Bowerman v. Takeda Pharm. USA, CV–13–1051.

• Decision Date: 25 September 2014
• Docket Number: No. CV–13–1051.,CV–13–1051.
• Citation: 2014 Ark. 388,442 S.W.3d 839
• Parties: Greg BOWERMAN, Individually and as a Class Representative on Behalf of all Taxpayers Within the State of Arkansas, Petitioner v. TAKEDA PHARMACEUTICALS U.S.A., Formerly Known as Takeda Pharmaceuticals North America, Inc.; Takeda Global Research And Development Center, Inc.; Takeda Pharmaceutical Co. Ltd. ; Takeda Pharmaceuticals America, Inc.; Takeda California, Inc., Formerly Known as Takeda San Diego, Inc. ; Takeda Pharmaceuticals International, Inc. ; Takeda Pharmaceuticals, LLC.; Eli Lilly and Co.; And Stephen L. LaFrance Pharmacy, LLC, Respondents.
• Court: Arkansas Supreme Court

2014 Ark. 388

442 S.W.3d 839

Greg BOWERMAN, Individually and as a Class Representative on Behalf of all Taxpayers Within the State of Arkansas, Petitioner

v.TAKEDA PHARMACEUTICALS U.S.A., Formerly Known as Takeda Pharmaceuticals North America, Inc.; Takeda Global Research And Development Center, Inc.; Takeda Pharmaceutical Co. Ltd. ; Takeda Pharmaceuticals America, Inc.; Takeda California, Inc., Formerly Known as Takeda San Diego, Inc. ; Takeda Pharmaceuticals International, Inc. ; Takeda Pharmaceuticals, LLC.; Eli Lilly and Co.; And Stephen L. LaFrance Pharmacy, LLC, Respondents.

No. CV–13–1051.

Supreme Court of Arkansas.

Sept. 25, 2014.

Sutter & Gillham, P.L.L.C., Little Rock, AR, by: Luther Oneal Sutter, for petitioner.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., Little Rock, AR, by: Lyn P. Pruitt and Kevin M. Lemley, for respondents.

Opinion

KAREN R. BAKER, Associate Justice.

This case involves two questions of Arkansas law certified to this court by the United States District Court for the Western District of Louisiana in accordance with our Supreme Court Rule 6–8 (2014), and accepted by this court on January 9, 2014. See In re Actos (Pioglitazone) Prods. Liab. Litig., 2014 Ark. 3, 431 S.W.3d 275 (per curiam). The certified questions are as follows:

Does Article 16 § 13 of the Arkansas Constitution provide Greg Bowerman with a claim for illegal exaction under the facts and circumstances provided in this case? If so, does that claim extend to both theories proffered by Bowerman (i.e., product liability and unfair trade practices) and each of the remedies requested?

Is Nelson v. Berry Petroleum Co., 242 Ark. 273, 413 S.W.2d 46 (1967), still good law in Arkansas? Does Nelson embrace the expansive reading presented by Bowerman, or the more narrow reading argued by defendants, or is Nelson applicable to the facts and circumstances of this case?

We answer both questions in the negative.

Greg Bowerman, as a representative of a constitutional class-action of citizen-taxpayers of the State of Arkansas, brought a case against Takeda Pharmaceuticals U.S.A., Inc., formerly known as Takeda Pharmaceuticals North America, Inc.; Takeda Global Research and Development Center, Inc.; Takeda Pharmaceutical Co. Ltd.; Takeda Pharmaceuticals America, Inc.; Takeda California, Inc. formerly known as Takeda San Diego, Inc.; Takeda Pharmaceuticals International, Inc.; Takeda Pharmaceuticals, LLC; Eli Lilly and Co.; and Stephen L. LaFrance Pharmacy, Inc.¹ , (collectively “Respondents”), alleging that an illegal exaction had taken place.

Bowerman initially filed the case in the Circuit Court of Saline County, Arkansas, on December 1, 2011. The case was removed to federal court in Arkansas, the United States District Court for the Eastern District of Arkansas, pursuant to the Class Action Fairness Act (21 U.S.C § 1332(d)) on March 12, 2012. It was then transferred to the United States District Court for the Western District of Louisiana to be included in the multidistrict litigation pending before that court on June 15, 2012. Respondents filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) on May 31, 2013, alleging that Bowerman had failed to state a claim upon which relief could be granted. Bowerman filed a response on July 3, 2013. The Court certified the questions to us in a certification order dated November 7, 2013. This order set out the factual allegations as follows:

The Respondents were engaged in the business of designing, developing, manufacturing, testing, packaging, promoting, marketing, distributing, labeling, and/or selling pioglitazone

, under the trade name “Actos ” for the treatment of Type II diabetes mellitus. Actos was approved by the Food and Drug Administration (“FDA”) in July of 1999 as a treatment for diabetes and is sold in several forms. It is alleged Pioglitazone has caused bladder cancer and other side effects, through a defective design and/or flaws in manufacturing.

