Second Circuit Rejects the Use of "Aggregate Proof" of Causation in a Putative Consumer Class Action

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In UFCW Local 1776 v. Eli Lilly & Co., No. 09-0222-CV, 2010 WL 3516183 (2d Cir. Sept. 10, 2010), the United States Court of Appeals for the Second Circuit reversed an order of the United States District Court for the Eastern District of New York certifying a class of third party payors (“TPPs”) consisting of unions and insurers who underwrite the purchase of drugs prescribed by physicians in an action against pharmaceutical manufacturer Eli Lilly & Co. (“Lilly”) alleging civil violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962, 1964 (“RICO”). At the core of this decision is the Second Circuit’s rejection of the use of “aggregate proof” of causation in the consumer class certification process.

In this case, the TPPs asserted, among other things, civil RICO violations based on Lilly’s alleged misrepresentations about its drug Zyprexa®. Zyprexa® is a prescription medication that has been approved by the United States Food & Drug Administration for treatment of schizophrenia and bipolar disorder. However, Lilly actively promoted the use of Zyprexa® to treat less severe conditions, such as depression and anxiety, for which there is allegedly no evidence that Zyprexa® provides effective treatment. The TPPs alleged that Lilly engaged in mail and wire fraud by deliberately misrepresenting the drug’s safety and efficacy to physicians, thereby conducting a racketeering enterprise in violation of RICO. A civil RICO claim requires a plaintiff to show (1) a substantive RICO violation; (2) injury to the plaintiff's business or property; and (3) that such injury was by reason of the substantive RICO violation.

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