MedicineLakex

 

Zyprexa_amicus final

09-0222-cv
United States Court of Appeals
Second Circuit
UFCW LOCAL 1776 and participating employers health and welfare fund, ERIC TAYAG and MID-WEST NATIONAL LIFE INSURANCE COMPANY OF TENNESSEE, on behalf of themselves and others similarly situated, SERGEANTS BENEVOLENT ASSOCIATION HEALTH AND WELFARE FUND, on behalf of themselves and others similarly situated, ELI LILLY AND COMPANY, TEXAS DEPARTMENT OF STATE HEALTH SERVICES, Defendant. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK BRIEF FOR PUBLIC JUSTICE AND AMERICAN ASSOCIATION
FOR JUSTICE AS AMICI CURIAE IN SUPPORT OF
PLAINTIFFS-APPELLEES AND SUPPORTING AFFIRMANCE
Jeffrey R. White CENTER FOR CONSTITUTIONAL 1825 K Street, N.W., Suite 200 LITIGATION, P.C. Washington, DC 20006 777 6th Street N.W., Suite 520 Washington, DC 20001-3723 Counsel for Amicus Curiae Public Counsel for Amicus Curiae American Association of Justice Elizabeth J. Cabraser LIEFF, CABRASER, HEIMANN & BERNSTEIN, LLP 275 Battery Street, 30th Floor San Francisco, CA 94111-3339 Additional Counsel for Amici Curiae Date: June 30, 2009 CORPORATE DISCLOSURE STATEMENTS
Pursuant to Rule 26.1 of the Federal Rule of Appellate Procedure, Amici Curiae Public Justice and American Association for Justice hereby state that they do not have any parent corporation, nor do they issue stock to the public, and that no publicly held company owns any of the stock of either entity. TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENTS. i TABLE OF AUTHORITIES. iii INTERESTS OF AMICI CURIAE. 1 INTRODUCTION AND SUMMARY OF ARGUMENT. 3 THIS COURT SHOULD AFFIRM THE DISTRICT COURT'S CLASS CERTIFICATION AND SUMMARY JUDGMENT ORDERS . 8 A. The Daunting Cost Of Proving Lilly's RICO Violations Eliminates Individual Suits As A Just, Practical, Or Cost-Effective Alternative To This Class Action. 8 A Jury May Decide the Factual Issues of Liability and Damages Presented in this Case Upon Common Proof Illuminated by Expert Testimony. 22 Common Proof Methodology Best Reflects The Market Reality Of Defendant's Conduct And Practices . 27 CERTIFICATE OF SERVICE . 37 CERTIFICATE OF COMPLIANCE. 39 ANTI-VIRUS CERTIFICATION . 40 TABLE OF AUTHORITIES
Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) .10, 14, 16 Basic Inc. v. Levinson, 485 U.S. 224 (1988) .28, 29, 30, 33 Berkey Photo, Inc. v. Eastman Kodak, 603 F.2d 263 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 100 S. Ct. 1061, 62 L. Ed 2d 783 (1980) . 26 Boyle v. United States, _ U.S. _, 2009 U.S. LEXIS 4159 . 27, 28 Bridge v. Phoenix Bond & Indemnity Co., _ U.S. _, 128 S. Ct. 2131, 170 L.Ed. 1012 (2008) .5, 27, 28, 29 Carnegie v. Household Int'l, Inc., 376 F.3d 656 (7th Cir. 2004) . 12 City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425 (2d Cir. 2008) . 28 Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326 (1980) . 16 Desiano v. Warner-Lamber Co., 326 F.3d 339 (2d Cir. Discover Bank v. Superior Court, 36 Cal. 4th 148 (Cal. 2003) . 19, 20 Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) . 29 Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) . 16 Gentry v. Superior Court, 42 Cal. 4th 443 (Cal. 2007) . 19 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) . 29 Hunter v. McKenzie, 197 Cal. 176 (Cal. 1925) . 33, 34 In re American Express Merchants' Litigation, 554 F.3d 300 (2d Cir. 2009) . passim TABLE OF AUTHORITIES
(continued)
In re Initial Public Offering Securities Litigation ("In re 471 F.3d 24 (2d Cir. 2006) . 16, 17 In re Tobacco Cases II 4 Cal. 4th 298 (Cal. 2009) . 33 Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir. 2004) . 14, 20 McGuire v. Russell Miller, Inc., 1 F. 3d 1306 (2d Cir. 1993) . 25, 26 McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008) . 5 Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) . 29 United States v. Domenico, 985 F.2d 1159 (2d Cir. 1993) . 26 United States v. Torniero, 235 F.2d 725 (2d Cir. 1984), cert. denied, 469 U.S. Vasquez v. Superior Court, 4 Cal. 3d 800 (Cal. 1971) .19, 20, 34 Williams v. Mohawk Indus., 465 F.3d 1277 (11th Cir. 2006) . 28 Zyprexa Products Liability Litigation, 253 F.R.D. 67 (E.D.N.Y. 2008). passim Federal Rules of Civil Procedure Rule 1.8, 20, 21 Federal Rules of Civil Procedure Federal Rules of Civil Procedure Rule 23(b)(3).7, 10, 13, 20 Federal Rules of Civil Procedure TABLE OF AUTHORITIES
(continued)
OTHER AUTHORITIES
Maria Glover, Beyond Unconscionability: Class Action Waivers and Mandatory Arbitration Agreements, 59 Vand. L. Rev. 1735 (2006) . 11 Stephan Landsman, The Civil Jury In America: Scenes From an Unappreciated History, 44 Hastings L.J. 579 (1993) . 27 Stuart M. Speiser & James E. Rooks, Jr., RECOVERY FOR WRONGFUL DEATH (4th ed. 2005) . 22, 24 Joseph Story, COMMENTARIES ON THE CONSTITUTION OF THE UNITED STATES (1833) . 27 Williston on Contracts (3d ed. 1970) . 34 INTERESTS OF AMICI CURIAE
Public Justice (formerly Trial Lawyers for Public Justice) is a national public interest law firm dedicated to fighting for justice through precedent-setting and socially significant individual and class actions designed to protect and advance consumer and victims' rights, environmental safety, civil rights and liberties, workers' rights, and the protection of the poor and powerless. It has served as counsel in dozens of class actions affecting such matters. Public Justice is committed to ensuring that all Americans have meaningful access to justice in their dealings with large corporations. Our experience has confirmed that class actions, properly utilized in cases like this one, are a powerful and necessary tool for vindicating victims' rights while protecting our free market system. Public Justice is involved in counteracting efforts by corporate defendants to insulate themselves from meaningful liability by eliminating the class action in cases of uniform misrepresentation and misleading conduct. Public Justice has previously appeared before this Court as amicus curiae in In re American Express Merchants' Litigation, 554 F.3d 300 (2d Cir. 2009), in which our brief rebutted defendants' incorrect premise that a statutory provision for attorneys' fees created adequate incentive for individual suits—an argument repeated in this case by the Product Liability Advisory Council, Inc. as amicus curiae in support of defendant. The American Association for Justice ("AAJ"), formerly the Association of Trial Lawyers of America, is a voluntary national bar association whose members represent personal injury plaintiffs, workers and union members, civil rights claimants, and small businesses. AAJ has advocated on behalf of access to the courts for all who seek legal recourse for wrongful injury and on behalf of the right to trial by jury. AAJ firmly believes that by holding wrongdoers accountable, including major pharmaceutical makers, the civil justice system fulfills its purposes of both compensating those who have been harmed and deterring conduct that endangers others. AAJ is concerned that the arguments raised by defendant and its amici in this case are designed to subvert those purposes and avoid that INTRODUCTION AND SUMMARY OF ARGUMENT
