Cases: Leichter

United States of America vs. Lee H. Leichter, et al.

Our client, Lee H. Leichter, was indicted in October 1993 with five other former executives and employees of a medical device manufacturer, C.R. Bard. The 392-count indictment included a count charging the six defendants with conspiring to defraud the Food and Drug Administration's Office of Device Evaluation.

The alleged fraud included the distribution of heart catheters for testing in humans without FDA approval, which approval the government claimed was required under an agency regulation. The defense contended that the FDA's device testing regulation contained an exemption which permitted them to conduct the testing in question without FDA approval and that, even if the defendants' reading of the regulation was incorrect, their honest misunderstanding of the law, if any, led them to conduct the testing without FDA approval, rather than an intent to defraud the FDA.

The alleged fraud also included the defendants' having made certain design and manufacturing changes to FDA-approved heart catheters and then having distributed them without obtaining FDA's approval of the changes. The government claimed that an FDA regulation required agency approval of the changes in question. The defense contended the FDA regulation in question does not require FDA's approval of the changes at issue and that, even if the defendants' reading of the regulation was incorrect, their honest misunderstanding of the law, if any, led them to distribute the modified catheters without FDA approval, rather than as part of a scheme to defraud the FDA.

The case was tried to a jury before Chief Judge Joseph L. Tauro of the federal district court in Boston during the summer of 1995. Prior to the trial, the judge ordered that only one count -- the conspiracy count -- of the 391 counts in the indictment be tried.

The dispute at trial and ever since concerned the meaning and application of the key phrase in FDA device testing and device modification regulations - "safe and effective." The defendants contended that the phrase "safe and effective" always means "safe and effective under the conditions of use and warnings against unsafe use in the approval labeling", as stated throughout the drug and medical device laws. Though it had previously persuaded the courts that the phrase "safe and effective" does not carry its ordinary meaning when used in the Food and Drug laws, the government reversed itself and argued at the trial, for the first time and without prior notice to the medical device industry, that the words, "safe and effective" carry their ordinary English meanings when used in the medical device regulations. Chief Judge Tauro refused to instruct the jury as to which of the disputed meanings was correct. Hence, these businessmen were exposed to conviction for violating government interpretations of rules of which the medical industry had no prior or fair notice at any material time.

Three defendants were acquitted by the jury, and three were convicted, including Lee H. Leichter. The three convicted defendants were each sentenced to eighteen months imprisonment, but their imprisonment was stayed pending their appeals.

After their sentencing, the defendants demanded to be tried on the untried counts prior to the appeal. The government argued that the appeal should go forward with the remaining counts available for prosecution even if the defendants prevailed on appeal.

On November 3, 1998, the Court of Appeals for the First Circuit agreed with the defendants. It dismissed the appeal without prejudice to being reinstated after the government either prosecuted or dismissed the untried counts. Subsequently, the government dismissed all of the remaining counts so that the appeal could go forward on the conspiracy count.

On March 16, 2001, the First Circuit vacated the defendants’ convictions on grounds that the district court’s erroneous refusal to instruct the jury on the meaning of the underlying statute and regulations prejudiced the defendants and seriously impaired their defense that they had acted reasonably and lawfully. The case was remanded to the District court for the government to either retry or dismiss the remaining count. 

On remand, after twelve years of investigation and litigation, not a single individual defendant was convicted of a felony.  The government dismissed the remaining felony count and reached an agreement with the defendants to resolve the matter.

This represents a classic case in which regulated parties were led, in one way or another, to believe that certain conduct was permissible under applicable statutes and regulations, but then the governmental agency changed its mind, decided upon a different interpretation of its regulations, and then sought retroactively to hold a regulated party to that new interpretation and to prosecute the party for violating this new interpretation. It additionally presents a case where a regulated party was prosecuted for following a perfectly reasonable interpretation of the law which just happened not to coincide with the agency's unannounced and newly minted interpretation.

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