FRIENDLY, Circuit Judge:
In this diversity action
Although other theories of liability for compensatory damages had been advanced in the complaint, plaintiff withdrew all except negligence and fraud upon the Food and Drug Administration (FDA). Defendant moved for a directed verdict on all claims for injury by cataract as unsupported by sufficient proof of causation and on the fraud and punitive damage claims as unsupported by the evidence; the motions were denied. The judge instructed the jury it must first determine the issue of causation; if it found for the plaintiff on that, it should then pass upon the other issues, which he explained in a charge to which defendant took no exception. He helpfully submitted six separate questions: (1) causation, (2) negligence, (3) fraud upon the FDA, (4) amount of compensatory damages, (5) liability for exemplary damages, and (6) the amount thereof. The jury gave affirmative answers to all the questions relating to liability and fixed compensatory damages at $17,500 and punitive damages at $100,000, which the judge later declined to eliminate or reduce, 254 F.Supp. 430 (1966). On appeal defendant contends that its motions
A summary of certain undisputed facts from this enormous record will be useful by way of introduction. MER/29 was developed in the late 1950's by The Wm. S. Merrell Company, a division of defendant, for the purpose of lowering blood cholesterol levels. At that time most physicians believed that a high level of cholesterol was a significant precursor of atherosclerosis, the leading single cause of death in the United States.
Before the drug was placed on the market there had been 246 experiments involving 3907 animals and it had been administered to over 2000 human patients under close clinical observation. Eighty per cent of these patients who had used the drug for 90 days or longer experienced a reduction of cholesterol levels averaging 20%. The only reported side effects were dermatitis of several different types, two reports of hair loss, some nausea and vomiting, one report of a drop in white blood cell count, two cases of vaginal bleeding or spotting, three cases of tearing or watering of the eyes, and one of blurred vision. In December 1959 many of the clinicians who had been administering the drug reported to a conference of eminent scientists and physicians held under defendant's auspices at Princeton, N. J.
In July 1959 defendant filed with the FDA a New Drug Application (NDA) for MER/29. The FDA cleared the drug for release in April 1960, subject to submission of approved labels. The label stated, under the heading "SIDE EF-facts," that "Isolated reports have been received of nausea, vomiting, temporary vaginal bleeding and dermatitis" and under the heading "CAUTION" a warning that "MER/29 has been shown to be entirely safe in the periods the drug has been studied, but long-term or lifetime effects are unknown. Periodic examination of patients on long-term MER/29 therapy is therefore necessary." Marketing began June 1. During the balance of 1960 over 100,000 persons used the drug, with no reports of cataracts.
In January 1961, Merck & Co., which had borrowed a sample of MER/29 and then synthesized its own supply, reported that test animals had developed cataracts. Defendant, after sending a team to Merck's laboratory, decided to make a further experiment on animals selected by it but did not reveal the Merck report to the FDA or the medical profession. On February 1 it learned that a user in Los Angeles, one Lee Anticouni, had developed a cataract; the facts were never run down for reasons later developed, and neither the FDA nor the profession was informed. Meanwhile additional thousands of patients were using the drug, with benefit to cholesterol levels and for the moment without important reported adverse effects.
On defendant's rerun of the Merck experiment, its dogs developed cataracts in October, 1961. At the same time the Mayo Clinic reported cataracts in two, later three, patients who were using MER/29. The combined effect of these two incidents was to cause the defendant, on October 18, 1961, to request the FDA's permission to issue a warning letter to all physicians, such permission then being required by law, 25 F.R. 12595 (1960), 21 C.F.R. § 130.9 (1963 ed.). Believing defendant's proposed letter to be too weak, the FDA withheld permission and insisted on a much stronger one which was approved on November 27 and mailed on December 1 to every doctor in the country and also to defendant's salesmen.
Plaintiff, then aged 60, began using MER/29 in February 1961. In June he noticed scaling, rashes and falling hair which he reported to his physician. These conditions became aggravated despite treatment; around the year-end he noted disturbing eye symptoms and stopped taking the drug. In about six months the skin and hair conditions disappeared but the eye ailment, later diagnosed as cataracts, became somewhat worse; however, it has not become sufficiently serious for him to have them removed.
