Mass Tort Deals: Must-Read Interviews for a Must-Read Book

Nancy Gertner Articles, Reuben Guttman Articles

In 1965, Ralph Nader published Unsafe at Any Speed, an exposé on automobile safety, and since its publication, consumer faith in product safety has never been the same.

The early efforts of Nader and his legion of young lawyers and researchers—who came to be known as Nader’s Raiders—spurred the growth of products liability litigation. Nader gave consumers and their counsel a reason to go to court: they challenged the safety of products from cars to cribs, and the courtroom provided the level playing field where even the little guy could be heard and get justice.

Now, 50 years later, a law professor at the University of Georgia is exposing impropriety in a system—known as multidistrict litigation, or MDL—that is designed to handle these types of cases.

In her 2019 book Mass Tort Deals: Backroom Bargaining in Multidistrict Litigation, Professor Elizabeth Chamblee Burch blows the whistle on MDL. She writes about a virtually unregulated system driven by deals between a limited group of plaintiff and defense lawyers involving tens of thousands of plaintiffs. Burch’s work is not just based on empirical data; she writes about victims of car accidents, misbranded drugs, and defective medical devices whose cases—purportedly consolidated only for pretrial proceedings—are resolved by court-appointed lead counsel through global settlements that give defendants finality and plaintiffs little choice but to accept the offer. Burch also raises concerns about a system that promotes, indeed at times coerces, settlements over the transparent litigation that has historically driven regulation and made products safer.

If one were to think her concerns involve only a small fraction of federal court litigation, think again. Burch writes that “from 2002 to 2017, MDL jumped from 16 to 37% of the federal court’s pending case load,” with 95 percent of those cases in the products liability arena.

The system that Burch writes about had its origins in the early 1960s, when the federal courts were flooded with nearly 2,000 lawsuits stemming from a nationwide conspiracy to fix the prices of equipment used in the transmission of electricity. With guidance from Chief Justice Earl Warren, who created a Coordinating Committee of Multidistrict Litigation, a process was created to drive efficiencies in the litigation of these cases. The work of Warren and the committee’s chair, Alfred P. Murrah—then Chief Judge of the Tenth Circuit—paved the way for the passage of the MDL statute, 28 U.S.C. § 1407, in 1968. That statute provides for the coordination for pretrial purposes of civil actions involving “one or more common questions of fact.” Cases filed anywhere in the federal court system can be transferred to a single district for pretrial purposes. The MDL statute is short and—in contrast to Federal Rule of Civil Procedure 23, which addresses class actions—provides no standards for the appointment of counsel, class representatives, or for the approval of settlements.

With Supreme Court rulings on class actions in the late 1990s making class certification more difficult for plaintiffs, mass tort actions—rolled up into the MDL system—became the go-to method for handling matters that in yesteryear might have been addressed through the more regulated class-action system. The big plaintiff firms could still litigate massive actions and the defense lawyers could still engineer settlements giving their clients global peace.

Yet, the MDL statute addresses only pretrial matters—not settlement; not global peace; not provisions for opting out; not the appointment of counsel, the compensation of counsel, or the confidentiality of and use of materials discovered in litigation. It is here that Burch does a masterful job of exposing the “Mass Tort Deals” that have evolved from an unregulated system.

To get a better sense of the problem, I posed questions to Professor Burch and Judge Nancy Gertner, who retired from the federal bench in 2011 and now teaches at Harvard Law. My interviews are below.

Judge Gertner, do we have a real problem with the MDL process and how do you view that problem from having been on the bench?

The problem is the classic one: rules and transparency. There were no clear rules with respect to who is assigned an MDL. There is no blind draw, no concrete set of procedures. After I complained about the asbestos MDL shortly after I got on the bench—late 1990s—I was never assigned a case again. My complaint was that the MDL judge, Judge [Charles] Weiner of Philadelphia, was simply dismissing the cases “subject to their being reopened by motion.” The dismissals were contrived, done for the purpose of showing that the cases were moving. I finally got an MDL when Judge Robert Keeton died and my court assigned me to one that had been assigned to him. In the last year I was on the bench, I drew a civil rights case that was headed for the MDL court. My case was the first filed, a second was in Chicago, a third in San Francisco. All of us were up to date, willing to take on the case. It was assigned to neither of us; it went to a judge in Memphis who was on the committee.

If the MDL process were “merely” procedural, it would be one thing. But the decisions made by the MDL judge profoundly affected the substantive outcomes of these cases. Under the circumstances, the failure to have a transparent judicial assignment process is critical to the fairness of the proceeding.

