Court Opinion

ID: 4364420
Source: CourtListenerOpinion
Date Created: 2019-02-04 20:05:48.008659+00
Date Added: 2024-06-11T14:21:49.612581
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

STATE OF DELAWARE, ex rel.
KATHLEEN JENNINGS, Attorney
General of the State of Delaware,

Plaintiff, C.A. NO. Nl 8C-01-223 MMJ CCLD

V.

PURDUE PHARMA L.P.; PURDUE
PHARMA INC.; THE PURDUE
FREDERICK COMPANY; ENDO
HEALTH SOLUTIONS INC.;
ENDO PHARMACEUTICALS INC.;
MCKESSON CORPORATION;
CARDINAL HEALTH INC.;
AMERISOURCEBERGEN
CORPORATION; ANDA
PHARMACEUTICALS, INC.; H.D.
SMITH, LLC; CVS HEALTH
CORPORATION; and WALGREENS
BOOTS ALLIANCE, INC.,

`, \ /VV\ ,\/\./\./\./\_/\/VV\./\./

Defendants.

Subrnitted: November 15, 2018
Decided: February 4, 2019

Upon Defendants’ Motions to Dismiss and Motion to Strike

Ryan P. NeWell, Esq., Shaun Michael Kelly, Esq., Kyle Evans Gay, Esq., Connolly
Gallagher, LLP, Wilmington, Delaware; Richard W. Fields, Esq., Fields PLLC,
Washington, District of Colurnbia; Scott W. Gilbert, Esq., Richard Shore, Esq.
(Argued), Mark A. Packman, Esq., lerma A. Hudson, Esq. (Argued), Michael B.
Rush, Esq. (Argued), Monique T. Abrishami, Esq., Richard J. Leveridge, Esq.,
Gilbert LLP, Washington, District of Columbia; Kathleen Jennings, Attorney
General, Michael Vild, Esq., Michelle Whalen, Esq., Delaware Department of
Justice, Attorneysfor the State of Delaware.

l

Brian D. Tome, Esq., Kelly E. Rowe, Esq., Reilly, McDevitt, & Henrich, PC,
Wilmington, Delaware; Mark S. Cheffo, Esq., Hayden A. Coleman, Esq. (Argued),
Debra D. O’Gorman, Esq., Dechert LLP, New York, NeW York; Judy L. Leone,
Esq., Dechert LLP, Philadelphia, Pennsylvania, Attorneys for Defendant Purdue
Pharma L.P. & T he Purdue Frederick Company (“Pura'ue Pharma ”).

Michael P. Kelly, Esq., Steven P. Wood, Esq., Daniel J. Brown, Esq., Hayley J.
Reese, Esq., McCarter & English, Wilmington Delaware; John A. Freedman, Esq.
(Argued), Arnold & Porter Kay Scholer LLP, Washington, District Of Columbia;
Sean O. Morris, Esq., Arnold & Porter Kay Scholer LLP, Los Angeles, California,
Attorneys for Defendant Endo Pharmaceutl`cals, lnc. & Endo Health Solutl`ons,
Inc. (“Endo”).

Kevin B. Collins, Esq., Katherine B. Shaffer, Esq., Covington & Burling,
Washington, District of Columbia; Neil K. Roman, Esq., Covington & Burling,
NeW York, NeW York; A. Thompson Bayliss, Esq., Michael A. Barlow, Esq.
(Argued), Sarah E. Delia, Esq., David A. Seal, Esq., Daniel J. McBride, Esq.,
Abrams & Bayliss, Wilmington, DelaWare, Attomeys for Defendant McKesson
Corpomtl`on.

David A. Felice, Esq., Bailey & Glasser LLP, Wilmington, Delaware; Steven
Pyser, Esq., Ashley W. Hardin, Esq. (Argued), Joshua D. Tully, Williams &
Connolly, Washington, District of Columbia, Attorneysfor Defendcmt Cardinal
Health, Inc.

Jennifer C. Wasson, Esq. (Argued), Jesse L. Noa, Esq., Carla M. Jones, Esq.,
Potter, Anderson, & Corroon LLP, Wilmington, Delaware; Louis W. Schack, Esq.,
Shannon E. McClure, Esq., Neil A. Hlawatsch, Esq., Reed Smith LLP,
Philadelphia, Pennsylvania, Attorneys for Defendant AmerisourceBergen
Corpomtz`on.

J ami B. Nimeroff, Esq., Brown, Garry, Nimeroff, Wilmington, Delaware; J ames
W. Matthews, Esq. (Argued), Katy E. Koski, Esq., Jaclyn V. Piltch, Esq., Redi
Kasollj a, Esq., Foley & Lardner, Boston, Massachusetts, Attorneysfor Defendant
Ana’a Pharmaceuticals, Inc.

Thomas E. Hanson, Esq., Barnes & Thornburg LLP, Wilmington, Delaware; Oni
N. Harton, Esq., Barnes & Thornburg LLP, Indianapolis, Indiana, Attorneysfor
Defendant H.D. Smith LLC.

Daniel B. Rath, Esq., Rebecca L. Butcher, Esq., Jennifer L. Cree, Esq., Landis,
Rath, & Cobb LLP, Wilmington, DelaWare; Eric R. Delinsky, Esq., AleXandra W.
Miller, Esq., R. Miles Clark, Esq. (Argued), Zuckerman Spaeder LLP,
Washington, District of Columbia, Attorneysfor Defendant CVS Health
Corporation.

Beth MoskoW-Schnoll, Esq., William Burton, Esq., Elizabeth A. Sloan, Esq.,
Ballard Spahr LLP, Wilmington, Delaware; Kaspar J. Stoffelrnayr, Esq., Katherine
M. Swift, Esq., Bartlit, Beck, Herrnan, Palenchar, & Scott LLP, Chicago, Illinois;

AleX J. Harris, Esq., Bartlit, Beck, Herrnan, Palenchar, & Scott LLP, Denver,
Colorado, Attorneysfor Defena’ant Walgreens Boots Alliance, Inc.

JOHNSTON, J.

PROCEDURAL CONTEXT

The State of Delaware (“State”), ex rel. Kathleen Jennings,l Attorney
General of the State of Delaware, brought this suit seeking compensatory, punitive,
and other damages, as Well as restitution, disgorgement, and civil penalties.
Defendants are: Purdue Pharma L.P., Purdue Pharma Inc., The Purdue Frederick
Company, Endo Health Solutions Inc., and Endo Pharmaceuticals Inc.
(collectively, “Manufacturers”); McKesson Corporation, Cardinal Health, Inc.,
AmerisourceBergen Corporation, Anda Pharrnaceuticals, Inc., and H. D. Smith,
LLC (collectively, “Distributors”); and CVS Health Corporation and Walgreens
Boots Alliance, Inc. (collectively, “Pharrnacies”).

As to the Manufacturers, the State argues that Manufacturers have duties to

 

l At the time the pending motions Were heard, Matthew P. Denn Was Attorney General.

