It's hard to draft the Monday post without being unduly influenced by the weekend's bloviations and dissipations. Between the WSJ weekend review section, the NYT Week in Review, the television parade of talking heads, and the requisite pitcher of mojitos on the deck, at least one random and silly Big Thought is certain to weasel its way into our case discussion. This week's semi-pertinent idea comes from a WSJ article on the "Death of Duopoly." The article discusses how binary power is bad for business (e.g., it wasn't good when photographers were stuck with just Kodak or Fuji for their film needs) and also probably bad for the public interest. The focus was on the phony or feckless choices presented by Republicans vs. Democrats. The WSJ presented some of those creepy photo merges, such as Obama and W, Carter and Reagan, and Nixon and Kennedy. The point seemed to be that the two choices are inadequate and usually crumble after a long enough period of consumer dissatisfaction. Thus, digital photography wrecked the Kodak-Fuji duopoly. And wither the Whigs?
Of course, we usually don't see the Next Thing coming. We are plagued by something that has to go down as the best phrase we've heard so far this year: "existence bias." People assume that the status quo will endure. The ultimate point of the WSJ article seemed to be that something new will emerge from the current political gridlock and might already be slouching toward us. Frankly, we were more interested in other examples of sticky choices, such as Celtics-Lakers or Beatles-Stones. (When we were in college, you were supposed to pick sides between the Talking Heads or Springsteen. Decades later, that choice seems as dumb and pointless as Beatles-Stones and now it's obvious from the calm perch of middle age that one can like them both. And for those of us who do, the recent passing of Clarence Clemons is as sad as the long, wailing sax note near the end of "Jungleland." It was, indeed, momentous when the Big Man joined the Band.)
There's a phony choice in the middle of the recent opinion in In re Zicam Cold Remedy, 2011 WL 2181188 (D. Ariz. June 3, 2011). It results in a ruling that is weaker than the mojito from the bottom of the pitcher after most of the ice has melted. The defendant moved for summary judgment on general causation grounds. The plaintiffs claimed that Zicam results in loss of the sense of smell. And if "existence bias" is the phrase of the day, then "anosmia" is the word of the day.
A friend has lacked a sense of smell since she was an infant. She claims it's an advantage, on the theory that people are more likely to complain about smells rather than praise them. We're not so sure. Maybe the smell of freshly baked madeleines won't inspire us to write a novel, but certainly among life's riches are the aroma of coffee in the morning, a gas station stop on the way to the Shore, and our kids' sweaty feet while running around the maze at Chuck E. Cheese. (When they were toddlers. Not now. Definitely not now.) So, yes, we side with the plaintiffs on this one.
So much for the olfactory sense. The legal issue is "whether plaintiffs must introduce evidence of the level of exposure that could cause anosmia, i.e., whether they must demonstrate a toxic dose." In re Zicam, 2011 WL 2181188 at *2.
Our answer to that question: Of course! The court's: 'Nah.' The court acknowledges the central tenet of toxicology about how "the dose makes the poison." For some reason, we've seen lots of defendants trot that out before juries over and over. Sure, the point is valid and important. But we squirm when a defendant calls its own product "poison." Surely, there's a better way of making the point that anything -- including water -- is potentially harmful if you take too much.
How much is too much? That’s the question.
Anyway, given that nobody disputes that central tenet of toxicology, how can someone claim that a product is harmful without establishing what amount it takes to cause the harm?
The Zicam court erects a straw man about how plaintiffs need not offer a "mathematically precise table equating levels of exposure with levels of harm." Id. at *5, quoting Wright v. Willamette Indus. Inc., 91 F.3d 1105, 1107 (8th Cir. 1996). Okay, but how about at least offering evidence that there's some dose that causes the harm -- maybe even the standard dose that people take? Here's where the court builds its decision on a false dichotomy. The court says there should be different standards for "products liability" and a "toxic tort." The latter requires proof of a harmful dose, but the latter does not. Id. at *3.
Say what? Well, why? No good answer that we can think of.
Even here, the court is confronted with two product liability cases that require proof of toxic dose: (1) McClain v. Metabolife Intern, Inc., 401 F.3d 1233, 1236 (11th Cir. 2005), and (2) In re Bextra & Celebrex, 524 F. Supp. 2d 166 (N.D. Cal. 2007). Here's what the Zicam court says about those cases: "Insofar as McClain and Bextra applied the 'toxic dose' requirement from environmental exposure litigation to drug products liability actions, they appear to be unique." In re Zicam, 2011 WL 2181188 at * 4. Even if that's true, why are they wrong?
