In Re Orthopedic Bone Screw Litigation , 193 F.3d 781 ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
10-7-1999
In Re Orthopedic Bone Screw Litigation
Precedential or Non-Precedential:
Docket 98-1762, 98-1829
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Filed October 7, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 98-1762 & 98-1829
IN RE: ORTHOPEDIC BONE SCREW PRODUCTS
LIABILITY LITIGATION
Plaintiffs Legal Committee,
Appellant at 98-1762
American Academy of Orthopaedic Surgeons,
North American Spine Society, and Scoliosis
Research Society (the Medical Associations),
Appellants at 98-1829
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
MDL No. 1014
(Honorable Louis C. Bechtle)
Argued April 26, 1999
Before: SCIRICA, ROTH and McKAY,* Circuit Judges
(Filed October 7, 1999)
_________________________________________________________________
*The Honorable Monroe G. McKay, United States Circuit Judge for the
Tenth Judicial Circuit, sitting by designation.
MICHAEL D. FISHBEIN, ESQUIRE
(ARGUED)
ARNOLD LEVIN, ESQUIRE
SANDRA L. DUGGAN, ESQUIRE
Levin, Fishbein, Sedran & Berman
510 Walnut Street, Suite 500
Philadelphia, Pennsylvania 19106
Attorneys for Plaintiffs
Legal Committee,
Appellant at 98-1762/
Cross-Appellee at 98-1829
FREDERICK KRUTZ, ESQUIRE
(ARGUED)
Forman, Perry, Watkins, Krutz
& Tardy
188 East Capitol Street
One Jackson Place, Suite 1200
Jackson, Mississippi 39225-2608
Attorney for American Academy of
Orthopaedic Surgeons, North
American Spine Society, and
Scoliosis Research Society,
Appellees at 98-1762/
Cross-Appellants at 98-1829
MITCHELL A. STEARN, ESQUIRE
Porter, Wright, Morris & Arthur
1667 K Street, N.W., Suite 1100
Washington, D.C. 20006
NORMAN J. JEDDELOH, ESQUIRE
Arnstein & Lehr
120 South Riverside Plaza,
Suite 1200
Chicago, Illinois 60606
Attorneys for American Academy of
Orthopaedic Surgeons,
Appellee at 98-1762/
Cross-Appellant at 98-1829
2
DANIEL J. MULHOLLAND, ESQUIRE
Forman, Perry, Watkins, Krutz
& Tardy
188 East Capitol Street
One Jackson Place, Suite 1200
Jackson, Mississippi 39225-2608
SHAWN M. COLLINS, ESQUIRE
The Collins Law Firm
1979 North Mill Street, Suite 109
Naperville, Illinois 60563
Attorneys for North American
Spine Society,
Appellee at 98-1762/
Cross-Appellant at 98-1829
JANET L. MacDONELL, ESQUIRE
Deutsch, Kerrigan & Stiles
755 Magazine Street
New Orleans, Louisiana 70130
Attorney for Scoliosis Research
Society,
Appellee at 98-1762/
Cross-Appellant at 98-1829
THOMAS G. STAYTON, ESQUIRE
Baker & Daniels
300 North Meridian Street,
Suite 2700
Indianapolis, Indiana 46204
ALBERT J. DAHM, ESQUIRE
Baker & Daniels
111 East Wayne Street, Suite 800
Fort Wayne, Indiana 46802
Attorneys for Zimmer, Inc.,
Appellee at 98-1829
3
MICHAEL R. FRUEHWALD,
ESQUIRE
Barnes & Thornburg
11 South Meridian Street,
Suite 1313
Indianapolis, Indiana 46204
Attorney for Ace Medical Company
and DePuy Motech, Inc.,
Appellees at 98-1762
J. KURT STRAUB, ESQUIRE
Obermayer, Rebmann, Maxwell
& Hippel
1617 John F. Kennedy Boulevard
One Penn Center, 19th Floor
Philadelphia, Pennsylvania 19103
Attorney for Scientific Spinal, Ltd.,
Appellee at 98-1762
ROBERT R. REEDER, ESQUIRE
Cozen & O'Connor
The Atrium
1900 Market Street
Philadelphia, Pennsylvania 19103
Attorney for Synthes, Inc.,
Synthes (USA), and Synthes North
America, Inc.,
Appellees at 98-1762/1829
4
PHILIP H. LEBOWITZ, ESQUIRE
(ARGUED)
Pepper, Hamilton & Scheetz
18th & Arch Streets
3000 Two Logan Square
Philadelphia, Pennsylvania
19103-2799
Attorney for Danek Medical, Inc.,
Sofamor, S.N.C., Sofamor Danek
Group, Inc., Warsaw Orthopedic,
Inc., Sofamor, Inc., Texas Scottish
Rite Hospital for Children,
Eduardo Luque, M.D., Charles E.
Johnston, II, M.D., Richard
Ashman, Ph.D., Gary Lowery,
M.D., George S. Rapp, M.D., Ensor
Transfeldt, M.D., John A. Herring,
M.D., Thomas Whitecloud, III,
M.D., Thomas Zdeblick, M.D.,
Appellees at 98-1762
RAYMOND J. PAJARES, ESQUIRE
Aubert & Pajares
3850 North Causeway Boulevard
Two Lakeway Center, Suite 1650
Metarie, Louisiana 70002
Attorney for Advanced Spine
Fixation System, Inc.,
Appellee at 98-1762
SUSAN S. WETTLE, ESQUIRE
DOUGLAS W. LANGDON, ESQUIRE
Brown, Todd & Heyburn
400 West Market Street, Suite 3200
Louisville, Kentucky 40202
Attorneys for Youngwood Medical
Specialties, Inc., f/k/a National
Medical Speciality, Inc., f/k/a
Stuart Medical Specialty, Inc.;
Stuart Medical, Inc., f/k/a Stuart
Drug and Surgical Supply, Inc.,
Appellees at 98-1762/1829
5
JAMES B. IRWIN, ESQUIRE
NATHAN T. GISCLAIR, ESQUIRE
Montgomery, Barnett, Brown, Read,
Hammond & Mintz
1100 Poydras Street
3200 Energy Centre
New Orleans, Louisiana 70163-3200
Attorneys for Smith & Nephew,
Inc.,
Appellee at 98-1762/1829
BRENDA N. HIGHT, ESQUIRE
McManemin & Smith
600 North Pearl Street, Suite 1600
Dallas, Texas 75201
Attorney for Estate of
David K. Selby,
Appellee at 98-1762/1829
CAROLINE P. GOLDEN, ESQUIRE
JOHN N. SCHOLNICK, ESQUIRE
BRADLEY C. TWEDT, ESQUIRE
Neal, Gerber & Eisenberg
Two North LaSalle Street,
Suite 2300
Chicago, Illinois 60602
Attorneys for GICD/USA Institute,
Inc.,
Appellee at 98-1762/1829
OPINION OF THE COURT
SCIRICA, Circuit Judge.
