MJS and Associates, L.L.C., a Texas Limited Liability Corporation v. Judy Master, RN and Matthew Master

ACCEPTED
12-15-00219-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
11/19/2015 8:06:13 PM
Pam Estes
CLERK
No. 12-15-00219-CV
FILED IN
In the Twelfth Court of Appeals 12th COURT OF APPEALS
TYLER, TEXAS
11/19/2015 8:06:13 PM
MJS & Associates, L.L.C.
PAM ESTES
Appellant Clerk
v.
Judy Master, RN & Matthew Master
Appellees
Appeal from the 145th Judicial District Court
Nacogdoches County, Texas
No. C127910, Hon. Campbell Cox, II, Presiding
Brief of Appellant MJS
Russell R. Smith Michelle R. Meriam
Texas Bar No. 18682310 Texas Bar No. 24063871
RSmith@fairchildlawfirm.com michellemeriam@warejackson.com
W. Wade Flasowski Timothy F. Lee
wflasowski@fairchildlawfirm.com Texas Bar No. 12139500
Texas Bar No. 24055482 timlee@warejackson.com
Fairchild, Price, Haley & Smith, LLP Ware, Jackson, Lee, O’Neill,
P.O. Drawer 631668 Smith & Barrow, LLP
Nacogdoches, Texas 75963-1668 2929 Allen Parkway, 39th Floor
(936) 569-2327 Houston, Texas 77019
(936) 569-7932 (fax) (713) 659-6400
(713) 659-6262 (fax)
Mark Kennedy
Texas Bar No. 24000122
mark@markkennedylaw.com
Joanna Martin
Texas Bar No. 24072153
joanna@markkennedylaw.com
Kennedy Attorneys & Counselors at Law
12222 Merit Drive, Suite 1750
Dallas, Texas 75251
(214) 445-0740
(972) 661-9320 (fax)
Oral Argument Requested
Identity of Parties and Counsel
Plaintiff/Appellant MJS and Associates, L.L.C.
Trial Counsel: Russell R. Smith
RSmith@fairchildlawfirm.com
W. Wade Flasowski
wflasowski@fairchildlawfirm.com
Fairchild, Price, Haley & Smith, LLP
P.O. Drawer 631668
Nacogdoches, Texas 75963-1668
(936) 569-2327
(936) 569-7932 (fax)
Mark Kennedy
mark@markkennedylaw.com
Joanna Martin
joanna@markkennedylaw.com
Kennedy Attorneys & Counselors at Law
12222 Merit Drive, Suite 1750
Dallas, Texas 75251
(214) 445-0740
(972) 661-9320 (fax)
Appellate Counsel: Michelle R. Meriam
michellemeriam@warejackson.com
Timothy F. Lee
timlee@warejackson.com
Ware, Jackson, Lee, O’Neill,
Smith & Barrow, LLP
2929 Allen Parkway, 39th Floor
Houston, Texas 77019
(713) 659-6400
(713) 659-6262 (fax)
Brief of Appellant MJS Page i
Defendants/Appellees Judy Master, RN and Matthew Master
Counsel: Joseph M. Callow, Jr.
jcallow@kmklaw.com
Keating Muething & Klekamp
One East Fourth St., Suite 1400
Cincinnati, Ohio 45202
(513) 579-6400
(513) 579-6457 (fax)
Travis P. Clardy
travis.clardy@kellyhart.com
Jerry Baker
jerry.baker@kellyhart.com
Kelly, Hart & Hallman, LLP
209 E. Main St.
P.O. Box 635426
Nacogdoches, Texas 75961
(936) 564-2500
(936) 564-2507 (fax)
Brief of Appellant MJS Page ii
Table of Contents
Identity of Parties and Counsel ....................................................................... i
Table of Contents ........................................................................................... iii
Index of Authorities ....................................................................................... vi
Statement of the Case .................................................................................... xi
Statement Regarding Oral Argument .......................................................... xii
Issues Presented
First Issue: No court has ever held that the False Claims Act
permits a qui tam relator to steal information belonging to a
party not accused of any illegal conduct and disclose it. Master
agreed not to take or disclose any confidential information to
which she had access during her employment, but she did so
anyway, and received $12 million as a result. Was Master’s
conduct protected under the federal statute? ................................... xiii
Second Issue: The trial court erred granting summary
judgment on causation based on an incompetent affidavit not
made on personal knowledge that only addressed one category
of damages, and because the allegation in the affidavit—that
LHC terminated its contract with MJS due to MJS’s poor
performance—is contradicted by evidence that LHC did so
because Master used its privileged and confidential information
to initiate a qui tam action, thus raising a genuine issue of
material fact. ...................................................................................... xiii
Third Issue: The trial court erred in granting no-evidence
summary judgment against MJS after MJS submitted more
than a scintilla of evidence to establish each disputed element of
its claims............................................................................................. xiii
Brief of Appellant MJS Page iii
Introduction..................................................................................................... 1
Statement of Facts .......................................................................................... 2
I.  The False Claims Act Litigation Against MJS’s Client, LHC ................ 2
A.  Attorneys for LHC Hired MJS to Perform Health Care
Compliance Audits ...................................................................... 2
B.  MJS Hired Master, Who Agreed Not to Take MJS’s
Property or Disclose Its Confidential Information ..................... 5
C.  Master Secretly Copied, Took, and Disclosed MJS’s
Confidential Information to Start a Qui Tam Suit against
LHC .............................................................................................. 7
D.  LHC Canceled Its Contract with MJS ....................................... 10
E.  Master Got Millions While MJS Nearly Went Broke.................13
II.  The Litigation between MJS and Master.............................................14
A.  The Federal Court Rejected Master’s Argument that Her
Conduct Was Protected Under the Act ...................................... 15
B.  The Trial Court Accepted Master’s Argument Under the
Act and Granted Summary Judgment Against MJS ................. 18
Summary of the Argument ............................................................................19
Argument and Authorities.............................................................................21
I.  First Issue: The Act Does Not Protect Master from Liability for
MJS’s State-Law Claims.......................................................................21
A.  Standard of Review.................................................................... 22
B.  The Act Does Not Preempt MJS’s Claims ................................. 23
C.  Federal Policy Does Not Clearly Outweigh the Interests in
Enforcing Master’s Agreements with MJS ............................... 28
1.  Master’s Confidentiality Obligations Do Not Negate
the Policies Behind the Act .............................................. 29
Brief of Appellant MJS Page iv
2.  The Interests in Enforcing Master’s Agreements Are
Compelling ....................................................................... 32
II.  Second Issue: Master Did Not Negate Causation as a Matter of
Law ...................................................................................................... 37
III.  Third Issue: MJS Presented More than a Scintilla of Evidence to
Support Each of Its Claims ................................................................. 40
A.  Standard of Review.................................................................... 40
B.  Breach of Contract ..................................................................... 40
C.  Breach of Fiduciary Duty............................................................41
D.  Tortious Interference with Contract ......................................... 43
E.  Texas Trade Secrets Act............................................................. 43
F.  Conversion ................................................................................. 45
G.  Conspiracy ................................................................................. 46
H.  Fraud.......................................................................................... 47
Prayer ............................................................................................................ 48
Certificate of Compliance ............................................................................. 50
Certificate of Service ..................................................................................... 50
Brief of Appellant MJS Page v
Index of Authorities
Cases
Acad. of Skills & Knowledge, Inc. v. Charter Sch., USA, Inc.,
260 S.W.3d 529 (Tex. App.—Tyler 2008, pet. denied) .......................41
Arizona v. U.S.,
___ U.S. ___, 132 S. Ct. 2492 (2012) ................................................ 24
BIC Pen Corp. v. Carter,
251 S.W.3d 500 (Tex. 2008) ............................................................... 24
Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,
489 U.S. 141 (1989) ............................................................................. 28
Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc.,
637 F.3d 1047 (9th Cir. 2011) ....................................................... 30, 31
Casso v. Brand,
776 S.W.2d 551 (Tex. 1989) ................................................................ 38
Chamber of Commerce of U.S. v. Whiting,
563 U.S. 582, 131 S. Ct. 1968 (2011) ................................................... 24
Cook v. Nacogdoches Anesthesia Group, L.L.P.,
167 S.W.3d 476 (Tex. App.—Tyler 2005, no pet.) ........................ 22, 23
Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health
Care Services, LLC,
404 S.W.3d 737 (Tex. App.—El Paso 2013, no pet.)........................... 42
ERI Consulting Engineers, Inc. v. Swinnea,
318 S.W.3d 867 (Tex. 2010)................................................................ 38
Four Bros. Boat Works, Inc. v. Tesoro Petroleum Companies, Inc.,
217 S.W.3d 653 (Tex. App.—Houston [14th Dist.] 2006, pet.
denied) ................................................................................................ 47
Gade v. Nat’l Solid Wastes Mgmt. Ass’n,
505 U.S. 88 (1992) .............................................................................. 24
Graber v. Fuqua,
279 S.W.3d 608 (Tex. 2009) .................................................. 23, 24, 27
Brief of Appellant MJS Page vi
Graham County Soil & Water Conservation Dist. v. U.S. ex rel.
Wilson,
559 U.S. 280 (2010) ............................................................................ 27
Great Dane Trailers, Inc. v. Estate of Wells,
52 S.W.3d 737 (Tex. 2001) .................................................................. 24
Gulbenkian v. Penn,
252 S.W.2d 929 (Tex. 1952) ................................................................ 38
In re JDS Uniphase Corp. Secs. Litig.,
238 F. Supp. 2d 1127 (N.D. Cal. 2002) .................................... 16, 35, 36
Johnson v. Brewer & Pritchard, P.C.,
73 S.W.3d 193 (Tex. 2002) ..................................................................41
King Ranch, Inc. v. Chapman,
118 S.W.3d 742 (Tex. 2003) ................................................................ 40
Lake v. Premier Transp.,
246 S.W.3d 167 (Tex. App.—Tyler 2007, no pet.) .............................. 40
Lawrence v. CDB Servs., Inc.,
44 S.W.3d 544 (Tex. 2001) ................................................................. 29
Mabrey v. SandStream, Inc.,
124 S.W.3d 302 (Tex. App.—Fort Worth 2003, no pet.).................... 42
MCI Sales & Serv., Inc. v. Hinton,
329 S.W.3d 475 (Tex. 2010) ......................................................... 23, 24
Mut. Pharm. Co., Inc. v. Bartlett,
___ U.S. ___, 133 S. Ct. 2466 (2013) .......................................... 23, 25
Nixon v. Mr. Prop. Mgmt. Co., Inc.,
690 S.W.2d 546 (Tex. 1985) ............................................................... 22
Patel v. City of Everman,
179 S.W.3d 1 (Tex. App.—Tyler 2004, pet. denied)............................ 46
Patriotic Veterans, Inc. v. Indiana,
736 F.3d 1041 (7th Cir. 2013).............................................................. 26
Brief of Appellant MJS Page vii
Patton v. Cox,
276 F.3d 493 (9th Cir. 2002) .............................................................. 36
Prudential Ins. Co. of Am. v. Fin. Review Services, Inc.,
29 S.W.3d 74 (Tex. 2000) ................................................................... 43
Sears, Roebuck & Co. v. Meadows,
877 S.W.2d 281 (Tex. 1994) ................................................................ 47
Sherrill v. Union Lumber Co.,
207 S.W. 149 (Tex. Civ. App.—Beaumont 1918, no writ) ................... 29
Siebert v. Gene Sec. Network, Inc,
11-CV-01987-JST, 2013 WL 5645309 (N.D. Cal. Oct. 16, 2013) .........31
Sw. Energy Prod. Co. v. Berry-Helfand,
411 S.W.3d 581 (Tex. App.—Tyler 2013, pet. granted) ....................... 45
Thompson v. Weaver,
429 S.W.3d 897 (Tex. App.—Tyler 2014, no pet.) .............................. 40
Town of Newton v. Rumery,
480 U.S. 386 (1987) ............................................................................ 29
Transp. Ins. Co. v. Faircloth,
898 S.W.2d 269 (Tex. 1995) ............................................................... 46
U.S. ex rel. Doe v. X Corp.,
862 F. Supp. 1502 (E.D. Va. 1994) ......................................... 21, 30, 35
U.S. ex rel. Grandeau v. Cancer Treatment Ctrs. of Am.,
350 F. Supp. 2d 765 (N.D. Ill. 2004) ...................................................16
U.S. ex rel. Grubbs v. Kanneganti,
565 F.3d 180 (5th Cir. 2009) ................................................................ 7
U.S. ex rel. Head v. Kane Co.,
668 F. Supp. 2d 146 (D.D.C. 2009) .............................................. 16, 30
U.S. ex rel. Holmes v. Northrop Grumman Corp.,
1:13CV85-HSO-RHW, 2015 WL 3504525 (S.D. Miss. June 3,
2015) ......................................................................................... 21, 34, 35
Brief of Appellant MJS Page viii
U.S. ex rel. Mossey v. Pal-Tech, Inc.,
231 F. Supp. 2d 94 (D.D.C. 2002) .......................................................31
U.S. ex rel. Rusher v. Omnicare, Inc.,
No. 4:08-cv-3396, 2015 WL 4389589 (S.D. Tex. July 15, 2015) ........31
U.S. v. Northrop Corp.,
59 F.3d 953 (9th Cir. 1995) ................................................................. 29
U.S. v. Quest Diagnostics Inc.,
734 F.3d 154 (2d Cir. 2013)......................................................21, 33, 34
Walsh v. Amerisource Bergen Corp.,
CIV.A. 11-7584, 2014 WL 2738215 (E.D. Pa. June 17, 2014) ..............31
Wells Fargo Const. Co. v. Bank of Woodlake,
645 S.W.2d 913 (Tex. App.—Tyler 1983, no writ) .............................. 37
Wyeth v. Levine,
555 U.S. 555 (2009) .......................................................... 24, 25, 26, 28
X Corp. v. Doe,
805 F. Supp. 1298 (E.D. Va. 1992), aff'd, Under Seal v. Under
Seal, 17 F.3d 1435 (4th Cir. 1994) ................................................. 16, 30
Zahodnick v. Int'l Bus. Machines Corp.,
135 F.3d 911 (4th Cir. 1997) .................................................................31
Statutes and Rules
21 C.F.R. § 314.70 (2015) .............................................................................. 25
False Claims Act, 31 U.S.C. § 3729 (West 2009) ....................................... 7, 8
False Claims Act, 31 U.S.C. § 3730 (West 2010) .................................. passim
Food, Drug, and Cosmetic Act, 21 U.S.C. § 355 (West 2013) ...................... 25
Health Insurance Portability and Accountability Act (HIPAA),
45 C.F.R. § 160 et seq. (2013) ..................................................... passim
Tex. R. Civ. P. 166a ..................................................................... 22, 37, 40, 43
Brief of Appellant MJS Page ix
Texas Trade Secrets Act, Tex. Civ. Prac. & Rem. Code Ann. §
134A.002 (West Supp. 2015) ........................................................ 43, 44
Texas Trade Secrets Act, Tex. Civ. Prac. & Rem. Code Ann. §
134A.004 (West Supp. 2015) .............................................................. 44
Brief of Appellant MJS Page x
Statement of the Case
Nature of the Case MJS sued its former employee, Judy
Master, for breach of contract, violations
of the Texas Trade Secrets Act, breach of
fiduciary duty, conversion, conspiracy,
tortious interference with contract, and
fraud. Master had used documents
surreptitiously taken from MJS against
MJS’s client in a federal qui tam action.
Course of Proceedings After MJS filed this suit, Master removed
it to federal district court in the Eastern
District of Texas and joined MJS as a
defendant in the pending qui tam action in
the Western District of Louisiana. The
federal court in Texas remanded this case
based on the lack of any federal question. 1
CR 128-37. The state trial court then
stayed the case in favor of the pending qui
tam action. 2 CR 197. The federal court in
Louisiana dismissed Master’s claims
against MJS with prejudice, 2 CR 255, and
the trial court lifted its stay. The parties
completed discovery and filed cross-
motions for summary judgment.
Trial Court’s Disposition The trial court granted Master’s motion for
summary judgment and entered final
judgment in Master’s favor. 5 CR 773.
Brief of Appellant MJS Page xi
Statement Regarding Oral Argument
This is a case of first impression in the nation. Master claims, and the
trial court agreed, that the federal False Claims Act insulates her from civil
liability for taking and disclosing her employer’s confidential information,
solely because that information was used to file a qui tam action. But the
qui tam defendant was MJS’s client, not MJS. No court in the nation has
applied the Act to protect qui tam relators from liability to third parties
such as MJS that were not accused of committing fraud against the U.S.
By granting Master’s motion for summary judgment, the trial court
has, in effect, ruled that confidentiality agreements are ineffective against
those who wish to take confidential information from one party and initiate
a qui tam action against another party in the hopes of receiving large
monetary rewards. In light of the important and novel questions presented
by this appeal, the Court may wish to hear oral argument.
Brief of Appellant MJS Page xii
Issues Presented
First Issue: No court has ever held that the False Claims Act permits
a qui tam relator to steal information belonging to a party not accused of
any illegal conduct and disclose it. Master agreed not to take or disclose any
confidential information to which she had access during her employment,
but she did so anyway, and received $12 million as a result. Was Master’s
conduct protected under the federal statute?
Second Issue: The trial court erred granting summary judgment on
causation based on an incompetent affidavit not made on personal
knowledge that only addressed one category of damages, and because the
allegation in the affidavit—that LHC terminated its contract with MJS due
to MJS’s poor performance—is contradicted by evidence that LHC did so
because Master used its privileged and confidential information to initiate a
qui tam action, thus raising a genuine issue of material fact.
Third Issue: The trial court erred in granting no-evidence summary
judgment against MJS after MJS submitted more than a scintilla of
evidence to establish each disputed element of its claims.
Brief of Appellant MJS Page xiii
Introduction
This appeal raises a question of first impression in the nation.
In the three months that Master worked for MJS, she purloined
MJS’s confidential, trade secret, and privileged information so that she
could file a complaint under the False Claims Act against MJS’s largest
client. As a result, MJS lost its largest client and was disparaged in the
media, leading to further business losses. But MJS, which is in the business
of auditing health care providers to ensure that they comply with
government regulations, did nothing wrong. Meanwhile, Master’s breaches
of her confidentiality obligations allowed her to reap a reward in excess of
$12 million.
When MJS sued Master under Texas law for breaching her
obligations, she insisted that her conduct was protected under the Act and
that MJS was without recourse. The only court in the nation to address that
question—the federal court that remanded this suit after Master tried to
remove it—concluded that the Act has no bearing on MJS’s purely state-law
claims. Nevertheless, the trial court accepted Master’s overtures that the
Act insulated her from liability and granted summary judgment. That
decision, if permitted to stand, would have a crippling effect on confidential
MJS’s Appellant’s Brief Page 1
relationships traditionally subject to state regulation, and this Court should
reverse.
Statement of Facts
I. The False Claims Act Litigation Against MJS’s Client, LHC
A. Attorneys for LHC Hired MJS to Perform Health Care
Compliance Audits
MJS is a healthcare consulting firm owned and operated by Jan and
Charlie Spears.1 It provides a wide array of services to health care providers,
including auditing services to ensure compliance with government
Medicare and Medicaid regulations.2
LHC Group, LLC is one of the largest providers of home health and
hospice services in the nation.3 In early 2005, attorneys from the Gachassin
Law Firm hired MJS to provide external compliance audits for their client,
LHC Group, LLC, “to assist their legal representation and advice [to their]
client.”4 LHC provided documentation to MJS that MJS reviewed using
specially-developed, proprietary software called The Auditor.5 MJS
assessed LHC’s compliance with federal and state regulations, accreditation
1 4 CR 509.
2 4 CR 509, ¶¶ 2-3.
3 4 CR 618.
4 4 CR 509, ¶ 4; 4 CR 517-18.
5 4 CR 523.
MJS’s Appellant’s Brief Page 2
standards, and agency policies and procedures. It then provided reports to
the attorneys on a secure, password-protected website.6
The contract between MJS, the attorneys, and LHC stated that all
information provided to MJS would be confidential and subject to the
attorney-client and work product privileges.7 It included a detailed
confidentiality provision. Under the terms of that provision, MJS agreed
that (1) MJS’s services were confidential and performed under the direction
and control of the attorneys, (2) MJS’s reports would remain confidential,
(3) MJS would provide all reports directly to the attorneys, not LHC, and
(4) MJS would notify the attorneys of any third-party request concerning
LHC and follow the attorneys’ directions in responding.8
With respect to the information it received from LHC, MJS agreed
that:
 MJS would use the material solely for the purpose of
performing services for the attorneys and LHC;
 MJS and its employees would keep the material “strictly
confidential”;
 MJS would inform its employees of the information’s
confidential nature; and
6 4 CR 523, 525.
7 4 CR 517.
8 4 CR 518, ¶ 3(a).
MJS’s Appellant’s Brief Page 3
 MJS and its employees would not disclose to any person,
including any governmental entity, the fact that an investigation
was taking place.9
Finally, MJS was required to immediately inform the attorneys of any
request for information provided by LHC, and MJS agreed not to release
any information until the latest reasonable date possible.10
As a home health care provider, LHC is subject to the Health
Insurance Portability and Accountability Act (HIPAA), 45 C.F.R. § 160 et
seq. (2013), which regulates the use and disclosure of personal health
information and imposes penalties for violations. Because MJS received
personal health information as part of its services for LHC, it, too, was
subject to HIPAA regulations. An addendum to the contract memorialized
HIPPA’s disclosure restrictions and required MJS to ensure that its agents
abided by the restrictions.11
In July 2007, MJS entered a new consultancy agreement with the
Gachassin Law Firm that expanded the scope of MJS’s services for LHC to
include auditing hospice records and increased MJS’s compensation.12 The
new agreement contained confidentiality provisions identical to the
9 Id. at ¶ 3(b).
10 Id. at ¶ 3(c).
11 4 CR 532-35.
12 4 CR 510, ¶ 6; 4 CR 543-44.
MJS’s Appellant’s Brief Page 4
original.13
LHC’s business grew, and by 2009, LHC served five times the number
of home health locations as it had when MJS began consulting for it. As
LHC grew, so too did MJS.14 In April 2008, MJS again negotiated higher
rates for its consulting services for LHC.15
B. MJS Hired Master, Who Agreed Not to Take MJS’s
Property or Disclose Its Confidential Information
In March 2007, MJS hired Master, a registered nurse, to work on
compliance audits, including those for LHC.16 As a condition of her
employment, Master signed an employment agreement and a statement of
confidentiality.17
Under the employment agreement, Master agreed that all “files,
records, documents, specifications, equipment, and similar items” relating
to MJS’s business were MJS’s “exclusive property” and that she would not
remove them from MJS’s premises under any circumstances without MJS’s
prior written consent.18 She also agreed that upon the end of her
134 CR 537-38. The 2007 Agreement incorporated a HIPAA addendum, although
no addendum appears in the record. 4 CR 542, ¶ 13.
14 4 CR 510, ¶ 6.
15 Id. at ¶ 8.
16 Id. at ¶ 10.
17 4 CR 551-54.
18 4 CR 551, ¶ 1.
MJS’s Appellant’s Brief Page 5
employment, she would return any MJS property.19
In the statement of confidentiality, Master further agreed that:
 She understood “the importance of observing strict ethical,
moral, and professional standards with confidentiality policies”;
 She would not discuss or release any information regarding any
of MJS’s clients with anyone not directly associated with MJS;
 She would obtain MJS’s authorization prior to releasing any
information obtained at MJS;
 She would not disclose or discuss treatment, financial, medical,
or social information relating to any patients of MJS’s clients
without written authorization from MJS management;
 She would not conduct any research to seek out information not
required for her assigned duties; and
 These confidentiality obligations would continue after her
employment with MJS ended.20
Master quit after less than three months on the job.21 She did not
provide any notice, but simply sent an email to her supervisor stating that
she was resigning “due to personal reasons” and that she had enjoyed
working with her supervisor and the MJS team.22
19 4 CR 551, ¶ 2.
20 4 CR 554.
21 4 CR 556.
22 Id.
MJS’s Appellant’s Brief Page 6
C. Master Secretly Copied, Took, and Disclosed MJS’s
Confidential Information to Start a Qui Tam Suit
against LHC
Within a month of leaving MJS, Master filed a qui tam complaint
against LHC in federal court in the Western District of Louisiana. The qui
tam action was based exclusively on confidential documents and
information she obtained during her brief employment with MJS.23 MJS
knew nothing about Master’s qui tam action.
The False Claims Act, 31 U.S.C. § 3730 (West 2010), permits an
individual to bring a qui tam action—a suit on her own behalf and in the
name of the federal government—against an entity the individual believes
has presented false or fraudulent claims for payment to the government,
including Medicare and Medicaid health care claims. See also 31 U.S.C. §
3729 (West 2009); U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 183
(5th Cir. 2009). The Act requires the individual to serve a complaint on the
government with a “written disclosure of substantially all material evidence
and information the person possesses” to support her allegations. 31 U.S.C.
§ 3730(b)(2). The complaint and disclosure statement are initially filed in
camera with the district court. 31 U.S.C. § 3730(b)(2)-(3).
23 1 CR 75; 4 CR 579-81. That case was styled U.S. ex rel. Judy Master v. LHC
Group, Inc., No. 6:07-cv-01117.
MJS’s Appellant’s Brief Page 7
The government may elect to intervene and prosecute the action
itself, with the qui tam relator remaining a party, or it can decline to
intervene and permit the qui tam relator to pursue the action. 31 U.S.C.
§§ 3729(b)(2), (c)(1), (c)(3). If the suit is successful, the defendant is liable
to the government for treble damages, plus a penalty between $5,000 and
$10,000 for each false claim. 31 U.S.C. § 3729(a). The qui tam relator is
then entitled to between 15 percent and 25 percent of the proceeds of any
settlement or judgment, plus expenses, attorney’s fees, and costs. 31 U.S.C.
§ 3730(d).
In Master’s qui tam suit, she accused LHC of filing false claims with
the government for reimbursement under Medicare and other health care
programs.24 She claimed to have “direct and independent knowledge” of the
information on which her allegations were based, “derived through her
former employment with MJS.”25 Master did not join MJS as a defendant.26
The complaint recounted Master’s employment at MJS, her role in
performing compliance audits for LHC, the manner in which MJS performs
audits using the Auditor software, and alleged that MJS determined that
24 1 CR 75.
25 1 CR 77, ¶ 9.
26 1 CR 75.
MJS’s Appellant’s Brief Page 8
LHC had a high non-compliance rate.27 Master’s complaint also alleged that
an unidentified person told Master that some of LHC’s costs were allowable
when Master believed they were not, and that Master “decided to quit
rather than create such a false impression.”28
MJS later learned that prior to quitting, Master made copies of
documents relating to the LHC audit during work hours. The purloined
documents included patient records and Auditor reports.29 She also made
handwritten notes about MJS records and conversations she allegedly
overheard between MJS employees.30 She conducted internet research
about qui tam suits and contacted an attorney specializing in
“whistleblower” cases.31 She took home the documents and other
information she obtained from MJS and turned them over to the attorney
and later to the government.32
27 1 CR 86-88, ¶¶ 48-50.
281 CR 88-89, ¶ 53. The complaint also accused MJS of changing answers in the
Auditor questionnaire to reduce LHC’s non-compliance rate. 1 CR 88-89, ¶¶ 52-55.
Master later testified that she did not know for sure that MJS changed any of her
answers, but had heard that they had. She did not know how the answers were
supposedly changed or who had changed them. 3 CR 443, 447.
29 3 CR 458-59; 4 CR 577-78.
30 3 CR 451; 4 CR 577-78.
31 4 CR 576.
32 3 CR 441-42, 464.
MJS’s Appellant’s Brief Page 9
Master never told MJS that she suspected fraud or that she intended
to file a qui tam action against LHC. She did not obtain permission to take
or disclose any of MJS’s information and did not tell anyone at MJS that
she was doing so.33 But Master attached to her qui tam complaint 128 pages
of confidential materials that she took from MJS to support her allegations
against LHC.34
Master knew she was not allowed to remove any documents from
MJS’s premises or to disclose any of MJS’s or LHC’s information of any
kind to anyone outside MJS.35 But she argued “that went out the door when
[she] suspected fraud.”36 Whether Master’s obligations to MJS did indeed
go out the door when she formed suspicions about MJS’s client is the
central issue in this appeal.
D. LHC Canceled Its Contract with MJS
Because the complaint was initially filed under seal, MJS did not
know that Master took documents before she quit or that she had used that
information to start a qui tam suit against MJS’s largest client.37
33 3 CR 458-59; 4 CR 511, 580.
34 4 CR 575, 579-81; 4 CR 514-15, ¶ 32. It is unknown how many pages Master
actually took.
35 3 CR 441.
36 Id.
37 1 CR 74; see also 4 CR 513, ¶ 27.
MJS’s Appellant’s Brief Page 10
In September 2008—over a year after Master filed her complaint—
MJS received, without explanation, a subpoena from the U.S. Inspector
General requiring it to turn over nearly every document in its possession
relating to LHC.38 MJS objected to the scope of the subpoena for nearly a
year. The government eventually narrowed the subpoena to encompass
documents related to LHC’s services to Medicare beneficiaries.39
During that time, LHC began assessing its compliance program.40 In
April 2009, it hired a new Chief Compliance Officer, Josh Proffitt.41 In June
2009, Proffitt held a meeting in Atlanta to evaluate MJS’s audits, determine
how to respond to the government investigation and subpoena, and
determine how to calculate how much LHC would have to reimburse the
government.42 MJS learned for the first time during that meeting that LHC
had not taken corrective action in response to MJS’s findings of non-
compliance in its auditing reports by reimbursing the government for non-
covered services.43
38 1 CR 115-17.
39 4 CR 511-12, ¶¶ 14, 20.
40 3 CR 433.
41 Id. at ¶ 2.
42 4 CR 511-12, ¶¶ 15-18.
43 4 CR 512, ¶ 16.
MJS’s Appellant’s Brief Page 11
Shortly after the meeting, on June 22, 2009, MJS responded to the
subpoena by producing the requested documents, as narrowed, to the
government.44 Three days later, Proffitt cancelled LHC’s contract with MJS
without explanation and instructed MJS to terminate all services being
performed for LHC.45
According to Proffitt, LHC terminated its contract with MJS because
it determined that MJS’s reports were too long, detailed, and inconsistent.46
He also claimed that “LHC would have terminated MJS regardless of
whether Judy Master filed the Complaint or whether the government
investigated the same.”47 MJS’s owner, Jan Spears, on the other hand,
testified that LHC had never complained about the services MJS provided,
never mentioned that MJS’s reports were unduly burdensome or
challenging, and never told MJS that it was reevaluating its auditing
functions.48
44 Id. at ¶ 19.
45 Id. at ¶ 20.
46 3 CR 434-35, ¶¶ 8-11.
47 3 CR 436.
48 4 CR 512-13, ¶¶ 20, 22-23.
MJS’s Appellant’s Brief Page 12
E. Master Got Millions While MJS Nearly Went Broke
More than two years later, in September 2011, the government
settled its claims against LHC for $65 million plus interest.49 The
agreement provided that Master would receive 19% of the settlement
amount, or $12.35 million plus interest, as well as over $1 million in
attorney’s fees.50 But, Master did not tell the Louisiana federal court about
the settlement, so her qui tam action remained pending.51
Also in September 2011, the court unsealed the record in the qui tam
action.52 Ten days later, an article about the suit and its settlement
appeared in Home Health Line, a nationally-distributed health care
industry periodical.53 The article disclosed that Master initiated the suit
against LHC and quoted extensively from her complaint.54 It also
insinuated, based on Master’s complaint, that MJS was complicit in LHC’s
alleged fraud against the government, describing MJS’s purported
49 4 CR 619.
50 4 CR 620.
51 2 CR 223.
522 CR 214-15. The court’s order unsealing the qui tam record does not appear in
the appellate record, but is available on Pacer. It confirms that (1) the complaint, but not
the disclosure documents, were unsealed, and (2) the order was entered on September
30, 2011—the same day the settlement agreement was executed. App’x A, Doc. 64, Order
Unsealing Qui Tam Record.
53 4 CR 513, ¶ 25; 4 CR 558-60.
54 4 CR 558-60.
MJS’s Appellant’s Brief Page 13
involvement under a bold subheading: Suit alleges consulting firm
played along.55
Through the article, MJS learned for the first time that a qui tam
action had been filed against LHC and that its former employee, Master,
was the one behind it.56 Shortly after the article was published, many of
MJS’s substantial clients fled and its revenue began to decline
dramatically.57 Potential clients rejected MJS’s pending proposals, and the
number of requests for proposals it received dropped significantly.58 From
2010 to 2013, MJS experienced a revenue shortfall of $1.2 million, which
Baylor Economics Professor James Henderson attributes to LHC’s
cancellation of its contract in late 2009 and the publication of the article in
late 2011.59
II. The Litigation between MJS and Master
MJS filed this lawsuit against Master in Texas state court on
December 22, 2011, alleging breach of contract, violations of the Texas
55 4 CR 559.
56 4 CR 513, ¶ 25.
57 Id. at ¶ 28; 4 CR 587.
58 4 CR 514, ¶ 28.
59 4 CR 587.
MJS’s Appellant’s Brief Page 14
Trade Secrets Act, breach of fiduciary duty, conversion, conspiracy, tortious
interference with contract, and fraud.60
A. The Federal Court Rejected Master’s Argument that
Her Conduct Was Protected Under the Act
Master removed the suit to the U.S. District Court for the Eastern
District of Texas.61 The same day, she also joined MJS as a defendant in the
still ongoing qui tam action in the Western District of Louisiana, asserting
claims for retaliation under the Act62 and seeking a declaratory judgment
that the Act pre-empted MJS’s claims in Texas and protected her conduct
in taking and disclosing MJS’s confidential materials.63
After removal, Master moved to dismiss MJS’s suit, or alternatively,
to transfer it to the qui tam action in Louisiana. MJS moved to remand.64
Master argued that federal jurisdiction existed because MJS’s state-law
claims necessarily depended on a substantial question of federal law:
whether Master’s conduct was protected under the Act.65 She claimed, as
60 1 CR 8-24.
61 1 CR 122-23, 126.
62 Master alleged that MJS retaliated against her by instructing her to alter bills
and harassing and discriminating against her when she complained and refused to
participate in the alleged fraud involving LHC. She claimed post-termination retaliation
based on MJS suing her in this case. 2 CR 208.
63 2 CR 205, 211.
64 1 CR 128.
65 1 CR 133.
MJS’s Appellant’s Brief Page 15
she does now, that she cannot be liable for state-law claims related to her
use of documents in qui tam actions.66
The federal court rejected Master’s argument and granted MJS’s
motion to remand on April 2, 2012.67 The order explains several reasons
why MJS’s claims do not implicate the Act:
 The Act “would appear to have little bearing on whether or not
she—who quit her job only three months after being hired—
breached a confidentiality agreement”;
 The Act’s purpose of preventing “harassment or retaliation
against would-be relators for lawful acts [] has little bearing on
whether Ms. Master can be civilly liable” for MJS’s claims;
 This was especially true given that MJS was not the target of her
qui tam action;
 Master did not cite any appellate decisions to support her
argument;
 The four district court cases she cited involved preventing fraud
by the relator’s employer68 (not a client of the relator’s
employer, as here), and one of those cases seemed to contradict,
rather than support, Master’s argument; and
 Even assuming that MJS’s claims require some reference to the
Act, the court was “far from convinced that the federal issue in
this case is substantial, rather than simply tangential.”69
66 1 CR 133.
67 1 CR 128-37.
68 The cases mentioned in the remand order are: U.S. ex rel. Head v. Kane Co.,
668 F. Supp. 2d 146 (D.D.C. 2009); U.S. ex rel. Grandeau v. Cancer Treatment Ctrs. of
Am., 350 F. Supp. 2d 765 (N.D. Ill. 2004); In re JDS Uniphase Corp. Secs. Litig., 238 F.
Supp. 2d 1127 (N.D. Cal. 2002); X Corp. v. Doe, 805 F. Supp. 1298 (E.D. Va. 1992).
69 1 CR 133-35.
MJS’s Appellant’s Brief Page 16
The court concluded:
Ms. Master worked for an entity that is not being accused of
fraud, and, under Ms. Master’s theory, would essentially find
itself without a recourse for Ms. Master’s use of confidential
information to prove a fraud perpetrated by another entity.
Whether Ms. Master’s actions were wrongful under Texas state
law as to [MJS], an entity not the target of her FCA case, does
not seem to [] require recourse to the FCA.70
After remand, Master argued that MJS’s claims constitute retaliation
under the Act and obtained a stay of this case pending resolution of her
retaliation claims in the Louisiana federal court.71 The Louisiana court,
though, dismissed her retaliation and declaratory judgment claims against
MJS with prejudice in March 2013.72 The same day, she finally informed
the Louisiana court of the settlement from September 2011, and the court
ordered her to file a motion to dismiss all claims by the end of the month.73
Shortly thereafter, final judgment was entered in the qui tam suit,
dismissing all claims with prejudice.74
70 1 CR 135.
71 2 CR 146-77; 2 CR 197.
72 2 CR 203-22. The Louisiana court held that Master’s pre-termination
retaliation claims were time-barred, the FCA does not recognize post-termination
retaliation claims, and the declaratory judgment claim could not proceed in federal
court on its own. 2 CR 215-21.
73 2 CR 223.
74 2 CR 255.
MJS’s Appellant’s Brief Page 17
B. The Trial Court Accepted Master’s Argument Under
the Act and Granted Summary Judgment Against MJS
Back in Texas, the trial court lifted its stay and set the case for trial in
June 2015.75 The parties conducted discovery and filed cross-motions for
summary judgment in May 2015. MJS moved for no-evidence summary
judgment on ten of Master’s affirmative defenses, including her claims that
her conduct was “protected by the federal False Claims Act, 31 U.S.C.
§ 3730(h)” and that “[i]t is against public policy for [MJS] to attempt to use
a contractual confidentiality agreement to try to thwart the purpose and
effect of the federal False Claims Act.”76
Master filed a traditional and no-evidence motion, arguing primarily
that her conduct was protected by the language of the Act and policy behind
it.77 The only summary judgment evidence she presented consisted of
excerpts from her own deposition testimony and Proffitt’s affidavit claiming
that LHC did not fire MJS because of Master’s actions.78 MJS responded
with evidence consisting of other excerpts from Master’s deposition
testimony, Spears’s affidavit, the confidentiality agreement, the
employment agreement, the 2005 and 2007 contracts between LHC and
75 2 CR 256-57, 262.
76 3 CR 406-18; see also 3 CR 397-98, ¶¶ 3-4.
77 3 CR 420-31.
78 3 CR 433-64.
MJS’s Appellant’s Brief Page 18
MJS, Master’s email resignation, the qui tam settlement agreement, the
disparaging article, an LHC corporate disclosure, and an expert report on
damages. Master did not reply.79
On June 3 and 8, the trial court held a hearing on both parties’
motions.80 It granted Master’s motions for traditional and no-evidence
summary judgment in their entirety and entered an order to that effect on
June 8.81 The trial court later denied MJS’s motion to modify the judgment,
and MJS timely appealed.82
Summary of the Argument
Master is attempting to escape liability for stealing her employer’s
confidential, trade secret, and privileged information and using it to her
own benefit. To do so, she convinced the trial court that the Act insulates
her from MJS’s state-law claims because it required her to take the
information and give it to the government.
For the Act to preempt MJS’s state-law claims, however, Master had
to overcome a presumption against preemption and meet the high
threshold of establishing that the Act made compliance with her
79 4 CR 509-644.
80 2 RR; 3 RR.
81 5 CR 773; 3 RR 45. The trial court also granted MJS’s no-evidence motion on
Master’s defenses of unclean hands, ratification, and failure to mitigate, but denied the
motion as to Master’s other affirmative defenses. 5 CR 768.
82 5 CR 780-83.
MJS’s Appellant’s Brief Page 19
confidentiality obligations impossible. She did neither. The Act did not, in
fact, require her to do anything. And it certainly did not require her to steal
protected information from a company that was not accused of fraud, but
rather in the business of preventing noncompliance. Similarly, the policies
behind the Act do not invalidate her confidentiality obligations. Courts have
enforced obligations concerning confidential, trade secret, and privileged
information, even when those obligations are owed to an alleged
fraudfeasor. But no court has ever held that a qui tam relator may breach
its obligations to parties not accused of fraud.
The trial court further erred in accepting Master’s argument that MJS
cannot establish causation because the only evidence Master relied upon
(1) was not competent summary judgment evidence, (2) did not address
every category of damages MJS seeks, and (3) is controverted by MJS’s
evidence, which raises a fact issue.
Finally, the trial court erred in granting Master’s no-evidence points
because MJS presented more than a scintilla of evidence on each of the
challenged elements. The trial court’s summary judgment should be
reversed and this case remanded for trial on the merits.
MJS’s Appellant’s Brief Page 20
Argument and Authorities
I. First Issue: The Act Does Not Protect Master from Liability
for MJS’s State-Law Claims
Several courts have recognized that “while the FCA permits any
person to bring a qui tam suit, it does not authorize that person to violate
state laws in the process.” U.S. v. Quest Diagnostics Inc., 734 F.3d 154, 163
(2d Cir. 2013) (emphasis in original); U.S. ex rel. Doe v. X Corp., 862 F.
Supp. 1502, 1507 (E.D. Va. 1994); U.S. ex rel. Holmes v. Northrop
Grumman Corp., 1:13CV85-HSO-RHW, 2015 WL 3504525, at *3 (S.D.
Miss. June 3, 2015). Nothing in the language of the Act creates an
affirmative defense against state-law claims, especially those brought
against the qui tam relator by a third party that has not been accused of
fraud against the government.83 See 31 U.S.C. § 3730.
A federal district court in this case—apparently the only court in the
nation to address this specific issue—has already rejected the notion that
the Act determines the outcome of this case. When the Texas federal court
remanded this case, it stated: “Ms. Master worked for an entity that is not
being accused of fraud, and, under Ms. Master’s theory, would essentially
83 The Act creates a private right of action, not a defense, against an entity
believed to have defrauded the government or an employer who retaliates against its
employee for “lawful acts” the employee takes pursuant to the FCA. 31 U.S.C. §§
3730(b)(1), 3730(h)(1). Master never accused MJS of committing fraud against the
government, and the Louisiana federal court dismissed the retaliation claim she brought
against MJS after MJS sued her in this case. 1 CR 75; 2 CR 203-22.
MJS’s Appellant’s Brief Page 21
find itself without [] recourse for Ms. Master’s use of confidential
information to prove a fraud perpetrated by another entity.”84
Nevertheless, after remand, Master continued to argue that the Act is
an affirmative defense to all of MJS’s claims against her.85 The trial court
erred by accepting her argument and granting summary judgment,86 and
this Court should reverse.
A. Standard of Review
The party moving for traditional summary judgment has the burden
of showing that there is no genuine issue of material fact and that it is
entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). To
determine whether there is a genuine issue of material fact, a court must
take as true all evidence favorable to the non-movant, indulge every
reasonable inference in its favor, and resolve any doubts in its favor. Nixon
v. Mr. Prop. Mgmt. Co., Inc., 690 S.W.2d 546, 549 (Tex. 1985).
Whether summary judgment is warranted is a question of law, so is
reviewed de novo. Cook v. Nacogdoches Anesthesia Group, L.L.P., 167
S.W.3d 476, 481 (Tex. App.—Tyler 2005, no pet.). Where, as here, the trial
court does not specify the ground on which it granted summary judgment,
84 1 CR 135.
85 3 CR 422-26.
86 3 RR 45.
MJS’s Appellant’s Brief Page 22
the appellant “must defeat each summary judgment ground argued by the
movant.” Id.
B. The Act Does Not Preempt MJS’s Claims
Master argued that she cannot be held liable for MJS’s state-law
claims because the Act required her to take the documents at issue and give
them to the government, and because holding her liable would frustrate the
Act’s purpose to encourage those with knowledge of fraud to come
forward.87 This is really an argument that, as a matter of federal law, the Act
preempts MJS’s state-law claims.88 That argument should be rejected.
The preemption doctrine bars state-law claims under certain limited
circumstances because “a court may not hold a civil defendant liable under
state law for conduct federal law requires.” Mut. Pharm. Co., Inc. v.
