Mahoney v. Endo Health Solutions, Inc. et al

Filing 78

OPINION AND ORDER.....The defendants April 19, 2016 motion to dismiss is granted in part. The following claims remain: (1) the § 349 claim; (2) breach of express warranty; and (3) the fraud and fraudulent concealment claims. (Signed by Judge Denise L. Cote on 7/20/2016) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------- X
:
SHANNON MAHONEY, individually and on
:
behalf of herself and all others
:
similarly situated,
:
Plaintiff,
:
:
-v:
:
ENDO HEALTH SOLUTIONS, INC., a
:
Delaware corporation; ENDO
:
PHARMACEUTICALS, INC., a Delaware
:
corporation; GENERICS INTERNATIONAL
:
(US PARENT), INC., a Delaware
:
corporation, d/b/a QUALITIEST
:
PHARMACEUTICALS; GENERICS
:
INTERNATIONAL (US), INC., a Delaware
:
corporation; GENERICS BIDCO I, LLC, a :
Delaware limited liability company;
:
GENERICS INTERNATIONAL (US HOLDCO),
:
INC., a Delaware corporation; GENERICS :
INTERNATIONAL (US MIDCO), INC., a
:
Delaware corporation; and VINTAGE
:
PHARMACEUTICALS, LLC, a Delaware
:
limited liability company,
:
:
Defendants.
:
-------------------------------------- X
APPEARANCES:
For the plaintiff:
Ryon M. McCabe
Robert C. Glass
McCabe Rabin, P.A.
1601 Forum Place, Suite 505
West Palm Beach, FL 33401
David M. Buckner
Brett E. von Borke
Buckner & Miles
3350 Mary Street
Miami, FL 33129
1

15cv9841(DLC)
OPINION AND ORDER

For the defendants:
Ingo W. Sprie, Jr.
Benjamin C. Wolverton
Arnold & Porter, LLP
399 Park Avenue
New York, NY 10022
Jonathan L. Stern
David D. Fauvre
Katharine C. Hinkle
Arnold & Porter, LLP
601 Massachusetts Ave, N.W.
Washington, DC 20001
DENISE COTE, District Judge:
Plaintiff Shannon Mahoney (“Mahoney”) has brought a
putative class action on behalf of a national class and a New
York class against Endo Health Solutions, Inc. (“Endo Health”)
and several related corporations.

Mahoney alleges that she and

other class members suffered an economic loss when they
purchased Qualitest Multi-Vitamin with Fluoride Chewable Tablets
(“Tablets”), which are available by prescription for children
who do not have access to fluoridated drinking water.

Mahoney

claims that the defendants marketed the Tablets as having a
certain concentration of fluoride, when in fact the
concentration of fluoride was much lower than the label
indicated and lower than the medically-recommended dosage.
The defendants have settled a related qui tam action and
paid substantial sums of money to the federal government and to
certain States.

The defendants filed a motion to dismiss the
2

amended complaint in Mahoney’s action in its entirety.
reasons that follow, the motion is granted in part.

For the

The

plaintiff’s claims for a violation of N.Y. Gen. Bus. Law § 349,
breach of express warranty, fraud and fraudulent concealment may
proceed.

Her claims for violations of the Magnuson-Moss

Warranty Act, breach of the implied warranty of merchantability,
unjust enrichment and negligent misrepresentation are dismissed.
Background
These facts are taken from the amended complaint or
documents integral to it.

Fluoride helps prevent dental caries,

which is more commonly known as tooth decay.

The American

Dental Association (“ADA”) and the American Academy of
Pediatrics (“AAP”) advocate that all geographic areas fluoridate
their community drinking water.

Approximately 95.5 million

Americans do not receive fluoride through their community’s
water source, however.

In communities that do not have

fluoridated water, the ADA and the AAP recommend that children
under 16 years of age receive daily dietary fluoride
supplements.

These supplements can take many forms, including

chewable multivitamins with fluoride.

The ADA and the AAP

publish a table recommending the appropriate dosage of fluoride
for children.

The three recommended dosage levels are 0.25

milligrams, 0.5 milligrams, and 1 milligram of “fluoride ion”
3

depending on the age of the child. 1

Dentists and other doctors

rely on this table of recommended dosages in prescribing
fluoride supplements to children.
Fluoride for use in chewable tablets can be obtained from
different sources, which include “sodium fluoride.”

Sodium

fluoride is a salt form of fluoride and contains 54.5% sodium
and 45.5% fluoride ion.

The ADA’s recommended dosage chart

notes that it takes 2.2 milligrams of sodium fluoride to yield 1
milligram of fluoride ion.

These pills must be prescribed by a

dentist or physician.
The defendants constituted, collectively, a dominant
manufacturer of fluoride tablets in the United States.

They

manufactured and distributed the Tablets under the Qualitest
Pharmaceuticals brand in fluoride concentrations that
corresponded to all three of the ADA-recommended dosages.

The

label on the outside of the Tablet bottles states the purported
dosage of fluoride in milligrams in bold letters.

In small

print that appears perpendicular to the main, bolded print
indicating the fluoride concentration, the labels indicate that
the “[a]ctive ingredient for caries prophylaxis [is] [f]luoride

Fluoride ion refers to fluoride in its purer form, and is
contrasted with the diluted sodium fluoride, as explained below.
The ADA-AAP recommended dosages are measured in terms of
fluoride ion levels.
1

4

as sodium fluoride.”

An image of the label is below.

