Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. N.J.: Class action suit against pharmaceutical companies dismissed for lack of standing, (Jun 25, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss a putative consumer class action suit, which alleged that certain pharmaceutical companies had violated various state consumer fraud laws, was dismissed by the federal district court in Trenton, New Jersey for lack of standing (Cottrell v. Alcon Laboratories, Inc., June 24, 2015, Wolfson, F.).

Background. Certain brand name and generic pharmaceutical companies performed selling, marketing, and distribution activities for various prescription eye drop products. The eye drop products were sold in plastic bottles and in given volumes of medications for a certain price. The plaintiffs, who were purchasers of the eye drop products, contended that, as a result of the bottle design, a greater volume of eye drop was dispensed than was required. This, according to the plaintiffs, resulted in a wasting of the eye product and the potential for eye damage through over-medication.

The plaintiffs brought claims individually, and on behalf of classes of consumers and third-party payors who paid all or part of the purchase prices of the eye drop products. The companies moved separately to dismiss all of the claims on the basis of standing, preemption, and failure to state a claim.

Standing. Three elements must be established in order for a plaintiff to have standing: (1) the plaintiff must have suffered an injury-in-fact; (2) there must be a causal connection between the injury and the conduct complained of; and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). Of these three required elements, “the injury-in-fact” element is often determinative.” Toll Bros., Inc. v. Twp. of Readington, 555 F.3d 131 (2009).

The court noted that, although the plaintiffs alleged that physical harm could result from an excessive dose of the eye product, none of them alleged they personally suffered any side effects. The court, therefore, determined that they could not premise standing on a theory of physical injury.

The companies argued that the plaintiffs did not show a concrete injury-in-fact, based on a theory of economic harm, because they received the benefit of their bargain; that is, they were able to use the eye drops that they purchased. Relying on a FTC statement, entitled “Policy Statement on Unfairness”, which states that a practice is “unfair if it likely to cause substantial injury to consumers which is not reasonable avoidable by the consumers themselves and is not outweighed by countervailing benefits to consumers or competition”, the plaintiffs countered that standing was established. According to the plaintiffs, the companies’ bottle design for its eye products caused substantial consumer injury because it compelled the purchase of unwanted amounts of eye drops.

The court, however, did not find the plaintiffs’ theory of economic damages sufficient to confer standing. Instead, it determined that each plaintiff must allege that he or she personally suffered some economic damage as a result of using the companies’ eye products. It noted that there are typically two theories of economic harm associated with consumer fraud actions: (1) benefit-of-the-bargain; and (2) out-of-pocket expenses. The court found that the plaintiffs were not denied their benefit-of-the-bargain because there were no allegations that companies induced them to purchase the eye drops by misrepresenting or concealing information; nor were the allegations that eye drops were ineffective for their prescribed purpose.

The court noted that the plaintiffs did claim that they were precluded from using the wasted eye drops because of the companies’ bottle design. However, they did not allege that they were promised a specific number of drops or doses and that they failed to receive those amounts. The court also noted that the plaintiffs did not allege any of the costs associated with the eye products and, while they claimed the wasted drops had some economic value, they failed to quantify that value. The court concluded that the plaintiffs’ injury-related allegations amounted to nothing more than conjecture since they did not allege any comparable cheaper products that they would have purchased or that the companies would manufacture, or have manufactured, less expensive products based on a different design.

Because the court determined that the parties’ lack of standing deprived it of subject matter jurisdiction, the court found that it was without authority to address the parties’ remaining merit-based arguments. It, therefore, granted the companies’ motions to dismiss.

The case is No. 14-5859 (FLW).

Attorneys: Jeffrey W. Herrmann (Cohn, Lifland, Pearlman, Herrmann & Knopf, LLC) for Leonard Cottrell. Roger B. Kaplan (Greenberg Traurig, LLP) for Alcon Laboratories, Inc. Robert J. McGuirl (Law Offices of Robert J. McGuirl, LLC) for Allergan, Inc. Liza M. Walsh (Connell Foley LLP) for Pfizer Inc. Charles B. Casper (Montgomery, McCracken, Walker & Rhoads) for Merck & Company, Inc. Kyle G. Everly (Segal McCambridge Singer & Mahoney Ltd.) for Akorn, Inc.

Companies: Alcon Laboratories, Inc.; Allergan, Inc.; Pfizer Inc.; Merck & Company, Inc.; Akorn, Inc.

Cases: StateUnfairTradePractices NewJerseyNews