Consumer Class Actions and Mass Torts : Class Action Lawyer & Attorney : J. Russell Jackson : Skadden Law Firm : Complex Class Actions : Consumer Class Actions & Mass Torts Law Blog

I've previously opined on this blog and elsewhere that global warming litigation -- at least cases in which individuals seek damages from companies that emit greenhouse gasses -- has no leg to stand on because causation is so attenuated and the issue is tied up with important political questions that are committed to the expertise of federal agencies like the EPA, as well as Congress.

My viewpoint was confirmed a few years ago in a case called Comer, in which a Mississippi federal court dismissed a class action filed by Hurricane Katrina victims who sought to blame their loss on various energy and mining companies.  The trial court had held that the chain of causation was too attenuated to confer constitutional standing on the plaintiffs, and it further held that the case should be dismissed under the political question doctrine because it required the federal court to decide policy questions about greenhouse gas emissions that were committed to the province of the political branches.

Comer had a curious subsequent history.  Plaintiffs appealed to the Fifth Circuit, where they won a partial victory, with the appellate court reversing the judgment on the state law claims of public and private nuisance, trespass, and negligence.  The defendants, however, petitioned for rehearing en banc, and the Fifth Circuit granted the petition and vacated the three-judge panel's decision.  Then, a Fifth Circuit judge was recused, resulting in the loss of a quorum for an en banc panel to act.  The Fifth Circuit thus dismissed the appeal and reinstated the District Court's opinion.  Plaintiffs did not petition the U.S. Supreme Court for certiorari, but instead petitioned for a writ of mandamus to require the Fifth Circuit to reinstate the appeal.  The Supreme Court denied plaintiffs' petition, and thus the District Court's opinion dismissing the lawsuit remained the law of the case.

In May 2011, Ned Comer and the other plaintiffs filed a virtually identical lawsuit in the same District Court asserting the causes of action the three-judge panel had said should have been remanded:  public and private nuisance, trespass, and negligence.  Plaintiffs sued the same defendants, and added a few more.  Feeling as if it was Groundhog's Day, the defendants once again moved to dismiss.

Yesterday the court issued an opinion unsurprisingly granting the defendants' motion to dismiss.  See Comer v. Murphy Oil USA, Inc., No. 1:11CV220-LG-RHW, Slip op. (S.D. Miss. Mar. 20, 2012).  The court's primary holding is that the suit is barred by the doctrines of res judicata and collateral estoppel.  The 11 plaintiffs in Comer I are the same plaintiffs who have brought Comer II.  The district court's order in Comer I was a final order dismissing the case for lack of jurisdiction, which is a decision on the merits for the purposes of res judicata.  Plaintiffs had a full and fair opportunity to argue the issue in the first suit.  The two suits involve the same "transaction," namely damages arising out of the occurrence of Hurricane Katrina.  Moreover, the admitted purpose of the second lawsuit is to convince the court that it was wrong in the first lawsuit.

The district court's res judicata holding should have ended the issue.  However the court, "out of an abundance of caution," went on to address the defendants' additional arguments.

The court held that plaintiffs lacked Article III standing to assert their state law claims.  The court focused on the causation element of the standing inquiry.  It noted that the U.S. Supreme Court found that a state had standing to bring a lawsuit to force the EPA to issue greenhouse gas regulations in Massachusetts v. EPA, 549 U.S. 497 (2007).  However, the Supreme Court gave special deference to a state  suing in its capacity as a quasi-sovereign, and expressly reserved the question of whether an individual would have standing to bring a global warming claim.  Moreover, the Supreme Court had acknowledged that causation regarding greenhouse gases emissions was a difficult global problem, and that any domestic reductions in emissions likely would be offset by increases in developing countries.

The district court also observed that in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527 (2011), the Supreme Court was equally divided on the question whether states had standing to file lawsuits against corporations to reduce greenhouse gas emissions, and it expressly reserved the question whether individuals could assert such standing.

The plaintiffs in Comer II relied on authorities under the Clean Water Act finding standing where the defendants were merely alleged to have contributed to plaintiffs' injuries.  The district court distinguished their authorities, relying in part on Native Village of Kivalina v. Exxonmobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009), which had explained that CWA cases only find "contribution" standing where a presumption of standing arises as a result of a defendant's violation of federally-mandated pollution limits.  Where, as here, there is no such federally-mandated limit on greenhouse gases (and thus no such violation), no presumption can arise.  Moreover, even the CWA cases recognized that a point of discharge can be too remote from the plaintiff's injury to be legally recognized as a contributing cause.  See slip op. at 21-22 (citing Friends of the Earth, Inc. v. Crown Cent. Petrol. Corp., 95 F.3d 358 (5th Cir. 1996) (plaintiffs whose injury was 18 miles from discharge did not have standing to sue over the discharge)).

Ultimately, the Comer II court recognized, even plaintiffs admit that global warming is attributable to numerous natural and man-made causes that interact cumulatively over the period of centuries to create climate effects:

The plaintiffs cannot allege that the defendants' particular emissions led to their property damage.  At most, the plaintiffs can argue that the types of emissions released by the defendants, when combined with similar emissions released over an extended period of time by innumerable manmade and naturally-occurring sources encompassing the entire planet, may have contributed to global warming, which caused sea temperatures to rise, which in turn caused glaciers and icebergs to melt, which caused sea levels to rise, which may have strengthened Hurricane Katrina, which damaged the plaintiffs' property.

It is insufficient for the plaintiffs to allege that the defendants' emissions contributed to the kinds of injuries that they suffered.

Slip op. at 20-21.  The court concluded that such tenuous causation should not allow plaintiffs to send the defendants on a discovery odyssey "that will likely cost millions of dollars."

The district court in Comer II also held that plaintiffs' claims were non-justiciable under the political question doctrine as established in Baker v. Carr.  Plaintiffs argued that Massachusetts v. EPA had rejected that argument.  But the district court held that Massachusetts v. EPA was fundamentally different because it involved the proper construction of a congressional statute.  Here, the policy judgments regarding greenhouse gas emission levels were expressly committed to the EPA.  Indeed, the district court noted, the Supreme Court had stated "that it possessed neither the expertise nor the authority to evaluate the policy judgments that EPA offered as justification for refusing to regulate motor vehicle emissions, such as issues involving foreign relations."  Slip op. at 26.  The Comer II court concluded:

[T]he plaintiffs are asking the Court, or more specifically a jury, to determine without the benefit of legislative or administrative regulation, whether the defendants' emissions are "unreasonable."  Simply looking to the standards established by the Mississippi courts for analyzing nuisance, trespass, and negligence claims would not provide sufficient guidance to the Court or a jury. . . .

. . . The Supreme Court held that judgments concerning the reasonableness of greenhouse gas emissions are properly committed to the EPA, and if district courts were to make such judgments, those judgments would interfere and potentially conflict with the EPA's actions.

. . . The Court finds that the claims presented by the plaintiffs constitute non-justiciable political questions, because there are no judicially discoverable and manageable standards for resolving the issues presented, and because the case would require the Court to make initial policy determinations that have been entrusted to the EPA by Congress.

Slip op. at 28-29.

The district court in Comer II also concluded that plaintiffs' state law causes of action are preempted by the Clean Air Act and the EPA actions that it authorizes, relying primarily on American Electric Power Company v. Connecticut.  That case had held that the CAA preempted a federal common law right to seek abatement of carbon dioxide emissions from power plants.  The Comer II court reasoned that plaintiffs' state law claims here required the court to do the same thing the federal common law claim would have in Connecticut:  determine the reasonableness of the defendants' greenhouse gas emissions.  Accordingly, it held that the state law claims were similarly preempted.

