McGraw's win in class action dispute will stand

By John O'Brien | Nov 28, 2011


WASHINGTON -- The U.S. Supreme Court will not hear the appeal of a group of drug stores that claimed state Attorney General Darrell McGraw had filed a class action lawsuit against it.

The court denied the drug stores' petition Monday, letting stand a decision by the U.S. Court of Appeals for the Fourth Circuit that said McGraw's lawsuit should be heard in a state court. The companies said it was essentially a class action and should've been heard in federal court.

The case alleges six drug stores -- Wal-Mart, CVS, Kmart, Kroger, Target and Walgreen -- did not pass savings on generic drugs to consumers.

"Indeed, the West Virginia Attorney General's role here is more analogous to the role of the EEOC or other regulator when it brings an action on behalf of a large group of employees or a segment of the public," says the Fourth Circuit's 2-1 judgment, filed in August. "Yet, the Supreme Court has concluded that such a regulator's action is not a class action of the kind defined in Rule 23."

After the judgment, the drug stores unsuccessfully asked for a rehearing of the case before all of the Fourth Circuit judges. The Fourth Circuit then chose, by a 2-1 vote of the same three judges who heard the case, not to issue a stay of its decision, allowing the case to proceed in Boone County Circuit Court. A petition for a full rehearing of that ruling was also denied.

Judge Ronald Lee Gilman dissented in the judgment and was the only member of the three-judge panel to vote for a stay. Even though the action was brought under state statutes, it doesn't take away the "essence" of the case, he wrote in his dissent.

"(T)he elements of numerosity, commonality, typicality and adequacy of representation have not been specifically pleaded," Gilman wrote. "But I submit that these are subsidiary factors that do not detract from the essence of the action.

"They are, in other words, 'bells and whistles' whose absence in the pleadings do not prevent the Attorney General's suit from being considered a class action under CAFA."

Gilman wrote that similar lawsuits filed by McGraw's outside counsel in other states are undisputed class actions.

McGraw hired two private firms - Bailey & Glasser and DiTrapano Barrett & DiPiero - for the case. The two firms have contributed more than $60,000 to McGraw's campaign fund over the years, including $11,800 for his 2008 race against Republican Dan Greear.

Bailey & Glasser brought similar lawsuits in Michigan and Minnesota. The Michigan suits were dismissed by a state judge because the only specific pricing information was obtained by a West Virginia whistleblower who worked at Kroger.

The Minnesota lawsuit, brought on behalf of unions that provide health care for their members, was initially dismissed in November 2009 by former U.S. District Judge James Rosenbaum, who had harsh words for the plaintiffs attorneys.

Rosenbaum was peeved that the complaint, filed against 13 defendants, only contained specific pricing information about two of them.

"(T)his Complaint utterly fails to state a cause of action on any basis. There are no, none, factual allegations touching any defendant other than CVS and Walgreen's," Rosenbaum said Nov. 20, 2009.

"There being no facts from which a fact finder could infer any liability concerning (the other defendants), and you asked me to sustain a complaint based upon that. It's not only laughable, it's absolutely reprehensible."

That lawsuit has been remanded to a Minnesota court.

Reach John O'Brien by e-mail at

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