FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PAINTERS AND ALLIED TRADES 

DISTRICT COUNCIL 82 HEALTH CARE 

FUND, third-party healthcare payor 

fund; ANNIE M. SNYDER, a 

California consumer; RICKEY D.

ROSE, a Missouri consumer; JOHN 

CARDARELLI, a New Jersey 

consumer; MARLYON K. BUCKNER, a 

Florida consumer; SYLVIE BIGORD, a 

Massachusetts consumer, on behalf 

of themselves and all others similarly 

situated,

Plaintiffs-Appellants,

v.

TAKEDA PHARMACEUTICALS 

COMPANY LIMITED, a Japanese 

Corporation; TAKEDA 

PHARMACEUTICALS U.S.A., FKA 

Takeda Pharmaceuticals North 

America, Inc., an Illinois 

corporation; ELI LILLY AND 

COMPANY, an Indiana corporation,

Defendants-Appellees.

No. 18-55588

D.C. No.

2:17-cv-07223-

SVW-AS

OPINION

Appeal from the United States District Court

for the Central District of California

Stephen V. Wilson, District Judge, Presiding
2 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Argued and Submitted June 6, 2019

Seattle, Washington

Filed December 3, 2019

Before: Carlos T. Bea, Jacqueline H. Nguyen,

and Paul J. Watford*, Circuit Judges.

Opinion by Judge Bea

SUMMARY**

Racketeer Influenced and Corrupt Organizations Act

The panel reversed the district court’s judgment 

dismissing civil RICO claims under Fed. R. Civ. P. 12(b)(6) 

for lack of RICO standing and remanded for further 

proceedings.

Plaintiffs brought a putative class action against 

pharmaceutical companies, alleging that the companies 

refused to change the warning label of their drug Actos or 

otherwise inform the public after they learned that the drug 

increased a patient’s risk of developing bladder cancer. 

Plaintiffs were five patients and a third-party payor (“TPP”) 

of health and welfare benefits to covered members and their 

* Judge Watford was drawn to replace Judge Rawlinson. Judge 

Watford has read the briefs, reviewed the record, and watched the 

recording of oral argument held on June 6, 2019.

** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 3

families. Plaintiffs sought to represent a class of similarly 

situated patients and TPPs who paid or incurred costs for 

Actos. They alleged that defendants conspired to commit 

mail and wire fraud by intentionally misleading physicians, 

consumers, and TPPs to believe that Actos did not increase 

a person’s risk of developing bladder cancer. Plaintiffs 

sought to recover economic damages under RICO for the 

payments they made to purchase Actos, which they allege 

they would not have purchased had they known of the 

bladder cancer risk. The district court held that plaintiffs 

failed to allege that their harm was “by reason of” the alleged 

RICO violation, as required for RICO standing, because they 

failed to allege the claimed RICO violation was the 

proximate cause of their claimed losses.

Agreeing with the First and Third Circuits, and 

disagreeing with the Second and Seventh Circuits, the panel 

held that plaintiffs sufficiently alleged proximate cause. 

Supreme Court precedent requires a direct relationship 

between the injury asserted and the defendant’s conduct. 

The Supreme Court applies the Holmes factors, considering 

(1) whether it would be too difficult to ascertain what 

damages are attributable to defendants’ alleged RICO 

violation, (2) the risk of multiple recoveries by plaintiffs at 

different levels of injury from defendants’ acts, and 

(3) whether holding defendants liable justifies the general 

interest of deterring injurious conduct. The panel concluded 

that plaintiffs sufficiently alleged a direct relationship, and 

the Holmes factors weighed in favor of permitting their 

RICO claims to proceed. The panel thus held that patients 

and TPPs suing pharmaceutical companies for concealing an 

allegedly unknown safety risk about a drug can satisfy 

RICO’s proximate cause requirement. The panel concluded 

that, although prescribing physicians served as 

intermediaries between defendants’ fraudulent omission of 
4 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Actos’s risk of causing bladder cancer and plaintiffs’ 

payments for Actos, prescribing physicians did not 

constitute an intervening cause to cut off the chain of 

proximate causation. In addition, plaintiffs adequately 

alleged reliance on defendants’ alleged misrepresentations 

and omissions.

The panel addressed additional claims in a concurrently 

filed memorandum disposition.

COUNSEL

R. Brent Wisner (argued) and Michael L. Baum, Baum 

Hedlund Aristei & Goldman PC, Los Angeles, California; 

Christopher L. Coffin and Nicholas R. Rockforte, Pendley 

Baudin & Coffin LLP, New Orleans, Louisiana; for 

Plaintiffs-Appellants.

Jonathan S. Franklin (argued), Norton Rose Fulbright US 

LLP, Washington, D.C.; Darryl W. Anderson and Geraldine 

W. Young, Norton Rose Fulbright LLP, Houston, Texas; for 

Defendants-Appellees Takeda Pharmaceuticals Company 

Limited and Takeda Pharmaceuticals U.S.A.

Randall L. Christian (argued) and Susan E. Burnett,

Bowman and Brooke LLP, Austin, Texas, for DefendantAppellee Eli Lilly and Co.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 5

OPINION

BEA, Circuit Judge:

Today we confront an issue of first impression in our 

circuit, and one that has caused an apparent circuit split 

among four of our sister circuits: In civil actions brought 

under the Racketeer Influenced and Corrupt Organizations 

Act (“RICO”) against pharmaceutical companies, do 

patients and health insurance companies who reimbursed 

patients adequately allege the required element of proximate 

cause where they allege that, but for the defendant’s omitted 

mention of a drug’s known safety risk, they would not have 

paid for the drug?

I. FACTUAL BACKGROUND

This appeal arises from a putative class action against 

Takeda Pharmaceuticals USA, Inc., its parent company 

Takeda Pharmaceutical Company Ltd., and Eli Lilly & Co. 

(collectively, “Defendants”). Together, Defendants 

developed and marketed a drug named Actos. Actos was 

intended to lower blood sugar in type 2 diabetics. 

Defendants obtained Food and Drug Administration 

(“FDA”) approval for Actos in 1999. The plaintiffs allege 

that despite learning through multiple studies over the next 

several years that Actos increased a patient’s risk of 

developing bladder cancer, Defendants refused to change 

Actos’s warning label or otherwise inform the public of such 

risk. Further, the plaintiffs allege that Defendants convinced 

the FDA that studies revealing that Actos increased the risk 

of bladder cancer were wrong. Defendants are alleged to 

have actively misled prescribing physicians, consumers, and 

third-party payors into believing that Actos did not increase 

a person’s risk of developing bladder cancer. Defendants did 
6 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

all of this, the plaintiffs allege, simply to increase their 

profits from the sale of Actos.

On September 17, 2010, after further studies of Actos 

revealed an increased risk of bladder cancer, the FDA 

announced that it was conducting a safety review of Actos. 

On June 15, 2011, the FDA released an official warning to 

the public that Actos may be linked to bladder cancer in 

patients who use it over prolonged periods of time. 

