VISION PHARMA, LLC v. SUNRISE PHARMACEUTICAL, INC.

Filing 117

OPINION. Signed by Judge Claire C. Cecchi on 6/20/2018. (sm)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

VISION PHARMA, LLC,

Civil Action No.: 2:13-cv-04692
Plaintiff,

v.

OPINION

SUNRISE PHARMACEUTICAL, iNC.,
Defendant.
CECCHI, District Judge.
I.

INTRODUCTION

This matter comes before the Court on the motion of Defendant Sunrise Pharmaceutical,
Inc. (“Defendant”) to dismiss Plaintiff Vision Pharma, LLC’s (“Plaintiff’) complaint. (ECF No.
72). The Court held oral argument on this matter (“Tr.”). For the reasons set forth below,1

Defendant’s motion to dismiss is granted in part and denied in part.
II.

BACKGROUND

Plaintiff “is a limited liability corporation organized and existing under the laws of the
State of Florida, with its principal place of business located.

.

.

[in] Florida[.]” (ECF No. I

¶ 1).

“In or about 2009,” Plaintiff alleges that it:
[M]oved from New Jersey to Florida, dissolv[ed] the New Jersey entity and
reincorporat{ed] as [a] Florida business entity of the same name in Florida. Both
entities are identical but for their state of incorporation, including, inter alia, the
entities’ members, assets, and Federal Tax Identification Number. The members
of the New Jersey entity formally transferred all rights, titles, and interests held by
the New Jersey entity to the Florida entity (including, but not limited to, the rights
at issue in the instant lawsuit) such that the Florida entity had effectively acquired
the New Jersey entity in full.

The Court considers any new arguments not presented by the parties to be waived. See Brenner
v. Local 514, United Bhd. of Carpenters & Joiners ofAm., 927 F.2d 1283, 1298 (3d Cir. 1991).

(Id.

¶ 11).

Subsequent to Defendant’s filing of a motion to dismiss, which in part argues that

Plaintiff lacks standing to bring its claims, Plaintiff clarified that the New Jersey entity did
not
actually formally transfer all of its rights, titles, and interests to Plaintiff, but instead maintains that
such rights transferred automatically. (ECF No. 73 at 9-16).
Plaintiffs “general business model involves supplying drug products to pharmacy chains,
wholesalers, and distributors.” (ECF No. 1

¶ 6).

“Beginning in or about 2006,” the New Jersey

entity and Defendant “entered a series of supply agreements (“Supply Agreements”), under which
[Defendant] manufactured Vision’ 2 Drug Products.” (Id.

¶ 8).

Plaintiff is not a signatory to the

Supply Agreements. (ECF No. 72-1 at 9).
Plaintiff alleges that the Supply Agreements “required [Defendant] to supply Vision with
all necessary formulation and development documentation for the Drug Products and... [to] notify
and supply Vision of any Form FDA 483 observations or warning letters received by [Defendant]
from the U.S. Food and Drug Administration (FDA).. within five (5) business days of receiving
.

same.” (ECF No. 1

¶ 10).

On April 29, 2010, Plaintiff contends that “Vision received a warning

letter from the FDA,” in which the FDA “determined that the Drug Products Vision purchased
from [Defendant were] adulterated within the meaning of 21 U.S.C. 351 (a)(2)(B).” (Id.

¶J 12-13).

Further, “[t]he FDA warned Vision that said Drug Products ‘may not be introduced into
or
delivered for introduction into interstate commerce.” (Id.

¶ 13).

The April 29, 2010 letter also

“referenced an FDA warning letter that was sent to [Defendant] on or about January 14, 2010 that
specifically referenced the Drug Products and [Defendant’s] prior manufacturing deficiencies

2

Plaintiff does not distinguish between itself and the New Jersey entity in its complaint. For
the
purposes of this factual background, the Court will refer to Plaintiffs general use of “Vision”
in
its complaint; however, such references should not be construed as findings that Plaintiff and the
New Jersey entity are one and the same, which will be discussed infra.
2

concerning the Drug Products as well as correspondence between [Defendant] and the FDA
concerning [the] same occurring in July 2009, September 2009, and November 2009.” (Id.

