IN THE SUPREME COURT OF MISSISSIPPI NO. 2014-CA-01213-SCT WATSON LABORATORIES, INC. AND ACTAV IS PHARMA, INC. f/k/a WATSON PHARMA, INC.

v. STATE OF MISSISSIPPI

DATE OF JUDGMENT: 05/14/2014 TRIAL JUDGE: HON. HOLLIS McGEHEE TRIAL COURT ATTORNEYS: GEOFFREY C. MORGAN TIMOTHY HOW ARD HAROLD PIZZETTA RONNIE MUSGROVE LERAY McNAMARA FRANK JOHN KOLB, IV CLINTON C. CARTER JASON D. W ATKINS W A LKER W . JONES, III DAVID T. MARON W I LLIAM N. REED DARREN M. GUILLOT LAURA SANDERS BROW N RAYMOND L. BROW

N THOMAS NEAL JAMERSON LUTHER T. MUNFORD MIKE W ALLACE GEORGE Q. EVANS TOM JULIAN MARK A. DREHER LEE DAVIS THAMES P. RYAN BECKETT C. MICHAEL MOORE W I LLIAM F. GOODMAN, III FRANK A. W O OD, JR. KATHY K. SMITH KATHRYN H. HESTER JOHN G. SIMS, IIICOURT FROM W HICH APPEALED: R. PEPPER CRUTCHER, JR. ROBERT D. GHOLSON JAMES R. MOZINGO NEVILLE H. BOSCHERT W I LLIAM C. BRABEC RICK A. LA TRACE JOSEPH A. SCLAFANI CHRISTOPHER A. SHAPLEY CARLTON W . REEVES J. DOUGLAS MINOR RICHARD O. BURSON RANKIN COUNTY CHANCERY COURT ATTORNEYS FOR APPELLANTS: RANDI P. MUELLER RONALD G. PERESICH JAMES W . MATTHEW S KATY E. KOSKI JOHN F. NAGLE JOHANNA M. McMULLAN ATTORNEYS FOR APPELLEE: OFFICE OF THE ATTORNEY GENERAL BY: GEORGE W . NEVILLE GEOFFREY C. MORGAN JACQUELINE H. RAY S. MARTIN MILLETTE D. RONALD MUSGROVE MICHAEL S. SMITH, II BLAKE D. SMITH CHARLES G. COPELAND REBECCA S. BLUNDEN ELLEN PATTON ROBB ANDY LOW RY NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES DISPOSITION:
MOTION FOR REHEARING FILED: MANDATE ISSUED: ON DIRECT APPEAL: AFFIRMED. ON CROSS-APPEAL: AFFIRMED - 01/11/2018

EN BANC. CHAMBERLIN, JUSTICE, FOR THE COURT: ¶1. In 2005, the State of M i ssissippi f iled suit against m ore than eighty prescription drug 2m anuf

acturers alleging, am ong other things, that e ac h c o mmi tted com m on-law f raud and violations of the Mississippi Consum er Protection Act. The a llegations, which w ill be m ore thoroughly discussed, f

o cused on whether t h e prescription-drug m anuf acturers inf

lated

r e p o r t e d p r i c e s , w h i c h caused the Mississippi Division of Medicaid (“Mississippi M edi c a i d ” )

to reim burse pharm acies at t h e i n f lated rates. The cases were eventually severed, so the present case and appeal involves only W atson Laboratories, Inc., W atson Pharm a Inc., and
W a tson Pharm aceuticals, Inc. (collectively “W atson”). ¶2. Following a bench trial, the Rankin County Chancery

Court concluded that W atson had com m itted c om m on-law f raud and had v i o l a ted the Mississippi Consum er P rotection
Act. A s a result, the chancery court a warded the State a total of $30,262,052 in civil penalties, com

pensatory dam ages, and punitive d am ages. T he chancery court also awarded
p o st-judgm ent interest of three percent o n the com p ensatory a nd punitive da ma g e s . Unsurprisingly , W atson a ppealed, challenging the chancery court’s decision; the State also has f iled a cross-appeal related to dam ages. ¶3. The C ourt af

f irm s the c hancery co u r t ’ s j u dgm ent in f avor of Mississippi Medicaid. Further, the Court holds that the ruling on the State’s cross-appeal is, likewise, af f irm ed.
FACTS AND PROCEDURAL HISTORY ¶4. The Center f

or Medicare and Medicaid Services (“CMS”) adm inisters Medicaid on the f e deral level, and Mississippi M edicaid adm inisters Medicaid on the state level. W atson

m anuf actures p r escription d

r ugs, p rim arily generic drugs, and these drugs t hen a re provided by p harm acies to Medicaid patients. I n order f or Mississippi M edicaid to reim burse 3pharm acies, Mississippi Medicaid is required by CMS to hav e a n a p p r o ved S tate Plan, which,

am ong other t h ings, def

ines the scope of services provided and how the services would be reim bursed. ¶5. M o re specif

ically , once a pharm acist dispenses a d rug to a Medicaid patient, it su b m i t s

a claim f orm to Mississippi Medicaid, and the claim is processed. The claim is reim bursed based on the lowest rate produced by any one of the three possible reim bursem ent f

orm ulas. The three f

orm ulas are the f

ollowing: 1. Federal Upper L im it; 2. the Usual and Custom ary charge to the general p ublic–i.e., cash custom ers; and 3. the Estim ated A cquisition Cost plus a reasonable dispensing f e e. The third f

o rm ula is the only

one at issue here. ¶6. According to C M S r e g u lations, the F ederal Upper Lim it rate is s et at 150% of the lowest published price when three or m ore m anuf acturers of the particular d rug are available

on the m arket. 42 C.F.R. § 447.332(b) (2006). A Federal Upper L im it cannot be set if there

are not three or m ore m anuf acturers o f the particular d rug on the m arket. 42 U.S.C.A. §
1396r-8. The second f

orm ula is f airly self -explanatory , ref

erring to the u sual a nd custom ary charge to the general public. ¶7. The third f

orm u la is the pri ma r y f

orm ula d iscussed in the instant case. Mississippi Medicaid def

ined estim ated acquisition cost as t h e “ b e s t estim ate of the price [ f or a drug] generally and currently paid” b y pharm acies. The e s tim ated acquisition cost was quantif ied
in term s of a percentage less than the average wholesale p r i c e . Mississippi Medicaid subscribed to First Data B a n k and utilized the reported average wholesale prices in

4determ ining the estim ated acquisition costs f or drug reim

bursem ents. W atson and other drug

m anuf acturers determ ined their respective average wholesale p rices (“AW P”) 1 and reported them to third-party publishers such as First DataBank, which then published the prices to its subscribers. For t h e r e levant dam ages period (1990-2005), Mississippi Medicaid def ined estim ated acquisition cost as average wholesale price m inus ten percent (May 1990-March 2002); average wholesale price m inus twelve percent (April 2002-June 2005); and average wholesale price m inus twenty

- f ive percent (July

2005-October 2005). ¶8. The parties’ understanding of the t erm “average wholesale price” is t he subject of the present appeal. The State f iled sui t a g a i n s t W atson in 2005 claim ing t hat W atson “knowingly , willf

ully , and/or intentionally p rovided or caused t o b e provided f alse and extraordinarily i nf

lated” average wholesale prices that W atson k new Mississippi Medicaid relied upon f

or its reim

bursem ent f

orm ulas. The State f

urther explained that W atson “had

a d u t y to report pricing inf o rm ation that f

airly and accurately ref

lected the [ average

w h o l e s ale price] of their p roducts rather than artif icially inf lated prices that f

raudulentl y increased Mississippi Medicaid reim b ursem ent pay

m ents to p r o viders.” Based on the
inf lated average w holesale prices, the State claim ed that W atson could “ m arket t he spread”

t o pharm acies, which encouraged pharm acies t o use W atson products in order to r e t u r n a

1 In 2 0 0 0 , Watso n ch an g e d th e lab e l f o r th e f ig u res p ro v id ed f

ro m “av e rag e w h o lesale p rice” t o “su g g e sted w h o lesale p rice.” A cco rd in g to th e ch an cery co u rt, Watso n ad m itted th at t h is ch an g e “w as a ch an g e i n n am e o n l y ” an d th at “Watso n . . . k n ew th at its r ep o rted ” su g g ested w h o lesale p rices w o u ld b e treated as a v e rag e w h o lesale p rices b y F i rst D ataB an k an d , u ltim ately , M ississip p i M ed icaid

. 5greater prof it, all to the detrim ent of Mississippi Medicaid, which was overpay ing based on the reported prices. “By m arketing the ‘spread’ on their products, [ W atson] i n t e n d e d to induce providers t o purchase [ its] drugs, knowing t hat the larger ‘spreads’ would allow the provider to pocket m ore m oney f rom t he State i n t h e f orm of higher Medicaid reim bursem ents.” “Marketing the spread” a l so would “ increase the i ndividual m arket share of their drugs, thereby

increasing their own prof its.” ¶9. T h e S t a t e a l s o a r g u e d t h at W atson’s a ctions or inactions v iolated Mississippi’ s Consum er Protection Act by “intentionally com m itt[ i ng] unf air and deceptive trade practices by f alsely and f

raudulently advertising the [ average wholesale p rices] of their products well above t heir actual acquisition costs with the intent n ot to sell them as a dvertised” and by “intentionally m isrepresenting the f acts concerning the reasons f or, existence of

, or am ounts

o f p r i ce reductions provided to providers.” A dditionally , the State c laim e d that W a t s o n

com m itted com m on-law f raud by knowingly m isrepresenting the average wholesale prices “with t he intent o f inducing [ Medicaid] to rely o n the f a lse inf orm ation i n setting prescription drug r eim bursem ent rates.” The S tate’s am ended com plaint r em oved a large a m ount of the langu a g e f

r o m t h e initial com

p laint, but it still asserted that W atson had violated Mississippi’s Consum er Protection Act and had com m itted com m on-law f raud. T he State’s second am ended com

plaint, f iled July 25, 2012, did not m aterially alter the allegations. ¶10. Af ter a lengthy pretrial p rocess, the chancery court hel d a b e n c h trial in t he m atter starting on Novem

ber 7, 2 0 12. Both sides presented num erous witnesses and a m ultitude of

6docum ents f or the chancery court t o consider, and o n Septem ber 6, 2013, the chancery court entered its f

indings of

f act and conclusions of

law. As the chancery

court explained: “The

outcom e of

this case hinges upon the p arties’ understanding and the m e a ning o f the phrase ‘Average W holesale Price’ . . . .” The chancery court f urther explained as f

o llows: The State introduced substantial evidence in support o f its po s i t i o n t hat [ Mississippi Medicaid] understood that the term AW P m eans just w hat it say s: the Average W holesale Prices paid t o W a t s o n by retailers f or the drugs at issue. In turn, W atson introduced a volum inous am ount of evidence in support of its position that t he pharm aceutical industry

. . . have u nderstood f or y ears that the term

“AW P” does not m ean what it say s, and in f act, i s a term of

the trade known and acknowledged b y a ll participants in t he p harm aceutical industry

. . . t o ref

lect to m ean a “suggested wholesale price” or “ sticker price.” W a tson acknowledges that its published “AW Ps” ref l ect a p rice that is higher than the a v e rage of wholesale prices paid by a retailer f or W atson pharm aceuticals.

