Tag: Litigation

It’s the Words, Not the Ideas, that Are Copyrightable

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The U.S. Court of Appeals for the Seventh Circuit dismissed a lawsuit claiming that Elton John and his songwriter partner Bernie Taupin had plagiarized their hit song “Nikita” from a song called “Natasha,” explaining that copyright law does not cover general ideas, but only the specific expression of an idea.  Guy Hobbs v. Elton John, Case No. 12-3652 (7th Cir., July 17, 2013) (Manion, J.).

Guy Hobbs composed “Natasha,” a song about a love story between a British man and a Ukrainian woman.  In 1983, Hobbs registered his copyright in the song and then sent the song to several music publishers, one of them being Elton John’s publisher, Big Pig.  However, the song was never published.  John released the Nikita song in 1985, wherein the singer from the west describes his love for a girl named Nikita, who he saw through the wall and who was on the other side of the line.  The copyright in Elton John song was registered with the U.S. Copyright Office by Big Pig.

Hobbs claimed that he first learned of the Nikita song in 2001.  He alleged that the lyrics infringed his copyright of Natasha and sought compensation from John and Taupin.  Hobbs later sued John, Taupin, and Big Pig for copyright infringement.  Hobbs claimed that his work was entitled to copyright protection because his selection and combination of the elements in Natasha constituted a “unique combination.”  Hobbs argued that the number of similar elements between the two works supported a claim for copyright infringement.

The district court held that the elements identified by Hobbs were not entitled to copyright protection when considered alone.  Hobbs had not established a “substantial similarity” between Natasha, a song about a British man and a Ukrainian woman who did meet, and John’s Nikita song describing an East German woman peering through the Berlin wall at a man she never met.  The district court also rejected Hobbs claim that the elements in the song created a unique combination that was copyrightable.  The district court held that although the theme of the two songs had some similar elements in common, the elements identified were not protectable under the Copyright Act.  Hobbs appealed.

The 7th Circuit agreed, concluding that “Natasha and Nikita simply tell different stories, and are separated by much more than small cosmetic differences.”  The 7th Circuit stated that the Copyright Act does not protect general ideas, but only the particular expression of an idea.  In addition, the Copyright Act does not protect “incidents, characters or settings which are as a practical matter indispensable, or at least standard, in the treatment of a given topic.”  The 7th Circuit concluded that “as a matter of law Natasha and Nikita are not substantially similar because they do not share enough unique features to give rise to a breach of the duty not to copy another’s work.”

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Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and Financial Institutions Anti-Fraud Enforcement Act (FIAFEA): A Novel Approach To Protecting Financial Institutions From Themselves

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In a matter of first impression, Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York ruled that the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) not only prohibits fraud perpetrated by a third party that harms a financial institution, but also renders unlawful fraudulent conduct committed by a financial institution that results in harm to itself. In the case of U.S. v. Bank of New York Melon (“BNYM”), the Government alleged that BNYM violated FIRREA by engaging in a scheme to defraud its clients regarding the pricing of foreign exchange trades and that the bank was ultimately harmed by its own misconduct.

FIRREA was passed in the late 1980s in reaction to the savings and loan crisis, and although it has been around for nearly a quarter century, it has not been utilized very often until recently. The law allows the Government to bring a civil action against any individual or entity for violating a number of criminal statutes prohibiting fraud, including mail and wire fraud, if the fraud affects a federally insured financial institution. In the case against BNYM, the Government asserted that the bank committed mail and wire fraud by making false representations regarding its pricing of foreign currency trades in connection with its “standing instruction” program. Under BNYM’s standing instruction program, the bank automatically set the price of foreign currency trades, relieving the client of the need to contact the bank directly and negotiate a price. BNYM allegedly represented that its standing instruction program provided “best execution” with respect to its foreign currency trades, which within the financial industry was commonly understood to mean that the client received the best available market price at the time the trade was executed. According to the lawsuit, however, BNYM did not provide best execution as the term was understood within the industry and instead priced its currency trades within a range least favorable to its clients.

Over time, BNYM’s clients allegedly learned about its pricing practices, which led to a number of lawsuits being filed against the bank by investors and customers, potentially exposing the bank to billions of dollars in liability. In addition, many of BNYM’s clients allegedly terminated their relationship with the bank in the wake of the revelations about its currency pricing policies. Thus, according to the lawsuit, BNYM’s fraudulent misrepresentations with regard to its currency pricing practices ultimately harmed the bank by causing it to lose customers and exposing it to liability.