Well, "Toxicology and pharmacology are distinct disciplines." Id. at *5. Fine. (Though not enough courts remember that sort of thing when we file Daubert challenges against plaintiff omnibus experts. But we digress. Again.) Also: "[i]n environmental exposure litigation, plaintiff s may allege injury caused by a substance with which many people interact harmlessly at lesser degrees of exposure. In order to explain how a pervasive substance is harmful, one must show that at a particular level of exposure, the substance becomes toxic. Without requiring this kind of evidence, the door is open to meritless claims based on generally harmless levels of exposure." Id.
That, friends, is a distinction without a difference. The idea behind prescription drugs is that “many people interact harmlessly” with them – at their approved doses. The problem is when those doses aren’t harmless. Unless the plaintiff has an overdose case – or is just plain bizarre like the lady that used almost 200 pounds of denture cream – that’s precisely what the plaintiff has to prove.
Note how the court does even try to suggest that it is any harder to prove toxic dose in a "toxic tort" than in a "product liability" case. Instead the court says it shouldn't be necessary in a product liability case because there aren't as many potential plaintiffs or specious claims. Really? Have you counted the thousands of plaintiffs in "product liability" - not "toxic tort" - MDLs? Or seen how many, after just a little nudge of discovery, had minimal exposure to the product? Or had Daubert motions defeat the plaintiffs’ hand-picked best case? Why should the door be any more open in a case involving products that help thousands of people than in a toxic tort case?
More fundamentally, you won't find the "product liability" vs. "toxic tort" distinction in Daubert or the Rules. Science is science. Proof is proof. The binary analysis in the Zicam case makes no sense. When it derides the need for "precision" it is inviting the sort of sloppy science that Daubert was meant to foreclose. The court posed a false choice and then made the wrong choice. You might even say it stinks.
Monday, June 20, 2011
Friday, June 17, 2011
E-Discovery Fee Shifting?
Maybe.
From what we can tell from the recent opinion in Race Tires America Inc. v. Hoosier Racing Tire Corp., 2011 WL 1748620 (W.D. Pa. May 6, 2011), that case was one of those e-discovery wars where the parties went at one another hammer and tong, and for long periods e-discovery disputes all-but-obscured the merits of the suit. Id. at *5.
The underlying facts almost don’t matter. Suffice it to say that the plaintiff, a tire manufacturer, was caught outside looking in when the governing body for the “sport” of dirt-track auto racing signed an exclusive tire supply contract with a competitor. Plaintiff filed an anti-trust action as a result. That’s enough about the merits.
Plaintiff lost. Race Tires America, Inc. v. Hoosier Racing Tire Corp., 660 F. Supp.2d 590 (W.D. Pa. 2009). Plaintiff lost again on appeal. Race Tires America, Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57 (3d Cir. 2010).
Then it came time to pay the piper for all those e-discovery follies.
The victorious defendants filed a bill of costs seeking to recover nearly $400,000 in e-discovery costs. 2011 WL 1748620, at *3. The court clerk allowed taxation of about 90% of the expenses sought. Id.
The statute covering costs, 28 U.S.C. §1920, enacted in 1948, doesn’t specifically cover e-discovery, but it was amended in 2008 to bring it at least somewhat into the 21st Century. Subsection 4 now reads: “Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case” – instead of just “papers.”
Also under §1920, a prevailing party is presumptively entitled to an award of statutorily authorized costs.
So in the e-discovery world, the taxation of e-discovery costs under §1920(4) comes down to what is “exemplification” and what is “necessary.”
The restrictive viewpoint considers the time and effort of e-discovery not to be “exemplification” – which only means “physical preparation and duplicating.” A similarly restrictive viewpoint considers electronic storage of documents to be merely for “convenience of counsel.” 2011 WL 1748620, at *6-7.
The court in Race Tires America, however, was sophisticated in the ways of e-discovery. At the request of the parties the court had entered a detailed pre-trial order governing such issues. 2011 WL 1748620, at *5-6 (quoting order). The court found that neither of these conservative approaches to taxation of e-discovery was appealing in today's real world of litigation. The parties had agreed to mutual electronic productions according to detailed criteria, reflected in the court’s order. The loser could not now be heard to argue that electronic “exemplification” was not contemplated. Nor could it come back, after agreeing to electronic production, and claim that was a mere “convenience”:
In light of the agreed-upon order, the ardor with which plaintiffs pursued electronic discovery, and the all-electronic nature of the case, the court found the prevailing defendant’s e-discovery expenses – including consultant’s fees – to be taxable because “the requirements and expertise necessary to retrieve and prepare these e-discovery documents for production were an indispensable part of the discovery process.” 2011 WL 1748620, at *9.
