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stem cell mis-regulation

The FDA’s California stem cell case has a new trial date, sort of

The FDA’s California stem cell case has a new trial date, sort of

When last I reported on the FDA’s injunction action against the California stem cell treatment operation, the judge had adjourned the July trial date because of the recent alarming uptick in COVID-19 cases in the area. The court ordered the parties to confer and come up with a new proposed date in November or thereafter.

The defense’s response to the order was unusual. It attempted to seek an earlier remote video trial. The judge was not prepared to do that just yet, but after further discussions, a few days ago, he issued an order setting a new trial date for November 10, 2020. HOWEVER, the judge ordered a telephone conference on October 19, 2020, to determine whether “1) [the] trial . . . can safely be conducted in-person, consistent with public health guidance; and/or 2) trial can fairly and reliably be conducted through remote appearances by witnesses and counsel.” Meaning, it is not at all clear that the trial will go forward on November 10th.

We already know that the Defendants want to go forward with a remote video trial. My guess is that the FDA might be reluctant. Based on the judge’s decision denying the FDA summary judgement, (the details of which I explained in a previous post, and here is that post: https://rickjaffeesq.com/2020/01/28/stem-cell-shocker-cali-federal-judge-denies-the-fda-summary-judgement-and-orders-a-trial-in-the-cell-surgical-network-case/ )
the judge agrees with the defense’s position that the procedure removes and reimplants the same thing, namely SVF. Hence the procedure is covered by the same day surgery exception. Therefore, it is not subject to the FDA’s regulatory authority. In short, the FDA is going to have to change the judge’s mind. I would speculate that the feds think they have a better chance of doing that in a live trial. If so, that would suggest that the feds will hold out for a live trial.

There might be another reason for the feds trying to delay the trial. Right now, there is a giant storm cloud over SVF and the California Stem Cell operation. I do not have any direct knowledge, but my experience tells me that kind of cloud is very bad for business. Since the FDA can read the tea leaves, it knows it has an uphill battle with this judge, and it will take the agency at least a year to get an appellate review of the district court’s decision. In the meantime, the FDA is continuing with its PR campaign on the illegality of this and other stem cell products and procedures. So, delaying this case might appear to the agency to have some benefit. But that is all speculation on my part. All we know for sure is that there is a new trial date, but in these uncertain times, it cannot be said that the case will actually be tried on that date.

Rick Jaffe, Esq.

Stem Cell Breaking News: Cali Stem Cell Trial Adjourned until Sometime After November

Stem Cell Breaking News: Cali Stem Cell Trial Adjourned until Sometime After November

Yesterday, California federal district court judge Jesus G. Bernal on his own adjourned the the FDA’s trial against Cell Surgical Network (“CSN”) and their owners Mark Berman and Elliot Lander. The parties were ordered to meet and confer about a new trial date to take place after November, 2020. The trial had been scheduled to commence on July 28th. Because of my deep interest in the case, I have been checking the Riverside Ca. Covid-19 numbers and once the numbers started to rise, and based on what has been happening in California in general (which is another area of interest and which I write about), I was pretty sure the the judge would have to knock the case off the docket. This is too big and too important to do via Zoom, and the judge really had no choice. Too bad, as this is for sure the most important stem cell case in the country right now, and in general, and for reasons having to do with my stem cell work, I was really hoping to get some clarity, or more specifically, another ruling similiar to the judge’s seminal summary judgement decision.

For my own needs, I have recently reviewed some of the pre-trial filings in the case, and in particular the proposed findings of facts and conclusions of law filed by the parties. (Findings of fact and conclusions of law are the main documents filed in a bench trial. In a jury trial, the parties would file proposed jury instructions. But in a bench trial, the findings of fact and conclusions of law are what the parties expect to show fact wise, and what they argue how the law applies to the facts, and of course, present the proposed outcome. In case you were wondering, there is no federal (7th Amendment) right to a jury trial in cases in which the relief is equitable, like injunctions and declaratory judgments).

CSN’s findings and conclusions, prepared by Venerable’s LA office’s team headed by Celeste Brecht are about the best I have ever seen in an FDA case (or maybe in any case). They clearly lay out CSN’s position in the case. If you want to understand exactly what the defendants did and why they think all of it is legal, and how the FDA improperly used industry guidance procedures to substantively change the law without going through the proper and required procedure, then read this document. (I know I am being alittle redundant, but I just love saying how the government acted improperly; it’s a defense lawyer’s thing, and spoiler alert, I’m not done yet!) Here it is.

csnproposedfindings

This document also cogently and succinctly lays out the evolution of the same day surgical procedure exception, from whence MSC/SVF procedures were considered 21 CFR 1271.15 EXEMPT, to the FDA’s illegal transformation of the procedure and a person’s body part into an illegal, unapproved, adulterated and misbranded drug.