Defendant's broadest contention is that a verdict should have been directed in its favor insofar as plaintiff sought damages for cataracts because of lack of adequate proof that these were induced by MER/29.
Defendant claims this afforded too weak a basis for an opinion in view of the doctor's admission on cross-examination and the testimony of defendant's two experts that plaintiff's cataracts were in the deep cortex and nucleus of the lens where senile cataracts are most likely to develop, rather than nearer the surface where toxic cataracts usually manifest themselves. To this defendant added the testimony of its experts that the slow development of Roginsky's cataracts, which had been largely arrested at the time of trial, pointed to their being senile rather than toxic, and that his skin ailment had not been of the type that had generally preceded MER/29 induced cataracts. However, plaintiff's medical witness denied such universal distinctions between the manifestation of senile and toxic cataracts and between plaintiff's form of dermatitis and others, and the cross-examination of defendant's experts was not without effect. With all this supplemented by the abundant evidence that symptoms generally like Roginsky's had often been followed by toxic cataracts, the issue of causation was rightly left to the jury, even though on our own appraisal we might well find defendant's experts to be more convincing.
Defendant's next complaint is that an erroneous refusal to direct a verdict for it on the fraud count prejudiced the jury's consideration of the issues of negligence and of liability for punitive damages. While our holding that the evidence was insufficient to warrant submission of the issue of punitive damages moots the latter branch of defendant's complaint, the former remains; indeed its force is increased since one of plaintiff's arguments, that much of the evidence complained of was properly submitted to the jury on the punitive damages issue, falls by the wayside.
Plaintiff's further rejoinder, that any vice in the admission of evidence on the fraud counts was cured by the special verdict wherein the jury found defendant liable for negligence as well as for fraud,
Defendant asserts, and plaintiff does not dispute, that mere violation of the Food, Drug and Cosmetic Act does not give rise to a private claim — a point which, in view of the agreement of the parties, we do not decide. See Developments in the Law, The Federal Food, Drug, and Cosmetic Act, 67 Harv.L.Rev. 632, 722 (1954). Plaintiff relies instead on the principle that a fraud action will lie not only when the defendant practices his deceit directly on the plaintiff but also when he submits known false data to an intermediary who may be reasonably expected to pass it on, the classical case being the dispatch of financial statements to a credit agency. See Tindle v. Birkett, 171 N.Y. 520, 64 N.E. 210 (1902). Defendant counters that this principle applies only when the false information is to be passed on more or less as such, and not when it is to be used simply for an overall evaluation by a government agency whether the person submitting the data may put a product on the market. It argues on this basis that plaintiff should have been confined to introducing evidence of misinformation or failure to disclose information that might have affected the label or other communication whose form was subject to FDA approval. It contends also there was insufficient proof of reliance by the FDA on such false or incomplete data as were submitted, so that even "but-for" causation was not established.
One's liability generally for fraud has been said to extend only "to the persons or class of persons whom he intends or has reason to expect to act or to refrain from action in reliance upon the misrepresentation" and who in fact so rely, Restatement (Second), Torts § 531 (Tent. Draft No. 10, 1964), and in the specific case of information required to be filed by statute, to all persons who have justifiably relied thereon. Id. § 536. This would encompass a fraudulent misrepresentation to or concealment from the FDA affecting the approved label or from the patient's doctor if he is regarded as the plaintiff's agent, see Wechsler v. Hoffman-LaRoche, Inc., 198 Misc. 540, 99 N.Y.S.2d 588 (Sup.Ct. Bronx Co. 1950) (Rabin, J.). On the other hand to regard the FDA as "agent" for every person in the United States, as plaintiff urges, would be to use words as a substitute for substance. If we were forced to decide, we would say that a plaintiff does not make out a case of fraud simply by showing that if the facts had been fully stated, the FDA might not have released the drug.
We believe avoidance is justified because the proof of defendant's negligence, much of which is reviewed in section V of this opinion, was such that the jury's finding on that issue could not have been significantly influenced by admission of evidence on the fraud count. It seems to have been rather clear in this case from the outset that the real fight was about punitive damages, with causation and fraud important
We thus come to the issue of punitive damages, an issue of extreme significance not only in monetary terms to this defendant in view of the hundreds of pending MER/29 actions and to the plaintiff as well, but from a longer range, to the entire pharmaceutical industry and to all present and potential users of drugs. Plaintiff, of course, does not claim that defendant intended to harm him; his contention is that defendant's negligence rose to such a level of irresponsibility or worse as to invite this extraordinary sanction.
