FI L ED U.S. COURT OF APPEAL S EL EVENTH CI RCUI T OCTOB ER 24, 2011 J OHN L EY CL ERK [DO NOT PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS

FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __ No. 1 0- 13 19 6

__ __ __ __ __ __ __ __ __ __ __ __ D.C. Dock et Nos . 1: 08 -m d- 01 92 8- DMM,

9: 08 -cv -8 08 73

SOUTHEAST L ABORERS HEALTH AND W ELFARE FUND, on be ha lf o f it se lf a nd all ot he rs si m il arl y si tu at ed ,

Pl ai nt iff s- App el la nt ,

ve rs us
BAYER CORPOR ATION, BAYER HEA LTHCARE PHARMAC EUTICAL, INC., BAYER HEA LTHCARE, LLC, BAYER HEAL THCARE, A.G.,
Defen da nt s- App el le es

.

__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co ur t fo r th e So ut he rn Dis tri ct of F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ _ (Oct ob er 2 4, 2 01 1)Befo re EDMONDSON an d M ARCUS, Ci rcu it Ju dg es , and FAW SETT, Dis tri ct * Ju dg e.
FAW SETT, Dist ric t J ud ge :
So ut he a st Lab or ers Heal th an d W el fare Fu nd (“ So ut he as t” ) is an em pl oyee
welf are be ne fit pl an th at rei mb ur se s pl an m em be rs fo r co ve red m ed ic al ex pe ns es

. So ut he as t fil ed th is pu rp or te d cl as s act io n on be ha lf of it se lf an d al l pr iv at e , n o ngo ve rn m en t a l en ti ti es in th e Uni te d St at es an d it s te rri to rie s th at pu rch as ed , rei m bu rs ed , or pa id a l l o r p a r t of th e co st of th e m ed ic at io n Tras y lo l fo r pu rp os es

ot he r th an res al e fro m Ja nu ary 1, 19 99 to Nov em be r 20 07

. So ut he as t al le ge s th at App el le es Bayer Co rp or at io n, Bayer Heal th care Ph arm aceu ti cal , I n c

. , Bayer
Heal th care , LLC, an d Bayer Heal th care , A

. G

. , (“ Bayer”), th e m an uf act ur ers of

T ra sy lo l, ei th er m is rep res en te d or su pp res se d em erg in g in fo rm at io n rev ea lin g se ri ous
ris ks as so ci at ed wit h th e us e of Tras y lo l. So ut he as t co nt en ds t h a t Bayer’ s co nd uc t
vi ol at ed , am on g ot he r th in gs , th e ci vi l RICO st at ut e, 18 U.S.C. §§ 19 62 (c)( 2) , 1 9 6 4 ( c); th e New Je rs ey Co ns um er Frau d Act, N.J. St at

. Ann

. § 56 :8 -1 e t s e q

. (“ NJC FA”); an d (3 ) th e im pl ie d warra nt y of m erch an ta bi li ty un de r New Je rs ey la w,
N.J. St at

. Ann

. § 12 A:2 -3 14

. On ap pe a l , So ut he as t co nt es ts th e di st ric t co ur t’s
di sm is sa l o f it s t hi rd am en de d c om pl ai nt wit h p reju di ce.

Honora ble Patricia C. F awse tt, United States District J udg e for the Middle District of * Florida , sitti ng by

desig nation.
2I.

The all eg at io ns of t he co m pl ai nt refl ect th at ap ro ti ni n -- th e ch em ic al na m e
fo r Tras y lo l -- was o rig in al ly dev el op ed in th e 1 95 0’s t o t reat pa nc reat it is

. Sci en ti st s l at er d is co ve red th at th e d ru g a ss is ts th e b od y in pre ve nt in g e xc es si ve
bl eed in g d ur in g s ur ge ry . In t he earl y 19 80 ’s, Bay er b eg an res earc hi ng ap ro ti ni n. By th e la te -1 99 0’s, Ba y er h ad rece iv ed va rio us Fo od an d Dru g Ad m in is tra ti on (FDA) ap pr ov al s fo r th e u se of a pr ot in in un de r th e tr ad e n am e Tras y lo l t o re du ce

pe rio pe rat iv e b lo od lo ss an d t he ne ed for bl oo d t ran sf us io ns in pa ti en ts

un de rg oi ng Co ro na ry

Arte ry By pa ss Graft (“ CABG”) su rg eri es . From 19 93
th ro ug h 2 00 7, Tras y lo l was rou ti ne ly adm in is te red to pa ti en ts un de rg oi ng CABG

su rg ery. Trasylo l co st s i n e xc es s o f $1 ,00 0.0 0 p er d os e, an d m ul ti pl e d os es are
of te n re qu ire d d ur in g t he co ur se of o ne CABG su rg ery. Oth er m ed ic at io ns us ed to

m an ag e b lo od lo ss du rin g s ur ge ry , in cl ud in g Am ic ar (a m in oc ap ro ic aci d) an d Cy kl ok ap ro n o r TA (tra ne xa m ic aci d) , cos t l es s t ha n $ 50 .00 pe r do se

. In Feb ru ary of

20 06 th e FDA rel eas ed a pu bl ic he al th ad vi so ry rel at in g t o
Tras y lo l an d s et an ad vi so ry co m m it te e m eet in g fo r Sep te m be r of 20 06 . The
ad vi so ry co m m it te e co nc lu de d i n S ep te m be r 20 06 th at th ere was no t en ou gh

ev id en ce t o re co m

m en d a ny chan ge to th e sa fet y lab el in g o f Tras y lo l. The FDA
di d re le as e a s eco nd pu bl ic he al th ad vi so ry ab ou t Tras y lo l t ha t m on th , ho wev er.

3In Sep te m

be r of 20 07 an ex pe rt a dv is or y

pa ne l fo r th e FDA reco m m en de d t ha t Bayer be a ll owe d t o c on ti nu e se ll in g Tra sylol bu t ca ut io ne d t ha t Tras y lo l s ho ul d

on ly be u se d i n p at ie nt s at hi gh ris k o f ex ces si ve bl eed in g d ur in g s ur ge ry

. Howev er, s oo n a fte rward , in Nov em be r of 20 07 , th e FDA co nc lu de d t ha t i t co ul d

no t i de nt ify a sp eci fic pa ti en t p op ul at io n fo r who m th e b en efi ts of u si ng Tras y lo l

ou twei gh ed th e h eal th ris ks ass oc ia te d wi th it s u se . At th e sa m e ti m e, Bayer

vo lu nt ari ly sus pe nd ed it s Tra sylol m ark et in g c am pa ig n. In May of 20 08 Bayer

no ti fie d t he FDA of i ts in te nt to rem ov e al l re m ai ni ng su pp li es of Tra sylol fro m
ho sp it al ph arm aci es an d war eh ou se s.
So ut he as t al le ge s t ha t t hr ou gh ou t t he Tras y lo l m ark et in g c am pa ig n, Ba y er

en ga ge d n um ero us do ct or s, re ferr ed to as “ Key Opi ni on Lead ers ,” to ag gr es si ve ly

m ark et Tras y lo l t o t he m ed ic al co m m un it y an d e m pl oyed a fr au du le nt m ark et in g

sc he m e to m is le ad de ci si on m ak ers in to be li ev in g t ha t Tras y lo l’s s afet y an d
effi cacy pro fil e jus ti fie d i ts pri ce o f ov er $ 1,0 00 .00 pe r do se . For e xa m pl e,
be twee n 1 99 8 a nd 20 07 , th e Tras y lo l l ab el st at ed , “ Data po ol ed fro m all pa ti en ts

un de rg oi ng CABG su rg ery in U.S. pl aceb o- co nt ro ll ed tri al s s ho wed no
si gn ifi can tl y

or c li ni cal ly sig ni fic an t i nc reas e in th e in ci de nc e o f po st op erat iv e

ren al dysfu nc ti on in pa ti en ts tre at ed wit h Tra sylol .” Fro m 20 02 to 20 07 , a ph y si ci an ’s bro ch ur e fro m Bayer st at ed , “ Tras y sl ol is ge ne ral ly w el l t ol erat ed ;

4gr aft po te nc y , MI, ren al or h ep at ic dysfu nc ti on , and m or ta li ty sim il ar t o p la ceb o.”