The district court in Comer II also held that plaintiffs' claims were barred by Mississippi's three-year statute of limitations.  Katrina had hit in 2005, but the lawsuit was filed in 2011.  Plaintiffs argued that Mississippi's savings statute operated to toll the statute of limitations.  The savings statute gives a plaintiff a year to commence a new suit where the prior suit has been dismissed or abated because of a defect or other matter not affecting the merits.

The district court held the savings statute did not apply because there was a judgment of dismissal with prejudice entered in Comer I.  Plaintiffs could have asked the U.S. Supreme Court for a writ of certiorari, but they did not.  Accordingly, the judgment was final.

There is, however, a slim reed of hope for plaintiffs to file a Comer III.  In ruling on the statute of limitations, the court concluded that plaintiffs' allegations about their future risk for more severe storms and loss of property are not yet actionable, in part because plaintiffs did not seek injunctive relief.  "As a result, the Court finds that the only actionable claims filed by the plaintiffs are the claims concerning Hurricane Katrina, and those claims are barred by the statute of limitations."  Slip op. at 33.  Could another storm or another theory of injury produce a Comer III?  It shouldn't.  But with these Plaintiffs, who knows?

Finally, the district court granted the defendants' motion to dismiss regarding proximate cause, which is a required element of each of plaintiffs' state law claims.  Mississippi defines proximate cause as a cause "'which in natural and continuous sequence unbroken by any efficient intervening cause produces the injury and without which the result would not have occurred.'"  Slip op. at 34 (citation omitted).  The court held that plaintiffs' theory couldn't meet this standard as a matter of law:

The assertion that the defendants' emissions combined over a period of decades or centuries with other natural and man-made gases to cause or strengthen a hurricane and damage personal property is precisely the type of remote, improbable, and extraordinary occurrence that is excluded from liability.

Slip op. at 35.

Judge Louis Guirola's opinion in Comer II is a strong reminder of the many difficulties that private plaintiffs would have trying to impose legal liability on companies for the purported effects of global warming.  Although I do not expect plaintiffs' counsel to simply vacate the field in the wake of this opinion, the strength of the arguments against liability suggest why there has been no great rush of firms to file suits asserting these theories of liability.

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As a kid, I was a huge fan of Carnac the Magnificent on Johnny Carson's Tonight Show.  In this first post of the new year, I thought I would channel my inner Carnac to make some predictions about what we can expect in the field of consumer class actions and mass torts in 2012.

1.  Wal-Mart v. Dukes will have tremendous impact on consumer class actions and mass torts.  Despite plaintiffs' attempts to limit the opinion solely to employment discrimination cases, the actual holdings in Dukes go to the fundamental core of class actions.  A unanimous Court said you can't deprive a defendant of its substantive right to challenge the elements of individual class members' claims just to make it easier to have a class.  Similarly, a unanimous Court strongly suggested -- even if the 8th Circuit didn't get it -- that Daubert rules matter at the class cert stage.  And a unanimous Court rejected the use of "trial by formula" rather than proof of actual damages.  These holdings are just as important -- if not moreso -- as the Court's articulation of the commonality standard, and you will begin to see the impact of these Dukes holdings in consumer class action cases this year.

2.  So many courts -- primarily in California -- have struggled to get around the clear preemption analysis in AT&T Mobility v. Concepcion that the U.S. Supreme Court is going to have to take up the issue of class arbitration waivers again.  It may not happen by the end of 2012, but too many courts have shot the bird to the Supremes since Concepcion.  Some argue that the decision does not apply to a particular cause of action under a state statute.  Others just find the whole arbitration provision containing a class action waiver void as against public policy.  But the simple fact is that it is nearly impossible to square these opinions with the very clear preemption analysis in Concepcion, and in the right case, the Court is going to have to issue certiorari to say that it really meant what it said.

3.  Courts may struggle for the right standard by which to judge personal jurisdiction, but plain ole stream-of-commerce theory is dead.  A majority of justices made that much plain in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).  They just couldn't agree on a new standard.  But we know there must be some purposeful availment in addition to mere awareness that the product might reach the forum.  I believe most courts that find jurisdiction will rely on web presence in the forum as the "plus" factor that shows purposeful availment of the forum's laws.

4.  Prescription medicine plaintiffs will continue to cast their plain old failure to warn claims as "design defect" claims to try to get around the clear bar of the learned intermediary doctrine.  Hopefully, most courts will continue to recognize that medicines are unavoidably unsafe products for which you cannot have a design defect claim.  Indeed, you can't even propose a feasible alternative design, because to do so is to change the product into something else!

5.  Global warming lawsuits seeking to foist on certain industries humanity's collective responsibility for climate change will continue, but the defenses of standing, remoteness, proximate cause and the political question doctrine will continue to be strong defenses.  Because the Supremes dealt only with federal law issues in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527 (2011), courts will still have to work these issues out as matters of state law.  We can expect plaintiffs to win at least one of these cases at a trial court level.  But the sheer magnitude of how far they are attempting to stretch state law should cause appellate courts to be more circumspect.

6.  Product sellers from tobacco to telephones will continue to vigorously defend their commercial speech rights under the First Amendment.  Appellate courts will grapple with these sellers' rights to not be forced to convey government messages about their products where there are other, less intrusive means of achieving the government's purpose.

7.  Plaintiffs will attempt to circumvent the federal preemption for generic medicines recognized in Pliva, Inc. v. Mensing, 131 S. Ct. 2567 (2011), by trying to describe various claims -- such as express warranty claims -- as enforcing voluntarily adopted standards, rather than imposing state law requirements that conflict with federal law.  Plaintiffs will be hard-pressed to succeed on such dubious claims for at least two reasons.  First, the statements they point to will be consistent with what FDA has approved for the label, making plaintiffs' claims conflict with federal law.  And second, it will be very difficult to find statements that were actually material and became part of the basis of the bargain.

8.  The food and beverage industries are going to continue to be a primary target for consumer fraud claims.  Often these suits are fueled by health claims in advertising or on the label.  But increasingly such suits are being brought based on an ingredient in the product.  Although FDA has balked at issuing regulations that fully define when products may be labeled "natural," it has begun enforcement actions against products that use the term and contain synthetic preservatives or other synthetic ingredients.  Expect more of such consumer fraud class actions in 2012.

9.  Although class action suits over head injuries in professional football players may capture the imagination of sports writers and the public, the fact remains that class actions for personal injuries are almost never certified because the individualized issues regarding each class member's alleged injury, causation, and damages predominate over any common issues.  Don't expect 2012 to bring a big class action payday for professional footballers who allege concussion-related harm.

10.  The U.S. Supreme Court's majority and dissenting opinions in Kiobel v. Royal Dutch Petroleum, No. 10-1491, are going to be fascinating reading.  Kiobel, of course, raises the issue of whether legally fictitious entities -- corporations, rather than individuals or Nation-States -- can be sued under the Alien Tort Statute, which dates back to 1789.  The Second Circuit -- looking around the globe to foreign legal precedents -- held that corporations were not subject to ATS suits.  One may imagine that certain Justices who might concur in that result might bristle at relying on foreign legal precedents to get there.  While I'm willing to bet that the result in Kiobel is affirmed, I'll honestly admit that I can't predict what the opinion(s) will look like in reaching that result.

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Reading a decision from the West Virginia Supreme Court often is like taking Mr. Toad's Wild Ride; you just never know where you might end up.  Last Friday's decision in White v. Wyeth, No. 35296, Slip Op. (W. Va. Dec. 17, 2010), is no different.

