November 8, 2011

Jeremy Taylor, Senior Attorney, National Legal Research Group

The U.S. Supreme Court recently decided a case involving the issue of federal preemption of state law warning claims against manufacturers of the generic drug metoclopramide.  See Pliva, Inc. v. Mensing, 131 S. Ct. 2567 (2011).  The plaintiffs were users of the drug who filed state court actions alleging that their long-term use of metoclopramide had caused them to suffer tardive dyskinesia.  In the first case, the U.S. District Court for the Eastern District of Louisiana granted in part and denied in part the manufacturer's motion to dismiss, and the manufacturer appealed.  The U.S. Court of Appeals for the Fifth Circuit affirmed.  In the second case, the U.S. District Court for the District of Minnesota granted the manufacturers' motions for summary judgment, and the consumer appealed.  The U.S. Court of Appeals for the Eighth Circuit reversed in part.  The Supreme Court granted certiorari, and the cases were consolidated.  The Court ruled that federal law preempts state laws imposing a duty on generic drug manufacturers to change a drug's label.

Following approval by the Food and Drug Administration ("FDA") of the sale of metoclopramide under a brand name, generic manufacturers began producing the drug, which is used to treat digestive disorders.  The plaintiffs had been prescribed the brand-name drug but had received generic metoclopramide from their pharmacists.  After having used the drug for several years, both plaintiffs developed tardive dyskinesia, a severe neurological disorder.  They sued the manufacturers in state court for failing to provide adequate warnings of the dangers of the drug.  The manufacturers argued that federal statutes and the FDA regulations preempted the state products liability causes of action, and they asserted that because federal law required them to use the same safety and efficacy labeling as was used in their brand-name equivalents while state law required the use of a different label, it was therefore impossible for them simultaneously to comply with both federal law and state law.  The Court noted that evidence has mounted that metoclopramide can cause tardive dyskinesia.  As a result, warning labels for the drug have been strengthened and amended several times.  In 2004, the brand-name manufacturer requested, and the FDA approved, a label change to provide that therapy with the drug should not exceed 12 weeks.  In 2009, the warning was intensified to caution that treatment with the drug can cause tardive dyskinesia, an often irreversible movement disorder.

October 25, 2011

Steve Friedman, Senior Attorney, National Legal Research Group

Congress enacted the Real Estate Settlement Procedures Act ("RESPA") of 1974, 12 U.S.C. §§ 2601-2617, in response to the need for significant reforms in the residential real estate settlement process.  See RESPACReal Estate Settlement Procedures Act Home Page (last visited Oct. 12, 2011) ("[RESPA] insures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices.").

Indeed, the legislation expressly states that it is intended to, among other things, eliminate "kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services."  12 U.S.C. § 2601(b)(2).  To that end, § 8(b) of RESPA provides as follows:  "No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."  Id. § 2607(b).

The U.S. Department of Housing and Urban Development, the federal agency responsible for enforcing RESPA, has asserted that four types of overcharging schemes are prohibited by § 8(b):

1.         Fee splitting, where two or more persons split a fee, any portion of which is unearned;

2.         Mark-ups, where a service provider charges the borrower for services performed by a third party in excess of the cost of the services to the service provider but keeps the excess itself [without providing any additional goods or services];

3.         Undivided unearned fees, where a service provider charges the borrower a fee for which no correlative service is performed; and

4.         Overcharges, where a service provider charges the borrower for services actually performed but in excess of the service's reasonable value.

Freeman v. Quicken Loans, 626 F.3d 799, 802 (5th Cir. 2010) (citing RESPA Statement of Policy 2001-1, 66 Fed. Reg. 53,052 (Oct. 18, 2001)).

All U.S. Courts of Appeals that have addressed the issue agree that § 8(b) plainly prohibits the first and fourth types of schemes, fee splitting and overcharges.  See id. (citing cases).  However:

The circuits disagree on the remaining two types of fees: mark‑ups and undivided unearned fees.  The Fourth, Seventh, and Eighth Circuits have each held that RESPA § 8 is exclusively an anti‑kickback provision.  [See Boulware v. Crossland Mortg., 291 F.3d 261 (4th Cir. 2002); Krzalic v. Republic Title, 314 F.3d 875 (7th Cir. 2002); Haug v. Bank of Am., 317 F.3d 832 (8th Cir. 2003).]  Accordingly, RESPA ' 8(b) requires two culpable parties, a giver and a receiver of the unlawful fee, rendering mark‑ups by a sole services provider not actionable.  The Second, Third, and Eleventh Circuits have rejected the two‑party requirement and held that RESPA § 8(b) prohibits mark‑ups.  [See Kruse v. Wells Fargo Home Mortg., 383 F.3d 49 (2d Cir. 204); Santiago v. GMAC Mortg. Group, 417 F.3d 384 (3d Cir. 2005); Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979 (11th Cir. 2003).]  Only the Second Circuit has explicitly addressed whether RESPA § 8(b) prohibits a sole provider's undivided unearned charges and found that it did.  Cohen v. JP Morgan Chase & Co., 498 F.3d 111 (2d Cir. 2007).  Presumably, the three circuits that require two culpable actors would not find undivided unearned charges actionable.

October 11, 2011

Suzanne Bailey—Senior Attorney

Perhaps the only provision of the Patient Protection and Affordable Care Act ("PPACA"), Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), not to have received widespread attention is a provision amending the Black Lung Benefits Act ("BLBA"), 30 U.S.C. §§ 901-944, to effectively reinstate the right of survivors of miners who died disabled by pneumoconiosis, or black lung disease, to collect derivative benefits under certain conditions, a right which was abolished in 1981. 