And a “ ke y

m es sa ge ” in Bayer’ s s el l-s he et di st rib ut ed to ho sp it al s an d d oc to rs as

rece nt ly as 20 04 st at ed in bo ld let te rs th at in CABG su rg ery, “ Tras y lo l h ad no
ad ve rs e eff

ect on ren al fun ct io n.”
The co m pl ai nt all eg es th at Bayer kn ew th es e st at em en ts were fa ls e o r

m is le ad in g. Th e al le ga ti on s re la ti ng to Bayer’ s k no wled ge in cl ud e, am on g o th er
th in gs : (1 ) an im al st ud ie s d em on st rat in g s ev ere k id ne y da m ag e as so ci at ed wit h t he

us e o f ap ro ti ni n p rio r to Tras y lo l’s ap pr ov al ; (2 ) a 1 99 2 s tu dy reve al in g re na l dysfu nc ti on in 13 ou t o f 20 pa ti en ts tre at ed wit h a pr ot in in ; (3 ) ev id en ce i nd ic at in g
th at Bayer rou ti ne ly recei ve d re po rts of a dv ers e in ci de nt s as so ci at ed wit h t he us e
of Tras y lo l; (4) Bayer’ s re fu sa l t o s po ns or or s up po rt s tu di es see ki ng to id en ti fy
th e cau se an d fr eq ue nc y

of r en al pro bl em s as so ci at ed wit h Tra sylol ; an d (5 ) two

in de pe nd en t s tu di es co m

pl et ed in 20 06 rev eal in g a rel at io ns hi p b et ween th e u se of

Tras y lo l an d i nc reas ed ris ks of r en al da m ag e an d o th er s eri ou s ad ve rs e rea ct io ns

. So ut he as t fi le d i ts ori gi na l co m pl ai nt in th e Uni te d S ta te s Di st ric t Co ur t fo r
th e Mi dd le Dis tri ct of Ten ne ss ee. The act io n was lat er t ran sf erre d t o t he Uni te d

St at es Dis tri ct Co ur t fo r th e So ut he rn Dis tri ct of F lo rid a as pa rt o f m ul ti -d is tri ct
li ti ga ti on pro ceed in gs in vo lv in g Tra sylol . There , Bay er fi le d a m ot io n t o d is m is s
So ut he as t’s fi rs t am en de d c om pl ai nt , whi ch th e d is tri ct co ur t g ran te d wi th ou t

5pr ejud ic e aft er d et erm in in g t ha t t he co m pl ai nt fai le d t o a ll eg e th e req ui si te

pr ox im at e cau sa ti on for bo th th e ci vi l RI CO an d NJ CFA cl ai m s. In res po ns e,
So ut he as t fi le d a sec on d a m en de d c om pl ai nt ad di ng th e b reac h o f im pl ie d

warra nt y cla im . Upo n m ot io n fr om Bayer, the di st ric t co ur t d is m is se d S ou th eas t’s

se co nd am en de d c om

pl ai nt , fin di ng th at So ut he as t fa il ed to all eg e p ro xi m at e

cau sa ti on un de r th e rel ev an t s ta nd ard s fo r th e ci vi l RI CO, NJCF A, and im pl ie d

warra nt y cla im s. A th ird am en de d c om pl ai nt was t he n fi le d a nd was d is m is se d
wit h p reju di ce b y

th e co ur t o n B ay er’s t hi rd m ot io n t o d is m is s. J ud gm en t was

en te red for Bayer on Ju ne 10 , 20 10 . On ap pe al , Sou th eas t ch al le ng es th e d is m is sa l
of it s ci vi l RI CO, NJCF A, and im pl ie d war ran ty clai m s. Fo r th e rea so ns set for th
be lo w, we affi rm

. II
.

“ ‘W e rev ie w de no vo th e d i s tri ct co ur t’s gr an t of a m ot io n to di sm is s un de r
Ru le 12 (b )(6 ) fo r fai lu re to st at e a cl ai m , acce pt in g t he all eg at io ns in th e co m pl ai nt

as tru e an d co ns tru in g th em in th e li gh t m os t fav or ab le to th e pl ai nt iff .’ ” Am

. Den ta l

Ass ’n v. Ci gn a Co rp ., 60 5 F

. 3 d 1 2 8 3 , 12 88 (1 1t h Ci r. 20 10 ) (q uo ti ng Mi ll s v.
F o r e most In s. Co ., 51 1 F.3 d 13 00 , 13 03 (1 1t h Ci r. 20 08 )). “ In as se ss in g t h e

su ffi ci en cy of th e co m

pl ai nt ’s al le ga ti on s , w e a re bo un d to ap pl y th e pl ead in g

st an d a r d a r t i cu la te d in Bel l Atl an ti c Co rp

. v. Twom bl y , 55 0 U.S. 54 4 (2 00 7) , an d

6Ash cro ft v. Iq ba l, 12 9 S. Ct

. 19 37 (2 00 9) .” Iro nwo r k e r s Loc al Uni on 68 v.

Ast raZen eca Ph arm

. LP, 63 4 F.3 d 13 52 , 13 59 ( 1 1 th Ci r. 20 11 ). Acco rd in gl y , “ a

co m pl ai nt m us t no w co nt ai n su ffi ci en t fact ua l m at te r, acce pt ed as tru e, to ‘stat e a
cl ai m to rel ie f th at is pl au si bl e on it s face .’ ” Am

. Den ta l, 60 5 F.3 d at 12 89 (q uo ti ng
Twom bl y , 55 0 U.S. at 57 0)

. II I.

A. Dismis sa l o f the NJ CFA Clai m
The di st ric t co ur t di sm is se d So ut he as t’s NJC FA cl ai m , fin di ng th at So ut he as t
ha d no t ad eq ua t e l y p l ed a cau sa l co nn ect io n be twee n Bayer’ s al le ge d frau du le nt

co nd uc t and So ut he as t’s asce rta in ab le lo ss

. On app eal , So ut he as t co nt en ds th at th e

co m pl ai nt al le ge s a cl ear cau sa l li nk be twee n it s lo ss an d Bayer’ s de cep ti ve co nd uc t

-- th at So ut he as t wou ld no t h a v e p a i d f o r Tras y lo l at al l, reg ard le ss of pr ic e, if Bayer
ha d no t su pp res se d th e tru th ab ou t th is m ed ic at io n. So ut he as t ad di ti on al ly arg ue s th at
th e di st ric t cou rt im

pr op erl y ch arac te riz ed th is al le ga ti on of a di rect cau sa l lin k as a
frau d on t h e m ark et th eo ry

. In res po ns e, Bayer m ai nt ai ns th at So ut he as t fai le d to
ad eq ua te ly pl ead a cau sa l ne xu s be cau se th e co m pl ai nt is de v o i d of al le ga ti on s
rel at in g to ho w or why So ut he as t m ad e th e de ci si on to pa y fo r Tras y lo l an d be cau se
So ut he as t’s al te rn at iv e th eo rie s of cau sa ti on am ou nt to no th in g m or e th an a frau d on
th e m ark et th eo ry

.

