State Ex Rel. Wilson v. Ortho-McNeil-Janssen Pharmaceuticals, Inc. ( 2015 )

THE STATE OF SOUTH CAROLINA
In The Supreme Court
State of South Carolina ex. rel. Alan Wilson, in his
capacity as Attorney General of the State of South
Carolina, Respondent,
v.
Ortho-McNeil-Janssen Pharmaceuticals, Inc., f/k/a
Janssen Pharmaceutical, Inc., and/or Janssen, L.P., and
Johnson & Johnson, Inc., Defendants,
of whom Ortho-McNeil-Janssen Pharmaceuticals, Inc. is
the Appellant.
Appellate Case No. 2012-206987
Appeal from Spartanburg County
Roger L. Couch, Circuit Court Judge
Opinion No. 27502
Heard March 21, 2013 – Filed February 25, 2015
AFFIRMED IN PART, REVERSED IN PART AND
REMANDED
Steven W. Hamm and Steven J. Pugh, both of
Richardson, Plowden & Robinson, PA, of Columbia; C.
Mitchell Brown, William C. Wood, Jr., A. Mattison
Bogan, and Miles E. Coleman, all of Nelson Mullins
Riley & Scarborough, LLP, of Columbia; Edward M.
Posner and Chanda A. Miller, both of Drinker Biddle &
Reath, LLP, of Philadelphia, Pennsylvania, for Appellant.
John B. White, Jr., and Donald C. Coggins, Jr., both of
Harrison, White, Smith & Coggins, PC, of Spartanburg;
John S. Simmons, of Simmons Law Firm, LLC, of
Columbia; Attorney General Alan M. Wilson, Deputy
Attorney General Robert D. Cook, and Assistant Deputy
Attorney General C. Havird Jones, Jr. all of Columbia;
Fletcher V. Trammell, Robert W. Cowan, and Elizabeth
W. Dwyer, all of Bailey Peavy Bailey, of Houston,
Texas, for Respondent.
Gray T. Culbreath and Laura W. Jordan, both of Gallivan
White & Boyd, P.A., of Columbia, for Amicus Curiae,
The South Carolina Chamber of Commerce.
JUSTICE KITTREDGE: Appellant Ortho-McNeil-Janssen Pharmaceuticals
(Janssen) is a pharmaceutical company that manufactures the antipsychotic drug
Risperdal. Risperdal is among a class of drugs prescribed primarily for the
treatment of schizophrenia. The Attorney General of South Carolina believed that
Janssen had violated the South Carolina Unfair Trade Practices Act (SCUTPA)1 by
engaging in unfair methods of competition by willfully failing to disclose known
risks and side effects associated with Risperdal.
On January 24, 2007, the State and Janssen entered into a tolling agreement
concerning the statute of limitations. SCUTPA has a three-year statute of
limitations, as section 39-5-150 of the South Carolina Code provides that "[n]o
action may be brought under this article more than three years after discovery of
the unlawful conduct which is the subject of the suit." The State filed its
Complaint on April 23, 2007, seeking statutory civil penalties against Janssen on
two claims. The first claim arose from the content of the written material furnished
by Janssen since 1994 with each Risperdal prescription, the so-called labeling
claim. The second claim centered on alleged false information contained in a
November 2003 Janssen-generated letter sent to the South Carolina community of
prescribing physicians, the so-called Dear Doctor Letter. Because both claims
arose more than three years prior to January 24, 2007, Janssen pled the statute of
limitations as a bar to the Complaint.
1
S.C. Code Ann. §§ 39-5-10 to -180 (1985 & Supp. 2013).
The matter proceeded to trial. A jury rendered a liability verdict against Janssen on
both claims. The trial court rejected Janssen's defenses, including the statute of
limitations, finding that both claims were timely. The trial court imposed civil
penalties against Janssen for both claims totaling $327,073,700 based on 553,055
separate violations of SCUTPA in connection with its deceptive conduct in the
sales and marketing of Risperdal.
Janssen appeals. We affirm the liability judgment on the labeling claim but modify
the judgment to limit the imposition of civil penalties to a period of three years
from the date of the tolling agreement, which is essentially coextensive with the
three-year statute of limitations, subject to an additional three months by virtue of
the time period between the January 24, 2007, tolling agreement and the filing of
the Complaint on April 23, 2007. We further remit the civil penalties on the
labeling claim to $34,545,400. We affirm the liability judgment on the DDL
claim, but remit those civil penalties to $101,480,000. Accordingly, we affirm in
part, reverse in part, and remand for entry of judgment against Janssen in the
amount of $136,025,400.
I.
FDA Regulatory Process and Background
A brief summary of the Food and Drug Administration's (FDA) regulatory
authority over the pharmaceutical industry and the evolution of antipsychotic drugs
provides a helpful backdrop to the facts of this case. "In the 1930's, Congress
became increasingly concerned about unsafe drugs and fraudulent marketing, and
it enacted the Federal Food, Drug, and Cosmetic Act (FDCA)."2 Wyeth v. Levine,
555 U.S. 555, 566 (2009) (citation omitted). The FDCA's "most substantial
innovation was its provision for premarket approval of new drugs." Id. Following
implementation of the FDCA, the FDA "required every manufacturer to submit a
new drug application, including reports of investigations and specimens of
proposed labeling" for regulatory review and approval.3 Id. "Until its application
2
The FDCA is codified at 21 U.S.C. §§ 301–399f (2006 & Supp. V 2011).
3
Prior to submitting a new drug application to the FDA for approval, the developer
of the drug must first "gain authorization to conduct clinical trials (tests on
humans) by submitting an investigational new drug application (IND)." Merck
KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 196 (2005) (citations omitted).
became effective, a manufacturer was prohibited from distributing a drug." Id.
FDA regulations require a new drug application to "include all clinical studies, as
well as preclinical studies related to a drug's efficacy, toxicity, and
pharmacological properties." Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S.
193, 196 (2005) (citing 21 C.F.R. § 314.50(d)(2), (5) (2005)).
The FDA new drug approval process includes specific procedures through which
warning labels are drafted, approved, and required to be included in the packaging
of manufactured drugs. A drug label "must contain a summary of the essential
scientific information needed for the safe and effective use of the drug," and the
label "must be informative and accurate and neither promotional in tone nor false
or misleading in any particular." 21 C.F.R. § 201.56(a)(1)–(2) (2014). Indeed,
federal regulations set forth detailed requirements as to the content, the formatting,
and the order of required information about potential risks and the safe and
effective use of a drug. Id. § 201.57(c) (2014). Specifically, FDA regulations
require drug labels to include, inter alia: (1) "black box" warnings about serious
risks that may lead to death or serious injury; (2) contraindications describing any
situations in which the drug should not be used because the risk of use outweighs
any possible therapeutic benefit; (3) warnings and precautions about significant
adverse reactions and other potential safety hazards; and (4) any adverse reactions
for which there is a basis to believe a causal relationship exists between the drug
and the occurrence of the adverse event. Id. As these FDA regulations make clear,
the category in which a particular risk appears on a drug label is a critical indicator
of both the degree of the risk and also the likelihood and severity of the adverse
consequences the drug may cause.
After a new drug application has been approved, the drug's sponsor has continuing
duties to the FDA to ensure the long term efficacy and safety of the approved drug.
For example, once drugs are approved by the FDA, the drug's sponsor is required
to review, and report to the FDA, all "adverse drug experience"4 information it
4
FDA regulations define an "adverse drug experience" as:
Any adverse event associated with the use of a drug in humans,
whether or not considered drug related, including the following: An
adverse event occurring in the course of the use of a drug product in
professional practice; an adverse event occurring from drug overdose
whether accidental or intentional; an adverse event occurring from
receives from any source, including adverse experiences reported during the
process of post-marketing clinical trials. 21 C.F.R. § 314.80(b), (c) (2014). As
new risks and side effects are discovered, a manufacturer must revise a drug's label
"to include a warning about a clinically significant hazard as soon as there is
reasonable evidence of a causal association with a drug; a causal relationship need
not have been definitely established." 21 C.F.R. § 201.57(c)(6)(i). As the FDA
does not conduct independent scientific testing, it is incumbent upon sponsors to
disclose all clinical data to ensure the safe and effective use of drugs.
Some have expressed a growing concern regarding the pharmaceutical industry's
reticence to disclose negative clinical data, and the impact this has on the public
health and welfare. Indeed, it has been stated that:
[T]he failure to disclose study results not only impacts clinical trial
participants, but the health of the general public may be put in
jeopardy as well. For drugs that have received FDA approval, post-
market clinical trials investigating new uses of the medication often
reveal important information concerning side effects and related
adverse complications with the treatment. To the extent that
prescribing physicians do not have this essential data, they could
inadvertently be putting their patients at serious risk by continuing to
recommend the medication.
Over the past few years, numerous scandals in the drug industry
illustrate that concealing unfavorable research results is far from an
isolated practice. . . . . In a quest to boost sales and increase
corporate profits, the temptation to hide or selectively disclose clinical
trial data has proven to be too much.
Christine D. Galbraith, Dying to Know: A Demand for Genuine Public Access to
Clinical Trial Results Data, 78 Miss. L.J. 705, 710 (2009).
"The FDA's premarket approval of a new drug application includes the approval of
the exact text in the proposed label." Wyeth, 555 U.S. at 568 (citing 21 U.S.C.
drug abuse; an adverse event occurring from drug withdrawal; and
any failure of expected pharmacological action.
21 C.F.R. § 314.80(a) (2014).
§ 355 (2006); 21 C.F.R. § 314.105(b) (2008)). Subsequent to approval of the new
drug application, a drug manufacturer must submit a supplemental application to
the FDA in order to effect any changes in the drug label. Id. (citing 21 U.S.C.
§ 355 (2006); 21 C.F.R. § 314.105(b) (2008)). "There is, however, an FDA
regulation that permits a manufacturer to make certain changes to its label before
receiving the agency's approval." Id. (emphasis added).
Among other things, this "changes being effected" (CBE) regulation
provides that if a manufacturer is changing a label to "add or
strengthen a contraindication, warning, precaution, or adverse
reaction" or to "add or strengthen an instruction about dosage and
administration that is intended to increase the safe use of the drug
product," it may make the labeling change upon filing its
supplemental application with the FDA; it need not wait for FDA
approval.
Id. (quoting 21 C.F.R. §§ 314.70(c)(6)(iii)(A), (C)).
Following FDA approval of a new drug (or a new indication for an existing drug),
pharmaceutical companies may begin to market the drug, subject to federal
regulations. See, e.g., 21 C.F.R. § 203.2 (2014) ("The purpose of this part is . . . to
protect the public health . . . ."). Typical pharmaceutical marketing strategies
include both direct sales calls (i.e., visits to prescribing doctors to distribute
literature and samples) and academic writings and speaking events led by
healthcare professionals.
Risperdal (risperidone) is an antipsychotic drug primarily used to treat
schizophrenia. Schizophrenia is a chronic, debilitating mental illness that affects
approximately 1% of the population. Following onset, schizophrenia is a lifelong,
incurable disease, and treatment almost always involves the use of an antipsychotic
drug. Between the 1950s and 1990s, medical practitioners prescribed typical
antipsychotics such as Thorazine (chlorpromazine), Prolixin (fluphenazine), Haldol
(haloperidol), Loxitane (loxapine), and Mellaril (thioridazine) to treat
schizophrenia. Although effective, these typical antipsychotics posed a number of
negative side effects, including involuntary muscle movements and tardive
dyskinesia, a long-lasting movement disorder.