3

disclose accurately the risks associated with opioid medications, specifically, the
high risk of addiction and subsequent misuse. The State contends that
Manufacturers misrepresented those risks through multi-million-dollar advertising
campaigns, and inaccurately claimed that those who were showing signs of
addiction were not actually addicted. The State argues that these misstatements
were targeted for maximum effect and to a specific audience. The State contends
that Manufacturers knew or should have known that their statements were false
and misleading Because they knew the statements were misleading,
Manufacturers violated their duties to disclose accurately the risks of using
purportedly highly dangerous opioid medications

As to Distributors, the State argues that Distributors have duties to actively
prevent opioid diversion.2 The State asserts that both Delaware and federal law
have established the duties of care that Distributors must follow. The State argues
that, as evidenced by prior regulatory actions against Distributors for failing to
prevent diversion, Distributors have violated their duties.

Similarly, as to Pharmacies, the State argues that Pharmacies have duties to
prevent opioid diversion and to report any suspicious orders. The State alleges that

Pharmacies repeatedly have failed to report suspicious orders made obvious to

 

2 Drug diversion refers to the transfer of any legally prescribed controlled substance from the
individual for whom it was prescribed to another person for any illicit use.

4

them by certain “red flags,” such as unusually large orders, repetitive orders, and
improperly filled orders. The State argues that Pharmacies have violated their
duties owed to the State, as evidenced by prior regulatory actions against
Pharmacies.

The State argues that Defendants’ collective misconduct has harmed and
continues to harm the State of Delaware and its citizens.3 The State alleges the
following:

Count I: Consumer Fraud (Against Manufacturer Defendants)

Count II: Nuisance (Against Manufacturer Defendants)

Count III: Negligence (Against Manufacturer Defendants)

Count IV: Unj ust Enrichment (Against Manufacturer Defendants)

Count V: Consumer Fraud (Against Distributor Defendants and

Pharmacy Defendants)

Count VI: Nuisance (Against Distributor Defendants and Pharmacy

Defendants)

Count VII: Negligence (Against Distributor Defendants and Pharmacy

Defendants)

 

3 In recent years, the frequency of opioid use for both chronic pain and non-medical purposes has
grown dramatically, resulting in an epidemic of prescription opioid abuse. According to the
Centers for Disease Control and Prevention (“CDC”), Delaware lost 669 people to drug overdose
deaths between 2014 and 2016. The alleged “main driver” of such deaths was prescription and
illicit opioids.

Count VIII: Unj ust Enrichment (Against Distributor Defendants and

Pharmacy Defendants)

Count IX: Civil Conspiracy (Against Manufacturer Defendants,

Distributor Defendants, Pharmacy Defendants).

Defendants have filed Motions to Dismiss. Manufacturers joined together to
file one Motion to Dismiss. Four of the five Distributors filed Motions to Dismiss:
McKesson Corporation, Cardinall Health, Inc. and AmerisourceBergen Corporation
have jointly filed one motion. Anda Pharmaceuticals, Inc. has separately filed its
own motion. The remaining distributor, H.D. Smith, LLC, has not joined in or filed
its own motion to dismiss, but did answer the complaint. The Pharmacies jointly
filed one motion to dismiss. Oral Argument was heard over two days: October 24,

2018 and November 15, 2018.

MOTION TO DISMISS STANDARD

In a Rule lZ(b)(6) Motion to Dismiss, the Court must determine whether the
claimant “may recover under any reasonably conceivable set of circumstances

susceptible of proof.”4 The Court must accept as true all well-pleaded allegations.5

 

4 Spence v. Funk, 396 A.Zd 967, 968 (Del.l978).
5 Id.

Every reasonable factual inference will be drawn in the non-moving party’s favor.6
If the claimant may recover under that standard of review, the Court must deny the

Motion to Dismiss.7

ANALYSIS
NEGLIGENCE AND CONSUMER FRAUD
The State contends that all Defendants violated statutory and common law
duties, which caused injury to the State. The State’s claims vary slightly as to each

class of Defendant.

Manufacturers
State ’s Allegations
The State argues that each Manufacturer Defendant has a legal obligation
under Delaware statutory and common law to exercise reasonable care in the
marketing, promotion, and sale of opioids. The State argues that Manufacturers’
duties are established by l6 Del. C. § 3302, which states: “No person shall

manufacturer, sell or trade in, within this State, any article of food or drugs which

 

6 Wilmington Sav. Fund. Soc ’v, F.S.B. v. Anderson, 2009 WL 597268, at *2 (Del. Super.) (citing
Doe v. Cahz'll, 884 A.2d 451, 458 (Del.2005)).
7 Spence, 396 A.2d at 968.

is . . . misbranded . . . within the meaning of this chapter.”8

The State argues that Manufacturers have breached their duties by misstating
facts and by failing to disclose accurately the risks associated with the use of
opioids. The State claims that Manufacturers have done this via a multi-million-
dollar advertising campaign that is run through websites, promotional materials,
live conferences, publications for doctors, and other vehicles. The State asserts
that Manufacturers trained pharmaceutical salesmen to tell doctors that the risk of
opioid addiction is less than l%, which is contrary to Center for Disease Control
(“CDC”) findings that suggest that there are significant risks of serious opioid
addiction and abuse. The CDC reports that about 26% of long term users
experience problems with addiction or dependence.9 The State claims although
there are warning labels approved by the Food and Drug Administration (“FDA”)
on the bottles of medication, the content in the advertising campaign is inconsistent

with those warning labels in that the advertising scheme significantly minimizes

 

8 See 16 Del. C. § 3_308 (“For the purposes of this chapter, a drug is deemed to be misbranded:
(l) If it is an imitation of or offered for sale under the name of another drug; (2) If the contents of
the package as originally put up were removed, in whole or in part, and other contents were
placed in such package or if the package fails to bear a statement on the label of the quantity or
proportion of any alcohol, morphine, opium, cocaine, heroin, alpha or beta eucaine, chloroform,
cannabis indica, chloral hydrate or acetanilide, or any derivative or preparation of any such
substances contained therein; (3) If its package or label bears any statement, design or device
regarding such article, or the ingredients or substances contained therein which is false or
misleading in any particular way; (4) If it is included in the definition of misbranding in the
Federal Food, Drug and Cosmetic Act.”).

9 Deborah Dowell, Tamara Haegerich, & Roger Chou, CDC Guidelinefor Prescribz'ng Opioids
for Chrom`c Pain - Um'ted States, 201 6, 65 Morbidity and Mortality Weekly Report l (2016),
https://Www.cdc.gov/mmWr/volumes/65/rr/rr650 l e l .htm.

8

the risks.

