Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. Walgreen Co.

In the

United States Court of Appeals

For the Seventh Circuit

No. 10-1686

P IRELLI A RMSTRONG T IRE C ORPORATION

R ETIREE M EDICAL B ENEFITS T RUST,

Plaintiff-Appellant,

v.

W ALGREEN C OMPANY,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 09 cv 2046—Virginia M. Kendall, Judge.

A RGUED S EPTEMBER 30, 2010—D ECIDED JANUARY 21, 2011

Before F LAUM, M ANION, and T INDER, Circuit Judges.

F LAUM, Circuit Judge. The plaintiff in this case,

Pirelli Armstrong Tire Corporation Retiree Medical

Benefits Trust (“Pirelli”), initiated a putative class action

under the Illinois Consumer Fraud and Deceptive Busi-

ness Practices Act. For tax law purposes, Pirelli is a vol-

untary employees’ beneficiary association, a tax exempt

trust that exists to provide specified benefits to members

2 No. 10-1686

of its related association. For our purposes, however,

Pirelli is a third-party payor (typically one’s insurance

company) that pays pharmacies for the portion of a drug

price that exceeds its members’ co-payments. Pirelli’s

lawsuit maintains that the defendant, Walgreen Company

(“Walgreens”), systematically took prescriptions that

were written for cheap forms of two popular drugs and

illegally filled the prescriptions with expensive forms.

The district court granted Walgreens’ motion to dismiss,

ruling that Pirelli failed to meet the heightened pleading

standard of Federal Rule of Civil Procedure 9(b). We

affirm the judgment of the district court.

I. Background

When a patient takes a prescription to a pharmacy,

the pharmacy has some maneuvering room: it generally

can fill the prescription with either the specified drug

or a generic, “bioequivalent” version of the drug. Under

Illinois law, however, a pharmacy cannot take a pres-

cription for the tablet form of a drug and fill it with

the capsule form of the drug, or vice-versa—the practice

is forbidden by statute and the differences in form

might affect how a person absorbs the active ingredients.

Warner-Lambert Co. v. Shalala, 202 F.3d 326, 327-28 & n.2

(D.C. Cir. 2000) (providing an overview of the reg-

ulatory regime and its implications); 225 ILCS 85/25

(a pharmacist may substitute only drugs that the Food

and Drug Administration (“FDA”) has determined to be

therapeutically equivalent); cf. also B.G. Charles & G.A.G.

No. 10-1686 3

Mogg, Comparative in Vitro and in Vivo Bioavailability of

Naproxen from Tablet and Caplet Formulations, 15 B IOPHARM .

& D RUG D ISPOSITION 121, 125 & Figure 1 (1994).

Pirelli alleges that Walgreens, a company that operates

roughly 7,000 pharmacies nationwide, violated the reg-

ulatory regime in Illinois with respect to two different

drugs. One drug was generic Zantac (“Ranitidine”). The

other was generic Prozac (“Fluoxetine”). Walgreens

allegedly took prescriptions that called for the less costly

form of each drug and filled them with the more costly

form. Consumers, responsible for only the co-pay, were

none the wiser. But Pirelli unwittingly reimbursed

Walgreens for costly forms of drugs that were never

prescribed.

That is the shorthand version; to explain how the

alleged scheme worked, Pirelli’s complaint provides

considerable detail about the drug approval process

before the FDA, the drug reimbursement process, and

the industry actors involved. We can summarize. Pirelli,

as a third-party payor, used a Pharmacy Benefit

Manager (“PBM”) to process, settle disputes over, and pay

pharmacies for prescriptions. Essentially, the PBM is a go-

between that processes and smoothes over transactions

between the third-party payor (Pirelli) and the pharmacy

(Walgreens). The PBM is not only a middleman, how-

ever; it establishes a list of Maximum Allowable Costs

(“MAC”) for various drugs. The MAC list gets turned over

to pharmacies like Walgreens. The list sets a reimburse-

ment price—effectively placing a ceiling on the price of

specified drugs. For drugs, or dosage forms of drugs, that

are not on the MAC list, the reimbursement price is based

4 No. 10-1686

on a benchmark, called the Average Wholesale Price

(“AWP”), which comes directly from a drug’s manufac-

turer. Predictably, when a drug is priced based on

the AWP, the reimbursement is higher than when reim-

bursement is based on the MAC price. Put another way,

a pharmacy makes more money when it sells a drug

whose reimbursement is governed by the AWP rather

than by the MAC list.

According to Pirelli, Walgreens took advantage of the

pricing scheme to commit fraud. Both Ranitidine tablets

and Fluoxetine capsules were the most popularly pre-

scribed forms of their respective drugs and were subject

to reimbursement based on the cheaper MAC list. But,

because the more expensive forms of the drugs were

rarely prescribed, there were no MAC-list prices for

Ranitidine capsules and Fluoxetine tablets. Since mid-2001,

Walgreens adopted a policy of filling prescriptions for

Ranitidine tablets with the more costly capsule form.

