MARY REICHARD, HOST: It’s Monday morning, start of a new work week for The World and Everything in It. Today is the 28th of January, 2019. Good morning to you, I’m Mary Reichard.
NICK EICHER, HOST: And I’m Nick Eicher. The Supreme Court handed down one ruling last week in a patent case. You may remember, Mary reported on the case last week. The one that asks: what’s the meaning of the phrase “otherwise available to the public”?
The pharmaceutical company Helsinn Healthcare developed an anti-nausea drug and secured a patent for it. Helsinn sued the generic drugmaker Teva Pharmaceuticals for allegedly infringing on the patent. Teva countered that Helsinn sold the drug before filing for patent protection. Doing that, Teva argued, voids the patent under the applicable federal law.
My memory here, Mary, was that you expected Teva to win.
In the end, it wasn’t even close. The justices ruled for the generic maker, and it was unanimous. Called it!
REICHARD: Thank ya, thank you very much!
No time for a victory lap here, because I’ve got another pharmaceutical case for you.
This one involves a well-known pharmaceutical company, Merck, and its drug for osteoporosis, called Fosamax.
This drug helps post-menopausal women who suffer from osteoporosis, basically brittle bones.
More than 500 individuals sued Merck and alleged that Fosamax caused them to suffer debilitating breaks in the thigh bone. They brought in cases that occurred during an 11-year period between 1999 and 2010. They claim the drug’s label did not properly warn them.
After 2010, Merck added a warning to the label.
David Frederick represents the patients.
FREDERICK: Our position is that brand name drug makers are responsible at all times for keeping their labels up to date.
Frederick then makes reference to the Food and Drug Administration. The FDA ensures drugs are safe and effective. Merck had proposed to the FDA that it should warn about the fracture risk. But the agency rejected the more serious warnings Merck suggested, because data didn’t back it up to FDA’s satisfaction.
Eventually, years later in 2010, FDA concluded a study and said Fosamax and similar drugs should include the warning about the rare thigh bone fracture.
So Merck’s defense is that Merck couldn’t have issued the warning prior to 2010, because the FDA didn’t think it was necessary.
Here’s Merck’s lawyer, Shay Dvoretzky.
DVORETZKY: If a manufacturer, as Merck did here, informs the FDA of a possible risk and unsuccessfully asks to revise its label in light of that risk, then failure to warn claims based on that risk are preempted as a matter of law.
“Pre-empted,” meaning, no lawsuit against Merck can stand.
Lawyer Frederick for the patients shot back that Merck could have gone further, if it really wanted to.
FREDERICK: If the FDA rejects an inadequate warning, or is uncertain about whether and how to mandate a proper warning, those federal decisions do not make it impossible for Merck to comply with state law duties to market safe drugs.
Much of this dispute has to do with the meaning of the letter the FDA sent to Merck rejecting its proposed warning, and whether what the FDA says has priority over state law about warning labels on drugs.
Chief Justice John Roberts could see the catch-22 here. We all tune out the parade of horribles on those TV commercials for drugs. That may inform the Chief Justice’s question to Frederick, the patients’ lawyer.
ROBERTS: I gather your answer is that the manufacturer has the responsibility. So, if the manufacturer knows this, it should put in this warning and, if it turns out that that was over-warning, then they can be sued for that?
FREDERICK: Well, there has to be an injury that comes from the over-warning.
ROBERTS: The injury is that doctors are not prescribing Fosamax to women who would benefit from it and they’re not prescribing it because Merck put in a warning that the FDA would determine was over-warning.
Another thread during argument is whether it should be up to a jury to figure out ambiguities in the FDA’s official letter to Merck, or to let a judge do it.
A few justices were skeptical in questioning Merck’s lawyer, but if I venture a guess, I think Merck will win this.
This last case today has the potential to affect millions of American homeowners.
As recently as the year 2016, about 400,000 home foreclosures took place, about half done outside the court system, meaning without a judge’s supervision. This are called a “non-judicial foreclosures.”
