IN RE: ZANTAC (RANITIDINE) PRODUCTS LIABILITY LITIGATION
MDL NO. 2924, 20-MD-2924
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
JUDGE ROBIN L. ROSENBERG, MAGISTRATE JUDGE BRUCE E. REINHART
June 30, 2021
This matter is before the Court on Brand Manufacturer Defendants’1 (“Defendants“) Motion to Dismiss RICO Claim in Consolidated Amended Consumer Economic Loss Class Action Complaint (“Motion to Dismiss“). DE 3115. The Court held a hearing on the Motion to Dismiss on June 3, 2021 (the “Hearing“). The Court has carefully considered the Motion to Dismiss, Plaintiffs’ Opposition thereto [DE 3327], Defendants’ Reply [DE 3425], the arguments that the parties made during the Hearing, and the record and is otherwise fully advised in the premises. For the reasons set forth below, the Defendants’ Motion to Dismiss is GRANTED and Count I of the Amended Consumer Economic Loss Class Action Complaint (“ELC“) is DISMISSED WITH PREJUDICE.
This case concerns the pharmaceutical product Zantac and its generic forms, which are widely sold as heartburn and gastric treatments. The molecule in question—ranitidine—is the active ingredient in both Zantac and its generic forms.
Zantac has been sold since the early 1980s, first by prescription and later as an over-the-counter (“OTC“) medication. In 1983, the U.S. Food and Drug Administration (“FDA“) approved the sale of prescription Zantac. AMPIC ¶ 240. GSK first developed and patented Zantac. Id. ¶ 239. Zantac was a blockbuster—the first prescription drug in history to reach $1 billion in sales. Id. ¶ 240.
GSK entered into a joint venture with Warner-Lambert in 1993 to develop an OTC form of Zantac. Id. ¶ 233. Beginning in 1995, the FDA approved the sale of various forms of OTC Zantac. Id. ¶¶ 233, 237. The joint venture between GSK and Warner-Lambert ended in 1998, with Warner-Lambert retaining control over the sale of OTC Zantac in the United States and GSK retaining control over the sale of prescription Zantac in the United States. Id. ¶ 243. Pfizer acquired Warner-Lambert in 2000 and took control of the sale of OTC Zantac in the United States. Id. ¶ 245. The right to sell OTC Zantac in the United States later passed to BI and then to Sanofi. Id. ¶¶ 249–50, 253–55. When the patents on prescription and OTC Zantac expired, numerous generic drug manufacturers began to produce generic ranitidine products in prescription and OTC forms. Id. ¶¶ 260-62.
Valisure LLC and ValisureRX LLC, a pharmacy and testing laboratory, filed a Citizen Petition on September 9, 2019, calling for the recall of all ranitidine products due to high levels of NDMA in the products. Id. ¶ 322. The FDA issued a statement on September 13 warning that some ranitidine products may contain NDMA. Id. ¶ 323. On November 1, the FDA announced that testing had revealed the presence of NDMA in ranitidine products. Id. ¶ 333. The FDA recommended that drug manufacturers recall ranitidine products with NDMA levels above the acceptable daily intake level. Id. Five months later, on April 1, 2020, the FDA requested the voluntary withdrawal of all ranitidine products from the market. Id. ¶ 338.
II. Procedural Background
After the discovery that ranitidine products may contain NDMA, plaintiffs across the country began initiating lawsuits related to their purchase and/or use of the products. On February 6, 2020, the United States Judicial Panel on Multidistrict Litigation created this multi-district litigation (“MDL“) pursuant to
Plaintiffs filed their first Master Complaints on June 22, 2020. DE 887, 888, 889. In those Master Complaints, Plaintiffs contended that the ranitidine molecule is unstable, breaks down into NDMA, and has caused thousands of consumers of ranitidine products to develop various forms of cancer. DE 887 ¶¶ 1, 6, 19. They alleged that “a single pill of ranitidine can contain quantities of NDMA that are hundreds of times higher” than the FDA‘s allowable limit. Id. ¶ 4. The Plaintiffs pursued federal claims and state claims under the laws of all 50 U.S. states, Puerto Rico, and the District of Columbia. See generally DE 889.
The Court has entered numerous Pretrial Orders to assist in the management of this MDL. In Pretrial Order # 36, the Court set a schedule for the filing and briefing of the first round of motions to dismiss under Rule 12 directed to the Master Complaints. DE 1346. The various defendants filed motions to dismiss.
