Chicago Business Litigation Lawyer Blog

New Kickback Lawsuit Brought Against Novartis

May 6, 2013 | Peter S. Lubin and James V. DiTommaso

A kickback by any other name is still a kickback. Novartis Pharmaceuticals Corp. has already paid the price for allegedly giving kickbacks but it allegedly appears not to have learned its lesson yet. After having settled fraud charges based on kickbacks less than three years ago, Novartis is now facing another lawsuit from the government for allegedly giving kickbacks to pharmacies that transferred kidney transplant patients from competitors’ drugs to its own.

The civil health care fraud lawsuit was filed in the U.S. District Court in Manhattan and it seeks unspecified damages and civil penalties. According to the lawsuit, the kickback scheme goes back as far as 2005.

U.S. Attorney Preet Bharara said the company allegedly used the “lure of kickbacks disguised as rebates” to turn at least 20 pharmacies into a sales force for its own drug, Myfortic. According to the lawsuit, this illegal behavior cost the public tens of millions of dollars in drugs dispensed by pharmacists who had accepted Novartis’s kickbacks in exchange for selling the more expensive drugs.

Novartis’s system allegedly opposed the use of a cheaper, generic immunosuppressant drug. The lawsuit claims that the pharmaceutical company found that it was highly profitable to pay pharmacies kickbacks of up to as much as 10 or even 20 percent in exchange for switching patients to Myfortic.

According to the lawsuit, Novartis offered one Los Angeles pharmacist a “bonus” rebate of several hundred thousand dollars in order to get the pharmacist to “shoulder the burden” of switching between 700 and 1,000 transplant patients to Myfortic.

The arrangement violates the federal anti-kickback statute which prohibits the offer or payment of rebates and other inducements for the purchase of drugs or services covered by Medicare, Medicaid or other health program.

Novartis denies the claims and said in a statement that it will defend itself. It said that the investigation into the pharmaceutical company’s interactions with specialty pharmacies relating to the handling of Myfortic had been previously disclosed.

The company said, “As a leading healthcare company, Novartis strives to achieve high performance with high integrity. [Novartis Pharmaceuticals Corp.] is committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products.”

Super Lawyers Names Peter Lubin 2013 Selection

April 30, 2013 | Peter S. Lubin and James V. DiTommaso

Super Lawyers named Chicago and Oak Brook business trial attorney Peter Lubin a Super Lawyer in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. DiTommaso Lubin’s Oak Brook and Chicago business trial lawyers have over thirty years experience in litigating complex class action, consumer rights and business and commercial litigation disputes. We handle libel and defamation cases, First Amendment issues and emergency business law suits involving injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud.

DiTommaso Lubin’s Wheaton, Naperville, and Aurora litigation attorneys have more than two and half decades of experience helping business clients unravel the complexities of Illinois and out-of-state business laws. Our Chicago business, commercial, class-action, and consumer litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices in Oak Brook, near Naperville and Glen Ellyn, we serve clients throughout Illinois and the Midwest.

If you’re facing a business or class-action lawsuit, or the possibility of one, and you’d like to discuss how the experienced Illinois business dispute attorneys at DiTommaso Lubin can help, we would like to hear from you. To set up a consultation with one of our Chicago class action attorneys and Chicago business trial lawyers, please call us toll-free at 630-333-0333 or contact us through the Internet.

Former Illinois Governor Thompson Says That Recent Lawsuit Against the White Sox is Simply a Self-Serving Tirade

April 30, 2013 | Peter S. Lubin and James V. DiTommaso

Chicago has long been known for its corrupt politicians. A former executive of the Illinois Sports Facilities Authority (ISFA) claims that the IFSA is no exception in a recent lawsuit. The Authority denies those allegations.

Perri Imer, the former executive director of the ISFA, has filed a lawsuit against former Illinois governor Jim Thompson and the White Sox owner Jerry Reinsdorf. The lawsuit alleges that the two conspired to have Imer fired two years ago to stop her reforms at the public agency from going through. The complaint alleges that Reinsdorf and Thompson, who was chairman of the ISFA at the time, “sought to silence Perri Imer and to stifle her efforts to protect Illinois taxpayers from Reinsdorf’s greed.”

According to the lawsuit, Reinsdorf allegedly pressured Thompson to remove Imer because of her success in getting the White Sox to pay $1.2 million in yearly rent to the agency for the use of U.S. Cellular Field. According to the lawsuit, Reinsdorf allegedly had “undue influence” over former Governor Thompson and apparently over all the members of the ISFA Board of Directors who became complicit in allowing Reinsdorf to treat Cellular Field and the surrounding publicly owned lands as his personal fiefdom.”

