seventy-first annual national moot court ......livia cleopatra, a resident of romulus, is the sole...
TRANSCRIPT
SEVENTY-FIRST ANNUAL
NATIONAL MOOT COURT COMPETITION
RECORD ON APPEAL
SUPREME COURT OF THE UNITED STATES October Term 2020
------ Docket No. 2020-01
------
Caesar Health Plan, Inc., Petitioner
v.
Livia Cleopatra, Respondent.
______________________________________________________________________________
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ACKNOWLEDGEMENTS
Special thanks to the Committee members who contributed to this year’s competition problem:
Alina Artunian Micaela Heery-Hyatt Zach Withers
The Committee is grateful to Stephanie Glazer and Martha Harris for their unwavering support and commitment to the sound administration of our National Competition.
The Committee is also grateful to the American College of Trial Lawyers for its continued support and commitment to our Competition.
The Committee is also grateful to Justin Bernstein (UCLA) and A.J. Bellido de Luna (St. Mary’s University School of Law) for their assistance with technical support for this year’s unique virtual competition.
We also thank all of our Regional Sponsors, staff, and volunteers, whose dedication and efforts are integral to the success of the National Moot Court Competition.
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FACTS IN THE RECORD
In May 2019, a previously unknown viral disease was identified in the nation of
Alexandria. Dubbed “Miasmic Syndrome,” the disease was found to be highly contagious and
fatal in at least 1% of cases. Within a matter of months, Miasmic Syndrome had become a
pandemic, spreading globally, infecting millions, and killing thousands.
Galen Research is a small American pharmaceutical company, headquartered in the state
of Romulus. Livia Cleopatra, a resident of Romulus, is the sole proprietor of Galen. Cleopatra is
also the commissioner of the Romulus Board of Health, a gubernatorially-appointed position.
Under Romulus law, there is no requirement that the Board of Health commissioner relinquish
outside positions or business interests, although the Commissioner is expected to recuse him or
herself in the event of a conflict of interest.
In September 2019, Galen announced that it had sponsored clinical trials in Alexandria in
concert with the Alexandrian government, testing whether its existing, FDA-approved cancer
medication Glukoriza could be an effective treatment for Miasmic Syndrome. According to the
results of the trial, Glukoriza cut the disease’s fatality rate by at least half and hastened patients’
recovery time by an average of several days.
At the time of the announcement, Glukoriza was available from Galen in the United
States at a list price of $10,000 per dose. When used as a cancer treatment, Galen’s approved
dosage of Glukoriza use is one dose per month over six months. When used as a treatment for
Miasmic Syndrome, Galen recommended four doses administered over a two-week period.
Glukoriza was first marketed in 2014, and prior to 2019, had achieved only limited market
penetration with approximately a thousand doses sold per year.
iv
As Galen announced the trial results, it massively expanded its manufacturing capacity
for Glukoriza, while simultaneously sending sales representatives out to physicians throughout
the country, persuading them to prescribe Glukoriza off-label1 to Miasmic patients. Galen also
engaged in a marketing campaign directed at health insurance companies to persuade them to
cover Glukoriza when prescribed as a treatment for Miasmic Syndrome. Both campaigns relied
heavily on the Alexandria/Galen trial data.2
Galen had limited success in convincing either doctors to prescribe or insurance
companies to cover Glukoriza as a treatment for Miasmic Syndrome. However, they scored a
notable client in November 2019, when Julius-Caesar Health System (“Julius-Caesar”) agreed to
make Glukoriza a preferred treatment for Miasmic Syndrome. Julius-Caesar Health System is a
partnership between two legally separate entities: Julius Medical Center (“Julius”), the single
largest healthcare provider in the state of Romulus, and Caesar Health Plan (“Caesar”), a health
insurance company. Julius-Caesar operates as an integrated payor-provider. Under this system,
almost all of Julius’s patients are members of Caesar. Plus, Caesar strongly encourages its
members to receive all or most of their care at Julius by requiring prior authorization and clinical
necessity before reimbursing members for care received outside of Julius. While Julius and
Caesar operate in close coordination, they are legally separate entities with separate leadership
and boards of directors. In agreeing to make Glukoriza its preferred Miasmic Syndrome
treatment, Julius agreed to educate its providers about the benefits of Glukoriza as a Miasmic
1 An “off-label” prescription refers to prescription of medication for use in a manner neither specified nor approved by the U.S. Food and Drug Administration. The practice is common and legal. See https://www.fda.gov/patients/learn-about-expanded-access-and-other-treatment-options/understanding-unapproved-use-approved-drugs-label. 2 While there are regulatory and preemption issues that generally arise in this context, including the FDA’s approval of “off-label” medication, these issues are not raised in this review.
v
Syndrome treatment, and Caesar agreed to fully cover prescriptions for Glukoriza when ordered
as a treatment for Miasmic Syndrome.
By February 2020, over 10,000 prescriptions for Glukoriza had been filled at Julius, and
covered and paid for by Caesar. Having gathered this quantity of outcomes data, researchers at
Julius were able to establish two facts with reasonable certainty:
1. Glukoriza had no significant effect in curing or ameliorating Miasmic Syndrome; and,
2. Patients who received Glukoriza at the condensed administration schedule recommended by Galen for Miasmic Syndrome suffered substantial side effects, far in excess of what Glukoriza caused when administered at its normal dosing schedule. In particular, upwards of 10% of patients receiving the condensed Glukoriza protocol suffered serious loss of kidney function.
On the basis of these findings, Julius-Caesar jointly made the decision to remove
Glukoriza from its list of recommended treatments for Miasmic Syndrome.3 Julius recommended
its providers stop prescribing it and Caesar removed the drug from its approved formulary as a
Miasmic Syndrome treatment.
Since Miasmic Syndrome was identified, a wide array of counterfeit, adulterated, and
otherwise dangerous drugs promising a miracle cure for the disease flooded the market. In
response, the Romulus legislature in October of 2019 passed the Emergency Miasmic Syndrome
Act (EMSA). In part, EMSA authorizes the Board of Health (“the Board”) to inspect and collect
records from any medical facility upon issuance of an administrative subpoena for evidence that
the facility was knowingly or negligently providing substandard care for Miasmic Syndrome.
3 While the Galen research indicated the possibility of some side effects from administration of Glukoriza, it was not until Julius had conducted its own investigation that it uncovered the extent of the harm on its patients who received Glukoriza. It was based on that discovery that Julius-Caesar made the decision to remove the “miracle drug” from its recommended treatments for Miasmic Syndrome. However, because Galen had not disclosed the severity of Glukoriza’s side effects, there is no question that Galen had, at least partially, misrepresented the nature of this drug.
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EMSA also empowers the Board of Health to take necessary actions in response to findings of
substandard care, including imposing monetary penalties, revoking those facilities’ operating
licenses, or such other actions which are necessary to protect the public health. The Board was
also authorized to subpoena any other party that was believed to hold such evidence about a
licensed medical facility. While the Board of Health is an 11-member body that generally
requires a majority vote to act, EMSA granted the Commissioner the unilateral authority to
authorize EMSA subpoenas.
In March 2020, the Board received reports that Miasmic Syndrome patients seen at Julius
Medical Center had notably worse health outcomes than patients seen elsewhere in the state.
Acting under the authority of EMSA, Commissioner Cleopatra issued subpoenas ordering Julius
Medical Center to submit its facilities to inspection, and ordering both Julius and Caesar Health
Plan to immediately turn over copies of all medical records relevant to patients diagnosed with,
tested for, or suspected of carrying Miasmic Syndrome.
Two separate groups of armed agents from the Board of Health simultaneously arrived at
Julius Medical Center and Caesar Health Plan’s facilities at 8AM on the morning of March 19,
2020, carrying the subpoenas and demanding compliance. The front desk staff at Julius Medical
Center immediately summoned the hospital’s attorneys, who quickly arrived on the scene,
challenged the subpoenas as overbroad, and refused to allow an inspection or turn over any
documents pending a court hearing on the subpoena’s validity. Ultimately, the agents left the
medical center without performing a search or collecting any documents.
