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STATE OF MINNESOTA
IN COURT OF APPEALS
C8-00-1885
Stacey A. Flynn,
Appellant,
vs.
American Home Products Corporation, et al.,
Respondents.
Filed May 15, 2001
Affirmed
G. Barry Anderson, Judge
Hennepin County District Court
File No. PI9816336
Ronald S. Goldser, James P. Watts, Jr., Zimmerman Reed, P.L.L.P., 901 North Third Street,
Suite 100, Minneapolis, MN 55401 (for appellant)
Jack M. Fribley, Bridget M. Ahmann, Peter J. Goss, Faegre & Benson, L.L.P., 2200 Wells Fargo
Center, 90 South Seventh Street, Minneapolis, MN 55402-3901 (for respondents)
Considered and decided by Toussaint, Presiding Judge, Anderson, Judge, and Poritsky, Judge.*
S Y L L A B U S
State-law damage claims made by a third party, alleging that a drug manufacturer's fraud on the
federal Food and Drug Administration caused the third party's injuries, are preempted by federal
law.
O P I N I O N
G. BARRY ANDERSON, Judge
Appellant Stacey A. Flynn brought an action against respondents American Home Products
Corporation (AHPC), et al., manufacturers of a brand-name drug, alleging that misrepresentations
AHPC made to the federal Food and Drug Administration caused her to ingest a generic version of
the drug, and that the generic drug injured her. The district court granted respondents' motion for
summary judgment. Because appellant's state common law tort and consumer protection claims are
preempted by federal law, we affirm.
FACTS
In October 1996, appellant Stacey A. Flynn began taking the diet drug “fen-phen,” a blend of
fenfluramine and phentermine. Appellant's doctor prescribed the compound after appellant
consulted the doctor for weight-loss treatment. The Professional Compounding Centers of America
and Professional Compounding Pharmacy, d/b/a/ the Medicine Shoppe Pharmacy, made the
generic fen-phen capsules from imported fenfluramine manufactured by Alfa Chemical, an Italian
pharmaceutical company.
Appellant ceased taking the generic form of fen-phen in about July 1997. In late 1997, appellant
was diagnosed as suffering from aortic insufficiency, commonly described as a leaky heart valve.
Appellant claims her fen-phen regimen caused that condition. In October 1998 appellant brought a
negligence action against Professional Compounding Centers of America and Professional
Compounding Pharmacy and, by amended complaint, added respondents as defendants, alleging
negligence and fraud.
Respondent American Home Products Corporation and its subsidiaries manufactured and
marketed Pondimin, a brand-name version of fenfluramine hydrochloride. Appellant alleged that
respondents, before and after obtaining federal Food and Drug Administration (FDA) approval of
the drug, withheld from the FDA information that fenfluramine caused serious health problems such
as primary pulmonary hypertension and valvular heart disease. Appellant alleged that, by breaching
their duty to disclose known instances of adverse effects of fenfluramine to the FDA, respondents
misrepresented the drug as safe and, consequently, physicians nationwide prescribed both brand
name and generic versions of fen-phen without knowing the true risks to their patients. Appellant
alleged that, had her doctor known the risks of fenfluramine, later removed from the market after
the risks became known, appellant would not have taken the generic version of fen-phen made by
the Medicine Shoppe Pharmacy and would not have suffered an injury.
Appellant settled her claim with the pharmacy defendants. Shortly thereafter, respondents moved
for summary judgment, arguing that they did not owe appellant any legal duty because she did not
use the product they manufactured. Respondents further argued that appellant's
fraud-and-misrepresentation-on-the-FDA claims are not actionable torts in Minnesota, nor do they
create a cause of action under Minnesota's consumer protection statutes. The district court agreed
and granted respondents' motion.
ISSUE
Are state common-law tort and consumer-fraud claims of manufacturer fraud on the federal Food
and Drug Administration (FDA) actionable in Minnesota?
ANALYSIS
Appellant argues that the district court erred as a matter of law by granting summary judgment to
respondents because her tort and consumer fraud claims are actionable in Minnesota. Summary
judgment is appropriate when a district court determines that “there is no genuine issue as to any
material fact and that either party is entitled to a judgment as a matter of law.” Minn. R. Civ. P.
