On June 30, 2021, Judge Rosenberg—who presides over the Zantac multidistrict litigation in the Southern District of Florida—dismissed with prejudice a RICO claim against the brand-name manufacturers of Zantac under the so-called “indirect purchaser” rule. [Note: King & Spalding represents certain defendants in this litigation.]

• The Zantac MDL involves individual and class action lawsuits related to the sale of Zantac and its generic forms, which are designed to treat heartburn and indigestion. First sold in the early 1980s, the active ingredient in these drugs is a molecule called ranitidine. In September 2019, a pharmacy tested a ranitidine drug and found that it contained NDMA, a molecule classified by certain government agencies as a probable carcinogen. Soon thereafter, the FDA issued a warning about ranitidine products and later requested the voluntary withdrawal of all ranitidine products from the market in April 2020.
• These events prompted a flood of lawsuits filed by individual consumers and third-party payors against brand-name manufacturers, generic manufacturers, retailers, and distributors. These lawsuits were consolidated in the MDL, and Judge Rosenberg then instructed plaintiffs to file master complaints against the defendants.
• In relevant part, plaintiffs asserted a RICO claim against brand-name manufacturers based on the theory that they formed an enterprise to deliberately and unlawfully misrepresent their products so that they could increase revenues. The plaintiffs alleged that the manufacturers carried out this scheme through a fraudulent interstate mail and wire campaign.
• The brand-name manufacturer defendants argued for the dismissal of the RICO claim based on the plaintiffs’ lack of RICO standing under the so-called “indirect purchaser” rule.
  • The indirect purchaser rule authorizes suits only when the plaintiff directly purchases a product from the defendant, and therefore prohibits suits where the plaintiff is steps removed from the defendant in the distribution chain.
  • The Supreme Court created the indirect purchaser rule to prevent treble-damages actions from transforming into “massive multiparty litigations” involving large classes of remote consumers suing multiple defendants throughout the distribution chain.
• Although the indirect purchaser rule originated in federal antitrust law, the district court considered lower court authority applying it to RICO claims, noting that the relevant provisions of RICO were modeled after analogous provisions in federal antitrust law.
  • Because plaintiffs did not purchase over-the-counter Zantac directly from any brand-name manufacturer, the court concluded that plaintiffs were “indirect purchasers” who lacked standing to pursue their RICO claims.
  • The court rejected plaintiffs’ argument that the Eleventh Circuit requires only proximate causation to establish standing in RICO cases. The court ruled that the proximate cause requirement and indirect purchaser rule represent distinct aspects of RICO standing.
  • Plaintiffs also argued for a “direct harm” exception to the indirect purchaser rule, asserting that they were the most “direct victims” of the defendants’ purported fraud. The court rejected this argument, relying on Supreme Court and circuit court precedent emphasizing that the indirect purchaser rule is a “bright-line rule.”
• The dismissal of the class action RICO claim with prejudice was a significant early win for the brand-name manufacturers and underscores the importance of spotting statutory standing issues in class action litigation, which (if successful) can lead to a pleading-stage dismissal.
• The case also builds upon a small, but growing body of cases adopting this bright-line rule in the context of RICO claims directed at product manufacturers. We previously reported on another recent example. If this trend continues, the indirect purchaser rule will sharply limit the application of RICO to consumer class actions targeting product manufacturers. Not only will that eliminate the risk of treble damages in such cases (and the taint of being branded a “racketeer), it will take away any argument that the court can exercise nationwide personal jurisdiction over the case regardless of the forum in which it is filed due to RICO's nationwide service of process provision. Indeed, plaintiffs have increasingly included RICO claims to take advantage of its nationwide jurisdictional reach and the possible application of supplemental jurisdiction over the remaining state-law claims. See, e.g. Lewis, et al. v. Daimler AG, et al., No. 9:19-cv-81220 (S.D. Fla.) (which we reported on here).
• The case is In re: Zantac (Ranitidine) Products Liability Litigation, MDL No. 2924 (S.D. Fla. 9:20-md-02924-RLR, and you can read more here.