1. What You Need To Know About The Rise Of Civil Litigation By State Attorneys General
This brown bag is brought to you by the Healthcare Liability and Litigation (HC Liability) Practice Group
April 18, 2011 · 12:00-1:00 pm Eastern
Moderator
Jay A. Martus Sheridan Healthcare INC Sunrise, FL
Speaker
Steven F. Barley
Hogan Lovells US LLP
Baltimore, MD

2. The States are coming, the States are coming!
What you should know about the rise of civil litigation by state attorneys general

3. Overview
This webinar will address 3 questions relating to the increase in AG civil litigation activity:
What is behind the rise in AGs pursuing consumer protection claims against the healthcare industry?
How does this litigation differ from traditional civil litigation?
What should you do about it?

4. What is behind the increase in this litigation?
The price is right
The hurdles are low
The potential recoveries are high
Political motivations
A desire to regulate conduct

5. What is behind the increase in this litigation?
The price is right: The cost of bringing cases can be relatively minimal. AGs can reduce costs by:
Use of outside counsel retained on contingency
Use of existing resources within the AG’s office
Combining resources:
NAAG
NAMFCU
Federal government

6. What is behind the increase in this litigation?
The hurdles are low
Potentially low liability thresholds. Liability can be triggered for conduct that is:
unfair
false
deceptive
unconscionable
AG may not need to show causation or reliance
AG may not need to show damage

7. What is behind the increase in this litigation?
The potential recoveries are high
Cash-strapped states, particularly Medicaid programs, are increasingly focused on “revenue sources”
Consumer protection/deceptive trade practice statutes can provide for outsized awards
Penalties, fines and/or forfeitures may be available and typically are awarded on a per violation basis
Examples of damages increased substantially by fines, penalties, or forfeitures:
GSK: (Kentucky pharmaceutical pricing litigation): damages = $661,000/penalties = $5,828,5000.
Pharmacia: (Wisconsin pharmaceutical pricing litigation): damages = $9 million/forfeitures, etc. = $13+ million.
J&J: Risperdal® marketing actions.

8. What is behind the increase in this litigation?
Political motivations
AG = Aspiring Governor
Potentially strong upsides to pursuing litigation:
AG seen as consumer friendly
Positive media coverage
Seen as confronting “abusive” corporate conduct
Seen as watchdog over state expenditures/protection of taxpayer money
Little downside to pursuing litigation:
Minimal potential risk or cost
Anti-business tag
Potential loss of litigation

9. What is behind the increase in this litigation?
A desire to regulate conduct
Can seek to fill voids left by federal agencies
Can move aggressively and quickly, unrestrained by regulatory process and requirements
The threat of a lawsuit can be used to pressure changes in conduct
Settlements may incorporate provisions impacting conduct
Some pharmaceutical settlements have required certain types of price reporting in addition to statutory or regulatory requirements
Recent AstraZeneca consent decree in Texas AG settlement: “AstraZeneca’s systems and controls shall:
be designed to ensure that financial incentives do not motivate AstraZeneca Marketing and/or Sales personnel to engage in improper promotion, sales and marketing of Seroquel; and
include mechanisms to exclude from incentive compensation sales that may indicate Off-Label promotion of Seroquel”

10. How does civil litigation with AGs differ from traditional civil litigation?
Consumer protection statutes are broad
Liability thresholds can be low
The relief can be wide-ranging
The AG often picks the venue
Some otherwise good defenses may not be available
Burdens can be one-sided
The state may not be treated the same as a private litigant

11. How does civil litigation with AGs differ from traditional civil litigation?
Consumer protection statutes are broad
Broad statutory language
Generalized prohibitions on conduct that is “unfair,” “unconscionable,” or “deceptive”
per se violations for specific types of conduct
Loose standing requirements
Direct/Indirect standing
A “consumer” is not always a “consumer”
AG Standing
Statutory enforcement power
Parens Patriae

12. How does civil litigation with AGs differ from traditional civil litigation?
Liability thresholds can be low
Statutes may have lower thresholds for imposing liability as compared to fraud or even negligence
Example: Recent BMS Pennsylvania AG action:
Jury found for BMS on fraud, civil conspiracy and negligent misrepresentations claims
Judge nevertheless imposed liability under the State Unfair Trade Practices and Consumer Protection Statute, finding that BMS engaged in unfair or deceptive practices
May not need to demonstrate causation or reliance
Some statutes do not require them at all
Other statutes it is a factor to be considered, but may be disregarded in an action “brought in the public interest”
Causation or reliance may not be required for injunctive relief because the injunction is aimed at stopping the defendant’s conduct
May not need to demonstrate damage
To obtain Injunctive Relief
To recover Penalties and Fines based on violations, even if no damage caused by conduct