The West Virginia Supremes are the gang that not long ago rejected the traditional learned intermediary doctrine, holding instead that manufacturers of medicines have a duty to warn patients directly of the medicine's potential side effects.  See State ex rel. Johnson & Johnson Corp. v. Karl, 647 S.E.2d 899 (W. Va. 2007).

So one can be forgiven for being less than optimistic when hearing that the West Virginia Supremes, in a prescription hormone therapy class action, decided whether the plaintiffs had to demonstrate that they had relied on the alleged consumer fraud to their detriment in bringing a claim under West Virginia's Consumer Protection Act. 

As readers of this blog know, most states' consumer protection acts require the plaintiff to connect his or her injury to the defendant's allegedly deceptive activity.  Folks have different names for that requirement.  Some call it "reliance."  Others call it "causation."  But the bottom line is that the plaintiff cannot receive damages merely by proving that the conduct is allegedly deceptive; he or she must have actually been injured by it.

I'll admit, as I sank into my club chair with my afghan and hot cocoa with peppermint to read this decision, I was expecting the West Virginia Supremes to join the fringe decisions -- like the Ninth Circuit's decision in Yokoyama -- that read the causation requirement right out of the statute.  Boy, was I wrong!  Instead, here's what they did.

First, the court quoted the statute it was interpreting:

Any person who purchases . . . goods . . . and thereby suffers any ascertainable loss of money or property . . . as a result of the use or employment by another person of a method, act or practice prohibited or declared to be unlawful by the provisions of this article . . . may bring . . . [a civil] action . . . to recover actual damages or two hundred dollars, whichever is greater.

Slip op. at 2.  The fundamental question was what does the "as a result of language" require the plaintiff to allege and prove?  Reliance?  Or something else?  It was undisputed that the complaint did not allege that any of the plaintiffs or their doctors ever received, read, or relied upon the defendants' alleged misrepresentations about hormone therapy.

Plaintiffs argued that there was no reliance/causation requirement because elsewhere the statute defined deceptive practices as the "concealment, suppression, or omission of any material fact" with the intent that others rely on it "whether or not any person has in fact been misled, deceived or damaged thereby."  Slip op. at 8-9.

But as I had noted in response to Yokoyama, state consumer protection statutes were adopted in the late 1960s and early 1970s when people believed the FTC did not have enough resources to police consumer fraud.  They were modeled, in large part, on the FTC Act and various proposed uniform statutes.  But one HUGE difference between the FTC Act and state consumer protection statutes was that, for the most part, the state statutes gave individual citizens a private right of action.  (The FTC Act does not; enforcement power lies only with the FTC.)  Typically, that private right of action in state statutes was limited -- individuals could not sue to enjoin deceptive activity (that power was usually reserved to state authorities), but individuals could sue where they had suffered actual loss as a direct result of the allegedly deceptive conduct.  

This division of authority has important implications.  State authorities can sue to enjoin "deceptive activity" without having to prove that a single person lost money, so long as the activity is deceptive.  But individuals, who do not have that power, are bound by notions of constitutional standing to have an injury that was caused by the defendant's conduct.  Thus, in the clauses where a private right of action is created, the statute typically requires a loss of money or property "as a result of" the deceptive conduct.  This causation requirement is not just a statutory pre-requisite; in many states it is a constitutional precondition to having standing to sue.

The West Virginia Supremes recognized the standing requirements inherent in the Consumer Protection Act.  Slip op. at 12-13.  And it looked to what other states with similar language had held in interpreting their statutes.  Id. at 15-16.  The court recognized the interconnectedness of the concepts of "reliance" and "causation."  And it articulated a rule that will apply in other Consumer Protection Act cases in West Virginia:

[W]hen consumers allege that a purchase was made because of an express or affirmative misrepresentation, the causal connection between the deceptive conduct and the loss would necessarily include proof of reliance on those overt misrepresentations.  Where concealment, suppression or omission is alleged, and proving reliance is an impossibility, the causal connection between the deceptive act and the ascertainable loss is established by presentation of facts showing that the deceptive conduct was the proximate cause of the loss.  In other words, the facts have to establish that "but for" the deceptive conduct or practice a reasonable consumer would not have purchased the product and incurred the ascertainable loss. . . . Thus, a private cause of action under [the Consumer Protection Act] must allege:  (1) unlawful conduct by a seller; (2) an ascertainable loss on the part of the consumer; and (3) proof of a causal connection between the alleged unlawful conduct and the consumer's ascertainable loss.  Where the deceptive conduct or practice alleged involves affirmative misrepresentations, reliance on such misrepresentations must be proven in order to satisfy the requisite causal connection.

Slip op. at 17-18 (citations omitted).

So far, so good, right?  Well, after I read the next three pages of the opinion, you could've knocked me over with a feather.  The court concluded that West Virginia's Consumer Protection Act did not apply to the transaction at issue in White:  the purchase of prescription pharmaceuticals.  As the court explained it, "we are simply not convinced that a causal connection exists within the context of prescription drug purchases" because "the consumer can not and does not decide what product to purchase."  Slip op. at 18.  Citing a New Jersey case, the court reasoned that doctors make the prescription decision.  And citing a law review article by Victor Schwartz, the court noted that the high degree of federal regulation of prescription medicines means that the fundamental "gap-filling" purpose behind the Consumer Protection Act is absent.  Id. at 19.  The court then held:

[F]or the reasons stated above, we find that the private cause of action afforded consumers under West Virginia Code sec. 46A-6-106(a) does not extend to prescription drug purchases.  But see State ex rel. Johnson & Johnson Corp. v. Karl, 220 W. Va. 463, 647 S.E.2d 899 (duty of drug manufacturers to warn in context of product liability cases).  Consequently, upon remand of this case, an order of dismissal should be entered in keeping with this new point of law.

Id. at 19-20.

So just to recap, in West Virginia, the Consumer Protection Act does not apply to prescription products because of the physician's role in prescribing the medicine and the federal regulatory oversight of the medicine.  But, the prescription product manufacturer can be held liable for a failure to warn despite it having warned the physician of all potential side effects included in an FDA-approved package insert.

Wild and Wonderful . . . West Virginia.

The White decision was issued without dissent.  Two justices -- Chief Justice Davis and Justice Workman -- were disqualified and were replaced by judges sitting by temporary assignment.  Justice McHugh delivered the opinion of the court.

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My firm is involved in this case, so I'll stick to strict reporting, but last Friday the Neurontin MDL transferee issued an opinion granting summary judgment on the claims of a number of third party payors, as well as many (but not all) individual claimants.  See In re Neurontin Marketing and Sales Practices Litigation, MDL No. 1629, Civ. A. No. 04-cv-10891-PBS, slip op. (D. Mass. Dec. 10, 2010).

The plaintiffs in the case are so-called "third party payors" (or "TPPs") -- health and benefit funds, mostly -- who allegedly paid for their members' prescriptions for the anti-convulsant medicine Neurontin.  There are also some individual plaintiffs in the cases who actually used the medicine. 

The TPPs allege that the defendant engaged in consumer fraud and RICO violations by allegedly promoting Neurontin for off-label uses, such as pain management, thus allegedly causing the TPPs to pay for prescriptions that were not beneficial to the patients.  The individual plaintiffs claim their doctors would not have prescribed Neurontin to them if the defendants had not engaged in certain alleged misrepresentations about off-label uses of the medicine.  All of the plaintiffs seek to be reimbursed for the amounts they spent on Neurontin.

The defendants had moved for summary judgment, arguing, inter alia, that plaintiffs did not create a triable issue of fact as to causation.

