The BLT: The Blog of Legal Times

DOJ's Cruden Named President of Environmental Law Institute

Veteran Justice Department environmental lawyer John Cruden is leaving government service to take over as president of the Environmental Law Institute.

Cruden, who serves as the career deputy assistant attorney general for the Environment and Natural Resources Division, is set to start at ELI later this month. A past president of the District of Columbia Bar, Cruden has supervised all federal civil environmental litigation since 1995.

Attorney General Eric Holder Jr., Associate Attorney General Thomas Perrelli and Steven McKinney of Birmingham’s Balch & Bingham, who chairs the American Bar Association’s environment section, are among the speakers expected to honor Cruden at a retirement celebration June 22 at Main Justice.

Cruden called his decision to leave Justice “bittersweet,” balancing his love for his government post—“I have the best career job in the government,” he said—with his enthusiasm for his new role leading the Environmental Law Institute. ELI is a nonpartisan research and education outlet based in Washington. Program areas include climate and energy, freshwater and ocean and land and biodiversity.

Responsible for the environmental division’s enforcement and defense sections, Cruden supervises more than 225 lawyers. Recently, he was a leading attorney in the Justice Department’s response to last year’s oil spill in the Gulf of Mexico. Cruden has twice served as acting assistant attorney general for the environment division. (Colleagues once gave him a fake Oscar, noting his “best acting” performance.)

Police Capable of Detecting Alcohol Without A Chemical Test, Appeals Court Rules

Adhering to the old adage of, "If it walks like a duck and quacks like a duck, then it just may be a duck," the District of Columbia Court of Appeals has ruled that when police charge someone with an open container law violation, they don't have to administer a chemical test to prove the liquid is alcohol.

In a precedent-setting opinion (PDF) issued today, the appellate judges found that while chemical testing is often used in narcotics cases, police officers are capable of deciding that a liquid is alcohol based on smell.

“This case presents an opportunity for us to address the following question, in a published opinion, for the first time: whether, in the absence of a chemical test of the liquid in the glass jar that allegedly contained alcohol, the evidence was sufficient for conviction,” they wrote.

In the underlying case, U.S. Park Police came across the appellant, Chrishana Derosiers, asleep in a parked car in May 2008. The police spotted a glass jar in the center console that contained a clear liquid.

Noting that Derosiers appeared “groggy” and “very disoriented,” police detected the smell of alcohol not only on her breath, but coming from the car as well. After smelling the clear liquid, they identified it as vodka; in a footnote, the appellate judges cited the trial judge’s note that vodka has an alcohol content of about 35 to 40 percent.

Once police officers had identified the liquid as alcohol by smell and charged Derosiers with unlawfully possessing an open container, they emptied the jar. A judge found Derosiers guilty when the case went to court.

Represented on appeal by Washington-based solo practitioner Aaron Price Sr., Derosiers argued that the conviction was invalid without a scientific test. The appellate judges wrote that while certain drug cases require additional testing to confirm the identity of narcotics, “sensory observations of experienced officers” have long been accepted as sufficient in alcohol-related cases.

“District of Columbia courts have accepted as proof the judgment of police officers who testified, based on their experience and good-faith sensory observations, as to the identity of an allegedly alcoholic beverage,” they wrote.

Price could not immediately be reached for comment this afternoon. Ariel Waldman, senior counsel to the city attorney general, said his office is “gratified by the court of appeals’ decision.”

The opinion “affirms the conviction secured by our hard-working prosecutors for possession of an open container of alcohol in a vehicle,” he said. “We intend to continue to prosecute vigorously alcohol and vehicle-related public safety offenses in the District of Columbia.”

Judges Dismisses Dispute over Release of Generic-Version Lipitor

Mylan Pharmaceuticals Inc. has lost its bid in Washington federal court to force a U.S. Food and Drug Administration decision on whether a rival company can have exclusive rights to sell the generic version of Lipitor.

In a written opinion (PDF) issued yesterday afternoon, U.S. District Court Judge James Boasberg dismissed Mylan's lawsuit against the FDA, ruling that the suit was premature and that Mylan lacked standing.

