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Merix Pharmaceutical Corporation v. Clinical Supplies Management, Inc.

United States District Court, N.D. Illinois, Eastern Division

May 27, 2015



MATTHEW F. KENNELLY, District Judge.

In 2005, Merix Pharmaceutical Corporation hired a company called PRACS Institute, Ltd. to conduct a double-blind, placebo-controlled clinical trial comparing Releev, a herpes drug manufactured by Merix, to a placebo. PRACS hired Clinical Supplies Management, Inc. (CSM), the defendant in this case, to receive the clinical supplies and label, package, and distribute them to the sites where the trial would occur. CSM signed a work order, also signed by PRACS and Merix executives, which detailed the services the company would provide. After the clinical trial was completed, Merix discovered that the placebo CSM received from EMS, the manufacturer Merix hired to produce the drugs for the trial, was adulterated. The placebo contained benzalkonium chloride, the active ingredient in Releev, and therefore was not a placebo. Because of the error, Merix claimed that the results of the trial were useless.

Merix sought to hold CSM accountable for this error. Merix sued CSM, and the case proceeded to a jury trial on two claims. First, the jury considered whether CSM was contractually obligated to check the chemical makeup of the samples it received and if so whether CSM breached that contract by failing to discover the adulterated placebo. Second, the jury considered whether CSM fraudulently induced Merix to hire CSM. Merix claimed that a CSM executive intentionally lied when he said that he had signed a non-disclosure agreement with Merix and that Merix relied on that representation to its detriment.

The jury returned a verdict in favor of CSM. Merix has moved for relief from judgment pursuant to Federal Rule of Civil Procedure 60(b)(3) and for a new trial pursuant to Federal Rule of Civil Procedure 59 based on allegedly improper arguments made by CSM's counsel, Jeffrey Singer, during his closing argument. Merix has also asked the Court to impose sanctions against Singer. For its part, CSM has asked the Court to award costs incurred during the litigation pursuant to Federal Rule of Civil Procedure 54(d)(1).

A. Motion for relief from judgment and for a new trial

A new trial is appropriate under Federal Rule of Civil Procedure 59 "if the jury's verdict is against the manifest weight of the evidence or if the trial was in some way unfair to the moving party." Venson v. Altamirano, 749 F.3d 641, 656 (7th Cir. 2014). Relief from final judgment under Rule 60 for misconduct by the opposing party is appropriate if the party seeking relief "had a meritorious claim that he could not fully and fairly present at trial due to his opponent's fraud, misrepresentation, or misconduct." Id. at 651; Fed.R.Civ.P. 60(b)(3). Relief under Rule 60(b) is "an extraordinary remedy and is only granted in exceptional circumstances." Willis v. Lepine, 687 F.3d 826, 833 (7th Cir. 2012) (internal quotation marks omitted).

Because Merix argues that the same alleged misconduct entitles it to relief under either Rule 59 or Rule 60(b) without distinguishing between the two standards, the Court considers the motion for new trial as a unitary request, not two separate requests. See id. at 836 (stating that the standard for a new trial under Rule 59(a) is "substantially similar to Rule 60(b)(3)'s fully-and-fairly' standard" and concluding that "the district court did not err in examining the two motions together"). Merix is entitled to relief only if Singer acted improperly and his actions prejudiced Merix or prevented it from fully and fairly presenting its case. Id. at 834, 840. The Court considers five factors to determine whether an improper argument "deprived a party of a fair trial: (1) the nature and seriousness of the argument, (2) whether the statement was invited by the opposing party, (3) whether the statement could be rebutted effectively, (4) whether an effective curative instruction was given, and (5) the weight of the evidence." Stollings v. Ryobi Techs., Inc., 725 F.3d 753, 760 (7th Cir. 2013). "[I]mproper remarks made during closing arguments rarely are so serious as to constitute reversible error." Venson, 749 F.3d at 657.

1. Arguments to which Merix did not object at trial

Merix's counsel, Richard Cannon, did not object to many of Singer's allegedly improper comments about which Merix now complains. Specifically, Merix now contends that Singer engaged in misconduct during his closing argument when he (1) attacked Meryl Squires, Merix's CEO and key witness; (2) discussed CSM's financial condition and the stakes of the litigation for CSM's employees; (3) mischaracterized pre-litigation communications between CSM and Merix; (4) suggested that the jury could go home earlier by checking two boxes on the verdict form; (5) encouraged the jury to violate the Court's instruction prohibiting consideration of Merix's recovery in other lawsuits; and (6) compared Merix's allegations against CSM to Merix's false advertising about Releev's efficacy. Merix did not interpose objections to these arguments during Singer's closing.

