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In re National Prescription Opiate Litigation

United States District Court, N.D. Ohio, Eastern Division

August 20, 2019

IN RE NATIONAL PRESCRIPTION OPIATE LITIGATION THIS DOCUMENT RELATES TO: Track One Cases

          OPINION AND ORDER REGARDING DEFENDANTS' MOTIONS TO EXCLUDE OPINIONS OF JAMES RAFALSKI AND CRAIG MCCANN

          DAN AARON POLSTER UNITED STATES DISTRICT JUDGE

         Before the Court are two related Daubert motions filed by Defendants: (1) a Motion to Exclude the Opinions Offered by James Rafalski (Doc. #: 1900); and (2) a Motion to Exclude the Opinions and Testimony of Craig McCann (Doc. #: 1906). For the reasons stated below, the Court GRANTS IN AND DENIES IN PART the Motion to Exclude Rafalski (Doc. #: 1900) and DENIES the Motion to Exclude McCann (Doc. #: 1906).

         Rafalski, a former Drug Enforcement Administration (“DEA”) investigator, offers opinions about, inter alia, the effectiveness of Defendants' efforts to prevent the diversion of controlled substances into illegitimate channels. Rafalski identified five methods that a Distributor could use to identify potentially suspicious orders. In turn, McCann, a data expert, applied Rafalki's methods to the DEA's Automation of Reports and Consolidation Orders System (“ARCOS”) data and Defendants' transactional data to identify transactions that meet the specified criteria of each methodology. Taken together, Rafalski and McCann provide opinions, as to specific Defendants, regarding the number of orders to the Track One Counties that each method would have flagged as potentially suspicious.

         Defendants ask the Court to exclude both opinions for a number of reasons, including unreliability, flawed assumptions, and lack of “fit” with issues in the case. Also, as to four of Rafalski's opinions, Defendants assert Rafalski has not disclosed the basis for the opinions and may not testify as to legal conclusions. The Court agrees Rafalski must disclose the basis for his opinions, and he may not opine as to what the law requires or whether Defendants' conduct violated the law. As to Rafalski's remaining opinions, the Court finds Defendants' attacks are unfounded. The Court's reasoning is set forth below.

         I. Rafalski.

         A. Credentials and Experience.

         Rafalski received an undergraduate degree in public administration from Eastern Michigan University in 1999. Rafalski Rpt, at ECF p. 4 (Doc. #: 1999-21).[1] In 2004, after 26 years as a law enforcement officer, Rafalski began work for the DEA as a Diversion Investigator in the Detroit Divisional Office, where he worked until June of 2017. Id. Diversion Investigators are responsible for conducting regulatory, state, civil, administrative, and criminal investigations. Id. From 2011 to 2017, Rafalski was primarily responsible for conducting administrative, civil, and regulatory investigations of DEA registrants. Id. In this capacity, he investigated the criminal conduct of individual physicians regarding improper opioid prescriptions and conducted regulatory investigations involving, inter alia, Distributors' compliance with DEA requirements regarding suspicious order monitoring systems (“SOMS”). Id. at ECF pp. 4-5.

         For example, in 2006, Rafalski conducted an accountability audit, record-keeping review, and security investigation of a Walgreens in Ohio to ensure compliance with controlled substances regulations and record keeping. Id. at ECF p. 5. This investigation resulted in the DEA issuing a letter of admonition for the maintenance of an inadequate SOMS. Id.

         From 2010 to 2013, Rafalski conducted an administrative investigation of The Harvard Drug Group to identify unusual patterns of distribution of oxycodone to Florida pain clinics. Id. at ECF p. 6. His work included the review of company records and policies, as well as the DEA's ARCOS data. Id. This investigation resulted in the DEA issuing an order to show cause for, inter alia, developing a work-around to avoid triggering the company's SOMS. Id.

         Also, from 2010 to 2013, Rafalski conducted an administrative investigation of Masters Pharmaceutical, reviewing company files regarding customer due diligence, including questionnaires, on-site investigation reports, and SOMS information. This investigation resulted in the DEA revoking the company's registration to manufacture and/or distribute controlled substances. Id.; see Masters Pharm., Inc. v. DEA, 861 F.3d 206 (D.C. Cir. 2017).

         From 2010 to 2017, Rafalski conducted an administrative investigation of Mallinckrodt in which he reviewed chargeback data[2] that revealed some pharmacies and/or practitioners were utilizing multiple Distributors to purchase the same product in large quantities. Id. at ECF pp. 6- 7. As a result of this investigation, the DEA and Mallinckrodt entered into a three-year Memorandum of Agreement. Id.

         Defendants do not challenge Rafalski's qualifications as an expert.