This is an appeal of the District Court's dismissal under
Fed. R. Civ. P. 12(b)(6) of conspiracy and concert of action
claims alleged by thousands of plaintiffs in multidistrict
litigation involving allegedly defective bone screw
implantation devices. The District Court held the claims,
insofar as they alleged a conspiracy to violate the Federal
Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C.A. S 301-
397 (West Supp. 1999), did not state a cause of action
6
upon which relief can be granted. Accordingly, the court
granted defendants' motions to dismiss those claims.
The District Court also made several rulings unfavorable
to the defendants. The court denied with prejudice their
motions to dismiss based on improper pleading and First
Amendment protection. Additionally, the District Court
denied the motions of several defendants for attorney's fees,
costs, and sanctions. These rulings are now challenged on
cross-appeal.
We will affirm the judgment of the District Court on all
issues.
I. BACKGROUND
This multidistrict litigation comprises more than 2,000
civil actions originally filed in approximately sixty of the
ninety-four federal districts. In August 1994, the cases were
consolidated in the Eastern District of Pennsylvania under
28 U.S.C. S 1407. All of the approximately 5,000 individual
plaintiffs claim to have suffered physical injuries caused by
defective orthopedic bone screw devices affixed to the
pedicles of their spines during spinal fusion surgery. The
devices, which are intended to stabilize the spine and
achieve fusion of the vertebrae, consist of rods or plates
that are screwed into the vertical axis of the lumbar spine.
In most cases, plaintiffs allege the devices broke after being
implanted in their spines. In some instances, plaintiffs have
undergone surgery to have the devices removed; in others,
the broken devices could not be removed.
Plaintiffs' original claims, filed in early 1994, set forth
causes of action based on both federal statutes and state
law tort and contract principles. Generally, they named as
defendants only the manufacturers and distributors of the
bone screw devices. Subsequent actions named a broader
array of defendants and stated additional theories of
recovery. In particular, hundreds of so-called "omni"
actions, first brought in October 1995, name as defendants
the manufacturers, designers, and distributors of the
devices; trade associations that conducted seminars on
their use; regulatory consultants; and physicians who
promoted the product. There are two types of omni actions.
7
The Plaintiffs' Legal Committee ("PLC") actions allege both a
horizontal conspiracy involving manufacturers and a
vertical conspiracy involving all of the defendants. The
Lestelle actions (so named after the attorney who drafted
the form complaint that served as the basis of these
actions) allege only a horizontal conspiracy involving
manufacturers. In addition to the conspiracy and concert of
action claims, the omni complaints allege fraud; negligent
misrepresentation; strict liability in tort; liability per se;
negligence; breach of implied warranty of merchantibility;
and (in some cases) loss of consortium.
In August 1996, the District Court dismissed the PLC
omni complaints in their entirety because the complaints
failed to demonstrate subject matter jurisdiction. See In re
Orthopedic Bone Screw Prods. Liability Litig., MDL No. 1014,
1996 WL 482977 (E.D. Pa. Aug. 22, 1996) (Pretrial Order
No. 477). The court also dismissed the conspiracy claims in
both the PLC and the Lestelle complaints for failure to state
a claim upon which relief could be granted, and it
dismissed the fraud claims in the Lestelle complaints
because the circumstances of fraud were not averred with
sufficient particularity. See id. All of these dismissals were
without prejudice. Plaintiffs subsequently filed hundreds of
amended omni complaints, which are the subject of this
appeal.1
Twice before, we have issued decisions in this litigation.
First, we denied the petitions of some defendants for a writ
of mandamus invalidating the District Court's dismissal of
the conspiracy and concert of action claims. See In re
Orthopedic Bone Screw Prods. Liability Litig., No. 97-1426,
1427, 1438, 1450, 1453, 1465, mem. op. (3d Cir. Nov. 10,
1997) (unpublished opinion). There we considered two of
the arguments raised by defendants here: their claim that
the First Amendment prohibits imposition of liability for
their speech at the seminars, and their contention that the
omni complaints fail to plead reliance and causation
adequately. Although these arguments did not persuade us
to grant the "extraordinary remedy" of mandamus relief, In
_________________________________________________________________
1. For ease of reference, we will refer to the amended omni complaints
simply as the "omni complaints."
8
re Asbestos Sch. Litig. (Pfizer Inc.), 46 F.3d 1284, 1288 (3d
Cir. 1994), we noted that the standards governing a
mandamus petition are more stringent than those
governing a direct appeal, and that our disposition did not
preclude defendants from asserting their arguments at a
later stage in the proceedings. Accordingly, our denial of a
writ of mandamus has no binding effect in the present
appeal. More recently, we determined that plaintiffs' state
law claims of fraud on the FDA were not preempted by the
Medical Device Amendments of 1976, 21 U.S.C.A. SS 360c-
360k (West Supp. 1999) ("MDA"). See In re Orthopedic Bone
Screw Prods. Liability Litig., 159 F.3d 817 (3d Cir. 1998).
A. Regulatory Framework
The conspiracy and concert of action claims at issue here
require some discussion of the regulatory framework
governing orthopedic bone screw devices. It is undisputed
that the devices are regulated by the FDCA, as amended by
the MDA. At the time the lawsuits were filed, the FDA had
classified the bone screw devices as "Class III" devices
because they "present a potential unreasonable risk of
illness or injury." 21 U.S.C. S 360c(a)(1)(C)(ii)(II).
Consequently, one must receive "premarket approval"
before commercially distributing or selling them. Id.S 360e(a). To obtain the data to support an application for
premarket approval, a manufacturer may use the device in
clinical trials under active FDA supervision pursuant to the
FDCA's Investigational Device Exemption ("IDE") provisions
and accompanying federal regulations. Id. S 360j(g); 21
C.F.R. pt. 812 (1998). Premarket approval will be granted
only if the IDE investigation proves the device is sufficiently
safe and effective.
Premarket approval is not required if the FDA determines
the device is "substantially equivalent" to a legally marketed
"predicate device" (that is, a device marketed before the
Medical Device Amendments went into effect on May 28,
1976) in terms of its intended use, technological
characteristics, safety, and effectiveness. 21 U.S.C.
S 360e(b)(1)(B); 21 C.F.R. S 807.100(b). A determination of
substantial equivalence is called "510(k) clearance" in
reference to the applicable section of the original Act. If a
device obtains 510(k) clearance, it may be introduced into
9
commerce without premarket approval. Alternatively, the
FDA may issue an order declaring the device "not
substantially equivalent" ("NSE"), which means that it
cannot be marketed without premarket approval.
