Compensable Injury

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Is fear of injury the same thing as injury?  The question answers itself.  At least it should.  They are not the same, and there are strong jurisprudential reasons for courts to throw out cases alleging mere fear of injury.  We have a No Injury scorecard documenting a pretty clear court consensus that fear of injury should not be enough to get a case to the jury.  Think of diet drug cases where the claim was an increased risk of heart valve injury.  Most courts concluded that such fear did not amount to actionable injury.  Considerations of Article III case or controversy or standing or ripeness usually persuaded courts that fear of physical injury simply did not cut it.  But not always.  So it is good that today’s case, Perez v. B. Braun Medical, Inc., 2018 WL 2316334 (S.D.N.Y. May 9, 2018), gets added to the defense side of the ledger.  In 2010, the plaintiff had been implanted with an IVC filter to treat her pulmonary embolism (PE) and deep vein thrombosis (DVT).  The implant was intended to be permanent.  In subsequent years there were reports of IVC filters causing problems via misalignment and migration.  In 2014, the FDA urged doctors to remove IVC filters within one to two months after the danger of PE subsides.  The plaintiffs alleged that the defendants in this case continued to market their IVC filter for long-term use — according to the court, the complaint alleged that the defendants were “defying the FDA’s general recommendations.”  Meanwhile, no doctor recommended that the plaintiff remove the IVC filter, even though in 2016 a CT scan showed that the tip of the IVC filter possibly had tilted.  That tipping point was apparently not enough to remove the filter, but was enough to file a lawsuit.  The complaint alleged that the IVC filter was defective and increased the risk that the plaintiff would suffer a serious injury. The plaintiff also referenced unspecified economic and psychological damages. The defendants moved to dismiss the complaint for failure to state a claim upon which relief can be granted, arguing that the complaint did not adequately allege that the plaintiff had suffered any cognizable injury.  The court granted the motion to dismiss.  It analyzed the personal injury, warranty, fraud, and New York Business law claims separately, so we will do likewise.

1. Personal Injury Claims

The plaintiff alleged that her physical injuries were the post-implant likely tilting of the IVC filter, psychological trauma of living with a defective product implanted in her body, and the increased risk of future injuries due to the IVC filter.  The problem for the plaintiff was that New York law is reasonably clear that a mere threat of future harm is insufficient to impose liability against a defendant in a tort context.  To be sure, the complaint also alleged that the plaintiff “sustained serious personal injuries,” “serious physical injuries,” and “severe injuries,” that she suffered “loss of enjoyment of life, disability, and other losses,” and that she “incurred substantial medical costs and expenses to treat and care for Plaintiff’s injuries described herein.”  But those are more rote formulas than factual allegations.  The complaint certainly never described the nature of the injuries.  New York law does recognize claims for emotional distress, but such claims must be premised on truly outrageous conduct, and nothing like that resided in the complaint.  Perhaps the best thing that the plaintiff had was an allegation that the defendants marketed permanent filters even after the “FDA warnings that caution generally against long-term implantation of IVC filters.” But because those warnings, whether or not they said what the plaintiff alleged, did not happen until after the plaintiff’s implant, they could not preserve the plaintiff’s claims.

2. Breach of Warranty Claims

The defendants had a strong statute of imitations argument, because the clock on warranty claims usually starts at the time delivery, which was in 2010, more than seven years before the complaint was filed.  New York’s statute of limitations for warranty claims is four years.  The plaintiff trued to dodge the statute of limitations by arguing that the warranty explicitly extended to future performance, and that existed here because the defendants had stated that the IVC filters were safe and effective for permanent implantation.  But the complaint did not explain how the plaintiff’s particular IVC filter had fallen short.  Again, the mere tilting of the IVC filter, even with a risk of future harm, did not equate to a cognizable injury,  New York courts (like most courts on planet Earth) have acknowledged a policy of protecting court dockets from “being clogged with frivolous and unfounded claims.”  Warranty claims often seem like add-ons in product liability cases, and here they were frail add-ons to already frail claims.

3. Fraud Based Claims

Fed. R. Civ. P. 9(b) requires that fraud claims be pleaded with specificity, and the Perez complaint did not come close to meeting this standard.  Again, the plaintiff leaned on the defendants’ representations that the IVC filters were safe and effective for their intended and reasonably foreseeable use.  But the plaintiff never explained why those statements are fraudulent. After all, the the complaint admitted that IVC filters can be used to reduce the risk of PE and DVT, and it nowhere alleges that the plaintiff’s filter performed in a manner different from how the defendants describe.  Whatever the complications and injuries that the defendants failed to warn the plaintiff about, the complaint did not specifically describe them, and could not allege that the plaintiff had sustained any such complications and injuries.  Moreover, the complaint lacked any facts showing that the alleged omissions were made with an intent to deceive.  The plaintiff simply had not made out a case for fraud.

4. New York General Business Law Claim

The complaint’s final count alleged that the defendants engaged in consumer fraud in violation of New York General Business Law Sections 349 and 350<http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000081&cite=NYGBS350&originatingDoc=Ib48241005e2b11e89868e3d0ed3e7ebe&refType=LQ&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.FindAndPrintPortal)>. Section 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” Section 350 prohibits “[f]alse advertising.”  As with the plaintiff’s breach of warranty and fraud based claims, the New York Business Law claims failed to show what materially misleading representations the defendants made. That there are side effects associated with IVC filters that are implanted long-term, does not mean that the plaintiff’s IVC filter “had not been effective for implantation into the IVC to prevent PE and DVT for which it was designed or that it is not safer than the alternative.”

What is interesting about the Perez case is how the lack of a real injury did not just undermine the personal injury claims (seems obvious enough), but also undermined the representational claims.  What is doubly interesting about the Perez case is that the no-injury defense worked with respect to an implanted device.  Most of the good cases on our no injury scorecard involved drugs.  Arguably, a plaintiff has a little more to work with when there is a device implanted in the body.  There is a continuing exposure.  Nevertheless, mere fear of injury could not overcome the court’s fear of frivolous claims.

Back when Bexis was still at Dechert, we put up a cautionary post called “CAFA Not With Standing.”  In that post we cautioned against using constitutional standing as a defense to class actions with questionable and attenuated damages claims.  Remember CAFA, we pointed out.  The damages sought in state-court class actions need to support federal Article III standing, or else defendants won’t be able to keep the actions in federal court.

Well, yesterday the court in Bouldry v. C.R. Bard, Inc., No. 12-80951-CIV, slip op. (S.D. Fla. Dec. 18, 2012), addressed precisely the situation discussed in that post.  Fortunately, our side won, and the class action stayed in federal court, where there are plenty of other arguments against its validity.

First, we have to point out that Reed Smith was involved in the Bouldry case, so we can’t say as much as we’d like.  We’ll have to stick to the legal propositions.  As for the facts, all we can say is that the Bouldry opinion should be applicable to other attenuated injury class actions, regardless of the product or conduct involved.

Bouldry involved a state class action in Florida alleging that a medical device had a higher risk of failure than it should.  The class consisted of people who had not suffered any failure.  There are good arguments that this sort of at-risk damages are not recoverable under most states’ laws − see our no injury scorecard, and in particular the Shiley heart valve cases from the late 1980s and early 1990s, which addressed similar allegations.  Hint:  the defendant won almost all of them.