Likewise, Walgreens filled prescriptions for Fluoxetine

capsules with the more costly tablet form. Each time it

filled a prescription, the theory goes, Walgreens repre-

sented to the PBM that it had received a prescription

for the costly form of the drug; the PBM passed on the

misrepresentation to Pirelli, who then reimbursed

Walgreens at the more expensive AWP price—two to

four times higher than the MAC price.

No. 10-1686 5

That is a lot of detail 1 , although detail (“particularity”) is

what a plaintiff needs in alleging fraud to satisfy the

requirements of the Federal Rules of Civil Procedure.

The particularity requirement ensures that plaintiffs

do their homework before filing suit and protects de-

fendants from baseless suits that tarnish reputations.

And the requirement dovetails with lawyers’ ethical

obligations to ensure they conduct a pre-complaint

inquiry before signing off on their clients’ contentions.

What sort of pre-complaint inquiry is evidenced by

Pirelli’s complaint? The complaint points to three grounds

for its suspicion that Walgreens defrauded it. The first

ground is a “preliminary review” of Pirelli’s reimburse-

ment data: during the course of the (apparently nation-

wide) review, Pirelli discovered “several instances

in which [Pirelli] paid Walgreens for the more expen-

sive dosage forms, when lesser [sic] expensive dosage

form [sic] were available.” That allegation, at least in a

vacuum, is not impressive. The data include a five-year

1

Perhaps more than we needed in some respects, particularly

in terms of minutiae about the drug industry and its

regulatory workings and commercial contours. See, e.g., Bankers

Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683 (7th Cir. 1992)

(providing a simple formulation of how fraud might have

been alleged in the case, which in turn shows that the require-

ment in the rules for fraud averments are not at war with

the rule that complaints be succinct). In this case, however,

the allegations were hefty but not confusing, so we note

only that Pirelli might have saved some paper, or used it to

address the deficiencies we identify below.

6 No. 10-1686

window, and one would expect some number of instances

when the more expensive forms of the drugs were pre-

scribed: Pirelli found 11 members on whose behalf it

reimbursed Walgreens for the more expensive form of

Ranitidine and just a single member on whose behalf

it reimbursed Walgreens for the more expensive form

of Fluoxetine. Only one member’s reimbursements oc-

curred in Illinois. Moreover, the fact that the drug compa-

nies make multiple forms suggests that there are markets

for them. And since the body may absorb capsules

and tablets differently, there could be medical reasons

for preferring one form of the drug over another in

specific cases.

The more interesting aspect of Pirelli’s preliminary look

comes from a subset of its data. Pirelli found three mem-

bers—one in Illinois, one in Louisiana, and one in

Iowa—who filled some prescriptions at Walgreens and

others at different pharmacies. The data are presented

in tables for each of the three members; the tables list

the date of each transaction, the pharmacy involved in

the transaction, and the dosage form for which Pirelli

reimbursed the pharmacy. The three histories show

that non-Walgreens pharmacies filled each member’s

Ranitidine prescription with tablets, while Walgreens

filled the same member’s prescription with more costly

capsules. For example, Pirelli’s exhibit shows that its

single Illinois patient had 16 prescriptions for Ranitidine

filled at 3 different pharmacies. Only Walgreens filled

prescriptions with the more costly form of the drug. In

each case, one cannot see if the reimbursements were

made under the same prescription, although it does

No. 10-1686 7

appear that something suspicious was happening: the

transactions involving Walgreens are sandwiched be-

tween transactions from other pharmacies, and no one

has suggested that a person might receive prescriptions

for both the tablet form of a drug and the capsule form.2

The pattern of reimbursements suggests that the three

members were supposed to get the cheaper form of

Ranitidine and they did not, either the result of a

prescription-filling error or fraud.

The second ground for Pirelli’s suspicion, and where

Pirelli gets most of its information about how the

alleged fraud worked, is a complaint filed in a 2003 qui tam

action in the Northern District of Illinois (the “qui tam

case”). The allegations in that whistleblower suit, based

on accusations made by a pharmacist, indicate that

“[u]pon receiving a [Ranitidine] tablet prescription, Wal-

greens’ pharmacy personnel could not process the orders

as written, but instead filled the prescriptions with cap-

sules.” The pharmacist in question did not actually

work for Walgreens. Rather, the pharmacist worked

for other pharmacies; when he would receive prescrip-

tions that were being transferred from Walgreens to

one of the pharmacies where he worked, the Wal-

greens pharmacists “regularly indicated” how their

prescription-filling system functioned. See Compl. ¶¶ 16-

17, United States ex rel. Lisitza v. Walgreens Co., No. 03-cv-

744 (N.D. Ill. Jan. 31, 2003).