According to the complaint, the public agency used taxpayer money to build and renovate U.S. Cellular Field as well as to build the restaurant next door, Bacardi at the Park. However, most of the revenue from those two facilities has allegedly gone to the White Sox.

The lawsuit alleges that the “highly favorable terms granted to the White Sox in 1998 and intended to last until at least 2029 served to create a sense of entitlement on the part of White Sox Chairman Reinsdorf, who has repeatedly acted as though U.S. Cellular Field was a gift by the Illinois taxpayers to Reinsdorf and his team”.

Thompson dismissed the lawsuit as a “self-serving tirade” and both he and a Reinsdorf spokesman denied the allegations.

Honeygate Leads to Civil Anti-Dumping Suit Relating Chinese Honey Being Dumped into the U.S. Market

April 29, 2013 | Peter S. Lubin and James V. DiTommaso

The government sometimes imposes sanctions on certain imports for the sake of fair competition on behalf of domestic producers, among other reasons. When companies choose to ignore those sanctions, they could find themselves held accountable, not only by the government, but also by the domestic producers who were harmed by the illegal imports.

The “Honeygate” investigation, led by the U.S. Immigration and Customs Enforcement investigative arm of the U.S. Department of Homeland Security is one such case. The investigation resulted in a series of seizures of illegally imported honey, criminal charges, and massive fines. The United States District of Illinois filed criminal charges against two of the country’s largest industrial honey suppliers, Groeb Farms, Inc. and Honey Solutions. The two companies entered into Deferred Prosecution Agreements with the government and confessed to knowingly facilitating the importation, purchase, and sale of the mislabeled Chinese honey in order to avoid the U.S.-imposed antidumping duties.

The United States government had imposed antidumping duties on Chinese honey because they found that the honey was sold at such a low price as to interfere with the sale of domestically-produced honey.

To avoid the United States’s antidumping duties, the honey distributors engaged in a massive conspiracy involving transshipping Chinese honey through other countries, disguising the honey’s origin, and then illegally importing the Chinese honey into the United States in order to avoid paying the U.S. dumping duties.

Three domestic honey producers, Adee Honey Farms, Bill Rhodes Honey Company, LLC, and Hackenberg Apiaries, have now filed a class action complaint in the U.S. District Court for the Northern District of Illinois. In addition to the three named plaintiffs, the class action asserts claims on behalf of a nationwide class consisting of all individuals and entities “with commercial beekeeping operations (300 or more hives) that produced and sold honey in the United States during the period from 2001 to the present.”

The lawsuit is building on the Honeygate investigation in its attempt to obtain compensation for the financial losses suffered by the domestic honey producers as a result of Groeb’s and Honey Solutions’s conduct. The class-action alleges that, by intentionally participating in the purchase, packaging, distributing, and sale of the Chinese honey, the two companies deceived consumers and purchasers.

The lawsuit alleges that consumers were deceived because the Chinese honey has allegedly been found to be “heavily adulterated, containing inexpensive sweeteners and sometimes blended with high fructose corn syrup and other additives, despite the fact that importers, in league with [Groeb and Honey Solutions], represent that it is pure honey.”
James J. Pizzirusso one of the attorneys representing the domestic honey producers, states that the domestic honey industry, which is “critically important to agriculture, has suffered losses at the hands of these fraudulent suppliers.”

Adam J. Levitt, another attorney for the plaintiffs, said “It is important that American beekeepers and honey producers get to play on a level playing field”.

Motion to Dismiss Denied in Lawsuit Alleging Law Schools Deceive Applicants to Enroll

April 27, 2013 | Peter S. Lubin and James V. DiTommaso

With the economy firmly stuck in a “jobless recovery”, many students feel more pressure than ever to further their education in the hopes that it will make them more employable. Colleges likewise release and advertise the employment rate of their graduates to entice new students to enroll.

However, many students are finding that they are unable to get the jobs that they felt the colleges promised them. There are currently more than a dozen law schools facing class action lawsuits from students who were unable to attain employment in their field after graduation. Recently, six of those lawsuits have been dismissed by the courts, six have had their motions to dismiss rejected, and three have motions to dismiss which are still under review.
Included among the cases which have been allowed to move forward, is Harnish v. Widener University School of Law. The lawsuit alleges that the school publicized misleading and incomplete graduate employment rates in violation of New Jersey and Delaware consumer fraud acts.

