Federal Court Rejects Off-Label Marketing Class Action

A Pennsylvania federal court recently refused to certify a proposed class action accusing a drugmaker of off-label marketing. See  In re: Actiq Sales and Marketing Practices Litigation, No. 2:07-cv-04492 E.D. Pa. March 23, 2015).

Plaintiffs were various entities who pay for employee's prescription drugs.  They alleged that defendant promoted its drug Actiq for uses not approved by the FDA.  As readers know, it is legal for doctors in their judgment to prescribe medications for uses other than those approved by the FDA, i.e., off-label uses. Plaintiffs argued that Cephalon’s conduct somehow caused Plaintiffs to make excessive off-label prescription payments for Actiq to treat conditions not approved by the FDA and for whom less expensive pain management drugs were appropriate. They asserted that under the circumscriptions of Actiq’s approved label, off-label marketing is not permissible since most forms of off-label use were for contraindicated conditions.

Plaintiffs moved for certification of one Nationwide Class defined as follows:
All Third Party Payors (“TPP”) in the United States who paid and/or reimbursed, in whole or in part, for the cost of Actiq prescribed for indications other than cancer and for consumption by their members, employees, plan participants, beneficiaries or insureds during the period from January 1, 2002 through December 31, 2006. Plaintiffs also suggested multi-state classes. 

The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (quoting Califano v. Yamasaki, 422 U.S. 682, 700-01 (1979)).  Class certification is proper only if the trial court is satisfied, after a rigorous analysis, that the prerequisites’ of Rule 23 are met. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 309 (3d Cir. 2008) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982)).

A decision to certify a class requires findings by the court, not merely a threshold showing by a party, that each requirement of Rule 23 is met.  In re Hydrogen Peroxide, 552 F.3d at 306; see Wal-Mart Stores, Inc., 131 S. Ct. at 2551. In conducting its analysis, a court is to resolve factual disputes by a preponderance of the evidence and to consider all relevant evidence and arguments by the parties. In re Hydrogen Peroxide, 552 F.3d at 306, 320. “Frequently [the court’s] ‘rigorous analysis’ will entail some overlap with the merits of the plaintiff’s underlying claim.” Wal-Mart Stores, Inc., 131 S. Ct. at 2551. Merits questions may be considered to the extent that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.  Amgen Inc. v. Conn. Ret. Plans and Trust Funds, 133 S. Ct. 1184, 1195 (2013). Plaintiffs’ burden is to show that the elements of their claims are capable of proof through evidence that is common to the class. See In re Hydrogen Peroxide, 552 F.3d at 311-12.

In opposing class certification here, Cephalon argued that individualized factual issues would predominate over their common claims, and the class action would be impossible to manage if certified. The Court agreed.

Nationwide and multi-state classes raise the issue of applicable substantive law.  Because choice of law is thus relevant to a determination under Rule 23, the Court first had to determine what law applied to Plaintiffs’ claim of unjust enrichment. 22 Powers v. Lycoming Engines, 328 F. App’x 121, 124 (3d Cir. 2009). Irreconcilable conflicts among state laws may defeat class certification. Federal courts sitting in diversity are to use conflict of laws rules of the forum state to determine which substantive law applies. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); Kaneff v. Del. Title Loans, Inc., 587 F.3d 616, 621 (3d Cir. 2009). This Court therefore used Pennsylvania rules on conflict of laws.

“[U]njust enrichment is a tricky type of claim that can have varying interpretations even by courts within the same state, let alone amongst the fifty states.” In re Sears, Roebuck & Co. Tools Mktg. and Sales Practices Litig., Nos. 05 C 4742, 05 C 2623, 2006 WL 3754823, at *1 n.3 (N.D. Ill. Dec. 18, 2006).  Here, Cephalon presented several bases upon which states’ laws conflict. For example, states apply various statutes of limitations to unjust enrichment claims. These differences meant that Plaintiffs’ claim for unjust enrichment  could withstand a statute of limitations defense in some jurisdictions but not in others, depending on the applicable law. A statute of limitations evidences a state’s policy interest in preventing litigation of delayed claims and preventing injustice by affording a defendant a fair opportunity to defend.

Additional variances in states’ unjust enrichment jurisprudence existed, including the availability of unjust enrichment as an independent cause of action, the need to show an absence of an adequate remedy at law, the requirement that a benefit be obtained at the direct expense of the plaintiff, the level of misconduct a plaintiff must prove, and the availability of defenses such as unclean hands and laches.  

