The federal Advisory Committee on Rules of Civil Procedure released its latest Civil Rules Agenda Book on November 7, 2017. A copy of it is available here.  A couple of items on the agenda should be of interest to blog readers.

The first topic has to do with proposed changes Fed. R. Civ. P. 30(b)(6), dealing with corporate witness designations (see tab 5 beginning on page 171). The following changes are under consideration:

  • Inclusion of specific reference to Rule 30(b)(6) among the topics for discussion at the Rule 26(f) conference, and in the report to the court under Rule 16.
  • Amending Rule 30(b)(6) to clarify that testimony at a Rule 30(b)(6) deposition is not a judicial admission.
  • Requiring and/or permitting supplementation of Rule 30(b)(6) testimony.
  • Forbidding contention questions in Rule 30(b)(6) depositions.
  • Adding a provision for objections at Rule 30(b)(6) depositions.
  • Amending Rule 30(b)(6) to address the application of limits on the duration and number of depositions.

The second topic has to do with requiring disclosure of third-party litigation funding arrangements (see tab 7B beginning on page 345). The proposed rules change would amend Fed. R. Civ. P. 26(a)(1)(A) to add a new subsection (v) to the items subject to mandatory initial disclosure:

(v) for inspection and copying as under Rule 34, any agreement under which any 5 person, other than an attorney permitted to charge a contingent fee representing a party, has a right to receive compensation that is contingent on, and sourced from, any proceeds of the civil action, by settlement, judgment or otherwise.

The committee notes several areas of “disagreement” that would have to be resolved before a rules change could be adopted. These are:

  • Definition of what types of third-party litigation funding agreements are covered.
  • Whether a new disclosure rule for third-party litigation funding should be parallel to the existing requirement for disclosure of a defendant’s insurance policies.
  • Extent to which third-party litigation funders control or impact the conduct of the litigation at issue.
  • Extent to which third-party litigation funders control or impact settlement of the litigation at issue.
  • Possible impact of disclosure of third-party litigation funding on the parties’ strategic behavior.
  • Potential for conflicts of interests created by third-party litigation funding.
  • Whether disclosure of third-party litigation funding is important to judicial recusal.
  • Whether disclosure of third-party litigation funding would be a threat to attorney/client privilege or work product protection.
  • How proportionality affects disclosure of third-party litigation funding.
  • Whether third-party litigation funding increases frivolous litigation.
  • Possible conflict between disclosure of third-party litigation funding and state regulation of professional responsibility.

It appears uncertain whether the committee will seriously consider this proposal or continue to defer action as it did in 2014.  A possible motivating factor, not present in 2014, is the threat of congressional action to amend the rules.

Readers who are interested in either of these two issues can comment on them here.

It is not as if we are delighted to see efforts to resuscitate breast implant litigation, but we won’t groan when the rulings are as good as they are in Laux v. Mentor Worldwide, LLC, No. 2:16-cv-01026-ODW(AGR) (C.D. Cal. Nov. 8, 2017).  Here, we are talking about Daubert rulings.  (The court also issued good preemption rulings that might be the subject of a separate post.)  The Laux court’s Daubert order is not up on Westlaw or Lexis yet, but it will be, and that is good news for defendants and bad news for plaintiffs.

The plaintiff in Laux alleged that she suffered pain and other injuries as a result of moldy silicone breast implants.  Her allegations depended upon opinions by a three experts:  Kolb, Blais, and Brawer.  At least two of these experts are repeat players. The other might be as well, but we confess to being a little out of touch with this litigation. One plaintiff expert (Kolb) explanted the implants and concluded that they were leaking bilaterally.  Another (Blais) examined the implants and concluded that they had defective valves, causing them to leak bilaterally. The moldy saline implant theory has persisted since the turn of the century, largely propped up by a book, The Naked Truth About Breast Implants, written by – ta da! – one of these experts.  Another one of the experts testified long ago at the FDA panel hearings and raised the theory back then that breast implants contained a manufacturing defect that either (1) allowed bi-directional flow of saline and bodily fluid in and out of the valves such that the saline became contaminated by “toxic mold” that then colonized and leached “biotoxins” into plaintiff’s body; or (2) allowed the silicone shell or toxins/metals to flake off in plaintiff’s tissue.  To our moldy eyes, this theory seems driven more by litigation than science.  Is our cynicism based at all on the fact that these selfsame experts seem to be actively working with plaintiffs’ counsel to resurrect breast implant litigation, claiming breast implants cause systemic autoimmune disease despite dozens of epidemiological studies to the contrary?  Yes.  Yes, it is.

In any event, these experts’ sparkling resumes did not dazzle the Laux court. Their methodologies were even weaker than their qualifications, which, as you will see, is really saying something.

By the way, this is hardly our favorite trio.  Here are just a few we prefer:

  • Harry, Hermione, and Ron
  • Kirk, Spock, and Bones
  • The Three Musketeers (literary or candy version)
  • The Three Fates
  • Three Dog Night
  • Three’s Company
  • The Three Amigos
  • Tinkers to Evers to Chance
  • The Good, the Bad, and the Ugly
  • The Dude, Walter, and Donny
  • Willie, Mickey, and The Duke
  • ZZ Top
  • Cream
  • Emerson, Lake, and Palmer
  • The Police
  • Destiny’s Child
  • The Three Tenors
  • Workaholics
  • Moe, Larry, and Curly.  (Heck, we also prefer Moe, Larry, and Shemp to any assortment of litigation/expert stooges.).

Anyway, here, in brief, is how the Laux court concluded that the three plaintiff expert (three blind mice?) opinions could not survive a Daubert challenge:

Kolb

The court deemed Kolb to be insufficiently qualified to provide the proposed testimony. Big surprise: a plastic surgeon is not competent to testify about immunology, mycology (the study of fungi), or infectious disease. Moreover, Kolb’s methodology, such as it was, was unreliable.  Yes, the “differential diagnosis” incantation was muttered by this expert, but to no effect. Kolb’s expert report stated that the plaintiff had developed biotoxin disease from defective implants, and that “Plaintiff had no other environmental mold exposure to account for these symptoms.”  Oops. That premise was directly contradicted by the plaintiff’s earlier statement that she was exposed to mold found in her bedroom closet and mother’s home. Further, Kolb’s failure to test for TGF beta 1 also prevented her from ruling out environmental exposure from an objective perspective.  The court decried Kolb’s “[u]nexplained selective use of the facts” which failed “to satisfy the scientific method.” None of Kolb’s theories had been tested, peer reviewed, or generally accepted by the scientific community.  Her “inferential leap” from the plaintiff’s symptoms to the conclusion that the plaintiff suffered from biotoxin disease was unsupported by any peer-reviewed scientific literature or research.  Adios, litigation expert amigo #1.

 

Blais

 

Blais is a chemist, not a microbiologist, pathologist, medical doctor, or engineer.  Blais has not published any of his theories on bacterial or fungal colonization of saline implants in peer-reviewed literature.  So much for qualifications.  Reliable methodology was also lacking.  Blais supplied a “Failure Analysis Report,” but the real failure was in the expert’s purported analysis, not the product. In developing his opinions for this case, Blais did not test the plaintiff’s breast implants, tissues, or blood, and did not establish a scientific basis for his conclusion that the plaintiff’s injuries were caused by the defendant’s breast implants.  The defendant argued that Blais’s “‘methodology’ essentially consists of looking at explanted breast implants, sometimes with the aid of a microscope, making a few notes and drawing pictures of what he claims to see.”  Not so impressive.  Blais took no measurements of the valves to support his opinion they contained manufacturing defects.  Rather, Blais stated that he “eyeball[ ed]” the valves to determine they were faulty.  Still not impressive. In addition (or subtraction?), Blais did not possess the defendant’s valve design specifications when he concluded that the valves on the plaintiff’s implants were defective. Instead, Blais utilized old documents and his own memory.  The Laux court concluded, as had other courts in earlier decisions, that Blais’s proffered testimony should never reach a juror’s ears. As Harry Potter might say, expulsus expertous hackus nonsensicus.