The package insert describes in some detail the different
dosage recommendations for fluoride tablets, and states, for
example, that a 1 milligram Tablet is recommended for children
ages 6-16 years.

The package insert tracks the ADA and AAP

recommended dosages for the Tablets based on the child’s age.
Mahoney contends that the bottle label and insert were
deliberately misleading because they were intended to convey
falsely that the Tablets provided the dosage of fluoride ion
recommended by the ADA and the AAP.
On December 16, 2015, the Court signed a Stipulation and
Order of Settlement and Dismissal (“Settlement”) in a related
qui tam action, United States of America ex rel. Porter v. Endo
Health Solutions, Inc. et al., 13cv1506.

All of the defendants

in this litigation were signatories to the Settlement.
5

In the

Settlement, the defendants admitted that “the product labeling
for [the Tablets] included dosage information, which stated the
supplements contained 1.0 mg, 0.5 mg, or 0.25 mg of fluoride,
respectively”; the “Defendants used sodium fluoride . . . as an
ingredient to manufacture [the Tablets]”; and that the Tablets
contained approximately “44% of the fluoride ion recommended by
the ADA-AAP Guidelines.”

This sub-potency pervaded all of the

Tablets manufactured from 2007 through the middle of 2013.
Mahoney, a resident of New York, is the mother of two
children who were prescribed fluoride supplements.

Mahoney’s

pediatrician prescribed a generic chewable multivitamin with
fluoride, specifying the fluoride dosage but not a particular
manufacturer.

Mahoney filled the prescription, typically at

three month intervals, at her local pharmacy.

The pharmacist

filled the prescription with pills that purportedly contained
the appropriate fluoride amount, relying on the labels for the
Tablets in order to fill the prescription correctly.

Mahoney’s

prescriptions were filled with the defendants’ Tablets.
According to Mahoney, she would never have purchased the Tablets
had she known that their labels were incorrect.
Based on these events, Mahoney brings several causes of
action: (1) violation of the Magnuson-Moss Warranty Act, 15
U.S.C. § 2301 et seq.; (2) breach of express warranty; (3)
6

negligent misrepresentation; (4) unjust enrichment; (5)
violation of N.Y. Gen. Bus. Law § 349; (6) breach of the implied
warranty of merchantability; (7) fraud; and (8) fraudulent
concealment. 2

The complaint was filed on December 17, 2015, the

day after the Settlement was signed by the Court.

The

defendants moved to dismiss on February 24, 2016.

The plaintiff

filed an amended complaint on March 18, and the defendants filed
a renewed motion to dismiss on April 19, which became fully
submitted on June 2.
Discussion
When deciding a motion to dismiss under Rule 12(b), Fed. R.
Civ. P., a court must “accept all allegations in the complaint
as true and draw all inferences in the non-moving party’s
favor.”

LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d

471, 475 (2d Cir. 2009).

“To survive a motion to dismiss under

Rule 12(b)(6), a complaint must allege sufficient facts which,
taken as true, state a plausible claim for relief.”

Keiler v.

Harlequin Enters. Ltd., 751 F.3d 64, 68 (2d Cir. 2014); Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (“[A] complaint must contain
sufficient factual matter, accepted as true, to state a claim
for relief that is plausible on its face.”).

“A claim has

Subject matter jurisdiction over this action exists under 28
U.S.C. § 1332(d)(2)(A) even if no federal cause of action
provides jurisdiction.
2

7

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.”

Parkcentral

Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 208
(2d Cir. 2014) (citation omitted).
I.

Group Pleading
The defendants argue that the amended complaint should be

dismissed because the plaintiff engages in impermissible “group
pleading.”

Complaints that “lump[]” several defendants together

and make allegations against those defendants “collectively” may
violate Rule 8, Fed. R. Civ. P.

Zurich Am. Ins. Co. v. Dah Sing

Bank, Ltd., No. 03cv7778 (DLC), 2004 WL 1328215, at *6 (S.D.N.Y.
June 15, 2004).

One of the core purposes of Rule 8 is to “give

the defendant fair notice of what the plaintiff’s claim is and
the grounds upon which it rests.”

E.E.O.C. v. Port Auth. of

New York & New Jersey, 768 F.3d 247, 253 (2d Cir. 2014)
(citation omitted).

In the context of the heightened pleading

requirements of Rule 9(b), however, the Second Circuit has held
that, in certain instances, “group pleading may satisfy the
source identification” required by Rule 9.

Loreley Fin.

(Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 173
(2d Cir. 2015).

As such, “there is no fixed requirement . . .

to identify a single entity within a group on pain of
8

dismissal.”

Id.

The defendants’ argument regarding group pleading may be
swiftly dismissed.

Each defendant signed the Settlement,

accepting responsibility for manufacturing the Tablets with less
than the stated amount of fluoride ion.
II.

Negligent Misrepresentation

To prevail on a claim of negligent misrepresentation
under New York law, a plaintiff must show (1) the
existence of a special or privity-like relationship
imposing a duty on the defendant to impart correct
information to the plaintiff; (2) that the information
was incorrect; and (3) reasonable reliance on the
information.
Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 490 (2d
Cir. 2014) (citation omitted). 3

“New York law strictly limits

negligent-misrepresentation claims to situations involving
actual privity of contract between the parties or a relationship
so close as to approach that of privity.”

Fin. Guar. Ins. Co.

v. Putnam Advisory Co., LLC, 783 F.3d 395, 405 (2d Cir. 2015)
(citation omitted).

