Judge sides with Rockwell Medical in wrongful-termination case

A federal judge has issued a tentative ruling in favor of Rockwell Medical Inc. (Nasdaq: RMTI) in a wrongful-termination suit brought by its former head of drug development, who was fired in September 2011..

Dr. Richard C. Yocum said in his suit that he was fired because he repeatedly complained to Chief Executive Officer Robert L. Chioini about possible violations of Securities and Exchange Commission and Food and Drug Administration rules.

The judge hearing the case did not rule on whether Rockwell Medical had, in fact, committed any violations. Instead, he considered the more narrow issue of whether the company was within its legal rights to fire Yocum.

Rockwell Medical, which makes and distributes dialysis products, is based in Wixom, Mich. The company had argued that Michigan is an “employment at will’’ state, which means that businesses can fire workers for any reason, or no reason. One of the exceptions to that rule is if an employee is fired in retaliation for reporting improper activity, either to management or outside bodies, such as regulatory agencies.

Yocum worked from his home in California, which also is an employment at will state. The law there does not require a worker to report improper activity to an outside agency to qualify for whistleblower protection.

The judge, Gonzalo P. Curiel, said in his tentative ruling that there was an “absence of evidence’’ linking Yocum’s firing to any protected activity. Curiel also said he was prepared to rule against Yocum on his claim that the firing constituted the intentional infliction of emotional distress. Rockwell Medical had noted in court filings that Yocum was soon hired by another medical company, at a higher annual salary.

Finally, Curiel said that Yocum had not presented evidence demonstrating that Rockwell Medical owed him any unpaid wages. According to the court docket, the judge is preparing a final written order in the case.

Curiel still must issue a written order reaffirming Rockwell Medical’s request for summary judgment for the ruling to become official.

Yocum’s suit against Rockwell Medical was the subject of a Sharesleuth story last year.

Yocum said in his complaint that press releases the company put out in 2010 and 2011 made it appear that the clinical trials for a new product called Soluble Ferric Pyrophosphate (SFP) were going better than they actually were.

Yocum was Rockwell Medical’s vice president of drug development and medical affairs, and had primary responsibility for the SFP development program.

He said in his suit that Chioini not only ignored his concerns about the trials but caused Rockwell Medical to issue press releases that included statements directly contradicting what Yocum had told him.

Yocum also said that, based on the nature of the questions he received from analysts or investors, it appears that Rockwell Medical engaged in selective disclosure regarding details of those trials.

Among other things, Yocum alleged that Rockwell Medical:

–falsely claimed that the results of its earlier Phase IIb studies of SFP were positive, despite the fact that they failed to demonstrate that the treatment was effective.

–falsely claimed that the Phase IIb trials produced clear dosing data.

–falsely claimed that the company had an agreement with the FDA on the design of its Phase III clinical trials.

– announced an unrealistic date for bringing SFP to market, disregarding Yocum’s much longer timetable.

Rockwell Medical announced in February that one of its clinical trials for SFP showed that regular use reduced the need for erythropoietin stimulating agents (ESAs) by as much as 37 percent. The company has said that such a reduction could mean big savings for dialysis providers and their patients.

Rockwell Medical expects to announce the results of its other trials later this year. Those are intended to show that SFP is safe and effective.

 

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