Continue Reading At Risk Claims Sufficient To Support Federal CAFA Jurisdiction

About a year ago we reported on the dismissal of what we characterized as a “really bogus” attempted class action in In re McNeil Consumer Healthcare Marketing & Sales Practices Litigation, 2011 WL 2802854 (E.D. Pa. July 15, 2011) (“MCH”). We distilled the 2011 MCH opinion down into four “simple rules” for pleading:

Simple rule #1: If you didn’t buy the product, you can’t claim economic loss from purchasing it.

Simple rule #2: There has to be something wrong with the product before you can sue over it.

Simple rule #3: What you didn’t buy can’t cause you any injury from its mere purchase.  See simple rule #1.

Simple rule #4: Don’t allege physical impossibilities.

We noted at the end of that post that the court in MCH had granted leave to amend, but speculated that the plaintiffs − even though enjoying the excellent representation characteristic of multidistrict proceedings − might well flunk TwIqbal again because they were more interested in alleging something that had a prayer of being certified as a class than they were in stating a claim in the first place.

It turns out we were right.

Continue Reading Still Standing

Sometimes it all depends on the docs.  One of the reasons that the Bone Screw litigation never really went anywhere is that the prescribing physicians were all tertiary care spine surgeons who by and large knew the devices they were implanting inside and out.  In almost a decade of litigation, the Bone Screw plaintiffs couldn’t get a single one of them to testify – even as a paid expert – that the devices were defective.

In other litigation defendants aren’t that fortunate.

And then there’s Drew v. AHPC, Inc., 2012 U.S. Dist. Lexis 49319 (E.D. Pa. April 9, 2012).  In Drew the prescribers actually tried to become plaintiffs themselves – alleging that they “operated weight-loss clinics or other facilities where they prescribed the [product].”  These prescribers alleged that they didn’t know squat about the drugs they were prescribing:

According to the complaint, [defendant] engaged in a fraudulent scheme to conceal the risks associated with these drugs and aggressively to market the drugs to healthcare providers.  Plaintiffs do not assert that they purchased diet drugs directly from [defendant] but rather that they acted as “conduits” for the sale of [the products] by prescribing the drugs to patients.

Id. at *2.

The plaintiffs did not allege that they, certainly, suffered any physical injury – or even that their patients did.  Rather they claimed that, when the risk information became known, their businesses (substantially based on the prescription of these drugs) dried up:

Plaintiffs allegedly had their businesses ruined, years of good will undercut, their livelihood destroyed, their standing in their respective communities impaired, and the[ir] investment rendered substantially worthless when [defendant] withdrew the drugs from the market.

Id. ad *2-3 (quoting complaint)

It’s a somewhat peculiar theory, since these businesses were based on prescribing drugs that, allegedly, shouldn’t have been sold, and that the plaintiffs would have been more than happy to go on prescribing had the supply not dried up.

Fortunately, the court thought so too.  Even the capacious California consumer protection statute (“UCL”) wasn’t broad enough to permit this sort of claim:

Plaintiffs have not alleged an injury sufficient to confer standing under the UCL.  Plaintiffs built profitable clinics and do not assert that they lost money while the [drugs] were on the market.  Instead, plaintiffs allege that they lost future business profits when [defendant] withdrew the drugs from the market at the request of the FDA.  Plaintiffs simply have no legally protected interest in [defendant’s] continuing to manufacture and sell the drugs in issue.

Drew, 2012 U.S. Dist. Lexis 49319, at *4.  They weren’t injured by any “sale” of the product, but only by their inability to go on prescribing it.  That is, they didn’t have a claim that they were injured because they couldn’t continue prescribing allegedly dangerous drugs.

The UCL doesn’t allow classic “damages.”  There wasn’t any basis for an injunction because the drugs had not been sold for years.  Nor was there a basis for “restitution,” since none of the purported injury consisted of monies retained by the defendants.  Id. at 5.  The mere loss of business opportunities to go on selling an allegedly defective product simply isn’t recoverable:

Compensation for a lost business opportunity and nonrestitutionary disgorgement of profits are not available as remedies under the UCL.

Id.  Bye-bye UCL.

The remaining claims just didn’t fit at all.  Strict liability and negligence had no application where the plaintiffs alleged no physical injury, but only “economic loss.”  Drew, 2012 U.S. Dist. Lexis 49319, at *6-7.  Implied warranty was just as off the wall, since there was no contractual privity at all – indeed, the prescribing physician plaintiffs didn’t buy or sell the drug at any point; they only prescribed it.  Id. at *8-9.  Nor were they “ultimate consumers,” only self-described “conduits.”  Id. at *9.  Finally, even if plaintiffs had adequately pleaded fraud (which they didn’t), they once again didn’t have a cognizable injury, only loss of future expectations:

Even if sufficiently pleaded, plaintiffs’ fraud claim fails because they have suffered no damage.  While the product in issue was on the market, plaintiffs made a profit from [prescribing it].  They have not alleged that [defendant] represented to them that [the drugs] would be on the market indefinitely or that [it] guaranteed the success of their investments.

Id. at *10-11.

Thus, prescribing physicians cannot become plaintiffs (at least in California).  The theory was downright bizarre to begin with – strict liability turned on its head – since the plaintiffs sought damages for not being allowed to continue prescribing the purportedly defective product to their patients.

Good riddance.

We were just reading an interesting, relatively new, decision from our home Circuit, Reilly v. Ceridian Corp., 664 F.3d 38 (3d Cir. 2011), and our reaction to it wasn’t quite what most readers would expect.  The defendant won, but we were still troubled.

Sometimes defendants can lose by winning – as we discussed that some time ago on the question of punitive damages and choice of law, pointing out that while having all punitive damages issue decided under a single state’s law sounds great as long as you like that state’s law, it’s not so great when the next plaintiff brings a class action – or the next client is headquartered in a state with less favorable law.

While that particular problem has faded, largely due to the Supreme Court’s constitutional punitive damages jurisprudence virtually precluding class actions for such damages, the truth of the general proposition remains.

As a defendant, be careful what you ask for, you might just get it.

Which brings us back to Reilly.  It’s not a drug/device case – indeed, it could hardly be farther afield.  Reilly involved illegal hackers possibly (maybe? conceivably?) getting their hands on the personal/financial information of the users of an internet financial outfit.  The plaintiffs had no proof whatever that the information had actually been misused, or that anybody actually suffered any harm.

Of course, that doesn’t stop the class action lawyers.  In they roared, claiming that even though nobody’s account had actually been hacked, the supposed class of users was entitled to damages for the mere possibility that they might suffer financial loss in the future.  Supposedly, the “class” members:

(1) have an increased risk of identity theft, (2) incurred costs to monitor their credit activity, and (3) suffered from emotional distress.

664 F.3d at 40.  Sounds sort of like something we’ve seen in our neck of the woods except instead of purported exposure to some supposed toxic substance, the claim here is purported exposure to hackers.

The trial court said “are you kidding me?” and threw the case out for lack of Article III standing (more about the details of that later).  Without a good, old-fashioned “case or controversy” – a constitutional requirement – these would-be litigants had no business in federal court.  The Third Circuit affirmed:

Constitutional standing requires an “injury-in-fact, which is an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. . . .  Allegations of “possible future injury” are not sufficient to satisfy Article III. . . .  A plaintiff therefore lacks standing if his “injury” stems from an indefinite risk of future harms inflicted by unknown third parties. . . .  [W]e refuse[] to confer standing when plaintiffs fail to allege an imminent injury-in-fact.