. . . Af ter caref ully r eviewing all of the evi d e n ce subm itted by the parties on the issue of t he m e aning of AW P and m ore im portantly , W atson’s and [ Mississippi Medicaid]’s understanding of t he m eaning of A W P, the evidence establishes that both W atson and [ Mississi p p i Medicaid] understood t hat W a tson’s A W Ps published in [ F i r s t DataBank] t hat were r elied upon by [ Mississippi M edicai d ] i n determ ining its estim ated acquisition cost re i mbursem ent f

or W atson’s drugs were not true average[ s ] of wholesale prices charged by

W atson to retailers f

or its particular drug products. Having c oncluded that [ M ississippi Medicaid] was aware that W atson’s published AW Ps at issue in this case represented higher prices than the average of wholesale prices being paid to W atson by retailers, the Court also concludes that t he State h ad no k nowledge d

uring t he relevant dam a ge period of the true Av e r a g e W h olesale Prices being p aid by Mississippi pharm acists to W atson f

or drugs being disp e n s e d through and reim b ursed by Medicaid. The evidence a lso conclusively establishes that no e m ploy ee/representative of [ M i s sissippi Medicaid] had any idea/belief that W atson’s published AW Ps were inf lated to the extent that they were.

7. . . However, the f a ct that the Legislature and [ Mississippi Me d i c a i d ] w ere discounting AW P s and continuously changing or increasing t h e d iscount to A W P fo r [ estim ated-acquisition-cost] r e i m b u r s e m e n t p u

r p o s e s s h o w s t

h a t b o t h the Legislature and [ Mississippi Medicaid] w e r e attem pting ( f utilely as we now know ) t o reim

b u rse p harm acies at a true Average W holesale Price p aid by pharm acies f

or drugs dispensed through Medicaid . . . .

. . . Although [ M ississippi Medicaid] understood that W atson’s p ublished AW Ps were h i ghe r than true Average W holesale Prices being paid by Mississippi pharm acies, Mississippi had no i dea as to the extent that W atson’s published AW Ps were inf l ated over true Average W ho l e s a l e Prices.

. . . A s previously noted, the S tate’s ef f ort was f utile, and the e vidence establishes t hat [ Mississippi Medicaid’s] reim b ursem e n t f

o r [ e s t i m a t e d acquisition c ost] based upon a discount to AW P f ell f ar short o f arriving at a t r u e A W P paid by Mississippi pharm acies. . . .

. . . Although the r e m a

y h a v e b e e n a n understanding in the pharm aceutical industry and in [ Mississippi Medicaid] that a drug m anuf acturer’s such as W atson’s published AW Ps w e r e higher than prices actually being paid by retailers f or W a tson’s drugs, there was never an understanding by [ M ississippi M edicaid] of the true prices that Mississippi pharm acies were p ay ing f or W atson’s drugs. The f act that som e e mp l o y ees of [ Mississippi Medicaid] and individuals associated with the pharm aceutical industry recognized that published AW Ps were inf lated d oes not require this Court to conclude that AW P was a t erm of art in the pharm aceutical i ndustry that carried with it a p articular def i n i t i on. In f act, t he d ef

inition(s) that W atson p roposes to assign to the phrase AW P, renders the phrase comp letely m eaningless and useless f or Medicaid reim bursem e nt purposes.

. . . W a tson a r gues, and the Court agrees, that W atson had no legal obligation to publish its AW Ps. However, once W atson caused t o be published its A W Ps, W a tson did have a n o bligation to publish t rue a nd accurate A W Ps that were relied upon and used by

Mississippi [ Medicaid] . . . .

8. . .

Based upon the evidence presented, this [ chancery c]ourt co n c l u d e s that the spread b etween the prices actually paid b y W atson’s custom ers f o r W atson’s products and W atson’s published AW Ps f o r these products were im portant to W a tson f rom a m arketing/prof

it standpoint and to its custom ers f rom a prof

it standpoint.

. . . If this [ chancery c]ourt were to accept W atson’s suggestion or urging that the term Average W holesale Price is a technical term of art within the pharm aceutical agency which me r e l y m eans a “suggested p rice” or “list price[ ,]” the ef

f ect of such a decision would be: (1) t o c ondone W atson’s conduct of causing t h e p u b lication of its Average W holesale Prices that are m eaningless; (2) to perm it W a tson to cause to be published any price whatsoever that it chooses a s its AW P f or a particular drug with the p ublished Average W h olesale Price having no relationship whatsoever to the true Average W holesal e P r i c e of W atson’s product; and (3) to perm i t W atson to cause to be published i ts A verage W holesale Prices f or its drugs when the published prices are in f act, prices f

o r w h i ch its custom e r s never paid f or W a tson’s drugs. . . .

. . .

. . . [ t]he State has presented no evidence w hich shows t hat [ Actavis, Inc. f / k/a W a tso n P h a r ma c euticals, Inc.]

. . . participated in t he m anuf acture, s ales or m arketi n g o f t h e d r

u gs a t issue in this litigation.

. . . F or t his reason, the [ chancery c]ourt dism isses Actavis, Inc. f /k/a W a tson Pharm a c euticals, Inc. as a Def endant f rom this action.

. . . This [ c hancery c]ourt concludes that W atson’s c onduct in causi n g to be published AW Ps t hat have no predictable r elationship to what custom ers pay f or i t s d r u g s w hile knowing Mississippi r elied on this inf orm ation in determ ining [ estim ated acquisition cost] is an u nf air an d d e c e ptive trade or practice within the m eaning of Mississippi’s Consum e r Protection Act.

. . .
9[ W ith respect t o the com m on-law f r aud claim ,] [ t ]he [ chancery c]ourt c o n c l u des that W atson m ade a representation by c ausing its AW Ps to be published b y [ First DataBank] with the intent that [ First D a t a B a n k ] publish this inf orm ation to t hird p arties such as [ M ississippi Medicaid].

. . . [ F urther, t]he evidence establishes that [ Mississippi Medicaid] believed that W atson’s published AW Ps were at least reasonabl y c l o s e t o the average prices its custom ers were pay ing f

or W atson’s drugs . . . .

. . . W a tson’s conduct caused Mississippi to o verpay f or its prescription drugs and as a r esult, Mississippi sustained proxim ate injury and d am ages as a result of W a tson causing the reporting of f alse and inf

lated AW Ps. ¶11. In sum , t he chancery c ourt concluded that W atson violated M ississippi Code Section 75-24-19(1)(b) o f the Mississippi Co n s u m er P rotection A ct 5, 241 tim e s based on the num ber of tim es W atson p ublished an inf lated average who l e s a le price f or a drug Medicaid reim bursed. As a consequence, the chancery court ordered W a t son to pay civil penalties in the am o u nt of $1,000 per v iolation f or a total of $5,241,000. The chancery court de clined

to award the State’s requested injunction because the State f ailed to of f er any evidence about
W a tson’s current practices or Medicaid’s current reim bur s e m e n t m e t

h o d

. T h e c h a

n c e r y c o u rt also awarded the State $7,141,552 in com pensatory dam a g e s f

or the c om m on-law-f

raud violation. The dam a ges am ount was based on the State’s expert wit n e s s’s testim ony regarding how m

uch Mississippi Medicaid overpaid f or reim bu r s e ments. Lastly , the chancery court postponed a punitive judgm ent award pending another hearing. ¶12. On February 28, 2014, the chancery court heard argum ent r egarding whether the State

was entitled t o puni t i v e d am ages and post-judgm ent interest. In its opinion letter, the

1 0chancery court noted that “[ t]hi s is clearly not a ‘run of the m ill’ f raud case but rather a planned, calculated, b old a nd f raudulent ef

f ort to, in a highly

im proper and unf

air m anner,

m axim i ze the com

pany ’s prof

its and to d o s o on the b acks of the t axpay ers who are ultim ately

f ooting the bill f

or W atson’s ‘f

ree run of the candy store’ of the public trust and

m oney .” The c hancery court f urther elaborated t hat “[ t]his case is the ‘textbook’ c ase where punitive dam a ges are not only appropriate but highly needed.” Further, the chancery court expla i n e d t h a t t he award o f punitive dam ages is “reasonably and r ationally related to the
purpose to punish what occurred giving rise t o the award a n d to deter its r epetition

. . . .” The chancery court then stated that W a tson’s conduct was “clearly reprehensible[ , ]” “continued
f or a long period of tim e,” and that W atson was a ware of i ts actions and attem pted to conceal them

. Finally the chancery court ordered that W atson Pharm ace u t i c a l s , Inc., 2 pay $17,879,500 in punitive dam ages. W a tson Pharm a was deem e d to have a negative net worth,

so i t was not ordered t o pay any punitive dam ages. The chancery court awarded three percent of post-judgm ent interest on the com p ensatory and punitive-dam ages am ounts. ¶13. The chancery c ourt entered its f inal judgm e nt on May 16, 2 014. Following W atson’s post-trial m otion, the chancery court m ade som e sm all changes to its f indings, but o therwise denied W atson’s m otion o n July 2 5 , 2014. W atson appealed and the State f iled a cross-appeal.

2 T h e ch an cery

co u rt’s letter o p in io n o rd ered th e p u n itiv e d am ag es ag ain st Watso n P h arm aceu ticals, In c., b u t th e ch an cery co u rt’s p rio r f in d in g s o f f

act an d co n clu sio n s o f law d ism issed A ctav is f

/k / a Watso n P h arm aceu ticals, In c., as a d ef en d an t. In th e f

in al j u d g m en t, th e co r rect p arty , Watso n L ab o r ato ries, w as o rd ered to p ay th e p u n itiv e-d am ag es aw ard

. 1 1S TATEMENT OF THE ISSUES

¶14. On appeal, W a tson a sks the Court to vacate the judgm ent a n d render judgm ent f or all claim s i n W atson’s f

a v o r . Specif

ically , W atson raises the f ollowing i ssues, presented verbatim , with any em

phasis appearing in the original:
I. W hether the Chancellor e rred as a m atte r o f l a w when he substituted “equity ” f

or law in determ ining that W a t son m a d e f als e s t a tem ents when it attached th e l a b e l “ Average W h olesale Price” to pricing inf orm a tion that the Chancellor f ound was known b y i n d ustry p a r t i c i p a n t s , i n c l u d i n g M i s s i s s i p p i M e d i c a i d , t o r e p r e s e n t reim bursem e nt b enchm arks known to be higher than averages of actual m a rket prices.
II. W hether the C hancellor e r r e d a s a m atter of law in f inding W atson liable f or f r aud d espite having determ ined that the State f ailed to prove an essential elem ent of its claim , to wit, “the hearer’s ignorance of [ the representation’s] f

alsity ,” based on his c o n c l usion that “DOM 3 understood that W atson’s AW Ps

. . . w e r e not t rue average (sic) of wholesale p rices charged by W atson to retailers f or its particular drug products.”
III. W hether t h e C hancellor e rred as a m a t ter of law w hen he f ound t hat DOM reason ably relied on its ( alleged) b elief that W a tson’s “AW Ps” were “reasonably close” or “predictably related” to averages of actual m a rket price, despite that W atson never m ade any such statem ents and despite that the C hancellor f ound that W atson’s a l leged “f alse statem ent” was a d if

f erent statem e n t, i .e., W atson’s a lleged representat i o n t hat “AW Ps” are equal to averages of a ctual m arket prices.
IV. W hether th e C h a ncellor erred as a m a tter of law and f act when he c o n c l u d ed that despite his f inding that W atson’s conduct was consistent with industry custom and practice, the S tate had nevertheless proven by clear and convincing evidence t h at W a tson intended to def raud

3 D O M ref

ers to M ississip p i’s D iv isio n o f M ed icaid . In th i s o p in io n , M ississip p i’s D iv isio n o f

M ed icaid is ref

erred to as M ississip p i M ed icaid

.

