Tuesday, July 17, 2007

Multistate class actions not entirely dead

At least not if you're a third-party payor who can aggregate the claims of its insureds, the way a traditional class action allows the legal system to do on the fly. In re Bextra and Celebrex Marketing Sales Practices and Product Liability Litigation, --- F. Supp. 2d ----, 2007 WL 1977282 (N.D. Cal.)

These putative class action lawsuits arise out of the marketing and sale of Celebrex and Bextra. This recent opinion dealt with challenges to the standing of third-party payor plaintiffs such as health plans and associational plaintiffs such as California Public Interest Research Group under state consumer protection laws. The judge analyzed the various state statutes at issue, reaching different results depending on the state.

Losers: The associational plaintiffs all lacked standing. Not all their members who took Celebrex or Bextra suffered the same harms. The association thus couldn’t stand in its members’ shoes, because those members needed to participate individually to determine damages. The associational plaintiffs wanted to press for injunctive and declaratory relief, but the court pointed out that other parties in the case with indisputable standing were already seeking that, so the associations were unnecessary. Moreover, the associations couldn’t allege that all of their members took Celebrex or Bextra. All their claims were dismissed.

In Texas, consumers have private rights of action, but business entities with assets of $25 million or more are excluded from the definition. The Texas third-party plaintiff here, according to filings with the state insurance commission, had more than $25 million at the relevant times, and the court took judicial notice of this and dismissed its claims, rejecting its arguments that the measure should be net assets and that reserves should be excluded. In Ohio, plaintiffs would have consumer standing if they are “persons” engaging in “consumer transactions” with suppliers. Though third-party payors are persons, they did not engage in consumer transactions – sales to individuals for personal purposes. In Alabama, plaintiffs have to be “natural persons,” and the third-party payors aren’t.

Non-losers: In Michigan, by contrast, plaintiffs have standing if they are persons and are damaged by unfair or deceptive acts in trade or commerce, which means providing goods etc. primarily for personal or household purposes. Because the statute does not require that the plaintiff be the consumer who purchased the goods, but only that it be damaged by the transaction, the Michigan third-party payor plaintiffs had standing. Indiana law is similar (requiring a “person” who suffers damages as a consumer), but there’s not much case law on the subject. Especially given that the legislature had amended the law to remove an earlier, more restrictive interpretation, the court held that sales to third-party payors for patients’ personal use could qualify, and thus relevant third-party payors could amend the complaint to allege Indiana state claims. New York law requires consumer-oriented conduct and injury to the plaintiff. The issue here was consumer orientation – did the challenged conduct affect the public interest? Because the allegations include that defendants falsely advertised the drugs directly to consumers, and that the misleading statements had an effect on consumers by leading them to pay more for their prescriptions, the complaint sufficed under New York law.

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