The remedy has a long history. Its first articulation in England came in a case of illegal entry. The jury was held justified in going beyond "the small injury done to the plaintiff" because of the desirability of taking account of "a most daring public attack made upon the liberty of the subject" through entry and imprisonment pursuant to "a nameless warrant." Huckle v. Money, 2 Will.K.B. 206, 95 Eng.Rep. 768 (1763). See also Wilkes v. Wood, Lofft 1, 18, 19, 98 Eng. Rep. 489, 498-99 (C.P.1763). Later decisions reflect a variety of rationales: redressing affronts to personal feelings not susceptible of measurement, cf. Tullidge v. Wade, 3 Wils.K.B. 18, 95 Eng. Rep. 909 (1769), financing the cost of deserving litigation where only small compensatory damages can be expected, diverting the plaintiff's desire for revenge into peaceful channels, and serving as punishment for and deterrence from socially disapproved conduct.
There is no doubt, however, that the remedy has been extended to cases where, although the defendant did not intend to harm the plaintiff, he showed "such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton." Prosser, Torts § 2 at 10 (1964). Such an extension was altogether natural: from a moral standpoint there is not too much difference between the driver who heads his car into a plaintiff and the driver who takes the wheel knowing himself to be so drunk that he probably will hit someone and not caring whether he does or not; and it is as important to deter the latter type of conduct as the former. But such cases still resemble those first considered in an important respect — a high probability that the number of plaintiffs will be few and that they will
The legal difficulties engendered by claims for punitive damages on the part of hundreds of plaintiffs are staggering. If all recovered punitive damages in the amount here awarded these would run into tens of millions, as contrasted with the maximum criminal penalty of "imprisonment for not more than three years, or a fine of not more than $10,000, or both such imprisonment and fine", 21 U.S.C. § 333(b), for each violation of the Food, Drug and Cosmetic Act with intent to defraud or mislead.
Although multiple punitive awards running into the hundreds may not add up to a denial of due process, nevertheless if we were sitting as the highest court of New York we would wish to consider very seriously whether awarding punitive damages with respect to the negligent — even highly negligent — manufacture and sale of a drug governed by federal food and drug requirements, especially in the light of the strengthening of these by the 1962 amendments, 76 Stat. 780 (1962), and the present vigorous attitude toward enforcement, would not do more harm than good. A manufacturer
However, the New York cases afford no basis for our predicting that the Court of Appeals would adopt a rule disallowing punitive damages in a case such as this, and the Erie doctrine wisely prevents our engaging in such extensive law-making on local tort liability, a subject which the people of New York have entrusted to their legislature and, within appropriate limits, to their own courts, not to us. Our task is the more modest one of assessing the sufficiency of the evidence within the framework of New York decisions on the award of punitive
The parties are in substantial agreement on one point — that New York does not impose punitive damages on a corporation unless, as charged by Judge Croake, "the officers or directors, that is, the management" of the company or the relevant division "either authorized, participated in, consented to or, after discovery, ratified the conduct" giving rise to such damages. Cleghorn v. New York Cent. & H. R. R. R., 56 N.Y. 44, 47-48 (1874); Wright v. Glen Falls, S. H. & Ft. E. St. R. R., 24 A.D. 617, 48 N.Y.S. 1026 (3d Dept. 1898); Rowe v. Brooklyn Heights R. R., 71 A.D. 474, 75 N.Y.S. 893, 894 (2d Dept. 1902); Walker v. Lord & Taylor, 236 App.Div. 111, 258 N.Y.S. 96 (1st Dept. 1932).
