Meijer, Inc. v. Ranbaxy Inc.

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

___________________________________

)

In re: Ranbaxy Generic Drug )

Application Antitrust Litigation, ) MDL No. 19-md-02878-NMG

)

This Document Relates To: )

)

All Cases )

)

___________________________________)

MEMORANDUM & ORDER

GORTON, J.

This multi-district ligation involves five actions which

are centralized in this Court and have been divided into two

putative classes against Ranbaxy Inc. and Sun Pharmaceutical

Industries Limited (collectively, “Ranbaxy” or “defendants”) for

allegedly causing the delayed market entry of three generic

drugs (Diovan, Valcyte and Nexium).

Direct purchaser plaintiffs (“DPPs”), such as wholesalers,

purchased brand name and generic drugs directly from drug

manufacturers. End-payor plaintiffs (“EPPs”), such as consumers

and third-party payors, purchased brand name and generic drugs

at the end of the distribution chain from retailers and other

financial intermediaries. The DPPs and EPPs (collectively,

- 1 -

“plaintiffs”) bring claims for violations of the Racketeer

Influenced and Corrupt Organizations Act (“RICO”), federal and

state antitrust law and state consumer protection law.

Following centralization, both the DPPs and the EPPs filed

amended consolidated complaints (Docket Nos. 20, 22)

(collectively, “the Consolidated Complaints”). Pending before

the Court are the motions of Ranbaxy to dismiss both

Consolidated Complaints (Docket Nos. 63, 65).1

I. Background

The facts of this case are described in detail in the

Report and Recommendation of Magistrate Judge Page Kelley with

respect to Ranbaxy’s motion to dismiss the complaint of

plaintiffs Meijer, Inc. and Meijer Distribution, Inc.

(collectively, “Meijer”) in the original action in this Court

prior to centralization. See Meijer, Inc. v. Ranbaxy, Inc.,

No.1:15-cv-11828-NMG (D. Mass. Sept. 7, 2016) (“Meijer I”). For

that reason, the Court provides only an abbreviated background

here.

1 The Consolidated Complaints name Ranbaxy Laboratories Limited

and Ranbaxy USA, Inc. as additional defendants. These entities

no longer exist and, therefore, will be dismissed.

- 2 -

A. Statutory and Regulatory Framework

The Food and Drug Administration (“FDA”) is charged with

regulating prescription drugs under the Food, Drug and Cosmetic

Act (“FDCA”). 21 U.S.C. §§ 301 et seq. The FDCA requires drug

manufacturers that create a new drug product to seek approval to

sell the drug by filing with the FDA a New Drug Application. 21

U.S.C. §§ 301-392.

Recognizing that the drug approval process is an onerous

one, Congress passed the Hatch-Waxman Amendments to the FDCA in

1984 (“the Hatch-Waxman Act”). Pub. L. No. 98-417, 98 Stat. 1585

(1984). The Hatch-Waxman Act created the Abbreviated New Drug

Application (“ANDA”) as a “fast-track” for manufacturers seeking

to launch generic versions of branded drugs previously approved

by the FDA. 21 U.S.C. § 355. The ANDA process allows a

manufacturer to demonstrate that its proposed generic has the

same therapeutically active ingredient and releases it at the

same rate and to the same extent as an FDA-approved drug.

§ 355(j)(2)(A)(vii).

The ANDA approval process proceeds in three phases. Ranbaxy

Labs., LTD. v. Burwell, 82 F. Supp. 3d 159, 170 (D.D.C. 2015).

In phase I, a generic drug manufacturer must “perfect” its

application. Id. This requires the generic manufacturer to

- 3 -

certify that the marketing of its generic drug will not infringe

upon any existing patents. § 355(j)(2)(A)(vii)(I)-(IV). If a

generic manufacturer certifies its application pursuant to

§ 355(j)(2)(A)(vii)(IV) (a “Paragraph IV certification”), it

claims that either an existing patent is invalid or will not be

infringed upon by the generic. Id.

A Paragraph IV certification is a per se patent

infringement upon the preexisting patent and prompts a 45-day

window for the patent holder to file suit. 35 U.S.C.

§ 271(e)(2). To compensate for this risk, the first generic

manufacturer to file a successful ANDA with a Paragraph IV

certification (“first filer”) is rewarded with a 180-day

exclusivity period during which no other manufacturers, with the

exception of those authorized by the branded drug manufacturer,

may market competing generics. 21 U.S.C. § 355(j)(5)(B)(iv).

This period of exclusivity is the most profitable time for a new

generic drug because the first filer typically procures an

overwhelming majority of the sales of the drug while offering

only a modest discount off the brand drug price.

Phase II is tentative approval (“TA”). An ANDA may be

tentatively approved if it could be unconditionally approved but

for the presence of blocking patents or other existing periods

- 4 -

of exclusivity. 21 U.S.C. § 355(j)(5)(B)(iv). A TA does not

authorize the drug to be marketed but serves to preserve the

180-day exclusivity period. Id.

Phase III is final approval which may be granted once the

manufacturer has met the FDA’s requirements. 21 U.S.C.

§ 355(j)(4).

B. Factual Background

Plaintiffs allege that Ranbaxy violated RICO, federal and

state antitrust laws and state consumer protection laws by

submitting multiple ANDAs with missing, incorrect or fraudulent

information, thereby wrongfully acquiring exclusivity periods

and delaying the market entry of generic drugs.

