Monday, February 25, 2013

A Solid Decison Dismissing Third Party Payer Claims -- And a Mundane Oscar Decision

We’re a bit too tired from going late into the evening watching the Oscars to say much of anything pithy today.  We’ll just complain.  Argo was a very good movie.  But Best Picture good?  Maybe, but maybe not.  It’s certainly not as shaky as last year’s pick, The Artist.  Cute and different doesn’t mean best.  Does anyone remember Crash winning best picture for 2005?  How the heck did that happen?  That might not even have been a good movie, no less best.  And Shakespeare In Love?  How does its victory over Saving Private Ryan look in retrospect? 

Against these historic mistakes, the selection of Argo isn’t bad.  As we said, it really was a good movie.  A historically based movie is unquestionably good when it can get your teen-aged son to look at you with wide eyes during the last 20 minutes and say, “Man, this is intense.”  Its selection as Best Picture also created a second, “hey, can you believe Ben Affleck just won an Oscar” moment.  Those are always fun.  He’s gotten pretty good at making movies.  The Town was a good one too.  So we’re really not complaining about Argo. 

This is more about Django Unchained.  We knew it never had a chance to win.  Quentin Tarantino makes unusual movies.  They’re loaded with violence, cursing and one odd circumstance piled on top of or backed into another.  And Tarantino himself sometimes comes off as a know-it-all when it comes to cinema.  But, man, what a move that was.  It must have been incredibly difficult to craft a movie about such a painful part of our history and yet have it at once be action-packed, terrifying, funny, exhausting, exhilarating, realistic, cartoonish, unpredictable and wonderfully predictable – and then to wrap it all up in a spaghetti western.  Who would even think to do such a thing, no less accomplish it?  For those of you who saw it, wasn’t it great to cheer Django on as he whipped the heck out of his former slave master?  We bet you’d never thought you’d get that experience at a movie.  Or wasn’t it a surreal movie-going moment to laugh along with the entire crowd as the KKK members complained about the guy who improperly cut the eye holes into their hoods?  And then be thrilled when Django shoots the KKK leader, Big Daddy (Don Johnson), off his horse.  Tarantino doesn’t make the type of movie that gets selected as Best Picture.  The Academy seems more comfortable throwing him a Best Screenplay award from time to time instead.  But you’ll likely never see another movie like that one again.  And you’ll definitely see more Argos.  Maybe Django Unchained should have been picked. 

Who knows?  McConnell thinks a lot about these things and sees all the Best Picture nominees.  He’ll probably straighten this all out on Wednesday. 

Now for your entertainment . . . . a third-party-payer case called Employer Teamsters-Local Nos. 175/505 Health and Welfare Trust Fund v. Bristol Myers Squibb Co., No. 2013 U.S. Dist. LEXIS 21589 (S.D. W.Va. Jan. 29, 2013).  As cases go, if you like courts dismissing plaintiffs’ claims for all sorts of reasons, this one should keep your attention. 

The Teamsters locals and their benefits fund sued Bristol Myers Squibb and Sanofi-Aventis, claiming that they’d paid too much for the blood thinner Plavix because defendants had marketed it as superior to aspirin when it allegedly wasn’t.  They claimed unjust enrichment and breach of the implied warranty of merchantability and sought reimbursement of the cost difference between Plavix and aspirin.  When this picture opens, the plaintiffs are already on their second amended complaint.  But they’re gonna need another one.  Because in the end the court grants defendants’ motion to dismiss. 

Plaintiffs’ breach of implied warranty of merchantability claim was based on the allegation that the “intended purpose” of Plavix was to serve as a superior alternative blood thinner to aspirin.  Id. at *14.  Superior performance to another product, however, seems strained as a definition of ordinary purpose.  Performance as indicated and labeled is more like it.  In fact, that’s how the plaintiffs themselves had framed it in their earlier complaint.  And ultimately that’s what the court found to be proper.  The FDA had approved Plavix to treat certain (principally heart related) conditions, and that’s how it was labeled.  Id. at *15-16.  It wasn’t approved as “superior” to aspirin.  There is also significant precedent, cited by the court, holding that implied warranty of merchantability claims must be based on the product’s ordinary purpose, not its superiority to other products:

Under the U.C.C., claims about a product's superiority over another product are not part of the implied warranty of merchantability.  Richard A. Lord, 18 Williston on Contracts § 52:76 (4th ed. 2012) (footnotes omitted) (“As a general principle . . . the implied warranty of merchantability requires only that the goods be fit for their ordinary purpose, not that they be perfect or in perfect condition, or be outstanding or superior, or of the best or highest quality.”); see also Sessa v. Riegle, 427 F. Supp. 760, 769 (E.D. Pa. 1977), aff'd, 568 F.2d 770 (3d Cir. 1978) (“The standard established [by U.C.C. § 2-314] does not require that goods be outstanding or superior.”); Miller v. Badgley, 51 Wn. App. 285, 753 P.2d 530, 535 (Wash. Ct. App. 1988) (“In order to be merchantable, goods need not be outstanding or superior . . . .”).  Furthermore, “a product that performs its ordinary functions adequately does not breach the warranty merely because it does not function as well as the buyer would like . . . .”  18 Williston on Contracts § 52:76 (footnote omitted).

