In Trio of Big Business Cases, Justices Sharply Divide

Benjamin Zipursky in Corporate Counsel, June 28, 2011

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SCOTUS v SCOTUS: Justices Sharply Divided in Big Business Decisions

In Pliva Inc. v. Mensing, CSX Transportation v. McBride, and Sorrell v. IMS Health, the U.S. Supreme Court showed distinct divisions in the Justices' approach to business oversight.

Marcia Coyle
The National Law Journal
June 28, 2011

Generic drug users cannot bring state tort suits against manufacturers for inadequate warning labels, a divided Supreme Court ruled on Thursday in one of three significant decisions affecting consumers and the business community.

Justice Clarence Thomas, writing for a 5-4 majority in Pliva Inc. v. Mensing, said it was impossible for manufacturers to comply both with a state-law obligation to attach a safer label to their generic metoclopramide and a federal-law duty to keep the label the same as the brand name drug label. In the face of that conflict, federal law, he said, preempts state tort claims.

A different 5-4 majority in CSX Transportation v. McBride reaffirmed a relaxed standard in the Federal Employers' Liability Act under which railroad workers could prove their injuries were caused by a railroad's negligence. And in the high court's first encounter with data mining, a 6-3 majority in Sorrell v. IMS Health struck down a Vermont law prohibiting pharmacies from selling physicians' prescribing information for marketing purposes without the physicians' permission.

The Court also announced that June 27 would be the final decision day of the term. The justices have four cases remaining, including two major First Amendment challenges, one involving state regulation of the sale of violent video games to minors, and the other a state public financing scheme for elections.

The generic drug case stemmed from two separate lawsuits brought by two women who, after several years of using metoclopramide (the generic version of Reglan) for digestive tract problems, developed a serious neurological disorder. They claimed that despite mounting evidence that long-term use of metoclopramide carried a risk of the disorder greater than what was indicated on the label, the manufacturers failed to change their labels to adequately warn of the danger.

The manufacturers, represented by Jay Lefkowitz of Kirkland & Ellis, argued that federal law and regulations of the Food & Drug Administration (FDA) required them to use the same safety labeling as their brand name counterpart. Because they could not simultaneously comply with the state and federal obligations, they said, federal law preempted the state tort claims. The FDA told the high court that the manufacturers had a duty to propose stronger warning labels to the federal agency if they believed the warnings were needed.

In his opinion reversing decisions by the U.S. Courts of Appeals for the 5th and 8th Circuits, Justice Thomas wrote, "We have held that state and federal law conflict where it is 'impossible for a private party to comply with both state and federal requirements.' We find impossibility here."

Thomas acknowledged that from the two women's perspective, the decision made "little sense" in light of the Court's ruling in 2009 in Wyeth v. Levine that there was no preemption of state failure to warn suits against brand-name manufacturers. But he distinguished Wyeth by saying that brand-name manufacturers had procedures under FDA regulations that allowed them to comply with state-law duties.

"We acknowledge the unfortunate hand that federal drug regulation has dealt Mensing, Demahy, and others similarly situated," he wrote.

Justice Sonia Sotomayor, joined by justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan, wrote a blistering dissent in which she accused the majority of inventing new principles of preemption "out of thin air," rewriting Wyeth, and tossing aside the presumption against preemption.

"As a result of today's decision, whether a consumer harmed by inadequate warnings can obtain relief turns solely on the happenstance of whether her pharmacist filled her prescription with a brand-name or generic drug," she wrote. "The Court gets one thing right: This outcome 'makes little sense.'"

Louis Bograd of the Center for Constitutional Litigation, counsel to Gladys Mensing and Julie Demahy, said, "Today, 75 percent of all prescriptions are filled with generic drugs, so three out of four patients have lost their right to sue over inadequate warnings." He suggested that the ruling would provide "powerful impetus" for lower courts to reconsider rulings that prevented generic drug consumers from suing brand-name manufacturers for inadequate labels.

In Sorrell v. IMS Health, Justice Anthony Kennedy rejected Vermont's argument that its law banning the sale of prescribing information by pharmacies, with some exceptions, was a mere commercial regulation and that it safeguarded medical privacy.

Applying heightened scrutiny under the First Amendment, he said, "The State has burdened a form of protected expression that it found too persuasive. At the same time, the State has left unburdened those speakers whose messages are in accord with its own views. This the State cannot do."

Justice Breyer, joined by justices Ginsburg and Kagan, dissented, saying the Vermont law only deprives data mining companies and drug companies of data that could help the drug companies create better sales messages. "In my view, this effect on expression is inextricably related to a lawful governmental effort to regulate a commercial enterprise."

IMS Health's counsel, Thomas Goldstein of Goldstein, Howe & Russell, said, "We think the case validates what the companies have been saying about the importance of this information for health care. It is a public good and will contribute to health care."
However, Sen. Patrick Leahy (D-Vt.) called the ruling "a win for data miners and large corporations and a loss for those of us who care about privacy not only in my home state of Vermont but across the nation. States like Vermont must be able to protect the privacy of sensitive information exchanged between a doctor and patient."

Although only two states had laws similar to the Vermont statute, an IMS Health official said there had been debates in 25 states over whether this information should be restricted. The ruling, he added, "now opens the door to debate on how this data should be utilized. That's a very different conversation."

And finally, the 5-4 majority in the generic drug case flipped, for the most part, in CSX Transportation v. McBride. Justice Ginsburg, joined by justices Thomas, Breyer, Sotomayor and Kagan, refused to incorporate a proximate cause standard developed in common-law tort cases into the Federal Employers' Liability Act.

The act's language, she wrote, is straightforward in stating that a railroad is liable for damages for an employee's injury or death resulting in whole or in part — no matter how small-- from the railroad's negligence. That is the way in which courts have applied the law for 50 years. The law's limits on who may sue, she added, reduce the risk of exorbitant liability.

Chief Justice John Roberts Jr., joined by justices Antonin Scalia, Kennedy and Samuel Alito Jr., dissented, saying, "Law has its limits. But no longer when it comes to the causal connection between negligence and a resulting injury covered by FELA. A new maxim has replaced the old: Caelum terminus est — the sky's the limit."

"Justice Ginsburg justifiably observed that the Supreme Court has quite consistently adhered to a flexible approach in this area, and there was no clear evidence of a need to depart from its well established path," said Benjamin Zipursky of Fordham University School of Law.

David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel, was winning counsel to Robert McBride.