Professor Burch, your book raises ethical issues regarding the MDL process. Why has there not been more of an outcry?

All of the primary stakeholders—plaintiffs’ lawyers, corporate defendants, defense attorneys, and yes, judges—benefit from settlements. And it’s in aggregate settlements where ethical issues arise most prominently. To give corporate defendants the closure they demand, some “settlements” (deals between defendants and plaintiffs’ attorneys) require plaintiffs’ lawyers to recommend the settlement uniformly to all their clients and then some take the extraordinary step of requiring lawyers to withdraw from representing clients who refuse to settle. That doesn’t leave much room for genuine consent.

Those who are most impacted by ethical violations are the plaintiffs, many of whom are severely injured and have neither the time nor the resources to make a stink. In a world of repeat players, they are the one-shotters, the ones who need and deserve the most protection because their voices are so rarely heard. But therein lay the crux of the principal–agent problem: if it’s in the lawyer’s best interest to flout the rules and get the deal done, there will be no outcry, only silence.

Judge Gertner, from your vantage point, why has there not been more of an outcry about the problem?

The question is who is likely to complain and to whom? Judges are not complaining; the assignments are a plum for the Court, entitling the judge to attend a yearly conference in Palm Beach. And the skewed assignment process is usually not apparent. (It was in my case.) The lawyers are not complaining. Candidly, many of the lawyers in MDL case are competing for lead counsel; the last thing they want to do is rock the boat.

Professor Burch, many of the MDLs involve drugs or medical devices. Are the issues you raise in your book ultimately impacting healthcare standards?

The mass-torts plaintiffs’ bar is a last resort, a failsafe of sorts, for when medical drugs or devices come on the market that do more harm than good. So, yes, there is a feedback loop from the courts to healthcare and vice versa.

The FDA regulates everything from tainted spinach to cosmetics to pet food. It can’t and won’t catch everything. There will be drugs and devices on the market that shouldn’t be. We would hope that litigation opens a window into the processes that allowed that to happen so that drug and device companies would avoid those kinds of mistakes in the future. But, if the past is any indicator, the profit motive is a very strong one to overcome.

Judge Gertner, what is the process for fixing the problems?

The authorizing legislation and rules should be redone. There ought to be rules with respect to the assignment of judges—a random draw, a set of principles. And the rules along with judicial training need to make clear that some cases should not be settled; the premium in the MDL is not—as it was supposed to be—providing a mechanism for shared discovery, with a trial to follow in the jurisdictions from which the cases came. The premium is on resolving the case.

Professor Burch, who needs to read your book, and what needs to be done to begin to fix the problems you identify?

I hope the book will appeal broadly to policymakers, judges, lawyers, and plaintiffs alike. It’s empirically based, but not stodgy. I aimed to make it accessible to a diverse group—from insiders who operate in this world daily to those who are injured and experiencing the judicial system firsthand.

As for a fix, there is no single, silver bullet. But there are many things that can improve it and judges can implement the changes and reforms I suggest without waiting for rule changes or legislation. I devote an entire chapter to proposals, but I’ve boiled the key principles down to the following:

  • Appoint lead plaintiffs’ lawyers based on the same principles of adequate representation that we see in class actions. In doing so, judges should invite applications and think about building the best team by seeking cognitive diversity—people with a diverse set of tools and skills, who approach problems differently.
  • Value dissent among lawyers and create outlets for it. As plaintiffs’ aims and preferences differ, dissenters can challenge the status quo and inject undisclosed information into the discussion. Dissenters can thereby act as a failsafe (but not a substitute) for adequate representation on key motions.
  • Tie plaintiffs’ attorneys’ common-benefit fees (the fees they are paid for their work on behalf of the group as a whole rather than their individual clients) to plaintiffs’ actual outcome rather than to the “sticker price” of the settlement fund. Begin by subtracting litigation costs and administrative fees from the gross settlement amount so that lawyers don’t profit from added expense. Then tailor awards to groups of lawyers based on quantum meruit. If there’s a group of non-lead lawyers who do little but advertise and freeride on leaders’ efforts, then taxing them with a higher percentage common-benefit fee might be appropriate. Conversely, if lawyers develop and try state court cases on their own, judges should reduce common-benefit fees for those lawyers to incentivize them to develop cases on the merits.
  • Empower plaintiffs to weigh in on their settlement awards. Awarding fees on a quantum meruit basis gives judges the authority to hear about the benefits of any deal from those who are most affected. Many plaintiffs want an opportunity to be heard, even if it’s just a chance to submit a letter to the judge. Some feel victimized not only by the corporate defendant but by the litigation process itself. If plaintiffs are receiving less than 50% of a settlement award, that should be a huge red flag for the judge.
  • Remand cases episodically. When leaders decide which cases they’re going to develop and which ones they aren’t, the ones that won’t benefit from multidistrict litigation centralization shouldn’t be waylaid by the MDL process. Likewise, if discovery reveals that a block of cases is no longer benefitting from centralization or if there is a global settlement that clients don’t want to accept, judges shouldn’t be hesitant to remand those cases to the federal courts from which they came. This gives plaintiffs the ability to credibly threaten trial and the corporate defendant the opportunity to demand case-specific proof.