1 2Mississippi Medicaid when it engaged in that conduct.

V. W hether the Chancellor erred a s a m atter of law and f act in f inding t hat W atson’ s c o n d u c t caused the State to pay m ore f o r drugs t han it otherwise would have based upon the speculative assertion that had DOM known the a verage prices p aid f or W atson’s d

rugs it w ould have reim bursed p harm acies e x a ctly at such average, w h en the undisputed evidence established that DOM’s reim bursem ent rates were the result of c om plicated political com

p rom ise necessary to protect Medicaid benef iciaries’ access to care.
VI. W hether the C hancellor erred as a m atter of law and f act by f inding t hat W atson violated the Mississippi Consum e r Protection Act (“MCPA”) by (a) ignoring that W atson’s “AW Ps” were not “ unf air” or “deceptive” f or t he sam e reasons they were n ot f raudulent, and ( b) r ely ing on legal standards that were m odif ied decades ago.
VII. W hether the Chancellor erred as a m atter of l aw and f act by f inding t hat W atson Lab’s conduct m erited p unitive dam ages (a) based on evidence relating to the c onduct of Schein, Inc. (later known as W atson Pharm a) bef o re Schein, Inc. was a cquired b y W P I , a nd thus evidence that was not r e levant and should not h ave been considered in considering whether W atson Labs’[ s] conduct warranted p unitive dam ages; (b) d e s p i t e the Chancellor’s f inding that W a tson Labs [ ’ s] condu c t com ported with industry c ustom and practice, evidence t hat established that W a tson L a bs’s conduct was not extrem e or otherwise o utside of industry norm s; a nd (c) despite f ail i ng to account f

or DOM’s o wn conduct which m ilitated against awarding punitive dam ages. ¶15. For organizational p u r p o s e s and c larity , the Court com bines the issues raised into issues involving the com m on-law-f rau d f inding, the Mississippi Consum er Protection Act f inding, and the p unitive-dam ages a ward. The State’s cros s - a p p eal raises the f ollowing issue:
1. The trial court ordered W atson to pay $7,141,552 in com pensatory dam ages due to W atson f

raud. The trial court als o f o u nd that W a tson v iolated the Mississippi Consum er P rotection Act but did not alternative l y award the

1 3$7,141552 under the MCPA because it had ruled that the S t a t e was

procedurally barred f

ro m recovering dam ages under the MCPA. Should the trial court have a llowed the State to collect com pensatory dam a ges under the MCPA?
STANDARD OF REVIEW ¶16. The Court leaves t h e c h a n c e r y c o u r t ’ s f actual f indings i ntact if the f

indings are supported by substantial evidence and are not determ ined t o be an abuse of discretion,

m anif estly wrong, or b a sed upon the application of an e rroneous legal standard. In re Estate of Baum gardner , 8 2 So. 3d 592, 598 ( M i s s . 2 0 1 2). The Court reviews questions of law using the de novo standard. Id. ¶17. W a tson argues that the Court should apply a heightened s tandard of review because the chancery c ourt’s f

inal j udgm ent is largely verbatim f r om the State’s p roposed f inal judgm ent. In Burnham v. Burnham , 185 So. 3d 358, 360 (Miss. 2015), the Court stated that “the rule that a chancellor’s d ecision to adopt a p arty ’s proposed f indings o f f

act was subject to ‘heightened scrutiny ’” was abandoned by t he Court i n Bluewater Logistics, LLC

v. W i lliford , 5 5 So. 3 d 148, 1 56–7 (Miss. 2011). W atson attem pts to distinguish B urnham by expla i n i n g that Brooks v. Brooks , 652 So. 2d 1113, 1118 (Miss. 1 995), has not been

ov e r r u led and that, although the Bluewater Logistics opinion did abolish the heightenedscrutiny standard, “it did so w ithout analy zing the reasons f

o r the h olding.” See Bluewater Logistics , 55 So. 3d at 156–7. W hile W atson is correct that Brooks has not been overruled
in its entirety , we take t his opportunity to reaf f irm this Court’s recognition in Burham that
“we [ have] abandoned the r u l e t h a t a chancellor’s d ecision to adopt a party ’s proposed

1 4f

indings of

f act was subject to ‘heightened scrutiny .’” Burnham , 185 So. 3d at 360. ¶18. Finally , Wa t s on a lludes on several occasions to t he State changing its argum ent or deviating f

rom its pleadings in this appeal. T his court’s obligation is t o assure that the trial

court properly applied the correct legal standard to the evidence properly presented at trial and that its ultim ate conclusion did not constitute an abuse of discretion. A n y objection, to the extent there is one, has been waived by a f a ilure to object a t t rial or r aise the issue in posttrial m otions. W hen evidence is introduced or an issue i s raised with the express or im plied

consent of the o ther party , the p leadings shall b e treated in all respects as i f they had been

am ended to conf

orm to such evidence. M.R.C.P. 15(b). This is particularly true when the issue has been tried. That is the case here.
ANALYSIS
I. Fraud ¶19. As r e l a t e s to com m on-law f raud, W atson b asically argues that the State has proven

none of the r equisite elem e nts. Specif ically , W atson argues that it m ade no f a l se statem ent, that the State k

n ew o f a n y alleged f

alsity , t hat the State did not r ely on the alleged f alse

statem ent, that W atson h ad no intent t o d eceive, and the State suf f ered no injury

. The chancellor f

ound otherwise, and we agree. ¶20. In Mississippi, “the circum stances constituting f raud or m istake shall b e stated with particularity .” M.R.C.P. 9(b). The elem ents of an intentional or f

r audulent r epresentation

are: (1) a r epresentation, ( 2 ) i ts f alsity , ( 3) its m ateriality , (4) the speaker’s 1 5knowledge of its f alsity or ignorance o f i ts truth, ( 5) his intent that it s h ould be acted on by the hearer and in the m anner r easonabl y c o n t e mp l ated, (6) the hearer’s ignorance o f its f alsity , (7) his reliance on its t ruth, (8) his right to rely thereon, and (9) his consequent and proxim ate injury

. Trim v. Trim , 33 S o. 3d 471, 478 (Miss. 2010) (quoting M cCord v. Healthcare Recoveries,
Inc. , 960 So. 2d 399, 406 (Miss. 200 7 ) )

. F u rther, “[ f ]raud m ust be proved by clear and convincing evidence.” Sapukotana v. Sapukotana , 179 So. 3d 1105, 1114 (Miss. 2015) (citing Nichols v. Sauls’ Estate , 165 So. 2d 352, 356 (Miss. 1964)). Fraud is essentially a question best lef

t to t he f actf inder. Allen v

. Mac T ools, Inc., 671 So

. 2 d 6 3 6 , 6 4 3 (Miss. 1996).
1. Watson’s False Representation ¶21. W a tson’s argum ent that it did not m ake a f alse statem ent appears to b e twof old. First,
W a tson argues that it did n ot m ake a f a lse statem ent because e very one i n the i ndustry knew that “Average W holesale Price” did not m ean “average wholesale price” and, theref ore, the

statem ent is true. Secondly , W atson argues that Mississippi Medicaid knew that “Average
W h olesale Price” did not m e an “average wholesale price” and, theref o re , c a nnot recover. This second argum ent is addressed hereinaf ter as it relates t o t h e h e a r e r ’s ignorance of its
f alsity and reliance on its truth and has no bearing on whether the statem ent was actually
f alse or not. ¶22. W a tson’s a rgum ent, theref ore, is that i t w as com m on knowledge in the industry that
A W P i s a term of the trade that does not actually m ean the “average wholesale price” of a

1 6particular drug. 4 W atson m aintains that AW P is m ore akin t o a “ suggested” w holesale price

and, in the context of t his case, is really used i n t he p harm aceutical drug f ield o nly as a m eans
to obtain a generic designation f o r the particular drug at issue. The chancellor f ound, in part, that the parties understood “that W a ts o n ’ s [ a v e rage wholesale prices] published in [ First DataBank] that were r elied on by [ Mississippi Medicaid] in determ ini n g i ts estim ated acquisition cost reim

bursem ent f

or W a tson’s drug[ s] were not true average[ s] o f wholesale prices charged by

W atson to retailers f

or its particular drug products.” ¶23. W a tson would have t he analy sis end there. However, as state d a b o v e , M ississippi Medicaid’s knowledge of the f a lsity (a f alsity W atson does not acknowled g e e x ists) is not
germ ane to the question of whether or not the representation was actually f alse. Theref

ore, W a ts o n’s sole argum ent t o support its position that there was no f a l se statem e nt is that
“AW P” i s an i n d u s t r y t e r m and, because the i ndustry did not def ine t he term “Average
W h olesale Price” as a lay m an would def

ine the term

“average wholesale price,” it was not
f alse. ¶24. The problem with W atson’s argum ent is t h a t i t w a s w e l l aware that Mississippi Medicaid relied upon the num b ers in F irst DataBank and/or sim ilar publications to establish

a benchm ark or starting p oint i n determ ining estim ated acquisition costs. W atson knew that

4 A ll p arties ack n o w l ed g e th at A WP d id n o t h a v e a lay

m an ’s m ean in g o f

“av erag e w h o l esale p rice.” I t sh o u ld b e n o ted , h o w ev er, th at th e ev id en ce o n t h i s issu e w as co n f l ictin g . A t tim es, F irst D ataB an k d ef in ed it as an “av erag e . . . ch arg ed .” C ertain in d u s try p artic i p an ts, in clu d in g S ch ein , d e f in ed i t at o n e p o in t as “co m p o site w h o lesale p rice ch arg ed

. ” N ev erth eless, M ississip p i M ed icaid ag reed th at A WP w as n o t a tru e av erag e. 1 7First DataBank def ined t he t erm “Average W holesale Price” as “ e ither the publish e d suggested wholesale price obtained f rom the m anuf

acturer or the price com m only charged by w holesalers as d e t e r m ined by survey .” The num b ers subm itted by W atson to First DataBank were neither. They were num bers driven by the requirem e nts necessary to obtain

a g e n e r ic drug designation. They were not “suggested w holesale prices” or “list prices.” 5 They were f abricated num

bers tied to nothing m ore than a ceiling am ount it was necessary to stay under in order to obtain a generic designation. ¶25. As the num

bers were not what they were purported t o be in the p ublication to which
W a tson subm itted t hem , they are f alse. 6 Further, W a tson knew First DataBank’s d ef inition of AW P and continued to update its num bers w i th the publication. Thus, W atson did m ake a f alse representation.