Defendant Lilly and its amici challenge the courts' authority and ability to adjudicate the claims of third-party payors (sometimes referred to as "health benefit providers" or "HBPs") that Lilly violated the federal RICO statute in pricing and marketing its antipsychotic prescription drug Zyprexa. Plaintiffs allege that Lilly set a "premium" price for Zyprexa (pricing it significantly higher than similar drugs) at the product's launch, and thereafter maintained blockbuster sales at that excessive price, by misrepresenting that Zyprexa was more effective than its competitors, by concealing its knowledge of Zyprexa's harmful metabolic side effects (marked weight gain and increased diabetes risk) and by withholding and misrepresenting such information in its intensive marketing of the drug to doctors. As plaintiffs' witnesses explained, because the population that uses antipsychotic drugs is a vulnerable one, HBPs did not interfere with the medical decisions of physicians to prescribe Zyprexa: what the doctors prescribed, the HBPs paid for. Their resulting RICO claim is a common one, arising from Lilly's allegedly fraudulent pricing decisions and marketing campaign: the HBPs incurred economic loss by reason of Lilly's fraud upon prescribers. Third party payors did not make individualized drug purchasing decisions, and they propose to establish both Lilly's civil RICO liability, and their own resulting damages, through common proof. The undersigned amici respectfully submit that the structuring of this particular case as a class action, and the conduct of a unitary civil RICO trial for the limited HBP class defined by the district court, has been vigorously tested in the evidentiary crucible below. The district court's amply informed decision that class treatment and common proof most faithfully reflect the nature and scope of Lilly's Zyprexa pricing decisions and marketing campaign should be affirmed as a legally correct and appropriate exercise of judicial The extraordinary nature of pharmaceutical manufacturers' system of pricing and marketing their prescription drugs, as acknowledged in the testimony of Lilly's own decisionmakers and expert witnesses, is neither individualized nor improvised. Rather, it is highly-scripted, centrally designed and controlled, and carefully calibrated to create an initial impression of value and efficacy; to withhold, disguise, and conceal unfavorable information; and to continuously convey a uniform, positive, pervasive and persuasive message of superior efficacy and "value."1 The prescription drug market is highly efficient in some respects, and rigidly non-elastic in others, and it need not and does not borrow concepts such as "fraud on the market" from other substantive areas, such as securities jurisprudence, in order to lend itself to common proof. Plaintiffs' proposed common proof methodology comes from established law and reflects such venerable concepts as the reasonable person and the inferential proof of causation-in-fact (as these developed independently of, and predated, securities litigation). Plaintiffs' methodology is faithful to the recognition, confirmed recently by an unanimous Supreme Court in Bridge v. Phoenix Bond & Indemnity Co., _ U.S. _, 128 S. Ct. 2131, 170 L.Ed. 1012 (2008), that RICO contains no first person reliance element. In light of Bridge, which essentially moots the arguments based on McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008), 1 The "unique distribution and financial aspects" of the "unusual" pharmaceutical market, with its manufacturer-controlled inelastic pricing, is described and explained by Lilly's own consultants and experts, as reflected in the class certification decision, In re Zyprexa Products Liability Litigation, 253 F.R.D. 67, 179-185 (E.D.N.Y. 2008) (testimony of Dr. E.M. Kolassa and others) . the persons injured by the fraud (here, the HBPs) need not be the persons (here, the prescribing physicians) to whom Lilly directed its allegedly fraudulent Zyprexa marketing scheme. On the record below, the RICO claim could more justly, speedily, and inexpensively be tried as a class action, than if consigned to the unnecessary, unwieldy, un-ending, and cost- prohibitive prospects of individualized litigation. The jury could determine, aided by pre-eminent experts and information from the "data rich pharmaceutical field," whether Lilly violated RICO, whether HBPs were economically damaged by reason of this violation, and, if so, by what quantum.2 Indeed, convening so many authoritative experts in one comprehensive trial, to provide an unmatched understanding and analysis of the world of pharmaceutical marketing from the perspectives of those who make, and those who pay for, a drug so many Americans take, would best serve due process for all stakeholders. Such a trial would be far superior, in terms of quality and integrity of process, as well as cost-effectiveness and efficiency, to the defendant's preference for scattered, piecemeal trials, presumably brought by those few HBPs rich or reckless enough to invest the necessary millions in individual prosecution. The evidence adduced in connection with the summary judgment and class certification proceedings below paints a detailed and insightful portrait of a market that was not created coincidentally, one prescription at a time, but was implemented from the top down, as Lilly first set its premium price, then maximized demand for Zyprexa by accentuating an invented claim of superior efficacy, and disguising the inconvenient truth of metabolic weight gain and diabetes. Under such circumstances, insistence upon individualized proof of reliance as to each prescription decision is unnecessary, and requiring such proof would not satisfy a legal entitlement, or constitute a superior alternative under Rule 23(b)(3). It simply would constitute surrender to defendant's preferred tactic of litigation by attrition, a default option disavowed by the Federal Rules, and one the district court, informed by the extensive evidence before it, has properly exercised its discretion to reject. A class action trial of the RICO claim would have the superior efficacy and value to the 2 253 F.R.D. at 189, 190. Both sides characterize the industry as "data rich," and the district court, reviewing the pricing, marketing and sales litigants and the system, that the plaintiffs claim Zyprexa lacked, without the prohibitive price-per-plaintiff of the individual trials urged THIS COURT SHOULD AFFIRM THE DISTRICT
