After Merck & Co.’s devastating loss in Texas several weeks ago in the first Vioxx case to go to a jury, the nation’s eyes now turn to Atlantic City, where New Jersey’s first case is set for trial on Sept. 12.
There are about 5,000 personal injury suits filed nationwide, about half in New Jersey, over the Merck painkiller that has been linked to increased risk of heart attack or stroke, but lurking behind those thousands of cases is a single one that could pose the greatest danger to America’s third-largest drug company.
On July 29, in the midst of the trial in Texas, New Jersey Superior Court Judge Carol Higbee certified a national class action covering every private third-party payer that allowed members of its health benefits plan to buy Vioxx.
With 20 million Vioxx users in the United States alone since 1999, Merck’s exposure could be well into the billions if it loses the case, International Union of Operating Engineers Local 68 Welfare Fund v. Merck & Co. Inc.
The majority of Vioxx purchases were through plans run by insurance companies and health maintenance organizations.
Unlike the thousands of individual personal injury claimants, Local 68 lawyers don’t have to prove that anyone suffered injury. The suit was filed under New Jersey’s plaintiff-friendly Consumer Fraud Act, under which all that need be proved is that the third-party payers were influenced by unconscionable Merck business practices — primarily deceptive marketing and promotion of Vioxx, either affirmatively or by omitting data such as the possibility of heart attacks.
The Consumer Fraud Act does not require proof that the buyer relied on the allegedly false advertising or that there is a specific causal link between a purchase and the marketing: only that there was a “causal nexus between the concealment of the material and the loss.”
If the engineers’ union wins, all third-party payers nationwide can recoup payments to the company, and under the CFA they are entitled to collect treble damages as well as attorney fees.
Assuming 10 million users each bought $1,000 worth of Vioxx through their benefits plan (Merck charged $72 for a 30-day supply), a plaintiffs’ verdict would come to $10 billion plus fees and expenses.
Lead Local 68 lawyer Christopher Seeger, of Seeger Weiss in New York and Newark, and co-counsel John Keefe Jr., of Keefe Law Firm in Red Bank, N.J., note that some carriers, HMOs, unions or plan administrators could opt out of the class, though none has so far. The class excludes government entities and the Medicaid and Medicare programs.
Merck lawyers Diane Sullivan of Dechert in Princeton and Jeffrey Judd of O’Melveny & Myers in San Francisco filed a motion for leave to appeal Higbee’s class certification, or interlocutory appeal, with the Appellate Division on Aug. 18.
The defense counsel argue in their brief that Higbee erred in deciding that under New Jersey’s choice-of-law rules such a national class dealing with the CFA should apply to out-of-state transactions. The Merck lawyers further argue that the CFA requires individualized proof of causation by each class member.
The certification of the third-party class was the second big blow dealt to the company by Higbee, the judge the New Jersey Supreme Court designated in 2003 to handle all the state’s Vioxx litigation.
In July 2004, she denied Merck’s motion to dismiss the Consumer Fraud Act claim for lack of standing. Merck lawyers argued that HMOs and insurance companies can’t be considered consumers under the CFA and are therefore not entitled to the law’s protections. Only individuals may sue, Merck contended.
But Higbee ruled that Merck’s attempt to limit the consumer under the act to “the one who actually takes the medication or uses the product is too simplistic.” The focus, she said, should be on the “misrepresentation causing a ‘person’ to pay for something they otherwise would not have been willing to pay for because of the higher cost.”
The company has already lost an interlocutory appeal on its move to dismiss based on standing. The appeal on the merits remains.
Merck would have been able to remove the case to federal court under the Class Action Fairness Act of 2005, but the case was filed before the law was passed.
The class certification has put Merck in a scrambling mode. Higbee herself said in her ruling that “there is no controlling Supreme Court or Appellate Division level decision as to whether [the Consumer Fraud Act] can be applied to a class action involving out of state plaintiffs and a New Jersey defendant.”
She rejected defense arguments that such a multistate class action would be unmanageable because the claims are predominantly individual and the state’s choice-of-law rules require that the consumer fraud law of the home sate of each putative class member apply.
The judge analyzed the consumer fraud laws of every state, and, after acknowledging that New Jersey probably has the strongest one, concluded there is nothing in any state or federal law barring such a class certification here.
She found that Local 68 meets all the requirements of the class action rules – it is representative of the class; its claims are typical of other third-party payers nationwide; it’s impractical to try so many plaintiffs separately; there are common issues of law and fact; and the plaintiffs attorneys are competent to represent the class.
As a result, Higbee concluded that the case belongs in New Jersey under state law. “There does not appear to be any state with stronger ties to this litigation than New Jersey,” she wrote, citing all the research and development, policy decisions, marketing operations, manufacturing and even press releases generated by Merck in the state.