That’s the important part. The plaintiffs also quibbled about costs being inflated, but the court wasn’t very impressed. The e-discovery costs weren’t out of line with amounts mentioned in comparable litigation, and any claim of deliberate inflation of such costs was implausible:
We have complained in the past (and we’re hardly alone) about the exorbitant and disproportionate costs that e-discovery imposes on defendants in our neck of the woods. While reliance on §1920(4) to tax costs, as in Race Tires America, is hardly the best way to attack the e-discovery problem – at least it’s a way. There will still be problems with who “prevails” in an MDL proceeding and whether well-healed plaintiffs’ litigation consortia will be allowed to maintain the fiction of penurious individual plaintiffs. But the reasoning in Race Tires America is at least a start towards a more equitable distribution of litigation expense and, equally importantly, towards some curbs on the tendency of counsel to make extravagant e-discovery demands as a way of augmenting the settlement value of their cases. Anything that puts the possibility of a “return to sender” on e-discovery costs has got to help.
From what we can tell from the recent opinion in Race Tires America Inc. v. Hoosier Racing Tire Corp., 2011 WL 1748620 (W.D. Pa. May 6, 2011), that case was one of those e-discovery wars where the parties went at one another hammer and tong, and for long periods e-discovery disputes all-but-obscured the merits of the suit. Id. at *5.
The underlying facts almost don’t matter. Suffice it to say that the plaintiff, a tire manufacturer, was caught outside looking in when the governing body for the “sport” of dirt-track auto racing signed an exclusive tire supply contract with a competitor. Plaintiff filed an anti-trust action as a result. That’s enough about the merits.
Plaintiff lost. Race Tires America, Inc. v. Hoosier Racing Tire Corp., 660 F. Supp.2d 590 (W.D. Pa. 2009). Plaintiff lost again on appeal. Race Tires America, Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57 (3d Cir. 2010).
Then it came time to pay the piper for all those e-discovery follies.
The victorious defendants filed a bill of costs seeking to recover nearly $400,000 in e-discovery costs. 2011 WL 1748620, at *3. The court clerk allowed taxation of about 90% of the expenses sought. Id.
The statute covering costs, 28 U.S.C. §1920, enacted in 1948, doesn’t specifically cover e-discovery, but it was amended in 2008 to bring it at least somewhat into the 21st Century. Subsection 4 now reads: “Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case” – instead of just “papers.”
Also under §1920, a prevailing party is presumptively entitled to an award of statutorily authorized costs.
So in the e-discovery world, the taxation of e-discovery costs under §1920(4) comes down to what is “exemplification” and what is “necessary.”
The restrictive viewpoint considers the time and effort of e-discovery not to be “exemplification” – which only means “physical preparation and duplicating.” A similarly restrictive viewpoint considers electronic storage of documents to be merely for “convenience of counsel.” 2011 WL 1748620, at *6-7.
The court in Race Tires America, however, was sophisticated in the ways of e-discovery. At the request of the parties the court had entered a detailed pre-trial order governing such issues. 2011 WL 1748620, at *5-6 (quoting order). The court found that neither of these conservative approaches to taxation of e-discovery was appealing in today's real world of litigation. The parties had agreed to mutual electronic productions according to detailed criteria, reflected in the court’s order. The loser could not now be heard to argue that electronic “exemplification” was not contemplated. Nor could it come back, after agreeing to electronic production, and claim that was a mere “convenience”:
[I]t is undisputed that Defendants produced to Plaintiff a massive quantity of ESI in response to written discovery requests. As discussed supra, the parties had previously agreed that document production would be made in electronic format. . . . During the collection process, [plaintiff] imposed – over [defendant’s] objections – over 442 search terms . . .[, which] resulted in over seven million “hits.”Id. at *9. To comply with plaintiff’s 119 different e-discovery requests, the defendants had to engage consultants, create a litigation database, review various forms of electronic storage, extract documents and metadata, and convert everything to the formats specified in the agreed-upon order. Id. All that required spending a lot of money.
In light of the agreed-upon order, the ardor with which plaintiffs pursued electronic discovery, and the all-electronic nature of the case, the court found the prevailing defendant’s e-discovery expenses – including consultant’s fees – to be taxable because “the requirements and expertise necessary to retrieve and prepare these e-discovery documents for production were an indispensable part of the discovery process.” 2011 WL 1748620, at *9.
