Cir., 4/18/03).

Warner-Lambert marketed Rezulin as a treatment for Type II diabetes. Plaintiffs alleged that it failed to adequately warn consumers and physicians of evidence it had that the drug caused liver damage. The drug was eventually pulled from the market. Plaintiffs brought suit for fraudulent marketing.

At the district court level, Judge Lewis A. Kaplan of the Southern District of New York dismissed the case, holding that plaintiffs had failed to show causation between their financial injuries and the marketing of the product. He based his ruling in part on a Second Circuit case, Laborers Local 17 Health and Benefit Fund v. Phillip Morris Inc. , 191 F.3d 229 (2d Cir. 1999) in which a cigarette manufacturer was found not liable to an insurer under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.S. ' 1 961 et seq. , for claims arising from cigarette-smoking injuries to its insureds because, under that statute, a plaintiff cannot state a claim without showing the relatively narrow direct injury requirements applied by federal courts in RICO.

On appeal, the Second Circuit reversed, finding that Laborers Local was not precedential in this case because New Jersey common law was the appropriate authority for determining a threshold showing of proximate cause, as the action arose in that state. Here, plaintiffs had alleged a direct injury to themselves – namely, that they had paid three-times as much for Rezulin as they would have paid for different comparable drugs that they would have chosen had they known of the dangers Rezulin posed — so their claims were not merely derivative.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.