Free Bottle with ketchup near red chili pepper on table Stock Photo

Luke Shapiro

Wake Forest University students who take a short drive North of campus might notice a familiar logo on the side of an otherwise nondescript brick building.  The red, lassoing cowboy of “Texas Pete” hot sauce greets visitors to the T.W.  Garner Foods (“Garner Foods”) facility in Winston-Salem, North Carolina.  Locals are proud to share the fun fact that Garner Foods has produced a variety of hot sauces under the Texas Pete label from their North Carolina facility since the early 20th Century.[1]  Unfortunately, not everyone finds this fact so “fun,” and, recently, some were perturbed enough to bring the issue to federal court.

         Phillip White, a California man, is the named plaintiff in a federal class action lawsuit brought against Garner Foods in the Central District of California.[2]   Sometime around September of 2021, Mr. White entered a Ralph’s store in Los Angeles, California and found exactly the hot and spicy ingredient he was looking for: a bottle of Texas Pete Original Hot Sauce.[3]  To Mr. White’s dismay, he wouldn’t find out until far too late that there was “nothing Texas about” the hot sauce he chose.[4]  Mr. White claims that if he had known the sauce’s true origins “he would not have purchased the Product or, would have paid significantly less for it.”[5]

In response, this lawsuit seeks to bring to light that Texas Pete is a Carolinian, righting the wrong done when class members like Mr. White bought sauce thinking otherwise and saving future spicy food lovers from the same fate.[6]  On behalf of two classes, the lawsuit alleges five different counts against Garner Foods, ranging from violations of California state competition and advertising laws to common law breach of warranty claims.[7]

The complaint emphasizes the gravity of Garner Foods’s transgression with a four-page geographical and historical analysis of hot sauce varietals and the significance of Texas hot sauce.[8]  Mr. White informs the court that today’s distinct Texas hot sauce is the result of centuries of crafting, pre-dating Spanish colonization of the territory.[9]  Thus, “it is no surprise that Texas takes great pride in its hot sauce” and out-of-state consumers will pay a premium to taste the tradition in every bottle of genuine Texas hot sauce.[10]

Mr. White alleges that Garner Foods recognized the value of Texas’s stature in the world of hot sauce and sought to capitalize on the demand for Texas hot sauce.[11]  To accomplish this, the complaint suggests that Garner Foods set out to intentionally deceive purchasers by naming and labeling the sauce in a way that suggests it is authentic, made-in-Texas hot sauce.[12]  Among the deceptive components of the label are a single white star, which the complaint claims evokes the Texas “lone star” state flag, and a cowboy with a lasso.[13]  The products’ back labels do indicate that Garner Foods is located in North Carolina, but Mr. White argues that this label is not clear enough, and, if it is, consumers shouldn’t be expected to look at the back label of products they purchase.[14]

Mr. White contests that these facts are enough to show five different legal causes of action.  For a subclass of those who purchased the products in California, the complaint alleges three violations of California law: (1) Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, et seq.); (2) False Advertising Law (Cal. Bus. & Prof. Code §§ 17500, et seq.); and (3) Consumers Legal Remedies Act (Cal. Civ. Code §§ 1750, et seq.).[15]  For a nationwide class of purchasers, the complaint alleges breach of warranty under two theories and unjust enrichment/restitution.[16]  To remedy these claims, Mr. White asks the court for, among others, the following: (1) damages corresponding with how much Mr. White or other class members would have paid for the product if he had known its true origins; (2) punitive damages for the alleged maliciousness of the Garner Foods’ actions; and (3) injunctive relief forcing Garner Foods to immediately cease and desist selling, marketing, distributing the unlawful products and to engage in affirmative ad campaign to “dispel the public misperception.”[17]

In early November 2022, Garner Foods filed a motion to dismiss the entire action.[18]  Procedurally, Garner Foods moves to dismiss based on Federal Rules of Civil Procedure 12(b)(6), 9(b), and 12(b)(1), arguing failure to state a claim, a lack of particularity around the fraud claim, and lack of standing, respectively.[19]  The Rule 12(b)(6) motion rests primarily on the contention that, to a reasonable consumer, the label imagery does not signal  any explicit claim to be from Texas, the back label’s manufacturing location disclosure is more than sufficient to inform geographically-motivated consumers.[20]  Both the complaint and the motion to dismiss reference Garner Foods’ website, which describes the process of coming up with a name as more innocently searching for an ”American” name that connotes spiciness.[21]  Next, the Rule 9(b) motion argues that Mr. White failed to allege sufficient facts about how or why he was misled, leaving any fraud claim wanting.[22]  Finally, the Rule 12(b)(1) motion alleges a lack of standing for injunctive relief.[23]  Citing case law that suggests a named class representative must be likely to be wronged again in a similar way, Garner Foods argues that Mr. White cannot be similarly wronged again because the complaint admits that he is now aware of Texas Pete’s true manufacturing location.[24]

Garner Foods’ motion seems to poke significant holes in each of the complaint’s claims, and it will be interesting to see if this lawsuit makes it out of the motion to dismiss phase, in part or at all.  If the lawsuit is able to survive the motion to dismiss, it appears that it will still be an uphill battle to prevail at trial.  The product labeling,[25] especially in light of the explanation on Texas Pete’s website,[26] is not likely to deceive a reasonable consumer as is required by the California statutes,[27] and can hardly be said to constitute any warranty, express or implied. In sum, Mr. White’s complaint was definitely spicy, but it seems unlikely that consumers will see a rebranded “Carolina Pete” on grocery store shelves any time soon.


[1] Texas Pete, The History of Texas Pete, https://texaspete.com/about/.

[2] Complaint at 1, 4, White v. T.W. Garner Food Co. (C.D. Cal. 2022) (No. 2:22-cv-06503).

[3] Id. at 5.

[4] Id. at 1.

[5] Id. at 5.

[6] Id. at 3.

[7] Id. at 29–45.

[8] Id. at 9–12.

[9] Id. at 11.

[10] Id. at 11–12.

[11] Id. at 2.

[12] Id. at 12.

[13] Id.

[14] Id. at 14, 17.

[15] Id. at 29, 37, 39.

[16] Id. at 42–44.

[17] Id. at 46.

[18] Defendant’s Motion of Notice and Motion to Dismiss at 1, White v. T.W. Garner Food Co. (C.D. Cal. 2022) (No. 2:22-cv-06503).

[19] Id. at 4–5.

[20] Id. at 2, 7–14.

[21] Complaint at 14; Defendant’s Motion of Notice and Motion to Defense at 12; Texas Pete, The History of Texas Pete, https://texaspete.com/about/.

[22] Defendant’s Motion of Notice and Motion to Defense at 15–16.

[23] Id. at 21–22.

[24] Id. at 22.

[25] Complaint at2, 14.

[26] Texas Pete, supra note 1.

[27] Defendant’s Motion of Notice and Motion to Defense at 6  (citing Steinberg v. Icelandic Provisions, Inc., 2022 WL 220641, at *3 (N.D. Cal. Jan. 25, 2022)).


Photo by Alena Shekhovtcova via Pexels

By Luul Lampkins

Earlier this year, Vans, Inc. (“Vans”) brought a trademark infringement lawsuit against MSCHF Product Studio Inc. (“MSCHF”) seeking a preliminary injunction related to its Wavy Baby sneakers.[1] In response, a federal judge ordered MSCHF to stop shipping the shoes and to cancel any outstanding orders.[2] Vans argued that the Wavy Baby sneakers “blatantly and unmistakably incorporate[d] Vans’ iconic trademarks and trade dress” in violation of the Lanham Act.[3]

MSCHF—a Brooklyn-based art collective—designed the Wavy Baby sneakers in collaboration with rapper “Tyga.”[4] Aside from Wavy Baby’s undulating soles and “waviness,” the “non-functional” shoes seem to resemble Vans’ Old Skool sneakers.[5] MSCHF’s founder and CEO, Gabriel Whaley, described the sneakers as a “‘liquified’ version of a classic skate shoe silhouette, but with almost all function warped and stripped away.”[6] Further, Tyga posted a video suggesting that the Old Skools could be transformed into Wavy Baby by heating them in the microwave.[7]

This is not the first time that MSCHF’s shoes have been at the center of a legal dispute. In 2021, Nike sued MSCHF over its “Satan Shoes,” arguing that they were “likely to cause confusion and dilution and create an erroneous association between MSCHF’s products and Nike.”[8] The parties ultimately settled one week after a judge granted Nike a temporary restraining order against MSCHF.[9]

In response to this lawsuit, MSCHF asserted a First Amendment defense, which is “an affirmative defense that requires a court to balance the defendant’s expressive interests against the public’s interest in avoiding confusion.”[10] MSCHF argued that Wavy Baby sneakers are protected under the First Amendment because they constitute social commentary that “challenged the sneakerhead culture Vans participates in, questioned consumerism, and confronted the tension between a virtual and digital world.”[11] MSCHF also explained that the shoes were meant to be a “parody and critique [of] modern culture.”[12]

The Second Circuit Court of Appeals heard this case on September 28, 2022. On appeal, MSCHF’s attorney argued that the district court failed to follow the Second Circuit’s precedent in Rogers v. Grimaldi.[13] In Rogers, the court articulated a two-prong test for the protected uses of trademarks. First, the work at issue must be “artistically relevant.”[14] Second, the work at issue may not be explicitly misleading.[15]

MSCHF contended that the Wavy Baby sneakers are protected under Rogers because they satisfied both prongs of the test. First, MSCHF argued that Wavy Baby is a work of artistic expression.[16] To support this position, MSCHF pointed to artist Daniel Arsham’s statement: “[t]here is not a single artist who would say MSCHF is not an artist, or that the Wavy Baby sneakers are not art.”[17] Further, MSCHF argued that Wavy Baby’s references to Vans’ marks are artistically relevant because they constituted “a parody of and commentary on Vans, whether or not Vans thinks MSCHF’s message was successfully communicated.”[18] MSCHF explained that there was an “artistic—i.e., noncommercial—association” between MSCHF and Vans rather than an “inten[t] to associate with the mark to exploit the mark’s popularity and good will.”[19]

MSCHF also argued that the Wavy Baby sneakers were not explicitly misleading.[20] Vans disagreed, arguing instead that the sneakers were likely to give rise to “consumer confusion,” thus rendering the sneakers “explicitly misleading as to source.”[21] MSCHF contended that Vans misunderstood the holding in Rogers, which explained that “a use is not explicitly misleading unless it is an ‘explicit indication,’ ‘overt claim,’ or ‘explicit misstatement as to the source of the artwork.”[22] To support its contention, MSCHF explained that Wavy Baby shoes are “larger and have a far different visual impression than Old Skool sneakers, and they come with a prominent parody warning label.”[23]

This case has brought up questions about the scope of the Second Circuit’s opinion in Rogers. While Vans argues that “courts have concluded that commercial products fall outside Rogers’ scope,” MSCHF asserts that the First Amendment still applies in this context.[24]

As the parties to this lawsuit await an ultimate decision from the Second Circuit, it is important to note the broader implications of this decision. This case illustrates the difference between a parody and a satire. Not all references to an existing mark are parodies. A parody must “make it clear that it does not originate from the mark owner” by commenting on the mark.[25] Satire, on the other hand, “comments on society at large or social trends in general” and must “justify its use of the mark beyond just the humor of doing so.”[26]

Parodies and satire are generally considered protected speech—even if they are communicated through a pair of sneakers. Nonetheless, these references to existing marks are only entitled to First Amendment protection if they comport with the requisite standards.


[1] Vans, Inc. v. MSCHF Prod. Studio, Inc., 22CV2156WFKRML, 2022 WL 1446681 (E.D.N.Y. Apr. 29, 2022).

[2] Nina Pullano, Vans-Inspired Sneaker Orders Held Up by Federal Judge, Courthouse News Serv. (Apr. 29, 2022), https://www.courthousenews.com/vans-inspired-sneaker-orders-held-up-by-federal-judge/.

[3] Complaint at 3, Vans, Inc., 2022 WL 1446681, https://www.courthousenews.com/wp-content/uploads/2022/04/22cv2156.pdf.

