Pat District Council 82 v. Takeda Pharmaceuticals Company

                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PAINTERS AND ALLIED TRADES               No. 18-55588
DISTRICT COUNCIL 82 HEALTH CARE
FUND, third-party healthcare payor          D.C. No.
fund; ANNIE M. SNYDER, a                 2:17-cv-07223-
California consumer; RICKEY D.              SVW-AS
ROSE, a Missouri consumer; JOHN
CARDARELLI, a New Jersey
consumer; MARLYON K. BUCKNER, a            OPINION
Florida consumer; SYLVIE BIGORD, a
Massachusetts consumer, on behalf
of themselves and all others similarly
situated,
                Plaintiffs-Appellants,

                  v.

TAKEDA PHARMACEUTICALS
COMPANY LIMITED, a Japanese
Corporation; TAKEDA
PHARMACEUTICALS U.S.A., FKA
Takeda Pharmaceuticals North
America, Inc., an Illinois
corporation; ELI LILLY AND
COMPANY, an Indiana corporation,
               Defendants-Appellees.

      Appeal from the United States District Court
          for the Central District of California
      Stephen V. Wilson, District Judge, Presiding
2          PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

               Argued and Submitted June 6, 2019
                      Seattle, Washington

                     Filed December 3, 2019

          Before: Carlos T. Bea, Jacqueline H. Nguyen,
              and Paul J. Watford *, Circuit Judges.

                      Opinion by Judge Bea


                          SUMMARY **


    Racketeer Influenced and Corrupt Organizations Act

    The panel reversed the district court’s judgment
dismissing civil RICO claims under Fed. R. Civ. P. 12(b)(6)
for lack of RICO standing and remanded for further
proceedings.

    Plaintiffs brought a putative class action against
pharmaceutical companies, alleging that the companies
refused to change the warning label of their drug Actos or
otherwise inform the public after they learned that the drug
increased a patient’s risk of developing bladder cancer.
Plaintiffs were five patients and a third-party payor (“TPP”)
of health and welfare benefits to covered members and their

      *
      Judge Watford was drawn to replace Judge Rawlinson. Judge
Watford has read the briefs, reviewed the record, and watched the
recording of oral argument held on June 6, 2019.
    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                3

families. Plaintiffs sought to represent a class of similarly
situated patients and TPPs who paid or incurred costs for
Actos. They alleged that defendants conspired to commit
mail and wire fraud by intentionally misleading physicians,
consumers, and TPPs to believe that Actos did not increase
a person’s risk of developing bladder cancer. Plaintiffs
sought to recover economic damages under RICO for the
payments they made to purchase Actos, which they allege
they would not have purchased had they known of the
bladder cancer risk. The district court held that plaintiffs
failed to allege that their harm was “by reason of” the alleged
RICO violation, as required for RICO standing, because they
failed to allege the claimed RICO violation was the
proximate cause of their claimed losses.

    Agreeing with the First and Third Circuits, and
disagreeing with the Second and Seventh Circuits, the panel
held that plaintiffs sufficiently alleged proximate cause.
Supreme Court precedent requires a direct relationship
between the injury asserted and the defendant’s conduct.
The Supreme Court applies the Holmes factors, considering
(1) whether it would be too difficult to ascertain what
damages are attributable to defendants’ alleged RICO
violation, (2) the risk of multiple recoveries by plaintiffs at
different levels of injury from defendants’ acts, and
(3) whether holding defendants liable justifies the general
interest of deterring injurious conduct. The panel concluded
that plaintiffs sufficiently alleged a direct relationship, and
the Holmes factors weighed in favor of permitting their
RICO claims to proceed. The panel thus held that patients
and TPPs suing pharmaceutical companies for concealing an
allegedly unknown safety risk about a drug can satisfy
RICO’s proximate cause requirement. The panel concluded
that, although prescribing physicians served as
intermediaries between defendants’ fraudulent omission of
4       PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Actos’s risk of causing bladder cancer and plaintiffs’
payments for Actos, prescribing physicians did not
constitute an intervening cause to cut off the chain of
proximate causation. In addition, plaintiffs adequately
alleged reliance on defendants’ alleged misrepresentations
and omissions.

    The panel addressed additional claims in a concurrently
filed memorandum disposition.


