U.S.A v. Guidant LLC

• Decision Date: 27 April 2010
• Docket Number: Crim. No. 10-mj-67 (DWF).
• Citation: 708 F.Supp.2d 903
• Parties: UNITED STATES of America, Plaintiff,v.GUIDANT LLC, formerly doing business as Guidant Corporation, Defendant.
• Court: U.S. District Court — District of Minnesota

708 F.Supp.2d 903

UNITED STATES of America, Plaintiff,v.GUIDANT LLC, formerly doing business as Guidant Corporation, Defendant.

Crim. No. 10-mj-67 (DWF).

United States District Court D. Minnesota.

April 27, 2010.

COPYRIGHT MATERIAL OMITTED

Robert M. Lewis, Assistant United States Attorney, United States Attorney's Office, and Ross S. Goldstein, Esq., United States Department of Justice, Office of Consumer Litigation, counsel for the Government.

Daniel M. Scott, Esq., Kelly & Wolter, P.A., counsel for Guidant.¹

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

On April 5, 2010, Guidant, LLC ² (“Guidant”) entered pleas of guilty on two misdemeanor counts charged by the Government in the Information. During the plea hearing, the Court also heard argument from counsel representing alleged victims.³

Normally, a court accepts or rejects a plea agreement at a plea hearing. At the April 5, 2010 plea hearing, however, the Court took the matter under advisement because of the unique contours of this case, including (1) arguments raised by counsel representing individuals claiming to have been injured by Guidant's criminal conduct; (2) the Government's and Guidant's positions with respect to the Court's authority to order restitution; (3) the absence of a probation provision in the Plea Agreement and Sentencing Stipulations (“Plea Agreement”); and (4) the uncertainty as to where the criminal fine and forfeiture money will go. Therefore, the matters now before the Court are (1) whether it has a right to order restitution and, if so, to what victims, if any; and (2) whether to accept the Plea Agreement submitted jointly by the Government and Guidant. For the reasons set forth below, the Court concludes that it has a right to order restitution under 18 U.S.C. § 3771 but that there are no victims directly and proximately harmed by Guidant's criminal conduct as it relates to the crimes to which Guidant has pled guilty to and to the underlying circumstances related to those crimes as admitted by Guidant. Further, for the reasons set forth below, the Court declines to accept the Plea Agreement as currently drafted.

BACKGROUND

Although Guidant developed, manufactured, and sold numerous medical devices, only two devices are the subject of this criminal proceeding-the Ventak Prizm 2DR (“Prizm”) and the Contak Renewal (“Renewal”).⁴ The Prizm is an implantable cardioverter defibrillator (“ICD”). An ICD is a medical device that is implanted in a patient to detect and treat abnormally fast heart rhythms that could result in sudden cardiac death. The Renewal is a cardiac resynchronization therapy defibrillator (“CRT-D”). A CRT-D is a specialized type of ICD.

The Federal Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. § 301 et seq., governs, in part, the manufacture, processing, packing, labeling, and shipping in interstate commerce of medical devices. The Food and Drug Administration (“FDA”) is the agency of the Government that is charged with enforcement of the FDCA. The FDCA and its regulations categorize medical devices into three classes, depending on their risk to the health, safety, or welfare of the patient, and require medical manufacturers to comply with certain reporting requirements. The Prizm and Renewal are Class III devices. Subject to the highest level of regulation, Class III devices include devices that are intended for use in supporting or sustaining life, are of substantial importance in preventing impairment of health, or present a potential unreasonable risk of illness or injury. Once the FDA approves a Class III device for use, a manufacturer may not make any modification to the device that affects the device's safety or effectiveness without receiving prior approval from the FDA. Moreover, in certain circumstances such as when a correction is made to a device, a medical manufacturer is required to submit a written report to the FDA within a specific amount of time.

On February 25, 2010, the Government charged Guidant with two misdemeanor counts related to the Prizm and Renewal. (Doc. No. 1.) In Count I, Guidant is charged with submitting a false and misleading report to the FDA on August 19, 2003, that concerned a change made to the Prizm on or about November 13, 2002. In Count II, Guidant is charged with failing and refusing to report to the FDA a medical device correction to the Renewal on or about March 2, 2005.

