159 F. Supp. 3d 898
N.D. Ill.2016Background
- Medical Mutual of Ohio (MMO), a third-party payor (TPP), sued manufacturers and promoters of testosterone replacement therapy (TRT) drugs, alleging fraudulent off-label marketing caused MMO to reimburse medically inappropriate TRT prescriptions.
- MMO grouped 23 defendants and alleged coordinated marketing enterprises targeting TPP formularies, physicians (peer-selling and publication schemes), and consumers (direct-to-consumer "Low T" campaigns), and claimed defendants concealed cardiovascular risks and overstated benefits.
- MMO asserted RICO claims (18 U.S.C. § 1962(c) and § 1962(d)), state consumer-protection and insurance-fraud claims, and common-law fraud, negligent misrepresentation, and unjust enrichment; most defendants moved to dismiss for lack of standing, failure to state a claim, and lack of personal jurisdiction for Solvay entities.
- The court found MMO has Article III standing (economic injury fairly traceable to defendants and redressable) and denied dismissal on timeliness grounds at the pleadings stage, citing Sidney Hillman.
- The court held MMO adequately alleged but-for causation and proximate causation for RICO claims insofar as MMO alleged direct misrepresentations to TPPs and foreseeable injury from formulary placement, but dismissed substantive RICO and fraud-based state/common-law claims for failure to plead fraud with the particularity Rule 9(b) requires (leave to amend granted).
- The court dismissed claims against Solvay S.A. and Solvay America, Inc. for lack of personal jurisdiction and declined to apply defendants’ preferred choice-of-law; it concluded Ohio law governs MMO’s state-law claims and found negligent misrepresentation claims survive the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing | MMO suffered concrete economic injury by reimbursing for unnecessary TRT prescriptions caused by defendants' fraud | TPPs in other cases lacked standing; MMO must meet Article III separate from RICO | MMO has Article III standing (economic loss, traceable, redressable) |
| Timeliness (RICO statute of limitations) | Discovery rule delays accrual; factual issue unsuitable for dismissal at pleading stage | Public reports show MMO should have known earlier; claims time-barred | Dismissal as untimely is premature; factual questions reserved for summary judgment |
| RICO causation and injury (but-for/proximate) | Direct misrepresentations to TPPs caused favorable formulary placement and payments; injury foreseeable and intended | Chain of causation is too attenuated (physicians/patients intervene); injuries not the direct result of defendants' actions | But-for and proximate causation sufficiently pleaded given alleged direct deceit of TPPs and foreseeability; substantive RICO claims nevertheless dismissed for Rule 9(b) defects |
| Particularity of fraud (Rule 9(b)) | Specific schemes, meetings, and materials alleged; some defendants targeted MMO | MMO fails to identify who said what to whom, when, and where; must plead with particularity | Allegations insufficient under Rule 9(b) as to direct misrepresentations to MMO/P&T—substantive RICO and fraud-based claims dismissed with leave to amend; negligent misrepresentation survives |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim; legal conclusions not entitled to assumption of truth)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements: injury-in-fact, causation, redressability)
- Holmes v. Security Investor Protection Corp., 503 U.S. 258 (1992) (RICO proximate-cause requires direct relation between injury and conduct)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) (focus on directness of relationship in RICO proximate-cause analysis)
- Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (2008) (RICO plaintiff may show proximate cause where injury is foreseeable and a natural consequence of the fraud)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (RICO proximate-cause requires direct injury; intervening targets may make injury too remote)
- Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., 782 F.3d 922 (7th Cir. 2015) (timeliness and discovery-rule factual questions usually not resolved on the pleadings)
- In re Neurontin Marketing & Sales Practices Litigation, 712 F.3d 21 (1st Cir. 2013) (TPP RICO claims upheld where defendants made direct misrepresentations to payors)
- In re Avandia Marketing, Sales Practices & Products Liability Litigation, 804 F.3d 633 (3d Cir. 2015) (denial of motion to dismiss RICO claims where TPP alleged direct misrepresentations and causal link)
- Desiano v. Warner-Lambert Co., 326 F.3d 339 (2d Cir. 2003) (TPP claims allowed where direct misrepresentations to payors supported causation)
- BCS Services, Inc. v. Heartwood 88, LLC, 637 F.3d 750 (7th Cir. 2011) (probabilistic approach to causation in civil RICO; plaintiff need only show that defendant probably caused the harm)