Thus, a person who wishes to market or sell a Class III
device has two primary avenues of obtaining FDA approval:
premarket approval, based on safety and efficacy data from
non-clinical laboratory studies or IDE investigation; or
510(k) clearance, based on a showing that the device is
substantially equivalent to one that was in commerce prior
to May 28, 1976.2 If a Class III medical device is introduced
into commerce without one of these two approvals, it is
deemed "adulterated" and the person who introduced the
device into commerce is criminally liable. See 21 U.S.C.
S 331(a). Similarly, it is a crime to introduce into commerce
a Class III device that is "misbranded," meaning that it does
not bear adequate directions for its intended use. See id.B. The Omni Complaints
According to the omni complaints, in 1984 AcroMed
Corporation -- and shortly thereafter, Sofamor, Inc. and
other sellers and manufacturers -- sought 510(k) clearance
to market pedicle screw devices. The FDA denied 510(k)
clearance but approved a series of IDE clinical trials
between 1986 and 1993. Because the trials failed to
generate sufficient safety data, the FDA denied premarket
approval after each one. Allegedly, defendants then
conspired to market their bone screw devices without the
necessary FDA approvals.
The omni complaints allege two distinct conspiracies. The
first is entitled, variously, the "Sofamor Conspiracy," the
"ASFSI Conspiracy," or the "Danek Conspiracy," depending
on the particular manufacturer being sued. It is alleged
that the manufacturer entered into written agreements with
spinal surgeons and other health care professionals in
which the manufacturer agreed to provide them royalties
_________________________________________________________________
2. Premarket approval is also not required upon a showing that the
device in question was itself introduced into interstate commerce for
commercial distribution before May 28, 1976. See 21 U.S.C.
S 360e(b)(1)(A).
10
and stock options in exchange for their participation in
"seminars" instructing physicians how to use the
manufacturer's bone screw device. According to the
complaints, although the seminars were conducted in the
guise of educating fellow members of the medical
profession, they were actually akin to "Tupperware parties"
in that their true purpose was purely commercial. Plaintiffs
also claim that the physicians who conducted the seminars
did not disclose to attendees that the bone screw device
had not received FDA premarket approval or 510(k)
clearance for use in pedicle fixation surgery; that clinical
trials had actually raised serious questions about its safety
and efficacy; and that they, the physicians, had a direct
financial stake in the sale of the device.
The complaints also describe an "Intercompany/
Association Conspiracy." Under this theory, plaintiffs claim
that manufacturers of the bone screw devices paid various
professional associations to sponsor and conduct seminars
for orthopedic surgeons. The purpose of the seminars,
again, was to promote the use of orthopedic bone screws in
surgery. At the seminars, the Intercompany/Association
conspirators allegedly concealed the same basic facts as in
the first conspiracy: namely, that the FDA had not
approved the use of the devices in pedicle fixation surgery;
that studies had raised serious doubts about the safety of
using the devices in such a procedure; and that the
associations were being paid by the manufacturers to
promote the devices. Later, the Intercompany/Association
conspirators allegedly implemented a two-part scheme to
avoid civil and criminal liability for these activities. First,
they established a trade association known as the"Spinal
Implant Manufacturers Group" to conduct a retrospective
study (the "Cohort Study") of pedicle screwfixation. The
results of the Cohort Study were reported to the FDA and
published in Spine magazine in October 1994, allegedly to
achieve reclassification of the bone screw device as a Class
I or II device (obviating the need for premarket approval)
and to serve as a defense in potential criminal or civil
litigation.3 According to plaintiffs, the Cohort study was an
_________________________________________________________________
3. In July 1998, the FDA reclassified most pedicle screw fixation devices
as Class II devices. See Orthopedic Devices: Classification and
Reclassification of Pedicle Screw Spinal Systems, 63 Fed. Reg. 40,025(1998) (codified at 21 C.F.R. S 888.3070).
11
intentional fraud, relying on selective data and ignoring
unfavorable results. Second, defendants Danek and
AcroMed allegedly agreed to mislead the FDA into believing
Zimmer4 had marketed a bone screw device for pedicle
fixation surgery in the United States before 1976, in an
attempt to obtain 510(K) clearance on the ground that the
bone screw device was "substantially equivalent" to a
predicate device.
C. District Court Proceedings
The District Court determined that although the two
conspiracies outlined in the omni complaints differ in some
respects, both essentially allege that defendants agreed to a
scheme to market and sell bone screw devices without the
necessary FDA approvals. See In re Orthopedic Bone Screw
Prods. Liability Litig., MDL No. 1014, Pretrial Order No. 861,
mem. op. at 18 (E.D. Pa. Apr. 16, 1997) [hereinafter "PTO
861"] (noting that each conspiracy "had the same single
objective: to promote and sell pedicle screw fixation devices
in violation of the FDCA").5 The court held the claims failed
to state a cause of action upon which relief could be
granted, see id. at 27, because civil conspiracy and concert
of action claims require an independent basis of tort
liability, which the FDCA does not provide. In accordance
with this ruling, the Judicial Panel for Multidistrict
Litigation began to remand all actions containing a claim of
conspiracy to violate the FDCA to transferor courts for
summary judgment proceedings and trial. Numerous
transferor courts have granted summary judgment for
defendants on such claims, concluding that PTO 861 is the
law of the case on that issue.
_________________________________________________________________
4. Zimmer, Inc., a manufacturer of the pedicle screw device, initially was
included as a defendant in the Intercompany/Association Conspiracy
claim brought by PLC. PLC and Zimmer have since settled their
respective claims against each other.
5. In addition, the omni complaints alleged that defendants conspired to
commit fraud by actively concealing material facts at the seminars. After
PTO 861 was entered, however, plaintiffs moved for voluntary dismissal
with prejudice of their conspiracy to defraud claims, which the District
Court granted. See In re Orthopedic Bone Screw Prods. Liability Litig.,
MDL 1014, Memorandum and Pretrial Order No. 1543, op. at 6 (E.D. Pa.
Aug. 13, 1998).
12
Also in PTO 861, the District Court denied defendants'
motion to dismiss all claims premised upon their speech at
the seminars. Defendants had argued that such speech is
protected by the First Amendment and therefore cannot be
the basis for imposing civil liability. The District Court
rejected this argument, holding that the complaints allege
false and misleading commercial speech, which does not
qualify for First Amendment protection. The court also
declined to dismiss plaintiffs' claims on the basis that they
failed to plead reliance and causation adequately, and it
denied the motions of several defendants -- the American
Academy of Orthopedic Surgeons, the Scoliosis Research
Society, and the North American Spine Society -- for
attorney's fees and sanctions under 28 U.S.C. S 1927, Fed.