In all my years doing this law thing, this one action, (and did I mention that it was illegal and improper?) is the single stupidest thing I’ve ever seen. Your body part removed and reimplanted during the same surgical procedure is a drug! In my opinion, this is perhaps the most extreme case of over regulation and lack of common sense that I have ever seen in the field.

For a long time, I thought the FDA would get away with its improper transformation, and that this case would reach a similiar result as the US Stem Cell case in Florida, because of the deference federal courts are required to give federal agencies like the FDA when it interprets its own regulations. However, in 2019, (after a few Justices gave some heart warming hints), the Supreme Court came out with a couple decisions which limit deference to laws and regulations which were ambiguous. This might well prove to be the death-knell of the FDA’s decade plus effort to (improperly) rewrite the the same day surgical exception.

So getting back to Venerable’s findings of fact and their succinct history of the FDA’s regulation of this issue, here it is:

“Regulatory History of the SSP Exception
6. Until 1997, the FDA exerted little to no control over human cellular and tissue-based products.
7. In 1997, the FDA introduced Guidance providing that:
the agency would not assert any regulatory control over cells or tissues that are removed from a patient and transplanted back into that patient during a single surgical procedure. The communicable disease risks, as well as the safety and effectiveness risks, would generally be no different than those typically associated with surgery.
(Ex. 88 (emphasis added).)
8. In 2001, the FDA then promulgated the Same Surgical Procedure Exception (“SSP Exception”) based on the 1997 Guidance.
9. The SSP Exception exempts from any FDA regulation:
[A]n establishment that removes HCT/P’s from an individual and implants such HCT/P’s into the same individual during the same surgical procedure.
21 C.F.R. § 1271.15(b).
10. The FDA has not amended the SSP Exception since its promulgation.
11. HCT/Ps are defined as “articles containing or consisting of human cells or tissue that are intended for implantation, transplantation, infusion, or transfer into a human recipient.” 21 C.F.R. § 1271.15(b).
12. In 2014, the FDA released a draft guidance that sought to create ambiguity in the SSP Exception. (Ex. 89.)
13. The draft guidance proposed substantive changes that interpret the SSP Exception to exclude surgical procedures that would otherwise qualify for exemption by requiring that the patient’s transplanted HCT/P be implanted in its
“original form,” which is very narrowly defined and otherwise limits the types of surgical procedures that would fall within the SSP Exception. (Id.)
14. The “original form” language is not included anywhere in the regulation, see 21 C.F.R. § 1271.15(b). Instead, the SSP Exception unambiguously states that a tissue or human cell is not a drug if it is removed from an individual and then re-implanted in the same individual.
15. The FDA adopted the draft guidance, which was improperly signed by Ana Abrams, in December 2017. (Ex. 87.)”

Ahh, this is music to my ears and will be to many in the stem cell field (on this side of the fence anyway). Only thing that’s needed is the judge’s signature. But alas, that can’t/won’t happen until sometime after November. We’ll all have to stay tuned until then.

Rick Jaffe, Esq.

Stem Cell Shocker: Cali. Federal Judge Denies the FDA Summary Judgement and Orders a Trial in the Cell Surgical Network Case

Stem Cell Shocker: Cali. Federal Judge Denies the FDA Summary Judgement and Orders a Trial in the Cell Surgical Network Case

Ok, let me get this out of the way up front. I predicted publicly and privately that the California federal court judge would follow the reasoning and result of the Florida federal judge who granted summary judgement to the FDA and issued a permanent injunction barring the Florida stem cell operation from using its SVF (stromal vascular fraction) product in humans.

I am very happy to report that I was wrong, (at least for now and until there is a trial).

Here is the judge’s opinion

stemcelldecision

The bottom line is that the California federal judge found a disputed issue of fact which requires a full trial. The issue of fact and how the judge got there is important and could foreshadow a result which the FDA and the stem cell institutional mafioso won’t like.

So, what is the issue of fact?

Here is the judge’s words and they are short and simple:

“The parties dispute whether the SVF Procedure alters the SVF cells (citation to brief omitted). Because both parties have submitted competing evidence on this point, there is a triable issue of fact and summary judgement is not appropriate.”
(Order at last page).

