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

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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Lots of ink has been spilled of late about litigants trying to use the courts to achieve certain results regarding global warming.  And much has been written about nuclear power in the wake of the tragedy in Japan.

So you can imagine that my eyebrows arched as I thumbed through my "to read" pile and discovered a decision from the Connecticut Supreme Court addressing a citizen's challenge to a nuclear plant's plan to increase its power generation, thereby increasing its discharge of radioactive waste and the discharge of warm water into Long Island Sound.  The court's decision is a good reminder that plaintiffs seeking to regulate through litigation often lack the sort of personal and direct injury that give rise to standing to sue.

In Burton v. Dominion Nuclear Connecticut, Inc., No. SC 18603 (Conn. Apr. 19, 2011), the plaintiff sued to prevent the operator of the Millstone Nuclear Power Station in Waterford from implementing its plan to increase its pwer generating capacity in its Unit 3 reactor by 7%.  The Plaintiff alleged that this would both increase the amount of nuclear waste released into the atmosphere, and would generate a warm-water plume in Long Island Sound that would injure the acquatic wildlife. 

(The operator had applied for and received all appropriate permits, with the Nuclear Regulatory Commission issuing a safety evaluation report finding that even with the increased radioactivity, the discharge would remain within federal guidelines and the thermal plume would pose no threat to endangered or threatened species of marine life.  Slip op. at 2.)

The plaintiff sued for a TRO and a permanent injunction in state court, asserting causes of action under the Connecticut Environmental Protection Act, common law public nuisance, "classical aggrievement," and violation of Connecticut's Unfair Trade Practices Act.

The trial court dismissed the claim, and the Connecticut Supreme Court affirmed.

The Connecticut Supreme Court first analyzed whether the plaintiff's claims were preempted by the federal Atomic Energy Act, concluding that one of them was.  As the court explained it, the AEA reserves to the federal government the regulation of the radiological safety aspects of nuclear plants, but reserves to the states their traditional responsibility for regulating utilities.  Thus, the court concluded, the trial court "had no jurisdiction to consider the plaintiff's claim regarding the increase in radioactive waste because the federal government has exclusive regulatory authority over radiation hazards and safety as well as radiological discharges from nuclear power plants."  Slip op. at 4. 

As for the plaintiff's claim about the thermal plume, however, that fell within the state's traditional powers and was not preempted.  Accordingly, the court went on to consider the plaintiff's standing to raise these claims.  The court quickly dispatched the CEPA claim, holding that because she merely challenged the result of the agency's decisionmaking, but did not allege that the discharges would result in pollution that exceeded the amount permitted under the regulatory scheme, she lacked standing to assert a CEPA claim.  The court described this problem as lacking the "substantive heft" required under the CEPA to establish citizen standing.  

Plaintiff relied on a prior case in which she had successfully sued to protect marine life in Long Island Sound.  But the Supreme Court distinguished that case, noting that there she had pled procedural violations by the agency in its decisionmaking process.  Because there were no such allegations in this case, however, and no allegations that the discharge levels would exceed established standards, the court found plaintiff's authority inapposite. Slip op. at 7.

The court then analyzed the public nuisance claim.  It instructed that private individuals have no standing to bring public nuisance claims generally; that power typically is reserved to the state.  The exception is where the individual has sustained injury of a different type and degree from the public at large.  Here, the plaintiff alleged no special injury and, as such, lacked standing to bring a public nuisance claim.  Slip op. at 8.

In Connecticut, the doctrine of "classical aggrievement" operates almost exactly like the special injury requirement of the public nuisance cause of action.  The plaintiff must allege a distinct legal interest in the subject matter of the lawsuit that is different from the general public's, and must show that the agency's decision has specifically injured that interest.  Slip op. at 9.  Because plaintiff could not make that showing, she had no standing to bring such a claim.