The agents at Caesar Health Plan, however, were able to secure compliance with the
subpoena by threatening to have all staff present arrested for obstruction of justice if they did not
immediately submit to the search and turn over all relevant documents and records. As Caesar’s
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staff were unable to quickly tell which records were pertinent to Miasmic Syndrome care, agents
required Caesar to turn over data on all claims received from Julius since the start of the
pandemic, including the medical data underlying each claim. Caesar’s attorneys did not arrive to
contest the subpoena until after the staff had turned over the documents and records.
Upon review of the data found at Caesar, the Board of Health found evidence that
Miasmic Syndrome patients at Julius had an unaccountably high rate of kidney failure. Based on
this data, the Board determined that Julius had been providing substandard care to its Miasmic
Syndrome patients and was actively causing harm to the patients. The Board report, primarily
written by Commissioner Cleopatra, noted that Caesar’s Miasmic Syndrome protocol involved
administering an array of off-label drugs to patients, which had not been adequately shown to be
safe when used together. The report noted that Glukoriza was generally safe, but it had never
before been used with the other elements of Julius’s protocol, such as the antibiotics
Ippomarathron and Gentiane. On March 30th, the Board of Health—by unanimous vote of the
11-member board—suspended Julius’s operating license.
On the same day, a whistleblower in Alexandria came forward with documents showing
severe discrepancies in the results of the 2019 Glukoriza trial. The whistleblower report
suggested that the researchers conducting the trial had falsified data and failed to properly follow
up with patients to assess for delayed side effects. In particular, the documents suggested that
some patients had started to show signs of kidney damage, but were discharged from the trial
before this could be confirmed. The documents did not suggest that Livia Cleopatra was aware of
the falsification. In fact, copies of internal Galen emails showed active attempts by Galen staff to
hide the falsifications from her.
viii
The release of the Alexandria whistleblower report was a scandal that engulfed Galen
Research and its owner, Livia Cleopatra. On April 5th, Cleopatra resigned under pressure from
her position as Board of Health Commissioner. On April 14th, the Board voted 6-5 to restore
Julius Medical Center’s operating license, upon Julius’s showing proof that the 100% of their
patients’ excess kidney morbidity could be accounted for by patients on Glukoriza, which Julius
no longer used as a treatment for Miasmic Syndrome.4 During the time of Julius’s license
suspension, over 15,000 patients dropped their membership in the Julius-Caesar integrated
system, and enrolled with new providers and insurance companies.
PROCEDURAL HISTORY OF THE PRESENT ACTION
Under Romulus law, because Galen Research is a sole proprietorship, its owner Livia
Cleopatra must personally answer to any lawsuit brought against Galen.
Caesar Health Plan filed a civil action against Livia Cleopatra on May 1st, 2020, in the
federal district court for the District of Romulus, alleging two causes of action:
1. A civil RICO action under 18 U.S.C. § 1964(c) against Cleopatra, in her capacity as sole proprietor and alter ego of Galen Research, alleging that Galen induced Caesar to underwrite Glukoriza as a treatment for Miasmic Syndrome by means of fraud, and absent the fraud no payments for the drug ever would have been made. Caesar seeks damages in the amount of all payments made by Caesar to Galen for Glukoriza as a Miasmic Syndrome treatment.
2. A 42 U.S.C. § 1983 civil rights claim against Cleopatra, in her capacity as Commissioner of the Romulus Board of Health, alleging she authorized an unconstitutional search of their premises, prohibited under the Fourth and Fourteenth amendments. Caesar seeks damages for reputational injury and lost premiums from members who have left the Julius-Caesar system following the suspension of Julius’s license.
Cleopatra filed a 12(b)(6) motion to dismiss both counts, based on:
4 The two dissenting votes argued that Julius’s use of the Glukoriza-Ippomarathron- Gentiane cocktail in the first place showed unacceptable irresponsibility.
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1. Caesar Health Plan lacks standing to allege a RICO violation on the mere basis of its having reimbursed prescriptions for drugs manufactured by Galen; and,
2. The EMSA subpoena and its method of execution were not in violation of any cognizable constitutional right, even if all facts alleged by Caesar were proven. Moreover, even if some constitutional right was violated, the suit is barred under the doctrine of Qualified Immunity because such right was not clearly established at the time of the alleged injury.
The District Court denied the motion in its entirety on May 30, 2020. On June 11th,
Cleopatra appealed that denial to the 14th Circuit Court of Appeals. On July 3rd, the 14th Circuit
reversed the district court, and ordered the motion granted in its entirety.5 Caesar petitioned the
United States Supreme Court for a writ of certiorari on July 17th, and petition was granted on
September 14, 2020.
5 Given the timely and important nature of this dispute, the 14th Circuit has granted an interlocutory appeal of the district court’s denial of Cleopatra’s motion to dismiss, permitting review of the matter. This issue is not subject to review.
x
APPENDIX 1
Romulus Consolidated Law (PCL)
Chapter 18 – Health Care and Public Health
Subchapter 18.8 – Board of Health
§ 18.8.001 – Definitions
[Sections a-ff omitted]
gg) Hospital: A facility or institution engaged principally in providing services by or under the supervision of a physician.
§ 18.8.100 – Responsibilities of the Board
a) The primary responsibility of the Board shall be the safeguarding of the Public Health, which shall be broadly construed to include the physical and mental wellbeing of the people of the State.
b) The Board shall especially focus on the control and elimination of contagious disease within the state.
c) The Board shall, in its discretion, take all actions as shall be necessary in support of these goals, within the powers delegated to it under the laws of the State of Romulus.
§ 18.8.500 – Licensing of Hospitals
a) It shall be unlawful for any Hospital to conduct business within the State, without possessing an Operating License issued by the Board.
b) The Board shall issue an Operating License upon a majority vote of the Board, if the Board in its sole discretion determines that the operation of the Hospital shall be in the interest of the Public Health, according to such procedures and regulations as the Board may set.
c) Upon a finding a licensed Hospital’s continued operation is no longer in the interest of the Public Health, the Board by a majority vote may take any or all of the following actions:
1) Instruct the Hospital to make certain changes, such that the Hospital’s continued operation will be in the interest of the Public Health;
2) Require the Hospital to pay an appropriate and proportional monetary fine; 3) Suspend the Hospital’s Operating License, until a date certain or until such date as
certain requirements are met; and 4) Permanently revoke the Hospital’s Operating License.
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§ 18.8.890 – Miasmic Syndrome Response
a) The Board shall be responsible to take all reasonable actions within its authority to determine whether the level of service provided to Miasmic Syndrome patients at each licensed Hospital is in compliance with all relevant standards in the medical field.
b) If any Hospital is found to provide Miasmic Syndrome care which is not in compliance with all relevant standards in the medical field, the Board will consider this as evidence that the Hospital’s operations are not in the interest of the Public Health.
§ 18.8.891 – Emergency Subpoenas in relation to Miasmic Syndrome
a) The Commissioner of the Board may authorize an administrative subpoena to any licensed Hospital, which may require the Hospital to:
1) Admit personnel of the Board onto their premises to inspect for evidence that the facility is providing substandard care for Miasmic Syndrome; and
2) Provide such records or documents to the Board as the Board may in its discretion require in order to determine if the Hospital is providing substandard care for Miasmic Syndrome.
b) The Commissioner of the Board may authorize an administrative subpoena to any other person or entity within the State, which may require that person to provide any records or documents to the Board as the Board may in its discretion require in order to determine if a licensed Hospital is providing substandard care for Miasmic Syndrome.
c) A subpoena issued under this section shall be no broader than is reasonably required to determine whether a Hospital is providing substandard care for Miasmic Syndrome.
d) If an entity fails to comply with a subpoena issued under this section:
1) If the entity is a licensed Hospital, the Board may treat this as evidence that the Hospital is providing substandard care for Miasmic Syndrome, and further may treat the act of refusal itself as evidence that the Hospital is providing care contrary to the Public Health; and
2) If the entity is not a licensed Hospital, the Board may seek a court order to enforce compliance with the subpoena.
e) Upon petition by an entity which is the target of a subpoena under this section, the full Board shall review the subpoena and may amend or quash it, if the Board agrees to do so by majority vote. No entity that so petitions will be penalized for its refusal, during the pendency of its petition, to comply with a subpoena under this section. During the pendency of any such petition, the entity will preserve all evidence as is sought by the subpoena. Failure to preserve such evidence may constitute Obstruction of Justice.
f) The Commission shall only issue a subpoena under this section:
1) Upon reasonable suspicion that the Hospital about which information is sought may be providing substandard care for Miasmic Syndrome; and
2) To a licensed Hospital at random, as part of a documented and fair methodology for conducting random inspections.
