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Guess Who's On the Winning Side in the Latest Novartis Employment Loss?

Alison Frankel

07-07-2010

The plaintiffs firm of Sanford Wittels & Heisler is definitely not on Novartis's Christmas card list.

Less than two months ago, you'll recall, Litigators of the Week David Sanford and Kate Kimpel, along with their Sanford Wittels colleagues, burned Novartis with the biggest verdict ever awarded in an employment discrimination class action: $250 million in punitive damages, $3.36 million in compensatory damages to 12 named plaintiffs, plus untold millions more to come as class members file individual damages claims.

Then, on Tuesday, Novartis got more disastrous employment litigation news. A three-judge panel of the U.S. Court of Appeals for the Second Circuit ruled that Novartis sales representatives are entitled to overtime when they work more than 40 hours a week. (Here's the 33-page opinion, written by Judge Amalya Kearse, and here's analysis from the New York Law Journal.) We'll give you one guess who was on the winning side of the Second Circuit ruling. Yep: Sanford Wittels. Partner Jeremy Heisler made the successful argument before the appellate panel, with Sanford, Kimpel, Steven Wittels, and Andrew Melzer on the briefs. The ruling affects some 2,700 sales reps who are part of three already-certified classes against Novartis. The NYLJ reports that damages could be in the range of $100 million.

Sanford told us Wednesday that the overtime case, which was originally filed in March 2006, grew out of the firm's investigation of Novartis's employment practices during the previously-filed gender discrimination case. "We were the first to file a wage-and-hour case on behalf of pharmaceutical sales reps," he said. Sanford Wittels followed the Novartis suit with wage-and-hour class actions on behalf of sales reps at Merck and Roche; both of those cases, he said, have been stayed pending the Novartis appeal. A number of other plaintiffs firms have since brought sales rep wage-and-hour class actions against other pharmaceutical companies, but Sanford told us the Second Circuit is the first court to issue a significant appellate ruling in the litigation.

The Second Circuit panel (which included Judge Peter Hall and Manhattan federal district court judge Jed Rakoff, sitting by designation) overturned a ruling by Manhattan federal district court judge Paul Crotty, who is overseeing a nationwide opt-in class action against Novartis as well as New York and California statewide class actions. Judge Crotty granted summary judgment to Novartis in all three class actions, ruling that even though Novartis sales reps don't actually sell drugs to physicians but merely encourage them to prescribe Novartis products, those reps are salepeople, and thus exempted from the Fair Labor Standards Act's overtime requirements.

The appellate panel, however, gave great deference to the opinion of the Secretary of the Department of Labor, who appeared in the case as an amicus for the plaintiffs. "The Secretary contends that because the reps do not make sales or obtain orders and do not exercise discretion and independent judgment, they are not within the 'outside salesman' or the 'administrative' employee categories that are exempted from the FLSA overtime pay requirements," the court wrote. "The Secretary's interpretations of her regulations are...entitled to 'controlling' deference."

Richard Schnadig of Vedder Price argued at the Second Circuit for Novartis. As The Am Law Daily noted in its coverage of the appellate ruling, he was also lead counsel for Novartis in the gender discrimination trial. He referred our call for comment to the company, which sent us this e-mail statement: "Novartis Pharmaceuticals Corporation is disappointed in [Tuesday's] decision from the U.S. Court of Appeals for the Second Circuit, and is currently assessing its legal options. NPC believes that the US District Court for the Southern District of New York correctly held that NPC sales representatives are both exempt outside sales persons and exempt administrative employees under the Fair Labor Standards Act and the related New York and California state laws."

Plaintiffs lawyer Sanford said he hadn't talked with Novartis about a wage-and-hour settlement before the Second Circuit ruling, and that the company now has "a fairly short window" to settle, given that the classes have already been certified. He declined to comment on whether Novartis is discussing a settlement of the gender discrimination case.

Sanford also said he hopes that someday Novartis will regard his firm as something other than a gigantic thorn in its side. "Our goal is to make Novartis a better place to work," he said. "At the end of the day, we hope Novartis will appreciate what we've done, although they probably don't appreciate it right now."