Id. at 17. 

Plaintiffs’ unjust enrichment claim had similar problems.  Plaintiffs asserted, essentially, that defendants convinced doctors to prescribe allegedly overpriced Plavix instead of cheaper aspirin and the defendants were thereby unjustly enriched.  Id. at *20.  But plaintiffs can’t just say that.  They have to satisfy Twombly and Iqbal by alleging facts that make this claim plausible.  They also have to explain how payment for a product that performs as intended can constitute unjust enrichment.  They did neither:

[T]he SAC does not allege, let alone plausibly, whether any prescriptions were written based on a misunderstanding of Plavix's efficacy. Nor does it allege how Defendants' retention of payments for a product that was effective in its ordinary purpose--though perhaps not as effective compared to other drugs as claimed--rises to the level of constituting unjust enrichment.

Id. at *20-21.  On this basis, the court dismissed the unjust enrichment claim.

Potentially more helpful, though, is the court’s discussion of the complaint’s deficient proximate causation allegations, which all by itself served as a basis to dismiss all plaintiffs’ claims.  The court traced its definition of proximate causation to the Supreme Court’s 1992 opinion in Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992).  Even though Holmes was a RICO case, the court believed that its “discussion of proximate causation . . . . provide[d] a general formula, not just applicable to RICO claims.”  Id. at *23 n.9 (citing Holmes, 503 U.S. at 268-69).  Under Holmes, proximate causation required “some direct relation between the injury asserted and the injurious conduct alleged.”  Id. at *23 (quoting Holmes, 503 U.S. at 268). 
Even with that broad definition, plaintiffs’ claims were doomed. 

As the defendants put it, “the causation between the alleged marketing activities and the reimbursement of Plavix prescriptions is riddled with too many intervening events for the Court to impose liability on Defendants.”  Id. at *21.  The most obvious and significant intervening event was the decision-making of the prescribing doctors:

[P]hysicians use their independent medical judgment to decide whether [a drug] is the best treatment for a given patient, and independent judgment can be influenced by a number of things, only one of which may be representation by a manufacturer as to a particular drug's relative safety and efficacy.

Id. at *23 (quoting Pennsylvania Employees Benefit Trust Fund v. AstraZeneca Pharma., 2009 U.S. Dist. LEXIS 76555 (M.D. Fla. July 18, 2009) (in turn applying Holmes).  The court was also influenced by a West Virginia Supreme Court decision that disallowed claims under West Virginia’s consumer protection act against a pharmaceutical manufacturer because doctors, rather than consumers, are the ones who select the drugs to prescribe to patients.  Id. at 30 (citing White v. Wyeth, 227 W.Va. 131 (W.Va. 2010). 

The prescribing doctors independent judgments and decision-making processes were just too significant as intervening events to allow plaintiffs’ claims to survive as alleged: 

Holmes and the other cases above suggest that the proximate causation analysis is about carefully drawing a line so as to distinguish the direct consequences in a close causal chain from more attenuated effects influenced by too many intervening causes. . . . .  The Court finds that Plaintiffs' claims do not satisfy the “direct relation” test found in Holmes . . .  and also finds that the policies announced in Holmes weigh in favor of dismissal here.  Between Defendants' alleged misleading marketing and Plaintiffs' prescription reimbursements lies a vast array of intervening events, including the “independent medical judgment” of doctors.  Without any specific allegations as to who received these misrepresentations, how the misrepresentations influenced doctors, and why certain patients received Plavix instead of alternative medications, this Court is left without sufficient allegations from which to properly infer that proximate causation is satisfied. Therefore, both of Plaintiffs' claims should be dismissed for lack of causation.

Id. at *31-32. 

So there’s your entertainment for today: claim-specific defenses to third-part-payer claims for unjust enrichment and breach of the implied warranty of merchantability, along with a broad proximate cause defense to boot.  It’s pretty good, just like Argo, but not very challenging or unusual.  But that’s what you get around Oscar time. 

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