Painters and Allied Trades District Council 82 Health Care Fund v. Takeda Pharmaceuticals Co., No. 18-55588 (9th Cir. 2019)Annotate this Case
The Ninth Circuit reversed the district court's dismissal of civil Racketeer Influenced and Corrupt Organizations Act (RICO) claims based on lack of RICO standing in a putative class action brought against pharmaceutical companies. Plaintiffs filed suit 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.
The panel held that patients and health insurance companies who reimbursed patients adequately alleged the required element of proximate cause where they alleged that, but for defendant's omitted mention of a drug's known safety risk, they would not have paid for the drug. The panel agreed with the First and Third Circuits that plaintiffs' damages were not too far removed from defendants' alleged omissions and misrepresentations to satisfy RICO's proximate cause requirement. In this case, plaintiffs sufficiently alleged a direct relationship, and the Holmes factors weighed in favor of permitting their RICO claims to proceed. The panel explained that, although prescribing physicians served as intermediaries between defendants' fraudulent omission of Actos's risk of causing bladder cancer and plaintiffs' payments for the drug, prescribing physicians did not constitute an intervening cause to cut off the chain of proximate causation. The panel also held that plaintiffs have adequately alleged the reliance necessary to satisfy RICO's proximate cause requirement.
Court Description: 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. 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.