No. 12-15-00219-CV 

In the Twelfth Court of Appeals 

MJS & Associates, L.L.C. 

Appellant 

v. 

Judy Master, RN & Matthew Master 

Appellees 

Appeal from the 145th Judicial District Court 

Nacogdoches County, Texas 

No. C127910, Hon. Campbell Cox, II, Presiding 

Brief of Appellant MJS 

Russell R. Smith 

Texas Bar No. 18682310 

RSmith@fairchildlawfirm.com

W. Wade Flasowski 

wflasowski@fairchildlawfirm.com

Texas Bar No. 24055482 

Fairchild, Price, Haley & Smith, LLP 

P.O. Drawer 631668 

Nacogdoches, Texas 75963-1668 

(936) 569-2327 

(936) 569-7932 (fax) 

Mark Kennedy 

Texas Bar No. 24000122 

mark@markkennedylaw.com 

Joanna Martin 

Texas Bar No. 24072153 

joanna@markkennedylaw.com

Kennedy Attorneys & Counselors at Law 

12222 Merit Drive, Suite 1750 

Dallas, Texas 75251 

(214) 445-0740 

(972) 661-9320 (fax) 

Michelle R. Meriam 

Texas Bar No. 24063871 

michellemeriam@warejackson.com

Timothy F. Lee 

Texas Bar No. 12139500 

timlee@warejackson.com 

Ware, Jackson, Lee, O’Neill, 

 Smith & Barrow, LLP 

2929 Allen Parkway, 39th Floor 

Houston, Texas 77019 

(713) 659-6400 

(713) 659-6262 (fax) 

Oral Argument Requested

ACCEPTED

12-15-00219-CV

TWELFTH COURT OF APPEALS

TYLER, TEXAS

11/19/2015 8:06:13 PM

Pam Estes

CLERK

 FILED IN 12th COURT OF APPEALS TYLER, TEXAS 11/19/2015 8:06:13 PM PAM ESTES Clerk
Brief of Appellant MJS Page i 

Identity of Parties and Counsel 

Plaintiff/Appellant MJS and Associates, L.L.C. 

Trial Counsel: Russell R. Smith 

RSmith@fairchildlawfirm.com

W. Wade Flasowski 

wflasowski@fairchildlawfirm.com 

Fairchild, Price, Haley & Smith, LLP 

P.O. Drawer 631668 

Nacogdoches, Texas 75963-1668 

(936) 569-2327 

(936) 569-7932 (fax) 

Mark Kennedy 

mark@markkennedylaw.com

Joanna Martin 

joanna@markkennedylaw.com

Kennedy Attorneys & Counselors at Law 

12222 Merit Drive, Suite 1750 

Dallas, Texas 75251 

(214) 445-0740 

(972) 661-9320 (fax) 

Appellate Counsel: Michelle R. Meriam 

michellemeriam@warejackson.com

Timothy F. Lee 

timlee@warejackson.com

Ware, Jackson, Lee, O’Neill, 

 Smith & Barrow, LLP 

2929 Allen Parkway, 39th Floor 

Houston, Texas 77019 

(713) 659-6400 

(713) 659-6262 (fax) 

 
Brief of Appellant MJS Page ii 

Defendants/Appellees Judy Master, RN and Matthew Master 

Counsel: Joseph M. Callow, Jr. 

jcallow@kmklaw.com

Keating Muething & Klekamp 

One East Fourth St., Suite 1400 

Cincinnati, Ohio 45202 

(513) 579-6400 

(513) 579-6457 (fax) 

Travis P. Clardy 

travis.clardy@kellyhart.com

Jerry Baker 

jerry.baker@kellyhart.com

Kelly, Hart & Hallman, LLP 

209 E. Main St. 

P.O. Box 635426 

Nacogdoches, Texas 75961 

(936) 564-2500 

(936) 564-2507 (fax) 

 
Brief of Appellant MJS Page iii 

Table of Contents 

Identity of Parties and Counsel ....................................................................... i

Table of Contents ........................................................................................... iii

Index of Authorities ....................................................................................... vi

Statement of the Case .................................................................................... xi

Statement Regarding Oral Argument .......................................................... xii

Issues Presented

First Issue: No court has ever held that the False Claims Act 

permits a qui tam relator to steal information belonging to a 

party not accused of any illegal conduct and disclose it. Master 

agreed not to take or disclose any confidential information to 

which she had access during her employment, but she did so 

anyway, and received $12 million as a result. Was Master’s 

conduct protected under the federal statute? ................................... xiii

Second Issue: The trial court erred granting summary 

judgment on causation based on an incompetent affidavit not 

made on personal knowledge that only addressed one category 

of damages, and because the allegation in the affidavit—that 

LHC terminated its contract with MJS due to MJS’s poor 

performance—is contradicted by evidence that LHC did so 

because Master used its privileged and confidential information 

to initiate a qui tam action, thus raising a genuine issue of 

material fact. ...................................................................................... xiii

Third Issue: The trial court erred in granting no-evidence 

summary judgment against MJS after MJS submitted more 

than a scintilla of evidence to establish each disputed element of 

its claims. ............................................................................................ xiii
Brief of Appellant MJS Page iv 

Introduction ..................................................................................................... 1

Statement of Facts .......................................................................................... 2

I. The False Claims Act Litigation Against MJS’s Client, LHC ................ 2

A. Attorneys for LHC Hired MJS to Perform Health Care 

Compliance Audits ...................................................................... 2

B. MJS Hired Master, Who Agreed Not to Take MJS’s 

Property or Disclose Its Confidential Information ..................... 5

C. Master Secretly Copied, Took, and Disclosed MJS’s 

Confidential Information to Start a Qui Tam Suit against 

LHC .............................................................................................. 7

D. LHC Canceled Its Contract with MJS ....................................... 10

E. Master Got Millions While MJS Nearly Went Broke ................. 13

II. The Litigation between MJS and Master............................................. 14

A. The Federal Court Rejected Master’s Argument that Her 

Conduct Was Protected Under the Act ...................................... 15

B. The Trial Court Accepted Master’s Argument Under the 

Act and Granted Summary Judgment Against MJS ................. 18

Summary of the Argument ............................................................................ 19

Argument and Authorities ............................................................................. 21

I. First Issue: The Act Does Not Protect Master from Liability for 

MJS’s State-Law Claims ....................................................................... 21

A. Standard of Review .................................................................... 22

B. The Act Does Not Preempt MJS’s Claims ................................. 23

C. Federal Policy Does Not Clearly Outweigh the Interests in 

Enforcing Master’s Agreements with MJS ............................... 28

1. Master’s Confidentiality Obligations Do Not Negate 

the Policies Behind the Act .............................................. 29
Brief of Appellant MJS Page v 

2. The Interests in Enforcing Master’s Agreements Are 

Compelling ....................................................................... 32

II. Second Issue: Master Did Not Negate Causation as a Matter of 

Law ...................................................................................................... 37

III. Third Issue: MJS Presented More than a Scintilla of Evidence to 

Support Each of Its Claims ................................................................. 40

A. Standard of Review .................................................................... 40

B. Breach of Contract ..................................................................... 40

C. Breach of Fiduciary Duty ............................................................ 41

D. Tortious Interference with Contract ......................................... 43

E. Texas Trade Secrets Act ............................................................. 43

F. Conversion ................................................................................. 45

G. Conspiracy ................................................................................. 46

H. Fraud .......................................................................................... 47

Prayer ............................................................................................................ 48

Certificate of Compliance ............................................................................. 50

Certificate of Service ..................................................................................... 50

 
Brief of Appellant MJS Page vi 

Index of Authorities 

Cases

Acad. of Skills & Knowledge, Inc. v. Charter Sch., USA, Inc., 

260 S.W.3d 529 (Tex. App.—Tyler 2008, pet. denied) ....................... 41 

Arizona v. U.S., 

___ U.S. ___, 132 S. Ct. 2492 (2012) ................................................ 24 

BIC Pen Corp. v. Carter, 

251 S.W.3d 500 (Tex. 2008) ............................................................... 24 

Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 

489 U.S. 141 (1989) ............................................................................. 28 

Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 

637 F.3d 1047 (9th Cir. 2011) ....................................................... 30, 31 

Casso v. Brand, 

776 S.W.2d 551 (Tex. 1989) ................................................................ 38 

Chamber of Commerce of U.S. v. Whiting, 

563 U.S. 582, 131 S. Ct. 1968 (2011) ................................................... 24 

Cook v. Nacogdoches Anesthesia Group, L.L.P., 

167 S.W.3d 476 (Tex. App.—Tyler 2005, no pet.) ........................ 22, 23 

Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health 

Care Services, LLC, 

404 S.W.3d 737 (Tex. App.—El Paso 2013, no pet.) ........................... 42 

ERI Consulting Engineers, Inc. v. Swinnea, 

318 S.W.3d 867 (Tex. 2010) ................................................................ 38 

Four Bros. Boat Works, Inc. v. Tesoro Petroleum Companies, Inc., 

217 S.W.3d 653 (Tex. App.—Houston [14th Dist.] 2006, pet. 

denied) ................................................................................................ 47 

Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 

505 U.S. 88 (1992) .............................................................................. 24 

Graber v. Fuqua, 

279 S.W.3d 608 (Tex. 2009) .................................................. 23, 24, 27 
Brief of Appellant MJS Page vii 

Graham County Soil & Water Conservation Dist. v. U.S. ex rel. 

Wilson, 

559 U.S. 280 (2010) ............................................................................ 27 

Great Dane Trailers, Inc. v. Estate of Wells, 

52 S.W.3d 737 (Tex. 2001) .................................................................. 24 

Gulbenkian v. Penn, 

252 S.W.2d 929 (Tex. 1952) ................................................................ 38 

In re JDS Uniphase Corp. Secs. Litig., 

238 F. Supp. 2d 1127 (N.D. Cal. 2002) .................................... 16, 35, 36 

Johnson v. Brewer & Pritchard, P.C., 

73 S.W.3d 193 (Tex. 2002) .................................................................. 41 

King Ranch, Inc. v. Chapman, 

118 S.W.3d 742 (Tex. 2003) ................................................................ 40 

Lake v. Premier Transp., 

246 S.W.3d 167 (Tex. App.—Tyler 2007, no pet.) .............................. 40 

Lawrence v. CDB Servs., Inc., 

44 S.W.3d 544 (Tex. 2001) ................................................................. 29 

Mabrey v. SandStream, Inc., 

124 S.W.3d 302 (Tex. App.—Fort Worth 2003, no pet.) .................... 42 

MCI Sales & Serv., Inc. v. Hinton, 

329 S.W.3d 475 (Tex. 2010) ......................................................... 23, 24 

Mut. Pharm. Co., Inc. v. Bartlett, 

___ U.S. ___, 133 S. Ct. 2466 (2013) .......................................... 23, 25 

Nixon v. Mr. Prop. Mgmt. Co., Inc., 

690 S.W.2d 546 (Tex. 1985) ............................................................... 22 

Patel v. City of Everman, 

179 S.W.3d 1 (Tex. App.—Tyler 2004, pet. denied) ............................ 46 

Patriotic Veterans, Inc. v. Indiana, 

736 F.3d 1041 (7th Cir. 2013).............................................................. 26 
Brief of Appellant MJS Page viii 

Patton v. Cox, 

276 F.3d 493 (9th Cir. 2002) .............................................................. 36 

Prudential Ins. Co. of Am. v. Fin. Review Services, Inc., 

29 S.W.3d 74 (Tex. 2000) ................................................................... 43 

Sears, Roebuck & Co. v. Meadows, 

877 S.W.2d 281 (Tex. 1994) ................................................................ 47 

Sherrill v. Union Lumber Co., 

207 S.W. 149 (Tex. Civ. App.—Beaumont 1918, no writ) ................... 29 

Siebert v. Gene Sec. Network, Inc, 

11-CV-01987-JST, 2013 WL 5645309 (N.D. Cal. Oct. 16, 2013) ......... 31 

Sw. Energy Prod. Co. v. Berry-Helfand, 

411 S.W.3d 581 (Tex. App.—Tyler 2013, pet. granted) ....................... 45 

Thompson v. Weaver, 

429 S.W.3d 897 (Tex. App.—Tyler 2014, no pet.) .............................. 40 

Town of Newton v. Rumery, 

480 U.S. 386 (1987) ............................................................................ 29 

Transp. Ins. Co. v. Faircloth, 

898 S.W.2d 269 (Tex. 1995) ............................................................... 46 

U.S. ex rel. Doe v. X Corp., 

862 F. Supp. 1502 (E.D. Va. 1994) ......................................... 21, 30, 35 

U.S. ex rel. Grandeau v. Cancer Treatment Ctrs. of Am., 

350 F. Supp. 2d 765 (N.D. Ill. 2004) ................................................... 16 

U.S. ex rel. Grubbs v. Kanneganti, 

565 F.3d 180 (5th Cir. 2009) ................................................................ 7 

U.S. ex rel. Head v. Kane Co., 

668 F. Supp. 2d 146 (D.D.C. 2009) .............................................. 16, 30 

U.S. ex rel. Holmes v. Northrop Grumman Corp., 

1:13CV85-HSO-RHW, 2015 WL 3504525 (S.D. Miss. June 3, 

2015) ......................................................................................... 21, 34, 35 
Brief of Appellant MJS Page ix 

U.S. ex rel. Mossey v. Pal-Tech, Inc., 

231 F. Supp. 2d 94 (D.D.C. 2002) ....................................................... 31 

U.S. ex rel. Rusher v. Omnicare, Inc., 

No. 4:08-cv-3396, 2015 WL 4389589 (S.D. Tex. July 15, 2015) ........ 31 

U.S. v. Northrop Corp., 

59 F.3d 953 (9th Cir. 1995) ................................................................. 29 

U.S. v. Quest Diagnostics Inc., 

734 F.3d 154 (2d Cir. 2013)...................................................... 21, 33, 34 

Walsh v. Amerisource Bergen Corp., 

CIV.A. 11-7584, 2014 WL 2738215 (E.D. Pa. June 17, 2014) .............. 31 

Wells Fargo Const. Co. v. Bank of Woodlake, 

645 S.W.2d 913 (Tex. App.—Tyler 1983, no writ) .............................. 37 

Wyeth v. Levine, 

555 U.S. 555 (2009) .......................................................... 24, 25, 26, 28 

X Corp. v. Doe, 

805 F. Supp. 1298 (E.D. Va. 1992), aff'd, Under Seal v. Under 

Seal, 17 F.3d 1435 (4th Cir. 1994) ................................................. 16, 30 

Zahodnick v. Int'l Bus. Machines Corp., 

135 F.3d 911 (4th Cir. 1997) ................................................................. 31 

Statutes and Rules

21 C.F.R. § 314.70 (2015) .............................................................................. 25 

False Claims Act, 31 U.S.C. § 3729 (West 2009) ....................................... 7, 8 

False Claims Act, 31 U.S.C. § 3730 (West 2010) .................................. passim

Food, Drug, and Cosmetic Act, 21 U.S.C. § 355 (West 2013) ...................... 25 

Health Insurance Portability and Accountability Act (HIPAA), 

45 C.F.R. § 160 et seq. (2013) ..................................................... passim

Tex. R. Civ. P. 166a ..................................................................... 22, 37, 40, 43 
Brief of Appellant MJS Page x 

Texas Trade Secrets Act, Tex. Civ. Prac. & Rem. Code Ann. § 

134A.002 (West Supp. 2015) ........................................................ 43, 44 

Texas Trade Secrets Act, Tex. Civ. Prac. & Rem. Code Ann. § 

134A.004 (West Supp. 2015) .............................................................. 44 

 
Brief of Appellant MJS Page xi 

Statement of the Case 

Nature of the Case MJS sued its former employee, Judy 

Master, for breach of contract, violations 

of the Texas Trade Secrets Act, breach of 

fiduciary duty, conversion, conspiracy, 

tortious interference with contract, and 

fraud. Master had used documents 

surreptitiously taken from MJS against 

MJS’s client in a federal qui tam action. 

Course of Proceedings After MJS filed this suit, Master removed 

it to federal district court in the Eastern 

District of Texas and joined MJS as a 

defendant in the pending qui tam action in 

the Western District of Louisiana. The 

federal court in Texas remanded this case 

based on the lack of any federal question. 1 

CR 128-37. The state trial court then 

stayed the case in favor of the pending qui 

tam action. 2 CR 197. The federal court in 

Louisiana dismissed Master’s claims 

against MJS with prejudice, 2 CR 255, and 

the trial court lifted its stay. The parties 

completed discovery and filed crossmotions for summary judgment. 

Trial Court’s Disposition The trial court granted Master’s motion for 

summary judgment and entered final 

judgment in Master’s favor. 5 CR 773. 
Brief of Appellant MJS Page xii 

Statement Regarding Oral Argument 

 This is a case of first impression in the nation. Master claims, and the 

trial court agreed, that the federal False Claims Act insulates her from civil 

liability for taking and disclosing her employer’s confidential information, 

solely because that information was used to file a qui tam action. But the 

qui tam defendant was MJS’s client, not MJS. No court in the nation has 

applied the Act to protect qui tam relators from liability to third parties 

such as MJS that were not accused of committing fraud against the U.S. 

 By granting Master’s motion for summary judgment, the trial court 

has, in effect, ruled that confidentiality agreements are ineffective against 

those who wish to take confidential information from one party and initiate 

a qui tam action against another party in the hopes of receiving large 

monetary rewards. In light of the important and novel questions presented 

by this appeal, the Court may wish to hear oral argument. 
Brief of Appellant MJS Page xiii 

Issues Presented 

 First Issue: No court has ever held that the False Claims Act permits 

a qui tam relator to steal information belonging to a party not accused of 

any illegal conduct and disclose it. Master agreed not to take or disclose any 

confidential information to which she had access during her employment, 

but she did so anyway, and received $12 million as a result. Was Master’s 

conduct protected under the federal statute? 

Second Issue: The trial court erred granting summary judgment on 

causation based on an incompetent affidavit not made on personal 

knowledge that only addressed one category of damages, and because the 

allegation in the affidavit—that LHC terminated its contract with MJS due 

to MJS’s poor performance—is contradicted by evidence that LHC did so 

because Master used its privileged and confidential information to initiate a 

qui tam action, thus raising a genuine issue of material fact. 

Third Issue: The trial court erred in granting no-evidence summary 

judgment against MJS after MJS submitted more than a scintilla of 

evidence to establish each disputed element of its claims. 
MJS’s Appellant’s Brief Page 1 

Introduction 

 This appeal raises a question of first impression in the nation. 

 In the three months that Master worked for MJS, she purloined 

MJS’s confidential, trade secret, and privileged information so that she 

could file a complaint under the False Claims Act against MJS’s largest 

client. As a result, MJS lost its largest client and was disparaged in the 

media, leading to further business losses. But MJS, which is in the business 

of auditing health care providers to ensure that they comply with 

government regulations, did nothing wrong. Meanwhile, Master’s breaches 

of her confidentiality obligations allowed her to reap a reward in excess of 

$12 million. 

 When MJS sued Master under Texas law for breaching her 

obligations, she insisted that her conduct was protected under the Act and 

that MJS was without recourse. The only court in the nation to address that 

question—the federal court that remanded this suit after Master tried to 

remove it—concluded that the Act has no bearing on MJS’s purely state-law 

claims. Nevertheless, the trial court accepted Master’s overtures that the 

Act insulated her from liability and granted summary judgment. That 

decision, if permitted to stand, would have a crippling effect on confidential 
MJS’s Appellant’s Brief Page 2 

relationships traditionally subject to state regulation, and this Court should 

reverse. 

Statement of Facts 

I. The False Claims Act Litigation Against MJS’s Client, LHC 

A. Attorneys for LHC Hired MJS to Perform Health Care 

Compliance Audits 

 MJS is a healthcare consulting firm owned and operated by Jan and 

Charlie Spears.1 It provides a wide array of services to health care providers, 

including auditing services to ensure compliance with government 

Medicare and Medicaid regulations.2 

 LHC Group, LLC is one of the largest providers of home health and 

hospice services in the nation.3 In early 2005, attorneys from the Gachassin 

Law Firm hired MJS to provide external compliance audits for their client, 

LHC Group, LLC, “to assist their legal representation and advice [to their] 

client.”4 LHC provided documentation to MJS that MJS reviewed using 

specially-developed, proprietary software called The Auditor.5 MJS 

assessed LHC’s compliance with federal and state regulations, accreditation 

 1 4 CR 509. 

2 4 CR 509, ¶¶ 2-3. 

3 4 CR 618. 

4 4 CR 509, ¶ 4; 4 CR 517-18. 

5 4 CR 523. 
MJS’s Appellant’s Brief Page 3 

standards, and agency policies and procedures. It then provided reports to 

the attorneys on a secure, password-protected website.6 

 The contract between MJS, the attorneys, and LHC stated that all 

information provided to MJS would be confidential and subject to the 

attorney-client and work product privileges.7 It included a detailed 

confidentiality provision. Under the terms of that provision, MJS agreed 

that (1) MJS’s services were confidential and performed under the direction 

and control of the attorneys, (2) MJS’s reports would remain confidential, 

(3) MJS would provide all reports directly to the attorneys, not LHC, and 

(4) MJS would notify the attorneys of any third-party request concerning 

LHC and follow the attorneys’ directions in responding.8

 With respect to the information it received from LHC, MJS agreed 

that: 

 MJS would use the material solely for the purpose of 

performing services for the attorneys and LHC; 

 MJS and its employees would keep the material “strictly 

confidential”; 

 MJS would inform its employees of the information’s 

confidential nature; and 

 6 4 CR 523, 525. 

7 4 CR 517. 

8 4 CR 518, ¶ 3(a). 
MJS’s Appellant’s Brief Page 4 

 MJS and its employees would not disclose to any person, 

including any governmental entity, the fact that an investigation 

was taking place.9

Finally, MJS was required to immediately inform the attorneys of any 

request for information provided by LHC, and MJS agreed not to release 

any information until the latest reasonable date possible.10

 As a home health care provider, LHC is subject to the Health 

Insurance Portability and Accountability Act (HIPAA), 45 C.F.R. § 160 et 

seq. (2013), which regulates the use and disclosure of personal health 

information and imposes penalties for violations. Because MJS received 

personal health information as part of its services for LHC, it, too, was 

subject to HIPAA regulations. An addendum to the contract memorialized 

HIPPA’s disclosure restrictions and required MJS to ensure that its agents 

abided by the restrictions.11 

 In July 2007, MJS entered a new consultancy agreement with the 

Gachassin Law Firm that expanded the scope of MJS’s services for LHC to 

include auditing hospice records and increased MJS’s compensation.12 The 

new agreement contained confidentiality provisions identical to the 

 9 Id. at ¶ 3(b). 

10 Id. at ¶ 3(c). 

11 4 CR 532-35. 

12 4 CR 510, ¶ 6; 4 CR 543-44. 
MJS’s Appellant’s Brief Page 5 

original.13

 LHC’s business grew, and by 2009, LHC served five times the number 

of home health locations as it had when MJS began consulting for it. As 

LHC grew, so too did MJS.14 In April 2008, MJS again negotiated higher 

rates for its consulting services for LHC.15 

B. MJS Hired Master, Who Agreed Not to Take MJS’s 

Property or Disclose Its Confidential Information 

 In March 2007, MJS hired Master, a registered nurse, to work on 

compliance audits, including those for LHC.16 As a condition of her 

employment, Master signed an employment agreement and a statement of 

confidentiality.17 

 Under the employment agreement, Master agreed that all “files, 

records, documents, specifications, equipment, and similar items” relating 

to MJS’s business were MJS’s “exclusive property” and that she would not 

remove them from MJS’s premises under any circumstances without MJS’s 

prior written consent.18 She also agreed that upon the end of her 

 13 4 CR 537-38. The 2007 Agreement incorporated a HIPAA addendum, although 

no addendum appears in the record. 4 CR 542, ¶ 13. 

14 4 CR 510, ¶ 6. 

15 Id. at ¶ 8. 

16 Id. at ¶ 10. 

17 4 CR 551-54. 

18 4 CR 551, ¶ 1. 
MJS’s Appellant’s Brief Page 6 

employment, she would return any MJS property.19 

 In the statement of confidentiality, Master further agreed that: 

 She understood “the importance of observing strict ethical, 

moral, and professional standards with confidentiality policies”; 

 She would not discuss or release any information regarding any 

of MJS’s clients with anyone not directly associated with MJS; 

 She would obtain MJS’s authorization prior to releasing any 

information obtained at MJS; 

 She would not disclose or discuss treatment, financial, medical, 

or social information relating to any patients of MJS’s clients 

without written authorization from MJS management; 

 She would not conduct any research to seek out information not 

required for her assigned duties; and 

 These confidentiality obligations would continue after her 

employment with MJS ended.20

 Master quit after less than three months on the job.21 She did not 

provide any notice, but simply sent an email to her supervisor stating that 

she was resigning “due to personal reasons” and that she had enjoyed 

working with her supervisor and the MJS team.22

 19 4 CR 551, ¶ 2. 

20 4 CR 554. 

21 4 CR 556. 

22 Id. 
MJS’s Appellant’s Brief Page 7 

C. Master Secretly Copied, Took, and Disclosed MJS’s 

Confidential Information to Start a Qui Tam Suit 

against LHC 

 Within a month of leaving MJS, Master filed a qui tam complaint 

against LHC in federal court in the Western District of Louisiana. The qui 

tam action was based exclusively on confidential documents and 

information she obtained during her brief employment with MJS.23 MJS 

knew nothing about Master’s qui tam action. 

 The False Claims Act, 31 U.S.C. § 3730 (West 2010), permits an 

individual to bring a qui tam action—a suit on her own behalf and in the 

name of the federal government—against an entity the individual believes 

has presented false or fraudulent claims for payment to the government, 

including Medicare and Medicaid health care claims. See also 31 U.S.C. § 

3729 (West 2009); U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 183 

(5th Cir. 2009). The Act requires the individual to serve a complaint on the 

government with a “written disclosure of substantially all material evidence 

and information the person possesses” to support her allegations. 31 U.S.C. 

§ 3730(b)(2). The complaint and disclosure statement are initially filed in 

camera with the district court. 31 U.S.C. § 3730(b)(2)-(3). 

 23 1 CR 75; 4 CR 579-81. That case was styled U.S. ex rel. Judy Master v. LHC 

Group, Inc., No. 6:07-cv-01117. 
MJS’s Appellant’s Brief Page 8 

 The government may elect to intervene and prosecute the action 

itself, with the qui tam relator remaining a party, or it can decline to 

intervene and permit the qui tam relator to pursue the action. 31 U.S.C. 

§§ 3729(b)(2), (c)(1), (c)(3). If the suit is successful, the defendant is liable 

to the government for treble damages, plus a penalty between $5,000 and 

$10,000 for each false claim. 31 U.S.C. § 3729(a). The qui tam relator is 

then entitled to between 15 percent and 25 percent of the proceeds of any 

settlement or judgment, plus expenses, attorney’s fees, and costs. 31 U.S.C. 

§ 3730(d). 

 In Master’s qui tam suit, she accused LHC of filing false claims with 

the government for reimbursement under Medicare and other health care 

programs.24 She claimed to have “direct and independent knowledge” of the 

information on which her allegations were based, “derived through her 

former employment with MJS.”25 Master did not join MJS as a defendant.26

 The complaint recounted Master’s employment at MJS, her role in 

performing compliance audits for LHC, the manner in which MJS performs 

audits using the Auditor software, and alleged that MJS determined that 

 24 1 CR 75. 

25 1 CR 77, ¶ 9. 

26 1 CR 75. 
MJS’s Appellant’s Brief Page 9 

LHC had a high non-compliance rate.27 Master’s complaint also alleged that 

an unidentified person told Master that some of LHC’s costs were allowable 

when Master believed they were not, and that Master “decided to quit 

rather than create such a false impression.”28

 MJS later learned that prior to quitting, Master made copies of 

documents relating to the LHC audit during work hours. The purloined 

documents included patient records and Auditor reports.29 She also made 

handwritten notes about MJS records and conversations she allegedly 

overheard between MJS employees.30 She conducted internet research 

about qui tam suits and contacted an attorney specializing in 

“whistleblower” cases.31 She took home the documents and other 

information she obtained from MJS and turned them over to the attorney 

and later to the government.32

 27 1 CR 86-88, ¶¶ 48-50. 

28 1 CR 88-89, ¶ 53. The complaint also accused MJS of changing answers in the 

Auditor questionnaire to reduce LHC’s non-compliance rate. 1 CR 88-89, ¶¶ 52-55. 

Master later testified that she did not know for sure that MJS changed any of her 

answers, but had heard that they had. She did not know how the answers were 

supposedly changed or who had changed them. 3 CR 443, 447. 

29 3 CR 458-59; 4 CR 577-78. 

30 3 CR 451; 4 CR 577-78. 

31 4 CR 576. 

32 3 CR 441-42, 464. 
MJS’s Appellant’s Brief Page 10 

 Master never told MJS that she suspected fraud or that she intended 

to file a qui tam action against LHC. She did not obtain permission to take 

or disclose any of MJS’s information and did not tell anyone at MJS that 

she was doing so.33 But Master attached to her qui tam complaint 128 pages 

of confidential materials that she took from MJS to support her allegations 

against LHC.34

 Master knew she was not allowed to remove any documents from 

MJS’s premises or to disclose any of MJS’s or LHC’s information of any 

kind to anyone outside MJS.35 But she argued “that went out the door when 

[she] suspected fraud.”36 Whether Master’s obligations to MJS did indeed 

go out the door when she formed suspicions about MJS’s client is the 

central issue in this appeal. 

D. LHC Canceled Its Contract with MJS 

 Because the complaint was initially filed under seal, MJS did not 

know that Master took documents before she quit or that she had used that 

information to start a qui tam suit against MJS’s largest client.37 

 33 3 CR 458-59; 4 CR 511, 580. 

34 4 CR 575, 579-81; 4 CR 514-15, ¶ 32. It is unknown how many pages Master 

actually took. 

35 3 CR 441. 

36 Id. 

37 1 CR 74; see also 4 CR 513, ¶ 27. 
MJS’s Appellant’s Brief Page 11 

 In September 2008—over a year after Master filed her complaint—

MJS received, without explanation, a subpoena from the U.S. Inspector 

General requiring it to turn over nearly every document in its possession 

relating to LHC.38 MJS objected to the scope of the subpoena for nearly a 

year. The government eventually narrowed the subpoena to encompass 

documents related to LHC’s services to Medicare beneficiaries.39 

 During that time, LHC began assessing its compliance program.40 In 

April 2009, it hired a new Chief Compliance Officer, Josh Proffitt.41 In June 

2009, Proffitt held a meeting in Atlanta to evaluate MJS’s audits, determine 

how to respond to the government investigation and subpoena, and 

determine how to calculate how much LHC would have to reimburse the 

government.42 MJS learned for the first time during that meeting that LHC 

had not taken corrective action in response to MJS’s findings of noncompliance in its auditing reports by reimbursing the government for noncovered services.43 

 38 1 CR 115-17. 

39 4 CR 511-12, ¶¶ 14, 20. 

40 3 CR 433. 

41 Id. at ¶ 2. 

42 4 CR 511-12, ¶¶ 15-18. 

43 4 CR 512, ¶ 16. 
MJS’s Appellant’s Brief Page 12 

 Shortly after the meeting, on June 22, 2009, MJS responded to the 

subpoena by producing the requested documents, as narrowed, to the 

government.44 Three days later, Proffitt cancelled LHC’s contract with MJS 

without explanation and instructed MJS to terminate all services being 

performed for LHC.45

 According to Proffitt, LHC terminated its contract with MJS because 

it determined that MJS’s reports were too long, detailed, and inconsistent.46

He also claimed that “LHC would have terminated MJS regardless of 

whether Judy Master filed the Complaint or whether the government 

investigated the same.”47 MJS’s owner, Jan Spears, on the other hand, 

testified that LHC had never complained about the services MJS provided, 

never mentioned that MJS’s reports were unduly burdensome or 

challenging, and never told MJS that it was reevaluating its auditing 

functions.48 

 44 Id. at ¶ 19. 

45 Id. at ¶ 20. 

46 3 CR 434-35, ¶¶ 8-11. 

47 3 CR 436. 

48 4 CR 512-13, ¶¶ 20, 22-23. 
MJS’s Appellant’s Brief Page 13 

E. Master Got Millions While MJS Nearly Went Broke 

 More than two years later, in September 2011, the government 

settled its claims against LHC for $65 million plus interest.49 The 

agreement provided that Master would receive 19% of the settlement 

amount, or $12.35 million plus interest, as well as over $1 million in 

attorney’s fees.50 But, Master did not tell the Louisiana federal court about 

the settlement, so her qui tam action remained pending.51 

 Also in September 2011, the court unsealed the record in the qui tam 

action.52 Ten days later, an article about the suit and its settlement 

appeared in Home Health Line, a nationally-distributed health care 

industry periodical.53 The article disclosed that Master initiated the suit 

against LHC and quoted extensively from her complaint.54 It also 

insinuated, based on Master’s complaint, that MJS was complicit in LHC’s 

alleged fraud against the government, describing MJS’s purported 

 49 4 CR 619. 

50 4 CR 620. 

51 2 CR 223. 

52 2 CR 214-15. The court’s order unsealing the qui tam record does not appear in 

the appellate record, but is available on Pacer. It confirms that (1) the complaint, but not 

the disclosure documents, were unsealed, and (2) the order was entered on September 

30, 2011—the same day the settlement agreement was executed. App’x A, Doc. 64, Order 

Unsealing Qui Tam Record. 

53 4 CR 513, ¶ 25; 4 CR 558-60. 

54 4 CR 558-60. 
MJS’s Appellant’s Brief Page 14 

involvement under a bold subheading: Suit alleges consulting firm 

played along.55 

 Through the article, MJS learned for the first time that a qui tam 

action had been filed against LHC and that its former employee, Master, 

was the one behind it.56 Shortly after the article was published, many of 

MJS’s substantial clients fled and its revenue began to decline 

dramatically.57 Potential clients rejected MJS’s pending proposals, and the 

number of requests for proposals it received dropped significantly.58 From 

2010 to 2013, MJS experienced a revenue shortfall of $1.2 million, which 

Baylor Economics Professor James Henderson attributes to LHC’s 

cancellation of its contract in late 2009 and the publication of the article in 

late 2011.59

II. The Litigation between MJS and Master 

 MJS filed this lawsuit against Master in Texas state court on 

December 22, 2011, alleging breach of contract, violations of the Texas 

 55 4 CR 559. 

56 4 CR 513, ¶ 25. 

57 Id. at ¶ 28; 4 CR 587. 

58 4 CR 514, ¶ 28. 

59 4 CR 587. 
MJS’s Appellant’s Brief Page 15 

Trade Secrets Act, breach of fiduciary duty, conversion, conspiracy, tortious 

interference with contract, and fraud.60 

A. The Federal Court Rejected Master’s Argument that 

Her Conduct Was Protected Under the Act 

 Master removed the suit to the U.S. District Court for the Eastern 

District of Texas.61 The same day, she also joined MJS as a defendant in the 

still ongoing qui tam action in the Western District of Louisiana, asserting 

claims for retaliation under the Act62 and seeking a declaratory judgment 

that the Act pre-empted MJS’s claims in Texas and protected her conduct 

in taking and disclosing MJS’s confidential materials.63 

 After removal, Master moved to dismiss MJS’s suit, or alternatively, 

to transfer it to the qui tam action in Louisiana. MJS moved to remand.64

Master argued that federal jurisdiction existed because MJS’s state-law 

claims necessarily depended on a substantial question of federal law: 

whether Master’s conduct was protected under the Act.65 She claimed, as 

 60 1 CR 8-24. 

61 1 CR 122-23, 126. 

62 Master alleged that MJS retaliated against her by instructing her to alter bills 

and harassing and discriminating against her when she complained and refused to 

participate in the alleged fraud involving LHC. She claimed post-termination retaliation 

based on MJS suing her in this case. 2 CR 208. 

63 2 CR 205, 211. 

64 1 CR 128. 

65 1 CR 133. 
MJS’s Appellant’s Brief Page 16 

she does now, that she cannot be liable for state-law claims related to her 

use of documents in qui tam actions.66 

 The federal court rejected Master’s argument and granted MJS’s 

motion to remand on April 2, 2012.67 The order explains several reasons 

why MJS’s claims do not implicate the Act: 

 The Act “would appear to have little bearing on whether or not 

she—who quit her job only three months after being hired—

breached a confidentiality agreement”; 

 The Act’s purpose of preventing “harassment or retaliation 

against would-be relators for lawful acts [] has little bearing on 

whether Ms. Master can be civilly liable” for MJS’s claims; 

 This was especially true given that MJS was not the target of her 

qui tam action; 

 Master did not cite any appellate decisions to support her 

argument; 

 The four district court cases she cited involved preventing fraud 

by the relator’s employer68 (not a client of the relator’s 

employer, as here), and one of those cases seemed to contradict, 

rather than support, Master’s argument; and 

 Even assuming that MJS’s claims require some reference to the 

Act, the court was “far from convinced that the federal issue in 

this case is substantial, rather than simply tangential.”69

 66 1 CR 133. 

67 1 CR 128-37. 

68 The cases mentioned in the remand order are: U.S. ex rel. Head v. Kane Co., 

668 F. Supp. 2d 146 (D.D.C. 2009); U.S. ex rel. Grandeau v. Cancer Treatment Ctrs. of 

Am., 350 F. Supp. 2d 765 (N.D. Ill. 2004); In re JDS Uniphase Corp. Secs. Litig., 238 F. 

Supp. 2d 1127 (N.D. Cal. 2002); X Corp. v. Doe, 805 F. Supp. 1298 (E.D. Va. 1992). 

69 1 CR 133-35. 
MJS’s Appellant’s Brief Page 17 

The court concluded: 

Ms. Master worked for an entity that is not being accused of 

fraud, and, under Ms. Master’s theory, would essentially find 

itself without a recourse for Ms. Master’s use of confidential 

information to prove a fraud perpetrated by another entity. 

Whether Ms. Master’s actions were wrongful under Texas state 

law as to [MJS], an entity not the target of her FCA case, does 

not seem to [] require recourse to the FCA.70

 After remand, Master argued that MJS’s claims constitute retaliation 

under the Act and obtained a stay of this case pending resolution of her 

retaliation claims in the Louisiana federal court.71 The Louisiana court, 

though, dismissed her retaliation and declaratory judgment claims against 

MJS with prejudice in March 2013.72 The same day, she finally informed 

the Louisiana court of the settlement from September 2011, and the court 

ordered her to file a motion to dismiss all claims by the end of the month.73

Shortly thereafter, final judgment was entered in the qui tam suit, 

dismissing all claims with prejudice.74 

 70 1 CR 135. 

71 2 CR 146-77; 2 CR 197. 

72 2 CR 203-22. The Louisiana court held that Master’s pre-termination 

retaliation claims were time-barred, the FCA does not recognize post-termination 

retaliation claims, and the declaratory judgment claim could not proceed in federal 

court on its own. 2 CR 215-21. 

73 2 CR 223. 

74 2 CR 255. 
MJS’s Appellant’s Brief Page 18 

B. The Trial Court Accepted Master’s Argument Under 

the Act and Granted Summary Judgment Against MJS 

 Back in Texas, the trial court lifted its stay and set the case for trial in 

June 2015.75 The parties conducted discovery and filed cross-motions for 

summary judgment in May 2015. MJS moved for no-evidence summary 

judgment on ten of Master’s affirmative defenses, including her claims that 

her conduct was “protected by the federal False Claims Act, 31 U.S.C. 

§ 3730(h)” and that “[i]t is against public policy for [MJS] to attempt to use 

a contractual confidentiality agreement to try to thwart the purpose and 

effect of the federal False Claims Act.”76 

 Master filed a traditional and no-evidence motion, arguing primarily 

that her conduct was protected by the language of the Act and policy behind 

it.77 The only summary judgment evidence she presented consisted of 

excerpts from her own deposition testimony and Proffitt’s affidavit claiming 

that LHC did not fire MJS because of Master’s actions.78 MJS responded 

with evidence consisting of other excerpts from Master’s deposition 

testimony, Spears’s affidavit, the confidentiality agreement, the 

employment agreement, the 2005 and 2007 contracts between LHC and 

 75 2 CR 256-57, 262. 

76 3 CR 406-18; see also 3 CR 397-98, ¶¶ 3-4. 

77 3 CR 420-31. 

78 3 CR 433-64. 
MJS’s Appellant’s Brief Page 19 

MJS, Master’s email resignation, the qui tam settlement agreement, the 

disparaging article, an LHC corporate disclosure, and an expert report on 

damages. Master did not reply.79 

 On June 3 and 8, the trial court held a hearing on both parties’ 

motions.80 It granted Master’s motions for traditional and no-evidence 

summary judgment in their entirety and entered an order to that effect on 

June 8.81 The trial court later denied MJS’s motion to modify the judgment, 

and MJS timely appealed.82 

Summary of the Argument 

 Master is attempting to escape liability for stealing her employer’s 

confidential, trade secret, and privileged information and using it to her 

own benefit. To do so, she convinced the trial court that the Act insulates 

her from MJS’s state-law claims because it required her to take the 

information and give it to the government. 

 For the Act to preempt MJS’s state-law claims, however, Master had 

to overcome a presumption against preemption and meet the high 

threshold of establishing that the Act made compliance with her 

 79 4 CR 509-644. 

80 2 RR; 3 RR. 

81 5 CR 773; 3 RR 45. The trial court also granted MJS’s no-evidence motion on 

Master’s defenses of unclean hands, ratification, and failure to mitigate, but denied the 

motion as to Master’s other affirmative defenses. 5 CR 768. 

82 5 CR 780-83. 
MJS’s Appellant’s Brief Page 20 

confidentiality obligations impossible. She did neither. The Act did not, in 

fact, require her to do anything. And it certainly did not require her to steal 

protected information from a company that was not accused of fraud, but 

rather in the business of preventing noncompliance. Similarly, the policies 

behind the Act do not invalidate her confidentiality obligations. Courts have 

enforced obligations concerning confidential, trade secret, and privileged 

information, even when those obligations are owed to an alleged 

fraudfeasor. But no court has ever held that a qui tam relator may breach 

its obligations to parties not accused of fraud. 

 The trial court further erred in accepting Master’s argument that MJS 

cannot establish causation because the only evidence Master relied upon 

(1) was not competent summary judgment evidence, (2) did not address 

every category of damages MJS seeks, and (3) is controverted by MJS’s 

evidence, which raises a fact issue. 

 Finally, the trial court erred in granting Master’s no-evidence points 

because MJS presented more than a scintilla of evidence on each of the 

challenged elements. The trial court’s summary judgment should be 

reversed and this case remanded for trial on the merits. 
MJS’s Appellant’s Brief Page 21 

Argument and Authorities 

I. First Issue: The Act Does Not Protect Master from Liability 

for MJS’s State-Law Claims 

 Several courts have recognized that “while the FCA permits any 

person to bring a qui tam suit, it does not authorize that person to violate 

state laws in the process.” U.S. v. Quest Diagnostics Inc., 734 F.3d 154, 163 

(2d Cir. 2013) (emphasis in original); U.S. ex rel. Doe v. X Corp., 862 F. 

Supp. 1502, 1507 (E.D. Va. 1994); U.S. ex rel. Holmes v. Northrop 

Grumman Corp., 1:13CV85-HSO-RHW, 2015 WL 3504525, at *3 (S.D. 

Miss. June 3, 2015). Nothing in the language of the Act creates an 

affirmative defense against state-law claims, especially those brought 

against the qui tam relator by a third party that has not been accused of 

fraud against the government.83 See 31 U.S.C. § 3730. 

 A federal district court in this case—apparently the only court in the 

nation to address this specific issue—has already rejected the notion that 

the Act determines the outcome of this case. When the Texas federal court 

remanded this case, it stated: “Ms. Master worked for an entity that is not 

being accused of fraud, and, under Ms. Master’s theory, would essentially 

 83 The Act creates a private right of action, not a defense, against an entity 

believed to have defrauded the government or an employer who retaliates against its 

employee for “lawful acts” the employee takes pursuant to the FCA. 31 U.S.C. §§ 

3730(b)(1), 3730(h)(1). Master never accused MJS of committing fraud against the 

government, and the Louisiana federal court dismissed the retaliation claim she brought 

against MJS after MJS sued her in this case. 1 CR 75; 2 CR 203-22. 
MJS’s Appellant’s Brief Page 22 

find itself without [] recourse for Ms. Master’s use of confidential 

information to prove a fraud perpetrated by another entity.”84

 Nevertheless, after remand, Master continued to argue that the Act is 

an affirmative defense to all of MJS’s claims against her.85 The trial court 

erred by accepting her argument and granting summary judgment,86 and 

this Court should reverse. 

A. Standard of Review 

 The party moving for traditional summary judgment has the burden 

of showing that there is no genuine issue of material fact and that it is 

entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). To 

determine whether there is a genuine issue of material fact, a court must 

take as true all evidence favorable to the non-movant, indulge every 

reasonable inference in its favor, and resolve any doubts in its favor. Nixon 

v. Mr. Prop. Mgmt. Co., Inc., 690 S.W.2d 546, 549 (Tex. 1985). 

 Whether summary judgment is warranted is a question of law, so is 

reviewed de novo. Cook v. Nacogdoches Anesthesia Group, L.L.P., 167 

S.W.3d 476, 481 (Tex. App.—Tyler 2005, no pet.). Where, as here, the trial 

court does not specify the ground on which it granted summary judgment, 

 84 1 CR 135. 

85 3 CR 422-26. 

86 3 RR 45. 
MJS’s Appellant’s Brief Page 23 

the appellant “must defeat each summary judgment ground argued by the 

movant.” Id. 

B. The Act Does Not Preempt MJS’s Claims 

 Master argued that she cannot be held liable for MJS’s state-law 

claims because the Act required her to take the documents at issue and give 

them to the government, and because holding her liable would frustrate the 

Act’s purpose to encourage those with knowledge of fraud to come 

forward.87 This is really an argument that, as a matter of federal law, the Act 

preempts MJS’s state-law claims.88 That argument should be rejected. 

 The preemption doctrine bars state-law claims under certain limited 

circumstances because “a court may not hold a civil defendant liable under 

state law for conduct federal law requires.” Mut. Pharm. Co., Inc. v. 

Bartlett, ___ U.S. ___, 133 S. Ct. 2466, 2476-77 (2013). Courts must begin 

with a presumption that Congress did not intend to preempt claims arising 

under state law. MCI Sales & Serv., Inc. v. Hinton, 329 S.W.3d 475, 489 

(Tex. 2010); Graber v. Fuqua, 279 S.W.3d 608, 611 (Tex. 2009). 

 A party arguing for preemption must therefore meet “a high 

threshold,” particularly when state and federal law have co-existed in a 

 87 3 CR 423-25. 

88 In the Louisiana federal court, Master also sought a judicial declaration that 

MJS’s claims were preempted by federal law, but that claim was dismissed along with 

her retaliation claims. 2 CR 205.
MJS’s Appellant’s Brief Page 24 

given field for a long period of time. Chamber of Commerce of U.S. v. 

Whiting, 563 U.S. 582, 131 S. Ct. 1968, 1985 (2011). In such circumstances, 

Congress has had the opportunity to expressly preempt state law, but 

chosen not to, and the Supreme Court will give little to no deference even to 

a federal agency’s opinion that state laws interfere with its objectives. 

Wyeth v. Levine, 555 U.S. 555, 580-81 (2009). 

 Preemption is implied when compliance with both state and federal 

law is impossible, or where “state law obstructs accomplishing and 

executing Congress’ full purposes and objectives.”89 BIC Pen Corp. v. 

Carter, 251 S.W.3d 500, 504 (Tex. 2008) (quoting Great Dane Trailers, 

Inc. v. Estate of Wells, 52 S.W.3d 737, 743 (Tex. 2001)). “Courts must 

cautiously approach this interpretive task lest it become a ‘free wheeling 

judicial inquiry into whether a state law is in tension with federal 

objectives,’ which ‘undercuts the principle that it is Congress rather than 

the courts that pre-empts state law.’” MCI, 329 S.W.3d at 483 (quoting 

Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 111 (1992) (Kennedy, 

J., concurring in part and concurring in the judgment)). 

 89 Preemption may be express, Arizona v. U.S., ___ U.S. ___, 132 S. Ct. 2492, 

2500-01 (2012), but the Act does not explicitly preempt state-law claims. It may also be 

implied where Congress evidences an intent to foreclose state regulation in an entire 

field, such as bankruptcy, Graber v. Fuqua, 279 S.W.3d 608, 623 (Tex. 2009), but the 

Act does not purport to regulate the field of confidential relationships. 
MJS’s Appellant’s Brief Page 25 

 For example, federal drug regulations require that the label on a 

generic drug be identical to the label on the previously-approved brandname drug. Food, Drug, and Cosmetic Act, 21 U.S.C. § 355(j)(2)(A)(v) 

(West 2013). But some state products liability laws would require the 

manufacturer to change its label. Bartlett, 133 S. Ct. at 2476-77. It is 

impossible for the manufacturer to comply with its duty under state law 

without violating federal law; therefore, the federal law prevails. Id. 