The Consolidated Complaints focus on Ranbaxy’s manufacture

of generic versions of three drugs branded Diovan, Nexium and

Valcyte. Diovan is the generic valsartan (“generic Diovan”) and

is used to treat high blood pressure and heart failure. Valcyte

is the generic valganciclovir hydrochloride (“generic Valcyte”)

and is an antiviral medication. Nexium is the generic

esomeprazole magnesium (“generic Nexium”) and is a proton-pump

inhibitor used to treat gastroesophageal reflux disease.

In late 2005, a whistleblower alerted the FDA to serious

and systemic issues of noncompliance with the FDA’s current Good

- 5 -

Manufacturing Practices at various Ranbaxy manufacturing

facilities. Following the whistleblower’s complaint, the FDA

began a series of detailed inspections at Ranbaxy’s facilities.

In response, Ranbaxy hired the law firm of Buc & Beardsley LLP

(“Beardsley”) and an auditor, Parexel Consulting LLC

(“Parexel”), pursuant to an agreement whereby Beardsley and

Ranbaxy could control what information Parexel shared with the

FDA. Beardsley reviewed Parexel’s audit reports and designated

them as privileged.

In June, 2006, the FDA issued a warning letter to Ranbaxy’s

facility in Paonta Sahib, India (“the Paonta Sahib facility”)

and recommended placing a hold on all ANDAs originating from

that facility. Nearly one year later, Ranbaxy notified the FDA

that the identified compliance issues were resolved. The FDA,

relying on Ranbaxy’s attestations, granted TAs for Ranbaxy’s

ADNAs for generic Diovan (in October, 2007), generic Nexium (in

February, 2008) and generic Valcyte (in June, 2008).

In July, 2008, the government subpoenaed the Parexel audits

and, upon examination, issued additional warning letters. In

February, 2009, the FDA froze all ANDAs originating from the

Paonta Sahib facility.

- 6 -

In January, 2012, Ranbaxy and the FDA entered into a

consent decree and Ranbaxy withdrew several ANDAs. With respect

to certain “excepted” ANDAs, Ranbaxy was permitted to retain its

first filer status upon demonstrating that the ANDA had been

substantially complete at the time of submission and did not

reflect a pattern or practice of data irregularities. Ranbaxy’s

generic Diovan, generic Valcyte and generic Nexium ANDAs were

among those “excepted.”

1. Diovan

Ranbaxy filed its ANDA for generic Diovan in 2004. In

2007, Ranbaxy amended its ANDA to include a Paragraph IV

certification, preserving eligibility for first filer status.

The patent holder filed suit and, pursuant to a settlement

agreement, Ranbaxy agreed to delay marketing generic Diovan

until September, 2012.

Ranbaxy’s generic Diovan ANDA was excepted from the FDA

consent decree and Ranbaxy was permitted to retain first filer

status. Plaintiffs submit that other ANDA filers had received

TAs by July, 2012, but were unable to obtain final approval

because of Ranbaxy’s first filer status. The FDA granted final

approval in June, 2014, and Ranbaxy launched generic Diovan the

following month.

- 7 -

2. Nexium

Ranbaxy filed its ANDA for generic Nexium in August, 2005,

and subsequently included a Paragraph IV certification,

preserving eligibility for first filer status. The patent

holder filed suit in November, 2005. In April, 2008, Ranbaxy

settled with the patent holder and agreed to delay launching

generic Nexium until May, 2014.

The agreed-upon entry date passed without Ranbaxy launching

generic Nexium. In November, 2014, the FDA rescinded its TA for

generic Nexium and stripped Ranbaxy of first filer status. That

same day, the FDA issued final approval to a competitor’s

generic Nexium ANDA and generic Nexium entered the market a few

weeks later.

3. Valcyte

Ranbaxy filed its ANDA for generic Valcyte in December,

2005 and included a Paragraph IV certification which made it

eligible for first filer status. In April, 2006, the patent

holder filed suit and, by virtue of a settlement agreement,

Ranbaxy agreed to delay the marketing of generic Valcyte until

March, 2013. Nearly one year after the passage of the agreed-

upon launch date, Ranbaxy was still unable to secure final

approval from the FDA. In November, 2014, the FDA rescinded the

- 8 -

TA for Ranbaxy’s generic Valcyte ANDA and stripped Ranbaxy of

first filer status. The FDA granted final approval to a

competitor that same day and generic Valcyte entered the market

shortly thereafter. Ranbaxy sued the FDA for revoking its TA

but the FDA prevailed on summary judgment.

C. Procedural Background

The first case filed in this Court before centralization,

Meijer I, was filed in 2015. In September, 2015, Ranbaxy moved

to dismiss. This Court accepted and adopted the Report and

Recommendation of Magistrate Judge Kelley (“R&R”) denying

defendant’s motion to dismiss. The Court certified its order

for interlocutory appeal, recognizing that defendant had raised

a complex legal question of first impression. The First Circuit

Court of Appeals declined to hear the interlocutory appeal.

Meijer, Inc. v. Ranbaxy Inc., No. 17-8008 (1st Cir. Dec. 28,

2018).

Additional lawsuits were subsequently filed in the United

States District Courts for the Eastern District of Pennsylvania,

the Eastern District of New York and the District of Massachusetts.

