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Keith v. Ferring Pharmaceuticals, Inc.

United States District Court, N.D. Illinois, Eastern Division

September 27, 2016

NICOLE KEITH, RYAN KEITH, JACK R DODDS, JR., CRYSTALINA R. DODDS, MICHELLE COOPER, and SHANNON MINERICH, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
FERRING PHARMACEUTICALS, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          AMY J. ST. EVE, District Court Judge

         On March 9, 2016, Plaintiffs Nicole Keith, Ryan Keith, Jack R. Dodds, Jr., Crystalina R. Dodds, Michelle Cooper, and Shannon Minerich (“Plaintiffs”), on behalf of themselves and all others similarly situated, brought the present eight-count First Amended Class Action Complaint against Ferring Pharmaceuticals, Inc. (“Defendant”) alleging claims for breach of express warranty (Count I), breach of the implied warranty of merchantability (Count II), and unjust enrichment (Count III), along with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count IV), the Texas Deceptive Trade Practices Consumer Protection Act (Count V), the Michigan Consumer Protection Act (Count VI), the South Dakota Deceptive Trade Practices and Consumer Protection Act (Count VII), and the Magnuson-Moss Warranty Act (Count VIII).

         Before the Court are Defendant's (1) motion to dismiss brought pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6), and (2) motion to strike the class allegations under Rule 23. For the following reasons, the Court grants in part - with and without prejudice - and denies in part Defendant's motion to dismiss. Further, the Court grants Plaintiffs' voluntarily dismissal of the Michigan Consumer Protection Act claim and Plaintiffs' Illinois breach of implied warranty claim without prejudice. The Court grants Plaintiffs leave to file a Second Amended Class Action Complaint, as discussed in detail below. See Runnion v. Girl Scouts of Greater Chicago & Nw. Indiana, 786 F.3d 510, 519 (7th Cir. 2015) (“a plaintiff whose original complaint has been dismissed under Rule 12(b)(6) should be given at least one opportunity to try to amend her complaint before the entire action is dismissed.”). Plaintiffs' Second Amended Class Action Complaint is due on or before October 14, 2016. The Court denies Defendant's motion to strike Plaintiffs' amended class allegations.

         LEGAL STANDARDS

         I. Federal Rule of Civil Procedure 12(b)(6)

         “A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). The relevant question at the motion to dismiss stage is not whether the plaintiff will ultimately prevail on the merits, but whether the complaint is sufficient to cross the federal pleading threshold. See Skinner v. Switzer, 562 U.S. 521, 529-30, 131 S.Ct. 1289, 179 L.Ed.2d 233 (2011). Pursuant to Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Under the federal notice pleading standards, a plaintiff's “factual allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Put differently, a “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570). In determining the sufficiency of a complaint under the plausibility standard, courts must “accept all well-pleaded facts as true and draw reasonable inferences in the plaintiffs' favor.” Roberts v. City of Chicago, 817 F.3d 561, 564 (7th Cir. 2016). It is well-settled that “a plaintiff ordinarily need not anticipate and attempt to plead around affirmative defenses.” Hyson USA, Inc. v. Hyson 2U, Ltd., 821 F.3d 935, 939 (7th Cir. 2016).

         II. Federal Rule of Civil Procedure 9(b)

         In pleading fraud in federal court, Rule 9(b) imposes a higher pleading standard than that required under Rule 8(a)(2). See Camasta, 761 F.3d at 736; Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 446 (7th Cir. 2011). Specifically, “plaintiffs must plead the ‘who, what, when, where, and how: the first paragraph of any newspaper story' of the alleged fraud.” Rocha v. Rudd, 826 F.3d 905, 911 (7th Cir. 2016) (citation omitted). In other words, the “requirement of pleading fraud with particularity includes pleading facts that make the allegation of fraud plausible, ” therefore, the “complaint must state ‘the identity of the person making the misrepresentation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.'” Grenadyor v. Ukrainian Vill. Pharmacy, Inc., 772 F.3d 1102, 1106 (7th Cir. 2014) (citations omitted); see also Rocha, 826 F.3d at 911. Allegations based on information and belief will not suffice under Rule 9(b) unless “(1) the facts constituting the fraud are not accessible to the plaintiff and (2) the plaintiff provides ‘the grounds for his suspicions.'” Grenadyor, 772 F.3d at 1108 (citations omitted); see also Bogina v. Medline Indus., Inc., 809 F.3d 365, 370 (7th Cir. 2016).

         BACKGROUND

         In their First Amended Complaint, Plaintiffs allege that Defendant manufactures, warrants, advertises, and sells Bravelle©, which is the brand name version of the generic drug urofollitropin, designed to treat infertility in women. (R. 24, First Am. Compl. ¶¶ 1, 24.) In particular, Bravelle stimulates egg maturation and multiple follicular development in women who are able to produce and release eggs. (Id. ¶¶ 1, 20.) Bravelle is commonly used in the course of assisted reproductive technology, such as in vitro fertilization (“IVF”). (Id. ¶¶ 1, 20.) On October 13, 2015, Defendant voluntarily recalled all Bravelle that it sold in the United States between March 2014 and October 2015 (the “Recalled Lots”) after Defendant's internal quality monitoring revealed that certain lots of Bravelle did not meet potency specifications. (Id. ¶¶ 2, 28.) Specifically, Defendant's stability testing showed a decreased potency in an ingredient in Bravelle, namely, the follicle stimulating hormone (“FSH”). (Id. ¶¶ 4, 22, 23.) Plaintiffs assert that this decreased potency resulted in a decreased therapeutic effect and created the potential for unnecessary over-exposure of patients. (Id. ¶ 4.)

