It has been a while since we saw a movie in a theater.  That is one aspect of the oft-discussed return to normality that appeals to us.  When we saw a trailer recently for The Many Saints of Newark, a prequel to old HBO mainstay The Sopranos, it piqued our interest.  It even made us return to the original series, which began more than twenty years ago, something we knew but still have a little trouble grasping.  The mobsters who are the focus of the show are constantly looking for new schemes to make money with the specter of RICO and FBI wiretaps, subpoenas, and informants never far from their minds.  When Junior Soprano is arrested in season 1, Tony is aware of the RICO predicates charged in the indictment.  As various criminal plans are hatched, the hatchers look for intermediaries, civilian and otherwise, to keep the higher ups further away from the actual crime if things go south.  You get the idea.

We are not saying plaintiff lawyers are like mobsters, but they do tend to come up with creative claims and theories in attempts to impose liability on as many defendants as possible even when they might have strong claims against one or more logical defendants.  We see this dynamic in one of the recent orders from the Zantac MDL, where plaintiffs have asserted many claims against many defendants in what seems to be at its core a litigation over alleged injuries from an alleged carcinogen, NMDA, in prescription and over-the-counter medications.  We have discussed a number of decisions, mostly good, from this MDL over the last several months.  In In re Zantac (Ranitidine) Products Liability Litigation, MDL No. 2924, 2021 WL 2685640 (S.D. Fla. June 30, 2021), the court addressed the OTC manufacturer defendants’ motion to dismiss the civil RICO claims asserted against them in the current complaint.  Why RICO when traditional product liability theories might do?  Well, the statute does provide a winning plaintiff with “threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.”  That would be why.  A more interesting question might be “how RICO.”  That is what the court addressed in what seems to us like a strong decision.

The specifics of the claims are that a bunch of purported class representatives claim to have purchased OTC Zantac and allege that the OTC manufacturers violated 18 U.S.C. § 1962(c) by “engag[ing] in . . . a pattern of racketeering activity or collection of unlawful debt” and/or conspired with each other to do so under §1962(d).  Id. at *3.  The alleged “racketeering activity” consisted of “an enterprise to deliberately and unlawfully misrepresent the safety risks” of the drug though a “decades-long marketing and promotional campaign to mislead the public,” “misleading communications with federal regulators,” and “efforts to manipulate key opinion leaders and industry groups.”  Id.  Defendants raised a number of arguments about plaintiffs’ failure to plead the elements of a RICO claim, but the court only had to decide one:  whether plaintiffs could sue as indirect purchasers of defendants’ medication given that they did not allege any direct purchases from defendants.

Unlike some of the really bad decisions in the third party payor context that have allowed RICO claims to proceed (see here and internal links), the plaintiffs here all claimed to have paid third party retailers like pharmacies and grocery stores for the drugs they purchased.  Defendants’ argument was fairly straightforward and grounded in multiple Supreme Court decisions.  They contended RICO prohibits recovery by indirect purchasers because its language focuses on direct purchasers and that language was modeled on federal antitrust law, which clearly prohibits recovery by indirect purchasers.  Id. at *4.

The rationales for barring indirect purchaser suits are:  (1) facilitating more effective enforcement of antitrust laws; (2) avoiding complicated damages calculations; and (3) eliminating duplicative damages against antitrust defendants.

Id. at *5 (internal citation omitted).  The majority of federal courts to consider the application of the indirect purchaser rule to civil RICO claims, including three circuit courts and a decision from the Southern District of Florida earlier this year, followed the same rationale.  Id. at *6.

Plaintiffs did not accede to the majority position without a fight.  They argued that a 1985 Supreme Court decision somehow trumped the 1992 Supreme Court decision endorsing antitrust principles for the interpretation of RICO’s language.  They also argued that language in an Eleventh Circuit decision from 1988 that there are “perils in relying too closely on the analogy of the antitrust laws” weighed against adopting the indirect purchaser rule.  Id. at *7.  Neither worked.  Then they claimed that RICO standing could be established based solely on allegations of proximate cause, citing another 1988 Eleventh Circuit case that involved direct purchasers.  “Because the Supreme Court’s message in Holmes [the 1992 case] was clear, the Court is persuaded to join the prevailing view that the indirect purchaser rule applies to RICO claims.”  Id.

Because plaintiffs “were not the first, nor even the second, purchasers in the OTC distribution chain,” the dismissal of their claims in the face of the adoption of the indirect purchaser rule was clear.  Id.at *8.  Yet, they offered a creative argument for the creation of an exception to the indirect purchaser rule for those who allegedly suffered “direct harm” or were the “first victims” of the alleged RICO scheme.  Although creative, this too had been addressed and rejected by a circuit court.  Id. at **8-9 (citing Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77, 92 (3d Cir. 2011)).  Thus, the indirect purchaser rule was an “unsurmountable hurdle for Plaintiffs” and their RICO claims were dismissed with prejudice.  Id. at *9.  With that, we will resist the urge to make any analogies to real or fictional mobsters and simply say that the ruling seems to us like another step in eliminating frivolous, but dangerous, civil RICO claims from product liability litigation against drug manufacturers.