Some “Inside (MDL 1938 Litigation) Baseball” Here — Dechert, Consolidated Complaints, and the Federal Discovery Rules. . . .

Last night, Dechert filed an unusual “letter brief” in MDL 1938 — seeking to dismiss many of the claims made in Polk, et al., v. Schering-Plough, et al. On September 25, 2008, the plaintiffs’ lawyers had submitted a massive consolidated amended class action complaint, in MDL 1938, chiefly for the purpose of satisfying the very-tight federal standards governing allowable pre-trial discovery. The plaintiffs had asked that the newest filing be considered chiefly for the purpose of satisfying the “pleading with particularity” requirements of the federal MDL rules, in Footnote 1 to the September 25, 2008 filing.

Now, step back a moment — and to oversimplfy, rather greatly — think of the present litigation stage/procedural wrangling, as you would one of those Southeast Asian-style shadow-puppet shows.

Got it? Okay — what is happening in Polk right now is very much like one of those shadow shows — we, the assembled audience (and the Judge), are nominally asked (by Dechert, on behalf of Schering and Merck) to accept the tautology that it would be judicially inefficient to give these particular plaintiffs “multiple bites at the same apple“. Sounds sensible — insofar as our shadow-puppet play goes, right? Right.

To catch a glimpse of the actual puppeteers, though — behind those gauze-screens, we’ll need a little wider-frame of reference. In sum, we’ll need to think about why pre-trial civil discovery is allowed, in the federal courts, more generally.

Civil discovery is allowed (prior to trial) so that a plaintiff may know — in advance — whether his or her case is tenable. It is also designed to allow truly innocent, honest, law-abiding defendants/companies to “clear themselves” quickly, and efficiently — and avoid the burdensome costs and distractions of any protracted, but mostly meritless, litigation.

Dechert — in its letter of last night — would turn this system on its head. Schering (through its lawyers) argues that the Polk MDL 1938 plaintiffs will need to lay out, with exclusivity — on pain of dismissal — right now, and precisely, each of the legal theories upon which they intend to rely at trial — in order to decide whether they will even be allowed to conduct discovery — thus foregoing all other theories that might emerge as the “truth, slowly outs, tailing gossamer veils of ambiguity” — — that is, as the facts emerge, from the documents and depositions. And this, before Schering (or Merck) has ever substantively answered one question, under oath, about the-admitted over-18-month ENHANCE disclosure delays.

Dechert would suggest the federal rules of MDL discovery require a sort of random crap-shoot, with a loaded (or perhaps, unloaded) gun, all while wearing a blind-fold, ear-muffs and thick oven-mitts.

The alternative, here? Open discovery based on the theories that seem most plausible at the moment?

Dechert tells Judge Cavanaugh that it would be too-unwieldy to contemplate — but I think not.

If Merck and Schering really are “in the clear“, here — that is, have nothing to hide — then each may turn over the documents, and have their executives offer depositions, free of any fear that some “other” theory of liability would be established in the process.

Said more plainly — there can be no public policy justification for large, supposedly-sophisticated multinational pharma companies hiding any evidence of wrong-doing, when it involves an FDA regulated human health-care drug — complete, voluntary, and willing candor (not wily procedural obfuscation) is the operative standard, here.

These companies are, by dint of our carefully-crafted geopolitical/economic system, handed a truly-collosal set of monopoly-marketing priviledges, in the twin-forms of requisite FDA Approvals, and iron-clad patent-law protections — to sell what are purported to be life-enhancing medicines, largely free of competition, to our citizenry.

The very least we should expect of them is that they promptly — and completely candidly — tell us the entire truth, as they learn it, about whether any particular monopoly good is providing a measurable, outcome-based benefit to us, for the multiple billions of dollars each year we collectively spend purchasing it.

So — the Dechert letter-page snippet (at above right, click to enlarge), gets it exactly backwards. I suspect Judge Cavanaugh will tell them so, eventually.

An important judicial teleconference — on discovery issues, and scheduling — on one “peninsula” of Schering-Plough’s “continent” of litigation. . . .