R. Civ. P. 54(d), and the court's inherent powers.
Because there is complete diversity of all plaintiffs and
defendants, the District Court had jurisdiction over each
civil action under 28 U.S.C. S 1332. In In re Orthopedic
Bone Screw Prods. Liability Litig., MDL 1014, Memorandum
and Pretrial Order No. 1543, (E.D. Pa. Aug. 13, 1998), the
District Court issued certification for final judgment under
Fed. R. Civ. P. 54(b) on all of plaintiffs' conspiracy and
concert of action allegations and complaints encompassed
in MDL No. 1014. Therefore, we have jurisdiction under 28
U.S.C. S 1291.
II. ANALYSIS
A. Dismissal of the Conspiracy and Concert of Action
Claims
We first address the dismissal of plaintiffs' conspiracy
and concert of action claims. This ruling was premised
upon the District Court's determination that civil
conspiracy does not provide a right of action in the absence
of an underlying tort; rather, it "renders each conspirator
vicariously liable for the commission of an act that is
independently actionable under state law and is in
furtherance of the conspiracy." PTO 861, at 23. Therefore,
the court held that plaintiffs' claims failed to state a cause
of action upon which relief could be granted. See id. at 25.
We exercise plenary review of this conclusion. See
13
Steamfitters Local Union No. 420 v. Phillip Morris, Inc., 171
F.3d 912, 919 (3d Cir. 1999).
No federal court of appeals has addressed the legal
cognizability of a claim for conspiracy to violate the FDCA.6
It is well settled, however, that the FDCA creates no private
right of action. See 21 U.S.C. S 337(a) (restricting FDCA
enforcement to suits by the United States); In re Orthopedic
Bone Screw Prods. Liability Litig., 159 F.3d 817, 824 (3d
Cir. 1998) ("It is . . . well established that Congress has not
created an express or implied private cause of action for
violations of the FDCA or the MDA."); PDK Labs., Inc. v.
Friedlander, 103 F.3d 1105, 1113 (2d Cir. 1997) (holding
that plaintiff 's suit "represents an impermissible attempt to
enforce the FDCA through a private right of action"); Mylan
Labs., Inc. v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993)
(same). The question, then, is whether violation of a federal
statute imposing criminal penalties but establishing no
private right of action may serve as a basis for civil recovery
under state conspiracy law.
The established rule is that a cause of action for civil
conspiracy requires a separate underlying tort as a
predicate for liability. Thus, one cannot sue a group of
defendants for conspiring to engage in conduct that would
not be actionable against an individual defendant. Instead,
" `actionable civil conspiracy must be based on an existing
_________________________________________________________________
6. In addition to the District Court here, one other federal district
court
has addressed the issue:
[A] conspiracy is only actionable if the acts in question, when
committed by a single person, would also be actionable. Defendant
. . . alleges that the acts complained of in count II are simply
violations of the FDCA, the act which comprehensively regulates the
marketing of prescription drugs in the United States, and that the
FDCA does not create a private right of action for enforcement by
private individuals such as plaintiffs.
To the extent that plaintiffs were attempting to assert a cause of
action under the FDCA, defendant would be correct.
Hawkins v. Upjohn Co., 890 F. Supp. 609, 611 (E.D. Tex. 1994) (applying
Texas law). The Hawkins court found that plaintiffs' complaint, though
poorly worded, actually alleged a conspiracy to commit fraud and
therefore was independently actionable under state law. See id.14
independent wrong or tort that would constitute a valid
cause of action if committed by one actor.' " Posner v. Essex
Ins. Co., 178 F.3d 1209, 1218 (11th Cir. 1999) (quoting
Williams Elec. Co. v. Honeywell, Inc., 772 F. Supp. 1225,
1239 (N.D. Fla. 1991)) (applying Florida law); accord Applied
Equip. Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454, 457
(Cal. 1994) ("Standing alone, a conspiracy does no harm
and engenders no tort liability. It must be activated by the
commission of an actual tort."); Stoldt v. City of Toronto,
678 P.2d 153, 161 (Kan. 1984) ("Conspiracy is not
actionable without commission of some wrong giving rise to
a cause of action independent of the conspiracy."); Alleco,
Inc. v. Harry & Jeanette Weinberg Found., Inc., 665 A.2d
1038, 1045 (Md. 1995) ("No action in tort lies for conspiracy
to do something unless the acts actually done, if done by
one person, would constitute a tort.") (citation omitted);
Alexander & Alexander of N.Y., Inc. v. Fritzen, 503 N.E.2d
102, 102-03 (N.Y. 1986) ("[A] mere conspiracy to commit a
tort is never of itself a cause of action. Allegations of
conspiracy are permitted only to connect the actions of
separate defendants with an otherwise actionable tort.")
(citations omitted).
Because this multidistrict litigation implicates the state
law of many different jurisdictions, we have reviewed the
law of every applicable jurisdiction on this point. Having
done so, we are unaware of any jurisdiction that recognizes
civil conspiracy as a cause of action requiring no separate
tortious conduct. To the contrary, the law uniformly
requires that conspiracy claims be predicated upon an
underlying tort that would be independently actionable
against a single defendant.7 Because plaintiffs here could
_________________________________________________________________
7. See, e.g., Hanten v. School Dist. of Riverview Gardens, 183 F.3d 799,
809 (8th Cir. 1999) ("[A] claim of civil conspiracy `does not set forth an
independent cause of action but rather is sustainable only after an
underlying tort claim has been established . . . .' " (quoting K & S
Partnership v. Continental Bank, N.A., 952 F.2d 971, 980 (8th Cir. 1991))
(applying Missouri law); Gaming Corp. of America v. Dorsey & Whitney,
88 F.3d 536, 551 (8th Cir. 1996) ("[C]onspiracy is based on the
commission of an underlying tort.") (applying Minnesota law); Halberstam
v. Welch, 705 F.2d 472, 479 (D.C. Cir.1983) ("Since liability for civil
conspiracy depends on performance of some underlying tortious act, the
15
not sue an individual defendant for an alleged violation of
the FDCA, it follows that they cannot invoke the mantle of
conspiracy to pursue the same cause of action against a
group of defendants. A claim of civil conspiracy cannot rest
solely upon the violation of a federal statute for which there
is no corresponding private right of action.
