552 F.3d 659 (8th Cir. 2009), 08-1491, Ashley County, Ark. v. Pfizer, Inc.

Docket Nº:08-1491.
Citation:552 F.3d 659
Party Name:ASHLEY COUNTY, ARKANSAS; Benton County, Arkansas; Cleburne County, Arkansas; Faulkner County, Arkansas, Plaintiffs, v. PFIZER, INC.; PDK Labs, Inc.; Warner Lambert Company, LLC; Johnson & Johnson; Perrigo Company; John Does, 1 through 10, Defendant-Appellees. Independence County, Arkansas; Chicot County, Arkansas; Conway County, Arkansas; Cross Cou
Case Date:January 05, 2009
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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552 F.3d 659 (8th Cir. 2009)

ASHLEY COUNTY, ARKANSAS; Benton County, Arkansas; Cleburne County, Arkansas; Faulkner County, Arkansas, Plaintiffs,

Independence County, Arkansas; Chicot County, Arkansas; Conway County, Arkansas; Cross County, Arkansas; Fulton County, Arkansas; Jackson County, Arkansas; Lawrence County, Arkansas; Izard County, Arkansas; Monroe County, Arkansas; Nevada County, Arkansas; Pulaski County, Arkansas; Sevier County, Arkansas; Sharp County, Arkansas; Stone County, Arkansas; Woodruff County, Arkansas; Union County, Arkansas, Plaintiff-Appellants,

v.

PFIZER, INC.; PDK Labs, Inc.; Warner Lambert Company, LLC; Johnson & Johnson; Perrigo Company; John Does, 1 through 10, Defendant-Appellees.

No. 08-1491.

United States Court of Appeals, Eighth Circuit.

January 5, 2009

         Submitted: Sept. 22, 2008.

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[Copyrighted Material Omitted]

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         Brian Gene Brooks, argued, Greenbrier, AR, James J. Thompson, Jr., and Nolan E. Awbrew, Birmingham, AL, James A. Simpson, Jr., Searcy, AR, and John M. Belew and Steve Bell, Batesville, AR, on the brief, for appellant.

          William F. Northrip, argued, Kansas City, MO, G. Spence Fricke, Little Rock, AR, on the brief, for appellees, Pfizer, Inc., Warner Lambert and Johnson & Johnson.

          Stephen E. Scheve and A. Kyle Harris, Houston, TX, and Blair Arnold, Batesville, AR, on the brief, for appellee, Perrigo Company.

          Before RILEY, HANSEN, and MELLOY, Circuit Judges.

          HANSEN, Circuit Judge.

          Twenty individual counties in Arkansas brought this civil suit against Pfizer, Inc., PDK Labs, Inc., Warner Lambert Company, LLC, Johnson & Johnson, Perrigo Company, and various John Does (collectively " Defendants" ),1 each of whom manufactures

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or distributes products containing ephedrine or pseudoephedrine. The complaint sought compensation to recoup the costs expended by the counties in dealing with the societal effects of the methamphetamine epidemic in Arkansas, with liability premised on the use of the Defendants' products in the methamphetamine manufacturing process. Sixteen of the counties (collectively " Counties" ) appeal the district court's 2 order granting the Defendants' motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure, and we affirm.

         I.

          Because we are reviewing a judgment granted on the pleadings, we view all the facts pleaded by the Counties, the nonmovants, as true, and we make all reasonable inferences in the Counties' favor. Poehl v. Countrywide Home Loans, Inc., 528 F.3d 1093, 1096 (8th Cir.2008). Methamphetamine is a highly addictive, synthetic drug that, according to the Counties, cannot be manufactured, or " cooked," without either ephedrine or pseudoephedrine. In Arkansas, methamphetamine is manufactured primarily in small toxic labs (" STLs" ) located in homes, tents, barns, or hotel rooms. According to the Counties, Arkansas has one of the highest numbers of STLs in the nation. The manufacturing process is dangerous, often resulting in explosions, chemical burns, chemical spills, and toxic fumes. The Counties allege that they have spent significant amounts of taxpayer dollars combating the manufacture of methamphetamine, including law enforcement costs to locate, eliminate, and clean up STLs where the methamphetamine is manufactured; prison and jail costs to house illegal users, dealers, and manufacturers; addiction treatment costs for users and addicts; costs to family service agencies for housing and treating children whose parents are arrested for methamphetamine-related charges; and costs for treating the physical side effects of methamphetamine use and exposure to its production.

