Merix Pharmaceutical Corp. v. Clinical Supplies Management, Inc.

Citations: 106 F. Supp. 3d 927; 2015 U.S. Dist. LEXIS 68094; 2015 WL 3407459Docket: No. 11 C 3318

Court: District Court, N.D. Illinois; May 27, 2015; Federal District Court

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In 2005, Merix Pharmaceutical Corporation engaged PRACS Institute, Ltd. to conduct a double-blind, placebo-controlled clinical trial for its herpes drug, Releev. PRACS contracted Clinical Supplies Management, Inc. (CSM) to manage the clinical supplies. CSM received and distributed the supplies, but the placebo provided was found to be adulterated with benzalkonium chloride, the active ingredient in Releev. This contamination rendered the trial results invalid, prompting Merix to sue CSM for breach of contract and fraudulent inducement. The jury ruled in favor of CSM on both counts.

Merix has since filed motions for relief from judgment under Federal Rule of Civil Procedure 60(b)(3) and a new trial under Rule 59, citing improper closing arguments by CSM’s counsel, Jeffrey Singer. CSM has countered by requesting litigation costs under Rule 54(d)(1). A new trial may be granted if the jury's verdict contradicts the weight of evidence or if the trial was unfair. Relief under Rule 60(b)(3) is contingent upon proving that the opposing party's misconduct prevented a fair trial. The Court will evaluate whether Singer's conduct improperly affected Merix's ability to present its case, considering five factors related to the nature of the arguments made.

Improper remarks made during closing arguments are seldom deemed reversible error. Merix's counsel, Richard Cannon, did not object to several comments made by Singer during his closing argument, which Merix now claims were improper. These comments include: (1) attacks on Merix’s CEO, Meryl Squires; (2) discussions about CSM’s financial condition and implications for its employees; (3) mischaracterizations of pre-litigation communications between CSM and Merix; (4) suggestions that the jury could expedite their decision; (5) encouragement to disregard court instructions on Merix's recovery in other lawsuits; and (6) comparisons of Merix’s allegations against CSM to its false advertising claims about Releev. 

Merix forfeited the right to challenge these arguments by failing to object during trial, as established in relevant case law. Even if objections had been raised, Singer's arguments were largely appropriate or harmless. Specifically, highlighting inconsistencies in Squires's testimony was relevant, as her credibility was pivotal to the case. Discussions of CSM’s financial condition were permissible, especially given the jury's instructions regarding punitive damages. Although Singer inaccurately stated that the 2011 lawsuit was the first communication from Merix, this misstatement was deemed harmless and supported by evidence suggesting CSM was unaware of accountability until that time. Overall, Merix’s failure to object at trial limits its ability to contest the closing arguments made by Singer.

Singer misrepresented the timing of communications between Merix and CSM but noted that Merix took five years to hold CSM accountable. Merix argued that Singer's suggestion that jurors could expedite their deliberation by checking two boxes on the verdict form was improper, yet it was deemed appropriate as it aligned with trial strategy. Singer highlighted the mistakes of EMS and PRACS employees, suggesting they, rather than CSM, were responsible for an adulterated placebo, which was consistent with CSM's defense strategy. 

Merix contended that Singer’s reference to previous false advertising claims against them violated court instructions. Singer compared Merix's allegations against CSM to prior false advertising claims, implying they were misleading. The court had previously ruled these claims relevant to the context of Merix's actions, and Merix had introduced the preliminary injunction evidence themselves, making Singer's remarks permissible.

Additionally, Merix objected to Singer referring to them as a "serial litigant" and indicating that litigation was part of their business. The court sustained this objection and instructed the jury to disregard the comment, emphasizing that prior litigations could only be considered for witness bias. The court's curative instruction is presumed effective in mitigating any potential prejudice from such comments.

Merix contends that Singer wrongfully questioned Squires’s honesty by alleging she fabricated a letter intended to counter claims from EMS employees that she directed the inclusion of benzalkonium chloride in a placebo. The letter, which Squires wrote to her granddaughter, was meant to demonstrate that she was focused on Releev during her Philadelphia visit. In closing arguments, Singer accused Squires of fabricating this letter for financial gain, despite the Court allowing him to proceed after overruling an objection from Cannon. While Singer's remark labeling Squires as "pathetic" was deemed harsh, it did not constitute improper argumentation, as he was addressing the letter's authenticity based on conflicting trial testimonies.

