We started out the week with our Come At Me Bro post rebutting some commentary from the other side about the games plaintiffs play with protective orders.  So we suppose it’s appropriate to close the week on the same note, responding to criticism from a different plaintiff-side blog directed at another of our posts.  We don’t mind being criticized; we’re lawyers.  That’s what we do for a living, and it’s what the other side does to us.  It’s not called an “adversary” system for nothing.

But here on the blogosphere, unlike in litigation, there’s no notice.  We don’t have to email someone that we’ve raked over the coals, and neither does anybody else.  Somebody drops an anvil on us; we throw a bomb back atcha.  It resembles the Spy vs. Spy cartoons we read in Mad Magazine when we were kids.

Maybe we’re catching more flack these days because there are more, better plaintiff-side blogs.  One of the best on the other side is Max Kennerly’s “Litigation & Trial” – it certainly looks prettier than ours, with a nifty barbarians-at-the-gates graphic at the top.  That graphic reminds us of some mass torts we’ve known.  Did Atilla pillage on contingent fee?

Anyway, Max is pretty smart.  His posts are always thoughtful, if usually misguided.  Come to think of it, he’d probably say the same thing about us.  He has some thoughts about our Spherical Error II post from a couple of weeks ago about the weird ways that the court construed the Pennsylvania consumer protection statute (the “UTPCPL”) in Sheet Metal Workers Local 441 Health & Welfare Plan v. GlaxoSmithKline, PLC, 2010 WL 3527601 (E.D. Pa. Sept. 8, 2010).

Having learned of Max’s post, we took a look and thought it merited a response.  It dismissed our first beef with the Sheet Metal Workers decision – that on several issues it expanded scope of the UTPCPL beyond anything the Pennsylvania state appellate courts had done.  We cited about a half-dozen Third Circuit cases (there is similar precedent in every circuit) saying that was a no-no.

Max professed not to understand that rule (“I’ve never known what to make of that dictum”), and eventually concluded it was a “rule of parsimony” similar to “Occam’s razor” (one thing we and Max evidently share is affinity for scientific references).  Our position, he of course found misguided (“The folks at Drug and Device Law (that’s us) confidently assert that . . . federal courts should bend over backwards to dismiss state law claims whenever possible”).

Umm … nope.

It would help to read the cases we cited.  The rule is more like a presumption.  If the plaintiffs are coming from somewhere out in left field, and there’s a less extravagant way to read state law, that’s what federal courts are supposed to do.  As the Third Circuit held earlier this year, it’s a “well-established principle that where two competing yet sensible interpretations of state law exist, we should opt for the interpretation that restricts liability, rather than expands it.”  Travelers Indemnity Co. v. Dammann & Co., 594 F.3d 238, 253 (3d Cir. 2010).  That pretty much sums it up.

We’ll put it another way.  We reckon that Max, like most lawyers on the other side, can cite the presumption against preemption in their sleep (we sure get nightmares about it).  Well, our federalism principle is pretty much the same thing.  The Supreme Court in Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005), described that presumption in similar terms:  “[E]ven if [the preemptive] alternative were just as plausible . . . we would nevertheless have a duty to accept the reading that disfavors preemption.”  Id. at 449.  Erie federalism is about the same thing.  It’s a rule to guide predictions of state law in the absence of definitive state-law precedent.  When faced with two plausible alternative readings of the law, courts are to choose the one that “restricts liability, rather than expands it.”  Travelers Indemnity, supra.

That’s precisely what we argued that the Sheet Metal Workers opinion failed to do – over and over again.  It did it with the elements of the UTPCPL, and then again with the statute’s legislative purpose, and a third time in finding a third party payer could be a “consumer” under the statute.  That’s three strikes.  Max doesn’t even argue with the umpire about the last two (legislative intent and consumer standing).  We thank him for that, otherwise this post would have to be a lot longer.

As for the first point about the elements of the statutory cause of action, Max doesn’t see it our way – surprise, surprise, surprise.  We get lambasted for “read[ing] the word ‘deceptive’ right out of the act” because we pointed out that both the Pennsylvania Supreme Court (Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 438 (2004)) and the Third Circuit (Hunt v. United States Tobacco Co., 538 F.3d 217, 221-22 (3d Cir. 2008)) have both held that the 1996 addition of “deceptive” to the Act didn’t change the obligation of private plaintiffs (unlike the state AG) to prove the elements of fraud.  See our prior post for the relevant quotes.

Instead, Max then offers Moser v. DeSetta, 589 A.2d 679 (Pa. 1991), a breach of fiduciary duty case having nothing to do with the UTPCPL, for the proposition that “fraud consists of anything calculated to deceive,” and therefore anything plaintiffs want to plead is OK.

Except it’s not.