Further, the State argues that Manufacturers stated that patients who showed
signs of addiction were not actually addicted to opioids. The State claims that
Manufacturers published a physician education pamphlet which suggested that
patients who showed signs of addiction were actually in need of more medication,
a phenomenon Manufacturers refer to as “pseudoaddiction.” The State argues that
“pseudoaddiction,” a term coined by a Manufacturer, is a concept rejected by the
CDC because it lacks scientific evidence. The State claims that Manufacturers
advocate for increasing dosages regardless of a patient’s actual prescribed dosage.
The State contends that, through their web content, Manufacturers actually
encourage patients, who believe they have not been prescribed an adequate dose, to
seek a different doctor who will prescribe them the dose they feel they require.
The State asserts that Manufacturers claim there is no risk of addiction when the
dosage is increased

The State argues that Manufacturers’ conduct amounts to a breach of duty

owed to the State,

Manufacturers ’ Response
Manufacturers argue first that the State’s claims are preempted because the

FDA has approved opioid medications for the treatment of pain. Manufacturers

maintain that they have complied with the FDA’s warning label requirements
Manufacturers argue that the State cannot impose a duty to alter FDA-approved
medicine. Further, Manufacturers assert that courts repeatedly have held that state
law claims are preempted where they would require a manufacturer to make
statements about safety or efficacy that are inconsistent with what the FDA has
required.

Manufacturers also argue that the State has failed to allege causation.
Manufacturers argue that the State has failed to identify any physician who heard
the alleged misrepresentations and subsequently prescribed opioid medications in
reliance on Manufacturers’ statements Manufacturers cite Teamsters Local 237
Welfare Funa', et al., v. AstraZeneca Pharmaceuticals LP and Zeneca, Inc.10 in
support of their argument that simply pleading deceptive advertising to the public
generally is insufficient. 11 Manufacturers assert that ultimately there is no
connection between the alleged misstatements and the harm to the State. Any
misstatement is simply too attenuated to establish causation. Manufacturers argue
that there is no fraud on the market. Further, as third-party payors, Manufacturers
cannot be forced to cover costs incurred by the State because the State is not an

insurer.

 

'° 2015 WL 4111826 (Del. Super.).
11 Id. at *8.

10

Manufacturers offer for support State ofSao Paulo of Federatz`ve Republic of
Brazl`l v. American Tobacco C0.,12 a case in which a municipality sought to recover
medical expenses supposedly incurred as a result of its citizens’ increased use of
tobacco products13 Manufacturers ask the Court to adopt the reasoning in Sao
Paulo, specifically that it would be “both unfair and unsound policy”14 to allow a
government to sue in its capacity as health care insurer or provider, and to pursue
claims on which its injured citizens, had they sued directly, might not be entitled to
recover. Manufacturers assert that this type of claim is something that the
legislature should address and that the government should not be able to
circumvent the burden of proving individual claims

This Court finds Sao Paulo distinguishable The plaintiffs in Sao Paulo
were foreign governments not United States municipalities As such, the plaintiffs
lacked standing to sue as parens patriae.l5 The Court finds this distinction crucial
in determining whether or not the State has standing in this case to sue in its
capacity as parens patriae.

In support of the lack of causation argument, Manufacturers cite Ashley

County, Arkansas v. Pfizer Incorporatea’. 16 ln Ashley, Arkansas counties brought

 

'2 919 A.2d 1116(D.De1. 2007).
13 Id

14 1a at 1123.

15 Id. at 1122.

16 552 F.3d 659 (th Cir. 2009).

ll

an action against manufacturers and distributors of over-the-counter cold and
allergy medications containing ephedrine or pseudoephedrine.17 The counties
sought damages under the Arkansas Deceptive Trade Practices Act and the
Arkansas crime victims civil liability statute, and under theories of public nuisance
and unjust enrichment18 The court found that the defendants did not proximately
cause plaintiffs’ damages and dismissed the claim because “the Counties cite[d] no
case, federal or state, that recognizes a cause of action available to a government
entity to recover against pharmaceutical manufacturers for the legal sale of
products containing pseudoephedririe based on the subsequent use of the product in
the manufacture of methamphetamine.”19

Manufacturers also argue that the State has failed to allege injury.
Manufacturers contend that the State has failed to identify any prescription
received by a patient that ultimately caused injury to the State. Further,
Manufacturers argue that the State is only able to make broad allegations as to all
Manufacturers, and cannot single out any wrongdoing by any individual
Manufacturer. Manufacturers also argue that the State’s claims are barred by the

derivative-injury rule, municipal cost recovery rule, and economic loss doctrine.

 

17 Ia’. at 670.
18 Ia'.
19 Ia' at 673.

12

T he State Has Statea’ Prima Facie Clailns Agal`nst Manufacturers

The Court finds that the State has met the notice pleading requirements as to
its claims against Manufacturers Under Delaware’s notice pleading requirements,
a plaintiff need only “state a short and plain statement of the claims showing that
the pleader is entitled to relief.”20 The State has met this burden by putting the
Manufacturers on notice of its claims of misrepresentations (“low risk” of
addiction and understated risk) made in literature and during training The State
plead its claims with sufficient particularity to allow the case to move forward.
The State’s allegations of labeling inconsistent with FDA approvals
(“pseudoaddiction,” softening and minimization) are sufficient to survive dismissal
on the grounds of federal preemption. Therefore, Manufacturers’ Motion to

Dismiss must be denied.

Distributors
State ’s Allegatl`ons
The State argues that Distributors have common law, statutory, and
regulatory duties to act reasonably as distributors of opioids. Specifically, the

State claims that Distributors have a duty to prevent opioid diversion. The State

 

20 Super. Ct. Civ. R. 8(a).
13

cites several statutes and regulations which, it claims, establish relevant duties21
The State claims that the Delaware Controlled Substances Act (“CSA”) “requires
distributors of controlled substances to take precautions to ensure a safe system for
distribution of controlled substances, including opioids, and to prevent diversion of
those controlled substances into illegitimate channels.”22 The State claims that
Delaware law has certain registration requirements for Distributors, and that in
order to distribute in Delaware, the Distributors must “establish, maintain, and
adhere to written policies and procedures for: identifying, records, and reporting
losses or thefts” and have written policies for “reporting criminal or suspected
criminal activities involving the inventory of a drug or drugs.”23 The State makes
clear that it is not asserting a cause of action under these laws, but rather, is using
the laws to argue that there are established, industry-wide duties

The State alleges that Distributors have the knowledge and expertise to
identify issues relating to diversion and know how to minimize the risk of
diversion. The State claims that Distributors have acknowledged these duties by

making “statements assuring the public they recognize their duty to curb the opioid

 

21 Delaware’s Uniform Controlled Substances Act (16 Del. C. § 4701); Uniform Controlled
Substances Act Regulations (24 Del. Aa'min. C. CSA 1.0); and “numerous professional
regulations related to persons who handle, prescribe, and dispense controlled substances.”
Compl. jj 95.

22 Compl. jj 103.

23 Compl. jj 104-05 (quoting 24 Del. Admin. C. § 2500-8).

14

epidemic.”24 The State claims that despite acknowledging and understanding their
duties to prevent diversion, Distributors have violated those duties The State
asserts that Distributors have failed to identify suspicious orders,25 which could
have led to the discovery and prevention of diversion.

The Drug Enforcement Agency (“DEA”) supposedly has provided guidance
on how to deal with suspicious orders Since 2006, the DEA has briefed
pharmaceutical distributors regarding “legal, regulatory, and due diligence
responsibilities.”26 The DEA has pointed out the “red flags distributors should
look for to identify potential diversion.”27 The DEA provided further information
at conferences and in subsequent publications The State claims that because
Distributors have been educated on drug diversion, they have been put on notice of
the problem of opioid diversion and the solution. Despite being put on notice,
Distributors allegedly failed to prevent or address this issue.