In response, BNYM argued that it could not be held liable under FIRREA because the financial institution harmed by the fraud must be the victim of the fraud or an innocent bystander, not the perpetrator of the fraud. The Court rejected this argument explaining that, in passing FIRREA, Congress’s goal was to broadly deter fraudulent conduct that might put a federally insured financial institution at risk. Accordingly, it was entirely consistent with Congress’s intent to render unlawful fraudulent conduct perpetrated by a financial institution and its employees that affects the financial institution itself in order to deter these institutions from engaging in such misconduct in the future.

This decision represents a potentially important breakthrough for whistleblowers. Under the Financial Institutions Anti-Fraud Enforcement Act (“FIAFEA”), a whistleblower that provides information to the Government regarding fraudulent activity affecting a financial institution that constitutes a violation of FIRREA may be entitled to a reward if the Government obtains a monetary recovery. Unlike other whistleblower statutes, a whistleblower recovery under FIAFEA does not hinge on whether the Government has suffered a monetary loss. If a whistleblower is aware of fraudulent conduct affecting a financial institution-even if the only financial institution that is harmed by the fraud is the very same institution that engaged in it-FIAFEA provides an avenue for disclosing the fraud to the authorities with the potential upside of a substantial reward for doing so. Given the recklessness and misconduct that led to the Great Financial Disaster, the Government’s use of FIRREA and FIAFEA to protect financial institutions from their own excesses is not only warranted, but may also deter future misconduct, just as Congress intended.

 

WildTangent Files its Supreme Court Certiorari Petition in Patent Infringement Case – Part 1

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In September of 2009, Ultramercial, Inc. sued WildTangent, Inc., Hulu and YouTube in the Central District of California for alleged patent infringement of U.S. 7,346,545 (the ’545 patent).  The ’545 patent claims trading advertisement viewing for access to content over the Internet.  The Abstract of the ’545 patent reads:

The present invention is directed to a method and system for distributing or obtaining products covered by intellectual property over a telecommunications network whereby a consumer may, rather paying for the products, choose to receive such products after viewing and/or interacting with an interposed sponsor’s or advertiser’s message, wherein the interposed sponsor or advertiser may pay the owner or assignee of the underlying intellectual property associated with the product through an intermediary such as a facilitator.

Claim 1 of the ’545 patent is more detailed:

1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

a first step of receiving, from a content provider, media products that are covered by intellectual-property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;

a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;

a third step of providing the media product for sale at an Internet website;

a fourth step of restricting general public access to said media product;

a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;

a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;

a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;

an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;

a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;

a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and

an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

As you can see, there are 11 method steps recited in Claim 1, so it is a very detailed claim and it cannot be summarized in a sentence or two.

The history of the case is not easy to summarize either.  In short, the District Court found that the subject matter of the patent was not patent eligible and dismissed the district court action before interpreting the claims.  In 2011, the Federal Circuit reversed the District Court decision, but the Supreme Court vacated the Federal Circuit’s decision in 2012 based on its recent opinion in Mayo v. Prometheus.  And in June of 2013 the Federal Circuit again reversed the District Court decision, leading to WildTangent’s Petition for Writ of Certiorari filed last week.

WildTangent’s cert petition is attached.  I will be discussing the petition and the ongoing patent eligibility battle in more detail in future posts.

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Top Whistleblower Settlements of 2013 – To Date

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The theme of the top whistleblower settlements to date in 2013 is, once again, health care fraud. Eight of the largest settlements involve fraud in the health care industry. This is indicative of the number of health care fraud cases being filed in recent years. According to the Department of Justice, since January 2009, over $10.3 billion has been recovered from health care fraud cases. This year, the focus seems to have particularly shifted to cases involving violations of the Anti-Kickback Statute and Stark law, which prohibit the giving of financial incentives for referrals or the use of particular pharmaceuticals or devices. Without further ado, here are the top whistleblower settlements of 2013 to date:

1. Ranbaxy USA Inc. ($500 Million)

Ranbaxy USA Inc., a subsidiary of Indian generic pharmaceutical manufacturer Ranbaxy Laboratories Limited, agreed to pay a total of $500 million to settle criminal and civil allegations filed against the company. Ranbaxy pleaded guilty and agreed to pay a criminal fine and forfeiture of $150 million. The civil settlement, which resolves False Claims Act violations, was for $350 million. Ranbaxy was accused of poor oversight and inadequate testing and maintenance of drugs manufactured at its facilities in Paonta Sahib and Dewas, India. This lead to false claims being submitted to numerous government agencies including the FDA, Medicaid, Medicare, TRICARE, the Federal Employees Health Benefits Program, the Department of Veterans Affairs, and USAID. The whistleblower in this case, former Ranbaxy executive Dinesh Thakur, will receive $48.6 million from the federal share of the civil settlement.

