Roundup: 1st, 3rd, 7th and 8th Circuits

Off-label marketing case against Pfizer can proceed; ADA doesn’t protect drug addict who lied on job application; Asset purchasers inherit liability for labor violations; Court can’t rule on severance arrangement

1st Circuit
Maine, Massachusetts, New Hampshire, Puerto Rico, Rhode Island

Off-label marketing case against Pfizer can proceed

In In re: Neurontin Marketing and Sales Practices Litigation, the 1st Circuit ruled April 3 that Pfizer Inc. must face off-label marketing claims from hundreds of insurers.

In 2004, the Department of Justice sued Pfizer for improperly marketing its epilepsy drug Neurontin. The company pleaded guilty and paid $430 million to resolve the allegations. Insurers also filed a class action against the company, claiming it tricked them into covering Neurontin prescriptions for unapproved uses, such as the treatment of bipolar disorder.

A district court refused to allow the insurers’ suit to proceed as a class. But the 1st Circuit reversed and remanded the decision, saying there was sufficient evidence that Pfizer’s improper marketing caused the insurers’ damages. The 1st Circuit also upheld a separate $142 million award to the Kaiser Foundation Health Plan Inc. over damages related to Pfizer’s illegal marketing.


3rd Circuit
Delaware, New Jersey, Pennsylvania

ADA doesn’t protect drug addict who lied on job application

A hospital did not violate the Americans with Disabilities Act (ADA) when it fired a recovering drug addict who lied on his job application, the 3rd Circuit ruled in Robert Reilly v. Lehigh Valley Hospital.

When recovering drug addict Robert Reilly was offered a job as a security guard at Lehigh Valley Hospital, he had to complete a form about his health, on which he denied being diagnosed with or treated for alcoholism or drug addiction. He got the job.

One day, Reilly was admitted to the hospital’s emergency room for a work-related injury. He told the treating physician that he had a history of narcotics use. The information made its way to human resources, and shortly after, the hospital fired Reilly for failing to disclose his drugabuse history on his application.

Reilly sued the hospital, claiming it violated the ADA. A district court granted the hospital’s motion for summary judgment. The 3rd Circuit upheld the decision on March 29, saying that although the ADA does protect drug addicts, the hospital did not violate the act when it terminated Reilly for lying on his application.


7th Circuit
Illinois, Indiana, Wisconsin

Asset purchasers inherit liability for labor violations

The 7th Circuit recently reminded asset purchasers of the successor liability risks they face when it comes to violations of federal labor and employment laws.

In Teed v. Thomas & Betts Power Solutions, a purchaser renounced any liability tied to a seller’s alleged previous wage and hour violations under the Fair Labor Standards Act (FLSA). Once the sale was complete, the employees who claimed the seller violated the FLSA shifted their claims onto the buyer.

A district court ruled that the buyer was liable for the alleged FLSA violations, and on March 26, the 7th Circuit affirmed the ruling. Judge Richard Posner wrote that “successor liability is appropriate in suits to enforce federal labor or employment laws—even when the successor disclaimed liability when it acquired the assets in question—unless there are good reasons to withhold such liability.”


8th Circuit
Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota

Court can’t rule on severance arrangement

On March 28, the 8th Circuit clarified the Employee Retirement Income Security Act’s (ERISA) application to severance arrangements.

In Dakota, Minnesota & Eastern Railroad Corp. v. Schieffer, a company terminated its CEO in anticipation of a merger. The employment agreement required the company to provide the CEO with benefits for three years after his severance payment.

A dispute arose concerning the severance payment amount, and the CEO filed a motion to arbitrate under the employee agreement. But the company contended that ERISA governed its employee agreement, and therefore a federal court should hear the case.

A district court granted the CEO’s motion to dismiss, saying it didn’t have jurisdiction over the matter because the employment agreement didn’t qualify as an ERISA plan. The 8th Circuit agreed, holding that an individual employment agreement providing severance benefits to a single person doesn’t constitute as an ERISA plan.

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