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PAINTERS AND ALLIED TRADES DISTRICT COUNCIL 82 HEALTH CARE FUND, a third-party healthcare payor fund, Annie M. Snyder, a California consumer, Rickey D. Rose, a Missouri consumer, John Cardarelli, a New Jersey consumer, Marlyon K. Buckner, a Florida consumer, and Sylvie Bigord, a Massachusetts consumer, on behalf of themselves and All others similarly situated, Plaintiffs, v. TAKEDA PHARMACEUTICAL COMPANY LIMITED, a Japanese corporation; Takeda Pharmaceuticals USA, Inc., an Illinois corporation (fka Takeda Pharmaceuticals North America, Inc.); and Eli Lilly & Company, an Indiana corporation, Defendants.
ORDER ON MOTION OF DEFENDANTS TAKEDA PHARMACEUTICAL COMPANY LIMITED AND TAKEDA PHARMACEUTICALS USA, INC. TO DISMISS UNDER RULES 12(b)(6) AND 9(b) AND/OR MOTION TO STRIKE CLASS ALLEGATIONS UNDER RULE 12(f) [ECF No. 173] and JOINDER OF ELI LILLY & COMPANY THERETO [ECF No. 174]
On August 21, 2020, Defendants Takeda Pharmaceutical Company Limited and Takeda Pharmaceuticals USA, Inc. (jointly, “Takeda”) filed their motion to dismiss Plaintiffs’ Second Amended Complaint pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure and to strike Plaintiffs’ class allegations under Rule 12(f).1 Defendant Eli Lilly & Company (“Lilly”) filed a joinder in the Motion.2 For the reasons stated below, the Court DENIES Takeda's Motion and DENIES Lilly's Joinder.
II. PROCEDURAL BACKGROUND
This putative class action was originally filed as part of a multi-district litigation in the Western District of Louisiana, MDL No. 6:11-md-2299 (the “MDL Court”), that consolidated claims related to the drug Actos.3 This case differs from the MDL cases because Plaintiffs here do not assert personal injury or product liability claims, but, rather, they allege that Takeda and Lilly conspired to market Actos fraudulently by concealing the association between its use and the development of bladder cancer.4 On September 26, 2017, the MDL Court ordered this case transferred to this district.5 On December 12, 2017, Plaintiffs filed a Second Amended Complaint. The SAC asserts claims for relief under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961–1968 (“RICO”), and state consumer fraud laws.6
On February 1, 2018, the Court dismissed this case, finding that Plaintiffs had not adequately pleaded causation.7 That decision was reversed in Painters & Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharm. Co. Ltd., 943 F.3d 1243 (9th Cir. 2019), cert. denied, ––– U.S. ––––, 141 S. Ct. 86, 207 L.Ed.2d 171 (2020). The Ninth Circuit held that Plaintiffs adequately alleged proximate causation to support their civil RICO claim and remanded the case for further proceedings. Id. at 1260. On August 21, 2020, Takeda filed the instant Motion and Lilly filed its Joinder, which adopts the contentions in Takeda's Motion and raises additional arguments specific to Lilly.
III. SUMMARY OF FACTUAL ALLEGATIONS
Takeda Pharmaceuticals USA, Inc., its parent company Takeda Pharmaceutical Company Ltd., and Eli Lilly & Co. developed and marketed a diabetes drug called Actos. Id. at 1246. Takeda obtained FDA approval for Actos in 1999. Id. Plaintiffs “allege that despite learning through multiple studies over the next several years that Actos increased a patient's risk of developing bladder cancer, Defendants refused to change Actos's warning label or otherwise inform the public of such risk.” Id.
Plaintiffs contend that Takeda and Lilly misled the FDA regarding the risk of bladder cancer by generating false studies, manipulating study results, and controlling the messaging about Actos to conceal aspects of the drug's mechanism that could have raised concerns.8 Plaintiffs also allege that Takeda and Lilly misled prescribing physicians, consumers, and third-party payors into believing that Actos did not create an increased risk of bladder cancer.9 According to Plaintiffs, Takeda and Lilly had reason to know about the increased bladder cancer risk but chose not to disclose it to increase profits from the sale of Actos.10
After the bladder cancer risk became known, sales of Actos dropped precipitously.11 A group of patients who developed bladder cancer and their families brought personal injury and wrongful death claims against Takeda and Lilly, and those claims were consolidated in the MDL case in the Western District of Louisiana. See Painters & Allied Trades, 943 F.3d at 1246.12 The MDL Court conducted a 37-day “bellwether” trial in 2014, and the jury returned a verdict in favor of the plaintiffs.13 The MDL Court concluded, among other things, that “the Plaintiffs presented evidence that the Defendants were aware of the risk of death by way of bladder cancer associated with Actos® use and that they chose to conceal and obfuscate those risks in order to sell more product and to increase their profit.”14
The instant action was filed by five individual patients and Painters and Allied Trades District Council 82 Health Care Fund (“Painters”), a third-party payor.15 The individual patients allege that neither they nor their physicians knew that Actos increased the risk of bladder cancer and that they would not have purchased Actos had they known.16 Painters claims that, as a result of the “fraudulent concealment of the bladder cancer risk,” it “reimbursed a significant number of claims at potentially elevated prices for Actos” that would not have been reimbursed “but for the fraud.”17
IV. LEGAL STANDARDS
A defendant may move to dismiss for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). To survive such a motion, the complaint must articulate “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint need not contain “detailed factual allegations,” but it must contain “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Id. at 555, 127 S.Ct. 1955. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
To state a RICO cause of action under 18 U.S.C. § 1964(c), a plaintiff must allege “ ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as ‘predicate acts’) (5) causing injury to the plaintiff's ‘business or property.’ ” Abcarian v. Levine, 972 F.3d 1019, 1028 (9th Cir. 2020) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)). In addition, a plaintiff must meet the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure if the RICO claim is based upon allegations of fraud. See, e.g., Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065–66 (9th Cir. 2004) (Rule 9(b) “applies to civil RICO fraud claims”).
