$9 Billion Punitive Damages Award Upheld in Actos Bellwether Trial

On August 28, 2014, U.S. District Court Judge Rebecca Doherty declined to overturn a Louisiana jury’s award of over $9 billion to plaintiffs Terrence and Susan Allen in the first federal bellwether trial over claims that the diabetes drug Actos increases the risk of getting bladder cancer. The verdict, which according to data compiled by Bloomberg was the nation’s second largest in 2014, and sixth largest in U.S. history, slapped Actos manufacturer Takeda Pharmaceuticals with $6 billion in punitive damages and the drug’s co-promoter Eli Lilly & Co. with $3 billion, as well as held each company liable for approximately $1.5 million in compensatory damages.

In response to the mammoth verdict rendered in April 2014, Takeda and Lilly jointly filed a motion pursuant to Rule 50(b) of the Federal Rules of Civil Procedure for judgment as a matter of law on all of the plaintiffs’ claims, including the factual basis for the plaintiffs’ demand for punitive damages.

First, Lilly contended that claims against it were preempted because as a co-promoter, the company did not have the authority to enact any changes to the Actos label. Co-promotion in the pharmaceutical industry occurs when two or more companies sell the same drug under the same trademark. Usually, as was the case here, one company develops and manufactures the drug while the other company, a co-promoter such as Lilly, is merely a licensee. According to James Huston of Morrison Foerster, LLP “co-promoters often think, ‘It’s not our job, we don’t have a duty to encourage the manufacturer to change the label.” 

While it was undisputed that Lilly had no regulatory or statutory obligation to participate in the process of developing the label, Judge Doherty held that Lilly was in control of the assorted marketing materials it produced regarding the drug. According to the Court, these marketing materials, like the label, also failed to adequately warn of the bladder cancer risk. Furthermore, the Court was persuaded by the plaintiffs’ argument that every document used to market the drug is essentially a “label” under federal regulations.

Next, in a related argument, both companies asserted that they were protected by the preemption doctrine because clear evidence was presented at trial that the FDA would not have allowed any further warning of the risk of bladder cancer. The Court, in its 100-page order, cited the U.S. Supreme Court’s holding in Wyeth v. Levine for the premise that the preemption doctrine would only apply to state claims where there was clear evidence that it is impossible for the drug manufacturer to comply with both federal and state requirements.

The Court concluded the plaintiffs had presented evidence that the FDA made overtures to include a bladder cancer warning, yet the defendants had resisted the overture. In so holding, the Court stated that in order to comply with New York Law, Takeda would, at the very least, have been required to make a full, complete and forthright disclosure of the scientific data to the FDA and encourage the FDA to include an adequate warning, and Lilly would have had to disclosed the actual increased risk of bladder cancer to the doctors whom it pitched Actos. Instead, the evidence presented by the plaintiffs at trial was sufficient for the jury to find that there was a concerted effort by the companies to resist, as well as fail to provide information to doctors and the FDA. Thus, the Court stated that it could not find that the defendants’ argument that the FDA, had it been presented with a complete, accurate, and forthright description of the risk, would have chosen to hide such from the public.

The Court also overruled arguments concerning specific causation and breach of implied warranty of merchantability. The defendants’ causation argument was based on their assertion that the testimony of the plaintiffs’ expert witness, Dr. Scott Delacroix, was lacking support and challenged the plaintiffs’ overreliance on him as a witness. Judge Doherty acknowledged that when the plaintiffs rely solely on expert witness testimony to meet their burden of proof, the testimony must be founded on substantial evidence and not merely expertise. The Court pointed out that the defendants failed to reference any offending testimony in their motion, however, and concluded that the defendants’ argument was “unpersuasive at best.”

Likewise, the Court was unimpressed with the defendants’ warrantee-of-merchantability argument. Under this theory, the defendants argued that they could not be liable to the plaintiffs because Actos is fit for its particular purpose and is minimally safe. At the outset, the Court was doubtful that the defendants were in their rights to even raise this issue post trial, and addressed it only “out of an abundance of caution.” In doing so, the Court found that the defendants’ “novel” argument ignored the fact that, under the applicable law, improper labeling can render a product unfit for its particular purpose.

The defendants’ also argued in their motion that the punitive damages were improper, and should have only been awarded if the jury found that the misconduct was exceptional and implied “criminal indifference to civil obligations.” The Court dismissed this argument, noting that the defendants failed to argue that this heightened punitive damages standard be included in the jury instructions during trial, and as a result, they were barred from raising the argument in a post-trial motion.

The defendants are likely to appeal this ruling to the Fifth Circuit.

The Actos multidistrict litigation has been ongoing since January 2012 and involves nearly 3,000 plaintiffs who similarly claim that using Actos carried risks of developing bladder cancer, and such risk was not properly included on the drug’s label. The second bellwether trial was scheduled to begin in April, but has since been continued indefinitely.

Counsel Financial provides working capital credit lines up to $5 million exclusively for the plaintiffs' bar in all states except California, where credit lines are issued by California Attorney Lending. Explore all of our financial solutions designed for contingent fee practice.