That’s the important part. The plaintiffs also quibbled about costs being inflated, but the court wasn’t very impressed. The e-discovery costs weren’t out of line with amounts mentioned in comparable litigation, and any claim of deliberate inflation of such costs was implausible:
[T]he assessment is reflective of the amounts incurred by the prevailing parties without respect to their anticipation of being prevailing parties and, in that regard, can hardly be considered as “puffed,” exorbitant, or contrived. Such costs were, in fact, incurred – and in significant respects at the discovery demands of Plaintiffs.2011 WL 1748620, at *11.
We have complained in the past (and we’re hardly alone) about the exorbitant and disproportionate costs that e-discovery imposes on defendants in our neck of the woods. While reliance on §1920(4) to tax costs, as in Race Tires America, is hardly the best way to attack the e-discovery problem – at least it’s a way. There will still be problems with who “prevails” in an MDL proceeding and whether well-healed plaintiffs’ litigation consortia will be allowed to maintain the fiction of penurious individual plaintiffs. But the reasoning in Race Tires America is at least a start towards a more equitable distribution of litigation expense and, equally importantly, towards some curbs on the tendency of counsel to make extravagant e-discovery demands as a way of augmenting the settlement value of their cases. Anything that puts the possibility of a “return to sender” on e-discovery costs has got to help.
Thursday, June 16, 2011
It Should Be An Interesting Couple Of Weeks
According to the Supreme Court’s website, the current term is due to end on June 27. With no fewer than six cases of interest still undecided after today’s decision in Smith v. Bayer Corp., No. 09–1205 (U.S. June 16, 2011), it promises to be an interesting couple of weeks. There are only three remaining opinion days scheduled on the Court’s calendar: 6/20, 6/23, and 6/27 (although the Court, being the Court, could change that if necessary). That works out to an average of two interesting decision per day.
First, Smith v. Bayer. It’s a loss for our side, but as a practical matter the issue of enjoining successive plaintiffs' attempts to certify the same class action in different courts doesn’t loom as large as it once did – since the Class Action Fairness Act (“CAFA”) rounds most of these sorts of cases up and ships them all into federal court where they can be coordinated – thus avoiding such plaintiff-side shenanigans. Smith involved some relatively old litigation, and thus unfortunately predated CAFA. See Slip op. at 3 n.1. In all likelihood, the same thing couldn’t happen again today.
Still, for personal and professional reasons we mourn the result because of Bexis’ involvement in winning that issue (the unanimous Supreme Court now says wrongly) in the first such case to be litigated, In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 333 F. 3d 763 (7th Cir. 2003). That was back when it still mattered a great deal, so at least its done some good in the meantime.
Smith was decided on Anti-Injunction Act grounds. For you non-lawyers, that act, one of the oldest statutes still in effect (enacted in 1793), governs when a federal court can enjoin (that means stop or interfere with the progress of) another lawsuit pending in a state court. The key exception to the Act’s general prohibition against doing this is that a federal court may act when “necessary . . . to protect or effectuate its judgments.” In Smith that meant protecting the federal court’s decision that no class involving the particular product under the particular state law cause of action could be certified.
The scope of this particular Anti-Injunction Act exception is governed by issues of res judicata (claim preclusion) and collateral estoppel (issue preclusion). Slip op. at 6. But these rules are applied, for various reasons, with “every benefit of the doubt go[ing] toward the state court.” Id. Any time we see the judicial thumb going on the scale like that (think “presumption against preemption”) and it’s against our side, we don’t expect anything good.
Two things must happen for preclusion to apply: (1) the issue must be the same and (2) the second plaintiff must have been involved in the original federal suit that produced the judgment that the injunction seeks to protect. Slip op. at 7. On issue #1, that means: Is a federal denial of class certification the “same” as a decision under an analogous state class action rule (where the language is essentially identical)? On issue #2, that means: is an absent class member in the first suit sufficiently involved in that suit to be bound by the denial?
The Court in Smith says “no” to each. Slip op. at 7.
First, state and federal class action rules were not the same, even though the classes were “mirror” images, and the substantive issues “broadly overlapped.”
Okay, so we lose, since we had to win both #1 and #2. All things considered, it could have been worse. Not every state’s class action jurisprudence is as ornery towards federal Rule 23 precedent as West Virginia’s. Get a different state where there’s lots of “we look to federal precedent for guidance” language in state class action opinions and the result could well be different.
Right?
Wrong, because the Court – in what is arguably dictum (that means stuff in an opinion that isn’t essential to the result) – went on to decide issue #2. The Court held that an unnamed class member cannot be considered a “party” to a class action that was never certified. Slip op. at 13-14. Nor did the Court find that absent class members were within any of the relatively rare exceptions to that Anti-Injunction Act’s party requirement. Instead, it held that “[n]either a proposed class action nor a rejected class action may bind nonparties.” Id. at 15. That’s an interesting statement that may come in useful in other contexts, but it was regrettably fatal to the defense position on issue #2 in Smith.