This case has to do with a homeowner named Dennis Obduskey. He’d fallen way behind in his mortgage payments, and although his bank initiated foreclosure proceedings several times, it didn’t follow through. Eventually it did. The bank hired some lawyers to perform a “non-judicial foreclosure.”
So the lawyers sent Obduskey a letter that they’d begun another foreclosure process.
But here’s a key point: The federal Fair Debt Collection Practices Act requires a lender to disclose the amount of money it’s seeking to collect. In this case, the lawyers initiating the foreclosure didn’t do that.
Obduskey contends he disputed the debt, but the law firm didn’t respond, and completed the foreclosure process.
So Obduskey sued.
That federal law restricts what debt collectors can do, and it defines debt collectors as someone who “regularly collects debts owed another.” It has certain carve outs, though, and that’s where the dispute lies.
The lawyers say they aren’t debt collectors by that definition, so the restrictions don’t apply.
But Obduskey says it’s not fair to deprive him of the law’s protections when the lawyers essentially are debt collectors in this situation.
So the question is whether a law firm is a debt collector subject to that law.
It was rough going for the lawyer’s lawyer, Kannon Shanmugam. He gets it from both wings of the court: from Justice Brett Kavanaugh and from Justice Elena Kagan.
KAGAN: Isn’t that how everybody understands a foreclosure notice? They’re going to foreclose on my house unless I come up with some money.
SHANMUGAM: I think that everyone would certainly understand that that is the consequence of a foreclosure proceeding. I think my submission is a more modest one…. My point would simply be that not everything that might, for instance, increase someone’s incentive to pay constitutes debt collection.
KAVANAUGH: Well, that’s true, but it’s inherently communicating a message that you need to repay the debt or you’re going to lose the house, as Justice Kagan says.You — you referred earlier to common sense. Well, common sense tells you this is an effort to have you repay the debt.
SHANMUGAM: Well, I don’t think that that’s true, and let me offer a sort of slightly modified —
KAVANAUGH: Why not? Why not? Even if the express words aren’t there, everyone who gets something like that, who has the money, and wants to, will understand this is a letter seeking to get you to repay.
The problem is a murky part of the law. It says that when a judge supervises the foreclosure or a bank takes you to court to collect money you owe on your mortgage, the Fair Debt Collections Act applies.
But it doesn’t apply to a repo man, for example. He just wants to take your car back, not get money out of you.
Obduskey’s lawyer Daniel Geyser got lots of questions about how to analyze the text of the law in question. Listen to this exchange with Justice Samuel Alito:
ALITO: Well, let me ask you this about the repo situation: Suppose that the repo guy is out there getting into a car, and the owner of the car sees him out the window and runs out with a gun and says what are you doing? And the repo guy says…. you’re in default on your payments, so I’m taking your car. Is he a debt collector because he’s now told the car owner about the debt?
GEYSER: In that scenario, I don’t think so because he’s not leveraging the security interest. It would be different if he said, if you want to pay now, I’ll get out of the car and go away. But if he says, look, you’ve run out of chances. You didn’t pay your bill. I’m towing the car. Take it up with the creditor. And to be very clear, what happens at that point, the repo man brings the car back to the creditor. At that point, the debtor still owes 100 percent of the same debt they owed before the repossession. It’s the creditor then who takes the car, sends the notice under the UCC, and says, if you want your car back, pay us the money, or we’ll auction off the car and pay down your debt.
ALITO: So what is the difference between that situation and the non-judicial foreclosure situation where the — the homeowner is simply notified that the — the house that — the mortgage is being foreclosed?
GEYSER: I — I think — I think there’s a stark difference, Your Honor.
ALITO: What is the difference?
This issue comes up every day around the country. Most states permit nonjudicial foreclosure proceedings, and the circuits are split on how to handle them. Clarity is sorely needed.
However the court decides, it’ll affect lenders, creditors, lawyers, and homeowners.
If Obduskey wins, then collection protections apply to non-judicial foreclosures.
And homeowners could then get damages and attorney’s fees under the federal law on collections.
And that’s this week’s Legal Docket.