Following the FDA’s official warning, Defendants changed 

Actos’s warning label to warn of a bladder cancer risk. The 

sales of Actos are alleged to have dropped shortly after the 

FDA issued its alert in 2010, and then again when the FDA 

issued its official warning in 2011, by a total of 

approximately 80%.

A group of patients who developed bladder cancer after 

ingesting Actos and their family members then brought 

personal injury and wrongful death claims against 

Defendants in the Western District of Louisiana. After a 

37-day trial in 2014, the jury returned a verdict in favor of 

the plaintiffs, but the parties later agreed to a global 

settlement program for all eligible personal injury claimants 

who used Actos before December 1, 2011 and had been 

diagnosed with bladder cancer. In re Actos (Pioglitazone) 

Prods. Liab. Litig., MDL No. 6:11-MD-2299, 274 F. Supp. 

3d 485, 503 (W.D. La. 2017).1

The present action was also originally filed in the 

Western District of Louisiana. But in late 2017, the parties 

stipulated to transfer the case to the Central District of 

California. The plaintiffs in this case comprise five 

1 No argument has yet been made in this action that the settlement 

encompassed the plaintiffs’ RICO claims or mooted them.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 7

individual patients from different states (collectively, 

“Patients”) and Painters and Allied Trades District Council 

82 Health Care Fund (“Painters Fund”) (together, 

“Plaintiffs”).

Painters Fund is a third-party payor (“TPP”) of health 

and welfare benefits to covered members and their families. 

As a TPP, Painters Fund reimburses its members’ claims for 

drugs, including Actos, submitted by pharmacies and 

healthcare providers covered by its plan. Painters Fund 

“relies on each member to submit claims for prescription 

medications that are medically reasonable and necessary for 

treatment,” with the expectation that patients and their 

prescribing physicians will “make informed decisions about 

which drugs will be prescribed and, in turn, submitted to 

[Painters Fund] for reimbursement.” Painters Fund “has the 

authority to determine which drugs are covered under its 

plan, although, [it] entrusts the administration of claims and 

formulary determinations to Prime Therapeutics, LLC, 

based in Eagan, Minnesota.”2

Patients are individuals with type 2 diabetes who were 

prescribed Actos by their physicians and who took Actos to 

help lower their blood sugar. Each patient paid an out-ofpocket sum for Actos. Patients each allege that neither they 

nor their physicians knew about Actos’s risk of bladder 

cancer when they began taking the drug and that they 

immediately stopped taking Actos once they learned that it 

increased their risk of developing bladder cancer. Patients 

also allege that they never would have purchased Actos had 

they known that it increased their risk of developing bladder 

cancer, and thus, that they never would have submitted 

2 Prime Therapeutics, LLC is not a party to this litigation and is not 

discussed elsewhere in the complaint.
8 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

claims for reimbursement for purchases of Actos to their 

respective TPPs. Only one patient, Annie Snyder from 

California, alleges that prior to starting her prescription, she 

read and relied upon the Actos label. But Plaintiffs generally 

allege that Patients relied on Defendants’ misrepresentations 

about Actos, by act or omission, in purchasing the drug, that 

physicians relied on such misrepresentations in prescribing 

Actos for their patients, and that TPPs relied on such 

misrepresentations in agreeing to pay for Actos prescriptions 

for their members.

Plaintiffs seek to represent a class of similarly situated 

patients and TPPs “who paid or incurred costs for the drug 

Actos, for purposes other than resale, between 1999, i.e., 

when the drug was approved, and the present,” excluding 

“those consumers who are presently seeking a personal 

injury claim arising out of their use of Actos.” Plaintiffs 

argue that Defendants conspired to commit mail and wire 

fraud under 18 U.S.C. §§ 1341, 1343 by intentionally 

misleading physicians, consumers, and TPPs to believe that 

Actos did not increase a person’s risk of developing bladder 

cancer. Plaintiffs seek to recover economic damages under 

RICO for the payments they made to purchase Actos under 

the assumption that it was a safe drug, which they allege they 

would not have purchased had they known that Actos 

increases a person’s risk of developing bladder cancer (this 

is called the “quantity effect theory” of damages).3 Plaintiffs 

3 Plaintiffs originally alleged a second damages theory—that they 

overpaid for Actos prescriptions because Defendants inflated the price 

of Actos under the guise that Actos did not increase a person’s risk of 

developing bladder cancer—called the “excess price theory.” But 

Plaintiffs have abandoned their excess price theory for damages on 

appeal.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 9

do not, however, seek to recover economic or non-economic 

damages caused by any person’s actual ingestion of Actos.

The district court dismissed with prejudice Plaintiffs’ 

RICO claims under Federal Rule of Civil Procedure 12(b)(6) 

in a single paragraph, holding that Plaintiffs failed 

adequately to allege facts sufficient to establish that 

Defendants’ acts and omissions were the proximate cause of 

their claimed damages. This appeal followed.4

II. ANALYSIS

A. Standard of Review

We review de novo the district court’s grant of a Rule 

12(b)(6) motion to dismiss. Bain v. Cal. Teachers Ass’n, 

891 F.3d 1206, 1211 (9th Cir. 2018). We take all of 

Plaintiffs’ factual allegations as true, and we may affirm the 

dismissal “only if it appears beyond doubt that [Plaintiffs] 

can prove no set of facts in support of [their] claim[s] which 

would entitle [them] to relief.” Id. (internal quotation marks 

omitted).

B. Plaintiffs’ RICO Claims

The crux of Plaintiffs’ complaint rests on their civil 

RICO claims. Although the RICO statute was originally 

enacted to combat organized crime, “it has become a tool for 

4 Plaintiffs also brought claims under state consumer protection laws 

of California, Florida, Massachusetts, Minnesota, Missouri, and New 

Jersey. In a separate order, the district court dismissed all of Plaintiffs’ 

state law claims. With the exception of their Massachusetts claim, 

Plaintiffs also appeal the dismissal of their state law claims. We address 

those claims in a concurrently filed memorandum disposition.
10 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

everyday fraud cases brought against respected and 

legitimate enterprises.” Sedima, S.P.R.L. v. Imrex Co., 

473 U.S. 479, 499 (1985) (internal quotation marks 

omitted). Broadly speaking, there are two parts to a civil 

RICO claim. The civil RICO violation is defined under 

18 U.S.C. § 1962,5 while “RICO standing” is defined under 

18 U.S.C. § 1964(c). The district court dismissed Plaintiffs’ 

RICO claims only for lack of standing, and thus we address 

only that portion of Plaintiffs’ RICO claims.

To allege civil RICO standing under 18 U.S.C. 

§ 1964(c), a “plaintiff must show: (1) that his alleged harm 

qualifies as injury to his business or property; and (2) that 

his harm was ‘by reason of’ the RICO violation.” Canyon 

County v. Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 

2008). Defendants do not dispute that Plaintiffs have alleged 

an injury to their business or property. Rather, as the district 

court held, Defendants argue that Plaintiffs have failed to 

allege that their harm was “by reason of” the alleged RICO 

violation because they have failed to allege the claimed 

RICO violation was the proximate cause of their claimed 

losses.