 On the other hand, the Supreme Court held in Wyeth v. Levine, 555 

U.S. 555, 568-81 (2009) that state product liability laws, which required the 

manufacturer of a the drug Phenergan to warn of the risks associated with 

directly injecting the drug into a patient’s vein, are not preempted by 

federal drug regulations. The Court rejected Wyeth’s impossibility 

argument because the FDA permits a manufacturer to supplement its 

labeling application and unilaterally strengthen its warnings before 

receiving official approval. Id. at 568-73; see also 21 C.F.R. §§ 314.70 

(c)(6)(iii)(A), (C) (2015). 

 Requiring Master to abide by her contractual, fiduciary, and related 

obligations under state law does not make compliance with the False 

Claims Act impossible. The case law is clear that “[c]onflict preemption 

requires complete impossibility—not mere inconvenience or hardship.” 
MJS’s Appellant’s Brief Page 26 

Patriotic Veterans, Inc. v. Indiana, 736 F.3d 1041, 1050 (7th Cir. 2013); see 

also Wyeth, 555 U.S. at 568-73. The Act does not require or even authorize 

a person to obtain evidence by unlawful means. It does not require or 

authorize a person to disclose her employer’s confidential and proprietary 

information to third parties90 for use against the employer’s client. In fact, 

it does not require someone who suspects fraud against the government to 

come forward in the first place; it merely authorizes one to do so. As one 

court aptly concluded: 

The Act permits “a person” to file a qui tam suit; it does not 

require him to do so. Nor does the Act immunize a relator for 

actions taken in pursuance of a qui tam action that violate state 

law. 

U.S. ex rel. Doe v. X Corp., 862 F. Supp. 1502, 1507 (E.D. Va. 1994). 

 Rather, the Act provides that if a person suspects fraud against the 

government, if that person wishes to file a complaint on the government’s 

behalf, and if that person hopes to share in the proceeds of any settlement 

or judgment, then that person must provide the government with relevant 

evidence and information in that person’s possession. 31 U.S.C. §§ 

3730(b)(1)-(2), 3730(d). But Master only obtained possession of the 

 90 Master repeatedly states that she only gave the documents she took from MJS 

to her attorneys and the government, and that it was not made available to the public. 

E.g., 3 CR 421, 425. That does not show she complied with her confidentiality 

obligations. Her attorneys and the government are third parties to her confidentiality 

agreement with MJS, so disclosure to them without authorization violated her 

obligations. 
MJS’s Appellant’s Brief Page 27 

documents and information she disclosed to her attorneys and the 

government by stealing them from MJS, in breach of her agreements with 

MJS and her fiduciary duty to MJS. 

 The Court should also reject Master’s argument that holding her to 

her confidentiality obligations would thwart Congress’s purpose of 

incentivizing individuals with knowledge of fraud to come forward. In 

Graber v. Fuqua, 279 S.W.3d 608, 616-17 (Tex. 2009), the Texas Supreme 

Court rejected a similar argument that malicious prosecution claims 

premised on bankruptcy litigation are preempted because they would 

“change the incentives for participation in bankruptcy.” The False Claims 

Act includes several incentives for individuals to bring qui tam actions, 

including monetary rewards and protection from retaliation. But unbridled 

authority to steal information from parties not accused of fraud is not an 

incentive Congress chose to include. “To effectuate a change in this result 

[], Congress must speak more clearly than it has.” Id. at 617. 

 In the 150 years since Congress enacted the Act, it has never expressly 

permitted qui tam relators to take and use confidential information in 

violation of state laws. Meanwhile, Congress enacted retaliation provisions 

in 1986 that affect state laws concerning at-will employment. See 31 U.S.C. 

§3930(h); Graham County Soil & Water Conservation Dist. v. U.S. ex rel. 
MJS’s Appellant’s Brief Page 28 

Wilson, 559 U.S. 280, 309 (2010) (Sotomayor, J., dissenting). “The case for 

federal pre-emption is particularly weak where Congress has indicated its 

awareness of the operation of state law in a field of federal interest, and has 

nonetheless decided to stand by both concepts.” Wyeth, 555 U.S. at 575 

(quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 

166–167 (1989)). 

 No court has considered it necessary to abrogate the rights of parties 

not accused of wrongdoing in order to incentivize individuals to gather 

evidence of fraud. To the extent the trial court’s judgment rests on a finding 

of preemption, it should be reversed. 

C. Federal Policy Does Not Clearly Outweigh the Interests 

in Enforcing Master’s Agreements with MJS 

 The trial court also erred if it accepted Master’s argument that “any 

confidentiality agreement under state law has to give way to the federal 

public policy [behind the Act] and the federal common law.”91 Because she 

has not identified any federal policy other than the Act itself, Master’s 

policy argument is no different than her preemption argument, and it fails 

for similar reasons. 

 Under federal law, a private agreement is unenforceable on public 

policy grounds only if “the interest in its enforcement is clearly outweighed 

 91 3 RR 8; see also 3 CR 420-21, 425-26. 
MJS’s Appellant’s Brief Page 29 

by a public policy against such terms.” Town of Newton v. Rumery, 480 

U.S. 386, 392 (1987). Courts must therefore analyze not only the effect of 

the agreement at issue on a federal policy, but also interests that are served 

by enforcing the agreement. Id. at 397-98. The Texas Supreme Court has 

cautioned against invalidating private agreements on policy grounds: 

Public policy . . . is a term of vague and uncertain meaning, 

which it pertains to the law-making power to define, and courts 

are apt to encroach upon the domain of that branch of the 

government if they characterize a transaction as invalid because 

it is contrary to public policy, unless the transaction 

contravenes some positive statute or some well-established rule 

of law. 

Lawrence v. CDB Servs., Inc., 44 S.W.3d 544, 553 (Tex. 2001) (quoting 

Sherrill v. Union Lumber Co., 207 S.W. 149, 153–54 (Tex. Civ. App.—

Beaumont 1918, no writ)). 

1. Master’s Confidentiality Obligations Do Not 

Negate the Policies Behind the Act 

 The federal policies behind the Act are to discourage fraud against the 

government and encourage insiders with knowledge of fraud to come 

forward. U.S. v. Northrop Corp., 59 F.3d 953, 963 (9th Cir. 1995). Some 

federal district courts in other jurisdictions, but no appellate courts, have 

relied on these policies to invalidate confidentiality agreements, but only 

when the party seeking to enforce the agreement is the one accused of 

fraud. 
MJS’s Appellant’s Brief Page 30 

 In U.S. ex rel. Head v. Kane Co., 668 F. Supp. 2d 146, (D.D.C. 2009), 

for example, the court dismissed the qui tam defendant’s counterclaim for 

breach of a separation agreement, stating: 

Enforcing a private agreement that requires a qui tam plaintiff 

to turn over his or her copy of a document, which is likely to be 

needed as evidence at trial, to the defendant who is under 

investigation would unduly frustrate the purpose of the [Act]. 

Id. at 152 (emphasis added). And in X Corp. v. Doe, 805 F. Supp. 1298, 

1310 n. 24 (E.D. Va. 1992), aff'd, Under Seal v. Under Seal, 17 F.3d 1435 

(4th Cir. 1994), the court preliminarily enjoined a company’s former inhouse counsel from disclosing confidential documents, but noted that 

public policy precluded the company from relying on its confidentiality 

agreement “to conceal illegal activity.”92

 The Ninth Circuit noted in Cafasso, U.S. ex rel. v. Gen. Dynamics C4 

Sys., Inc., 637 F.3d 1047, 1062 (9th Cir. 2011), that a public policy 

exception to enforcing confidentiality agreements may have “some merit” 

under the Act. But it declined to adopt an exception under the facts of the 

case, where the defendant had accused the relator of taking thousands of 

confidential documents. Id. It explained that “[t]he need to facilitate valid 

 92 The general counsel subsequently initiated a qui tam action, which the 

company and the government settled, and the court disqualified the general counsel 

from serving as relator because his complaint relied on information and documents 

obtained in violation of his confidentiality obligations. Doe, 862 F. Supp. at 1503, 1509-

10. 
MJS’s Appellant’s Brief Page 31 

claims does not justify the wholesale stripping of a company’s confidential 

documents.” Id. With Cafasso as their only appellate guidance, other courts 

have recognized a possible policy exception but permitted counterclaims for 

breach of contract when some of the confidential documents at issue might 

not be relevant to the qui tam complaint.93 E.g., U.S. ex rel. Rusher v. 

Omnicare, Inc., No. 4:08-cv-3396, 2015 WL 4389589, at *5 (S.D. Tex. July 

15, 2015); Walsh v. Amerisource Bergen Corp., CIV.A. 11-7584, 2014 WL 

2738215, at *7 (E.D. Pa. June 17, 2014); Siebert v. Gene Sec. Network, Inc, 

11-CV-01987-JST, 2013 WL 5645309, at *8 (N.D. Cal. Oct. 16, 2013). 

 Still other courts have permitted counterclaims related to the taking 

of confidential information without discussing the agreements’ implications 

on public policy. In a retaliation suit under the Act, the Fourth Circuit held 

that the former employee breached nondisclosure agreements by taking the 

company’s confidential information without its consent and disclosing it to 

his attorneys. Zahodnick v. Int'l Bus. Machines Corp., 135 F.3d 911, 915 

(4th Cir. 1997). And the district court in U.S. ex rel. Mossey v. Pal-Tech, 

Inc., 231 F. Supp. 2d 94, 99 (D.D.C. 2002) permitted counterclaims for 

violation of Virginia's Uniform Trade Secrets Act and breach of contract 

resulting from the disclosure and retention of confidential information. 

 93 It is not known whether Master took more documents and information than 

she included in her qui tam disclosures. 
MJS’s Appellant’s Brief Page 32 

 No court has held that an agreement between a qui tam relator and a 

third party to the qui tam suit is void for public policy, and this Court 

should not be the first to do so. As the federal court held in remanding this 

case, any relationship between MJS’s claims and the policies behind the Act 

are attenuated at best.94 MJS did not commit fraud against the government, 

and is not invoking its agreements with Master in an attempt to conceal its 

own wrongdoing. Refusing to enforce those agreements would not, 

therefore, discourage fraud. Nor would it discourage true insiders—

employees or agents of the purported fraudfeasor—from providing the 

government with evidence of fraud they lawfully obtain. 

2. The Interests in Enforcing Master’s Agreements 

Are Compelling 

 The interests in enforcing Master’s agreements with MJS, which 

implicate a number of protected relationships, greatly outweigh the policy 

concerns behind the Act. LHC’s patients’ information was protected under 

HIPAA,95 45 C.F.R. § 160 et seq., and the information MJS received from 

LHC was protected not only under HIPAA, but by the attorney-client 

privilege. MJS was, in fact, an agent of LHC’s attorneys and contractually 

agreed to keep the information it used to audit LHC strictly confidential in 

 94 1 CR 134. 

95 4 CR 532-35. 
MJS’s Appellant’s Brief Page 33 

accordance with the attorneys’ confidentiality duties.96 LHC’s attorneys 

required MJS to extend those confidentiality obligations to MJS employees 

who had access to LHC’s information. 

 MJS was not the target of Master’s qui tam action, but she secretly 

copied stacks of MJS’s confidential documents while still employed, took 

them home, and disclosed them in the hopes of financial gain. Master not 

only breached her confidentiality agreement, but jeopardized HIPAAprotected patient information and attorney-client confidentiality, as well as 

MJS’s confidentiality obligations and Trade Secrets information associated 

with the Auditor software. 

 A series of federal cases have squarely held that the Act does not 

excuse disclosure of a client’s confidential information. In U.S. v. Quest 

Diagnostics Inc., 734 F.3d 154 (2d Cir. 2013), the general counsel for a 

clinical laboratory, responsible for all compliance matters, expressed 

concerns that that the company was violating the Act and federal antikickback statutes and was subsequently replaced. Id. at 159-61. He then 

joined two other former executives and formed a partnership to bring a qui 

tam action against the company, using information that was otherwise 

protected by his confidentiality obligations. Id. at 161. The district court 

 96 4 CR 517. 
MJS’s Appellant’s Brief Page 34 

dismissed the complaint and disqualified the relators and their counsel 

from bringing another complaint, without prejudice to the government or 

other potential relators. Id. at 162-63. The Second Circuit affirmed, stating 

that “[n]othing in the [Act] evinces a clear legislative intent to preempt 

state statutes and rules that regulate an attorney’s disclosure of client 

confidences.” Id. at 163. 

 Similarly, the district court in U.S. ex rel. Holmes v. Northrop 

Grumman Corp., 1:13CV85-HSO-RHW, 2015 WL 3504525, at *10 (S.D. 

Miss. June 3, 2015) held that an attorney who acted as relator “violated his 

duty to retain confidential information by allowing his own interest in 

pursing this qui tam action to override his duties to [his client].” Holmes

represented an insurance company, Munich Re, in an arbitration regarding 

a coverage dispute and entered a confidentiality agreement covering 

documents produced by the opposing party, Northrop. Id. at *1. Holmes 

also obtained documents from the Navy, purportedly for use in the 

arbitration. Id. He then filed a qui tam complaint against Northrop based 

on documents obtained from both Northrop and the Navy. Id. at *1-2. 

 Munich Re, like MJS, was not accused of fraud or joined in the qui 

tam action. But, Northrop moved to disqualify Holmes and dismiss the 

complaint “based on the totality of the circumstances surrounding his 
MJS’s Appellant’s Brief Page 35 

conduct as relator,” including his use of confidential documents. Id. at *1. 

The court granted both motions, holding that Holmes violated his ethical 

duties by using documents obtained on his client’s behalf for personal gain, 

and that he breached his confidentiality agreement with Northrop. Id. at *8 

n. 8. The dismissal was without prejudice to the government pursuing its 

own action or to any other potential relators who could file a complaint 

without using documents obtained by breaching their legal and ethical 

obligations. Id. at *10; see also X Corp., 862 F. Supp. at 1509-10 (“Because 

the complaint contains X Corp.'s confidences and secrets, which Doe has 

been enjoined under state law from disclosing, Doe cannot serve as a 

relator in this action.”).

 Finally, In re JDS Uniphase Corp. Sec. Litig., 238 F. Supp. 2d 1127, 

1135 (N.D. Cal. 2002) acknowledges that even employers who are accused 

of ongoing fraud may enter valid agreements to protect their confidential 

information and trade secrets. The State of Connecticut filed a securities 

fraud class action against JDS and was conducting investigations into the 

allegations, but JDS’s former employees believed they could not provide 

information to the investigators because of confidentiality agreements they 

had signed during employment. Id. at 1130. Connecticut asked the court to 

hold that the agreements were void, at least in part, due to the policy in 
MJS’s Appellant’s Brief Page 36 

favor of allowing employees to assist in securities fraud investigations. Id. 

at 1130, 1136. 

 In analyzing relevant precedent, the court noted that “[h]ighly 

personal medical information is the sort of information, like trade secrets, 

that a party unquestionably has the right to ask another party to keep 

confidential.” Id. at 1137 (discussing Patton v. Cox, 276 F.3d 493 (9th Cir. 

2002)). JDS’s confidentiality agreements, however, were overly broad, so 

the court limited their scope to protect only truly confidential, trade secret, 

and privileged information. Id. at 1137-38. 

 Master has not argued that her confidentiality agreements were 

overly broad. All of the information and documents Master stole from MJS 

related to its services for LHC’s attorneys was protected by the attorneyclient privilege.97 Master admitted that everything she took was MJS’s 

confidential property.98 And the documents included MJS’s trade secrets 

and LHC patient information protected under HIPAA.99 Thus, both Master 

and MJS had heightened confidentiality obligations that did not dissipate 

simply because Master suspected that LHC had engaged in wrongdoing. 

 97 4 CR 517. 

98 3 CR 441. 

99 3 CR 458-59; 4 CR 577-78. 
MJS’s Appellant’s Brief Page 37 

The trial court therefore erred to the extent it granted Master’s motion for 

summary judgment based on her policy arguments. 

II. Second Issue: Master Did Not Negate Causation as a Matter 

of Law 

 In both her traditional and no-evidence motions, Master contended 

that Proffitt’s declaration negated causation as a matter of law because he 

stated that LHC did not terminate its contract with MJS because of 

Master’s actions. 3 CR 426, 430. But supporting affidavits must “be made 

on personal knowledge.” Tex. R. Civ. P. 166a(f). “An affidavit based on 

information and belief is insufficient as verification by oath and its content 

is not factual proof in a summary judgment proceeding.” Wells Fargo 

Const. Co. v. Bank of Woodlake, 645 S.W.2d 913, 914 (Tex. App.—Tyler 

1983, no writ). Proffitt’s declaration is not based on personal knowledge, 

and he does not state that he speaks on behalf of LHC or that he personally 

made the decision to terminate LHC’s contract with MJS.100 Instead, his 

statements are based on “information and belief.”101 His declaration is not, 

therefore, competent summary judgment evidence and cannot support 

summary judgment for Master.102 

 100 3 CR 433-36. 

101 3 CR 433, ¶ 1. 

102 MJS objected to the declaration for lack of foundation and on the basis that 

Proffitt’s statements were speculation, conclusory, and improper opinions. 4 CR 476-77. 
MJS’s Appellant’s Brief Page 38 

 Even if Proffitt’s declaration were competent summary judgment 

evidence, it does not address all of MJS’s causation and damages 

arguments. MJS alleged that Master’s actions damaged its business not 

only because of the loss of LHC, but also because its current and potential 

customers fled after Master’s complaint was made public. And MJS also 

requested disgorgement, which is premised on Master’s improper benefit at 

MJS’s expense.103 See ERI Consulting Engineers, Inc. v. Swinnea, 318 

S.W.3d 867, 873 (Tex. 2010) (noting that disgorgement of wrongdoer’s illgotten gains is equitable remedy for breach of fiduciary duty); Restatement 

(Third) of Restitution § 39 (2011).

 The supreme court has also noted that “[i]f the credibility of the 

affiant or deponent is likely to be a dispositive factor in the resolution of the 

case, then summary judgment is inappropriate.” Casso v. Brand, 776 

S.W.2d 551, 558 (Tex. 1989). That is especially true when the non-movant 

submits controverting evidence. Id. “The duty of the court hearing the 

motion for summary judgment is to determine if there are any issues of fact 

to be tried, and not to weigh the evidence or determine its credibility, and 

thus try the case on the affidavits.” Gulbenkian v. Penn, 252 S.W.2d 929, 

931 (Tex. 1952). 

 

The trial court overruled these objections. 5 CR 767. 

103 3 CR 279-80, 284; 4 CR 497-98. 
MJS’s Appellant’s Brief Page 39 

 MJS submitted controverting evidence that could lead a reasonable 

juror to conclude that Proffitt’s statements were self-serving and not 

credible, including evidence that: 

 LHC terminated its contract with MJS just three days after MJS 

provided documents to the government in response to the 

subpoena. 4 CR 512, ¶¶ 19-20. 

 Over the course of the four-year business relationship, LHC 

expanded MJS’s scope of services and twice increased its 

compensation. 4 CR 510, ¶¶ 6, 8; 4 CR 537-49. 

 LHC never told MJS that it was reevaluating its auditing 

functions. 4 CR 513, ¶ 23. 

 LHC never complained about the services MJS provided. 4 CR 

512, ¶¶ 20, 22. 

 LHC never mentioned that MJS’s reports were unduly 

burdensome, challenging, or contradictory. 4 CR 512, ¶ 22. 

This evidence, based primarily on Spears’s affidavit, directly contradicts the 

Proffitt declaration on which Master relies, and raises a genuine issue of 

material fact as to whether Master’s actions caused MJS damages. 

 The trial court therefore erred to the extent it granted summary 

judgment on the basis that Proffitt’s declaration conclusively establishes 

that Master did not cause injury to MJS. 
MJS’s Appellant’s Brief Page 40 

III. Third Issue: MJS Presented More than a Scintilla of 

Evidence to Support Each of Its Claims 

A. Standard of Review 

 A party may move for summary judgment without presenting 

evidence on the ground that there is no evidence of one or more essential 

elements of a claim on which the opposing party has the burden of proof at 

trial. Tex. R. Civ. P. 166a(i). The burden then shifts to the non-movant to 

bring forth evidence that raises a fact issue on the challenged elements. Id.; 

Thompson v. Weaver, 429 S.W.3d 897, 901-02 (Tex. App.—Tyler 2014, no 

pet.). To do so, the non-movant need only present more than a scintilla of 

probative evidence, which is evidence that rises to a level that would enable 

reasonable and fair-minded people to differ in their conclusions as to a vital 

fact. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003); 

Thompson, 429 S.W.3d at 902. 

B. Breach of Contract 

 The elements of a breach of contract action are: (1) the existence of a 

valid contract, (2) performance or tendered performance by the plaintiff, 

(3) breach of the contract by the defendant, and (4) damages sustained by 

the plaintiff as a result of the breach. Lake v. Premier Transp., 246 S.W.3d 

167, 173 (Tex. App.—Tyler 2007, no pet.). Master did not challenge the first 
MJS’s Appellant’s Brief Page 41 

element.104 Though she challenged the remaining elements, she also 

repeatedly admitted that she received confidential information from MJS in 

exchange for her employment and agreement to keep that information 

confidential, and that she did not comply with her agreements.105 And MJS 

presented uncontroverted expert evidence of the damages it sustained as a 

result of Master’s breaches of her agreements, including drastic declines in 

revenue following the loss of LHC’s business and the release of the article 

when the qui tam complaint was unsealed.106

C. Breach of Fiduciary Duty 

 The elements of a breach of fiduciary duty action are: (1) the existence 

of a fiduciary relationship between the parties, (2) the defendant’s breach of 

her fiduciary duty, and (3) either injury to the plaintiff or benefit to the 

defendant resulting from the breach. Acad. of Skills & Knowledge, Inc. v. 

Charter Sch., USA, Inc., 260 S.W.3d 529, 540 (Tex. App.—Tyler 2008, pet. 

denied). 

 The Texas Supreme Court has held that an employee may owe 

fiduciary duties to her employer when acting in an agency capacity. 

Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 200 (Tex. 2002). In 

 104 3 CR 427. 

105 3 CR 441-42. 

106 4 CR 586-605. 
MJS’s Appellant’s Brief Page 42 

particular, a fiduciary duty arises in an employment relationship that 

prevents an employee from using confidential or proprietary information 

acquired during the relationship in a manner adverse to the employer. 

Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care 

Services, LLC, 404 S.W.3d 737, 752-53 (Tex. App.—El Paso 2013, no pet.); 

Mabrey v. SandStream, Inc., 124 S.W.3d 302, 316 (Tex. App.—Fort Worth 

2003, no pet.). The court in Cuidado Casero held that there was more than 

a scintilla of evidence to support a breach of fiduciary duty claim where the 

evidence showed that an employee of a home health care agency had access 

to confidential patient and Trade Secrets information that she used for her 

own benefit in violation of a confidentiality agreement. 404 S.W.3d at 753. 

 Master admits receiving confidential and proprietary information as 

part of her employment with MJS, and admits that she took that 

information in violation of the express language of her confidentiality 

agreements and disclosed it to third parties.107 As a result, Master benefited 

at MJS’s expense by receiving over $12 million while MJS’s business 

suffered.108 The trial court erred in finding that there was no evidence that 

Master breached a fiduciary duty to MJS. 

 107 3 CR 441-42. 

108 4 CR 620; 4 CR 586-89. 
MJS’s Appellant’s Brief Page 43 

D. Tortious Interference with Contract 

 The elements of tortious interference with contract are: (1) an existing 

contract subject to interference, (2) willful and intentional interference with 

the contract, (3) proximate causation, and (4) actual damage or loss. 

Prudential Ins. Co. of Am. v. Fin. Review Services, Inc., 29 S.W.3d 74, 77 

(Tex. 2000). Master, however, recited the elements of tortious interference 

with prospective business relations, rather than with an existing contract. 

3 CR 429-30. For that reason alone, she did not meet Rule 166a(i)’s 

requirement that the motion “state the elements as to which there is no 

evidence.” 

 But setting that point aside, her only argument—that Proffitt’s 

declaration stating that LHC’s termination of its contract with MJS had 

nothing to do with the qui tam action—does not entitle her to summary 

judgment on MJS’s claim for tortious interference for the reasons discussed 

above under issue two. 

E. Texas Trade Secrets Act 

 A person is liable for misappropriation under the Texas Trade Secrets 

Act if she acquires knowledge of another’s trade secret “under 

circumstances giving rise to a duty to maintain its secrecy or limit its use” 

and subsequently discloses the trade secret without the owner’s consent. 

Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(3)(B)(ii)(b) (West Supp. 
MJS’s Appellant’s Brief Page 44 

2015). A trade secret under the statute is, among other things, information, 

including formulas, programs, methods, techniques, and processes that: 

 (A) derives independent economic value, actual or potential, 

from not being generally known to, and not being readily 

ascertainable by proper means by, other persons who can 

obtain economic value from its disclosure or use; and 

(B) is the subject of efforts that are reasonable under the 

circumstances to maintain its secrecy. 

Tex. Civ. Prac. & Rem. Code Ann. § 134A.002(6). Damages for 

misappropriation include unjust enrichment. Tex. Civ. Prac. & Rem. Code 

Ann. § 134A.004 (West Supp. 2015). 

 MJS’s Auditor software, the process by which Master used the 

software to conduct compliance audits for MJS, and the reports it produced 

are all trade secrets within the meaning of the statute.109 The employment 

agreement Master signed also included the following provision: 

Trade Secrets During the term of employment, Employer will 

make available and Employee will have access to, and become 

familiar with, various trade secrets, consisting of processes and 

compilations of information, records, customer lists, and 

specifications, owned by Employer and regularly used in the 

operation of the business of the Employer. Employee shall not 

disclose any such trade secrets, directly or indirectly, nor use 

them in any way. . . .110

It is undisputed that Master took information generated by MJS’s software 

and disclosed it to her attorneys and the government without MJS’s 

 109 See 4 CR 523-24. 

110 4 CR 551. 
MJS’s Appellant’s Brief Page 45 

knowledge or consent. And Master discusses MJS’s trade secrets processes 

in the qui tam complaint, which is now unsealed and publicly available.111

 This Court has noted that plaintiffs in trade secret cases “can seldom 

establish a specific injury” to calculate lost profits, so courts use “flexible 

and imaginative methods” to measure damages in light of the 

circumstances surrounding the misappropriation. Sw. Energy Prod. Co. v. 

Berry-Helfand, 411 S.W.3d 581, 609 (Tex. App.—Tyler 2013, pet. granted). 

Both the statute and the common law permit a plaintiff to recover for 

unjust enrichment associated with the misappropriation, or for the value of 

the Trade Secrets at the time it was misappropriated. Id. Only by using the 

Auditor software was Master able to assess LHC’s compliance, which led 

her to form the belief that LHC was violating the Act. She then provided the 

Auditor information to the government and ultimately gained $12 million 

as a result of her misappropriation. This is sufficient evidence of damages 

to which MJS is entitled for Master’s misappropriation to defeat summary 

judgment. 

F. Conversion 

 To establish a claim for conversion, the plaintiff must prove that 

(1) the plaintiff owned, possessed, or had the immediate right to possession 

 111 1 CR 87. 
MJS’s Appellant’s Brief Page 46 

of personal property, (2) the defendant wrongfully exercised dominion or 

control over the property, and (3) the plaintiff was injured. Patel v. City of 

Everman, 179 S.W.3d 1, 16 (Tex. App.—Tyler 2004, pet. denied). Master 

only challenged the second element. Once again, she argued that the Act 

permitted her to take MJS’s personal property, so she did not wrongfully 

exercise dominion or control over that property.112 This is not a true noevidence point, and reasons why Master’s argument is wrong are discussed 

above under the first issue. 

G. Conspiracy 

 “Civil conspiracy requires a meeting of the minds between two or 

more persons to accomplish an unlawful purpose or to accomplish a lawful 

purpose by unlawful means.” Transp. Ins. Co. v. Faircloth, 898 S.W.2d 

269, 278 (Tex. 1995). Master did not challenge the evidence of conspiracy, 

but argued, without citing any authority, that “the sole allegation in this 

cause of action relates to the filing of a sealed complaint, which is protected 

conduct.” 3 CR 429. As discussed above under the first issue, Master’s 

conduct was not protected by the Act. There is also more than a scintilla of 

evidence that Master conspired with both her husband and her attorney to 

use MJS’s confidential and proprietary information to pursue a qui tam 

 112 3 CR 428-29. 
MJS’s Appellant’s Brief Page 47 

action against LHC,113 which was a meeting of the minds to achieve a lawful 

purpose by unlawful means. 

H. Fraud 

 Actionable fraud requires a false, material misrepresentation that was 

either known to be false when made or was asserted without knowledge of 

its truth, intent that the claimant act on the misrepresentation, and reliance 

on the misrepresentation that caused injury. Sears, Roebuck & Co. v. 

Meadows, 877 S.W.2d 281, 282 (Tex. 1994). Silence is the equivalent of a 

material misrepresentation when the circumstances impose a duty to 

speak, such as when there is a confidential or fiduciary relationship or when 

new information makes the party’s prior representation misleading or 

untrue. Four Bros. Boat Works, Inc. v. Tesoro Petroleum Companies, Inc., 

217 S.W.3d 653, 670-71 (Tex. App.—Houston [14th Dist.] 2006, pet. 

denied). 

 Master argued that “[h]er conduct is protected by statute” and that 

there is no evidence that she made a material misrepresentation. 3 CR 431. 

We have already addressed the first assertion above under issue one. 

Nothing in the Act protects a party from liability for its own fraud. 

 113 4 CR 576. 
MJS’s Appellant’s Brief Page 48 

 In exchange for receiving access to MJS’s confidential and proprietary 

information, Master represented that she would not take or disclose any of 

that information. In reliance on that representation, MJS provided her 

access to the confidential information. Master either never intended to keep 

that information confidential or failed to disclose that she changed her 

mind when she began making copies, contacted an attorney, and began 

sharing the confidential information. The trial court erred in granting 

summary judgment on MJS’s fraud claim. 

Prayer 

 For these reasons, there is a genuine issue of material fact as to each 

of MJS’s claims against Master, and the trial court erred in granting 

summary judgment. MJS respectfully requests that the Court reverse the 

trial court’s summary judgment and remand for trial on the merits. 
MJS’s Appellant’s Brief Page 49 

Respectfully submitted, 

 /s/ Michelle R. Meriam 

Michelle R. Meriam 

Texas Bar No. 24063871 

michellemeriam@warejackson.com

Timothy F. Lee 

Texas Bar No. 12139500 

timlee@warejackson.com 

Ware, Jackson, Lee, O’Neill, 

 Smith & Barrow, LLP 

2929 Allen Parkway, 39th Floor 

Houston, Texas 77019 

(713) 659-6400 

(713) 659-6262 (fax) 

Russell R. Smith 

Texas Bar No. 18682310 

RSmith@fairchildlawfirm.com

W. Wade Flasowski 

Texas Bar No. 24055482 

Fairchild, Price, Haley & Smith, LLP 

P.O. Drawer 631668 

Nacogdoches, Texas 75963-1668 

(936) 569-2327 

(936) 569-7932 (fax) 

Mark Kennedy 

Texas Bar No. 24000122 

mark@markkennedylaw.com 

Joanna Martin 

Texas Bar No. 24072153 

joanna@markkennedylaw.com

Kennedy Attorneys & Counselors at Law 

12222 Merit Drive, Suite 1750 

Dallas, Texas 75251 

(214) 445-0740 

(972) 661-9320 (fax) 

Attorneys for Appellant 
MJS’s Appellant’s Brief Page 50 

Certificate of Compliance 

 According to Microsoft Word’s word count function, the Rule 9.4(i)(1) 

portion of this document contains 10,148 words. 

 /s/ Michelle R. Meriam 

Michelle R. Meriam 

Certificate of Service 

 On November 19, 2015, on or before the last day for filing this brief, a 

true and correct copy was provided to all counsel of record via ProDoc or 

email, as follows: 

Joseph M. Callow, Jr. 

jcallow@kmklaw.com

Keating Muething & Klekamp 

One East Fourth St., Suite 1400 

Cincinnati, Ohio 45202 

(513) 579-6400 

(513) 579-6457 (fax) 

Travis P. Clardy 

travis.clardy@kellyhart.com

Jerry Baker 

jerry.baker@kellyhart.com

Kelly, Hart & Hallman, LLP 

209 E. Main St. 

P.O. Box 635426 

Nacogdoches, Texas 75961 

(936) 564-2500 

(936) 564-2507 (fax) 

Attorneys for Appellees

 /s/ Michelle R. Meriam 

Michelle R. Meriam 
UNITED STATES DISTRICT COURT 

WESTERN DISTRICT OF LOUISIANA

LAFAYETTE DIVISION

JUDY MASTER CIVIL ACTION NO. 07-1117

*SEALED*

VERSUS JUDGE ELIZABETH ERNY FOOTE

L H C GROUP INC, ET AL. MAGISTRATE JUDGE HORNSBY

ORDER

The United States having intervened in part of this action and having declined to

intervene in part of this action pursuant to the False Claims Act, 31 U.S.C. § 3730(b)(2) and

(4),

IT IS ORDERED that, upon good cause shown by the United States relating to the

protection of its investigative process, the record in this matter be unsealed, with the

exception of the following documents, which shall remain under seal: Record Document

9, Record Document 10, Record Document 14, Record Document 15, Record Document

16, Record Document 17, Record Document 18, Record Document 19, Record Document

20, Record Document 21, Record Document 22, Record Document 24, Record Document

25, Record Document 27, Record Document 28, Record Document 29, Record Document

32, Record Document 37, Record Document 38, Record Document 39, Record Document

40, Record Document 41, Record Document 42, Record Document 43, Record Document

44, Record Document 45, Record Document 46, Record Document 47, Record Document

50, Record Document 51, Record Document 52, Record Document 53, Record Document

Case 6:07-cv-01117-EEF-MLH Document 64 Filed 09/30/11 Page 1 of 3 PageID #: 260
54, Record Document 55, Record Document 56, Record Document 57, Record Document

58, Record Document 59, and Record Document 60. 

IT IS FURTHER ORDERED that within five days from the date of today, the United

States shall file its Partial Dismissal upon completion of settlement. 

IT IS FURTHER ORDERED that upon the filing of the Partial Dismissal by the

United States, this case shall be stayed for thirty days.

IT IS FURTHER ORDERED that within thirty days, the Relator shall file a status

report updating the Court on the settlement of the declined claims, whether an extension

of the stay will be necessary, and whether a telephone conference with the Court is

needed.

IT IS FURTHER ORDERED that as to the part of the action in which the United

States has declined to intervene, the parties serve all pleadings and motions filed in that

part of the action, including supporting memoranda, upon the United States, as provided

for in 31 U.S.C. § 3730(c)(3). The United States may order any deposition transcripts and

is entitled to intervene in that part of the action, for good cause, at any time. 

IT IS FURTHER ORDERED that the parties shall serve all notices of appeal upon

the United States. 

IT IS FURTHER ORDERED that all Orders of this Court be sent to the United

States. 

IT IS FURTHER ORDERED that should the Relator or Defendant propose that the

part of the action in which the United States has declined to intervene be dismissed,

settled, or otherwise discontinued, the Court will solicit the written consent of the United

Case 6:07-cv-01117-EEF-MLH Document 64 Filed 09/30/11 Page 2 of 3 PageID #: 261
States before ruling or granting its approval.

THUS DONE AND SIGNED in Shreveport, Louisiana, this 30th day of September,

2011.

Case 6:07-cv-01117-EEF-MLH Document 64 Filed 09/30/11 Page 3 of 3 PageID #: 262
128

**NOT FOR PRINTED PUBUICATION ** 

I 

IN THE UNITED STATES DISljRICT COURT 

FOR THE EASTERN DISTRICjT OF TEXAS 

LUFKIN DIVISIO~ 

MJS & ASSOCIATES, LLC, § 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

Plaint([[, 

V. 

JUDY MASTER eta/, 

CiT Action No. 9:12-CV-19 

JUIDGE RON CLARK 

I 

I 

Defendants. 

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND AND DENYING AS 

MOOT DEFENDANTS' MOTION TO DISMISS OR TRANSFER VENUE 

Plaintiff MJS & Associates, LLC filed suit againsl Defendants Judy Master and Matthew 

Master in Texas state court on December 22, 2011, allegin1 state law claims for breach of contract, 

violation of the Texas Trade Secrets Act, breach of fiduciah duty, conversion, conspiracy, tortious 

interference with a contract, and fraud. No federal claims wLe asserted. Defendants timely removed 

the case on federal question grounds, claiming that a "substaltial federal question regarding the false 

Claims Act" existed, Doc.# l at Page ID # 2, despite the: fact that no federal claim was actually 

presented in the Complaint. Defendants then filed a motion to dismiss and/or transfer to the United 

States District Court for the Western District of Louisia1. After Defendants' motion was filed, 

I 

Plaintiff filed a motion to remand the case to state court. 

The court does not have subject matter jurisdiction to hear the case. No federal question is 

presented, as Plaintiffs well-pled complaint does not cstlblish either that federal law creates an 

asserted cause of action or that Plaintiffs right to relief!necessarily depends on resolution of a 

A ~RUE COPY I CERilrY ~JAVIO J. MALAND, CLERK 

IJ.S. Dl RICT COURT ~S . IS· ICT, TEXAS 

** NOT FOR PRINTED PUBUICATION ** 

I 

IN THE UNITED STATES DISljRICT COURT 

FOR THE EASTERN DISTRICr OF TEXAS 

LUFKIN DIVISIO~ 

MJS & ASSOCIA TES, LLC, § 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

Pia in t!!f, 

v. 

JUDY MASTER et ai, 

CiT Action No. 9:12-CV-19 

JUIDGE RON CLARK 

I 

I 

Defendants. 

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND AND DENYING AS 

MOOT DEFENDANTS' MOTION TO DISMISS OR TRANSFER VENUE 

Plaintiff MJS & Associates, LLC filed suit againsl Defendants Judy Master and Matthew 

Master in Texas state court on December 22,2011, alleginl state law claims for breach of contract, 

violation of the Texas Trade Secrets Act, breach of fiduciah duty, conversion, conspiracy, tortious 

interference with a contract, and fraud. No federal claims wLe asserted. Defendants timely removed 

the case on federal question grounds, claiming that a "Substaltial federal question regarding the false 

Claims Act" existed, Doc. # I at Page ID # 2, despite the: fact that no federal claim was actually 

presented in the Complaint. Defendants then filed a motion to dismiss and/or transfer to the United 

States District Court for the Western District of Louisia1. After Defendants' motion was filed, 

I 

Plaintiff filed a motion to remand the case to state court. 

The court does not have subject matter jurisdiction to hear the case. No federal question is 

presented, as Plaintiffs well-pled complaint does not cstlblish either that federal law creates an 

asserted calise of action or that Plaintiffs right to reliefineceSSarilY depends on resolution of a 

A ~RUE COPY I CERTli=Y 

~)AVIO J. MALAND, CLERK 

W.E. 01 RICT COURT 

!lIl.S IS' ICT, TEXAS 
129

substantial question offederallaw. Plaintiffs motion is granted, and the case remanded to the !45th 

Judicial District Court of Nacogdoches County, Texas. Dlfcndants' motion to dismiss or transfer 

is denied as moot. 

I. BACKGROUND 

The following facts are primarily drawn from Plainliffs Complaint, and the court makes no 

detennination as to their veracity at this time. 

Plaintiff is a healthcarc consulting firm. and provides services to agencies and providers that 

participate in federal and state healthcare programs, inclJding Medicare and Medicaid. In 2005, 

Plainti IT was retained by a law finn in Lafayette, Loui sianalto perfonn an external compliance audit 

ofLHC Group, lnc.ln perfom1ingthe audit, Plaintiff obtained and reviewed LHC records containing 

confidential and proprietary personal health information thL was protected by the Health Insurance 

Portability and Accountability Act, or HIPPA. 

Plaintiff hired Defendant Judy Master in March 2007 to work as a nurse consultant on the 

LHC compliance audit and, after she was hired, trained bJ to review skilled nurse visits provided 

by Medicare home health agencies. Ms. Master signed Jl employment agreement in which she 

I 

agreed not to disclose or use any trade secrets-including infommtion, records, and customer lists 

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owned and used by Plaintifl in the regular course of business-during or after her employment, 

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except as required by her employment. Doc.# I -I at Page lD #51. Plaintiff also utilized computer 

passwords to limit LHC record and document access. 

Ms. Master quit her job with PlaintifTs in June 2007. During her employment, Plaintiff 

alleges that Ms. Master and co-Defendant Matthew Master Lnspired to misappropriate confidential 

I 

and proprietary infonnation from Plaintiff as pertained to LI-IC. Ms. Master than used this 

2 

substantial question offederallaw. Plaintiffs motion is granted, and the case remanded to the 145th 

Judicial District Court of Nacogdoches County, Texas. Dlfcndants' motion to dismiss or transfer 

is denied as moot. 

I. BACKGROUND 

The following facts are primarily drawn from PlaiJiffs Complaint, and the court makes no 

detennination as to their veracity at this time. 

Plaintiff is a healthcarc consulting firm. and provides services to agencies and providers that 

participate in federal and state healthcare programs, incllding Medicare and Medicaid. In 2005, 

Plainti IT was ,etai ned by a law finn in Lafayette. Lou; Sianalto perfonn an external compliance audi t 

ofLHC Group, Inc. In perf0n11ingthe audit, Plaintiff obtained and reviewed LHC records containing 

confidential and proprietary personal health information thL was protected by the Health Insurance 

Portability and Accountability Act, or HIPPA. 

Plaintiff hired Defendant Judy Master in March 2007 to work as a nurse consultant on the 

LHC compliance audit and, after she was hired, trained bJ to review skilled nurse visits provided 

by Medicare home health agencies. Ms. Master signed all employment agreement in which she 

I 

agreed not to disclose or use any trade secrets-including infommtion, records, and customer lists 

I 

owned and used by Plaintifl in the regular course of busincss-during or after her employment, 

I 

except as required by her employment. Doc. # I -I at Page 10 # 51. Plainti f1' also utilized computer 

passwords to limit LHC record and document access. 

Ms. Master quit her job with PlaintitTs in June 2007. During her employment, Plaintiff 

alleges that Ms. Master and co-Defendant Matthew Master LnsPired to misappropriate confidential 

I 

and proprietary infonnation from Plaintiff as pertained to LHC. Ms. Mastcr than used this 

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infonnation as the basis of a qui tam suit, filed in the United States District Court for the Western 

District of Louisiana in July 2007 pursuant to the false eLms Act, against LHC. United States of 

I 

America ex ref .Judy Master v. LHC Group, Inc., 6:07-cv-1117 (W.O. La.). 

During the course of the Western District case, thel United States issued subpoenas to both 

Plaintiff and LHC, requesting infonnation regarding the colpliance audit Plaintiffperfomwd. LHC, 

1 

upon receipt of the subpoena, tenninated its contract with Plaintiff. The Western District case was 

unsealed in September 2011, and Plaintiff then allegedly Ltrned for the first time that Defendants 

had misappropriated Plaintifrs confidential infonnation. 

In the Western District case, the United States opted to intervene with respect to certain of 

I 

Relator's-i.e., Ms. Master's-claims that LHC violated the False Claims Act, but declined to 

intervene in the other claims in the case. These claims wel subsequently settled, with Ms. Master 

receiving over $12,000,000. The remainder of the claims t the case were stayed in October 2011, 

and remain stayed at this time. 1 

Ms. Master filed her Second Amended ComplaiJt on January 27, 2012 in the Western 

I 

District case, which added Plaintiff in the instant case, MJ S, as a party for the first time. 2 According 

to the January 2012 Complaint, MJS retaliated against Ms. Master by harassing and discriminating 

against her in response to her complaints and refusal to participate in ti·aud, in violation of the False 

Claims Act, 31 U .S.C. § 3 730(h). The Complaint also seeksL declaratory judgment that the state law 

1 A status conference in the We stem District case i~ set for April 16, 20 12 regarding 

scheduling issues, presumably with respect to the stayed claims. 

2 Although MJS is mentioned in the first two Comdlaints Relator filed-the original 

Complaint on July 30, 2007 and First Amended Complain~ on November 29, 2007-it does not 

seem to actually be named as a party until the January 20 I !2 Second Amended Complaint. 

3 

infonnation as the basis of a qui tam suit, filed in the United States District Court for the Western 

District of Louisiana in July 2007 pursuant to the false cLms Act, against LHC. United States of 

I 

America ex relJudy Master v. LHe Group, Inc., 6:07-cv-1117 (W.O. La.). 

During the course of the Western District case, thel United States issued subpoenas to both 

Plaintiffand LHC, requesting infonnation regarding the colPliance audit PlaintiffperfomlCd. LHC, 

1 

upon receipt of the subpoena, tenninated its contract with Plaintiff. The Western District case was 

unsealed in September 2011, and Plaintiff then allegedly Limed for the first time that Defendants 

had misappropriated Plaintifrs confidential infonnation. 

In the Western District case, the United States opted to intervene with respect to certain of 

I 

Relator's-i.e., Ms. Master's-claims that LHC violated the False Claims Act, but declined to 

intervene in the other claims in the case. These claims wel subsequently settled, with Ms. Master 

receiving over $12,000,000. The remainder of the claims t the case were stayed in October 2011, 

and remain stayed at this time. ' 

Ms. Master filed her Second Amended ComplaiJt on January 27, 2012 in the Western 

I 

District case, which added Plaintiff in the instant case, MJ S, as a party for the first time. 2 According 

to the January 2012 Complaint, MJS retaliated against Ms. Master by harassing and discriminating 

against her in response to her complaints and refusal to participate in tI'aud, in violation of the False 

Claims Act, 31 U.S.c. § 3730(h). The Complaint also seeksLdec1aratory judgment that the state law 

1 A status conference in the Westem District case i~ set for April 16, 2012 regarding 

scheduling issues, presumably with respect to the stayed claims. 

2 Although MJS is mentioned in the first two comJlaints Relator filed-the original I 

Complaint on July 30, 2007 and First Amended Complaint 011 November 29, 2007-it does not 

seem to actually be named as a party until the January 201 Q. Second Amended Complaint. 

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claims relating to Ms. Master's duties of confidentiality arc preempted by federal law (i.e., the False 

Claims Act) and that she did not violate any employment Lreement with MJS. 

The instant case was originally filed in Texas state laurt on December 22, 20 12 by Plaintiff. 

It was removed on January 27,2012, which was the same hay that Ms. Master's Second Amended 

Complaint was filed in the Western District action. Defldants filed their motion to dismiss or 

transfer to the Western District on February 3, 2012, andl Plaintiff filed its motion to remand on 

February 26, 2012. As far as the court can tell from these Lotions, the only thing the parties agree 

on is that this is the wrong court to hear this case. 

II. THE COURT WILL CONSIDER PLAINTIFF'S !MOTION TO REMAND BEFORE \ 

DEFENDANTS' MOTION TO DISMISS/TRANSFER 

Although the parties do not spend much, if any, ti+ addressing this point in their briefing', 

the court will consider Plaintiffs motion to remand before considering Defendants' motion to 

dismiss/transfer, even though Defendants' motion was filjd first. 

The court "shall" remand a case "at any time befot final judgment [if] it appears that the 

I 

district court lacks subject matter jurisdiction .... ", 28 U.S.C. § 1447(c), and the Fifth Circuit has 

stated that a district court does not err "by first resolving itl jurisdictional concems" by ruling on a 

I 

motion to remand prior to ruling on a motion to dismiss. 1-rrden v. Field Mem '! Cmty. Hasp., 265 

F. App'x 405, 408 (5th Cir. 2008); see also Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 

242, 246-47 (5th Cir. 2011) (noting without comment tlJt the district court ruled on a later-filed 

motion to remand before ruling on an earlier-filed motion \to dismiss). 

3Plaintiffstates, without elaboration, that Defendants' motion to dismiss is premature, and 

' should be considered only after the motion to remand is disposed of. Doc.# 15 at 2. Defendants 

do not seem to address the point at all. 

4 

claims relating to Ms. Master's duties of confidentiality are preempted by federal law (i.e., the False 

Claims Act) and that she did not violate any employment Lreement with MJS. 

The instant case was originally filed in Texas state turt on December 22, 20 12 by Plaintiff. 

It was removed on January 27,2012, which was the same hay that Ms. Master's Second Amended 

Complaint was filed in the Western District action. DefLdants filed their motion to dismiss or 

transfer to the Western Dislrict on February 3, 2012, andi Plaintiff filed its motion to remand on 

February 26, 2012. As far as the court can tell from these Lotions, the only thing the parties agree 

on is that this is the wrong court to hear this case. 