The court granted summary judgment against each of the TPPs that the defendants had moved against.  (There was one other TPP that had alleged it directly received and relied on misrepresentations, and it had tried its claim to a plaintiff's verdict.)  In analyzing the summary judgment motion, the court first noted that, to establish a RICO violation, "plaintiffs must show both that defendants' mail or wire fraud in violation of the racketeering statute was a 'but for' cause of their injuries as well as a proximate cause."  Slip op. at 21 (citations omitted).  The TPPs pointed to aggregated proof that after doctors were approached by salespeople about the medicine, prescriptions rose significantly.  But the TPPs could not show which prescriptions were for off-label use, and they could not show which prescriptions were caused by misrepresentations and which were not.

(As we have noted before, off-label use of a medicine can be beneficial.  Doctors are allowed to prescribe medicines for uses that are not yet approved by the FDA, relying on such things as their patients' experience, the experience of colleagues in the medical community, and the available medical literature.)

The court followed the strong body of precedents that reject aggregate proof that does not address causation individually and specifically:

However, the Class TPP Plaintiffs have put forth no evidence as to which, if any, doctors were tainted by misleading information like 'Dear Doctor' letters or other marketing material.  There is no evidence in the record that any of the Class TPP Plaintiffs communicated directly with Pfizer in the development or evaluation of a drug formulary.

. . . [Merely correlating promotional spending to prescriptions] does not suffice to demonstrate the extent of harm caused by the fraud, as opposed to run-of-the-mill off-label detailing.  Most courts have rejected such aggregate proof.  The Second Circuit recently held, in a class action regarding sales and marketing of the drug Zyprexa, that where 'plaintiffs allege an injury that is caused by physicians relying on [a pharmaceutical company's] misrepresentations,' the injury cannot be shown by generalized proof. . . .

Because the Class TPP Plaintiffs have not directly relied on misrepresentations by defendants, and because they  have presented no evidence as to how many or which physicians who prescribed Neurontin to their members relied on fraud, they cannot establish causation.

Slip op. at 26-28 (citations omitted).

The court also analyzed the claims of 6 individual plaintiffs.  The treating doctors all had testified that they had not been influenced by any sales presentations by the defendant in prescribing Neurontin for these patients.  The court generally credited this testimony, granting summary judgment on the claims of 4 of the individual plaintiffs.  It denied summary judgment and found a triable issue of fact for 2 plaintiffs who could establish that their doctors had actually received a communication from the defendant that had been alleged in another trial to be misleading for the information that it had not disclosed.

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Today the Ninth Circuit, in an unpublished opinion, affirmed an MDL transferee's Rule 12 dismissal of a putative class action brought by third party payors against a biotech company for allegedly fraudulent promotion of off-label uses for its medicines that promote blood cell production.  See United Food & Commercial Workers Central Pennsylvania & Regional Health & Welfare Fund v. Amgen, Inc., No. 90-56118, Slip op. (9th Cir. Oct. 21, 2010).  Because I helped brief the appeal for the defendant, I won’t editorialize here.

Plaintiffs had asserted a federal RICO claim, as well as a claim under California's Unfair Competition Law (Cal. Bus. & Prof. Code sec. 17200).  They alleged that the defendant promoted its medicines Epogen and Aranesp for uses that had not been approved by the FDA.  The trial court initially had dismissed the claims, granting plaintiffs leave to replead and encouraging them to provide sufficient particularity regarding the alleged fraud and how it purportedly caused them harm.  Plaintiffs filed an amended complaint, which the defendant again moved to dismiss.  The trial court granted the motion, dismissing the case with prejudice.

The Ninth Circuit affirmed, holding that the third party payors had not alleged with sufficient particularity the fraudulent nature of defendant’s conduct:

The complaint did not identify statements or representations made by Amgen that were literally false or misleading at the time they were made, as required in a civil RICO action based on mail and wire fraud.  Nor did the complaint identify material omissions in derogation of an independent statutory or fiduciary duty to disclose.

Slip op. at 2 (citations omitted)

The court also independently held that plaintiffs failed to allege proximate causation with sufficient particularity, i.e., they did not allege a direct causal connection between the defendant’s conduct and plaintiffs' alleged injury:

Instead, the complaint proffered an attenuated causal chain that involved at least four independent links, namely, (1) the USP-DI’s listing of Aranesp for anemia of cancer, (2) Medicare’s decision to cover Aranesp for anemia of cancer, (3) third-party payors’ decision to cover Aranesp for anemia of cancer (in addition to covering Aranesp for anemia in heart failure patients and cancer directly, and Epogen for all of those uses), and (4) doctors’ decisions to prescribe Aranesp and Epogen for these uses.  This causal theory is too attenuated to satisfy the Supreme Court’s proximate causation requirement in the RICO context.  Hemi Group, LLC v. City of New York, 130 S. Ct. 983, 989 (2010) . . .

The complaint also failed to satisfy Rule 9(b) with respect to its UCL claims, because it did not explain why Amgen’s conduct was fraudulent or allege an adequate theory of causation or reliance. . . .

Slip op. at 3 (citations omitted).

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A number of prominent, scholarly people keep trying to explain why aggregate proof of causation should be allowed in order to facilitate class action litigation.  Judge Jack B. Weinstein has done it in his opinions.  Professor Sam Issacharoff has written about it.  And many deans of the plaintiffs' bar have argued for it.

But nobody has been able to explain to my satisfaction how one uses Rule 23 -- which is not supposed to (and constitutionally could not) alter the substantive elements of claims or defenses -- to deprive a defendant of the right to challenge each class member on the element of legal causation, where such factual challenge would be possible if the class members sued individually. 

Recently, the Second Circuit took up the question of aggregate proof in a third-party payor case against a pharmaceutical company.  In UFCW Local 1776 v. Eli Lilly & Co., No. 09-0222-cv, Slip op. (2d Cir. Sept. 10, 2010), union health benefit plans and other third-party payors for plan members' prescriptions sued the maker of Zyprexa in a class action lawsuit, alleging RICO violations, common law fraud, unjust enrichment, and violations of state consumer protection statutes.  In a lengthy opinion, Judge Jack B. Weinstein had certified a class of third-party payors on the theory that they had paid a higher price for Zyprexa than they would have if the maker had not allegedly misrepresented certain product risks and promoted the medicine for unapproved uses.  Professor Issacharoff defended the certification on appeal, arguing for aggregate proof of causation.

The Second Circuit reversed, and in doing so, had some important things to say about aggregate proof.  The court noted that the market for prescription medicines involves lots of intermediaries:

[D]irect exchanges between consumers and producers are rare.  An individual patient does not choose what drug to take; she is prescribed a drug by her physician.  Nor does the individual patient always pay directly for that drug.  Rather, a TPP, such as her insurance provider, often pays some or all of the drug's cost.

. . . The [TPP's] formulary is usually managed by a Pharmacy Benefit Manager ("PBM"). . . . Drugs placed on a formulary are approved by the PBM's Pharmacy and Therapeutics Committee, made up of physicians and clinical pharmacists. . . .

[I]n the market for prescription drugs, three sets of price negotiations exist:  "(1) retail pharmacies and nonretail providers negotiate with pharmaceutical managers and wholesalers, (2) payors (often through PBMs) negotiate with pharmaceutical manufacturers and wholesalers, and (3) payors negotiate with retail pharmacies and nonretail providers.  The negotiations over price, moreover, do not intersect with the therapeutic choice of what drug a patient should take, which is a decision made by a physician with only minimal input by her patient or the TPP.

Slip op. at 9-10.