The New York courts have used a variety of phrases to describe the "moral culpability," Walker v. Sheldon, 10 N.Y.2d 401, 404-405, 223 N.Y.S.2d 488, 491, 179 N.E.2d 497 (1961), which will support punitive damages for
Obviously this definition would be met if a manufacturer placed a drug on the market without any test program, a practice now rendered unlawful by federal legislation, or when its management knew the program had disclosed dangers of serious mischance or was incomplete in some material respect. Sufficient proof would also be furnished if, after the drug had been placed on the market, the manufacturer was shown to have become aware of danger and to have done nothing, deliberately closing its eyes. On the other hand, error in failing to make what hindsight demonstrates to have been the proper response — even "gross" error — is not enough to warrant submission of punitive damages to the jury. Cf. De Marasse v. Wolf, 140 N.Y.S.2d 235 (Sup.Queens Co.1955).
The judge properly did not restrict the plaintiff to evidence showing that defendant should have been aware that MER/29 was cataractogenic, since this other evidence tended to show the defendant's overall attitude toward the drug including its danger to the eyes. See Voltz v. Blackmar, 64 N.Y. 440, 445 (1876). However, the presence of the
One of the earliest and most inflammatory items was this: As part of the New Drug Application submitted to the FDA, defendant reported on a 16 month study of three pairs of monkeys, one of each pair being given the drug and the other being a control. The plan was to start the dosage at two and a half times the anticipated human dose, and then to raise it first to five and then to ten times. The experiment had been conducted by a toxicologist, Smith, who had left the company's employ before reporting on it; the write-up by his successor, Dr. King, contained numerous errors — none, however, shown to have been known to management — and one thing that was much worse. A laboratory technician testified to an occasion when she had submitted a final graph of the weights of the monkeys to a Dr. Van Maanen who directed her to increase the weight shown for one monkey whose weight had dropped 25% and to show weights for others for two weeks after they had in fact been autopsied; after complaining to Dr. King, her immediate supervisor, she made the changes. But Dr. Van Maanen, Merrell's Director of Biological Science, was also a subordinate who reported to the vice president and research director, Dr. Werner, and there was not the slightest evidence that the latter or any higher authority knew of his dictating this change in the observed data.
The next episode relates to a study of 90 rats ending February 1960, of which thirty received ten times the recommended human dose, thirty received five times, and thirty served as a control, with a third of each to be autopsied in three, six and twelve months respectively. At the first autopsy corneal opacities (not cataracts, which are lenticular opacities) were observed in eight out of the twenty drugged rats. This was known to Getman, president and general manager of the Merrell Division, and was reported to the FDA. Dr. Murray, assistant to the Vice President in charge of Research, wrote the FDA that a consultant had advised that such corneal changes were common in laboratory rats and he believed them to be inflammatory. The record affords no basis for believing this was not the company's sincere opinion. Later there was an increased incidence of cataracts in the drugged rats as well as in some of the control rats; the former was not reported although the latter was, but there is no evidence
Dr. King also failed to report either to management or the FDA the development of cataracts in two dogs on a three month study ending February 1960, as to which he also modified his description of other abnormalities. Again there is no evidence that management was aware of this; furthermore, the whole study was worthless since the dogs were contaminated by distemper and viral hepatitis, and when it was rerun with sound dogs, no opacities were observed.
Plaintiff makes much of a memorandum dated May 17, 1960, shortly before MER/29 was put on the market, between two company vice-presidents with copies to still higher officers, concerning an analog which had been developed in the course of experimentation. Seizing on a phrase which suggested the desirability of having the analog "available as a substitute in the event Mer-29 gets into trouble," plaintiff argues this supports an inference that defendant put MER/29 on the market knowing that it would get into trouble, at the very time when a better product was in hand. But plaintiff takes the phrase quite out of context. The fact is that the letter discusses the company's general policy on licensing its drugs to other manufacturers and the application of this policy to the MER/29 analog. It says that animal work performed to date "indicates some question as to the toxicity of the analog in the lower animals (just as MER-29 itself does), but the work with the analog indicates it may be even better than MER-29. Although a lot more animal work would have to be done to tie down better the question of toxicity, action of the product, etc., this could be done. * * * In view of the tremendous importance of MER-29 and this analog, it probably will be decided that Merrell should follow through with the additional animal work and the clinical work on this analog in order to prove out its relative inferiority or superiority and thus have it available as a substitute in the event MER-29 gets into trouble, or perhaps introduced later as an improved product." The memorandum goes on to discuss various pros and cons of licensing an analog not thoroughly tested to another pharmaceutical manufacturer who would do the work. We find no basis for the sinister inference plaintiff would draw; the picture is rather of a company reasonably satisfied that it had a good product despite some known "toxicity in the lower animals" and considering what to do with another that might or might not prove better.
