Thursday, December 20, 2012

Kentucky AG Can't Dodge Merck's Due Process Suit over Vioxx Contingency Counsel

Kentucky Attorney General Jack Conway can't seem to shake Merck's constitutional challenge to his use of contingency fee lawyers in litigation over Vioxx. U.S. District Judge Danny Reeves in Frankfort, Ky., first rejected the AG's bid to dismiss the case back in March, sustaining Merck's claims that the use of contingency fee attorneys violates its due process right to an impartial tribunal under the Fourteenth Amendment. On Wednesday, Judge Reeves refused to toss the case yet again, handing another early-round victory to the company and its counsel at Skadden, Arps, Slate, Meagher & Flom and Frost Brown Todd. 

The story of Merck's transition from defense to offense in this little slice of the massive Vioxx docket is a little bit complicated, but the procedural details were key to Wednesday's ruling. Conway filed suit against Merck in state court in September 2009, alleging that the company violated the Kentucky Consumer Protection Act by marketing and distributing Vioxx, the popular pain drug that was pulled from shelves in 2004 over risks of heart damage. Merck removed the case to federal court in October 2009, and it was transferred to the Vioxx multidistrict litigation in Louisiana in April 2010. In January of this year, the judge overseeing the MDL ruled that the case was improperly removed and granted the Kentucky AG's motion to remand it back to state court. Merck sought to appeal that decision, but the U.S. Court of Appeals for the Fifth Circuit denied the company's motion in February, and the case finally landed back in state court in Kentucky on March 20.

The AG's contingency fee counsel at Garmer & Prather and Hare, Wynn, Newell & Newton came into the case midstream. In September 2010, with the case pending on the MDL docket, Conway retained outside counsel to assist with the Vioxx litigation. Merck responded by suing the AG in federal court in August 2011, claiming the AG's contingency arrangement allowed the plaintiffs lawyers to pursue a "quasi-criminal enforcement proceeding" in violation of its due process rights. Merck sought a preliminary injunction barring the private lawyers from handling the case. But in March--just one day after the MDL had remanded the underlying dispute to state court--Judge Reeves ruled that the company "failed to establish a likelihood that the contingency fee counsel have actually assumed control over the Vioxx litigation" and denied the company's motion. Two days later, Reeves nevertheless denied the AG's motion to dismiss the case, finding that Merck had stated a plausible claim that its due process rights had been violated.

In light of the MDL's remand of the underlying case, the attorney general filed a renewed motion to dismissin April, arguing that the court should abstain from adjudicating the case. The motion cited the U.S. Supreme Court's decision in Younger v. Harris, which bars federal courts from interfering with ongoing state judicial proceedings. Merck's lawyers at Skadden, led by John Beisner, countered that the federal case posed no threat to the state court proceeding, that the Kentucky state court didn't provide an adequate opportunity for the company to raise its due-process claims, and that Younger doesn't permit abstention where cases have progressed significantly prior to remand. 

Reeves concluded in Wednesday's ruling that the federal case involves an important state interest, and that Merck failed to show that the state court lacks a procedure for raising its due process claims. Still, he ultimately sided with Merck and denied the AG's motion to dismiss. The judge pointed to the progress in the federal case while the state was dormant at the MDL. "Because the state proceeding in Merck I was not 'ongoing,' abstention is not appropriate under the principles of Younger," he wrote. 

 In a statement, a spokesperson for the AG said the state disagrees with the ruling "and will continue to defend the position of the Office of the Kentucky Attorney General as this case continues."

We reached out Skadden's Beisner for comment, but a firm spokesperson said he was tied up in court on Thursday.

Posted by Ross Todd at 02:00 PM.

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Friday, December 14, 2012

Merck Shareholders Can See Documents Company Gave to Government

Merck & Co. Inc. has already paid nearly $1 billion to the federal government to resolve claims that it misbranded its painkiller Vioxx. To make matters worse, the drug giant has now lost a bid to keep Merck's shareholders from seeing potentially damaging documents that the company turned over to the U.S. Department of Justice.

In a 7-page decision issued on Wednesday, U.S. District Judge Stanley Chesler ordered Merck to produce the documents in multidistrict securities litigation involving Vioxx. He ruled that Merck waived the attorney-client privilege for the documents by turning them over to the Justice Department, even though the department signed an agreement promising to keep the documents confidential.

Merck pulled Vioxx, one of its bestsellers, from the market in 2004 after a clinical trial showed that the drug caused heart attacks. Even before the recall, concerns over Vioxx's safety started to depress Merck's stock price. A slew of shareholder class actions followed and were consolidated before Chesler in 2005. Firms representing the plaintiffs include Bernstein Litowitz Berger & Grossman; Brower Piven; and Carella Byrne Cecchi Olstein Brody & Agnello.

