Thursday, May 31, 2012

A Silver Lining?

We really don’t like it when state aspiring governors (that’s what “AG” stands for, isn’t it?) come after our clients − especially when our clients were merely exercising their First Amendment rights to make truthful statements about this or that off-label use.  But then, the state AGs never cared what we thought before, so why should they start now.


Stuff, like state AG litigation, happens.

But we’d like to let folks know about a possible silver lining around at least some of those big, dark, state AG clouds.  We’re talking about the recent Minnesota Supreme Court decision, Curtis v. Altria Group, Inc., No. A10-0215, slip op. (Minn. May 30, 2012).  It’s not a drug/device case (it involves cigarettes), but the legal principles should carry over with respect to at least some state AGs and their copycats who come to play in our sandbox.

The relevant legal rule recognized in Curtis is this: since a state AG acts on behalf of the citizens of that state (we lawyers call that “parens patriae”), the resolution (usually by settlement) of a state AG action precludes private copycat plaintiffs from later suing over the same allegations.

Here’s what happened in Curtis.  In 1994, the Minnesota state AG brought a consumer fraud action against the defendants over “light” cigarettes (but it could have been anything), seeking among other things, restitution and damages.  Slip op. at 4-5.  This AG action settled a few years later for over $100 million.  Id. at 6.  Not too long after that, copycat plaintiffs came to Minnesota and brought private suits under the same consumer protection statutes, alleging the same violations, and also seeking restitution and damages.  Id. at 7.

The issue before the Court was, can private plaintiffs get away with this kind of repetitive litigation?

Fortunately, the Minnesota Supreme Court said no.  We’ll spare you a lot of detailed discussion because the important points are well-encapsulated in the Court’s syllabus:

Under [the Minnesota act], the Minnesota Attorney General (State AG) has the authority to bring a lawsuit . . . and to seek not only the relief available to the State . . ., but also the relief available to a private litigant. . . . It logically follows that the State AG has the authority to settle and release a private litigant’s claims.

The 1998 Settlement Agreement entered into by the State AG and [defendant] expressly released and barred [copycat plaintiffs’] consumer protection claims . . . and is binding on [those plaintiffs].

Curtis, slip op. at 2-3, syllabus points 1, 3 (emphasis added).  Syllabus point 2 dealt with the reverse situation, and isn’t really relevant to this discussion.

What this means − at least in Minnesota − is that, if our clients have the misfortune to be sued by a state AG, and they settle the action, that settlement can preclude copycat private litigation involving the same allegations.  Given that the state AG can assert the public’s consumer protection rights, the Court concluded that private consumer protection litigation was merely “part of the broader authority of the State AG to bring a lawsuit . . . to enforce all remedies available to it,” including those remedies also provided to private litigants.  Curtis, slip op. at 11-12.  “[I]t logically follows” that since the AG can pursue private as well as public remedies, the AG “has authority to settle and release” those claims, including those of subsequent private litigants.  Id. at 14.

That “release,” moreover, was a nice, big, fat general one − including “all claims that the State of Minnesota made, or could have made.”  Curtis, slip op. at 17.  The release had the usual “broad and comprehensive” provisions we expect to see in general releases:  “any and all manner,” “known or unknown, suspected or unsuspected, accrued or unaccrued, whether legal, equitable or statutory,” “relating to the subject matter,” “directly or indirectly based on, arising out of or in any way related to” - that kind of thing.  Id. at 18.  The Court applied the general release generally.  The copycat plaintiffs’ claims easily satisfied the “related to” test since they “assert[ed] violation of the same consumer protection statutes arising from the same fraudulent and deceptive misrepresentations.”  Id. at 18-19 (emphasis original).

The copycats’ last stand was a provision in the settlement providing that “no portion . . . shall bind any non-party.”  Curtis, slip op. at 20.  Because the state AG was acting on behalf of the public, members of the public couldn’t claim to be “nonparties”:

We read the words “representatively” and “derivatively” to encompass [private copycats’] right as private litigants to bring [monetary] claims against [defendant].  Because the State AG brought and released those claims, including [monetary] consumer protection claims that could have been brought on behalf of private litigants, the release expressly determined [private copycats’] right to bring a [monetary] consumer protection claim.

Id. at 21.  Bingo.  The tagalongs got tagged out.

Since our clients are all too often on the receiving end of the same sort of litigation − both state AG actions and follow-up copycat litigation − Curtis suggests to us that the same silver lining might be available in elsewhere.  The relevant state law would have to allow the state AG to recover the same monetary damages as private litigants, but once that happens, the rest should flow.  Since the AGs almost always claim to act on behalf of the public, their monetary settlements using general release language should also bind individual copycat plaintiffs and thus preclude relitigation of those claims.

Thanks to Scott Smith at Nilan Johnson (who filed a amicus brief for the right side of the “v.”) for passing Curtis along.

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