¶ 14).

More specifically, the January 14, 2010 letter: (1) stated that Defendant “had committed multiple
violations of the Current Good Manufacturing Practice (CGMP) regulations for finished
pharmaceuticals;” (2) “noted that at least some of [Defendant’s] CGMP violations had been
revealed in earlier inspections and [Defendant] had failed to complete the corrective actions it
promised to the FDA;” and (3) “concluded that [Defendant’s] CGMP violations caused its [D]rug
[P]roducts to be adulterated within the meaning of 21 U.S.C. 351(a)(2)(B).” (Id.

¶J 23-25, 2$).

According to Plaintiff, Defendant, in violation of the Supply Agreements, did not: (1)
timely advise Vision that it received letters or correspondence from the FDA; (2) provide Vision
with responses to the FDA; or (3) supply Vision with formulation and development documentation
for the Drug Products. (Id.

¶J 15-17, 26-27).

Plaintiff contends that Defendant also failed to abide

by its purported “verbal agreement that [Defendant] would advise Vision of any 4$3 observations
or FDA warning letters.” (Id.

¶ 1$).

On June 10, 2010, Plaintiff alleges that “Vision received a

second letter from the FDA further reiterating its demand that Vision cease all distributions of the
[Defendant’s] Drug Products.” (Id.

¶ 19).

Plaintiff also alleges that upon information and belief, Defendant: (1) manufactured and
sold adulterated Drug Products “to Vision with knowledge of actual, or at least potential,
adulteration problems;” (2) “willfully hid its FDA compliance issues from its customers, including
Vision;” and (3) “had systematic and ongoing FDA compliance issues since as early as 2007.” (Id.

¶J 20-22).

Plaintiff filed this suit on August 5, 2013. (ECF No. 1).

3

III.

LEGAL STANDARD
A.

Subject Matter Jurisdiction

A court must grant a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) if
the court determines that it lacks subject-matter jurisdiction over a claim. See In re Schering
Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 243 (3d Cir. 2012).
“Generally, where a defendant moves to dismiss under Rule 12(b)(1) for lack of subject-matter
jurisdiction, the plaintiff bears the burden of proving by a preponderance of the evidence that the
Court has subject matter jurisdiction.” The Connetly Firm, P.C. v. US. Dep ‘t ofthe Treasury, No.
15-2695, 2016 WL 1559299, at *2 (D.N.J. Apr. 18, 2016) (citing Gould Elecs. Inc. v. United
States, 220 F.3d 169, 178 (3d Cir. 2000)).
The first step in evaluating a 1 2(b)(1) motion is determining whether the 1 2(b)( 1) motion
presents a facial attack or a factual attack. See Constitution Party ofPa. v. Aichete, 757 F.3d 347,
357-58 (3dCir. 2014). “A facial attack, as the adjective indicates, is an argument that considers a
claim o its face and asserts that it is insufficient to invoke the subject matter jurisdiction of the
court[.]” Id. at 358. “A factual attack, on the other hand, is an argument that there is no subject
matter jurisdiction because the facts of the case[.]” Id. F or facial attacks, “the court must consider
the allegations of the complaint as true.” Mortensen v. First Fed. Say. & Loan Ass ‘n, 549 F.2d
884, 891 (3d Cir. 1977). For factual attacks, however:
[T]here is substantial authority that the trial court is free to weigh the evidence and
satisfy itself as to the existence of its power to hear the case. In short, no
presumptive truthfulness attaches to plaintiffs allegations, and the existence of
disputed material facts will not preclude the trial court from evaluating for itself the
merits ofjurisdictional claims. Moreover, the plaintiff will have the burden ofproof
that jurisdiction does in fact exist.