Merix also argues that Singer breached Court orders by discussing the Glaxo litigation details. The Court permitted some evidence from the Glaxo case, as it provided relevant context for the current clinical trials. Merix acknowledged that the preliminary injunction in the Glaxo case influenced its decision to initiate these trials. However, the Court previously ruled that Merix could not relitigate claims from the Glaxo case regarding the validity of Releev's pre-marketing studies. Despite this, Merix introduced evidence about negative findings from Judge Debevoise in the Glaxo suit. During Squires's testimony, Cannon elicited acknowledgment from her about Judge Debevoise's disagreement with Merix's claims of clinical trial support, fully aware that the Court had restricted such inquiries. Subsequently, Merix presented the complete text of Judge Debevoise's injunction, which included unfavorable conclusions about its claims concerning Releev.

Merix introduced evidence from the deposition of Lawrence Weinstein, its attorney in the Glaxo litigation, which included a preliminary injunction ruling indicating that Merix's reliance on a specific study was a significant issue. Weinstein's testimony, which Merix did not object to, included the judge's findings on the falsity of Merix's claims regarding Releev. This lack of objection allowed for the discussion of false advertising claims and the judge's conclusions during closing arguments, including assertions that Merix's claim about Releev curing herpes in one day was scientifically unfounded.

Singer, during his closing arguments, referenced the absence of a scientific basis for Merix's claims and argued that the claims were found to be literally false. Although Cannon objected to some studies not presented to the jury, Singer's arguments were ultimately deemed appropriate as they were based on evidence in the record introduced by Merix. Merix's failure to object or seek limiting instructions effectively forfeited its right to challenge these arguments. 

However, Singer crossed a line by making inflammatory and irrelevant accusations against Squires regarding safety testing of Releev, suggesting intentional negligence and consumer fraud. The court noted that such statements were not relevant to the trial’s focus and were considered inappropriate.

Squires did not provide a reason for marketing Releev prior to conducting a double-blind, placebo-controlled study. Singer's accusations exploited a pretrial ruling that barred evidence regarding Merix’s financial condition unless CSM argued that the company should have expedited clinical trials. CSM interpreted this ruling as applicable only to Merix’s financial struggles post-Glaxo litigation, while Singer referenced Merix’s failure to complete a clinical study before marketing Releev. Merix claimed it did not conduct an earlier trial due to financial constraints, but the ruling prevented it from rebutting Singer's claims. Although Singer's comments were deemed inappropriate, the Court promptly sustained an objection and instructed the jury that false advertising claims were not part of the trial, mitigating potential prejudice. 

Singer also misused the ruling by questioning why Squires did not publish results from a valid clinical trial (the Riley study) in a scientific journal, despite Squires stating that financial constraints hindered publication. The Court ruled out related testimony due to the preclusion of evidence about Merix’s financial status, rendering Merix unable to explain the Riley study's non-publication. Although Cannon objected to Singer’s comments, the Court sustained the objection, further reducing any unfair prejudice. 

Merix aimed to establish that the cumulative effect of multiple improper arguments by Singer rendered the trial fundamentally unfair. The Court considers the overall trial record to assess this claim, acknowledging that improper comments during closing arguments typically do not necessitate a reversal. The identified improper arguments included: 1) Singer's encouragement for jurors to consider Merix's recovery in litigation against EMS and PRACS; 2) accusations against Squires for selling unsafe products for profit; and 3) comments regarding the failure to publish the Riley study.

The Court addressed objections to improper arguments made during the trial, providing curative instructions for all but one instance. Despite the absence of a specific remedy for the last objection, the Court repeatedly clarified that the attorneys’ statements were not to be considered evidence, effectively mitigating any potential harm. The Court’s handling of these objections is presumed to eliminate prejudice. Merix's case was relatively weak, relying heavily on Squires's testimony, which jurors had reasons to doubt. The breach of contract claim involved an ambiguous contract regarding CSM's responsibilities for testing materials. Although the work order indicated CSM's obligation to inspect products, it was argued that CSM was only responsible for packaging and labeling due to the ambiguity, supported by the significant disparity in payment between CSM and PRACS, which managed the clinical trial.

