ThePopTort

Generic Drug Industry: “Catch Me If You Can”

These days when you are prescribed a drug, about 90 percent of the time you end up with the generic version. Most people don’t know that the generic drug industry has complete immunity for marketing drugs it knows to be unsafe. This is thanks to recent U.S. Supreme Court decisions (beginning in 2011), followed by the 2018 Trump FDA withdraw of an Obama administration proposed regulation that would have fixed the problem.  

This regulation would have allowed consumers harmed or killed by a generic drug due to the drug’s inadequate labeling or defective design, to hold the manufacturer accountable in court. It would have restored rights to injured patients that were taken away by the U.S. Supreme Court in 2011.

Incredibly, we were almost there with a rule change. Obama’s FDA proposed the rule change, had a powerful public hearing about what these Supreme Court decisions had done to people (here’s our testimony) and received many comments in support of the change. (This from us and other consumer groups.) But generic drug industry lobbyists were already swarming the agency, guns ablazin’. Don’t do this, they screamed. Generic drug prices will skyrocket if you make us accountable.

We all knew this was bogus. But that’s not the shocking part.

At the same time these companies were jumping up and down about the rule change, they were illegally raising prices on drugs to such an extent (e.g., “1,215 generics, many of them the most prescribed drugs, jumped on average more than 400 percent in a single year”), that their activities are now considered perhaps “the biggest price-fixing scheme in U.S. history.” In fact, the Attorney General of Connecticut, William Tong, is calling the generic drug industry “the largest private sector corporate cartel in history.”

Shame on the generic drug industry.

As reported last night on 60 Minutes,Tong’s office has been examining the generic drug industry for almost five years. On Friday, with massive evidence of fraud, more than 40 other states joined Connecticut in filing a 500-page price-fixing lawsuit against the generic drug industry. (At least state AG’s still have the right to sue these companies.) Tong’s office found evidence of price-fixing involving “every kind of drug that touches our everyday lives.” (The drugs include “treatments for diabetes, cancer, arthritis and other medical conditions.” ) And they are putting “Americans' lives at risk.”

His office was able to catch the fraud with some stealth and tedious law enforcement techniques, leading them to “hard evidence, in the form of text messages, emails, documents, witnesses that demonstrate clearly that [the price hikes weren't] about product shortages. It was about profit. It was about cold, hard greed.” As far as the average consumer, said Tong, “It's devastating. it affects health insurance premiums and health insurance plans. It impacts Medicare and Medicaid. And it is a chain reaction that drives up the price of American healthcare to unnatural heights.”

The lawsuit, “also names 15 individual senior executives responsible for sales, marketing and pricing.” It says that by 2012, for example, “Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the United States” as they sought to “significantly raise prices on as many drugs as possible.” They picked companies with which it already had “very profitable collusive relationships,” and developed understandings to lead and follow each other’s price increases,” which “resulted in many billions of dollars of harm to the national economy over a period of several years.”

Kelley Dougherty, a Teva vice president, said, “The allegations in this new complaint, and in the litigation more generally, are just that — allegations … The company delivers high-quality medicines to patients around the world and is committed to complying with all applicable laws and regulations in doing so.”

High-quality medicine. So that’s another thing. NBC is coincidently running a frightening story (featured on this morning’s Today Show) about tainted generic drugs manufactured oversees, where most are made. As the Center for Justice & Democracy noted in its 2013 report, “America's Unaccountable Generic Drug Industry; How Legal Immunity Could Be Making You Sick,” generic drugs are manufactured in countries like India and China, to supposedly “keep prices low." (Sound familiar?) In these countries, the FDA rarely inspects factories or the supply chain. History shows that generic drugs or ingredients can be manufactured in dilapidated, dirty factories. And now, one former FDA inspector is ringing an alarm.

The main NBC story focused on the recent recall of the very popular blood pressure generic drug, valsartan, which apparently contained a carcinogenic “contaminant formerly used in the production of rocket fuel.”

The valsartan recall came as little surprise to Massoud Motamed, a former inspector with the U.S. Food and Drug Administration (FDA). More than a year before the notices went out, Motamed had tried to sound the alarm on what he flagged as potential systemic problems at two facilities in China and India that produce the active ingredients in generic valsartan and other blood pressure medications.

Speaking out publicly for the first time, Motamed told NBC News that the FDA ultimately overruled his recommendation to crack down on one of the plants. Perhaps more alarming, he says the issues at the two overseas drug production facilities are hardly unique.

"This is only the tip of the iceberg," Motamed said in an exclusive interview.

Blomberg wrote about some of this earlier this year, noting,

Data integrity was also at the heart of FDA inspector concerns at a plant halfway across the world, where Zhejiang Huahai Pharmaceutical Co. Ltd. was supplying the active ingredient valsartan—a widely used treatment for high blood pressure that is taken alone, as well as sold in combination with other cardiovascular drugs—for major pharmaceutical companies such as Teva Pharmaceutical Industries Ltd., the largest generic drug maker in the world. 

The inspection in May 2017 found that the Chinese ingredient maker ignored quality checks that showed unnamed drugs didn’t meet U.S. standards. Four months later, higher-ups at the FDA once again overrode the concerns of those on the ground who wanted to slap Zhejiang Huahai with harsher penalties. Instead, the agency gave the company a chance to fix its problems.