4

Id.; see also Hood v. Mercer-Bucks Orthopaedics, No. 14-3427, 2014 WL 5465879, at *3 (D.N.J.
Oct. 28, 2014) (holding that for factual attacks, courts are permitted “to weigh and consider facts
‘outside the pleadings’ to decide whether subject matter jurisdiction is proper”) (citations omitted).
A motion to dismiss for lack of standing is properly brought pursuant to Federal Rule of
Civil Procedure 12(b)(l), because standing is a matter of jurisdiction. See Baltentine v. United
States, 486 F.3d 806, 810 (3d Cir. 2007).
“Article III of the Constitution limits the jurisdiction of federal courts to ‘Cases’ and
‘Controversies.” Lance v. Coffinan, 549 U.S. 437, 439 (2007). One key aspect of this case-orcontroversy requirement is standing. See Id. “The standing inquiry.. focuse[sj on whether the
.

party invoking jurisdiction had the requisite stake in the outcome when the suit was filed.” Aichele,
757 F.3d at 360 (alteration in original) (quoting Davis v. FEC, 554 U.S. 724, 734 (2008)).
To establish standing, a plaintiff must satisfy a three-part test, showing: “(1) an ‘injury in
fact,’ i.e., an actual or imminently threatened injury that is ‘concrete and particularized’ to the
plaintiff; (2) causation, i.e., traceability of the injury to the actions of the defendant; and (3)
redressability of the injury by a favorable decision by the Court.” Nat ‘1 Collegiate Athletic Ass ‘ii
v. Governor ofN.i, 730 F.3d 208, 218 (3d Cir. 2013) (quoting Summers v. Earth Island Inst., 555
U.S. 488, 493 (2009)), abrogated on other grounds by Murphy v. Nat’l Collegiate Athletic Ass ‘n,
138 S. Ct. 1461(201 8). “The party invoking federal jurisdiction bears the burden of establishing
these elements.” Lujan v. Defs. of Wildlfe, 504 U.S. 555, 561 (1992).
B.

Rule 12(b)(6)

For a complaint to survive dismissal pursuant to Fed. R. Civ. P. 12(b)(6), it “must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbat, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombty, 550 U.S. 544,
5

570 (2007)). In evaluating the sufficiency of a complaint, the Court must accept all well-pleaded
factual allegations in the complaint as true and draw all reasonable inferences in favor of the nonmoving party. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). “Factual
allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555. Furthermore, “[a] pleading that offers ‘labels and conclusions’

.

.

.

will not do. Nor

does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.”
Iqbal, 556 U.S. at 678 (citations omitted).
IV.

DISCUSSION
A.

Subject Matter Jurisdiction

The Court treats Defendant’s motion to dismiss for lack of standing as a factual attack,
rather than a facial one, because Defendant argues that Plaintiff does not possess the rights of the
New Jersey entity under the Supply Agreements. (ECF Nos. 72-1 at 9-14; 74 at 1-6; 97 at 2-7).
The Court is therefore entitled to “weigh the evidence and satisfy itself as to the existence of its
power to hear the case.” Mortensen, 549 F.2d at 891. Even in “the existence of disputed material
facts,” if the Court finds that Plaintiff has shown by a preponderance of the evidence that Plaintiff
possesses the rights of the New Jersey entity, the Court may find that subject matter jurisdiction is
proper.3 See Id.
Plaintiff avers that it is the successor-in-interest to the New Jersey entity under a de facto
merger and/or mere continuation theory. (ECF No. 94 at 1). Plaintiffs argument that it possesses
the rights of the New Jersey entity would be unnecessary but for the New Jersey entity’s relocation
to Florida. That is, Plaintiff has no written documentation evincing a merger of the New Jersey