2

Pirelli does not know what form the doctors actually pre-

scribed for these members; it says that it lacks access to the

prescriptions, and Walgreens does not say otherwise.

8 No. 10-1686

The third ground for Pirelli’s suspicion comes from an

investigation that was conducted by another PBM, not

the one that Pirelli used. The PBM looked at transac-

tions that it had facilitated with Walgreens, drawing

most of its data from St. Louis, Boston, and Phoenix. The

investigation indicated that, for the transactions that

the PBM facilitated, Walgreens filled an overwhelmingly

large percentage (97 percent) of Ranitidine prescrip-

tions with capsules, while every other pharmacy filled

prescriptions for Ranitidine with capsules at a meager

rate (3 percent). Given the relative popularities of the

two dosage forms, the data indicate that something

suspicious was happening and that clerical errors do not

dispel the suspicion. The PBM’s investigation was the

basis of a lawsuit (the “ESI suit”).

In 2009, Pirelli filed a suit of its own. Pirelli initiated

a putative class action on behalf of all third-party

payors who reimbursed Walgreens for Ranitidine

capsules, Fluoxetine tablets, or both, between 2001 and

2005. Pirelli initially contended that Walgreens’ actions

violated 35 different states’ unfair or deceptive acts

laws, including the Illinois Consumer Fraud and Decep-

tive Business Practices Act, 815 ILCS 505/1, et seq. In

addition to the fraud claims, Pirelli brought an unjust

enrichment claim under Illinois law. However, the laws

of all of the states besides Illinois have been pruned

from the litigation: the parties litigated the case as if

Illinois law applied to Pirelli’s claims, the district court

indicated that it was considering this only as an Illinois

case, and Pirelli has not attempted to expand the scope

of the litigation.

No. 10-1686 9

Walgreens moved to dismiss the complaint, and the

district court granted the motion, first without preju-

dice and then with prejudice. The district court rea-

soned that Pirelli did not adequately meet the height-

ened pleading requirement of Federal Rule of Civil Pro-

cedure 9(b) because Pirelli did not “provide facts

showing that any individual at a Walgreens store made

a misrepresentation or concealed a material fact.” More-

over, relying on case law from this circuit, the district

court observed that Pirelli had failed sufficiently to

allege that it had been injured by Walgreens’ fraudulent

scheme, a prerequisite to recovery under Illinois law.

Finally, the district court concluded that the complaint

in the qui tam case “help[ed] lay the foundation for

Pirelli’s argument about Walgreens’ corporate policy, [but

did] not substantiate Pirelli’s claim that it was itself

defrauded by Walgreens.” Thus, the court ruled that

the complaint failed to plead fraud with sufficient par-

ticularity as the federal rules require.

II. Discussion

The sufficiency of a complaint is a question of law

that we decide without deference to the district court’s

ruling. Crichton v. Golden Rule Ins. Co., 576 F.3d 392, 395

(7th Cir. 2009). Although we do not adopt all of the

district court’s reasoning, the complaint was appro-

priately dismissed. Pirelli failed to plead adequate

grounds for its suspicions of fraud, and its unjust enrich-

ment claim was hitched to its fraud claim. The short-

comings of the fraud claim doomed the unjust enrich-

ment claim.

10 No. 10-1686

A. Pirelli’s Fraud Claim

Pirelli maintains that Walgreens’ alleged scheme vio-

lated the Illinois Consumer Fraud and Deceptive

Business Practices Act (“ICFA”). The ICFA makes it

unlawful to use deception or fraud in the conduct of

trade or commerce.3 In addition to its general proscrip-

tions, the act provides a right of action for a person

who suffers “actual damage” as a result of a violation.

815 ILCS 505/10a(a). When a plaintiff in federal court

alleges fraud under the ICFA, the heightened pleading

standard of Federal Rule of Civil Procedure 9(b) ap-

plies. Davis v. G.N. Mortg. Corp., 396 F.3d 869, 883 (7th

Cir. 2005).

The concepts involved are relatively straightforward,

but this appeal implicates important wrinkles that

merit discussion. Under Rule 9(b) of the Federal Rules

of Civil Procedure, a party who alleges fraud or mistake

“must state with particularity the circumstances con-

stituting fraud or mistake.” As one district court has

noted, the particularity requirement of Rule 9(b) is de-

3

The provision provides: “Unfair methods of competition

and unfair or deceptive acts or practices, including but not

limited to the use or employment of any deception, fraud,

false pretense, false promise, misrepresentation or the conceal-

ment, suppression or omission of any material fact, with

intent that others rely upon the concealment, suppression or

omission of such material fact, or the use or employment of

[specified practices] in the conduct of any trade or commerce

are hereby declared unlawful . . . .” 815 ILCS 505/2 (foot-

notes omitted).

