We've blogged numerous times about the tentative, non-final, and informal status of FDA warning letters (and untitled letters and similar enforcement precursors like Form 483s). We've cited precedent, FDA internal manuals, FDA's own position taken in formal briefing, and learned treatises on FDA law. That an FDA warning letter has no binding legal effect (indeed, they are not even reviewed by FDA's lawyers before they are issued) has seemingly been answered authoritatively over and over again. Yet, still we see goofy results like this:
Defendant moves to exclude any evidence, including expert testimony, regarding the [FDA] Form 483,  Warning Letter, and [second] Form 483 arguing the evidence is irrelevant and that any probative value is exceeded by unfair prejudice to Defendant. The Court disagrees. All three documents relate to the [product plaintiff] was [using], and they are relevant to whether Defendant complied with federal regulations regarding product complaints and implementation of corrective and preventative action. Moreover, the documents are relevant to when and whether the [product performed appropriately].
In addition, the Court finds that the probative value of [these three documents] outweighs any prejudice to the Defendant.
Godelia v. Zoll Services, LLC, 2019 WL 3883682, at *3 (S.D. Fla. Aug. 16, 2019). No citations omitted – the decision didn't bother to cite anything for its result.
Perhaps we need to go further. Maybe the problem here is that pro-plaintiff judges ignore the FDA law because it isn't binding on them. We've pretty much beaten the FDA law to death, so it could be time to look elsewhere. Interestingly, we found the following in a case decided only three days after Godelia:
As stressed by Defendants, it is well-established that an "investigation that has not resulted in charges or any finding of wrongdoing does not support an inference of scienter." In re Hertz Global Holdings, Inc. Securities Litigation, 2017 WL 1536223, at *17 n.6 (D.N.J. April 27, 2017) (citing Brophy v. Jiangbo Pharmaceuticals, Inc., 781 F.3d 1296, 1304 (11th Cir. 2015) ("The 'mere existence of an SEC investigation' likewise does not equip a reviewing court to explain which inferences might be available beyond a general suspicion of wrongdoing."), aff'd, 905 F.3d 106 (3d Cir. 2018)). Such an investigation "is not evidence of fraud, or even negligence or mistake." Southeastern Pennsylvania Transportation Authority v. Orrstown Financial Services, Inc., 2016 WL 7117455, at *11 (M.D. Pa. Dec. 7, 2016) (citing Meyer v. Greene, 710 F.3d 1189, 1201 (11th Cir. 2013) ("The announcement of an investigation reveals just that − an investigation − and nothing more.")); see also Utesch v. Lannett Company, Inc., 316 F. Supp.3d 895, 903-04 (E.D. Pa. 2018) (holding that the existence of a government inquiry alone is not sufficient to raise a strong inference of scienter).
Teamsters Local 456 Pension Fund v. Universal Health Services, ___ F. Supp.3d ___, 2019 WL 3886839, at *40 (E.D. Pa. Aug. 19, 2019) (citations not omitted, either, although some have received non-substantive modifications).
What struck us in particular about Local 456 is that, unlike Godelia, it cited and followed Eleventh Circuit precedent. Local 456 isn't even by an Eleventh Circuit court, whereas Godelia is. So we started with the two Eleventh Circuit decisions Local 456 cited (but Godelia did not). These were securities law cases, and they have different elements of proof than product liability, most notably the need to prove "scienter" (which is legal jargon that approximates "intent"). The plaintiff in Brophy claimed that the mere fact of a governmental investigation was probative of this element. The Eleventh Circuit called barnyard expletive on that argument. "The 'mere existence of [the government's] investigation' likewise does not equip a reviewing court to explain which inferences might be available beyond a general suspicion of wrongdoing." 781 F.3d at 1305. And that was on a motion to dismiss.
Brophy in turn quoted In re Hutchinson Technology, Inc. Securities Litigation, 536 F.3d 952 (8th Cir. 2008), which held that adding allegations to a complaint about a government investigation that had not resulted is a conviction was futile:
[W]e consider the [government's] opening and closing an investigation irrelevant to the issue of [plaintiff's] complaint sufficiency. The mere existence of [this] investigation does not suggest that any of the allegedly false statements were actually false . . . nor does it add an inference of scienter. Under either an abuse of discretion or a de novo standard of review, we agree . . . that [plaintiff] has not shown that any potential amendment would save its complaint.
Id. at 962.
The other Eleventh Circuit case cited in Local 452 was, if anything, even more emphatic:
The announcement of an investigation reveals just that − an investigation − and nothing more. . . . That does not mean that [such] investigations, in and of themselves, reveal to the market that a company's previous statements were false or fraudulent.
Meyer v. Greene, 710 F.3d 1189, 1201 (11th Cir. 2013) (citations omitted). In other words, the simple existence of a governmental investigation cannot be grounds to infer that what the government was investigating was actually true.
In our little jaunt through securities litigation, we ran across some other appellate decisions for the same proposition. The Ninth Circuit held that announcement of a governmental investigation cannot "plausibly" establish causation:
The announcement of an investigation does not "reveal" fraudulent practices to the market. Indeed, at the moment an investigation is announced, the market cannot possibly know what the investigation will ultimately reveal. While the disclosure of an investigation is certainly an ominous event, it simply puts investors on notice of a potential future disclosure of fraudulent conduct. Consequently, any decline in a corporation's share price following the announcement of an investigation can only be attributed to market speculation. . . . This type of speculation cannot form the basis of a viable loss causation theory.
Loos v. Immersion Corp., 762 F.3d 880, 890 (9th Cir. 2014).
Plaintiffs allege that the [government] is investigating [defendants] for fraud, but that assertion is too speculative to add much, if anything, to an inference of scienter. In fact, defendants represented at oral argument − and plaintiffs did not dispute − that the [government's] investigation has already settled without a finding of culpability.
Cozzarelli v. Inspire Pharmaceuticals, Inc., 549 F.3d 618, 628 n.2 (4th Cir. 2008).
Securities litigation is only one other kind of civil litigation, and SEC investigations are only one type of analogous governmental enforcement. Defendants fearing that the law directly concerning FDA warning letters won't be enough to deter a judge from letting plaintiffs rely on them – see Godelia − should seek precedential reinforcement elsewhere, since binding precedent may exist in any number of analogous areas.
This article is presented for informational purposes only and is not intended to constitute legal advice.