Why is it important/critical/dispositive whether or not the SVF Procedure alters the SVF cells?

The FDA argued that the procedure creates an unapproved, adulterated and mislabeled new drug.
The Defendants argued that they are doing a surgical procedure which falls under the single surgical procedure (“SSP) exception to full drug regulation of HCT/P’s under 21 CFR 1271

If the SSP exception applies then the FDA loses. If it does not, the FDA wins.

Here is how the judge phrases it:

“While the SSP exception could apply to a procedure that removes SVF cells by removing adipose tissue from a patient and implants only extracted SVF cells back into the same patient, it only applies if those cells remains unaltered.”
The count then concludes with the language first quoted.

There are prior steps to the judge’s reasoning/conclusion, relating to whether you compare the total product removed (adipose tissue which includes fat and other stuff) versus what is reimplanted (SVF), or do you look at the target of what is sought to be removed (the SVF) and compare that to what is reimplanted (the same SVF, according to the defendants).

The judge choose the latter, which required him to dig deeper into whether the cells were altered, i.e. whether they were the same as what was taken out.

He determined that the parties had different views about that. In other words, there was a factual dispute about a critical element of the case, and factual disputes are resolved by trials, not by summary judgment. Hence the denial of the government’s summary judgment motion. This is a big loss, (albeit interim) for the FDA.

Something else that the feds won’t like is that the judge did not show the almost universal deference given to an administrative agency’s interpretation of its own statutes and regulations. The judge thought that the agency’s view of “what is taken out of the body” was overly broad and didn’t make any sense. Basically, the judge accepted the defense view on this, and then held that there is no deference to an agency’s opinion which is not realistic and doesn’t make sense. Ouch!

Something else the judge didn’t like, and something which I found really offensive about the government’s efforts, was its attempt to bar defendants Berman and Lander from testifying either as an expert or any way else. I think the judge was offended by that whole argument and called out the government on it, at one point castigating the government for wasting the his time. Really Big Ouch on that one.

So, what’s next?

Per a court approved December 2019 joint stipulation, the parties have 14 days to submit a proposed schedule for the trial and whatever else has to be scheduled, but perhaps the government might try something else. We’ll see.

What is the effect of this order?
As a lawyer on the side of the private stem cell clinics, this is very good news for these clinics. I happen to think that the SVF taken out is the same SVF put back in, because ultimately all the process does is strip out the fat and the structure from the remaining SVF. If the judge thinks so too, then the government is going to lose the injunction case, at least based on the judge’s analysis in his order today.

This could set up an appeal by the government, and could result in conflicting decisions between the Ninth and Eleventh Circuits (home of appeals from Florida).

This is also good news for the Florida clinic because a federal judge has accepted the argument it had made, but unfortunately, it was not the federal judge on its case. Still that’s why they have appellate courts.

This is also welcome news to the customers who have banked their SVF with the Florida operation, to the extent the material had not been destroyed (and last I checked a few months ago, it hadn’t been).

Finally, it is very, very good news for the physician affiliates of the Cell Surgical Network, as well as other physicians using SVF, (at least outside the Southern District of Florida.) The judge’s opinion is a clear indication that the only legal hurdle left is whether the SVF coming out is the same SVF going back in. If it is, and the judge so finds, then there’s going to be a substantial uptick of SVF procedures being offered in this country (outside of the Southern District of Florida). But then again, I’ve been wrong before, so we will just have to see what happens.

A shout out to federal Judge Jesus G. Bernal for this important decision standing up to the government, and to the very excellent work of defense counsel, the very venerable Venerable law firm.

Rick Jaffe, Esq.

FDA v. California Stem Cell case update

FDA v. California Stem Cell case update

Honestly, I lost interest in this case after the federal judge in the Florida US Stem Cell case granted summary judgement to the FDA and issued a permanent injunction barring the use of the stem cell/SVF product, which is basically the same stuff used by the California group. I assumed that the California federal judge would agree with the Florida judge. I am still making that assumption, but I did learn a few interesting things from my cursory review of the summary judgment papers which have been filed. Also, I heard some misinterpretations of what has recently happened in the case, so I thought it might be helpful to set people straight.

The Schedule

In federal court, the parties propose an initial schedule which is accepted, rejected or modified by the court. It is everyone’s rough guess of how long it will take to get to a trial. But things change. It is extremely common for scheduling orders to be revised, meaning deadlines and trial settings are pushed back, by months, or many months, and there are sometimes several successive revisions to scheduling orders.