COURT'S CLASS CERTIFICATION AND SUMMARY
JUDGMENT ORDERS
The Daunting Cost Of Proving Lilly's RICO
Violations Eliminates Individual Suits As A Just,
Practical, Or Cost-Effective Alternative To This Class
Action
Access to justice is a cornerstone of our democracy, and our courts are charged to administer the civil justice process to "secure the just, speedy, and inexpensive determination of every action and proceeding." Fed. R. Civ. P. 1. Yet, it is the inescapable reality of litigation that every procedure has a price tag. Procedural choices that increase cost and delay favor the wealthier and more sophisticated litigant regardless of the merit of its position. At the extreme, when the preferences (e.g., for unnecessarily individualized or protracted litigation) of one side, masquerading as due process, impose costs that operate as a bar to entry or continuation by the other, the Federal Rules are subverted, and due process is a casualty. The eventual data in their submissions, agreed. outcomes of the scattered cases that overcome such barriers are likely to bear as slight a relationship to the merits, with as little utility in advancing confidence in the law, as the rituals of trial by battle or ordeal our system ostensibly replaced. Here, given the abundance of data on the modus operandi of the pharmaceutical industry, the prospect of determining liability and damages is realistic, but the price tag is a large one.3 The Zyprexa record reflects the deployment of 82 experts, 19 Daubert motions, evidentiary hearings on summary judgment and class certification longer than many trials, and the massive expert economic and financial analyses reviewed in the class certification decision.4 Such costs are especially daunting to plaintiffs because, unlike their lawyers' fees, which are deferred and contingent, expert and other discovery costs must be incurred regardless of outcome, and paid up front. Spreading these costs among those similarly situated, however, 3 See, e.g., Zyprexa, 253 F.R.D. at 188-189, describing the data and evidence available to enable reasonably accurate estimates to be made of the HBP class' total out-of-pocket payments during the class period, for purposes of a class-wide damages determination. 4 See, e.g., damages model calculations and charts reproduced in Zyprexa, 254 F.R.D. at 157-166. renders even large expenses cost-effective and proportional to the amounts at stake. This result is accomplished by the class treatment of common issues. Where such common issues—here, Lilly's conduct, Zyprexa's characteristics and risks, Lilly's marketing campaign, and the sequence of nondisclosure, concealment, and ultimate revelation of Zyprexa's true efficacy and risks—predominate over questions unique to particular HBPs, Rule 23(b)(3) class treatment is both available, and superior, from the standpoint of balanced fairness to both sides.5 The record below, set forth in scrupulous detail by the district court, fully supports the superiority of certification in this case. Expert expenses for plaintiffs alone dwarf the damages of each of the representative plaintiffs and most members of the class. Lilly, too, has incurred similarly substantial expert expenses, which would also be multiplied and replicated for each HBP that undertook to 5 See, e.g., Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 624 (1997) ("Predominance is a test readily met in certain cases alleging consumer or securities fraud or violations of the antitrust laws.") Like securities and antitrust suits, this RICO case proceeds under a single federal statute, assuring common questions of law; and, as in consumer suits, the verity and materiality of the statements and omissions uniformly conveyed to the relevant market (here, prescribing physicians) are significant common questions of fact. prosecute its claims alone. The expenditure of millions of dollars to replicate the same experts' testimony regarding the uniform marketing of one drug, by one defendant, using a standardized approach to saturate the medical community with Zyprexa promotion, would constitute an unwarranted consumption of scarce healthcare and corporate dollars, and waste of professional and judicial resources.6 This Court's American Express decision acknowledges the economic reality that "many individual claims are only viable if brought on a class action basis," and that prohibiting class actions in lawsuits where the expected recovery is dwarfed by the cost of litigating the claim would effectively deprive many worthy litigants of access to justice. The result would be that "businesses are able to engage in unchecked market misbehavior . . " In re: American Express, 554 F.3d at 303, citing Maria Glover, Beyond Unconscionability: Class Action Waivers and Mandatory Arbitration Agreements, 59 Vand. L. Rev. 1735, 1746-47 (2006). 6 Lilly's marketing methods and promotional expenditures, such as the $291 million it spent on deploying 2,000 detailers on over 14 million scripted "doctor interactions" and $1.2 billion (retail value) in "free samples," are described in Zyprexa, 253 F.R.D. at 102-109. As with the antitrust claims pursued in American Express, the RICO claims here provide the incentive of treble damages and attorneys' fees, yet recovery on those claims is uncertain and, in any event, far in the future. Prosecution through trial and appeal will require additional substantial out-of-pocket costs that greatly exceed the losses of the average class member: an irrational, not to mention imprudent and financially impossible investment for most third party payors to make. See Carnegie v. Household Int'l, Inc., 376 F.3d 656, 661 (7th Cir. 2004); American Express, 554 F.3d at 313. Like the merchants in American Express, the HBPs' individual claims here range in the thousands of dollars,7 amounts whose loss is felt, and which these (largely not-for-profit) payors deserve to recover should they prove Lilly's RICO violations. While some of them (or their losses) may be larger than the merchants in American Express, "the third party payors are largely institutions with fiduciary obligations to 7 The estimated damages of the named plaintiffs/class representatives range from $10,000 for Mid-West Life Insurance