Category: HealthLaw Blog

Will the “Peasants” Revolt Against the FDA?

As you can tell, I love talking about health law issues, if you have any health law questions or better yet, need to refer a case, just drop me an email and I will answer it.

“Its a wonderful life.” In a 1946 Frank Capra Christmas movie, an angel must earn his wings by helping Jimmy Stewart’s character realize his life has value, after rich and greedy business interests have bankrupted him and ruined his life, when all he wanted to do was help people.

The movie ended happily, “every time a bell rings, an angel gets his wings.” This jingle has a very dark history, which is why I bring it up in reference to weight loss drugs like Ozempic and Mounjaro.

Martin Luther & The Efficacy of Indulgences. In 1517, a Catholic monk and professor of theology named Martin Luther, nailed his Ninety-Five Theses, or Disputation on the Power and Efficacy of Indulgences to the door of a cathedral in Wittenberg, Germany. What had disturbed Martin Luther, was the Church’s corrupt practice of selling “indulgences” to the faithful.

The church collectors claimed that the souls of loved ones needed to be “purged” of sins, before they would be permitted to enter heaven (hence the word, “Purgatory”):

“As soon as a coin in the coffer rings, the soul from purgatory springs.”

This angered Martin Luther, who knew something the peasants didn’t. The Bible, written in Latin (which Germans didn’t speak, as Voltaire observed in 1756, “the Holy Roman Empire was neither holy, Roman, nor an empire”), contained no mention of a “Purgatory.” A secret the Church kept by prohibiting the Bible from being published in a language Germans understood.

Luther’s 95 Theses were not the first challenge to the Church, but were aided by the invention of the printing press. When the peasants found out they had been defrauded, they revolted and things got ugly. (See, The Protestant Reformation, Henry the Eighth, The Spanish Inquisition, Northern Ireland, etc.).

How the FDA similarly works to keep the public in the dark, isn’t a secret, but will require explanation. I will use two of my own case files, which were a lot of fun.

Tilton vs. Richardson, 6 F.3d 683 (10th Cir. 1993.) The Rev. Robert Tilton was a Dallas televangelist who used sent out little squares of material he called “prayer cloths.” He claimed these magical bullshit cloths were the secret to God’s healing the sick. If the faithful rubbed the cloth on a sick loved one, sent in a donation along with a prayer request, then Tilton would touch the cloth and pray. God just might intervene with a miracle, for a price.

I got involved as a defense lawyer when several plaintiff’s lawyers sued Tilton for fraud, after NBC news ran a story showing that the prayer cloths were thrown in the trash after the money was removed at a bank. Tilton never touched them. He then sued my clients in a precursor to an Anti-SLAPP suit (Tilton claimed the Plaintiff’s lawyers were conspiring under 42 USC §1985 to infringe on Tilton’s 1st Amendment rights).

The 10th Circuit ruled that §1985, known as the “Ku Klux Klan Act,” was not meant to protect white preachers and threw out Tilton’s case. However, in the original case, the Texas Supreme Court in Tilton v. Marshall, 925 S.W.2d 672 (Tex.1996), ruled that the Plaintiffs could not sue Tilton for damages, because the faithful could not prove the element of “causation” (that God would have answered their prayers, had Tilton actually prayed as promised.)

State v. Valerie Saxion, Inc., 450 S.W.3rd 602 (Tex.App—Ft. Worth 2014). Although Robert Tilton’s “magical bullshit prayer cloths” might arguably have been considered a “medical device” requiring FDA approval, it wasn’t until Valerie Saxion started selling healing vitamins, that the FDA and The Texas Attorney General got involved.

Valerie Saxion was a bubbly television host on the world’s largest Christian Television network, TBN’s Alternative Health program. She began telling listeners that Selenium, which is a mineral next to Sulphur on the Periodic Table, helps prevent prostate cancer and that’s why God made it. She just happened to sell a line of vitamins containing Selenium. (She had also never heard of the FDA.)

The Consumer Protection Division of the Texas Attorney General’s office sued to silence her under the FD&C Act. There is another old saying:

When the law is against you, pound the facts.
When the facts are against you, pound the law.
When both are against you, pound the table.

Which is what I did when I argued Valerie Saxion’s case before the 2nd Court of Appeals in Fort Worth. There was no question she violated the FD&C Act. So, I countersued Gov. Greg Abbott, who was the AG at the time, for a declaratory judgment that the State of Texas can’t censor Valerie Saxion’s teaching about God’s plan when he created Selenium. (We lost.)

The FDA. Unlike Robert Tilton’s “magical bullshit cloths,” Valerie Saxion sold something the FDA did regulate. Her vitamins became “drugs” the minute she mentioned the word “cancer.” The FDA regulates drugs, for safety and “efficacy” (meaning “effective,” the word used by Martin Luther’s 95 Theses about “indulgences” 1512). Sellers of vitamins can sell Selenium with a label “Supports Prostate Health,” but will be put out of business if the seller mentions any disease, like “cancer.”

The uninitiated might think the FDA only exists to protect the public. It would be too simplistic to say they don’t care at all. However, like the Church in 1512, the FDA cares about saving people for a price.

The FDA is funded by taxpayers but is influenced, if not corrupted, by fees paid by big pharma, under a system the public doesn’t understand. When big pharma plays by FDA rules, it receives a governmental monopoly in exchange for paying the $1 billion price tag to get a drug through the patent and FDA approval process. In turn the FDA becomes the attack dog for its paymasters.