No. 10-1686 11

signed to discourage a “sue first, ask questions later”

philosophy. Berman v. Richford Indus., Inc., 1978 WL 1104,

at *5 (S.D.N.Y July 28, 1978); see also Fidelity Nat’l Title

Ins. Co. of N.Y. v. Intercounty Nat’l Title Ins. Co., 412 F.3d

745, 748-49 (7th Cir. 2005) (the particularity require-

ment “forces the plaintiff to conduct a careful pretrial

investigation” and minimizes the risk of extortion that

may come from a baseless fraud claim); Kennedy v.

Venrock Assocs., 348 F.3d 584, 594 (7th Cir. 2003) (the

particularity requirement protects defendants from

“privileged libel”).

In adding flesh to the bones of the word particularity,

we have often incanted that a plaintiff ordinarily must

describe the “who, what, when, where, and how” of the

fraud—“the first paragraph of any newspaper story.”

United States ex rel. Lusby v. Rolls-Royce Corp., 570

F.3d 849, 854 (7th Cir. 2009). Yet, because courts and

litigants often erroneously take an overly rigid view of

the formulation, we have also observed that the

requisite information—what gets included in that first

paragraph—may vary on the facts of a given case. Emery

v. Am. Gen. Fin., Inc., 134 F.3d 1321, 1324 (7th Cir. 1998)

(flexibility when information lies outside of plaintiff’s

control); In re HealthCare Compare Corp. Secs. Litig., 75

F.3d 276, 285 (7th Cir. 1996) (Ripple, J., dissenting)

(noting that reasonable minds can and will differ on the

adequacy of a given fraud averment); see also Shushany

v. Allwaste, Inc., 992 F.2d 517, 521 (5th Cir. 1993) (“What

constitutes ‘particularity’ will necessarily differ with the

facts of each case . . . .”). The twin demands of detail

and flexibility, though in tension with one another, make

12 No. 10-1686

sense in light of the competing purposes of the federal

rules. Heightened pleading in the fraud context is

required in part because of the potential stigmatic injury

that comes with alleging fraud and the concomitant

desire to ensure that such fraught allegations are not

lightly leveled. At the same time, the adoption of the

Federal Rules of Civil Procedure constituted a self-con-

scious departure from prior pleading regimes that em-

phasized form for form’s sake. See also 2 James Wm. Moore,

M OORE’S F EDERAL P RACTICE § 9.03[1][b], at 9-18 (3d ed.

2010) (although “plaintiffs are not absolutely required

to plead the specific date, place, or time of the fraudulent

acts,” they still must “use some alternative means

of injecting precision and some measure of substantia-

tion into their allegations of fraud”); David Marcus, The

Federal Rules of Civil Procedure and Legal Realism as a Juris-

prudence of Law Reform, 44 G A. L. R EV. 433, 471 (2010)

(contending that Charles Clark, one of the primary

drafters and exponents of the federal rules, used code-

and common-law pleading instrumentally as the “foil[s]

for his procedural jurisprudence”).

Here is the wrinkle and the rub. A plaintiff who

alleges fraud can provide all the detail in the world, but

does not have unlimited leeway to do so on “information

and belief.” When a plaintiff sets out allegations on in-

formation and belief, he is representing that he has a

good-faith reason for believing what he is saying, but

acknowledging that his allegations are “based on second-

hand information that [he] believes to be true.” B LACK’S

L AW D ICTIONARY 783 (7th ed. 1999); see also Pirraglia v.

Novell, Inc., 339 F.3d 1182 (10th Cir. 2003) (quoting

No. 10-1686 13

B LACK’S L AW D ICTIONARY 779 (6th ed. 1990)). Although

Pirelli did not use the phrase “information and belief” in

its complaint, its allegations fall squarely within the

definition of the term. See also Dey v. Cont’l Cent. Credit, 88

Cal. Rptr. 3d 241, 244 n.1 (Cal. Ct. App. 2008) (allegations

based on hearsay constitute information and belief).

As counsel for Pirelli stated at oral argument, “We’re

secondhand on a lot of this information . . . we’re picking

up from the qui tam complaint . . . adopting these allega-

tions.”

That insight about Pirelli’s allegations has conse-

quences. Even though it sounds more like an ethical

issue than an evaluation of the amount of detail in a

complaint, we have ruled that a plaintiff generally

cannot satisfy the particularity requirement of Rule 9(b)

with a complaint that is filed on information and belief.

Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683

(7th Cir. 1992) (“Even before Rule 11 was amended to

require [reasonable pre-complaint inquiry], and a fortiori

since, it was understood that the duty to plead the cir-

cumstances constituting fraud with particularity could

not be fulfilled by pleading those circumstances on ‘in-

formation and belief[.]’ ”). The general rule that fraud

cannot be pled based on information and belief is not

ironclad, however: the practice is permissible, so long

as (1) the facts constituting the fraud are not acces-

sible to the plaintiff and (2) the plaintiff provides “the

grounds for his suspicions.” Uni*Quality, Inc. v. Infotronx,

Inc., 974 F.2d 918, 924 (7th Cir. 1992); Bankers Trust, 959

F.2d at 684.