And now my take. Our rule of law is a work in progress. That’s what makes is special. It is a system that welcomes critique and improvement. For NITA lawyers and jurists who champion the rule of law, the Burch book is a must-read. It is a catalyst for an open dialogue and undoubtedly procedural changes in the way many of these mass tort cases are adjudicated.

Reuben Guttman is a founding partner of Guttman, Buschner & Brooks, PLLC, in Washington, D.C. Read more of his On the Rule of Law columns here.

Corporate Crime Reporter: Reuben Guttman on the Failure of Corporate Compliance

Reuben Guttman Articles, Whistleblower Articles

Corporate Crime Reporter, Volume 34, Number 3, Monday, January 20, 2020

REUBEN GUTTMAN ON THE FAILURE OF CORPORATE COMPLIANCE

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says.

“WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model,” Guttman told Corporate Crime Reporter in an interview last week.

“Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it,” Guttman said. “I have litigated against Abbott Labs. The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. It resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.”

“What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I s_aw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill.”

“Compliance programs in part are being used to assuage people and not make them second guess because they believe someone else is taking care of it.”

“When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal.”

“But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.”

“And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?”

“Our niche as a law finn is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice.”

“Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance? Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015. It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance.”

“I come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful. If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act.”

“In many respects you have compliance programs that are analogous to company dominated unions. Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do
with it.”

“Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation. For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.”

If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose? “I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.”

“I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?”

“The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not. At the least, you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.”

“Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?”

A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharnrnceutical industry – “Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing.

These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say – we have to take the 73 7 M AXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.”

“In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.”

Is there any evidence that the government corporate criminal enforcement program is deterring wrongdoing? “Based on the wrongdoing I’ve seen, no.”

“Each of the big phannaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.”

“The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact. What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.”

INTERVIEW WITH REUBEN GUTTMAN, GUTTMAN, BUSCHNER & BROOKS, WASHINGTON, D.C.

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says. We interviewed Guttman on January 13, 2020.

CCR: You graduated from Emory Law School in 1985. What have you been doing since?

GUTTMAN: I have been doing litigation against large corporations. Between 1985 and 1990, I was counsel to the Service Employees International Union.

I was the chief outside counsel to the Oil Chemical and Atomic Workers Union (OCA W). l represented OCA W in the nuclear weapons sector. I brought significant cases against the Department of Energy and environmental and safety and health issues.

I have had a corporate fraud practice under the False Claims Act and other statutes. I have been involved in cases against the major pharmaceutical companies – Pfizer, GlaxoSmithKline, Wyeth, Celgene, Abbott Labs. And collectively these cases have resulted in recoveries totaling $6 billion.

I have done lots of litigation under the Fair Labor Standards Act against the meatpacking industry involving meatpackers in the midwest.

Primarily my expertise is corporate fraud and mismanagement. I bring securities class actions based on breaches of fiduciary duties. I have litigated the issue of whether the Hershey Corporation had to make disclosures about records regarding its use of child labor in the Ivory Coast and Ghana.

I have had a pretty broad practice over 35 years. I have reinforced that through teaching at various law schools – including Rutgers and Emory.

I’m writing a book on pre-trial litigation which will be published by Walters Kluwer hopefully in the fall. My co-author is Jason Lore at Rutgers.

I do a regular blog for the National Institute of Trial Advocacy called The Rule of Law blog. I was on the board of directors of the American Constitution Society for six years – I’m now on the advisory board. It’s been 35 years of an eclectic practice.

CCR: What is the primary practice of your law firm?

GUTTMAN: It is complex litigation involving corporations.

CCR: Is your practice exclusively plaintiffs’ side?

GUTTMAN: Yes.

CCR: What percentage of your practice is False Claims Act?

GUTTMAN: Seventy percent.

CCR: Other than False Claims Act, what kind of cases do you bring?

GUTTMAN: We have a large class action under ERISA against the mortgage servicers. It’s a novel theory. The court has sustained our complaint. I’m sitting in South Carolina now.

