ATTORNEY GENERAL V MERCK SHARP & DOHME CORP
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STATE OF MICHIGAN
COURT OF APPEALS
ATTORNEY GENERAL, STATE OF
MICHIGAN, and CARBOLOGY, INC.,
FOR PUBLICATION
March 17, 2011
Plaintiffs-Appellees,
v
MERCK SHARP & DOHME CORPORATION,
f/k/a MERCK & COMPANY, INC.,
No. 292003
Ingham Circuit Court
LC No. 08-001132-CZ
Defendant-Appellant.
Before: SAWYER, P.J., and FITZGERALD and SAAD, JJ.
FITZGERALD, J. (dissenting).
I respectfully dissent. In my view, the trial court properly determined that plaintiffs’
claim under the Medicaid False Claim Act, MCL 400.601 et seq., as pleaded is not a product
liability action subject to the absolute defense established by MCL 600.2946(5). Consequently,
the trial court properly declined to grant summary disposition in favor of defendant Merck
Sharpe & Dohme Corporation (Merck).
Defendant’s motion for summary disposition was brought pursuant to MCR 2.116(C)(8).
A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint and is limited to
the pleadings alone. All well-pleaded factual allegations are accepted as true and construed in a
light most favorable to the nonmovant. A motion under MCR 2.116(C)(8) may be granted only
where the claims alleged are “so clearly unenforceable as a matter of law that no factual
development could possibly justify recovery.” When deciding a motion brought under this
section, a court considers only the pleadings. MCR 2.116(G)(5). Maiden v Rozwood, 461 Mich
109, 119-120; 597 NW2d 817 (1999).
Defendant is the manufacturer of the prescription pain reliever Vioxx, which was
approved by the Food and Drug Administration (FDA) in May 1999 for the treatment of
osteoarthritis, the management of acute pain in adults, and the treatment of primary
dysmenorrheal. Subsequent clinical trials and independent studies conducted after Vioxx was
approved by the FDA showed that patients using Vioxx had four or five times as many heart
attacks as patient using the over-the-counter pain reliever Aleve. In 2004, defendant voluntarily
removed Vioxx from the market.
-1-
On August 21, 2008, plaintiffs brought this action under the Medicaid False Claim Act
(MFCA), MCL 400.601 et seq.1 The gist of plaintiffs’ complaint is that defendant fraudulently
induced the State of Michigan (the state) to cover Vioxx under Medicaid by failing to adequately
disclose its risks.2 Plaintiffs alleged that defendant learned through clinical trials as early as
2000 that Vioxx posed a risk of heart attacks and other adverse cardiovascular events and that
defendant did not disclose this knowledge to the public. They also alleged that defendant used a
marketing campaign to maximize the sale of Vioxx and, in the course of doing so, attempted to
minimize the safety risks of Vioxx and to overstate its efficacy. Plaintiffs averred that if
defendant had been truthful about the safety and efficacy of Vioxx, the state would not have paid
all or part of the $20 million cost of Vioxx prescribed to Michigan Medicaid beneficiaries.
Defendant moved for summary disposition and asserted that plaintiffs’ MFCA claim is,
in truth, a product liability claim that attempts to avoid the absolute defense of MCL
600.2946(5).3 MCL 600.2946(5) immunizes manufacturers and sellers of an FDA-approved
drug from liability in a product liability action where the drug complied with FDA standards and
labeling when it left the manufacturer’s or seller’s control.4 Taylor v Smithkline Beecham Corp,
468 Mich 1, 6-7; 658 NW2d 127 (2003). The trial court denied the motion. The court concluded
that plaintiffs’ claim did not constitute a products liability action because it did not require proof
of a defective or unsafe product. The trial court also concluded that the legislature did not intend
for MCL 600.2946(5) to foreclose actions under the MFCA.
1
Plaintiffs relied on § 607 of the MFCA, which provides in pertinent part:
(1) A person shall not make or present or cause to be made or presented to an
employee or officer of this state a claim under the social welfare act, 1939 PA
280, MCL 400.1 to 400.119b, upon or against the state, knowing the claim to be
false.
