This post is from the non-Reed Smith side of the blog.

Plaintiffs seeking sanctions in the Actos litigation is nothing new.  We’ve covered the absurd federal MDL spoliation ruling here and the saner result from the Illinois state court proceeding here.   Apparently, the MDL plaintiffs weren’t satisfied with their win on spoliation or with their equally ridiculous trial verdict, so this time they went after Eli Lilly asking the court to use its inherent power to strike Lilly’s answer to the complaint and to enter default judgment in favor of plaintiffs.  In re Actos Prods. Liab. Litig., 2014 U.S. Dist. LEXIS 81305 at *19 (W.D. La. Jun. 11, 2014).  Fortunately, the court denied the motion in its entirety – in large part because plaintiff overreached on the sanctions it wanted imposed and under-reached on the legal theories it used to support its arguments.  But, at the core of the motion was something no defendant or defense counsel wants to have to face – allegations of perjury by a former employee.

We don’t know exactly how Lilly found itself in the situation we are about to describe.  But, the words of every trial advocacy professor we’ve ever had sprang immediately to mind: Don’t lose because you failed to thoroughly prepare your witnesses.  You never want to be surprised at trial by what your witness is going to say.  And while that gets trickier with a former employee, if you are identifying them on your witness list as someone who will testify on your behalf, you better have considered things like:  was the witness prepared by counsel, does the witness make a good appearance, has the witness provided testimony elsewhere that is concerning or problematic.  And, if the reality is that this is “the” witness on a central issue regardless of how some of these questions are answered – then you better prepare, prepare, prepare and prepare again.

Here’s what happened in this case.  The witness was a former Lilly regional sales manager and marketing brand leader for Actos.  Id. at *25.  He was identified on both plaintiff and defendant’s Will-Call Witness Lists.  Id. at *25-28.  After he testified at trial, and before conclusion of the trial, plaintiffs alleged the witness committed perjury by (1) testifying inconsistently with a prior declaration, (2) denying knowledge of several Actos-related events, and (3) denying any contact with another Lilly drug, Zyprexa.  Id. at *21.  On the last topic, plaintiffs were trying to get the court to reconsider its decision to preclude evidence of Lilly’s criminal conviction for off-label sales and marketing of Zyprexa.  Id.  Of course, the second part of plaintiffs’ argument was that the witness’s alleged perjury should be imputed to defendant Lilly.  Id. at *22. 

Based on plaintiffs' accusations against the former Lilly employee, the court ordered some supplemental document production and ordered an evidentiary hearing to allow plaintiffs to cross-examine the witness on the newly produced documents and for the court to consider the question of perjury.  Id. at *30.  At the hearing, the witness corrected some of his prior testimony.  At the heart of the witness’s new testimony was the distinction between “I don’t know” and “I don’t recall”:

More importantly, perhaps, is the fact that [the witness] was questioned by Plaintiffs' counsel during the evidentiary hearing on the distinction between someone who has no knowledge of something that occurred in the past and someone who has nomemory of something that might or might not have occurred in the past.  [The witness’s] answers revealed that, at best, he is not particularly sensitive to that distinction.  However, when questioned directly, he agreed that it would have been more accurate for him to have testified -- at least as to some of these areas of inquiry -- that he simply didn't remember having seen documents that were found in his custodial files instead of denying that he ever knew anything about the content of those documents.

Id. at * 38.  How many times have you asked a witness during prep -- is this something you don’t know or you don’t recall? Either answer is perfectly acceptable – it just has to be correct. The distinction between knowledge and memory shouldn’t be a blurry line.

While the court found the witness’s explanation demonstrated confusion on his part and was certainly relevant to credibility, it did “not necessarily support the conclusion that he intentionally testified falsely as to his knowledge of the subject areas with which the Plaintiffs were concerned.”  Id.  The witness’s refreshed recollection led him to correct his testimony both on Actos-related issues and on Zyprexa.  Id. at *40.  As for the prior declaration, the court was certainly concerned about inconsistencies, but ultimately found that the declaration was carefully crafted “so as to prevent the conclusion that there is a clear incompatibility between his Declaration and his trial testimony.”  Id. at *41.  Again, preparation is the key.  Every witness should be confronted with prior statements during prep.  If something has changed in the interim, the witness better know how to handle questions about that change.  Otherwise, consistent testimony is key.

Overall, while the court was significantly less than thrilled with the conflicts and contradictions in the testimony, it wasn’t enough to support plaintiffs’ request for sanctions.  Which brings us back to plaintiffs’ legal arguments.  First, on imputing the witness’s behavior to the defendant, the court found that was a difficult question that raised numerous issues and considerations that neither party had fully briefed or developed.  Id. at *33.  But, it was also an issue that need not be decided because as a criminal matter “the issue is framed improperly” and as a civil matter “the outcome of such an analysis has no potential to change this Court’s ruling” denying the motion.  Id.

Second, perjury is a criminal matter.  If the court found a reasonable basis to believe perjury had occurred, the proper course would be to refer the matter to the U.S. Attorney’s Office. Id. at *35.  So, the court viewed plaintiffs’ request for the sanction of default judgment to be beyond its constitutional authority.  Id.

Third, plaintiffs asked the court to impose sanctions only under its inherent authority.  To do so, plaintiff must have proffered evidence “of such egregious conduct as to justify the last resort of sanction issued, only, pursuant to the inherent power of the Courts.”  Id. at *36.  As discussed above, they didn’t carry their burden. 

Finally, on the issue of whether the alleged perjury prejudiced plaintiffs.  Putting aside the jury verdict in plaintiffs’ favor, the court found plaintiffs gave up their prejudice argument. “[T]his Court granted opportunity for the Plaintiffs to put [the witness] back on the stand after the evidentiary hearing and Plaintiffs, for strategic reasons, declined.”  Id. at *44.  That was plaintiffs’ choice and they are stuck with it.

Like we said at the outset – plaintiffs overreached by seeking the ultimate sanction against a defendant – default judgment – based on testimony that was certainly muddled but not clearly false.  And, they under-reached by not seeking sanctions under the Federal Rules of Civil Procedure, relying only on the court’s inherent power.  It’s not pretty, but it’s a defense win.  We’ll take it and the lessons that come from it.