Motamed says “a more systemic issue has largely gone unreported: FDA inspectors struggling to keep up with foreign drug manufacturers that may bury or hide problems in their production. Last year, the FDA inspected only one in five registered human drug manufacturing facilities abroad, according to agency data.”

Catch ‘em if you can.

Law Day: Out of the Mouths of Jurors

Many judges and scholars have written eloquently in defense of the civil jury, warning against even limited intrusions into the right to civil jury trial. Take the late conservative Supreme Court Chief Justice William H. Rehnquist, who once wrote, “The right of trial by jury in civil cases at common law is fundamental to our history and jurisprudence....  A right so fundamental and sacred to the citizen, whether guaranteed by the Constitution or provided by statute, should be jealously guarded....” 

So true. Yet some of the most powerful sentiments about civil juries come not from judges or scholars, but from jurors themselves. Jurors are just ordinary people randomly chosen from the community, making decisions about society’s tolerance (or intolerance) for certain types of behavior, deliberating and rendering verdicts, and then fading anonymously back into the community. It’s an incredible system.

Despite being enshrined in the Seventh Amendment to the U.S. Constitution and nearly every state constitution, the civil jury system has been under siege for several decades now. The power and authority of civil jurors, who cannot be bought-off by special interests, represent a tremendous threat to the power structure in this country. Today, between so-called “tort reform” laws in most states, the recent proliferation of forced arbitration, and the dramatic decrease in civil jury trials, the entire system is on shaky ground. So what to do?

Here's one thing we might try. In all the political fighting around these issues, sometimes we forget to listen to those at the core of this debate - jurors themselves. Why do civil juries do what they do, and how do they feel when their power is taken away? There are two main reasons juries render verdicts for plaintiffs. One is to provide fair and adequate compensation to the injured.  Second is to hold wrongdoers accountable. Here are just a few examples – in their own words.

Compensation to the injured

1. The case of James Todd Beason 

James Todd Beason, an Texas oilfield worker, was severely injured when a crane fell on him, leading to two amputations on his left arm. He now “lives daily with severe nerve pain and has several other health complications as a result.” When he sued the company in Oklahoma, he and his wife were awarded $9 million in economic damages and $6 million in noneconomic damages. Little did the jury know, however (because they were not told), that Oklahoma’s state lawmakers had capped noneconomic damages at $350,000. So the judge was forced to drastically reduce this verdict.

As recently reported in Tulsa World,

Beason said he will never forget the reaction of the jury when they were told about the cap.

“Grown men and women came outside and were in tears,” he said. “I remember a gentleman came up and he was bawling. He was crying. He said, ‘We thought we were doing the right thing. We thought we were taking care of you and your family.’”

Fortunately, the Oklahoma Supreme Court was listening, and just recently invalidated the $350,000 cap, finding it unconstitutional.  Chalk one up for those jurors!

2. The case of Stephen Olsen

Steven Olsen is blind and brain damaged because, as a jury ruled, he was a victim of medical malpractice when he was two years old.  He fell on a stick in the woods while hiking. The family’s HMO refused to do an $800 CAT scan, which would have detected a growing brain mass caused by the stick.  

When they sued the HMO, a jury awarded $7.1 million in noneconomic damages for Steven’s avoidable life of suffering. But the judge was forced to cut this award to $250,000, the amount of California’s noneconomic compensation cap. This outraged the jury. Jury foreman Thomas Kearns then wrote a letter published in the San Diego Union Tribune, in which he described how they had reached their verdict:

“We viewed video of Steven, age 2, shortly before the accident. This beautiful child talked and shrieked with laughter as any other child at play. Later, Steven was brought to the court and we watched as he groped, stumbled and felt his way along the front of the jury box.  There was no chatter or happy laughter.  Steven is doomed to a life of darkness, loneliness and pain. He is blind, brain damaged and physically retarded.  He will never play sports, work, or enjoy normal relationships with his peers.  His will be a lifetime of treatment, therapy, prosthesis fitting and supervision around the clock.”

This anti-jury cap is still the law in California.

Accountability

1. Whirlpool

Some years ago, an Alabama jury reached a $581 million verdict against Whirlpool, which had dealers all over the state soliciting — door-to-door — poor, unsophisticated and elderly customers to purchase satellite-TV dishes for $1,100 plus 22 percent interest.  The same equipment could be bought at an electronics store for $199, amounting to an effective interest rate of 300 percent.  One witness who was sold a satellite dish was legally blind. Another had less than a 5th grade education.  A former agent who later quit testified that Whirlpool specifically targeted illiterate and unsophisticated people, and that he had trained others to lie about the terms of the financing which included a deceptive credit card scheme.

Why $581 million? A juror who spoke to one of the lawyers in the case said that the jury was “sick” at how Whirlpool treated poor, uneducated people, misrepresenting to them from the very start.  The juror also said the jury was “inflamed” that there were still “thousands of people out there” who were victims of the scheme, but that Whirlpool had not helped those people.  They felt their verdict was important “to get their Whirlpool’s attention.”  (See more here.)

The verdict was eventually cut nearly in half – to $300 million – and the parties later settled for an undisclosed sum. Within a couple weeks of that case the Alabama legislature passed a law capping punitive damages.