“Rule 9(b) demands that the circumstances constituting the alleged fraud be ‘specific enough to give defendants notice of the particular misconduct ․ so that they can defend against the charge and not just deny that they have done anything wrong.’ ” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly–Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). “Any averments which do not meet that standard should be ‘disregarded,’ or ‘stripped’ from the claim for failure to satisfy Rule 9(b).” Id. “Averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).
“Federal Rule of Civil Procedure 9(b) provides that ‘[i]n alleging fraud ․, a party must state with particularity the circumstances constituting fraud,’ while ‘[m]alice, intent, knowledge, and other conditions of a person's mind may be averred generally.’ ” Sanford v. MemberWorks, Inc., 625 F.3d 550, 557–58 (9th Cir. 2010) (quoting Fed. R. Civ. P. 9(b)). “Consequently, ‘[t]he only aspects of wire [or mail] fraud that require particularized allegations are the factual circumstances of the fraud itself.’ ” Id. at 558 (quoting Odom v. Microsoft Corp., 486 F.3d 541, 554 (9th Cir. 2007)). “When an entire complaint, or an entire claim within a complaint, is grounded in fraud and its allegations fail to satisfy the heightened pleading requirements of Rule 9(b), a district court may dismiss the complaint or claim.” Vess, 317 F.3d at 1107. “The level of factual specificity needed to satisfy this pleading requirement will vary depending on the context.” In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1107 (9th Cir. 2013).
“The mail and wire fraud statutes are identical except for the particular method used to disseminate the fraud, and contain three elements: (A) the formation of a scheme to defraud, (B) the use of the mails or wires in furtherance of that scheme, and (C) the specific intent to defraud.” Eclectic Properties E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014) (citing Schreiber Distrib. Co. v. Serv–Well Furniture Co., Inc., 806 F.2d 1393, 1399 (9th Cir. 1986)). “[W]ire fraud requires the intent to deceive and cheat—in other words, to deprive the victim of money or property by means of deception.” United States v. Miller, 953 F.3d 1095, 1103 (9th Cir. 2020) (emphasis removed).
“Proof of an affirmative, material misrepresentation supports a conviction of mail fraud without any additional proof of a fiduciary duty.” United States v. Benny, 786 F.2d 1410, 1418 (9th Cir. 1986). However, “[t]he fraudulent scheme need not be one which includes an affirmative misrepresentation of fact, since it is only necessary for the government to prove that the scheme was calculated to deceive persons of ordinary prudence.” United States v. Bohonus, 628 F.2d 1167, 1172 (9th Cir. 1980). The “[d]eceitful concealment of material facts is not constructive fraud but actual fraud.” Cacy v. United States, 298 F.2d 227, 229 (9th Cir. 1961). While “there can be no fraud absent a duty to speak,” a “duty to disclose” may arise in some circumstances “from the telling of a half-truth, independent of any responsibilities arising from a trust relationship.” United States v. Laurienti, 611 F.3d 530, 541 (9th Cir. 2010) (affirming convictions in criminal securities fraud case).
A. Takeda's Motion
1. Plaintiffs’ Allegations of Fraud Satisfy Rule 9(b)
a. Plaintiffs’ Allegations Are Sufficiently Detailed and Specific
“The elements of a civil RICO claim are as follows: ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as ‘predicate acts’) (5) causing injury to plaintiff's ‘business or property.’ ” Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)). Here, the predicate acts are based upon alleged mail and wire fraud.18 Takeda argues that Plaintiffs failed to meet the pleading standards of Rules 12(b)(6) and 9(b).19 According to Takeda, “there is no statement in the Complaint identifying what statement was fraudulent, by whom, to whom it was made, or when.”20 Takeda argues that “allegations regarding communications exchanged between Takeda, Lilly, and other alleged coconspirators—which comprise the bulk of the[ ] ‘mail and wire fraud’ allegations—fail to state with particularity any actual fraud committed against Plaintiffs, their prescribers or payors, or anyone connected to Plaintiffs.”21 According to Takeda, such internal communications “do not detail any actual misrepresentations or omissions made to the Plaintiffs in this case or others in their relevant decision-making chains.”22
Plaintiffs contend that they have adequately pleaded their predicate fraud claims, citing numerous paragraphs in the SAC 23 that they claim allege “the factual circumstances of the fraud as it relates to each Plaintiff, i.e., the when, the what, and the how.”24 For example, Plaintiffs state they have pleaded “[w]hen each [consumer] Plaintiff first purchased Actos” and “[w]hen each [consumer] Plaintiff stopped purchasing Actos.”25 This is not what is meant by “when” under Rule 9(b)’s “who, what, when, where, and how” test. Vess, 317 F.3d at 1106. The Ninth Circuit has “interpreted Rule 9(b) to mean that the pleader must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986) (emphases added; citations omitted). Thus, to survive a motion to dismiss, Plaintiffs must plead who made what false representation where, when, and how. See, e.g., Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (“To satisfy Rule 9(b), a pleading must identify ‘the who, what, when, where, and how of the misconduct charged,’ as well as ‘what is false or misleading about [the purportedly fraudulent] statement, and why it is false.’ ” (quoting Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010))).
