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Teamsters Local 237 Welfare Fund v. Astrazeneca Pharmaceuticals LP

Superior Court of Delaware, New Castle

July 8, 2015

TEAMSTERS LOCAL 237 WELFARE FUND, et. al., on behalf of themselves and others similarly situated, Plaintiffs
v.
ASTRAZENECA PHARMACEUTICALS LP and ZENECA, INC., Defendants

Submitted: May 18, 2015

Upon Consideration of Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaint, GRANTED.

A. Zachary Naylor, Esquire, Chimicles & Tikellis LLP, Wilmington, DE, Attorney for Plaintiffs.

Michael P. Kelly, Esquire, McCarter & English, LLP, Wilmington, DE, Attorney for Defendants.

OPINION

VIVIAN L. MEDINILLA JUDGE

I. INTRODUCTION

Plaintiffs, six New York-based health care funds, [1] filed this class action suit in November 2004 against Defendants Astrazeneca Pharmaceuticals, L.P. and Zeneca, Inc. ("Defendants" or "Astrazeneca") alleging consumer fraud, unjust enrichment, and negligent misrepresentation in connection with Astrazeneca's marketing of its prescription heartburn medication, Nexium. Defendants moved to dismiss. This Court stayed the action while parallel litigation involving essentially the same factual allegations was pending in the United States District Court for the District of Delaware ("District Court"). Following a lengthy procedural history in the District Court, the stay was lifted. Now before the Court are Defendants' motions to dismiss Plaintiffs' Second Amended Complaint ("SAC"), or alternatively, to strike certain allegations in the SAC. For the reasons set forth below, the Motion to Dismiss is GRANTED.

II. FACTS AND PROCEDURAL HISTORY

Astrazeneca is the manufacturer of Prilosec, a drug used to treat heartburn and related diseases. The generic term for Prilosec is omeprazole. In 2000, Prilosec generated approximately $6 billion in sales for Astrazeneca. Astrazeneca's patent for Prilosec was set to expire in 2001.[2]

Plaintiffs are six New York-based union health and benefit funds that allegedly reimbursed for their members' purchases of Astrazeneca products in fifteen different states.[3] Plaintiffs contend that Astrazeneca, a Delaware company, engaged in consumer fraud by introducing an essentially identical drug called Nexium to the market when generic omeprazole became available as over-the-counter "Prilosec OTC."[4] Plaintiffs allege that Astrazeneca falsely represented Nexium to be superior to Prilosec in an effort to keep Astrazeneca's market share dominant after losing its patent for Prilosec.[5]

Plaintiffs filed their original class action complaint on November 18, 2004. An amended complaint was filed on February 16, 2005. Defendants filed a motion to dismiss on March 3, 2005. On May 4, 2005, the Court entered a stipulated order to stay the proceedings because parallel litigation in the District Court had been instituted.[6]

The District Court case was styled as Pennsylvania Employee Benefit Trust Fund v. Zeneca (hereinafter "Zeneca") and involved a putative class of plaintiffs from Pennsylvania, New York, and Michigan.[7] Defendants moved to dismiss on grounds that, inter alia, Plaintiffs' claims were preempted by federal law. Plaintiffs appealed, and the Third Circuit affirmed.[8] In 2009, the United States Supreme Court remanded the case to the Third Circuit with instructions to reconsider the case in light of another then-recent decision wherein the Court held that state consumer protection laws were not preempted by federal law in all cases.[9]

On May 6, 2010, following remand from the Third Circuit, the District Court again dismissed the complaint.[10] Specifically, the District Court held: (1) under a Delaware choice of law analysis, the law of the plaintiffs' home states controlled the claims;[11] (2) the complaint failed to state a claim under each of the respective states' consumer protection laws;[12] (3) there was no adequate causal connection between Defendants' alleged misrepresentations and Plaintiffs' decision to purchase Nexium over Prilosec such that the unjust enrichment claim could survive dismissal;[13] and (4) the complaint did not contain allegations of reliance such that the claim for negligent misrepresentation could survive dismissal.[14] Although the District Court granted leave to do so, Plaintiffs did not file an amended complaint, nor did Plaintiffs appeal the decision.