The United States Judicial Panel on Multidistrict Litigation

determined the lawsuits involved common questions of fact and

centralized the action in this Court for pretrial proceedings

- 9 -

(Docket No. 2). Upon centralization, the case was divided into

two putative classes of direct purchasers and indirect purchasers.

Each putative class filed an amended consolidated complaint

(Docket Nos. 20, 22). Ranbaxy then moved to dismiss both

complaints (Docket Nos. 63, 65).

II. Motions to Dismiss

A. Legal Standard

To survive a motion to dismiss, a complaint must contain

sufficient factual matter, accepted as true, to “state a claim

to relief that is plausible on its face.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007). In considering the merits of

a motion to dismiss, the Court may only look to the facts

alleged in the pleadings, documents attached as exhibits or

incorporated by reference in the complaint and matters of which

judicial notice can be taken. Nollet v. Justices of Trial Court

of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000), aff’d, 228

F.3d 1127 (1st Cir. 2000).

Furthermore, the Court must accept all factual allegations

in the complaint as true and draw all reasonable inferences in

the plaintiff’s favor. Langadinos v. Am. Airlines, Inc., 199

F.3d 68, 69 (1st Cir. 2000). If the facts in the complaint are

- 10 -

sufficient to state a cause of action, a motion to dismiss the

complaint must be denied. See Nollet, 83 F. Supp. 2d at 208.

Although a court must accept as true all the factual

allegations in a complaint, that doctrine is not applicable to

legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662 (2009).

Threadbare recitals of legal elements which are supported by

mere conclusory statements do not suffice to state a cause of

action. Id. Accordingly, a complaint does not state a claim of

relief where the well-pled facts fail to warrant an inference of

any more than the mere possibility of misconduct. Id. at 1950.

B. Application

Ranbaxy moves to dismiss both Consolidated Complaints on

the grounds that: 1) Ranbaxy is entitled to Noerr-Pennington

immunity; 2) plaintiffs cannot demonstrate proximate cause and

3) plaintiffs cannot establish a predicate offense under RICO.

Although the motions overlap substantially, there are several

arguments unique to each plaintiff group. With respect to the

DPPs, the parties disagree over whether the Court should

consider Ranbaxy’s motion anew or treat it as a motion for

reconsideration, given that the Court previously denied a motion

to dismiss filed by Ranbaxy in Meijer I. Ranbaxy moves to

dismiss the DPPs’ complaint on the additional ground that the

- 11 -

federal antitrust claims of the DPPs are barred by the FDCA.

With respect to the EPPs, Ranbaxy moves to dismiss on the

grounds that 1) the FDCA preempts their state law claims;

2) their state law antitrust claims are unavailing; 3) their

state law consumer protection claims lack merit; and 4) the

statute of limitations bars several of their claims.

The Court will address arguments unique to the DPPs, unique

to the EPPs and common to both plaintiff groups seriatim.

1. Arguments Unique to the DPPs

a. Effect of Meijer I

Preliminarily, the parties dispute whether the Court should

even entertain defendants’ motions to dismiss the claims of the

DPPs. The DPPs submit that the Court should treat the motion as

one for reconsideration because, by Ranbaxy’s own admission,

“the Court previously considered [its] argument[s] and was

ultimately unpersuaded.” Ranbaxy urges the Court to consider

its arguments anew because additional plaintiffs and a third

drug (Nexium) have altered the nature of the case.

This contest highlights an issue of substantial

disagreement among federal courts: the nature of a consolidated

complaint filed after MDL centralization. Several courts have

referred to consolidated complaints as mere “procedural

- 12 -

device[s] used to promote judicial efficiency and economy” and

have declined to give such complaints the “same effect as an

ordinary complaint.” See, e.g., In re Propulsid Prods. Liab.

Litig., 208 F.R.D. 133, 141–42, 144 (E.D. La. 2002) (citing 9

Charles A. Wright & Arthur R. Miller, Federal Practice and

Procedure § 2382 (1971) and Diana E. Murphy, Unified and

Consolidated Complaints in Multidistrict Litigation, 132 F.R.D.

597 (1991)). Other courts have entertained motions to dismiss

consolidated complaints in the regular course. See, e.g., In re

Zimmer Nexgen Knee Implant Prods. Liab. Litig., MDL No. 2272,

2012 WL 3582708 (N.D. Ill. Aug. 16, 2012); In re Trasylol Prods.

Liab. Litig., No. 08–MD–1928, 2009 WL 577726 (S.D. Fla. Mar. 5,

2009).

Courts are more willing to consider a motion to dismiss a

consolidated complaint if it challenges the sufficiency of

factual allegations common to all plaintiffs. See, e.g., In re

Katrina Canal Breaches Litig., 309 F. App'x 836 (5th Cir. 2009)

(per curiam); In re Bextra & Celebrex Mktg., Sales Practices &

Prod. Liab. Litig., No. MDL 05–01699 CRB, 2007 WL 2028408, at *9

(N.D. Cal. July 10, 2007).

