Pa. Employee v. Zeneca Inc., Civil Action No. 05-075-ER

• Court: United States District Courts. 3th Circuit. United States District Court (Delaware)
• Writing for the Court: EDUARDO C. ROBRENO
• Citation: 710 F.Supp.2d 458
• Parties: PENNSYLVANIA EMPLOYEE, BENEFIT TRUST FUND, et al., Plaintiffs, v. ZENECA, INC., et al., Defendants.
• Docket Number: Civil Action No. 05-075-ER
• Decision Date: 06 May 2010

710 F.Supp.2d 458

PENNSYLVANIA EMPLOYEE, BENEFIT TRUST FUND, et al., Plaintiffs,
v.
ZENECA, INC., et al., Defendants.

Civil Action No. 05-075-ER.

United States District Court,
D. Delaware.

May 6, 2010.

710 F.Supp.2d 462

A. Zachary Naylor, Robert Ray Davis, Chimicles & Tikellis, LLP, Jeffrey S. Goddess, Rosenthal, Monhait & Goddess, P.A., Wilmington, DE, Christopher J. McDonald, Pro Hac Vice, Jeffrey L. Kodroff, Pro Hac Vice, Ronald S. Goldser, Pro Hac Vice, Steve W. Berman, Pro Hac Vice, Ellen Meriwether, Pro Hac Vice, Jason J. Thompson, Pro Hac Vice, Scott V. Papp,

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Pro Hac Vice, Gerald Lawrence, Pro Hac Vice, for Plaintiffs.

Daniel M. Silver, Michael P. Kelly, McCarter & English, LLP, Alycia A. Degen, Pro Hac Vice, John W. Treece, Pro Hac Vice, Joshua E. Anderson, Pro Hac Vice, Maja C. Eaton, Pro Hac Vice, Mark E. Haddad, Pro Hac Vice, Peter I. Ostroff, Pro Hac Vice, Richard D. Raskin, Pro Hac Vice, Sidley Austin LLP, Los Angeles, CA, for Defendants.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge.

TABLE OF CONTENTS

I.	INTRODUCTION	463
II.	BACKGROUND	463

A. Factual Background 463

1.	Parties	463
2.	Facts	464

B. Procedural History 465

III. DISCUSSION 466

A. Choice of Law 466

1.	Delaware Choice of Law Process	466
2.	Application of Delaware's Choice of Law Rules	470

(a) Consumer Protection Claims 471

(i)	Delaware versus Pennsylvania	471
(ii)	Delaware versus New York	473
(iii)	Delaware versus Michigan	475

(b)	Unjust Enrichment	477
(c)	Negligent Misrepresentation	477

B. Failure to State a Claim under Rule 12(b)(6) 478

1.	Motion to Dismiss Standard	478
2.	Consumer Protection Claims	480

(a)	Plaintiffs PEBTF, AFSCME, Scofield	480
(b)	Plaintiff Macken	480
(c)	Plaintiff Watters/Wellness Plan	482

3.	Unjust Enrichment	485
4.	Negligent Misrepresentation	485

C. Dismissal with Prejudice/Leave to Amend 486

IV. CONCLUSION 487

I. INTRODUCTION

Before the Court is a motion to dismiss with prejudice filed by Defendants AstraZeneca Pharmaceuticals LP and Zeneca, Inc. (collectively, "Defendants"). This matter involves a putative class action asserting that Defendants engaged in deceptive business practices by orchestrating a misleading marketing campaign with respect to the prescription drug Nexium.

Based on the factual deficiencies in Plaintiffs' amended complaint concerning the relationship between Defendants' alleged misrepresentations and Plaintiffs' purchase of Nexium, the Court will grant Defendants' motion to dismiss. The Court further concludes, however, that dismissal with prejudice is not warranted under the circumstances and will allow Plaintiffs leave to amend to cure these deficiencies.

II. BACKGROUND

A. Factual Background

1. Parties

As this case involves several different plaintiffs from various jurisdictions, thereby

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implicating choice of law issues, a brief recitation of the relevant parties' backgrounds is helpful to the Court's analysis.

• Pennsylvania Employee Benefit Trust Fund ("PEBTF") is a labor management trust which provides healthcare benefits, including prescription drug coverage, to approximately 70,000 participants and beneficiaries. (Am. Compl. ¶ 16.) Its members are located in Pennsylvania and Delaware, among several other states. ( Id.) PEBTF is organized under the laws of the Commonwealth of Pennsylvania. ( Id.)

• AFSCME District Council 47 Health & Welfare Fund ("AFSCME") is a welfare benefit plan organized under Pennsylvania law. ( Id. ¶ 18.) Its members include roughly 4,000 active city employees and 700 retirees, and it serves to pay a portion of the purchase price for prescription drugs, including Nexium, for its participants. ( Id.)

• Victoria Scofield ("Scofield") is a resident of Pennsylvania who made co-payments for Nexium during the applicable class period. ( Id. ¶ 20.)

• Joseph Macken ("Macken") is an individual residing in New York who purchased Nexium for personal consumption during the applicable class period. ( Id. ¶ 19.)

• Linda A. Watters ("Watters") is the Commissioner of Financial and Insurance Services for the State of Michigan and serves as Rehabilitator of The Wellness Plan, a third party payor (the "Wellness Plan"). ( Id. ¶ 17.) ¹ Watters' role is to collect and liquidate the assets and liabilities of the Wellness Plan. ( Id.) ²

• Defendants Zeneca, Inc. and AstraZeneca Pharmaceuticals LP are organized under the laws of the state of Delaware. ( Id. ¶¶ 26, 27.) Defendants maintain research and manufacturing facilities throughout the United States. ( Id. ¶ 29.)