56.03. When reviewing a grant of summary judgment, we must consider (1) whether there are any
genuine issues of material fact, and (2) whether the district court erred in its application of the law.
Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn. 1988).
When, as in this case, the material facts are not in dispute, we review de novo the district court's
application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).
Although at first blush this case appears to be a products-liability action, appellant insists, in her
brief and in oral argument, that it is not:
Appellant's claims do not sound in product liability * * * . Appellant's claims are
that these Respondents deliberately withheld information they were legally obligated
[by the FDA] to disclose [to the FDA] * * * . Appellant was injured because these
Respondents deliberately violated their legal duties imposed on them as
manufacturers of prescription drugs.
Appellant does not dispute the district court's conclusion that she was not injured by respondents'
product, Pondimin. Instead, appellant argues that respondents' failure to fulfill its legal reporting
duties to the FDA creates three causes of action: (1) fraudulent misrepresentation; (2) negligent
misrepresentation; and (3) relief under Minnesota's consumer protection statutes.
I.
Appellant first argues that Minnesota can and should recognize a tort characterized by other
jurisdictions as “fraud-on-the-FDA.” The so-called tort of fraud-on-the-FDA creates liability
based on a manufacturer's misrepresentations made to the FDA, relied on by a third party, which
causes injury to the third party. The district court concluded that Minnesota does not recognize this
tort, and this is an issue of first impression in Minnesota appellate courts. We are mindful that “the
task of extending existing law falls to the supreme court or the legislature, but it does not fall to this
court.” Tereault v. Palmer, 413 N.W.2d 283, 286 (Minn. App. 1987), review denied (Minn.
Dec. 18, 1987). It is not the function of this court to establish new causes of action, even when
such actions appear to have merit. Stubbs v. North Mem'l Med. Ctr., 448 N.W.2d 78, 81 (Minn.
App. 1989), review denied (Minn. Jan. 12, 1990). As a starting point to our analysis, we review
some history of the proposed common-law tort of fraud-on-the-FDA beginning with disputes
regarding the use of orthopedic bone screws.
Beginning in 1994, over 5,000 plaintiffs alleged that they were injured by implantation of bone
screws in their spines, and filed approximately 2,000 actions in over 60 of the 94 federal judicial
districts, claiming that the defendant screw manufacturers' misrepresentations to the FDA regarding
the intended use of the screws caused their injuries. Bruzer v. Danek Med. Inc., No. Civ.
3-95-971, 1998 WL 1048225 at *1-*2 (D. Minn. Oct. 1, 1998). The judicial panel on
multidistrict litigation consolidated and transferred the cases to a federal judge in the Eastern District
of Pennsylvania. Id. at *1. After pretrial proceedings and a variety of rulings on motions to dismiss,
including a determination by the federal district court that federal law preempted the state-law
fraud-on-the-FDA claims, the cases were remanded to the originating districts for trial. Id.; In re
Orthopedic Bone Screw Prods. Liab. Litig., 159 F.3d 817, 821 (3d Cir. 1998), rev'd sub nom.,
Buckman Co. v. Plaintiffs' Legal Comm., 121 S. Ct. 1012 (2001).
The Pennsylvania court remanded one of those cases to the Federal Court for the District of
Minnesota: Bruzer. In Bruzer, the plaintiffs alleged, among other things, that
defendant-manufacturers had conspired to make false representations to the FDA in order to
receive the proper approval for the devices. Bruzer, 1998 WL 1048225 at *1-*2. Granting the
defendants' motion for summary judgment on the basis of earlier pretrial rulings, the federal district
court also observed that the plaintiffs had “failed to show that Minnesota [state] law would allow
such a claim, or that it differs in any way from the rule that a substantial majority, if not all, of the
states would follow” precluding such a claim. Id. at *5, n.5 (citation and quotation omitted).
Meanwhile, other plaintiffs appealed the Pennsylvania federal district court's preemption ruling to
the United States Court of Appeals for the Third Circuit. The Third Circuit reversed the
Pennsylvania federal district court's pretrial preemption ruling and concluded that if the state law of
fraudulent misrepresentation would impose liability on the manufacturer, a fraud-on-the-FDA claim
was not preempted by federal medical device statutes. In re Orthopedic Bone Screw Prods.
