PLUMBERS' LOCAL UNION NO. 690 HEALTH PLAN v. SANOFI-AVENTIS U.S., INC. et al

Filing 118

OPINION. Signed by Judge Kevin McNulty on 5/4/17. (DD, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

PLUMBERS’ LOCAL UNION NO. 690
HEALTH PLAN and DELAWARE
VALLEY HEALTH CARE COALITION,

Civ. No. 15-956 (KM) (MAH)
OPINION

Plaintiffs,
V.

SANOFI, S.A., et al.,
Defendants.

KEVIN MCNULTY, U.S.D.J.
This matter comes before the Court on motions to dismiss the Second
Amended Complaint (“2AC”, ECF no. 92) for lack of standing under Fed. R. Civ.
P. 12(b)(1) and for failure to state a claim upon which relief may be granted
under Fed. R. Civ. P. 12(b)(6). Plumbers’ Local Union No. 690 Health Plan
(“Local 690”) and newly-added plaintiff Delaware Valley Health Care Coalition
(“DVHCC”) bring this action against Sanofi S.A., Sanofi US Services Inc.,
Sanofi-Aventis U.S., LLC (collectively, “Sanofi”), Fidia Farmaceutici S. p .A.
(“Fidia Italy”), Fidia Pharma USA Inc. (“Fidia USA”; together with Fidia Italy,
“Fidia”), Accenture PLC(ACN) (“Accenture”), Deloitte LLP, Christopher
Viehbacher, Dennis Urbaniak, Raymond Godleski, and Thomas C. Valentine.
The plaintiffs claim that they or their members have been caused to pay
inflated reimbursements for a Sanofi drug, Hyalgan, as a result of two
fraudulent schemes. The first involves the distribution of free samples of
Hyalgan, which resulted in artificially high costs; the second involves kickbacks
that induced retail pharmacies to switch customers to high cost Sanofi
diabetes drugs. I earlier found that the First Amended Complaint

(“

1AC”) failed

to allege facts sufficient to link those schemes to any adverse effect on Local
1

690 or its members. That defect persists, and there are others as well. I will
therefore dismiss most of this Second Amended Complaint for lack of standing,
and in the alternative for failure to state a claim.
Like the parties, I find Constitutional standing to be a useful lens
through which to view the allegations. But particularly where, as here, the
standing challenge is a facial one, the distinction between a jurisdictional Rule
12(b)(1) analysis and a Rule 12(b)(6) analysis may blur. Such conundrums
need not be solved definitively, because either way the analysis comes out
much the same. For example, the lack of a concrete injury for purposes of Rule
12(b)(1) would, afortiori, support a dismissal on 12(b)(6) grounds for failure to
allege causation. To assist in review, however, I discuss standing under Rule
12(b)(1) in Section III, infra, and then more briefly discuss the same quasistanding issues under Rule 12(b)(6) in Section IV, infra.
I.

BACKGROUND
Familiarity with my prior Opinion (ECF No. 89

(“op.”))

and Order (ECF

No. 90) dismissing Local 690’s 1AC for failure to state a claim is assumed.
(ECF No. 89 (“Op.”)) Indeed, this opinion must be read in conjunction with the
earlier one. Because the First and Second Amended Complaints are in most
respects identical, I address here only those facts pertinent to the incremental
question presented here: Do the new allegations of the 2AC remedy the
deficiencies of the 1AC? I conclude that they do not, and therefore grant these
renewed motions to dismiss.
A.

Facts
Plaintiff Local 690 is a third-party payor (“TPP”) that reimburses its

members for the cost of prescription drugs. Its members reside in
Pennsylvania, New Jersey, North Carolina, South Carolina, and Florida. (2AC

¶J

3, 5) Co-plaintiff DVHCC is a “coalition of union funds who negotiates

prescription drug benefit contracts with pharmacy benefit managers (“PBM5”)
for use by its members.” (Id.

¶

6) DVHCC’s constituent TPPs, which include
2

Local 690, are located in the District of Columbia and 12 additional states,
including California, Colorado, Delaware, Indiana, Kentucky, Massachusetts,
Maryland, Michigan, New York, Ohio, West Virginia, and Wisconsin. (Id.

¶ 8)

Sanofi manufactures, markets, and sells prescription
pharmaceuticals. (Id. ¶j 11 -.20) Fidia owns the rights to Hyalgan, an
osteoarthritis drug; until 2011, Fidia licensed the right to sell and market
Hyalgan to Sanofi. (Id.

¶J 21-26) Three of the individual defendants—

Viehbacher, Godleski, and Urbaniak—were senior Sanofi officers’ (collectively,
the “Individual Sanofi Defendants,” and together with Sanofi, “the Sanofi
Defendants”). The fourth individual, Valentine, was a Sanofi sales
representative and district sales manager in Orange County, California. (2AC
¶j 36-45)
As it did in the 1AC, Local 690, joined now by DVHCC, alleges that
Sanofi and Fidia engaged in two fraudulent practices: the “free samples
scheme” and the “diabetes drug scheme.” The basic mechanics of each have
not changed since the 1AC, see Op. 5-9, but I provide a brief overview for
context.
The gist of the free samples scheme is that Sanofi caused plaintiffs to
pay an inflated price for Hyalgan by manipulating federal health care program
reimbursement rates from 2005 to 2009.2 The scheme worked like this: A
doctor would purchase Hyalgan direct from Sanofi (or Fidia, after 2011) and
administer it to a patient. The doctor then billed a federal health program, such

Or so I gather from the context. The complaint alleges that Godleski and
Urbaniak were employed by “Defendants.” (2AC ¶J 1, 39, 42).
2
Fidia is alleged to have “continued” the scheme after 2011, although virtually all
of the 2AC’s allegations focus on Sanofi’s conduct between 2005 and 2009. (e.g., 2AC
¶j 82, 155) As discussed in Part IILB.1., infra, there are no factual allegations
establishing that Fidia engaged in the same misconduct as Sanofi once it regained
Hyalgan’s distribution rights.
1

3

as Medicare or Medicaid, for reimbursement. (2AC
3

¶ 94) Medicare reimbursed

the doctor in an amount that was based in whole or in part on Hyalgan’s
average sales price (“ASP”); a TPP like Local 690, the patient, or both would
4
pay the difference. (Id.
5

¶J 83, 89, 95) From 2005 to 2009, Sanofi allegedly gave

doctors free samples of Hyalgan as an incentive to prescribe Hyalgan instead of
the drug’s lower-cost competitor. (Id.

¶ 110, 113) Although Sanofi was required

by law to figure those zero-cost samples into Hyalgan’s ASP, it didn’t; Hyalgan’s
ASP was therefore artificially high. (e.g.,

id.

¶J 85, 87-88, 95, 103) Since Sanofi

pegged the price of Hyalgan to its ASP, plaintiffs claim, Medicare and its co
payors paid more for the drug than they should have. (Id.
6

¶J 112, 182-83)

The 2AC alleges that the scheme operated nationwide and involved
“hundreds of

[] thousands” of unreported free samples of Hyalgan. From 2005

through 2009, Sanofi allegedly distributed at least 168,000 unreported
samples, each worth in excess of $70. (Id.

¶ 115, 161) The 2AC also alleges that

Sanofi sales representatives entered into rebate-type arrangements (e.g.,
The 2AC contains a few stray allegations concerning Medicaid and private
reimbursement programs. (2AC ¶J 91-92, 95, 101, 161) As with the 1AC, however, the
2AC focuses on cost of Hyalgan to plaintiffs vis-à-vis the alleged manipulation of
Medicare reimbursement procedures.
The 2AC mentions that average wholesale price (“AWP”) was used instead of
ASP in some instances, but its particular relevance to the free samples scheme is not
clear. (e.g., 2AC ¶J 92, 97, 183, 191)
I note that the alleged purpose of the free sample scheme has shifted somewhat
since the 1AC. While the 1AC alleges that the free samples scheme was a naked
attempt to avoid price competition with Supartz, the lower-cost competitor, the 2AC
suggests that the scheme was ultimately an effort to prop up Hyalgan’s Medicare
reimbursement rate. From 2002 to 2009, Hyalgan shared the same Medicare
reimbursement code as Supartz. (2AC ¶ 104, 108) The reimbursement rate for that
code was an average of the two drugs’ sales prices. (Id. ¶ 106-107) Wary of a
“downward spiral” in Hyalgan’s reimbursement rate, Sanofi (or Fidia, after 2011)
buoyed the Hyalgan/Supartz code rate by incentivizing doctors to choose Hyalgan by
lowering its “acquisition price” (i.e., effective price) with unreported free samples. (Id. ¶
110)
Plaintiffs specifically allege that they covered a 20% coinsurance obligation for
drugs like Hyalgan. (2AC ¶ 89) They also allege that Hyalgan could cost as much as
“$1,460, of which Local 690 paid $988.42 and the Local 690 member paid $247.11.”
(Id. ¶ 248)

6

4

conditioning the receipt of free samples on the purchase of a certain number of
Hyalgan units). These quasi-rebates involved doctors in eight states, including
California, New York, Texas, Rhode Island, North Carolina, Indiana, Florida,
and Georgia. (Id.

