Comcast Corp. v. Behrend’s Impact In Toxic Tort Litigation

I have written about how the U.S. Supreme Court’s decision in Comcast v. Behrend has had the practical result of raising the bar for class certification and leveling the playing field for corporate defendants. Until recently, however, it was unclear what impact this anti-trust decision would have on toxic tort litigation. 

On January 17, 2014, the Seventh Circuit issued a groundbreaking decision in Parko v. Shell Oil Company, which was an appeal from the Illinois district court’s certification of a class of property owners in Roxana, Illinois, who had filed suit against Shell Oil Company which (together with various subsidiaries) had owned and operated an oil refinery from 1918 to 2000 adjacent to the village where the 150 class members reside. Although multiple claims were alleged, Parko was  largely a diminution of property value case.

 In Parko, the class action plaintiffs were successful in obtaining class certification in the district court without having to provide evidence. Typically, plaintiffs seek to reserve any discussion of the merits of their claims until after class certification.  Plaintiffs are well aware that the certification of a class creates enormous pressure on defendants to settle regardless of the merits of the case.

The plaintiffs alleged that the refinery had leaked benzene and other contaminants into the groundwater under the class members’ homes.  The Seventh Circuit found it particularly significant that the groundwater was not being used as a drinking water supply.  As such, it was unclear whether the contamination had caused any diminution of property value at all.

In addition, the Seventh Circuit noted defendants’ contention that the contamination alleged by plaintiffs occurred over a 90-year period and involved acts and omissions charged against the six defendants, and maybe other polluters as well.  The defendants had identified sources of pollution in the area that were attributable to the operations of non-parties.  As a consequence,  class members could have experienced different levels of contamination from multiple sources over many years. 

Relying on the language in Comcast Corp. v. Behrend, the Court reversed the district court, holding that a trial judge may not "refuse to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination."  

The Court held that "mere assertion by class counsel that common issues predominate is not enough. That would be too facile. Certification would be virtually automatic. And so Rule 23 does not set forth a mere pleading standard….Rather, when factual disputes bear on issues vital to certification (that is, to whether the suit should be allowed to be litigated as a class action), such as predominance, the court must receive evidence . . . and resolve the disputes before deciding whether to certify the case."  (emphasis added)  In reviewing the record below, the court stated that it was not even clear that plaintiffs "have identified a common issue."

The Parko decision is short and pithy, and contains a trove of valuable nuggets of good language for the class action  toxic tort defense practitioner. 

On proof of diminution of property value:   

Real estate values have taken a drubbing in recent years, with the collapse of the housing bubble and the ensuing financial crisis. It can’t be assumed that a decline in the value of residential property in Roxana (if in fact there’s been a decline) is the result of proximity to a refinery that for all one knows has been leaking contaminants for the last 95 years without causing detectable harm. There are many things commonly found in soil beneath rural or suburban houses that homeowners would very much like not to enter their home (such as earthworms, fungi, ants, beetles, slugs, radon, chemical residues, thousands of different types of microbe— and groundwater), but as long as there is no danger of such unwanted visitors their underground presence should not affect property values. Benzene in the water supply is one thing; benzene in groundwater that does not feed into the water supply is quite another. (emphasis added)

On Rule 23’s predominance requirement post-Comcast:  

The district judge did not explore any of these issues. He treated predominance as a pleading requirement. He thought it enough at this stage that the plaintiffs intend to rely on common evidence and a single methodology to prove both injury and damages, and that whether the evidence and the methodology are sound and convincing is a question going to the strength of the plaintiffs’ case and should be postponed to summary judgment proceedings or trial. But if intentions (hopes, in other words) were enough, predominance, as a check on casting lawsuits in the class action mold, would be out the window. Nothing is simpler than to make an unsubstantiated allegation. A district judge may not "refus[e] to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination."