The State argues that Distributors have negligently or recklessly allowed
diversion. The State, as a basis for this allegation, points out that Distributors’
conduct has resulted “numerous civil fines and other penalties recovered by

government agencies - including actions by the DEA related to violations of the

 

24 Compl. jj 141.
25 The State describes these orders as unusually large or frequent orders
26 Compl. jj 134.
27 Compl. jj 134.

15

[F ederal Controlled Substances Act].”28 The State claims that Distributors have
engaged in a consistent nationwide pattern and practice of illegally distributing
opioids by allowing diversion to occur.

In sum, the State claims that the Distributors had duties to prevent opioid
diversion, acknowledged and understood those duties, and violated those duties,

resulting in injury to the State.

Distributors ’ Response

Distributors argue that the State has failed to plead a cognizable injury under
Delaware law. Distributors assert that the State cannot recover damages belonging
to individuals who allegedly have been personally injured by opioid addiction.
Distributors argue that the State cannot recover on the basis of these indirect
injuries29 Distributors further argue that the State may not recover the costs of
normal public services In support of this position, Distributors cite Baker v. Smith
& Wesson Corporation,30 in which the Court stated: “[Pjublic expenditures made
in the performance of governmental functions are not recoverable from a tortfeasor

in the absence of a specific statute.”3l

 

28 Compl. jj 145.

29 See State of Sao Paulo of Federative Rep. of Braz. v. Am. Tobacco C0., 919 A.2d 1116, 1123
(Del. 2007)(“State may not bring a direct action to seek damages for others’ injuries Without
standing in their shoes as a subrogee”).

30 2002 WL 31741522 (Del. Super.).

31 Ia'. at *4.

16

Distributors argue that the State has failed to allege a negligence claim.
Specifically, Distributors argue that they do not owe a duty to the State to report or
halt shipment of “suspicious” orders Distributors maintain that there is no
common law or statutory duty to report these orders Distributors also contend that
there is no duty to the State because the State is not the customer. Distributors
claim that their duties are solely to their customer, the pharmacies Distributors
assert that they act merely as middlemen between manufacturers and pharmacies,
and that their responsibility is to take and fill orders Distributors claim that the
State has failed to allege that Distributors made any specific misrepresentations to

pharmacies

T he State Has Statea’ Clat'nts Agal`nst Distributors

The Court finds that Distributors’ duties are not limited to pharmacies
Pursuant to 6 Del. C. § 2513:

(a) The act, use or employment by any person of any deception,
fraud, false pretense, false promise, misrepresentation, or the
concealment, suppression, or omission of any material fact with intent
that others rely upon such concealment, suppression or omission, in
connection with the sale, lease or advertisement of any merchandise,
whether or not any person has in fact been misled, deceived or
damaged thereby, is an unlawful practice. .. (emphast`s added).

Because the language of the statute contemplates general reliance, the Court finds

that the State need not limit its claims to misrepresentations made directly to

17

pharmacies
Drug diversion is a medical and legal concept involving the transfer of any
legally prescribed controlled substance nom the individual for whom it was
prescribed to another person for any illicit use. The State claims that a purpose of
the Delaware Consumer Fraud Act is to prevent diversion, and under this statute,
Distributors have a duty to prevent diversion. Distributors maintain that the State’s
claims are barred by the safe harbor provided in 6 Del. C. § 2513 which states:
(b) This section shall not apply:
(2) To any advertisement or merchandising practice
which is subject to and complies with the rules and
regulations, of and the statutes administered by, the
Federal Trade Commission. ..
The Court finds that whether or not Distributors complied with “rules and
regulations” cannot be determined without further discovery. The Court cannot
find, as a matter of law, that Distributors fall within in this safe harbor provision at
this stage in the litigation.
Distributors rely on Baker32 to support the proposition that a municipality
may not recover for its citizens’ injuries In Baker, the Mayor of Wilmington, on

behalf of the City, sued several handgun manufacturers.33 The lawsuit was part of

a nationwide effort to force the handgun industry to make its products safer and to

 

32 2002 WL 31741522 (D€l. Super.).
33161. at *l.

18

reduce gun violence. The plaintiffs in Baker were not the direct victims of injuries
caused by firearms The Court in Baker considered whether the City of
Wilmington could recover the costs of municipal services, including police work
and emergency response, in the absence of claims brought by direct victims The
issue was “whether the common law prohibition on municipalities recovering costs
from tortfeasors ..is the law in Delaware.”34 The Court granted the defendant’s
motion to dismiss, stating that “the court will not twist a jury trial involving
municipal costs into a wildly expensive referendum on handgun control. The
Mayor and the City must find another means to their ends.”35

The Court finds that the municipal cost recovery rule does not apply in this
case. In five separate courts, and in the multi-district federal litigation based in
Ohio, judges have rejected the notion that the municipal cost recovery rule bars
recovery for public costs These courts reasoned that when the alleged conduct is
ongoing and persistent (as opposed to a one-time event), the rule may be
suspended. The Court finds that the conduct in this case is continuous Thus, the
municipal cost recovery rule does not apply.

Under 16 Del. C. § 4733, manufacturers distributors, and pharmacies must

register and be licensed in order to dispense opioid medications The applicant

 

34 Id.
35 Ia'. at *7.

19

must have an underlying professional license in the State. The Secretary of State
may deny registration to an applicant if the Secretary “determines that the issuance
of that registration would be inconsistent with the public interest.”36 The statute
lists eight factors that the Secretary shall consider when determining whether an
issuance of a registration would be inconsistent with the public interest:

(1) Maintenance of effective controls against diversion of controlled
substances into other than legitimate medical, scientific or industrial
channels;

(2) Compliance with applicable federal, state and local law, including
but not limited to such requirements as having a license to practice as
a practitioner or having documented training and continuing education
as a drug detection animal trainer;

(3) Any convictions of the applicant under any federal and state laws
relating to any controlled substance;

(4) Past experience in the manufacture or distribution of controlled
substances and the existence in the applicant's establishment of
effective controls against diversion;

(5) Furnishing by the applicant of false or fraudulent material in any
application filed under this chapter;

(6) Suspension or revocation of the applicant's federal registration to
manufacture, distribute, prescribe, dispense or research controlled
substances as authorized by federal law;

(7) Any professional license disciplined in any jurisdiction; and

(8) Any other factors relevant to the public interest.37

The State argues that this statute imposes on Distributors (and Pharmacies) a
duty to report, and that a breach of that duty could result in a revocation of license

and registration. The State has not alleged any claims under this statute, but argues

 

36 16 Det. C. § 4733(a).
37 Id.

20

that Section 4733 creates a well-established duty to report in the opioid industry.

The Court finds that Section 4733 does not create a cause of action.
However, the statute may be evidence of a standard of care.