5 T estim o n y

m ad e it clear th at A WP m ean t n o t h in g , as relates to p r icin g , in th e in d u s try

. N ap o lean C lark , t h e D irecto r o f M ark etin g f o r Watso n ’s G en eric D iv isio n , testif i ed , in p a rt, th at, “T h e c o n tract p rices th a t w e n eg o t iate w ith t h e cu sto m ers are a co n f i d en tial n eg o tiated p rice, an d th e S WP p la ys n o b ea rin g i n th o se d iscu ssio n s an d th o se n eg o tiatio n s.” (E m

p h a sis ad d ed .) A WP an d S WP w ere sy n o n y m o u s alth o u g h ev id en ce p resen ted th ro u g h th e P rice A lert B u lletin in d icates th at w as n o t alw ay s th e case.

6 Throughout its b rief

, W atson m akes m

uch of the chancellor’s ref erenceto“equity ” in def ining th e term A WP

. We d o n o t a g ree w ith Watso n ’s co n t en tio n t h a t th e ch an cello r ref eren ced eq u i ty in a n attem p t to circu m v en t th e p ro p er leg al co n clu sio n . U p o n r ev iew o f th e j u d g me n t, i t is c lear th at th e ch an cello r r ef eren ced h is eq u itab l e p o w e rs o n ly as a rein f o rcem en t o f h is d ecisio n t o rej ect Watso n ’s d ef in itio n o f A W P

. W h ile th e ch an cello r’s ref eren ce to eq u ity m ay h av e b een a p o o r ch o i ce o f w o rd s, w e d o f in d th at th e ch an cello r u sed t h e c o rrect leg al stan d a rd to d eterm in e th e m ean in g o f A WP

. T h e ch an c ello r p ro p erly laid o u t th e ev id en ce an d rej ected Watso n ’s p o sitio n as to th e m ean in g o f A WP

. 1 82. Watson’s Intent to Deceive

¶26. Suf

f icient e vidence exists in the record to support t he chancellor’s f inding of an intent

to deceive. This evidence included, but was not lim ited to, proof t hat W atson and others in the industry “m arketed the spread.” Watso n d e n ies th at it “m ark eted th e sp r ead ” d esp ite a
p leth o ra o f ev i d en ce th at d em o n s trated th at th e p r actice w as th e in d u stry stan d a rd

. C i n d y B o yd s t o n , a f

o r m e r s a l e s p e r s o n a n d n a t i o n a l s a l e s t r a i n e r f o r S c h e i n P h arm aceu ticals— W atso n ’s p red ecesso r– testif i ed th at, “T h e g en eric in d u stry is b u ilt u p o n th e s p r ead .” L etters in tro d u c ed in to th e reco rd also co n f irm ed th a t A WP w as a “ tactic” an d th at S ch ein w as “w i llin g to m ak e an y a d j u stm en t s in A WP th at are n ecessary t o m ak e o u r

cu sto m ers m o re co m

p etitiv e in t h e area o f reim b u rsem en t ” an d th at, if th e s p read s w ere n o t f av o r ab le, S ch ein w o u ld “ f in d o u t w h ere o u r A W P n eed s to b e to b eco m e f av o rab le.” O th er letters also w ere in tro d u ced t h at d em o n strated th at Watso n m ark eted p ro d u cts “v ia lu crativ e
sp read s.” The greater the spread, the greater the prof it. W atson also published i ts AW P with knowledge that Mississippi Medicaid would see and use it in its r eim b ursem ent calculations. The evidence clearly e s t a b l i shed that a bigger “spread” m eant m ore business f or W atson. The trial court was al l o w e d to rely u pon the totality o f the evidence in m aking this determ ination. ¶27. Intent is rarely s usceptible t o d i r e c t proof

. Price v . State , 749 So. 2d 1 188, 1194 (Miss. Ct. App. 1999) (“Intent is alm ost alway s, absent a conf ession, proved by i nf

erences f r o m c onduct and not by d irect evidence.”); Critikon, Inc. v. Becton Dickinson V asc u l a r Access, Inc., 120 F.3d 1253, 1 256 (Fed. C ir. 1989) (“Direct evidence of intent o r proof of 1 9deliberate schem ing is r arely available in i nstances of inequitable conduct, but i ntent m ay be

inf erred f rom the surrounding circum stances.”). This is esp e cially applicable in a f raud

s e tting. W atson, a s m ay have b een its right, certainly c hose n ot to advise Mississippi Medicaid that its “starting point” was based on an illusion. ¶28. As the old idiom goes, “‘actions generally speak e ven louder than words.’” Farragut

v. Massey, 612 So. 2d 325, 329 (Miss. 1992) (quoting Sum ter Lum ber Co. v. Skipper , 184 So. 296, 299 (Miss. 1938)); Corely v. Reed, 145 So. 241, 243 ( Miss. 1933). W atson knew that Mississippi Medicaid would rely on its f alse s tatem ents and benef

itted f rom this reliance. It is evident that W atson intended to deceive Mississippi Medicaid.
3. Mississippi M

edicaid’s Ignorance of the F alsity and Reasonable Reliance on its Truth ¶29. W a tson’s strongest argum e nts certainly are that Mississippi M edicaid had knowledge of t he f alsity and d id not reasonably rely on the truth of the statem ent. W a tson’s position in this regard is best sum m arized by the State’s brief in which i t notes, “Of course Mississippi Medicaid did not t hink W atson’s [ average wholesale prices] were the actual averages . . . .” The trial judge conf

irm e d a s m

uch, f inding that M ississippi Medicaid did, in f act, know that the m eaning of AW P did not correlate to true averages of wholesale prices charged to retailers. ¶30. W a tson t hus w ould have us hold that Mississippi Medicaid k new o f the f

alsity and, likewise, had no right to rely on an alleged f alse statem ent if Mississippi Medicaid knew it

to be f alse. Also, W atson bolsters this argum ent b y p ointing out that the Of f ice of the

2 0Inspector General (“OIG”) an d o t h e r s had warned Mississippi Medicaid on num erous

occas i o n s that AW P num bers did not represent actual averages and that the actual prices

were m uch lower. W h ile this is a f acially appealing argum ent, reali t y i s n e v e r quite so sim ple. ¶31. W a tson’s argum ent m isses the point. W e agree that Mississippi Medicaid knew that
AW P d id not represent the actual averages that w ere paid f or the drugs in question and that the OIG an d others sent several letters warning Mississippi Medicaid that AW P was unreliable because the actua l p r i c es paid were m uch lower. Testim ony at trial and other evidence, including the O IG letters, though, clearly established t hat the actual prices paid

were the result of a vast array of d i s c o u n ts that were given to t he purchasers. Indeed, the letters f rom the OIG recognized a s m uch and listed AW P m inus an appropriate discount as being one of three proper way s to deal wit h t h i s d i screpancy , and M ississippi M edicaid` reasonably

chose this m ethod to deal with the discrepancy

. ¶32. Today , we ref

use to im properly lim it the scope of W atson’s f raudulent representation.
W a tson would h ave u s h old that, because M ississippi Medi c a i d k n e w t hat AW P did not represent the actual “average wholesale price,” as that term is com m only used, Mississippi Medicaid knew that AW P was a f alse statem ent and cannot rea s o n a b l y h ave relied on W a tson’s statem ent. This argum e nt, though, accounts f or only o n e f

a cet of the f

raudulent representation m ade b y W atson. W hile we a gree, a n d t he State concedes, that Mississippi Medicaid knew what AW P was not, it h ad n o idea what it was—a f abricated num

ber used

2 1to situate t he drug m anuf acturer in the generic m arket place. 7 M ississippi Medicaid did not know tha t A WP w a s not a “ suggested wholesale price” u pon w hich discounts were then applied. Yet “suggested wholesale price” i s the d ef inition of AW P used by First DataBank.
W a tson knew that the num bers would be presented as such when i t f o r w a r d ed them to be published. That is the f

raud. ¶33. M i s s i s s i p p i M e d i c a i d had every right to rely on AW P a s a “ starting point” or “benchm ark” f

or determ ining appropriate reimb u r s e me n t rates. They were held out as a “suggested wholesale price” and constituted the n um b er u pon which Mississippi Medicaid

attem pted to determ i n e an appropriate discount. Proof of supposed warnings are just red herrings in the a naly sis. T he OIG letters s pecif ically provided that a pr oper reduction of
AW P w as an acceptable alternative. 8 That is e xactly what Mississippi Medicaid attem pted

to do. W hen given national survey num bers, M ississippi Medicaid attem pted to determ ine

7 M ississip p i M e d icaid k n ew th at A WP w as n o t an accu rate rep resen tatio n o f th e actu al p rice o f th e d ru g , b u t it is ev id e n t f ro m th e r eco rd th at M i ssissip p i M ed icaid d id n o t k n o w th at A WP h ad n o ra tio n al relatio n sh i p to th e u n d isco u n t ed p rice o f th e d ru g . T h e P rice A lert B u lletin stated th at A WP w a s n o t an accu rate f i g u r e b ecau se o f d isco u n ts, p rem i u m s, reb ates, sp ecial o f f ers, in cen tiv e s, etc., an d lik en e d it to a “stick er p rice” in th e au to in d u stry

. C lark ’s testim o n y o n b eh a lf o f Watso n , th o u g h , clearly co n trad icts th is. Watso n attem

p ted t o lik e n th e p rices to t h e s tick er p rice (M an u f a ctu rer’s S u g g ested R etail P rice (“M S R P ”)) f

o r a n au to m o b ile d u rin g w itn ess ex am in atio n at trial. H o w ev er, th e an alo g y su p p o rts th e S t ate. T h e M S R P o n a n a u t o m o b ile is a p rice o n e can w alk in to th e d ealersh ip an d , v ery u n w isely , p ay . H o w ev er, as ev ery o n e k n o w s, a m u ltitu d e o f d isco u n ts an d red u ctio n s a re a

p p lied to th e M S R P to reach a f in al p rice. O n e d o es n o t sim p ly g et a $ 3 0 ,0 0 0 au to m o b ile f

o r $ 5 , 0 0 0

. T h e M S R P h as m ean i n g related to th e f in al p rice. It is clear f ro m th e reco rd th at th e A WP d id n o t.