[4] David H. Siegel, The Usual MSCHF, Nat’l Law Rev. (Apr. 29, 2022), https://www.natlawreview.com/article/usual-mschf.

[5] Id.

[6] Declaration of Gabriel Whaley at 19, Vans, Inc., 2022 WL 1446681, https://www.documentcloud.org/documents/21755821-vans-v-mschf-whaley-declaration.  

[7] Tyga (@tyga), TikTok (Apr. 11, 2022), https://www.tiktok.com/@tyga/video/7085456096751799598?is_from_webapp=v1&item_id=7085456096751799598.  

[8] Bryan Pietsch, Nike Sues Over Unauthorized ‘Satan Shoes,N.Y. Times (Mar. 28, 2021), https://www.nytimes.com/2021/03/28/style/nike-satan-shoes-lil-Nas-x.html

[9] Id.

[10] Reply Brief for Defendant-Appellant at 14–15, Vans, Inc., 2022 WL 1446681.

[11] Declaration of Gabriel Whaley, supra note 6, at 19.

[12] Id.

[13] 875 F.2d 994 (2d Cir. 1989). See Oral Argument at 6:28, Vans, Inc., 2022 WL 1446681, https://www.ca2.uscourts.gov/decisions/isysquery/4e5af85a-87c8-4dbe-93ab-35e9b09a0b90/51-60/list/.

[14] Rogers v. Grimaldi, 875 F.2d 994, 1000 (2d Cir. 1989)

[15] Id.

[16] Reply Brief for Defendant-Appellant, supra note 10, at 3.

[17] Id.

[18] Id. at 22.

[19] Id. at 23.

[20] Id. at 24.

[21] Id.

[22] Id.

[23] Id. at 25.

[24] Id. at 11.

[25] Siegel, supra note 4.

[26] Id.

Free Red Blue and Yellow Textile Stock Photo

Isaac Hopkin

Elon Musk (“Musk”) has a taste for the dramatic.[1]  His most recent example was a hostile takeover bid to purchase the social media app Twitter, only to torpedo the deal three months later,[2]  just to opt back into the deal.[3] When Musk backed out, Twitter sued for specific performance of the agreement.[4]  Nearly two months after the complaint was filed a former employee, Peiter “Mudge” Zatko, filed a Whistleblower Report to the SEC, DOJ, and FTC alleging inter alia that Twitter violated a settlement with the FTC, had serious data protection problems, had not followed protocols with bots, and lied in filings with government agencies.[5]  Musk moved to amend his Verified Counterclaims to include the Whistleblower Report, and the Court of Chancery granted the motion.[6]  Now Musk is back in, but the dispute is not yet over,[7] and if the deal falls through again the Whistleblower Report could play a large role.

Is this Whistleblower Report significant to Musk if the merger deal falls through again?  Case law and the agreement itself suggest yes.

Case Law

Twitter already faced a large hurdle to enforce specific performance.[8]  Now, if the allegations contained in the report are true, or plausible, specific performance may be impossible.[9]  Specific performance is a dramatic remedy that only should be granted when there is no adequate remedy at law.[10]  It is an equitable remedy designed to compel the breaching party to perform its obligations.[11]  Specific performance is “matter of grace” that is within the discretion of the Court of Chancery.[12]  A party seeking to enforce a Merger Agreement must prove by a preponderance of the evidence that the parties to the contract allowed for specific performance.[13]

The party seeking specific performance then must prove by clear and convincing evidence (1) that a valid contract exists; (2) it is ready, willing and able to perform under the contract; and (3) the balance of the equities tips in its favor.[14]  A court will not grant specific performance if the party seeking the remedy has itself either breached the agreement or not fulfilled its obligations.[15]  A defendant opposing specific performance need only prove by the preponderance of the evidence that the plaintiff failed to meet the terms and conditions in the contract.[16]

Contract

In addition, the conditions precedent granting specific performance in the contract may have been violated if the Whistleblower Report is true or plausible.  The contract does allow for specific performance if certain conditions are fulfilled.[17]  For Twitter to maintain specific performance as a remedy against Musk’s breach, Twitter may not experience a “Material Adverse Effect within the meaning of the Merger Agreement.”[18]  The relevant “Material Adverse Effects” include compliance with applicable laws, SEC disclosures, disclosure controls and procedures, litigation including potential lawsuits or government investigations, and intellectual property infringement.[19]

Analysis

Here, the Whistleblower Report may preclude specific performance.  The Whistleblower Report alleges that Twitter knowingly violated a settlement agreement with the FTC, had serious data protection problems, had not followed protocols with bots, and lied in filings with government agencies.[20]  All of which would breach the Merger Agreement. Twitter already faced a large legal hurdle to enforce specific performance because of how rarely it is granted.[21]  Now the Whistleblower Report gives Musk more ways to avoid specific performance.

As it pertains to Musk, he can escape specific performance if he proves some sort of breach of the Merger Agreement, and the Whistleblower Report assists Musk in this defense.  First, it would show that the conditions precedent were not fulfilled and thus the contract would not allow specific performance.  Without the remedy available Twitter would fail on the first prong of the standard. Second, it would demonstrate that Twitter was not willing, able, and ready to comply with the agreement, because the platform is not what it represented.  Even if Twitter could prove there was a valid contract, the Whistleblower Report argues that Twitter does not function as advertised, and includes security breaches in privacy, security, and other areas.[22]   If this is true, although Twitter is ready and willing to comply with the contract it would not “be able” to perform as agreed.  For example, Twitter represented in the Merger Agreement that the company had no changes in its business since January 1, 2022, and that it had no undisclosed liabilities.[23] Twitter cannot perform these if the Whistleblower Report is true.   As such, the Whistleblower Report could be Musk’s saving grace against specific performance.

The entire tale of Musk and Twitter has been a spectacle, in which Musk has used his large presence to bully Twitter and its shareholders.[24]  Just today it was reported that Musk had a change of heart and wants to go through with the deal.[25]  The reasons for the sudden about-face are varied, ranging from he knew he was going to lose[26] to Twitter securing the right to inspect Musk’s alleged communications Peiter Zatko.[27]  Whatever they may be, the deal is not yet finished, and Twitter is not going to dismiss the complaint on Musk’s word.[28]  If the dispute falls through again, the same dispute will remain with Chancellor McCormack[29] and the Whistleblower Report could serve as Musk’s main defense against specific performance.

Musk created the situation,[30] however, the Whistleblower Report may help him avoid performance. 

This is not to speak to other potential remedies Twitter may be granted – as far as specific performance goes, it seems unlikely given more evidence that Twitter will overcome this hurdle.  Musk still must prove by the preponderance of the evidence that the report is true, but at a minimum the report gives Musk another arrow in his quiver to avoid the situation he created and the remedy Twitter is seeking.


[1] See e.g., Wikipedia, Elon Musk, Wikipedia (explaining many big bold projects, controversial tweets, a goal to fly to Mars, and a leadership style that encourages dialogue but also punishes employees impulsively) https://en.wikipedia.org/wiki/Elon_Musk (last visited September 30, 2022, 5:10 PM).

[2] See generally Grace Kay & Katie Canales, A Timeline of Elon Musk’s 9-Month Chaotic Saga to buy Twitter, from him Tweeting a Poop Emoji at the CEO to a Whistleblower Appearing Before Congress, Business Insider (Sept. 13, 2022, 1:32 PM), https://www.businessinsider.com/what-happened-with-elon-musk-twitter-timeline.

[3] David Faber et al., Twitter Shares Surge 22% after Elon Musk Revives Deal to Buy Company at Original Price, CNBC (last updated Oct. 4, 2022 at 4:20 PM) https://www.washingtonpost.com/technology/interactive/2022/twitter-whistleblower-sec-spam/.

[4] Grace Kay & Katie Canales, supra note 2.

[5] Joseph Menn et al., Former Security Chief Claims Twitter Buried ‘Egregious Deficiencies’, Washington Post (last updated Aug. 23, 2022 at 12:27 PM) https://www.washingtonpost.com/technology/interactive/2022/twitter-whistleblower-sec-spam/.

[6] Twitter, Inc v. Musk, C.A. No. 2022-0613-KSJM at *1-4 (Del. Ch. Sept. 7, 2022) (McCormick, C.). It should be noted that amending under Delaware law is a “low bar” so granting the amendment itself is not legally significant. Id. at *2-3.

[7] See Jeff Montgomery and Leslie Papas, Musk Says he will Close $44B Twitter Deal on Original Terms, Law 360 (Oct. 4, 2022, 1:25 PM) (“Musk’s condition on what the Chancery Court does gets more interesting. A mere stay of the action would not give Twitter the ironclad guarantee of closing that it would want, and delaying the Oct. 17 trial date is something Musk has unsuccessfully sought two times now. So Twitter, and the court have to worry about this being a delay gambit.”) https://www.law360.com/articles/1537124?from_lnh=true.

[8] See generally 3 Voss on Delaware Contract Law § 15.33 (2022).

[9] See discussion below Infra, FN 10-20

[10] Millien v. Popescu, C.A. No 8670-VCN, memo. Op. at *33 (Del. Ch. Jan. 31, 2014) (Noble, V.C.)

[11] Halpin v. Riverstone Nat’l, Inc., C.A. No. 9796-VCG, memo. op. at *10 (Del. Ch. Feb. 26, 2015) (Glasscock, V.C.).

[12] Currax Pharmaceuticals LLC v. Optinose AS, C.A. No. 2020-1022-MTZ, memo. op. at *9. (Del. Ch. Jan 22, 2021) (Zurn, V.C.).

[13] United Rentals, Inc. v. RAM Holdings, Inc., C.A. No. 3360-CC, 937 A.2d 810, 834, n.112 (Del. Ch. Dec. 21, 2007) (Chandler, C.)

[14] Szambelak v. Tsipouras, C.A. No 936-VCN, Itr. op. at *14-15 (Del. Ch. Nov. 29, 2007) (Noble, V.C.) (emphasis added)

[15] Wells v. Lee Builders, Inc., 99 A.2d 620, 621 (Del.1953); see also Capital Bakers, Inc. v. Leahy, 178 A. 648, 650 (Del. Ch. 1935) (“Should the complainant . . .  who has violated the contract be afforded the injunctive aid of this court to restrain the defendant from violating it? As a general proposition, one who himself has breached a contract has no standing in equity to compel the other party to perform it.”).

[16] Hazen v. Miler, C.A. No. 1292-S (Del. Ch. Nov. 18, 1991) (Jacobs, V.C.)

[17] Exhibit 17 to Plaintiff’s Opposition to Defendants’ Motion for Leave to Amend Their Pleading and Extend the Case Schedule, at 70-71, Twitter, Inc v. Musk, C.A. No. 2022-0613-KSJM (Del. Ch. July 12, 2022) (§ 9.9) [hereinafter Merger Agreement].

[18] Id. at 60 (§ 7.2(c)).

[19] Id. at 24-29 (§§ 4.5, 4.6, 4.8, 4.11, 4.14).

[20] Joseph Menn et al., supra note 5.

[21] See Anthem, Inc. v. Cigna Corp., C.A. No. 2017-0114-JTL, Trans. At *9-10 (Del. Ch. May 11, 2017) (“An order compelling closing has only been issued once. . .”)

[22] Joseph Menn et al., supra note 5.

[23] Merger Agreement at 26 (§§ 4.9, 4.10).

[24]Complaint, at 1, Twitter, Inc v. Musk, C.A. No.2022-0613-KSJM (Del. Ch. July, 12, 2022).

[25] David Faber et al., supra note 3.

[26] See Jef Feely et al., Musk Revives $44 Billion Twitter Bid, Aiming to Avoid Trial, Bloomberg (last updated Oct. 4, 2022 at 3:43 PM) (“Even with the late emergence of a Twitter whistleblower who alleged executives weren’t forthcoming on security and bot issues, there were concerns Musk’s side would not be able to prove a material adverse effect, the legal standard required to exit the contract.”) https://www.bloomberg.com/news/articles/2022-10-04/musk-proposes-to-proceed-with-twitter-deal-at-54-20-a-share. While specific performance was an unlikely remedy for Twitter given the large hurdle Musk could still face other forms of liability, where he has to pay Twitter billions, a plausible reason for going through with the deal was paying at or near what he would pay anyway and get the asset in return.

