The tale of the tape: 3M and Covington & Burling
In this corner: Covington & Burling, the 53rd-largest law firm in the nation and one of the silkiest of silk-stocking law firms in the country. (Eric Holder left the firm in 2009 to become attorney general in the Obama administration.)
In the opposite corner: 3M, the pride of Minnesota and progenitor of such archetypal American products as Scotch Brand tape, Post-it Notes, and Scotchgard Fabric Protector. Who would guess these two Brooks Brothers-suited Wall Street darlings would stoop to rabbit-punching each other, rumbling though the courthouse like the Crusher and a former Minnesota governor in the wrestling ring?
It wasn’t always that way. From 1992 through 2010, 3M and Covington were a tag team, taking on nasty environmental accusations against 3M by the government, among other cases. High on the list of those allegations were some involving PVC-related contamination. Covington worked with 3M on the dangers of PFC (a kind of PVC) food wrapping exposed to high heat (as in a microwave oven). 3M decided to phase out using PFCs in its products in 2000, and to stop selling PVC products altogether (one of the few American companies to do so; the companies that make Gore-Tex and Teflon products still use PVCs). It was Covington that helped guide 3M’s PFC phase out with the Food and Drug Administration.
But since 1995, Covington has also worked with the State of Minnesota on environmental issues, and therein lies the seed of the conflict. In 2010, just months after Covington had closed out its legal work for longtime client 3M, it accepted a request by longtime client Minnesota to prosecute 3M. The charges? “Damage to the environment” caused by the residue of PFCs legally disposed of by the company. The law firm was diligent on the state’s behalf, gathering more than 6 million pages of documents and more than 50 technical expert depositions. But after almost two years, with much work and money expended, the guillotine fell.
3M filed suit, claiming Covington had a substantial advantage because the turncoat law firm could take inside information gathered while in 3M’s employ and now use it against 3M. Covington claimed its previous work with 3M was completely unrelated to the lawsuit it was now pursuing. 3M wondered why Covington had never informed them of their decision to work on this case, as is common protocol in such circumstances. Covington wondered why it took 3M almost a year and a half to make the accusations and bring the suit. Nasty accusations flew.
It should surprise no one that at the core of this conflict is money. A lawsuit similar to the one Minnesota brought (and Covington pursued) against 3M was brought against the DuPont Corp. in Ohio. It resulted in a $300 million judgment against DuPont. On Covington’s side, their contingent deal with the state put them in the position to earn an estimated $50 million, should they win in court.
Ben Wogsland, speaking for the Minnesota attorney general’s office, says that the state did not know about Covington’s failure to inform 3M that it was now working against the company, “but frankly, those issues are between 3M and Covington.”
3M’s attorney William A. Brewer III, of Dallas’ Bickel & Brewer, says bringing the case against Covington was at least partly a matter of principle. “The case is important,” he says, “because it underscores the confidentiality surrounding attorney and client communications as fundamental to the integrity of our legal system.”
This wasp’s nest hit the courtroom of Hennepin County Judge Robert Blaeser. 3M’s lawyers asked that Covington be disqualified from the case. Covington argued that it had advised 3M on unrelated matters when dealing with the FDA and that it properly ended its relationship with 3M when it agreed to take the case for the state.
Judge Blaeser decided the case in 3M’s favor, writing “Covington has ‘switched sides’ by representing a client who is now suing a former client.” Because of that, said the judge, “the firm will be benefitted by contradicting the very positions it had long advocated on 3M’s behalf.”
The case went to the Minnesota Appeals Court, which upheld Covington’s disqualification. It is now on appeal to the Minnesota Supreme Court.
Details, details, details. Michele Bachmann didn’t win in her bid to become president of the United States, and she may lose as well in court.
The Bachmann presidential campaign has been sued, and is also under investigation by a hefty collection of government agencies. Among those investigating the campaign (in which she finished a distant sixth in the Republican Iowa primary) are the Federal Election Commission, the independent Office of Congressional Ethics (OCE), the FBI, the U.S. Justice Department, the Iowa Supreme Court and the U.S. House’s Committee on Ethics.
Campaign finance rules are notoriously complex. Still, a few allegations against the Bachmann campaign are straightforward.