Pfizer has held exclusive rights to Lipitor for 15 years, according to Boasberg’s opinion. Seeking to tap into the lucrative Lipitor market – in one filing (PDF), the FDA calls it “one of the most prescribed drugs in the world” – Mylan and Ranbaxy Pharmaceuticals Inc. have been developing generic versions of the drug for almost a decade.

Ranbaxy was the first to challenge Pfizer’s exclusive right to the Lipitor-related patents starting in 2002. According to the terms of a settlement with Pfizer, Ranbaxy was given permission to begin marketing its generic drug as of Nov. 30, 2011.

As the first to throw its hat in the ring, Ranbaxy became eligible for an exclusivity arrangement that would prevent any competitors from marketing a generic version of the drug for 180 days after November 30. This arrangement, as approved by Congress as a reward for bringing generic drugs onto the market, is subject to FDA approval.

In 2009, the FDA notified Ranbaxy that it was launching an investigation into data produced from one of its facilities in India, but has not released publicly whether the data is related to the generic Lipitor drug. Mylan’s complaint is filed under seal, but according to Boasberg’s opinion the company is claiming that if the investigation involves the generic Lipitor, Ranbaxy will have to withdraw and re-file its application, in the process losing its “first” place spot and eligibility for exclusivity.

Mylan sued the FDA on March 18, seeking a preliminary injunction from the court to force the agency to issue a decision on whether the investigation into Ranbaxy involves the generic Lipitor and, if it does, to then make a decision on whether Ranbaxy should still be entitled to the 180-day exclusivity.

In the injunction order Mylan had proposed (PDF) to the court, the company alleged that the FDA “has arbitrarily, capriciously and unlawfully failed to make a decision or other determination.” Mylan claimed that it was at risk of losing millions if it manufactured the drug and then Ranbaxy was granted exclusivity, or if it waited and missed out on potential business if the FDA denied the exclusivity.

Both the FDA and Ranbaxy filed motions to dismiss. Ranbaxy, in its motion to dismiss (PDF), accused Mylan of pushing the agency to make a decision prematurely “so that they can enter the generic atorvastatin market free from the constraints of Ranbayd’s hard-earned exclusivity.”

Boasberg wrote in his opinion that he was granting the dismissal on two fronts – first, that Mylan lacks standing to sue and second, that the suit is premature. Noting that Mylan has yet to receive approval of its own version of generic Lipitor, Boasberg wrote that there is no previous case law that allows a company awaiting approval of its own drug to force the FDA to take action on a competitor’s application.

Mylan was represented by Douglas Farquhar of Washington’s Hyman, Phelps & McNamara, who declined to comment when reached Monday evening. The U.S. Department of Justice, which represented the FDA, and the FDA both declined to comment.

In an earnings call this morning, Mylan CEO Robert Coury spoke about the decision.

“We are disappointed in the court’s ruling granting the FDA's motion to dismiss our complaint, even though we did not incorporate any financial benefit from generic Lipitor into our 2011 guidance,” Coury said during the call, according to a Mylan spokeswoman. “We fully intend to evaluate all available options to help facilitate timely consumer access to generic versions of Lipitor."

Ranbaxy was represented by Carmen Shepard and Carlos Angulo of Washington’s Zuckerman Spaeder, who referred questions to Ranbaxy. A Ranbaxy spokesman said in a written statement this morning that “we concur with Judge Boasberg’s decision.”

DOJ Demands $225K Payment From Film Distributor

Updated 7:08 p.m.

On Oct. 15, 2008, the Smithsonian Institution wired $300,000 to a company for the licensing and exhibition of the film, "Dinosaurs: Giants of Patagonia."

The very next day, the company received a $300,000 check from the Smithsonian for the same invoice. Mistake? That's what the government maintains.

The Justice Department wants the extra money returned. Alleging unjust enrichment, prosecutors this week sued Fort Lauderdale-based Comet Distribution Ltd. in Washington federal district court to force the return of the overpayment.

DOJ lawyers said the Comet president promised to refund the government its extra money but has failed to do so. The suit (PDF) said Comet has returned $75,000 of the extra $300,000, leaving a $225,000 debt to the government.

Justice Department lawyers said in the suit that the government is seeking “a debt owed to the United States for an overpayment mistakenly paid” to Comet. The suit does not explain how the Smithsonian paid twice on the same invoice.

