The Non-Diverse Sales Representative in Pharmaceutical and Medical Device Litigation: Fraudulent Joinder and the Learned Intermediary Doctrine

One of the major tactical considerations in pharmaceutical and medical device litigation is determining the most advantageous venue. Plaintiffs often wish to be in state court; defendants may prefer federal court. Given the opportunity, defendants may seek to remove state court cases to federal court on the grounds of diversity of citizenship. In general, this is possible if 1) the defendant and the plaintiff are citizens of different states; and 2) the amount in controversy exceeds $75,000, exclusive of costs.

But "diversity jurisdiction" exists only if there is "complete diversity"—that is, all individuals and corporate entities on the defendant side are citizens of a state different from all individuals and corporate entities on the plaintiff side. To stay in state court, plaintiffs may name a non-diverse entity—a person or corporate entity they know to be a citizen of their state—as a defendant.

One common target is the pharmaceutical or medical device company’s local sales representative. As part of their job, sales representatives meet with prescribing physicians and provide them with information about the medicines or devices distributed by their employer. The local representative may have provided samples. Plaintiffs seeking to stay in state court may name the non-diverse sales representative as a defendant based on such conduct. On its face, naming the non-diverse sales representative as a codefendant would destroy the complete diversity needed to remove a case to federal court. To short-circuit this strategy, defense counsel may rely on the doctrine of fraudulent joinder and the learned intermediary doctrine.

Fraudulent Joinder

In certain situations, a federal court may disregard the citizenship of a non-diverse party under the doctrine of fraudulent joinder. Although there are differences among the federal circuits, the broad elements of the doctrine are relatively well defined. Under the doctrine, the citizenship of a non-diverse party is ignored for the purpose of determining diversity jurisdiction if: 1) actual fraud in the pleading of jurisdictional facts exists; or 2) the plaintiff, in essence, cannot recover against the non-diverse defendant under state law. If either of these is the case, the court can and should disregard the citizenship of a non-diverse defendant and deny the plaintiff’s motion to remand.

It is usually difficult to establish actual fraud in pleading jurisdictional facts, so the first basis for fraudulent joinder infrequently is invoked. The battle typically ensues over the issue of whether a legal claim could exist against the sales representative under state law. If so, the case is remanded to state court, typically without the chance for an appeal.

Learned Intermediary Doctrine

To avoid remand to state court, a defendant company can argue that the learned intermediary doctrine bars any possible claim, regardless of the liability theory, against the sales representative. This doctrine is based on the judicial recognition of a practical reality: despite what information a pharmaceutical or medical device maker provides about a particular medication or device, prescribing physicians—and not those companies—determine what medicine or device is prescribed for any particular patient. A patient simply cannot obtain a prescription medication legally without an order from a licensed physician. Physicians do not rely solely on information provided by the company, but on their experience, expertise, skill, training, education, and judgment in deciding what form of therapy is best for any particular patient. Only health care professionals are in a position to understand the significance of the potential benefits and risks of a particular medicine or device to a particular patient. Thus, physicians stand as a "learned intermediary" between pharmaceutical or medical device companies and patients.

The learned intermediary doctrine is well-established in virtually every state. Courts in most jurisdictions hold that it is the company’s obligation to adequately inform the prescribing physician, not the patient, of any relevant risks associated with a medication or a medical device. So long as the prescribing physician is adequately informed through whatever source, the pharmaceutical or medical device company cannot be held liable for failing to disclose a particular risk to a patient. Although some jurisdictions may recognize a limited exception in cases involving vaccines or contraceptives, particularly if the company has engaged in extensive direct-to-consumer advertising, most courts hold that the doctrine applies to virtually all prescription medications and medical devices.

