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

 

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

 

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

 

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Id.

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

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

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

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

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

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

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

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

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

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

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

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

We’re pleased to report the demise of a plaintiff’s firm’s attempt to punish the FDA for rejecting the firm’s attempt to force the agency to create evidence helpful to plaintiffs in litigation. The ploy began in 2012, when “a law firm that represents hundreds” of plaintiffs in prescription drug mass tort litigation “on a contingency fee basis” “filed a citizen petition with the [FDA].”  Sheller, P.C. v. U.S. Dep’t of HHS, 119 F. Supp.3d 364, 368 (E.D. Pa. 2015). Plaintiff sought agency action that it could, in turn, parade before juries in the underlying mass tort, specifically: “that the FDA immediately revoke the [relevant] indication for the . . . [d]rugs” at issue or alternatively “require that labeling for those drugs include a black box warning based on the lack of sufficient data to prove their safety.”  Id.  In addition, the plaintiff law firm sought to enlist the FDA in evading a confidentiality order (originally agreed to by the law firm) that protected discovery which the defendant in the underlying litigation had provided.  Id.

So far, so what?  While annoying, attempts of this nature to embroil the FDA in mass tort prescription medical product litigation are part of the other side’s play book.  (((Bexis))) recalls similar machinations during the Bone Screw litigation whereby the plaintiffs did everything they could (ultimately unsuccessfully) to prevent the Agency from adding to those products’ labeling previously off-label uses that had become the medical standard of care – because the Bone Screw plaintiffs’ litigation strategy was based on the procedures in question being off label.

The Bone Screw plaintiffs failed, 63 Fed. Reg. 40025-41 (FDA Jul. 27, 1998) – as did the law firm plaintiff in Sheller (119 F. Supp.3d at 368) – since the FDA normally has little patience for the junk science that the other side routinely peddles in mass tort litigation.  The plaintiff law firm in Sheller would have been off not filing the petition at all, since according to plaintiff, “the FDA decision to deny its petition “has been used as the basis to assert federal preemption and other [defense] arguments against [plaintiff’s] clients in [mass-tort] litigation.”  Id.

No kidding.  That’s the down side this sort of litigation strategy.  Attempts to involve the FDA in litigation have the risk that, if one loses, the FDA’s actions can create a positive narrative for the other side.

But plaintiffs believe in the doctrine of “heads I win; tails you lose.”

So in Sheller the plaintiff law firm attempted to gin up, from their failed strategy, a tort cause of action – not an administrative claim – against the FDA.  Talk about a bootstrap.  The plaintiff law firm was the one that involved the FDA in the first place.  The bizarre theory of liability postulated that, if the FDA wouldn’t cooperate in creating pro-plaintiff evidence/themes in the underlying litigation, that required the plaintiff law firm to work harder and spend more money to come up with something that juries might believe.  So the law firm sued the FDA to recover its purportedly increased litigation costs:

Plaintiff [claims] . . . that the FDA denial of [its] citizen petition increased [its] costs in litigating [because] . . . the defendant . . . has argued that the FDA’s denial of the Petition proves, as a matter of law, that the [drug’s] label is adequate. . . . Plaintiff argues that it must continue to expend resources in defending against that argument, and it faces the risk that a Court will accept it, lowering [plaintiff’s] contingent fee recovery.

Sheller, 119 F. Supp.3d at 369-70 (quotation marks omitted).

Continue Reading Bootstrapped Claim Against the FDA Gets the Boot

Ever since we first waded into the issue of “duty to supply” back in 2007 in connection with the litigation that produced Abigail Alliance for Better Access to Developmental Drugs v. von Eschenbach, 495 F.3d 695 (D.C. Cir. 2007), we’ve criticized cases that, either actually or potentially, seek to impose liability – not for defective products – but for failure to supply as much of a non-defective drug as has been prescribed for the plaintiff.  Today, we’re updating that discussion with a recent development, the affirmance of the decision that rejected the concept of “duty to supply” in 22 states.  We blogged about that decision in the district court here.  Plaintiffs thereafter appealed, but dropped their claims asserting a “free-standing duty to supply the market.”  What’s left are described as “acceleration” (that progression of the disease allegedly worsened”) and “contaminant” (related to the production difficulties) claims.