By the 1980s, clozapine was being investigated for the treatment of schizophrenia
on the theory that it might be more effective and cause fewer movement disorders
than typical antipsychotics. Clozapine was termed an "atypical antipsychotic"
because it affected a different part of the brain than the older, typical
antipsychotics. The medical community soon discovered that clozapine, too, had
negative side effects, including agranulocytosis—a dramatic and sometimes deadly
decrease in white blood cell count. Thus, in spite of its efficacy in treating the
symptoms of schizophrenia, clozapine was usually used only as a "last resort"
drug, prescribed for only about 10% of the schizophrenic population.
In 1994, Janssen introduced Risperdal in the United States as the second atypical
antipsychotic drug on the market. From 1994 to 1996, Risperdal held a unique
place in the market—it was promoted as being more effective than the older,
typical antipsychotics, without the dangerous side effects associated with
clozapine. In 1996, Eli Lilly (Lilly) introduced a third atypical antipsychotic drug
to the market: Zyprexa. Zyprexa was dramatically successful when it hit the
market, and Lilly and Janssen competed to capture the antipsychotic market.
Spurred by this fierce competition, Janssen developed a marketing strategy to
distinguish Risperdal and protect its market share. By 1998, Janssen was
promoting Risperdal as having a lower risk of weight gain and a lower metabolic
risk profile than Zyprexa.5 Despite the claims made by Janssen, post-marketing
studies, some as early as 1994, revealed Risperdal posed a serious risk of
substantial weight gain, increased prolactin levels, and hyperprolactinemia in
patients taking atypical antipsychotics. This increased the long-term risk of
developing various kinds of cancer, osteoarthritis, cardiovascular disease, and
stroke. Additionally, atypical antipsychotics greatly increased the risk of diabetes
mellitus, which can have very serious, even life-threatening consequences. By
1997, Janssen also had information that Risperdal posed a serious risk of stroke,
cardiac arrest, and sudden death in the elderly. Despite this clinical information, it
was several years before Janssen updated the Risperdal label to accurately reflect
the frequency and severity of the risk of hyperprolactinemia, weight gain and
diabetes, or stroke, cardiac arrest, and sudden death in the elderly.
In 1997, Janssen commissioned a clinical trial (Trial 113) designed to establish
Risperdal's superiority over Zyprexa as to metabolic side effects, including weight
5
In turn, Lilly differentiated Zyprexa as posing a lower risk for movement
disorders and hyperprolactinemia, a hormonal imbalance causing serious and
lasting reproductive side effects, when compared to Risperdal.
gain and diabetes. In 1999, the results of Trial 113 were not what Janssen desired,
as the study concluded that there was no difference between Risperdal and Zyprexa
in terms of long-term weight gain or the onset of diabetes mellitus. Janssen did not
disclose or publish the results of Trial 113 and continued to claim that Risperdal
was superior to Zyprexa in terms of these negative metabolic side effects.
By August 2000, Janssen also received results from two epidemiological studies.
One study was based on a review of the records of patients treated with atypical
antipsychotics in a New England insurance database (ERI study). The ERI study
showed that Risperdal patients developed diabetes mellitus at a significantly higher
incident rate than patients taking Zyprexa. The second study was commissioned
by Janssen (HECON study), and it concluded that Risperdal was not associated
with an increased risk of diabetes mellitus. By this time, and notwithstanding
Janssen's furtive efforts, the risks and adverse side effects associated with atypical
antipsychotic drugs were fairly well known.
In May 2000, the FDA asked sponsors of atypical antipsychotic drugs to submit a
comprehensive review of all clinical data pertaining to metabolic side effects. In
response, Janssen did not disclose the results of the Trial 113 study but disclosed
only the favorable results from its own HECON study, affirmatively indicating to
the FDA that no long-term trials pertaining to metabolic side effects had taken
place. The FDA's review was not thwarted by Janssen's efforts, as the FDA's
investigation prompted it to request that product labeling for all atypical
antipsychotic medications, including Risperdal, include a warning about
hyperglycemia and diabetes.
Janssen was concerned that the FDA-mandated label warning would result in a
substantial loss of Risperdal market share. Notwithstanding the Trial 113 and ERI
study results suggesting an association between Risperdal and diabetes, in October
2000, Janssen's Associate Director of Central Nervous System Medical Affairs
wrote an email to her colleagues urging that Janssen must avoid Risperdal being
"lumped in to [sic] the atypical class for diabetes. . . . [W]e need to work hard on a
strategy to avoid risperdal being thought of as a diabetes-inducing medication.
Instead, when worried about diabetes, we want doctors to prescribe Risperdal."
Janssen then determined it would take control of how the message surrounding the
new diabetes warning would be communicated. Janssen officials' strategy was to
"soften the blow" through what is known in the industry as a Dear Doctor Letter
(DDL). The inspiration came from a DDL that Lilly sent to prescribers, informing
them that the entire class of atypical antipsychotics was now subject to a new
"class label" for diabetes and hyperglycemia. A senior vice president for Janssen's
parent company wrote in an internal email that "Lilly's DDL is pretty clever. How
much commercial liability would we incur if we sent a similar letter about
Risperdal, assuming the FDA is unwilling to communicate the issue?"
On November 10, 2003, Janssen disseminated a DDL, which did not include the
text of the new diabetes/hyperglycemia warning, but stated:
Hyperglycemia-related adverse events have infrequently been
reported in patients receiving RISPERDAL. Although confirmatory
research is still needed, a body of evidence from published peer-
reviewed epidemiology research suggests that RISPERDAL is not
associated with an increased risk of diabetes when compared to
untreated patients or patients treated with conventional antipsychotics.
Evidence also suggests that RISPERDAL is associated with a lower
risk of diabetes than some other studied atypical antipsychotics.
To put it mildly, the November 2003 DDL contained false information.
Additionally, in training its employees on the labeling update, Janssen
communicated to its field sales team that Risperdal had a "0%" increased diabetes
risk compared to placebo. This was part of the message communicated to
physicians in DDL follow-up visits with physicians.
Meanwhile, by January 2004, Janssen had updated the Risperdal label to include
the new diabetes/hyperglycemia warning. Janssen determined that the negative
sales impact had been minimal because of its deceptive efforts in the November
2003 DDL. In other words, the November 2003 DDL worked, as far as Janssen
was concerned, in protecting its market share.
Thereafter, in April 2004, the FDA's Division of Drug Marketing Advertising and
Communications (DDMAC)6 issued a "Warning Letter" to Janssen, characterizing
the November 2003 DDL as "false or misleading" in violation of the FDCA.
Specifically, the letter provided:
6
This agency is now known as the Office of Prescription Drug Promotion (OPDP).
DDMAC has concluded that the DHCP7 letter is false or misleading in
violation of Sections 502(a) and 201(n) of the Federal Food, Drug,
and Cosmetic Act (Act) (21 U.S.C. 325(a) and 321(n)) because it fails
to disclose the addition of information relating to hyperglycemia and
diabetes mellitus to the approved product labeling, minimizes the risk
of hyperglycemia-related adverse events, which in extreme cases is
associated with serious adverse events including ketoacidosis,
hyperosmolar coma, and death, fails to recommend regular glucose
control monitoring to identify diabetes mellitus as soon as possible,
and misleadingly claims that Risperdal is safer than other atypical
antipsychotics. The healthcare community relies on DHCP letters for
accurate and timely information regarding serious risks and associated
changes in labeling and the dissemination of this letter at a time
critical to educating healthcare providers is a serious public health
issue.
The FDA also determined that the scientific studies referenced in the DDL "do not
represent the weight of the pertinent scientific evidence" nor did the DDL
accurately describe the results of the cited studies. As a result of the FDA's
warning, Janssen issued a corrective letter in July 2004, acknowledging that the
November 2003 DDL "omitted material information about Risperdal, minimized
potentially fatal risks, and made misleading claims suggesting superior safety to
other atypical antipsychotics without adequate substantiation, in violation of the
[FDCA]."
As to Risperdal's label, Janssen did not update the label to include a boxed warning
regarding the risk of stroke, cardiac arrest, and sudden death in the elderly until
February 2005, and no warning about hyperprolactinemia appeared in the label
until August 2008.8
7
Dear Health Care Provider, which is another term for a Dear Doctor Letter.
8
To be sure, prior versions of the Risperdal label mentioned the risk of
"cerebrovascular adverse events" in elderly patients, increased prolactin levels, and
hyperprolactinemia; however, Janssen's categorization of those risks on the label
underrepresented and minimized the frequency and severity of the risks associated
with Risperdal. As noted, the category in which a particular risk appears on a drug
label is a critical indicator of both the degree of the risk and also the likelihood and
severity of the adverse consequences the drug may cause. See 21 C.F.R.
In April of 2007, the Attorney General of South Carolina filed a state law claim
against Janssen, seeking civil penalties under SCUTPA. The State pursued two
claims against Janssen, one in connection with the Risperdal label (the labeling
claim) and the second concerning the November 2003 DDL (the DDL claim).
Following a twelve-day trial, the jury returned a verdict on liability in favor of the
State, finding that Janssen's actions with respect to both the labeling and DDL
claims were willful violations of SCUTPA.
After dismissing the jury, the trial court separately considered evidence and
arguments during a two-day hearing to determine the appropriate penalty for
Janssen's SCUTPA violations. The trial court issued an order assessing penalties
against Janssen of $152,849,700 for the labeling claim and $174,224,000 for the
DDL claim, for a total penalty of $327,073,700. This appeal followed. This case
was transferred from the court of appeals to this Court pursuant to Rule 204(b),
SCACR.
II.
Analysis Concerning Liability
SCUTPA "declares unfair or deceptive acts or practices in trade or commerce
unlawful." Singleton v. Stokes Motors, Inc., 358 S.C. 369, 379, 595 S.E.2d 461,
466 (2004) (citing S.C. Code Ann. § 39-5-20(a) (2002)). "An unfair trade practice
has been defined as a practice which is offensive to public policy or which is
immoral, unethical, or oppressive." deBondt v. Carlton Motorcars, Inc., 342 S.C.
254, 269, 536 S.E.2d 399, 407 (Ct. App. 2000) (citing Young v. Century Lincoln-
Mercury, Inc., 302 S.C. 320, 326, 396 S.E.2d 105, 108 (Ct. App. 1989), aff'd in
part, rev'd in part on other grounds, 309 S.C. 263, 422 S.E.2d 103 (1992)).
SCUTPA provides for both civil actions brought by private citizens and
enforcement actions brought by the Attorney General on behalf of the State. S.C.
Code Ann. §§ 39-5-50(a), -110(a), -140(a) (1985). While the only section of
SCUTPA at issue in this case is an enforcement action brought by the Attorney
General, we note the distinction between the two types of actions. In an action
brought by a citizen under section 39-5-140(a) of the South Carolina Code, there is
§§ 201.56, 201.57 (setting forth detailed requirements on the content and format of
information on drug labels to ensure labels are not inaccurate, false, or misleading
and convey all pertinent information regarding the safe and effective use of drugs).
a requirement that the person suffer an "ascertainable loss of money or property,
real or personal, as a result of the use or employment by another person of an
unfair or deceptive method, act or practice . . . ." Thus, SCUTPA requires that a
private claimant suffer an actual loss, injury, or damage, and requires a causal
connection between the injury-in-fact and the complained of unfair or deceptive
acts or practices. S.C. Code Ann. § 39-5-140(a).9
Conversely, an enforcement action brought by the Attorney General has no such
actual impact requirement. See S.C. Code Ann. § 39-5-50(a). The Attorney
General "may recover on behalf of the State a civil penalty of not exceeding five
thousand dollars per violation." S.C. Code Ann. § 39-5-110(a). "The legislature
intended . . . [SCUTPA] to control and eliminate the large scale use of unfair and
deceptive trade practices within the state of South Carolina." Noack Enters. v.