Barb Heki, an Iowa grandmother, was a gung-ho volunteer for the Bachmann campaign. After a while, though, she discovered it was using her personal—and private—list of home-school families’ email addresses, a list she never offered to share. She asked the campaign for an explanation. Home-schoolers are a hot group for religiously inclined Republican candidates. When the campaign staff gave her no explanation, the longtime board member of the Network of Christian Home Educators (which booted her off the board when the Bachmann people started using their private email list) sued the campaign for answers—and damages. The suit stirred up a variety of possible suspects. One campaign staffer claimed to have been told by Bachmann’s Iowa campaign chair, state Sen. Kent Sorenson, that “we took [the email list].” Sorenson publicly denied any involvement and a campaign staffer who is also an aide to Sorenson later confessed to the theft, which he said he obtained “by accident.” In June 2013 the Bachmann folks agreed to a settlement with Heki, the terms of which were undisclosed to the public.
Among the claims of broken federal campaign rules is the mixing of Bachmann’s campaign staff and her staff charged with promoting of her biography, Core of Conviction. The book was published six weeks before the Iowa primary and Bachmann promoted it in Iowa bookstores during the campaign.
Sorenson was a hot property for the Bachmann campaign. He was well-known in Iowa and sought after by many of the presidential candidates because of his unimpeachable religious and Tea Party credentials. After the campaign crumbled, however, he became the focus of several state and federal investigations into allegations of improper payments from the campaign to the senator. In October, a special investigator found probable cause that Sorenson violated Iowa’s ethics rules by taking money from committees tied to the Bachmann campaign; he resigned from his state senate seat. In any event, Bachmann hardly got her money’s worth. Shortly before the end of the campaign, Sorenson jumped ship and joined the Ron Paul presidential campaign.
Over the months, investigations tumbled into more investigations. Beyond the issues mentioned above, allegations arose that her campaign improperly used PAC funds to pay presidential campaign staff, and the New York Times reported that her husband may have broken campaign finance laws.
When Bachmann announced her decision not to run for re-election, she stoutly denied that any of this affected her decision. And staffers close to her believe that she had nothing to do with any of the unseemly allegations. Bachmann says she was busy being “the candidate” and relied on experienced staff who were “directed to comply with all relevant election laws.”.
Never shout ‘He’s a tool!’ on a crowded website?
If hamburgers could sue, the courts (like the eater’s arteries) would be clogged. Scroll down any of the dozens of websites that rate restaurants and you’ll see food described in the vilest terms: hog slop, garbage-dump-ready, rat -meat. The proliferation of rating sites shows both that these sites are providing an appreciated service and that people love to give their opinion. But when you move from hamburgers and hotel rooms to rating people, quite often the fun ends.
Dr. David McKee, a Duluth neurologist, was not laughing when he saw what one former client wrote about him on a doctor-rating website. The reviewer, Dennis Laurion, complained that McKee made statements that he interpreted as rude and quoted a nurse who had called the doctor “a real tool.” As these statements echoed through the Internet, McKee felt his reputation was being tarnished. He sued, and so began a four-year journey that ended this year in the Minnesota Supreme Court.
Laurion was unhappy with the way McKee treated his father, who was brought to the doctor after he had a stroke. Laurion went to several rate-your-doctor sites to give his opinion. That’s just free speech, isn’t it?
It sure is, says Laurion’s attorney, John D. Kelly of the Duluth firm Hanft Fride. “The court held that what my client was quoted as saying was not defamatory,” he says. “I do think the Internet makes it much easier for persons exercising poor judgment to broadcast defamatory statements, however… a medium… doesn’t change the quality of a statement from non-defamatory to defamatory.”
But McKee’s lawyer, Marshall Tanick, of Hellmuth & Johnson, says no matter where it was said, defamation is defamation.
“The thing that’s often misunderstood is that this was not just about free speech, but about making actual false statements,” Tanick says. “The problem is today’s unfettered opportunity to express opinion, whether or not the substance of what’s said is true or not. We need some boundaries.”
But boundaries were not on the minds of the Minnesota Supreme Court. Free speech was. Chief Justice Lorie Gildea wrote, “The point of the post is, ‘This doctor did not treat my father well.’ I can’t grasp why that wouldn’t be protected opinion.” As to referring to the doctor as “a real tool,” Justice Alan Page wrote that the insult “falls into the category of pure opinion because the term … cannot be reasonably interpreted as a fact and it cannot be proven true or false.”
