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The $2 trillion-plus Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on March 27, 2020 is by far the richest and expansive economic stimulus package of our generation.
Like most broad-sweeping legislation, the law of unintended consequences will apply and future litigation is inevitable. In that regard, in addition to a number of important measures for relief, the act introduces considerations that may be relevant for future litigation, including a broad liability exemption for volunteer health-care professionals under federal or state law for any harm caused by an act or omission in the provision of health-care services during the Covid-19 public health emergency.
Also relevant are amendments to the Federal Food, Drug, and Cosmetic Act relating to determinations of the safety and effectiveness of certain over-the-counter drugs, among others, including administrative and judicial remedies to challenge any such determination; limitation of liability of third parties and employers where an employer directs a third party to defer payments of payroll taxes and where a customer enters into a service contract with a professional employer organization and directs that organization to defer payment of applicable payroll taxes, respectively; and recovery for fraud and overpayment of pandemic emergency unemployment benefits in accordance with state law for unemployment compensation. Each are addressed in more detail below.
The CARES Act explicitly exempts volunteer health-care professionals from liability under federal or state law for any harm caused by an act or omission in the provision of health care services during the Covid-19 public health emergency, if the harm occurs in the course of providing health care services and the provision of such services was within the scope of a professional license and taken in good faith.
The only exceptions to this far-reaching exemption from liability relate to willful, reckless, or negligent conduct, conscious, flagrant indifference, and action taken under the influence of drugs or alcohol. The CARES Act also explicitly preempts state law unless it provides greater protections. Sec. 3215(a)-(c). This liability exemption for volunteer health-care professionals may encourage retired medical professionals to assist in providing care during the emergency.
Most of the litigation-related provisions relate to the regulation of certain non-prescription drugs marketed without an approved drug application. The sct introduces amendments to the Federal Food, Drug, and Cosmetic Act relating to determinations of the safety and effectiveness of certain over-the-counter drugs in the form of administrative orders. It also provides for administrative and judicial remedies to challenge any such order made upon the initiative of the Secretary. Specifically, no later than two business days prior to issuing a proposed administrative order, the Secretary shall make reasonable efforts to notify sponsors of such drugs informally. The Secretary may thereafter publish the proposed order on the Food and Drug Administration's website, including the reasons for the order, and provide notice thereof in the Federal Register, provide for public comment for not less than 45 calendar days (or 180 days for a determination that the drug is not generally recognized as safe and effective), and issue a final administrative order, together with a detailed statement of the reasons, effective after the expiration of the time allotted for judicial review (discussed below). Sec. 505(G)(b)(2).
Requesters of drugs that will be subject to such order will have within 45 calendar days of the issuance of an order, or within 30 calendar days after a prior decision, to invoke formal dispute resolution, up to the level of Director of the Center for Drug Evaluation and Research. Sec. 505(G)(b)(2)(A). The specifics of that formal dispute resolution are undefined in the CARES Act.
There is also a right to a hearing, notice of which must be provided by the Secretary, for persons who exercised formal dispute resolution (Sec. 505(G)(b)(3)), and includes the right to present testimony, including expert testimony, and to cross-examine witnesses presented by other parties. The right to a hearing must be invoked not later than 30 calendar days after receiving notice of the final decision of the formal dispute resolution. The Secretary may deny a request for a hearing if the request contains “no genuine and substantial question of material fact.” Sec. 505(G)(b)(3)(C)(i). The Secretary may also consolidate requests for a hearing, holding a single hearing for multiple related requests in which all persons whose hearing requests were granted may participate. Sec. 505(G)(b)(3)(C)(ii).
Where a hearing proceeds, a designee of the Secretary will serve as the presiding officer. Such designee may not be an employee of the Center for Drug Evaluation and Research or involved in the development of the administrative order at issue. The presiding officer shall issue a final decision with findings of fact and conclusions of law. Sec. 505(G)(b)(3)(C)(iii).
