Thursday, July 19, 2007

Celebrex class action continues (again)

In re Bextra and Celebrex Marketing, Sales Practices and Product Liability Litigation, 2007 WL 2028408 (N.D. Cal.)

After ruling on standing, the court turned to defendants’ motion to dismiss for failure to state a claim. Essentially, plaintiffs complain that defendants intentionally misrepresented Celebrex’s effectiveness and safety for pain relief, specifically by claiming that (1) Celebrex had fewer gastrointestinal side effects than traditional non-steroidal anti-inflammatory pain relievers, (2) Celebrex improved quality of life, and (3) Celebrex was cardioprotective or at least safe for cardiovascular health. The proposed class consists of all consumers and third-party payors who paid for Celebrex from Dec. 1, 1998.

The complaint has three claims: (1) the violation of state consumer protection laws of every state and territory, (2) unjust enrichment, and (3) breach of warranty.

On the consumer protection claims, defendants’ main argument is that there can be no “market causation” theory of damages, as set forth in Oliveira v. Amoco Oil Co., 776 N.E.2d 151 (Ill. 2002). Oliveira concerned an Illinois consumer protection class action against Amoco for false advertising of premium gas. Plaintiff didn’t allege that deceptive ads induced him to buy gas, but that he was damaged because the ads created an artificially inflated price for gas he did purchase. Deception, in other words, increased demand, thus raising prices and injuring all consumers whether or not they saw the deceptive ads. The Illinois Supreme Court rejected this theory, because the plaintiff didn’t allege that he was himself deceived; there was no proximate causation.

The court distinguished Oliveira because plaintiffs here aren’t arguing market causation. Rather, they allege they were deceived by false advertising – defendants convinced doctors to prescribe Celebrex and third-party payors to pay for it, at ten times the cost of the alternatives, by falsely claiming superiority. The complaint alleges that Celebrex substituted for cheaper drugs that would have been used absent the false advertising.

Defendants objected that plaintiffs didn’t allege that they saw specific ads, nor that their doctors prescribed Celebrex based on specific ads. But the consumers need not have been aware of the false claims to have been damaged by them. When a third party is a necessary intermediary – for example, a builder who relies on false claims and uses a defective product to build a house for a consumer – falsity, reliance, and damage can all be present even though the end consumer has no independent knowledge of or beliefs about the specific falsely advertised product. That’s what plaintiffs pled here: the medical community was deceived and prescribed Celebrex to patients who paid for it. They aren’t complaining that they paid too much for Celebrex given the truth, but that they wouldn’t have used Celebrex at all. “The unmistakable inference from the [complaint] is that there is no reason for physicians to prescribe and for consumers and third-party payors to pay for Celebrex other than defendants’ false claims; thus, the physicians must have been aware of those false claims when they prescribed the drug.” On a motion to dismiss, that suffices.

The court therefore also rejected defendants’ argument based on the “learned intermediary doctrine.” Because the complaint alleges that doctors were deceived along with patients and third-party payors, the requirement of a prescription doesn’t break the chain of causation.

Defendants also argued that plaintiffs suffered no injury because they received the benefit of their bargain: a pain reliever without gastrointestinal or cardiovascular side effects. But the court thought that argument sidestepped the central allegations of the complaint: “plaintiffs could have and would have received exactly the same relief at a much lower cost but for defendants’ deception.” You can’t just market the same old product at a higher price, claim it’s better than the alternatives, then defend against a false advertising claim by arguing that there was nothing better on the market. In such circumstances, you’ve taken consumers’ money under false pretenses.

Likewise, the court refused to dismiss the unjust enrichment claims. It may be the case that unjust enrichment requires a direct relationship between the plaintiffs and defendants – money transferred directly between them – and maybe plaintiffs ultimately won’t be able to show such a direct relationship. But the complaint sufficiently stated a claim.

By contrast, the court dismissed the breach of implied warranty claims for failure to allege manifestation of a defect. The drugs weren’t unfit for the ordinary purposes for which they were used; the mere possibility of unfitness is insufficient if it doesn’t manifest. Without allegations that plaintiffs suffered cardiovascular or gastrointestinal problems from taking Celebrex, the complaint was fatally deficient. A false advertising claim can be based on the theory that a cheaper drug would have worked as well; an implied warranty claim cannot be.

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