Judge William H. Walls of the U.S. District Court for the District of New Jersey pointed to the broad nature of the New Jersey statute when he denied the defendants’ motion to dismiss. The statute, he says, extends to purchases made for business purposes and does not require proof of reliance in order to be enforced.

Eight Widener University law school alumni who graduated between 2008 and 2011 comprise the plaintiffs in the class-action lawsuit. Initially, the court determined that the plaintiffs failed to assert any common law fraud causes of action. The plaintiffs then voluntarily dismissed their cause of action which alleged violation of Delaware’s Deceptive Trade Practices Act.

The two remaining causes of action allege that Widener violated the New Jersey and Delaware consumer fraud acts. According to the lawsuit, Widener violated these laws by allegedly:
1) stating that approximately 90-95% of their graduates secured employment within nine months of graduation;
2) manipulating the employment data to make it seem as though the overwhelming majority of recent graduates secure full-time, permanent employment for which a J.D. is required or preferred;
3) distributing false post-graduate employment data and salary information to various third parties (such as the ABA and U.S. News and World Report);
4) making deceptive and misleading statements and omissions about Widener’s reputation with potential employers, the value of a Widener degree, and the pace at which recent graduates can expect to obtain gainful employment in their field; and
5) making students pay inflated tuition based on these misleading statements and omissions.
The court agreed that, taking these allegations at face value, the plaintiffs have plausible claims under the consumer fraud acts.

The court concluded that the 90-95% employment rate posted on Widener’s website was indeed allegedly misleading. Although the statement may have been technically true, Walls agreed that it was plausible for a law student to believe that the figures referred to law-related employment. In making this decision, Walls pointed out that the figures were posted in a class profile which was sandwiched between “judicial clerkships” and “full time legal employers”.
Walls further stated that Widener’s website aims to persuade students to obtain a law degree through their program and that the figures were sent to third-party evaluators to establish Widener’s standing.

Without much further discussion, the court agreed that the plaintiffs had also pleaded enough information to withstand the motion to dismiss their cause of action under the Delaware consumer Fraud Act.

Apple Settles Breach of Warranty Class Action Over Alleged Misuse of Water Damage Claims

April 26, 2013 | Peter S. Lubin and James V. DiTommaso

Amidst the many legal and financial troubles it has been facing lately, Apple can scratch one class-action lawsuit off the list. The class-action combined a number of lawsuits that had been filed in San Francisco against the company and dealt with Apple’s warranty policy for its iPhone and iPod touch.

According to the lawsuit, Apple allegedly refused to repair or replace merchandise still under one- or two-year warranty if a piece of white tape inside the device had changed color. The tape was supposed to turn pink or red when it came into contact with water. Since said water contact is known to damage electronic devices, Apple customer service personnel were instructed not to repair devices with tape that had changed color.

However, the tape manufacturer, 3M, allegedly said that humidity could potentially turn the tape at least pink. The customer service manual also states that “If a customer disputes whether an iPod with an activated [Liquid Contact Indicator] has been damaged by liquid contact and there are no external signs of damage from corrosion, then the iPod may still be eligible for warranty service.”

Although the tech giant admits no wrongdoing, it has agreed to settle the case for $53 million. This has the potential to affect hundreds of thousands of iPhone, iPhone 3G, and iPhone 3GS owners as well as customers who bought the first three generations of the iPod touch media player. Each member of the claim could get as much as $400 although, if there are enough people with claims, it could end up being less than half that much.

This is not the first time Apple has had to contend with complaints regarding its warranty policies. Recently, the CEO, Tim Cook, apologized to China after the state-run CCTV network and Chinese celebrities chastised the company on its replacement and repair policies in the more than 1 billion customer market.

The EU has also repeatedly castigated the firm over its warranty policies and Italy even threatened to close Apple’s offices if a warranty concern wasn’t addressed.

Court Limits Preliminary Injunction in Non-Compete Case Based on Indefinite Contractual Term – EXFO America, Inc. v. Herman

April 24, 2013 | Peter S. Lubin and James V. DiTommaso

A communications company sought to enjoin a former employee from working for a competitor or divulging any trade secrets, pursuant to a non-competition agreement signed by the parties. The employee contended that the agreement was unenforceable because it failed to define a key term. The U.S. District Court for the Eastern District of Texas, in EXFO America, Inc. v. Herman, granted a limited preliminary injunction against the employee, finding the non-competition agreement to be indefinite, but still enforceable.