In passing, we note that one of the authorities the Court in Smith cited was the ALI’s Principles of the Law of Aggregate Litigation §2.11. Slip op. at 16 n. 11. We mentioned before that one of our objections to the Principles was that they sought to overrule Bridgestone/Firestone. Well, precisely that has come to pass. One subsidiary lesson that we take away from Smith is that the defense side needs to pay more attention to what goes on at ALI.
Basically the Court says “tough luck” to the policy argument that class action plaintiffs shouldn’t get multiple bites at the class certification apple. Defendants are stuck relying on “stare decisis and comity” and hoping for the best. Slip op. at 17. But the Court goes on to point out, as we have, that as a practical matter CAFA now substantially fixes this problem – and thus gives the Court another excuse not to use the Anti-Injunction Act to do the same thing:
The Smith Court admits that CAFA provides “cold comfort” to the defendants in this case. Slip op. at 17. But let’s not forget that the entire Smith v. Bayer decision provides equally cold comfort to the plaintiffs. That’s because, as we’ve celebrated before, in the interim, the West Virginia Supreme Court has blown out the substantive cause of action on which the class action in Smith was based. In White v. Wyeth, 705 S.E.2d 828 (W. Va. 2010), that court held that, as a matter of statutory interpretation and fundamental policy, “[t]he private cause of action afforded consumers under West Virginia [consumer protection act] does not extend to prescription drug purchase.” Id. at (syllabus point 6). So bye-bye Smith.
Ironically, the one place where the Bridgestone/Firestone principle might live on is in those states (California is one, and we're sure there are others - Texas?) where the intermediate appellate courts are divided geographically and don’t have to follow each other’s precedent. Right now, the California intermediate appellate courts are split, as well, on whether to follow Bridgestone/Firestone. See Johnson v. GlaxoSmithKline, Inc., 83 Cal. Rptr.3d 607 (Cal. App. 2008) (not following); Alvarez v. May Dept. Stores Co., 49 Cal.Rptr.3d 892 (Cal. App. 2006) (following).
Where the conflict is between two state courts, there’s no Anti-Injunction Act federalism overlay (thus no need for a thumb on the scale), and the issue is by definition the same, since the same state’s class action rule is involved. The tougher question would be whether an absent class member can be considered sufficiently close to a “party” in the prior action to be bound. We would still answer that question “yes” – as long as the first class certification denial was not based on adequacy of representation grounds. If there’s adequate representation, then there’s no reason not to bind those adequately represented in the first action to its result. But that’s just us. Smith didn’t buy that in the Anti Injunction Act context.
Anyway, that still leaves us with six mega-cases to be decided in the remaining two weeks (actually less) of the Supreme Court's current term. Here’s a brief overview of what’s out there.
The only pharma-product liability case on the list is the Mensing generic preemption case, Nos. 09-993, 09-1039. We’ve already had a lot to say about Mensing, and if you’re interested those posts are here, here, here, and here. Given the unusual lineups and close questions that we pointed out after reviewing the oral argument, we’re not going to make any predictions about the outcome (which could even be a 4-4 tie, although such a result would probably have been announced earlier), except to say that Mensing could go right down to the 6/27 wire.
Another pharma-related case is Sorrell v. IMS Health Inc., 10-779. We blogged about Sorrell here, here, and here. Sorrell could establish, albeit in a non-products setting, that pharmaceutical detailing is First Amendment-protected commercial speech, and we’re optimistic that the Court will go at least this far. Depending upon exactly how the Court conducts the commercial speech analysis that would follow an affirmative answer to the first question, Sorrell could say a lot, or might not say much, of interest to another of our “hot button” issues – the First Amendment protection of truthful promotion of off-label use.
We’ve also followed and analyzed the two “stream of commerce” product liability personal jurisdiction cases that the Court has, J. McIntyre Machinery v. Nicastro, No. 09-1343, and Goodyear v. Brown, No. 10-76. We’ve discussed those cases here, here, and here. As we discussed, the lower court result in Brown would open a foreign defendant to almost unlimited “general personal jurisdiction” (could be sued about anything) based upon minute market shares. Nicastro would abolish state borders for purposes of determining “specific personal jurisdiction” (suits related to the in-state transaction), and determine everything on the basis of national contacts in stream of commerce cases. We expect those two cases to be decided in tandem. Because of the absurd result in Brown and the federalism implications of Nicastro, we also have to say that we’re cautiously optimistic in both cases. If we get good results, we hope they will also result in the overturning of another, even more recent, extreme expansion of corporate personal jurisdiction, Bauman v. DaimlerChrysler AG, ___ F.3d ___, 2011 WL 1879210 (9th Cir. May 18, 2011).