In this case, the Government complied with the then current scheduling order and filed its motion for summary judgment in early July. The judge took a quick look at the papers, and he probably reviewed the docket in the Florida stem cell case. On his own, he pushed back the hearing on summary judgement to December. That meant the original trial date had to be put off as well.

The judge ordered to parties to meet and confer and come up with a new trial date and other deadlines. The parties couldn’t agree on much. Interestingly, the Defendants asked for a quicker hearing than the judge ordered December hearing, because of the uncertainty and resulting financial problems the case was creating for the defendants’ business. The judge declined, and set the trial date in February 2020.

That was fine for the Government because it is not expecting there to be a trial, based on its view of the law, and its recent summary judgement win in the US Stem Cell case on similar facts.

The fact that the trial date has been pushed back until February 2020 has no legal significance because 1. As stated, trials get put back all the time in federal cases, and 2. The Government (and most likely the judge) doesn’t think there will be a trial.

What I learned from the Government’s Summary Judgment Papers

Caveat: because of the press of other business, I only took a quick look at the papers. My impression was the Government’s papers were very similar to the papers it filed in the US Stem Cell cases. However, the papers did relate two facts which I was not aware of.

First, in 2018 the Government obtained a court order seizing the company’s toxin laced stem cell/SVF vacinia product, based on a finding that the product was misbranded. It is unlikely that this judge will reach a different result, on that product at least. The people who make misbranded products get injunctions issued against them for producing misbranded drugs.

Second, the company is (or had been) expanding some of its patients stem cells. I don’t get it. We know from appellate authority in the Regenerative Sciences case that is illegal. These two facts make a much stronger case for the Government than the facts in the Florida case. Here is the Government’s Motion for Summary Judgment (without the declarations and exhibits)
govtsumj

What I learned from the Defendants’ Summary Judgment Papers

While I thought the Government’s papers in this case were basically the same as what it filed in the Florida case, I think the defense papers in this case are much stronger than in the Florida case. Same firm in both cases, but different lawyers.

Don’t get me wrong, the Florida defense papers were perfectly fine, well written and extremely competent. However, I think the California summary judgment papers presented a more compelling defense, notwithstanding the fact that they had some bad facts to deal with. (Lander’s declaration states that they are not doing these two bad things anymore, or hadn’t as of the date of the FDA’s complaint). The California defense also had the advantage of their clients being actual board-certified surgeons, rather than the morons in Florida who thought it was a good idea to have a nurse practitioner inject people’s eyeballs with stem cells. Still, I thought the California papers were excellent and told a very compelling story. Hats off to the defense team.

Here is the Defendants’ Summary Judgment Response, and the principal declarations:

sumjopposition
landerdec
gurwitzdec

I really liked the expert report attached to the attorney’s affidavit. I do not recall if it was submitted in the Florida case. If it was, it made alot more sense here since the defendants are surgeons and make a better case for a surgery exception, than in Florida case where (I presume) NP’s are not licensed to practice surgery.

Will the Defense’s excellent papers make a difference?

The defense has some very bad facts to overcome (expansion of cells, and using a toxin in a product which has been determined by a judge in the same district to a misbranded drug), and the recent US Stem Cell decision dealing with a product which is closer to being FDA compliant under applicable law.

So, despite, the excellent job on the papers by defense counsel, as an old Louisiana friend of mine used to say: “You can’t make chicken salad out of chicken [explicative deleted].” And that’s about how I see it. We’ll have the answer probably mid-to late January, 2020.

Rick Jaffe, Esq.
rickjaffeesquire@gmail.com

The US Stem Cell Judge Denies the Motions to Intervene by the SVF Owners Subject to….?

The US Stem Cell Judge Denies the Motions to Intervene by the SVF Owners Subject to….?

On July 31st, the US Stem Cell judge issued an “Omnibus Order” denying “without prejudice” all of the SVF’s Motions to Intervene in the case.
Here is her order:
orderdenyingintervention

What is happening is confusing, even to an FDA litigator like me. But, for what it’s worth, here is my explanation of what’s going on and why we’re here, (whereever “here” is).

First, I think that neither party specifically informed the judge that the company was banking SVF product for its patients and possibly people who were not patients, but just used US Stem Cell as an SVF bank). I do not know why that happened/didn’t happen.