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Chapter 30: Criminal Law
Subchapter 30.50: Interference with Public Administration
§ 30.50.120 – Obstruction of Investigation
It shall be a misdemeanor to obstruct or impede any duly authorized agent of the State of Romulus in that agent’s conduct of a search or investigation authorized by law.
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APPENDIX 2
State of Romulus Department of Health
Livia Cleopatra, Commissioner
SUBPOENA FOR INSPECTION AND PRODCUTION OF DOCUMENTS SPECIAL PUBLIC HEALTH NEED - EMSA
To CAESAR HEALTH PLAN (THE “ORGANIAZATION”) AND ITS PERSONNEL,
Under the authority granted by the Emergency Miasmic Syndrome Act (PCL § 18.8.891),
you are hereby COMMANDED to admit to the Organization’s premises the personnel of the
Romulus Board of Health, for the purposes of conducting an inspection and search for
information relevant to potential negligent or substandard care for Miasmic Syndrome.
You are further COMMANDED to product to such personnel all records related to
medical care at Julius Medical Center, which are:
1) Related to the diagnosis and/or treatment of Miasmic Syndrome, or
2) Related to patients who are suspected of carrying Miasmic Syndrome
Records sought under this subpoena include all insurance claims and medical records in
the possession of the Organization which are related to such services and/or patient population,
and which are dated on or after May 1, 2019.
Compliance with this subpoena will take place at 8 AM on March 19, 2020. Failure to
comply by the Organization, through its personnel, may result in such legal actions by the Board
of Health as are necessary to protect the public health. The Board is empowered to impose
monetary penalties, and in appropriate situations to revoke a facility’s operating license in the
event of noncompliance with an EMSA subpoena. Illegally interfering with the execution of this
legally-authorized collection of information is a criminal offence.
. Livia Cleopatra . Livia Cleopatra, Commissioner
March 13, 2020
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APPENDIX 3
Header:
From: [email protected] (Livia Cleopatra, Commissioner [HEALTH]) To: [email protected] (Marcus Brutus, Deputy Inspector [HEALTH]) Date: March 13, 2020, 7:38 PM Subject: Caesar Subpoena
Body:
DI Brutus,
See attached EMSA subpoena issued today against Caesar Health Plan, in regard to the Julius situation. Please review. A similar subpoena has been prepared against Julius.
I want you to take a team and execute this at Caesar’s premises. Show up at the compliance deadline and get what we’re entitled to on the spot. I don’t want them to have time to hide anything.
DI Antony is executing the subpoena at Julius simultaneously. We’re not leaving anything to chance here. This is the first time we’ve used this authority and the public might be resistant, so set a precedent that these subpoenas are serious business, and we don’t expect any backtalk. The state gave us power and we’re using it.
- LC
Header:
From: [email protected] (Marcus Brutus, Deputy Inspector [HEALTH]) To: [email protected] (Livia Cleopatra, Commissioner [HEALTH]) Date: March 13, 2020, 9:41 PM Subject: Re: Caesar Subpoena
Body:
Received.
- Brutus
1
UNITED STATES DISTRICT COURT, ROMULUS
Docket No. 20-014
Caesar Health Plan, Inc., Plaintiff
v.
Livia Cleopatra, Defendant
MEMORANDUM AND ORDER
NERO, District Judge.
The facts of this case are set forth in the Record and are cited here only to the extent
necessary to describe our ruling.
Plaintiff, Caesar Health Plan (“Caesar”), brings its complaint before this court against Livia
Cleopatra (“Cleopatra”) alleging two causes of action. First, Caesar brings a civil RICO claim
under 18 U.S.C. § 1964(c) alleging that Galen induced Caesar to underwrite Glukoriza as a
treatment for Miasmic Syndrome by means of fraud. Second, Caesar has sued Cleopatra under 42
U.S.C. § 1983 claiming that Cleopatra, in her capacity as Commissioner of the Romulus Board of
Health, authorized an unconstitutional search of Caesar’s premises in violation of the Fourth and
Fourteenth Amendment. Under the RICO claim, Caesar seeks damages in the amount of all
payments made by Caesar to Galen for Glukoriza. Under the civil rights claim, Caesar seeks
damages for reputational injury and lost premiums from members who have left the Julius-Caesar
system following the suspension of Julius’s license.
2
Cleopatra filed a 12(b)(6) motion to dismiss both counts. With regards to the RICO
claim, Cleopatra argues that Caesar Health Plan lacks standing to allege a RICO violation on the
mere basis of its having reimbursed prescriptions for drugs manufactured by Galen. With regard
to the section 1983 claim, Cleopatra contends that the EMSA subpoena (and its method of
execution) were not in violation of any cognizable constitutional right. But, in the alternative,
even if a constitutional right was violated, suit should be barred under the doctrine of qualified
immunity. We have reviewed Plaintiff’s pleadings and all relevant motion papers, and now
DENY Cleopatra’s motion to dismiss on both counts.
DISCUSSION
ISSUE ONE: RICO Claim under 18 U.S.C. § 1964(c)
We find that Caesar has adequately pleaded the causation requirements under 18 U.S.C.
§ 1964(c) to substantiate its civil RICO claim, and therefore deny Cleopatra’s motion to dismiss.
Title 18 of the United States Code § 1964(c) provides that:
“any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.”
Therefore, a plaintiff bringing a civil RICO claim must additionally state an injury to
business or property and “that a RICO predicate offense ‘not only was a ‘but for’ cause of injury,
but was the proximate cause as well.’” Hemi Grp., LLC v. City of New York, 559 U.S. 1, 9 (2010)
(citing Holmes v. Sec. Inv'r Protection Corp., 503 U.S. 258, 268 (1992)). The requirement to show
proximate causation—or otherwise called, a “direct relation” requirement—under civil RICO is a
“limiting principle intended to stymie a flood of litigation, reserving recovery for those who have
been directly affected by a defendants wrongdoing.” St Luke’s Health Network, Inc. v. Lancaster
3
Gen. Hosp., 967 F.3d 295, 299 (3d Cir. 2020) (citing Holmes, 503 U.S. at 268 (“[W]e use
‘proximate cause’ to label generically the judicial tools used to limit a person's responsibility for
the consequences of that person's own acts.”)).
Additionally, the Supreme Court in Holmes articulated three practical factors to consider
in analyzing the “direct relation” requirement:
First, the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct from other, independent, factors. Second, quite apart from problems of proving factual causation, recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries. And, finally, the need to grapple with these problems is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely.
Id. at 269–70 (internal citations omitted).
The court recognizes that Holmes and its progeny do not address the exact problem at issue
here: whether third-party payors have standing to sue pharmaceutical companies for concealing a
drug’s known safety risk. However, this issue has been addressed by other courts in the nation.
See Painters & Allied Trades District Council 82 Health Care Fund v. Takeda Pharm. Co., 943
F.3d 1243, 1248 (9th Cir. 2019) (finding adequate standing for third-party payors bringing civil
RICO claims); Sidney Hillman Health Center v. Abbott Labs., 873 F.3d 574, 575 (7th Cir. 2017)
(finding insurer’s allegations insufficient to support their RICO standing); UFCW Local 1776 v.
Eli Lilly & Co., 620 F.3d 121, 123, 129 (2d Cir. 2010) (finding plaintiffs’ injuries too attenuated
because they “rest[] on the independent actions of third and even fourth parties”); In re Avandia
Marketing, Sales Practices & Product Liability Litig., 804 F.3d 633, 634 (3d Cir. 2015) (finding
third-party payors sufficiently alleged proximate cause to support their civil RICO claim).
4
In denying the motion to dismiss, we adopt the approach undertaken by the Ninth Circuit
in Painters & Allied Trades District Council 82 Health Care Fund v. Takeda Pharm. Co., 943
F.3d 1243, 1248 (9th Cir. 2019) to find that Caesar adequately alleged the element of proximate
cause to support its civil RICO claim. We find that the “decisions of prescribing physicians and
pharmacy benefit managers” do not “constitute [an] intervening cause[] that [would] sever the
chain of proximate cause between the drug manufacturer and [the third-party payor].” Id. at 1257.