¶

149a-k) No specific example of a Local 690 beneficiary

paying an inflated price for Hyalgan is alleged; for the most part, the complaint
only avers generally that Local 690 and DVHCC members reimbursed
beneficiaries for Hyalgan treatments in 2005 and beyond. (E.g.

¶J

9, 151-53,

2AC Ex. C)
The second fraudulent practice, the diabetes drug scheme, involved
kickback arrangements between Sanofi, Deloitte, and Accenture. The object of
the kickback was to induce pharmacies, such as Walgreens and Rite Aid, to
switch plaintiffs’ beneficiaries from competitors’ diabetes drugs to those of
Sanofi. From 2012 to 2013, Sanofi, through Viehbacher, Urbianiak, and
Godleski, allegedly entered into three such contracts. These contracts were
allegedly miscoded in Sanofi’s internal project management systems to avoid
legal review. (Id.

¶

212, 2 16-17) In 2014, Diane Ponte, a former Sanofi

paralegal, discovered nine such contracts, totaling $34 million, and filed a
whistleblower suit in New Jersey state court. (Id.

¶J

221-22) The 2AC alleges

on information and belief that two unnamed Local 690 beneficiaries’ diabetes
prescriptions were switched in October 2009 and June 2011, resulting in an
increased cost to Local 690. (Id.

¶J

249-250) It is similarly “believed and

therefore averred” that DVHCC and its members paid for Sanofi’s expensive
diabetes drugs as a result of kickback contracts, although no specific instance
is identified. (Id.
B.

¶

251)

Procedural History
Local 690 filed the original complaint in New Jersey state court on

December 18, 2014. On February 6, 2015, defendants removed the case to this
Court under the Class Action Fairness Act, 28 U.S.C. 1332(d). (ECF No.1)

5

where, and how” of the free samples scheme, and “fails to provide the
necessary minimal support of its information-and-belief allegations.” (Op. 16)
Absent from the 1AC was any example of a “doctor’s billing or mis-billing
anyone (let alone billing Local 690) for a Hyalgan sample (let alone one the
doctor received for free) .“ Also absent was any allegation of “the existence or
amount of any [lower] payment that Local 690 would have made but for the
alleged free sample scheme.” In short, I could not discern from the 1AC “any
allegedly unlawful conduct that had any effect on Local 690 and its New Jersey
or Pennsylvania beneficiaries.” (Id. 17)
I found the factual allegations concerning the diabetes drug scheme
similarly “skimpy.” (Id. 21) Stripped of conclusory or speculative allegations,
what remained of the 1AC was “a portmanteau allegation that some twelve
contracts, contents unknown, broke a number of rules and laws and
constituted improper kickbacks to induce Accenture and Deloitte to perform
acts that may or may not have occurred, and may or may not have affected
Local 690 and its members.” (Id. 23) For these reasons, among others, I
dismissed Local 690’s claims under New Jersey’s Consumer Fraud Act and
Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, as well as
its claims for disgorgement, unjust enrichment, and conspiracy. The dismissal
was without prejudice, however, because “[i]f this misconduct occurred, and if
it affected Local 690 and its beneficiaries.

.

.

,

it should be possible through

reasonable investigation to uncover specific facts and examples of it.” (Id. 3)
On July 11, 2016, Local 690 filed the 2AC. For the most part, its
allegations are cut-and-pasted from the 1AC. There are a few stylistic and
structural innovations, however. Some allegations are dropped: The 2AC
abandons all claims against the Genzyme Corporation, and it also drops the
disgorgement claim against all defendants. On the other hand, the 2AC adds
DVHCC as a plaintiff, and adds claims under three more states’ consumer
protection and unfair practice statutes. The 2AC also now includes allegations
in which plaintiffs disclaim knowledge of what they formerly alleged as true,
6

stating for example that “only Sanofi knows the specifics of its sampling
conduct” and “only discovery will reveal such specifics to Plaintiffs.” (E.g., 2AC
¶J 154-56)
On September 12, 2016, defendants filed these renewed motions to
dismiss the 2AC. (ECF Nos. 104, 105, 106, 107, 108) Accenture and the Sanofi
Defendants move to dismiss for lack of standing and failure to state a claim.
Deloitte and Fidia move to dismiss for failure to state a claim. Valentine moves
to dismiss for lack of personal jurisdiction and failure to state a claim.
C.

Claims
The alleged free samples scheme involves defendants Sanofi, Fidia,

and Valentine. The alleged diabetes drug scheme involves Deloitte, Accenture,
and the Sanofi Defendants (i.e., Sanofi plus Viehbacher, Urbaniak, and
Godleski). The following claims, asserted against all defendants and
encompassing both schemes, are common to the 1AC and 2AC:
1) violations of New Jersey’s Consumer Fraud Act (“NJCFA”), N.J.
Stat. Ann.

§ 56:8-1, et seq;

2) violations of Pennsylvania’s Unfair Trade Practices and
Consumer Protection Law (“UTPCPL”), 73 P.3.

7
§ 20 1-1, et seq;

3) unjust enrichment; and
4) conspiracy, concert of action, or aiding or abetting.
To these, the 2AC adds four claims:
1) violations of New York’s General Business Law (“NYGBL”),

§

349, et seq;

The following provisions are specifically cited: § 20 1-2(4)(ii) (causing confusion
of the source of a good or service); 20 1-2(4)(v) making representations about a good or
service); 201-2(4)(ix) (advertising a good or service with the intent not to sell them as
advertised); 201-2(4) (xi) (misrepresenting reasons for price reductions); 201-2(4) (xii)
(offering to pay a buyer for a contract for goods or services when such compensation is
contingent on the occurrence of a subsequent event); and 201-2(4)(xxi) (any other
deceptive conduct—a catchall).
7

2) violations of California’s Unfair Competition Law Business &
Professions Code (“CUCL”),

§ 17200, et seq;

3) violations of California’s Consumer Legal Remedies Act
(“CLRA”), California Civil Code

§ 1750, et seq; 8 and

4) violations of Maryland’s Consumer Protection Act (“MCPA”), §
9
13-101, et seq.
The 2AC requests damages and unspecified injunctive relief.
II.

STANDARDS
A.

Rule 12(b)(1) Motion to Dismiss
Section III of this Opinion analyzes the motions insofar as they seek to

dismiss the complaint for lack of standing under Fed. R. Civ. P. 12(b)(1). A Rule
12(b)(1) motion, because it implicates the Court’s subject matter jurisdiction,
may be raised at any time. lowana v. Ford Motor Co., 67 F. Supp. 2d 424, 43738 (D.N.J. 1999). Rule 12(b)(1) challenges may be either facial or factual
attacks. See 2 Moore’s Federal Practice

§ 12.30[4] (3d ed. 2007); Mortensen v.

First Fed. Say. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977).

These provisions are specifically cited: § 1770(a)(2) (misrepresenting source,
sponsorship, approval, or certification of goods and services); 1770(a)(3)
(misrepresenting the affiliation, connection, or association with, or certification by,
another); 1770(a)(4) (using deceptive representations or designations of geographic
origin in connection with goods or services); 1770(a)(5) (representing that goods have
characteristics, ingredients, uses, benefits, or quantities that they do not have); and
1770(a)(8) (disparaging the goods, services, or businesses of another by a false or
misleading act of another).
9
These provisions of Maryland’s Consumer Protection Act are cited: § 13-301(1)
(misrepresentation that deceived customers); 13-301(2) (representing that consumer
goods or services have a characteristic, ingredient, use, benefit, or quantity that they
do not have); 13-301(3) (omitting a material fact that deceives or tends to deceive); 13301(4) (disparaging goods or services of another by misrepresentation of a material
fact); 13-301(6) (misrepresenting the existence or amount of a price reduction); 13301(8) (stating falsely the reason for offering or supplying consumer goods or services
a sale or discount prices); 13-301(9) (deceiving or misrepresenting or omitting any
material fact with the intent that a consumer rely on the same in connection with the
sale of any consumer goods).