to $264,000 for UFCW Local 1776. Estimated damages for 3 of the 4 representative plaintiffs are under $100,000. The cost of obtaining expert damages analysis to establish and quantify RICO issues far exceeds these amounts, and in disaggregated litigation, one cannot make up individual losses on volume. This otherwise insuperable financial barrier is the problem the class action was designed to solve. manage resources and reduce costs . ." Zyprexa, 253 F.R.D. 69, 406. They cannot squander their beneficiaries' premiums or contributions, and, especially in the current economic situation and health care crisis, the reasonable person would not expect nor desire them to do so. In the quest to foreclose class action treatment for claims of every size, defendant and its amici argue both that "large damages" connote an interest in "individually controlling the prosecution . . of separate actions" that precludes Rule 23(b)(3) superiority, and that "small damages" are not worth the investment of judicial resources. In this view, damages, it seems, of whatever size, are too large, too small, but never just right for class certification. In this case, thorough familiarity with the nature, scope, and cost of the evidence that would shape the ultimate trial led to the district court's finding Class actions are a superior method of dealing with third-party payor claims. Denial of certification would be a death knell for third-payor claims. In re Zyprexa, 253 F.R.D. at 199. Even were the record less decisive on this point, the Rule 23(b)(3) predominance/superiority requirement is not a mandate of impossibility. Rule 23 does not require a showing that all other alternatives to class action are impossible; it simply entails a comparative consideration of litigation alternatives and a determination that class treatment is the better choice. In expressly rejecting the argument that RICO claims offer sufficient inducements (in terms of treble damages and attorneys' fees) to render class treatment superfluous, and affirming certification of a doctors' RICO class, Klay v Humana, Inc., 382 F.3d 1241 (11th Cir. 2004), reminds us that "the text of Rule 23(b)(3) does not exclude from certification cases in which individual damages run high," a holding that "is especially true when the defendants are corporate behemoths with a demonstrated willingness and proclivity for drawing out legal proceedings for as long as humanly possible and burying their opponents in paperwork and filings." Klay, 382 F.3d at 1271, citing and quoting Amchem, 521 U.S. at 617. Defendant and its amici express concern that an aggregate calculation of damages, under any methodology, will inevitably overstate their extent. They posit, however, no alternative but disaggregation, which would leave each HBP entirely to its own devices, unnecessarily maximizing transaction costs while unfairly depressing damages. Klay rejected the argument that aggregating actual loss claims via class action somehow triggers unfair or disproportionate levels of damages. RICO allows for treble damages, but these are limited by economic loss. "RICO does not guarantee a fixed amount of damages regardless of the gravity of the defendants' behavior. Furthermore, since RICO violations must be intentional, there is no danger that the defendants will be subject to an unjustly harsh verdict for accidental behavior." 382 F.3d at 1272. Defendant's apparent willingness to tax its resources through the endless re-litigation of the same conduct during the same timeframe involving the same actions in promoting and marketing the same drug—despite the cost to its shareholders (and to the taxpayer- subsidized court system) cannot be justified on presumption of affluence on the part of third party payors. The record reflects that many of them are not-for-profits; all of them are fiduciaries; and their beneficiaries (or beneficiaries' employers) directly foot the bills. Moreover, as this Court has been at pains to emphasize, its recent decision in American Express "in no way rest[ed] upon the status of the plaintiffs as ‘small' merchants." 554 F.3d at 320. Thus, the demonstration of "the necessity of some class mechanism" is in no way dependent on the ‘size' of any or all of the merchant plaintiffs [or the absolute value of their claims]; it depends upon a showing that the size of the recovery received by any individual plaintiff will be too small to justify the expenditure of bringing an individual action." Id. [bracketed material supplied]. In American Express, plaintiffs made that demonstration by showing that their expert fees (which "would be at least several hundred thousand dollars, and might exceed $1 million," 554 F.3d at 317) made the cost to each individual plaintiff prohibitive relative to its potential recovery. Id. at 320. This Court observed that this is precisely the scenario where the class action is warranted. Id. at 312 citing Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 338 (1980); Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 161 (1974); Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997). Even more individually prohibitive expert costs are involved in this case. The district court's summary of the class certification process (designed to satisfy this Court's In re IPO requirements),8 and its numerous citations to and quotations from the depositions, reports, 8 "Following In re IPO, this Court considered a huge amount of evidence in this and related Zyprexa cases on the viability [of class trial] issues, held extensive evidentiary hearings, and had briefed and argued all RICO and Rule 23 issues at great length." Zyprexa, 253 F.R.D. at 193, citing In re Initial Public Offering Securities Litigation ("In re IPO"), 471 F.3d 24, 27 (2d Cir. 2006). and/or in-court testimony of scores of highly respected (and high- priced) experts for both sides, over the course of at least eight days of evidentiary hearings, speaks, both credibly and expensively, for itself. The district court not only considered, but chronicled, the daunting yet necessary evidentiary efforts involved in the preview of liability and damages that In re IPO requires to demonstrate the susceptibility of significant issues to predominantly common proof. In finding predominance on this record, the district court also established superiority: The court takes note of the enormous amount of human and financial resources required of plaintiffs' counsel to arrive at this state. To carry an individual burden of litigating individual actions, even for some of the largest funds, would be impractical. Individual litigation would constitute a waste of resources of the courts and parties. 