This decision is Hochendoner v. Genzyme Corp., Nos. 15-1446, -1447, slip op. (1st Cir. May 23, 2016).  The allegations in Hochendoner were that production difficulties led to a shortage of the only FDA-approved treatment for Fabry Disease, a progressive condition that is eventually fatal if untreated.  Slip op. at 3-5.  The shortage (which lasted several years) led to rationing, and in response to rationing a bunch of Fabre sufferers tried to sue.  For more details, see our prior post.  Except for one plaintiff, none of them alleged that there was anything wrong with the product they actually received – only that they didn’t receive enough of it, and as a result their pre-existing Fabre Disease symptoms recurred and/or progressed.

The First Circuit affirmed, albeit on different grounds – standing . Although not addressed in the District Court, standing is a “prerequisite” to subject matter jurisdiction, and cannot be waived.  Slip op. at 8.  An interesting procedural point that the court confirmed is that a “plaintiff bears the burden of establishing sufficient factual matter to plausibly demonstrate his standing to bring the action” under TwIqbalId. at 10.  In Hochendoner all but one of the plaintiffs alleged no particularized injury (no doubt because the litigation was a putative class action, and anything particularized is likely to preclude class certification).  Simply being required to take a reduced dose of a drug didn’t come close to actual, particularized injury:

Utterly absent, however, is any allegation linking the alleged acceleration and contaminant injuries to any specific plaintiff. This gap is most apparent with respect to the contaminant theory.  There is simply no assertion at any point in the complaints that any specific plaintiff took or received a dose contaminated with particulate matter.  Rather, the allegation is only that [defendant] produced a batch of [the drug] contaminated with particulate matter − not that contaminated doses were ever shipped or administered to any named Fabry patients.

Continue Reading New Duty To Supply Decision

We have posted many times about cases where a manufacturer of a regulated product is sued over alleged violations of a state consumer protection or deceptive trade practices act because of something allegedly amiss in the product’s name, labeling, advertising, or sales practices.  We know that drug and device manufacturers like the ones we represent can spend resources dealing with state attorneys general over the threat that such suits will be brought.  We cannot recall seeing, let alone posting on, a case where the manufacturer sued the state attorney general because its threat of suit—relayed to major retailers, who stopped selling the product—allegedly hurt its business and constitutional rights.  There would seem to be lots of reasons why an action like this might not be taken by a company that wants to keep doing business in the particular state for other products it manufacturers.  But if you are a one product, dietary supplement company and your presumably large market in Texas disappeared after letters went out based on a determination by the Texas AG’s office, not by a court, then you might be the one to bring suit preemptively.  That is what happened in NiGen Biotech, L.L.C., v. Paxton, No. 14-10923, 2015 U.S. App. LEXIS 17223 (5th Cir. Sept. 30, 2015).

The unusual posture of the case—in comparison to those we usually handle or read—means that it delves into constitutional issues that we knew better back when we clerked and the docket was sprinkled with cases against state actors.  The ones brought by prisoners are remembered more for their unique fact patterns and brand of advocacy than for the constitutional principles they implicated.  NiGen, likewise, holds our interest not because its treatment of sovereign immunity, federal question jurisdiction, and standing has direct implications for the sort of cases that normally fill our posts.  Rather, it shows that a manufacturer can go on the offensive against a state AG who probably thought it could do just about whatever it wanted prior to bringing its own suit.  It is not that we think the manufacturer Nigen is right on the underlying issue of whether the product’s label was deceptive, which touches on some complex constitutional issues, especially since Amarin has come down since this case started.