For more information about this settlement, read the DOJ press release.

2. C.R. Bard Inc. ($48.26 Million)

C.R. Bard Inc., a New Jersey-based corporation that develops, manufactures, and markets medical products, agreed to pay $48.26 million to resolve kickback allegations filed against the company. Bard was accused of submitting false claims to Medicare for brachytherapy seeds used to treat prostate cancer. According to the complaint filed in 2006, Bard paid illegal kickbacks in numerous forms to both physicians and customers who used the seeds to perform treatment for prostate cancer. The whistleblower in this case, Julie Darity, was a former Bard manager for brachytherapy contracts administration. She will receive $10,134,600 as her portion of the settlement.

For more information about this settlement, read the DOJ press release

3. Par Pharmaceutical Companies Inc. ($45 million)

Par Pharmaceutical Companies, Inc., one of the top five U.S. generic pharmaceutical companies, pleaded guilty to federal criminal charges and agreed to settle civil allegations involving the company’s promotion of the drug Megace ES. Par was fined $18 million and ordered to pay an additional $4.5 million in criminal forfeiture. The company will also pay $22.5 million to resolve the civil allegations. The civil suit accused Par of promoting Megace ES for non-FDA approved uses that were not covered by federal healthcare programs and of actively ignoring some of the negative side effects the drug has on various patient groups when promoting Megace ES. The settlement resolves three separate whistleblower lawsuits that were filed against the company. Two of the five whistleblowers in the cases, Mr. Michael McKeen and Ms. Courtney Combs will receive $4.4 million as their portion of the settlement. Any payments to the other whistleblowers, Ms. Christine Thomas, Mr. James Lundstrom, and Mr. Elliott, are unknown at this time.

For more information about this settlement, read our blog post.

4. Dr. Steven J. Wasserman ($26.1 Million)

This year, the Department of Justice announced one of the largest ever settlements with an individual under the False Claims Act. Florida dermatologist, Dr. Steven J. Wasserman agreed to settle allegations filed against him for $26.1 million. Dr. Wasserman was accused of performing medically unnecessary services and engaging in an illegal kickback scheme. Dr. Alan Freedman, the whistleblower in this case, was a pathologist at a company involved in the kickback operation. He filed his qui tam lawsuit in 2004 and will receive slightly over $4 million as his share in the settlement.  

For more information about this settlement, read our blog post. 

5. CH2M Hill Hanford Group Inc. ($18.5 Million)

CH2M Hill Hanford Group Inc. and its parent company CH2M Hill Companies Ltd. agreed to settle civil and criminal allegations relating to time card fraud for a total of $18.5 million. CH2M had a contract with the Department of Energy to manage and clean 177 large underground storage tanks that contained radioactive and hazardous waste at a nuclear site in Washington. CH2M employees allegedly regularly overstated the number of hours they worked on time cards submitted to the Department of Energy. As a result, CH2M was overpaid for more hours of work than were actually performed. The civil settlement was for $16.55 million. CH2M will also pay $1.95 million to resolve the criminal liabilities. To date, eight CH2M employees have pleaded guilty to engaging in the time card fraud. The whistleblower in this case, Carl Schroeder, was a former CH2M employee and one of the individuals who pleaded guilty to the scheme. The qui tam provisions of the False Claims Act bar whistleblowers from receiving a portion of the settlements if they are convicted for their role in the fraud scheme. Therefore, Mr. Schroeder will not receive a portion of this settlement.

For more information about this settlement, read the DOJ press release. 

6. American Sleep Medicine LLC ($15.3 Million)

The Department of Justice announced a $15.3 million False Claims Act settlement it reached with American Sleep Medicine LLC. American Sleep is a Florida-based company that owns and operates 19 diagnostic sleep testing centers across the country. Its primary business is to provide testing for patients who suffer from sleep disorders. American Sleep allegedly submitted false claims to Medicare, TRICARE, and the Railroad Retirement Medicare Program for tests that were performed by technicians who lacked the proper certification required by these agencies for reimbursement. The whistleblower in this case, Daniel Purnell, will receive about $2.6 million as his portion of the settlement.

For more information about this settlement, read the DOJ press release.  

7. Adventist Health System & White Memorial Medical Center
   ($14.1 Million)

This month, Adventist Health System and its affiliated hospital White Memorial Medical Center agreed to a $14.1 million settlement. The settlement was the result of a qui tam lawsuit filed against the companies accusing them of violating the Anti-Kickback Act and the Stark Statute. Of the $14.1 million, $11.5 million will go to the federal government and $2.6 million will go to California’s Department of Health Care Services. Adventist Health was allegedly improperly compensating physicians for patient referrals to White Memorial by transferring medical and non-medical supplies and other inventory to the physicians at less than fair market value. White Memorial was also accused of paying referring physicians at a rate above fair market value for teaching services at the family practice residency program. The whistleblowers in this case were Dr. Hector Luque and Dr. Alejandro Gonzalez, who were members and partners of White Memorial. They will collectively receive $2,389,219 as their portion of the settlement.

