Judge Approves Partial Fee Request, Defers Action on "Enhancement"

By Walter F. Roche Jr.

A federal bankruptcy judge has approved the undisputed portion of a multimillion dollar fee request in the case of the New England Compounding Center, but deferred action on the disputed $2.6 million balance.
In a brief order issued Wednesday U.S. Bankruptcy Judge Henry J. Boroff approved fees and expenses totaling $1.1 million for Paul D. Moore, the Boston attorney who acted as trustee in the case.
Moore had initially requested  $5.758 million, but later trimmed it to $3.75 million.
In his order Boroff said he was taking the remainder of the fee request under advisement.
Moore, in an email response to questions about the order, noted that "despite having spent most of my time on this case for more than three years, I, like the victims, was the last other than them, to get paid."
 "They (the victims) should understand that I have constantly reminded everyone of the need to distribute these funds as soon as possible," Moore added,  noting his efforts in amassing an estimated $200 million trust fund, most of which will go to victims."
In a two hour court session in October, Thomas Sobol, who represents victims of a deadly 2012 fungal meningitis outbreak, did not dispute the $1.1 million request, but argued that Moore was not entitled to an enhancement boosting the fee to $3.75 million.
NECC has been blamed for the 2012 outbreak which sickened 778 patients, killing 76 of them. Moore served as the trustee in the bankruptcy proceedings and now holds the title of post confirmation officer.
He is a partner with the firm of Duane Morris, which already has been paid $4.3 million under a separate Boroff order.
 Under a liquidation plan approved by Boroff most of the  $200 million trust fund is expected to go to victims  of the outbreak. The fund includes payments from the owners of NECC, insurance companies and other firms that provided services to NECC.
Moore said that prior to the deposits in the trust fund "(t)he victims had every right to consider themselves 'The Forgotten', which they have never been in my mind. "
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Dispute Could Delay NECC Criminal Trials

By Walter F. Roche Jr.

A dispute between federal prosecutors and defense attorneys over hundreds of records seized from a defunct Massachusetts drug compounding firm could result in a delay in a scheduled criminal trial.
The dispute involves some 630 emails spread over 2.5 million pages which were seized by federal agents more than three years ago during a raid on the New England Compounding Center in Framingham, Mass.
Stephen Weymouth, the attorney for Glenn Chin, the former top pharmacist for NECC, said the dispute arose when prosecutors disclosed that they would not have time to completely review the 630 emails before the scheduled April 4 trial date. Instead, he said,  prosecutors  agreed not to use any of those documents at trial.
In criminal cases so-called filter teams, not connected with the investigation, review seized internal documents to determine whether they contain any privileged information, such as communications between defendants and their lawyers. Prosecutors would then be barred from using the privileged material.
Weymouth said that the agreement not to use the documents was not adequate because those same emails may include so-called exculpatory evidence favorable to defendants.
As an example, he said, there could be emails in which a defendant raised concerns about the quality of work from an independent company that was supposed to be testing NECC's products.
The dispute over the emails is scheduled to be aired at a Jan. 21 hearing before U.S. District Judge Richard G. Stearns.
Federal prosecutors did not respond to a request for comment.
"I don't know what the court is going to do," Weymouth said, adding that the dispute arose over the past four or five weeks.
Chin and NECC founder Barry Cadden are facing multiple charges including 25 counts of second degree murder.
Cadden, Chin and 12 other former owners and employees of NECC were named in a 2014 131-count indictment with charges ranging from second degree murder to racketeering and mail and wire fraud.
Cadden and Chin will be tried separately as will Douglas and Carla Conigliaro, who were part owners of the company.
All of the defendants have entered not guilty pleas.
NECC has been named as the source of fungus laden steroids that were shipped to medical facilities across the country. The outbreak sickened 778 patients, killing 76 of them.
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Negotiations on Meningitis Liens Already Underway

By Walter F. Roche Jr.