6645 F.3d at 42.

Interestingly, the Reilly court spotted the same analogy to medical monitoring that we did.  It took pains to distinguish risk of physical injury from risk of financial harm:

[S]tanding in medical-device and toxic-tort cases hinges on human health concerns.  Courts resist strictly applying the “actual injury” test when the future harm involves human suffering or premature death.

Id. at 45.

Sigh of relief.

What the hey – why?

It comes down to what do we fear more?  Would we rather have a transparently bogus no-injury class action kicking around a little longer (particularly in this post-Dukes world) in federal court, or would we rather be litigating the exact, same claims in the much less comfortable venue of the plaintiff’s favorite state-court judge?

Usually, when it comes down to defending claims in federal rather than state court, we’ll choose federal court.

So what does Article III standing have to do with that?  Unfortunately, the answer may well be “everything.”

Remember CAFA, the Class Action Fairness Act, the vehicle through which all these class actions are moved to federal court in the first place?

Well, it turns out that, if there’s no Article III standing (in, say, a “no injury” product liability class action for economic loss), there is a significant risk that CAFA can’t keep that litigation in federal court.  A lack of constitutional standing in such cases could, as a practical matter, repeal CAFA for “no injury” class actions.  Plaintiffs would be free to file these cases in state court and, when defendant removed, plaintiffs could seek remand because of the patent weakness of their own claims, because absent standing there is no subject matter jurisdiction.

That’s the problem. Now for the technical stuff.

The starting point is the difference between old-fashioned removal under 28 USC §1441 and removal under CAFA.  Section 1441 provides generally that civil actions “of which the district courts of the United States have original jurisdiction” may be removed.  However, if Article III standing is lacking, the district courts do not have original jurisdiction, and a case would not be removable under this section.  Under these circumstances (where there’s no subject matter jurisdiction in federal court), remand, rather than dismissal, is what 28 U.S.C. §1447(c) dictates.

Is CAFA different?  In CAFA, 28 U.S.C. §1453 provides that “a class action [as defined in 28 USC §1332(d)(1)] may be removed.”  Thus, on its face CAFA creates removal jurisdiction for “class actions,” as defined, without regard to subject matter jurisdiction.  But what good is the right to remove if there’s no subject matter jurisdiction once the case lands in federal court?

Arguably, not much.

This kind of conundrum has arisen before with respect to 28 U.S.C. §1442(b), which bestows on federal officers a right to any action brought against them, regardless of the existence of subject matter jurisdiction.  This difference led some courts to hold that when federal officers remove a case in which Article III standing is lacking, the appropriate remedy is dismissal rather than remand, because 28 USC §1447(c) required remand only where the action was “removed improvidently and without [removal] jurisdiction.”  See, e.g., Maine Ass’n of Interdependent Neighborhoods, Inc. v. Petit, 644 F. Supp. 81, 84 (D. Me. 1986).  Well, that’s just the opposite, you say.  Petit supports a conclusion that, where Article III standing is lacking (as in a “no injury” class action removed to federal court), the case should not be remanded under §1447(c) and should instead be dismissed.  Bang!  You’re dead.

Trouble is, it doesn’t work that way any longer.  Section 1447(c) was amended in 1988 to remove the “improvidently removed without jurisdiction” language that was the key to Petit and its ilk.  Now, §1447(c) expressly provides:

If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

“Shall” is usually considered rather mandatory.  Hello state court.

Thus, on its face, §1447 now requires remand of any removed action in which it appears that subject matter jurisdiction – not removal jurisdiction – is lacking.  No less of an authority than the Supreme Court has pointed out that “the literal words of §1447(c) . . . on their face, give . . . no discretion to dismiss rather than remand an action.”  International Primate Protection League v. Administrators of Tulane Education Fund, 500 U.S. 72, 89 (1991). Accord University of South Alabama v. American Tobacco Co., 168 F.3d 405, 410 (11th Cir.1999) (§1447(c) “is mandatory and may not be disregarded”); Roach v. West Virginia Regional Jail & Correctional Facility Authority, 74 F.3d 46, 48-49 (4th Cir. 1996) (“plain language of §1447(c) gives no discretion to dismiss rather than remand an action removed from state court over which the court lacks subject-matter jurisdiction”); but see Maine Ass’n of Interdependent Neighborhoods v. Commissioner, 876 F.2d 1051, 1054 (1st Cir. 1989) (dismissing rather than remanding).

Back to CAFA.  Federal officer cases may be analogous, but CAFA is expressly made subject to §1447(c).  28 U.S.C. §1453(c)(1) (“Section 1447 shall apply to any removal of a case under this section”).  There isn’t much law on the subject, but in Mirto v. Amerian International Group, Inc., 2005 WL 827093 (N.D. Cal. Apr. 8, 2005), the court held that §1447(c) required remand, not dismissal, of a “no injury” class action where Article III standing did not exist.  The case involved – SURPRISE! – the infamous California Unfair Business Practices Act:

[Plaintiff’s] action against [defendant] stems from his right under California law to challenge the company’s allegedly unfair business practices as a private attorney general even if he suffered no individualized injury. . . .  Article III of the Constitution, however, limits the jurisdiction of the federal courts to “cases and controversies,” a restriction that has been held to require a plaintiff to show, inter alia, that he has actually been injured by the defendant’s challenged conduct.  So a plaintiff whose cause of action is perfectly viable in state court under state law may nonetheless be foreclosed from litigating the same cause of action in federal court.

Clearly the court cannot hear this case; the only question is what to do with it. . . .  The question boils down to whether a lack of standing is a “lack[ of] subject matter jurisdiction” within the meaning of 28 USC §1447(c).

Id. at *2.  The court in Mirto then listed no fewer than six reasons why standing equalled subject matter jurisdiction:  (1) that result was “doctrinally conventional”; (2) treatises agreed that remand was the appropriate result; (3) the aforementioned amendment to §1447(c); (4) dictum in an earlier Ninth Circuit case; (5) the dismissal would be without prejudice, so the plaintiffs could refile, then the defendants re-remove, and so on – infinite do loop style; and (6) a peculiar timing issue of no longstanding relevance.  Id. at *3.

What’s the answer?  We don’t know.  But it sure looks like to us that CAFA incorporates §1447(c).  And it’s also hard to argue, given the amendment, that remand isn’t the relief mandated by the statute.

So defendants really need to be careful where Article III standing intersects with removal under CAFA.  These “no injury” class actions were one of the chief reason (there were other reasons as well, certainly) that the defense community wanted CAFA in the first place.  We can’t let “standing” become a vehicle for rendering CAFA – the most important federal tort reform initiative of this century – a nullity in “no injury” cases.

Thus while, arguing lack of Article III standing may look like a great way to get rid of a particular case, our side needs to be careful not to sacrifice the forest to get rid of a couple of rather scraggly trees that would probably die of other causes in any event.

Thanks to John Thomas of Dykema for sharing his insights into this knotty problem with us.

Today is Boxing Day, when we, along with millions of other Americans, scamper off to the Mall to return those Christmas presents that just didn’t quite fit (physically or spiritually or aesthetically) our needs. So buh-bye jelly-of-the-month club (we’re diabetic), Hello Kitty lounge pants (wrong size), Three Stooges talking bottle-opener (we love hearing “nyuck, nyuck, nyuck” whilst popping the top off a Yuengling, and that’s why we already have one), and the boxed DVD set of all the episodes of Punky Brewster (like we said, we’re diabetic).