Delaware recognizes the traditional “but for” definition of proximate
causation.38 “Most simply stated, proximate cause is [defined in Delaware as] that
direct cause without which the accident would not have occurred.”39 To show
proximate cause, there must be known and intentional consequences

The State alleges that Distributors had actual or constructive knowledge that
they were breaching common law duties and violating the Delaware Controlled
Substances Act and Federal Controlled Substances Act. Distributors counter that
any diversion and subsequent harm are intervening, superseding causes that
extinguish their liability. A superseding cause is a new and independent act that
breaks the causal connection between the original tortious conduct and the injury.40
However, if the intervening negligence of a third party was reasonably foreseeable,
the original tortfeasor is liable for negligence because the causal connection

between the original tortious act and the resulting injury remains unbroken.41

 

38 See Duphily v. Delaware Electric Cooperatt`ve, Inc., 662 A.2d 821, 828 (Del. 1995)(citing
LaWS v. Webb, 658 A.2d 1000 (Del. 1995)); MOjj(ifl‘ V. Carroll, 640 A.2d 169, 174 (Del. 1994);
Culver v. Bennett, 588 A.2d 1094 (Del. 1991).

39 Culver v. Bennen, 588 A.2d 1094 (Del. 1991)(quoiing Chudnofsky v. Edwards, 208 A.2d 516
(Del. 1965)).

40Dttpht'ly, 662 A.2d at 829.

41 Id.

21

In Ashley County, Arkansas v. Pfizer Incorporatea’, 42 the court determined
that “criminal actions of the methamphetamine cooks and those further down the
illegal line of manufacturing and distributing methamphetamine are ‘sufficient to
stand as the cause of the injury’ . . .and they are ‘totally independent’ of the
Defendants’ actions of selling cold medicine to retail stores.”43 Distributors ask
this Court to apply the reasoning in Ashley County.

The Court finds Ashley County distinguishable The State’s allegations
regarding proximate cause establish a prima facie case of reasonable foreseeability
The intervening causes that aid diversion and subsequent illegal activities are not
“totally independent” from Distributors’ conduct. The Ashley County court’s
finding that defendants’ conduct was too attenuated to establish liability does not
apply in this case.

The Court finds that the State has met its pleading requirements
Distributors’ duties are not limited to pharmacy customers The Court cannot
determine, without discovery, whether Distributors are protected by the safe harbor
provision in 6 Del. C. § 2513. The State has set forth a prima facie case of
reasonable foreseeability and proximate cause. Therefore, Distributors’ Motion to

Dismiss the negligence and consumer fraud claims must be denied.

 

42 552 F.3d 659 (8th Cir. 2009).
43 Ia'. at 670.

22

T he State Has Statea’ Clal`ms Agat`nst Anda

Distributor Defendant Anda Pharmaceuticals, Inc. (“Anda”) has moved
separately from other Distributors Anda argues that the Complaint improperly
lumps all of the Distributors together in group allegations and that these
allegations are conclusory. Anda echoes the arguments presented by other
Distributors, but adds that the Complaint is not specific enough to put Anda on
notice.

Superior Court Rule 9(b) requires that certain types of claims be plead with a
heightened particularity. “The purpose of this Rule is to ‘(1) provide defendants
with enough notice to prepare a defense; (2) prevent plaintiffs nom using
complaints as fishing expeditions to unearth wrongs to which they had no prior
knowledge; and (3) preserve a defendant's reputation and goodwill against baseless
claims.”’44

In order to plead negligence with the requisite particularity, “a defendant
must be apprised of: (1) what duty, if any, was breached; (2) who breached it, (3)

what act or failure to act breached the duty, and (4) the party upon whom the act

was perf`ormed.”45 In its Complaint, the State repeatedly refers to specific statutory

 

44 Greenfieldfor Fora1 v. Bua'get of Delaware, Inc., 2017 WL 729769, at *2 (Del. Super.)(quoting
In re Benzene Liti'gatt`on, 2007 WL 625054, at *6 (Del. Super.)(citing Stuchen v. Duty Free Int'l,
Inc., 1996 WL 33167249, at *5 (Del. Super.))).

43 Myer v. Dyer, 542 A.2d 802, 805 (Del. Super.).

23

and common law duties, identifies defendant groups, points out the actions or
inactions Defendants allegedly committed or omitted, and claims that Defendants’
conduct caused injury to the State of Delaware.

At the pleading stage, a defendant in a group of similar defendants may
attempt to distinguish its behavior nom other defendants.46 When given the
opportunity at oral argument to distinguish itself from other Distributors, Anda
only highlighted two differences: (1) that there were no enforcement actions
against Anda initiated by the DEA; and (2) that there were no allegations of
specific misrepresentations unlike those in the Complaint against Cardinal and
McKesson. Anda emphasized that the State only referenced Anda specifically a
few times in its Complaint.

The Court finds that there is no meaningful or substantive distinction
between Anda and other Distributor defendants at this stage of the proceedings
The Court’s rulings apply to Anda in the same manner as to Distributors Anda
has failed to distinguish itself from other Distributor defendants Therefore,

Anda’s Motion to Dismiss must be denied.

 

46 In re Benzene Lt'tigation, 2007 WL 625054, at *1 (Del. Super.)(ln a mass tort case, the Court
allowed defendants to isolate claims among a group of defendants The defendants moved
separately to distinguish behavior, and the court treated defendants as individual movants.).

24

Pharmacies
State ’s Allegatt'ons

The State argues that Pharmacies also have a duty to prevent diversion, and
that Pharmacies have breached that duty by failing to address certain “red flags”
when filling prescriptions The State claims that at “the pharmacy level, diversion
occurs whenever a pharmacist fills a prescription despite having reason to believe
it was not being filled for a legitimate medical purpose.”47 The State claims:

A prescription may lack a legitimate medical purpose when a patient

is either a drug dealer or opioid-dependent, seeks to fill multiple

prescriptions from different doctors, travels great distances between a

doctor and a pharmacy to fill a prescription, presents multiple

prescriptions for the largest dose of more than one controlled

substance such as opioids and benzodiazepines, or when there are

other red flags surrounding the transaction.48

The State alleges that “[o]n information and belief, Pharmacy Defendants
regularly filled opioid prescriptions that would have been deemed questionable or
suspicious by a reasonably-prudent pharmacy.”49 The State argues that Pharmacies
have a duty under the Delaware CSA to take precautions to “ensure a safe system

for distribution of controlled substances, including opioids, and to prevent

diversion of those controlled substances into illegitimate channels.”50

 

47 Compl. jj 11.
48 Compl. jj 11.
49 Compl. 11 189.
30 Compl. jj 114.

25

The State also argues that Delaware’s Prescription Monitoring Program
(“PMP”) imposes certain duties on Pharmacies Delaware’s PMP is a reporting
system that aims to monitor the sale and distribution of controlled substances in the
State of Delaware.3l The State claims that the PMP imposes a duty on Pharmacies
to submit information related to dispensing prescription opioids. The State argues
that “under Delaware law ‘ [w]hen a [pharmacy] has a reasonable belief that a
patient may be seeking a controlled substance [including opioids] for any reason
other than the treatment of an existing medical condition, the dispenser shall obtain
a patient utilization report regarding the patient for the preceding 12 months nom
the [PMP] before dispensing the prescription.”’32 The State argues that Delaware
law requires that “[i]f a pharmacist believes he or she has discovered a pattern of
prescription abuse, the local Board of Pharmacy and the DEA must be
contacted.”33

The State argues that despite industry-specific knowledge of the risks
of opioid abuse,34 Pharmacies breached their duties by failing to identify

“red flags” and report those issues to the proper authorities.33 The State

 

31 16 Del. C. § 4798.