The administrator for the $200 million trust fund benefiting victims of a 2012 fungal meningitis outbreak says she already has begun negotiations with the federal government and major insurers to resolve liens that otherwise could vastly deplete those funds.
Lynne F. Riley, the trust fund administrator, said today in an email response to questions, that she and her staff already have reviewed some 2,500 claims. That number far exceeds the 778 victims that have been cited by federal prosecutors in court filings.
"There are ongoing negotiations regarding the medical liens on victims' distributions, which must be resolved before a first interim distribution can be made," Riley wrote in the email.
She said that preliminary values had been set on some 2,500 claims and efforts were underway to resolve claims "with inaccurate calculations or other major defects before the first interim distribution."
Riley, a partner in the Boston law firm of Casner and Edwards, did not predict how much time would be needed to resolve the remaining issues.
She said the ongoing negotiations were with the federal government on Medicare and Medicaid claims "as well as several private providers that have asserted liens on many of the National Settlement Fund distributions.
Riley said she was not aware that four members of Congress, including U.S. Sen. Lamar Alexander, a Tennessee Republican, had recently written to U.S. Health and Human Services Secretary Sylvia Burwell asking her to exercise her legal authority to waive any liens on victims' distributions.
HHS and private insurers have been notifying victims that they intend to seek reimbursement for costs they incurred for the medical care provided to outbreak victims.
For victims who underwent extensive and recurrent hospitalization, those liens could literally wipe out any distribution from the trust fund.
The trust funds were amassed during the bankruptcy proceedings of the New England Compounding Center, the defunct Massachusetts firm blamed for the 2012 outbreak. The company shipped thousands of vials of contaminated steroids to health provider across the country. Of the 778 known victims, 76 died.
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Victims Await Word on Awards, Timing

By Walter F. Roche Jr

As 2015 comes to a close with no payments, victims of the 2012 fungal meningitis outbreak are still awaiting word on when they will be getting payments from a $200 plus million trust fund.
Interviews with victims and their attorneys show that predictions range from three to six months before any actual payments may be forthcoming.
In fact, victims and their attorneys don't even know with any certainty how much of an award they can expect.
The year is ending without any payments despite predictions by some that checks could go out before Dec. 31, 2015.
In one recent court session, Fredric Elllis, one lawyer for the victims, estimated that survivors of victims who died in the outbreak could expect payments ranging from $175,000 to $200,000, with that total being spread over two separate checks.
He stressed the figure was just an estimate.
Victims have been informed that the payments will be computed on a point system based on the severity of their illnesses. But how much each point will translate to in dollars and cents is still not known.
Dennis O'Brien, a Tennessee survivor of the outbreak, said he is hoping to get an idea of how much of a payment to expect within about a month.
He said he expects an initial payment in winter or early spring and the balance at a later date after figures are finalized.
Rosanna Bennington, a Minnesota victim, said she heard from her lawyers about three weeks ago.
 "The only thing that they had to say was that they did not expect us to get a settlement until some time in 2016, but they had no idea when," she wrote, adding "We have no idea what the point value is in relationship to dollars
Predictions from victims' attorneys on a payment timetable range from three to six months for an initial payment.
"The latest information we have heard is distributions will start in the first half of 2016," Nashville attorney Mark Chalos wrote in an email response to questions.
Another attorney expressed hope that initial payments could come in the first quarter of 2016, while yet another said he was hopeful for more definitive information over the coming week.
Requests for information from Lynne F. Riley, the attorney overseeing the trust fund were unsuccessful.
Paul D. Moore, the former trustee in the bankruptcy of the New England Compounding Center, recently reported that all approved payments to other creditors had been paid.
Another uncertainty for victims is the amount of any award that could be claimed by health insurance carriers that covered the cost of their care.
Recently four U.S. Senate members wrote to U.S. Health and Human Services Secretary Sylvia Burwell, asking her to waive any claims for reimbursement for Medicare recipients. Thus far there has been no reply. A waiver would affect the majority of the outbreak victims.
NECC has been named as the source for thousands of vials of fungus tainted steroids injected into the spines and joints of unsuspecting patients.
Federal court records show 778 patients  were sickened in the outbreak with 76 dying.
Meanwhile victims like Bennington are still suffering from the after effects of their illnesses.
"I am disabled from this event and my back issues," Bennington wrote. "I am struggling to get by day by day. We the victims of this event are financially crippled."
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U.S. Attorney Seeks to Block Meningitis Depositions

By Walter F. Roche Jr.

