307 F.R.D. 150
E.D. Pa.2015Background
- Plaintiffs (Indiana Carpenters Welfare Fund and Pennsylvania Turnpike Commission) are third‑party payors (TPPs) who seek class certification to recover unjust enrichment for payments reimbursing off‑label prescriptions of Actiq (fentanyl lozenge) from 2002–2006. Cephalon manufactured and marketed Actiq, which the FDA approved in 1998 under Subpart H only for breakthrough cancer pain in opioid‑tolerant cancer patients.
- Cephalon allegedly repositioned Actiq after acquiring U.S. marketing rights, promoted its use for non‑cancer breakthrough pain, ran medical education and speaker programs, distributed samples and reimbursement assistance, and substantially increased sales (from ~$15M in 2000 to ~$550M in 2006).
- Internal Cephalon audit found noncompliance with the Actiq RiskMAP monitoring/intervention requirements. Cephalon later pled guilty (2008) to off‑label promotion of multiple drugs, including Actiq, for a limited period in 2001.
- TPPs reimbursed many off‑label Actiq prescriptions; TPPs varied in formulary controls and utilization management (some used prior authorization/step therapy; others had open formularies). Plaintiffs seek classwide disgorgement of Cephalon profits (~$698.9M) on an unjust enrichment theory.
- Court undertook conflict‑of‑laws analysis, concluded that the unjust enrichment law of each putative class member’s home state governs, and denied class certification because Rule 23(b)(3)’s predominance and superiority requirements were not met.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for unjust enrichment | Apply a uniform law (Plaintiffs argued minor differences) | Multistate variations exist and govern; forum rule requires state‑law choice‑of‑law analysis | Court: true conflict exists; apply each TPP’s home state unjust enrichment law |
| Predominance (Rule 23(b)(3)) | Common proof (Cephalon marketing, RiskMAP noncompliance, guilty plea, expert damages model) makes unjust enrichment amenable to class treatment and grouping of states | Plaintiffs’ claim requires individualized inquiries into prescribing decisions, TPP coverage choices, statutes of limitations, and varying state elements/defenses | Court: individual issues predominate; common evidence does not suffice to prove unjust enrichment for all TPPs; predominance fails |
| Workability of grouping (multistate class) | States can be grouped by similar unjust enrichment formulations (Plaintiffs proposed groupings) | Grouping cannot overcome material state differences and fact‑specific inquiries about equitable circumstances | Court: grouping not a workable solution here; cannot overcome legal and factual variation |
| Superiority (Rule 23(b)(3)) | Class action is the efficient method to adjudicate widespread TPP injuries | TPPs are sophisticated, some have sued individually; multistate law application and individualized issues render a class unmanageable | Court: class action not superior; manageability and fairness weigh against certification |
Key Cases Cited
- In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir. 2008) (district court must perform rigorous analysis of Rule 23 prerequisites and may resolve factual disputes by a preponderance of the evidence)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal courts sitting in diversity must apply forum state choice‑of‑law rules)
- Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147 (1982) (Rule 23(a) prerequisites and typicality/commonality principles)
- Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012) (elements of unjust enrichment vary materially among states, complicating multistate classes)
- In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998) (courts may group similar state laws in multistate class actions but plaintiffs bear burden to show workability)
- Grandalski v. Quest Diagnostics Inc., 767 F.3d 175 (3d Cir. 2014) (grouping may be permissible but plaintiffs must demonstrate a workable method; individual issues can defeat predominance)
- Marcus v. BMW of N. Am., LLC, 687 F.3d 583 (3d Cir. 2012) (court must consider individualized facts relevant to predominance; defendant conduct alone is not dispositive)