This Court will follow that approach and will consider

defendant’s motion to dismiss insofar as it challenges issues

- 13 -

common to all DPPs. The Court will not apply the heightened

motion for reconsideration standard but, with respect to any

argument previously rejected by the Court in Meijer I, will

provide only a cursory analysis to determine whether the law has

substantially changed.

b. FDCA Preclusion of DPPs’ Claims

Ranbaxy avers that, pursuant to Buckman v. Plaintiffs’

Legal Committee, 531 U.S. 341 (2001), the authority to enforce

violations of the FDCA belongs exclusively to the FDA. As a

result, argues Ranbaxy, the FDCA precludes the DPPs’ federal

antitrust claims. This Court previously recognized that the

issue is one of first impression in this Circuit. As far as

this Court can discern, that has not changed. Indeed, Ranbaxy

cites no new case law addressing FDCA preclusion of federal

antitrust claims involving fraud on the FDA.

Furthermore, Ranbaxy fails to proffer any persuasive

reason for this Court to reexamine its previous analysis of

Buckman’s application to federal antitrust claims.

Accordingly, the Court incorporates the reasoning in

Meijer I and holds the claims of the DPPs are not precluded

by the FDCA.

- 14 -

2. Arguments Unique to the EPPs

a. FDCA preemption of the EPPs’ Claims

Ranbaxy submits that whatever the merits of the

Court’s preclusion analysis in Meijer I with respect to the

federal antitrust claims of the DPPs, it is inapplicable to

the preemption analysis of the state law antitrust and

consumer protection claims of the EPPs. To the extent that

Ranbaxy alleges that the EPPs’ federal RICO claim is

precluded by the FDCA, the Court rejects that argument for

the reasons articulated in Meijer I.

Ranbaxy avers that Buckman compels the Court to

dismiss the EPPs’ state law claims as preempted by the

FDCA. In Buckman, the plaintiffs attempted to bring state

law tort claims against a manufacturer and a federal

regulatory consultant for injuries caused by orthopedic

bone screws. 531 U.S. at 344. At summary judgment, the

only remaining defendant was the federal regulatory

consultant who had assisted the manufacturer in “navigating

the federal regulatory process” in an allegedly fraudulent

manner. Id. at 343. According to the plaintiffs, the

consultant prepared a fraudulent FDA application on behalf

of the bone screw manufacturer in an effort to secure FDA

- 15 -

approval for the bone screws. Id. at 354. The FDA did not,

however, make an independent determination of fraud. Id. at

354.

The United States Supreme Court held that the FDCA

preempted plaintiffs’ state law tort claims. Id. at 343.

The Court reasoned that the plaintiffs’ claims did not rely

on traditional state tort law independent of federal

regulations. Id. at 350-53. Instead, the plaintiffs relied

on the anti-fraud provisions of the FDCA in support of

their claims. Id. at 343. In that sense, the suit was one

for enforcement of the FDCA rather than for remediation of

tortious conduct and thus inevitably conflicted with the

FDA’s responsibility to police fraud pursuant to the FDCA.

Id. at 350.

Neither party proffers a citation that addresses the

applicability of Buckman to state law antitrust and

consumer protection claims. The First Circuit has,

however, considered Buckman in similar circumstances. In

Dumont v. Reily Foods Co., a customer brought a consumer

protection claim alleging that a coffee creamer

manufacturer mislabeled a product as containing hazelnut in

violation of the FDCA. 934 F.3d 35, 41 (1st Cir. 2019).

- 16 -

The court applied Buckman and held that the claim was not

preempted by the FDCA but declined to elucidate the

standard governing FDCA preemption of consumer protection

claims. Id. Instead, because the parties agreed on a

standard, the court adopted it, in essence, without

prejudice. Id. at 42.

Although Dumont fails to clarify the applicable

standard, it is nonetheless instructive. On the one hand,

the court dismissed so much of the complaint as attempted

to hold the defendant liable for violating federal false

labeling standards. Id. On the other hand, the court

allowed to proceed a separate and independent consumer

protection claim. Id. The court reasoned that

the preemptive force [of the federal regulations]

will restrict the factfinder to determining

whether conduct that does violate the federal

regulations is also deceptive under Massachusetts

law by virtue of its nature rather than its

federal illegality.

Id. at 43.

That reasoning is buttressed by the concurring opinion

of Justice Stevens in Buckman in which he notes the absence

of a determination by the FDA that the defendant in Buckman

had committed fraud. Buckman, 531 U.S. at 354 (Stevens, J.,

concurring). Had the FDA found fraud, Justice Stevens

- 17 -

observed, the plaintiff would have been able to establish

causation for his state law claims without second-guessing

the FDA’s decision making. Id. Under such circumstances,

state law remedies “would not encroach upon, but rather

would supplement and facilitate” federal enforcement. Id.

Here, the EPPs have alleged that the FDA found fraud.

Indeed, the FDA went so far as to rescind tentative

approval for Ranbaxy’s generic Valcyte and generic Nexium

ANDAs. Furthermore, the fraud found by the FDA and

realleged by plaintiffs in the Consolidated Complaints is a

necessary element in the causation analysis of the EPPs’

claims but, as in Dumont and contrary to Buckman, their

claims do not seek to remedy only FDCA noncompliance. The

EPPs must establish that they were injured by conduct of

Ranbaxy that is independently proscribed under state law by

virtue of its nature rather than its federal proscription.

Dumont, 934 F.3d at 43. As pled by the EPPs, such an

indirect relationship between the state and federal claims

does not warrant preemption. Id.

