There are certain narratives in the Foreign Corrupt Practices Act space – while theoretically possible – are rarely, if ever, found in actual FCPA enforcement actions.
For instance, all probably recognize that a bribe to foreign official to obtain a contract to build a bridge could – theoretically – result in the contract being awarded to a company that uses sub-standard steel causing the bridge to collapse and thus causing human injuries and/or death.
Likewise, all probably recognize that a bribe to a foreign physician (who the DOJ and SEC may consider a “foreign official”) to implant a defective medical device or to prescribe a worthless drug could – theoretically – result in patient health and safety issues.
However, rarely (if ever) are these type of narrative scenarios found in actual FCPA enforcement – the vast majority of which involve companies that are otherwise generally viewed as selling the best product for the best price. Pointing this out is not meant to condone the conduct at issue, but rather to address a common narrative when it comes to FCPA enforcement actions and how the narrative generally falls apart upon closer inspection.
I was reminded of this dynamic upon reading a recent court decision (see 2020 WL 8373400) involving Biomet in a products liability / defective product lawsuit.
By way of background, as highlighted in prior posts here and here, Biomet has resolved not just one, but two FCPA enforcement actions for allegedly bribing physicians and other healthcare providers in various countries.
In the civil lawsuit, plaintiffs sought to introduce evidence of these “other complaint files, claims, and lawsuits” and Biomet sought to exclude this evidence.
The court refused to take the bait on the bribery narrative (i.e. that because Biomet bribed certain doctors its products must have therefore being defective) and stated as follows:
“Defendants ask the Court to “exclude evidence concerning [defendants’] deferred prosecution agreements with the Justice Department and related documents.” Defendants assert they entered into two deferred prosecution agreements (“DPA”) with the United States Department of Justice. First, in 2005, the “U.S. Attorney’s Office for the District of New Jersey (“USAO”) commenced an industry-wide investigation into hip and knee manufacturers’ consultant-hiring practices.” As a result of the investigation, defendants reformed their practices related to hiring physician consultants. According to defendants, the 2005 investigation “had nothing to do with product safety or product liability.” Second, in 2012, defendants entered into a DPA following allegations that they violated the Foreign Corrupt Practices Act related to products sold in Brazil and Mexico. Again, defendants argue this had nothing to do with patient health or patient care. Thus, defendants argue the DPAs and related evidence are irrelevant. Defendants also argue the evidence is unduly prejudicial and constitutes improper character evidence.
In response, plaintiffs assert the admissions in plea agreements are admissible as exceptions to the hearsay rule. The issues raised by defendants are not hearsay objections and thus, the Court need not consider whether admissions in the DPAs are hearsay or admissible as a hearsay exception. Plaintiffs also argue, however, that the evidence is relevant to the punitive damages issue. Specifically, plaintiffs argue it is relevant to show defendants bribed doctors to use the M2a Magnum even though it was unsafe and safer alternatives were available.
Evidence of the DPAs is irrelevant and thus, inadmissible. The DPAs relate to defendants’ consultant-hiring practices and orthopedics sold in Brazil and Mexico, or according to plaintiffs, charges that defendants bribed doctors to implant the M2a Magnum. These charges are unrelated to plaintiffs’ claim that the M2a Magnum was defectively designed. Indeed, the 2007 DPA stated that the government did not allege the conduct adversely affected patient health or patient care. Nor is there any evidence that the charges had anything to do with a defective design. Similarly, the DPAs are not relevant to punitive damages. Even if plaintiffs’ characterization that defendants were bribing doctors to use their product is correct, nothing about that behavior relates to the design defect. Also, the Court is unable to find any evidence to support plaintiffs’ position that defendants bribed doctors because they knew their product was not the safest or least expensive product. Plaintiffs’ theory, without additional support, amounts to no more than speculation that defendants bribed doctors because they knew they were manufacturing and selling an unsafe product.”