A plaintiff may not use the “collateral source rule” to “borrow” an insurer’s injury so as to state a claim under California’s Unfair Competition law
Plaintiff Williamson paid only his prescription-drug deductible, which he would have paid no matter the price of his medicine. Nonetheless, he sued the drug maker, defendant Genetech, both individually and as representative of a putative class, alleging they overcharged for a leukemia drug. (Williamson v. Genetech (August 11, 2023) A164426.) Despite his lack of actual harm, the plaintiff plead the novel theory that under the “collateral source” rule the harm to his insurer in having to overpay for a drug could support his individual claim:
Williamson later sued Genentech, on behalf of himself and a putative class of similarly situated individuals, alleging that Genentech violates the unfair competition law by selling Rituxan (and three other medications) in excessively large single-use vials.
In his operative (third amended) complaint, Williamson alleges that, because the appropriate dosage varies based on a patient’s body size, Genentech’s vial sizes are too large for most patients. He insists Genentech should be required to offer smaller vial sizes. . . to reduce waste of expensive medicine. . . . . However, Williamson alleges that he took only Rituxan, not the other three medications, and that, to do so, he paid a $231.15 deductible. He admits that “[a]ll remaining payments” were made by his health insurer. . . . (Id., p. 2.)
Genetech’s demurer was sustained without leave to amend by the Hon. Daniel S. Murphy of the Los Angeles County Superior Court and plaintiff appealed. The Second District agreed with the trial court that under the facts plead plaintiff could not state an Unfair Competition claim:
The obvious problem here is that Williamson suffered no injury. He paid a deductible of $231.15 to obtain Rituxan; his insurer paid the remaining cost. He concedes that he would have paid the same deductible regardless of the size of Genentech’s vials. Thus, Genentech’s alleged unfair business practice—using excessively large vials—has not injured Williamson in any way. (See Kwikset, supra, 51 Cal.4th at pp. 323, 326.) Williamson does not dispute this point.
. . . Williamson wants to borrow an injury from somebody else to establish standing, using the collateral source rule. . . .
It is a creative argument. The collateral source rule concerns the amount of money owed by a tortfeasor to the injured victim: “if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor.” (Id., pp. 4-4.)[2]
Therefore, the Williamson panel outright rejected plaintiff’s “collateral source” theory:
The collateral source rule has no application here. First, in both tort and criminal restitution cases, the rule applies when a defendant injured a victim, and the issue is simply how much compensation the defendant owes to the victim in light of payments from an insurer or other collateral source. Williamson cites no cases in which the rule applied to a plaintiff who suffered no injury. (Id., p. 6.)
Williamson therefore held plaintiff simply had no“Article III standing” [1] to bring suit.
The appellate court also rejected plaintiff’s argument that permitting him to bring a claim would “encourage” others to buy insurance, succinctly noting “people with insurance, like Williamson, are not injured, and people without insurance are injured.” (Id., p. 7; emphasis added.)
The appellate court further agreed with the trial court that plaintiff should not, as he requested, be granted leave to amend to add another class representative who may have suffered actual harm. Not only are rulings regarding leave to amend left to the sound discretion of the trial court, meaning such decisions will not be disturbed absent an “abuse of discretion,” but the Second District found it relevant that plaintiff had not identified even one other potential plaintiff to take the place of Williamson. (Id., p. 8.)
Lessons for practitioners
In a suit such as this it is, of course, counsel rather than the client who “drives the train,” so to speak, as counsel defines the scope of the potential class claiming injury and must decide who is the named “representative.” For the reasons stated above, plaintiff Williamson was not a suitable party, either as an individual or such a representative. Presumably, there may have been another plaintiff who in fact suffered actual injury and who therefore would be better-suited to be the named plaintiff. Indeed, one could argue that counsel admitted such in maintaining the complaint could be amended to add such another lead plaintiff. But, as noted, counsel did not propose any specific person to take the place of Williamson.
1 - Plaintiff had no “actual injury” and therefore no Constitutional "standing" under Unfair Competition law. Williamson explained that California law requires such an injury. Moreover, standing, as defined by Federal law, and, in particular, Article III of the United States Constitution, requires an injury that is “(a) concrete and particularized, and (b) actual or imminent, not ‘conjectural’ or ‘hypothetical.’” (Williamson, p. 4, citing Kwikset Corp. v. Superior Court (2011) 51 Cal. 4th 310, at 232.)
2 - On this and other points Williamson cited Helfend v. Southern California Rapid Transit Dist. (1970) 2 Cal.3d 1, as the leading case defining the scope of the “collateral source” rule in California.