After it obtained summary judgement, the government prepared an order requiring all SVF product in the Defendants’ possession to be destroyed. So far as I can tell, neither party informed the judge about the banked product for customers.

The defendants did not inform its SVF banking customers of the problem, until after the judge signed the injunction order, whereupon the defendants told its customers that their body material was about to be destroyed per the court’s order, and encouraged them to write to the judge via the clerk’s office.

The clerk received over two hundred letters and at least two motions to intervene, one of which was filed by a South Florida law firm purporting to represent many of the SVF banking customers.

After the judge started seeing these letters from the SVF banking customers, she did what she probably thought was the only thing she could do, given the procedural posture of the case, (namely, that there was a final judgement); she issued a stay of the part of the injunction order relating to the banking customers’ SVF, pending the filing of an appeal by the defendants of her permanent injunction order and judgment.

If the defendants appeal, then the judge’s stay continues until the court of appeals (the Eleventh Circuit) makes some applicable ruling on the case. If the defendants do not appeal, her stay of the destruction order automatically dissolves, and the destruction will take place under the FDA’s supervision, per the final permanent injunction.

Here is what my gut tells me is going to happen (meaning this is not a researched deep analysis).

If the defendants file a timely appeal (and I hope and suspect they will), that should essentially end the district court’s involvement in the case, as technically, I don’t think she will have jurisdiction on the case once a timely appeal is filed. She may issue another clarifying opinion telling the intervenors to try to intervene in the appeal, but that is about all I expect to happen in the district court, unless and until the court of appeal reverses and remands all or a part of the case back to the district court.

And I will go out on a limb and make a prediction about will happen in the court of appeals.

The part of the injunction order enjoining the defendants from performing SVF transplant procedures will be affirmed.

However, if correctly litigated, the part of the judge’s order mandating the destruction of the banked SVF product will or should be reversed on the grounds that the district court never acquired jurisdiction over the material/failure to join an indispensable party/the relief granted exceeded the claims in the lawsuit, or some combination thereof, as will be argued by the intervenors. That part of the case will be remanded for further proceedings. At that point, I would hope to see a settlement between the FDA and the SVF banking customers.

Well, maybe there is some wishful thinking going on here, but I think that is the way it could play out, if it goes that far.

Rick Jaffe, Esq.
rickjaffeesquire@gmail.com

Should you be worried if you banked your SVF/Stem Cells?

Should you be worried if you banked your SVF/Stem Cells?

The injunction entered by the Florida federal district court judge in the US Stem Cell case ordered the company to destroy all of the SVF product which it was storing for their patients and SVF banking customers. I did not think that was right, in large part because the owners of the stored product were not parties to that lawsuit. See my previous post: http://rickjaffeesq.com/2019/07/22/breaking-new-on-the-us-stem-cell-case-svf-destruction-order-stayed-and-svf-owners-intervene-in-the-suit/

here is the final injunction order:
permanentinjunctionorder

The basis of the judge’s destruction order was that the material is an unapproved new drug basically because the separation of the SVF from the fat from which it was derived constitutes more than minimal manipulation and is not even a stem cell. The FDA also claimed that US Stem Cell was using the product in their patients for non-homologous use, but that may or may not carry over into SVF banking because there is no use homologous or otherwise in banking, and won’t be until the client wants the cell back for reimplantation, arguably anyway. The other problem the court had with the product, (also adopting the FDA’s position), is that the material was not produced in accordance with Current Good Manufacturing Practices, which made the drug product adulterated under FDA law.

As I reported recently, the judge stayed the part of the injunction ordering the destruction of the banked SVF product pending appeal, even though she thought the product was FDA illegal and the owners did not have any rights to their body parts.

In case you have any doubt about how unimpressed the judge was with the rights of patients/consumers to control their own body parts (or something derived therefrom), here are the judge’s words and you can decide for yourself.

