United States: D. Mass. Applies Causation Analysis To Curtail Restitution

The major sporting event this time of the year is the NCAA basketball tournament. Our money is on Villanova University, because that is where we sent a lot of our money over the last four years, funding the education of the Drug and Device Law Son. Even if we didn't have a Villanova graduate in the family, we'd probably root for that school, because it is just down the road from where we live, it runs an athletic program that manages to be both excellent and clean, and we know many extremely fine people associated with the University. Our money is also on Jalen Brunson as the tournament Most Valuable Player (MVP). [That being said, there is a lot to like in all of the Final Four teams. In particular, the amazing run of Loyola of Chicago, with chaplain Sister Jean, is a great sports Cinderella tale. Plus, the smartest guy in our law school class went to Loyola-Chicago, and is probably right now bragging to his students at USC Law about the inevitability of the Ramblers cutting down the nets at the end.]

If we had to pick an MVP for the area of law in which we practice, we'd choose causation. It is a powerful concept we learned back in our first year of law school, and it probably plays a bigger role in deciding cases than anything else, including duty, breach, damages, or Bexis's beloved preemption. Even when dealing with statutes that do their best to erode such tried and true defenses as reliance, causation can ride in to save the day for our clients. If no other defense seems available, do not give up on causation. It poses fundamental questions of "so what?" "what if?" "but for?" "why?" and "huh?" — and there are lots of plaintiffs who can never answer those questions satisfactorily.

Today's case, United States v. Chin, 2018 WL 1399297 (D. Mass. March 20, 2018), is a criminal case, which (1) might seem a bit far afield from the heartland of what we – and here the royal "we" encompasses most of our readers as well as ourselves – do, (2) explains why today's post was penned by this particular ink-stained wretch, as ex-AUSAs are always quick to glom onto any case where the first listed party is the United States of America, and (3) turns on the all-powerful notion of causation. The defendant was convicted for mail fraud racketeering (RICO), conspiracy, and violations of the federal Food, Drug, and Cosmetic Act. The underlying conduct involved the notorious national spinal meningitis epidemic traced to defective doses of injectable methylprednisolone acetate manufactured by the New England Compounding Center (NECC). The defendant was a supervising pharmacist at NECC. Now it was time for sentencing. The government sought $82 million in restitution to be paid to the families of the deceased and the survivors.

The court observed that "[r]eality casts a cold light on the $82 million request." The defendant was destitute and would never-ever be in a position to pay even a small fraction of the amount sought. The government conceded at oral argument that "any restitution award would be no more than a symbolic gesture." Indeed. This selfsame scenario played out in many courts when we represented the United States. The statutes and sentencing guidelines made restitution a component of sentencing, and the standard presentence report would include a recommendation of restitution. But the standard joke in our office was that we would go out onto the roof of the courthouse and shoot off fireworks if a defendant ever actually paid any restitution. As the government said in Chin, an order of restitution amounts to a mere gesture.

Nevertheless, courts take restitution seriously, as they should. Restitution is required by the Mandatory Victim Restitution Act (MVRA), 18 U.S.C. section 3663A(c)(1)(A)(ii). Restitution is paid to victims, so the Chin court begins with the MVRA's definition of "victim": "a person directly and proximately harmed as a result of the commission of an offense." When we see words such as "directly," "proximately," and "as a result of" we think causation. So did the Chin court. "Directly" and "proximately" signal efforts to cabin the causation concept in some reasonable, predictable fashion. Any law school graduate can think back to the ancient Palsgraf v. Long Island R.R., (1928) case, where New York's high court (per future SCOTUS Justice Cardozo) tried to limit proximate cause via the requirement of foreseeability. Then again, we are also all familiar with how courts over the intervening years have stretched foreseeability to the breaking point, so much so that, as we have said with respect to some decisions, on even a not-so-clear day some judges can foresee forever. But the Chin court actually drew a pretty tight circle around causation. It held that "a loss for restitution purposes must be causally tied to the underlying offense of conviction, in Chin's case, mail fraud and racketeering conspiracy based on predicate acts of mail fraud." The government's calculation of an $82 million restitution award was based on a tabulation of the medical expenses, costs for physical and occupational therapy, lost income, burial expenses, and other expenditures compiled by patients who were injected with the contaminated drugs. But NECC "made no representations to end-users and patients for the purposes of obtaining property (money); rather, it made those misrepresentations ... to the hospitals and clinics that purchased the drugs." The government suggested at oral argument that the word "sterile" on the syringes in question, if seen by a patient prior to injection, would potentially constitute a misrepresentation for mail fraud purposes, there is no evidence in the record to suggest that this ever occurred.

Moreover, in an interesting way, the learned intermediary relationship played a role in cutting off causation in the Chin case. To the extent that patients may have implicitly relied on NECC's representations by relying on their doctors as learned intermediaries, this additional layer of insulation between NECC and the patient further renders any such reliance "too attenuated" to satisfy the "direct causation" standard of the MVRA. Consequently, the Chin court calculated the total restitution award as the loss suffered by the hospitals and clinics that purchased lots of degraded or defective drugs during the life of the racketeering enterprise.

In sum, the Chin case demonstrates the continuing force of the causation requirement. This was a criminal case, and the issue of restitution was at the center. The Chin court's analysis of proximate causation is better and tighter than we typically see in civil cases, and we can, ahem, foresee some litigant attempting to distinguish away Chin on those grounds. But why should there be any difference in the causation analysis? We intend to have the Chin causation analysis in our pocket the next time we litigate the issue, especially if we are in the sometimes challenging First Circuit.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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