This brings us to the receipt of the report from Merck & Co. in January 1961 as to cataracts in dogs which we mentioned at the outset. Since this, to our minds, was the first information reaching management which might indicate that MER/29 could have such serious side effects as to make it unsafe despite its beneficial qualities, the officers' action must be severely scrutinized.
Defendant's immediate response was to send Dr. Werner, its research vice-president, Dr. Van Maanen and Dr. King to the Merck laboratory. The decision made on their return was to rerun the experiment. On its face this was not heedless or reckless conduct;
Indeed, the serious criticism is not over what defendant did but what it failed to do — notify the FDA, the medical profession, or both. Plaintiff does not contend that FDA regulations required defendant to report the Merck results, the requirements then being limited to reporting results of experiments done in the manufacturer's own laboratory or by an investigator who had been furnished the drug. See 21 C.F.R. § 130.4(c) (1963 ed.). The claim is rather that, even though there is no direct proof that such notification was considered and rejected, its logic was so apparent as to permit an inference that defendant didn't want the FDA to know of the Merck results for fear it might order the warning accompanying the drug to be stiffened or the drug withdrawn, and didn't want physicians to know for fear they would be unduly frightened. Assuming a jury could find that this was so and that defendant was motivated by commercial considerations as well as by a desire to benefit potential victims of atherosclerosis and granting that management knew its own experiments had disclosed corneal opacities in rats, we fail to see how this meets the definition of reckless indifference to human life or health. The question on that score is not what defendant feared the FDA or doctors would do but what it feared MER/29 would do. Here the Merck report, with the infirmities we have noted, had to be set against the belief of defendant's management, erroneous only in one minor respect, that no cataracts had ever been reported in the 4000 animals previously tested including monkeys, which are closer than dogs to humans, in the 2000 patients under clinical observation for many months, or in the 100,000 patients who had used the drug for varying periods since its release in June 1960. We cannot see how these circumstances would warrant allowing a jury to find that Getman and Werner, the two principal decision-makers on this matter, who continued to use MER/29 themselves, consciously disregarded a substantial and unjustifiable risk of which they were aware.
Neither do we think the scale is tipped by the Anticouni incident, which followed shortly thereafter. Dr. McMaster, associate director of medical research for the Merrell Division, had first heard of Anticouni in May 1960 from a Los Angles cardiologist, one of the clinicians who had been administering the drug on an experimental basis. The cardiologist then reported that Anticouni had exhibited very severe dermatitis which he was unable to evaluate due to the patient's taking, in addition to MER/29 at twice the recommended dose, several other drugs, one of which has since been removed from the market because of its production of toxic side effects including severe dermatitis. McMaster asked for the records and offered to provide funds for further investigation; on several later occasions he repeated the former request but without result. On February 1, 1961, the cardiologist called Dr. McMaster to report that Anticouni had left his care and was said to have developed cataracts and to be consulting other physicians and attorneys. McMaster again asked for the cardiologist's files but did not receive them. He did nothing more until June when, on a trip to Los Angeles, he examined the files but was not enlightened, and sought to obtain the name of Anticouni's ophthalmologist without success. This episode was known to Getman, at least in a general way. Despite defendant's argument that the report was mere hearsay, that the other drugs Anticouni was taking were as likely as MER/29 to have caused cataracts, and that a cataract in this cardiac patient was likely to be of the senile, not the toxic, variety, a jury could find that the failure to exert greater energy in running down this report was negligent.