Judicial review is available and follows the same procedures as set forth in Section 505(h) of the Federal Food, Drug, and Cosmetic Act, except any application for judicial review, must be made in the appropriate district court. Sec. 505(G)(b)(3)(D). A request for judicial review must be made within 60 calendar days after the latest of:
(I) the date on which notice of such order is published; (II) the date on which a hearing with respect to such order is denied; (III) the date on which a final decision is made following a hearing under subparagraph (C)(v); or (IV) if no hearing is requested the date on which the time for requesting a hearing expires. (Sec. 505(G)(b)(3)(D))
The Act also provides for safety labeling changes where such change is reasonably expected to mitigate a significant or unreasonable risk of a serious adverse event associated with the use of a drug. Sec. 505(G)(b)(4)(A). Similar to the procedures above, no later than 48 hours before issuing a proposed administrative order, the Secretary shall make reasonable efforts to notify sponsors of such drugs informally. After such reasonable efforts, the Secretary shall issue an interim order, along with a detailed statement of the reasons for such order, publish notice thereof in the Federal Register, and provide for public comment for a period of not less than 45 calendar days.
The Secretary may thereafter issue a final order not later than six months after the comment period closes. The Secretary must also afford sponsors of such drugs an opportunity for formal dispute resolution up to the level of the Director of the Center for Drug Evaluation and Research. A request for formal dispute resolution must be made within 45 calendar days of the issuance of the order, and for subsequent levels of appeal, within 30 calendar days of the prior decision.
Sponsors subject to a final order may request a hearing if they participated in the formal dispute resolution process. The judicial review procedures are the same as those discussed above. Sec. 505(G)(b)(4)(B)-(G).
Finally, the Act includes expedited procedures for issuing administrative orders that pose an imminent hazard to public health (Sec. 505(G)(b)(4)(A)) as well as exemptions for other drugs without evidence of their safety and effectiveness (Sec. 505(G)(b)(3)(B)). These provisions ensure that sponsors of certain over-the-counter drugs have opportunities to challenge determinations on the safety and effectiveness of certain drugs and may assist in ensuring that safe and effective drugs are put on the market in an efficient manner during the crisis.
The CARES Act allows for a delay of payment of employer payroll taxes and includes several related limitations of liability. First, if an employer designates a third party to carry out its obligations under the CARES Act, and “directs such person to defer payment of any applicable employment taxes during the payroll tax deferral period under this section, such employer shall be solely liable for the payment of such applicable employment taxes.” Sec. 2302(c)(1). Second, where a customer enters into a service contract with a professional employer organization and directs the organizer to defer payment of applicable employment taxes, the customer is solely liable for payment of such taxes. Sec. 2302(c)(2).
Recovery for fraud and overpayment of pandemic emergency unemployment benefits – The CARES Act specifies that the withdrawal of pandemic emergency unemployment benefits, repayment of benefits, and determinations by the state regarding such benefits are to be made under the same provisions applicable to unemployment benefits. For example, state unemployment benefits governing overpayment of unemployment benefits will also apply to overpayment of pandemic emergency unemployment compensation. The CARES Act also provides that no repayments or deductions will be required without a hearing and that repayment may be waived for equitable considerations where the individual is without fault. Sec. 2107(e). See also Sec. 2104(f).
In conclusion, the CARES Act provides trillions of dollars in immediate and direct economic relief intended to respond to the economic consequences of the Covid-19 pandemic. The CARES Act, however, is not limited to economic aid. It also contains important liability exemptions for volunteer health care professionals and administrative and judicial remedies in relation to certain drugs, which may assist in increasing the size of the medical workforce and encouraging the development of safe and effective drugs needed to respond to the pandemic. Other litigation provisions in the CARES Act ensure that public funds intended to assist workers affected by the pandemic are not abused. These litigations considerations may therefore play an important role in the Covid-19 pandemic.