It was precisely because of these intermediaries -- and the independent way in which they make their decisions -- that the court held that "but-for" causation could not be the subject of aggregate proof.  Because doctors consider things other than a manufacturer's statements about the efficacy and side effects of its medicine when they are deciding what medicine to prescribe, reliance could not be presumed for each prescription.  Id. at 26.

The court also rejected plaintiffs' theory of proximate cause -- namely, that because the manufacturer put out alleged misrepresentations, the doctors necessarily relied on them to prescribe more of the medicine and the TPPs paid for it.  The court explained:

This narrative skips several steps and obscures the more attenuated link between the alleged misrepresentations made to doctors and the ultimate injury to the TPPs.  In fact, if plaintiffs' factual allegations are correct, the chain of causation runs as follows:  Lilly distributes misinformation about Zyprexa, physicians rely upon the misinformation and prescribe Zyprexa, TPPs relying on the advice of PBMs and their Pharmacy and Therapeutics Committees place Zyprexa on their formularies as approved drugs, TPPs fail to negotiate the price of Zyprexa below the level set by Lilly, and TPPs overpay for Zyprexa. . . .  [P]hysicians, PBMs, and PBM Pharmacy and Therapeutics Committees all play a role in the chain between Lilly and TPPs.

Id. at 27.

The court also noted that doctors rely on a variety of sources for information about medicines other than the manufacturer, including their own knowledge and experience.  Because it was possible -- indeed, even probable -- "that at least some doctors were not misled by Lilly's alleged misrepresentations" and thus did not fall within plaintiffs' theory, the court concluded that "[t]his makes general proof of but-for causation impossible."

Plaintiffs' counsel keep trying to import the concept of aggregate proof from securities litigation, where the presumption of an efficient market suggests that information that is disclosed about a product necessarily affects its price.  But that is not how the markets for consumer goods work.  Disclosures do not move markets.  People buy consumer goods for a variety of reasons -- even irrational ones.  The Second Circuit stressed that fact in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008).  And a defendant accused of consumer fraud is allowed to challenge each person's decisionmaking process and to prove that nothing it said harmed the plaintiff.  The fact that it is a class action in which the allegations are made does not change that simple fact. 

Hopefully the recent decision in Local 1776 puts the aggregate proof concept to rest in consumer class actions.  But it probably won't.  My colleagues on the other side of the "v" are creative and indefatigable.  As for me -- I'll keep my focus on the fact that Rule 23 doesn't change the substantive rules, no matter what.  And as long as one can demonstrate independence of thought and action in the consumer marketplace, the concept of "aggregate proof of causation" or a "presumption of reliance" amounts to a change of the substantive rules just to facilitate class certification.  And that's just wrong.

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Regular readers of this blog know that there are a plethora of decisions dismissing class actions brought by so-called "third party payors" (e.g., union health and benefit plans) to recover sums they paid for medicines that their members took.  Typically, courts hold that the injury in such cases is simply too remote for the third party payors to have standing.  Put differently, courts hold that the defendant's challenged conduct is not the direct cause of these third party payors' "injuries" because the decision to prescribe and take the medicine was a result of the independent conduct of prescribing physicians and their patients.

Last week the MDL court in the Yaz Marketing, Sales Practices and Products Liability Litigation reached the same conclusion after canvassing the case law.  See Philadelphia Firefighters Union Local No. 22 Health and Welfare Fund v. Bayer Healthcare Pharmaceuticals, Inc., 3:09-cv-20071-DRH-PMF, Slip op. (S.D. Ill. Aug. 5, 2010).

The class definition in Philadephia Firefighters was as broad as could be:  "'[a]ll third party payors in the United States and its territories that purchased, reimbursed, and/or paid for all or part of the cost of YAZ dispensed pursuant to prescriptions in the United States.'"  Id. at 2.  Plaintiffs pled causes of action under RICO, as well as common law negligence, fraud, misrepresentation, and unjust enrichment.  (Notably, plaintiffs did not plead state consumer fraud statutes.  Presumably this was because the state consumer fraud statutes are simply too different to be adjudicated in a single class.)  Plaintiffs' theory of the case was that although Yaz was approved by the FDA as an oral contraceptive and to treat moderate acne and Premenstrual Dysphoric Disorder (PMDD), the defendant had promoted Yaz to treat off-label conditions like mild acne and Premenstrual Syndrome (PMS) without telling people about the substantially increased risks of heart and gallbladder problems from the medicine.  This allegedly caused the market for Yaz to expand and allowed the defendant to maintain a "falsely inflated price" for Yaz.  Id. at 6.

The court began its analysis by considering whether the plaintiffs had the necessary standing to assert a RICO claim under federal law.  Reciting the Supreme Court case law, the court observed that RICO requires plaintiffs to show not only that defendant's conduct was a "but-for" cause of their injuries, but also that it is the proximate cause as well.  In other words, there must be a direct relationship between the injury asserted and the injurious conduct alleged.

The court surveyed a majority of the third party payor opinions, concluding that the injury to third party payors is simply too remote and speculative to meet RICO's direct injury requirement.  The court adopted the reasoning of Ironworkers Local Union No. 68 v. Astrazeneca Pharmaceuticals LP, 585 F. Supp. 2d 1339 (M.D. Fla. 2008), explaining:

[P]hysicians use independent medical judgment to decide whether to prescribe the subject drug to a particular patient and that judgment can be influenced by any number of factors.  Accordingly, establishing that the third party payor's injuries were caused by the alleged misconduct would require an inquiry into each doctor patient relationship to determine whether the physician was influenced by the alleged misrepresentations and to what extent.

Philadelphia Firefighters, Slip op. at 16.

The court concluded that "multiple steps separate the alleged wrongful conduct . . . and the alleged injuries . . . including patient preference, the independent judgment of the prescribing physician, and the reimbursement decision rendered by the third party payor and its benefits manager."  Id. at 18.  Accordingly, the complaint flunked RICO's direct injury requirement.

The court applied the same analysis to plaintiffs' common law causes of action, finding no proximate causation for negligence, misrepresentation or fraud.  As for unjust enrichment, the court reasoned that because that theory was based on an underlying tort, and no tort cause of action had been sufficiently pled, the unjust enrichment complaint also failed as a matter of law.

Philadelphia Firefighters is a strong opinion that confirms what already has become quite clear:  although plaintiffs lawyers have gravitated toward these claims as a way to possibly avoid learned intermediary and causation defenses, the overwhelming weight of authority is that third party payors stand far too remote from the medical treatment decisions to plead proximate causation.

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One of the first lessons that first year law students learn in torts class is that tort liability does not extend to all harms caused by a tortfeasor, and we do not owe duties to the world at large.  Indeed, if it were otherwise, we each would be insurers for harm that we may cause to others, no matter how remote or speculative the claim. 

Rather, tort law imposes concepts such as duty, foreseeability, and proximate causation to limit a tortfeasor’s ultimate liability to certain people to whom he owed a duty who suffered personal injury or property damage proximately caused by the tortfeasor's conduct.  Pure economic harm (such as lost profits) is deemed too remote and speculative to be compensable in negligence without some sort of accompanying physical injury or property damage.   Thus, a driver who causes a traffic accident is not liable to the hundreds of people stuck behind him on a closed freeway who may have missed a meeting, failed to make a delivery, or missed a concert that they had expensive tickets for.  He is liable, however, to the person who was physically injured, and to any other person whose car was damaged in the crash.

Last week the Florida Supreme Court issued an opinion that reflects a serious debate about the limiting principles of tort law.  See Curd v. Mosaic Fertilizer, LLC, 2010 WL 2400384 (Fla. June 17, 2010).  The fact that it comes from a case in which commercial fishermen were seeking damages for pollution of the ocean ensures that we will be hearing more about it in litigation over the Gulf of Mexico oil spill.