 

Brawer

 

There were some technical problems with Brawer’s expert report.  It recited “a toxicology opinion with no data in support of that opinion whatsoever.” (emphasis in original)  Brawer opines that there was “breast implant toxicity,” but neglects to state what toxic substance was at issue.  That would seem to be a problematic gap in the analysis.  The Laux court could find no support for Brawer’s “because I said so” – in lawyerese, we sometimes call it ipse dixit — conclusion regarding breast implant toxicityThus, the court held that Brawer’s report “fails to satisfy several requirements of Rule 26, and his report is so lacking of scientific principles and methods that the Court cannot find his opinions reliable or helpful in this case.”

 

Three up, three down.  It reminds us of a typical inning thrown by the late Roy Halladay.

 

Meanwhile, three cheers to Dustin Rawlin and Monee Hanna of Tucker Ellis, who brought this ruling to our attention.

We can be inundated with news.  Old news.  New news.  Fake news.  Breaking news.  News that makes you want to break something.  News that makes you want to go back to bed.  In trying to be discerning consumers of the news, it is useful to do not just a reality check but a date check.  Stories on a social media stream come with a presumption of newness, but the date of the release of the story—once you find it—may make you stop reading because it is not news any more.  You may even have read the old news when it was new and just got suckered back by the misimpression of novelty.  A story about a new species of dinosaur, or even beetle, being discovered?  We are clicking.  Einstein’s prediction of gravitational waves verified?  Click—wait, we saw that way back in early 2016, and a Nobel Prize was awarded for that last month.

Generic drug preemption may not be as clickworthy as a “new” ankylosaur, but these decisions do still catch our attention.  After Mensing, Bartlett and scores of published decisions preempting the vast majority of conceivable claims—or holding that state law does not recognize the claim the plaintiff would need to sidestep preemption—you might think that plaintiffs would stop pursuing these claims.  Well, the nonsense that is innovator liability has not provided a viable alternative—although the plaintiffs keep trying (like here and here)—and courts have not yet resorted to Rule 11 for pursuing obviously preempted claims, so the plaintiffs keep trying.  When Kious v. Teva Pharmaceuticals USA, Inc., No. 16-990-R, 2016 WL 9559038 (W.D. Okla. Dec. 8, 2016), popped up in our searches, we thought it might be new and newsworthy.  It really was old news made to seem new because it had taken eleven months to get on Westlaw.  The generic manufacturer defendant secured dismissal of the claims against it on preemption, but was there anything new, different or interesting about it?  We think it is pretty much old hat, but that may be the point.

Kious involves a plaintiff who claims to have developed Stevens-Johnson Syndrome as the result of the use of a generic antibiotic, the label for which apparently matched that of the reference drug.  The plaintiff sued the generic manufacturer, asserting standard state law claims, and a motion to dismiss the amended complaint followed.  (He also sued the branded manufacturer, but that is not discussed in the opinion.)  The court walked through each asserted claim, starting with design defect.  Preemption of such claims is not really a question post-Bartlett, but the Tenth Circuit’s decision in Schrock, discussed here, left no doubt that strict liability and negligence design claims fail.  Id. at *2.  Next up was the claim for manufacturing defect, which was really just a re-packaged claim for design defect.  Plaintiff claimed “that every dose of azithromycin was defective because of its design and/or lack of adequate warnings,” so he did not plead a manufacturing defect claim under Oklahoma law (and the design claim under a different label was still preempted). Id.

Next up were the warnings claims.  Plaintiff did not allege a failure to update the generic label to mirror the reference drug’s label, so Mensing’s application should have been straightforward.  Not so, claimed the plaintiff, because Mensing involved prescriptions written before the Food and Drug Administration Amendments Act of 2007, which established a procedure under which FDA could ask for a new label from a generic manufacturer if the reference drug was no marketed and there is new safety information.  Even this argument, however, was not new, as courts like the Seventh Circuit had already rejected it.  The Wagner decision (a lofty fifth place on last’s year’s best list) made clear that the FDAAA did not remove the prohibition against a generic drug manufacturer changing its label unilaterally.  2016 WL 9559038, *4. Kious went a step further—and we think this was actually novel—and noted that the FDA’s proposed rule from 2013 to allow generic manufacturers to change their labels unilaterally in some situations supports preemption.  “The proposed rule would be unnecessary if, as Plaintiff urges, the 2007 Amendments permitted unilateral labeling changes by generic manufacturer.” Id. No news is good news, at least here, so warnings claims are still preempted.

The remaining claims were also dismissed.  Express warranty claims are really preempted warnings claims and implied warranty claims were really preempted design claims or preempted warnings claims, depending on how construed.  Again, the Schrock decision, also under Oklahoma law, determined the result. Id. at *5.  For the claims of fraud, negligent misrepresentation, and negligent concealment, the court looked to the Eleventh Circuit’s decision in Guarino for clear authority that these were simply another version of preempted warnings claims. Id. at **5-6.  That was it for every claim plaintiff offered and, plaintiff did not get to amend again.  Judgment for the defendant after only two strikes.  Could it be that sanctions for asserting frivolous claims are next in such suits?  That would be news, no matter when it happens.

Interestingly, it’s a case that is almost a year old that has us thinking about litigation tourism post Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017).   We know that plaintiffs’ forum shopping gamesmanship isn’t over. It’s just gotten a lot more difficult now that the Supreme Court has said non-resident plaintiffs can’t go suing non-resident defendants anywhere they want. The most straight forward way for plaintiffs to stay out of federal court, assuming that is their goal, is to sue in defendant’s home state. Per the forum defendant rule, even where diversity exists, a defendant cannot remove a case to federal court if one of defendants (properly joined and served) is a citizen of the state in which the case was filed. See 28 U.S.C. § 1441(b). Stuck in state court, which isn’t always a bad thing, defendants then need to carefully consider forum non conveniens and choice of law issues.

Those were both key issues defendant decided to move on in Yocum v. Biogen, Inc., 2016 WL 10517110 (Mass. Super. Dec. 14, 2016). The case only recently popped up in our searches but with the likelihood of seeing more litigation filed in defendant’s backyards, we thought it worth a quick mention. Plaintiff brought a wrongful death suit in Massachusetts alleging that his wife died as a result of side effects from defendant’s drug used to treat her multiple sclerosis. Id. at *1. Plaintiff resides in and decedent received treatment and died in Wisconsin. Defendant’s principal place of business is in Massachusetts. Id. Just because defendant couldn’t remove the case to federal court, it still had some decisions to make. Such as, would it prefer the case to be litigated in Wisconsin. And, if it couldn’t move the case west, should Wisconsin law still apply. Yes and yes were the answers for this defendant.

