Corcoran et al v. CVS Health Corporation

Northern District of California, cand-4:2015-cv-03504

RESPONSE re [445] Response (Non Motion), CVS Reply Brief in support of CVS's Proposal for Adjudication of Individualized Issues by CVS Pharmacy, Inc.

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1 Enu Mainigi (admitted pro hac vice) Grant A. Geyerman (admitted pro hac vice) 2 WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. 3 Washington, DC 20005 4 Telephone: (202) 434-5000 Facsimile: (202) 434-5029 5 Edward W. Swanson (Cal. Bar No. 159859) 6 August Gugelmann (Cal. Bar No. 240544) 7 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 8 San Francisco, CA 94104 Telephone: (415) 477-3800 9 Facsimile: (415) 477-9010 10 Attorneys for Defendant CVS Pharmacy, Inc. 11 12 IN THE UNITED STATES DISTRICT COURT 13 FOR THE NORTHERN DISTRICT OF CALIFORNIA 14 OAKLAND DIVISION 15 16 Christopher Corcoran, et al., Case No. 15-cv-03504-YGR 17 Plaintiffs, CLASS ACTION 18 v. Reply Brief in Support of CVS's Proposal 19 for Adjudication of Individualized Issues CVS Pharmacy, Inc., 20 Date: May 13, 2020 21 Defendant. Time: 9:30 a.m. 22 Courtroom: 1 Judge: Hon. Yvonne Gonzalez Rogers 23 24 Plaintiffs offer no responsive proposal for adjudicating the individualized issues in this case. 25 Instead, they conflate the question of whether to certify a class with the separate question of how 26 individualized issues should be adjudicated. 27 28 CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 1 1 Class certification does not extinguish individual issues. When a court certifies a class under 2 Rule 23(b)(3), it is concluding, among other things, that issues common to the class "predominate" 3 over issues pertaining to the individual class members. The court is not thereby concluding that 4 individual issues do not exist or that all issues can be decided on a class-wide basis without individual 5 proof. See, e.g., United Food & Commercial Workers & Emp'rs Midwest Health Benefits Fund v. 6 Warner Chilcott Ltd. (In re Asacol Antitrust Litig.), 907 F.3d 42, 52 (1st Cir. 2018) ("[W]e have 7 recognized that a class may be certified notwithstanding the need to adjudicate individual issues so 8 long as the proposed adjudication will be both 'administratively feasible' and 'protective of 9 defendants' Seventh Amendment and due process rights.'"). Plaintiffs' opposition brief appears to 10 misunderstand this fundamental premise of class actions and, consequently, Plaintiffs would deprive 11 CVS of its constitutional rights to litigate each issue as to each claimant who is suing CVS. 12 The First Circuit in Asacol made this clear. In holding that class-wide issues did not 13 predominate over individual issues, the Court emphasized that, if a class were certified, the defendant 14 still would have the right to litigate, class member-by-class member, those issues that are not capable 15 of class-wide resolution. That is because Rule 23 is a procedural mechanism for resolving issues 16 class-wide that are capable of global resolution; it does not impair a defendant's rights under the 17 Seventh Amendment and Due Process Clause to litigate, through a jury trial if necessary, each issue of 18 liability and damages that may determine the defendant's liability to each claimant. See id. at 53 19 ("The fact that plaintiffs seek class certification provides no occasion for jettisoning the rules of 20 evidence and procedure, the Seventh Amendment, or the dictate of the Rules Enabling Act.").1 21 Ultimately, where individualized issues remain, Plaintiffs must still come forward with a trial plan that 22 is "administratively feasible" and that provides CVS the "opportunity to press at trial genuine 23 challenges" to the prima facie elements of each class member's claims. Id. at 52, 58; see also, e.g., 24 Dakota Granite Co. v. BNSF Ry. (In re Rail Freight Fuel Surcharge Antitrust Litig.), 934 F.3d 619, 25 1 26 See also In re Asacol, 907 F.3d at 56 (referring to "the core principle that class actions are the aggregation of individual claims, and do not create a class entity or re-apportion substantive claims"); 27 id. at 53 ("A 'class cannot be certified on the premise that [the defendant] will not be entitled to litigate its statutory defenses to individual claims.'" (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 28 338, 367 (2011))). CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 2 1 627 (D.C. Cir. 2019) ("Given the need in this case for at least 2,037 individual determinations of 2 injury and causation, the district court did not abuse its discretion in denying class certification on the 3 ground that common issues do not predominate."). 