Country Corner Interiors of Hilton Head Island, Inc., 290 S.C. 475, 477, 351
S.E.2d 347, 349 (Ct. App. 1986) (quotations and citations omitted).
At the outset of our analysis, our review of the extensive record compels us to
acknowledge that Risperdal has been an effective drug. The State did not file this
case because of concern with Risperdal's efficacy as an atypical antipsychotic.10
Risperdal, like virtually all pharmaceutical drugs, has risks and side effects. The
State filed this case because of its belief that Janssen engaged in unfair and
deceptive conduct in South Carolina by failing to properly disclose Risperdal's
9
"Under section 39-5-140, a plaintiff can recover treble damages where 'the use or
employment of the unfair or deceptive . . . act or practice was a willful or knowing
violation of § 39-5-20.'" Wright v. Craft, 372 S.C. 1, 23–24, 640 S.E.2d 486, 498
(Ct. App. 2006) (quoting Noack Enters., Inc. v. Country Corner Interiors of Hilton
Head Island, Inc., 290 S.C. 475, 477, 351 S.E.2d 347, 348–49 (Ct. App. 1986)).
10
Similar Risperdal litigation against Janssen and its parent company, Johnson &
Johnson, has been ongoing throughout the United States. In November 2013,
Johnson & Johnson agreed to pay more than $2.2 billion in civil and criminal
settlements with the United States Department of Justice to resolve claims that it
improperly marketed Risperdal.
Following oral argument, we received supplemental citations filed by Janssen
regarding similar litigation in Louisiana and Arkansas. After closely examining
the reported decisions in those states, we have determined that the cases involve
statutory claims which do not mirror the SCUTPA.
risks and side effects in an attempt to mislead prescribing physicians and the
public. An objective review of the evidence and law bears out the State's
allegations that Janssen engaged in a systematic pattern of deceptive conduct.
Janssen raises a number of issues in their appeal. While we reach the merits of a
number of these issues, many of the issues are not preserved for this Court's
review, and we address them only briefly.
A.
Opening and Closing Arguments
Janssen claims that various portions of the State's opening and closing arguments
were inflammatory and unduly prejudicial and thus warrant a new trial.
Specifically, Janssen claims that the State invited the jury to impose liability on the
basis of Janssen's size and commercial success by repeatedly referring to Janssen's
profits from selling Risperdal and claiming that Janssen put "profits over safety."
We find that Janssen's arguments on appeal are procedurally barred. Although
Janssen noted a generalized "continuing objection" at the outset of trial, apparently
believing it could make a more specific after-the-fact objection to any alleged
improper argument or evidence, such an approach is wholly inconsistent with our
law requiring a contemporaneous objection. See Young v. Warr, 252 S.C. 179,
200, 165 S.E.2d 797, 807 (1969) ("[T]he proper course to be pursued when counsel
makes an improper argument is for opposing counsel to immediately object and to
have a record made of the statements or language complained of and to ask the
court for a distinct ruling thereon." (citing Crocker v. Weathers, 240 S.C. 412, 424,
126 S.E.2d 335, 340 (1962))). This rule is designed to enable the trial court to
timely address and remedy a founded objection. See Herron v. Century BMW, 395
S.C. 461, 465, 719 S.E.2d 640, 642 (2011) ("'Issue preservation rules are designed
to give the trial court a fair opportunity to rule on the issues, and thus provide us
with a platform for meaningful appellate review.'" (quoting Queen's Grant II
Horizontal Prop. Regime v. Greenwood Dev. Corp., 368 S.C. 342, 373, 628 S.E.2d
902, 919 (Ct. App. 2006))). Here, absent a contemporaneous objection identifying
the particular comments complained of and the basis for the objection, Janssen has
waived its right to complain about this issue on appeal. Webb v. CSX Transp., Inc.,
364 S.C. 639, 655, 615 S.E.2d 440, 449 (2005) (holding that the failure to
contemporaneously object precluded the defendant from raising an issue on appeal
(citing Taylor v. Medenica, 324 S.C. 200, 212, 479 S.E.2d 35, 41 (1996))).11
Moreover, Janssen's "continuing objection" at trial concerning the propriety of
counsel's statements to the jury was limited to relevance, which is an entirely
different basis than the inflammatory/unduly prejudicial argument that Janssen
now advances on appeal. Thus, even generously construing Janssen's pre-trial
objection as sufficient to preserve the objection, Janssen's claim is nonetheless
procedurally barred from appellate review because Janssen argues a different basis
on appeal than was argued at trial. State v. Dunbar, 356 S.C. 138, 142, 587 S.E.2d
691, 694 (2003) ("A party may not argue one ground at trial and an alternate
ground on appeal." (citing State v. Prioleau, 345 S.C. 404, 411, 548 S.E.2d 213,
216 (2001); State v. Benton, 338 S.C. 151, 157, 526 S.E.2d 228, 231 (2000))).
Janssen's claims of error are without merit in any event. Janssen relies on our
holding in Branham v. Ford Motor Co., 390 S.C. 203, 701 S.E.2d 5 (2010), in
urging this Court to order a new trial. In Branham, the plaintiff's attorney strayed
beyond the parameters of permissible jury argument and sought punitive damages
for the damage caused to non-parties. Id. at 235, 701 S.E.2d at 22. We ordered a
new trial, holding that "[t]he closing argument invited the jury to base its verdict on
passion rather than reason. . . . [and] denied [defendant] a fair trial." Id. We find
that Branham is readily distinguishable from this case. Here, counsel for the State
directly linked the elements of SCUTPA to Janssen's misleading and deceptive
practices and its motivations to retain (and increase) Risperdal market share. Such
arguments were within proper bounds as the State sought to establish that Janssen
acted willfully and contrary to the public interest. In addition, the nature of
counsel's comments is more closely associated with what Janssen believes was a
grossly excessive award of civil penalties, and the jury's role was limited to
11
We acknowledge the rule in South Carolina that counsel is not required to harass
the trial judge by making continued objections after an issue has been ruled upon.
See Dunn v. Charleston Coca-Cola Bottling Co., 311 S.C. 43, 45–46, 426 S.E.2d
756, 758 (1993) (noting that where a trial judge has fair opportunity to consider
and rule upon an issue, it is not incumbent upon counsel "to harass the judge by
parading the issue before [the trial judge] again"). However, that is not the
situation before us, for Janssen failed to bring to the trial court's attention any of
the comments of which it now complains or specify the basis for its objection,
much less obtain a ruling from the trial court. Thus, because the trial court did not
have a fair opportunity to consider and rule upon Janssen's specific objections, it
was incumbent upon Janssen's counsel to object contemporaneously.
determining liability. The jury had no role in determining the amount of the civil
penalties.
B.
Admission of 1994, 1999, and 2004 DDMAC Letters
Janssen argues that the admission of several DDMAC letters was reversible error
because the letters constitute inadmissible hearsay and should also have been
excluded under Rule 403, SCRE. Once again, we find that Janssen has not
preserved these assignments of error for appellate review.12 Even if we were to
reach the merits of these claims, however, we would affirm the admission of these
letters pursuant to Rule 220(b)(1), SCACR. This evidence was relevant to the
issue of liability and concomitantly the statute of limitations concerning the
labeling claim, which, as discussed below, inures to Janssen's benefit.
12
Janssen's contemporaneous objection at trial to admission of the 1994 DDMAC
letter was on the basis of relevance, not on the basis of hearsay or Rule 403, SCRE.
See Talley v. S.C. Higher Educ. Tuition Grants Comm., 289 S.C. 483, 487, 347
S.E.2d 99, 101 (1986) ("It is an axiomatic rule of law that issues may not be raised
for the first time on appeal." (citing Am. Hardware Supply Co. v. Whitmire, 278
S.C. 607, 609, 300 S.E.2d 289, 290 (1983))). While it appears that Janssen was
more specific in objecting to the admission of the 1999 DDMAC letter—objecting
on relevancy, hearsay, and Rule 403, SCRE grounds—the trial judge did not
specifically rule on the hearsay or Rule 403, SCRE, issues. Thus, Janssen's
assignment of error is not preserved for appellate review. Kleckley v. Nw. Nat.
Cas. Co., 338 S.C. 131, 138, 526 S.E.2d 218, 221 (2000) ("An issue not raised to
or addressed by the trial court or the Court of Appeals is not properly preserved for
review by the Supreme Court . . . ." (citing Anonymous (M-156-90) v. State Bd. of
Med. Exam'rs, 329 S.C. 371, 375, 496 S.E.2d 17, 18–19 (1998); Camp v. Springs
Mortg. Corp., 310 S.C. 514, 516, 426 S.E.2d 304, 305 (1993))). Regarding the
2004 DDMAC letter, no challenge is preserved for our review. Janssen's pre-trial
objection to admission of the letter was only with regard to use or mention of the
letter during opening statements, and Janssen's counsel did not state the specific
grounds for the objection. Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731,
733 (1998) ("[A]n objection must be sufficiently specific to inform the trial court
of the point being urged by the objector." (citation omitted)).
C.
Adverse Impact
Janssen argues that the State's SCUTPA claims fail as a matter of law because the
State failed to show that Janssen's unfair and deceptive conduct had an adverse
impact within South Carolina. We disagree. We reject Janssen's attempt to ascribe
an injury-in-fact element in an individual claim to an Attorney General directed
claim, for to do so would be judicial engrafting of an element beyond that imposed
by the legislature. In the context of this case, Janssen's attempt to judicially
impose an injury-in-fact element to an Attorney General initiated SCUTPA claim
is nothing more than an "if we lied, nobody fell for it" defense. In this regard, we
observe that Janssen seeks to impose an absurd adverse impact element in a claim
concerning alleged unfair and deceptive marketing of prescription medicines. In
many instances, as here, the manifestations of adverse consequences from
prescription medicines are not immediate, but occur over time. Such is generally
the case with Risperdal. In any event, Janssen's deceptive conduct had an adverse
impact on the citizens of South Carolina, for Janssen maintained its superior
market share, which, after all, was what Janssen sought to achieve by its
dishonesty.
The provisions of SCUTPA allow three types of enforcement actions: (1) lawsuits
initiated by the Attorney General seeking injunctive relief; (2) lawsuits by the
Attorney General seeking civil penalties; or (3) lawsuits by private parties who
have suffered ascertainable losses. S.C. Code Ann. §§ 39-5-50, -110, -140; see
also Michael R. Smith, Note, Recent Developments Under the South Carolina
Unfair Trade Practices Act, 44 S.C. L. Rev. 543, 543–44 (1993) (discussing
generally various provisions of SCUTPA). Although this case is an appeal from a
lawsuit by the Attorney General seeking civil penalties, we note some important
distinctions between actions brought by the Attorney General and those brought by
private parties.