Absent actual privity of contract,

there must be (1) an awareness by the maker of the
statement that the statement is to be used for a
The Court must determine what substantive law governs the
dispute. Neither party explicitly addresses the choice of law
question. The defendants rely on New York law in their briefs,
and the plaintiff impliedly consents to the application of New
York law by failing to argue that another law should apply.
Moreover, the first amended complaint identifies New York law as
the basis for the plaintiff’s statutory claims. Thus, New York
law applies to the plaintiff’s state law claims. See Chau v.
Lewis, 771 F.3d 118, 126 (2d Cir. 2014).
3

9

particular purpose; (2) reliance by a known party on
the statement in furtherance of that purpose; and (3)
some conduct by the maker of the statement linking it
to the relying party and evincing its understanding of
that reliance.
N. Star Contracting Corp. v. MTA Capital Const. Co., 993
N.Y.S.2d 11, 14 (1st Dep’t 2014); Sykes v. RFD Third Ave. 1
Associates, LLC, 15 N.Y.3d 370, 373 (2010) (relying on the same
three-part test in discerning whether there was a privity-like
relationship).

See also Fin. Guar. Ins. Co., 783 F.3d at 405

(the relationship must be such that the defendant “owed [the
plaintiff] a duty to speak with care” (citation omitted)). 4
The plaintiff’s negligent misrepresentation claim is
dismissed.

Mahoney has not plausibly pled that she was in

privity with the defendants or that her relationship with them
was so close that it resembled privity of contract under New
York law.

A “privity-like” relationship does not exist when a

plaintiff is one of a large class of possible consumers.

See

Sykes v. RFD Third Ave. 1 Associates, LLC, 884 N.Y.S.2d 745, 749
(1st Dep’t 2009), aff’d, 15 N.Y.3d 370 (2010).
The plaintiff’s arguments to the contrary are unavailing.
The Second Circuit has not definitively ruled that claims for
negligent misrepresentation must be pled with the particularity
that Rule 9(b) requires, but courts in this District frequently
hold that Rule 9 applies. See Eternity Glob. Master Fund Ltd.
v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 188 (2d Cir.
2004).
4

10

The plaintiff relies on a three-part test articulated in Kimmell
v. Schaefer, 89 N.Y.2d 257, 264 (1996), and repeated in Suez
Equity Inv’rs, L.P. v. Toronto-Dominion Bank, 250 F.3d 87 (2d
Cir. 2001), designed to determine whether the duty to speak with
care exists in a commercial context.

Kimmel, 89 N.Y.2d at 263.

Kimmel determined that liability for a negligent
misrepresentation may exist in that context when the defendant
is in a “special position of confidence and trust with the
injured party” that justifies reliance on the defendant’s
speech.

Id. at 263-64.

In determining whether justifiable reliance exists in
a particular case, a fact finder should consider
whether the person making the representation held or
appeared to hold unique or special expertise; whether
a special relationship of trust or confidence existed
between the parties; and whether the speaker was aware
of the use to which the information would be put and
supplied it for that purpose.
Suez, 250 F.3d at 103 (quoting Kimmel, 89 N.Y.2d at 264)
(analyzing a negligent misrepresentation claim in connection
with securities fraud).

See also Mandarin Trading Ltd. v.

Wildenstein, 16 N.Y.3d 173, 180 (2011) (listing the same three
factors in upholding the dismissal of a negligent
misrepresentation claim in connection with a fraudulent art
transaction).

In Suez, the court found that a special

relationship between the plaintiff and defendant existed because
11

the relationship “extended beyond the typical arm’s length
business transaction.”

Suez Equity Inv’rs, 250 F.3d at 103.

The “defendants [had] initiated contact with the plaintiffs,
induced them to forbear from performing their own due diligence,
and repeatedly vouched for the veracity of the allegedly
deceptive information.”

Id.

The Suez test for pleading justifiable reliance does not
assist the plaintiff in her effort to plead the existence of a
privity-like relationship here. 5

No privity-like relationship

exists in the absence of “even [] bare, minimal contact” between
the parties.

Mandarin Trading Ltd., 16 N.Y.3d at 181.

Expertise alone cannot create a special relationship when “the
relationship between the parties is too attenuated.”

Id.

The

plaintiff has not pled that her relationship with the defendants
extended beyond that which exists between an ordinary consumer
and a prescription drug manufacturer.

Thus, the negligent

misrepresentation claim is dismissed.
III. Breach of Implied Warranty of Merchantability
Under the Uniform Commercial Code (“UCC”), which New York
The plaintiff also relies on a district court case denying a
motion to dismiss a negligent misrepresentation claim when a
patient sued the manufacturer of a defective medical device,
Williamson v. Stryker Corp., No. 12cv7083 (CM), 2013 WL 3833081
(S.D.N.Y. July 23, 2013). In Williamson, however, the plaintiff
alleged reliance on conversations with corporate representatives
of the defendant.
5

12

has adopted, “a warranty that the goods shall be merchantable is
implied in a contract for their sale if the seller is a merchant
with respect to goods of that kind.”

N.Y. U.C.C. § 2-314(1).

Goods are merchantable if they meet certain requirements,
including “fit[ness] for the ordinary purposes for which such
goods are used.”

Id. § 2-314(2)(c).

Additionally, goods must

“conform to the promises or affirmations of fact made on the
container or label if any.”

Id. § 2-314(2)(f).

To succeed on

an implied warranty claim, the plaintiff “must show both the
existence and breach of the warranty and that the breach was the
proximate cause of plaintiff’s damages.”