                       COUNSEL

R. Brent Wisner (argued) and Michael L. Baum, Baum
Hedlund Aristei & Goldman PC, Los Angeles, California;
Christopher L. Coffin and Nicholas R. Rockforte, Pendley
Baudin & Coffin LLP, New Orleans, Louisiana; for
Plaintiffs-Appellants.

Jonathan S. Franklin (argued), Norton Rose Fulbright US
LLP, Washington, D.C.; Darryl W. Anderson and Geraldine
W. Young, Norton Rose Fulbright LLP, Houston, Texas; for
Defendants-Appellees Takeda Pharmaceuticals Company
Limited and Takeda Pharmaceuticals U.S.A.

Randall L. Christian (argued) and Susan E. Burnett,
Bowman and Brooke LLP, Austin, Texas, for Defendant-
Appellee Eli Lilly and Co.
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.               5

                         OPINION

BEA, Circuit Judge:

    Today we confront an issue of first impression in our
circuit, and one that has caused an apparent circuit split
among four of our sister circuits: In civil actions brought
under the Racketeer Influenced and Corrupt Organizations
Act (“RICO”) against pharmaceutical companies, do
patients and health insurance companies who reimbursed
patients adequately allege the required element of proximate
cause where they allege that, but for the defendant’s omitted
mention of a drug’s known safety risk, they would not have
paid for the drug?

             I. FACTUAL BACKGROUND

    This appeal arises from a putative class action against
Takeda Pharmaceuticals USA, Inc., its parent company
Takeda Pharmaceutical Company Ltd., and Eli Lilly & Co.
(collectively, “Defendants”).           Together, Defendants
developed and marketed a drug named Actos. Actos was
intended to lower blood sugar in type 2 diabetics.
Defendants obtained Food and Drug Administration
(“FDA”) approval for Actos in 1999. The plaintiffs allege
that despite learning through multiple studies over the next
several years that Actos increased a patient’s risk of
developing bladder cancer, Defendants refused to change
Actos’s warning label or otherwise inform the public of such
risk. Further, the plaintiffs allege that Defendants convinced
the FDA that studies revealing that Actos increased the risk
of bladder cancer were wrong. Defendants are alleged to
have actively misled prescribing physicians, consumers, and
third-party payors into believing that Actos did not increase
a person’s risk of developing bladder cancer. Defendants did
6        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

all of this, the plaintiffs allege, simply to increase their
profits from the sale of Actos.

    On September 17, 2010, after further studies of Actos
revealed an increased risk of bladder cancer, the FDA
announced that it was conducting a safety review of Actos.
On June 15, 2011, the FDA released an official warning to
the public that Actos may be linked to bladder cancer in
patients who use it over prolonged periods of time.
Following the FDA’s official warning, Defendants changed
Actos’s warning label to warn of a bladder cancer risk. The
sales of Actos are alleged to have dropped shortly after the
FDA issued its alert in 2010, and then again when the FDA
issued its official warning in 2011, by a total of
approximately 80%.

    A group of patients who developed bladder cancer after
ingesting Actos and their family members then brought
personal injury and wrongful death claims against
Defendants in the Western District of Louisiana. After a
37-day trial in 2014, the jury returned a verdict in favor of
the plaintiffs, but the parties later agreed to a global
settlement program for all eligible personal injury claimants
who used Actos before December 1, 2011 and had been
diagnosed with bladder cancer. In re Actos (Pioglitazone)
Prods. Liab. Litig., MDL No. 6:11-MD-2299, 

 (W.D. La. 2017). 1

    The present action was also originally filed in the
Western District of Louisiana. But in late 2017, the parties
stipulated to transfer the case to the Central District of
California. The plaintiffs in this case comprise five

    1
      No argument has yet been made in this action that the settlement
encompassed the plaintiffs’ RICO claims or mooted them.
          PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                         7

individual patients from different states (collectively,
“Patients”) and Painters and Allied Trades District Council
82 Health Care Fund (“Painters Fund”) (together,
“Plaintiffs”).