13. How does civil litigation with AGs differ from traditional civil litigation?
The relief can be wide-ranging
Non-traditional, statutory damages available
Penalties, fines, forfeitures, restitution, attorneys fees and costs
Doubling/trebling of damages awards
May provide enhanced awards for activity directed at certain groups, such as the elderly
“Per violation” fines and penalties
Injunctive Relief
Can interfere with ongoing business practices and strategies
Can be imposed by court that is ill-equipped or ill-informed
Can permit aggregated relief without regard to class action considerations

14. How does civil litigation with AGs differ from traditional civil litigation?
The AG often picks the venue
Careful drafting of complaint by AG may defeat removal to federal court
Cases frequently filed in plaintiff-friendly state venues with:
Friendly juries
Friendly judges

15. How does civil litigation with AGs differ from traditional civil litigation?
Some otherwise good defenses may not be available
A statute of limitations defense is rarely available. This can impose significant litigation burdens in cases involving older conduct:
Stale knowledge
Former employees
Document/ESI complications
Causation may not be required
Lack of need to demonstrate damage to obtain injunctive relief or fines
May permit the aggregation of claims without class action procedural safeguards
Pointing to the government’s own knowledge or conduct may not matter:
“The Court acknowledges the jury verdicts finding neither negligent misrepresentation nor fraudulent misrepresentation. The Court concludes, however, that the standard to be applied in a UTPCPL enforcement action is different. Pursuant to this conclusion, the Court determines that a plaintiff’s knowledge of the inaccuracy of a representation and a plaintiff’s lack of reliance, while factors to be considered, are not necessarily complete defenses in an enforcement action brought in the public interest under the UTPCPL.” BMS Pennsylvania Opinion (citations omitted).

16. How does civil litigation with AGs differ from traditional civil litigation?
The burdens can be one-sided
Discovery burdens are often one-sided
State’s sharing of resources
State’s outsourcing of risk and cost to plaintiffs contingency fee counsel

17. How does civil litigation with AGs differ from traditional civil litigation?
The state may not be treated the same as a private litigant
The AG may lament a lack of resources and get away with it
The AG may use the court of public opinion via an often receptive media
Judges tend to be more lenient on the state

18. What should You do? Recognize the risks
Pay attention to the political landscape
Be proactive
Assemble a multi-disciplinary team

19. What should You do? Recognize risks early
AG activity often follows other events:
Federal litigation/settlements/publicly commenced investigations
Product recalls
High-profile matters of media interest
Private plaintiff class actions
Pay particular attention to issues impacting:
A significant number of consumers
State or federal expenditures (e.g. Medicaid)

20. What should You do? Pay attention to the political landscape
Use the Media, if appropriate, to fight back
Use “back door” resources
Investigate whether there are divisions within the State over the case that can be exploited (i.e., AG vs. Governor, Agency v. AG, etc.)
Get involved in legislative process

21. What should You do? Be proactive Meet with the AG, if advisable, to:
To better understand the asserted basis for the case
To ascertain the AG’s goals
To educate the AG about your side of the case
Conduct an objective early case evaluation
Understand and investigate the conduct
Understand the unique aspects of the state CPA statute that are good or bad for you
Retain experts early to assess exposure
Determine if outside counsel’s retention is proper
In appropriate cases, consider early non-traditional methods of gathering information
Open records requests
State archive reviews
Develop your defense themes early
Form joint defense groups to pool resources and information

22. What should You do? Assemble multi-disciplinary teams
Involve knowledgeable regulatory counsel to provide:
Assistance with merits
Assistance with resolution, especially if involves a CIA
Consult experienced civil and white collar counsel
Engage well-connected local counsel
Retain knowledgeable experts

23. QUESTIONS

24. Steven F. Barley, Partner Baltimore
A Fellow of the American College of Trial Lawyers, Steve Barley is an experienced courtroom lawyer who represents diverse clients in a range of complex civil matters, with an emphasis on complex commercial litigation. He has significant experience in consumer litigation, securities litigation, class action litigation, and litigation involving claims of breach of fiduciary duty and fraud. Steve has extensive bench and jury trial experience in courts and before arbitration panels and has obtained many favorable jury verdicts and arbitration awards for his clients. His cases have been highlighted in several publications, including a case that was cited as a "Defense Verdict of the Year" by the National Law Journal.
Chambers USA, America’s Leading Lawyers for Business 2008, describes Steve as "precise, smart, and well-liked by judges." According to Benchmark, America's Leading Litigation Firms and Attorneys 2008, peers characterize Steve as "an all purpose trial lawyer who can try anything imaginable."
Steven F. Barley
[TEAM ROLE]
Partner, Baltimore T
Complex Commercial Litigation
Consumer Protection Defense
Class Action Litigation
Securities Litigation

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