We are settling a civil rights class action against the South Carolina prison system. The settlement will require the treatment of thousands of prisoners for Hepatitis C. It has partially settled already. It requires the state to test prisoners.

We are involved in derivative litigation in Delaware.

CCR: You are primarily a False Claims Act firm.

GUTTMAN: We actually litigate non-intervene cases. For Celgene, we settled on the eve of trial. We took tons of depositions. We are trial lawyers. We are not lawyers who put the case in play hoping the government will settle.

Right now we are suing Massachusetts General Hospital in a non intervene case. We are litigating against a urologist in New York City in a nonintervene case. We settled the intervene portion of it for $12.3 million in November.

We are always in discovery, we are always taking depositions.

CCR: Are you saying that the majority of your False Claims Act cases are non-intervene cases?

GUTTMAN: A decent percentage of them. We litigate more False Claims Act cases than anybody else in the country. That’s just my perspective.

CCR: How many False Claims Act cases do you have going at any one time?

GUTTMAN: We get anywhere between 500 and 1,000 knocks on the door a year. We will cull that down to four, five or six False Claims Act cases that we take a year.

We vet these cases so heavily that by the time they get to the government, the government is looking at a case that is strong on the merits.

CCR: You have a strong filter. Do you know pretty much know within the first couple of minutes of talking with a whistleblower whether or not it’s going to be a case for your or not?

GUTTMAN: We can tell from the first twenty or thirty minutes. Let me give you an anecdote. A number of years ago I had a case against Abbott Labs.

The case settled for $1.6 billion. 1 asked the government lawyer a little while after the case settled – when did you realize it was a good case? And the government lawyer said – about 30 minutes into the client interview. We can pretty much tell up front whether it has some heft, whether it’s a case that we are going to dig into and investigate. There are ways to eliminate cases quickly.

CCR: How many cases are you carrying at any one time?

GUTTMAN: Dozens.

CCR: How many cases do you settle a year?

GUTTMAN: In the last five years, we have been resolving four or five cases a year.

CCR: We posted a story on Twitter from the Wall Street Journal about an interview with a Justice Department official, Matt Miner. He was talking about how internal compliance programs can help prevent corporate crimes. You went onto our Twitter feed and wrote – “Internal compliance programs do nothing to address pervasive wrongdoing central to a company’s business model, as in Enron, Tyco and WorldCom. This I know from 30 years plus of litigation against corporate wrongdoers.”

I read that to Duke Law Professor Sam Buell. He told us this – “This guy is saying – I’ve seen companies spend lots of money on compliance and it didn’t make a difference because they were thoroughly corrupt and everyone in the company didn’t care about compliance. But other people will say- I’ve seen companies with good compliance who generally stayed away from enforcement actions. Or I’ve seen companies with bad compliance but they got better; and their problems with the government decreased. Everyone is talking anecdotes. Companies are enormously complex. They are the most complicated things we have in our society. They become extremely difficult to study empirically.”

GUTTMAN: I was at Milberg Weiss and Grant & Eisenhofer. At Milberg, we were part of the Enron litigation. Milberg was also part of the Worldcom litigation.

When I was at Grant & Eisenhofer, they were part of the Tyco litigation. WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model.

Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it. I have litigated against Abbott Labs.

The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. lt resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.

What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I saw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill. Compliance programs in part are being used to 14 CORPORATE CRIME REPORTER MONDAY JANUARY 20, 2020 assuage people and not make them second guess because they believe someone else is taking care of it.

When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal. But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.

And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?

Our niche as a law firm is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice. Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance?

Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015.

It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance. 1 come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful.

If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act. In many respects you have compliance programs that are analogous to company dominated unions.

Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do with it.

Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation.

For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.

We are now suing Massachusetts General Hospital for overlapping surgeries. The allegations are that they completely overlapped.

CCR: What do you mean by overlapped?

GUTTMAN: In the orthopedic area, you book patients whose~urgeries overlap. The surgeon is running from one surgery to another. We just settled such a case against another hospital in New York City. It’s a Medicare fraud case.

CCR: If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose?

GUTTMAN: I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.

I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?

The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not.

At the least you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.

Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?

CCR: A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharmaceutical industry –

GUTTMAN: Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing. These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say- we have to take the 737 MAXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.

In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.

CCR: Is there any evidence that the government corporate criminal enforcement program is detening wrongdoing?

GUTTMAN: Based on the wrongdoing I’ve seen, no.

Each of the big pharmaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.

The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact.

What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.

CCR: Of your practice, what part of the False Claims Act cases are FCPA or Medicare fraud or other?