The black lung benefits program was enacted originally as Title IV of the Federal Coal Mine Health and Safety Act of 1969 (FCMHSA), 83 Stat. 792, 30 U.S.C. § 901 et seq., to provide benefits for miners totally disabled due at least in part to pneumoconiosis arising out of coal mine employment, and to the dependents and survivors of such miners. 

September 27, 2011

John Stone, Senior Attorney

According to a federal district court that was recently considering a case of alleged bullying of a disabled adolescent girl at school, if bullying were a medical issue, it would be characterized as a disease affecting America's youth, and a team from the Centers for Disease Control charged with investigating epidemics would be called in to study it.  The problem is pervasive and serious, particularly in the middle school years.  It is the most common type of violence in our schools.  T.K. v. N.Y.C. Dep't of Educ., No. 10-CV-00752, 2011 WL 1549243, at *5 (E.D.N.Y. Apr. 25, 2011).  (T.K. is one of the parents of the student, who is referred to in the case only as "L.K.")

As the court considered in T.K., when the student victim of bullying is also disabled within the meaning of the federal Individuals with Disabilities Education Act ("IDEA"), 20 U.S.C. §§ 1400-1482, a school district's response, or its lack thereof, can raise the prospect that the student has been deprived of the "free appropriate public education" to which he or she is entitled under the IDEA.  In a lengthy memorandum and order, the court in T.K. set out to answer this "largely unresolved issue."  Id. at *1.  Not only did the court find in principle that the IDEA can be violated in such circumstances, but it also found that the particular school district in the case before it was not entitled to summary judgment on the IDEA claim brought by the disabled student's parents.

In T.K., the bullying took the form of repeated instances of the student's being ostracized, isolated, and teased by fellow students.  In addition, she was sometimes pushed or intentionally tripped by other students.  Other specific incidents of bullying included a classmate's drawing depicting L.K. in a disparaging light; a student's chasing L.K. with what he claimed was blood but was in fact ketchup; other students' refusing to touch things once L.K. had; and a prank phone call made to L.K.'s home, which the school was informed about.

To be sure, "bullying" is a somewhat subjective term, and it must be distinguished from less serious or harmful conduct, such as horseplay.  Every disagreement or conflict among children does not amount to bullying.  What distinguishes bullying from other forms of childhood aggression is unequal and coercive power.  Referring to authorities on the subject, the court observed that the bully/victim connection can be viewed as the opposite of a healthy peer relationship.  Peers are equals on the same social standing, while a bullying nexus lacks equality of standing. It is the inequality, abuse, and unfairness associated with bullying that makes it unacceptable in law as well as in education.  Id. at *9.

In determining whether school bullying has deprived a disabled child of a free appropriate public education under the IDEA, the question to be asked is whether school personnel were deliberately indifferent to, or failed to take reasonable steps to prevent, bullying that substantially restricted a child in his or her educational opportunities.  The applicable standard takes into account administrative advice that has long been given to schools in how to apply the IDEA and other child-protective legislation.  Referencing a document from the U.S. Department of Education, Office of Civil Rights, the court stated that for at least 10 years, schools have been on notice of their obligations in this area:

The Lawletter Vol 36 No 2, September 30, 2011

John Stone, Senior Attorney, National Legal Research Group

A county corrections employee was ultimately terminated, primarily because an investigation had indicated that while attending a conference, he had sent a sexually graphic image to the personal cell phone of a subordinate, who then displayed it to other coworkers.  In federal court, he brought federal claims under 42 U.S.C. § 1983 as well as a state law claim seeking review of the administrative decision to fire him.  In the end, the court declined to exercise supplemental jurisdiction over the state law claim because it found that the trial court had properly granted summary judgment for the county defendants on the federal constitutional claims.  Merrifield v. Santa Fe Bd. of County Comm'rs, Nos. 10-2175, 10-2179, 2011 WL 3000687 (10th Cir. July 25, 2011).

One of the fired employee's constitutional claims was that his First Amendment right of association had been violated because the County had retaliated against him when, early in the disciplinary process, he had hired an attorney and informed the County that all communications on the matter should go through his attorney.  The argument was that the retaliation had taken the form of choosing the strongest sanction—termination—as opposed to some lesser punishment that would have let the employee keep his job.  The lower court found that the employee had failed to present enough evidence of a retaliatory motive to survive the summary judgment motion, but, as discussed by the Tenth Circuit, there was also a legal, not just factual, obstacle to the right-of-association claim.

The Lawletter Vol 36 No 2, September 30, 2011

Paul Ferrer, Senior Attorney, National Legal Research Group

The Due Process Clause of the Fourteenth Amendment sets the outer boundaries of a state court's authority to assert personal jurisdiction over a nonresident defendant.  The canonical decision in this area remains International Shoe Co. v. Washington, 326 U.S. 310 (1945).  International Shoe and its progeny have classified cases involving out-of-state corporate defendants into two categories, which have come to be known as "general or all-purpose jurisdiction" and "specific or case-linked jurisdiction."  Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011).  A court may assert general jurisdiction over foreign corporations to hear any and all claims against them "when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State," without regard to whether the claims arise out of the corporations' contacts with the State.  Id. (quoting Int'l Shoe, 326 U.S. at 317).  The paradigm bases for the exercise of general jurisdiction over a foreign corporation are domicile, place of incorporation, and principal place of business.  See id. at 2854.  In contrast to general jurisdiction, specific jurisdiction is confined to adjudication of issues arising from or related to the very controversy that establishes jurisdiction.  See id. at 2851.  For example, many states have enacted long-arm statutes authorizing their courts to exercise specific jurisdiction over out-of-state manufacturers whose products caused injury in the forum state, where the suit arose out of that injury.  See id. at 2855.