Supreme Court remand may signal end for data breach class actions

The Supreme Court’s decision to remand a Fair Credit Reporting Act (FCRA) case to the Ninth Circuit Court of Appeals may affect the future of class actions brought by victims of health care data breaches.  The High Court told the Ninth Circuit to determine whether the respondent in Spokeo, Inc. v. Robins (May 16, 2016) sustained a concrete injury for purposes of proceeding with FCRA allegations based on Spokeo’s alleged dissemination of incorrect information about the respondent.  The opinion emphasized the importance of the concreteness element of the injury-in-fact requirement of standing, and could endanger lawsuits filed by data breach victims based on impending injuries.

Spokeo

The respondent alleged that while he was “out of work” and “actively seeking employment,” Spokeo, a website that calls itself a “people search engine,” posted misinformation about him that was detrimental to his job search.  Specifically, he claimed that the misinformation stating that he was married with children, employed, and in “very strong” economic health made him appear overqualified for work, desirous of a higher salary, and unwilling to travel or relocate. He alleged that Spokeo’s actions violated the FCRA, which requires consumer reporting agencies to “follow reasonable procedures to assure maximum possibly accuracy.”

A district court determined that the respondent did not have standing to sue, but the Ninth Circuit reversed, noting that Spokeo violated the respondent’s individual statutory rights and that his interests regarding how his credit information was handled were “individualized rather than collective.”  Writing for the majority, Justice Alito noted that standing requires an injury in fact that is both “concrete and particularized,” in addition to being “actual or imminent.” While the Ninth Circuit’s analysis concluded that the respondent’s injury was particularized, affecting him “in a personal and individual way,” the Supreme Court determined that the appellate court did not perform a separate analysis to determine whether the injury was concrete, with Justice Alito noting that “not all inaccuracies cause harm or present any material risk of harm.” He also noted, however, that concrete injuries may be tangible or intangible.  Justice Thomas concurred, while Justice Ginsburg, joined by Justice Sotomayor, dissented.

Health care ramifications

The Supreme Court’s view on concreteness could affect the ability of data breach victims to file class actions against the entities that held their protected health information (PHI). Prior cases have dealt with the “actual or imminent” aspects of alleged injuries, with circuits disagreeing with one another. In 2015, for example, the U. S. Court of Appeals for the Seventh Circuit determined that retail customers whose credit card information had been hacked were subject to a “certainly impending” risk or future injury involving fraudulent charges and identity theft, even though they had not actually fallen victim to those actions (see Credit hacking case opens door to health care class actions, August 11, 2015).  It issued a similar decision in 2016  in Lewert v. P.F. Chang’s China Bistro, Inc. (April 14, 2016), another credit hacking case, noting that the injuries were concrete.

In Khan v. Children’s National Health System (May 18, 2016), decided after Spokeo, the U.S. District Court for the District of Maryland determined that the plaintiff had did not have an injury in fact.  It noted that, in the context of data breaches, victims allege “an injury in fact arising from increased identity theft if they put forth facts that provide either (1) actual examples of the use of the fruits of the data breach for identity theft, even if involving other victims; or (2) a clear indication that the data breach was for the purpose of using the plaintiffs’ personal data to engage in identity fraud.” In Khan, phishing emails targeted a hospital system’s employees’ emails that happened to contain some PHI, but the court found no evidence that hackers targeted PHI for the purposes of committing identity fraud.  The Khan court noted that the majority of district courts follow this line of reasoning. Stakeholders should follow the Spokeo case, as the ultimate decision may be an indication of the future trend of data breach class actions.

Supreme Court lets patent invalidation stand, generic Cubicin® could be coming

The U.S. Supreme Court will not hear a brand-name antibiotic manufacturer’s appeal of a decision invalidating its patents, meaning that a competitor can proceed with its plans to manufacture a generic version of the drug. A federal district court determined that four patents for the injectable drug Cubicin® were invalid for obviousness. Cubist Pharmaceutical, Inc., later acquired by Merck & Co., Inc., appealed the decision to the Federal Circuit, which sided with the district court in November 2015 (Cubist Pharmaceuticals, Inc. v. Hospira, Inc., Fed. Cir., November 12, 2015). Cubist sought certiorari, arguing that the Federal Circuit’s rules on patents were too restrictive regarding obviousness. Hospira had opposed the petition because it would result in the High court conducting its own factual analysis on the validity of the patent. The High Court’s denial of certiorari means that Hospira, Inc., acquired by Pfizer, Inc. in 2015, may pursue authorization to sell a generic version of the daptomycin product.