14 No. 10-1686

Here, Pirelli’s complaint skips the phrase “information

and belief” and just provides the grounds for its suspi-

cions: besides its preliminary look at its own reimburse-

ment data, the complaint relies on the ground that

other people have sued Walgreens and detailed their

allegations. But when someone alleges fraud based on

information and belief, not just any grounds will do. The

grounds for the plaintiff’s suspicions must make the

allegations plausible, even as courts remain sensitive to

information asymmetries that may prevent a plaintiff

from offering more detail. See In re Rockefeller Center

Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002); see

also Lusby, 570 F.3d at 854 (concluding that the knowl-

edge evinced in a qui tam relator’s fraud complaint sup-

ported a plausible inference of fraud in that case). Al-

though the federal rules are flexible in this realm, allega-

tions based on the mere filing of other lawsuits gen-

erally will not provide much in the way of plausible

corroboration of a plaintiff’s fraud. But cf. Thornton v.

Evans, 692 F.2d 1064, 1081 (7th Cir. 1982) (holding, in

a context different than Rule 9(b) but animated by

similar concerns, that “where the acts constituting fraud

and conspiracy [were] peculiarly within the defendants’

knowledge,” it was permissible to base a verification

statement on information from public filings in other

lawsuits, published government reports, and informa-

tion in the media).

It is appropriate to accord limited corroborative weigh

to allegations in another’s lawsuit. To appreciate why,

consider the 2003 qui tam case. We take judicial notice

of the complaint in the qui tam case, even though only

No. 10-1686 15

portions were cited in Pirelli’s complaint. See 520 S. Mich.

Ave. Assocs., Ltd. v. Shannon, 549 F.3d 1119, 1137 n.14

(7th Cir. 2008). Notably, the complaint of massive fraud

in the qui tam case itself is based largely on information

and belief. See, e.g., Compl. ¶¶ 20, 23, 36, United States

ex rel. Lisitza v. Walgreens Co., No. 03-cv-744 (N.D. Ill.

Jan. 31, 2003) (detailing particulars of how the fraudu-

lent scheme worked). The whistleblower (“relator” in

the statutory argot) who made the allegations did not

actually observe the prescription-filling practices. Rather,

he alleged that he was a temporary pharmacist who

was placed by an employment agency at pharmacies

other than Walgreens. He typically was placed at phar-

macies “somewhere” in Illinois. When he would receive

prescriptions that were transferred from Walgreens to

one of the pharmacies to which he was temporarily

assigned, the relator observed that Ranitidine prescrip-

tions were filled by Walgreens with the more expensive

capsules. According to the complaint, the relator asked

about this and “Walgreens pharmacists regularly

indicated that Walgreens had set up its system so

that [R]anitidine tablets were impossible to provide,

and that all [R]anitidine prescriptions were filled as

capsules despite what a physician had specifically pre-

scribed.” Id. ¶¶ 16-18. Details of what the relator

learned, such as the timeframe during which Walgreens

pharmacists would make the alleged confessions,

whether the relator’s observations were universal, or the

geographic scope of the fraud, are not fleshed out.

That is not to say that the complaint in that case

would have been inadequate as to that plaintiff. The al-

16 No. 10-1686

legations in the qui tam case were made by a whistle-

blower. The qui tam relator surely lacked access to reim-

bursement data from third-party payors that would

have allowed him to provide additional circumstances

corroborating the existence of fraud. But the same con-

clusion obviously would not apply to a third-party

payor itself. It would be odd if a complaint like this,

itself based on information and belief, could constitute

plausible corroboration for a fraud claim brought by

a third-party payor, without pointing to any meaningful

indication that the plaintiff had been injured. Imagine

the possibilities under a contrary approach: Case

Number 1 in one jurisdiction could be filed on informa-

tion and belief, which would prove insufficient. Yet, a

second litigant could bring Case Number 2, alleging a

fraud based on the complaint in Case Number 1 and

survive a motion to dismiss, having done sufficient pre-

complaint inquiry by doing little more than reading a

daily law bulletin. The outcome would be odd indeed.

The allegations in the ESI suit, too, are problematic,

though for a slightly different reason. The matter pled

in the ESI suit not only speaks to the existence of a fraud

but attempts to address whether Pirelli was injured by

a fraudulent scheme. ESI learned that an overwhelm-

ingly large percentage of prescriptions for Ranitidine

in primarily three geographic areas (none in Illinois)

was filled with the more expensive, less prescribed

dosage form of the drug. Those allegations tend to

show that ESI was injured by a fraudulent scheme.

The district court was correct not to place weight on

the allegations in the ESI suit. Again, Pirelli is relying on

No. 10-1686 17

the mere fact of someone else’s allegations, which evince

little pre-complaint inquiry on Pirelli’s part and which

speak to potential fraud in three other jurisdictions

outside of Illinois in any event. A plaintiff pleading

fraud on information and belief has to show that the

missing pieces are outside of its control. Ackerman v. Nw.