Comet and the Smithsonian entered into a 50-year contract (PDF) that included a $600,000 licensing fee, to be paid in two installments—one by March 2008 and the other by October 2008. The suit indicates the Smithsonian made a double-payment in October 2008.

A Comet official was not immediately reached for comment this afternoon. Court records do not show that Comet has retained counsel.

Assistant U.S. Attorney Judith Kidwell, who filed the suit on behalf of the United States, declined to comment. A Smithsonian spokesperson was not immediately reached for comment this afternoon.

Guatemalans Sue U.S. Over 'Tuskegee-style' Experiments

Seven Guatemalan citizens filed suit on Monday against U.S. health officials over nonconsensual medical experiments – including the infection of hundreds of Guatemalans with syphilis – carried out by U.S. doctors starting in the 1940s.

The Washington office of Fort Lauderdale, Fla.'s Conrad & Scherer and New York’s Parker Waichman Alonso are handling the class action, which was filed in U.S. District Court for the District of Columbia.

The class action stems from a 2009 study by Susan Reverby, a Wellesley College professor who found evidence that the U.S. government signed off on nonconsensual experiments on Guatemalan prisoners, orphans and patients in a mental hospital between 1946 and 1948. President Obama issued an official apology following the release of Reverby’s study.

The complaint [.pdf] filed in federal court broadens the scope of the allegations. The plaintiffs accuse U.S. officials of carrying out experiments and infecting Guatemalans with syphilis through the early 1970s.

Piper Hendricks, one of the Conrad & Scherer attorneys handling the case, said that given parallels with the experiments in Tuskegee, Ala., in which hundreds of African American men with syphilis were left untreated as U.S. doctors studied the effects of the disease from the 1930s through the 1970s, “there is no clear-cut timeline for what happened in Guatemala.”

Hendricks said her firm has previously worked on suits involving human rights issues in Latin America, so when news of Reverby’s study broke, they were contacted about pursuing a class action. She said she expects the class to grow as word spreads; the complaint notes that there were at least 700 test subjects and that thousands of people could have been affected.

An attorney with Parker Waichman Alonso could not immediately be reached today for comment.

Dannon Agrees to Drop Claims of Activia’s ‘Irregularity’ Benefits

Jamie Lee Curtis is going to have to change her selling point when advertising Activia yogurt.

According to the terms of a settlement between Federal Trade Commission and Dannon Company Inc., Activia can no longer be advertised as helping to relieve digestive “irregularity” unless the company discloses the amount of the product that must be consumed in order to receive those benefits. Dannon is also required to pay $21 million to resolve the state-level investigations opened by 39 state attorneys general.

The settlement, which was announced today, requires Dannon to drop claims about some of the health benefits offered by its Activia Yogurt and DanActive dairy drink product because the FTC deemed those claims to be “deceptive” and “exaggerated.”

The two products, which are among Dannon’s most successful, contain beneficial bacteria known as probiotics. As part of a national advertising campaign featuring Curtis, the actress who starred in the “Halloween” series and “Trading Places,” Dannon claimed that one daily serving of Activia could relieve irregularity and help with “slow intestinal transit time.” In advertisements for its DanActive product, Dannon claimed that the product could help prevent colds and flu.

In television, Internet, print ads and on the product’s packaging, Dannon also claimed that there was scientific proof to back up those claims.

But according to the FTC, Dannon failed to substantiate those claims and was thus exaggerating the health benefits of those two products. The FTC also alleged that the health claims for Activia and DanActive were proven false by clinical tests.

The FTC contends that it actually takes three daily servings of Activia to help relieve irregularity.

The settlement bars Dannon from making any claims about cold and flu benefits for its products unless those claims are approved by the Food and Drug Administration. The company cannot make any claims about treating irregularity with fewer than three servings of a yogurt product a day unless those claims are verified by two clinical trials.

In a prepared statement, FTC Chairman Jon Leibowitz said, “These types of misleading claims are enough to give consumers indigestion. Consumers want, and are entitled to, accurate information when it comes to their health. Companies like Dannon shouldn’t exaggerate the strength of scientific support for their products.”

Defense Contractor Wins New Trial in False Claims Case in D.C.