2. McDonald’s Coffee Case.

In the documentary film, Hot Coffee, which tells the story of the often unfairly-maligned McDonald’s coffee case, two jurors described why the jury decided to hit the company with $2.7 million in punitive damages (later reduced by the judge). An article in Reader’s Digest explains:

The trial revealed that [plaintiff Stella] Liebeck was not alone. McDonald’s had received more than 700 complaints about burns from hot beverages over the previous ten-year period.… “There was a person behind every number, and I don’t think the corporation was attaching enough importance to that,” juror Betty Farnham told the Wall Street Journal.

After seven days of testimony and four hours of deliberation, the jurors sided with Liebeck. They awarded her $200,000 in compensatory damages. But because she caused the spill, they reduced the amount to $160,000. The jurors then awarded her $2.7 million in punitive damages, which, they reasoned, was equivalent to about two days’ worth of McDonald’s coffee sales. The total was $2,735,000 more than Liebeck’s lawsuit had requested.

“The only way you can get the attention of a big company [is] to make punitive damages against them,” said juror Marjorie Getman. “And we thought this was a very small punitive damage.”

Jurors are understandably angry when they find out that their efforts to be fair and just are cheapened and devalued.  As we celebrate Law Day today, it is important to be aware that we are reaching a new level of disrespect for the civil jury system in this country. The nation’s founders would clearly be angry too.

Frontier Justice II: Forced Arbitration that Shocks the Conscience

Yesterday, the Center for Justice & Democracy released its newly-updated “Cases Tossed Out of Court Because of Forced Arbitration Clauses and Class Action Bans.” We thought we’d highlight some of the newer cases. If you thought forced arbitration clauses and class action bans couldn’t possibly, legally be used in cases like these, think again. They could. And they were:

• A 90-year-old nursing home resident was thrown against a wall by a nurse’s assistant, dying from injuries. Her death was ruled a homicide and the assistant was criminally charged.  Yet her family’s wrongful death suit was thrown out of court.  A forced arbitration clause had been buried in the nursing home’s admission agreement, which was signed by her daughter.  
• A 12-year-old boy was sexually assaulted and stalked at his boarding school. When his father sued the school, the case was forced into secret arbitration because he had signed a student enrollment agreement containing an arbitration clause.
• An employee suffered repeated sexual harassment and retaliation at a consumer goods refurbishing company. During this time, each employee was told to sign a new employment agreement containing a forced arbitration clause. This employee refused to do so, both orally and in writing. Nonetheless, a court forced her into arbitration.
• Video-game giant Valve allowed underage gambling through its online Steam Marketplace platform and video games like “Counter-Strike: Global Offensive.” A court agreed with the company that children had agreed to arbitrate any disputes when they created their accounts and that their parents, though non-signatories, were also bound by those terms.
• Wells Fargo, the scandal-plagued bank, continues to use forced arbitration clauses and class action bans in customer agreements, and to strong-arm its customers into arbitration.  For example, since 2009, it has been litigating against - and forcing into arbitration - customers that it defrauded, specifically by charging them illegal overdraft fees. . 
• Hertz, which also operates Dollar and Thrifty, uses shady debt-collector Viking Credit Services to bill customers for costly car damage months after they had returned undamaged rental cars.  The court said customers has “agreed” to arbitration because in order to rent the cars, they selected ‘I Agree’ at the automated airport kiosk.
• Washington, D.C.’s Aveda Institute, which charged cosmetology students $26,000 tuition, used students to sell products instead of providing them necessary coursework to prepare for the state board exam. A forced arbitration clause, buried in their enrollment agreement, led a court to throw out their class action, compelling them to privately arbitrate.
• Approximately 57 million customers and 600,000 drivers of Uber, who were victims of the company’s personal identification data breach that the company waited a full year to reveal, were forced to arbitrate all claims because they “agreed to” forced arbitration when signing up with Uber.
• Employees at Fiat Chrysler, including the company’s diversity manager, brought a class action alleging systemic discrimination and retaliation. Six claims were dismissed because of forced arbitration clauses in employment contracts. Two other employees, who joined the company before these clauses were included, were allowed to proceed with a much smaller class action.
• A Red Robin employee brought a class action for illegal wage theft. A class of over 18,500 workers was certified, yet months later more than 2,600 new hires were thrown out of the case because they had “agreed” to arbitration. The court said they could “scroll up or down to review the two arbitration documents before signing,” were able to “download the unsigned Arbitration Agreement as a Word document,” were sent a PDF copy of the signed agreement to their personal email, and then failed to "opt out."

These last two cases show how splitting victims in two can lead to terribly unfair, bizarre results, where victims experiencing the exact same type of wrongdoing but are forced to arbitrate would be unable to benefit from any larger settlement and in fact, could be left with nothing.

It is time for Congress to do something about this!

Forced Arbitration: Frontier Justice in America’s Legal System

Next time you’re talking to a corporate CEO, ask them this: Suppose the company found itself in court for one reason or another.  The judge had no legal training. The process had no real rules. The judge was neither required to follow law nor issue a written legal opinion. Once the judge ruled, their decision was enforceable with the full weight of the law even though it might be legally incorrect. And it all happened in secret. No legal precedent could ever be established to guide the company’s – or any other company’s – future conduct. Would you consider this a system that promotes legal predictability and certainty for businesses, or not?