8

8

A facial Rule 12(b)(1) asserts that the allegations of the complaint do
not set forth sufficient grounds to establish subject matter jurisdiction.
Iwanowa, 67 F. Supp. 2d at 438. “In reviewing a facial attack, the court must
only consider the allegations of the complaint and documents referenced
therein and attached thereto, in the light most favorable to the plaintiff.”
Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015) (citing
Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000)). A facial
Rule 12(b)(1) motion assumes that the allegations of the complaint are true.
Cardio—Med. Assoc., Ltd. v. Crozer—Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir.
1983); Iwanowa, 67 F. Supp. 2d at 438. “With respect to 12(b)(1) motions in
particular, ‘[t]he plaintiff must assert facts that affirmatively and plausibly
suggest that the pleader has the right he claims (here, the right to jurisdiction),
rather than facts that are merely consistent with such a right.”’ In re Schering
Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 244 (3d
Cir. 2012) (quoting Stalley v. Catholic Health Initiatives, 509 F.3d 517, 521 (8th
Cir. 2007)). See also Lincoln Ben. Life Co. 800 F.3d at 105 (further discussing
distinctions between facial and factual attack).
B.

Rule 12(b)(6) Motion to Dismiss
Section IV of this Opinion analyzes the motions insofar as they seek to

dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). Rule
12(b)(6) provides for the dismissal of a complaint, in whole or in part, if it fails
to state a claim upon which relief can be granted. The moving party, ordinarily
the defendant, bears the burden of showing that no claim has been stated.
Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). For purposes of a
motion to dismiss, the well-pleaded factual allegations of the complaint must
be taken as true, with all reasonable inferences drawn in plaintiff’s favor.
Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (“reasonable
inferences” principle not undermined by
Federal Rule of Civil Procedure 8(a) does not require that a complaint
contain detailed factual allegations. Nevertheless, “a plaintiff’s obligation to
9

provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The factual
allegations must be thus sufficient to raise a plaintiff’s right to relief above a
speculative level. The claim, in other words, must be “plausible on its face.” See
id. at 570; see also Umland v. PLANCO Fin. Serus., Inc., 542 F.3d 59, 64 (3d Cir.
2008). A claim has “facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin
to a ‘probability requirement’.

.

.

it asks for more than a sheer possibility.”

Iqbal, 556 U.S. at 678. All of this has been distilled by the Third Circuit in a
three-step process:
To determine whether a complaint meets the pleading
standard, our analysis unfolds in three steps. First, we
outline the elements a plaintiff must plead to a state a claim
for relief. See [Iqbal, 556 U.S.] at 675; Argueta [v. U.S.
Immigration & Customs Enforcement, 643 F.3d 60, 73 (3d
Cir. 2011)]. Next, we peel away those allegations that are no
more than conclusions and thus not entitled to the
assumption of truth. See Iqbal, 556 U.S. at 679; Argueta,
643 F.3d at 73. Finally, we look for well-pled factual
allegations, assume their veracity, and then “determine
whether they plausibly give rise to an entitlement to relief.”
Iqbal, 556 U.S. at 679; Argueta, 643 F.3d at 73. This last
step is “a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.”
Iqbal, 556 U.S. at 679.
Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012). Accord Carpenters
Health and Wefare Fund of Philadelphia v. Management Resource
Systems, Inc., 837 F.3d 378, 382 (3d Cir. 2016) (citing Bistrian).

10

C.

Rule 9(b)
To analyze the Rule 12(b)(6) motion, I must determine whether the

ordinary Rule 8(a) or the more stringent Rule 9(b) pleading standard applies to
plaintiffs’ state law consumer protection and unfair practice claims. With the
exception of the NYGBL claim, I resolve this issue as I did in my prior Opinion:
I will apply Rule 9(b) “[tjo the extent the scheme rests on falsehoods or
misrepresentations—e.g., about the true price of the drugs, about the nature of
the contracts, or the bonafides of the pharmacies’ prescription practices;”
contrariwise, I will apply Rule 8(a) “[tb

the extent the claims may be viewed in

the alternative as alleging, e.g., regulatory violations or unconscionable
business practices.” (Op. 14)
For claims of fraud, Federal Rule of Civil Procedure 9(b) imposes a
heightened pleading requirement, over and above that of Rule 8(a). Specifically,
it requires that “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P.
9(b). “Malice, intent, knowledge, and other conditions of a person’s mind,”
however, “may be alleged generally.” Id. That heightened pleading standard
requires the plaintiff to “state the circumstances of the alleged fraud with
sufficient particularity to place the defendant on notice of the precise
misconduct with which it is charged.” Frederico v. Home Depot, 507 F.3d 188,
200 (3d Cir. 2007) (internal quotation and citation omitted).
In general, “[tb

satisfy this heightened standard, the plaintiff must

plead or allege the date, time, and place of the alleged fraud or otherwise inject
precision or some measure of substantiation into a fraud allegation.” Id.
“Plaintiff must also allege who made the misrepresentation to whom and the
general content of the misrepresentation.” Lum v. Bank of Am., 361 F.3d 217,
224 (3d Cir. 2004) (internal citation omitted); In re Suprema Specialties, Inc.
Sec. Litig., 438 F.3d 256, 276—77 (3d Cir. 2006) (“Rule 9(b) requires, at a
minimum, that plaintiffs support their allegations of fraud with all of the
essential factual background that would accompany the first paragraph of any
11

newspaper story—that is, the who, what, when, where and how of the events at
issue.”) (internal quotation and citation omitted)).
While the plaintiff must provide allegations sufficient to provide
defendants “notice of the ‘precise misconduct’ with which defendants are
charged,” Rule 9(b) does not “require plaintiffs to plead issues that may have
been concealed by the defendants.” Rob v. City Investing Co. Liquidating Trust,
155 F.3d 644, 658 (3d Cir. 1998) (quoting Seville Indus. Machinery v.
Southmost Machinery, 742 F.2d 786, 791 (3d Cir. 1984) and citing Christidis v.
First Pennsylvania Mortg. Trust, 717 F.2d 96, 99 (3d Cir. 1983)). The
particularity requirement, for example, can be relaxed in cases of corporate
fraud because plaintiffs cannot be expected to have personal knowledge of the
details of corporate internal affairs. Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d
628, 645 (3d Cir. 1989). Even so, a plaintiff must still allege that facts based on
information and belief are in the exclusive control of a defendant and “must
accompany such an allegation with a statement of facts upon which their
allegation is based.” Shapiro v. UJB Fin. Corp., 946 F.2d 272, 285 (3d Cir.
1992); see also Zavala v. Wal-Mart Stores, Inc. 393 F. Supp. 2d 295, 314 (D.N.J.
2005), aff’d sub nom. Zavala v. Wal-Mart Stores, Inc., 691 F.3d 257 (3d Cir.
2012). In other words:
A complaint must delineate at least the nature and scope of
plaintiffs’ effort to obtain, before filing the complaint, the
information needed to plead with particularity. This
requirement is intended to ensure that plaintiffs thoroughly
investigate all possible sources of information, including but
not limited to all publicly available relevant information,
before filing a complaint.
Shaprio, 964F.2d at 285.
The state consumer protection and unfair practice statutes under
which plaintiffs sue encompass fraud, but also a range of other unconscionable

12

or deceptive business practices. As this issue relates to the NJCFA’° and
UTPCPL,” I have already ruled: Rule 9(b) applies to the extent each such claim
“rests on falsehood or misrepresentations”; Rule 8(a) applies to the extent it
rests on “regulatory violations or unconscionable business practices.” (Op. 14)
(citing Smajlaj, 782 F. Supp. at 98 n.9; Belmont, 708 F.3d at 498 n.33))
Plaintiffs offer no reason to adopt any different approach with respect to the
2
MCPA,’ CUCL, and CLRA claims. “I will therefore, in the course of the
13
analysis, advert to both” the Rule 8 and 9 standards. (Op. 14)
To state a prima facie case under the NJFCA a plaintiff must allege three
elements: “(1) unlawful conduct by defendant; (2) and ascertainable loss by the
plaintiff; and (3) a causal connection between the defendant’s unlawful conduct and
the plaintiffs ascertainable loss.” Bosland v. Warnock Dodge, Inc., 964 A.2d 741, 749
(N.J. 2009). “Some claims under the [NJ]CFA may not require pleadings complying
with Rule 9(b). Not every such claim involves an affirmative misrepresentation or
material omission.” Smajlaj v. Campbell Soup Co., 782 F. Supp. 2d 84, 98 n.9 (D.N.J.
2011) (alteration added).
10