7The NJC FA pr oh ib it s “ [t]he act , us e or em pl oym en t b y a n y p e r so n of an y

un co ns ci on ab le co m

m erci al pr act ic e, de cep ti on , frau d, fal se pr et en se , fal se pr om is e,

m is rep res en ta ti on , or th e kn owi ng , co nc ea l men t , su pp res si on , or om is si on of an y

m at eri al fact wit h in te nt th at ot he rs rel y up on su ch c o n ceal m en t, su pp res si on or

om is si on , in co nn ect io n wit h th e sa le or ad ve rti se m en t of a n y mer c h an di se .” N.J.

St at

. Ann

. § 56 :8 -2

. To st at e a cl ai m un de r th e NJC FA, “ a pl ai nt iff m us t al le ge each
of th ree elem en ts : (1) un la wfu l con du ct by th e de fen da nt s; (2) an asc ert ai na bl e lo ss

on th e pa rt of th e pl ai nt iff ; an d (3 ) a cau sa l rel at io ns hi p be twee n th e de fen da nt s’

un la wfu l co nd uc t an d t h e p l a in ti ff’s as cert ai na bl e lo ss .” N.J. Ci ti zen Acti on v.
Sch eri ng -Pl ou gh Co rp ., 84 2 A.2d 17 4, 17 6 (N.J. Su pe r. Ct

. App

. Div

. 20 03 ) (ci ti ng
Co x v. Sear s Ro eb uc k & Co ., 64 7 A.2d 45 4 (N.J. 19 94 )). Unl ik e cl ai m s fo r co m m on
la w frau d, th e NJC FA “ do es no t req ui re pr oo f th at a co ns um er ha s act ua ll y rel ie d on

a p ro hi bi te d a ct in ord er t o re co ve r.” In t’l Unio n of Opera ti ng Eng ’rs Loc al No. 6 8

W el fare Fu nd v. Mer ck & Co ., In c. (Me rck II), 92 9 A.2d 10 76 , 10 87 (N.J. 20 07 ). In
li eu of th is tra di ti on al rel ia nc e el em en t, a NJC FA pl ai nt iff m us t de m on st rat e th at it s

as cert ai na bl e lo ss is “ at tri bu ta bl e to c o n d u c t m ad e un la wfu l by th e [NJC FA].”
Thi ed em an n v. Mer ced es -Ben z USA, LLC, 87 2 A.2d 78 3, 79 1 (N.J. 20 05 ) (ci ta ti on

om it te d)

. In ge n e r a l , t h e cau sa l ne xu s be twee n a pl ai nt iff ’s as cert ai na bl e lo ss an d th e

8un la wfu l co nd uc t of a de fen da nt m ay no t be pr es um ed in NJC FA cl ai m s. W ei nb erg

v. Sp rin t Co rp ., 80 1 A.2d 28 1, 29 1 (N.J. 20 02 ). In st ead , “ a pr iv at e pl ai nt iff m us t
sh ow th at he or sh e su ffer ed an ‘ascer ta in ab le lo ss

. . . as a res ul t’ of th e un la wfu l

co nd uc t.” Mes hi ns ky v. Nich ol s Yach t Sal es , In c., 54 1 A.2d 10 63 , 10 67 (N.J. 19 88 ) (ci ta ti on s om it te d)

. In ot he r frau d act io ns , ho wev er, el em en ts si m il ar to as cert ai na bl e
lo ss an d cau sa l n ex us m ay be pre su m ed in cert ai n c irc um st an ces . For e xa m pl e, th e
Su pr em e Co ur t ha s ad op te d a pr es um pt io n of rel ia nc e in th e se cu rit ie s frau d co nt ex t
whe re th e de fen da nt di ss em in at es a frau d to an effi ci en t cap it al m ark et

. See

St on eri dg e In v. Part ne rs , LLC v. Sci en ti fic -Atl an ta , 55 2 U.S. 14 8, 15 9 (2 00 8) (ci ti ng
Bas ic In c. v. Lev in so n, 48 5 U.S. 22 4, 24 7 (1 98 8) ). Th i s pr es um pt io n of rel ia nc e,
refe rred to as t he “ frau d o n t he m ark et th eo ry ,” ha s b een de sc rib ed as f ol lo ws:
The frau d on th e m ark et th eo ry is ba se d on th e hypo th es is th at , in
an op en an d de ve lo pe d se cu rit ie s m ark et , th e pr ic e of a co m pa ny’ s st oc k is de te rm in ed by th e av a i l a bl e m at eri al in fo rm at io n reg ard in g th e c om pa ny an d it s bu si ne ss

. . . . Mi sl ead in g st at em en ts wil l th eref o r e de frau d pu rch as ers of st oc k ev en if th e pu rch as ers do no t di rect ly rel y on th e m is st at em en ts

. . . . The cau sa l c o n ne ct io n be twee n th e de fen da nt s’ frau d an d th e pl ai nt iff s’ pu rch as e of st oc k in su ch a cas e is
no le ss si gn ifi can t th an in a cas e of di rect rel ia nc e on m is rep res en ta ti on s.
B a s i c , 4 85 U.S. a t 24 1- 42 (q uo ta ti on om it te d)

. In th is m an ne r, ev id en ce of a f r a u d
di ss em in a t e d to an op en m ark et crea te s a reb ut ta bl e pr es um pt io n of rel ia nc e in th e

se cu rit ie s fr au d c on te xt . Id. at 24 7.

9In Mer ck II, th e New Je rs ey Su pr em e Co ur t ad dr es se d th e pr op rie ty in NJC FA

cl ai m s of us in g a frau d on t h e marke t th eo ry to de m on st rat e as cert ai na bl e lo ss an d

pr oo f of a c a u s a l n ex us be twee n th e de fen da nt ’s act s an d th e cl ai m ed da m ag es ,
st at in g:
Frau d on th e m ark et is es se nt ia ll y a crea tu re of fed eral se cu rit ie s li ti ga ti on

. I n t h at co nt ex t, pl ai nt iff s who pu rch as ed se cu rit ie s are pe rmi t t e d to de m on st rat e th at th ey were da m ag ed si m pl y be cau se de fen da nt en ga g e d i n b eh av io r ot he rwis e pr oh ib it ed an d th ere was a ch an ge in pri ce. The t he or y th eref or e p res um es rel ia nc e.
We h a v e reject ed th e frau d on th e m ark et th eo ry as be in g in ap pr op ria te in an y co nt ex t ot he r th an fed eral se cu ri tie s fr au d lit iga

tion. The refo re, t o t he ex te nt th at pl ai nt iff see ks to pro ve on ly t ha t t he pri ce c h a rg ed fo r Vio xx was hi gh er th an it sh ou ld ha ve be en as a res u l t o f de fen da nt ’s frau du le nt m ark et in g cam pa ig n, an d se e k s th ereb y to be rel ie ve d of th e us ua l req ui rem en ts th at pl ai nt iff pr ov e an asc ert ai na bl e lo ss , th e th eo ry

m us t fa il

. Mer ck II, 92 9 A.2d at 10 88 (in te rn al ci ta ti on s om it te d)