Bellevue S. Associates

v. HRH Const. Corp., 78 N.Y.2d 282, 298 (1991).
There is no requirement of privity for such a warranty
claim so long as the plaintiff’s claim is one for personal
injury.

“A seller’s warranty whether express or implied extends

to any natural person if it is reasonable to expect that such
person may use, consume or be affected by the goods and who is
injured in person by breach of the warranty.”

N.Y. U.C.C. § 2-

318 (emphasis added); Ross v. Alexander Mitchell & Son, Inc., 31
N.Y.S.3d 703, 703 (4th Dep’t 2016) (“Privity is not required in
a personal injury action for breach of express or implied
warranty.” (citation omitted)).

But, “no implied warranty will

extend from a manufacturer to a remote purchaser not in privity
13

with the manufacturer where only economic loss and not personal
injury is alleged.”

Lexow & Jenkins, P.C. v. Hertz Commercial

Leasing Corp., 504 N.Y.S.2d 192, 193-94 (2d Dep’t 1986); see
Adirondack Combustion Techs., Inc. v. Unicontrol, Inc., 793
N.Y.S.2d 576, 579 (3d Dep’t 2005) (“A claim based upon a breach
of an implied warranty requires a showing of privity . . . when
there is no claim for personal injuries”); Gordon v. Ford Motor
Co., 657 N.Y.S.2d 43, 43 (1st Dep’t 1997) (holding that “there
can be no implied warranty absent privity between [the
defendants] and the plaintiffs”).

See also Bellevue S.

Associates, 78 N.Y.2d at 298 (“Defenses available to claims of
breach of the implied warranty of merchantability include . . .
lack of privity.”).
The plaintiff’s implied warranty claim is dismissed.

She

has not pled that she is in privity with the defendants and the
plaintiff has not alleged that her children were personally
injured as a result of ingesting the sub-potent fluoride
Tablets.

Thus, the injury she claims is limited to the economic

loss she experienced when she paid for Tablets that were not fit
for their ordinary purpose of preventing tooth decay.

Privity

is required for a successful implied warranty claim where only
economic damages are alleged, and there is no privity here.
The plaintiff principally argues that privity is not
14

required under New York law, citing Goldberg v. Kollsman
Instrument Corp., 12 N.Y.2d 432 (1963).

Goldberg, however, was

a wrongful death case.
The plaintiff next contends that, even if privity were
required, there is an exception to that requirement for “things
of danger” such as the Tablets.

She relies on Hubbard v. Gen.

Motors Corp., No. 95cv4362, 1996 WL 274018 (S.D.N.Y. May 22,
1996), in which the plaintiff alleged that the defendant had
manufactured a defective braking system in cars.

Hubbard found

that “New York recognizes an exception to [the privity
requirement] where the product in question is a ‘thing of
danger.’”

Id. at *5.

The decision cites only Goldberg and All-

Tronics, Inc. v. Ampelectric Co., 354 N.Y.S.2d 154 (2d Dep’t
1974), which recognized “the principle that a defect in a
potentially hazardous product subjects the distributor-vendor
and the manufacturer to liability to a purchaser for breach of
implied warranties” where the plaintiff claimed property damage
from a fire allegedly caused by the defendant’s defective
products.

All-Tronics, 354 N.Y.S.2d at 156.

This purported

“thing of danger” exception does not appear in recent New York
cases, however, which have overwhelmingly upheld the privity
requirement where only economic loss is alleged in cases that
involve indisputably dangerous products.
15

Adirondack Combustion

Techs., Inc., 793 N.Y.S.2d at 579 (privity required for economic
damages involving an exploding boiler).

Accordingly, even if

the plaintiff had adequately pled that the Tablets are things of
danger, which she has not, her claim for a breach of the implied
warranty of merchantability must be dismissed because she only
seeks economic losses associated with paying for the Tablets
themselves.
Finally, recognizing this hurdle to her implied warranty
claim, the plaintiff suggests in her brief that she may bring an
implied warranty claim for the increased health risk her
children experienced from consumption of the defendants’
Tablets.

In her amended complaint, the plaintiff asserts that

her children experienced “increased risk for developing tooth
cavities.”

She does not claim any damages for that injury,

however, instead alleging throughout her complaint that she
“suffered damages and ascertainable losses of money and property
by paying for” the Tablets when she would not have done so
absent the alleged misrepresentation. 6

Thus, although she does

describe an increased risk of tooth decay in the complaint, she
does not plead that she suffered any compensable damages other
than economic damages as a result of that increased risk.

Thus,

A lawsuit claiming personal injury would, of course, present
certain challenges when pursued on behalf of a class.
6

16

her attempt to recast this increased risk as a personal injury
that would satisfy § 2-318 is unavailing.
IV.

Breach of Express Warranty

Express warranties are governed by N.Y. U.C.C. § 2313(1)(a), which provides that an express warranty includes
“[a]ny affirmation of fact or promise made by the seller to the
buyer which relates to the goods and becomes part of the basis
of the bargain.”

Moreover, “[a]ny description of the goods

which is made part of the basis of the bargain creates an
express warranty that the goods shall conform to the
description.”

Id. § 2-313(1)(b).

Section 2-318 further

provides that “[a] seller’s warranty whether express or implied
extends” to any foreseeable user “who is injured in person by
breach of the warranty.”
The defendants moved to dismiss the plaintiff’s express
warranty claim because the plaintiff is not in privity with the
defendants.

The New York Court of Appeals has dispensed with

the requirement of privity in cases involving breach of an
express warranty where only economic damages are alleged.