1. Supreme Court Precedent

The Supreme Court has interpreted the phrase “by reason 

of” in 18 U.S.C. § 1964(c) to require, as elements for a civil 

RICO recovery, both proximate and but-for causation.6

 

5 To recover for a civil RICO violation, “a plaintiff must prove that 

the defendant engaged in (1) conduct (2) of an enterprise (3) through a 

pattern (4) of racketeering activity.” Chaset v. Fleer/Skybox Int’l, LP, 

300 F.3d 1083, 1086 (9th Cir. 2002) (citing 18 U.S.C. § 1962).

6 Defendants do not argue in this appeal that Plaintiffs’ allegations 

fail to allege but-for causation.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 11

Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 268 (1992). 

The requirement of proximate cause seeks to “limit a 

person’s responsibility for the consequences of that person’s 

own acts.” Id. Put another way, “the proximate-cause 

requirement generally bars suits for alleged harm that is ‘too 

remote’ from the defendant’s unlawful conduct.” Lexmark 

Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 

133 (2014). Thus, it “demand[s] . . . some direct relation 

between the injury asserted and the injurious conduct 

alleged.” Holmes, 503 U.S. at 268.

This “direct relation” requirement is based upon three 

practical factors, stated in Holmes:

First, the less direct an injury is, the more 

difficult it becomes to ascertain the amount 

of a plaintiff’s damages attributable to the 

violation, as distinct from other, independent, 

factors. Second, quite apart from problems 

of proving factual causation, recognizing 

claims of the indirectly injured would force 

courts to adopt complicated rules 

apportioning damages among plaintiffs 

removed at different levels of injury from the 

violative acts, to obviate the risk of multiple 

recoveries. And, finally, the need to grapple 

with these problems is simply unjustified by 

the general interest in deterring injurious 

conduct, since directly injured victims can 

generally be counted on to vindicate the law 

as private attorneys general, without any of 

the problems attendant upon suits by 

plaintiffs injured more remotely.
12 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Id. at 269–70 (internal citations omitted). The Supreme 

Court has applied the Holmes factors, along with its direct 

relation requirement, in each of its decisions addressing 

proximate cause for civil RICO claims.

In Anza v. Ideal Steel Supply Corp., the plaintiff—a steel 

mill product retailer in New York City—alleged that one of 

its retail competitors caused it economic harm by failing to 

charge customers applicable New York state sales taxes, 

thereby defrauding the New York state tax authority. 

547 U.S. 451, 457–58 (2006). This conduct, the plaintiff 

alleged, allowed the defendant to offer lower prices and 

attract more customers, which in turn caused the plaintiff to 

lose customers and profit. Id. The district court dismissed 

the plaintiff’s complaint under Rule 12(b)(6) for failure to 

plead proximate cause, but the Second Circuit vacated the 

district court’s judgment, holding that the plaintiff had 

adequately pleaded that the defendant proximately caused its 

damages. Id. at 455. The Supreme Court then reversed the 

Second Circuit’s judgment and held that the plaintiff failed 

to satisfy the requirement to allege proximate cause under 

RICO because the “direct victim of this conduct was the 

State of New York, not [the plaintiff].” Id. at 458. Indeed,

“[i]t was the State that was being defrauded and the State 

that lost tax revenue as a result.” Id. Although the plaintiff 

alleged that it suffered its own harms by losing customers 

and profits through the defendant’s failure to tax its 

customers, the plaintiff’s asserted harms were “entirely 

distinct from the alleged RICO violation (defrauding the 

state),” and thus the plaintiff’s allegations failed the 

Supreme Court’s direct relation requirement for the element 

of proximate cause. Id.

Likewise, in Hemi Group, LLC v. City of New York, the 

Supreme Court reversed the Second Circuit’s holding that 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 13

the plaintiffs had sufficiently alleged damages proximately 

caused by the defendants’ actions under RICO to survive 

dismissal under Rule 12(b)(6). 559 U.S. 1, 4–5 (2010). 

There, the City of New York (the “City”), which imposed a 

$1.50-per-pack tax on each pack of cigarettes possessed 

within New York City for sale or use, sued a New Mexico 

retailer that sold cigarettes online to residents in New York 

City. Id. at 4–6. The City alleged that the New Mexico 

retailer failed to comply with a federal law requiring out-ofstate vendors to submit customer information to the states 

into which it ships cigarettes. Id. at 4. That failure, the City 

argued, not only made it more difficult for the City to track 

down people who possessed cigarettes in New York City 

purchased elsewhere, but also constituted mail and wire 

fraud under RICO, which caused the City to lose millions of 

dollars in uncollected per-pack cigarette taxes. Id.

The Supreme Court disagreed. It held that the New 

Mexico retailer’s failure to submit customer information to 

the State of New York was too attenuated from the City’s 

loss of cigarette possession tax proceeds to satisfy the 

proximate cause allegation requirement. See id. at 11. The 

Supreme Court explained that the conduct constituting the 

alleged fraud was the New Mexico retailer’s failure to 

submit customer information to the State of New York, but 

“the conduct directly responsible for the City’s harm was the 

customers’ failure to pay their taxes.” Id. Thus, “the 

conduct directly causing the harm was distinct from the 

conduct giving rise to the fraud,” and therefore the City 

failed to satisfy the Supreme Court’s direct relation 

requirement. Id.

In contrast, in Bridge v. Phoenix Bond & Indemnity Co., 

the Supreme Court affirmed the Seventh Circuit’s reversal 

of the district court’s order dismissing the plaintiffs’ 
14 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

complaint for failure sufficiently to allege the proximate 

cause element under RICO. 553 U.S. 639, 645, 661 (2008). 

The plaintiffs were bidders at a county tax lien auction. Id.

at 643. To ensure fair distribution of tax liens during the 

auctions, the county enacted a “Single, Simultaneous Bidder 

Rule,” requiring each “tax [lien] buying entity” to bid in its 

own name and not to use agents or employees to submit 

simultaneous bids on its behalf. Id. The plaintiffs alleged 

that the defendants violated that rule by using agents to 

submit simultaneous bids on the defendants’ behalf and 

directing those agents to file false attestations that they had 

complied with the county’s rules. Id. at 643–44. The 

plaintiffs alleged that this deceptive practice resulted in the 

defendants receiving a disproportionately higher share of tax 

liens at the county auction. Id. The plaintiffs further alleged 

that as a result of this deceptive practice, they were deprived 

of their ability to obtain their fair share of tax liens at the 

county auction. Id. at 644.

The defendants countered that the plaintiffs’ alleged 

harm was too speculative to satisfy RICO’s proximate cause 

requirement because the defendants misrepresented 

information to the county, not the plaintiffs. Id. at 648. But 

a unanimous Supreme Court rejected this argument, noting 

that proximate cause is “a flexible concept that does not lend 

itself to a black-letter rule that will dictate the result in every 

case.” Id. at 654 (internal quotations omitted). Applying its 

direct relation requirement, the Supreme Court held that the 

plaintiffs’ “alleged injury—the loss of valuable liens—is the 

direct result of [the defendants’] fraud. It was a foreseeable 

and natural consequence of [the defendants’] scheme to 

obtain more liens for themselves that other bidders would 

obtain fewer liens.” Id. at 658. And unlike in Anza and Hemi 

Group, where other parties suffered more direct injuries than 

the plaintiffs, in Bridge, the county—which sold the tax liens 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 15

at prices not dependent on who was the buyer—was not 

injured. Id. Rather, the plaintiffs were the immediate 

victims of the defendants’ fraud and were best situated to sue 

the defendants. Id. Thus, the Supreme Court held that the 

plaintiffs had sufficiently alleged proximate cause under 

RICO. Id. at 661.