52 Compl. jj 120 (citing 16 Del_ C. § 4798(@)).

33 Compl.jj131.

34 The State argues that Pharmacies (along With other Defendants) have received extensive
guidance on how to identify signs of illegal opioid use and how to prevent that use. The State
claims that Pharmacies have received training nom the DEA, “state pharmacy boards,” and
“national industry associations.” Compl. jj 170.

33 Compl. jj 186.

26

contends that this breach caused injury to the State of Delaware and its

citizens

Prescrz'ptt'on Monitoring Program
Delaware has promulgated comprehensive regulation of dispensing
controlled substances.36 Section 4735(b) of Title 16 sets forth an express purpose
to prevent diversion in Delaware’s PMP:

(b) The Secretary, after due notice and hearing may limit, suspend,
fine or revoke the registration of any registrant who:

(1) Has failed to maintain effective controls against

diversion of controlled substances into other than

legitimate medical, scientific or industrial channels ...37

Regulation of prescription drug distribution also is contained in Delaware’s

Uniform Controlled Substances Act ( 16 Del. C. §§ 4701, et seq.), Uniform
Controlled Substances Act Regulations (24 Del. Admt`n. C. CSA 1.0 et seq.), code
sections regarding branding of drugs (e.g., 16 Del. C. §§ 3302, et seq.), and
numerous professional regulations related to persons who handle, prescribe, and
dispense controlled substances These provisions provide strict controls and

requirements throughout the opioid distribution chain. Delaware law also

incorporates and references Federal law regarding the marketing, distribution, and

 

56 16 Del. C. §§ 4701 er seq.
57 16 Det. C. §4735(6)(1).

27

sale of prescription opioids, including the Federal Controlled Substances Act, 21
U.S.C. §§ 801 et seq., and the F ederal Food, Drug, and Cosmetic Act, 21 U.S.C §§

321 et seq.

Delaware’s Uniform Controlled Substances act is administered by the

Secretary of State:

The Secretary shall administer this chapter. Except as otherwise
provided in this chapter, the Secretary may delete or reschedule
substances enumerated in the schedules of controlled substances only

if:
(1) Such substances have been deleted from or
rescheduled within the federal schedules of controlled
substances by the Attorney General of the United States
pursuant to 21 USC § 811, et seq.; and

(2) The findings required by this chapter for placement
of substances in the schedules of controlled substances
have been made.38

Pharmacies ’ Response
Pharmacies argue that the PMP administration by Delaware’s Secretary of
State has exclusive jurisdiction over the regulation of prescription sales Thus, no
negligence claims may be brought by the State. However, Pharmacies concede:
that the State has authority to prosecute criminal conduct; that the PMP does not
prohibit medical negligence claims; and that common law negligence claims are

possible. If negligence results in injury to a patient receiving a prescription, all

 

5516De1. C.§4711.
28

“red flags” are coextensive with statutory and regulatory reporting obligations
Pharmacies proffer Doe v. Bradley39 in support of their argument that
statutory duties to report misconduct do not give rise to common law negligence
claims ln Doe v. Bradley, the Court considered “the scope of a physician's duty to
report to appropriate authorities that another physician might be engaged in
conduct that could endanger the health, welfare or safety of that physician's
patients or the public at large.”60 The Court found that the “[p]laintiffs’ complaint
did not allege facts that would allow the court to impose a common law duty upon
the medical society defendants to prevent Dr. Bradley from causing harm to the
[p]laintiffs”61 Pharmacies argue that under Doe v. Bradley, the regulatory scheme

and enforcement procedures under Delaware law prohibit a private cause of action.

The State Has Not Statea1 a Clat`m Against Pharmacies
Delaware law requires that a medical negligence claim be accompanied by
an Affidavit of Merit:

(a) No health-care negligence lawsuit shall be filed in this State
unless the complaint is accompanied by:

(1) An affidavit of merit as to each defendant signed by
an expert witness, as defined in § 6854 of this title, and
accompanied by a current curriculum vitae of the

 

39 2011 WL 290829 (Del. Super.).
69 2011 WL 290829, at *1.
61 Ia'. at *4.

29

witness, stating that there are reasonable grounds to

believe that there has been health-care medical

negligence committed by each defendant. . . .62
To the extent that the State’s claims fall within the definition of medical
negligence, the Complaint against Pharmacies must be dismissed without prejudice
to provide the State an opportunity to obtain an Affidavit of Merit.

The Court finds that the remaining allegations against Pharmacies _
breaches of duties to prevent diversion _ are entirely speculative and conclusory.
Additionally, Delaware’s comprehensive pharmacy regulatory scheme and
enforcement procedures, as well as federal regulations, preempt the claims alleged
in the Complaint. Therefore, Pharmacies’ Motion to Dismiss must be granted.

The dismissal is without prejudice as to claims sounding in medical negligence, to

allow the State an opportunity to submit an Affidavit of Merit.

NUISANCE
Under Delaware law, a public nuisance is “activity which produces some
tangible injury to neighboring property or persons coming into contact with it and
which a court considers to be objectionable under the circumstances.”63

Distributors argue that the State’s public nuisance claim is not cognizable

 

62 16 Del. C. §6853(a).
63 Patton v. Simone, 1992 WL 398478, at *9 (Del. Super.)(citing State v. Ht'll, 167 A.2d 738, 741

(Del. Ch. 1961)).
30

under Delaware law. Distributors assert that Delaware Courts do not recognize
products-based public nuisance claims, only property-based nuisance claims
Distributors rely on Sills v. Smith & Wesson Corporatz'on64 to support this
position.63 Distributors argue that the State has not identified or alleged a public
right with which Distributors have interfered, claiming this as an essential element
to a nuisance claim.

In Sills v. Smith & Wesson Corporatt`on,66 the Mayor of Wilmington sued
twelve handgun manufacturers and three trade associations to recover money
damages incurred by the City in connection with the design, marketing, and
advertising of handguns One of the nine counts alleged was a nuisance claim.
The complaint alleged that “governmental entities may recover direct costs
associated with protecting their citizens in the ‘abatement of a public nuisance.”’67
The Court stated that “Delaware has yet to recognize a cause of action for public
nuisance based upon products Delaware public nuisance claims have been limited

to situations involving land use. While no express authority exists requiring public

 

64 2000 WL 33113806 (Del. Super.).

63 Sills v. Smith & Wesson Corp., 2000 WL 33113806 (Del. Super.)(holding that Delaware law
does not recognize products-based nuisance claims).

66 2000 WL 33113806 (Del. Super.).

67 ld. at *2 (citing City of Evansville v. Kentucky Liquia' Recycling, Inc., 604 F.2d 1008, 1017
(7th Cir. 1979), cert. denied, 444 U.S. 1025 (1980)(costs of abating toxic waste public nuisance
are recoverable); U.S. v. Occia'ental Chem. Corp., 965 F.Supp. 408, 412_413 (W.D.N.Y. 1997)
(exercise of police power to protect public health in abating toxic waste public nuisance are
recoverable)).