First up was a motion to dismiss on the grounds of forum non conveniens.   Defendant’s argument was that not only was Wisconsin an available alternative forum, but that both public and private interests favored litigating there as opposed to Massachusetts. Generally speaking, all things being equal, courts don’t disrupt a plaintiff’s choice of forum. So, where case-specific witnesses like treaters and prescribers are in plaintiff’s home state and company witnesses are in defendant’s home state – most courts see that as a wash. See id. at *3. One set of witnesses or another are either traveling or being put on video. That’s not to say that this is always equal. For instance, if significant depositions of company witnesses have already occurred and won’t need to be repeated, maybe that helps tip things toward the plaintiff’s home state. Or, if the relevant company witnesses have changed jobs, retired, or otherwise moved, the defendant home state connection becomes more attenuated. Likewise, depending on the issues, a large company’s principal place of business might not be where the key company witnesses are located. These are likely the types of things a defendant is going to have to address to move the scales on the private interests.

Turning from the private interests to the public interests, defendant raised two arguments – the court would need to apply Wisconsin law and Wisconsin has a significant interest in regulating tortious conduct alleged to have occurred within the state. Taking them in reverse, the court found that Massachusetts has an equally significant interest in regulating the conduct of a resident business. Id. Another push. Left then with only choice of law, that alone is not enough to warrant a forum non dismissal. Defendant’s motion was denied.

That brings us to choice of law. If defendant can’t get to Wisconsin, it wanted to bring Wisconsin to it. Here the court agreed with defendant. We don’t usually take a definitive position on choice of law issues because frankly, our choice is likely to change case to case. So, we’ll just say that defendant did a good job of explaining why Wisconsin has the more meaningful contacts with the issues and the parties and that it is not an unusual conclusion for a court to decide to apply the law of the place where the injury occurred. Id. at *4-6.

Then we get to the substantive issues. Applying Wisconsin law, the court dismissed plaintiff’s breach of warranty and punitive damages claims. Wisconsin does not recognize breach of warranty for products liability suits. Id. at *6. Nor does Wisconsin recognize claims for punitive damages in wrongful death actions. Id. Both categories of claims, however, were dismissed without prejudice. Plaintiff was given an opportunity to try to re-plead the breach of warranty allegations as cognizable Wisconsin claims. And, since Wisconsin does recognize punitive damages for survival actions, plaintiff was getting another shot at that one too.

Finally, defendant also sought dismissal of the failure to warn claims as preempted. Defendant argued that the risks of the drug were considered by the FDA at the time of approval and that there was no newly acquired information that would have allowed defendant to change its label under the CBE regulations. Id. at *7. Therefore, it was impossible for defendant to comply with both federal and state requirements. But, this case is still at the pleadings stage and the court found that plaintiff had alleged enough to survive preemption. Specifically, plaintiff alleged that there were factual developments post-approval regarding the risks that would not have been considered at the time the FDA reviewed the drug and its labeling. Id. Further, the court found that defendant had not presented “clear evidence” that the FDA would not have approved a labeling change. Id. at *8.

It is worth noting, however, that the court did say that if plaintiff was pursuing a fraud-on-the-FDA type claim (failure to disclose risks to the FDA), that claim was preempted. Id. at *8n.12. Given that the court’s preemption decision was based on a very sparse record, we wouldn’t be surprised to see a round 2 on this issue after some discovery.

If defendants are going to see more home state litigation, even if forum non conveniens is a bit of an uphill battle – establishing choice of law early on may have several benefits. Dismissing claims is certainly one of them, but knowing what law is going to apply on issues such as learned intermediary and causation before discovery gets underway can be invaluable.

 

We remember how, shortly after the atrocious decision in Johnson & Johnson v. Karl, 647 S.E.2d 899 (W. Va. 2007), rejecting altogether the learned intermediary rule, litigation tourists visiting West Virginia argued that Karl represented that state’s “public policy” and therefore the learned intermediary rule could not apply even to their out-of-state cases under the “public policy” exception to the ordinary rules for sorting out choice of law issues.  This was also back in the halcyon days (for the other side) of essentially unlimited plaintiff forum shopping pre-Bauman, so the specter existed that, if this argument succeeded, plaintiffs from all over the country, or even the world, would flock to West Virginia, and by the mere fact of their litigation tourism, thereby rid themselves of one of our side’s most significant arguments.

A couple of West Virginia federal courts were sufficiently pro-plaintiff to buy that “public policy” choice-of-law analysis.  Woodcock v. Mylan, Inc., 661 F. Supp.2d 602, 609 (S.D.W. Va. 2009) (“[b]ecause West Virginia has rejected the learned-intermediary doctrine on public-policy grounds and applying Alabama law to the marketing defect claim would violate that public policy, West Virginia law applies to that claim”); Vitatoe v. Mylan Pharmaceuticals, Inc., 696 F. Supp.2d 599, 610 (N.D.W. Va. 2010) (“it is impossible to apply the substantive law of Louisiana to [plaintiff’s] inadequate warning claim without violating West Virginia public policy”; following “Woodcock’s helpful public policy analysis”).  For doing this, we trolled Woodcock with eighth place on our 2009 bottom ten decisions list:

This decision invoked “forum public policy” to apply West Virginia’s rejection of the learned intermediary rule to a forum shopping plaintiff from Alabama – a staunch learned intermediary state.  That can’t be right.  Practically all major tort law doctrines are grounded in a court’s sense of “public policy.”  Thus the “forum public policy” exception (previously limited to legislatively set policy) becomes another constitutionally suspect means of applying forum law to cases with no significant ties to the state in question.  Any other forum shopper can presumably make the same argument. We’re sure we haven’t seen the last of this.  We blogged about Woodcock here.

Fortunately, the West Virginia legislature stepped in and did the right thing, making its own declaration of West Virginia public policy in 2011:

Choice of Law in Pharmaceutical Product Liability Actions.

It is public policy of this state that, in determining the law applicable to a product liability claim brought by a nonresident of this state against the manufacturer or distributor of a prescription drug for failure to warn, the duty to warn shall be governed solely by the product liability law of the place of injury (“lex loci delicti”).

W. Va. Code §55-8-16(a).  We cheered that development here.

Of course, the entire Karl learned intermediary brouhaha became moot (or so we thought) several years later when the legislature did themselves one better and directly overruled Karl on the merits.  See W. Va. Code 55-7-30 (restoring the learned intermediary rule).  Even more vigorously, we cheered on that development – after the fact, of course, since we made sure not to breathe a word about this before it was a done deal (we know the other side reads our blog, so there are some things we do keep quiet about).

Given this background, it is with no small degree of schadenfreude that we bring to you M.M. v. Pfizer, Inc., ___ S.E.2d ___, 2017 WL 5077106 (W. Va. Nov. 1, 2017).  M.M. involved the West Virginia sojourn of other litigation tourists, this time from Michigan.  Id. at *2.  Michigan, as anyone involved in the defense of prescription medical product liability litigation knows, has a statute that provides the strongest FDA compliance defense in the country (although Texas is close):

In a product liability action against a manufacturer or seller, a product that is a drug is not defective or unreasonably dangerous, and the manufacturer or seller is not liable, if the drug was approved . . . by the [FDA], and the drug and its labeling were in compliance with the [FDA’s] approval at the time the drug left the control of the manufacturer or seller. . . .

Mich. Comp. Laws Ann. §600.2946(5).  As we’ve mentioned before, that statute has produced a “diaspora” of Michigan plaintiffs all running away from the policy judgment made by the legislature of their chosen state of residence.  Those prior plaintiffs didn’t have much luck, and as it turns out, neither did this one.

