Source: http://www.baileydaily.com/2009/
Timestamp: 2019-04-22 04:04:05+00:00

Document:
Los Angeles Superior Court Grants Certification of Deceptive Promotion Class in Johnson v. GlaxoSmithKline, Inc.
On December 17, 2009, Los Angeles Superior Court Judge Peter D. Litchman certified a UCL deceptive advertising class in Johnson v. GlaxoSmithKline arising out the promotion of the drug Paxil. This case is one which my firm filed way back in 2003, and has seen many ups and downs, including outright dismissal. See Johnson v. GlaxoSmithKline, Inc., 166 Cal. App. 4th 1497 (2008). As I am a directly involved in this case, I will leave my statements on this matter at that. However, I would like to say that certification of was achieved by a great group of attorneys, not only from my office, but from Milstein, Adelman & Kreger, LLP and Kabateck Brown and Kellner.
In the two previous posts I have focused on the Court's analysis regarding predominance (here and here). However, another material component of In Re Vioxx Class Cases, __ Cal. App. 4th __ (2009) was the Court’s finding with regard to the issue of typicality.
On this issue, the trial court “concluded that the named plaintiffs, who were all individuals, did not possess claims typical of prescription drug benefit providers who had paid all or part of the purchase price of Vioxx for their subscribers.” See Slip Opinion, at 2-3. The trial court reasoned that typicality was lacking “on the basis that ‘[Merck] present[ed] persuasive evidence that the decisionmaking that goes into purchasing Vioxx on an individual basis is entirely distinct from the process for putting it into a group formulary.’” See id. at 20.
The plaintiffs claimed the trial court erred by treating third party payors (“TPPs”) as distinct from consumers. See id., at 20. Plaintiffs’ reasoned that the claims of the entire class of TPPs were subsidiary to consumers, and as such, “if an individual patient, acting in reliance on Merck’s misrepresentations, paid too much for Vioxx, the TPP which paid a portion of that purchase price should also be entitled to recover.” See id. The Court disagreed.
with respect to the UCL claim, in considering whether the representation was likely to mislead, we consider the audience to whom the misrepresentation was directed. Whether an individual patient or physician was likely to be misled by Merck’s representations is a completely different inquiry from whether a sophisticated P&T committee, with substantial resources and the ability to conduct its own research, was likely to be misled. As such, the trial court did not err in concluding the individual plaintiffs’ claims were not typical of the claims of the TPPs.
The Court also noted that the class was overly broad, in that it “fail[ed] to exclude individuals who suffered personal injury from taking Vioxx.” See Slip Opinion, at 20 n.16 (citing Akkerman v. Mecta Corp., Inc., 152 Cal.App.4th 1094, 1103-1104 (2007)). Similarly, the Court also concluded that the class “fail[ed] to exclude those with a ‘flat copayment’ pharmaceutical benefit[,]” as such individuals “would pay the same copayment for a generic drug (i.e., naproxen) as they would for a name brand drug (i.e., Vioxx) would have no economic loss under plaintiffs’ theory of the case….” See id. (citing In re Cipro Cases I & II, 121 Cal.App.4th 402, 418 (2004).
While each of these defects may have been resolved by redefining the class [Hicks v. Kaufman & Broad Home Corp., 89 Cal. App. 4th 908, 916 (2001) (“if necessary to preserve the case as a class action, the court itself can and should redefine the class where the evidence before it shows such a redefined class would be ascertainable”)], such action likely would have futile in light of the Court’s findings on the issue predominance.
Yesterday I reported on the Second District’s Decision in In Re Vioxx Class Cases, __ Cal. App. 4th __ (2009). Having had some time to digest the opinion, it is apparent that In Re Vioxx provides some significant guidance on numerous issues that have arisen post Tobacco II.
plaintiffs challenge all aspects of the trial court’s ruling. First, they argue that the trial court erred in finding the individual plaintiffs’ claims are not typical of the claims of the TPPs. Second, they argue that the trial court erred in concluding that individual issues prevailed on the element of reliance, because they could establish reliance on a class-wide basis and, in any event, reliance is unnecessary to their UCL and FAL causes of action. Finally, plaintiffs argue that their method of calculating damages is subject to common proof.