GUTTMAN: There is overlap. You could have a situation where a company is unlawfully marketing a drug. And they are not making that disclosure to the public. In a large pharmaceutical fraud case, you are going to have a securities component. We have been involved in a number ofFCPA cases.

CCR: Has the plaintiffs bar moved over the years from primarily class actions to primarily False Claims Act cases now?

GUTTMAN: It’s a complicated question. Elizabeth Burch is a professor of law at the University of Georgia. She has just published a book titled Mass Torts. It would be worth interviewing her on this.

In 1965, Ralph Nader published Unsafe at Any Speed. Before that book, people thought – if you got into a car accident, it was your fault. Nader made people think – it could be a defect in the automobile. He was the impetus for plaintiffs’ class
actions.

In 1968, Congress passed the multi-district litigation (MDL) statute. The courts needed to figure out how to address the 3,000 price fixing cases in the electrical transmission industry. There was an informal mechanism to do that. And that was codified in 1968.

With the rise of the class actions, the defense bar organized and made it harder to certify a class action. I’m actually arguing a class action certification case tomorrow, so it’s on my mind.

By the 1990s, you had two Supreme Court asbestos cases. And with those cases, the Supreme Court made it more difficult to certify class actions. Because cases were not being certified, you had all of these mass tort cases being brought as individual cases. Lawyers on both sides sought to use the MDL process.

It’s not that people are moving into false claims as much as people are moving into these MDL mass tort cases.

Of course, some product liability attorneys want to get into the false claims area. But the reality is that the false claims bar, to some degree, is the impetus for a lot of these cases. We bring the big pharma false claims cases and other cases follow.

Another thing that has been happening is that the courts have been cracking down on access to the courts. The pleading standards have been toughened.

When I got out of law school, there was something called notice pleading. As long as you put the other side on notice about what the case was about, that was enough.

In 2007 or 2008, the Supreme Court came down with a couple of cases requiring the pleading of facts. You can’t just plead conclusions. If you plead conclusions, the court will strip out the conclusion. And then the court will apply a plausibility standard.

And a judge will look at a case and say – is this case plausible? In a false claims case, you have to plead fraud with particularity or specificity. These cases are front loaded in the sense that you have to do the investigation up front. You have to prove a case that the government thinks is a good case – not a case you think is a good case. All of those are filters that whittle down access.

CCR: There is a public debate over the role of the trial lawyer in society. A case can be made that big business has defeated the trial lawyers in the court of public opinion. Why did that happen?

GUTTMAN: I don’t think they have won the debate. Everything we have in this country that makes us safer is the result of transparency in the court system – the trial lawyers.

The trial lawyers brought us Brown v. Board of Education. The trial lawyers brought us Loving v. Virginia – the right to marry who you want to marry without regard to race.

The trial lawyers brought us safer automobiles, seat belts. They exposed the dangers of lead paint. The trial lawyers brought us safer food. We can live safer healthier lives because of trial lawyers.

CCR: You are making the argument. But regular people don’t like trial lawyers.

GUTTMAN: I haven’t done polling. I’m going to court tomorrow morning. I try cases. I have a comfort level because I know I’m saving people’s lives tomorrow morning when I am going to get Hepatitis treatment for thousands of pnsoners.

The state of South Carolina prison system is going to be testing 20,000 people and treating them. I know I’m having an impact.

I have brought cases that have saved people from drugs that are harmful to them. Maybe trial lawyers are not getting the message out. I teach and have a broader public policy perspective.

I try to take cases that have a broader impact. I want to leave the world a better place. I went to law school so that I could do things that make the world a better place.

Contact: Reuben Guttman, Guttman, Buschner & Brooks, Embassy Row District, 1509 22nd Street NW, Washington, D.C. 20037. Phone: 202.800.3001. Email: rguttman@gbblegal.com

Reuben Guttman Represents Whistleblowers in $12.3 Million Settlement

Reuben Guttman Articles

Congratulations are in order for NITA faculty member and author Reuben Guttman, who successfully represented whistleblowers and the federal government in a False Claims Act filing against a Boston teaching hospital for allowing its urology department chair to book simultaneous surgeries and for billing Medicare for procedures performed by his unsupervised medical residents. Reuben, a founding member of the D.C. law firm of Guttman, Buschner & Brooks PLLC, was part of the legal team that negotiated a $12.3 million settlement for the whistleblowers.

The case involved Dr. David Samadi, a “celebrity urologist” specializing in robotic prostate surgeries. The high volume of Dr. Samadi’s procedures at Northwell Health of New York’s teaching facilities was the subject of 2017 investigation by the Boston Globe, which spurred whistleblowers to file lawsuits against the surgeon and hospital.