Before continuing with developments as to cataracts, we must recount another episode on which plaintiff heavily relies because the participation of management is plain. On March 24, 1961, Vice President Woodward of the Merrell Division addressed a memorandum to President Richardson of the parent company, with copies to Getman, Werner, McMaster and Murray, as to side effects of MER/29 on hair, a phenomenon which later experience indicated to be a not infrequent precursor of cataracts. Woodward reported that the company "had initiated a review of reported thinning of the hair of people taking MER/29," that this had disclosed 51 such reports out of 300,000 users, and that he and Getman felt "morally and legally bound" promptly to alter the warning accordingly. He recommended giving this warning despite the risk that it might provide the FDA with an occasion to re-examine Merrell's entire NDA: "we have made no changes to this point in any of our MER/29 literature, basically because we were afraid to `stir the pot' in Washington" since "we have heard from several sources that FDA at times has considered reopening our NDA file but, frankly, we do not know whether this is true." He enclosed a draft of a proposed letter to the FDA referring "to several reports concerning thinning or texture changes of hair" and proposing to add to the warning in the brochure accompanying MER/29 the words "and thinning of the hair." Richardson referred the memorandum to another vice president of the top company, Stormont, who promptly reported that although the facts as to hair effects were inconclusive, "the weight of the evidence seems to indicate that MER-29 may produce some hair changes in a very small proportion of cases" and that the warning should be revised as proposed. So far fine, but Stormont added that he didn't "particularly like" Dr. McMaster's suggestion that the warning be broadened to read "changes in color, texture, or amount" instead of "loss," since "this sounds rather frightening"; McMaster's memorandum had disclosed that of the 51 cases of hair changes, only five had included color and six texture. Dr. McMaster agreed with Stormont's suggestion. Richardson authorized proceeding along these lines,
Since the Merck report had included rats
The proposed letter to the medical profession was first read to the FDA over the telephone on October 18. It began by saying its purpose "is to advise you of those cases where MER/29 therapy should be discontinued." It recited that there had been "a number of reports of hair loss, changes in color and texture of hair, and dermatitis" and that "more recently, lens opacities have been observed in four patients following severe dermatitis." It advised immediately withdrawing MER/29 "if changes in hair or skin occur" and warning patients to watch for and report such symptoms. The proposed letter went on to describe the types of dematitis and hair loss that would indicate cessation of therapy; it concluded by saying that "Your adherence to the cautions presented here will permit you to use MER/29 effectively in your practice."
Dr. Nestor of the FDA telephoned early the following morning. He said, as reported in a memorandum from Dr. Murray to Getman, that the FDA did not have sufficient pertinent facts to decide on the warning letter, that it feared side effects might be more severe and extensive than stated, and that the letter "might, therefore, be misleading and lead the physician to a false sense of security." The FDA wanted all facts available to the defendant "on the cases of eye changes, including the actual case records," a written copy of the proposed letter, and a statement that defendant had "supplied all toxicity data in animals and man, including that available to us from outside sources." Dr. Nestor had recounted discussions of MER/29 with several experts who were concerned with "numerous other serious side effects" which he enumerated, had expressed the FDA's feeling that they had enough evidence to suspend approval of the drug, and had told of advice from their statistician that Merrell's claims for significant lowering of cholesterol levels were not true. A meeting was arranged for October 26, and Getman directed that the FDA's requests be fully met. Meetings, some of them apparently rather stormy, were held on October 26 and again on November 2,
Meanwhile, on October 20 defendant wrote, as it was free to do, to clinicians who had been administering the drug at high dosages, telling them of the reported cataract cases, now four in number, and strongly urging discontinuance of the drug if hair or skin changes appeared. It discontinued placing new advertisements and instructed salesmen to return all samples and promotional literature other than the FDA approved labelling, cautioning them, however, not to mention that their samples had been recalled. Merrell also sought the advice of two independent clinical investigators and the professor who had chaired the
The letter approved by the FDA on November 27 and sent on December 1 to all physicians and all the defendant's salesmen began by noting that while "comparatively few serious clinical injuries have been reported to date, their possible significance is emphasized by findings from animal studies." It next told of the four human cataract cases, one involving a patient receiving the recommended daily dosage of 250 mg., and added that "cataracts and corneal opacities have also been produced with MER/29 in animals." It said that slit lamp examinations were necessary for early detection of cataracts and thus were "indicated prior to and periodically during therapy." The letter went on with hair changes and skin changes, saying these might be related to each other and to cataracts, and recommended that MER/29 therapy be discontinued immediately on their occurrence. It also reported certain scattered cases of other adverse effects in humans and more in animals. While observing that "the side effects of all types reported to us to date total substantially less than one percent of the patients treated," including a number under therapy for more than a year and a few in excess of three, the letter "recommended that MER/29 be used only in patients who can be maintained under very close supervision and frequent observation" and never at more than 250 mg. per day. It concluded by saying that further studies were under way and requesting any information the physician could contribute.