8 N o tices f ro m C M S o n ly

co n d em n e d “n o n d isco u n ted ” o r “u n m o d if ied ” A WP s. 2 2the am ounts actually being paid in Mississippi based u pon Mississippi’s particular f acts and circum stances and with f

u ll k n o w l e d ge that if t he reim

bursem e nts were discounted t oo m uch, Mississippi Medicaid would run a f o u l o f f ederal laws aim e d a t keeping the m a rketplace accessible. ¶34. Mississippi Medicaid’s reim bursem ent p l a n , a s t h e State argued, w as governed by
f ederal law. Title 42 Section 1396a(a)(30) required, in part:
A State plan f

or m edical a s s i stance m ust

. . . assure that pay m ents are consistent w ith e f

f iciency , econom y , and quality of care and are suf

f icient to enlist enough providers so that care and services are available under the p lan at least to t he extent that such care and s ervi c e s a r e a v ailable to the general population in the geographic area.
42 U.S.C. § 1396a(a)(30). F urther, Mississippi Medicaid’s reim bursem ent f

orm ula had to be a pproved b y a f

ederal agency . T his agency , t h e C e n t er f or Medicare and Medicaid
Ser v i c e s (“CMMS”), was well aware of the issues surrounding AW P, as evidenced by the
OIG letters. Yet CMMS continued to a pprove Mississippi’s r e im bursem ent plan. Once again, Mississippi Medicaid had a right to believe its reim bursem ent f

orm u la was sound. ¶35. Finally , as noted above, Mississippi Medicaid did not sim ply bury i ts head in the sand. Upon r eceiving w arnings, it attem pted to determ ine the p rices that were actually being paid
in Mississippi. Ef

f o rts were m ade to establish an a p propriate discount to the AW P f igure. 9

9 T h ese in clu d ed w ell-reaso n ed attem p ts to set an ap p ro p riate A WP d isco u n t th ro u g h co m m u n i catio n w ith th e R eg io n al D iv isio n o f M ed icaid an d c o n t a c t w ith th e M ed icaid d iv isio n s o f o th er states. M ississip p i M ed icaid a lso co m m issio n e d a stu d y w h i ch in clu d ed f in d in g s f ro m a co n su ltan t th at a reco m m e n d ed o p tio n f o r reim b u rsem en t w as A WP m in u s a d isco u n t. 2 3It m

u st be noted that the ef

f orts of Mississippi Medicaid w ere subpar. W hether through bad decisions, lack of m anpower or other reasons, the ef f or ts f ell short. That is, of course, the problem w ith dealing with f raud. One does not know the actions are f raudulent until it is too late. ¶36. Mississippi Medicaid was under no obligation to investigate f a c ts it reasonably

had

a good-f aith basis to rely upon. “Contributory n egligence is not a def ense to an action based

on f raud.” Nash Mississippi V alley Motor Co. v. Childress , 125 So. 7 08, 7 09 (Miss. 1930). The hearer i s entitled to reasonably rely on a f acially valid statem ent. See id

. (“If a f alse

statem ent is m ade by one who m a y be f airly as s u m ed t o know w hat he is t alking about, it

m ay be accepted as true, without q uestion and without inquiry , although the m eans of correct inf orm ation are in reach.”). Mississippi Medicaid had a good-f aith basis to be l i e v e AW P constituted a proper starting point f or d e t erm ining reim

bursem e nt rates and took steps—whether adequate or not—to discoun t that am ount. As the chancellor recognized, though, such ef

f orts w ere f

utile as Missi s s i ppi Medicaid’s “starting point” m eant nothing. ¶37. Regarding Mississippi Medicaid’s reasonable reliance, the law is b est sum m arized in Rhyne v. Gam m il , in which the Court held:
It is e nough that it be m ade with an i nexcusable disregard of its accuracy , and where all of the f

acts are in t h e p o s s e ssion of the person m aking the representation, h e m a y not shi f t the burden of verif

ication upon one who he knows is acting upon his representation. Rhyne v. Gam m il , 60 So. 2d 500, 502 (Miss. 1952); see also W eem s, R., Mississippi Law of Torts , § 10.1 (2d ed. 2008).
2 44. Mississippi Medicaid’s Injury

¶38. “[ D]am ages are speculative only w h en the cause is uncertain, not w hen t he am ount is uncertain.” Parker Tractor & I m plem ent Co. v. Johnson , 819 So. 2 d 1234, 1239 (Miss. 2002) ( citing A d

a m s v . U . S. Hom ecrafters, I

nc. , 7 44 So. 2d 736, 740 (Miss. 1999)).
“‘W here it is reasonably c ertain that dam age has resulted, m ere uncertainty as to the am ount

w i l l n o t p reclude the r ight o f recovery . . . .’” Warren v. D erivaux , 9 96 So. 2d 729, 7 3 7 (Miss. 2 008) (quoting Cain v . Mid-South Pum

p Co. , 458 So. 2d 1 048, 1050 ( Miss. 1984)). ¶39. Evidence in the record i s suf f icient to show t he o verpay m ent f o r the drugs in question. The e xtent of t he dam ages, through just and reasonable inf e rence, has been supported by the evidence. Mississippi law is clear that an award f or dam ages where the sum is uncertain will not f ail. Such an award is suf f icient under the law. ¶40. W a tson also argues that dam ages h a v e not been shown because the State m ade no signif icant changes to its reim

bursem ent f

orm ula and that its f

o rm ula was based on “reasons independent o f any belief t hat W atson’s [ average wholesale p r i c e s ] were equal to or ‘predictably related’ to actual averages of transaction prices.” A c c o r d i ng to W atson, Mississippi Medicaid’s “ reim bursem ent l evels were the result of political pressure and the

com prom ises m ade by [ Mississippi Medicaid] to ensure access to c a r e f o r all of its benef iciaries.” W atson, once again, m i sses the point. ¶41. Mississippi M edicaid m ade m ultiple changes to its reim burse me n t f

o r mula and the
f act that i t m ay have taken into account additional f actors, pol i t i cal o r otherwise, is not

2 5relevant to whether the injury actually existed, given the evidence in the record. W e agree with W atson that the f

raudule n t m i srepresentation m ust have proxim ately caused Mississippi Medicaid’s i njury

. See Russell v. S. Nat’l Foods, Inc. , 754 S o. 2 d 1246, 1256 (Miss. 2000) (“[ R]ecovery is not perm itted if the proxim ate cause of the m onetary l o s s is other than the
f raud alleged.”). W e disagree w i t h Wa tson’s a rgum ent, though, that the f raud did not proxim ately cause t he injury

. Substantial evidence in the record supports this f inding by the chancellor. Further, i nsuf f icient evidence exists in the record to support W atson’s a rgum ent that the other reim

bursem ent f

actors, supposedly considered by Mississippi M edicaid, would have caused the injury had W atson not def rauded Mississippi Medicaid. Given the record bef ore u s , Wa t s on’s argum ent, if relevant at a ll, would go to the am ount of d a m ages—whether Mississippi Medicaid properly m i tigated its dam ages a s a result o f t h e injury —and not to w hether the injury exists. See State v. Abbott Laboratories , 829 N.W .2d 753, 763–64 (W isc. App. 2013). ¶42. In s um , we f

ind substantial evidence to support the chancellor’s f inding that W atson def rauded the S t a t e . F or y e ars, W atson intentionally published its AW Ps t o Mississippi Medicaid with t he knowledge and intent that Mississippi Medicaid would rely on the f igures
f or i t s reim

b ursem ent f

o rm ulas. W hile Mississippi Medicaid knew that W atson’s AW Ps

were not the actual wholesale prices of the drug, it is evident that Mississippi M edicaid did

not know that the AW Ps had no relatio n t o the actual p rices paid f or the drugs. As such, Mississippi Medicaid continued to reasonably rely on the AW Ps as the s tarting point f or its

2 6reim

bursem ent f

orm ula. All t h e w h i l e , W a t s o n “ m a

r k e t e d t h e spread,” e x ploiting Mississippi Medicaid’s lack of

knowledge at the expense of the taxpay ers of

the State of

Mississippi.
II. Mississippi Consum er Protection Act
A. W a t s on’s Violation of t he Mississippi Consum er Protection Act ¶43. The c hancery court determ ined that W atson had violated the Mississippi Consum er Protection Act. The Mississippi Consum er Protection Act prohibits “unf a i r m e thods of

com petition af

f ecting com m erce and unf a i r o r d e c e ptive trade practices in or af f ecting

com m erce.” Miss. Code Ann. § 75-24-5(1) ( Rev. 2 016). Section 75-24-5(2) provides that the f o llowing are “unf

air m ethods of com

petition and unf

a ir or deceptive trade practices or acts” and are prohibited: “[ r]epresenting that goods or services have sponsorship, approval, characteristics, i ngredients, uses, benef its, or quantities that they do not have o r that a person has a sponsorship, approval, status, af f iliation, or conn ection that he does not have;” and

“ [ m ]isrepresentations of f act concerning t he reasons f or, existence of

, or am ount of pric e reductions.” Miss. Code Ann. § 75-24-5(2)(e),(k). ¶44. Here, i t is unnecessary to regurgitate the f

a cts at issue, as they

are identical to those addressed in the com m o n-law f raud analy sis above. H owever, it is w orthy t o note t hat f raud is n o t r e q u i r e d to establish a violation of the M ississippi Consum er Protection Act. See
Holm an v. H

oward Wilson Chrysler Jeep, Inc., 972 So. 2d 564, 572 (M i s s . 2 0 0 8 ). This

m akes a claim easier to prove, at least as relates t o its deceptive nature, under the Mississippi
Consum er Protection Act. Relating to the c onsum er-protection claim , the chancellor f ound
2 7that:
W a tson’s conduct in causing to be published AW Ps that have no predictable

relationship t o what c onsum ers pay f o r its drugs while knowing M i ssissippi relied on this inf

o rm ation in determ ining [ estim ated a cquisitio n c o s t ] is an unf air and d eceptive trade practice within t h e m eaning of M ississippi’s Consum e r Protection Act.
W e concur. ¶45. W a tson argues that t he c h a n c e l l o r erred by a pply ing t he “capacity or tendency to deceive” test, as it is outdated and has been r eplaced by t he target-audience test adopted by the Federal T rade Com m ission. See Matter of C liffdale Assocs., Inc. , 103 F.T.C. 110, 1984
W L 565319 (1984). ¶46. This argum ent is without m erit. Section 75-24-3(c) provides, in part: that in construing what constitutes unf air o r deceptive t rade practices that the courts will be guided by the in t e r p r e t ations given by the Federal Trade Com m ission and the f

ederal courts t o Section 5(a)(1) of the F ederal Trade Com m ission Act (15 USCS 45(a)(1)) as f rom t im e to tim e am ended. Sim ply stated, the chancellor adhered to the act. ¶47. T h e c h a

n c e l l o r e xplained that Mississippi’s Consum er Pr o t e c t i o n A c t d o e s n o t p r o v i d e

a def inition o f what is an “ unf

air or deceptive trade practice[ ;]” theref ore, the chancellor used guidance f

rom t he Federal T rade Com m ission a n d f ederal-court precedent of analogous
f ederal statutes. The c hancellor relied on FTC v. Raladam C o. , 316 U.S. 149, 1 52, 62 S.
Ct. 966, 86 L. Ed. 1336 (1942), in which the United S tates Suprem e Court determ ined that

a particular act or p r actice i s deceptive or unf air if it has the capacity or tendency to deceive. The chancellor also c ited In Re : G i a n t F o o d , Inc. , 61 F.T.C. 326 (1962) t o explain that
2 8“FTC regulations regarding a dvertisem e nts f o r reductions of

f list price s m aintain that a particular list price ‘will not be deem ed f ictitious if it is the price at which substantial (that is not i solated or insignif ic a n t ) s ales are m ade’ but that one ‘ signif icantly in excess of the highest p rice at which substantial sales in the t rade area are m ade’ is m isleading.” Finally , the chancellor cited In Re: Lupron , 295 F. S upp. 2d 148, 168 n.1 9 ( D

. Mass. 2003), in which t h e d i s trict c ourt stated: “There i s a dif f e rence between a sticker price and a sucker price. If one were c onf

ronting a m odest m a r

k u p of the a ctual [ average wholesale price]

. .