Bartlett, ___ U.S. ___, 133 S. Ct. 2466, 2476-77 (2013). Courts must begin
with a presumption that Congress did not intend to preempt claims arising
under state law. MCI Sales & Serv., Inc. v. Hinton, 329 S.W.3d 475, 489
(Tex. 2010); Graber v. Fuqua, 279 S.W.3d 608, 611 (Tex. 2009).
A party arguing for preemption must therefore meet “a high
threshold,” particularly when state and federal law have co-existed in a
87 3 CR 423-25.
88 In the Louisiana federal court, Master also sought a judicial declaration that
MJS’s claims were preempted by federal law, but that claim was dismissed along with
her retaliation claims. 2 CR 205.
MJS’s Appellant’s Brief Page 23
given field for a long period of time. Chamber of Commerce of U.S. v.
Whiting, 563 U.S. 582, 131 S. Ct. 1968, 1985 (2011). In such circumstances,
Congress has had the opportunity to expressly preempt state law, but
chosen not to, and the Supreme Court will give little to no deference even to
a federal agency’s opinion that state laws interfere with its objectives.
Wyeth v. Levine, 555 U.S. 555, 580-81 (2009).
Preemption is implied when compliance with both state and federal
law is impossible, or where “state law obstructs accomplishing and
executing Congress’ full purposes and objectives.”89 BIC Pen Corp. v.
Carter, 251 S.W.3d 500, 504 (Tex. 2008) (quoting Great Dane Trailers,
Inc. v. Estate of Wells, 52 S.W.3d 737, 743 (Tex. 2001)). “Courts must
cautiously approach this interpretive task lest it become a ‘free wheeling
judicial inquiry into whether a state law is in tension with federal
objectives,’ which ‘undercuts the principle that it is Congress rather than
the courts that pre-empts state law.’” MCI, 329 S.W.3d at 483 (quoting
Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 111 (1992) (Kennedy,
J., concurring in part and concurring in the judgment)).
89 Preemption may be express, Arizona v. U.S., ___ U.S. ___, 132 S. Ct. 2492,
2500-01 (2012), but the Act does not explicitly preempt state-law claims. It may also be
implied where Congress evidences an intent to foreclose state regulation in an entire
field, such as bankruptcy, Graber v. Fuqua, 279 S.W.3d 608, 623 (Tex. 2009), but the
Act does not purport to regulate the field of confidential relationships.
MJS’s Appellant’s Brief Page 24
For example, federal drug regulations require that the label on a
generic drug be identical to the label on the previously-approved brand-
name drug. Food, Drug, and Cosmetic Act, 21 U.S.C. § 355(j)(2)(A)(v)
(West 2013). But some state products liability laws would require the
manufacturer to change its label. Bartlett, 133 S. Ct. at 2476-77. It is
impossible for the manufacturer to comply with its duty under state law
without violating federal law; therefore, the federal law prevails. Id.
On the other hand, the Supreme Court held in Wyeth v. Levine, 555
U.S. 555, 568-81 (2009) that state product liability laws, which required the
manufacturer of a the drug Phenergan to warn of the risks associated with
directly injecting the drug into a patient’s vein, are not preempted by
federal drug regulations. The Court rejected Wyeth’s impossibility
argument because the FDA permits a manufacturer to supplement its
labeling application and unilaterally strengthen its warnings before
receiving official approval. Id. at 568-73; see also 21 C.F.R. §§ 314.70
(c)(6)(iii)(A), (C) (2015).
Requiring Master to abide by her contractual, fiduciary, and related
obligations under state law does not make compliance with the False
Claims Act impossible. The case law is clear that “[c]onflict preemption
requires complete impossibility—not mere inconvenience or hardship.”
MJS’s Appellant’s Brief Page 25
Patriotic Veterans, Inc. v. Indiana, 736 F.3d 1041, 1050 (7th Cir. 2013); see
also Wyeth, 555 U.S. at 568-73. The Act does not require or even authorize
a person to obtain evidence by unlawful means. It does not require or
authorize a person to disclose her employer’s confidential and proprietary
information to third parties90 for use against the employer’s client. In fact,
it does not require someone who suspects fraud against the government to
come forward in the first place; it merely authorizes one to do so. As one
court aptly concluded:
The Act permits “a person” to file a qui tam suit; it does not
require him to do so. Nor does the Act immunize a relator for
actions taken in pursuance of a qui tam action that violate state
law.
U.S. ex rel. Doe v. X Corp., 862 F. Supp. 1502, 1507 (E.D. Va. 1994).
Rather, the Act provides that if a person suspects fraud against the
government, if that person wishes to file a complaint on the government’s
behalf, and if that person hopes to share in the proceeds of any settlement
or judgment, then that person must provide the government with relevant
evidence and information in that person’s possession. 31 U.S.C. §§
3730(b)(1)-(2), 3730(d). But Master only obtained possession of the
90 Master repeatedly states that she only gave the documents she took from MJS
to her attorneys and the government, and that it was not made available to the public.
E.g., 3 CR 421, 425. That does not show she complied with her confidentiality
obligations. Her attorneys and the government are third parties to her confidentiality
agreement with MJS, so disclosure to them without authorization violated her
obligations.
MJS’s Appellant’s Brief Page 26
documents and information she disclosed to her attorneys and the
government by stealing them from MJS, in breach of her agreements with
MJS and her fiduciary duty to MJS.
The Court should also reject Master’s argument that holding her to
her confidentiality obligations would thwart Congress’s purpose of
incentivizing individuals with knowledge of fraud to come forward. In
Graber v. Fuqua, 279 S.W.3d 608, 616-17 (Tex. 2009), the Texas Supreme
Court rejected a similar argument that malicious prosecution claims
premised on bankruptcy litigation are preempted because they would
“change the incentives for participation in bankruptcy.” The False Claims
Act includes several incentives for individuals to bring qui tam actions,
including monetary rewards and protection from retaliation. But unbridled
authority to steal information from parties not accused of fraud is not an
incentive Congress chose to include. “To effectuate a change in this result
[], Congress must speak more clearly than it has.” Id. at 617.
In the 150 years since Congress enacted the Act, it has never expressly
permitted qui tam relators to take and use confidential information in
violation of state laws. Meanwhile, Congress enacted retaliation provisions
in 1986 that affect state laws concerning at-will employment. See 31 U.S.C.
§3930(h); Graham County Soil & Water Conservation Dist. v. U.S. ex rel.
MJS’s Appellant’s Brief Page 27
Wilson, 559 U.S. 280, 309 (2010) (Sotomayor, J., dissenting). “The case for
federal pre-emption is particularly weak where Congress has indicated its
awareness of the operation of state law in a field of federal interest, and has
nonetheless decided to stand by both concepts.” Wyeth, 555 U.S. at 575
(quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141,
166–167 (1989)).
No court has considered it necessary to abrogate the rights of parties
not accused of wrongdoing in order to incentivize individuals to gather
evidence of fraud. To the extent the trial court’s judgment rests on a finding
of preemption, it should be reversed.
C. Federal Policy Does Not Clearly Outweigh the Interests
in Enforcing Master’s Agreements with MJS
The trial court also erred if it accepted Master’s argument that “any
confidentiality agreement under state law has to give way to the federal
public policy [behind the Act] and the federal common law.”91 Because she
has not identified any federal policy other than the Act itself, Master’s
policy argument is no different than her preemption argument, and it fails
for similar reasons.
Under federal law, a private agreement is unenforceable on public
policy grounds only if “the interest in its enforcement is clearly outweighed
91 3 RR 8; see also 3 CR 420-21, 425-26.
MJS’s Appellant’s Brief Page 28
by a public policy against such terms.” Town of Newton v. Rumery, 480
U.S. 386, 392 (1987). Courts must therefore analyze not only the effect of
the agreement at issue on a federal policy, but also interests that are served
by enforcing the agreement. Id. at 397-98. The Texas Supreme Court has
cautioned against invalidating private agreements on policy grounds:
Public policy . . . is a term of vague and uncertain meaning,
which it pertains to the law-making power to define, and courts
are apt to encroach upon the domain of that branch of the
government if they characterize a transaction as invalid because
it is contrary to public policy, unless the transaction
contravenes some positive statute or some well-established rule
of law.
Lawrence v. CDB Servs., Inc., 44 S.W.3d 544, 553 (Tex. 2001) (quoting
Sherrill v. Union Lumber Co., 207 S.W. 149, 153–54 (Tex. Civ. App.—
Beaumont 1918, no writ)).
1. Master’s Confidentiality Obligations Do Not
Negate the Policies Behind the Act
The federal policies behind the Act are to discourage fraud against the
government and encourage insiders with knowledge of fraud to come
forward. U.S. v. Northrop Corp., 59 F.3d 953, 963 (9th Cir. 1995). Some
federal district courts in other jurisdictions, but no appellate courts, have
relied on these policies to invalidate confidentiality agreements, but only
when the party seeking to enforce the agreement is the one accused of
fraud.
MJS’s Appellant’s Brief Page 29
In U.S. ex rel. Head v. Kane Co., 668 F. Supp. 2d 146, (D.D.C. 2009),
for example, the court dismissed the qui tam defendant’s counterclaim for
breach of a separation agreement, stating:
Enforcing a private agreement that requires a qui tam plaintiff
to turn over his or her copy of a document, which is likely to be
needed as evidence at trial, to the defendant who is under
investigation would unduly frustrate the purpose of the [Act].
Id. at 152 (emphasis added). And in X Corp. v. Doe, 805 F. Supp. 1298,
1310 n. 24 (E.D. Va. 1992), aff'd, Under Seal v. Under Seal, 17 F.3d 1435(4th Cir. 1994), the court preliminarily enjoined a company’s former in-
house counsel from disclosing confidential documents, but noted that
public policy precluded the company from relying on its confidentiality
agreement “to conceal illegal activity.”92
The Ninth Circuit noted in Cafasso, U.S. ex rel. v. Gen. Dynamics C4
Sys., Inc., 637 F.3d 1047, 1062 (9th Cir. 2011), that a public policy
exception to enforcing confidentiality agreements may have “some merit”
under the Act. But it declined to adopt an exception under the facts of the
case, where the defendant had accused the relator of taking thousands of
confidential documents. Id. It explained that “[t]he need to facilitate valid
92 The general counsel subsequently initiated a qui tam action, which the
company and the government settled, and the court disqualified the general counsel
from serving as relator because his complaint relied on information and documents
obtained in violation of his confidentiality obligations. Doe, 862 F. Supp. at 1503, 1509-
10.
MJS’s Appellant’s Brief Page 30
claims does not justify the wholesale stripping of a company’s confidential
documents.” Id. With Cafasso as their only appellate guidance, other courts
have recognized a possible policy exception but permitted counterclaims for
breach of contract when some of the confidential documents at issue might
not be relevant to the qui tam complaint.93 E.g., U.S. ex rel. Rusher v.
Omnicare, Inc., No. 4:08-cv-3396, 2015 WL 4389589, at *5 (S.D. Tex. July
15, 2015); Walsh v. Amerisource Bergen Corp., CIV.A. 11-7584, 2014 WL
2738215, at *7 (E.D. Pa. June 17, 2014); Siebert v. Gene Sec. Network, Inc,
11-CV-01987-JST, 2013 WL 5645309, at *8 (N.D. Cal. Oct. 16, 2013).
Still other courts have permitted counterclaims related to the taking
of confidential information without discussing the agreements’ implications
on public policy. In a retaliation suit under the Act, the Fourth Circuit held
that the former employee breached nondisclosure agreements by taking the
company’s confidential information without its consent and disclosing it to
his attorneys. Zahodnick v. Int'l Bus. Machines Corp., 135 F.3d 911, 915
(4th Cir. 1997). And the district court in U.S. ex rel. Mossey v. Pal-Tech,
Inc., 231 F. Supp. 2d 94, 99 (D.D.C. 2002) permitted counterclaims for
violation of Virginia's Uniform Trade Secrets Act and breach of contract
resulting from the disclosure and retention of confidential information.
93 It is not known whether Master took more documents and information than
she included in her qui tam disclosures.
MJS’s Appellant’s Brief Page 31
No court has held that an agreement between a qui tam relator and a
third party to the qui tam suit is void for public policy, and this Court
should not be the first to do so. As the federal court held in remanding this
case, any relationship between MJS’s claims and the policies behind the Act
are attenuated at best.94 MJS did not commit fraud against the government,
and is not invoking its agreements with Master in an attempt to conceal its
own wrongdoing. Refusing to enforce those agreements would not,
therefore, discourage fraud. Nor would it discourage true insiders—
employees or agents of the purported fraudfeasor—from providing the
government with evidence of fraud they lawfully obtain.
2. The Interests in Enforcing Master’s Agreements
Are Compelling
The interests in enforcing Master’s agreements with MJS, which
implicate a number of protected relationships, greatly outweigh the policy
concerns behind the Act. LHC’s patients’ information was protected under
HIPAA,95 45 C.F.R. § 160 et seq., and the information MJS received from
LHC was protected not only under HIPAA, but by the attorney-client
privilege. MJS was, in fact, an agent of LHC’s attorneys and contractually
agreed to keep the information it used to audit LHC strictly confidential in
94 1 CR 134.
95 4 CR 532-35.
MJS’s Appellant’s Brief Page 32
accordance with the attorneys’ confidentiality duties.96 LHC’s attorneys
required MJS to extend those confidentiality obligations to MJS employees
who had access to LHC’s information.
MJS was not the target of Master’s qui tam action, but she secretly
copied stacks of MJS’s confidential documents while still employed, took
them home, and disclosed them in the hopes of financial gain. Master not
only breached her confidentiality agreement, but jeopardized HIPAA-
protected patient information and attorney-client confidentiality, as well as
MJS’s confidentiality obligations and Trade Secrets information associated
with the Auditor software.
A series of federal cases have squarely held that the Act does not
excuse disclosure of a client’s confidential information. In U.S. v. Quest
Diagnostics Inc., 734 F.3d 154 (2d Cir. 2013), the general counsel for a
clinical laboratory, responsible for all compliance matters, expressed
concerns that that the company was violating the Act and federal anti-
kickback statutes and was subsequently replaced. Id. at 159-61. He then
joined two other former executives and formed a partnership to bring a qui
tam action against the company, using information that was otherwise
protected by his confidentiality obligations. Id. at 161. The district court
96 4 CR 517.
MJS’s Appellant’s Brief Page 33
dismissed the complaint and disqualified the relators and their counsel
from bringing another complaint, without prejudice to the government or
other potential relators. Id. at 162-63. The Second Circuit affirmed, stating
that “[n]othing in the [Act] evinces a clear legislative intent to preempt
state statutes and rules that regulate an attorney’s disclosure of client
confidences.” Id. at 163.
Similarly, the district court in U.S. ex rel. Holmes v. Northrop
Grumman Corp., 1:13CV85-HSO-RHW, 2015 WL 3504525, at *10 (S.D.
Miss. June 3, 2015) held that an attorney who acted as relator “violated his
duty to retain confidential information by allowing his own interest in
pursing this qui tam action to override his duties to [his client].” Holmes
represented an insurance company, Munich Re, in an arbitration regarding
a coverage dispute and entered a confidentiality agreement covering
documents produced by the opposing party, Northrop. Id. at *1. Holmes
also obtained documents from the Navy, purportedly for use in the
arbitration. Id. He then filed a qui tam complaint against Northrop based
on documents obtained from both Northrop and the Navy. Id. at *1-2.
Munich Re, like MJS, was not accused of fraud or joined in the qui
tam action. But, Northrop moved to disqualify Holmes and dismiss the
complaint “based on the totality of the circumstances surrounding his
MJS’s Appellant’s Brief Page 34
conduct as relator,” including his use of confidential documents. Id. at *1.
The court granted both motions, holding that Holmes violated his ethical
duties by using documents obtained on his client’s behalf for personal gain,
and that he breached his confidentiality agreement with Northrop. Id. at *8
n. 8. The dismissal was without prejudice to the government pursuing its
own action or to any other potential relators who could file a complaint
without using documents obtained by breaching their legal and ethical
obligations. Id. at *10; see also X Corp., 862 F. Supp. at 1509-10 (“Because
the complaint contains X Corp.'s confidences and secrets, which Doe has
been enjoined under state law from disclosing, Doe cannot serve as a
relator in this action.”).
Finally, In re JDS Uniphase Corp. Sec. Litig., 238 F. Supp. 2d 1127,
1135 (N.D. Cal. 2002) acknowledges that even employers who are accused
of ongoing fraud may enter valid agreements to protect their confidential
information and trade secrets. The State of Connecticut filed a securities
fraud class action against JDS and was conducting investigations into the
allegations, but JDS’s former employees believed they could not provide
information to the investigators because of confidentiality agreements they
had signed during employment. Id. at 1130. Connecticut asked the court to
hold that the agreements were void, at least in part, due to the policy in
MJS’s Appellant’s Brief Page 35
favor of allowing employees to assist in securities fraud investigations. Id.
at 1130, 1136.
In analyzing relevant precedent, the court noted that “[h]ighly
personal medical information is the sort of information, like trade secrets,
that a party unquestionably has the right to ask another party to keep
confidential.” Id. at 1137 (discussing Patton v. Cox, 276 F.3d 493 (9th Cir.
2002)). JDS’s confidentiality agreements, however, were overly broad, so
the court limited their scope to protect only truly confidential, trade secret,
and privileged information. Id. at 1137-38.
Master has not argued that her confidentiality agreements were
overly broad. All of the information and documents Master stole from MJS
related to its services for LHC’s attorneys was protected by the attorney-
client privilege.97 Master admitted that everything she took was MJS’s
confidential property.98 And the documents included MJS’s trade secrets
and LHC patient information protected under HIPAA.99 Thus, both Master
and MJS had heightened confidentiality obligations that did not dissipate
simply because Master suspected that LHC had engaged in wrongdoing.
97 4 CR 517.
98 3 CR 441.
99 3 CR 458-59; 4 CR 577-78.
MJS’s Appellant’s Brief Page 36
The trial court therefore erred to the extent it granted Master’s motion for
summary judgment based on her policy arguments.
II. Second Issue: Master Did Not Negate Causation as a Matter
of Law
In both her traditional and no-evidence motions, Master contended
that Proffitt’s declaration negated causation as a matter of law because he
stated that LHC did not terminate its contract with MJS because of
Master’s actions. 3 CR 426, 430. But supporting affidavits must “be made
on personal knowledge.” Tex. R. Civ. P. 166a(f). “An affidavit based on
information and belief is insufficient as verification by oath and its content
is not factual proof in a summary judgment proceeding.” Wells Fargo
Const. Co. v. Bank of Woodlake, 645 S.W.2d 913, 914 (Tex. App.—Tyler
1983, no writ). Proffitt’s declaration is not based on personal knowledge,
and he does not state that he speaks on behalf of LHC or that he personally
made the decision to terminate LHC’s contract with MJS.100 Instead, his
statements are based on “information and belief.”101 His declaration is not,
therefore, competent summary judgment evidence and cannot support
summary judgment for Master.102
100 3 CR 433-36.
101 3 CR 433, ¶ 1.
102 MJS objected to the declaration for lack of foundation and on the basis that
Proffitt’s statements were speculation, conclusory, and improper opinions. 4 CR 476-77.
MJS’s Appellant’s Brief Page 37
Even if Proffitt’s declaration were competent summary judgment
evidence, it does not address all of MJS’s causation and damages
arguments. MJS alleged that Master’s actions damaged its business not
only because of the loss of LHC, but also because its current and potential
customers fled after Master’s complaint was made public. And MJS also
requested disgorgement, which is premised on Master’s improper benefit at
MJS’s expense.103 See ERI Consulting Engineers, Inc. v. Swinnea, 318
S.W.3d 867, 873 (Tex. 2010) (noting that disgorgement of wrongdoer’s ill-
gotten gains is equitable remedy for breach of fiduciary duty); Restatement
(Third) of Restitution § 39 (2011).
The supreme court has also noted that “[i]f the credibility of the
affiant or deponent is likely to be a dispositive factor in the resolution of the
case, then summary judgment is inappropriate.” Casso v. Brand, 776
S.W.2d 551, 558 (Tex. 1989). That is especially true when the non-movant
submits controverting evidence. Id. “The duty of the court hearing the
motion for summary judgment is to determine if there are any issues of fact
to be tried, and not to weigh the evidence or determine its credibility, and
thus try the case on the affidavits.” Gulbenkian v. Penn, 252 S.W.2d 929,
931 (Tex. 1952).
The trial court overruled these objections. 5 CR 767.
103 3 CR 279-80, 284; 4 CR 497-98.
MJS’s Appellant’s Brief Page 38
MJS submitted controverting evidence that could lead a reasonable
juror to conclude that Proffitt’s statements were self-serving and not
credible, including evidence that:
 LHC terminated its contract with MJS just three days after MJS
provided documents to the government in response to the
subpoena. 4 CR 512, ¶¶ 19-20.
 Over the course of the four-year business relationship, LHC
expanded MJS’s scope of services and twice increased its
compensation. 4 CR 510, ¶¶ 6, 8; 4 CR 537-49.
 LHC never told MJS that it was reevaluating its auditing
functions. 4 CR 513, ¶ 23.
 LHC never complained about the services MJS provided. 4 CR
512, ¶¶ 20, 22.
 LHC never mentioned that MJS’s reports were unduly
burdensome, challenging, or contradictory. 4 CR 512, ¶ 22.
This evidence, based primarily on Spears’s affidavit, directly contradicts the
Proffitt declaration on which Master relies, and raises a genuine issue of
material fact as to whether Master’s actions caused MJS damages.
The trial court therefore erred to the extent it granted summary
judgment on the basis that Proffitt’s declaration conclusively establishes
that Master did not cause injury to MJS.
MJS’s Appellant’s Brief Page 39
III. Third Issue: MJS Presented More than a Scintilla of
Evidence to Support Each of Its Claims
A. Standard of Review
A party may move for summary judgment without presenting
evidence on the ground that there is no evidence of one or more essential
elements of a claim on which the opposing party has the burden of proof at
trial. Tex. R. Civ. P. 166a(i). The burden then shifts to the non-movant to
bring forth evidence that raises a fact issue on the challenged elements. Id.;
Thompson v. Weaver, 429 S.W.3d 897, 901-02 (Tex. App.—Tyler 2014, no
pet.). To do so, the non-movant need only present more than a scintilla of
probative evidence, which is evidence that rises to a level that would enable
reasonable and fair-minded people to differ in their conclusions as to a vital
fact. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003);
Thompson, 429 S.W.3d at 902.
B. Breach of Contract
The elements of a breach of contract action are: (1) the existence of a
valid contract, (2) performance or tendered performance by the plaintiff,
(3) breach of the contract by the defendant, and (4) damages sustained by
the plaintiff as a result of the breach. Lake v. Premier Transp., 246 S.W.3d
167, 173 (Tex. App.—Tyler 2007, no pet.). Master did not challenge the first
MJS’s Appellant’s Brief Page 40
element.104 Though she challenged the remaining elements, she also
repeatedly admitted that she received confidential information from MJS in
exchange for her employment and agreement to keep that information
confidential, and that she did not comply with her agreements.105 And MJS
presented uncontroverted expert evidence of the damages it sustained as a
result of Master’s breaches of her agreements, including drastic declines in
revenue following the loss of LHC’s business and the release of the article
when the qui tam complaint was unsealed.106
C. Breach of Fiduciary Duty
The elements of a breach of fiduciary duty action are: (1) the existence
of a fiduciary relationship between the parties, (2) the defendant’s breach of
her fiduciary duty, and (3) either injury to the plaintiff or benefit to the
defendant resulting from the breach. Acad. of Skills & Knowledge, Inc. v.
Charter Sch., USA, Inc., 260 S.W.3d 529, 540 (Tex. App.—Tyler 2008, pet.
denied).
The Texas Supreme Court has held that an employee may owe
fiduciary duties to her employer when acting in an agency capacity.
Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 200 (Tex. 2002). In
104 3 CR 427.
105 3 CR 441-42.
106 4 CR 586-605.
MJS’s Appellant’s Brief Page 41
particular, a fiduciary duty arises in an employment relationship that
prevents an employee from using confidential or proprietary information
acquired during the relationship in a manner adverse to the employer.
Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care
Services, LLC, 404 S.W.3d 737, 752-53 (Tex. App.—El Paso 2013, no pet.);
Mabrey v. SandStream, Inc., 124 S.W.3d 302, 316 (Tex. App.—Fort Worth
2003, no pet.). The court in Cuidado Casero held that there was more than
a scintilla of evidence to support a breach of fiduciary duty claim where the
evidence showed that an employee of a home health care agency had access
to confidential patient and Trade Secrets information that she used for her
own benefit in violation of a confidentiality agreement. 404 S.W.3d at 753.
Master admits receiving confidential and proprietary information as
part of her employment with MJS, and admits that she took that
information in violation of the express language of her confidentiality
agreements and disclosed it to third parties.107 As a result, Master benefited
at MJS’s expense by receiving over $12 million while MJS’s business
suffered.108 The trial court erred in finding that there was no evidence that
Master breached a fiduciary duty to MJS.
107 3 CR 441-42.
108 4 CR 620; 4 CR 586-89.
MJS’s Appellant’s Brief Page 42
D. Tortious Interference with Contract
The elements of tortious interference with contract are: (1) an existing
contract subject to interference, (2) willful and intentional interference with
the contract, (3) proximate causation, and (4) actual damage or loss.
Prudential Ins. Co. of Am. v. Fin. Review Services, Inc., 29 S.W.3d 74, 77
(Tex. 2000). Master, however, recited the elements of tortious interference
with prospective business relations, rather than with an existing contract.
3 CR 429-30. For that reason alone, she did not meet Rule 166a(i)’s
requirement that the motion “state the elements as to which there is no
evidence.”
But setting that point aside, her only argument—that Proffitt’s
declaration stating that LHC’s termination of its contract with MJS had
nothing to do with the qui tam action—does not entitle her to summary
judgment on MJS’s claim for tortious interference for the reasons discussed
above under issue two.
E. Texas Trade Secrets Act
A person is liable for misappropriation under the Texas Trade Secrets
Act if she acquires knowledge of another’s trade secret “under
circumstances giving rise to a duty to maintain its secrecy or limit its use”
and subsequently discloses the trade secret without the owner’s consent.
Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(3)(B)(ii)(b) (West Supp.
MJS’s Appellant’s Brief Page 43
2015). A trade secret under the statute is, among other things, information,
including formulas, programs, methods, techniques, and processes that:
(A) derives independent economic value, actual or potential,
from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and
(B) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(6). Damages for
misappropriation include unjust enrichment. Tex. Civ. Prac. & Rem. Code
Ann. § 134A.004 (West Supp. 2015).
MJS’s Auditor software, the process by which Master used the
software to conduct compliance audits for MJS, and the reports it produced
are all trade secrets within the meaning of the statute.109 The employment
agreement Master signed also included the following provision:
Trade Secrets During the term of employment, Employer will
make available and Employee will have access to, and become
familiar with, various trade secrets, consisting of processes and
compilations of information, records, customer lists, and
specifications, owned by Employer and regularly used in the
operation of the business of the Employer. Employee shall not
disclose any such trade secrets, directly or indirectly, nor use
them in any way. . . .110
It is undisputed that Master took information generated by MJS’s software
and disclosed it to her attorneys and the government without MJS’s
109 See 4 CR 523-24.
110 4 CR 551.
MJS’s Appellant’s Brief Page 44
knowledge or consent. And Master discusses MJS’s trade secrets processes
in the qui tam complaint, which is now unsealed and publicly available.111
This Court has noted that plaintiffs in trade secret cases “can seldom
establish a specific injury” to calculate lost profits, so courts use “flexible
and imaginative methods” to measure damages in light of the
circumstances surrounding the misappropriation. Sw. Energy Prod. Co. v.
Berry-Helfand, 411 S.W.3d 581, 609 (Tex. App.—Tyler 2013, pet. granted).
Both the statute and the common law permit a plaintiff to recover for
unjust enrichment associated with the misappropriation, or for the value of
the Trade Secrets at the time it was misappropriated. Id. Only by using the
Auditor software was Master able to assess LHC’s compliance, which led
her to form the belief that LHC was violating the Act. She then provided the
Auditor information to the government and ultimately gained $12 million
as a result of her misappropriation. This is sufficient evidence of damages
to which MJS is entitled for Master’s misappropriation to defeat summary
judgment.
F. Conversion
To establish a claim for conversion, the plaintiff must prove that
(1) the plaintiff owned, possessed, or had the immediate right to possession
111 1 CR 87.
MJS’s Appellant’s Brief Page 45
of personal property, (2) the defendant wrongfully exercised dominion or
control over the property, and (3) the plaintiff was injured. Patel v. City of
Everman, 179 S.W.3d 1, 16 (Tex. App.—Tyler 2004, pet. denied). Master
only challenged the second element. Once again, she argued that the Act
permitted her to take MJS’s personal property, so she did not wrongfully
exercise dominion or control over that property.112 This is not a true no-
evidence point, and reasons why Master’s argument is wrong are discussed
above under the first issue.
G. Conspiracy
“Civil conspiracy requires a meeting of the minds between two or
more persons to accomplish an unlawful purpose or to accomplish a lawful
purpose by unlawful means.” Transp. Ins. Co. v. Faircloth, 898 S.W.2d
269, 278 (Tex. 1995). Master did not challenge the evidence of conspiracy,
but argued, without citing any authority, that “the sole allegation in this
cause of action relates to the filing of a sealed complaint, which is protected
conduct.” 3 CR 429. As discussed above under the first issue, Master’s
conduct was not protected by the Act. There is also more than a scintilla of
evidence that Master conspired with both her husband and her attorney to
use MJS’s confidential and proprietary information to pursue a qui tam
112 3 CR 428-29.
MJS’s Appellant’s Brief Page 46
action against LHC,113 which was a meeting of the minds to achieve a lawful
purpose by unlawful means.
H. Fraud
Actionable fraud requires a false, material misrepresentation that was
either known to be false when made or was asserted without knowledge of
its truth, intent that the claimant act on the misrepresentation, and reliance
on the misrepresentation that caused injury. Sears, Roebuck & Co. v.
Meadows, 877 S.W.2d 281, 282 (Tex. 1994). Silence is the equivalent of a
material misrepresentation when the circumstances impose a duty to
speak, such as when there is a confidential or fiduciary relationship or when
new information makes the party’s prior representation misleading or
untrue. Four Bros. Boat Works, Inc. v. Tesoro Petroleum Companies, Inc.,
217 S.W.3d 653, 670-71 (Tex. App.—Houston [14th Dist.] 2006, pet.
denied).
Master argued that “[h]er conduct is protected by statute” and that
there is no evidence that she made a material misrepresentation. 3 CR 431.
We have already addressed the first assertion above under issue one.
Nothing in the Act protects a party from liability for its own fraud.
113 4 CR 576.
MJS’s Appellant’s Brief Page 47
In exchange for receiving access to MJS’s confidential and proprietary
information, Master represented that she would not take or disclose any of
that information. In reliance on that representation, MJS provided her
access to the confidential information. Master either never intended to keep
that information confidential or failed to disclose that she changed her
mind when she began making copies, contacted an attorney, and began
sharing the confidential information. The trial court erred in granting
summary judgment on MJS’s fraud claim.
Prayer
For these reasons, there is a genuine issue of material fact as to each
of MJS’s claims against Master, and the trial court erred in granting
summary judgment. MJS respectfully requests that the Court reverse the
trial court’s summary judgment and remand for trial on the merits.
MJS’s Appellant’s Brief Page 48
Respectfully submitted,
/s/ Michelle R. Meriam
Michelle R. Meriam
Texas Bar No. 24063871
michellemeriam@warejackson.com
Timothy F. Lee
Texas Bar No. 12139500
timlee@warejackson.com
Ware, Jackson, Lee, O’Neill,
Smith & Barrow, LLP
2929 Allen Parkway, 39th Floor
Houston, Texas 77019
(713) 659-6400
(713) 659-6262 (fax)
Russell R. Smith
Texas Bar No. 18682310
RSmith@fairchildlawfirm.com
W. Wade Flasowski
Texas Bar No. 24055482
Fairchild, Price, Haley & Smith, LLP
P.O. Drawer 631668
Nacogdoches, Texas 75963-1668
(936) 569-2327
(936) 569-7932 (fax)
Mark Kennedy
Texas Bar No. 24000122
mark@markkennedylaw.com
Joanna Martin
Texas Bar No. 24072153
joanna@markkennedylaw.com
Kennedy Attorneys & Counselors at Law
12222 Merit Drive, Suite 1750
Dallas, Texas 75251
(214) 445-0740
(972) 661-9320 (fax)
Attorneys for Appellant
MJS’s Appellant’s Brief Page 49
Certificate of Compliance
According to Microsoft Word’s word count function, the Rule 9.4(i)(1)
portion of this document contains 10,148 words.
/s/ Michelle R. Meriam
Michelle R. Meriam
Certificate of Service
On November 19, 2015, on or before the last day for filing this brief, a
true and correct copy was provided to all counsel of record via ProDoc or
email, as follows:
Joseph M. Callow, Jr.
jcallow@kmklaw.com
Keating Muething & Klekamp
One East Fourth St., Suite 1400
Cincinnati, Ohio 45202
(513) 579-6400
(513) 579-6457 (fax)
Travis P. Clardy
travis.clardy@kellyhart.com
Jerry Baker
jerry.baker@kellyhart.com
Kelly, Hart & Hallman, LLP
209 E. Main St.
P.O. Box 635426
Nacogdoches, Texas 75961
(936) 564-2500
(936) 564-2507 (fax)
Attorneys for Appellees
/s/ Michelle R. Meriam
Michelle R. Meriam
MJS’s Appellant’s Brief Page 50
Case 6:07-cv-01117-EEF-MLH Document 64 Filed 09/30/11 Page 1 of 3 PageID #: 260
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
JUDY MASTER CIVIL ACTION NO. 07-1117
*SEALED*
VERSUS JUDGE ELIZABETH ERNY FOOTE
L H C GROUP INC, ET AL. MAGISTRATE JUDGE HORNSBY
ORDER
The United States having intervened in part of this action and having declined to
intervene in part of this action pursuant to the False Claims Act, 31 U.S.C. § 3730(b)(2) and
(4),
IT IS ORDERED that, upon good cause shown by the United States relating to the
protection of its investigative process, the record in this matter be unsealed, with the
exception of the following documents, which shall remain under seal: Record Document
9, Record Document 10, Record Document 14, Record Document 15, Record Document
16, Record Document 17, Record Document 18, Record Document 19, Record Document
20, Record Document 21, Record Document 22, Record Document 24, Record Document
25, Record Document 27, Record Document 28, Record Document 29, Record Document
32, Record Document 37, Record Document 38, Record Document 39, Record Document
40, Record Document 41, Record Document 42, Record Document 43, Record Document
44, Record Document 45, Record Document 46, Record Document 47, Record Document
50, Record Document 51, Record Document 52, Record Document 53, Record Document
Case 6:07-cv-01117-EEF-MLH Document 64 Filed 09/30/11 Page 2 of 3 PageID #: 261
54, Record Document 55, Record Document 56, Record Document 57, Record Document
58, Record Document 59, and Record Document 60.
IT IS FURTHER ORDERED that within five days from the date of today, the United
States shall file its Partial Dismissal upon completion of settlement.
IT IS FURTHER ORDERED that upon the filing of the Partial Dismissal by the
United States, this case shall be stayed for thirty days.
IT IS FURTHER ORDERED that within thirty days, the Relator shall file a status
report updating the Court on the settlement of the declined claims, whether an extension
of the stay will be necessary, and whether a telephone conference with the Court is
needed.
IT IS FURTHER ORDERED that as to the part of the action in which the United
States has declined to intervene, the parties serve all pleadings and motions filed in that
part of the action, including supporting memoranda, upon the United States, as provided
for in 31 U.S.C. § 3730(c)(3). The United States may order any deposition transcripts and
is entitled to intervene in that part of the action, for good cause, at any time.
IT IS FURTHER ORDERED that the parties shall serve all notices of appeal upon
the United States.
IT IS FURTHER ORDERED that all Orders of this Court be sent to the United
States.
IT IS FURTHER ORDERED that should the Relator or Defendant propose that the
part of the action in which the United States has declined to intervene be dismissed,
settled, or otherwise discontinued, the Court will solicit the written consent of the United
Case 6:07-cv-01117-EEF-MLH Document 64 Filed 09/30/11 Page 3 of 3 PageID #: 262
States before ruling or granting its approval.
THUS DONE AND SIGNED in Shreveport, Louisiana, this 30th day of September,
2011.
** NOT FOR PRINTED PUBUICATION **
**NOT
IN THE UNITED STATES DISljRICT COURT
I
FOR THE EASTERN DISTRICr
DISTRICjT OF TEXAS
LUFKIN DIVISIO~
MJS & ASSOCIA
ASSOCIATES,
TES, LLC, §
§
Pia in t!!f,
Plaint([[, §
§ CiT Action No. 9:12-CV-19
v.
V. §
§
JUDY MASTER et ai,
eta/, § JUIDGE RON CLARK
§
Defendants. § I
I
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND AND DENYING AS
MOOT DEFENDANTS' MOTION TO DISMISS OR TRANSFER VENUE
Plaintiff MJS & Associates, LLC filed suit againsl Defendants Judy Master and Matthew
22, 2011, alleginl
Master in Texas state court on December 22,2011, allegin1 state law claims for breach of contract,
violation of the Texas Trade Secrets Act, breach of fiduciah duty, conversion, conspiracy, tortious
interference with a contract, and fraud. No federal claims wLe asserted. Defendants timely removed
the case on federal question grounds, claiming that a "Substaltial
"substaltial federal question regarding the false
Claims Act" existed, Doc.
Doc.## lI at Page ID # 2, despite the: fact that no federal claim was actually
presented in the Complaint. Defendants then filed a motion to dismiss and/or transfer to the United
States District Court for the Western District of Louisia1. After Defendants' motion was filed,
I
Plaintiff filed a motion to remand the case to state court.
The court does not have subject matter jurisdiction to hear the case. No federal question is
presented, as Plaintiffs well-pled complaint does not cstlblish either that federal law creates an
asserted cause
calise of action or that Plaintiffs right to relief!necessarily
reliefineceSSarilY depends on resolution of a
A ~RUE COPY II CERTli=Y
CERilrY
~JAVIO J. MALAND, CLERK
~)AVIO
IJ.S.
W.E. Dl01 RICT COURT
~S .
!lIl.S IS· ICT, TEXAS
IS'
128
substantial question offederallaw. Plaintiffs motion is granted, and the case remanded to the 145th
!45th
Judicial District Court of Nacogdoches County, Texas. Dlfcndants' motion to dismiss or transfer
is denied as moot.
I. BACKGROUND
The following facts are primarily drawn from PlaiJiffs
Plainliffs Complaint, and the court makes no
detennination as to their veracity at this time.
Plaintiff is a healthcarc consulting firm. and provides services to agencies and providers that
inclJding Medicare and Medicaid. In 2005,
participate in federal and state healthcare programs, incllding
Plainti IT was ,etai ned by a law finn in Lafayette.
retained Lafayette, Lou;
Loui Sianalto
sianalto perfonn an external compliance audi
auditt
ofLHC Group, lnc.ln perfom1ingthe audit, Plaintiff obtained and reviewed LHC records containing
Inc. In perf0n11ingthe
confidential and proprietary personal health information thL was protected by the Health Insurance
Portability and Accountability Act, or HIPPA.
Plaintiff hired Defendant Judy Master in March 2007 to work as a nurse consultant on the
bJ
LHC compliance audit and, after she was hired, trained bJ to review skilled nurse visits provided
by Medicare home health agencies. Ms. Master signed Jl
all employment agreement in which she
I
agreed not to disclose or use any trade secrets-including infommtion, records, and customer lists
I
owned and used by Plaintifl in the regular course of busincss-during
business-during or after her employment,
I
except as required by her employment. Doc. lD #51.
Doc.## I -I at Page 10 # 51. Plaintiff
Plainti f1' also utilized computer
passwords to limit LHC record and document access.
Ms. Master quit her job with PlaintifTs
PlaintitTs in June 2007. During her employment, Plaintiff
alleges that Ms. Master and co-Defendant Matthew Master LnsPired
Lnspired to misappropriate confidential
I
LI-IC. Ms. Mastcr
and proprietary infonnation from Plaintiff as pertained to LHC. Master than used this
2
129
infonnation as the basis of a qui tam suit, filed in the United States District Court for the Western
District of Louisiana in July 2007 pursuant to the false eLms
cLms Act, against LHC. United States of
I
ref .Judy Master v. LHe
America ex relJudy LHC Group, Inc., 6:07-cv-1117 (W.O. La.).
thellUnited States issued subpoenas to both
During the course of the Western District case, the
Plaintiff and LHC, requesting infonnation regarding the col
Plaintiffand colpliance Plaintiffperfomwd. LHC,
P liance audit PlaintiffperfomlCd.
1
upon receipt of the subpoena, tenninated its contract with Plaintiff. The Western District case was
unsealed in September 2011, and Plaintiff then allegedly Limed
Ltrned for the first time that Defendants
had misappropriated Plaintifrs confidential infonnation.
In the Western District case, the United States opted to intervene with respect to certain of
I
Relator's-i.e., Ms. Master's-claims that LHC violated the False Claims Act, but declined to
intervene in the other claims in the case. These claims wel subsequently settled, with Ms. Master
receiving over $12,000,000. The remainder of the claims t the case were stayed in October 2011,
and remain stayed at this time. 1'
Ms. Master filed her Second Amended ComplaiJt on January 27, 2012 in the Western
I
District case, which added Plaintiff in the instant case, MJ S, as a party for the first time. 2 According
to the January 2012 Complaint, MJS retaliated against Ms. Master by harassing and discriminating
against her in response to her complaints and refusal to participate in ti·aud,
tI'aud, in violation of the False
U .S.C. § 3730(h).
Claims Act, 31 U.S.c. 3 730(h). The Complaint also seeksL
seeksLdec1aratory
declaratory judgment that the state law
A status conference in the We
11 stem District case i~ set for April 16, 2012
Westem 20 12 regarding
scheduling issues, presumably with respect to the stayed claims.
22 Although
MJS is mentioned in the first two comJlaints
Comdlaints Relator filed-the original
Complain~ on
I
Complaint on July 30, 2007 and First Amended Complaint 011 November 29, 2007-it does not
20 I !2Q. Second Amended Complaint.
seem to actually be named as a party until the January 201
3
130
claims relating to Ms. Master's duties of confidentiality are
arc preempted by federal law (i.e., the False
Claims Act) and that she did not violate any employment Lreement with MJS.
The instant case was originally filed in Texas state laurt
turt on December 22, 20 12 by Plaintiff.
It was removed on January 27,2012, which was the same hay that Ms. Master's Second Amended
Complaint was filed in the Western District action. Defldants
DefLdants filed their motion to dismiss or
transfer to the Western Dislrict
District on February 3, 2012, andi
andl Plaintiff filed its motion to remand on
February 26, 2012. As far as the court can tell from these Lotions, the only thing the parties agree
on is that this is the wrong court to hear this case.
II. THE COURT WILL CONSIDER PLAINTIFF'S !MOTION
MOTION
\
TO REMAND BEFORE
DEFENDANTS' MOTION TO DISMISS/TRANSFER
Although the parties
partie' do not spend much, if any, li+
ti+ addressing this poinl
point in their briefing',
the court will consider Plaintiffs motion to remand before considering Defendants' motion to
dismiss/transfer, even though Defendants' motion was filld
filjd first.
The court "shall" remand a case "at any time befot final judgment [if] it appears that the
I
district court lacks subject matter jurisdiction .... ",28
", 28 U.S.C. § 1447(c),
1447(e), and the Fifth Circuit has
stated that a district court does not err "by first resolving itl jurisdictional concems" by ruling on a
I
I-rrden v. Field Mem '!'/ Cl1Ity.
motion to remand prior to ruling on a motion to dismiss. 1-rrden Cmty. Hasp., 265
405, 408 (5th Cir. 2008); see also Cuevas v. SAC
F. App'x 405,408 Servicing. LP, 648 F.3d
BAC Home Loans Servicing,
242, 246-47 (5th eir.
