AG Jennings, DOJ Fight Corporate Abuse of Class Action Settlements

Delaware leads bipartisan coalition opposing attempt to weaponize class action settlements against state law enforcement actions

Attorney General Kathy Jennings announced Monday that Delaware has filed an amicus brief in a Minnesota federal court opposing a corporation’s attempt to weaponize a class action settlement against a parallel law enforcement action by the Minnesota Attorney General. Delaware’s brief was also signed by the attorneys general of 35 other states and the District of Columbia.

Following a lengthy investigation, Minnesota’s Attorney General filed suit in 2017 against CenturyLink, Inc. for unlawful business practices, alleging the Louisiana-based telecommunications provider had harmed Minnesota consumers through fraudulent and deceptive billing. Trial in Minnesota’s lawsuit is scheduled for March 2020.

In addition, numerous private litigants have filed class action lawsuits against CenturyLink in connection with the same conduct, which is alleged to have harmed millions of consumers across the United States. In early 2018, the Judicial Panel on Multidistrict Litigation consolidated the private class action lawsuits before Judge Michael J. Davis in the United States District Court for the District of Minnesota.

In October, CenturyLink announced that it had reached a tentative settlement with the private litigants in federal court. Under the proposed settlement, consumers would only receive a small fraction of the losses CenturyLink is alleged to have caused. CenturyLink then asked Judge Davis to bar the Minnesota Attorney General’s state court restitution claims against it, arguing that any further relief ordered by the state court would be “duplicative” of payments consumers will receive under the private settlement.

“Class action settlements aren’t get-out-of-jail-free cards,” said Attorney General Jennings. “This issue is bigger than any one state or business; this is about giant corporations playing by a different set of rules than everyone else. The injunction that CenturyLink has requested would undermine state consumer protection laws and send a message that corporations can violate the law and unilaterally avoid full accountability by leveraging private settlements to squeeze out law enforcement efforts. I’m grateful to my colleagues for standing up to say we won’t let that happen.”

Delaware’s brief makes four principal arguments:

  1. CenturyLink’s request is unconstitutional under the Eleventh Amendment
  2. Additional federal statutes bar the Courts from granting CenturyLink’s request
  3. The approach advocated for by CenturyLink would incentivize class action settlement abuse, diminish recoveries for fraud victims, and enable bad actors to keep more of the proceeds of their misconduct.
  4. State attorneys general are not represented in class actions and are legally separate from private litigants

The Minnesota Attorney General filed a separate brief opposing CenturyLink’s proposal on November 15. A hearing on the matter will be held before Judge Davis on December 11.

Delaware’s amicus brief was also signed by the attorneys general of: Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, Wyoming, and the District of Columbia.

Delaware’s work in this matter was led by Deputy Attorney General David Weinstein, with assistance from Fraud Division Director Owen Lefkon, Director of Impact Litigation Christian Wright, and Deputy Attorney General Michael Clarke.

Delaware, Reckitt Reach Suboxone Settlement

Multi-state settlement resolves allegations of improper marketing and sale of addictive withdrawal treatment

Attorney General Kathy Jennings announced today that Delaware and other states have reached an agreement with pharmaceutical distributor Reckitt Benckiser Group (“Reckitt”) to settle allegations that the company, either directly or through a subsidiary, improperly marketed and otherwise promoted the drug Suboxone, resulting in improper expenditures of state Medicaid funds.

Suboxone is a drug product approved for use by recovering opioid addicts to avoid or reduce withdrawal symptoms while they undergo treatment. Suboxone and its active ingredient, buprenorphine, are powerful and addictive opioids.

“I’m grateful for the work that our Medicaid Fraud Control Unit does each day to protect consumers and ensure good stewardship of our tax dollars,” said Attorney General Jennings. “The opioid crisis has been one of the deadliest epidemics in Delaware history, and the challenges of recovery cannot be overstated. Appropriate medication can be a vital resource for people facing the considerable challenges of recovery, and we expect companies selling that medication to be fair and honest with consumers and Medicaid alike.”

Reckitt is an English public limited company headquartered in the United Kingdom. Until December 23, 2014, Reckitt’s wholly owned subsidiary Indivior Inc. (then known as Reckitt Benckiser Pharmaceuticals, Inc.) distributed, marketed, and sold Suboxone Sublingual Tablets and Suboxone Sublingual Film in the United States.

