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Court bypasses RICO test case

The Supreme Court refused on Monday to provide new guidance on the kind of proof needed to show that a corporate activity challenged in a civil RICO lawsuit had caused harm to others.  The Justices gave no reason as they turned aside an attempt by the pharmaceutical giant, Pfizer Inc., to head off a wave of lawsuits over its promotion of the drug Neurontin for pain management.

The Court granted no new cases.  There were no requests for the views of the federal government on new cases.

In the Pfizer case — Pfizer Inc. v. Kaiser Foundation Health Plan, Inc. — the company already faces one verdict awarding $142 million in damages, and could be facing a series of new trials seeking additional millions in damages.  The drug Neurontin was developed by a predecessor company, and originally gained federal approval for treatment of epileptic seizures.

Pfizer and predecessor companies actively promoted off-label uses of the drug to treat bipolar disorder, migraine headaches, and other forms of pain management related to diabetes.  Because federal law bars drug makers from promoting off-label uses of their products, Pfizer and its predecessors were fined $430 million after the Justice Department challenged the off-label campaign.

After that, and based partly on the evidence developed in that case, Pfizer was sued by various providers of health insurance or employee drug benefits, under the Racketeer Influenced and Corrupt Organizations Act.  The lawsuits contended that the drug was not effective for the off-label uses, but that Pfizer nevertheless had persuaded doctors to prescribe it for many patients, requiring the health insurance providers to pay for those prescriptions.   A jury agreed, and assessed fines at more than $47.4 million, which, under RICO, was tripled, to $142.1 million.

That verdict came in a case filed by Kaiser Foundation Health Plan, an HMO organization.  However, other lawsuits against Pfizer — by the health insurer, Aetna, Inc., by a business firm that provided benefits for its workers, Harden Manufacturing Inc., by a labor union benefit plan, and by a Blue Cross-Blue Shield entity in Louisiana.  The other cases were dismissed on summary judgment at the district court level.

The cases then went to the U.S. Court of Appeals for the First Circuit, which upheld the verdict against Pfizer and overturned the summary judgment decisions in the other cases, clearing those for trial.

Pfizer’s unsuccessful petition to the Supreme Court argued that lower courts are confused about the proof necessary to show “causation” in civil RICO cases — that is, the kind of evidence needed to show that the challenged business activity actually caused harm.   Pfizer told the Supreme Court that the First Circuit, in the decision it sought to challenge, had ruled that “proximate causation” could be proved under RICO on the basis of proof of intent and foreseeability of harm.  Those who sued Pfizer do not read the Circuit Court ruling the same way; they said the appeals court had said it was not sufficient only to prove intent and foreseeability, so there must be some evidence of a direct cause-and-effect link.

In another order, the Court expanded from one hour to ninety minutes the time for oral argument on January 13, in the constitutional case over the President’s power to fill vacant government positions while the Senate is in recess — National Labor Relations Board v. Noel Canning (12-1281).

The NLRB will now have forty-five minutes, Noel Canning, the business firm involved in the case, will have thirty minutes, and the Senate’s Republican leader, Sen. Mitch McConnell of Kentucky, will have fifteen minutes.  McConnell and forty-four other GOP senators are in the case to defend the role of the chamber’s minority in reviewing presidential appointments.

Recommended Citation: Lyle Denniston, Court bypasses RICO test case, SCOTUSblog (Dec. 9, 2013, 10:01 AM),