Indeed, it is “foreseeable,” in the “American health care system” that while doctors prescribe the
drugs, “physicians would not be the ones paying for the drugs they prescribe[].” Id. at 1257
(quoting In re Neurontin Mktg. & Sales Practices Litig., 712 F.3d 21, 38 (1st Cir. 2013)). As was
abundantly clear to the court in Painters—and is clear here—it is third-party payors who pay for
the drugs, and an increase in a pharmaceutical company’s sale for a specific drug is only possible
once the insurance company “receive[s] payments for the additional [] prescriptions [] induced.”
Id. There is no intervening cause between Caesar’s injuries—and equally as important, the
patients’ injuries—and Galen’s inducements.6 And as the court in Painters warned:
If we were to hold the opposite—that prescribing physicians’ and pharmacy benefit managers’ decisions constitute an intervening cause to sever the chain of proximate cause—as the Second and Seventh Circuits have held, drug manufacturers would be insulated from liability for their fraudulent marketing schemes, as they could continuously hide behind prescribing physicians and pharmacy benefit managers. That is not the purpose the requirement of proximate cause is intended to serve. Proximate cause exists to “limit a person’s responsibility for the consequences of that person’s own acts.” Holmes, 503 U.S. at 268, 112 S.Ct. 1311. Here, Plaintiffs seek to hold Defendants liable for the consequences of their own acts and omissions toward Plaintiffs: the money spent by Plaintiffs to purchase Actos. Id. at 1258.
6 There is no question that a pharmaceutical company has the right to disseminate truthful and non-misleading information about its medicines. See e.g., United States v. Caronia, 703 F.3d 149 (2d Cir. 2012). Although Galen disclosed the vague possibility of side effects from the off-label administration of Glukoriza to its healthcare providers, it failed to disclose their extreme severity, as well as any data or tests that may have otherwise revealed such information.
5
Recognizing the public interest in holding Galen accountable for its actions in harming
thousands of individuals, capitalizing on the inherent fear of the global pandemic, Miasmic
Syndrome, and fraudulently inducing third-party payors into paying for Glukoriza as a “treatment”
for the disease, we see no reason to insulate Galen from its fate.
ISSUE TWO: Civil Rights Claim under 42 U.S.C. § 1983
The Court also denies Cleopatra’s motion to dismiss the section 1983 claim.
42 USC § 1983 provides that:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law.
To this plain text, the Supreme Court of the United States has added the doctrine of
qualified immunity. As the Court explained in District of Columbia v. Wesby, 138 S.Ct. 577, 589
(2018), qualified immunity is a Court-made proviso to § 1983 that relief is barred:
unless (1) [the Defendant government officer] violated a federal statutory or constitutional right, and (2) the unlawfulness of their conduct was “clearly established at the time." Reichle v. Howards, 566 U.S. 658, 664, (2012). “Clearly established" means that, at the time of the officer’s conduct, the law was “‘sufficiently clear’ that every ‘reasonable official would understand that what he is doing’” is unlawful. Ashcroft v. al-Kidd, 563 U.S. 731, 741 (2011) (quoting Anderson v. Creighton, 483 U.S. 635, 640 (1987)). In other words, existing law must have placed the constitutionality of the officer’s conduct “beyond debate.” al-Kidd, 566 U.S. at 741. This demanding standard protects “all but the plainly incompetent or those who knowingly violate the law.” Malley v. Briggs, 475 U.S. 335, 341 (1986).
This court may therefore not grant relief, and must grant the Defendant’s motion to dismiss,
unless the Court concludes that the Defendant’s actions alleged by the Plaintiff (if proven) would
constitute a violation of the Plaintiff’s legal or constitutional rights under color of state law, and
that such action was so clearly in violation of the Plaintiff’s constitutional or legal rights that the
6
Defendant was either “plainly incompetent,” or in knowing violation of the law. Upon review of
the pleadings, this court so concludes.
Fourth Amendment
Defendant Cleopatra, the Commissioner of Romulus Board of Health, ordered subpoenas
to be issued to Julius Medical Center and Caesar Health Plan according to her authority under PCL
§ 18.8.891. Armed agents of the Board served the subpoena on Caesar at precisely 8AM on the
morning of March 16th, 2020.7 In any event, it is undisputed that by the time Caesar’s attorneys
arrived, the Board’s agents had seized from Caesar not just the materials actually subpoenaed, but
all insurance claims and supporting medical data it had received in relation to Julius patients, going
back to May 1, 2019. We now consider whether this search violated the Fourth Amendment.
The Fourth Amendment to the Constitution states that:
“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
The Supreme Court has repeatedly held that “searches conducted outside the judicial process,
without prior approval by a judge or a magistrate judge, are per se unreasonable . . . subject only
to a few specifically established and well-delineated exceptions.” City of Los Angeles v. Patel, 135
7 The parties have stipulated that a similar subpoena was simultaneously served on Julius, and that Julius’s staff refused to comply and called for their attorneys. Julius’s attorneys are said to have demanded a hearing on the validity of the subpoena. The Board’s agents left without searching Julius Medical Center or collecting any records, and no evidence has been presented that any action was taken against Julius Medical Center in response. The subpoena issued against Julius is not in evidence, nor does the record reflect what sort of hearing Julius’s attorneys demanded, but the Court notes that PCL § 18.891(e) provides an avenue to appeal an EMSA subpoena to the full Board, and a safe harbor for refusal to comply during the pendency of such an appeal.
7
S.Ct. 2443, 2452 (2015), quoting Arizona v. Gant, 556 U.S. 332, 338 (2009) and Katz v. United
States, 389 U.S. 347, 357 (1967) (internal quotes omitted). “This rule applies to commercial
premises as well as to homes.” Id. (quoting Marshall v. Barlow's, Inc., 436 U.S. 307, 312, (1978)
(internal quotes omitted)).
A warrantless search performed pursuant to statutory authority may be reasonable where
two conditions are met. First, “special needs” must “make the warrant and probable-cause
requirement impracticable.” Id. (quoting Skinner v. Railway Labor Executives' Ass'n, 489 U.S.
602, 619 (internal quotes omitted)). Second, the “primary purpose of the searches” must be
“distinguishable from the general interest in crime control." Id. (quoting Indianapolis v. Edmond,
531 U.S. 32, 44 (2000)). Third, while “administrative searches” conducted under such conditions
may sometimes be reasonable, “the subject of the search must be afforded an opportunity to obtain
precompliance review before a neutral decisionmaker” unless another exception applies. Id. (citing
See v. City of Seattle, 387 U.S. 541, 545 (1967) and Donovan v. Lone Steer, Inc., 464 U.S. 408,
415 (1984)). Where such precompliance review is not afforded the target, and no other exception
applies, the search violates the Fourth Amendment. Id. at 2456-57. The court will refer to this
three part requirement as “the Patel rule.”
This court will address the second factor first, because it can be most easily answered. The
Board’s subpoena was clearly designed as part of a valid public purpose and not for the general
purpose of detecting crime. The Board is responsible for regulating hospitals, for determining
whether each hospital offers appropriate care for Miasmic Syndrome, and to either bring hospitals
not providing such care into compliance or to shut them down so the public can seek care
elsewhere. It was empowered to issue EMSA subpoenas to serve precisely that purpose.
8
No one has alleged to this court that the Board sought anything from Caesar, other than
evidence it needed as part of its valid licensure investigation of Julius Medical Center. At least as
to its intent, this subpoena falls well into the safe harbor for administrative investigations
established by cases like Skinner, 489 U.S. 602 (drug test of railroad employees involved in
accidents, to improve railroad safety), Donovan v. Lone Steer Inc., 464 U.S. 408 (1984) (subpoena
for employee records, to improve compliance with Fair Labor Standards Act), and Donovan v.
Dewey, 452 U.S. 594 (1981) (random mine inspections to ensure mine safety). This court does not
disagree with the principle that “[t]he need for preventive action is great, and city after city has
seen this need and granted the power of inspection to its health officials; and these inspections are
apparently welcomed by all but an insignificant few.” Frank v. Maryland, 359 U.S. 360, 372
(1959) (overruled on other grounds by Camara v. Municipal Court of City and County of San
Francisco, 387 U.S. 523 (1967)).
