Bahamas Surgery Center LLC v. Kimberly-Clark Corp.

Fraud

Central District

U.S. District Judge Dolly M. Gee

Plaintiff's Lawyers: Michael J. Avenatti, Ahmed I. Ibrahim, Filippo Marchino, Eagan Avenatti LLP

Defense Lawyers: Alexander G. Calfo, Julia E. Romano, Chilton Davis Varner, Madison Kitchens, King & Spalding LLP; Bradley Pratt, The Pratt Law Firm

A federal jury's $454 million verdict against two companies accused of fraudulently marketing medical gowns resulted from what the plaintiff's attorney describes as "a series of surgical strikes."

"We had to be incredibly efficient and very quick on our feet," said Michael J. Avenatti of Eagan Avenatti LLP in Newport Beach.

That's because U.S. District Judge Dolly M. Gee allotted his team no more than 12 hours to present their case. Twelve hours for a class action fraud case "is no small feat," Avenatti said.

While they ended up using slightly more time, the precision preparation put Avenatti's team in a perfect position to adjust their strategy as the trial required, including when they noticed the average age of the jury was 27.

"I think we just did a far superior job of reading our jurors and picking themes that resonated with them," Avenatti said.

Avenatti sued Halyard Health Inc. and Kimberly-Clark Corp. on behalf of 428 California medical centers, including major hospitals and surgery centers such as UCLA Medical Center, Hoag Memorial Hospital, Shriners Hospital, UC San Diego Medical Center and Cedars-Sinai Medical Center. The lawsuit alleged Halyard fraudulently marketed and sold MicroCool surgical gowns.

The verdict, delivered by the jury just before 8 p.m. on a Friday in April, awarded $350 million in punitive damages against the Kimberly-Clark Corporation and $100 million against Halyard Health, a spinoff of Kimberly-Clark.

They also ordered Kimberly-Clark to pay nearly $3.9 million in compensatory damages; Halyard is to pay $261,445. Bahamas Surgery Center, LLC v. Kimberly-Clark Corporation et al., 14-CV08390 (C.D. Cal., filed Oct. 29, 2014).

Halyard and Kimberly-Clark Corp.'s defense team is challenging the judgment. Alexander G. Calfo and Julia E. Romano of King & Spalding LLP in Los Angeles represent both companies, including during trial, but each has hired its own counsel after the verdict.

Theodore J. Boutrous Jr., Julian W. Poon and Theane Evangelis of Gibson, Dunn & Crutcher LLP are representing Kimberly-Clark. Donald B. Verrilli Jr., and Daniel P. Collins of Munger, Tolles & Olson LLP represent Halyard.

The defendants filed a motion for new trial, remittitur of amendment of the judgment that called the punitive damages award "grossly excessive" and said the verdict "was the product of passion, prejudice and improper and excluded evidence." They also filed a motion to decertify the class.

Avenatti's team, which includes Ahmed I. Ibrahim and Filippo Marchin, is challenging both motions.

Gee ruled in August that the motions "are appropriate for decision without oral argument." She has not issued a decision as of press time.

Avenatti said he considered the youth of the jury in his closing argument, which ended: "If after hearing all that you decide this was wrong ... you need to send a message, and that message needs to be: Keep the champagne on ice. WTF. Thank you."

"WTF," an abbreviation for a phrase that ends with a profanity, referenced an email written by a former Halyard employee that was key evidence in Avenatti's case. The employee said executives were living well while the company sold defective gowns and included "WTF." Avenatti referenced the email throughout the trial. His closing argument mentioned it a final time after he described the champagne parties that will occur in corporate boardrooms if jurors awarded no or minimal damages.

Avenatti said their flexibility is an advantage of being a boutique firm: his attorneys work their cases from beginning to end.

"The same people that cross-examine people at trial actually take the depositions and get their hands dirty along the way," he said. "That's not always true and in fact, it's rarely true at the big firms."

-- Meghann M. Cuniff