To recover actual damages under SCUTPA, a private claimant must suffer an
actual loss, injury, or damages, and the claimant must demonstrate a causal
connection between the injury-in-fact and the complained of unfair or deceptive
acts or practices. S.C. Code Ann. § 39-5-140(a). Additionally, a private party may
recover treble damages if the unlawful acts at issue are determined to be willful or
knowing. Id. On the other hand, where the Attorney General files suit on behalf of
the State, he is not required to show any injury-in-fact to recover a civil penalty.13
See S.C. Code Ann. §§ 39-5-110, -140. Rather, SCUTPA allows the Attorney
General to recover statutory damages of up to $5,000 per violation upon a showing
that the unlawful acts at issue are willful.14 S.C. Code Ann. § 39-5-110(a). If the
13
Other states have similar provisions. See, e.g., Mulligan v. QVC, Inc., 888
N.E.2d 1190, 1196 (Ill. App. Ct. 2008) ("Although the Attorney General may
prosecute a violation of the [Consumer Fraud and Deceptive Business Practices]
Act without showing that any person has in fact been damaged, it is well settled
that in order to maintain a private cause of action under the Consumer Fraud Act, a
plaintiff must prove that she suffered actual damage as a result of a violation of the
Act." (citation omitted)); Edmonds v. Hough, 344 S.W.3d 219, 223 (Mo. Ct. App.
2011) ("The [Merchandising Practices] Act eliminates the need for the Attorney
General to prove intent to defraud or reliance in order for the court to find that a
defendant has engaged in unlawful practices. Intent and reliance are not necessary
elements of the cause of action." (quotations and citations omitted)). We
recognize, however, there are jurisdictions that require the state to show an injury-
in-fact as an element of unfair trade practice type claim. Following oral argument
in this case, Janssen has submitted supplemental authority consisting of court
decisions from other states reversing trial court verdicts against Janssen. We have
carefully reviewed those decisions and conclude they are not persuasive, for the
cases submitted by Janssen involve different claims with elements that do not
mirror the South Carolina UFTPA.
14
"[A] willful violation occurs when the party committing the violation knew or
should have known that his conduct" was unlawful. S.C. Code Ann. § 39-5-
110(c). In addition to the civil penalty, the Attorney General is authorized to seek
injunctive relief when he "has reasonable cause to believe that any person is using,
has used or is about to use any method, act or practice declared by § 39-5-20 to be
unlawful . . . ." S.C. Code Ann. § 39-5-50(a). To be sure, the legislature has
granted the Attorney General broad investigative powers. See S.C. Code Ann. §
39-5-70(a) ("When it appears to the Attorney General that a person has engaged in,
is engaging in, or is about to engage in any act or practice declared to be unlawful
by this article[,] . . . [he may serve] an investigative demand . . . ."). While an
individual statutory claim necessarily includes an injury-in-fact element, an
Attorney General initiated claim does not. It is the protection of the people of
South Carolina that lies at the center of an Attorney General directed claim.
Attorney General determines that an enforcement action "would be in the public
interest," he is statutorily authorized to proceed without making any such showing
of injury-in-fact or reliance.15 S.C. Code Ann. § 39-5-50(a). Thus, Janssen
misconstrues the legislature's manifest purpose in providing for an Attorney
General directed claim, for a SCUTPA action brought by the State is to protect the
citizens of South Carolina from unfair or deceptive acts in the conduct of any trade
or commerce. Janssen's contention to the contrary is not only fundamentally at
odds with unambiguous legislative intent in authorizing an Attorney General
SCUTPA claim, but is also inconsistent with well-established South Carolina law.
On the issue of liability, our case law interpreting and applying SCUTPA is
clear—while a private party SCUTPA action requires the traditional showing of an
injury, an action brought by the Attorney General on behalf of the State contains
no actual injury element. For the foregoing reasons, we hold that, although the
State had the burden of proving Janssen's representations had a tendency to
deceive, the State was not required to show actual deception or that those
representations caused any appreciable injury-in-fact or adversely impacted the
marketplace. We find ample support in the record that the State met its burden of
proving that Janssen's actions had the tendency to deceive. Janssen's unfettered
desire for sales and market share led it to engage in a systematic pattern of
intentional nondisclosure, false representations, and deceptive conduct in violation
of SCUTPA. Most assuredly, Janssen intended to deceive the public and the
medical community. Although we reject Janssen's effort to impose an injury-in-
fact element in an Attorney General initiated claim, we believe the argument
carries persuasive weight in the assessment of an appropriate penalty, which we
address in the penalty section.
15
"'It is in the public interest generally to prevent the use of false and misleading
statements in the conduct of business . . . [and] actual deception need not be
shown; a finding of a tendency [and capacity] to deceive and mislead will suffice.'"
State ex rel. McLeod v. Brown, 278 S.C. 281, 285, 294 S.E.2d 781, 783 (1982)
(quoting U.S. Retail Credit Assoc., Inc. v. F.T.C., 300 F.2d 212, 221 (4th Cir.
1962)) (ellipsis in original). Additionally, "[t]he health, welfare, and safety of the
lives and property of the people of this State . . . are matters of public concern."
S.C. Const. art. XII, § 1.
D.
Exclusion of Dr. Wecker's Expert Testimony
Janssen claims that the trial court erred in excluding the testimony of Dr. William
Wecker, an expert statistician whose testimony, according to Janssen, would have
shown that Janssen's representations in the Risperdal label and the November 2003
DDL had no impact on any prescribing physicians. The import of Dr. Wecker's
testimony would have been that, notwithstanding Janssen's false representations,
the community of prescribing physicians was well aware of the risks and side
effects of Risperdal.
We are again presented with an issue that was not properly preserved for appellate
review. When the trial court filed its order on February 25, 2011, excluding the
testimony of Dr. Wecker on relevancy grounds, Janssen waited until March 21,
2011, to make an offer of proof of his testimony. The offer of proof came too late.
TNS Mills, Inc. v. S.C. Dep't of Rev., 331 S.C. 611, 628, 503 S.E.2d 471, 480
(1998) (noting that a failure to make a proffer of what an excluded witness's
testimony would have been precludes appellate review); see also Greenville Mem'l
Auditorium v. Martin, 301 S.C. 242, 244, 391 S.E.2d 546, 547 (1990) ("An alleged
erroneous exclusion of evidence is not a basis for establishing prejudice on appeal
in absence of an adequate proffer of evidence in the court below." (citations
omitted)).16
On the merits, for the reasons discussed in the previous section, we would not find
reversible error in any event. We do acknowledge there was evidence presented,
which otherwise tended to support Janssen's thesis that its deceptive conduct had
no effect on the community of prescribing physicians, for they knew the truth
concerning the risks and side effects associated with Risperdal. Excluding Dr.
Wecker's testimony, therefore, resulted in no prejudice to Janssen. Yet, as
discussed above, Janssen's relevancy argument is based on the false premise that
actual harm resulting from the deceptive conduct is a necessary element of an
Attorney General directed claim.
16
It is for the same reason we reject Janssen's claim that the trial court erred by
excluding the testimony of the twenty surveyed physicians and evidence of the
2007 Zyprexa product insert and 2010 Latuda product insert.
E.
First Amendment
Janssen argues that the liability verdict and the penalty award impermissibly
restrict its right to free speech. We disagree.
Again, Janssen has not preserved this issue for review. Although Janssen
requested a First Amendment jury instruction and raised the issue in its motion for
JNOV, Janssen failed to raise any First Amendment issues in its motion for a
directed verdict. Janssen's failure to raise this issue in its motion for a directed
verdict precludes any appellate review. In re McCracken, 346 S.C. 87, 93, 551
S.E.2d 235, 238 (2001) ("[S]ince only grounds raised in the directed verdict
motion may properly be reasserted in the jnov motion, and since no grounds were
raised in the directed verdict motion, no jnov claim is preserved for our review."
(citing Duncan v. Hampton Cnty. Sch. Dist. #2, 335 S.C. 535, 545, 517 S.E.2d 449,
454 (Ct. App. 1999))).
There is no error in any event, for the First Amendment does not bar imposition of
liability on Janssen for violating SCUTPA. Janssen relies on the false premise that
its conduct was not unfair and deceptive. While commercial speech is entitled to
First Amendment protections, the Constitution does not erect a blanket shield
insulating commercial speech from liability in all circumstances. In this regard, we
find Janssen's reliance on Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (2011), is
misplaced. The Supreme Court of the United States held in Sorrell that "[s]peech
in aid of pharmaceutical marketing . . . is a form of expression protected by the
Free Speech Clause of the First Amendment." Id. at 2659. Sorrell, however, does
not deal with deceptive commercial speech. Instead, the Sorrell Court invalidated
a Vermont law that regulated the type of pharmacy records that a drug
manufacturer could obtain and use in marketing prescription drugs. Id. at 2659.
The State of Vermont never argued "that the provision challenged . . . will prevent
false or misleading speech," nor did it argue that the detailing17 at issue was "false
17
Pharmaceutical companies such as Janssen "promote their drugs to doctors
through a process called 'detailing.' This often involves a scheduled visit to a
doctor's office to persuade the doctor to prescribe a particular pharmaceutical.
Detailers bring drug samples as well as medical studies that explain the 'details'
and potential advantages of various prescription drugs." Sorrell, 131 S. Ct. at
2659.
or misleading within the meaning of [the Supreme] Court's First Amendment
precedents." Id. at 2672. We do not construe Sorrell as foreclosing a state from
prohibiting unfair and deceptive prescription drug marketing.
Indeed, it is a well-settled proposition that "[t]he government may ban forms of
communication more likely to deceive the public than to inform it, or commercial
speech related to illegal activity." Cent. Hudson Gas & Elec. Corp. v. Pub. Serv.
Comm'n of N.Y., 447 U.S. 557, 563–64 (1980) (internal citations omitted). The
State correctly notes that commercial speech is not protected by the First
Amendment unless it concerns lawful activity and is not misleading. Johnson v.
Collins Entm't Co., 349 S.C. 613, 624, 564 S.E.2d 653, 659 (2002).
Here, the jury found that Janssen's acts were unfair or deceptive, and thus unlawful
under SCUTPA. In an action at law tried to a jury, the jury's factual findings will
not be disturbed unless a review of the record discloses that there is no evidence
that reasonably supports the jury's findings. City of North Myrtle Beach v. E.
Cherry Grove Realty Co., 397 S.C. 497, 502, 725 S.E.2d 676, 678 (2012). The
record is replete with evidence that reasonably supports a finding that Janssen's
conduct was unfair and deceptive. Thus, we conclude Janssen may not avail itself
of the protections of the First Amendment to shield itself from its deceptive
conduct and false representations.
F.
Jury Instructions
Janssen argues that the trial court erred by failing to charge the jury on federal law
regarding "unfairness" and instead looking to South Carolina law to define the
term. We disagree.
