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May 11, 2021

DEFAULT JUDGMENTS
Tennessee Circuit Court issues rare default liability judgment against Endo as a discovery sanction
The district attorneys general of Tennessee’s 1^st, 2^nd, and 3^rd judicial districts and Baby Doe, a baby born drug-dependent, sued Purdue Pharma and related Endo Pharmaceuticals entities (the manufacturer defendants) in 2017 under Tennessee’s Drug Dealer Liability Act (DDLA), as well as a former prescriber and certain street-level defendants. Under the DDLA, “a person who illegally distributes drugs or knowingly facilitates the illegal distribution of a drug in Tennessee can be held liable to an appropriate plaintiff,” based on direct liability or on market facilitation. Appropriate plaintiffs include a baby born drug dependent and government agencies who can allege damages caused by an individual’s use of an illegal drug. The district attorneys general are representing their respective local governmental agencies.

As the Court noted, “Stakes in this litigation are high. Plaintiffs have alleged that Baby Doe may suffer from long-term (perhaps lifetime) impairments as a result of exposure to drug in utero. As for the District Attorneys, they have filed expert reports that, collectively, estimate the local governments’ prospective damages at $2.4 billion.”

During the time period relevant to this litigation, Endo sold opioids, including Opana ER, in Tennessee, and purportedly had a system in place to identify and detect overprescribing or diversion of its products. The system was based in part on reports from its sales representatives to their managers and so on up the chain. As a result of these reports, Endo could elect to do nothing, or place the prescriber on an exclusion list which would prevent Endo sales representatives from detailing (i.e., promoting to) that prescriber. The Court noted that records concerning this system and therefore “Endo’s knowledge concerning suspect practices by Tennessee prescribers – including knowledge of potential diversion – are obviously critical to this case” for the purposes of establishing liability. “This would include email correspondence concerning Tennessee prescribers, formal Reports of Suspected Diversion to district managers or compliance officials, and the responses by district managers or compliance officials to these reports ...”

At the heart of the instant opinion and order is whether Endo was forthcoming and timely during Court-ordered document disclosures. In 2018, the Court issued an order to compel, requiring Endo to disclose to plaintiffs, inter alia,  the following for all of its prescription opioids from June 13, 2007 to the date of entry: “(3) Endo’s knowledge of suspect practices concerning the drugs, including but not limited to high-volume prescribers who were likely engaged in diversion or over-prescribing; (4) Endo’s policies, practices, and procedures for addressing potential abuse and diversion of its drugs; and (5) the volume of Endo Opioids streaming into the relevant geographic area and the illegal drug market.” This order, according to the Court, was not fully complied with: “Endo did not search the files of any of its 86 Tennessee sales representatives, any of 18 District Sales Managers ..., or the files of its non-executive level compliance officials. ... Instead, Endo engaged in obfuscation and delay.” On 3 occasions prior to January 2020 the Court noted statements made by Endo and stated each time, “This was not true. [Emphasis in original]”

The Court identified specific misconduct prior to Endo’s Rule 30.02(6) Deposition: “On the night of January 15 [2020], shortly before the next scheduled status conference the following morning, Endo served 34 pages of objections to the deposition notice, including objections to the words “person,” “opioids,” “efforts,” “communicate,” “diversion,” “district attorneys,” “due diligence”, “Opana ER” (its own product), and the word “pharmacy.” [Emphasis in the original]” At the scheduled deposition, the Court noted that Endo again falsely affirmed it had delivered all the requested documents related to prescribers.

The Court issued a Discovery Cutoff Certification Order requiring each party to certify by February 14, 2020 that it had produced all responsive records and to identify any records being withheld pursuant to objections. Endo “certified its compliance with that Order, stating that it had made a ‘reasonable search’ for records but not identifying any specific categories of documents that it had withheld. Again, this was not true.” On March 26, 2020, following additional records disclosures, “the Court ruled from the bench that Endo had given an evasive response to 3^rd RFP No. 2 that amounted to a failure to answer ... The Court ordered Endo to produce all responsive records in 5 days. It also warned that any further non-compliance could result in severe sanctions, up to and including default judgment, as well as potential referral to the Board of Professional Responsibility.” Endo subsequently produced “thousands of responsive records.” Further disputes over Endo’s prescriber files led to a plaintiffs’ motion for sanctions, following which Endo produced over 60,000 documents. Following a Contempt Order in May 2020, Endo continued to produce documents, ultimately “Endo’s post-contempt productions included 255,000 documents (over 170,000 of which Plaintiffs had never, seen before) and approximately 1 million Bates’ stamped pages. Among those documents were nearly 100,000 spreadsheets, 8,500 PowerPoints, additional Reports of Suspected Diversion, 9,000 documents containing the word “diversion”, over 1,700 documents with the phrase “pill mill,” and additional exclusion lists.” [Emphasis in original.]”

As the Court summarized, “in total, Endo produced nearly 400,000 documents after the close of fact discovery – despite certifying on February 14 ... that its productions were complete ... By the time Endo had completed these productions, all pretrial deadlines had run. The parties had completed expert disclosures and expert depositions, filed and fully briefed numerous summary judgment motions ..., filed and fully briefed numerous motions in limine, filed and briefed numerous expert exclusion motions by Endo, and exchanged witness lists, exhibit lists, and deposition designations.”

On April 6, the Court entered a default judgment on the issue of liability in favor of the plaintiffs, noting that “Although this is a harsh sanction, justice demands it under the circumstances. Anything less would make a mockery of the attorneys who play by the rules and the legal system.” The Court also issued the following sanctions: (1) Costs to plaintiffs for processing and handling documents produced after February 14, 2020, along with attorney’s fees; (2) Documents produced after February 14 are deemed authentic and admissible by plaintiffs if desired; (3) Such documents may be introduced to the jury and explained by plaintiffs; (4) Costs and fees to plaintiffs for all motions to compel; (5) Costs and fees to plaintiffs for depositions taken in 2018 and 2019 without benefit of complete records. The Court ordered plaintiffs to identify within 15 days those defense attorneys who made false statements to them, and within 30 days of the order, “each of the Arnold and Porter attorneys who are partners or shareholders and who have been admitted pro hac vice in this case shall Show Cause why their pro hac vice admissions should not be revoked.” The Court reserved further sanctions, and reserved entering a final judgment pending a damages trial. [Staubus et al. v. Purdue Pharma L.P. et al, No. C41916, Tenn. Cir. Ct. Sullivan Co., April 6, 2021; https://bit.ly/2Q83S68]