[27] Jeff Montgomery, Twitter gets ok to Probe Musk’s Alleged Anonymous Source, Law 360 ( Oct. 4, 2022, 10:37 AM) https://www.law360.com/articles/1536975?from_lnh=true.

[28] Jeff Montgomery and Leslie Papas, supra note 7.

[29] Id.

[30] Grace Kay & Katie Canales, supra note 2.


Photo by Brett Joran via Pexels

By Carli Berasi

Of the 2,428,213,158 acres that make up the land area of the United States,[1] a mere twelve percent is protected land that “has been conserved as national parks, wilderness areas, permanent conservation easements, state parks, national wildlife refuges, national monuments, or other protected areas.”[2]  Protected lands, which comprise twenty-four percent of the United States’ land mass, benefit from safeguards by the United States for such purposes as nature conservation, recreation, grazing, and wildlife defense.[3]  As such, the government (both at the federal and state level) can protect and regulate activities that occur in these areas, including conservation, recreation, and measured commercial activity.[4]  

Alaska only encompasses 365 million acres of the United States’ total land area, yet singularly contributes to over half of the United States’ “federally-designated wilderness.”[5]  Eighty-eight percent of Alaska is owned by the public, and it possesses “[thirty-two] state game refuges, critical habitat areas, and wildlife sanctuaries across the state, totaling over 3.2 million acres.”[6]  Following the passage of the Alaska National Interest Lands Conservation Act (“ANILCA”) in 1980, 148 million acres in Alaska were “dedicated to conservation purposes . . . constituting 70 percent of all national park lands in America, 80 percent of wildlife refuge acreage, and 53 percent of designated Wilderness in the National Wilderness Preservation System.”[7]  As a result, Alaska possesses the coveted status of being one of the most environmentally protected states[8] and functions as a haven for the ecological diversity it possesses.[9]

Many of the protected land areas, as well as residential and commercial areas, in Alaska are inaccessible by visitors through roadways.[10]  For example, only three of the eight national parks in Alaska are “accessible by road.”[11]  Further, “[a]s many as 8 out of 10 of Alaska’s communities are not connected to the road system” established in Alaska.[12]  This means that Alaska’s visitors and residents (of which there are 724,357—firmly securing its spot on the list of least populated states[13]) can be faced with significant accessibility concerns associated with living in and traveling within the state.[14]  As one article noted, “Alaska is roughly twice the size of Texas, with a road system about the size of Hawaii’s.  This means that the vast majority of Alaska cannot be accessed by highway vehicle.”[15]  Startlingly, this amounts to a mere twenty percent of Alaska being “accessible by roads.”[16]

While some might view Alaska’s lack of accessibility as a small price to pay for the adventurous charm of the “Last Frontier’s” remote, rugged, and awe-inspiring landscape, as well as flourishing wildlife,[17] others focus on the pitfalls associated with a more “remote” way of life.[18]  While it is acknowledged that tourism activities resulting from the allure of Alaska’s protected landscape has substantially bolstered the state’s economy, “many Alaskans still believe federal management is too restrictive and has held back potential growth in tourism and other industries.”[19]  Further, the inaccessibility of some remote towns in Alaska creates obstacles for residents to obtain basic provisions.[20]

In 2018, these two perspectives collided when the United States government and King Cove Corporation structured a land-exchange agreement.[21]  The land exchange would give King Cove Corporation a plot of land within Izembek National Wildlife Refuge (“the Refuge”) for the purpose of building a twelve-mile road to connect King Cove with Cold Bay.[22]  In response to the agreement, the Friends of Alaska National Wildlife Refuges, among other conservation groups, filed a lawsuit against the Trump Administration to prevent the swap and construction, asserting that the agreement “will result in the removal of designated Wilderness from the Refuge for the purpose of constructing a road through the heart of Izembek.”[23]

Izembek National Wildlife Refuge is not only a wildlife haven but also has been a protected area since 1960 due to “its ecologically unique habitat and wilderness characteristics.”[24]  The Refuge is 315,000 acres,[25] and it is also home to many “federally-protected species,” including the northern sea otter and the Stellar sea lion, as well as migratory fowl, brown bears, and caribou.[26]  Opponents of the land-swap and road assert both legal arguments and environmental concerns against the land exchange, such as that sanctioning the land exchange violated ANILCA, since “the exchange does not meet ANILCA’s conservation purposes or the specific purposes of Izembek Refuge to protect wilderness and wildlife values.”[27]  Additionally, opponents of the road “have long-standing interests in protect[ing] Izembek from a land exchange and road construction . . . includ[ing] preserving and enjoying the wildlife, habitat, and wilderness values of Izembek . . . .”[28]  Notably, prior to the Trump Administration’s agreement, the Obama Administration had years earlier rejected such an arrangement due to similar concerns, as the Interior Secretary stated that “the road ‘would lead to significant degradation of irreplaceable ecological resources that would not be offset by the protection of other lands to be received under an exchange,’” and “there were other ways to get from one town to the other.”[29]

King Cove and Cold Bay, which are “two remote towns on the Aleutian Islands archipelago,” can currently only reach each other via air or sea travel, and this new road through the Refuge would be the first road connecting the two areas.[30]  Significantly, the road would enable King Cove residents to reach Cold Bay’s “larger, all-weather airport to ‘facilitate medical evacuations.’”[31]  King Cove residents believe this is necessary, as its local airport “is small and often closed by bad weather conditions . . . .”[32]  

Initially, the federal district court ruled in favor of the plaintiffs, “void[ing] [the] land exchange deal,” as the government did not provide adequate justification for now engaging in the agreement, since the government had entered a “previous decision that alternatives to a road exist and that road would cause significant environmental harm.”[33]  Following this ruling,  the U.S. Interior Department entered into a new agreement with King Cove Corporation, similar to the original land-swap arrangement, differing in that “the swap is not limited to 500 acres, and the agreement does not say the road is limited to noncommercial use—though it does specify it would be unpaved.”[34]  Again, a lawsuit was filed to prevent the land-swap agreement and thus the road from being built, alleging that “the justification [for the new swap agreement] is still inadequate.”[35]  The plaintiffs emphasized not only the ecological significance of the land, but also that King Cove is so remote that a road would not eliminate their safety concerns.[36]  Proponents countered that “the road would be passable nearly all the time and is the only practical option.”[37]  Once again, the district court found in favor of the plaintiffs, as “the administration’s new justification for the swap ‘offers no new information or data to justify his contrary finding that the value of the added acreage to the refuge system counters the negative effects of a road through Izembek . . . .’”[38]

However, in March 2022, the Ninth Circuit Court of Appeals reversed course from the previous district court decisions. The court stated that “the value of a road to the King Cove community outweighed the harm that it would cause to environmental interests . . . ”[39] and held that the government “did not violate ANILCA because ANILCA’s protections would no longer apply with the completion of the exchange and the lands are then private . . . [and the district court] erred in finding that ANILCA’s purposes exclude social and economic concerns and that the Secretary has broad discretion to reverse course on policy decisions.”[40]  In response to the decision, the plaintiffs have committed to “continue the fight to save the Izembek Refuge.”[41]

This case demonstrates the tension between infrastructure and progress and preserving our nation’s protected lands.  While the proposed road through Izembek may seem inconsequential at only twelve miles, it presents significant concerns that such development might result in a slippery slope towards a pattern of building infrastructure in environmentally protected areas.  As noted by the Trustees for Alaska, “[a]llowing a road through Izembek would set a precedent that would imperil the entire Refuge System.”  When alternatives exist, therefore, we must safeguard, respect, and protect our designated public lands.


[1] State Area Measurements and Internal Point Coordinates, United States Census Bureau, https://www.census.gov/geographies/reference-files/2010/geo/state-area.html (Dec. 16, 2021).

[2] Matt Lee-Ashley et al., How Much Nature Should America Keep? cap (Aug. 6, 2019) https://www.americanprogress.org/article/much-nature-america-keep/.

[3] America’s Protected Areas, ESRI, https://storymaps.esri.com/stories/2017/protected-areas/ (last visited Mar. 30, 2022).

[4] Id.

[5] Who Owns Alaska?,  Resource Review 1, 3 (n.d.),  https://rdc.memberclicks.net/assets/Resource-Reviews/rr.se.whoownsalaska.2009.pdf (Specifically, fifty-eight million acres of the 109.5 million total acres of “federally-designated wilderness” exist in Alaska.).

[6] Conservation Areas, Alaska Department of Fish and Game, https://www.adfg.alaska.gov/index.cfm?adfg=conservationareas.main#:~:text=Alaska%20contains%20365.5%20million%20acres,of%20fish%20and%20wildlife%20habitats (last visited Mar. 30, 2022).

[7] Who Owns Alaska?, supra note 5, at 2.

[8] Annalise Mantz, States that Are Conserving the Most Land, Stacker (Sept. 10, 2018),  https://stacker.com/stories/1614/states-are-conserving-most-land.

[9] About the Region, National Park Service, https://www.nps.gov/locations/alaska/about-the-region.htm (last visited Mar. 30, 2022).

[10]Alaska’s National Parks & Public Lands, Alaska.Org, https://www.alaska.org/destinations/parks-and-public-lands#:~:text=3%20National%20Parks%20are%20accessible,a%20boat%20or%20air%20taxi (last visited Mar. 30, 2022).

[11] Id.

[12] Infrastructure for All Alaskans, InfrastructureReportcard.org, https://www.infrastructurereportcard.org/wp-content/uploads/2017/02/Alaska-RC.pdf (last visited Mar. 30, 2022).

[13] US States – Ranked by Population 2022, World Population Review, https://worldpopulationreview.com/states (last visited Mar. 30, 2022).

[14] Infrastructure, supra note 12 (stating that “Large portions of Alaska are only accessible by air or water”).

[15] Accessing Alaska: What’s the Best Way to Get Around, Alaska Outdoors Supersite,  https://alaskaoutdoorssupersite.com/accessing-alaska (last visited Mar. 30, 2022).

[16] Liz, Transportation in Alaska, Golden North Van Lines (July 11, 2019), https://www.goldennorthvanlines.com/transportation-in-alaska/.

[17] Kraig Becker, 7 Reasons Why Alaska is Still ‘The Last Frontier’, Men’s Journal,  https://www.mensjournal.com/travel/7-reasons-alaska-still-last-frontier/#:~:text=But%20perhaps%20the%20most%20well,close%20of%20the%2019th%20century (last visited Mar. 30, 2022).

[18] Alex DeMarban, Federal Appeals Court Rules in Favor of Village’s Efforts to Extend a Road Through Alaska’s Izembek National Wildlife Refuge, Anchorage Daily News (Mar. 16, 2022), https://www.adn.com/alaska-news/2022/03/16/court-rules-in-favor-of-villages-efforts-to-extend-a-road-through-alaskas-izembek-national-wildlife-refuge/.

[19] Who Owns Alaska?, supra note 5.

[20] Zachary Crockett, How a Remote Alaska Town Gets Its Groceries, Hustle (May 3, 2020),  https://thehustle.co/how-a-remote-alaska-town-gets-its-groceries/.

[21]Dan Joling, Deal Reached on Land Swap for Road Through Izembek Wildlife Refuge, Anchorage Daily News (July 24, 2019), https://www.adn.com/alaska-news/rural-alaska/2019/07/24/deal-reached-for-land-swap-for-road-through-izembek-wildlife-refuge/.

[22] Id.

[23] Complaint at 6, Friends of Alaska National Wildlife Refuges v. Zink (D. Alaska 2018) (No. 3:18-cv-00029-TMB), https://www.biologicaldiversity.org/programs/public_lands/pdfs/Izembek-2018-01-30-Complaint.pdf.

[24] Complaint, Friends of Alaska National Wildlife Refuge, 3:18-cv-00029-TMB at 6.

[25] Hillel Aron, Controversial Road on Alaska Peninsula Gets Another Chance After Ninth Circuit Steps In, Courthouse News Service (Mar. 16, 2022) https://www.courthousenews.com/controversial-road-on-alaska-peninsula-gets-another-chance-after-ninth-circuit-steps-in/.

[26] Complaint at 10–11, Friends of Alaska National Wildlife Refuges v. Zink (D. Alaska 2018) (No. 3:18-cv-00029-TMB.