          The Defendants are manufacturers and distributors of over-the-counter cold and allergy medications containing either ephedrine or pseudoephedrine. None of the Defendants are retailers, nor do they sell the medications directly to the public. The Counties allege that the Defendants marketed and sold their products in Arkansas knowing that the products were being used illegally to manufacture methamphetamine.3 The Counties allege that the Defendants knew that their products were being used illegally at least as early as 1986 when the federal Drug Enforcement Administration (DEA) began pushing for controls over the sale of products containing ephedrine or pseudoephedrine. During two different time periods, in 1995-1996 and in 1998-1999, the DEA placed restrictions on the importation of bulk ephedrine and tracked the sales of ephedrine and pseudoephedrine outside of " blister

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packs." According to the Counties, methamphetamine use and abuse declined dramatically during these time periods, but the Defendants allegedly fought to create loopholes in the regulations to continue reaping large profits in the sale of their products. In time, the Counties say, methamphetamine cooks learned how to exploit the loopholes, and methamphetamine use rose again.

         The Counties claim that the Defendants knew of measures they could have voluntarily taken to reduce the availability of their products to methamphetamine cooks but consciously chose not to, fighting regulatory efforts in order to continue reaping large profits. The actions that the Defendants (who are manufacturers and wholesalers) allegedly should have voluntarily taken included directing the retailers to place the products behind the counter of retail stores; requiring the retailers to make retail purchasers sign for products when purchased from the retailer; educating the retailers and their employees about suspicious behavior by persons seeking to purchase the products for illegal use; requiring the retailers to lock the products in display cases; and requiring the retailers to limit the amount of product that could be purchased at retail by an individual during a specified period of time. These measures were eventually included in DEA regulations issued in 2005. The Counties also alleged that two of the Defendants, Warner Lambert and Pfizer, developed effective alternative cold medications that did not contain ephedrine or pseudoephedrine and that could not be used to produce methamphetamine, but that neither of them brought the alternative products to market.

         The Counties assert that the Defendants knew they were selling far more than the legitimate market for their products consumed as evidenced by the fact that the revenues of one of the Defendants, Perrigo, declined rapidly from $182 million to $30 million once regulations were passed in 2005 limiting access to the Defendants' products. The Counties also allege that the DEA sent letters to some of the Defendants warning them that their products were being used to make methamphetamine and that an executive from Pfizer admitted that the pharmaceutical industry was responsible for a portion of the methamphetamine problem in the United States. The Counties do not allege, however, that any of the Defendants violated any federal or state regulation governing the manufacture, distribution, packaging, or sale of their products. Nor do the Counties dispute that the sale of products containing ephedrine and pseudoephedrine is heavily regulated by both state and federal agencies.

         The Counties sought damages under four different causes of action: common law unjust enrichment; the Arkansas Deceptive and Unconscionable Trade Practices Act (ADTPA), see Ark Code Ann. § 4-88-107; common law nuisance; and the Arkansas crime victims civil liability statute, see Ark.Code Ann. § 16-118-107. The District Court granted the Defendants' motion for judgment on the pleadings,4 and the Counties appeal.

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          II.

          The Counties filed their case in Arkansas state court, and the Defendants removed it to federal court based on diversity of citizenship. 28 U.S.C. § 1332. We therefore apply federal procedural rules, see Scenic Holding, LLC v. New Bd. of Trustees of Tabernacle Missionary Baptist Church, Inc., 506 F.3d 656, 665 (8th Cir.2007), but Arkansas substantive law, see Bores v. Domino's Pizza, LLC, 530 F.3d 671, 674 (8th Cir.2008). The district court granted judgment on the pleadings under Federal Rule of Civil Procedure 12(c), which required the court to " accept as true all factual allegations set out in the complaint" and to " construe the complaint in the light most favorable to the plaintiff[s], drawing all inferences in [their] favor." Wishnatsky v. Rovner, 433 F.3d 608, 610 (8th Cir.2006). " Judgment on the pleadings is appropriate only when there is no dispute as to any material facts and the moving party is entitled to judgment as a matter of law," id., the same standard used to address a motion to dismiss for failure to state a claim under Rule 12(b)(6), see Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990). " Because this is a diversity case, we interpret [Arkansas] law in determining whether the elements of the offenses have been pled." Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1062 (8th Cir.2005). We review the district court's dismissal de novo. Wishnatsky, 433 F.3d at 610.

          Our task in this diversity case is to apply Arkansas law and, where an issue has not been decided by the Supreme Court of Arkansas, to predict how it would decide the issue. See STL 300 N. 4th, LLC v. Value St. Louis Assocs., L.P., 540 F.3d 788, 792 (8th Cir.2008). When state law is ambiguous or undeveloped, " we look to ‘ relevant state precedent, analogous decisions, considered dicta, and any other reliable data’ to determine how the Supreme Court of [Arkansas] would construe [Arkansas] law." United Bank of Iowa v. Indep. Inputs (In re W. Iowa Limestone, Inc.), 538 F.3d 858,...

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