Continue Reading Going on Offense against State Deceptive Trade Practices AG Actions

Can a plaintiff sue in federal court for consumer fraud when he never purchased and never used the product?  This is not a trick question, and the obvious answer is also the correct answer.  No, he can’t.  But the point raises interesting strategic issues that we will get to in a minute.  The case du jour is Dapeer v. Neutrogena Corp.No. 14-22113-Civ, 2015 U.S. Dist. LEXIS 37644 (S.D. Fla. Mar. 25, 2015), where the plaintiff filed a class action alleging that the labeling for more than 20 different types of sunblock made deceptive sun protection claims.  Id. at **2-3.  Mind you, the plaintiff did not allege sunburn, or any other adverse effect of the allegedly underpowered and purportedly not-so-water-resistant lotions and sprays.  His claims were of the economic type, as class actions these days tend to be, alleging that he would not have purchased the products had he known that the products did not actually block the sun or resist water as well as the labels claimed. Id. at *3.

The problem for the plaintiff was that he had purchased only two of the products, leading the court to conclude that he lacked Article III standing to represent classes asserting claims over the products he never bought.  Apparently, there are district courts that would have allowed this plaintiff to do what he wanted to do, i.e., represent class members on claims involving over 20 products [see id. at *9 n.3], although we cannot see how that can possibly be.  The rule in the Eleventh Circuit seems rock solid:  “[A]t least one named plaintiff must establish Article III standing for each class subclaim.  In other words, Article III standing of a named plaintiff must be established on a claim-by-claim basis within the Eleventh Circuit, and deferring the standing determination to the class certification stage will yield no different result.”  Id. at *9 (citations omitted).

So to have standing in a claim alleging deceptive sales, the plaintiff must have bought the product, and the district court therefore dismissed the claims related to products the plaintiff did not purchase or use.  Id. at *9 (“Here, Plaintiff lacks Article III standing to bring claims on behalf of the . . . products he did not purchase because he cannot conceivably allege any injuries from the products that he never purchased or used.”).  The class action still went forward, but with claims over two products instead of more than 20.

Continue Reading Plaintiff Gets Burned By Article III in Sunblock Class Action

Today we have this guest post from Reed Smith‘s Andrew Stillufsen about a recent defense win in a third party payer (or is it”payor”?) case here in the Eastern District of Pennsylvania.  We hope you find it as interesting as we did.  As usual all credit and/or blame belong to the guest poster.

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Travelers Indemnity Co. v. Cephalon, Inc., is a third party payor case where plaintiffs – workers compensation insurers – claimed that they were injured by paying for prescriptions for defendant drug company’s  pain medications which were written as a result of its alleged off-label marketing of the drug.  2014 U.S. Dist. Lexis 95075 (E.D. Pa. July 14, 2014).  SPOILER ALERT:  as with similar cases, even after extensive discovery and an amended complaint, plaintiffs still failed to allege facts sufficient to establish standing or to support any of their fraud claims.  Motion to dismiss granted.

Before the court could address plaintiffs’ substantive claims, it first had to determine whether the allegations were sufficient to establish standing.    To establish standing, the plaintiff must show that they suffered a cognizable injury. Id. at *16-18.   “The contours of the injury-in-fact requirement, while not precisely defined, are very generous, requiring only that the claimant allege some specific, identifiable trifle of injury.”  Id. at *17.  (citations and internal quotations omitted).  Under the now-familiar TwIqbal analysis, plaintiffs failed to allege sufficient facts to show even a mere “trifle.”

In this case, plaintiffs essentially alleged two theories of injury.  First, they claimed they were injured because “they did not get what they paid for,” as plaintiffs paid for drugs that were not safe or effective due to defendant’s alleged fraudulent off-label marketing.  Second, but for the alleged off-label marketing, plaintiffs  claimed they were injured when they paid for more expensive drugs when less-expensive drugs were available.  Id. at *18-19.