“To bring a private cause of action under the UTPCPL, a plaintiff must show
that he justifiably relied on the defendant’s wrongful conduct or representation and
that he suffered harm as a result of that reliance.” Yocca v. Pittsburgh Steelers Sports,
Inc., 578 Pa. 479, 501 (2004). Rule 9(b) does not apply to the extent that the alleged
conduct is not based on fraudulent conduct. Belmont v. M.B. Partners, Inc., 708 F.3d
470, 498 n.33 (3d Cir. 2013).
11

To bring an action under the MCPA, a plaintiff must allege “(1) an unfair or
deceptive practice or misrepresentation that (2) is relied upon, and (3) causes [him]
actual injury.” Farasat v. Wells Fargo Bank, N.A., 913 F. Supp. 2d 197, 205 (D. Md.
2012) (quoting Stewart v. Bierman, 859 F. Supp. 2d 754, 768 (D. Md. 2012) (citing
Lloyd v. Gen. Motors Corp., 397 Md. 108, 916 A.2d 257, 277 (Md. 2007)) (alteration in
original)). “MCPA claims that sound in fraud are subject to the heightened pleading
standards of Federal Rule of Civil Procedure 9(b).” Spaulding v. Wells Fargo Bank, N.A.,
920 F. Supp. 2d 614, 623 (D. Md. 2012).
12

The CUCL prohibits acts or practices that are, (1) unlawful; (2) fraudulent; or (3)
unfair. Cal. Bus. & Prof. Code § 17200. Each prong of the UCL constitutes a separate
and distinct theory of liability. Keams v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir.
2009). Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180,
(1999). The UCL proscribes “unfair competition,” which includes “any unlawful, unfair
or fraudulent business act or practice and unfair, deceptive, untrue or misleading
advertising.” § 17200. The fraudulent practice prong of the UCL “has been understood
to be distinct from common law fraud.” In re Tobacco H Cases, 46 Cal. 4th 298, 312,
93 Cal. Rptr. 3d 559, 207 P.3d 20, 29 (Cal. 2009). “A [common law] fraudulent
deception must be actually false, known to be false by the perpetrator and reasonably
relied upon by a victim who incurs damages. None of these elements are required to
state a claim.
under the UCL.” Id. Claims under fraudulent prong still require a
13

.

.

13

I will, however, apply the ordinary pleading standard to plaintiffs’
NYGBL claims. “Section 349 [of the NYGBLj extends ‘well beyond common law
fraud to cover a broad range of deceptive practices,’ and as such, claims under

§ 349 are not subject to the heightened pleading standard of Fed. R. Civ. P.
9(b).” Argabright v. Rheem Mgf Co., 201 F. Supp. 3d 578, 607 (D.N.J. 2016)
(quoting Pelman ex rel. Pelman v. McDonald’s Corp., 396 F.3d 508, 511 (2d Cir.
2005)); see also City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425, 455
(2d Cir. 2008) (“[A]n action under

§ 349 is not subject to the pleading-with-

particularity requirements of Rule 9(b), Fed. R. Civ. P., but need only meet the
bare-bones notice-pleading requirements of Rule 8(a).”) (quoting Pelman, 396
F.3d at 51 1).’4 Defendants concede that Rule 8 should apply to plaintiffs’
NYBGL claims. For those claims only, then, I will apply the ordinary noticepleading standard.

plaintiff to plead that the alleged misrepresentation was directly related to the
injurious conduct and that the plaintiff actually relied on the alleged
misrepresentation. Id.
The CLRA is similarly broad: It prohibits “unfair methods of competition and
unfair or deceptive acts or practices undertaken by any person in a transaction
intended to result or which results in the sale or lease of goods or services to any
consumer.” Cal. Civ. Code § 1770(a). Conduct that is “likely to mislead a reasonable
consumer” violates the CLRA. Colgan v. Leatherman Tool Grp., Inc., 135 Cal. App. 4th
663, 680 (2006) (quoting Nagel v. Twin Labs., Inc., 109 Cal. App. 4th 39, 54 (2003)).
Under either statute, “only allegations (‘averments’) of fraudulent conduct must
satisfy the heightened pleading requirements of Rule 9(b),” if fraud is not an essential
element of the claim. Vess Ciba-Geigy Corp. USA, 317 F.3d. 1097, 1105 (9th Cir.
2003); Kearns, F.3d at 1126-27.
“A plaintiff under section 349 must prove three elements: first, that the
challenged act or practice was consumer-oriented; second, that it was misleading in a
material way; and third, that the plaintiff suffered an injury as a result of the
deceptive act.” Stutman v. Chemical Bank, 95 N.Y.2d 24, 29 (2000).
14

14

III.

ANALYSIS: RULE 12(B)(1)
The motions seek, in part, to dismiss the 2AC under Rule 12(b)(1).

Jurisdiction is lacking, they say, because the 2AC fails to allege that the
plaintiffs have suffered a compensable, concrete injury that is attributable to
defendants’ conduct. In terms of alleging concrete injury, the 2AC fails to
improve upon the 1AC in any way that matters; plaintiffs still fail to allege
crucial specifics about the free samples or diabetes drug schemes. While the
2AC contains many general statements about defendants’ misconduct, there
are virtually no allegations that tie such alleged misconduct to any harm
suffered by Local 690 or DVHCC.
A.

Legal Standard
Defendants advance a number of constitutional and statutory

standing arguments. Plaintiffs, defendants say, failed to plead any injury or
causation, and therefore lack first-party standing (or, in DVHCC’s case,
associational standing), to bring these claims. I mostly agree. Local 690 has
failed to allege any facts suggesting that it suffered an actual injury traceable
to either scheme. And DVHCC, which is made up of TPPs including Local 690,
lacks standing to bring damages claims on behalf of others, with one exception:
it does have standing to seek prospective injunctive relief on behalf of its New
York and California members, but only against Fidia.
A plaintiff must establish standing to sue under Article III of the
United States Constitution, which limits the jurisdiction of federal courts to
“Cases” and “Controversies.” To meet the “irreducible constitutional minimum”
of Article III, the plaintiff must establish three elements:
First, the plaintiff must have suffered an injury in fact—an
invasion of a legally protected interest which is (a) concrete
and particularized and (b) actual or imminent, not
conjectural or hypothetical. Second, there must be a causal
connection between the injury and the conduct complained
of—the injury has to be fairly traceable to the challenged
action of the defendant, and not the result of the
15

independent action of some third party not before the court.
Third, it must be likely, as opposed to merely speculative,
that the injury will be redressed by a favorable decision.
Schering-Plough, 678 F. 3d at 244 (quoting Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61 (1992)).
A named plaintiff in a putative class action must possess standing,
just like that of any other plaintiff. See, e.g., Lewis v. Casey, 518 U.S. 343, 357
(1996) (“That a suit may be a class action..

.

adds noting to the question of

standing, for even named plaintiffs who represent a class ‘must allege and
show that they have been personally injured, not that injury has been suffered
by other, unidentified members of the class to which they belong and which
they purport to represent.”) (quoting Simon v. E. Ky. Wefare Rights Org., 426
U.S. 26, 40 n. 20 (1977)). “[I]f none of the named plaintiffs purporting to
represent a class establishes the requisite case or controversy with the
defendants, none may seek relief on behalf of himself or any other member of
the class.” O’Shea v. Littleton, 414 U.S. 488, 494 (1974).
Standing is typically analyzed claim by claim. See, e.g., 678 F.3d at 245
(“Since ‘standing is not dispensed in gross,’ a plaintiff who raises multiple
causes of action ‘must demonstrate standing for each claim he seeks to
press.”) (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006)
(internal citations omitted)). Each count of the 2AC, however, is predicated on
the same allegedly deceptive or fraudulent course of conduct; the free samples
scheme and the diabetes drug scheme are the twin threads that run through
all of the legal claims. Instead of analyzing the 2AC count by count, then, I
analyze it scheme by scheme.
1.