Weight loss drugs. One exception, which happened recently with weight loss drugs, occurs when the FDA approved manufacturer can’t keep up with demand. Because the manufacturer can’t lose profits on drugs it can’t make, the FDA allows generic copies to be compounded, as long as a drug is listed on the FDA drug shortage list.

What this also means is that there can be an unlimited, inexpensive supply of an FDA approved life-saving weight loss drug, that no one is allowed to sell. At least not inexpensively. This is true, even though the public suffers:

“Every time big pharma’s coffers ring, another soul from weight-loss purgatory springs.”

South Park did a masterful job lampooning this absurd state of FDA affairs in “The End of Obesity,” where Eric Cartman explained why he couldn’t get a prescription for Ozempic, “Rich people get Ozempic, and poor people get a prescription for listening to ‘Lizzo’ body positivity records.”

Martin Merritt, J.D., Ole Miss Law ’86. Martin tried over 500 healthcare law cases to jury verdict, judgment or ALJ administrative law decision. He has been selected to the 2024 D Magazine “Best Lawyers in Dallas” List, Texas Monthly’s “Texas Super Lawyers” and U.S. News and World Reports “Best Lawyers in America,” is Past President of the Texas Health Lawyers Association, Past Chair of the Dallas Bar Health Law Section and State Bar of Texas award-winning author, has published books from the ABA, and published hundreds of articles on matters related to health law and legal ethics in the Federal Lawyer, the Texas Bar Journal and many trade publications. If you have a question or need to make a referral, Martin can be contacted at his office in Dallas, Texas. Email at Martin@MartinMerritt.com

I took a deposition last week in a Trade Secrets case involving physicians, compounding pharmacies and the weight loss drug, Mounjaro®. As the corporate representative paused to think up an answer, I started watching the planes take off and land at Love Field from my 49th floor window. I began to think about the story of Albert Einstein’s “E=MC2.

I have seen a big jump in trade secrets cases, as non-competes are set to become illegal September 4. These claims really are all over the place, in part, because people don’t know what a trade secret is.

Part of the problem is people get confused– just because something (like a formula) “formula”) is on a statutory list of things that “might” be a trade secret, it doesn’t mean that the formula “is” a trade secret, if it doesn’t fit the rest of the definitions. Namely, it must be have some economic value because it is a “secret.” Unlike a patent, trademark, or an FDA approved drug, nobody in the government examines and preapproves a “trade secret” as valid IP claim.

Worse, trade secret litigation is often framed less by logic, and more by anger on the part of the litigant who yells the loudest or has the biggest “stick.” (See, also “arguing through vehemence,” or “argumentum ad baculum)”.

Which leads to some fun depositions like last week. Particularly in areas like MedSpas, Weight Loss and Botox Centers; which were once were the sole province of doctors, but are now rife with amateur neo-entrepreneurs:

“Q: So. . . do you think the practice of medicine is a trade secret?”

“Q: Are you saying that how doctors prescribe an FDA approved drug is your trade secret?”

And so, that’s how I came to be staring out the window watching the airplanes take off and land.

What Does “E=MC2” have to do with Patents, FDA Drugs and Trade Secrets? Admittedly, I know as much about the science of patents and the FDA approval process, as a horse knows about a road map. But like any good horse, with a little prodding I know enough to eventually get where I need to go.

Albert Einstein developed his “E=MC2” theories of relativity while working in a Swiss patent office in 1902 examining clock patents. Patents are how inventors keep others from copying their ideas. Clocks weren’t new in 1902, but trains which go fast (and the need to catch one on schedule) were.

While it was simple in the early days of trains to determine how much time it would take for a train to go from New York to another town, it was anybody’s guess what “local time” might be for passengers waiting at the station when the train arrived.

The problem lies in how the sun works. Noon occurs, and for that matter, any time ante meridiem or post meridiem, at different times in every town, as we travel east or west. Solar noon in New York happens earlier than solar noon in Cleveland. Which is a problem for making efficient train schedules people can count on. Anyone who figured out the answer could get rich from the patent.

And that’s what Einstein was doing in the patent office in Switzerland. People were trying to get official recognition or a “patent” on their ideas to synchronize distant clocks. Einstein had a little extra brain bandwidth than your average patent examiner, and used it to imagine what would happen to the speed of light, if it came from one of those moving trains. Would it go faster? If not, why not? Any physicist can fill a chalkboard with calculations, but it takes true genius to make all of it fit on your thumbnail, like “E=MC2”.

The train schedule problem was eventually solved when somebody got the more practical idea of using time zones, “why don’t we just ‘ballpark’ it?” And that’s how the planes at Love Field takeoff and land on time. We use time “zones” instead of precise solar time, which is a great idea, but also worth nothing.

The idea of “time zones” wouldn’t be a trade secret however, because it only has economic value, by not being a “secret.” It’s like the “Heimlich” maneuver— a good idea that only works, because everybody knows about it.

A Few other observations about patents, FDA approval and trade secrets:

(1) Patents are not a “secret.” The word “patent” as a noun, means the right to exclude others from copying the design, which shares the same root as the adverb “patently” (meaning “open, obvious.”) A patent application is a “claim,” to an invention of something “new and useful.” The formula or process is published. “What’s in it” or “how it works,” is not a secret.

(2) Patents are easier to get, harder to enforce. The government doesn’t enforce patents simply because a patent is granted. The government usually will raid warehouses to enforce an IP law only if there is some other intellectual property law involved, like the Lanham Act (trademark, “fake Rolexes”) or offending the FDA (“misbranding” or labelling violation.)