This Court’s reluctance to broaden Buckman is

consistent with the “legion of cases upholding parallel

requirements to federal violations as actionable under

- 18 -

state law.” See, e.g., In re Medtronic, Inc. Implantable

Defibrillators Litig., 465 F. Supp. 2d 886 (D. Minn. 2006);

Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996). Other courts

that have considered the application of Buckman to state

consumer protection and antitrust claims have similarly

held. See In re Lipitor Antitrust Litig., 336 F. Supp. 3d

395, 411 (D.N.J. 2018); In re DDAVP Indirect Purchaser

Antitrust Litig., 903 F. Supp. 2d 198, 220-21 (S.D.N.Y.

2012).

Accordingly, the EPPs may utilize evidence of

Ranbaxy’s efforts to manipulate the regulatory process in

order to prove their state law antitrust and consumer

protection claims without converting them into preempted

fraud-on-the-FDA claims.

b. State Antitrust Claims

i. Standing

Ranbaxy challenges the EPPs’ standing to bring

antitrust claims under the laws of Florida and

Massachusetts. Both state statutes have, however, been

interpreted as permitting claims by indirect purchasers. In

re Solodyn (Minocycline Hydrochloride) Antitrust Litig.,

- 19 -

No. 14–md–02503–DJC, 2015 WL 5458570, *16 (D. Mass. Sept.

16, 2015). Therefore, the EPPs have standing.

ii. Jurisdiction and Venue

Ranbaxy submits that the Arizona, Michigan and North

Dakota claims of the EPPs must be dismissed for failure to

bring those claims in the proper jurisdictions but Ranbaxy

offers no support for its contention that the respective

state statutes provide for exclusive state court

jurisdiction. Absent an express congressional prohibition

to the contrary, the Court declines to interpret the

applicable laws as depriving federal courts of

jurisdiction. See In re Remicade Antitrust Litig., 345 F.

Supp. 3d 566, 590 (E.D. Pa. 2018) (allowing Arizona

antitrust claim to proceed in federal court); Superior

Consulting Co. v. Walling, 851 F. Supp. 839 (E.D. Mich.

1994) (allowing Michigan antitrust claim to proceed in

federal court).

iii. State Action Doctrine

Ranbaxy contends that the Iowa and Minnesota claims

of the EPPs fail because Ranbaxy is entitled to state

action immunity, which permits anticompetitive conduct if

authorized and supervised by government officials. FTC v.

- 20 -

Ticor Title Ins. Co.,504 U.S. 621, 627 (1992). This

doctrine applies only to conduct “undertaken pursuant to a

clearly articulated and affirmatively expressed state

policy” that is “actively supervised” by government

officials. Mueller v. Wellmark, Inc., 818 N.W. 2d 244, 258

(Iowa 2012). Ranbaxy provides no evidence whatsoever that

its alleged anticompetitive activities were expressly

approved or regulated as required by the state action

doctrine. See Crippen v. City of Cedar Rapids, 618 N.W. 2d

562, 567 (Iowa 2000).

iv. Miscellaneous

Ranbaxy challenges the California claim of the EPPs

because the applicable statute “bans combinations,” but not

single firm monopolies. Asahi Kasei Pharma Corp. v.

CoTherix, Inc., 138 Cal. Rptr. 3d 620, 626 (Cal. Ct. App.

2012). The EPPs have adequately alleged, however, that

Ranbaxy conspired with Beardsley and Parexel to mislead the

FDA.

Ranbaxy’s dispute with respect to the EPPs’ Vermont

antitrust claims will be analyzed below in tandem with its

dispute with the EPPs’ Vermont consumer protection claims

because the arguments substantially overlap.

- 21 -

c. State Consumer Protection Claims

i. Notice and Demand

Ranbaxy urges dismissal of the California, Maine and

West Virginia claims of the EPPs for failure to serve

Ranbaxy with the required notice and demand prior to the

filing of the respective suits. The EPPs concede that

notice was not provided but maintain that Ranbaxy cannot

convincingly argue that it had inadequate notice. The EPPs

further maintain that any settlement demand would have been

futile but, alternatively, ask for leave to amend to meet

the statutory requirements.

The EPPs proffer no support for their contention that

the required notice and demand was either unnecessary or

futile. Indeed, the EPPs failed even to plead as much.

Accordingly, the EPPs’ consumer protection claims under the

laws of California, Maine and West Virginia will be

dismissed without prejudice. The EPPs may amend their

consolidated complaint to meet the statutory requirements.

Contrary to Ranbaxy’s assertions, dismissal with

prejudice under California law is unnecessary. See Morgan

v. AT&T Wireless Serv., Inc., 99 Cal.Rptr.3d 768, 789 (Cal.

App. Ct. 2009) (explaining that dismissal with prejudice is

- 22 -

not required where it is not necessary to further the

purpose of providing defendant with an opportunity to

correct the alleged wrong before a lawsuit is filed).

ii. Standing

Ranbaxy asserts the EPPs lack standing under the

consumer protection laws of Maine, Michigan, Missouri,

Pennsylvania, North Carolina and Vermont because the EPPs

did not purchase the goods at issue primarily for personal,

familial or household purposes.

The EPPs explicitly exclude from their putative class

any persons or entities who purchased branded or generic

Diovan, Nexium or Valcyte for purposes of resale. The EPPs

pay costs of individual consumers for prescription drugs

used for personal, familial or household purposes.

Each challenged provision provides standing for

entities that purchase goods on behalf of their members for

the members’ personal, familial or household use. Sheet

Metal Workers Local 441 Health & Welfare Plan v.

GlaxoSmithKline, PLC, 737 F. Supp. 2d 380, 421-22 (E.D. Pa.

