City of S.F. v. Purdue Pharma L.P., Case No. 3:18-cv-07591-CRB

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
Writing for the CourtCHARLES R. BREYER United States District Judge
Decision Date30 September 2020
PartiesCITY AND COUNTY OF SAN FRANCISCO, et al., Plaintiffs, v. PURDUE PHARMA L.P., et al., Defendants.
Docket NumberCase No. 3:18-cv-07591-CRB

CITY AND COUNTY OF SAN FRANCISCO, et al., Plaintiffs,
v.
PURDUE PHARMA L.P., et al., Defendants.

Case No. 3:18-cv-07591-CRB

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

September 30, 2020


ORDERING GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS THE FIRST AMENDED COMPLAINT

The City and County of San Francisco ("San Francisco") and the People of the State of California (collectively, "the City"), acting by and through San Francisco City Attorney Dennis Herrera, have brought a lawsuit intended to address the impact of the opioid epidemic in San Francisco. The lawsuit targets two distinct sets of defendants, "Marketing Defendants"1 and "Distributor Defendants"2 (collectively, "Defendants").3 See infra App. A. The City alleges that: (1) "RICO Marketing Defendants"4 violated RICO by forming an illegal Opioid Marketing Enterprise and defrauding San Francisco; (2) "RICO Supply Chain Defendants"5 also violated RICO by forming an illegal Opioid Supply Chain Enterprise and defrauding San Francisco; (3) all Defendants contributed to the creation of a public nuisance, i.e., the opioid epidemic, in violation of California Civil Code §§ 3479-3480; (4) all Defendants, except Walgreens, violated

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California's Unfair Competition Law ("UCL"); and (5) Marketing Defendants engaged in acts that violated California's False Advertising Law ("FAL"), Cal. Bus. & Prof. Code § 17500 et seq.

Five categories of Defendants—all Defendants,6 Manufacturers,7 Distributors,8 Walgreens,9 and Anda, Inc.—move to dismiss the City's First Amended Complaint ("FAC") for failure to state a claim. Foreign Defendants also move to dismiss for lack of personal jurisdiction and insufficient service of process, with Endo Int'l and MNK plc also moving to dismiss for insufficient process. The Court hereby GRANTS Defendants' motion to dismiss the City's RICO claims and DENIES all other bases for dismissal.

I. BACKGROUND

The opioid crisis has infiltrated communities throughout the country. Between 1999 and 2016, more than 350,000 people died from opioid-related overdoses—2017, alone, added nearly 48,000 people to the total number of opioid-related deaths. FAC (dkt. 128) ¶¶ 3-4. San Francisco has been particularly impacted. From 2006 through 2016, the number of people who inject drugs in San Francisco has jumped from 10,000 to over 25,000 persons. Id. ¶ 52. In 2018, San Francisco paramedics administered naloxone10 to 1,647 people, which was nearly double the amount administered in 2016. Id. ¶ 55 (citing Brian Rinker, Drug Users, Equipped With Naloxone, Are Helping to Reverse Overdoses in San Francisco, ABC News (June 14, 2019), available at https://abcnews.go.com/Health/drug-users-equippednaloxone-helping-reverse-overdoses-san/story?id=63696298). Hospitalizations and overdose deaths have also increased substantially since 2014. Id. ¶ 54 (citing Dr. Phillip O. Coffin, et al., Substance Use Trends in San Francisco Through 2018 at 9 (December 2019), available at https://ndews.umd.edu/sites/ndews.umd.edu/files/San-Francisco-Substance-Use-2019-Annual-Report-Trends-Through-2018.pdf). Not only has the opioid crisis impacted San Francisco's streets, but San Francisco's

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jails are seeing an influx of opioid contraband. See id. ¶ 57. The San Francisco Sheriff's Department purchased mail screening equipment to combat the massive influx of fentanyl. Id. Even though San Francisco budgeted $23.2 million to address the opioid crisis, the opioid epidemic persists. See id. ¶ 58 (citing City & County of San Francisco, California Mayor's 2017-2018 & 2018-2019 Proposed Budget, Mayor's Office of Public Policy and Finance at 15 (June 1, 2017), available at https://sfmayor.org/sites/default/files/CSF_Budget_Book_2017_Final_CMYK_LowRes.pdf).

As a result of the epidemic, over 2,700 lawsuits, including this one, were filed against opioid manufacturers, distributors, and dispensers. These actions were transferred to Judge Dan A. Polster in the U.S. District Court for the Northern District of Ohio. In February 2020, Judge Polster remanded this action back to the Northern District of California to proceed as a bellwether trial. One month later, the City filed its FAC.

