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From Products Liability Law Daily, October 28, 2014

$9B Actos verdict against Takeda, Eli Lilly slashed to $36M on due process grounds

By Pamela C. Maloney, J.D.

Finding that the ratio of compensatory-to-punitive damages violated due process, a federal district court in Louisiana reduced a jury award of $9 billion in punitive damages to $36 million in the bellwether multidistrict litigation action brought against Eli Lilly and Takeda Pharmaceuticals for injuries allegedly caused by the drug Actos, which was formulated to treat diabetes. In addition, the court finalized the compensatory damages awarded to the bellwether patient, who developed bladder cancer allegedly as a result of his ingestion of Actos, accepting the amounts stipulated to by the parties. The patient was awarded $945,000 in compensatory damages, and his wife received $325,000 (In re Actos (Pioglitazone) Products Liability Litigation (Allen v. Takeda Pharmaceuticals North America, Inc.), October 27, 2014, Doherty, R.).

Background. In 1998, Takeda Pharmaceutical Company Limited, Takeda Pharmaceuticals U.S.A., Inc., Takeda Pharmaceuticals International, Inc., Takeda Pharmaceuticals LLC, Takeda Development Center Americas, Inc., Takeda California, Inc. (collectively, Takeda) entered into an agreement with Eli Lilly and Company, giving Eli Lilly the exclusive right in the United States to co-promote Actos (pioglitazone Hcl), a drug developed by Takeda to treat type 2 diabetes. Eli Lilly’s active promotion of the drug ended in March 2006.

In June 2006, Terrence Allen began taking Actos under a prescription. Allen was diagnosed with bladder cancer in January 2011 and stopped taking Actos in April 2011. Allen, along with his wife Susan Allen, brought product liability and other claims against Takeda and Eli Lilly as part of multidistrict litigation regarding Actos. The jury found that Actos exposure increased the risk of bladder cancer; that Takeda and Eli Lilly were aware of the increased risk; that they undertook a coordinated pattern of effort over several years to prevent the FDA, the medical community, and the public from knowing about this increased risk; and that they did so to preserve the profits Actos was generating for them in the United States and globally. The jury awarded the Allens $6 billion in punitive damages against Takeda and $3 billion against Eli Lilly. It also awarded Terrence Allen $150,000 in past compensatory damages and $1 million in future compensatory damages and awarded his wife Susan Allen $325,000 in damages for loss of consortium; Takeda was assigned 75 percent of the liability on those damages and Eli Lilly 25 percent. The two companies moved for a new trial, primarily challenging the constitutionality of the jury’s punitive damages awards against them.

Punitive damages standard. In its memorandum ruling granting in part the drug companies’ motion for a new trial, the court reiterated its note from the onset of the Allen trial that “New York law was unclear as to the applicable standard of proof in punitive damages claims—there being a split in the lower courts and no determination by New York’s highest court—to which a plaintiff must be held.” However, the drug companies argued that the New York courts have adopted the U.S. Supreme Court’s Due Process Clause test for excessiveness as to punitive damages awards. After reviewing the most relevant decisions outlining the Supreme Court’s excessiveness analysis, the district court concluded that the High Court had provided three “guideposts”—degree of reprehensibility, ratio, and comparable civil penalties—for courts to use as the basis of any analysis of the factors on which the issue of constitutional excessiveness ultimately turns,i.e., the reasonableness and proportionality of the punitive damages award.

Degree of reprehensibility. The district court ruled that the evidence presented at trial supported the jury’s determination that in failing to provide adequate warnings of the risk of bladder cancer associated with Actos, both drug companies acted with a wanton and reckless disregard for the results of their actions, putting the public health and welfare at risk. Thus, their conduct met the criteria of an increased or high degree of reprehensibility.