Randy

Knitwear, Inc. v. Am. Cyanamid Co., 11 N.Y.2d 5, 16 (1962);
Jesmer v. Retail Magic, Inc., 863 N.Y.S.2d 737, 739 (2d Dep’t
2008); Murrin v. Ford Motor Co., 756 N.Y.S.2d 596, 597 (2d Dep’t
2003).

As the New York Court of Appeals observed:
17

The policy of protecting the public from injury,
physical or pecuniary, resulting from
misrepresentations outweighs allegiance to old and
out-moded technical rules of law which, if observed,
might be productive of great injustice. The
manufacturer unquestionably intends and expects that
the product will be purchased and used in reliance
upon his express assurance of its quality . . .
[h]aving invited and solicited the use, the
manufacturer should not be permitted to avoid
responsibility, when the expected use leads to injury
and loss, by claiming that he made no contract
directly with the user.
Codling v. Paglia, 32 N.Y.2d 330, 339 (1973) (citing Randy
Knitwear)).

Thus, privity is not required and the defendants’

motion to dismiss the plaintiff’s express warranty claim is
denied.
The defendants’ arguments to the contrary are not
persuasive.

The defendants primarily contend that, because

Randy Knitwear predated the effective date of the UCC (1964) and
the subsequent amendment of § 2-318 (1975), it is no longer good
law. 7

The commentary on relevant UCC sections, however,

indicates that Randy Knitwear remains controlling precedent
despite the subsequent enactment of the UCC.

It explains that

“the warranty sections of this Article are not designed in any

See Jeffrey W. Deaver, Products Liability in New York: Section
2-318 of the UCC -- the Amendment Without A Cause, 50 Fordham L.
Rev. 61, 70 (1981) (UCC became effective in New York in 1964);
id. at 74 (discussing the 1975 amendment of § 2-318 that
increased the number of plaintiffs who could sue manufacturers
for breach of warranties if personal injury was alleged).
7

18

way to disturb those lines of case law growth which have
recognized that warranties need not be confined either to sales
contracts or to the direct parties to such a contract.”
U.C.C. § 2-313, cmt.2 (discussing express warranties).

N.Y.
For

example, express warranties “may arise in other appropriate
circumstances such as in the case of bailments for hire.”

Id.;

see also Vermont Plastics, Inc. v. Brine, Inc., 79 F.3d 272, 280
(2d Cir. 1996) (discussing the same comment to the same
provision of the Vermont UCC and finding that “[a]ccording to
the comment, among the circumstances in which contractual
privity is not required are (1) bailments for hire, and (2)
situations covered by [§] 2-318. . . . Beyond these two
circumstances, however, the matter is left to the case law.”
(citation omitted)).

Thus, the official comment accompanying

§ 2-313 leaves Randy Knitwear undisturbed.
The comments accompanying § 2-318 further support this
view.

The New York annotations to § 2-318 explain that:

[T]he Code enlarges the number of prospective
plaintiffs in a warranty action but it does not
increase the number of potential defendants. In no
way is the Code intended to limit the extension of
warranty protection by the courts to a greater number
of plaintiffs or the expansion of the manufacturer’s
liability as in [Randy Knitwear].
N.Y. U.C.C. § 2-318, N.Y. Annotations.

See also Barkley Clark

and Christopher Smith, 1 Law of Prod. Warranties § 10:11 (2015)
19

(observing that “§ 2-318 is ‘neutral’ on vertical privity,” and
“the great weight of authority follows Randy Knitwear”).

The

official and state-specific comments on §§ 2-313 and 2-318 thus
show that Randy Knitwear’s holding remains good law even though
it predates the UCC.

Moreover, as described above, more recent

authority follows Randy Knitwear and does not require privity
between a consumer and a manufacturer where the plaintiff
alleges breach of an express warranty and seeks only economic
damages.
In support of their argument that privity is required, the
defendants cite Koenig v. Boulder Brands, Inc., 995 F. Supp. 2d
274, 290 (S.D.N.Y. 2014), and Carcone v. Gordon Heating & Air
Conditioning Co., 623 N.Y.S.2d 679, 680 (4th Dep’t 1995), among
other decisions.

These cases are not sufficiently persuasive to

overcome the New York Court of Appeals’ ruling in Randy Knitwear
and the commentary explaining that Randy Knitwear remains good
law.

The defendants’ motion to dismiss the plaintiff’s express

warranty claim is therefore denied.
V.

Magnuson-Moss Warranty Act (“MMWA”)
The MMWA, 15 U.S.C. § 2301 et seq., provides consumers with

a private cause of action for violations of implied and express
warranties in certain circumstances.

Wilbur v. Toyota Motor

Sales, U.S.A., Inc., 86 F.3d 23, 26 (2d Cir. 1996).
20

The MMWA

provides that “a consumer who is damaged by the failure of a
supplier, warrantor, or service contractor to comply with any
obligation under this chapter, or under a written warranty,
implied warranty, or service contract, may bring suit for
damages and other legal and equitable relief” in federal court.
15 U.S.C. § 2310(d)(1).

The MMWA limits the subject matter

jurisdiction of the federal courts to adjudicate such claims.
For example, individual claims must be for $25 or more, and
there is a $50,000 amount in controversy requirement for all
claims brought in a suit.

Id. § 2310(d)(3)(A)-(B).

The MMWA

further provides that “no claim shall be cognizable . . . if the
action is brought as a class action, and the number of named
plaintiffs is less than one hundred.”

