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ASEA/AFSCME Local 52 Health Benefits Trust v. St. Jude Medical, LLC

United States District Court, D. Minnesota

January 24, 2019

ASEA/AFSCME Local 52 Health Benefits Trust, individually and on behalf of a class of similarly situated third party payors, Plaintiff,
v.
St. Jude Medical, LLC, a Delaware corporation, and Abbott Laboratories, an Illinois corporation, Defendants.

          Karl L. Cambronne, Esq., Bryan L. Bleichner, Esq., Jeffrey D. Bores and Chestnut Cambronne, PA, Robert K. Shelquist, Esq. and Lockridge Grindal Nauen, PLLP, Adam J. Levitt, Esq. and Dicello Levitt & Casey LLC, Jason T. Dennett, Esq. and Tousley Brain Stephens PLLC, counsel for plaintiff.

          Barry Fields, Esq. and Kirkland & Ellis, LLP, Thomas F. Nelson, Esq. and Stinson Leonard Street, LLP, counsel for defendants.

          ORDER

          David S. Doty, Judge

         This matter is before the court upon the motion to dismiss by defendants St. Jude Medical, LLC and Abbott Laboratories. Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants the motion.

         BACKGROUND

         This putative class action arises out of the Food and Drug Administration's (FDA) October 2016 recall of certain models[1] of St. Jude's cardiac defibrillators due to a battery defect which can cause the device's lithium batteries to deplete suddenly and prematurely.[2] Compl. ¶ 25. The devices are designed to “provide pacing therapy to support slow heart rhythms, and electrical shock or pacing therapy to treat fast heart rhythms.” Id. ¶ 23. If the defect occurs, the affected defibrillator could malfunction and cause serious health complications, including death. Id. ¶ 27. St. Jude received FDA approval to market the devices in 2004. See id. ¶ 52.

         St. Jude is a medical device manufacturer based in Minnesota. Id. ¶ 2. Abbott Laboratories, an Illinois company, acquired St. Jude on January 4, 2017. Id. St. Jude is now a wholly owned subsidiary of Abbott. Id. ¶ 7.

         Plaintiff ASEA/AFSCME Local 52 Health Benefits Trust provides healthcare benefits to employees of the State of Alaska and their eligible family members under a collective bargaining agreement. Id. ¶ 1. Plaintiff is what is referred to as a “third-party payor” (TPP) of medical expenses. Id. ¶ 22. Specifically relevant here, plaintiff, on behalf of its beneficiaries, paid for the cost of implanting the recalled devices and may be required to pay costs incurred in removing and replacing the devices. Id. ¶¶ 1, 33.

         According to the complaint, St. Jude became aware of the battery defect as early as 2011, but failed to report or further investigate the problem. Id. ¶¶ 28, 83-89. Plaintiff alleges that in 2014, St. Jude knew that at least one patient had died following premature battery depletion in an ICD. Id. ¶¶ 28, 88. Plaintiff further alleges that St. Jude actively concealed information about the defect from its management boards, the FDA, and the public. Id. ¶¶ 29-31, 89-91. The defect came to light in the spring of 2016 during Abbott's due diligence review as part of the planned merger with St. Jude, which prompted St. Jude to finally investigate the cause of the battery defect. Id. ¶ 32, 97-100. In August 2016, St. Jude decided to recall the defective devices and worked with the FDA to do so. Id. ¶¶ 101-02. On October 10, 2016, the FDA issued a Class I recall of 251, 346 St. Jude devices sold in the United States and manufactured before May 2015.[3] Id. ¶ 103. St. Jude has offered to reimburse patients for expenses not covered by insurance relating to device removal and replacement. Id. ¶ 113.

         In September 2017, plaintiff commenced proposed nationwide and Alaska class actions in the Northern District of Illinois against St. Jude and Abbott alleging breach of express warranty, breach of implied warranty, negligence, failure to warn, product liability -manufacturing defect, strict liability - manufacturing defect, violation of the Minnesota Prevention of Consumer Fraud Act, misrepresentation by omission, unjust enrichment, and violation of the Alaska Consumer Protection Act. The court dismissed the case, concluding that it lacked jurisdiction over St. Jude and that venue was improper because the central events in the case occurred outside of Illinois. ASEA/AFSCME Local 52 Health Benefits Trust v. Abbott Labs., No. 17-6704, 2018 WL 3022670 (N.D. Ill. June 18, 2018).

         On July 24, 2018, plaintiff re-filed the case here asserting the same claims raised in the Illinois action except for the strict liability claim. Plaintiff alleges that by not timely disclosing the battery defect, St. Jude caused it and other proposed class members to needlessly pay hundreds of millions of dollars for the defective devices and their replacement costs. Compl. ¶¶ 35-37. Plaintiff seeks certification of nationwide and Alaska classes, [4]declaratory relief, actual and statutory damages, costs of medical monitoring, pre- and post-judgment interest, and attorneys' fees and costs. Defendants now move to dismiss on various grounds.

         DISCUSSION

         I. Standing

         Defendants first argue that this action should be dismissed because plaintiff, as a TPP, lacks standing to recover for its plan participants' injuries. Article III of the United States Constitution limits the jurisdiction of federal courts to justiciable cases and controversies. U.S. Const. art. III, § 2; Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992). Standing is an “essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan, 504 U.S. at 560. To satisfy Article III standing requirements, a plaintiff must demonstrate:

(1) it has suffered an injury in fact that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000). Whether the plaintiff has established the three elements of standing is an “inescapable threshold question.” Advantage Media, L.L.C. v. City of Eden Prairie, 456 F.3d 793, 799 (8th Cir. 2006). If a plaintiff lacks standing, “the district court has no subject-matter jurisdiction” and must dismiss the case. Faibisch v. Univ. of Minn., 304 F.3d 797, 801 (8th Cir. 2002); Fed.R.Civ.P. 12(h)(3).

         A. Causal Connection

         Defendants argue that plaintiff lacks standing because plaintiff's alleged injury is not fairly traceable to defendants' conduct. Defendants assert that the causal chain is too attenuated because there is a multi-step “winding” sequence of intervening events. Specifically, defendants argue that plaintiff's causal chain hinges on the following hypothetical events: (1) St. Jude disclosed the defect right away, (2) physicians and the public would have learned about the defect, (3) the FDA would have investigated the defect and issued a recall, (4) physicians would have stopped ...


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