Merck Faces New Jersey Jury After Big Texas Loss

Meanwhile, lurking behind the thousands of Vioxx suits 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 New Jersey 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 do not 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 act they are entitled to collect treble damages as well as attorney fees. Assuming 10 million users each bought $1000 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.

Weiss, the lead lawyer for Local 68, and co-counsel John Keefe Jr., of Lynch Keefe Bartels in Shrewsbury, NJ, 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 Judge Higbee's class certification, or interlocutory appeal, with the New Jersey Appellate Division on Aug. 18. The defense counsel argue in their brief that Judge Higbee erred in deciding that under New Jersey's choice of law rules such a national class dealing with the state statute should apply to out-of-state transactions. The Merck lawyers further argue that the act requires individualized proof of causation by each class member.

One-Two Punch

The certification of the third-party class was the second big blow dealt to the company by Judge 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 cannot be considered consumers under the state statute and are therefore not entitled to its protections. Only individuals may sue, Merck contended. But Judge 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. Judge 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 is 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, Judge 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 1800 cases consolidated before U.S. District Judge Eldon Fallon in New Orleans, said, “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.”

First Trial-Ready Case

Merck's more immediate battle in New Jersey is the first personal injury trial, Humeston v. Merck & Co., ATL-L-2272-03. Merck had urged Judge Higbee to postpone the trial, which started mid-September, for 45 days, citing a “media blitz” after the first Vioxx trial. That ended Aug. 19 with an Angleton, TX, jury awarding $253.4 million to the widow of Bob Ernst, who died in 2001 after taking Vioxx for 8 months. The award is expected to be reduced to about $26 million due to Texas caps on damages. The judge denied the motion.

Following Humeston are 2311 cases, though the number continues to rise almost daily. The plaintiffs come from 33 states. Unlike cases filed in other states, the defense cannot 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 that some may be settled on a case-by-case basis. The plaintiff in the New Jersey case is Frederick Humeston of Boise, ID, a postal worker who took Vioxx for 2 months before suffering a heart attack in 2001 at age 56. The company argues that Humseston 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 that Humeston had long needed painkillers for a knee injury from a combat wound in Vietnam. Calling his client “a two-time Purple Heart-decorated Marine,” Seeger noted that “It's gonna [sic] be hard to keep his service out of the case because that's why he took Vioxx.” Seeger told The Wall Street Journal that Judge Higbee had refused to exclude evidence about Humeston's war record, Merck's promotional campaign and its attempts to sway or discredit doctors with concerns about the safety of Vioxx. An attorney for the company said such issues can be raised again during trial.

Why Humeston?

Both sides jointly selected Humeston in a process, conducted by Judge 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, MS, 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, knows more about the Vioxx litigation nationwide than anyone, Judge 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 Weiss 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 Mr. Keefe called 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.”

After Merck & Co.'s devastating loss in Texas earlier this month 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 was set for trial on Sept. 12.

There are about 5000 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. Last month, New Jersey Superior Court Judge Carol Higbee, who is overseeing nearly 2500 Vioxx product-liability cases, rejected a Merck request to postpone the trial. The plaintiff's attorney, Christopher Seeger of Seeger-Weiss in Manhattan and Newark, told The Wall Street Journal that he was “absolutely thrilled” by the judge's action. “I just can't wait to get in a courtroom with this company,” he said.

The Worst Danger

Meanwhile, lurking behind the thousands of Vioxx suits 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 New Jersey 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 do not 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 act they are entitled to collect treble damages as well as attorney fees. Assuming 10 million users each bought $1000 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.

Weiss, the lead lawyer for Local 68, and co-counsel John Keefe Jr., of Lynch Keefe Bartels in Shrewsbury, NJ, 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 Judge Higbee's class certification, or interlocutory appeal, with the New Jersey Appellate Division on Aug. 18. The defense counsel argue in their brief that Judge Higbee erred in deciding that under New Jersey's choice of law rules such a national class dealing with the state statute should apply to out-of-state transactions. The Merck lawyers further argue that the act requires individualized proof of causation by each class member.

One-Two Punch

The certification of the third-party class was the second big blow dealt to the company by Judge 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 cannot be considered consumers under the state statute and are therefore not entitled to its protections. Only individuals may sue, Merck contended. But Judge 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. Judge 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 is 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, Judge 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 1800 cases consolidated before U.S. District Judge Eldon Fallon in New Orleans, said, “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.”

First Trial-Ready Case

Merck's more immediate battle in New Jersey is the first personal injury trial, Humeston v. Merck & Co., ATL-L-2272-03. Merck had urged Judge Higbee to postpone the trial, which started mid-September, for 45 days, citing a “media blitz” after the first Vioxx trial. That ended Aug. 19 with an Angleton, TX, jury awarding $253.4 million to the widow of Bob Ernst, who died in 2001 after taking Vioxx for 8 months. The award is expected to be reduced to about $26 million due to Texas caps on damages. The judge denied the motion.

Following Humeston are 2311 cases, though the number continues to rise almost daily. The plaintiffs come from 33 states. Unlike cases filed in other states, the defense cannot 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 that some may be settled on a case-by-case basis. The plaintiff in the New Jersey case is Frederick Humeston of Boise, ID, a postal worker who took Vioxx for 2 months before suffering a heart attack in 2001 at age 56. The company argues that Humseston 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 that Humeston had long needed painkillers for a knee injury from a combat wound in Vietnam. Calling his client “a two-time Purple Heart-decorated Marine,” Seeger noted that “It's gonna [sic] be hard to keep his service out of the case because that's why he took Vioxx.” Seeger told The Wall Street Journal that Judge Higbee had refused to exclude evidence about Humeston's war record, Merck's promotional campaign and its attempts to sway or discredit doctors with concerns about the safety of Vioxx. An attorney for the company said such issues can be raised again during trial.

Why Humeston?

Both sides jointly selected Humeston in a process, conducted by Judge 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, MS, 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, knows more about the Vioxx litigation nationwide than anyone, Judge 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 Weiss 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 Mr. Keefe called 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.”