Preliminary to the Court’s substantive evaluation of the trial court’s order, however, the Court laid out some important ground rules designed to guide a trial court’s evaluation of a UCL claim.
“While the “may have been acquired” language of Business and Professions Code section 17203 is so broad as to allow restitution without individual proof of injury, it is not so broad as to allow recovery without any evidentiary support. (Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 697.).
However, in order to obtain class wide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive (Corbett v. Superior Court, supra, 101 Cal.App.4th 649, 670) but the existence of a “measurable amount” of restitution, supported by the evidence. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 698.) The failure of naproxen as a viable class-wide comparator thus defeats the claim for class-wide restitution. The trial court concluded that whether any particular plaintiff’s loss can be measured by the difference in price between Vioxx and generic naproxen depends on issues specific to that individual plaintiff. The evidence supports the trial court’s conclusion in this regard. Even if plaintiffs establish, class-wide, that Merck misrepresented the cardiovascular risks of Vioxx in a manner that was likely to deceive plaintiffs and their prescribing physicians, no plaintiff would be able to recover without first identifying a proper comparator drug, the cost of which would provide the actual value to the patient of the Vioxx received. As the trial court concluded, on the evidence, that the issue of a proper comparator was a patient-specific issue, incorporating the patient’s medical history, treatment needs, and drug interactions, the trial court properly concluded that restitution could not be calculated on a class-wide basis.
See Slip Opinion, at 27-28.
Although the trial court also mentioned that there was no class-wide evidence of the price paid for Vioxx, we agree with plaintiffs that the actual amounts paid could likely be resolved in a claims process. The trial court’s “[o]verarching” concern was that there was no evidence that any particular NSAID would be a proper comparator for each class member.
See Slip Opinion, at 28 n.23.
The Court’s analysis is very dense, and likely will take some time to fully unpack. I will likely provide posts in the coming days examining the Court’s opinion further, including the Court’s analysis concerning the plaintiff’s challenge to typicality.
On December 15, 2009, the Second District (Division 3) upheld the trial court's denial of class certification in In Re Vioxx Class Cases, __ Cal.App. 4th __ (2009). In that case, the plaintiffs sought recovery, on behalf of all persons and entities in California who paid for Vioxx, of the difference in price between what they paid for Vioxx and what they would have paid for a safer, equally effective, pain reliever. The plaintiff’s theory alleged that Merck knew about the dangers of Vioxx but engaged in a campaign to hide or explain away those risks, and pursued causes of action under the UCL, the FAL the CLRA, and unjust enrichment.
The [trial] court concluded that the monetary value plaintiffs wish to assign to their claim – the difference in price between Vioxx and a generic, non-specific NSAID, implicates a patient-specific inquiry and therefore fails the community of interest test. In short, the trial court rejected the entire premise of plaintiffs’ class action. While the trial court allowed the possibility that plaintiffs could recover for having been exposed to misrepresentations, the trial court concluded that the theory that the entire class was harmed because Vioxx was no more effective, and less safe, than naproxen implicated individual issues of proof.
See Slip Opinion, at 24-25.
Plaintiffs mounted a two-pronged challenge to the trial court’s conclusions – neither were successful.
The trial court did not err in rejecting naproxen as a valid class-wide comparator. Defendants introduced substantial evidence that, after Vioxx was withdrawn from the market, most Vioxx patients switched to another COX-2 inhibitor, not a generic NSAID such as naproxen. As this evidence indicates that Vioxx was worth more than naproxen to a majority of class members, it is more than sufficient to support the trial court’s conclusion that naproxen is not a valid comparator on a class-wide basis.
See Slip Opinion, at 25-26.