Mut. Life Ins. Co., 172 F.3d 467, 471 (7th Cir. 1999). But

Pirelli has not suggested (much less explained why) it

does not have the requisite knowledge about its reim-

bursement data to bolster its complaint with informa-

tion like that which apparently undergirds the ESI suit.

Although “Rule 9(b) is satisfied by a showing that

further particulars of the alleged fraud could have been

obtained without discovery,” Emery, 134 F.3d at 1323,

it strikes us that information like that pled in the ESI

Suit would not be the product of discovery but of a more

fulsome look at its own data.

Because it is appropriate to give limited if any weight

to the ESI suit, we turn to Pirelli’s preliminary reimburse-

ment data. Those data comprise an exhibit to Pirelli’s

complaint showing only that it reimbursed Walgreens

for the more expensive form of Ranitidine for eleven of

its members since 2001. (Only one of the members was

in Illinois.) In addition, it reimbursed Walgreens for the

more expensive form of Fluoxetine for two members

since 2001. (Neither member was in Illinois.) Pirelli has

not placed the data in context, however, and there is no

reason to think that reimbursements for a total of eleven

members nationwide is suspicious—among all of the

pharmacies with which Pirelli had dealings, did only

Walgreens seek reimbursement for the more expensive

18 No. 10-1686

form of Ranitidine over this period? Are prescriptions

for that form so exceedingly rare that the mere fact of

reimbursement should raise eyebrows? Pirelli has not

pled or argued that the answer to these questions is yes,

and common sense, cf. Ashcroft v. Iqbal, 129 S. Ct. 1937,

1950 (2009) (courts should draw on “judicial experience

and common sense” in determining whether a given

claim is plausible), says that the answer to each is likely

to be no. Nor has Pirelli provided overall reimburse-

ment figures for these drugs. The fact that drug

companies make multiple forms of drugs and that there

may be therapeutic reasons for preferring one over

another suggest that there are markets for different

forms of the drugs. In short, the data, untethered as they

are, cannot corroborate a fraud because their free-

floating nature stymies any meaningful understanding

of what the numbers mean. Absent a reason to think

otherwise, the most plausible explanation for dispensing

a well known, popular drug in any form is that it was

prescribed.

We see no reason why Pirelli, which apparently has

mined its national data in search of these transactions,

could not easily have done more. Something along the

lines of the allegations underpinning the ESI suit would

have improved Pirelli’s pleading fortunes. But a better

presentation of its data might have done the trick, too.

Putting the numbers in context could tell us whether

Pirelli also reimbursed Walgreens for the cheaper form

of the drugs in the five-year period that Pirelli examined.

To the extent it did not, the fraud claim would be sup-

ported; to the extent it did, it would be undermined.

No. 10-1686 19

Or we could see if reimbursements for the more expen-

sive forms of the drugs outstripped reimbursements for

the cheaper versions in an unlikely way. Pirelli did not

have to dance to ESI’s comprehensive statistical tune, but

did need to provide firsthand facts or data to make its

suspicions plausible. Pirelli’s de minimis showing tells us

little and does not fulfill Rule 9(b)’s purpose of “forc[ing]

the plaintiff to do more than the usual investigation

before filing his complaint.” Ackerman, 172 F.3d at 469.

In an effort to stave off dismissal, Pirelli does point to

the subset of three members from its preliminary data,

but those data, too, suffer from fatal shortcomings.

Recall that Pirelli examined a subset of the twelve mem-

bers on whose behalf it reimbursed Walgreens. Pirelli

broke out the reimbursement patterns for three of its

members who had Ranitidine prescriptions filled by

both Walgreens and other pharmacies. The records

show that Walgreens reimbursed Pirelli for the more

expensive form of Ranitidine while other pharmacies

were reimbursing Pirelli for the cheaper form. The reim-

bursements came during overlapping time periods, so

it looks as if Walgreens was either intentionally switching

prescriptions or as if there were clerical errors at work.

The small-n analysis, however, is problematic, particu-

larly given that we still lack any context for the data.

The bare fact of inconsistent reimbursements for three

patients in a five-year time period is not sufficient to

raise allegations of fraud above the speculative level.

Without knowing anything else about the overall num-

bers involved, the dearth of transactions does not tend

20 No. 10-1686

to corroborate the existence of a fraud. Indeed,

according to its complaint, Pirelli does business in at least

California, Connecticut, Florida, Illinois, Louisiana, and

Tennessee. For an entity with national reach, laboring

under a system in which prescriptions are transferred

from one pharmacy to another, see Compl. ¶ 16, United

States ex rel. Lisitza v. Walgreens, No. 03-cv-744 (N.D. Ill.