The civil settlement resolves allegations that, from 2010 through 2014, Reckitt directly or through its subsidiaries:

  1. Promoted the sale and use of Suboxone to physicians who were writing prescriptions for patients without any counseling or psychosocial support, for uses that were unsafe, ineffective, and medically unnecessary. These practices allegedly made Suboxone susceptible to diversion for uses that lacked a legitimate medical purpose.
  2. Falsely and misleadingly claimed that Suboxone Sublingual Film was less susceptible to diversion and abuse than other buprenorphine products, and that Suboxone Sublingual Film was less susceptible to accidental pediatric exposure than Suboxone Sublingual Tablets;
  3. Fraudulently claimed in an FDA petition that it had discontinued manufacturing and selling Suboxone Sublingual Tablet “due to safety concerns” about the drug’s tablet formulation; and
  4. Fraudulently stifled generic competition for various forms of Suboxone in order to improperly control pricing, including pricing to federal health care programs.

Reckitt has agreed to pay a total of $700 million to resolve various civil fraud allegations impacting government health care programs, with $3.08 million going to Medicaid. Delaware’s share of $1.3 million will go to the Division of Medicaid and Medical Assistance within the Department of Health and Social Services.

A National Association of Medicaid Fraud Control Units (“NAMFCU”) Team participated in the investigation and in settlement negotiations. The Team included representatives from the Offices of the Attorneys General for the states of California, Indiana, New York, Ohio, Virginia, and Washington. Director Christina Kontis and Senior Auditor Ellen Yates of the Medicaid Fraud Control Unit handled this matter for Delaware.

Attorney General Jennings Announces Multistate Settlement with Johnson & Johnson, Ethicon, Inc.

Delaware Attorney General Kathleen Jennings announced Thursday a multistate settlement with Johnson & Johnson and its subsidiary, Ethicon, Inc., for their deceptive marketing of transvaginal surgical mesh devices.

A multistate investigation found the companies violated state consumer protection laws by misrepresenting the safety and effectiveness of the devices and failing to sufficiently disclose risks associated with their use.

“Manufacturers of medical devices must do better than the cavalier and dangerous attitude towards women exhibited here by Johnson and Johnson. Today’s settlement holds Johnson and Johnson accountable for their failures and my office will continue to ensure that Delawarean’s can rely on manufacturer’s assurances as to the safety and effectiveness of medical devices,” said Attorney General Jennings.

Transvaginal surgical mesh is a synthetic material that is surgically implanted through the vagina to support the pelvic organs of women who suffer from stress urinary incontinence or pelvic organ prolapse.

The multistate investigation found the companies misrepresented or failed to adequately disclose the products’ possible side effects, including the risk of chronic pain and inflammation, mesh erosion through the vagina, incontinence developing after surgery, painful sexual relations, and vaginal scarring. Evidence shows the companies were aware of the possibility for serious medical complications but did not provide sufficient warnings to consumers or surgeons who implanted the devices.

The settlement requires J&J and Ethicon to provide full disclosure of the device’s risks and accurate information on promotional material and package inserts.

Among the specific requirements, the companies must:

  • refrain from referring to the mesh as “FDA approved” when that is not the case;
  • refrain from representing in promotions that risks associated with mesh can be eliminated with surgical experience or technique alone;
  • ensure that any product trainings provided to medical professionals covers the risks associated with the mesh;
  • omit claims that surgical mesh stretches after implantation, that it remains soft after implantation, that foreign body reactions are transient, and that foreign body reactions “may” occur (when in fact they will occur);
  • disclose that mesh risks include: fistula formation, inflammation, mesh extrusion, exposure, and erosion into the vagina and other organs;
  • disclose risks of tissue contraction, pain with intercourse, loss of sexual function, urge incontinence, de novo incontinence, infection following transvaginal implantation, and vaginal scarring; and
  • disclose that revision surgeries may be necessary to treat complications, that revision surgeries may not resolve complications, and that revision surgeries are also associated with a risk of adverse reactions.

Additionally, Johnson & Johnson has agreed to pay a combined $116.86 million to the 41 participating states and District of Columbia. Delaware will receive $1.4 million under the settlement which will go to the state’s Consumer Protection Fund. The Fund pays the investigative costs, consumer outreach activities and operations of Delaware DOJ’s Consumer Protection Unit, with excess amounts returned to the state’s General Fund for allocation by the state legislature and Governor through the normal budgetary process.

Joining Delaware in this multistate settlement are Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and Wisconsin.

The matter was handled by Assistant Director of Consumer Protection Regina S. Schoenberg.

DOJ Announces String of Home Improvement Fraud Indictments

Additional victims encouraged to contact Consumer Protection Unit

The Delaware Department of Justice’s Consumer Protection Unit today announced three indictments, including separate criminal charges against two brothers, in a series of home improvement frauds targeting older Delawareans.