We do not disagree that a trial court has discretion to order restitution even in the absence of individualized proof of injury. (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 452.) However, in order to obtain class wide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive (Corbett v. Superior Court, supra, 101 Cal.App.4th 649, 670) but the existence of a “measurable amount” of restitution, supported by the evidence. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 698.) The failure of naproxen as a viable class-wide comparator thus defeats the claim for class-wide restitution. The trial court concluded that whether any particular plaintiff’s loss can be measured by the difference in price between Vioxx and generic naproxen depends on issues specific to that individual plaintiff. The evidence supports the trial court’s conclusion in this regard. Even if plaintiffs establish, class-wide, that Merck misrepresented the cardiovascular risks of Vioxx in a manner that was likely to deceive plaintiffs and their prescribing physicians, no plaintiff would be able to recover without first identifying a proper comparator drug, the cost of which would provide the actual value to the patient of the Vioxx received. As the trial court concluded, on the evidence, that the issue of a proper comparator was a patient-specific issue, incorporating the patient’s medical history, treatment needs, and drug interactions, the trial court properly concluded that restitution could not be calculated on a class-wide basis.
On December 10, 2009, Judge Jeffrey T. Miller of the Southern District of California entered an interesting order in response to the plaintiff’s request to relinquish supplemental jurisdiction over state law wage claims in Weltman v. Ortho Mattress, 2009 U.S. Dist. LEXIS 115178 (S.D. Cal. Dec. 10, 2009).
In that case, the plaintiff filed a federal action that asserted federal question jurisdiction based upon an alleged violation of the FLSA, and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over seven state law causes of action. See id., at 2. Thereafter, plaintiff filed a motion seeking certification of the seven law state claims on a class-wide basis, leaving the federal FLSA misclassification claim out of the mix to be pursued on an individual basis. See id., at 4. In conjunction with filing a motion for class certification, however, plaintiff also filed an ex parte application to have the court relent its supplemental jurisdiction over the state law class claims so that plaintiff’s state-law claims could be pursued in state court. See id., at 1, 10-11 (“Plaintiff's counsel requested that Plaintiff be permitted to pursue his state claims in state court and that the court decline to exercise jurisdiction over the state claims.”).
Here, the court declines to exercise supplemental jurisdiction over the state law class claims because the state law claims substantially predominate over the relatively straight-forward FLSA claim. The anticipated economies and convenience anticipated by the class action device do not apply under the circumstances given the individualized determinations required to assess the state law class claims. See Executive Software, 24 F.3d at 1555-57. Further, the state law claims implicate no federal interest yet California courts have a strong interest in enforcing state law labor claims, like those asserted by Plaintiff herein.
See Weltman, 2009 U.S. Dist. LEXIS 115178, at 10.
Not apparent within the opinion are plaintiff counsel's justifications for initially bringing the combination FLSA/State law action, and subsequent decision to limit the FLSA claim to plaintiff only. While the Court's preliminary conclusions regarding predominance are likely not binding, a plaintiff confronted by such a scenario may have more efficient methods to resolve this issue – such as dismissing the plaintiff's individual FLSA claim.
Second District Upholds Order Decertifying Misclassification Class in Keller v. Tuesday Morning, Inc.
Here, the record contained the declarations of four managers, TM's expert, its Vice-president of Store Operations, and five of TM's attorneys. All asserted in detail the wide disparity in store location, size, configuration, management duties and styles. They also established that managers routinely exercise their independent judgment. In his written ruling, Judge Munoz noted the varying characteristics of the stores and identified matters he believed were susceptible to class-wide proof (mandated management policies) and those that were individual inquiries (time spent performing exempt duties and exercising discretion). The court observed that the managers, who filed declarations for the class, were impeached by their deposition testimony. This was a comment on the nature of the evidence, and did not constitute a consideration of the case on the merits, or a determination of witness credibility.
I have managed to obtain a copy of Orange County Superior Court Judge David C. Velasquez’s class certification Order in the Complete ® Cases. As previously reported by The National Law Journal, the Court certified a broad UCL restitutionary class consisting of all California consumers who purchased Complete MoisturePlus contact lens solution after 2003 based on alleged deceptive marketing practices. The Court's order may be found here.
On October 29, 2009, the Fourth District (Division Two) issued an opinion in Zhang v. Superior Court, __ Cal. App. 4th __ (2009), concluding that insurers are not immune from liability under the fraud prong of the UCL for conduct that would violate the “Unfair Insurance Practices Act” (Insurance Code § 790.03 et seq.).