Applying Pennsylvania's choice of law rules,most of the relevant factors weighed in favor of applying the laws of TPPs’ various home states, including the most important factors. See Restatement (Second) of Conflict of Laws § 221 cmt. d. Policy considerations also led to the same conclusion. Plaintiffs’ home states had a regulatory interest in providing redress to its citizens for acts of wrongdoing.

For the same reasons why an actual conflict existed among the unjust enrichment laws of the fifty states, individual issues of law predominated with regard to a nationwide class. In addition to proving different elements for all class members to establish unjust enrichment at trial, other individual issues that may predictably arise included the level of misconduct required to be proven and whether defendant might avail itself of particular defenses. 

Plaintiffs argued their smaller multi-state classes addressed this issue. Plaintiffs’ notable grouping efforts, however, still did not account for individual fact issues such that common issues predominated. “The polestar of the unjust enrichment inquiry is whether the defendant has been unjustly enriched[.]” Limbach Co., LLC v. City of Phila., 905 A.2d 567, 577 (Pa. Cmmw. Ct. 2006). Resolution to this question is, by nature, fact-sensitive. Id. Even if some common proof regarding equitable circumstances was present here, Plaintiff’s proposal to make a class-wide showing of whether Cephalon’s enrichment was unjust failed. Under an unjust enrichment theory, all facts and circumstances are considered to determine whether, without a remedy, inequity would result or persist. It is a physician’s prerogative whether to prescribe Actiq for any medical purpose, on-label or off. Physicians may have accounted for a number of factors in making their Actiq prescriptions, including their experiences with patients and their experiences with prescribing Actiq. See Ironworkers Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352, 1362 (11th Cir. 2011) (“Several considerations shape the physician’s medical judgment, including both individual patient concerns and drug-specific information regarding the propriety of a drug’s use for treatment of a patient’s given condition . . . The physician learns about a drug through multiple sources, only one of which might be the drug manufacturer’s promotions and literature.”  It was also uncontested that Actiq provided the benefit of effective pain relief to many who used it. If doctors would have written Actiq prescriptions regardless of the defendant's alleged acts, then payment for prescriptions beyond would not be unjust.  In sum, whether  payments for Actiq prescriptions resulted in "unjust" enrichment is a question resolved by examination into the actions not only of Cephalon, but also of individual payers  and prescribing doctors. See Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 611 (3d Cir. 2012).

The class also failed the superiority prong. Together with predominance, the superiority criterion is designed to “achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” Amchem Prods., Inc., 521 U.S. at 615 (quoting Fed. R. Civ. P. 23 advisory committee’s note). The Court here considered the factors enumerated in Rule 23(b)(3) for determining superiority:
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.

Here, the largest impediment to a finding of superiority was the difficulty of managing a class action in which the laws of plaintiffs' various home states applied and individual questions of fact predominated. Also, plaintiffs here were sophisticated institutional entities with an interest in controlling litigation when relatively large amounts of money are at stake.  Indeed, some putative absent class members had already filed suit based on Cephalon’s distribution of Actiq.

Motion for class certification denied.

Federal Court Denies Class Certification in "Smart Meter" Case

A Florida federal court recently denied class certification in a case alleging negligence against Honeywell  over its installation of smart electric meters at the homes of Florida Power & Light customers. See Cortes, et al. v. Honeywell Building Solutions SES Corporation, et al., No. 1:14-cv-20429 (S.D. Fla., Sept. 25. 2014). 

Plaintiffs alleged the meters were defective, damaging the connections and allegedly causing electrical arcing, which resulted in more extensive damage to items like pools and air conditioners. 
They sought certification of a class defined as “All Florida Power & Light customers in Florida who had a Smart Meter installed at their property after September, 2009 and who have suffered or will suffer unreimbursed economic loss arising from the defendant’s improper installation of the Smart Meter."

The court noted that, although the trial court should not determine the merits of the plaintiffs’ claim at the class certification stage, the trial court can and should consider the merits of the case to the degree necessary to determine whether the requirements of Rule 23 will be satisfied. Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 1188 n.15 (11th Cir. 2003).  Indeed, sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question; certification is proper only if the trial court is satisfied, after a rigorous analysis, that the
prerequisites of Rule 23 have been satisfied. Frequently that rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped.