. The N.J. Ci ti zen Acti on co ur t
al so rej e c t e d a f

rau d on th e m ark et th eo ry ad va nc ed by th e pl ai nt iff s in th at cas e -- th at th e de fen da nt s’ m is le ad in g ad ve rti si ng in fla te d th e pr ic e th e pl ai nt iff s pa id fo r
th ei r pr od uc ts

. 84 2 A.2d at 17 8. The co ur t ex pr es se d si m il ar co nc ern th at al lo win g

a frau d on th e m ark et th eo ry to sa ti sf y th e m an da to ry el em en ts of as cert ai na bl e lo ss

an d cau sa l ne xu s “ wou ld vi rtu al ly el im in at e th e req ui rem en t th at th er e b e a

co nn ect io n be twee n th e m is de ed co m pl ai ne d of an d t h e lo ss su ffer ed

. Ado pt in g [a
fr au d on th e m ark et ] th eo ry wou ld th eref or e fu nd am en ta ll y al te r th e co nc ep t of

10cau sa ti on in t h e [ N J C F A ] co nt ex t.” 84 2 A.2d at 17 8. Thu s, a frau d on th e m ark et

th eo ry is in su ffi ci en t to es ta bl is h eit he r as cert ai na bl e lo ss or pr ox im at e cau sa ti on in

NJC FA cl ai m s.
In th e pr es en t cas e, th e di st ric t co ur t di sm is se d So ut he as t’s NJC FA cl ai m , fin di ng th at So ut he as t fai le d to al le ge “ a pr em is e of pr o x i mat e c au sa ti on th at is
di st in gu is ha bl e fro m on e th at rel ie s on a frau d- on -th e-m ark et an al y si s.” Sp eci fic al ly,
th e di st ric t c o u r t d et erm in ed th at “ [t]he re is no su bs ta nt iv e di ffer en ce be twee n th e

qu es ti on of whe th er [So ut he a s t ] w o u l d ha ve pa id fo r Tras y lo l at al l in st ead of a
lo wer-p ric ed al te rn at iv e ve rs us whe th er Pl ai nt iff pa id to o m uc h fo r Tras y lo l be cau se
of th e act ua l v al ue of t he dru g.”

So ut he as t, co nc ed in g th at a frau d o n t h e m ark et th eo ry m ay no t be us ed to

es ta bl is h as cert a in ab le lo ss or cau sa ti on , arg ue s th at th e di st ric t co ur t

m is ch arac te riz ed it s al le ga ti on s by fai li ng to reco gn iz e th e di st in ct io n be tw ee n pa y ing

to o m uc h fo r a dr ug an d no t pa y in g fo r a dr ug at al l. So ut he as t arg ue s th at in Mer ck 1

The Supreme Court has fore closed Southeast fr om asserting a “f raud- on-the-F DA” 1 theory of ca usation -- that is, that Southeast relied on F DA’s a pproval of T rasy

lol, which itself was the pr oduct of fr aud. See B uckman Co. v. Plaintiffs’ L eg al Comm., 531 U.S. 341, 348 (2001) ( finding state law “ fra ud on the FD A” c laims to be pree mpted by fede ral law ). Southeast has also disclaimed a

chain of causa tion that runs throug h the dec isions of indivi dual doctors, alleg ing in its second a

nd third amende d complaints that “phy sicians’ de cisions to prescr ibe Trasy lol were completely

separ ate a

nd distinct from the dec ision of [ Southeast] and Cl ass Members to pa

y for Tr asy lol. . . . I rre spective of the phy sician’s de cision to prescr ibe Tra sy lol, an alterna tive drug or no drug at all, [S outheast] and Class Members had a n independe nt choice whether or not to pay

for Tr asy lol.”
11II, th e New Je rs ey Su pr em e Co ur t ta ci tl y en do rs ed a th eo ry of cau sa ti on fo r NJC FA

cl ai m s whe reb y

a th ird -p art y

pa y or is pe rm it te d t o s ta te a cau sa l ne xu s be twee n th e
al le ge d frau du le nt co nd uc t an d th e pa y or ’s a sc ert ai na bl e lo ss th at is di st in ct fro m a
frau d o n t he m ark et th eo ry , by si m pl y ass ert in g th at ab se nt th e al le ge dl y frau du le nt

co nd uc t, a m ed ic at io n wo ul d n ot ha ve be en on th e m ark et

. In In te rn at io na l Unio n of Opera ti ng Eng in eers Loc al No. 68 W el fare Fu nd v.
Mer ck & Co ., In c. (Me rck I), 89 4 A.2d 11 36 (N.J. Su pe r. Ct

. App

. Div

. 20 06 ), rev ’d,

92 9 A.2d 10 76 (N.J. 20 07 ), th e New Je rs ey ap pe ll at e co ur t cert ifi ed a cl as s of th ird

pa rty pa y or s who ha d pa id fo r th e dr ug Vio xx
. 89 4 A.2d at 11 53

. The Mer ck I co ur t
fo un d th at th e pa y or s co ul d es ta bl is h a su ffi ci en t ne xu s be twee n th e al le ge d frau d an d

t h e a s c e rta in ab le lo ss fo r pu rp os es of a NJC FA cl ai m by de m on st rat in g, vi a ex pe rt

pr oo f, ei th er th at Mer ck ’s sc he m e “ al lo wed th e co m pa ny to ach ie ve m or e fav or ab le pl acement on th e fo rm

ul ari es th an it ot he rwis e m ig ht ha ve ,” or “ th at ab se nt Mer ck ’s

m is co nd uc t, Vi ox x wo ul d n ot ha ve be en on th e m ark et at a ll .” Id . at 1 14 5.

In Mer ck II, th e New Je rs ey Su pr em e Co ur t rev ers ed th e ap pe ll at e co ur t’s cl as s

cert ifi cat io n, fin di ng th a t t h e f r au d on th e m ark et th eo ry is “ in ap pr op ria te in an y

co nt ex t ot he r th an fed eral se cu rit ie s frau d li ti ga ti on ,” an d “ [t]he refo re, to the ex te nt
th at pl ai nt iff se ek s to pr ov e on ly th at th e pr ic e ch arg ed fo r Vio xx was hi gh er th an it
sh ou ld ha ve be en as a res ul t of de fen da nt ’s frau du le nt m ark et in g cam pa ig n, an d se ek s

12th ereb y to be rel ie ve d of th e us ua l req ui rem en ts th at pl ai nt iff pr ov e an as cert ai na bl e

lo ss , th e th eo ry

m us t fa il .” Merc k II , 92 9 A.2 d a t 1 08 8 (c it at io ns om it te d)