253 F.R.D. a 199. Given this extensive record, individual HBP Civil RICO litigation would be wasteful of private and public resources. In these hard times, with our healthcare system in crisis, that alone is a powerful argument for affirmance. But reversal would have an even more corrosive impact on the role of private federal statutory actions in protecting the free market system -- the engine of our economic prosperity -- and on the fair dealing, honest business practices, and truthful and accurate information, in every industry, upon which that Private litigation has a crucial role to play in protecting the free market system, by complementing government regulation and preserving the ability of consumers to make fully informed choices about the products they will buy and use. In this particular case, enforcement and deterrence are especially vital because third-party payors, who by definition pay for the choices doctors make and the drugs consumers take, are not only dependent upon the honesty of pharmaceutical companies in dealing with the medical community, but are entrusted, as fiduciaries, with expending their beneficiaries' health care dollars prudently. The need for such deterrence to protect consumers, and the inadequacy of disaggregated litigation to provide it, has long been recognized. What was observed nearly 40 years ago, in establishing class actions in the mass-marketing consumer context, resonates with even greater urgency today: "If each is left to assert his rights alone if and when he can, there will at best be a random and fragmentary enforcement, if there is any at all. This result is not only unfortunate in the particular case, but it will operate generally to impair deterrent effect of the sanctions which underlie much contemporary law." Vasquez v. Superior Court, 4 Cal. 3d 800, 807 (Cal. 1971).9 Class actions to recover economic losses incurred by reason of fraudulent conduct produce "several salutary by-products, including the therapeutic effect upon those sellers who indulge in fraudulent practices, and to legitimate business enterprises by curtailing illegitimate competitors, and avoidance to the judicial process of the burden of multiple litigation involving identical claims." Vasquez, 4 Cal. 3d at 808; Discover Bank, 36 Cal. 4th at 156; Gentry, 42 Cal. Where, as here, the consequences of decertification include not only the added institutional and public burdens imposed by multiple repetitious litigation, but the inability of many of those defrauded to bring such suits at all, the class action is not simply the fairest, most practical, and most cost-effective mode of litigation; rather, it is, as 9 These Vasquez principles have been reaffirmed for the economic realities of 21st century consumer marketing and employment relations in, inter alia, Discover Bank v. Superior Court, 36 Cal. 4th 148, 156 (Cal. 2003) and Gentry v. Superior Court, 42 Cal. 4th 443, 453 (Cal. 2007). American Express recognized, the only means of deterrence.10 The long experience of appellate courts in upholding the pivotal role of class actions bears this out: "Individual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery could be insufficient to justify bringing a separate action; thus an unscrupulous seller retains the benefits of its wrongful conduct." Discover Bank, 36 Cal. 4th at 156, quoting, inter alia, Thus Rule 23(b)(3) itself requires neither the absolute impossibility of individual litigation, nor the absolute perfection of the class mechanism: it requires instead relative superiority, in comparison with "other available methods for fairly and effectively adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). See also Klay, 382 F.3d at 1273-1275. Rule 23 implements the animating promise and directive of Rule 1 that all of the Federal Rules (including those that govern discovery, pretrial proceedings, trials and settlements) "secure the just, speedy, and inexpensive determination of every action and proceeding." 10 Other appellate courts have concurred, in the specific context of Civil RICO. See Klay, 382 F.3d at 1270-1276. The tripartite concerns of Rule 1 (justice, speed, and economy), which combine to define due process, are present to the highest degree here, given, as Lilly's own experts attested, the near-absolute control of pharmaceutical companies in setting drug prices, and maintaining them. Drug prices are not fluid, but sticky. Neither doctors, consumers, nor HBPs can decide to pay less for Zyprexa, as investors can with under-performing stock. Indeed, Lilly could and did, not only maintain, but raise, Zyprexa's price as negative information accumulated and its "value" declined. See Zyprexa, 253 F.R.D. at 102. Id. at 180-181 (testimony of Lilly expert Dr. Kolassa). Both patients and payors are stuck, for long periods, with the unfortunate economic (and sometimes physical and emotional) consequences of prescribers' misinformed choices. Thus, discovery of heretofore concealed risks may decrease sales, but not decrease prices, and returning ill-gotten, excess profit on any scale sufficient to repair loss, and deter repeat performances, requires collective action in court to redress a scheme the "market" alone cannot correct. A Jury May Decide the Factual Issues of Liability and
Damages Presented in this Case Upon Common Proof
Illuminated by Expert Testimony
Juries, aided by specialist experts, routinely calculate damages utilizing multiple variables whose values can be estimated but not known. A common example is the award of damages for the value of a decedent's lost earning capacity in a wrongful death suit, in which the jury factors the age the decedent would likely have attained, potential career advancement and projected earnings over that span, and other variables estimable from available data on others, but literally unknowable as to decedent. Upon proof of wrongdoing, the tortfeasor bears the risk of uncertainty as to the quantum of damages, subject to the safeguard of appellate review.11 The jury is entrusted to perform this multi-variable calculus not because it is more knowledgeable on these matters than the experts who assist it or the judge who instructs it, but because our system recognizes that neither the "experts" nor the judge are its superiors in this regard, and wisely divides the functions of parties, witnesses, 11 See generally, Stuart M. Speiser & James E. Rooks, Jr., RECOVERY FOR WRONGFUL DEATH (4th ed. 2005). judge, and jury to mirror – and protect – our basic system of separation of powers, and checks and balances. Here, there