Still No Word From Cali. Judge Bernal on the Cell Surgical Network Case, But at this Point it Almost Doesn’t Matter

Still No Word From Cali. Judge Bernal on the Cell Surgical Network Case, But at this Point it Almost Doesn’t Matter

The last entries in the court docket in the FDA’s injunction case against the Cell Surgical Network (“CSN”) and individual defendants (the late) Mark Berman and Eliot Lander were on November 5, 2021, and those mostly dealt with some belated substitution of counsel issues.

Sooner or later, the decision will come out. Based on the summary judgment denial and the judge’s demeanor and comments in the trial, I thought that he might stay consistent with what he said in his summary judgment decision and rule for the defendants, at least on the most important claims. But some of the stuff, like the use of the smallpox vaccine or some part thereof, is too out there for the judge to give them a complete pass.

And of course, there is the technically non-binding Eleventh Circuit authority upholding the Florida district court’s summary judgment against the US Stem Cell clinics on identical facts. So, who knows.

I want to point out two facts.

First, so far as I can tell, the FDA has not filed any other injunction actions against private stem cell clinics. Maybe they think that the Eleventh Circuit’s decision will scare clinics off. I doubt that will be the case. Maybe they are waiting for Judge Bernal to grant the injunction? Possible. If he does, that would be bad news for all CSN affiliates. Although it could be argued that it might not directly bind affiliate clinics, I think any prudent attorney would advise their CSN affiliate clinic clients to move on to another stem cell product. And that is what I think has happened since the FDA filed these two lawsuits. Clinics have moved on to other materials. And that is why I say that it almost doesn’t matter how Judge Bernal rules.

The other fact is that a few state attorney generals have filed false advertising lawsuits against some of these private stem cell clinics. (And the FTC (Federal Trade Commission) has extracted a multi-million dollar settlement against a California stem cell clinic, but that was a couple of years ago).

As I have said in previous posts, I think these state AG false advertising/deceptive business practices lawsuits constitute the real danger to these clinics, for one simple reason. In addition to seeking injunctions against the continued false advertising, they are seeking money damages, and big money damages at that. And that should get the attention of these clinic operators. (FYI: I represent one clinic that got hit with a multi-million dollar (summary) judgment. The case is up on appeal. I am reasonably confident the summary judgment will be reversed and a trial will take place.)

A few words about these state false advertising claims

All or almost all states have consumer protection/false advertising laws. These laws give states the right to pursue false advertising by businesses. The laws allow the state attorney general to obtain an injunction as well as penalties and restitution for the victims of the false advertising, and that could mean every dime the victims paid to the false advertisers (plus the aforementioned fines). The penalties, fines and restitution can be substantial. While there are variations in some of the state laws, there is a great deal of commonality for one big reason.

An important technical point:

Some of the small states don’t have a lot of jurisprudence in this area of the law. Other states, like Texas and New York, have more activity. The government agency which has the most experience in the false advertising field is, of course, the FTC. Acknowledging this, many states like New York use FTC case law as precedent for applying state false advertising laws.

This is a bad thing for alleged false advertisers because the FTC has very strict and sometimes counterintuitive rules which take a very broad view of false advertising, including “lack of adequate substantiation.”

The FTC has other legal slight-of-hands, like the concept of an “implied claim.” Let me give you a galling example. I litigated a case where the FTC took issue with a seller of herbs who made the 100% truthful statement that “native American Indians used chapperal to treat cancer.” The FTC took the position that while historically true, the statement nonetheless was false advertising because of the “implied claim” that the herb was an effective treatment for cancer.

And in case you were wondering, the FTC is really not big on patient testimonials.

The point is that it is ridiculously easy for stem cell clinics to engage in what the FTC would view as false advertising. And since many states incorporate or rely on the FTC as guidance for their false advertising laws, well you see the problem. So even if you are in a state that does not have a lot of case law, there is a very well-developed body of federal law that you can expect to be applied by the courts in your jurisdiction.

My advice: be very careful about what you say about your treatment. And, don’t get caught!

Rick Jaffe, Esq.

5 thoughts on “Still No Word From Cali. Judge Bernal on the Cell Surgical Network Case, But at this Point it Almost Doesn’t Matter

  1. It would be a shame for CSN to completely abandon SVF and move onto other product offerings to patients. It seems that the autologous use of adipose derived stem cells is a very promising same day procedure and not just for bone and joint issues. Big Dawg seemed to think back in May of this year that the FDA could soften their enforcement take on things and provide some sort of alternative regulatory pathway for certain types of HCT/P’s. (https://ipscell.com/2022/05/one-size-doesnt-fit-all-fda-may-soften-some-cell-therapy-regs/ )
    I’m not so sure that Stromal Vascular Fraction and fat derived stem cells would be under consideration by the FDA for such an alternative path to regulation. (Probably not?) Knoepfler seemed to think that such a change relative to FDA Regulatory Oversight “is likely to happen in some form.” But, he also mentioned that it is far from a “done deal”. From your most recent piece, it’s not just the FDA that is making life difficult for progress in the use of patients’ autologous stem cells. It’s also the FTC. Just wondering if you had a chance to read this blog piece from Dr. Knoepfler, and what your take on it might be. I always appreciate your very thoughtful analysis on this difficult issue, Mr. Jaffee.

    1. Thx for the comment Douglas. Obviously, if the judge rules that CSN’s SVF is not a new drug, the affiliates can continue to use it (at least unless and until the 9th Circuit reverses and holds that it is a new drug under the trial established facts). That would make it a split in the circuits which would make it legal in the West, illegal in the Southeast, and undetermined in the rest of the country.
      I hadn’t seen the big dawg’s May post. I don’t see the feds changing their mind on SVF, but I was glad to see that they are rethinking their regulatory approach. It’s about time, and probably Covid made them re evaluate their priorities given the limitations of resources during a pandemic. Good on them. Appreciate the heads up about this. I’m going to do a post about it and share a couple thoughts.

    1. No way to tell. It’s not like the Supreme Court that has a fixed term and has to or is expected to decide all cases within the term. It could be tomorrow or a month or three months. That being said, I would think it would be soon, since Since it’s already been seven and a half months, and that’s a long time.

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