 On the appropriate level of judicial inquiry pre-certification:

The judge should have investigated the realism of the plaintiffs’ injury and damage model in light of the defendants’ counterarguments, and to that end should have taken evidence. For if the defendants are right, there is no common issue, only individual issues that will vary from homeowner to homeowner: is there benzene in the groundwater beneath his home at a level of concentration that if the groundwater were drunk would endanger health (and is there any possibility it would enter the water supply); what is the source of the benzene in the groundwater beneath a given home (that is, who is the polluter who caused the groundwater to become polluted); could the presence of the benzene in that concentration cause any other form of harm; has the presence of the benzene reduced the value of his property; if so, how great has the reduction been. It is difficult to see how these issues can be managed in the class action format. But in any event they must be engaged by the district judge before he can make a responsible determination of whether to certify a class.

Benzene in the water supply is one thing; benzene in groundwater that does not feed into the water supply is quite another."  Amen!



Comcast May Be A Class Action Game-Changer, But Not In Boston

In Comcast Corp. v Behrend, 133 S.Ct. 1426 (March 27, 2013), the Supreme Court held that the lower court erred in failing to consider flaws in plaintiffs’ damages model merely because the damages model would be pertinent on merits issues…..thus, "running afoul of our precedents requiring precisely that inquiry".  It was up to the district court to determine whether the expert’s methodology was "just and reasonable inference or speculative."  

Citing the Reference Manual on Scientific Evidence, the court held that the "first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event."  

Pre-Comcast, plaintiffs generally focused on getting over the hump of standing and/or alleging damages under various legal theories at the pleading stage, without knowing how they would ever prove up damages. No more! The ground has shifted beneath the feet of the plaintiff class action bar.  To cite the D.C. Circuit Court of Appeals, the new judicial mantra is "No damages model, no predominance, no class certification".

Despite Comcast’s holding, some federal trial courts continue to certify class actions of arguably questionable merit. An example of such a case is In re: Nexium (Esomeprazole) Antitrust Litigation which was handed down by the District of Massachusetts on November 14, 2013.

Plaintiffs alleged that they paid higher prices for Nexium because less expensive generic versions of Nexium were prevented from coming onto the market due to AstraZeneca’s settlement with three generic manufacturers. The end-payors (as the plaintiffs called themselves) sought to certify a sprawling Rule 26(b)(3) class consisting of virtually every consumer (insured and uninsured), commercial insurer, health plan and pharmacy benefit manager who had paid any portion of the purchase price for Nexium for a six year period in twenty-six states.

Although the district court referenced the Supreme Court’s rulings in Wal-Mart and Comcast, it certified a class despite plaintiffs’ adoption of a model that adopted the use of “aggregate damages calculations.” The defendants properly objected to the damages model because it failed to account for differences in injuries and losses among class members.

The use of an "average" price differential, even if capable of being proven, ignored the variations within the class and did not identify which end-purchasers would have saved money and which would have lost money if and when generic Nexium had entered the market. Even the district court acknowledged that under plaintiffs’ model certain class members who suffered no damages whatsoever would remain in the class.

Applying the reasoning of the D.C. Circuit in In re: Rail Freight Fuel Surcharge Antitrust Litig., one of the most important circuit court decisions applying Comcast, class certification would most likely have been denied because common questions of fact cannot predominate where there exists no reliable means of proving classwide injury in fact.

Plaintiffs’ expert conceded that the proposed class included tens of thousands of consumers who would continue to purchase branded Nexium after generic entry due to preference or their physician’s recommendation. Such brand loyalists would potentially have faced higher Nexium prices had generic Nexium been available.

Other consumers were not injured because their co-pays were the same for both generic and branded Nexium. Plaintiffs’ average price differential model ignored variations within the class and failed to distinguish between purchasers who would have lost money if and when generic Nexium would have entered the market and those who would not have lost money.

 In an almost identical situation involving a similar set of facts and the same plaintiffs’ expert, Dr. Meredith Rosenthal, a Philadelphia district court denied class certification in Sheet Metal Workers Local 1141 Health and Welfare Plan v. GlaxoSmithKline, No. 04-5898, 2010 WL 385552, at #27 (E.D.Pa. Sep. 30, 2010), class certification was denied by the Pennsylvannia district court (pre-Comcast) which rejected an analogous damages model proposed by Dr. Rosenthal in a case of alleged generic drug suppression involving the drug Wellbutrin SR.  There, as in the Nexium case, plaintiffs’ model failed to exclude uninjured class members. Because plaintiffs were unable to meet their burden of Rule 26(b)(3) that questions of law or fact common to class members predominated over any questions affecting only individual members, the district court denied class certification.