Also of interest to us is the climate change case, American Electric Power Co. v. Connecticut, No 10-174. This is the ultimate in “judicial triumphalism” cases, where a plaintiff tries to convince a court to engage in social engineering of the sort that the (more) political branches of government haven’t been able to enact. There are any number of ways that AEP could be decided, including narrow grounds that wouldn’t interest us very much – as bloggers, anyway. There are two potential bases for decision, however, that we would find extremely encouraging. These are: (1) The Court could reinvigorate the “political question doctrine” and thereby directly curb the lower courts’ impulse towards judicial triumphalism. (2) The Court could analyze the plaintiff’s non-traditional public nuisance cause of action and hold, for legal and/or policy reasons, that the federal common law is not about to recognize any such claim. While not binding on any state court, in the past, Supreme Court decisions rejecting expansive tort theories in the context of federal common law have also been quite persuasive in forestalling further adoption of such theories by state courts. We can think of the economic loss rule and pure risk/medical monitoring as two examples of this. We previously blogged on these implications of AEP here.
Last but certainly not least, the Court has yet to decide the mother of all class action cases, Dukes v. WalMart, No. 10-277. As we discussed in our prior Dukes post, the Court is almost certain to decide the scope of Fed. R. Civ. P. 23(b)(2) in cases where a purportedly “injunctive” class also includes a large monetary relief component. The Court could also provide new binding precedent concerning the scope of any or all of the Fed. R. Civ. P. 12(a) class certification criteria of numerosity, commonality, typicality, and/or adequacy of representation. Whatever the Court does with respect to the Rule 23(a) issues would be binding in any type of class action case. A decision in Dukes upholding certification of such a huge and polyglot class would be most unwelcome (in this precinct, anyway), but we think also unlikely. If there’s a reversal in Dukes (the more probable bottom line), its scope will determine whether class certification in the more run-of-the-mill class actions is made easier or more difficult. Needless to say, we’re rooting for the latter.
In any event, hang on to your hats – the Supreme Court's annual end-of-term roller coaster ride is just beginning, and this one has more peaks (and possible valleys) than most.
First, Smith v. Bayer. It’s a loss for our side, but as a practical matter the issue of enjoining successive plaintiffs' attempts to certify the same class action in different courts doesn’t loom as large as it once did – since the Class Action Fairness Act (“CAFA”) rounds most of these sorts of cases up and ships them all into federal court where they can be coordinated – thus avoiding such plaintiff-side shenanigans. Smith involved some relatively old litigation, and thus unfortunately predated CAFA. See Slip op. at 3 n.1. In all likelihood, the same thing couldn’t happen again today.
Still, for personal and professional reasons we mourn the result because of Bexis’ involvement in winning that issue (the unanimous Supreme Court now says wrongly) in the first such case to be litigated, In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 333 F. 3d 763 (7th Cir. 2003). That was back when it still mattered a great deal, so at least its done some good in the meantime.
Smith was decided on Anti-Injunction Act grounds. For you non-lawyers, that act, one of the oldest statutes still in effect (enacted in 1793), governs when a federal court can enjoin (that means stop or interfere with the progress of) another lawsuit pending in a state court. The key exception to the Act’s general prohibition against doing this is that a federal court may act when “necessary . . . to protect or effectuate its judgments.” In Smith that meant protecting the federal court’s decision that no class involving the particular product under the particular state law cause of action could be certified.
The scope of this particular Anti-Injunction Act exception is governed by issues of res judicata (claim preclusion) and collateral estoppel (issue preclusion). Slip op. at 6. But these rules are applied, for various reasons, with “every benefit of the doubt go[ing] toward the state court.” Id. Any time we see the judicial thumb going on the scale like that (think “presumption against preemption”) and it’s against our side, we don’t expect anything good.
Two things must happen for preclusion to apply: (1) the issue must be the same and (2) the second plaintiff must have been involved in the original federal suit that produced the judgment that the injunction seeks to protect. Slip op. at 7. On issue #1, that means: Is a federal denial of class certification the “same” as a decision under an analogous state class action rule (where the language is essentially identical)? On issue #2, that means: is an absent class member in the first suit sufficiently involved in that suit to be bound by the denial?
The Court in Smith says “no” to each. Slip op. at 7.
First, state and federal class action rules were not the same, even though the classes were “mirror” images, and the substantive issues “broadly overlapped.”
