In more lawsuits, companies are being forced to reveal internal information during the pretrial discovery phase that otherwise would be kept private
A showdown is looming in a Florida courtroom over an issue that has long bedeviled business: How much internal information can a company be forced to make public simply because it has become a defendant in a lawsuit?
In federal court in Orlando, drugmaker AstraZeneca (AZN) is battling to keep confidential thousands of pages of correspondence, studies, and other material related to its blockbuster antipsychotic drug Seroquel. On Feb. 13, Bloomberg News, invoking "the public's right of access to judicial documents," asked the court to unseal selected filings. A hearing on the request is scheduled for Feb. 26.
The battle grows out of claims by consumers who allege that AstraZeneca didn't adequately disclose that Seroquel can trigger serious weight gain and diabetes. There is also an unusual allegation of sexual misconduct that AstraZeneca is trying to keep contained by arguing that it is irrelevant and should be kept from a jury. More than 6,000 Seroquel cases have been consolidated in the Florida case.
Cards on the Table
Plenty of companies have found their inner workings on public display through material they have disclosed in lawsuits. Details about Philip Morris' (PM) nicotine research, Firestone's tire designs, Merck's (MRK) Vioxx studies, and Wal-Mart's (WMT) employment practices have all come to light this way. In some instances the companies failed to get confidential treatment for the documents. In other instances, the information has been leaked, despite confidentiality decrees. That's what happened to Eli Lilly (LLY) in litigation involving its antipsychotic Zyprexa. In a February 2007 ruling, a federal judge found that David S. Egilman, an expert witness for the plaintiffs, helped funnel sealed documents to The New York Times. In 2007, Egilman, a community health professor at Brown University, paid $100,000 to Lilly, which donated the amount to charity. Egilman says he thought the documents offered evidence of wrongdoing and he felt he had an obligation to release them.
Companies generally accept that evidence presented during a trial enters the public domain. Most lawsuits, though, never get that far, and even when they do, only a limited amount of material ends up being used at trial. But, as with the Seroquel litigation, confidentiality concerns often arise before that stage, in connection with the truckloads of information businesses often must disclose to their adversaries during the pretrial phase of a lawsuit known as discovery. A big fear is that this information can be used in a selective or distorted fashion to tarnish a company's reputation in the press, or to fuel additional lawsuits and government investigations. "The mere threat of that often coerces companies into settlement of cases that they would otherwise never settle because they feel they have no liability," says Susan Hackett, general counsel of the Association of Corporate Counsel, a trade group of in-house attorneys.
The stakes are high in the Seroquel litigation for London-based AstraZeneca. Nationwide it faces roughly 9,000 lawsuits on behalf of 15,000 consumers. The drug, approved for treating schizophrenia and bipolar disorder, is the company's second-biggest seller, ringing up global revenue of $4.4 billion in 2008. So far, things are off to a good start for the company. The first two cases selected for trial in Orlando were tossed out by the judge in January, who concluded that the plaintiffs wouldn't be able to prove that Seroquel caused the harm they allege.
But there are many more cases to go. AstraZeneca says it has turned 50 million pages of material over to plaintiffs' attorneys. In an e-mail, AstraZeneca spokesman Tony Jewell says the company is willing to discuss lifting its confidentiality claims for "large portions" of the documents. But some should remain under seal, the company argues in a court filing, because they contain trade secrets or because disclosure of incomplete information about Seroquel might "mislead the public" and "create a potential public health risk."
Bloomberg argues that concerns about Seroquel's health risks are precisely why the material filed in court should be accessible. It also points to the recent litigation involving Lilly's Zyprexa, which similarly raised concerns about diabetes risk. While many Lilly documents were filed under seal, courts ultimately ordered them disclosed. Lilly has paid $1.2 billion to settle Zyprexa claims. A Lilly spokeswoman says the company "stands by the safety and efficacy of Zyprexa."
While the battle over the AstraZeneca and Lilly documents are in many respects similar, the Seroquel litigation contains a twist that is unusual for a drug product-liability case. The plaintiffs have stated in a court filing that Wayne MacFadden, AstraZeneca's former U.S. medical director for Seroquel, had sexual relationships with an outside Seroquel researcher and with another woman who prepared Seroquel medical literature. This, says the filing, calls into question the integrity of information the company has disclosed about Seroquel. AstraZeneca "does not condone the conduct at issue," spokesman Jewell says in an e-mail, noting that MacFadden is no longer employed by the drugmaker. MacFadden did not respond to messages seeking comment.
The company and the plaintiffs are currently arguing about whether this information should be admitted as evidence at a trial, but some documents relating to the debate, including MacFadden's e-mail exchanges with the two women, are under seal. Proclaiming itself to be the "eyes and ears of the public," Bloomberg is seeking this material, too.