Following an amendment to Pretrial Order # 36, Plaintiffs filed the AMPIC on February 8, 2021. DE 2759. After the Court granted a two-week extension of time [DE 2720], Plaintiffs filed the MMC [DE 2832-1] and the ELC [DE 2835] on February 22, 2021. In Pretrial Order # 61, the Court set a schedule for the filing and briefing of the second round of motions to dismiss under Rule 12 directed to the Master Complaints. DE 2968. The Defendants filed the Motion to Dismiss addressed herein pursuant to that schedule.
III. The Economic Loss Class Action Complaint
One hundred and eighty named Plaintiffs bring the ELC on behalf of themselves and all others similarly situated. Each Plaintiff asserts that he or she purchased and/or used a ranitidine product during an approximate timeframe. The Plaintiffs bring the complaint in their individual
Plaintiffs assert Count I of the ELC against Defendants for alleged violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO“),
Plaintiffs allege that Defendants were aware of the risks associated with ranitidine consumption. ELC ¶ 529. Rather than remove OTC Zantac from store shelves or warn the public about its safety risks, Defendants formed an enterprise to deliberately and unlawfully misrepresent and conceal the safety risks. Id. ¶¶ 501, 528-68, 569-606, 733-34. Defendants’ motivation was to increase their “revenues and profits from the OTC Zantac and minimize their losses from the manufacture and the sale of all their Ranitidine-Containing Products.” Id. ¶ 734. Defendants carried out their scheme through “thousands” of fraudulent interstate mail and wire communications during a decades-long marketing and promotional campaign to mislead the public [id. ¶¶ 615-17, 627, 629-48], through misleading communications with federal regulators [id. ¶¶ 552, 574, 582, 584, 589], and through efforts to manipulate key opinion leaders and industry groups regarding the science and safety of ranitidine products [id. ¶¶ 675-96]. Plaintiffs purchased
IV. Summary of the Parties’ Arguments and the Court‘s Rulings
Defendants filed the instant Motion to Dismiss seeking the dismissal with prejudice of Plaintiffs’ RICO claim in Count I of the ELC. DE 3115 at 6.3 Defendants make three primary arguments in support of dismissal. First, Plaintiffs lack statutory standing to assert a RICO claim for three reasons: Plaintiffs did not purchase OTC Zantac directly from any Defendant and therefore cannot sue them under the indirect purchaser rule; Plaintiffs have not alleged a cognizable injury; and Plaintiffs have not plausibly alleged proximate causation. Id. at 12, 14-15. Second, Plaintiffs failed to allege an “association-in-fact enterprise,” a basic element of a civil RICO claim, because they did not plausibly allege a common, criminal purpose or relationships amongst Defendants. Id. at 17-18. And third, Plaintiffs failed to allege that Defendants committed a pattern of racketeering activity. Id. at 25.
Plaintiffs respond that they have standing to sue Defendants under RICO because the indirect purchaser rule does not apply to RICO claims; they have alleged a cognizable injury in that they spent money on a worthless product; and, they have plausibly alleged proximate causation. DE 3327 at 11-18. Next, Plaintiffs have pled an “association-in-fact enterprise” because they allege that Defendants’ common purpose was fraudulent in nature and that the dependent relationships between Defendants ensured a common purpose. Id. at 19-24. Finally, Plaintiffs have pled a pattern of racketeering by means of wire and mail fraud that spanned more than two decades. Id. at 25.
Therefore, the Court grants Defendants’ Motion to Dismiss. Plaintiffs’ RICO claim in Count I of the ELC is dismissed with prejudice.
V. Standard of Review
The inquiry when determining if a plaintiff has statutory standing is whether the plaintiff has a cause of action under the statute. Lexmark Int‘l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 (2014). A court may grant a motion to dismiss a pleading if the pleading fails to state a claim upon which relief can be granted.
The Motion to Dismiss raises several separate legal issues, however, the applicability of the indirect purchaser rule is dispositive in this case. The Court first explains in greater depth the parties’ arguments relating to the indirect purchaser rule, and then reviews the relevant law governing the indirect purchaser rule before providing its analysis and conclusion.