I think we all know the answer. Yet what I just described are critical elements of “forced arbitration.” We usually talk about forced arbitration as a corporate-designed private, secretive process of dispute resolution rigged against consumers, employees, and small businesses. But for corporations who must rely on a strong, stable civil justice system for guidance on how to act, it’s unpredictable, uncertain, and mostly useless. And that’s exactly the point Rep. Katie Porter made in her questioning last week of the U.S. Chamber of Commerce’s Tom Quaadman, at a U.S. House hearing called, “Putting Investors First: Reviewing Proposals to Hold Executives Accountable.”

The context of her questioning was the concern that the Securities and Exchange Commission might be willing to succumb to extremist pressure and, for the first time, allow public companies to force defrauded investors into private arbitration to resolve securities disputes. Such a process would not only harm investors, but also would undermine “the crucial role shareholder lawsuits play in deterring financial fraud and protecting the integrity of U.S. capital markets.” 

Getting directly at the arbitration problems described above, Rep. Porter asked Mr. Quaadman, “Do you think the certainty of law is important to companies?” and “Is legal uncertainty positive?” Immediately he knew where she was going. As she tried to nail him, he did his best to slither out of it, ultimately pivoting the discussion to a completely different system, called FINRA (the Financial Industry Regulatory Authority). She wasn’t asking about FINRA. FINRA rules would not apply to shareholder arbitration. But she let it go.  

Huge props to her, however, for starting this conversation. Clarity. Predictability. Certainty. These are recurrent themes coursing through the business community’s arguments for “tort reform.” “Business certainty” is the reason states cap punitive damages and enact a myriad of liability limits. It’s the reason Congress sometimes considers federalizing state tort laws. It’s the reason corporate groups seek to establish uniform legal standards, curtail federal agency power, preempt state tort remedies, or otherwise block plaintiffs’ access to the courts. Corporations make this argument to legislators. They argue it to judges. They argue it to federal agencies. No branch or level of government has been exempt.

Please, take their word for it:

• Sponsors of 2011 Tennessee legislation capping damages: “This new law will provide certainty and predictability for businesses.”
• The American Legislative Exchange Council’s Civil Justice Task Force:  [We] are at the fore-front of efforts to restore fairness and predictability to state civil justice systems … that treats defendants in a consistent manner.”
• U.S. Chamber of Commerce: “[A]bsence of uniformity [in the law] creates damaging uncertainty for businesses in this sector.… [U]ncertainty about the scope of a federal statute has harmful consequences for any national business whose conduct is regulated by that statute.” 
• National Association of Manufacturers: State tort claims should be preempted because they subject businesses to “uncertain, unpredictable” liability. 
• U.S. Chamber of Commerce and the National Association of Manufacturers: Venue and personal jurisdiction rules “give[] a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.…" This “[p]redictability is valuable to corporations making business and investment decisions.”
• Coalition to Save Local Businesses (U.S. Chamber of Commerce, the National Retail Federation, and the International Franchise Association): Expanding liability under labor laws “would cause uncertainty for businesses.”
• National Small Business Association: State by state products liability laws “create uncertainty for businesses selling in a national marketplace.”
• George Mason University School of Law: Competition is harmed “[i]f businesses are unsure about where the line between legal and illegal behavior is drawn.”

Even when it comes to investor protection, they make the argument.  Here’s the U.S. Chamber, again: To foreign investors, the legal system can be “a source of significant investor uncertainty” and “international investors are not alone in that concern. It is a concern that is shared by U.S. businesses in general.” And while we generally agree with none of that, one thing is clearly true: the last thing the U.S. Chamber should support now is a legal system for investors that’s secret, with no trained judges, no rules, no record, no decisions with any precedential value and which actually might be legally wrong, and provide basically nothing to help companies establish what’s legal and what’s not. 

Big business lobbyists like to complain about the unpredictability of jury awards even though data show them to be generally consistent and conservative. But when it comes to unqualified legal uncertainty for defendants, forced arbitration wins that contest by orders of magnitude. It’s about as uncertain, unpredictable and unclear as a legal system could be.  

Purdue and Sackler’s Rat Pack

I hesitate to rely on “rat” analogies because, as PopTort fans know, we’re based in New York City and no one here likes to be reminded of that little problem. But when I think of the creators of the opioid epidemic and their “tort reform” apologists – including OxyContin makers Purdue Pharma and its generic cousin Rhodes, the Sackler family which controls Purdue, and groups like the American Tort Reform Association (ATRA) and the U.S. Chamber of Commerce – “cornered rat” is one image that seems appropriate. 

First to refresh, evidence gathered from state opioid litigation and recently reported in the New York Times can be summarized as follows:

• As the country’s addiction crisis worsened, the billionaire Sackler family decided to “increase their profits by selling treatments for the very problem their company had helped to create: addiction to opioids.” It was “named Project Tango.”
• By then, the company had already pled “guilty to a federal felony and paying more than $600 million in criminal and civil penalties.”
• The pharmaceutical industry developed “a multipronged approach” to “reshape public perceptions about pain and chip away at physicians’ reluctance to prescribe opioids, long known to be addictive, by describing an 'epidemic' of untreated pain affecting 100 million Americans.”
• Manufacturers funded “front groups” that were “disguised as ‘unbiased’ sources of cutting-edge medical research and information” and trained “sales representatives focused on doctors who were high-volume opioid prescribers, as well as inexperienced providers and primary care physicians who knew little about pain management, encouraging them to prescribe higher and higher doses for longer stretches of time.” These “sales representatives could earn tens of thousands of dollars in bonuses and were rewarded with trips to tropical islands.”
• As reports of overdoses grew, Richard Sackler urged the company to blame the patients. “We have to hammer on abusers in every way possible,” he wrote in a 2001 email disclosed in documents filed in the Massachusetts case. “They are the culprits and the problem. They are reckless criminals.”