2010) (allowing consumer protection suit under Pennsylvania

and North Carolina statutes by health benefit plans that

purchased goods for their members’ personal use); Rathe

- 23 -

Salvage, Inc. v. R. Brown & Sons, Inc., 965 A.2d 355, 467

(Vt. 2008) (explaining Vermont statute was amended to

ensure businesses were provided the same protections as

individuals); Ports Petroleum Co. of Ohio v. Nixon, 37

S.W.3d 237, 240 (Mo. 2001) (explaining the Missouri statute

is “unrestricted, all-encompassing and exceedingly broad”);

Zine v. Chrysler Corp., 600 N.W.2d 384, 393 (Mich. Ct. App.

1999) (explaining the Michigan statute focuses on

the use to which the goods would be put, not on the

characterization of the plaintiff as a consumer). Ranbaxy

cites no support for its suggestion that the Maine statute,

which has not been examined in this context, should be

otherwise construed.

iii. Conduct within the Scope of the Statute

The consumer protection statutes of Minnesota,

Missouri, New Mexico, North Dakota and South Dakota relate

only to conduct that occurs “in connection with the sale”

of the goods at issue. Ranbaxy maintains that its alleged

fraud was made in connection with the FDA approval process,

not with respect to any sale of goods. Ranbaxy’s argument

fails all around. Sheet Metal Workers Local 441 Health &

Welfare Plan, 737 F. Supp. 2d at 414 (applying the

- 24 -

Minnesota statute to misleading statements and deceptive

acts made to the Patent and Trademark Office); Jackson v.

Barton, 548 S.W.3d 263, 270 (Mo. 2018) (interpreting the

Missouri statue to prohibit deceptive practices if there is

a relationship between the sale and unlawful conduct by any

person occurring before, during or after a sale); Lohman v.

Daimler-Chrysler Corp., 166 P.3d 1091, 1097 (N.M. Ct. App.

2007) (affording the New Mexico statute broad scope

“encompass[ing] misrepresentations which bear on downstream

sales by and between third parties”); A & R Fugleberg

Farms, Inc v. Triangle Ag, LLC, 2010 WL 1418870 (D.N.D.

Apr. 7, 2010) (interpreting the North Dakota statute

liberally to cover fraud and misrepresentation that induced

individuals to enter into a contract); In re DDAVP Indirect

Purchaser Antitrust Litig., 903 F. Supp. 2d at 229

(explaining the South Dakota statute applies to

misrepresentations made to the Patent and Trademark Office

because such representations, in turn, allow the defendant

to manufacture and market their product).

iv. Facially inapplicable

The Michigan, Nevada and New Mexico statutes are,

according to Ranbaxy, facially inapplicable because

- 25 -

Ranbaxy’s conduct does not fall within the statutorily

enumerated practices. With respect to Michigan and Nevada,

federal courts have sustained causes of action under the

state consumer protection statutes for similar allegedly

anticompetitive conduct. FTC v. Mylan Labs., Inc., 62 F.

Supp. 2d 25, 48 (D.D.C. 1999) (Michigan); Sergeants

Benevolent Association Health & Welfare Fund v. Actavis,

plc, No. 15 Civ. 6549 (CM), 2018 WL 7197233, *46-47

(S.D.N.Y. Dec. 26, 2018) (Nevada). The New Mexico statute

is to be interpreted broadly in favor of consumer

protection and applies to misrepresentations that are

designed to enable manufacturers to sell goods. Lohman, 166

P.2d at 1097. Consequently, the challenged provisions are

not facially inapplicable.

v. Reliance

Ranbaxy urges dismissal of the Pennsylvania, South

Dakota and West Virginia consumer protection claims of the

EPPs for failure to plead that the EPPs relied on

defendant’s fraud to their detriment.

To establish a cause of action under the Pennsylvania

consumer protection statute, a plaintiff must demonstrate

that he justifiably relied on the defendant’s wrongful

- 26 -

conduct and that he suffered harm as a result. Yocca v.

Pittsburg Steelers Sports, Inc., 854 A.2d 425, 438-39 (Pa.

2004). The South Dakota statute allows a party to

establish third party reliance whereby a defendant makes a

misrepresentation to a third party on which the plaintiff

relies. Brookings Mun. Utilities, Inc. v. Amoco Chemical

Co., 103 F. Supp. 2d 1169, 1178 (D.S.D. 2000).

The EPPs do not, however, identify any specific

misrepresentations upon which they relied to their detriment.

They allege that they purportedly bought branded and generic

drugs at an artificially inflated price but they do not

allege their decisions were made in reliance on Ranbaxy’s

conduct rather than out of necessity and a limited market.

Accordingly, the EPPs have not established reliance as

required by Pennsylvania and South Dakota law.

The Supreme Court of Appeals of West Virginia has

interpreted the West Virginia consumer protection statute

to cover both affirmative misrepresentations and omissions.

White v. Wyeth, 705 S.E.2d 828, 837-38 (Va. 2010). Where

an omission is the alleged violative conduct, a plaintiff

may show proximate cause in the absence of any proof of

reliance. Id. Plaintiffs have adequately alleged that

- 27 -

Ranbaxy’s omissions proximately caused them ascertainable

loss and may pursue their West Virginia consumer protection

claim.

vi. Miscellaneous

Ranbaxy alleges that the Massachusetts claim of the

EPPs fails because Ranbaxy’s conduct did not “occur

primarily within the commonwealth.” M.G.L. c. 93A § 11.