For more information about this settlement, read our blog post.

8. Cooper Health System ($12.6 Million)

Cooper Health System and Cooper University Hospital, a hospital and health care system in South New Jersey, agreed to a $12.6 million settlement that resolved allegations that Cooper engaged in an elaborate illegal kickback scheme. According to the complaint, Cooper created a sham advisory board to pay high-volume medical practices upwards of $18,500 each to attend four meetings over the course of a year with the true goal of encouraging medical practices to refer patients to Cooper. The whistleblower in this case, Dr. Nicholas L. DePace, is a prominent Delaware Valley cardiologist. Dr. DePace was invited to join the sham advisory board and, after attending one of the meetings, figured out Cooper’s true intentions. Dr. DePace’s whistleblower reward has not yet been determined.

For more information about this settlement, read our blog post.

9. Hospice of Arizona ($12 Million)

Three Arizona hospice companies, Hospice of Arizona LC, American Hospice Management LLC and American Hospice Management Holdings LLC, agreed to settle a False Claims Act lawsuit with the government for $12 million. In order for hospice care to be reimbursed by Medicare, patients are required to have a life expectancy of, at most, six months.The qui tam lawsuit, filed against the companies in 2010, accused the defendants of submitting false claims to Medicare for patients who did not need to be admitted to the Hospice of Arizona. Additionally, they were accused of submitting false claims by overbilling Medicare for some of the hospice’s services. Ellen Momeyer, the whistleblower in this action, was a former Hospice of Arizona employee. Momeyer will receive $1.8 million (approximately 15%) as her share of the settlement.

For more information about this settlement, read our blog post.

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Michigan Cardiology Settlement of Medicare and Medicaid Fraud Allegations

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On July 10, 2013, United States Attorney Barbara L. McQuade announced a $4 million settlement between Allegiance Health d/b/a W.A. Foote Memorial Hospital, Jackson Cardiology Associates, P.C., Jashu R. Patel, M.D. and the U.S. Government.  The U.S. Department of Justice collaborated with the Birmingham, Michigan law firm, Vezina Law, PLC, in pursuing this action against the Jackson, Michigan based defendants.

According to allegations brought against the defendants in 2008, Foote Memorial Hospital, Jackson Cardiology Associates, and Dr. Patel knowingly billed Medicare, Medicaid, and other federal health care programs for medically unnecessary cardiovascular procedures and tests, including, but not limited to, stress tests, cardiac catheterizations, cardiac stents, and peripheral angiography procedures.

The lawsuit was filed in the United States District Court for the Eastern District of Michigan under the qui tam provisions of the Federal and State False Claims Acts.  Both False Claims Acts allow private individuals with knowledge of fraud against a government program to file lawsuits on the Government’s behalf.  If the case is successful, the private plaintiffs, known as relators or whistleblowers, are entitled to a percentage of the Government’s recovery.  The state and federal False Claims Acts both provide for recovery of three times the single damages incurred by the government as a result of the fraud, as well as civil monetary penalties of between $5,500 and $11,000 per false claim submitted and statutory attorney fees.

The relator in this case is Dr. Julie Movach, an independent contractor with Medical Practice and a physician board certified in internal medicine, cardiology, and echocardiography.  Dr. Movach released a statement explaining how important it is for her to deliver the best care to her patients and ensure that they do not undergo any unnecessary procedures.  When she realized that certain health care providers were more concerned with their personal financial well-being rather than the welfare of their patients, to the point that they would commit fraud against federal health care programs, Dr. Movach knew she must expose this corruption.  She took it upon herself to file a lawsuit against the defendants on behalf of the U.S. government.  Dr. Movach deserves our thanks and applause for her willingness to risk her livelihood in order to ensure people with genuine need can continue to receive assistance from Medicare and Medicaid.

In this case, the combined settlement was $4,150,988.31. The Foote Memorial Hospital settled the allegations with the federal government for $1,824.927.98 and with the State of Michigan for $126,060.33.  At the same time, Dr. Patel and Jackson Cardiology settled the allegations with the federal government for $2,200,000.00.  As the whistleblower, Dr. Movach will receive a 19% share of the overall settlement, which amounts to approximately $760,000 of the proceeds.