Cubicin (daptomycin for injection) is an injectable antibacterial product used to treat complicated skin and structure infections (cSSSI) and staphylococcus aureus bloodstream infections (bacteremia), including those with right-sided infective endocarditis. Hospira filed an abbreviated new drug application (ANDA) with the FDA in 2011 to sell a daptomycin product equivalent to Cubicin before the expiration of the Cubist patents. Cubist filed suit pursuant to the Hatch-Waxman Act (P.L. 98-417) alleging that Hospira had infringed on its five patents. Although the court found Hospira infringed on one patent, it determined that the remaining four patents were invalid because they were based, in part, on less frequent administration of a drug, and the benefit of less frequent administration would have been obvious to a person of skill in the art.

The fifth patent expires in June 2016. Upon its expiration, Hospira can move forward with plans to sell a generic daptomycin product.

Supreme Court issues opinion in contraceptive mandate challenge

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Today, the Supreme Court issued its opinion in Zubik v. Burwell. The per curiam opinion does not reach a decision on the merits of the case, in which religious employer petitioners argued that the Affordable Care Act’s contraceptive mandate substantially burdens the exercise of their religions in violation of the Religious Freedom Restoration Act. The Court remanded the consolidated cases, directing the Courts of Appeals to afford the parties “an opportunity to arrive at an approach going forward that accommodates petitioners’ religious exercise while at the same time ensuring that women covered by petitioners’ health plans ‘receive full and equal health coverage, including contraceptive coverage.'”

In a concurring opinion, Justice Sotomayor, joined by Justice Ginsburg, reminded lower courts that they should not construe the per curiam opinion or the Court’s earlier request for supplemental briefing as providing an indication of the Court’s views on the merits of this and related cases. Sotomayor noted that the Court has made similar disclaimers before, but”some lower courts have ignored those instructions.” She warned, “on remand in these cases, the Courts of Appeals should not make the same mistake.”

A full analysis of the decision is forthcoming; for additional information about the oral arguments in this case, see High court weighs government’s interest in protecting women’s health against hijacking religious organizations’ insurers, Health Reform WK-EDGE, March 24, 2016. For information about the supplemental briefing requested by the Court, see SCOTUS asks for supplemental briefing on alternative accommodations in Zubik, Health Reform WK-EDGE, April 1, 2016.

You can refer to Wolters Kluwer’s Health Reform Topic Page on Contraceptive Coverage for all developments related to the Affordable Care Act’s contraceptive mandate.

PharMerica requests Supreme Court review of FCA’s first-to-file bar

PharMerica Corporation, a provider of long-term care pharmacy services, asked the Supreme Court to change its position on the “first-to-file” bar under the False Claims Act (FCA). In a petition for a writ of certiorari, the pharmacy company asked the high court to review its May 2015 ruling in Kellogg Brown & Root Services, Inc. v. U.S. ex rel. Carter (Carter), in which the court ruled that an earlier FCA suit based upon substantially the same subject matter ceases to bar related and subsequent FCA suits after the earlier suit is dismissed. PharMerica objects to the 2015 ruling because it led to the revival of a whistleblower case brought against the company by a former employee. PharMerica’s petition warns that the Supreme Court needs to review its earlier decision to prevent the “neutering of the first-to-file bar.”

Trial court

The dispute arose from the qui tam action of a pharmacist formerly employed by PharMerica. Because a similar case was pending in Wisconsin (Wisconsin case) when the whistleblower’s case was filed, a district court dismissed the case on the grounds that it was barred under 31 U.S.C. §3730(b)(5). The trial court concluded that dismissal under the first-to-file bar was appropriate because the two actions were based on substantially the same facts and conduct.

First Circuit

After the case was dismissed, the Supreme Court handed down its decision in the Carter case, changing the outlines of the FCA’s first-to-file bar. Subsequent to that decision, the Wisconsin case that barred the whistleblower action was settled and dismissed. As a result, the whistleblower filed a motion to remand, seeking to either have the appeals court supplement his complaint with additional facts or have the case remanded to allow for supplementation. The First Circuit granted the whistleblower’s request to supplement his complaint (see FCA action dismissed under first-to-file bar may get another chance on remand, Health Law Daily, December 17, 2015).

Certiorari

PharMerica objected to the First Circuit’s decision in its petition, asserting that the Carter decision and the appellate court’s holding will allow copycat lawsuits to “circumvent the plain terms of the first-to-file bar.” The pharmacy service provider argued that the whistleblower should not have been able to resurrect his case simply by keeping it on the docket until the prior case was inevitably dismissed. PharMerica asserted that review is necessary to prevent copycat relators from “bringing placeholder suits, certain in the knowledge that earlier-filed actions will one day conclude.”