Takeda, however, contends that Plaintiffs’ “case rests primarily, if not entirely, on putative fraud-by-omission; that is, Defendants’ purported concealment of and failure to disclose Actos's bladder cancer risks.”26 While Takeda correctly argues that a plaintiff is not relieved of its Rule 9(b) burden merely because the plaintiff's fraud case is based upon a fraud-by-omission theory,27 “a plaintiff in a fraud-by-omission suit faces a slightly more relaxed burden, due to the fraud-by-omission plaintiff's inherent inability to specify the time, place, and specific content of an omission in quite as precise a manner.” Tait v. BSH Home Appliances Corp., Case No. 10-cv-00711 DOC, 2011 WL 3941387, at *2 (C.D. Cal. Aug. 31, 2011) (citing Baggett v. Hewlett-Packard Co., 582 F. Supp. 2d 1261, 1267 (C.D. Cal. 2007)); see also United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001) (“Rule 9(b) may be relaxed to permit discovery in a limited class of corporate fraud cases where the evidence of fraud is within a defendant's exclusive possession”); UMG Recordings, Inc. v. Glob. Eagle Entm't, Inc., 117 F. Supp. 3d 1092, 1107 (C.D. Cal. 2015) (where fraudulent omission is at issue, “the requirements of Rule 9(b) are relaxed, but not eliminated” (citations omitted)); Waldrup v. Countrywide Fin. Corp., Case No. 13-cv-08833-CAS, 2014 WL 3715131, at *5 (C.D. Cal. July 23, 2014) (“while the requirements of Rule 9(b) are relaxed for fraudulent omission claims, they are not eliminated”).
For example, in a case involving scuba diving computers, the plaintiff alleged that (1) the defendant advertised and distributed the dive computers without disclosing the material fact that the computers were defective; (2) the defendant advertised the dive computers as safe; and (3) the defendant knew that the computers contained safety defects, which it learned from customer complaints and its work repairing the alleged defects. Huntzinger v. Aqua Lung Am., Inc., Case No. 15-cv-1146 WQH, 2015 WL 8664284, at *1 S.D. Cal. Dec. 10, 2015. The district court concluded that the allegations met the requirements of Rule 9(b). Id. at *8.
In Martinez v. Nash Finch Co., 886 F. Supp. 2d 1212 (D. Colo. 2012), the district court explained that “[a]lthough Rule 9(b)’s requirement of particularity in pleadings applies to claims of fraudulent omission, that standard is modified somewhat” in omission cases. Id. at 1216. In such cases, the plaintiff “must sufficiently identify ‘the particular information that should have been disclosed, the reason the information should have been disclosed, the person who should have disclosed it, and the approximate time or circumstances in which the information should have been disclosed.’ ” Id. (quoting S.E.C. v. Nacchio, 438 F. Supp. 2d 1266, 1277 (D. Colo. 2006)). The defendants in Martinez alleged that a grocery store advertised that it was “[a] great way to save—plus 10% at the register!” Id. at 1214. The plaintiffs contended that “they understood the promotional language to mean that the posted price would be reduced by 10% at the register, resulting in a 10% savings.” Id. at 1215. “The reality, however, was precisely the opposite—at the register, the posted or advertised price was increased by 10%.” Id. The plaintiffs alleged they were misled by the store's failure to disclose “that posted or advertised prices would be increased by 10% at the register.” Id. at 1216. The district court held that the plaintiffs satisfied the Rule 9(b) pleading requirement. Id. at 1216-17. Although the plaintiffs did “not identify the time and place of every advertisement that included the pertinent language,” the court concluded that “under the circumstances[ ] the failure to allege such matters” did not deprive the defendant of “meaningful notice of the grounds upon which” the plaintiffs based their claim. Id. at 1217. The plaintiffs “appear[ed] to contend” that the defendant “commonly used” the marketing language in question, “suggesting that [the defendant] made repeated and systematic use of the misleading language.” Id. The district court further explained that the defendant was “[p]resumably ․ aware of the contents of its own advertising materials, and thus, [the defendant] can readily ascertain when and where it used the ‘great way to save—plus 10%’ language, or, at the very least, can clarify the matter via discovery.” Id. Under these circumstances, the court found that the plaintiffs “pled their claims of deception ․ with sufficient specificity to satisfy Rule 9(b).” Id.
