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Media Alerts - W. Scott Harkonen, M.D., v. United States Department of Justice and United States Office of Management and Budget - Ninth
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February 1, 2016
  W. Scott Harkonen, M.D., v. United States Department of Justice and United States Office of Management and Budget - Ninth
Headline: 9th Cir. affirms district court's 12(b)(6) dismissal of action seeking the correction of allegedly false statements the United States Justice Department made about plaintiff in a press release.

Area of Law: Constitutional Law; Information Quality Act
Issues Presented: Whether the Information Quality Act confers the right to judicial review of the Department of Justice's refusal to correct allegedly false and misleading information published by the agency in a press release.

Brief Summary:
Plaintiff, a doctor, was convicted of mail fraud for issuing a press release which promoted a new drug with allegedly false and misleading statements. On the day of plaintiff's conviction, the Department of Justice ("DOJ") issued its own press release that plaintiff alleged to contain false and misleading information. Plaintiff filed suit in district court claiming he was entitled to a redaction of the allegedly false information and removal of the press release from all official government websites under the Information Quality Act ("IQA"). The IQA required government agencies to create guidelines for ensuring that information disseminated is reliable and procedures for correcting previously disseminated false or misleading information. The district court granted the government's 12(b)(6) motion.

The Ninth Circuit panel affirmed the district court's dismissal because the DOJ had excluded all press releases from its guidelines for complying with the IQA. This exclusion was found a proper exercise of the agency's power to interpret the IQA. First, Congress did not unambiguously intend that press releases must be included in their definition of "dissemination". Second, DOJ guidelines closely mirrored the guidelines established by the Office of Management and Budget ("OMB"), which took careful consideration and used input from several sources when making its decision to exclude press releases.

Significance: This holding limits the scope of the Information Quality Act by allowing government-agencies to completely exclude press releases and related communications, and those agencies therefore have no obligation to correct false information released in such a manner.

Extended Summary:

Plaintiff W. Scott Harkonen is a medical doctor who served as the Chief Executive Officer for InterMune, Inc., which developed, marketed and sold drugs. One of these drugs, Actimmune, was approved by the FDA for the treatment of two rare disorders. InterMune then sought to determine whether Actimmune would be effective treating patients with idiopathic pulmonary fibrosis ("IPF"), a different disorder which is more common. After a Phase III clinical trial with 330 patients, the FDA staff told Harkonen that the data was insufficient to grant approval for the use of Actimmune in the treatment of IPF. The data was insufficient because the study did not meet its primary endpoint, as Actimmune had failed to reduce death or disease progression in the entire group of treated subjects.

Harkonen thereafter distributed a press release titled, "InterMune Announces Phase III Data Demonstrating Survival Benefit of Actimmune in IPF." The first paragraph stated that the study, "demonstrate[d] a significant survival benefit in patients with mild to moderate disease randomly assigned to Actimmune versus control treatment" and concluded, "[t]here was also approximately a 10% relative reduction in the rate of progression-free survival associated with Actimmune versus placebo, the trial's primary endpoint, but this was not a statistically significant difference." The third paragraph of the press release quoted Harkonen as stating, "Actimmune may extend the lives of patients suffering from [IPF]." The fourth paragraph quoted a study investigator as stating, "Actimmune should be used early in the course of [IPF] in order to realize the most favorable long-term survival benefit." In the sixth paragraph the press release finally again addressed the failure of the study to reach its primary endpoint when it described the failure as demonstrating "a strong positive trend in increased survival in the overall patient population." Finally, in the tenth paragraph the release quoted an InterMune officer as stating, "[W]e believe [there] is compelling rationale for consideration of Actimmune for the treatment of patients with [IPF]".

Harkonen was indicted on one count of wire fraud for allegedly false statements contained in the press release, and one count of felony misbranding related to alleged off-label marketing and sale of Actimmune for IPF. He was convicted of wire fraud and acquitted for the misbranding count. His conviction was affirmed upon appeal.

On the day Harkonen was convicted, the DOJ issued a press release titled, "W. Scott Harkonen, Former Biotech CEO, Convicted of Wire Fraud." The DOJ press release stated, "Mr. Harkonen lied to the public about the results of a clinical trial and offered false hope to the people stricken with a deadly disease," and also stated, "[t]he actions of this defendant served to divert precious financial resources from the VA's critical mission of providing healthcare to this nation's military veterans." The press release was posted on the DOJ website.