Liab. Litig., 159 F.3d at 829. Thus, the self-described “narrow” holding of Bone Screw
recognized that existing state law of fraudulent misrepresentation determined whether a plaintiff
could recover under a theory of fraud-on-the-FDA. Id.
In response to the Third Circuit's ruling, some states have declined to recognize fraud-on-the-FDA
as a cause of action under state tort law. See, e.g., Jones v. Danek Med., Inc., No. Civ.
A.4:96-3323-12, 1999 WL 1133272 at *8 (D.S.C. Oct. 12, 1999) (finding plaintiff failed to
demonstrate common-law fraud elements of misrepresentation or causation, and that claim would
fail “even if South Carolina recognized such a tort” as fraud-on-the-FDA, which it did not); Castle
v. Danek Med. Inc, No. Civ. 96-2485, 1999 WL 1129649 at *2 (W.D. La. Oct. 5, 1999) (“no
cause of action relating to fraud `on the FDA' * * * exists” under Louisiana law); Johnson v.
Smith & Nephew Richards, Inc., No. 97-CV-363-K, 1999 WL 1117105 at * 2 (N.D. Okla.
Sept. 30, 1999) (granting summary judgment on other grounds and suggesting “fraud on the FDA”
theory of recovery may not be theoretically valid); Parks v. Danek Med., Inc., No. 2:95CV206,
1999 WL 1129706 at *9 (N.D. Ind. June 17, 1999) (“fraud on the FDA” not recognized under
Indiana law). Other states, however, have recognized the tort as a derivation of common-law fraud.
See, e.g., Baker v. Smith & Nephew Richards, Inc., No. Civ.A.1:97-CV1233RWS, 1999 WL
1129650 at *8 (N.D. Ga. Sept. 30, 1999) (fraud-on-the-FDA derived from Restatement
(Second) Torts § 533, an indirect fraud claim, supported by Georgia law, but granting summary
judgment to medical manufacturer because “intent to defraud the FDA is not intent to defraud the
Plaintiffs.”)
The defendant medical manufacturers appealed the Third Circuit's decision. The United States
Supreme Court granted certiorari and reversed by opinion filed February 21, 2001, five days after
oral argument in this case. Buckman Co., 121 S. Ct. at 1017. The Supreme Court determined that
the plaintiffs' state-law fraud-on-the-FDA claims conflict with, and are therefore preempted by, the
federal statutes regulating premarket approval of medical devices. Id.
The U.S. Supreme Court's ruling raises the question of whether appellant's fraud-on-the-FDA
claims are likewise preempted by FDA regulations governing premarket approval and
post-approval regulation of drugs. Because this issue is new, novel, legal, and decisive, and
because the lack of a district court ruling causes no advantage or disadvantage to either party, we
elect to review it. See Watson v. United Servs. Auto. Ass'n, 566 N.W.2d 683, 687 (Minn. 1997)
(explaining the requirements for review of issue not addressed in district court); Pikop v.
Burlington N. R.R., 390 N.W.2d 743, 748 (Minn. 1986) (preemption is a matter of statutory
construction that appellate courts review de novo).
The United States Constitution provides that the laws of the United States “shall be the supreme
Law of the Land; * * * any thing in the Constitution or laws of any state to the Contrary
notwithstanding.” U.S. Const. art. VI, cl. 2. This supremacy provision has given rise to preemption
doctrine, under which federal statutes and agency regulations may preempt state law. Louisiana
Pub. Serv. Comm'n v. F.C.C., 476 U.S. 355, 369, 106 S. Ct. 1890, 1898-99 (1986). State
statutes, as well as state common law, may be preempted. Midwest Motor Exp., Inc., v.