In reversing the trial court’s demurrer, the court concluded that that the California Supreme Court’s decision in Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988) did not stand for the proposition “that insurers who violate the Unfair Insurance Practices Act can never be liable in tort to the injured party” [id., at 7], as the Supreme Court’s decisions in both Moradi-Shalal and Manufacturers Life Ins. Co. v. Superior Court, 10 Cal.4th 257, 267 (1995) expressly acknowledged that the Unfair Insurance Practices Act did not stand as a substantive bar to existing tort law remedies. See id., at 7-8. Rather, drawing from the analysis in both Moradi-Shalal and Manufacturers Life, the Zhang court reasoned that a UCL claim can be barred only if “a plaintiff relies on conduct that violates the Unfair Insurance Practices Act but is not otherwise prohibited…” See id., at 8.
Thus, in the words of Zhang, “if a plaintiff expressly alleges conduct expressly prohibited by the UCL, such as fraudulent conduct likely to deceive the public  or false advertising, there is simply no reason to apply Moradi-Shalal to prohibit the cause of action." See id., at 10-11.
I'd like to take a minute to thank Curt Cutting of the California Punitive Damages blog and Kimberly Kralowec of The UCL Practitioner for their mentions of my burgeoning blog. Their posts can be found here and here. Also, welcome to the new visitors who have come to check things out. Feel free to drop me a line.
Fourth District Orders Publication of Opinion in Kaldenbach v. Mutual of Omaha Life Insurance Co.
On October 26, 2009, the Fourth District (Division Three) ordered its opinion upholding denial of certification in Kaldenbach v. Mutual of Omaha Life Insurance Co., __ Cal.App.4th___ (2009) be published. This decision was previously discussed here.
There were myriad other individualized issues the court found to predominate including whether any given agent took Mutual’s training, read its manuals, and routinely followed the training and materials; and what materials, disclosures, representations, and explanations were given to any given purchaser. These individualized issues go not to the injury suffered by a purchaser, but to whether there was in fact an unfair business practice by Mutual. Neither In re Tobacco II Cases, supra, 46 Cal.4th 298, nor Massachusetts Mutual, supra, 97 Cal.App.4th 1282, compel a different result.
As reasoned by the Court, this justification supported the trial court’s denial of certification, as “there was no evidence linking those common tools to what was actually said or demonstrated in any individual sales transaction[,]” but rather, “[t]he record demonstrates Mutual’s training materials and methods were not uniform throughout the class period of 1988 through 1995.” See id., at 18, 22-23.
Multiple Requests For Publication Filed in Cohen v. DirecTV, Inc.
Between the period of October 16, 2009 and October 19, 2009, four separate publication requests were filed in Cohen v. DirecTV. The requests are contained here, here, here and here.
As I discussed in a prior post, Cohen is poorly reasoned, as the California Supreme Court rejected this very line of analysis in In Re Tobacco II Cases.
1. Atypical Results: advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.
2. All Forms of Paid Endorsement, Including Sponsored Research: The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. Examples where disclosure would be required include (1) the post of a blogger who receives cash or in-kind payment to review a product, or (2) reference to the findings of a research organization that conducted research sponsored by the company. A paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.
3. Celebrity Disclosure of Relationship with Advertisers: In addition to reinforcing existing precedent that celebrities may be held personally liable for false or unsubstantiated claims made in an endorsement – or for failure to disclose material connections between the advertiser and endorsers, the revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.
Time to dust off my avatar (Matt Ballyhoo), there is a legal storm brewing in the land of Linden. On September 15, 2009, a class action complaint was filed in the Northern District of California against Second Life operator, Linden Laboratories, for trademark infringement. The suit alleges that Linden was an active participant in Second Life users' misappropriation of virtual goods (in the case of the named plaintiff, virtual beds) that netted real-life creators hundreds of thousands in actual revenue (that is U.S. dollars, as opposed to the Linden dollar).
The potential for real lifers to make a living in Second Life is no joke. At one time I actually contemplated hanging out a shingle in SL, and apparently, I was not alone. As reported by the ABA, some attorneys have set up office within second life. Indeed, Second Life has its own Bar (Second Life Bar Association), and a burgeoning court system. I anticipate some serious venue and jurisdictional challenges on the horizon.

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