         B. Opinions.

         Rafalski expresses opinions about the compliance requirements for Manufacturers and Distributors to: (1) maintain effective controls to prevent diversion of controlled substances into illegitimate channels; (2) design and operate a system to identify suspicious orders (SOMS); and (3) report suspicious orders “when discovered.”[3] Rafalski Rpt. at ECF p. 10 (Doc. #: 1999-21). His opinions address four main categories:

(1) what the law and DEA regulations require regarding the duties of Manufacturers and Distributors to maintain effective control against the diversion of controlled substances, id. at ECF pp. 9-21;[4]
(2) key components and characteristics that make SOMS and due diligence programs effective, id. at ECF pp. 36-40;
(3) five methodologies that, as calculated by Craig McCann (discussed below), identify “suspicious orders” that Defendants should not have shipped without conducting due diligence to dispel the suspicion of diversion, id. at ECF pp. 40-46; and
(4) the SOMS and due diligence practices of various Defendants and how they failed to comply with statutory and regulatory duties to maintain effective control against diversion, id. at ECF pp. 46-187.

         Rafalski examined in detail the SOMS and due diligence procedures of six Distributors, concluding each violated its duty to maintain effective control against diversion, including duties to identify, report and/or stop shipment of suspicious orders.[5] See Rafalski Rpt. at ECF pp. 9, 54-55, 68-69, 77-81, 91-93, 104-105, 120-121, 142-144 (Doc. #: 1999-21). Rafalski opines that these SOMS failures “directly led to massive quantities of pills being shipped to buyers who had placed suspicious orders of controlled substances” that should never have been shipped “until after the suspicion of diversion was dispelled.” Id. at 40.

         In addition, Rafalski examined the SOMS and due diligence procedures of seven Manufacturers, concluding each failed to meet its obligation to maintain effective controls against diversion.[6] Rafalski opines that, to comply with their duty to maintain effective control, Manufacturers must use all relevant prescribing and chargeback data. Id. at ECF pp. 145-187.

         C. Analysis.

         Defendants ask the Court to exclude Rafalski's testimony because: (1) he refused to disclose the basis for four of his opinions; (2) his methodology is based on faulty assumptions; and (3) he has no basis to conclude that all flagged orders were diverted for illicit use. See Defs. Mem. on Rafalski at 1 (Doc. #: 1900-1). The Court addresses each argument below.

         1. Refusal to Disclose the Basis for Four Opinions.

         Defendants urge the Court to exclude the following opinions because Rafalski has not disclosed the basis for them:

(1) the law required Defendants to halt all shipments after identifying an initial suspicious order;
(2) DEA regulations require certain “key components” regarding SOMS and due diligence systems;
(3) the Controlled Substance Act (“CSA”) and its implementing regulations require Manufacturers to consider prescription and chargeback data; and
(4) DEA registrants must document and permanently retain suspicious order reports and due diligence records.

See Defs. Mem. on Rafalski at 8 (Doc. #: 1900-1). Defendants also assert these opinions constitute impermissible legal conclusions. Id. at 8 n.3.

         As to these four opinions, Defendants seek exclusion because Rafalski has refused to disclose the “legal guidance” he received from DEA attorneys that forms, at least in part, the basis for his opinions. Id. at 7-9. In deposition, Rafalski stated that, in forming these opinions, in addition to his training and experience, he applied “legal guidance” that he received from the DEA's attorneys during his tenure there. Defs. Mtn. to Excl. Rafalski, Ex. 2 at 694:8 to 695:21 (“Rafalski Depo.”) (Doc. #: 1900-3). Citing Touhy regulations, [7] however, Rafalski refused to disclose this legal guidance. See Id. at 842:1-19. In light of this refusal, Rafalski may not testify as to these opinions. See Fed. R. Civ. P. 26(a)(2)(B) (expert report must contain a complete statement of all opinions the witness will express and the basis and reasons therefor); Fed.R.Civ.P. 37(c) (if a party fails to provide information as required by Rule 26(a), the party may not use the information at trial “unless the failure was substantially justified or is harmless”).

         Moreover, these same opinions constitute legal conclusions. It is the Court's role to instruct the jury as to applicable principles of the law. Shahid v. City of Detroit, 889 F.2d 1543, 1547-1548 (6th Cir. 1989) (quoting United States v. Zipkin, 729 F.2d 384, 387 (6th Cir. 1984) (it is for the judge, not witness, to instruct the jury as to applicable principles of the law). Although Rule 704(a) of the Federal Rules of Evidence does not preclude an opinion “just because it embraces an ultimate issue, ” Fed.R.Evid. 704(a), the ultimate issue must be a factual one. See Berry v. City of Detroit, 25 F.3d 1342, 1353 (6th Cir. 1994). In other words, an expert generally may not opine as to what ...


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