[27] Press Release, Chessie Sharp, Friends of Alaska National Wildlife Refuges, Izembek (June 7, 2020), https://alaskarefugefriends.org/izembek-press-release/.

[28] Complaint at 6, Friends of Alaska National Wildlife Refuges v. Zink (D. Alaska 2018) (No. 3:18-cv-00029-TMB).

[29] Aron, supra note 25.

[30] Id.

[31] Id.

[32] Id.

[33] Court Win Protects Izembek!, Trustees for Alaska (Mar. 29, 2019), https://trustees.org/court-win-protects-izembek/.

[34] Liz Ruskin, It’s Back: U.S. Interior Dept. Signs New Land Deal for King Cove Road, KTOO (July 23, 2019),  https://www.ktoo.org/2019/07/23/its-back-u-s-interior-dept-signs-new-land-swap-deal-for-king-cove-road/.

[35] Liz Ruskin, Environmental Groups File New Lawsuit to Block New Izembek Land Swap Deal, KTOO (Aug. 7, 2019),  https://www.ktoo.org/2019/08/07/environmental-groups-file-new-lawsuit-to-block-new-izembek-land-swap-deal/.

[36] Id.

[37] Id.

[38] Laura Bies, Court Halts Road Through Izembek National Wildlife Refuge, The Wildlife Society (June 10, 2020), https://wildlife.org/court-halts-road-through-izembek-national-wildlife-refuge/.

[39] Aron, supra note 25.

[40] Jamie Rappaport Clark, Ninth Circuit Ruling Threatens Land, Water, Wildlife in Izembek Refuge, Defenders of Wildlife (Mar. 16, 2022) https://defenders.org/newsroom/ninth-circuit-court-ruling-threatens-land-water-wildlife-izembek-refuge.

[41] Id.

Classroom, School, Education, Learning, Lecture

Danny Cundiff

The Constitution of Ohio states, “[t]he general assembly shall make such provisions, by taxation, or otherwise, as, with the income arising from the school trust fund, will secure a thorough and efficient system of common schools throughout the state . . . . ”[1]  Under a “thorough and efficient system,” it is “the state’s duty to provide a system which allows its citizens to fully develop their human potential” while “rich and poor people alike are given the opportunity to become educated so that they may flourish . . . . ”[2]  Despite the constitutional mandate that “it is the state’s obligation to fund education … the legislature has left much of that responsibility upon local school districts.”[3]  Ohio’s public schools, contrary to most public schools in the United States, are primarily funded locally through property taxes.[4]   As a result, there is inequity between school districts in affluent areas with higher property tax revenues and poorer areas with much lower property tax revenues,[5] which “starved” schools for funds and created anything but a “thorough and efficient” school financing scheme.[6]  Therefore, twenty five years ago, the Ohio Supreme Court held that the state’s public school financing system violated the Ohio Constitution.[7]  However, the same system is still in use today,[8] which begs the question: How?

Three years after its first holding, DeRolph made its way to the Ohio Supreme Court again in DeRolph II.[9]  The State claimed that it had now enacted new legislation that “[met] and even exceed[ed]” the “thorough and efficient” system requirement.[10]  In DeRolph I, the Court identified four aspects of the school-funding scheme that needed to be eliminated:

(1) the operation of the School Foundation Program, (2) the emphasis of Ohio’s school funding system on local property tax, (3) the requirements of school district borrowing through the spending reserve and emergency school assistance loan programs, and (4) the lack of sufficient funding in the General Assembly’s biennium budget for the construction and maintenance of public school buildings.[11]

DeRolph v. State, 728 N.E.2d 993, 998 (Ohio 2000) (DeRolph II).

Specifically, the Court noted in DeRolph II that, while funding systems that rely too much on local property taxes are “extremely difficult to rectify,” they “run counter to [Ohio’s] Constitution’s explicit requirement for a statewide system of public schools.”[12]  Finally, the Court recognized that this problem “underlies most of the other deficiencies in Ohio’s school system.”[13]  In neither DeRolph I nor DeRolph II did the Ohio Supreme Court instruct the General Assembly as to the specifics of new legislation.[14]

Instead, in DeRolph I, it recognized that creation of an entirely new funding structure would take time and stayed the effect of its decision for twelve months.[15]  In DeRolph II, the Court noted that the General Assembly’s new formula was “almost identical to its predecessor,” which conflicted with the Court’s mandate from DeRolph I requiring a “complete systematic overhaul” with respect to school financing.[16]  While the Court recognized the need for studies, experts, goals, and priorities, each of which required “hard choices,” the Court again declined to instruct the General Assembly on how to form a “thorough and efficient” funding structure for public schools.[17]  Three years after DeRolph II, the Court reiterated that it was up to the General Assembly to determine what the new funding structure would be and ended any further litigation surrounding DeRolph without a new funding structure.[18]

Since DeRolph I, DeRolph II, and Lewis, nothing has changed in Ohio, and the status quo continues to be, “[t]he more affluent the community, the better the education.”[19]  A former justice of the Ohio Supreme Court opined that inaction amounted to “[a]bsolute thievery,” stating that “[h]undreds of millions of dollars of education funding were stolen from the children, and the legislature did nothing.”[20]

The average school district in Ohio spends approximately $12,500 per student,[21] but that number hardly paints the entire picture.  For example, “Cleveland Municipal Schools spend $11,000 per student, while Orange Schools spend $20,000 per student,”[22] despite the two cities being separated by just 17.5 miles.[23]  Further, Wickliffe City Schools spend just $2,000 per student, the lowest in the state.[24]  The highest expenditure per student in Ohio belongs to Vanlue Local Schools, which spend over $20,000 per student, more than ten times the amount Wickliffe City Schools spends per student.[25]  This disparity clearly cuts against the mandated “thorough and efficient” funding for public education, and it is no surprise that Vanlue Local Schools have a higher performance index than Wickliffe City Schools.[26]

The funding scheme for public education in Ohio has been in need of revision for a very long time.  The courts have recognized this, but have not taken concrete steps to remedy the problem.[27]  The problem has even advanced to litigation between school districts, as public schools fight to obtain funding through tax revenue in a system that has already been found unconstitutional.[28]  Therefore, instead of investing their money into educating the next generation, public schools have been reduced to litigating over tax revenue from a 405-acre tract of land.[29]  The General Assembly, pursuant to the Ohio Supreme Court’s mandate, must enact a “thorough and efficient” funding structure for Ohio’s public schools to ensure that a sound, equal education can be had anywhere in the state, and “rich and poor people alike are given the opportunity to become educated so that they may flourish . . . . ”[30]


[1] Ohio Const. art VI. § 2.

[2] DeRolph v. State, 677 N.E.2d 733, 736, 740 (Ohio 1997) (DeRolph I).

[3] Id. at 745.

[4] Id. at 738.

[5] Karen Kasler, Report Finds Ohio Hasn’t Bridged Funding Gap between Rich and Poor School Districts, WOSU (Aug. 15, 2018, 4:06 PM), https://news.wosu.org/news/2018-08-15/report-finds-ohio-hasnt-bridged-funding-gap-between-rich-and-poor-school-districts.

[6] DeRolph I, 677 N.E.2d at 745.

[7] Id. at 747.

[8] Monique John, Despite Being Unconstitutional, Ohio’s School Funding System Lives On. How is it Hurting Students?, WCPO Cincinnati, https://www.wcpo.com/news/election-2020/despite-being-unconstitutional-ohios-school-funding-system-lives-on-how-is-it-hurting-students (last updated Dec. 17, 2020, 1:45 PM).

[9] See DeRolph v. State, 728 N.E.2d 993, 997 (Ohio 2000) (DeRolph II).

[10] Id. at 998.

[11] Id.

[12] Id. at 999

[13] Id. at 1000.

[14] See DeRolph I, 677 N.E.2d at 747; DeRolph II, 728 N.E. at 1003.

[15] Id.

[16] DeRolph II, 728 N.E.2d at 1006.

[17] Id. at 1000, 1002-03.

[18] State v. Lewis, 789 N.E.2d 195, 202-03 (Ohio 2003).

[19] Harry Boomer & Stephanie Czekalinski, The Next 400: School Funding System Ruled Unconstitutional 4 Times, Failing Students in Poor Rural, Urban Areas, 19 News, https://www.cleveland19.com/2021/03/12/next-school-funding-system-ruled-unconstitutional-times-failing-students-poor-rural-urban-areas/, (last updated Mar. 12, 2021, 5:38 PM).

[20] Id.

[21] Aaron Churchill, Ohio Media Spreads Myths about School Funding, Thomas Fordham Inst. (Dec. 14, 2020), https://fordhaminstitute.org/ohio/commentary/ohio-media-spreads-myths-about-school-funding.

[22] Boomer, supra note 19.

[23] Maps, Google, https://www.google.com/maps/dir/Downtown,+Cleveland,+OH/Orange,+Ohio/@41.4553269,-81.7230086,11z/data=!3m1!4b1!4m14!4m13!1m5!1m1!1s0x8830fa7be9bc5935:0x39e29ea31d74e9b9!2m2!1d-81.6856808!2d41.5047834!1m5!1m1!1s0x88311d2840188df1:0x1b30ac6698d6ff41!2m2!1d-81.4801687!2d41.4494132!3e0 (last visited Mar. 9, 2022).

[24] Ohio School Report Cards, Ohio Dept. of Educ., https://reportcard.education.ohio.gov/district/finance/044313 (last visited Mar. 21, 2022).

[25] Id.

[26] Id.

[27] See DeRolph I, supra note 2; DeRolph II, supra note 8.

[28] See, e.g., Beachwood City Sch. Dist. Bd. of Educ. v. Warrensville Heights City Sch. Dist. Bd. of Educ., 158 N.E.3d 906, 908 (Ohio Ct. App. 2020).

[29] Id.

[30] DeRolph, supra note 2 at 741.

Photo by Wokandapix from Pixabay

By Laura Merriman

On November 23, 2021, after four years of waiting, a jury in Sines v. Kessler found that fourteen individuals and ten white supremacist organizations conspired to commit racially motivated violence in Charlottesville, Virginia during the “Unite the Right” rally on August 12, 2017.[1]  The rally, organized to protest the removal of a Robert E. Lee statute, devolved into violent clashes with counter-protestors, culminating with James Alex Fields Jr. driving his car into a crowd of counter-protestors killing Heather Heyer and injuring dozens more.[2]  The jury awarded the plaintiffs—nine Virginia residents including counter-protesters and those injured by Fields—$25 million in punitive damages and an additional one million in compensatory damages.[3]  The civil suit not only compensated the plaintiffs, but was also part of a larger strategy to disrupt and dismantle extremist groups.[4]

Civil litigation is not a new tool in the fight against extremism.[5]  Beulah Mae Donald (“Mrs. Donald”), with the help of the Southern Poverty Law Center (“SPLC”), sued the United Klans of America (“United Klan”)—the largest Klan organization in the country at the time—for the murder of her nineteen-year-old son, Michael Donald in 1981.[6]  The all white jury awarded her $7 million , allowing Mrs. Donald to go after the United Klan’s assets.[7]  As a result, United Klan had to turn over its headquarters to Mrs. Donald, effectively ending its operation.[8]  SPLC continued to win multi-million-dollar judgments against the Ku Klux Klan (“KKK”), Aryan Nation, and other white supremacist organizations in the 1980s and 1990s forcing them to turn over their assets to satisfy judgments.[9]

The Charlottesville civil suit followed similar tactics: plaintiffs brought claims under Virginia state law and two federal claims under 42 U.S.C. § 1985, popularly known as the Ku Klux Klan Act of 1871 (“KKK Act”).[10]  The KKK Act was the third and final enforcement act passed by Congress during Reconstruction in response to widespread intimidation and violence in the Southern states, mostly at the hands of the KKK.[11]  The KKK Act made it a federal crime for “two or more persons . . . [to] conspire to prevent, by force, intimidation, or threat” from voting, holding office, testifying, or serving on a jury.[12]  It gave the president the authority to use the military to protect civil rights where state officials failed to act.[13]  It is also one of the few laws that allows individuals to sue private citizens, not the government, for depriving them of the their civil rights.[14]  The law effectively shut down the KKK until 1915, though terrorism against African Americans continued.[15]  In addition the Charlottesville suit, the KKK Act is the basis of a lawsuit against the main participants in the January 6 riot.[16]