Here, Plaintiffs meet the Rule 9(b) standard. Among other things, Plaintiffs allege the following:
• Beginning in the 1980s, Takeda worked to develop the drug that would become Actos, partnering with “the Upjohn Company, a pharmaceutical company with an established presence in the United States and familiarity with [FDA] regulations and protocols” on the development of the drug.28
• In a letter dated September 21, 1993, Upjohn informed Takeda that it would not proceed with the development of Actos, stating that Upjohn's Pharmaceutical Executive Council “decided that further clinical development of pioglitazone could not be justified based on their concern regarding pioglitazone's margin of safety.”29
• Takeda asked Upjohn to state that it was withdrawing from the development of Actos for business rather than safety reasons.30 The request caused concern among some Upjohn personnel, with one stating that his colleagues at Upjohn “are concerned about the lack of frankness (and honesty?) of the Takeda statement.”31
• Takeda proceeded to develop Actos independently. A 1996 study of Actos in rats showed the development of abnormal bladder cells and tumor formation.32 Takeda then hired Dr. Sam Cohen of the University of Nebraska Medical Center “to devise an explanation” for why rats developing cancer after exposure to Actos did not indicate a similar risk for humans.33 According to Plaintiffs, the Cohen hypothesis “was a sham theory, designed to hide the observed bladder cancer risks.”34
• In January 1999, Takeda submitted its New Drug Application for Actos to the FDA and began discussions with Lilly regarding a marketing partnership for the drug.35 Lilly “was concerned about why Upjohn had cancelled its prior partnership with Takeda.”36 On January 21, 1999, Takeda's Kunio Iwatani sent Lilly's Larry Ellingston a message stating that Upjohn did not mention the safety of pioglitazone to the FDA and that “it might be advisable for us to keep saying that Upjohn's decision” was based upon business rather than safety concerns.37
• Before entering into the co-promotion agreement with Takeda, Lilly prepared a PowerPoint slide that listed “bladder cancer” below the heading “most significant adverse events” for the drug that would be marketed as Actos.38
• “Takeda kept Lilly up to date on all issues relating to Actos and obtained Lilly's consent not to disclose information about the bladder cancer risk to Lilly distributors until Lilly had received Takeda's instructions.”39 Around January 2003, Lilly “agreed with Takeda not to raise the bladder cancer issue during a telephone conference call with physicians.”40
• “In Comprehensive Meeting Materials dated August 5, 2002, a section entitled ‘Responses to FDA,’ refers to a four-way conference call among Lilly and several Takeda employees; the stated reason for the call was to ‘stress the importance of managing information’ regarding an association between Actos and bladder cancer and confirm the future communication routes.”41
• To promote Actos over a competing drug, Avanida, Takeda and Lilly initially marketed Actos as having the additional benefit of reducing cholesterol.42 Underlying this claim was the fact that Actos was both a “PPAR gamma agonist” and a “weak PPAR alpha agonist.”43 The FDA, however, raised concerns about such dual PPAR alpha/gamma agonists.44
• A summary dated August 13, 2002, of a conversation between Takeda and the FDA's Dr. Jeri El-Hage expressed concern regarding an increased risk of bladder cancer.45 “Dr. El-Hage explained that ‘[b]ased on these findings, and the fact that other dual PPAR agonist have discontinued from development, the Division does not feel that the general population is being adequately informed about the possible risk of dual PPARs.’ ”46
• “In response to the FDA's concern over Actos and bladder cancer, Takeda executives converged in an ‘Actos FDA Response Meeting’ on August 12-13, 2002.”47 The meeting included a PowerPoint presentation by Philip Collett, a Takeda executive in Europe, which included the following comments on Takeda's experience with marketing Actos in Europe: (1) Takeda “stuck to” Dr. Cohen's hypothesis “despite many challenges”; and (2) Takeda did not “ ‘turn over any stones,’ ” such as undertaking “ ‘database searches.’ ”48 “Takeda communicated its strategy to Lilly via electronic wires.”49 “Lilly, in turn, instructed its sales force to stop promoting Actos as a dual PPAR agonist and to start telling prescribers that Actos was a selective PPAR gamma agonist—a fact that Lilly knew was false.”50 Takeda also convinced “the FDA that Actos was not a dual PPAR agonist, and that it was only an activator for PPAR gamma—not PPAR alpha.”51
• Takeda manipulated scientific data to hide the association between Actos and bladder cancer.52 For example, Takeda and Lilly “conspired” to misrepresent data published in The Lancet in 2005 by failing to report a benign neoplasm in the control group, which “would have rendered a statistically significant difference [in bladder cancer rates] between the Actos and placebo groups.”53
In sum, Plaintiffs allege that Takeda knew that Actos caused an increased risk of bladder cancer, but Takeda took a series of steps to conceal this fact from regulators, physicians, and, ultimately, consumers. Plaintiffs allege numerous detailed allegations in support of this claim.
Takeda maintains that these allegations are nonetheless insufficient because “Plaintiffs do not contend that they or their prescribing physicians were actually defrauded” by the statements in the SAC.54 Rather, “all Plaintiffs have done is cite e-mails and letters that do not detail any actual misrepresentations or omissions made to the Plaintiffs in this case or others in their relevant decision-making chains.”55 To be sure, Plaintiffs’ allegations are less extensive with respect to the claims of each particular Plaintiff. With respect to Painters, for example, Plaintiffs do not allege specific misleading communications. Rather, Plaintiffs aver more broadly that “the Enterprise participants ․ deprived each consumer and their prescriber of material information they needed to make informed decisions about whether to purchase Actos ․”56
Similarly, for the individual Plaintiffs, the SAC does not allege specific communications that they or their physicians received from Defendants.57 Rather, Plaintiffs allege, on information and belief, that the individual Plaintiffs’ physicians were “never informed about Actos’ association with bladder cancer” when the individual Plaintiffs purchased and consumed Actos.58 Nonetheless, Plaintiffs plead the who, what, where, when, and how of a broad scheme that allegedly occurred over many years, and they support their allegations of fraud with specific averments, including references to numerous specific communications with dates and names. Further, the Court evaluates the SAC under a slightly relaxed burden because Plaintiffs rely to a significant degree on a fraud-by-omission theory, as discussed above.
Under these circumstances, the Court concludes that Plaintiffs allege their underlying fraud claim with adequate specificity. Given the nature of the allegations, which are based in part on a fraud-by-omission theory, and given the broad scope of the alleged scheme to conceal the association between Actos and bladder cancer, the allegations in the SAC are sufficient to meet the notice requirements of Rule 9(b).
b. Plaintiffs Adequately Allege Fraudulent Concealment or Fraud by Omission
Takeda also contends that Plaintiffs have not met their burden to allege fraud by omission because such a claim requires an “independent duty” to disclose.59 According to Takeda, Plaintiffs’ case “rests primarily, if not entirely, on putative fraud-by-omission; that is, Defendants’ purported concealment of and failure to disclose Actos's bladder cancer risk.”60 As discussed above, Takeda argues that a plaintiff is not relieved of its Rule 9(b) burden merely because the plaintiff's fraud case is based upon a fraud-by-omission theory.61 Takeda further argues that absent “an independent duty” to disclose, failure to disclose cannot be the basis of a fraud.62
“Mail and wire fraud can be premised on either a non-disclosure or an affirmative misrepresentation.” Eller v. EquiTrust Life Ins. Co., 778 F.3d 1089, 1092 (9th Cir. 2015) (citing United States v. Benny, 786 F.2d 1410, 1418 (9th Cir. 1986)). “A non-disclosure, however, can support a fraud charge only ‘when there exists an independent duty that has been breached by the person so charged.’ ” Id. (quoting United States v. Dowling, 739 F.2d 1445, 1449 (9th Cir. 1984), rev'd on other grounds, 473 U.S. 207, 105 S.Ct. 3127, 87 L.Ed.2d 152 (1985)). Such an independent duty may arise from a fiduciary relationship or a statute requiring disclosure. See id.