If a State’s procedural provision tracks the language of a Federal Rule, but a state court interprets that provision in a manner federal courts have not, then the state court is using a different standard and thus deciding a different issue.Slip op. at 9. So it comes down to whether – where the analogous class action rules are identically written – have the state courts “declar[ed] their independence” of federal precedent on the issue? Id. at 10. On class actions, the Court found that the West Virginia Supreme Court (of Appeals) had done so. It cited some thumb-in-the-feds-eye language from another prescription drug class action, In re West Virginia Rezulin Litigation, 585 S.E.2d 52 (W. Va. 2003), where that court stated that it intended “to avoid having our legal analysis of our [class action] Rules amount to nothing more than Pavlovian responses to federal decisional law.” Slip op. at 10 (quoting 585 S.E.2d at 61). The Court went on to find that Rezulin in fact rejected federal predominance precedent. Slip op. at 11.
Okay, so we lose, since we had to win both #1 and #2. All things considered, it could have been worse. Not every state’s class action jurisprudence is as ornery towards federal Rule 23 precedent as West Virginia’s. Get a different state where there’s lots of “we look to federal precedent for guidance” language in state class action opinions and the result could well be different.
Right?
Wrong, because the Court – in what is arguably dictum (that means stuff in an opinion that isn’t essential to the result) – went on to decide issue #2. The Court held that an unnamed class member cannot be considered a “party” to a class action that was never certified. Slip op. at 13-14. Nor did the Court find that absent class members were within any of the relatively rare exceptions to that Anti-Injunction Act’s party requirement. Instead, it held that “[n]either a proposed class action nor a rejected class action may bind nonparties.” Id. at 15. That’s an interesting statement that may come in useful in other contexts, but it was regrettably fatal to the defense position on issue #2 in Smith.
In passing, we note that one of the authorities the Court in Smith cited was the ALI’s Principles of the Law of Aggregate Litigation §2.11. Slip op. at 16 n. 11. We mentioned before that one of our objections to the Principles was that they sought to overrule Bridgestone/Firestone. Well, precisely that has come to pass. One subsidiary lesson that we take away from Smith is that the defense side needs to pay more attention to what goes on at ALI.
Basically the Court says “tough luck” to the policy argument that class action plaintiffs shouldn’t get multiple bites at the class certification apple. Defendants are stuck relying on “stare decisis and comity” and hoping for the best. Slip op. at 17. But the Court goes on to point out, as we have, that as a practical matter CAFA now substantially fixes this problem – and thus gives the Court another excuse not to use the Anti-Injunction Act to do the same thing:
[T]o the extent class actions raise special problems of relitigation, Congress has provided a remedy that does not involve departing from the usual rules of preclusion. In [CAFA], Congress enabled defendants to remove to federal court any sizable class action involving minimal diversity of citizenship. Once removal takes place, Federal Rule 23 governs certification. And federal courts may consolidate multiple overlapping suits against a single defendant in [an MDL]. Finally, we would expect federal courts to apply principles of comity to each other’s class certification decisions when addressing a common dispute.Id. (citations omitted). Maybe, in addition to CAFA, the last sentence in this quote will serve as a kick in the pants to the lower courts – federal courts, anyway – not to let plaintiffs peddle the same meritless class actions in multiple fora. We hope so, and will employ that sentence to that effect.
The Smith Court admits that CAFA provides “cold comfort” to the defendants in this case. Slip op. at 17. But let’s not forget that the entire Smith v. Bayer decision provides equally cold comfort to the plaintiffs. That’s because, as we’ve celebrated before, in the interim, the West Virginia Supreme Court has blown out the substantive cause of action on which the class action in Smith was based. In White v. Wyeth, 705 S.E.2d 828 (W. Va. 2010), that court held that, as a matter of statutory interpretation and fundamental policy, “[t]he private cause of action afforded consumers under West Virginia [consumer protection act] does not extend to prescription drug purchase.” Id. at (syllabus point 6). So bye-bye Smith.
Ironically, the one place where the Bridgestone/Firestone principle might live on is in those states (California is one, and we're sure there are others - Texas?) where the intermediate appellate courts are divided geographically and don’t have to follow each other’s precedent. Right now, the California intermediate appellate courts are split, as well, on whether to follow Bridgestone/Firestone. See Johnson v. GlaxoSmithKline, Inc., 83 Cal. Rptr.3d 607 (Cal. App. 2008) (not following); Alvarez v. May Dept. Stores Co., 49 Cal.Rptr.3d 892 (Cal. App. 2006) (following).