A. Arguments
Defendants argue that the indirect purchaser rule bars Plaintiffs’ RICO claims. DE 3115 at 12. This rule of statutory standing originated in the antitrust context. Id. at 9. The rule prohibits a product consumer from suing a defendant such as manufacturers from whom the consumer did not directly purchase the product. Id. The indirect purchaser rule is a simple, bright-line rule. DE 3425 at 8 (citing Apple Inc. v. Pepper, 139 S. Ct. 1514, 1521 (2019)). The Supreme Court and the Eleventh Circuit have explained that Congress modeled RICO‘s civil-action provision,
Plaintiffs respond that the indirect purchaser rule does not apply outside of the antitrust context. DE 3327 at 13. Plaintiffs argue that Supreme Court and Eleventh Circuit precedent do not support applying the rule in the RICO context; in fact, precedent requires the opposite. Id. at 13-14. The Eleventh Circuit has held that plaintiffs bringing RICO claims have standing as long as they show that their injuries were proximately caused by the RICO violation. Id. at 14 (citing
B. Law on the Indirect Purchaser Rule
In Illinois Brick Co. v. Illinois, 431 U.S. 720, 737 (1977), the Supreme Court interpreted federal antitrust law to contain a statutory standing principle called the indirect purchaser rule. In that case, the Illinois Brick Company manufactured and distributed concrete blocks and sold those blocks to masonry contractors, who sold masonry structures to general contractors, who sold their services for construction projects to the State of Illinois, the ultimate consumer of the blocks. Id. at 726. The State sued Illinois Brick, alleging that Illinois Brick had engaged in a conspiracy to fix the price of the blocks, leading to an overcharge that flowed down the distribution chain to the ultimate consumer, the State. Id. at 727.
The Supreme Court ruled that the State did not have standing to bring an antitrust action against Illinois Brick because the State had not purchased the blocks directly from Illinois Brick. Id. at 737. The Court held that plaintiffs who are two or more steps removed from the antitrust violator in a distribution chain have no statutory standing. Id. Illinois Brick “established a
The Supreme Court created the indirect purchaser rule to prevent the transformation of “treble-damages actions into massive multiparty litigations involving many levels of distribution and including large classes of ultimate consumers remote from the defendant.” Illinois Brick, 431 U.S. at 740; see
The Supreme Court has emphasized, however, that “the bright-line rule of Illinois Brick means that there is no reason to ask whether the rationales of Illinois Brick ‘apply with equal force’ in every individual case.” Id. (quoting Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 216 (1990)). In cases where some or all of these rationales do not apply to the facts of a particular case, the Court has warned against engaging in “an unwarranted and counterproductive exercise to litigate a series of exceptions” to the indirect purchaser rule. UtiliCorp, 497 U.S. at 208 (rejecting a proposal to create an exception to Illinois Brick where it was relatively simple to trace the pass-on of an alleged overcharge to indirect purchasers and where intermediaries passed on most or all of the overcharge to the ultimate consumer).
Turning to whether the indirect purchaser rule applies in the RICO context, the majority of federal courts to address the issue have applied the rule to RICO claims. These courts rely on the language of Holmes and include the Third, Sixth, and Seventh Circuits. See Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 616 (6th Cir. 2004); McCarthy v. Recordex Serv., Inc., 80 F.3d 842, 855 (3d Cir. 1996); see Carter v. Berger, 777 F.2d 1173, 1177 (7th Cir. 1985). In McCarthy, the Third Circuit held that “the precepts taught by Illinois Brick and UtiliCorp apply to RICO claims, thereby denying RICO standing to indirect victims.” 80 F.3d at 855 (“Indeed, plaintiffs have conceded that, if they lacked antitrust standing, they also lacked RICO standing.“). In Trollinger, the Sixth Circuit held that “indirect purchasers lack standing under RICO and the antitrust laws to sue for overcharges passed on to them by middlemen.” 370 F.3d at 616. And in Carter, the Seventh Circuit held that, because the indirect purchaser rule promotes the enforcement of antitrust and RICO laws, it “therefore applies to RICO, too.” 777 F.2d at 1177. See also Hu v. BMW of N. Am., LLC, No. CV184363KMJBC, 2021 WL 346974, at *4 (D.N.J. Feb. 2, 2021);
Even within Circuits that have not addressed this issue, several federal district courts have held that the indirect purchaser rule applies in the RICO context. These district courts include one within the Southern District of Florida. See, e.g., In re Takata Airbag Prods. Liab. Litig., No. 14-24009-CV, 2021 WL 908552, at *12 (S.D. Fla. Mar. 9, 2021) (holding that the indirect purchaser rule applies in the RICO context as well“); Harris Cnty., Tex. v. Eli Lilly & Co., No. CV H-19-4994, 2020 WL 5803483, at *12 (S.D. Tex. Sept. 29, 2020) (declining “to follow the minority rule” and holding “that indirect purchasers lack standing under RICO“).