II. THE COURT WILL CONSIDER PLAINTIFF'S MOTION TO REMAND BEFORE \ 

DEFENDANTS' MOTION TO DISMISS/TRANSFER 

Although the partie' do not spend much, if any, li+ addressing this poinl in their briefing', 

the court will consider Plaintiffs motion to remand before considering Defendants' motion to 

dismiss/transfer, even though Defendants' motion was filld first. 

The court "shall" remand a case "at any time befot final judgment [if] it appears that the 

I 

district court lacks subject matter jurisdiction .... ",28 U.S.C. § 1447(e), and the Fifth Circuit has 

stated that a district court does not err "by first resolving itl jurisdictional concems" by ruling on a 

I 

motion to remand prior to ruling on a motion to dismiss. I-rrden v. Field Mem '/ Cl1Ity. Hasp., 265 

F. App'x 405,408 (5th Cir. 2008); see also Cuevas v. SAC Home Loans Servicing. LP, 648 F.3d 

242,246-47 (5th eir. 2011) (noting without comment tlJt the district court ruled on a later-filed 

motion to remand before ruling on an earlier-filed motion Ito dismiss). 

JPlaintiffstates, without elaboration, that Defendants' motion to dismiss is premature, and , should be considered only aftcr the motion to remand is disposed of. Doc. # 15 at 2. Defendants 

do not seem to address the point at all. 

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132

The court will therefore consider the merits of Plaintiffs motion to remand before reaching 

Defendants' motion to dismiss/transfer. 

III. PLAINTIFF'S MOTION TO REMAND IS GRANTED 

This is a court of limited jurisdiction and may helr a case only when jurisdiction is both 

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authorized by the United States Constitution and con finned by statute. Owen Equip. Co. v. Kroger, I 

437 U.S. 365,371,98 S. Ct. 2396,2401 (1978). There is ho diversity jurisdiction in this case4, so 

for jurisdiction to exist there must be a federal question plsented. 28 U.S.C. § 1331. 

A. Applicable law 

Federal question jurisdiction arises when ... plaintiffs set fm1h allegations founded on a I 

claim or right arising under the Constitution, treaties, or laws of the United States ... In 

general, questions concerning federal question jurisdiction are resolved by application of the I 

well-pleaded complaint rule ... The mle provides that the plaintiffs properly pleaded 

complaint governs the jurisdictional inquiry. I 

Hart v. Bayer Cmp., 199 F.3d 239, 243-44 (5th Cir. 2000) (internal quotations omitted). 

I 

A federal question exists only [in] those cases in which a well-pleaded complaint establishes 

either that federal law creates the cause of actidn or that the plaintiff's right to relief 

necessarily depends on resolution of a substantial qLestion of federal law ... In other words, 

federal question jurisdiction exists where ( 1) re~olving a federal issue is necessary to 

resolution of the state-law claim; (2) the federal i~sue is actually disputed; (3) the federal 1 

issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and 

state judicial responsibilities. 

Singh v. Duane Morris LLP, 538 F.3d 334, 337-38 (5th Cir. 2008) (internal quotation omitted; 

brackets in original). 

B. Analysis 

Defendants concede that Plaintiffs Complaint actually pleads only state law claims; 

however, they argue that, underthe four factor test articulatld in Singh, federal question jurisdiction 

I 4AII parties are Texas citizens. Doc.# 1-1 at Page ID '11-6. 

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The court will therefore consider the merits of Pia in tiffs motion to remand before reaching 

Defendants' motion to dismiss/transfer. 

III. PLAINTIFF'S MOTION TO REMAND IS GRANTED 

This is a court of limited jurisdiction and may helr a case only when jurisdiction is both 

I 

authorized by the United States Constitution and con finned by statute. Owen Equip. Co. v. Kroger, I 

437 U.S. 365, 371,98 S. Ct. 2396, 2401 (1978). There is ho diversity jurisdiction in this case4, so 

for jurisdiction to exist there must be a federal question plsented. 28 U.S.C. § 1331. 

A. Applicable law 

Federal question jurisdiction arises when ... plaintiffs set f0l1h allegations founded on a I 

claim or right arising under the Constitution, treaties, or laws of the United States ... In 

gcncral, questions concerning federal question jurisdiction are resolved by application of the I 

well-pleaded complaint rule ... The mle provides that the plaintiffs properly pleaded 

complaint governs the jurisdictional inquiry. I 

Hart v. Bayer COIp., 199 F.3d 239, 243-44 (5th eir. 2000) (internal quotations omitted). 

I 

A federal question exists only [in] those cases in which a well-pleaded complaint establishes 

either that federal law creates the cause of actidn or that the plaintiffs right to relief 

necessarily depends on resolution of a substantial qLestion of federal law ... In other words, 

federal question jurisdiction exists where (I) re~olving a federal issue is necessary to 

resolution of the state-law claim; (2) the federal i~sue is actually disputed; (3) the federal 1 

issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and 

state judicial responsibilities. 

Singh v. Duane Morris LLP, 538 F.3d 334, 337-38 (5thCir. 2008) (internal quotation omitted; 

brackets in original). 

B. Analysis 

Defendants concede that Plaintiffs Complaint actually pleads only state law claims; 

however, they argue that, under the four factor test articllla1d in Singh, federal question jurisdiction 

I 

4AlI parties are Texas citizens. Doc. # 1-1 at Page ID 1/6. 

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133

exists nevertheless because the state law claims Plaintiff has pled necessarily depend on resolution 

of a substantial question offedcrallaw. Specifically, DefeLants suggest that Plaintiff's claims turn 

I 

on whether Ms. Master's conduct is protected under the False Claims Act. To resolve this issue, the 

court considers each of the Singh factors in turn. 

1. Whether resolution of a federal issue is necessat)! to resolution of the stale law 

claims (factor (1)) I 

As noted above, Plaintiff alleges Texas state law claims for breach of contract, violation of 

the Texas Trade Secrets Act, breach of fiduciary duty, conLrsion, conspiracy, tortious interference 

wtth . d fi d II . f" M 'I d . . . . C' . • h a contract, an rau , a stemmmg rom s. Master· s con uct m acqumng llllOmlaUon m t e 

1 

course of her employment regarding LHC that she later used in the Western District qui tam suit. All 

I 

of these claims require PlaintitT to demonstrate that Ms. Master's taking of the information was 

I 

wrongful; that is, in breach of her employment contract. Defendants essentially contend that Plaintiff 

cannot demonstrate the taking was wrongful without recolse to the False Claims Act, specifically 

31 u.s.c. § 3730(h). 

The court disagrees. 3 1 U.S .C. § 3 730(h )(1) allows an employee to avoid retaliation based 

on "lawful acts done by the employee ... in furtherance lor an action under this section or other 

efforts to stop 1 or more violations of this subchapter." This provision is invoked in a civil action 

by an employee who was discharged, discriminated aga+t, demoted, suspended, threatened, or 

harassed in the tenns and conditions of her employment. Regardless of whether or not Ms. Master 

can prove such a retaliation claim in the Western District cJse, it would appear to have little bearing 

on whether or not she-who quit her job only three Lonths after being hired-breached a 

confidentiality agreement she signed with Plaintiff upon hJ hiring. Plaintiff asserts that her actions 

violated her employment contract, which seems to require no recourse to the False Claims Act. 

6 

exists nevertheless because the state law claims Plaintiff has pled necessarily depend on resolution 

ofa substantial question offederallaw. Specifically, DefeLants suggest that Plaintiff's claims turn 

I 

on whether Ms. Master's conduct is protected under the False Claims Act. To resolve this issue, the 

court considers each of the Singh factors in turn. 

1. Whether resolution of a federal issue is necessQf)! to resolulion of the stale law 

claims (factor (1)) I 

As noted above, Plaintiff alleges Texas state law claims for breach of contract, violation of 

the Texas Trade Secrets Act, breach offiduciary duty, conLrSion, conspiracy, tortious interference 

with . d fi d II . f" M ' I d· ... C' .• h a contract, an rau, a stemming rom s. Master· s con uct III acqumng mlornlaUon m t e 

1 

course of her employment regarding LHC that she later used in the Western District qui tam suit. All 

I 

of these claims require PlaintitT to demonstrate that Ms. Master's taking of the information was 

I 

wrongful; that is, in breach of her employment contract. Defendants essentially contend that Plaintiff 

cannot demonstrate the taking was wrongful without recolse to the False Claims Act, specifically 

31 U.S.c. § 3730(h). 

The court disagrees. 31 U.S .C. § 3 730(h)(1) allows an employee to avoid retaliation based 

on "lawful acts done by the employee ... in furtherance lor an action under this section or other 

efforts to stop 1 or more violations of this subchapter." This provision is invoked in a civil action 

by an employee who was discharged, discriminated aga+t, demoted, suspended, threatened, or 

harassed in the tenns and conditions of her cmployment. Regardless ofwhethcr or not Ms. Mastcr 

can prove such a retaliation claim in the Western District cJse, it would appear to have little bearing 

on whether or not shc-who quit her job only three tonths after being hired-breached a 

confidentiality agreement she signed with Plaintiff upon hJ hiring. Plaintiffasscrts that her actions 

violated her employmcnt contract, which secms to require no recourse to the False Claims Act. 

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134

Defendants make much of the legislative history behind the False Claims Act While the 

court agrees that Section 3730(h) is aimed at preventing hjrassment or retaliation against would-be 

relators for lawful acts, this has little bearing on whethlr Ms. Master can be civilly liable on 

Plaintiffs allegations that she breached an employment clntract she entered into upon her hiring. 

I 

This is especially true because Plaintiff in this case was not the target of Ms. Master's False Claims 

\ 

Act case, and was not added as a Defendant in the Western District case until one month after 

Plaintiff filed the instant case in Texas state court. 

Defendants also cite several district court cases for the proposition that relators may disclose 

documents to the United States in qui tam cases without btaching confidentiality agreements. No 

appellate court opinions are cited by Defendants to suppjrt this idea. At least one of those cases 

seems to partly contradict, rather than support, DefendaJs' argument. In re JDS Uniphase Cotp. 

Sees. Litig., 238 F. Supp. 2d 1127 (N.D. Cal. 2002). RegJdless, unlike the case at bar, all involve 

preventing fraud by the relator or Plaintiffs employer.5 HLe, the qui tam suit was against a client 

of Ms. Master's employer (LHC), rather than her employel itself (Plaintiff). 

5United States ex rei. Head v. Kane Co., 668 F. Supp. 2d 146 (D.D.C. 2009) (where 

relator brought qui tam action against fanner employer, and employer raised a counterclaim for 

breach of the employment contract which was dismissed because the contract was void as against 

public policy; the court specifically stated that "[e]nforcink a private agreement that requires a 

qui tam plaintiff to turn over his or her copy of a document, which is likely to be needed as 

evidence at trial, to the defendant who is under investigati?n would unduly trustrate the purpose" 

of the FCA) (emphasis added); United Stales ex rei Grandeau v. Cancer Treatment Ctrs. of Am., 

350 F. Supp. 2d 765 (N.D. Ill. 2004) (relator's employer \Jas the qui tam Deftmdant and brought 

counterclaims for breach of contract, breach of fiduciary d~ty, and conversion); In re .IDS j 

Uniplwse Corp. Sees. Litig., 238 F. Supp. 2d 1127 (N.D_ €a\. 2002) (in a securities fraud case, 

confidentiality agreements between the Defendant employkr and fanner employees were void as 

against public policy "[t]o the extent that those agreement~ preclude fom1er employees from 

assisting in investigations of wrongdoing that have nothin~ to do with trade secrets or other 

confidential business. information~'); X Co11J: v. Doe, 805 ~· S~pp. 1~98 (~.D·_Y~· 199?) (where 

employer brought smt to prevent 1ts fanner m-house counsel irom dtsclosmg mfonnatwn to the 

United States, the in-house counsel stated that the documehts disclosed ongoing fraud on the part 

of the employer). 

7 

Defendants make much of the legislative history behind the False Claims Act. While the 

court agrees that Section 3730(h) is aimed at preventing hjrassment or retaliation against would-be 

relators for lawful acts, this has little bearing on whethlr Ms. Master can be civilly liable on 

Plaintiffs allegations that she breached an employment Jntract she entered into upon her hiring. 

I 

This is especially true because Plaintiff in this case was not the target of Ms. Master's False Claims 

I 

Act case, and was not added as a Defendant in the Western District case until one month after 

Plaintiff filed the instant case in Texas state court. 

Defendants also cite several district court cases for the proposition that relators may disclose 

documents to the United States in qui tam cases without btaching confidentiality agreements. No 

appellate court opinions are cited by Defendants to suPPJrt this idea. At least one of those cases 

seems to partly contradict, rather than support, DefendaJs' argument. 111 re JDS Uniphase COtp. 

Sees. Litig., 238 F. Supp. 2d 1127 (N.D. Cal. 2002). RegJdless, unlike the case at bar, all involve 

preventing fraud by the relator or Plainti frs employer.s HLe, the qui lam suit was against a client 

of Ms. Master's employer (LHC), rather than her emPloyel itself (Plaintiff). 

5Uniled Slates ex rei. Head v. Kane Co., 668 F. Supp. 2d 146 (D.D.C. 2009) (where 

relator brought qui tam action against fonner employer, and employer raised a counterclaim for 

breach of the employment contract which was dismissed because the contract was void as against 

public policy; the court specitically stated that "[e]nforcink a private agreement that requires a 

qui tam plaintiff to turn over his or her copy of a document, which is likely to be needed as 

evidence at trial, to Ihe de/endant who is under investigali?n would unduly trustrate the purpose" 

of the FCA) (emphasis added); Uniled Slates ex rei Grandeau v. Cancer Treatment Ors. of Am., 

350 F. Supp. 2d 765 (N.D. Ill. 2004) (relator's employer \Jas the qui tam Defendant and brought 

counterclaims for breach of contract, breach of fiduciary d~ty, and conversion); In re .IDS I 

Uniplwse Corp. Sees. Litig., 238 F. Supp. 2d 1127 (N.D. €a\. 2002) (in a securities fraud case, 

confidentiality agreements between the Defendant employkr and fonner employees were void as 

against public policy "[t]o the extent that those agreemcntk preclude fOrlller employees from 

assisting in investigations of wrongdoing that have nothin~ to do with trade secrets or other 

confidential business information"); X COt]}. v. Doe, 805 ~. Supp. 1298 (E.D. Va. 1992) (where 

employer brought suit to prevent its fonner in-house counsel from disclosing infonnation to the 

United Stales, the in-house counsel stated that the documehts disclosed ongoing fraud on the part 

of the employer). 

7 
135

The court understands the concerns of those district courts and the importance of the FCA 

in preventing fraud. If Ms. Master had worked directly for JHC, the court may very well have agreed 

with those opinions. However, Ms. Master worked for an Ltity that is not being accused of fraud, 

· · 1lr · fi and, under Ms. Master's theory, would essentially find ttse wtthout a recourse or Ms. Master's use 

of confidential infonnation to prove a fraud perpetrated bl another entity. Whether Ms. Master's 

I 

actions were wrongful under Texas state law as to Plaintiffj an entity not the target of her FCA case, 

does not seem to have require recourse to the FCA. 

2. Whether the federal issue is actually disputed and whether it is substantial (factors 

(2) and (3)) 

As the court has concluded resolution of a federal issue is not necessary to resolution of the 

state law claims, both of these factors are not appl icab I e. +en assuming the court is incorrect as to 

its conclusion on factor (I) and the parties would dispute the federal issue if it existed (factor (2)), 

l 

"federal jurisdiction demands not only a contested federal issue, but a substantial one, indicating a 

serious federal interest in claiming the advantages thoughttl be inherent in a federal forum." Grable 

&Sons Meta/Prods., Inc. v. Darue Eng'g&M.fg., 545 u.sLo8, 313, 125 S. Ct. 2363,2367 (2005). 

Granting, for the sake of argument, that a court wLid have to consult the FCA to resolve 

Plaintiff's purely state law claims, this is by far the only 1sue that would likely arise in the case. 

Plaintiff would have to prove, for example, with respect td one or more of its causes of action that 

Ms. Master acquired the infonnation later used in the qui tam action in the course of her 

employment, that the information was covered under the confidentiality agreement, that she owed 

l 

a fiduciary duty to Plaintiff: that she conspired with her co-!Defendant, and that Plaintiff was hanned 

by her actions. In other words, the court is far from conviled that the federal issue in this case is 

substantial, rather than simply tangential. 

8 

The court understands the concerns of those district courts and the importance of the FCA 

in preventing fraud. !fMs. Master had worked directly for JHC, the court may very well have agreed 

with those opinions. However, Ms. Master worked for an Ltity that is not being accused offraud, 

. . llf . ti and, under Ms. Master's theory, would essentIally find ltse without a recourse or Ms. Master's use 

of confidential infonnation to prove a fraud perpetrated bl another entity. Whether Ms. Master's 

I 

actions were wrongful under Texas state law as to Plaintiff! an entity not the target of her FCA case, 

does not seem to have require recourse to the FCA. 

2. Whether thefederal issue is actually dispuled and whether it is substanlial (jactors 

(2) and (3)) 

As the court has concluded resolution of a federal issue is not necessary to resolution ofthe 

state law claims, both of these factors are not appl icab Ie. +en assum ing the court is incorrect as to 

its conclusion on factor (I) and the parties would dispute the federal issue if it existed (factor (2)), 

I 

"federal jurisdiction demands not only a contested federal issue, but a substantial one, indicating a 

serious federal interest in claiming the advantages thoughttl be inherent in a federal forum." Grable 

& SOilS Meta/Prods., Inc. v. Dame Ellg 'g & Mfg., 545 u.s.1 308, 313, 125 S. Ct. 2363, 2367 (2005). 

Granting, for the sake of argument, that a court wLld have to consult the FCA to resolve 

Plaintiff's purely state law claims, this is by far the only 1S11e that would likely arise in the case. 

Plaintiff would have to prove, for example, with respect td one or more of its causes of action that 

Ms. Master acquired the infonnation later used in the qui lam action in the course of her 

employment, that the information was covered under the confidentiality agreement, that she owed 

1 

a tiduciary duty to Plaintiff: that she conspired with her co-8efendant, and that Plaintiff was hanned 

by her actions. In other words, the court is far from conviled that the federal issue in this case is 

substantial, rather than simply tangential. 

8 
136

3. Federal jurisdiction will not disturb the balance of federal and state judicial 

responsibilities (factor (4)) 

Finally, even assuming the first three factors would support Defendants' position, 

even when the state action discloses a contested andlsubstantial federal question, the exercise 

of federal jurisdiction is subject to a possible veto. For the federal issue will ultimately I 

qualify for a federal forum only if federal jurisdiction is consistent with congressional 

judgment about the sound division of labor betwe6n state and federal courts governing the 

application of[28 U.S.C.] § 1331 ... [T]he pres~nce of a disputed federal issue and the 

ostensible importance of a federal forum are never rieccssarily dispositive; there must always 

be an assessment of any disruptive portent in cxer6ising federal jurisdiction. 

Grable, 545 U.S. at 313-14, 125 S. Ct. at2367-68. 

Here, Plaintiff, a Texas entity, filed its state Jaw c~aims in a Texas state court against two 

Texas citizens on December 22,2011. At that time, Plaintiff was not a party in the Western District 

of Louisiana qui tam action; Plaintiff was not added as a darty until one month after the state case 

\ 

was filed. This may not be an attempt by Defendants at fonnn manipulation per se, but not even 

Defendants wish this case to stay in a Texas federal court. In fact, if Defendants had their way, the 

issues Plaintiffraises would be litigated by a Louisiana federal court, either by dismissal of this case 

I 

in favor of the pending Louisiana case or by transfer to theiWestern District. It makes little sense to 

handle a case involving Texas parties and Texas claims in any federal court, much less a Louisiana 

federal court, and much more sense to remand it to the TJas state court from whence it came. 

C. Conclusion 

The removing party bears the burden of showing lthat federal jurisdiction exists and that 

removal was proper. Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 

2002). Because the removal statute is strictly construed ij favor of remand, any doubts should be 

resolved against removal. !d. 

Keeping this burden in mind, the court will grant Plaintiffs motion to remand. This case is 

remanded to the 145th Judicial District Court ofNacogdJhes County, Texas. 

9 

3. Federal jurisdictio/1 will not disturb the balance of federal and state judicial 

responsibilities (factor (4)) 

Finally, even assuming the first threc factors would support Defendants' position, 

even when the state action discloses a contested andlsubstantial federal question, the exercise 

of federal jurisdiction is subject to a possible veto. For the federal issue will ultimately I 

qualify for a federal forum only if federal jurisdiction is consistent with congressional 

judgment about the sound division of labor betwe6n state and federal courts governing the 

application of[28 U.S.C.] § 1331 ... [T]he pres~nce of a disputed federal issue and the 

ostensible importance of a federal forum are never rieccssarily dispositive; there must always 

be an assessment of any disruptive portent in exer6ising federal jurisdiction. 

Grable, 545 U.S. at 313-14,125 S. Ct. at 2367-68. 

Here, Plaintiff, a Texas entity, filed its state law Claims in a Texas state court against two 

Texas citizens on December 22,2011. At that time, Plaintiffwas not a party in the Western District 

of Louisiana qui tam action; Plaintiff was not added as a darty until one month (dier the state case 

\ 

was filed. This may not be an attempt by Defendants at fonnn manipulation per se, but not even 

Defendants wish this case to stay in a Texas federal court. In fact, if Defendants had their way, the 

issues Plaintiffraises would be litigated by a Louisiana federal court, either by dismissal of this case 

I 

in favor of the pending Louisiana case or by transfer to thelwestern District. It makes little sense to 

handle a case involving Texas parties and Texas claims in any federal court, much less a Louisiana 

federal court, and much more sense to remand it to the TJas state court from whence it came. 

C. Conclusion 

The removing party bears the burden of showing Ithat federal jurisdiction exists and that 

removal was proper. Mangllno v. Prudential Prop. &: Cas. Ins. Co., 276 FJd 720, 723 (5th Cir. 

2002). Because the removal statute is strictly construed iJ favor of remand, any doubts should be 

resolved against removal. Id. 

Keeping this burden in mind, the court will grant Plaintiffs motion to remand. This case is 

remanded to the 145th Judicial District Court of NaCOgdaihes County, Texas. 

9 
137

. ' . . 

IV. DEFENDANTS' MOTION TO DISMISSfrRANSFER IS DENIED AS MOOT 

Because the court remands the case, it need not conlidcr the arguments raised in Defendants' 

motion to dismiss/transfer. That motion is denied as moJ 

JT IS THEREFORE ORDERED that PlaintiffMJSI& Associates, LLC's Motion to Remand 

[Doc. # I 0] is GRANTED. This case is remanded tj the I 45th Judicial District Court of 

Nacogdoches County, Texas. 

IT IS FURTHER ORDERED that Defendants Judy Master and Matthew Master's Motion 

to Dismiss or Transfer [Doc.# 2] is DEN LED AS MOOT.I 

So ORDERED and SIGNED tl1is 2 day of April, !2012. 

Ron Clark, United States District Judge 

10 

. ' . . 

IV. DEFENDANTS' MOTION TO DISMISSrrRANSFER IS DENIED AS MOOT 

Because the court remands the case, it need not conlidcr the arguments raised in Defendants' 

motion to dismiss/transfer. That motion is denied as moJ 

IT IS THEREFORE ORDERED that PlaintiffMJsl& Associates, LLC's Motion to Remand 

[Doc. # 10] is GRANTED. This case is remanded tJ the 145th Judicial District Court of 

Nacogdoches County, Texas. 

IT IS FURTHER ORDERED that Defendants Judy Master and Matthew Master's Motion 

to Dismiss or Transfer [Doc. # 2] is DENiED AS MOOT.I 

So ORDERED and SIGNED tllis 2 day of April, !2012. 

Ron Clark, United States District Judge 

10 
255

Case 6:07-cv-01117-EEF-MLH Document 156 Filed 04/15/13 Page 1 of 1 Page!D #: 1420 

JUDY MASTER 

VERSUS 

UNITED STATES DISTRICT COURT 

WESTERN DISTRICT OF LOUISIANA 

LAFAYETTE DIVISION 

CIVIL ACTION NO. 07-1117 

JUDGE ELIZABETH ERNY FOOTE 

LHC GROUP INC, ET AL. MAGISTRATE JUDGE HORNSBY 

FINAL JUDGMENT 

Pursuant to the Court's Memorandum Ruling [Record Document 150] and 

Qui Tam Plaintiff Judy Master's Notice of Voluntary Dismissal [Record Document 

154], the Court hereby enters final judgment DISMISSING all claims with 

prejudice, with costs to be borne by each party respectively. Accordingly, the Motion 

for Entry of Judgment under Rule 54(b) filed by MJS & Associates, L.L.C. [Record 

Document 153] is hereby DENIED AS MOOT. The clerk is hereby ordered to close 

this case. 

THUS DONE AND SIGNED in Shreveport, Louisiana, on this 15th day of 

April, 2013. 

'J-~EXII!IHII!IIIB111111T~-. 

I 4 

Case 6:07-cv-01117-EEF-MLH Document 156 Filed 04/15/13 Page 1 of 1 PagelD #: 1420 

JUDY MASTER 

VERSUS 

UNITED STATES DISTRICT COURT 

WESTERN DISTRICT OF LOUISIANA 

LAFAYETTE DIVISION 

CIVIL ACTION NO. 07-1117 

JUDGE ELIZABETH ERNY FOOTE 

LHC GROUP INC, ET AL. MAGISTRATE JUDGE HORNSBY 

FINAL JUDGMENT 

Pursuant to the Court's Memorandum Ruling [Record Document 150] and 

Qui Tam Plaintiff Judy Master's Notice of Voluntary Dismissal [Record Document 

154], the Court hereby enters final judgment DISMISSING all claims with 

prejudice, with costs to be borne by each party respectively. Accordingly, the Motion 

for Entry of Judgment under Rule 54(b) filed by MJS & Associates, L.L.C. [Record 

Document 153] is hereby DENIED AS MOOT. The clerk is hereby ordered to close 

this case. 

THUS DONE AND SIGNED in Shreveport, Louisiana, on this 15th day of 

April, 2013. 

I!)-IIIIIE"XH·I·B·IT-~ 

I 4 
517

AC REgJ\.ilKNT 

FOR 

PROFF~SSIONAL SERVICES 

THIS AGREEM}:NT ("Agreemeut") is made and entered into effective the 1'1 day of 

Febmary, 2005 by and between Gachassin Law Firm, LLC (the ''Attornq1s") in regard to legal 

services to be performed on behalf of LHC Group, L.L.C., on behalf of it subsidiaries and affiliates, 

(hereinafter col1ectively referred to as the "Client') and MJS & Associates (hereinafter the-

"Co11sulrattt"). The Client joins this Agreement for the limited purpose of agreeing to the specific 

provisions referenced above the Client's signature at the end of this Agreement_ 

\VJTNESS.ETH: 

\VHEREAS, the Attorneys have been engaged to provide legal advice to the Client; and, 

\\1-ffiREAS, the Consultant represents that it is knowledgeable and skilled in the review of 

home health licensure, certification, reimbursement and documentation regulations, and that the 

Consultant is able to provide the services herein contemplated; and, 

\VHEREAS, as part of providing such legal advice, the Attorneys consider it appropriate to 

engage the services of Consultant to provide the Attorneys expert and technical information 

regarding home health hcensure and certification, and documentation regulations, and the other 

matters addressed herein as Services (defined below) as tbey relate to the Client (as described on 

Exhibit "A" attached hereto); and, 

'VHEREAS, the Client, the Attorneys and the Consultant have entered into this Agrr.ement 

with the intention and expectation that the Services to be rendered by the Consultant under the tem1s 

of this Agreement will be confidential and access to any information, •eports, and analysis wilf be 

restricted to only those persons authorized by the Client and the Attomeys, and will be subject to the 

"attorney-client" and "work product'' privilege; and, 

\VHEREAS, for convenience, the Attorneys authorize and direct that the Consultant interact 

directly with the Client for purposes of conducting the described Services, as well as obtaining and 

reviewing the Evaluation Material (as hereinafter defined), but direct that all results, analysis, reports, 

and recommendations be provided directly and exclusively to the Attorneys to assist the Artomeys in 

providing the requested legal advice 1o the Client. ,_ 

NOW, THEREFORE, in exchange for the mutual covenants and agreements contained 

herein, and for other good and valuable consideration, the receipt and sufficiency of which is 

acknowledged by the parties, the parties agree as follows: 

1. Performance of SerYices. The Consultant shall perform the services denoted on the 

attached Exhibit "A" (the "Services") for and on behalf of the Attorneys. The Consu1tant shall be 

solely responsible for the performance of such Services and shall control such performance. 

Consultant agrees to perform such Services in a professional manner, minimizing the disruption to the 

Client's business activities Lo the greatest extent reasonably possible. The Services shall be performed 

by persons selected by Consultant, whose qualifications, performance and payment shall be the sole 

responsibility of Consultant. The Consultant shan not be responsible for any services or obhgatiuns 

other than the specific Senriccs described herein and perfunned by Consultant. 11le Services to be 

ACREf!:MENT 

FOR 

PROFF~SSIONAL SERVICES 

THIS AGREEM}:NT ("Agreement") is made and entered into effective the 101 day of 

Febmary, 2005 by and between Gachassin Law Firm, LLC (the "Attorneys") in regard to legal 

services to be perfonned on behalf of LHC Group, L.L.C., on behalf of it subsidiaries and affiliates, 

(hereinafter collectively referred to as the "Client') and MJS & Assodatcs (hereinafter the· 

"Consultant"). The Clientjolns this Agreement for the limited purpose of agreeing to the specific 

provisions referenced above the Client's signature at the end of this Agreement. 

,,'rrNESSETH: 

WHEREAS, the Attorneys have been engaged to provide legal advice to the Client; and, 

"1ffiREAS, the Consultant represents that it is knowledgeable and skilled in the review of 

home health licensure, certifica1ion, reimbursement and documentation regulations, and that the 

Consultant is able to provide the services herein contemplated; and, 

WHEREAS, as part of providing such legal advice, the Attorneys consider it appropriate to 

engage the services of Consultant to provide the Attorneys expert and technical information 

regarding home health licensure and certification, and documentation regulations, and the other 

matten; addressed herein as Services (defined below) as they relate to the Client (as described on 

Exhibit "A" attached hereto); and, 

'VHEREAS. the Client, the Attorneys and the Consultant have entered into this Agreement 

with the intention and expectation that the Services to be rendered by the Consultant under the temlS 

of this Agreement will be confidential and ac:cess to any information, reports, and analysis will be 

restricted to only those persons authorized by the Client and the Attomeys, and will be subject to the 

"attorney-client" and "work product" privilege; and, 

WHEREAS, for cOllvenience, the Attorneys authorize and direct that the Consultant interact 

directly with the Client for purposes of conducting the described Services, as well as obtai.ning and 

reviewing the Evaluation Material (as hereinafter detlned), but direct that all results, analysis, reports, 

and recommendations be provided directly and eXclusively to the Attorneys to assist the Attomeys in 

providing the requested legal advice to the Client. '-

NOW, THEREFORE, in exchange for the mutual covenants and agreements contained 

herein, and for other good and valuable consideration, the receipt and sufficiency of which is 

acknowledged by the parties, the parties agree as follows: 

1. Performance of Services. The Consultant shall perform the services denoted on the 

attached Exhibit "A" (the "'Services") for and on behalf of the Attorneys. The Consu1tant shall be 

solely responsible for the performance of such Services and shall control such perfonnance. 

Consultant agrees to perform such Services in a professional manner, minimizing the disruption Lo the 

Client's busjness activities LO the greatest extent reasonably possible. The Services shall be performed 

by persons selected by Consultant, whose qualifications, performance and payment shall be the sole 

responsibility of Consultant. The Consultant shaH nol be responsible for any services or obligations 

other than the specific Services described herein and perfurmed by Consultant. The Services to be 
518

' ' 

--

perfonned by Consultant may be modified or amended only by a written agreement, executed by 

Consultant, the Attorneys, and the Client. 

2. Cooperation bv Attorneys and Client. The Attomeys shall facilitate the 

Consultant's access to the materials, records and facility of the Client in a manner which pennits the 

Consultant to reasonably perfonn the Services in an efficient and economical manner. 

3. Confidentiality. (a) The Services are provided to the Attorneys to assist their legal 

representation and advice to the Clien_t regarding, among other things, the matters to be reviewed by 

the Consultant as part of the Services. All such Services are confidential and are under the control 

and direction of the Attorneys (as to dissemination of the results, reports, and recommendations, 

whether in electronic or written fom1, including access to "'l11c Auditor" as provided in Exhibit A [the 

"Reports"]); not as to the actual perfom1ance of the Services, which performance is and shall be the 

sole responsibility of the Consultant). 'l11e Consultant acknowledges that all such Reports, as well as 

the information accumulated or created by the Consultant as part of the process of performing the 

Services and generating the Reports (all together, with the Reports, referred to herein as the 

"Collfldential Information") is and shall remain confidential. Such Confidential Information shall be 

marked "Confidential Report to Attomeys" and shall only be released to the Attorneys (and shall not 

be delivered directly to the Client). Consultant shall notify the Attorneys in the event that any person 

or entity shall contact Consultant regarding the Services, the Client (in regard to the Services) or the 

Confidential Information, and shall follow the direction of the Attorneys regarding responding to such 

request, except as otherwise provided herein. 

(b) The Consultant, in assisting the Attorneys with its investigation of the Client, will request 

certain information of and regarding the Client which is confidential, proprietary and/or has not been 

made available to the general public. As a condition of either the Attorneys or the Client furnishing 

such infonnation, the Consultant agrees to treat confidentially such information and any other 

information (hereinafter collectively referred to as the "Evaluatio11 Material") furnished by or on 

behalf of the Client. It is hereby agreed that the Evaluation Material will be used only for the purpose 

ofperfonning the Services and that the Evaluation Material will be kept strictly confidential by the 

Consultant and its representatives; provided, however, that any of such information may be disclosed 

to the Consultant's representatives who need to know such information for the purpose of the 

investigation (it is understood that such representatives shall be infom1ed of the confidential nature of 

such information and shall be directed to treat such information confidentially, and that the Consultant 

shall be responsible for compliance hereunder by its representatives.) As used herein, the term 

"representatives" shall mean the Consultant's directors, officers, employees and agents who are 

assigned or engaged by the Consultant to perform the Services, to the extent that such representatives 

receive or are permitted access to the Evaluation Material. The Consultant will not, and will direct its 

representatives not, to disclose to any person the fact that an investigation is taking or has taken place. 

The term "person" as used herein shall include, without limitation, any government (local, state or 

federal) entity, department or agency, corporation, Consultant, partnership and individual. 

(c) In the event that the Consultant is requested or required (by oral questions, interrogatories, 

requests for information or documents, subpoena or similar process) to disclose any information 

supplied to it, the Consultant will provide the Attorneys immediate written notice of such request or 

requirements so that the Attorneys may seek an appropriate protective order. Consultant agrees not to 

release such information until the latest date which the Consultant, on advice of counsel, determines 

that such response can be delayed without censure or penalty, by Consultant's reasonable 

determination. 

, , 

perf01l11ed by Consultant may be modified or amended only by a written agreement, executed by 

Consultant, the Attorneys, and the Client. 

2. Cooperation bv Attorneys and Client. The Attomeys shall facilitate the 

Consultant's access to the materials, records and facility of the Client in a manner which pelmits the 

Consultant to reasonably per[onn the Services in an efficient and economical manner. 

3. ConfidentiaJity. (a) The Services are provided to the Attorneys to assist their legal 

representation and advice to the Clien,t regarding, among other things, the matters to be reviewed by 

the Consultant as part ofthe Services. All such Services are confidential and are under the control 

and direction of the Attorneys (as to dissemination of the results, reports, and recommendations, 

whether in electronic or written foml, including access to "'111e Auditor" as provided in Exhibit A [the 

"Reports"]); not as to the actual perf0ll11anCe of the Services, which performance is and shall be the 

sale responsibility of the Consultant). The Consultant acknowledges that all such Reports, as well as 

the infonnation accumulated or created by the Consultant as part of the process ofperfomting the 

Services and generating the Reports (all together, with the Reports, referred to herein as the 

"Confidential Information") is and shall remain confidential. Such Confidential Information shall be 

marked "Collfidelltial Report to Atromeys" and shall only be released to the Attorneys (and shall not 

be delivered directly to the Client). Consultant sha11 notify the Attorneys in the event that any person 

or entity shall contact Consultant regarding the Services, the Client (in regard to the Services) or the 

Confidential Information, and shall follow the direction of the Attorneys regarding responding to such 

request, except as otherwise provided herein. 

(b) The Consultant, in assisting the Attorneys with its investigation of the Client, will request 

certain information of and regarding the Client which is confidential, proprietary and/or has not been 

made available to the general public. As a condition of either the Attorneys or the Client furnishing 

such infonnation, the Consultant agrees to treat confidentially such information and any other 

information (hereinafter collectively referred to as the "Evaluation ftfaterial") furnished by or on 

behalf of the Client. It is hereby agreed that the Evaluation Material will be used only for the purpose 

ofperfonning the Services and that the Evaluation Material will be kept strictly confidential by the 

Consultant and its representatives; provided, however, that any of such information may be disclosed 

to the Consultant's representatives who need to know such information for the purpose of the 

investigation (it is understood that such representatives shall be infomled of the confidential nature of 

such information and shall be directed to treat such information confidentially, and that the Consultant 

shall be responsible for compliance hereunder by its representatives.) As used herein, the tem1 

"representatives" shall mean the Consultant's directors, officers, employees and agents who are 

assigned or engaged by the Consultant to perform the Services, to the extent that such representatives 

receive or are permitted access to the Evaluation Material. The Consultant will not, and will direct its 

representatives not, to disclose to any person the fact that an investigation is taking or has taken place. 

The term "person" as used herein shall include, without limitation, any government (local, state or 

federal) entity, department or agency, corporation, Consultant, partnership and individual. 

(c) In the event that the Consultant is requested or required (by oral questions, interrogatories, 

requests for information or documents, subpoena or similar process) to disclose any infonnation 

supplied to it, the Consultant will provide the Attorneys immediate written notice of such request or 

requirements so that the Attorneys may seek an appropriate protective order. Consultant agrees not to 

release such information until the latest date which the Consultant, on advice of counsel, determines 

that such response can be delayed without censure or penalty, by Consultant's reasonable 

determination. 
532

_Business Associate 

Contract Addendum 

THIS BUSINESS ASSOCIATE ADDENDUM, is incorporated into the Professional 

Services Agreement entered into between the pa1ties; including; LHC GROUP, LLC and its 

subsidiaries and affiliates (hereafter collectively the "Client"), and MJS and ASSOCIATES 

(hereafter "Consultant") to set forth the relationships and obligations of lhe parties in respect to 

compliance with the requirements of the Health Insurance Portability and Accountability Act of 

1996. 

I. Introduction: The Client is subject to the Standards for Privacy oflndividually Identifiable 

Health Infonnation ( 45 CPR Parts 160 and 164) (the "Privacy Rule"). The Client and Consultant 

have entered into an. Professional Services Agreement (the ''Agreement") of even date herewith. 

The Client and Consu1tant may provide, for or on beha1f of one another, certain services 

described 1n the Agreement and, in the process, recejve jndividually identHiable health 

infonnation which is protected under the Privacy Rule ("PHI"). As a result, the Client and 

Consultant enter into this Addendum in order to comply with the Privacy Rule. 

2. Uses and Disclosures of PHl: Except as provided in Paragraph 3, the Client and Consultant 

are permitted and/or required to use and disclose the PHI they obtain from one another, only to 

the extent such use or disclosure is: (i) necessary to provide services to one another; (ii) 

permitted under the Privacy Rule or (iii) in accordance with the terms contained herein. The 

Client and Consultant are specifically prohibited from any use or disclosme of the PHI that 

would violate the requirements of the Privacy Rule. 

3. Other Permitted Uses and Disclosures: Notwithstanding Paragraph 2; the Client and 

Consultant may use the PHI to perform data aggregation services (as defined in the Privacy Rule) 

if such usc is necessary for the proper management and administration of Client's operations, or 

to carry out their legal responsibilities hereunder. Consultant may disclose tbe PHI if necessary 

for the proper management and administration of the Consultant or to carry out its legal 

responsibilities, but only if 

(A) The disclosure is required by law; or 

(B) The Client or Consultant obtains reasonable assurances from the person to whom 

the PHI is disclosed that it wiJI be held confidentially and used or further disclosed only as 

required by law or for the purpose for which it was disclosed to the person, and the person 

notifies the Client or Consultant of any instances of which it is aware in which the confidentiality 

of the Pill has been breached_ 

4. Other Obligations of the Client and Consultant: ln addition to the foregoing, the Client 

and Consultant shall, with regard to the Pill: 

(A) Not use or further disclose the PHI other than as pennitted or required by the 

Agreement or as required by law; 

_Business Associate 

Contract Addendum 

THIS BUSINESS ASSOCIATE ADDENDUM, is incorporated into the Professional 

SeIVices Agreement entered into between the palties; including; LHC GROUP, LLC and its 

subsidiaries and affiliates (hereafter collectively the "Client"), and MJS and ASSOCIATES 

(hereafter "Consultant") to set forth the relationships and obligations of lhe parties in respect to 

compliance with the requirements of the Health Insurance Portability and Accountability Act of 

1996. 

1. Introduction: The Client is subject to the Standards for Privacy ofIndividually Identifiable 

Health Infonnation (45 CPR Parts 160 and 164) (the "Privacy Rule"). The Client and Consultant 

have entered into an Professional Services Agreement (the ~'Agreement") of even date herewith. 

The Client and ConsuUant may provide, for or on beha1f of one another, certain services 

described ln the Agreement and, in the process, receive individually identjfiable health 

infonnation which is protected under the Privacy Rule ("PHI') As a result, the Client and 

Consultant enter into this Addendum in order to comply with the Privacy Rule. 

2. Uses and Disclosures of PHI: Except as provided in Paragraph 3, the Client and Consultant 

are pennitted and/or required to lise and disclose the PHI they obtain from one another, only to 

the extent such use or disclosure is: (i) necessary to provide services to one another; (ii) 

permitted under the Privacy Rule or (iii) in accordance with the tenns contained herein. The 

Client and Consultant are specifically prohibited from any use Or disclosure ofthe PHI that 

would violate the requirements of the Privacy Rule. 

3. Other Permitted Uses and Disclosures: Notwithstanding Paragraph 2; the Client and 

Consultant may use the pm to perfonn data aggregation services (as defined in the Privacy Rule) 

if such use is necessary for the proper management and admjnistration of Client's operations, or 

to carry out their legal responsibilities hereunder. Consultant may disclose tbe PHI ifnecessary 

for the proper management and administration of the Consultant Or to carry out its legal 

responsibilities, but only if: 

(A) The disclosure is required by law; or 

(B) The Client or Consultant obtains reasonable aSSllrances from the person to whom 

the PHI is disclosed that it will be held confidentially and used or further disclosed only as 

required by law or for the purpose for which it was disclosed to the person, and the person 

notifies the Client or Consultant of any instances of which it is aware in which the confidentiality 

of the PID has been breached_ 

4. Other Obligations of the Client and Consultant: In addition to the foregoing, the Client 

and Consultant shall, with regard to the Pill: 

(A) Not use or further disclose the PHI other than as pennitted or required by the 

Agreement or as required by law; 
533

(B) Usc appropriate and commercially reasonable safeguards to prevent use or disclosure 

of the information other than as provided for by the Agreement; 

(C) Promptly report to the other any usc or disclosure of the information not provided for 

by the Agreement of which it becomes aware, and have in place procedures to mitigate any 

ham1ful effects from the inappropriate use or disclosure; 

(D) Ensure that any agents, including a subcontractor, to whom they provide the PHI 

agrees to the same restrictions and conditions that apply to the Client and Consultant with respect 

to such information; 

(E) Promptly make the PHI available to the other upon request in compliance with the 

access provisions of the P~vacy Rule; 

(F) Promptly make the PHI available for amendment and incorporate any amendments to 

the PHI maintained by the Client and Consultant as required by the Privacy Rule; 

(G) Maintain data on all disclosures ofPtn for which accounting is required by the 

Privacy Rule for at least six years after the date of the last such disclosure, and make that data 

available to the Company as necessary to provide accountings of disclosures in accordance with 

the Privacy Rule; 

(H) Make its internal books, and records relating to the use and disclosure of the PHI 

available to the Secretary for purposes of determining the Client's compliance with the Privacy 

Rule; and 

(I) At termination of the Agreement, to the extent feasible, recover all PHI in the 

possession of its agents and subcontractors return or destroy all ofthe PI-Il that the Client and 

Consultant still maintain in any form and retain no copies of such information or, if such return 

or destruction is not feasible, extend the protections of the Agreement to the remaining PHI and 

limit further uses and disclosures to those purposes that make the retum or destruction of the 

infom1ation infeasible. 

(J) Remain knowledgeable of the requirements applicable to health care providers under 

the Privacy Rule and provide appropriate education and training to employees, officers, directors, 

commissioners, agents, and contractors to ensure their knowledge of and compliance with those 

provtSIOilS. 

5. Term: This Addendum shall become effective immediately upon execution of the Professional 

Services Agreement and, except as hereinafter provided, shall remain in force a11d effect until the 

last of the PHI is retumed to the Client or destroyed. 

6. Termination of A~:reement: Notwithstanding any provision of the Agreement to the contrary 

regarding tenn or termination, as hereinafter provided, the Client is authorized to tem1inate the 

Agreement if it determines that the Consultant has violated a material term of this Addendum (a 

(B) Usc appropriate and commercially reasonable safeguards to prevent use or disclosure 

of the infonnation other than as provided for by the Agreement; 

(C) Promptly report to the other any usc or disclosure of the information not provided for 

by the Agreement of which it becomes aware, and have in place procedures to mitigate any 

ham1ful effects from the inappropriate use or disclosure; 

(D) Ensure that any agents, including a subcontractor, to whom they provide the PHI 

agrees to the same restrictions and conditions that apply to the Client and Consultant with respect 

to such information; 

(E) Promptly make the PHI available to the other upon request in compliance with the 

access provisions of the P~vacy Rule; 

(F) Promptly make the PHI available for amendment and incorporate any amendments to 

the PHI maintained by the Client and Consultant as required by the Privacy Rule; 

(G) Maintain data on all disclosures ofPffi for which accounting is required by the 

Privacy Rule for at least six years after the date of the last such disclosure, and make that data 

available to the Company as necessary to provide accountings of disclosures in accordance with 

the Privacy Rule; 

(H) Make its internal books, and records relating to the use and disclosure of the PHI 

available to the Secretary for purposes of detcffi1ining the Client's compliance with the Privacy 

Ru1e; and 

(1) At termination of the Agreement, to the extent feasible, recover all PHI in the 

possession of its agents and subcontractors return or destroy all of the PI-IT that the Client and 

Consultant still maintain in any fonn and retain no copies of such infonnation or, if such return 

or destruction is not feasible, extend the protections of the Agreement to the remaining PHI and 

limit further uses and disclosures to those purposes that make the retum or destruction of the 

infomlation infeasible. 

(1) Remain knowledgeable of the requirements applicable to health care providers under 

the Privacy Rule and provide appropriate education and training to employees, officers, directors, 

commissioners, agents, and contractors to ensure their knowledge of and compliance with those 

proVISIOns. 

5. Term: This Addendum shall become effective immediately upon execution o[the Professional 

Services Agreement and, except as hereinafter provided, shall remain in force alld effect until the 

last of the PHI is returned to the Client or destroyed. 

6. Termination of A1:reement: Notwithstanding any provision of the Agreement to the contrary 

regarding tenn or termination, as hereinafter provided, the Client is authorized to temlinate the 

Agreement ifit detennines that the Consultant has violated a material term of this Addendum (a 
534

"Privacy Breach"). 

A. Upon learning of a Privacy Breach, unless the Client reasonably believes that the 

Consultant has already remedied the condition leading to or causing the Privacy Breach, the 

Client shall give written notice to the Consultant ("Notice"). 

B. If the Client has not received satisfactory assurances within ten (1 0) days of the date 

ofthe Notice that Consultant has cured the breach or ended the violation, as applicable, then the 

Client shall immediately terminate the Agreement if, in the its sole discretion, it detennines that 

tennination is feasible. If it determines that termination is not feasible, it shall immediately 

report the problem to the Secretary of the Department of Health & Hwnan Services. 

7. Conflicting provisions: In the event that any requirements or provisions ofthis Addendum 

should be in conflict with any requirements or provisions ofthe Agreement) the requirements or 

provisions of this Addendum· shall control. 

8. Changes required by law: The parties hereto have acknowledged that this Addendum is 

entered into in order to comply with the requirements of the Privacy Rule. In the event that the 

provisions or interpretation of the Privacy Rule are materially changed, or in the event that other 

law is enacted or interpreted which materiaiiy effects the tenns of this Addendum, the parties 

agree to enter into a mutually acceptable amendment to this Addendum, on or before the 

effective date of that change, to bring the terms hereof into compliance therewith. 