_________________________________________________________________
conspiracy is not independently actionable; rather, it is a means for
establishing vicarious liability for the underlying tort.") (applying
District
of Columbia law); Cunningham v. PFL Life Ins. Co., 42 F. Supp.2d 872,
884 (N.D. Iowa 1999) ("[C]onspiracy does not state an independent cause
of action, but rather requires the commission of an underlying wrong for
which liability may be extended to an additional defendant by virtue of
a conspiracy.") (applying Iowa law); University Sys. of N.H. v. United
States Gypsum Co., 756 F. Supp. 640, 652 (D.N.H. 1991) ("For a civil
conspiracy to exist, there must be an underlying tort which the alleged
conspirators agreed to commit. Conspiracy, then, serves as a device
through which vicarious liability for the underlying tort may be imposed
on all who commonly plan, take part in, further by cooperation, lend aid
to, or encourage the wrongdoers' acts.") (applying New Hampshire law);
In re North Dakota Personal Injury Asbestos Litig. No. 1, 737 F. Supp.
1087, 1095 (D.N.D. 1990) ("One of the parties must commit some act in
pursuance of the agreement that is itself a tort for civil conspiracy to
exist.") (applying North Dakota law); McGlasson v. Barger, 431 P.2d 778,
780 (Colo. 1967) ("[U]nless a civil action in damages would lie against
one of the conspirators, if the act was done by him alone, it will not lie
against many acting in concert.") (quoting Pullen v. Headberg, 127 P.
954, 955 (Colo. 1912)); O'Neal v. Home Town Bank of Villa Rica, 514
S.E.2d 669, 675 (Ga. Ct. App. 1999) ("Absent the underlying tort, there
can be no liability for civil conspiracy."); Cohen v. Bowdoin, 288 A.2d
106(Me. 1972) (" `[C]onspiracy' fails as the basis for the imposition of
civil
liability absent the actual commission of some independently recognized
tort; and when such separate tort has been committed, it is that tort,
and not the fact of combination, which is the foundation of the civil
liability."); Admiral Ins. Co. v. Columbia Casualty Ins. Co., 486 N.W.2d
351, 359 (Mich. Ct. App. 1992) ("Because [plaintiff] has failed to state
any tortious action, its conspiracy action must also fail."); Middlesex
Concrete Prods. & Excavating Corp. v. Carteret Indus. Ass'n, 181 A.2d
774, 779 (N.J. 1962) ("[A] conspiracy cannot be made the subject of a
civil action unless something has been done which, absent the
conspiracy, would give a right of action."); Nix v. Temple Univ., 596 A.2d
1132, 1137 (Pa. Super. Ct. 1991) (" `Absent a civil cause of action for a
particular act, there can be no cause of action for civil conspiracy.' ")
(quoting Pelagatti v. Cohen, 536 A.2d 1337, 1342 (Pa. Super. Ct. 1987)).
16
Plaintiffs contend the doctrine of per se liability (often
called "negligence per se") establishes that violations of
federal statutes can be the basis of common law tort liability.8
They cite the following passage from the Restatement of
Torts:
Even where a legislative enactment contains no express
provision that its violation shall result in tort liability,
and no implication to that effect, the court may, and in
certain types of cases customarily will, adopt the
requirements of the enactment as the standard of
conduct necessary to avoid liability for negligence. The
same is true of municipal ordinances and
administrative regulations.
Restatement (Second) of Torts S 285 cmt. c (1977). In
addition, plaintiffs rely on numerous cases in which courts,
in determining common law tort liability, have considered
whether the defendant's conduct violated federal law. See,
e.g., Stanton ex rel. Brooks v. Astra Pharmaceutical Prods.,
Inc., 718 F.2d 553, 565 (3d Cir. 1983) (holding that failure
to comply with FDA regulations constituted negligence per
se under Pennsylvania law); Orthopedic Equip. Co. v.
Eutsler, 276 F.2d 455, 461 (4th Cir. 1960) ("[W]e think that
a violation of the Federal Food, Drug, and Cosmetic Act is
negligence per se in Virginia . . . .").
In these and many other cases, courts have found that
violations of a federal statute or regulations constituted
negligence per se under state law. But the cases make clear
the doctrine of per se liability does not create an
independent basis of tort liability but rather establishes, by
reference to a statutory scheme, the standard of care
appropriate to the underlying tort. See, e.g. , Grove Fresh
Distribs., Inc. v. Flavor Fresh Foods, Inc., 720 F. Supp. 714,
716 (N.D. Ill. 1989) ("Grove Fresh relies on the FDA
regulation merely to establish the standard or duty which
defendants allegedly failed to meet. Nothing prohibits Grove
Fresh from using the FDCA or its accompanying
_________________________________________________________________
8. The phrase "per se liability" is used primarily in the antitrust
context,
in which horizontal price-fixing arrangements are held to violate the
Sherman Act regardless of their reasonableness. See FTC v. Superior Ct.
Trial Lawyers Ass'n, 493 U.S. 411, 435 (1990); United States v. Socony-
Vacuum Oil Co., 310 U.S. 150, 225-26 n.59 (1940).
17
regulations in that fashion."). Liability per se enables
plaintiffs to establish as a matter of law that the
defendant's conduct constituted a breach of duty in a
negligence action, so that only causation and damages need
be proved. See In re TMI, 67 F.3d 1103, 1118 (3d Cir. 1995)
("[W]here defendants violated the relevant statute or
regulation, courts have held as a matter of law that
plaintiffs have satisfied the first two elements of their cause
of action: the duty and breach of duty."); Stanton, 718 F.2d
at 564 n.22 (noting, in the FDCA context, that
"Pennsylvania law views a statutory violation as conclusive
evidence of negligence, in the absence of an excuse for that
violation . . . . We emphasize, however, that the
nomenclature `negligence per se' does not mean that a
plaintiff seeking to recover under that doctrine may
dispense with establishing proximate cause."). See generally
1 J.D. Lee & Barry A. Lindahl, Modern Tort Law: Liability
& Litigation S 3.33, at 102 (1980) ("Under the per se rule,
the violation of an applicable statute is conclusive proof of
negligence, leaving only the question of causation to be
determined.") (citation omitted).
The theory of per se liability advanced by the plaintiffs
here is quite different. Plaintiffs do not invoke the statutory
violations to prove defendants' liability for a separate
underlying tort, but instead contend the violations
themselves form a cause of action. This interpretation of
per se liability would allow private plaintiffs to recover for
violations of a federal statute that creates no private cause
of action and, in fact, expressly restricts its enforcement to
the federal government. See 21 U.S.C.A.S 337(a) (West
Supp. 1999).9 Plaintiffs' theory would undermine section
337(a) by establishing a private, state-law cause of action
for violations of the FDCA, so long as those actions are
brought against more than one defendant. We do not
believe the concept of per se liability supports such a
result.