This time, even if West Virginia courts might have been inclined to cut the Michigan plaintiffs a break, they ran headlong into the West Virginia choice-of-law statute mentioned above.  Even though it was passed to overturn half-baked Karl-based “public policy” determinations, the statute’s literal terms establish West Virginia choice of law “public policy” as to all prescription drug warning cases.  Thus, the M.M. plaintiff – despite having nothing to do with Karl – was entirely out of luck.  “Here, there is no dispute that the injuries alleged by [plaintiffs] all occurred in the State of Michigan.  Thus, [the] failure to warn claim is governed by Michigan law, which forecloses such a claim if the drug was approved by the FDA and the manufacturer complied with the FDA’s labeling requirements.”  2017 WL 5077106, at *3 (also discussing why fraud-on-the-FDA exception to statute doesn’t apply).  Thus, “Michigan law forecloses [plaintiffs’] failure to warn claim.” Id. Interestingly, the court added:

To recognize such a claim under West Virginia law where the same already is foreclosed in the same case by the law of another jurisdiction, however, would contradict the full faith and credit due our sister jurisdictions.

Id. (citations omitted).  “Full faith and credit”?   We confess we haven’t seen that much, indeed ever, before in prescription medical product liability litigation, but anything that keeps a plaintiff from relitigating something they’ve already lost finds favor here.

Unfortunately for these plaintiffs, they were also entirely unable to come up with any defect claim that wasn’t really a statutorily covered warning claim.  “[B]oth the strict liability and negligence claims allege that [defendant] improperly failed to include . . . warnings on its labeling, which, again, constitute allegations that [defendant] failed to warn.”  Id. at *4.  Even if West Virginia law could apply, the choice-of-law statute meant that West Virginia law kicked things back to Michigan, and was “foreclosed thereby.”  Id.  Both their strict liability and negligence claims, although making boilerplate allegations, were “merely a restatement of [plaintiffs’] failure to warn claim,” id. (strict liability), or “merely a reiteration of [plaintiffs’] failure to warn claim.”  Id. at *5 (negligence).  Any way one looked at the case, plaintiffs alleged only a failure to warn, and failure to warn claims had to be determined by Michigan law, where plaintiffs lost.

[B]ecause [plaintiffs’] failure to warn claim is governed by Michigan law, and the governing Michigan statutes provide that a manufacturer cannot be held liable where it has complied with the FDA reporting, disclosure, and labeling requirements, there exists no duty that could have been breached so as to establish a claim for negligence.

Id. at *5.

Now that BMS has pulled the welcome mat away from litigation tourists, we don’t expect much more of a Michigan diaspora, but even if there were, the West Virginia choice-of-law statute, enacted for an entirely different purpose, will preclude any of them from relying on more favorable West Virginia law.  See Id. at *3 n.2 (noting that §55-8-16(a) has since been expanded so that it applies to “all liability claims at issue,” not just warnings).

In the mass torts world in which we find ourselves, glimmers of jurisprudential light can seem few and far between. Two things we love are good warnings causation decisions and sneaky plaintiffs getting caught at their own games.  Today’s case has both.  In Thompson v. Janssen Pharm., Inc., 2017 WL 5135548 (C.D. Cal. Oct. 23, 2017), the court considered simultaneous motions:  the plaintiffs’ motion for voluntary dismissal without prejudice and the defendants’ motion for summary judgment.

The plaintiff began taking Risperdal in 2001 after he was diagnosed with tics and other disorders, and he alleged that the drug caused him to develop gynecomastia (breast enlargement). Nevertheless, he continued – and continues – to take Risperdal (sixteen years, five doctors, and counting) because it effectively controls his tics, notwithstanding his alleged gynecomastia, his lawsuit, and his doctor’s recommendation that he stop taking the drug.

The Plaintiffs’ Motion for Voluntary Dismissal without Prejudice

The plaintiffs sued in the Central District of California, asserting the usual litany of claims. One day before the defendant moved for summary judgment, the plaintiffs moved for voluntary dismissal without prejudice so they could re-file their case in state court and park it in the already-existing JCCP, California’s version of an MDL.  They claimed that, though they had “been diligently seeking discovery” to prove their case, they were “unable to do so effectively” in federal court. Thompson, 2017 WL 5135548 at *4.

The court explained that factors relevant to its decision included: 1) the opposing party’s effort and expense in preparing for trial; 2) excessive delay and lack of diligence by the moving party in prosecuting the action; 3) insufficient explanation of the need for dismissal; and 4) the fact that the opposing party has moved for summary judgment. Id. at *5 (citations omitted).  Naturally, the plaintiff argued that all of these factors weighed in favor of granting the motion, but the court disagreed.

The court pointed out that, though the plaintiffs argued that they had been diligent in prosecuting his case, they had “failed to serve expert disclosure or expert reports.” Id. at *6.  Moreover, through the plaintiffs’ motion was “purportedly premised on their intention to join the pending state court [Risperdal litigation],” they gave “no explanation as to why they waited until . . . mere days before the summary judgment deadline” when they had notice of the state court litigation for more than a year. Id. The court concluded that this was “an insufficient explanation of the need for dismissal,” one of the factors to be considered. Id. (internal punctuation omitted).

In addition, though the defendants’ motion for summary judgment was not pending when the plaintiffs filed their motion (it was filed the next day), the defendants had notified the plaintiffs that they would be filing for summary judgment before the plaintiffs moved for dismissal. The court held that “the proximity of the two motions raise[d] the inference that that Plaintiffs’ motion might have been motivated by a desire to . . . avoid an imminent adverse ruling by way of Defendants’ summary judgment motion and also avoid the consequence of their failure to serve expert disclosures.” Id. (internal punctuation and citation omitted).

Simply put, as the court correctly perceived, the plaintiffs’ tactic was a transparent attempt to hide their meritless case in another mass proceeding on the chance that an inventory settlement would line their pockets at some point down the road.  The court concluded, “. . . Plaintiffs have not provided sufficient justification for voluntary dismissal given the untimeliness of the request and the proximity to Defendants’ motion for summary judgment.” Id.  Motion denied.

The Defendants’ Motion for Summary Judgment

It was undisputed that all of the plaintiffs’ claims were premised on the defendants’ alleged failure to warn about the rate of gynecomastia. As such, the defendants argued that all of the plaintiff’s claims failed because, inter alia: 1) the plaintiff assumed the risk by continuing to take the drug once he was aware of the alleged risk; and 2) the plaintiff could not prove “warnings causation;” in other words, he could not satisfy his burden of proving that that a different warning would have changed his doctors’ decisions to prescribe the drug for him. Id.

As to assumption of the risk, the defendants argued that the plaintiff was aware of the risk of gynecomastia but “continues to use Risperdal because he believes the benefits of the medicine in treating his condition outweigh the very risks that he has sued upon.” Id. at *7 (citation omitted).  The court disagreed, holding that the record did not clearly indicate that the plaintiff’s treating physicians discussed the risk of gynecomastia with the plaintiff.

But it was clear, on the record, that all of the plaintiff’s prescribing physicians were themselves aware of the risk of gynecomastia. And the plaintiff “provided no evidence that a different warning would have altered the physicians’ decisions to prescribe Risperdal.”  Therefore, the plaintiff could not “demonstrate the [warnings] causation required to survive summary judgment under California’s learned intermediary doctrine.” Id. at *8.

Nor were the plaintiffs’ claims saved by California’s “overpromotion exception.” As the court explained, “California courts have in the past recognized that the learned intermediary doctrine may not apply where a medication has been overpromoted to the extent that any warnings would have been nullified.” Id. at *9 (citation omitted).  But the overpromotion exception applies only in “unusual cases” (our California colleagues tell us that it is very rarely applied), and not “where a plaintiff’s prescribing physician did not rely on promotional statements when choosing treatment options.” Id. (citation omitted).  In this case, there was no evidence that any of the plaintiff’s prescribers relied on the defendant’s promotional activities, and the exception did not apply.