4 CVS did not, and does not, understand the Court's prior class certification rulings to hold that 5 there are no individualized issues whatsoever in this litigation. Rather, consistent with the text of Fed. 6 R. Civ. P. 23(b)(3), the Court held that individualized issues do not predominate over common issues. 7 See, e.g., Corcoran v. CVS Health, 2017 WL 3873709, at *8 (N.D. Cal. Sept. 5, 2017) ("That some of 8 these [damages] calculations will involve individualized and fact-specific determinations is 9 insufficient to defeat class certification."); see id. at *6–7 (implying that reliance may depend upon 10 knowledge of "the relationship between the pharmacy's U&C and what the pharmacy charges them, 11 which may be at times less than or more than the HSP program prices"); Corcoran v. CVS Health, 12 2017 WL 1065135, at *7 n.15 (N.D. Cal. Mar. 21, 2017) ("[T]he Court notes that evidence of the 13 PBMs and plaintiffs' knowledge of the HSP program and its relation to U&C prices may have bearing 14 on the presumption of reliance, to the extent such exists in the states at issue."). CVS filed its bench 15 brief to ensure that the adjudication of the individualized issues in this case will occur in a manner that 16 protects CVS's constitutional rights. See In re Asacol, 907 F.3d at 52 (noting adjudication of 17 individualized issues must be "protective of defendants' Seventh Amendment and due process 18 rights"). If, however, CVS misunderstands the prior rulings in this regard (i.e., the Court did intend its 19 prior class certification decisions to mean that there are no individualized issues in this case), then the 20 Court should decertify the class as to the individual issues CVS has identified. Contrary to Plaintiffs' 21 suggestion, it would be entirely proper for the Court to revisit a class certification decision in that 22 manner. Fed. R. Civ. P. 23(c)(1)(C) ("An order that grants or denies class certification may be altered 23 or amended before final judgment."); see also Gen. Tel. Co. v. Falcon, 457 U.S. 147, 160 (1982) 24 ("Even after a certification order is entered, the judge remains free to modify it in the light of 25 subsequent developments in the litigation."); Racies v. Quincy Biosci., LLC, 2020 WL 2113852, at *5 26 (N.D. Cal. May 4, 2020) (decertifying UCL and CLRA class because "proof of reliance cannot be 27 shown on a common basis, and common questions of fact do not predominate"); see also, e.g., Marlo 28 v. UPS, 639 F.3d 942, 948–49 (9th Cir. 2011) (affirming de-certification where "Plaintiff has not CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 3 1 provided common proof to support a class-wide judgment as to liability. . . and the result is that 2 individualized issues predominate over common ones" (alteration and quotation marks omitted)); 3 Thomas v. Baca, 2012 WL 994090, at *3 (C.D. Cal. Mar. 22, 2012) (decertifying class where "[e]ven 4 if class membership were ascertainable, the existence of highly individualized questions of proof as to 5 damages would render a class action unmanageable"). 6 Plaintiffs' arguments concerning individualized issues are without merit. CVS identified six 7 issues that must be decided on an individual basis. Plaintiffs' arguments that these issues can be 8 decided class-wide are unpersuasive. 9 First, the statutes in Florida and Massachusetts proscribe "unfair" conduct, but require 10 plaintiff-by-plaintiff adjudication when the plaintiffs' circumstances are relevant to proving the prima 11 facie elements of a claim. See, e.g., Porsche Cars N. Am., Inc. v. Diamond, 140 So. 3d 1090, 1098 12 (Fla. 3d DCA 2014) ("When the individual knowledge and experience of the consumer is an important 13 element of the cause of action and its defense, there can be no class-wide proof that injury was not 14 reasonably avoidable [and thus no class-wide proof of 'unfairness']."); Hanrahran v. Specialized Loan 15 Servicing, LLC, 54 F. Supp. 3d 149, 154 (D. Mass. 2014) ("Both the defendant's and the plaintiff's 16 conduct, knowledge, and what they should have reasonably known may be factors in determining 17 whether an act or practice is unfair [under Chapter 93A]."). Plaintiffs do not even mention the cases 18 CVS cites. They instead cite only to distinguishable