Plaintiffs have alleged, however, that at least some EPPs

were injured by Ranbaxy’s conduct in Massachusetts.

Whether Ranbaxy can prove that the conduct did not occur

primarily in Massachusetts is an issue ill-suited for

disposition at this stage. See Workgroup Technology Corp.

v. MGM Grand Hotel, LLC, 246 F. Supp. 2d 102, 118 (D. Mass

2003).

Ranbaxy submits that the EPPs’ Minnesota claim fails

because “the sole statutory remedy for deceptive trade

practices” under the Minnesota consumer protection statute

is injunctive relief which plaintiffs do not seek. Sup.

Edge, Inc. v. Monsanto Co., 964 F. Supp. 2d 1017, 1041 (D.

Minn. 2013). The EPPs do not contest the issue and the

Court agrees with Ranbaxy.

- 28 -

Ranbaxy avers that the Nebraska claim of the EPPs

fails because Ranbaxy’s conduct is regulated under laws

administered by a regulatory body or officer acting under

statutory authority of the United States. Neb. Rev. Stat

§ 59-1617(1). As described above with respect to the EPPs’

state antitrust claims, the state action doctrine does not

bar such claims.

d. Statute of Limitations

Ranbaxy submits that the EPPs’ RICO claim, antitrust claims

under the laws of 18 states and consumer protection claims under

the laws of nine states are all barred by a four-year statute of

limitations. Specifically, Ranbaxy contends that when the FDA

revoked Ranbaxy’s approval for Valcyte and Nexium on November 4,

2014, the claims of the EPPs accrued. The EPPs’ complaints were

not, however, filed until November 6, 2018 and February 13,

2019, more than four years after that accrual and therefore

after the expiration of each applicable statute of limitations.

The statute of limitations is a “fact-intensive"

affirmative defense” and will be rejected unless shown “with

certitude” at the motion to dismiss stage. See Nat’l Assoc. of

Gov’t Workers v. Mulligan, 854 F. Supp. 2d 126, 131 (D. Mass

2012). As explained in Meijer I, this case raises the issue of

- 29 -

a possible continuing violation which is ill-suited for

resolution at this stage.

3. Arguments Common to Both Plaintiff Groups

a. Noerr-Pennington Immunity

Ranbaxy contends that it is entitled to Noerr-

Pennington immunity which immunizes government petitioning

activity even if anticompetitive effects result and even if

the petitioner uses disingenuous tactics. See Eastern R.R.

Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127

(1961) and United Marine Workers v. Pennington, 381 U.S.

657 (1965) (“the Noerr-Pennington doctrine”). There is an

exception to the Noerr-Pennington doctrine for “sham

petitioning”, however, which holds that immunity is

withheld if a defendant uses the petitioning process as a

mere “anticompetitive tool without legitimately seeking a

positive outcome.” See, e.g., A.D. Bedell Wholesale Co.,

Inc. v. Phillip Morris Inc., 263 F.3d 239, 250 n.29 (3d

Cir. 2001).

Ranbaxy submits one argument not rejected in Meijer I

in support of its contention that the sham petitioning

exception is inapplicable. It argues that the exception

applies only when the alleged anticompetitive conduct is a

- 30 -

result of a defendant’s use of governmental process as

opposed to its use of the outcome of that process. See

City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S.

365, 381 (1991). The Supreme Court in Omni Outdoor

Advertising, Inc. explained

the purpose of delaying a competitor's entry into

the market does not render lobbying activity a

“sham,” unless . . . the delay is sought to be

achieved only by the lobbying process itself, and

not by the governmental action that the lobbying

seeks.

Id.

Ranbaxy submits that plaintiffs do not allege that it

gained an anticompetitive advantage by merely seeking a TA

for its ANDAs. Any alleged anticompetitive advantage,

according to Ranbaxy, could have resulted only from the

outcome of that process: the FDA’s grant of the coveted

exclusivity period. Ranbaxy provides no support, however,

for its limitation of the governmental process at issue to

include only the tentative approval stage as opposed to the

entire ANDA approval process.

A grant of tentative approval, even as a first filer,

is a mere step in the process of obtaining final approval

and taking a generic drug to market. The grant of

exclusivity is, to be sure, a consequential stage of the

- 31 -

ANDA approval process but it does not authorize a party to

take a drug to market. 21 U.S.C. § 355(i)(5)(B)(iv). Here,

plaintiffs adequately allege that Ranbaxy used a stage of

the ANDA approval process to secure exclusivity while

awaiting final approval to bar competition.

Drawing all reasonable inferences in favor of the

plaintiffs, they have adequately alleged that the sham

petitioning exception to the Noerr-Pennington doctrine

applies.

b. Proximate Cause

Ranbaxy contends that plaintiffs have failed to allege

proximate cause with respect to their antitrust and RICO

claims because 1) the FDA’s regulatory activity was an

intervening factor and 2) no other manufacturer was in a

position to secure final approval of a generic competitor

during the relevant timeframe.