And so, in the absence of evidence of warnings causation, the court granted summary judgment for the defendants. The correct result, and a nice cautionary tale for plaintiffs thinking they can game the system, ignore both rules and law, and await the filling of their outstretched hands.  Does our defense heart good.

We have always thought that the False Claims Act resides in some sort of alternate universe when it comes to pharmaceutical products. The central concept behind the FCA is easy:  The FCA penalizes anyone who presents, or causes to be presented, to the federal government “a false or fraudulent claim for payment or approval.”  31 U.S.C. § 3729(a)(1).  In other words, you can’t swindle the government.  That is the basic point you need to know to understand the Act, but if you want more detail you can review our recent FCA primer here.

It starts to get fuzzy when a plaintiff (or more accurately the “relator” under the FCA) tries to append the FCA to allegations of off-label promotion of prescription drugs. In the case of truthful off-label promotion, there is no falsity.  And, the defendant drug manufacturer has usually made no claim to the government for payment.  So where is the eponymous “false claim”?  Add to that the increasingly common practice of applying Rule 9(b)’s particularized pleading standard to FCA allegations across the board, and you see an increasing number of opinions holding that plaintiffs cannot use off-label promotion as the basis for their FCA claims.

That is what a divided Sixth Circuit panel decided in United States ex re. Ibanez v. Bristol-Myers Squibb Co., No. 16-3154, 2017 U.S. App. LEXIS 21328 (6th Cir. Oct. 27, 2017).  In Ibanez, two former sales representatives brought a qui tam action on behalf of the government alleging that the defendants “engaged in a complex, nationwide scheme” to improperly promote the prescription drug Abilify through off-label promotion and illegal kickbacks to physicians. Id. at *2.  Their claims failed, however, for the same reason that most FCA claims fail in this context:  The relators could not allege with particularity a connection between the manufacturers’ alleged conduct and a claim for payment made to the government.  The court’s synopsis of the pleading standard highlights how a relator has to allege facts linking it all together:

A claim under [the FCA] “requires proof that alleged false or fraudulent claim was ‘presented’ to the government.” At the pleading stage, this requirement is stringent:  “where a relator alleges a ‘complex and far-reaching fraudulent scheme,’ in violation of [the FCA] it is insufficient to simply plead the scheme; [s]he must also identify a representative false claim that was actually submitted to the government.”

. . . . Rule 9(b) requires relators to adequately allege the entire chain—from start to finish—to fairly show defendants caused false claims to be filed.

Id. at *9-*10 (citations omitted, emphasis added). When applied to alleged improper promotion of prescription drugs, the causal chain gets sketchy:

First, a physician to whom [the manufacturers] improperly promoted Abilify must have prescribed the medication for an off-label use or because of improper inducement. Next, that patient must fill the prescription.  Finally, the filling pharmacy must submit a claim to the government for reimbursement on the prescription.

Id. at *10. According to the Sixth Circuit, this chain “reveals just what an awkward vehicle the FCA is for punishing off-label promotion schemes.” Id.

“Awkward vehicle.” Those are the Sixth Circuit’s words, not ours, but the description is apropos.  These relators were unable to allege a single representative false claim, because they could not allege the causal chain from beginning to end.  Although they alleged that the defendants made false statements in order increase Abilify prescriptions, they could not allege any connection between the alleged statements and any claim to the government. Id. at *14.  They could not allege a conspiracy to violate the FCA either because having a plan to increase prescriptions through improper promotion “may be condemnable,” but it does not amount to an agreement “made in order to violate the FCA.” Id. at *16 (emphasis in original).  The court acknowledged an exception to this stringent pleading requirement—the so-called Prather exception—where a relator has personal knowledge directly related to billing practices, supporting a “strong inference that a false claim was submitted.” Id. at *11-*12.  But these relators were former sales representatives with no involvement in government billing.  The majority held that their lack of personal knowledge negated the Prather exception, although the dissenting judge disagreed. Id. at *13, *34-*37.

The relators therefore failed to state a claim, and the Sixth Circuit also rejected their proposed amended complaint because it had all the same problems as the former complaint: The relators alleged that various pharmacies submitted claims to Medicaid for Abilify prescriptions, but they could not identify the prescribing physicians or otherwise connect the claims to the defendants’ alleged conduct. Id. at *23-*24.  They alleged that certain physicians prescribed Abilify covered by Medi-Cal, but could not allege that the prescriptions were off label or resulted from any improper promotion. Id. at *24.  They alleged that a certain patient was prescribed Abilify off label, but they could not allege that the prescription was presented to the government for payment or was connected to the alleged improper promotion. Id. at *24-*26.

The proposed conspiracy claim in the amended complaint failed for similar reasons: The claims were not adequately tied to any allegedly false statements made by the defendants.  “Thus, the connection between the false statements and claims submitted to the government remains ‘too attenuated to establish liability.’” Id. at *27-*28.

There are other wrinkles in the opinion, but we have covered the essentials. If there is one takeaway from the opinion (and this blogpost), it is this:  An FCA claim based on improper promotion of prescription drugs will almost always fail because there are too many links in the causal chain leading from the alleged promotional activity to a claim for payment submitted to the government.  The first link may be the most difficult.  Physicians exercise their independent medical judgment in writing prescriptions every day, including prescribing drugs for off-label uses.  Who is say whether any one decision was actually influenced by off-label promotion?  When adding in the patient’s decision to fill the prescription and the pharmacy’s decision to submit a claim for government reimbursement, the connection becomes “too attenuated.”  Or, as the Sixth Circuit put it, awkward.

Just two days ago, Bexis lowered the boom on the Third Circuit’s recent decision in Cottrell v. Alcon Labs, ___ F.3d ___, 2017 WL 4657402 (3d Cir. Oct. 18, 2017).   In a 2-1 decision, the Cottrell court permitted the plaintiffs to proceed on the notion that making eye drop drips bigger than they have to be is a consumer protection violation.  To Bexis’s eyes, that decision was blind to the lack of standing, the absence of any “substantial economic injury,”  and the FDA’s non-approval of eye drop drips of the “smaller” size plaintiffs claim it is somehow illegal not to make under state law.  It turns out that there is someone else out there even more unhappy with the Cottrell decision than Bexis: the defendant.  Now we have the defendant’s Petition for Rehearing and Rehearing En Banc,  https://www.druganddevicelawblog.com/wp-content/uploads/sites/30/2017/11/Cottrell-rehearing-petition.pdf which makes an insightful and compelling case for undoing the panel’s decision.