. Howev er, th e Mer ck II co ur t di d no t sp eci fic al ly ad dr es s th e ap pe ll at e co ur t’s

s t a t e men t th at a cau sa l ne xu s be twee n th e al le ge d frau d an d th e as cert ai na bl e lo ss

co ul d be es ta bl is he d by de m onst ra tin g “ tha t ab se nt Me rc k’ s m iscon du ct , Vio xx wou ld

no t ha ve be en on th e m ark et at al l.” Mer ck I, 89 4 A.2d at 11 45

. In th e in st an t ap pe al , So ut he as t arg ue s th at by fai li ng to ad dr es s th e lo wer co ur t’s st at em en t, th e Mer ck II

co ur t t aci tl y

en do rs ed th is th eo ry

of c au sa ti on . W e d is ag ree.
A th eo r y of cau sa ti on rel y in g so le ly on an al le ga ti on th at th e m ed ic at io n in

qu es ti on wou ld no t ha ve be en on th e m ark et ab se nt th e al le ge d frau du le nt co nd uc t is

no m or e th an a st at e la w “ frau d on th e FDA” th eo ry , a t h e o r y t h a t ha s be en

sp eci fic al ly reject ed by th e Su pr em e Co ur t. Bu ck m an , 53 1 U.S. at 34 8. In Bu ck m an , pl ai nt iff s so ug h t d a mag es un de r st at e to rt la w, arg ui ng th at ab se nt de fen da nt ’s
frau du le nt rep res en ta ti on s, th e FDA wou ld no t ha ve ap p r o v ed th e or th op ed ic bo ne

sc rews an d th e pl ai nt iff

s wou ld no t ha ve be en in

jure d by th es e de vi ces

. Id

. at 34 3- 44

. The Co ur t di sm is se d pl ai nt iff s’ st at e la w “ frau d on th e FDA” cl ai m s, co nc lu di ng th at

su ch cl ai m s are in “ co nf

li ct wit h, an d

. . . th eref

or e im pl ie dl y pr e-em

pt ed by, fed eral
la w.” Id . a t 34 8 ( f

o o t n o t e o mi tt ed ). The co nf li ct was fo un d to ari se “ fro m th e fact
th at th e fed eral st at ut or y sc he m e am pl y em po wers th e FDA to pu ni sh an d de te r frau d

13ag ai ns t th e [FDA], an d th at th is au th or it y is us ed by th e [FDA] to ach ie ve a so m ewh at

de li cat e ba la nc e of st at ut or y ob jecti ve s. Th e b a la nc e so ug ht by th e [FDA] can be
sk ewed by al lo win g frau d- on -th e-FDA cl ai m s un de r st at e to rt la w.” Id

. Acco rd in gl y ,
t h e M e r c k I I co ur t co ul d no t ha ve im pl ic it ly ap pr ov ed of a st at e la w “ frau d on th e
FDA” th eo ry of cau sa ti on fo r NJC FA cl ai m s whe reb y a th ird -p art y pa y or is pe rm it te d

to st at e a cau sa l ne xu s be tw e e n t h e a l le ge d frau du le nt co nd uc t an d th e pa y or ’s

as cert ai na bl e l os s by si m pl y as se rti ng th at ab se nt th e al le ge dl y frau du le nt co nd uc t,
th e FDA wou ld no t h av e ap pr ov ed th e m ed ic at io n t o b e o n t he m ark et

. So ut he as t ad di ti on al ly arg ue s th at th e co m pl ai nt se ts fo rth a se co nd , di rect
ch ai n of cau sa ti on th at is al so di st in ct fro m a frau d on th e m ark et th eo ry , co nt en di ng
th at (1 ) th e pl an do cu m en ta ti on st at in g th at So ut he as t wou ld on ly pa y fo r “ m ed ic al ly

ne ces sa ry ” ex pe ns es an d (2 ) th e FDA’s pr on ou nc em en t th at it co ul d no t id en ti fy an y

sp eci fic pa ti en t po pu la ti on fo r who m t h e b e n e fit s of us in g Tras y lo l ou twei gh th e

sa fet y ris ks , es ta bl is h a cau sa l ne xu s be twee n Bayer’ s al le ge d frau du le nt co nd uc t an d

S o u t h e as t’s de ci si on to pa y fo r Tras y lo l. Su ch a th eo ry of cau sa ti on , su pp or te d by
fact ua l a l l e g a t io ns co nn ect in g th e al le ge d frau d to th e im pl em en ta ti on of th e pl an
do cu m en ta ti on , m ay

be su ffi ci en t t o a ll eg e a cau sa l nex us in a h y po th et ic al NJCF A
cl ai m

. In th e pr es en t cas e, ho wev er, th e co m pl a i n t f a i l s t o pr ov id e an y fact ua l
al le ga ti on s co nn ect in g th e FDA’s pr on ou nc em en t to So ut he as t’s de te rm in at io n of

14m ed ic al ne ces s i t y a s a pr eco nd it io n to it s pa y m en t. Eve n if Tras y lo l was in fact

m ed ic al ly un ne ces sa ry an d c o n t r a i n di cat ed fo r al l us es , So ut he as t al le ge s no fact s
in di cat in g h o w it wou ld ha ve in de pe nd en tl y ev al ua te d Tras y lo l’s m ed ic al

ap pr op ria te ne ss , as id e fro m rel y in g on th e in te rm ed ia rie s of pr es cri bi ng ph y si ci an s,
th e FDA, or th e m ark et

. Rel ia nc e on th e fir st of th es e in te rm ed ia rie s So ut he as t it se lf
ha s di s c l a i med , whi le rel ia nc e on th e se co nd an d th ird of th es e in te rm ed ia rie s is

pr ecl ud ed by Bu ck m an an d Mer ck II, res pe ct iv el y
. Thu s, So ut he as t’s s u p p o s e dl y

“ di rect ch ai n of cau sa ti on ” i s u n s u p po rte d by fact ua l al le ga ti on s. On th e fact s
al le ge d, th e on ly cau sa l ne xu s be twee n th e rev el at io n o f Tras y lo l’s tru e ris k pr of il e

an d So ut he st ’s de te rm in at io n no t to pa y fo r Tras y lo l is m erel y a rep ack ag ed fo rm of

in di rect cau sa ti on -- rel y in g ei th er on th e FDA’s a pp ro va l de ci si on s fo r Tras y lo l or

a m ark et cap ab le of effi ci en tl y di ge st in g th e tru th an d rel ay in g it to So ut he as t in th e
fo rm of a m ark et pr ic e. Co nt rary to So ut he as t’s su gg es ti on , ei th er th eo ry of cau sa ti on
is far fr om

di rect , and for ecl os ed by the rel ev an t ca se law.

