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Brief calls for review in W.Va. AG's case against pharmacies

By John O'Brien | Jul 13, 2011


RICHMOND, Va. (Legal Newsline) - The Washington Legal Foundation claims West Virginia Darrell McGraw is acting like a class action lawyer and a decision saying otherwise should be reviewed.

WLF was joined by the Allied Educational Foundation in an amicus brief accepted last month by the U.S. Court of Appeals for the Fourth Circuit, which ruled in May that McGraw's lawsuit against a group of prescription drug retailers is not a class action and should be heard in state court.

The group of pharmacies - which includes Wal-Mart, Target, CVS, Walgreen, Kroger and Kmart - has petitioned for a review of the decision by entire roster of Fourth Circuit judges. May's decision was a 2-1 ruling.

WLF's brief says the decision put the Fourth Circuit in conflict with a decision from the Fifth Circuit in Louisiana Attorney General Buddy Caldwell's lawsuit against Allstate Insurance Co.

"The panel held that for a representative suit to constitute a 'class action' within the meaning of (the Class Action Fairness Act), 'the representative party must be part of the class and possess the same interest and suffer the same injury as the class members,'" the brief says.

"Thus, the panel held, because the West Virginia Attorney General does not possess claims typical of those held by consumers who allegedly were overcharged by CVS, this suit is not a 'class action' as defined by (federal law). The Fifth Circuit has concluded precisely the opposite."

Caldwell alleged Allstate was cheating its policyholders, and the Fifth Circuit ruled the policyholders were the real parties in interest in the case. That meant the lawsuit was removable to federal court under CAFA.

McGraw's case alleges the drug stores didn't pass savings on generic drugs on to consumers.

"En banc review is warranted to allow the Court to determine whether it really intended to create such a direct conflict with another federal circuit court," the brief says.

The brief adds that no defendant in the case is a citizen of West Virginia - "Protecting out-of-state defendants... from the discriminatory treatment it was feared they would suffer in state courts was one of the Framers' (of the Constitution) primary rationales for establishing a federal court system and creating a right of removal from state court."

WLF says its mission is to "maintain balance in the Courts and help our government strengthen America's free enterprise system."

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.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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