Like all cornered rats, Purdue and the Sackler’s are trying to fight their way out of this, and “tort reform” groups are right by their side, lashing out at the principal way the industry is now being held to account – litigation. Importantly, this is public enforcement litigation brought by state and local public officials, who in addition to trying to uncover the truth (all the above information comes from evidence in state AG lawsuits), are trying to re-coup the extraordinary costs of responding to a crisis that was deliberately dumped in their lap.

In December 2018, 60 Minutes did a feature story on Mississippi’s former Attorney General Mike Moore, one of the attorneys who “engineered the historic 1998 settlement under which Big Tobacco paid billions to address smoking-related health issues.” He happens now to be one of the attorneys suing opioid manufacturers and distributors, “coordinating with 30-plus states that have filed suit, and with many of the local governments, nearly 1,500 cities and counties that also are suing.”

Back in 2017, a PR firm that works with ATRA pitched the following campaign strategy to Purdue (information uncovered in the Oklahoma AG’s lawsuit against the company):

CAMPAIGN GOALS AND OBJECTIVES

Our goal is to make state attorneys general think twice about joining the litigation and establish a credible watch-dog organization to monitor the use of contingency fee counsel should other state attorneys general join the suit. While specific strategies and tactics would be tailored to each Individual state attorney general, our initial program recommendations include the following objectives:

Leverage existing legal reform platforms-especially groups focused on outside use of contingency fee counsel-to promote our message and apply pressure.

Shine a spotlight on the plaintiff's attorneys involved in the cases to call into question their credibility and personal profit motive.

STRATEGY

To accomplish these goals and objectives, we recommend a three-track strategy:

Track One: Identify and conduct research on the primary plaintiff's attorneys involved in the suits, including Mike Moore, and demonstrate their methods and personal monetary motivations.

It goes on. The campaign was partly successful, taking credit for at least one early Wall Street Journal editorial attacking Moore and these lawsuits, bragging that “team ATRA worked with this writer over the last couple of weeks on this using research we produced.”

No doubt. But what they couldn’t do is stop state and local governments from moving forward, and not only against Purdue, but also against the Sackler's. Right now, the Attorneys General of New York, Massachusetts, Connecticut, Rhode Island and Utah “have filed suit against members of the [Sackler] family [while] last month, a coalition of more than 500 counties, cities and Native American tribes named the Sackler’s in a case in the Southern District of New York, bringing the family into a bundle of 1,600 opioids cases being overseen by a federal court judge in Cleveland.”

So now there’s a new corporate strategy brewing. The U.S. Chamber of Commerce – the nation’s largest lobby force which represents the drug industry among many others - has stepped in. The Chamber wants new state-based legislation with a very targeted goal: wiping out all the city and county lawsuits.  And just like ATRA, the Chamber is starting this by planting stories in major publications. In this case, it has produced a “study” fabricating urgent reasons to end these lawsuits, and trying to get reporters to bite.  Bloomberg unfortunately did, for one.

This effort is boosting at least a couple different Chamber goals. The first is obviously to try to weaken the opioid litigation.  The Chamber can’t defend the reprehensible conduct of Purdue and other opioid manufacturers, so it is trying to weaken the litigation against them. Pretty classic.

The second strategy, which seems also part of a larger one, was revealed in today’s extraordinary new investigation by USA TODAY, The Arizona Republic and the Center for Public Integrity. The articles discuss, among many things, how corporate and conservative interests are lobbying for state "preemption" bills. Writes the investigative team:

These laws, in effect, allow state legislators to dictate to city councils and county governing boards what they can and cannot do within their jurisdiction….  

USA TODAY’s algorithm found more than 100 such bills had been introduced on an expanding array of topics.

Because preemption bills have almost exclusively been advanced by Republicans, many of whom rail against the excessive mandates of Washington, D.C., critics see such legislation as the height of hypocrisy.

"There's real ... hypocrisy in many of these so-called conservative legislators trying to rip away local control when they preached for years that a government that's closest to you ... is most responsive to you," said Dawn Penich-Thacker, who campaigned to overturn Arizona's school-voucher expansion with a public vote.

All I know is, the Bloomberg headline “U.S. Chamber Warns Cities are Litigating Too Much” makes a whole lot more sense now.

Ring around the nosey, a pocketful of cozy

When one set of commercial pilots is unable to stop a Boeing jet’s fatal nose dive, “difficult questions” are raised about the safety of these planes. When a second set of commercial pilots is unable to stop another fatal nose dive of that same model plane, the FBI is called in. Suddenly, it becomes obvious to everyone that the “cozy relationship” that has long infected the relationship between regulators and corporations – not just in aviation but in many areas - can have catastrophic consequences and might be criminal. But it shouldn’t take a catastrophe.

