Thursday, July 19, 2012

Still Standing

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

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

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

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

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

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

It turns out we were right.

In In re McNeil Consumer Healthcare Marketing & Sales Practices Litigation, 2012 WL 2885932 (E.D. Pa. July 13, 2012) (“MCH II”), the court threw out the complaint for a second time − this time for keeps.  Once again the plaintiffs failed to allege any personalized injury to themselves that would justify them having standing to sue in federal court.  Focused primarily on avoiding individualized issues (such as reliance and fact of injury) that would preclude class certification, the MCH II plaintiffs pleaded themselves out of court (thus making it very simple for their counsel to wash their hands of their “clients” altogether).  Moreover, given the Third Circuit’s intervening standing decision in In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235 (3d Cir. 2012), we have to like the defendants’ chances on appeal.

The MCH litigation ostensibly involved the recall of certain products (mostly over-the-counter) due to quality control problems at the defendant’s facility.  The defendant offered full refunds to anyone who purchased a recalled product.  However, the plaintiffs couldn’t bring themselves to limit their claims just to those products, and tried to attack every product ever made in that facility, whether it was recalled or not − hence our Simple Rule #2.  Nothing changed in this regard the second time around.

For simplicity sake, we (like the MCP II opinion) will move from our four simple rules to the four categories of plaintiffs left in their repleaded complaint:  (1) purchasers of products that were never recalled; (2) purchasers of recalled products who requested a refund; (3) purchasers of recalled products who didn’t bother to request a refund; and (4) supposed purchasers who threw away the product and couldn’t tell if they bought a recalled product or not.

Nobody claimed any personal injury of any sort (which would have made class certification impossible), so as it turned out none of them had standing to sue.  MCH II thus drove these money-grubbers from the temple of justice.  Hallelujah!

As to the first category − the non-recalled product plaintiffs − the basic problem was the same as before.  Purchasers of unrecalled products that had not harmed them didn’t allege any injury that was cognizable in any court:

[P]laintiffs here rely upon the experiences of other individuals to establish that the drugs they purchased were defective. This they cannot do. . . . The fact that other persons suffered adverse effects, or that the defendants recalled some products that were manufactured in the same facility as the drugs they purchased, does not suffice to establish injury in fact as to this group.

MCH II, 2012 WL 2885932, at *15 (various things omitted).

As to the second category − the recall/refund plaintiffs − this group had no standing because the refund had redressed their damages.  Complaints about the recall process were irrelevant:

As with the plaintiffs who purchased non-recalled products, this group may not rely on the experiences of other individuals to establish injury.  The defendants have offered the plaintiffs a cash refund as to all products that have been recalled. A named plaintiff must allege facts showing that he or she personally suffered economic loss as a result of an inadequate recall to state a cognizable injury.

Id. (emphasis original). “Critically, no plaintiff has alleged that he or she sought a refund for recalled products and was denied one, or that any refund actually received did not fully cover the price paid for a recalled product.”  Id. at *16.  Of course no plaintiff stated that − it would have underscored the individualized nature of the inquiry and defeated class certification, not to mention left counsel with a pesky (and uneconomic) individual claim to litigate thereafter.  So bye-bye recall particpants.

As to the third category − the recall/can’t be bothered plaintiffs − their alleged problems were, to put it bluntly, their own darn fault.  Or, as the court held:

To find that these plaintiffs have been injured with respect to their purchases of recalled products, the Court would have to assume that if the plaintiffs requested a refund, they would be denied one, or that the refund offered would be inadequate to make them whole. When such speculation is required as to the causal link between the behavior of a defendant and an injury of the plaintiff, no standing exists.

MCH II, 2012 WL 2885932, at *18.  Other persons’ supposed difficulties in obtaining refunds were irrelevant because − to avoid a fatal class certification problem − none of these plaintiffs pleaded reliance.  Id. (“these plaintiffs have not even alleged that their awareness of potentially inadequate refund offers caused them not to seek a refund”).  Those who failed to seek a refund suffered injury as a “result of the plaintiffs’ own choices” and had no damages “fairly traceable to the actions of the defendants.”  Id.

As to the fourth and final category − the throw-away plaintiffs − the defendants weren’t at fault because there was no evidence that they encouraged the plaintiffs to spoliate their own evidence:

No plaintiff who has alleged that he or she discarded products “because of the recall” alleges that he or she did so because of any instructions given by the defendants.  As with plaintiffs who purchased recalled products but did not seek a refund, any injury suffered by this group is not traceable to the defendants’ conduct.

MCH II, 2012 WL 2885932, at *19.  These plaintiffs claimed that throwing the product away was “normal consumer behavior.”  Id.  Maybe so, but that “normal” behavior simply wasn’t the defendant’s fault.  Id. (such facts “do not give rise to a plausible inference that these plaintiffs’ injuries are fairly traceable to the conduct of the defendants”).

Finally, note that word − “plausible” − that’s TwIqbal-speak.  Another thing we’ve noted in MCH II is its application of TwIqbal pleading standards to standing.  See 2012 WL 2885932, at *13, following Schering Plough, 678 F.3d at 244, for the proposition that a “court must apply a ‘plausibility’ standard when analyzing . . . standing.”  We don’t know whether this is controversial, as Rule 12(b)(1) isn’t that far away from Rule 12(b)(6), but to the extent it’s an issue, MCH II decided it in favor of TwIqbal.

Anyway, kudos to the defense in MCH.  We were on a conference call today where it was mentioned that MDL class action plaintiffs’ counsel need an average seven-figure recovery per case to make a profit.  They didn’t get a dime here, and that’s the best form of deterrence (short of Rule 11) that there is.