Caroline Lannon, NAAG Program Counsel
This February, the U.S. Supreme Court denied a cert petition by Johnson & Johnson (J&J) in its appeal of a California Court of Appeals decision upholding $302 million in civil penalties for their “active, willful measures . . . to suppress information and conceal serious risk and complication information” regarding their surgically implanted pelvic mesh devices. In 2020 the California trial court found that J&J and its subsidiary Ethicon Inc. manufactured surgically implanted pelvic mesh devices which caused extreme complications including mesh erosion (where mesh erodes into other tissues and organs), chronic inflammation, infections, and internal bleeding. The court found that these manufacturers had made deceptive statements to consumers and doctors about the safety of these mesh products made with polypropylene; J&J knew of these dangerous risks and side effects but suppressed that information and continued to advertise these products. The prolapse-treating mesh was eventually discontinued by J&J in 2012, but the court found J&J continued to conceal serious risk and complication information from physicians and patients.
California filed suit against J&J in 2016 alleging that the company knowingly concealed the risks of multiple mesh products. In 2019, the Office of the California Attorney General completed an eight-week bench trial and in January 2020, the trial court ruled that J&J’s subsidiary Ethicon did in fact mislead consumers about the true risks of its pelvic mesh products. J&J was ordered to pay nearly $344 million in civil penalties for thousands of violations of California’s Unfair Competition Law and its false advertising law. J&J and Ethicon appealed, arguing that its due process rights were violated and that the court had abused its discretion by counting each one-on-one deceptive oral conversation between sales representatives and doctors as a separate violation. The California Court of Appeals agreed that the court did abuse its discretion in regard to the oral marketing communications because the repetitive activities of sales representatives, including, Ethicon-sponsored meals and health fairs,1 were not separate communications and were not likely to deceive doctors. The appellate court agreed with California with respect to the other claims and found that 1) the civil penalties did not violate the excessive fines clauses, 2) the penalties did not violate Ethicon’s due process rights, 3) the trial court did not err in calculating the civil penalty, and 4) Ethicon waived its free speech argument. J&J appealed the ruling to the California Supreme Court, which denied its petition for review.
In the fall of 2022, J&J filed a petition for writ of certiorari to the U.S. Supreme Court, arguing that Ethicon’s due process rights were violated because it did not have fair notice that it potentially faced millions of dollars in penalties under the California UDAP statute when sending these materials to California. J&J argued that fair notice requirements apply even when the statute is not categorized as penal and that those requirements apply not only to the prohibited conduct, but also to the severity of the penalty that may be imposed. J&J alleged that just the threat of these massive UDAP penalties is forcing companies into settlements, which is creating a chilling effect on the companies’ protected speech which could deter investment and innovation, especially in the sciences. J&J also argued that in some states UDAP actions brought by the attorneys general are being driven by private plaintiffs’ attorneys retained by the state, rather than being triggered by genuine consumer complaints. Finally, J&J also contended that California’s consumer protection statute, along with other states’ UDAPs, was unconstitutionally vague.
In its response, California emphasized that the state trial court had the authority to issue per-violation civil penalties under the state statute, especially since the per-violation amount was only $1,250. California also rejected J&J’s claim that state UDAP statutes are too vague, stressed that other state’s consumer protection statutes were not at issue in this suit, and noted that J&J’s argument about possible chilling effect was mere speculation. California was represented by the California Department of Justice and not by private counsel.
In February, the U.S. Supreme Court denied the J&J’s cert petition. Although the Court did not address the question of constitutional limits on civil penalties under UDAP statutes, J&J’s cert petition gives consumer protection attorneys a glimpse into future arguments that may be made against those statutes. The California appellate court found that J&J’s conduct violated California’s UDAP statute, but it also found that California failed to prove that oral marketing and communications were likely to deceive doctors. UDAP statutes remain a robust enforcement tool, but this appeal gives us new insight into future challenges to those statutes.
- “In particular, we strike the portion of the judgment imposing civil penalties for the following activities and communications: sales representative detailing (8,191 UCL violations and 6,066 FAL violations; or $17,821,250 in penalties); Ethicon-sponsored meals (8,199 UCL violations and 6,029 FAL violations; or $17,785,000 in penalties); and health fairs (2,575 UCL violations and 2,505 FAL violations; or $6,350,000 in penalties).” People v. Johnson & Johnson, 77 Cal.App.5th 295, 342 (Cal. Ct. App. 2022)