. intended to make sales of the drug f or the treatm ent of Medicare patients com m ercially

v i a b l e . . . , it is unlikely that there would have b een a governm ent investigation o f Def endants’ m arketing practices.” ¶48. Decisions of

the f ederal courts and the Federal Trade Com m i ssion clearly “guided” the c hancellor’s determ ination. Nothin g in Section 75-24-3(c), though, d elegates the chancellor’s determ ination to t he f ederal courts, nor does the statute bind Mississippi judges

to varied, changing decisions at the f ederal level. T he judges, as f actf inders in bench trials, and the juries of the State o f Mississippi are perf ectly capable o f determ i ning—while being “guided” by f

ederal authority

—what are dece p t i v e practices. That is exactly what the chancellor did here. ¶49. Further, the debate over the correct standard in the case at hand is not relevant in that
W a tson’s actions were deceptive u nder either standard. W a tson’s practice in publishing its
AW Ps has been discussed in depth above in the com m on-law-f raud analy sis. The practice

2 9clearly is m isleading.

¶50. In addition, num ero u s s t a t e c o u r t s , a d d r e s s i n g s u b s t a n t i ally s im ilar consum er protection, have f

ound the practice t o b e d eceptive or m isleading even in cases where the judgm en t against the pharm aceutical com pany was reversed. In the Matter of Mississippi
Medicaid Pharm aceutical Average Wholesale Price Litigation: S a n doz, Inc. v. State of
M i ssissippi, 190 So. 3d 829, 841 (Miss. 2015) (“[ U ]nf air reporting of f

ictitious AW Ps caused the substantial injury of $23,661,618 in overpay m ents to phar ma c i e s p articipating in Medicaid.”) (af

f irm ing judgm ent); Abbott Laboratories , 829 N.W .2d at 761–62 ( af f irm ing judgm ent); Sandoz, Inc. v. C om . ex rel Conway , 405 S .W .3d 506 (Ky

. 2012) (“W e recognize, however, that there was am ple evidence f

rom which the jury could have properly determ ined that Sandoz did, in f a c t , s u bm it AW Ps in a f alse, m isleading, or deceptive

m anner.”) (reversing judgm ent); Blue Cross Blue S hield of Massa c h u s etts, et al v. AstraZeneca Pharm s, LP, 582 F.3d 156 (1st Cir. 2009) (af f irm ing judgm ent). ¶51. Second, a c onsum er n ot only could but did rely upon the m isleading practice while acting reasonably

under the circum stances. Like a num ber of states, Mississippi Medicaid used AW P as a starting point f or determ ining its reim

bursem e nt r ate. It was reasonable to believe that a price advertised as a “suggested wholesale price” w ould have a correlation to the a ctual, wholesale price or a t least to som e price. 10 Mississippi M edicaid knew that there

10 E v id en c e n o ted th at th e F ed eral R e gi s t e r h a d a ddr e s s e d t he p u rp o sef

u l m an ip u latio n o f th e A W P to in crease cu sto m er p ro f its f ro m f ed eral h ealth care p ro g ram s in its p u b licatio n . 3 0would be discounts f rom this price and it attem p ted, s ubject to num erou s c o n s t raints, to adjust AW P to those discounts. Finally , f or reasons already ad d r e s s e d , the practice was

m aterial.
B. Com p ensatory Dam ages Pursuant to the Mississippi

Consum e r Protection Act ¶52. W e now turn to the State’s cross-appeal. The S t a t e a s serts that the c hancery court erred i n f inding that it was not perm itted to receive com pensatory dam ages f

or violations of the Mississippi Consum e r Protection Act because the State had f a iled to com

ply with an inf orm al dispute resolution program as required by

Mississippi Code Section 75-24-15(2). First, the State claim s that W atson waived i ts right to raise the State’s noncom pliance with Section 75-24-15(2) s ince it waited nearly seven y ears to raise it. Further, the State contends that it is not subject to t he dispute-resolution requirem ent because it is not a private actio n

as discussed b y the s tatute. Finally , the State urges that , even if it did not com ply with Section 75-24-15(2), the chancery court could have relied on Mississippi Code Sec t i o n 75-24-11 to provide com p ensatory dam ages to the S tate

. T h e State is not entitled to

com pensatory dam a ges f

or a violation of

the Mississippi Consum e r Protection Act.
1. W aiver ¶53. For several reasons, W atson did not waive its right t o f ile f or dism issal based on the State’s f ailure to attem

pt resolution through the inf orm al dispute-settlem ent program . It is undisputed that the State never pleaded or ref erred t o S e c tion 75-24-15 in i ts case, but
W a tson claim s that the reason it f iled its m otion to dism i ss was based on t he chancery court’s

3 1recent award of com pensatory dam ages under Section 75-24-15 against Sandoz, even though the State had not raised S ection 7 5-24-15 in its com plaints a gainst Sandoz either. Thus, once W a tson learned of the S andoz verdict in late 2011, which awarded com pensatory dam ages pursuant t o Section 75-24-15 e v en though not pleaded, i t prom ptly f i led the m otion to dism iss. Such action was reasonable. ¶54. Additionally , W atson counters the State’s w a i v e r a r g u me n t b y a r g u i n g t hat the
inf orm al dispute settlem ent program was a statutory requirem ent that could not be waived. The Court has n o t a d d r e ssed the issue, b ut in 2007, the Court of A ppeals did address the

exact issue. In Dom inquez v. Palm er , 970 So. 2 d 737, 743 (Miss. Ct. App. 2007), the Court of Appeals rejected a party ’s claim that the o ther party had waived h is right to r a ise

n o n com pliance with Section 75-15-24(2) d ue to active participation in the litigatio n . T h e Court of Appeals explained that Section 75-15-24(2) w as a “statutory requirem ent with which a plaintif

f m ust com ply ” and not sim ilar to a party ’s f a ilure to com

p el arbitration early in litigation. Id

. ¶55. W a tson did n ot waive its r ight to r aise noncom pliance with Section 7 5-24-15(2) in its

m otion to dism i ss. 2. Applicability of Section 75-24-15( 2) ¶56. Section 7 5-24-15 is titled “Private Actions.” Accordin g t o s u b s e c t i on o ne, “any
person who purchases or l eases g oods or s ervices prim arily f or personal, f

am ily or h ousehold
purposes and thereby suf f ers a ny ascertainable loss o f m o n e y o r property

. . . as a result

. .

3 2. . m ay b ring an action at law

. . . to recover such loss of m oney or d am ages f or the loss of such property

. . . .” Miss. Code Ann. § 75-24-15(1) (Rev. 2016). Section 75-2 4

- 1 5 ( 2 ) provides: “ In any private action brought under this chapter, the plaintif f m ust have f irst m ade

a reasonable attem

p t to resolve any claim throu gh an inf orm al dispute s e ttlem ent program approved by the A ttorney General.” (Em phasis added.) Next, Section 75-24-15(3) provides: “In any action . . . under this section of this chapter, a prevailing def endant m ay recover in addition to any other relief that m ay be provided in this s ection costs and a r easonable attorney ’s f

ee, if in t h e o p i n i o n of the court, said action

. . . was f rivolous or f

iled f or the
purpose of harassm ent or delay .” Finally , subsection f our s t a t es t hat “[ n]othing in this chapter s hall b e construed to perm it any class action or s uit, but every private action m ust be

m aintained in t he nam e of and f o r the sole use and benef

it of the individual person.” Miss. Code Ann. § 75-24-15(4) (Rev. 2016). ¶57. According to the S tate, “[ s]ubsection [ one] establishes the right of a n individual that

was cheated to bring an action under the [ M ississippi C o n s u me r Protection Act]. That is exactly wha t t he State did. This right is not lim ited t o ‘private actions’– just lim ited to
persons that suf

f ered an ascertainable loss.” The State asserts that the phrase “private action” “is not m entioned until [ s ]ubsection [ two].” T he State elaborates that “private action” also is not included in subsection three but does appear in subsection f our. T he State’s a rgum ent is that it was perm itted t o bring its action u nder s u b section one, but any of the subsections that contain the phrase “private action” do not apply because the a cti o n i s a public action

3 3brought by

the Attorney

General. ¶58. The S tate f

ails to explain how, in a section titled “Private Actions,” it could bring a public action, which i s n ot authorized or contem plated under subsection one, and receive the benef it of the section without also c om ply ing with the r em aining provisions. It is not a logical reading of

the statute. The chancellor was correct.
3. Section 75-24-11 ¶59. The State n ext argues that, even if it is not eligible f or c om pensatory dam a ges under Section 75-24-15, t he chancery court should have awarded dam ages pursua nt t o Section 75-24-11, which p r ovides that “ the court m a y m ake such additional orders or judgm ents, including restitution, as m a y be n ecessary to restore to any person . . . any m o nies or property , real or personal, which m ay have been a cquired by m eans of any p ractice prohibited by this chapter

. . . .” Miss. Code Ann. § 75-24-11 ( Rev. 2 016). The State c laim s that the chancery

court s h o u l d h a ve awarded it $ 7,141,552, the sam e am ount it received as com pensatory dam ages f

or the f raud claim

. ¶60. The Sta t e h a s n o t p rovided a single c itation t o the m ore than 50,000-page record where the chancery c ourt addressed the a pplicability of Section 75-24-11, and it was

m entioned only in passing during the proceedings. W ithout the b enef it of a citation to the record, w hich is the duty of t he State to provide pursuant to our a ppellate rules, showing the issue was presented to the chancery court and rejected, the iss u e cannot adequately be addressed. See M.R.A.P. 28(a)(7), (f ). The C o u r t d o e s n o t h old lower courts in error f or

3 4issues not presented to it and ruled upon by the lower c ourt. “W e accept without h esitation

the ordinarily sound principle that this C ourt sits to r eview actions of trial courts a nd that we should undertake consideration o f no m a tter w h ich has not f irst been presented to and decided by the trial court.” Educ. Placem ent Servs. v. Wilson , 487 So. 2d 1316, 1320 (Miss. 1986). W e decline to hold the Chancellor in error on this issue.
III. Punitive Dam ages ¶61. In Mississippi, an award of punitive dam ages is governed by statute. Mississippi Code Section 11-1-65(1)(a) provides that punitive d a m ages m ay not be awarded if the claim ant does not prove by clear and c onvincing evidence that the def endant against whom punitive dam ages a r e sought acted with actual m alice, gross negligence which e v idences a willf u l , wanton or reckless disregard f or the saf ety o f others, o r com m itted actual f raud. Miss. Code A nn. § 11-1-65(1)(a) ( Rev. 2014). Additionally , Section 11-1-65(1)(e) outlines
f actors f or a f actf i nder to consider, when relevant, in cases involving punitive dam ages: the def endant’ s f

inancial condition and net worth; the n ature and reprehensibility of t he d ef endant’s wrongdoing, f

or exam ple, the im

pact of the def endant’s conduct on the plaintif f , or the relationship o f the d ef endant to the plaintif f ; the def endant’s awareness of the am ount of harm being caused and t h e d e f e ndant’s m otivation in causing such harm ; t he duration o f the def endant’s m isconduct a nd whether the def endant attem

pted to conceal such m isconduct; and a ny other circum s tances shown by the evidence that bear on determ ining a proper am ount of punitive dam a ges. Miss. Code Ann. § 11- 1

- 6 5(1)(e) (Rev. 2014). “Punitive dam ages are perm issible f or wrongs that ‘im port insult, f

raud or oppression and not m erely i njuries but injuries inf licted in the spirit of wanton disregard f or the rights of others.’” Wise v. V alley B ank , 861 So. 2d 1029,
3 51033 (Miss. 2003) (quoting First Nat’l Bank v. Langley , 314 So. 2d 324, 339 (Miss. 1975)).

