Antitrust Law Daily Wrap Up, RICO—NDMiss: Individualized Issues Concerning the Prescription of Heartworm Medication Doom Class Action , (Apr 3, 2013)

By Jody Coultas, J.D.

The federal district court in Greenville, Mississippi, has declined to certify a Racketeer Influenced and Corrupt Organizations Act (RICO) class action against heartworm drug manufacturer Merial, Limited based on the predominance of individual issues of injury, causation, and damages (Haley v. Merial, Limited, April 1, 2013, Davidson, G.).

Merial manufacturers HeartGard and HeartGard Plus heartworm prevention medication for dogs, and markets the medication as 100% effective against heartworms. The named plaintiffs alleged that their dogs contracted heartworms, despite using Merial’s products, and that Merial knew that its claims of effectiveness were false. Despite receiving warning letters from the FDA concerning the marketing and promotion of HeartGard and HeartGard Plus as 100% effective at heartworm prevention, Merial continued and even strengthened its deceptive advertising until finally discontinuing the advertising. However, Merial allegedly took no other action to correct the impression of 100% effectiveness. The purchasers alleged that Merial violated RICO by distributing its products through websites that post HeartGard advertisements and failed to abide by the FDA’s warnings.

The class met the certification requirements of Federal Rule of Civil Procedure 23(a). Rule 23(a) requires that the class is so numerous that joinder of all members is impracticable; there are questions of law or fact common to the class; the claims or defenses of the representative parties are typical of the claims or defenses of the class; and the representative parties will fairly and adequately protect the interests of the class. The class could be more than 4 million purchasers that had common claims against Merial. The class representatives’ claims were typical of the class and the class was adequately represented.

A class action may be maintained under Rule 23(b) if: the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole, or the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

The class failed to meet the requirement of Rule 23(b)(2) by failing to show that injunctive relief predominated over the monetary damages sought by the class, according to the court. Even if injunctive relief was available to the class, which the court noted was unlikely, the requested monetary relief was more than incidental to the requested injunctive or declaratory relief. Damages are incidental if they flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief. Incidental damages are those to which class members would be automatically entitled once liability to the class is established. Because computing the monetary relief available to class members would require complex individualized determinations, the actual damages were more than incidental. The court also noted that the requested injunctive relief would be difficult to enforce or define.

The necessity of individualized inquiries concerning injury, causation, and damages precluded certification of the class, according to the court. The claims were based on Merial’s alleged participation in an enterprise through a pattern of racketeering activity that constituted mail fraud and wire fraud against the American veterinarian community and dog owners when it advertised and promoted HeartGard and HeartGard Plus as 100% effective against heartworm prevention. The issues of whether Merial's alleged pattern of racketeering activity injured class members, whether Merial caused the injury, and what relief was appropriate could not be determined on a class-wide basis. Individualized inquiries would be necessary to prove injury of overpayment as the purchase price was likely to vary across time and geographic region. The court would also have to look at each case that the medication was prescribed and the circumstances of why the medication was chosen.

The case is No. 4:09-CV-00094-GHD-JMV.

Attorneys: C. W. Walker, III (Lake Tindall, LLP) for Neal Haley. Michael E. McWilliams (Butler, Snow, O'Mara, Stevens & Cannada) for Merial, Limited.

Companies: Merial, Limited

Cases: RICO Advertising MississippiNews