In re Oxycontin Antitrust Litig., Nos. 04–MD–1603 (SHS), 08 Civ. 3380(SHS), 2011 WL 4469494 (S.D.N.Y. Sept. 26, 2011).

Courtney Love, Jack Osbourne, and Jenna Jameson. What do they have in common? The media has reported that these “celebrities” have battled OxyContin. Is it true? We have no idea, but they may be interested in this OxyContin parens patriae case.

A District Court in New York held that the mere fact that the state may not prevail on certain claims due to a lack of standing or for failure to state a claim or not legally entitled to it does not render its citizens the real parties in interest in a parens patriae action. 

The Commonwealth of Kentucky, through its Attorney General, and Pike County commenced this action in Kentucky state court alleging that Purdue Pharma entities violated Kentucky state law by misleading health care providers, consumers, and government officials regarding the risks of addiction associated with the prescription drug OxyContin, an opioid analgesic drug approved for use in the management of moderate to severe pain.

The plaintiffs maintained that from December 1995 to June 2001, Purdue supervisors and employees marketed and promoted OxyContin to medical care providers as “less addictive, less subject to abuse and diversion, and less likely to cause tolerance and withdrawal than other pain medications,” despite knowing that such assertions were false or misleading. According to the plaintiffs, those misrepresentations and omissions prevented physicians and patients from accurately assessing the appropriate uses and risks of OxyContin, causing physicians to prescribe OxyContin and Kentucky patients to request OxyContin more often than they would have had they known the truth about the drug. The plaintiffs asserted that Kentucky citizens have become addicted to OxyContin, causing serious adverse health consequences, including death, as well as such problems as ‘the commission of criminal acts to obtain OxyContin.’

The State of Kentucky covers the health care costs—including the costs of OxyContin prescriptions and drug addiction treatment—for indigent and otherwise eligible Kentucky citizens through its state Medicaid program and its Pharmaceutical Assistance Program.  Kentucky’s Medicaid program, which is a joint federal and state program, covers approximately 669,000—or one in six—Kentuckians and accounts for 20% of the state budget.  

Kentucky alleged that Purdue’s purported wrongful marketing and promotion of OxyContin has resulted in the state paying for prescriptions that never would have been written and medical services provided that never would have been required in the absence of Purdue’s deceptive practices. 

Pike County alleged that it had spent millions of dollars to investigate, apprehend, prosecute, and incarcerate individuals who, ‘due to the fraudulently concealed addictive nature of OxyContin, had resorted to criminal means to continue their addiction.’

Based on these allegations, the plaintiffs asserted claims for: (1) violation of the Kentucky Medicaid Fraud Statute, KRS § 205.8463 and § 446.070; (2) violation of KRS § 15.060; (3) violation of the Kentucky False Advertising Statute, KRS § 517.030 and § 446.070; (4) public nuisance; (5) unjust enrichment and restitution; (6) indemnity; (7) negligence; (8) violation of state antitrust law; (9) strict liability; (10) common-law fraud; (11) conspiracy and concert of action; and (12) punitive damages. The plaintiffs sought damages based on the Medicaid-related expenses it had incurred, as well as other equitable and injunctive relief.

Purdue removed the action to the federal court in Kentucky claiming jurisdiction under federal-question and CAFA. The MDL Panel subsequently transferred the action to the Southern District of New York for inclusion in the In re OxyContin Antitrust Litigation (04–MDL–1603) MDL proceeding. 

The plaintiffs moved to remand, which the District Court granted.

First, the Court observed that the vast majority of federal district courts that have considered the federal question jurisdiction—in analogous cases brought by attorneys general against pharmaceutical companies for reimbursement of Medicaid-related expenses—have found that they lacked federal question jurisdiction and have remanded the actions to state court.

Next, Purdue maintained that the action was a ‘class action’ removable under CAFA. Because the Commonwealth of Kentucky and Pike County are the only real parties in interest in this parens patriaeaction, the Court found that CAFA’s requirement that the action have at least 100 plaintiffs was not met.  

Simply put, this was not a class action. The Court noted that the plaintiffs brought this action in both its proprietary and parens patriae capacities, and sought (1) damages for a direct, tangible injury it has allegedly suffered—the reimbursement of Medicaid claims involving OxyContin—and (2) equitable and injunctive relief on the basis of its “quasi-sovereign interest” in protecting the health and safety of its citizens.

Purdue, however, urged that Kentucky consumers were also real parties in interest because, according to Purdue, the plaintiffs sought damages on behalf of a discrete group of Kentucky consumers, and in support, relied on two cases, Louisiana ex rel. Caldwell v. Allstate Ins., 536 F.3d 418 (5th Cir.2008) and West Virginia ex rel. McGraw v. Comcast Corp., 705 F.Supp.2d 441 (E.D.Pa.2010), in which claims filed by state attorneys general were deemed to be subject to CAFA. (Editors’ Note: See the CAFA Law Blog analysis of Caldwell posted on April 14, 2008 and the CAFA law blog analysis of McGraw posted on July 22, 2010.). 

The Court observed that neither case was controlling and both were distinguishable. In Caldwell and McGraw, the courts held that citizens were real parties in interest because the attorneys general asserted that the defendant companies had violated state antitrust laws and sought treble damages on behalf of citizens who had purchased insurance policies and cable subscriptions, respectively, from those companies. In neither case was the State seeking restitution for damages that it—as opposed to its citizens—had suffered. 

The Court observed that unlike in Caldwell and McGraw, this action involved the plaintiffs’ proprietary interest in recovering monies that it—not Kentucky consumers—spent reimbursing Medicaid claims involving OxyContin. The plaintiffs expressly denied seeking any type of relief for losses incurred by Kentucky consumers; rather, the state Attorney General was fulfilling his responsibility, pursuant to KRS § 15.020 and § 15.060, to pursue an action on behalf of the Commonwealth in order to “collect and recover money due the Commonwealth.”

Purdue, however, emphasizing cherry-picked language in the amended complaint, contended that the plaintiffs sought restitution on behalf of individual consumers for costs they had incurred related to OxyContin. 

The Court disagreed because the claim for restitution clearly stated that the plaintiffs sought reimbursement for the health care costs, medical care costs, prescription costs, and rehabilitation and other programs and services costs that it paid pursuant to its State Medicaid Program. Moreover, the Attorney General was representing Kentucky citizens indirectly to the extent that they paid taxes, which tax monies are then disbursed from the State Treasury to pay for such programs as Medicaid.

Second, Purdue urged that the plaintiffs’ request for “a fund establishing a medical monitoring program” was a claim that belonged solely to individual consumers. The Court observed that the plaintiffs may not be able to obtain its requested relief; however, this did not change the fact that the plaintiffs’ request for a “medical monitoring fund” was a parens patriae claim brought on behalf of the Kentucky population as a whole; it was not a claim made at law for damages on behalf of a particular subset of the Kentucky population.

Finally, the Court stated that the mere fact that the plaintiffs might not prevail on its strict liability and negligence claims—due to a lack of standing or for failure to state a claim—did not render Kentucky citizens the real parties in interest in this action. 

The Court concluded that Purdue failed to meet their burden of establishing that the Court had subject matter jurisdiction over this action, and accordingly remanded the action to state court.

Editors’ Note: For an outstanding article on CAFA jurisdiction and parens patriae, see “Removal of Attorney General Actions Under the Class Action Fairness Act of 2005,” BNA, Inc. Class Action Litigation Report, Vol. 12, No. 9, May 13, 2011.