International Bhd. of Teamsters, 512 N.W.2d 881, 887-89 (Minn. 1994). State law is not to be
preempted unless Congress, by “clear and manifest purpose,” intended to do so. Rice v. Santa Fe
Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152 (1947). Congress may preempt state
law by express statutory language, but preemption may also be implied. Dahl v. Charles Schwab
& Co., 545 N.W.2d 918, 922 (Minn. 1996). “If Congress evidences an intent to occupy a given
field, any state law falling within that field is pre-empted.” Silkwood v. Kerr-McGee Corp., 464
U.S. 238, 248, 104 S. Ct. 615, 621 (1984) (citations omitted). The U.S. Supreme Court, in
Buckman, observed that:
Policing fraud against federal agencies is hardly a field which the States have
traditionally occupied, such as to warrant a presumption against finding federal
pre-emption of a state-law cause of action. To the contrary, the relationship
between a federal agency and the entity it regulates is inherently federal in character
because the relationship originates from, is governed by, and terminates according
to federal law. Here, [the medical device manufacturers'] dealings with the FDA
were prompted by the [Medical Device Amendments] * * * . Given this analytical
framework, we hold that the plaintiffs' state-law fraud-on-the-FDA claims conflict
with, and are therefore impliedly pre-empted by federal law.
121 S. Ct. at 1017 (citations and quotations omitted).
The Buckman Court described the comprehensive regulatory scheme for obtaining FDA approval
for a medical device, which includes the FDA's disclosure requirements and power to investigate
suspected fraud. Id. at 1017-18. In addition, the Court reasoned that there are criminal statutes
governing the making of false statements to the federal government, and the FDA may respond to
fraud by seeking injunctive relief, civil penalties, or criminal prosecution. Id. (citing 18 U.S.C.
§ 1001 (1994 & Supp. IV) (proscribing fraud on the Government of the United States); 21 U.S.C.
§ 332 (1994) (providing for injunctive relief); 21 U.S.C. § 333(f)(1)(A) (1994) (providing for civil
penalties); and 21 U.S.C. § 333(a) (1994) (providing for criminal prosecution)). The Court
recognized that the FDA has a “variety of enforcement options that allow it to make a measured
response to suspected fraud upon the Agency,” and that the flexibility of the statutory scheme “is a
critical component of the * * * regulatory framework under which the FDA pursues difficult (and
often competing) objectives.” Id. at 1018.
Considering the FDA's comprehensive enforcement statutes and because “complying with the
FDA's detailed regulatory regime in the shadow of 50 States' tort regimes will dramatically increase
the burdens facing potential [FDA approval] applicants,” the Court held that “[s]tate-law
fraud-on-the-FDA claims inevitably conflict with the FDA's responsibility to police fraud
consistently with the Agency's judgment and objectives.” Id. The Court concluded:
[W]ere plaintiffs to maintain their fraud-on-the-agency claims here, they would not
be relying on traditional state tort law which had predated the federal enactments in
question. On the contrary, the existence of these federal enactments is a critical
element of their case. * * * [The claims are] therefore preempted * * * .
Id. at 1020.
In this case, appellant alleges that respondents committed fraud on the FDA by failing to comply
with a number of agency regulations requiring disclosure of adverse drug experiences. Specifically,
appellant cites 21 C.F.R. § 201.57 (2000), providing that labels contain safety information, and 21
C.F.R. § 314.80-.81 (2000), requiring postmarketing reporting of adverse drug experiences. The
disclosure and reporting requirements of those provisions are part of the Food, Drug, and
Cosmetic Act's regulation of new drugs, governed by 21 U.S.C. § 355 (1994 & Supp. VI).
Violations of § 355 are prohibited acts pursuant to 21 U.S.C. § 331 (1994). As Buckman makes
clear, the FDA may respond to acts prohibited by § 331 by seeking injunctive relief, civil penalties,
or criminal prosecution under the agency's statutory authority. See Buckman, 121 S. Ct. at
1017-18.
As in Buckman, the existence of state-law claims against applicants for, and recipients of, FDA
drug approval for alleged violation of FDA regulations conflicts with the FDA's authority to
consistently police fraud within the agency's powers. Like the claims of fraudulent procurement of
medical device approval at issue in Buckman, the existence of the federal regulations is critical to
appellant's claims that those regulations were violated and caused her injuries. Moreover, the
Buckman Court's observation that 50 state-law causes of action for violation of the FDA's detailed
regulations would increase the burdens placed on applicants for FDA approval applies to drug
manufacturers as well as to medical-device manufacturers. For these reasons, we conclude that
appellant's fraud-on-the-FDA common-law tort and statutory consumer fraud claims are
preempted by federal law and are not actionable in Minnesota.