Although plaintiff makes many other criticisms of defendant's conduct in late 1961 — alleged withholding of data as to other forms of toxicity in animals,
Furthermore, while defendant's proposed letter would have served as a first warning, it was never suggested that it would be the last. Defendant's position all along was that it should be permitted to send out its warning letter immediately on the understanding that the letter would be subject to change as a result of further conferences and investigations. In fact, this might well have been better for the public than what the FDA accomplished. The essentials in which the December 1 letter differed from what defendant volunteered to send on October 19 were the recommendations that slit-lamp examinations be made before and during therapy and that MER/29 be used only under very close supervision and frequent observation, and the omission of the reassuring concluding paragraph. We cannot say that, on the basis of what it then knew, defendant's failure to propose so strong a warning could reasonably be found reckless or wanton.
Plaintiff's final suggestion is that MER/29 was taken off the market in April 1962 not because of the increasing reports of cataracts, culminating in that of the six year old boy at the Mayo Clinic, but because of a surprise inspection of the Merrell plant by the FDA which revealed the fabricated monkey data discussed some time back. Taking the evidence in the sense most favorable to plaintiff, the utmost shown is that the raid may have accelerated the decision by a few days; there is nothing to warrant an inference that but for this defendant would have continued marketing the drug in the face of increasing evidence of its cataractogenic qualities.
Plaintiff places heavy reliance on the argument that even though no one of the incidents we have analyzed would itself warrant a finding of recklessness, their combination permits an inference of a plan which not only heightens the significance of each item but would permit consideration of other acts we have not detailed including those of subordinates. We have no quarrel with this as a general principle; indeed we have said quite recently that, even in a criminal case, "The trier is entitled, in fact bound, to consider the evidence as a whole; and, in law as in life, the effect of this generally is much greater than of the sum of the parts." United States v. Bottone, 365 F.2d 389, 392 (2 Cir.), cert. denied, 385 U.S. 974, 87 S.Ct. 514, 17 L.Ed.2d 437 (1966). Still the burden devolves on the court to see that when all the evidence is thus considered, there is enough to warrant the finding that the law requires. And here we think plaintiff fails. The thorough discovery by his industrious and able counsel has unearthed countless instances of carelessness and even of wilfulness by subordinate officials and of failure to exercise proper supervision and possible bad judgment by higher ones. Granted that few human endeavors would escape without blemish from such searching scrutiny, the picture is not a pretty one. But there was no proof from which a jury could properly conclude that defendant's officers manifested deliberate disregard for human welfare; what it shows as to this, apart from negligence in policing subordinates and a somewhat stiff-necked attitude toward the FDA, is rather that they were so convinced of the value of the drug both to the public welfare and to the company's finances that they maintained a sanguine view longer than prudence warranted.
Moreover, New York demands, as it might have to before punishing a defendant with fines similar to those imposed on a criminal charge, that the quality of conduct necessary to justify punitive damages must be "clearly established." Cleghorn v. New York Cent.
The judgment as to compensatory damages is affirmed; the judgment as to punitive damages is reversed. No costs.
HAYS, Circuit Judge:
My brethren, disregarding the Ostopowitz case in which a New York court passed upon the same issues as those involved here, speculate on what the higher New York courts might hold.
At the very least, I would await the result of appeal in Ostopowitz.
On Petition for Rehearing
Roginsky's fifty-five page petition for rehearing warrants a few additional ones from us.