9. Definitions: As used in this Addendum, the following terms have the following meanings: 

"Business Associate" includes not only the person or entity executing this Addendum. but 

also includes all of its employees~ officers, directors) commissioners, agents, and 

contractors. 

"Disclosure" or "disclose'' means tl1e release, transfer, provision of access to, or divulging 

in any other manner of information outside the entity holding the information, as more 

fully described in the Privacy Rule. 

"Use" means, with respect to individually identifiable health infonnation, the sharing, 

employment, application, utilization, examination~ or analysis of such infonnation within 

an entity that maintains such infonnation, as more fuUy described in the Privacy Rule. 

10. Miscellaneous: 

A. Ownership of PHI: The PHI to which the Cllent and Consultant have access under the 

Agreement or this Addendum shall be and remain the property of the Client. 

"Privacy Breach"). 

A. Upon learning of a Privacy Breach, unless the Client reasonably believes that the 

Consu1tant has already remedied the condition leading to or causing the Privacy Breach. the 

Client shall give written notice to the Consultant ("Notice"). 

B. If the Client: has not received satisfactory assurances within ten (10) days of the date 

ofthe Notice that Consultant has cured the breach or ended the violation, as applicable, then the 

Client shan immediately tennina!.e the Agreement if, in the its sole discretion, it detennines that: 

tennination is feasible. If it determines that tennination is not feasible, it shall immediately 

report the problem to the Secretary of the Department of Health & Hwnan Services. 

7. Conflicting provisions: In the event that any requirements or provisions ofthis Addendum 

should be in conflict with any requirements or provisions ofthe Agreement) the requirements or 

provisions of this Addendum· shall control. 

8. Changes required by law: The parties hereto have acknowledged that this Addendum is 

entered into in order to comply with the requirements of the Privacy Rule. In the event that the 

provisions or interpretation of the Privacy Rule are materially changed, or in the event that other 

law is enacted or interpreted which materiaIly effects the tenllS of this Addendum, the parties 

agree to enter into a mutually acceptable amendment to this: Addendum, on or before the 

effective date of that change, to bring the terms hereof into compliance therewith. 

9. Definitions: As used in this Addendunl, the following terms have the following meanings: 

"Business Associate" includes not only the person or entity executing this Addendum. but 

also includes all of its employees, officers, directors~ commissioners, agents, and 

contractors. 

"Disclosure" or "disclose" means t11e release, transfer, provision of access to, or divulging 

in any other manner ofinfonnation outside the entity holding the infotmation, as more 

fully described in the Privacy Rule. 

"Use" means, with respect to individually identifiable health infonnation, the sharing, 

employment, application, utilization, examination, or analysis of such infonnation within 

an entity that maintains such infonnation, as more fuUy described in the Privacy Rule. 

10. Miscellaneous: 

A. Ownership of PHI: The PHI to which the Cllent and Consultant have access under the 

Agreement or this Addendum shall be and remain the property of the Client:. 
535

B. Indemnification: Each party to this Addendum shaU indemnify and hold the other 

hannless from any and all liability, damages, costs and expenses, including attorneys fees and 

costs of defense, resulting from the action or omission ofthe other party with respect to the 

obligations undertaken by either of them under this Addendum. 

C. Injunctive Relief: Notwithstanding any rights or remedies provided for in this 

Addendum, the Client retain all rights to seek injunctive relief to prevent or stop the 

inappropriate use or disclosure ofPHT directly or indirectly by the Consultant. 

D. No Third Party Beneficiaries: Nothing in this Addendum is intended to confer upon or 

create in, nor shall anything herein confer upon or create in, any person other that the parties and 

their successors and assigns, any Iights, remedies, obligations, or liabilities whatsoever. 

E:\005[)0\QO()Corpe>ralc\Corporate Compli onceiPSA ·Ja11 Sp.,ars-0 1-24-2005. wpd 

B. Indemnification: Each parLy to this Adderidum shall indemnify and hold the other 

hannless from any and all liability, damages, costs and expenses, including attorneys fees and 

costs of defense, resulting from the action or omission ofthe other party with respect to the 

obligations undertaken by either of them under this Addendum. 

C. Injunctive Relief: Notwithstanding any rights or remedies provided for in this 

Addendum, the Client retain all rights to seek injunctive relief to prevent or stop the 

inappropriate use or disclosure ofPHT directly or indirectly by the Consultant. 

D. No Third Party Beneficiaries: Nothing in this Addendum is intended to confer upon or 

create in, nor shall anything herein confer upon Or create in, any person other that the parties and 

their successors and assigns, any lights, remedies, obligations, or liabilities whatsoever. 

E:\005[)OIOO[)CorpClTalcICoopora1e Compli oncelPSA ·Jal1 Sp"aTS-O 1-24-2005. wpd 
551

124447.GR8 .mb.4.6.0 1 Confidential to Attorney 

EMPLOYMENT AGREEMENT 

By this Agreement. M. Jan Spears and Associates, Inc., referred to in this Agreement as 

~Ioyer, !ocated al 162,0 West Seale, Nacogdoches, Texas, 75964, employs 

I..I.DV /VIttscra ll# , referred to in this Agreement as Employee, of 

I ~ A A£. , who, for considerat~on of the providing. of 

cGnf~dentiaranHP Prietary information, trade secrets, trade specific training and other such 

benefits incident to their employment. by M. Jan Spears and Associates, agrees and 

acknowledges the following terms and conditions: _ · 

1. Trade Secrets Duling the term of employment, Employer will make 

avaitable and Employee will have access io, and become familiar IIVlth, 

various trade secrets, consisting of processes and compilations of 

Information, records, customer lists, and. specifications, owned· by 

Employer and regularly used in the operation of th~ business of the 

Employer. Employee shafl not disclose any such trade secrets, directly 

or indirectly, nor use them in any way, either during the term of this 

Agreement or at any time thereafter, except as required in the course of 

employment All files, records, documents, specifications, equipment, and 

similar items relating to the business of the Employer, whether or not 

prepared by the Employee, shaU remain the exclusive property of the 

Employer and shall not be removed from the premises of the Employer 

under any circumstances without the prior written consent of the 

Employer. 

2. Return of Employer."s Property On the tenn[nation of employment or 

whenever requested by Employer, Employee shall immediately deliver to 

Employer all property in Emp~oyee's possession or under Employee's 

control belonging to the Employer, including, but nof limtted to aU 

accounting records, computer terminals. hardware, software and tapes. 

accounting machines, and all office furniture and fixtures, supplres, and 

other personal property in good condition. ordinary wear and tear 

excepted. 

3. Noncompetition By Employee During the tenn of this Agreement, 

Employee shall not. directly or indirectly, either as an employee, employer, 

consultant, agent, principal, partner, stockholder, corporate officer, 

director, or in any other individual or representative capacity, engage or 

participate in any business that is iri competition in any manner whatever 

with the business ofth~ Employer. Furthermore, on the termination of this 

Agreement, Employee expressly agrees not to engage or participate, 

directly or indirer:;tly, in any business located within the East Texas 

Region, from Nacogdoches County North 1a Smith County, West fo 

Madison County, East to Louisiana and South to the Gulf Coast, 

including but not limited to the Greater Houston/Harris County Area, or 

any area that empfoyee worked in, seiVed or called upon as an employee 

of M. Jan Spears and Associates, that is in competition with the business 

of the Employer or a current client of the Employer for a period of fv..ro (2) 

years. 

38 of 153 

124447.GR8 .mo.4.6.0 1 Confidential to AttDrney 

EMPLOYMENT AGREEMENT 

By this Agreement. M. Jan Spears and Associates, Inc., referred to in this Agreement as 

~IOyer, located al 162,0 West Seale, Nacogdoches, Texas, 75964, employs 

G.lDV /VIltscra illV' , referred to in this Agreement as Employee, of 

I ~ A It £. ' who, for considerat~Qn of the providing. of 

c(}nf~dentiar ana p prietary information, trade secrets, trade specific training and other such 

benefits incident to their employment, by M. Jan Spears and Associates, agrees and 

acknowledges the fonowing terms and conditions: . . 

1. Trade Secrets Duling the term of employment, Employer wi\! make 

avaitable and Employee will have access 10, and become familiar IIVlth, 

various trade secrets, consisting of processes and compilations of 

Information, records, customer lists, and. specifications, owned' by 

Employer and regularly used in the operation of th~ business of the 

Employer. Employee shaH not disclose any such trade secrets, directly 

or indirectly. nor use them in any way, either during the term of this 

Agreement or at any time thereafter, except as required in the course of 

employment All files, records, documents, specifications, equipment, and 

similar items relating to the business of the Employer, whether or not 

prepared by the Employee, shaH remain the exclusive property of the 

Employer and shall not be removed from the premises of the Employer 

under any circumstances without the prior written consent of the 

Employer. 

2. Return of Employer."s Property On the tenn[nation of employment or 

whenever requested by Employer, Employee shall immediately deliver to 

Employer all property in Emp~oyee's possession or under Employee's 

control belonging to the Employer, including, but nof limtted to aU 

accounting records, computer terminals. hardware, software and tapes. 

accounting machines, and all office furniture and fixtures, suppl1es, and 

other personal property in good condition, ordinary wear and tear 

excepted. 

3. Noncompetition By Employee During the tenn of this Agreement, 

Emp!oyee shall not. directly or indirectly, either a.s an employee. employer, 

consultant, agent, principal, partner, stockholder, corporate officer, 

director. or in any other individual or representative capacity, engage or 

participate in any business that is in competition in any manner whatever 

with the business ofth~ Employer. Furthermore, on the termination of this 

Agreement, Employee expressly agrees not to engage or participate, 

directly or indirectly, in any business located within the East Texas 

Region. from Nacogdoches County North to Smith County, West to 

Madison County, East to LOUisiana and South to the Gulf Coast, 

including but not limited to the Greater Houston/Harris County Area, or 

any area that empfoyee worked in, selVed or called upon as an employee 

of M. Jan Spears and Associates, that is in competition with the business 

of the Employer or a current client of the. Employer for a period of fv..ro (2) 

years. 

3B of 153 
554

MJS & Associates LLC 

STATEMENT OF CONFIDENTIALITY 

Confidential to Atlomey 

1620 Wesr Seale 

Nacogdo~he~ TeKas 75964 

Phon~: 936-559-7234 

Fax: 936-560-4652 

Cell; 936-554·7225 

charliesp61ars@mjanspears.c::om 

I understand the importance of observing strict ethical moral and professional standards with 

confidentiali1y poljcies. I agree not to DISCUSS OR RELEASE any information obtained 

within. the company regarding any MJS client, recor~ personnel or any other information with or 

to ElllY indi.vidual not directly associated with MJS or any other party or individual not directly 

assbciated with the information. [fully agree that any information that is released will only be 

done with proper authorization and/or in accordance with policy for the release of approved 

information.. 

I will not disclose or discuss client's patient•s conditions, treatments~ or status, even if they are 

known to me personally, with anyone at or outside the Company except to carry out my regular 

duties that I am assigned within authorized responsibilities. 

I will not release or d.iscus.s information to anyone concerning financial, medical or social 

information ofthose patients ofthe clients, their family, MJS employees, orthe Company as a 

whole. which is not authorized in writing by an official in management in authority to release 

such information. 

I will not seek or retain, copy or disclose confidential information about our cHent}s or MJS 

employees for roy own or others use _by researching computer terminals; billing infonnation, 

personnel or medical records, or ~Y other sources ex.cep~ to carry out duties as assigned I will 

not at anytime. share or disclose any MJS computer systems access usemame or password to 

anyone. I will not at anytime tamper with any MJS computer system (hardware. software, or 

firmware) to gain unauthorized access. I will not at anytime disclose to any unauthorized 

personnel. any procedures (in whole or in part) in order to gain unauthorized access to any MJS 

computer system. 

My signature on this document indicates that I understand and agree to abide by the 

aforementioned policies, and that any breach ofthe policies will result in disciplinary procedures 

up to and including termination. In addition to, ifl leave employment with MJS, I understand 

professional conduct is expected also in reference to compliance with the above agreement and 

pecalties or damages may also apply to the breach of this. agreement up to $10,000 per violation. 

I fully agree and accept these terms as a condition of my employment. I also accept the 

aforementioned with moral, ethical and professional standards applicable thereafter any MJS 

MJS & Associates LLC 

STATEMENT OF CONFlDENTIALITY 

Contidentlallo Attorney 

1620 Wesr Seale 

Nacogdoche~ TeKas 7~964 

Phone: 936-559--7234 

Fal(: 936-550-4652 

Celf; 936-554·722El 

charljaspearS@mjanspears.com 

I understand the importance of observing strict ethical mora! and professional standards with 

confidentiali1y poljcies. I agree not to DISCUSS OR RELEASE any information obtained 

within the company regarding any MJS client, recor~ personnel or any other information with or 

to any individual not directly as.sociated with MJS or any other party or individual not directly 

associated with the information. [fully agree that any infonnation that is released will only be 

done with proper authorization and/or in accordance with policy for the release of approved 

informationI will not disclose or discuss client's patient's conditions, treatments~ or status. e'Ven if they are 

known to me personally. with anyone at or outside the Company except to carry out my regular 

duties that I am assigned within authorized responsibilities. 

I will not release or discuss information to anyone concerning financial) medical or social 

information of those patients of the clients, their family, MJS employees, or the Company as a 

whole, which is not authorized in writing by an official in management in authority to release 

such infonnatiou_ 

I will not seek or retain, copy or disclose confidential infonnation about our clienfs or MJS 

employees for roy own or others use .by researching computer terminals, billing infonnation. 

personnel or medical records, or any other sources ex..cept to carry out duties as assigned I will 

not at anytime. share or disclose any MJS computer syst~ access usemame or password to 

anyone. I will not at anytime tamper with any MJS computer system (hard.ware. software. or 

finnware) to gain unauthorized access. I will not at anytime disclose to any unauthorized 

personnel. any procedures (in whole or in part) in order to gain unauthorized access to any MJS 

computer system_ 

My signature on this document indicates that [understand and agree to abide by the 

aforementioned policies, and that any breach of the policies will result in disciplinary procedures 

up to and including termination. In addition to, iflleave employment with MJS. I understand 

professional conduct is expected also in reference to compliance with the above agreement and 

penalties Or damages may also apply to the breach of this agreement up to $10.000 per violation. 

1 fully agree and accept these terms as a condition of my employment. I also accept the 

aforementioned with moral, ethical and professional standards applicable thereafter any MJS 

ent. 

~1flI A/~J,7 

~. 
556

·, ___ _...r Sheri Foster , SupeJ'IIisor Compliance 

From: Judy Master RN 

Dear Sheri 

I am resigning from MJS effective June 11, 2007 due to personal reasons. 

1 have enjoyed working with you and T J and me MJS team.·. 

I will mail the key or have my husband drop It by. This Is my written 

permission to mail my check(s) to me. 

pBJ~erely, /1 _ D 

·VtAM (./feY~ /'Judy~ ster .. ~ 1 345 R 3408 

' Jac orwi!te, Texas 75766 

Sheri Foster f SupeJ'l./isor Compliance 

From: Judy Master RN 

Dear Sheri 

I am resigning from MJS effective June 11,2007 due to personal reasons. 

I have enjoyed working with you and T J and me MJ$ team.·. 

I will mail the key or have my husband drop It by. This Is my written 

permission to mail my check(s) to me. 

pBI~erelYI 11 . D 

,VtAM f. /lcY~ 

/'JUdY~ ster .'~ 1 345 R 3408 

t Jac orwilte, Texas 75766 
773

MJS a.od ASSOCIATES, L.LC. 

A Tcxa~ Lin1Hcd LiahiJif)' 

Cnrpnration, 

vs. 

.runv MASTER, RN., 

J\IA TTHEW MASTI!:R, 

Defeml:mt!l. 

FILED 

__1_: _!1_£ -f2-,M. 

JUN 8 2015 

JESS!CA HILL 

CAUSE NO. Clll 7910 DlSTRlCT CLERK 

NACOGDOCHES COUNTY, TX 

§ IN THE DJSTRJCT COURT OF 

§ 

§ 

§ 

~ 

§ 

§ NACOGDOCH£SCOVNTY,TEXAS 

§ 

~ 

§ 

§ 

~ 145111 JUlllClAl... DISTRICT 

UR»I£R ON DEFKNlMNTS' 

MOTlON FOR SUMMARY .J[)OGMENT 

On thi~ day co:~me on to lx: considere.j Oefcndan!s Judy MaSter, R.N. 1:1nd Y11111hew 

Mas:er':i Mmian for Su..-nmary JJdgment. A ftcr cons;dering the Moliun and henring \he nr~utnents 

of counsel, itnppea:s Hl the C:..urt U1ut such Motion and should in all things be (j RANTED. 

This order flnally dispose..~ of nil par',ics and f1li Clilims ;:md is appeali.!ble. 

SIGN ED on this the ___3____ !,lay ol~~--' 2015. 

<;;2-G~ ........ ~ JUDGE PRESIDING 

MJS and ASSOCIATES, L.l.C. 

A TC'l8!i LimHcd LiahiJit)' 

Cnrpnration, 

VS. 

.ruDY MASnm, RN., 

J\fA TTHEW MASTER, 

Defendants. 

FlLED ~;~t/5 ?M. 

JUN 8 2015 

JESS!CA !-IILL 

CA USE NO. ell27910 DlSTRlCT CLERK 

NACOGDOCHES COUNTY, TX 

§ IN THE DISTRJCT COlJRT OF 

§ 

§ 

§ 

* § 

§ NACOGDOCHES COUNTY. TEXAS 

§ 

~ 

§ 

§ 

i 145111 JUllIClA1" DISTRICT 

ORDER ON DEFgNI>ANTS' 

MOTION fOR SUl\:1MARY.JlJOGMENT 

On this day C3me on to b;: considered Defcndarus JUO)' MaSl~r, R.N. imd M(tllhew 

Ma$tet':i MOIicn for SU.l11mary JJcigment. After cO!is;dering the MOliun and hC!lring the lI.l"~uments 

orcounsci, illlppea!1llo the C:.lurt \hut such Motion and should in all things be (jRANTED. 

This order ilnally dispose .... ofnll parties <lIld fill clilims :mo is appeali.lbk 

SIGNEDon thistb.e~(,Iayol~ ~_-' 2015. 

(2-c2::..------, "--> 

JUDGE PRESJDING 
§ 3729. False claims, 31 USCA § 3729

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Unconstitutional or Preempted Limited on Constitutional Grounds by U.S. v. Hawley, N.D.Iowa, Aug. 01, 2011

United States Code Annotated

Title 31. Money and Finance (Refs & Annos)

Subtitle III. Financial Management

Chapter 37. Claims (Refs & Annos)

Subchapter III. Claims Against the United States Government (Refs & Annos)

31 U.S.C.A. § 3729

§ 3729. False claims

Currentness

(a) Liability for certain acts.--

(1) In general.--Subject to paragraph (2), any person who--

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);

(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly

delivers, or causes to be delivered, less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government

and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information

on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the

Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or

transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases

an obligation to pay or transmit money or property to the Government,

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted

by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410 1), plus 3 times

the amount of damages which the Government sustains because of the act of that person.
§ 3729. False claims, 31 USCA § 3729

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

(2) Reduced damages.--If the court finds that--

(A) the person committing the violation of this subsection furnished officials of the United States responsible for

investigating false claims violations with all information known to such person about the violation within 30 days after

the date on which the defendant first obtained the information;

(B) such person fully cooperated with any Government investigation of such violation; and

(C) at the time such person furnished the United States with the information about the violation, no criminal prosecution,

civil action, or administrative action had commenced under this title with respect to such violation, and the person did not

have actual knowledge of the existence of an investigation into such violation,

the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of

that person.

(3) Costs of civil actions.--A person violating this subsection shall also be liable to the United States Government for the

costs of a civil action brought to recover any such penalty or damages.

(b) Definitions.--For purposes of this section--

(1) the terms “knowing” and “knowingly” --

(A) mean that a person, with respect to information--

(i) has actual knowledge of the information;

(ii) acts in deliberate ignorance of the truth or falsity of the information; or

(iii) acts in reckless disregard of the truth or falsity of the information; and

(B) require no proof of specific intent to defraud;

(2) the term “claim”--

(A) means any request or demand, whether under a contract or otherwise, for money or property and whether or not the

United States has title to the money or property, that--
§ 3729. False claims, 31 USCA § 3729

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

(i) is presented to an officer, employee, or agent of the United States; or

(ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government's

behalf or to advance a Government program or interest, and if the United States Government--

(I) provides or has provided any portion of the money or property requested or demanded; or

(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is

requested or demanded; and

(B) does not include requests or demands for money or property that the Government has paid to an individual as

compensation for Federal employment or as an income subsidy with no restrictions on that individual's use of the money

or property;

(3) the term “obligation” means an established duty, whether or not fixed, arising from an express or implied contractual,

grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from

the retention of any overpayment; and

(4) the term “material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt

of money or property.

(c) Exemption from disclosure.--Any information furnished pursuant to subsection (a)(2) shall be exempt from disclosure

under section 552 of title 5.

(d) Exclusion.--This section does not apply to claims, records, or statements made under the Internal Revenue Code of 1986.

[(e) Redesignated (d)]

CREDIT(S)

(Pub.L. 97-258, Sept. 13, 1982, 96 Stat. 978; Pub.L. 99-562, § 2, Oct. 27, 1986, 100 Stat. 3153; Pub.L. 103-272, § 4(f)(1)

(O), July 5, 1994, 108 Stat. 1362; Pub.L. 111-21, § 4(a), May 20, 2009, 123 Stat. 1621.)

Notes of Decisions (1429)

Footnotes

1 So in original. Probably should read “Public Law 101-410”.

31 U.S.C.A. § 3729, 31 USCA § 3729

Current through P.L. 114-61 (excluding P.L. 114-52, 114-54, 114-59, and 114-60) approved 10-7-2015
§ 3729. False claims, 31 USCA § 3729

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

WestlawNext 
§ 3730. Civil actions for false claims, 31 USCA § 3730

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

United States Code Annotated

Title 31. Money and Finance (Refs & Annos)

Subtitle III. Financial Management

Chapter 37. Claims (Refs & Annos)

Subchapter III. Claims Against the United States Government (Refs & Annos)

31 U.S.C.A. § 3730

§ 3730. Civil actions for false claims

Effective: July 22, 2010

Currentness

(a) Responsibilities of the Attorney General.--The Attorney General diligently shall investigate a violation under section

3729. If the Attorney General finds that a person has violated or is violating section 3729, the Attorney General may bring a

civil action under this section against the person.

(b) Actions by private persons.--(1) A person may bring a civil action for a violation of section 3729 for the person and for

the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only

if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

(2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses

shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure.

1

 The complaint shall be

filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.

The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and

the material evidence and information.

(3) The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains

under seal under paragraph (2). Any such motions may be supported by affidavits or other submissions in camera. The defendant

shall not be required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served

upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure.

(4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Government shall--

(A) proceed with the action, in which case the action shall be conducted by the Government; or

(B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right

to conduct the action.

(5) When a person brings an action under this subsection, no person other than the Government may intervene or bring a related

action based on the facts underlying the pending action.
§ 3730. Civil actions for false claims, 31 USCA § 3730

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

(c) Rights of the parties to qui tam actions.--(1) If the Government proceeds with the action, it shall have the primary

responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action. Such person shall

have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).

(2)(A) The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person

has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for

a hearing on the motion.

(B) The Government may settle the action with the defendant notwithstanding the objections of the person initiating the action if

the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances.

Upon a showing of good cause, such hearing may be held in camera.

(C) Upon a showing by the Government that unrestricted participation during the course of the litigation by the person initiating

the action would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant,

or for purposes of harassment, the court may, in its discretion, impose limitations on the person's participation, such as--

(i) limiting the number of witnesses the person may call;

(ii) limiting the length of the testimony of such witnesses;

(iii) limiting the person's cross-examination of witnesses; or

(iv) otherwise limiting the participation by the person in the litigation.

(D) Upon a showing by the defendant that unrestricted participation during the course of the litigation by the person initiating

the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court

may limit the participation by the person in the litigation.

(3) If the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct

the action. If the Government so requests, it shall be served with copies of all pleadings filed in the action and shall be supplied

with copies of all deposition transcripts (at the Government's expense). When a person proceeds with the action, the court,

without limiting the status and rights of the person initiating the action, may nevertheless permit the Government to intervene

at a later date upon a showing of good cause.

(4) Whether or not the Government proceeds with the action, upon a showing by the Government that certain actions of discovery

by the person initiating the action would interfere with the Government's investigation or prosecution of a criminal or civil

matter arising out of the same facts, the court may stay such discovery for a period of not more than 60 days. Such a showing

shall be conducted in camera. The court may extend the 60-day period upon a further showing in camera that the Government

has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil

action will interfere with the ongoing criminal or civil investigation or proceedings.
§ 3730. Civil actions for false claims, 31 USCA § 3730

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

(5) Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to

the Government, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is

pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person

would have had if the action had continued under this section. Any finding of fact or conclusion of law made in such other

proceeding that has become final shall be conclusive on all parties to an action under this section. For purposes of the preceding

sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court of the United States,

if all time for filing such an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not

subject to judicial review.

(d) Award to qui tam plaintiff.--(1) If the Government proceeds with an action brought by a person under subsection (b), such

person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the

proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to

the prosecution of the action. Where the action is one which the court finds to be based primarily on disclosures of specific

information (other than information provided by the person bringing the action) relating to allegations or transactions in a

criminal, civil, or administrative hearing, in a congressional, administrative, or Government 2 Accounting Office report, hearing,

audit, or investigation, or from the news media, the court may award such sums as it considers appropriate, but in no case more

than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the

action in advancing the case to litigation. Any payment to a person under the first or second sentence of this paragraph shall

be made from the proceeds. Any such person shall also receive an amount for reasonable expenses which the court finds to

have been necessarily incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded

against the defendant.

(2) If the Government does not proceed with an action under this section, the person bringing the action or settling the claim

shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages. The amount shall

be not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of

such proceeds. Such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily

incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.

(3) Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who

planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the

court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under

paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any

relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising

from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive

any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action,

represented by the Department of Justice.

(4) If the Government does not proceed with the action and the person bringing the action conducts the action, the court may

award to the defendant its reasonable attorneys' fees and expenses if the defendant prevails in the action and the court finds

that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of

harassment.

(e) Certain actions barred.--(1) No court shall have jurisdiction over an action brought by a former or present member of the

armed forces under subsection (b) of this section against a member of the armed forces arising out of such person's service

in the armed forces.
§ 3730. Civil actions for false claims, 31 USCA § 3730

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

(2)(A) No court shall have jurisdiction over an action brought under subsection (b) against a Member of Congress, a member of

the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government

when the action was brought.

(B) For purposes of this paragraph, “senior executive branch official” means any officer or employee listed in paragraphs (1)

through (8) of section 101(f) of the Ethics in Government Act of 1978 (5 U.S.C. App.).

(3) In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the

subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.

(4)(A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the

same allegations or transactions as alleged in the action or claim were publicly disclosed--

(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;

(ii) in a congressional, Government 2 Accountability Office, or other Federal report, hearing, audit, or investigation; or

(iii) from the news media,

unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

(B) For purposes of this paragraph, “original source” means an individual who either (i) prior to a public disclosure under

subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a

claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or

transactions, and who has voluntarily provided the information to the Government before filing an action under this section.

(f) Government not liable for certain expenses.--The Government is not liable for expenses which a person incurs in bringing

an action under this section.

(g) Fees and expenses to prevailing defendant.--In civil actions brought under this section by the United States, the provisions

of section 2412(d) of title 28 shall apply.

(h) Relief from retaliatory actions.--

(1) In general.--Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor,

or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any

other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee,

contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations

of this subchapter.
§ 3730. Civil actions for false claims, 31 USCA § 3730

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 5

(2) Relief.--Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or

agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation

for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees.

An action under this subsection may be brought in the appropriate district court of the United States for the relief provided

in this subsection.

(3) Limitation on bringing civil action.--A civil action under this subsection may not be brought more than 3 years after

the date when the retaliation occurred.

CREDIT(S)

(Pub.L. 97-258, Sept. 13, 1982, 96 Stat. 978; Pub.L. 99-562, §§ 3, 4, Oct. 27, 1986, 100 Stat. 3154, 3157; Pub.L. 100-700,

§ 9, Nov. 19, 1988, 102 Stat. 4638; Pub.L. 101-280, § 10(a), May 4, 1990, 104 Stat. 162; Pub.L. 103-272, § 4(f)(1)(P), July 5,

1994, 108 Stat. 1362; Pub.L. 111-21, § 4(d), May 20, 2009, 123 Stat. 1624; Pub.L. 111-148, Title X, § 10104(j)(2), Mar. 23,

2010, 124 Stat. 901; Pub.L. 111-203, Title X, § 1079A(c), July 21, 2010, 124 Stat. 2079.)

Notes of Decisions (2154)

Footnotes

1 See, now, Rule 4(i) of the Federal Rules of Civil Procedure.

2 So in original. Probably should be “General”.

31 U.S.C.A. § 3730, 31 USCA § 3730

Current through P.L. 114-9 approved 4-7-2015

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Declined to Extend by Saini v. International Game Technology, D.Nev., May 16, 2006

238 F.Supp.2d 1127

United States District Court,

N.D. California.

In re: JDS UNIPHASE CORPORATION SECURITIES LITIGATION

This document relates to All Actions

No. C-02-1486 CW EDL. | Oct. 18, 2002.

Lead plaintiff in securities fraud class action against company moved for order limiting scope of confidentiality agreements

signed by former employees. The District Court, Laporte, United States Magistrate Judge, held that confidentiality agreements

binding former employees did not preclude former employees from disclosing non trade secret, non privileged information

regarding securities fraud.

Motion granted.

West Headnotes (1)

[1] Federal Civil Procedure Actions in which remedy is available

Private Securities Litigation Reform Act (PSLRA) prohibition, on discovery during pendency of motion to dismiss in

securities fraud action, did not preclude court from granting request, of claimants that confidentiality obligations of

former employees of company be limited to disclosures of trade secrets, allowing employees and former employees

wishing to do so to disclose non trade secret and nonprivileged information regarding securities fraud; discovery was

not involved. Securities Exchange Act of 1934, § 21D(b)(3)(B), as amended, 15 U.S.C.A. § 78u-4(b)(3)(B).

13 Cases that cite this headnote

Attorneys and Law Firms

*1127 Darren J. Robbins, San Diego, CA, John Frith Stewart, Segal, Stewart, Cutler, Lindsay, Janes & Ber, Louisville, KY,

Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach, San Francisco, CA, for Pipefitters Local 522 & 633 Pention Trust

Fund, Plaintiff.

Christopher T. Heffelfinger, Jennifer Sharon Abrams, Berman DeValerio Pease & Tabacco, P.C., San Francisco, CA, Jonathan

M. Plasse, Louis J. Gottlieb, Goodkind Labation Rudoff & Sucharow LLP, New York City, for Connecticut Retirement Plans

and Trust Funds, Lead Plaintiff.

Timothy J. Burke, Stull Stull & Brody, Los Angeles, CA, for Edward Cantamount, Consol Plaintiff.

Behram V. Parekh, Weiss & Yourman, Los Angeles, CA, for Jerold Sorensen, Consol Plaintiff.
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Darren J. Robbins, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Paul J. Geller, Cauley Geller Bowman &

Coates LLP, Boca Raton, FL, *1128 Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach, San Francisco, CA, for Joel

Abrams, Consol Plaintiff.

Alfred G. Yayes, Law Offices of Alfred G. Yates, Pittsburgh, PA, Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach,

San Francisco, CA, for Kimberly Saleik, Consol Plaintiff.

Darren J. Robbins, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Reed R. Kathrein, Milberg Weiss Bershad

Hynes & Lerach, San Francisco, CA, for Greg Brockwell, Consol Plaintiff.

Darren J. Robbins, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Marc S. Henzel, Law Offices of Marc

C. Henzel, Bala Cynwyd, PA, Reed R. Kathrein, Milberg Weiss Bershad Hynes & Lerach, San Francisco, CA, for Gene

Dolzhansky, Consol Plaintiff.

Gregory M. Egleston, Bernstein Liebhard & Lifshitz LLP, New York City, Lionel Z. Glancy, Glancy Binkow LLP, Los Angeles,

CA, Mel E. Lifshitz, Bernstein Liebhard & Lifshitz, LLP, New York City, Michael M. Goldberg, Glancy & Binkow LLP, Los

Angeles, CA, for John F. Raymond, Pond Equities, Consol Plaintiffs.

Jennifer Sharon Abrams, Berman, De Valerio Pease Tabacco Burt & Pucillo, San Francisco, CA, Steven J. Toll, Cohen Milstein

Hausfeld & Toll, PLLC, Seattle, WA, for Gary T. Grabar, Consol Plaintiff.

Jacqueline Sailer, Rabin & Peckel LLP, New York City, Joseph J. Tabacco, Jr., Berman DeValerio Pease Tabacco Burt &

Pucillo, San Francisco, CA, for Hene Armour, Consol Plaintiff.

Behram V. Parekh, Weiss & Yourman, Los Angeles, CA, Jordan L. Lurie, Weiss & Yourman, Los Angeles, CA, Kevin J.

Yourman, Weiss & Yourman, Los Angeles, CA, Michael D. Braun, Stull, Stull & Brody, Los Angeles, CA, for Martin Hacker,

Consol Plaintiff.

Betsy C. Manifold, Francis A. Bottini, Jr., Francis M. Gregorek, Wolf Haldenstein Adler Freeman & Herz, San Diego, CA,

for L. A. Murphy, Consol Plaintiff.

Andrew Schatz, Schatz & Nobel, P.C., James Albert Caputo, Spector Roseman & Kodroff, PC, San Diego, CA, Patrick A.

Klingman, Schatz & Nobel P.C., Hartford, CT, for John Erisman, Harriet Goldstein, Consol Plaintiffs.

Michael Donovan, Donovan Searles, LLC, Paul J. Scarlato, Weinstein Kitchenoff Scarlato & Goldman, Philadelphia, PA, for

Saffi Omar, Consol Plaintiff.

Jules Brody, Stull Stull & Brody, New York City, Kevin J. Yourman, Weiss & Yourman, Los Angeles, CA, Michael D. Braun,

Timothy J. Burke, Stull, Stull & Brody, Los Angeles, CA, for Steven Cantamount., Consol Plaintiff.

Laurence D. King, Kaplan Fox & Kilsheimer LLP, San Francisco, CA, for Seymour Halpern, Consol Plaintiff.

John Emerson, The Emerson Firm, Houston, TX, for Victor Cape, Consol Plaintiff.

David R. Scott, James E. Miller, Scott & Scott LLC, Colchester, CT, for Rudolf Skubella, Consol Plaintiff.

Deborah R. Gross, Law Offices of Bernard M. Gross, PC, Philadelphia, PA, for Ralph Kirk, Consol Plaintiff.

Curtis V. Trinko, Law Offices of Curtis V. Trinko, New York City, for Warren C. Sterrett, Consol Plaintiff.

William B. Federman, Dreier Baritz & Federman, Oklahoma City, OK, for Larry Thomas, Consol Plaintiff.
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

Elizabeth E. Leland, Juli F. Desper, Lynn Lincoln Sarko, Keller Rohrback L.L.P., Seattle, WA, for Grover Ellis, Linda Raybine,

Consol Plaintiffs.

Jeffrey Neiman, The Neiman Law Firm, Brooklyn, NY, Joseph P. Garland, *1129 Klein & Solomon LLP, Kenneth A. Elan,

Law Offices of Kenneth A. Elan, New York City, Lionel Z. Glancy, Glancy & Binkow LLP, Mel Urbach, Law Offices of Mel

Urbach, Jersey City, NJ, Michael M. Goldberg, Glancy & Binkow LLP, Los Angeles, CA, for Aaron Jungreis, Consol Plaintiff.

Barbara A. Podell, Savett Frutkin Podell & Ryan, P.C., Philadelphia, PA, Charles J. Piven, Law Offices of Charles J. Piven,

P.A., Baltimore, MD, Joseph M. Barton, Gold Bennett Cera & Sidener LLP, San Francisco, CA, Sherrie R. Savett, Berger

& Montague, P.C., Philadelphia, PA, Solomon B. Cera, Gold Bennett Cera & Sidener LLP, San Francisco, CA, for Leonard

Sollins, Consol Plaintiff.

Karen M. Hanson, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, for Michael Salter, Consol Plaintiff.

Bruce D. Oakes, Law Office of Bruce D. Oakes, St. Louis, MO, for Richard Reinsich, Consol Plaintiff.

Joseph M. Barton, Gold Bennett Cera & Sidener LLP, San Francisco, CA, Mark S. Willis, Matthew J. Ide, Cohen Milstein

Hausfeld & Toll PLLC, Washington, DC, for Houston Municipal Employees Pension System, Consol Plaintiff.

Joseph M. Barton, Gold Bennett Cera & Sidener LLP, Solomon B. Cera, San Francisco, CA, Mark S. Willis, Steven J. Toll,

Cohen Milstein Hausfeld & Toll, P.L.L.C., Seattle, WA, for Houston Municipal Employees Pension System, Consol Plaintiff.

Aaron H. Darsky, Schubert & Reed LLP, San Francisco, CA, Andrew J. Morganti, Donald J. Enright, Finkelstein Thompson

& Loughran, Washington, DC, for Paul Hesano, Consol Plaintiff.

Christopher J. Gray, Christopher Lovell, Lovell & Stewart, LLP, New York City, for Suresh Khanna, Consol Plaintiff.

Aaron H. Darsky, Schubert & Reed LLP, San Francisco, CA, Carol V. Gilden, Michael E. Moskovitz, Much Shelist

FreedDeneberg Ament & Rub, Chicago, IL, Juden Justice Reed, Robert C. Schubert, Willem F. Jonckheer, Schubert & Reed

LLP, San Francisco, CA, for Steven J. Greenfogel, Mike Gray, Consol Plaintiffs.

Juli F. Desper, Keller Rohrback LLP, Seattle, WA, Timothy J. Burke, Stull Stull & Brody, Los Angeles, CA, for Edwin Cancilla,

Movant.

Holly H. Tambling, Morrison & Foerster LLP, Terri Garland, Morrison & Foerster, San Francisco, CA, for JDS Uniphase

Corporation, Jozef Straus, Anthony R. Muller, Charles J. Abbe, Defendants.

Holly H. Tambling, Morrison & Foerster LLP, San Francisco, CA, Howard S. Caro, Michael L. Charlson, Heller Ehrman White

& McAuliffe LLP, Menlo Park, CA, Michael J. Shepard, Heller Ehrman White & McAuliffe LLP, San Francisco, CA, for

Kevin Kalkhoven, Defendant.

Holly H. Tambling, Morrison & Foerster LLP, San Francisco, CA, for Dan E. Pettit, M. Zita Cobb, Joseph Ip, Frederick

Leonberger, Michael C. Phillips, Donald R. Scrifes, Casimir S. Skrzypczak, Peter A. Guglielmi, Robert E. Enos, Bruce D. Day,

Martin A. Kaplan, Defendants.

Angela N. O'Rourke, Joseph A. Meckes, Mark C. Dosker, Squire Sanders & Depsey LLP, San Francisco, CA, Daniel L. Bockett,

Squire Sanders & Depsey LLP, Cleveland, OH, for The Furukawa Electric Co., Ltd., Defendant.

ORDER GRANTING IN PART LEAD PLAINTIFF'S MOTION TO LIMIT THE SCOPE OF

CONFIDENTIALITY AGREEMENTS SIGNED BY FORMER JDS UNIPHASE EMPLOYEES
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

LAPORTE, United States Magistrate Judge.

In this securities action, lead plaintiff Connecticut Retirement Plans and Trust *1130 Funds (“Connecticut”) moves to limit

the scope of confidentiality agreements signed by former employees of defendant JDS Uniphase Corporation (“JDSU”). For

the reasons set forth below, the motion is granted, with modifications.

I. Background

As lead plaintiff in this action, Connecticut has been investigating acts of JDSU and the individual defendants relating to alleged

artificial inflation of the price of JDSU securities during the putative class period of July 27, 1999 through July 26, 2001.

Investigators hired by lead counsel have identified and have spoken with numerous former employees of JDSU. Many of these

former employees have informed the investigators that they are willing to talk about relevant activities at JDSU during the class

period, but they believe they are unable to do so because of one or more confidentiality agreements that they entered into with

JDSU (or with companies later acquired by JDSU) at the time they were hired, at the time they were terminated, or both.

One such agreement is entitled “Employee Proprietary Information and Inventions Agreement.” (Gottlieb Decl., Ex. A.) That

agreement provides, in relevant part:

(a) Confidential Restrictions. I understand that, in the course of my work as an employee of the Company, I [have had and]

may have access to Proprietary Information (as defined below) concerning the Company. I acknowledge that the Company

has developed, compiled, and otherwise obtained, often at great expense, this information, which has great value to the

Company's business. I agree to hold in strict confidence and in trust for the sole benefit of the Company all Proprietary

Information and will not disclose any Proprietary Information, directly or indirectly, to anyone outside of the Company,

or use, copy, publish, summarize, or remove from Company premises such information (or remove from the premises any

other property of the Company) except (i) during my employment to the extent necessary to carry out my responsibilities

as en employee of the Company or (ii) after termination of my employment, as specifically authorized in writing by a duly

authorized officer of the Company. I further understand that the publication of any Proprietary Information through literature

or speeches must be approved in advance in writing by a duly authorized officer of the Company.

(b) Proprietary Information Defined. I understand that the term “Proprietary Information” in this Agreement means all

information and any idea in whatever form, tangible or intangible, whether disclosed to or learned or developed by me,

pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, or business associates,

unless (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in

my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is

disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information

(without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. I further

understand that the Company considers the following information to be included, without limitation, in the definition of

Proprietary Information: (A) notebooks, schematics, techniques, employee suggestions, development tools and processes,

computer printouts, computer programs, design drawings and manuals, and improvements; (B) information about costs,

profits, markets, and sales; (C) plans for future development and new product concepts; and (D) all documents, books, *1131

papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved

by any means, that have been or will be given to me by the Company (or any affiliate of it), as well as written or verbal

instructions or comments.

(Id. at 1.)

Another such agreement is entitled “Separation Agreement and General Release.” (Gottlieb Decl., Ex. B.) That agreement

provides, in relevant part:
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 5

You agree to return all Company property, including, without limitation, all books, manuals, records, reports, notes, contracts,

lists, blueprints, and other documents, or materials, or copies thereof, and equipment furnished to or prepared by you in

the course of or incident to your employment. You also acknowledge and reaffirm your continuing obligations under the

Proprietary Information Agreement you signed with the Company on original date of hire.

... You also agree that this Agreement is confidential and that you will not discuss it, or any of its terms, with anyone without

the Company's prior consent, except your spouse and to any legal or financial advisors for legitimate business reasons, or as

otherwise compelled by law. Further, you agree that you will not make or publish, either orally or in writing, any disparaging

statement regarding the Company, its employees, clients, vendors, or customers, or in any way impede or interfere with the

Company's customer relationships.

(Id. at 2.)

A third agreement is entitled “E-Tek Dynamics, Inc. Proprietary Information and Inventions Agreement.” (Macika Decl., Ex.

A.) That agreement provides, in relevant part:

a. Definition Employee acknowledges and agrees that Employee has obtained or may now or hereafter obtain from the

Company certain of the Company's confidential information, which confidential information includes but is not limited to

all of the Company's (i) past, present and future research, (ii) business, development and marketing plans, (iii) customer

lists and customer relationships, (iv) prices (except where publicly disclosed by the Company) and pricing strategies, (v)

secret inventions, processes, methods and specifications, (vi) compilations of information (including without limitation

studies, records, reports, drawings, memoranda, drafts and any other related information), (vii) trade secrets, (viii) product

development proposals, and (ix) other ideas, concepts, strategies, designs, suggestions and recommendations relating without

limitation to any of the foregoing or to any product developed or proposed to be developed by the Company or by the

Employee and/or others for the Company (collectively, the “Confidential Information”). Employee further acknowledges

and agrees that the Company is the owner of all such Confidential Information, any copies thereof, and of all copyright,

trade secret, patent, trademark and other intellectual or industrial property rights therein or associated therewith. Employee

understands and agrees that the unauthorized use or disclosure of the Confidential Information and any of the Company's

related intellectual and industrial property rights constitutes unfair competition, and promises not to engage in any unfair

competition with the Company during Employee's employment or at anytime thereafter.

b. Term. Employee agrees that for a period of five (5) years following either the disclosure to Employee of any of the

Company's Confidential Information or the termination of Employee's employment with the Company, whichever is last to

occur, Employee will not disclose *1132 said information or any portion thereof to any person, firm, corporation or other

entity, or make use of such information in any way without the Company's prior written consent, or reverse engineer, decompile, or disassemble any of the Company's products without such consent.

(Id. at 1.)

II. Discussion

Connecticut argues that the Court should limit the scope of these agreements and any other confidentiality agreements between

JDSU and its former employees so that they would not prohibit former JDS Uniphase employees from responding to questions

posed by investigators for Lead Plaintiff and/or by Lead Counsel related to the alleged securities fraud. No proposed order has

been submitted. Connecticut contends that to the extent JDSU seeks to use the agreements for purposes other than the protection

of trade secrets, the agreements are unduly broad and should be deemed void as against public policy. Alternatively, Connecticut

requests “that the Court: (a) grant plaintiffs permission to depose a limited number of former JDS Uniphase employees prior

to the Court's decision on the motion to dismiss, or (b) grant plaintiffs an adverse inference that, despite public disclosures to

the contrary, defendants were aware of the Company's sharply declining financial condition and results prior to their selling of

more than one billion dollars' worth of Company stock.” (Motion at 12.)
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 6

A. The Reform Act's ban on discovery during the pendency of a motion to dismiss does not bar plaintiffs' motion

JDSU argues that Connecticut's motion is an impermissible attempt to evade the statutory restrictions on early discovery that

are imposed by the Private Securities Litigation Reform Act of 1995 (“Reform Act”). 1 The purpose of the Reform Act was

“to restrict abuses in securities class-action litigation, including: (1) the practice of filing lawsuits against issuers of securities

in response to any significant change in stock price, regardless of defendants' culpability; (2) the targeting of “deep pocket”

defendants; (3) the abuse of the discovery process to coerce settlement; and (4) manipulation of clients by class action attorneys.”

SG Cowen Securities Corporation v. United States District Court for the Northern District of California, 189 F.3d 909, 911

(9th Cir.1999) (quoting In re Advanta Corp. Secs. Litig., 180 F.3d 525, 530-31 (3d Cir.1999)). The Reform Act instituted a

heightened pleading standard, and “mandated a stay of discovery during the pendency of a summary judgment or dismissal

motion.” Id.

1 The Court has also received an opposition brief from defendant The Furukawa Electric Co. Ltd. (“Furukawa”), which correctly notes

that they are not a party to the confidentiality agreements at issue, and thus Connecticut's references to “defendants” should not be

taken to include Furukawa.

Under the Reform Act, “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss,

unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent

undue prejudice to that party.” 15 U.S.C. § 78u-4(b)(3)(B). This section was “intended to prevent unnecessary imposition of

discovery costs on defendants.” SG Cowen, 189 F.3d at 911 (citing H.R. Conf. Rep. No. 104-369, 104th Cong. 1st Sess. at 32

(1995), reprinted in 1995 U.S.C.C.A.N. Sess. 731). The Ninth Circuit has held that the Reform Act's discovery stay provision

“clearly contemplates that ‘discovery should be permitted in securities class actions only after the court has sustained the legal

sufficiency of the complaint.’ ” Id. at 912 (quoting *1133 S.Rep. No. 104-98, at 14 (1995), reprinted in U.S.C.C.A.N. 693).

Thus, the Ninth Circuit has construed the Reform Act's discovery stay to apply not only during the pendency of a motion to

dismiss, but until the Court has sustained the legal sufficiency of the complaint.

Here, there is no motion to dismiss pending, but the time for responding to the consolidated complaint has not yet elapsed.

On September 12, Judge Wilken signed a stipulation granting defendants until December 9 to respond to the consolidated

complaint. JDSU's counsel indicated at the hearing that they are likely to file a motion to dismiss. As the Court has not yet

sustained the legal sufficiency of the consolidated complaint, plaintiffs are not yet entitled to take discovery. Accordingly, under

the Ninth Circuit's interpretation of the Reform Act in SG Cowen, plaintiffs are not yet entitled to take discovery. Id.

