While there are some 5,000 personal injury suits currently filed against Merck alleging Vioxx-related damages, the greatest danger to the drug-maker could be a class action gearing up in New Jersey. While upwards of 20 million Americans were taking Vioxx, most sales of the drug were made through health plans. In late June a New Jersey Superior Court Judge certified a national class action covering every private third-party payer who provided Vioxx to their members.

Filed under New Jersey's Consumer Fraud Act, plaintiffs do not need to show helth harms, but rather only need to prove that they were influenced by "unconscionable business practices," in this case Merck's deceptive marketing of Vioxx. HMOs and other health providers in the class can, under the law, recoup payments made to Merck ans are also entitled to triple damages and attorney fees if they prove victorious. That could add up to billions.

Via Law.com:

Class Action Could Mean Billion-Dollar Exposure for Merck - Multistate class of third-party payers would be entitled under Consumer Fraud Act to treble damages and attorney fees

Tim O'Brien
New Jersey Law Journal
September 2, 2005

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 Lynch Keefe Bartels in Shrewsbury, 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 predominately individual and the state's choice-of-law rules require that the consumer fraud law of the home state 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. "Does New Jersey have any reason not to protect consumers (third-party payers) from other states from fraud committed by a New Jersey corporation? … No. … Do other states have any interest in denying their citizens the protection of New Jersey law if it offers them more protection than the law of plaintiff's state? … No."

Seeger, who is also co-lead liaison counsel to the 1,800 cases consolidated before U.S. District Judge Eldon Fallon in New Orleans, says, "I believe there are similar class action rulings for settling purposes, but I agree that this seems to be the first ruling regarding New Jersey's CFA anywhere for a litigation class."

Merck's more immediate battle in New Jersey is the first personal injury trial, Humeston v. Merck & Co., ATL-L-2272-03, set for jury selection in two weeks. Merck filed a motion to postpone the trial's start for 45 days, citing a "media blitz" after the first Vioxx trial. Higbee turned down that request Monday, also rejecting several other Merck motions related to the upcoming trial.

Following Humeston will be 2,311 cases, though the number continues to rise almost daily. The plaintiffs come from 33 states. Unlike cases filed in other states, the defense can't have them removed to federal court -- where the rules of evidence tend to favor defendants -- because Merck is a New Jersey company. Merck has vowed to vigorously fight the suits notwithstanding a hint by its general counsel last week that some may be settled on a case-by-case basis.

The company is expected to argue that Frederick Humeston of Boise, Idaho, who took Vioxx for two months before suffering a heart attack in 2001 at age 56, had other risk factors, including clogged arteries, a weight problem and a lack of exercise. Seeger, who represents Humeston and another 225 plaintiffs, denies that and says Humeston has long needed painkillers for a knee injury from a combat wound in Vietnam. Calling his client "a two-time Purple Heart decorated Marine," Seeger notes that "it's gonna be hard to keep his service out of the case because that's why he took Vioxx."

Both sides jointly selected Humeston in a process, conducted by Higbee, that initially whittled the selection to five plaintiffs. Dechert partner Sullivan is expected to try the case for the company, which has also brought in Williams & Connolly partner Stephen Raber and Christy Jones of the Jackson, Miss., firm of Butler, Snow, O'Mara, Stevens & Cannada.

Seeger and associate David Buchanan, who has taken the lead in much of the New Jersey litigation, know more about the Vioxx litigation nationwide than anyone, Higbee said in concluding that Seeger Weiss is qualified to represent the third-party payer class. The firm, having led the discovery process, is the depository of 7 million documents produced so far, according to the judge. Seeger had filed the class action and many related cases before Merck withdrew Vioxx 11 months ago.

But whatever the outcome of Humeston -- other cases are set to go shortly in California and Alabama as well as in federal court in Louisiana -- the Local 68 case is expected to go to trial next year. Plaintiffs' co-counsel Keefe calls it a simple case: "We say three things. Vioxx was no more efficacious than over-the-counter drugs; the plans were deceived into paying 800 percent more than those OTC drugs; and the company did not disclose the risk of cardio problems."

The original article appears here.

-- MDT

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