The plaintiff, EXFO America, Inc., manufactures and sells products under the brand name NetHawk. The company formerly employed the defendant, Dan Herman, under a contract that included a non-competition agreement. The court’s opinion does not describe the circumstances of Herman’s departure from EXFO, but Herman subsequently took a job with Spirent Communications, a competitor of EXFO. EXFO filed a complaint in federal court in April 2012 and requested a preliminary injunction prohibiting Herman from working for Spirent for a six-month period, and prohibiting him from revealing any trade secrets or other confidential information belonging to EXFO for at least five years, beginning on his termination date.

The non-competition agreement between EXFO and Herman purported to prohibit Herman, upon the termination of his employment with EXFO, from working or participating in any way in the “Business” for a period of six months anywhere within the United States. Where a definition of the term “Business” would normally appear, however, the clause merely contained the form language “{describe products or attach a list as an exhibit}.” Herman argued to the court that this lack of definition of a clearly essential term rendered the non-competition agreement unenforceable.

Speedway Motors Litigation Continues

April 24, 2013 | Peter S. Lubin and James V. DiTommaso

While many consider an oral agreement to be as binding as a legal contract, not everyone chooses to see it that way. Bruton Smith, owner of Speedway Motors Inc. (SMI) and Charlotte Motor Speedway, discovered this for himself regarding an agreement he made with Cabarrus County in North Carolina.

According to the lawsuit, Smith agreed to build a drag strip and make more than $200 million in upgrades to the Charlotte Motor Speedway. In return, Concord and Cabarrus county officials offered $80 million in tax breaks. The deal was announced in November 2007 but was never put into writing until the day after the zMax Dragway officially opened in August 2008, three weeks before its first scheduled race.

The contract stipulated that SMI was to spend its millions in infrastructure improvements within three years, but would be reimbursed through property tax breaks as improvements increased the value of the drag strip. Smith rejected the contract and SMI and Charlotte Motor Speedway sued the city in September 2009. Concord was dropped from the case after agreeing to pay $2.8 million and getting land easements. It is a common method used by North Carolina governments to encourage company investment.

SMI’s lawyers allege that local officials made a verbal promise in 2007 to provide $80 million in no more than six years. They also allege that the county had a financial motive and therefore cannot defend itself with a local law which protects municipalities from lawsuits.
Lawyers for Cabarrus County on the other hand, claim that the 2007 agreement was “an agreement to agree, which is not an agreement at all”. They also said that the fact that SMI built the drag strip and made other improvements before the deal was finalized is not the fault of the county.

The county’s lawyers further declare that it would be difficult for the county to come up with $80 million quickly because it is permitted to collect no more than $104 million in property taxes each year. According to the lawyers, that information is public knowledge and so SMI cannot claim that it was blindsided.

The dispute began when Smith gave the orders for workers to start grazing land on speedway property for the $60 million drag strip 20 miles north of Charlotte before obtaining the requisite permits to do so. When the area residents complained about the potential for increased noise, Smith dismissed the complaints. In a 2008 interview, he asked, “Do you have any friends that built a house close to a speedway that didn’t know there was a speedway here? Can you imagine? All of you knew there was a speedway here, right?”
When local officials delayed in granting the permits, Smith threatened to build the drag strip elsewhere and move the speedway, which helps to foster a motorsports industry with an estimated worth of $6 billion a year in North Carolina.

It is not clear whether SMI – which owns the track and seven others in Georgia, Tennessee, California, Kentucky, Nevada, New Hampshire and Texas – has yet received any of the $80 million it was allegedly promised.

A judge dismissed the lawsuit last year but Smith is now trying to resurrect it. A three-judge state Court of Appeals panel will hold a closed-door discussion to determine whether the lawsuit will be heard by a jury. They are expected to reach a decision within the next three months and, if they decide to allow the case to move forward, it could be appealed to the Supreme Court. If the lawsuit does not move forward, SMI may have to wait as long as 40 years to be reimbursed.

Criminal Defense Lawyer in Drew Peterson Case Files Libel and Defamation Law Suit

April 22, 2013 | Peter S. Lubin and James V. DiTommaso

Far from solidarity in troubled times, the attorneys for Drew Peterson seemed to turn on each other as soon as their client was convicted. Each blames the other for the loss of the case and the dispute will now begin a legal battle of its own.

