Opinion
Mdl No. 1430, Master File No. 01-CV-10861-RGS.
May 14, 2004
On November 25, 2003, this court denied, in part, the motion of defendants Abbott Laboratories (Abbott), Takeda Chemical Industries, Ltd. (Takeda), and TAP Pharmaceutical Products, Inc. (TAP), to dismiss the consolidated class action complaint. Thereafter, plaintiffs Liberty National Life Insurance Company (Liberty National) and United American Insurance Company (United American), whose action was transferred by the Multi-District Litigation Panel to this court on January 22, 2004, moved to amend their most recently filed complaint in light of the court's January 24, 2003 Memorandum and Order (finding that Alabama lacked personal jurisdiction over Takeda) and its later dismissal of several of the class action counts. Liberty National and United American's Second Amended Complaint eliminates Takeda as a defendant, dismisses Count III (a RICO claim alleging a TAP-physicians enterprise), Count IV (a RICO claim alleging an individual physicians enterprise), and Count VIII (a restitution/unjust enrichment claim), while amending the remaining claims to conform with the court's November 25, 2004 decision. Abbott moves to dismiss the Second Amended Complaint, asserting that it fails to plead fraud with particularity. TAP joins in requesting the dismissal of Count V, asserting that plaintiffs have failed to adequately plead common law fraud under Alabama law.
Abbott and TAP also move to dismiss the Count IV consumer protection statute claims, arguing that the plaintiff insurers lack standing under Texas and Alabama law as "consumers." Liberty National and United American concede that Count IV is "due to be dismissed." Opposition Memorandum, at 2.
Abbott asks that the court dismiss the Second Amended Complaint in its entirety, contending that all of Liberty National and United American's claims are predicated on fraud and that they fail to plead fraud against Abbott with the particularity required by Fed.R.Civ.P. 9(b). Abbott maintains that because "the Complaint does not include a single, specific allegation that Abbott marketed or sold Lupron® to any medical care provider, that Abbott made any false or misleading misrepresentations concerning Lupron®, and/or that Abbott was involved in establishing or reporting any price for Lupron®, there is no basis for a finding of liability (direct or vicarious) against Abbott." Abbott Memorandum at 2.
"[T]he court must keep in mind the purpose of Rule 9(b), including avoiding groundless claims and strike suits, the potential damage to a defendant's reputation, especially if the underlying RICO claim is based on criminal activities, and ensuring that defendants have been adequately put on notice to enable them to give meaningful responses. . . . On the other side of the scale, the court should note the policy in favor of allowing amendments and trying cases on their merits, and against dismissals which would deny plaintiffs their day in court." New England Data Services, Inc. v. Becher, 829 F.2d 286, 292 (1st Cir. 1987).
In its November 25, 2003 Order, the court addressed at length the issues raised by Abbott in context of the class action complaint. In re: Lupron® Marketing and Sales Practices Lit., 295 F. Supp.2d 148 (D. Mass. 2003). Plaintiffs allege that Abbott jointly (with TAP and Takeda) determined the price at which Lupron® would be sold by TAP, and was actively involved in various of the Lupron® marketing schemes. Seconded Amended Complaint ¶¶ 111-115. At this stage of the litigation, these allegations, for the reasons the court has previously explained, are sufficient to satisfy Rule 9(b). In re: Lupron®, 295 F. Supp.2d at 165-171.
With regard to the common law fraud claim (Count VI), Abbott and TAP assert that plaintiffs have failed to allege the elements required under both Alabama and Texas law. The parties agree that common law fraud claims require (1) a false representation, (2) of a material fact, (3) on which a plaintiff reasonably relied, and (4) which caused the plaintiff injury or damage. See Boackle v. Bedwell Construction Company, Inc., 770 So.2d 1076, 1080 (Ala. 2000). Abbott and TAP argue that both Alabama and Texas also require a showing of a "present intent on the part of the defendant to deceive the plaintiff." See Baker v. State Farm General Ins. Co., 585 So.2d 804, 807 (Ala. 1991);Ernest Young, L.L.P. v. Pacific Mutual Life Ins. Co., 51 S.W.3d 573, 578 (Tex. 2001). The parties also agree that Alabama law does not require that the defendants' misrepresentation be made directly to the plaintiff. See Thomas v. Halstead, 605 So.2d 1181, 1185 (Ala. 1992). In support of dismissal, Abbott and TAP assert that plaintiffs fail to allege a false representation, causation, or an intention on the part of defendants that the plaintiffs be deceived.
The "present intent" requirement is not an element per se of common law fraud but a clarification of the intent required. Present intent distinguishes a statement for which a defendant will be held liable from a nonactionable statement of a purely promissory nature. See People v. Ashley, 42 Cal.2d 246, 273, 267 P.2d 271 (Cal. 1954) (Traynor, J.).
For present purposes, the court sees no need to address the issue of whether Alabama law applies to United American's common law fraud claim.
I disagree. Plaintiffs adequately allege that TAP and Abbott knew that the stated AWP for Lupron® was a made-up and inflated figure. Moreover TAP and Abbott knew, or should have known, that Liberty National and United American, as health care insurers, would rely on the AWP in determining reimbursement rates to their insureds. Defendants iterate the same argument made in the earlier proceedings, that under Langford v. Rite Aid of Alabama, Inc., 231 F.3d 1308, 1313-1314 (11th Cir. 2000), retailers are under no duty to disclose their pricing structure to consumers and that differential pricing is not a fraudulent practice. As the court has pointed out previously, In re: Lupron®, 295 F. Supp.2d at 167, defendants' reliance on Langford ignores the crucial distinction between an affirmative misrepresentation and mere silence. See Bonilla v. Volvo Car Corp., 150 F.3d 62, 71 (1st Cir. 1998). Finally, the insurers allege actual reliance, which is sufficient for present purposes.
ORDER
For the foregoing reasons, Abbott and TAP's motion to dismiss Liberty National and United American's Second Amended Complaint is DENIED, with the exception of Count IV, which by agreement will be DISMISSED.
SO ORDERED.