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Healthcare Fraud Case Results in $491 Million Settlement

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On July 30, 2013, Pfizer Inc., one of the world’s largest pharmaceutical companies, announced its finalized agreement to pay $491 million to the U.S. government in order to resolve accusations that the company and one of its subsidiaries defrauded the U.S. healthcare system.  Under the settlement, Pfizer will pay $257 million in order to resolve civil allegations that Wyeth Pharmaceuticals Inc., owned by Pfizer, engaged in illegal marketing that led to false claims being brought to Medicare and similar healthcare programs.  Pfizer will pay the other $234 million of the settlement in order to cover criminal fines and penalties.

According to allegations in the lawsuit, Wyeth Pharmaceuticals had illegally marketed a transplant drug named Rapamune for uses that had not been approved by the U.S. Food & Drug Administration (FDA).  Patients use Rapamune in combination with other drugs following kidney transplants.  However, Wyeth’s advertising campaigns advocated the drug for unapproved applications, such as use after liver, lung, heart, pancreas, and islet transplants.  According to a U.S. attorney, this type of off-label marketing endangers patients and erodes the population’s confidence in the FDA.  In 2002, the FDA required Wyeth to place a “black box warning,” the most stringent type of warning required by the agency, on the Rapamune product label.  This warning would advise people of the risks inherent in using Rapamune after liver transplants.  One year later, the FDA required a similar type of warning with regard to the use of Rapamune after lung transplants.  Nevertheless, claims up to 90% of Wyeth’s Rapamune sales were allegedly for “off-label” uses.

The $491 million settlement resulted from two qui tam lawsuits filed against Wyeth Pharmaceuticals Inc.  Under provisions of the False Claims Act, private citizens with knowledge of fraud committed against the government can file a qui tam lawsuit on behalf of the United States.  The individual filing the lawsuit is known as the relator or whistleblower.  Healthcare whistleblowers, such as the persons who brought the lawsuits against Wyeth, serve an important role in exposing and eradicating healthcare fraud.  Many whistleblowers have personal knowledge of deceptive practices because they work for the companies that submit false claims to the Government.  By relating their knowledge to the appropriate authorities, these individuals can assure that healthcare programs can achieve their intended benefits to Americans with the greatest need of federal assistance.

In the first case, the False Claims Act whistleblowers were Marlene Sandler and Scott Paris.  They jointly filed a lawsuit in Pennsylvania that alleged aspects of off-label marketing.  At the time, the Government declined to intervene and the relators commenced to litigate the case on their own.  Two years later, a second qui tam whistleblower, Mark Campbell, came forward.  Mr. Campbell is a former Wyeth sales representative who worked for the company for twenty years.  Throughout the tenure of his employment, he became aware of Wyeth’s off-label marketing practices.  After he filed his lawsuit against Wyeth in the U.S. District Court for the Western District of Oklahoma, the Department of Justice intervened in the Sandler and Paris action.  The Government then transferred the matter to the Oklahoma court and consolidated the two cases.  The three Medicare fraud whistleblowers have aligned their interests and cooperated to help the investigation into Wyeth’s actions.

Because the whistleblowers took on a personal risk in bringing allegations against their employer and they devoted their time in relaying information vital to the case, they will obtain a significant proportion of the settlement.  False Claims Act whistleblowers typically receive 15% to 25% of settlements.  That means that Ms. Sandler, Mr. Paris, and Mr. Campbell will all potentially receive millions of dollars from Pfizer Inc.

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What Does The Word “Natural” Mean, Anyway?

Mintz Logot’s 2 o’clock in the afternoon, you need a snack – maybe a granola bar, but which one? Does the package that boasts it is “100% Natural” win out over the one that is only “All Natural”?  Would you even consider one that is merely “Natural”? Well, don’t expect the U.S. Food and Drug Administration to help you decide anytime soon – they have left it up to the courts to grapple with.

Lawsuits against food companies alleging consumer fraud based on deceptive labeling have increased in the last few years.  Many of these lawsuits have been brought in the U.S. District Court in the Northern District of California, causing that court to be known as the “Food Court” (no, not the one at the mall).  One common bone of contention is the use of the word “natural” in food labeling.  “Natural” remains undefined by the U.S. Food and Drug Administration after a failed attempt to do so in 1991.  It reaffirmed its informal policy for use of the word “natural” on food labeling claims:

The agency will maintain its current policy . . . not to restrict the use of the term “natural” except for added color, synthetic substances, and flavors as provided in [21 CFR] §101.22.  Additionally, the agency will maintain its policy . . . regarding the use of “natural,” as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.  Further, at this time the agency will continue to distinguish between natural and artificial flavors as outlined in §101.22. See more here.