This Court already determined in Meijer I that

Ranbaxy’s obfuscation affected the FDA’s pace in granting

final approval to Ranbaxy and that plaintiffs have alleged

sufficient facts and legitimate inferences to raise a

factual question that is ill-suited for resolution at this

- 32 -

stage. Ranbaxy provides no reason for the Court to deviate

from that holding.

c. RICO Predicate Offenses

Ranbaxy proffers one new argument with respect to

plaintiffs’ RICO claims: plaintiffs cannot demonstrate

that Ranbaxy committed the alleged predicate acts of mail

and/or wire fraud because Ranbaxy did not deprive the FDA

of “property.” See 18 U.S.C. § 1961(1).

Mail and wire fraud require proof of 1) a scheme or

artifice to defraud, 2) knowing and willing participation

in that scheme with the specific intent to defraud; and

3) the use of interstate mail or wire communications in

furtherance of the scheme. Sanchez v. Triple-S Mgmt.,

Corp., 492 F.3d 1, 9-10 (1st Cir. 2007). Both statutes are

“limited in scope to the protection of property rights.”

Cleveland v. United States, 531 U.S. 12, 18 (2000);

Pasquantino v. United States, 544 U.S. 349, 355 & n.2

(2005). In other words, the thing obtained by fraud must

be “property in the hands of the victim.” Cleveland, 531

U.S. at 15.

The parties’ primary disagreement involves the

application of the holding in Cleveland. In that case, the

- 33 -

defendants were charged with engaging in a scheme that

involved fraudulent applications to obtain video poker

licenses in Louisiana. 531 U.S. at 15. The Supreme Court

considered whether a government regulator conveys

“property” under the mail fraud statute when it issues a

license. Id. at 20. The Court acknowledged that the

government had a substantial economic interest in the video

poker industry but ultimately held that a license is not

“property” in the hands of a government regulator. Id. The

primary concern of the agency in issuing licenses is,

according to the Court, regulatory and, for that reason,

not actionable as mail fraud. Id.

The decision in Cleveland stands for the proposition

that a government regulator does not own licenses; instead,

it holds the regulatory power to issue licenses.

Pasquantino, 544 U.S. at 357; see also United States v.

Middendorf, No. 18-cr-36 (JPO), 2018 WL 3443117 (S.D.N.Y.

July, 17, 2018) (“To borrow an analogy from physics, what

is potential energy in the hands of the government becomes

kinetic energy in the hands of a license-holder.”).

Ranbaxy submits that a license to market drugs for a

180-day exclusivity period is virtually indistinguishable

- 34 -

from the license at issue in Cleveland and, therefore,

cannot be considered “property” in the hands of the FDA.

This case is, however, distinguishable from Cleveland.

In Cleveland, the citizens of the State of Louisiana and

the State itself were the only alleged victims of the

defendants’ scheme to obtain a video poker license

fraudulently. Cleveland, 531 U.S. at 15-17. For that

reason, the only interests at stake were purely regulatory:

the State’s interest in “honest services” and in protecting

its people from unregulated video poker operators. Id. at

372.

Here, in contrast, plaintiffs have alleged that

Ranbaxy’s fraud affected the interests of individuals and

entities other than the government. Specifically,

plaintiffs allege that Ranbaxy’s conduct caused a delay in

the availability of generic Diovan, Valcyte and Nexium

which caused them to purchase those drugs at artificially

inflated prices, an interest distinct from any regulatory

interests of the FDA.

Ranbaxy asserts that its alleged fraud was directed

solely at the FDA and, therefore, the FDA is necessarily

its only “victim.” Not so. Although the mail and wire

- 35 -

fraud statutes require a victim, the victim need not be the

one who would be named in an indictment for mail or wire

fraud. See United States v. Hatch, 926 F.2d 387, 392 (5th

Cir. 1991) (“The focus of the mail fraud statute is upon

the use of the mail to further a scheme to defraud, not

upon any particular kind of victim.”). More importantly,

there is no requirement in the mail or wire fraud statutes

that the victim who is deprived of money or property be the

same party who was deceived by the defendant’s scheme. See

id.; accord. United States v. Valencia, No. 04–515, 2006 WL

3716657, at (S.D. Tex. Dec. 14, 2006), aff'd, 600 F.3d 389

(5th Cir. 2010); see also United States v. Howard, 619 F.3d

723, 727 (7th Cir. 2010)(“[E]ven if an indictment names

particular victims, the government need not prove intent to

harm those named victims.”).

Plaintiffs have alleged that Ranbaxy’s fraud resulted

in it securing an unfair and profitable market advantage

which caused plaintiffs to pay higher prices for brand and

generic Diovan, Valcyte and Nexium. Accordingly, they have

sufficiently pled a predicate offense under RICO.

- 36 -

ORDER

For the forgoing reasons,

a. the motion of defendant Ranbaxy to dismiss

(Docket No. 65) is, with respect to the complaint of

the Direct Purchaser Plaintiffs, DENIED;

b. the motion of defendant Ranbaxy to dismiss

(Docket No. 63) is, with respect to the consumer

protection claims of the End-Payor Plaintiffs under

the laws of: California, Maine, Minnesota,

Pennsylvania, South Dakota and West Virginia, ALLOWED,

but is otherwise DENIED; and

c. the motions of defendant Ranbaxy to dismiss the claims

against Ranbaxy Laboratories Limited and Ranbaxy USA,

Inc. (Docket Nos. 63, 65), are ALLOWED.

So ordered.

/s/ Nathaniel M. Gorton

Nathaniel M. Gorton

United States District Judge

Dated November 27, 2019

- 37 -