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

A Pennsylvania intermediate appellate court yesterday affirmed a trial court's decertification of a statewide class action alleging plaintiffs had suffered economic harm from taking Neurontin for uses not approved by the FDA.  See Clark v. Pfizer Inc., No. 754 EDA 2009, 2010 Pa. Super. 6, Slip op. (Pa. Super. Jan. 19, 2010).  In doing so, the court rejected a "fraud on the market" theory and so-called "statistical proof" of causation.  Because my Skadden colleagues worked on the appeal, I'll only briefly summarize its holdings here.

Plaintiffs often cite to Pennsylvania precedents that encourage early and liberal certification of class actions.  But the corollary to such a liberal certification rule, of course, is that where discovery presents evidence that the case cannot be manageably tried as a class, the trial court retains the discretion to decertify the class.  That is what happened in Clark:  the trial court originally had certified a class of Pennsylvania residents, but after discovery and upon the evidence, the court then decertified the class.  It also found that people who benefitted from taking Neurontin could not state a claim, and so it had granted summary judgment as to those class members who had benefitted from taking the medicine.  And it granted summary judgment on the express warranty claim because there was no proof that plaintiffs had received any warranties.

Plaintiffs complained that the trial court -- by granting summary judgment and then decertifying the class -- had put them in an impossible position where absent class members arguably were bound by substantive judgments on their claims, but could not appeal them because there was no proper class.  Under the circumstances, the Superior Court effectively agreed and reversed the trial court's two grants of summary judgment.  Slip op. at 24-25.

But the Superior Court affirmed the trial court's decertification of the class.  The trial court had decertified the class because there were individual questions for each class member as to whether he or she had benefitted from taking Neurontin.  Although the Superior Court acknowledged that this was true, it stressed that the real reason the class could not be certified was that the proposed class failed the typicality, commonality and predominance requirements of the class action rule.  Why?  Because causation (i.e. reliance by each class member's doctor upon a misrepresentation) could not be presumed:

Where there exists various intervening and possibly superseding causes of the damage, liability cannot be determined on a class-wide basis because individual issues would predominate issues of fact and law that are common to the class and the representatives of the class.

Slip op. at 10 (citation omitted).

Plaintiffs' expert had relied on statistical modeling to opine that virtually all of the class members' doctors had relied on the defendants' alleged misrepresentations to prescribe Neurontin for uses not approved by the FDA.  But as a result of discovery, defendants had introduced testimony from Pennsylvania doctors establishing that their prescriptions were based on other factors, not any so-called "misrepresentations."  Citing to the decision in the federal MDL -- In re Neurontin Marketing, Sales Practices & Products Liability Litigation, 257 F.R.D. 315 (D. Mass. 2009) -- the Superior Court rejected any "presumption of causation" or "fraud-on-the-market theory" (slip op. at 11), holding instead that each class member must establish reliance/causation on his or her own to establish a right to recover (id. at 15).  As the court put it:

In sum, statistical probability does not substitute for actual inquiry, as a general showing of percentages does not tend to prove that the class members' specific doctors relied upon Defendants' statements or that Defendants' statements were the proximate cause of an injury.

Slip op. at 16.

Because the issue of causation was an individual question for each class member, the case could not be tried as a class action.

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California’s Fourth District Court of Appeal issued an opinion last Monday that illustrates once again why splitting the baby is never a satisfying result.  See Paduano v. American Honda Motor Co., 2009 WL 57806 (Cal. App. Jan. 12, 2009).  The case was straightforward enough:  plaintiff bought a hybrid car expecting it to get 51 miles per gallon, which was what the brochure said was the EPA’s fuel economy estimate for manual transmission versions of the car.  But the car didn’t come close.  Instead, it averaged roughly 30 miles per gallon when plaintiff drove the car.  Apparently EPA’s method of testing hybrid cars differs substantially from how some drivers typically drive them, so that the EPA estimates can be significantly better than actual experience.

Plaintiff sued for breach of one federal and two state warranty statutes, as well as for violations of California’s Unfair Competition Law (“UCL”) and its Consumer Legal Remedies Act (“CLRA”).

The trial court granted summary judgment on all claims, finding, inter alia, that they were preempted by the federal Energy Policy and Conservation Act.  The Court of Appeal, however, affirmed dismissal of the warranty claims, but reversed on the UCL and CLRA claims, holding that they were not preempted.

The court was right to affirm dismissal of the warranty claims because Honda clearly made no warranty about the EPA’s fuel economy estimate.  Rather, the label stated – as required by federal law – “ACTUAL MILEAGE will vary with options, driving conditions, driving habits and vehicle’s conditions.”  And 49 U.S.C. § 32908(d) “clearly provides that ‘[a] disclosure about fuel economy or estimate annual fuel costs under this section does not establish a warranty under the law of the United States or a State.’”  Id. at *7.

Ultimately, however, the majority held that the plaintiff’s UCL and CLRA claims were not preempted.  In doing so, it applied a presumption against preemption from the California Supreme Court’s “colored salmon” case:  Farm Raised Salmon Cases, 42 Cal.4th 1077, 1087-88 (2008), cert. denied sub nom., Albertson’s, Inc. v. Kanter, 2009 WL 56199 (U.S. Jan. 12, 2009).  Paduano, 2009 WL 57806 at *12-*13.  It then applied the U.S. Supreme Court’s recent decision in Altria Group v. Good, 2008 WL 5204477 (U.S. Dec. 15, 2008) to hold that the language of the Energy Policy and Conservation Act does not expressly preempt the plaintiff’s claims.  Paduano, 2009 WL 57806 at *15.  Because the UCL and the CLRA are laws of general applicability that are not based specifically on the disclosure of fuel economy or fuel operating costs, the court held that the federal act’s express preemption provision did not apply.

The majority then found that there might be viable UCL and CLRA claims arising out of two statements from the defendant’s sales brochure:  (1)  “Just drive the Hybrid like you would a conventional car and save on fuel bills,” and (2) “IS THERE ANYTHING SPECIAL I HAVE TO DO?  You just have to love saving money and getting terrific gas mileage.”   Id. at *10-*11.

As Justice Terry O’Rourke points out in the dissent, these statements are “mere unspecific, nonfactual assertions constituting non-actionable puffery.”  Id. at *32-*33.  And the first statement, taken in context, is actually just differentiating this Hybrid from an electric car the owner would have to plug in to charge.  Id. at *23.

But more important, Justice O’Rourke makes it plain that the plaintiff’s sole theory of liability is premised exclusively on the EPA’s mileage estimate, and that the sought-after relief – eliminating or reducing the EPA’s mileage estimate –  actually was expressly preempted by the federal statute because it would impose a legal obligation “related to fuel economy standards.”  Id. at *25.  The Supreme Court’s recent Good decision, Justice O’Rourke explains, is wholly irrelevant to the issue at hand.

The majority and dissenting opinions in Paduano highlight the difficulty of consistently applying the Supreme Court’s preemption precedents.  There is much too much detail in the two sides’ positions to analyze in this blog post.  But certain fundamental questions – such as when to apply the presumption against preemption, and when does a statute of general applicability “impose” obligations within the meaning of an express preemption provision – clearly remain hotly disputed.  One hopes the California Supreme Court will accept review of Paduano, which seems certain to be appealed, and provide some additional clarity in this area.

 

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