“As an initial matter, the Court is not persuaded that any party has a property interest in the SVF Product warranting a stay of the Order of Permanent Injunction. First, the law is unsettled as to a party’s rights in its biological tissue. See, e.g., Greenberg v. Miami Children’s Hosp. Research Inst., Inc., 264 F. Supp. 2d 1064, 1075 (S.D. Fla. 2003) (explaining that “[t]he property right in blood and tissue samples also evaporates once the sample is voluntarily given to a third party.”). And, in this case, any such rights would be governed by the contractual relationship between Defendants and each individual patient, which rights are not addressed properly in this lawsuit. Second, as explained in the Court’s Order on the Parties’ Motions for Summary Judgment, the SVF Product is not the same as the patients’ stem cells; rather, the SVF Product is a separate product created by Defendants through a proprietary and complex multi-step processing procedure. See D.E. 73. Lastly, in-line with well-settled and recently affirmed Supreme Court precedent, in the Court’s Order on the Parties’ Motions for Summary Judgment, the Court deferred to the FDA’s scientific expertise and its interpretation of the FDCA that the SVF Product is an adulterated and misbranded drug. See D.E. 73; Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (affirming Auer v. Robbins, 519 U.S. 452 (1997)). Accordingly, the Court is not persuaded that any party has a property interest in the SVF Product because it is an adulterated and misbranded drug. See United States v. Ellis Research Labs., Inc., 300 F.2d 550, 554 (7th Cir. 1962) (“We find no merit in defendants’ argument that the injunction sought and granted is an unconstitutional and unwarranted exercise of the regulatory powers exercised by the United States under the Act in question . . . they can have no vested interest in a business activity found to be illegal.”) (emphasis added).”

Here is the judge’s complete stay order:
staydestructionorder

I think there are sound and compelling arguments to be made in response to the judge’s opinion, and sooner or later, in this or another case, I am confident they will be made.

So, the question arises what, if any effect the judge’s decision will have on patients who have banked their SVF (or some other stem cell derived product) with other stem cell banks. There are technical, theoretical and practical answers to this.

The technical legal answer is that a district court decision is not binding in other districts. The reasoning of the decision might be persuasive, but the decision itself is not binding. In fact, I think even a judge in the same district court can disagree. That is especially the case here since the owners of the material were not parties to the lawsuit, and I think that makes the judge’s decision on this particular point much less persuasive.

My prediction is that eventually the patients/SVF owners of material held by US Stem Cells will become parties to the appeal. If so, once the Eleventh Circuit decision comes out (in about a year) that decision will be precedential and binding unless another court of appeals takes a different position. So much for the technical/legal.

As to the theoretical, I suppose the FDA could take that decision and start looking at all the stem cell banking operations to determine which of them are manufacturing adulterated drugs (and that would probably be most or all of them I would guess) even though these materials are not imminently going to be injected into patients. However, I do not see that happening.

The reality is the FDA has a lot on its plate in the stem cell field. There are many hundreds of these private stem cell clinics out there operating in violation of FDA law. The 2017 FDA guidance document stated reason for not taking action against all these clinics is that it wanted to give the industry a three-year window to come into compliance, (and that was damn nice of them if you ask me). But in actuality, the FDA does not have the manpower to investigate and prosecute them all. So as Siddhartha says, “If you have nothing to eat, you should fast.”

Apart from the autologous MSC dervied stem cell clinics, there are dozens and probably hundreds of clinics providing allogeneic based products. All of these places are treating patients with what the FDA would consider illegal drugs. The MSC based autologous stem cell banks are just “manufacturing” and storing the material for possible future use. (And honestly, I just do not get why older people store their stem cells. I’ll address that in another post). But back to the point, I have to believe that the low risk profile of these stem cell banks puts them way down on the potential enforcement list.

I think the FDA’s next target is much more likely to be clinics that provide birth related derived products (i.e. umbilical cord stem cells, cord and placental tissue, and more exotic products) used in alleogeneic therapy. But more about that later.

Rick Jaffe, Esq.
rickjaffeesquire@gmail.com

Breaking New on the US Stem Cell Case: SVF Destruction Order Stayed and SVF Owners Intervene in the Suit

Breaking New on the US Stem Cell Case: SVF Destruction Order Stayed and SVF Owners Intervene in the Suit

Last week was busy in the US Stem Cell case and some much needed help arrived.

First, to their credit, the defendants in the case moved to stay the SVF destruction order for the product it was banking for patients/customers. Although the judge was skeptical that these people had a prioprietary interest in their banked SVF product, she did grant the stay, on technical grounds, basically saying that she’ll continue the stay until the later of the expiration of the defendant’s time to appeal her final decision, or if they do appeal, until the Eleventh Circuit Court of Appeals dissolves her stay pending appeal. The bottom line is that so long as the defendants appeal the final decision, the SVF product will not be destroyed well into the appeal process. That is certainly good news for the people who have banked their SVF with the company. Here is the judge’s order:
staydestructionorder

I haven’t done a deep dive into the cases she cited, but I think the judge is oversimplying things, and their are serious arguments to be made. More simply put: I think she is wrong on the law or or at least wrong on the equities involved.

