We again post the day after a holiday, when stores are flooded with shoppers—this time exchanging gifts purchased last time. We discuss a case involving discussions of “consumer value” and “fair market value.” So, you might think we would go back to that shopping well. No. We have decided to zag. To us, the opinion on class certifications in Saavedra v. Eli Lilly & Co., No. 2:12-cv-9366-SVW (MANx) (C.D. Cal. Dec. 18, 2014), slip op., evokes another seasonal activity, playoff football. Depending on how you count the requirements, plaintiffs in a purported class action need to clear three or four hurdles to get the certification they want. Class certification tends to be a vehicle to settlement, which is what the lawyers who drive class action litigation really want, particularly in the consumer protection context. Tripping over one of the hurdles typically means the journey was a waste. In the NFL, four of the twelve playoff teams each need to win three straight games to hoist the Lombardi Trophy; the other eight each need to win four straight. Teams that lose in the Conference Championship or Super Bowl tend to view the season as a failure, not a success. The teams and players do profit from incomplete playoff runs, but we are not shaken from our view of the parallel here.
In the top division of college football, there is now a playoff of four teams. The winner will have to win two straight games. This would be on top of the conference championship game and “rivalry week” game that each had to win over the preceding weeks. (Again, three or four hurdles, depending on how you view it.) We can assume that the three teams that lose in the playoffs will not be “happy to have been here.” The four universities will have profited quite a bit from the playoffs—and the players not all (which is a different discussion entirely)—but only one will have succeeded once it is done. Still, once the playoffs start, the champion will be measured objectively: which team won two playoff games? In the past, before there was a playoff, the crowning of a champion or champions of this division of college football was a matter of subjectivity: based on the individual view of the voters of the various groups that might anoint a champion, which team had the best season? That subjectivity irked fans. Even with mounds of statistics to measure performance, the lack of the definitive measurable—the results of playoff games—was unsatisfying. (Yes, we know that the four playoff teams are selected with a large measure of subjectivity, but work with us.)
In consumer protection class actions premised on an alleged misrepresentation about a prescription drug, the plaintiffs should have to allege an objective harm and an objective way to measure it. When they cannot, they should not have a class (or probably even individual claims of the purported class representatives). Saavedra comes out of litigation over the risks of withdrawal from a prescription antidepressant. We have posted previously on summary judgment on warnings claims in personal injury cases with the same product and risk. Here and here.
We have even posted previously on an opinion in Saavedra, which we found less than satisfying even though it found that the learned intermediary doctrine does apply to consumer protection claims about a prescription drug. That opinion invited the plaintiffs, after the opportunity to take discovery, to move for class certification. Eighteen months later, we have the denial of the motion for class certification, which hinged on an unusual and overtly subjective theory of injury. The subjectivity meant that plaintiffs could not clear any of the hurdles for class certification, discussed recently in another consumer protection case from a neighboring court. The Saavedra plaintiffs got to the playoffs, surviving summary judgment and conducting extensive discovery, but flamed out. Much like the Bengals of recent vintage.
Asserting claims under consumer protection statutes from California, Massachusetts, Missouri, and New York, the plaintiffs claimed that the risk of complications upon withdrawal from the antidepressant was much higher than the “greater than or equal to 1%” in the drug’s label. While the label’s use of “greater than” makes plaintiffs’ misrepresentation premise dubious, it was plaintiffs’ “novel” theory of how they were harmed that made certification improper:
Plaintiffs argue that class members were harmed because they purchased a product that was represented to have a roughly 1% risk of withdrawal side effects but that actually had an approximately 44% risk of withdrawal side effects. Thus, Plaintiffs claim they were injured because the drug as received was worth less than the drug as represented. However, Plaintiffs do not assert that class members were harmed by being overcharged or by being induced to purchase something that they would have not otherwise purchased. Instead, Plaintiffs argue that the harm was in receiving a product that had less value than the value of the product as class members expected to receive it.
We do not claim expertise in economic theory, but the court seemed pretty adept in unpacking why this was based on “a subjective concept distinct from the fair market value concept commonly used when calculating benefit-of-the-bargain damages.” The ability to calculate damages for a class is part of one of the hurdles for class certification—that common issues predominate over individual issues. Where the damages for each purported class member hinge on what she thought the drug was worth, regardless of what she paid for it, then calculating damages for on a classwide basis is a hard sell.
Still, plaintiffs, through their pharmacoeconomics experts, tried. The expert came up with the broad strokes of a valuation scheme based on using a survey to establish the average value consumers—after the fact and probably not consumers who need the drug—ascribe to the drug with two different rates of withdrawal side effects and then applying a refund ratio to whatever a class member actually paid for the drug. This kind of analysis, if permitted, could probably be manufactured for most drugs ever sold, each time coming up with some number to represent how consumers think a drug with less risks is worth more than a drug with more risks, all things otherwise being equal. It would also alter the causation requirements in consumer protection statutes. The court was not willing to do that, particularly for prescription drugs, where what someone pays has little to do with how they value the drug. Not only is “a consumer’s out-of-pocket costs for a drug  not a proxy for the drug’s value to the consumer,” “a rational consumer would surely pay less than she believes the drug is worth.” For these reasons and various flaws in the expert’s damages model, the court held that plaintiffs “failed to present a method for calculating damages that is tied to their theory of liability.” This ended the chance for a damages class, but the court was not done.
The subjectivity of plaintiffs’ theory also made it a poor fit for classwide proof of reliance and causation, another aspect of predominance. “Because Plaintiffs divorce their injury from price, their asserted injury is akin to subjective disappointment with the product received,” making for individualized inquiries into what physicians treating specific patients, or perhaps the patients themselves, thought about the risk of withdrawal side effects. Re-casting the inquiry into what an “average consumer” thought does not help because “[i]t is unclear to the Court why any individual is harmed when she purchases a product that the average person (but not necessarily the purchaser) subjectively overvalues because of a misrepresentation.”
Without a feasible method for calculating classwide damages, the proposed class did not present a superior method for adjudicating the issues. Given “the need for individualized proof of causation and damages” and a “fact-intensive individualized inquiry that will likely be required to show damages,” “a class action would be unmanageable.” This consideration outweighed the factors favoring class treatment that hinged on the low damages for each potential plaintiff.
The plaintiffs even tried to certify an issue class under Fed. R. Civ. P. 23(c)(4) for whether the defendant made materially misleading misrepresentations, which is something like playing for the small trophy as winner of the losers’ bracket. The court viewed this attempt as “an end-run around 23(b)(3)’s predominance requirement.” (Yes, end-run is a football term, and, yes, we have expounded on it before.) Because Plaintiffs were unable “to show that damages can be determined even on an individual basis once liability is decided” and there had been plenty of opportunity to see if a 23(b)(3) class certification was appropriate, the issue class would “not materially advance this case’s resolution.”
We do not know if the drug’s label failed to represent the withdrawal risk, if any doctor would have prescribed less drug with a different label, or if any patient paid more because of what the label said. We do know that a class action for alleged violation of consumer protection statutes should not lie where objective damages cannot be calculated and the inquiry into causation would have to proceed on an individual, subjective basis. We are glad that the right result was reached, even if it took a while. Mostly, we are glad that the playoffs are almost here.