II.
Even if federal law did not preempt appellant's fraud-on-the-FDA claims, her claims fail on the
merits under Minnesota common law.
A. Fraudulent Misrepresentation
Appellant's amended complaint alleged that she suffered damages as a result of respondents'
fraudulent misrepresentations to the FDA. In Minnesota, a plaintiff must prove five elements to
succeed on a claim for fraudulent representation:
(1) there was a false representation by a party of a past or existing material fact
susceptible of knowledge;
(2) made with knowledge of the falsity of the representation or made as of the
party's own knowledge without knowing whether it was true or false;
(3) with the intention to induce another to act in reliance thereon;
(4) that the representation caused the other party to act in reliance thereon; and
(5) that the party suffer pecuniary damage as a result of the reliance.
Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 532 (Minn. 1986). Appellant does not point
to any affirmative representations made by respondents that were relied upon by her physician
when issuing the prescription for fen-phen. Instead, appellant seems to argue that the third and
fourth elements are met because respondents' failure to reveal damaging information concerning the
brand-name drug Pondimin affected the FDA's approval of the drug and, consequently, her
physician's decision to prescribe a generic version of fen-phen.
Under Minnesota law, fraudulent misrepresentation based on the concealment of a material fact
occurs when one party knowingly conceals a material fact that is “peculiarly within his own
knowledge,” and the other party relies on the presumption that the fact does not exist. Richfield
Bank & Trust Co. v. Sjogren, 309 Minn. 362, 364, 244 N.W.2d 648, 650 (1976). But central
to such a claim is that “there must be a suppression of facts which one party is under a legal or
equitable obligation to communicate to the other, and which the other party is entitled to have
communicated to him.” Id. Appellant has not presented any Minnesota authority supporting an
extension of this duty to third parties, and indeed, the authority we have found holds to the
contrary. See Karlstad State Bank v. Fritsche, 392 N.W.2d 615, 618 (Minn. App. 1986) (no
fraud for failure to disclose in the absence of defendant's direct communication with plaintiffs).
Moreover, there is no fiduciary relationship here. The general rule is that “one party to a transaction
has no duty to disclose material facts to the other” except “when the parties are in a fiduciary
relationship with each other.” Midland Nat'l Bank v. Perranoski, 299 N.W.2d 404, 413 (Minn.
1980) (citation and quotation omitted). “A fiduciary relation exists when confidence is reposed on
one side and there is resulting superiority and influence on the other * * * .” Kennedy v.
Flo-Tronics, Inc., 274 Minn. 327, 331, 143 N.W.2d 827, 830 (1966) (citation and quotation
omitted). Although federal regulations required respondents to disclose product safety information
to the FDA, respondents did not owe appellant, who did not purchase their product and with
whom they had no relationship, the same obligation. See In re Minnesota Breast Implant Litig.,
36 F. Supp.2d 863, 880 (D. Minn. 1998) (holding that, under Minnesota's fraudulent
representation and fraudulent concealment law, a medical manufacturer does not have a duty to
disclose to a plaintiff safety information concerning a product sold to the plaintiff by another
manufacturer). Thus, appellant has not established that respondents intended that she rely on their
representations to the FDA.
Appellant argues that respondents intended all consumers rely on their representations to the FDA
and owed all consumers a duty to disclose material facts, but that contention conflicts with
Minnesota common law, which requires a stronger relationship and a direct communication.
Appellant did not purchase or use respondents' product, and therefore, there was no direct
relationship between them, let alone a fiduciary relationship that gave rise to a duty. The district
court did not err as a matter of law by granting summary judgment to respondents on this basis.
B. Negligent Misrepresentation
Appellant's amended complaint also alleges that respondent had a duty to appellant to make
nonnegligent representations to the FDA. This state law claim, although preempted, would also
have failed on the merits. The Restatement (Second) of Torts § 311 (1965) provides that the
elements of the tort of negligent misrepresentation are:
(1) a duty of reasonable care in conveying information; (2) breach of that duty by
negligently giving false information; (3) reasonable reliance on the
misrepresentations, which reliance is the proximate cause of physical injury; and (4)
damages.