There are two problems with Takeda's argument. First, Plaintiffs persuasively contend that Takeda did, in fact, owe a duty to disclose.63 For example, Plaintiffs cite a federal statute that provides, inter alia, that “[a] drug or device shall be deemed to be misbranded ․ [i]f its labeling is false or misleading in any particular.” 21 U.S.C. § 352. In an MDL case involving the epilepsy drug Neurontin, the district court held that “a manufacturer of a pharmaceutical has a duty to disclose to physicians and patients material facts about the risks of the drug, particularly when it is engaged in off-label marketing for uses not approved by the FDA, if it knows that the plaintiff and/or his prescriber does not know or cannot reasonably discover the undisclosed facts.” In re Neurontin Mktg., Sales Practices & Prod. Liab. Litig., 618 F. Supp. 2d 96, 110 (D. Mass. 2009). The court explained that “courts have routinely held that a manufacturer of a drug has a duty to warn physicians, and in some cases, warn patients, about the dangers of the administration of a drug.” Id. (citations omitted); see also Ringelestein v. Johnson & Johnson, Case No. 16 C 4970, 2017 WL 2362630, at *3 (N.D. Ill. May 31, 2017) (“a pharmaceutical company has a duty to disclose known risks of its drugs to patients and their physicians”).
Second, “fraudulent concealment—without any misrepresentation or duty to disclose—can constitute common-law fraud.” United States v. Colton, 231 F.3d 890, 899 (4th Cir. 2000). As the Fourth Circuit explained,
This does not mean, however, that simple nondisclosure similarly constitutes a basis for fraud. Rather, the common law clearly distinguishes between concealment and nondisclosure. The former is characterized by deceptive acts or contrivances intended to hide information, mislead, avoid suspicion, or prevent further inquiry into a material matter. The latter is characterized by mere silence. Although silence as to a material fact (nondisclosure), without an independent disclosure duty, usually does not give rise to an action for fraud, suppression of the truth with the intent to deceive (concealment) does.
Id. (citing Stewart v. Wyoming Cattle-Ranche Co., 128 U.S. 383, 388, 9 S.Ct. 101, 32 L.Ed. 439 (1888)). Here, Plaintiffs do not merely allege nondisclosure. Rather, they allege that Takeda actively sought to conceal the bladder cancer risks that Actos posed. For example, Plaintiffs allege that Takeda hired an expert to develop a sham theory 64 and changed its marketing strategy with respect to whether Actos was a dual PPAR alpha/gamma agonist once such dual agonists raised concerns about increased risk of bladder cancer.65
c. Plaintiffs’ Case Does Not Depend upon a “Fraud on the FDA” Theory
Finally, Takeda argues that “Plaintiffs’ claims appear to also rely primarily, if not entirely, on alleged omissions to the FDA, as part of the FDA approval process of the Actos label.”66 Takeda contends that such “ ‘fraud on the FDA’ ” allegations “cannot give rise to private statutory and common law fraud claims by civil litigants.”67 In support of this contention, Takeda cites Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 121 S.Ct. 1012, 148 L.Ed.2d 854 (2001), which held that the plaintiffs’ state law claims in that case for “fraud-on-the-FDA” conflicted with and were “therefore impliedly pre-empted by[ ] federal law.” Id. at 348, 121 S.Ct. 1012.
Takeda's argument is misguided because Plaintiffs do not rely exclusively on a “fraud on the FDA” theory. Plaintiffs allege not merely that Takeda defrauded the FDA, but also that Takeda, Lilly, or persons acting on their behalf made specific false or misleading representations and omissions directly to doctors and in published articles.68 Accordingly, even assuming that Takeda's alleged misrepresentations to the FDA do not give rise to a private cause of action,69 Plaintiffs have still stated a claim because the predicate fraud claim does not rely solely on alleged misrepresentations to the FDA.
2. Plaintiffs Adequately Allege Their RICO Claims
Takeda argues that Plaintiffs fail to allege the specific elements of a RICO claim. Specifically, Takeda contends that Plaintiffs fail to allege adequately a RICO “enterprise” and the required “pattern” of racketeering activity. Takeda's argument is foreclosed by the Ninth Circuit's en banc decision in Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007). There, the plaintiff alleged an improper marketing arrangement—spanning a period of almost two years—between Best Buy and Microsoft through which Best Buy promoted Microsoft's products and provided consumer information to Microsoft in exchange for payment and cross-promotion. Id. at 552-53. The Ninth Circuit held that the plaintiff adequately pleaded an associated-in-fact enterprise for RICO purposes. Id. The alleged enterprise here is similar. Plaintiffs allege that over a multi-year period Takeda and Lilly conspired to market Actos in a fraudulent manner that concealed the association between Actos and bladder cancer. Cf. id. (discussing criteria for an associated-in-fact enterprise). In view of the similarity between the enterprise alleged in Odom and the enterprise alleged here, Plaintiffs have sufficiently pleaded their RICO claims.