We wish we could take back some of the crummier cases we saw this year, and exchange them for something better. Luckily, something like that happened with one of the cases that made it onto last week’s Ten Worst list. We bemoaned Lefaivre v. KY Pharmaceuticals Co., 636 F.3d 935 (8th Cir. 2011), for permitting an improper private FDCA violation claim to go forward. More recently, a subsequent iteration from that litigation suggests the claims won’t go very far forward, because there is no ascertainable loss. In Polk v. KV Pharmaceuticals Co., 2011 WL 6257466 (E.D. Mo. Dec. 15, 2011), the same basic claim was dismissed pursuant to Fed. R. Civ. P. 12(b)(6). The plaintiffs filed a putative class action, alleging that they had used Metoprolol Succinate tablets, and had gotten less than they expected because the FDA found that the defendants were not in compliance with current good manufacturing practices. That FDA finding means that the tablets were “adulterated” within the meaning of 21 U.S.C. section 351(a)(2)(B).

The plaintiffs tried to rely on the Consent Decree entered into between the defendants and the FDA. But in the Consent Decree preamble the parties disclaimed liability, The plaintiffs argued that the disclaimer was “inconsequential” and that the findings in the Consent Decree provided evidence of liability. The court disagreed and concluded that the Consent Decree contained “only allegations that were neither admitted nor denied by Defendants as well as the express denial of liability by the Defendants.” 2011 WL 6257466 at *4. Therefore, the Consent Decree was evidence of nothing except that a settlement was reached between the defendants and the FDA. So far so good.

And it’s about to get better. The plaintiffs’ central claim is that the medication was worth less than what they paid for it, in light of the adulteration. But there was no evidence that the tablets posed any health risk to consumers. The court then followed the reasoning of Myers-Armstrong v. Actavis Totowa, LLC, 2009 WL 1082026 (N.D. Cal. April 22, 2009), a case we applauded here. Noncompliance with good manufacturing practices is insufficient in the face of no actual “manifestation of a defect that results in some injury or rational fear of injury” to state a cognizable claim. 2011 WL 6257466, quoting Myers-Armstrong. Put simply, there’s no evidence that “adulteration” equals ascertainable loss. Therefore, the claims under both the Missouri consumer protection statute and breach of warranty fail.

The Polk case is like finding another present under the tree after you thought you were all done. Or it’s like taking back that weird “The Scream” inflatable and exchanging it for something serviceable and solid, like a Yellow Submarine ice cube tray, or a nice, pro-defense ruling.

When we convince a court that an action against one of our clients must be dismissed for failure to state a claim – say, for TwIqbal reasons – under Rule 12, we sometimes say that the plaintiff’s case was so poor that s/he couldn’t even get to first base.  A much rarer form of dismissal, however, essentially holds that the plaintiffs can’t even get to the plate, let alone to first base.  That’s when a complaint is dismissed for lack of standing.  A dismissal for lack of standing recently occurred in In re McNeil Consumer Healthcare, Marketing & Sales Practices Litigation, 2011 WL 2802854 (E.D. Pa. July 15, 2011).  When that kind of dismissal occurs, you can bet the complaint is really bogus.

When it happens in an MDL, you can bet that the bogus nature of the complaint is no accident.

Here’s the scoop.  The MCH litigation involves “purported quality control issues affecting certain over-the-counter healthcare products” made by the manufacturer defendant.  2011 WL 2802854, at *1.  It’s typical of much current mass tort litigation (described in our “Anatomy of a Mass Tort” post) in that it stems from “regulatory action” (#2 on our list of litigens) – in this instance various FDA recalls.

All this litigation in the wake of FDA action makes a mockery of the other side’s public chest-beating that product liability litigation somehow increases product safety by uncovering product defects.  In fact, the opposite is true.  The FDA discovered the problem, worked with the defendant to fix it, and only afterwards did the private litigants show up with their hands out.  They didn’t improve the safety anything.  All product liability does in this type of situation is increase the price of every product that a defendant makes to everyone who buys it.

But the claims at issue in the recent MCH decision are even worse than that.  They don’t have anything to do with safety.  They’re just ginned up claims for purely economic loss filed by people who really weren’t hurt at all.

That’s why the court found there was no standing.

The biggest problem the court found is that, while the complaint alleged that there were quality control problems involving dozens (“twenty-one different products, and at least seventy-four types,” 2011 WL 2802854, at *9) of products (“subject products”), some of which were recalled (“recalled subject products”), none of the seventeen plaintiffs bothered to allege that s/he had purchased any particular product, sought but did not obtain any particular refund, etc.:

The plaintiffs do not claim that they suffered any physical injury; instead, their claims are based entirely on economic injuries.  The allegations of specific economic injury . . . are sparse.  The plaintiffs do not allege which particular Subject Products or Recalled Subject Products they purchased.  The plaintiffs also do not allege that they availed themselves of any refund offers, and were inadequately compensated thereby.  Instead, the [complaint] sets forth identical allegations with respect to each of the twenty-seven named plaintiffs.

2011 WL 2802854, at *7.

Standing is what gives a plaintiff the right to appear in court in the first place.  Under the constitution, any “case or controversy” can be brought (assuming other jurisdictional requirements are met) in federal court.  But a person doesn’t have standing in the abstract.  A defendant must have hurt a plaintiff in some way.  That’s called the “injury in fact” requirement of standing.  Id. at *8.  The legal definition is, “an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent.”  Id.  There’s also a causation element to standing.

In product liability cases that means that the plaintiff had to buy or otherwise come into harmful contact with the product.  A plaintiff can’t come into court seeking to recover for injuries done to other people.  That’s not a “concrete” injury – at least not to that particular plaintiff.

But the MCH complaint was egregiously deficient:

[P]laintiffs do not allege which particular products they purchased.  Instead, each named plaintiff alleges that he or she “purchased Subject Products including some Recalled Subject Products.”  . . .At no point in the [complaint] do the plaintiffs identify a single product that they purchased.

2011 WL 2802854, at *10.  That’s pretty bad.

Simple rule #1:  If you didn’t buy the product, you can’t claim economic loss from purchasing it.

But that’s not all.  The complaint also failed to allege what was wrong with the products.

In addition, the plaintiffs do not allege how the unspecified Subject Products they purchased were defective.  Instead, the plaintiffs allege only that each Subject Product suffered from “serious problems.”  . . .Notably, several of the products that appear on the “Subject Products” list are not even alleged to have been recalled or subject to any FDA citations.  Because the plaintiffs do not identify which products were purchased, it is impossible to match the many incidents outlined in the [complaint] with the specific drugs that fall under the Subject Products category.

2011 WL 2802854, at *10.

Simple rule #2:  There has to be something wrong with the product before you can sue over it.

That’s no injury and no defect.  How about the trifecta?  Did the plaintiffs at least allege causation?

No.

The plaintiffs do not, however, allege that they purchased the affected lots of . . . and were not made whole.  The same logic applies to all of the remaining allegations in the [complaint]. . . .  [P]laintiffs cite to approximately eleven recalls . . . and a handful of FDA reports, but do not allege how they were harmed by any of these incidents.  Instead, the plaintiffs only allege, in general terms, that they “suffered damage” as a result of their “out of pocket payments for Subject Products” that were unsafe.

2011 WL 2802854, at *10.  Incredible as it may sound, plaintiffs did a better job alleging injury to other people (people who complained on the defendant’s blog) than they did to themselves.  Id. at *12.

Simple rule #3: What you didn’t buy can’t cause you any injury from its mere purchase.  See simple rule #1.

