- FCPA Professor - https://fcpaprofessor.com -

Court Concludes That Plaintiffs Counsel’s Reference To Prior FCPA Settlement In Civil Case Provides Grounds For A New Trial

Once the ink is dry on a Foreign Corrupt Practices Act settlement, most people forget about it. However, it does not disappear and may be resurrected by opportunistic parties including in civil litigation.

Such is the circumstance in this post which discusses a recent 5th Circuit decision in which plaintiffs’ counsel referenced a 2011 FCPA enforcement action against Johnson & Johnson and a related entity. (See here [1] for the prior post).

The 5th Circuit described the background of In re: Depuy Orthopedics, Inc. Pinnacle Hip Implant Production Liability Litigation (2018 WL 1954759) as follows (internal citations omitted):

“These appeals and cross-appeal are from the second in a series of bellwether trials from the Pinnacle Hip multidistrict litigation (“MDL”), in which several thousand plaintiffs claim injuries from Pinnacle hips manufactured and sold by DePuy Orthopaedics, Incorporated (“DePuy”). The five plaintiffs in this consolidated action—Margaret Aoki, Jay Christopher, Donald Greer, Richard Klusmann, and Robert Peterson—received Pinnacle’s metal-on-metal (“MoM”) design, suffered complications, and required revision surgery. They sued DePuy and its parent corporation, Johnson & Johnson (“J & J”),  and secured a half-billion-dollar jury verdict. Defendants’ various post-trial motions—for judgment as a matter of law (“JMOL”), dismissal of claims against J & J for lack of personal jurisdiction, and a mistrial—were denied. Defendants renew all three lines of argument on appeal, attacking the verdict on nearly twenty independent bases. […]

In the alternative, defendants request a new trial based on irrelevant and prejudicial evidence. A district court can grant a new trial if it finds “the verdict [was] against the weight of the evidence, the damages awarded [were] excessive, the trial was unfair, or prejudicial error was committed in its course.” We review that decision for abuse of discretion, “especially” where, as here, the motion “ha[s] been denied.” Because the errors are sufficiently egregious, multiple, and prejudicial to pierce the usual deference, we order a new trial.

[…]

The Deferred Prosecution Agreement and Saddam Hussein

We begin with the most problematic evidence: the bribes paid by non-party J & J subsidiaries to the “henchmen” and “regime” of Saddam Hussein in Iraq. In 2011, J & J entered into a Deferred Prosecution Agreement (“DPA”) in which it “admit[ted], accept[ed], and acknowledg[ed] that it [was] responsible for” violations of the Foreign Corrupt Practices Act committed by non-party affiliates. One of the alleged violations involved bribes by two such affiliates to the Iraqi government, then under Hussein’s control. In the middle of trial, the court ordered DePuy to produce a Federal Rule of Civil Procedure 30(b)(6) corporate representative to testify before the jury at length about the DPA. Plaintiffs’ counsel then mentioned it several times, including during closing arguments.

The district court allowed these repeated references to Hussein and the DPA because defendants had supposedly “opened the door” by eliciting testimony on their corporate culture and marketing practices. This justification is strained, given that J & J owns more than 265 companies in 60 countries, and the Iraqi portion of the DPA addresses conduct by non-party subsidiaries. “[T]he Rules of Evidence do not simply evaporate when one party opens the door on an issue.” And a party cannot introduce evidence of prior bad “acts … to show that on a particular occasion the person acted in accordance with the character.” FED. R. EVID. 404(b) (1).

Our Rule 404(b) inquiry proceeds in two steps: “First, it must be determined that the extrinsic offense evidence is relevant to an issue other than the defendant’s character. Second, the evidence must possess probative value that is not substantially outweighed by its undue prejudice and must meet the other requirements of rule 403.” Though our inquiry is deferential and “inclusi[ve],” we go well beyond rational-basis review. Even where the evidence serves some conceivable non-character purpose such as impeachment, we still must carefully consider whether the introducing party was actually “attempting to convince the jury that [the defendant] was a bad man” who acted in conformity with his bad character in the case at hand. If yes, the unduly prejudicial effect of such an argument will very likely substantially outweigh its probative value.

The Rule 404(b) question lends itself to just one reasonable resolution. During closing arguments, Lanier [counsel for plaintiffs] suggested unequivocally that the jury treat the DPA not as impeachment, nor even as otherwise-inadmissible rebuttal evidence offered “curatively,” but as a proxy for J & J’s liability: If you go back and look at the DPA, that’s the deferred prosecution agreement where the company paid money one time because of kickbacks to doctors in America, the other time because of the bribes to Saddam Hussein’s government, the bribes in Greece, Romania, Poland and other places where they were bribing people to put in … their products. The DPA has [J & J] admitting its responsibility in it. J & J is admitting that they’re responsible. They have already taken this issue out of your hands realistically. That alone is a winner…. [J & J] has admitted their responsibility for this. That ought to be enough.

Indeed. Lanier tainted the result by inviting the jury to infer guilt based on no more than prior bad acts, in direct contravention of Rule 404(b)(1). That alone provides grounds for a new trial. Plaintiffs insist the DPA was admissible because it went to defendants’ “intent, knowledge, plan, motive, and opportunity.” But that suggestion is as dubious as it is vague. The record makes plain that the DPA and Hussein were “wafted before the jury to trigger their punitive instinct.”  Lanier repeatedly referenced bribes to the Hussein “regime,” despite that the alleged bribes involve neither DePuy nor its products. Crucially, he then invited the jury to infer J & J’s liability based solely on that. Nothing in our otherwise inclusive Rule 404(b) jurisprudence countenances such a tactic.

Plaintiffs lastly suggest that any error was harmless, because the court instructed the jury generally not to treat counsel’s statements as evidence. But the court “gave no cautionary instruction at the time of the improper argument,” and its subsequent generic instruction made no mention of the DPA. Granted, “in some instances, the district court may determine that a specific curative instruction is inappropriate because it would merely call further attention to the evidence, and thus be more harmful than the original comment.” . But the references to Hussein were both recurring and “highly prejudicial,” presented as if sufficient to prove liability. A general instruction at the close of trial was “grossly inadequate under the circumstances.”  Lanier’s statement was among “the last thing[s] the jury heard before retiring to deliberate,” and a colossal verdict followed. Because the taint is unmistakable, the verdict cannot stand.”

[2]