Continue Reading Guest Post – Another Third Party Payor Case Is Shown The Door

“Necessity is the mother of invention.”  “Desperate times call for desperate measures.”  “Bad facts make bad law.”  We see two of three of these adages play out in Carik v. U.S. Dept. of Health and Human Services, No. 12-272 (BAH), 2013 U.S. Dist. LEXIS 168714 (D.D.C. Nov. 27, 2013). To the great credit of the judge, who generally followed “Patience is a virtue” in dismissing an 89 page complaint against FDA, NIH, DHHS, and their respective top officials, bad facts did not make bad law here.  As our title suggests—clearly, this would be the worst cover of the Rolling Stones’ “You can’t always get what you want” ever—this case was an attempt by plaintiffs to make the government force two drug manufacturers produce more of two drugs that plaintiffs wanted to take.

What is not apparent from the Carik decision is that that at least some of these same twenty-five plaintiffs had already failed in their efforts with direct lawsuits against these manufacturers.  As detailed here
and here, two other district courts previously found no duty to supply these plaintiffs in particular or the market in general with approved drugs.  (The plaintiff from Lacognata was clearly also in Carik, but we cannot tell if the plaintiff from Schubert was one of the twelve named or thirteen unnamed plaintiffs in Carik.)  These results were consistent with decisions in clinical trial and experimental use cases, where patients have much closer relationships with manufacturers, rejecting a right to continue taking a drug after the manufacturer stops offering it (for free or otherwise).  Driven, we are sure, by desperation and what they viewed as necessity for their own long-term health, the Carik plaintiffs came up with the idea of suing all parts of the government they could think of having anything to do with the two drugs at issue.

Successfully suing the government is hard to do.  Successfully suing the government as a back-up to an unsuccessful suit against private parties is harder still.  So, it should not be too surprising that the plaintiffs in Carik failed.  Still, it is an interesting and potentially useful decision.

Each of the drugs at issue is the only drug approved for its particular indication and had a history of shortages based on manufacturing and/or compliance issues.  Id. at **3-4.  Plaintiffs and defendants agreed that these shortages were caused by the actions and inactions of the non-party manufacturers.  Id. at *2.  Yet, plaintiffs offered a long “mix[ of] facts, legal arguments, and political and social theory, often in the same paragraph,” in an attempt to cobble together some legal basis to require the government defendants to do something to alleviate the problem.  Id.  Typically, such vague complaints addressed in this blog are dealt with under 12(b)(6) and TwIqbal.  Here, defendants’ motion to dismiss for lack of standing under 12(b)(1) took care of the case without the court having to consider whether claims upon which relief could be granted had been stated.

Before bringing their suit, the Carik plaintiffs had petitioned NIH in 2010 to “march-in” on the patent for one of the drugs to allow it to be developed by others; something called the Bayh-Dole Act apparently creates such an exception to traditional patent protection when federal funding helped develop the technology, which was apparently the case with one of the drugs here.  Id. at **13-15.  Even though NIH noted that the requested intervention would not solve the drug shortage, it directed the patent holder to report on the status of the drug’s availability.  According to the patent holder, nobody had requested a license for the drug and the drug shortage was over by early 2013—after the suit was filed—so NIH closed its march-in case.  More on this later.

The lead plaintiff had also submitted a citizen petition to FDA in early 2011 asking that it “allocate full doses of [the drug] to U.S. citizens under its consent decree with [the manufacturer].”  Id. at **15-16.  The FDA does not manufacture drugs or keep stores of them for distribution, so we do not how this petition could ever be granted.  As FDA often does with citizen petitions, it merely responded to this petition with the statement that it would take more time to analyze the complex issues presented.  So, the petition was still pending when the case was filed.

