In a recent post in his Drug and Device Law blog, James Beck alerted readers to pay close attention to the U.S. Supreme Court’s decision to grant cert in Halliburton v. Erica P. John Fund. As the Litigation Daily reported, Halliburton has asked the court to eliminate the fraud-on-the-market presumption that gives securities fraud plaintiffs a shortcut to showing classwide reliance. If the court wipes away the presumption, it would be a major blow to securities class actions.
Beck, who is counsel at Reed Smith, pointed out in his blog that the Halliburton case could help defendants in litigation beyond the securities arena, including drug and device cases. In particular, it could help counter a recent ruling by the U.S. Court of Appeals for the First Circuit in which the court allowed aggregate proof of reliance for the purpose of deciding class certification. The case, Harden v. Pfizer, was brought by employers, unions and other third-party payors who argued that Pfizer’s marketing caused doctors to write Neurontin prescriptions for off-label uses by their members.
We talked to Beck (who is no relation to this reporter) about why product liability lawyers should be watching Halliburton. Our conversation was edited for clarity and length.
Litigation Daily: Explain how the Supreme Court’s review of the Halliburton case could affect drug and medical device cases.
James Beck: I see claims alleging aggregate reliance made regularly in drug and device cases, although few succeed. Plaintiffs often raise fraud and consumer fraud claims in the prescription drug arena. Every one of those claims has a reliance element to it. It requires proof that something the defendant did or said caused the plaintiff to do something that injured the plaintiff. Reliance is a very individualized issue that precludes such cases proceeding as class actions.
I see the court’s review of Halliburton as something of a win-win proposition on the defense side. If [Basic v. Levinson] is overturned, the ruling will have a lot of good language on why presumptions about mass reliance are invalid, and these could be applied beyond the securities arena. If Basic is affirmed, it will be limited to securities cases. The upside of the reversal of Basic is greater than the downside.
LD: You’ve criticized the First Circuit’s ruling this year in Harden v. Pfizer for allowing aggregate proof of reliance. Explain what happened there.
JB: The First Circuit allowed a single plaintiff’s causation expert to testify on the basis of statistical probability that a percentage of off-label Neurontin prescriptions were written as a result of something that Pfizer said. That’s almost unprecedented. It is a very rare case where a court accepts aggregate proof of reliance. Dozens of cases have come out the other way on this point. A cert petition is pending in the Neurontin case. [Reed Smith represents Pfizer, but not in this matter.]
LD: What’s the policy argument that reliance should be proved individually in drug and device cases?
JB: It goes back to fundamental tort law. Causation is an essential element of every tort claim. It’s an essential element for a reason: You don’t ordinarily hold a defendant liable to a plaintiff unless it caused the plaintiff’s injury. Otherwise it’s called a tax.
LD: Where are class actions more appropriate?
JB: Where the theory of liability has nothing to do with the provision of information. Civil rights cases, for example. Or where plaintiffs are seeking an injunction, like for cases involving prison conditions. But where you’re talking about individualized damages, where liability turns on what one person told another, in my view that’s not a proper class action.