31

nuisance claims be restricted to those based on land use, Delaware courts remain
hesitant to expand public nuisance.”68 The Court held that there was “no
independent claim for public nuisance” and rentsed to recognize a public nuisance
claim for products.69

Other jurisdictions also have refused to allow products-based public
nuisance claims There is a clear national trend to limit public nuisance to land
use.7O

On December 28, 2018, the State submitted to the Court supplemental
authority related to briefing on Defendants’ Motions to Dismiss, attaching an

opinion issued by MDL Judge Dan Aaron Polster of the United States District

Court for the Northern District of Ohio. This Court concurs with Judge Polster as

 

68 Ia'. at *7.

69 Ia’.

70 See, e.g., Tt`oga Public School Dist. No. 15 of Willt'arns County, State of N.D. v. U.S. Gypsum
Co., 984 F.2d 915, 921 (8th Cir. 1993)(“to interpret the nuisance statute in the manner espoused
by Tio ga would in effect totally rewrite North Dakota tort law”); State v. Leaa' Ina’ustries, Ass ’n,
Inc., 951 A.2d 428, 456 (R.I. 2008)(“[t]he law of public nuisance never before has been applied
to products, however harmful”); In re Leaa' Paint Litt'g., 924 A.2d 484, 505 (N.J. 2007) (“Were
we to permit these complaints to proceed, We would stretch the concept of public nuisance far
beyond recognition and would create a new and entirely unbounded tort antithetical to the
meaning and inherent theoretical limitations to the tort of public nuisance”); City of Chicago v.
Beretta U.S.A. Corp., 821 N.E.2d 1099, 1116 (Ill. 2004)(“there is no authority for the
unprecedented expansion of the concept of public rights to encompass the right asserted by
plaintiffs . .the plaintist claim does not meet all of the required elements of a public nuisance
action”); People ex re. Spitzer v. Sturm, Ruger & Co., Inc., 761 N.Y.S. 2d 192, 196 CN.Y. App.
Div. 2003)(“giving a green light to a common-law public nuisance cause of action today will, in
our judgment, likely open the courthouse doors to a flood of limitless, similar theories of public
nuisance, not only against these defendants but also against a wide and varied array of other
commercial and manufacturing enterprises and activities”).

32

to the vast majority of his conclusions However, the Court finds this supplemental
authority distinguishable from the State’s case regarding the public nuisance claim.

Judge Polster’s Opinion discusses in great detail Ohio legislative history
relating to product liability and nuisance claims The Opinion determined that “in
light of the legislative history, the Court finds it at least plausible, if not likely, that
the 2005 and 2007 Amendments to the OPLA intended to clarify the definition of
‘product liability claim’ to mean ‘a claim or cause of action [including any
common law negligence or public nuisance theory of product liability. . .] that is
asserted in a civil action. . .that seeks to recover compensatory damages ..for
[harm] . . . . ”’71

There is no comparable legislative history in Delaware.

The State only has alleged a public nuisance claim. The State has not
alleged a product liability claim, nor has it asked the Court to determine whether
Delaware product liability law contemplates a public nuisance claim. In Delaware,
public nuisance claims have not been recognized for products72

The State has failed to allege a public right with which Defendants have

interfered. A defendant is not liable for public nuisance unless it exercises control

 

71 In re Natt'onal Prescrt'ptt'on Opiate Litigation, No. 1:17-md-2804 (66‘ Cir. 2018),
http://courtweb.pamd.uscourts.gov/courtwebsearch/ndoh/BOTEXQ3LV4.pdf.
72 Sills v. Smith & Wesson Corp., 2000 WL 33113806, at *7 (Del. Super.).

33

over the instrumentality that caused the nuisance at the time of the nuisance.73 The
State has failed to allege control by Defendants over the instrumentality of the
nuisance at the time of the nuisance. Thus, all Defendants’ Motions to Dismiss the

nuisance claims must be granted.

CIVIL CONSPIRACY

To establish a valid claim for civil conspiracy, a plaintiff must prove: “(l) A
confederation or combination of two or more persons; (2) An unlawful act done in
furtherance of the conspiracy; and (3) Actual damage.”74 “In Delaware, ‘civil
conspiracy is not an independent cause of action. . .it must arise from some
underlying wrong.”’73

The State argues that Manufacturers “have engaged, and continue to engage,
in a massive marketing campaign to misstate and conceal the risks of treating
chronic pain with opioids.”76 The State argues that “[w]ithout Manufacturer

Defendants’ misrepresentations which created demand, Distributor Defendants

would not have been able to sell to Pharmacy Defendants the increasing number of

 

73 Patton v. Simone, 1992 WL 183064, at *13 (Del. Super.).

74 Johnson v. Preferred Professt'onal Ins. Co., 91 A.3d 994, 1014 (Del. Super.)(citing Nicolet,
Inc. v. Nutt, 525 A.2d 146, 149-50 (Del. l987)(citing McLaughlin v. Copeland, 455 F.Supp. 749,
752 (D.Del. 1978), affd, 595 F.2d 1213 (3d Cir. 1979))).

73 Ia'. at 1014 (citing Rarnunno v. Cawley, 705 A.2d 1029, 1030 (Del. 1998)).

76 Compl. jj 303.

34

orders of prescription opioids for non-medical purposes throughout Delaware.”77
The State asserts that “[w]ithout Distributor Defendants’ supply of prescription
opioids, Pharmacy Defendants would not have been able to fill and dispense the
increasing number of orders of prescription opioids for non-medical purposes
throughout Delaware.”78 The State alleges that this chain of conduct lead to
damages suffered by the State of Delaware and its citizens

“There is no such thing as a conspiracy to commit negligence or, more
precisely, to fail to exercise due care.”79 However, in Nicolet, Inc. v. Nutt,80 the
Delaware Supreme Court found allegations of intentional misrepresentation of
fraudulent concealment sufficient to support the plaintiffs’ claim that a
manufacturer participated in an industry-wide conspiracy to conceal the health
hazards of asbestos81

In order to allege a prima facie case of fraudulent concealment, a plaintiff
must show: “(1) deliberate concealment of a material fact or silence in the face of a
duty to speak; (2) scienter; (3) intent to induce reliance upon the concealment; (4)

causation; and (5) resulting damage.”82 In Nt`colet, the Delaware Supreme Court

 

77 Compl. jj 305.

78 Compl. jj 306.

79 Szczerba v. American Cigarette Outlet, Inc., 2016 WL 1424561, at *3 (Del. Super.)(citing
Anderson v. Airco, Inc., 2004 WL 2827887 (Del. Super.)(citing Ryan v. Elt' Lt'lly & Co., 514
F.supp. 1004, 1012 (D.s.C.1981))).

99 525 A.2d 146 (Del. 1987).