cases that did not address the question here. 19 The very first case Plaintiffs cite considered "deceptive," as opposed to "unfair," conduct under 20 the FDUTPA. See Latman v. Costa Cruise Lines, N.V., 758 So. 2d 699, 703 (Fla. 3rd DCA 2000) 21 (applying the "reasonable consumer" test by which Florida courts measure whether conduct was 22 "deceptive"). Similarly, the court in De Giovanni v. Jani-King International, Inc., denied with 23 prejudice class certification of Massachusetts Chapter 93A claims premised upon misrepresentations 24 specifically because those claims would require "delving into the decisionmaking of each individual 25 franchisee" and "resorting to individualized reliance inquiries." See 262 F.R.D. 71, 79–80 (D. Mass. 26 2009) (emphasis added). Plaintiffs cite the portion of De Giovanni describing a separate Chapter 93A 27 claim, which challenged as "inherently unfair" certain allegedly unconscionable provisions in the 28 defendant's "standard, adhesion contract" that every single class member signed. See also id. at 80– CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 4 1 84. That obviously is not this case and, in any event, the De Giovanni court denied class certification 2 of those claims on typicality grounds. See id. at 86–87 (explaining the named plaintiffs were not 3 "injured"—i.e., charged the inherently unfair excessive fees provided for in the contract). The 4 remaining cases are no more helpful to Plaintiffs.2 At bottom, "unfairness" under both the Florida and 5 Massachusetts statutes depends on the individual plaintiff's circumstances. 6 Second, Plaintiffs misconstrue CVS's "knowledge" defense. CVS will have a strong defense 7 against the claim of any individual class member who understood, for example, that the HSP program 8 was an alternative to insurance to purchase their prescription or that the HSP price was less than their 9 copayment. The class member's knowledge would negate prima facie elements of the class member's 10 claims, including reliance, materiality, causation, and injury, and it would support CVS's statute of 11 limitations defense in jurisdictions where the class member's reasonable diligence can determine when 12 the claim accrues. Such arguments based on class members' knowledge are entirely consistent with 13 the Court's prior holdings, which, for example, (1) acknowledged that class member knowledge is 14 relevant to the underlying consumer protection claims but (2) held that these individual issues did not 15 defeat predominance because the "small percentage of putative class members [who] were also HSP 16 members" did not show that "putative class members were aware of the fraudulent acts alleged here," 17 Corcoran, 2017 WL 3873709, at *7. While the Court held this was not a reason to deny class 18 certification, the Court did not hold CVS cannot present evidence of these facts and argue they negate 19 prima facie elements of individual class members' claims. 20 Finally, Plaintiffs treat CVS's arguments about out-of-pocket maximums and reimbursement 21 arrangements as though they concern only the amount of a class member's damages, but in fact these 22 arguments also address whether each class member can show any "injury-in-fact" or "harm," which is 23 2 W.S. Badcock Corp. v. Myers, 696 So. 2d 776, 778–79 (Fla. 1st DCA 1996) (not addressing question 24 whether "unfair" practice class may be certified, and appearing to consider the conduct as "deceptive" in light of the Court's simultaneous consideration of Truth in Lending Act claims which are assessed 25 "on an objective standard"); Execu-Tech Bus. Sys. v. New Oji Paper Co., 752 So. 2d 582, 586 (Fla. 26 2000) (addressing only personal jurisdiction question, not class certification or unfairness); In re Pharm. Indus. Average Wholesale Price Litig., 491 F. Supp. 2d 20, 94–96 (D. Mass. 2007) (finding 27 that all class members, even those who knew of allegedly unfair conduct, "were locked into the nationwide reimbursement scheme established by statute or contract," thus precluding need to look at 28 individual circumstances of class members in context of Chapter 93A claims). CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 5 1 a separate and required element of their claims. Plaintiffs rely on the "collateral source" rule, a state 2 law doctrine arising primarily in personal injury cases. Whatever the viability of the collateral source 3 rule may be in the six states at issue here (Plaintiffs' brief does not say), it would not overcome CVS's 4 defense against a class member who suffered no injury from an alleged overcharge. See, e.g., Howell 5 v. Hamilton Meats & Provisions, Inc., 257 P.3d 1130, 1143–44 (Cal. 2011) (limiting collateral source 6 rule). 