In Curd, a fertilizer manufacturer owned a phosphogypsum storage area near a tidal estuary in Florida.  The property had a wastewater storage area that was overfilled, and the dikes around the pond were narrower than they were supposed to be.  State and local authorities warned the company that the facility was in danger of a spill if there were even a few inches of tropical rain.  As predicted, rains came, the dike gave way and pollutants ultimately spilled into Tampa Bay, allegedly killing the fish that commercial fishermen relied upon for their livelihood.

The fishermen sued, asserting common law negligence and a claim under Florida Statute section 376.313, which permits people to bring a private cause of action for damages from the discharge of pollutants.  The intermediate court of appeal had held that the fishermen could not sue, as they had not suffered personal injury or property damage.  After all, they did not own the fish in the sea.

The Florida Supremes reversed.  Analyzing the plain language of the statute, they held that "damages" were not only physical injury and property damage, but also damage to the environment, including living creatures.  The statute allowed anyone to sue for such harm.  Moreover, following some earlier precedents, the court held that the liability under the statute was strict liability, and certain affirmative defenses ordinarily available at common law would be unavailable against the statutory claim.  The court reasoned that the Legislature created a remedial scheme that should be liberally construed to allow any person who could demonstrate "damage" from a discharge to bring a claim.

The court also rejected the argument that the fishermen’s claim was barred by the economic loss doctrine.  This was not a commercial transaction where warranty law could be expected to govern the parties’ expectations, the court reasoned, and the defendant was not a product manufacturer that had produced a product which injured only itself.  As such, the court held that the principles underlying the economic loss doctrine simply did not apply to the case.

As for the negligence claim, the commercial fishermen, the court noted, were not like the public at large, in that they had a license from the state to regularly harvest the fish in Tampa Bay for profit.  The court cited a series of common law decisions holding that fishermen suffered a special or unique harm – “a diminution or loss of livelihood” – which was not suffered by the public at large.  This was sufficient to form a common law duty, the court reasoned, when combined with the foreseeability of a Tampa Bay release causing harm to Tampa Bay fishermen.

Justice Ricky Polston partially dissented and partially concurred.  He agreed with the majority’s reading of the statute, including the fact that it should be liberally construed:  “If the statute is overly broad as suggested by the [court below], that is an issue for the Legislature to address.” 

But Justice Polston disagreed with the majority when it came to the common law claim for negligence.  He began by noting that the Florida Supreme Court previously had abrogated the traditional tort requirement that a plaintiff suffer a personal injury or property damage.  See Indemnity Ins. Co. v Am. Aviation, Inc., 891 So.2d 532 (Fla. 2004) (“in general, actionable conduct that frustrates economic interests should not go uncompensated solely because the harm is unaccompanied by injury to a person or other property”).  In light of this radical departure from traditional tort law, Justice Polston argued that “the function of the duty element takes on a greater role to filter out the unwarranted claims.” 

According to Justice Polston:

Commercial fishermen in Florida do not have a ‘special’ interest within the ‘zone of risk’ the majority finds [the defendant] to have created.  Rather, commercial fishermen are few among the tens of thousands of Floridians who earn their living from healthy ocean waters.  For example, in 2006, beach tourism alone contributed $24.1 billion to the state’s economy and provided 275,630 Floridians with jobs, earning them $7.7 billion. . . .

Although the majority rules that the commercial fishermen’s state licenses set them apart from the general population, if every state-licensed Floridian has a ‘special’ or ‘unique’ interest, then it seems there is endless ‘foreseeable’ liability.  Commercial fisherman are a small group among thousands of licensed Floridians who can claim economic damages from pollution of coastal waters.  For example, hotels and restaurants near the beach, seafood truck drivers, beach community realtors, and yacht salesmen are all licensed by the State to conduct commercial activities that may be negatively affected by the pollution of coastal waters.  Because the commercial fishermen have not demonstrated that [the defendant] owed a specific, unique duty to protect their purely economic interests, I would disallow common law recovery in order to avoid subjecting defendants to limitless liability to an indeterminate number of individuals conceivably injured by any negligence.

This question – what constitutes a “special interest” that would give rise to a duty over and above any so-called duty to the general public – will no doubt be hotly litigated in the wake of the Gulf of Mexico oil spill.  Notably, the Curd opinion may not have answered that question as broadly as plaintiffs may think.  As Justice Polston pointed out at the beginning of his partial concurrence, the majority deliberately limited the scope of its opinion.  Although the putative class included all persons engaged in the catch or sale of fish, the opinion is limited to commercial fishermen and “does not extend to distributors, seafood restaurants, fisheries, fish brokers, or the like who may have been affected by [the defendant’s] pollution,” Justice Polston observed.  The opinion also was limited to the depletion of marine life and did not cover the “harm to reputation as alleged in the petitioner’s complaint and mentioned by the [intermediate court of appeal].”  Thus, even in Florida, defendants still may have strong arguments regarding the limiting principles of duty, foreseeability and proximate cause. 

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Continuing that long line of cases rejecting claims by third party payors seeking to recover sums paid for medicines that allegedly were promoted for off-label uses is Southeast Laborers Health & Welfare Fund v. Bayer Corp., Case No. 08-1928-MD-Middlebrooks/Johnson, slip op. (S.D. Fla.) (registration with Law 360 required to access link).  In Southeast Laborers, the trial court had given plaintiff two extra opportunities to plead a claim under RICO or the New Jersey Consumer Fraud Act. 

Plaintiffs alleged that Bayer promoted the $1,000-per-dose drug Trasylol for off-label use in controlling surgical bleeding despite its knowledge that there were cheaper, more effective medicines that presented less risks of kidney damage and other harms.  In the Second Amended Complaint, plaintiff alleged that it "paid enormous sums of money to Bayer that they would not have paid had they been aware that Trasylol was not safer, more efficacious or of greater value than available alternatives that were significantly cheaper," and it "would never have incurred this expense had Bayer been honest about the safety and efficacy of Trasylol."  Slip op. at 10.  

The court held that this failed to plead the necessary proximate causation under RICO because it was tantamount to a "fraud-on-the-market" theory that nearly every court to consider the question has rejected outside of the securities context.  Slip op. at 12.  As the court explained:

Although Plaintiff argues that it had an independent choice of whether or not to pay for Trasylol, it does not explain how/why it made the choice to pay for Trasylol and how/why Bayer's alleged concealment of the dangers of Trasylol led Plaintiff to pay for Trasylol.  Ultimately, Plaintiff has not established a different premise of proximate causation and still has not met the Holmes requirement that it demonstrate a direct relation between its payment for Trasylol and Bayer's alleged fraudulent concealment.

Id. at 13.  The court thus dismissed the RICO claim with prejudice.

For similar reasons, the court dismissed the New Jersey Consumer Fraud Act claim with prejudice, holding that plaintiff had failed to properly allege proximate causation.  Id. at 16 ("Plaintiff has not alleged a premise of proximate causation that is distinguishable from one that relies on a fraud-on-the-market analysis.").  Plaintiff argued that a fraud-on-the-market analysis applies only where a plaintiff argues that the price was inflated by the alleged misrepresentations.  But the court rejected this argument, saying that even where plaintiff alleges that it would not have paid any amount for the medicine and seeks a complete rescission of all sales, this, too, is a fraud-on-the-market analysis that has been rejected repeatedly.  Id.