Where the conflict is between two state courts, there’s no Anti-Injunction Act federalism overlay (thus no need for a thumb on the scale), and the issue is by definition the same, since the same state’s class action rule is involved. The tougher question would be whether an absent class member can be considered sufficiently close to a “party” in the prior action to be bound. We would still answer that question “yes” – as long as the first class certification denial was not based on adequacy of representation grounds. If there’s adequate representation, then there’s no reason not to bind those adequately represented in the first action to its result. But that’s just us. Smith didn’t buy that in the Anti Injunction Act context.
Anyway, that still leaves us with six mega-cases to be decided in the remaining two weeks (actually less) of the Supreme Court's current term. Here’s a brief overview of what’s out there.
The only pharma-product liability case on the list is the Mensing generic preemption case, Nos. 09-993, 09-1039. We’ve already had a lot to say about Mensing, and if you’re interested those posts are here, here, here, and here. Given the unusual lineups and close questions that we pointed out after reviewing the oral argument, we’re not going to make any predictions about the outcome (which could even be a 4-4 tie, although such a result would probably have been announced earlier), except to say that Mensing could go right down to the 6/27 wire.
Another pharma-related case is Sorrell v. IMS Health Inc., 10-779. We blogged about Sorrell here, here, and here. Sorrell could establish, albeit in a non-products setting, that pharmaceutical detailing is First Amendment-protected commercial speech, and we’re optimistic that the Court will go at least this far. Depending upon exactly how the Court conducts the commercial speech analysis that would follow an affirmative answer to the first question, Sorrell could say a lot, or might not say much, of interest to another of our “hot button” issues – the First Amendment protection of truthful promotion of off-label use.
We’ve also followed and analyzed the two “stream of commerce” product liability personal jurisdiction cases that the Court has, J. McIntyre Machinery v. Nicastro, No. 09-1343, and Goodyear v. Brown, No. 10-76. We’ve discussed those cases here, here, and here. As we discussed, the lower court result in Brown would open a foreign defendant to almost unlimited “general personal jurisdiction” (could be sued about anything) based upon minute market shares. Nicastro would abolish state borders for purposes of determining “specific personal jurisdiction” (suits related to the in-state transaction), and determine everything on the basis of national contacts in stream of commerce cases. We expect those two cases to be decided in tandem. Because of the absurd result in Brown and the federalism implications of Nicastro, we also have to say that we’re cautiously optimistic in both cases. If we get good results, we hope they will also result in the overturning of another, even more recent, extreme expansion of corporate personal jurisdiction, Bauman v. DaimlerChrysler AG, ___ F.3d ___, 2011 WL 1879210 (9th Cir. May 18, 2011).
Also of interest to us is the climate change case, American Electric Power Co. v. Connecticut, No 10-174. This is the ultimate in “judicial triumphalism” cases, where a plaintiff tries to convince a court to engage in social engineering of the sort that the (more) political branches of government haven’t been able to enact. There are any number of ways that AEP could be decided, including narrow grounds that wouldn’t interest us very much – as bloggers, anyway. There are two potential bases for decision, however, that we would find extremely encouraging. These are: (1) The Court could reinvigorate the “political question doctrine” and thereby directly curb the lower courts’ impulse towards judicial triumphalism. (2) The Court could analyze the plaintiff’s non-traditional public nuisance cause of action and hold, for legal and/or policy reasons, that the federal common law is not about to recognize any such claim. While not binding on any state court, in the past, Supreme Court decisions rejecting expansive tort theories in the context of federal common law have also been quite persuasive in forestalling further adoption of such theories by state courts. We can think of the economic loss rule and pure risk/medical monitoring as two examples of this. We previously blogged on these implications of AEP here.
Last but certainly not least, the Court has yet to decide the mother of all class action cases, Dukes v. WalMart, No. 10-277. As we discussed in our prior Dukes post, the Court is almost certain to decide the scope of Fed. R. Civ. P. 23(b)(2) in cases where a purportedly “injunctive” class also includes a large monetary relief component. The Court could also provide new binding precedent concerning the scope of any or all of the Fed. R. Civ. P. 12(a) class certification criteria of numerosity, commonality, typicality, and/or adequacy of representation. Whatever the Court does with respect to the Rule 23(a) issues would be binding in any type of class action case. A decision in Dukes upholding certification of such a huge and polyglot class would be most unwelcome (in this precinct, anyway), but we think also unlikely. If there’s a reversal in Dukes (the more probable bottom line), its scope will determine whether class certification in the more run-of-the-mill class actions is made easier or more difficult. Needless to say, we’re rooting for the latter.
In any event, hang on to your hats – the Supreme Court's annual end-of-term roller coaster ride is just beginning, and this one has more peaks (and possible valleys) than most.
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