Intentionally or otherwise, it is alleged Respondents violated the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., including both statutory and regulatory standards. It is alleged Respondents knew or should have known that Actos

had the potential to cause bladder cancer, heart attacks and other cardiovascular problems, and concealed their knowledge of these potential side effects from the public as well as the State of Arkansas and its physicians. As a result of being prescribed Actos for many years, Bowerman alleges Arkansas citizens have been permanently and severely injured, having suffered serious consequences from long-term Actos use. As a result, it is alleged the State and its prescribing physicians were unaware and could not reasonably have known or have learned through reasonable diligence, that Arkansas citizens whose health care is subsidized with public funds were being exposed to the risk of the side effects described above, and that those risks were the direct and proximate result of the Respondents' acts, omissions, and misrepresentations.

The State of Arkansas provides reimbursement for medical products and services provided to some of its citizens. Under the State program, Arkansas citizens were prescribed and began taking Actos

upon direction of their physicians; some citizens subsequently developed bladder cancer and other side effects, allegedly caused by Actos. It is alleged Arkansas citizens have (and had) several safer alternative products available to treat the conditions they have. Moreover, Arkansas citizens and physicians allegedly have not been adequately warned about the significant risks and

lack of benefits associated with long-term Actos

therapy.

Additionally, the Respondents allegedly engaged in unfair methods of competition and unfair and deceptive trade practices by making false representations that Actos

was better at lowering blood sugar than existing medications and could decrease diabetics' cardiovascular risks. As a result, plaintiff alleges the State of Arkansas spent millions of its citizens' dollars on an overpriced, harmful drug.

Bowerman further alleges the State of Arkansas, and its citizens, have borne (and continue to bear) the treatment costs for heart attacks

, heart injury, excessive fluid retention, fluid overload disease, liver damage, liver failure, strokes and/or server injury to the heart leading to cardiac arrest, bladder cancer, and death, allegedly caused by Actos. The State allegedly would not have purchased Actos for the benefit of its citizens had Respondents properly disclosed the risks associated with its long-term use. Therefore, the taxpayers of Arkansas allegedly have paid public funds to the Respondents that, absent the Respondents' illegal actions, would have remained in the Treasury. As a further result of the Respondents' actions and inactions, it is alleged the State Treasury was diminished because the State paid to treat Arkansas citizens injured due to the ingestion of Actos, which caused and will continue to cause Bowerman various injuries and damages.

While the first question certified to this court actually consists of two separate questions, we will focus only on the first as we find it dispositive of the issue. Does article 16, section 13 of the Arkansas Constitution provide Bowerman with a claim for illegal exaction under the facts and circumstances provided in this case? We hold that it does not.

Article 16, section 13 of the Arkansas Constitution states that any citizen of any county, city, or town may institute suit, in behalf of himself and all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever. An illegal exaction is defined as any exaction that either is not authorized by law or is contrary to law. Carnegie Pub. Library of Eureka Springs v. Carroll Cnty., 2012 Ark. 128, 2012 WL 1036847. Two types of illegal-exaction cases can arise under article 16, section 13 : “public funds” cases, where the plaintiff contends that public funds generated from tax dollars are being misapplied or illegally spent, and “illegal tax” cases, where the plaintiff asserts that the tax itself is illegal. Id. Here, the question before us involves a “public funds” case, because Bowerman only asserts that public funds were used improperly. He does not assert that any of the taxes used to generate the public funds are illegal.

It is uncontested that Bowerman has not used or purchased Actos

. However, as this is an illegal-exaction claim, there is no question that Bowerman has standing. Citizens have standing to bring a public-funds case because they have a vested interest in ensuring that the tax money they have contributed to the state treasury is lawfully spent. Ghegan & Ghegan, Inc. v. Weiss, 338 Ark. 9, 991 S.W.2d 536 (1999). Thus, the only standing requirements we have imposed in public-funds cases is that the plaintiff be a citizen and that he or she have contributed tax money to the general treasury. Id. We have not required the plaintiff to trace his or her individual tax contribution to the tax money that is allegedly being spent in an illegal manner, nor have we required the plaintiff to establish a significant tax contribution to the state treasury. Id. Hence, in public-funds cases we have given the word “interested” as used in article 16, section 13, a very broad construction. Id. The Court found that Bowerman was a citizen of Arkansas and a taxpayer. Therefore, Bowerman has standing to bring the claim.

However, simply because Bowerman has standing does not mean that his claim is properly brought. Before a public-funds type of illegal exaction will be allowed to proceed, there must be facts showing that monies generated from tax dollars or arising from taxation are being misapplied or illegally spent. Dockery v. Morgan, 2011 Ark. 94, 380 S.W.3d 377. Any arbitrary or unlawful action exacting taxes or tax revenues may be restrained and annulled by a taxpayer affected by such procedure....