Merix’s fraudulent inducement claim was based on Squires's assertion that a CSM executive misled her about a non-disclosure agreement, influencing Merix's decision to engage CSM instead of another firm that would have identified issues with the placebo. However, Squires's testimony was inconsistent, as she initially did not include key individuals in her claims, and discrepancies arose over the timing and duration of the phone call. This inconsistency undermined her credibility and Merix's position. Ultimately, even if jurors believed the misrepresentation occurred, they might have reasonably concluded that the link between the alleged misstatement and Merix's damages was too weak to establish liability.

Merix did not experience damages from the alleged misrepresentation, and its fraud claim was on par with its breach of contract claim in terms of solidity. The document distinguishes Merix's cited cases for new trials based on the severity of misconduct, the district court’s responses, and the evidence's weight against the losing party. In Stollings v. Ryobi Technologies, defense counsel's unfounded accusations consumed a significant portion of the opening statement and persisted throughout the trial, leading to a conclusion that the improper arguments significantly impacted the verdict. Similarly, Spicer v. Rossetti involved inappropriate comments attacking the heart of the plaintiff's case, with the district court improperly overruling objections. Joseph v. Brierton featured defense counsel suggesting that a judgment would financially ruin his clients, despite knowing it would not. In contrast, Singer's inappropriate comments in Merix's case were limited, Merix objected timely, and the evidence heavily favored CSM. Therefore, the court found that these comments did not compromise Merix's right to a fair trial, denying Merix's motion for relief or a new trial and any request for sanctions.

Regarding costs, since Merix is not entitled to a new trial, the court considered CSM's request for costs under Federal Rule of Civil Procedure 54(d)(1), which presumes that the prevailing party will recover costs unless otherwise stated. Merix contested CSM's entitlement to costs due to Singer's alleged misconduct. The Seventh Circuit acknowledges two scenarios where costs might be denied: misconduct by the party seeking costs or if the losing party is indigent. Denial of costs for misconduct is rare and typically requires exceptional circumstances. Singer's conduct did not rise to this level, as it did not extend or delay litigation unnecessarily.

A court in the district determined that a cost reduction was justified due to the handling of 146 contested motions, primarily focused on discovery disputes, which were largely decided in favor of the plaintiffs. The defendants’ attorneys exhibited uncooperative pretrial behavior and repeatedly failed to adhere to discovery orders. Conversely, another ruling indicated that a single instance of discovery misconduct did not meet the threshold of exceptional misconduct as seen in prior case law. The court also noted that improper comments made during closing arguments did not warrant a denial or reduction of costs.

Taxation of costs against a losing party involves two steps: determining the recoverability of the costs and assessing the reasonableness of the amounts. Under 28 U.S.C. § 1920, recoverable costs include clerk and marshal fees, transcript fees, witness fees, and copying costs. CSM submitted a cost bill totaling $63,290.51, seeking recovery for various expenses including deposition transcripts and witness-related costs.

Specifically, CSM sought $19,928.17 for transcripts from nineteen depositions, which are recoverable as per § 1920(2). CSM and Merix agreed that the original page rate of $3.65 for depositions arranged by CSM applies, amounting to an award of $9,880.55. There is a dispute over the ten depositions arranged by Merix, where CSM argues for full reimbursement based on its lack of control over the court reporters. Judicial Conference rates typically apply, but a precedent suggests that a party cannot contest rates if they selected the reporter. After reviewing invoices, the court concluded that CSM's request for reimbursement at private court reporters’ rates was reasonable, thus taxing Merix the full cost for those depositions.

CSM is prohibited from recovering costs for deposition exhibits since these were provided during discovery, and CSM did not contest this point, leading to a forfeiture of its argument. The Court requires CSM to recalculate its deposition transcript expenses by excluding exhibit costs. For video recordings, CSM sought $4,736.38 for recordings of ten depositions and Steve Purdy's deposition. The Court found that while recording Purdy's deposition was necessary due to his unavailability for trial, the recordings of CSM's own employees were merely convenient. Therefore, CSM must adjust its video recording cost request to include only Purdy's deposition. 

CSM also claimed $790.55 for the pretrial conference transcript. The Court rejected Merix's assertion that this expense was unnecessary, finding it reasonable and necessary for CSM to obtain the transcript to refine its trial strategy based on the Court's oral rulings. Consequently, the Court orders Merix to pay this amount. Lastly, CSM requested $14,217.25 for the trial transcript, which consists of 1,961 pages at $7.25 per page; the excerpt does not provide a ruling on this request.