The Court notes that the parties agree that New Jersey state law applies to the question of subject
matterjurisdiction. (ECF Nos. 94 at 2, 5 n.12; 95 at 1-2).
6

entity and Plaintiff, a liquidation of the New Jersey entity and a sale of assets to Plaintiff, or an
assignment of the Supply Agreements from the New Jersey entity to Plaintiff. Nonetheless, the
Court finds that the evidence in the record suggests that Plaintiff is the de facto successor or a mere
continuation of the New Jersey entity.
Most often applied in the context of corporate successor liability, the de facto merger and
mere continuation theories serve as exceptions to the general rule that “when a company sells its
assets the purchasing company is not liable for the seller’s debts and liabilities.” Luxliner F.L.
Exp., Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 73 (3d Cir. 1993).
In determining whether a particular transaction amounts to a de facto consolidation
or mere continuation, most courts consider four factors: (1) continuity of
management, personnel, physical location, assets, and general business operations;
(ii) a cessation of ordinary business and dissolution of the predecessor as soon as
practically and legally possible; (iii) assumption by the successor of the liabilities
ordinarily necessary for the uninterrupted continuation of the business of the
predecessor; and (iv) continuity of ownership/shareholders.
Glynwed, Inc. v. Plastimatic, Inc., 869 F. Supp. 265, 275-76 (D.N.J. 1994). “Not all of these
factors need be present for a de facto merger or continuation to have occurred. The crucial inquiry
is whether there was an ‘intent on the part of the contracting parties to effectuate a merger or
consolidation rather than a sale of assets.” Luxliner, 13 F.3d at 73 (citations omitted).
Here, the record indicates that “the Members of [the] New Jersey [entity] continued as the
three members of [Plaintiff] and held identical membership interests in [Plaintiff] as previously
held in [the] New Jersey [entity].” (ECF No. 73 at 12). Moreover, “[d]uring and after the
relocation, [Plaintiff] was operated as the same company that was originally organized as [the]
New Jersey [entity] and the Members/officers continued to conduct the business with no
change[.]” (Id.). Although “the state of organization and business address” changed, (id.), the

7

New Jersey entity and Plaintiff “had identical management, personnel, assets, and general business
operations[.]” (ECF No. 94 at 4).
This is especially evident from the purchase orders, packing slips, and invoices exchanged
between Plaintiff and Defendant, which, other than a change of address for Plaintiff from New
Jersey to Florida, are virtually identical to the purchase orders, packing slips, and invoices
exchanged between the New Jersey entity and Defendant. (See generally ECF Nos. 72-12; 72-13;
72-17 (all also showing that Plaintiff retained the name “Vision Pharma LLC” from the New Jersey
entity)). In fact, on September 1, 2009, Defendant sent a packing slip and invoice to Plaintiff at
its Florida address. (ECF Nos. 72-13 at 97; 72-17 at 53). On October 9, 2009, Defendant did the
same. (ECF Nos. 72-13 at 99; 72-17 at 54). Nothing in the record indicates that Defendant ever
questioned Plaintiffs identity or objected to the New Jersey entity’s relocation to and
reincorporation in Florida. (See, e.g., ECF No. 72-15 at 2 (presenting an email from Defendant to
Plaintiff on February 2, 2010, afier the New Jersey entity was canceled and Plaintiff reincorporated
in Florida, regarding a warning letter from the FDA)).
Defendant next contends that “[eJven assuming arguendo that a Florida billing address on
two purchase orders from [the New Jersey entity] makes those two orders valid contracts between
[Defendant] and [Plaintiff],” such purchase orders do not meet the “statutory subject matter
jurisdiction minimum to sustain an action in the District of New Jersey.” (ECF No. 97 at 7 n.8).
This argument is without merit. The question before the Court is not whether two purchase orders
meet the statutory subject matter jurisdiction minimum, but rather whether the evidence before the
Court shows that Plaintiff is the de facto successor or a mere continuation of the New Jersey entity.
Having continued to engage in business with Plaintiff with the knowledge that its address changed

8

from New Jersey to Florida, and without raising any concerns in connection with such,
Defendant’s actions lean towards a finding that the first factor weighs in Plaintiffs favor.4
Moreover, the New Jersey entity’s registration was canceled on October 2, 2009, (ECF No.
73-1 at 64), only thirty-five days after Plaintiffs effective date of incorporation in Florida.5 (Id.
at 57). The reason for cancellation of the New Jersey entity is listed as “business moved to another
state.” (Id. at 64). Although Plaintiff has not provided the Court with formal documentation as to
whether it assumed the liabilities of the New Jersey entity, Plaintiff maintains in its papers and
represented during oral argument that Plaintiff has and will continue to assume such liabilities.
(ECF No. 94 at 4; Tr. 27:22-28:1, 32:10-33:12, 36:6-22).