The IQA required the OMB to draft guidelines "that provide policy and procedural guidance to Federal agencies for ensuring and maximizing the quality, objectivity, utility, and integrity of information . . . disseminated by Federal agencies . . . ." The IQA also required each agency set up its own agency-specific guidelines and to "establish administrative mechanisms allowing affected persons to seek and obtain correction of information maintained and disseminated by the agency that does not comply with the guidelines . . . ." OMB published a set of guidelines which, after receiving input from sources including several Federal Agencies, excluded information distributed through press releases from its definition of "dissemination".

DOJ then issued its own agency-specific guidelines, which closely mirrored the OMB guidelines, and do "not apply to information disseminated in . . . press releases [sic] fact sheets, press conferences or similar communications (in any medium) that announce, support or give public notice of information in DOJ." DOJ expressly stated that their agency-specific guidelines are not regulations and are not legally enforceable.

During the appeal of his conviction for wire fraud, Harkonen filed multiple requests with DOJ requesting a retraction of the statements that he falsified test results and he diverted financial resources, and removal of the press release from official government websites. DOJ denied all of the requests, maintaining that the statements were either true or outside the scope of the guidelines.

Harkonen filed a complaint in the U.S. District Court for the Northern District of California, seeking a declaratory judgment and permanent injunction requiring retraction and removal of the press release from official government websites. The district court granted the government's motion to dismiss under Rule 12(b)(6) and Harkonen appealed.

The panel only decided whether the exclusion of press release from the coverage of the IQA guidelines were within the DOJ's and OMB's authority.

The panel analyzed the authority of the government agencies using the two-step framework established by Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). First, if Congress "has directly spoken to the precise question at issue . . . the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Second, if a statute is ambiguous with respect to a specific issue, the question is whether the agency's answer is based on a permissible construction of the statute. This means the administrative regulation will be upheld "unless it is arbitrary, capricious, or manifestly contrary to the statute." Defenders of Wildlife v. Browner, 191 F.3d 1159, 1162 (9th Cir. 1999).

In deciding whether Congress intended to include press releases in the guidelines, the panel started with the plain meaning of the statute. The IQA does not define the word "disseminated", and there is no relevant discussion in the legislative history. The structure of the IQA shows that Congress was concerned with information shared by government agencies and access to information possessed by government agencies. These concerns do not express an intent for the guidelines to apply to all information released by the government. The D.C. circuit is the only other circuit to hear the issue and it held that the definition of "disseminated" was left to the discretion of the OMB. Prime Time Int'l Co. v. Vilsack, 599 F.3d 678, 685 (D.C.C. 2010). The panel here agreed, found that the statute was not unambiguous as to the definition of "disseminated" and proceeded to the second step of the analysis.

In deciding whether the OMB and DOJ's exclusion of press releases from the coverage of the IQA was arbitrary or capricious, the panel noted that government agencies make extensive use of press releases. OMB balanced concerns that the "nternet enables agencies to communicate information quickly and easily to a wide audience . . . [which] increases the potential harm that can result from the dissemination of information that does not meet basic information quality guidelines" with the costs of information quality, and considered input from various sources, before making the exclusion. Given the deference provided to agencies in the interpretation of ambiguous statutes and the careful consideration taken by OMB, the panel found that excluding press releases from the IQA guidelines was a "permissible interpretation of the statute".

Lastly, the panel acknowledged that the DOJ's determination that the 2009 press release fell within its exclusion is neither erroneous not inconsistent with the department guidelines, and therefore is entitled to judicial deference. Auer v. Robbins, 519 U.S. 452, 461 (1997). The panel affirmed the district court decision to grant the government's 12(b)(6) motion and dismiss the matter.

To read the full opinion, please visit:

Panel: John T. Noonan, William A. Fletcher, and Andre M. Davis (sitting by designation), Circuit Judges.

Argument Date: March 9, 2015

Date of Issued Opinion: September 8, 2015

Docket Number: 13-15197 (D.C. No. 4:12-cv-00629-CW)

Decided: Affirmed district court decision to dismiss on 12(b)(6) grounds.

Case Alert Author: Matthew J. Gustin

For plaintiff-appellant: Mark E. Haddad (argued), Sidley Austin LLP, San Francisco, California; Coleen Klasmeier and Kathleen M. Mueller, Sidley Austin LLP, Washington D.C.

For defendants-appellees: Melissa N. Patterson (argued) and Alisa B. Klein, Appellate Staff Attorneys, Melinda Haag, United States Attorney, and Stuart F. Delery, Assistant Attorney General, United States Department of Justice, Civil Division, Washington D.C.

Author of Opinion: John T. Noonan, Circuit Judge

Circuit: Ninth

Case Alert Circuit Supervisor:
Ryan T. Williams

    Posted By: Ryan Williams @ 02/01/2016 08:36 PM     9th Circuit  

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