Plaintiff had added to the Second Amended Complaint express and implied warranty theories.  The court dismissed the express warranty theory without prejudice for plaintiff's failure to identify any affirmation of fact, promise, or description of Trasylol that it had received that had become part of the basis of the bargain.   Id. at 18-19.  The court dismissed the implied warranty claim without prejudice because the complaint did not allege that Trasylol was unfit for the intended purpose of preventing perioperative bleeding.  Id. at 20.

The court dismissed plaintiff's common law fraud and negligent misrepresentation claims with prejudice for failure to identify any reasonable reliance and/or proximate causation.  Id. at 22.

And the court dismissed the unjust enrichment count because such claims generally are "not allowed to proceed where all of the plaintiff's other tort claims have failed because of the remoteness of a plaintiff's injuries from a defendant's wrongdoing.  Id. at 23.

Southeast Laborers joins a growing body of law that prevents remote parties from bringing suits for speculative harm allegedly arising out of hundreds or thousands of individual doctor-patient decisions.

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New Yorkers always warn: "Don't buy a dog at a pet store!  They all come from puppy mills, are sick, and were raised in deplorable conditions."

But I bought my dog at a mall pet store.  I wasn't shopping for a dog nearly two years ago when Ted came into my life.  But decisions have consequences, and the decision to kill time at a pet store while waiting for friends to arrive for dinner at a nearby restaurant resulted in me sharing my apartment with Mr. Ted E. Bear.

I didn't know much about where he came from.  His papers said a farm in Missouri, my home state.

And frankly, I didn't care.  Although I sincerely hoped he had not come from a puppy mill, he had a very chill personality and I could tell we would get along well together.  If he had the croup and I had to pay for a vet visit, so be it.  (Thankfully, he didn't.)

Given this experience, I read Martinelli v. Petland, Inc., 2010 WL 376921 (D. Ariz. Jan. 26, 2010) with great interest.  In Martinelli, 32 plaintiffs brought a class action against Petland, alleging that they defrauded consumers by selling sick dogs that were raised in puppy mills while representing to the public that the puppies were "healthy," "the finest available," bred by "professional and hobby breeders who have years of experience in raising quality family pets," and "bred under safe and humane conditions by a reputable breeder with proper canine husbandry practices."  Plaintiffs plead causes of action under RICO, state consumer protection statutes, and unjust enrichment.

The court in Martinelli dismissed all but two plaintiffs' RICO and consumer protection claims for failure to adequately plead causation.  The complaint was chock full of allegedly fraudulent statements made by Petland and the breeder, The Hunte Corporation, on websites and in written materials.  Conspicuously absent from the complaint, however, were allegations saying that these statements caused them to make their purchase.  The court noted that "not a single Plaintiff has alleged that he or she ever visited Defendants' websites, received Defendants' written brochures, or relied on a written health certificate or warranty."  Id. at *3.

The court held that "absent some allegation of reliance, Plaintiffs have not pled a 'direct and proximate causal relationship' between Plaintiffs' injuries and [the] purported fraudulent scheme."  Id.  The plaintiffs argued that causation should be inferred as a matter of common sense, as no one would want to purchase defective goods.  But the court noted that even if plaintiffs had received the alleged misrepresentations, the court could not presume that they were material to the plaintiffs' decisions to purchase the animals:

[T]here is no single, common-sense reason for a puppy purchase.  A person might buy a puppy because he falls in love with it in the store window, he has heard it will make a good guard dog, he likes the price, he is referred to the store by a friend, or he finds the store convenient.  It is not necessarily true that every purchaser would base his or her decision on the fact that the puppy was "the finest available" or was bred by professional, hobby, or USDA-approved breeders -- key misrepresentations identified in the amended complaint.

In making their common-sense causation argument, Plaintiffs focus exclusively on the health of the puppies, asserting that "it is illogical that Plaintiffs would purchase their sickly or dying puppy mill puppy absent a misrepresentation as to its health. . . . A person who falls in love with a puppy in the store window might well purchase the puppy in the absence of any representation concerning its health.  However unwise, some people may even buy a sick puppy in order to provide it a good home and nurse it back to health.  It simply cannot be said that a representation concerning the puppy's health is obviously relied on in the same way that a consumer looking for car wax relies on the product's label as "car wax" or in the same way that a person paying for a tax service relies on the assumption that the service will be available.  Plaintiffs conspicuously have failed to allege that they relied on representations concerning the puppies' health, and the Court cannot assume that such representations were the reason Plaintiffs purchased the puppies.

Id. at *4 (citations omitted).

The court dismissed the RICO claims of all plaintiffs except two -- Plaintiffs Moskow and Galatis -- who alleged reliance upon oral representations made by Petland (but not the breeder, Hunte).  Plaintiff Galatis allegedly was specifically reassured by a Petland employee that the puppy was healthy and "(1) it had never been sick, (2) was up to date on his shots, (3) was not hypoglycemic, and (4) was lethargic and quiet only because he was stuck in a cage all day long."  Id. at *5.  Plaintiff Moskow asked whether his puppy was from a puppy mill and he was assured that it was not.  The court held that these oral representations were part of the scheme alleged in the complaint, and it inferred that plaintiffs had relied upon them in making their purchase.  Thus, the RICO claim survived for Plaintiffs Moskow and Galatis.

The court applied the same analysis to the Rule 9(b) challenge to the complaint and to the state consumer protection act claims.  The generic allegations of the vast majority of the plaintiffs failed to sufficiently plead causation:

Plaintiffs assert that reliance is not an element of many state consumer protection claims.  But plaintiffs do not dispute that causation is an essential element.  Indeed, "whether it be termed an issue of reliance or an issue of proximate cause, an appropriate rule is that where the defendant is alleged to have made material misrepresentations or misstatements, there must be a cause and effect relationship between the defendant's acts and the plaintiff's injuries.  Thus, regardless of whether reliance is a required element under state consumer protection statutes, Plaintiffs "must at least allege that they were exposed to the offensive conduct."  Plaintiffs other than Moskow and Galatis have made no such allegation.

Id. at *9 (citations omitted).

The court thus dismissed the state consumer protection claims except for Plaintiff Moskow's claim under the Maine consumer protection act.  (Plaintiff Galatis was from Massachusetts, but the Massachusetts act had not been pled in the amended complaint.)  It also dismissed the unjust enrichment claims for all plaintiffs except Moskow and Galatis; because the two had adequately pled a fraud-based claim, the unjust enrichment claim could stand, the court held.

Finally, the court rejected the defendant's assertion of the economic loss doctrine as a defense to the claims.  Petland argued that because plaintiffs allegedly received damaged goods, they therefore were asserting typical warranty claims that give rise to purely economic loss.  The court disagreed, observing that plaintiffs were seeking damages for being fraudulently induced into entering into the sales contract.

Martinelli is an interesting decision because it parses through the possible motivations underlying the purchase decision and holds that, after already having been given one chance to amend the complaint, a plaintiff cannot plead consumer fraud or RICO without pleading a causal connection between the allegedly fraudulent statements and the reason he made the purchase.  Because this is an essential element of each class member's claim, it seems clear that individual issues would predominate a trial, making class certification unlikely. 

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You may not know it, but I'm famous!  Well, not really famous -- but I was mentioned in the New York Times yesterday.  And well, it wasn't really me, but my doppelganger.  They screwed my name up, calling me "Jackson Russell."  Nevertheless, there I was, sort of, being part of an article about a woman who has sued a mobile phone manufacturer and a mobile service provider because, according to the three-page complaint, they "failed to properly warn of the hazard of cell phone use while driving that created a reasonably foreseeable risk of an accident," allegedly resulting in an accident that killed the plaintiff's mother.  The plaintiff has sued in Oklahoma state court for compensatory and punitive damages in excess of $10 million.

