In December we addressed the topic of cybersecurity from a product liability perspective.  In particular, our prior report highlighted the U.S. Food and Drug Administration’s final guidance on the need for effective cybersecurity and warned that medical device manufacturers should heed the FDA’s recommendations. See article. As promised, we have continued to monitor the development of the cybersecurity litigation landscape.

Recently, the Third Circuit affirmed a lower court holding denying a company’s motion to dismiss the Federal Trade Commission’s action alleging that by failing to maintain appropriate data security for consumers’ personal information the company had violated the Federal Trade Commission Act.   F.T.C. v. Wyndham Worldwide Corp., 2015 WL 4998121 (3d Cir. Aug. 24, 2015).  The case against Wyndham does not, strictly speaking, fall within the realm of product liability; however, the court’s ruling has serious implications for companies facing litigation arising from cybersecurity breaches, including product manufacturers.

The case against Wyndham follows a line of administrative actions that the Federal Trade Commission (“FTC”) has brought against companies with allegedly deficient cybersecurity that failed to protect consumer data against hackers.  In Wyndham, the FTC alleged that on three occasions in 2008 and 2009 hackers accessed Wyndham’s network causing the theft of personal and financial information of hundreds of thousands of consumers.  The FTC filed suit against Wyndham alleging, among other claims, that Wyndham’s deficient cybersecurity conduct was an unfair practice. On interlocutory appeal, the Third Circuit addressed the issue of whether the FTC has authority to regulate cybersecurity under the unfairness prong of §45(a) of the Federal Trade Commission Act of 1914 (“the Act”).

To understand the arguments raised by both sides, it is helpful to review briefly the legislative history of the Act.  Section 45(a) of the Act prohibits “unfair methods of competition in commerce.”  15 U.S.C. § 45(a).  In 1938, Congress inserted an additional prohibition against “unfair or deceptive acts or practices in or affecting commerce,” expanding the scope of §45(a).  Wheeler-Lea Act, Pub. L. No. 75-447, §5, 52 Stat. 111, 111 (1938).  In 1964 the FTC clarified the scope of the Act—in an effort to combat allegedly unfair or deceptive advertising and labeling of cigarettes—explaining that the following three factors would govern unfairness determinations:

(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common-law, statutory or other established concept of unfairness;

(2) whether it is immoral, unethical, oppressive, or unscrupulous; [and]

(3) whether it causes substantial injury to consumers (or competitors or other businessmen).

Fed. Reg. 8324, 8355 (July 2, 1964).  In 1980, the FTC updated its unfairness policy statement, and iteration of the provision that Congress codified in 1994.  15 U.S.C. §45(n).  Section 45(n) requires “substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”  Id.

In its appeal, Wyndham renewed its argument made in the district court that even if the initial enactment of §45(a) included cybersecurity, the three legislative acts since the Act’s amendment in 1938 removed cybersecurity from the scope of the provision’s meaning.  2015 WL 4998121 at *7.  Invoking prior Supreme Court precedent, Wydham argued that just as Congress intended to exclude tobacco products from the FDA’s jurisdiction in FDA v. Brown & Williamson Tobacco Corp., it similarly has enacted legislation meant to exclude cybersecurity from the FTC’s regulatory jurisdiction. 529 U.S. 120, 142 (2000).  In other words, because Congress has narrowly tailored data-security legislation through several legislative acts targeting data-security in specific sectors of the economy, the FTC may not generally establish data-security standards for the private sector.

Unpersuaded by Wyndham’s inconsistency arguments, the Third Circuit held that the FTC may bring unfairness actions against companies whose inadequate cybersecurity resulted in consumer harm.  2015 WL 4998121, at *8.  The Court affirmed the district court’s conclusion that subsequent data-security legislation complements—rather than precludes—FTC’s authority.

Following the Third Circuit’s recent ruling and considering the ongoing rise of cybersecurity breaches across all industries, companies should understand the potential litigation risks they face pursuant to the unfairness prong of §45(a).  Notably, the Third Circuit highlighted that prior to Wyndham the majority of cases brought under the auspices of the Act’s unfairness prong have resolved in settlement—not unlike claims brought under the False Claims Act, an authority now notorious for reaping high settlements.  Although the Act does not permit trebling of damages as is allowed under the False Claims Act, civil penalties pursuant to 15 U.S.C. §45 are limited to $10,000 for each violation—thus raising addition questions about what constitutes a “violation.” We will continue to monitor this interesting intersection of cybersecurity and product liability litigation.