In this case, the analysis of the first Patel factor follows the second. The first factor requires
a “special need[], beyond the normal need for law enforcement, [which] makes the warrant and
probable cause requirement impracticable.” Patel, 135 S.Ct. at 2452 (quoting Skinner, 489 U.S. at
619). The key fact in play is that these inspections are sought for purposes of ensuring health and
safety, rather than for criminal enforcement. In order to sanction a hospital, the Board is not
required to make a finding beyond a reasonable doubt. In fact, its rulings are purely discretionary,
according to the Board’s determination of what outcome would best serve the public health. See
PCL § 18.8.500. It would be unreasonable and unproductive to require that the Board have
evidence that a crime was committed, before it could conduct an inspection to determine the needs
of public health. In principle, to this point, a regime of searches by subpoena rather than warrant
might be approvable.
9
The Board’s subpoena manifestly failed to comply with the third Patel factor: that Caesar
be given an opportunity for precompliance review. The Board’s agents descended upon Caesar the
morning of March 19, 2020, demanding immediate delivery of a massive cache of data and
threatening jail to anyone who failed to comply.8 This is, almost precisely, Patel all over again. In
Patel, the Court prohibited warrantless on-the-spot searches of hotel registers, because “a hotel
owner who refuses to give an officer access to his or her registry can be arrested on the spot. The
Court has held that business owners cannot reasonably be put to this kind of choice.” Patel, 123
S.Ct. at 2452 (citing Camara, 387 U.S. at 533).
The Court does note the existence of PCL § 18.8.891(e), granting the target of a subpoena
the right to appeal such subpoena to the full Board of Health. This avenue of “review” is
constitutionally meaningless. The subpoena was issued under the legal authority of the Board,
whose agents enforced it. While perhaps PCL § 18.8.891(e) allows the full Board to serve as a
check on its own Commissioner, the active question is who serves as a check on the Board? Patel
requires recourse to a “neutral decisionmaker.” Patel, 123 S.Ct. at 2452. The Board, whose interest
is in collecting as much evidence as it can for use in its enforcement activities, is not “neutral.”
Even if PCL § 18.8.891(e) were to be considered an avenue of precompliance review,
Cleopatra took care in her drafting of the Caesar subpoena to avoid mentioning it. The subpoena
describes two potential outcomes: immediate compliance—as of the instant the subpoena was
delivered—or, “illegal interference,” a “criminal offense”. What “interference” is “illegal”, under
what law? Neither EMSA nor any other part of the Board of Health’s enabling legislation appear
8 This court will not call such compliance “voluntary,” when viewed in the light most favorable to the plaintiff, as the Board’s agents are alleged to have threatened jail time for anyone who failed to cooperate. The text of the subpoena itself appears to substantiate such a threat, in its statement that “Illegally interfering with the execution of this legally-authorized collection of information is a criminal offence.” Subpoena, Exhibit 1.
10
to grant Board agents the authority to make arrests. Under PCL § 30.50.120, resistance to the
Board’s subpoena could theoretically be predicate to a charge of Obstruction of Investigation –
and since the statutes do not cross-reference each other, we do not know whether such charge
would also be withheld during the PCL § 18.8.891(e) safe harbor period. No evidence strictly
shows that Cleopatra ordered the threat of jail time, but the ominously-worded subpoena and the
order to “set a precedent that these subpoenas are serious business”, Appx. C, guided the agents’
enforcement.
If this case were being decided pre-Patel, the Court might need to rely more heavily on the
line of “pervasively regulated industry” cases culminating in New York v. Burger, 482 U.S. 691
(1987). Concisely, the Burger rule states that when a particular industry is pervasively regulated,
“where the privacy interests of the owner are weakened and the government interests in regulating
particular businesses are concomitantly heightened, a warrantless inspection of commercial
premises may well be reasonable within the meaning of the Fourth Amendment.” Burger, 482 U.S.
at 702. The Patel court cautioned against extending the rule to new contexts, stating that “[o]ver
the past 45 years, the Court has identified only four industries that have such a history of
government oversight that no reasonable expectation of privacy could exist for a proprietor over
the stock of such an enterprise,” those being liquor sales, firearms sales, mining, and auto junking.
123 S.Ct. at 2454. Considering the veritable forest of medical privacy safeguards present in federal
law9 and every state, it strains credulity that a custodian of patient medical records might
reasonably consider itself subject to “weakened privacy interests.”
9 See, e.g., the Health Insurance Portability and Accountability Act Privacy and Security rules, codified at 45 CFR Parts 160, 162, and 164.
11
We need not delve too deeply into that analysis, because even if Caesar were operating in
a “closely regulated industry,” Burger would only legitimate a warrantless search of their premises
in the event that three criteria were met:
1. First, there must be a substantial government interest that informs the regulatory scheme pursuant to which the inspection is made.
2. Second, the warrantless inspections must be necessary to further the regulatory scheme.
3. The statute's inspection program, in terms of the certainty and regularity of its application, must provide a constitutionally adequate substitute for a warrant.
482 U.S. at 702-703 (internal quotes omitted).
The first and second Burger factors can be derived from a mix-and-match of the first two
Patel factors: That 1) special needs must make the warrant and probable-cause requirement
impracticable; and, 2) that the primary purpose of the searches must be distinguishable from the
general interest in crime control. By comparison, a warrantless search might be prohibited under
Patel but allowed under Burger, if no allowance for precompliance review was made, but some
other “constitutionally adequate substitute for a warrant” was present. Under Burger, an
administrative search’s authorizing statute would serve that purpose if it “advise[s] the owner of
the commercial premises that the search is being made pursuant to the law and has a properly
defined scope, and it must limit the discretion of the inspecting officers.” Burger, 482 U.S. 703
(citing Marshall v. Barlow's, Inc., 436 U.S. 307, 323 (1987)). “To perform this first function, the
statute must be sufficiently comprehensive and defined that the owner of commercial property
cannot help but be aware that his property will be subject to periodic inspections undertaken for
specific purposes.” Id. (citing Donovan v. Dewey, 452 U.S. 594, 600 (1981)). But where a statute
authorizing warrantless search has a reach is so broad that it may allow warrantless search against
nearly anyone, rather than “only to a single industry, where regulations [are] . . . already . . .
pervasive,” this logic does not apply. See Marshall, 436 U.S. at 321.
12
In the instant case:
1. The relevant statute authorizes searches by the Board of Health, which generally regulates hospitals and not insurance companies,
2. The instant search was conducted against an insurance company, which had no reason to know how far the scope of the Board’s authority runs,
3. The relevant statute authorizes nearly unlimited searches, as long as they are “require[d] in order to determine if a licensed Hospital is providing substandard care for Miasmic Syndrome” (PCL § 18.8.891(b)),
4. The instant subpoena made full use of the statute’s broad authority, asking for “all records related to medical care at Julius Medical Center” within a certain timeframe, with only vaguely specified search boundaries; and,
5. To illustrate exactly how porous the limits on the Board’s search authorities appear to be, the Board’s agents walked off with a haul of data that actually exceeded the search authorized under the subpoena.
This was not the case of a mining inspector inspecting a mine pursuant to well-established
mine inspection rules. See generally Dewey, 452 U.S. 594. This is not the case of a treasury agent
inspecting a gun store’s gun inventory pursuant to well-established rules regarding the inspection
of interstate firearm sales. See generally U.S. v. Biswell, 406 U.S. 311 (1972). This is the case of
a regulator illegally searching a business that had no reason to know it was being regulated, how
those regulations worked, or what would happen if it did not comply.
Qualified Immunity
Having found that the EMSA subpoena violated Caesar’s Fourth Amendment rights, this
court would nonetheless be compelled to dismiss this case if the doctrine of Qualified Immunity
protected Cleopatra. As noted supra, Qualified Immunity presents a mighty aegis shield over the
heads of governmental wrongdoers, shielding them from § 1983 liability when they “violated a
federal statutory or constitutional right” unless a court finds that, at the time the wrongdoing was
committed, “the unlawfulness of their conduct was ‘clearly established at the time’” and “the
constitutionality of the officer’s conduct [was] ‘beyond debate.’” Wesby, 138 S.Ct. 577 at 589. In
other words, a plaintiff may receive no recompense against a person who merely violates their
13
constitutional rights: only “the plainly incompetent or those who knowingly violate the law” may
be held responsible. Id. Or, as another federal judge succinctly and accurately described the
binding precedent we work under, “public officials duck consequences for bad behavior— no
matter how palpably unreasonable— as long as they were the first to behave badly.” Zadeh v.