Finally, Plaintiffs “three

Members/officers continued as the members, officers[,] and employees of [Plaintiff] without any
change in ownership interest or business capacity.” (ECF No. 94 at 4).
Defendant contends that “the analysis of whether the continuationlde facto merger theory
applies does not begin unless there first is a written transaction between the two entities.” (ECF
No. 97 at 3). Although Defendant citçs a number of cases where a writing existed between two
entities, Defendant does not identify any precedent indicating that such a writing is required. In

Defendant also argues that “[t]here is not one purchase order sent by [Plaintiff] to [Defendant]
that was filled. To the contrary, every purchase order that was filled. [was] on [the New Jersey
entity’s] letterhead[.]” (ECF No. 97 at 7). Although the Court recognizes that the September 11,
2009 purchase order contains the New Jersey entity’s contact information at the bottom of the
page, the billing address lists Plaintiffs Florida address. (ECF No. 72-12 at 22). Thereafter,
Defendant affirmatively invoiced Plaintiff for Drug Products at its Florida address. (ECF Nos. 7213 at 99; 72-17 at 54). Defendant clearly knew that Plaintiffs address had changed, and yet
continued to do business with Plaintiff, as it had with the New Jersey entity since at least 2008.
(See generally ECF Nos. 72-12; 72-13; 72-17). Accordingly, the Court finds Defendant’s
argument without merit.
Although Defendant argues that cancellation of an LLC is very different than dissolution of an
LLC, (ECF No. 97 at 5), there is no dispute that the New Jersey entity ceased ordinary business
operations and no longer existed after October 2, 2009.
9
.

.

determining whether a de facto merger or mere continuation theory applies, New Jersey courts
consider the four factors enumerated above, none of which require a written contract or agreement.
Because the Court found that such factors have been met, Defendant’s argument is without merit.
Defendant further maintains that “in New Jersey, the doctrines of a de facto merger or
continuation have only been applied as one of the exceptions to the general rule of corporate
successor nonliability in asset acquisitions,” and have not been applied to cases “where a de facto
merger or continuation permitted the resulting entity to enforce contractual rights or bring tort
claims belonging to the prior entity.” (ECF No. 97 at 3). Although a New Jersey court opined that
it was not “aware of [any] cases applying de facto merger for the benefit of the resulting entity,”
it also held that “our courts have not held that the doctrine is only relevant to liabilities, and in fact
have defined the doctrine more broadly.” In re Hazardous Discharge Site Remediation fund
Innocent Party Grant Application Cflflake Assocs., LLC, No. A-4685-l 1T4, 2013 WL 2217417,
at *7 (N.J. Super. Ct. App. Div. May 22, 2013).
“explained that a ‘merger is defined.

.

.

More specifically, the New Jersey court

as the absorption by one corporation of one or more usually

smaller corporations, which latter corporations lose their identity by becoming part of the larger
enterprise.” Id. (citations omitted).
The record indicates that Plaintiff was a successor to the New Jersey entity by virtue of a
de facto merger or mere continuation. The Court finds that, under these specific set of facts, to
hold that Plaintiff does not have standing to bring this action would promote form over substance
and be fundamentally unfair. It was not until Plaintiff filed a complaint against Defendant that
Defendant raised any issue with the New Jersey entity’s relocation to and reincorporation in
Florida. To the contrary, the evidence before the Court indicates that Defendant acknowledged
Plaintiff as a successor or continuation of the New Jersey entity by continuing to provide the same
10

services to Plaintiff without objection.

(See generally ECF Nos. 72-12; 72-13; 72-17

(documenting purchase orders, packing slips, and invoices between the New Jersey entity and
Defendant, which are virtually identical to the purchase orders, packing siips, and invoices
between Plaintiff and Defendant)).

Moreover, the New Jersey entity no longer exists.

Accordingly, the Court holds that Plaintiff possesses standing as the real party in interest in this
lawsuit.6’7
B.