Fi na ll y , So ut he as t rai se s a no ve l th eo ry of ca u s a t i o n , a r g u i n g t h a t Bayer’ s
al le ge d mat e r i a l om is si on s gi ve ris e to a pr es um pt io n of cau sa ti on

. Thi s arg um en t

was no t rai se d b e l ow, an d on th at gr ou nd we m ay de cl in e to ad dr es s it s m eri ts on

ap pe al

. See Fo rm

by v. Farm ers an d Mer c h s

. B a n k , 90 4 F.2 d 62 7, 63 4 (1 1t h Ci r.
19 90 ) (“ As a ge ne ral ru le , an ap pe ll at e co ur t wil l no t co ns id er a le ga l is su e or th eo ry

15rai se d for th e fir st ti m e on ap pe al .” (q uo ta ti on om it te d) ). So ut he as t con te nd s th at it

rai se d th is arg um en t in a rep ly to Bayer’ s m ot io n to di sm is s by st at in g th at “ pa y m en t
fo r a pr od uc t by s o meo n e e xp os ed to m is le ad in g m at eri al s ‘w ou ld be su ffi ci en t to

es ta bl is h pr ima fa ci e pr oo f of cau sa ti on ,’ ” qu ot in g Varac al lo v. Mas s. Mu t. Life In s.
Co

. (Vara cal lo ), 75 2 A.2d 80 7, 81 7 (N.J. Su pe r. Ct

. App

. Div

. 20 00 ). Howev er, th is

arg um en t was m ad e in th e co nt ex t of exp la in in g th at a NJC FA cl ai m req ui res pro of
of a cau sa l ne xu s, no t act ua l rel ia nc e. At no po in t di d So ut he as t r e fere nc e a

pr es um pt io n of cau sa ti on ari si ng fro m an al le ga ti on of an om is si on o r o t h e r wis e
ack no wled ge th e di sc us si on o f t h is pr es um pt io n in Varac al lo

. Acco rd in gl y , th e 2

arg um en t is waiv ed

. See Fo ur Se a s o n s Hot el s & Res or ts , B.V. v. Co ns or ci o Barr S.A., 37 7 F.3 d 11 64 , 1 1 6 9 ( 1 1 t h Ci r. 20 04 ) (fi nd in g an arg um en t waiv ed whe re

no th in g i n th e pa rty’ s br ie f to th e di st ric t co ur t “ co ul d ha ve po ss ib ly al ert ed th e
di st ric t ju dg e to th e arg um en t [m ad e o n a pp eal ]”).

Mo reo ve r, ev en if th is arg um en t ha d be en rai se d be lo w, it wou ld ha ve be en to

no av ai l. So ut he as t pr im a r i ly de pe nd s on Varac al lo to su pp or t it s arg um en t th at Bayer’ s al le ge d m at eri al om is si on s gi ve ris e to a pr es um pt io n of cau sa ti on

. Su ch

Fur thermore , pag es 813 and 814 of the Var aca llo opinion, cited in S outheast’s re sponse 2 to the motion to di smiss, di scuss the proposition that common law fr aud re quires proof of relianc e while NJCFA claims only require proof of

a ca usal nexus between the c oncea lment of the mater ial fac t and the loss. Var aca llo, 752 A.2d at 813-14. I n contra st, pag es 817 and 818 of the Var aca llo opinion, cited in S outheast’s re ply brief, spe cifica lly

discuss the presumption of
causa tion arising f

rom an a lleg ation of an omission. I d. at 817-18.
16de pe nd en ce is i l l

- f o un de d. The Varac al lo co ur t co nf ro nt ed a si tu at io n un li ke th e
ci rcu m st an ces of th e pr es en t case

. The re, the co ur t add res se d th e fo ll owi ng na rro w

qu es ti on : “ Fo r pu rp os es of cert ifyin g a cl as s, m us t th e pl ai nt iff

s of fer di rect pr oo f th at
th e en ti re cl as s rel ie d on de fen da nt ’s rep res en ta ti on th at om it te d m at eri al fact s, whe re
th e pl ai nt iff

s ha ve es ta bl is he d th at th e de fen da nt wit hh el d th es e m at eri al fact s fo r th e

pu rp os e of in du ci ng th e ve ry act io n th e pl ai nt iff s pu rs ue d? ” Varac al lo , 75 2 A.2d at
81 7. In ad di ti on , Varac al lo te st ifi ed th at he ha d read th e al le ge d m is st at em en ts an d
rel ie d u po n t he m

in de ci di ng to pu rch as e th e p ol ic ie s at is su e. Id . at 8 11

. In co nt ras t in th e pr es en t cas e, th e qu es ti on is no t whe th er So ut he as t m us t of fer
di rect pr oo f th at th e en ti re pr op os ed cl as s rel ie d up on Bayer’ s rep res en ta ti on s.
In st ead , th e qu es ti on is whe th er So ut he as t it se lf can es ta bl is h a cau sa l ne xu s be twee n
th e al le ge d om is si on an d it s as cert ai na bl e lo ss

. Howev er, un li ke th e fact s in

Varac al lo , th e th ird am en de d co m p l a i n t i n t he in st an t cas e is de vo id of al le ga ti on s
th at So ut he as t, or an y ot he r pr op os ed cl as s m em be r, act ua ll y rel ie d on Bayer’ s

rep res en ta ti on s. The al le ga ti on s o f S ou th eas t’s co m pl ai nt are th eref

or e
di st in gu is ha bl e fro m Var a c a ll o an d do no t rai se a pr es um pt io n of cau sa ti on

. Acco rd in gl y , we affi rm

th e d is tri ct co ur t’s d is m is sa l o f So ut he as t’s NJ CFA cl ai m

. B. Dis m is sa l o f the Ci vi l RI CO Cla im
The di st ric t co u r t di sm is se d So ut he as t’s ci vi l RICO cl ai m aft er fin di ng th at

17So ut he as t fai le d to su ffi ci en tl y al l e g e a di rect rel at io ns hi p be twee n it s pa y m en t fo r
Tras y lo l an d B ay er’s al le ge d frau du le nt co nc eal m en t. On ap pe al , Sou th eas t ar gu es
th at th e cau sa l ch ai n i s “ si m pl e, di rect an d u ni nt erru pt ed .”
The fed eral RICO la ws pr ov id e ci vi l an d cri m in al li ab il it y fo r pe rs on s en ga ge d

in a pa tt ern of r ack et eeri ng act iv it y
. See 18 U.S.C. §§ 19 62 -1 96 4. To sta te a cl ai m
f or a RICO vi ol at io n, a pl ai nt iff m us t al le ge : “ (1 ) a vi ol at io n of se ct io n 1 9 6 2 ; ( 2 )

in jury to bu si ne ss or pr op ert y ; an d (3 ) th at th e vi ol at io n cau se d th e in jury.” Avi rg an

v. Hul l, 93 2 F.2 d 15 72 , 15 77 (1 1t h Ci r. 19 91 ) (ci ti ng O’ Mal le y v. O’ Neil l, 88 7 F.2 d

15 57 , 15 61 (1 1t h Ci r. 19 89 )). In or de r to ad eq ua te ly pl ead th e f i r s t e l e m en t, a
vi ol at io n of § 19 62 , a pl ai nt iff m us t al l e g e : “ (1 ) co nd uc t (2 ) of an en te rp ris e (3 )
th ro ug h a pa tt ern (4 ) of rack et eeri ng act iv it y .” W il li am s v. Mo ha wk In du s., In c., 46 5 3

F.3 d 1 27 7, 1 28 2 (1 1t h C ir. 2 00 6) (qu ot at io n o m it te d)

. Ci vi l RICO pl ai nt iff

s “ m us t al so sa ti sf

y th e req ui rem en ts of 1 8 U.S.C. §

19 64 (c).” W il li am s, 46 5 F.3 d at 12 82

. Sect io n 19 64 (c) pr ov id es th at “ [a]ny pe rs on
in jure d in hi s bu si ne s s o r p r o p e r t y by re as on of a vi ol at io n of se ct io n 19 62 of th is
ch ap te r m ay su e th eref

or .” 18 U.S.C. § 19 64 (c) (em ph as is ad de d)

. To es ta bl is h th e

“ by reas on of

” el em en t of § 19 64 (c), a pl ai nt iff m us t de m on st rat e th at th e de fen da nt ’s

The a lleg ed ra ckete ering activity here was mail and w ire fr aud. See 18 U .S.C. § 3 1961(1)( B)

. 18vi ol at io n was n o t o nl y th e “ bu t fo r” cau se of th e pl ai nt iff ’s in jury bu t al so it s

pr ox im at e cau se

. Hol m es v. Sec. In ve st or Pr o t e ct io n Co rp ., 50 3 U.S. 25 8, 26 8 (1 99 2) ; Will ia m s, 4 65 F.3d at 1 28 7.