Free Samples Scheme
i.

Local 690

Local 690 alleges on behalf of its beneficiaries in New Jersey,
Pennsylvania, North Carolina, South Carolina, and Florida, that it paid an
inflated price for Hyalgan because the drug’s ASP did not take into account free
16

samples provided to doctors across the country. Here, as in the 1AC, the
“dollars, dates, or circumstances” of any particular overcharge are not
identified. (Op. 17) The 2AC instead avers generally that “Local 690 has
reimbursed for Hyalgan during the relevant time period.” (2AC

¶

9) But those

allegations, taken as true, do not establish anything “more than a sheer
possibility” that Local 690 suffered an injury-in-fact caused by the defendants’
conduct. See Schering-Plough, 678 F.3d at 243-44 (quoting Iqbal, 556 U.S. at
678)). More is required to establish that Local 690 is plausibly—not merely
conceivably—a victim of the free samples scheme.
I look for that something more in the allegations new to the 2AC. The
2AC contains two new groups of allegations that bear on the issue of standing:
(1) A settlement that resolved allegations involving free samples in
New Jersey, California, Maryland, and New York (the Giddarie
Settlement”); and
(2) Examples of Sanofi sales representatives misusing Hyalgan
samples in California, New York, Texas, Rhode Island, North Carolina,
Indiana, Florida, and Georgia (as relevant here, the “Florida and N.C.
Sales Rep Conduct”).
These two groups of allegations overlap with Local 690’s territory as to the
states of New Jersey, North Carolina, and Florida; the other states I set aside.
The Giddarie Settlement is potentially relevant insofar as it involves
New Jersey and North Carolina. Sanofi, Local 690 says, “agreed to pay New
Jersey” an unidentified portion of a $617,000 global settlement “to account for
the value of its Hyalgan samples disseminated in the state” between 2005 and
2009.’ (2AC

¶

154) Elsewhere, the 2AC alleges that Sanofi paid North Carolina

got $41,713.36 in restitution, interest, and other costs out of that $617,000

I read somewhat between the lines here. The Giddarie complaint alleged a time
period between 2005 and 2009. The Giddarie Settlement itself does not appear to be
publicly available, and its time frame may be different.
15

17

197)16 But there is no non-speculative factual allegation that Local
690 actually paid an inflated price for Hyalgan attributable to any free sample
pot. (Id.

¶

distributed in New Jersey or North Carolina. The Giddarie Settlement therefore
adds very little to the analysis.
Here is what I mean. Assume that some quantity of free Hyalgan
samples was distributed in each state. But to which doctors? And for the
treatment of which patients? Without any pertinent facts or examples, the most
that can be inferred from the fact that Sanofi settled the Giddarie for general
misconduct in New Jersey or North Carolina is that these practices may or may
not have affected Local 690’s beneficiaries in those states.’ To look at it
7
another way, any concrete connection to the plaintiff is lacking; there is no
minimal factual allegation that Local 690 ever paid for a Hyalgan treatment
administered to one of its New Jersey or North Carolina beneficiaries at all.
Thus the Giddarie settlement does not plausibly suggest that Local 690 has
suffered any injury-in-fact traceable to defendants’ conduct in New Jersey.
That leaves the second group of allegations, the Florida and N.C.
Sales Rep Conduct. Florida and North Carolina are states in which Local 690’s
beneficiaries are located. The 2AC alleges, albeit on information and belief, that
a “South Florida based sales representative of Sanofi.
samples.

.

.

.

.

promised 15 Hyalgan

for every 50 Hyalgan units” purchased by an unnamed medical

practice, and that the sales representative “delivered over 200 Hyalgan
samples” to that practice in 2007 and 2008. (2AC

¶

149j) Something similar

allegedly occurred in North Carolina in 2008 and 2009: a sales representative
allegedly promised an unnamed medical practice “25 free Hyalgan units.
for
.

.

every 100 units purchased,” and “over 200 Hyalgan samples were delivered” to
that practice. (2AC ¶ 149h) These allegations creep closer to establishing that
The Department of Justice allegedly took $26,902.72 of North Carolina’s share
of the award. (2AC ¶ 197).
16

Local 690 indeed candidly admits that “only Sanofi knows the specifics of its
sampling conduct within New Jersey,” and it does not know “which doctors in which
states received free samples and billed for free samples of Hyalgan.” (2AC
¶J 124, 154)
17

18

Local 690 suffered an injury as a result of defendant’s conduct, but they too
fail to bridge the gap between conceivability and plausibility.
To illustrate the point, accept, as before, the truth of these allegations
(although they are made on information and belief, and their basis is not
disclosed). Assume that Sanofi sales representatives entered into rebate-type
agreements with at least two doctors in North Carolina and Florida, and
assume further, though less plausibly, that this practice drove up the ASP of
Hyalgan in those two states. There is still no allegation that Local 690 or its
beneficiaries paid, let alone overpaid, anything for Hyalgan in those states
during the relevant period. The relevant physicians’ patients may or may not
have been Local 690 beneficiaries; if so, those beneficiaries may or may not
have been prescribed Hyalgan. I am of course mindful that “[t]he plausibility
standard is not akin to a ‘probability requirement.”’ Iqbal, 556 U.S. at 678; see
also In re Schering Plough, 678 F.3d at 244 (the plaintiff must “plausibly
suggest that the pleader has the right he claims (here, the right to jurisdiction),
rather than facts that are merely consistent with such a right.”) But the 2AC
contains no factual allegation suggesting on any basis that any Local 690
beneficiary was billed for any Hyalgan treatment in North Carolina or Florida in
2007, 2008, or 2009. In short, maybe someone is alleged to have been
overbilled in those states during those years, but there is no allegation that
that someone is Local 690.
As to North Carolina and Florida, the 2AC falls back on a broad
generalization: “[P]lan beneficiaries,” Local 690 alleges, were treated “with
Subject Drugs [by the North Carolina and Florida medical providers] and
thereafter sought and received reimbursement for Subject Drugs from Plaintiffs
at

[]

inflated prices.” (2AC

¶

53) This allegation is simply too general and

conclusory. Local 690, despite one opportunity to amend, has still failed to
allege any fact that connects practices by Sanofi personnel even one instance
in which Local 690 paid an inflated price for Hyalgan. And even assuming that

19

this allegation passes the minimum constitutional standing threshold, it is not
sufficient to state a claim under Rule 12(b)(6). See Part IV.A., irifra.
Local 690 attempts to evade this fundamental pleading deficiency by
pointing the finger at Sanofi and Fidia. Those defendants, Local 690 alleges,
were required by law to track their samples, but they didn’t. That is why Local
690 cannot now demonstrate that any specific doctor billed or mis-billed a
Local 690 beneficiary for Hyalgan. But there is no reason that Local 690
18
should thereby be excused from holding up its end of the jurisdictional inquiry:
surely Local 690 could ascertain from its own information or records which of
its own beneficiaries it reimbursed for Hyalgan. Indeed, it is likely that only
19
Local 690, and not Sanofi, would have the information that could conceivably
connect any wrongdoing by Sanofi to any injury suffered by Local 690. Because
Local 690 has not alleged factually that it paid for a Hyalgan treatment in
North Carolina or Florida at all, it necessarily has not alleged that it overpaid,
and therefore it has not alleged that it suffered an injury-in-fact.
ii.

DVHCC

DVHCC, too, seeks to bring claims based on the free samples scheme.
DVHCC is not itself a TPP but rather an association of TPPs; it argues that it
has standing based on injuries to its members.
By its own admission, DVHCC does not have first-party standing. The
2AC explicitly alleges that DVHCC’s member TPPs, not DVHCC, reimbursed
beneficiaries for Hyalgan. (2AC

¶

10) DVHCC, in short, never paid anything for

Hyalgan at any time; it therefore does not assert an injury suffered by itself.
At the same time, plaintiffs aver that defendants do have such information
within their exclusive control, and that this is a reason to deny defendants’ motion to
dismiss and allow this case to proceed towards discovery.
18

I note that DVHCC apparently conducted such an investigation, and has
submitted a chart demonstrating that its member plans made thousands of dollars in
payments for Hyalgan from 2005 to 2014 in New Jersey, California, Maryland, and
New York. (2AC Ex. C) There are other problems, however, with DVHCC’s standing.
See infra.
19

20

The real dispute here is about associational standing. Associational
standing requires that (1) the organization’s “members.