There are two exceptions to the Reform Act's discovery stay. Discovery is stayed “unless the courts finds upon the motion of

any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice.” With respect to the

first exception, there is not a hint of a suggestion in the plaintiff's papers that there is an urgent need to preserve evidence. As

for the second exception, the Ninth Circuit has held that a plaintiff's inability, without discovery, to obtain the facts needed

to meet the Reform Act's heightened pleading requirements is not the sort of “undue prejudice” contemplated by the Reform

Act. SG Cowen, 189 F.3d at 913.

The Act requires the trial court to dismiss the complaint if it fails to satisfy the Act's heightened pleading

standards. See § 78u-4(b)(3)(A). Thus, as a matter of law, failure to muster facts sufficient to meet the

Act's pleading requirements cannot constitute the requisite “undue prejudice” to the plaintiff justifying a

lift of the discovery stay under § 78u-4(b)(3)(B). To so hold would contravene the purpose of the Act's

heightened pleading standards.

Id. Thus, plaintiffs have not shown any justification for lifting the Reform Act's discovery stay to allow them to take depositions

before the Court rules on the upcoming motion to dismiss.
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

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By filing this motion, however, plaintiffs are not seeking discovery in the ordinary sense of the word. In essence, what the

plaintiffs are asking for is an order from the Court allowing former JDSU employees to speak voluntarily to plaintiffs' lead

counsel about certain topics without fear of breaching JDSU's confidentiality agreements. This is not discovery, because

plaintiffs are not using court process to require these third parties to provide information about the lawsuit. Instead, plaintiffs

are merely seeking an order that would allow former employees to speak voluntarily if they wish to do so.

JDSU argues, however, that Connecticut's motion falls within the scope of the Reform Act's stay of “all discovery and other

proceedings.” 15 U.S.C. § 78u-4(b)(3)(B) (emphasis added). In Medhekar v. United States District Court, 99 F.3d 325 (9th

Cir.1996), the Ninth Circuit was asked to determine whether initial disclosures are stayed under the Reform Act during the

pendency of a motion to dismiss. The court held that initial disclosures are discovery, and therefore are included in the Reform

Act's stay of discovery until the district court upholds the complaint. Id. The court then went on to hold that even if initial

disclosures are not the same as discovery, they are at a minimum included in the Reform Act's stay of “discovery and other

proceedings.” Id. In defining the term “other proceedings,” the Ninth Circuit held that “[g]iven the context and legislative

history of the Act, it *1134 appears that the term was intended to include litigation relating to discovery, which would certainly

include disclosures and would not, as real party fears, include all litigation activity in general.” Id.

Here, however, Connecticut does not seek discovery, but merely seeks a ruling on the scope of JDSU's confidentiality

agreements with its former employees, so that it may speak with former employees who wish to voluntarily cooperate with

Connecticut's investigation. Unlike discovery and initial disclosures, these interviews are not compelled by the Federal Rules

of Civil Procedure. Neither the former employees nor the defendants are required to participate in these interviews in any way.

The Court agrees with In re Tyco International Ltd. Securities Litigation, 2001 U.S. Dist. Lexis 819 (D.N.H.2001), in which the

district court declined to prohibit voluntary discussions between plaintiffs and third party witnesses because “[n]either logic,

tradition, the constitution nor the PSLRA prohibit interviewing prospective witnesses.” Id. at *8. In fact, the Reform Act's

heightened pleading standard encourages plaintiffs to do more investigation before filing a complaint, not less.

In re Flir Systems Inc. Securities Litigation, 2000 WL 33201904 (D.Or.2000) is also instructive. In Flir, the court was asked to

permit a deposition of Palmquist, a former employee of the defendant, during the discovery stay. The court distinguished SG

Cowen by noting that discovery was not being sought against the defendant, but against a third party, and thus the discovery

would not impose any significant burden on the defendant. Id. at *2. Because Palmquist had filed a civil complaint in state court

alleging accounting fraud by the defendant, the court found that the proposed discovery was not a mere fishing expedition.

Id. The court also noted that the only reason Palmquist would not talk to the plaintiffs voluntarily was that defendants were

asserting a confidentiality provision in Palmquist's employment contract. Id. at *3. The court found that the Reform Act “is a

shield intended to protect security-fraud defendants from costly discovery requirements, [citation omitted], not to be a sword

with which defendants can destroy the plaintiffs' ability to obtain information from third parties who are otherwise willing to

disclose it.” Id. It is questionable whether Flir 's holding that plaintiffs could depose Palmquist is consistent with SG Cowen.

The Court agrees, however, with the Flir court's conclusion that the Reform Act was not intended to provide defendants with

the means to bar all investigation into their conduct. The Reform Act was not intended to provide defendants with immunity

from suit, but, rather, was intended to protect defendants from the burdens of defending against frivolous litigation.

Plaintiffs' proposed interviews with former employees of JDSU do not impose any burden or cost on JDSU. The Court finds

that plaintiffs' proposed voluntary interviews with former employees do not fall within the scope of “discovery.” Accordingly,

the Reform Act's ban on discovery during the pendency of a motion to dismiss has no application to plaintiffs' motion.

B. The merits of plaintiffs' motion

Connecticut states that it has no interest in any information that could be construed as a trade secret, and is willing to discuss

reasonable measures to accommodate any legitimate concerns of JDSU with respect to use of the information obtained from

former employees in the course of its investigation. In Connecticut's reply brief, it provides examples of the types of questions

that it wishes to ask former employees, all of which relate directly to the *1135 allegations of wrongdoing that are at issue

in this case. None of these questions appears to implicate any trade secrets of JDSU, or any other information that JDSU can
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

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legitimately claim is confidential. Thus, contrary to JDSU's attempts at misdirection, the issue is not whether JDSU can lawfully

enter into contracts with its employees to protect its confidential business information and trade secrets. Connecticut concedes

that such agreements are lawful. Instead, the issue is whether JDSU's confidentiality agreements can lawfully be used to prohibit

its former employees from providing whistleblower-type information about allegedly unlawful acts that occurred during their

employment with JDSU.

In Chambers v. Capital Cities/ABC, 159 F.R.D. 441 (S.D.N.Y.1995), an age discrimination case, plaintiffs' counsel wished to

interview former employees of the defendant. Plaintiffs sought an order authorizing them to inform those former employees that

they could safely disregard agreements with the defendant not to disclose various types of information. The court recognized

the legitimacy of agreements between employers and employees that are designed to protect dissemination of confidential

information. Id. at 444. The court also held, however, that:

It has been recognized that at least in some circumstances, agreements obtained by employers requiring

former employees to remain silent about underlying events leading up to disputes, or concerning

potentially illegal practices when approached by others can be harmful to the public's ability to rein in

improper behavior, and in some contexts ability of the United States to police violations of its laws.

Absent possible extraordinary circumstances not present here, it is against public policy for parties to

agree not to reveal, at least in the limited contexts of depositions or pre-deposition interviews concerning

litigation arising under federal law, facts relating to alleged or potential violations of such law.

Id. (footnote omitted). The Court also noted that “agreements restricting former employee revelation of events in the workplace

which are not privileged but may involve violations of federal law have the effect of ‘hindering’ implementation of the

‘Congressionally mandated duty to enforce the provisions' of federal statutes.” Id. (quoting EEOC v. United States Steel,

671 F.Supp. 351, 357 (E.D.Pa.1987)). The court declined to authorize plaintiffs' counsel to tell former employees that they

need not be concerned about the confidentiality agreements, however, because such a remedy “would make plaintiff's counsel

the decisionmaker concerning what confidentiality requirements were related to genuine trade secrets or other legitimately

privileged information, and which dealt with concealment of information relating to potential improprieties on the part of the

employee.” Id. at 445. Instead, it ordered the defendant to either (1) notify all former employees whom plaintiff wanted to

interview, in writing, that no unfavorable consequences for the employees would flow from providing information to plaintiffs'

counsel about specific subjects, or (2) accept an adverse inference that the information, if disclosed, would be contrary to

defendant's position. Id.

If applied to depositions or pre-deposition interviewing with respect to litigation under federal substantive

law, agreements calling or appearing to call for silence concerning matters relevant to alleged legal

violations, whether or not such agreements are sought to be enforced, inherently chill communication

relevant to the litigation. Where conduct of a party tends to preclude availability of information relevant

to a litigation and where no genuine basis for keeping that information confidential exists, *1136 a

court or factfinder may infer that the information, if disclosed, would be contrary to the position of the

party engaging in such conduct.

Id.

Another case from the Southern District of New York also held that “[d]isclosures of wrongdoing do not constitute revelations

of trade secrets which can be prohibited by agreements binding on former employees.” McGrane v. The Reader's Digest

Association, Inc., 822 F.Supp. 1044, 1052 (S.D.N.Y.1993). That court also noted that “[c]ourts are increasingly reluctant

to enforce secrecy arrangements where matters of substantial concern to the public-as distinct from trade secrets or other

legitimately confidential information-may be involved.” Id. at 1046.

Congress has also indicated a public policy in favor of whistleblowers in securities cases. The recently enacted Sarbanes-Oxley

Act of 2002 prohibits companies from discriminating against employees because of any lawful act by the employee to assist in
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

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an investigation of securities fraud. 18 U.S.C. § 1514A(a)(1). At oral argument, defendants correctly pointed out that this section

only applied to investigations conducted by the government, or by the company itself. Nonetheless, the statute demonstrates

the public policy in favor of allowing even current employees to assist in securities fraud investigations. It certainly does not

establish a public policy in favor of allowing employers to muzzle their employees with overbroad confidentiality agreements.

Other than their argument that plaintiffs are attempting to circumvent the discovery stay provision of the Reform Act, JDSU

provides very few specific arguments against plaintiff's motion, relying instead primarily on straw-man arguments about the

validity of confidentiality agreements in general. JDSU argues that it used several types of agreements containing provisions

designed to protect its confidential and competitively sensitive business information, and that the form of those agreements

evolved over the years. (DeWees Decl. ¶¶ 10, 14.) JDSU does not state, however, that these agreements differed in any material

way from the sample agreements provided by Connecticut. In any event, the issue is not about the specific language of any

of these agreements, but whether JDSU can ever enforce these types of agreements against former employees to prevent them

from providing non-tradesecret, unprivileged information about JDSU's allegedly illegal activities.

JDSU does point to Patton v. Cox, 276 F.3d 493 (9th Cir.2002), however, which arguably provides some support to JDSU's

position. In that case, a doctor, Cox, conducted a court-ordered psychological examination of the plaintiff, Patton, allegedly

pursuant to an oral agreement with Patton to keep the results of the examination confidential. Id. at 494. Patton and his former

wife were involved in a bitter child custody dispute, and Patton's teenage sister-in-law had alleged that Patton had engaged in

improper sexual conduct with her. Id. at 494, 501. Patton was also a doctor, and as a result of his sister-in-law's allegations,

the Arizona Board of Medical Examiners (“BOMEX”) filed a complaint against him for unprofessional conduct and unfitness

to practice medicine. Id. at 494. Dr. Cox voluntarily testified at the BOMEX hearing, and revealed that as a result of his

examination of Patton, he believed that Patton was a pedophile and a danger to children. Id. at 495. Patton then sued Dr. Cox

for breach of contract. Id.

The district court granted Dr. Cox's motion to dismiss on the ground that absolute witness immunity precluded any liability

arising from Dr. Cox's testimony at a quasi-judicial hearing. Id. The Ninth Circuit *1137 reversed, applying Arizona law. The

Court recognized that Dr. Cox served the public interest by bringing to light the potential danger facing Patton's young, female

patients. Id. at 498. Nonetheless, the court concluded that:

applying our perception of Arizona law, we hold that witness immunity does not bar an action for breach of contract when,

as in this case, the witness participated voluntarily in a quasi-judicial proceeding. This ruling will not hinder “the resolution

of disputes and the ascertainment of truth,” [citation omitted] because witnesses can be compelled to testify as needed, which

would then trigger immunity protection.

Id. at 500. The Ninth Circuit noted that because Dr. Cox voluntarily entered into the confidentiality agreement, “[h]e chose to

limit his ability to share information he obtained about Dr. Patton, and he was not at liberty to breach his obligation even if he

felt it was in the public's best interest to do so.” Id.

The Ninth Circuit did not discuss whether such agreements would be unenforceable in violation of public policy, and thus Patton

does not directly conflict with Chambers. Nonetheless, by holding that the public interest did not trump Cox's confidentiality

agreement with Patton, a reasonable argument could be made that the Ninth Circuit would not find the confidentiality agreements

at issue here to be in violation of public policy, at least under Arizona law. This Court, of course, is applying federal law. Patton

is also distinguishable because, unlike the instant case, Patton involved disclosure of private medical information, which is

at the core of an individual's right to privacy. See id. (“we cannot help but consider the reasonable expectation of Dr. Patton

that this extremely private information would not be disseminated beyond the scope of the Utah court order.”) Highly personal

medical information is the sort of information, like trade secrets, that a party unquestionably has the right to ask another party

to keep confidential.

Here, however, JDSU's confidentiality agreements are so broad that they cover information that cannot possibly be considered

confidential. To the extent that those agreements preclude former employees from assisting in investigations of wrongdoing
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 10

that have nothing to do with trade secrets or other confidential business information, they conflict with the public policy in

favor of allowing even current employees to assist in securities fraud investigations.

In addition, one of the agreements, entitled “Separation Agreement and General Release,” bars former employees who signed it

from making “any disparaging statement” about the company, its clients, vendors or customers. Unlike the agreement at issue in

Patton, which the court found was voluntarily entered into, plaintiffs stated at the hearing that this agreement was imposed on a

former employee in a mass layoff as a condition of receiving severance benefits. Defense counsel acknowledged that plaintiffs'

characterization may be correct. To the extent that this agreement can be read to prohibit an employee from providing any

information about any wrongdoing by JDSU, it is plainly unenforceable.

Accordingly, the Court finds that Chambers is more applicable here than Patton. The Court agrees with the Chambers court

that JDSU cannot use its confidentiality agreements to chill former employees from voluntarily participating in legitimate

investigations into alleged wrongdoing by JDSU. JDSU unquestionably has a legitimate interest in preventing dissemination of

trade secrets and confidential business information, however. In order to properly balance these competing interests between

Connecticut and JDSU, the Court *1138 also agrees with the Chambers court that the appropriate remedy is not to allow

plaintiffs to be the sole arbiters of whether their investigation avoids infringing on legitimate confidentiality concerns.

The Court finds that the procedural restrictions imposed in Chambers are unduly cumbersome and elaborate, however. Rather

than requiring the defendants to provide written notice to all former employees that plaintiff wished to interview, or accept an

adverse inference, as in Chambers, the Court will simply rule that answering the questions set forth in plaintiffs' reply brief

and the additional question requested at the hearing do not violate JDSU's confidentiality agreements. In addition, the Court

will require the parties to enter into a protective order providing that any information plaintiffs learn during the course of these

interviews may be used only for purposes of this litigation. This will be far less intimidating to the former employee, and far

less intrusive to the plaintiffs' investigation, than requiring the plaintiffs to provide JDSU with the name of each person they

wish to interview and requiring JDSU's counsel to attend each interview. By issuing this order restricting the interviews to

the questions that plaintiffs have requested, and to narrow followup questions on those topics, the risk that the interviews will

expand into areas of legitimate concern to JDSU is minimized.

III. Conclusion

For the reasons set forth above, the Court grants Connecticut's motion to limit the scope of confidentiality agreements signed

by former JDSU employees, with the following restrictions:

1. All former employees of JDSU may answer the following questions, and any followup questions on the same topic, without

fear of breaching any confidentiality agreement with JDSU:

a. At what time during the Class Period did you become aware of a significant downturn in JDSU sales or sale/revenue

projections?

b. Do you have any reason to believe that JDSU managers, officers or directors became aware of that downtown in sales or

projections at any time during the Class Period?

c. At what time during the Class Period did you become aware of a significant decrease in purchasing (including cancellation

or modification or contracts) by JDSU?

d. Do you have any reason to believe that JDSU managers, officers or directors became aware of that downturn in purchasing

(or cancellation or modification of contracts) by JDSU?

e. At what time during the Class Period did you become aware of a downturn in JDSU's production needs, e.g., eliminating

work shifts, reducing overtime, instituting a hiring freeze?
In re JDS Uniphase Corp. Securities Litigation, 238 F.Supp.2d 1127 (2002)

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f. At what time during the Class Period did you become aware of significant decrease in JDSU inventory?

g. Do you have any reason to believe that JDSU managers, officers or directors became aware of that inventory increase at

any time during the Class Period?

h. At what time during the Class Period did you become aware of any inventory obsolescence problems at JDSU?

i. Do you have any reason to believe that JDSU managers, officers or directors became aware of that inventory obsolescence

problem at any time during the Class Period?

j. Are you aware of any reason why any JDSU managers, officers or directors sold their JDSU stock during the Class Period?

*1139 2. In answering these questions, former JDSU employees should not disclose any information protected by the attorneyclient privilege, nor should they disclose any confidential business methods used by JDSU.

3. Any information plaintiffs learn during the course of their interviews with former JDSU employees may be used only for

purposes of this litigation.

4. Plaintiffs have not demonstrated that they are entitled to take any depositions prior to the Court's decision on the upcoming

motion to dismiss.

5. Plaintiffs have not shown that they are entitled to an inference that, despite public disclosures to the contrary, defendants

were aware of JDSU's sharply declining financial condition and results prior to their selling of more than one billion dollars'

worth of Company stock.

IT IS SO ORDERED.

All Citations

238 F.Supp.2d 1127

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)

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2015 WL 3504525

Only the Westlaw citation is currently available.

United States District Court,

S.D. Mississippi,

Southern Division.

UNITED STATES ex rel. HOLMES, Plaintiff

v.

NORTHROP GRUMMAN CORPORATION and Huntington Ingalls Incorporated, Defendants.

Civil No. 1:13cv85–HSO–RHW. | Signed June 3, 2015.

Attorneys and Law Firms

Donald C. Holmes, Greensboro, MD, pro se.

David H. Fulcher–Federal Gov, U.S. Attorney's Office, Jackson, MS, Elizabeth Anne Strawn, U.S. Department of Justice,

Washington, DC, for Plaintiff.

Richard P. Salloum, Franke & Salloum, PLLC, Gulfport, MS, Angela R. Jones–PHV, David F. Taylor–PHV, Perkins Coie, LLP,

Seattle, WA, Jeffrey N. Eisenstein–PHV, William Hartmann Young–PHV, Perkins Coie, LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' [151] MOTION TO

DISQUALIFY RELATOR AND DISMISS FIRST AMENDED COMPLAINT AND DENYING

AS MOOT DEFENDANTS' [102] MOTION TO DISMISS AMENDED COMPLAINT

HALIL SULEYMAN OZERDEN, District Judge.

*1 BEFORE THE COURT is the Motion to Disqualify Relator and Dismiss First Amended Complaint [151] filed by

Defendants Northrop Grumman Corporation and Huntington Ingalls Incorporated. Relator Donald Holmes has filed a Response

[156], and Defendants have filed a Reply [157]. Also before the Court is the Motion to Dismiss Amended Complaint [102]

filed by Defendants, Relator's Response [117], and Defendants' Reply [103]. 1 Having considered the parties' submissions,

relevant legal authorities, and the record, the Court is of the opinion that the Motion to Disqualify Relator and Dismiss First

Amended Complaint [151] should be granted, Relator Donald Holmes should be disqualified from serving as a relator based on

the totality of the circumstances surrounding his conduct as a relator, and this civil case should be dismissed without prejudice

to any rights of the United States government. The Court further finds that the Motion to Dismiss Amended Complaint [102]

should be denied as moot.

1 This case was transferred from the United States District Court for the District of Columbia to this Court by Order [73] dated February

28, 2013. The Motion to Dismiss Amended Complaint [102], Response [117], and Reply [103], were each filed before the case was

transferred and were refiled on this Court's docket following the transfer.

I. BACKGROUND

Hurricane Katrina made landfall on the Mississippi Gulf Coast on August 29, 2005. As a result of the damages caused by the

hurricane, Northrop Grumman Corporation (“NGC”) made claims on an insurance policy issued to a subsidiary of NGC by

Munich Re, an insurance company represented by attorney Gerald Fisher (“Fisher”). First Am. Compl. 5[43]; Aff. of Relator

Gerald Fisher (“Fisher Aff.”) ¶ 7 [11 (Attach.A), 23–24 of 86]. To obtain documents from NGC during the adjustment process,
U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)

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Fisher, on behalf Munich Re, entered into a confidentiality agreement with NGC dated October 24, 2006, governing the use of

documents produced by NGC. Fisher Aff. ¶ 7 [11 (Attach.“A”), 26 of 86]; Confidentiality Agreement [11, 56 of 85].

By April 2010, NGC and Munich Re had commenced arbitration proceedings in London, England, to resolve coverage disputes

which had arisen related to NGC's claim for insurance benefits (“UK Arbitration”). Fisher, along with attorney Donald Holmes

(“Holmes”), represented Munich Re in the UK Arbitration. Mem. in Supp. of Relators' Mot. to Allow Them to Provide

Information to Assist the [DOJ] in Its Investigation 7 [11, 12 of 86] (“Relators' Mot. to Assist the DOJ”). Fisher and Holmes filed

a complaint on behalf of Munich Re on April 6, 2010, in the United States District Court for the District of Columbia seeking to

obtain documents from the United States Navy (“the Navy”) purportedly for use in the UK Arbitration. Compl. 1[1], Case No.

1:10–cv–00551–JEB (D.D.C.) (the “Touhy Action”). On June 2, 2010, while both the UK Arbitration and the Touhy Action

remained pending, Fisher and Holmes filed the Complaint [1] in this case under seal in the United States District Court for the

District of Columbia against NGC, Northrop Grumman Shipbuilding Corporation, and Northrop Grumman Ship Systems, Inc.

(collectively, “Northrop Grumman”), under the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729–3733 (“FCA”). 2

The United States has declined to intervene in this case. Notice of Election to Decline Intervention 1[20].

2

“The FCA's qui tam provisions permit a private individual, as a relator, to sue on the United States' behalf to recover for false claims

for payment submitted to the Government.” United States ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App'x 890, 892

(5th Cir.2013).

*2 On August 18, 2012, prior to the transfer of the case, Fisher apparently decided to withdraw from serving as a relator, and

Holmes filed the operative First Amended Complaint [43] in this case. Holmes alleges that “[t]his case is a civil false claims

action brought on behalf of the United States by [Holmes], who has properly gained access to documents and information

showing that the U.S. Government has been defrauded in the amount of not less than $835 million by the unlawful actions of”

Northrop Grumman. First Am. Compl. 5[43]. Holmes asserts that prior to Hurricane Katrina's landfall, Northrop Grumman was

behind “in its budget in the performance” of various shipbuilding contracts with the Navy. Id. at 6. Holmes notes that “[w]ithin

months after Hurricane Katrina ..., Congress appropriated $2.3 billion to the Navy in restricted emergency shipbuilding and

conversion funding [ ] (hereinafter ‘the Katrina Money’)....” Id. at 7. According to Holmes, the Katrina Money “was to be

used only for ‘the consequences' of” Hurricane Katrina, but Northrop Grumman filed false claims with the Navy by seeking

reimbursement for unrelated cost overruns which it experienced before and after Hurricane Katrina, thus allowing Northrop

Grumman to avoid the consequences of its alleged inefficiency and mistakes. Id. at 7–11.

On the basis of these allegations, Holmes advances claims for violations of the FCA. Am. Compl. 15–24[1]. Holmes maintains

that Northrop Grumman violated the FCA by misusing restricted Congressional funding to cover cost overruns on contracts

for which Northrop Grumman was financially responsible and by using “[a]rtifices and [d]evices” to deceive the Navy into

paying for Northrop Grumman's non-Katrina related cost overruns. Id. at 15–20. Holmes further asserts that Northrop Grumman

violated the FCA by providing untruthful information to the Navy and Congress to prevent them from making accurate

procurement decisions, to conceal the status of contract performance related to seven shipbuilding contracts, and to prevent

discovery of the fact that Northrop Grumman was not keeping separate accounting records which segregated Hurricane Katrina's

monetary consequences from unrelated costs. Id. at 20–23.

Northrop Grumman now moves to disqualify Holmes from serving as a relator and to dismiss the First Amended Complaint

based on alleged ethical violations committed by Holmes. Mem. Br. in Supp. of Mot. to Disqualify Relator and Dismiss First

Am. Compl. 1[153]. According to Northrop Grumman, Holmes has breached his ethical duties of obedience to court orders,

candor and honesty to the courts and to Northrop Grumman, respect for Northrop Grumman's legal rights, and loyalty to his

former client, Munich Re. Id. at 12–13. Northrop Grumman maintains that Holmes' conduct was not authorized or required by

either the FCA or misprision of felony statute, 18 U.S.C. § 4. Id. at 19–24.

Holmes offers excerpts from various prior filings which he asserts address Northrop Grumman's Motion [151]. Resp. in Opp'n

to Defs.' Mot. to Disqualify and Dismiss 2–9[156]. Holmes claims that “[f]ederal courts have repeatedly held that confidentiality

agreements are not a bar to the disclosure of fraud to the government” and posits that such holdings are “directly applicable”
U.S. ex rel. Holmes v. Northrop Grumman Corp., Slip Copy (2015)

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here. Id. at 3–5. Holmes asserts that Munich Re had no objection to his decision to report Northrop Grumman's alleged fraud to

the United States Department of Justice (“DOJ”). Id. at 8–9. Holmes also acknowledges that he violated the terms of a Stipulated

Protective Order issued by the Court in the Touhy Action and notes that “with 20/20 hindsight, he should have handled the

situation differently[,]” but Holmes appears to argue the Order is not entitled to be accorded the weight of a court order. Id.

at 10–11. Holmes also posits that the ethical nature of his conduct should not be considered because the FCA preempts the

ethical rules governing his conduct. Id.

II. DISCUSSION

A. Legal Standard

*3 In allowing an attorney to serve as a relator and finding the attorney was nevertheless still required to abide by his ethical

obligations as an attorney, one court has reasoned that “[w]hile the [FCA] permits any person ... to bring a qui tam suit, it

does not authorize that person to violate state laws in the process.” United States ex rel. Doe v. X Corp. (“X Corp. II”), 862

F.Supp. 1502, 1507 (E.D.Va.1994). Although attorneys may act as relators pro se, non-attorneys are prohibited from proceeding

as relators pro se. See, e.g., Timson v. Sampson, 518 F.3d 870, 873–74 (11th Cir.2008) (finding that a non-attorney was “not

[authorized to] maintain a qui tam suit under the FCA as a pro se relator”). A primary policy reason for this prohibition is that

“[l]awyers are bound to ethical constraints to which non-lawyers may have no knowledge and no obligation[, and v]iolation

of these fundamental canons may result in serious consequences to the errant attorney.” United States ex rel. Schwartz v. TRW

Inc., 118 F.Supp.2d 991, 995 (C.D.Cal.2000). Furthermore, “[a]n attorney ‘has an obligation which he owes to the court[ ... ],

and he owes a public duty to aid in the administration of justice, to uphold the dignity of the court and respect its authority.’ “ Id.

(quoting United States v. Onan, 190 F.2d 1, 6–7 (8th Cir.1951)). These ethical obligations and the consequences of breaching

them remain applicable to attorneys proceeding as relators pro se. See X–Corp. II, 862 F.Supp. at 1507 (“[S]tate statutes and

rules that regulate an attorney's disclosure of client confidences” apply in the context of a qui tam action, and attorneys serving

as relators therefore have “significant incentives ... to abide by their” state law obligations in light of this fact and “given the

existence of state disciplinary powers over attorneys....”). Because Holmes is permitted to act as a relator pro se in this matter

due to his status as an attorney, the Court will evaluate whether he should be disqualified from serving as a relator by reference

to the rules of professional conduct governing Holmes as an attorney.

An attorney's breach of his ethical obligations may be raised in a motion to disqualify counsel, which is a “substantive

motion[ ] ... determined by applying standards developed under federal law .” In re Am. Airlines, 972 F.2d 605, 610 (5th

Cir.1992) (citations omitted) (emphasis removed). Generally, when considering a motion to disqualify counsel in a civil case,

the Fifth Circuit Court of Appeals “consider[s] the motion governed by the ethical rules announced by the national profession

in the light of the public interest and the litigants' rights.” In re Dresser Industries, Inc., 972 F.2d 540, 543 (5th Cir.1992).

While “the relevant local and national ethical canons provide a useful guide for adjudicating motions to disqualify, they are not

controlling.” F.D.I.C. v. U.S. Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir.1995) (citation omitted). “A court must take into account

not only the various ethical precepts adopted by the profession but also the social interests at stake[,]” including whether the

lawyer's conduct “has (1) the appearance of impropriety in general, or (2) a possibility that a specific impropriety will occur, and

(3) the likelihood of public suspicion from the impropriety outweighs any social interests which will be served by the lawyer's

continued participation in the case.” Id. (quoting Dresser, 972 F.2d at 544) (internal marks omitted). Disqualification of counsel

“is a sanction that must not be imposed cavalierly[,]” and the record must reveal “at least a reasonable possibility that some

identifiable impropriety actually occurred [ ]” before disqualification will be justified. Id. at 1316.

B. Analysis

1. The Court Will Consider the Ethical Nature of Holmes' Conduct

*4 Insofar as Holmes takes the position that the ethical nature of his conduct is not relevant because the FCA preempts the

ethical rules governing his conduct, this argument is not persuasive. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss

10–11[156]. Courts addressing the issue of whether the FCA preempts state ethics rules have declined to find preemption. In
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United States v. Quest Diagnostics Inc., the Second Circuit Court of Appeals refused to conclude that the FCA preempts the

State of New York's ethical rules governing attorneys' conduct. 734 F.3d 154, 163 (2d Cir.2013) (“Nothing in the [FCA] evinces

a clear legislative intent to preempt state statutes and rules that regulate an attorney's disclosure of client confidences.”) (citing

Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)). Holmes' position is further refuted by the fact that non-lawyers are

prohibited from proceeding pro se as qui tam relators while lawyers may proceed pro se as qui tam relators due to the ethical

obligations to which lawyers remain bound and may be subjected to discipline for violating. See Schwartz, 118 F.Supp.2d at

995 (quoting Onan, 190 F.2d at 6–7). Accordingly, the Court rejects Holmes' invitation to ignore the ethical implications of

his conduct.

2. Holmes Has Breached Various Standards of Ethics

In assessing the entirety of Holmes' conduct related to this case, the Court must identify the applicable “local and national

ethical” standards. See U.S. Fire, 50 F.3d at 1314 (citation omitted). Much of Holmes' conduct occurred while the case was

pending in the United States District Court for the District of Columbia. This Court therefore will look to “the Rules of

Professional Conduct[, ]as adopted by the District of Columbia Court of Appeals” (“DCRPC”). D.D.C. Loc. R. 83.15(a).

The Local Uniform Civil Rules for the Northern and Southern Districts of Mississippi provide that the Mississippi Rules of

Professional Conduct (“MRPC”) govern litigants practicing in this Court, and thus the Court will also consider the MRPC

given the transfer of the case to this Court. See L.U. Civ. R. 83.1(c). In addition, the Fifth Circuit recognizes the American Bar

Association's Model Rules of Professional Conduct (“ABA Model Rules”) as “the national standards utilized by this circuit

in ruling on disqualification motions.” Am. Airlines, 972 F.2d at 610. Because of the unique procedural history of this case,

the Court will consider the totality of Holmes' conduct related to this case in light of the ethical standards set forth in both the

DCRPC and MRPC, as well as those of the ABA Model Rules.

a. Holmes Violated His Duty of Candor

The record reveals that Holmes has violated his ethical duty to act with candor. “A lawyer shall not knowingly: (1) make a

false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the

tribunal by the lawyer....” ABA Model Rule 3.3(a)(1); see also DCRPC 3.3(a)(1) (same); MRPC 3.3(a)(1) (“A lawyer shall

not knowingly ... make a false statement of material fact or law to a tribunal....”). Additionally, “[i]n the course of representing

a client a lawyer shall not knowingly[ ] ... make a false statement of material fact or law to a third person....” ABA Model

Rule 4.1(a); see also DCRPC 4.1(a) (same); MRPC 4.1(a) (same). “It is professional misconduct for a lawyer to ... engage in

conduct involving dishonesty, fraud, deceit or misrepresentation....” ABA Model Rule 8.4(c); DCRPC 8.4(c) (same); MRPC

8.4(c) (same).

*5 Holmes and Fisher filed the Touhy Action on April 6, 2010, pursuant, in part, to 28 U.S.C. § 1782,

3

 and represented

to the Court that Munich Re sought documents from the Navy “in aid of” the UK Arbitration. 4 Com pl. 1–4[1], Case No.

1:10–cv–00551–JEB (D.D.C.). Northrop Grumman and Munich Re, through Holmes and Fisher, subsequently submitted a

Stipulated Protective Order, the terms of which were agreed upon by Munich Re, Northrop Grumman, and the Navy, which

specifically recited that Munich Re “has a need for the documents being produced by the U.S. Navy for the purposes of the UK

Arbitration[,] ... [and Munich Re] is agreeable to entering into this protective order and protecting the documents [produced by

the Navy] appropriately....” Stipulated Protective Order 3 [19–1], Case No. 1:10–cv–551–JEB (D.D.C.). The parties' Stipulated

Protective Order was entered on June 24, 2010, as an Order of the United States District Court for the District of Columbia.

Order 1, Ex. A[20], Case No. 1:10–cv–00551–JEB (D.D.C.).

3

Section 1782 allows parties to apply for and obtain an order that the Navy be required “to produce a document ... for use in a

proceeding in a foreign ... tribunal.” 28 U.S.C. § 1782(a).

4 Munich Re, through Holmes and Fisher, filed an Amended Complaint [21] on May 3, 2010, but the allegations in the Amended

Complaint relevant to this Court's analysis do not differ from those of the Complaint. See Am. Compl. 7, 11[21], Case No. 1:10–cv–
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551–JEB (D.D.C.). In fact, Holmes and Fisher, on behalf of Munich Re, further alleged that Munich Re's “exercise of rights provided

by 28 U.S.C. § 1782 are in aid of private foreign arbitration only....” Am. Compl. 11[21].

Holmes points out that this qui tam case was not filed until June 2, 2010, nearly two months after he and Fisher filed the Touhy

Action, and Holmes appears to suggest that there cannot be a connection between documents sought from the Navy in the

previously filed Touhy Action and this qui tam case. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss 7[156]. Holmes,

however, acknowledges in the First Amended Complaint [43] he filed in this case that he had “gained access to documents

and information showing that the U.S. Government has been defrauded” and explicitly based his claim on “documentation

submitted by Northrop Grumman to the Navy....” Am. Compl. 5, 6, 10, 11[43]. 5 These allegations reveal Holmes' clear intent

to support his qui tam claims in this case with the documents he obtained from the Navy through the Touhy Action purportedly

for use in the UK Arbitration. This calls into question the veracity of Holmes' statements made not only to the court in the Touhy

Action as to why he sought the documents but also to this Court insofar as Holmes alleges he has “properly gained access to”

the documents upon which the First Amended Complaint is based. See, e .g., Am. Compl. 11[21], Case No. 1:10–cv–551–JEB

(D.D.C.) (alleging, through Holmes and Fisher, that Munich Re's “exercise of rights provided by 28 U.S.C. § 1782 are in aid of

private foreign arbitration only”); Ex. “A” to Jt. Mot. to Enter Protective Order 3 [19–1], Case No. 1:10–cv–551–JEB (D.D.C.)

(submitting proposed stipulated protective order in which Munich Re, through Holmes and Fisher, recites that it “is agreeable

to entering into this protective order and protecting the documents [produced by the Navy] appropriately”); First Am. Compl.

5[43]. There is no evidence in the record that Holmes ever attempted to correct these statements. As a result, the Court finds

that Holmes violated his duty of candor by obtaining documents from the Navy through the Touhy Action without disclosing

his intent to use the documents to support his claims in this qui tam case.

5 Holmes and Fisher even predicted in the original Complaint [1] that “[u]pon review of documents submitted by Northrop Grumman

to the [Navy], ... those records will show that Northrop Grumman also improperly used Katrina Money for pre-Katrina overruns....”

Compl. 8[1]. Though slightly rephrased, this allegation also appears in the First Amended Complaint [43] filed by Holmes. See First

Am. Compl. 11[43] (“[Holmes] alleges that the records submitted by Northrop Grumman to the Naval Sea Systems Command in

support of its claims for payment show that Northrop Grumman also improperly used Katrina Money for pre-Katrina overruns to

its subcontracts and material costs.”).

b. Holmes and His Duty of Loyalty to Munich Re

*6 Unless the client gives informed consent, “a lawyer shall not represent a client if the representation involves a concurrent

conflict of interest.” ABA Model Rule 1.7(a). “A concurrent conflict of interest exists if[ ] ... there is a significant risk that

the representation of one or more clients will be materially limited by the lawyer's responsibilities to ... a third person or by a

personal interest of the lawyer.” Id. at 1.7(a)(2); see also DCRPC 1.7(b)(4) (“[A] lawyer shall not represent a client with respect

to a matter if [ ] ... [t]he lawyer's professional judgment on behalf of the client will be or reasonably may be adversely affected

by the lawyer's responsibilities to or interests in a third party or the lawyer's own financial, business, property, or personal

interests.”); MRPC 1 .7(b) (“A lawyer shall not represent a client if the representation of that client may be materially limited

by the lawyer's responsibilities ... to a third person[ ] or by the lawyer's own interests unless ... the client has given knowing

and informed consent after consultation.”).

In the UK Arbitration, Holmes and Fisher, on Munich Re's behalf, took the position that Munich Re did not owe compensation

to NGC for certain losses related to Hurricane Katrina because the Navy had previously paid Defendants to compensate for

those losses. See United States' Consolidated Resp. to Relators' Ex Parte Motions 6–7[14]. However, at the same time he was

representing Munich Re in the UK Arbitration Holmes filed the Complaint [1] and First Amended Complaint [43], in which he

alleged that the Navy should have never paid funds to Defendants and that it was Defendants' fraudulent conduct which duped

the Navy into paying the funds. Id. Holmes has not sufficiently disputed this characterization of the conflicting positions he

took as counsel for Munich Re, on the one hand, and as a relator in this case seeking over 2.5 billion dollars, 6 on the other.

These positions reflect a conflict between Holmes' personal interest as a relator, arguing that the Navy's payments to Northrop

Grumman were invalid, and Holmes' interest as counsel to Munich Re, advocating the validity of those same payments to

alleviate Munich Re's responsibilities to Northrop Grumman. Consequently, the record supports a finding that there was at

least “a significant risk” that Holmes' representation of Munich Re was “materially limited by” Holmes' “personal interest”
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in pursing this qui tam case, such that Holmes' conduct created a concurrent conflict of interest jeopardizing his obligation of

loyalty to Munich Re. See ABA Model Rule 1.7(a).

6 Holmes alleges that the United States was defrauded in the amount of “not less than $835 million” and “prays ... for treble that sum

or $2.505 billion” dollars. First Am. Compl. 23[43].

Faced with this conflict, there is no evidence that Holmes obtained any kind of “informed consent” from Munich Re to

simultaneously represent Munich Re while prosecuting this qui tam action. See ABA Model Rule 1.7 (prohibiting concurrent

conflicts of interest but making an exception where the attorney obtains affected clients' informed consent). “ ‘Informed consent’

denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and

explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” ABA Model

Rules 1 .0(e); see also DCRPC 1.0(e) (same); MRPC, Terminology (“ ‘Informed consent’ denotes voluntary acceptance and

agreement by a person of a proposed course of conduct after adequate information has been imparted to the person that allows

the person to arrive at a decision.”). The Comment to ABA Model Rule 1.0(e) notes that informed consent is often required

“before ... pursuing a course of conduct.” Comment [6], ABA Model Rule 1.0 (citing ABA Model Rules 1.2(c), 1.6(a) and

1.7(b)). The Comment also states

*7 [t]he lawyer must make reasonable efforts to ensure that the client or other person possesses

information reasonably adequate to make an informed decision. Ordinarily, this will require

communication that includes a disclosure of the facts and circumstances giving rise to the situation, any

explanation reasonably necessary to inform the client or other person of the material advantages and

disadvantages of the proposed course of conduct and a discussion of the client's or other person's options

and alternatives.

Comment [6], ABA Model Rule 1.0.

The record does not reveal facts supporting a finding that Holmes obtained Munich Re's informed consent at any point in time

to engage in a course of conduct which created a concurrent conflict of interest between Holmes' duties to Munich Re and his

own personal interests in this case. Holmes suggests that he obtained consent from Munich Re, but the timing of Munich Re's

“consent” is questionable and there is no evidence the consent was “informed.” Specifically, Holmes contends

[the DOJ] directly asked the client, Munich Re, orally and in writing, specifically whether it had any

concerns about its counsel disclosing the information of the fraud to the DOJ. Munich Re specifically

responded in writing that it had no objection and did not participate in that decision, but respected

counsel's view of their obligations to disclose to [the] DOJ under U.S. law.

Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss 9[156]. Holmes does not identify when he discussed his perceived

legal obligations with Munich Re, the content of those discussions, or whether Munich Re had the benefit of independent

counsel. See id.; see also Relators' Mot. to Assist the DOJ 10 [11, 12 of 86]; Holmes Aff. 6–7 [11, 41–42 of 86] (asserting

that Munich Re consented to Holmes' actions without any indication of what, if any, information was provided to Munich Re,

when that information was provided, or on what basis Munich Re made its alleged decision to consent). Holmes thus has not

demonstrated facts supporting a finding that Holmes had Munich Re's informed consent to engage in conduct that involved a

concurrent conflict of interest, and as such, Holmes breached his duty of loyalty to his client, Munich Re, in order to bolster

his position in this case.

c. Duty to Retain Confidentiality of Information

The ABA Model Rules, the MRPC, and the DCRPC each require attorneys to keep information relating to the representation

of a client confidential. “A lawyer shall not reveal information relating to the representation of a client unless the client

gives informed consent[ ]....” ABA Model Rule 1.6(a); see also MRPC 1.6(a) (same); DCRPC 1.6(a) (”[A] lawyer shall not

knowingly: ... reveal a confidence or secret of the lawyer's client[,] ... use a confidence or secret of the lawyer's client to the
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disadvantage of the client[, or] ... use a confidence or secret of the lawyer's client for the advantage of the lawyer or of a third

person....). 7

7 Rule 1.6(b) of the DCRPC defines “confidence” and “secret” as follows: “ ‘Confidence’ refers to information protected by the

attorney-client privilege under applicable law, and ‘secret’ refers to other information gained in the professional relationship that

the client has requested be held inviolate, or the disclosure of which would be embarrassing, or would be likely to be detrimental,

to the client.”

*8 Holmes has revealed and attempted to make personal use of information relating directly to his representation of Munich

Re in the form of documents he obtained on Munich Re's behalf from the Navy and Northrop Grumman for use in the UK

Arbitration. Relators' Mot. to Assist the DOJ [11, 4 of 86] (“Relators have provided the Government with an extensive Disclosure

Memorandum pointing out that the evidence of this fraud is based on documents available directly from the Navy, many of

which Relators obtained pursuant to Touhy Regulation Requests in connection with ongoing litigation on an insurance claim.”).

These documents were subject to various confidentiality obligations existing between Munich Re, Northrop Grumman, and the

Navy, and a Stipulated Protective Order imposed by the United States District Court for the District of Columbia. See Ex. “1” to

Relators' Mot. to Assist the DOJ [11, 56–66 of 86]; Stipulated Protective Order [20–1], Case No. 1:10–cv–551–JEB (D .D.C.).

There is no indication that Holmes would have otherwise come into possession of these documents but for his representation

of Munich Re. Holmes acknowledged using these documents to pursue this qui tam action in which he seeks over 2.5 billion

dollars, a portion of which would be available to him by virtue of his serving as relator. See, e.g., First Am. Compl. 9, 10, 23[43].

Absent Munich Re's informed consent, Holmes violated the duty to keep information related to his representation of Munich

Re confidential when he revealed and made use of the documents he obtained during his representation of Munich Re. 8

8

In addition, it is likely that Holmes' conduct violated Rule 4.4(a) of the ABA Model Rules. “In representing a client, a lawyer shall

not use ... methods of obtaining evidence that violate the legal rights of ... a [third] person.” ABA Model Rule 4.4(a); see also DCRPC

4.4(a) (same); MRPC 4.4(a) (same). In obtaining documents from Northrop Grumman and the Navy, Holmes, on behalf of Munich

Re, submitted to at least one agreement to keep documents Munich Re received from Northrop Grumman confidential and participated

in the creation and submission of the Stipulated Protective Order restricting the use and dissemination of documents received by

Munich Re from the Navy. Holmes' use of these documents for his own purposes in this qui tam action can reasonably be construed

as violating the legal rights of Northrop Grumman and the Navy.

Holmes has not shown that he obtained Munich Re's informed consent prior to revealing and making use of confidential

information he obtained as counsel for Munich Re. See ABA Model Rule 1.6 (prohibiting attorneys from revealing clients'

confidential information absent the client's informed consent). Holmes appears to acknowledge that Munich Re “did not

participate in” his decision to disclose to the DOJ documents that he obtained on Munich Re's behalf and which fell within the

scope of the various confidentiality obligations he owed Munich Re. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss

9[156]; see also ABA Model Rule 1.6(a) (“A lawyer shall not reveal information relating to the representation of a client unless

the client gives informed consent [ ]....”); MRPC 1.6(a) (same); DCRPC 1.6(a) (“[A] lawyer shall not knowingly: ... reveal a

confidence or secret of the lawyer's client[,] ... use a confidence or secret of the lawyer's client to the disadvantage of the client

[, or] ... use a confidence or secret of the lawyer's client for the advantage of the lawyer or of a third person....”). Similar to

his actions surrounding the concurrent conflict of interest which jeopardized his duty of loyalty to Munich Re, Holmes has not

sufficiently established that he obtained Munich Re's informed consent prior to revealing Munich Re's confidential information.

Consequently, Holmes breached his duty to protect his client's confidential information.

d. Holmes' Duty to Obey Court Orders

*9 Perhaps the most serious of the ethical violations committed by Holmes is his having knowingly ignored his obligations

under the Stipulated Protective Order entered in the Touhy Action by the United States District Court for the District of

Columbia. “A lawyer shall not[ ] ... knowingly disobey an obligation under the rules of a tribunal except for an open refusal

based on an assertion that no valid obligation exists....” ABA Model Rule 3 .4(c); see also DCRPC 3.4(c) (same); MRPC 3.4(c)

(same). Holmes notes that the Stipulated Protective Order was first submitted as a proposed order and seems to argue that it

should not be treated as a court order. Resp. in Opp'n to Defs.' Mot. to Disqualify and Dismiss 10–11[156]. This argument
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overlooks the fact that Holmes jointly submitted the Stipulated Protective Order as a proposed order, and the United States

District Court for the District of Columbia specifically entered the Stipulated Protective Order “as an [O]rder of the Court....”

Order 1 [20–1], Case No. 1:10cv551–JEB (D.D.C .). Holmes was undoubtedly required to comply with the obligations imposed

by the Stipulated Protective Order.

The Stipulated Protective Order provides that documents produced by the Navy “shall be used or disclosed solely in the UK

Arbitration” and “shall not be used in any other proceeding or for any other purpose without further order of this Court.” Id.

at 6–7 [20–1, 9–10 of 13]. Holmes openly acknowledges that he violated the terms of the Stipulated Protective Order by his

admission that he disclosed documents subject to the Stipulated Protective Order to the DOJ and allowed his “expert team”

to analyze such documents. 9 Relators' Mot. to Assist the DOJ 2, 10–12 [11, 4, 12–14 of 86]. If he had an objection to the

Navy's designation of any information as being protected under the Stipulated Protective Order, the Stipulated Protective Order

required Holmes to make an objection to the particular designations, but the record does not reveal that Holmes made any such

objections. Stipulated Protective Order 8 [20–1, 11 of 13], Case No. 1:10cv551–JEB (D.D.C.); see also Resp. in Opp'n to Defs.'

Mot. to Disqualify and Dismiss 6[156] (“With perfect 20/20 hindsight [,]” Holmes agrees that he “should have separately sought

[the Court's] permission to use the documents” obtained in the Touhy Action and that doing so “would have been a good thing

to do....”). Holmes was well aware of the terms of the Stipulated Protective Order, and requested that the District Court for the

District of Columbia enter the Stipulated Protective Order, but knowingly violated the obligations imposed by that Order in

pursuit of his own interests in this qui tam action. Holmes' violation of the Stipulated Protective Order is yet another example

of his unethical conduct surrounding his actions as a relator in this case.

9

Prior cases indicate that one court generally should decline from evaluating whether a litigant before it has violated the order of

another court. See, e.g., In re Wright, No. Civ. A. 06–356, 2006 WL 508050, at *3 (E.D.La. Feb. 22, 2006) (“[I]t would be an

unwise policy for one court to determine whether a litigant violated another court's order.”) (citing In re Marriage of Smith, 549

F.Supp. 761, 755 (W.D.Tex.1982)). The Court, however, finds that this general principle is not implicated under the specific facts

of this case because Holmes has acknowledged repeatedly that he violated the Stipulated Protective Order and thus the Court need

not determine whether a violation has occurred. Moreover, the Court expressly limits its consideration of Holmes' violation of the

Stipulated Protective Order to being only one of several factors militating in favor of disqualifying Holmes from serving as a relator

in this case. Still, the seriousness of Holmes' violation of the Stipulated Protective Order should not be overlooked. See Holden v.