Merix contests the necessity of the trial transcript and argues against CSM's claim for a higher hourly page rate, asserting that the transcript was only for convenience due to the trial's modest length. However, CSM's need to address Merix’s post-trial motion, particularly concerning the arguments made by Singer in closing, justifies the acquisition of the transcript, excluding jury selection and opening statements. Consequently, Merix can only recover costs at the standard rate of $3.65 per page for the trial transcripts, with CSM directed to adjust its cost request accordingly.

CSM has requested $16,864.48 for photocopying, exemplification, and imaging. Under 28 U.S.C. § 1920(4), a prevailing party can recover these costs if deemed necessary and reasonable; however, costs incurred for convenience are not recoverable. The Court confirms that CSM does not need to provide overly detailed descriptions to recover costs, but it must present the best possible breakdown from its records. CSM’s invoices lack sufficient detail, primarily listing page counts and rates without specifying the documents copied or digitized. The Court awards CSM $101.52 for one adequately described document and one-third of the remaining photocopying costs, instructing CSM to recalculate its costs accordingly.

Lastly, CSM seeks $5,653.68 for witness fees, travel, and lodging expenses for specific individuals, which are authorized under 28 U.S.C. §§ 1821 and 1920(3) for reasonable expenses incurred by witnesses.

Barring any statutory or contractual obligations, statutes limit the recovery for witness travel and lodging expenses. Witnesses can receive $40 per day for attendance and travel, along with actual travel expenses and subsistence for overnight stays, as per 28 U.S.C. § 1821. CSM amended its bill of costs to reflect the correct statutory rates, which are $194 per day for lodging and $71 per day for meals in Chicago. Merix contends that CSM cannot recover witness fees for employees Buchanan, Lauinger, and Finken, as CSM failed to demonstrate payment for their testimony, leading to forfeiture on this point.

The court agrees with Merix regarding the non-recovery of expenses for CSM's president and CEO, Gerald Finken, as he had a personal stake in the litigation, rendering him a real party in interest. Although corporate officers can be witnesses under § 1821, they are not entitled to recover costs for attending trial as corporate representatives unless they are called to testify. Since Finken sat at counsel’s table throughout the trial and had a vested interest in the outcome, CSM cannot recover his expenses.

Merix also disputes Jennifer Lauinger’s lodging expenses, arguing CSM should only recover for one night instead of three. Lauinger testified on September 18, 2014, and while it was reasonable for her to stay the night before, she could have returned home after completing her testimony. The court allows recovery for two nights of lodging for Lauinger. Other expenses related to hotel, airline, and meals were deemed reasonable, with the court taxing $1,281.08 for Fritz, $1,003.20 for Buchanan, $1,366.20 for Lauinger, and $0 for Finken. Additionally, CSM seeks $1,100 for private process servers used for serving subpoenas.

A prevailing party is entitled to recover costs for private process servers, capped at the marshal’s fee of $55 per hour, as established in Collins v. Gorman. Merix contested one charge as duplicative, but CSM clarified that the charges were for separate subpoenas served in April 2013 and July 2012, which the Court verified through invoices. The Court found CSM’s request for process server fees reasonable, resulting in a tax of $1,100 against Merix. Additionally, the Court taxed $790.55 for the pretrial conference transcript and $3,650.48 for witness fees. CSM was instructed to recalculate its requests for deposition and trial transcript costs, including video recordings and photocopying, as per the Court's guidance.

The Court denied Merix's motion for relief from judgment, a new trial, and sanctions while partially granting CSM’s petition for costs. CSM must submit a revised calculation to Merix by June 3, 2015, and Merix is to respond by June 10, 2015. A joint submission detailing cost-related contentions is required by June 17, 2015. The Court disregarded juror statements presented by Merix that suggested improper arguments affected the verdict, citing Federal Rule of Evidence 606(b)(1), which prohibits considering juror deliberations in verdict validity assessments. Furthermore, the Court acknowledged it was unaware of Merix's intention to introduce Judge Debevoise's preliminary injunction decision as evidence prior to trial, and noted a lack of detailed review of exhibit lists and deposition designations before trial proceedings.