are fewer, less complex, and less uncertain variables than in the wrongful death case.12 Lilly both decided the "value" and preset the price of Zyprexa utilizing pharmaceutical pricing principles thoroughly explained by Lilly's own experts. The jury will know, to a degree perhaps unattained in other types of litigation, every factor that goes into such decisions. The pricing principles of the pharmaceutical industry, as thoroughly explicated by Lilly's Dr. Kolassa and others, may be "unusual," in that, as listed on the record (253 F.R.D. at 179- 182) they focus on the "price of competitive products," "the reimbursement environment" ("how a product is likely to be reimbursed by payors"), and "public relations and public policy concerns over pricing" but little on the costs of research, materials, and manufacture. Nonetheless, Lilly has explained it, and the parties have provided data on it, well within the ability of a jury to comprehend, and evaluate. Perhaps the district court's skill and 12 In a RICO claim, math ends the matter. In wrongful death, juries are also called upon to place monetary value on "nonmathematically calculable" damages, such as "mental anguish" or "loss of love and experience in organizing and summarizing the evidence has assisted in this regard, but the Zyprexa liability and damages issues seem far less arcane than many of the intellectual property and antitrust suits that federal juries determine. Because Lilly both ascribed and affirmatively promoted Zyprexa as possessing a specific degree of "value" (both absolutely and in comparison to competitor drugs) and set and maintained its price, any deficit in efficacy or increase in risk of harm revealed in the course of the class period creates a gap between price paid and value. That gap is one measure of the damage, and its existence is subject to common proof using objective evidence that requires no inquiry into the subjective individual thought processes of doctors, patients, or HBPs. An even more direct measure is available here: comparing Zyprexa with actual, competing products as to which its superior "value" is discredited, utilizing the price differential to calculate Quantifying that damage, as in the wrongful death case, requires evaluation of that evidence, and estimation of the level of affection," and are not bound by any fixed or precise rules in so doing. Speiser & Rooks, supra, at 11:11. damage, if any, that exists by reason of Lilly's wrongdoing. In short, and unremarkably, it involves the exercise of judgment, utilizing the inputs of the evidence interpreted by the experts, and informed by the judge's instruction on the law. Because the proof is common, one jury suffices as to fairness, and is superior, to many, from the institutional and public standpoints of consistency, economy, and efficiency. We would not ask different juries to reprise the proof of liability or damages in a wrongful death case because it involves, as multiple plaintiffs, decedents' different heirs, on the ground that more is better; we would call that waste. This Court has consistently rejected the recurring suggestion that the issues raised in a particular civil dispute, whether it involves patients, business, or insurance, or issues of science, technology, or medicine, are beyond the ken of jurors. In McGuire v. Russell Miller, Inc., 1 F. 3d 1306 (2d Cir. 1993), it stated, "we do not hold that the amount of attorneys' fees is too complex for jurors to decide; rather, we hold that the better practice is for the jury to determine the amount. This Circuit first discussed whether some actions were too complex to be tried to a jury in Berkey Photo, Inc. v. Eastman Kodak, 603 F.2d 263, 279 n.20 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 100 S. Ct. 1061, 62 L. Ed 2d 783 (1980),13 and since has refused to uphold the so-called "‘complexity exception' to the Seventh Amendment." 1 F.3d at 1316. "The framers of the Bill of Rights expected that jurors would be capable of resolving disputed issues of fact in the federal courts. Even in civil litigation, where difficult issues and abstruse evidence proliferate, we have never acknowledged a ‘complexity exception' to the right to a jury trial." Id., citing United States v. Domenico, 985 F.2d 1159, 1120 (2d Cir. 1993); United States v. Torniero, 235 F.2d 725, 734 (2d Cir. 1984), cert. denied, 469 U.S. 1110 (1985). A jury (the repository of the community conscience) is thus, as the district court observed (having reviewed the evidence itself), well able to evaluate Lilly's conduct and estimate any resulting loss. In re Zyprexa, 253 F.R.D. at 76; 81-82; 156-160; 165-166; 189-192; 195. But it can do so most fairly, most comprehensively, and most efficiently, only if all those harmed in the same manner by the same 13 Berkey noted, in "large and complex cases" involving "novel legal issues," the "better practice" of utilizing special verdicts or jury interrogatories pursuant to Fed. R. Civ. P. 49: "in that way the right to a jury trial of all factual issues is preserved." 603 F.2d at 279. There appears no impediment to doing so here; indeed, the plaintiffs' trial plan incorporated such aids. allegedly violative conduct are before the Court and bound by the In a very real sense the jury right defines our nation. We might not have a Constitution today, without its inclusion in the Bill of Rights.14 The jury right belongs to both sides, and due process is denied if one side's claimed right to separate trials is allowed to block the other's right to any meaningful trial. There is no right to submit the same question of fact to multiple juries, and the significant facts here—those involving Lilly's decisions and conduct, and their impact on Zyprexa's price and value—are identical for the HBP class. That class is entitled to a jury trial upon them. Common Proof Methodology Best Reflects The
Market Reality Of Defendant's Conduct And
Practices
