These days, the common offshoot of a manufacturer's settlement with a regulator or an attorney general is a wave of copycat lawsuits brought by lawyers who merely duplicate the allegations in the plea agreement or the government's case and paste them willy-nilly into a class action complaint. Often, these lawyers have not even gone to the trouble of finding plaintiffs who can support the allegations with respect to the products at issue. And when the defendant moves to dismiss, as defendants inevitably do, the retort is typically something like: "They paid lots of money in fines to the government, so there simply must be a class action here."
Recently, some of my colleagues at my firm succeeded in obtaining the dismissal of a class action that had followed on the heels of a settlement with the government. See Zafarana v. Pfizer Inc., Civ. A. No. 09-cv-4026 (E.D. Pa. July 19, 2010).
In Zafarana, the manufacturer of prescription medicines had settled with the US Department of Justice allegations that it had engaged in various unlawful methods of promoting 12 of its medicines for so-called "off-label uses," i.e., uses that had not yet been approved by the Food and Drug Administration. The settlement had involved a fine that was reported to be over $2 billion.
Of course, regular readers of this blog know that it is not illegal for doctors to prescribe medicines for off-label uses. In fact, they do so all of the time. Accordingly, the fact that a manufacturer may violate the Food, Drug, and Cosmetics Act in promoting a medicine for an unapproved use does not mean that people necessarily have been injured by such conduct. Indeed, the use of medicines for off-label purposes can be standard medical care for certain health conditions.
In Zafarana, after the defendant's settlement with the government, two plaintiffs sued the defendant in a copycat class action, claiming to represent all people who had ingested all 12 of the medicines covered by the settlement. (Of course, the two plaintiffs had not themselves ingested all 12 medicines and thus could not possibly be class representatives for the medicines they had not taken themselves.)
Plaintiff Zafarana had taken the medicine Lyrica for roughly a year for the off-label purpose of treating idiopathic torticollis. She pled that she received no medical benefit from the medicine and suffered two of its side effects: weight gain and blurred vision. She also alleged that she paid more for Lyrica than an alternative treatment of Tylenol and stretching.
Plaintiff Dumville had taken Geodon for a short, undisclosed period of time for the off-label purpose of treating his depression. (Geodon had been approved by the FDA to treat schizophrenia.) He alleged that he received no benefit from the medicine and immediately stopped taking it because of "a number of severe side effects." He also alleged that there were cheaper alternative treatments.
Plaintiffs alleged violations of various states' consumer protection statutes, "conspiracy/concert of action/aiding and abetting," and unjust enrichment.
The District Court began by considering the defendant's argument that the lawsuit was really just an attempt to enforce the FDCA. There is no private right of action in the FDCA. The District Court ultimately rejected this argument, finding that plaintiffs could sue on independent state law causes of action that were not merely premised on FDCA violations.
The court also rejected the defendant's argument that the case was barred by the statute of limitations, reasoning that there was an issue of fact as to the "discovery rule," i.e., when plaintiffs knew or should have known that they had a cause of action. Notably, the court held that fraudulent concealment would have been unavailable to toll the statute of limitations because the complaint did not point to any separate act of fraud committed by the defendant to conceal the injury. Slip op. at 14.
The court next analyzed the amended complaint count by count. Plaintiff Zafarana was a New Jersey resident and had sued under New Jersey's Consumer Fraud Act (the "NJCFA"). The defendant argued that her claim was barred by the New Jersey Product Liability Act (the "NJPLA"), which applies to any claim for personal injury or property damage allegedly caused by a product. Analyzing the terms of the statutes, the court concluded that Ms. Zafarana's NJCFA claims that the medicine did not cure her health problems and that it caused side effects were barred by the NJPLA. However, the court held that the NJCFA claim that she paid more for Lyrica than she should have was not barred by the NJPLA because it did not involve personal injury or property damage.
Ultimately, however, the court held that the "inflated cost" claim was barred by the terms of the NJCFA because it failed to allege in the amended complaint an "ascertainable loss" that was "caused by" the challenged conduct. The court noted that New Jersey's Supreme Court has rejected a fraud-on-the-market theory, and thus plaintiff must plead a real loss and that the loss was caused by the defendant's conduct. Ms. Zafarana did not do this:
Plaintiffs, however, simply have not stated any facts that make it plausible that a less expensive alternative would have been prescribed. Plaintiffs seem to ignore the role played by the prescribing physician in this case. They have not stated, and likely cannot state, that they would have been prescribed other, less costly medications, but only that they could have been prescribed such medications. It is also true, however, that they could have been prescribed a more expensive medication, or a combination of other medications that , while individually less expensive, were cumulatively more expensive. Due to the discretion of the prescribing physician, the injury alleged is entirely hypothetical, and cannot provide the basis for a claim under the NJCFA.
Slip op. at 20.
Analyzing Plaintiff Dumville's statutory claim, the court first had to determine what law applied. Although Dumville was now a resident of Wisconsin, he was treated and consumed the product in Pennsylvania. Thus, Wisconsin's consumer fraud statute was irrelevant; the court applied Pennsylvania's instead.
Pennsylvania's Unfair Trade Practices and Consumer Protection Law (the "UTPCPL") also requires plaintiff to plead an ascertainable loss "as a result of" the allegedly deceptive conduct. The court held that Mr. Dumville had failed to plead causation because he could not establish his own justifiable reliance on the defendant's statements -- as required by Pennsylvania courts interpreting the statute -- because of the role of the prescribing doctor as a learned intermediary. Slip op. at 23-24.
The District Court made quick work of plaintiffs' conspiracy allegations. The court rejected the claims under New Jersey and Pennsylvania law, respectively, because the complaint failed to plead an underlying independent cause of action, which is required for civil conspiracy claims. Moreover, Pennsylvania requires that the conspiracy have as its sole purpose injuring the plaintiffs; plaintiffs could not plead that the defendant's sole purpose in engaging in the challenged conduct was to injure them. Rather, they had alleged the defendant had a profit motive for promoting the off-label use of its products.
The court similarly dismissed the "aiding and abetting" causes of action. There is no such cause of action for aiding and abetting fraud under Pennsylvania law. And in New Jersey, to the extent there is one, the aidor and abettor must be supporting the commission of an underlying tort, which the court held was not properly pled in the amended complaint. Slip op. at 28.
Finally, the court rejected plaintiffs' unjust enrichment claims. First, it noted that unjust enrichment is not a substitute for a tort claim, and where there is no underlying tort, there can be no unjust enrichment. Second, the court observed that there was no direct relationship between the manufacturer and the plaintiff-patients, making this a particularly inappropriate instance in which to create quasi-contract liability.
Notably, the court rejected plaintiffs' request for leave to amend the complaint. It observed that plaintiffs already had amended the complaint after the defendant filed the first motion to dismiss. Indeed, they added over 140 pages to the complaint, to bring it to a whopping 178 pages. Moreover, the court concluded there simply was nothing more plaintiffs could add that would give rise to a claim.
The Zafarana decision is an important reminder that just because a manufacturer may settle a qui tam claim with the government, that does not automatically mean that the manufacturer should be subject to civil liability in a class action. In such situations the individual claims still deserve close scrutiny. Where, as in Zafarana, they fail to causally connect any harm to the alleged misconduct, they should be dismissed.