(3) Patenting a drug is just the first step to market. While the FDA could approve a drug without a patent, it costs too much for a seller to obtain FDA approval for a drug or device without a patent. Someone else could just copy it. Usually only patented drugs are worth the trouble. Then, the FDA takes over to determine if drug is also safe and effective, what instructions and warnings must come with the drug. But once approval is granted, the FDA will enforce exclusivity, including compounding generic versions.

(4) Compounding or off label prescribing. The FDA does not regulate doctors. If a doctor in his medical judgement, decides an FDA approved drug is safe and effective for another illness, he can prescribe the drug “off-label.” (Think, “Ivermectin” for COVID). The doctor is answerable to the medical board which may consider this a form of “Complimentary Alternative Medicine,” for which there must be written patient “informed consent,” after proper disclosures and warnings.

(5) Things get out of hand sometimes, even when everybody follows the rules. I handled dozens of Ivermectin Texas Medical Board complaints last year, after doctors were bombarded by patients who demanded Ivermectin as a prophylactic against COVID. While Ivermectin worked (it won a noble prize for medicine because it saved lives as an anti-parasitic in poor countries), it wasn’t covered by insurance unless the patient actually had parasites, which was the FDA approved use.

Doctors were legally able to prescribe Ivermectin for off-label use, but when the patient went to the drug store, the pharmacy billed insurance, who paid the claims, thinking the doctor had prescribed the drugs for rare parasite infections. Insurance paid and paid, until so many claims began piling up, that insurance began to wonder “how is it that everybody suddenly has this rare parasitic infection?”

The natural conclusion was that the doctors must be committing “fraud,” so Insurance filed complaints with the medical board against the doctors for healthcare fraud. Turns out, the doctors had no idea how insurance was billed by Walgreens or CVS. Even where the doctors told the patients not to claim the drug on insurance, they did it anyway.

As you can tell, I love talking about this, if you have any health law questions or better yet, need to refer a case, just drop me an email and I will answer it.

Next week, I will conclude the topic, with a discussion how the FDA works with states attorneys general Consumer Protection Divisions to protect the interests of big pharma.

If I were stranded on a desert island and given one set of books, I would take Will and Ariel Durant’s The Story of Civilization. In 11 volumes, the father daughter team interpret 2000 years of human behavior in a way that provides living context, “why we do what we do,” in a way readers can hold in their minds decades after reading.

The first volume brilliantly distills in one phrase, what must have been like for mankind to transition from hunter gatherers to farmers and merchants– “fear did not enter the heart of man, until he began to plan for the future.”

This phrase, explains why I love the Durants’ work, and why some people are more comfortable spending every penny they earn, accumulating no wealth at all; while those who do are often more miserable. If we don’t accumulate wealth, we don’t have to worry about keeping it.

Deus ex machina— Jesus “in a syringe.” A little over two years ago, Ozempic®, Mounjaro® and Zepbound® burst onto the scene, as a redeemer of sins, salvation could be had for a price (just a little “pinprick,” and there would be no more “ahhhhhh . . .”)

(Yes. I know, I have had too much coffee on a Saturday morning, when I use Latin and Pink Floyd’s The Wall in the same sentence.)

What’s the problem? When a drug manufacturer like Eli Lilly either invents a new drug (or buys the license from someone who did), it can gain “exclusivity” for its stockholders (the people who saved money, rather than spent it all and want to protect it).

If “Eli Lilly” sounds like a Civil War character, interestingly, he was. The company was founded by a real life pharmacist and colonel in the Union Army who was captured and imprisoned by Confederates during the Civil War.

One way to gain exclusivity for stock holders, is to patent the drug, which Eli Lilly did to gain exclusivity for Mounjaro® and Zepbound®. Patents can last for up to several decades, but there are shenanigans that can extend the patent. (See, “The Mounjaro Patent Thicket,” at Greyb.com)

The other way to protect shareholder’s is to gain FDA “exclusivity” which can be granted, even to generic drugs, but usually for a shorter period of time. (See, “Exclusivity and Generic Drugs: What does it Mean? FDA.gov/GenericDrugs.)

While a US Patent is only enforceable by the patent holder, the FDA enforces compounding restrictions under Section 503A of the FD&C Act. (See, “Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product Under Section 503A of the Food Drug and Cosmetic Act, Guidance for Industry at FDA.gov.”) Often the FDA will pay states Attorneys General to do the enforcing through Consumer Protection Divisions.

FDA Shortage list. There was only one problem, while Eli Lilly patented salvation in a syringe, it couldn’t make enough of the stuff to keep it in stock. In such a case, the FDA publishes a “drug shortage” list. (Just Google it.) Eli Lilly’s Tirzeptide had been on the list for obvious reasons, but on August 2, Lilly announced that it had plenty in stock, and to protect shareholders, you can imagine what happened next.

Kirkland Ellis to weight loss centers: “Cease and Desist.” And so it came to pass that my client, a Nurse Practitioner operating a weight loss clinic in an “itty-bitty” East Texas town (pop. of 1,239) eceived a “cease and desist” letter from Kirkland Ellis (an international law firm with more offices than we can count on our fingers and toes).

The letter was a simple “Cease and Desist” on the basis of the FDA Drug Shortage list, and not made on the basis of a Patent violation, could be, because it sounds scarier to invoke the FDA as protector of big businesses like Lilly. (Don’t know.)

It is a story for another day (meaning I need to make a “Part II”), how the FDA and US Patent Office work with State Attorneys General Consumer Protection Divisions to protect massive profits for Eli Lilly, over consumers. So many stories to tell. (More to come!)