Last month, Judge Cavanaugh encouraged the plaintiffs’ lawyers in the consolidated actions now captioned In Re Vytorin/Zetia Marketing, Sales Practices, and Products Liability Litigation (Civil Action No. 08-285 (DMC); MDL No. 1938, US Dist. Ct. NJ), to meet with the defendants’ lawyers and try to work out some of their differences. One of the more important remaining differences is now scheduled to be the subject of a July 17, 2008 judicially-supervised teleconference. Quoting from the Magistrate’s letter order, just filed July 3, and entered as of July 4, 2008, then:

“. . . .Please be advised that this matter has been scheduled for a telephone conference on Thursday, July 17, 2008 at 10:00 a.m. The parties should be prepared to address the discovery scheduling issue raised in plaintiffs’ letter of June 19, 2008 to District Judge Cavanaugh (docket no. 61). Plaintiffs’ co-liaison counsel are responsible for arranging and initiating the conference call. . . .”

/s/ Mark Falk
United States
Magistrate Judge

The issue to be discussed on this call is whether the plaintiffs will be allowed to begin “discovery” — that is, start reviewing Schering documents (including Schering’s “due diligence” files), and potentially taking depositions — before the court rules on the pending Schering-Plough motion to dismiss these consolidated actions.

It may take several months — into early 2009 — before the court will be fully-briefed on the issues that will drive its decision on the pending motion to dismiss. So, quite sensibly, the plaintiffs do not want this to be a period of “lost time“, in terms of moving the litigation forward, should the judge deny Schering’s motion to dismiss (given the considerable amount of potential evidence of alleged negligence, if not outright malfeasance, and the variety of the plaintiffs’ theories for recovery, I personally doubt that Schering has much of a chance of winning on its motion to dismiss — I’ll explain why some other time).

So — here’s “what’s-up” for July 17: whether the plaintiffs may begin to force Schering to turn over that potential evidence, essentially immediately, perhaps entirely mooting the pending motion to dismiss.

While I think it likely that Magistrate Judge Falk (for District Court Judge Cavanaugh), is likely to allow immediate discovery — it is a certainty that Schering will seek to have the judge — Judge Cavanaugh — reconsider the Magistrate’s decision — in the event that the Magistrate allows immediate discovery. Delay, in these situations, is usually the ally of the defendants — that is, the longer Schering can hold-out, and avoid offering up its internal files for review, the greater the chance that various peoples’ memories will have faded, or clouded-over, and sharp recall of details will have been “lost” — such that no clear trail of wrong-doing (or exoneration!) will appear from any of the documents (and the depositions of witnesses, as they are quizzed about the relevance, meaning and import of the documents).

So — I’ll predict that Magistrate Judge Falk will allow essentially immediate discovery (an important “first-step” toward victory for the plaintiffs); Schering will file a motion for reconsideration — and, if Judge Cavanaugh (after a Schering motion to reconsider) then allows discovery to proceed immediately, Schering’s lawyers will take an immediate appeal of that order “upstairs” — to the Court of Appeals.

However, there are ways in which Judge Cavanaugh’s ultimate order may be crafted to minimize the chance that Schering could acheive additional delay (by filing that appeal). For example, Judge Cavanaugh could enter his order (allowing immediate discovery against Schering) as a “non-final“, or conditional, order — it could be an interim order allowing discovery to proceed, subject to his ruling on the motion to dismiss. That would leave Schering with almost no basis to appeal, as only “final orders” are generally appealable, under the federal rules. If non-final, the order would be non-appealable — but might be vacated, if, at some future point, as briefing on the motion to dismiss evolves, Judge Cavanaugh sees the motion for dismissal as being more meritorious than it now would appear to be.

So — and the reason for all this circumlocution, here — if this July 17 conference call goes well for the plaintiffs, internal Schering documents could begin to emerge as early as late-August, 2008. More likely, it will be late-September 2008, but soon enough, Schering will have to begin to make those diligence files available. And there will very-likely be a treasure trove of evidence there.

Evidence that radiates well-beyond these consumer fraud cases — to the derivative actions, to the ERISA cases, to the RICO actions and, of course, to the securities fraud claims — and, very-little of it likely helpful to Schering’s defenses. Remember, you read it here, first.