After two highly-publicized failures in 2010 and 2013, the first prescription drug to enhance women’s sexual drive – known as “Female Viagra” or “the little pink pill” – succeeded in winning regulatory approval last week. The Food and Drug Administration’s Aug. 18 decision was not entirely surprising, given that an advisory committee of outside experts had recommended in June the drug be approved – albeit with precautions required to ensure that the drug was not overused. The FDA is not required to follow the advice of its committee (which in this case voted favorably by 18 to 6), but usually does so.

Although the approval has been heavily touted as a victory for women, Flibanserin, manufactured by Sprout Pharmaceuticals and marketed as Addyi, is actually the first drug approved to treat a lowered or absent libido for either sex. Viagra and other drugs available for men are not approved to increase desire.

Specifically, the FDA approved Addyi to treat “acquired, generalized hypoactive sexual desire disorder (HSDD) in premenopausal women.” Some surveys estimate that HSDD affects about 10 percent of women.

According to the agency’s press release, the drug is approved for women whose loss of sexual desire causes marked distress or interpersonal difficulty and is not the result of illness, relationship problems or side effects of other medicines. Similar to some anti-depressant and anxiety medications, Addyi is thought to work by changing the balance of certain brain neurotransmitters like dopamine and serotonin.

The little pink pill’s road to approval has been an interesting one. After Addyi’s second FDA denial in 2013, a coalition called Even the Score began actively lobbying for the drug’s approval (the agency’s rejection struck many women’s groups as unfair in light of the relatively speedy approval of Viagra in the 1990s, and even prompted gender bias accusations against the FDA.) For the last 18 months, Even the Score has rallied together a highly visible women’s sexual health campaign in support of “Female Viagra,” a movement some have analogized to the lobbying efforts by advocacy group Act Up that pushed the FDA on AIDS drugs in the 1980s.

Some women’s groups are claiming Addyi’s approval is the biggest breakthrough for female sexual health since the oral contraceptive. But critics of the campaign say that advocates have co-opted the women’s movement to pressure federal regulators into approving a drug that is at best minimally effective and at worst the cause of serious side effects.

Significantly, Addyi’s label has a boxed warning – the strongest kind – saying the drug should not be used by those who drink alcohol, since that combination can increase the risk of severely low blood pressure and fainting. According to the FDA’s website, the most common adverse reactions associated with the use of Addyi are dizziness, somnolence (sleepiness), nausea, fatigue, insomnia and dry mouth. Women are advised to stop using the drug if they see no result after eight weeks.

In apparent response to the advisory committee’s precaution that the drug not be overused, Sprout Pharmaceuticals has said it would not advertise on radio or television for 18 months after the drug’s approval. Cindy Whitehead, the chief executive of Sprout, declined to forecast sales of Addyi, and said that the company would focus its marketing on doctors, not consumers.

As our readers can probably predict, some doctors will likely prescribe the drug beyond approved uses in the label (i.e., “off-label” use), which they are allowed to do. For example, although the drug was approved for premenopausal women only, physicians may prescribe it for postmenopausal women as well. Some may even prescribe the drug off-label to men.

Critics of the drug have penned letters to the FDA, urging it to reject Addyi despite the advisory committee’s favorable vote. Concerns voiced in the letter include that it is unreasonable to expect that young women taking Addyi would refrain from drinking alcohol, as well as Sprout’s financial backing of the public relations campaign that presumably played a large part in persuading the committee.

The most common question mark surrounding the drug’s approval, however, is whether low sexual desire in women is actually a medical condition. Even if one rules out a host of common factors of flagging desire – relationship troubles, poor body image, cultural messages – the science of this affliction is not well-understood. Treating with a pharmaceutical drug what is arguably not a medical condition at all has many critics raising the big red flag on the little pink pill. (Amusingly, one letter to the FDA from sex researchers in the Netherlands and Belgium said the drug was based on the mistaken notion that lack of spontaneous sexual desire was in any way abnormal.)

At this time, it is unclear how much the drug will cost or whether insurance companies will cover it. What is immediately clear, however, is that should the pill ultimately make it to market (target date: October 17), it will undoubtedly be the subject of any number of products liability claims, which we will be sure to monitor. The uncertain nature of this “condition,” coupled with the colossal hype surrounding its approval, can almost guarantee that Female Viagra may have the roughest leg of its journey yet ahead.