(2) A person shall not make or present or present or cause to be made or
presented a claim under the social welfare act, 1939 PA 280, MCL 400.1 to
400.119b, that he or she knows falsely represents that the goods or services for
which the claim is made were medically necessary in accordance with
professionally accepted standards. [MCL 400.607(1) and (2).]
2
Plaintiffs’ complaint also included a claim for unjust enrichment.
3
Defendant relied on Duronio v Merck & Co, Inc, unpublished opinion per curiam of the Court
of Appeals, issued June 13, 2006 (Docket No. 267003), in which a panel of this Court affirmed a
trial court’s grant of summary disposition in favor of defendant in a similar case. In Duronio, the
plaintiff asserted a fraud claim and violation of the Michigan Consumer Protection Act (MCPA),
MCL 445.901 et seq., based on allegations that the defendant misrepresented or concealed the
risks associated with Vioxx.
4
An exception to the absolute defense exists in situation involving fraud or bribery in dealings
with the FDA. See MCL 600.2946(5)(a) and (b).
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Defendant argues on appeal that, despite plaintiffs’ labeling of its cause of action as a
claim under the MFCA, plaintiffs’ claim is a product liability action as defined in MCL
600.2945(h) and used in MCL 600.2946(5).5
MCL 600.2946(5) states in pertinent part:
In a product liability action against a manufacturer or seller, a product that
is a drug is not defective or unreasonably dangerous, and the manufacturer or
seller is not liable, if the drug was approved for safety and efficacy by the United
States food and drug administration, and the drug and its labeling were in
compliance with the United States food and drug administration’s approval at the
time the drug left the control of the manufacturer or seller.
In interpreting this provision, our Supreme Court has stated, “The Legislature has determined
that a drug manufacturer or seller that has properly obtained FDA approval of a drug has acted
sufficiently prudently so that no tort liability may lie.” Taylor, 468 Mich at 7. In other words, a
drug that has obtained FDA approval is “not defective or unreasonably dangerous” for purposes
of a product liability action.
MCL 600.2945 defines “product liability action” and “production” as follows:
(h) “Product liability action” means an action based on a legal or
equitable theory of liability brought for the death of a person or for injury to a
person or damage to property caused by or resulting from the production of a
product.
(i) “Production” means manufacture, construction, design, formulation,
development of standards, preparation, processing, assembly, inspection, testing,
listing, certifying, warning, instructing, marketing, selling, advertising, packaging,
or labeling.
Thus, plaintiffs’ claim is a “product liability action” subject to the absolute defense of
MCL 600.2946(5) if (1) the action is based on a legal or equitable theory of liability, (2) the
action is brought for the death of a person or for injury to a person or damage to property, and (3)
that loss was caused by or resulted from the construction, design, formulation, development of
standards, preparation, processing, assembly, inspection, testing, listing, certifying, warning,
instructing, marketing, selling, advertising, packaging, or labeling of a product.
The point of contention is whether plaintiffs’ claim was “brought for the death of a
person or for injury to a person or damage to property.” Here, plaintiff is seeking money
5
Notably, defendant has not asked this court to resolve the question of whether defendant’s
actions concerning its introduction and continued sale of Vioxx could be deemed sufficient to
state a cause of action for a violation of the MFCA.
-3-
damages “representing Medicaid overpayments wrongfully received by Defendant” as a result of
defendant’s allegedly fraudulent conduct that occurred after the FDA’s approval of Vioxx. To
treat this case as a product liability action would require a finding that plaintiffs’ claim for
money wrongfully paid was brought for damage to property.
In order to determine whether plaintiffs’ claim was brought for “damage to property”
pursuant to MCL 600.2945(h), this Court must interpret this phrase. “The fair and natural import
of the provision governs, considering the subject matter of the entire statute.” People v
McGraw, 484 Mich 120, 124; 771 NW2d 655 (2009) (emphasis added). When examined in the
proper context of a product liability statute, it is clear that “damage to property” means physical
damage to property caused by a defective or unreasonably dangerous product.