Because of the complaint’s pervasive failure to link any of the 17 plaintiffs to any of the many drugs or any of the many allegations of “serious problems,” the court dismissed the entire mess for lack of standing:

[P]laintiffs have not established injury-in-fact with respect to claims involving the Subject Products.  Even if the Court were to read the allegations of “serious problems” generously, . . . the plaintiffs have not alleged that they . . . have suffered injury as a result of said problems. . . .  [P]laintiffs must establish that they themselves have suffered injury.  In the absence of particularized harm, the plaintiffs’ injuries are abstract and hypothetical, rather than distinct and palpable.

2011 WL 2802854, at *10.

As the fundamental problem was plaintiffs’ total failure to establish “injury in fact,” we have added MCH to our no injury scorecard.

The court threw out, for similar reasons, allegations relating to product recalls/refunds and a supposed “phantom recall.”  2011 WL 2802854, at *12-18.  The “phantom recall” claim was particularly egregious because, even assuming everything plaintiffs alleged was true – injury was inherently impossible, because the whole point of the purported exercise was to take the products at issue off the shelves:

It is not clear how the plaintiffs could have been harmed by the removal of products that they contend were defective. Instead, each purportedly defective unit . . . that was removed from store shelves became unavailable for purchase by a consumer. It does not logically follow that the plaintiffs could have been injured by these actions.

Id. at 16.

Simple rule #4:  Don’t allege physical impossibilities.

Some of our readers may be asking a simple question of their own – why?  MCH was multi-district litigation. That kind of litigation attracts the best lawyers on both sides.  Good plaintiff lawyers certainly know how to plead the fundamental elements of product identification, causation and injury that were totally lacking from this complaint.  Heck, even bad ones can do that if forced.  So what gives?

We think we know.  The complaint dismissed by MCH was a class action.  Even more after Dukes, but also under abundant prior precedent, the commonality and predominance requirements for certification of class actions place a huge premium on every claim being the same.  What was left out of MCH were the particulars of each plaintiff’s claim – the what, where, and when that establish any individual’s right to sue.

Maybe the vague, generalized pleading that got these MCH plaintiffs thrown out of court can be fixed, at least to the extent that any plaintiff actually bought a product subject to recall (whether they can ever show injury without improper “fraud on the market”-type theories is another matter altogether).  But once those particulars creep in – that plaintiff X bought product Y under circumstances linking it to purported misconduct Z – the individualized nature of each and every claim becomes blatantly obvious, even on the face of the complaint.

So to the extent that the plaintiffs opt to replead in compliance with MCH, they’re only cutting their own throats down the road at the class certification stage.  And without class certification, this sort of pure economic loss claim – even assuming it could state a claim under some bizarre theory – is simply not worth pursuing.

To our readers:

Sorry about that.  Blogger was down for almost 24 hours yesterday and this morning.  In almost five years, we’ve never experienced that during business hours.  Anyway, that combined with Bexis having to fly to the west coast for the ALI annual meeting, kept us from posting until now.

Here’s the post we were planning on uploading yesterday.

******************

We try to keep abreast of what’s happening out there.  Our goal, not always met, is to check the federal courts of appeals’ websites every day.  We run searches and check some other things, too.  But we can’t follow everything, especially if it’s not directly drug/device related.  That’s why we’re indebted to our readers, such as Jeff Yeatman at DLA Piper, for sending us items that they think we should know about – and even telling us why.

The Fourth Circuit’s recent decision in Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88 (4th Cir. 2011), is an example.  Sure, we’d seen the blurbs about it from BNA and other sources, but Rhodes is an environmental contamination (alleged) case, so we’d let it go by.  But there’s something else about Rhodes that touches on something near and dear to our hearts – federalism in the context of state-law tort litigation in federal court.

It turns out that Rhodes was one of these made-for-litigation would-be class actions where nobody was really hurt.  The plaintiffs brought claims – not because anybody had any disease, but merely because (they claimed) they had an elevated level of a certain chemical in their blood that was linked to that claimed pollution.

That kind of claim reminds us of the question, “What is the sound of one hand clapping?”  Purely on the basis of elevated blood levels, the plaintiffs in Rhodes sued for “negligence, gross negligence, battery, trespass, and private nuisance.”  There was also a claim for medical monitoring, but the plaintiffs dismissed that after class certification was denied (raising other interesting issues worthy of their own post).  636 F.3d at 93.

The district court threw out all of the claims under West Virginia law, for the perfectly logical reason that they didn’t have any injury.  The plaintiff’s position was straight out of the movie “Minority Report” – we can sue you now, because you’re going to injure us in the future – as if somebody can be tagged for drunk driving solely on the basis of blood alcohol level, before ever getting into the car.

We’re traditionalists here. No injury; no lawsuit – only the sound of one hand clapping.

On appeal in Rhodes the Fourth Circuit agreed.  Negligence law in West Virginia was pretty much the same as negligence law anywhere, the plaintiff “is required to prove that he or she sustained an injury caused by the defendant’s allegedly negligent conduct.”  636 F.3d at 94.  Plaintiffs admitted they had nothing more than elevated blood readings.  They didn’t present any precog evidence (we suppose Agatha was unavailable), so the court affirmed dismissal because no injury had happened or was “reasonably certain.”  Id. at 95.  If that was all the case was about, however, Jeff wouldn’t have sent it to us, nor would we be blogging about it.

Rather, plaintiffs claimed that battery did not require actual harm – merely “physical impairment” that wasn’t really impairment at all – but only “any alteration in the structure or function of any part of the body, even when such structural change does not cause other harm.”  636 F.3d at 95 (citing Restatement (Second) of Torts §15, comment a (1964)).

Current West Virginia law, however, requires “actual physical impairment” for battery.  636 F.3d at 95.  Mere exposure and fear of injury aren’t enough.  Id.  Undeterred, plaintiffs asked the court to predict that the West Virginia Supreme Court (technically “of Appeals”) would overthrow current law and adopt the broader Restatement view.

Here’s where we get interested.

The Fourth Circuit refused to make the prediction.  We’re a federal court, it held.  It’s not our job to “expand the tort of battery under West Virginia law to include any chemical exposure that results in potentially dangerous, detectable levels of that chemical in a person’s body.”  Id. at 95.  Eschewing judicial triumphalism, the court accepted its “limited” role of applying existing state law:

[O]ur role in the exercise of our diversity jurisdiction is limited. A federal court acting under its diversity jurisdiction should respond conservatively when asked to discern governing principles of state law. Therefore, in a diversity case, a federal court should not interpret state law in a manner that may appear desirable to the federal court, but has not been approved by the state whose law is at issue. Mindful of this principle, we decline the plaintiffs’ invitation to predict that the West Virginia Supreme Court of Appeals would adopt the specific provisions of the Restatement advanced by the plaintiffs.

Id. at 96 (citing Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 4 (1975)).

All right!  Rhodes isn’t just a no-injury case, it’s a federalism case.  The Fourth Circuit turned down flat an opportunity to play the activist and predict an expansion of state tort law beyond the limits of current precedent.  Not only that, it did so for West Virginia, where before 2010, at any rate, we’d have given higher odds on any type of expansive prediction coming true than just about anywhere else in the country.