Robinson, 928 F.3d 457, 479 (5th Cir. 2019) (Willett, J., dissenting).
As described in Section II.B. of this opinion, supra, the first Wesby factor is satisfied
because the issuance of the subpoena did in fact violate Caesar’s rights under the Fourth
Amendment. The second factor thus comes into play – was this right “clearly established” as of
March 13th, 2020? The court finds that it was.
In the opinion of this court, it is dispositive that Patel was decided in 2015, the EMSA was
enacted in 2019, and the instant subpoena was written and executed in 2020. Patel stated
unambiguously that “the subject of the search must be afforded an opportunity to obtain
precompliance review before a neutral decisionmaker.” Patel, 135 S.Ct. at 2452. Such opportunity
was not offered. Even to the extent that recourse to the full Board may have technically been
available under PCL §18.8.891(e)—and this court remains dubious that such recourse would have
been sufficient—Cleopatra wrote and enforced the instant subpoena in a manner that Caesar could
not have known about that recourse. Precisely as in Patel, Caesar’s employees on the ground were
given the choice between compliance and jail. “The Court has held that business owners cannot
reasonably be put to this kind of choice.” Patel, 135 S.Ct. at 2452.
The Court acknowledges that in Patel, the hotel owners subject to warrantless search
agreed that they would not have objected to searches conducted pursuant to administrative
subpoena. Id. at 2453. This has no effect on the instant case because the “administrative
subpoenas” considered in Patel would have been legally proper administrative subpoenas:
14
In those instances, however, where a subpoenaed hotel operator believes that an attempted search is motivated by illicit purposes, respondents suggest it would be sufficient if he or she could move to quash the subpoena before any search takes place. A neutral decisionmaker, including an administrative law judge, would then review the subpoenaed party's objections before deciding whether the subpoena is enforceable.
Id. at 2453. The concession that would have satisfied the Patel hotels is the very same concession
that would have rendered the Patel search legal: The opportunity for independent review.
Patel was not vague, nor did it impose any draconian rule against government officials. It
acknowledged that warrantless searches could still reasonably conducted without precompliance
review in the event in exigent circumstances. In this instance, it is alleged that a week went by
between Cleopatra becoming aware of allegations against Caesar and her decision to write out a
subpoena, and another week went by between her issuance of the subpoena and the Board’s agents’
execution of a search. Cleopatra explicitly instructed her agents not to execute the subpoena until
the following week. That week could have been spent seeking a warrant, or else the Board could
have noticed Caesar of the subpoena a week in advance and given them a chance to seek review.
Cleopatra chose to execute the subpoena as a surprise not because she had to, but because she
wanted to. Nor could the search have reasonably be considered “with consent,” when Caesar’s
staff originally stood in the Board inspectors’ path and stood aside only when threatened with
arrest. If any other exception applies, this court has been unable to find it.
Any government official familiar with Patel would have recognized that a warrantless
search, conducted without exigency, consent, or recourse to independent third party review, was a
violation of the United States Constitution. All government officials had five years to educate
themselves on the fact that the United States Constitution prohibited such searches, between the
decision of Patel in 2015 and the instant search in 2020. Cleopatra either declined to so educate
herself, or did so educate herself and proceeded to ignore the lesson. Which one happened is
15
irrelevant, because Qualified Immunity is an objective test. A reasonable, law-abiding person in
Cleopatra’s shoes would not have authorized this unconstitutional raid. Cleopatra, allegedly, did.
Qualified Immunity will not shield her from the consequences.
CONCLUSION
The motion to dismiss is DENIED on both claims.
16
UNITED STATES COURT OF APPEALS, FOURTEENTH CIRCUIT
Docket No. 20-099
Livia Cleopatra, Defendant-Appellant
v.
Caesar Health Plan, Inc., Plaintiff-Appellee
BEFORE SULLA, C.J., CATO, and CICERO, JJ.
OPINION
SULLA, Chief Judge.
For the reasons set forth below, the memorandum and order of the United States District
Court for District of Romulus is REVERSED as to both claims. This case is REMANDED to
the court below for further proceedings not inconsistent with this decision.
RELEVANT BACKGROUND
The facts of this case are set forth in the Record on Appeal and are cited here only to the
extent necessary to describe our ruling.
The United States and the state of Romulus are in the midst of a global pandemic. As of
today’s date, Miasmic Syndrome has infected millions across the world. The disease has no known
cure and science about the virus that causes the disease is still in its infancy. Across the world,
healthcare companies are rushing to find a cure (or at the very least, a vaccine) that would curb the
spread of the disease. Today, we deal with the aftermath of a pharmaceutical disaster.
17
The drug Glukoriza was developed years before the Miasmic Syndrome reared its ugly
head in our world. Approved initially as cancer medication, the nation of Alexandria soon
discovered that an increased dose of Glukoriza was capable of hastening patients’ recovery time
and reducing the fatality rate of Miasmic Syndrome. Based on the overwhelming success of
several clinical trials in Alexandria, Galen Research—an American pharmaceutical company—
began mass producing Glukoriza in the United States and encouraging physicians across the
country to prescribe its administration to treat and cure Miasmic Syndrome. Unfortunately,
Glukoriza’s success was short-lived. After nearly 10,000 prescriptions filled at Julius alone, it was
revealed not only that Glukoriza’s ability to cure Miasmic Syndrome was mostly a fluke—and
indeed, part of a greater fraudulent marketing campaign based on results of inadequate clinical
testing—but the administration of the drug also created substantial side effects—including death—
to a substantial number of patients receiving the drug.
Acknowledging the disastrous side effects of Glukoriza, the Romulus legislature passed
the Emergency Miasmic Syndrome Act (“EMSA”), carrying with it a series of regulations
prohibiting medical providers from prescribing the drug (and other related “miracle drugs”) and
enforcing this prohibition through administrative searches of medical offices. There are two issues
before us today. The first stems, in part, from an administrative subpoena under the EMSA issued
to search through the offices of Julius and Caesar, looking for evidence demonstrating violations
of the act (and otherwise prescribing Glukoriza or similar drugs to patients of Julius Medical
Center). The Appellant-Defendant, Livia Cleopatra (“Cleopatra”), was the Commissioner of the
Board of Health and caused the subpoena to be served. The second is based on Caesar’s allegation
that Cleopatra, in her capacity as sole proprietor of Galen Research, induced Appellee-Defendant,
18
Caesar Health Plan, Inc. (“Caesar”) to underwrite Glukoriza as a treatment for Miasmic Syndrome
by means of fraud.
Cleopatra filed a 12(b)(6) motion to dismiss both counts, based on Caesar’s lack of standing
to allege a civil RICO violation; and on the fact that the subpoena (and its method of execution)
were not in violation of any cognizable constitutional right, and even if it were, the suit should be
barred under the doctrine of qualified immunity.
The district court denied Cleopatra’s motion to dismiss in its entirety. The district court
found that Casesar, as third-party payor, had sufficient standing under § 1964(c) to bring a claim
against Cleopatra. Moreover, the district court found that the EMSA subpoena and its method of
execution were in such clear violation of the Fourth Amendment that even qualified immunity
could not protect Cleopatra’s from liability. This appeal followed. We disagree and reverse the
decision of the district court.
We review de novo the district’s court denial of a Rule 12(b)(6) motion to dismiss, and
take all of Plaintiff’s factual allegations as true.10
ISSUE ONE: RICO Claim under 18 U.S.C. § 1964(c)
Caesar argues that Galen conspired to commit mail and wire fraud under 18 U.S.C. §§
1341, 1343 by intentionally misleading physicians, consumers, and third-party payors to believe
that Glukoriza would adequately cure Miasmic Syndrome. Although the RICO statute was
originally enacted to combat organized crime, it has “become a tool for everyday fraud cases
brought against respected and legitimate enterprises.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479
(1984) (internal quotations marks omitted). Standing under civil RICO is defined under 18 U.S.C.
10 The district court has certified its judgment denying Cleopatra’s motion to dismiss for immediate interlocutory appeal. The matter is otherwise appropriate for resolution by this Court.