“ W he n a co ur t e v a lu at es a RICO cl ai m fo r pr ox im at e cau sa ti on , th e cen tra l

qu es ti on it m

us t as k is wh e t h e r th e al le ge d vi ol at io n le d di rect ly to th e pl ai nt iff ’s
in juri es .” Anza v. Id eal Ste el Su pp ly Corp ., 54 7 U.S. 45 1, 4 61 (20 06 ). In Ho lm es , th e Su pr em e Co ur t di sc us se d th ree sp eci fic fact or s fo r co ur ts to co ns id er in ev al uating
th e d ire ct ne ss be twee n a n a ll eg ed in jury and th e in

juri ou s co nd uc t as fol lo ws:
Fi rs t, t he le ss di rect an in jury is , th e m or e di ffi cu lt it be co m es to as cert ai n th e am ou nt of a pl ai nt iff ’s d a mag e s at tri bu ta bl e to th e vi ol at io n, as di st in ct fro m o th er, in de pe nd en t, fact or s. Seco nd , qu it e ap art fro m pr ob le m s of pr ov in g fact ua l cau sa ti on , reco gn iz in g cl ai m s of t h e i nd ire ct ly in

jure d wou ld fo rce co ur ts to ad op t co m pl ic at ed ru l e s ap po rti on in g da m ag es am on g pl ai nt iff s rem ov ed at di ffer en t le ve ls of in jury fro m th e vi ol at iv e act s, to ob vi at e th e ris k of m ul ti pl e reco ve rie s. And , fin al ly, th e ne ed to gr ap pl e wit h th es e pr ob le m s is si m pl y un jus ti fie d b y th e ge ne ral in te res t i n d et erri ng in juri ou s co nd uc t, s in ce di rect ly in jure d vi ct im s can ge ne ral ly be co un te d on to vi nd ic at e th e la w as pr iv at e at to rn ey s ge ne ral , wit ho ut an y of th e pr ob le m s at te nd an t up on su it s b y pl ai nt iff s i nju red m or e rem ot el y
. 50 3 U.S. at 26 9- 70 (ci ta ti on s o m it te d)

. In th e pr es en t c a s e , th e di st ric t co ur t co nd uc te d a th or ou gh an al y si s of

S o ut he as t’s ci vi l RICO al le ga ti on s an d fo un d th at th e fact or s de sc rib ed in Hol m e s weig he d he av il y ag ai ns t a fin di ng of p ro xi m at e cau sa ti on

. The fir st Hol m es fact or

19was fo un d to be th e mo s t pr ob le m at ic to So ut he as t’s cl ai m s be cau se , al th ou gh

So ut he as t al le ge d th at it ha d an in de pe nd en t ch oi ce of whe th er o r n o t t o p a y fo r
Tras y lo l, So ut he as t fai le d to ex pl ai n ho w or why it m ad e th e ch o i c e t o pa y fo r
Tras y lo l an d ho w or why Bayer’ s al le ge d co nc eal m en t of th e da ng ers of Tras y lo l le d

So ut he as t t o p ay

for Tras y lo l.

On ap pe al , So ut he as t co nt in ue s to as se rt th at it wou ld ne ve r ha ve in cu rred th e

ex p e n s e o f Tras y lo l if Bayer ha d be en ho ne st ab ou t Tras y lo l’s sa fet y an d effi cacy,

arg ui ng th at , ta ke n to ge th er, (1 ) th e pl an do cu m en ta ti on st at in g th at So ut he as t wou ld

on ly pa y fo r “ m ed ic al ly ne ces sa ry ” ex pe ns es an d (2 ) th e FDA’s pr on ou nc em en t th at
i t co ul d no t id en ti fy an y sp eci fic pa ti en t po pu la ti on fo r who m th e be ne fit s of u s i n g
Tras y lo l ou twei gh ed th e sa fet y ris ks , es ta bl is h a di rect in jury to S o u th eas t. Yet,
de sp it e be in g pr ov id ed wit h se ve ral op po rtu ni ti es , So ut he as t fai le d to al le ge fact s pl au si bl y de m on st rat in g th at So ut he as t wou ld ha ve in de pe nd en tl y de te rm in ed th at 4

Tr a s y lo l was no t “ m ed ic al ly ne ces sa ry ” if Bayer ha d di sc lo se d th e al le ge d l y

su pp res se d m at eri al in fo rm at io n. In th e ab se nc e of su ch fact ua l al le ga ti on s, it can no t

reas on ab ly be in ferr ed th at Bayer’ s al le ge dl y frau du le nt co n d u c t l e d di rect ly to
So ut he as t’s deci si on to pa y for Tras y lo l. Co ns eq ue nt ly, th e co m pl ai nt fai ls to m eet

As with its NJ CFA c laim, Southeast may not rely on a fr aud-on- the-mar

ket or fr aud-on- 4 the-F DA theor

y of ca usation for its RI CO claim.
20th e di rect rel at io n req ui rem en t, an d th e di st ric t co ur t pr op erl y di sm is se d So ut he as t’s

ci vi l RI CO cl ai m

. 5

C. Dismis sa l o f the I m pl ie d Wa rra nty Cla im
Fi na ll y , So ut he as t ch al le ng es th e d i s tri ct co ur t’s di sm is sa l of it s im pl ie d

warra nt y cl ai m

un de r New Je rs ey

law, d is pu ti ng th e d is tri ct co ur t’s co nc lu si on th at
So ut he as t ha d “ no t ad eq ua te ly pl ed th at Tr a s yl ol ’s de fect pr ox im at el y cau se d it s

eco no m ic da m ag es ,” an d ha d “ no t al le ge d th at Tras y lo l was no t fi t fo r it s i nt en de d

us e in pre ve nt in g p eri op erat iv e b le ed in g.”
Und er New Je rs ey la w, “ a warra nt y th at th e go od s sh al l be m erch an ta bl e is

im pl ie d in a co nt ract fo r th ei r sa le if th e se ll er is a m erch an t wit h res pe ct to go od s of
th at ki nd .” N.J. St at

. Ann

. § 12 A:2

- 3 1 4 ( 1 )

. In or de r fo r “ [g ]ood s to be

m erch an ta bl e,” th ey m

us t be “ fit fo r th e or di na ry pu rp os es fo r whi ch su ch go od s are

us ed .” Id

. § 12 A:2 -3 14 (2 ). Thi s “ im pl ie d warra nt y of m erch an ta bi li ty m ean s th at th e

pr od uc t is reas on ab ly fit fo r th e pu rp o s e i n t e n de d; it do es no t im pl y ab so lu te

pe rfec ti on .” Ja ku bo wsk i v. Mi nn

. Mi ni ng & Mfg., 1 99 A.2d 82 6, 83 1 (N.J. 19 64 ).