Citing the possibility it could jeopardize a pending criminal case, the U.S. Attorney in Boston, Mass. is asking a judge to delay depositions of a former employee of the firm blamed for a fatal meningitis outbreak.
In a filing made last week U.S. Attorney Carmen Ortiz said that depositions, which are being sought in pending civil cases, should be delayed until after the criminal trial of a key defendant, Barry Cadden, who is facing 25 counts of second degree murder.
Cadden was the top pharmacist and part owner of the New England Compounding Center, the  defunct Framingham, Mass. firm blamed for a 2012 fungal meningitis outbreak that sickened 778 patients across the country. Seventy-six of those patients died.
Prosecutors contend that scheduled depositions of former NECC salesman John Notarianni and Joseph Connolly could result in Cadden and his attorneys gaining access to information in the upcoming criminal case. Cadden and 13 other defendants are scheduled to go on trial next Spring.
According to the filing, prosecutors also filed a sealed memorandum backing its argument for blocking the depositions, at least temporarily.
The prosecutors described Connolly and Notarianni as "potential important witnesses" in the criminal case. Notarianni was an NECC salesman who handled the NECC account, records in the civil cases show. Connolly's role has not been disclosed.
Scott Connolly, a former NECC pharmacist, is one of the defendants in the criminal case along with Cadden and a dozen other owners and employees.
"Depositions of witnesses about important issues in the criminal case, including NECC's clean room practices and Medical Sales Management sales tactics ... could potentially harm the criminal case," the filing states.
Prosecutors charged that Cadden already "has publicly confirmed his efforts to use the discovery process to circumvent the criminal discovery process. The court should not allow a criminal defendant to abuse the civil process in this way."
The brief states that prosecutors expect lawyers for the Saint Thomas Outpatient Neurosurgical Center and related parties to question the two witnesses "on the same topics that the government intends to elicit from them at trial."
The Saint Thomas clinic is a defendant in dozens of the civil suits brought by victims of the outbreak who were injected with fungus laden NECC steroids in 2012.
Under a recently disclosed schedule, those cases, which have been merged in U.S. District Court in Boston, Mass., will not go to trial until next Spring, about the same time set for the criminal case.
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HHS Asked to Waive Millions in Liens on Outbreak Victims

By Walter F. Roche Jr.

In a move that could save millions of dollars intended for victims of the 2012 fungal meningitis outbreak, four members of Congress have asked a top federal official to waive the recovery of money paid by the federal government to pay for many of the victims' treatments.
In a three-page letter to Health and Human Services Secretary Sylvia Burwell, the four asked her to officially waive any government claim to a $200 million trust fund set up to compensate victims of the 2012 fatal outbreak.
The letter asks Burwell to "use your statutory authority to waive all Medicare liens that could attach to a victims' compensation fund to benefit  victims of the New England Compounding Center tragedy."
Signers of the letter include Tennessee Republican Lamar Alexander and Massachusetts Democrat Elizabeth Warren.
The 2012 outbreak sickened 778 patients across the country, killing 76 of them.
Citing "the unique circumstances of this case," the four legislators, two from each party, wrote that "Many victims who received tainted doses have suffered through terrible side effects caused by the infection and the powerful drugs that save their lives."
The plea comes as more and more victims have been put on notice by the federal government and private insurers that they plan to attach liens to any awards stemming from current court litigation in order to recoup payments they made for the victims' care and recovery.
In an email response to questions recently,  a spokesman for the Centers for Medicare and Medicaid Services stated that the agency was required by law to seek recovery under a legal process called subrogation.
But in their letter, the four senators cited a specific provision in federal law that gives the HHS secretary the power to waive the recovery efforts.
They also noted that NECC was able to evade state and federal requirements because of a "regulatory gap."
Stating that federal government was "partially responsible" for the suffering of the victims, the letter concluded that a decision by the federal government "to attach Medicare liens to the NECC victims' compensation fund will result in continued hardship for NECC victims and their families."
In addition to Alexander and Warren the letter was signed by U.S. Senators Pat Roberts and Al Franken. Franken from Minnesota is a Democrat while Roberts is a Kansas Republican.