In a comment to The Legal Advocate, Reuben remarked, “If you think about FRE 401 as not distinguishing between direct and circumstantial evidence, the task of putting together a complex fraud case like this one is less daunting. These cases are just like a 500-piece jigsaw puzzle where you don’t have the picture on the cover of the box to guide you but do have an evolving theory for guidance.”

Reuben serves as faculty at NITA deposition programs in Seattle and Atlanta and trial skills programs in D.C. He is co-author of the United States ex rel. Rodriguez v. Hughes, et al. case files, which involve a whistleblower in the defense industry. Reuben and co-author J.C. Lore are currently writing Pretrial Advocacy, a new textbook that will be published by NITA in late 2020.

Source: https://www.nita.org/blogs/reuben-guttman-represents-whistleblowers

NY Healthcare Network Pays $12.3 Mill. To Settle Claims Alleging False Medicare Billing

Elizabeth Shofner, Justin Brooks Articles, Nancy Gertner Articles, Reuben Guttman Articles, Traci Buschner Articles, Whistleblower News

As a result of a lawsuit brought under the Federal False Claims Act by three whistleblowers, one of the New York area’s largest healthcare providers – Northwell Health, Inc. whose subsidiary includes Lenox Hill Hospital —  has agreed to pay $12.3 million to resolve claims that it engaged in false or fraudulent billing to the Federal Medicare system.

Northwell operates 23 hospitals and 700 outpatient centers.

The settlement covers three alleged schemes involving Urologist David B. Samadi: that (1) Northwell over-compensated Samadi in order to secure hospital referrals in alleged violation of the Physician Self-Referral Law (the “Stark Act”), (2) Northwell billed Medicare for surgeries where Samadi violated billing procedures governing overlapping surgeries, and (3) Northwell billed for procedures that were not medically necessary to perform in an operating room.

The Physician Self-Referral Law, 42 U.S.C. §1395nn, prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

According to a settlement agreement executed in United States of America ex rel. George Markelson, et. al. v. David B. Samadi, M.D.  and Northwell Health, Inc. et al., “Defendants’ practices resulted in the submission of several million dollars of inappropriate claims to Medicare.”

The settlement also states that, “when portions of an endoscopic surgery in OR 21 overlapped with a surgery in OR 25, Samadi was not present in OR 21 throughout the entire period of time the scope was inserted to the time the scope was removed.” The settlement agreement also states that, “Samadi would freeze or pause the robotic equipment in OR 25 and leave the patient under the care of the anesthesiologist, operating room staff, and, in some instances, a urology resident.”

Relators were represented by the Jacob D. Fuchsberg Law Firm, LLP, and by Guttman, Buschner & Brooks, PLLC. The Jacob D. Fuchsberg Law Firm, LLP, is a prominent medical malpractice firm and Guttman, Buchner & Brooks, PLLC, is a nationally recognized firm engaging in complex litigation and representing whistleblowers under the Federal False Claims Act and state false claims statutes.

“We exposed medical malpractice designed to inflate surgical volume, revenue, profit, and compensation and conduct that tramples on patient rights, abuses confidence in healthcare, corrupts graduate medical education, and violates the law,” said Joseph Lanni of the Jacob D. Fuchsberg Law Firm, LLP.

“While this case was filed and resolved as a matter of false or fraudulent billing to the Medicare system, in reality it was about the egregious monetization of human maladies which is all too common in healthcare delivery today,” said Reuben Guttman of Guttman, Buschner & Brooks, PLLC.

The attorneys who worked on the case from the Fuchsberg firm include Joseph Lanni, Edward Hynes, Jaehyun Oh, Alan Fuchsberg, and Bradley Zimmerman. It was Joseph Lanni who originally investigated this matter and directed the Fuchsberg firm’s efforts in developing, filing and litigating the case.

Those working on the case from GBB include Reuben Guttman, Traci Buschner, Liz Shofner, Justin Brooks, and Nancy Gertner.

