A Boston federal judge has attached $5 million of assets belonging to New England Compounding Pharmacy Inc., a company linked to a fungal meningitis outbreak that caused 36 deaths.
U.S. District Judge F. Dennis Saylor IV of the District of Massachusetts issued the order on November 21 in Cole v. New England Compounding Pharmacy Inc. and Erkan v. New England Compounding Pharmacy Inc.
The ruling followed a two-hour hearing the day before about the plaintiffs’ request to attach up to $461 million in assets. Aside from New England Compounding’s assets, the plaintiffs sought to attach the assets of two related companies and six individuals who are directors, officers, shareholders and employees.
Saylor’s order allowed the two plaintiffs to gain a jointly held $5 million attachment against New England Compounding’s physical property in order to satisfy the potential claims of plaintiffs Michele Erkan and Robert Cole. The Cole and Erkan cases are two out of a dozen pending in the District of Massachusetts. The plaintiffs firm Hagens Berman Sobol Shapiro of Seattle is tracking 51 total federal cases.
New England Compounding’s injectable steroids from three recalled lots of preservative-free methylprednisolone acetate have been tied to a multistate outbreak of fungal meningitis and other infections. There are 510 cases and 36 deaths associated with the outbreak, according to the Centers for Disease Control and Prevention.
Saylor specified that the property could remain in New England Compounding’s physical custody and used in the ordinary course of business. Saylor also wrote that the property may not be sold or transferred without court approval. His order also preliminarily enjoined the company from issuing dividends to its stockholders or paying non-customary bonuses.
Saylor wrote that there’s a limited factual record in the case and that the amount and scope of the liability insurance coverage is unknown. He also wrote that “it is unclear at best whether any plaintiff class will ever be certified.”
He went on to write that the individual plaintiffs have shown a reasonable likelihood of success on their claims.
Saylor also observed that the company is still in operation “at least in some limited form, such as to participate in the recall of certain of its products,” and seizure of its physical assets would immediately put it out of business. The judge decided not to seize the intangible assets immediately.
“If nothing else, it appears that public health and the balance of equities favor an orderly and proper recall of the company’s products. Nonetheless, it appears that some limited restraint of assets is appropriate in order to prevent any extraordinary transfer of cash out of the company to avoid future judgments,” Saylor wrote.
As for the other defendants, Saylor wrote that the plaintiffs “have not, at this early stage, met the burden of demonstrating a substantial likelihood of success on the merits.”
The other corporate defendants are sister company Ameridose LLC, which closed last month during a government investigation and Medical Sales Management Inc., and six individual defendants, including Barry Cadden, an owner, president, head pharmacist, and director of pharmacy at New England Compounding until recently.
“The court took seriously the risk that New England Compounding’s assets may be depleted before judgment was entered for any victims and entered what we believe to be appropriate prejudgment security,” said Kristen Johnson Parker, an associate in the Boston office of Hagens Berman and one of the plaintiffs’ lawyers on the case.
Ameridose’s lawyer, Matthew Moriarty, a Cleveland partner at Tucker Ellis, declined to comment. New England Compounding’s lawyer, Alan Winchester, a New York partner at HarrisBeach of Rochester, N.Y., did not respond to a request for comment. The individual defendants’ lawyers also did not respond.
Sheri Qualters can be contacted at email@example.com.