Third Circuit Affirms Dismissal Opining No Physical Injury Equals No Ascertainable Loss

On February 12, 2016, a panel of the U.S. Court of Appeals for the Third Circuit affirmed dismissal of a lawsuit accusing GlaxoSmithKline (“GSK”) of violating the Missouri Merchandising Practices Act (“MMPA”) by failing to adequately warn of the risks associated with the use of a prescription drug, Avandia. [In Re: Avandia Marketing, Sales Practices and Products Liability Litigation, No. 15-2145, 3rd Cir.; 2016 U.S. App. LEXIS 2463]. The Court affirmed a lower court decision granting GSK’s motion for judgment after finding that the patient/Plaintiff failed to show that she suffered an “ascertainable loss” as required by the Act.

Appellant Staci Laurino is a former user of GSK’s Avandia, a prescription drug approved by the Food and Drug Administration to aid in the lowering of blood glucose in patients with type 2 diabetes.  Laurino did not sue on the grounds that she had been physically injured as a result of taking Avandia, rather Laurino alleged GSK “engaged in misrepresentations, and failed to adequately advise consumers and medical providers of the risks of Avandia, including but not limited to the increased risk of heart attacks and deaths[,]” in violation of the MMPA, and sought damages equal to the difference between the drug’s actual value and the value of the drug had it been as represented by GSK. 

The case, originally filed in the U.S. District Court for the Eastern District of Missouri, was transferred to the pending In re Avandia Multi-District Litigation in the Eastern District of Pennsylvania.  Laurino then filed an Amended Complaint, and GSK moved to dismiss for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6).  The District Court found Laurino had standing, but held that she received all of the benefits of taking Avandia without suffering any harm, thereby sustaining no ascertainable loss as required under the MMPA.  For failure to state a claim under the MMPA, and because the District Court further believed Laurino would be unable to correct the fundamental deficiency of “ascertainable loss” if given the opportunity, the District Court dismissed Laurino’s Amended Complaint with prejudice.  Laurino appealed.

The purpose of the MMPA is to “preserve fundamental honesty, fair play and right dealings in public transactions.”  Zmuda v. Chesterfield Valley Power Sports, Inc., 267 S.W.3d 712, 716 (Mo. Ct. App. 2008).  Under the MMPA, “[t]he act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce . . . , in or from the state of Missouri, is declared to be an unlawful practice.” Mo. Stat. Ann. § 407.020.1. “Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of” an unlawful practice may bring a civil action. Mo. Stat. Ann. § 407.025.1.

In her appeal, Laurino argued the District Court erred in relying on the lack of physical injury and misapplied Missouri law that allows an ascertainable loss through the benefit-of-the-bargain rule.[1]  Laurino sought support in the Missouri Court of Appeals’ holding in Plubell v. Merck & Co., Inc., 289 S.W.3d 707, 715 (Mo.App. W.D. 2009) that because the plaintiffs alleged the drug was worth less than the product as represented, “they stated an objectively ascertainable loss under the MMPA using the benefit-of-the-bargain rule.”  However, upon thorough consideration, the District Court explained the statement was made in the context of class certification under Missouri state procedural law, and did not “inquire whether the plaintiffs will prevail on the merits or even whether the plaintiffs have stated a cause of action.” Laurino v. SmithKline Beecham Corp. (In re Avandia Mktg., Sales Practices & Prods. Liab. Litig.), 100 F. Supp. 3d 441, 446 (E.D. Pa. 2015) (quoting Plubell, 289 S.W.3d at 715).

The District Court then, persuaded by federal court opinions interpreting Missouri law[2], opined Laurino’s:

“proposed liability theory, which requires no demonstrable loss of any benefit, would lead to absurd results…

The absurdity is inherent in the nature of Plaintiff's claimed loss, which is based only on the idea that Avandia is inherently worth some unspecified amount less than whatever Plaintiff might have paid for it. The logical extension of this argument in the prescription-drug context is that there is some price point at which a patient would agree to take a drug, despite the risk of side effects and despite the existence of other, equally effective drugs that do not carry such risk. The Court cannot imagine what that price point might be.  Plaintiff received all the benefits of taking Avandia without any harm, and therefore suffered no loss.”

Laurino, at 446-47.

In In re Bisphenol-A (BPA) Polycarbonate Plastic Products Liab. Litig. (“In re BPA I”), three classes of Missouri consumers moved for class certification on claims for violation of the Missouri Merchandising Practices Act, breach of the implied warranty of merchantability, and unjust enrichment as to sales of baby bottles and sippy cups.  In denying class certification, the U.S. District Court for the Western District of Missouri found that the proposed class could not be certified because (1) it included individuals who had not suffered an injury in fact: consumers who knew about the Bisphenol-A polycarbonate plastic and purchased the products anyway suffered no injury, and (2) consumers who fully used Defendants’ baby bottles and other products without physical harm before learning about BPA suffered no injury and could not assert a claim under consumer protection statutes.

Likewise, in Mikhlin v. Johnson & Johnson, plaintiffs did not claim physical harm or the recovery of personal injury damages, but claimed to not received the benefit of their bargain based upon studies indicating an increased risk of ovarian cancer associated with genital use of Johnson’s® Baby Powder.  The U.S. District Court for the Eastern District of Missouri held that “[a]lthough Plaintiffs contend that they would not have purchased Johnson’s® Baby Powder if they had known the “true facts,” they obtained the “full value” of the product before learning the truth so they have not suffered any economic damage from their purchase. Id. at *10

In affirming the District Court’s Order dismissing Laurino’s Amended Complaint with prejudice, the U.S. Court of Appeals for the Third Circuit panel held “Laurino received the drug she was prescribed, the drug did the job it was meant to do (i.e., controlled her blood sugar levels), and it caused no apparent physical injuries.” In re Avandia, 2016 U.S. App. LEXIS 2463, at *7.  She received all the desired benefits and was unaffected by any alleged concealment. Id. (quoting Laurino, 100 F. Supp. 3d at 446.).  “Under such circumstances, there could be no ascertainable loss.” Id.  “[I]n short, Laurino received the benefit of the bargain and accordingly sustained no ascertainable damages under the MMPA.” Id. at *7-8.

While the panel’s opinion was not an opinion of the full Court and does not constitute binding precedent upon courts in the Third Circuit, the current holding among federal courts in Missouri is clear:

Missouri consumers who purchase products, and completely use (and benefit from) such products – in the absence of other physical injury, obtain the full benefit of their bargains and suffer no loss.

See here for more on pending Missouri legislation affecting the Missouri Merchandising Practices Act.