Rule 12(b)(6)

In addition to lack of standing, Defendant raises a number of arguments as to why
Plaintiff’s complaint should be dismissed for failure to state a claim upon which relief may be
granted. Defendant first contends that Plaintiff “fails to allege that the specific Drug Products
delivered to [the] New Jersey [entity] were adulterated upon tender of delivery or at any time
thereafter.” (ECF No. 72-1 at 19-20). More specifically, Defendant avers that Plaintiff “alleges
only that the FDA issued warning letters which labeled unidentified batches of the Drug Products
as adulterated,” which warning letters are “merely advisory.” (Id. at 20). Further, Defendant
maintains that Plaintiff “fails to allege a casual nexus between the advisory warning letters which
were issued months after the Drug Products were delivered to [the] New Jersey [entity] and its
alleged damages.” (Id.).
The Court finds that Plaintiff states a claim upon which relief may be granted. In Silver v.
Medtronic, Inc., the court rejected a similar argument raised by a defendant, opining that:

6

Based on the foregoing, the Court need not address Plaintiff’s remaining arguments as to why it
maintains standing. Moreover, the Court need not consider whether the New Jersey entity is a
necessary and indispensable party, as it has found that Plaintiff is a de facto successor or mere
continuation of the New Jersey entity, and because the New Jersey entity no longer exists.
For the same reasons as set forth above, the Court finds that Plaintiff also maintains standing to
bring its tort claims against Defendant.
11

Plaintiff has cited to the FDA warning letters, including three specifically outlining
failures of CGMPs at the Minneapolis, Minnesota manufacturing facility. Plaintiff
has further alleged that his Device was manufactured in that facility and was subject
to those failures. Finally, Plaintiff alleged that his Device failed because it was
“manufactured out of specification” and was “adulterated” due to the federal
violations. Taking Plaintiffs allegations as true, as we must, he has certainly pled
a plausible claim[.]
236 F. Supp. 3d 889, 898-99 (M.D. Pa. 2017). Although Silver involved a manufacturing defect
claim, the same rationale applies here. Plaintiff has cited to two FDA warning letters, both
concluding that the Drug Products Plaintiff purchased from Defendant were adulterated within the
meaning of 21 U.S.C.

§

351(a)(2)(B). (ECF Nos. 1-1 at 2; 1-2 at 1). Plaintiff has further alleged

that Defendant manufactured the adulterated Drug Products since as early as 2007, which
adulterated products were sold by Defendant to Plaintiff. (ECF No. 1

¶J 20,

22, 29). Finally,

Plaintiff alleged that Plaintiff suffered damages because it was unable to sell its inventory of the
adulterated Drug Products, which were deemed unsalable by the FDA. (Id.

¶f 57-58).

Taking

Plaintiffs allegations as true, the Court finds Plaintiff has pled a plausible claim for relief. See
Silver, 236 F. Supp. 3d at 898-899.
Defendant next avers that Plaintiffs contract and warranty claims8 relating to transactions
that occurred before August 6, 2009 are barred by the statute of limitations. (ECF No. 72-1 at 2123). In response, Plaintiffmaintains that the statute of limitations should be equitably tolled. (ECF
No. 73 at 19-21).

8

Defendant also contends that Plaintiffs warranty claims must fail because Plaintiff fails to allege
that the Drug Products were defective upon tender of delivery. (ECF No. 72-1 at 25). The Court
disagrees. Although Defendant contends that the FDA warning letters “were issued months after
the last of the Drug Products were delivered to” the New Jersey entity, (Id.), such letters make
explicit reference to violations noted by the FDA during inspections in as early as 2007 and 2009.
(ECF Nos. 1-1 at 1; 1-2 at 1-4). Plaintiff additionally makes these allegations in its complaint.
(ECF No. 1 ¶J 14, 22, 25). Accordingly, the Court finds that Plaintiff has adequately stated a
claim.
12

“An action for breach of any contract for sale must be commenced within four years after
the cause of action has accrued.” N.J. Stat. Ann.