Simpson Paper Co., 48 F. App'x 917, 2002 WL 31115137, at *2 (5th Cir. Sept. 18, 2002) (“Deliberately disobeying court orders

demonstrates sufficient bad faith to justify a district court's sanction under its inherent powers.”).

3. The Totality of Holmes' Ethical Violations Require His Disqualification as Relator

*10 When viewed in its entirety, Holmes' conduct reveals multiple improprieties. See U.S. Fire, 50 F.3d at 1314 (noting that

courts adjudicating a motion to disqualify should consider, in addition to relevant ethical precepts, the impropriety of counsel's

conduct and the extent to which public suspicion of that conduct outweighs any social interests served by allowing counsel

to continue participating) (quoting Dresser, 972 F.2d at 544) (internal marks omitted). Holmes' conduct did not merely bear

the appearance of impropriety but was in fact improper. Holmes violated his duty of loyalty to Munich Re by simultaneously

advocating a position for Munich Re that was completely contrary to the position he continues to advocate as relator in this

case. Holmes violated his duty to retain confidential information by allowing his own interest in pursing this qui tam action to

override his duties to Munich Re related to the confidentiality of documents he obtained on Munich Re's behalf, which placed

Munich Re in jeopardy of violating various confidentiality obligations to which Holmes knew his client was bound. In seeking

to build support for his qui tam case, Holmes also knowingly violated the Stipulated Protective Order issued by the court in the

Touhy Action. All the while, Holmes violated his duty of candor by failing to apprise the court in the Touhy Action or counsel

for NGC in the UK Arbitration of his motives for obtaining the confidential information.

The accompanying public suspicion arising from Holmes' conduct outweighs any social interest in permitting him to continue

participating as a relator. See U.S. Fire, 50 F.3d at 1314 (5th Cir.1995) (quoting Dresser, 972 F.2d at 544). The potential for

public suspicion stemming from this conduct is exemplified by the DOJ's concerns that Holmes' conduct gave rise to “serious

ethical and professional responsibility concerns....” United States' Consolidated Resp. to Relators' Ex Parte Motions 6[14].
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Furthermore, in considering Holmes' disqualification, the Court is not faced with the prospect of disqualifying an innocent

party's chosen counsel. Rather, disqualifying Holmes only precludes him from receiving the benefits which may otherwise be

available to him personally as a relator, such that the social interests in allowing him to continue participating in this case are

minimal. The Court finds that based on the totality of the ethical violations committed by Holmes surrounding this qui tam

case, Holmes should be disqualified from serving as relator in this case.

4. Dismissal of the First Amended Complaint

In determining whether dismissal of the First Amended Complaint [43] is warranted, the pertinent inquiry is the extent to which

Northrop Grumman stands to suffer prejudice if the action were to proceed to trial. See Quest Diagnostics, 734 F.3d at 166–67

(affirming district court's decision to disqualify relators and dismiss their qui tam complaint due to the fact that allowing the

case to proceed “would taint the trial proceedings and prejudice defendants”). Here, the Court finds that merely disqualifying

Holmes from serving as relator without dismissing the case would greatly prejudice Northrop Grumman because the case would

be tried on a record developed primarily through the fruits of Holmes' unethical conduct. In addition, the fact that the United

States government rather than Holmes is the real party in interest further supports dismissing Holmes' First Amended Complaint

[43]. See United States ex rel. Williams v. Bell Helicopter Textron Inc., 417 F.3d 450, 453 (5th Cir.2005). Namely, as the real

party in interest, the government would not be prevented from bringing these or similar claims against Northrop Grumman. See

Quest Diagnostics, 734 F.3d at 167 (noting that dismissal of the disqualified relators' complaint was further justified by the fact

that neither the United States, as the real party in interest, nor any other relator was foreclosed from bringing the claims). The

Court thus finds that the First Amended Complaint [43] should be dismissed with prejudice as to Holmes but without prejudice

as to any rights of the United States. 10

10 The Fifth Circuit has found that dismissal of a relator's complaint should not necessarily operate as a dismissal with prejudice

against the United States merely because it opted not to intervene. Williams, 417 F.3d at 454–55 (finding that dismissal of a relator's

complaint for failure to comply with Rule 9(b) did not operate as a dismissal with prejudice against the government simply because

the government did not intervene). This is because the FCA “does not require the government to proceed if its investigation [of

allegations in a qui tam complaint] yields a meritorious claim.” Id. at 455.

III. CONCLUSION

*11 Based on the foregoing, the Court concludes that Donald Holmes should be disqualified from serving as a relator in this

qui tam case, and that this civil action should be dismissed with prejudice as to Holmes, but without prejudice to any rights

possessed by the United States government.

IT IS, THEREFORE, ORDERED AND ADJUDGED that the Motion to Disqualify Relator and Dismiss the First Amended

Complaint [151] filed by Defendants Northrop Grumman Corporation and Huntington Ingalls Incorporated is GRANTED.

IT IS, FURTHER, ORDERED AND ADJUDGED that Donald Holmes is DISQUALIFIED from serving as a relator in

this qui tam case.

IT IS, FURTHER, ORDERED AND ADJUDGED that this case is DISMISSED WITH PREJUDICE as to Donald Holmes,

but WITHOUT PREJUDICE as to any rights of the United States government.

IT IS, FURTHER, ORDERED AND ADJUDGED that the Motion to Dismiss Amended Complaint [102] filed by Defendants

Northrop Grumman Corporation and Huntington Ingalls Incorporated is DENIED AS MOOT.

SO ORDERED AND ADJUDGED.
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FINAL JUDGMENT

This matter came on to be heard on the Motion to Disqualify Relator and Dismiss First Amended Complaint [151] filed

by Defendants Northrop Grumman Corporation and Huntington Ingalls Incorporated. The Court, after a full review and

consideration of Defendants' Motion, Relator's Response [156], Defendants' Rebuttal [157], the record, and relevant legal

authorities, finds that in accord with the reasons more fully stated in its Memorandum Opinion and Order entered herewith,

IT IS, THEREFORE, ORDERED AND ADJUDGED that this civil action is DISMISSED WITH PREJUDICE as to

Relator Donald Holmes, but WITHOUT PREJUDICE as to any rights of the United States government.

SO ORDERED AND ADJUDGED.

All Citations

Slip Copy, 2015 WL 3504525

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KeyCite Yellow Flag - Negative Treatment

Called into Doubt by Pulkkinen v. Pulkkinen, Fla.App. 1 Dist., November 26, 2013

129 S.Ct. 1187

Supreme Court of the United States

WYETH, Petitioner,

v.

Diana LEVINE.

No. 06–1249. | Argued Nov. 3, 2008. | Decided March 4, 2009.

Synopsis

Background: Patient brought action against drug manufacturer for failure to warn of dangers of administration of nausea

medication directly into patient's vein, which resulted in onset of gangrene and amputation of patient's arm. The Washington

Superior Court, Geoffrey W. Crawford, J., entered judgment on jury's verdict in patient's favor, and manufacturer appealed.

The Vermont Supreme Court, Johnson, J., 183 Vt. 76, 944 A.2d 179, affirmed. Certiorari was granted.

[Holding:] The United States Supreme Court, Justice Stevens, held that state law failure-to-warn claims against manufacturer

of antihistamine that was used to treat nausea, for failing to adequately warn of dangers of administering drug intravenously

using an IV-push, rather than IV-drip, methodology, were not preempted by federal law, either on theory that manufacturer

could not have modified warning label placed on drug once it had been approved by the Food and Drug Administration (FDA),

and that it was impossible for manufacturer to comply with both state law duties underlying failure-to-warn claims and its

federal labeling duties, or on theory that requiring manufacturer to comply with state law duty to provide stronger warning

about IV-push administration, after the Food and Drug Administration (FDA) had previously approved warning label placed

on drug, would obstruct purposes and objectives of federal drug labeling regulation.

Affirmed.

Justice Breyer concurred and filed opinion.

Justice Thomas concurred in judgment and filed opinion.

Justice Alito dissented and filed opinion, in which Chief Justice Roberts and Justice Scalia joined.

**1189 *555 Syllabus *

* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience

of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50 L.Ed. 499.

Petitioner Wyeth manufactures the antinausea drug Phenergan. After a clinician injected respondent Levine with Phenergan by

the “IV-push” method, whereby a drug is injected directly into a patient's vein, the drug entered Levine's artery, she developed

gangrene, and doctors amputated her forearm. Levine brought a state-law damages action, alleging, inter alia, that Wyeth had

failed to provide an adequate warning about the significant risks of administering Phenergan by the IV-push method. The

Vermont jury determined that Levine's injury would not have occurred if Phenergan's label included an adequate warning, and it
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awarded damages for her pain and suffering, substantial medical expenses, and loss of her livelihood as a professional musician.

Declining to overturn the verdict, the trial court rejected Wyeth's argument that Levine's failure-to-warn claims were pre-empted

by federal law because Phenergan's labeling had been approved by the federal Food and Drug Administration (FDA). The

Vermont Supreme Court affirmed.

Held: Federal law does not pre-empt Levine's claim that Phenergan's label did not contain an adequate warning about the IVpush method of administration. Pp. 1193 – 1204.

(a) The argument that Levine's state-law claims are pre-empted because it is impossible for Wyeth to comply with both the statelaw duties underlying those claims and its federal labeling duties is rejected. Although a manufacturer generally may change

a drug label only after the FDA approves a supplemental application, the agency's “changes being effected” (CBE) regulation

permits certain preapproval labeling changes that add or strengthen a warning to improve drug safety. Pursuant to the CBE

regulation, Wyeth could have unilaterally added a stronger warning about IV-push administration, and there is no evidence that

the FDA would ultimately have rejected such a labeling change. Wyeth's cramped reading of the CBE regulation and its broad

assertion that unilaterally changing the Phenergan label would have violated federal law governing unauthorized distribution

and misbranding of drugs are based on the fundamental misunderstanding that the FDA, rather than the manufacturer, bears

primary responsibility for drug labeling. It is a central premise of the Federal Food, Drug, and Cosmetic Act (FDCA) and the

FDA's regulations that the manufacturer bears responsibility for the content of its label at all times. Pp. 1196 – 1199.

**1190 *556 (b) Wyeth's argument that requiring it to comply with a state-law duty to provide a stronger warning would

interfere with Congress' purpose of entrusting an expert agency with drug labeling decisions is meritless because it relies on an

untenable interpretation of congressional intent and an overbroad view of an agency's power to pre-empt state law. The history

of the FDCA shows that Congress did not intend to pre-empt state-law failure-to-warn actions. In advancing the argument

that the FDA must be presumed to have established a specific labeling standard that leaves no room for different state-law

judgments, Wyeth relies not on any statement by Congress but on the preamble to a 2006 FDA regulation declaring that statelaw failure-to-warn claims threaten the FDA's statutorily prescribed role. Although an agency regulation with the force of law

can pre-empt conflicting state requirements, this case involves no such regulation but merely an agency's assertion that state law

is an obstacle to achieving its statutory objectives. Where, as here, Congress has not authorized a federal agency to pre-empt

state law directly, the weight this Court accords the agency's explanation of state law's impact on the federal scheme depends on

its thoroughness, consistency, and persuasiveness. Cf., e.g.,Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124.

Under this standard, the FDA's 2006 preamble does not merit deference: It is inherently suspect in light of the FDA's failure to

offer interested parties notice or opportunity for comment on the pre-emption question; it is at odds with the available evidence

of Congress' purposes; and it reverses the FDA's own longstanding position that state law is a complementary form of drug

regulation without providing a reasoned explanation. Geier v. American Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146

L.Ed.2d 914, is distinguished. Pp. 1199 – 1204.

183 Vt. 76, 944 A.2d 179, affirmed.

STEVENS, J., delivered the opinion of the Court, in which KENNEDY, SOUTER, GINSBURG, and BREYER, JJ., joined.

BREYER, J., filed a concurring opinion. THOMAS, J., filed an opinion concurring in the judgment. ALITO, J., filed a dissenting

opinion, in which ROBERTS, C.J., and SCALIA, J., joined.

Attorneys and Law Firms

Edwin S. Kneedler for the United States as amicus curiae, by special leave of the Court, supporting petitioner.

David C. Frederick, for respondent.
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Bert W. Rein, Karyn K. Ablin, Brendan J. Morrissey, Wiley Rein LLP, Washington, DC, Allan R. Keyes, R. Joseph O'Rourke,

Ryan, Smith, Carbine, Ltd., Rutland, VT, Seth P. Waxman, Counsel of Record, Paul R.Q. Wolfson, Catherine M.A. Carroll,

Margaret Williams, Smith Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, William J. Ruane, Wyeth, Madison,

NJ, for petitioner.

Richard I. Rubin, Rubin, Kidney, Myer & DeWolfe, Barre, Vermont, David C. Frederick, Counsel of Record, Scott H.

Angstreich, Scott K. Attaway, Brendan J. Crimmins, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington,

D.C., for respondent.

Opinion

Justice STEVENS delivered the opinion of the Court.

*558 Directly injecting the drug Phenergan into a patient's vein creates a significant risk of catastrophic consequences. A

Vermont **1191 jury found that petitioner Wyeth, the manufacturer of the drug, had failed to provide an adequate warning of

that risk and awarded damages to respondent Diana Levine to compensate her for the amputation of her arm. The warnings on

Phenergan's label had been deemed sufficient by the federal Food and Drug Administration (FDA) when it approved Wyeth's

new drug application in 1955 and when it later approved changes in the drug's labeling. The question we must decide is whether

the FDA's approvals provide *559 Wyeth with a complete defense to Levine's tort claims. We conclude that they do not.

I

Phenergan is Wyeth's brand name for promethazine hydrochloride, an antihistamine used to treat nausea. The injectable form

of Phenergan can be administered intramuscularly or intravenously, and it can be administered intravenously through either

the “IV-push” method, whereby the drug is injected directly into a patient's vein, or the “IV-drip” method, whereby the drug

is introduced into a saline solution in a hanging intravenous bag and slowly descends through a catheter inserted in a patient's

vein. The drug is corrosive and causes irreversible gangrene if it enters a patient's artery.

Levine's injury resulted from an IV-push injection of Phenergan. On April 7, 2000, as on previous visits to her local clinic

for treatment of a migraine headache, she received an intramuscular injection of Demerol for her headache and Phenergan for

her nausea. Because the combination did not provide relief, she returned later that day and received a second injection of both

drugs. This time, the physician assistant administered the drugs by the IV-push method, and Phenergan entered Levine's artery,

either because the needle penetrated an artery directly or because the drug escaped from the vein into surrounding tissue (a

phenomenon called “perivascular extravasation”) where it came in contact with arterial blood. As a result, Levine developed

gangrene, and doctors amputated first her right hand and then her entire forearm. In addition to her pain and suffering, Levine

incurred substantial medical expenses and the loss of her livelihood as a professional musician.

After settling claims against the health center and clinician, Levine brought an action for damages against Wyeth, relying on

common-law negligence and strict-liability theories. Although Phenergan's labeling warned of the danger of gangrene and

amputation following inadvertent intra-arterial *560 injection, 1 Levine alleged that **1192 the labeling was defective

because it failed to instruct clinicians to use the IV-drip method of intravenous administration instead of the higher risk IV-push

method. More broadly, she alleged that Phenergan is not reasonably safe for intravenous administration because the foreseeable

risks of gangrene and loss of limb are great in relation to the drug's therapeutic benefits. App. 14–15.

1 The warning for “Inadvertent Intra-arterial Injection” stated: “Due to the close proximity of arteries and veins in the areas most

commonly used for intravenous injection, extreme care should be exercised to avoid perivascular extravasation or inadvertent intraarterial injection. Reports compatible with inadvertent intra-arterial injection of Phenergan Injection, usually in conjunction with

other drugs intended for intravenous use, suggest that pain, severe chemical irritation, severe spasm of distal vessels, and resultant
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gangrene requiring amputation are likely under such circumstances. Intravenous injection was intended in all the cases reported but

perivascular extravasation or arterial placement of the needle is now suspect. There is no proven successful management of this

condition after it occurs.... Aspiration of dark blood does not preclude intra-arterial needle placement, because blood is discolored

upon contact with Phenergan Injection. Use of syringes with rigid plungers or of small bore needles might obscure typical arterial

backflow if this is relied upon alone. When used intravenously, Phenergan Injection should be given in a concentration no greater

than 25 mg per mL and at a rate not to exceed 25 mg per minute. When administering any irritant drug intravenously, it is usually

preferable to inject it through the tubing of an intravenous infusion set that is known to be functioning satisfactorily. In the event that a

patient complains of pain during intended intravenous injection of Phenergan Injection, the injection should be stopped immediately

to provide for evaluation of possible arterial placement or perivascular extravasation.” App. 390.

Wyeth filed a motion for summary judgment, arguing that Levine's failure-to-warn claims were pre-empted by federal law. The

court found no merit in either Wyeth's field pre-emption argument, which it has since abandoned, or its conflict pre-emption

argument. With respect to the contention that there was an “actual conflict between a specific FDA order,”id., at 21, and Levine's

failure-to-warn action, the *561 court reviewed the sparse correspondence between Wyeth and the FDA about Phenergan's

labeling and found no evidence that Wyeth had “earnestly attempted” to strengthen the intra-arterial injection warning or that

the FDA had “specifically disallowed” stronger language, id., at 23. The record, as then developed, “lack[ed] any evidence that

the FDA set a ceiling on this matter.” Ibid.

The evidence presented during the 5–day jury trial showed that the risk of intra-arterial injection or perivascular extravasation

can be almost entirely eliminated through the use of IV-drip, rather than IV-push, administration. An IV drip is started with

saline, which will not flow properly if the catheter is not in the vein and fluid is entering an artery or surrounding tissue. See

id., at 50–51, 60, 66–68, 75. By contrast, even a careful and experienced clinician using the IV-push method will occasionally

expose an artery to Phenergan. See id., at 73, 75–76. While Phenergan's labeling warned against intra-arterial injection and

perivascular extravasation and advised that “[w]hen administering any irritant drug intravenously it is usually preferable to

inject it through the tubing of an intravenous infusion set that is known to be functioning satisfactorily,” id., at 390, the labeling

did not contain a specific warning about the risks of IV-push administration.

The trial record also contains correspondence between Wyeth and the FDA discussing Phenergan's label. The FDA first

approved injectable Phenergan in 1955. In 1973 and 1976, Wyeth submitted supplemental new drug applications, which the

agency approved after proposing labeling changes. Wyeth submitted a third supplemental application in 1981 in response to a

new FDA rule governing drug labels. Over the next 17 years, Wyeth and the FDA intermittently corresponded about Phenergan's

label. The most notable activity occurred in 1987, when the FDA suggested different warnings about the risk of arterial exposure,

and in 1988, when Wyeth submitted revised labeling incorporating the *562 proposed changes. The FDA did not respond.

Instead, in 1996, it requested from Wyeth the labeling then in use and, without addressing Wyeth's 1988 submission, instructed

it to “[r]etain verbiage in current label” regarding intra-arterial injection. Id., at 359. After a few further changes to the labeling

not related to intra-arterial injection, the FDA approved Wyeth's 1981 application in 1998, instructing that Phenergan's final

printed label “must be identical” to the approved package insert. Id., at 382.

Based on this regulatory history, the trial judge instructed the jury that it could **1193 consider evidence of Wyeth's

compliance with FDA requirements but that such compliance did not establish that the warnings were adequate. He also

instructed, without objection from Wyeth, that FDA regulations “permit a drug manufacturer to change a product label to add

or strengthen a warning about its product without prior FDA approval so long as it later submits the revised warning for review

and approval.” Id., at 228.

Answering questions on a special verdict form, the jury found that Wyeth was negligent, that Phenergan was a defective product

as a result of inadequate warnings and instructions, and that no intervening cause had broken the causal connection between

the product defects and the plaintiff's injury. Id., at 233–235. It awarded total damages of $7,400,000, which the court reduced

to account for Levine's earlier settlement with the health center and clinician.Id., at 235–236.

On August 3, 2004, the trial court filed a comprehensive opinion denying Wyeth's motion for judgment as a matter of law. After

making findings of fact based on the trial record (supplemented by one letter that Wyeth found after the trial), the court rejected
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Wyeth's pre-emption arguments. It determined that there was no direct conflict between FDA regulations and Levine's statelaw claims because those regulations permit strengthened warnings without FDA approval on an interim basis and the record

contained evidence *563 of at least 20 reports of amputations similar to Levine's since the 1960's. The court also found that

state tort liability in this case would not obstruct the FDA's work because the agency had paid no more than passing attention

to the question whether to warn against IV-push administration of Phenergan. In addition, the court noted that state law serves

a compensatory function distinct from federal regulation. Id., at 249–252.

The Vermont Supreme Court affirmed. It held that the jury's verdict “did not conflict with FDA's labeling requirements for

Phenergan because [Wyeth] could have warned against IV-push administration without prior FDA approval, and because

federal labeling requirements create a floor, not a ceiling, for state regulation.” 183 Vt. 76, 84, 944 A.2d 179, 184 (2006). In

dissent, Chief Justice Reiber argued that the jury's verdict conflicted with federal law because it was inconsistent with the FDA's

conclusion that intravenous administration of Phenergan was safe and effective.

The importance of the pre-emption issue, coupled with the fact that the FDA has changed its position on state tort law and

now endorses the views expressed in Chief Justice Reiber's dissent, persuaded us to grant Wyeth's petition for certiorari. 552

U.S. 1161, 128 S.Ct. 1118, 169 L.Ed.2d 845 (2008). The question presented by the petition is whether the FDA's drug labeling

judgments “preempt state law product liability claims premised on the theory that different labeling judgments were necessary

to make drugs reasonably safe for use.” Pet. for Cert. i.

II

Wyeth makes two separate pre-emption arguments: first, that it would have been impossible for it to comply with the statelaw duty to modify Phenergan's labeling without violating federal law, see Fidelity Fed. Sav. & Loan Assn. v. de la Cuesta,

458 U.S. 141, 153, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982), and second, that recognition of Levine's state tort action creates

an unacceptable “obstacle to the accomplishment and execution of the full purposes *564 and objectives of Congress,”

**1194 Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941), because it substitutes a lay jury's decision

about drug labeling for the expert judgment of the FDA. As a preface to our evaluation of these arguments, we identify two

factual propositions decided during the trial court proceedings, emphasize two legal principles that guide our analysis, and

review the history of the controlling federal statute.

The trial court proceedings established that Levine's injury would not have occurred if Phenergan's label had included an

adequate warning about the risks of the IV-push method of administering the drug. The record contains evidence that the

physician assistant administered a greater dose than the label prescribed, that she may have inadvertently injected the drug

into an artery rather than a vein, and that she continued to inject the drug after Levine complained of pain. Nevertheless, the

jury rejected Wyeth's argument that the clinician's conduct was an intervening cause that absolved it of liability. See App. 234

(jury verdict), 252–254. In finding Wyeth negligent as well as strictly liable, the jury also determined that Levine's injury was

foreseeable. That the inadequate label was both a but-for and proximate cause of Levine's injury is supported by the record

and no longer challenged by Wyeth. 2

2 The dissent nonetheless suggests that physician malpractice was the exclusive cause of Levine's injury. See, e.g., post, at 1217

(opinion of ALITO, J.) (“[I]t is unclear how a ‘stronger’ warning could have helped respondent”); post, at 1225 – 1227 (suggesting

that the physician assistant's conduct was the sole cause of the injury). The dissent's frustration with the jury's verdict does not put

the merits of Levine's tort claim before us, nor does it change the question we must decide—whether federal law pre-empts Levine's

state-law claims.

The trial court proceedings further established that the critical defect in Phenergan's label was the lack of an adequate

warning about the risks of IV-push administration. Levine also offered evidence that the IV-push method should *565 be

contraindicated and that Phenergan should never be administered intravenously, even by the IV-drip method. Perhaps for this

reason, the dissent incorrectly assumes that the state-law duty at issue is the duty to contraindicate the IV-push method. See, e.g.,
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post, at 1221, 1230 – 1231. But, as the Vermont Supreme Court explained, the jury verdict established only that Phenergan's

warning was insufficient. It did not mandate a particular replacement warning, nor did it require contraindicating IV-push

administration: “There may have been any number of ways for [Wyeth] to strengthen the Phenergan warning without completely

eliminating IV-push administration.” 183 Vt., at ––––, n. 2, 944 A.2d, at 189, n. 2. We therefore need not decide whether a

state rule proscribing intravenous administration would be pre-empted. The narrower question presented is whether federal

law pre-empts Levine's claim that Phenergan's label did not contain an adequate warning about using the IV-push method of

administration.

[1] [2] [3] [4] Our answer to that question must be guided by two cornerstones of our pre-emption jurisprudence. First,

“the purpose of Congress is the ultimate touchstone in every pre-emption case.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485,

116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (internal quotation marks omitted); see Retail Clerks v. Schermerhorn, 375 U.S. 96,

103, 84 S.Ct. 219, 11 L.Ed.2d 179 (1963). Second, “[i]n all pre-emption cases, and particularly in those in which Congress has

‘legislated ... in a field which the States have traditionally occupied,’ ... we ‘start with the assumption that the historic police

**1195 powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose

of Congress.’ ” Lohr, 518 U.S., at 485, 116 S.Ct. 2240 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct.

1146, 91 L.Ed. 1447 (1947)). 3

3 Wyeth argues that the presumption against pre-emption should not apply to this case because the Federal Government has regulated

drug labeling for more than a century. That argument misunderstands the principle: We rely on the presumption because respect for

the States as “independent sovereigns in our federal system” leads us to assume that “Congress does not cavalierly pre-empt statelaw causes of action.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). The presumption thus

accounts for the historic presence of state law but does not rely on the absence of federal regulation.

For its part, the dissent argues that the presumption against pre-emption should not apply to claims of implied conflict pre-emption

at all, post, at 1228, but this Court has long held to the contrary. See, e.g.,California v. ARC America Corp., 490 U.S. 93, 101–

102, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989); Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 716,

105 S.Ct. 2371, 85 L.Ed.2d 714 (1985); see also Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 387, 122 S.Ct. 2151, 153

L.Ed.2d 375 (2002). The dissent's reliance on Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341, 121 S.Ct. 1012, 148 L.Ed.2d

854 (2001), see post, at 1229, and n. 14, is especially curious, as that case involved state-law fraud-on-the-agency claims, and the

Court distinguished state regulation of health and safety as matters to which the presumption does apply. See 531 U.S., at 347–

348, 121 S.Ct. 1012.

*566 In order to identify the “purpose of Congress,” it is appropriate to briefly review the history of federal regulation of drugs

and drug labeling. In 1906, Congress enacted its first significant public health law, the Federal Food and Drugs Act, ch. 3915, 34

Stat. 768. The Act, which prohibited the manufacture or interstate shipment of adulterated or misbranded drugs, supplemented

the protection for consumers already provided by state regulation and common-law liability. In the 1930's, Congress became

increasingly concerned about unsafe drugs and fraudulent marketing, and it enacted the Federal Food, Drug, and Cosmetic Act

(FDCA), ch. 675, 52 Stat. 1040, as amended, 21 U.S.C. § 301 et seq. The Act's most substantial innovation was its provision

for premarket approval of new drugs. It required every manufacturer to submit a new drug application, including reports of

investigations and specimens of proposed labeling, to the FDA for review. Until its application became effective, a manufacturer

was prohibited from distributing a drug. The FDA could reject an application if it determined that the drug was not safe for

use as labeled, though if the agency failed to act, an application became effective 60 days after the filing. FDCA, § 505(c),

52 Stat. 1052.

*567 In 1962, Congress amended the FDCA and shifted the burden of proof from the FDA to the manufacturer. Before 1962,

the agency had to prove harm to keep a drug out of the market, but the amendments required the manufacturer to demonstrate

that its drug was “safe for use under the conditions prescribed, recommended, or suggested in the proposed labeling” before it

could distribute the drug. §§ 102(d), 104(b), 76 Stat. 781, 784. In addition, the amendments required the manufacturer to prove

the drug's effectiveness by introducing “substantial evidence that the drug will have the effect it purports or is represented to

have under the conditions of use prescribed, recommended, or suggested in the proposed labeling.” § 102(d), id., at 781.
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As it enlarged the FDA's powers to “protect the public health” and “assure the safety, effectiveness, and reliability of **1196

drugs,” id., at 780, Congress took care to preserve state law. The 1962 amendments added a saving clause, indicating that

a provision of state law would only be invalidated upon a “direct and positive conflict” with the FDCA. § 202, id., at 793.

Consistent with that provision, state common-law suits “continued unabated despite ... FDA regulation.” Riegel v. Medtronic,

Inc., 552 U.S. 312, ––––, 128 S.Ct. 999, 1017, 169 L.Ed.2d 892 (2008) (GINSBURG, J., dissenting); see ibid., n. 11 (collecting

state cases). And when Congress enacted an express pre-emption provision for medical devices in 1976, see § 521, 90 Stat. 574

(codified at 21 U.S.C. § 360k(a)), it declined to enact such a provision for prescription drugs.

In 2007, after Levine's injury and lawsuit, Congress again amended the FDCA. 121 Stat. 823. For the first time, it granted the

FDA statutory authority to require a manufacturer to change its drug label based on safety information that becomes available

after a drug's initial approval. § 901(a), id., at 924–926. In doing so, however, Congress did not enact a provision in the Senate

bill that would have required the FDA to preapprove all changes to drug labels. See S. 1082, 110th Cong., 1st Sess., § 208,

pp. 107–114 (2007) *568 (as passed) (proposing new § 506D). Instead, it adopted a rule of construction to make it clear that

manufacturers remain responsible for updating their labels. See 121 Stat. 925–926.

III

[5] Wyeth first argues that Levine's state-law claims are pre-empted because it is impossible for it to comply with both the

state-law duties underlying those claims and its federal labeling duties. See de la Cuesta, 458 U.S., at 153, 102 S.Ct. 3014. The

FDA's premarket approval of a new drug application includes the approval of the exact text in the proposed label. See 21 U.S.C.

§ 355; 21 CFR § 314.105(b) (2008). Generally speaking, a manufacturer may only change a drug label after the FDA approves

a supplemental application. There is, however, an FDA regulation that permits a manufacturer to make certain changes to its

label before receiving the agency's approval. Among other things, this “changes being effected” (CBE) regulation provides that

if a manufacturer is changing a label to “add or strengthen a contraindication, warning, precaution, or adverse reaction” or to

“add or strengthen an instruction about dosage and administration that is intended to increase the safe use of the drug product,”

it may make the labeling change upon filing its supplemental application with the FDA; it need not wait for FDA approval.

§§ 314.70(c)(6)(iii)(A), (C).

Wyeth argues that the CBE regulation is not implicated in this case because a 2008 amendment provides that a manufacturer

may only change its label “to reflect newly acquired information.” 73 Fed.Reg. 49609. Resting on this language (which Wyeth

argues simply reaffirmed the interpretation of the regulation in effect when this case was tried), Wyeth contends that it could

have changed Phenergan's label only in response to new information that the FDA had not considered. And it maintains that

Levine has not pointed to any such information concerning the risks of IV-push administration. Thus, Wyeth insists, it was

impossible for it *569 to discharge its state-law obligation to provide a stronger warning about IV-push administration without

violating federal law. Wyeth's argument misapprehends both the federal drug regulatory scheme and its burden in establishing

a pre-emption defense.

We need not decide whether the 2008 CBE regulation is consistent with the FDCA and the previous version of the **1197

regulation, as Wyeth and the United States urge, because Wyeth could have revised Phenergan's label even in accordance with

the amended regulation. As the FDA explained in its notice of the final rule, “ ‘newly acquired information’ ” is not limited

to new data, but also encompasses “new analyses of previously submitted data.” Id., at 49604. The rule accounts for the fact

that risk information accumulates over time and that the same data may take on a different meaning in light of subsequent

developments: “[I]f the sponsor submits adverse event information to FDA, and then later conducts a new analysis of data

showing risks of a different type or of greater severity or frequency than did reports previously submitted to FDA, the sponsor

meets the requirement for ‘newly acquired information.’ ” Id., at 49607; see also id., at 49606.

The record is limited concerning what newly acquired information Wyeth had or should have had about the risks of IV-push

administration of Phenergan because Wyeth did not argue before the trial court that such information was required for a CBE
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labeling change. Levine did, however, present evidence of at least 20 incidents prior to her injury in which a Phenergan injection

resulted in gangrene and an amputation. See App. 74, 252. 4 After the first such incident came to Wyeth's attention in 1967,

it notified the FDA and worked with the agency to change Phenergan's label. *570 In later years, as amputations continued

to occur, Wyeth could have analyzed the accumulating data and added a stronger warning about IV-push administration of

the drug.

4 Levine also introduced evidence that Pfizer had withdrawn Vistaril, another antinausea drug, from intravenous use several decades

earlier because its intravenous injection had resulted in gangrene and amputations. See App. 79.

Wyeth argues that if it had unilaterally added such a warning, it would have violated federal law governing unauthorized

distribution and misbranding. Its argument that a change in Phenergan's labeling would have subjected it to liability for

unauthorized distribution rests on the assumption that this labeling change would have rendered Phenergan a new drug lacking

an effective application. But strengthening the warning about IV-push administration would not have made Phenergan a new

drug. See 21 U.S.C. § 321(p)(1) (defining “new drug”); 21 CFR § 310.3(h). Nor would this warning have rendered Phenergan

misbranded. The FDCA does not provide that a drug is misbranded simply because the manufacturer has altered an FDAapproved label; instead, the misbranding provision focuses on the substance of the label and, among other things, proscribes

labels that fail to include “adequate warnings.” 21 U.S.C. § 352(f). Moreover, because the statute contemplates that federal

juries will resolve most misbranding claims, the FDA's belief that a drug is misbranded is not conclusive. See §§ 331, 332,

334(a)-(b). And the very idea that the FDA would bring an enforcement action against a manufacturer for strengthening a

warning pursuant to the CBE regulation is difficult to accept—neither Wyeth nor the United States has identified a case in

which the FDA has done so.

[6] Wyeth's cramped reading of the CBE regulation and its broad reading of the FDCA's misbranding and unauthorized

distribution provisions are premised on a more fundamental misunderstanding. Wyeth suggests that the FDA, rather than

the manufacturer, bears primary responsibility for drug labeling. Yet through many amendments to the FDCA and to FDA

regulations, it has remained a central premise of federal drug regulation that the **1198 manufacturer bears responsibility

*571 for the content of its label at all times. It is charged both with crafting an adequate label and with ensuring that its warnings

remain adequate as long as the drug is on the market. See, e.g., 21 CFR § 201.80(e) (requiring a manufacturer to revise its label

“to include a warning as soon as there is reasonable evidence of an association of a serious hazard with a drug”); § 314.80(b)

(placing responsibility for postmarketing surveillance on the manufacturer); 73 Fed.Reg. 49605 (“Manufacturers continue to

have a responsibility under Federal law ... to maintain their labeling and update the labeling with new safety information”).

Indeed, prior to 2007, the FDA lacked the authority to order manufacturers to revise their labels. See 121 Stat. 924–926. When

Congress granted the FDA this authority, it reaffirmed the manufacturer's obligations and referred specifically to the CBE

regulation, which both reflects the manufacturer's ultimate responsibility for its label and provides a mechanism for adding

safety information to the label prior to FDA approval. See id., at 925–926 (stating that a manufacturer retains the responsibility

“to maintain its label in accordance with existing requirements, including subpart B of part 201 and sections 314.70 and 601.12

of title 21, Code of Federal Regulations (or any successor regulations)” (emphasis added)). Thus, when the risk of gangrene

from IV-push injection of Phenergan became apparent, Wyeth had a duty to provide a warning that adequately described that

risk, and the CBE regulation permitted it to provide such a warning before receiving the FDA's approval.

Of course, the FDA retains authority to reject labeling changes made pursuant to the CBE regulation in its review of the

manufacturer's supplemental application, just as it retains such authority in reviewing all supplemental applications. But absent

clear evidence that the FDA would not have approved a change to Phenergan's label, we will not conclude that it was impossible

for Wyeth to comply with both federal and state requirements.

*572 Wyeth has offered no such evidence. It does not argue that it attempted to give the kind of warning required by the

Vermont jury but was prohibited from doing so by the FDA. 5 See Tr. of Oral Arg. 12–13; see also Brief for United States as

Amicus Curiae 25. And while it does suggest that the FDA intended to prohibit it from strengthening the warning about IV-
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push administration because the agency deemed such a warning inappropriate in reviewing Phenergan's drug applications, both

the trial court and the Vermont Supreme Court rejected this account as a matter of fact. In its decision on Wyeth's motion for

judgment as a matter of law, **1199 the trial court found “no evidence in this record that either the FDA or the manufacturer

gave more than passing attention to the issue of” IV-push versus IV-drip administration. App. 249. The Vermont Supreme Court

likewise concluded that the FDA had not made an affirmative decision to preserve the IV-push method or intended to prohibit

Wyeth from strengthening its warning about IV-push administration. 183 Vt., at ––––, 944 A.2d, at 188–189. Moreover, Wyeth

does not argue that it supplied the FDA with an evaluation *573 or analysis concerning the specific dangers posed by the IVpush method. We accordingly cannot credit Wyeth's contention that the FDA would have prevented it from adding a stronger

warning about the IV-push method of intravenous administration. 6

5 The record would not, in any event, support such an argument. In 1988, Wyeth did propose different language for Phenergan's

warning about intra-arterial injection, adapted from revisions the FDA proposed in 1987. See App. 339–341, 311–312. When the

FDA approved Wyeth's application, it instructed Wyeth to retain the wording in its current label. During the trial court proceedings,

Levine indicated that the language proposed in 1988 would have more strongly warned against IV-push administration. But the trial

court and the Vermont Supreme Court found that the 1988 warning did not differ in any material respect from the FDA-approved

warning. See 183 Vt. 76, ––––, 944 A.2d 179, 189 (2006) (“Simply stated, the proposed warning was different, but not stronger.

It was also no longer or more prominent than the original warning ...”); App. 248–250. Indeed, the United States concedes that the

FDA did not regard the proposed warning as substantively different: “[I]t appears the FDA viewed the change as non-substantive

and rejected it for formatting reasons.” Brief for United States as Amicus Curiae 25; see also 183 Vt., at ––––, 944 A.2d, at 189.

6 The dissent's suggestion that the FDA intended to prohibit Wyeth from strengthening its warning does not fairly reflect the record.

The dissent creatively paraphrases a few FDA orders—for instance by conflating warnings about IV-push administration and intraarterial injection, see, e.g., post, at 1222, 1223 – 1224, 1225 – 1226—to suggest greater agency attention to the question, and it

undertakes a study of Phenergan's labeling that is more elaborate than any FDA order. But even the dissent's account does not support

the conclusion that the FDA would have prohibited Wyeth from adding a stronger warning pursuant to the CBE regulation.

Impossibility pre-emption is a demanding defense. On the record before us, Wyeth has failed to demonstrate that it was

impossible for it to comply with both federal and state requirements. The CBE regulation permitted Wyeth to unilaterally

strengthen its warning, and the mere fact that the FDA approved Phenergan's label does not establish that it would have

prohibited such a change.

IV

[7] Wyeth also argues that requiring it to comply with a state-law duty to provide a stronger warning about IV-push

administration would obstruct the purposes and objectives of federal drug labeling regulation. Levine's tort claims, it maintains,

are pre-empted because they interfere with “Congress's purpose to entrust an expert agency to make drug labeling decisions

that strike a balance between competing objectives.” Brief for Petitioner 46. We find no merit in this argument, which relies on

an untenable interpretation of congressional intent and an overbroad view of an agency's power to pre-empt state law.

Wyeth contends that the FDCA establishes both a floor and a ceiling for drug regulation: Once the FDA has approved *574

a drug's label, a state-law verdict may not deem the label inadequate, regardless of whether there is any evidence that the FDA

has considered the stronger warning at issue. The most glaring problem with this argument is that all evidence of Congress'

purposes is to the contrary. Building on its 1906 Act, Congress enacted the FDCA to bolster consumer protection against harmful

products. See Kordel v. United States, 335 U.S. 345, 349, 69 S.Ct. 106, 93 L.Ed. 52 (1948);United States v. Sullivan, 332 U.S.

689, 696, 68 S.Ct. 331, 92 L.Ed. 297 (1948). Congress did not provide a federal remedy for consumers harmed by unsafe or

ineffective drugs in the 1938 statute or in any subsequent amendment. Evidently, it determined that widely available state rights

of action provided appropriate relief for injured consumers. 7 It may also have recognized that **1200 state-law remedies

further consumer protection by motivating manufacturers to produce safe and effective drugs and to give adequate warnings.
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7 Although the first version of the bill that became the FDCA would have provided a federal cause of action for damages for injured

consumers, see H.R. 6110, 73d Cong., 1st Sess., § 25 (1933) (as introduced), witnesses testified that such a right of action was

unnecessary because common-law claims were already available under state law. See Hearings on S.1944 before a Subcommittee of

the Senate Committee on Commerce, 73d Cong., 2d Sess., 400 (1933) (statement of W.A. Hines); see id., at 403 (statement of J.A.

Ladds) (“This act should not attempt to modify or restate the common law with respect to personal injuries”).

[8] If Congress thought state-law suits posed an obstacle to its objectives, it surely would have enacted an express pre-emption

provision at some point during the FDCA's 70–year history. But despite its 1976 enactment of an express pre-emption provision

for medical devices, see § 521, 90 Stat. 574 (codified at 21 U.S.C. § 360k(a)), Congress has not enacted such a provision for

prescription drugs. See Riegel, 552 U.S., at ––––, 128 S.Ct., at 1009 (“Congress could have applied the pre-emption clause

to the entire FDCA. It did not do so, but instead wrote a pre-emption clause that applies only to medical devices *575 ”). 8

Its silence on the issue, coupled with its certain awareness of the prevalence of state tort litigation, is powerful evidence that

Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness. As Justice O'Connor

explained in her opinion for a unanimous Court: “The case for federal pre-emption is particularly weak where Congress has

indicated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to stand by both

concepts and to tolerate whatever tension there [is] between them.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S.

141, 166–167, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989) (internal quotation marks omitted); see also supra, at 1194 (discussing

the presumption against pre-emption).

8

In 1997, Congress pre-empted certain state requirements concerning over-the-counter medications and cosmetics but expressly

preserved product liability actions. See 21 U.S.C. §§ 379r(e), 379s(d) (“Nothing in this section shall be construed to modify or

otherwise affect any action or the liability of any person under the product liability law of any State”).

[9] Despite this evidence that Congress did not regard state tort litigation as an obstacle to achieving its purposes, Wyeth

nonetheless maintains that, because the FDCA requires the FDA to determine that a drug is safe and effective under the

conditions set forth in its labeling, the agency must be presumed to have performed a precise balancing of risks and benefits

and to have established a specific labeling standard that leaves no room for different state-law judgments. In advancing this

argument, Wyeth relies not on any statement by Congress, but instead on the preamble to a 2006 FDA regulation governing the

content and format of prescription drug labels. See Brief for Petitioner 8, 11, 42, 45, and 50 (citing 71 Fed.Reg. 3922 (2006)). In

that preamble, the FDA declared that the FDCA establishes “both a ‘floor’ and a ‘ceiling,’ ” so that “FDA approval of labeling ...

preempts conflicting or contrary State law.” Id., at 3934–3935. It further stated that certain state-law actions, such as those

involving failure-to-warn claims, “threaten FDA's statutorily *576 prescribed role as the expert Federal agency responsible

for evaluating and regulating drugs.” Id., at 3935.

This Court has recognized that an agency regulation with the force of law can pre-empt conflicting state requirements. See,

e.g.,Geier v. American Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000); Hillsborough County v.

Automated Medical Laboratories, Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985). In such cases, the Court

has **1201 performed its own conflict determination, relying on the substance of state and federal law and not on agency

proclamations of pre-emption. We are faced with no such regulation in this case, but rather with an agency's mere assertion

that state law is an obstacle to achieving its statutory objectives. Because Congress has not authorized the FDA to pre-empt

state law directly, cf. 21 U.S.C. § 360k (authorizing the FDA to determine the scope of the Medical Devices Amendments' preemption clause), 9

 the question is what weight we should accord the FDA's opinion.

9

For similar examples, see 47 U.S.C. §§ 253(a), (d) (2000 ed.) (authorizing the Federal Communications Commission to pre-empt “any

[state] statute, regulation, or legal requirement” that “may prohibit or have the effect of prohibiting the ability of any entity to provide

any interstate or intrastate telecommunications service”); 30 U.S.C. § 1254(g) (2006 ed.) (pre-empting any statute that conflicts with

“the purposes and the requirements of this chapter” and permitting the Secretary of the Interior to “set forth any State law or regulation

which is preempted and superseded”); and 49 U.S.C. § 5125(d) (2000 ed. and Supp. V) (authorizing the Secretary of Transportation

to decide whether a state or local statute that conflicts with the regulation of hazardous waste transportation is pre-empted).
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[10] [11] In prior cases, we have given “some weight” to an agency's views about the impact of tort law on federal objectives

when “the subject matter is technica[l] and the relevant history and background are complex and extensive.” Geier, 529 U.S., at

883, 120 S.Ct. 1913. Even in such cases, however, we have not deferred to an agency's conclusion that state law is pre-empted.

Rather, we have attended to an agency's explanation of how state law affects the regulatory scheme. While *577 agencies

have no special authority to pronounce on pre-emption absent delegation by Congress, they do have a unique understanding of

the statutes they administer and an attendant ability to make informed determinations about how state requirements may pose

an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines, 312 U.S, at 67, 61

S.Ct. 399; see Geier, 529 U.S., at 883, 120 S.Ct. 1913;Lohr, 518 U.S., at 495–496, 116 S.Ct. 2240. The weight we accord the

agency's explanation of state law's impact on the federal scheme depends on its thoroughness, consistency, and persuasiveness.

Cf. United States v. Mead Corp., 533 U.S. 218, 234–235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001); Skidmore v. Swift & Co.,

323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944).

Under this standard, the FDA's 2006 preamble does not merit deference. When the FDA issued its notice of proposed rulemaking

in December 2000, it explained that the rule would “not contain policies that have federalism implications or that preempt State

law.” 65 Fed.Reg. 81103; see also 71 id., at 3969 (noting that the “proposed rule did not propose to preempt state law”). In

2006, the agency finalized the rule and, without offering States or other interested parties notice or opportunity for comment,

articulated a sweeping position on the FDCA's pre-emptive effect in the regulatory preamble. The agency's views on state law

are inherently suspect in light of this procedural failure.

Further, the preamble is at odds with what evidence we have of Congress' purposes, and it reverses the FDA's own longstanding

position without providing a reasoned explanation, including any discussion of how state law has interfered with the FDA's

regulation of drug labeling during decades of coexistence. The FDA's 2006 position plainly does not reflect the agency's own

view at all times relevant to this litigation. Not once prior to Levine's injury **1202 did the FDA suggest that state tort law

stood as an obstacle to its statutory mission. To the contrary, it cast federal labeling standards as a floor upon which States could

build and repeatedly disclaimed *578 any attempt to pre-empt failure-to-warn claims. For instance, in 1998, the FDA stated

that it did “not believe that the evolution of state tort law [would] cause the development of standards that would be at odds

with the agency's regulations.” 63 id., at 66384. It further noted that, in establishing “ minimal standards” for drug labels, it did

not intend “to preclude the states from imposing additional labeling requirements.” Ibid.

10

10 See also 44 Fed.Reg. 37437 (1979) (“It is not the intent of the FDA to influence the civil tort liability of the manufacturer”);

59 Fed.Reg. 3948 (1994) (“[P]roduct liability plays an important role in consumer protection”); Porter, The LohrDecision: FDA

Perspective and Position, 52 Food & Drug L.J. 7, 10 (1997) (former chief counsel to the FDA stating that the FDA regarded state

law as complementing the agency's mission of consumer protection).

In keeping with Congress' decision not to pre-empt common-law tort suits, it appears that the FDA traditionally regarded state

law as a complementary form of drug regulation. The FDA has limited resources to monitor the 11,000 drugs on the market, 11

and manufacturers have superior access *579 to information about their drugs, especially in the postmarketing phase as new

risks emerge. State tort suits uncover unknown drug hazards and provide incentives for drug manufacturers to disclose safety

risks promptly. They also serve a distinct compensatory function that may motivate injured persons to come forward with

information. Failure-to-warn actions, in particular, lend force to the FDCA's premise that manufacturers, not the FDA, bear

primary responsibility for their drug labeling at all times. Thus, the FDA long maintained that state law offers an additional, and

important, layer of consumer protection that complements FDA regulation. **1203 12 The agency's 2006 preamble represents

a dramatic change in position.