I n or de r to es ta bl is h an im pl ie d warra nt y cl ai m , a pl ai nt iff m us t pr ov e “ th a t t h e

pr od uc t was no t reas on ab ly fit fo r th e o r d i n a r y pu rp os es fo r whi ch it was so ld an d

The pa rties submitted supplemental briefs a ddressing this court’s re cent de cision in 5 I ronworke rs L ocal Union 68 v. Astra Z enec a Pharma ceutica ls, L P, 634 F.3d 1352 (11th Cir. 2011). The holding in the prese nt case is not inconsist ent with the I ronworke rs dec ision.
21su ch de fect pr ox im at el y cau se d in jury to th e ul ti m at e co ns um er

. ” H o l l i ng er v.
Sh op pe rs Para di se of N.J., In c., 34 0 A.2d 68 7, 69 2 (N.J. Su pe r. Ct

. Law Div

. 19 75 ) (ci ta ti on s o m it te d)

. So ut he as t do es no t as se rt th at Tras y lo l’s al le ge d de fect ph y si cal ly ha rm ed an y
of it s pl an m em

be rs

. In st ead , So ut he as t co nt en ds th at th e co m pl ai nt st at es a cl ai m fo r
br each of im

pl ie d warra nt y un de r New Je rs ey la w be cau se a ha rm fu l m ed ic at io n is

pe r se un m erch an ta bl e. In su pp or t of th is th eo ry , So ut he as t rel ie s pr im ari ly on Mo ne s
v. Im pe ria l Bo tt li ng W or ks , Inc ., 18 5 A. 4 83 (N.J. 1 93 6)

. In Mo ne s, th e co ur t he ld th at a m ag ne si a so lu ti on th at fai le d to co m pl y wit h th e
Uni te d St at es Ph arm aco po ei a req ui rem en ts was un m erch an ta bl e be cau se it was so ld

to a bu si ne ss fo r pu rp os es of res al e an d th e bu si ne ss co ul d n ot leg al ly resel l i t. 1 85

A. at 48 3. On th es e fact s, th e New Je rs ey Su pr em e Co ur t co nc lu de d th at “ [c]erta in ly

a de al er who pu rch as es fo r res al e can no t be sa id to be wit ho ut warra nt y if th e go od s
whi ch he pu rch as es can no t be res ol d wit ho ut vi ol at in g th e l a w o f t h i s s ta te .” Id

. Thu s, Mo ne s do es no t st an d fo r th e pr op os it io n th at a dr ug is pe r se un m erch an ta bl e
be cau se it is ha rm fu l, ev en whe re it do es no t c au se ha rm to th e pl ai nt iff

. In st ead , Mo ne s st an ds fo r th e fam il ia r pr op os it io n th at a br each of im pl ie d warra nt y cl ai m is

pr op erl y as se rte d whe re a go od is no t reas on ab ly fit fo r th e or d i n a r y pu rp os es fo r
whi ch it was so ld . Th e rem ai ni ng cas es cit ed by Sou th eas t s im il arl y fai l to su pp or t

22So ut he as t’s t he or y th at a ha rm fu l m ed ic at io n i s p er s e u nm erch an ta bl e.

In th e p r e s en t cas e, th e co m pl ai nt al le ge s th at Tras y lo l was “ no t fit fo r th e

or di na ry pu rp os e fo r whi ch an ti -fi br in ol y ti c dr ug s are us ed .” Non et he le ss , So ut he as t
do es no t al le ge th at Tras y lo l fai le d to act as an an ti -fi br in ol y ti c or th at it or an y of it s

m em be rs were ph y si cal ly ha rm e d b y Tr as y lo l. Mo reo ve r, So ut he as t ha s fai le d to
id en ti fy an y cas e la w to su pp or t it s th eo ry th at th e po te nt ia l of a dr ug to cau se ha rm fu l
si de effe ct s, in th e ab st ract , ren de rs a dr ug pe r se un m erch an ta bl e, ev en as to pl ai nt iff s
th at di d no t su ffer th e si de effe ct s. Thu s, th e co m pl ai nt do es no t al le ge th at Tras y lo l
is un fit fo r th e or di na ry pu rp os e fo r whi ch it was so ld , a req ui rem en t to st at e a cl ai m
fo r br each of i m

pl ie d war ran ty und er New J ers ey law.

In ad di ti on , So ut he as t ha s no t al le ge d th at Tras y lo l’ s de fe ct pr oxi m at el y cau se d

S o u t h e as t’s eco no m ic da m ag es

. To su ccee d on a br each of warra nt y cl ai m , th e pl ai nt iff ’s in

jury m us t ari se as a pr ox im at e res ul t of th e al le ge d de fect of th e pr od uc t.
See San to r v. A & M Karag he us ia n, In c., 20 7 A.2 d 3 05 , 31 3 (N.J . 1 96 5) (req ui rin g

pr od uc t de fect to “ cau se [] in jury or da m ag e” to su pp or t a br each of im pl ie d warra nt y
cl ai m ); Ho ll in ge r, 34 0 A.2d at 69 2 (to be li ab le fo r br each of wa rran ty, th e “ de fect [m us t] pr ox im at el y cau s e [ ] i nju ry to th e ul ti m at e co ns um er”)

. Here, th e al le ge d

pr od uc t de fect is th at Tras y lo l crea te d an un du e ris k of ki dn ey fai lu re an d ot he r bo di ly
ha rm s. Howev er, So ut he as t do es no t as se rt th at Tras y lo l’s al le ge d de fect ph y si cal ly

23ha rm ed So ut he as t, no r do es So ut he as t as se rt a de riv at iv e cl ai m on be ha lf of an y it s

m em be rs th at m ig ht ha ve su ffer ed ph y si cal in juri es fro m in ge st in g Tras y lo l. In st ead , th e eco no m ic ha rm f

o r w h i c h So ut he as t se ek s reco ve ry is th e ex ces s m on ey th at it

pa id fo r th e hi gh -p ric ed Tras y lo l in st ead of th e ch eap er ge ne ric al te rn at iv e dr ug s. Bu t
th is ha rm was no t cau se d by th e co nd it io n whi ch ren de red Tras y lo l un m erch an ta bl e,

na m el y , it s un sa f

e c o n d i ti on

. In st ead , it was al le ge dl y cau se d by Bayer’ s

m is rep res en ta ti on s an d frau d. Howev er, frau d is no t rel ev an t m is c o n d u c t f or

pu rp os es of a br each of warra nt y cl ai m

. See San to r, 20 7 A.2d at 31 3 (“ The li ab il it y [fo r a pr od uc t de fect un de r to rt or co nt ract la w] do es no t de pe nd on

. . . pr oo f of le ga l

or eq ui ta bl e frau d.” ). Thu s, th e al le ge d pr od uc t de fect un de rlyin g So ut he as t’s br each
of warranty cl ai m di d no t cau se So ut he as t’s as se rte d in jury. Acco rd in gl y , So ut he as t’s
im pl ie d war ran ty clai m

was p ro pe rly dis m is se d.

IV.

Fo r th e fo reg oi ng reas on s, th e di st ric t co ur t’s jud gm en t di sm is si ng So ut he as t’s
th ird am en de d c om

pl ai nt is AFFIRMED

.

24