Not only that, the Fourth Circuit invoked federalism more than once in Rhodes.   Plaintiffs also advocated following a Restatement position over current West Virginia law in the context of public nuisance – another “tort” notorious for its susceptibility to expansive liability (real or imagined).  Rhodes refused to hold that, just because a case is called a “class action,” the actual harm requirement of public nuisance (called “special injury”) could be read out of the law.  Federalist principles again precluded such an argument:

We are not persuaded by this argument, because it fails to acknowledge that the Supreme Court of Appeals of West Virginia has not recognized a class action exception to the “special injury” requirement. We decline to recognize such an exception in the first instance because, as we have stated, a federal court in the exercise of its diversity jurisdiction should act conservatively when asked to predict how a state court would proceed on a novel issue of state law.

636 F.3d at 97-98 (again citing Challoner).

So Rhodes is a federalist two-fer.

Rhodes also got us thinking.  We’ve been touting federalism in diversity tort cases for almost as long as we’ve been blogging.  One of our very first posts, way back in November 2006, cited not only Challoner, but examples of pro-federalist precedent in every federal court of appeals.

We thought we’d go look and see if there are any more recent decisions like Rhodes out there.

Right off the bat we know of a couple of others, in our home Third Circuit.  Bexis has been pushing the federalist principle in the Third Circuit for almost twenty years now, back as far as Philadelphia v. Lead Industries Ass’n, 994 F.2d 112, 123 (3d Cir. 1993), one of his first ever PLAC amicus assignments.  As we blogged about at the time, in Sheridan v. NGK Metals Corp., 609 F.3d 239 (3d Cir. 2010), the court refused to expand Pennsylvania law in another exposure-only case:

A federal court under Erie is bound to follow state law as announced by the highest state court. . . . Unlike our role in interpreting federal law, we may not “act as a judicial pioneer” in a diversity case.

Id. at 253-54 (quoting Lead Industries; other citation and quotation marks omitted).  And then there’s M.G. v. A.I. Dupont Hospital for Children, 393 Fed. Appx. 884 (3d Cir. 2010), which we blogged about here, after excoriating the (now reversed) district court opinion here.  Bexis also briefed that one for PLAC, and the Third Circuit took notice.  In M.G., the Third Circuit “note[d] the well-established principle that a federal court sitting in diversity, when called upon to make a prediction of state law, should act conservatively” in reversing a prediction that Delaware would adopt medical monitoring.  Id. at 893 n.7.

So here’s what our little search turned up:

Third Circuit:  Still more good law out of the Third:  Refusing to abrogate economic loss rule in New Jersey – “[I]n reaching our conclusion we have exercised restraint in accordance with the 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, until the Supreme Court of that state decides differently.”  Travelers Indemnity Co. v. Dammann & Co., 594 F.3d 238, 253 (3d Cir. 2010).

Fifth Circuit:  Refusing to create new exception to Texas economic loss rule – “[I]n hazarding an Erie guess, our task is to attempt to predict state law, not to create or modify it.  The practical effect of adopting an exception like the one [plaintiffs] propose is the creation of a previously nonexistent state law cause of action.  Therefore, [plaintiffs] carry a heavy burden to assure us that we would not be making law.”  Memorial Hermann Healthcare System Inc. v. Eurocopter Deutschland, GmbH, 524 F.3d 676, 678 (5th Cir. 2008).

Sixth Circuit:  Refusing to grant standing under Ohio declaratory judgment statute to uninjured persons – “[W]hen given a choice between an interpretation of state law which reasonably restricts liability, and one which greatly expands liability, we should choose the narrower and more reasonable path.”  Aarti Hospitality, LLC v. City of Grove City, 350 Fed. Appx. 1, 6 (6th Cir. 2009).

Seventh Circuit:  Refusing to abrogate impact rule in Illinois medical malpractice cases – “[F]ederal courts are loathe to fiddle around with state law.  And that is especially true when it comes to important matters of state tort law, where there is an inherent danger in us intruding on the state’s development of its own law.”  Barnes v. Anyanwu, 391 Fed. Appx. 549, 553 (7th Cir. 2010).

Eighth Circuit:  Refusing to broaden the universe of persons considered “clients” in legal malpractice cases – “Our duty is to conscientiously ascertain and apply state law, not to formulate new law based on our own notions of what is the better rule.”  Leonard v. Dorsey & Whitney LLP, 553 F.3d 609, 612 (8th Cir. 2009).

Ninth Circuit:  Refusing to create a new exception to California’s implied warranty privity requirement – “We decline this invitation to create a new exception that would permit [plaintiff’s] action to proceed.  So doing, we acknowledge that state courts have split on this privity question, and that the requirement may be an archaism in the modern consumer marketplace.  Nonetheless, California courts have painstakingly established the scope of the privity requirement . . . and a federal court sitting in diversity is not free to create new exceptions to it.”  Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1023-24 (9th Cir. 2008).

District of Columbia Circuit:  Refusing to recognize negligent infliction of emotional distress in the District – “Were we to allow [plaintiff] to recover for IIED, we would be substantially expanding the scope of the third-party IIED tort under District of Columbia law. Of course, in considering common law claims, federal courts must apply existing law-we have no power to alter or expand the scope of D.C. tort law.” Pitt v. District of Columbia, 491 F.3d 494, 507 (D.C. Cir. 2007).

Looking at things, we have to say that federalism is alive and well – if not always successful – in the federal appellate courts. In somewhat less than five years since our first look at the subject, we’ve found new precedent in over half of the circuits, the Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, and DC circuits, all refusing to expand the scope of state-law claims at least in part for federalism reasons under the Erie rule. Thus, we continue to think that anytime that a novel tort theory is asserted in a diversity case in federal court, defendants should include federalism-based arguments in opposition to the claim.

We’re pleased by the dismissal of Myers-Armstrong v. Actavis Totowa LLC, 2009 WL 1082026 (N.D. Cal. April 22, 2009). In M-A, the defendant was basically shut down by the FDA over Good Manufacturing Practices issues at its plant. The defendant recalled over 100 drugs (it was a generic manufacturer) at the wholesale, but not retail level. The plaintiff took one of these drugs, was not hurt by it, but sued over all 100+ drugs.

What a worthless lawsuit. Of course, it was a putative class action.

The court threw it out on the eminently sensible ground that a plaintiff who took a drug that was effective, and wasn’t hurt by it, hasn’t been injured just by the drug being “adulterated” under the FDCA because there were GMP violations at the plant were it was made. The court literally concluded that “life’s too short” to allow this kind of 100% opportunistic litigation:

As a concession to the shortness of life, California law does not allow a civil lawsuit to recover the purchase price for medicine consumed by the purchaser which performed as intended with no harm or fear of future harm merely because the consumer would not have purchased it had he or she known that the medicine came from a plant whose quality-control had been compromised. That the CDP was adulterated due to a lack of compliance with GMP requirements is not enough, without more, to state a claim. A plaintiff must allege an actual manifestation of a defect that results in some injury or rational fear of future injury in order to state cognizable claims. There must be at least some physical manifestation such as physical harm, or a failure of the drug to work as intended, or a rational fear of future harm, none of which are alleged.

If the pills had not been consumed, the consumer might possibly have a claim for a refund. But after consuming the pills and obtaining their beneficial effect with no downside, the consumer cannot get a refund on the theory that the pills came from a source of uncertain quality…. [T]he civil law should not be expanded to regulate every hypothetical ill in the absence of some real injury to the civil plaintiff.