Under the Supreme Court’s Bridge precedent alone, we 

think Plaintiffs’ allegations satisfy the Supreme Court’s 

direct relation requirement. Here, the alleged violation is 

that Defendants actively concealed Actos’s risk of causing 

bladder cancer to sell more Actos to unsuspecting persons, 

thereby increasing Actos’s revenue. And Plaintiffs’ alleged 

injury is that they purchased Actos prescriptions for which 

they would not have paid had they been warned about 

Actos’s risk of bladder cancer. Because Plaintiffs were 

immediate victims of Defendants’ alleged fraudulent 

scheme to conceal Actos’s risk of bladder cancer, the alleged 

RICO violation (conspiracy to commit mail and wire fraud 

violative of 18 U.S.C. §§ 1341, 1343) has a direct relation to 

Plaintiffs’ alleged harm.

The Holmes factors also weigh in favor of permitting 

Plaintiffs’ RICO claims to proceed. The first Holmes factor 

tasks us with determining whether it would be too difficult 

to ascertain what damages are attributable to Defendants’ 

alleged RICO violation, as opposed to factors other than, and 

independent of, Defendants’ alleged misrepresentations. 

503 U.S. at 269. While “it is often easier to ascertain the 

damages that flow from actual, affirmative conduct, than to 

speculate what damages arose from a party’s failure to act,” 

Oregon Laborers-Employers Health & Welfare Trust Fund 

v. Philip Morris Inc., 185 F.3d 957, 965 (9th Cir. 1999) 

(internal quotation marks omitted), we are not persuaded that 

it is so difficult here that Plaintiffs should be denied the 
16 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

opportunity to prove their damages.7 We leave it to the 

district court on remand to assess Plaintiffs’ damages, if the 

litigation proceeds to that phase.

Second, we consider the risk of multiple recoveries by 

plaintiffs at different levels of injury from the defendants’ 

acts. Holmes, 503 U.S. at 269. Here, like in Bridge, and 

unlike in Anza and Hemi Group, there is no concern of 

“duplicative recoveries by plaintiffs removed at different 

levels of injury from the violation.” Bridge, 553 U.S. at 658. 

It is each individual plaintiff who paid out money for Actos 

prescriptions who now seeks recovery of those payments. 

As we read Plaintiffs’ complaint, the damages suffered by 

Patients and Painters Fund do not overlap, as it appears that 

Patients seek to recover only the dollars they paid for Actos 

out-of-pocket, for which they have not been reimbursed by 

a TPP.8

 Further, Plaintiffs’ putative class expressly excludes 

individuals who are pursuing personal injury claims, so there 

7 We note that Defendants’ argument that had Plaintiffs not taken 

Actos, they would have paid for an alternative drug to treat their type 2 

diabetes, has not fallen on deaf ears. It seems quite logical that Plaintiffs 

would have paid for a different drug to treat patients’ diabetes had they 

known that Actos increases a person’s risk of developing bladder cancer. 

But at this stage in the proceedings, we take Plaintiffs’ allegations that 

they would not have bought or paid for Actos as true. Bain, 891 F.3d 

at 1211. Plaintiffs do not allege that they would have paid for an 

alternative diabetes drug had they known Actos carries an increased risk 

of causing bladder cancer. Further, if what Defendants argue proves 

true, Plaintiffs may still be entitled to damages if the alternative drugs 

they would have paid for cost less than Actos. Plaintiffs have alleged 

there are at least three less expensive alternatives to Actos, and discovery 

may prove Plaintiffs were likely to have bought these alternatives. In 

any event, this is a damages question for another day.

8 Of course, on remand, if discovery reveals that Patients’ claimed 

damages overlap with damages claimed by Painters Fund or another 

TPP, Plaintiffs should not recover any overlapping damages.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 17

is no risk that some plaintiffs will receive overlapping 

economic and personal injury damages.

Finally, under the third Holmes factor, we consider 

whether holding Defendants liable in this case justifies the 

general interest of deterring injurious conduct or whether 

there are more directly injured victims we can count on to 

hold Defendants liable. 503 U.S. at 269–70. Here, patients 

and TPPs who paid money for Actos are the most direct 

victims of those who suffered economic injury. Although 

people who ingested Actos and developed bladder cancer 

suffered an additional and greater harm than others who paid 

for Actos but did not develop bladder cancer, this does not 

change the fact that all patients and TPPs who paid for Actos 

on the premise that it did not cause an increased risk of 

bladder cancer were allegedly defrauded by Defendants and 

suffered the same direct economic injury: payments for a 

drug which would not have been purchased if suitably 

described. Additionally, others may have been affected by 

Defendants’ alleged fraud. For instance, prescribing 

physicians who prescribed Actos for their patients may have 

watched their patients develop bladder cancer. But as far as 

we can tell from Plaintiffs’ complaint, prescribing 

physicians did not suffer an economic injury. Thus, holding 

Defendants liable for Plaintiffs’ alleged injuries advances 

the interest in deterring injurious conduct, without including 

others who did not suffer direct out-of-pocket losses.

2. Circuit Court Precedent

While our court has recognized the Supreme Court’s 

direct relation requirement and Holmes factors for RICO 

proximate cause in several cases, see, e.g., Harmoni 

International Spice, Inc. v. Hume, 914 F.3d 648 (9th Cir. 

2019); Canyon County, 519 F.3d at 972; Oregon Laborers, 
18 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

185 F.3d at 963–66,9 we have never applied it to the situation 

at issue here—whether patients and TPPs suing 

9 Oregon Laborers, the case most closely related to the present 

action in this circuit to date, is distinguishable. There, six employee 

health and welfare benefit plans sued tobacco companies and public 

relations companies under federal RICO and other antitrust and state 

laws. 185 F.3d at 961. The plaintiffs alleged that the defendants 

conspired to persuade the public that scientific studies linking smoking 

to health risks were not accurate and that the connection between 

smoking and disease was merely an “open controversy.” Id. The 

plaintiffs alleged that this wrongful conduct “resulted in more smoking, 

less quitting, and smoking of more hazardous cigarettes” among their 

plan participants, which then resulted in more disease among their plan 

participants who smoked. Id. at 962. In turn, the plaintiffs alleged, they 

suffered higher expenditures to cover their plan participants’ medical 

bills. Id.