The Jacob D. Fuchsberg Law Firm, LLP, is a prominent New York law firm representing plaintiffs in complex medical malpractice, product liability, toxic exposure, major vehicle and other personal injury cases. The firm’s attorneys, including those involved in this case, have regularly secured trial verdicts or settlements in the millions of dollars. Mr. Lanni, Mr. Fuchsberg, Mr. Zimmerman and Ms. Oh recently investigated and filed multiple lawsuits on behalf of workers at a national laboratory exposed to toxic chemicals and carcinogenic substances, including the solvents TCE, PCE and other volatile organic compounds, that received considerable attention with lengthy articles in the New York Times, Newsday, as well as on various televised news segments. The same attorneys at the firm are in the process of investigating and filing medical malpractice lawsuits involving septic shock related deaths, limb amputations, and disfigurements due to major medical errors at hospitals that appear related to negligent surgical stapler use by surgeons and inattentive postoperative care performed by improperly supervised junior residents and physician assistants. More information on the firm can be found at https://www.fuchsberg.com/

Guttman, Buschner & Brooks PLLC is a boutique firm whose attorneys have worked on cases recovering nearly $6 billion dollars for state and federal governments including  $280 million recovery in a non-intervened case against Celgene Corporation on the brink of trial (U.S. ex rel. Brown v. Celgene); a settlement against Humana Inc. achieved on the brink of trial (U.S. Graves ex rel. Humana). Attorneys at the firm represented the lead whistleblower in U.S. ex rel. McCoyd v. Abbott Labs, which involved the recovery of $1.6 billion for the government; one of several whistleblowers bringing FCA cases against GlaxoSmithKline in 2012, which resulted in the recovery of $1.04 billion (U.S. ex rel. Graydon v. GSK);  one of the whistleblowers bringing FCA cases against Pfizer which resulted in the recovery of $2.3 billion (U.S. ex rel. DeMott v. Pfizer); the lead whistleblowers in U.S. ex rel. Sandler and Paris v. Pfizer, which resulted in recovery of $257.4 million; the lead whistleblower in U.S. ex rel. Szymoniak v. Bank of America, which resulted in the recovery of $95 million; three of the whistleblowers FCA cases against a large hospital chain (U.S. ex rel. Doghramji v. CHS), which resulted in the recovery of $98 million; the lead whistleblower in U.S. ex rel.  Kurnik v. Amgen, which resulted in the aggregate recovery of $30 million from Amgen, Inc., Omnicare, and PharMerica Corp.; and the whistleblower in U.S. ex rel. Abrahamsen v. Hudson Valley, which resulted in a recovery of $5.5 million to the federal government and state government. More information on GBB can be found at www.gbblegal.com. The firm also maintains the following informational site for whistleblowers, the media, and academics: www.whistleblowerlaws.com

Also available online at PRNewswire.

On the Rule of Law: The Times They are a-Changing and So Should Trial Advocacy Training

Reuben Guttman Articles, Whistleblowers Blog , ,

By Reuben A. Guttman |

As a lawyer, I grew up in dusty warehouses, the repositories for massive document reviews. I tore through boxes, often disappointed to find reams of computer runs, no doubt the product of a twentieth-century printer that pecked out letters one at a time. I drafted my first complaint on an IBM Selectric II typewriter, hitting the whiteout key repeatedly with my index finger, often erasing entire sentences at a time. I walked that complaint to the federal courthouse in Pittsburgh, Pennsylvania, wrote out a check from my personal account, and received the file stamped copy. Back in the days of the “notice pleading,” my eleven-page masterpiece was a triumph. 

For young lawyers, this may seem like the practice of a different age. For veteran attorneys, it was yesteryear. In my lifetime, technological changes have rewritten the rules of litigation and trials. 

The days of the dusty warehouses are gone. Documents arriving on zip drives are uploaded to a platform enabling a lawyer to lay in bed at night and access millions of pages of potential evidence on a two-pound iPad or small iPhone. 

With iPhones, virtually every person, from every corner of the earth, can be videoed, photographed, or audio-recorded at a moment’s notice. Spontaneous comment, once pried loose through deposition testimony, is now recorded for posterity on Twitter feeds, Facebook newsfeeds, LinkedIn profiles, Instagram accounts, and emails. What should never have been can now be undone using a website called Wayback Machine that reveals original drafts of online information.

Of course, few people walk their complaint to the courthouse anymore for filing. That too is done electronically. Today, the only place one can find an IBM Selectric II is perhaps at a yard sale or in a Smithsonian Institution warehouse. The skilled typist, whose hands once danced on typewriter keyboards, are no longer necessary for big litigation. Lawyers can research, draft, edit, and file their pleadings directly from the confines of a tiny laptop computer, even while sipping coffee at the neighborhood coffeehouse.

The opportunities for young lawyers to hang a shingle and be a voice for the voiceless are almost infinite. The overhead of having a law library, a secretary, or a runner to file papers in court has vanished. Even where cases require more than one lawyer so that legal thought can be second-guessed, practice norms have changed. Today, smaller firms and solo practitioners join forces for a case or joint venture with other firms. Because individual lawyers can now represent those in need without the support of a big enterprise, training individual lawyers to put together and litigate cases is an even more empowering endeavor. Newly minted lawyers can no longer complain about employment prospects. A licensed law school graduate with the right training should be ready to represent clients. There is currently no dearth of those in need of representation. It is the job of law schools and legal educators to provide lawyers and would-be lawyers with practical skills.