3. Takeda's Request to Strike Class Allegations
Finally, Takeda requests that the Court strike the class allegations.70 See Fed. R. Civ. P. 12(f) (“The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”). For example, Takeda argues that 20% of class members continued to take Actos after the bladder cancer risk was disclosed and that such individuals could not claim that they would not have purchased Actos had they known of the risk.71 Further, Takeda contends that “[c]onsumers who previously asserted, settled, and released personal injury claims arising out of their use of Actos, and the TPPs and other entities that resolved and released liens related to settling claimants, could not be part of any class in this case.”72 Takeda also maintains that “[t]he proposed class cannot be certified because pervasive individual questions about causation, reliance, injury, and damages are inescapable.”73 While there may indeed be substantial hurdles to class certification in this case, the Court declines to strike the class allegations at this juncture. See, e.g., Guido v. L'Oreal, USA, Inc., Case No. CV 11-1067 CAS, 2011 WL 13152488, at *11 C.D. Cal. June 27, 2011 (motion to strike class allegations was “premature given that the parties have not commenced discovery, no Rule 16 conference has occurred, and plaintiffs have not filed a motion for class certification”). Takeda's “arguments are better addressed on a motion for class certification with a more complete record.” Id.
B. Lilly's Joinder
In addition to adopting Takeda's arguments, Lilly makes the following additional arguments:
1. Lilly-Specific Allegations
Lilly contends that the specific allegations against it are “scant and conclusory” and that they do not meet the requirements of Rules 9(b) or 12(b)(6).74 In response, Plaintiffs point to many specific allegations in the SAC,75 some of which are quoted or summarized below:
• On January 21, 1999, Takeda transmitted a fax to Lilly's Larry Ellingston stating that the “FDA had never been told” that Upjohn abandoned the development of Actos for safety reasons.76 Among other things, the fax included the statement, “it might be advisable for us to keep saying that Upjohn's decision is based on the results of internal business evaluation, and efficacy and safety of pioglitazone have been demonstrated clearly by Takeda.”77
• Before entering the co-promotion agreement with Takeda, Lilly prepared a PowerPoint slide that listed “ ‘bladder cancer’ ” below the heading “ ‘most significant adverse risks for pioglitazone[.]’ ”78
• The co-promotion agreement between Takeda and Lilly “provided for an elaborate governance structure, designed to give each company an equal say in running the joint venture.”79
• “Lilly agreed to a target of 800,000 primary details per year for Actos,” which, over the course of seven years, “amounts to more than five million presentations of Actos® by Lilly representatives” to U.S. doctors.80 Lilly was also “charged with the broader overall marketing and promotion of Actos, including activities not traditionally associated with marketing, including: overseeing customer medical services; participation in clinical studies; participation in regulatory issues; exchange of information related to Adverse Events, Device Adverse Events; and post-marketing surveillance; and communications with the FDA about labeling issues.”81
• “Lilly was also charged with generating scientific materials about Actos, which despite the appearance of independence, were designed to persuade doctors to prescribe Actos. Lilly also explicitly agreed not to use data from clinical studies that would negatively affect sales of Actos, which amounted to an agreement to hide from the public and the medical community results of clinical studies that showed problems with Actos.”82
• “Takeda kept Lilly up to date on all issues relating to Actos and obtained Lilly's consent not to disclose information about the bladder cancer risk to Lilly distributors until Lilly had received Takeda's instructions.”83
• Lilly “agreed with Takeda not to raise the bladder cancer issue during a telephone conference call with physicians in and around January, 2003.”84
• After receiving direction from Takeda, Lilly “instructed its sales force to stop promoting Actos as a dual PPAR agonist and to start telling prescribers that Actos was a selective PPAR gamma agonist—a fact that Lilly knew was false.”85
• “On information and belief, Lilly thereafter engaged in the wholesale destruction of documents linking Actos to PPAR alpha activation, and made changes to its website in response to the FDA's 2002 inquiries. This was done in furtherance of the ongoing enterprise to conceal bladder cancer risks. Lilly was fully aware that Takeda was changing its story and knew that representing Actos as a selective PPAR gamma agonist to the FDA was false. Nonetheless, Lilly contributed to the fraud by retooling its promotional efforts by instructing its sales force to pitch the new message.”86
• “When the PROactive study was published in the Lancet in 2005, it did not reveal the statistically significant increase in the risk of bladder cancer. Dr. John Dormandy, the lead author of the paper, conspired with Takeda and Lilly to misrepresent the data. Specifically, the PROactive paper published in 2005 reported that there were 14 (0.5%) cases of bladder neoplasms in the Actos group and 6 (0.2%) in the placebo group. In truth, one of the neoplasms in the placebo group had been deemed to be a benign tumor and, per the study's protocol, should not have been counted. This change in the data from 6 to 5, however, would have rendered a statistically significant difference between the Actos and placebo groups.”87
The SAC also quotes from the MDL Court's decision in the MDL “bellwether” trial, which, among other things, states the following:
[T]his Court concludes that the Plaintiffs have pointed to substantial evidence, of such quality and weight, that was put into the record during the trial of this matter, to establish a legally-sufficient basis for the jury's finding reflecting that Actos® exposure creates an increased risk of bladder cancer; that both Takeda and Lilly were aware that Actos® creates this increased risk; that both Takeda and Lilly undertook a concerted, coordinated pattern of effort, of several years’ duration, to prevent the FDA, the medical community, and the public from obtaining knowledge of this risk; and that the primary reason for this effort was to preserve the tremendous profits generated by the sale of Actos® in the United States and worldwide.