It was unclear from the court’s presentation of plaintiffs’ contentions whether the propriety of the actions by NIH and FDA on the respective petitions was being challenged.  We suspect that they were not because there were no petitions on the second drug in the case and there would not have been pre-suit exhaustion of administrative remedies.  Instead, it looks like the plaintiffs were pursuing multiple avenues simultaneously, including the cases against the manufacturers in other courts.  The causes of action asserted against the government—and the patent holder, who was later dropped—could hardly have been more vague:  Violations of the Fifth and Tenth Amendments, violations of the Patent Clause, violations of the doctrine of separation of powers, and violations of the FDCA.  Id. at *16.  We cannot recall ever seeing a suit based on a violation of a doctrine.   Because the decision was based on lack of standing, the applicability of cases against manufacturers and other private defendants was somewhat limited.

According to Supreme Court cases like Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), standing requires (a) an injury in fact, (b) causation between the injury and the defendant’s conduct, and (c) the ability for the court to redress the issue. The court never got to the third element, but it seems to us that this was a no-brainer by the time of the motion to dismiss.  For the drug at issue for twenty-four of the plaintiffs, “the drug shortage was over.”  No damages were sought.  The only relief sought was to do something to end the shortage.  So, there was no possibility of redress short of use of a WABAC Machine.  (There is apparently a movie coming out based on “Peabody’s Improbable History,” itself a sideshow within “The Rocky and Bullwinkle Show,” which suggests there are no new ideas in children’s movies.)  For the drug used by the remaining plaintiff, whose claims probably did not belong in this case anyway, there was nothing suggesting any possibility of redress even though the shortage had not ended.  The shortage was related to the manufacturer shifting from one plant to another.  The FDA can delay or prevent manufacturing a particular drug at a plant, but nobody claims it has authority to order manufacturing to occur.

As it was, twenty four of the plaintiffs had not alleged an injury in fact, or even the “imminent or certainly impending injury” that suffices in the standing context.  As should be the case for product liability cases, mere possibility of adverse effects from taking less or weaker doses of the drug because of the shortages was not enough.  2013 U.S. Dist. LEXIS 168714, **24-28.

The remaining plaintiff, however, claimed that the shortages of her drug had injured her eyesight and put her at imminent risk for irreversible damage, which was enough for the first element.  The court also rejected, with detailed analysis we will not repeat here, the idea that the vague constitutional injuries alleged by all the plaintiffs constituted cognizable injuries in fact.  The arguments from plaintiffs were so wacky that the court’s analysis would be unlikely to come up in cases against drug companies.

None of the plaintiffs could satisfy the causation element of standing.  They argued that the government defendants had a duty to alleviate the drug shortages and that the manufacturers were somehow acting as agents of the government.  As to the former argument, “[t]here is, quite simply, no statutory basis for the defendants to have taken the action plaintiffs alleged they should have taken, let alone a duty to do so.”  Id. at *46.  As to the latter argument, there actually are standards from the Supreme Court for when actions of private entities can be attributed to the government.  Plaintiffs did not allege the defendants “exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice [of the private parties] must in law be deemed to that of the [government].”  Id. at **50-51 (quoting S.F. Arts & Athletics, Inc. v. U.S. Olympic Comm., 483 U.S. 522, 546 (1987)).  So much for standing.

These were clearly correct decisions on the facts presented.  One might claim that decisions like these affirming that drug manufacturers act independent of FDA run contrary to the conflict preemption arguments we make for such manufacturers, but we do not see it that way.  The FDA’s regulatory scheme delineates various powers, rights and duties.  Decisions that recognize what FDA has no authority or duty to do can be as important as decisions that recognize what a drug manufacturer has no authority or duty to do, like make labeling changes that FDA has already rejected.  We know courts would never make up fictional powers just to get to a certain result.

It’s the day after Labor Day.  For some it is the day they mourn the end of summer.  For some, it is the start of the countdown to the holiday season (58 days till Halloween, 86 days till Thanksgiving, 113 days till Christmas).  But for the vast majority, the first week of September means back to school.  Whether it is nervous kindergarteners heading out for the first time, surly teens who have to be dragged out of bed kicking and screaming, or college freshman quickly realizing why no upper classmen take Friday morning classes – it is all part of the back to school ritual.