 

Two preliminary matters are worthy of comment before we tell you what the Petition said. First, we have been so unkind about the Third Circuit’s error in the Fosamax case that we managed to attract the attention of the excellent CA3 blog.   In that blog, the author wondered whether our dissection of Fosamax was perhaps a bit more violent than necessary.  The author also wondered whether we were coming close to accusing the court of bad faith.  Yes to the former, but definitely No to the latter.  As we told the CA3 blog, we took issue with what we saw as bad reasoning, but never-ever thought there was any bad faith.  (The CA3 blog was generous enough to print our disclaimer.  Thanks for that.)  By and large, we are mighty proud of our home circuit.  We know several of the judges, and every one of them is honorable, hard-working, and much smarter than we are.  Sometimes we are not going to agree with the court’s decisions.  Luckily for us we work in a profession and live in a country where debate and criticism are allowed.  Second, succeeding on a petition for rehearing and rehearing en banc is not easy.  When we clerked for Ninth Circuit Judge William Norris, it seemed there was a presumption against such petitions.  Who wants to admit they were wrong?  And yet we remember one time our judge was on a panel where things strayed from the norm.  Another member of the panel (who will remain unnamed) loved to decide cases before oral argument and draft a memorandum disposition rather than a bench memorandum.  This judge prided himself on having almost no backlog.  He pushed for deciding a particular contract dispute via a mere memorandum disposition, not a published opinion, because he saw the issues as being too obvious and insignificant for the Federal Reporter.  And so a memo dispo issued.  But then the losing party filed a petition for rehearing that was not only insistent, but it made a lot of sense.  We met with our Judge in his chambers to talk it over.  The telephone rang.  It was the third member of the panel, who began by saying, “Bill, I think maybe we got one wrong.”  The two judges confabbed, and then set about persuading the third to change his mind and change the outcome.  It took some arm-twisting, but in the end, justice was done.  A mistake led to a proud moment.  By the way, the Ninth Circuit Judge who called our Judge was Anthony Kennedy.  He is now on the U.S. Supreme Court.  So whenever we hear criticisms of Justice Kennedy for fence-sitting, or for grounding some of his opinions in “the right to define one’s own concept of existence, of meaning, of the universe, and of the mystery of human life” or, much worse, international law, we recall his extraordinary integrity and modesty, and how he was supremely interested in getting things right.

 

Back to the Cottrell Petition. The main points in favor of revisiting the Third Circuit’s decision are that it is contrary to Finkelman v. National Football League, 810 F.3d 187 (3d Cir. 2016), it “radically expands Article III standing,” and that it directly conflicts with Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017).  Moreover, the plaintiff’s inherently speculative theory of injury in fact was rejected by federal courts in Massachusetts and Missouri.  (When a court comes out with a more pro-plaintiffy position than courts in Massachusetts and Missouri, that’s really saying something.)  That theory was also rejected by the district court in Cottrell.  And then the Third Circuit reversed that rejection.  

 

Remember that the Cottrell plaintiffs did not claim that the medications caused them physical harm or were ineffective in treating their eye conditions, or that the defendants misrepresented or omitted any information about the medications or the number of doses expected.  Rather, the plaintiffs simply insist that smaller eye drops would have cost them less.  How is that any different from the Third Circuit’s earlier, controlling Finkelman case, where the plaintiffs had purchased two Super Bowl tickets on the resale market for $2,000 each, and contended that the National Football League had violated New Jersey’s ticket law by not offering at least 95% of tickets to the general public and instead withholding most tickets for league insiders?  The plaintiff in Finkelman alleged that the NFL’s conduct had caused him injury by reducing the supply of tickets, thereby driving up the cost of tickets on the resale market.  The Third Circuit in Finkelman held that the plaintiff lacked standing because the injury was wholly speculative.  Sure, maybe the NFL’s withholding of tickets increased prices on the resale market, but “it might also be the case that it had no effect on the resale market,” and indeed tickets might even have been more expensive in plaintiff’s hypothetical resale market, as members of the general public may have greater incentives than league insiders to resell at high prices.  (We have to admit that, as residents of Philadelphia, where the local team has the best record in the entire NFL, the availability of Super Bowl tickets is a much, much bigger issue to us right now than the size of eye drops.)

The Petition makes the point that, just as in Finkelman, other market effects might have produced a result very different from what the plaintiffs theorized.  In Cottrell, the plaintiffs essentially presumed that the defendants price their products solely according to volume, such that “changing the eyedropper size would not change the price of the medicine, while extending the useful lifespan of each bottle, driving down [the plaintiffs’] aggregate costs.” But it is just as likely that use of smaller drops would prompt use of different sized containers, or that smaller drops would result in a higher price – because of more doses – for the same container.  Who knows?  All we do know is that the allegations of the complaint do not “affirmatively and plausibly” add up to an “injury” caused by the defendant’s conduct.  

The Petition nicely captures the absurdity of the Third Circuit’s analysis, under which consumers suffer Article III injury from “unfairness” whenever they “walk into a supermarket and buy a product — from toothpaste, to ketchup, to deodorant, to hairspray — so long as they can then conceive of a way that the product might be dispensed more efficiently.”  The Petition also nicely exposes the weakness in the Third Circuit’s effort to distinguish away the Seventh Circuit decision in Eike.  According to the Cottrell majority, Eike “seemed to begin its standing analysis with a determination that the plaintiffs had ‘no cause of action.’” But while it is true that the Seventh Circuit did (correctly) conclude that the plaintiffs had “no cause of action,” the Seventh Circuit also separately held that there was no Article III injury, without ever suggesting a causal connection between the two.  Eike, 850 F.3d at 318.  The Seventh Circuit got it fundamentally right when it held that the fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; “it is just a regret or disappointment.” 

As residents in, and fans of, the Third Circuit, the Cottrell decision certainly is cause for “regret and disappointment.” We called this post a “second look” at the eye-drop litigation.  It is the second look we have taken at the Cottrell case.  We hope that the Third Circuit takes a second look.      

 

 

This post is from the non-Reed Smith side of the blog.

Way back at the start of this year, we posted about a great preemption win on express warranty. Well, that case has worked its way through the appellate process and the Fifth Circuit unfortunately has reversed the decision. But, we aren’t going to rage against the decision as you might expect us to. We aren’t going to laud it either. Rather, we are taking the decision for what it is – the narrowest of preemption escapes based on the unusually detailed nature of what the manufacturer actually said in the alleged warranty. Good luck to plaintiffs trying to use this decision elsewhere. For 99.9% of express warranty cases, this case’s rationale actually is a positive result.

The facts of the case are straightforward. Plaintiff alleged that a neurostimulator implanted in his spine stopped working after one and a half years, had to be explanted, and that he suffered complications from the revision surgery. Wildman v. Medtronic, Inc., 2017 U.S. App. LEXIS 21655 at *2-3 (5th Cir. Oct. 31, 2017). Plaintiff’s only claim was that the defendant breached its express warranty guaranteeing the device for 9 years. The alleged warranty language is important. The defendant’s website said that in addition to battery life, “many other factors and components are involved in determining the overall longevity of an implanted medical device.” And that based on extensive testing of many components, not just the battery, defendant had “confidence that [its] device is reliable for 9 years.” Id. at *4. Plaintiff alleged these statements were not reviewed or approved by the FDA. The device’s reference manual did undergo FDA review and approval as part of the PMA process. The manual contains an approved FDA statement that the device’s “battery life” was 9 years. Id. at *5. It is the distinction between “battery life” and “device life” that is at the crux of the court’s decision.

Why is that so important? Because that Fifth Circuit stated definitively that “when a claim challenges a representation the FDA blessed in the approval process, it is preempted.” Id. at *8. Could not be any clearer. Hence the reason this decision is probably more beneficial to defendants generally than to plaintiffs. Because the manufacturer’s website drew a distinction between the battery and the rest of the components, the court found the language was guaranteeing the reliability of the latter but that the FDA had only evaluated the former. Id. at *9. A verdict that the defendant’s representation was misleading or untruthful would therefore not run counter to any safety finding by the FDA. Instead, it would parallel federal regulations prohibiting false or misleading statements about medical devices.  Id. at *10-12.

The Fifth Circuit goes on to point out that where an express warranty claim survives preemption, it also still has to meet the TwIqbal pleadings standards. Therefore, an express warranty claim based on “vague allegations about representations . . . made to doctors or consumers” isn’t enough. Id. at *13. Another defense-favorable holding emphasizing that Wildman is an aberration.