The takeaway from this case might be the knowledge that behind any rating service lie real people with real feelings. McKee spent more than $60,000 in the effort to clear his name, as he saw it. Dennis Laurion told theStar Tribune he spent the equivalent of two years’ income, some of which he had to borrow from relatives who supplied the money by raiding their retirement funds.
The Hennepin County sheriff takes on the sovereign citizen movement
Hennepin County Sheriff Rich Stanek has seen a lot of weirdness in his decades in law enforcement, but even he was shocked by this odd turn of events. And, more shocking yet, he was the victim.
“I didn’t know anything was happening,” he says, “until I went to refinance my property. My mortgage company called and very nicely said to me ‘Mr. Stanek, we have a problem. Are you aware that you have millions of dollars in outstanding liens?”
More precisely, the amount totaled more than $25 million in liens.
That was his introduction to the sovereign citizen movement and their use of “paper terrorism,” as the FBI has dubbed it. “Sovereign citizens” consider the U.S. government, and most of its laws, to be illegal, therefore not applicable to them. This denial allows them the luxury of changing their name to include punctuation marks and signing documents with their thumbprint. Stanek says 90 percent are nonviolent.
“In Minnesota,” says Stanek, “anyone can file a lien by going to the Secretary of State’s office, or in any of the 87 different counties in the state. Liens represent a claim by the filer that they are owed money for goods or services contracted by the accused.”
But sovereign citizens have converted the fully legal instrument of liens from a tool for victims to a weapon of economic terror (or at least a formidable level of time-consuming, ulcer-inducing nuisance). In this case, liens are filed as a method of revenge for perceived injustices, as they were by Thomas and Lisa Eilertson, who filed the liens against Stanek.
In 2009 the Eilertsons lost their home because of failure to pay their mortgage. Under the tutelage of sovereign citizen websites, books and in-person classes, they learned how to turn liens into financial weapons. Over the three years that followed the loss of their home, they filed more than $250 billion in liens, and other claims, against those they considered the cause of their problems, including Stanek, county attorneys and other court officials. The liens were filed against vehicles, houses and even mineral rights.
In an affidavit, the Hennepin County examiner of titles says that in a conversation with the Eilertsons about foreclosure, one of them told her, “We’re going to have to lien ya.” And they did.
They didn’t get their way—Thomas Eilertson is now in state prison serving a 23-month sentence—but they did manage to create chaos in the lives of the government officials they targeted.
“Even though I had public resources to assist me,” Stanek says, “it was difficult. It took several years for these liens to be removed, it cost a lot of taxpayer money and it was a paperwork nightmare.”
Two golden oldie rock bands sent their lawyers to MN this year
Poverty, on a stipend of $36,000 a year. Consider Amber Schon, the fourth ex-wife of Journey guitarist Neal Schon. She petitioned Hennepin County court to force her ex-husband to add $2,758 a month to his current payments of $3,000 a month. A girl’s got expenses, you know. Among Amber’s annual expenses are $9,600 for birthday parties and $2,000 a month in postage.
Amber’s mother, Judy Kozan, a former mayor of Waseca, wrote in her blog about an anonymous father who was not paying his ex-wife nearly enough money. That parsimoniousness caused “his two little girls to go homeless,” she wrote, “and placed “his ex in a situation where she literally had no money for food, gas, for the car, bills, nothing.” Entertainment newspapers and websites worldwide, whose editors reasoned that the anonymous father must be her ex-son-in-law Schon, picked up and reprinted her blog post.
That did not please Neal Schon, who called his lawyers. The suit initially asked that Kozan be ordered to stop making or publishing disparaging statements about him (and his new, and fifth, fiancée), and that he be awarded $150,000 in damages. Kozan told the Star Tribune that “I never called him a deadbeat dad and I never accused him of not making payments … I don’t have money for an attorney, so I don’t know how I’m supposed to deal with this. Is he thinking he’ll take my Social Security checks?”
As for poor Amber’s requests for more money, Hennepin County District Court Judge Mary Vasaly denied her petition, concluding her financial difficulties were of her own making.
And: We’re not going to take it. Did any of the diners enjoying the food at the Twisted Sister food truck confuse their meal with the heavy metal music of the band of the same name? No matter. Jay Jay French, the band’s lead guitarist, and his attorney sent a letter demanding the owners change the food truck’s name. “It is the opinion of our client,” said the letter, “with which we concur, that your use of the name Twisted Sister will cause dilution of our client’s famous mark and will cause confusion among consumers.”