11 In 1955, the same year that the agency approved Wyeth's Phenergan application, an FDA advisory committee issued a report

finding “conclusively” that “the budget and staff of the Food and Drug Administration are inadequate to permit the discharge of

its existing responsibilities for the protection of the American public.” Citizens Advisory Committee on the FDA, Report to the

Secretary of Health, Education, and Welfare, H.R. Doc. No. 227, 84th Cong., 1st Sess., 53. Three recent studies have reached similar

conclusions. See FDA Science Board, Report of the Subcommittee on Science and Technology: FDA Science and Mission at Risk
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2, 6 (2007), online at http://www.fda.gov/ohrms/ dockets/ac/07/briefing/2007–4329b_02_01_FDA% 20Report% 20on% 20Science

% 20 and% 20Technology.pdf (all Internet materials as visited Feb. 23, 2009, and available in Clerk of Court's case file) (“[T]he

Agency suffers from serious scientific deficiencies and is not positioned to meet current or emerging regulatory responsibilities”);

National Academies, Institute of Medicine, The Future of Drug Safety: Promoting and Protecting the Health of the Public 193–194

(2007) (“The [FDA] lacks the resources needed to accomplish its large and complex mission .... There is widespread agreement that

resources for postmarketing drug safety work are especially inadequate and that resource limitations have hobbled the agency's ability

to improve and expand this essential component of its mission”); GAO, Drug Safety: Improvement Needed in FDA's Postmarket

Decision-making and Oversight Process 5 (GAO–06–402, 2006), http://www.gao.gov/new.items/d06402.pdf (“FDA lacks a clear

and effective process for making decisions about, and providing management oversight of, postmarket safety issues”); see also House

Committee on Oversight and Government Reform, Majority Staff Report, FDA Career Staff Objected to Agency Preemption Policies

4 (2008) (“[T]he Office of Chief Counsel ignored the warnings from FDA scientists and career officials that the preemption language

[of the 2006 preamble] was based on erroneous assertions about the ability of the drug approval process to ensure accurate and upto-date drug labels”).

12 See generally Brief for Former FDA Commissioners Drs. Donald Kennedy and David Kessler as Amici Curiae; see also Kessler &

Vladeck, A Critical Examination of the FDA's Efforts To Preempt Failure–To–Warn Claims, 96 Geo. L.J. 461, 463 (2008); Bates

v. Dow Agrosciences LLC, 544 U.S. 431, 451, 125 S.Ct. 1788, 161 L.Ed.2d 687 (2005) (noting that state tort suits “can serve as

a catalyst” by aiding in the exposure of new dangers and prompting a manufacturer or the federal agency to decide that a revised

label is required).

Largely based on the FDA's new position, Wyeth argues that this case presents a conflict between state and federal law analogous

to the one at issue in Geier. There, we held that state tort claims premised on Honda's failure to install airbags conflicted with a

federal regulation that did not require airbags for all cars. The Department of Transportation *580 (DOT) had promulgated a

rule that provided car manufacturers with a range of choices among passive restraint devices. Geier, 529 U.S., at 875, 120 S.Ct.

1913. Rejecting an “ ‘all airbag’ ” standard, the agency had called for a gradual phase-in of a mix of passive restraints in order

to spur technological development and win consumer acceptance. Id., at 879, 120 S.Ct. 1913. Because the plaintiff's claim was

that car manufacturers had a duty to install airbags, it presented an obstacle to achieving “the variety and mix of devices that

the federal regulation sought.” Id., at 881, 120 S.Ct. 1913.

Wyeth and the dissent contend that the regulatory scheme in this case is nearly identical, but, as we have described, it is quite

different. In Geier, the DOT conducted a formal rulemaking and then adopted a plan to phase in a mix of passive restraint

devices. Examining the rule itself and the DOT's contemporaneous record, which revealed the factors the agency had weighed

and the balance it had struck, we determined that state tort suits presented an obstacle to the federal scheme. After conducting

our own pre-emption analysis, we considered the agency's explanation of how state law interfered with its regulation, regarding

it as further support for our independent conclusion that the plaintiff's tort claim obstructed the federal regime.

By contrast, we have no occasion in this case to consider the pre-emptive effect of a specific agency regulation bearing the

force of law. And the FDA's newfound opinion, expressed in its 2006 preamble, that state law “frustrate[s] the agency's

implementation of its statutory mandate,” 71 Fed.Reg. 3934, does not merit deference for the reasons we have explained. 13

Indeed, the “complex and extensive” regulatory *581 history and background relevant to this case, Geier, 529 U.S., at 883,

120 S.Ct. 1913, undercut the FDA's recent pronouncements of pre-emption, as they reveal the longstanding coexistence of

state and federal law and the FDA's traditional recognition of state-law remedies—a recognition in place each time the agency

reviewed Wyeth's Phenergan label. 14

13 The United States' amicus brief is similarly undeserving of deference. Unlike the Government's brief in Geier v. American Honda

Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000), which explained the effects of state law on the DOT's regulation

in a manner consistent with the agency's prior accounts, see id., at 861, 120 S.Ct. 1913, the Government's explanation of federal drug

regulation departs markedly from the FDA's understanding at all times relevant to this case.

14 Wyeth's more specific contention—that this case resembles Geier because the FDA determined that no additional warning on IVpush administration was needed, thereby setting a ceiling on Phenergan's label—is belied by the record. As we have discussed, the

FDA did not consider and reject a stronger warning against IV-push injection of Phenergan. See also App. 249–250 (“[A] tort case
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is unlikely to obstruct the regulatory process when the record shows that the FDA has paid very little attention to the issues raised

by the parties at trial”).

**1204 In short, Wyeth has not persuaded us that failure-to-warn claims like Levine's obstruct the federal regulation of drug

labeling. Congress has repeatedly declined to pre-empt state law, and the FDA's recently adopted position that state tort suits

interfere with its statutory mandate is entitled to no weight. Although we recognize that some state-law claims might well

frustrate the achievement of congressional objectives, this is not such a case.

V

We conclude that it is not impossible for Wyeth to comply with its state and federal law obligations and that Levine's commonlaw claims do not stand as an obstacle to the accomplishment of Congress' purposes in the FDCA. Accordingly, the judgment

of the Vermont Supreme Court is affirmed.

It is so ordered.

Justice BREYER, concurring.

I write separately to emphasize the Court's statement that “we have no occasion in this case to consider the pre-emptive effect

of a specific agency regulation bearing the force of law.” Ante, at 1203. State tort law will sometimes help the *582 Food

and Drug Administration (FDA) “uncover unknown drug hazards and [encourage] drug manufacturers to disclose safety risks.”

Ante, at 1202. But it is also possible that state tort law will sometimes interfere with the FDA's desire to create a drug label

containing a specific set of cautions and instructions. I also note that some have argued that state tort law can sometimes raise

prices to the point where those who are sick are unable to obtain the drugs they need. See Lasagna, The Chilling Effect of Product

Liability on New Drug Development, in The Liability Maze 334, 335–336 (P. Huber & R. Litan eds.1991). The FDA may seek

to determine whether and when state tort law acts as a help or a hindrance to achieving the safe drug-related medical care that

Congress sought. Medtronic, Inc. v. Lohr, 518 U.S. 470, 506, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (BREYER, J., concurring

in part and concurring in judgment); cf. Bates v. Dow Agrosciences LLC, 544 U.S. 431, 454–455, 125 S.Ct. 1788, 161 L.Ed.2d

687 (2005) (BREYER, J., concurring). It may seek to embody those determinations in lawful specific regulations describing,

for example, when labeling requirements serve as a ceiling as well as a floor. And it is possible that such determinations would

have pre-emptive effect. See Lohr, supra, at 505, 116 S.Ct. 2240 (opinion of BREYER, J.) (citing Hillsborough County v.

Automated Medical Laboratories, Inc., 471 U.S. 707, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985)). I agree with the Court, however,

that such a regulation is not at issue in this case.

Justice THOMAS, concurring in the judgment.

I agree with the Court that the fact that the Food and Drug Administration (FDA) approved the label for petitioner Wyeth's

drug Phenergan does not pre-empt the state-law judgment before the Court. That judgment was based on a jury finding that the

label did not adequately warn of the risk involved in administering Phenergan through the IV-push injection method. Under

federal law, without prior approval from the FDA, Wyeth could have “add[ed] or strengthen[ed]” information on its label about

“a contraindication, *583 warning, precaution, or adverse reaction,” **1205 21 CFR § 314.70(c)(6)(iii)(A) (2008), or “about

dosage and administration that is intended to increase the safe use of the drug product,” § 314.70(c)(6)(iii)(C), in order to

“reflect newly acquired information,” including “new analyses of previously submitted data,” about the dangers of IV-push

administration of Phenergan, 73 Fed.Reg. 49603, 49609 (2008). It thus was possible for Wyeth to label and market Phenergan in

compliance with federal law while also providing additional warning information on its label beyond that previously approved

by the FDA. In addition, federal law does not give drug manufacturers an unconditional right to market their federally approved

drug at all times with the precise label initially approved by the FDA. The Vermont court's judgment in this case, therefore,

did not directly conflict with federal law and is not pre-empted.
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I write separately, however, because I cannot join the majority's implicit endorsement of far-reaching implied pre-emption

doctrines. In particular, I have become increasingly skeptical of this Court's “purposes and objectives” pre-emption

jurisprudence. Under this approach, the Court routinely invalidates state laws based on perceived conflicts with broad federal

policy objectives, legislative history, or generalized notions of congressional purposes that are not embodied within the text of

federal law. Because implied pre-emption doctrines that wander far from the statutory text are inconsistent with the Constitution,

I concur only in the judgment.

I

A

In order “to ensure the protection of our fundamental liberties,” Atascadero State Hospital v. Scanlon, 473 U.S. 234, 242, 105

S.Ct. 3142, 87 L.Ed.2d 171 (1985) (internal quotation marks omitted), the “Constitution establishes a system of dual sovereignty

between the States and the Federal Government.” *584 Gregory v. Ashcroft, 501 U.S. 452, 457, 111 S.Ct. 2395, 115 L.Ed.2d

410 (1991). The Framers adopted this “ ‘constitutionally mandated balance of power,’ ” Atascadero State Hospital, supra,

at 242, 105 S.Ct. 3142, to “reduce the risk of tyranny and abuse from either front,” because a “federalist structure of joint

sovereigns preserves to the people numerous advantages,” such as “a decentralized government that will be more sensitive to

the diverse needs of a heterogeneous society” and “increase[d] opportunity for citizen involvement in democratic processes,”

Gregory, supra, at 458, 111 S.Ct. 2395. Furthermore, as the Framers observed, the “ compound republic of America” provides

“a double security ... to the rights of the people” because “the power surrendered by the people is first divided between two

distinct governments, and then the portion allotted to each subdivided among distinct and separate departments.” The Federalist

No. 51, p. 266 (M. Beloff ed., 2d ed.1987).

Under this federalist system, “the States possess sovereignty concurrent with that of the Federal Government, subject only to

limitations imposed by the Supremacy Clause.” Tafflin v. Levitt, 493 U.S. 455, 458, 110 S.Ct. 792, 107 L.Ed.2d 887 (1990). In

this way, the Supremacy Clause gives the Federal Government “a decided advantage in [a] delicate balance” between federal

and state sovereigns. Gregory, 501 U.S., at 460, 111 S.Ct. 2395. “As long as it is acting within the powers granted it under the

Constitution, Congress may impose its will on the States.” Ibid. That is an “extraordinary power in a federalist system.” Ibid.

Nonetheless, the States retain substantial sovereign authority. U.S. Const., Amdt. 10 (“The powers not delegated to **1206

the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people”);

see also Alden v. Maine, 527 U.S. 706, 713, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999); Printz v. United States, 521 U.S. 898, 918–

922, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997); New York v. United States, 505 U.S. 144, 155–156, 112 S.Ct. 2408, 120 L.Ed.2d

120 (1992); Gregory,supra, at 457–459, 111 S.Ct. 2395;Tafflin, supra, at 458, 110 S.Ct. 792. In accordance with the text and

structure of the Constitution, “[t]he powers delegated by the proposed constitution to the *585 federal government, are few

and defined” and “[t]hose which are to remain in the state governments, are numerous and indefinite.” The Federalist No. 45,

at 237–238. Indeed, in protecting our constitutional government, “the preservation of the States, and the maintenance of their

governments, are as much within the design and care of the Constitution as the preservation of the Union and the maintenance

of the National government.” Texas v. White, 7 Wall. 700, 725, 19 L.Ed. 227 (1869), quoted in New York v. United States,

supra, at 162, 112 S.Ct. 2408.

As a result, in order to protect the delicate balance of power mandated by the Constitution, the Supremacy Clause must operate

only in accordance with its terms. The clause provides:

“This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or

which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every

State shall be bound thereby, any Thing in the Constitution or Laws of any state to the Contrary notwithstanding.”Art. VI, cl. 2.
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With respect to federal laws, then, the Supremacy Clause gives “supreme” status only to those that are “made in Pursuance”

of “[t]his Constitution.” Ibid.; see 3 J. Story, Commentaries on the Constitution of the United States § 1831, p. 694 (1833)

(hereinafter Story) (“It will be observed, that the supremacy of the laws is attached to those only, which are made in pursuance

of the constitution”).

Federal laws “made in Pursuance” of the Constitution must comply with two key structural limitations in the Constitution that

ensure that the Federal Government does not amass too much power at the expense of the States. The first structural limitation,

which the parties have not raised in this case, is “the Constitution's conferral upon Congress of not all governmental powers, but

only discrete, enumerated ones.” Printz,supra, at 919, 117 S.Ct. 2365; see also United States v. Morrison, *586 529 U.S. 598,

618, n. 8, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000); New York v. United States, supra, at 155–157, 112 S.Ct. 2408;McCulloch v.

Maryland, 4 Wheat. 316, 405, 4 L.Ed. 579 (1819) (“This government is acknowledged by all to be one of enumerated powers”). 1

1 This structural limitation may be implicated in a pre-emption case if the federal law at issue is beyond the scope of Congress'

enumerated powers. Expansion of congressional power through an “increasingly generous ... interpretation of the commerce power

of Congress,” for example, creates “a real risk that Congress will gradually erase the diffusion of power between State and Nation

on which the Framers based their faith in the efficiency and vitality of our Republic.” Garcia v. San Antonio Metropolitan Transit

Authority, 469 U.S. 528, 583–584, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985) (O'Connor, J., dissenting); see also Marbury v. Madison,

1 Cranch 137, 176, 2 L.Ed. 60 (1803) (“The powers of the legislature are defined, and limited; and that those limits may not be

mistaken, or forgotten, the constitution is written”).

The second structural limitation is the complex set of procedures that Congress **1207 and the President must follow to enact

“Laws of the United States.” See INS v. Chadha, 462 U.S. 919, 945–946, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983) (setting forth

the Constitution's Bicameral and Presentment Clauses, Art. I, § 7, cls. 2–3, which “prescribe and define the respective functions

of the Congress and of the Executive in the legislative process”). “[T]he Framers were acutely conscious that the bicameral

requirement and the Presentment Clauses would serve essential constitutional functions,” Chadha, 462 U.S., at 951, 103 S.Ct.

2764, by allowing the passage of legislation only after it has proceeded through “a step-by-step, deliberate and deliberative

process,” id., at 959, 103 S.Ct. 2764, that was “finely wrought and exhaustively considered” by the Framers, id., at 951, 103

S.Ct. 2764. The Supremacy Clause thus requires that pre-emptive effect be given only those to federal standards and policies that

are set forth in, or necessarily follow from, the statutory text that was produced through the constitutionally required bicameral

and presentment procedures. See 3 J. Story § 1831, at 694 (Actions of the Federal Government “which are not pursuant to its

constitutional powers, but which are invasions of the residuary authorities of the smaller societies,” are not “the *587 supreme

law of the land. They will be merely acts of usurpation, and will deserve to be treated as such”).

B

In light of these constitutional principles, I have become “increasing[ly] reluctan[t] to expand federal statutes beyond their terms

through doctrines of implied pre-emption.” Bates v. Dow Agrosciences LLC, 544 U.S. 431, 459, 125 S.Ct. 1788, 161 L.Ed.2d

687 (2005) (THOMAS, J., concurring in judgment in part and dissenting in part). My review of this Court's broad implied

pre-emption precedents, particularly its “purposes and objectives” pre-emption jurisprudence, has increased my concerns that

implied pre-emption doctrines have not always been constitutionally applied. Under the vague and “potentially boundless”

doctrine of “purposes and objectives” pre-emption, Geier v. American Honda Motor Co., 529 U.S. 861, 907, 120 S.Ct. 1913, 146

L.Ed.2d 914 (2000) (STEVENS, J., dissenting), for example, the Court has pre-empted state law based on its interpretation of

broad federal policy objectives, legislative history, or generalized notions of congressional purposes that are not contained within

the text of federal law. See, e.g.,Pharmaceutical Research and Mfrs. of America v. Walsh, 538 U.S. 644, 678, 123 S.Ct. 1855,

155 L.Ed.2d 889 (2003) (THOMAS, J., concurring in judgment) (referring to the “concomitant danger of invoking obstacle

pre-emption based on the arbitrary selection of one purpose to the exclusion of others”); Crosby v. National Foreign Trade

Council, 530 U.S. 363, 388–391, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000) (SCALIA, J., concurring in judgment) (criticizing the

majority's reliance on legislative history to discern statutory intent when that intent was “perfectly obvious on the face of th[e]
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statute”); Geier, supra, at 874–883, 120 S.Ct. 1913 (relying on regulatory history, agency comments, and the Government's

litigating position to determine that federal law pre-empted state law).

Congressional and agency musings, however, do not satisfy the Art. I, § 7 requirements for enactment of federal law and,

therefore, do not pre-empt state law under the Supremacy *588 Clause. When analyzing the pre-emptive effect of federal

statutes or regulations validly promulgated thereunder, “[e]vidence of pre-emptive purpose [must be] sought in the text and

structure of the [provision] at issue” to comply with the Constitution. **1208 CSX Transp., Inc. v. Easterwood, 507 U.S. 658,

664, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993); see also New York v. FERC, 535 U.S. 1, 18, 122 S.Ct. 1012, 152 L.Ed.2d 47

(2002) (“[A] federal agency may pre-empt state law only when and if it is acting within the scope of its congressional delegated

authority ... [for] an agency literally has no power to act, let alone pre-empt the validly enacted legislation of a sovereign State,

unless and until Congress confers power upon it” (internal quotation marks omitted; second alteration in original)); Camps

Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 617, 117 S.Ct. 1590, 137 L.Ed.2d 852 (1997) (THOMAS, J.,

dissenting) (noting that “treating unenacted congressional intent as if it were law would be constitutionally dubious”). Preemption analysis should not be “a freewheeling judicial inquiry into whether a state statute is in tension with federal objectives,

but an inquiry into whether the ordinary meanings of state and federal law conflict.” Bates, supra, at 459, 125 S.Ct. 1788

(THOMAS, J., concurring in judgment in part and dissenting in part) (internal quotation marks and citation omitted); see also

Geier, supra, at 911, 120 S.Ct. 1913 (STEVENS, J., dissenting) (“[P]re-emption analysis is, or at least should be, a matter of

precise statutory [or regulatory] construction rather than an exercise in free-form judicial policymaking” (internal quotation

marks omitted)). Pre-emption must turn on whether state law conflicts with the text of the relevant federal statute or with the

federal regulations authorized by that text. See Foster v. Love, 522 U.S. 67, 71, 118 S.Ct. 464, 139 L.Ed.2d 369 (1997) (finding

that conflict pre-emption question “turn[ed] entirely on the meaning of the state and federal statutes” at issue before the Court);

see also New York v. FERC, supra, at 19, 122 S.Ct. 1012.

II

This Court has determined that there are two categories of conflict pre-emption, both of which Wyeth contends are at *589

issue in this case. First, the Court has found pre-emption “where compliance with both federal and state regulations is a physical

impossibility for one engaged in interstate commerce.” Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142–143,

83 S.Ct. 1210, 10 L.Ed.2d 248 (1963). Second, the Court has determined that federal law pre-empts state law when, “under the

circumstances of [a] particular case, [state] law stands as an obstacle to the accomplishment and execution of the full purposes

and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941).

2

2 The majority's pre-emption analysis relies in part on a presumption against pre-emption. Ante, at 1194, and n. 3 (opinion of STEVENS,

J.). Because it is evident from the text of the relevant federal statutes and regulations themselves that the state-law judgment below

is not pre-empted, it is not necessary to decide whether, or to what extent, the presumption should apply in a case such as this one,

where Congress has not enacted an express-pre-emption clause. Cf. Altria Group, Inc. v. Good, 555 U.S. 70, ––––, 129 S.Ct. 538,

551–552, 172 L.Ed.2d 398 (2008) (THOMAS, J., dissenting) (rejecting the use of a presumption against pre-emption in express preemption cases).

A

Wyeth first contends that “it would have been impossible for it to comply with the state-law duty to modify Phenergan's labeling

without violating federal law.” Ante, at 1193 (opinion for the Court by STEVENS, J.). But, as the majority explains, the text of

the relevant federal statutory provisions and the corresponding regulations do not directly conflict with the state-law judgment

before us.
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This Court has used different formulations of the standard to be used in deciding **1209 whether state and federal law conflict,

and thus lead to pre-emption, under the “impossibility” doctrine. See, e.g.,Geier, supra, at 873, 120 S.Ct. 1913 (“a case in which

state law penalizes what federal law requires”); American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524

U.S. 214, 227, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998)(AT & T) (when state-law claims “directly conflict” with federal law),

cited in Geier, supra, at 874, 120 S.Ct. 1913 (describing AT & T as a “cas[e] involving impossibility”); Florida *590 Lime &

Avocado Growers, supra, at 142–143, 83 S.Ct. 1210 (“where compliance with both federal and state regulations is a physical

impossibility”). The Court has generally articulated a very narrow “impossibility standard,” see Crosby, 530 U.S., at 372–373,

120 S.Ct. 2288 (citing Florida Lime & Avocado Growers, supra, at 142–143, 83 S.Ct. 1210); see also Sprietsma v. Mercury

Marine, 537 U.S. 51, 64–65, 123 S.Ct. 518, 154 L.Ed.2d 466 (2002); United States v. Locke, 529 U.S. 89, 109, 120 S.Ct. 1135,

146 L.Ed.2d 69 (2000)—in part because the overly broad sweep of the Court's “purposes and objectives” approach, see infra,

at 1211 – 1217, has rendered it unnecessary for the Court to rely on “impossibility” pre-emption.

The Court, in fact, has not explained why a narrow “physical impossibility” standard is the best proxy for determining when state

and federal laws “directly conflict” for purposes of the Supremacy Clause. There could be instances where it is not “physically

impossible” to comply with both state and federal law, even when the state and federal laws give directly conflicting commands.

See Nelson, Preemption, 86 Va. L.Rev. 225, 260–261 (2000). For example, if federal law gives an individual the right to

engage in certain behavior that state law prohibits, the laws would give contradictory commands notwithstanding the fact that

an individual could comply with both by electing to refrain from the covered behavior. Ibid. Therefore, “physical impossibility”

may not be the most appropriate standard for determining whether the text of state and federal laws directly conflict. See ibid.

(concluding that the Supremacy Clause does not limit direct conflicts to cases with “physically impossible” conflicts and arguing

that evidence from the Founding supports a standard of “logical-contradiction”); see also AT & T, supra, at 227, 118 S.Ct. 1956

(requiring that the state-law claims “directly conflict” with federal law); 3 Story § 1836, at 701 (suggesting instead that a state

law is pre-empted by the Supremacy Clause when it is “repugnant to the constitution of the United States” (emphasis added)).

*591 Nonetheless, whatever the precise constitutional contours of implied pre-emption may be, I am satisfied that it does not

operate against respondent's judgment below. The text of the federal laws at issue do not require that the state-court judgment

at issue be pre-empted, under either the narrow “physical impossibility” standard, Florida Lime & Avocado Growers,supra, at

142–143, 83 S.Ct. 1210, or a more general “direc[t] conflict” standard, AT & T,supra, at 227, 118 S.Ct. 1956.

Under the FDA's “changes being effected” regulation, 21 CFR § 314.70(c)(6)(iii), which was promulgated pursuant to the

FDA's statutory authority, it is physically possible for Wyeth to market Phenergan in compliance with federal and Vermont law.

As the majority explains, Wyeth could have changed the warning on its label regarding IV-push without violating federal law.

See ante, at 1196 – 1197. The “changes being effected” regulation allows drug manufacturers to change their labels without the

FDA's preapproval if the changes “add or strengthen a contraindication, warning, precaution, or adverse **1210 reaction,” §

314.70(c)(6)(iii)(A), or “add or strengthen an instruction about dosage and administration that is intended to increase the safe

use of the drug product,” § 314.70(c)(6)(iii)(C), in order to “reflect newly acquired information,” including “new analyses of

previously submitted data,” 73 Fed.Reg. 49603, 49609. Under the terms of these regulations, after learning of new incidences

of gangrene-induced amputation resulting from the IV-push administration of Phenergan, see ante, at 1196 – 1197, federal law

gave Wyeth the authority to change Phenergan's label to “strengthen a ... warning,” “strengthen a ... precaution,” § 314.70(c)

(6)(iii)(A), or to “strengthen an instruction about ... administration [of the IV-push method] ... to increase the safe use of the

drug product,” § 314.70(c)(6)(iii)(C). Thus, it was physically possible for Wyeth to comply with a state-law requirement to

provide stronger warnings on Phenergan about the risks of the IV-push administration method *592 while continuing to market

Phenergan in compliance with federal law.

In addition, the text of the statutory provisions governing FDA drug labeling, and the regulations promulgated thereunder,

do not give drug manufacturers an unconditional right to market their federally approved drug at all times with the precise

label initially approved by the FDA. Thus, there is no “direct conflict” between the federal labeling law and the state-court

judgment. The statute prohibits the interstate marketing of any drug, except for those that are federally approved. See 21 U.S.C.

§ 355(a) (“No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of
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an application filed pursuant to subsection (b) or (j) of this section is effective with respect to such drug” (emphasis added)).

To say, as the statute does, that Wyeth may not market a drug without federal approval (i.e., without an FDA-approved label)

is not to say that federal approval gives Wyeth the unfettered right, for all time, to market its drug with the specific label that

was federally approved. Initial approval of a label amounts to a finding by the FDA that the label is safe for purposes of gaining

federal approval to market the drug. It does not represent a finding that the drug, as labeled, can never be deemed unsafe by

later federal action, or as in this case, the application of state law.

Instead, FDA regulations require a drug manufacturer—after initial federal approval of a drug's label—to revise the federally

approved label “to include a warning as soon as there is reasonable evidence of an association of a serious hazard with a

drug.”21 CFR § 201.80(e). Drug manufacturers are also required to “establish and maintain records and make reports” to the

FDA about “[a]ny adverse event associated with the use of a drug in humans, whether or not considered drug related,” after it

has received federal approval. §§ 314.80(a), (c), (j). In addition, the manufacturer must make periodic reports about “adverse

drug experience *593 [s]” associated with its drug and include “a history of actions taken since the last report because of

adverse drug experiences (for example, labeling changes or studies initiated).” §§ 314.80(c)(2)(i)-(ii). When such records and

reports are not made, the FDA can withdraw its approval of the drug. § 314.80(j); see also 21 U.S.C. § 355(e) (“The Secretary

may ... withdraw the approval of an application ... if the Secretary finds ... that the applicant has failed to establish a system for

maintaining required records, or has repeatedly or deliberately failed to maintain such records or to make required reports”).

The FDA may also determine that a drug is no longer safe for use based on “clinical or other experience, tests, or other scientific

**1211 data.” Ibid. (approval may be withdrawn if “the Secretary finds ... that clinical or other experience, tests, or other

scientific data show that such drug is unsafe for use under the conditions of use upon the basis of which the application was

approved”).

The text of the statutory provisions and the accompanying regulatory scheme governing the FDA drug approval process,

therefore, establish that the FDA's initial approval of a drug is not a guarantee that the drug's label will never need to be changed.

And nothing in the text of the statutory or regulatory scheme necessarily insulates Wyeth from liability under state law simply

because the FDA has approved a particular label.

In sum, the relevant federal law did not give Wyeth a right that the state-law judgment took away, and it was possible for

Wyeth to comply with both federal law and the Vermont-law judgment at issue here. The federal statute and regulations neither

prohibited the stronger warning label required by the state judgment, nor insulated Wyeth from the risk of state-law liability.

With no “direct conflict” between the federal and state law, then, the state-law judgment is not pre-empted. Cf. AT & T, 524 U.S.,

at 221–226, 118 S.Ct. 1956 (finding pre-emption where federal law forbade common carriers from extending communications

privileges requested by state-law *594 claims); Foster, 522 U.S., at 68–69, 118 S.Ct. 464 (finding pre-emption where the

federal statute required congressional elections on a particular date different from that provided by state statute).

B

Wyeth also contends that state and federal law conflict because “recognition of [this] state tort action creates an unacceptable

‘obstacle to the accomplishment and execution of the full purposes and objectives of Congress,’ Hines v. Davidowitz, 312

U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941), because it substitutes a lay jury's decision about drug labeling for the expert

judgment of the FDA.” Ante, at 1193 – 1194. This Court's entire body of “purposes and objectives” pre-emption jurisprudence

is inherently flawed. The cases improperly rely on legislative history, broad atextual notions of congressional purpose, and even

congressional inaction in order to pre-empt state law. See supra, at 1192 – 1194. I, therefore, cannot join the majority's analysis

of this claim, see ante, at 1199 – 1204, or its reaffirmation of the Court's “purposes and objectives” jurisprudence, ante, at 1199

– 1200 (analyzing congressional purposes); ante, at 1201 (quoting the “ ‘purposes and objectives' ” pre-emption standard from

Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941), and Geier, 529 U.S., at 883, 120 S.Ct. 1913);ante, at

1202 – 1203, and nn. 13–14 (analyzing this case in light of Geier, 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914).
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1

The Court first formulated its current “purposes and objectives” pre-emption standard in Hines when it considered whether

the federal Alien Registration Act pre-empted an Alien Registration Act adopted by the Commonwealth of Pennsylvania. The

Court did not find that the two statutes, by their terms, directly conflicted. See Hines, supra, at 59–60, and n. 1, 61 S.Ct. 399

(citing Pa. Stat. Ann., Tit. 35, §§ 1801–1806 (Purdon Supp.1940)); 312 U.S., at 60, and n. 5, 61 S.Ct. 399 (citing Act of June

28, 1940, 54 Stat. 670); 312 U.S., at 69–74, 61 S.Ct. 399 (analyzing numerous extratextual sources and finding pre-emption

without *595 concluding that the terms of the federal and state laws directly conflict); see also id., at 78, 61 S.Ct. 399 (noting

that “[i]t is conceded that the federal **1212 act in operation does not at any point conflict with the state statute” (Stone,

J., dissenting)). 3 Nonetheless, the Court determined that it was not confined to considering merely the terms of the relevant

federal law in conducting its pre-emption analysis. Rather, it went on to ask whether the state law “stands as an obstacle to the

accomplishment and execution of the full purposes and objectives of Congress.” Id., at 67, 61 S.Ct. 399.

3 According to the Court, the Pennsylvania Act required:

“every alien 18 years or over, with certain exceptions, to register once each year; provide such information as is required by

the statute, plus any ‘other information and details' that the Department of Labor and Industry may direct; pay $1 as an annual

registration fee; receive an alien identification card and carry it at all times; show the card whenever it may be demanded by any

police officer or any agent of the Department of Labor and Industry; and exhibit the card as a condition precedent to registering

a motor vehicle in his name or obtaining a license to operate one. ... Nonexempt aliens who fail to register are subject to a fine ...

or imprisonment .... For failure to carry an identification card or for failure to show it upon proper demand, the punishment is a

fine ... or imprisonment ....” Hines, 312 U.S., at 59–60, 61 S.Ct. 399 (footnote omitted).

The Court explained that the federal Alien Registration Act required:

“a single registration of aliens 14 years of age and over; detailed information specified by the Act, plus ‘such additional matters as

may be prescribed by the Commissioner, with the approval of the Attorney General’; finger-printing of all registrants; and secrecy

of the federal files .... No requirement that aliens carry a registration card to be exhibited to police or others is embodied in the

law, and only the wilful failure to register is made a criminal offense ....” Id., at 60–61, 61 S.Ct. 399.

In so doing, the Court looked far beyond the relevant federal statutory text and instead embarked on its own freeranging

speculation about what the purposes of the federal law must have been. See id., at 69–74, 61 S.Ct. 399. In addition to the meaning

of the relevant federal text, the Court attempted to discern “[t]he nature of the power exerted by Congress, the object sought to

be attained, and the character of the obligations *596 imposed by the law.” Id., at 70, 61 S.Ct. 399. To do so, the Court looked

in part to public sentiment, noting that “[o]pposition to laws ... singling out aliens as particularly dangerous and undesirable

groups, is deep-seated in this country.” Ibid. The Court also relied on statements by particular Members of Congress and on

congressional inaction, finding it pertinent that numerous bills with requirements similar to Pennsylvania's law had failed to

garner enough votes in Congress to become law. Id., at 71–73, and nn. 32–34, 61 S.Ct. 399. Concluding that these sources

revealed a federal purpose to “protect the personal liberties of law-abiding aliens through one uniform national registration

system,” the Court held that the Pennsylvania law was pre-empted. Id., at 74, 61 S.Ct. 399.

Justice Stone, in dissent, questioned the majority's decision to read an exclusive registration system for aliens into a statute

that did not specifically provide such exclusivity. See id., at 75, 61 S.Ct. 399. He noted his concern that state power would

be improperly diminished through a pre-emption doctrine driven by the Court's “own conceptions of a policy which Congress

ha[d] not expressed and which is not plainly to be inferred from the legislation which it ha[d] enacted.” Ibid. In his view,

nothing that Congress enacted had “denie[d] the states the practicable means of identifying their alien residents and of recording

their whereabouts.” Id., at 78, 61 S.Ct. 399. Yet, the Hines majority employed pre-emption to override numerous state alienregistration laws even though enacted federal law “at no point conflict[ed] with the state legislation and [was] **1213

harmonious with it.” Id., at 79, 61 S.Ct. 399. 4

4 According to Justice Stone, the Hines majority's analysis resembled an inquiry into whether the federal act “ ‘occupied the field,’

” rather than an application of simple conflict pre-emption principles. Id., at 78, 61 S.Ct. 399 (dissenting opinion). Regardless of
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whether Hines involved field or conflict pre-emption, the dissent accurately observed that in assessing the boundaries of the federal

law—i.e., the scope of its pre-emptive effect—the Court should look to the federal statute itself, rather than speculate about Congress'

unstated intentions. Id., at 78–79, 61 S.Ct. 399. See also Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 616–

617, 117 S.Ct. 1590, 137 L.Ed.2d 852 (1997) (THOMAS, J., dissenting) (noting that “field pre-emption is itself suspect, at least as

applied in the absence of a congressional command that a particular field be pre-empted”).

*597 2

The consequences of this Court's broad approach to “purposes and objectives” pre-emption are exemplified in this Court's

decision in Geier, which both the majority and the dissent incorporate into their analysis today. See ante, at 1202 – 1203, and nn.

13–14; post, at 1220 – 1222 (opinion of ALITO, J.). In Geier, pursuant to the National Traffic and Motor Vehicle Safety Act of

1966 (Safety Act), 80 Stat. 718, 15 U.S.C. § 1381 et seq. (1988 ed.), the Department of Transportation (DOT) had promulgated

a Federal Motor Vehicle Safety Standard that “required auto manufacturers to equip some but not all of their 1987 vehicles

with passive restraints.” 529 U.S., at 864–865, 120 S.Ct. 1913. The case required this Court to decide whether the Safety Act

pre-empted a state common-law tort action in which the plaintiff claimed that an auto manufacturer, though in compliance with

the federal standard, should nonetheless have equipped a 1987 automobile with airbags. Id., at 865, 120 S.Ct. 1913. The Court

first concluded that the Safety Act's express pre-emption provision and its saving clause, read together, did not expressly preempt state common-law claims. See id., at 867–868, 120 S.Ct. 1913. 5

 The Court *598 then proceeded to consider whether

the state action was nonetheless pre-empted as an “obstacle” to the purposes of the federal law. The Court held that the state

tort claim was pre-empted, relying in large part on comments that DOT made when promulgating its regulation, statements that

the Government made in its brief to the Court, and regulatory history that related to the federal regulation of passive restraints.

See id., at 874–886, 120 S.Ct. 1913.

5 The Safety Act's express pre-emption provision stated in part:

“Whenever a Federal motor vehicle safety standard established under this subchapter is in effect, no State ... shall have any authority

either to establish, or to continue in effect, with respect to any motor vehicle or item of motor vehicle equipment[,] any safety

standard applicable to the same aspect of performance of such vehicle or item of equipment which is not identical to the Federal

standard.” 15 U.S.C. § 1392(d) (1988 ed.).

The Safety Act also included a saving clause, which stated: “Compliance with any Federal motor vehicle safety standard issued

under this subchapter does not exempt any person from any liability under common law.” § 1397(k). The majority and dissent in

Geier agreed that the import of the express pre-emption provision and the saving clause, read together, was that by its terms, the

Safety Act did not expressly pre-empt state common-law actions. See Geier, 529 U.S., at 867–868, 120 S.Ct. 1913;id., at 895–

898, 120 S.Ct. 1913 (STEVENS, J., dissenting).

In particular, the majority found that DOT intended to “deliberately provid[e] the manufacturer[s] with a range of choices among

different passive restraint devices” and to “bring about a mix of different devices introduced gradually over time,” based on

comments that DOT made when promulgating its regulation, rather **1214 than the Safety Act's text. Id., at 875, 120 S.Ct.

1913. The majority also embarked on a judicial inquiry into “why and how DOT sought these objectives,” ibid., by considering

regulatory history and the Government's brief, which described DOT's safety standard as “ ‘embod[ying] the Secretary's policy

judgment that safety would best be promoted if manufacturers installed alternative protection systems in their fleets rather than

one particular system in every car,’ ” id., at 881, 120 S.Ct. 1913 (quoting Brief for United States as Amicus Curiae in Geier

v. American Honda Motor Co., O.T.1999, No. 98–1811, p. 25); see also 529 U.S., at 883–884, 120 S.Ct. 1913. Based on this

“ex post administrative litigating position and inferences from regulatory history and final commentary,” id., at 910–911, 120

S.Ct. 1913 (STEVENS, J., dissenting), the Court found that the state action was pre-empted because it would have required

manufacturers of all cars similar to that in which the plaintiff was injured to “install airbags rather than other passive restraint

systems” and would have, therefore, “presented an obstacle to the variety and mix of devices that the federal regulation sought”

to phase in gradually, id., at 881, 120 S.Ct. 1913.

The Court's decision in Geier to apply “purposes and objectives” pre-emption based on agency comments, regulatory *599

history, and agency litigating positions was especially flawed, given that it conflicted with the plain statutory text of the saving
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clause within the Safety Act, which explicitly preserved state common-law actions by providing that “[c]ompliance with any

Federal motor vehicle safety standard issued under this subchapter does not exempt any person from any liability under common

law,” 15 U.S.C. § 1397(k) (1988 ed.). 6 See Engine Mfrs. Assn. v. South Coast Air Quality Management Dist., 541 U.S. 246,

252, 124 S.Ct. 1756, 158 L.Ed.2d 529 (2004) (“Statutory construction must begin with the language employed by Congress

and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose” (internal quotation

marks omitted)); West Virginia Univ. Hospitals, Inc. v. Casey, 499 U.S. 83, 98, 111 S.Ct. 1138, 113 L.Ed.2d 68 (1991) (“The

best evidence of th[e] purpose [of a statute] is the statutory text adopted by both Houses of Congress and submitted to the

President”). In addition, the Court's reliance on its divined purpose of the federal law—to gradually phase in a mix of *600

passive restraint systems—in order to invalidate **1215 a State's imposition of a greater safety standard was contrary to the

more general express statutory goal of the Safety Act “to reduce traffic accidents and deaths and injuries to persons resulting

from traffic accidents,” 15 U.S.C. § 1381 (1988 ed.). This Court has repeatedly stated that when statutory language is plain, it

must be enforced according to its terms. See Jimenez v. Quarterman, 555 U.S. 113, 129 S.Ct. 681, 172 L.Ed.2d 475 (2009); see

also, e.g.,Dodd v. United States, 545 U.S. 353, 359, 125 S.Ct. 2478, 162 L.Ed.2d 343 (2005); Lamie v. United States Trustee,

540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530

U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000). The text in Geier “directly addressed the precise question at issue” before the

Court, so that should have been “the end of the matter; for the court, as well as the agency, must give effect to the unambiguously

expressed intent of Congress.” National Assn. of Home Builders v. Defenders of Wildlife, 551 U.S. 644, ––––, 127 S.Ct. 2518,

2534, 168 L.Ed.2d 467 (2007) (internal quotation marks omitted). With text that allowed state actions like the one at issue in

Geier, the Court had no authority to comb through agency commentaries to find a basis for an alternative conclusion.

6

In addition to the impropriety of looking beyond the plain text of the saving clause to regulatory history, DOT comments, and an

administrative litigating position to evaluate the Safety Act's pre-emptive effect, it is unclear that the Court in Geier accurately

assessed the federal objectives of the relevant federal law. As the dissent in Geier pointed out, the purpose of the Safety Act, as stated

by Congress, was generally “ ‘to reduce traffic accidents and deaths and injuries to persons resulting from traffic accidents.’ ” Id.,

at 888–889, 120 S.Ct. 1913 (opinion of STEVENS, J.) (quoting 15 U.S.C. § 1381 (1988 ed.)). On its face, that goal is of course

consistent with a state-law judgment that a particular vehicle needed a passive restraint system that would better protect persons from

death and injury during traffic accidents. Furthermore, the dissent observed that “by definition all of the standards established under

the Safety Act ... impose minimum, rather than fixed or maximum, requirements.” 529 U.S., at 903, 120 S.Ct. 1913 (citing 15 U.S.C.

§ 1391(2) (1988 ed.)). Thus, in the dissent's view, the requirements of the DOT regulation were not ceilings, and it was “obvious

that the Secretary favored a more rapid increase” than required by the regulations. 529 U.S., at 903, 120 S.Ct. 1913. That goal also

would be consistent with a state-law judgment finding that a manufacturer acted negligently when it failed to include an airbag in

a particular car. See id., at 903–904, 120 S.Ct. 1913.

Applying “purposes and objectives” pre-emption in Geier, as in any case, allowed this Court to vacate a judgment issued by

another sovereign based on nothing more than assumptions and goals that were untethered from the constitutionally enacted

federal law authorizing the federal regulatory standard that was before the Court. See Watters v. Wachovia Bank, N. A., 550

U.S. 1, 44, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007) (STEVENS, J., dissenting) (noting that pre-emption “affects the allocation

of powers among sovereigns”). “ ‘[A]n agency literally has no power to act, let alone pre-empt the [law] of a sovereign State,

unless and until Congress confers power upon it.’ ” New York v. FERC, 535 U.S., at 18, 122 S.Ct. 1012 (quoting Louisiana

Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 374, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986)). Thus, no agency or individual Member

of Congress can pre-empt a State's judgment by merely musing about goals or *601 intentions not found within or authorized

by the statutory text. See supra, at 1206 – 1208.

The Court's “purposes and objectives” pre-emption jurisprudence is also problematic because it encourages an overly expansive

reading of statutory text. The Court's desire to divine the broader purposes of the statute before it inevitably leads it to assume

that Congress wanted to pursue those policies “at all costs”—even when the text reflects a different balance. See Geier, supra,

at 904, 120 S.Ct. 1913 (STEVENS, J., dissenting) (finding no evidence to support the notion that the DOT Secretary intended

to advance the purposes of the safety standard “at all costs”); Nelson, 86 Va. L.Rev., at 279–280. As this Court has repeatedly

noted, “ ‘it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary

objective must be the law.’ ” E.g.,Norfolk Southern R. Co. v. Sorrell, 549 U.S. 158, 171, 127 S.Ct. 799, 166 L.Ed.2d 638
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(2007) (quoting Rodriguez v. United States, 480 U.S. 522, 526, 107 S.Ct. 1391, 94 L.Ed.2d 533 (1987)(per curiam)). Federal

legislation is often the result of compromise between legislators and “groups with marked but divergent interests.” See Ragsdale

v. Wolverine World Wide, Inc., 535 U.S. 81, 93–94, 122 S.Ct. 1155, 152 L.Ed.2d 167 (2002). Thus, a statute's text might reflect

a compromise between parties who wanted to pursue a particular goal to different extents. See, e.g.,ibid. (noting that the Family

and Medical Leave Act's provision of only 12 workweeks **1216 of yearly leave “was the result of compromise” that must

be given effect by courts); Silkwood v. Kerr–McGee Corp., 464 U.S. 238, 257, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984) (finding

that a state law was not pre-empted though it allegedly frustrated a primary purpose of the Atomic Energy Act because the

Act provided that its purpose was to be furthered only “to the extent it is consistent ‘with the health and safety of the public’

” (quoting 42 U.S.C. § 2013(d) (1982 ed.))); see also Manning, What Divides Textualists from Purposivists? 106 Colum. L.Rev.

70, 104 (2006) (“Legislators may compromise on a statute that does not fully address a perceived mischief, accepting half a loaf

to *602 facilitate a law's enactment”). Therefore, there is no factual basis for the assumption underlying the Court's “purposes

and objectives” pre-emption jurisprudence that every policy seemingly consistent with federal statutory text has necessarily

been authorized by Congress and warrants pre-emptive effect. Instead, our federal system in general, and the Supremacy Clause

in particular, accords pre-emptive effect to only those policies that are actually authorized by and effectuated through the

statutory text.

3

The majority, while reaching the right conclusion in this case, demonstrates once again how application of “purposes and

objectives” pre-emption requires inquiry into matters beyond the scope of proper judicial review. For example, the majority

relies heavily on Congress' failure “during the ... 70–year history” of the federal Food, Drug, and Cosmetic Act to enact an

express pre-emption provision that addresses approval of a drug label by the FDA. Ante, at 1200. That “silence on the issue,

coupled with [Congress'] certain awareness of the prevalence of state tort litigation,” the majority reasons, is evidence that

Congress did not intend for federal approval of drug labels to pre-empt state tort judgments. Ibid.; see also ante, at 1199 –

1200 (construing from inaction that Congress “[e]vidently [had] determined that widely available state rights of action provided

appropriate relief”). Certainly, the absence of a statutory provision pre-empting all state tort suits related to approved federal

drug labels is pertinent to a finding that such lawsuits are not pre-empted. But the relevance is in the fact that no statute explicitly

pre-empts the lawsuits, and not in any inferences that the Court may draw from congressional silence about the motivations or

policies underlying Congress' failure to act. See Brown v. Gardner, 513 U.S. 115, 121, 115 S.Ct. 552, 130 L.Ed.2d 462 (1994)

( “[C]ongressional silence lacks persuasive significance” (internal *603 quotation marks omitted)); O'Melveny & Myers v.

FDIC, 512 U.S. 79, 85, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994) (“[M]atters left unaddressed in [a comprehensive and detailed

federal] scheme are presumably left subject to the disposition provided by state law”); Camps Newfound, 520 U.S., at 616, 117

S.Ct. 1590 (“[O]ur pre-emption jurisprudence explicitly rejects the notion that mere congressional silence on a particular issue

may be read as pre-empting state law”).

In this case, the majority has concluded from silence that Congress believed state lawsuits pose no obstacle to federal drugapproval objectives. See ante, at 1200. That is the required conclusion, but only because it is compelled by the text of the relevant

statutory and regulatory provisions, not judicial suppositions about Congress' unstated goals. The fact that the Court reaches

the proper conclusion does not justify its speculation about the reasons for congressional inaction. In this case, the Court has

relied on the perceived congressional policies underlying inaction **1217 to find that state law is not pre-empted. But once the

Court shows a willingness to guess at the intent underlying congressional inaction, the Court could just as easily rely on its own

perceptions regarding congressional inaction to give unduly broad pre-emptive effect to federal law. See, e.g.,American Ins.

Assn. v. Garamendi, 539 U.S. 396, 401, 405–408, 429, 123 S.Ct. 2374, 156 L.Ed.2d 376 (2003) (finding that Congress' failure

to pass legislation indicating that it disagreed with the President's executive agreement supported, at least in part, the Court's

determination that the agreement pre-empted state law). Either approach is illegitimate. Under the Supremacy Clause, state law

is pre-empted only by federal law “made in Pursuance” of the Constitution, Art. VI, cl. 2—not by extratextual considerations

of the purposes underlying congressional inaction. See Hoffman v. Connecticut Dept. of Income Maintenance, 492 U.S. 96,

104, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989) (plurality opinion) (finding that policy arguments that “are not based in the text of
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the statute ... *604 are not helpful”); TVA v. Hill, 437 U.S. 153, 194, 98 S.Ct. 2279, 57 L.Ed.2d 117 (1978) (“Our individual

appraisal of the wisdom or unwisdom of a particular course consciously selected by the Congress is to be put aside in the process

of interpreting a statute”). Our role, then, is merely “to interpret the language of the statute[s] enacted by Congress.” Barnhart

v. Sigmon Coal Co., 534 U.S. 438, 461, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002).