19
§ 1964(c). The district court denied Cleopatra’s motion to dismiss alleging Caesar’s lack of
standing to allege a RICO violation on the basis of it having reimbursed prescription drugs
manufactured by Galen. On that basis, we address the RICO claim.
The civil damages provision of RICO provides that “[a]ny person injured in his business
or property by reason of a violation of section 1962 of this chapter may sue therefor ... and shall
recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's
fee.” 18 U.S.C. § 1964(c). To allege civil RICO standing, a plaintiff must show “(1) that his
alleged harm qualifies as injury to his business or property; and (2) that his harm was ‘by reason
of’ the RICO violation.” Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008).
Cleopatra, in her capacity as sole proprietor of Galen Pharmaceuticals, does not dispute that Caesar
has alleged an injury to its business or property. Indeed, over 15,000 patients have dropped their
membership in the Julius-Caesar integrated system. Rather, Cleopatra argues that Caesar has failed
to allege that its harm was “by reason of” the alleged RICO violation because it failed to allege the
claimed RICO violation was the proximate cause of their claimed losses. We agree.
Our RICO causation analysis is controlled primarily by Holmes v. Securities Investor
Protection Corp., 503 U.S. 258 (1992) and its progeny. In Holmes, the Supreme Court held that
the civil RICO provision, “by reason of” contains both a but-for causation requirement, and a
proximate causation requirement. Therefore, even where the harm is plainly foreseeable, our
inquiry does not end there; we must also ask “the central question”: “whether the alleged violation
led directly to the plaintiff's injuries.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006).
The motivating principles behind this need for “some direct relation between the injury asserted
and the injurious conduct alleged” include three factors expressed in Holmes: 1) the difficulty in
ascertaining damages caused by remote actions; 2) the risk of duplicative recoveries; and 3) the
20
prospect that more immediate victims of an alleged RICO violation can be expected to pursue their
own claims. Holmes, 503 U.S. at 269–70, 112 S. Ct. 1311. Any link that is “too remote,” “purely
contingent,” or “indirect[t]” is insufficient. Hemi Grp, LLC v. City of New York, 130 S. Ct. 983,
989 (2010).
Today, we have difficulty extending the doctrine of proximate causation to encompass the
injuries suffered by Caesar Health Plan in underwriting prescriptions for Glukoriza, without
violating the principle that any link between Caesar’s injuries and Galen’s conduct should not be
“too remote’ and indirect. The court does not downplay the seriousness of Caesar’s injuries—and
the injuries to others from the side effects of off-label prescription medication and allegedly
inadequate clinical trials. But the question before us is not, “are the injuries sufficiently harrowing
to justify RICO liability”—but rather were Galen’s actions the direct cause of the injuries that
occurred to Caesar, as a third-party payor.
While the U.S. Food and Drug Administration may approve of the use of certain
medication to treat one conditions, physicians—using their years of medical expertise and
experience—are free to prescribe the same medication to treat other, sometimes unrelated,
conditions—called “off-label” use. And third-party payors, like Caesar Health Plan, are free to
underwrite such prescriptions in order to maintain the relationships they have with the prescribing
physicians and medical service providers. But it is the responsibility of the physicians to determine
the efficacy and health-benefits for such off-label prescriptions, based on their independent
assessment of the patient, the medication, and review of any clinical research or test trials
conducted by the pharmaceutical companies.
It makes sense, then, that medical providers can be held accountable for any
misrepresentations made by the pharmaceutical company—indeed, it is their job, as healthcare
21
providers, to provide adequate healthcare to their patients based on their years of medical training
and experience.11 And third-party payors and insurance companies should be free to rely on the
prescribing physicians to make informed decisions about which drugs to prescribe.
This court cannot justify holding insurance companies and other third-party payors
responsible for improper representations made by drug manufacturers to physicians about the
efficacy of drug prescriptions. That form of liability is several levels removed in the causal
sequence of the injury calculus. These entities, like Caesar, play no role in making any formulary
determinations as to treatment, and rely exclusively on each member to submit claims for
medications that are reasonable and necessary for treatment; at most, Caesar negotiates prices they
pay for drugs like Glukoriza. See UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121, 134 (2d
Cir. 2010) (finding chain of causation too “attenuated” where TPPs did not “allege that they relied
on Lilly's misrepresentations” but rather that Lilly directed its misrepresentations at doctors
prescribing the drug at issue because “only the TPPs were in a position to negotiate the price paid
for Zyprexa” and so “the only reliance that might show proximate causation with respect to price
is reliance by the TPPs, not reliance by the doctors”); United Food & Commercial Workers Cent.
Penn. & Reg'l Health & Welfare Fund v. Amgen, Inc., 400 Fed. App’x. 255, 257 (9th Cir. 2010)
(TPPs failed to plead proximate causation linking alleged misconduct to alleged injury where it
depended on “an attenuated causal chain that involved at least four independent links,” including
doctors’ decisions to prescribe drug for off-label uses); Bristol Myers Squibb Co., 969 F.Supp.2d
at 475 (“Between Defendants' alleged misleading marketing and Plaintiffs' prescription
11 There is no question that pharmaceutical companies may be liable for misrepresentations it made to physicians.
22
reimbursements lies a vast array of intervening events, including the ‘independent medical
judgment’ of doctors.” (citation omitted)).
If, for example, Galen had made these representations to Caesar (thereby putting Caesar
on notice of potential wrongdoing or, at the very least, the results of inadequate clinical testing),
that could satisfy the proximate causation requirement. But as it stands, the only misrepresentations
were made (if they were made at all) to physicians at Julius Medical center.
We do recognize that there is a circuit split as to this very issue of proximate cause. Caesar,
and the court below, rely primarily on the analysis of the Ninth Circuit in Painters & Allied Trades
District Council 82 Health Care Fund v. Takeda Pharm. Co., 943 F.3d 1243, 1248 (9th Cir. 2019).
In Painters, defendants, Takeda Pharmaceuticals, were alleged to have actively misled doctors,
consumers, and insurance companies into believing that Actos, a drug intended to lower blood
sugar in type 2 diabetes, did not increase a person’s risk of developing bladder cancer. Plaintiffs,
Painters Fund, were third-party payors of health and welfare benefits who reimbursed its members’
claims for drugs. Defendants disputed Plaintiff’s standing based on the “direct relation”
requirement for civil RICO claims. In siding with the Plaintiff, the Ninth Circuit found that
Plaintiff’s allegations satisfied the proximate cause requirements because Plaintiffs were
“immediate victims of Defendants alleged fraudulent scheme to conceal Actos’s risk of bladder
cancer,” there was “no risk that plaintiffs will receive overlapping economic and personal injury
damages,” and “holding Defendants liable for Plaintiffs’ alleged injuries advance[d] the interest in
determining injurious conduct.” Id. at 1252.
The Ninth Circuit’s conclusory analysis in Painters does not do justice to the situation at
hand. To begin, there is an inherent difficulty a district court would have in ascertaining the extent
of Caesar’s damages directly attributable to Galen. Moreover, there is a major risk of multiple
23
recoveries by Caesar stemming from the exact same conduct—Galen’s alleged misrepresentations.
For each patient alleging injuries, Galen would be required to pay (1) the patient for its direct
misrepresentation; (2) the physicians, for prescribing the medication based on this
misrepresentation; and (3) the third-party payor, who paid for the physician to prescribe the
misrepresented medication to the patient. As it abundantly clear, the damages suffered by patients,
the Caesar, and Julius “overlap,” Painters, 943 F.3d at 1252, failing the second Holmes factor. See
Holmes, 503 U.S. at 269 (“Second, quite apart from problems of proving factual causation,
recognizing claims of the indirectly injured would force courts to adopt complicated rules
apportioning damages among plaintiffs removed at different levels of injury from the violative
acts, to obviate the risk of multiple recoveries.”). And related to the high risk of overlapping
injuries, we can “count” on other “more directly injured victims” to hold Galen liable for its
actions. Painters, 943 F.3d at 1252. It is for this reason this court adopts the approach of the
Second Circuit in UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010). As the
Second Circuit correctly points out, third party payors do not generally rely on the
pharmaceutical’s actual misrepresentations—“the misrepresentations [] [are] directed through
mailings and otherwise at doctors,” and third party payors are merely put “in a position to negotiate
the price paid” for the medication.” Id. at 134.
For these reasons, we reverse the district court’s denial of Caesar’s motion to dismiss based
on RICO standing.