Modeled after the language of the Federal Trade Commission Act (FTCA),18
SCUTPA declares unlawful any unfair or deceptive acts or practices in trade or
commerce. Compare 15 U.S.C. § 45(a)(1) (2012) ("Unfair methods of competition
in or affecting commerce, and unfair or deceptive acts or practices in or affecting
commerce, are hereby declared unlawful."), with S.C. Code Ann. § 39-5-20(a)
("Unfair methods of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce are hereby declared unlawful."). SCUTPA does
not define the terms "unfair" and "deceptive"; rather, the legislature intended the
18
15 U.S.C. §§ 41–77 (2012).
courts to be guided by federal interpretations of those terms. S.C. Code Ann. § 39-
5-20(b) (1985) (instructing South Carolina courts to take guidance from "the
interpretations given by the Federal Trade Commission and the Federal Courts to
§ 5(a)(1)" of the FTCA); see also Wright v. Craft, 372 S.C. 1, 26, 640 S.E.2d 486,
500 (Ct. App. 2006) ("Whether an act or practice is unfair or deceptive within the
meaning of the [SC]UTPA depends on the surrounding facts and the impact of the
transaction on the marketplace." (citing deBondt, 342 S.C. at 269, 536 S.E.2d at
407)).
To this end, our courts have interpreted those terms consistent with legislative
intent. "'An act is "unfair" when it is offensive to public policy or when it is
immoral, unethical, or oppressive.'" Health Promotion Specialists, LLC v. South
Carolina Bd. of Dentistry, 403 S.C. 623, 638, 743 S.E.2d 808, 816 (2013) (quoting
Gentry v. Yonce, 337 S.C. 1, 12, 522 S.E.2d 137, 143 (1999)). "'An act is
"deceptive" when it has a tendency to deceive.'" Id. (quoting Gentry, 337 S.C. at
12, 522 S.E.2d at 143).
At trial, Janssen requested a jury instruction based on section 45(n) of the FTCA as
it relates to determining whether an act or practice is "unfair."19 Specifically,
Janssen asked the trial court to instruct the jury that in order to find dissemination
of the November 2003 DDL to be an "unfair" trade practice, the jury must find "the
act or practice causes or is likely to cause substantial injury to consumers which is
not reasonably avoidable by consumers themselves and not outweighed by
countervailing benefits to consumers or to competition." 15 U.S.C. § 45(n) (2012).
We find no error, and we view this assignment of error as closely aligned with
Janssen's view that an Attorney General directed action will not lie in the absence
of an actual loss or damage, a view which we reject. Nevertheless, while there is
little evidence of actual harm, there is overwhelming evidence of Janssen's
longstanding pattern of deception in pursuit of its goal to deceive prescribing
physicians and the public, as well as maintain and increase market share as a result
19
Section 45(n) of the FTCA prohibits the Federal Trade Commission (FTC) from
declaring an act or practice to be "unfair" unless "the act or practice causes or is
likely to cause substantial injury to consumers which is not reasonably avoidable
by consumers themselves and not outweighed by countervailing benefits to
consumers or to competition." 15 U.S.C. § 45(n) (2012). Further, in determining
whether an act or practice is unfair, section 45(n) provides that the FTC may
consider established public policy along with all other evidence, but such public
policy considerations may not serve as the primary basis for a finding of
unfairness. Id.
of its deceptive practices.
Janssen also requested that the jury be instructed that a violation of public policy is
not, in and of itself, a basis for finding Janssen's conduct to be an unfair trade
practice and that a violation of public policy may not even be the primary basis
upon which the jury based a finding of liability. According to Janssen, its
requested jury instructions reflect the definition of "unfair" set forth in the FTCA,
by which South Carolina courts are to be guided. We find no reversible error.
Although SCUTPA refers to the FTCA for guidance, we find that the language of
section 39-5-20(b) of the South Carolina Code reveals that federal interpretations
are persuasive but not binding authority. Our appellate courts have amassed a
strong and consistent body of case law defining "unfair" under SCUTPA. In the
absence of a legislative response, it would be inappropriate for this Court to depart
from settled South Carolina precedent. Moreover, we do not discern the wide
chasm between the federal and state definitions of "unfair" that Janssen urges. We
find that the jury instructions as given correctly stated South Carolina law and
afforded the proper test for determining whether Janssen's conduct was "unfair"
under SCUTPA. Thus, we hold that the trial court did not abuse its discretion by
declining to adopt Janssen's proposed jury instructions. See Pittman v. Stevens,
364 S.C. 337, 340, 613 S.E.2d 378, 379 (2005) ("The trial judge is required to
charge only the current and correct law of South Carolina." (citing McCourt v.
Abernathy, 318 S.C. 301, 305, 457 S.E.2d 603, 606 (1995))).
G.
Regulated Activity Exception to SCUTPA
Janssen claims that the State's labeling claim was barred by SCUTPA's regulated
activity exemption. We hold that Janssen has failed to preserve this issue for
appellate review. However, even if we were to reach the merits, we would find
that Janssen is not entitled to avail itself of the regulated activity exemption.
SCUTPA expressly provides that it is inapplicable to "[a]ctions or transactions
permitted under laws administered by any regulatory body or officer acting under
statutory authority of this State or the United States." S.C. Code § 39-5-40(a)
(1985). "This exception exempts an entity from liability where its actions are
lawful or where it does something required by law, or does something that would
otherwise be a violation of the Act, but which is allowed under other statutes or
regulations." Dema v. Tenet Physician Servs. Hilton Head, Inc., 383 S.C. 115,
123, 678 S.E.2d 430, 434 (2009) (quotations omitted). Janssen argues that, after
approval of a proposed label, the FDA both authorized and required the use of that
approved label. Thus, Janssen argues that FDA approval of the label triggers
SCUTPA's regulated activity exemption and prohibits any claim in connection
with the sufficiency of the label.
Initially, Janssen fails to identify any specific trial court rulings claimed to
constitute error. Because of this, Janssen's argument does not sufficiently identify
with particularity the alleged error, and Janssen has abandoned its claim on appeal.
See Rule 208(b)(4), SCACR ("The brief shall contain references to the transcript,
pleadings, orders, exhibits, or other materials which may be properly included in
the Record on Appeal . . . to support the salient facts alleged. References shall also
be made to where relevant objections and rulings occurred in the transcript."); see
also First Sav. Bank v. McLean, 314 S.C. 361, 363, 444 S.E.2d 513, 514 (1994)
("Mere allegations of error are not sufficient to demonstrate an abuse of discretion.
On appeal, the burden of showing abuse of discretion is on the party challenging
the trial court's ruling." (citation omitted)).
However, even if Janssen had properly preserved this issue, we note that Janssen
was not entitled to avail itself of this SCUTPA provision. Wyeth makes clear that
"a central premise of federal drug regulation [is] that the manufacturer bears
responsibility for the content of its label at all times." 555 U.S. at 570–71. "[The
manufacturer] is charged both with crafting an adequate label and with ensuring
that its warnings remain adequate as long as the drug is on the market." Id. at 571
(citing 21 C.F.R. § 201.80(e); 21 C.F.R. § 314.80(b); 73 Fed. Reg. 49605). Wyeth
clearly rejects the notion that a manufacturer's decision not to include a stronger
warning is authorized by the FDA—absent evidence that the FDA affirmatively
considered and rejected the stronger warning after being supplied with an
evaluation or analysis of the specific dangers presented. Id. at 572–73. The very
purpose of the "changes being effected" corollary to the FDCA authorizes
manufacturers to strengthen the warnings on a label without FDA approval, as long
as the manufacturer files a supplemental new drug application. Id. at 568; 21
C.F.R. § 314.70(c)(6)(iii)(A), (C) (2013). Indeed, the United States Supreme
Court in Wyeth noted that "Congress enacted the FDCA to bolster consumer
protection against harmful products. Congress did not provide a federal remedy
for consumers harmed by unsafe or ineffective drugs in the [FDCA]. Evidently, it
determined that widely available state rights of action provided appropriate relief
for injured consumers." Id. at 574. Accordingly, Janssen cannot shield itself from
liability by claiming that the FDA's approval of its label constituted an express
authorization of its labeling decisions. See id. at 583 (Thomas, J., concurring in the
judgment) ("[F]ederal law does not give drug manufacturers an unconditional right
to market their federally approved drug at all times with the precise label initially
approved by the FDA.").
H.
Statute of Limitations
Janssen claims that the trial court erred by granting the State's motion for a directed
verdict on the statute of limitations on the labeling claim and the DDL claim. We
disagree concerning the DDL claim and affirm, but agree in part with Janssen
regarding the labeling claim. The statute of limitations bars the labeling claim
insofar as the trial court imposed civil penalties for violations that occurred more
than three years prior to the parties' tolling agreement. Because of the ongoing
nature of Janssen's deceptive conduct, we affirm the judgment on the labeling
claim but limit the imposition of civil penalties to a three-year period, coextensive
with the statute of limitations, subject only to the additional period of time between
the tolling agreement and the filing of the Complaint.
At the close of all of the evidence, the State moved for a directed verdict as to
Janssen's statute of limitations defense, arguing that Janssen failed to present any
evidence that the Attorney General's office had actual or constructive notice of
Janssen's unlawful conduct prior to the commencement of the three year statute of
limitations.20 Specifically, the State argued there was no evidence that the
Attorney General, more than three years prior to the commencement of the statute
of limitations on January 24, 2004, knew or should have known about the
deceptiveness of the DDL and the Risperdal label, the concealed studies, or the
unlawful promotion of Risperdal in South Carolina.
The trial court granted the State's motion for a directed verdict, finding that neither
the DDL claim nor the labeling claim was barred by the three-year statute of
limitations. Specifically, the trial court noted that although the medical community
at large was aware of the risks associated with Risperdal, some even as early as the
mid-1990s, the point in time at which the side-effects of Risperdal became known
was not the gravamen of the State's claims. Rather, the specific conduct at issue
20
The Complaint was filed on April 23, 2007, but, as noted, the State and Janssen
entered into a tolling agreement concerning the statute of limitations on January
24, 2007.
was Janssen's false and misleading statements in the DDL and Janssen's failure to
update its label to reflect the known degree of risks associated with Risperdal.
Accordingly, the relevant inquiry was the point at which the State should have
known that Janssen's conduct as to the DDL and the Risperdal label was unfair or
deceptive and, thus, gave rise to a SCUTPA claim.
As to the DDL claim, the trial court found that claim was not barred by the statute
of limitations because there was no evidence that the false or misleading nature of
the DDL could have been discovered before the DDMAC issued its warning letter
to Janssen in April 2004, which was within the timeframe of the tolling agreement.
As to the labeling claim, the trial court found that because Janssen took affirmative
steps to prevent disclosure of unfavorable clinical trial results that revealed the
serious degree of risks associated with Risperdal, the statute of limitations was
equitably tolled during the period of time in which Janssen knew, but failed to
disclose and shielded from public knowledge, the true degree of risks associated
with Risperdal. The trial court found the labeling claim likewise was not barred by
the statute of limitations, and awarded a civil penalty for each of the of 509,499
Risperdal "sample boxes" distributed in South Carolina from 1998 through the date
of the Complaint, April 23, 2007, each of which included the drug label in the
sample packaging.
Janssen argues this was error and that both claims are barred by the statute of
limitations because the State had actual or constructive knowledge of the claims
before January 24, 2004. Specifically, as to the DDL claim, Janssen contends that
the claim was discoverable from the face of the DDL itself, and therefore, the
statute of limitations began to run at the time the DDL was mailed in November
2003. As to the labeling claim, Janssen contends that claim is barred because the
risks associated with Risperdal were widely known by the mid-1990s and that the
alleged inadequacies in the labeling were apparent from the face of the label itself;
therefore, Janssen posits that the labels themselves put the State on notice of its
labeling claim as early as 1994, and that the three-year statute of limitations thus
ran long before the State's Complaint was filed in 2007. Janssen further argues the
doctrine of equitable tolling should be sparingly applied and that there is no basis
for applying it here.