The other big news is that last week, a Florida law firm appeared in the case on behalf of some of the people whose SVF is the subject of the destruction order, via a motion to intervene. Here is the intervention motion:
interventionmotion

I’m not sure how this is going to play out since the judge has already issued a final judgement in the case. I suspect these consumers will end up being part of the appeal, which is probably what the lawyers are thinking, but we will just have to wait and see.

It’s all good news for everyone who has their SVF banked at the US Stem Cell facility. Now at least there will be someone directly protecting their interests.

I still think that the proper resolution is to allow these people to remove their property from the defendants’ possession and shipping it to some other location, probably out of the country. Initially, the FDA probably won’t like that idea, so the intervenors are going to have to find some additional means of persuasion. We will see what happens.

Rick Jaffe, Esq.
rickjaffeesquire@gmail.com

Chaos, Unfairness and Illegality in the US Stem Cell Case

Chaos, Unfairness and Illegality in the US Stem Cell Case

I have been following and writing about the US Stem case (and the FDA’s parallel California case) since the company received its warning letter and throughout the litigation. Last month, the judge issued the final injunction order. Here it is:
permanentinjunctionorder

The order, among other things, mandates the destruction of all SVF product in the defendants’ possession, which destruction is to be supervised by the FDA. (page 9, paragraph 10)

That caught me by surprise. I might have missed something in the pleadings and motions in the case, but I did not know or appreciate that the company was storing or banking SVF for patients, or possibly even non patients who just wanted to bank their stem cells. I wonder whether the Judge knew that.

Caveat: I haven’t seen the US Stem Cells SVF banking agreement, but I have worked on some cord banking agreements. There is one thing I am fairly confident about, and that it that the product is owned by the patient/consumer and not by the banking facility, in this case, US Stem Cell or some affiliate.

Legally, the relationship between the US Stem Cell and the SVF donor is a bailment, not unlike, (but much more complicated obviously) when you check your coat with the coat check or when you park your car in a commercial garage. The difference of course is that the entity holding the property helped create it. But that does not change the ownership issue.

Federal civil procedure defines parties as either necessary or indispensable. My impression, (rather than my considered legal analysis) is that the owner of the property would be an indispensable party, unless the bailment agreement specifically conferred on the bailee (the party holding the property in trust for the owner/bailor) granted it the exclusive right to dispose of or defend the property or something like that, and I would doubt there is such a provision in the banking agreement.

Normally, failure to join an indispensable party would be brought up by the defendant in a federal case, but I don’t think it was. I would argue that the government lawyers had an obligation to bring it up, since it the government is not just an ordinary litigant. I think the issue could also be raised by the court itself, if the court becomes aware of the issue. (Just my impression based on past work on related issues, not a considered legal opinion). I seem to recall that failure to join an indispensable party is a fatal defect to a case, whenever it is raised, even on appeal.

After the injunction order was issued, US Stem Cells notified all of its banking customers of the injunction order requiring the destruction of their property and advised them to either write to the court or hire an attorney (alittle late in my book). I’ve heard that there is a Florida attorney who is trying to find enough customers/clients to collect an adequate retainer.

The case docket lists 200 or so letters from customers who have banked their stem cells/SVF.

Here they are
usstemcellletters

letters

letters3

I think the stem cell institutional mafia should read some of these letters, and maybe it will restore some needed humility and compassion which is often lost when institutionalists concern themselves with the Public rather than actual people.

These letters from the SVF owners show the outrageous result of the Court’s order. I have to wonder whether the judge knew that the order would cause the destruction of property of people who were not parties to the lawsuit. These people’s property is being taken away from them without due process or just compensation. Last time I checked, that is illegal under the Fifth Amendment,and actionable under 42 U.S.C 1983, and could result in money damages as well as injunctive relief against the government. Who would you sue? The government and its lawyers for sure. Maybe the defendants also. But the Government is the party whose attention you need to get.

What would be the goal of the lawsuit? That’s pretty simple: Ask the judge to modify the order to allow the SVF owners to remove their property from US Stem Cell, and if necessary, have it shipped someplace else. There might be a procedural wrinkle or two to deal with first, but that’s where the case should end up.

Here’s hoping . . . .