To prevail, the Charlottesville suit plaintiffs needed to show the defendants planned the violence in advance.[17]  The plaintiffs provided evidence from online message boards and text messages leading up to the rally as evidence of conspiracy to commit violence, including communications endorsing vehicular attacks.[18]  The defendants based their defense on the First Amendment arguing they were merely expressing their beliefs.[19]  University of Virginia Law professor George Rutherglen doubted, however, that the free speech defense would succeed in defending “racially discriminatory confrontations and violence.”[20]  Furthermore, Judge Norman K. Moon rejected the defendants’ early attempts to dismiss the case on First Amendment grounds citing the KKK Act.[21]

The jury ultimately deadlocked on the federal claims under the KKK Act but found the defendants liable of conspiracy under Virginia law.[22]  Even prior to judgment, the lawsuit impacted the defendant’s finances.  A few of the defendants faced sanctions and fines for destroying evidence or ignoring proceedings, while others felt the toll of the costly drawn-out litigation.[23]  Defendant Richard Spencer described the suit as “financially crippling” and caused him to reduce his public appearances out of fear of another lawsuit.[24]

Having secured a judgment, plaintiffs can now search for any of the defendants’ assets, including bank accounts, cars, and even furniture and have it seized to satisfy the judgment.[25]  Though assets are harder to find today than in the 1980s when these organizations had land, buildings, and bank accounts.[26]  Now assets can be in cryptocurrency, which is much harder to find and seize—such is the case for Tanya Gersh, who is trying to collect a $14 million judgment for an antisemitic harassment campaign against Andrew Anglin, whose assets are in Bitcoin.[27]

Since the damages are for an intentional civil wrongdoing, defendants cannot discharge them through bankruptcy.[28]  Plaintiffs will have the power to garnish up to twenty-five percent of defendants’ paychecks, seize assets as soon as they are accumulated, and “keep the judgment alive until the defendants’ estates are settled.” [29]  The likely effect is that defendants will be forced out of the public life because any time they draw attention to themselves through events or public statements, they risk a new subpoena about assets or new wage garnishment orders.[30]

It is unlikely the plaintiffs in the Charlottesville suit will collect the full $26 million or stop the defendants from starting new organizations with similar missions.[31]  Yet, plaintiffs and their attorneys see the verdict as an overall success.[32]  Following the ruling, plaintiffs’ attorney Roberta Kaplan stated the verdict sent a clear message that racist and antisemitic violence will not be tolerated.[33]  They plan to refile and retry the federal conspiracy claims, confident a new jury will find for the plaintiffs.[34]


[1] Tyler Hammel, Jury Hits Rally Organizers with Millions of Dollars in Damages, Daily Progress (Nov. 23, 2021), https://dailyprogress.com/news/august12/jury-hits-rally-organizers-with-millions-of-dollars-in-damages/article_81ffded6-4cb1-11ec-ae69-8f1e78cb683b.html; Neil MacFarquhar, The Charlottesville Rally Civil Trial, Explained, N.Y. Times, https://www.nytimes.com/live/2021/charlottesville-rally-trial-explained#why-is-this-a-civil-case (Oct. 28, 2021).

[2] MacFarquhar, supra note 1.

[3] Tyler Hammel, Rally Trial Defendants Unlikely to Pay Most of Their Punitive Damages, Daily Progress (Dec. 3, 2021), https://dailyprogress.com/news/august12/rally-trial-defendants-unlikely-to-pay-most-of-their-punitive-damages/article_5ab5e11c-5469-11ec-ad53-437e76c20b25.html; MacFarquhar, supra note 1.

[4] Odette Yousef, Hate on Trial in Virginia, Four Years after Deadly Extremist Rally, NPR (Oct. 25, 2021, 5:10 AM), https://www.npr.org/2021/10/25/1048371482/hate-on-trial-in-virginia-four-years-after-deadly-extremist-rally.

[5] Id.

[6] Id.; Robin Toner, A Mother’s Struggle with the Klan, N.Y. Times (Mar. 8, 1987), https://www.nytimes.com/1987/03/08/us/a-mother-s-struggle-with-the-klan.html.

[7] Toner, supra note 6.

[8] Donald v. United Klans of America, Southern Poverty Law Center,  https://www.splcenter.org/seeking-justice/case-docket/donald-v-united-klans-america (last visited Jan. 27, 2022); Yousef, supra note 4.

[9] Yousef, supra note 4.

[10] Gillian Brockell, The Deadly History Behind the 1871 Law Underpinning the Charlottesville Trial, Wash. Post, (Nov. 24, 2021, 7:00 AM), https://www.washingtonpost.com/history/2021/11/24/kkk-act-charlottesville-trial/; 42 U.S.C. § 1985.

[11] Brockell, supra note 10.

[12] 42 U.S.C. § 1985; Brockell, supra note 10.

[13] Brockell, supra note 10.

[14] MacFarquhar, supra note 1.

[15] Id.

[16] Id.

[17] Id.

[18] Id.; Hammel, supra note 1.

[19] MacFarquhar, supra note 1.

[20] Id.

[21] Id.

[22] Hammel, supra note 1.

[23] MacFarquhar, supra note 1; Yousef, supra note 4.

[24] Yousef, supra note 4.

[25] Hammel, supra note 3.

[26] Yousef, supra note 4.

[27] Id.

[28] Hammel, supra note 3.

[29] Id.

[30] Id.

[31] Hammel, supra note 1.

[32] Id.

[33] Id.

[34] Id.


Post image by Blake Emrys on Flickr

11 Wake Forest L. Rev. Online 93 (2021)

Introduction

In 2018, 128 people died every day from an opioid overdose, twenty-five percent of patients misused opioids prescribed for chronic pain, and approximately 1.7 million people developed a substance use disorder directly from prescription opioid use.[1]  The effects were so devastating that the opioid epidemic was declared a national emergency.[2]  In response, government officials and courts sought criminal and civil retribution to hold pharmaceutical executives responsible for their roles in the epidemic, most recently with the Racketeer Influenced and Corrupt Organizations Act (“RICO”).[3]  When applied in the civil context, however, courts disagree on whether a fraudulent misrepresentation can satisfy the proximate cause requirements under RICO.[4]  This Comment seeks to identify whether a misrepresentation of the addictive qualities of opioids would be a sufficient showing of proximate cause for a civil RICO claim to succeed and argues that such misrepresentations would be sufficient.

This Comment proceeds in five parts.  Part I explains the progression of the opioid epidemic, pharmaceutical companies’ fraudulent misrepresentations, and the recovery options available to combat the epidemic—particularly RICO.  Part II discusses RICO’s role in addressing fraudulent misrepresentations in the pharmaceutical industry.  Part III describes the circuit split regarding fraudulent misrepresentations in civil RICO causation.  Part IV analyzes the fraudulent misrepresentations that led to the opioid epidemic and argues that those misrepresentations are sufficient to establish proximate cause in a civil RICO claim.  Part V recommends that the Supreme Court should grant certiorari on this issue and hold that misrepresentations of a drug’s harmful side effects are sufficient to show proximate cause in civil RICO cases.

I. Background

A. The United States Opioid Epidemic

The United States opioid epidemic is a major public health issue that has devastated the country’s social and economic welfare.[5]  The epidemic began in the late 1990s when pharmaceutical companies began encouraging the medical community to prescribe prescription opioids to their patients.[6]  During this time, pharmaceutical companies paid physicians to host informational seminars on drugs for their peers.[7]  While hosting these events can be a positive source of information in the medical community, the speakers of these programs often received kickbacks to prescribe the drugs they were promoting.[8]  The more prescriptions the physicians wrote, the more kickbacks they received.[9]  By 2015, nearly fifty percent of physicians received kickbacks for prescribing pharmaceutical drugs.[10]

Often, physicians knew little about the drugs they were prescribing.[11] Pharmaceutical companies assured physicians of opioid safety, guaranteeing that patients would not become addicted.[12]  As a result, physicians prescribed the drugs at high rates and quantities, leading to widespread addiction.[13]  Newly addicted and reliant, patients soon turned to more potent drugs—like cocaine and heroin—culminating in the opioid epidemic now overtaking the United States.[14]

B. The History of Fraudulent Misrepresentations in the Pharmaceutical Industry

The pharmaceutical industry has a long history of systemic fraud related to the “testing, marketing, and distribution of dangerous pharmaceutical drugs.”[15]  Throughout this history, pharmaceutical representatives have routinely concealed harmful side effects from physicians to convince them to prescribe dangerous drugs using “lies, bribes, and kickbacks.”[16]  In fact, in the pharmaceutical industry, it is so common for physicians to be deceived about dangerous products “that it’s often dismissed as the equivalent of driving slightly over the speed limit.”[17]

Drug representatives are also targeted as these individuals are often offered large bonuses for selling harmful drugs.[18]  For example, to increase sales of OxyContin, Purdue Pharma developed a “bonus system [that] encouraged sales representatives”[19] to use “any means necessary” to increase sales rates, even if it meant downplaying OxyContin’s addictive tendencies.[20]  In this way, pharmaceutical manufacturers frequently engage in a “coordinated conspiracy to deceive the American public and the medical profession about the efficacy and safety of opioids.”[21]

C. RICO

In 2017, the federal government and state governments began to pursue criminal and civil retribution against pharmaceutical companies for their role in the opioid epidemic.[22]  These entities often sought to recover for the economic harm they incurred due to increased rates of addiction in their communities.[23]  While civil lawsuits were routinely unsuccessful early on, settlements have begun to increase in recent years, indicating their growing success.[24]  For example, in 2007, Purdue Pharma settled in a civil suit with twenty-six states for $19.5 million.[25]  In 2016, Cardinal Health and AmerisourceBergen, distributors of prescription opioids, did the same, settling with the State of West Virginia for $34 million.[26]

Generally, individual plaintiffs seeking damages for personalized injuries have also sought to recover via direct-injury lawsuits.[27]  In the pharmaceutical context, direct-injury lawsuits “generally target opioid manufacturers for alleged misrepresentations during advertisement or opioid distributors for an alleged failure to monitor illicit distribution.”[28]  When asserting direct-injury claims, plaintiffs generally rely on tort-based theories, one of which is RICO.[29] 

RICO makes it “unlawful for any person employed by or associated with any enterprise . . . to conduct or participate, directly or indirectly, in the conduct of such [an] enterprise’s affairs through a pattern of racketeering activity” that affects interstate commerce.[30]  To assert a RICO violation, a claimant must establish an “association-in-fact” enterprise, defined as a “group of persons associated together for a common purpose.”[31]  To be a part of such an enterprise, a defendant must have either made decisions or intentionally performed acts that furthered the enterprise’s common purpose.[32]  The enterprise’s common purpose must be “separate from the pattern of racketeering activity” that the enterprise is engaging in; otherwise, it will not amount to a RICO violation, only a general conspiracy to commit a crime.[33] 

To establish a pattern of racketeering activity, there must be two or more acts that are “‘chargeable’ . . . under a host of state and federal laws,”[34] as well as interrelated, continuous, and occurring within a ten-year period.[35]  Otherwise, the acts will be deemed “isolated” and will fail to constitute a pattern.[36]  Furthermore, either the enterprise itself or the predicate acts of the enterprise must have a de minimis impact on interstate commerce.[37]  This is generally a low threshold, as courts routinely find that most, if not all, economic behavior impacts interstate commerce.[38]  Thus, to prosecute a defendant under RICO, a plaintiff must show that (i) a defendant performed two or more acts, (ii) those activities together formed a pattern of racketeering activity, (iii) the defendant benefitted from or participated in an enterprise, and (iv) the activities of that enterprise affected interstate commerce.[39] 

II. RICO and the Pharmaceutical Industry

In the pharmaceutical context, defendants participate in a RICO enterprise when they give or follow a directive to engage in fraud or when they exert influence or control in a scheme to fraudulently profit from the sale of prescription drugs.[40]  Thus, a RICO enterprise is formed when pharmaceutical companies conspire to misrepresent the efficacy and risks of opioids and opioid addiction.[41] While pharmaceutical executives are typically the easiest to implicate in such an enterprise, any person engaged in “false claims, kickback schemes, and acts of clinical and publication bias” are potential defendants for inclusion.[42]