We first address the DDL claim. SCUTPA provides for a three-year statute of
limitations. S.C. Code Ann. § 39-5-150 (1985). Under the discovery rule, the
three-year clock starts ticking on the date the injured party either knows or should
have known by the exercise of reasonable diligence that a cause of action arises
from wrongful conduct. Dean v. Ruscon Corp., 321 S.C. 360, 363, 468 S.E.2d
645, 647 (1996) (citation omitted). We have carefully reviewed the record in light
of the appropriate standard of review, and we agree with the trial court. As a
matter of law, the only reasonable conclusion supported by the evidence at trial
was that the existence of a claim, i.e. the deceptive and unfair nature of Janssen's
conduct in disseminating the DDL, could not have reasonably been discovered
prior to April 2004 when the FDA issued the Warning Letter to Janssen.21 See id.
at 366, 468 S.E.2d at 648 (finding that where the only reasonable conclusion
supported by the evidence was that the lawsuit accrued on a particular date, there
was no issue for the jury to decide and a directed verdict was proper). We affirm
the trial court's finding that the DDL claim was timely.
We turn to the labeling claim. The procedural dilemma we confront is that the
statute of limitations issue concerning the labeling claim was resolved at trial
through principles of equitable tolling. A determination in equity is not proper for
a directed verdict motion insofar as determining what matters should be submitted
to the jury. It was therefore legal error to resolve the issue of equitable tolling
pursuant to a directed verdict motion. Under our de novo review of this equitable
issue, we agree with Janssen that there is an insufficient basis for application of
that doctrine to preserve the timeliness of all labeling violations, reaching back to
the time Risperdal was first introduced in 1994. See Hooper v. Ebenezer Sr. Servs.
& Rehab. Ctr., 386 S.C. 108, 117, 687 S.E.2d 29, 33 (2009) (noting the doctrine of
equitable tolling should be used sparingly and only when the interests of justice
demand its use). However, we do not view the error as one mandating reversal and
a new trial, given the continuing nature of the accrual of labeling violations.
Clearly, much of the labeling claim accrued more than three years prior to the
January 24, 2007 tolling agreement. The risks associated with atypical
antipsychotics, like Risperdal, were becoming well known by the late 1990s. The
State's experts testified that the Risperdal label was inadequate as early as 1994
when Janssen began marketing the drug. By all accounts, in the early 2000s,
evidence of the risks was pervasive.22 We find that the only reasonable conclusion
21
Considerable argument is presented over whether the discovery rule should be
analyzed through the person of the Attorney General or the typical approach of the
reasonably prudent person. We need not decide the "relevant plaintiff" question
and purported distinction between the two, for the result would be the same here.
22
This underscores Janssen's point that the community of prescribing physicians
was well aware of the Risperdal risks, and Janssen's resulting contention that the
supported by the evidence is that the Attorney General knew, or most assuredly
should have known, of potential SCUTPA violations regarding the Risperdal label
prior to January 24, 2004. Thus, the labeling violations occurring prior to January
24, 2004, were therefore barred by the statute of limitations.
Nevertheless, the labeling claim presents ongoing violations of SCUTPA that
continued after January 24, 2004 and during the three-year-period prior to the
tolling agreement. In requesting that the entire labeling claim be dismissed as time
barred, Janssen assumes, wrongly so, that its ability to successfully invoke the
statute of limitations to bar the labeling claim prior to January 24, 2004, ends the
labeling claim altogether. We reject Janssen's position, for Janssen misapprehends
the statute of limitations and the concept of continuous accrual of this SCUTPA
cause of action. The labeling claim presents a series of discrete, independently
actionable wrongs that are at the core of the typical unfair trade practice action.
The principles of this type of continuous accrual respond to
the inequities that would arise if the expiration of the statute of
limitations period following a first breach of duty or instance of
misconduct were treated as sufficient to bar suit for any subsequent
breach or misconduct; parties engaged in long-standing malfeasance
would thereby obtain immunity in perpetuity from suit even for recent
and ongoing malfeasance. In addition, where misfeasance is ongoing,
a defendant's claim to repose, the principal justification underlying the
limitations defense, is vitiated. . . . [Accordingly,] separate, recurring
invasions of the same right can each trigger their own statute of
limitations. . . . Generally speaking, continuous accrual applies
whenever there is a continuing or recurring obligation: [w]hen an
obligation or liability arises on a recurring basis, a cause of action
accrues each time a wrongful act occurs, triggering a new limitations
period.
Aryeh v. Canon Bus. Solutions, Inc., 292 P.3d 871, 880 (Cal. 2013) (quotations and
citations omitted) (distinguishing the continuous accrual doctrine from the
continuing violation doctrine, which involves a single injury that is the product of a
series of small harms, any one of which is not actionable on its own). See Estate of
Livingston v. Livingston, 404 S.C. 137, 147–48, 744 S.E.2d 203, 209 (Ct. App.
2013) (finding a new statute of limitations begins to run after each separate injury,
allegedly deceptive practices had little or no effect on the practice and frequency of
prescribing Risperdal.
and therefore statute of limitations barred only claims falling outside the three-year
time period and did not bar claims occurring within that time), cert. granted, No.
2013-001505 (S.C. Sup. Ct. filed Oct. 24, 2014); see also Hogar Dulce Hogar v.
Cmty. Dev. Comm'n of Escondido, 2 Cal. Rptr. 3d 497, 502 (Ct. App. 2003)
("When an obligation or liability arises on a recurring basis, a cause of action
accrues each time a wrongful act occurs, triggering a new limitations period."
(citation omitted)); cf. Anonymous Taxpayer v. S.C. Dep't of Rev., 377 S.C. 425,
440–41, 661 S.E.2d 73, 81 (2008) (finding that, under the facts presented, the
particular claim alleged by plaintiff constituted only one cause of action, and
therefore, there was no continuing injury that would trigger a new limitations
period).
Indeed, the language of SCUTPA itself contemplates that an unlawful method, act,
or practice may result in multiple statutory violations, and it is the violations
themselves that cause the statute of limitations to begin to run. S.C. Code Ann. §
39-5-110(a) ("If a court finds that any person is willfully using or has willfully
used a method, act or practice declared unlawful by § 39-5-20, the Attorney
General . . . may recover on behalf of the State a civil penalty of not exceeding five
thousand dollars per violation." (emphasis added)). We adopt the view that aligns
with legislative intent as reflected in section 39-5-110, a common sense approach
recognizing that the SCUTPA statute of limitations begins to run anew with each
violation. Thus, where a claim involves a series of ongoing violations, recovery is
limited to a period coextensive with the applicable statute of limitations.
In sum, we agree with the State regarding the DDL claim, for we find that claim, in
the exercise of reasonable diligence, could have been discovered no earlier than
April 2004 when the FDA issued its warning letter to Janssen. However, we agree
with Janssen concerning the labeling claim insofar as civil penalties were awarded
for violations occurring from 1998 until January 24, 2004 (three years prior to the
tolling agreement). Under these facts, it was error to award the State civil penalties
for violations in connection with the labeling claim outside the statute of
limitations. An award for civil penalties within the statute of limitations was
proper.
I.
Preemption
Janssen argues that both the labeling claim and the DDL claim are preempted by
federal law. Specifically, Janssen argues the labeling claim is barred by implied
conflict preemption and that the DDL claim is barred by the express preemption
provision of the FDCA, 21 U.S.C. § 337(a) (2006). We disagree.
When "Congress has 'legislated . . . in a field which the States have traditionally
occupied,' we 'start with the assumption that the historic police powers of the States
were not to be superseded by the Federal Act unless that was the clear and manifest
purpose of Congress.'" Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)
(quotations and citations omitted) (ellipses in original).
"In 1962, Congress amended the FDCA and shifted the burden of proof from the
FDA to the manufacturer." Wyeth, 555 U.S. at 567. "Before 1962, the [FDA] had
to prove harm to keep a drug out of the market, but the amendments required the
manufacturer to demonstrate that its drug was safe for use under the conditions
prescribed, recommended, or suggested in the proposed labeling before it could
distribute the drug." Id. (quotations and citations omitted). "In addition, the
amendments required the manufacturer to prove the drug's effectiveness by
introducing substantial evidence that the drug will have the effect it purports or is
represented to have under the conditions of use prescribed, recommended, or
suggested in the proposed labeling." Id. (quotations and citations omitted). "As
[Congress] enlarged the FDA's powers to protect the public health and assure the
safety, effectiveness, and reliability of drugs, Congress took care to preserve state
law." Id. (quotations and citations omitted). "The 1962 amendments [to the
FDCA] added a saving clause, indicating that a provision of state law would only
be invalidated upon a direct and positive conflict with the FDCA." Id. (quotations
and citations omitted). "Consistent with that provision, state common-law suits
'continued unabated despite . . . FDA regulation.'" Id. (quoting Riegel v.
Medtronic, Inc., 552 U.S. 312, 340 (2008) (Ginsburg, J., dissenting)).23
Based upon Wyeth, we find that the State's DDL claim is not expressly preempted
by federal law. Additionally, we find that Janssen has not preserved their implied
conflict preemption claim for appellate review. Even assuming Janssen's argument
regarding implied preemption is not procedurally barred, however, we find it to be
without merit.
23
The FDA did not have the authority to mandate a manufacturer change its label
until amendments to the FDCA in 2007. 21 U.S.C. § 355(o)(4) (Supp. V 2011).
1.
Express Preemption of the DDL Claim
Janssen argues that the State's claim regarding the DDL relies on a single piece of
evidence—the April 2004 DDMAC warning letter characterizing Janssen's DDL as
"false and misleading." As such, Janssen asserts the DDL claim is based solely on
a violation of the FDCA, which provides no private right of action. Janssen thus
concludes that this "federal claim" is preempted and may not be maintained.
Because Janssen's argument is based on a false premise, we disagree.
It is true that the State pursued a SCUTPA claim based on the November 2003
DDL. It is also true that the State introduced the April 2004 DDMAC warning
letter as evidence in support of its DDL claim. It is not true that the sole evidence
establishing the false and misleading nature of the DDL comes from the
subsequent April 2004 DDMAC warning letter. Janssen not only views the DDL
claim myopically, but conflates the concepts of evidence and claims. There was
substantial additional evidence relating to the deception surrounding the November
2003 DDL, much of which is noted above. For example, the State presented
evidence that, scientific proof to the contrary, Janssen's Risperdal sales strategy
specifically sought to differentiate Risperdal from competing drugs by
emphasizing that Risperdal caused less weight gain relative to other atypical
antipsychotics such as Zyprexa.
Moreover, the State presented internal emails between Janssen executives, one of
which included discussion of Janssen's desire to gain market share over
competitors by avoiding being subjected to a class labeling requirement as to
diabetes/hyperglycemia. Yet another email indicated that at least one Janssen
scientist supported glucose screening and monitoring for Risperdal patients, but
that such a position was "not the company line." Janssen's broad, aggressive, and
deceptive marketing strategy resulted in the discrete DDL claim. In short, the
record is replete with evidence beyond the 2004 DDMAC warning letter to support
the State's DDL claim. Further, at the end of trial, the jury was charged with
determining several factual issues, each of which was based solely on the
provisions of SCUTPA, and the trial judge assessed penalties under SCUTPA
framework. Accordingly, we find that the State's SCUTPA claim concerning the
DDL is not preempted by the FDCA.