“Please Tell Me you Didn’t. . . How to Keep Clients Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse”

I just got off the phone with one of dozens of clients I represent from coast-to-coast (literally Temecula California to Raleigh, North Carolina), over what is called an “SIU recoupment insurance audit” which is part of a continuing war on doctors by insurance companies.

Although “SIU” stands for “Special Investigations Unit,” I like to call them “Spanish Inquisition Units,” because they blow in like the 1970’s Monte Python’s “Spanish Inquisition” television skit, demanding the production of documents relating to a small number of patients. There is no advanced notice and no time to prepare to produce the documents.

Because “nobody expects the Spanish Inquisition,” these SIU agents almost certainly will find fault in the documents which they then extrapolate across all the clinic’s claims. This lack of Due Process is designed to be patently unfair, calling to mind another famous quote, this time from a real-life cleric:

“If you give me six lines written by the hand of the most honest of men, I will find something in them which will hang him.

–Cardinal Richelieu, French Cleric and Statesman (1585–1642)

An SIU “recoupment audit” is a post-payment review of a certain number of patient charts (usually 29), to determine whether a service was “medically necessary.” Medical necessity doesn’t simply mean that the item or service was valid, but also that “necessity” is documented in the chart. If the chart is missing some required language, a signature, or receipt, or anything else is out of place, then the entire claim is deemed medically “unnecessary,” regardless of the patient’s need for the service.

These SIU auditors will then extrapolate the errors found in the 29 claims across the entire universe of a provider’s claims, which magically both puts money back in the pocket of the insurance company and give the patient the service for free. Due Process be damned.

In one of the worst examples, I received this week, with a provider had just received a $750,000 “claw back” demand from the SIU of a Medicaid HMO for payments for IV infusion drugs for poor patients with rare diseases. The audit found that documentation of receipt of the drugs by the patient was insufficient, some “box” wasn’t checked, even though the medical chart, the patient and the medical staff all agree that the patient received the drugs intravenously. You could line up the pope and a convent of nuns as witnesses, and it doesn’t matter to the SIU.

So I have to go in and try to win an appeal or arbitration award to reverse the finding of the SIU bureaucrats. Which sadly, brings me to my final literary reference:

The Oxford Dictionary defines “bureaucrat,” as “an official in a government department, in particular one perceived as being concerned with “procedural correctness” at the expense of people’s needs.

“Please Tell Me you Didn’t. . . How to Keep Clients Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse”

Would you like to help Dallas police officers with simple wills, and estate planning on 9/11?

The Dallas Bar Probate section is calling for volunteers to help Dallas Police Officers with Wills, Medical Powers of Attorney, Directive to Physicians, etc. All you need is a laptop and four hour’s time.

Here is the post that went out to the Probate Section:

“For the past two years, Bank of America has coordinated an estate planning activity on 9/11 for first responders in different parts of the country. Bradley Arant Boult Cummings, LLP, a national law firm with 13 offices and 650 lawyers has joined in on the coordination.

This year, the project has been expanded to other locations, including Dallas. As a member of the DBA Probate, Trusts & Estates Section, you are invited to volunteer a four-hour block of time (12:00 p.m. – 4:00 p.m.) on Wednesday, September 11, 2024 at Dallas Police Department Headquarters at 1400 Botham Jean Blvd., Dallas 75215 in preparing simple wills and five advance planning documents for active members of the Dallas Police Department — Medical Power of Attorney, Directive to Physicians, HIPAA authorization, Durable Power of Attorney, and Declaration of Guardian. (The project may be expanded to other first responders next year if all goes well.) Note that interested police will be advised that it will not be possible to assist people with large or complicated estates, those with special needs children, those disinheriting certain close relatives (e.g., spouse, biological or adopted child, etc.), or those who want to set up sophisticated trusts.

“Police officers who respond to an emailed DPD flyer that they would like estate planning assistance will complete a questionnaire in advance of September 11 to facilitate document completion. All of the documents will be fillable in Word. A volunteer lawyer will be asked to review the questionnaire with a police officer and complete the documents through signature by the end of two hours. (It is anticipated that each lawyer will devote two hours to each of two police officers.) BofA and Bradley will supply lawyers, witnesses, notaries, and printers so that at the conclusion of a session, an officer can leave with completed documents.

“If you volunteer, the only things you will be asked to bring with you will be your talented brains and laptops. You will not leave with any documents. It will be made clear to the police officers that a volunteer’s services will conclude and their cases will be closed when they leave the event. You will leave with what you came in the door with and knowledge that you have helped someone who is at risk of being in harm’s way on a daily basis in his/her job.

“Now, estate planners are used to spending time with clients before drafting and finalizing wills and related documents. Thus, a two-hour period seems very short to go from start to finish. The process has worked, however, in other parts of the country, so it should be possible to do it here.

If you would like to be a volunteer at the four-hour 9/11 event, please let me know via email at pjmiller@airmail.net as soon as you can and, in any event, by August 15, 2024. So that you will know what will be involved, I will then email you a copy of the DPD flyer that is to be sent to police officers, the advance questionnaire, the fillable documents, and instructions to be given to officers when they leave the event.

Thanks so much for reading this and being willing to help in this commemorative activity!

Best,

Paula Miller

“Please Tell Me you Didn’t. . . How to Keep Clients Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse”

As a healthcare lawyer, almost everything my clients do is potentially illegal. I have a lot of sleepless nights worrying about how to protect them. Frankly, most days I feel more like I am fighting a battle to put out dumpster fires at an abandoned Circuit City parking lot, than practicing law.