Even though the case is being remanded, plaintiff hasn’t proven anything yet. Far from it. As the court points out, to prove his express warranty claim under Texas law is going to require both reliance and notice. Id. at *8n.3. It’s also going to require proof that something other than the battery caused the device to fail. Id. at *13-14. Plaintiff already amended his complaint to change from his more specific allegation that the device failed due to the battery to a more general allegation that the “neurostimulator did not conform to a nine-year device life.” Id. at *5. But does that general allegation meet the mark on the TwIqbal yardstick? The only claim that escapes preemption is a narrow one – did defendant breach a warranty about the longevity of some component other than the battery. On remand, the first issue for the district court is to determine whether plaintiff’s complaint sufficiently alleges facts to support such a claim. Again we say good luck on that.

The case may be, for the moment, revitalized, but the opinion bringing it back to life had enough juice worth the squeeze for defendants.

Last month we brought you word of an excellent result (preemption) in a ridiculous case − a class action claiming that the drops in eye-drops are too big.  That decision was in accord with an earlier decision likewise dismissing such claims on preemption grounds. See Thompson v. Allergan USA, Inc., 993 F. Supp.2d 1007 (E.D. Mo. 2014) (discussed here).

However, there is another ground on which these bottom-feeding actions have been dismissed – lack of sufficient injury to support standing.  After all, the concept of some sort of ideal “price” for a product, above which it is improper to charge is a will-o-wisp, apparently knowable only to plaintiff-side experts (just ask them, they’ll tell you).  This is called “benefit of the bargain” by such experts.  Courts tend to use a different description – “absurd.”

[Plaintiff] received the drug she was prescribed, the drug did the job it was meant to do . . ., and it caused no apparent physical injuries. Under such circumstances, there could be no ascertainable loss. . . .  The Court believes Plaintiffs’ proposed liability theory, which requires no demonstrable loss of any benefit, would lead to absurd results and holds that Plaintiffs fail to state a claim as a matter of law.

In re Avandia Marketing Sales Practices & Products Liability Litigation, 639 F. Appx. 866, 869 (3d Cir. 2016) (citations and quotation marks omitted), affirming, 100 F.Supp.3d 441, 446 (E.D. Pa. 2015), also holding  “absurdity is inherent in the nature of Plaintiff’s claimed loss” because it was “based only on the idea that [the product] is inherently worth some unspecified amount less than whatever Plaintiff might have paid for it”).

That was essentially how the Seventh Circuit reacted to these same eye drop allegations in Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017) (discussed here).  We described the absurd theory that the plaintiffs were pursuing in our Eike post, and because we’re lazy, we’ll simply repeat that here:

The plaintiffs sued pharmaceutical manufacturers of eye drops used for the treatment of glaucoma because the drops were bigger than they needed to be.  The theory is that the plaintiffs were paying more than they would have if the drops were smaller.  The plaintiffs alleged no conspiracy among the defendants.  This was not an antitrust case. . . .  Nor did the plaintiffs allege any misrepresentations.  Rather, the plaintiffs simply sought, because they thought it would be less expensive, a smaller dose product that nobody made.

The Seventh Circuit essentially agreed: “The fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; it is just a regret or disappointment − which is all we have here, the class having failed to allege ‘an invasion of a legally protected interest.’”  850 F.3d at 318 (citations omitted).  Accord Carter v. Alcon Laboratories, Inc., 2014 WL 989002, at *4-5 (E.D. Mo. March 13, 2014) (also dismissing identical claim for lack of any cognizable injury).

Apparently, however, the inherent triviality of that claim is no deterrent to today’s class action lawyers, who seem to have nothing better to do than measure the comparative value of eye drop drips.  After several attempts, they seem to have found a couple of judges credulous enough to allow one of these non-injury cases to survive – at least on the standing/injury issue.  That’s today’s case, Cottrell v. Alcon Labs, ___ F.3d ___, 2017 WL 4657402 (3d Cir. Oct. 18, 2017).   Looking to the “scientific consensus on eye drop size,” the majority is willing to let plaintiffs proceed on the notion that making eye drop drips bigger than they have to be is a consumer protection violation.  Id. at *2.  They may proceed even though “no defendant has reduced their products’ drop sizes,” and thus there is no competing product, priced at any price, against which to ascertain the plaintiffs’ purportedly “substantial economic injury.”  Id.  Nor does it appear that the FDA has ever approved – or even had submitted to it – eye drop drips of the “smaller” size plaintiffs claim it is somehow illegal not to make under state law.

The standing question focused on “injury in fact,” and as the party bringing the claim, plaintiffs had the burden of proving standing.  Id. at *4.  To find standing here, the majority (conceding that the district court’s no-standing analysis had “some persuasive appeal”) went deep into the weeds – breaking “injury in fact” into various “components.”  Id. at *5.  The first was a “legally protected interest.”  Conveniently, this allowed the Cottrell majority to base their result on something that prior precedent had “not defined” or even “clarified whether [it] does any independent work in the standing analysis.”  Id.  Presto!  A clean slate on which to build a standing castle in the air.  “[W]hether a plaintiff has alleged an invasion of a ‘legally protected interest’ does not hinge on whether the conduct alleged to violate a statute does, as a matter of law, violate the statute.” Id.  Impressive – this is a holding that the merits don’t matter. We’ll come back to that.

The second aspect of Cottrell’s drawing on a clean slate is “that financial or economic interests are ‘legally protected interests’ for purposes of the standing doctrine.”  Id. at *6.  Well, duh.  That seems like a platitude.  Third, “legally protected interests” can be created by statute, including a state statute.  Id.  That also sounds platitudinous – except Cottrell separates that proposition from any injury.  That comes in the fourth factor – that “interest must be related to the injury in fact” as opposed to being “a byproduct of the suit itself.”  Id.

Having set up this thicket on its clean slate, the court’s actual analysis of the injury requirement’s application to overly large eye drop drips takes only a paragraph:

Plaintiffs claim economic interests: interests in the money they had to spend on medication that was impossible for them to use.  They seek monetary compensation for Defendants’ conduct that they allege caused harm to these interests.  Plaintiffs’ claimed interests arise from state consumer protection statutes that provide monetary relief to private individuals who are damaged by business practices that violate those statutes.  These claims fit comfortably in categories of “legally protected interests” readily recognized by federal courts.

Id. (citing Cantrell v. City of Long Beach, 241 F.3d 674, 684 (9th Cir. 2001)).  Wow!  At that level of generality, any claim that anything for any reason should have been made differently or priced differently confers standing.  That no such alternative product exists is of no bearing.  This breathtakingly broad holding means that the amount of harm to the “economic interest” being undefinable has no bearing.  That the “business practices” at issue were a consequence of the FDA-approved design of the product has no bearing.  These are presumably “merits questions” that court already divorced from standing by putting that rabbit in the hat in its “first” stroke on the blank slate – that merits don’t matter.

We’ve seen this sort of credulous avoidance of merits questions before in class actions before.  Remember how courts for decades misinterpreted Eisen v. Carlyle & Jacqueline, 417 U.S. 156 (1974), to find that class certification can’t look at the merits?  That was finally interred once and for all in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 & n.6 (2011), but now we see it popping up again on this supposed standing blank slate.