Other federal district courts have held that the indirect purchaser rule does not apply to federal RICO claims. These courts have reached this decision within circuits that have yet to provide guidance on the rule‘s application to federal RICO claims. See, e.g., In re: EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs. & Antitrust Litig., 336 F. Supp. 3d 1256, 1325 (D. Kan. 2018) (declining to apply the indirect purchaser rule to a RICO claim in the absence of supporting Tenth Circuit authority and instead holding that RICO standing requires only a showing of proximate causation); GolTV, Inc. v. Fox Sports Latin Am., Ltd., No. 16-24431-CIV, 2018 WL 1393790, at *19 (S.D. Fla. Jan. 26, 2018) (noting the parties’ failure to cite to any Eleventh Circuit authority applying the indirect purchaser rule and holding that the Eleventh Circuit‘s standard for RICO standing is no more than proximate causation).
C. Analysis and Conclusion
1. The Applicability of the Indirect Purchaser Rule in the RICO Context
The Court must first decide whether the indirect purchaser rule applies in the RICO context. The Court looks to the Supreme Court‘s decision in Holmes which held that, because RICO‘s civil-suit provision was modeled on federal antitrust law, antitrust standing principles like proximate causation apply equally to RICO claims. 503 U.S. at 267-68. This Court recently concluded, “[i]t logically follows that the limits the Supreme Court has placed on anti-trust standing, namely the [in]direct purchaser rule, would apply in the RICO context as well.” In re Takata, 2021 WL 908552, at *12.
Plaintiffs, relying on Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 498-99 (1985), argue that, despite the Supreme Court‘s holding in Holmes, the indirect purchaser rule does not apply to RICO claims. Specifically, Plaintiffs argue that Sedima represents the Supreme Court‘s unwillingness to interpret RICO statutory standing requirements identically to those under antitrust law. DE 3327 at 13-14. In Sedima, the Supreme Court rejected the Second Circuit‘s conclusion that “just as an antitrust plaintiff must allege an ‘antitrust injury,’ so a RICO plaintiff must allege a ‘racketeering injury.‘” Id. at 485. The Court held that it did not perceive a distinct “racketeering injury” requirement from the text of the RICO statute. Id. However, as the Seventh Circuit explained in Carter, ”Sedima held that the ‘antitrust injury’ rule of antitrust does not apply to RICO, but this is so because ‘RICO injury’ would be an unintelligible requirement, not because there is no parallel between the two statutes.” Carter, 777 F.2d at 1176 (citation omitted).
So too is their reliance on Eleventh Circuit authority. Plaintiffs rely primarily upon Grogan v. Platt, 835 F.2d 844, 847-48 (11th Cir. 1988) to demonstrate that the Eleventh Circuit would refrain from applying the indirect purchaser in the RICO context. In Grogan, the court did acknowledge “the perils in relying too closely on the analogy of the antitrust laws” to RICO. Id. at 847-88. However, the court was faced with the question of whether the plain language of the RICO statute authorizes recovery of a particular category of damages, not whether the indirect purchaser rule applies to RICO. Id.
Plaintiffs rely upon Corcel, 551 F. App‘x at 576, and Bivens Gardens Office Building, Inc. v. Barnett Banks of Florida, Inc., 140 F.3d 898, 906 (11th Cir. 1998), to argue that proximate causation is all that is required in the Eleventh Circuit to establish RICO standing. DE 3327 at 14. However, as in Grogan, these cases did not involve indirect purchaser plaintiffs and did not mention the indirect purchaser rule. And while these cases held that a RICO plaintiff must demonstrate that his or her injuries were proximately caused by the RICO violation, proximate causation and the indirect purchaser rule, while related, are “two analytically distinct aspects” of standing. McCarthy, 80 F.3d at 851. Because the Supreme Court‘s message in Holmes was clear, the Court is persuaded to join the prevailing view that the indirect purchaser rule applies to RICO claims.
The Court next turns to the question of whether Plaintiffs are indirect purchasers, as contemplated by Illinois Brick. The bright-line indirect purchaser rule leaves no question that they are. Plaintiffs do not allege that they purchased OTC Zantac directly from any Defendant. Instead, Plaintiffs conceded at the Hearing that OTC Zantac was sold by Defendants to various distributors, then sold to retailers, and then sold to consumers. See Hearing Tr. at 125. Thus, Plaintiffs were not the first, nor even the second, purchasers in the OTC Zantac distribution chain. They were, by definition, indirect purchasers who lack standing to sue Defendants under RICO. See McCarthy, 80 F.3d at 848, 855 (explaining that “only the purchaser immediately downstream” has standing to assert RICO claims for payment of “excessive prices“).