¶62. The chancery c ourt n o ted that it had considered the f a c tors set f

o rth in S ection 11-1-65
in m aking its award. The chancery court stated that t he a ward was “reasonably a nd r ationally related t o the purpose to p unish what occurred g i v i n g r i se to the award and to deter its repetition” a nd that t he “evidence clearly s u pports an ongoing n e e d t o d e t e r W atson and others f r o m e n g a g i ng i n f

raudulent prof

it taking at t he cost of the p ublic trust, t he public
f unds, t he program itself a nd the benef iciaries o f t h e p r o gram , who

. . . are already at a disadvantage in their respective lif e circum stances.” The chancery court f urther explained that W atson’s conduct was clearly reprehensible a nd h ad continued f o r a l ong period of tim e, and that W atson clearly was aware o f the m isconduct and had attem pted to concea l its actions. ¶63. The chancery court applied the applicable law t o t he evidence. W atso n d o es argue that the c o urt based its decision largely on inadm issible and/o r i r r e l e v ant docum ents of corporations independent o f W atson. However, the record does n ot support t h e a rgum ent that the decisi o n w a s b a s ed largely on these docum ents. Further, the docum ents were relevant to issues bef

ore the court including, b ut not lim ited t o, “m arketing the s p r e a d ” by
W a tson and others in the pharm aceutical industry

. This a r gum ent is w i t h o ut m erit. The punitive dam ages award is af f irm ed.

3 6CONCLUSION

¶64. For the reasons stated above, the judgm ent of the chancellor is a f f irm ed on both direct appeal and cross-appeal. ¶65. ON DIRECT APPEAL: AFFIRMED. ON CROSS-APPEAL: AFFIRMED.
RANDOLPH A N D K ITCHENS, P.JJ., KING, MAX WELL A ND BEAM, JJ., C O NCUR. C OLEMAN, J., DISSENTS WITH S EPARATE WRITTEN OPINI O N JOINED BY ISHEE, J. WALLER, C.J., N OT PARTICIPATING. COLEMAN, JUSTICE, DISSENTING: ¶66. T h e m ajority af

f irm s the trial court’s award and f inding of f

raud that i s b a s e d o n a f raudulent statem e nt neither proven nor alleged but, rather, craf ted f or the f irst tim e by

the trial court in its dispositive o pinion. Moreover, the trial judge acknowledged in the opinion that, in order to im

pose liability against W atson, he disregarded t he law applicable to f raud and rested his verdict on equitable considerations. The chancellor e r red in doing so; equity

m ust f ollow the law. The chancellor applied the wrong legal standard to the State’s claim s

m ade pursuant to the Consum er Protection Act. Accordingly and with respect, I dissent.
I. The State’s com m o n-law fraud claim f ailed as a m atter of law . ¶67. The State’s com m o n-law f raud c laim f

ailed as a m atter of l a w p u r s u a n t t o the trial judge’s own f

indings. T h e statem ent a lleged a nd p roved by the State to b e f alse was known by the State to be f

alse. Only by engineering a new, allegedly f alse statem ent and p redicating the f inding of liability upon i t was the t rial court able to f i nd W atson l iable, b u t t h e S t a te neither alleged nor p roved that W a tson ever actually m ade the new, a llegedly f alse statem ent.

3 7A. The State bore the burden of proving all nine elements of common-law fraud by clear and convincing evidence. ¶68. In order to succeed on a claim of f raud, a party m

ust prove b y clear and convincing evidence e a ch of the f

ollowing n ine elem ents: ( 1) a representation; ( 2) its f a lsity ; (3) its

m ateriality ; (4) the speaker’s knowledge of its f alsity or i gnorance o f its truth; (5) his intent that it should be acted on b y the person in a m anner reasonably contem plated; (6) the hearer’s ignorance of its f

alsit y ; ( 7) the hearer’s reliance on its truth; (8) the hearer’s r ight to rely thereon; and (9) the hearer’s consequent and p roxim ate injury

. Trim v . Trim , 33 So. 3d 471, 478 (Miss. 2010).
B. T h e representation alleged and proven by the State to satisfy the first e l e m e nt of its fraud claim was the Average W holesale Price o

f W atson’s drugs. ¶69. The S tate recorded the f i n a l i t e r a t i on of its c laim s against W atson in its Second
Am ended Com

plaint (as to W atson Pharm aceuticals

. . . ). There, the St a t e a l l e g ed that
W a tson had m isrepresented t he average wholesale p rice of its drugs. The State alleged that
W a tson m isled “the S tate of M i s s i ssippi about t he Average W holesale Prices of [ its] drugs.

. . ,” and that the A v e r a g e Wh olesale Price was not the “actual prices at which [ W atson’s] drugs were g enerally and c u r r e ntly available in the p harm aceutical

m arketplace.

. . .” The State alleged that W a t s o n e n g a g e d in “the ty pical generic drug industry practice of setting or publishing AW P with or without r ef erence to t he anticipated wholesale price of the product and then sim ply f ailing or declining to correct that price as the

m arke t d r o p s .” Under the s ection of the Second Am ended Com plaint detailing the f

raud
3 8a l l e gations, the State alleged, “W atson and i ts related entities knew that the [ Avera g e

W h olesale Price] inf

orm ation provided and caused to be reported was f alse.” ¶70. Claim s sounding in f r aud m ust be pleaded with particularity . Miss. R. Civ. P. 9(b). “[ T]he circum stances constituting the f r aud shall be s tated with particularity

. Fraud will n ot be inf

erred or presum ed and m a y not b e c h a r g e d in general term s. The circum stances of the alle g e d f r a ud such a s the tim e, place a nd contents of any false representations or conduct m u st be stated.” Brabham v. Brabham , 483 So. 2d 341, 342 (Miss.1986) (c i t i n g M i s s. R. Civ. P. 9(b); McMahon v. McMahon , 2 4 7 M i s s . 822, 157 So. 2d 4 94, 495 (1963); V. Grif f ith, Mississippi Chancery Practice § 589 (2d ed. 1950)). Allen v. Mac Tools, Inc. , 671 So. 2d 636, 642 (Miss. 1 996) (em phasis added). A plaintif f alleging f r aud m ust include the alleged ly f alse s tatem ent in the com plaint. In the case sub judice , the statem e nts alleged by the State to be f

alse were the average wholesale prices of the various generic drugs it of f ered. Pu r s u a n t to the language of t he com plaint, discussed above, W a tson told the State, t hrough the reporting interm ediary , that the average wholesale price of Drug A was $ X

. The statem ent was repeated and m ade over and over a g a i n a s to each drug and each instance of r eporting, and it was t he statem ent alleged and proved by the State at trial in satisf

a ction of the f

irst elem ent of

f raud. ¶71. Af ter the trial, th e c h a n c e l l o r wrote, “The State introduced substantial e vidence in support of its position that [ the Departm ent of Medicaid] understood that the t erm [ Average
W h olesale Price] m eans just what it say s: t he Average W holesale P rices paid to W atson by retailers f or the drugs at issue.” The chancellor listed the proof which included, inter alia , the plain m eaning of Average W holesale Price and various publications that def ine Average

3 9W h olesale Price as an average of wholesale prices paid by retailers.
C. The evidence showed, and the trial judge found, that the plaintiff State of Mississippi k

new that the statement at issue was false, at which point the State’s common-law fraud claim failed as a matter of law. ¶72. On appeal, W atson m ak e s argum ents as t o why the proof at t rial f ailed to establish several of the elem ents of the S t a t e ’ s c l a i m f or com m on-law f

raud. However, the m ost

co mp e l l i n g argum ent centers around the sixth elem ent, the hearer’s ignorance o f the f alse nature of the statem ent. ¶73. In his f

inal opinion, the chancellor who p resided over the t rial and heard t he evidence wrote, Af te r c aref ully reviewing all of the evidence subm itted by the parties on the issue of the m eaning of [ Average W holesale Price] a nd m o re i mp o r t a n tly , W a tson’s and [ the Departm ent of Medicaid’s] understanding of the m eaning of [ Average W holesale Price], the evidence establishes that both W atson and [ the Departm ent] understood that W atson’s [ Average W h o l e s a l e Prices]

. . . t h a t were relied upon b y [ the Departm ent] in determ ining i ts estim a t e d acquisition c o s t r e i m

bursem ent f

or W atson’s drugs were not true average of wholesale prices c harged by W atson to retailer s f or its particular drug products. The above-quoted f

inding by the c hancellor ended t he State’s f r aud claim – f

ull s top. Af

ter identif y ing the State’s alleged representation and discussing t he proof that led hi m t o f i nd that the representation was f alse, t he trial judge u nequivocally f ound that the Departm ent of Medicaid knew it was f

alse. A s a m atter of law, the f inding should have been the end of the
State’s f raud claim , and a v erdict in f a vor of W atson should have been entered because the State wholly

f ailed to prove the sixth elem e nt.

4 0D. The trial judge erred when he invoked t he equitable power of the court to reformulate the representation alleged by t he State to satisfy the first element of its fraud claim

. ¶74. Af ter acknowledging that the State knew f ull well that the Average W holesale Prices supplied by W atson were not actually representative o f the average prices paid b y pharm acies
f or t he drugs p roduced by W atson, the chancellor nevertheless em barked u pon a exploration of the plain m e aning o f the words Average W holesale Price and c oncluded that the State was entitled to believe t hey m eant, w ell, a verage wholesale price. However, t he cha n c e llor’s exploration of the m eaning contradicts t he conclusion he reached earlier when, in the abovequoted and clear l anguage, h e f ound that the S tate already knew Average W holesale Price did not m e an average wholesale price. ¶75. The chancellor went on to provide the f ollowing explanation: Finally , Chancery Courts a re Courts of Equity

. The “Chancellor[ ’]s rem edial powe r s are m arked by plasticity

. Equity jurisdiction perm i ts innovation t hat justice m ay be done.” Hall v. Wood , 443 So. 2d 834, 842 ( Miss. 1983). In the opinion o f the C ourt, adopting the m eaning of t he A verage Wh o l e s a le Price that W atson proposes would be inequitable, and the Court declines to do so.
In other words, af

ter m aking f

actual f indings f atal t o the State’s claim of f r aud, which is a clearly de f

i n ed legal claim with known elem ents, the chancellor u ntethered his ultim ate f inding of liability f

rom t he controlling l aw by claim ing the authority in equity to disassociate his d eterm ination f

rom the com m on-law elem ents of f raud. W hen th e c h a n c ellor took the above-described step, he e rred a n d wrongly based a m ultim illion-dollar dam a ges award against the def

endant on a claim

never m ade and not cognizable in our law.