         Further, Plaintiffs allege that Defendant recalled unsold batches of Bravelle directly from pharmacies and sought to recall the Bravelle already sold to consumers by sending letters directly to the consumers. (Id. ¶ 29.) According to Plaintiffs, individual patients who purchased Bravelle are able to contact Defendant and obtain a reimbursement solely for the price of the Bravelle that they purchased once Defendant determines that the Bravelle purchased was from one of the Recalled Lots. (Id.) More specifically, Plaintiffs assert that under the reimbursement plan, Defendant is offering reimbursement for the consumers' out-of-pocket expenditures to purchase Bravelle, but not for any of the other costs related to the fertility treatments. (Id.)

         Plaintiffs maintain that before manufacturing, warranting, advertising, and/or selling the Recalled Lots of Bravelle, Defendant failed to take appropriate steps to ensure that the Recalled Lots were effective for their intended use and would provide the reproductive health benefits Defendant claimed. (Id. ¶ 5.) Furthermore, Plaintiffs allege that Defendant knew or should have known that the Recalled Lots were not suitable for use and were sub-potent due to the decreased FSH potency. (Id.) Plaintiffs and the putative classes seek relief for damages that the Recalled Lots' failure to meet potency specifications cause, including the out-of-pocket expenditures to purchase Bravelle, the payments they made to medical providers for fertility treatments utilizing Bravelle, and any associated costs. (Id. ¶ 6.)

         Also, Plaintiffs allege that all of the Bravelle they purchased was part of the Recalled Lots and that they were damaged as a direct and proximate result of their Bravelle purchases contained in the Recalled Lots. (Id. ¶ 11.) Plaintiffs contend that they would not have purchased Bravelle had they known prior to their purchases that the Bravelle they bought suffered from sub-potency issues, or even that it had the potential to suffer from sub-potency issues, nor would they have paid the costs associated with the related medical treatment of which Bravelle was an integral part. (Id. ¶¶ 12, 26, 61.)

         Plaintiffs bring this action on behalf of themselves and all persons in the United States who purchased Bravelle contained in the Recalled Lots. (Id. ¶¶ 5, 35.) In addition, or in the alternative, Plaintiffs bring this lawsuit on behalf of a multi-state class, which consists of individuals or entities in Illinois, California, Florida, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, and Washington, who purchased Bravelle contained in the Recalled Lots. (Id. ¶ 26.) Also, in addition or in the alternative, Plaintiffs allege claims on behalf of an Illinois class, a Michigan class, a Texas class, and a South Dakota class. (Id. ¶¶ 37, 38, 39, 40.)

         Allegations regarding the named Plaintiffs include that Nicole Keith and Ryan Keith are married and reside in Lansing, Illinois, and that in July 2015, Nicole Keith's sister-in-law, Christina Dorris, began an IVF cycle that included injections of Bravelle. (Id. ¶ 7.) Embryos retrieved from Ms. Dorris at the end of the cycle were then implanted into Mrs. Keith. (Id.) During the course of this fertility treatment, Mr. and Mrs. Keith paid approximately $20, 000 to $25, 000 in out-of-pocket costs related to the IVF process. (Id.) Ultimately, the IVF treatment was not successful and Mrs. Keith did not become pregnant. (Id.) Due to the significant costs involved in the treatment, Mr. and Mrs. Keith cannot afford to begin another cycle of IVF treatment. (Id.)

         Named Plaintiffs Jack R. Dodds, Jr. and Crystalina R. Dodds are married and reside in Magnolia, Texas. (Id. ¶ 8.) The Dodds made two purchases of Bravelle during the recall period - the first in April 2014 and the second in July 2014. (Id.) Mrs. Dodds used the Bravelle for a total of two cycles of ovarian stimulation and egg retrieval. (Id.) The Dodds spent over $3, 000 on their purchases of Bravelle and in excess of $35, 000 in related out-of-pocket costs, including anesthesiologist fees, medical facility procedure fees, and pre-implantation fees. (Id.) After two treatment cycles with Bravelle, only three unusable eggs were retrieved from Mrs. Dodds' ovaries. (Id.) In sum, the fertility treatments were not successful and Mrs. Dodds did not become pregnant. (Id.) Because of the significant costs involved in the treatment, the Dodds cannot continue with IVF treatments at this time. (Id.)