While contending that we are concluded by the trial judge's decision in Ostopowitz v. Wm. S. Merrell Co., Supreme Court, Westchester County, New York, No. 5879/63, see fn. 3 to our opinion, now under appeal by the defendant to the Appellate Division, Second Department, Roginsky urges, as "the chief relief sought," that we "suspend" our decision until appellate proceedings in that case and another, Space v. Richardson-Merrell, Inc., now on trial in Broome County, New York, are concluded. We do not regard ourselves as bound by the rulings of a state nisi prius judge although we treat these with respect. Insofar as Fidelity Union Trust Co. v. Field, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109 (1940), on which plaintiff relies, may have indicated such a duty of abnegation, King v. Order of United Commercial Travelers, 333 U.S. 153, 68 S.Ct. 488, 92 L.Ed. 608 (1948) and Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 204-205, 76 S.Ct. 273, 100 L.Ed. 199 (1956) id. at 209-212, 76 S.Ct. 273 (concurring opinion of Mr. Justice Frankfurter), have removed this, in favor of Professor Corbin's earlier view that when a federal court must determine state law, it should not slavishly follow lower or even upper court decisions but ought to consider all the data the highest court of the state would use. See Corbin, The Laws of the Several States, 50 Yale L.J. 762 (1941). Such is the established position of this court. See, e. g., Strubbe v. Sonnenschein, 299 F.2d 185, 188-189 (2 Cir. 1962); Merritt-Chapman & Scott Corp. v. Public Util. Dist. No. 2, 319 F.2d 94, 103 (2 Cir. 1963); and Evans v. S. J. Groves & Sons Co., 315 F.2d 335, 341-345 (2 Cir. 1963), a negligence case in which we predicted the result later reached by the New York Court of Appeals in Pfaffenbach v. White Plains Express Corp., 17 N.Y.2d 132, 269 N.Y.S.2d 115, 216 N.E.2d 324 (1966). In any event we in no way disagree with the Supreme Court Justice's ruling that "high moral culpability" may justify the award of punitive damages under New York law, a position based on the leading
We are similarly unimpressed by plaintiff's alternative position. If Roginsky wished a truly authoritative ruling on state law, he should have sued in a state court. The suggestion that the federal courts should suspend decision after their time has been taken by a twenty day trial and an appeal requiring detailed examination of an appendix of more than 2000 printed pages and hundreds of exhibits comes with rather ill grace when advanced by counsel for the first time more than three months after the appeal was argued and only after an adverse decision, although the Ostopowitz ruling was reported a week after the argument. We think plaintiff would have been rightly outraged if, in the event of affirmance, defendant had now made a similar suggestion. Moreover, plaintiff has received what the jury considered full compensation for the cataracts, arrested at an early stage,
Plaintiff objects to our remarks on the problem of multiple punitive damage awards for serious negligence in the manufacture of goods or the rendition of services, claiming that this question has here arisen "when the MER/29 litigation is pretty well at an end."
We have reviewed plaintiff's extensive criticisms of our summary of the
Counsel's final point is that it may have been a mistake to try the case and argue the appeal on the basis that complicity by defendant's presidents or vice-presidents must be shown to warrant a punitive award, see p. 842, n. 17. They find support for the view that the acts of inferior supervisory employees may be enough in the brief opinion in Soucy v. Greyhound Corp., 27 A.D.2d 112, 276 N.Y.S.2d 173 (3d Dept. 1967), a case decided on the pleadings which we cited for a different point although it had not been cited to us and which we do not find very helpful on the instant question,
The petition for rehearing is denied.
HAYS, Circuit Judge (dissenting):
For a very recent indication that the New York courts will selectively permit or disallow punitive damages depending on whether that extraordinary remedy is necessary to achieve the desired punishment, deterrence, etc., see James v. Powell, 19 N.Y.2d 249, 279 N.Y.S.2d 10, 225 N.E.2d 741 (1967). The court reversed an award of punitive damages for fraudulently conveying assets with the purpose of thereby evading payment of a judgment, saying that the remedies provided for fraudulent conveyances are effective and there is "no need" for the windfall of punitive damages to induce the victim to institute suit. Change cit. from N.Y.L.J. to, 279 N.Y.S.2d at 18, 225 N.E.2d at 747.
Professor Morris keenly observes that a crucial factor in determining whether the jury should be permitted to award exemplary damages against the corporation is whether "the case calls for institutional correction not likely to be forthcoming without a punitive damage award." Ibid.
The Supreme Court followed the complicity rule in the days of "general jurisprudence." See Lake Shore & Michigan Southern Ry. v. Prentice, 147 U.S. 101, 13 S.Ct. 261, 37 L.Ed. 97 (1893).
Talbot was an FDA doctor.