Rick Jaffe,
rickjaffeesquire@gmail.com

The Private Stem Cell Field Moves On; Maybe This Time They’re Be Smarter or More Cautious

The Private Stem Cell Field Moves On; Maybe This Time They’re Be Smarter or More Cautious

With the recent Summary Judgment decision in the US Stem Cell case, my prediction is that the fat-based stem cell business will slow down and eventually cease to be a thing.

Here is the judge’s decision
http://rickjaffeesq.com/wp-content/uploads/2019/06/USRM-lawsuit.pdf

Lawyers will tell potential entrants into the field that a federal judge has held the use of autologous fat-based products to be illegal, at least pending and barring a different result in the FDA’s companion case in California. However, I do not think that is likely.

As to the existing MSC/SVF practices, hard choices have to be made, especially for those not associated with the US Stem Cell network and who currently operate below the state and federal radar screen: Continue with business as usual, or stop and move on to the next thing.

Because of the FDA’s operational practices and limitations, I do not see it as a major deterrent to existing fat-based clinics, at least not until the expiration of the 3-year grace period the FDA granted the industry when the stem cell industry guidance documents were issued in late 2017. Presumably, the small, under-the-radar clinics will have until late 2020 to come into compliance (which they will never be able to do, so read, go out of buisness).

For sure, the FDA will continue its enforcement activities, especially against the US Stem Cell affiliates, and then against the California stem cell affiliates if there is a summary judgment in that case. However, if a clinic is making money and getting good feedback from the patients about results, some may decide to continue with the product and model, at least until the end of the 2020 grace period.

I menitoned state radar screen because some of the state attorney general’s offices are starting to become players via consumer protection laws,following the FTC’s widely reported multi-million dollar consent agreement against a California stem cell operation back in October, 2018.

Here is the FTC’s announcement of the settlement.
https://www.ftc.gov/news-events/press-releases/2018/10/ftc-stops-deceptive-health-claims-stem-cell-therapy-clinic

That case, and others that might follow might make some of these clinics rethink their position, or at least clean-up their websites, and that would be a very, very good idea. State (and federal) consumer protection target the clinics where it hurts, their pocketbooks. I would expect these types of actions might be a bigger factor than even the FDA, in the short to medium term. In large part because this is low hanging fruit for the AG’s and results in easy and favorable PR. Many AG’s are looking at what’s next, and the common job path is AG, then Governor or senator, then who knows.

And the states have other tools to deal with the MSC/SVF model, which they are starting to use.

Sooner or later, the entire MSC/SVF field is going to move on (and many in the field already have done so). My work has given me the opportunity to review the MSC/SVF operations, documentation and adverstising practices. I hope the players creating the new business model do not make the same mistakes as were made in the MSC/SVF model. But, I am guessing that the same forces which drove the soon-to-be-old model, will also drive the new one, and the same mistakes and same government reactions will surface. But we’ll see.

Rick Jaffe, Esq.
rickjaffeesquire@gmail.com

Florida Federal Judge Grants Summary Judgment to the FDA against US Stem Cell; Game Over except for the obligatory appeal

Florida Federal Judge Grants Summary Judgment to the FDA against US Stem Cell; Game Over except for the obligatory appeal

The U.S. Stem Cell summary judgment decision has just come down. It’s 30 plus pages.
here it is.
USRM lawsuit

Result: FDA 1, US Stem Cell 0. Game over except for the appeal, which will take at least a year.

I haven’t had a chance to closely read the decision yet, but I am expecting that the judge accepted the FDA’s position in toto. The judge has or will issue a final judgment, and then the case goes up to the court of appeals, starting with the filing of a notice of appeal.

The big question

Will the company comply with the injunction order? My guess is that the lawyers will tell the company that it’s over, (unless some court issues a stay of the judgment, and I think that’s unlikely).

It’s one thing to defy the FDA’s asserted position in a warning letter and guidance documents. It is an entirely different thing to violate a federal court injunction order. That carriers civil and criminal contempt penalties and a ticket to a federal trial (bench for civil contempt, and a jury for criminal contempt). Done that, it’s not fun for the client.

The US Stem Cell affiliates throughout the country are going to have to do some hard thinking about this, at least those who haven’t moved on yet from SVF products derived from fat.

I’ll write about this again, once I have reviewed the judge’s decision closely. While I think this decision is legally significant, practically, it will have less effect than the regulators might expect, because, as I’ve said many times before, this was expected and many in the field have moved on to new HCT/P’s and here we go again, from the beginning.

Rick Jaffe, Esq.
rickjaffeesquire@gmail.com