Because that’s not at all what the Sheet Metal Workers opinion held, and not why we’re critical of that decision.  Rather, Sheet Metal Workers concluded, contrary to scads of decisions (cited in our prior post), that the addition of “deceptive” relaxed what these private plaintiffs had to plead.  2010 WL 3527601, at *33 (“the addition of the word “deceptive,” along with the Pennsylvania Supreme Court’s broad construction of the PUTPCPL . . . to address both fraudulent and unfair business practices, renders previous interpretations requiring plaintiffs to allege common law fraud erroneous”).  That reasoning, discredited by years of precedent and belied by everything in the statute’s legislative history, is what prompted our post.

Max only missed it by that much.

Since Max can’t really deny that the legal conclusion we criticized was wrong – contrary to at least three Pa. Supreme Court decisions and the Third Circuit Hunt case – he changed the subject (frankly, in that position, we would too).  If a trial court’s holding is indefensible, a good lawyer invents something more plausible that the court might have done, and tries to sell that to the appellate court.  So the post shifts the argument away from the elements of fraud, where the law is clear (and Sheet Metal Workers is clearly in error), to what facts might constitute fraud.  Only by changing the subject could Max argue that Toy v. Metropolitan Life Insurance Co., 928 A.2d 186 (Pa. 2007), is irrelevant.  Toy specifically held that “justifiable reliance” is an element of all UTPCPL catch-all clause cases.  Id. at 201 (“justifiable reliance is an element of the claims”).  And reliance is precisely what’s lacking in Sheet Metal Workers.

The problem is that Sheet Metal Workers is an antitrust case masquerading as consumer fraud.  That’s a bad fit.  The allegations, accurately recited at the beginning of Max’s post, are that by instituting “sham” litigation (which, if proven, has in some circumstances been held be an anticompetitive practice), the defendant kept a competing drug off the market and allowed the defendant to exercise monopoly power over prices.

Whatever else that might be, that’s not UTPCPL consumer fraud.  There’s no information being disseminated that deceived any purchaser.  The conduct that the plaintiffs sue over – the sham litigation – didn’t involve any contact between the defendant and the plaintiff third party payers.  The sham litigation wasn’t brought against them, but against (we assume) some non-party, would-be competitor.  The plaintiffs didn’t rely on anything the defendant said or did not say.

Hence, the Sheet Metal Workers plaintiffs’ attempt to read “deceptive” as deleting elements of fraud that binding precedent says weren’t deleted isn’t avoidable by changing the subject to the peculiar facts alleged.  The legal elements remain.  There wasn’t any reliance on a deceptive statement.  If plaintiffs had been able to plead reliance properly, the court would never have needed to emphasize a (non-existent in private actions) distinction between “fraud” and “deception” in the first place.

Having taken evasive action with Moser, Max then veers completely off course to a discussion of Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (U.S. 2010).  Shady Grove is an interesting case, but it doesn’t do away with Erie v. TompkinsShady Grove held that a state procedural prohibition against class actions can’t prevent the application of F.R. Civ. P. 23 to seek class action status in federal court:

The question in dispute is whether [plaintiff’s] suit may proceed as a class action.  Rule 23 provides an answer.  It states that “[a] class action may be maintained” if two conditions are met:  The suit must satisfy the criteria set forth in subdivision (a) ( i.e., numerosity, commonality, typicality, and adequacy of representation), and it also must fit into one of the three categories described in subdivision (b).  By its terms this creates a categorical rule entitling a plaintiff whose suit meets the specified criteria to pursue his claim as a class action. . . .  Thus, Rule 23 provides a one-size-fits-all formula for deciding the class-action question.  Because [the state statute] attempts to answer the same question – i.e., it states that [plaintiff’s] suit “may not be maintained as a class action” . . . it cannot apply in diversity suits.

130 S. Ct. at 1437 (cites and parentheticals omitted) (our emphasis added)

So a state that, like Mississippi, prohibits class actions altogether, or the New York statute prohibiting class actions for a statutory cause of action, can’t override Rule 23 in federal court.

That has nothing to do with anything at issue in Sheet Metal Workers (probably why the opinion doesn’t cite Shady Grove).  Under Shady Grove, the “conditions” of Rule 23 must still be “met.”  And as we said in our prior post, the “justifiable reliance” element of a claim UTPCPL is a “class action killer.”   It’s not that the UTPCPL bars class actions whether or not they satisfy Rule 23 (or the Pennsylvania class action rules). No, it’s that a UTPCPL private cause of action contains substantive elements – such as reliance – that prevent it from satisfying Rule 23’s (or state law rules) prerequisites for class certification.

Fidelity to state substantive law – that’s what the federalism presumption we discussed at the outset is all about.  Nothing in Shady Grove calls into question what Erie v. Tompkins settled.  Federal courts must follow state substantive law, and can’t make it up as they go along – as Sheet Metal Workers did in using the discredited “1996 amendment to add deception” argument to strip the elements of common law fraud, and in particular reliance, from the UTPCPL.

Max is right about one thing – it’s pretty simple.

Sorry about that, chief.