Regulatory capture. Revolving door. These concepts are nothing new. Back in 2005 during the George W. Bush administration, for example, a study from the Revolving Door Working Group showed how federal agencies were then captured by the very industries they were supposed to regulate, and were led by a revolving door of industry figures. According to the study, the appointment of corporate executives and business lobbyists to key posts in federal agencies was a rampant problem. Under Obama, things were maybe a bit better but still not good. Under Trump, it’s a calamity. 

Shortly after he took office, Trump “signed an executive order that bars former lobbyists, lawyers and others from participating in any matter they worked on for private clients within two years of going to work for the government.” But by last year, according to the Associated Press, Trump had already “issued at least 37 ethics waivers to key administration officials at the White House and executive branch agencies.” For example, “[o]f 59 EPA hires tracked by the AP over the last year, about a third worked as registered lobbyists or lawyers for chemical manufacturers, fossil fuel producers or other corporate clients.” Here are some other examples:

Health and Human Services asked for waivers for senior counselor to the secretary Keagan Lenihan, a registered lobbyist who recently worked for a pharmaceutical and health services company, and for HHS chief of staff Lance Leggitt, who recently lobbied on behalf of his law firm’s health law practice group.

Agriculture Department policy adviser Kailee Tzacz is allowed to “participate personally and substantially in matters regarding the Dietary Guidelines for Americans,” a guide that offers nutritional information and recommendations.…

Although [Craig Holman of Public Citizen] was initially optimistic when Trump issued his executive order, Holman said Wednesday, “It is now quite evident that the pledge was little more than campaign rhetoric. Not only are key provisions simply ignored and not enforced, when in cases where obvious conflicts of interest are brought into the limelight, the administration readily issues waivers from the ethics rules.”

Which brings us back to aviation.  To be honest, I naively thought this was one area where the safety interests of regulators, manufacturers and airlines were generally aligned. It couldn’t possibly be in any of their interests to facilitate plane crashes. Airline safety regulation has even been propped up as a model for other industries, like health care.  About a decade ago, Health Affairs wrote: 

The movement to improve quality of care and patient safety has grown, but examples of measurable and sustained progress are rare. The slow progress made in health care contrasts with the success of aviation safety. After a tragic 1995 plane crash, the aviation industry and government created the Commercial Aviation Safety Team [CAST] to reduce fatal accidents. This public-private partnership of safety officials and technical experts is responsible for the decreased average rate of fatal aviation accidents. We propose a similar partnership in the health care community to coordinate national efforts and move patient safety and quality forward.

CAST includes the FAA, airline groups, manufacturers and pilots' associations.  and yup, it still exists. 

Silly us, I guess. As explained by Stephen Mihm, associate professor of history at the University of Georgia, in a Bloomberg piece called “The FAA Has Always Played Cozy With the Aviation Industry”:

The FAA is unusual among federal agencies because it was originally established to regulate and promote an industry. This fostered the unusually cozy relationship between regulators and business that has persisted to the present, even as the agency’s official mandate became exclusively focused on safety beginning in the 1990s.

Yet even then, actual fixes to the law and to the FAA’s mandate were largely cosmetic, with the “FAA’s reluctance to act until planes fell from the sky earned it an unfortunate nickname: the ‘tombstone agency’.… [T]he House Transportation and Infrastructure Committee described in 2008 a 'culture of coziness' between industry and regulators that had led to 'malfeasance, bordering on corruption.'"

For example, in the case of Boeing,

[T]he FAA began allowing Boeing and other manufacturers to certify that their systems comply with federal safety regulations. In effect, Boeing employees assumed the role that FAA regulators had once performed. This has undoubtedly lightened the regulatory load on companies, and it certainly comports with the FAA’s original mandate to encourage domestic aviation. But the recent crashes suggest that this ambition may ultimately undercut the safety of airline passengers.

“Miracle on the Hudson” hero-pilot, Captain Chelsey "Sully" Sullenberger was more blunt In a scathing op ed. He first explained that some of the problems are budgetary:  

For too many years, the FAA has not been provided budgets sufficient to ensure appropriate oversight of a rapidly growing global aviation industry. Staffing has not been adequate for FAA employees to oversee much of the critically important work of validating and approving aircraft certification. Instead, much of the work has been outsourced by designating aircraft manufacturer employees to do the work on behalf of the FAA. This, of course, has created inherent conflicts of interest, when employees working for the company whose products must be certified to meet safety standards are the ones doing much of the work of certifying them. There simply are not nearly enough FAA employees to do this important work in-house.…

To make matters worse, there is too cozy a relationship between the industry and the regulators. And in too many cases, FAA employees who rightly called for stricter compliance with safety standards and more rigorous design choices have been overruled by FAA management, often under corporate or political pressure.

In the case of the Boeing 737 Max, in 2015, “Boeing was particularly eager to get the plane into service quickly, so it could compete with Airbus’s new A320neo,” writes John Cassidy at the New Yorker:

Early on, employees of the F.A.A. and Boeing decided how to divide up the certification work. But, partway through the process, a former F.A.A. safety engineer told the Seattle Times, “we were asked by management to re-evaluate what would be delegated. Management thought we had retained too much at the FAA.” The engineer said that “there was constant pressure to re-evaluate our initial decisions,” and “even after we had reassessed it … there was continued discussion by management about delegating even more items down to the Boeing Company.”