My brief mention in the article was on the common knowledge defense.  It is commonly known that using a handheld mobile phone without a hands-free device increases the risk of accidents.  Manufacturers warn about it in the product literature.  Service providers post billboards about it.  Governmental authorities and public interest groups erect signs warning against it.  And most notably, it is illegal, and all licensed drivers are charged with knowledge of that law.  On this point, tort law is clear:  one has no duty to warn of a commonly known hazard.  And what sort of warning would possibly alter the behavior of the driver who insists on using a hand-held mobile phone while possessed of the common knowledge about the risks?  Simply put, there is none.

Interestingly, the Times reporter actually spoke with the driver of the truck that collided with the plaintiff's mother, who had pled guilty to negligent homicide.  The driver does not blame the mobile phone company, and is quoted as saying:  "It's our choice if we're going to talk on the cellphone while driving or walking down the street or in the office."

The article about the Oklahoma lawsuit appeared with a much larger article in the author's "Driven to Distraction" series, entitled "Promoting the Car Phone, Despite Risks."  This article reads like a plaintiff's complaint, attempting to establish "who knew what when" and pairing the history of marketing for early mobile phones called "car phones" and the scientific research about the risks of distracted driving.  It continually suggests that using hands-free devices does not eliminate the risk of using mobile phones while driving because the problem is "the distraction that comes from focusing on a conversation, not the road."  (Of course the same could be said for conversations with passengers, as well as the distraction that results from eating fast food, drinking beverages, singing along with the radio, putting on make-up or operating an electric razor while driving.)  The article mentions critics who demand "placing overt warnings on the packaging and screens of cellphones."  But in the end, drivers are charged by law with the duty to operate their vehicles responsibly and focusing on the road, regardless of the potential activity that may distract them, and regardless of whether they are "warned" to do so.

In light of the larger Times article, I thought it might be useful to offer more analysis of such claims, rather than my doppelganger's mere mention of the common knowledge doctrine.  To begin with, it would be tough for the plaintiff in a case such as this to establish a legal duty running from the phone manufacturer -- and particularly the service provider -- to someone other than their customer.  A product seller does not owe a duty to the world, and particularly where the product has functioned properly and injury has resulted only from the purchaser's misuse of the product, there can be no duty imposed on the product seller.  This is true in cases where firearm manufacturers are sued for injuries caused to third parties from criminal activity, and it presumably would be true if a plaintiff sued McDonald's for causing driver distraction by selling a billboard-advertised "extra value" meal to a driver from the "drive-thru" window.

Similarly, any duty running from the product seller to the purchaser who injures himself driving while using a hand-held mobile phone may be extinguished in many states by the illegal acts doctrine, which basically holds that a person who injures himself performing an illegal activity may not sue to recover for injuries incurred during that illegal activity.

Moreover, finding a viable cause of action will be difficult for mobile phone plaintiffs as well.  There are two basic product liability theories that could be asserted in these cases:  (1) design defect, and (2) failure to warn.  The design defect claim hardly seems plausible.  Although the "Promoting the Car Phone" article describes one engineer who suggested in the 1960s that there be a lock on the dial to prevent dialing while driving, the simple fact is that it would be difficult to posit a feasible alternative design that did not also detract from the benefits of having a mobile phone in the car.  It is recognized that mobile phones contribute to automobile safety by allowing us to report dangerous driving and accidents, obtain emergency roadside repairs, and receive directions in unfamiliar locations without consulting maps.  Indeed, there have been lawsuits against some automobile manufacturers seeking to impose liability for not having digital mobile assistance capabilities in their cars, and one Oklahoma court even refused to dismiss a cause of action against a mobile service provider who failed to provide a customer with triangulation information to help locate the customer's mother, who had disappeared on the way to the doctor and, allegedly as a result of the delay in locating her, lost the opportunity for rescue and medical attention.  See Frey v. AT&T Mobility LLC, 2008 WL 4415328 (N.D. Okla. Sept. 23, 2008).

As I previously noted, the failure to warn theory would be difficult not only because of common knowledge about the risks of using hand-held mobile phones while driving, but also because the mobile phone manufacturers already include such warnings in their product literature. 

Actual causation and proximate causation also would be extremely difficult to prove.  What kind of warning actually would change the conduct of a driver who, in this day and age, insists on using a hand-held mobile phone while driving?  And given the remoteness of the manufacturer and the service provider from the injured plaintiff -- and the intervening illegal conduct of the driver -- can there be causation as a matter of law?

The few cases to have addressed the question squarely answer the question in the negative.  For example, in Williams v. Cingular Wireless, 809 N.E.2d 473 (Ind. App. 2004), a plaintiff sued a mobile phone company for giving its customer a mobile phone that the customer was using when he collided with the plaintiff.  The court first concluded that there was no relationship between the mobile phone company and the plaintiff that would give rise to a legal duty on the company to protect the plaintiff.  Moreover, even though many states were adopting statutes that made driving while using a hand-held mobile phone illegal, the court held that there was no foreseeability:

Although we agree that it may be foreseeable that a person who is using a cellular phone while driving might be in an accident, we do not agree with the leap in logic Williams urges us to make that it is likewise foreseeable to a legally significant extent that the sale of the phone would result in an accident.  A cellular phone does not cause a driver to wreck a car.  Rather, it is the driver's inattention while using the phone that may cause an accident.  Drivers frequently use cellular phones without causing accidents, and, of course, cellular phones are used in all sorts of places other than in vehicles.  We do not conclude that there was a high degree of foreseeability that the sale of the phone would result in an accident.

 Id. at 478 (citation omitted).

The court went on to consider where public policy requires placing the responsibility for safe driving:

Simply because an action may have some degree of foreseeability does not make it sound public policy to impose a duty.  For example, many items may be used by a person while driving, thus making the person less attentive to driving.  It is foreseeable to some extent that there will be drivers who eat, apply make up, or look at a map while driving and that some of those drivers will be involved in car accidents because of the resulting distraction.  However, it would be unreasonable to find it sound public policy to impose a duty on the restaurant or cosmetic manufacturer or map designer to prevent such accidents.  It is the driver's responsibility to drive with due care.  Similarly, Cingular cannot control what people do with the phones after they purchase them.  To place a duty on Cingular to stop selling cellular phones because they might be involved in a car accident would be akin to making a car manufacturer stop selling otherwise safe cars because the car might be negligently used in such a way that it causes an accident.

. . . Ultimately, sound public policy dictates that the responsibility for negligent driving should fall on the driver.  Legislation has already been drafted to address the issue of cellular phone use while driving and to place the responsibility on the driver to refrain from doing so.  We are confident that the legislature is taking appropriate measures to protect public safety, and that is both its right and duty.

Id. at 478-79; see also Steele v. Cingular Wireless LLC, 2007 WL 2456104 (Cal. App. Aug. 30, 2007) (describing trial court's demurrer on plaintiff's claim that mobile phone provider owed a duty to plaintiff, who was injured in an accident allegedly caused by the provider's customer while talking on a mobile phone).

At the end of the day, I don't expect lawsuits against mobile phone companies for traffic-related harm to gain much traction.  The problems with duty, foreseeability, and causation are simply too great to make this a lucrative area for litigation.  The simple fact is that there are many potential distractions for drivers:  fast food, beverages, the radio, electronic billboards, and mobile phones, just to name a few.  But the legal responsibility for driving safely and avoiding dangerous distractions rests with the driver, and as a matter of public policy it simply makes no sense to impose on product manufacturers liability that would simply be passed through to their customers in the form of increased prices.

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