 

 

After more than twenty years of litigation, a dispute between Central American banana farmers and the Dole Food Company, Inc. (“Dole”) and other related companies may finally have run its course.  Farmers first filed suit in Texas state court in 1993 alleging sterility and other health complications resulted from exposure to the pesticide dibromochloropropane (“DBCP”).  Since then, the claims have bounced around between various US jurisdictions in a state of what can only be described as procedural purgatory.

At the time we last reported on the juridical saga in October 2011, courts in California and Florida had refused to recognize judgments entered against Dole in Nicaraguan courts.  Meanwhile, back on the banana farm, Dole was poised to settle the claims of more than 5,000 plaintiffs, potentially resolving thirty-three lawsuits in Nicaragua and five lawsuits in the US.  Almost a year after that blog post, counsel for the 5,000 plaintiffs finally met the conditions that would trigger Dole’s payments—namely, obtaining a signed release from each plaintiff and procuring the dismissal of the thirty-eight lawsuits.  But just as these suits were ending, others were ramping up.

As we previously noted, seven new DBCP cases were filed in Louisiana federal court in June 2011.  In September 2012, the District Court for the Eastern District of Louisiana granted summary judgment in favor of Dole on the basis that the claims were time-barred, and the Fifth Circuit later affirmed.  While the summary judgment motion was pending, however, plaintiffs filed identical lawsuits in Delaware federal court.  In Delaware, Dole moved to dismiss based on the application of the first-filed rule, which requires cases of concurrent jurisdiction to be decided by the court that first had possession of the subject.  The Delaware District Court agreed that the first-filed rule applied and dismissed the action with prejudice.

On appeal before a panel for the Third Circuit, Appellants argued that the Delaware District Court abused its discretion in dismissing with prejudice instead of staying the action.  In a 2-1 decision issued last week, the panel found that the District Court did not abuse its discretion in dismissing the action with prejudice based on the fact that the plaintiffs “were blatantly forum shopping and were attempting to get a second bite at the proverbial apple.”  The panel concluded, “Just as we have held that forum shopping is a basis for departing from the first-filed rule, it can also be a basis for enforcing the rule.  Here, the Appellants not only filed first, but filed second as well.  This duplication of litigation was of their own making and it was not an abuse of discretion for the Delaware District Court to dismiss their second-filed complaint with prejudice, instead of staying the matter.”

The dissenting judge agreed that the first-filed rule applied, but argued that the District Court’s decision to dismiss with prejudice instead of stay the action was contrary to caselaw and out of sync with other Courts of Appeals that have addressed the issue.  The dissent reasoned that dismissing with prejudice is inappropriate if “it could cause properly presented claims to go unheard,” and “[b]ecause the Louisiana court dismissed on procedural grounds, the Delaware District Court’s dismissal of the plaintiffs’ claims—with prejudice—effectively ends the plaintiffs’ lawsuit.”

Whether or not this is the end of the road for the banana farmers, the broad take away for corporate defendants is to never underestimate the importance of pursuing procedural challenges with zeal.  Both the majority and the dissent recognized that despite more than twenty years of litigation across numerous jurisdictions, no US court has ever heard the merits of the banana farmers’ claims.  Each proceeding simply added another layer to the litigation’s complex procedural history, which the Third Circuit aptly characterized as “labyrinthine.”

Careful Gatekeeping Excludes Questionable Expert Methodology in Cymbalta Suit

August 17, 2015

A ruling in one of the Cymbalta cases last week confirms that Daubert requires an expert’s testimony to be based on his particular area of expertise and on a methodology recognized by a community greater than one. Plaintiff Erin Hexum is one of many who claim Eli Lilly and Company (“Lilly”) failed to warn her of […]

Read the full article →

Recent Decision Rejects Ethnicity As A Factor For Determining Future Lost Earnings

August 12, 2015

When it comes to proving damages in a case where future lost earnings are at issue, there’s a familiar cadence: the plaintiff puts on evidence that seeks to maximize potential future earnings and the defense rebuts with evidence that minimizes future earning potential, sometimes relying on statistics and data concerning race and ethnicity.  Given the recent decision by Judge […]

Read the full article →