Smith v. Brutger Cos., 569 N.W.2d 408, 413 (Minn. 1997). Even if appellant were able to prove
the elements of duty, reasonable reliance, and proximate cause, the Minnesota Supreme Court has
recognized negligent misrepresentation involving damages only for pecuniary loss, and has expressly
declined to recognize the tort of negligent misrepresentation involving the risk of physical harm. Id.
at 414. Accordingly, the district court did not err as a matter of law by granting summary judgment
to respondents on this claim.
C. Consumer Fraud Statutes
Finally, we conclude that appellant would not have been successful under Minnesota's consumer
fraud statutes, even if the statutes, to the extent they afforded relief for fraud-on-the-FDA, had not
been preempted. Appellant's complaint alleged that respondents violated a number of consumer
protection statutes: Minn. Stat. § 325D.44 (1998), which prohibits deceptive practices concerning
the quality of goods or services, Minn. Stat. § 325F.69 (1998), which prohibits fraud in connection
with the sale of any merchandise, and Minn. Stat. § 325D.13 (1998), which prohibits
misrepresentation of product ingredients or quality.
Minn. Stat. § 8.31, subd. 3a (1998) authorizes private action for violations of these statutes by
“any person.” Id. The Minnesota Supreme Court has interpreted the “any person” language
broadly, holding that a claim under Minn. Stat. § 8.31 may be brought by a plaintiff who is not the
actual purchaser of the defendant's products. Group Health Plan, Inc., v. Philip Morris Inc.,
621 N.W.2d 2, 8-11 (Minn. 2001). But Group Health, answering questions certified by the
federal district court in the context of a Rule 12 motion to dismiss, emphasized that a “causal nexus”
between the alleged injury and the wrongful conduct that violates the statute is a necessary element
of an action to recover damages under § 8.31, subd. 3a. Id. at 14. “The statute requires that there
must be some legal nexus between the injury and the defendant's wrongful conduct.” Id. at 14
(citation and quotation omitted). The causal nexus includes a “reliance component” that may be
proven by “direct or circumstantial evidence” that is relevant and probative “as to the relationship
between the claimed damages and the alleged prohibited conduct.” Id. at 14-15. Thus, for
appellant to prove causation, a necessary element of her statutory consumer fraud claims, she must
at least present circumstantial evidence of some reliance on respondents' alleged
misrepresentations.
When a motion for summary judgment is made and supported as provided in Minn. R. Civ. P. 56,
an adverse party may not rest on mere averments or denials in that party's pleading but must
present specific facts showing that there is a genuine issue for trial. Minn. R. Civ. P. 56.05.
Summary judgment is mandatory against a party with the burden of proof that fails to establish an
essential element of its claim. Lloyd v. In Home Health, Inc., 523 N.W.2d 2, 3 (Minn. App.
1994). In response to a motion for summary judgment, a plaintiff must produce sufficient evidence
to show a genuine issue of material fact as to each element. Rouse v. Dunkley & Bennett, P.A.,
520 N.W.2d 406, 410-11 (Minn. 1994).
Appellant's response to respondents' summary judgment motion did not include any deposition
testimony, affidavits, interrogatory answers, or other evidence connecting respondents' drug
Pondimin to the alleged injury she sustained by ingesting a generic compound of fen-phen. Instead,
the deposition testimony and medical records show that appellant decided to take the generic drug
after viewing advertisements placed by unnamed sources and consulting with her doctor and her
mother. Appellant alleges that, but for respondents' fraud on the FDA, a physician's desk reference
would have contained negative information about Pondimin that would have aided her doctor. But
appellant presented no evidence that either she or her physician relied on the physician's desk
reference, any representations, or the absence of representations made by respondents concerning
Pondimin in the course of deciding that a generic phen-fen compound would be an appropriate
treatment.
We conclude that appellant has not presented sufficient evidence to show that there is a genuine
issue of material fact concerning causation. Accordingly, we hold the district court did not err by
granting respondents' motion for summary judgment on appellant's consumer fraud claims.
D E C I S I O N
State law claims by a third party that drug manufacturers' fraud on the federal Food and Drug
Administration caused injury to the third party are preempted by federal law.
Affirmed.
Footnotes
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by
appointment pursuant to Minn. Const. art. VI, § 10.
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