242,246-47 Cir. 2011) (noting without comment tlJt the district court ruled on a later-filed
\to dismiss).
motion to remand before ruling on an earlier-filed motion Ito
JPlaintiffstates,
3
,' motion to dismiss is premature, and
Plaintiffstates, without elaboration, that Defendants'
should be considered only aftcr
after the motion to remand is disposed of. Doc.
Doc.## 15 at 2. Defendants
do not seem to address the point at all.
4
131
The court will therefore consider the merits of Pia
Plaintiffs
in tiffs motion to remand before reaching
Defendants' motion to dismiss/transfer.
III. PLAINTIFF'S MOTION TO REMAND IS GRANTED
This is a court of limited jurisdiction and may helr a case only when jurisdiction is both
I
authorized by the United States Constitution and con finned by statute. Owen Equip. Co. v. Kroger,
I
437 U.S. 365,371,98
365, 371,98 S. Ct. 2396,
2396,2401
2401 (1978). There is ho diversity jurisdiction in this case4 , so
for jurisdiction to exist there must be a federal question plsented. 28 U.S.C. § 1331.
A. Applicable law
Federal question jurisdiction arises when ... plaintiffs set f0l1h
fm1h allegations founded on a
I
claim or right arising under the Constitution, treaties, or laws of the United States ... In
general,
gcncral, questions concerning federal question jurisdiction
I
are resolved by application of the
well-pleaded complaint rule ... The mle provides that the plaintiffs properly pleaded
complaint governs the jurisdictional inquiry. I
Cmp., 199 F.3d 239, 243-44 (5th eir.
Hart v. Bayer COIp., Cir. 2000) (internal quotations omitted).
I
A federal question exists only [in] those cases in which a well-pleaded complaint establishes
either that federal law creates the cause of actidn or that the plaintiffs
plaintiff's right to relief
necessarily depends on resolution of a substantial qLestion of federal law ... In other words,
federal question jurisdiction exists where (I) ( 1) re~olving a federal issue is necessary to
resolution of the state-law claim; (2) the federal i~sue
1
is actually disputed; (3) the federal
issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and
state judicial responsibilities.
Singh v. Duane Morris LLP, 538 F.3d 334, 337-38 (5thCir.
(5th Cir. 2008) (internal quotation omitted;
brackets in original).
B. Analysis
Defendants concede that Plaintiffs Complaint actually pleads only state law claims;
however, they argue that, under
underthe articulatld in Singh, federal question jurisdiction
the four factor test articllla1d
4AlI
4 AII parties are Texas citizens. Doc.
Doc.#
I'11-6.
# 1-1 at Page ID 1/6.
5
132
exists nevertheless because the state law claims Plaintiff has pled necessarily depend on resolution
of a substantial question offederallaw.
ofa offedcrallaw. Specifically, DefeLants suggest that Plaintiff's claims turn
I
on whether Ms. Master's conduct is protected under the False Claims Act. To resolve this issue, the
court considers each of the Singh factors in turn.
1. Whether resolution of a federal issue is necessQf)!
necessat)! to resolulion
resolution of the stale law
claims (factor (1)) I
As noted above, Plaintiff alleges Texas state law claims for breach of contract, violation of
the Texas Trade Secrets Act, breach of
offiduciary conLrSion, conspiracy, tortious interference
fiduciary duty, conLrsion,
. a contract, an d firau,
with
wtth . f"rom M
rau d, a II stemmmg
stemming 'II
M s. Master·' s cond
duct·III .
. .. .llllOmlaUon
.m acqumng .mlornlaUon
C' .
m the
. ••
1
course of her employment regarding LHC that she later used in the Western District qui tam suit. All
I
of these claims require PlaintitT to demonstrate that Ms. Master's taking of the information was
I
wrongful; that is, in breach of her employment contract. Defendants essentially contend that Plaintiff
cannot demonstrate the taking was wrongful without recolse to the False Claims Act, specifically
u.s.c. § 3730(h).
31 U.S.c.
The court disagrees. 3311 U.S .C. § 3730(h
730(h)(1)
)(1) allows an employee to avoid retaliation based
on "lawful acts done by the employee ... in furtherance lor an action under this section or other
efforts to stop 1 or more violations of this subchapter." This provision is invoked in a civil action
by an employee who was discharged, discriminated aga+t, demoted, suspended, threatened, or
harassed in the tenns and conditions of her employment.
cmployment. Regardless of
ofwhethcr
whether or not Ms. Master
Mastcr
can prove such a retaliation claim in the Western District cJse, it would appear to have little bearing
on whether or not shc-who
she-who quit her job only three Lonths
tonths after being hired-breached a
confidentiality agreement she signed with Plaintiff upon hJ hiring. Plaintiffasscrts
Plaintiff asserts that her actions
violated her employment
employmcnt contract, which secms
seems to require no recourse to the False Claims Act.
6
133
Defendants make much of the legislative history behind the False Claims Act
Act. While the
court agrees that Section 3730(h) is aimed at preventing hjrassment or retaliation against would-be
relators for lawful acts, this has little bearing on whethlr Ms. Master can be civilly liable on
Plaintiffs allegations that she breached an employment clntract
Jntract she entered into upon her hiring.
I
This is especially true because Plaintiff in this case was not the target of Ms. Master's False Claims
I
\
Act case, and was not added as a Defendant in the Western District case until one month after
Plaintiff filed the instant case in Texas state court.
Defendants also cite several district court cases for the proposition that relators may disclose
documents to the United States in qui tam cases without btaching confidentiality agreements. No
suppjrt this idea. At least one of those cases
appellate court opinions are cited by Defendants to suPPJrt
In re JDS Uniphase Cotp.
seems to partly contradict, rather than support, DefendaJs' argument. 111 COtp.
Sees. Litig., 238 F. Supp. 2d 1127 (N.D. Cal. 2002). RegJdless, unlike the case at bar, all involve
preventing fraud by the relator or Plainti frs employer. 5s HLe, the qui tam
Plaintiffs lam suit was against a client
of Ms. Master's employer (LHC), rather than her employel
emPloyel itself (Plaintiff).
5Uniled
5 United Slates
States ex rei. Head v. Kane Co., 668 F. Supp. 2d 146 (D.D.C. 2009) (where
relator brought qui tam action against fonner
fanner employer, and employer raised a counterclaim for
breach of the employment contract which was dismissed because the contract was void as against
public policy; the court specitically
specifically stated that "[e]nforcink a private agreement that requires a
qui tam plaintiff to turn over his or her copy of a document, which is likely to be needed as
evidence at trial, to the
Ihe defendant
de/endant who is under investigali?n
investigati?n would unduly trustrate the purpose"
United Slates
of the FCA) (emphasis added); Uniled Stales ex rei Grandeau v. Cancer Treatment Ctrs. Ors. of Am.,
350 F. Supp. 2d 765 (N.D. Ill. 2004) (relator's employer \Jas the qui tam Deftmdant
Defendant and brought
counterclaims for breach of contract, breach of fiduciary d~ty,
j I
and conversion); In re .IDS
Uniplwse Corp. Sees. Litig., 238 F. Supp. 2d 1127 (N.D. (N.D_ €a\. 2002) (in a securities fraud case,
confidentiality agreements between the Defendant employkr and fonner fanner employees were void as
agreement~ preclude fom1er
against public policy "[t]o the extent that those agreemcntk fOrlller employees from
assisting in investigations of wrongdoing that have nothin~ to do with trade secrets or other
confidential business information~'); X Co11J:
business. information"); COt]}. v. Doe, 805 ~.~· Supp.
S~pp. 1298
1~98 (E.D.
(~.D·_Y~·
Va. 199?)
1992) (where
employer brought smtsuit to prevent 1ts fanner in-house
its fonner m-house counsel fromirom disclosing
dtsclosmg infonnation
mfonnatwn to the
States, the in-house counsel stated that the documehts disclosed ongoing fraud on the part
United Stales,
of the employer).
7
134
The court understands the concerns of those district courts and the importance of the FCA
in preventing fraud. If Ms. Master had worked directly for JHC, the court may very well have agreed
!fMs.
with those opinions. However, Ms. Master worked for an Ltity that is not being accused of fraud,
offraud,
.
· find ·ltse
and, under Ms. Master's theory, would essentIally
essentially . llf .
ttse1lr wtthout
·
without a recourse tifior Ms. Master's use
of confidential infonnation to prove a fraud perpetrated bl another entity. Whether Ms. Master's
I
actions were wrongful under Texas state law as to Plaintiff!
Plaintiffj an entity not the target of her FCA case,
does not seem to have require recourse to the FCA.
2. the federal issue is actually dispuled
Whether thefederal disputed and whether it is substanlial
substantial (jactors
(factors
(2) and (3))
As the court has concluded resolution of a federal issue is not necessary to resolution ofthe
of the
state law claims, both of these factors are not appl icab IIe.
e. +en assuming
assum ing the court is incorrect as to
its conclusion on factor (I) and the parties would dispute the federal issue if it existed (factor (2)),
Il
"federal jurisdiction demands not only a contested federal issue, but a substantial one, indicating a
serious federal interest in claiming the advantages thoughttl be inherent in a federal forum." Grable
SOilS Meta/Prods., Inc. v. Dame
&Sons
& Darue Ellg 'g & Mfg., 545
Eng'g&M.fg., u.s.1
u.sLo8,
308, 313, 125 S. Ct. 2363,2367
2363, 2367 (2005).
Granting, for the sake of argument, that a court wLld
wLid have to consult the FCA to resolve
Plaintiff's purely state law claims, this is by far the only 1sue
1S11e that would likely arise in the case.
Plaintiff would have to prove, for example, with respect td one or more of its causes of action that
Ms. Master acquired the infonnation later used in the qui tam
lam action in the course of her
employment, that the information was covered under the confidentiality agreement, that she owed
a fiduciary
l
1
tiduciary duty to Plaintiff: that she conspired with her co-8efendant,
co-!Defendant, and that Plaintiff was hanned
by her actions. In other words, the court is far from conviled that the federal issue in this case is
substantial, rather than simply tangential.
8
135
3. jurisdiction will not disturb the balance of federal and state judicial
Federal jurisdictio/1
responsibilities (factor (4))
Finally, even assuming the first threc
three factors would support Defendants' position,
even when the state action discloses a contested andlsubstantial federal question, the exercise
of federal jurisdiction is subject to a possible veto.
I
For the federal issue will ultimately
qualify for a federal forum only if federal jurisdiction is consistent with congressional
judgment about the sound division of labor betwe6n state and federal courts governing the
application of[28 U.S.C.] § 1331 ... [T]he pres~nce of a disputed federal issue and the
ostensible importance of a federal forum are never rieccssarily dispositive; there must always
be an assessment of any disruptive portent in exer6ising
cxer6ising federal jurisdiction.
Grable, 545 U.S. at 313-14, 125 S. Ct. at
313-14,125 at2367-68.
2367-68.
Here, Plaintiff, a Texas entity, filed its state law c~aims in a Texas state court against two
Jaw Claims
Texas citizens on December 22,2011. At that time, Plaintiffwas
Plaintiff was not a party in the Western District
of Louisiana qui tam action; Plaintiff was not added as a darty until one month (dier
after the state case
\
was filed. This may not be an attempt by Defendants at fonnn manipulation per se, but not even
Defendants wish this case to stay in a Texas federal court. In fact, if Defendants had their way, the
issues Plaintiffraises would be litigated by a Louisiana federal court, either by dismissal of this case
I
in favor of the pending Louisiana case or by transfer to thelwestern
theiWestern District. It makes little sense to
handle a case involving Texas parties and Texas claims in any federal court, much less a Louisiana
federal court, and much more sense to remand it to the TJas state court from whence it came.
C. Conclusion
The removing party bears the burden of showing lthat
Ithat federal jurisdiction exists and that
Manguno v. Prudential Prop. &
removal was proper. Mangllno &: Cas. Ins. Co., 276 FJd
F.3d 720, 723 (5th Cir.
iJ
2002). Because the removal statute is strictly construed ij favor of remand, any doubts should be
resolved against removal. !d.
Id.
Keeping this burden in mind, the court will grant Plaintiffs motion to remand. This case is
ofNacogdJhes
remanded to the 145th Judicial District Court of NaCOgdaihes County, Texas.
9
136
. '
. .
IV. DEFENDANTS' MOTION TO DISMISSrrRANSFER
DISMISSfrRANSFER IS DENIED AS MOOT
Because the court remands the case, it need not conlidcr the arguments raised in Defendants'
motion to dismiss/transfer. That motion is denied as moJ
JT IS THEREFORE ORDERED that PlaintiffMJsl&
IT PlaintiffMJSI& Associates, LLC's Motion to Remand
[Doc. # 10]
I0] is GRANTED. This case is remanded tj
tJ the 145th
I 45th Judicial District Court of
Nacogdoches County, Texas.
IT IS FURTHER ORDERED that Defendants Judy Master and Matthew Master's Motion
to Dismiss or Transfer [Doc.# DEN LED AS MOOT.I
[Doc. # 2] is DENiED
So ORDERED and SIGNED tllis
tl1is 2 day of April, !2012.
Ron Clark, United States District Judge
10
137
Case 6:07-cv-01117-EEF-MLH Document 156 Filed 04/15/13 Page 1 of 1 PagelD
Page!D #: 1420
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
JUDY MASTER CIVIL ACTION NO. 07-1117
VERSUS JUDGE ELIZABETH ERNY FOOTE
LHC GROUP INC, ET AL. MAGISTRATE JUDGE HORNSBY
FINAL JUDGMENT
Pursuant to the Court's Memorandum Ruling [Record Document 150] and
Qui Tam Plaintiff Judy Master's Notice of Voluntary Dismissal [Record Document
154], the Court hereby enters final judgment DISMISSING all claims with
prejudice, with costs to be borne by each party respectively. Accordingly, the Motion
for Entry of Judgment under Rule 54(b) filed by MJS & Associates, L.L.C. [Record
Document 153] is hereby DENIED AS MOOT. The clerk is hereby ordered to close
this case.
THUS DONE AND SIGNED in Shreveport, Louisiana, on this 15th day of
April, 2013.
'J-~EXII!IHII!IIIB
111111T~-.
I!)-IIIIIE"XH·I·B·IT-~
255
I 4
AC REgJ\.ilKNT
ACREf!:MENT
FOR
PROFF~SSIONAL SERVICES
THIS AGREEM}:NT ("Agreemeut")
("Agreement") is made and entered into effective the 1'1011 day of
Febmary, 2005 by and between Gachassin Law Firm, LLC (the ''Attornq1s")
"Attorneys") in regard to legal
perfonned on behalf of LHC Group, L.L.C., on behalf of it subsidiaries and affiliates,
services to be performed
collectively referred to as the "Client') and MJS & Assodatcs
(hereinafter col1ectively Associates (hereinafter the·
the-
"Co11sulrattt").
"Consultant"). The Clientjolns
Client joins this Agreement for the limited purpose of agreeing to the specific
provisions referenced above the Client's signature at the end of this Agreement.
Agreement_
,,'rrNESSETH:
\VJTNESS.ETH:
\VHEREAS,
WHEREAS, the Attorneys have been engaged to provide legal advice to the Client; and,
"1ffiREAS,
\\1-ffiREAS, the Consultant represents that it is knowledgeable and skilled in the review of
home health licensure, certification,
certifica1ion, reimbursement and documentation regulations, and that the
Consultant is able to provide the services herein contemplated; and,
\VHEREAS, as part of providing such legal advice, the Attorneys consider it appropriate to
WHEREAS,
engage the services of Consultant to provide the Attorneys expert and technical information
regarding home health licensure
hcensure and certification, and documentation regulations, and the other
matters addressed herein as Services (defined below) as tbey
matten; they relate to the Client (as described on
Exhibit "A" attached hereto); and,
Agreement
'VHEREAS, the Client, the Attorneys and the Consultant have entered into this Agrr.ement
'VHEREAS.
tem1s
with the intention and expectation that the Services to be rendered by the Consultant under the temlS
of this Agreement will be confidential and ac:cess reports, and analysis wilf
access to any information, •eports, will be
restricted to only those persons authorized by the Client and the Attomeys, and will be subject to the
product'' privilege; and,
"attorney-client" and "work product"
WHEREAS, for convenience,
\VHEREAS, cOllvenience, the Attorneys authorize and direct that the Consultant interact
directly with the Client for purposes of conducting the described Services, as well as obtai.ning
obtaining and
reviewing the Evaluation Material (as hereinafter defined),
detlned), but direct that all results, analysis, reports,
and recommendations be provided directly and eXclusively
exclusively to the Attorneys to assist the Artomeys
Attomeys in
providing the requested legal advice 1o
to the Client. ,_
'-
NOW, THEREFORE, in exchange for the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and sufficiency of which is
acknowledged by the parties, the parties agree as follows:
1. Performance of SerYices.
Services. The Consultant shall perform the services denoted on the
"Services") for and on behalf of the Attorneys. The Consu1tant shall be
attached Exhibit "A" (the "'Services")
solely responsible for the performance of such Services and shall control such perfonnance.
performance.
Consultant agrees to perform such Services in a professional manner, minimizing the disruption to Lo the
busjness activities Lo
Client's business LO the greatest extent reasonably possible. The Services shall be performed
by persons selected by Consultant, whose qualifications, performance and payment shall be the sole
responsibility of Consultant. The Consultant shan not be responsible for any services or obligations
shaH nol obhgatiuns
other than the specific Services perfunned by Consultant. 11le
Senriccs described herein and perfurmed The Services to be
517
,' ,'
--
perf01l11ed
perfonned by Consultant may be modified or amended only by a written agreement, executed by
Consultant, the Attorneys, and the Client.
2. Cooperation bv Attorneys and Client. The Attomeys shall facilitate the
Consultant's access to the materials, records and facility of the Client in a manner which pennits
pelmits the
Consultant to reasonably perfonn
per[onn the Services in an efficient and economical manner.
3. Confidentiality. (a) The Services are provided to the Attorneys to assist their legal
ConfidentiaJity.
representation and advice to the Clien_t
Clien,t regarding, among other things, the matters to be reviewed by
of the Services. All such Services are confidential and are under the control
the Consultant as part ofthe
and direction of the Attorneys (as to dissemination of the results, reports, and recommendations,
whether in electronic or written fom1,
foml, including access to "'111e
"'l11c Auditor" as provided in Exhibit A [the
"Reports"]); not as to the actual perf0ll11anCe
perfom1ance of the Services, which performance is and shall be the
sole responsibility of the Consultant). 'l11e
sale The Consultant acknowledges that all such Reports, as well as
infonnation accumulated or created by the Consultant as part of the process ofperfomting
the information of performing the
Services and generating the Reports (all together, with the Reports, referred to herein as the
"Collfldential
"Confidential Information") is and shall remain confidential. Such Confidential Information shall be
"Confidential Report to Atromeys"
marked "Collfidelltial Attomeys" and shall only be released to the Attorneys (and shall not
be delivered directly to the Client). Consultant sha11
shall notify the Attorneys in the event that any person
or entity shall contact Consultant regarding the Services, the Client (in regard to the Services) or the
Confidential Information, and shall follow the direction of the Attorneys regarding responding to such
request, except as otherwise provided herein.
(b) The Consultant, in assisting the Attorneys with its investigation of the Client, will request
certain information of and regarding the Client which is confidential, proprietary and/or has not been
made available to the general public. As a condition of either the Attorneys or the Client furnishing
such infonnation, the Consultant agrees to treat confidentially such information and any other
"Evaluation Material")
information (hereinafter collectively referred to as the "Evaluatio11 ftfaterial") furnished by or on
behalf of the Client. It is hereby agreed that the Evaluation Material will be used only for the purpose
ofperfonning the Services and that the Evaluation Material will be kept strictly confidential by the
Consultant and its representatives; provided, however, that any of such information may be disclosed
to the Consultant's representatives who need to know such information for the purpose of the
investigation (it is understood that such representatives shall be infomled
infom1ed of the confidential nature of
such information and shall be directed to treat such information confidentially, and that the Consultant
shall be responsible for compliance hereunder by its representatives.) As used herein, the tem1term
"representatives" shall mean the Consultant's directors, officers, employees and agents who are
assigned or engaged by the Consultant to perform the Services, to the extent that such representatives
receive or are permitted access to the Evaluation Material. The Consultant will not, and will direct its
representatives not, to disclose to any person the fact that an investigation is taking or has taken place.
The term "person" as used herein shall include, without limitation, any government (local, state or
federal) entity, department or agency, corporation, Consultant, partnership and individual.
(c) In the event that the Consultant is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoena or similar process) to disclose any information
infonnation
supplied to it, the Consultant will provide the Attorneys immediate written notice of such request or
requirements so that the Attorneys may seek an appropriate protective order. Consultant agrees not to
release such information until the latest date which the Consultant, on advice of counsel, determines
that such response can be delayed without censure or penalty, by Consultant's reasonable
determination.
518
_Business Associate
Contract Addendum
THIS BUSINESS ASSOCIATE ADDENDUM, is incorporated into the Professional
Services Agreement entered into between the pa1ties;
SeIVices palties; including; LHC GROUP, LLC and its
subsidiaries and affiliates (hereafter collectively the "Client"), and MJS and ASSOCIATES
(hereafter "Consultant") to set forth the relationships and obligations of lhe parties in respect to
compliance with the requirements of the Health Insurance Portability and Accountability Act of
1996.
oflndividually Identifiable
I. Introduction: The Client is subject to the Standards for Privacy ofIndividually
1.
Health Infonnation (45
(45 CPR Parts 160 and 164) (the "Privacy Rule"). The Client and Consultant
~'Agreement") of even date herewith.
an. Professional Services Agreement (the ''Agreement")
have entered into an
The Client and ConsuUant
Consu1tant may provide, for or on beha1f of one another, certain services
described 1n
ln the Agreement and, in the process, recejve jndividually identHiable
receive individually identjfiable health
infonnation which is protected under the Privacy Rule ("PHI')
("PHI"). As a result, the Client and
Consultant enter into this Addendum in order to comply with the Privacy Rule.
2. Uses and Disclosures of PHI:
PHl: Except as provided in Paragraph 3, the Client and Consultant
are permitted
pennitted and/or required to lise
use and disclose the PHI they obtain from one another, only to
the extent such use or disclosure is: (i) necessary to provide services to one another; (ii)
permitted under the Privacy Rule or (iii) in accordance with the tenns
terms contained herein. The
Client and Consultant are specifically prohibited from any use or disclosme of
Or disclosure the PHI that
ofthe
would violate the requirements of the Privacy Rule.
3. Other Permitted Uses and Disclosures: Notwithstanding Paragraph 2; the Client and
Consultant may use the PHIpm to perfonn
perform data aggregation services (as defined in the Privacy Rule)
if such use
usc is necessary for the proper management and admjnistration
administration of Client's operations, or
to carry out their legal responsibilities hereunder. Consultant may disclose tbe PHI ififnecessary
necessary
for the proper management and administration of the Consultant or Or to carry out its legal
responsibilities, but only if
if:
(A) The disclosure is required by law; or
(B) The Client or Consultant obtains reasonable aSSllrances
assurances from the person to whom
wiJI be held confidentially and used or further disclosed only as
the PHI is disclosed that it will
required by law or for the purpose for which it was disclosed to the person, and the person
notifies the Client or Consultant of any instances of which it is aware in which the confidentiality
of the Pill
PID has been breached_
4. Other Obligations of the Client and Consultant: ln
In addition to the foregoing, the Client
and Consultant shall, with regard to the Pill:
(A) Not use or further disclose the PHI other than as pennitted or required by the
Agreement or as required by law;
532
(B) Usc appropriate and commercially reasonable safeguards to prevent use or disclosure
information other than as provided for by the Agreement;
of the infonnation
(C) Promptly report to the other any usc or disclosure of the information not provided for
by the Agreement of which it becomes aware, and have in place procedures to mitigate any
ham1ful effects from the inappropriate use or disclosure;
(D) Ensure that any agents, including a subcontractor, to whom they provide the PHI
agrees to the same restrictions and conditions that apply to the Client and Consultant with respect
to such information;
(E) Promptly make the PHI available to the other upon request in compliance with the
access provisions of the P~vacy Rule;
(F) Promptly make the PHI available for amendment and incorporate any amendments to
the PHI maintained by the Client and Consultant as required by the Privacy Rule;
(G) Maintain data on all disclosures ofPtn
ofPffi for which accounting is required by the
Privacy Rule for at least six years after the date of the last such disclosure, and make that data
available to the Company as necessary to provide accountings of disclosures in accordance with
the Privacy Rule;
(H) Make its internal books, and records relating to the use and disclosure of the PHI
determining the Client's compliance with the Privacy
available to the Secretary for purposes of detcffi1ining
Rule;
Ru1e; and
(I)
(1) At termination of the Agreement, to the extent feasible, recover all PHI in the
possession of its agents and subcontractors return or destroy all of the PI-Il
ofthe PI-IT that the Client and
Consultant still maintain in any fonn
form and retain no copies of such infonnation
information or, if such return
or destruction is not feasible, extend the protections of the Agreement to the remaining PHI and
limit further uses and disclosures to those purposes that make the retum or destruction of the
infomlation
infom1ation infeasible.
(1)
(J) Remain knowledgeable of the requirements applicable to health care providers under
the Privacy Rule and provide appropriate education and training to employees, officers, directors,
commissioners, agents, and contractors to ensure their knowledge of and compliance with those
proVISIOns.
provtSIOilS.
5. Term: This Addendum shall become effective immediately upon execution o[the of the Professional
Services Agreement and, except as hereinafter provided, shall remain in force alld
a11d effect until the
retumed to the Client or destroyed.
last of the PHI is returned
A~:reement: Notwithstanding any provision of the Agreement to the contrary
6. Termination of A1:reement:
tem1inate the
regarding tenn or termination, as hereinafter provided, the Client is authorized to temlinate
if it detennines
Agreement ifit determines that the Consultant has violated a material term of this Addendum (a
533
"Privacy Breach").
A. Upon learning of a Privacy Breach, unless the Client reasonably believes that the
Consultant
Consu1tant has already remedied the condition leading to or causing the Privacy Breach.
Breach, the
Client shall give written notice to the Consultant ("Notice").
B. If the Client:
Client has not received satisfactory assurances within ten (10)
(1 0) days of the date
ofthe Notice that Consultant has cured the breach or ended the violation, as applicable, then the
Client shan terminate the Agreement if, in the its sole discretion, it detennines that:
shall immediately tennina!.e that
tennination is feasible. If it determines that tennination
termination is not feasible, it shall immediately
report the problem to the Secretary of the Department of Health & Hwnan Services.
7. Conflicting provisions: In the event that any requirements or provisions ofthis Addendum
should be in conflict with any requirements or provisions ofthe Agreement) the requirements or
provisions of this Addendum· shall control.
8. Changes required by law: The parties hereto have acknowledged that this Addendum is
entered into in order to comply with the requirements of the Privacy Rule. In the event that the
provisions or interpretation of the Privacy Rule are materially changed, or in the event that other
materiaiiy effects the tenllS
law is enacted or interpreted which materiaIly tenns of this Addendum, the parties
agree to enter into a mutually acceptable amendment to thisthis: Addendum, on or before the
effective date of that change, to bring the terms hereof into compliance therewith.
9. Definitions: As used in this Addendum,
Addendunl, the following terms have the following meanings:
"Business Associate" includes not only the person or entity executing this Addendum. but
employees~ officers, directors)
also includes all of its employees, directors~ commissioners, agents, and
contractors.
"Disclosure" or "disclose'' tl1e release, transfer, provision of access to, or divulging
"disclose" means t11e
in any other manner ofofinfonnation infotmation, as more
information outside the entity holding the information,
fully described in the Privacy Rule.
"Use" means, with respect to individually identifiable health infonnation, the sharing,
examination~ or analysis of such infonnation within
employment, application, utilization, examination,
an entity that maintains such infonnation, as more fuUy described in the Privacy Rule.
10. Miscellaneous:
A. Ownership of PHI: The PHI to which the Cllent and Consultant have access under the
Client.
Agreement or this Addendum shall be and remain the property of the Client:.
534
B. Indemnification: Each parLy
party to this Addendum
Adderidum shaU
shall indemnify and hold the other
hannless from any and all liability, damages, costs and expenses, including attorneys fees and
costs of defense, resulting from the action or omission ofthe other party with respect to the
obligations undertaken by either of them under this Addendum.
C. Injunctive Relief: Notwithstanding any rights or remedies provided for in this
Addendum, the Client retain all rights to seek injunctive relief to prevent or stop the
inappropriate use or disclosure ofPHT directly or indirectly by the Consultant.
D. No Third Party Beneficiaries: Nothing in this Addendum is intended to confer upon or
create in, nor shall anything herein confer upon or
Or create in, any person other that the parties and
their successors and assigns, any lights,
Iights, remedies, obligations, or liabilities whatsoever.
E:\005[)0\QO()Corpe>ralc\Corporate Compli oncelPSA
E:\005[)OIOO[)CorpClTalcICoopora1e onceiPSA ·Jal1
·Ja11 Sp"aTS-O 1- 24-2005. wpd
Sp.,ars-0 1-24-2005.
535
124447.GR8 .mo.4.6.0
.mb.4.6.0 1 Confidential to AttDrney
Attorney
EMPLOYMENT AGREEMENT
By this Agreement. M. Jan Spears and Associates, Inc., referred to in this Agreement as
~Ioyer,
~IOyer, !ocated
located al 162,0 West Seale, Nacogdoches, Texas, 75964, employs
I..I.DV /VIltscra
G.lDV /VIttscra illV'll# , referred to in this Agreement as Employee, of
I ~ A £. ItA£. ,
' who, for considerat~Qn
considerat~on of the providing. of
cGnf~dentiaranHP
c(}nf~dentiar ana p Prietary
prietary information, trade secrets, trade specific training and other such
benefits incident to their employment.
employment, by M. Jan Spears and Associates, agrees and
acknowledges the following
fonowing terms and conditions: ._ .·
1. Trade Secrets Duling the term of employment, Employer will wi\! make
avaitable and Employee will have access 10, io, and become familiar IIVlth,
various trade secrets, consisting of processes and compilations of
owned· by
Information, records, customer lists, and. specifications, owned'
Employer and regularly used in the operation of th~ business of the
Employer. Employee shaH shafl not disclose any such trade secrets, directly
indirectly, nor use them in any way, either during the term of this
or indirectly.
Agreement or at any time thereafter, except as required in the course of
employment All files, records, documents, specifications, equipment, and
similar items relating to the business of the Employer, whether or not
prepared by the Employee, shaH shaU remain the exclusive property of the
Employer and shall not be removed from the premises of the Employer
under any circumstances without the prior written consent of the
Employer.
2. Return of Employer."s Property On the tenn[nation of employment or
whenever requested by Employer, Employee shall immediately deliver to
Employer all property in Emp~oyee's possession or under Employee's
control belonging to the Employer, including, but nof limtted to aU
accounting records, computer terminals. hardware, software and tapes.
accounting machines, and all office furniture and fixtures, supplres,
suppl1es, and
other personal property in good condition.
condition, ordinary wear and tear
excepted.
3. Noncompetition By Employee During the tenn of this Agreement,
Emp!oyee
Employee shall not. directly or indirectly, either as employee. employer,
a.s an employee,
consultant, agent, principal, partner, stockholder, corporate officer,
director. or in any other individual or representative capacity, engage or
director,
in
participate in any business that is iri competition in any manner whatever
with the business ofth~ Employer. Furthermore, on the termination of this
Agreement, Employee expressly agrees not to engage or participate,
directly or indirectly,
indirer:;tly, in any business located within the East Texas
Region. from Nacogdoches County North 1a
Region, to Smith County, West to fo
Madison County, East to LouisianaLOUisiana and South to the Gulf Coast,
including but not limited to the Greater Houston/Harris County Area, or
any area that empfoyee worked in, selVed
seiVed or called upon as an employee
of M. Jan Spears and Associates, that is in competition with the business
of the Employer or a current client of the
the. Employer for a period of fv..ro (2)
years.
38
3B of 153
551
Contidentlallo
Confidential to Attorney
Atlomey
1620 Wesr Seale
Nacogdoche~
Nacogdo~he~ TeKas 7~964
75964
Phon~:
Phone: 936-559-7234
936-559--7234
Fax: 936-550-4652
Fal(: 936-560-4652
Cell; 936-554·722El
Celf; 936-554·7225
charljaspearS@mjanspears.com
charliesp61ars@mjanspears.c::om
& Associates LLC
MJS &
STATEMENT OF CONFIDENTIALITY
CONFlDENTIALITY
I understand the importance of observing strict ethical mora!
moral and professional standards with
confidentiali1y poljcies. I agree not to DISCUSS OR RELEASE any information obtained
within. the company regarding any MJS client, recor~ personnel or any other information with or
within
ElllY individual
to any indi.vidual not directly as.sociated
associated with MJS or any other party or individual not directly
assbciated with the information. [fully agree that any information
associated infonnation that is released will only be
done with proper authorization and/or in accordance with policy for the release of approved
information..
information-
patient's conditions, treatments~ or status.
I will not disclose or discuss client's patient•s even if they are
status, e'Ven
known to me personally.
personally, with anyone at or outside the Company except to carry out my regular
duties that I am assigned within authorized responsibilities.
discuss information to anyone concerning financial,
I will not release or d.iscus.s financial) medical or social
information ofofthose
those patients of the clients, their family, MJS employees, or
ofthe the Company as a
orthe
whole, which is not authorized in writing by an official in management in authority to release
whole.
such information.
infonnatiou_
I will not seek or retain, copy or disclose confidential infonnation
information about our cHent}s
clienfs or MJS
employees for roy own or others use .by_by researching computer terminals; infonnation,
terminals, billing infonnation.
~Y other sources ex..cept
personnel or medical records, or any ex.cep~ to carry out duties as assigned I will
any syst~ access usemame or password to
not at anytime. share or disclose any MJS computer systems
anyone. I will not at anytime tamper with any MJS computer system (hard.ware. software, or
(hardware. software.
finnware) to gain unauthorized access. I will not at anytime disclose to any unauthorized
firmware)
personnel. any procedures (in whole or in part) in order to gain unauthorized access to any MJS
system_
computer system.
My signature on this document indicates that [understand
I understand and agree to abide by the
ofthe
aforementioned policies, and that any breach of the policies will result in disciplinary procedures
up to and including termination. In addition to, ifl leave employment with MJS.
iflleave MJS, I understand
professional conduct is expected also in reference to compliance with the above agreement and
pecalties Or damages may also apply to the breach of this.
penalties or this agreement up to $10.000
$10,000 per violation.
1I fully agree and accept these terms as a condition of my employment. I also accept the
aforementioned with moral, ethical and professional standards applicable thereafter any MJS
ent.
~1flI A/~J,7
~.
554
·, ___ _...r
Sheri Foster , SupeJ'l./isor
f SupeJ'IIisor Compliance
From: Judy Master RN
Dear Sheri
Iam 11, 2007 due to personal reasons.
resigning from MJS effective June 11,2007
1 MJS team.·.
I have enjoyed working with you and TJ and me MJ$
I will mail the key or have my husband drop It by. This Is my written
permission to mail my check(s) to me.
pBJ~erely,
pBI~erelYI /1 ._D
11
,VtAM f.(./feY~
·VtAM /lcY~
/'JUdY~
/'Judy~ ster
...'~~ 1 345 R 3408
't Jac orwilte,
orwi!te, Texas 75766
556
FlLED
FILED
~;~t/5
__1_: _!1_£ -f2-,M.
?M.
JUN 8 2015
HILL
JESS!CA !-IILL
CA USE NO. Clll
CAUSE ell27910
7910 DlSTRlCT CLERK
NACOGDOCHES COUNTY, TX
MJS and
a.od ASSOCIATES, L.l.C. L.LC. § IN THE DISTRJCT
DJSTRJCT COlJRT
COURT OF
Tcxa~ LimHcd
A TC'l8!i Lin1Hcd LiahiJit)'
LiahiJif)' §
Cnrpnration, §
§
~
vs.
VS.
*§
§ NACOGDOCHES COUNTY. TEXAS
NACOGDOCH£SCOVNTY,TEXAS
§
.runv MASnm,
.ruDY MASTER, RN., ~
J\IA
J\fA TTHEW MASTER,
MASTI!:R, §
§
Defendants.
Defeml:mt!l. i~ 145 111 JUllIClA1"
JUlllClAl... DISTRICT
ORDER
UR»I£R ON DEFKNlMNTS'
DEFgNI>ANTS'
MOTlON FOR SUMMARY .J[)OGMENT
MOTION fOR SUl\:1MARY.JlJOGMENT
thi~ day C3me
On this lx: considered
co:~me on to b;: considere.j Defcndarus MaSl~r, R.N. imd
Judy MaSter,
Oefcndan!s JUO)' 1:1nd M(tllhew
Y11111hew
Mas:er':i MOIicn
Ma$tet':i Su..-nmary JJcigment.
Mmian for SU.l11mary Aftcr cons;dering
JJdgment. After cO!is;dering the MOliun
Moliun and hC!lring
henring the
\he nr~utnents
lI.l"~uments
orcounsci,
of counsel, illlppea!1llo
itnppea:s Hl the C:.lurt \hut such Motion and should in all things be (j
C:..urt U1ut (jRANTED.
RANTED.
This order ilnally dispose..~
flnally dispose .... of nil parties
ofnll and fill
par',ics
PRESIDING
JUDGE PRESJDING
773
§ 3729. False claims, 31 USCA § 3729
KeyCite Yellow Flag - Negative Treatment
Unconstitutional or Preempted Limited on Constitutional Grounds by U.S. v. Hawley, N.D.Iowa, Aug. 01, 2011
United States Code Annotated
Title 31. Money and Finance (Refs & Annos)
Subtitle III. Financial Management
Chapter 37. Claims (Refs & Annos)
Subchapter III. Claims Against the United States Government (Refs & Annos)
31 U.S.C.A. § 3729
§ 3729. False claims
Currentness
(a) Liability for certain acts.--
(1) In general.--Subject to paragraph (2), any person who--
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly
delivers, or causes to be delivered, less than all of that money or property;
(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government
and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information
on the receipt is true;
(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the
Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or
(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or
transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases
an obligation to pay or transmit money or property to the Government,
is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted
by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410 1 ), plus 3 times
the amount of damages which the Government sustains because of the act of that person.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 3729. False claims, 31 USCA § 3729
(2) Reduced damages.--If the court finds that--
(A) the person committing the violation of this subsection furnished officials of the United States responsible for
investigating false claims violations with all information known to such person about the violation within 30 days after
the date on which the defendant first obtained the information;
(B) such person fully cooperated with any Government investigation of such violation; and
(C) at the time such person furnished the United States with the information about the violation, no criminal prosecution,
civil action, or administrative action had commenced under this title with respect to such violation, and the person did not
have actual knowledge of the existence of an investigation into such violation,
the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of
that person.
(3) Costs of civil actions.--A person violating this subsection shall also be liable to the United States Government for the
costs of a civil action brought to recover any such penalty or damages.
(b) Definitions.--For purposes of this section--
(1) the terms “knowing” and “knowingly” --
(A) mean that a person, with respect to information--
(i) has actual knowledge of the information;
(ii) acts in deliberate ignorance of the truth or falsity of the information; or
(iii) acts in reckless disregard of the truth or falsity of the information; and
(B) require no proof of specific intent to defraud;
(2) the term “claim”--
(A) means any request or demand, whether under a contract or otherwise, for money or property and whether or not the
United States has title to the money or property, that--
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
§ 3729. False claims, 31 USCA § 3729
(i) is presented to an officer, employee, or agent of the United States; or
(ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government's
behalf or to advance a Government program or interest, and if the United States Government--
(I) provides or has provided any portion of the money or property requested or demanded; or
(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is
requested or demanded; and
(B) does not include requests or demands for money or property that the Government has paid to an individual as
compensation for Federal employment or as an income subsidy with no restrictions on that individual's use of the money
or property;
(3) the term “obligation” means an established duty, whether or not fixed, arising from an express or implied contractual,
grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from
the retention of any overpayment; and
(4) the term “material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt
of money or property.
(c) Exemption from disclosure.--Any information furnished pursuant to subsection (a)(2) shall be exempt from disclosure
under section 552 of title 5.
(d) Exclusion.--This section does not apply to claims, records, or statements made under the Internal Revenue Code of 1986.
[(e) Redesignated (d)]
CREDIT(S)
(Pub.L. 97-258, Sept. 13, 1982, 96 Stat. 978; Pub.L. 99-562, § 2, Oct. 27, 1986, 100 Stat. 3153; Pub.L. 103-272, § 4(f)(1)
(O), July 5, 1994, 108 Stat. 1362; Pub.L. 111-21, § 4(a), May 20, 2009, 123 Stat. 1621.)
Notes of Decisions (1429)
Footnotes
1 So in original. Probably should read “Public Law 101-410”.
31 U.S.C.A. § 3729, 31 USCA § 3729
Current through P.L. 114-61 (excluding P.L. 114-52, 114-54, 114-59, and 114-60) approved 10-7-2015
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3
§ 3729. False claims, 31 USCA § 3729
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
WestlawNext © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4
§ 3730. Civil actions for false claims, 31 USCA § 3730
United States Code Annotated
Title 31. Money and Finance (Refs & Annos)
Subtitle III. Financial Management
Chapter 37. Claims (Refs & Annos)
Subchapter III. Claims Against the United States Government (Refs & Annos)
31 U.S.C.A. § 3730
§ 3730. Civil actions for false claims
Effective: July 22, 2010
Currentness
(a) Responsibilities of the Attorney General.--The Attorney General diligently shall investigate a violation under section
3729. If the Attorney General finds that a person has violated or is violating section 3729, the Attorney General may bring a
civil action under this section against the person.
(b) Actions by private persons.--(1) A person may bring a civil action for a violation of section 3729 for the person and for
the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only
if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.
(2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses
shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure. 1 The complaint shall be
filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.
The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and
the material evidence and information.
(3) The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains
under seal under paragraph (2). Any such motions may be supported by affidavits or other submissions in camera. The defendant
shall not be required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served
upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure.
(4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Government shall--
(A) proceed with the action, in which case the action shall be conducted by the Government; or
(B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right
to conduct the action.
(5) When a person brings an action under this subsection, no person other than the Government may intervene or bring a related
action based on the facts underlying the pending action.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 3730. Civil actions for false claims, 31 USCA § 3730
(c) Rights of the parties to qui tam actions.--(1) If the Government proceeds with the action, it shall have the primary
responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action. Such person shall
have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).
(2)(A) The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person
has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for
a hearing on the motion.
(B) The Government may settle the action with the defendant notwithstanding the objections of the person initiating the action if
the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances.
Upon a showing of good cause, such hearing may be held in camera.
(C) Upon a showing by the Government that unrestricted participation during the course of the litigation by the person initiating
the action would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant,
or for purposes of harassment, the court may, in its discretion, impose limitations on the person's participation, such as--
(i) limiting the number of witnesses the person may call;
(ii) limiting the length of the testimony of such witnesses;
(iii) limiting the person's cross-examination of witnesses; or
(iv) otherwise limiting the participation by the person in the litigation.
(D) Upon a showing by the defendant that unrestricted participation during the course of the litigation by the person initiating
the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court
may limit the participation by the person in the litigation.
(3) If the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct
the action. If the Government so requests, it shall be served with copies of all pleadings filed in the action and shall be supplied
with copies of all deposition transcripts (at the Government's expense). When a person proceeds with the action, the court,
without limiting the status and rights of the person initiating the action, may nevertheless permit the Government to intervene
at a later date upon a showing of good cause.
(4) Whether or not the Government proceeds with the action, upon a showing by the Government that certain actions of discovery
by the person initiating the action would interfere with the Government's investigation or prosecution of a criminal or civil
matter arising out of the same facts, the court may stay such discovery for a period of not more than 60 days. Such a showing
shall be conducted in camera. The court may extend the 60-day period upon a further showing in camera that the Government
has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil
action will interfere with the ongoing criminal or civil investigation or proceedings.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
§ 3730. Civil actions for false claims, 31 USCA § 3730
(5) Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to
the Government, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is
pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person
would have had if the action had continued under this section. Any finding of fact or conclusion of law made in such other
proceeding that has become final shall be conclusive on all parties to an action under this section. For purposes of the preceding
sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court of the United States,
if all time for filing such an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not
subject to judicial review.