A. Proving Causation in Civil RICO Claims

Standing to bring a civil RICO claim is stated under 18 U.S.C. § 1964(c).[43]  Under the statute, a plaintiff has standing for a civil RICO claim when their injury (i) is to their business or property, and (ii) was caused “by reason of” the RICO violation.[44]  The Supreme Court’s interpretation of “by reason of” requires the plaintiff to prove both proximate and but-for causation.[45]  But-for causation asks whether the plaintiff’s injury would have occurred but for the defendant’s conduct.[46]  Proximate causation serves to prevent liability when the link between the defendant’s conduct and the plaintiff’s injury has been severed.[47]  Thus, proximate causation requires a plaintiff to show some sort of direct relationship between the defendant’s actions and the plaintiff’s injury.[48]

Holmes v. Securities Investor Protection Corp.[49] sets out three principles to guide the causation analysis[50]

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, . . . 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 . . . .[51]

The first Holmes principle asserts that an injured party must be readily identifiable with readily apparent damages.[52]  Damages are considered to be readily apparent when the action that caused the plaintiff’s injury has already occurred, because this negates the need for factual speculation.[53]  The second principle requires damages to be awarded to the plaintiffs without fear that multiple parties will receive overlapping damages.[54]  To conform with this principle, a court can award damages when only one party is seeking recovery for their payments towards a drug or when each individual plaintiff seeks only to recover for the damages they individually paid for a prescription drug.[55]  Finally, the third principle requires that those most directly injured are bringing the suit; thus, the parties bringing the suit must be those best suited to do so.[56]

Since Holmes, however, the Supreme Court has eased the proximate cause standard for plaintiffs bringing RICO claims on mail and wire fraud.[57]  In Bridge v. Phoenix Bond & Indemnity Co.,[58] the Court held that a plaintiff asserting a RICO claim on mail or wire fraud does not need to show that they relied on the defendant’s alleged misrepresentations to establish proximate cause.[59]  As such, the plaintiff may recover whether or not they are the direct recipient of the false statements made.[60]  But because a plaintiff must establish both but-for and proximate causation, they often still must show that someone relied on the defendant’s misrepresentation.[61]

B. Criminal RICO Application

In 2019, a Massachusetts court found John Kapoor (“Kapoor”), former executive of pharmaceutical company Insys, guilty of conducting a national scheme to pay physicians to prescribe a highly potent and addictive fentanyl-spray.[62]  In Kapoor’s case, United States v. Michael Babich,[63] the Insys executives knowingly instructed physicians to prescribe the fentanyl-spray at six times the FDA-approved limit to guarantee patient reliance.[64]  To ensure compliance, the executives held speaker programs disguised as “educational lunches and dinners,” which they used to pay bribes and kickbacks to high-prescribing physicians.[65]  The Insys executives also targeted third-party payors (“TPPs”) using fake call centers to trick insurance companies into covering the spray at higher rates than they otherwise would have if they had known of the spray’s addictive tendencies.[66] 

Kapoor and six other Insys executives were found guilty of racketeering, wire fraud, and mail fraud conspiracy, marking the “first successful prosecution of top pharmaceutical executives for crimes related to the illicit marketing and prescribing of opioids.”[67]  As such, this case serves as the beginning of a new era in civil litigation to hold executives responsible for their role in the opioid epidemic.[68]

III.  Conflicting Interpretations of Misrepresentations Under RICO

Several federal circuit courts have addressed the question of whether, in the civil context, fraudulent misrepresentation can satisfy the direct-injury requirements necessary to establish proximate cause under RICO.[69]  The First, Third, and recently the Ninth Circuit have held that fraudulent misrepresentations can satisfy the direct-injury requirement, while the Second and Seventh Circuit have held that they cannot.[70]  To date, the Supreme Court has not granted certiorari to resolve this issue.[71]

A. Fraudulent Misrepresentation as a Sufficient Assertion of Proximate Cause

  1. Ninth Circuit

In Painters & Allied Trades District Council 82 Health Care Fund v. Takeda Pharmaceuticals,[72] the Ninth Circuit reviewed whether patients and TPPs can sufficiently meet the proximate cause requirements in a civil RICO claim when a pharmaceutical manufacturer fraudulently misrepresents a drug’s allegedly known safety risks.[73]  There the defendants allegedly knew of and concealed that Actos, a drug prescribed to regulate blood sugar for Type II diabetics, increased a patient’s risk of developing bladder cancer.[74]  The plaintiffs alleged that they would never have paid for or taken the drug if they had known of the risk of bladder cancer.[75]

The court concluded that the plaintiffs were the direct victims of the defendants’ alleged misrepresentations and therefore that the defendants’ fraudulent misrepresentations were directly related to the plaintiff’s harm.[76]  Thus, the Ninth Circuit held that both patients and TPPs who paid for Actos could successfully meet the proximate cause requirements.[77]  In so holding, the Ninth Circuit noted that because physicians commonly prescribe prescription drugs—like Actos—it is foreseeable that physicians would prescribe such a drug and therefore “play a causative role” in the defendant’s fraudulent scheme.[78]  Accordingly, physician actions do not sever proximate cause.[79]

The Painters decision marked an express change of opinion for the Ninth Circuit.[80]  Ten years prior, in 2009, the Ninth Circuit conversely found that misrepresentation claims could not successfully assert proximate cause in civil RICO claims.[81]  Now, with the Ninth Circuit basing its decision on policy implications and societal interest, Painters introduces new considerations on the issue that cannot be ignored.[82] 

  1. First Circuit

In In re Neurontin,[83] the First Circuit considered whether the Kaiser Foundation (“Kaiser”) could recover for an alleged injury arising from Pfizer’s alleged fraudulent marketing of Neurontin for off-label uses.[84]  Kaiser argued that Pfizer’s campaign explicitly targeted TPPs to influence formulary and prescribing decisions and encouraged physicians to serve on speaker’s bureaus and sponsor informational sessions to promote Pfizer drugs, while disguising bribe and kickback payments.[85]  Through expert witness testimony, the court found that three out of ten Neurontin prescriptions made for such off-label uses would not have been written but for Pfizer’s fraudulent marketing scheme.[86]  As such, the court held that Kaiser was a primary, intended, and direct victim that successfully met the proximate cause requirements under RICO.[87] 

  1. Third Circuit

In In re Avandia,[88] GlaxoSmithKline (“GSK”) marketed Avandia as a safer and more effective alternative to existing medications currently available for Type II diabetes treatment.[89]  As a result, TPPs added Avandia to their formularies and covered Avandia prescriptions at preferred rates.[90]  Soon after, however, risks arose regarding heart-related side effects, which GSK actively denied and countered despite knowledge to the contrary.[91] 

The Third Circuit held that the presence of intermediaries did not sever proximate cause because the TPPs’ injury was a foreseeable result of GSK’s scheme.[92]  Since TPPs covered the costs of Avandia directly because of GSK’s misrepresentations of Avandia’s risks, the TPPs were held to be intended and direct victims.[93]  Thus, the court concluded that reliance on GSK’s misrepresentations was sufficient to allege proximate cause.[94]

B. Fraudulent Misrepresentation as an Insufficient Assertion of Proximate Cause

In a Seventh Circuit case, Sidney Hillman Health Center of Rochester v. Abbott Labs.,[95] Abbott Labs allegedly solicited physicians to prescribe Depakote, a drug approved to treat seizures and migraines, for off-label uses.[96]  There the Seventh Circuit reasoned that because it would be too difficult to calculate the plaintiff’s damages due to unknown factors—some patients likely benefitted from taking Depakote for an off-label use, and some physicians would undoubtedly have prescribed Depakote for off-label uses regardless of solicitation—misrepresentations made to physicians fail the first Holmes factor and do not constitute a direct injury.[97]  As such, the Seventh Circuit held that such misrepresentations cannot meet the proximate cause requirements of civil RICO claims.[98]  Similarly, in UFCW Local 1776 v. Eli Lilly & Co.,[99] the Second Circuit concluded that a physicians’ reliance on misrepresentations is not a but-for cause of a drug’s higher price because physicians do not consider a drug’s price when they order prescriptions.[100]  Thus, the Second Circuit held that fraudulent misrepresentations do not sufficiently establish proximate cause for a civil RICO claim.[101]

IV. Analysis

Painters, In re Avandia, and In re Neurontin discuss the issue of recovery for TPPs (and patients as well in the case of Painters) when dealing with fraudulent misrepresentations of a prescription drug’s harmful side effects.[102]  These cases more closely align with the issues arising out of the opioid epidemic—as seen in Michael Babich—where pharmaceutical manufacturers and their executives fraudulently misrepresented the addictive qualities of opioids, in the form of a fentanyl-spray, resulting in economic injury to both patients and TPPs.[103]

A. The Opioid Epidemic Compared to Other Civil Applications

Like the pharmaceutical manufacturers in In re Avandia who falsely promoted Avandia as safe for use, the Insys executives in Michael Babich misrepresented the risks of the addictive qualities of their fentanyl-spray to ensure its coverage and use.[104]  In In re Avandia, the pharmaceutical manufacturer knew of Avandia’s increased cardiac complications; in Michael Babich, the pharmaceutical manufacturer knew their fentanyl-spray risked addiction and misuse.[105]  Like the pharmaceutical manufacturer in In re Avandia who promoted Avandia knowing its cardiac risks, the pharmaceutical executives in Painters also actively misled physicians, consumers, and TPPs to prescribe and use Actos despite knowing its risk for bladder cancer.[106]  Thus, in all three cases, pharmaceutical manufacturers formulated schemes to misrepresent the harmful side effects of their touted drugs to increase prescription rates at the expense of patients and TPPs.

Michael Babich also mimicked these cases’ use of speakers’ bureaus and physician targeting.  Both Michael Babich and In re Neurontin used speaker programs to target physicians with high prescription numbers and pay bribes and kickbacks to these physicians in exchange for increased prescription orders and dosages.[107]  Furthermore, like Pfizer’s marketing scheme in In re Neurontin that actively targeted TPPs to add drugs to their formularies and influence prescribing decisions, Insys’ marketing scheme in Michael Babich targeted TPPs through the use of a fake call center that was used to guarantee insurance coverage of their fentanyl-spray.[108]  In both cases, the use of these schemes directly targeted TPPs, causing them to prescribe more opioids than they otherwise would have prescribed.[109]  In these ways, the facts of Michael Babich reflect those of Painters, In re Avandia, and In re Neurontin.

Thus, as the fraudulent misrepresentations presented in the aforementioned cases all constituted a direct injury,[110] it is likely that a civil RICO claim based on the fraudulent misrepresentations of the opioid epidemic would be successful.  Therefore, opioid epidemic plaintiffs should bring civil—as well as criminal—suits when seeking retribution for their injuries caused by pharmaceutical companies’ fraudulent misrepresentations of the addictive qualities of opioids.

B. Analyzing the Proximate Cause Requirements of Civil RICO Claims

  1. How Opioid Epidemic Plaintiffs Can Meet the Damages Attributable Requirement

In situations where plaintiffs can allege damages due to the failure to warn of a drug’s harmful side effects, damages are not based on factual speculation and are thus readily apparent.[111]  In these situations, plaintiffs bring suit because they incurred an injury from taking a drug.  To have such an injury, a plaintiff must have already taken the drug, meaning that their injury has already occurred and cannot be based on factual speculation.  In the context of the opioid epidemic, a plaintiff brings suit asserting injury for the harm incurred from taking a drug with addictive characteristics.  Because the factual scenario seen in the opioid epidemic falls squarely into this context, a plaintiff’s damages will be readily apparent and meet the damages attributable requirement.

Damages in these cases will also be readily determinable.[112]  When a plaintiff’s injury is based on a fraudulent misrepresentation of a drug’s harmful side effects, the amount of damages attributable would amount to the difference between the cost of the injurious drug and the cost of a cheaper, alternative drug.[113]  Thus, in the context of the opioid epidemic, the damages alleged would amount to the cost between what a patient, or TPPs, would have paid for an alternative drug and what they paid for the harmful drug prescribed.  Because this amount is easily determinable, patients and TPPs would likely meet this requirement in any civil litigation arising from the opioid epidemic.