The plaintiff is Joel Brodsky, formerly the lead attorney for Drew Peterson in his murder trial, although he has since resigned from the legal team. Steven Greenberg, another member of the legal team who is still representing Peterson, is one of the defendants in the case. The lawsuit is the result of a 15-page letter, which Greenberg wrote and distributed. According to the lawsuit, the letter contains “false and misleading” statements which are allegedly an attempt to defame Brodsky as revenge for Brodsky attempting to fire Greenberg from Peterson’s case.

Among other things, the letter calls Brodsky a liar and an incompetent lawyer. One section reads, “You wafted the greatest case by ignorance, obduracy and ineptitude, … Your effort to blame me is suggestive of a six-year-old changing the rules of the game when he falls behind. … You are nothing more than a bully.” The letter also accuses Brodsky of “single-handedly” losing the trial and provides an unflattering description of his leadership, saying he insisted on the other lawyers calling him “coach”.

Allegedly, Greenberg developed a grudge against Brodsky after Brodsky told him to stop appearing on national television during the trial. The lawsuit alleges that this grudge caused Greenberg “to ignore the best interest of Peterson and become irrationally fixated and obsessed with destroying Brodsky”.

According to the lawsuit, the letter put Brodsky’s law office “in a false light in the public eye” which caused him to lose profits.

Brodsky also named the Chicago Tribune, its parent Tribune Co., Tribune reporter Stacey St. Clair, AOL Patch Media Corp., and Patch editor Joseph Hosey as defendants for publishing the defamatory letter.

Greenberg called the lawsuit “frivolous” and claims not to be worried by it because the “truth is a defense”. Tribune Editor Gerould W. Kern released a written statement which said, “We stand behind our reporting and our reporters, and we intend to defend this suit vigorously.
Walter P. Maskym, a Chicago attorney representing Brodsky in the case, said he is confident that Brodsky will win the case and “that his good name will be cleared and his professional reputation restored.”

In addition to defamation, the lawsuit is asserting claims for alleged false-light invasion of privacy and violation of the Illinois Deceptive Trade Practices Act.

Ford Sued in Class Action Claiming Unintended Acceleration

April 19, 2013 | Peter S. Lubin and James V. DiTommaso

While Toyota’s problems with unintended acceleration in their vehicles have garnered much media attention, Toyota is hardly the only car company to experience these problems. Audi experienced similar issues in the 1980’s from which it took them a decade to recover in the American market. Honda, Jeep, Mercedez-Benz, Hyundai and Kia have all had reported issues over the years.

Most recently brought before the court with alleged unintended acceleration issues is Ford. In fact, according to the Transportation Department’s inspector general, a 2011 report revealed that Ford actually had the same number of deaths and injuries from these acceleration issues as Toyota: 374 from 2003 through 2009. Ford alone received 22% of all of the complaints regarding unintended acceleration during that period. That’s more than any other single car manufacturer.
The National Highway Traffic Safety Administration’s (NHTSA’s) data shows that complaints regarding Ford vehicles increased dramatically from 2005 to 2007. Injuries from acceleration issues peaked between 2004 and 2006.

A spokesperson for Ford though, has released a statement that the NHTSA has investigated many cases of alleged unintended acceleration over the years and has found that driver error is more commonly the cause of these accidents. They also stated that the NHTSA is much more “scientific and trustworthy than work done by personal injury lawyers and their paid experts”.
The NHTSA also could not find evidence of electronic malfunctions in Toyota vehicles in a 2011 report it did with the National Aeronautics and Space Administration. Nevertheless, Toyota recently settled a class action lawsuit for $1.1 billion to put the matter to rest. Toyota, as well as BMW, Mercedez-Benz, Audi and Volkswagen, have all begun installing brake override systems into every vehicle they make. These brake override systems will stop the car when the brake and the gas petal are activated at the same time. Ford also began installing these “brake override accelerators” into its vehicles in 2010.

Despite the fact that the NHTSA concluded that most of the Toyota alleged acceleration issues in Toyota vehicles were due to driver error, the recall of nearly 10 million vehicles and the publicity as well as the congressional hearings, have prompted the NHTSA to propose a rule which would require all vehicles to have a brake override system.

The case recently filed against Ford was filed in the U.S. District Court for the Southern District of West Virginia and includes 20 Ford owners in 14 states. The case covers Ford vehicles made between 2002 and 2010 and alleges a “design defect” in the electronic control of the gas pedals which made the vehicles susceptible to sudden, unintended acceleration. The lawsuit alleges that the vehicles should have had a brake override system and is seeking damages for the reduced value of the vehicles.