The district court held that the plaintiffs failed to state a RICO claim 

for relief under Rule 12(b)(6), and we affirmed. Id. at 961. We held that 

the plaintiffs’ alleged injury was “indirect” and too remote to satisfy 

RICO’s proximate cause requirement. Id. at 963. We explained that “all 

of [the] plaintiffs’ claims rely on alleged injury to smokers—without any 

injury to smokers, [the] plaintiffs would not have incurred the additional 

expenses in paying for the medical expenses of those smokers.” Id. 

(second emphasis added). Instead of the plaintiffs, we reasoned, the 

smokers were the direct victims of the defendant’s alleged wrongful 

conduct. Id. at 964. Thus, under the Supreme Court’s direct relation 

requirement, we held that the alleged RICO violation was distinct from 

the plaintiffs’ alleged injury. See id. at 963–64. Therefore, the plaintiffs 

failed to allege that their damages were proximately caused by the 

defendants’ actions. See id. at 966.

Plaintiffs’ alleged injury in this case is distinct from the plaintiffs’ 

alleged injury in Oregon Laborers. There, the chain of causation from 

the defendant’s alleged misrepresentation to the plaintiffs’ alleged injury 

depended upon an independent link that required the smokers to develop 

illnesses that necessitated medical treatment, for which the plaintiffs then 

paid. But here, Plaintiffs’ alleged injury is directly related to 

Defendants’ alleged misrepresentations, as they allege that they paid 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 19

pharmaceutical companies for concealing an allegedly 

known safety risk about a drug can satisfy RICO’s proximate 

cause requirement.10 But several of our sister circuits have 

money out-of-pocket for Actos, which they otherwise would not have 

paid had Defendants not fraudulently omitted Actos’s risk of causing 

bladder cancer. Whether Plaintiffs developed bladder cancer is 

irrelevant to their claims. Thus, Oregon Laborers is distinguishable and 

does not control here.

10 The Seventh Circuit once commented that the Ninth Circuit

“deem[s] this [issue] so straightforward that [it] ha[s] issued 

nonprecedential decisions” about it. Sidney Hillman Health Ctr. v. 

Abbott Labs., 873 F.3d 574, 578 (7th Cir. 2017). Not quite. Rather, in 

In re Actimmune Marketing Litigation, we summarily affirmed the 

district court’s dismissal without prejudice of the plaintiffs’ RICO claims

where the district court held in part that the plaintiffs’ complaint failed

sufficiently to plead proximate cause for their civil RICO claim for lack 

of specificity under Federal Rule of Civil Procedure 8(a). 464 F. App’x 

651 (9th Cir. 2011) (citing In re Actimmune Mktg. Litig., 614 F. Supp. 

2d 1037, 1050–51 (N.D. Cal. 2009)). When the plaintiffs filed their 

amended complaint, they abandoned their RICO claims. See In re 

Actimmune Mktg. Litig., No. C 08-02376 MHP, 2009 WL 3740648, at *1 

(N.D. Cal. Nov. 6, 2009). Our summary affirmance of the district court’s 

decision to dismiss the plaintiffs’ RICO claims without prejudice can 

hardly be considered a decision on the merits of the issue that we deemed 

“so straightforward” as to issue a non-binding decision.

In United Food & Commercial Workers Central Pennsylvania & 

Regional Health & Welfare Fund v. Amgen, Inc., the plaintiffs sued 

Amgen, Inc. for concealing adverse test results about a drug’s off-label 

uses. 400 F. App’x 255, 257 (9th Cir. 2010). We held that the plaintiffs’ 

complaint failed to identify false statements or material omissions that 

Amgen made about the drug’s safety. Id. Further, we held that the 

plaintiffs failed to plead a cognizable theory of proximate cause for their 

civil RICO claim because the complaint “proffered an attenuated causal 

chain that involved at least four independent links”—(1) the United 

States Pharmacopeia-Drug Information (“USP-DI”)’s listing of the drug 

to be used for a certain off-label use; (2) Medicare’s decision to cover 

the drug for that off-label use; (3) third-party payors’ decision to cover 
20 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

addressed this question in similar factual scenarios and have 

reached different results, creating an apparent inter-circuit 

split. We look to their reasoning for guidance.

a. Seventh Circuit

In Sidney Hillman Health Center v. Abbott Laboratories, 

two TPPs who had paid to cover their patients’ off-label11

uses of a prescription drug named Depakote sued the drug 

manufacturer under RICO for concealing its role in 

promoting Depakote’s off-label uses to intermediaries, such 

as prescribing physicians. 873 F.3d 574, 575 (7th Cir. 2017). 

In relevant part, the district court dismissed the TPPs’ 

complaint for failure to allege that their damages were 

proximately caused by the drug manufacturer’s concealed 

off-label promotion, and the Seventh Circuit affirmed. Id. at 

575, 578.

The Seventh Circuit first noted that, in some cases, an 

injury to one person caused by wrongs against another can 

satisfy RICO’s proximate cause requirement, as the Supreme 

Court held in Bridge, 553 U.S. at 661. 873 F.3d at 576. 

However, the Seventh Circuit held that the TPPs in Sidney 

Hillman were too far removed from the alleged RICO 

the drug for the off-label use; and (4) doctors’ decisions to prescribe the 

drug for the off-label use. Id. But we never independently addressed 

whether patients and TPPs can meet RICO’s proximate cause 

requirement under the Supreme Court’s direct relation requirement and 

Holmes factors to hold pharmaceutical companies liable for mail and 

wire fraud. Further, our present case does not require as many causal 

links. And of course, because unpublished dispositions from our circuit 

are not precedential, see Ninth Circuit Rule 36-3(a), we are free to decide 

this issue in the first instance.

11 “Off-label” refers to using a drug to treat conditions other than 

those it was originally developed to treat.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 21

violation to satisfy the proximate cause requirement. Id. 

The Seventh Circuit opined that while TPPs “part with 

money . . . it is not at all clear that they are the initially 

injured parties, let alone the sole injured parties.” Id. The 

Seventh Circuit explained that patients may be the most 

directly injured parties, as they incurred financial loss (if 

they paid a copayment to receive Depakote) and personal 

injury damages if they suffered harmful effects from using 

Depakote for an unsafe off-label use. Id. Moreover, the 

Seventh Circuit noted, the “patients’ health and financial 

costs come first in line temporally; that pharmacies then send 

bills to [TPPs], which cover the remainder of the expense, 

does not make those [TPPs] the initial losers” from the drug 

manufacturer’s unlawful promotion scheme. Id. The 

Seventh Circuit opined that prescribing physicians may also 

suffer loss, though indirectly, because “[i]f a physician 

prescribes an ineffective medicine and so does not provide 

[patients] help, patients may turn elsewhere.” Id.

The Seventh Circuit next explained that physicians make 

independent decisions when prescribing patients medicine, 

and it would be difficult to disentangle which physicians’ 

decisions, if any, were influenced by the drug 

manufacturer’s unlawful promotions. Id. at 577–78. That, 

and other factors, such as the fact that some patients may 

have benefited from using Depakote for an off-label use, 

convinced the Seventh Circuit that it would be too difficult 

to calculate the plaintiffs’ alleged damages. Id. Thus, the 

Seventh Circuit held that the TPPs—“several levels removed 

in the causal sequence” from the drug manufacturer’s 

actions—could not satisfy RICO’s proximate cause 

requirement. Id. at 576–78.
22 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

b. Second Circuit

Similarly, in UFCW Local 1776 v. Eli Lilly & Co., TPPs 

and individual patients brought a putative class action for 

civil RICO fraud against the manufacturer of the drug 

Zyprexa, alleging that the manufacturer misrepresented 

Zyprexa’s side effects and effectiveness to physicians and 

promoted Zyprexa for off-label uses when there was no 

evidence that Zyprexa was effective for off-label uses. 