Chesler dismissed the shareholders' action in 2007, ruling that they waited too long to bring suit. According to the judge, the investors knew way back in 2001 that Merck was understating Vioxx's risk. That year, a study came out that raised red flags about Vioxx and that prompted the Food and Drug Administration to send a warning letter to Merck. Chesler's dismissal of the shareholders' suit was appealed all the way up to the U.S. Supreme Court, which ruled in 2009 that the case could go forward. The plaintiffs survived a motion to dismiss in August 2011.

In November 2011, Merck pled guilty to criminal charges brought by the Justice Department and agreed to pay a $321 million criminal fine. It also agreed to pay $628 million to resolve the Justice Department's additional civil allegations. (In 2007, after years of bellwether trials, Merck also paid $4.85 billion to resolve more than 27,000 personal injury claims over Vioxx.)

As part of its 2011 deal with the Justice Department, Merck agreed to turn over communications that were protected by attorney-client privilege. A 1989 decision by the U.S. Court of Appeals for the Third Circuit held that when a company turns over documents to government investigators, attorney-client privilege is waived for the documents in all future follow-up civil litigation. In an effort to get around that ruling, Merck and its lawyers insisted that Justice officials sign a confidentiality and non-waiver agreement. As lawyers from LeClair Ryan (which isn't involved in the Vioxx securities MDL) pointed out in this this blog post, courts have split over whether to enforce such non-waiver agreements, which are known as "selective waivers."

U.S. Magistrate Judge Cathy Waldor left no doubt over her position, ruling in October that "documents produced to the [Justice Department] pursuant to a confidentiality and non-waiver agreement must be turned over to plaintiffs." Sibling publication New Jersey Law Journal reported on Waldor's ruling in this story.

In his Wednesday ruling, Chesler adopted Waldor's recommendation. "[A]pplying selective waiver in the context of voluntary disclosure to government agencies would amount to an unjustified expansion of the attorney-client privilege," he wrote, adding, "Judge Waldor correctly applied Third Circuit precedent in concluding that Merck must produce the documents."

James Cecchi of Carella Byrne, who serves as liaison counsel for the shareholder plaintiffs in the MDL, did not immediately return a call seeking comment. We also didn't immediately hear back from Cravath partner Robert Baron, who represents Merck.

Posted by Jan Wolfe at 02:00 PM.

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Friday, November 16, 2012

Alito Defends 'Citizens' in Speech to Federalist Society

Justice Samuel Alito defended the 2010 decision in Citizens United v. Federal Election Commission on Thursday night, jabbing at critics of the U.S. Supreme Court's majority opinion but also admitting the success of their public relations campaign.

Alito said arguments can be made for overturning Citizens United, but not the popular one that boils down to one line: Corporations shouldn't get free speech rights like a person.

“It is pithy, it fits on a bumper sticker, and in fact a variety of bumper stickers are available,” Alito told a crowd of about 1,400 at The Federalist Society’s annual dinner. He cited two: “End Corporate Personhood,” and “Life does not begin at incorporation.”

Then Alito pointed out the same people do not question the First Amendment rights of media corporations in cases like The New York Times Co. v. Sullivan, the Pentagon papers case. If corporations did not have free speech rights, newspapers would lose such cases, he said.

Alito added that nobody questioned whether First Amendment rights extended to the corporation that broadcast the awards speech during which Nicole Richie swore on air, an episode immortalized in Fox v. Federal Communications Commission.

Alito censored himself when repeating Richie’s quote to the conservative crowd: “Have you ever tried to get cow bleep out of a Prada purse, it’s not so bleeping simple.”

Alito said the real issue is whether free speech rights “should be limited to certain preferred corporations, namely those media organizations.” And with the proliferation of the Internet and social media, the line is getting more blurry between individuals and media, he said.

The crowd heard a few zingers from Alito about how he learned constitutional law. Alito said Yale assigned him to the class of Charles Reich, a professor who had written several popular books about the decline of society. Reich thought “redemption could be found in the college hippie,” Alito said.

Reich started asking each student why they wanted to become a lawyer, and then engaged them in an extended debate. “This went on for weeks,” Alito said. The point he was trying to get across was that “there are no livable lives to be lived in the law.”

Reich also spent class time telling the students about a law firm at which one partner died during a tirade against an associate and another committed suicide by jumping down the elevator shaft.

One day, someone brought wine into class. “He began to chant, ‘Who put the acid in the wine, who put the acid in the wine,’ and that was the end of the class for the day,” Alito said. Soon, there was a note on the class door: “I have found it necessary to go to San Francisco, the rest of the classes are cancelled.”

“That was the end of my instruction in constitutional law,” Alito said, to applause from the audience. “I was forced to teach myself.”