Contemporary litigation is not just about new opportunities, it is also about how we investigate and try cases. Along with advances in technology, the United States Supreme Court has imposed procedural changes that front-load litigation, requiring lawyers to gather fact-specific evidence for the pleading stage. In the Iqbal and Twombly decisions, the Supreme Court eliminated the age-old notice pleading standard. After these opinions were issued, plaintiff lawyers feared lacking the necessary information to meet the new standards. Yet, information readily available on the Internet from LinkedIn, Facebook, Instagram, Twitter, and chat rooms continually provides data and information to would-be litigants before discovery even begins. Company policies, government standards, and the standards of well-known oversight entities like the Joint Commission of the Accreditation of Hospitals need not be accessed through a trip to the library and searching the stacks: they can be pulled up on an iPhone while watching a baseball game.

In his autobiography, My Life in Court, the great trial lawyer Louis Nizer talked about litigation as a game of probability. Witnesses are put on the stand and testify to an event or chain of events. While their testimony may be truthful, it may not be accurate. Memories are flawed and witnesses view events from a particular vantage point, often not incorporating a scene’s entirety.

One wonders if Nizer—who passed away in 1994—would view things differently today. iPhone videos, photographs, audio recordings, and emails memorializing real-time recollections eliminate jury guessing games and reduce the need for witnesses. Does counsel really need eyewitness testimony of a car accident also captured on an iPhone? In a theoretical sense, just as automation has taken workers off the production line, technological innovation has taken witnesses off the stand.

To keep up with the times, we need to adjust teaching methods. Trial advocacy programs often start by teaching students the art of direct and cross-examination, followed by openings and closings. Why not begin training by requiring that students try cases using only documents, videos, photographs, and audio recordings? This forces students to learn the evidentiary rules of relevance, hearsay, and authentication as well as the art of openings and closings. For their first mock trial, prohibit students from calling witnesses; make them try the case using non-testimonial evidence. Then have them retry the same case with witnesses. This approach is the legal equivalent of the basketball coach making players practice with their weak hand or the ice hockey coach having players scrimmage with their sticks turned upside down.

Forcing students to focus on exhibits also teaches them how to select, or better yet de-select—perhaps from a trove of electronic information—exhibits that nail the case. In an era of abundant information, the skill of exhibit de-selection is critical to avoid going down a rabbit hole and losing the decision maker.

Front-loaded litigation, caused by pleading rules changes, requires that students think about evidentiary rules during case development and investigation. Here are some rules to stress:

  • FRE 201 (Judicial Notice of Adjudicative Facts). So much available online information meets FRE 201 requirements. Challenge those in trial advocacy programs to look outside the case file for industry standards or other usable evidence. This not only teaches students about the rule, it encourages curiosity, creativity, and thinking outside the box.
  • FRE 801(d)(2) (An Opposing Party’s Statement). Simply teaching students about opposing party statements is not enough. In an age when opposing party statements are common, students must also learn this rule’s broad utility. Think about emails, PowerPoint presentations, LinkedIn, Facebook, and Tweets.
  • FRE 901 (Authenticating or Identifying Evidence) and FRE 902 (Evidence that is Self-Authenticating). Teach students that if evidence is one, relevant under 401; two, not excluded under 403; three, not hearsay under 801(d); or four, meets a hearsay exception under 803, then the 901 and 902 authentication rules are the gateway for presenting evidence without a witness in court. FRE 902(13) and (14) even contemplate the mechanisms to authenticate electronic data.
  • FRE 1006 (Summaries to Prove Content). In an age of more information than we know what to do with, consider FRE 1006 the “sleeper” of the Federal Rules of Evidence. It allows the presentation of data summaries to the court and/or the jury. Remember the movie The Rainmaker where the young lawyer, played by Tom Cruise, presents Great Insurance Company’s CEO with a foot-thick computer run of wrongfully denied claims? FRE 1006 permits summary usage in lieu of burdening the jury with a multitude of documents detailing the same thing. FRE 1006 may also eliminate the need for expert testimony from economists and accountants who will do nothing more than summarize and add up numbers.

Most importantly, we as teachers need to keep up with changes, adjust our methods, and maintain student engagement.


Reuben Guttman is a founding partner of Guttman, Buschner & Brooks, PLLC, in Washington, D.C. Read more of his On the Rule of Law columns here.

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