Nor are we persuaded by plaintiffs' argument that
_________________________________________________________________
9. The statute also permits state governments to bring suit in certain
limited circumstances, but only upon approval by the Secretary of
Health and Human Services. See id. S 337(b).
18
Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) and In re
Orthopedic Bone Screw Prods. Liability Litig., 159 F.3d 817(3d Cir. 1998) (Bone Screw I) dictate reversal of the District
Court. In Medtronic, the Supreme Court held the Medical
Device Amendments ("MDA") do not preempt state common
law negligence claims against manufacturers of defective
medical devices. The Court observed that interpretation of
a preemption provision does not occur in a "contextual
vacuum," 518 U.S. at 485, but must be informed by two
additional considerations: (1) the presumption against
preemption unless clearly and manifestly indicated by
Congress; and (2) the principle that "the purpose of
Congress is the ultimate touchstone" in determining the
extent of preemption. Id. Finding that Congress did not
intend the MDA to foreclose state-law negligence lawsuits,
the Court allowed plaintiffs' claims to proceed.
In Bone Screw I, we interpreted Medtronic to mean that
common law claims of fraudulent misrepresentation are not
preempted by the MDA, even if the conduct underlying
those claims violated the FDCA. See 159 F.3d at 825(holding that Medtronic "overrules everything in [Michael v.
Shiley, Inc., 46 F.3d 1316 (3d Cir. 1995)] that would
prevent a plaintiff from pursuing a cause of action for
fraudulent misrepresentation based on common law
principles"). Notably, we reserved judgment on whether the
plaintiffs had stated a claim under state law upon which
relief could be granted. See id. at 829.
Although plaintiffs concede the District Court here"did
not explicitly invoke preemption principles," they claim that
"its decision was plainly based on a construction of
legislative intent." (Appellants' Br. at 31 n.21.) They argue
Medtronic and Bone Screw I stand for the proposition that
Congress did not intend to foreclose state law remedies
based on violations of federal medical device law, and the
District Court therefore erred in dismissing claims based on
conspiracy to violate the FDCA. Medtronic and Bone Screw
I are crucially different from this case, however. Both raised
the issue whether state common law claims were
preempted by the FDCA and Medical Device Amendments.
After Medtronic, it is clear that such claims survive, and
Bone Screw I so held. Consequently, state law claims such
19
as negligence, breach of implied warranty, and fraudulent
misrepresentation are viable, even to the extent they seek
recovery for conduct that may also have violated the FDCA.
But neither Medtronic nor Bone Screw I purports to allow
private plaintiffs to sue directly for violations of a federal
statute in the absence of a separate underlying cause of
action. They merely hold that such causes of action as
previously existed under state law were not preempted by
the FDCA and Medical Device Amendments.
We will therefore uphold the District Court's dismissal of
the conspiracy and concert of action claims alleging a
conspiracy to violate the FDCA.
B. First Amendment Protection
The District Court also denied defendants' motions to
dismiss the conspiracy and concert of action claims on
First Amendment grounds. These claims are based largely
upon the allegation that defendants conspired to commit
fraud by actively concealing material facts at the seminars.
Allegedly, speakers at the seminars failed to disclose that
they had a direct financial stake in the use of the devices,
that the devices had not yet been approved by the FDA, and
that testing had raised concerns about their safety.
According to defendants, imposition of liability for their
speech at the seminars would violate their First
Amendment rights.
The First Amendment's prohibition on abridging the
freedom of speech applies to the states through the Due
Process Clause of the Fourteenth Amendment. See Duncan
v. Louisiana, 391 U.S. 145, 148 (1968). Imposition of civil
liability, such as the award of money damages, is treated
no less stringently than direct regulation on speech: "The
fear of damage awards . . . may be markedly more
inhibiting than the fear of prosecution under a criminal
statute." New York Times Co. v. Sullivan, 376 U.S. 254,
279-280 (1964); see also Cohen v. Cowles Media Co., 501
U.S. 663, 676 n.4 (1991) (Blackmun, J., dissenting) ("[W]e
have long held that the imposition of civil liability based on
protected expression constitutes `punishment' of speech for
First Amendment purposes.").
20
The Supreme Court has long recognized a " `common-
sense distinction between speech proposing a commercial
transaction, which occurs in an area traditionally subject to
government regulation, and other varieties of speech.' "
Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 65 (1983)
(quoting Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447,
455-56 (1978)). Commercial speech is accorded a lesser
degree of First Amendment protection than other kinds of
speech. For instance, the government may enact content-
based restrictions on false or misleading commercial
messages. See, e.g., Central Hudson Gas & Elec. Corp. v.
Public Serv. Comm'n of N.Y., 447 U.S. 557, 562-63 (1980)
("[T]here can be no constitutional objection to the
suppression of commercial messages that do not accurately
inform the public about lawful activity. The government
may ban forms of communication more likely to deceive the
public than to inform it . . . ."); Virginia State Bd. of
Pharmacy v. Virginia Citizens Consumer Council, Inc., 425
U.S. 748, 771-72 n.24 (1976). In addition, "the First
Amendment does not protect commercial speech about
unlawful activities." 44 Liquormart, Inc. v. Rhode Island,
517 U.S. 484, 497 n.7 (1996); accord Pittsburgh Press Co.
v. Pittsburgh Comm'n on Human Relations, 413 U.S. 376(1973) (same). Thus, an issue of primary significance here
is whether defendants' speech at the seminars was
commercial speech, and if so whether it was false and
misleading, or concerned unlawful activities.
Commercial speech is "broadly defined as expression
related to the economic interests of the speaker and its
audience, generally in the form of a commercial
advertisement for the sale of goods and services." U.S.
Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d
914, 933 (3d. Cir. 1990) (citing Bolger, 463 U.S. at 66-67;
Central Hudson, 447 U.S. at 561). In deciding whether
speech is commercial, we consider the following factors: "(1)
is the speech an advertisement; (2) does the speech refer to
a specific product or service; and (3) does the speaker have
an economic motivation for the speech. An affirmative
answer to all three questions provides `strong support' for
the conclusion that the speech is commercial." U.S.
Healthcare, 898 F.2d at 933 (citation omitted). At the same
time, we must be mindful of the "difficulty of drawing bright
21
lines that will clearly cabin commercial speech in a distinct
category." City of Cincinnati v. Discovery Network, Inc., 507
U.S. 410, 419 (1993). Often, speech consists of"complex
mixtures of commercial and noncommercial elements."
Bolger, 463 U.S. at 81 (Stevens, J., concurring). Where the
commercial and noncommercial elements of speech are
"inextricably intertwined," the court must apply the "test for
fully protected expression." Riley v. National Fed'n of the
Blind of N.C., Inc., 487 U.S. 781, 796 (1988).