Id. § 2310(d)(3)(C).

Moreover, in a class action, the “person obligated under the
warranty” must be “afforded a reasonable opportunity to cure
such failure to comply” with the warranty.

Id. § 2310(e). 8

In

addition to damages, a successful plaintiff may recover
attorney’s fees.

Id. § 2310(d)(2).

The defendants raise three arguments for dismissing the
plaintiff’s MMWA claim: (1) the MMWA does not apply because the
Tablets are not “consumer products” within the meaning of the

The defendants do not argue that the plaintiff fails to meet
these requirements.
8

21

statute; (2) the MMWA does not apply because the labels at issue
are otherwise governed by federal law; and (3) the MMWA claim
fails because the state law warranty claims fail.

The

plaintiff’s MMWA claim is dismissed because the Tablets’ labels
and package inserts are otherwise governed by the Food, Drug,
and Cosmetic Act (“FDCA”).

The Court declines to reach the

defendants’ argument that the Tablets are not consumer products.
The MMWA provides that:
This chapter . . . shall be inapplicable to any
written warranty the making or content of which is
otherwise governed by Federal law. If only a portion
of a written warranty is so governed by Federal law,
the remaining portion shall be subject to this
chapter.
15 U.S.C. § 2311(d).

Federal Trade Commission (“FTC”)

regulations also specify that this section “exempts from the Act
. . . any written warranty the making or content of which is
required by federal law.”

16 C.F.R. § 700.3(a).

The FDCA and its accompanying regulations contain labeling
requirements for drugs. 9

Under the FDCA, “labeling” is defined

as “all labels and other written, printed, or graphic matter (1)
upon any article or any of its containers or wrappers, or (2)

Under 21 U.S.C. § 321(g)(1)(B), a “drug” is an article
“intended for use in the diagnosis, cure, mitigation, treatment
or prevention of disease in” humans. There is no dispute that
the Tablets are drugs within this definition because they are
intended to prevent dental caries.
9

22

accompanying such article.”

21 U.S.C. § 321(m).

Labels for

drugs must include “the established name and quantity or, if
determined to be appropriate by the Secretary, the proportion of
each active ingredient.”

Id. § 352(e)(1)(A)(ii).

The

regulations accompanying the FDCA contain a complex and lengthy
set of requirements that different types of drug labels must
satisfy.

See generally 21 C.F.R. § 201.56; Id. § 201.80.

The “Indications and Usage” section of the package insert
is also addressed in the FDA regulations: “If there is a
specific pediatric indication (i.e., an indication different
from those approved for adults) . . . it shall be described
under the ‘Indications and Usage’ section of the labeling.”
§ 201.80(f)(9)(ii).

Id.

Any “appropriate pediatric dosage

information shall be given under the ‘Dosage and Administration’
section of the labeling.”

Id.

The defendants’ motion to dismiss the MMWA claim is granted
because the relevant portions of the Tablets’ labels and inserts
are governed by the FDCA.

The alleged false statement at issue

in this litigation is narrow.

It consists of the defendants’

representation that the Tablets contain a certain amount of
fluoride ion when they in fact contain less than half that
amount.

As the plaintiff points out, 21 U.S.C.

§ 352(e)(1)(A)(ii) requires drug manufacturers to include the
23

quantity of each active ingredient on the Tablets’ labels.
Thus, the alleged misrepresentation is governed by the FDCA and
is not actionable under the MMWA.
The plaintiff’s arguments to the contrary are not
persuasive.

First, the plaintiff relies on the FTC’s

regulations concerning the MMWA.

Those regulations provide that

the § 2311(d) exclusion applies only to warranties “required by
federal law.”

16 C.F.R. § 700.3(a).

The plaintiff contends

that this regulation demonstrates that the “governed by”
language in § 2311(d) should be applied only where the
warranty’s contents were required, not simply regulated, by
federal law.

It is unnecessary to explore whether any tension

exists between these two formulations, however, since the
disclosure of the Tablets’ active ingredient, which is the key
misrepresentation at issue here, is both governed by and
required by the FDCA.
Next, the plaintiff discusses the second sentence of
§ 2311(d), which provides that, “[i]f only a portion of a
written warranty is so governed by Federal law, the remaining
portion shall be subject to this chapter.”

See Sandoval v.

PharmaCare US, Inc., ---F. Supp. 3d---, 2015 WL 7351512, at *8
(S.D. Cal. Sept. 30, 2015) (discussing this provision).

The

plaintiff contends that certain portions of the “Indications and
24

Usage” section of the package insert are not required by the
FDCA.

Specifically, the plaintiff points to a section of the

inserts that states, for example: “Multivitamin with 1 mg
Fluoride Chewable Tablets provide fluoride in tablet form for
children 6-16 years of age in areas where the water fluoride
level is less than 0.3 ppm.”

The plaintiff contends that this

language and the rest of the Indications and Usage section are
not required by the FDCA, but are actionable warranties under
the MMWA.
The plaintiff is wrong.

As the plaintiff recognizes, the

language in the “Indications and Usage” section is consistent
with the ADA-AAP dosage recommendations. 10

The statements are

not themselves misrepresentations, nor do they specifically
identify the amount of fluoride ion in the Tablets.

While these

statements may be evidence of the defendants’ fraudulent intent
with respect to the label’s representation about the actual
fluoride concentrations in the Tablets, they are not the alleged
false warranty at issue in this litigation.