A party forfeits any post-trial challenge to opposing counsel's arguments by failing to object at trial. See Venson, 749 F.3d at 657; Soltys v. Costello, 520 F.3d 737, 745 (7th Cir. 2008). Merix "should have voiced its objection... at the time the immoderate comments were made" and is now bound by its "decision to sit silent." Gonzalez v. Volvo of Am. Corp., 752 F.2d 295, 298 (7th Cir. 1985) (declining to reverse a jury verdict, even though "counsel's conduct was grossly immoderate"). Merix has forfeited its challenges to each of these arguments by failing to object.

Even if Cannon had objected, however, the arguments in question were not inappropriate or were harmless. First, with respect to Singer's accusations about Meryl Squires, it was appropriate for Singer to highlight inconsistencies in Squires's testimony, particularly because the contract and fraud claims turned on her credibility. See Ramsey v. Am. Air Filter Co., 772 F.2d 1303, 1311 (7th Cir. 1985). Singer did not make his attacks in an inappropriate way.

Second, Singer's statements about CSM's net income and the stakes of the litigation for CSM's seventy employees were proper subjects for argument. Contrary to Merix's assertion, Singer did not violate any ruling; the Court had barred testimony about the Squires family's finances, not CSM's financial condition. See 9/4/2014 Tr. 109:14-110:2. CSM's financial condition was relevant, because the jury was instructed to consider awarding punitive damages if it found CSM liable based in part on the "amount of money [ ] necessary to punish CSM and discourage CSM and others from future wrongful conduct in light of CSM's financial condition." Trial Tr. 1848:20-21.

Third, Singer's comments about pre-suit communications between Merix and CSM's attorneys did not unfairly prejudice Merix. Singer said during his closing argument that

the first communication we got from Merix, five years after invalidation of the clinical trial, [was] when she sued us. That makes no sense. If there was such an agreement for us to be her watchdog, her eyes and ears as pursuant to this contract, you would think she wouldn't be waiting five years to let us know that she holds us accountable.

Trial Tr. 1923:20-25. According to Merix, the e-mails that the Court excluded showed that Merix and CSM communicated earlier than the date of filing suit and that CSM knew early on that it might be blamed for the error in the clinical trial. Singer did make an inaccurate statement. The filing of this lawsuit in 2011 was not the first communication between CSM and Merix; the companies' lawyers exchanged e-mails as early as 2010. But Singer's misstatement during closing argument was harmless. If anything, the e-mails that the Court excluded support Singer's suggestion that CSM did not know it would be blamed until 2011. In the e-mails, Cannon offered to help CSM's attorney avoid producing discovery in response to a subpoena sent by EMS related to the Merix-EMS litigation. See Pl.'s Mots. in Limine, Exs. 8-11. Nothing in those communications suggested that Merix might hold CSM accountable. Thus, even though Singer misstated the timing of the first communications between Merix and CSM, he was correct that Merix waited five years to hold CSM accountable.

Fourth, Merix contends that Singer improperly suggested that the jurors could go home earlier by checking two boxes on the verdict form. Trial Tr. 1931:21-1932:7. To the contrary, there was nothing improper in Singer's request that the jury find in CSM's favor. Moreover, Cannon responded to this point during his rebuttal. Id. 1932:21-1933:3.

Fifth, Merix argues that Singer's statements suggesting that PRACS and EMS were to blame for the adulterated placebo violated the Court's instruction prohibiting the jury from considering Merix's recovery in other lawsuits for purposes other than bias. Singer highlighted EMS and PRACS employees' mistakes and asked why CSM, rather than EMS or PRACS, was being blamed for the failed study. Id. 1912:19-22, 1931:20. These statements did not encourage the jury to consider other awards obtained by Merix. Instead, the remarks supported the argument, which was developed by CSM throughout the trial, that Squires and the other companies involved in the study were to blame for the adulterated placebo, not CSM. This was an appropriate trial strategy and argument.

Sixth, Merix contends that Singer improperly discussed earlier false advertising claims against Merix. Before the PRACS clinical study, GlaxoSmithKline Consumer Healthcare, L.P. (Glaxo) sued Merix for false advertising, and a federal court in New Jersey issued a preliminary injunction prohibiting Merix from making claims about Releev's efficacy without a valid clinical study. Singer referred to Merix's claims against CSM as "another false and misleading claim, " implying that Merix's allegations against CSM were similar to Merix's false advertising, and he noted that a federal judge "stepped in" to "stop what was deemed to be unfair competition." Id. 1893:22-23; 1909:3-10. Cannon did not object, and in any event this was fair argument. Before trial, the Court concluded that the false advertising claims and the preliminary injunction were relevant to explain why Merix initiated the PRACS trial. As the Court put it,

if there's a problem from the fact that your lawsuit stems from the fact that the client got sued for false advertising, well, that's part of the background that you have to live with. That doesn't entitle you to refute the false advertising claim. That's not what this trial is about.