4 1¶76. Equity f ollows the law; equity must f ollow the law. Joel v. J

oel , 43 So. 3 d 424, 430 (¶ 20) (Miss. 2010). Courts of equity cannot ignore or change u nam b iguous legal principles

to provide relief where the law f orbids it. In re Estate of

M iller , 840 So. 2d 703, 708 (Miss. 2003). I f

ind persuasive the r easoning of the u n a n im ous Mississippi Court of Appeals in Mosley v. Triangle Townhouses, LLC , 1 70 S o. 3d 1 251 (Miss. C t. App. 2015). There, the plaintif f sued f or specif ic perf orm ance and asked the chancery court t o o rder t he def endant

t o p a y h i m “ a f

air and equitable f

inder’s f ee if he f ound a b uy er” f

or the def

endant’s apartm ent com

plex. Mosley , 170 So. 3d at 1252 (¶ 3). However, the p l a i n t i f f h a d no real estate broker’s license and Mississippi’s statutory law f orbade him

f rom recovering such a
f ee. Id. at 1252 (¶ 5). T he plaintif f argued, “[ E]quity f

ollows the law as f

ar as the law goes in s ecuring t he rights of t he parties and no f urther. W hen the law stops short o f securing this object, equity continues t h e rem edy until c o m plete justice is done.” In other words, the plaintif f a r gued that, despite the bar to recovery presented b y the statute, the court should be able to utilize its equitable powers to provide him with a rem edy

. ¶77. The Court of Appeals f latly rejected his argum e nt, writing, “This is not a case where the law sim

p ly f ails to go as f

ar as justice requires. Instead, th i s i s a n a r e a w here the law actually p laces a roadblock p r e v e n t i n g equity f rom going any f

urther.” Id. at 1254 (¶ 17).
In the case sub judice , as in Mosley , the law on f raud provides a roadblock, because the State

cannot and d id not prove every elem ent of its claim

. See M agniac v. Thom son , 56 U.S. 281,
299 (1853) (“That w herever t h e r ights or the situation of parties are clearly def ined and

4 2established by law, equity

has no power to change or unsettle those rights or that situation, but in all such instances the ma x im equitas sequiter legem is strictly applicable.”). The chancellor erred when he cited equity to reach a result the law f orbids.
E. No e vidence supports an award against W atson f or common-law fraud based on the chancellor’s reformulation of the a lleged representation. ¶78. Even if equitable c onsiderations a llowed t he c hancellor to f ashion relief denied by the
f ailure of the State to prove the elem ent s o f c o mmo n - l aw f raud, no e vidence exists in the record to support an award of f raud under the chancellor’s revised version of the allegedly
f als e representation. The representation upon which t he chancellor based his liability d e t e rm ination was that the Average W holesale Price was “predictably r elated” to averag e

m arket prices, as h e put it in the section of his opinion d iscussing the C onsum er P rotection
Act. On appeal, W atson contends that the State never provided a ny evidence that it h ad m ade
any such statem ent. In its responsive brief , the State does not identif y any testim ony or other evidence otherwise. T he very f irst elem ent of a f

raud c l aim is that a representation be m ade, and the claim

m ust f ail at the outset absent evidence of a representation.
II. The c hancellor erred by utilizing an outdated standard for f inding Watson liable pursuant to the Mississippi Consum e r Protection Act. ¶79. The c hancery court determ ined that W atson had violated t he Mississippi Consum er Protection Act. At issue is Mississippi Code S e c t i o n 7 5 -24-5(1), which prohibits “unf air

m ethods of com

petition af

f ecting com m erce and unf air or deceptive trade practice s i n or af f ecting c om m erce.” Section 75-24-5(2) provides that the f ollowing are “unf

air m ethods

4 3of com

petition and unf

air or deceptive trade practices o r a c t s ” a n d are prohibited: “Representing that goods or services have sponsorship, a p p r o v a l , c h a

r a c t e r i s t i c s , ingredients,

uses, benef

its, or q uantities t hat they do not have or that a person h as a sponsorship, approval,

s t atus, af f iliation, or connection that he does not have;” and “ Misrepresentations of f act concerning the reasons f

o r , e xistence of

, o r am ount of price reductions.” Miss. Code Ann. §§ 75-24-5(2)(e),(k) (Rev. 2016). The chancery court provided six c ases f r om other jurisdictions in which other court s “have determ ined that reporting inf l ated [ average wholesale prices] in the m anner W atson adm ittedly did in this case, constitutes a deceptive and u nf air trade practice in violation of consum er protection laws substantial[ ly ] identical to Mississippi’s [ Consum er Protection Act]. ¶80. The chancery court expl a i n ed that Mississippi’s Consum er P rotection Act does not provide a def

inition of “unf

air or deceptive trade practice[ ;]” theref ore, it utilized guidance
f rom the Federal Trade C om m is s i on and f ederal court precedent o f analogous f ederal

statutes. The chanc e r y c o u r t ’ s opinion relies on FTC v. Raladam Co. , 316 U.S. 149, 152 (1942), in which the United States Suprem e Court determ ined that a particular act or practice is deceptive or unf

air i f it h as t he capacity o r t endency to deceive. R e j e c t i n g W atson’s
argum ent that the case addressed regulations regarding advertisem ents of reductions of f list prices and was inapplicable, the chancery court cited In Re: Giant Food, Inc. , 61 F.T.C. 326 (1962), to explain that “FTC regulati ons regarding advertisem ents f o r r eductions of

f list prices m aintain that a particular list price ‘will not b e d e e me d f i ctitious if it is the price at

4 4which substan t i a l ( that i s n o t isolated or i nsignif icant) sales are m ade’ but that one ‘signif icantly in excess of the highest p rice at which substantial sales in the trade area are

m ade’ is m isleading.” Finally , the chancery court cited a Massachusetts district court case wherein a sim i lar argum ent to W atson’s sticker o r list price argum e nt was m ade. In In Re: Lupron , 295 F. Supp. 2d 148, 168 (n.19) (D. Mass. 2003), the district court stated: “There is a dif f erence between a sticker price and a sucker price. If one were conf ronting a m odest

m ark up of the a ctual [ average w holesale price]

. . . i ntended to m ake s ales of the drug f or the treatm ent of

Medicare patients com m ercially viable

. . . , it is unlikely

that there would have been a governm ent investigation of Def en d a nts’ m arketing practices.” Based on the above cases, the chancery court concluded t hat “W a tson’s c onduct in c ausing to be p ublished [ average wholesale prices] that have no predictable relationship to what custom e rs pay f or its drugs while knowing Mississippi relied on this inf orm ation in deter mi n i n g [ e stim ated acquisi t i o n cost] is an unf air and deceptive t rade or practice within the m eaning of Mississippi’s Consum er Protection Act.” ¶81. W a tson a rgues t hat the chancery court e r red in apply ing the “capacity or tendency to deceive” test, as it i s outdated and has been replaced b y the target audience test adopted by the Federal Trade Com m ission. According t o the Feder a l T rade Com m i ssion’s Policy
Statem ent on Deception, 103 F .T.C. 110 (1983), a court f irst m u st d eterm i ne whether there has been a representati o n , om ission, or practice likely t o m islead. Then, the practice m ust be exam ined f

rom the perspective of a consum er a cting reasona b l y i n the circum stances.

4 5Finally , the representation, om ission, or practice m ust be m aterial. W atson f urther explains that courts have rejected unreasonable interpretations by m em bers of a target audience. ¶82. According to W a tson, “ Mississippi Medicaid utilized published ‘[ average wholesale prices]’ with c om

plete understanding of its ind u s t r y - w ide m eaning, again as e v idenced by its own def

inition and its consistent practice of discounting of f p ublished [ average wholesale prices].” W atson argues that its conduct was n ot m a t erial b ecause no evidence was presented that Medicaid would have acted d if f erently had it been aware of a f alsity , a prem i se which is supported by the f

act t hat W atson had not changed its m e t hodology even af ter f iling suit or appearing f

or oral argum e nts held in the course of the instant appeal. ¶83. W a tson’s conduct wa s n o t a v i o l ation of Mississippi’s Consum er Protection Act.
M ississippi Code Section 75-24-3(c) provides, “It is the intent of the Legislature t h a t i n construing what constitutes u nf a ir or deceptive trade practices that the c ourts w ill be guided by the interpretations given by the Federal T rade C om m ission and the f edera l c o u r t s t o Section 5(a)(1) of t h e F e d e r a l Trade Com m ission Act (15 U.S.C.S. 45(a)(1)) a s f rom t im e
to tim e am ended.” Theref o r e, the above, newer Federal Trade Com m i ssion test is required and not t he test relied upon by the cha n c e r y c o u r t

. Courts have no discretion, but m ust f ollow constitutional statutory directives. Stockstill v. State , 854 So. 2d 1017, 1023 (¶ 13) (Miss. 2 003) (citing Anderson v. Lam bert , 494 So. 2d 370, 372 (Miss. 1986) (citing Baker

v. S tate , 327 So. 2d 288 (Miss. 1976); C arter v. Harrison Cty. Election Com m ’n , 183 So. 2d 630 (Miss. 1966); B eard v. Stanley , 205 Miss

. 7 2 3 , 3 9 S o . 2d 3 17 (1949))). As the

4 6Stockstill Court wrote, “Our prim ary objective when construing statutes i s t o adopt that

interpretation which will m eet the true m eaning of the Legislature.” Stockstill , 854 So. 2d

at 1023 (¶ 13) (citations o m itted). W hen i t com es to the question of how courts should def ine unf air trade practices, t h e L e gislature has m ade its intent c ry stal clear in Section 75-24-3;
Courts m ust use the Federal Trade Com m ission interpretations. ¶84. In In re Cliffdale , 103 F.T.C. 110 (1984), the Trade Com m ission explained: Consistent with its Policy Statem ent on D e c eption, i ssued on O c t o b er 14, 1983, the Com m i ssion will f ind a n a ct o r p ractice deceptive if , f irst, there i s a representat i o n , om ission, or practice that, second, is l ikely to m islead consum ers acting reasonably under the c i r c u ms tances, and t hird, the representation, om ission, o r practice is m a terial. T hese elements a rticulate the factors actually used in most ea[ r ] lier C o mmission cases identifying whether or not an act or practice was deceptiv e , even though the language used in those cases was often couched in such t e r m s as “ a tendency and capacity to deceive.” (Em phasis added.) Thus, the chancellor applied an inappropriate legal standard, as t he above

test c learly is the pref

e rred test a nd is in line w i t h t h e s t a t u tory directive. Because the chancellor applied the wrong legal standard, I would reverse and rem and f or the application of the correct one.
III. Conclusion ¶85. The trial court’s f inding acknowledging that t he St a t e k n e w o f t h e f a l sity of the allegedly f

raudulent s tatem ents def

eats the State’s com m on-law f raud claim as a m atter of law. Both the com

p ensatory and punitive d am ages awarded t o the State based on the

com m on-law f

raud claim should b e reversed. In contravention of the applicable statute, the

4 7trial court em ploy ed the wrong legal standard to the State’s claim that W a tson violated the Mississippi Consum er Protecti o n A c t

. I would r everse a nd render judgm ent in f avor of
W a tson as to the State’s com m on-law f raud claim and reverse a n d r em and t h e C o n s u mer Protection Act claim

f o r the trial court to apply the correct legal standard. ISHEE, J., JOINS THIS OPINION.

4 8