  1. How Opioid Epidemic Plaintiffs Can Avoid Duplicative Recovery

In opioid epidemic cases, multiple parties, including patients and TPPs, will likely look to recover damages.  In these cases, each individual plaintiff will be limited in what they can recover while still conforming with the second Holmes principle.[114]  To ensure that there is no duplicative recovery, and thus no violation of the second principle, each plaintiff will only be able to recover damages for what they individually paid for a prescription drug.[115]  Because both TPPs and patients will have incurred economic injury in a civil litigation suit, such a limitation is the only way to ensure compliance with the second Holmes principle and sufficiently assert proximate cause.[116] 

  1. How Opioid Epidemic Plaintiffs Can Meet the Direct-Injury Requirement

In civil opioid epidemic litigation, patients are directly injured parties because they incur financial and personal injury when they suffer harmful effects from using dangerous drugs.[117]  Patients suffer financial injury in paying out-of-pocket for expensive, harmful drugs that often lead to complications and further health problems, including addiction and drug misuse.  TPPs are directly injured parties that incur financial loss when they are targeted to add drugs to their formularies at preferred rates.[118]  For the preceding reasons, TPPs and patients are the most directly injured parties of pharmaceutical companies’ fraudulent schemes to market and promote harmful drugs; thus, they are the best suited plaintiffs to bring suits against pharmaceutical companies.  As such, both patients and TPPs would meet this third and final requirement in any future civil litigation related to the opioid epidemic.

C. Policy Considerations

Policy considerations further drive the argument in favor of allowing pharmaceutical companies’ fraudulent misrepresentations to sufficiently constitute proximate cause for patients and TPPs in civil RICO claims.  For one, if courts hold that the causal chain is too attenuated to constitute proximate cause for TPPs and patients—like the Second and Seventh Circuits do—the implications would effectively allow pharmaceutical companies to avoid liability for their fraudulent marketing schemes.[119]  In this way, pharmaceutical companies would be shielded from liability and permitted to hide behind the physicians who prescribed their drugs.[120]

For example, in the context of the opioid epidemic, such a holding would allow pharmaceutical companies to go unpunished for encouraging physicians to prescribe opioids at dangerous doses and rates.  While arguably physicians should still be held liable for their own roles in the opioid epidemic, by not extending this same liability to pharmaceutical companies there would be no deterrence to stop pharmaceutical companies from engaging in these fraudulent schemes too.  As such, pharmaceutical companies are likely to continue utilizing these harmful and fraudulent methods and will undoubtedly continue to use physicians as a proxy for engaging in such methods in the future if such actions are not met with liability.

Fraudulent misrepresentations should also be held to constitute proximate cause in civil RICO claims to allow plaintiffs to recover for their injuries.  Patients and TPPs routinely incur economic injury in paying for expensive drugs.[121]  Patients often incur additional financial harm when forced to sustain their habits.[122]  For example, following the onset of addiction, patients must often pay to continue to use prescription opioids, or when prescription opioids are unavailable, they must pay for other drugs, such as heroin and cocaine.[123]  When the financial harm stems from the patients’ continued use of prescription opioids, TPPs are also financially affected.[124]  Since addiction to these drugs results in the need for continued use, permitting such recovery would allow patients and TPPs to obtain some compensation for the harms wrongfully inflicted upon them.[125]  Therefore, pharmaceutical companies should not be allowed to cause such extreme harm and avoid responsibility,[126] especially when the societal harm caused by these misrepresentations far outweighs the corporate gains.  Thus, for society to fully recover, adequate recovery must be allowed.

Ensuring liability would also allow trust to be restored in the medical system. Patients need to feel comfortable seeking care from their physicians.  For this to occur, patients and other medical consumers must maintain a certain level of trust in the field of science and medicine.  Patients need to feel that their physicians are prescribing them medications for their own betterment, not for the personal gain or profit of the prescribing physician.  Thus, if pharmaceutical schemes, aimed to profit to the detriment of patients and TPPs, are ensured to be met with litigation, then pharmaceutical companies’ wrongful conduct will be deterred while increasing societal trust in the medical system.

Pharmaceutical executives must be held accountable before progress can be efficiently made.  Allowing plaintiffs to satisfy the requirements of proximate cause in civil RICO claims will allow the largest societal benefit.  Therefore, this position should be upheld in future civil litigation surrounding the opioid epidemic.

V. Recommendation

While pharmaceutical companies misrepresenting drugs to consumers and insurers to increase profits is certainly not a new occurrence, the opioid epidemic has arguably been the most widespread incidence of such an event.  Because the opioid epidemic can affect anyone and everyone, the opioid epidemic is arguably one of the most transcendent public health issues that the United States has ever encountered.  For this reason, the Supreme Court should grant certiorari on the issue of whether a fraudulent misrepresentation can constitute proximate cause in a civil RICO claim, especially regarding recovery for cases dealing with the opioid epidemic and the addictive tendencies of opioids.

The Supreme Court should grant certiorari on this issue because it is crucial for a uniform approach to be created and adhered to in the United States.  If the Supreme Court denies certiorari and allows this issue to remain with the various circuits, then pharmaceutical companies could continue to avoid liability.  Without a uniform approach, pharmaceutical companies can continue to bypass responsibility, establishing their companies in circuits that do not regard fraudulent misrepresentations as a sufficient means of causation in civil RICO claims.  Thus, by failing to grant certiorari on this issue, the Supreme Court would be allowing pharmaceutical companies, and their executives, to avoid prosecution for their wrongful acts by allowing them the opportunity to reside in circuits with favorable precedent.  Since the opioid epidemic affects every state on a national level, this sort of piecemeal approach across the circuits is not a suitable option; instead, the only way to truly curb these immense harms is with a uniform, national standard guaranteed to be consistently applied.

Should the Supreme Court grant certiorari to hear this issue of fraudulent misrepresentation as sufficient for proximate cause, the Court should follow the approach taken by the First, Third, and Ninth Circuits.  Victims of the opioid epidemic have suffered.  Not only have patients suffered physical injury, dealing with increased risk of disease or a newfound lifelong addiction, but patients have incurred financial injury in paying for drugs that not only did not ease their existing medical ailments, but also created new conditions that have further exacerbated their financial situations.  States and local communities have also suffered economic injury.  These communities have seen spikes in crime rates as consumers seek to maintain their habits and incur increased costs stemming from the need to provide treatment for their constituents.  As such, if the Court grants certiorari on the issue, not only should it hold that fraudulent misrepresentations are enough to assert proximate cause, but it should also hold that patients, TPPs, state governments, and municipal communities are all victims of such misrepresentations, and thus, are entitled to recovery.

The Supreme Court should also hold that fraudulent misrepresentations should be sufficient allegations of proximate cause because of the effect that such a holding would have on the legal system moving forward.  Allowing pharmaceutical companies to fraudulently misrepresent drugs at the peril of consumers and TPPs effectively contributes to the overburdening of the legal system.  With fewer persons addicted to drugs that often lead to addiction of more potent drugs, such as heroin and cocaine, the crime rates in local communities would arguably decrease.  With fewer crimes being committed by addicts attempting to maintain their habits, heavily impacted communities and the legal system would become less strained.  As such, the deterrence of fraudulent misrepresentations of a harmful drug’s side effects, especially opioids, would have immense societal benefit.  Thus, not only should the Court grant certiorari on this issue, but it should also hold that fraudulent misrepresentations of the addictive qualities of opioids are sufficient to allege proximate cause in civil RICO claims.

Conclusion

The opioid epidemic has recently subjected pharmaceutical companies to increased scrutiny, which will likely result in an uproar of future opioid epidemic litigation.  Should this litigation arise, the Supreme Court should grant certiorari on the issue of whether fraudulent misrepresentations of the addictive qualities of opioids are sufficient to show proximate cause for civil RICO claims.  Due to the policy considerations and societal implications the opioid epidemic has created, the Supreme Court should hold—as the First, Third, and Ninth Circuits have held—that misrepresentations of the addictive qualities of opioids are sufficient to show proximate cause for a civil RICO claim.

Shannon Porterfield[127]*

       [1].   Opioid Overdose Crisis, Nat’l Inst. on Drug Abuse (Mar. 11, 2021), https://www.drugabuse.gov/drug-topics/opioids/opioid-overdose-crisis.

      [2].   See Edgar Aliferov, Note, The Role of Direct-Injury Government-Entity Lawsuits in the Opioid Litigation, 87 Fordham L. Rev. 1141, 1142 (2018).

      [3].   See 18 U.S.C. §§ 1961–1968.

      [4].   See infra Part III.

      [5].   Societal costs soared in recent years, rising from roughly $55.7 billion in 2011 to $78.5 billion in 2016. Aliferov, supra note 2, at 1144; see also Nat’l Inst. on Drug Abuse, supra note 1.

      [6].   See Nat’l Inst. on Drug Abuse, supra note 1.

      [7].   Aaron Kessler et al., The More Opioids Doctors Prescribe, the More Money They Make, CNN (Mar. 12, 2018, 8:45 AM), https://www.cnn.com/2018/03/11/health/prescription-opioid-payments-eprise/index.html.

      [8].   Id.  Hosting such events is not illegal until and unless physicians receive kickbacks in exchange for prescribing the drugs.  Id.  A kickback is any form of payment provided in exchange for an action or transaction that is usually illegal or improper.  See What Is Kickback?, The Law Dictionary, https://thelawdictionary.org/kickback/#:~:text=Black’s%20Law%20Dictionary)-,What%20is%20KICKBACK%3F,job%2C%20contract%2C%20or%20order (last visited Aug. 24, 2021) (defining kickback as “a bribe for routing a job, contract, or order.”).

      [9].   Kessler et al., supra note 7.

     [10].   Id.

      [11].   Nat’l Inst. on Drug Abuse, supra note 1.

     [12].   Id.

     [13].   Id.

     [14].   Understanding the Epidemic, Ctrs. For Disease Control & Prevention, https://www.cdc.gov/drugoverdose/epidemic/index.html (last visited Aug. 24, 2021).

     [15].   Eugene McCarthy, A Call to Prosecute Drug Company Fraud as Organized Crime, 69 Syracuse L. Rev. 439, 442 (2019).

     [16].   Id.

     [17].   Id. at 478 (quoting Stephanie M. Greene, After Caronia: First Amendment Concerns in Off-Label Promotion, 51 San Diego L. Rev. 645, 648 (2014) (internal citation omitted)).

     [18].   McCarthy, supra note 15, at 478.

      [19].    Id. (brackets in original source) (quoting Art Van Zee, The Promotion and Marketing of OxyContin: Commercial Triumph, Public Health Tragedy, 99 Am. J. Pub. Health 221, 222 (2009)).

     [20].   Id. (quoting Zee, supra note 19, at 222).

     [21].   Richard Ausness, The Current State of Opioid Litigation, 70 S.C. L. Rev. 565, 586 (2019) (quoting Complaint and Demand for Jury Trial at 135, City of Lansing v. Purdue Pharma L.P., No. 1:17-CV-01114 (W.D. Mich. Dec. 19, 2017)).

     [22].   See Aliferov, supra note 2, at 1152–53, 1155.

     [23].   Id. at 1144.

     [24].   Id. at 1152.

     [25].   Id.

     [26].   Id. at 1153–54 (noting that Cardinal Health was sued for its failure to monitor suspicious orders for opioids, which West Virginia argued “facilitated the operation of pill mills throughout the state”).  Cardinal Health agreed to pay $20 million of the $36 million settlement.  Id. at 1154 n.94.

     [27].   See, e.g., id. at 1156–57 (“When initiated by a party other than the government, a direct-injury claim is simple: a plaintiff’s personal interests (e.g., health or property) have been injured by a third party and the plaintiff seeks to recover damages flowing from that injury.”).

     [28].   Id. at 1156.

