Monday, March 24, 2008

Damned If You Do . . .

We don't usually report on labor and employment cases in this space.

Heck, we don't usually read labor and employment cases.

But the recent decision in Mylan Pharmaceuticals , Inc. v. United Steel, Paper and Forestry, Local 8-957, No. 1:07CV4, 2008 U.S. Dist. LEXIS 17988 (N.D.W. Va. Mar. 6, 2008), compels us to speak. Not because of its implications for labor law (you'll be startled to hear), but because of the intersection of this labor case and the defense of product liability litigation.

In a nutshell, Mylan manufactures generic prescription drugs. John Jones worked in Mylan's granulation department, running tests to determine the density of raw drug materials that would later be made into tablets or capsules. When the results of one of those tests didn't meet the pre-established parameters, "Jones manipulated the results and recorded false numbers on a data sheet." Id. at *2. "Jones admitted that he had altered the numbers, and further disclosed that he had manipulated data approximately 50 times in the past." Id. at *3. (Apparently, the tests do not affect the potency of the final drug product, but could affects the drug's release behavior.)

Mylan fired Jones for violating both Mylan's Code of Conduct and the federal Code of Federal Regulations.

So far, so good. That response seems entirely appropriate to us.

Naturally, that's where the train jumps the tracks.

Jones' union initiated a grievance procedure in which it argued that Mylan subjected Jones to disparate treatment by firing him for a first-time offense.

The testimony at the arbitration sounds about right to us: Federal law prohibits adulterating drugs, and fudging test results can constitute adulteration. The FDA can sanction, in a host of ways, manufacturers that adulterate drugs. At the most extreme, the FDA can seek an injunction to shut down the company.

On the other hand, apparently no other union member at Mylan had ever before been successfully discharged for a first-time violation of a rule.

The arbitrator held that "Mylan had not enforced the Code of Conduct in a reasonable and fair manner and had discharged Jones without just cause. He thus awarded Jones reinstatement
. . . . " Id. at *7.

The federal court found that the arbitrator's award did not violate a clearly defined public policy and drew its essence from the collective bargaining agreement, and so affirmed the award. Jones goes back to work. Id. at *29.

Maybe this makes sense as a matter of labor law; we don't know -- we don't play in that sandbox. But it's not very fair from the product liability, or consumer fraud, perspective.

Suppose purchasers of the adulterated Mylan drug sue Mylan for consumer fraud because Mylan sold an adulterated product. Isn't one of Mylan's best defenses (at a minimum, to a claim for punitive damages) that it promptly fired the guy who falsified the data? Won't a jury be awfully mad if Mylan chose to use gentler, progressive discipline for such a heinous offense?

Okay, you say, the defendant can explain to the jury that it tried to fire the culprit, and an arbitrator ordered him reinstated. Maybe a jury will understand.

But what about the next guy who does the same thing that Jones did? It would be silly for a company in Mylan's shoes to try to fire the next guy, because it already knows the result -- the employee will be reinstated. Maybe the company would even be sanctioned somehow -- for taking an indefensible position -- if it tried to fire the next guy situated like Jones, when the company already knew the result in Jones' case.

In that next situation, you have an employee repeatedly fabricating test results and a company deciding not to fire him. Then, as sure as we're typing here, a consumer will sue Mylan. The company will face an outraged plaintiff telling a jury in a consumer fraud or product liability case that the company should be hung high for knowingly selling adulterated products.

The explanation -- "we tried to fire the last guy who did it; an arbitrator wouldn't let us; a court upheld that award; we couldn't fire this guy" -- would be the object of scorn in plaintiff's counsel's closing argument: "A big company like this couldn't figure out a way to fire an employee who was fabricating test results? They want you to believe that? Is there anything this company won't say to take your eye off the ball?" And so on.

We know that it's asking a lot for the fabric of the law to be entirely consistent across all substantive areas. But the clash between labor and product liability law becomes just a little too stark when you read decisions like this one.

We do have two prescriptions for drug companies suffering from the Mylan malady. First, don't unionize. (Egad! We spend our lives writing pro-defense stuff in the realm of product liability, and we immediately write the typical pro-corporate position when we veer off into labor law. Maybe it's in our genes.) Without a union, there's no arbitration process to undo the firing. There's still, of course, the possibility of a lawsuit to undo the firing, but that's inevitable.

Second, and less dramatically, a company could negotiate with its union to eliminate violations of FDA regulations from grievance procedures covered by the collective bargaining agreement. If firing an employee for violating federal law were exempt from the grievance process, then the Mylan situation could not arise. We don't know if a union would agree to that, but it's a theoretical possibility.

Ultimately, both of those remedies are pretty strong medicine for an ill that simply shouldn't exist at all.

Most companies would generally like to do the right thing and not be held liable for doing so. The law should leave enough breathing room to make that possible.

1 comment:

Anonymous said...

Here's another wrinkle. What if the company is operating under a corporate integrity agreement, or is being investigated?

1. What if there is a conflict between this decision and a company's obligations under a corporate integrity agreement (or deferred prosecution agreement)?

2. What if the company wants to voluntarily disclose this misconduct and mitigate the consequences it expects to come as a result of a government investigation? Considering the Thompson Memo, the company's leniency might be misconstrued.