Meningitis Lawyers Give Opposiite Liability Arguments

By Walter F. Roche Jr.

With the fate of the claims of dozens of victims in the balance, opposing lawyers Thursday gave a federal judge totally opposite interpretations of Tennessee laws on health care and product liability.
Appearing before U.S. District Judge Rya Zobel, George Nolan, a Nashville attorney representing victims of the 2012 fungal meningitis outbreak, said it was absolutely undisputed that a Nashville clinic did seek and obtain compensation for vials of a steroid that sickened and killed unsuspecting patients.
C.J. Gideon, the lawyer for the Nashville and other Tennessee clinics, said Nolen was wrong and Tennessee's unique product liability does not apply to claims by victims and their survivors.
There was no bill for the steroid, Gideon said, adding that the invoices from the Saint Thomas Outpatient Neurosurgery Center, were for a complete medical service.
It was, he said, "a fixed one time fee for the entire process."
Gideon said that as a result, all of the claims fall under Tennessee's health liability law.
The question of which law applies is critical to the outcome of the dozens of pending cases.
If Zobel adopts the position of the clinics, any award to victims will be limited by the state's health care liability law, which sets strict limits on the amount victims can recover. Those caps don't apply to the product liability law.
Nolan, who spokes first in the 80-minute session, said that there are claims that fall under the health care law, but the product liability claims are separate.
"Some of our claims do fall under the health care liability law. No question about it," Nolan said."
But, he added "there is no question money changed hands. A sale has occurred," he said citing deposition testimony from the clinic manager, Debra Schamberg.
Gideon said that a recent Tennessee Supreme Court decision bolstered the clinic argument and he added that under Tennessee law, when there is a conflict between two statutes, the new law should be applied. The health care law went into effect long after the product liability law, he said.
"This is clearly a transaction involving medical services," Gideon said.
Nolan cited a provision of the product liability law that provides that when the manufacturer of a defective product is bankrupt, the seller becomes liable. He also cited another Tennessee Supreme Court case, which, he said, backs the plaintiffs' argument.
The New England Compounding Center, which produced the fungus tainted steroids, filed for bankruptcy on Dec. 21, 2012, a few months after the deadly outbreak became public. That, Nolan said, triggered the product liability law.
Federal court records show 778 patients from across the country were sickened in the outbreak and 76 of them died. In Tennessee 153 patients were sickened and 16 of them died.
The two sides also argued over what so-called bellwether cases will be heard first. Lawyers for Saint Thomas charged that the plaintiffs were maneuvering to eliminate cases with little or no liklihood of  substantial awards.
"It's simply not fair," said Marcy Greer, one of the clinic lawyers.
Gerard Stranch, a Nashville lawyer for victims, said the issue was "much ado about nothing."
Zobel took both issues under advisement.
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Bankruptcy Judge Gets Status Report on NECC

By Walter F. Roche Jr.

