W.Va. AG, trial lawyers opposed consumer ruling

Jessica M. Karmasek Dec. 22, 2010, 11:00am


CHARLESTON, W.Va. -- West Virginia Attorney General Darrell McGraw and the state's trial lawyers are more than likely not happy about a ruling handed down by the state Supreme Court of Appeals last week in the case of White v. Wyeth.

Following the Court's ruling in the case Dec. 17, plaintiffs now will have to show a causal connection between their individual claims of injury and any alleged unfair or deceptive conduct if suing for misrepresentation under the state's Consumer Credit and Protection Act.

Previously, state consumers simply had to prove there was misrepresentation and then could seek damages.

The ruling has tremendous implications for consumers, especially those filing lawsuits involving prescription medications, for the Court also found that the private cause of action afforded state consumers does not extend to prescription drug purchases.

The Court's decision also might affect the state Attorney General's Office and the number of opportunities for lawsuits it files on behalf of the state.

In an amicus brief filed prior to the Court's ruling, McGraw expressed his support for the group of private citizens who purchased prescription hormone replacement therapy drugs and alleged in their suit, filed in April 2004, that pharmaceutical company Wyeth used "unfair" and "deceptive" practices in promoting the drug products.

In his office's 33-page brief filed Feb. 22, McGraw wrote that requiring a consumer to show proof of reliance is a "significant impediment" to fraud claims, particularly in class actions.

McGraw's office contended that Wyeth urged the trial court to ignore the plain language of West Virginia Code and "read into it a reliance requirement."

"Reliance is not a requirement" under state code, he said.

"The Legislature made its intention crystal clear with the words they chose in providing this right," McGraw wrote. "To find otherwise, and hold that reliance is a requirement before a consumer can assert a private cause of action under the WVCCPA would impair the consumers' ability to stop practices before they cause widespread consumer harm."

His office also argued it leads businesses to try to evade consequences for their deceptive practices by inserting clauses in the fine print of their contracts stating that the consumer did not rely on what the salesperson said.

McGraw further argued that the words "result" and "reliance" are not interchangeable.

In 2009, the Putnam Circuit Court found that the consumer protection act does not require plaintiffs pursuing a private cause of action to allege reliance in their complaints. The court then denied Wyeth's motions to dismiss or for summary judgment for lack of standing.

However, the lower court observed that the interpretation of the phrase "as a result of" in West Virginia Code was a matter of first impression and was a determinative issue in a potentially large and costly suit.

Concerned with the seeming conflict between its interpretation of the statutory phrase in light of the constitutional standing requirement regarding causal connection, the lower court certified the issue as a legal question to the state's high court.

Wyeth also petitioned the Court for review of the certified question, which was accepted by order dated Nov. 12, 2009.

The certified question -- reformulated by the state's high court -- reads, "Does the 'as a result of' language in Section 46A-6-106(a) of the West Virginia Consumer Credit and Protection Act require proof of reliance on alleged affirmative misrepresentations in order to satisfy the element of causation in private causes of action brought pursuant to the Act?"

McGraw, citing Webster's Dictionary, defined "result" as "something that follows as a consequence of another action, condition or event." "Reliance," he wrote, is defined as "somebody or something needed or depended on."

"The statute explicitly states that consumers may bring a private cause of action if they have suffered an ascertainable loss 'as a result of,' or as a consequence of, or following the business's use of unfair or deceptive acts or practices," he wrote.

"Had the Legislature intended to require consumers to prove they had relied upon a misrepresentation and suffered a loss as a result of their reliance thereon, it would have said so."

McGraw argued in his conclusion that consumers often lack "intimate knowledge" of the products and services they are purchasing and the education to understand whether the language in the contract they are about to execute contains a legal loophole that does not actually protect them.

"The WVCCPA was not enacted to determine whether the parties got the benefits of a presumed arms' length bargain," he wrote. "Rather, state consumer protection statutes were enacted to outlaw unfair and deceptive conduct, even if the consumer was not actually deceived."

The West Virginia Association for Justice, which represents more than 500 attorneys in West Virginia and surrounding states, filed its own amicus brief in support of the plaintiffs.

In its 16-page brief, filed on Feb. 22, the trial lawyers group argued the rejection of a reliance requirement has been "a consistent part of the jurisprudence in this State for at least 10 years." Answering "no" to the certified question, the group wrote, "requires nothing more than reaffirming this consistent jurisprudence."

"It seems that only the pharmaceutical manufacturers and others who commit consumer fraud are interested in imposing the reliance requirement," the trial lawyers group said.

Like the Supreme Court, which surveyed other states and their language, the WVAJ did their own study. However, they found that requiring proof of reliance "is a minority position."

The Court's research revealed otherwise -- that the private cause of action provisions of 28 states contain the "as a result of" language, and that 11 states and the District of Columbia have statutes containing the "whether or not any person has in fact been misled, deceived or damaged" language. Only five states have both statutory provisions, it found.

The WVAJ said "a few" states have explicit reliance requirements and that "a few" states do judicially impose reliance requirements, but that "the vast majority" do not.

The group also argued that interpreting the consumer protection act as requiring reliance is "contrary to many policies that underlie the statute."

"Judicially imposing a reliance requirement is inconsistent with the legislative choices made in establishing the statute and this Court's precedents," it wrote. "First, as this Court has recognized, the Legislature explicitly left out class action bans present in the model act upon which the W.Va. Statute is based. Moreover, this Court has explicitly held that contractual restrictions on the right to bring consumer protection class actions are unconscionable and unenforceable.

"If this Court will not permit parties to contractually waive class relief on public policy grounds, it should not strain to adopt constructions of the Act that may have substantially the same effect."

The Product Liability Advisory Council, a non-profit association with more than 100 corporate members representing American and international product manufacturers, filed the lone amicus brief in support of the pharmaceutical company at the center of the Court's ruling.

The council, in its 30-page brief, filed on Jan. 14, argued that the Putnam Circuit Court's decision was "unnecessary" and "a faulty interpretation" of the remedial provisions of the consumer protection act.

"If, as the Circuit Court held, reliance resulting in actual injury is not required, this will have far-reaching negative effects on the development of product liability law and litigation in this State, as attorneys recast traditional product liability claims as consumer protection claims for which they seek class certification," the council wrote.

As the council pointed out, "one cannot be injured 'as a result of' a deceptive act without actually being deceived."

The language and structure of the act show that reliance is necessary, it argued.

"While it explicitly defines a 'deceptive act' so as not to require proof that 'any person has in fact been misled, deceived or damaged thereby,' when it creates the private cause of action, it with equal specificity requires proof that the plaintiff's loss is 'a result of' such a deceptive act," the council wrote.

Had the Court affirmed the lower court's answer to the certified question, the council argued, it would further encourage lawsuit abuse. It also would mean higher prices to cover the manufacturers' costs of routinely making such windfall payments.

"Product manufacturers one way or another build such costs into the price of their products, and so the vast majority of consumers will simply have to pay more," it wrote. "And if enough expensive, time-consuming, and bankruptcy-threatening class actions are filed, there may come a point where consumers who have real injuries receive less compensation.

"Given the increasing cost of health care in our country, not just consumers, but the general public cannot afford the additional, unnecessary costs that Plaintiffs' answer to the certified question would impose."

Consumers also would suffer from the loss of product innovation if manufacturers are forced to cut back on research and development spending for fear of litigation, the council said.

"The civil justice system should concentrate on the fair and efficient administration of cases filed by plaintiffs who are actually injured as a result of reliance on a defendant's deceptive act," it concluded.

More News