“The Twisted Sister band has gone after numerous parties across the country,” says Barnes and Thornton attorney Ken Suzan. “Normally under trademark confusion you have to show that the products can be confused, and there’s the issue of the dilution of a famous trademark.”
Interestingly, the entire band was not in agreement with the substance of the suit. Dee Snider, Twisted Sister lead singer, tweeted that he was sorry to hear about the name dispute and made clear that he had no part in the filing.
Owner Wesley Kaake, who bought the truck from the two sisters who originally owned it, says in retrospect the dispute could have been avoided had he had a trademark lawyer in on the deal at the time of purchase. He’s changed the name of his truck to House of Hunger.
Drink accused of dipping deeply into waiters’ tips
It’s a retailer’s dream. If your customers steal from you, don’t take the loss yourself; instead, make your employees pay for it. And that’s exactly what the wait staff and bartenders of Uptown Drink bar claimed the bar’s ownership was doing to them.
Restaurants and bars are all too familiar with the many creative ways customers have found to avoid paying their bills. There’s the simple walkout, of course, or the sneakier tactic of leaving the credit card charge unsigned. Uptown Drink, one of three bar/restaurants owned by Mike Whitelaw, decided that in many of these cases, it would charge back its losses—including cash register shortages—to the servers by taking those losses from their tip pool.
“It didn’t seem right,” one of those waiters told the Star Tribune, “but who were we to question the bosses who said we had to pay?”
One of those servers, Jana Karl, decided to question the bosses in a big way. Karl gathered more than 700 employees in a class action suit against Drink, accusing it of unfair and illegal treatment. Under Minnesota law, employers may not deduct or withhold any part of an employee’s wages for loss without the employee’s voluntary consent after the loss has occurred.
And that’s exactly how Drink explained their seizure of the wait-staff’s tips. At trial, Drink admitted that “on occasion” servers were required to pay for shortages, but, no, no, no, they were not forced into it, it was entirely voluntary. The waiters voluntarily paid for the losses because they wanted to avoid being written up for mishandling cash. And anyway, the servers’ tips are not part of their wages, Drink claimed. If a waiter or waitress did not volunteer his or her tips, some witnesses at the trial testified, those employees could lose their jobs.
To some, this sounded more like coercion than voluntary compliance. Still, the suit wound its way through the court system until this summer, when it hit the state Supreme Court, which issued a final ruling.
An opinion for the court written by Chief Justice Lorie Gildea said what to many was already obvious: “Gratuities (i.e. tips) … fall under the definition of ‘wages’ even though the money is paid by another person, and not the employer.” As for seizure of wait-staff wages, continued Justice Gildea, “under the plain language of the law, these deductions from the employees’ wages were unlawful.”
The wait staff’s attorney, Steven Smith of Nichols Kaster, came to the case with some sympathy for the employees—in his younger life he was a grocery bagger. “In terms of its impact,” he says, “the decision does set a precedent. The thing that’s most troubling about the practice by bar and restaurant owners is it’s definitely taking advantage of a workforce. Most people are not going to chance losing their job. The court awarded the plaintiffs $70,000 in damages and ordered Drink to pay attorney fees and other costs, totaling $700,000. But before the former Drink servers rush out for a celebratory drink themselves, their former employer had one more insult left for them. Uptown Drink filed for Chapter 11 bankruptcy in 2011, in a case that is still moving through the courts.
Sen. Wellstone’s still stirring it up in Washington, D.C.
A class action lawsuit filed by the New York State Psychiatric Association against the Minnetonka-based UnitedHealth insurance company has had one unexpected consequence. Both sides seem to agree on one big thing: It’s the government’s fault.
The suit is one of the first major tests of the jewel in the late Paul Wellstone’s crown, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act, passed in 2008, and signed into law by President Obama. That law requires group health plans with mental health and substance abuse coverage to provide benefits equal to those for other chronic health conditions.
But equal coverage still seems to be a dream rather than a reality.