It is difficult to understand how the Massachusetts district court determined that the Nexium end-payors’ damages model met the “rigorous analysis” standard required by Comcast and Wal-Mart, particularly as there are many  thousands of plaintiffs in the class who have not suffered injury. Plaintiffs’ methodology indisputably failed to identify non-injured members of the class.  We look forward to the First Circuit’s analysis of the Rule 23(b)(3) issues presented by the case, assuming that an appeal is in the offing. 

Second Circuit Grapples with Medical Monitoring

On May 1, 2013, the Second Circuit issued an important decision in Caronia v. Philip Morris USA Inc., 2d Cir., No. 11-0316 (5/1/13). The Court provides an excellent summary of the law concerning medical monitoring claims in New York state and federal courts, and in other jurisdictions around the country. However, the Second Circuit concluded that the New York Court of Appeals was best suited to determine whether New York recognizes an independent claim for medical monitoring.

Therefore, the Court certified the following questions of New York law to the Court of Appeals: (1) Under New York law, may a current or former longterm smoker who has not been diagnosed with a smoking-related disease, and who is not under investigation by a physician for such a suspected disease, pursue an independent equitable cause of action for medical monitoring for such a disease? (2) If New York recognizes such an independent cause of action for medical monitoring, (a) what are the elements of that cause of action? and (b) what is the applicable statute of limitations, and when does that cause of action accrue?

Caronia, a putative class action, was commenced on January 19, 2006. The class plaintiffs are persons aged 50 years or older who currently smoke Marlboro cigarettes or ceased smoking them within one year prior to the commencement of the lawsuit, and smoked Marlboro cigarettes for at least 20-packed years. The complaint alleges that none of the plaintiffs are presently diagnosed with lung cancer nor under investigation under a physician for suspected lung cancer. Plaintiffs’ most recent amended complaint alleges that a newly established medical surveillance technique known as Low Dose CT scanning of the chest is a safe, efficacious and inexpensive technique which, for the first time, provides the means to identify and diagnose lung cancer at an early stage, when it is still curable.

In the trial court, the plaintiffs sought medical monitoring as a remedy for their tort claims of strict liability, negligence and breach of warranty but had not pled a free-standing claim for medical monitoring. It was not until plaintiffs filed their Fourth Amended Complaint that a stand-alone claim for medical monitoring was pled.

The Second Circuit affirmed the SDNY’s dismissal of plaintiffs’ traditional strict liability, negligence, and breach of warranty claims for redress of the smokers’ increased risk of developing lung cancer on the ground that these claims were time-barred. Thus, whether plaintiffs’ sole remaining claim for medical monitoring is a stand-alone claim or merely an element of consequential damages becomes critical to plaintiffs’ right of recovery. Because the statute of limitations bars plaintiffs’ pursuit of their traditional claims for negligence and strict products liability, any medical monitoring issue becomes moot if it is merely an element of consequential damages. If the underlying negligence and strict products liability claims are time-barred, then no consequential damages are recoverable.

 However, if New York recognizes an independent cause of action for medical monitoring, and, if, as recognized, that claim is viewed as accruing when an effective monitoring test becomes available, then, according to the Second Circuit, the statute of limitations likely will not have run on such an independent cause of action. Thus, the question certified to the New York Court of Appeals takes on critical importance.

 In Donovan v. Philip Morris USA, Inc., an almost identical case brought by the same plaintiff lawyers in the District of Massachusetts, the federal district court certified similar questions of law to the Supreme Judicial Court of Massachusetts. Notably, Sheila Birnbaum, now with Quinn Emanuel, and Gary Long of Shook Hardy & Bacon, argued on behalf of Philip Morris in both Massachusetts and New York.

In Donovan, the court held that plaintiffs who sued for medical monitoring, based on sub-clinical effects of exposure to cigarette smoke and increased risk of lung cancer, stated a cognizable claim under Massachusetts state law.