Alito quipped that there were several books about constitutional law to buy and read, “but a beginner might start out by actually reading the text of the constitution.”

“It is hard not to notice that Congress’ powers are limited,” Alito said. “And you will see there is an amendment that comes right after the First Amendment, and there’s another that comes after the Ninth Amendment. Those are just a couple of examples.” 

Posted by Todd Ruger at 11:56 AM.

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Thursday, October 4, 2012

Top Law Firm Websites Down for Several Hours

More than three dozen websites from top law firms were down Thursday morning, apparently for at least several hours.

Gone from the home pages of Akin Gump Strauss Hauer & Feld, Covington & Burling, Baker & McKenzie and other firms were links for attorneys and offices, among other firm details. Instead, there were links that included: "In Pain? Get Relief Now" and "Find Injury Attorneys."

The websites are hosted by One North Interactive LLC, which provides technology services to law firms. The Chicago-based company said in a message to Akin that "a hosting incident" happened at 7:35 a.m. Eastern.

"This incident was caused by an issue with a critical DNS record. The issue with the DNS record has been resolved," One North Interactive said. "However, changes to DNS take time to propagate through the full DNS tree. We will continue to monitor the issue and provide updates as we have them.”

Benjamin Harris, an Akin spokesman, said his firm's website wasn't attacked by hackers, noting that the back end of the website is functioning correctly.

Jen Bullett, a One North Interactive spokeswoman, wrote in an email that none of the websites were hacked and security wasn't breached. The company said in a client alert that the incident was the result of an "oversight in renewing a critical domain name" in its transition to an independent business. One North Interactive in August announced its formation and its acquisition of Hubbard One web group from Thomson Reuters. The deal was finalized on Monday.

"One North’s commitment to clients and the market is complete transparency, which must also include errors and mistakes on our end," Bullett wrote. "We acknowledge that this outage puts our clients in a very challenging spot and are working collectively as we speak to address all issues."

Other downed websites included the main pages of Patton Boggs; Wilmer Cutler Pickering Hale and Dorr; Hogan Lovells; McDermott Will & Emery; White & Case; Mayer Brown; Sutherland Asbill & Brennan; DLA Piper; Holland & Knight; Baker Botts; Foley & Lardner; Troutman Sanders; Cleary Gottlieb Steen & Hamilton; Jones Day; Weil, Gotshal & Manges; Reed Smith; Sullivan & Cromwell; Morrison & Foerster; Davis Polk & Wardwell; Ropes & Gray; Shearman & Sterling; Proskauer Rose; Dechert; Debevoise & Plimpton; Cravath, Swaine & Moore; Bryan Cave; Katten Muchin Rosenman; Fish & Richardson; Schulte Roth & Zabel; Finnegan, Henderson, Farabow, Garrett & Dunner; Dorsey & Whitney; Hughes Hubbard & Reed; Kramer Levin Naftalis & Frankel; Chadbourne & Parke; and Sutherland Asbill & Brennan.

As of 2:47 p.m., the websites of the law firms listed appeared to be operating properly.

Posted by Jenna Greene and Matthew Huisman at 03:11 PM.

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Tuesday, July 31, 2012

Failed Court Nominees Land Public Sector Jobs

Both of Gov. Chris Christie’s recently rejected nominees to the state Supreme Court — Bruce Harris and Phillip Kwon — have been hired to fill two public sector jobs.

The New Jersey Turnpike Authority on Tuesday hired Harris as its new general counsel. The move comes after last week’s decision by the Port Authority of New York and New Jersey to hire Kwon, the former first assistant attorney general, to be its deputy general counsel.

Harris is being paid $165,000 a year and Kwon’s post pays a salary of $215,000.

Had they been appointed to the Supreme Court, they would have been paid $185,482 a year.

The Senate Judiciary Committee declined to confirm the nominations, Harris on May 31 and Kwon on March 22, in 7-6 votes.

Democrats, who make up the majority, cited Harris' lack of legal experience and the fact that he had not made partner at either firm where he worked, Greenberg Traurig in Florham Part and before that Riker, Danzig, Scherer, Hyland & Perretti in Morristown.

As for Kwon, they were concerned about his mother's liquor-store business having paid $160,000 to settle federal government claims of improper cash deposits.

Christie has said the two were spurned for political reasons and that Democrats are still angry over his decision to not nominate Justice John Wallace Jr., a Democrat, for tenure.

Harris, the Republican mayor of Chatham, would have become the court's first openly gay justice. Kwon, an independent formerly registered as a Republican in New York State, would have become the court’s first Asian-American justice.

At Port Authority, Kwon is replacing former Attorney General Paula Dow, who held the deputy general counsel post for several months before being appointed to the Superior Court bench in Burlington County.

Posted by Michael Booth at 03:45 PM.

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