.

.

have standing to

sue on their own; (2) the interests the organization seeks to protect are
germane to its purpose; and (3) neither the claim asserted nor the relief
requires individual participation by its members.” NAAMJP v. Simandle, 2015
U.S. Dist. LEXIS 115865, at *11 (D.N.J. Sept. 1, 2015) (quoting Blunt v. Lower
Merion School Dist., 767 F.3d 247, 279 (3d Cir. 2014)), aff’d, 658 F. App’x 127
(3d. Cir. 2017)). The first two prongs are grounded in the constitution; the third
is prudential. United Food & Commer. Workers Union Local 751 v. Brown Group,
517 U.S. 544, 556-558 (1997). Because there is no dispute that the interests
DVHCC seeks to protect are germane to its purpose, I address here only the
first and third prongs. I find that DVHCC may bring claims on behalf of some of
its members, but only for injunctive relief, and only against Fidia.
a.

The standing of DVHCC’s members

The first prong of the associational standing test—the Constitutional
requirement that DVHCC ‘s members themselves possess standing—dooms
many of DVHCC’s claims.
DVHCC sues on behalf of its TPP members in over a dozen states.
20
The 2AC, however, alleges only that DVHCC’s members in New Jersey,
Maryland, New York, and California paid for Hyalgan treatments between 2005
and 2014. Standing for the vast majority of these members is based on the
double-barreled allegation that (a) Hyalgan samples were distributed in these
states and (b) some DVHCC members reimbursed for some Hyalgan treatments
in some of those same states in the same time period. (2AC

¶

9-10) This

allegation, as noted above, is general and conclusory; it requires a closer look
in order to rise above the conjectural level.

They are: Pennsylvania, New Jersey, California, Colorado, Delaware, Indiana,
Kentucky, Massachusetts, Maryland, Michigan, North Carolina, New York, Ohio,
South Carolina, West Virginia, and Wisconsin. DVHCC also claims to have members in
Washington, D.C.
20

21

Peeling away the layers of generic allegations contained in the 2AC,
see Bistriari, supra, I find that there are two states—New York and California—
where DVHCC presents a plausible case for its members’ standing. In those
states, the 2AC alleges, (1) DVHCC’s members paid for Hyalgan while free
samples of the drug were simultaneously being distributed to doctors who
treated DVHCC’s members’ beneficiaries; (2) a Sanofi sales representative
entered into a specific rebate-type arrangement with a medical practice which
treated DVHCC’s members’ beneficiaries; and (3) Sanofi settled the Giddarie
matter for some amount of money to account for the free samples distributed
in that state. (2AC Ex. C, ¶J 149a-e, 156-57, 15960)21 That case, of course, is
far from airtight; there is still no factual allegation that connects these fairly
high-level allegations to a specific instance in which a DVHCC member paid an
inflated price for Hyalgan. Nevertheless, we are at the pleading stage, and
22
DVHCC has articulated a theory that gives its claims a hue of plausibility.
DVHCC says that defendants’ manipulation of reimbursement procedures
resulted in across-the-board inflation of the price of Hyalgan to Medicare and

As to New Jersey and Maryland, the 2AC does contain allegations (1) and (3),
and the 2AC does specifically allege that “Sanofi agreed to pay Maryland the sum of
$5,026.35 out of the $617,000 paid” to resolve all claims as to all states. (2AC 158)
¶
Still, there is no factual allegation that an illegal sampling arrangement transpired in
Maryland or New Jersey, let alone one that affected DVHCC members. And even if
DVHCC did have standing to pursue claims on behalf of its Maryland members, I
would still dismiss it for failure to state a claim. See Part III.B-D.
22
That type of allegation will ultimately prove to be critical to making sense out of
the allegations in the 2AC. Take one representative example. Quoting an email, the
2AC alleges that a Sanofi sales representative promised Southern California-based
Physician Practice A that “orders @ 93 you get 25 samples. Orders at $77 you get 15.”
(2AC ¶ 149a) This is the most specific allegation of rebate-type arrangement between a
Sanofi sales representative and a doctor, but there is no allegation to anchor it to a
specific date or time. While it is alleged upon information and belief that the
agreement occurred sometime in the four years between 2005 and 2009, Plan B, the
sole DVHCC member that allegedly paid a specific amount for Hyalgan, is located in
Northern California, and only made such payments from 2007 to 2012. (Id. 156, 2AC
¶
Ex. C) Furthermore, there is no allegation that Plan B actually reimbursed for Hyalgan
administered by Physician Practice A. Logical gaps of this kind plague the 2AC.
21

22

its co-payors. It follows that if DVHCC’s members reimbursed for Hyalgan
23
during the period of price inflation, then they may have suffered an injury that
could be proven. So taking all allegations as true and construing all inferences
in favor of DVHCC, it is plausibly alleged that DVHCC’s members suffered an
injury-in-fact traceable to defendants’ misuse of free Hyalgan samples in New
York and California.

b.

The individual-participation prong

The third, “no-individual-participation” prong of the associational
standing analysis, however, is devastating to whatever claims might survive the
prong one analysis. Indeed, it eliminates all of DVHCC’s damages claims, as
well as its injunctive claims against all but one defendant.
The crwc of this lawsuit is that DVHCC’s members allegedly paid more
for Hyalgan than they should have. Naturally, DVHCC seeks money damages
on their behalf to make them whole. But “[b]ecause claims for monetary relief
usually require individual participation, courts have held associations cannot
generally raise these claims on behalf of their members.” Pa. Psychiatric Soc’y
Green Spring Health Servs., 280 F.3d 278, 284-285 (3d Cir. 2002); see also
United Food, 517 U.S. at 554-558; Hunt v. Wash. State Apple Adver. Comm’n,
432 U.S. 333, 342-344 (1977); Conn State Dental Ass’n v. Anthem Health Plans,
Inc., 591 F.3d 1337, 1354 (11th Cir. 2009) (“Damage claims are incompatible
with associational standing because such claims usually require ‘individualized
proof.”’) (quoting Warth v. Seldin, 422 U.S. 490, 515-16 (1975)); Bano v. Union
Carbide Corp., 361 F.3d 696, 714 (2d Cir. 2004) (“We know of no Supreme
Court or federal court of appeals ruling that an association has standing to
pursue damages on behalf of its members.”)

This may be viewed as some sort of Medicare analogy to the fraud-on themarket theory, which is unique to securities law. Such a theory, as applied here, is rife
with difficulties. It presumes, for example, an efficient market in which the
participants possess all material information, so that misinformation may be
presumed to affect every individual purchaser in the relevant period.
23

23

This third prong, as DVHCC points out, is a prudential one. But “[tb
see Hunt’s third prong as resting on less than constitutional necessity is not, of
course, to rob it of its value.” United Food, 517 U.S. at 556. And its value is
amply demonstrated in a case where the complaint fails to suggest that the
plaintiff will be able to show damages with any particularity. Id. (“[The bar
against damages in associational standing cases] may guard against the hazard
of litigating a case to the damages stage only to find the plaintiff lacking
detailed records or the evidence necessary to show the harm with sufficient
specificity.”) In short, I see no reason to depart from the usual rule here. The
24
damages claims should be dismissed on prong three grounds.
Prong three does not bar DVHCC from seeking injunctive and
declaratory relief on behalf of its members. Such relief, by definition, is
prospective. See, e.g., Los Angeles v. City of Lyons, 461 U.S. 95, 103 (1983)
(“[Pjast exposure to illegal conduct does not in itself show a present case or
controversy regarding injunctive relief.

.

.

if unaccompanied by continuing,

present, adverse effects.”); Corliss v. O’Brien, 200 Fed. App’x. 80, 84 (3d Cir.