At this stage in the proceedings, it is difficult to
determine precisely what portion of the seminars, if any,
consisted of a sales pitch to the attendees and what portion
was non-commercial medical discussion. The defendants
characterize the seminars as teaching events aimed at
promoting "continuing medical education" and accordingly
contend that the speech is entitled to the highest level of
First Amendment protection. Plaintiffs, on the other hand,
liken the seminars to medical "Tupperware parties" at
which defendants' sole objective was to generate sales of
their products.
We believe there is a sufficient factual dispute about the
nature of the seminars to preclude granting defendants'
motion to dismiss on First Amendment grounds. The
amended omni complaints allege, inter alia, that the
seminars were organized by sales representatives employed
by the participating manufacturers; that these
representatives invited spinal surgeons to attend and later
followed up with phone calls in an effort to generate sales;
that employees of the manufacturers staffed sales booths
and distributed videotapes, product catalogues, and other
literature at the seminars; and that the speakers at the
seminars were doctors and scientists who had entered into
lucrative royalty agreements giving them a direct financial
stake in the sales of bone screw devices. If true, these
allegations would provide strong support for characterizing
the seminars as commercial speech.
Defendants argue that even if their speech at the
seminars was commercial in nature (which they deny), it
constitutes "truthful, nonmisleading speech about a lawful
product" and therefore is protected. 44 Liquormart, 517
U.S. at 504; see also Greater New Orleans Broadcasting
22
Ass'n v. United States, ___ U.S. ___, 119 S. Ct. 1923 (1999)
(holding that a state may not ban nonmisleading
advertisements of legal gambling). Plaintiffs respond that
the speech at the seminars was highly misleading and
deceptive. The amended omni complaints allege defendants
knowingly withheld material facts at the seminars and
falsely represented to the physicians in attendance that the
devices were safe and effective for use in pedicle screw
fixation surgery.
Clearly, there is a considerable and unresolved factual
dispute regarding key elements of the speech at issue. In
order to dismiss the claims on First Amendment grounds,
we would have to determine either that defendants' speech
at the seminars was noncommercial in nature, or that it
was truthful or nonmisleading commercial speech
concerning a lawful product. In view of our obligation to
accept as true the factual allegations of the nonmoving
party, we are unwilling to do either at this point. Whether
the allegations in the omni complaints are true remains to
be determined. But dismissal is warranted only if"it
appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to
relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). We do
not believe this standard has been met; therefore, we will
uphold the District Court's denial of defendants' motions to
dismiss. Of course, defendants are free to raise their First
Amendment argument in the transferor courts after the
factual record is more fully developed.
C. Plaintiffs' Theory of Damages
Defendants North American Spine Society, American
Academy of Orthopedic Surgeons, and Scoliosis Research
Society (collectively "the medical associations") submitted a
joint brief in which they argue that plaintiffs' claims should
be dismissed for failure to plead causation adequately. In
particular, they contend plaintiffs have not properly alleged
a causal connection between the seminars and the
decisions of individual physicians to use the bone screw
devices in surgery. They argue that in order to allege
proximate cause adequately, each plaintiff must
demonstrate that his or her surgeon relied upon
defendants' statements at the seminars in making the
23
decision to use the devices for pedicle fixation surgery, and
that this decision in turn caused the injury upon which
relief is sought. Plaintiffs' theory of causation, they claim,
eschews proof of individualized reliance in favor of an
unjustified extension of the "fraud-on-the-market-theory" of
liability developed in securities law. See Basic Inc. v.
Levinson, 485 U.S. 224 (1988).10 For their part, plaintiffs
claim their market theory of causation extended only to the
fraud aspect of their conspiracy claims, which they have
now discontinued, and they also dispute that they are
required to prove individualized causation. They argue it is
sufficient to show that the seminars contributed to the
creation of an unlawful black market for pedicle screw
fixation devices, in the absence of which plaintiffs would
not have been injured.
We believe these issues are best resolved under a plenary
standard in the transferor courts, rather than on the appeal
of a motion to dismiss. Whether plaintiffs have adequately
alleged causation depends greatly on the particulars of the
state law governing each claim. This fact alone counsels
against dismissing all claims on this basis. See Bone Screw
I, 159 F.3d at 826 ("While we are not in a position to
canvass all the potentially applicable law [of the transferor
jurisdictions], what we know about tort law generally
makes us unwilling to say that all of the plaintiffs' claims
will fail for want of the kind of a causation that will give rise
to liability."). There is no uniform rule governing the level of
specificity with which proximate cause must be proven in
the various jurisdictions involved in this litigation.
Moreover, many jurisdictions have adopted a "substantial
factor" test that does not lend itself to facile predictions
about which theories of damages will suffice. See, e.g.,
_________________________________________________________________
10. As noted, the medical associations previouslyfiled a petition for a
writ of mandamus invalidating plaintiffs' fraud-on-the-market theory as
a matter of law. In denying the writ, we observed that plaintiffs had
represented to the Court that they planned to assemble evidence of
individualized reliance through the discovery process, and that they
would rely on a fraud-on-the-market theory only in those cases where
reliance could not be proven. See In re Orthopedic Bone Screw Prods.
Liability Litig., MDL No. 1014, mem. op. at 8-9 (3d Cir. Nov. 10, 1997)
(unpublished opinion).
24
Parks v. AlliedSignal, Inc., 113 F.3d 1327, 1332 (3d Cir.
1997) ("When addressing causation, Pennsylvania has
rejected the `but for' test and adopted the `substantial
factor' test . . . ."); Dawson v. Bunker Hill Plaza Assocs.,
673 A.2d 847, 853 (N.J. Super Ct. App. Div. 1996)
("Liability attaches not only to the dominating cause but
also to any cause which constitutes at any event a
substantial factor in bringing about the injury.") (internal
quotation marks omitted); Abrahams v. Young & Rubicam,
Inc., 692 A.2d 709, 712 (Conn. 1997) ("[I]t is axiomatic that
proximate cause is an actual cause that is a substantial
factor in the resulting harm.") (internal quotation marks
omitted); State v. Hubka, 480 N.W.2d 867, 869 (Iowa 1992)
("The general rule is that a defendant's conduct is the
proximate cause of injury or death to another if (1) her
conduct is a `substantial factor' in bringing about the harm
and (2) there is no other rule of law relieving the defendant
of liability because of the manner in which her conduct
resulted in the harm.").
We believe the transferor courts are in the best position
to determine whether the applicable state law permits
plaintiffs to recover damages without proving individual
reliance. Accordingly, we decline to dismiss plaintiffs'
claims on this basis.