Among the many horror stories detailed in the suit is that of Jonathan Denbo, the director of marketing for the CBS Sports network. Denbo, who had generalized anxiety disorder, began seeing a therapist twice a week after the death of his mother. But last year UnitedHealth informed him it would no longer cover that treatment, according to the New York Times. He was, said the insurance company, “generally functioning quite well.” Denbo and his psychiatrist had other thoughts on the matter. Too bad, said UnitedHealth. The company wrote to Denbo that “the use of multiple therapy sessions is limited to acute exacerbations of illnesses or in the context of a clinical urgent situation in order to prevent a higher level of care.”
Imagine an insurance company stopping heart failure treatment for the same rationale; therein lies the crux of the suit.
The suit maintains that not only did United not provide mental health parity, but it eliminated, reduced or discouraged mental health care for many of the complainants.
Meiram Bendat, a co-counsel in the suit, says that because of the nature of mental illness, those people “are the easiest group to railroad when it comes to denying care.” He says UHG applies “disparate medical necessity definitions,” while reserving unfettered discretion for itself to reject mental health claims.
Both sides seem to agree that it’s the government’s lack of clear rules of the game that lies at the heart of much of the problem.
Dr. Henry Harbin has one foot in both camps. He is a psychiatrist and a health care consultant who was CEO of two national health care companies. There have been a number of issues with enforcing the law, he says, “which is due in part to lack of clarity in the regulation. Without a robust, clear, and final parity law, I think there will be many more lawsuits.”
With the arrival of the Affordable Health Care Act, the problem only magnifies. Thirty-two million additional people are expected to gain mental health coverage in their health insurance. The government has written what it calls the “interim final rules,” for coverage, which doesn’t much soothe either consumers or insurance providers.
This suit will provide the first significant test of the interim final rules.
UnitedHealth finds itself caught between the government and angry consumers. “We are committed to helping people receive the mental health and substance abuse treatment they need to reach long-term recovery,” says Brad Lotterman, a spokesman for UnitedHealth. “Per company policy, we do not discuss pending litigation.”
For some Minnesota cows, morning becomes electric
Waverly farmer Harlan Poppler makes his living selling milk. So when milk production began falling and his cows started dying—70 of his 200-cow herd died in a year-and-a-half span—a despondent Poppler began searching for the reason.
All the usual suspects were eliminated. “During that time,” Poppler told theStar Tribune, “everything as far as management and protocols stayed the same.”
Then, one day, the light bulb switched on. Observing his cows drink, he noticed that they were lapping at the water instead of dipping into the water bin for long, steady drinks. “That’s when we put two and two together,” he says. “It was then [that] stray current came to mind.” Poppler knew his cows must have been getting shocked from water that was electrified.
“Stray current” is the occurrence of electrical potential between two objects that should not have any voltage difference between them. The phenomenon sometimes occurs in cities. In Boston, stray voltage killed several dogs in the 1990s. In 2004 a New York City woman was fatally electrocuted walking her dogs.
But the most frequently occurring losses caused by stray voltage in the last few decades have happened on dairy farms, which are often served by decades-old wiring.
After years of losing cows and declining milk production, Poppler solved the problem by changing his farm’s electrical setup. Seeking restitution after spending tens of thousands of dollars, Poppler filed for damages against the Wright-Hennepin Cooperative Electric Association.
Wright-Hennepin countered with research from the 1990s that showed electricity conducted into dairy herds was insignificant and caused no harm to the animals. “We see a lot of farmers being put under a lot of stress from the market,” said Daniel Bellig, Wright-Hennepin co-counsel, quoted in the Star Tribune “and it’s causing them to point the finger somewhere else.”
A Wright County jury awarded Poppler $700,000 in damages, finding the utility at fault for the stray voltage on the farm. The Minnesota Appeals Court agreed, finding the Popplers were entitled to damages. The case is currently in the Wright County court system to specifically calculate the Popplers’ estimated $700,000 loss in profits, so damages can be finalized.
Poppler, and his attorneys at the Hammarback Law Offices, in River Falls, Wisc., is pleased with the win, but he emphasizes that it doesn’t make up for the loss of animals and the emotional damage inflicted. “There’s no way we’re ever going to be compensated for what we lost,” he says.
And: Alvin Schlangen has had his own agrarian struggles with the justice system. In early March 2011, egg farmer Schlangen pulled his delivery van into a spot near the Macalester College athletic field in St. Paul. He was surrounded by police cars. The police searched, then confiscated, the contents of his van and charged him with distributing illegal substances. Cocaine? Marijuana? Mollies? Nope. Milk. Raw, unpasteurized milk.