Finally, the court considered the plaintiff's Hail Mary theory:  violation of CUPTA.  In reasoning that should resonate beyond the facts of this case, the Supreme Court reiterated that where plaintiffs plead unfair trade practices under CUTPA, they must plead a direct injury caused by the unfair trade practice.  See slip op. at 9 (citing cases holding that the doctrines of remoteness and proximate causation apply to CUTPA claims).  The court concluded:

We concluded that the plaintiff has failed to establish standing to bring her CUTPA claim because she does not allege harm from the increase in the temperature of the thermal plume that is not remote, indirect, or derivative.  Her principal allegation is that the elevated temperature of the water will affect wildlife, fish and other aquatic organisms, which, in turn, will indirectly pose a danger to her health and affect ther ability to enjoy her recreational pursuits of swimming, boating and consuming seafood from Long Island Sound and estuary.  She does not allege, however, precisely how her health will be endangered from the elevated temperature of the thermal plume or how her recreational pursuits will be affected; nor did she present evidence to that effect at the hearing on the motion to dismiss.  Thus, without more specificity, it is impossible to conclude that the harm the plaintiff has alleged is direct.  We therefore conclude that the trial court properly dismissed her claim of unreasonable pollution under CUTPA for lack of standing.

Slip op. at 9 (citation omitted).

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Yesterday's featured case involved the question of duty.  Sticking with that theme, I thought I'd bring to your attention another duty case, this time in the tort context.

One of the first lessons I learned in Torts class is the notion that foreseeability does not define the scope of the legal duty in tort.  For example, if I negligently caused an auto accident such that the highway patrol had to shut down the Long Island Expressway, it is certainly foreseeable that people in the cars behind me might miss a business meeting, fail to deliver a pizza on time, or miss their own wedding.  But tort law does not impose a duty on me to avoid those consequences for other people, even though they may result in financial loss.  Rather, tort law imposes a duty on me only to avoid negligently causing injury to a person or property.  Without personal injury or property damage, the fact that one of the drivers behind me was inconvenienced (or even financially impacted) simply does not give rise to a legal claim. 

In Sanders v. Norfolk So. Ry. Co., 2010 WL 4386881 (4th Cir. Nov. 5, 2010) (unpublished per curiam affirmance), the Fourth Circuit was squarely faced with the duty question.  (I should note that some of my colleagues were involved in this case.)  A train had derailed in a small town, causing a chlorine leak.  People within a one-mile radius were under a mandatory temporary evacuation order, and people within a two mile radius were under a temporary "shelter in place" order.  (The railroad quickly agreed to a class action settlement for those who were directly impacted.) 

But people who lived within a two-to-five mile radius of the crash site wanted a payday, too, so they filed a putative class action suit.  The defendant moved to dismiss, the trial court granted the motion, and the Fourth Circuit agreed.  The Fourth Circuit explained that:

South Carolina recognizes reasonable limitations on tort liability in negligence actions where the plaintiffs have suffered no personal injury and have no direct relationship with the tortfeasor. . . .

. . . While Appellants may have properly pled that their injuries were foreseeable, foreseeability alone may not give rise to a duty under South Carolina law. . . . 

Here, the only injuries alleged by Appellants are those directly related to their non-mandatory evacuation or temporary retreat from their homes.  While these harms may have been foreseeable by [the defendant], we agree with the district court that they are too remote to warrant a finding of legal duty.

Id. at *2 (citations omitted).

Similarly, the court affirmed the dismissal of the nuisance claims.  Dismissal of the public nuisance claim was proper because the plaintiffs had not alleged that their real or personal property was damaged by the accidental chlorine gas release.  And dismissal of the private nuisance claim was proper because the "release was a singular event and did not continuously keep them out of their homes."  Id. at *3.

Sanders is a reminder that foreseeability is not the equivalent of duty in tort law, and that the duty concept serves to cut off liability for harms that are simply too remote or attenuated from the challenged conduct.

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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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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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