Corporate Counsel, July 21, 2011 – A Small Firm’s Long Shadow

Posted July 21st, 2011.

Sanford Heisler has forced Big Pharma companies to focus on overtime issues.

Sue Reisinger
Corporate Counsel

The 25-lawyer firm that’s casting such a long shadow is Sanford Heisler. Its first major win against a global drug giant came last July, when Sanford Heisler won the largest jury award ever—$250 million—in a sex discrimination case against New Jersey–based Novartis Pharmaceuticals Corporation. Before Novartis appealed, Sanford Heisler settled for $175 million and major reforms in how the drug company treats its employees. Law professor Marcia McCormick, of the St. Louis University School of Law, says while the heads of most companies tend to support diversity and fairness, the Novartis case will cause some serious “corporate soul-searching.”

It was a landmark decision. Until then, sales reps throughout the U.S. drug industry had been treated as exempt employees, which meant they often worked long hours with no overtime pay. Now that’s likely to change. “Just because the companies never paid overtime doesn’t mean that they shouldn’t pay it now,” says Sanford Heisler cofounder Jeremy Heisler, who successfully argued the appeal.

The law firm didn’t intend to target Novartis, says firm cofounder David Sanford. The lawyers stumbled on the overtime issue while researching the discrimination case. Robert Pelzer, Novartis president and chief of legal affairs in the United States, declined to comment for this story, as did the company’s new defense counsel Evan Chesler, presiding partner at Cravath, Swaine & Moore.

It’s not uncommon for the plaintiffs bar to jump on a successful trial strategy against an entire industry, experts say. “I’ve seen this before in other industries,” says Ronald Meisburg, former general counsel of the National Labor Relations Board. “It’s like finding a good fishing hole.”

Sanford cautions that the pharma industry is a powerful opponent. “They have virtually unlimited resources to fight, and fight they do,” he says. But class action status is a power tool for plaintiffs that can level the field. “Only through class actions,” Sanford says, “can you achieve the broad-based, systemic change to companies, bringing them into compliance with federal law.”

Women employees in particular are committed to forcing companies to reform through their lawsuits, Kimpel says. She was co–lead counsel with Sanford on the Novartis sex discrimination case, which listed 33 pages of reforms in its settlement. Drug companies “shouldn’t be allowed to make massive profit margins by underpaying half their workforce,” Kimpel argues. “No company is too big to be held accountable.”

What can companies do to adapt to such culture shifts and wage-hour precedents, and to keep firms like Sanford Heisler from dragging them into court? Legal experts offer several answers. McCormick recommends doing an internal audit on pay and promotion practices.

And polish your friendship with people in the human resources and finance departments. “It becomes a stress test of your relationship with them,” Machlo­witz explains, “when they see their competitors not doing what you are telling your company it has to do.”

Meisburg, the ex–NLRB lawyer, understands that stress. “It’s sometimes difficult to get companies to spend money before a problem is at the door,” he says. “But these claims can be expensive to defend or pay . . . [and] can have a very broad impact on the company. It’s a good idea,” he emphasizes, “to self-evaluate.”

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