MDL Court Rule 50(b) Opinion, 2014 WL 12776173, at *15.88
Considering the foregoing, it is difficult to view the allegations against Lilly as “scant and conclusory”; they are enough to meet the Rule 9(b) and 12(b)(6) standards. See also Section V.A.1, supra (addressing Takeda's similar argument).
2. Post-2006 Claims
Lilly also argues that claims relating to payments for Actos after the end of the co-promotion agreement with Takeda in 2006 should be dismissed.89 Specifically, Lilly contends that the claims against it by Plaintiffs Snyder and Rose should be dismissed because both of them began taking the drug after the co-promotion agreement ended.90 Lilly also asks the Court to dismiss all claims “to the extent they are based on post-September 2006 ingestion of or payment for Actos.”91
Plaintiff Snyder alleges the following: On or about October 16, 2009, Snyder was prescribed a 15 mg daily dose of Actos, and she continued to use Actos until August 2011.92 Snyder never saw or heard about the September 15, 2010, FDA alert or the June 15, 2011, FDA bladder cancer warning.93 During the period that Snyder purchased Actos, she was never informed regarding Actos's bladder cancer risks.94 “Upon information and belief,” Snyder's prescriber “was never informed” about the risk of bladder cancer associated with Actos.95 “Had [ ] Snyder known that Actos increased the risk of causing bladder cancer, she would never have purchased and ingested the drug” nor submitted claims to her third-party payor insurer.96 The allegations are similar with respect to Plaintiff Rose.97
Whether Lilly's pre-2006 conduct caused harm after the co-promotion agreement expired is a question of fact that the Court does not reach on a motion to dismiss. Efforts to conceal may well continue to cause harm until that which was concealed is disclosed. A fortiori, with respect to those patients who began taking Actos before the co-promotion agreement ended but continued to take the drug after the agreement expired, it is logical that Lilly's marketing efforts affected the decision of patients to begin taking the drug and therefore to continue taking the drug after the co-promotion agreement ended. Accordingly, the SAC adequately states a claim for relief with respect to these patients.
3. Preemption and Preclusion
Finally, Lilly argues that it never had the ability independently to alter the Actos warnings and that Plaintiffs’ claims against Lilly are therefore preempted.98 Plaintiffs’ arguments in opposition are persuasive.99
Plaintiffs respond that the MDL Court already decided this issue in favor of Plaintiffs.100 Lilly replies that the law-of-the-case doctrine does not apply where the prior ruling was “clearly erroneous.”101 The MDL Court's conclusion, however, is based upon sound reasoning. See MDL Court Rule 50(b) Opinion, 2014 WL 12776173, at *17-*19.
First, the MDL Court distinguished the cases that Lilly cited as applying to generic manufacturers, which Lilly is not. Id.
Second, the MDL Court cited the U.S. Supreme Court's decision in Wyeth v. Levine, 555 U.S. 555, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009), explaining that there the Court rejected “the foundational premise upon which Lilly's argument rests—that information available concerning a health risk cannot be shared, or that providing that information or providing an enhanced warning of a serious health risk associated with an approved drug, automatically constitutes a misbranding violation[.]” Id. at *18 (citing Wyeth, 555 U.S. at 570, 129 S.Ct. 1187).
Third, the MDL Court cited testimony by Ron Hoven, “who worked for Lilly for almost 30 years” and “was responsible for marketing activities for Actos® for Lilly in the United States from 2004 to 2006.” Id. Hoven “acknowledged that the limitation upon which Lilly now is relying, in the instant motion, played no role in Lilly's marketing operations.” Id.
Fourth, the MDL Court cited evidence that Lilly “did not choose to operate as a simple marketer of Actos®, a company simply taking orders from Takeda and carrying them out; Lilly chose, instead, to play a much larger role in the development of the labeling and dissemination of information concerning Actos®.” Id. at *19.
Finally, the Court agrees with Plaintiffs that enforcement of RICO is “consistent and complementary to the FDCA's purpose of ensuring honest disclosures of drug efficacy.”102 See POM Wonderful, 573 U.S. at 106, 134 S.Ct. 2228 (Lanham Act claims may challenge food and beverage labels even though they are regulated by the FDCA). Accordingly, the Court rejects Lilly's arguments based upon preemption or preclusion.
For the foregoing reasons, the Court hereby ORDERS as follows:
1. Takeda's Motion to Dismiss Under Rules 12(b)(6) and 9(b) and/or Motion to Strike Class Allegations Under Rule 12(f) is DENIED.
2. Lilly's Joinder in Takeda's Motion is likewise DENIED.
3. The Court sets a video Status Conference on Friday, March 5, 2021, at 1:00 p.m. The parties are DIRECTED to file a Joint Status Report advising the Court of the current posture of the case no later than 12:00 noon on Friday, February 26, 2021.
IT IS SO ORDERED.
1. Takeda's Mot. to Dismiss Under Rules 12(b)(6) and 9(b) and/or Mot. to Strike Class Allegations Under Rule 12(f) (the “Motion”) [ECF No. 173].
2. Lilly's Joinder in the Motion (the “Joinder”) [ECF No. 174].
3. ACTOS is a registered trademark of Takeda Pharmaceutical Company Limited, Reg. No. 2307686.
4. See generally Second Am. Compl. (the “SAC”) [ECF No. 127].
5. Order on Mot. to Transfer Case [ECF No. 55].
6. See SAC 55-74.
7. See Order Partially Granting Mot. to Dismiss [ECF No. 140].
8. See, e.g., SAC ¶¶ 31-35, 48-50, 59-63, 70-87, & 95.
9. See, e.g., id. at ¶¶ 1, 44, 45, 60-62, 67, 79, 85-87, 100, 134, & 135.
10. See, e.g., id. at ¶¶ 25-28 & 36.
11. Id. at ¶ 102.
12. See also SAC at ¶¶ 111-26.
13. Id. at ¶ 124. The parties later “agreed to a global settlement program for all eligible personal injury claimants who used Actos before December 1, 2011 and had been diagnosed with bladder cancer.” Painters & Allied Trades, 943 F.3d at 1246 (citing In re Actos (Pioglitazone) Prods. Liab. Litig., 274 F. Supp. 3d 485, 503 (W.D. La. 2017)).