Ratio. For this second guidepost, the district court pointed out that although the Supreme Court has espoused a ratio link between the harm suffered as measured by the amount of compensatory damages, it has refused to set a bright-line rule or a rigid mathematical formula to limit the acceptable scope of punitive damages. Instead, the High Court has limited any guidance offered to the specific facts of each case. Turning to the specific facts of this case, the district court found the drug companies’ deliberate conduct caused egregious bodily harm to this patient and that this harm resulted from a deliberate and sustained campaign to deceive and conceal information from the Food and Drug Administration, from prescribing physicians, and from patients. Following the lead of the Supreme Court, the district court dodged the “troublesome determination” of whether there is or should be a definitive substantive ceiling on punitive damages awards, and decided that a ratio of compensatory-to-punitive damages of 1:5424 for the award against Takeda and 1:8136 for the award against Eli Lilly might “jar[] one’s constitutional sensibilities,” even in a case involving personal injury and bodily harm as well as a high degree of reprehensible conduct.

Comparable civil penalties. Because New York law does not provide for the potential for civil penalties or fines against the drug companies for their actions in this matter, this guidepost did not shed any light on the reasonableness or proportionality of the punitive damages award in this matter, the court explained.

Due process review. After reviewing the guideposts, the court went on to conduct a due process analysis, examining the reasonableness and the proportionality of the jury’s award. The reasonableness inquiry, which focuses primarily on the degree of reprehensibility of the drug companies’ conduct, requires a subjective review of the evidentiary and factual grounds keying the award to the drug companies’ conduct. The district court found that the jury’s award was not unreasonable given the goal of punitive damages to punish and deter. The court rejected the drug companies’ argument that the jury acted out of passion or prejudice in setting the amount of the punitive damages award.

On the other hand, the proportionality prong of the due process analysis focuses on the ratio between the compensatory and punitive damages awards, encompassing a more objective gauge of the excessiveness of an award. The court reminded the parties that even in the unique circumstances of an MDL, the punishment could not reach out to benefit those parties not before the court, and, in this instance, only the Allens were before the court. In addition, fundamental fairness should dictate that the amount of the award should not be so large as to trigger bankruptcy or wholly discourage companies from engaging in the “necessary commerce.”

Absent clear guidance from the Supreme Court as to what constitutes a fair ratio, the court concluded that it had to focus on the proportionality of the award to the actual or possible harm inflicted. Given the actual harm to the patient in this case and the amount of the compensatory damages, the court concluded that the 6,101 to 1 ratio between the total compensatory damages and the total punitive damages awarded was so large as to violate substantive due process.

Remedy for excessive award. However, its determination that the punitive damages award was excessive left open the question of what level award would not violate substantive due process and whether, under the Seventh Amendment, the district court had the authority to make such an award itself. It was clear that the drug manufacturers were entitled to a remedy for this constitutional violation. They had sought a new trial; however, because the jury’s determination was not the result of passion or prejudice, but was the result of the jury’s analysis of the evidence, its assessment of the financial situation of the two companies, and its application of New York law, per the court’s instruction, a new trial was not warranted.

The district court determined that in lieu of a new trial, remitter of the punitive damages award was the proper remedy in this case. Following the limited guidance provided by the U.S. Court of Appeals for the Fifth Circuit’s maximum recovery rule, and honoring the requirements of the Seventh Amendment, the district court concluded that the highest level of punitive damages that could be awarded based on the facts of this case was a ratio of 1:25 of compensatory damages to punitive damages. Thus, the court entered an award of punitive damages against Takeda in the amount of $27,656,250, and a second award in the amount of $9,218,750 against Eli Lilly, for a total of $36,875,000.

The case number is MDL No. 6:11-md-2299; Case No. 6-12-cv-00064-RFD-PJH (Memorandum RulingAmended Judgment).

Attorneys: Paul J. Pennock (Weitz & Luxenberg) for Terrence Allen. Jaimme Angelle Collins (Adams & Reese) for Takeda Pharmaceutical Co. Ltd. Colin J. Garry (Sidley Austin) for Takeda Pharmaceuticals LLC. Sara J. Gourley (Sidley Austin) for Eli Lilly & Co.

Companies: Takeda Pharmaceutical Co. Ltd; Takeda Pharmaceuticals LLC; Eli Lilly & Co.

MainStory: TopStory DamagesNews DrugsNews LouisianaNews NewYorkNews

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