620 F.3d 121, 123, 129 (2d Cir. 2010). The plaintiffs alleged 

two damages theories: (1) the “excess price theory”—that 

they overpaid for Zyprexa prescriptions because the 

manufacturer relied on its misrepresentations to charge 

higher prices; and (2) the “quantity effect theory”—that they 

paid for Zyprexa prescriptions “that would not have been 

issued but for the alleged misrepresentations.” Id. The 

district court certified a class of TPPs based upon their 

excess price theory for damages, but the Second Circuit 

reversed. Id. at 123, 137.

As to the proximate cause requirement under RICO, the 

Second Circuit held that the plaintiffs’ injuries under both of 

their damages theories were too attenuated, as they “rest[] on 

the independent actions of third and even fourth parties.” Id.

at 134 (quoting Hemi Group, 559 U.S. at 15). The Second 

Circuit was not persuaded by the plaintiffs’ argument that

“the ultimate source for the information on which doctors 

based their prescribing decisions was [the manufacturer] and 

its consistent, pervasive marketing plan,” because the 

manufacturer was “not . . . the only source of information 

on which doctors based prescribing decisions.” Id. at 135 

(emphasis in original). Rather, “[a]n individual patient’s 

diagnosis, past and current medications being taken by the 

patient, the physician’s own experience with prescribing 

Zyprexa, and the physician’s knowledge regarding the side 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 23

effects of Zyprexa are all considerations that would have 

been taken into account in addition to the alleged 

misrepresentations distributed by [the manufacturer].” Id. 

Accordingly, the Second Circuit held that the plaintiffs 

failed to allege that their damages were proximately caused 

by the drug manufacturer’s wrongful conduct and reversed 

the district court’s certification order.12 Id. at 134, 136; see 

also Sergeants Benevolent Ass’n Health & Welfare Fund v. 

Sanofi-Aventis U.S. LLP, 806 F.3d 71, 90–91 (2d Cir. 2015) 

(holding that the plaintiff’s RICO claims were foreclosed by 

UFCW Local 1776, 620 F.3d at 121).

c. First Circuit

To the contrary, in In re Neurontin Marketing & Sales 

Practices Litigation, a jury awarded Kaiser Foundation 

Health Plan (“Kaiser”), a TPP, damages for the injury it 

suffered in paying for off-label Neurontin prescriptions that 

were induced by Pfizer’s (the drug manufacturer) fraudulent 

scheme to misrepresent Neurontin’s effectiveness for offlabel conditions. 712 F.3d 21, 25–26 (1st Cir. 2013). The 

district court had found that Kaiser relied on Pfizer’s 

fraudulent marketing campaign in deciding to include 

Neurontin in its formulary—a list of medications its treating 

physicians were authorized to prescribe. Id. at 28–29. The 

district court subsequently denied Pfizer’s motion for a new 

trial, and Pfizer appealed. Id. at 27.

12 The Second Circuit remanded, however, for the district court to 

consider individual claims based upon the plaintiffs’ quantity effect 

damages theory. UFCW Local 1776, 620 F.3d at 136. The Second 

Circuit noted that “while that theory cannot support class certification, it 

is not clear that the theory is not viable with respect to individual claims 

by some TPPs or other [individual] purchasers.” Id.
24 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Pfizer argued that Kaiser could not satisfy RICO’s 

proximate cause requirement as a matter of law. Id. at 34. 

But the First Circuit disagreed, holding that “Kaiser has met 

both the direct relationship and functional tests articulated in 

Holmes and its progeny.” Id. at 38. Unlike the Second and 

Seventh Circuits, the First Circuit rejected the argument that 

there were “too many steps in the causal chain between 

[Pfizer’s] misrepresentations and Kaiser’s alleged injury” to 

meet the “direct relation” requirement. Id. Rather, the First 

Circuit held that “the causal chain in this case is anything but 

attenuated,” because Pfizer “has always known that, because 

of the structure of the American health care system, 

physicians would not be the ones paying for the drugs they 

prescribed.” Id. at 38–39. Pfizer’s fraudulent marketing 

scheme, which was meant to increase its sales and profits, 

“only became successful once Pfizer received payments for 

the additional Neurontin prescriptions it induced.” Id. at 39. 

Those payments came from TPPs, including Kaiser. Id.

The First Circuit also rejected Pfizer’s argument that 

“because doctors exercise independent medical judgment in 

making decisions about prescriptions, the actions of these 

doctors are independent intervening causes” that cut off the 

chain of causation. Id. The First Circuit explained that 

“Pfizer’s scheme relied on the expectation that physicians 

would base their prescribing decisions in part on Pfizer’s 

fraudulent marketing.” Id. “The fact that some physicians 

may have considered factors other than Pfizer’s detailing 

materials in making their prescribing decisions does not add 

such attenuation to the causal chain as to eliminate 

proximate cause”; rather, “[t]his is a damages question” 

about the “total number of prescriptions that were 

attributable to Pfizer’s actions.” Id. Finally, the First Circuit 

noted that “[h]olding Pfizer liable will have an effect in 

deterring wrongful conduct,” and thus it held that Kaiser had 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 25

satisfied the proximate cause requirement under RICO. Id.

at 39–40.

d. Third Circuit

Similarly, in In re Avandia Marketing, Sales Practices & 

Product Liability Litigation, the Third Circuit held that the 

TPP plaintiffs sufficiently alleged proximate cause for their 

civil RICO claims. 804 F.3d 633, 634 (3d Cir. 2015). There, 

TPPs filed a putative class action against the defendant 

alleging under RICO that the defendant misrepresented 

significant heart-related safety risks associated with the drug 

Avandia. Id. at 634–36. The plaintiffs alleged that they 

included Avandia in their formularies and covered it at 

favorable rates for their members in reliance on the 

defendant’s misrepresentations about Avandia’s safety. Id.

at 636. The plaintiffs also alleged that physicians relied on 

the defendant’s misrepresentations in deciding to prescribe 

Avandia and that they would have prescribed it to fewer 

patients if the defendant had not concealed its safety risks. 

Id. The district court held that the plaintiffs adequately 

alleged that the defendant proximately caused their damages 

but certified its decision for interlocutory appeal. Id. at 637.

