Articles from April 2013

In re Neurontin: First Circuit Issues Decision With Sensible View of Aggregate Evidence

The First Circuit has issued a critical decision both in its ultimate ruling and its reasoning. See In re: Neurontin Marketing & Sales Practices Litig., No. 11-1806 (1st Cir. Apr. 3, 2013) (slip opinion available here). In a decision written by Chief Judge Sandra Lynch, the unanimous three-judge panel reversed the district court’s grant of summary judgment and denial of class certification. See slip op. at 24-25.

In the underlying case, plaintiffs alleged that doctors prescribing the anti-seizure drug Neurontin were deceived by the defendant, pharmaceutical giant Pfizer, with respect to “off-label” uses for which Neurontin is not formally approved. The district court repeatedly rejected the plaintiffs’ use of widely-accepted statistical methods, including multiple regression, to prove causation. The First Circuit panel rejected the defendants’ argument that the plaintiffs’ use of aggregate evidence precluded class treatment. See slip op. at 20-22.

The plaintiffs’ expert had shown by regression analysis that essentially all Neurontin prescriptions for bipolar disorder were the result of Pfizer’s off-label marketing. In denying the plaintiffs’ second class certification motion, the district court adopted reasoning typically invoked by class action defendants, holding that the plaintiffs’ expert could not offer class-wide causation evidence because the regression analysis did not take account of doctors’ individual prescribing decisions, and only focused on Pfizer’s off-label marketing. See slip op. at 8.

While the second class certification motion was pending, Pfizer filed a summary judgment motion premised on the same causation argument, arguing that the doctor-by-doctor inquiry purportedly required to augment the regression analysis would be “unmanageable.” Slip op. at 13. The district court denied the second class certification motion and granted Pfizer’s summary judgment motion.

The First Circuit reversed both the district court’s entry of summary judgment and denial of class certification, with the centerpiece of the appellate ruling being the panel’s endorsement of the rigorous statistical methods that the district court had rejected. Recognizing that regression analysis is capable of distinguishing the relative causation effects among multiple independent variables, Judge Lynch’s decision noted that the plaintiffs had not relied exclusively on the regression analysis: “[I]n addition to the aggregate statistical evidence, . . . plaintiffs also presented circumstantial evidence that supported an inference of causation”, such as “documents showing that psychiatrists had almost never prescribed Neurontin for bipolar disorder until after Pfizer began its marketing campaign, at which point prescriptions jumped by 1700% in two years.” Slip op. at 20.

The first Circuit’s decision serves as essential guidance for plaintiffs’ counsel in complex litigation requiring sophisticated and rigorous scientific methods in order to confront facile arguments like those advanced by Pfizer, and adopted, repeatedly and emphatically, by the trial court.

Abraham v. St. Croix: Third Circuit Ponders Meaning of “Single Event or Occurrence” under CAFA

The Third Circuit is currently considering whether, under the Class Action Fairness Act (CAFA), removal of a toxic tort class action from state to federal court is proper where it is undisputed that all of the sites alleged to be toxic are within one state or territory. See Abraham v. St. Croix Renaissance Group, L.L.L.P., No. 12-0011 (Dist. V.I. Dec. 7, 2012) (remand order under appeal in Third Circuit, available here).

CAFA expressly provides for “local controversies” to be heard in state, not federal court. The plaintiffs based their remand motion on CAFA’s provision that removal is improper when all claims arise from “an event or occurrence” within a single state (or its territorial equivalent). See order at 4 (“The question presented is whether the allegations as pleaded concerning the continual release of red mud, red dust, and coal dust as well as the friable asbestos over a period of years fit within the meaning of ‘an event or occurrence’ as set forth in [CAFA].”).

The district court found the “event or occurrence” requirement satisfied and ordered the action to be remanded to the Virgin Islands court it was filed in, reasoning as follows: “We think that an event, as used in CAFA, encompasses a continuing tort which results in a regular or continuous release of toxic or hazardous chemicals” and, therefore, “[w]e see no reason to distinguish between a discrete happening, such as a chemical spill causing immediate environmental damage, and one of a continuing nature, such as is at issue here.” Order at 8 (footnote omitted).

Whether the Third Circuit will affirm the district court’s remand order remains to be seen. Last week’s oral argument revealed that there is an apparent consensus on the panel that all pertinent events happened on St. Croix; thus, like the district court, the Third Circuit must determine whether that constitutes a “single event or occurrence.” In addition to the issue of statutory interpretation, the plaintiffs’ counsel argued on appeal that remand is consistent with CAFA’s motivating purpose, which is to send interstate disputes to federal court, but keep genuinely local controversies in state court. The Third Circuit’s ruling is likely to indicate whether CAFA’s primary function is to provide a rational means of dividing complex litigation labor between federal and state courts, or to serve as a device (like arbitration) deployed mainly to frustrate class and representative actions.