The City alleges that Defendants are responsible for two primary causes of the opioid crisis in San Francisco. First, Marketing Defendants used false and deceptive advertising techniques in a marketing scheme designed to increase the demand and sale of prescription opioids. Id. ¶¶ 7-11. These defendants allegedly created and used a marketing enterprise that targeted physicians, patients, lawmakers, and enforcement agencies, in a systematic effort to change prescriber habits and public perception regarding prescription opioids. Id. ¶¶ 225-546. Second, Defendants manufactured, distributed, and dispensed greater quantities of opioids than they knew would be necessary for legitimate medical uses, failed to design and implement effective controls over the distribution of opioids, and failed to report and take steps to halt suspicious orders that were being diverted into illegal secondary markets. Id. ¶¶ 7, 12. In doing so, Defendants allegedly violated their legal obligations under the Controlled Substances Act ("CSA"), California law, and common law. Id. ¶¶ 579-83. Despite this conduct, Defendants publicly represented that they complied with their legal obligations. Id. ¶¶ 668-80. These factual allegations form the underlying basis for the City's claims.

Now pending are nine motions to dismiss and one request for judicial notice.

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II. DISCUSSION

A. The MDL court's decisions are not binding "law of the case."

As a preliminary matter, Defendants argue that this Court should not adopt the MDL's rulings in other cases as the law of this case. Law of the case doctrine is a discretionary practice whereby courts do not redecide issues resolved by the transferee court. 15 Charles Alan Wright & Arthur Miller, Federal Practice and Procedure § 3867 (4th ed. Apr. 2020 Update). The MDL court has ruled on several pre-trial motions that applied to all cases consolidated before the MDL; however, the MDL court never ruled on a motion to dismiss involving the present case. See, e.g., In re Nat'l Prescription Opiate Litig., No. 1:17-MD-2804, 2020 WL 4550400, at *7 (N.D. Ohio Aug. 6, 2020) (denying motions to dismiss Lake and Trumbull counties' claims against pharmacy defendants). Defendants argue that the doctrine is inapplicable here because it applies only to rulings in the same case, and thus, the prior MDL rulings on motions to dismiss should not prevent this Court from independently reviewing each of Defendants' arguments in this case. Def. Mot. (dkt. 169) at 5. The City warns that this would result in "piecemeal decision making that MDL centralization is intended to avoid." Opp. (dkt. 208) at 7 (quoting 15 Charles Alan Wright & Arthur Miller, Federal Practice and Procedure § 3867 (4th ed. Aug. 2019 Update)). But even the City acknowledges that the MDL's decisions are not binding—just, given the similarities, highly persuasive. Id. at 8. This Court agrees: the MDL's rulings will serve as a "springboard." This Court will independently review Defendants' arguments, but will rely on the MDL's rulings as highly persuasive authority to the extent that these decisions are consistent with California and Ninth Circuit authority.

The City relies excessively on this Court's statement that it will "not review or alter any of the rulings [that] have already been entered in the MDL litigation." Id. at 6-7 (internal citations omitted). This Court will not disturb the decisions by Judge Polster with respect to the entire MDL. But a transferee judge's decision to grant a motion depends on the factual record in that case, not on the record of a separate case adjudicated by the MDL court. See In re Nat'l Prescription Opiate Litig., 956 F.3d 838, 845 (6th Cir. 2020); see also Thomas v. Bible, 983 F.2d 152, 154 (9th Cir. 1993) ("[A] court is generally precluded from reconsidering an issue that has

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already been decided by the same court, or a higher court in the identical case." (emphasis added) (internal citation omitted)).

Accordingly, this Court will independently consider Defendants' arguments to the extent that they (1) were not raised in the MDL, or (2) rely on California or Ninth Circuit precedent. However, the Court adopts as persuasive the MDL's conclusions regarding one of Defendants' threshold arguments that the MDL court has repeatedly rejected and that is not based on Ninth Circuit precedent: that the CSA and its implementing regulations do not impose duties on Defendants. See, e.g., Def. Mot. at 11-12, 17-19, 19 n.18, 29-30, 30 n.28 (relying on its arguments to the MDL court). The Court begins with this issue because several other issues turn on the question whether the CSA imposes such duties. See infra Subparts II.E.4; II.E.5.a; II.E.5.c.ii; II.E.6.a.i.

1. Duties under the CSA and its implementing regulations.

The CSA and its implementing regulations do impose duties on Defendants. The CSA authorizes the Attorney General to "promulgate rules and regulations . . . relating to the registration and control of the manufacture, distribution, and dispensing of controlled substances . . . ." 21 U.S.C. § 821. Pursuant to this authority, the DEA Administrator promulgated § 1301.71(a), which requires all registrants to "provide effective controls and procedures to guard against theft and diversion of controlled substances." 21 C.F.R. § 1301.71(a). The DEA Administrator also promulgated § 1301.74(b), which imposes a legal obligation on non-practitioner registrants—manufacturers and distributors—to "design and operate a system to disclose to the registrant suspicious orders of controlled substances." 21 C.F.R. 1301.74(b). The MDL court concluded that these regulations impose duties on manufacturers and distributors to identify, report, and refrain from shipping suspicious orders. In re...

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