 The issue is whether the New York Court of Appeals will adopt the reasoning of Donovan, which sets a dangerous precedent, or take a more conservative approach. The obvious concern is that the “damages floodgates” may potentially open if the burden of medical monitoring plaintiffs is reduced to demonstrating a sub-cellular or physiological change rather than an injury or disease. Under such a loosened standard, particularly if an independent cause of action for medical monitoring is permitted to proceed, a sun tan, a skin blemish, a sneeze or elevated cholesterol could justify permitting a medical monitoring claim to proceed.

Perhaps we exaggerate, but why would not McDonald’s restaurants potentially be exposed to claims for diabetes medical monitoring claims brought by customers alleging they suffer  from  fast food-induced obesity?  Why would not Coppertone be subject to damages claims by customers with sunburns who allege they may be at risk for developing skin cancer due to the sun tan lotion’s  lack of efficacy in preventing sunburns?  In both situations, sub-cellular or physiological change could be demonstrated, particularly in the absence of a requirement to demonstrate phsical injury or disease.  A cynic might argue that a Donovan-style medical monitoring rule is designed only  to punish the tobacco industry rather than establish sound jurisprudence..

Although New York courts have held that medical monitoring may be an element of consequential damages, if certain requisites are met, Donovan can be distinguished from several Appellate Division medical monitoring cases in New York. For example, in Abusio v. Consolidated Edison Co., the Second Department upheld the trial court’s dismissal of cancerphobia claims on the grounds that plaintiffs had not presented sufficient evidence to prevail. However, in its decision, the Second Department cited cases which found that future medical monitoring costs could be sought for cancerphobia if a plaintiff could “establish both that he or she was in fact exposed to the disease-causing agent that there is a ‘rational basis’ for his or her fear of contracting the disease… this ‘rational basis’ has been construed to mean the clinically demonstrable presence of PCBs in the plaintiff’s body, or some indication of PCB-induced disease, i.e., some physical manifestation of PCB contamination… .”

A much-cited Fourth Department Appellate Division case, Askey v. Occidental Chemical Corp, examined claims of exposure to toxic discharges from a landfill and considered whether plaintiffs could recover for an anticipated need for medical monitoring. In particular, the court examined the then “novel issue” whether persons with an increased risk of disease could recover the costs of future medical monitoring in the absence of any apparent physical injury. In that case, the court concluded that recovery for medical monitoring was available as an element of consequential damage, but not as a stand-alone cause of action. But this article is not intended to be a survey of New York law on the subject.  The Second Circuit decision provides a cogent analysis of the important New York case law on medical monitoring and .I direct the reader to that discussion.

It is my view that any medical monitoring plaintiff should be required, at a minimum, to demonstrate injury or disease to recover medical monitoring damages and that no stand-alone claim for medical monitoring should be permitted. 


Comcast Corp. v. Behrend Decision Levels Class Action Playing Field

The Foley Hoag Product Liability Update is a good source of information concerning developments in product liability and related law for product manufacturers and sellers. Published quarterly, the Update is prepared under the aegis of David R. Geiger, the chair of Foley Hoag’s product liability and complex tort practice.

Although any of the six articles in the April 2013 Update are worthy of comment, the Update’s discussion of Comcast Corp. v. Behrend, 133 S. Ct. 1426, 2013 WL 1222646 (Mar. 27, 2013) is the most significant. Behrend was filed as a hope-to-be antitrust class action in the U.S. District Court of the Eastern District of Pennsylvania.

Among other Rule 23 requirements, plaintiffs were required to prove that the damages resulting from the alleged injury were measurable on a classwide basis through use of a common methodology. Although plaintiffs proposed four distinct theories as to how they had been injured by defendants’ anti-competitive conduct, the trial court held that only one theory of damages was capable of class-wide proof. Nevertheless, the court certified a class under that single theory.

On appeal to the Third Circuit, defendants argued certification was inappropriate because plaintiffs’ expert had acknowledged that his model measured damages resulting from all four of plaintiffs’ theories of harm, not just a single theory.