In the papers, DVHCC denies that there is any need for individualized proof of
damages, and therefore argues that the purpose animating the rule—i.e., the need for
individual participation on the part of DVHCC’s members—is inapplicable here:
24

[B]ecause the DVHCC acts as a group purchasing organization
who negotiates template agreements with pharmacy benefits
managers for its members who are themselves putative class
members there is no need for individualized proof of damages
because damages are the same for all the members when
reimbursed under the agreements negotiated by the DVHCC.
Because its members apply the same reimbursement formula, as
negotiated by DVHCC, there exists common basis for calculating
individual class claims and proving damages.
(ECF No. 122, p. 29) Of course, statements in briefs cannot serve to amend a deficient
complaint. But at any rate, this explanation only poses more questions: What template
agreements? Which DVHCC members adopted those agreements? And when and
where did reimbursements for Hyalgan pursuant to those agreements occur, and to
whom, and in what amount? The problem remains that no TPP has stepped up to
allege that it reimbursed for Hyalgan at some relevant time and place, and overpaid as
a result. These questions only underscore the need for individual participation from
DVHCC’s members on the question of damages.
-

-

24

2006) (“Declaratory judgment is inappropriate solely to adjudicate past
conduct.”) (citing Gruntal & Co., Inc. v. Steinberg, 837 F. Supp. 85, 89 (D.N.J.
1993)).
No such prospective relief can be granted as to Sanofi, which has not
marketed or sold Hyalgan since 2011, or Valentine, who has been barred from
participating in federal health care programs since June 2013. (2AC ¶j 23,
258, 261) To the extent that DVHCC has standing to seek injunctive or
declaratory relief, then, it may do so only against Fidia, which allegedly
assumed the rights to market and sell Hyalgan in the United States in 2011.
In sum, Local 690 does not have standing to bring any claims related
to the free samples scheme. DVHCC does, but only on behalf of its New York
and California beneficiaries, and only for injunctive relief against Fidia.
2.

Diabetes Drug Scheme

As to the diabetes drug scheme, I analyze Local 690 and DVHCC’s
standing claims together. The 2AC fails to allege any facts that would
demonstrate injury or causation as to either plaintiff. The 2AC cites to no
example of DVHCC or its members having paid an increased cost for a Sanofi
diabetes drug due to a pharmacy’s “switching” a beneficiary from a lower cost
drug. As to Local 690, the 2AC cites the same two information-and-belief
examples identified in the 1AC. (2AC

¶f

249-50) The 2AC offers nothing further

to cure the deficiencies identified in my prior Opinion. Chief among those
deficiencies is that the 2AC, like the 1AC, does not actually “allege that a drug
switch was made by a pharmacy at all” but merely that a “medication ‘was
switched.’” (Op. 17) “[A] doctor, or the patient,” as opposed to a pharmacist, I
wrote, “could just have easily been the decision maker.” (Id.) The plaintiffs’
25
sparse information-and-belief allegations—about their own members,
remember—are not sufficient to establish a justiciable injury, let alone one
It remains unexplained, for example, how a pharmacist could have made such a
switch without a prescription (or really, why) from a physician in the first place.

25

25

caused by defendants’ conduct. I therefore find that neither Local 690 nor
DVHCC has standing to bring claims related to the diabetes drug scheme.
***

This 82-page, 369-paragraph 2AC contains many sweeping
statements about the defendants’ misuse of Hyalgan samples nationwide. It
contains only an inadequate handful of factual allegations, however, about how
that misconduct might have affected the members of Local 690 or DVHCC. And
as to the diabetes drug scheme, there are essentially no connecting allegations.
By squinting a bit, I can discern that DVHCC has alleged standing to bring
claims on behalf of its New York and California members for prospective
declaratory and injunctive relief, but only for conduct related to the free
samples scheme, and only against Fidia. That said, the absence of factuality in
the 2AC is acute, and that deficiency would persist even if Local 690 or DVHCC
could somehow establish standing to pursue all of the claims asserted here.
IV.

ANALYSIS: RULE 12(B)(6)
I turn to the motions insofar as they assert under Rule 12(b)(6) that

the 2AC does not state a claim. Dismissal for failure to state a claim would be
appropriate for many of the same reasons discussed above in relation to
standing. And there are other grounds for dismissal as well.
A.

Free Samples Scheme
1.

Fidia

Because the standing analysis left only injunctive claims against
Fidia, I first consider the viability of those remaining claims. The 2AC, like the
26
I am mindful that the first step of the 12(b)(6) analysis is to “outline the
elements a plaintiff must plead to state a claim for relief.” Bistrian, 696 F.3d at 365. As
explained in Part III.A., supra, however, the 2AC basically alleges that all defendants
are responsible for the entirety of two different fraudulent schemes under five different
states’ laws. The papers do not clariir what conduct, if any, is particularly actionable
under each state’s law, or which defendant is particularly liable for that conduct. Like
the parties, I therefore analyze the 12(b)(6) motions concurrently. I note, however, that
the elements of the NYBGL, CUCL, CLRA, UTPCPL and MCPA are canvassed in Part
26

26

1AC, contains no sufficient allegation that any Fidia entity engaged in unlawful
conduct at any time. Reviewing the allegations of the 1AC, I found:
27
These are conclusory allegations that lack any specific
factual allegations of fraudulent or deceptive action by
Fidia. Fidia licensed Hyalgan to Sanofi and allegedly
knew about Sanofi’s acts or advised Sanofi, in some
unspecified way, regarding “strategy” relating to
samples. There are no further allegations as to Fidia’s
role in any illicit action as it relates to Local 690. No
specific factual examples are given. There are no
allegations showing that any Local 690 beneficiary in
Pennsylvania or New Jersey was affected. That Fidia
regained control of Hyalgan distribution in 2011 is
irrelevant: the alleged time period for the sample
infractions is 2005-2009.

(op.

20)
The 2AC does not meaningfully attempt to remedy any of these

deficiencies; indeed, as to Fidia, the Second Amended Complaint is largely a
cut-and-paste of the First. (ECF Nos. 104-3

¶J

22, 72-77, 135, 137, 139, 264)

(redline of the 1AC and 2AC, hereinafter “Redline”)). True, there is a sprinkling

of fresh allegations: e.g., “Fidia committed to continuing the same marketing
and sales practices” and “free samples practices started by Sanofi continued by

Fidia.” (2AC

¶J

81, 82)28 These are too generic and conclusory to support a

plausible inference of unlawful or fraudulent conduct.

II.C, and essentially all of them require some showing of harm or causation, which is
one of the primary deficiencies here.

I note that Fidia USA has reprised its argument that it cannot be held liable
because it was incorporated only in 2011, after Sanofi’s alleged wrongful conduct.
Because the 2AC has failed to state a claim against any Fidia entity in any case, I need
not reach this argument here. For the same reason, I also do not address its argument
(joined by the Sanofi Defendants) that the free samples scheme claim is barred by
prior release or res judicata.
27

Nor am I persuaded by Exhibit A, attached to the 2AC, on which these
allegations rely. The document is a letter, dated from August 2011, informing “Hyalgan

28

prescribers that Fidia Italy, through Fidia USA, that Sanofi U.S. LLC will no longer
distribute Hyalgan, that Fidia Italy, through Fidia USA, will distribute Hyalgan, and
that “there will be no changes in how HYALGAN” will be supplied to prescribers.
Plaintiffs take this as smoking-gun evidence of Fidia’s participation in the free samples
27

The 2AC, in short, does not state facts that would give rise to a valid
claim for relief under the NJCFA, UTPCPL, MCPA, CUCL, or CLRA.
2.

Sanofi and Valentine

As to Sanofi and Valentine, I found that the 1AC failed to “explain the
who, what, when, where, and how” of their alleged participation in the free
samples scheme.

(Op.

16) (citing In re Suprema Specialties, F.3d 217, 224, 276-

77 (3d Cir. 2006)). Despite the opportunity to amend, that failure persists here.
Virtually all of the 2AC’s key allegations are cribbed verbatim from the
1AC. For example, this is paragraph 175 of the 1AC:
In particular, Local 690 and its beneficiaries paid for
multiple injections of Hyalgan and Synvisc, based on
Sanofi’s and Genzyme’s practices of providing free
samples of Hyalgan and Synvisc who could be and
were billed by doctors. The charges for such injections
were at times as high [as] $1,460 for individual
Hyalg[a]n prescriptions of which Local 690 paid 88.42
and the Local 690 member paid $247.11
.