Following the District Court's decision, on August 8, 2010, the Court granted Plaintiffs' motion to lift the stay on the instant action. Unfortunately, and without much explanation, more than three years passed without any action taken by either party.[15] On October 4, 2013, Astrazeneca moved to dismiss the action in this Court for failure to prosecute. After a status conference with the then-presiding judge, the Court denied the motion and issued a scheduling order. On April 4, 2014, pursuant to the scheduling order, Plaintiffs filed the Second Amended Class Action Complaint (the "SAC").

The SAC before this Court alleges (1) violations of the Delaware Consumer Fraud Act ("DCFA");[16] (2) violations of the other 14 individual state consumer protection statutes wherein Plaintiffs are alleged to have purchased Nexium; (3) unjust enrichment; and (4) negligent misrepresentation. The SAC differs from the original class action complaint in two respects: it removes claims for tortious interference, and raises new factual allegations that Astrazeneca engaged in an illegal "pay-for-delay" or "reverse" settlement scheme with potential generic manufacturers of Nexium in order to maintain Astrazeneca's dominance over the omeprazole market. The "pay-for-delay" activities allegedly occurred in 2008.[17]

On May 8, 2014, Astrazeneca filed a notice of removal to the District Court. Defendants sought removal on the basis that the new "reverse settlement" and "pay-for-delay" allegations raised a new and distinct claim, which gave the federal court jurisdiction under the Class Action Fairness Act of 2005 ("CAFA").[18]Plaintiffs disagreed and moved to remand the case back to this Court. By order dated November 18, 2014, the District Court granted Plaintiffs' motion.[19] The District Court concluded that the new allegations related back to the date of the original filing, which occurred before the enactment of CAFA, and, therefore, CAFA did not apply.[20]

After remand, Defendants filed the instant motion to dismiss and a briefing schedule was issued. Defendants also filed a separate motion to strike the allegations concerning the "pay-for-delay" scheme from the SAC. A hearing was held on both motions on April 23, 2015.

On May 7, 2015, Plaintiffs filed a "Notice of Supplemental Authority" and attached two cases from the Northern District of California, which purport to bolster Plaintiffs' argument against dismissal.[21] On May 12, 2015, Defendants filed their response which urged the Court to disregard the cases as inapposite.[22]On May 14, 2015, Plaintiffs filed a "Response in Furtherance of their Notice of Supplemental Authority, " again urging this Court to consider the California cases, and restating their disagreement with Defendants' position.[23] On May 18, 2015, Defendants filed a "Further Response Re: Plaintiffs' Notice of Supplemental Authority."

Having considered the briefs and submissions of the parties, exhibits and appendices attached thereto, relevant case law and authorities, and the oral arguments of the parties, the matter is ripe for review.

III. STANDARD OF REVIEW

When deciding a motion to dismiss for failure to state a claim under Superior Court Rule 12(b)(6), all-well pleaded allegations in the complaint are to be accepted as true, [24] and the Court must draw all reasonable inferences in favor of the non-moving party.[25] The complaint will be dismissed only if it appears to a certainty that under no set of facts which could be proved to support the claim asserted would Plaintiff be entitled to relief.[26]

IV. DISCUSSION

The Court will first undertake a choice of law analysis to determine what law should apply to the claims at issue in this case. The Court will next apply the controlling state law to Plaintiffs' claims. Finally, the Court will address any supplemental issues concerning the disposition of this case.

A. Choice of Law[27]

In Pennsylvania Employee Benefit Trust Fund v. Zeneca, Inc. ("Zeneca"), [28]the District Court applied Delaware's choice of laws principles and determined that the law of each of the plaintiffs' residence or place of business controlled the consumer fraud claims they asserted against Astrazeneca.[29] The Court notes that the ...


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