(d) Award to qui tam plaintiff.--(1) If the Government proceeds with an action brought by a person under subsection (b), such
person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the
proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to
the prosecution of the action. Where the action is one which the court finds to be based primarily on disclosures of specific
information (other than information provided by the person bringing the action) relating to allegations or transactions in a
criminal, civil, or administrative hearing, in a congressional, administrative, or Government 2 Accounting Office report, hearing,
audit, or investigation, or from the news media, the court may award such sums as it considers appropriate, but in no case more
than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the
action in advancing the case to litigation. Any payment to a person under the first or second sentence of this paragraph shall
be made from the proceeds. Any such person shall also receive an amount for reasonable expenses which the court finds to
have been necessarily incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded
against the defendant.
(2) If the Government does not proceed with an action under this section, the person bringing the action or settling the claim
shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages. The amount shall
be not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of
such proceeds. Such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily
incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.
(3) Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who
planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the
court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under
paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any
relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising
from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive
any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action,
represented by the Department of Justice.
(4) If the Government does not proceed with the action and the person bringing the action conducts the action, the court may
award to the defendant its reasonable attorneys' fees and expenses if the defendant prevails in the action and the court finds
that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of
harassment.
(e) Certain actions barred.--(1) No court shall have jurisdiction over an action brought by a former or present member of the
armed forces under subsection (b) of this section against a member of the armed forces arising out of such person's service
in the armed forces.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3
§ 3730. Civil actions for false claims, 31 USCA § 3730
(2)(A) No court shall have jurisdiction over an action brought under subsection (b) against a Member of Congress, a member of
the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government
when the action was brought.
(B) For purposes of this paragraph, “senior executive branch official” means any officer or employee listed in paragraphs (1)
through (8) of section 101(f) of the Ethics in Government Act of 1978 (5 U.S.C. App.).
(3) In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the
subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.
(4)(A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the
same allegations or transactions as alleged in the action or claim were publicly disclosed--
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government 2 Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, “original source” means an individual who either (i) prior to a public disclosure under
subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a
claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or
transactions, and who has voluntarily provided the information to the Government before filing an action under this section.
(f) Government not liable for certain expenses.--The Government is not liable for expenses which a person incurs in bringing
an action under this section.
(g) Fees and expenses to prevailing defendant.--In civil actions brought under this section by the United States, the provisions
of section 2412(d) of title 28 shall apply.
(h) Relief from retaliatory actions.--
(1) In general.--Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor,
or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any
other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee,
contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations
of this subchapter.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4
§ 3730. Civil actions for false claims, 31 USCA § 3730
(2) Relief.--Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or
agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation
for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees.
An action under this subsection may be brought in the appropriate district court of the United States for the relief provided
in this subsection.
(3) Limitation on bringing civil action.--A civil action under this subsection may not be brought more than 3 years after
the date when the retaliation occurred.
CREDIT(S)
(Pub.L. 97-258, Sept. 13, 1982, 96 Stat. 978; Pub.L. 99-562, §§ 3, 4, Oct. 27, 1986, 100 Stat. 3154, 3157; Pub.L. 100-700,
§ 9, Nov. 19, 1988, 102 Stat. 4638; Pub.L. 101-280, § 10(a), May 4, 1990, 104 Stat. 162; Pub.L. 103-272, § 4(f)(1)(P), July 5,
1994, 108 Stat. 1362; Pub.L. 111-21, § 4(d), May 20, 2009, 123 Stat. 1624; Pub.L. 111-148, Title X, § 10104(j)(2), Mar. 23,
2010, 124 Stat. 901; Pub.L. 111-203, Title X, § 1079A(c), July 21, 2010, 124 Stat. 2079.)
Notes of Decisions (2154)
Footnotes
1 See, now, Rule 4(i) of the Federal Rules of Civil Procedure.
2 So in original. Probably should be “General”.
31 U.S.C.A. § 3730, 31 USCA § 3730
Current through P.L. 114-9 approved 4-7-2015
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5
In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
KeyCite Yellow Flag - Negative Treatment
Declined to Extend by Saini v. International Game Technology, D.Nev., May 16, 2006
238 F. Supp. 2d 1127United States District Court,
N.D. California.
In re: JDS UNIPHASE CORPORATION SECURITIES LITIGATION
This document relates to All Actions
No. C-02-1486 CW EDL. | Oct. 18, 2002.
Lead plaintiff in securities fraud class action against company moved for order limiting scope of confidentiality agreements
signed by former employees. The District Court, Laporte, United States Magistrate Judge, held that confidentiality agreements
binding former employees did not preclude former employees from disclosing non trade secret, non privileged information
regarding securities fraud.
Motion granted.
West Headnotes (1)
[1] Federal Civil Procedure Actions in which remedy is available
Private Securities Litigation Reform Act (PSLRA) prohibition, on discovery during pendency of motion to dismiss in
securities fraud action, did not preclude court from granting request, of claimants that confidentiality obligations of
former employees of company be limited to disclosures of trade secrets, allowing employees and former employees
wishing to do so to disclose non trade secret and nonprivileged information regarding securities fraud; discovery was
not involved. Securities Exchange Act of 1934, § 21D(b)(3)(B), as amended, 15 U.S.C.A. § 78u-4(b)(3)(B).
13 Cases that cite this headnote
Attorneys and Law Firms
*1127 Darren J. Robbins, San Diego, CA, John Frith Stewart, Segal, Stewart, Cutler, Lindsay, Janes & Ber, Louisville, KY,
Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach, San Francisco, CA, for Pipefitters Local 522 & 633 Pention Trust
Fund, Plaintiff.
Christopher T. Heffelfinger, Jennifer Sharon Abrams, Berman DeValerio Pease & Tabacco, P.C., San Francisco, CA, Jonathan
M. Plasse, Louis J. Gottlieb, Goodkind Labation Rudoff & Sucharow LLP, New York City, for Connecticut Retirement Plans
and Trust Funds, Lead Plaintiff.
Timothy J. Burke, Stull Stull & Brody, Los Angeles, CA, for Edward Cantamount, Consol Plaintiff.
Behram V. Parekh, Weiss & Yourman, Los Angeles, CA, for Jerold Sorensen, Consol Plaintiff.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
Darren J. Robbins, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Paul J. Geller, Cauley Geller Bowman &
Coates LLP, Boca Raton, FL, *1128 Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach, San Francisco, CA, for Joel
Abrams, Consol Plaintiff.
Alfred G. Yayes, Law Offices of Alfred G. Yates, Pittsburgh, PA, Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach,
San Francisco, CA, for Kimberly Saleik, Consol Plaintiff.
Darren J. Robbins, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Reed R. Kathrein, Milberg Weiss Bershad
Hynes & Lerach, San Francisco, CA, for Greg Brockwell, Consol Plaintiff.
Darren J. Robbins, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Marc S. Henzel, Law Offices of Marc
C. Henzel, Bala Cynwyd, PA, Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach, San Francisco, CA, for Gene
Dolzhansky, Consol Plaintiff.
Gregory M. Egleston, Bernstein Liebhard & Lifshitz LLP, New York City, Lionel Z. Glancy, Glancy Binkow LLP, Los Angeles,
CA, Mel E. Lifshitz, Bernstein Liebhard & Lifshitz, LLP, New York City, Michael M. Goldberg, Glancy & Binkow LLP, Los
Angeles, CA, for John F. Raymond, Pond Equities, Consol Plaintiffs.
Jennifer Sharon Abrams, Berman, De Valerio Pease Tabacco Burt & Pucillo, San Francisco, CA, Steven J. Toll, Cohen Milstein
Hausfeld & Toll, PLLC, Seattle, WA, for Gary T. Grabar, Consol Plaintiff.
Jacqueline Sailer, Rabin & Peckel LLP, New York City, Joseph J. Tabacco, Jr., Berman DeValerio Pease Tabacco Burt &
Pucillo, San Francisco, CA, for Hene Armour, Consol Plaintiff.
Behram V. Parekh, Weiss & Yourman, Los Angeles, CA, Jordan L. Lurie, Weiss & Yourman, Los Angeles, CA, Kevin J.
Yourman, Weiss & Yourman, Los Angeles, CA, Michael D. Braun, Stull, Stull & Brody, Los Angeles, CA, for Martin Hacker,
Consol Plaintiff.
Betsy C. Manifold, Francis A. Bottini, Jr., Francis M. Gregorek, Wolf Haldenstein Adler Freeman & Herz, San Diego, CA,
for L. A. Murphy, Consol Plaintiff.
Andrew Schatz, Schatz & Nobel, P.C., James Albert Caputo, Spector Roseman & Kodroff, PC, San Diego, CA, Patrick A.
Klingman, Schatz & Nobel P.C., Hartford, CT, for John Erisman, Harriet Goldstein, Consol Plaintiffs.
Michael Donovan, Donovan Searles, LLC, Paul J. Scarlato, Weinstein Kitchenoff Scarlato & Goldman, Philadelphia, PA, for
Saffi Omar, Consol Plaintiff.
Jules Brody, Stull Stull & Brody, New York City, Kevin J. Yourman, Weiss & Yourman, Los Angeles, CA, Michael D. Braun,
Timothy J. Burke, Stull, Stull & Brody, Los Angeles, CA, for Steven Cantamount., Consol Plaintiff.
Laurence D. King, Kaplan Fox & Kilsheimer LLP, San Francisco, CA, for Seymour Halpern, Consol Plaintiff.
John Emerson, The Emerson Firm, Houston, TX, for Victor Cape, Consol Plaintiff.
David R. Scott, James E. Miller, Scott & Scott LLC, Colchester, CT, for Rudolf Skubella, Consol Plaintiff.
Deborah R. Gross, Law Offices of Bernard M. Gross, PC, Philadelphia, PA, for Ralph Kirk, Consol Plaintiff.
Curtis V. Trinko, Law Offices of Curtis V. Trinko, New York City, for Warren C. Sterrett, Consol Plaintiff.
William B. Federman, Dreier Baritz & Federman, Oklahoma City, OK, for Larry Thomas, Consol Plaintiff.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
Elizabeth E. Leland, Juli F. Desper, Lynn Lincoln Sarko, Keller Rohrback L.L.P., Seattle, WA, for Grover Ellis, Linda Raybine,
Consol Plaintiffs.
Jeffrey Neiman, The Neiman Law Firm, Brooklyn, NY, Joseph P. Garland, *1129 Klein & Solomon LLP, Kenneth A. Elan,
Law Offices of Kenneth A. Elan, New York City, Lionel Z. Glancy, Glancy & Binkow LLP, Mel Urbach, Law Offices of Mel
Urbach, Jersey City, NJ, Michael M. Goldberg, Glancy & Binkow LLP, Los Angeles, CA, for Aaron Jungreis, Consol Plaintiff.
Barbara A. Podell, Savett Frutkin Podell & Ryan, P.C., Philadelphia, PA, Charles J. Piven, Law Offices of Charles J. Piven,
P.A., Baltimore, MD, Joseph M. Barton, Gold Bennett Cera & Sidener LLP, San Francisco, CA, Sherrie R. Savett, Berger
& Montague, P.C., Philadelphia, PA, Solomon B. Cera, Gold Bennett Cera & Sidener LLP, San Francisco, CA, for Leonard
Sollins, Consol Plaintiff.
Karen M. Hanson, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, for Michael Salter, Consol Plaintiff.
Bruce D. Oakes, Law Office of Bruce D. Oakes, St. Louis, MO, for Richard Reinsich, Consol Plaintiff.
Joseph M. Barton, Gold Bennett Cera & Sidener LLP, San Francisco, CA, Mark S. Willis, Matthew J. Ide, Cohen Milstein
Hausfeld & Toll PLLC, Washington, DC, for Houston Municipal Employees Pension System, Consol Plaintiff.
Joseph M. Barton, Gold Bennett Cera & Sidener LLP, Solomon B. Cera, San Francisco, CA, Mark S. Willis, Steven J. Toll,
Cohen Milstein Hausfeld & Toll, P.L.L.C., Seattle, WA, for Houston Municipal Employees Pension System, Consol Plaintiff.
Aaron H. Darsky, Schubert & Reed LLP, San Francisco, CA, Andrew J. Morganti, Donald J. Enright, Finkelstein Thompson
& Loughran, Washington, DC, for Paul Hesano, Consol Plaintiff.
Christopher J. Gray, Christopher Lovell, Lovell & Stewart, LLP, New York City, for Suresh Khanna, Consol Plaintiff.
Aaron H. Darsky, Schubert & Reed LLP, San Francisco, CA, Carol V. Gilden, Michael E. Moskovitz, Much Shelist
FreedDeneberg Ament & Rub, Chicago, IL, Juden Justice Reed, Robert C. Schubert, Willem F. Jonckheer, Schubert & Reed
LLP, San Francisco, CA, for Steven J. Greenfogel, Mike Gray, Consol Plaintiffs.
Juli F. Desper, Keller Rohrback LLP, Seattle, WA, Timothy J. Burke, Stull Stull & Brody, Los Angeles, CA, for Edwin Cancilla,
Movant.
Holly H. Tambling, Morrison & Foerster LLP, Terri Garland, Morrison & Foerster, San Francisco, CA, for JDS Uniphase
Corporation, Jozef Straus, Anthony R. Muller, Charles J. Abbe, Defendants.
Holly H. Tambling, Morrison & Foerster LLP, San Francisco, CA, Howard S. Caro, Michael L. Charlson, Heller Ehrman White
& McAuliffe LLP, Menlo Park, CA, Michael J. Shepard, Heller Ehrman White & McAuliffe LLP, San Francisco, CA, for
Kevin Kalkhoven, Defendant.
Holly H. Tambling, Morrison & Foerster LLP, San Francisco, CA, for Dan E. Pettit, M. Zita Cobb, Joseph Ip, Frederick
Leonberger, Michael C. Phillips, Donald R. Scrifes, Casimir S. Skrzypczak, Peter A. Guglielmi, Robert E. Enos, Bruce D. Day,
Martin A. Kaplan, Defendants.
Angela N. O'Rourke, Joseph A. Meckes, Mark C. Dosker, Squire Sanders & Depsey LLP, San Francisco, CA, Daniel L. Bockett,
Squire Sanders & Depsey LLP, Cleveland, OH, for The Furukawa Electric Co., Ltd., Defendant.
ORDER GRANTING IN PART LEAD PLAINTIFF'S MOTION TO LIMIT THE SCOPE OF
CONFIDENTIALITY AGREEMENTS SIGNED BY FORMER JDS UNIPHASE EMPLOYEES
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3
In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
LAPORTE, United States Magistrate Judge.
In this securities action, lead plaintiff Connecticut Retirement Plans and Trust *1130 Funds (“Connecticut”) moves to limit
the scope of confidentiality agreements signed by former employees of defendant JDS Uniphase Corporation (“JDSU”). For
the reasons set forth below, the motion is granted, with modifications.
I. Background
As lead plaintiff in this action, Connecticut has been investigating acts of JDSU and the individual defendants relating to alleged
artificial inflation of the price of JDSU securities during the putative class period of July 27, 1999 through July 26, 2001.
Investigators hired by lead counsel have identified and have spoken with numerous former employees of JDSU. Many of these
former employees have informed the investigators that they are willing to talk about relevant activities at JDSU during the class
period, but they believe they are unable to do so because of one or more confidentiality agreements that they entered into with
JDSU (or with companies later acquired by JDSU) at the time they were hired, at the time they were terminated, or both.
One such agreement is entitled “Employee Proprietary Information and Inventions Agreement.” (Gottlieb Decl., Ex. A.) That
agreement provides, in relevant part:
(a) Confidential Restrictions. I understand that, in the course of my work as an employee of the Company, I [have had and]
may have access to Proprietary Information (as defined below) concerning the Company. I acknowledge that the Company
has developed, compiled, and otherwise obtained, often at great expense, this information, which has great value to the
Company's business. I agree to hold in strict confidence and in trust for the sole benefit of the Company all Proprietary
Information and will not disclose any Proprietary Information, directly or indirectly, to anyone outside of the Company,
or use, copy, publish, summarize, or remove from Company premises such information (or remove from the premises any
other property of the Company) except (i) during my employment to the extent necessary to carry out my responsibilities
as en employee of the Company or (ii) after termination of my employment, as specifically authorized in writing by a duly
authorized officer of the Company. I further understand that the publication of any Proprietary Information through literature
or speeches must be approved in advance in writing by a duly authorized officer of the Company.
(b) Proprietary Information Defined. I understand that the term “Proprietary Information” in this Agreement means all
information and any idea in whatever form, tangible or intangible, whether disclosed to or learned or developed by me,
pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, or business associates,
unless (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in
my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is
disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information
(without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. I further
understand that the Company considers the following information to be included, without limitation, in the definition of
Proprietary Information: (A) notebooks, schematics, techniques, employee suggestions, development tools and processes,
computer printouts, computer programs, design drawings and manuals, and improvements; (B) information about costs,
profits, markets, and sales; (C) plans for future development and new product concepts; and (D) all documents, books, *1131
papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved
by any means, that have been or will be given to me by the Company (or any affiliate of it), as well as written or verbal
instructions or comments.
(Id. at 1.)
Another such agreement is entitled “Separation Agreement and General Release.” (Gottlieb Decl., Ex. B.) That agreement
provides, in relevant part:
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4
In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
You agree to return all Company property, including, without limitation, all books, manuals, records, reports, notes, contracts,
lists, blueprints, and other documents, or materials, or copies thereof, and equipment furnished to or prepared by you in
the course of or incident to your employment. You also acknowledge and reaffirm your continuing obligations under the
Proprietary Information Agreement you signed with the Company on original date of hire.
... You also agree that this Agreement is confidential and that you will not discuss it, or any of its terms, with anyone without
the Company's prior consent, except your spouse and to any legal or financial advisors for legitimate business reasons, or as
otherwise compelled by law. Further, you agree that you will not make or publish, either orally or in writing, any disparaging
statement regarding the Company, its employees, clients, vendors, or customers, or in any way impede or interfere with the
Company's customer relationships.
(Id. at 2.)
A third agreement is entitled “E-Tek Dynamics, Inc. Proprietary Information and Inventions Agreement.” (Macika Decl., Ex.
A.) That agreement provides, in relevant part:
a. Definition Employee acknowledges and agrees that Employee has obtained or may now or hereafter obtain from the
Company certain of the Company's confidential information, which confidential information includes but is not limited to
all of the Company's (i) past, present and future research, (ii) business, development and marketing plans, (iii) customer
lists and customer relationships, (iv) prices (except where publicly disclosed by the Company) and pricing strategies, (v)
secret inventions, processes, methods and specifications, (vi) compilations of information (including without limitation
studies, records, reports, drawings, memoranda, drafts and any other related information), (vii) trade secrets, (viii) product
development proposals, and (ix) other ideas, concepts, strategies, designs, suggestions and recommendations relating without
limitation to any of the foregoing or to any product developed or proposed to be developed by the Company or by the
Employee and/or others for the Company (collectively, the “Confidential Information”). Employee further acknowledges
and agrees that the Company is the owner of all such Confidential Information, any copies thereof, and of all copyright,
trade secret, patent, trademark and other intellectual or industrial property rights therein or associated therewith. Employee
understands and agrees that the unauthorized use or disclosure of the Confidential Information and any of the Company's
related intellectual and industrial property rights constitutes unfair competition, and promises not to engage in any unfair
competition with the Company during Employee's employment or at anytime thereafter.
b. Term. Employee agrees that for a period of five (5) years following either the disclosure to Employee of any of the
Company's Confidential Information or the termination of Employee's employment with the Company, whichever is last to
occur, Employee will not disclose *1132 said information or any portion thereof to any person, firm, corporation or other
entity, or make use of such information in any way without the Company's prior written consent, or reverse engineer, de-
compile, or disassemble any of the Company's products without such consent.
(Id. at 1.)
II. Discussion
Connecticut argues that the Court should limit the scope of these agreements and any other confidentiality agreements between
JDSU and its former employees so that they would not prohibit former JDS Uniphase employees from responding to questions
posed by investigators for Lead Plaintiff and/or by Lead Counsel related to the alleged securities fraud. No proposed order has
been submitted. Connecticut contends that to the extent JDSU seeks to use the agreements for purposes other than the protection
of trade secrets, the agreements are unduly broad and should be deemed void as against public policy. Alternatively, Connecticut
requests “that the Court: (a) grant plaintiffs permission to depose a limited number of former JDS Uniphase employees prior
to the Court's decision on the motion to dismiss, or (b) grant plaintiffs an adverse inference that, despite public disclosures to
the contrary, defendants were aware of the Company's sharply declining financial condition and results prior to their selling of
more than one billion dollars' worth of Company stock.” (Motion at 12.)
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5
In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
A. The Reform Act's ban on discovery during the pendency of a motion to dismiss does not bar plaintiffs' motion
JDSU argues that Connecticut's motion is an impermissible attempt to evade the statutory restrictions on early discovery that
are imposed by the Private Securities Litigation Reform Act of 1995 (“Reform Act”). 1 The purpose of the Reform Act was
“to restrict abuses in securities class-action litigation, including: (1) the practice of filing lawsuits against issuers of securities
in response to any significant change in stock price, regardless of defendants' culpability; (2) the targeting of “deep pocket”
defendants; (3) the abuse of the discovery process to coerce settlement; and (4) manipulation of clients by class action attorneys.”
SG Cowen Securities Corporation v. United States District Court for the Northern District of California, 189 F.3d 909, 911
(9th Cir.1999) (quoting In re Advanta Corp. Secs. Litig., 180 F.3d 525, 530-31 (3d Cir.1999)). The Reform Act instituted a
heightened pleading standard, and “mandated a stay of discovery during the pendency of a summary judgment or dismissal
motion.” Id.
1 The Court has also received an opposition brief from defendant The Furukawa Electric Co. Ltd. (“Furukawa”), which correctly notes
that they are not a party to the confidentiality agreements at issue, and thus Connecticut's references to “defendants” should not be
taken to include Furukawa.
Under the Reform Act, “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss,
unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent
undue prejudice to that party.” 15 U.S.C. § 78u-4(b)(3)(B). This section was “intended to prevent unnecessary imposition of
discovery costs on defendants.” SG Cowen, 189 F.3d at 911 (citing H.R. Conf. Rep. No. 104-369, 104th Cong. 1st Sess. at 32
(1995), reprinted in 1995 U.S.C.C.A.N. Sess. 731). The Ninth Circuit has held that the Reform Act's discovery stay provision
“clearly contemplates that ‘discovery should be permitted in securities class actions only after the court has sustained the legal
sufficiency of the complaint.’ ” Id. at 912 (quoting *1133 S.Rep. No. 104-98, at 14 (1995), reprinted in U.S.C.C.A.N. 693).
Thus, the Ninth Circuit has construed the Reform Act's discovery stay to apply not only during the pendency of a motion to
dismiss, but until the Court has sustained the legal sufficiency of the complaint.
Here, there is no motion to dismiss pending, but the time for responding to the consolidated complaint has not yet elapsed.
On September 12, Judge Wilken signed a stipulation granting defendants until December 9 to respond to the consolidated
complaint. JDSU's counsel indicated at the hearing that they are likely to file a motion to dismiss. As the Court has not yet
sustained the legal sufficiency of the consolidated complaint, plaintiffs are not yet entitled to take discovery. Accordingly, under
the Ninth Circuit's interpretation of the Reform Act in SG Cowen, plaintiffs are not yet entitled to take discovery. Id.
There are two exceptions to the Reform Act's discovery stay. Discovery is stayed “unless the courts finds upon the motion of
any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice.” With respect to the
first exception, there is not a hint of a suggestion in the plaintiff's papers that there is an urgent need to preserve evidence. As
for the second exception, the Ninth Circuit has held that a plaintiff's inability, without discovery, to obtain the facts needed
to meet the Reform Act's heightened pleading requirements is not the sort of “undue prejudice” contemplated by the Reform
Act. SG Cowen, 189 F.3d at 913.
The Act requires the trial court to dismiss the complaint if it fails to satisfy the Act's heightened pleading
standards. See § 78u-4(b)(3)(A). Thus, as a matter of law, failure to muster facts sufficient to meet the
Act's pleading requirements cannot constitute the requisite “undue prejudice” to the plaintiff justifying a
lift of the discovery stay under § 78u-4(b)(3)(B). To so hold would contravene the purpose of the Act's
heightened pleading standards.
Id. Thus, plaintiffs have not shown any justification for lifting the Reform Act's discovery stay to allow them to take depositions
before the Court rules on the upcoming motion to dismiss.
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By filing this motion, however, plaintiffs are not seeking discovery in the ordinary sense of the word. In essence, what the
plaintiffs are asking for is an order from the Court allowing former JDSU employees to speak voluntarily to plaintiffs' lead
counsel about certain topics without fear of breaching JDSU's confidentiality agreements. This is not discovery, because
plaintiffs are not using court process to require these third parties to provide information about the lawsuit. Instead, plaintiffs
are merely seeking an order that would allow former employees to speak voluntarily if they wish to do so.
JDSU argues, however, that Connecticut's motion falls within the scope of the Reform Act's stay of “all discovery and other
proceedings.” 15 U.S.C. § 78u-4(b)(3)(B) (emphasis added). In Medhekar v. United States District Court, 99 F.3d 325 (9th
Cir.1996), the Ninth Circuit was asked to determine whether initial disclosures are stayed under the Reform Act during the
pendency of a motion to dismiss. The court held that initial disclosures are discovery, and therefore are included in the Reform
Act's stay of discovery until the district court upholds the complaint. Id. The court then went on to hold that even if initial
disclosures are not the same as discovery, they are at a minimum included in the Reform Act's stay of “discovery and other
proceedings.” Id. In defining the term “other proceedings,” the Ninth Circuit held that “[g]iven the context and legislative
history of the Act, it *1134 appears that the term was intended to include litigation relating to discovery, which would certainly
include disclosures and would not, as real party fears, include all litigation activity in general.” Id.
Here, however, Connecticut does not seek discovery, but merely seeks a ruling on the scope of JDSU's confidentiality
agreements with its former employees, so that it may speak with former employees who wish to voluntarily cooperate with
Connecticut's investigation. Unlike discovery and initial disclosures, these interviews are not compelled by the Federal Rules
of Civil Procedure. Neither the former employees nor the defendants are required to participate in these interviews in any way.
The Court agrees with In re Tyco International Ltd. Securities Litigation, 2001 U.S. Dist. Lexis 819 (D.N.H.2001), in which the
district court declined to prohibit voluntary discussions between plaintiffs and third party witnesses because “[n]either logic,
tradition, the constitution nor the PSLRA prohibit interviewing prospective witnesses.” Id. at *8. In fact, the Reform Act's
heightened pleading standard encourages plaintiffs to do more investigation before filing a complaint, not less.
In re Flir Systems Inc. Securities Litigation, 2000 WL 33201904 (D.Or.2000) is also instructive. In Flir, the court was asked to
permit a deposition of Palmquist, a former employee of the defendant, during the discovery stay. The court distinguished SG
Cowen by noting that discovery was not being sought against the defendant, but against a third party, and thus the discovery
would not impose any significant burden on the defendant. Id. at *2. Because Palmquist had filed a civil complaint in state court
alleging accounting fraud by the defendant, the court found that the proposed discovery was not a mere fishing expedition.
Id. The court also noted that the only reason Palmquist would not talk to the plaintiffs voluntarily was that defendants were
asserting a confidentiality provision in Palmquist's employment contract. Id. at *3. The court found that the Reform Act “is a
shield intended to protect security-fraud defendants from costly discovery requirements, [citation omitted], not to be a sword
with which defendants can destroy the plaintiffs' ability to obtain information from third parties who are otherwise willing to
disclose it.” Id. It is questionable whether Flir 's holding that plaintiffs could depose Palmquist is consistent with SG Cowen.
The Court agrees, however, with the Flir court's conclusion that the Reform Act was not intended to provide defendants with
the means to bar all investigation into their conduct. The Reform Act was not intended to provide defendants with immunity
from suit, but, rather, was intended to protect defendants from the burdens of defending against frivolous litigation.
Plaintiffs' proposed interviews with former employees of JDSU do not impose any burden or cost on JDSU. The Court finds
that plaintiffs' proposed voluntary interviews with former employees do not fall within the scope of “discovery.” Accordingly,
the Reform Act's ban on discovery during the pendency of a motion to dismiss has no application to plaintiffs' motion.
B. The merits of plaintiffs' motion
Connecticut states that it has no interest in any information that could be construed as a trade secret, and is willing to discuss
reasonable measures to accommodate any legitimate concerns of JDSU with respect to use of the information obtained from
former employees in the course of its investigation. In Connecticut's reply brief, it provides examples of the types of questions
that it wishes to ask former employees, all of which relate directly to the *1135 allegations of wrongdoing that are at issue
in this case. None of these questions appears to implicate any trade secrets of JDSU, or any other information that JDSU can
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In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
legitimately claim is confidential. Thus, contrary to JDSU's attempts at misdirection, the issue is not whether JDSU can lawfully
enter into contracts with its employees to protect its confidential business information and trade secrets. Connecticut concedes
that such agreements are lawful. Instead, the issue is whether JDSU's confidentiality agreements can lawfully be used to prohibit
its former employees from providing whistleblower-type information about allegedly unlawful acts that occurred during their
employment with JDSU.
In Chambers v. Capital Cities/ABC, 159 F.R.D. 441 (S.D.N.Y.1995), an age discrimination case, plaintiffs' counsel wished to
interview former employees of the defendant. Plaintiffs sought an order authorizing them to inform those former employees that
they could safely disregard agreements with the defendant not to disclose various types of information. The court recognized
the legitimacy of agreements between employers and employees that are designed to protect dissemination of confidential
information. Id. at 444. The court also held, however, that:
It has been recognized that at least in some circumstances, agreements obtained by employers requiring
former employees to remain silent about underlying events leading up to disputes, or concerning
potentially illegal practices when approached by others can be harmful to the public's ability to rein in
improper behavior, and in some contexts ability of the United States to police violations of its laws.
Absent possible extraordinary circumstances not present here, it is against public policy for parties to
agree not to reveal, at least in the limited contexts of depositions or pre-deposition interviews concerning
litigation arising under federal law, facts relating to alleged or potential violations of such law.
Id. (footnote omitted). The Court also noted that “agreements restricting former employee revelation of events in the workplace
which are not privileged but may involve violations of federal law have the effect of ‘hindering’ implementation of the
‘Congressionally mandated duty to enforce the provisions' of federal statutes.” Id. (quoting EEOC v. United States Steel,
671 F. Supp. 351, 357 (E.D.Pa.1987)). The court declined to authorize plaintiffs' counsel to tell former employees that they
need not be concerned about the confidentiality agreements, however, because such a remedy “would make plaintiff's counsel
the decisionmaker concerning what confidentiality requirements were related to genuine trade secrets or other legitimately
privileged information, and which dealt with concealment of information relating to potential improprieties on the part of the
employee.” Id. at 445. Instead, it ordered the defendant to either (1) notify all former employees whom plaintiff wanted to
interview, in writing, that no unfavorable consequences for the employees would flow from providing information to plaintiffs'
counsel about specific subjects, or (2) accept an adverse inference that the information, if disclosed, would be contrary to
defendant's position. Id.
If applied to depositions or pre-deposition interviewing with respect to litigation under federal substantive
law, agreements calling or appearing to call for silence concerning matters relevant to alleged legal
violations, whether or not such agreements are sought to be enforced, inherently chill communication
relevant to the litigation. Where conduct of a party tends to preclude availability of information relevant
to a litigation and where no genuine basis for keeping that information confidential exists, *1136 a
court or factfinder may infer that the information, if disclosed, would be contrary to the position of the
party engaging in such conduct.
Id.
Another case from the Southern District of New York also held that “[d]isclosures of wrongdoing do not constitute revelations
of trade secrets which can be prohibited by agreements binding on former employees.” McGrane v. The Reader's Digest
Association, Inc., 822 F. Supp. 1044, 1052 (S.D.N.Y.1993). That court also noted that “[c]ourts are increasingly reluctant
to enforce secrecy arrangements where matters of substantial concern to the public-as distinct from trade secrets or other
legitimately confidential information-may be involved.” Id. at 1046.
Congress has also indicated a public policy in favor of whistleblowers in securities cases. The recently enacted Sarbanes-Oxley
Act of 2002 prohibits companies from discriminating against employees because of any lawful act by the employee to assist in
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In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
an investigation of securities fraud. 18 U.S.C. § 1514A(a)(1). At oral argument, defendants correctly pointed out that this section
only applied to investigations conducted by the government, or by the company itself. Nonetheless, the statute demonstrates
the public policy in favor of allowing even current employees to assist in securities fraud investigations. It certainly does not
establish a public policy in favor of allowing employers to muzzle their employees with overbroad confidentiality agreements.
Other than their argument that plaintiffs are attempting to circumvent the discovery stay provision of the Reform Act, JDSU
provides very few specific arguments against plaintiff's motion, relying instead primarily on straw-man arguments about the
validity of confidentiality agreements in general. JDSU argues that it used several types of agreements containing provisions
designed to protect its confidential and competitively sensitive business information, and that the form of those agreements
evolved over the years. (DeWees Decl. ¶¶ 10, 14.) JDSU does not state, however, that these agreements differed in any material
way from the sample agreements provided by Connecticut. In any event, the issue is not about the specific language of any
of these agreements, but whether JDSU can ever enforce these types of agreements against former employees to prevent them
from providing non-tradesecret, unprivileged information about JDSU's allegedly illegal activities.
JDSU does point to Patton v. Cox, 276 F.3d 493 (9th Cir.2002), however, which arguably provides some support to JDSU's
position. In that case, a doctor, Cox, conducted a court-ordered psychological examination of the plaintiff, Patton, allegedly
pursuant to an oral agreement with Patton to keep the results of the examination confidential. Id. at 494. Patton and his former
wife were involved in a bitter child custody dispute, and Patton's teenage sister-in-law had alleged that Patton had engaged in
improper sexual conduct with her. Id. at 494, 501. Patton was also a doctor, and as a result of his sister-in-law's allegations,
the Arizona Board of Medical Examiners (“BOMEX”) filed a complaint against him for unprofessional conduct and unfitness
to practice medicine. Id. at 494. Dr. Cox voluntarily testified at the BOMEX hearing, and revealed that as a result of his
examination of Patton, he believed that Patton was a pedophile and a danger to children. Id. at 495. Patton then sued Dr. Cox
for breach of contract. Id.
The district court granted Dr. Cox's motion to dismiss on the ground that absolute witness immunity precluded any liability
arising from Dr. Cox's testimony at a quasi-judicial hearing. Id. The Ninth Circuit *1137 reversed, applying Arizona law. The
Court recognized that Dr. Cox served the public interest by bringing to light the potential danger facing Patton's young, female
patients. Id. at 498. Nonetheless, the court concluded that:
applying our perception of Arizona law, we hold that witness immunity does not bar an action for breach of contract when,
as in this case, the witness participated voluntarily in a quasi-judicial proceeding. This ruling will not hinder “the resolution
of disputes and the ascertainment of truth,” [citation omitted] because witnesses can be compelled to testify as needed, which
would then trigger immunity protection.
Id. at 500. The Ninth Circuit noted that because Dr. Cox voluntarily entered into the confidentiality agreement, “[h]e chose to
limit his ability to share information he obtained about Dr. Patton, and he was not at liberty to breach his obligation even if he
felt it was in the public's best interest to do so.” Id.
The Ninth Circuit did not discuss whether such agreements would be unenforceable in violation of public policy, and thus Patton
does not directly conflict with Chambers. Nonetheless, by holding that the public interest did not trump Cox's confidentiality
agreement with Patton, a reasonable argument could be made that the Ninth Circuit would not find the confidentiality agreements
at issue here to be in violation of public policy, at least under Arizona law. This Court, of course, is applying federal law. Patton
is also distinguishable because, unlike the instant case, Patton involved disclosure of private medical information, which is
at the core of an individual's right to privacy. See id. (“we cannot help but consider the reasonable expectation of Dr. Patton
that this extremely private information would not be disseminated beyond the scope of the Utah court order.”) Highly personal
medical information is the sort of information, like trade secrets, that a party unquestionably has the right to ask another party
to keep confidential.
Here, however, JDSU's confidentiality agreements are so broad that they cover information that cannot possibly be considered
confidential. To the extent that those agreements preclude former employees from assisting in investigations of wrongdoing
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In re JDS Uniphase Corp. Securities Litigation, 238 F. Supp. 2d 1127 (2002)
that have nothing to do with trade secrets or other confidential business information, they conflict with the public policy in
favor of allowing even current employees to assist in securities fraud investigations.
In addition, one of the agreements, entitled “Separation Agreement and General Release,” bars former employees who signed it
from making “any disparaging statement” about the company, its clients, vendors or customers. Unlike the agreement at issue in
Patton, which the court found was voluntarily entered into, plaintiffs stated at the hearing that this agreement was imposed on a
former employee in a mass layoff as a condition of receiving severance benefits. Defense counsel acknowledged that plaintiffs'
characterization may be correct. To the extent that this agreement can be read to prohibit an employee from providing any
information about any wrongdoing by JDSU, it is plainly unenforceable.
Accordingly, the Court finds that Chambers is more applicable here than Patton. The Court agrees with the Chambers court
that JDSU cannot use its confidentiality agreements to chill former employees from voluntarily participating in legitimate
investigations into alleged wrongdoing by JDSU. JDSU unquestionably has a legitimate interest in preventing dissemination of
trade secrets and confidential business information, however. In order to properly balance these competing interests between
Connecticut and JDSU, the Court *1138 also agrees with the Chambers court that the appropriate remedy is not to allow
plaintiffs to be the sole arbiters of whether their investigation avoids infringing on legitimate confidentiality concerns.
The Court finds that the procedural restrictions imposed in Chambers are unduly cumbersome and elaborate, however. Rather
than requiring the defendants to provide written notice to all former employees that plaintiff wished to interview, or accept an
adverse inference, as in Chambers, the Court will simply rule that answering the questions set forth in plaintiffs' reply brief
and the additional question requested at the hearing do not violate JDSU's confidentiality agreements. In addition, the Court
will require the parties to enter into a protective order providing that any information plaintiffs learn during the course of these
interviews may be used only for purposes of this litigation. This will be far less intimidating to the former employee, and far
less intrusive to the plaintiffs' investigation, than requiring the plaintiffs to provide JDSU with the name of each person they
wish to interview and requiring JDSU's counsel to attend each interview. By issuing this order restricting the interviews to
the questions that plaintiffs have requested, and to narrow followup questions on those topics, the risk that the interviews will
expand into areas of legitimate concern to JDSU is minimized.
III. Conclusion
For the reasons set forth above, the Court grants Connecticut's motion to limit the scope of confidentiality agreements signed
by former JDSU employees, with the following restrictions:
1. All former employees of JDSU may answer the following questions, and any followup questions on the same topic, without
fear of breaching any confidentiality agreement with JDSU:
a. At what time during the Class Period did you become aware of a significant downturn in JDSU sales or sale/revenue
projections?
b. Do you have any reason to believe that JDSU managers, officers or directors became aware of that downtown in sales or
projections at any time during the Class Period?
c. At what time during the Class Period did you become aware of a significant decrease in purchasing (including cancellation
or modification or contracts) by JDSU?
d. Do you have any reason to believe that JDSU managers, officers or directors became aware of that downturn in purchasing
(or cancellation or modification of contracts) by JDSU?
e. At what time during the Class Period did you become aware of a downturn in JDSU's production needs, e.g., eliminating
work shifts, reducing overtime, instituting a hiring freeze?
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f. At what time during the Class Period did you become aware of significant decrease in JDSU inventory?
g. Do you have any reason to believe that JDSU managers, officers or directors became aware of that inventory increase at
any time during the Class Period?
h. At what time during the Class Period did you become aware of any inventory obsolescence problems at JDSU?
i. Do you have any reason to believe that JDSU managers, officers or directors became aware of that inventory obsolescence
problem at any time during the Class Period?
j. Are you aware of any reason why any JDSU managers, officers or directors sold their JDSU stock during the Class Period?
*1139 2. In answering these questions, former JDSU employees should not disclose any information protected by the attorney-
client privilege, nor should they disclose any confidential business methods used by JDSU.
3. Any information plaintiffs learn during the course of their interviews with former JDSU employees may be used only for
purposes of this litigation.
4. Plaintiffs have not demonstrated that they are entitled to take any depositions prior to the Court's decision on the upcoming
motion to dismiss.
5. Plaintiffs have not shown that they are entitled to an inference that, despite public disclosures to the contrary, defendants
were aware of JDSU's sharply declining financial condition and results prior to their selling of more than one billion dollars'
worth of Company stock.
IT IS SO ORDERED.
All Citations
238 F. Supp. 2d 1127End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 11
U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
2015 WL 3504525Only the Westlaw citation is currently available.
United States District Court,
S.D. Mississippi,
Southern Division.
UNITED STATES ex rel. HOLMES, Plaintiff
v.
NORTHROP GRUMMAN CORPORATION and Huntington Ingalls Incorporated, Defendants.
Civil No. 1:13cv85–HSO–RHW. | Signed June 3, 2015.
Attorneys and Law Firms
Donald C. Holmes, Greensboro, MD, pro se.
David H. Fulcher–Federal Gov, U.S. Attorney's Office, Jackson, MS, Elizabeth Anne Strawn, U.S. Department of Justice,
Washington, DC, for Plaintiff.
Richard P. Salloum, Franke & Salloum, PLLC, Gulfport, MS, Angela R. Jones–PHV, David F. Taylor–PHV, Perkins Coie, LLP,
Seattle, WA, Jeffrey N. Eisenstein–PHV, William Hartmann Young–PHV, Perkins Coie, LLP, Washington, DC, for Defendant.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' [151] MOTION TO
DISQUALIFY RELATOR AND DISMISS FIRST AMENDED COMPLAINT AND DENYING
AS MOOT DEFENDANTS' [102] MOTION TO DISMISS AMENDED COMPLAINT
HALIL SULEYMAN OZERDEN, District Judge.
*1 BEFORE THE COURT is the Motion to Disqualify Relator and Dismiss First Amended Complaint [151] filed by
Defendants Northrop Grumman Corporation and Huntington Ingalls Incorporated. Relator Donald Holmes has filed a Response
[156], and Defendants have filed a Reply [157]. Also before the Court is the Motion to Dismiss Amended Complaint [102]
filed by Defendants, Relator's Response [117], and Defendants' Reply [103]. 1 Having considered the parties' submissions,
relevant legal authorities, and the record, the Court is of the opinion that the Motion to Disqualify Relator and Dismiss First
Amended Complaint [151] should be granted, Relator Donald Holmes should be disqualified from serving as a relator based on
the totality of the circumstances surrounding his conduct as a relator, and this civil case should be dismissed without prejudice
to any rights of the United States government. The Court further finds that the Motion to Dismiss Amended Complaint [102]
should be denied as moot.
1 This case was transferred from the United States District Court for the District of Columbia to this Court by Order [73] dated February
28, 2013. The Motion to Dismiss Amended Complaint [102], Response [117], and Reply [103], were each filed before the case was
transferred and were refiled on this Court's docket following the transfer.
I. BACKGROUND
Hurricane Katrina made landfall on the Mississippi Gulf Coast on August 29, 2005. As a result of the damages caused by the
hurricane, Northrop Grumman Corporation (“NGC”) made claims on an insurance policy issued to a subsidiary of NGC by
Munich Re, an insurance company represented by attorney Gerald Fisher (“Fisher”). First Am. Compl. 5[43]; Aff. of Relator
Gerald Fisher (“Fisher Aff.”) ¶ 7 [11 (Attach.A), 23–24 of 86]. To obtain documents from NGC during the adjustment process,
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U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
Fisher, on behalf Munich Re, entered into a confidentiality agreement with NGC dated October 24, 2006, governing the use of
documents produced by NGC. Fisher Aff. ¶ 7 [11 (Attach.“A”), 26 of 86]; Confidentiality Agreement [11, 56 of 85].