A case from the District of New Jersey is most analogous to this case. See Rickman, 2020 WL 3468250, at *1. In Rickman, class plaintiffs asserted that the automaker BMW colluded with several other defendants to market cars as “clean diesel,” when they knew that the cars discharged emissions at impermissible levels and concealed the true level of emissions through deceptive technology. Id. The plaintiffs alleged that the defendants misled them by making affirmative misrepresentations and by failing to disclose material information and that, but for the defendants’ conduct, the plaintiffs either would not have bought the cars or would have paid less for them. Id. at *7. The plaintiffs did not allege that they bought cars directly from BMW or the other defendants; rather, the plaintiffs bought them from dealers, from private parties, or at auctions. Id. at *9. The court held that the plaintiffs did not have standing to sue under RICO when they did not purchase their cars directly from the defendants. Id. (“The Third Circuit and courts in this District have repeatedly held that such indirect purchasers lack standing to assert RICO claims.“).
Plaintiffs argue that they “are not ‘indirect purchasers’ as understood by Illinois Brick because they are the direct victims and targets of Defendants’ fraud” and “any intermediaries purely benefitted from the increased demand for OTC Zantac.” Id. at 14-15 (emphasis in original). Plaintiffs further argue that they “suffered the first—and perhaps only—injury by purchasing a drug with a material, undisclosed safety risk.” Id. at 15. Faced with identical arguments in Warren General Hospital v. Amgen Inc., 643 F.3d 77, 92 (3d Cir. 2011), the Third Circuit noted that Illinois Brick and its progeny:
[D]id not resolve what party was a direct purchaser by calculating exactly where the harm lay. In fact, the [Supreme] Court‘s discussion in those cases of the policy rationales underpinning the rule manifests the Court‘s intent to avoid linking direct purchaser status to injury calculations in determinations. In UtiliCorp, the consumer plaintiffs also argued that the public utility (the direct purchaser) had not been harmed by the antitrust defendant‘s actions, and that consumers had borne the full brunt of the injuries, thus justifying an exception to the Illinois Brick rule. The Court highlighted the need to apply the rule consistently: “[T]he process of classifying various market situations according to the amount of pass-on likely to be involved and its susceptibility of proof in a judicial forum would entail the very problems that the [indirect purchaser] rule was meant to avoid. The litigation over where the line should be drawn in a particular class of cases would inject the same massive evidence and complicated theories into treble-damages proceedings, albeit at a somewhat higher level of generality.
643 F.3d 77, 92 (3d Cir. 2011) (quoting UtiliCorp, 497 U.S. at 216-17).
The Court agrees with the Third Circuit‘s interpretation of Illinois Brick and UtiliCorp: there are no “direct-harm” or “first victim” exceptions to the indirect purchaser rule. Id.; see also Hu, 2021 WL 346974, at *4 (holding that there is no direct-harm exception to the indirect purchaser rule). Accordingly, the Plaintiffs’ assertion that they are not true indirect purchasers is unpersuasive. The bright-line indirect purchaser rule, as articulated in Illinois Brick and reiterated in UtiliCorp and Apple, is an unsurmountable hurdle for Plaintiffs. As the Supreme Court
Additionally, the Supreme Court has noted that “the bright-line rule of Illinois Brick means that there is no reason to ask whether the rationales of Illinois Brick ‘apply with equal force’ in every individual case” as it is unwise to “engage in ‘an unwarranted and counterproductive exercise to litigate a series of exceptions.‘” Id. at 1524 (quoting UtiliCorp, 497 U.S. at 216-17). Because the rationales underpinning the indirect purchaser rule are not dispositive, the Court need not discuss them here in order to apply the indirect purchaser rule to Plaintiffs’ RICO claim.
In sum, the Court‘s examination of the Supreme Court‘s rulings in cases such as Illinois Brick, UtiliCorp, and Apple, and of other caselaw applying those rulings, leads it to the conclusion that the indirect purchaser rule applies in the RICO context and in this case. Because Plaintiffs did not purchase OTC Zantac directly from Defendants, Plaintiffs’ RICO claim fails for lack of statutory standing.
VII. Conclusion
For the foregoing reasons, it is ORDERED AND ADJUDGED that Brand-Name Manufacturer Defendants’ Motion to Dismiss [DE 3115] is GRANTED. Count I of the Consolidated Amended Consumer Economic Loss Class Action Complaint [DE 2835] is DISMISSED WITH PREJUDICE.
DONE and ORDERED in Chambers, West Palm Beach, Florida, this 30th day of June, 2021.
ROBIN L. ROSENBERG
UNITED STATES DISTRICT JUDGE
Copies furnished to Counsel of Record