For the second time this year, appellate lawyers at O’Melveny & Myers have wiped out a huge jury verdict against Johnson & Johnson Inc. and a subsidiary over their marketing of the antipsychotic drug Risperdal. The reversals are a blow to plaintiffs firm Bailey Peavy Bailey, which has now seen $250 million in attorney fee awards go up in smoke.
The Arkansas Supreme Court vacated on Thursday a $1.2 billion jury verdict that the Arkansas Attorney General’s Office won in a suit alleging that J&J and subsidiary Janssen Pharmaceuticals Inc. didn’t properly communicate Risperdal’s risks and illegally marketed it for off-label uses. The court also set aside a $181 million fee award for Bailey Peavy Bailey, which handled the case on the state’s behalf.
Risperdal received regulatory approval for limited psychiatric disorders in 1993 and became a blockbuster drug for J&J. Several state attorneys general began suing J&J in 2004, alleging that it made misleading claims in letters to doctors about the safety and effectiveness of the drug. The U.S. Department of Justice also opened an investigation into whether J&J had promoted Risperdal for off-label uses like treating bipolar disorder and anxiety.
The state of Louisiana, represented by Bailey Peavy Bailey (then Bailey Perrin Bailey), won a $257 million verdict from J&J in 2010. State court judge Donald Hebert later tacked on $71 million in attorney fees. The $1.2 billion verdict on behalf of the state of Arkansas followed in April 2012. Drinker Biddle & Reath handled both trials for J&J.
Soon after, J&J struck a $2.2 billion deal with the U.S. Department of Justice. And in August 2012, the drug giant reached a $181 million settlement with a coalition of 35 state attorneys general. Louisiana, Arkansas, and some other states were carved out of the deal so they could keep their individual cases alive.
J&J brought in O’Melveny & Myers to handle appeals in both the Louisiana and Arkansas cases. In January of this year, the firm won a ruling from the Louisiana Supreme Court that vacated the $257 million verdict and a $70 million fee award on the grounds that there was insufficient evidence of fraudulent conduct.
The ruling only raised the stakes for the Feb. 27 oral argument before the Arkansas Supreme Court over the colossal verdict in that state. O’Melveny’s Walter Dellinger III handled that oral argument for J&J, squaring off against David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel.
Dellinger argued that the case hinged on a misreading of a provision of Arkansas’ Medicaid fraud statute. The trial judge interpreted that provision as prohibiting all companies from making material misstatements about their obligations under state and federal laws. But O’Melveny argued that, when read in connection with a preceding provision that referenced hospitals and nursing homes, it becomes more clear that the statute was intended to apply to misstatements by health care facilities seeking government certification.
To combat that argument, a group of 65 Arkansas legislators from both parties argued in an amicus brief that this sort of verdict is a result they envisioned when they passed the act at issue. But the high court sided with O’Melveny’s statutory interpretation anyway. “Janssen is indisputably not a health care facility applying for certification or recertification as described in the statute. Hence, the statutory provision is not applicable,” the justices wrote.