If you have similar nightmares, I found a remedy. Go have lunch with a criminal defense lawyer of the stature of Dallas’ Bob Hinton, whom I have discovered is a legitimate Texas treasure. I met him last month while he was presenting at a Dallas Bar Association Trials Skills CLE, then asked him to lunch.

Holy cow! Bob has some stories to tell, with his baritone mixture of Tennessee and Texas accents, he honestly makes you feel like “everything is going to be alright,” even though he is talking about capital murder-for-hire cases, dating back to the 70’s and “Racehorse” Haynes.

Bob’s stories are his to tell, not mine. I can only tell you, one hour talking with Bob, and my healthcare “dumpster fires” seem to burn a little less incandescently.

“The Problem with Eric,” is a story that is in the public domain, so I can talk about it, by Katy Vine and Ana Worrel published in the July 2024 issue of Texas Monthly. Which I should mention, is a magazine with stories so good that this isn’t even the lead story of the month. Here are the highlights which illustrate how the FBI catches bad guys:

(1) A guy named Eric Maund, heir to an Austin auto dealership fortune (worth $40 million)
(2) Cheated on his wife in 2020
(3) With a “world’s oldest professional” (the profession is “old,” not the woman)
(4) Whose boyfriend didn’t know the woman was a “professional,”
(5) Until he found out the horrifying truth, after digging through the woman’s phone logs
(6) Which boyfriend then decided to “protect her honor,”
(7) By attempting to blackmail Eric the millionaire ($25,000, or he would tell Eric’s wife.)
(8) Eric, in response, did what seemed like a good idea to him, and hired Charlie Sheen’s former bodyguard to “eliminate” the couple.
(9) A bodyguard who was fired by the actor, for being “too crazy,” even for Charlie Sheen. (What could possibly go wrong?)

How the FBI caught the “bad guys.” The lawyer in me is less interested in the lurid details of the crime and more interested in how the FBI figured it out. The double murder-for-hire took place in the vehicle of one of the victims, in Nashville. The FBI found the deceased boyfriend’s phone, and then ran a search through the victim’s Pinger text messages, and found some items which quickly identified Erik as a “person of interest.”

The FBI then were able to secretly run a warrant on Erik’s iCloud phone and bank accounts, to discover that Erik had wired $150,000 to the bodyguard, on the day of the murders. What stuck out to me, in the article, however, is the quote from the FBI Agent:

“[B]y 2021, we had done everything we knew to do covertly. . . there were no more bank records to search. There were no more phone records to obtain. There was no more iCloud data to gather.”

So, they then began approaching witnesses, some of whom wore a wire and that is how they got confirmation they had the bad guys.

How the government investigates clients. Many of my clients want to know if the FBI is tapping their phones, after receiving a simple document subpoena. Are they following the client around? Is a lapel flower actually a microphone? How do they go through bank accounts? How do they investigate?

Well, the good news, is you don’t have to guess. The government doesn’t do anything without publishing precisely how they will go about their jobs on FBI websites and DOJ Criminal Resource Manuals. The FBI will usually work quietly at first, then get louder as the case nears indictment.

It also matters whether the crime involves serious risk of bodily harm, or purely white-collar, non-violent offenses. The former being more likely to justify more intrusive techniques.

Civil Investigative Demands and Civil Discovery. Sometimes, the government will conduct parallel civil and criminal cases. This is typically where I get involved. It is not unusual to receive a False Claims Act request for production, while a secret grand jury is also investigating the same issue. Once I learn there is a criminal case, I will typically bring in one of my criminal bar colleagues to help out and see if we can figure out what is going on.

Bank records. “Following the money,” has been a meme since Watergate. How they go about this depends on the facts. There is a “Right to Financial Privacy Act,” on which the DOJ has published some 90 sections in the Criminal Resource Manual, starting at Sec. 401 and continuing through Sec. 488. The Act prohibits Government authorities from gaining access to, obtaining copies of, or the information contained in the financial records of any customer from a financial institution unless access is permitted by one of the exceptions to the Act, such as a grand jury subpoena, or is accomplished by one of the methods provided by the Act: (1) customer authorization; (2) administrative summons or subpoena; (3) search warrant; (4) judicial subpoena; or (5) a formal written request.

“Knock and Talks.” The FBI classifies people as “Targets, subjects and witnesses.” Sometimes, the FBI will just go “knock and talk” to people, often employees of a target, who have some relation to the target, but are not the intended target. If they can get this person to give them information voluntarily, or produce records, these may form the basis for other subpoenas and warrants.

Cooperating Defendants. Sometimes, the FBI will contact a lower-level target, to see if he will cooperate in exchange for credit toward a lesser sentence.

As described in the Texas Monthly “The Trouble with Eric” article, the FBI got as far as it could, investigating Eric Maund with “covert” investigations into bank accounts and iCloud accounts, then recruited informants who wore a wire.

“Wiretaps.” Typically, not used in healthcare and most white collar cases. The FBI has a “Frequently Asked Questions” page, which states that agents can’t simply tap phones at will. Wiretapping is used rarely, only in more serious cases:

“Wiretapping is one of the FBI’s most sensitive techniques and is strictly controlled by federal statutes. It is used infrequently and only to combat terrorism and the most serious crimes. Title 18, U.S. Code, Section 2516, contains the protocol requiring all law enforcement officers to establish probable cause that the wiretaps may provide evidence of a felony violation of federal law. After determining if a sufficient showing of probable cause has been made, impartial federal judges approve or disapprove wiretaps. The approving judge then must continue to monitor how the wiretap is being conducted. Wiretapping without meeting these stringent requirements and obtaining the necessary court orders is a serious felony under the law.