D. Costs and Sanctions
The medical associations filed cross-motions for costs
and sanctions under 28 U.S.C. S 1927, Fed. R. Civ. P.
54(d), and the court's inherent judicial powers. In support,
they argued that plaintiffs acted in bad faith and needlessly
multiplied the litigation by bringing the conspiracy to
defraud claim despite having no means of proving
individualized reliance. The District Court denied these
motions, finding that defendants had not demonstrated
"willful bad faith" on the part of the plaintiffs. See In re
Orthopedic Bone Screw Prods. Liability Litig., MDL 1014,
Memorandum and Pretrial Order No. 1543, op. at 8-9 (E.D.
Pa. Aug. 13, 1998) ("PTO 1543").
We review the denial of attorney's fees and costs for
abuse of discretion. See Gioioso v. Stuebben, 979 F.2d 956,
959 (3d Cir. 1992). Such an abuse occurs when the court's
25
decision " `rests upon a clearly erroneousfinding of fact, an
errant conclusion of law or an improper application of law
to fact.' " Morgan v. Perry, 142 F.3d 670, 682 (3d Cir. 1998)
(quoting Hanover Potato Prods., Inc. v. Shalala, 989 F.2d
123, 127 (3d Cir. 1993)).
Imposition of attorney's fees and costs under section
1927 is reserved for behavior " `of an egregious nature,
stamped by bad faith that is violative of recognized
standards in the conduct of litigation.' " Baker Indus., Inc.
v. Cerberus Ltd., 764 F.2d 204, 208 (3d Cir. 1985) (quoting
Colucci v. New York Times Co., 533 F. Supp. 1011, 1014
(S.D.N.Y. 1982)). Thus, fees may not be awarded unless
there is "a finding of willful bad faith on the part of the
offending attorney." Baker, 764 F.2d at 209. An award of
fees under the court's inherent powers requires a similar
finding. See Chambers v. NASCO, Inc., 501 U.S. 32, 45-46
(1991) (court may assess fees under inherent powers when
a party has acted " `in bad faith, vexatiously, wantonly, or
for oppressive reasons' ") (quoting Alyeska Pipeline Serv. Co.
v. Wilderness Soc'y, 421 U.S. 240, 258-59 (1975)).
We agree with the District Court that no finding of bad
faith was warranted here. As noted, several of plaintiffs'
claims were premised upon a theory of damages that
defendants characterize as a "fraud-on-the-market" theory.
They contend this theory is so lacking in merit that it
should never have been advanced, and that plaintiffs'
reliance on it needlessly multiplied the proceedings and
incurred wasteful expense. Regardless of whether plaintiffs'
theory of causation is ultimately accepted by transferor
courts, we cannot say the plaintiffs acted in bad faith in
raising it. The Supreme Court has specifically instructed
that courts should be wary of chilling legitimate advocacy
by imposing fees too hastily: "[I]t is important that a district
court resist the understandable temptation to engage in
post hoc reasoning by concluding that, because a plaintiff
did not prevail, his action must have been unreasonable or
without foundation. This kind of hindsight logic could
discourage all but the most airtight claims . . . ."
Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421-22
(1978); accord Baker, 764 F.2d at 208 (bad-faith
requirement is "necessary to avoid chilling an attorney's
26
legitimate obligation to represent his client zealously").
Restraint is particularly important where, as here, the case
presents complex factual and legal issues. See In re
Kunstler, 914 F.2d 505, 523 (4th Cir. 1990) (sanctioning
powers should be exercised with restraint to avoid chilling
"novel factual or legal theories"); Barney v. Holzer Clinic,
Ltd., 110 F.3d 1207, 1213 (6th Cir. 1997) (holding that an
award of fees under section 1927 was not warranted where
the "central issue was one of first impression"); United
States v. Alexander, 981 F.2d 250, 253 (5th Cir. 1993)
(vacating an assessment of sanctions because of"the
absence of authority in this Circuit combined with the
complexity of the issue").
Additionally, we believe the history of this litigation
undermines any claim that plaintiffs acted in "actual" or
"willful" bad faith, as required for an award of fees under
section 1927. Baker, 764 F.2d at 208-09. Early in
consolidated pretrial proceedings, the District Court raised
the issue whether the original omni complaints satisfied the
requirements of Fed. R. Civ. P. 11, which provides for the
imposition of sanctions upon attorneys who submit
complaints lacking a sufficient legal and factual basis. In
response, plaintiffs submitted a 750-page Particularized
Statement of Facts accompanied by numerous exhibits,
explicating in more detail their claims for relief. The District
Court then determined that the complaints did not violate
Rule 11 but still were not pleaded with sufficient
particularity, and granted plaintiffs' leave to replead. See In
re Orthopedic Bone Screw Prods. Liability Litig., MDL No.
1014, Pretrial Order No. 477 (E.D. Pa. Aug. 22, 1996). In
response, the PLC developed amended "form" complaints
that were expressly authorized by the District Court before
being transmitted to the various plaintiffs' attorneys, who
modified them as necessary to suit the particulars of their
clients' cases. Although this history is not dispositive, we
believe it strongly supports the District Court's
determination that plaintiffs' counsel did not act in bad
faith; to the contrary, they responded to the court's request
to cure potential defects in the complaints before
proceeding further.
Finally, we also note that defendants' principal argument
for imposing costs -- namely, that plaintiffs cannot prove
27
that defendants' conduct at the seminars was the
proximate cause of their injuries -- is largely a question of
fact which remains unresolved. Plaintiffs still contend that
individual reliance can be proven in many cases, and we
will not second-guess this representation on the appeal of
a motion for attorney's fees. As the District Court aptly
observed, "If this court imposed sanctions for prosecuting
these claims the court would implicitly engage in fact
finding that is typically reserved for a jury." PTO 1543, at
10. We therefore see no abuse of discretion in the court's
denial of the medical associations' motion for attorney's fees
and costs.
III. CONCLUSION
We hold that the District Court properly dismissed
plaintiffs' conspiracy and concert of action claims based on
violations of the FDCA, because these claims failed to state
a claim upon which relief can be granted. We alsofind no
error in the District Court's denial of defendants' motions to
dismiss. At this stage in the proceedings, it would be
premature to conclude that even if plaintiffs' allegations are
true, defendants' speech at the seminars could not possibly
form the basis of civil liability under the First Amendment.
Similarly, we do not believe plaintiffs' theory of damages is
so devoid of legal support in all jurisdictions that it can be
dismissed outright in consolidated pretrial proceedings.
Defendants, of course, are free to challenge its legal viability
in the transferor courts. We will also uphold the denial of
the medical associations' motions for attorney's fees and
costs.
Accordingly, we will affirm the judgment of the District
Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
28