A federal appeals court in Washington today ordered a new trial for government contractor Science Applications International Corp., which was ordered in 2008 to pay $6.5 million for breaking a contract and submitting false payment claims.

The U.S. Court of Appeals for the D.C. Circuit said the jury that found the technology and engineering company guilty of violating the False Claims Act should have been instructed on a standard that does not attach liability for accidental or negligent breaches of contract.

The Nuclear Regulatory Commission sued McLean, Va.-based SAIC for failing to disclose conflicts of interest during its work for the commission in crafting a rule to govern radioactive material release and recycling. Following a four-week trial, a jury in Washington’s federal trial court said SAIC concealed business relationships with private companies that stood to gain from the rule.

Today, a three-judge panel of the D.C. Circuit unanimously ruled in favor of a new trial for SAIC. The appeals court, however, rejected SAIC’s request for judgment as a matter of law.

Gibson, Dunn & Crutcher partner Theodore Olson, co-chairman of the firm's appellate and constitutional law group, argued for SAIC in the appeals court in September. Olson was not immediately reached for comment this afternoon.

The appeals court said in a 39-page opinion, written by Judge David Tatel, that the jury received the wrong instruction on liability. The court rejected the application of “collective knowledge”—for instance, linking together officials who didn’t have contact with each other—to the FCA.

“Strict enforcement of the FCA’s scienter requirement will also help to ensure that ordinary breaches of contract are not converted into FCA liability,” Tatel wrote in the opinion, joined by Chief Judge David Sentelle and Judge Thomas Griffith.

Lawyers for SAIC argued in the appeals court that the contractor wasn’t liable for false claims because its contract never designated compliance with conflict of interest requirements as a condition for payment.

The National Defense Industrial Association, represented by Jenner & Block, and the U.S. Chamber of Commerce, represented by McKenna, Long & Aldridge, supported SAIC as friends of the court in the D.C. Circuit litigation. A copy of the appellate court’s opinion is here.

Drug Company's Lawyers Want $77M Judgment Vacated

A defense lawyer for generic drug manufacturer Mylan Inc. urged a federal appeals court panel in Washington today to vacate a nearly $77 million judgment against the company in a closely watched antitrust case.

Several health insurance companies, including Blue Cross & Blue Shield of Massachusetts Inc. and Health Care Services Corp, filed suit in Washington federal district court to challenge agreements Mylan entered in 1997 with companies that sold the active pharmaceutical ingredient for the anti-anxiety drugs Lorazepam and Clorazepate.

The suit alleged the agreement cut off access to raw materials, allowing Mylan to raise drug prices. The trial in 2005 in the U.S. District Court for the District of Columbia marked one of the first pitting indirect purchasers — the health care providers—against drug companies. A jury sided with the plaintiffs, and Judge Thomas Hogan ultimately imposed treble damages totaling nearly $77 million.

Gyma Laboratories of America, Inc. and Cambrex Corporation, who are also named defendants, are represented by Hunton & Williams. Profarmaco, a Cambrex subsidiary, sells active pharmaceutical ingredients. Gyma is a registered agent for Profarmaco and other ingredient suppliers.

Mylan's raw material agreement did not harm competitors, a lawyer for Mylan, Jonathan Jacobson, argued today in the U.S. Court of Appeals for the D.C. Circuit. Jacobson, a Wilson Sonsini Goodrich & Rosati partner in New York, said supply of the ingredients rose a year after the agreement, and he said there were more competitors in 1998 than in 1997.

Jacobson said Mylan doesn’t control the price that pharmacies set for drugs. Lawyers for Mylan said in court papers that pharmacies mark up reimbursement rates to health insurers from the net sales price they pay to generic drug manufacturers.

Senior Judge Stephen Williams, who was on the panel with Chief Judge David Sentelle and Senior Judge A. Raymond Randolph, examined whether the increase in market supply of the drug ingredients stemmed from artificially high prices.

Martin Lueck, chairman of Robins, Kaplan, Miller & Ciresi of Minneapolis, argued for the plaintiffs. Mylan, Lueck said in court, “shocked” the system and reaped “enormous” profit from the raw material exclusivity agreement.

The appeals court took the case under advisement and did not immediately rule.

DOJ Asks Judge to Stay Injunction in Stem Cell Case

The Justice Department today asked a federal judge in Washington to stay his ruling this month that blocks the government from funding research that involves human embryonic stem cells.