A typical claim in a lawsuit will contend that the use of the word “natural,” whether as “100% Natural,” “All Natural,” or something similar, is misleading if the product contains or was processed with a compound perceived by plaintiffs to be artificial or synthetic.  The problem in these lawsuits is that the term is undefined, and even FDA says that it is difficult to define a food product that is natural because it has likely been processed and is no longer a “product of the earth.”  This leaves fertile ground for plaintiff’s class action attorneys to bring claims against food companies for any use of the word.

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Does My Email Communication Constitute a Binding Agreement?

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In an era where the prevalence of email exchanges in the business arena is almost commonplace, clients and attorneys should be aware that a form of identification which could constitute their signature in an email, attesting to the substance of a negotiated settlement, may be considered a binding and enforceable stipulation of settlement under CPLR 2104.  Last month, a unanimous panel of the Appellate Division, Second Department, held, in Forcelli v. Gelco Corporation, 27584/08, that an agent for a vehicle insurer who sent an email message to plaintiff’s counsel, with her name entered at the bottom of the email, summing up the settlement terms in an automobile accident case, constituted “a writing subscribed by [client] or his attorney” as required under the statute.

The Forcelli case was brought by Mr. Forcelli and his wife for injuries Mr. Forcelli allegedly suffered in connection with a three-car accident on the Saw Mill River Parkway.  One of the cars was driven by the defendant Mitchell Maller who was driving a car owned by defendant Gelco Corporation.  In January 2011, Gelco and Maller (the “Gelco Defendants”) moved for summary judgment seeking dismissal of all claims.  In March 2011, the Gelco Defendants met with plaintiffs and their counsel for mediation.  Ms. Brenda Greene, a claims adjuster with the insurer of the Gelco Defendants’ vehicle, was also present and she informed Plaintiffs that she had authority to settle the case on behalf of her insured.  Although the mediation did not result in an immediate settlement, the parties continued their discussions and on May 3, 2011, Ms. Greene orally offered to settle the case for $230,000.  Plaintiffs’ counsel orally accepted the offer on behalf of the Plaintiffs.  Ms. Greene then sent an email message to Plaintiffs’ counsel memorializing the terms of the settlement.  On May 4, 2011, Plaintiffs signed a release in exchange for receiving the $230,000.  A few days later, on May 10, 2011, the Supreme Court issued an order granting the Gelco Defendants’ motion for summary judgment dismissing all claims against them.  After the Court’s decision, the Gelco Defendants took the position that there was no settlement finalized under CPLR 2104.  Plaintiffs moved to enforce the settlement agreement as set forth in Ms. Greene’s email message.

Writing for the unanimous panel, Judge Sandra Sgroi stated that “given the now widespread use of email as a form of written communication in both personal and business affairs, it would be unreasonable to conclude that email messages are incapable of conforming to the criteria of CPLR 2104 simply because they cannot be physically signed in a traditional fashion.”  Specifically, Judge Sgroi noted that the agent ended the email with the expression “Thanks Brenda Greene,” which “indicates that the author purposefully added her name to this particular email message rather than a situation where the sender’s email software has been programmed to automatically generate the name of the email sender….”  Judge Sgroi noted that Ms. Greene’s email message set forth the material terms of the settlement agreement and contained an expression of mutual assent.  Importantly, the settlement was not conditioned on any further occurrence and the record clearly demonstrated that Ms. Greene had apparent authority to settle the case on behalf of the insured.

Judge Sgroi cited to both First and Third Department decisions where those Courts came to the same conclusion.  In Williamson v. Delsener, 59 A.D.3d 291 (2009), the Appellate Division, First Department held that “emails exchanged between counsel, which contained their printed names at the end, constitute signed writings (CPLR 2104) within the meaning of the statute of frauds and entitle plaintiff to judgment.”  The First Department noted that the email communications evidenced that Delsener was aware of and consented to the settlement and there was no indication in the record that counsel was without authority to enter into the settlement.

Likewise, in Newmark & Co. Real Estate Inc. v. 2615 East 17 Street Realty LLC, 80 A.D.3d 476 (2011), which involved payment of a commission under a brokerage agreement, the First Department found that although the defendant did not sign the brokerage agreement sent by the plaintiff, there were several email communications, supported by other documentary evidence, which contained the terms of the brokerage agreement.  The Court stated that “an email sent by a party, under which the sending party’s name is typed, can constitute a writing for the purposes of the statute of frauds.”  The email agreement set forth all relevant terms of the agreement and thus “constituted a meeting of the minds.”