Which got us thinking about some of the greatest school-based movies.  There are way too many to name, so apologies from the start if we miss your favorite.  But anyone’s short list for high school movies has to include The Breakfast Club, Fast Times at Ridgemont High, Ferris Buehler’s Day Off, Grease, and Dazed and Confused.  Graduating to college you have Goodwill Hunting, The Social Network, The Paper Chase, Higher Learning, Old School, and Back to School

And, of course, the single best movie about college of all time – National Lampoon’s Animal House. “You guys playing cards?”  “Guess what I am now.”  “Was it over when the Germans bombed Pearl Harbor?” “Toga, Toga.”  And who could forget:  “Is that a pledge pin?  On your uniform?”  Of course, true classics like Animal House can’t be replicated, but they can be spoofed.

Continue Reading Monster Beverage Launches Preemptive Strike

We like CAFA – that is the Class Action Fairness Act – because a federal forum is generally much preferred (and becoming moreso after Dukes and Comcast) for class actions involving prescription medical products, not to mention just about anything else.  Thus we cautioned some time ago that the industry could “lose by winning” to the extent that it defeated what were essentially no-injury class actions on the ground that the plaintiffs had no constitutional standing under Article III to bring such claims.

What’s the problem with that?
CAFA, that’s what.  Specifically, unless the plaintiffs in a state-court class action assert enough of an injury to confer constitutional standing, the case can’t be removed to (or, more specifically, cannot remain in) federal court.  That’s an issue because some states have statutes that permit suits based on allegations of injury that are too remote or too attenuated to support standing under Article III’s “case or controversy” requirement for suing in federal court.
Our general view is that most medical monitoring class actions (and more generally, most no-injury class actions of all sorts) are vulnerable on multiple fronts, so there’s no need to employ the Article III standing cudgel from our armamentarium to beat them.  Possible exceptions to this rule should be examined very carefully to avoid creating adverse precedent.
Sure enough, the potential for plaintiff-side mischief that we identified in our CAFA Not With Standing post have in fact cropped up.  So far, we’re doing all right.  Late last year we blogged about Bouldry v. C.R. Bard, Inc., ___ F. Supp.2d ___, 2012 WL 6599829 (S.D. Fla. Dec. 18, 2012), in which medical monitoring plaintiffs advanced their own purported lack of constitutional standing as a basis for remand of an otherwise CAFA-eligible case to state court.  Fortunately for CAFA, those plaintiffs failed.  Standing was recognized with respect to medical monitoring claimants under both federal (“an alleged increased risk of future harm satisfies Article III’s injury-in-fact requirement,” id. at *3) and state (“plaintiffs in cases such as these have yet to suffer physical injuries, [but] it is not accurate to say that no injury has arisen at all,” id.) grounds.
Fast forward to last week.  The CAFA/standing argument resurfaced in our neighborhood.  We’re pleased to report that, once again, the plaintiffs’ claim of lack of constitutional standing was rejected.  See Brown v. C.R. Bard, Inc., ___ F. Supp.2d ___, 2013 WL 1787561 (E.D. Pa. April 26, 2013).  As in Bouldry, the medical monitoring claims were based on the allegation that a particular implanted medical device, which was functioning perfectly, was nevertheless “at risk of fracturing at some point in the future.”  Id. at *1.
Understandably, plaintiffs were desperate to get Brown remanded, since there is controlling Third Circuit precedent that “might-break-in-the-future” claims are not actionable under Pennsylvania law.  See Angus v. Shiley, Inc., 989 F.2d 142 (3d Cir. 1993) (rejecting similar claim that heart valve might break in the future) (applying Pennsylvania law).
Thus, these plaintiffs made the same argument as their counterparts in Bouldry – that the need for medical monitoring was not an alleged “injury” sufficient to confer constitutional standing.  The key case in these parts is Reilly v. Ceridian Corp., 664 F.3d 38 (3d Cir. 2011), which – lo and behold – was the decision that prompted our initial CAFA Not With Standing post.  Brown relied upon the same discussion in Reilly that we highlighted in our post:

