McGraw's drug-pricing case will go on during appeal

John O'Brien Aug. 17, 2011, 12:29pm


RICHMOND, Va. (Legal Newsline) - West Virginia Attorney General Darrell McGraw's drug-pricing case against six pharmacies will continue in state court following a federal appeals court's decision not to issue a stay on its recent decision.

The U.S. Court of Appeals for the Fourth Circuit on Tuesday denied the drug stores' motion to stay a ruling that said McGraw had not filed a class action lawsuit against them. The stores wanted a stay against the judgment while they appealed it to the U.S. Supreme Court.

Through private attorneys hired to represent his office, McGraw had fought the stay in a response filed Aug. 4.

"The State filed this action two years ago, and the pharmacies' unwarranted removal has caused enough delay," the attorneys wrote. "The brief 60-day timeframe that Congress allocated for the appeal of a remand of a putative class action has been stretched beyond recognition. There is no more reason for delay."

The case alleges six drug stores - Wal-Mart, CVS, Kmart, Kroger, Target and Walgreen -- did not pass savings on generic drugs to consumers. The drug stores have been arguing that McGraw's case is essentially a class action and should be heard in federal court.

However, a 2-1 vote by a panel of judges from the Fourth Circuit went McGraw's way. No other member of the Fourth Circuit expressed an interest to have the case heard before the entire court, and the drug stores have decided to appeal to the U.S. Supreme Court. A preliminary stay was issued while the Fourth Circuit decided if it would lengthen it.

In their motion to stay the Fourth Circuit's decision pending an appeal to the U.S. Supreme Court, the drug stores said that the decision has created a conflict with decisions by the Fifth and Ninth circuits.
The May judgment 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 and was the only member of the three-judge panel to vote for a stay. Even though the action was brought under state statutes, it doesn't take away the "essence" of the case, he wrote in his dissent.

"(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.

From Legal Newsline: Reach John O'Brien by e-mail at

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