As the Supreme Court has repeatedly made clear, most recently in Boyle v. United States, _ U.S. _, 2009 U.S. LEXIS 4159,15 14 As noted, inter alia, in Stephan Landsman, The Civil Jury In America: Scenes From an Unappreciated History, 44 Hastings L.J. 579, 596 (1993); Joseph Story, COMMENTARIES ON THE CONSTITUTION OF THE UNITED STATES at 653 (1833), inclusion of a civil jury trial right was critical in securing ratification of the Constitution. 15 In rejecting petitioner's argument that a RICO "enterprise" "must have structural features additional to those that can be fairly inferred from RICO's language", the Court reiterated its statement in Bridge: attempts to engraft new elements, restrictions, or exclusive modalities of proof upon RICO to countermand its statutory charter of broad construction, are doomed. Defendant's and its amici's plea to import securities-specific causation concepts such as "loss causation" and "transaction causation" into the RICO claim at issue must thus be rebuffed as antithetical to its remedial purposes. 16 Plaintiffs- Appellees' brief, at pp. 28-20 recites the correct cause-in- fact/proximate cause legal framework for RICO causation, and the cases that embody it. Bridge, 128 S. Ct. at 2141-45; City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425, 442 (2d Cir. 2008); Lerner v. Fleet Bank, N.A., 318 F.3d 113, 123 (2d Cir. 2003); Desiano v. Warner-Lambert Co., 326 F.3d 339 (2d Cir. 2003); Williams v. Mohawk Indus., 465 F.3d 1277, 1280 (11th Cir. 2006); and of course the RICO "classics," Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497 "We have repeatedly refused to adopt narrowing constructions of RICO in order to make it conform to a preconceived notion of what Congress intended to proscribe." Boyle v. United States, 2009 U.S. LEXIS 4156. **4,23 (collecting Supreme Court decisions rejecting limitations, restrictions, or qualifications on the "breadth" of the RICO statute). (1985) and Holmes v. Securities Investor Protection Corp., 503 U.S. Consistency in the securities causation import business is not the pharmaceutical entities' strong suit. On one hand, they urge adoption of "transaction causation" from Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 342 (2005), a non sequitur after Bridge, and inapposite to the scenario of this case, where those damaged as a result of the scheme were non-participants in the transactions that comprised it.17 At the same time, they set up and attack the straw man of Basic Inc. v. Levinson, 485 U.S. 224 (1988) and its efficient securities market-premised presumption of reliance, notwithstanding the fact that the plaintiffs do not rely on that presumption to prove causation, and the district court observed it did not apply in this case. Zyprexa, 253 F.R.D. at 194. Just as the punishment should fit the crime, the proof should fit the scheme, and both transaction causation and loss causation are poor 17 As the district court observed, with respect to Bridge v. Phoenix Bond & Indemnity Co., _ U.S. _, 128 S. Ct. 2131, 2145 (2008), plaintiffs' own reliance on defendant's misrepresentations is neither an element nor a proximate causation requirement of a civil RICO claim "The instant case is a perfect example of that proposition. The fits: they do not mirror the structural or factual reality of the way pharmaceuticals are marketed in general, or the evidence that demonstrated how Zyprexa was marketed in particular. As the district court observed, the pharmaceutical market is hardly efficient, in the Basic sense, from the standpoint of doctors, patients, or HBPs. Zyprexa, 253 F.R.D. at 194. Unlike investors, they cannot alter prescription prices or easily dump the drugs they prescribe or ingest based on their poor performance or on newly revealed adverse information. HBPs pay for drugs they do not possess or use, and cannot sell. From the manufacturer standpoint, the market is very efficient: Lilly set a premium price; controlled most information reaching the FDA, prescribers, HBPs, and the public about Zyprexa through every available channel, including drug studies and continuing medical education; and delivered a blitz of one-on-one, in-person sales messages to physicians nationwide through a cadre of over 2,000 detailers: a ratio of one detailer to every 4.5 doctors.18 In this market, fraud was directed to prescribing doctors. The overpayments were made by third-party . . payors. 253 F.R.D. at 191. 18 See Zyprexa, 253 F.R.D. at 105-109, 157, 165. prices were not efficiently and instantaneously adjusted in response to new information: instead, Lilly controlled most information, and the As Lilly's drug pricing advisor Dr. Kolassa testified, Lilly followed its usual course of holding, and raising, Zyprexa prices, even as studies revealed its deficiencies and dangers; as Zyprexa slipped from best to worst drug for the target market, the price held. Zyprexa, 253 F.R.D. at 180-181. So the sales decline that, in an efficient market, would have occurred early in Zyprexa's marketing cycle (and which would have prevented most of the HBPs' damages) did not commence until late 2003; and when sales did decline, the unit price for Zyprexa held—and Lilly even raised it. Id. at 190. If the price was inflated, the jury can determine by how much. If some percentage of Zyprexa prescriptions would have been written in the face of all revealed material information, sales data at every point along the cycle of concealment to disclosure will enable the jury to reasonably estimate the amount. The insistence on individual proof of causation and loss from a transaction-by-transaction analysis (a methodology neither legally required nor realistically possible) ignores the fact that only "successful" transactions from Lilly's standpoint—Zyprexa prescriptions—caused loss to the HBPs who paid for prescriptions. Doctors not persuaded to prescribe Zyprexa did not "rely" on information communicated or controlled by Lilly, but they likewise did not cause payments by HBPs. The insistence on transaction-by-transaction proof also presumes facts already refuted by indisputable evidence: these transactions were not highly individualized—they were scrupulously scripted. Detailers were not medical professionals given to nuanced discussion; they were salespeople who were trained—and monitored—to stay on message. Zyprexa, 253 F.R.D. at 103, 107- 108, 175. For example, detailers provided doctors with hypothetical, "abstract" "patient profiles" (such as 30-something "Donna," and geriatric "Martha"), 253 F.R.D. at 124-125, stereotypes for whom Lilly considered Zyprexa ideal. The idea was to condition doctors to fit real patients into these pre-conceived molds. Looking at what happened—the cause-and-effect of Lilly's promotional, marketing, detailing, and educational programs—is reality-based (cause-in-fact) common proof methodology. It is objective and reasonable, and it is reliable, without foundering on the subjective notion of "reliance." Pre-dating Basic efficient market theory, the common law recognized the universal principle that fraud may be proven through circumstantial evidence, and that causation could be demonstrated by action. The common law has also long recognized that it is more reliable to infer reliance upon misrepresentation or concealment by observing what