The Appellate Division, Third Department, held in Brighton Investment, LTD. v. Ronen Har-ZVI, 88 A.D.3d 1220 (2011) that “an exchange of emails may constitute an enforceable contract, even if a party subsequently fails to sign implementing documents, when the communications are sufficiently clear and concrete to establish such an intent.”  (internal citations omitted.)

While the law in this area is plainly evolving, clients and attorneys should be careful when setting forth terms of a settlement or conducting any sort of negotiations via email.  One simple suggestion that may reduce the risk that emails with typed signatures (or even a signature block) at the bottom may unintentionally create a binding agreement is to include in the email a form of disclaimer that the email is for negotiation purposes only and does not constitute or give rise to a binding legal agreement.  We certainly have not heard the last word on this subject.  It will be up to the Court of Appeals to render a decision that will hopefully give some degree of finality to the issue of whether name identification on an email constitutes the type of signature required for a binding settlement under CPLR 2104.

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First Post-Supreme Court Defense of Marriage Act (DOMA) Case Rules in Favor of Same-Sex Spouse

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In one of the first post-Supreme Court DOMA cases, the Eastern District of Pennsylvania, applying Illinois state law, held that the surviving same-sex spouse of a deceased participant in an employer sponsored pension plan was entitled to the spousal death benefit offered under the plan. See Cozen O’Connor, P.C. v. Tobits, Civil Action No. 11-0045; 2013 WL 3878688 (E.D. Pa., July 29, 2013).

This case is significant because it is the first case after the Supreme Court’s June 26, 2013 decision in United States v. Windsor, 133 S. Ct. 2675 (2013) to grapple with choice of law in determining whether a marriage is valid for purposes of obtaining spousal benefits under an ERISA-covered plan. While Windsor ruled that Section 3 of DOMA defining marriage only as between persons of the opposite sex unconstitutional for purposes of applying federal law, it did not address or invalidate Section 2, which permits states to decline to recognize same-sex marriages performed in other states.

Case Background

In 2006, Sarah Farley and Jean Tobits were married in Canada. Shortly after they were married, Ms. Farley was diagnosed with cancer, and she died in 2010. At the time of her death, Ms. Farley was employed by the law firm of Cozen O’Connor and a participant in the firm’s profit sharing plan (the Plan). The Plan provided that a participant’s surviving spouse would receive a death benefit if the participant died before the participant’s retirement date. If the participant was not married or the participant’s spouse waived his or her right to the death benefit, the participant’s designated beneficiary would be entitled to the death benefits. The Plan defined “Spouse” as “the person to whom the Participant has been married throughout the one-year period ending on the earlier of (1) the Participant’s annuity starting date or (2) the date of the Participant’s death.”

Ms. Farley’s parents and Ms. Tobits both claimed a right to the Plan’s death benefits. Ms. Farley’s parents claimed that they had been designated as the beneficiaries, but it was undisputed that Ms. Tobits had not waived her rights to the death benefits. Cozen O’Connor filed an interpleader action in the Eastern District of Pennsylvania asking the court to determine who was entitled to the benefits. Therefore, the case focused on whether Ms. Tobits qualified as a “Spouse” under the Plan and thus was entitled to the death benefits.

The Court’s Ruling

The court noted that Windsor “makes clear that where a state has recognized a marriage as valid, the United States Constitution requires that the federal laws and regulations of this country acknowledge that marriage” irrespective of whether the marriage is between a same-sex couple or a heterosexual couple. With Windsor’s emphasis on states’ rights to define marriage, lower courts are left with the complicated task of deciding which state law applies when determining whether a same-sex spouse is entitled to benefits under federal law in those instances, as in Cozen, where multiple jurisdictions with different laws on same-sex marriage are implicated.

Apparently, because Cozen O’Connor is headquartered in Pennsylvania, the Plan is administered there, and the Plan’s choice of law provision references Pennsylvania law, the Farleys asked the court to apply Pennsylvania state law to determine the validity of the marriage. Pennsylvania’s mini-DOMA statute expressly defines marriage as between a man and a woman. The court concluded that ERISA preempted Pennsylvania law. It reasoned that if courts were required to look at the state in which the plans were drafted, plan administrators might be encouraged to forum shop for states with mini-DOMA laws to avoid paying benefits to same-sex couples. The court thought this kind of forum shopping would upset ERISA’s principle of maintaining national uniformity among benefit plans. Without further analysis, the court concluded Pennsylvania state law was not an option for determining Ms. Tobits’ status as a spouse within the meaning of the Plan.