Even the work that was retained, such as reviewing technical documents provided by Boeing, was sometimes curtailed. “There wasn’t a complete and proper review of the documents,” the former engineer added. “Review was rushed to reach certain certification dates.”

The new revelations don’t stop there. “Federal prosecutors and Department of Transportation officials are scrutinizing the development of Boeing Co.’s 737 MAX jetliners,” the Wall Street Journal reported on Monday. “A grand jury in Washington, D.C., issued a broad subpoena dated March 11 to at least one person involved in the 737 MAX’s development, seeking related documents, including correspondence, emails and other messages,” a source told the paper. (The Justice Department and Department of Transportation declined to comment on the Journal’s reporting.)

Sully concludes his op ed by making what seems like an utterly obvious point: “there is a strong business case for quality and safety, that it is always better and cheaper to do it right instead of doing it wrong and trying to repair the damage after the fact, and when lives are lost, there is no way to repair the damage.”

Sexual Assault and Civil Justice, Except for Servicemembers

In the Center for Justice & Democracy’s new report, The Importance of Civil Justice to Sexual Assault Survivors and the Devastating Consequences of “Tort Reform,” you will learn about recent civil cases filed after sexual violence by all types of assailants: Boy Scout leaders, clergy and religious instructors, doctors, Uber drivers, entertainment moguls, massage therapists, restaurant employees, school employees and students, security guards, and sports coaches.

But here’s what you won’t find in that 50-page report: a single case brought by a servicemember. That would include the nearly 15,000 (women and men) members of the military who are sexually assaulted each year, sometimes more than once. 

In every other instance of sexual violence, civil cases can be filed to help ease the financial burdens of an assault, expose abusers and provide a forum to hold perpetrators directly accountable. But if you are a servicemember, who pledged to die for your country and was raped while doing so, there is almost nothing you can do about it.

We have written about this before, but there are good reasons to remind us of the issue again, not the least of which is the change in Congress. It is up to Congress to fix this, and by “this,” we mean the Feres doctrine.

Feres is a 69-year-old policy – created out of whole cloth by the U.S. Supreme Court in 1950 – which bars U.S. military personnel from suing the government for personal injuries suffered while they are in the armed forces. It applies even in the case of a sexual assault. Read more about Feres here and in this great new article, Rethinking Feres, by Professor Andrew F. Popper of American University’s Washington College of Law. 

Dwight Stirling, the CEO of the Center for Law and Military Policy (CLMP) wrote about the injustice of this law shortly after Senator Martha McSally (AZ-R), the first female pilot to see combat, recently said she had been raped by her commanding officer. Noted Stirling,

Fearing career retaliation, some estimates say 90 percent of sex assault victims, like McSally, don't even bother to report.…

It is outrageous that sexual assault is characterized as an occupational hazard of military service. …The only way to fix the system is to empower the victims of military sexual assault to hold their assailants accountable in civil court …It is absolutely the only way.

In January, Rep. Jackie Speier, D-Calif., new chair of the House Armed Services personnel subcommittee, said this would be a priority issue for her. Writes Military Times,

[T]he panel’s guiding focus will be to tackle “critical issues that impact not only our service members but their families who also bear the burden of sacrifice and commitment to our country.”…

[T]he Feres Doctrine debate could lead to some of the most dramatic military policy changes to come out of Congress this year. Speier has been following a handful of court challenges to the legal precedent in recent months, and is planning a hearing on the issue early this session.

This couldn’t come soon enough!

Civil Justice – The Next Big Shiny Object?

Some may wonder why we write about issues that seem so obscure considering the tweeting mob boss in the White House, his allied dictators and fake national emergencies, the obsessions of cable news hosts (“can a sitting president be indicted after all?"). or pick whatever shiny “objet du jour” you like.

Indeed, while news-followers were fixated on Michael Cohen or maybe even Kim Jong-un this week, we watched as Congressperson and Senator after Congressperson and Senator introduced major new legislation – literally bill after bill - to ban the insidious use of forced arbitration clauses and class action waivers in consumer, employment and small business contracts.

Here's the coalition letter in support of the main piece of legislation, H.R. 1423/S. 610, the "Forced Arbitration Injustice Repeal (FAIR) Act." It has 147 House co-sponsors and 32 Senate co-sponsors, and counting. Wow! (See some coverage of the major news conference here, here, here.)

But being in such great company is not the only reason why we stay focused on the civil justice system. Here’s why we really do it.

In 2018, the U.S. Chamber of Commerce spend $95 million lobbying (far more than anyone else), a third of which was spent by the their “tort reform” branch (Institute for Legal Reform); the Chamber’s #1 issue in terms of lobbying reports was “torts;” the Chamber’s #1 bill was H.R. 985, the anti-class action bill, and Mayer Brown (their pro-forced arbitration law firm), led their outside lobbying expenditures. Liability and tort issues may not be shiny but they sure are big in Congress. We need to keep talking about them and hope someone hears.

That’s why we are proud to tell you about the new Loyola Consumer Law Review article from the Center for Justice & Democracy, which discusses the Chamber's push to pass that terrible class action bill in the last Congress, H.R. 985, showing it to be a corrupt and ultimately failed effort. The article shows how the forces actually running things in Congress, like the U.S. Chamber of Commerce, hope you never pay attention to us. They’d prefer to bulldoze over your legal rights with as little notice as possible, thank you very much. 