people actually do, rather than theorizing about what they thought they would have done had things been different. Hunter v. McKenzie, 197 Cal. 176, 185 (Cal. 1925). The law has also long recognized the concepts of materiality as a fact question for the jury, and used the hypothetical reasonable person (not the individual, subjective party) as the standard for measuring materiality, in order to avoid exclusive dependence on inherently unreliable, subjective testimony. Material misrepresentations are those to which a reasonable person would attach importance in determining choice of action in the transaction in question. See, e.g., discussion and collection of authorities in In re Tobacco Cases II, 4 Cal. 4th 298, 326 (Cal. 2009). Courts instruct jurors to consider what a reasonable person would or should have done, and to compare what the parties actually did, in jury These long-established methods of common proof are entirely compatible with RICO causation. As the Vasquez court observed, The rule in this state and elsewhere is that it is not necessary to show reliance upon false representations by direct evidence. "The fact of reliance upon alleged false representations may be inferred from the circumstances attending the transaction which oftentimes afford much stronger and more satisfactory evidence of the inducement which prompted the party defrauded to enter into the contract than his direct testimony to the same effect. 4 Cal. 3d at 814, citing Hunter, supra, and 12 Williston on Contracts 480 (3d ed. 1970). Lilly's misrepresentations and omissions regarding Zyprexa were material if a reasonable person would have attached importance to them, and if "a reasonable man would have relied upon the alleged misrepresentation, an inference of justifiable reliance by each class member would arise." Vasquez, 4 Cal. 3d at 814. Thus, if the alleged misrepresentations are found by the factfinder to be material, an inference of reliance as to each class member may be found without individualized direct testimony. Id. In this case, the falsity and materiality of standardized misrepresentations and omissions, made to thousands of doctors through standardized communications, is at issue. The jury can, as juries long have, be properly instructed as to materiality and the reasonable person standards, and can consider, weigh, and calculate the parties' experts' analyses and data on sales levels preceding and subsequent to the disclosure of accurate information on Zyprexa. In short, a class jury is ably equipped to determine how the extent to which the prescription prices paid by the PCBs constitute loss by reason of Lilly's RICO violation. III. CONCLUSION
For the foregoing reasons, this Court should affirm the district court's denial of summary judgment and the district court's class certification determination. Respectfully submitted, Dated: June 30, 2009 LIEFF, CABRASER, HEIMANN & BERNSTEIN, LLP By Elizabeth J. Cabraser 275 Battery Street, 30th Floor San Francisco, CA 94111-3339 (415) 956-1000 Attorneys for Amici Curiae Public Justice and American Association for Justice Claire Prestel PUBLIC JUSTICE 1825 K Street, N.W., Suite 200 Washington, DC 20006 (202) 797-8600 Counsel for Amicus Curiae Public Justice Jeffrey R. White Center for Constitutional Litigation, P.C. 777 6th Street N.W., Suite 520 Washington, DC 20001 (202) 944-2839 Counsel for Amicus American Association of Justice CERTIFICATE OF SERVICE
I, Jeffrey R. White attorney for Amicus Curiae American Association for Justice and a member of the bar of this Court, hereby certify that I have caused two copies of this Brief of Amici Curiae and a copy of the accompanying Motion for Leave to File on the parties through their counsel via FedEx addressed as indicated on the attached Service List, and I have caused an electronic version of the brief in PDF format to be sent to the email addresses shown on the _ Jeffrey R. White Attorney for Amicus Curiae American Association for Justice Dated: June 30, 2009 David Booth Alden, Esq. Stephen Murray, Jr. North Point, 901 Lakeside Douglas R. Plymale Cleveland, OH 44114 650 Poydras Street, Suite 1100 [email protected] New Orleans, LA 70130 Attorneys for Amicus Attorneys for Amici Pharmaceutical Research and Manufacturers of America Lauren G. Barnes Kristen J. Parker HAGENS BERMAN SOBOL 77 W. Wacker Drive Chicago, IL 60601 55 Cambridge Parkway, Suite [email protected] Cambridge, MA 02142 Attorneys for Amicus Curiae Manufacturers of Attorneys for Amici Samuel Issacharoff 40 Washington Square South Robert A. Long, Esq. New York, NY 10012 COVINGTON & BURLING 1201 Pennsylvania Avenue, Attorneys for Plaintiffs- Appellees Washington, DC 20044 Andrea Bierstein BIERSTEIN SHERIDAN Danielle H. Brim KING & SPALDING, LLP & HAYES, LLP 112 Madison Avenue, 7th Floor 1180 Peachtree Street, NE New York, NY 10016 Atlanta, GA 30309 Attorneys for Plaintiffs- Appellees CERTIFICATE OF COMPLIANCE
This amicus brief complies with the type-volume limitation in Federal Rule of Appellate Procedure 29(d). It contains 6,967 words as counted by the word-processing system used to prepare the brief, including footnotes and exclusive of the parts of the brief exempted from the type-volume limitation by Federal Rule of Appellate Procedure 32(a)(7)(B)(iii). This brief also complies with the typeface requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule of Appellate Procedure 32(a)(6) because it was prepared in a proportionally-spaced typeface using Microsoft Word in 14-point Times New Roman typeface. _ Jeffrey R. White Attorney for Amici Curiae Public Justice and American Association for Justice Dated: June 30, 2009 ANTI-VIRUS CERTIFICATION
Case Name: In re Zyprexa Products Liability Litigation (UFCW Local 1776 & Participating Employers Health & Welfare Fund, Mid-West Nat'l Life Ins. Co. of Tenn., Local 28 Sheetmetal Workers, and Sergeants Benevolent Ass'n Health & Welfare Fund, on behalf of themselves and others similarly situated, Plaintiffs-Appellees Eli Lilly & Co., Defendant-Appellant) Docket Number: 09-0222-cv I, Jeffrey R. White, hereby certify that the Brief for Public Justice and American Association for Justice as Amici Curiae in Support of Plaintiffs-Appellees was submitted in PDF form as an e- mail attachment to [email protected] in the above- referenced case was scanned using McAfee VirusScan Enterprise Workstation (with virus definition version 8.5.0.781 last updated on June 22, 2009) and found to be VIRUS FREE. _ Jeffrey R. White Attorney for Amicus Curiae American Association for Justice Dated: June 30, 2009

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