Instead, the court applied Illinois law, the state where Ms. Farley and Ms. Tobits had jointly resided until Ms. Farley’s death. It was undisputed that Ms. Farley and Ms. Tobits had a valid Canadian marriage certificate. The court concluded that the marriage was valid in Illinois and that Ms. Tobits was Ms. Farley’s spouse within the Plan’s definition. Accordingly, the court held that Ms. Tobits was entitled to the Plan’s death benefit. Although not entirely clear, the court presumably came to this conclusion based on Illinois’ civil union statute (even though it was enacted after Ms. Farley’s death). The statute provides that (i) same-sex marriages and civil unions legally entered into in other jurisdictions will be recognized in Illinois as civil unions and (ii) persons entering into civil unions will be afforded the benefits recognized by Illinois law to spouses. See 750 Ill. Comp. Stat. An. 75/5 and 75/60 (West 2011).

Impact of Cozen on ERISA Benefit Plans

Cozen is the first ruling in the wake of Windsor to address which state law might apply when there are conflicting state laws as to whether a valid marriage is recognized for the purpose of being a “spouse,” and therefore whether the spouse is entitled to benefits under an ERISA-covered plan. In Cozen, Ms. Farley and Ms. Tobits were lawfully married in Canada, and the court ruled that Illinois’s civil union law recognizes lawful marriages performed in other jurisdictions. The court applied the law of the domicile state to support its holding that Ms. Tobits was a surviving spouse entitled to the Plan’s death benefit.

The Cozen decision may have little value outside of cases where a valid same-sex marriage is performed in one state (the “state of celebration”) and the state where the couple is domiciled recognizes same-sex marriages. In other situations, faced with a choice of law where the law of the state of domicile conflicts with the law of the state of celebration, the outcome could be different, because Section 2 of DOMA survives after the Windsor decision. Unless the federal government creates a uniform method of determining the choice of law question, ERISA cases raising benefit entitlement questions in the context of same-sex marriages are likely to continue to complicate plan administration, and ERISA’s goal of maintaining national uniformity in the administration of benefits will remain elusive.

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U.S. Medical Oncology Practice Sentenced for Use and Medicare Billing of Cancer Drugs Intended for Foreign Markets

GT Law

In a June 28, 2013 news release by the Office of the United States Attorney for the Southern District of California, in San Diego, it was reported that a La Jolla, California medical oncology practice pleaded guilty and was sentenced to pay a $500,000 fine, forfeit $1.2 million in gross proceeds received from the Medicare program, and make restitution to Medicare in the amount of $1.7 million for purchasing unapproved foreign cancer drugs and billing the Medicare program as if the drugs were legitimate. Although the drugs contained the same active ingredients as drugs sold in the U.S. under the brand names Abraxane®, Alimta®, Aloxi®, Boniva®, Eloxatin®, Gemzar®, Neulasta®, Rituxan®, Taxotere®, Venofer® and Zometa®), the drugs purchased by the corporation were meant for markets outside the United States, and were not drugs approved by the FDA for use in the United States. Medicare provides reimbursement only for drugs approved by the Food and Drug Administration (FDA) for use in the United States. To conceal the scheme, the oncology practice fraudulently used and billed the Medicare program using reimbursement codes for FDA approved cancer drugs.

In pleading guilty, the practice admitted that from 2007 to 2011 it had purchased $3.4 million of foreign cancer drugs, knowing they had not been approved by the U.S. Food and Drug Administration for use in the United States. The practice admitted that it was aware that the drugs were intended for markets other than the United States and were not the drugs approved by the FDA for use in the United States because: (a) the packaging and shipping documents indicated that drugs were shipped to the office from outside the United States; (b) many of the invoices identified the origin of the drugs and intended markets for the drugs as countries other than the United States; (c) the labels did not bear the “Rx Only” language required by the FDA; (d) the labels did not bear the National Drug Code (NDC) numbers found on the versions of the drugs intended for the U.S. market; (e) many of the labels had information in foreign languages; (f) the drugs were purchased at a substantial discount; (g) the packing slips indicated that the drugs came from the United Kingdom; and (h) in October, 2008 the practice had received a notice from the FDA that a shipment of drugs had been detained because the drugs were unapproved.

In a related False Claims Act lawsuit filed by the United States, the physician and his medical practice corporation paid in excess of $2.2 million to settle allegations that they submitted false claims to the Medicare program. The corporation was allowed to apply that sum toward the amount owed in the criminal restitution to Medicare. The physician pleaded guilty to a misdemeanor charge of introducing unapproved drugs into interstate commerce, admitting that on July 8, 2010, he purchased the prescription drug MabThera (intended for market in Turkey and shipped from a source in Canada) and administered it to patients. Rituxan®, a product with the same active ingredient, is approved by the Food and Drug Administration for use in the United States.

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