The Third Circuit’s decision is expected to issue shortly, possibly by mid-May.

Clark v. Honey-Jam Café: Seventh Circuit Declines Post-Comcast Review of Class Certification

Earlier this week, a distinguished Seventh Circuit panel, consisting of Judges Richard A. Posner, Daniel A. Manion and David F. Hamilton, rejected a defendant’s petition to appeal an Illinois district court’s class certification ruling. Clark v. Honey-Jam Café, LLC, No. 13-8006 (7th Cir. April 22, 2013) (order denying petition to appeal class cert., available here).

In the underlying case, a class of tipped employees being paid a sub-minimum hourly wage alleged that they were required to perform non-tipped tasks for which they were not paid minimum wage as dictated by the FLSA. The Honey-Jam class was certified last month, a few days prior to the issuance of the Comcast v. Behrend ruling, where the Supreme Court found class certification inappropriate because individualized damages analyses would create a predominance of individual issues. The defendant argued that the Honey-Jam certification must be reviewed in light of Comcast, and that the district court failed to properly determine the predominance of collective issues over individual ones, specifically whether damages could be calculated class-wide.

The Honey-Jam order reinforces the contention of the dissenting justices in Comcast that the latter is a very narrow ruling, “good for this day and case only,” and that “the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3).” Comcast v. Behrend, 569 U.S. ___ (2013), slip op. dissent at 5, 3 (Ginsburg and Breyer, JJ., dissenting).

Genesis HealthCare Corp. v. Symczyk: SCOTUS Allows Pick-Off of Named Plaintiff for $7500; Justice Kagan Is Not Impressed

The Supreme Court has issued the most recent installment in its serial neutering of class and representative actions. See Genesis HealthCare Corp. v. Symczyk, 569 U.S ___ (2013) (slip opinion available here). Justice Clarence Thomas wrote the 5-4 majority opinion that staked out a holding contrary to longstanding authority prohibiting class and collective action defendants from “picking off” named plaintiffs.

The Symczyk plaintiffs had alleged that their employer arbitrarily subtracted 30 minutes from employees’ daily aggregate clocked-in time to account for meal breaks, irrespective of whether any breaks were actually taken, which resulted in employees not receiving overtime pay they were entitled to. The employer/defendant offered the named plaintiff $7500 to abandon the suit. When the plaintiff didn’t respond to the offer, the defendant asked the federal trial court to dismiss the case as moot, since the settlement offer met or exceeded any amount that the plaintiff would be able to recover in an individual lawsuit. Slip op. at 1-2.

The majority opinion first acknowledges (and declines to resolve) a Circuit split before concluding that the Supreme Court was simply without the power to address the issue: “The Third Circuit clearly held in this case that respondent’s individual claim was moot. 656 F. 3d, at 201. Acceptance of respondent’s argument to the contrary now would alter the Court of Appeals’ judgment, which is impermissible in the absence of a cross-petition from respondent.” Slip op. at 5. The immovable constraint of the mootness issue not being properly before the court thus had the fortuitous consequence of allowing the Third Circuit’s ruling to stand, to the effect that the $7500 offer had in fact mooted the case. By contrast, the Third Circuit had also ruled that, even though the plaintiff’s personal claim was moot, the case could nonetheless go forward if other employees opted into the FLSA collection action. On this point, the majority found itself fully empowered to overrule the Third Circuit, and did so. See slip op. at 10-11.

The dissent took the position long-codified in class and representative action case law that a mere offer to pay off a named plaintiff does not suffice to “moot” a case, the essence of which concerns the numerous other employees who are not the named plaintiff. The dissent presented a lengthy and pragmatic hypothetical, where fictional plaintiff Ms. Smith is presented with a settlement offer, which she declines in favor of moving forward with a representative action. After stating unequivocally that such a scenario could not serve to moot Smith’s claims, Justice Kagan added a twist to the hypo to highlight the absurdity of the result in this case:

[S]uppose the defendant additionally requests that the court enter judgment in Smith’s favor—though over her objection—for the amount offered to satisfy her individual claim. Could a court approve that motion and then declare the case over on the ground that Smith has no further stake in it? That course would be less preposterous than what the court did here; at least Smith, unlike Symczyk, would get some money. But it would be impermissible as well.

Slip op. dissent at 6-7 (Kagan, J.).

Although the underlying legal analysis is entirely unrelated to doctrines applicable to the Federal Arbitration Act (FAA) or satisfaction of Federal Rule 23’s predominance requirement, the Symczyk majority is composed of precisely the same justices as AT&T Mobility v. Concepcion and Wal-Mart v. Dukes.