Pharmacies ask for rehearing of class action debate

John O'Brien Jun. 15, 2011, 1:36pm


RICHMOND, Va. (Legal Newsline) - A group of pharmacies sued by West Virginia Attorney General Darrell McGraw is appealing a federal appeals court's decision to send the case to state court.

The U.S. Court of Appeals for the Fourth Circuit in May rejected the defendants' argument that McGraw had filed what was essentially a class action lawsuit against them. As a class action, they argued, the case belonged in federal court and not in Boone County Circuit Court, where it was first filed.

The three-judge panel that heard the case ruled 2-1 for McGraw, and now the defendants seek a rehearing in front of the entire Fourth Circuit in a petition filed June 3.

"(T)he majority's decision directly conflicts with the authoritative precedent from the only other federal appellate court to have addressed the issue," the petition says, noting a pair of 2008 decisions that involved Hurricane Katrina.

"(T)he Fifth Circuit held that even where an attorney general is the nominal plaintiff, an action is removable under the (Class Action Fairness Act) when it seeks reimbursement for a subgroup of state citizens."

McGraw's lawsuit alleges the defendants - six prescription drug retailers including CVS, Target and Wal-Mart - did not pass savings on generic drugs onto consumers. He hired private attorneys to pursue the case as well as another one against Rite Aid.

In its appeal brief, the group of pharmacies claimed McGraw's lawsuit satisfies the jurisdictional requirements of the federal CAFA.

"The AG's allegations make abundantly clear that more than $5 million and the interests of more than 100 persons are at issue. If the rightful interests of the West Virginia consumers on whose behalf the AG has brought suit are recognized, there also is undeniably minimal diversity between at least some plaintiffs (who are West Virginia citizens) and all defendants (as none of the defendants reside in or is a citizen of West Virginia."

The pharmacies added that any consumer who was allegedly overcharged is a real party in interest to the case.

The decision says the West Virginia statutes on which McGraw relies contain none of the essential requirements for a class action. McGraw is not designated as a member of the class and he is not required to give notice to overcharged customers, the decision says.

"Indeed, the West Virginia Attorney General's role here is more analogous to the role of the EEOC or other regulator when it brings an action on behalf of a large group of employees or a segment of the public," the decision says. "Yet, the Supreme Court has concluded that such a regulator's action is not a class action of the kind defined in Rule 23."

Judge Ronald Lee Gilman dissented. Even though the action was brought under state statutes, it doesn't take away the "essence" of the case, he wrote.

"(T)he elements of numerosity, commonality, typicality and adequacy of representation have not been specifically pleaded," Gilman wrote. "But I submit that these are subsidiary factors that do not detract from the essence of the action.

"They are, in other words, 'bells and whistles' whose absence in the pleadings do not prevent the Attorney General's suit from being considered a class action under CAFA."

Gilman wrote that similar lawsuits filed by McGraw's outside counsel in other states are undisputed class actions.

McGraw hired two private firms - Bailey & Glasser and DiTrapano Barrett & DiPiero - for the case. The two firms have contributed more than $60,000 to McGraw's campaign fund over the years, including $11,800 for his 2008 race against Republican Dan Greear.

Bailey & Glasser brought similar lawsuits in Michigan and Minnesota. The Michigan suits were dismissed by a state judge because the only specific pricing information was obtained by a West Virginia whistleblower who worked at Kroger.

The Minnesota lawsuit, brought on behalf of unions that provide health care for their members, was initially dismissed in November 2009 by former U.S. District Judge James Rosenbaum, who had harsh words for the plaintiffs attorneys.

Rosenbaum was peeved that the complaint, filed against 13 defendants, only contained specific pricing information about two of them.

"(T)his Complaint utterly fails to state a cause of action on any basis. There are no, none, factual allegations touching any defendant other than CVS and Walgreen's," Rosenbaum said Nov. 20, 2009.

"There being no facts from which a fact finder could infer any liability concerning (the other defendants), and you asked me to sustain a complaint based upon that. It's not only laughable, it's absolutely reprehensible."

A federal magistrate judge is currently deciding if that lawsuit will be remanded to a Minnesota court.

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