The insert makes reference to the AAP when it states that: The
AAP “recommends that children up to age 16, in areas where
drinking water contains less than optimal levels of fluoride,
receive daily fluoride supplementation.” This statement is not
alleged to be false and does not contain a specific warranty
about the concentration of fluoride in the Tablets.
10

25

VI.

New York General Business Law § 349

N.Y. Gen. Bus. Law § 349 prohibits “deceptive acts or
practices in the conduct of any business, trade or commerce or
in the furnishing of any service in this state.”

Orlander v.

Staples, Inc., 802 F.3d 289, 300 (2d Cir. 2015) (citation
omitted).

To succeed on a § 349 claim, “a plaintiff must allege

that a defendant has engaged in (1) consumer-oriented conduct
that is (2) materially misleading and that (3) plaintiff
suffered injury as a result of the allegedly deceptive act or
practice.”

Id. (citation omitted).

“The New York Court of

Appeals has adopted an objective definition of ‘misleading,’
under which the alleged act must be likely to mislead a
reasonable consumer acting reasonably under the circumstances.”
Cohen v. JP Morgan Chase & Co., 498 F.3d 111, 126 (2d Cir. 2007)
(citation omitted).

In addition, there must be a causal

“connection between the misrepresentation and some harm from, or
failure of, the product.”

Orlander, 802 F.3d at 302 (citation

omitted).
Under New York law, conduct is “consumer-oriented” when it
“had a broader impact on consumers at large.”
F.3d at 490 (citation omitted).

Crawford, 758

“Private contract disputes,

unique to the parties, for example, would not fall within the
ambit of the statute.”

Id. (citation omitted).
26

This element

thus “may be satisfied by showing that the conduct at issue
potentially affects similarly situated consumers.”

Sykes v. Mel

S. Harris & Associates LLC, 780 F.3d 70, 84 (2d Cir. 2015)
(citation omitted).

In sum, “the injury must be to the public

generally as distinguished from the plaintiff alone.”

Wilson v.

Nw. Mut. Ins. Co., 625 F.3d 54, 64-65 (2d Cir. 2010) (citation
omitted); see Euchner-USA, Inc. v. Hartford Cas. Ins. Co., 754
F.3d 136, 143 (2d Cir. 2014) (“deceptive conduct aimed at the
public at large” is consumer-oriented (citation omitted)).
The plaintiff has plausibly pled that the defendants
violated N.Y. Gen. Bus. Law § 349.

The labels and inserts were

directed towards pharmacists and consumers, and the plaintiff
alleges that these labels were materially misleading.

The

defendants’ only ground for moving to dismiss the § 349 claim is
that the conduct alleged is not consumer-oriented.

The

defendants contend that the statements at issue were directed to
doctors or pharmacists, not patients, and therefore the
statements were not meant to mislead consumers.

The cases the

defendants cite in support of their argument involve large
private transactions between sophisticated businesses and
therefore do not address the facts at hand.

E.g., Weiss v.

Polymer Plastics Corp., 802 N.Y.S.2d 174, 176 (2d Dep’t 2005)
(“The transaction in this case was between two companies in the
27

building and supply industry.”); St. Patrick's Home for Aged &
Infirm v. Laticrete Int’l, Inc., 696 N.Y.S.2d 117, 122 (1st
Dep’t 1999) (“The transaction in this case was a sizable one
between two companies . . . this was not the type of ‘modest’
transaction that the statute was intended to reach.” (citation
omitted)).

The defendants’ reading of the phrase “consumer-

oriented” under New York law is therefore unduly narrow. 11

The

plaintiff has plausibly pled that the defendants’ conduct was
consumer-oriented and the defendants’ motion to dismiss the
§ 349 claim is denied.
VII. Fraud and Fraudulent Concealment
“Under New York law, fraud requires proof of (1) a material
misrepresentation or omission of a fact, (2) knowledge of that
fact’s falsity, (3) an intent to induce reliance, (4)
justifiable reliance by the plaintiff, and (5) damages.”
Loreley Fin. (Jersey) No. 3 Ltd., 797 F.3d at 170 (citation
omitted).

Fraudulent concealment requires that the plaintiff

plead “(1) failure to discharge a duty to disclose; (2) an
intention to defraud, or scienter; (3) reliance; and (4)
The defendants’ attempt to apply the learned intermediary
doctrine to this suit also fails. The learned intermediary
doctrine applies to failure to warn claims and provides that a
“drug manufacturer’s duty to warn of the dangers of using the
drug in question” is “fulfilled by giving adequate warning to
the prescribing physician.” Spensieri v. Lasky, 94 N.Y.2d 231,
239 (1999).
11

28

damages.”

TVT Records v. Island Def Jam Music Grp., 412 F.3d

82, 90-91 (2d Cir. 2005).
In the context of a business transaction, the duty to
disclose arises where a party, with a duty to be
complete, has made only a partial or ambiguous
statement, or where one party possesses superior
knowledge, not readily available to the other, and
knows that the other is acting on the basis of
mistaken knowledge.
Id. at 91 (citation omitted).
Rule 9(b) has heightened pleading requirements for fraud
claims in federal court.

Under these requirements, the

complaint must “(1) detail the statements (or omissions) that
the plaintiff contends are fraudulent, (2) identify the speaker,
(3) state where and when the statements (or omissions) were
made, and (4) explain why the statements (or omissions) are
fraudulent.”

Loreley Fin. (Jersey) No. 3 Ltd., 797 F.3d at 171

(citation omitted).

“[T]hough mental states may be pleaded

generally, Plaintiffs must nonetheless allege facts that give
rise to a strong inference of fraudulent intent.”
omitted).