         Another named Plaintiff, Michelle Cooper, resides in Gross Pointe, Michigan. (Id. ¶ 9.) Ms. Cooper paid approximately $3, 000 for Bravelle to use as part of her treatment leading up to Intrauterine Insemination (“IUI”). (Id.) Plaintiffs allege that Ms. Cooper incurred an additional $1, 000 in related expenses. (Id.) The Bravelle purchased by Ms. Cooper came from lot number K 11813A-2, a lot that Defendant's own internal testing confirmed as sub-potent. (Id.) Ms. Cooper did not become pregnant. (Id.)

         Named Plaintiff Shannon Minerich resides in Marmarth, North Dakota. (Id. ¶ 10.) Ms. Minerich purchased one cycle of Bravelle in November 2014 in connection with undergoing an IVF cycle and paid approximately $870 out-of-pocket for the Bravelle and approximately $10, 000 in related costs. (Id.) Plaintiffs allege that Ms. Minerich only retrieved two usable eggs. (Id.) Ms. Minerich's fertility treatment was unsuccessful and she did not become pregnant. (Id.) At the time Ms. Minerich purchased the Bravelle contained in the Recalled Lots and underwent her IVF cycle in November 2014, she was a resident of South Dakota. (Id.)

         ANALYSIS

         I. General Arguments

         In its motion to dismiss, Defendant first sets forth general arguments concerning the sufficiency and plausibility of Plaintiffs' allegations as they relate to all or part of the claims in this lawsuit. These arguments include: (1) Plaintiffs do not plausibly allege that all recalled Bravelle was out of specification (“OOS”)[1] (all counts); (2) Plaintiffs do not sufficiently allege that the Bravelle that they bought and used was OOS (all counts); (3) Plaintiffs Dodds, Minerich, and Keith allege that Bravelle worked as promised (Counts I-V, VII, VIII); (4) Plaintiffs fail to plausibly allege, or allege with particularity, Defendant's misrepresentations or deceptive conduct (Counts IV-VII); (5) Plaintiffs fail to plausibly allege reliance or causation related to Defendant's alleged misrepresentations (Count I, II, IV-VIII); and (6) Plaintiffs do not plead the details of their Bravelle purchases with particularity (Counts IV-VII). The Court will address Defendant's arguments that Plaintiffs failed to plausibly allege, or allege with particularity, Defendant's deceptive conduct or misrepresentations, reliance, and causation as it relates to each individual claim below. The Court first turns to Defendant's general arguments set forth above under (1), (2), and (3).

         A. All Recalled Bravelle

         Defendant first argues that Plaintiffs have failed to plausibly allege that all recalled Bravelle was sub-potent or OOS. Specifically, Defendant takes issue with Plaintiffs' allegations based on “information and belief” that all of the Recalled Lots were defective, as well as Plaintiffs' reliance on the inference that - based on Defendant's voluntary recall of the 32 lots of Bravelle - Defendant knew or suspected that these lots were sub-potent or had the potential to be sub-potent due to the decreased FSH potency. (First Am. Compl. ¶¶ 2, 30, 31.) In addition to the allegations Defendant highlights, Plaintiffs also allege that the Bravelle they purchased was included in the Recalled Lots and further assert that Defendant knew but failed to disclosed that the Recalled Lots were defective because the lots did not meet the potency standards as Defendant had advertised and warranted. (Id. ¶¶ 32, 67, 82, 91, 100, 116.)

         Turning to Defendant's first argument, allegations “cannot be faulted for their reliance on ‘information and belief.'” Brown v. Budz, 398 F.3d 904, 914 (7th Cir. 2005). The phrase “information and belief” is “used by plaintiffs who have a good-faith belief in the allegations they make, but nevertheless make those allegations based on secondhand information.” Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 948 (7th Cir. 2013); see also Boykin v. KeyCorp, 521 F.3d 202, 215 (2d Cir. 2008) (Sotomayor, J) (“allegations may be based on information and belief when facts are peculiarly within the opposing party's knowledge.”) (citation omitted). Courts, however, “frown on making allegations ‘on information and belief' in the fraud context and generally find that such claims do not meet Rule 9(b)'s particularity requirement.” Cincinnati Life, 722 F.3d at 948. The Court will discuss Defendant's Rule 9(b) arguments in the context of the Plaintiffs' deceptive business practices claims below. See Camasta, 761 F.3d at 738 (“a plaintiff alleging fraud ‘does not have unlimited leeway' in satisfying the particularity requirement of Rule 9(b) when the circumstances are pleaded solely on ‘information and belief.'”).

         Viewing Plaintiffs' well-pleaded allegations as true and all reasonable inferences in their favor - as the Court is required to do at the procedural posture despite Defendant's suggestion otherwise - Plaintiffs have plausibly alleged that all of the Recalled Lots were sub-potent or had the potential to be sub-potent - especially because Plaintiffs do not have personal knowledge about how the decreased FSH potency varied among the Recalled Lots. See 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1224 (3d ed. 2004) (“Pleading on information and belief is a desirable and essential expedient when matters that are necessary to complete the statement of a claim are not within the knowledge of the plaintiff.”). In short, Plaintiffs' allegations that the recalled Bravelle was OOS or sub-potent based on information and belief are sufficient under the federal pleading standards because the potency information is not within the Plaintiffs' personal knowledge.

         B. Individual ...


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