2009 WL 1082026, at *4 (citations and footnote omitted).

The case as to the 100+ drugs that the plaintiff never took was given the back of the court’s hand. “As to the other 106 drugs, state law does not supply her with a damages remedy for the additional reason that she did not even purchase or ingest any of the other 106 drugs. Plaintiff cites no California decision that shows her extreme theory should go forward.” Id. at *5. We hope the defendant gives serious consideration to Rule 11 sanctions.

This case will also be fondly listed in our no-injury scorecard.

The only discordant note in M-A was the court’s rejection of a preemption argument based upon a perceived conflict with the FDA’s decision not to recall the drugs on the retail level. Id. We think a better preemption argument – and one that wouldn’t have flown in the face of Levine – would have been that the claims were disguised attempts at private enforcement of the GMP violations that brought about the recall, and thus barred by §337(a) and Buckman. As we’ve pointed out before, the exceptions allowing private FDCA enforcement in the food area don’t apply to drugs.

As readers who use our No Injury Scorecard know, we’re very interested in identifying situations where plaintiffs – and especially consumer fraud plaintiffs – get dismissed because they don’t have (or don’t choose to allege) a legally sufficient injury.

Why?

Class actions, mostly. As we’ve pointed out before, the plaintiff-side class action aggregators have pretty much been expelled from the product liability/personal injury temple. This trend – that personal injuries and class actions don’t mix – is so pronounced that even more recent drafts of the ALI’s Principles of Aggregate Litigation (which we think has an inordinate fondness for class actions) admit it.

So to keep their straws in the prescription medical product honey pot, the class action purveyors had to find something else to sue over – several things, actually. They now like pure economic loss claims. But they can’t use (at least in most places) traditional tort causes of action because of other impediments, such as reliance requirements that bar most traditional fraud class actions and the economic loss rule, which precludes purely economic losses from being recovered in negligence or strict liability. Maybe one day we’ll post about those, but not today.

Hence the recent emphasis on consumer fraud statutes.

But in the consumer fraud arena, most of these statutes (even California, now) require that there be some sort of actual, concrete loss. The more favorable statutes require a loss of money or property. Others, with vaguer damage provisions (such as New Jersey’s “ascertainable loss” standard) have, not surprisingly, seen more action from the other side of the v.

In those cases – as far as the damage requirement goes – our bottom line is this: if a particular individual (whether a class representative or just a class member) took/used the drug/device and (1) it provided effective relief of the condition it was prescribed to treat, and (2) the person didn’t suffer whatever risk allegedly wasn’t warned about, then the case shouldn’t be in court.

In that situation, not only wasn’t there any harm (the stuff worked and caused no other injury) but it would be unfair to the defendant to permit any recovery. Basically, that particular plaintiff/class member got exactly what s/he paid for. Whatever unwarned-of risk is being litigated didn’t affect this person. There’s no injury, and thus no basis for recovery. Any recovery amounts to a windfall.

Not only is this the right result for a whole host of social and jurisprudential reasons – but it has an extra added benefit that (from our perspective as defense lawyers) is even better. It should defeat class certification.

Why?

The spiel used to justify economic loss class actions is that economic damages can simply be calculated on the basis of some formula, and because of that, they aren’t an “individualized” issue (like calculating personal injury damages) that defeats class certification. But if the fact of injury – putting aside the amount – is dependent upon the existence of personal injury, then most if not all of the individualized issues that surround personal injuries get reincorporated into the consumer fraud action, even if the only damages actually recoverable are economic.

So the argument that the plaintiff wasn’t hurt because s/he got exactly what s/he paid for has the added bonus (beyond simply making logical sense) of defeating class certification. How does it do in court?

Pretty well, most of the time.

The first time we ever ran across the argument was in a rather weird context – constitutional, that is “case or controversy,” standing. Rivera v. Wyeth-Ayerst Laboratories, was (predictably) a class action for economic loss. Insurers were suing over their (alleged) payment for prescriptions for a drug with an unwarned-of risk. But the drug was effective, and only a few people (twelve) ever encountered the risk. Despite that, the insurers sought reimbursement for every prescription they reimbursed during whatever class period was alleged.

Well, pigs get fat, but hogs get slaughtered. And this overreach got slaughtered.

The Rivera court held “no way.” The class alleged no injury that could even count as a case or controversy under Article III of the U.S. Constitution. First, there was no claim in contract/warranty:

By plaintiffs’ own admission, [the class representative] paid for an effective pain killer, and she received just that – the benefit of her bargain. An award of damages for breach of contract is supposed to place the injured party as nearly as possible in the position that he would have occupied had the defaulting party performed the contract. [The drug] worked. Had [defendant] provided additional warnings or made [the drug] safer, the plaintiffs would be in the same position they occupy now. Accordingly, they cannot have a legally protected contract interest.

283 F.3d 315, 320 (5th Cir. 2002). Second, there was no claim in tort:

The plaintiffs apparently believe that if they keep oscillating between tort and contract law claims, they can obscure the fact that they have asserted no concrete injury. Such artful pleading, however, is not enough to create an injury in fact. . . . By definition, [plaintiff’s] no-injury “damages” will not vary with [defendant’s] degree of negligence or the drug’s propensity for harm. [Plaintiff] has not even indicated what additional warnings [defendant] should have included. . .perhaps because as one not injured by the drugs, she does not know.

Id. at 320-21.

Hard on the heels of Rivera, came a similar decision involving the diabetes drug Rezulin. That drug allegedly carried inadequate warnings about liver injury. A class of alleged users brought consumer fraud claims even though they never got hurt by the drug, and it had treated their conditions (diabetes) effectively. The court held that there were no damages, even under the capacious terms of the New Jersey consumer fraud statute:

Every one of these theories would involve issues individual to the particular class member. . . . Plaintiffs’ contention that everyone who took [the drug] sustained an ascertainable loss presumes that [it] was worthless. But that is not a defensible position. Even plaintiffs’ experts acknowledge that [the drug] was enormously beneficial to many patients. Those patients presumably got their money’s worth and suffered no economic injury. And the question whether an individual class member got his or her money’s worth is inherently individual. Indeed, it involves very much the same questions as would a claim for money damages for personal injury.

In re Rezulin Products Liability Litigation, 210 F.R.D. 61, 68-69 (S.D.N.Y. 2002); see Zehel-Miller v. Astrazenaca Pharmaceuticals, LP, 223 F.R.D. 659, 664 (M.D. Fla. 2004) (quoting and following Rezulin).

A year later, another court put the question thusly: “The question. . .is whether patients who were prescribed a drug for pain, and who personally suffered no ill effects or lack of efficacy, can sue for money damages. . .as consumers injured by. . .allegedly-fraudulent advertising claims.” Williams v. Purdue Pharma Co., 297 F. Supp. 2d 171, 172 (D.D.C. 2003). After reviewing the plaintiffs and their allegations, the court noted the disconnect between the two. Id. at 176 (“[t]he class these plaintiffs seek to represent, however, has not had those problems”) (emphasis original). The class could not sue over alleged injuries to other people:

Although the plaintiffs allege a “benefit of the bargain” theory of injury, they do not allege that [the drug] failed to provide them effective pain relief or that they suffered any adverse consequences from their use of [the drug]. . . . Without alleging that a product failed to perform as advertised, a plaintiff has received the benefit of his bargain and has no basis to recover purchase costs. . . . Those patients who purchased [the drug]. . ., and who obtained effective pain relief without addiction received the “benefit of their bargain.” Those who did not, as plaintiffs concede, can be compensated through tort law.

Id. To the extent there were misrepresentations without injury, the government, but not private plaintiffs, could enforce consumer protection statutes. Id. at 177.