It is illegal in Minnesota to sell raw milk anywhere but on the farm on which it was produced. Schlangen is the point man for the Morell Freedom Foods Co-op, which brings raw milk products to city slickers who like the taste and believe that raw milk has health benefits unavailable in commercially sold milk. Supporters believe that raw milk contains healthful nutrients and bacteria that fight allergies, tooth decay, colic, growth problems, osteoporosis, arthritis, heart disease and even cancer. Says Sally Fallon Morell, who founded the raw milk support organization: “Pasteurized milk is one of the greatest public health disasters in history.”
Mike Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota, doesn’t agree. “The data are overwhelming on the safety of pasteurized milk and the lack of safety of unpasteurized milk,” he told the Star Tribune.
What do those data say? The federal Centers for Disease Control and Prevention (CDC) say raw milk was the cause of 93 disease outbreaks across the nation between 1998 and 2009, including 1,837 illnesses, 195 hospitalizations and two deaths. According to the U of M’s veterinarian school, five outbreaks of illness in Minnesota between 2000 and 2008 can be tied to raw milk. According to the Centers for Disease Control, as many as 160,000 Minnesotans drink raw milk. Twenty states ban the stuff outright.
A six-member jury found Schlangen innocent on all counts, giving the raw milk movement one of their few legal successes. It didn’t last long. In a separate jury trial a few months later, in Stearns County, Schlangen was convicted on some of the same charges, sentenced on the charge of handling food without a license and given a $1,000 fine ($700 of which was suspended) and one year of probation. Says Schlangen: “Raw milk is 10 times less risky than pasteurized milk. This is just about control.”
Sometimes it’s better to call your therapist before you call your lawyer
It’s the oldest story in the book, as old as Jacob and Esau, and Antigone’s brothers, who fought for control of the Theban throne. And in North Mankato, at the MICO Co., the brothers who were heirs to their father’s empire replayed the archetypal story, until a lawsuit brought the walls tumbling down.
Gordon McGrath bought a hydraulic brake company named MICO in 1960 and built it into a global powerhouse. According to court documents, the company’s projected sales for 2011 were $52 million.
Two years before he died in 2004, two of his sons were given control of the company. Brent McGrath was named president, while Dan McGrath became executive vice president. At their father’s death, each brother was given 50 percent of MICO’s voting shares.
Brent hired Glenn Gabriel, the former director of public safety for the City of Mankato, to be his right-hand man. Almost immediately, there was trouble between the two brothers. Brent fired one of Dan’s key assistants, prompting Dan to offer to sell out his shares to his family. And, according to the district court, which heard the case, that was precisely the reason for the firing: “[…] to force Dan to leave MICO and/or sell his shares cheaply.”
Brent McGrath and Glenn Gabriel didn’t respond to Dan’s offer to sell, but they did demand that he no longer carry on his business in the MICO headquarters. Then he was demoted, stripped of his direct reports and put under Gabriel’s supervision.
The message was all too clear to Dan who did, after all, own 50 percent of the voting shares of the company. “…the demotion,” he wrote in an email, as reported in the Star Tribune, “is the latest event in what I perceive to be an effort to drive me out of the company.” Brent and Gabriel responded by placing Dan on an involuntary leave of absence.
More provocations followed, until Dan decided to sue. Brent McGrath and Gabriel’s first response to the suit? Dan was put on administrative leave and had his executive bonus and profit-sharing monies cut off. An email sent to Brent from his (and Dan’s) half-brother shows clearly the family feeling at that point: “I want Dan terminated!!!!!!!!!!!!!!!”
The suit was assigned to the courtroom of Nicollet County District Judge Todd Westphal, who wrote: “Gabriel … kicked [Dan] out of meetings that he had been invited to attend […] hindered Dan from communicating with other employees […] reprimanded employees who did communicate with him, and humiliated and insulted him.”
Brent and Gabriel had cause to regret dismissing Dan’s initial offer, in 2004, to sell his shares for $3.9 million, about $4 million below market share. Judge Westphal ruled that the company must purchase Dan’s shares for $11.5 million. To that he added compensatory and punitive damages and attorney’s fees, for a total award of $21.3 million.
The case was appealed to the state appellate court and the Supreme Court, both of which upheld the decision.