It’s not really a blank slate, however.  The Third Circuit, and many other courts, have held that TwIqbal “plausibility” requirements apply to the analysis of standing questions.  “With respect to 12(b)(1) motions in particular, the plaintiff must assert facts that affirmatively and plausibly suggest that the pleader has the right he claims.”  In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 244 (3d Cir. 2012) (applying TwIqbal pleading requirements to standing analysis in RICO drug pricing class action).  TwIqbal “teach that standing cannot rest on mere ‘legal conclusions’ or ‘naked assertions.’”  Finkelman v. National Football League, 810 F.3d 187, 194 n. 55 (3d Cir. 2016) (citation and quotation marks omitted).

Because Lujan mandates that standing “must be supported in the same way as any other matter on which the plaintiff bears the burden of proof,” it follows that the TwomblyIqbal facial plausibility requirement for pleading a claim is incorporated into the standard for pleading subject matter jurisdiction.  Lujan, 504 U.S. at 561.  Therefore, we join many of our sister circuits and hold that when evaluating a facial challenge to subject matter jurisdiction under Rule 12(b)(1), a court should use TwomblyIqbal’s “plausibility” requirement, which is the same standard used to evaluate facial challenges to claims under Rule 12(b)(6).

Silha v. ACT, Inc., 807 F.3d 169, 174 (7th Cir. 2015) (citing Schering Plough along with many other cases).  “Just as the plaintiff bears the burden of plausibly alleging a viable cause of action, so too the plaintiff bears the burden of pleading facts necessary to demonstrate standing.”  Hochendoner v. Genzyme Corp., 823 F.3d 724, 730 (1st Cir. 2016) (Iqbal citation omitted) (also providing string citation of TwIqbal standing cases).

Along these lines, we also point out that the sole citation in Cottrell supporting its one-paragraph injury in fact analysis, Cantrell, supra, is a Ninth Circuit case, and the Ninth Circuit is the only circuit that does not follow TwIqbal in standing cases. See Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th Cir. 2011) (cited as lone exception in Silha).

Having thus improperly insulated the inherently ridiculous nature of the alleged injury from TwIqbal inspection on standing questions – without even mentioning TwIqbalCottrell then disagrees with Eike for precisely that reason.  To do so, Cottrell splits another hair – distinguishing business practices that are “unfair” under a consumer protection statute from those “that are fraudulent, deceptive, or misleading.”  2017 WL 4657402, at *6.

The plaintiffs in Eike explicitly alleged that the defendants’ practices in manufacturing and selling eye medication were “unfair”. . . .  The Court was obliged to take these allegations as true for purposes of the standing inquiry.

Id.

That is, to be charitable, garbage. “Unfair” by itself is your classic legal conclusion.  Under TwIqbal, legal conclusions have to be accompanied by some factual basis to survive dismissal.  Eike rightly pointed out that, in the absence of any allegation of anything false or misleading about how these products were marketed, an “unfairness” allegation amounted to mere “dissatisfaction with the defendants’ products or their prices.”  2017 WL 4657402, at *6 (describing Eike).

Having thus improperly given the plaintiffs’ inherently implausible theory on “legally protected interest a TwIqbal free pass, Cottrell also waved it through the other injury in fact factors it created.  Most interestingly – because of the dissent – Cottrell attempted to distinguish a prior standing precedent, Finkelman, supra.

[Plaintiffs’] pricing theory is far less speculative than . . . the theory of financial harm we rejected in Finkelman . . ., [where t]he plaintiff claimed that this policy reduced the number of tickets available in the resale market.  Under the basic economic principle of supply and demand then, the policy resulted in an inflated ticket price in the resale market, according to the plaintiff.  We rejected plaintiff’s theory, as the plaintiff pled no facts to support their assertion that [defendant’s] policy would actually reduce the number of tickets in the resale market.

Id. at *9.  Since a “reduced size” of the eye drop drip (produced by a different sized hole in the tip) was the “only change from the status quo” that plaintiffs’ theory in Cottrell required in the majorities eyes, it was less “speculative” than the too-remote theory in Finkleman, and thus “sufficient to satisfy the injury-in-fact requirement.”  Id. at *10.

The dissent saw things differently.  Finkleman was dispositive (“I believe that Finkelman all but decides this case”).  Cottrell, 2017 WL 4657402, at *12 (dissenting opinion).  “We properly recognized that markets operate in complex ways.”  The market forces in Finkleman “made clear that any potentially unlawful conduct by the [defendant] did not necessarily result in higher prices to the plaintiff” and “concluded that we have no way of knowing whether [defendant’s] withholding of tickets would have had the effect of increasing or decreasing prices on the secondary market.”  Id.

[F]or purposes of analyzing economic injuries in the context of marketwide effects, we cannot do precisely what the plaintiffs here ask of us:  isolate and change one variable while assuming that no downstream changes would also occur.  These cases . . . reflect courts’ skepticism about plaintiffs’ ability to satisfy the case or controversy requirement of Article III by relying on such imaginative economic theories.  Thus, contrary to the Majority’s assertion, the plaintiffs’ pricing theory does in fact depend on exactly the sort of presumption rejected by us and by other courts − namely, the presumption that no other aspects of the market would change once the defendants’ conduct did. . . .  Finkelman makes clear that [standing analysis] distinguishes “between allegations that stand on well-pleaded facts and allegations that stand on nothing more than supposition.” . . .  The plaintiffs . . . ask us to assume certain facts about other actors’ behavior − exactly the sort of assumption that cannot be proven at trial. Accordingly, I would reject the plaintiffs’ alleged economic injury as overly speculative and untenable under existing precedent.

Id. at *13 (multiple citation footnotes omitted).

The Cottrell dissent goes on to discuss multiple reasons why plaintiffs’ attenuated economic assumptions are “a particularly bad fit for the market for pharmaceuticals.”  Id.

  • Pharmaceuticals are not priced “by volume;” “unit-based pricing is too one-dimensional for the [pharmaceutical] marketplace.”
  • Pharmaceutical pricing is “value-based”; “measured in part by effective doses.”
  • This pricing “shift . . . sever[s] the link between volume and price upon which the plaintiffs’ alleged injury depends.”
  • “[T]he price of each bottle could actually increase if each bottle provided more doses.”
  • Because plaintiffs’ assumption “does not reflect market conditions and pressures in the pharmaceutical industry,” it would “draw an unreasonable inference about the downstream consequences of” the design change they are demanding.
  • “[U]nreasonable” inferences cannot be accepted “at face value.”

Id. at *13-14 (dissenting opinion).

The dissent is of the view that the majority’s decision conflicts with Finkleman.  We agree, but go further.  We think the entire construct in Cottrell conflicts with prior Third Circuit precedent applying TwIqbal in standing cases because of its holding that the merits – and thus the facts that must be pleaded to establish the “plausibility” of the claim on the merits – don’t matter in standing cases.  Cottrell thus represents, with In re Fosamax (Alendronate Sodium) Products Liability Litigation, 852 F.3d 268 (3d Cir. 2017), the second abrupt pro-plaintiff lurch by the Third Circuit this year, which is less surprising than it might seem, considering the both of the judges in the majority in Cottrell also decided Fosamax.

About the only good thing that can be said about Cottrell is that it did not purport to decide that preemption issue that has also defeated these half-baked dropper drip size allegations.  Id. at *11.  That argument is that design changes affecting the dosage of medication delivered – which is necessarily what plaintiffs’ drop size allegations depend on – are “major” changes that require prior FDA approval, and thus are “impossible” to carry out with the immediacy that state law demands. See Gustavesen v. Alcon Laboratories, Inc., ___ F. Supp.3d ___, 2017 WL 4374384, at *5 (D. Mass. Sep. 29, 2017), and Thompson, 993 F. Supp.2d at 1013-13, as discussed in our prior posts.