The plaintiffs in Reilly attempted to sue a payroll processing firm after a breach in the firm’s security system potentially exposed the plaintiffs’ personal information.  In holding that the plaintiffs lacked standing, the Third Circuit Court of Appeals compared them to litigants in defective-medical-device cases who require medical monitoring. See [Reilly] at 44.  The court noted that in the latter type of cases, “an injury has undoubtedly occurred.  In medical-device cases, a defective device has been implanted into the human body with a quantifiable risk of failure. . . .  Hence, the damage has been done; we just cannot yet quantify how it will manifest itself.”  Id. at 45 (emphasis supplied).

Brown, 2013 WL 1787561, at *2 (emphasis original in Brown).  Indeed, the court in Brown harkened back to one of our old Bone Screw cases – decided before CAFA was even a gleam in defense counsel’s eye – where Judge Bechtle held that “exposure to a potentially dangerous medical device whose safety has not been demonstrated” was an injury-in-fact for purposes of establishing standing.  In re Orthopedic Bone Screw Products Liability Litigation, 1999 WL 455667, at *5 (E.D. Pa. July 2, 1999).  See Brown, 2013 WL 1787561, at *2 (citing Bone Screw among other cases).
Thus the court in Brown, like the court in Bouldry before it, answered the $64,000 question in favor of constitutional standing:

[A]n injury-in-fact exists once a plaintiff has a  potentially defective medical device implanted into her body. . . .  [G]iven the facts alleged in the complaint and the law in this Circuit, there are no doubts to resolve here.  Under Reilly, “an injury has undoubtedly occurred” when a potentially defective medical device is implanted within a patient.  664 F.3d at 45.  Therefore, the complaint’s allegation that [plaintiffs] received potentially defective [implant] ensures that they suffered an injury-in-fact under Article III.

Brown, 2013 WL 1787561, at *3 (other citations omitted).
The Brown decision also rejects a couple of other standing-related arguments:  (1) It didn’t matter that the complaint expressly alleged that the action was not removable because plaintiffs were not alleging device failure or present injuries.  That “injury-in-fact” allegation was a mere conclusion of law that under TwIqbal a court could disregard.  Id. at *3.  (2) Plaintiffs claimed that standing required a “future risk of physical injury [that] exceeds a 50 percent chance of being manifest.”  The court found no such requirement in any of the standing cases and refused to invent one.  Id.
One wonders – at least we wonder – whether plaintiffs have unavailingly tried no-constitutional-standing arguments in CAFA-removed cases not involving prescription medical products, so we decided to take a look.

We didn’t find much.  The most interesting case is probably Colucci v. ZonePerfect Nutrition Co., 2012 WL 6737800 (N.D. Cal. Dec. 28, 2012).  Colucci was a California UCL case where the plaintiff’s damages were allegedly a higher price paid due to claimed mislabeling of a food product.  Plaintiff sued over 20 similar kinds of products, but had only actually bought one of them.  The court nonetheless found Article III standing as to all 20 products.  Id. at *4-5.  If there’s constitutional standing in Colucci, we have to think there would also be such standing in any case brought against a prescription medical product manufacturer.

Conversely, a remand for lack of Article III standing occurred in Robinson v. Hornell Brewing Co., 2012 WL 6213777, at *8 (D.N.J. Dec. 13, 2012), but the issue was quite different, since the plaintiff was seeking only injunctive relief.  Robinson thus did not involve lack of cognizable injury by a product user as the asserted ground for lack of standing.  All the other Article III standing cases under CAFA either involve extraneous issues, such as associational standing, or have since been resolved by statutory amendments, such as whether an individual plaintiff has standing after the class action aspects of a case have been disposed of.
So right now, we’re 2-0 on Article III standing under CAFA where the plaintiff resists removal on lack of a constitutionally cognizable injury.  Next up – the hat trick.