Dan McGrath’s attorneys, Douglas Peterson and Dan Oberdorfer, were from Leonard Street and Deinard. Opposing them were attorneys from Doyle Hance.
Should medical products be promoted like used cars?
Medtronic has been an extraordinary blessing to Minnesota, not to mention for the more than 1 million people a year who benefit from the company’s medical ingenuity. The company brought in more than $16.2 billion in revenue in 2012 and it employs better than 46,000 workers, many of them in Minnesota.
But the company also provides ancillary employment for a group of professionals it might prefer to avoid: an army of medical malpractice lawyers across the country, politicians, and small groups of doctors, outraged by what they consider Medtronic’s careless presentation of facts.
The latest focus of these outraged professionals has been Medtronic’s bone fusion drug INFUSE.
INFUSE is a genetically modified version of a naturally occurring protein that encourages the fast growth of bone. In 2002 the FDA approved the product for a few very specific uses, primarily for one well-defined type of back surgery; at the time of its introduction, it was considered something of a miracle drug. Used in back operations, INFUSE could eliminate the need for an additional operation to capture a piece of the patient’s own bone to be used as a grafting agent in a spinal operation.
Medtronic introduced the product with fanfare that included the results of tests by doctors, all of whom hailed the safe and beneficial use of the product. Yes, there was some unwanted bone formation, but this was seen as no problem for patients.
Then the problems started appearing. The unwanted growth of bone turned out to be a bigger problem than was presented. In some cases, out-of-control bone growth caused severe pain and necessitated additional operations. Across the country, patients were experiencing difficulties and complications associated with the product that were never talked about in Medtronic’s literature.
Angry doctors (and investigative journalists) began re-examining the test results Medtronic offered as proof of the drug’s efficacy and safety. What they found was shocking. Bad results were never reported in their full implications. And the good reports were written by doctors heavily dependent on Medtronic money. One doctor, a co-author of a positive review of the product, was discovered to have been the beneficiary of more than $23 million from Medtronic. Another doctor, who had written a 2003 paper which declared the INFUSE would become the “new gold standard” in spine surgery, received more than $34 million from Medtronic over a 15-year period, mostly for royalties, according to a Milwaukee Journal-Sentinel investigative report on the product.
The editors of The Spine Journal were so angered by the failure of Medtronic’s initial studies to tell the whole story that they devoted an entire issue of the magazine to unveiling problems the studies had missed. Then the government stepped in, with a full-blown Senate investigation of INFUSE’s marketing.
Today, new legal problems are mushrooming for the company, arising from the “off-label” uses of the product—those uses for INFUSE that were not approved by the FDA—from which many of the serious problems have arisen. The crux of the legal debate is whether or not Medtronic promoted the off-label uses of its product, or if such uses were completely the idea of the doctors who used it. More than 80 percent of the INFUSE used goes to an off-label use.
Attorney Stuart Goldenberg, of Minneapolis-based Goldenberg Law, has filed 34 INFUSE-related cases and says hundreds more are forthcoming. He explains the legal rationale: “If a device is fully approved by the FDA, a lawsuit for the negligence of the manufacturer is not allowed,” he says. “However, a device manufacturer is prohibited from promoting an off-label use not approved by the FDA. Our complaints allege that Medtronic actively promoted off-label use to surgeons and our clients without disclosing the real risks of these procedures.” Medtronic denies promoting any off-label uses of INFUSE.
The issue was decided this fall in the Hennepin County District Court of Judge Laurie Miller. She tossed out the negligence, warranty, consumer actions and strict liability claims against Medtronic, saying they were preempted by federal law. But she asked to see greater specificity in the complaints about allegations of fraud and misrepresentation, and has allowed attorneys to amend complaints on those issues for greater specificity. Medtronic, meanwhile, is scheduled to bring another motion to dismiss, claiming the amended complaints are still not specific enough. Whatever the decision, the case is widely expected to end up before the U.S. Supreme Court.
“It’s a great company,” Detroit-based orthopedic surgeon Dr. Rahul Vaidya told the Milwaukee Journal-Sentinel. “[INFUSE] was just badly brought to market. The orthopedic-industrial complex jumped on the product and everyone thought they would make money. And maybe they weren’t as judicious as we would have liked them to be.”
This article is reprinted in partnership with Twin Cities Business.