As many as 20,146 patients in the United States may have been implanted with Prizm and Renewal devices between late 2002 and June 2005. (Doc. No. 4 at 3.) Of those 20,146 patients, approximately 2,657 are claimants in the Guidant MDL. ( Id. at 4.) On March 1, 2010, the Government filed a Motion for Order for Alternative Victim Notification Procedures pursuant to 18 U.S.C. § 3771(d)(2). In that motion, the Government sought a “reasonable procedure to give effect to the notification provisions of the Crime Victims Rights Act ... due to the large number of individuals who might assert that they are victims of the offenses charged.” ( Id. at 1.) Because it had “not concluded that any such persons are in fact victims of the offenses charged,” the Government submitted the motion “out of an abundance of caution” and recommended that alleged victims be notified in two ways: (1) through the Guidant MDL Lead Counsel Committee and (2) through the United States Attorney and Department of Justice websites. ( Id. at 1-2, 4-5.) The Court granted the Government's motion on March 11, 2010, and directed that a notice to alleged victims be posted on the websites of the United States Attorney's Office, the Department of Justice Office of Consumer Litigation, and this Court. (Doc. No. 8 at 2-3.) The Court also directed the Clerk of Court to electronically file a copy of the notice in the Guidant MDL and ordered Mr. Zimmerman to provide a copy of the notice to all Guidant MDL claimants who had been implanted with a Prizm or Renewal device and their counsel. ( Id. at 3.)

After asking for and receiving the Court's permission, a memorandum and supplemental memorandum were submitted on behalf of the “victims.” ⁵ (Doc Nos. 13 and 18.) Guidant and the Government submitted responses to the alleged victims' memorandum and supplemental memorandum. (Doc. Nos. 14, 15 and 20.) On April 5, 2010, Lawrence J. Knopf, Vice President and Secretary of Guidant LLC, entered pleas of guilty on behalf of Guidant to two misdemeanor counts charged in the Information. At the plea hearing, the Court took under advisement whether it had a right to order restitution and if so, to what victims, if any, and whether to accept the Plea Agreement.

DISCUSSION

The Plea Agreement provides that Guidant will waive indictment and plead guilty to an Information alleging:

a. Count One of the Information will charge Guidant with violating the Federal Food, Drug, and Cosmetic Act by making materially false and misleading statements on reports required to be filed with the United States Food and Drug Administration in violation of 21 U.S.C. § 331(q)(2), a misdemeanor pursuant to 21 U.S.C. § 333(a)(1).

b. Count Two of the Information will charge Guidant with violating the Federal Food, Drug, and Cosmetic Act by failing to promptly notify the United States Food and Drug Administration of a correction it made to a medical device to reduce a risk to health posed by the device, in violation of 21 U.S.C. §§ 331(q)(1) and 360i(g), a misdemeanor pursuant to 21 U.S.C. 333(a)(1).

(Doc. No. 9 at 7.) The Plea Agreement further provides that the parties “recommend jointly that the Court impose a sentence requiring Guidant to pay the United States a criminal fine of $253,962,251 pursuant to 18 U.S.C. § 3571(d).⁶” ( Id. at 8-9.) The Plea Agreement also provides that Guidant will agree to a “criminal forfeiture to the United States in the amount of $42,079,675” and a special assessment of $250 pursuant to 18 U.S.C. § 3013.⁷ ( Id. at 9-10.) In the Plea Agreement, the parties jointly agreed not to include a provision that ordered restitution or probation. The agreement also specifically states that a presentence investigation report is not necessary because the plea and sentencing hearings, together with the record and the Plea Agreement, “will provide the Court with sufficient information concerning Guidant, the crime charged in this case, and Guidant's role in the crime to enable the meaningful exercise of sentencing authority by the Court under 18 U.S.C. § 3553.” ( Id. at 10.)

I. Restitution

The alleged victims urge the Court to reject the Plea Agreement because it does not contain a provision for restitution. The alleged victims assert that “Guidant device recipients are clearly victims of Guidant's criminal offenses and any Plea Agreement and Sentencing Stipulation that does not include a provision for restitution for said victims is neither fair nor appropriate.” (Doc. No. 13 at 16.) The Government and Guidant respond that the Court does not have authority to order restitution because restitution is not available for the charged offenses,⁸ and they accuse the alleged victims of using this criminal proceeding as a way to improperly seek an equitable remedy. Moreover, according to the Government and Guidant, even if the Court has authority to order restitution, there are no victims that were directly and proximately harmed by Guidant's criminal conduct as it relates to the crimes to which it has pled guilty and to the underlying circumstances of those crimes which Guidant admitted to during its pleas.

The Court has no inherent authority to impose restitution; rather, “[f]ederal courts cannot order restitution in a criminal case without a statutory basis.” United States v. Lachowski, 405 F.3d 696, 698 (8th Cir.2005). The foundational inquiry for determining whether restitution is available is to identify the offense charged, in this case violations of 21 U.S.C. §§ 331(q)(1) and (2). Those portions of the FDCA do not contain a specific restitution...