III

The origins of this Court's “purposes and objectives” pre-emption jurisprudence in Hines, and its broad application in cases

like Geier, illustrate that this brand of the Court's pre-emption jurisprudence facilitates freewheeling, extratextual, and broad

evaluations of the “purposes and objectives” embodied within federal law. This, in turn, leads to decisions giving improperly

broad pre-emptive effect to judicially manufactured policies, rather than to the statutory text enacted by Congress pursuant to

the Constitution and the agency actions authorized thereby. Because such a sweeping approach to pre-emption leads to the

illegitimate—and thus, unconstitutional—invalidation of state laws, I can no longer assent to a doctrine that pre-empts state

laws merely because they “stan[d] as an obstacle to the accomplishment and execution of the full purposes and objectives” of

federal law, Hines, 312 U.S., at 67, 61 S.Ct. 399, as perceived by this Court. I therefore respectfully concur only in the judgment.

Justice ALITO, with whom THE CHIEF JUSTICE and Justice SCALIA join, dissenting.

This case illustrates that tragic facts make bad law. The Court holds that a state tort jury, rather than the Food and Drug

Administration (FDA), is ultimately responsible for regulating warning labels for prescription drugs. That result cannot be

reconciled with Geier v. American Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000), or general

principles of conflict pre-emption. I respectfully dissent.

*605 I

The Court frames the question presented as a “narro[w]” one—namely, whether Wyeth has a duty to provide “an adequate

warning about using the IV-push method” to administer Phenergan. Ante, at 1194. But that ignores the antecedent question

of who—the FDA or a jury in Vermont—has the authority and responsibility for determining the “adequacy” of Phenergan's

warnings. Moreover, it is unclear how a “stronger” warning could have helped respondent, see ante, at 1199; after **1218 all,

the physician's assistant who treated her disregarded at least six separate warnings that are already on Phenergan's labeling, so

respondent would be hard pressed to prove that a seventh would have made a difference. 1

1

Indeed, respondent conceded below that Wyeth did propose an adequate warning of Phenergan's risks. See Plaintiff Diana Levine's

Memorandum in Opposition to Wyeth's Motion for Summary Judgment in Levine v. American Home Products Corp. (now Wyeth),

No. 670–12–01 Wncv (Super. Ct. Washington Cty., Vt.), ¶ 7, p. 26. Specifically, respondent noted: “In 1988, Wyeth proposed

language that would have prevented this accident by requiring a running IV and explaining why a running IV will address and reduce

the risk [of intra-arterial injection].” Ibid. See also id., at 24 (“Although not strong enough, this improved the labeling instruction, if

followed, would have prevented the inadvertent administration of Phenergan into an artery ...”). The FDA rejected Wyeth's proposal.

See App. 359.

More to the point, the question presented by this case is not a “narrow” one, and it does not concern whether Phenergan's label

should bear a “stronger” warning. Rather, the real issue is whether a state tort jury can countermand the FDA's considered

judgment that Phenergan's FDA-mandated warning label renders its intravenous (IV) use “safe.” Indeed, respondent's amended

complaint alleged that Phenergan is “not reasonably safe for intravenous administration,” App. 15, ¶ 6; respondent's attorney

told the jury that Phenergan's label should say, “ ‘Do not use this drug intravenously,’ ” id., at 32; respondent's expert told the

*606 jury, “I think the drug should be labeled ‘Not for IV use,’ ” id., at 59; and during his closing argument, respondent's
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attorney told the jury, “Thank God we don't rely on the FDA to ... make the safe[ty] decision. You will make the decision. ...

The FDA doesn't make the decision, you do,” id., at 211–212. 2

2 Moreover, in the trial judge's final charge, he told the jury that “the critical factual issue which you must decide” is whether Phenergan's

FDA-mandated label reflects a proper balance between “the risks and benefits of intravenous administration and the potential for

injury to patients.” Id., at 220. See also 183 Vt. 76, ––––, 944 A.2d 179, 182 (2006) (recognizing that respondent's argument is that

Phenergan's “label should not have allowed IV push as a means of administration”).

Federal law, however, does rely on the FDA to make safety determinations like the one it made here. The FDA has long

known about the risks associated with IV push in general and its use to administer Phenergan in particular. Whether wisely

or not, the FDA has concluded—over the course of extensive, 54–year–long regulatory proceedings—that the drug is “safe”

and “effective” when used in accordance with its FDA-mandated labeling. The unfortunate fact that respondent's healthcare

providers ignored Phenergan's labeling may make this an ideal medical-malpractice case. 3 But turning a common-law tort suit

into a “frontal assault” on the FDA's regulatory regime for drug labeling upsets the well-settled meaning of the Supremacy

Clause and our conflict pre-emption jurisprudence. Brief for United States as AmicusCuriae 21.

3 Respondent sued her physician, physician's assistant, and hospital for malpractice. After the parties settled that suit for an undisclosed

sum, respondent's physician sent her a letter in which he admitted “responsibility” for her injury and expressed his “profoun[d]

regre[t]” and “remors[e]” for his actions. 1 Tr. 178–179 (Mar. 8, 2004) (testimony of Dr. John Matthew); see also App. 102–103

(testimony of physician's assistant Jessica Fisch) (noting that her “sense of grief” was so “great” that she “would have gladly cut

off [her own] arm” and given it to respondent). Thereafter, both the physician and the physician's assistant agreed to testify on

respondent's behalf in her suit against Wyeth.

*607 **1219 II

A

To the extent that “[t]he purpose of Congress is the ultimate touchstone in every pre-emption case,” Medtronic, Inc. v. Lohr, 518

U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (internal quotation marks omitted), Congress made its “purpose” plain

in authorizing the FDA—not state tort juries—to determine when and under what circumstances a drug is “safe.” “[T]he process

for approving new drugs is at least as rigorous as the premarket approval process for medical devices,” Riegel v. Medtronic,

Inc., 552 U.S. 312, ––––, 128 S.Ct. 999, 1018, 169 L.Ed.2d 892 (2008) (GINSBURG, J., dissenting), and we held that the latter

pre-empted a state-law tort suit that conflicted with the FDA's determination that a medical device was “safe,” id., at ––––,

128 S.Ct., at 1018 (opinion of the Court).

Under the Federal Food, Drug, and Cosmetic Act (FDCA), a drug manufacturer may not market a new drug before first

submitting a new drug application (NDA) to the FDA and receiving the agency's approval. See 21 U.S.C. § 355(a). An NDA

must contain, among other things, “the labeling proposed to be used for such drug,” § 355(b)(1)(F), “full reports of investigations

which have been made to show whether or not such drug is safe for use and whether such drug is effective in use,” § 355(b)

(1)(A), and “a discussion of why the benefits exceed the risks [of the drug] under the conditions stated in the labeling,” 21 CFR §

314.50(d)(5)(viii) (2008). The FDA will approve an NDA only if the agency finds, among other things, that the drug is “safe for

use under the conditions prescribed, recommended, or suggested in the proposed labeling thereof,” there is “substantial evidence

that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended,

or suggested in the proposed labeling thereof,” and the proposed labeling is not “false or misleading in any particular.” 21

U.S.C. § 355(d).

*608 After the FDA approves a drug, the manufacturer remains under an obligation to investigate and report any adverse

events associated with the drug, see 21 CFR § 314.80, and must periodically submit any new information that may affect the

FDA's previous conclusions about the safety, effectiveness, or labeling of the drug, 21 U.S.C. § 355(k). If the FDA finds that
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the drug is not “safe” when used in accordance with its labeling, the agency “shall” withdraw its approval of the drug. § 355(e).

The FDA also “shall” deem a drug “misbranded” if “it is dangerous to health when used in the dosage or manner, or with the

frequency or duration prescribed, recommended, or suggested in the labeling thereof.” § 352(j).

Thus, a drug's warning label “serves as the standard under which the FDA determines whether a product is safe and effective.” 50

Fed.Reg. 7470 (1985). Labeling is “[t]he centerpiece of risk management,” as it “communicates to health care practitioners the

agency's formal, authoritative conclusions regarding the conditions under which the product can be used safely and effectively.”

71 Fed.Reg. 3934 (2006). The FDA has underscored the importance it places on drug labels by promulgating comprehensive

regulations—spanning an entire part of the Code of Federal Regulations, see 21 CFR pt. 201, with seven subparts and 70

separate sections—that set forth drug manufacturers' labeling obligations. Under those regulations, the FDA must be satisfied

that a drug's warning label contains, among other things, “a summary of the essential scientific information needed for the safe

and effective use of the drug,” § 201.56(1), including a **1220 description of “clinically significant adverse reactions,” “other

potential safety hazards,” “limitations in use imposed by them, ... and steps that should be taken if they occur,” § 201.57(c)(6)

(i). Neither the FDCA nor its implementing regulations suggest that juries may second-guess the FDA's labeling decisions.

*609 B

1

Where the FDA determines, in accordance with its statutory mandate, that a drug is on balance “safe,” our conflict preemption cases prohibit any State from countermanding that determination. See, e.g.,Buckman Co. v. Plaintiffs' Legal Comm.,

531 U.S. 341, 348, 121 S.Ct. 1012, 148 L.Ed.2d 854 (2001) (after the FDA has struck “a somewhat delicate balance of statutory

objectives” and determined that petitioner submitted a valid application to manufacture a medical device, a State may not use

common law to negate it); International Paper Co. v. Ouellette, 479 U.S. 481, 494, 107 S.Ct. 805, 93 L.Ed.2d 883 (1987)

(after the EPA has struck “the balance of public and private interests so carefully addressed by” the federal permitting regime

for water pollution, a State may not use nuisance law to “upse[t]” it); Chicago & North Western Transp. Co. v. Kalo Brick &

Tile Co., 450 U.S. 311, 321, 101 S.Ct. 1124, 67 L.Ed.2d 258 (1981) (after the Interstate Commerce Commission has struck

a “balance” between competing interests in permitting the abandonment of a railroad line, a State may not use statutory or

common law to negate it).

Thus, as the Court itself recognizes, it is irrelevant in conflict pre-emption cases whether Congress “enacted an express preemption provision at some point during the FDCA's 70–year history.” Ante, at 1200; see also Geier, 529 U.S., at 869, 120

S.Ct. 1913 (holding the absence of an express pre-emption clause “does not bar the ordinary working of conflict pre-emption

principles”). Rather, the ordinary principles of conflict pre-emption turn solely on whether a State has upset the regulatory

balance struck by the federal agency. Id., at 884–885, 120 S.Ct. 1913; see also Chicago & North Western Transp. Co., supra, at

317, 101 S.Ct. 1124 (describing conflict pre-emption as “a two-step process of first ascertaining the construction of the [federal

and state laws] and then determining the constitutional question *610 whether they are actually in conflict” (internal quotation

marks omitted)).

2

A faithful application of this Court's conflict pre-emption cases compels the conclusion that the FDA's 40–year–long effort

to regulate the safety and efficacy of Phenergan pre-empts respondent's tort suit. Indeed, that result follows directly from our

conclusion in Geier.
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Geier arose under the National Traffic and Motor Safety Vehicle Act of 1966, which directs the Secretary of the Department

of Transportation (DOT) to “establish by order ... motor vehicle safety standards,” 15 U.S.C. § 1392(a) (1988 ed.), which are

defined as “minimum standard[s] for motor vehicle performance, or motor vehicle equipment performance,” § 1391(2). Acting

pursuant to that statutory mandate, the Secretary of Transportation promulgated Federal Motor Vehicle Safety Standard 208,

which required car manufacturers to include passive restraint systems (i.e., devices that work automatically to protect occupants

from injury during a collision) in a certain percentage of their cars built in or after 1987. See 49 CFR § 571.208 (1999). Standard

208 did not require installation of any particular type of passive restraint; instead, it gave manufacturers the option to install

automatic **1221 seatbelts, airbags, or any other suitable technology that they might develop, provided the restraint(s) met

the performance requirements specified in the rule. Ibid.

Alexis Geier drove her 1987 Honda Accord into a tree, and although she was wearing her seatbelt, she nonetheless suffered

serious injuries. She then sued Honda under state tort law, alleging that her car was negligently and defectively designed because

it lacked a driver's-side airbag. She argued that Congress had empowered the Secretary to set only “minimum standard[s]”

for vehicle safety. 15 U.S.C. § 1391(2). She also emphasized that the National Traffic and Motor Safety Vehicle Act contains

a saving clause, which *611 provides that “[c]ompliance with any Federal motor vehicle safety standard issued under this

subchapter does not exempt any person from any liability under common law.” § 1397(k).

Notwithstanding the statute's saving clause, and notwithstanding the fact that Congress gave the Secretary authority to set only

“minimum” safety standards, we held Geier's state tort suit pre-empted. In reaching that result, we relied heavily on the view of

the Secretary of Transportation—expressed in an amicus brief—that Standard 208 “ ‘embodies the Secretary's policy judgment

that safety would best be promoted if manufacturers installed alternative protection systems in their fleets rather than one

particular system in every car.’ ” 529 U.S., at 881, 120 S.Ct. 1913 (quoting Brief for United States as Amicus Curiae, O.T.1999,

No. 98–1811, p. 25). Because the Secretary determined that a menu of alternative technologies was “safe,” the doctrine of

conflict pre-emption barred Geier's efforts to deem some of those federally approved alternatives “unsafe” under state tort law.

The same rationale applies here. Through Phenergan's label, the FDA offered medical professionals a menu of federally

approved, “safe” and “effective” alternatives—including IV push—for administering the drug. Through a state tort suit,

respondent attempted to deem IV push “unsafe” and “ineffective.” To be sure, federal law does not prohibit Wyeth from

contraindicating IV push, just as federal law did not prohibit Honda from installing airbags in all its cars. But just as we held that

States may not compel the latter, so, too, are States precluded from compelling the former. See also Fidelity Fed. Sav. & Loan

Assn. v. de la Cuesta, 458 U.S. 141, 155, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) (“The conflict does not evaporate because

the [agency's] regulation simply permits, but does not compel,” the action forbidden by state law). If anything, a finding of

pre-emption is even more appropriate here because the FDCA—unlike the National Traffic and Motor Safety Vehicle Act—

contains no evidence that Congress intended *612 the FDA to set only “minimum standards,” and the FDCA does not contain

a saving clause. 4 SEE ALSO **1222 ante, at 1200 (conceding congress' “ silence” on the issue).

4 To be sure, Congress recognized the principles of conflict pre-emption in the FDCA. See Drug Amendments of 1962, § 202, 76 Stat.

793 (“Nothing in the amendments made by this Act to the Federal Food, Drug, and Cosmetic Act shall be construed as invalidating

any provision of State law ... unless there is a direct and positive conflict between such amendments and such provision of State

law”). But a provision that simply recognizes the background principles of conflict pre-emption is not a traditional “saving clause,”

and even if it were, it would not displace our conflict-pre-emption analysis. See Geier v. American Honda Motor Co., 529 U.S. 861,

869, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000) (“[T]he saving clause ... does not bar the ordinary working of conflict pre-emption

principles”); id., at 873–874, 120 S.Ct. 1913 (“The Court has ... refused to read general ‘saving’ provisions to tolerate actual conflict

both in cases involving impossibility and in ‘frustration-of-purpose’ cases” (emphasis deleted and citation omitted)).

III

In its attempt to evade Geier 's applicability to this case, the Court commits both factual and legal errors. First, as a factual

matter, it is demonstrably untrue that the FDA failed to consider (and strike a “balance” between) the specific costs and benefits
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associated with IV push. Second, as a legal matter, Geier does not stand for the legal propositions espoused by the dissenters

(and specifically rejected by the majority) in that case. Third, drug labeling by jury verdict undermines both our broader preemption jurisprudence and the broader workability of the federal drug-labeling regime.

A

Phenergan's warning label has been subject to the FDA's strict regulatory oversight since the 1950's. For at least the last 34 years,

the FDA has focused specifically on whether IV-push administration of Phenergan is “safe” and “effective” when performed

in accordance with Phenergan's label. The agency's ultimate decision—to retain IV push as one *613 means for administering

Phenergan, albeit subject to stringent warnings—is reflected in the plain text of Phenergan's label (sometimes in boldfaced

font and all-capital letters). And the record contains ample evidence that the FDA specifically considered and reconsidered the

strength of Phenergan's IV-push-related warnings in light of new scientific and medical data. The majority's factual assertions

to the contrary are mistaken.

1

The FDA's focus on IV push as a means of administering Phenergan dates back at least to 1975. In August of that year, several

representatives from both the FDA and Wyeth met to discuss Phenergan's warning label. At that meeting, the FDA specifically

proposed “that Phenergan Injection should not be used in Tubex & reg;.” 2 Record 583, 586 (Plaintiff's Trial Exh. 17, Internal

Correspondence from W.E. Langeland to File (Sept. 5, 1975) (hereinafter 1975 Memo)). “Tubex” is a syringe system used

exclusively for IV push. See App. 43. An FDA official explained that the agency's concerns arose from medical-malpractice

lawsuits involving IV push of the drug, see 1975 Memo 586, and that the FDA was aware of “5 cases involving amputation

where the drug had been administered by Tubex together with several additional cases involving necrosis,” id., at 586–587.

Rather than contraindicating Phenergan for IV push, however, the agency and Wyeth agreed “that there was a need for better

instruction regarding the problems of intraarterial injection.” Id., at 587.

The next year, the FDA convened an advisory committee to study, among other things, the risks associated with the Tubex

system and IV push. App. 294. At the conclusion of its study, the committee recommended an additional IV-push-specific

warning for Phenergan's label, see ibid., but did not recommend eliminating IV push from the drug label altogether. In response

to the committee's recommendations, the FDA instructed Wyeth to make several changes to *614 strengthen Phenergan's

label, including the addition of upper case warnings related to IV push. See id., at 279–280, 282–283.

**1223 In 1987, the FDA directed Wyeth to amend its label to include the following text:

“ ‘[1] When used intravenously, [Phenergan] should be given in a concentration no greater than 25 mg/ml and at a rate not to

exceed 25 mg/minute. [2] Injection through a properly running intravenous infusion may enhance the possibility of detecting

arterial placement.’ ” Id., at 311–312.

The first of the two quoted sentences refers specifically to IV push; as respondent's medical expert testified at trial, the label's

recommended rate of administration (not to exceed 25 mg per minute) refers to “IV push, as opposed to say being in a bag

and dripped over a couple of hours.” Id., at 52. The second of the two quoted sentences refers to IV drip. See id., at 15–16

(emphasizing that a “running IV” is the same thing as “IV drip”).

In its 1987 labeling order, the FDA cited voluminous materials to “suppor[t]” its new and stronger warnings related to IV

push and the preferability of IV drip. 5Id., at 313. One of those articles specifically discussed the relative advantages and

disadvantages of IV drip compared to IV push, as *615 well as the costs and benefits of administering Phenergan via IV push. 6

The FDA also cited published case reports from the 1960's of gangrene caused by the intra-arterial injection of Phenergan,

7

 and
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the FDA instructed Wyeth to amend Phenergan's label in accordance with the latest medical research. 8 The FDA also studied

drugs similar to Phenergan and cited numerous cautionary articles—one of which urged the agency to consider contraindicating

**1224 such drugs for IV use altogether. 9

5 The FDA cited numerous articles that generally discuss the costs and benefits associated with IV push. See, e.g., Nahrwold & Phelps,

Inadvertent Intra–Arterial Injection of Mephenteramine, 70 Rocky Mountain Medical J. 38 (Sept.1973) (cited in App. 314, no. 14);

Albo, Cheung, Ruth, Snyder, & Reemtsma, Effect of Intra–Arterial Injections of Barbituates, 120 Am. J. of Surgery 676 (1970) (cited

in App. 314, no. 12); Corser, Masey, Jacob, Kernoff, & Browne, Ischaemia Following Self-administered Intra-arterial Injection of

Methylphenidate and Diamorphine, 40 Anaesthesia 51 (1985) (cited in App. 314, no. 9); Correspondence Regarding Thiopental and

Thiamylal (3 letters), 59 Anesthesiology 153 (1983) (cited in App. 314, no. 11); Miller, Arthur, & Stratigos, Intra-arterial Injection

of a Barbituate, 23 Anesthesia Progress 25 (1976) (cited in App. 315, no. 19).

6

See Webb & Lampert, Accidental Arterial Injections, 101 Am. J. Obstetrics & Gynecology 365 (1968) (cited in App. 313, no. 5).

7

See Hager & Wilson, Gangrene of the Hand Following Intra-arterial Injection, 94 Archives of Surgery 86 (1967) (cited in App. 313,

no. 7); Enloe, Sylvester, & Morris, Hazards of Intra–Arterial Injection of Hydroxyzine, 16 Canadian Anaesthetists' Society J. 425

(1969) (hereinafter Enloe) (noting “recent reports” of “the occurrence of severe necrosis and gangrene following [administration of]

promethazine (Phenergan & reg;)” (cited in App. 314, no. 15)). See also Mostafavi & Samimi, Accidental Intra-arterial Injection of

Promethazine HCl During General Anesthesia, 35 Anesthesiology 645 (1971) (reporting a case of gangrene, which required partial

amputation of three fingers, after Phenergan was inadvertently pushed into an artery in the “antecubital” area); Promethazine, p. 7,

in Clinical Pharmacology (Gold Standard Multimedia Inc. CD–ROM, version 1.16 (1998) (noting that “[i]nadvertent intra-arterial

injection [of Phenergan] can result in arteriospasm ... and development of gangrene”)).

8 Hager and Wilson noted that the most common reactions to intra-arterial injections of drugs like Phenergan include “[i]mmediate,

severe, burning pain,” as well as “blanching.” 94 Archives of Surgery, at 87–88. The FDA required Wyeth to include Hager and

Wilson's observations on Phenergan's label. See App. 311 (requiring the label to warn that “ ‘[t]he first sign [of an intra-arterial

injection] may be the patient's reaction to a sensation of fiery burning’ ” pain and “ ‘[b]lanching’ ”).

9

See Enloe 427 (discussing hydroxyzine—an antihistamine with chemical properties similar to those of Phenergan—and suggesting

its “temporary” benefits can never outweigh the risks of intra-arterial injection); see also Goldsmith & Trieger, Accidental Intra–

Arterial Injection: A Medical Emergency, 22 Anesthesia Progress 180 (1975) (noting the risks of intra-arterial administration of

hydroxyzine) (cited in App. 315, no. 18); Klatte, Brooks, & Rhamy, Toxicity of Intra–Arterial Barbituates and Tranquilizing Drugs,

92 Radiology 700 (1969) (same) (cited in App. 314, no. 13). With full knowledge of those risks, FDA retained IV push for Phenergan,

although the agency required Wyeth to incorporate observations from the Enloe article into Phenergan's label. Compare Enloe 427

(arguing that “every precaution should be taken to avoid inadvertent intra-arterial injection,” including the use of “an obviously wellfunctioning venoclysis”), with App. 312 (FDA's 1987 changes to Phenergan's label). In contrast, at some time around 1970, the

FDA prohibited all intravenous use of hydroxyzine. See id., at 79 (testimony of Dr. Harold Green). The FDA's decision to regulate

the two drugs differently—notwithstanding (1) the agency's knowledge of the risks associated with both drugs and (2) the agency's

recognition of the relevance of hydroxyzine-related articles and case reports in its regulation of Phenergan—further demonstrates

that the FDA intentionally preserved IV-push administration for Phenergan. See also Haas, Correspondence, 33 Anesthesia Progress

281 (1986) (“[Hydroxyzine's] restriction does not lie with the medicine itself, but in the practice and malpractice of intravenous

techniques. Unfortunately, the practitioner who knows how to treat injection technique problems is usually not the practitioner with

the intravenous technique problems”).

*616 In “support” of its labeling order, the FDA also cited numerous articles that singled out the inner crook of the elbow

—known as the “antecubital fossa” in the medical community—which is both a commonly used injection site, see id., at 70

(noting that respondent's injection was pushed into “the antecubital space”), and a universally recognized high-risk area for

inadvertent intra-arterial injections. One of the articles explained:

“Because of the numerous superficial positions the ulnar artery might occupy, it has often been entered during attempted

venipuncture [of the antecubital fossa]. ... However, the brachial and the radial arteries might also be quite superficial in the

elbow region .... The arterial variations of the arm, especially in and about the cubital fossa, are common and numerous.

If venipuncture must be performed in this area, a higher index of suspicion must be maintained to forestall misdirected
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injections.” Stone & Donnelly, The Accidental Intra-arterial Injection of Thiopental, 22 Anesthesiology *617 995, 996

(1961) (footnote omitted; cited in App. 315, no. 20). 10

10 See also Engler, Freeman, Kanavage, Ogden, & Moretz, Production of Gangrenous Extremities by Intra–Arterial Injections, 30 Am.

Surgeon 602 (1964) (“Accidental arterial injection most often occurs in the antecubital region because this is a favorite site for

venopuncture and in this area the ulnar and brachial arteries are superficial and easily entered” (cited in App. 313, no. 6)); Engler,

Gangrenous Extremities Resulting from Intra-arterial Injections, 94 Archives of Surgery 644 (1966) (similar) (cited in App. 314, no.

16); Lynas & Bisset, Intra-arterial Thiopentone, 24 Anaesthesia 257 (1969) (“Most [anesthesiologists] agree that injections on the

medial aspect of the antecubital fossa are best avoided” (cited in App. 314, no. 8)); Waters, Intra-arterial Thiopentone, 21 Anesthesia

346 (1966) (“The risk of producing gangrene of the forearm by accidental injection of sodium thiopentone into an artery at the

elbow has been recognised for many years” (cited in App. 314, no. 10)); see also Hager & Wilson, 94 Archives of Surgery, at 88

(emphasizing that one of the best ways to prevent inadvertent intra-arterial injections is to be aware of “aberrant or superficial arteries

at the antecubital, forearm, wrist, and hand level”); Mostafavi & Samimi, supra (warning against antecubital injections).

**1225 Based on this and other research, the FDA ordered Wyeth to include a specific warning related to the use of the

antecubital space for IV push. 11

11 See App. 311 (requiring Phenergan's label to warn that practitioners should “ ‘[b]eware of the close proximity of arteries and veins

at commonly used injection sites and consider the possibility of aberrant arteries' ”).

2

When respondent was injured in 2000, Phenergan's label specifically addressed IV push in several passages (sometimes in lieu

of and sometimes in addition to those discussed above). For example, the label warned of the risks of intra-arterial injection

associated with “aspiration,” which is a technique used only in conjunction with IV push. 12 The *618 label also cautioned

against the use of “syringes with rigid plungers,” App. 390, which are used only to administer the drug via IV push. As

respondent's medical expert testified at trial, “by talking plungers and rigid needles, that's the way you do it, to push it with the

plunger.” Id., at 53 (testimony of Dr. John Matthew). Moreover, Phenergan's 2000 label devoted almost a full page to discussing

the “Tubex system,” see id., at 391, which, as noted above, is used only to administer the drug via IV push.

12 “Aspiration” refers to drawing a small amount of blood back into the needle to determine whether the needle is in an artery or a vein.

Ordinarily, arterial blood is brighter than venous blood—but contact with Phenergan causes discoloration, which makes aspiration an

unreliable method of protecting against intra-arterial injection. See id., at 282. Therefore, the label warned that when using IV push, a

medical professional should beware that “[a]spiration of dark blood does not preclude intra-arterial needle placement, because blood

is discolored upon contact with Phenergan Injection.” Id., at 390.

While Phenergan's label very clearly authorized the use of IV push, it also made clear that IV push is the delivery method

of last resort. The label specified that “[t]he preferred parenteral route of administration is by deep intramuscular injection.”

Id., at 390. If an intramuscular injection is ineffective, then “it is usually preferable to inject [Phenergan] through the tubing

of an intravenous infusion set that is known to be functioning satisfactorily.” Ibid. See also id., at 50–51 (testimony of

respondent's medical expert, Dr. John Matthew) (conceding that the best way to determine that an IV set is functioning

satisfactorily is to use IV drip). Finally, if for whatever reason a medical professional chooses to use IV push, he or she is on

notice that “INADVERTENT INTRA–ARTERIAL INJECTION CAN RESULT IN GANGRENE OF THE AFFECTED

EXTREMITY.” Id., at 391; see also id., at 390 (“Under no circumstances should Phenergan Injection be given by intra-arterial

injection due to the likelihood of severe arteriospasm and the possibility of resultant gangrene”).

Phenergan's label also directs medical practitioners to choose veins wisely when using IV push:

“Due to the close proximity of arteries and veins in the areas most commonly used for intravenous injection, extreme *619

care should be exercised to avoid perivascular extravasation or inadvertent intra-arterial injection. Reports compatible with
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inadvertent intra-arterial injection of Phenergan Injection, usually in conjunction with other drugs intended for intravenous

use, suggest that pain, severe chemical irritation, severe spasm of distal vessels, and resultant gangrene requiring amputation

are likely under such circumstances.” Ibid.

Thus, it is demonstrably untrue that, as of 2000, Phenergan's “labeling did not contain a specific warning about the risks of

**1226 IV-push administration.” Ante, at 1192. And whatever else might be said about the extensive medical authorities and

case reports that the FDA cited in “support” of its approval of IV-push administration of Phenergan, it cannot be said that the

FDA “paid no more than passing attention to” IV push, ante, at 1193; nor can it be said that the FDA failed to weigh its costs

and benefits, Brief for Respondent 50.

3

For her part, respondent does not dispute the FDA's conclusion that IV push has certain benefits. At trial, her medical

practitioners testified that they used IV push in order to help her “in a swift and timely way” when she showed up at the

hospital for the second time in one day complaining of “intractable” migraines, “terrible pain,” inability to “bear light or sound,”

sleeplessness, hours-long spasms of “retching” and “vomiting,” and when “every possible” alternative treatment had “failed.”

App. 40 (testimony of Dr. John Matthew); id., at 103, 106, 109 (testimony of physician's assistant Jessica Fisch).

Rather than disputing the benefits of IV push, respondent complains that the FDA and Wyeth underestimated its costs (and

hence did not provide sufficient warnings regarding its risks). But when the FDA mandated that Phenergan's label read,

“INADVERTENT INTRA–ARTERIAL INJECTION *620 CAN RESULT IN GANGRENE OF THE AFFECTED

EXTREMITY,” id., at 391, and when the FDA required Wyeth to warn that “[u]nder no circumstances should Phenergan

Injection be given by intra-arterial injection,” id., at 390, the agency could reasonably assume that medical professionals would

take care not to inject Phenergan intra-arterially. See also 71 Fed.Reg. 3934 (noting that a drug's warning label “communicates

to health care practitioners the agency's formal, authoritative conclusions regarding the conditions under which the product

can be used safely and effectively”). Unfortunately, the physician's assistant who treated respondent in this case disregarded

Phenergan's label and pushed the drug into the single spot on her arm that is most likely to cause an inadvertent intra-arterial

injection.

As noted above, when the FDA approved Phenergan's label, it was textbook medical knowledge that the “antecubital fossa”

creates a high risk of inadvertent intra-arterial injection, given the close proximity of veins and arteries. See supra, at 1224 –

1225; see also The Lippincott Manual of Nursing Practice 99 (7th ed.2001) (noting, in a red-text “NURSING ALERT,” that

the antecubital fossa is “not recommended” for administering dangerous drugs, “due to the potential for extravasation”). 13

According to the physician's assistant who injured respondent, however, “[i]t never crossed my mind” that an antecubital

injection of Phenergan could hit an artery. App. 110; see also ibid. (“[It] just wasn't something that I was aware of at the

time”). Oblivious to the risks emphasized in Phenergan's warnings, the physician's assistant pushed a double dose of the drug

into an antecubital artery over the course of “[p]robably about three to four minutes,” id., at 111; id., at 105, notwithstanding

respondent's *621 complaints of a “ ‘burn [ing]’ ” sensation that she subsequently described as “ ‘one of the most extreme

pains that I've ever felt,’ ” **1227 id., at 110, 180–181. And when asked why she ignored Phenergan's label and failed to stop

pushing the drug after respondent complained of burning pains, the physician's assistant explained that it would have been “just

crazy” to “worr[y] about an [intra-arterial] injection” under the circumstances, id., at 111.

13 In addition, respondent's own medical expert testified at trial that it is a principle of “basic anatomy” that the antecubital fossa contains

aberrant arteries. See 2 Tr. 34–35 (Mar. 9, 2004) (testimony of Dr. Daniel O'Brien); see also ibid. (noting that Gray's Anatomy, which

is “the Bible of anatomy,” also warns of arteries in the antecubital space).

The FDA, however, did not think that the risks associated with IV push—especially in the antecubital space—were “just crazy.”

That is why Phenergan's label so clearly warns against them.
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B

Given the “balance” that the FDA struck between the costs and benefits of administering Phenergan via IV push, Geier compels

the pre-emption of tort suits (like this one) that would upset that balance. The contrary conclusion requires turning yesterday's

dissent into today's majority opinion.

First, the Court denies the existence of a federal-state conflict in this case because Vermont merely countermanded the FDA's

determination that IV push is “safe” when performed in accordance with Phenergan's warning label; the Court concludes

that there is no conflict because Vermont did not “mandate a particular” label as a “replacement” for the one that the jury

nullified, and because the State stopped short of altogether “contraindicating IV-push administration.” Ante, at 1194. But as we

emphasized in Geier (over the dissent's assertions to the contrary), the degree of a State's intrusion upon federal law is irrelevant

—the Supremacy Clause applies with equal force to a state tort law that merely countermands a federal safety determination

and to a state law that altogether prohibits car manufacturers from selling cars without airbags. Compare 529 U.S., at 881–

882, 120 S.Ct. 1913, with id., at 902, 120 S.Ct. 1913 (STEVENS, J., dissenting). Indeed, as recently as last Term, we held that

the Supremacy Clause pre-empts *622 a “[s]tate tort law that requires a manufacturer's catheters to be safer, but hence less

effective, than the model the FDA has approved ....” Riegel, 552 U.S., at ––––, 128 S.Ct., at 1008. It did not matter there that the

State stopped short of altogether prohibiting the use of FDA-approved catheters—just as it does not matter here that Vermont

stopped short of altogether prohibiting an FDA-approved method for administering Phenergan. See also Lohr, 518 U.S., at 504,

116 S.Ct. 2240 (BREYER, J., concurring in part and concurring in judgment) (noting it would be an “anomalous result” if preemption applied differently to a state tort suit premised on the inadequacy of the FDA's safety regulations and a state law that

specifically prohibited an FDA-approved design).

Second, the Court today distinguishes Geier because the FDA articulated its pre-emptive intent “without offering States or other

interested parties notice or opportunity for comment.” Ante, at 1201; see also ante, at 1203. But the Geier Court specifically

rejected the argument (again made by the dissenters in that case) that conflict pre-emption is appropriate only where the agency

expresses its pre-emptive intent through notice-and-comment rulemaking. Compare 529 U.S., at 885, 120 S.Ct. 1913 (“To insist

on a specific expression of agency intent to pre-empt, made after notice-and-comment rulemaking, would be in certain cases

to tolerate conflicts that an agency, and therefore Congress, is most unlikely to have intended. The dissent, as we have said,

apparently welcomes that result .... We do not”), with id., at 908–910, 120 S.Ct. 1913 (STEVENS, J., dissenting) (emphasizing

that “we generally expect an administrative regulation to declare any intention to **1228 pre-empt state law with some

specificity,” and that “[t]his expectation ... serves to ensure that States will be able to have a dialog with agencies regarding preemption decisions ex ante through the normal notice-and-comment procedures of the Administrative Procedure Act” (internal

quotation marks omitted)). Indeed, pre-emption is arguably more appropriate here than in Geier because the FDA (unlike the

DOT) declared its pre-emptive intent in the Federal Register *623 . See 71 Fed.Reg. 3933–3936. Yet the majority dismisses

the FDA's published preamble as “inherently suspect,” ante, at 1201, and an afterthought that is entitled to “no weight,” ante,

at 1204. Compare Lohr, supra, at 506, 116 S.Ct. 2240 (opinion of BREYER, J.) (emphasizing that the FDA has a “special

understanding of the likely impact of both state and federal requirements, as well as an understanding of whether (or the extent

to which) state requirements may interfere with federal objectives,” and that “[t]he FDA can translate these understandings into

particularized pre-emptive intentions ... through statements in ‘regulations, preambles, interpretive statements, and responses

to comments' ”).

Third, the Court distinguishes Geier because the DOT's regulation “bear[s] the force of law,” whereas the FDA's preamble

does not. Ante, at 1203; see also ante, at 1200. But it is irrelevant that the FDA's preamble does not “bear the force of law”

because the FDA's labeling decisions surely do. See 21 U.S.C. § 355. It is well within the FDA's discretion to make its labeling

decisions through administrative adjudications rather than through less-formal and less-flexible rulemaking proceedings, see

SEC v. Chenery Corp., 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947), and we have never previously held that our preemption analysis turns on the agency's choice of the latter over the former. Moreover, it cannot be said that Geier 's outcome
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hinged on the agency's choice to promulgate a rule. See ante, at 1200, 1203. The Geier Court relied—again over the dissenters'

protestations—on materials other than the Secretary's regulation to explain the conflict between state and federal law. Compare

529 U.S., at 881, 120 S.Ct. 1913, with id., at 899–900, 120 S.Ct. 1913 (STEVENS, J., dissenting), and ante, at 1204 (BREYER,

J., concurring).

Fourth, the Court sandwiches its discussion of Geier between the “presumption against pre-emption,” ante, at 1200, and heavy

emphasis on “the longstanding coexistence of state and federal law and the FDA's traditional recognition of state-law remedies,”

ante, at 1203. But the Geier Court specifically rejected the argument (again made by the dissenters *624 in that case) that the

“presumption against pre-emption” is relevant to the conflict pre-emption analysis. See 529 U.S., at 906–907, 120 S.Ct. 1913

(STEVENS, J., dissenting) (“[T]he Court simply ignores the presumption [against pre-emption]”). Rather than invoking such

a “presumption,” the Court emphasized that it was applying “ordinary,” “longstanding,” and “experience-proved principles

of conflict pre-emption.” Id., at 874, 120 S.Ct. 1913. Under these principles, the sole question is whether there is an “actual

conflict” between state and federal law; if so, then pre-emption follows automatically by operation of the Supremacy Clause.

Id., at 871–872, 120 S.Ct. 1913. See also Buckman, 531 U.S., at 347–348, 121 S.Ct. 1012 (“ [P]etitioner's dealings with the FDA

were prompted by [federal law], and the very subject matter of petitioner's statements [to the FDA] were dictated by [federal

law]. Accordingly—and in contrast to situations implicating ‘federalism concerns and the historic primacy of state regulation

of matters of health and safety’—no presumption **1229 against pre-emption obtains in this case” (citation omitted)). 14

14 Thus, it is not true that “this Court has long” applied a presumption against pre-emption in conflict pre-emption cases. Ante, at

1195, n. 3 (majority opinion). As long ago as Gibbons v. Ogden, 9 Wheat. 1, 210, 6 L.Ed. 23 (1824), the Court inquired whether

a state law “interfer[ed] with,” was “contrary to,” or “c[a]me into collision with” federal law—and it did so without ever invoking

a “presumption.” See also Davis, Unmasking the Presumption in Favor of Preemption, 53 S.C.L.Rev. 967, 974 (2002) (noting that

many of the Court's early pre-emption cases “resulted in almost automatic preemption of concurrent state regulation”). In subsequent

years the Court has sometimes acknowledged a limited “presumption against pre-emption,” but it nonetheless remained an open

question—before today—whether that presumption applied in conflict pre-emption cases. See Crosby v. National Foreign Trade

Council, 530 U.S. 363, 374, n. 8, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000) (“We leave for another day a consideration in this context

of a presumption against preemption”). Moreover, this Court has never held that the “presumption” applies in an area—such as drug

labeling—that has long been “reserved for federal regulation.” United States v. Locke, 529 U.S. 89, 111, 120 S.Ct. 1135, 146 L.Ed.2d

69 (2000). See also Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341, 347–348, 121 S.Ct. 1012, 148 L.Ed.2d 854 (2001).

*625 Finally, the Geier Court went out of its way to emphasize (yet again over the dissenters' objections) that it placed “some

weight” on the DOT's amicus brief, which explained the agency's regulatory objectives and the effects of state tort suits on the

federal regulatory regime. 529 U.S., at 883, 120 S.Ct. 1913; compare id., at 910–911, 120 S.Ct. 1913 (STEVENS, J., dissenting)

(criticizing the majority for “uph[olding] a regulatory claim of frustration-of-purposes implied conflict pre-emption based on

nothing more than an ex post administrative litigating position and inferences from regulatory history and final commentary”).

See also Lohr, 518 U.S., at 496, 116 S.Ct. 2240 (recognizing that the FDA is “uniquely qualified” to explain whether state law

conflicts with the FDA's objectives). Yet today, the FDA's explanation of the conflict between state tort suits and the federal

labeling regime, set forth in the agency's amicus brief, is not even mentioned in the Court's opinion. Instead of relying on the

FDA's explanation of its own regulatory purposes, the Court relies on a decade-old and now-repudiated statement, which the

majority finds preferable. See ante, at 1201 – 1202, 1203, n. 13. Cf. Riegel, 552 U.S., at ––––, 128 S.Ct., at 1010 (noting that “the

agency's earlier position (which the dissent describes at some length and finds preferable) is ... compromised, indeed deprived

of all claim to deference, by the fact that it is no longer the agency's position” (citation omitted)); Altria Group, Inc. v. Good,

555 U.S. 70, ––––, 129 S.Ct. 538, 549–550, 172L.Ed.2d 398 (2008) (rejecting petitioners' reliance on the pre-emptive effect

of the agency's “longstanding policy” because it is inconsistent with the agency's current one). And Justice BREYER suggests

that state tort suits may “help the [FDA],” ante, at 1204 (concurring opinion), notwithstanding the FDA's insistence that state

tort suits will “disrupt the agency's balancing of health risks and benefits,” Brief for United States as Amicus Curiae 9.

Geier does not countenance the use of state tort suits to second-guess the FDA's labeling decisions. And the Court's contrary

conclusion has potentially far-reaching consequences.
Wyeth v. Levine, 555 U.S. 555 (2009)

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*626 C

By their very nature, juries are ill equipped to perform the FDA's cost-benefit-balancing function. As we explained in Riegel,

juries tend to focus on the risk of a **1230 particular product's design or warning label that arguably contributed to a particular

plaintiff's injury, not on the overall benefits of that design or label; “the patients who reaped those benefits are not represented

in court.” 552 U.S., at 325, 128 S.Ct., at 1008. Indeed, patients like respondent are the only ones whom tort juries ever see,

and for a patient like respondent—who has already suffered a tragic accident—Phenergan's risks are no longer a matter of

probabilities and potentialities.

In contrast, the FDA has the benefit of the long view. Its drug-approval determinations consider the interests of all potential

users of a drug, including “those who would suffer without new medical [products]” if juries in all 50 States were free to

contradict the FDA's expert determinations. Id., at ––––, 128 S.Ct., at 1009. And the FDA conveys its warnings with one voice,

rather than whipsawing the medical community with 50 (or more) potentially conflicting ones. After today's ruling, however,

parochialism may prevail.

The problem is well illustrated by the labels borne by “vesicant” drugs, many of which are used for chemotherapy. As a class,

vesicants are much more dangerous than drugs like Phenergan,

15 but the vast majority of vesicant labels—like Phenergan's—

either allow or do not disallow IV push. See Appendix, infra. Because vesicant extravasation can have devastating consequences,

and because the potentially lifesaving benefits of these drugs offer hollow solace to the victim *627 of such a tragedy, a jury's

cost-benefit analysis in a particular case may well differ from the FDA's.

15 Vesicants may cause “blistering, severe tissue injury, or tissue necrosis” upon extravasation—even if the drug is not injected into an

artery. See, e.g., Schulmeister, Administering Vesicants, 9 Clinical J. of Oncology Nursing 469, 469–470 (2005). See also ante, at

1192 (majority opinion) (noting that Phenergan is labeled as an “irritant”); cf. Brief for Anju Budhwani et al. as Amici Curiae 15

(suggesting Phenergan should be considered a “vesicant”).

For example, consider Mustargen (mechlorethamine HCl)—the injectable form of mustard gas—which can be used as an

anticancer drug. Mustargen's FDA-approved label warns in several places that “This drug is HIGHLY TOXIC.” 16 Indeed,

the drug is so highly toxic:

16 FDA, Oncology Tools Product Label Details, online at http:// www.accessdata.fda.gov/scripts/cder/onctools/labels.cfm?

GN=meclorethamine,% 20nitrogen% 20mustard (as visited Mar. 2, 2009, and available in Clerk of Court's case file).

“Should accidental eye contact occur, copious irrigation for at least 15 minutes with water, normal saline or a balanced salt

ophthalmic irrigating solution should be instituted immediately, followed by prompt ophthalmologic consultation. Should

accidental skin contact occur, the affected part must be irrigated immediately with copious amounts of water, for at least 15

minutes while removing contaminated clothing and shoes, followed by 2% sodium thiosulfate solution. Medical attention

should be sought immediately. Contaminated clothing should be destroyed.” 17

17 Ibid.

Yet when it comes to administering this highly toxic drug, the label provides that “the drug may be injected directly into any

suitable vein, [but] it is injected preferably into the rubber or plastic tubing of a flowing intravenous infusion set. This reduces

the possibility of severe local reactions due to extravasation or high concentration of the drug.” (Emphasis added.) Similarly,

the FDA-approved labels for other powerful chemotherapeutic vesicants **1231 —including Dactinomycin, Oxaliplatin,

Vinblastine, and Vincristine—specifically allow IV push, notwithstanding their devastating effects when extravasated.

*628 The fact that the labels for such drugs allow IV push is striking—both because vesicants are much more dangerous than

Phenergan, and also because they are so frequently extravasated, see Boyle & Engelking, Vesicant Extravasation: Myths and
Wyeth v. Levine, 555 U.S. 555 (2009)

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Realities, 22 Oncology Nursing Forum 57, 58 (1995) (arguing that the rate of extravasation is “considerably higher” than 6.4%

of all vesicant administrations). Regardless of the FDA's reasons for not contraindicating IV push for these drugs, it is odd (to

say the least) that a jury in Vermont can now order for Phenergan what the FDA has chosen not to order for mustard gas. 18

18 The same is true of FDA's regulation of hydroxyzine. See n. 9, supra.

* * *

To be sure, state tort suits can peacefully coexist with the FDA's labeling regime, and they have done so for decades. Ante, at

1199 – 1200. But this case is far from peaceful coexistence. The FDA told Wyeth that Phenergan's label renders its use “safe.”

But the State of Vermont, through its tort law, said: “Not so.”

The state-law rule at issue here is squarely pre-empted. Therefore, I would reverse the judgment of the Supreme Court of

Vermont.

*629 APPENDIX TO OPINION OF ALITO, J.

Vesicant 1IV Push2

Dactinomycin Specifically allowed

Mechlorethamine

(Mustargen) Specifically allowed

Oxaliplatin Specifically allowed

Vinblastine Specifically allowed

Vincristine Specifically allowed

Bleomycin Neither mentioned nor prohibited

Carboplatin Neither mentioned nor prohibited

Dacarbazine Neither mentioned nor prohibited

Mitomycin Neither mentioned nor prohibited

Carmustine Not prohibited; IV drip recommended

Cisplatin Not prohibited; IV drip recommended

Epirubicin Not prohibited; IV drip recommended

Etoposide Not prohibited; IV drip recommended

Ifosfamide Not prohibited; IV drip recommended

Mitoxantrone Not prohibited; IV drip recommended
Wyeth v. Levine, 555 U.S. 555 (2009)

129 S.Ct. 1187, 173 L.Ed.2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176...

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Paclitaxel Not prohibited; IV drip recommended

Teniposide Not prohibited; IV drip recommended

Vinorelbine Not prohibited; IV drip recommended

Daunorubicin Prohibited

Doxorubicin Prohibited

1 Wilkes & Barton–Burke, 2008 Oncology Nursing Drug Handbook 27–33 (2008) (Table 1.6).

2

IV-push information is derived from the “dosage and administration” sections of individual drug labels (available in Clerk of Court's

case file).

All Citations

555 U.S. 555, 129 S.Ct. 1187, 173 L.Ed.2d 51, 77 USLW 4165, Prod.Liab.Rep. (CCH) P 18,176, 09 Cal. Daily Op. Serv. 2644,

2009 Daily Journal D.A.R. 3199, 21 Fla. L. Weekly Fed. S 675

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.