The Third Circuit affirmed. Applying the Supreme 

Court’s direct relation requirement, the Third Circuit held 

that “[t]he conduct that allegedly caused [the] plaintiffs’ 

injuries is the same conduct forming the basis of the RICO 

scheme alleged in the complaint—the misrepresentation of 

the heart-related risks of taking Avandia that caused TPPs 

. . . to place Avandia in the formulary.” Id. at 644. Next, 

looking to the Holmes factors, the Third Circuit noted that it 

would not be too difficult to distinguish between the 

damages attributable to the defendant’s alleged violation 

from other independent factors, and that at the pleadings 

stage, the question of damages was “a question for another 
26 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

day.” Id. Further, the Third Circuit observed that the 

plaintiffs were best situated to sue, as the plaintiffs’ alleged 

injury “is an economic injury independent of any physical 

injury suffered by Avandia users,” and “prescribing 

physicians did not suffer RICO injury from [the defendant’s] 

marketing of Avandia.” Id.

The Third Circuit, like the First Circuit, rejected the 

defendant’s argument that “the presence of intermediaries, 

doctors and patients, destroys proximate cause because they 

were the ones who ultimately decided whether to rely on [the 

defendant’s] misrepresentations.” Id. at 645. The Third 

Circuit explained that “drug manufacturers are well aware 

that TPPs cover the cost of their drugs” and the defendant’s 

“fraudulent scheme could have been successful only if [the] 

plaintiffs paid for Avandia, [which] is the very injury that 

[the] plaintiffs seek recovery for.” Id. Thus, the plaintiffs’ 

alleged injury had a direct relation to the alleged RICO 

violation. Id. Therefore, the Third Circuit affirmed the 

district court’s holding that the plaintiffs adequately alleged 

RICO proximate cause at the pleadings stage. Id. at 645–46.

e. Circuit Court Precedent Analysis

Although each of these four circuit court opinions arises 

under similar factual scenarios, factual and procedural 

distinctions exist between them. For example, the Third and 

Seventh Circuits’ opinions confronted the issue whether the 

plaintiffs could satisfy the proximate cause requirement 

under RICO at the pleadings stage, whereas the Second 

Circuit considered the issue at the class certification stage, 

and the Third Circuit reviewed the issue post-trial. Further, 

while the Second, Third, and Seventh Circuit cases involved 

putative class actions, the First Circuit’s opinion involved a 

single TPP. But these minor factual and procedural 

differences do not help us resolve the central dispute 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 27

between the Second and Seventh Circuits’ reasoning and the 

First and Third Circuits’ reasoning.

Indeed, it seems the central dispute between the Second 

and Seventh Circuits and the First and Third Circuits is 

whether the decisions of prescribing physicians and 

pharmacy benefit managers constitute intervening causes 

that sever the chain of proximate cause between the drug 

manufacturer and TPP.13 We think the First and Third 

Circuits have it right because their reasoning is more 

consistent with the Supreme Court’s direct relation 

requirement.

In this case, although prescribing physicians serve as 

intermediaries between Defendants’ fraudulent omission of 

Actos’s risk of causing bladder cancer and Plaintiffs’ 

payments for Actos, prescribing physicians do not constitute 

an intervening cause to cut off the chain of proximate cause. 

An intervening cause is “a later cause of independent origin 

that was not foreseeable.” Mendez v. County of Los Angeles, 

897 F.3d 1067, 1081 (9th Cir. 2018) (quoting Exxon Co. v. 

Sofec, 517 U.S. 830, 837 (1996)). Here, since Actos was a 

13 We note that all four of our sister circuits’ opinions may support 

the claims by individual patients who are plaintiffs in this case, not just 

the First and Third Circuits’ opinions. In Sidney Hillman, in holding that 

TPPs are too far removed from the drug manufacturer’s alleged wrongful 

conduct to satisfy the RICO proximate cause requirement, the Seventh 

Circuit implied that individual patients may be able to satisfy the 

proximate cause requirement, as they are the most directly injured party 

whose “health and financial costs come first in line temporally.” 

873 F.3d at 576. And in UFCW Local 1776, although the Second Circuit 

reversed the district court’s class certification order because the plaintiffs 

could not satisfy RICO’s proximate cause requirement as a class, it 

remanded to the district court to consider in the first instance individual 

plaintiffs’ claims based upon the quantity effect damages theory. 

620 F.3d at 136.
28 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

prescription drug, it was required to be prescribed by 

physicians. Hence, it was perfectly foreseeable that 

physicians who prescribed Actos would play a causative role 

in Defendants’ alleged fraudulent scheme to increase 

Actos’s revenues. Further, “because of the structure of the 

American health care system,” Defendants have always 

known that “physicians would not be the ones paying for the 

drugs they prescribed.” Neurontin, 712 F.3d at 38–39. 

Rather, they are well aware that TPPs and individual patients 

pay for the drugs. See Avandia, 804 F.3d at 645. 

Defendants’ alleged fraudulent marketing scheme, which 

was intended to increase Actos’s sales, “only became 

successful once [they] received payments for the additional 

[Actos] prescriptions [they] induced”—the very injury for 

which Plaintiffs seek recovery. Neurontin, 712 F.3d at 39. 

This is consistent with the Supreme Court’s requirement that 

the proximate cause inquiry focus on the direct relation 

between the alleged violation and alleged injury. Hemi 

Group, 559 U.S. at 12.

If we were to hold the opposite—that prescribing 

physicians’ and pharmacy benefit managers’ decisions 

constitute an intervening cause to sever the chain of 

proximate cause—as the Second and Seventh Circuits have 

held, drug manufacturers would be insulated from liability 

for their fraudulent marketing schemes, as they could 

continuously hide behind prescribing physicians and 

pharmacy benefit managers. That is not the purpose the 

requirement of proximate cause is intended to serve. 

Proximate cause exists to “limit a person’s responsibility for 

the consequences of that person’s own acts.” Holmes, 

503 U.S. at 268. Here, Plaintiffs seek to hold Defendants 

liable for the consequences of their own acts and omissions 

toward Plaintiffs: the money spent by Plaintiffs to purchase 

Actos.
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 29

There is also a difference between fraudulent promotion 

of “off-label” uses for a prescription drug as in Sidney 

Hillman, 873 F.3d at 575 and UFCW Local 1776, 620 F.3d 

at 127, and fraudulent failure to warn of a drug’s known risk 

of causing bladder cancer, as in this case.

It was recognized in both Sidney Hillman and UFCW 

Local 1776 that the drug manufacturer’s fraudulent 

promotion of a prescription drug for off-label uses was not 

the only basis upon which the prescribing physicians relied 

in prescribing the drug. In Sidney Hillman, the Seventh 

Circuit noted that it would be too difficult to disentangle 

which physicians’ prescribing decisions, if any, were 

influenced by the defendants’ unlawful promotion of the 

prescription drug for off-label uses. 873 F.3d at 577–78. 

Similarly, in UFCW Local 1776, the Second Circuit noted 

that the drug manufacturer’s unlawful promotion of the 

prescription drug for off-label uses was not the only source 

of information upon which the prescribing physicians based 

their decisions to prescribe the drug. 620 F.3d at 135.