Grand jury subpoenas. These typically issue after the investigation has been going on for a while, and are either directed toward businesses for documents, or witnesses who must appear and testify.

Key takeaway: “Never lie to the FBI.” While clients have a right to remain silent, once they start talking, it is a very bad idea to lie to the FBI. In fact, “obstruction” is a separate crime which can snare people who aren’t the original bad actors. The older the investigation, the better the chance investigators already know the answers to most of the questions, anyway.

“Please Tell Me you Didn’t. . . How to Keep Clients Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse” -Blog

The FTC issued a nearly-complete ban on non-compete agreements which would have taken effect 120 days after the new rule had been published in the Federal Register, or on September 4, 2024. A Texas Court has now enjoined the rule, but only as to the parties in the case. So, where are we now?

First, for those of you needing context, or just like keeping score of “who just punched whom”, the Biden Administration is “Blue.” Blue politicians and states are more Labor and regulatory friendly. (See, Exhibit “A”: California).

In California, employers can get into trouble and fined $2500 for each unfair competition violation, including either asking an employee to sign a non-compete, or failing to tell an employee with an unenforceable non-compete that the agreement isn’t worth the paper it is written on.

Texas is “Red,” which is pro-business. You might say that Texas prides itself on “beating the pants off” California, when it comes to encouraging businesses to move from Blue states to the Lone Star State.

One way Texas does this is found in Texas Bus. & Com. Code 15.50, which allows non-competes which are reasonable in time, scope and geographic limits.

But, complicating matters, is the fact that Texas has pockets of Blue cities, Dallas, Houston, Austin, San Antonio (basically, any large city in America tends to be Blue, while the countryside is Red), and Texas state court judges in big cities are more likely to find that the “reasonableness” element of non-compete contracts, are not, well, “reasonable.”

In sum, it is a mess, even in states that allow non-competes.

The Biden FTC rule was intended to make the rest of the country more like California than Texas. And in Texas, “them’s fightin’ words.”

Not surprisingly, then, Ryan LLC, the world’s largest business tax firm, headquartered in Dallas (if you’ve ever ridden by the Dallas Galleria Mall, you can’t miss the building) filed suit in Texas federal court to seek an injunction against the enforcement of the FTC ban.

According to a July 16, 2024 blog I found on Westlaw:

On July 3, 2024, a federal court in Texas issued an order that partially enjoins the Federal Trade Commission (“FTC”) from implementing or enforcing its Final Rule prohibiting most non-compete agreements (the “Final Rule”), marking the latest development to the FTC’s issuance of the Final Rule.

The July 3rd order was issued in the case of Ryan, LLC v. Federal Trade Commission , (“Ryan, LLC”) in which the plaintiff, Ryan, LLC , a tax firm, brought suit against the FTC with the backing of the U.S. Chamber of Commerce, and others, including two Texas trade associations. The Court’s order, issued just two months before the Final Rule was set to take effect on September 4, 2024, comes with two significant caveats:

First, it is applicable only to the plaintiffs in the Ryan, LLC litigation, as the Court declined to impose a nationwide injunction without further briefing from the parties as to why such nationwide injunctive relief would be necessary to the plaintiffs at a preliminary stage. Second, the order left open the possibility of a nationwide injunction as the Court signaled an intent to rule on the merits of the case on or before August 30, 2024. Yet as written, the order leaves the Final Rule intact for all other employers beyond those named as plaintiffs in the pending action.

The Texas Court held that the plaintiffs were likely to prevail on the merits of their claims. It reasoned that Section 6(g) of the FTC Act does not grant the FTC the authority for “substantive rulemaking,” such as the Final Rule, but rather limits it to issuing “housekeeping rules” necessary to prevent unfair competition. As a result, the Court concluded that the FTC lacked the authority to issue the Final Rule in the first place. The Court further criticized the FTC for adopting a “one-size-fits-all approach with no end date,” without adequately considering alternative, less restrictive measures and reasoned the Final Rule is arbitrary and capricious because it is “unreasonably overbroad without a reasonable explanation.” As such, the Court found that Ryan, LLC and the other plaintiffs in the case had shown a likelihood of success on the merits.

Then again, if Trump gets elected, the first thing he will likely do, is undo anything the Biden administration did, so this might all be a moot point anyway.

So, what do we do when Congress writes a statute pertaining to a federal agency and administrative law which no one can understand?

On Friday, June 28 the U.S. Supreme Court expressly overruled the case from which “Chevron deference” is derived. The case is Loper Bright Enterprises v. Raimondo (22-451) (holding that “The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”)

If you don’t know what “Chevron deference” is, don’t worry, I am one of those nerds who spent the 4th of July reading the case so I can unpack this for you. After all, it isn’t that often we a get S.Ct. decision that takes me back to law school, with cites to Chief Justice Marshall and Marbury v. Madison.

The way a bill becomes a law, meaning how a “statute’ ends up published in the United States Code (“U.S.C.”) is very cumbersome, in that both houses of Congress must vote to pass the bill, then the President must sign it. This is a hugely inefficient way to govern. Anytime the government wishes to change anything, there would need to be a new statute, complete with presidential signature.

The way a rule becomes a law, one that ends up published in the Code of Federal Regulations (“C.F.R.”) is that Congress must first delegate rule-making authority to the executive branch (a/k/a the “administrative branch”) through an “enabling statute,” which is why we call it “administrative law.” Every official CFR rule will cite its enabling statute, which helps us know the rule is valid and we must obey it.