And these are paragraphs 247 and 248 of the 2AC (I have bolded the
substantive addition):
In particular, Local 690 and its beneficiaries, and
DVHCC and its members, paid for multiple injections
of Hyalgan for multiple plan beneficiaries, based on
Sanofi’s practices of providing free samples of Hyalgan
could be and were billed by doctors. The charges for
such injections were at times as high [as] $1,460 for
individual Hyalgan prescriptions of which Local 690
paid $988.42 and the Local 690 member paid $247.11
Allegations like paragraph 247 and 248, I have already ruled, “lack the
required specificity” to survive a motion to dismiss. And there are over a dozen

scheme, but I do not read so much into it. This is a form letter addressed to customers
of Hyalgan generally; its purpose to alert them to a change in the drug’s distributor,
and to allay any concern that contracts negotiated with Sanofi will not be honored or
that the typical reimbursements will become unavailable. This letter does not establish
in any way that Fidia engaged in unlawful conduct.
28

more pairs of 1AC/2AC allegations—averments explicitly discussed in my
Opinion—just like

it.29

(Compare Opinion 15-19 (addressing the insufficiency of

1AC

¶J 75-76, 90-94, 97, 101, 103, 110-112, 123-24, 126, 202, 205), with
Redline, ¶J 84, 86-87, 114, 119, 145-146, 149, 162, 164, 169-170, 182-82,
185, 252, 255 (allegations remain substantively unchanged)).
There are a couple differences between the allegations of the 1AC and
2AC, but they are immaterial. The allegations concerning Sanofi sales
representatives’ encouragement of billing for free samples are for some reason
now pled with certainty rather than “upon information and belief.” They are
otherwise identical, however. (Op. 18-19; 2AC ¶J 169, 175-180) Then as now,
the primary factual basis for believing Sanofi knew about and orchestrated the
free sample scheme is that, by training sales reps in the proper use of samples
in 2005, Sanofi was actually condoning the improper use of samples. It remains
a non sequitur. (Op. 17-18 2AC

¶J 164-165) These amendments barely rise

above the stylistic; they do not “plausibly suggest wrongdoing” under Rule 8(a)
or satisfy the specificity required by Rule 9(b).
The 2AC’s extensive citation to the Giddarie qui tam complaint and
settlement is similarly unavailing. As discussed above, the Giddarie Settlement
may support the inference that free Hyalgan samples were given out by
someone to someone in New Jersey, California, Maryland, New York, and
Pennsylvania at some point. It says nothing about how the allegations
30
connect to the beneficiaries or members of Local 690 or DVHCC. Plaintiffs have
added a handful of new citations to the Giddarie complaint itself, but these,

Paragraphs 247 and 248, as it happens, are the only somewhat specific
allegations addressing the Hyalgan prescriptions that DVHCC or Local 790 may have
paid for. But these allegations still do not provide the where, when, and how necessary
to state a claim.
29

3°
The full list of 20 states affected by the settlement are as follows: California,
Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Massachusetts, Montana,
Nevada, New Hampshire, New Mexico, New York, North Carolina, Oklahoma, Rhode
Island, Tennessee, Texas, Virginia, and Wisconsin. The District of Columbia is also
alleged to have received settlement money from the Giddarie matter. (2AC J 193)

29

too, are nothing more than generalized, sweeping allegations about Sanofi’s
practices. (See, e.g., 2AC ¶J 10 1-106, 114-15) Incorporation by reference of an
unrelated lawsuit does not excuse Local 690 or DVHCC from pleading the
minimal factual support necessary to support their claims in this case.
’
3
As to Valentine specifically, the 2AC, like the 1AC, alleges that
Valentine delivered or supervised thc delivery of samples of Hyalgan to doctors
in California between 2006 and 2009, and was later censured for that conduct
by the federal government. (2AC ¶J 47, 255-58; see op. 20) But there is no
allegation that connects his acts to any injury to the plaintiffs. For example,
there is no pertinent factual allegation establishing that he delivered or
supervised the delivery of a Hyalgan sample to a physician practice that treated
a Local 690 or DVHCC member beneficiary, or that Local 690 or a DVHCC
member actually paid for a Hyalgan sample that was mis-billed. (Compare 2AC
32
¶ 149a-d with 2AC Ex. C)
In sum, insofar as DVHCC or Local 690 may be deemed to possess
standing, the 2AC nevertheless fails to state a claim based on the free samples
scheme against Fidia, Sanofi, or Valentine.
B.

Diabetes Drug Scheme

No plaintiff, I have ruled, has standing to bring claims related to the
diabetes drug scheme. Even if Local 690 or DVHCC had standing, however, I
would dismiss the NJCFA, UTPCPL, MCPA, CUCL, and CLRA claims relating to
the diabetes drug scheme against Accenture, Deloitte, and the Individual
Sanofi Defendants.

The rest of the 68-page Giddarie complaint contains many detailed factual
averments individuals and events in Georgia, none of which are relevant to plaintiffs’
claims here.
31

Because I have found that neither plaintiff has standing to pursue claims
against Valentine, and that even if they did, their claims would be dismissed for failure
to state a claim, I do not reach Valentine’s fact-bound contention that he should be
dismissed from this case for lack of personal jurisdiction.
32

30

My reasons are essentially those stated in my earlier Opinion, pp. 2123, and in Part III.A.2, supra. That is so because the 2AC largely recapitulates
the skimpy factual allegations of the 1AC (Redline ¶j 139, 144, 203-40, 245,
264), and what little is new is immaterial. Deloitte and Accenture, for example,
are now alleged to have nationwide business operations, and their “techniques
of secrecy” are said to be “identified” in the Giddarie complaint. (2AC

¶J

32, 35

265)33 There is no mention of Accenture or Deloitte in the Giddarie complaint,
however. The failure to specifr the scope of these defendants’ business
activities was not one of the deficiencies of the 1AC. And the deficiencies that
were identified in my prior Opinion have not been addressed by the 2AC.
34
In the end, plaintiffs stand here today as they did a year ago. They
claim that diabetes drugs were improperly switched at some cost to TPPs
through illegal kickback agreements, although they aren’t sure how and cannot
state how they were harmed as a result. That is still not enough to state a
claim under the NJCFA or UTPCPL. Nor do these allegations state a claim
under MCPA, CUCL, or CLRA. As to all defendants, the 2AC must be dismissed
for failure to state a claim related to the diabetes drug scheme.
C.

Unjust Enrichment and Conspiracy
To the extent that any plaintiff has standing, the remaining tort

claims must be dismissed as well. Under New Jersey law, to state a claim for

There are no new allegations concerning the Individual Sanofi Defendants.
34
Those deficiencies included: (1) the lack of “essential details that would tie
[Deloitte and Accenture] to the kickback scheme”; (2) that no specific pharmacy is
alleged to have been involved in the kickback scheme or “that any such pharmacy
served” Local 690 or DVHCC members’ beneficiaries; (3) the absence of facts
“suggesting that the scheme, however nefarious, had any effect” on plaintiffs or their
members or beneficiaries; (4) that the examples of switching date from 2009 and 2011,
“well before the 20 12-13 time period of alleged kickback contacts”; (5) that a number
of the allegations copied from the Ponte complaint are pleaded here with certainty, but
in Ponte’s complaint were pleaded on information and belief; and (6) that a related
securities fraud complaint based on the whistleblower allegations of Ponte was itself
dismissed for failure to state a claim in the Southern District of New York, In re Sanofi
Secs. Litig., 155 F. Supp. 3d 386 (S.D.N.Y. 2016). (op. 2 1-23)
31

unjust enrichment, “a plaintiff must allege that (1) at plaintiff’s expense (2)
defendants received a benefit (3) under circumstances that would make it
unjust for defendant to retain benefit without paying for it.” Synder v. Famam
Cos., 792 F. Supp. 2d 712, 724 (D.N.J. 2011); see also VRG Corp. v. GKN
Realty Corp., 641 A.2d 519, 526 (N.J. 1994). A civil conspiracy claim requires a
properly pleaded unlawful act. See G.D. v. Kenny, 15 A.3d 300, 321 (N.J. 2011)
(dismissing a civil conspiracy claim where the plaintiff could not “establish that
defendants committed an unlawful act or a wrong against him that constitutes
a tort entitled him to recovery.”) For the reasons stated above, no plaintiff has
pled any underlying unjust or unlawful action resulting in payment of money
that it is entitled to recover. Because there is no unlawful act, it follows that
the 2AC fails to state a claim for civil conspiracy.
V.

CONCLUSION
For the reasons set forth above, the defendants’ motions to dismiss for

lack of subject matter jurisdiction and failure to state a claim are GRANTED.
Plaintiffs, armed with specific instructions from the court, have already once
been granted leave to remedy these basic pleading deficiencies, have enlisted
the aid of a trade association which lacks standing, and have failed to remedy
these defects. Because further amendment would be futile, this dismissal is
with prejudice.
Dated: May 4, 2017

(4&4b
(I
.7

KEVIN MCNULTY
United States District Judge

32