7 Howell is instructive. There, the plaintiff was injured in a car accident and sued the other 8 driver's employer, seeking compensatory damages for past medical expenses. Plaintiff sought to 9 recover as damages the entire amount originally billed by the treating healthcare providers to her 10 insurer, as opposed to the providers' adjusted billed amount once their negotiated rates with the insurer 11 for the at-issue services were taken into account. The plaintiff claimed entitlement to the higher, 12 original billed amount as an alleged "benefit" of her insurance. See id. at 1143. She claimed it 13 violated the collateral source rule to deny her the original amount as her damages. The California 14 Supreme Court found the collateral source rule did not apply to permit recovery of the original billed 15 amount as opposed to the lower negotiated rate: "Having never incurred the full bill, plaintiff could 16 not recover it in damages for economic loss. For this reason alone, the collateral source rule would be 17 inapplicable." Id. "Certainly, the collateral source rule should not extend so far as to permit recovery 18 for sums neither the plaintiff nor any collateral source will ever be obligated to pay." Id. at 1143. 19 Applying Howell's rationale to, for example, a consumer whose insurance plan imposed an 20 annual out-of-pocket maximum on copayments supports CVS's argument. The consumer whose 21 insurance plan included an out-of-pocket maximum was not injured merely because his copayment 22 early in the year was higher than it (allegedly) should have been. Over the year, assuming he reached 23 his out-of-pocket maximum and continued making purchases, he will have paid the same amount for 24 prescriptions in the aggregate—the maximum, capped amount—just as he would have had the earlier 25 copayment been lower.3 In that way, like in Howell, the consumer's insurance benefits are structured 26 3 27 Plaintiffs' footnote 4 refers to healthcare reform. That the Affordable Care Act made certain practices mandatory as of January 1, 2014, does not mean that the practice never occurred prior to 28 January 1, 2014. Thus, Plaintiffs' claim that the out-of-pocket maximum defense "does not even CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 6 1 in such a way that the consumer sustained no economic injury by paying a copayment in one isolated 2 transaction that exceeded the HSP price. 3 Concerning whether a third party like the class member's employer reimbursed the copayment 4 amount, although the Court found this argument insufficient to make individualized issues 5 predominate over common issues "at this [class certification] stage," Corcoran, 2017 WL 1065135, at 6 *7 n.15, the Court did not hold the argument is irrelevant to the merits of Plaintiffs' claims. 7 * * * 8 In sum, CVS's proposal would materially advance the litigation by structuring the proceedings 9 in a manner that resolves issues the Court has held are subject to class-wide adjudication, while still 10 protecting CVS's constitutional rights to litigate every legal element and defense. Plaintiffs, by 11 contrast, offer no contrary proposal, other than the unconstitutional one of extinguishing all 12 individualized issues. The Court should adopt CVS's proposal. 13 14 Dated: May 11, 2020 Respectfully submitted, 15 16 By: Grant A. Geyerman ______________ 17 Enu Mainigi (admitted pro hac vice) 18 Grant A. Geyerman (admitted pro hac vice) WILLIAMS & CONNOLLY LLP 19 725 Twelfth Street, N.W. Washington, DC 20005 20 Telephone: (202) 434-5000 21 Facsimile: (202) 434-5029 22 Edward W. Swanson (Cal. Bar No. 159859) 23 August Gugelmann (Cal. Bar No. 240544) 24 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 25 San Francisco, CA 94104 Telephone: (415) 477-3800 26 Facsimile: (415) 477-9010 27 apply to nearly the entire class period" is a non-starter. Even if Plaintiffs were correct, CVS's defense 28 would still apply to 18 whole months of the class period. CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 7 1 Attorneys for Defendant CVS Pharmacy, Inc. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CVS Reply ISO Proposal for CASE NO. 15-CV-03504-YGR Adjudication of Individualized Issues 8