“Products liability is the name currently given to the area of the law involving the
liability of those who supply goods or products for the use of others to purchasers, users, and
bystanders for losses of various kinds resulting from so-called defects in those products.”
Prosser & Keeton, Torts (5th ed), § 95, p 677 (emphasis added). Indeed, the language in MCL
600.2946(5) refers to a product liability action and defines when a drug is not “defective or
unreasonably dangerous” for purposes of that action. Product liability includes multiple theories
of recovery and types of losses. Prosser & Keeton, Torts (5th ed), § 95, p 678, lists five different
categories of losses:
(1) personal injuries, (2) physical harm to tangible things, other than the
assembled product such as an automobile, a helicopter, or an industrial machine
of some kind, (3) physical harm to or destruction of the assembled product
purchased by the first purchaser for use, (4) physical harm to or destruction of a
product that was constructed with or repaired with the use of the target seller’s
component part, and (5) direct economic loss resulting from the purchase of the
inferior product, and indirect inconsequential loss, such as loss of profits,
resulting from the unfitness of the product adequately to serve the purchaser’s
purpose, such as when a plastic pipe purchased for an irrigation system on a golf
course is unsatisfactory and requires replacement.
The first four types of losses are based on personal injuries or physical damage to
property. The fifth type is based on purely economic loss. Under Michigan jurisprudence,
disputes involving economic loss relating to a transaction in goods are generally subject to
Article 2 of the Uniform Commercial Code (UCC), MCL 440.1101 et seq., rather than the
Revised Judicature act (RJA). See Neibarger v Universal Cooperatives, Inc, 439 Mich 512; 486
NW2d 612 (1992). The Court in Neibarger explained the rationale:
The economic loss doctrine, simply stated, provides that “‘[w]here a purchaser’s
expectations in a sale are frustrated because the product he bought is not working
properly, his remedy is said to be in contract alone, for he has suffered only
“economic” losses.’” This doctrine hinges on a distinction drawn between
transactions involving the sale of goods for commercial purposes where economic
expectations are protected by commercial and contract law, and those involving
the sale of defective products to individual consumers who are injured in a
-4-
manner which has traditionally been remedied by resort to the law of torts. [Id. at
520-521.]
Thus, in the context of the RJA, losses based on personal injury or physical damage to property
are the only actionable losses addressed under the rubric of product liability. Again, this is
consistent with damages caused by a defective or unsafe product.
If damage to property is given a broad interpretation, like that in Duronio, the statute
would provide a manufacturer or seller of drugs immunity to claims for losses that are different
than the four types of losses listed above and not contemplated by the Legislature. The
definition of product liability action must be considered in the context of a suit by purchasers,
users, or bystanders who suffer losses resulting from defects in a product. Prosser & Keeton,
Torts (5th ed), § 95, p 677. The damages in this case do not derive from injuries to a purchaser,
user, or bystander.6 Our Supreme Court has explained that product liability “derive[d] either
from a duty imposed by law or from policy considerations which allocate the risk of dangerous
and unsafe products to the manufacturer and seller rather than the consumer.” Neibarger, 439
Mich at 523 (emphasis added). Here, every section of the statute is written in the context of a
suit by a purchaser, user, or bystander. Indeed, the definitions of “misuse” and “sophisticated
user” make it clear that the potential plaintiff in a product liability action is the user of the
product. See MCL 600.2945(e), (j).
Based on the foregoing, “damage to property” is properly interpreted as physical damage
to property resulting from a defective or unreasonably dangerous product. As such, the present
case is not a product liability action, as defined in MCL 600.2945(h), because a suit brought for
the return of Medicaid overpayments is not “brought for . . . damage to property.” Accordingly,
I would conclude that the trial court properly denied defendant’s motion for summary
disposition.
/s/ E. Thomas Fitzgerald
6
The damages arise from an injury to Michigan’s Medicaid program and represent the amount of
money wrongfully paid to defendant.
-5-
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