9/4/2014 Tr. 91:13-18. In addition, as explained in the next section of this decision with regard to a related point, Merix itself introduced the preliminary injunction into evidence, including the judge's findings about Merix's claims concerning Releev. Singer did not cross the line when he alluded to the false advertising claims.

2. Arguments to which Merix objected at trial

Cannon did object to several of Singer's remarks during his closing argument. The Court addresses each argument individually and then considers the cumulative effect of Singer's improper comments.

Merix contends that Singer violated the Court's instruction barring the jury from considering evidence of other lawsuits filed by Merix for purposes other than bias, by encouraging jurors to consider Merix's recovery in litigation against EMS and PRACS. Specifically, Singer referred to Merix as a "serial litigant" during his closing argument and stated that litigation "is part of their business." Trial Tr. 1885:4-5. The Court sustained Cannon's objection, instructed the jury to disregard the comment, and reiterated that the jury could consider litigation by Merix against other parties only for the purpose of assessing the potential bias of certain witnesses. Id. 1885:6-12. Where, as here, opposing counsel immediately objects to an improper argument and the court issues a curative instruction, the instruction is presumed to be effective. See Christmas v. City of Chicago, 682 F.3d 632, 642 (7th Cir. 2012); Willis, 687 F.3d at 834. There is nothing here that rebuts the presumption.[1]

Merix argues that Singer improperly expressed his belief about Squires's honesty when he accused her of fabricating a letter for trial. Merix offered the letter, written by Squires to her granddaughter, to rebut the testimony of employees of EMS, the drug manufacturer, who stated that Squires had instructed them to put benzalkonium chloride in the placebo while she was in Philadelphia. The letter was intended to show that Squires did not instruct the manufacturer to put benzalkonium chloride in the placebo, as the letter indicated that Squires worked on Releev rather than the placebo during her trip. The letter read: "I went to the company that manufactures Releev for us [in Philadelphia].... We improved the way they will manufacture Releev." Trial Tr. 306:5-7. During his closing argument, Singer accused Squires of fabricating the letter and "us[ing] her granddaughter as a source for making money." Id. 1927:25-1928:1. The Court overruled Cannon's objection but directed Singer to "move forward." Id. 1928:5. Although Singer's comment that Squires was "pathetic" was unnecessarily derisive, it was not improper for him to challenge the authenticity of the handwritten note based on conflicting testimony elicited at trial. See Probus v. K-Mart, Inc., 794 F.2d 1207, 1210-11 (7th Cir. 1986) ("The tone of counsel's remarks here was unnecessarily harsh, perhaps even belligerent and derisive, but that does not mean that they were improper argument.").

Merix argues that Singer repeatedly violated the Court's orders by discussing the details of the false advertising claims and the preliminary injunction opinion in the Glaxo litigation. The Court declined to exclude all evidence about the Glaxo case. Some background regarding that case was relevant and probative because "it set[ ] the background for the clinical trials" at issue in the present case. Trial Tr. 230:8-10, 235:18-22. Indeed, Merix itself contended that the preliminary injunction ruling in the Glaxo case was what prompted it to commission the clinical trials. That said, Merix correctly points out that the Court ruled, on two separate occasions, that Merix could not "retry" the underlying claims in the Glaxo case by attempting to show that the pre-marketing studies of Releev were scientifically valid. See 9/4/2014 Tr. 91:2-92:3 (final pretrial conference); Trial Tr. 230:8-21 (sidebar during testimony of Squires); see also Trial Tr. 235:23-236:1 (telling the jury that "this case is not about the dispute between [Glaxo] and Merix").

But despite knowing that it would not be able to relitigate the accuracy of the pre-marketing studies, Merix itself put in evidence regarding the adverse findings about those studies made by Judge Debevoise in the Glaxo suit. First, during his direct examination of Squires-after being told by the Court that he could not elicit testimony regarding whether Squires believed in the accuracy of the studies, see Trial Tr. 231:25-232:9-Cannon elicited the following testimony from Squires:

Q: And without giving any details or itemizations of the clinical trial evidence that you had at that point in time, did you understand that you had clinical trial support for ...

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