Last week, Chief Judge Royce Lamberth of the U.S. District Court for the District of Columbia issued a preliminary injunction that DOJ attorneys said today threatens ongoing research projects and potentially negates years of scientific progress toward treatment of certain illnesses.

President Barack Obama in March 2009 removed restrictions on embryonic stem cell research that were put in place by President George W. Bush.

Justice lawyers today filed an emergency motion asking Lamberth to stay his ruling while the government takes the dispute to the U.S. Court of Appeals for the D.C. Circuit. Gibson, Dunn & Crutcher partner Thomas Hungar, a lead attorney for the plaintiffs—Drs. James Sherley and Theresa Deisher—was not immediately reached for comment this afternoon.

The government, Lamberth said, cannot take any action from pursuing National Institutes of Health guidelines that cover human embryonic stem cell research. DOJ lawyers in today’s brief said the guidelines, published last year, cover research “that has been ongoing for years, including under the policies of the prior Administration."

“The issuance of a stay is necessary to prevent the irreparable harm that is certain to occur if, during the pendency of its appeal, NIH is forced to cease all activities pertaining to [human embryonic stem cell] research that is subject to government funding,” the DOJ said in a motion signed by Federal Programs Branch trial attorney Kyle Freeny. (The government's motion is here.)

Lawyers for Sherley and Deisher, doctors who work with adult stem cells and receive NIH funding, argue the NIH guidelines increase the competition for NIH funding and limit the available funds for adult stem cell research.

The DOJ motion said a “stay should not be denied for the benefit of two scientists whose only alleged harm is increased competition from other meritorious research projects that may ultimately save lives.”

NIH Director Dr. Francis Collins wrote a declaration that DOJ included with today's motion. Collins said, among other things, that Lamberth's order prevents NIH from providing $54 million in funds to 24 human embryonic research projects that are underway and expected to receive funds by the end of September.

Lamberth could rule this week. He set a Sept. 3 deadline for the plaintiffs to file an opposition to the government’s request to stay the preliminary injunction.

Judge Blocks Virginia AG in Climate Inquiry

A state judge ruled today that Virginia Attorney General Ken Cuccinelli did not give a sufficient reason when he tried to subpoena records regarding a climate researcher.

Cuccinelli, a Republican, said he wanted the records in order to investigate whether the researcher, Michael Mann, made false claims in connection with state grant funding. Cuccinelli is a skeptic of human causes of global warming, an area that Mann has studied at the University of Virginia and elsewhere. Mann is now a professor at Pennsylvania State University.

In a six-page letter to the parties, Judge Paul Peatross Jr. wrote that the Attorney General’s Office failed to show that it had “reason to believe” that fraud occurred.

“In order for the Attorney General to have ‘reason to believe,’ he has to have some objective basis to issue a civil investigative demand, which the Court has power to review,” Peatross wrote. He added that Cuccinelli’s office must state specifically what it believes was “misleading, false or fraudulent” in Mann’s conduct.

Peatross wrote, however, that Cuccinelli’s office does have authority to investigate the handling of state grant money, so the attorney general could make another request with more detail.

A Cuccinelli spokesman did not immediately respond to a request for comment. A message left with a University of Virginia spokeswoman was not immediately returned. Chuck Rosenberg, a Hogan Lovells partner representing the university and a former U.S. attorney for the Eastern District of Virginia, declined to comment.

UPDATE (1:44 p.m.): In a statement, Cuccinelli said he would issue a new request for information that conforms to Peatross' ruling. "We will also take time to fully examine the decision and all of the available options before deciding whether or not to also appeal aspects of the ruling," Cuccinelli said. He said he was pleased that the judge ruled in favor of his office having the authority to conduct its investigation.

UPDATE (4:33 p.m.): A spokeswoman at the University of Virginia released a statement saying officials there are also pleased with the ruling. "In reaching its conclusion, the court made several important findings: that the attorney general failed to sufficiently support any allegation that Dr. Mann engaged in fraudulent conduct; that academic freedom should inform the propriety of an inquiry into the conduct of University faculty; and that the scope of any future inquiries by the attorney general would have to be substantially more narrow than these" requests, the statement said.