By April 2010, NGC and Munich Re had commenced arbitration proceedings in London, England, to resolve coverage disputes
which had arisen related to NGC's claim for insurance benefits (“UK Arbitration”). Fisher, along with attorney Donald Holmes
(“Holmes”), represented Munich Re in the UK Arbitration. Mem. in Supp. of Relators' Mot. to Allow Them to Provide
Information to Assist the [DOJ] in Its Investigation 7 [11, 12 of 86] (“Relators' Mot. to Assist the DOJ”). Fisher and Holmes filed
a complaint on behalf of Munich Re on April 6, 2010, in the United States District Court for the District of Columbia seeking to
obtain documents from the United States Navy (“the Navy”) purportedly for use in the UK Arbitration. Compl. 1[1], Case No.
1:10–cv–00551–JEB (D.D.C.) (the “Touhy Action”). On June 2, 2010, while both the UK Arbitration and the Touhy Action
remained pending, Fisher and Holmes filed the Complaint [1] in this case under seal in the United States District Court for the
District of Columbia against NGC, Northrop Grumman Shipbuilding Corporation, and Northrop Grumman Ship Systems, Inc.
(collectively, “Northrop Grumman”), under the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729–3733 (“FCA”). 2
The United States has declined to intervene in this case. Notice of Election to Decline Intervention 1[20].
2 “The FCA's qui tam provisions permit a private individual, as a relator, to sue on the United States' behalf to recover for false claims
for payment submitted to the Government.” United States ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App'x 890, 892
(5th Cir.2013).
*2 On August 18, 2012, prior to the transfer of the case, Fisher apparently decided to withdraw from serving as a relator, and
Holmes filed the operative First Amended Complaint [43] in this case. Holmes alleges that “[t]his case is a civil false claims
action brought on behalf of the United States by [Holmes], who has properly gained access to documents and information
showing that the U.S. Government has been defrauded in the amount of not less than $835 million by the unlawful actions of”
Northrop Grumman. First Am. Compl. 5[43]. Holmes asserts that prior to Hurricane Katrina's landfall, Northrop Grumman was
behind “in its budget in the performance” of various shipbuilding contracts with the Navy. Id. at 6. Holmes notes that “[w]ithin
months after Hurricane Katrina ..., Congress appropriated $2.3 billion to the Navy in restricted emergency shipbuilding and
conversion funding [ ] (hereinafter ‘the Katrina Money’)....” Id. at 7. According to Holmes, the Katrina Money “was to be
used only for ‘the consequences' of” Hurricane Katrina, but Northrop Grumman filed false claims with the Navy by seeking
reimbursement for unrelated cost overruns which it experienced before and after Hurricane Katrina, thus allowing Northrop
Grumman to avoid the consequences of its alleged inefficiency and mistakes. Id. at 7–11.
On the basis of these allegations, Holmes advances claims for violations of the FCA. Am. Compl. 15–24[1]. Holmes maintains
that Northrop Grumman violated the FCA by misusing restricted Congressional funding to cover cost overruns on contracts
for which Northrop Grumman was financially responsible and by using “[a]rtifices and [d]evices” to deceive the Navy into
paying for Northrop Grumman's non-Katrina related cost overruns. Id. at 15–20. Holmes further asserts that Northrop Grumman
violated the FCA by providing untruthful information to the Navy and Congress to prevent them from making accurate
procurement decisions, to conceal the status of contract performance related to seven shipbuilding contracts, and to prevent
discovery of the fact that Northrop Grumman was not keeping separate accounting records which segregated Hurricane Katrina's
monetary consequences from unrelated costs. Id. at 20–23.
Northrop Grumman now moves to disqualify Holmes from serving as a relator and to dismiss the First Amended Complaint
based on alleged ethical violations committed by Holmes. Mem. Br. in Supp. of Mot. to Disqualify Relator and Dismiss First
Am. Compl. 1[153]. According to Northrop Grumman, Holmes has breached his ethical duties of obedience to court orders,
candor and honesty to the courts and to Northrop Grumman, respect for Northrop Grumman's legal rights, and loyalty to his
former client, Munich Re. Id. at 12–13. Northrop Grumman maintains that Holmes' conduct was not authorized or required by
either the FCA or misprision of felony statute, 18 U.S.C. § 4. Id. at 19–24.
Holmes offers excerpts from various prior filings which he asserts address Northrop Grumman's Motion [151]. Resp. in Opp'n
to Defs.' Mot. to Disqualify and Dismiss 2–9[156]. Holmes claims that “[f]ederal courts have repeatedly held that confidentiality
agreements are not a bar to the disclosure of fraud to the government” and posits that such holdings are “directly applicable”
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U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
here. Id. at 3–5. Holmes asserts that Munich Re had no objection to his decision to report Northrop Grumman's alleged fraud to
the United States Department of Justice (“DOJ”). Id. at 8–9. Holmes also acknowledges that he violated the terms of a Stipulated
Protective Order issued by the Court in the Touhy Action and notes that “with 20/20 hindsight, he should have handled the
situation differently[,]” but Holmes appears to argue the Order is not entitled to be accorded the weight of a court order. Id.
at 10–11. Holmes also posits that the ethical nature of his conduct should not be considered because the FCA preempts the
ethical rules governing his conduct. Id.
II. DISCUSSION
A. Legal Standard
*3 In allowing an attorney to serve as a relator and finding the attorney was nevertheless still required to abide by his ethical
obligations as an attorney, one court has reasoned that “[w]hile the [FCA] permits any person ... to bring a qui tam suit, it
does not authorize that person to violate state laws in the process.” United States ex rel. Doe v. X Corp. (“X Corp. II”), 862
F. Supp. 1502, 1507 (E.D.Va.1994). Although attorneys may act as relators pro se, non-attorneys are prohibited from proceeding
as relators pro se. See, e.g., Timson v. Sampson, 518 F.3d 870, 873–74 (11th Cir.2008) (finding that a non-attorney was “not
[authorized to] maintain a qui tam suit under the FCA as a pro se relator”). A primary policy reason for this prohibition is that
“[l]awyers are bound to ethical constraints to which non-lawyers may have no knowledge and no obligation[, and v]iolation
of these fundamental canons may result in serious consequences to the errant attorney.” United States ex rel. Schwartz v. TRW
Inc., 118 F. Supp. 2d 991, 995 (C.D.Cal.2000). Furthermore, “[a]n attorney ‘has an obligation which he owes to the court[ ... ],
and he owes a public duty to aid in the administration of justice, to uphold the dignity of the court and respect its authority.’ “ Id.
(quoting United States v. Onan, 190 F.2d 1, 6–7 (8th Cir.1951)). These ethical obligations and the consequences of breaching
them remain applicable to attorneys proceeding as relators pro se. See X–Corp. II, 862 F.Supp. at 1507 (“[S]tate statutes and
rules that regulate an attorney's disclosure of client confidences” apply in the context of a qui tam action, and attorneys serving
as relators therefore have “significant incentives ... to abide by their” state law obligations in light of this fact and “given the
existence of state disciplinary powers over attorneys....”). Because Holmes is permitted to act as a relator pro se in this matter
due to his status as an attorney, the Court will evaluate whether he should be disqualified from serving as a relator by reference
to the rules of professional conduct governing Holmes as an attorney.
An attorney's breach of his ethical obligations may be raised in a motion to disqualify counsel, which is a “substantive
motion[ ] ... determined by applying standards developed under federal law .” In re Am. Airlines, 972 F.2d 605, 610 (5th
Cir.1992) (citations omitted) (emphasis removed). Generally, when considering a motion to disqualify counsel in a civil case,
the Fifth Circuit Court of Appeals “consider[s] the motion governed by the ethical rules announced by the national profession
in the light of the public interest and the litigants' rights.” In re Dresser Industries, Inc., 972 F.2d 540, 543 (5th Cir.1992).
While “the relevant local and national ethical canons provide a useful guide for adjudicating motions to disqualify, they are not
controlling.” F.D.I.C. v. U.S. Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir.1995) (citation omitted). “A court must take into account
not only the various ethical precepts adopted by the profession but also the social interests at stake[,]” including whether the
lawyer's conduct “has (1) the appearance of impropriety in general, or (2) a possibility that a specific impropriety will occur, and
(3) the likelihood of public suspicion from the impropriety outweighs any social interests which will be served by the lawyer's
continued participation in the case.” Id. (quoting Dresser, 972 F.2d at 544) (internal marks omitted). Disqualification of counsel
“is a sanction that must not be imposed cavalierly[,]” and the record must reveal “at least a reasonable possibility that some
identifiable impropriety actually occurred [ ]” before disqualification will be justified. Id. at 1316.
B. Analysis
1. The Court Will Consider the Ethical Nature of Holmes' Conduct
*4 Insofar as Holmes takes the position that the ethical nature of his conduct is not relevant because the FCA preempts the
ethical rules governing his conduct, this argument is not persuasive. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss
10–11[156]. Courts addressing the issue of whether the FCA preempts state ethics rules have declined to find preemption. In
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U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
United States v. Quest Diagnostics Inc., the Second Circuit Court of Appeals refused to conclude that the FCA preempts the
State of New York's ethical rules governing attorneys' conduct. 734 F.3d 154, 163 (2d Cir.2013) (“Nothing in the [FCA] evinces
a clear legislative intent to preempt state statutes and rules that regulate an attorney's disclosure of client confidences.”) (citing
Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)). Holmes' position is further refuted by the fact that non-lawyers are
prohibited from proceeding pro se as qui tam relators while lawyers may proceed pro se as qui tam relators due to the ethical
obligations to which lawyers remain bound and may be subjected to discipline for violating. See Schwartz, 118 F.Supp.2d at
995 (quoting Onan, 190 F.2d at 6–7). Accordingly, the Court rejects Holmes' invitation to ignore the ethical implications of
his conduct.
2. Holmes Has Breached Various Standards of Ethics
In assessing the entirety of Holmes' conduct related to this case, the Court must identify the applicable “local and national
ethical” standards. See U.S. Fire, 50 F.3d at 1314 (citation omitted). Much of Holmes' conduct occurred while the case was
pending in the United States District Court for the District of Columbia. This Court therefore will look to “the Rules of
Professional Conduct[, ]as adopted by the District of Columbia Court of Appeals” (“DCRPC”). D.D.C. Loc. R. 83.15(a).
The Local Uniform Civil Rules for the Northern and Southern Districts of Mississippi provide that the Mississippi Rules of
Professional Conduct (“MRPC”) govern litigants practicing in this Court, and thus the Court will also consider the MRPC
given the transfer of the case to this Court. See L.U. Civ. R. 83.1(c). In addition, the Fifth Circuit recognizes the American Bar
Association's Model Rules of Professional Conduct (“ABA Model Rules”) as “the national standards utilized by this circuit
in ruling on disqualification motions.” Am. Airlines, 972 F.2d at 610. Because of the unique procedural history of this case,
the Court will consider the totality of Holmes' conduct related to this case in light of the ethical standards set forth in both the
DCRPC and MRPC, as well as those of the ABA Model Rules.
a. Holmes Violated His Duty of Candor
The record reveals that Holmes has violated his ethical duty to act with candor. “A lawyer shall not knowingly: (1) make a
false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the
tribunal by the lawyer....” ABA Model Rule 3.3(a)(1); see also DCRPC 3.3(a)(1) (same); MRPC 3.3(a)(1) (“A lawyer shall
not knowingly ... make a false statement of material fact or law to a tribunal....”). Additionally, “[i]n the course of representing
a client a lawyer shall not knowingly[ ] ... make a false statement of material fact or law to a third person....” ABA Model
Rule 4.1(a); see also DCRPC 4.1(a) (same); MRPC 4.1(a) (same). “It is professional misconduct for a lawyer to ... engage in
conduct involving dishonesty, fraud, deceit or misrepresentation....” ABA Model Rule 8.4(c); DCRPC 8.4(c) (same); MRPC
8.4(c) (same).
*5 Holmes and Fisher filed the Touhy Action on April 6, 2010, pursuant, in part, to 28 U.S.C. § 1782, 3 and represented
to the Court that Munich Re sought documents from the Navy “in aid of” the UK Arbitration. 4 Com pl. 1–4[1], Case No.
1:10–cv–00551–JEB (D.D.C.). Northrop Grumman and Munich Re, through Holmes and Fisher, subsequently submitted a
Stipulated Protective Order, the terms of which were agreed upon by Munich Re, Northrop Grumman, and the Navy, which
specifically recited that Munich Re “has a need for the documents being produced by the U.S. Navy for the purposes of the UK
Arbitration[,] ... [and Munich Re] is agreeable to entering into this protective order and protecting the documents [produced by
the Navy] appropriately....” Stipulated Protective Order 3 [19–1], Case No. 1:10–cv–551–JEB (D.D.C.). The parties' Stipulated
Protective Order was entered on June 24, 2010, as an Order of the United States District Court for the District of Columbia.
Order 1, Ex. A[20], Case No. 1:10–cv–00551–JEB (D.D.C.).
3 Section 1782 allows parties to apply for and obtain an order that the Navy be required “to produce a document ... for use in a
proceeding in a foreign ... tribunal.” 28 U.S.C. § 1782(a).
4 Munich Re, through Holmes and Fisher, filed an Amended Complaint [21] on May 3, 2010, but the allegations in the Amended
Complaint relevant to this Court's analysis do not differ from those of the Complaint. See Am. Compl. 7, 11[21], Case No. 1:10–cv–
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4
U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
551–JEB (D.D.C.). In fact, Holmes and Fisher, on behalf of Munich Re, further alleged that Munich Re's “exercise of rights provided
by 28 U.S.C. § 1782 are in aid of private foreign arbitration only....” Am. Compl. 11[21].
Holmes points out that this qui tam case was not filed until June 2, 2010, nearly two months after he and Fisher filed the Touhy
Action, and Holmes appears to suggest that there cannot be a connection between documents sought from the Navy in the
previously filed Touhy Action and this qui tam case. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss 7[156]. Holmes,
however, acknowledges in the First Amended Complaint [43] he filed in this case that he had “gained access to documents
and information showing that the U.S. Government has been defrauded” and explicitly based his claim on “documentation
submitted by Northrop Grumman to the Navy....” Am. Compl. 5, 6, 10, 11[43]. 5 These allegations reveal Holmes' clear intent
to support his qui tam claims in this case with the documents he obtained from the Navy through the Touhy Action purportedly
for use in the UK Arbitration. This calls into question the veracity of Holmes' statements made not only to the court in the Touhy
Action as to why he sought the documents but also to this Court insofar as Holmes alleges he has “properly gained access to”
the documents upon which the First Amended Complaint is based. See, e .g., Am. Compl. 11[21], Case No. 1:10–cv–551–JEB
(D.D.C.) (alleging, through Holmes and Fisher, that Munich Re's “exercise of rights provided by 28 U.S.C. § 1782 are in aid of
private foreign arbitration only”); Ex. “A” to Jt. Mot. to Enter Protective Order 3 [19–1], Case No. 1:10–cv–551–JEB (D.D.C.)
(submitting proposed stipulated protective order in which Munich Re, through Holmes and Fisher, recites that it “is agreeable
to entering into this protective order and protecting the documents [produced by the Navy] appropriately”); First Am. Compl.
5[43]. There is no evidence in the record that Holmes ever attempted to correct these statements. As a result, the Court finds
that Holmes violated his duty of candor by obtaining documents from the Navy through the Touhy Action without disclosing
his intent to use the documents to support his claims in this qui tam case.
5 Holmes and Fisher even predicted in the original Complaint [1] that “[u]pon review of documents submitted by Northrop Grumman
to the [Navy], ... those records will show that Northrop Grumman also improperly used Katrina Money for pre-Katrina overruns....”
Compl. 8[1]. Though slightly rephrased, this allegation also appears in the First Amended Complaint [43] filed by Holmes. See First
Am. Compl. 11[43] (“[Holmes] alleges that the records submitted by Northrop Grumman to the Naval Sea Systems Command in
support of its claims for payment show that Northrop Grumman also improperly used Katrina Money for pre-Katrina overruns to
its subcontracts and material costs.”).
b. Holmes and His Duty of Loyalty to Munich Re
*6 Unless the client gives informed consent, “a lawyer shall not represent a client if the representation involves a concurrent
conflict of interest.” ABA Model Rule 1.7(a). “A concurrent conflict of interest exists if[ ] ... there is a significant risk that
the representation of one or more clients will be materially limited by the lawyer's responsibilities to ... a third person or by a
personal interest of the lawyer.” Id. at 1.7(a)(2); see also DCRPC 1.7(b)(4) (“[A] lawyer shall not represent a client with respect
to a matter if [ ] ... [t]he lawyer's professional judgment on behalf of the client will be or reasonably may be adversely affected
by the lawyer's responsibilities to or interests in a third party or the lawyer's own financial, business, property, or personal
interests.”); MRPC 1 .7(b) (“A lawyer shall not represent a client if the representation of that client may be materially limited
by the lawyer's responsibilities ... to a third person[ ] or by the lawyer's own interests unless ... the client has given knowing
and informed consent after consultation.”).
In the UK Arbitration, Holmes and Fisher, on Munich Re's behalf, took the position that Munich Re did not owe compensation
to NGC for certain losses related to Hurricane Katrina because the Navy had previously paid Defendants to compensate for
those losses. See United States' Consolidated Resp. to Relators' Ex Parte Motions 6–7[14]. However, at the same time he was
representing Munich Re in the UK Arbitration Holmes filed the Complaint [1] and First Amended Complaint [43], in which he
alleged that the Navy should have never paid funds to Defendants and that it was Defendants' fraudulent conduct which duped
the Navy into paying the funds. Id. Holmes has not sufficiently disputed this characterization of the conflicting positions he
took as counsel for Munich Re, on the one hand, and as a relator in this case seeking over 2.5 billion dollars, 6 on the other.
These positions reflect a conflict between Holmes' personal interest as a relator, arguing that the Navy's payments to Northrop
Grumman were invalid, and Holmes' interest as counsel to Munich Re, advocating the validity of those same payments to
alleviate Munich Re's responsibilities to Northrop Grumman. Consequently, the record supports a finding that there was at
least “a significant risk” that Holmes' representation of Munich Re was “materially limited by” Holmes' “personal interest”
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in pursing this qui tam case, such that Holmes' conduct created a concurrent conflict of interest jeopardizing his obligation of
loyalty to Munich Re. See ABA Model Rule 1.7(a).
6 Holmes alleges that the United States was defrauded in the amount of “not less than $835 million” and “prays ... for treble that sum
or $2.505 billion” dollars. First Am. Compl. 23[43].
Faced with this conflict, there is no evidence that Holmes obtained any kind of “informed consent” from Munich Re to
simultaneously represent Munich Re while prosecuting this qui tam action. See ABA Model Rule 1.7 (prohibiting concurrent
conflicts of interest but making an exception where the attorney obtains affected clients' informed consent). “ ‘Informed consent’
denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and
explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” ABA Model
Rules 1 .0(e); see also DCRPC 1.0(e) (same); MRPC, Terminology (“ ‘Informed consent’ denotes voluntary acceptance and
agreement by a person of a proposed course of conduct after adequate information has been imparted to the person that allows
the person to arrive at a decision.”). The Comment to ABA Model Rule 1.0(e) notes that informed consent is often required
“before ... pursuing a course of conduct.” Comment [6], ABA Model Rule 1.0 (citing ABA Model Rules 1.2(c), 1.6(a) and
1.7(b)). The Comment also states
*7 [t]he lawyer must make reasonable efforts to ensure that the client or other person possesses
information reasonably adequate to make an informed decision. Ordinarily, this will require
communication that includes a disclosure of the facts and circumstances giving rise to the situation, any
explanation reasonably necessary to inform the client or other person of the material advantages and
disadvantages of the proposed course of conduct and a discussion of the client's or other person's options
and alternatives.
Comment [6], ABA Model Rule 1.0.
The record does not reveal facts supporting a finding that Holmes obtained Munich Re's informed consent at any point in time
to engage in a course of conduct which created a concurrent conflict of interest between Holmes' duties to Munich Re and his
own personal interests in this case. Holmes suggests that he obtained consent from Munich Re, but the timing of Munich Re's
“consent” is questionable and there is no evidence the consent was “informed.” Specifically, Holmes contends
[the DOJ] directly asked the client, Munich Re, orally and in writing, specifically whether it had any
concerns about its counsel disclosing the information of the fraud to the DOJ. Munich Re specifically
responded in writing that it had no objection and did not participate in that decision, but respected
counsel's view of their obligations to disclose to [the] DOJ under U.S. law.
Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss 9[156]. Holmes does not identify when he discussed his perceived
legal obligations with Munich Re, the content of those discussions, or whether Munich Re had the benefit of independent
counsel. See id.; see also Relators' Mot. to Assist the DOJ 10 [11, 12 of 86]; Holmes Aff. 6–7 [11, 41–42 of 86] (asserting
that Munich Re consented to Holmes' actions without any indication of what, if any, information was provided to Munich Re,
when that information was provided, or on what basis Munich Re made its alleged decision to consent). Holmes thus has not
demonstrated facts supporting a finding that Holmes had Munich Re's informed consent to engage in conduct that involved a
concurrent conflict of interest, and as such, Holmes breached his duty of loyalty to his client, Munich Re, in order to bolster
his position in this case.
c. Duty to Retain Confidentiality of Information
The ABA Model Rules, the MRPC, and the DCRPC each require attorneys to keep information relating to the representation
of a client confidential. “A lawyer shall not reveal information relating to the representation of a client unless the client
gives informed consent[ ]....” ABA Model Rule 1.6(a); see also MRPC 1.6(a) (same); DCRPC 1.6(a) (”[A] lawyer shall not
knowingly: ... reveal a confidence or secret of the lawyer's client[,] ... use a confidence or secret of the lawyer's client to the
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U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
disadvantage of the client[, or] ... use a confidence or secret of the lawyer's client for the advantage of the lawyer or of a third
person....). 7
7 Rule 1.6(b) of the DCRPC defines “confidence” and “secret” as follows: “ ‘Confidence’ refers to information protected by the
attorney-client privilege under applicable law, and ‘secret’ refers to other information gained in the professional relationship that
the client has requested be held inviolate, or the disclosure of which would be embarrassing, or would be likely to be detrimental,
to the client.”
*8 Holmes has revealed and attempted to make personal use of information relating directly to his representation of Munich
Re in the form of documents he obtained on Munich Re's behalf from the Navy and Northrop Grumman for use in the UK
Arbitration. Relators' Mot. to Assist the DOJ [11, 4 of 86] (“Relators have provided the Government with an extensive Disclosure
Memorandum pointing out that the evidence of this fraud is based on documents available directly from the Navy, many of
which Relators obtained pursuant to Touhy Regulation Requests in connection with ongoing litigation on an insurance claim.”).
These documents were subject to various confidentiality obligations existing between Munich Re, Northrop Grumman, and the
Navy, and a Stipulated Protective Order imposed by the United States District Court for the District of Columbia. See Ex. “1” to
Relators' Mot. to Assist the DOJ [11, 56–66 of 86]; Stipulated Protective Order [20–1], Case No. 1:10–cv–551–JEB (D .D.C.).
There is no indication that Holmes would have otherwise come into possession of these documents but for his representation
of Munich Re. Holmes acknowledged using these documents to pursue this qui tam action in which he seeks over 2.5 billion
dollars, a portion of which would be available to him by virtue of his serving as relator. See, e.g., First Am. Compl. 9, 10, 23[43].
Absent Munich Re's informed consent, Holmes violated the duty to keep information related to his representation of Munich
Re confidential when he revealed and made use of the documents he obtained during his representation of Munich Re. 8
8 In addition, it is likely that Holmes' conduct violated Rule 4.4(a) of the ABA Model Rules. “In representing a client, a lawyer shall
not use ... methods of obtaining evidence that violate the legal rights of ... a [third] person.” ABA Model Rule 4.4(a); see also DCRPC
4.4(a) (same); MRPC 4.4(a) (same). In obtaining documents from Northrop Grumman and the Navy, Holmes, on behalf of Munich
Re, submitted to at least one agreement to keep documents Munich Re received from Northrop Grumman confidential and participated
in the creation and submission of the Stipulated Protective Order restricting the use and dissemination of documents received by
Munich Re from the Navy. Holmes' use of these documents for his own purposes in this qui tam action can reasonably be construed
as violating the legal rights of Northrop Grumman and the Navy.
Holmes has not shown that he obtained Munich Re's informed consent prior to revealing and making use of confidential
information he obtained as counsel for Munich Re. See ABA Model Rule 1.6 (prohibiting attorneys from revealing clients'
confidential information absent the client's informed consent). Holmes appears to acknowledge that Munich Re “did not
participate in” his decision to disclose to the DOJ documents that he obtained on Munich Re's behalf and which fell within the
scope of the various confidentiality obligations he owed Munich Re. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss
9[156]; see also ABA Model Rule 1.6(a) (“A lawyer shall not reveal information relating to the representation of a client unless
the client gives informed consent [ ]....”); MRPC 1.6(a) (same); DCRPC 1.6(a) (“[A] lawyer shall not knowingly: ... reveal a
confidence or secret of the lawyer's client[,] ... use a confidence or secret of the lawyer's client to the disadvantage of the client
[, or] ... use a confidence or secret of the lawyer's client for the advantage of the lawyer or of a third person....”). Similar to
his actions surrounding the concurrent conflict of interest which jeopardized his duty of loyalty to Munich Re, Holmes has not
sufficiently established that he obtained Munich Re's informed consent prior to revealing Munich Re's confidential information.
Consequently, Holmes breached his duty to protect his client's confidential information.
d. Holmes' Duty to Obey Court Orders
*9 Perhaps the most serious of the ethical violations committed by Holmes is his having knowingly ignored his obligations
under the Stipulated Protective Order entered in the Touhy Action by the United States District Court for the District of
Columbia. “A lawyer shall not[ ] ... knowingly disobey an obligation under the rules of a tribunal except for an open refusal
based on an assertion that no valid obligation exists....” ABA Model Rule 3 .4(c); see also DCRPC 3.4(c) (same); MRPC 3.4(c)
(same). Holmes notes that the Stipulated Protective Order was first submitted as a proposed order and seems to argue that it
should not be treated as a court order. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss 10–11[156]. This argument
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U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
overlooks the fact that Holmes jointly submitted the Stipulated Protective Order as a proposed order, and the United States
District Court for the District of Columbia specifically entered the Stipulated Protective Order “as an [O]rder of the Court....”
Order 1 [20–1], Case No. 1:10cv551–JEB (D.D.C .). Holmes was undoubtedly required to comply with the obligations imposed
by the Stipulated Protective Order.
The Stipulated Protective Order provides that documents produced by the Navy “shall be used or disclosed solely in the UK
Arbitration” and “shall not be used in any other proceeding or for any other purpose without further order of this Court.” Id.
at 6–7 [20–1, 9–10 of 13]. Holmes openly acknowledges that he violated the terms of the Stipulated Protective Order by his
admission that he disclosed documents subject to the Stipulated Protective Order to the DOJ and allowed his “expert team”
to analyze such documents. 9 Relators' Mot. to Assist the DOJ 2, 10–12 [11, 4, 12–14 of 86]. If he had an objection to the
Navy's designation of any information as being protected under the Stipulated Protective Order, the Stipulated Protective Order
required Holmes to make an objection to the particular designations, but the record does not reveal that Holmes made any such
objections. Stipulated Protective Order 8 [20–1, 11 of 13], Case No. 1:10cv551–JEB (D.D.C.); see also Resp. in Opp'n to Defs.'
Mot. to Disqualify and Dismiss 6[156] (“With perfect 20/20 hindsight [,]” Holmes agrees that he “should have separately sought
[the Court's] permission to use the documents” obtained in the Touhy Action and that doing so “would have been a good thing
to do....”). Holmes was well aware of the terms of the Stipulated Protective Order, and requested that the District Court for the
District of Columbia enter the Stipulated Protective Order, but knowingly violated the obligations imposed by that Order in
pursuit of his own interests in this qui tam action. Holmes' violation of the Stipulated Protective Order is yet another example
of his unethical conduct surrounding his actions as a relator in this case.
9 Prior cases indicate that one court generally should decline from evaluating whether a litigant before it has violated the order of
another court. See, e.g., In re Wright, No. Civ. A. 06–356, 2006 WL 508050, at *3 (E.D.La. Feb. 22, 2006) (“[I]t would be an
unwise policy for one court to determine whether a litigant violated another court's order.”) (citing In re Marriage of Smith, 549
F. Supp. 761, 755 (W.D.Tex.1982)). The Court, however, finds that this general principle is not implicated under the specific facts
of this case because Holmes has acknowledged repeatedly that he violated the Stipulated Protective Order and thus the Court need
not determine whether a violation has occurred. Moreover, the Court expressly limits its consideration of Holmes' violation of the
Stipulated Protective Order to being only one of several factors militating in favor of disqualifying Holmes from serving as a relator
in this case. Still, the seriousness of Holmes' violation of the Stipulated Protective Order should not be overlooked. See Holden v.
Simpson Paper Co., 48 F. App'x 917, 2002 WL 31115137, at *2 (5th Cir. Sept. 18, 2002) (“Deliberately disobeying court orders
demonstrates sufficient bad faith to justify a district court's sanction under its inherent powers.”).
3. The Totality of Holmes' Ethical Violations Require His Disqualification as Relator
*10 When viewed in its entirety, Holmes' conduct reveals multiple improprieties. See U.S. Fire, 50 F.3d at 1314 (noting that
courts adjudicating a motion to disqualify should consider, in addition to relevant ethical precepts, the impropriety of counsel's
conduct and the extent to which public suspicion of that conduct outweighs any social interests served by allowing counsel
to continue participating) (quoting Dresser, 972 F.2d at 544) (internal marks omitted). Holmes' conduct did not merely bear
the appearance of impropriety but was in fact improper. Holmes violated his duty of loyalty to Munich Re by simultaneously
advocating a position for Munich Re that was completely contrary to the position he continues to advocate as relator in this
case. Holmes violated his duty to retain confidential information by allowing his own interest in pursing this qui tam action to
override his duties to Munich Re related to the confidentiality of documents he obtained on Munich Re's behalf, which placed
Munich Re in jeopardy of violating various confidentiality obligations to which Holmes knew his client was bound. In seeking
to build support for his qui tam case, Holmes also knowingly violated the Stipulated Protective Order issued by the court in the
Touhy Action. All the while, Holmes violated his duty of candor by failing to apprise the court in the Touhy Action or counsel
for NGC in the UK Arbitration of his motives for obtaining the confidential information.
The accompanying public suspicion arising from Holmes' conduct outweighs any social interest in permitting him to continue
participating as a relator. See U.S. Fire, 50 F.3d at 1314 (5th Cir.1995) (quoting Dresser, 972 F.2d at 544). The potential for
public suspicion stemming from this conduct is exemplified by the DOJ's concerns that Holmes' conduct gave rise to “serious
ethical and professional responsibility concerns....” United States' Consolidated Resp. to Relators' Ex Parte Motions 6[14].
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8
U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
Furthermore, in considering Holmes' disqualification, the Court is not faced with the prospect of disqualifying an innocent
party's chosen counsel. Rather, disqualifying Holmes only precludes him from receiving the benefits which may otherwise be
available to him personally as a relator, such that the social interests in allowing him to continue participating in this case are
minimal. The Court finds that based on the totality of the ethical violations committed by Holmes surrounding this qui tam
case, Holmes should be disqualified from serving as relator in this case.
4. Dismissal of the First Amended Complaint
In determining whether dismissal of the First Amended Complaint [43] is warranted, the pertinent inquiry is the extent to which
Northrop Grumman stands to suffer prejudice if the action were to proceed to trial. See Quest Diagnostics, 734 F.3d at 166–67
(affirming district court's decision to disqualify relators and dismiss their qui tam complaint due to the fact that allowing the
case to proceed “would taint the trial proceedings and prejudice defendants”). Here, the Court finds that merely disqualifying
Holmes from serving as relator without dismissing the case would greatly prejudice Northrop Grumman because the case would
be tried on a record developed primarily through the fruits of Holmes' unethical conduct. In addition, the fact that the United
States government rather than Holmes is the real party in interest further supports dismissing Holmes' First Amended Complaint
[43]. See United States ex rel. Williams v. Bell Helicopter Textron Inc., 417 F.3d 450, 453 (5th Cir.2005). Namely, as the real
party in interest, the government would not be prevented from bringing these or similar claims against Northrop Grumman. See
Quest Diagnostics, 734 F.3d at 167 (noting that dismissal of the disqualified relators' complaint was further justified by the fact
that neither the United States, as the real party in interest, nor any other relator was foreclosed from bringing the claims). The
Court thus finds that the First Amended Complaint [43] should be dismissed with prejudice as to Holmes but without prejudice
as to any rights of the United States. 10
10 The Fifth Circuit has found that dismissal of a relator's complaint should not necessarily operate as a dismissal with prejudice
against the United States merely because it opted not to intervene. Williams, 417 F.3d at 454–55 (finding that dismissal of a relator's
complaint for failure to comply with Rule 9(b) did not operate as a dismissal with prejudice against the government simply because
the government did not intervene). This is because the FCA “does not require the government to proceed if its investigation [of
allegations in a qui tam complaint] yields a meritorious claim.” Id. at 455.
III. CONCLUSION
*11 Based on the foregoing, the Court concludes that Donald Holmes should be disqualified from serving as a relator in this
qui tam case, and that this civil action should be dismissed with prejudice as to Holmes, but without prejudice to any rights
possessed by the United States government.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the Motion to Disqualify Relator and Dismiss the First Amended
Complaint [151] filed by Defendants Northrop Grumman Corporation and Huntington Ingalls Incorporated is GRANTED.
IT IS, FURTHER, ORDERED AND ADJUDGED that Donald Holmes is DISQUALIFIED from serving as a relator in
this qui tam case.
IT IS, FURTHER, ORDERED AND ADJUDGED that this case is DISMISSED WITH PREJUDICE as to Donald Holmes,
but WITHOUT PREJUDICE as to any rights of the United States government.
IT IS, FURTHER, ORDERED AND ADJUDGED that the Motion to Dismiss Amended Complaint [102] filed by Defendants
Northrop Grumman Corporation and Huntington Ingalls Incorporated is DENIED AS MOOT.
SO ORDERED AND ADJUDGED.
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U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)
FINAL JUDGMENT
This matter came on to be heard on the Motion to Disqualify Relator and Dismiss First Amended Complaint [151] filed
by Defendants Northrop Grumman Corporation and Huntington Ingalls Incorporated. The Court, after a full review and
consideration of Defendants' Motion, Relator's Response [156], Defendants' Rebuttal [157], the record, and relevant legal
authorities, finds that in accord with the reasons more fully stated in its Memorandum Opinion and Order entered herewith,
IT IS, THEREFORE, ORDERED AND ADJUDGED that this civil action is DISMISSED WITH PREJUDICE as to
Relator Donald Holmes, but WITHOUT PREJUDICE as to any rights of the United States government.
SO ORDERED AND ADJUDGED.
All Citations
Slip Copy, 2015 WL 3504525End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 10
Wyeth v. Levine, 555 U.S. 555 (2009)
129 S. Ct. 1187, 173 L. Ed. 2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176...
KeyCite Yellow Flag - Negative Treatment
Called into Doubt by Pulkkinen v. Pulkkinen, Fla.App. 1 Dist., November 26, 2013
129 S. Ct. 1187Supreme Court of the United States
WYETH, Petitioner,
v.
Diana LEVINE.
No. 06–1249. | Argued Nov. 3, 2008. | Decided March 4, 2009.
Synopsis
Background: Patient brought action against drug manufacturer for failure to warn of dangers of administration of nausea
medication directly into patient's vein, which resulted in onset of gangrene and amputation of patient's arm. The Washington
Superior Court, Geoffrey W. Crawford, J., entered judgment on jury's verdict in patient's favor, and manufacturer appealed.
The Vermont Supreme Court, Johnson, J., 183 Vt. 76, 944 A.2d 179, affirmed. Certiorari was granted.
[Holding:] The United States Supreme Court, Justice Stevens, held that state law failure-to-warn claims against manufacturer
of antihistamine that was used to treat nausea, for failing to adequately warn of dangers of administering drug intravenously
using an IV-push, rather than IV-drip, methodology, were not preempted by federal law, either on theory that manufacturer
could not have modified warning label placed on drug once it had been approved by the Food and Drug Administration (FDA),
and that it was impossible for manufacturer to comply with both state law duties underlying failure-to-warn claims and its
federal labeling duties, or on theory that requiring manufacturer to comply with state law duty to provide stronger warning
about IV-push administration, after the Food and Drug Administration (FDA) had previously approved warning label placed
on drug, would obstruct purposes and objectives of federal drug labeling regulation.
Affirmed.
Justice Breyer concurred and filed opinion.
Justice Thomas concurred in judgment and filed opinion.
Justice Alito dissented and filed opinion, in which Chief Justice Roberts and Justice Scalia joined.
**1189 *555 Syllabus *
* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience
of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S. Ct. 282, 50 L. Ed. 499.
Petitioner Wyeth manufactures the antinausea drug Phenergan. After a clinician injected respondent Levine with Phenergan by
the “IV-push” method, whereby a drug is injected directly into a patient's vein, the drug entered Levine's artery, she developed
gangrene, and doctors amputated her forearm. Levine brought a state-law damages action, alleging, inter alia, that Wyeth had
failed to provide an adequate warning about the significant risks of administering Phenergan by the IV-push method. The
Vermont jury determined that Levine's injury would not have occurred if Phenergan's label included an adequate warning, and it
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awarded damages for her pain and suffering, substantial medical expenses, and loss of her livelihood as a professional musician.
Declining to overturn the verdict, the trial court rejected Wyeth's argument that Levine's failure-to-warn claims were pre-empted
by federal law because Phenergan's labeling had been approved by the federal Food and Drug Administration (FDA). The
Vermont Supreme Court affirmed.
Held: Federal law does not pre-empt Levine's claim that Phenergan's label did not contain an adequate warning about the IV-
push method of administration. Pp. 1193 – 1204.
(a) The argument that Levine's state-law claims are pre-empted because it is impossible for Wyeth to comply with both the state-
law duties underlying those claims and its federal labeling duties is rejected. Although a manufacturer generally may change
a drug label only after the FDA approves a supplemental application, the agency's “changes being effected” (CBE) regulation
permits certain preapproval labeling changes that add or strengthen a warning to improve drug safety. Pursuant to the CBE
regulation, Wyeth could have unilaterally added a stronger warning about IV-push administration, and there is no evidence that
the FDA would ultimately have rejected such a labeling change. Wyeth's cramped reading of the CBE regulation and its broad
assertion that unilaterally changing the Phenergan label would have violated federal law governing unauthorized distribution
and misbranding of drugs are based on the fundamental misunderstanding that the FDA, rather than the manufacturer, bears
primary responsibility for drug labeling. It is a central premise of the Federal Food, Drug, and Cosmetic Act (FDCA) and the
FDA's regulations that the manufacturer bears responsibility for the content of its label at all times. Pp. 1196 – 1199.
**1190 *556 (b) Wyeth's argument that requiring it to comply with a state-law duty to provide a stronger warning would
interfere with Congress' purpose of entrusting an expert agency with drug labeling decisions is meritless because it relies on an
untenable interpretation of congressional intent and an overbroad view of an agency's power to pre-empt state law. The history
of the FDCA shows that Congress did not intend to pre-empt state-law failure-to-warn actions. In advancing the argument
that the FDA must be presumed to have established a specific labeling standard that leaves no room for different state-law
judgments, Wyeth relies not on any statement by Congress but on the preamble to a 2006 FDA regulation declaring that state-
law failure-to-warn claims threaten the FDA's statutorily prescribed role. Although an agency regulation with the force of law
can pre-empt conflicting state requirements, this case involves no such regulation but merely an agency's assertion that state law
is an obstacle to achieving its statutory objectives. Where, as here, Congress has not authorized a federal agency to pre-empt
state law directly, the weight this Court accords the agency's explanation of state law's impact on the federal scheme depends on
its thoroughness, consistency, and persuasiveness. Cf., e.g.,Skidmore v. Swift & Co., 323 U.S. 134, 65 S. Ct. 161, 89 L. Ed. 124.
Under this standard, the FDA's 2006 preamble does not merit deference: It is inherently suspect in light of the FDA's failure to
offer interested parties notice or opportunity for comment on the pre-emption question; it is at odds with the available evidence
of Congress' purposes; and it reverses the FDA's own longstanding position that state law is a complementary form of drug
regulation without providing a reasoned explanation. Geier v. American Honda Motor Co., 529 U.S. 861, 120 S. Ct. 1913, 146
L. Ed. 2d 914, is distinguished. Pp. 1199 – 1204.
183 Vt. 76, 944 A.2d 179, affirmed.
STEVENS, J., delivered the opinion of the Court, in which KENNEDY, SOUTER, GINSBURG, and BREYER, JJ., joined.
BREYER, J., filed a concurring opinion. THOMAS, J., filed an opinion concurring in the judgment. ALITO, J., filed a dissenting
opinion, in which ROBERTS, C.J., and SCALIA, J., joined.
Attorneys and Law Firms
Edwin S. Kneedler for the United States as amicus curiae, by special leave of the Court, supporting petitioner.
David C. Frederick, for respondent.
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Bert W. Rein, Karyn K. Ablin, Brendan J. Morrissey, Wiley Rein LLP, Washington, DC, Allan R. Keyes, R. Joseph O'Rourke,
Ryan, Smith, Carbine, Ltd., Rutland, VT, Seth P. Waxman, Counsel of Record, Paul R.Q. Wolfson, Catherine M.A. Carroll,
Margaret Williams, Smith Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, William J. Ruane, Wyeth, Madison,
NJ, for petitioner.
Richard I. Rubin, Rubin, Kidney, Myer & DeWolfe, Barre, Vermont, David C. Frederick, Counsel of Record, Scott H.
Angstreich, Scott K. Attaway, Brendan J. Crimmins, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington,
D.C., for respondent.
Opinion
Justice STEVENS delivered the opinion of the Court.
*558 Directly injecting the drug Phenergan into a patient's vein creates a significant risk of catastrophic consequences. A
Vermont **1191 jury found that petitioner Wyeth, the manufacturer of the drug, had failed to provide an adequate warning of
that risk and awarded damages to respondent Diana Levine to compensate her for the amputation of her arm. The warnings on
Phenergan's label had been deemed sufficient by the federal Food and Drug Administration (FDA) when it approved Wyeth's
new drug application in 1955 and when it later approved changes in the drug's labeling. The question we must decide is whether
the FDA's approvals provide *559 Wyeth with a complete defense to Levine's tort claims. We conclude that they do not.
I
Phenergan is Wyeth's brand name for promethazine hydrochloride, an antihistamine used to treat nausea. The injectable form
of Phenergan can be administered intramuscularly or intravenously, and it can be administered intravenously through either
the “IV-push” method, whereby the drug is injected directly into a patient's vein, or the “IV-drip” method, whereby the drug
is introduced into a saline solution in a hanging intravenous bag and slowly descends through a catheter inserted in a patient's
vein. The drug is corrosive and causes irreversible gangrene if it enters a patient's artery.
Levine's injury resulted from an IV-push injection of Phenergan. On April 7, 2000, as on previous visits to her local clinic
for treatment of a migraine headache, she received an intramuscular injection of Demerol for her headache and Phenergan for
her nausea. Because the combination did not provide relief, she returned later that day and received a second injection of both
drugs. This time, the physician assistant administered the drugs by the IV-push method, and Phenergan entered Levine's artery,
either because the needle penetrated an artery directly or because the drug escaped from the vein into surrounding tissue (a
phenomenon called “perivascular extravasation”) where it came in contact with arterial blood. As a result, Levine developed
gangrene, and doctors amputated first her right hand and then her entire forearm. In addition to her pain and suffering, Levine
incurred substantial medical expenses and the loss of her livelihood as a professional musician.
After settling claims against the health center and clinician, Levine brought an action for damages against Wyeth, relying on
common-law negligence and strict-liability theories. Although Phenergan's labeling warned of the danger of gangrene and
amputation following inadvertent intra-arterial *560 injection, 1 Levine alleged that **1192 the labeling was defective
because it failed to instruct clinicians to use the IV-drip method of intravenous administration instead of the higher risk IV-push
method. More broadly, she alleged that Phenergan is not reasonably safe for intravenous administration because the foreseeable
risks of gangrene and loss of limb are great in relation to the drug's therapeutic benefits. App. 14–15.