Jan. 31, 2003), one would expect some number of

prescription-filling errors. See also T O E RR IS H UMAN:

B UILDING A S AFER H EALTH S YSTEM 28-31 (Linda T. Kohn,

Janet M. Corrigan, & Molla S. Donaldson, eds., 2000)

(stating that medication related errors are among the

most common types of errors and suggesting that their

frequency may be higher than it appears because studies

focus on adverse effects from medication errors rather

than errors that cause no harm). Pirelli has offered us no

reason to think that these three instances are representa-

tive of something broader, and its pleading betrays its

own timidity on that score. The complaint characterizes

the handful of transactions it identifies as “suspiciously

consistent” with the unlawful scheme alleged in the

qui tam case and the ESI suit. To satisfy the particularity

requirement of Rule 9(b) when it made allegations

based on information and belief, however, Pirelli

needed corroboration, not just consistency.

We do note, however, that both the district court and

Walgreens overstated the extent of Pirelli’s burden. In

order to survive the motion to dismiss phase, Pirelli

needed some firsthand information to provide grounds

to corroborate its suspicions. A preliminary look at data,

in theory, would have been an appropriate means of

No. 10-1686 21

accomplishing that task. Had the data showed an

unlikely pattern of reimbursements, it would have helped

make Pirelli’s claim plausible. Moreover, Walgreens

is incorrect inasmuch as it suggests that Pirelli neces-

sarily needed Illinois data to establish the existence of a

fraudulent scheme. See Corley v. Rosewood Care Ctr., 142

F.3d 1041, 1051 (7th Cir. 1998) (relaxed standard applies

when the information constituting the fraud is in the

hands of the defendant). Similarly, the district court was

incorrect when it suggested that Pirelli needs to point to

specific misrepresentations made by particular Wal-

greens staffers. Suppose Pirelli had enough reimburse-

ments nationwide to indicate that something was awry

but only limited reimbursements in any given jurisdic-

tion. If Pirelli knew that reimbursements of the drugs

skewed 75/25 in favor of the cheaper forms with non-

Walgreens pharmacies, but the proportions were flipped

with respect to Walgreens, it might have provided suffi-

cient grounds to corroborate Pirelli’s suspicion that

Walgreens was engaged in fraud and that Pirelli was

injured by the scheme. See Corley, 142 F.3d at 1050 (“the

particularity requirement of Rule 9(b) must be relaxed

where the plaintiff lacks access to all facts necessary to

detail his claim”). But those are not the allegations

here—and flexibility in the face of information asymme-

tries should not be conflated with whistling past the

rules of civil procedure.

As a proposed end run around the complaint’s par-

ticularity problems, Pirelli argues that Rule 9(b) does not

apply and that it should get the benefit of Rule 8 of the

Federal Rules of Civil Procedure. Rule 8, which governs

22 No. 10-1686

the allegations in most suits, substitutes particularity for

the lesser showing of “fair notice” of the nature of the

claim. Fed. R. Civ. P. 8(a)(2); Tamayo v. Blagojevich, 526 F.3d

1074, 1083 (7th Cir. 2008). The argument is that the

more forgiving pleading standards should apply

because Pirelli is entitled to recover under the ICFA’s

bar on unfair practices that fall short of deception.

815 ILCS 505/2 (banning unfair or deceptive acts); Robinson

v. Toyota Motor Credit Corp., 775 N.E.2d 951, 960-61

(Ill. 2002) (discussing factors that make a practice unfair

under the ICFA). When a claim alleges an unfair prac-

tice, the relaxed pleading standards of Rule 8 do indeed

govern. Windy City Metal Fabricators & Supply, Inc. v. CIT

Tech. Fin. Servs., Inc., 536 F.3d 663, 670 (7th Cir. 2008).

However, the practices alleged in Pirelli’s com-

plaint constitute fraudulent activity, and the dictates of

Rule 9(b) apply to allegations of fraud, not claims of

fraud. Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502,

507 (7th Cir. 2007) (“A claim that ‘sounds in fraud’—in

other words, one that is premised upon a course of fraud-

ulent conduct—can implicate Rule 9(b)’s heightened

pleading requirements.”). Here, the complaint alleges

that Walgreens unlawfully and intentionally concealed

from Pirelli’s PBM, or misrepresented to it, the form of

the drug that was prescribed and that Pirelli suffered

damages as a result. That is fraud predicated on either

a misrepresentation or an omission. See, e.g., United States

v. Stephens, 421 F.3d 503, 507 (7th Cir. 2005) (fraud em-

braces half-truths “that the defendant knows to be mis-

leading and which the defendant expects another to act

upon to his detriment and the defendant’s benefit”);

No. 10-1686 23

McClellan v. Cantrell, 217 F.3d 890, 893 (7th Cir. 2000) (fraud

includes misrepresentations, misleading omissions and

“embraces all the multifarious means which human

ingenuity can devise and which are resorted to by one

individual to gain advantage over another by false sug-

gestions or by the suppression of truth”). The district

court correctly concluded both that Rule 9(b) applied

and that its dictates were not satisfied.