The Third Circuit affirmed class certification on the ground that defendant’s objections to the scope of the expert’s damages model were not appropriate at the class certification stage; such an inquiry would improperly require the trial court to reach the merits of plaintiffs’ claims. Any consideration of the objections to the scope of the expert’s damages assessment should await the merits phase of the case, according to the court.

After granting certiorari, the Supreme Court reversed, holding that the Third Circuit had erred in refusing to consider defendants’ arguments that plaintiffs’ damages model was insufficient to establish their alleged damages on a class-wide basis. The Court reaffirmed the legal principle that class certification requires the trial court to determine that the prerequisites of Rule 23 are satisfied, even if that analysis necessitates some degree of inquiry into the merits of plaintiffs’ claim.

Although damages calculations need not be exact at the class-certification stage, the Court held that any model supporting a plaintiff’s damages case must at least be consistent with its liability case, particularly with respect to the anti-competitive effect of the alleged violation at issue in the case. The trial court certified only one of plaintiffs’ four theories of harm, all of which theories plaintiffs’ experts had modeled for damages purposes. The Supreme Court held that a model that does not even attempt to measure the damages attributable to the lone surviving theory of damages is insufficient under Rule 23.

 The Behrend holding is significant for class action practitioners. As much as possible, class action plaintiffs want to reserve any discussion of the merits of their claim until after class certification. Behrend should now permit defendants to place merits issues before the court at an earlier stage in the litigation if they can argue that such an inquiry is necessary to establish that Rule 23 prerequisites have been satisfied.

Going forward, defense counsel should be able to argue that a plaintiff’s damages model should be able to withstand rigorous Daubert scrutiny prior to class certification. The certification of a class creates enormous pressure on defendants to settle regardless of the merits of the case. The practical result of the decision is that the bar for class certification has been raised and the playing field leveled. 

National Suture Class Action Rejected

The Mass Tort Defense Blog reported recently that the North Carolina federal district court overseeing the MDL concerning panacryl sutures declined last week to certify a proposed national class action in In re Panacryl Sutures Products Liability Cases, 2009 WL 3874347 (E.D.N.C. 11/13/09).  The decision is a significant one for pharmaceutical and medical device MDL practitioners because the court’s reasoning in denying class certification is broadly applicable to other medical device products. It is increasingly rare for plaintiffs to obtain class certification in medical device litigation and this case is no exception. Panacryl Sutures are synthetic, braided, absorbable surgical sutures, designed to remain in a patient’s body for 24-36 months after surgery to provide wound support. Various plaintiffs alleged that Panacryl Sutures were defective in that they allegedly caused a high rate of foreign body reactions when used as directed. Plaintiffs further alleged that the defendants failed to provide adequate warning of the dangers associated with the devices. Plaintiffs eventually filed a motion to certify a National Class Action. The Panacryl sutures were the subject of a  2006 recall by FDA.

In his blog post, Dechert’s Sean P Wajert, discusses the various rationale underlying the court’s decision not to certify a national class. In evaluating the requirements under Rule 23(a) and Rule 23(b), the court considered the impact that the laws of the various states where plaintiffs reside would have on the proposed class.  Considering Rule 23(a)(3)’s "typicality" requirement, the court found that the plaintiffs had not considered the varying substantive laws governing every class member.  Considering to Rule 23(b), the court found that in class actions governed by the laws of several states, variations in state law often overwhelmed common issues.  The court held that the plaintiffs would have to demonstrate by "extensive analysis" that the laws of interested jurisdictions did not pose "insuperable obstacles" to class certification.  As Mr. Wajert points out, courts have generally found that common questions of fact do not predominate in medical device products cases. In the Panacryl Sutures litigation, the sutures were used in a variety of surgical procedures, which required different techniques and skill sets on the part of the surgeon and presented different risks of post-operative complications.  Thus, it is not likely that any class would have been certified due to a lack of predominance of common issues, let alone a national class. For a further discussion of the policy and legal considerations that warrant denial of class actions in pharmaceutical and medical device litigation, take a look at the enthusiastic discussion of the decision in the Drug and Device Law Blog authored by Jim Beck and Dechert and Mark Herrmann at Jones Day.