Almost simultaneously, another court adopted essentially the same argument – although the class action claims involved were unjust enrichment and warranty, rather than consumer fraud. Again, economic loss does not occur where the drug is effective and the plaintiff was not injured:

The Court cannot accept this argument, however, for it is based on the premise that Baycol did not provide any benefit. . . . [T]o succeed on either the unjust enrichment or breach of warranty claims, Plaintiffs would have to demonstrate that they were either injured by [the drug], or that [the drug] did not provide them any health benefits.

In re Baycol Products Liability Litigation, 218 F.R.D. 197, 213-14 (D. Minn. 2003). See also Heindel v. Pfizer, Inc., 381 F. Supp.2d 364, 379-80 (D.N.J. 2004) (class action claim that purchasers of a “medicine whose benefits they clearly enjoyed” were nevertheless “entitled to reimbursement for some or all of the purchase price” was “patently absurd”; “recoveries by those whose products function properly means excess compensation”).

Then, in Prohias v. Pfizer, Inc., 485 F. Supp.2d 1329, 1336 (S.D. Fla. 2007), similar allegations were made against a drug manufacturer, this time for supposed promotion of an off label use. Ruling under the consumer fraud statutes of New York and New Jersey, the court pointed out that not only wasn’t the drug harmful – but these plaintiffs still took it, even after filing suit:

I cannot come up with any theory upon which [plaintiffs] are actually injured or aggrieved by the allegedly misleading advertisement. Rather, as explained above, the fact that they currently take [the drug], in light of the information they have, requires me to conclude that they take [the drug] for its. . .undisputed health benefits, and therefore cannot claim to have suffered any damage from the allegedly misleading statements about [its other] benefits.

* * * *

Moreover, [plaintiffs] (or their physicians) obviously believe that they continue to receive benefits from taking [the drug], notwithstanding any alleged limitations as to its efficacy, and continue to pay the price charged by [defendant] and its distributors. Thus, to show any damages under the “price inflation” theory, would require evidence of the hypothetical price at which [the drug] would sell if not for the allegedly misleading advertisements. Determination of such hypothetical price, even with expert proof, is too speculative to be the premise of an “actual injury.”

Id. at 1336-37. The utter lack of damages is one reason we previously referred to this litigation as a “strike suit.”

Most recently – only a couple of months ago – another federal court reached held that allegedly illegal off-label promotion was not actionable where the plaintiff did not allege ineffectiveness or inferiority. This time a RICO class action bit the dust:

Plaintiffs allege that Defendants’ fraud is their misrepresentation of the safety and efficacy of [the drug] for off-label uses and that it is worth less than what they paid for it, without alleging that the drug harmed the beneficiaries in any way or that the drug lacked safety or efficacy; as such, the Court must infer that the drug did not harm the beneficiaries. Without alleging that a product failed to perform as advertised, a Plaintiff has received the benefit of his bargain and has no basis to recover purchase costs. Therefore, Plaintiffs do not plead a concrete financial loss in the form of overpayment, absent allegations that the drug was inferior on some level and worth less than what they paid for it. Because Plaintiffs fail to sufficiently allege a cognizable RICO injury under federal or New Jersey law, they lack standing to bring such claims.

District 1199P Health and Welfare Plan v. Janssen, L.P., 2008 WL 5413105, at *9 (D.N.J. 2008. Dec. 23, 2008).

State courts have drawn similar conclusions. In Baron v. Pfizer, Inc., 840 N.Y.S.2d 445 (App. Div. 2007), the first state appellate court to consider such an argument concluded, in an off-label promotion case, that a company’s promotion of an effective off-label use – while illegal – was not actionable consumer fraud:

[W]e note that plaintiff failed even to allege. . .that [the drug] was ineffective to treat her neck pain, and her claim that any off-label prescription of [the drug] was potentially dangerous both asserts a harm that is merely speculative and is belied in any event by the fact that off-label use is a widespread and accepted medical practice. In short, because plaintiff failed to allege actual harm or that she sustained a pecuniary injury, [the trial court] properly determined that she failed to state a claim.

Id. at 448. Similar allegations were dismissed in Kansas:

[T]he plaintiffs did not suffer “loss or injury” and were not aggrieved within the meaning of the statute. . . . The plaintiff. . .suffered no physical injury and received a drug that provided relief for her pain. Thus, she has no loss. The attorney general may bring an action against defendant if he believes that the citizens of Kansas have been aggrieved by defendant’s actions, even if no loss has been suffered.

Porter v. Merck & Co., 2005 WL 3719630, at *3 (Kan. Dist. Aug. 19, 2005). And in Indiana:

[Plaintiff] does not allege that she had to supplement her [drug] with other pain relievers or incur any other cost because [the drug] was not safe or effective. Nor does she allege. . .that she suffered any injury because [the drug] was less safe than [the defendant] represented it to be. . . . [Plaintiff] has not alleged any actual damages as required by the [consumer fraud act].

Kantner v. Merck & Co., 2007 WL 3092779, at ¶¶17-19 (Ind. Super. Apr 18, 2007).

But all is not sweetness and light. Last year the court in De Bouse v. Bayer AG, 896 N.E.2d 882, (Ill. App. 2008) – the Fifth District (the court with jurisdiction over Illinois’ infamous Madison and St. Clair litigation centers) – allowed a class action to proceed that, in practical terms, was indistinguishable from that rejected in In re Baycol (the nominal causes of action being different, however). The reasoning in De Bouse relied more on Gestalt psychology than on legal causation principles:

The dissent suggests that the plaintiff cannot establish that she suffered actual damages, even if the purchase was based on deceptive conduct, if the drug lowered the plaintiff’s cholesterol without causing any side effects, because the plaintiff would have gotten exactly what she paid for: a safe, cholesterol-lowering drug. In our view, a consumer who is fortunate to avoid a known but concealed adverse reaction associated with the use of a medication does not necessarily “get her money’s worth.” Product value is determined by the price, the product’s efficacy and benefits, the product’s safety risks, and the availability of other products relative to price, performance, and risk. A consumer cannot judge “true value” where known information regarding product performance is withheld. A consumer is entitled to make an informed choice, in conjunction with her health care professionals, about the actual risks and benefits of a prescription drug.

896 N.E.2d at 891.

By contrast, the dissent in De Bouse accepted the majority-rule argument – effective treatment without encountering the alleged risk means no legally cognizable injury:

[T]he plaintiff cannot establish that she suffered actual damage as a result of her purchase of [the drug]. . . . The plaintiff purchased and paid for a cholesterol-lowering drug. The complaint does not allege that the plaintiff suffered any personal injury as a result of using the drug, nor does she allege that the drug did not work to lower her cholesterol. If, in fact, the drug lowered the plaintiff’s cholesterol without causing any adverse side effects or personal injuries, then the plaintiff got exactly what she paid for: an effective, safe, cholesterol-lowering drug.

Id. at 901.

But the outlier decision that is De Bouse might not be around much longer. In our pursuit of completeness, we actually checked the citing references for every case in this post – even cases from 2008. Sometimes, compulsive behavior is rewarded. Checking De Bouse revealed a very recent development:

Appeal Allowed by, No. 107528, ___ N.E.2d ___ (Ill. Jan. 28, 2009).

That means that less than a week ago, the Illinois Supreme Court agreed to review De Bouse. We can only hope that the court will appreciate the wisdom embodied by the majority rule and will reject strike-suit class actions on behalf of uninjured persons.