In sum, Pirelli’s allegations were insufficient. Although

a plaintiff generally receives the benefit of reasonable

inferences at the motion to dismiss phase, e.g., Bonte v.

U.S. Bank, N.A., 624 F.3d 461, 463 (7th Cir. 2010), a plain-

tiff who bases allegations of fraud on information and

belief bears the burden of pleading plausible grounds

for suspecting that the defendant was engaged in a fraud-

ulent scheme. Pirelli did not shoulder that burden, and

its complaint was appropriately dismissed as a result.

B. Pirelli’s Unjust Enrichment Claim

One loose end remains. Pirelli argues that it has a

claim for unjust enrichment even if its fraud claim is not

viable. The district court dismissed the claim under

Federal Rule of Civil Procedure 12(b)(6), for failure to

state a claim upon which relief can be granted, concluding

that the dismissal of the fraud claim took the unjust

enrichment claim with it. We agree.

Under Illinois law, unjust enrichment is not a separate

cause of action. “Rather, it is a condition that may be

brought about by unlawful or improper conduct as

24 No. 10-1686

defined by law, such as fraud, duress, or undue in-

fluence, and may be redressed by a cause of action based

upon that improper conduct.” Alliance Acceptance Co. v.

Yale Ins. Agency, Inc., 648 N.E.2d 971, 977 (Ill. App. Ct. 1995)

(quoting Charles Hester Enters., Inc. v. Ill. Founders Ins. Co.,

484 N.E.2d 349, 354 (Ill. App. Ct. 1985)). For example, a

breach of a contract, or of a fiduciary duty, might create

a situation in which someone has retained a benefit that

ought to be disgorged based on principles of equity.

See also, e.g., HPI Health Care Servs., Inc. v. Mt. Vernon

Hosp., Inc., 545 N.E.2d 672, 679 (Ill. 1989) (citing 1 G.

Palmer, T HE L AW OF R ESTITUTION § 1.1, at 2-4 (1978), and

discussing one set of circumstances in which retaining

a benefit has been deemed unjust). Pirelli argues that

the conduct of which it has accused Walgreens violates

state law and therefore it should be able to maintain

its unjust enrichment claim. See Ass’n Benefit Servs., Inc. v.

Caremark RX, Inc., 493 F.3d 841, 855 (7th Cir. 2007) (“Illinois

courts have held that conduct rises to the level of

wrongful, in the context of an unjust enrichment claim,

when it violates the law.”).

But again, it is allegations of fraud, not claims of fraud,

to which Rule 9(b) applies. Pirelli’s complaint does not

contend merely that Walgreens erred in filling prescrip-

tions, violated the Illinois Pharmacy Act by doing so,

and should therefore be disgorged of erroneously

obtained benefits. Nor did Pirelli set out its unjust en-

richment claim in the alternative, pursuant to Federal

Rule of Civil Procedure 8(d)(2). See Holman v. Indiana,

211 F.3d 399, 407 (7th Cir. 2000) (“While [plaintiffs] need

not use particular words to plead in the alternative,

No. 10-1686 25

they must use a formulation from which it can be rea-

sonably inferred that this is what they were doing.”).

Rather, the complaint maintains that Walgreens was

engaged in a massive, perhaps fully-automated, system

of filling prescriptions for the more expensive forms of

Ranitidine and Fluoxetine. A system in which other

industry actors were deceived. We have found those

averments, bolstered by reimbursements to a single

member in Illinois for just one of the drugs at issue and

by a smattering of untethered nationwide data, insuf-

ficient to satisfy Pirelli’s information-and-belief

plausibility-burden.

In Caremark RX, we reaffirmed that “when the plain-

tiff’s particular theory of unjust enrichment is based on

alleged fraudulent dealings and we reject the plaintiff’s

claims that those dealings, indeed, were fraudulent, the

theory of unjust enrichment that the plaintiff has

pursued is no longer viable.” 493 F.3d at 855. Pirelli’s

response brief elides the complaint’s omission of alter-

native pleading, subtly reorienting its response brief

toward a more straightforward unjust enrichment claim

of a type that it might have pled in the alternative. The

effort founders, however, because of the axiomatic rule

that a plaintiff may not amend his complaint in his re-

sponse brief. Frederico v. Home Depot, 507 F.3d 188, 201-

02 (3d Cir. 2007) (citing Car Carriers, Inc. v. Ford Motor

Co., 745 F.2d 1101, 1107 (7th Cir. 1984)). Therefore, the

district court did not err by dismissing Pirelli’s unjust

enrichment claim.

26 No. 10-1686

III. Conclusion

For the reasons set forth above, the judgment of the

district court is A FFIRMED.

1-21-11