1 The warning for “Inadvertent Intra-arterial Injection” stated: “Due to the close proximity of arteries and veins in the areas most
commonly used for intravenous injection, extreme care should be exercised to avoid perivascular extravasation or inadvertent intra-
arterial injection. Reports compatible with inadvertent intra-arterial injection of Phenergan Injection, usually in conjunction with
other drugs intended for intravenous use, suggest that pain, severe chemical irritation, severe spasm of distal vessels, and resultant
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gangrene requiring amputation are likely under such circumstances. Intravenous injection was intended in all the cases reported but
perivascular extravasation or arterial placement of the needle is now suspect. There is no proven successful management of this
condition after it occurs.... Aspiration of dark blood does not preclude intra-arterial needle placement, because blood is discolored
upon contact with Phenergan Injection. Use of syringes with rigid plungers or of small bore needles might obscure typical arterial
backflow if this is relied upon alone. When used intravenously, Phenergan Injection should be given in a concentration no greater
than 25 mg per mL and at a rate not to exceed 25 mg per minute. When administering any irritant drug intravenously, it is usually
preferable to inject it through the tubing of an intravenous infusion set that is known to be functioning satisfactorily. In the event that a
patient complains of pain during intended intravenous injection of Phenergan Injection, the injection should be stopped immediately
to provide for evaluation of possible arterial placement or perivascular extravasation.” App. 390.
Wyeth filed a motion for summary judgment, arguing that Levine's failure-to-warn claims were pre-empted by federal law. The
court found no merit in either Wyeth's field pre-emption argument, which it has since abandoned, or its conflict pre-emption
argument. With respect to the contention that there was an “actual conflict between a specific FDA order,”id., at 21, and Levine's
failure-to-warn action, the *561 court reviewed the sparse correspondence between Wyeth and the FDA about Phenergan's
labeling and found no evidence that Wyeth had “earnestly attempted” to strengthen the intra-arterial injection warning or that
the FDA had “specifically disallowed” stronger language, id., at 23. The record, as then developed, “lack[ed] any evidence that
the FDA set a ceiling on this matter.” Ibid.
The evidence presented during the 5–day jury trial showed that the risk of intra-arterial injection or perivascular extravasation
can be almost entirely eliminated through the use of IV-drip, rather than IV-push, administration. An IV drip is started with
saline, which will not flow properly if the catheter is not in the vein and fluid is entering an artery or surrounding tissue. See
id., at 50–51, 60, 66–68, 75. By contrast, even a careful and experienced clinician using the IV-push method will occasionally
expose an artery to Phenergan. See id., at 73, 75–76. While Phenergan's labeling warned against intra-arterial injection and
perivascular extravasation and advised that “[w]hen administering any irritant drug intravenously it is usually preferable to
inject it through the tubing of an intravenous infusion set that is known to be functioning satisfactorily,” id., at 390, the labeling
did not contain a specific warning about the risks of IV-push administration.
The trial record also contains correspondence between Wyeth and the FDA discussing Phenergan's label. The FDA first
approved injectable Phenergan in 1955. In 1973 and 1976, Wyeth submitted supplemental new drug applications, which the
agency approved after proposing labeling changes. Wyeth submitted a third supplemental application in 1981 in response to a
new FDA rule governing drug labels. Over the next 17 years, Wyeth and the FDA intermittently corresponded about Phenergan's
label. The most notable activity occurred in 1987, when the FDA suggested different warnings about the risk of arterial exposure,
and in 1988, when Wyeth submitted revised labeling incorporating the *562 proposed changes. The FDA did not respond.
Instead, in 1996, it requested from Wyeth the labeling then in use and, without addressing Wyeth's 1988 submission, instructed
it to “[r]etain verbiage in current label” regarding intra-arterial injection. Id., at 359. After a few further changes to the labeling
not related to intra-arterial injection, the FDA approved Wyeth's 1981 application in 1998, instructing that Phenergan's final
printed label “must be identical” to the approved package insert. Id., at 382.
Based on this regulatory history, the trial judge instructed the jury that it could **1193 consider evidence of Wyeth's
compliance with FDA requirements but that such compliance did not establish that the warnings were adequate. He also
instructed, without objection from Wyeth, that FDA regulations “permit a drug manufacturer to change a product label to add
or strengthen a warning about its product without prior FDA approval so long as it later submits the revised warning for review
and approval.” Id., at 228.
Answering questions on a special verdict form, the jury found that Wyeth was negligent, that Phenergan was a defective product
as a result of inadequate warnings and instructions, and that no intervening cause had broken the causal connection between
the product defects and the plaintiff's injury. Id., at 233–235. It awarded total damages of $7,400,000, which the court reduced
to account for Levine's earlier settlement with the health center and clinician.Id., at 235–236.
On August 3, 2004, the trial court filed a comprehensive opinion denying Wyeth's motion for judgment as a matter of law. After
making findings of fact based on the trial record (supplemented by one letter that Wyeth found after the trial), the court rejected
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Wyeth's pre-emption arguments. It determined that there was no direct conflict between FDA regulations and Levine's state-
law claims because those regulations permit strengthened warnings without FDA approval on an interim basis and the record
contained evidence *563 of at least 20 reports of amputations similar to Levine's since the 1960's. The court also found that
state tort liability in this case would not obstruct the FDA's work because the agency had paid no more than passing attention
to the question whether to warn against IV-push administration of Phenergan. In addition, the court noted that state law serves
a compensatory function distinct from federal regulation. Id., at 249–252.
The Vermont Supreme Court affirmed. It held that the jury's verdict “did not conflict with FDA's labeling requirements for
Phenergan because [Wyeth] could have warned against IV-push administration without prior FDA approval, and because
federal labeling requirements create a floor, not a ceiling, for state regulation.” 183 Vt. 76, 84, 944 A.2d 179, 184 (2006). In
dissent, Chief Justice Reiber argued that the jury's verdict conflicted with federal law because it was inconsistent with the FDA's
conclusion that intravenous administration of Phenergan was safe and effective.
The importance of the pre-emption issue, coupled with the fact that the FDA has changed its position on state tort law and
now endorses the views expressed in Chief Justice Reiber's dissent, persuaded us to grant Wyeth's petition for certiorari. 552
U.S. 1161, 128 S. Ct. 1118, 169 L. Ed. 2d 845 (2008). The question presented by the petition is whether the FDA's drug labeling
judgments “preempt state law product liability claims premised on the theory that different labeling judgments were necessary
to make drugs reasonably safe for use.” Pet. for Cert. i.
II
Wyeth makes two separate pre-emption arguments: first, that it would have been impossible for it to comply with the state-
law duty to modify Phenergan's labeling without violating federal law, see Fidelity Fed. Sav. & Loan Assn. v. de la Cuesta,
458 U.S. 141, 153, 102 S. Ct. 3014, 73 L. Ed. 2d 664 (1982), and second, that recognition of Levine's state tort action creates
an unacceptable “obstacle to the accomplishment and execution of the full purposes *564 and objectives of Congress,”
**1194 Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 85 L. Ed. 581 (1941), because it substitutes a lay jury's decision
about drug labeling for the expert judgment of the FDA. As a preface to our evaluation of these arguments, we identify two
factual propositions decided during the trial court proceedings, emphasize two legal principles that guide our analysis, and
review the history of the controlling federal statute.
The trial court proceedings established that Levine's injury would not have occurred if Phenergan's label had included an
adequate warning about the risks of the IV-push method of administering the drug. The record contains evidence that the
physician assistant administered a greater dose than the label prescribed, that she may have inadvertently injected the drug
into an artery rather than a vein, and that she continued to inject the drug after Levine complained of pain. Nevertheless, the
jury rejected Wyeth's argument that the clinician's conduct was an intervening cause that absolved it of liability. See App. 234
(jury verdict), 252–254. In finding Wyeth negligent as well as strictly liable, the jury also determined that Levine's injury was
foreseeable. That the inadequate label was both a but-for and proximate cause of Levine's injury is supported by the record
and no longer challenged by Wyeth. 2
2 The dissent nonetheless suggests that physician malpractice was the exclusive cause of Levine's injury. See, e.g., post, at 1217
(opinion of ALITO, J.) (“[I]t is unclear how a ‘stronger’ warning could have helped respondent”); post, at 1225 – 1227 (suggesting
that the physician assistant's conduct was the sole cause of the injury). The dissent's frustration with the jury's verdict does not put
the merits of Levine's tort claim before us, nor does it change the question we must decide—whether federal law pre-empts Levine's
state-law claims.
The trial court proceedings further established that the critical defect in Phenergan's label was the lack of an adequate
warning about the risks of IV-push administration. Levine also offered evidence that the IV-push method should *565 be
contraindicated and that Phenergan should never be administered intravenously, even by the IV-drip method. Perhaps for this
reason, the dissent incorrectly assumes that the state-law duty at issue is the duty to contraindicate the IV-push method. See, e.g.,
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post, at 1221, 1230 – 1231. But, as the Vermont Supreme Court explained, the jury verdict established only that Phenergan's
warning was insufficient. It did not mandate a particular replacement warning, nor did it require contraindicating IV-push
administration: “There may have been any number of ways for [Wyeth] to strengthen the Phenergan warning without completely
eliminating IV-push administration.” 183 Vt., at ––––, n. 2, 944 A.2d, at 189, n. 2. We therefore need not decide whether a
state rule proscribing intravenous administration would be pre-empted. The narrower question presented is whether federal
law pre-empts Levine's claim that Phenergan's label did not contain an adequate warning about using the IV-push method of
administration.
[1] [2] [3] [4] Our answer to that question must be guided by two cornerstones of our pre-emption jurisprudence. First,
“the purpose of Congress is the ultimate touchstone in every pre-emption case.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485,
116 S. Ct. 2240, 135 L. Ed. 2d 700 (1996) (internal quotation marks omitted); see Retail Clerks v. Schermerhorn, 375 U.S. 96,
103, 84 S. Ct. 219, 11 L. Ed. 2d 179 (1963). Second, “[i]n all pre-emption cases, and particularly in those in which Congress has
‘legislated ... in a field which the States have traditionally occupied,’ ... we ‘start with the assumption that the historic police
**1195 powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose
of Congress.’ ” Lohr, 518 U.S., at 485, 116 S. Ct. 2240 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct.
1146, 91 L. Ed. 1447 (1947)). 3
3 Wyeth argues that the presumption against pre-emption should not apply to this case because the Federal Government has regulated
drug labeling for more than a century. That argument misunderstands the principle: We rely on the presumption because respect for
the States as “independent sovereigns in our federal system” leads us to assume that “Congress does not cavalierly pre-empt state-
law causes of action.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S. Ct. 2240, 135 L. Ed. 2d 700 (1996). The presumption thus
accounts for the historic presence of state law but does not rely on the absence of federal regulation.
For its part, the dissent argues that the presumption against pre-emption should not apply to claims of implied conflict pre-emption
at all, post, at 1228, but this Court has long held to the contrary. See, e.g.,California v. ARC America Corp., 490 U.S. 93, 101–
102, 109 S. Ct. 1661, 104 L. Ed. 2d 86 (1989); Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 716,
105 S. Ct. 2371, 85 L. Ed. 2d 714 (1985); see also Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 387, 122 S. Ct. 2151, 153
L. Ed. 2d 375 (2002). The dissent's reliance on Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341, 121 S. Ct. 1012, 148 L. Ed. 2d
854 (2001), see post, at 1229, and n. 14, is especially curious, as that case involved state-law fraud-on-the-agency claims, and the
Court distinguished state regulation of health and safety as matters to which the presumption does apply. See 531 U.S., at 347–
348, 121 S. Ct. 1012.
*566 In order to identify the “purpose of Congress,” it is appropriate to briefly review the history of federal regulation of drugs
and drug labeling. In 1906, Congress enacted its first significant public health law, the Federal Food and Drugs Act, ch. 3915, 34
Stat. 768. The Act, which prohibited the manufacture or interstate shipment of adulterated or misbranded drugs, supplemented
the protection for consumers already provided by state regulation and common-law liability. 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), ch. 675, 52 Stat. 1040, as amended, 21 U.S.C. § 301 et seq. The Act's most substantial innovation was its provision
for premarket approval of new drugs. It required every manufacturer to submit a new drug application, including reports of
investigations and specimens of proposed labeling, to the FDA for review. Until its application became effective, a manufacturer
was prohibited from distributing a drug. The FDA could reject an application if it determined that the drug was not safe for
use as labeled, though if the agency failed to act, an application became effective 60 days after the filing. FDCA, § 505(c),
52 Stat. 1052.
*567 In 1962, Congress amended the FDCA and shifted the burden of proof from the FDA to the manufacturer. Before 1962,
the agency 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. §§ 102(d), 104(b), 76 Stat. 781, 784. 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.” § 102(d), id., at 781.
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As it enlarged the FDA's powers to “protect the public health” and “assure the safety, effectiveness, and reliability of **1196
drugs,” id., at 780, Congress took care to preserve state law. The 1962 amendments added a saving clause, indicating that
a provision of state law would only be invalidated upon a “direct and positive conflict” with the FDCA. § 202, id., at 793.
Consistent with that provision, state common-law suits “continued unabated despite ... FDA regulation.” Riegel v. Medtronic,
Inc., 552 U.S. 312, ––––, 128 S. Ct. 999, 1017, 169 L. Ed. 2d 892 (2008) (GINSBURG, J., dissenting); see ibid., n. 11 (collecting
state cases). And when Congress enacted an express pre-emption provision for medical devices in 1976, see § 521, 90 Stat. 574
(codified at 21 U.S.C. § 360k(a)), it declined to enact such a provision for prescription drugs.
In 2007, after Levine's injury and lawsuit, Congress again amended the FDCA. 121 Stat. 823. For the first time, it granted the
FDA statutory authority to require a manufacturer to change its drug label based on safety information that becomes available
after a drug's initial approval. § 901(a), id., at 924–926. In doing so, however, Congress did not enact a provision in the Senate
bill that would have required the FDA to preapprove all changes to drug labels. See S. 1082, 110th Cong., 1st Sess., § 208,
pp. 107–114 (2007) *568 (as passed) (proposing new § 506D). Instead, it adopted a rule of construction to make it clear that
manufacturers remain responsible for updating their labels. See 121 Stat. 925–926.
III
[5] Wyeth first argues that Levine's state-law claims are pre-empted because it is impossible for it to comply with both the
state-law duties underlying those claims and its federal labeling duties. See de la Cuesta, 458 U.S., at 153, 102 S. Ct. 3014. The
FDA's premarket approval of a new drug application includes the approval of the exact text in the proposed label. See 21 U.S.C.
§ 355; 21 CFR § 314.105(b) (2008). Generally speaking, a manufacturer may only change a drug label after the FDA approves
a supplemental application. There is, however, an FDA regulation that permits a manufacturer to make certain changes to its
label before receiving the agency's approval. 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.
§§ 314.70(c)(6)(iii)(A), (C).
Wyeth argues that the CBE regulation is not implicated in this case because a 2008 amendment provides that a manufacturer
may only change its label “to reflect newly acquired information.” 73 Fed.Reg. 49609. Resting on this language (which Wyeth
argues simply reaffirmed the interpretation of the regulation in effect when this case was tried), Wyeth contends that it could
have changed Phenergan's label only in response to new information that the FDA had not considered. And it maintains that
Levine has not pointed to any such information concerning the risks of IV-push administration. Thus, Wyeth insists, it was
impossible for it *569 to discharge its state-law obligation to provide a stronger warning about IV-push administration without
violating federal law. Wyeth's argument misapprehends both the federal drug regulatory scheme and its burden in establishing
a pre-emption defense.
We need not decide whether the 2008 CBE regulation is consistent with the FDCA and the previous version of the **1197
regulation, as Wyeth and the United States urge, because Wyeth could have revised Phenergan's label even in accordance with
the amended regulation. As the FDA explained in its notice of the final rule, “ ‘newly acquired information’ ” is not limited
to new data, but also encompasses “new analyses of previously submitted data.” Id., at 49604. The rule accounts for the fact
that risk information accumulates over time and that the same data may take on a different meaning in light of subsequent
developments: “[I]f the sponsor submits adverse event information to FDA, and then later conducts a new analysis of data
showing risks of a different type or of greater severity or frequency than did reports previously submitted to FDA, the sponsor
meets the requirement for ‘newly acquired information.’ ” Id., at 49607; see also id., at 49606.
The record is limited concerning what newly acquired information Wyeth had or should have had about the risks of IV-push
administration of Phenergan because Wyeth did not argue before the trial court that such information was required for a CBE
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labeling change. Levine did, however, present evidence of at least 20 incidents prior to her injury in which a Phenergan injection
resulted in gangrene and an amputation. See App. 74, 252. 4 After the first such incident came to Wyeth's attention in 1967,
it notified the FDA and worked with the agency to change Phenergan's label. *570 In later years, as amputations continued
to occur, Wyeth could have analyzed the accumulating data and added a stronger warning about IV-push administration of
the drug.
4 Levine also introduced evidence that Pfizer had withdrawn Vistaril, another antinausea drug, from intravenous use several decades
earlier because its intravenous injection had resulted in gangrene and amputations. See App. 79.
Wyeth argues that if it had unilaterally added such a warning, it would have violated federal law governing unauthorized
distribution and misbranding. Its argument that a change in Phenergan's labeling would have subjected it to liability for
unauthorized distribution rests on the assumption that this labeling change would have rendered Phenergan a new drug lacking
an effective application. But strengthening the warning about IV-push administration would not have made Phenergan a new
drug. See 21 U.S.C. § 321(p)(1) (defining “new drug”); 21 CFR § 310.3(h). Nor would this warning have rendered Phenergan
misbranded. The FDCA does not provide that a drug is misbranded simply because the manufacturer has altered an FDA-
approved label; instead, the misbranding provision focuses on the substance of the label and, among other things, proscribes
labels that fail to include “adequate warnings.” 21 U.S.C. § 352(f). Moreover, because the statute contemplates that federal
juries will resolve most misbranding claims, the FDA's belief that a drug is misbranded is not conclusive. See §§ 331, 332,
334(a)-(b). And the very idea that the FDA would bring an enforcement action against a manufacturer for strengthening a
warning pursuant to the CBE regulation is difficult to accept—neither Wyeth nor the United States has identified a case in
which the FDA has done so.
[6] Wyeth's cramped reading of the CBE regulation and its broad reading of the FDCA's misbranding and unauthorized
distribution provisions are premised on a more fundamental misunderstanding. Wyeth suggests that the FDA, rather than
the manufacturer, bears primary responsibility for drug labeling. Yet through many amendments to the FDCA and to FDA
regulations, it has remained a central premise of federal drug regulation that the **1198 manufacturer bears responsibility
*571 for the content of its label at all times. It 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. See, e.g., 21 CFR § 201.80(e) (requiring a manufacturer to revise its label
“to include a warning as soon as there is reasonable evidence of an association of a serious hazard with a drug”); § 314.80(b)
(placing responsibility for postmarketing surveillance on the manufacturer); 73 Fed.Reg. 49605 (“Manufacturers continue to
have a responsibility under Federal law ... to maintain their labeling and update the labeling with new safety information”).
Indeed, prior to 2007, the FDA lacked the authority to order manufacturers to revise their labels. See 121 Stat. 924–926. When
Congress granted the FDA this authority, it reaffirmed the manufacturer's obligations and referred specifically to the CBE
regulation, which both reflects the manufacturer's ultimate responsibility for its label and provides a mechanism for adding
safety information to the label prior to FDA approval. See id., at 925–926 (stating that a manufacturer retains the responsibility
“to maintain its label in accordance with existing requirements, including subpart B of part 201 and sections 314.70 and 601.12
of title 21, Code of Federal Regulations (or any successor regulations)” (emphasis added)). Thus, when the risk of gangrene
from IV-push injection of Phenergan became apparent, Wyeth had a duty to provide a warning that adequately described that
risk, and the CBE regulation permitted it to provide such a warning before receiving the FDA's approval.
Of course, the FDA retains authority to reject labeling changes made pursuant to the CBE regulation in its review of the
manufacturer's supplemental application, just as it retains such authority in reviewing all supplemental applications. But absent
clear evidence that the FDA would not have approved a change to Phenergan's label, we will not conclude that it was impossible
for Wyeth to comply with both federal and state requirements.
*572 Wyeth has offered no such evidence. It does not argue that it attempted to give the kind of warning required by the
Vermont jury but was prohibited from doing so by the FDA. 5 See Tr. of Oral Arg. 12–13; see also Brief for United States as
Amicus Curiae 25. And while it does suggest that the FDA intended to prohibit it from strengthening the warning about IV-
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push administration because the agency deemed such a warning inappropriate in reviewing Phenergan's drug applications, both
the trial court and the Vermont Supreme Court rejected this account as a matter of fact. In its decision on Wyeth's motion for
judgment as a matter of law, **1199 the trial court found “no evidence in this record that either the FDA or the manufacturer
gave more than passing attention to the issue of” IV-push versus IV-drip administration. App. 249. The Vermont Supreme Court
likewise concluded that the FDA had not made an affirmative decision to preserve the IV-push method or intended to prohibit
Wyeth from strengthening its warning about IV-push administration. 183 Vt., at ––––, 944 A.2d, at 188–189. Moreover, Wyeth
does not argue that it supplied the FDA with an evaluation *573 or analysis concerning the specific dangers posed by the IV-
push method. We accordingly cannot credit Wyeth's contention that the FDA would have prevented it from adding a stronger
warning about the IV-push method of intravenous administration. 6
5 The record would not, in any event, support such an argument. In 1988, Wyeth did propose different language for Phenergan's
warning about intra-arterial injection, adapted from revisions the FDA proposed in 1987. See App. 339–341, 311–312. When the
FDA approved Wyeth's application, it instructed Wyeth to retain the wording in its current label. During the trial court proceedings,
Levine indicated that the language proposed in 1988 would have more strongly warned against IV-push administration. But the trial
court and the Vermont Supreme Court found that the 1988 warning did not differ in any material respect from the FDA-approved
warning. See 183 Vt. 76, ––––, 944 A.2d 179, 189 (2006) (“Simply stated, the proposed warning was different, but not stronger.
It was also no longer or more prominent than the original warning ...”); App. 248–250. Indeed, the United States concedes that the
FDA did not regard the proposed warning as substantively different: “[I]t appears the FDA viewed the change as non-substantive
and rejected it for formatting reasons.” Brief for United States as Amicus Curiae 25; see also 183 Vt., at ––––, 944 A.2d, at 189.
6 The dissent's suggestion that the FDA intended to prohibit Wyeth from strengthening its warning does not fairly reflect the record.
The dissent creatively paraphrases a few FDA orders—for instance by conflating warnings about IV-push administration and intra-
arterial injection, see, e.g., post, at 1222, 1223 – 1224, 1225 – 1226—to suggest greater agency attention to the question, and it
undertakes a study of Phenergan's labeling that is more elaborate than any FDA order. But even the dissent's account does not support
the conclusion that the FDA would have prohibited Wyeth from adding a stronger warning pursuant to the CBE regulation.
Impossibility pre-emption is a demanding defense. On the record before us, Wyeth has failed to demonstrate that it was
impossible for it to comply with both federal and state requirements. The CBE regulation permitted Wyeth to unilaterally
strengthen its warning, and the mere fact that the FDA approved Phenergan's label does not establish that it would have
prohibited such a change.
IV
[7] Wyeth also argues that requiring it to comply with a state-law duty to provide a stronger warning about IV-push
administration would obstruct the purposes and objectives of federal drug labeling regulation. Levine's tort claims, it maintains,
are pre-empted because they interfere with “Congress's purpose to entrust an expert agency to make drug labeling decisions
that strike a balance between competing objectives.” Brief for Petitioner 46. We find no merit in this argument, which relies on
an untenable interpretation of congressional intent and an overbroad view of an agency's power to pre-empt state law.
Wyeth contends that the FDCA establishes both a floor and a ceiling for drug regulation: Once the FDA has approved *574
a drug's label, a state-law verdict may not deem the label inadequate, regardless of whether there is any evidence that the FDA
has considered the stronger warning at issue. The most glaring problem with this argument is that all evidence of Congress'
purposes is to the contrary. Building on its 1906 Act, Congress enacted the FDCA to bolster consumer protection against harmful
products. See Kordel v. United States, 335 U.S. 345, 349, 69 S. Ct. 106, 93 L. Ed. 52 (1948);United States v. Sullivan, 332 U.S.
689, 696, 68 S. Ct. 331, 92 L. Ed. 297 (1948). Congress did not provide a federal remedy for consumers harmed by unsafe or
ineffective drugs in the 1938 statute or in any subsequent amendment. Evidently, it determined that widely available state rights
of action provided appropriate relief for injured consumers. 7 It may also have recognized that **1200 state-law remedies
further consumer protection by motivating manufacturers to produce safe and effective drugs and to give adequate warnings.
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7 Although the first version of the bill that became the FDCA would have provided a federal cause of action for damages for injured
consumers, see H.R. 6110, 73d Cong., 1st Sess., § 25 (1933) (as introduced), witnesses testified that such a right of action was
unnecessary because common-law claims were already available under state law. See Hearings on S.1944 before a Subcommittee of
the Senate Committee on Commerce, 73d Cong., 2d Sess., 400 (1933) (statement of W.A. Hines); see id., at 403 (statement of J.A.
Ladds) (“This act should not attempt to modify or restate the common law with respect to personal injuries”).
[8] If Congress thought state-law suits posed an obstacle to its objectives, it surely would have enacted an express pre-emption
provision at some point during the FDCA's 70–year history. But despite its 1976 enactment of an express pre-emption provision
for medical devices, see § 521, 90 Stat. 574 (codified at 21 U.S.C. § 360k(a)), Congress has not enacted such a provision for
prescription drugs. See Riegel, 552 U.S., at ––––, 128 S.Ct., at 1009 (“Congress could have applied the pre-emption clause
to the entire FDCA. It did not do so, but instead wrote a pre-emption clause that applies only to medical devices *575 ”). 8
Its silence on the issue, coupled with its certain awareness of the prevalence of state tort litigation, is powerful evidence that
Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness. As Justice O'Connor
explained in her opinion for a unanimous Court: “The case for federal pre-emption is particularly weak where Congress has
indicated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to stand by both
concepts and to tolerate whatever tension there [is] between them.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S.
141, 166–167, 109 S. Ct. 971, 103 L. Ed. 2d 118 (1989) (internal quotation marks omitted); see also supra, at 1194 (discussing
the presumption against pre-emption).
8 In 1997, Congress pre-empted certain state requirements concerning over-the-counter medications and cosmetics but expressly
preserved product liability actions. See 21 U.S.C. §§ 379r(e), 379s(d) (“Nothing in this section shall be construed to modify or
otherwise affect any action or the liability of any person under the product liability law of any State”).
[9] Despite this evidence that Congress did not regard state tort litigation as an obstacle to achieving its purposes, Wyeth
nonetheless maintains that, because the FDCA requires the FDA to determine that a drug is safe and effective under the
conditions set forth in its labeling, the agency must be presumed to have performed a precise balancing of risks and benefits
and to have established a specific labeling standard that leaves no room for different state-law judgments. In advancing this
argument, Wyeth relies not on any statement by Congress, but instead on the preamble to a 2006 FDA regulation governing the
content and format of prescription drug labels. See Brief for Petitioner 8, 11, 42, 45, and 50 (citing 71 Fed.Reg. 3922 (2006)). In
that preamble, the FDA declared that the FDCA establishes “both a ‘floor’ and a ‘ceiling,’ ” so that “FDA approval of labeling ...
preempts conflicting or contrary State law.” Id., at 3934–3935. It further stated that certain state-law actions, such as those
involving failure-to-warn claims, “threaten FDA's statutorily *576 prescribed role as the expert Federal agency responsible
for evaluating and regulating drugs.” Id., at 3935.
This Court has recognized that an agency regulation with the force of law can pre-empt conflicting state requirements. See,
e.g.,Geier v. American Honda Motor Co., 529 U.S. 861, 120 S. Ct. 1913, 146 L. Ed. 2d 914 (2000); Hillsborough County v.
Automated Medical Laboratories, Inc., 471 U.S. 707, 713, 105 S. Ct. 2371, 85 L. Ed. 2d 714 (1985). In such cases, the Court
has **1201 performed its own conflict determination, relying on the substance of state and federal law and not on agency
proclamations of pre-emption. We are faced with no such regulation in this case, but rather with an agency's mere assertion
that state law is an obstacle to achieving its statutory objectives. Because Congress has not authorized the FDA to pre-empt
state law directly, cf. 21 U.S.C. § 360k (authorizing the FDA to determine the scope of the Medical Devices Amendments' pre-
emption clause), 9 the question is what weight we should accord the FDA's opinion.
9 For similar examples, see 47 U.S.C. §§ 253(a), (d) (2000 ed.) (authorizing the Federal Communications Commission to pre-empt “any
[state] statute, regulation, or legal requirement” that “may prohibit or have the effect of prohibiting the ability of any entity to provide
any interstate or intrastate telecommunications service”); 30 U.S.C. § 1254(g) (2006 ed.) (pre-empting any statute that conflicts with
“the purposes and the requirements of this chapter” and permitting the Secretary of the Interior to “set forth any State law or regulation
which is preempted and superseded”); and 49 U.S.C. § 5125(d) (2000 ed. and Supp. V) (authorizing the Secretary of Transportation
to decide whether a state or local statute that conflicts with the regulation of hazardous waste transportation is pre-empted).
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[10] [11] In prior cases, we have given “some weight” to an agency's views about the impact of tort law on federal objectives
when “the subject matter is technica[l] and the relevant history and background are complex and extensive.” Geier, 529 U.S., at
883, 120 S. Ct. 1913. Even in such cases, however, we have not deferred to an agency's conclusion that state law is pre-empted.
Rather, we have attended to an agency's explanation of how state law affects the regulatory scheme. While *577 agencies
have no special authority to pronounce on pre-emption absent delegation by Congress, they do have a unique understanding of
the statutes they administer and an attendant ability to make informed determinations about how state requirements may pose
an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines, 312 U.S, at 67, 61
S. Ct. 399; see Geier, 529 U.S., at 883, 120 S. Ct. 1913;Lohr, 518 U.S., at 495–496, 116 S. Ct. 2240. The weight we accord the
agency's explanation of state law's impact on the federal scheme depends on its thoroughness, consistency, and persuasiveness.
Cf. United States v. Mead Corp., 533 U.S. 218, 234–235, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001); Skidmore v. Swift & Co.,
323 U.S. 134, 140, 65 S. Ct. 161, 89 L. Ed. 124 (1944).
Under this standard, the FDA's 2006 preamble does not merit deference. When the FDA issued its notice of proposed rulemaking
in December 2000, it explained that the rule would “not contain policies that have federalism implications or that preempt State
law.” 65 Fed.Reg. 81103; see also 71 id., at 3969 (noting that the “proposed rule did not propose to preempt state law”). In
2006, the agency finalized the rule and, without offering States or other interested parties notice or opportunity for comment,
articulated a sweeping position on the FDCA's pre-emptive effect in the regulatory preamble. The agency's views on state law
are inherently suspect in light of this procedural failure.
Further, the preamble is at odds with what evidence we have of Congress' purposes, and it reverses the FDA's own longstanding
position without providing a reasoned explanation, including any discussion of how state law has interfered with the FDA's
regulation of drug labeling during decades of coexistence. The FDA's 2006 position plainly does not reflect the agency's own
view at all times relevant to this litigation. Not once prior to Levine's injury **1202 did the FDA suggest that state tort law
stood as an obstacle to its statutory mission. To the contrary, it cast federal labeling standards as a floor upon which States could
build and repeatedly disclaimed *578 any attempt to pre-empt failure-to-warn claims. For instance, in 1998, the FDA stated
that it did “not believe that the evolution of state tort law [would] cause the development of standards that would be at odds
with the agency's regulations.” 63 id., at 66384. It further noted that, in establishing “ minimal standards” for drug labels, it did
not intend “to preclude the states from imposing additional labeling requirements.” Ibid. 10
10 See also 44 Fed.Reg. 37437 (1979) (“It is not the intent of the FDA to influence the civil tort liability of the manufacturer”);
59 Fed.Reg. 3948 (1994) (“[P]roduct liability plays an important role in consumer protection”); Porter, The LohrDecision: FDA
Perspective and Position, 52 Food & Drug L.J. 7, 10 (1997) (former chief counsel to the FDA stating that the FDA regarded state
law as complementing the agency's mission of consumer protection).
In keeping with Congress' decision not to pre-empt common-law tort suits, it appears that the FDA traditionally regarded state
law as a complementary form of drug regulation. The FDA has limited resources to monitor the 11,000 drugs on the market, 11
and manufacturers have superior access *579 to information about their drugs, especially in the postmarketing phase as new
risks emerge. State tort suits uncover unknown drug hazards and provide incentives for drug manufacturers to disclose safety
risks promptly. They also serve a distinct compensatory function that may motivate injured persons to come forward with
information. Failure-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. Thus, the FDA long maintained that state law offers an additional, and
important, layer of consumer protection that complements FDA regulation. **1203 12 The agency's 2006 preamble represents
a dramatic change in position.
11 In 1955, the same year that the agency approved Wyeth's Phenergan application, an FDA advisory committee issued a report
finding “conclusively” that “the budget and staff of the Food and Drug Administration are inadequate to permit the discharge of
its existing responsibilities for the protection of the American public.” Citizens Advisory Committee on the FDA, Report to the
Secretary of Health, Education, and Welfare, H.R. Doc. No. 227, 84th Cong., 1st Sess., 53. Three recent studies have reached similar
conclusions. See FDA Science Board, Report of the Subcommittee on Science and Technology: FDA Science and Mission at Risk
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2, 6 (2007), online at http://www.fda.gov/ohrms/ dockets/ac/07/briefing/2007–4329b_02_01_FDA% 20Report% 20on% 20Science
% 20 and% 20Technology.pdf (all Internet materials as visited Feb. 23, 2009, and available in Clerk of Court's case file) (“[T]he
Agency suffers from serious scientific deficiencies and is not positioned to meet current or emerging regulatory responsibilities”);
National Academies, Institute of Medicine, The Future of Drug Safety: Promoting and Protecting the Health of the Public 193–194
(2007) (“The [FDA] lacks the resources needed to accomplish its large and complex mission .... There is widespread agreement that
resources for postmarketing drug safety work are especially inadequate and that resource limitations have hobbled the agency's ability
to improve and expand this essential component of its mission”); GAO, Drug Safety: Improvement Needed in FDA's Postmarket
Decision-making and Oversight Process 5 (GAO–06–402, 2006), http://www.gao.gov/new.items/d06402.pdf (“FDA lacks a clear
and effective process for making decisions about, and providing management oversight of, postmarket safety issues”); see also House
Committee on Oversight and Government Reform, Majority Staff Report, FDA Career Staff Objected to Agency Preemption Policies
4 (2008) (“[T]he Office of Chief Counsel ignored the warnings from FDA scientists and career officials that the preemption language
[of the 2006 preamble] was based on erroneous assertions about the ability of the drug approval process to ensure accurate and up-
to-date drug labels”).
12 See generally Brief for Former FDA Commissioners Drs. Donald Kennedy and David Kessler as Amici Curiae; see also Kessler &
Vladeck, A Critical Examination of the FDA's Efforts To Preempt Failure–To–Warn Claims, 96 Geo. L.J. 461, 463 (2008); Bates
v. Dow Agrosciences LLC, 544 U.S. 431, 451, 125 S. Ct. 1788, 161 L. Ed. 2d 687 (2005) (noting that state tort suits “can serve as
a catalyst” by aiding in the exposure of new dangers and prompting a manufacturer or the federal agency to decide that a revised
label is required).
Largely based on the FDA's new position, Wyeth argues that this case presents a conflict between state and federal law analogous
to the one at issue in Geier. There, we held that state tort claims premised on Honda's failure to install airbags conflicted with a
federal regulation that did not require airbags for all cars. The Department of Transportation *580 (DOT) had promulgated a
rule that provided car manufacturers with a range of choices among passive restraint devices. Geier, 529 U.S., at 875, 120 S. Ct.
1913. Rejecting an “ ‘all airbag’ ” standard, the agency had called for a gradual phase-in of a mix of passive restraints in order
to spur technological development and win consumer acceptance. Id., at 879, 120 S. Ct. 1913. Because the plaintiff's claim was
that car manufacturers had a duty to install airbags, it presented an obstacle to achieving “the variety and mix of devices that
the federal regulation sought.” Id., at 881, 120 S. Ct. 1913.
Wyeth and the dissent contend that the regulatory scheme in this case is nearly identical, but, as we have described, it is quite
different. In Geier, the DOT conducted a formal rulemaking and then adopted a plan to phase in a mix of passive restraint
devices. Examining the rule itself and the DOT's contemporaneous record, which revealed the factors the agency had weighed
and the balance it had struck, we determined that state tort suits presented an obstacle to the federal scheme. After conducting
our own pre-emption analysis, we considered the agency's explanation of how state law interfered with its regulation, regarding
it as further support for our independent conclusion that the plaintiff's tort claim obstructed the federal regime.
By contrast, we have no occasion in this case to consider the pre-emptive effect of a specific agency regulation bearing the
force of law. And the FDA's newfound opinion, expressed in its 2006 preamble, that state law “frustrate[s] the agency's
implementation of its statutory mandate,” 71 Fed.Reg. 3934, does not merit deference for the reasons we have explained. 13
Indeed, the “complex and extensive” regulatory *581 history and background relevant to this case, Geier, 529 U.S., at 883,
120 S. Ct. 1913, undercut the FDA's recent pronouncements of pre-emption, as they reveal the longstanding coexistence of
state and federal law and the FDA's traditional recognition of state-law remedies—a recognition in place each time the agency
reviewed Wyeth's Phenergan label. 14
13 The United States' amicus brief is similarly undeserving of deference. Unlike the Government's brief in Geier v. American Honda
Motor Co., 529 U.S. 861, 120 S. Ct. 1913, 146 L. Ed. 2d 914 (2000), which explained the effects of state law on the DOT's regulation
in a manner consistent with the agency's prior accounts, see id., at 861, 120 S. Ct. 1913, the Government's explanation of federal drug
regulation departs markedly from the FDA's understanding at all times relevant to this case.
14 Wyeth's more specific contention—that this case resembles Geier because the FDA determined that no additional warning on IV-
push administration was needed, thereby setting a ceiling on Phenergan's label—is belied by the record. As we have discussed, the
FDA did not consider and reject a stronger warning against IV-push injection of Phenergan. See also App. 249–250 (“[A] tort case
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is unlikely to obstruct the regulatory process when the record shows that the FDA has paid very little attention to the issues raised
by the parties at trial”).
**1204 In short, Wyeth has not persuaded us that failure-to-warn claims like Levine's obstruct the federal regulation of drug
labeling. Congress has repeatedly declined to pre-empt state law, and the FDA's recently adopted position that state tort suits
interfere with its statutory mandate is entitled to no weight. Although we recognize that some state-law claims might well
frustrate the achievement of congressional objectives, this is not such a case.
V
We conclude that it is not impossible for Wyeth to comply with its state and federal law obligations and that Levine's common-
law claims do not stand as an obstacle to the accomplishment of Congress' purposes in the FDCA. Accordingly, the judgment
of the Vermont Supreme Court is affirmed.
It is so ordered.
Justice BREYER, concurring.
I write separately to emphasize the Court's statement that “we have no occasion in this case to consider the pre-emptive effect
of a specific agency regulation bearing the force of law.” Ante, at 1203. State tort law will sometimes help the *582 Food
and Drug Administration (FDA) “uncover unknown drug hazards and [encourage] drug manufacturers to disclose safety risks.”
Ante, at 1202. But it is also possible that state tort law will sometimes interfere with the FDA's desire to create a drug label
containing a specific set of cautions and instructions. I also note that some have argued that state tort law can sometimes raise
prices to the point where those who are sick are unable to obtain the drugs they need. See Lasagna, The Chilling Effect of Product
Liability on New Drug Development, in The Liability Maze 334, 335–336 (P. Huber & R. Litan eds.1991). The FDA may seek
to determine whether and when state tort law acts as a help or a hindrance to achieving the safe drug-related medical care that
Congress sought. Medtronic, Inc. v. Lohr, 518 U.S. 470, 506, 116 S. Ct. 2240, 135 L. Ed. 2d 700 (1996) (BREYER, J., concurring
in part and concurring in judgment); cf. Bates v. Dow Agrosciences LLC, 544 U.S. 431, 454–455, 125 S. Ct. 1788, 161 L. Ed. 2d
687 (2005) (BREYER, J., concurring). It may seek to embody those determinations in lawful specific regulations describing,
for example, when labeling requirements serve as a ceiling as well as a floor. And it is possible that such determinations would
have pre-emptive effect. See Lohr, supra, at 505, 116 S. Ct. 2240 (opinion of BREYER, J.) (citing Hillsborough County v.
Automated Medical Laboratories, Inc., 471 U.S. 707, 105 S. Ct. 2371, 85 L. Ed. 2d 714 (1985)). I agree with the Court, however,
that such a regulation is not at issue in this case.
Justice THOMAS, concurring in the judgment.
I agree with the Court that the fact that the Food and Drug Administration (FDA) approved the label for petitioner Wyeth's
drug Phenergan does not pre-empt the state-law judgment before the Court. That judgment was based on a jury finding that the
label did not adequately warn of the risk involved in administering Phenergan through the IV-push injection method. Under
federal law, without prior approval from the FDA, Wyeth could have “add[ed] or strengthen[ed]” information on its label about
“a contraindication, *583 warning, precaution, or adverse reaction,” **1205 21 CFR § 314.70(c)(6)(iii)(A) (2008), or “about
dosage and administration that is intended to increase the safe use of the drug product,” § 314.70(c)(6)(iii)(C), in order to
“reflect newly acquired information,” including “new analyses of previously submitted data,” about the dangers of IV-push
administration of Phenergan, 73 Fed.Reg. 49603, 49609 (2008). It thus was possible for Wyeth to label and market Phenergan in
compliance with federal law while also providing additional warning information on its label beyond that previously approved
by the FDA. In addition, 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. The Vermont court's judgment in this case, therefore,
did not directly conflict with federal law and is not pre-empted.
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I write separately, however, because I cannot join the majority's implicit endorsement of far-reaching implied pre-emption
doctrines. In particular, I have become increasingly skeptical of this Court's “purposes and objectives” pre-emption
jurisprudence. Under this approach, the Court routinely invalidates state laws based on perceived conflicts with broad federal
policy objectives, legislative history, or generalized notions of congressional purposes that are not embodied within the text of
federal law. Because implied pre-emption doctrines that wander far from the statutory text are inconsistent with the Constitution,
I concur only in the judgment.
I
A
In order “to ensure the protection of our fundamental liberties,” Atascadero State Hospital v. Scanlon, 473 U.S. 234, 242, 105
S. Ct. 3142, 87 L. Ed. 2d 171 (1985) (internal quotation marks omitted), the “Constitution establishes a system of dual sovereignty
between the States and the Federal Government.” *584 Gregory v. Ashcroft, 501 U.S. 452, 457, 111 S. Ct. 2395, 115 L. Ed. 2d
410 (1991). The Framers adopted this “ ‘constitutionally mandated balance of power,’ ” Atascadero State Hospital, supra,
at 242, 105 S. Ct. 3142, to “reduce the risk of tyranny and abuse from either front,” because a “federalist structure of joint
sovereigns preserves to the people numerous advantages,” such as “a decentralized government that will be more sensitive to
the diverse needs of a heterogeneous society” and “increase[d] opportunity for citizen involvement in democratic processes,”
Gregory, supra, at 458, 111 S. Ct. 2395. Furthermore, as the Framers observed, the “ compound republic of America” provides
“a double security ... to the rights of the people” because “the power surrendered by the people is first divided between two
distinct governments, and then the portion allotted to each subdivided among distinct and separate departments.” The Federalist
No. 51, p. 266 (M. Beloff ed., 2d ed.1987).
Under this federalist system, “the States possess sovereignty concurrent with that of the Federal Government, subject only to
limitations imposed by the Supremacy Clause.” Tafflin v. Levitt, 493 U.S. 455, 458, 110 S. Ct. 792, 107 L. Ed. 2d 887 (1990). In
this way, the Supremacy Clause gives the Federal Government “a decided advantage in [a] delicate balance” between federal
and state sovereigns. Gregory, 501 U.S., at 460, 111 S. Ct. 2395. “As long as it is acting within the powers granted it under the
Constitution, Congress may impose its will on the States.” Ibid. That is an “extraordinary power in a federalist system.” Ibid.