§ 12A:2-725(1).

A cause of action accrues when the breach occurs, regardless of the aggrieved
party’s lack of knowledge of the breach. A breach of warranty occurs when tender
of delivery is made, except that where a warranty explicitly extends to future
performance of the goods and discovery of the breach must await the time of such
performance the cause of action accrues when the breach is or should have been
discovered.
N.J. Stat. Ann.

§ 12A:2-725(2). “Equitable tolling functions to stop the statute of limitations from

running where the claim’s accrual date has already passed.” Oshiver v. Levin, Fishbein, Sedran &
Berman, 38 F.3d 1380, 1387 (3d Cir. 1994), abrogated on other grounds by Rotkiske v. Klemm,
890 F.3d 422 (3d Cir. 2018). Equitable tolling “may excuse [a] plaintiffs non-compliance with
the statutory limitations provision at issue when it appears that (1) the defendant actively misled
the plaintiff.

.

.

and (2) this deception caused the plaintiffs non-compliance with the limitations

provision.” Id.
At the motion to dismiss stage, the Court is required “to accept all allegations of fact as
true and draw all reasonable inferences in [Plaintiffs] favor.” Id. Here, Plaintiff alleges that
Defendant actively misled Plaintiff by failing to notify Plaintiff of Defendant’s correspondence
with the FDA, the FDA warning letters, or the FDA observation letters stating that the Drug
Products were adulterated or otherwise in violation of CGMP regulations. (ECF No. 1
16, 18, 26-27; see also id.

¶J 10, 15-

¶ 2 1-22 (alleging further that Defendant willfully hid its FDA

compliance issues from customers, and had systematic and ongoing FDA compliance issues since
as early as 2007)). Plaintiff also alleges that this deception caused Plaintiffs non-compliance with
the limitation provision. (Id.

¶ 46 (“[Plaintiff] would not have purchased the Drug Products if

[Defendant] had timely made [Plaintiff] aware that: (1) the Drug Products were being manufactured
pursuant to existing and ongoing CGMP violations as determined by the FDA; and/or (ii)
13

[Defendant’s] continuing, willful failure to correct the CGMP violations over the course of several
months would ultimately lead to the FDA deeming the Drug Products unsalable in interstate
commerce.”)). At this stage of the litigation, the Court finds that Plaintiff has adequately pled the
doctrine of equitable tolling. Accordingly, Defendant’s argument in this regard is without merit.
Defendant also maintains that the alleged oral agreement between the parties requiring
Defendant to notify Plaintiff of any FDA observations, warning letters, or other correspondence is
barred by the statute of frauds. (ECF No. 72-1 at 23). The New Jersey Statute of Frauds provides
that:
[A] contract for the sale of goods for the price of $500 or more is not enforceable
by way of action or defense unless there is some writing sufficient to indicate that
a contract for sale has been made between the parties and signed by the party against
whom enforcement is sought or by his authorized agent or broker.
N.J. Stat. Ann.

§ 12A:2-201(1). “Goods” are defined as “all things.. which are movable at the
.

time of identification to the contract for sale other than the money in which the price is to be paid,
investment securities

.

.

.

and things in action.” N.J. Stat. Ann.

§ 12A:2-105. The alleged oral

agreement between the parties requiring Defendant to notify Plaintiff of any FDA observations,
warning letters, or other correspondence is clearly not a contract for the sale of goods.
Accordingly, Defendant’s argument is without merit.
Defendant next argues that Plaintiff’s claims for negligence, fraud and deceit,9 and breach
of the covenant of good faith and fair dealing are duplicative of its claim for breach of contract.
Defendant also argues that Plaintiffs fraud and deceit claim must be dismissed for failure to
plead with particularity because “there are no allegations in the complaint regarding the
circumstances constituting fraud including the identity of the individual who made [the] false
representation, the date that the false representation was made, the identity of the individual to
whom the false representation was made, or the location where the false representation was made.”
(ECF No. 72-1 at 24; see also ECF No. 74 at 9-10). Even under Federal Rule of Civil Procedure
9(b)’ s heightened pleading requirement, however, the Court finds that Plaintiffs complaint puts
14