Before analyzing the Rule 23(a) requirements, a court must determine whether the class definition is adequate. O’Neill v. The Home Depot U.S.A., Inc., 243 F.R.D. 469, 477 (S.D. Fla. 2006); see also Bussey v. Macon Cnty. Greyhound Park, Inc., 562 F. App’x 782, 787 (11th Cir. 2014).  A vague
class definition portends significant manageability problems for the court.  O’Neill, 243 F.R.D.
at 477. “An identifiable class exists if its members can be ascertained by reference to objective criteria."   The analysis of the objective criteria also should be administratively feasible, said the court. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual inquiry.  Bussey, 562 F. App’x at 787.

Defendants argued that membership in the proposed class required a determination whether the
Smart Meter was improperly installed; whether the customer had unreimbursed economic loss;
and whether the loss was caused by the improper installation. The court agreed that the proposed class definition impermissibly required a finding of liability and causation at the class certification stage. For the court to determine membership, it would also need to determine the validity of putative class members’ claims and defenses to those claims. The focus on individuals’ experiences — merely to determine membership in the class — would typically require the putative class members to self-report electrical problems started occurring after the Smart Meters were installed. As such, “the only evidence likely to be offered in many instances will be the putative class member’s uncorroborated claim that he or she” observed electrical problems after the Smart Meter installation. Perez v. Metabolife Int’l, Inc., 218 F.R.D. 262, 269 (S.D. Fla. 2003). This self-interested reporting, often unverifiable but for the Plaintiffs’ own testimony, implicates defendants’ due process rights, and “individualized mini-trials would be required even on the limited issue of class membership.” Id.  The repeated use of these procedures would result in inefficient resolution of the claims, defeating one of the central purposes of the class action tool. See McGuire v. Int’l Paper Co.,
1994 WL 261360, at *5 (S.D. Miss. Feb. 18, 1994).

The court also found the definition of the class impermissibly vague in its inclusion of “customers . . . who have suffered or will suffer unreimbursed economic loss . . . .”  Plaintiffs were requesting a class to be certified of individuals who, at any point in the future, may suffer economic losses as a result of the Smart Meter installations. Apart from the considerations of causation, this proposed subset of class membership was presently impossible to determine.

The court also questioned the showing of numerosity ( a somewhat rare gem for the class action defense reader). Plaintiffs made reference to 603 FPL customer inquiries involving alleged property damage related to Smart Meter installation, but they failed to indicate whether any of these 603 inquiries involve “unreimbursed economic loss,” a requirement contained in the proposed class definition. Plaintiffs then tried to point to evidence of a subset of customers who sought repairs following installation. But nothing in plaintiffs’ factual showing indicated these customers’ problems were caused by the Smart Meter installation — as opposed to any number of other factors — or, again, involved unreimbursed economic loss, two prerequisites to membership in the proposed class. Thus, said the court, these assertions did not come close to showing the number of plaintiffs is large enough to satisfy the numerosity requirement. See Hugh’s Concrete & Masonry Co. v. Southeast Pers. Leasing, Inc., No. 8:12-CV-2631-T-17AEP, 2014 WL 794317, at *2 (M.D. Fla. Feb. 26, 2014) (“[T]he Court cannot find Plaintiff’s bases for numerosity go beyond mere speculation, bare allegations, or unsupported conclusions. Thus, Plaintiff fails the numerosity requirement.”).


Turning to predominance under Rule 23(b)(3), under the law of the Eleventh Circuit, the combination of significant individualized questions going to liability and the need for individualized assessments of damages precludes Rule 23(b)(3) certification. In re Conagra Peanut Butter Products Liab. Litig., 251 F.R.D. 689, 698 (N.D. Ga. 2008).  As is typical, plaintiffs pointed to alleged common issues of defendant's conduct, such as training of employees on installation. While defendants may well have employed similar methods of training employees to install the Smart Meters, those actions were but one component of the tort inquiry. Plaintiffs also would need to prove a breach of duty, if any, was the proximate cause of the damages. The proximate cause determinations would predominate over the determination of the common issue of defendants’ alleged conduct, due to the numerous potential causes of meter can damage. The mere fact that installers were negligent in installations does not mean that negligence caused any damages. Even assuming negligence could be proven, plaintiffs “would still have the bulk of
their cases to prove,” namely injury in fact and causation. Neenan v. Carnival Corp., 199 F.R.D.
372, 376 (S.D. Fla. 2001); see also In re Agent Orange’ Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 165 (2d Cir. 1987) (“The relevant question, therefore, is not whether Agent Orange has the capacity to cause harm, . . . but whether it did cause harm and to whom. That determination is highly individualistic [] and depends upon the characteristics of individual plaintiffs (e.g. state of health, lifestyle) and the nature of their exposure . . . .”).  The fact-finder would still need to make specific determinations of proximate causation for additional plaintiffs, which would predominate over a class-wide determination of negligence.

