BNA’s Health Care Daily Report, September 10, 2014 – Smith & Nephew Will Pay U.S. $8.3 Million, Settling First Device Country of Origin Case

Posted September 10th, 2014.

Reproduced with permission from BNA’s Health Care Daily Report, 175 HCDR (Sept. 10, 2014). Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bna.com>

By Dana A. Elfin

Medical device manufacturer Smith & Nephew Inc. will pay $8.3 million to settle what whistleblower attorneys say may be the first-ever Trade Agreements Act ‘‘Country of Origin’’ case involving medical devices (United States ex rel. Cox v. Smith & Nephew, Inc., W.D. Tenn., No. 2:08-cv-02832, order ofdismissal 9/4/14).

Judge John T. Fowlkes Jr. of the U.S. District Court for the Western District of Tennessee signed an order dismissing the whistle-blower case Sept. 4. The whistle-blower, Samuel Adam Cox III, who formerly worked for Smith & Nephew as the information technology global director of Enterprise Resource Planning, sued the company under the whistle-blower provisions of the False Claims Act for violating the Trade Agreements Act (TAA).

According to the settlement, the relator will receive $2.3 million. Smith & Nephew also agreed to pay relator’s counsel $3 million.

The TAA requires government contractors to certify that they will only sell products to the government that originate in the U.S. or a country that has signed a trade agreement with the U.S. The law gives a preference to companies that sell products manufactured in the U.S. or in a country that is a trading partner.

Company Allegedly Violated Trade Act. In his lawsuit, Cox claimed that Smith & Nephew violated the TAA by selling products that were manufactured in Malaysia, a country that hasn’t executed a trade agreement with the U.S.

H. Vincent McKnight Jr., co-chair of the whistleblower practice at the class action litigation firm Sanford Heisler LLP, New York, which represented Cox, said Sept. 4 in a statement that the settlement ‘‘sends a clear message to those medical device companies that routinely violate the Trade Agreements Act by misrepresenting the ‘Country of Origin’ of goods sold under contract to U.S. Government agencies.’’

McKnight predicted that the ‘‘settlement will create a ripple effect for other medical device companies that choose to turn a blind eye to their obligations under the Trade Agreements Act.’’ The government ‘‘has turned its attention to these flagrant violations and is stepping up enforcement,’’ he said.

Sanford Heisler Chairman David Sanford said the settlement represents the right result for all parties and reaffirms the vital role that whistle-blowers play in uncovering fraud against the government.

The whistle-blower provisions permit private citizens to sue on behalf of the U.S. and receive a portion of proceeds of any settlement or judgment.

U.S. Declined to Intervene. The government declined to intervene in the case but helped craft the settlement, McKnight said.

Sanford Heisler LLP is a public interest class-action litigation law firm with offices in New York, Washington and San Francisco.

Kevin Patrick Whitmore and Stuart J. Canale of the U.S. Attorney’s Office for the Western District of Tennessee, in Memphis; and H. Vincent McKnight of McKnight and Kennedy LLC in Silver Spring, Md., represented the U.S.

Cox is represented by David W. Sanford, H. Vincent McKnight, Ross B. Brooks of Sanford Heisler LLP and Grant Morris of the Law Offices of Grant Morris. Robert J. Conlan of Sidley Austin LLP in Washington, and Byron Norman Brown and Glen G. Reid Jr. of Wyatt Tarrant & Combs, LLP in Memphis, represented London-based Smith & Nephew Inc.

 

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bna.com

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