Administrative law exploded in the industrial era after the “New Deal,” (there wasn’t much need for the F.A.A. until we invented airplanes.) And soon too, problems of interpretation followed. There is a reason for this.

Congress frequently paints a big fuzzy picture in very low resolution of what Congress intends by a statute (think Monet’s “Water Lilies”). Then somebody has to figure out what Congress meant.

Chevron Deference is (“was”) one method of interpretation, which held that if Congress wrote an ambiguous law, it did so on purpose, intending that the relevant administrative agency figure it out. Courts would then just defer to the agency’s interpretation. And everybody would be perfectly content, walking hand in hand into the sunset.

“The Rise of Tyranny.” While it is very difficult for Congress to pass any law, it seems federal administrative agencies literally cannot stop themselves making new ones. As noted, after the “New Deal” era, administrative law rapidly expanded, to the point there is seemingly a regulation for every regulation. Critics argue that giving federal agencies that much power leads to tyranny by unelected officials.

For example, federal agencies frequently don’t stick to the plan of writing formal CFR “rules,” but instead will also issue “sub-regulatory” pronouncements about the rules, published in the Federal Register (F.R.) Which sounds official, but really isn’t. These interpretations aren’t law at all, but merely ideas stuck in a register where the government publishes both real laws and almost every thought the government ever has had.

Nevertheless, these sub-regulatory Federal Register pronouncements will then be cited (volume and page) by the very agencies who dreamed them up, as if these “ideas” are laws. For for example in lawsuits against my clients, the government will cite these FR entries to demonstrate that a defendant was “on notice” of an interpretation taken by a federal regulatory agency, even though the position was neither in an actual rule nor a statute.

One of the best books criticizing this state of affairs, is The Rise of Tyranny, by Jonathan Emord (2008), because of quotes like this:

“Since the 1930s the Congress has delegated legislative, executive, and judicial powers to over 200 independent regulatory commissions. Those agencies enact over ninety percent of all federal law. They are ruled by individuals who are unelected and largely unaccountable to the Courts and Congress. Repeatedly they pursue their own self-interest at the expense of life and health. Often the agencies become captives of the industry they regulate, as in the case of the FDA (captive to the pharmaceutical industry) because it is in the economic self-interest of those who run the agency to obtain lucrative post government employment form the key industries regulated. The result is widespread corruption, biased and perverse enforcement of the law, and anti-competitive regulation.

The Chevron Doctrine comes from a “Clean Air Act” Supreme Court decision during the Reagan Administration in 1984, where the Court reasoned that under the Administrative Procedures Act, courts should accord due respect to the Executive Branch’s interpretation of ambiguous federal statutes because “[t]he officers concerned [were] usually able men, and masters of the subject,” who may well have drafted the laws at issue.

While the APA specifically mandates that Courts treat most agency determinations of fact as binding on the courts, under the Chevron Doctrine, courts also began deferring to administrative agencies’ interpretation of Congressional intent on questions of law. Which is not in the APA.

At the time in 1984, the Chevron case wasn’t thought to be that big a deal. But in subsequent cases, the Court eventually stated that Chevron rested on “a presumption that Congress, when it left ambiguity in a statute meant for implementation . . . first and foremost, by the agency, and desired the agency (rather than the courts) to possess whatever degree of discretion the ambiguity allows.”

In Loper Bright Enterprises v. Raimondo (June 2024) The S.Ct. expressly overruled Chevron, holding:

“Chevron cannot be reconciled with the APA by presuming that statutory ambiguities are implicit delegations to agencies. That presumption does not approximate reality. A statutory ambiguity does not necessarily reflect a congressional intent that an agency, as opposed to a court, resolve the resulting interpretive question.

However, the Court was clear, that any case decided under Chevron is still valid.

“By overruling Chevron, though, the Court does not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite the Court’s change in interpretive methodology.

Which means, we lawyers (representing regulators and the regulated), get to go fight all over again, about what Congress’ might have meant, because we can no longer presume Congress knew what it was doing, when it wrote a statute no one understands.

I hope you all have a wonderful Independence Day! The word “patriot,” meaning loyal to your country, comes from two Latin words smashed together “pa” (father) and “terra” (land). As in, dulce et decorum est pro patria mori. (“Sweet and fitting it is to die for one’s country.”)

As much as everyone likes to complain about the government, take heart that this is nothing new. This friction is by design. If you are wondering, politically speaking, I am one of these people who finds that the farther to the left or right a person is, the less I would want them in charge of anything that matters.

Thomas Jefferson explain below, why we do politics this way in his Notes on the State of Virginia, 1881. The idea here is that in America, everyone has a say in governance. We don’t have a king, we have elected officials. But, you have to watch those we elect like a hawk. They will misbehave, especially for money. Because as in England, from whom we won independence, people are reliably all the same when it comes to power:

Thomas Jefferson, Notes on the State of Virginia, 1881

“Mankind will soon learn to make interested use or every power they possess. . . . human nature is the same on both sides of the Atlantic. . . 173 despots would surely be as oppressive as one.”

“With money we will get men and with men we will get money, said Caesar. The time to guard against corruption and tyranny, is before they shall have gotten hold on us. It is better to keep the wolf out of the fold, than to trust to drawing his teeth and talons after he shall have entered.”

“The purpose of establishing different houses of legislation is to introduce the influence of different interests or different principles.”

“Thus in Great-Britain it is said their constitution relies on the house of commons for honesty, and the lords for wisdom; which would be a rational reliance if honesty were to be bought with money, and if wisdom were hereditary.