Id. (citation

“An inference is strong if it is cogent and at least

as compelling as any opposing inference one could draw from the
facts alleged.”

Id. at 176-77.

“At the pleading stage, . . . a

fraud plaintiff may establish a strong inference of scienter
. . . by alleging facts that constitute strong circumstantial
evidence of conscious misbehavior or recklessness.”
29

Id. at 177

(citation omitted).

The facts alleged in the pleadings are

considered “in their totality, not in isolation.”

Id. at 171.

The key purpose of these requirements is to “inform each
defendant of the nature of its alleged participation in the
fraud.”

Id. at 172 (citation omitted).

The plaintiff has pled sufficient facts to raise a strong
inference of fraudulent intent and the remaining elements of a
fraudulent concealment claim.

The defendants manufactured and

sold the Tablets, which included labels and package inserts
implying that the fluoride dosage was sufficient to prevent
tooth decay and that the Tablets complied with the ADA-AAP
recommendations.

The defendants admitted that the Tablets were

sub-potent and did not deliver the dosage of fluoride ion
indicated on the labels.

The defendants allegedly knew that the

master formula for the Tablets differed from the fluoride
concentration listed on the labels and package inserts.

These

facts constitute strong circumstantial evidence of scienter and
therefore satisfy Rule 9(b)’s pleading requirements.

See

Loreley Fin. (Jersey) No. 3 Ltd., 797 F.3d at 174 (“At the
pleadings stage, the alleged fraud need only be plausible based
on the complaint; it need not be more likely than other
possibilities.”).
The defendants’ arguments to the contrary are not
30

persuasive.

The defendants primarily contend that the labels

are inconsistent with an intent to deceive because they listed
the active ingredient of “fluoride as sodium fluoride.”
According to the defendants, this small-print, sideways
disclosure undermines any inference of fraudulent intent.

A

disclosure on the label and package insert that the active
ingredient is fluoride as sodium fluoride does not render the
plaintiff’s fraud claim implausible.

Nothing in the label or

the insert explained that the Tablets do not contain the
recommended dosages of fluoride ion that are discussed on the
insert itself or that sodium fluoride contains only 45% of the
recommended amount of fluoride ion. 12

Thus, although the labels

indicate that the active ingredient was sodium fluoride, the
complaint contains strong circumstantial evidence of the
defendants’ fraudulent intent.
VIII.

Unjust Enrichment

The elements of an unjust enrichment claim are “(1) the
other party was enriched, (2) at the other party’s expense, and

Read together, the label and the insert add to the confusion.
The active ingredient in a 1 milligram Tablet is listed as
“fluoride as sodium fluoride.” But the “Nutrition Facts”
section lists “Fluoride” and then indicates that there is “1 mg”
of that ingredient. Thus, even a careful reader could conclude
that there was sufficient sodium fluoride in the Tablet to yield
an overall fluoride concentration of 1 milligram (meaning that
there were 2.2 milligrams of sodium fluoride in the Tablet).
12

31

(3) that it is against equity and good conscience to permit the
other party to retain what is sought to be recovered.”

Georgia

Malone & Co. v. Rieder, 19 N.Y.3d 511, 516 (2012) (citation
omitted).

Unjust enrichment “is available only in unusual

situations when, though the defendant has not breached a
contract nor committed a recognized tort, circumstances create
an equitable obligation running from the defendant to the
plaintiff.”

Corsello v. Verizon New York, Inc., 18 N.Y.3d 777,

790 (2012).

“Typical cases are those in which the defendant,

though guilty of no wrongdoing, has received money to which he
or she is not entitled.”

Id.

“[U]njust enrichment is not a

catchall cause of action” and it “is not available where it
simply duplicates, or replaces, a conventional contract or tort
claim.”

Id.; see Scarola Ellis LLP v. Padeh, 984 N.Y.S.2d 56,

59 (1st Dep’t 2014).
The defendants’ motion to dismiss the unjust enrichment
claim is granted.

As discussed above, the typical unjust

enrichment case involves a party who retains money to which he
is not entitled despite the fact that he has not committed a
recognized tort or breached a contract.

Here, the accusations

surrounding the plaintiff’s unjust enrichment claim overlap with
her fraud, fraudulent concealment, express warranty, and § 349
claims, all of which may proceed.
32

She therefore may not bring

an unjust enrichment claim as a catch-all cause of action where
she adequately pleads that the defendants committed the
recognized tort of fraud and breached an express warranty.
The plaintiff’s brief arguments to the contrary are not
persuasive.

She primarily contends that other courts in this

district have allowed unjust enrichment claims to proceed
alongside § 349 claims, for example.

E.g., Quinn v. Walgreen

Co., 958 F. Supp. 2d 533, 545 (S.D.N.Y. 2013) (allowing a § 349
claim and an unjust enrichment to proceed, but not addressing
whether the unjust enrichment claim was duplicative).

These

cases do not overcome the New York Court of Appeals’ decision in
Corsello, however, which held that “[a]n unjust enrichment claim
is not available where it simply duplicates, or replaces, a
conventional contract or tort claim.”

33

18 N.Y.3d at 790.

Conclusion
The defendants’ April 19, 2016 motion to dismiss is granted
in part.

The following claims remain: (1) the § 349 claim; (2)

breach of express warranty; and (3) the fraud and fraudulent
concealment claims.
Dated:

New York, New York
July 20, 2016

________________________________
DENISE COTE
United States District Judge

34