Nonetheless, the States retain substantial sovereign authority. U.S. Const., Amdt. 10 (“The powers not delegated to **1206
the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people”);
see also Alden v. Maine, 527 U.S. 706, 713, 119 S. Ct. 2240, 144 L. Ed. 2d 636 (1999); Printz v. United States, 521 U.S. 898, 918–
922, 117 S. Ct. 2365, 138 L. Ed. 2d 914 (1997); New York v. United States, 505 U.S. 144, 155–156, 112 S. Ct. 2408, 120 L. Ed. 2d
120 (1992); Gregory,supra, at 457–459, 111 S. Ct. 2395;Tafflin, supra, at 458, 110 S. Ct. 792. In accordance with the text and
structure of the Constitution, “[t]he powers delegated by the proposed constitution to the *585 federal government, are few
and defined” and “[t]hose which are to remain in the state governments, are numerous and indefinite.” The Federalist No. 45,
at 237–238. Indeed, in protecting our constitutional government, “the preservation of the States, and the maintenance of their
governments, are as much within the design and care of the Constitution as the preservation of the Union and the maintenance
of the National government.” Texas v. White, 7 Wall. 700, 725, 19 L. Ed. 227 (1869), quoted in New York v. United States,
supra, at 162, 112 S. Ct. 2408.
As a result, in order to protect the delicate balance of power mandated by the Constitution, the Supremacy Clause must operate
only in accordance with its terms. The clause provides:
“This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or
which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every
State shall be bound thereby, any Thing in the Constitution or Laws of any state to the Contrary notwithstanding.”Art. VI, cl. 2.
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With respect to federal laws, then, the Supremacy Clause gives “supreme” status only to those that are “made in Pursuance”
of “[t]his Constitution.” Ibid.; see 3 J. Story, Commentaries on the Constitution of the United States § 1831, p. 694 (1833)
(hereinafter Story) (“It will be observed, that the supremacy of the laws is attached to those only, which are made in pursuance
of the constitution”).
Federal laws “made in Pursuance” of the Constitution must comply with two key structural limitations in the Constitution that
ensure that the Federal Government does not amass too much power at the expense of the States. The first structural limitation,
which the parties have not raised in this case, is “the Constitution's conferral upon Congress of not all governmental powers, but
only discrete, enumerated ones.” Printz,supra, at 919, 117 S. Ct. 2365; see also United States v. Morrison, *586 529 U.S. 598,
618, n. 8, 120 S. Ct. 1740, 146 L. Ed. 2d 658 (2000); New York v. United States, supra, at 155–157, 112 S. Ct. 2408;McCulloch v.
Maryland, 4 Wheat. 316, 405, 4 L. Ed. 579 (1819) (“This government is acknowledged by all to be one of enumerated powers”). 1
1 This structural limitation may be implicated in a pre-emption case if the federal law at issue is beyond the scope of Congress'
enumerated powers. Expansion of congressional power through an “increasingly generous ... interpretation of the commerce power
of Congress,” for example, creates “a real risk that Congress will gradually erase the diffusion of power between State and Nation
on which the Framers based their faith in the efficiency and vitality of our Republic.” Garcia v. San Antonio Metropolitan Transit
Authority, 469 U.S. 528, 583–584, 105 S. Ct. 1005, 83 L. Ed. 2d 1016 (1985) (O'Connor, J., dissenting); see also Marbury v. Madison,
1 Cranch 137, 176, 2 L. Ed. 60 (1803) (“The powers of the legislature are defined, and limited; and that those limits may not be
mistaken, or forgotten, the constitution is written”).
The second structural limitation is the complex set of procedures that Congress **1207 and the President must follow to enact
“Laws of the United States.” See INS v. Chadha, 462 U.S. 919, 945–946, 103 S. Ct. 2764, 77 L. Ed. 2d 317 (1983) (setting forth
the Constitution's Bicameral and Presentment Clauses, Art. I, § 7, cls. 2–3, which “prescribe and define the respective functions
of the Congress and of the Executive in the legislative process”). “[T]he Framers were acutely conscious that the bicameral
requirement and the Presentment Clauses would serve essential constitutional functions,” Chadha, 462 U.S., at 951, 103 S. Ct.
2764, by allowing the passage of legislation only after it has proceeded through “a step-by-step, deliberate and deliberative
process,” id., at 959, 103 S. Ct. 2764, that was “finely wrought and exhaustively considered” by the Framers, id., at 951, 103
S. Ct. 2764. The Supremacy Clause thus requires that pre-emptive effect be given only those to federal standards and policies that
are set forth in, or necessarily follow from, the statutory text that was produced through the constitutionally required bicameral
and presentment procedures. See 3 J. Story § 1831, at 694 (Actions of the Federal Government “which are not pursuant to its
constitutional powers, but which are invasions of the residuary authorities of the smaller societies,” are not “the *587 supreme
law of the land. They will be merely acts of usurpation, and will deserve to be treated as such”).
B
In light of these constitutional principles, I have become “increasing[ly] reluctan[t] to expand federal statutes beyond their terms
through doctrines of implied pre-emption.” Bates v. Dow Agrosciences LLC, 544 U.S. 431, 459, 125 S. Ct. 1788, 161 L. Ed. 2d
687 (2005) (THOMAS, J., concurring in judgment in part and dissenting in part). My review of this Court's broad implied
pre-emption precedents, particularly its “purposes and objectives” pre-emption jurisprudence, has increased my concerns that
implied pre-emption doctrines have not always been constitutionally applied. Under the vague and “potentially boundless”
doctrine of “purposes and objectives” pre-emption, Geier v. American Honda Motor Co., 529 U.S. 861, 907, 120 S. Ct. 1913, 146
L. Ed. 2d 914 (2000) (STEVENS, J., dissenting), for example, the Court has pre-empted state law based on its interpretation of
broad federal policy objectives, legislative history, or generalized notions of congressional purposes that are not contained within
the text of federal law. See, e.g.,Pharmaceutical Research and Mfrs. of America v. Walsh, 538 U.S. 644, 678, 123 S. Ct. 1855,
155 L. Ed. 2d 889 (2003) (THOMAS, J., concurring in judgment) (referring to the “concomitant danger of invoking obstacle
pre-emption based on the arbitrary selection of one purpose to the exclusion of others”); Crosby v. National Foreign Trade
Council, 530 U.S. 363, 388–391, 120 S. Ct. 2288, 147 L. Ed. 2d 352 (2000) (SCALIA, J., concurring in judgment) (criticizing the
majority's reliance on legislative history to discern statutory intent when that intent was “perfectly obvious on the face of th[e]
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statute”); Geier, supra, at 874–883, 120 S. Ct. 1913 (relying on regulatory history, agency comments, and the Government's
litigating position to determine that federal law pre-empted state law).
Congressional and agency musings, however, do not satisfy the Art. I, § 7 requirements for enactment of federal law and,
therefore, do not pre-empt state law under the Supremacy *588 Clause. When analyzing the pre-emptive effect of federal
statutes or regulations validly promulgated thereunder, “[e]vidence of pre-emptive purpose [must be] sought in the text and
structure of the [provision] at issue” to comply with the Constitution. **1208 CSX Transp., Inc. v. Easterwood, 507 U.S. 658,
664, 113 S. Ct. 1732, 123 L. Ed. 2d 387 (1993); see also New York v. FERC, 535 U.S. 1, 18, 122 S. Ct. 1012, 152 L. Ed. 2d 47(2002) (“[A] federal agency may pre-empt state law only when and if it is acting within the scope of its congressional delegated
authority ... [for] an agency literally has no power to act, let alone pre-empt the validly enacted legislation of a sovereign State,
unless and until Congress confers power upon it” (internal quotation marks omitted; second alteration in original)); Camps
Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 617, 117 S. Ct. 1590, 137 L. Ed. 2d 852 (1997) (THOMAS, J.,
dissenting) (noting that “treating unenacted congressional intent as if it were law would be constitutionally dubious”). Pre-
emption analysis should not be “a freewheeling judicial inquiry into whether a state statute is in tension with federal objectives,
but an inquiry into whether the ordinary meanings of state and federal law conflict.” Bates, supra, at 459, 125 S. Ct. 1788(THOMAS, J., concurring in judgment in part and dissenting in part) (internal quotation marks and citation omitted); see also
Geier, supra, at 911, 120 S. Ct. 1913 (STEVENS, J., dissenting) (“[P]re-emption analysis is, or at least should be, a matter of
precise statutory [or regulatory] construction rather than an exercise in free-form judicial policymaking” (internal quotation
marks omitted)). Pre-emption must turn on whether state law conflicts with the text of the relevant federal statute or with the
federal regulations authorized by that text. See Foster v. Love, 522 U.S. 67, 71, 118 S. Ct. 464, 139 L. Ed. 2d 369 (1997) (finding
that conflict pre-emption question “turn[ed] entirely on the meaning of the state and federal statutes” at issue before the Court);
see also New York v. FERC, supra, at 19, 122 S. Ct. 1012.
II
This Court has determined that there are two categories of conflict pre-emption, both of which Wyeth contends are at *589
issue in this case. First, the Court has found pre-emption “where compliance with both federal and state regulations is a physical
impossibility for one engaged in interstate commerce.” Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142–143,
83 S. Ct. 1210, 10 L. Ed. 2d 248 (1963). Second, the Court has determined that federal law pre-empts state law when, “under the
circumstances of [a] particular case, [state] law stands as an obstacle to the accomplishment and execution of the full purposes
and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 85 L. Ed. 581 (1941). 2
2 The majority's pre-emption analysis relies in part on a presumption against pre-emption. Ante, at 1194, and n. 3 (opinion of STEVENS,
J.). Because it is evident from the text of the relevant federal statutes and regulations themselves that the state-law judgment below
is not pre-empted, it is not necessary to decide whether, or to what extent, the presumption should apply in a case such as this one,
where Congress has not enacted an express-pre-emption clause. Cf. Altria Group, Inc. v. Good, 555 U.S. 70, ––––, 129 S. Ct. 538,
551–552, 172 L. Ed. 2d 398 (2008) (THOMAS, J., dissenting) (rejecting the use of a presumption against pre-emption in express pre-
emption cases).
A
Wyeth first contends that “it would have been impossible for it to comply with the state-law duty to modify Phenergan's labeling
without violating federal law.” Ante, at 1193 (opinion for the Court by STEVENS, J.). But, as the majority explains, the text of
the relevant federal statutory provisions and the corresponding regulations do not directly conflict with the state-law judgment
before us.
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This Court has used different formulations of the standard to be used in deciding **1209 whether state and federal law conflict,
and thus lead to pre-emption, under the “impossibility” doctrine. See, e.g.,Geier, supra, at 873, 120 S. Ct. 1913 (“a case in which
state law penalizes what federal law requires”); American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524
U.S. 214, 227, 118 S. Ct. 1956, 141 L. Ed. 2d 222 (1998)(AT & T) (when state-law claims “directly conflict” with federal law),
cited in Geier, supra, at 874, 120 S. Ct. 1913 (describing AT & T as a “cas[e] involving impossibility”); Florida *590 Lime &
Avocado Growers, supra, at 142–143, 83 S. Ct. 1210 (“where compliance with both federal and state regulations is a physical
impossibility”). The Court has generally articulated a very narrow “impossibility standard,” see Crosby, 530 U.S., at 372–373,
120 S. Ct. 2288 (citing Florida Lime & Avocado Growers, supra, at 142–143, 83 S. Ct. 1210); see also Sprietsma v. Mercury
Marine, 537 U.S. 51, 64–65, 123 S. Ct. 518, 154 L. Ed. 2d 466 (2002); United States v. Locke, 529 U.S. 89, 109, 120 S. Ct. 1135,
146 L. Ed. 2d 69 (2000)—in part because the overly broad sweep of the Court's “purposes and objectives” approach, see infra,
at 1211 – 1217, has rendered it unnecessary for the Court to rely on “impossibility” pre-emption.
The Court, in fact, has not explained why a narrow “physical impossibility” standard is the best proxy for determining when state
and federal laws “directly conflict” for purposes of the Supremacy Clause. There could be instances where it is not “physically
impossible” to comply with both state and federal law, even when the state and federal laws give directly conflicting commands.
See Nelson, Preemption, 86 Va. L.Rev. 225, 260–261 (2000). For example, if federal law gives an individual the right to
engage in certain behavior that state law prohibits, the laws would give contradictory commands notwithstanding the fact that
an individual could comply with both by electing to refrain from the covered behavior. Ibid. Therefore, “physical impossibility”
may not be the most appropriate standard for determining whether the text of state and federal laws directly conflict. See ibid.
(concluding that the Supremacy Clause does not limit direct conflicts to cases with “physically impossible” conflicts and arguing
that evidence from the Founding supports a standard of “logical-contradiction”); see also AT & T, supra, at 227, 118 S. Ct. 1956(requiring that the state-law claims “directly conflict” with federal law); 3 Story § 1836, at 701 (suggesting instead that a state
law is pre-empted by the Supremacy Clause when it is “repugnant to the constitution of the United States” (emphasis added)).
*591 Nonetheless, whatever the precise constitutional contours of implied pre-emption may be, I am satisfied that it does not
operate against respondent's judgment below. The text of the federal laws at issue do not require that the state-court judgment
at issue be pre-empted, under either the narrow “physical impossibility” standard, Florida Lime & Avocado Growers,supra, at
142–143, 83 S. Ct. 1210, or a more general “direc[t] conflict” standard, AT & T,supra, at 227, 118 S. Ct. 1956.
Under the FDA's “changes being effected” regulation, 21 CFR § 314.70(c)(6)(iii), which was promulgated pursuant to the
FDA's statutory authority, it is physically possible for Wyeth to market Phenergan in compliance with federal and Vermont law.
As the majority explains, Wyeth could have changed the warning on its label regarding IV-push without violating federal law.
See ante, at 1196 – 1197. The “changes being effected” regulation allows drug manufacturers to change their labels without the
FDA's preapproval if the changes “add or strengthen a contraindication, warning, precaution, or adverse **1210 reaction,” §
314.70(c)(6)(iii)(A), or “add or strengthen an instruction about dosage and administration that is intended to increase the safe
use of the drug product,” § 314.70(c)(6)(iii)(C), in order to “reflect newly acquired information,” including “new analyses of
previously submitted data,” 73 Fed.Reg. 49603, 49609. Under the terms of these regulations, after learning of new incidences
of gangrene-induced amputation resulting from the IV-push administration of Phenergan, see ante, at 1196 – 1197, federal law
gave Wyeth the authority to change Phenergan's label to “strengthen a ... warning,” “strengthen a ... precaution,” § 314.70(c)
(6)(iii)(A), or to “strengthen an instruction about ... administration [of the IV-push method] ... to increase the safe use of the
drug product,” § 314.70(c)(6)(iii)(C). Thus, it was physically possible for Wyeth to comply with a state-law requirement to
provide stronger warnings on Phenergan about the risks of the IV-push administration method *592 while continuing to market
Phenergan in compliance with federal law.
In addition, the text of the statutory provisions governing FDA drug labeling, and the regulations promulgated thereunder,
do 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. Thus, there is no “direct conflict” between the federal labeling law and the state-court
judgment. The statute prohibits the interstate marketing of any drug, except for those that are federally approved. See 21 U.S.C.
§ 355(a) (“No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of
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an application filed pursuant to subsection (b) or (j) of this section is effective with respect to such drug” (emphasis added)).
To say, as the statute does, that Wyeth may not market a drug without federal approval (i.e., without an FDA-approved label)
is not to say that federal approval gives Wyeth the unfettered right, for all time, to market its drug with the specific label that
was federally approved. Initial approval of a label amounts to a finding by the FDA that the label is safe for purposes of gaining
federal approval to market the drug. It does not represent a finding that the drug, as labeled, can never be deemed unsafe by
later federal action, or as in this case, the application of state law.
Instead, FDA regulations require a drug manufacturer—after initial federal approval of a drug's label—to revise the federally
approved label “to include a warning as soon as there is reasonable evidence of an association of a serious hazard with a
drug.”21 CFR § 201.80(e). Drug manufacturers are also required to “establish and maintain records and make reports” to the
FDA about “[a]ny adverse event associated with the use of a drug in humans, whether or not considered drug related,” after it
has received federal approval. §§ 314.80(a), (c), (j). In addition, the manufacturer must make periodic reports about “adverse
drug experience *593 [s]” associated with its drug and include “a history of actions taken since the last report because of
adverse drug experiences (for example, labeling changes or studies initiated).” §§ 314.80(c)(2)(i)-(ii). When such records and
reports are not made, the FDA can withdraw its approval of the drug. § 314.80(j); see also 21 U.S.C. § 355(e) (“The Secretary
may ... withdraw the approval of an application ... if the Secretary finds ... that the applicant has failed to establish a system for
maintaining required records, or has repeatedly or deliberately failed to maintain such records or to make required reports”).
The FDA may also determine that a drug is no longer safe for use based on “clinical or other experience, tests, or other scientific
**1211 data.” Ibid. (approval may be withdrawn if “the Secretary finds ... that clinical or other experience, tests, or other
scientific data show that such drug is unsafe for use under the conditions of use upon the basis of which the application was
approved”).
The text of the statutory provisions and the accompanying regulatory scheme governing the FDA drug approval process,
therefore, establish that the FDA's initial approval of a drug is not a guarantee that the drug's label will never need to be changed.
And nothing in the text of the statutory or regulatory scheme necessarily insulates Wyeth from liability under state law simply
because the FDA has approved a particular label.
In sum, the relevant federal law did not give Wyeth a right that the state-law judgment took away, and it was possible for
Wyeth to comply with both federal law and the Vermont-law judgment at issue here. The federal statute and regulations neither
prohibited the stronger warning label required by the state judgment, nor insulated Wyeth from the risk of state-law liability.
With no “direct conflict” between the federal and state law, then, the state-law judgment is not pre-empted. Cf. AT & T, 524 U.S.,
at 221–226, 118 S. Ct. 1956 (finding pre-emption where federal law forbade common carriers from extending communications
privileges requested by state-law *594 claims); Foster, 522 U.S., at 68–69, 118 S. Ct. 464 (finding pre-emption where the
federal statute required congressional elections on a particular date different from that provided by state statute).
B
Wyeth also contends that state and federal law conflict because “recognition of [this] state tort action creates an unacceptable
‘obstacle to the accomplishment and execution of the full purposes and objectives of Congress,’ Hines v. Davidowitz, 312
U.S. 52, 67, 61 S. Ct. 399, 85 L. Ed. 581 (1941), because it substitutes a lay jury's decision about drug labeling for the expert
judgment of the FDA.” Ante, at 1193 – 1194. This Court's entire body of “purposes and objectives” pre-emption jurisprudence
is inherently flawed. The cases improperly rely on legislative history, broad atextual notions of congressional purpose, and even
congressional inaction in order to pre-empt state law. See supra, at 1192 – 1194. I, therefore, cannot join the majority's analysis
of this claim, see ante, at 1199 – 1204, or its reaffirmation of the Court's “purposes and objectives” jurisprudence, ante, at 1199
– 1200 (analyzing congressional purposes); ante, at 1201 (quoting the “ ‘purposes and objectives' ” pre-emption standard from
Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 85 L. Ed. 581 (1941), and Geier, 529 U.S., at 883, 120 S. Ct. 1913);ante, at
1202 – 1203, and nn. 13–14 (analyzing this case in light of Geier, 529 U.S. 861, 120 S. Ct. 1913, 146 L. Ed. 2d 914).
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1
The Court first formulated its current “purposes and objectives” pre-emption standard in Hines when it considered whether
the federal Alien Registration Act pre-empted an Alien Registration Act adopted by the Commonwealth of Pennsylvania. The
Court did not find that the two statutes, by their terms, directly conflicted. See Hines, supra, at 59–60, and n. 1, 61 S. Ct. 399(citing Pa. Stat. Ann., Tit. 35, §§ 1801–1806 (Purdon Supp.1940)); 312 U.S., at 60, and n. 5, 61 S. Ct. 399 (citing Act of June
28, 1940, 54 Stat. 670); 312 U.S., at 69–74, 61 S. Ct. 399 (analyzing numerous extratextual sources and finding pre-emption
without *595 concluding that the terms of the federal and state laws directly conflict); see also id., at 78, 61 S. Ct. 399 (noting
that “[i]t is conceded that the federal **1212 act in operation does not at any point conflict with the state statute” (Stone,
J., dissenting)). 3 Nonetheless, the Court determined that it was not confined to considering merely the terms of the relevant
federal law in conducting its pre-emption analysis. Rather, it went on to ask whether the state law “stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress.” Id., at 67, 61 S. Ct. 399.
3 According to the Court, the Pennsylvania Act required:
“every alien 18 years or over, with certain exceptions, to register once each year; provide such information as is required by
the statute, plus any ‘other information and details' that the Department of Labor and Industry may direct; pay $1 as an annual
registration fee; receive an alien identification card and carry it at all times; show the card whenever it may be demanded by any
police officer or any agent of the Department of Labor and Industry; and exhibit the card as a condition precedent to registering
a motor vehicle in his name or obtaining a license to operate one. ... Nonexempt aliens who fail to register are subject to a fine ...
or imprisonment .... For failure to carry an identification card or for failure to show it upon proper demand, the punishment is a
fine ... or imprisonment ....” Hines, 312 U.S., at 59–60, 61 S. Ct. 399 (footnote omitted).
The Court explained that the federal Alien Registration Act required:
“a single registration of aliens 14 years of age and over; detailed information specified by the Act, plus ‘such additional matters as
may be prescribed by the Commissioner, with the approval of the Attorney General’; finger-printing of all registrants; and secrecy
of the federal files .... No requirement that aliens carry a registration card to be exhibited to police or others is embodied in the
law, and only the wilful failure to register is made a criminal offense ....” Id., at 60–61, 61 S. Ct. 399.
In so doing, the Court looked far beyond the relevant federal statutory text and instead embarked on its own freeranging
speculation about what the purposes of the federal law must have been. See id., at 69–74, 61 S. Ct. 399. In addition to the meaning
of the relevant federal text, the Court attempted to discern “[t]he nature of the power exerted by Congress, the object sought to
be attained, and the character of the obligations *596 imposed by the law.” Id., at 70, 61 S. Ct. 399. To do so, the Court looked
in part to public sentiment, noting that “[o]pposition to laws ... singling out aliens as particularly dangerous and undesirable
groups, is deep-seated in this country.” Ibid. The Court also relied on statements by particular Members of Congress and on
congressional inaction, finding it pertinent that numerous bills with requirements similar to Pennsylvania's law had failed to
garner enough votes in Congress to become law. Id., at 71–73, and nn. 32–34, 61 S. Ct. 399. Concluding that these sources
revealed a federal purpose to “protect the personal liberties of law-abiding aliens through one uniform national registration
system,” the Court held that the Pennsylvania law was pre-empted. Id., at 74, 61 S. Ct. 399.
Justice Stone, in dissent, questioned the majority's decision to read an exclusive registration system for aliens into a statute
that did not specifically provide such exclusivity. See id., at 75, 61 S. Ct. 399. He noted his concern that state power would
be improperly diminished through a pre-emption doctrine driven by the Court's “own conceptions of a policy which Congress
ha[d] not expressed and which is not plainly to be inferred from the legislation which it ha[d] enacted.” Ibid. In his view,
nothing that Congress enacted had “denie[d] the states the practicable means of identifying their alien residents and of recording
their whereabouts.” Id., at 78, 61 S. Ct. 399. Yet, the Hines majority employed pre-emption to override numerous state alien-
registration laws even though enacted federal law “at no point conflict[ed] with the state legislation and [was] **1213
harmonious with it.” Id., at 79, 61 S. Ct. 399. 4
4 According to Justice Stone, the Hines majority's analysis resembled an inquiry into whether the federal act “ ‘occupied the field,’
” rather than an application of simple conflict pre-emption principles. Id., at 78, 61 S. Ct. 399 (dissenting opinion). Regardless of
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whether Hines involved field or conflict pre-emption, the dissent accurately observed that in assessing the boundaries of the federal
law—i.e., the scope of its pre-emptive effect—the Court should look to the federal statute itself, rather than speculate about Congress'
unstated intentions. Id., at 78–79, 61 S. Ct. 399. See also Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 616–
617, 117 S. Ct. 1590, 137 L. Ed. 2d 852 (1997) (THOMAS, J., dissenting) (noting that “field pre-emption is itself suspect, at least as
applied in the absence of a congressional command that a particular field be pre-empted”).
*597 2
The consequences of this Court's broad approach to “purposes and objectives” pre-emption are exemplified in this Court's
decision in Geier, which both the majority and the dissent incorporate into their analysis today. See ante, at 1202 – 1203, and nn.
13–14; post, at 1220 – 1222 (opinion of ALITO, J.). In Geier, pursuant to the National Traffic and Motor Vehicle Safety Act of
1966 (Safety Act), 80 Stat. 718, 15 U.S.C. § 1381 et seq. (1988 ed.), the Department of Transportation (DOT) had promulgated
a Federal Motor Vehicle Safety Standard that “required auto manufacturers to equip some but not all of their 1987 vehicles
with passive restraints.” 529 U.S., at 864–865, 120 S. Ct. 1913. The case required this Court to decide whether the Safety Act
pre-empted a state common-law tort action in which the plaintiff claimed that an auto manufacturer, though in compliance with
the federal standard, should nonetheless have equipped a 1987 automobile with airbags. Id., at 865, 120 S. Ct. 1913. The Court
first concluded that the Safety Act's express pre-emption provision and its saving clause, read together, did not expressly pre-
empt state common-law claims. See id., at 867–868, 120 S. Ct. 1913. 5 The Court *598 then proceeded to consider whether
the state action was nonetheless pre-empted as an “obstacle” to the purposes of the federal law. The Court held that the state
tort claim was pre-empted, relying in large part on comments that DOT made when promulgating its regulation, statements that
the Government made in its brief to the Court, and regulatory history that related to the federal regulation of passive restraints.
See id., at 874–886, 120 S. Ct. 1913.
5 The Safety Act's express pre-emption provision stated in part:
“Whenever a Federal motor vehicle safety standard established under this subchapter is in effect, no State ... shall have any authority
either to establish, or to continue in effect, with respect to any motor vehicle or item of motor vehicle equipment[,] any safety
standard applicable to the same aspect of performance of such vehicle or item of equipment which is not identical to the Federal
standard.” 15 U.S.C. § 1392(d) (1988 ed.).
The Safety Act also included a saving clause, which stated: “Compliance with any Federal motor vehicle safety standard issued
under this subchapter does not exempt any person from any liability under common law.” § 1397(k). The majority and dissent in
Geier agreed that the import of the express pre-emption provision and the saving clause, read together, was that by its terms, the
Safety Act did not expressly pre-empt state common-law actions. See Geier, 529 U.S., at 867–868, 120 S. Ct. 1913;id., at 895–
898, 120 S. Ct. 1913 (STEVENS, J., dissenting).
In particular, the majority found that DOT intended to “deliberately provid[e] the manufacturer[s] with a range of choices among
different passive restraint devices” and to “bring about a mix of different devices introduced gradually over time,” based on
comments that DOT made when promulgating its regulation, rather **1214 than the Safety Act's text. Id., at 875, 120 S. Ct.
1913. The majority also embarked on a judicial inquiry into “why and how DOT sought these objectives,” ibid., by considering
regulatory history and the Government's brief, which described DOT's safety standard as “ ‘embod[ying] the Secretary's policy
judgment that safety would best be promoted if manufacturers installed alternative protection systems in their fleets rather than
one particular system in every car,’ ” id., at 881, 120 S. Ct. 1913 (quoting Brief for United States as Amicus Curiae in Geier
v. American Honda Motor Co., O.T.1999, No. 98–1811, p. 25); see also 529 U.S., at 883–884, 120 S. Ct. 1913. Based on this
“ex post administrative litigating position and inferences from regulatory history and final commentary,” id., at 910–911, 120
S. Ct. 1913 (STEVENS, J., dissenting), the Court found that the state action was pre-empted because it would have required
manufacturers of all cars similar to that in which the plaintiff was injured to “install airbags rather than other passive restraint
systems” and would have, therefore, “presented an obstacle to the variety and mix of devices that the federal regulation sought”
to phase in gradually, id., at 881, 120 S. Ct. 1913.
The Court's decision in Geier to apply “purposes and objectives” pre-emption based on agency comments, regulatory *599
history, and agency litigating positions was especially flawed, given that it conflicted with the plain statutory text of the saving
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clause within the Safety Act, which explicitly preserved state common-law actions by providing that “[c]ompliance with any
Federal motor vehicle safety standard issued under this subchapter does not exempt any person from any liability under common
law,” 15 U.S.C. § 1397(k) (1988 ed.). 6 See Engine Mfrs. Assn. v. South Coast Air Quality Management Dist., 541 U.S. 246,
252, 124 S. Ct. 1756, 158 L. Ed. 2d 529 (2004) (“Statutory construction must begin with the language employed by Congress
and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose” (internal quotation
marks omitted)); West Virginia Univ. Hospitals, Inc. v. Casey, 499 U.S. 83, 98, 111 S. Ct. 1138, 113 L. Ed. 2d 68 (1991) (“The
best evidence of th[e] purpose [of a statute] is the statutory text adopted by both Houses of Congress and submitted to the
President”). In addition, the Court's reliance on its divined purpose of the federal law—to gradually phase in a mix of *600
passive restraint systems—in order to invalidate **1215 a State's imposition of a greater safety standard was contrary to the
more general express statutory goal of the Safety Act “to reduce traffic accidents and deaths and injuries to persons resulting
from traffic accidents,” 15 U.S.C. § 1381 (1988 ed.). This Court has repeatedly stated that when statutory language is plain, it
must be enforced according to its terms. See Jimenez v. Quarterman, 555 U.S. 113, 129 S. Ct. 681, 172 L. Ed. 2d 475 (2009); see
also, e.g.,Dodd v. United States, 545 U.S. 353, 359, 125 S. Ct. 2478, 162 L. Ed. 2d 343 (2005); Lamie v. United States Trustee,
540 U.S. 526, 534, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530
U.S. 1, 6, 120 S. Ct. 1942, 147 L. Ed. 2d 1 (2000). The text in Geier “directly addressed the precise question at issue” before the
Court, so that should have been “the end of the matter; for the court, as well as the agency, must give effect to the unambiguously
expressed intent of Congress.” National Assn. of Home Builders v. Defenders of Wildlife, 551 U.S. 644, ––––, 127 S. Ct. 2518,
2534, 168 L. Ed. 2d 467 (2007) (internal quotation marks omitted). With text that allowed state actions like the one at issue in
Geier, the Court had no authority to comb through agency commentaries to find a basis for an alternative conclusion.
6 In addition to the impropriety of looking beyond the plain text of the saving clause to regulatory history, DOT comments, and an
administrative litigating position to evaluate the Safety Act's pre-emptive effect, it is unclear that the Court in Geier accurately
assessed the federal objectives of the relevant federal law. As the dissent in Geier pointed out, the purpose of the Safety Act, as stated
by Congress, was generally “ ‘to reduce traffic accidents and deaths and injuries to persons resulting from traffic accidents.’ ” Id.,
at 888–889, 120 S. Ct. 1913 (opinion of STEVENS, J.) (quoting 15 U.S.C. § 1381 (1988 ed.)). On its face, that goal is of course
consistent with a state-law judgment that a particular vehicle needed a passive restraint system that would better protect persons from
death and injury during traffic accidents. Furthermore, the dissent observed that “by definition all of the standards established under
the Safety Act ... impose minimum, rather than fixed or maximum, requirements.” 529 U.S., at 903, 120 S. Ct. 1913 (citing 15 U.S.C.
§ 1391(2) (1988 ed.)). Thus, in the dissent's view, the requirements of the DOT regulation were not ceilings, and it was “obvious
that the Secretary favored a more rapid increase” than required by the regulations. 529 U.S., at 903, 120 S. Ct. 1913. That goal also
would be consistent with a state-law judgment finding that a manufacturer acted negligently when it failed to include an airbag in
a particular car. See id., at 903–904, 120 S. Ct. 1913.
Applying “purposes and objectives” pre-emption in Geier, as in any case, allowed this Court to vacate a judgment issued by
another sovereign based on nothing more than assumptions and goals that were untethered from the constitutionally enacted
federal law authorizing the federal regulatory standard that was before the Court. See Watters v. Wachovia Bank, N. A., 550
U.S. 1, 44, 127 S. Ct. 1559, 167 L. Ed. 2d 389 (2007) (STEVENS, J., dissenting) (noting that pre-emption “affects the allocation
of powers among sovereigns”). “ ‘[A]n agency literally has no power to act, let alone pre-empt the [law] of a sovereign State,
unless and until Congress confers power upon it.’ ” New York v. FERC, 535 U.S., at 18, 122 S. Ct. 1012 (quoting Louisiana
Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 374, 106 S. Ct. 1890, 90 L. Ed. 2d 369 (1986)). Thus, no agency or individual Member
of Congress can pre-empt a State's judgment by merely musing about goals or *601 intentions not found within or authorized
by the statutory text. See supra, at 1206 – 1208.
The Court's “purposes and objectives” pre-emption jurisprudence is also problematic because it encourages an overly expansive
reading of statutory text. The Court's desire to divine the broader purposes of the statute before it inevitably leads it to assume
that Congress wanted to pursue those policies “at all costs”—even when the text reflects a different balance. See Geier, supra,
at 904, 120 S. Ct. 1913 (STEVENS, J., dissenting) (finding no evidence to support the notion that the DOT Secretary intended
to advance the purposes of the safety standard “at all costs”); Nelson, 86 Va. L.Rev., at 279–280. As this Court has repeatedly
noted, “ ‘it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary
objective must be the law.’ ” E.g.,Norfolk Southern R. Co. v. Sorrell, 549 U.S. 158, 171, 127 S. Ct. 799, 166 L. Ed. 2d 638© 2015 Thomson Reuters. No claim to original U.S. Government Works. 21
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(2007) (quoting Rodriguez v. United States, 480 U.S. 522, 526, 107 S. Ct. 1391, 94 L. Ed. 2d 533 (1987)(per curiam)). Federal
legislation is often the result of compromise between legislators and “groups with marked but divergent interests.” See Ragsdale
v. Wolverine World Wide, Inc., 535 U.S. 81, 93–94, 122 S. Ct. 1155, 152 L. Ed. 2d 167 (2002). Thus, a statute's text might reflect
a compromise between parties who wanted to pursue a particular goal to different extents. See, e.g.,ibid. (noting that the Family
and Medical Leave Act's provision of only 12 workweeks **1216 of yearly leave “was the result of compromise” that must
be given effect by courts); Silkwood v. Kerr–McGee Corp., 464 U.S. 238, 257, 104 S. Ct. 615, 78 L. Ed. 2d 443 (1984) (finding
that a state law was not pre-empted though it allegedly frustrated a primary purpose of the Atomic Energy Act because the
Act provided that its purpose was to be furthered only “to the extent it is consistent ‘with the health and safety of the public’
” (quoting 42 U.S.C. § 2013(d) (1982 ed.))); see also Manning, What Divides Textualists from Purposivists? 106 Colum. L.Rev.
70, 104 (2006) (“Legislators may compromise on a statute that does not fully address a perceived mischief, accepting half a loaf
to *602 facilitate a law's enactment”). Therefore, there is no factual basis for the assumption underlying the Court's “purposes
and objectives” pre-emption jurisprudence that every policy seemingly consistent with federal statutory text has necessarily
been authorized by Congress and warrants pre-emptive effect. Instead, our federal system in general, and the Supremacy Clause
in particular, accords pre-emptive effect to only those policies that are actually authorized by and effectuated through the
statutory text.
3
The majority, while reaching the right conclusion in this case, demonstrates once again how application of “purposes and
objectives” pre-emption requires inquiry into matters beyond the scope of proper judicial review. For example, the majority
relies heavily on Congress' failure “during the ... 70–year history” of the federal Food, Drug, and Cosmetic Act to enact an
express pre-emption provision that addresses approval of a drug label by the FDA. Ante, at 1200. That “silence on the issue,
coupled with [Congress'] certain awareness of the prevalence of state tort litigation,” the majority reasons, is evidence that
Congress did not intend for federal approval of drug labels to pre-empt state tort judgments. Ibid.; see also ante, at 1199 –
1200 (construing from inaction that Congress “[e]vidently [had] determined that widely available state rights of action provided
appropriate relief”). Certainly, the absence of a statutory provision pre-empting all state tort suits related to approved federal
drug labels is pertinent to a finding that such lawsuits are not pre-empted. But the relevance is in the fact that no statute explicitly
pre-empts the lawsuits, and not in any inferences that the Court may draw from congressional silence about the motivations or
policies underlying Congress' failure to act. See Brown v. Gardner, 513 U.S. 115, 121, 115 S. Ct. 552, 130 L. Ed. 2d 462 (1994)
( “[C]ongressional silence lacks persuasive significance” (internal *603 quotation marks omitted)); O'Melveny & Myers v.
FDIC, 512 U.S. 79, 85, 114 S. Ct. 2048, 129 L. Ed. 2d 67 (1994) (“[M]atters left unaddressed in [a comprehensive and detailed
federal] scheme are presumably left subject to the disposition provided by state law”); Camps Newfound, 520 U.S., at 616, 117
S. Ct. 1590 (“[O]ur pre-emption jurisprudence explicitly rejects the notion that mere congressional silence on a particular issue
may be read as pre-empting state law”).
In this case, the majority has concluded from silence that Congress believed state lawsuits pose no obstacle to federal drug-
approval objectives. See ante, at 1200. That is the required conclusion, but only because it is compelled by the text of the relevant
statutory and regulatory provisions, not judicial suppositions about Congress' unstated goals. The fact that the Court reaches
the proper conclusion does not justify its speculation about the reasons for congressional inaction. In this case, the Court has
relied on the perceived congressional policies underlying inaction **1217 to find that state law is not pre-empted. But once the
Court shows a willingness to guess at the intent underlying congressional inaction, the Court could just as easily rely on its own
perceptions regarding congressional inaction to give unduly broad pre-emptive effect to federal law. See, e.g.,American Ins.
Assn. v. Garamendi, 539 U.S. 396, 401, 405–408, 429, 123 S. Ct. 2374, 156 L. Ed. 2d 376 (2003) (finding that Congress' failure
to pass legislation indicating that it disagreed with the President's executive agreement supported, at least in part, the Court's
determination that the agreement pre-empted state law). Either approach is illegitimate. Under the Supremacy Clause, state law
is pre-empted only by federal law “made in Pursuance” of the Constitution, Art. VI, cl. 2—not by extratextual considerations
of the purposes underlying congressional inaction. See Hoffman v. Connecticut Dept. of Income Maintenance, 492 U.S. 96,
104, 109 S. Ct. 2818, 106 L. Ed. 2d 76 (1989) (plurality opinion) (finding that policy arguments that “are not based in the text of
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the statute ... *604 are not helpful”); TVA v. Hill, 437 U.S. 153, 194, 98 S. Ct. 2279, 57 L. Ed. 2d 117 (1978) (“Our individual
appraisal of the wisdom or unwisdom of a particular course consciously selected by the Congress is to be put aside in the process
of interpreting a statute”). Our role, then, is merely “to interpret the language of the statute[s] enacted by Congress.” Barnhart
v. Sigmon Coal Co., 534 U.S. 438, 461, 122 S. Ct. 941, 151 L. Ed. 2d 908 (2002).
III
The origins of this Court's “purposes and objectives” pre-emption jurisprudence in Hines, and its broad application in cases
like Geier, illustrate that this brand of the Court's pre-emption jurisprudence facilitates freewheeling, extratextual, and broad
evaluations of the “purposes and objectives” embodied within federal law. This, in turn, leads to decisions giving improperly
broad pre-emptive effect to judicially manufactured policies, rather than to the statutory text enacted by Congress pursuant to
the Constitution and the agency actions authorized thereby. Because such a sweeping approach to pre-emption leads to the
illegitimate—and thus, unconstitutional—invalidation of state laws, I can no longer assent to a doctrine that pre-empts state
laws merely because they “stan[d] as an obstacle to the accomplishment and execution of the full purposes and objectives” of
federal law, Hines, 312 U.S., at 67, 61 S. Ct. 399, as perceived by this Court. I therefore respectfully concur only in the judgment.
Justice ALITO, with whom THE CHIEF JUSTICE and Justice SCALIA join, dissenting.
This case illustrates that tragic facts make bad law. The Court holds that a state tort jury, rather than the Food and Drug
Administration (FDA), is ultimately responsible for regulating warning labels for prescription drugs. That result cannot be
reconciled with Geier v. American Honda Motor Co., 529 U.S. 861, 120 S. Ct. 1913, 146 L. Ed. 2d 914 (2000), or general
principles of conflict pre-emption. I respectfully dissent.
*605 I
The Court frames the question presented as a “narro[w]” one—namely, whether Wyeth has a duty to provide “an adequate
warning about using the IV-push method” to administer Phenergan. Ante, at 1194. But that ignores the antecedent question
of who—the FDA or a jury in Vermont—has the authority and responsibility for determining the “adequacy” of Phenergan's
warnings. Moreover, it is unclear how a “stronger” warning could have helped respondent, see ante, at 1199; after **1218 all,
the physician's assistant who treated her disregarded at least six separate warnings that are already on Phenergan's labeling, so
respondent would be hard pressed to prove that a seventh would have made a difference. 1
1 Indeed, respondent conceded below that Wyeth did propose an adequate warning of Phenergan's risks. See Plaintiff Diana Levine's
Memorandum in Opposition to Wyeth's Motion for Summary Judgment in Levine v. American Home Products Corp. (now Wyeth),
No. 670–12–01 Wncv (Super. Ct. Washington Cty., Vt.), ¶ 7, p. 26. Specifically, respondent noted: “In 1988, Wyeth proposed
language that would have prevented this accident by requiring a running IV and explaining why a running IV will address and reduce
the risk [of intra-arterial injection].” Ibid. See also id., at 24 (“Although not strong enough, this improved the labeling instruction, if
followed, would have prevented the inadvertent administration of Phenergan into an artery ...”). The FDA rejected Wyeth's proposal.
See App. 359.
More to the point, the question presented by this case is not a “narrow” one, and it does not concern whether Phenergan's label
should bear a “stronger” warning. Rather, the real issue is whether a state tort jury can countermand the FDA's considered
judgment that Phenergan's FDA-mandated warning label renders its intravenous (IV) use “safe.” Indeed, respondent's amended
complaint alleged that Phenergan is “not reasonably safe for intravenous administration,” App. 15, ¶ 6; respondent's attorney
told the jury that Phenergan's label should say, “ ‘Do not use this drug intravenously,’ ” id., at 32; respondent's expert told the
*606 jury, “I think the drug should be labeled ‘Not for IV use,’ ” id., at 59; and during his closing argument, respondent's
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attorney told the jury, “Thank God we don't rely on the FDA to ... make the safe[ty] decision. You will make the decision. ...
The FDA doesn't make the decision, you do,” id., at 211–212. 2
2 Moreover, in the trial judge's final charge, he told the jury that “the critical factual issue which you must decide” is whether Phenergan's
FDA-mandated label reflects a proper balance between “the risks and benefits of intravenous administration and the potential for
injury to patients.” Id., at 220. See also 183 Vt. 76, ––––, 944 A.2d 179, 182 (2006) (recognizing that respondent's argument is that
Phenergan's “label should not have allowed IV push as a means of administration”).
Federal law, however, does rely on the FDA to make safety determinations like the one it made here. The FDA has long
known about the risks associated with IV push in general and its use to administer Phenergan in particular. Whether wisely
or not, the FDA has concluded—over the course of extensive, 54–year–long regulatory proceedings—that the drug is “safe”
and “effective” when used in accordance with its FDA-mandated labeling. The unfortunate fact that respondent's healthcare
providers ignored Phenergan's labeling may make this an ideal medical-malpractice case. 3 But turning a common-law tort suit
into a “frontal assault” on the FDA's regulatory regime for drug labeling upsets the well-settled meaning of the Supremacy
Clause and our conflict pre-emption jurisprudence. Brief for United States as AmicusCuriae 21.