(ECF No. 72-1 at 23-25). Plaintiff contends that its claims are not duplicative, but rather are based
upon duties which are separate and distinct from any contractual obligations. (ECF No. 73 at 2224). Whether Plaintiffs claims are duplicative or not, a “claim of redundancy may be dealt with
more soundly on a developed factual record, whether on summary judgment or in connection with
focusing the issues preliminary to trial.” HUMC Opco LLC v. United Benefit Fund, No. 16-168,
2016 WL 6634878, at *4 (D.N.J. Nov. 7, 2016); see also Univ. Spine Ctr. v. Horizon Blue Cross
Blue Shield ofNJ , No. 16-9253, 2017 WL 3610486, at *4 (D.N.J. Aug. 22, 2017) (“Courts in this
district and elsewhere have held that because a plaintiff may plead in the alternative, dismissal of
a.

.

.

claim as duplicative of [another] claim is generally not appropriate on a motion to dismiss.”).

Accordingly, Defendant’s motion to dismiss is denied on these grounds, but without prejudice so
that such contentions may be renewed in the context of summary judgment or at trial.
Finally, Defendant avers that Plaintiff cannot state a claim for violations of the New Jersey
Consumer Fraud Act (“NJCFA”) because Plaintiff is not a consumer. (ECF No. 72-1 at 25). “To
bring a NJCFA claim, {p]laintiffs must demonstrate that they are ‘consumers’

.

..

.

A ‘consumer,’

while not defined by the NJCFA, has been described as ‘one who uses (economic) goods, and so
diminishes or destroys their utilities.” Viking Yacht Co. v. Composites One LLC, 496 F. Supp. 2d
462, 473 (D.N.J. 2007) (citations omitted), aff’d, 385 F. App’x 195 (3d Cir. 2010). “A business
entity can qualify as a member of the public, or ‘person,’ when it is in a consumer-oriented
situation. In determining whether the NJCFA applies, the Court should look to the character of

Defendant on sufficient notice of its fraud claim. Accordingly, Defendant’s argument is without
merit. See Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984)
(“Rule 9(b) requires plaintiffs to plead with particularity the ‘circumstances’ of the alleged fraud
in order to place the defendants on notice of the precise misconduct with which they are charged,
and to safeguard defendants against spurious charges of immoral and fraudulent behavior.”).
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the transaction and not to the identity of the purchaser.” Id. at 474. “Under New Jersey law,
‘purchasers of wholesale goods for resale are not consumers within the meaning of the NJCFA.’
However, New Jersey courts have found that businesses who purchase and use products are
‘consumers’ under the NJCF A.” Id.
Here, although Plaintiff correctly argues that a business may be considered a consumer
under the NJCFA, a business only “qualifies] as a member of the public and consumer when it
acts as a consumer.

.

.

.

[A] commercial reseller of goods is not a consumer and cannot sue under

the NJCFA.” World Express & Connection, Inc. v. Crocus Investments, LLC, No. 15-8 126, 2017
WL 4516465, at *4 (D.N.J. Oct. 10, 2017). Plaintiff expressly states in its complaint that it “would
be supplying the Drug Products manufactured by [Defendant] to its customers[.]” (ECF No. 1
see also Id.

¶6

¶ 9;

(“[Plaintiffs] general business model involves supplying drug products to

pharmacy chains, wholesalers, and distributors.”), ¶32 (“The ordinary purpose of said Drug
Products is for distribution into interstate commerce (including to pharmacies within this District
for distribution to District residents).”)). In other words, Plaintiff expressly identifies itself as a
reseller of Defendant’s Drug Products. Accordingly, Plaintiff is not considered a consumer under
the NJCFA and Count I of its complaint must be dismissed.

V.

CONCLUSION
For the foregoing reasons, Defendant’s motion to dismiss is granted in part and denied in

part. An appropriate Order accompanies this Opinion.

DATED:

10

2

CLAIRE C. CECCHI, U.S.D.J.

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