81 Ia'. at 149.

82 Szczerba, 2016 WL 1424561, at *3 (citing Nz`colet, 525 A.2d at 149-50).

35

found that the plaintiffs met these elements reasoning:

[P]laintiffs claim the conspiracy, which allegedly included

[defendant], caused “to be positively asserted to plaintiffs in a manner

not warranted by the information possessed by said defendants that

it was safe to work in close proximity to [the] [asbestos] materials”

and suppressed “medical and scientific data and other knowledge,

causing plaintiffs to be and remain ignorant thereof.” The complaint

clearly alleges scienter in that the participants “knowingly and

willfully conspired” in the scheme [and] alleges an intent to

induce reliance on false or incomplete material facts In our opinion

these allegations are sufficient to state a tort claim based on a theory

of fraudulent concealment83

In this case, the Court finds that the State has not adequately alleged in its
Complaint that Defendants engaged in a civil conspiracy similar to the allegations
in Nz'colet. The State has merely alleged parallel conduct by Defendants making
no claims that “the participants ‘knowingly and willfully conspired’ in the
scheme”84 in order to induce reliance. The State has not alleged that the
Defendants intended to conspire, but merely stated at oral argument that
Defendants attended the same conferences There are no allegations of a concerted
action, an agreement to commit an underlying wrong, awareness of an agreement,
or action in accordance with that agreement The State argues that “Manufacturer

Defendants, Distributor Defendants and Pharmacy Defendants need not have

expressly agreed to this course of action; concerted conduct itself is sufficient.”

 

33 Nicolet, 525 A.2d at 149,
84 Id.

36

This argument is not supported by Delaware law.
The Civil Conspiracy claims are hereby dismissed without prejudice. The
claims may be added if evidence supporting a conspiracy surfaces during

discovery.

UNJUST ENRICHMENT

Delaware law defines unjust enrichment as “the unjust retention of a benefit
to the loss of another, or the retention of money or property of another against the
fundamental principles of justice or equity and good conscience.”83 Unjust
enrichment requires the following: (1) an enrichment; (2) an impoverishment; (3) a
relation between the enrichment and the impoverishment; (4) the absence of
justification; and (5) the absence of a remedy provided by law.86

Under Delaware law, unjust enrichment is not a stand-alone claim in
Superior Court. The claim must be brought in the Court of Chancery. In this
Court, unjust enrichment may be asserted as a possible measure of damages

Therefore, the unjust enrichment claim must be dismissed

 

83 Incyte Corporation v. Flexus Biosciences, Inc., 2017 WL 7803923, at *4 (Del. Super.)(citing
Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010)).
86 See Nemec v. Shraa'er, 991 A.2d 110, 1130 (Del. 2010).

37

ENDO PHARMACEUTICALS INC.’S MOTION TO STRIKE

Endo argues that to the extent that the State relies on references to a 2016
Assurance of Discontinuance (AOD) between the New York Attorney General and
Endo, those allegations should be stricken or, at a minimum, cannot form the basis
of the State’s claims Endo also argues that the AOD was made without Endo
admitting to any of the findings of the New York Attorney General’s investigation
The parties allegedly agreed that the AOD was not intended for use by any third
party in any other proceeding and is not intended, and should not be construed, as
an admission by Endo of any liability or finding set forth hererin.”87 Endo argues
that the State is trying to use the settlement against Endo. Endo claims that many
courts have stricken as immaterial and impertinent allegations that refer to or are
derived nom settlements and other preliminary or non-adjudicated proceedings
including governmental investigations

The State claims that it is only using two findings nom the New York
Attorney General’s investigation, which Endo did not admit. Further, the
settlement is not an admission by Endo, but the statements quoted by the State in
its Complaint are the New York Attorney General’s findings and the State has a

right to use them. The State contends that it is not using the findings to establish

 

87 Assurance of Discontinuance jjjj 54, 67 (Endo requested in its Motion to Dismiss that the Court
take judicial notice of the AOD, an executed copy of which is available on the NYAG’s
Website.); See https://ag.ny.gov/pdfs/Endo_AOD_0301 16-Fully_Executed.pdf.

38

Endo’s liability, but to help refute Endo’s contention that the State has not stated a
claim. The State argues that pleadings are not evidence of liability and are more
properly a subject of a motion in limine.88
When ruling on a motion to strike, the Court considers: (1) whether the
challenged averments are relevant to an issue in the case; and (2) whether they are
unduly prejudicial.89 “Motions to strike are not favored and are granted sparingly,
and then only if clearly warranted, with doubt being resolved in favor of the
pleading, and objectionable matter will be stricken only if it is clearly shown to be
unduly prej udicial.”96
The Court finds that the matters objected to in Endo’s motion are relevant

and have not been shown to be unduly prejudicial Therefore, Endo’s Motion to

Strike Paragraph 83 of the Complaint must be denied.

 

88 The State proffers Johnson v. M&M, 242 F.R.D. 187, 190 (D. Conn. 2007)(“a complaint is not
submitted to the jury” and “whether evidence of the prior investigations will be admissible at
trial is an issue to be resolved at a later stage”).

89 See Shajj‘er v. Davt`s, 1990 WL 81892, at *4 (Del. Super.)(citing Pack & Process, Inc. v.
Celotex Corp., 503 A.2d 646, 660-61 (Del. Super. 1990)).

90 Pack & Process, Inc. v. Celotex Corp., 503 A.2d 646, 660-61 (Del. Super. 1985).

39

CoNCLUsIoN

The Court finds that the State of Delaware has established a prima facie case
for Negligence and Consumer Fraud against the Manufacturer Defendants Anda
Pharmaceuticals, and the Distributor Defendants However, the State of Delaware
has not demonstrated a prima facie case for Negligence and Consumer Fraud
claims against the Pharmacy Defendants Therefore, Manufacturer
Defendants’, Distributor Defendants’, and Anda Pharmaceuticals’ Motions to
Dismiss the Negligence and Consumer Fraud claims are hereby DENIED.
Pharmacy Defendants’ Motion to Dismiss the Negligence and Consumer
Fraud claims is hereby GRANTED.

The Court finds that the State of Delaware’s nuisance claims fail as a matter
of law. Therefore, all Motions to Dismiss the Nuisance claims are hereby
GRANTED.

The Court finds that the State of Delaware has failed to adequately plead its
civil conspiracy claim because the State only asserts parallel conduct by
Defendants and has failed to establish a prima facie case involving concerted
action, agreement, awareness of the agreement, and action in accordance with that
agreement. Therefore, all Motions to Dismiss the Civil Conspiracy claims are
hereby GRANTED, without prejudice. Claims for Civil Conspiracy may be

added if such evidence surfaces during discovery.

40

The Court finds that the State of Delaware’s unjust enrichment claim is not a
stand-alone claim at law. This claim must be brought in the Court of Chancery.
Unjust enrichment may be asserted as a possible measure of damages Therefore,
all Motions to Dismiss the Unjust Enrichment claims are hereby GRANTED.

The Court finds that the matter objected to in Endo Pharmaceutical’s Motion
to Strike Paragraph 83 of the Complaint has not been shown to be unduly
prejudicial. Therefore, Endo Pharmaceutical’s Motion to Strike Paragraph 83
of the Complaint is hereby DENIED.

IT IS SO ORDERED.

 

 

41