Fourth Circuit sticking with decision in W.Va. AG's drug-pricing case

John O'Brien Jul. 27, 2011, 12:16pm


RICHMOND, Va. (Legal Newsline) - A federal appeals court has declined to review its rejection of a claim made by prescription drug retailers who said West Virginia Attorney General Darrell McGraw is acting like a class action lawyer.

In a 2-1 vote in May, a panel of judges on the U.S. Court of Appeals for the Fourth Circuit ruled McGraw did not file a class action against the companies and that his lawsuit, which alleges they did not pass savings on generic drugs to consumers, should be heard in a state court. Thursday, the court declined a request to have the full roster of Fourth Circuit judges hear the matter.

The request made by the group of pharmacies - which includes Wal-Mart, Target, CVS, Walgreen, Kroger and Kmart - was supported by the Washington Legal Foundation and the Allied Educational Foundation. The two submitted an amicus brief.

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 May 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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