Consumer Class Claims on Health Care Discount Ads Rejected

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Consumers could not pursue deceptive advertising claims against providers of a health care discount program as a class action because the claims were governed by the varying consumer protection laws of different states and factual variations abounded, included varying advertisements in different states, the U.S. Court of Appeals In Cincinnati has ruled.

In 2007, Universal Health Card and Coverdell & Company created a program designed to provide health care discounts to consumers. Membership in the program was touted as giving consumers access to a network of health care providers that had agreed to lower their prices for members.

Universal placed ads in newspapers around the country encouraging customers to visit its website or call its toll-free hotline to learn more about the program and to sign up for a membership. Coverdell was responsible for maintaining the network of health care providers and for reviewing Universal’s advertising materials.

Consumers discovered that health care providers listed in the discount network had never heard of the program, and complained that the newspaper advertisements, designed to look like news stories and dubbed “advertorials,” were deceptive. Two disenchanted consumers sued Universal and Coverdell seeking to represent a nationwide class of all people who had joined the program.

State Consumer Protection Laws

Ohio’s choice of law rules made it clear that the consumer protection laws of the state where each injury took place would govern these claims, the court determined. In view of this and the consumers’ appropriate concession that the consumer protection laws of the affected states varied in material ways, the court found that no common legal issues favored a class-action approach to resolving this dispute.

Varied Ads, Need for Particularized Proof

Advertisements for the program varied to account for the different requirements of each state’s consumer protection laws—a point the consumers acknowledges but could not overcome, according to the court.

In addition, a key part of the consumers’ claim was that the program was worthless because the listed healthcare providers near the consumers did not offer the promised discounts or because there were no listed providers near them in the first place. But to establish the point, the consumers would need to make particularized showings in different parts of the country, the court said.

Even if callers heard identical sales pitches, Internet visitors saw the same website, and purchasers received the same fulfillment kit, these similarities established only that there was some factual overlap, not a predominant factual overlap among the claims and surely not one sufficient to overcome the key defect that the claims had to be resolved under different legal standards.

The court affirmed a decision striking the class allegations and dismissing this lawsuit without prejudice against both Universal and Coverdell.

The November 10 opinion in Pilgrim v. Universal Health Card, LLC will be reported at CCH Advertising Law Guide ¶64,467.

Consumer Class Action Denied in McDonald's French Fries Case

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

Certification of a nationwide class was denied in a consumer protection lawsuit against McDonald's because individual issues predominated, according to the federal district court in Chicago.

The action alleged false advertising about ingredients in McDonald's potato products in violation of the unfair trade practices laws of 50 states and the District of Columbia.

Gluten, Wheat, and Dairy-Free

McDonald's French fries and hash browns are fried in an oil made of 99% vegetable oil and 1% natural beef flavor, which contains wheat and dairy products. A group of McDonald's customers alleged that McDonald's falsely advertised its potato products as gluten, wheat, and dairy-free on its website and in literature at restaurants. The customers argued that, but for McDonald's representations, they would not have purchased the potato products.

In order to obtain class certification, the customers needed to show that: (1) common issues of law and fact predominated, and (2) a class action was superior to other forms of adjudication.

Individual Reliance

The customers failed to show that common issues of law and fact predominated, according to the court. Class treatment was inappropriate because the class was over-inclusive and each class member would have to be interviewed to determine whether they actually relied on McDonald's representations, the court ruled.

When a separate evidentiary hearing is necessary for each member's claim, the benefits of class treatment are outweighed by the challenges presented to the court.

Conflicts Among State Laws

Material conflicts between various state consumer protection laws also weighed against class certification, according to the court. Numerous courts have pointed out the material conflicts among the 50 states' laws, and have denied class certification on that basis. In this case, the court concluded that individual issues of law predominated and class treatment was not appropriate.

The decision is In re: McDonald's French Fries Litigation, ND Ill., CCH State Unfair Trade Practices Law ¶31,813.

U.S. Supreme Court Orders Another Look at Drug Ad Case

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

In a suit asserting that advertising of the prescription drug Nexium violated the consumer protection statutes of the 50 states, the U.S. Supreme Court has vacated a lower court’s decision that the state law claims were federally preempted.

In August 2007, the U.S. Court of Appeals in Philadelphia held that the state law claims were preempted by the federal Food, Drug, and Cosmetic Act and regulations of the Food and Drug Administration (Pennsylvania Employees Benefit Trust Fund v. Zeneca, Inc., CCH Advertising Law Guide ¶62,622; CCH State Unfair Trade Practices Law ¶31,463).

According to a class action complaint, drug manufacturer Zeneca misleadingly advertised Nexium as superior to Prilosec (another Zeneca drug) for treating gastroesophageal reflux disease. The patent for Prilosec was due to expire in 2001.

The appellate court took the position that allowing generalized state consumer fraud laws to dictate the parameters of false and misleading advertising in the prescription drug context would pose an undue obstacle to both Congress's and the FDA's objectives in protecting the nation's prescription drug users.

The Supreme Court remanded the case to the appellate court for further consideration in light of the Court’s March 4, 2009 decision in Wyeth v. Levine, No. 06-1249. In Wyeth, the Court upheld a jury verdict of liability against a pharmaceutical manufacturer (Wyeth) in a case based on Vermont common law claims of negligence and strict liability for failure to warn of the dangers of injecting an anti-nausea drug directly into a patient’s vein.

Federal Preemption

In rejecting Wyeth’s contention of federal preemption, the Court observed that if Congress thought state law suits posed an obstacle to its objectives, it surely would have enacted an express preemption provision for prescription drugs at some point during the Food, Drug, and Cosmetic Act’s 70-year history. But despite the 1976 enactment of an express pre-emption provision for medical devices, Congress has not enacted such a provision for prescription drugs. Its silence on the issue, coupled with its certain awareness of the prevalence of state tort litigation, was viewed by the Court as powerful evidence that Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness.

What effect, if any, the Wyeth decision will have upon the preemption issue in the Nexium case must now be determined by the U.S. Court of Appeals in Philadelphia.

Further details on the Court’s March 9 summary decision vacating and remanding Pennsylvania Employees Benefit Trust Fund v. Zeneca, Inc., No. 07-822, will be reported in CCH Advertising Law Guide and CCH State Unfair Trade Practices Law. The March 9 order list appears here.