“But with us, wealth and wisdom have equal chance for admission into both houses.

“The concentrating these in the same hands is precisely the definition of despotic government. All the powers of government, legislative, executive, and judiciary, result to the legislative body. It will be no alleviation that these powers will be exercised by a plurality of hands, and not by a single one.

“An elective despotism was not the government we sought for . . .the powers of government should be so divided and balanced among several bodies of magistracy, as that no one could transcend their legal limits, without being effectually checked and restrained by the others.

“They should look forward to a time, and that not a distant one, when corruption in this, as in the country from which we derive our origin, will have seized the heads of government, and be spread by them through the body of the people; when they will purchase the voices of the people, and make them pay the price.

In sum, we have to watch our elected officials, if we don’t like what our elected officials are doing, and feel that corruption has seized the heads of government, vote the bastards out. The price of freedom is eternal vigilance.

As a health lawyer, you won’t see me on any “largest plaintiff’s verdicts” list. Which is probably a good thing. If I ever were, I don’t think you’d ever see me again. I will likely be doing what I love, health law, for a long time—one-tenth of an hour at a time.

One of the things I do love best about my job is getting to save people. This week, I got a “two-for-one.”

I had this kid that just graduated medical school and the TMB was holding up his license to “re-investigate” an old criminal matter in his background, which at the time, the grand jury had “no billed.” If you know anything about grand juries, they will indict a ham sandwich, so there was nothing there. But that didn’t stop the TMB from making the kid sweat. We just got word this week that he got his license.

But, he also said that his dad, who is a doctor, needed me, because he was the target of a DEA investigation. A DEA agent had called with her badge number, and said that the doctor’s bank account looked suspicious for drug activity, and they wanted information.

It took me about 15 seconds of listening to the story to tell the kid, “this is a scam.” There is no way that the DEA will call a doctor to ask for bank account information—they’re the government. They already know “what’s in your wallet.” (And besides, the DEA shows up in a doctor’s office to count pills, not money.)

The kid called me back to tell me, “yeah, it was a scam.”

Corporate Transparency and the New Beneficial Ownership (BOI) reporting rules for lawyers and clients. With “two-for-one” win, who needs to be on the largest pile of money, anyhow? Well, funny thing about piles of money, turns out lots of dishonest people do want to get their hands on them.

There are new rules for lawyers who represent clients who want to form limited liability companies with the Secretary of State. I do this about 100 times a year and the new rules are fairly intrusive, because if a lawyer files with the SOS for a client, the client must now waive attorney-client confidentiality as to who his lawyer was. Client lists with lawyers are confidential, unless they aren’t. And now they aren’t. At least when it comes to corporate formation.

If I form the company for the client, I must now give the client my FinCEN number, which I could only get after navigating this rabbit hole: (1) going to the Texas “txt.gov” car tag and driver’s license website to set up an account for my authenticated driver’s license, (2) go to a similar federal ID website, sort of like the Texas one, to give them a copy of my license to drive, prior to being allowed to (3) go the to the FinCEN website to get a number from them, which I must (4) give to the client so that the client can go waive confidentiality and tell the government who their lawyer or “Company Applicant” might be, even though no crime/fraud has occurred.

I started to count the number of government issued ID numbers I needed to accomplish this task, but gave up.

The Financial Crimes Enforcement Network (FinCEN). FinCEN is part of the Department of Treasury and investigates financial crimes. After looking at their website, it is hard not to be a fan. They are after terrorists and drug dealers who are money-laundering, financial exploitation of elderly people, money laundering from human trafficking of all kinds, foreign kleptocracy money, ransomware operators, (and yes, health care fraud.) I am very glad FinCEN exists.

The reason they want to know what lawyer set up a company is so they can send legitimate subpoenas and discovery to law firms, who set up suspected companies. We can argue about the implications of this, or we can go scream at clouds, both feel like they would do the same amount of good.

But what is also entering through the same door, are the very scammers FinCEN is set up to combat. Much like the doctor who was told the DEA is after them, scammers will quickly figure out that they too, can send out fake document requests to law firms and make phone calls to all kinds of professions, posing as FinCEN agents.

According to an April 22, 2024 posting by the Industrial Federal Credit Union, entitled “Beware of Scammers Posing as Law Enforcement Agents:”

“These scammers employ various deceptive tactics, including the use of fake names and badge numbers. In some instances, they may even use the identities of real law enforcement agents, accompanied by a text in what appears to be legitimate law enforcement credentials in photo form. Additionally, these scammers may possess certain details about you, such as part or all of your Social Security number (SSN). For medical professionals like doctors and pharmacists, they may possess National Provider Identifier numbers or state license numbers.

And now, after the Corporate Transparency Act takes effect, add lawyers to the list of professionals who may be asked for financial information about the firm and clients. Here are key points to remember:

• Law enforcement will never call and ask for your SSN or any other personal information. It will not demand payment, nor will it call you to threaten arrest or claim you are under investigation if you don’t pay.
• Caller ID may display a legitimate law enforcement phone number, but this does not confirm the authenticity of the call. Modern technology enables scammers to manipulate caller ID information, so it’s crucial not to rely solely on this.
• Never disclose your SSN or confirm any portion of it to unknown callers. Similarly, refrain from providing bank account or credit card numbers to anyone contacting you unsolicited.
• Any request to wire money, purchase gift cards, or send cash or cryptocurrency should be treated as a scam, regardless of the identity the caller claims to have.

If you receive a suspicious call, promptly end the conversation and report the incident to ReportFraud.ftc.gov.