14. Id. at ¶ 126 (quoting In re Actos (Pioglitazone) Prod. Liab. Litig., No. 6:11-MD-2299, 2014 WL 12776173, at *36 (W.D. La. Sept. 5, 2014) (the “MDL Court Rule 50(b) Opinion”)).
15. Id. at ¶¶ 2-7.
16. Id. at ¶¶ 139-205.
17. Id. at ¶ 138.
18. See, e.g., SAC at ¶¶ 254 & 257.
19. Motion 7:23-9:8.
20. Id. at 9:14-15.
21. Id. at 9:21-25 (emphasis removed).
22. Id. at 11:6-8.
23. See, e.g., SAC ¶¶ 133–35, 137, 139, 140, 143–45, 148, 150–53, 157–59, 162, 164–67, 171–73, 176, 178–81, 185–87, 190, 192–95, 197–99, 202–05, & 240.
24. Plaintiffs’ Opp'n to Takeda's Motion (the “Opposition”) [ECF No. 180] 18:17-20:9.
25. Id. at 18:20-22.
26. Motion at 11:18-20.
27. See id. at 11:16-27.
28. SAC at ¶ 23.
29. Id. at ¶ 25 (emphasis removed).
30. Id. at ¶ 26.
31. Id. at ¶ 27.
32. Id. at ¶ 28.
33. Id. at ¶ 29.
34. Id. at ¶ 31; see also id. at ¶¶ 29-33.
35. Id. at ¶ 35.
38. Id. at ¶ 36.
39. Id. at ¶ 44.
40. Id. at ¶ 45.
41. Id. at ¶ 46.
42. Id. at ¶ 53.
43. Id. at ¶ 54. According to Plaintiffs, Actos “operate[s] by activating a receptor in cells” known as “a peroxisome proliferator-activated receptor” or “PPAR.” Id. ¶ 21. “There are several different kinds of PPARs: alpha, gamma, delta, and dual/mixed.” Id. at ¶ 22. An agonist “activat[es]” a receptor; thus, a dual PPAR alpha/gamma receptor activates both alpha and gamma PPAR receptors. See id.
44. Id. at ¶ 55.
45. Id. at ¶ 57.
46. Id. at ¶ 58.
47. Id. at ¶ 60.
49. Id. at ¶ 62.
51. Id. at ¶ 63.
52. See, e.g., id. at ¶¶ 73-91.
53. Id. at ¶ 85.
54. Motion 10:23-24.
55. Id. at 11:6-8.
56. SAC ¶ 135.
57. See, e.g., id. ¶¶ 139-205.
58. See, e.g., id. at ¶ 149.
59. Motion 11:22-27.
60. Id. at 11:18-20.
61. Id. at 11:16-27.
62. Id. at 11:22-27.
63. Opposition at 22:10-23:4.
64. SAC at ¶ 31.
65. Id. at ¶¶ 53-62.
66. Motion 11:28-12:1.
67. Id. at 12:2-4.
68. See SAC at ¶¶ 62, 70, 71, 85-87, & 100.
69. See POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102, 134 S.Ct. 2228, 189 L.Ed.2d 141 (2014) (FDCA does not preclude a private party from bringing a Lanham Act claim challenging misleading a food label even though label is regulated by the FDCA).
70. Motion 19:1-25:20.
71. Id. at 21:4-15.
72. Id. at 21:17-20.
73. Id. at 23:18-19.
74. Joinder at 3:12-13.
75. See SAC ¶¶ 1, 35-50, 51-54, 62-65, 70, 73, 84, 85, & 88-92.
76. SAC ¶ 35.
78. Id. at ¶ 36 (alteration in original).
79. Id. at ¶ 37.
80. Id. at ¶ 38.
81. Id. at ¶ 39.
82. Id. at ¶ 40.
83. Id. at ¶ 44.
84. Id. at ¶ 45.
85. Id. at ¶ 62.
87. Id. at ¶ 85.
88. See SAC at ¶¶ 125 & 126.
89. Joinder 1:8-2:22.
90. Those periods are October 2009 to August 2011 for Snyder and May 2007 to November 2011 for Rose. Id. at 2:13-16.
91. Lilly passingly requests that the Court strike the class allegations. See id. at 2:20-22. The Court declines to strike the class allegations for the same reasons discussed above with respect to Takeda's Motion. See Section V.A.3, supra.
92. SAC ¶ 139.
93. Id. at ¶¶ 141 & 142.
94. Id. at ¶ 145.
95. Id. at ¶ 149.
96. Id. at ¶ 151.
97. See id. ¶¶ 152-65.
98. Joinder 4:16-9:28.
99. See Pl.’s Opp'n to Joinder at 3:5-8:19 [ECF No. 181].
100. See Opposition at 3:9-4:27 (quoting MDL Court Rule 50(b) Opinion, 2014 WL 12776173, at *17).
101. Lilly's Reply ISO Joinder [ECF No. 186] at 5:18-19.
102. Opp'n to Joinder 8:16-18.
JOHN W. HOLCOMB, UNITED STATES DISTRICT JUDGE
Response sent, thank you
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Docket No: Case No. 2:17-cv-07223-JWH-ASx
Decided: February 19, 2021
Court: United States District Court, C.D. California.
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