Author: Michael V. Caracappa

“Pharma Bro” Avoids the Most Serious Adverse Inference Sanction for Spoliating Evidence Under Rule 37(e)

In an opinion out of the Southern District of New York addressing alleged spoliation of ESI, Judge Denise Cote found that the plaintiffs – the Federal Trade Commission and a collection of states – only sufficiently established half of their spoliation claims sought against defendant Martin Shkreli. Shkreli, aka “Pharma Bro,” and his business partner, Kevin Mulleady, launched Vyera in 2014. The plaintiffs alleged that in November 2017 Vyera entered into several anti-competitive agreements, including exclusive supply agreements, with a company preparing to seek FDA approval for the manufacture of the active ingredient in one of Vyera’s branded drug products. The plaintiffs sought sanctions under Rule 37(e) against Shkreli, alleging he failed to preserve messages on two cellphones despite receiving a litigation hold in late 2015. The first phone – a company-issued phone – was allegedly used by Shkreli to communicate about issues relevant to the case. When Shkreli’s attorney sent the company phone to be forensically imaged in April 2020, it was discovered that it had been factory reset (i.e., wiped) sometime in 2016 or 2017. While neither Shkreli nor Vyera produced communications from this phone, Vyera represented that company-issued phones were backed up to iCloud. The second was a contraband phone Shkreli appeared to have possessed while in prison. A Vyera executive testified...

The District of Delaware Adopts the Federal Circuit’s Factors in Rejecting Regulatory Bar in a Protective Order

In Amicus Therapeutics US, LLC v. Teva Pharmaceuticals USA, Inc., United States Magistrate Judge Christopher J. Burke rejected the defendants-generic drug manufacturers’ demand that a so-called regulatory bar be included in the parties’ proposed protective order. In denying the request, Judge Burke adopted the Federal Circuit’s approach as set forth in cases like In re Deutsche Bank Trust Co. Ams., 605 F.3d 1373 (Fed. Cir. 2010). Despite denying the defendants’ request, and while noting the rarity of courts ordering the inclusion of similar provisions in protective orders, Judge Burke explicitly left the door open to the possibility, emphasizing the highly fact-sensitive nature of these disputes. The defendants sought the inclusion of a regulatory bar that would preclude anyone who was granted access to information marked “Confidential” or “Highly Confidential” under the proposed protective order from participating in any FDA proceedings concerning migalastat (the drug at issue in the case), including by filing a citizen petition. In deciding under what factors to analyze this discovery dispute, Judge Burke identified two possibilities: (a) the Third Circuit’s Pansy factors, or (b) the Federal Circuit’s Deutsche Bank factors. The court and the parties agreed the latter should be applied because the Third Circuit’s Pansy factors generally concern whether information should be protected from intentional disclosure from the public, whereas...

Caught in the Sauce: Papa John’s Founder’s Failure to Preserve ESI in Cellphones Leads to Curative Sanctions Despite Initial Preservation Efforts

Practitioners and litigants alike largely understand that they must preserve evidence related to anticipated litigation. One potential pitfall, however, lies in the continuing nature of that obligation. Generally, a litigant’s duty to preserve evidence continues despite, for example, the collection of relevant documents or the imaging of devices containing relevant information. These principles were illustrated in a cautionary opinion by the Honorable Colin H. Lindsay, United States Magistrate Judge for the United States District Court for the Western District of Kentucky, in Schnatter v. 247 Grp., LLC, No. 3:20-3 (BJB) (CHL), 2022 WL 2402658 (W.D. Ky. Mar. 14, 2022). The case arose in the wake of Forbes Magazine publishing an article detailing a leaked conference call between the founder of Papa John’s, John H. Schnatter, and a marketing agency, during which Schnatter made racially charged comments. Within a week of publication, Schnatter was out as Chairman of Papa John’s and the University of Louisville announced it would rename the then Papa John’s Cardinal Stadium. Schnatter immediately retained counsel to assist in his separation with Papa John’s and explore potential affirmative claims. On July 25, 2018, just two weeks after the Forbes article was published, Schnatter’s own counsel sent him a Litigation Hold Notice. The Notice outlined his document preservation responsibilities, including suspending any automatic destruction...