Isaac K. Lovell, 44, of Bear was indicted on July 8, 2019 on charges including Racketeering, Conspiracy to Commit Racketeering, Home Improvement Fraud, and Theft Greater than $100,000. The indictment alleges that Isaac Lovell utilized his home improvement business, Phire-Fly Contracting Co., to defraud senior citizens, including an older woman from whom Lovell received over $600,000 between 2015 and 2017. A warrant was issued for Isaac Lovell’s arrest in July 2019; he was recently arrested in Ohio and extradited to Delaware on August 13, 2019.

David H. Lovell, 48, of Wilmington was indicted on August 19, 2019, on charges including Racketeering and Home Improvement Fraud. The indictment against David Lovell alleges that between 2015 and 2017, he used his home improvement business, DHL & Son Contracting, to defraud multiple elderly individuals. In a pattern similar to his brother’s, David Lovell convinced his victims to pay him for home improvement services that he never completed.

Andrew W. Masserelli, 48, of Magnolia was indicted on August 5, 2019, on charges of Home Improvement Fraud and Theft Greater than $1,500. Between 2016 and 2018, Masserelli and his business, Drew’s Tree Service, allegedly defrauded multiple homeowners, including two senior citizens, by failing to substantially complete tree removal work on their properties after accepting money.

Individuals who believe they have been defrauded by any of these individuals or their businesses are encouraged to contact the Department of Justice at (302) 577-8600. Other reports of home improvement fraud, in general, should be made to local law enforcement.

CPU advises Delawareans hiring a contractor for home improvement work to be alert for scams, and to help avoid them by doing homework before hiring a contractor:

  • Contractors should always be bonded and maintain all required licenses for mechanical work.
  • Get references and follow up on them, including conducting online searches and searching for companies at the Delaware Better Business Bureau’s website.
  • Do research and talk to friends and neighbors about a contractor’s reputation.
  • Always have terms with contractors memorialized in writing.
  • Never pay for the work in cash or in full up front, keep detailed payment records, and withhold final payment until you are satisfied with the work.

Because fraud victims are often embarrassed, Delawareans with older loved ones are encouraged to have their loved ones contact them before entering into any home improvement contract, and to visit loved ones’ residence regularly when home improvement work is being performed.

For more tips on hiring a contractor, visit the Federal Trade Commission’s website.

The Delaware Department of Justice reminds the public that an indictment is merely an allegation and is not evidence of guilt. Defendants are presumed innocent and are entitled to a jury trial at which the State bears the burden of proving each charge beyond a reasonable doubt.


Amended Complaint Asserts Walgreens’ Liability in Opioid Epidemic

In a recent court filing in Delaware’s ongoing civil lawsuit against the pharmaceutical industry over the prescription opioid crisis, the State asserts Walgreens’ liability for its role in the addiction epidemic as both a pharmacy and a distributor and seeks to add Walgreens to the list of manufacturer and distributor defendants.

An amended complaint filed April 2 argues that two Walgreens entities, Walgreen Co. and Walgreen Eastern Co., Inc., distributed and filled prescriptions for large amounts of prescription opioids in Delaware between 2006 and 2014, controlling a substantial portion of the Delaware wholesale prescription opioid market during that time. Walgreens was an original defendant in the suit filed last year and was dismissed from the lawsuit in February 2019, but the court’s order allowed for additional information to be provided to argue that Walgreens should be added back in as a defendant.

The suit contends Walgreens failed in its duty to use due diligence to avoid filling orders for prescription opioids that could be diverted into illicit markets. The amended complaints also adds Walgreens to its Distributor Claims, which consist of negligence and consumer fraud claims.

The inclusion of pharmacies in Delaware’s suit makes it one of the nation’s only legal actions that targets every level of the prescription opioid distribution system for its alleged failure to meet legal obligations that have contributed to Delaware’s opioid addiction epidemic.

The suit in Delaware Superior Court names Purdue Pharma L.P., Purdue Pharma Inc., The Purdue Frederick Company, Endo Health Solutions Inc., Endo Pharmaceuticals Inc., McKesson Corporation, Cardinal Health, Inc., Amerisourcebergen Drug Corporation, Anda Pharmaceuticals, Inc., H. D. Smith, LLC, Walgreen Co., and Walgreen Eastern Co., Inc. as defendants. Delaware is represented in this litigation by the law firms of Gilbert LLP, Fields PLLC, Connolly Gallagher LLP, and Cross & Simon, LLC.