2.
Implied Conflict Preemption of the Labeling Claim
Janssen argues that the State's labeling claim is barred by implied conflict
preemption. Janssen failed to raise the doctrine of implied conflict preemption in
its motion for summary judgment or its initial directed verdict motion at the close
of the State's case-in-chief. Accordingly, this argument was waived because it was
not asserted in Janssen's initial motion for directed verdict.24 See Freeman v. A. &
M. Mobile Home Sales, Inc., 293 S.C. 255, 258–59, 359 S.E.2d 532, 535 (Ct. App.
1987).
Additionally, Janssen's argument on appeal is substantively different than the
argument below. Before the trial court, Janssen moved for a directed verdict,
arguing that the Wyeth "exception to preemption" did not apply since the State
failed to establish that Janssen could have, and should have, updated the Risperdal
label without prior FDA approval. Given this purported failure of proof, Janssen
argued that the State's labeling claim was preempted. The trial court rejected
Janssen's argument and found that Wyeth was controlling. In contrast, Janssen now
argues that the State's SCUTPA claims sought to impose labeling requirements
different from those required by the FDA, and thus, according to Janssen, the
doctrine of implied conflict preemption bars the State's claims. This argument,
however, is not preserved for appellate review. See Dunbar, 356 S.C. at 142, 587
S.E.2d at 694 ("A party may not argue one ground at trial and an alternate ground
on appeal." (citing Prioleau, 345 S.C. at 411, 548 S.E.2d at 216; Benton, 338 S.C.
at 157, 526 S.E.2d at 231)).
Nonetheless, even were we to find Janssen's argument not to be procedurally
barred, we would find it is without merit. Janssen suggests that the State sought to
impose labeling requirements different than those imposed by the FDA. The
State's claim, however, did not seek to penalize Janssen for distributing its FDA-
24
Notably, Janssen did raise express preemption as to the DDL in its initial
directed verdict motion. However, counsel for Janssen candidly acknowledged in
its renewed directed verdict motion at the close of the evidence, "[W]e have an
argument that hasn't been made by us before, and that is that the package insert
claim, the claim dealing with the label, is preempted by federal law." Further,
counsel for Janssen stated, "We're arguing something quite different that we
haven't argued before. We haven't [previously] argued about Wyeth against
Levine."
approved label. Rather, the State sought civil penalties based on Janssen's actions
in failing to discharge its ongoing, affirmative duty to keep its label updated and
ensure "that its warnings remain adequate as long as the drug is on the market."
Wyeth, 555 U.S. at 571 (citing 21 C.F.R. § 201.80(e); 21 C.F.R. § 314.80(b); 73
Fed. Reg. 49605).
Further, we reject Janssen's argument that Wyeth is inapposite because this case
involves an enforcement action by the Attorney General on behalf of the State.
Regardless of whether a state-law enforcement action is brought by a private
individual or an attorney general on behalf of a state, Wyeth makes clear that
federal labeling standards are "a floor upon which States could build" and noted
the FDA's agency position that, "in establishing minimal standards for drug labels,
it did not intend to preclude the states from imposing additional labeling
requirements." Id. at 577–78 (quotations omitted). Rather, "[f]ailure-to-warn
actions, in particular, lend force to the FDCA's premise that manufacturers, not the
FDA, bear primary responsibility for their drug labeling at all times." Id. at 579.
Indeed, "federal law does not give drug manufacturers an unconditional right to
market their federally approved drug at all times with the precise label initially
approved by the FDA." Id. at 583 (Thomas, J. concurring in the judgment).
Janssen's claim is without merit.
Having affirmed the trial court concerning Janssen's liability in connection with
both the labeling claim and the DDL claim, we turn now to the penalty award.25
25
Janssen raises a number of other issues, each of which we have carefully
reviewed and find to be without merit or unpreserved. We affirm based upon Rule
220(b)(1), SCACR, and the following authorities: Fields v. J. Haynes Waters
Builders, Inc., 376 S.C. 545, 557, 658 S.E.2d 80, 86 (2008) (holding that in order
to warrant reversal, the appealing party must show both the error of the ruling and
resulting prejudice) (citing Fields v. Reg. Med. Ctr. Orangeburg, 363 S.C. 19, 26,
609 S.E.2d 506, 509 (2005)); Webb v. CSX Transp., Inc., 364 S.C. 639, 655, 615
S.E.2d 440, 449 (2005) (finding the failure to raise a contemporaneous objection at
trial waives the right to complain about an issue on appeal) (citing Taylor v.
Medenica, 324 S.C. 200, 214 n.9, 479 S.E.2d 35, 42 n.9 (1996)); Futch v.
McAllister Towing of Georgetown, Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598
(1999) (noting that an appellate court need not address remaining issues when
disposition of prior issues is dispositive) (citing Whiteside v. Cherokee Cnty. Sch.
Dist. No. One, 311 S.C. 335, 340, 428 S.E.2d 886, 889 (1993)); Wilder Corp. v.
Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998) ("[A]n objection must be
III.
Penalty Award
SCUTPA allows the Attorney General to recover on behalf of the State a civil
penalty of up to $5,000 per violation. S.C. Code Ann. § 39-5-110(a).
Undoubtedly, Janssen's deceptive conduct relating to Risperdal warrants a civil
penalty, and because the civil penalty award under section 39-5-110(a) is within
the discretion of the trial court, we review the trial court's penalty award under an
abuse of discretion standard. State ex rel. McLeod v. C & L Corp., Inc., 280 S.C.
519, 528, 313 S.E.2d 334, 340 (Ct. App. 1984) ("The party challenging a
discretionary ruling of the trial court has the burden of showing a clear abuse of
discretion."); accord Vanderbilt Mortg. & Fin., Inc. v. Cole, 740 S.E.2d 562, 566
(W.Va. 2013) (holding a trial court's award of civil penalties pursuant to state
statute will not be disturbed on appeal unless it clearly appears the trial court
abused its discretion).
The State argued, and the trial court agreed, that the distribution of each sample
box containing the deceptive labeling, each DDL, and each follow-up sales call to
the DDL by a Janssen representative constituted a separate SCUTPA violation.
The trial court adopted a multi-factor test used by the United States Court of
Appeals for the Third Circuit in determining an appropriate civil penalty: "(1) the
good or bad faith of the defendants; (2) the injury to the public; (3) the defendant's
ability to pay; (4) the desire to eliminate the benefits derived by a violation; and (5)
the necessity of vindicating the authority of [the regulatory agency]." United
States v. Reader's Digest Ass'n, Inc., 662 F.2d 955, 967 (3d Cir. 1981).26
sufficiently specific to inform the trial court of the point being urged by the
objector." (citation omitted)); Talley v. South Carolina Higher Educ. Tuition
Grants Comm., 289 S.C. 483, 487, 347 S.E.2d 99, 101 (1986) ("It is an axiomatic
rule of law that issues may not be raised for the first time on appeal." (citing Am.
Hardware Supply Co. v. Whitmire, 278 S.C. 607, 609, 300 S.E.2d 289, 290
(1983))); Eaddy v. Smurfit-Stone Container Corp., 355 S.C. 154, 164, 584 S.E.2d
390, 396 (Ct. App. 2003) ("[S]hort, conclusory statements made without
supporting authority are deemed abandoned on appeal and therefore not preserved
for our review." (citing Glasscock, Inc. v. U.S. Fid. & Guar. Co., 348 S.C. 76, 81,
557 S.E.2d 689, 691 (Ct. App. 2001))).
26
Application of the Reader's Digest factors was proper here. Given that this is
our first opportunity to address the appropriate factors for assessing a civil penalty
Janssen challenges the penalty award on numerous grounds, including the
argument that the total penalty, in excess of $327,000,000, is excessive. We agree
with Janssen in part. There are certain factors common to the labeling and DDL
claims. First, Janssen's deceit was substantial. In order to maintain its market
share, Janssen's furtive efforts to mislead prescribing physicians about the risks and
side effects associated with Risperdal were reprehensible and in callous disregard
for the health and welfare of the public. Janssen's desire for market share and
increased sales27 knew no bounds, leading to its egregious violation of South
Carolina law, particularly in connection with the DDL. Janssen's conduct is
irrefutably linked to its longstanding efforts to conceal the truth regarding
Risperdal. This corrupt corporate culture through the years was a factor, and
understandably so, in the trial court's imposition of such a substantial penalty.
We agree in part with Janssen that its conduct had little impact on the community
of prescribing physicians. The truth about the risks associated with atypical
antipsychotics was well known, particularly in the pharmaceutical and medical
professions. This begs the question of why Janssen would go to such lengths to
perpetuate and defend a lie. Whatever the answer, the point remains that Janssen
did go to such lengths. Yet, the absence of significant actual harm resulting from
Janssen's deceptive conduct leads us to conclude the trial court erred in part in its
penalty assessment.
in an Attorney General directed claim under SCUTPA, we direct that,
prospectively, the following list of non-exclusive factors be used in assessing civil
penalties under SCUTPA: (1) the degree of culpability and good or bad faith of the
defendant; (2) the duration of the defendant's unlawful conduct; (3) active
concealment of information by the defendant; (4) defendant's awareness of the
unfair or deceptive nature of their conduct; (5) prior similar conduct by the
defendant; (6) the defendant's ability to pay; (7) the deterrence value of the
assessed penalties; and (8) the actual impact or injury to the public resulting from
defendant's unlawful conduct. We further authorize our able trial judges to
consider any other factors they deem appropriate under the circumstances. In
issuing a ruling, the trial court should make sufficient findings of fact concerning
all relevant factors to enable appellate review.
27
Since 1994, Risperdal sales approximated $30 billion.
A.
Violations and Reduced Civil Penalty
1.
Labeling Claim
The trial court assessed a $300 civil penalty against Janssen for each Risperdal
"sample box" distributed to South Carolina prescribers from 1998 through the date
of the Complaint, April 23, 2007, for a total of 509,499 violations. As discussed,
we reverse the civil penalties awarded for conduct that occurred prior to January
24, 2004, for that part of the State's labeling claim is barred by the statute of
limitations. Based on the record, during the period of time from February 2004
until the filing of the Complaint in April of 2007, Janssen made 20,575 visits to
prescribing physicians in South Carolina and distributed 345,454 sample boxes
containing deceptive labeling.28
Janssen challenges the penalty award of $300 per sample box on numerous
grounds, including the argument that the penalty is excessive. We agree and find
the $300 penalty per sample box excessive. Based on the totality of the
circumstances and consideration of the Reader's Digest factors, we remit the
penalty to $100 per sample box, for a civil penalty of $34,545,400.
2.
DDL Claim
Janssen mailed 7,184 DDLs to South Carolina physicians in November 2003. The
trial court considered each letter a separate violation and imposed a penalty of
$4,000 per letter, for a penalty of $28,736,000. In addition, the trial court counted
each follow-up sales call to the DDL by a Janssen representative as a separate
violation. There were 36,372 follow-up sales calls. The trial court again assessed
a penalty of $4,000 for each sales call, for a penalty of $145,488,000.
Janssen challenges the penalty award on numerous grounds, including
excessiveness. While the question presented is close, we cannot say that the trial
28
We arrive at this number based on documents submitted by Janssen showing the
total samples distributed and the total number of visits to prescribing physicians.