     [29].   See generally id. at 1160 (noting that “plaintiffs employ either a tort-based theory or equitable theory to complete the direct-injury claim” and subsequently referencing the various tort theories, including RICO).  While RICO was enacted primarily to combat organized crime, its use in other contexts—including the opioid epidemic—has grown substantially, particularly because of its ability to “prosecute an entire criminal enterprise and its constituent members at once.”  McCarthy, supra note 15, at 471, 441.

     [30].   18 U.S.C. § 1962(c).

     [31].   In re Nat’l Prescription Opiate Litig., No. 1:17-md-2804, 2019 WL 4279233, at *2 (N.D. Ohio Sept. 10, 2019) (quoting Boyle v. United States, 556 U.S. 938, 946 (2009)).

     [32].   Id. at *3; see also 18 U.S.C. § 1962(c) (stating that defendants must participate “directly or indirectly”).

     [33].   In re Nat’l Prescription Opiate Litig., 2019 WL 4279233, at *2 (quoting Frank v. D’Ambrosi, 4 F.3d 1378, 1386 (6th Cir. 1993)).

      [34].  David Farve et al., Racketeer Influenced and Corrupt Organizations, 57 Am. Crim. L. Rev. 1191, 1195, 1197 (2020) (quoting Nat’l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 256–57 (1994)). 

     [35].   Id. at 1197.  Such acts could include murder, robbery, bribery, extortion, or federal offenses involving bankruptcy or securities fraud.  Id. at 1195–96.  In the criminal context, the required acts that amount to racketeering activity can also include “mail fraud, wire fraud, insurance fraud, false claims, and honest services fraud.”  McCarthy, supra note 15, at 465.

     [36].   Farve et al., supra note 34, at 1197–98.

     [37].   Id. at 1207.

     [38].   McCarthy, supra note 15, at 466.

     [39].   Farve et al., supra note 34, at 1194.

     [40].   McCarthy, supra note 15, at 476.  In the pharmaceutical context, “[pharmaceutical] [e]xecutives, sales representatives, doctors, lawyers, and politicians” often make up such enterprises.  Id.

     [41].   See, e.g., In re Nat’l Prescription Opiate Litig., No. 1:17-md-2804, 2019 WL 4279233, at *3 (N.D. Ohio Sept. 10, 2019) (holding that the plaintiffs “produced sufficient evidence for a reasonable jury to conclude that all [d]efendants . . . associated together for the common purpose of expanding the prescription opioid market,” thereby forming a RICO enterprise).

     [42].   McCarthy, supra note 15, at 477–78.

     [43].   18 U.S.C. § 1964(c); Painters & Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharmas., 943 F.3d 1243, 1248 (9th Cir. 2019).

     [44].   18 U.S.C. § 1964(c); Painters, 943 F.3d at 1248.

     [45].   Painters, 943 F.3d at 1248 (citing Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 268 (1992)).

     [46].   Ausness, supra note 21, at 595 (asking “whether the injury would have occurred in the absence of the defendant’s conduct”).

     [47].   Id. at 599.  In Ashley County v. Pfizer, Inc., drug companies selling over-the-counter cold medicines used to produce methamphetamine were said not to have proximately caused the counties’ increased costs even though they knew the medicine would be used to make methamphetamine.  552 F.3d 659, 662–73 (8th Cir. 2009).  The court held that the act of selling cold medicine was “totally independent” from the defendant’s production of methamphetamine.  Id. at 670; see also Ausness, supra note 21, at 599–600 (discussing the Ashley County opinion).

     [48].   Holmes, 503 U.S. at 268.

     [49].   503 U.S. 258.

     [50].   See id. at 269.

     [51].   Id. at 269–70 (citations omitted).

     [52].   Id. at 269.

     [53].   In re Avandia Mktg., Sales, Pracs. & Prod. Liab. Litig., 804 F.3d 633, 640 (3d. Cir. 2015); see also Sidney Hillman Health Ctr. of Rochester v. Abbott Labs, 873 F.3d 574, 577 (7th Cir. 2017).  In Sidney Hillman, the plaintiffs’ claim was too speculative to meet the first Holmes requirement.  873 F.3d at 577.   The court held that it was too difficult for the court to determine whether TPPs would have incurred costs from paying for another medication or whether physicians would have prescribed the drug for off-label uses without solicitation; thus, there was too much speculation for the damages to be readily apparent.  Id.

     [54].   Holmes, 503 U.S. at 269.

     [55].   In re Neurontin Mktg. & Sales Pracs. Litig., 712 F.3d 21, 37 (1st Cir. 2013); Painters & Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharms., 943 F.3d 1243, 1251 (9th Cir. 2019).

     [56].   In re Neurontin, 712 F.3d at 38.

     [57].   Farve et al., supra note 34, at 1235.

     [58].   553 U.S. 639 (2008).

     [59].   Id. at 649 (citing Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 476 (2006) (“Because an individual can commit an indictable act of mail or wire fraud even if no on relies on his fraud, he can engage in a pattern of racketeering activity . . . without proof of reliance.”)). 

     [60].   See id. at 656.  The RICO statute “provides no basis for imposing a first-party reliance requirement.”  Id. at 660.

     [61].   Id. at 658.

     [62].   Gabrielle Emanuel, Opioid Executive John Kapoor Found Guilty in Landmark Bribery Case, NPR (May 2, 2019, 2:37 PM), https://www.npr.org/2019/05/02/711346081/opioid-executive-john-kapoor-found-guilty-inlandmark-bribery-case; see also First Superseding Indictment at 7–8, United States v. Michael Babich, Crim. No. 16cr10343ADB (D. Mass. Oct. 24, 2017), https://www.justice.gov/usao-ma/page/file/1010246/download.

     [63].   First Superseding Indictment, supra note 62 at 16.

     [64].   Id. at 25–26.  This was especially dangerous due to the potency of the fentanyl-spray; if the fentanyl-spray was prescribed at the same dosage as other fentanyl-based products on the market, then the patient could risk a fatal overdose.  Id. at 10.

     [65].   Id. at 16–17.

     [66].   Id. at 32–33.

     [67].   See Emmanuel, supra note 62; see also Hannah Kuchler et al., Insys Executives Are Sentenced to Prison Time, Putting Opioid Makers on Notice, PBS (Jan. 23, 2020), https://www.pbs.org/wgbh/frontline/article/opioid-maker-insys-executives-sentenced-prison-subsys/.

     [68].   See Emmanuel, supra note 62.

     [69].   See infra Part III.A–B.

     [70].   See infra Part III.A–B.

     [71].   See Sergeants Benevolent Assoc. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, 137 S. Ct. 140 (2016).

     [72].   943 F.3d 1243 (9th Cir. 2019).

     [73].   Id. at 1252–53.

     [74].   Id. at 1246 (alleging that defendants misrepresented the risk of bladder cancer to increase sales of Actos).

     [75].   Id. at 1247, 1251.

     [76].   Id. at 1251.

     [77].   Id. at 1252 (reasoning that “all patients and TPPs who paid for Actos on the premise that it did not cause an increased risk of bladder cancer were allegedly defrauded by Defendants and suffered the same direct, economic injury: payments for a drug which would not have been purchased if suitably described”).

     [78].   Id. at 1257.

     [79].   Id.

     [80].   See generally In re Epogen & Aranesp Off-Label Mktg. & Sales Pracs. Litig., No. MDL 08-1934 PSG, 2009 WL 1703285 (Cal. June 17, 2009) (detailing the contrary holding).

     [81].   See In re Epogen, 2009 WL 1703285, at *7–8.

     [82].   See Painters, 943 F.3d at 1257–59 (discussing the benefits of deterring wrongful conduct and allowing economic recovery for victims).

     [83].   712 F.3d 21 (1st Cir. 2013).

     [84].   Id. at 25–26.

     [85].   Id. at 28.

     [86].   Id. at 30.

     [87].   Id. at 37–38.

     [88].   804 F.3d 633 (3d Cir. 2015).

     [89].   Id. at 635.

     [90].   Id.

     [91].   Id. at 635–36.

     [92].   Id. at 645.

     [93].   Id.

     [94].   Id.

     [95].   873 F.3d 574 (7th Cir. 2017).

     [96].   Id. at 575.  While physicians can prescribe medications to their patients to treat off-label conditions, drug manufacturers are prohibited from promoting drugs for such purposes.  Id.

     [97].   Id. at 577; see also Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 269 (1992).

     [98].   Sidney Hillman, 873 F.3d at 578.

     [99].   620 F.3d 121 (2d Cir. 2010).

   [100].   Id. at 133–34.

   [101].   Id. at 134.

   [102].   See supra Part III.A.  Sidney Hillman and UFCW deal with fraudulent promotions of “off-label” uses and pricing decisions rather than a fraudulent failure to warn of a drug’s known risk of harmful side effects.  See supra Part III.B.

   [103].   See First Superseding Indictment, supra note 62, at 7–8.

   [104].   See id. at 26–27; see also Kuchler et al., supra note 67; Emanuel, supra note 62; In re Avandia Mktg., Sales, Prac. & Prod. Liab. Litig., 804 F.3d 633, 635 (3d Cir. 2015).

   [105].   See First Superseding Indictment, supra note 62, at 7–8, 26–27; In re Avandia, 804 F.3d at 635.

   [106].   See Painters & Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharmas., 943 F.3d 1243, 1246 (9th Cir. 2019).

   [107].   See First Superseding Indictment, supra note 62, at 17–18, 20 (quoting Burlakoff telling a sales representative “[t]hey do not need to be good speakers, they need to write a lot of . . . [prescriptions for the Fentanyl-Spray]”); In re Neurontin Mktg. & Sales Prac. Litig., 712 F.3d 21, 28 (1st Cir. 2013).

   [108].   See In re Neurontin, 712 F.3d at 40; Emanuel, supra note 62; see also First Superseding Indictment, supra note 62, at 32–33 (misleading insurers as to their employment, patient diagnoses, and past medications used).

   [109].   In re Neurontin, 712 F.3d at 40; First Superseding Indictment, supra note 62, at 20–22, 27, 30–31.

   [110].   See supra Part III.A.

   [111].   See In re Avandia Mktg., Sales, Prac. & Prod. Liab. Litig., 804 F.3d 633, 640 (3d Cir. 2015).

   [112].   See supra notes 52–53 and accompanying text.

   [113].   In re Avandia, 804 F.3d at 644.

   [114].   See Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 269–70 (1992); see also supra notes 54–55 and accompanying text.

   [115].   Painters, 943 F.3d at 1251–52; see also In re Neurontin, 712 F.3d at 37.

   [116].   In re Avandia, 804 F.3d at 645–46; Painters, 943 F.3d at 1251–52.

   [117].   See, e.g., Painters, 943 F.3d at 1251–52.  It does not matter if some plaintiffs incurred extra or less harm from taking a drug that has harmful benefits; all patients are held to suffer the same direct economic injury.  Id.

   [118].   In In re Avandia, the court noted that TPPs are held to “suffer[] direct economic harm when, as a result of [a pharmaceutical company’s] alleged misrepresentations, they pa[y] supracompetitive prices for [brand drugs] instead of purchasing lower-priced generic [drugs].”  In re Avandia, 804 F.3d at 639–40 (citing In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 531 (3d Cir. 2004)).

   [119].   Painters, 943 F.3d at 1257.

   [120].   Id.

   [121].   See, e.g., id. at 1252 (discussing how patients and TPPs suffered economic injury paying for the drug Actos, which they would not have purchased if not for the fraudulent misrepresentation).

   [122].   See generally Nat’l Inst. on Drug Abuse, supra note 1 (discussing the “total ‘economic burden’ of prescription opioid misuse . . . including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement”).

   [123].   See id. (stating that roughly five percent of those who developed an opioid addiction transitioned to heroin and roughly eighty percent of those who use heroin misused opioids before using heroin).

   [124].   See, e.g., In re Neurontin Mktg. & Sales Prac. Litig., 712 F.3d 21, 38–39 (1st Cir. 2013) (showing that TPPs incur injury from paying for additional prescriptions due to fraudulent marketing schemes).

   [125].   Id.

   [126].   Id. at 38–39.

       *.   J.D. Candidate 2022, Wake Forest University School of Law.  Shannon would like to thank the Wake Forest Law Review Board and Staff for their hard work and time on this Comment.  She would also like to thank her family and friends for their unyielding support and encouragement.