3 Respondent sued her physician, physician's assistant, and hospital for malpractice. After the parties settled that suit for an undisclosed
sum, respondent's physician sent her a letter in which he admitted “responsibility” for her injury and expressed his “profoun[d]
regre[t]” and “remors[e]” for his actions. 1 Tr. 178–179 (Mar. 8, 2004) (testimony of Dr. John Matthew); see also App. 102–103
(testimony of physician's assistant Jessica Fisch) (noting that her “sense of grief” was so “great” that she “would have gladly cut
off [her own] arm” and given it to respondent). Thereafter, both the physician and the physician's assistant agreed to testify on
respondent's behalf in her suit against Wyeth.
*607 **1219 II
A
To the extent that “[t]he purpose of Congress is the ultimate touchstone in every pre-emption case,” Medtronic, Inc. v. Lohr, 518
U.S. 470, 485, 116 S. Ct. 2240, 135 L. Ed. 2d 700 (1996) (internal quotation marks omitted), Congress made its “purpose” plain
in authorizing the FDA—not state tort juries—to determine when and under what circumstances a drug is “safe.” “[T]he process
for approving new drugs is at least as rigorous as the premarket approval process for medical devices,” Riegel v. Medtronic,
Inc., 552 U.S. 312, ––––, 128 S. Ct. 999, 1018, 169 L. Ed. 2d 892 (2008) (GINSBURG, J., dissenting), and we held that the latter
pre-empted a state-law tort suit that conflicted with the FDA's determination that a medical device was “safe,” id., at ––––,
128 S.Ct., at 1018 (opinion of the Court).
Under the Federal Food, Drug, and Cosmetic Act (FDCA), a drug manufacturer may not market a new drug before first
submitting a new drug application (NDA) to the FDA and receiving the agency's approval. See 21 U.S.C. § 355(a). An NDA
must contain, among other things, “the labeling proposed to be used for such drug,” § 355(b)(1)(F), “full reports of investigations
which have been made to show whether or not such drug is safe for use and whether such drug is effective in use,” § 355(b)
(1)(A), and “a discussion of why the benefits exceed the risks [of the drug] under the conditions stated in the labeling,” 21 CFR §
314.50(d)(5)(viii) (2008). The FDA will approve an NDA only if the agency finds, among other things, that the drug is “safe for
use under the conditions prescribed, recommended, or suggested in the proposed labeling thereof,” there is “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 thereof,” and the proposed labeling is not “false or misleading in any particular.” 21
U.S.C. § 355(d).
*608 After the FDA approves a drug, the manufacturer remains under an obligation to investigate and report any adverse
events associated with the drug, see 21 CFR § 314.80, and must periodically submit any new information that may affect the
FDA's previous conclusions about the safety, effectiveness, or labeling of the drug, 21 U.S.C. § 355(k). If the FDA finds that
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the drug is not “safe” when used in accordance with its labeling, the agency “shall” withdraw its approval of the drug. § 355(e).
The FDA also “shall” deem a drug “misbranded” if “it is dangerous to health when used in the dosage or manner, or with the
frequency or duration prescribed, recommended, or suggested in the labeling thereof.” § 352(j).
Thus, a drug's warning label “serves as the standard under which the FDA determines whether a product is safe and effective.” 50
Fed.Reg. 7470 (1985). Labeling is “[t]he centerpiece of risk management,” as it “communicates to health care practitioners the
agency's formal, authoritative conclusions regarding the conditions under which the product can be used safely and effectively.”
71 Fed.Reg. 3934 (2006). The FDA has underscored the importance it places on drug labels by promulgating comprehensive
regulations—spanning an entire part of the Code of Federal Regulations, see 21 CFR pt. 201, with seven subparts and 70
separate sections—that set forth drug manufacturers' labeling obligations. Under those regulations, the FDA must be satisfied
that a drug's warning label contains, among other things, “a summary of the essential scientific information needed for the safe
and effective use of the drug,” § 201.56(1), including a **1220 description of “clinically significant adverse reactions,” “other
potential safety hazards,” “limitations in use imposed by them, ... and steps that should be taken if they occur,” § 201.57(c)(6)
(i). Neither the FDCA nor its implementing regulations suggest that juries may second-guess the FDA's labeling decisions.
*609 B
1
Where the FDA determines, in accordance with its statutory mandate, that a drug is on balance “safe,” our conflict pre-
emption cases prohibit any State from countermanding that determination. See, e.g.,Buckman Co. v. Plaintiffs' Legal Comm.,
531 U.S. 341, 348, 121 S. Ct. 1012, 148 L. Ed. 2d 854 (2001) (after the FDA has struck “a somewhat delicate balance of statutory
objectives” and determined that petitioner submitted a valid application to manufacture a medical device, a State may not use
common law to negate it); International Paper Co. v. Ouellette, 479 U.S. 481, 494, 107 S. Ct. 805, 93 L. Ed. 2d 883 (1987)
(after the EPA has struck “the balance of public and private interests so carefully addressed by” the federal permitting regime
for water pollution, a State may not use nuisance law to “upse[t]” it); Chicago & North Western Transp. Co. v. Kalo Brick &
Tile Co., 450 U.S. 311, 321, 101 S. Ct. 1124, 67 L. Ed. 2d 258 (1981) (after the Interstate Commerce Commission has struck
a “balance” between competing interests in permitting the abandonment of a railroad line, a State may not use statutory or
common law to negate it).
Thus, as the Court itself recognizes, it is irrelevant in conflict pre-emption cases whether Congress “enacted an express pre-
emption provision at some point during the FDCA's 70–year history.” Ante, at 1200; see also Geier, 529 U.S., at 869, 120
S. Ct. 1913 (holding the absence of an express pre-emption clause “does not bar the ordinary working of conflict pre-emption
principles”). Rather, the ordinary principles of conflict pre-emption turn solely on whether a State has upset the regulatory
balance struck by the federal agency. Id., at 884–885, 120 S. Ct. 1913; see also Chicago & North Western Transp. Co., supra, at
317, 101 S. Ct. 1124 (describing conflict pre-emption as “a two-step process of first ascertaining the construction of the [federal
and state laws] and then determining the constitutional question *610 whether they are actually in conflict” (internal quotation
marks omitted)).
2
A faithful application of this Court's conflict pre-emption cases compels the conclusion that the FDA's 40–year–long effort
to regulate the safety and efficacy of Phenergan pre-empts respondent's tort suit. Indeed, that result follows directly from our
conclusion in Geier.
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Geier arose under the National Traffic and Motor Safety Vehicle Act of 1966, which directs the Secretary of the Department
of Transportation (DOT) to “establish by order ... motor vehicle safety standards,” 15 U.S.C. § 1392(a) (1988 ed.), which are
defined as “minimum standard[s] for motor vehicle performance, or motor vehicle equipment performance,” § 1391(2). Acting
pursuant to that statutory mandate, the Secretary of Transportation promulgated Federal Motor Vehicle Safety Standard 208,
which required car manufacturers to include passive restraint systems (i.e., devices that work automatically to protect occupants
from injury during a collision) in a certain percentage of their cars built in or after 1987. See 49 CFR § 571.208 (1999). Standard
208 did not require installation of any particular type of passive restraint; instead, it gave manufacturers the option to install
automatic **1221 seatbelts, airbags, or any other suitable technology that they might develop, provided the restraint(s) met
the performance requirements specified in the rule. Ibid.
Alexis Geier drove her 1987 Honda Accord into a tree, and although she was wearing her seatbelt, she nonetheless suffered
serious injuries. She then sued Honda under state tort law, alleging that her car was negligently and defectively designed because
it lacked a driver's-side airbag. She argued that Congress had empowered the Secretary to set only “minimum standard[s]”
for vehicle safety. 15 U.S.C. § 1391(2). She also emphasized that the National Traffic and Motor Safety Vehicle Act contains
a saving clause, which *611 provides that “[c]ompliance with any Federal motor vehicle safety standard issued under this
subchapter does not exempt any person from any liability under common law.” § 1397(k).
Notwithstanding the statute's saving clause, and notwithstanding the fact that Congress gave the Secretary authority to set only
“minimum” safety standards, we held Geier's state tort suit pre-empted. In reaching that result, we relied heavily on the view of
the Secretary of Transportation—expressed in an amicus brief—that Standard 208 “ ‘embodies the Secretary's policy judgment
that safety would best be promoted if manufacturers installed alternative protection systems in their fleets rather than one
particular system in every car.’ ” 529 U.S., at 881, 120 S. Ct. 1913 (quoting Brief for United States as Amicus Curiae, O.T.1999,
No. 98–1811, p. 25). Because the Secretary determined that a menu of alternative technologies was “safe,” the doctrine of
conflict pre-emption barred Geier's efforts to deem some of those federally approved alternatives “unsafe” under state tort law.
The same rationale applies here. Through Phenergan's label, the FDA offered medical professionals a menu of federally
approved, “safe” and “effective” alternatives—including IV push—for administering the drug. Through a state tort suit,
respondent attempted to deem IV push “unsafe” and “ineffective.” To be sure, federal law does not prohibit Wyeth from
contraindicating IV push, just as federal law did not prohibit Honda from installing airbags in all its cars. But just as we held that
States may not compel the latter, so, too, are States precluded from compelling the former. See also Fidelity Fed. Sav. & Loan
Assn. v. de la Cuesta, 458 U.S. 141, 155, 102 S. Ct. 3014, 73 L. Ed. 2d 664 (1982) (“The conflict does not evaporate because
the [agency's] regulation simply permits, but does not compel,” the action forbidden by state law). If anything, a finding of
pre-emption is even more appropriate here because the FDCA—unlike the National Traffic and Motor Safety Vehicle Act—
contains no evidence that Congress intended *612 the FDA to set only “minimum standards,” and the FDCA does not contain
a saving clause. 4 SEE ALSO **1222 ante, at 1200 (conceding congress' “ silence” on the issue).
4 To be sure, Congress recognized the principles of conflict pre-emption in the FDCA. See Drug Amendments of 1962, § 202, 76 Stat.
793 (“Nothing in the amendments made by this Act to the Federal Food, Drug, and Cosmetic Act shall be construed as invalidating
any provision of State law ... unless there is a direct and positive conflict between such amendments and such provision of State
law”). But a provision that simply recognizes the background principles of conflict pre-emption is not a traditional “saving clause,”
and even if it were, it would not displace our conflict-pre-emption analysis. See Geier v. American Honda Motor Co., 529 U.S. 861,
869, 120 S. Ct. 1913, 146 L. Ed. 2d 914 (2000) (“[T]he saving clause ... does not bar the ordinary working of conflict pre-emption
principles”); id., at 873–874, 120 S. Ct. 1913 (“The Court has ... refused to read general ‘saving’ provisions to tolerate actual conflict
both in cases involving impossibility and in ‘frustration-of-purpose’ cases” (emphasis deleted and citation omitted)).
III
In its attempt to evade Geier 's applicability to this case, the Court commits both factual and legal errors. First, as a factual
matter, it is demonstrably untrue that the FDA failed to consider (and strike a “balance” between) the specific costs and benefits
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associated with IV push. Second, as a legal matter, Geier does not stand for the legal propositions espoused by the dissenters
(and specifically rejected by the majority) in that case. Third, drug labeling by jury verdict undermines both our broader pre-
emption jurisprudence and the broader workability of the federal drug-labeling regime.
A
Phenergan's warning label has been subject to the FDA's strict regulatory oversight since the 1950's. For at least the last 34 years,
the FDA has focused specifically on whether IV-push administration of Phenergan is “safe” and “effective” when performed
in accordance with Phenergan's label. The agency's ultimate decision—to retain IV push as one *613 means for administering
Phenergan, albeit subject to stringent warnings—is reflected in the plain text of Phenergan's label (sometimes in boldfaced
font and all-capital letters). And the record contains ample evidence that the FDA specifically considered and reconsidered the
strength of Phenergan's IV-push-related warnings in light of new scientific and medical data. The majority's factual assertions
to the contrary are mistaken.
1
The FDA's focus on IV push as a means of administering Phenergan dates back at least to 1975. In August of that year, several
representatives from both the FDA and Wyeth met to discuss Phenergan's warning label. At that meeting, the FDA specifically
proposed “that Phenergan Injection should not be used in Tubex & reg;.” 2 Record 583, 586 (Plaintiff's Trial Exh. 17, Internal
Correspondence from W.E. Langeland to File (Sept. 5, 1975) (hereinafter 1975 Memo)). “Tubex” is a syringe system used
exclusively for IV push. See App. 43. An FDA official explained that the agency's concerns arose from medical-malpractice
lawsuits involving IV push of the drug, see 1975 Memo 586, and that the FDA was aware of “5 cases involving amputation
where the drug had been administered by Tubex together with several additional cases involving necrosis,” id., at 586–587.
Rather than contraindicating Phenergan for IV push, however, the agency and Wyeth agreed “that there was a need for better
instruction regarding the problems of intraarterial injection.” Id., at 587.
The next year, the FDA convened an advisory committee to study, among other things, the risks associated with the Tubex
system and IV push. App. 294. At the conclusion of its study, the committee recommended an additional IV-push-specific
warning for Phenergan's label, see ibid., but did not recommend eliminating IV push from the drug label altogether. In response
to the committee's recommendations, the FDA instructed Wyeth to make several changes to *614 strengthen Phenergan's
label, including the addition of upper case warnings related to IV push. See id., at 279–280, 282–283.
**1223 In 1987, the FDA directed Wyeth to amend its label to include the following text:
“ ‘[1] When used intravenously, [Phenergan] should be given in a concentration no greater than 25 mg/ml and at a rate not to
exceed 25 mg/minute. [2] Injection through a properly running intravenous infusion may enhance the possibility of detecting
arterial placement.’ ” Id., at 311–312.
The first of the two quoted sentences refers specifically to IV push; as respondent's medical expert testified at trial, the label's
recommended rate of administration (not to exceed 25 mg per minute) refers to “IV push, as opposed to say being in a bag
and dripped over a couple of hours.” Id., at 52. The second of the two quoted sentences refers to IV drip. See id., at 15–16
(emphasizing that a “running IV” is the same thing as “IV drip”).
In its 1987 labeling order, the FDA cited voluminous materials to “suppor[t]” its new and stronger warnings related to IV
push and the preferability of IV drip. 5 Id., at 313. One of those articles specifically discussed the relative advantages and
disadvantages of IV drip compared to IV push, as *615 well as the costs and benefits of administering Phenergan via IV push. 6
The FDA also cited published case reports from the 1960's of gangrene caused by the intra-arterial injection of Phenergan, 7 and
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the FDA instructed Wyeth to amend Phenergan's label in accordance with the latest medical research. 8 The FDA also studied
drugs similar to Phenergan and cited numerous cautionary articles—one of which urged the agency to consider contraindicating
**1224 such drugs for IV use altogether. 9
5 The FDA cited numerous articles that generally discuss the costs and benefits associated with IV push. See, e.g., Nahrwold & Phelps,
Inadvertent Intra–Arterial Injection of Mephenteramine, 70 Rocky Mountain Medical J. 38 (Sept.1973) (cited in App. 314, no. 14);
Albo, Cheung, Ruth, Snyder, & Reemtsma, Effect of Intra–Arterial Injections of Barbituates, 120 Am. J. of Surgery 676 (1970) (cited
in App. 314, no. 12); Corser, Masey, Jacob, Kernoff, & Browne, Ischaemia Following Self-administered Intra-arterial Injection of
Methylphenidate and Diamorphine, 40 Anaesthesia 51 (1985) (cited in App. 314, no. 9); Correspondence Regarding Thiopental and
Thiamylal (3 letters), 59 Anesthesiology 153 (1983) (cited in App. 314, no. 11); Miller, Arthur, & Stratigos, Intra-arterial Injection
of a Barbituate, 23 Anesthesia Progress 25 (1976) (cited in App. 315, no. 19).
6 See Webb & Lampert, Accidental Arterial Injections, 101 Am. J. Obstetrics & Gynecology 365 (1968) (cited in App. 313, no. 5).
7 See Hager & Wilson, Gangrene of the Hand Following Intra-arterial Injection, 94 Archives of Surgery 86 (1967) (cited in App. 313,
no. 7); Enloe, Sylvester, & Morris, Hazards of Intra–Arterial Injection of Hydroxyzine, 16 Canadian Anaesthetists' Society J. 425
(1969) (hereinafter Enloe) (noting “recent reports” of “the occurrence of severe necrosis and gangrene following [administration of]
promethazine (Phenergan & reg;)” (cited in App. 314, no. 15)). See also Mostafavi & Samimi, Accidental Intra-arterial Injection of
Promethazine HCl During General Anesthesia, 35 Anesthesiology 645 (1971) (reporting a case of gangrene, which required partial
amputation of three fingers, after Phenergan was inadvertently pushed into an artery in the “antecubital” area); Promethazine, p. 7,
in Clinical Pharmacology (Gold Standard Multimedia Inc. CD–ROM, version 1.16 (1998) (noting that “[i]nadvertent intra-arterial
injection [of Phenergan] can result in arteriospasm ... and development of gangrene”)).
8 Hager and Wilson noted that the most common reactions to intra-arterial injections of drugs like Phenergan include “[i]mmediate,
severe, burning pain,” as well as “blanching.” 94 Archives of Surgery, at 87–88. The FDA required Wyeth to include Hager and
Wilson's observations on Phenergan's label. See App. 311 (requiring the label to warn that “ ‘[t]he first sign [of an intra-arterial
injection] may be the patient's reaction to a sensation of fiery burning’ ” pain and “ ‘[b]lanching’ ”).
9 See Enloe 427 (discussing hydroxyzine—an antihistamine with chemical properties similar to those of Phenergan—and suggesting
its “temporary” benefits can never outweigh the risks of intra-arterial injection); see also Goldsmith & Trieger, Accidental Intra–
Arterial Injection: A Medical Emergency, 22 Anesthesia Progress 180 (1975) (noting the risks of intra-arterial administration of
hydroxyzine) (cited in App. 315, no. 18); Klatte, Brooks, & Rhamy, Toxicity of Intra–Arterial Barbituates and Tranquilizing Drugs,
92 Radiology 700 (1969) (same) (cited in App. 314, no. 13). With full knowledge of those risks, FDA retained IV push for Phenergan,
although the agency required Wyeth to incorporate observations from the Enloe article into Phenergan's label. Compare Enloe 427
(arguing that “every precaution should be taken to avoid inadvertent intra-arterial injection,” including the use of “an obviously well-
functioning venoclysis”), with App. 312 (FDA's 1987 changes to Phenergan's label). In contrast, at some time around 1970, the
FDA prohibited all intravenous use of hydroxyzine. See id., at 79 (testimony of Dr. Harold Green). The FDA's decision to regulate
the two drugs differently—notwithstanding (1) the agency's knowledge of the risks associated with both drugs and (2) the agency's
recognition of the relevance of hydroxyzine-related articles and case reports in its regulation of Phenergan—further demonstrates
that the FDA intentionally preserved IV-push administration for Phenergan. See also Haas, Correspondence, 33 Anesthesia Progress
281 (1986) (“[Hydroxyzine's] restriction does not lie with the medicine itself, but in the practice and malpractice of intravenous
techniques. Unfortunately, the practitioner who knows how to treat injection technique problems is usually not the practitioner with
the intravenous technique problems”).
*616 In “support” of its labeling order, the FDA also cited numerous articles that singled out the inner crook of the elbow
—known as the “antecubital fossa” in the medical community—which is both a commonly used injection site, see id., at 70
(noting that respondent's injection was pushed into “the antecubital space”), and a universally recognized high-risk area for
inadvertent intra-arterial injections. One of the articles explained:
“Because of the numerous superficial positions the ulnar artery might occupy, it has often been entered during attempted
venipuncture [of the antecubital fossa]. ... However, the brachial and the radial arteries might also be quite superficial in the
elbow region .... The arterial variations of the arm, especially in and about the cubital fossa, are common and numerous.
If venipuncture must be performed in this area, a higher index of suspicion must be maintained to forestall misdirected
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injections.” Stone & Donnelly, The Accidental Intra-arterial Injection of Thiopental, 22 Anesthesiology *617 995, 996
(1961) (footnote omitted; cited in App. 315, no. 20). 10
10 See also Engler, Freeman, Kanavage, Ogden, & Moretz, Production of Gangrenous Extremities by Intra–Arterial Injections, 30 Am.
Surgeon 602 (1964) (“Accidental arterial injection most often occurs in the antecubital region because this is a favorite site for
venopuncture and in this area the ulnar and brachial arteries are superficial and easily entered” (cited in App. 313, no. 6)); Engler,
Gangrenous Extremities Resulting from Intra-arterial Injections, 94 Archives of Surgery 644 (1966) (similar) (cited in App. 314, no.
16); Lynas & Bisset, Intra-arterial Thiopentone, 24 Anaesthesia 257 (1969) (“Most [anesthesiologists] agree that injections on the
medial aspect of the antecubital fossa are best avoided” (cited in App. 314, no. 8)); Waters, Intra-arterial Thiopentone, 21 Anesthesia
346 (1966) (“The risk of producing gangrene of the forearm by accidental injection of sodium thiopentone into an artery at the
elbow has been recognised for many years” (cited in App. 314, no. 10)); see also Hager & Wilson, 94 Archives of Surgery, at 88
(emphasizing that one of the best ways to prevent inadvertent intra-arterial injections is to be aware of “aberrant or superficial arteries
at the antecubital, forearm, wrist, and hand level”); Mostafavi & Samimi, supra (warning against antecubital injections).
**1225 Based on this and other research, the FDA ordered Wyeth to include a specific warning related to the use of the
antecubital space for IV push. 11
11 See App. 311 (requiring Phenergan's label to warn that practitioners should “ ‘[b]eware of the close proximity of arteries and veins
at commonly used injection sites and consider the possibility of aberrant arteries' ”).
2
When respondent was injured in 2000, Phenergan's label specifically addressed IV push in several passages (sometimes in lieu
of and sometimes in addition to those discussed above). For example, the label warned of the risks of intra-arterial injection
associated with “aspiration,” which is a technique used only in conjunction with IV push. 12 The *618 label also cautioned
against the use of “syringes with rigid plungers,” App. 390, which are used only to administer the drug via IV push. As
respondent's medical expert testified at trial, “by talking plungers and rigid needles, that's the way you do it, to push it with the
plunger.” Id., at 53 (testimony of Dr. John Matthew). Moreover, Phenergan's 2000 label devoted almost a full page to discussing
the “Tubex system,” see id., at 391, which, as noted above, is used only to administer the drug via IV push.
12 “Aspiration” refers to drawing a small amount of blood back into the needle to determine whether the needle is in an artery or a vein.
Ordinarily, arterial blood is brighter than venous blood—but contact with Phenergan causes discoloration, which makes aspiration an
unreliable method of protecting against intra-arterial injection. See id., at 282. Therefore, the label warned that when using IV push, a
medical professional should beware that “[a]spiration of dark blood does not preclude intra-arterial needle placement, because blood
is discolored upon contact with Phenergan Injection.” Id., at 390.
While Phenergan's label very clearly authorized the use of IV push, it also made clear that IV push is the delivery method
of last resort. The label specified that “[t]he preferred parenteral route of administration is by deep intramuscular injection.”
Id., at 390. If an intramuscular injection is ineffective, then “it is usually preferable to inject [Phenergan] through the tubing
of an intravenous infusion set that is known to be functioning satisfactorily.” Ibid. See also id., at 50–51 (testimony of
respondent's medical expert, Dr. John Matthew) (conceding that the best way to determine that an IV set is functioning
satisfactorily is to use IV drip). Finally, if for whatever reason a medical professional chooses to use IV push, he or she is on
notice that “INADVERTENT INTRA–ARTERIAL INJECTION CAN RESULT IN GANGRENE OF THE AFFECTED
EXTREMITY.” Id., at 391; see also id., at 390 (“Under no circumstances should Phenergan Injection be given by intra-arterial
injection due to the likelihood of severe arteriospasm and the possibility of resultant gangrene”).
Phenergan's label also directs medical practitioners to choose veins wisely when using IV push:
“Due to the close proximity of arteries and veins in the areas most commonly used for intravenous injection, extreme *619
care should be exercised to avoid perivascular extravasation or inadvertent intra-arterial injection. Reports compatible with
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inadvertent intra-arterial injection of Phenergan Injection, usually in conjunction with other drugs intended for intravenous
use, suggest that pain, severe chemical irritation, severe spasm of distal vessels, and resultant gangrene requiring amputation
are likely under such circumstances.” Ibid.
Thus, it is demonstrably untrue that, as of 2000, Phenergan's “labeling did not contain a specific warning about the risks of
**1226 IV-push administration.” Ante, at 1192. And whatever else might be said about the extensive medical authorities and
case reports that the FDA cited in “support” of its approval of IV-push administration of Phenergan, it cannot be said that the
FDA “paid no more than passing attention to” IV push, ante, at 1193; nor can it be said that the FDA failed to weigh its costs
and benefits, Brief for Respondent 50.
3
For her part, respondent does not dispute the FDA's conclusion that IV push has certain benefits. At trial, her medical
practitioners testified that they used IV push in order to help her “in a swift and timely way” when she showed up at the
hospital for the second time in one day complaining of “intractable” migraines, “terrible pain,” inability to “bear light or sound,”
sleeplessness, hours-long spasms of “retching” and “vomiting,” and when “every possible” alternative treatment had “failed.”
App. 40 (testimony of Dr. John Matthew); id., at 103, 106, 109 (testimony of physician's assistant Jessica Fisch).
Rather than disputing the benefits of IV push, respondent complains that the FDA and Wyeth underestimated its costs (and
hence did not provide sufficient warnings regarding its risks). But when the FDA mandated that Phenergan's label read,
“INADVERTENT INTRA–ARTERIAL INJECTION *620 CAN RESULT IN GANGRENE OF THE AFFECTED
EXTREMITY,” id., at 391, and when the FDA required Wyeth to warn that “[u]nder no circumstances should Phenergan
Injection be given by intra-arterial injection,” id., at 390, the agency could reasonably assume that medical professionals would
take care not to inject Phenergan intra-arterially. See also 71 Fed.Reg. 3934 (noting that a drug's warning label “communicates
to health care practitioners the agency's formal, authoritative conclusions regarding the conditions under which the product
can be used safely and effectively”). Unfortunately, the physician's assistant who treated respondent in this case disregarded
Phenergan's label and pushed the drug into the single spot on her arm that is most likely to cause an inadvertent intra-arterial
injection.
As noted above, when the FDA approved Phenergan's label, it was textbook medical knowledge that the “antecubital fossa”
creates a high risk of inadvertent intra-arterial injection, given the close proximity of veins and arteries. See supra, at 1224 –
1225; see also The Lippincott Manual of Nursing Practice 99 (7th ed.2001) (noting, in a red-text “NURSING ALERT,” that
the antecubital fossa is “not recommended” for administering dangerous drugs, “due to the potential for extravasation”). 13
According to the physician's assistant who injured respondent, however, “[i]t never crossed my mind” that an antecubital
injection of Phenergan could hit an artery. App. 110; see also ibid. (“[It] just wasn't something that I was aware of at the
time”). Oblivious to the risks emphasized in Phenergan's warnings, the physician's assistant pushed a double dose of the drug
into an antecubital artery over the course of “[p]robably about three to four minutes,” id., at 111; id., at 105, notwithstanding
respondent's *621 complaints of a “ ‘burn [ing]’ ” sensation that she subsequently described as “ ‘one of the most extreme
pains that I've ever felt,’ ” **1227 id., at 110, 180–181. And when asked why she ignored Phenergan's label and failed to stop
pushing the drug after respondent complained of burning pains, the physician's assistant explained that it would have been “just
crazy” to “worr[y] about an [intra-arterial] injection” under the circumstances, id., at 111.
13 In addition, respondent's own medical expert testified at trial that it is a principle of “basic anatomy” that the antecubital fossa contains
aberrant arteries. See 2 Tr. 34–35 (Mar. 9, 2004) (testimony of Dr. Daniel O'Brien); see also ibid. (noting that Gray's Anatomy, which
is “the Bible of anatomy,” also warns of arteries in the antecubital space).
The FDA, however, did not think that the risks associated with IV push—especially in the antecubital space—were “just crazy.”
That is why Phenergan's label so clearly warns against them.
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B
Given the “balance” that the FDA struck between the costs and benefits of administering Phenergan via IV push, Geier compels
the pre-emption of tort suits (like this one) that would upset that balance. The contrary conclusion requires turning yesterday's
dissent into today's majority opinion.
First, the Court denies the existence of a federal-state conflict in this case because Vermont merely countermanded the FDA's
determination that IV push is “safe” when performed in accordance with Phenergan's warning label; the Court concludes
that there is no conflict because Vermont did not “mandate a particular” label as a “replacement” for the one that the jury
nullified, and because the State stopped short of altogether “contraindicating IV-push administration.” Ante, at 1194. But as we
emphasized in Geier (over the dissent's assertions to the contrary), the degree of a State's intrusion upon federal law is irrelevant
—the Supremacy Clause applies with equal force to a state tort law that merely countermands a federal safety determination
and to a state law that altogether prohibits car manufacturers from selling cars without airbags. Compare 529 U.S., at 881–
882, 120 S. Ct. 1913, with id., at 902, 120 S. Ct. 1913 (STEVENS, J., dissenting). Indeed, as recently as last Term, we held that
the Supremacy Clause pre-empts *622 a “[s]tate tort law that requires a manufacturer's catheters to be safer, but hence less
effective, than the model the FDA has approved ....” Riegel, 552 U.S., at ––––, 128 S.Ct., at 1008. It did not matter there that the
State stopped short of altogether prohibiting the use of FDA-approved catheters—just as it does not matter here that Vermont
stopped short of altogether prohibiting an FDA-approved method for administering Phenergan. See also Lohr, 518 U.S., at 504,
116 S. Ct. 2240 (BREYER, J., concurring in part and concurring in judgment) (noting it would be an “anomalous result” if pre-
emption applied differently to a state tort suit premised on the inadequacy of the FDA's safety regulations and a state law that
specifically prohibited an FDA-approved design).
Second, the Court today distinguishes Geier because the FDA articulated its pre-emptive intent “without offering States or other
interested parties notice or opportunity for comment.” Ante, at 1201; see also ante, at 1203. But the Geier Court specifically
rejected the argument (again made by the dissenters in that case) that conflict pre-emption is appropriate only where the agency
expresses its pre-emptive intent through notice-and-comment rulemaking. Compare 529 U.S., at 885, 120 S. Ct. 1913 (“To insist
on a specific expression of agency intent to pre-empt, made after notice-and-comment rulemaking, would be in certain cases
to tolerate conflicts that an agency, and therefore Congress, is most unlikely to have intended. The dissent, as we have said,
apparently welcomes that result .... We do not”), with id., at 908–910, 120 S. Ct. 1913 (STEVENS, J., dissenting) (emphasizing
that “we generally expect an administrative regulation to declare any intention to **1228 pre-empt state law with some
specificity,” and that “[t]his expectation ... serves to ensure that States will be able to have a dialog with agencies regarding pre-
emption decisions ex ante through the normal notice-and-comment procedures of the Administrative Procedure Act” (internal
quotation marks omitted)). Indeed, pre-emption is arguably more appropriate here than in Geier because the FDA (unlike the
DOT) declared its pre-emptive intent in the Federal Register *623 . See 71 Fed.Reg. 3933–3936. Yet the majority dismisses
the FDA's published preamble as “inherently suspect,” ante, at 1201, and an afterthought that is entitled to “no weight,” ante,
at 1204. Compare Lohr, supra, at 506, 116 S. Ct. 2240 (opinion of BREYER, J.) (emphasizing that the FDA has a “special
understanding of the likely impact of both state and federal requirements, as well as an understanding of whether (or the extent
to which) state requirements may interfere with federal objectives,” and that “[t]he FDA can translate these understandings into
particularized pre-emptive intentions ... through statements in ‘regulations, preambles, interpretive statements, and responses
to comments' ”).
Third, the Court distinguishes Geier because the DOT's regulation “bear[s] the force of law,” whereas the FDA's preamble
does not. Ante, at 1203; see also ante, at 1200. But it is irrelevant that the FDA's preamble does not “bear the force of law”
because the FDA's labeling decisions surely do. See 21 U.S.C. § 355. It is well within the FDA's discretion to make its labeling
decisions through administrative adjudications rather than through less-formal and less-flexible rulemaking proceedings, see
SEC v. Chenery Corp., 332 U.S. 194, 67 S. Ct. 1575, 91 L. Ed. 1995 (1947), and we have never previously held that our pre-
emption analysis turns on the agency's choice of the latter over the former. Moreover, it cannot be said that Geier 's outcome
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hinged on the agency's choice to promulgate a rule. See ante, at 1200, 1203. The Geier Court relied—again over the dissenters'
protestations—on materials other than the Secretary's regulation to explain the conflict between state and federal law. Compare
529 U.S., at 881, 120 S. Ct. 1913, with id., at 899–900, 120 S. Ct. 1913 (STEVENS, J., dissenting), and ante, at 1204 (BREYER,
J., concurring).
Fourth, the Court sandwiches its discussion of Geier between the “presumption against pre-emption,” ante, at 1200, and heavy
emphasis on “the longstanding coexistence of state and federal law and the FDA's traditional recognition of state-law remedies,”
ante, at 1203. But the Geier Court specifically rejected the argument (again made by the dissenters *624 in that case) that the
“presumption against pre-emption” is relevant to the conflict pre-emption analysis. See 529 U.S., at 906–907, 120 S. Ct. 1913(STEVENS, J., dissenting) (“[T]he Court simply ignores the presumption [against pre-emption]”). Rather than invoking such
a “presumption,” the Court emphasized that it was applying “ordinary,” “longstanding,” and “experience-proved principles
of conflict pre-emption.” Id., at 874, 120 S. Ct. 1913. Under these principles, the sole question is whether there is an “actual
conflict” between state and federal law; if so, then pre-emption follows automatically by operation of the Supremacy Clause.
Id., at 871–872, 120 S. Ct. 1913. See also Buckman, 531 U.S., at 347–348, 121 S. Ct. 1012 (“ [P]etitioner's dealings with the FDA
were prompted by [federal law], and the very subject matter of petitioner's statements [to the FDA] were dictated by [federal
law]. Accordingly—and in contrast to situations implicating ‘federalism concerns and the historic primacy of state regulation
of matters of health and safety’—no presumption **1229 against pre-emption obtains in this case” (citation omitted)). 14
14 Thus, it is not true that “this Court has long” applied a presumption against pre-emption in conflict pre-emption cases. Ante, at
1195, n. 3 (majority opinion). As long ago as Gibbons v. Ogden, 9 Wheat. 1, 210, 6 L. Ed. 23 (1824), the Court inquired whether
a state law “interfer[ed] with,” was “contrary to,” or “c[a]me into collision with” federal law—and it did so without ever invoking
a “presumption.” See also Davis, Unmasking the Presumption in Favor of Preemption, 53 S.C.L.Rev. 967, 974 (2002) (noting that
many of the Court's early pre-emption cases “resulted in almost automatic preemption of concurrent state regulation”). In subsequent
years the Court has sometimes acknowledged a limited “presumption against pre-emption,” but it nonetheless remained an open
question—before today—whether that presumption applied in conflict pre-emption cases. See Crosby v. National Foreign Trade
Council, 530 U.S. 363, 374, n. 8, 120 S. Ct. 2288, 147 L. Ed. 2d 352 (2000) (“We leave for another day a consideration in this context
of a presumption against preemption”). Moreover, this Court has never held that the “presumption” applies in an area—such as drug
labeling—that has long been “reserved for federal regulation.” United States v. Locke, 529 U.S. 89, 111, 120 S. Ct. 1135, 146 L. Ed. 2d
69 (2000). See also Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341, 347–348, 121 S. Ct. 1012, 148 L. Ed. 2d 854 (2001).
*625 Finally, the Geier Court went out of its way to emphasize (yet again over the dissenters' objections) that it placed “some
weight” on the DOT's amicus brief, which explained the agency's regulatory objectives and the effects of state tort suits on the
federal regulatory regime. 529 U.S., at 883, 120 S. Ct. 1913; compare id., at 910–911, 120 S. Ct. 1913 (STEVENS, J., dissenting)
(criticizing the majority for “uph[olding] a regulatory claim of frustration-of-purposes implied conflict pre-emption based on
nothing more than an ex post administrative litigating position and inferences from regulatory history and final commentary”).
See also Lohr, 518 U.S., at 496, 116 S. Ct. 2240 (recognizing that the FDA is “uniquely qualified” to explain whether state law
conflicts with the FDA's objectives). Yet today, the FDA's explanation of the conflict between state tort suits and the federal
labeling regime, set forth in the agency's amicus brief, is not even mentioned in the Court's opinion. Instead of relying on the
FDA's explanation of its own regulatory purposes, the Court relies on a decade-old and now-repudiated statement, which the
majority finds preferable. See ante, at 1201 – 1202, 1203, n. 13. Cf. Riegel, 552 U.S., at ––––, 128 S.Ct., at 1010 (noting that “the
agency's earlier position (which the dissent describes at some length and finds preferable) is ... compromised, indeed deprived
of all claim to deference, by the fact that it is no longer the agency's position” (citation omitted)); Altria Group, Inc. v. Good,
555 U.S. 70, ––––, 129 S. Ct. 538, 549–550, 172L.Ed.2d 398 (2008) (rejecting petitioners' reliance on the pre-emptive effect
of the agency's “longstanding policy” because it is inconsistent with the agency's current one). And Justice BREYER suggests
that state tort suits may “help the [FDA],” ante, at 1204 (concurring opinion), notwithstanding the FDA's insistence that state
tort suits will “disrupt the agency's balancing of health risks and benefits,” Brief for United States as Amicus Curiae 9.
Geier does not countenance the use of state tort suits to second-guess the FDA's labeling decisions. And the Court's contrary
conclusion has potentially far-reaching consequences.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 32
Wyeth v. Levine, 555 U.S. 555 (2009)
129 S. Ct. 1187, 173 L. Ed. 2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176...
*626 C
By their very nature, juries are ill equipped to perform the FDA's cost-benefit-balancing function. As we explained in Riegel,
juries tend to focus on the risk of a **1230 particular product's design or warning label that arguably contributed to a particular
plaintiff's injury, not on the overall benefits of that design or label; “the patients who reaped those benefits are not represented
in court.” 552 U.S., at 325, 128 S.Ct., at 1008. Indeed, patients like respondent are the only ones whom tort juries ever see,
and for a patient like respondent—who has already suffered a tragic accident—Phenergan's risks are no longer a matter of
probabilities and potentialities.
In contrast, the FDA has the benefit of the long view. Its drug-approval determinations consider the interests of all potential
users of a drug, including “those who would suffer without new medical [products]” if juries in all 50 States were free to
contradict the FDA's expert determinations. Id., at ––––, 128 S.Ct., at 1009. And the FDA conveys its warnings with one voice,
rather than whipsawing the medical community with 50 (or more) potentially conflicting ones. After today's ruling, however,
parochialism may prevail.
The problem is well illustrated by the labels borne by “vesicant” drugs, many of which are used for chemotherapy. As a class,
vesicants are much more dangerous than drugs like Phenergan, 15 but the vast majority of vesicant labels—like Phenergan's—
either allow or do not disallow IV push. See Appendix, infra. Because vesicant extravasation can have devastating consequences,
and because the potentially lifesaving benefits of these drugs offer hollow solace to the victim *627 of such a tragedy, a jury's
cost-benefit analysis in a particular case may well differ from the FDA's.
15 Vesicants may cause “blistering, severe tissue injury, or tissue necrosis” upon extravasation—even if the drug is not injected into an
artery. See, e.g., Schulmeister, Administering Vesicants, 9 Clinical J. of Oncology Nursing 469, 469–470 (2005). See also ante, at
1192 (majority opinion) (noting that Phenergan is labeled as an “irritant”); cf. Brief for Anju Budhwani et al. as Amici Curiae 15
(suggesting Phenergan should be considered a “vesicant”).
For example, consider Mustargen (mechlorethamine HCl)—the injectable form of mustard gas—which can be used as an
anticancer drug. Mustargen's FDA-approved label warns in several places that “This drug is HIGHLY TOXIC.” 16 Indeed,
the drug is so highly toxic:
16 FDA, Oncology Tools Product Label Details, online at http:// www.accessdata.fda.gov/scripts/cder/onctools/labels.cfm?
GN=meclorethamine,% 20nitrogen% 20mustard (as visited Mar. 2, 2009, and available in Clerk of Court's case file).
“Should accidental eye contact occur, copious irrigation for at least 15 minutes with water, normal saline or a balanced salt
ophthalmic irrigating solution should be instituted immediately, followed by prompt ophthalmologic consultation. Should
accidental skin contact occur, the affected part must be irrigated immediately with copious amounts of water, for at least 15
minutes while removing contaminated clothing and shoes, followed by 2% sodium thiosulfate solution. Medical attention
should be sought immediately. Contaminated clothing should be destroyed.” 17
17 Ibid.
Yet when it comes to administering this highly toxic drug, the label provides that “the drug may be injected directly into any
suitable vein, [but] it is injected preferably into the rubber or plastic tubing of a flowing intravenous infusion set. This reduces
the possibility of severe local reactions due to extravasation or high concentration of the drug.” (Emphasis added.) Similarly,
the FDA-approved labels for other powerful chemotherapeutic vesicants **1231 —including Dactinomycin, Oxaliplatin,
Vinblastine, and Vincristine—specifically allow IV push, notwithstanding their devastating effects when extravasated.
*628 The fact that the labels for such drugs allow IV push is striking—both because vesicants are much more dangerous than
Phenergan, and also because they are so frequently extravasated, see Boyle & Engelking, Vesicant Extravasation: Myths and
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Wyeth v. Levine, 555 U.S. 555 (2009)
129 S. Ct. 1187, 173 L. Ed. 2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176...
Realities, 22 Oncology Nursing Forum 57, 58 (1995) (arguing that the rate of extravasation is “considerably higher” than 6.4%
of all vesicant administrations). Regardless of the FDA's reasons for not contraindicating IV push for these drugs, it is odd (to
say the least) that a jury in Vermont can now order for Phenergan what the FDA has chosen not to order for mustard gas. 18
18 The same is true of FDA's regulation of hydroxyzine. See n. 9, supra.
***
To be sure, state tort suits can peacefully coexist with the FDA's labeling regime, and they have done so for decades. Ante, at
1199 – 1200. But this case is far from peaceful coexistence. The FDA told Wyeth that Phenergan's label renders its use “safe.”
But the State of Vermont, through its tort law, said: “Not so.”
The state-law rule at issue here is squarely pre-empted. Therefore, I would reverse the judgment of the Supreme Court of
Vermont.
*629 APPENDIX TO OPINION OF ALITO, J.
Vesicant 1 IV Push 2
Dactinomycin Specifically allowed
Mechlorethamine
(Mustargen) Specifically allowed
Oxaliplatin Specifically allowed
Vinblastine Specifically allowed
Vincristine Specifically allowed
Bleomycin Neither mentioned nor prohibited
Carboplatin Neither mentioned nor prohibited
Dacarbazine Neither mentioned nor prohibited
Mitomycin Neither mentioned nor prohibited
Carmustine Not prohibited; IV drip recommended
Cisplatin Not prohibited; IV drip recommended
Epirubicin Not prohibited; IV drip recommended
Etoposide Not prohibited; IV drip recommended
Ifosfamide Not prohibited; IV drip recommended
Mitoxantrone Not prohibited; IV drip recommended
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 34
Wyeth v. Levine, 555 U.S. 555 (2009)
129 S. Ct. 1187, 173 L. Ed. 2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176...
Paclitaxel Not prohibited; IV drip recommended
Teniposide Not prohibited; IV drip recommended
Vinorelbine Not prohibited; IV drip recommended
Daunorubicin Prohibited
Doxorubicin Prohibited
1 Wilkes & Barton–Burke, 2008 Oncology Nursing Drug Handbook 27–33 (2008) (Table 1.6).
2 IV-push information is derived from the “dosage and administration” sections of individual drug labels (available in Clerk of Court's
case file).
All Citations
555 U.S. 555, 129 S. Ct. 1187, 173 L. Ed. 2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176, 09 Cal. Daily Op. Serv. 2644,
2009 Daily Journal D.A.R. 3199, 21 Fla. L. Weekly Fed. S 675
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 35