Vioxx Class Action Defense Cases–In re Vioxx: California Appellate Court Affirms Denial Of Class Action Treatment In Putative UCL/CLRA Class Action Involving Vioxx Because Individual Issues Predominate

Feb 1, 2010 | By: Michael J. Hassen

Class Action under California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) Arising out of Merck’s Manufacture and Marketing of Vioxx Properly Denied Class Action Certification because Evidence Supported Trial Court’s Conclusion that Individual Issues Predominate Over Common Issues California Appellate Court Holds

Plaintiffs filed a putative class action in California state court against Merck arising out of its manufacture and marketing of Vioxx, which Merck pulled from the market in September 2004 after a study revealed an increased risk of cardiovascular problems associated with the drug; specifically, the class action complaint alleged causes of action for violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) and alleging unjust enrichment. In re Vioxx Class Cases, 180 Cal.App.4th 116, 103 Cal.Rptr.3d 83, 87-88 (Cal.App. December 15, 2009). According to the allegations underlying the class action complaint, plaintiffs did not “suffer[] any adverse effects from taking Vioxx” but, they alleged, Merck was liable for false advertising and for marketing a drug that was “less safe than other, less expensive, pain relievers.” Id., at 87; see also id., at 89-90. Plaintiffs moved the trial court to certify the litigation as a class action, id., at 90; defense attorneys opposed class action treatment on the grounds that individual issues would predominate over questions common to the putative class and that the claims of the named representatives were not typical. Id., at 91-92. The trial court agreed with Merck and denied class action certification. Id., at 92-93. In part, the trial court found that the named plaintiffs (who were individuals) “did not possess claims typical of prescription drug benefit providers,” id., at 88. The California Court of Appeal affirmed, rejecting plaintiffs’ claim that reversal was compelled by the Supreme Court’s decision in In re Tobacco II Cases, 46 Cal.4th 298 (Cal. 2009), which issued after the trial court order denying class action treatment.

The appellate court observed that “trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, [and so] they are afforded great discretion in granting or denying certification.” In re Vioxx, at 93 (quoting In re Tobacco II, at 311). In California, “in the absence of other error, a trial court ruling supported by substantial evidence generally will not be disturbed ‘unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation].’” In re Tobacco II, at 311. Particularly here, where the trial court considered thousands of pages of documents in determining the propriety of class action treatment, the appellate court will not substitute its decision for the trial court’s with respect to the inferences to be drawn from the evidence. In re Vioxx, at 94 (citation omitted).

The Court of Appeal began by analyzing the class action’s CLRA claim. See In re Vioxx, at 94. California’s CLRA “declares numerous practices in the sale of goods or services to consumers to be unlawful,” but “‘requires that plaintiffs in a CLRA action show not only that a defendant’s conduct was deceptive but that the deception caused them harm.’” Id., at 94-95 (citation omitted). The appellate court explained at page 95, “Causation, on a class-wide basis, may be established by materiality. If the trial court finds that material misrepresentations have been made to the entire class, an inference of reliance arises as to the class.” However, the Court further explained that “if the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action.” Id. (citation omitted). Here, the evidence established that third party payors were in a different position than individual patients, supporting the trial court’s conclusion that individual issues would not predominate. See id., at 96-98. Moreover, the issue of reliance “could not be resolved on a class-wide basis and instead depended upon an individual determination with respect to each class member.” Id., at 98. In the appellate court’s words, “All of this evidence supports the trial court’s conclusion that whether Merck’s misrepresentations were material, and therefore induced reliance, is a matter on which individual issues prevailed over common issues, justifying denial of class certification with respect to the CLRA claim.” Id., at 99.

With respect to the class action’s UCL claim, the Court of Appeal explained that plaintiffs’ argument was that Merck’s advertising was “fraudulent” within the meaning of the UCL and the false advertising law (FAL). In re Vioxx, at 95. The Court acknowledges that “[c]onsumer class actions under the UCL serve an important role in the enforcement of consumers’ rights,” but added that UCL remedies are “limited” in that “‘damages cannot be recovered,’” id. (citations omitted).And while California’s UCL has been interpreted as “so broad as to allow restitution without individual proof of injury, it is not so broad as to allow recovery without any evidentiary support.” Id., at 96 (citation omitted). Specifically, with respect to restitution, the proper measure of damage is the “difference between what the plaintiff paid and the value of what the plaintiff received”; accordingly, “to recover under this measure, there must be evidence of the actual value of what the plaintiff received.” Id. (Injunctive relief is unavailable because Vioxx was withdrawn from the market, so there is “no threat that the misconduct is likely to be repeated in the future.” Id., at 99.) Here, the trial court “specifically found that class damages are not subject to common proof.” Id., at 100. The lower court concluded that the restitution claim “implicates a patient-specific inquiry and therefore fails the community of interest test.” Id. The appellate court agreed that “restitution could not be calculated on a class-wide basis.” Id., at 101. Accordingly, it affirmed the judgment. Id.

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