Certification denied.

 

Motion to Strike Class Allegations Granted

Mercedes-Benz USA LLC made a successful preemptive strike against class certification in a proposed class action suit over alleged suspension problems in GL model Mercedes vehicles. See Becnel v. Mercedes-Benz USA, LLC, No. 2:14-cv-00003 (E.D. La., 6/3/14).

 

This matter arose from Plaintiff's claims for negligence, strict product liability, breach of implied warranty, fraud, and violations of the Louisiana Unfair Trade Practice Act,and the Magnuson-Moss Warranty Act. Plaintiff's claims arise from his purchase of a 2008 Mercedes-Benz GL320 from Mercedes-Benz of New Orleans.  Plaintiff brought the vehicle to the Dealer for service several times. Each time that Becnel tendered the vehicle to the Dealer, the Airmatic Suspension System allegedly was cited as the problem and was repaired. Plaintiff alleged that MBUSA knew that the Suspension System was defective but concealed that fact from current, future, and past owners and/or lessors of GL model vehicles. Plaintiff filed a class action complaint on January 2, 2014 against MBUSA on behalf of "[a]ll current and past owners or people who leased Mercedes-Benz USA, LLC GL model of vehicles since 2007."

Defendant moved to strike the class allegations. The standard applied to the motion to strike is essentially identical to the standard applied in class certification motions. See Grant,2010 WL 3303853; see also Markey v. Louisiana Citizens Fair Plan, 2008 WL 5427708 (E.D. La. Dec. 30, 2008)(Vance, J.) ; Truxillo v.Johnson & Johnson, et al., 2007 WL 4365439 *1 (E.D. La. Dec. 12, 2007)(Barbier, J.) (noting that the issues raised in a motion for judgment on the pleadings regarding class allegations overlap with the issues raised in a motion to certify the class.)

Defendant advanced several arguments in support of its motion to strike.   For example, MBUSA contended that due process barred the Court from applying Louisiana law to all the claims of absent class members from other states, and that the application of every other applicable state's laws would be unmanageable. Plaintiff suggested that this argument was premature. He argued that despite the potential for uncommon issues of law, it cannot be denied that there were some common issues of fact. Even if the Court would have to engage in a conflicts analysis to determine if the various state laws were incompatible, that only means that class certification may be improper further along in litigation, but was not improper now.

The court focused on the predominance and manageability challenges that were presented by the proposed class. The Court said it could not accept Plaintiff's assertion that he "cannot foresee any manageability problems." Based on the pleadings alone, the Court pointed to several issues: it was reasonable to assume that this matter will require the application of laws from fifty-one different jurisdictions, as it was readily apparent that at least one person from every state and the District of Columbia will be found to have purchased or leased a 2007 GL Class Mercedes. The Court anticipated serious manageability issues in applying these differing laws to Plaintiff's numerous state law causes of action, including claims for: negligence; products liability based on manufacturing defects, design defects, warning defects, and breach of express warranty; redhibition; fraudulent concealment; and unfair trade practices.

Additionally, Plaintiff, and presumably other class members, faced serious prescription.statute of limitations issues that would ultimately hinge on their ability to show that the discovery doctrine tolled the prescriptive period. The use of the discovery doctrine would necessarily involve the task of determining at what time it became unreasonable for each class member to ignore the problems with the vehicles at issue. See Chevron USA, Inc. v. Aker Mar., Inc., 604 F.3d 888, 893-94(5th Cir. 2010) (noting that in such cases, "the prescriptive period [does] not begin to run until [a plaintiff has] a reasonable basis to pursue a claim against a specific defendant.") The same issue would present itself with regard to the fraud claims, in that the Court would have to determine the element of reliance for each and every class member. See Castano, 84 F.3d at 745 ("fraud class action cannot be certified when individual reliance will be an issue.")

These serious manageability problems far outweighed any benefit that a class action would create, said the court. Plaintiff conclusorily pointed to the usual presumed benefits highlighted in class certification motions, but did not propose any concrete strategy for achieving these goals. In light of the manageability issues. The Court said it could not imagine that that the many issues that would require individual treatment for each class member would not outweigh or at least balance out any benefit conferred by class treatment.

Motion to strike granted.