A federal bankruptcy judge got a year end status report on claims filed in the case of the New England Compounding Center including an agreement for a Nashville clinic to drop its $1.17 billion claim.
The report from Paul D. Moore, who served as trustee in the case, was delivered in a Springfield. Mass. courtroom with most of the participating lawyers testifying by phone.
Bankruptcy Judge Henry J. Boroff agreed to delay till Jan. 6 a separate hearing on disputed claims filed by the Inspira Health Network and a group of insurers, including Lexington Insurance.
Moore's report listed only two claims on which he did not register objections: a $13,760 claim by American Express Travel Services and a $1,858.35 claim by Liquidity Solutions.
The report listed 11 claims that are to be eliminated because of subsequent claims that superceded the original claims and 32 claims that were either waived or released.
The Saint Thomas Outpatient Neurosurgical Center waived its claim for $1.17 billion when it agreed to the liquidation plan earlier approved by Boroff.
Also waived were claims by the parent company and affiliates of Saint Thomas.
Moore's report also listed 23 claims which were filed without sufficient documentation.
In an email following the hearing Moore said that he had paid all of the approved or allowed claims, but payments to victims are being handled by a court appointed person overseeing the trust in which the $200 million has been placed.
 The liquidation plan approved by Boroff could provide some $200 million or more to victims of the 2012 fungal meningitis outbreak, which state and federal regulators have concluded was caused by fungus tainted steroids injected into the spines and other joints of patients across the country.
The outbreak sickened 778 patients, killing 76 of them.
The lawyer for Moore told Boroff that negotiations were ongoing with a couple other claimants.
The hearing on the Inspira and related cases is set for 11:30 a.m. on Jan. 6. Inspira entered into a $16 million settlement of suits filed by patients who had been injected with fungus laden steroids from NECC.
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Nashville Clinic Seeks Hold on Product Liability Claims

By Walter F. Roche Jr.

The Nashville, Tenn. clinic where patients were injected with fungus tainted steroids is asking a federal judge to put on hold claims that the clinic is liable for millions of dollars in damages under state product liability statutes.
The attorneys for Saint Thomas Outpatient Neurosurgical Center filed a motion in U.S. District Court in Boston, Mass. seeking a hold on the claims until the Tennessee Supreme Court acts on a related but separate case that hinges on the applicability of Tennessee's product liability law.
In the motion Saint Thomas clinic lawyers said waiting for the Tennessee court to issue a decision "is the most prudent course at this point in the litigation."
Lawyers for victims of the outbreak labeled the filing another stall tactic.
"This is yet another attempt in a long series of attempts by Saint Thomas to delay their patients' day in court. Saint Thomas knows it did wrong and caused harm. Saint Thomas is trying desperately to avoid being held  accountable," said Nashville attorney Mark Chalos, who represents victims.
The request to the state court to answer the product liability issue stems from a case filed in Nashville by the insurance company that covered a Crossville clinic, the Specialty Surgery Center, where other patients were injected with fungus laden steroids from the same defunct drug compounder.
"This precise question of Tennessee law remains unresolved with no specific authoritative Tennessee decision for this court to follow," clinic lawyers stated in court filings.
Nonetheless the clinic lawyers added that if the judge in the Boston cases were to continue the claims without a delay, the conclusion should be that the "claims fail as a matter of law in this factual context."
Lawyers for plaintiffs have argued in state and federal court that the law does apply because of a provision that the sellers of a defective product can be held liable if the manufacturer is bankrupt. The New England Compounding Center, the manufacturer of the steroids, filed for bankruptcy in late 2012. 
The 19-page clinic filing is but the latest development in hundreds of civil suits stemming from the 2012 fungal meningitis outbreak cause by steroids shipped from the New England Compounding Center, the now shuttered Framingham, Mass. drug firm. The outbreak sickened 778 patients, killing 76 of them.
The cases have been consolidated before U.S. District Judge Rya Zobel, who now must decide whether to continue to with product liability claims or put them on hold.
Leaving the questions on Tennessee law to Tennessee courts, the filing concludes "provides the most direct and feasible means of clarifying unsettled areas of state law."