2. Facts

Defendants produced and sold the drug Prilosec, which is known as a proton pump inhibitor ("PPI") used to treat gastroesophegal reflux disease ("GERD") and erosive esophagitis ("EE"). ( Id. ¶¶ 32-35.) These conditions are commonly associated with acid reflux disease and heartburn. ( Id.) Defendants engaged in substantial marketing of Prilosec, resulting in it being known colloquially as the "purple pill" and generating sales of approximately $6 billion in 2000. ( Id. ¶¶ 40-44.) The patent for Prilosec was set to expire in 2001, at which point it could be sold in its generic form (known as omeprazole). ( Id. ¶ 40.) ³ According to Plaintiffs, in response to this

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expiring patent for Prilosec, Defendants developed Nexium for the purpose of converting its market share from Prilosec to Nexium. ( Id. ¶¶ 45-47.)

On February 14, 2001, Defendants obtained approval from the Food and Drug Administration ("FDA") for final labeling of Nexium for treatment of EE and GERD. ( Id. ¶ 11.) Defendants engaged in extensive studies comparing Prilosec and Nexium in the period leading up to its FDA approval. One published clinical study used to obtain FDA approval of Nexium compared both 20mg and 40mg doses of Nexium to the approved 20 mg dose of Prilosec. ( Id. ¶¶ 71-76.) The data from this study showed that 40mg of Nexium had a statistically significant healing rate over 20mg of omeprazole (i.e., Prilosec). ( Id.) The FDA later determined that Nexium should be approved at recommended dosages of 20mg or 40mg once daily, for four to eight weeks, for the healing of EE, and at 20mg for healing of both EE and symptomatic GERD. ( Id. ¶¶ 79-83.) Plaintiffs' position is that this distinction is illusory since the differing dosages would not affect most patients, such that Nexium, in fact, provides no real benefits over Prilosec. ( Id. ¶¶ 73-77.) In other words, Plaintiffs allege that Nexium merely constitutes Prilosec "repackaged" in a slightly altered chemical form.⁴

Defendants engaged in a large-scale marketing campaign, which included both physician-directed marketing ("PD Marketing") and direct-to-consumer advertising ("DTC Advertising"), in order to boost the sales of Nexium over the comparable product of Prilosec. ( Id. ¶¶ 84-88.) Plaintiff's theory is that since Defendants knew that Nexium was not more effective than Prilosec on the whole, their misleading advertising campaign cost individual consumers and third party payors billions in unnecessary drug expenditures by inducing buyers of Nexium, such as Plaintiffs, to purchase Nexium when the less-expensive, but equally-effective, alternative of omeprazole/ Prilosec was readily available.

B. Procedural History

On February 11, 2005, PEBTF filed a putative class action alleging that Defendants deceptive marketing of Nexium caused consumer injury. On April 5, 2005, and April 14, 2005, Watters and Macken, respectively, filed complaints mirroring the substantive allegations contained in PEBTF's complaint. On May 27, 2005, PEBTF, Watters, and Macken filed a consolidated class action complaint on behalf of an alleged nationwide class of consumers and third party payors that purchased or paid for Nexium.

On July 21, 2005, Defendants moved to dismiss PEBTF, Watters and Macken's consolidated complaint on the grounds that the claims were preempted by federal law and barred by state law, plaintiffs lacked

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standing under Article III, and failed to satisfy Fed.R.Civ.P. 9(b). On November 8, 2005, Judge Robinson granted Defendants' motion to dismiss on preemption grounds and because the claims were exempted under the Delaware Consumer Fraud Act. The Third Circuit affirmed Judge Robinson's decision, but after granting a petition for certiorari, the Supreme Court remanded the case in light of its decision in Wyeth v. Levine, --- U.S. ----, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009). On May 5, 2009, the Third Circuit remanded the case for further proceedings "consistent with Wyeth v. Levine." On May 27, 2009, the case was reassigned to this Court sitting by designation.

On July 16, 2009, this Court entered Pretrial Order No. 2. Pursuant to this Order, Plaintiffs filed an amended consolidated class action complaint (the "Amended Complaint") on August 14, 2009. The Amended Complaint asserts four causes of action: (1) violation of the Delaware Consumer Fraud Act ("DCFA"); (2) violations of the consumer protection statutes of the 50 states; (3) unjust enrichment; and (4) negligent misrepresentation. On September 15, 2009, Defendants filed a motion to dismiss the Amended Complaint with prejudice pursuant to Fed. R. Civ. 12(b)(6). The Court held a hearing on the motion to dismiss on January 14, 2010.

III. DISCUSSION

In order to address the issues raised in Defendants' motion to dismiss, the Court must first resolve the choice of law question to determine the applicable law relevant to each Plaintiff's claims. Second, the Court will address Defendants asserted deficiencies with respect to the Amended Complaint in order to determine whether Fed.R.Civ.P. 12(b)(6) requires dismissal. Finally, the Court will determine whether dismissal with prejudice is warranted based on the procedural posture of the case.

A. Choice of Law

The parties dispute the appropriate law to be applied to each of the claims asserted in the Amended Complaint. Defendants' position is that the law of the home states of the respective named Plaintiffs should apply, whereas Plaintiffs contend that Delaware law should control.

1. Delaware Choice of Law Process

When...