 

Class Certification Denied in BPA Litigation

A Missouri federal court last week denied the class certification motion of consumers suing defendants in the multi-district litigation over the use of bisphenol-A in baby bottles and sippy cups. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 4:08-md-01967 (W.D. Mo.).

As we have posted before, the federal judge in the MDL involving BPA in baby bottles refused last Summer to certify three proposed multistate classes in this multidistrict litigation. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 08-1967 (W. D. Mo. July 7, 2011).   That decision offered an interesting discussion of choice of law, and of the notion of commonality after Dukes v. Walmart, and included an important reminder that while individual issues relating to damages do not automatically bar certification, they also are not to be ignored. E.g., In re St. Jude Medical, Inc., 522 F.3d 836, 840-41 (8th Cir. 2008) (individual issues related to appropriate remedy considered in evaluating predominance); Owner-Operator Independent Drivers Ass’n, Inc. v. New Prime, Inc., 339 F.3d 1001, 1012 (8th Cir. 2003), cert. denied, 541 U.S. 973 (2004) (individual issues related to damages predominated over common issues); see also In re Wilborn, 609 F.3d 748, 755 (5th Cir. 2010).

The court gave plaintiffs an opportunity to show that a class of Missouri-only consumers should be certified, and plaintiffs then moved for certification of three classes of Missouri consumers. Plaintiffs alleged three causes of action: violation of the Missouri Merchandising Practices Act (MMPA), breach of the implied warranty of merchantability, and unjust enrichment.

The court focused first on standing. A court may not certify a class if it contains members who lack
standing. In re Zurn Pex Plumbing Products Liability Litigation, 644 F.3d 604, 616 (8th Cir. 2011). Plaintiffs’ proposed classes here could not be certified because they included individuals who had not suffered an injury-in-fact.  Individuals who knew about BPA’s existence and the surrounding controversy before purchasing defendants’ products had no injury. There was a potential for the proposed classes to include a large number of such uninjured consumers. Plaintiffs admitted that parents often carefully research baby care product purchases, and defendants submitted proof that information regarding BPA was in the media (including popular press such as "20/20") as early as 1999.

The opinion also offers an instructive discussion of reliance. Plaintiffs argued the issue of knowledge goes only to consumers’ reliance on defendants’ alleged nondisclosure, and plaintiffs always contend reliance is not an element of their consumer fraud claims. The court explained that the hypothetical posed by the question of reliance – whether the plaintiff would have purchased the product if she/he had known – presupposes the consumer did not know the relevant information. Thus, the question of knowledge logically precedes the question of reliance.

Even consumers who were unaware of BPA when they purchased defendants’ products may not have suffered an injury. Consumers who fully used defendants’ baby bottles and other products without physical harm before learning about BPA suffered no injury, and could not assert a claim under consumer protection statutes or for breach of warranty. Plaintiffs asserted that none of the proposed class members received what they intended to obtain, because plaintiffs were not provided material information before making their purchases. But plaintiffs were bargaining for baby products at the time of transaction, not for a certain type of information. Those who fully used the products before learning about BPA would have received 100% use (and benefit) from the products.

In the Rule 23 analysis proper, the court also noted that plaintiffs’ proof of what defendants failed to disclose would not be common for all class members, at least with respect to the scientific debate concerning BPA. Class-wide evidence cannot be used to show what defendants knew or should have known because their knowledge and the available information about BPA changed during the
class period. Plaintiffs' proposed trial plan stated they intended to show defendants' alleged awareness and nondisclosure of various scientific studies from 1997 to at least 2006.

The court's observation on materiality is also worth noting. A material fact for state consumer fraud liability includes a fact which a reasonable consumer would likely consider to be important in making a purchasing decision.  Even if this is an objective inquiry, that does not mean it can always be proven with class-wide evidence. A 2006 study allegedly showing BPA's effect on the endocrine systems of snails, even if material, would not be probative of defendants' liability in 2002. Similarly, a reasonable consumer may be less likely to consider a scientific study from 1997 significant if that consumer learned that federal agencies over the years – the FDA in particular – considered that study, and nevertheless still concluded BPA could be safely used to make baby products.

Finally, the court considered superiority and manageability, with a key issue of concern how to determine who was in the class (some courts do this analysis under the ascertainability rubric). Identifying himself or herself as a purchaser would not prove a person is in the class. A plaintiff in a typical case is not allowed to establish an element of a defendant’s liability merely by completing an affidavit swearing the element is satisfied, and this should be no different for a class action.  Defendants would be entitled to cross-examine each and every alleged class member regarding his or her memory and story.

For all these reasons, class certification denied.