Clinic Seeks to Block Saint Thomas' Consultant's Subpoena

By Walter F. Roche Jr.

A Nashville clinic where dozens of patients were injected with fungus tainted steroids is asking a federal judge to block a subpoena seeking records of a key consultant.
Lawyers for the Saint Thomas Outpatient Neurosurgical Center are asking a federal judge to issue a protective order effectively blocking or limiting a subpoena issued to Michael O'Neal, a pharmacist and consultant who has worked for the clinic for nearly a decade.
In multiple filings in U.S. District Court in Boston, Mass., the Saint Thomas lawyers argued that a Tennessee law, specifically protects from disclosure the information sought by victims of a 2012 fungal meningitis outbreak.
Lawyers for victims contend the records are essential in gathering information on how and why the Nashville clinic came to purchase the tainted drugs and inject them in unsuspecting patients.
The filings come in a group of cases filed in behalf of victims of the 2012 outbreak caused, according to state and federal regulators, by fungus tainted vials of methylprednisolone acetate from the defunct New England Compounding Center.
The outbreak sickened 778 patients, killing 76 of them. Most of Tennessee's 153 known victims were treated at the Saint Thomas outpatient clinic. Sixteen of those patients died.
In the filings Saint Thomas' lawyers, from the firm of Gideon and Cooper, noted that a Nashville judge already has ruled in a related case that the records are covered by the Tennessee Patient Safety and Quality Improvement Act of 2011.
In an affidavit, also filed with the court, O'Neal stated that his role was to conduct monthly inspections at the Nashville outpatient clinic and to provide advice to the facility director.
According to his filing he first went to work as a consultant to the clinic in 2000. He said his contract was revised in 2007.
Both O'Neal and Debra Schamberg, the facility director at the time of the outbreak, stated in separate filings, that his duties were expressly related to quality control and patient safety as they related to pharmaceuticals.
Saint Thomas lawyers stated that were the federal court not to block the subpoena it "will render the Tennessee law ineffective" along with the ruling by Nashville Circuit Court Judge Joseph Binkley.
Binkley's order, the clinic filing contends, "barred the discovery of O'Neal's reports and communications" with the clinic.
"If allowed the," the motion states, it "would let the genie out of the bottle and there is no way that genie could be put back in."
The brief states that both state and federal statutes were drafted to encourage health providers to thoroughly review quality control matters without fear that those efforts could late be used as evidence against them.
"Confidentiality in these functions is essential," the filing states.
Saint Thomas' lawyers also argued that the subpoena was "sweeping and indiscriminate" and covered documents dating back long before the outbreak.
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Nashville Nursing Home Closing Voluntarily

By Walter F. Roche Jr.

A Nashville nursing home is closing its doors voluntarily, while the state has put a freeze on any new admissions at a Greene County facility recently cited for multiple violations.
Closing by Dec. 15 is the Belcourt Terrace Nursing Home in Nashville, Tenn. which is licensed for 49 beds, but recently had only 23 residents.
Woody McMillin, a spokesman for the state Health Department said the closure was voluntary and the Belcourt staff were assisting patients and their families with finding other placement.
The facility is owned by an Ohio firm AHF/Central State Services. Company officials did not respond to a request for comment.
In a legal notice the home said it would be placing the state license on inactive status and would be withdrawing from the Medicare and Medicaid programs.
The home has a history of rules violations but recently received clearance on a long list of corrective actions.
The facility had been cited earlier this year for patients having developed bed sores and leaving patients in bed for extended periods of time during the day.
In Greene County state Health Commissioner John Dreyzehner has imposed a freeze on any new admissions to John M. Reed Health and Rehabilitation. He also fined the home $4,000 citing multiple violations of state and federal requirements.
The 63-bed nursing home in Limestone was inspected on Nov. 5 and cited for failure to provide basic services and failing to maintain proper medical records.
Dreyzehner also named an independent monitor to oversee the operation of the home.