(20,575 visits times 16.79 sample boxes per visit equals a total of 345,454.25
sample boxes, rounded to 345,454).
court abused its discretion in assessing the $28,736,000 penalty associated with the
7,184 DDLs. A $4,000 penalty per each DDL is indeed substantial. But Janssen's
deceit, as described above, was also substantial. The DDL was especially
egregious, for it represented not mere nondisclosure but a corporately sanctioned
decision to affirmatively lie and an attempt to mislead the medical community.
We affirm the civil penalty of $28,736,000 penalty associated with the 7,184
DDLs.
Janssen's misconduct in the more than 36,000 follow-up visits may be similarly
viewed, for the follow-up visits were designed to continue the false DDL narrative.
Nevertheless, a penalty of $4,000 per follow-up visit is excessive as a matter of
law under the circumstances. We find in most instances, these were follow-up
calls to the same prescribing physicians who received the DDL in the mail. In fact,
in many instances there were multiple calls to the same physicians. We remit the
penalty to $2,000 per follow-up sales call, for a penalty of $72,744,000. When
combined with the penalty for the DDL mailing, the total penalty assessed against
Janssen for the DDL claim is $101,480,000.
The combined civil penalty for the labeling and DDL claims is $136,025,400.
B.
Constitutionality of the Penalty Award
Janssen also raises a number of constitutional challenges to the trial court's penalty
order. First, Janssen claims that the $327 million penalty violates the Excessive
Fines Clause of the Eighth Amendment to the U.S. Constitution and Article 1,
Section 15 of the South Carolina Constitution. Second, Janssen claims that the
penalty award violates due process because it is grossly excessive. We analyze
this argument on the basis of the remitted penalty of approximately $136 million.
We find no constitutional violation.
"The touchstone of the constitutional inquiry under the Excessive Fines Clause [of
the U.S. Constitution] is the principle of proportionality: The amount of the
forfeiture must bear some relationship to the gravity of the offense that it is
designed to punish." United States v. Bajakajian, 524 U.S. 321, 334 (1998); see
also Medlock v. One 1985 Jeep Cherokee VIN 1JCWB7828FT129001, 322 S.C.
127, 132, 470 S.E.2d 373, 377 (1996) (adopting the federal "instrumentality"
standard in the context of civil forfeitures for purposes of South Carolina's
"excessive fines" analysis). The Court will only find a violation of the Excessive
Fines Clause if the penalty is "grossly disproportional to the gravity of a
defendant's offense." Bajakajian, 524 U.S. at 334 (emphasis added). "The Ninth
Circuit and other federal courts have consistently found that civil penalty awards in
which the amount of the award is less than the statutory maximum do not run afoul
of the Excessive Fines Clause." United States v. Mackby, 221 F. Supp. 2d 1106,
1110 (N.D. Cal. 2002) (citing cases from the First Circuit, Ninth Circuit, and D.C.
Circuit). This is so because legislative pronouncements regarding the proper range
of fines "represent the collective opinion of the American people as to what is and
is not excessive. Given that excessiveness is a highly subjective judgment, the
courts should be hesitant to substitute their opinion for that of the people." United
States v. 817 N.E. 29th Drive, Wilton Manors, Fla., 175 F.3d 1304, 1309 (11th Cir.
1999) (citing Bajakajian, 524 U.S. at 336).
We find that the penalty in this case, now reduced, bears a rational relationship to
the gravity of Janssen's conduct in perpetuating a marketing scheme in South
Carolina designed to be unfair and deceptive under our law. Furthermore, the
penalty awards per violation are within the range set by the legislature in enacting
SCUTPA. Accordingly, the penalty award is not grossly disproportionate to
Janssen's pattern of unfair and deceptive behavior, and, thus, we hold that the
award does not violate the Excessive Fines Clause of the South Carolina or the
United States Constitution. We turn now to Janssen's due process argument.
The Due Process Clause of the U.S. Constitution "places a limitation upon the
power of the states to prescribe penalties for violations of their laws . . . ." St.
Louis, Iron Mt. & S. Ry. Co. v. Williams, 251 U.S. 63, 66 (1919). States, however,
"still possess a wide latitude of discretion in the matter, and . . . their enactments
transcend the limitation only where the penalty prescribed is so severe and
oppressive as to be wholly disproportioned to the offense and obviously
unreasonable." Id. at 66–67 (citations omitted); see also Shipman v. Du Pre, 222
S.C. 475, 480, 73 S.E.2d 716, 718 (1952) (embracing the Williams standard).
Given the evidence that demonstrates Janssen's pattern of unfair and deceptive
behavior, we find that the penalties in this case are not violative of the Due Process
Clause. We decline to set forth a bright-line rule or ratio to delineate what level of
penalties are appropriate, instead undertaking a case-by-case determination based
on the severity of the underlying conduct. While the penalty award against Janssen
is quite large, the penalty must be analyzed in context in view of the clear
legislative intent of SCUTPA to deter unfair and deceptive behavior in the conduct
of trade and commerce in South Carolina. When all factors are considered, we
find that the penalty award does not violate the Due Process Clause.
And finally, we comment on the amicus curiae brief filed by the South Carolina
Chamber of Commerce. The Chamber seeks clarity from this Court to provide a
predictable and favorable business climate in this state. The Chamber is especially
distressed by the $327 million penalty, which it views as excessive and as "overt
hostility toward business." While we agree the penalty awarded by the trial court
was excessive, the Chamber's additional concerns are based on a series of false
premises. The Chamber posits that Janssen's conduct is being "judged according to
subjective, intangible standards." More to the point, the implication is that South
Carolina stands alone in arbitrarily singling-out Janssen for what amounts to
nothing more than an aggressive marketing strategy. That is simply not the case.
Because of its deceptive conduct in the marketing of Risperdal, Janssen has been
the subject of litigation throughout the country. Indeed, the deceptive marketing
that gave rise to this action also formed the basis of federal civil and criminal
claims against Janssen and its parent company; the federal litigation has thus far
resulted in agreed upon penalties in excess of $2 billion. When viewed
objectively, Janssen over the course of many years consciously engaged in lies and
deception in the marketing of Risperdal. Thus, the suggestion that the Attorney
General of South Carolina stands alone in pursuing amorphous and subjective
claims against Janssen is without merit. Surely the Chamber desires a legal system
that honors the rule of law and one which does not insulate businesses from
liability for unfair and deceptive practices. Our decision today is faithful to
objective legal principles, legislative intent in SCUTPA and the rule of law.
Moreover, we have set forth clear guidance for the business community, the Bench
and the Bar for determining what conduct is actionable under SCUTPA and what
factors bear on the determination of an appropriate penalty—precisely the type of
clarity the Chamber seeks.
IV.
Conclusion
Based on the statute of limitations, we reverse the judgment on labeling claim to
the extent the trial court awarded civil penalties for conduct prior to January 24,
2004. We otherwise affirm as modified the judgment on the labeling claim and
remit the civil penalty to $34,545,400. We affirm the liability judgment on the
DDL claim, but remit those civil penalties to $101,480,000. We remand to the trial
court for entry of judgment in the amount of $136,025,400.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
TOAL, C.J., BEATTY, and HEARN, JJ., concur. PLEICONES, J., dissenting
in a separate opinion.
JUSTICE PLEICONES: With great respect for the majority's thorough treatment
of these complex issues, I dissent from those portions of its opinion addressing: (1)
the timeliness of the labeling claim; and (2) the reduction of the DDL penalty
award.
I. Statute of Limitations
I agree the Attorney General knew or should have known prior to January 24, 2004
that he may have had a SCUTPA claim against Janssen based, in part, on research
indicating Janssen's Risperdal label misled consumers insofar as it failed to
disclose the drug's side effects. See Kreutner v. David, 320 S.C. 283, 285–86, 465
S.E.2d 88, 90 (1995) (discussing the discovery rule for purposes of triggering the
limitations period and finding that where the evidence is overwhelming a
reasonable person should have known she might have a claim at a time beyond the
statute of limitations, then such claim is time-barred). I therefore agree with the
majority's conclusion that the Attorney General's SCUTPA claim for labeling
violations occurring before January 24, 2004 was time-barred, and that the trial
judge erred in holding equitable tolling removed the bar.
My disagreement is with the majority's application of the continuous accrual
doctrine. I would not apply the doctrine in this appeal because doing so does not
affirm the statute of limitations ruling to the extent the trial judge found the pre-
January 24, 2004 labeling claim timely and permitted that claim to go to the jury.
In my opinion, we may invoke our authority to affirm on any ground appearing in
the record only when the result is to affirm the trial judge's ruling in toto. See Rule
220(c), SCACR. Here, the effect of applying the continuous accrual doctrine is
only a partial affirmance. Further, we have no way of knowing whether the jury's
liability determination was based on conduct outside the limitations period since
we cannot know whether this jury would have found a SCUTPA violation had it
considered only Janssen's labeling conduct after January 24, 2004. I do not agree
that reducing the amount of the penalty for the labeling claim cures the prejudice to
Janssen given the unreliability of the jury's liability determination. Thus, I
respectfully submit we should not apply the continuous accrual doctrine29 in this
appeal as doing so prejudices Janssen.
Accordingly, I would reverse the jury's finding of liability because the labeling
29
I leave for another day whether we should adopt this doctrine in the context of
SCUTPA or other statutory claims.
claim is barred by the statute of limitations. I would also reverse the trial judge's
labeling claim penalty because the claim is untimely.
DDL Penalty Award
As for the reduction of the DDL penalty award, I would find the trial judge did not
abuse his discretion in awarding $174,224,000 based on Janssen mailing 7,184
deceptive DDLs and following up with 36,372 sales calls to sanction the deception
already perpetrated. See State ex rel. McLeod v. C & L Corp., 280 S.C. 519, 528,
313 S.E.2d 334, 340 (Ct. App. 1984) (reviewing the award of civil penalties under
an abuse of discretion standard). As for Janssen's contention that the follow-up
sales calls were made to the same prescribing physicians who had already received
the DDL, I would find the trial judge properly considered this argument and
exercised his discretion in finding Janssen's culpability (Reader's Digest30 Factor 2)
outweighed the actual impact or injury resulting from Janssen's unlawful conduct
(Reader's Digest Factor 8).
Ultimately, the trial judge was in the best position to evaluate Janssen's conduct,
the degree of culpability, the duration of Janssen's conduct, Janssen's active
concealment of Risperdal's side effects to South Carolina health care providers,
Janssen's awareness of its deceptive conduct, Janssen's ability to pay, and the
actual impact, if any, resulting from Janssen's deceptive conduct. See Reader's
Digest Ass'n, 662 F.2d at 967. Based on the trial judge's articulation of the
Reader's Digest factors and his proper consideration of those factors, I would find
Janssen has not shown the court abused its discretion in awarding a $174,224,000
civil penalty for the DDL claim, an amount within the limits set forth in SCUTPA.
See Wallace v. Timmons, 237 S.C. 411, 421, 117 S.E.2d 567, 572 (1960) (stating
that in reviewing a trial judge's decision under an abuse of discretion standard, this
Court may not substitute its judgment simply because it might have reached a
different conclusion had it been in the trial judge's place). Therefore, I would
affirm the trial judge's penalty award of $174,224,000 as to the DDL claim.
30
United States v. Reader's Digest Ass'n, 662 F.2d 955, 967 (3d Cir. 1981)
(outlining the multi-factor analysis to determine the propriety of a statutory
penalty, which the trial judge applied, the majority has adopted, and with which I
concur).