Not this time, suckas!

Our Love but Mostly Hate for Tech Companies

Have you noticed the latest TV craze? No, not sitcom reboots. Shows are trying to stick into their titles the most “scatological” of the “seven dirty words.” Schitt’s Creek, for example. Or the latest hilarious episode of Documentary Now, "Batshit Valley."

But when I think of that word, I think about how many tech giants really don’t give a “that word” about their customers. Now you might say “hey, didn’t Google just end their practice of forcing their employees to arbitrate all disputes in private, rigged arbitration systems?” Yes they did - after an vigorous and perilous effort by their employees. Writes Bloomberg:

The shift is a victory for Google employees who’ve been organizing on several fronts, including workplace harassment, the treatment of contract workers and what kind of work the company does for government and military groups. The Mountain View, California-based company won’t require third-parties that employ sub-contracted staff for Google to institute the same changes, though. About half of those in Google’s total workforce aren’t official employees of the company.

But it’s something, and it’s something the rest of the tech industry has not yet done (not to mention every other industry.)

But then again, how many times have you clicked “I have read and agreed to the Terms of Service” before conducting your latest online transaction, without any idea that the company just forced you, their loyal customer, into these same kind of "forced arbitration" agreements? That means you can’t sue them in court if, say, they use your personal data illegally or otherwise violate your privacy. Public Citizen put together this “Forced Arbitration Rogues Gallery,” so you can see some of the companies that make you "agree" to this. (Check out this article too, which cites a 2011 class action lawsuit that might be far more difficult to bring today over Google’s current products. The case, In re Google Buzz Privacy Litigation, led to an $8 million settlement with Gmail users “arising out of Google’s disclosure of personally identifiable information without authorization through the defunct site, Google Buzz.”)

We all know that tech companies do a terrible job protecting your privacy and can’t be trusted to self-regulate. That’s why last year, California enacted the California Consumer Protection Act, the strongest privacy law in the nation. As described by Consumer Watchdog:

It would, for instance, allow a private right of action – though with some limits -- in data breach cases.  No such right currently exists. The law ensures:

• The right of Californians to know what personal information is being collected about them.

• The right of Californians to know whether their personal information is sold or disclosed and to whom.

• The right of Californians to say no to the sharing or sale of personal information.

• The right of Californians to access their personal information.

• The right of Californians to equal service and price, even if they exercise their privacy rights.

• That businesses cannot sell personal information of consumers under the age of 16 without explicit consent.

Tech companies like Google fought this law, but they lost. And they are likely to lose again when California moves to close up certain loopholes in last year’s legislation, problems made clear by the recent massive Starwoods/Marriott hack.  Specifically, the bill would “expand[] the requirements for companies to notify users or customers if their passport and government ID numbers, along with biometric data, such as fingerprints, and iris and facial recognition scans, have been stolen.”

As Neema Singh Guliani, senior legislative counsel at the American Civil Liberties Union, pointed out in the Washington Post,

It has often been state legislatures — not Congress — that have led efforts to protect consumer privacy. California was the first in the nation to require that companies notify consumers of a data breach (other states have since followed suit), the first to mandate that companies disclose through a conspicuous privacy policy the types of information they collect and share with third parties, and among the first to recognize data privacy rights for children. Illinois set important limits on the commercial collection and storage of biometric information, such as fingerprints and face prints. Idaho, West Virginia, Oklahoma and other states have passed laws to protect student privacy.

But now, “companies like Amazon, Apple, Facebook and Google are pushing hard for federal digital privacy legislation in 2019, and not quite out of the goodness of their hearts. … Central to all these proposals is the notion that a federal bill should preempt any statewide legislation—like, say, California's—from taking effect.”  Some bills have already been floated.

As Guliani put it, “This seeming willingness to subject themselves to federal regulation is, in fact, an effort to enlist the Trump administration and Congress in companies’ efforts to weaken state-level consumer privacy protections."

And not only that. Imitating the (failed) strategy of Big Tobacco, tech companies are now pressuring Congress to pass some sort of “grand bargain” that would not only preempt state laws, but also would repeal:

…every other existing piece of federal privacy legislation, including landmark laws like Health Insurance Portability and Accountability Act (HIPAA) and Family Educational Rights and Privacy Act (FERPA). Every sector- or issue-specific privacy law would be removed, and state and local lawmakers would be unable to draft stricter, more specific regulations in the future.…

The Children’s Online Privacy Protection Act (COPPA) would be one of the repealed laws. It was authored by Sen. Ed Markey (D-MA) in the late ‘90s, and IT was one of the first pieces of legislation governing the collection of data. The law imposes requirements on companies when it comes to collecting data on children under 13 years of age, which has become a sticking point for a number of tech companies. Both Google and Facebook have been sued multiple times for violating COPPA, and the law is one of the main reasons many web services cut off at age 13.

“As Congress works to provide the American people with a comprehensive federal privacy law, we should build upon—not dismantle—existing safeguards,” Markey said, responding to ITIF’s proposal. “Getting rid of COPPA is literally like throwing the baby out with the bath water.”

Babies? What in the world does Google care about babies?

Happy President's Day!

Some things just speak for themselves.