Echoing the first factor of Holmes, the failure to warn of 

the bladder cancer risk in this case makes Plaintiffs’ 

damages more clearly “attributable to [Defendants’] 

violation.” 503 U.S. at 269. The damages claimed from offlabel uses in Sidney Hillman and UFCW Local 1776 are less 

directly attributable to the alleged false promotions. It is 

much more likely that Actos’s risk of causing a disease as 

serious as bladder cancer would materially influence 

prescribing physicians’ decisions whether to prescribe 

Actos. Plaintiffs’ allegations confirm this theory, as they 

allege that a survey conducted by Defendants in 2003 

showed that 75% of surveyed physicians’ interest in a 

different oral anti-diabetic drug declined “greatly” once they 

learned that it carried a risk of causing bladder cancer. 
30 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Further, Plaintiffs allege that those survey results are 

confirmed by their allegation that sales of Actos decreased 

approximately 80% once the FDA issued its official warning 

that Actos may be linked to bladder cancer in patients who 

use it over a prolonged period of time. Taking those 

allegations as true, as we must, the question whether 

prescribing physicians would not have been influenced by 

Defendants’ alleged fraudulent omission is less concerning 

in this case than it was to the Second and Seventh Circuits.

Moreover, the Seventh Circuit’s distinction that TPPs’ 

injuries are too far removed from the drug manufacturer’s 

fraudulent scheme to satisfy the RICO proximate cause

requirement because they are not “the sole injured parties” 

and because individual patients’ “health and financial costs 

come first in line temporally” misses the mark. Sidney 

Hillman, 873 F.3d at 576. The Supreme Court has never 

made a distinction about temporal proximity of the plaintiffs 

to the damages caused to others when evaluating whether a 

plaintiff has adequately alleged that the defendant 

proximately caused the plaintiff’s damages under RICO. 

Additionally, the fact that individual patients and TPPs both 

suffered economic injuries from a drug manufacturer’s 

fraudulent scheme does not mean that one group of plaintiffs 

should be favored to recover over the other, so long as they 

both suffered the same economic injuries from the drug 

manufacturer’s same misconduct. Finally, the Seventh 

Circuit’s comment that prescribing physicians may suffer 

indirect loss does not attenuate the chain of causation so far 

as to break it. See id. Even if prescribing physicians suffer 

an indirect loss such as reputational harm for prescribing an 

ineffective or unsafe drug, they are not out of pocket for the 

price of the drug and thus do not suffer the same economic 

loss as do individual patients and TPPs. For these reasons, 

we agree with the First and Third Circuits that Plaintiffs’ 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 31

damages are not too far removed from Defendants’ alleged 

omissions and misrepresentations to satisfy RICO’s 

proximate cause requirement.

3. Reliance

As a threshold matter, any argument that Patients have 

not alleged that they relied on Defendants’ 

misrepresentations and omissions lacks merit. Each patient 

alleged that had he “known that Actos increased the risk of 

causing bladder cancer, he would never have purchased and 

ingested the drug.” Additionally, Patients alleged that they 

“relied on Defendants’ . . . misrepresentations of Actos’[s] 

safety in purchasing the drug.” These statements are 

sufficient to allege that Patients relied on Defendants’ 

misrepresentations.

Next, the Supreme Court has explained that if there is a 

direct relationship between a defendant’s wrongful conduct 

and a plaintiff’s alleged injury, a RICO plaintiff who did not 

directly rely on the defendant’s omission or 

misrepresentation can still satisfy the requirement of 

proximate causation of damages. Recall that in Bridge the 

defendants’ misrepresentations that they complied with the 

county’s “Single, Simultaneous Bidder Rule” were made to 

the tax lien selling county, not to the plaintiff tax lien buyers. 

553 U.S. at 648. But the Supreme Court held that it was 

sufficient to establish proximate cause between the 

defendants’ alleged wrongful conduct and the plaintiffs’ 

alleged injury that the county had relied on the defendants’ 

false attestations. See id. at 658–59. What mattered most in 

the RICO proximate causation inquiry was whether there 

was a direct relationship between the alleged RICO violation 

and the plaintiffs’ alleged injury. See id. And there was. The 

plaintiffs’ “alleged injury—the loss of valuable [tax] liens—
32 PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

[was] the direct result of . . . [the defendants’] scheme to 

obtain more liens for themselves.” Id. at 658.

In so holding, the Supreme Court expressly rejected the 

defendants’ argument that “[direct] reliance is an element of 

a civil RICO claim predicated on mail fraud.” 553 U.S. 

at 646–49. The Supreme Court explained that the civil 

RICO statute has no reliance requirement on its face, and a 

person may be injured “by reason of” another person’s fraud 

even if the injured party did not rely on any 

misrepresentation. Id. at 648–49. Nonetheless, the Supreme 

Court noted that it “may well be that a RICO plaintiff 

alleging injury by reason of a pattern of mail fraud must 

establish at least [indirect] reliance in order to prove 

causation.” 553 U.S. at 658–59. This is because, logically, 

a plaintiff cannot even establish but-for causation if no one

relied on the defendant’s alleged misrepresentation. Id.

Despite this precedent, Defendants argue that Painters 

Fund failed to allege reliance on Defendants’ omissions of 

Actos’s bladder cancer risk, since Painters Fund expressly 

alleged that, as a TPP, it “relies on [its] members and their 

prescribers to make informed decisions about which drugs 

will be prescribed and, in turn, submitted to Plaintiff Painters 

Fund for reimbursement.” This argument is also meritless. 

Like in Bridge, where it was sufficient to satisfy RICO’s 

proximate cause requirement that the county (a third party) 

had relied on the defendants’ false attestations, here, it is 

sufficient to satisfy RICO’s proximate cause requirement 

that Painters Fund alleged that prescribing physicians (also 

third parties, but not intervening causes) relied on 

Defendants’ misrepresentations and omissions.

Finally, Defendants argue that even if Painter’s Fund has 

alleged indirect reliance, its general allegations of indirect 

reliance—i.e., that prescribing physicians relied on 
PAT DIST. COUNCIL 82 V. TAKEDA PHARM. 33

Defendants’ misrepresentations and omissions in 

prescribing Actos for their patients, which Painters Fund 

then reimbursed—are insufficient, because Painters Fund 

should have alleged with specificity exactly which 

prescribing physicians were misled by Defendants’ alleged 

misrepresentations. Remembering that this case is before us 

at the pleadings stage and without the benefit of discovery, 

we recognize that it would be difficult for Painters Fund to 

determine with specificity exactly which doctors relied on 

Defendants’ alleged misrepresentations. All that is required 

of Painters Fund at this stage is to allege that someone in the 

chain of causation relied on Defendants’ alleged 

misrepresentations and omissions, which it has done here. 

Thus, we hold that Plaintiffs have adequately alleged the 

reliance necessary to satisfy RICO’s proximate cause 

requirement.

III. CONCLUSION

While we express no opinion on Plaintiffs’ chances of 

success in this litigation as it proceeds, we hold that 

Plaintiffs have satisfactorily alleged that Defendants 

proximately caused their claimed damages at the pleadings 

stage. We reverse the district court’s judgment dismissing 

Plaintiffs’ RICO claims under Rule 12(b)(6) for lack of 

RICO standing, and we remand to the district court for 

further proceedings consistent with this disposition.