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A Safe Harbor In Arkansas

By James M. Beck and Mark Herrmann

No, we're not talking about the McClellan Kerr Project that turned Little Rock and Tulsa, of all places, into seaports. We're talking consumer protection lawsuits against pharmaceutical companies (aren't we always).

We've mentioned a couple of times before that a lot of consumer protection laws contain "safe harbor" provisions that bar suits over conduct that was "authorized"/"approved"/"permitted" (the statutory language varies) by governmental agencies. On several occasions, detailed in these prior posts, courts have dismissed consumer protection claims that attacked FDA-approved actions (usually labeling) after finding that the challenged conduct falls within one of these "safe harbor" provisions.

Well, that other day it happened again - in Arkansas - in the Supreme Court of Arkansas, to be precise. The case is DePriest v. AstraZeneca Pharmaceuticals, L.P., slip op. (Ark. Nov. 5, 2009). The drug involved in Nexium, and the claim was that the defendant fraudulently marketed this drug as better than older drugs that - allegedly - did essentially the same thing. Slip op. at 2. The form of suit in DePriest, predictably enough, was an economic-loss-only class action. There was no allegation that the drug didn't work, hurt people, or anything like that - only that it wasn't as "new" as the defendant claimed it was. Classic strike suit - the only worthwhile claim is by the plaintiffs' lawyers for fees.

The Arkansas Supreme Court got an appeal after the trial court dismissed the case because, among other things, the attack on the defendant's labeling was barred by the safe harbor provision of the Arkansas consumer protection statute, Ark. Code Ann. §4-88-101(1). See DePriest v. AstraZeneca Pharmaceuticals, L.P., 2008 WL 3242562 (Ark. Cir. July 31, 2008). Arkansas has one of the broader safe harbor provisions around, precluding suit over "actions or transactions permitted ... [by] a regulatory body," either federal or state. "Permitted" is one of several safe harbor variants, and shows up, in addition to Arkansas, in Connecticut, Florida, Indiana, Maine, Masssachusetts, Montana, Nebraska, New Mexico, Ohio, Rhode Island, South Carolina, South Dakota, Utah, Washington, and Wyoming (look 'em up in Bexis' book, page 2.14-8).

In DePriest, the court rejected California precedent - decided under a statute without an equivalent "safe harbor" provision, and held that everything in the defendant's advertising was "permitted" by the drug's FDA-approved labeling. Slip op. at 14-15 ("[t]he FDA-approved labeling did, in fact, indicate that the approved dose of [the drug] was superior to the approved dose of [the precursor drug] at healing [the condition at issue]"). The same ruling applied both to physician and direct-to-consumer advertising. Id. at 15-16.

The information included in the labeling of a new drug reflects a determination by the FDA that the information is not "false or misleading." By approving information to be included in the drug labeling, the FDA has determined the information complies with its rules and regulations. Therefore, if the FDA labeling supports the statements made in the advertising for an FDA-approved drug, the statements are not actionable under the [Arkansas consumer protection statute].

Slip op. at 16 (citations omitted). The court held that all the statements were adequately supported, thereby affirming the dismissal. Slip op. at 16-17.

Accordingly, we conclude that [defendant's] advertisements constituted actions permitted under the laws administered by the FDA, and therefore, the [Arkansas statute], by its own terms, does not apply to the challenged conduct.

Slip op. at 19.

DePriest is the first state supreme court decision in the country to affirm dismissal of a consumer fraud action against an FDA-regulated defendant based upon a safe harbor provision relating to government regulated conduct. Congrats to AZ and its lawyers.

Oh, BTW: for those who are interested in common-law claims, the court in DePriest affirmed dismissal of the following other claims for the following reasons:

• Fraud - Statements supported by FDA-approved labeling were, as a matter of law, neither false nor misrepresentations. Slip op. at 20.
• Unjust enrichment - Because there were no false statements, there was no tortious conduct, and thus nothing "unjust" for equity to remedy. Slip op. at 20-21.
• Promissory estoppel - An advertisement simply isn't a quasi-contractual promise that can support such a theory. Slip op. at 22.

Finally, talk about sore losers, the plaintiffs tried to recuse the judge that dismissed their case. We've expressed ourselves on this general subject already. We'll leave it at that. Suffice it to say that, on appeal, the court gave the recusal claim the back of its hand. Slip op. at 24 (trial court hadn't "prejudged" the case; it was granting the defendant's motion).

Defense counsel should always check out the relevant state's consumer protection safe harbor language (if any) carefully. DePriest is the latest opinion demonstrating that decisive defenses can lurk in that language.

Full post as published by Drug and Device Law on November 09, 2009 (boomark / email).