What is sometimes overlooked, however, is that not only does the doctrine define the nature of the company’s obligations, it also protects sales representatives, among others, from liability. The doctrine makes the company that actually developed, made, distributed, and promoted a medicine or medical device solely responsible for its products—and not some other person or entity. This means that employees of the manufacturer, including sales representatives, generally are not legally liable for injuries that may have been caused by the company’s product. As one court has noted, "[t]here is no basis for a claim against a sales representative under the learned intermediary doctrine that imposes a duty on the manufacturer of the drug to warn the physicians." Catlet v. Wyeth, 379 F. Supp.2d 1374, 1381 (D. Ga. 2004) (emphasis in the original).

This rule is not inconsistent with agency law. Generally, an employer can be liable for the torts of an employee that are committed within the scope of employment. That does not necessarily mean, however, that an employee can be held liable for the torts of his or her employer. An agent is not liable for torts arising out of conduct that was 1) within the scope of the agency and 2) ratified by the principal. So long as agents submit evidence establishing that they acted within the scope of employment and the company ratified their conduct, they should be free from liability.

Vargas v. Merck

However, certain courts have accepted the argument that the application of the learned intermediary doctrine is a factual question that must be resolved in favor of remand. An example is Vargas v. Merck & Co., 2006 WL 3487403 (S.D. Tex. Dec. 1, 2006).

In Vargas, the plaintiff sued Merck and a variety of non-diverse sales representatives in state court, claiming that he suffered personal injuries caused by Vioxx^®. He asserted several causes of action against the sales representatives, including negligence, fraud, and breach of warranties. Merck removed the action on the ground that the sales representatives had been fraudulently joined. In opposing the plaintiff’s motion to remand, Merck argued that under the learned intermediary doctrine, the sales representatives did not owe any legal obligation to the plaintiff, and thus, the plaintiff had no possibility of recovery from them.

The court granted the plaintiff’s motion and remanded the action to state court. The court stated that sales representatives fell "outside the protective realm" of the learned intermediary doctrine if information provided the prescribing physician was "inadequate or misleading." In his complaint, the plaintiff alleged that the representatives misrepresented the risks of Vioxx "to the health care industry." Stating that the learned intermediary doctrine applies only if adequate warnings are provided, the court ruled that the allegations in the complaint were sufficient to establish potential liability on the part of the sales representatives.

Legal Issue vs. Fact Question

For defense counsel, of course, this analysis misses the mark. The application of the learned intermediary doctrine has nothing to do with whether or not a physician is adequately informed or whether the sales representative acted within the scope of employment. These are fact questions. The application of the learned intermediary doctrine is a question of law: whether the manufacturer is solely responsible for its product. The doctrine is undermined, if not undone, if a court is willing to hold that someone other than the company is liable for its products.

One of the reasons courts may be receptive to a plaintiff’s argument such as the one presented in Vargas is that there are widely differing standards among the federal circuits for determining whether a potential recovery exists and differences in how the standards are applied. Defense counsel must contend with the fact that the doctrine is a creature of state law, the scope of which can be and is construed differently from state to state. As shown in Vargas, a skillful plaintiff’s lawyer can use ambiguities inherent in these standards to craft a potentially persuasive argument.

Securing Removal

However, there are at least two ways a defendant manufacturer can enhance its chance of remaining in federal court. The first is by carefully choosing the jurisdiction where to raise the fraudulent joinder argument. Federal courts sitting in jurisdictions where the learned intermediary doctrine is well defined and recognized as presenting a legal issue may be more receptive.

Second, a company can submit evidence demonstrating its control over sales representatives in support of its notice of removal, as well as in opposition to a remand motion. The only limit on the nature of such evidence is the creativity of the defense lawyer. Relevant proof could include:

In the face of such evidence, even courts that have been persuaded to view the application of the doctrine as a question of fact may hesitate to remand a case.

Fraudulent joinder remains an important legal basis for removing pharmaceutical and medical device cases. So long as sales representatives remain targets, companies can develop arguments based on the learned intermediary doctrine. The difficulty will continue to lie in persuading courts that the proper application of the doctrine requires determination of a legal question, not a factual one.