ISSUE TWO: Civil Rights Claim under 42 U.S.C. § 1983
Cleopatra’s motion to dismiss Caesar’s 42 USC § 1983 claim on grounds of Qualified
Immunity may be more simply disposed of. The decision below accurately states that the
24
controlling standard is set under District of Columbia v. Wesby, 138 S.Ct. 577 (2018). That core
applicable standard is best quoted in full:
[O]fficers are entitled to qualified immunity under § 1983 unless (1) they violated a federal statutory or constitutional right, and (2) the unlawfulness of their conduct was clearly established at the time. “Clearly established” means that, at the time of the officer’s conduct, the law was sufficiently clear that every reasonable official would understand that what he is doing is unlawful. In other words, existing law must have placed the constitutionality of the officer’s conduct beyond debate. This demanding standard protects all but the plainly incompetent or those who knowingly violate the law.
The “clearly established” standard also requires that the legal principle clearly prohibit the officer’s conduct in the particular circumstances before him. The rule’s contours must be so well defined that it is clear to a reasonable officer that his conduct was unlawful in the situation he confronted. This requires a high degree of specificity. ...[C]ourts must not define clearly established law at a high level of generality, since doing so avoids the crucial question whether the official acted reasonably in the particular circumstances that he or she faced. A rule is too general if the unlawfulness of the officer’s conduct does not follow immediately from the conclusion that the rule was firmly established.
138 S.Ct. at 589 (internal quotes omitted).
It follows from the statement above that Qualified Immunity will generally not apply in a
case of first impression. “[W]here an official's duties legitimately require action in which clearly
established rights are not implicated, the public interest may be better served by action taken ‘with
independence and without fear of consequences.’” Harlow v. Fitzgerald, 457 U.S. 800, 819 (1982)
(quoting Pierson v. Ray, 386 U.S. 547, 554 (1967)). And it should be considered a case of first
impression where the type of facts or controlling legal law in play has never been before
adjudicated:
For example, the right to due process of law is quite clearly established by the Due Process Clause, and thus there is a sense in which any action that violates that Clause (no matter how unclear it may be that the particular action is a violation) violates a clearly established right. Much the same could be said of any other constitutional or statutory violation. But if the test of ‘clearly established law’ were to be applied at this level of generality, it would bear no relationship to the ‘objective legal reasonableness’ that is the touchstone of Harlow. Plaintiffs would
25
be able to convert the rule of qualified immunity that our cases plainly establish into a rule of virtually unqualified liability simply by alleging violation of extremely abstract rights.
Anderson v. Creighton, 483 U.S. 635, 639-40 (1987).
The instant case involves a plethora of unknowns and untested authorities. The EMSA,
which authorized the subpoena in question, is barely a year old. The evidence suggests the
subpoena in question was actually the first one ever issued. At the very least, it is the first one to
be litigated. No cases in this circuit have analyzed a similar law. We are unfamiliar with any cases
in this circuit or in the Supreme Court that involve a warrantless search of an insurance company
for medical records pertaining to a hospital as authorized by a statute in response to a pandemic.
We are unfamiliar with any cases in this circuit or the Supreme Court involving a warrantless
search of an insurance company, OR of a hospital, OR for medical records, OR as necessitated by
a pandemic. The fact that the Supreme Court has opined on other statutes authorizing other types
of searches for other reasons cannot be found to “clearly prohibit the officer’s conduct in the
particular circumstances before [her],” such that this court could confidently state that only a
person who is “plainly incompetent” or “knowingly violat[ing] the law,” could possibly have made
the same decisions that Appellant did. City of Los Angeles v. Patel, 135 S.Ct. 2443 (2015), so
heavily relied upon by the court below, was a case about hotels and warrantless searches without
subpoena. It does not speak to the instant case.
A reasonable officer in the Appellant’s position could have believed that EMSA subpoenas
were inherently exigent, because they are necessary to combat an ongoing pandemic. No
controlling court has found otherwise. A reasonable officer could have believed that in this
particular situation, an exigency applies because each day that went by meant more people were
receiving dangerously improper care. No court has found otherwise. See Patel, 135 S.Ct. at 2454
26
n.4 (listing cases where otherwise illegal administrative searches would be legitimated by
exigency). A reasonable officer may have believed that hospitals, or at the very least hospitals
providing treatment for pandemic disease, were “closely regulated” and subject to the Burger rule.
No controlling court has found otherwise. See, e.g., Zadeh v. Robinson, 928 F.3d 457 (5th Cir.
2019) (finding that even if Pain Clinics are not a closely regulated industry, a reasonable official
might have believed they were). A reasonable officer certainly may have believed that the EMSA,
which is limited in application only to entities which hold information relevant to Miasmic
Syndrome, only allows search for such information, and only allows search subject to duly
authorized subpoena, provided a “a constitutionally adequate substitute for a warrant” as required
by Burger, 482 U.S. at 703. No controlling court has found otherwise. And a reasonable official
may have believed that the subpoena recipient’s recourse to the full Board under PCL § 18.8.891(e)
constituted “an opportunity to obtain precompliance review before a neutral decisionmaker.” See
Patel, 135 S.Ct at 2452. No controlling court has found otherwise.
We could go on, but it is not necessary. Never before has this particular confluence of fact
and law appeared before this court, nor before the Supreme Court. This court is called upon today
to decide one thing—whether or not suit under 42 USC § 1983 may properly proceed through a
claim of Qualified Immunity against Appellant Livia Cleopatra, on account of the subpoena she
authorized as Commissioner of the Romulus Board of Health against Caesar Health Plan. Because
Appellant had no explicit and uncontrovertable warning against taking such action, “sufficiently
clear that every reasonable official would understand that what he is doing is unlawful,” Wesby,
138 S.Ct. at 589, we hold that it may not. The decision of the District Court is REVERSED, and
the motion to dismiss the Caesar’s claim under 42 USC § 1983 should be GRANTED.
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OPINION CONCURRING IN THE JUDGMENT BY CICERO, J.
I join the panel’s opinion in full, because it is necessitated by the law as it stands. I write
separately to note that at no point did the panel adjudicate whether Caesar Health Plan’s Fourth
Amendment rights were or were not violated. Nor was the panel required to do so. Such cases may
be disposed of on a finding that the law was not “clearly established,” without any requirement
that the court decide what the law is. Pearson v. Callahan, 555 U.S. 223, 227 (2009). And, quite
reasonably, a court will not decide a question unnecessary to the disposition of the case.
This regime is not working. The instant case leaves the Romulus Board of Health still
uncertain whether EMSA subpoenas are constitutional. It leaves other Romulus institutions
uncertain whether or not to comply with or fight other EMSA subpoenas they may face in the
future. It leaves Caesar uncompensated for its constitutional harms, and indeed uncertain whether
it suffered any. And it fails to inform other government officers and entities how to behave in the
future, when other laws are applied to other situations. It fails, in short, to do all the things a federal
Court of Appeals decision should do and that failure is a natural result of the regime of Qualified
Immunity we currently labor under.
It is not within this court’s power or duty to usurp the Supreme Court of the United States,
and I will not do so. But it is within the power of the Supreme Court to modify, or entirely upend,
the way in which we adjudicate claims of Qualified Immunity. Were it to do so in this case, our
result may be quite different.
CONCLUSION
The trial court is REVERSED as to both issues with instructions that the matter is
REMANDED for proceedings not inconsistent with this decision.
1
SUPREME COURT OF THE UNITED STATES October Term 2020
----- Docket No. 2020-01
-----
Caesar Health Plan, Inc., Petitioners,
v.
Livia Cleopatra, Respondents.
Petition for certiorari is GRANTED. The Court certifies the following questions:
1. Is the proximate cause element of a civil RICO matter satisfied (and therefore, standing
conferred) where Caesar Health Plan, as third-party payor, alleges that they would not
have underwritten a prescription for Glukoriza as a treatment for Miasmic Syndrome if
Galen had not misrepresented the safety risks to prescribers?
2. Does a state government official who orders the warrantless search of medical records
from a health insurance company violate the Fourth Amendment, where such search is
conducted pursuant to a state statute which does not authorize precompliance review
before a judicial entity? If so, is the official protected from liability under 42 U.S.C. §
1983 by the doctrine of Qualified Immunity?