    Painters Fund is a third-party payor (“TPP”) of health
and welfare benefits to covered members and their families.
As a TPP, Painters Fund reimburses its members’ claims for
drugs, including Actos, submitted by pharmacies and
healthcare providers covered by its plan. Painters Fund
“relies on each member to submit claims for prescription
medications that are medically reasonable and necessary for
treatment,” with the expectation that patients and their
prescribing physicians will “make informed decisions about
which drugs will be prescribed and, in turn, submitted to
[Painters Fund] for reimbursement.” Painters Fund “has the
authority to determine which drugs are covered under its
plan, although, [it] entrusts the administration of claims and
formulary determinations to Prime Therapeutics, LLC,
based in Eagan, Minnesota.” 2

    Patients are individuals with type 2 diabetes who were
prescribed Actos by their physicians and who took Actos to
help lower their blood sugar. Each patient paid an out-of-
pocket sum for Actos. Patients each allege that neither they
nor their physicians knew about Actos’s risk of bladder
cancer when they began taking the drug and that they
immediately stopped taking Actos once they learned that it
increased their risk of developing bladder cancer. Patients
also allege that they never would have purchased Actos had
they known that it increased their risk of developing bladder
cancer, and thus, that they never would have submitted

    2
      Prime Therapeutics, LLC is not a party to this litigation and is not
discussed elsewhere in the complaint.
8        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

claims for reimbursement for purchases of Actos to their
respective TPPs. Only one patient, Annie Snyder from
California, alleges that prior to starting her prescription, she
read and relied upon the Actos label. But Plaintiffs generally
allege that Patients relied on Defendants’ misrepresentations
about Actos, by act or omission, in purchasing the drug, that
physicians relied on such misrepresentations in prescribing
Actos for their patients, and that TPPs relied on such
misrepresentations in agreeing to pay for Actos prescriptions
for their members.

    Plaintiffs seek to represent a class of similarly situated
patients and TPPs “who paid or incurred costs for the drug
Actos, for purposes other than resale, between 1999, i.e.,
when the drug was approved, and the present,” excluding
“those consumers who are presently seeking a personal
injury claim arising out of their use of Actos.” Plaintiffs
argue that Defendants conspired to commit mail and wire
fraud under 

, 1343 by intentionally
misleading physicians, consumers, and TPPs to believe that
Actos did not increase a person’s risk of developing bladder
cancer. Plaintiffs seek to recover economic damages under
RICO for the payments they made to purchase Actos under
the assumption that it was a safe drug, which they allege they
would not have purchased had they known that Actos
increases a person’s risk of developing bladder cancer (this
is called the “quantity effect theory” of damages). 3 Plaintiffs



    3
      Plaintiffs originally alleged a second damages theory—that they
overpaid for Actos prescriptions because Defendants inflated the price
of Actos under the guise that Actos did not increase a person’s risk of
developing bladder cancer—called the “excess price theory.” But
Plaintiffs have abandoned their excess price theory for damages on
appeal.
          PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                           9

do not, however, seek to recover economic or non-economic
damages caused by any person’s actual ingestion of Actos.

    The district court dismissed with prejudice Plaintiffs’
RICO claims under Federal Rule of Civil Procedure 12(b)(6)
in a single paragraph, holding that Plaintiffs failed
adequately to allege facts sufficient to establish that
Defendants’ acts and omissions were the proximate cause of
their claimed damages. This appeal followed. 4

                           II. ANALYSIS

A. Standard of Review

    We review de novo the district court’s grant of a Rule
12(b)(6) motion to dismiss. Bain v. Cal. Teachers Ass’n,

 (9th Cir. 2018). We take all of
Plaintiffs’ factual allegations as true, and we may affirm the
dismissal “only if it appears beyond doubt that [Plaintiffs]
can prove no set of facts in support of [their] claim[s] which
would entitle [them] to relief.” 

 (internal quotation marks
omitted).

B. Plaintiffs’ RICO Claims

   The crux of Plaintiffs’ complaint rests on their civil
RICO claims. Although the RICO statute was originally
enacted to combat organized crime, “it has become a tool for

    4
      Plaintiffs also brought claims under state consumer protection laws
of California, Florida, Massachusetts, Minnesota, Missouri, and New
Jersey. In a separate order, the district court dismissed all of Plaintiffs’
state law claims. With the exception of their Massachusetts claim,
Plaintiffs also appeal the dismissal of their state law claims. We address
those claims in a concurrently filed memorandum disposition.
10        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

everyday fraud cases brought against respected and
legitimate enterprises.” Sedima, S.P.R.L. v. Imrex Co.,

 (1985) (internal quotation marks
omitted). Broadly speaking, there are two parts to a civil
RICO claim. The civil RICO violation is defined under

, 5 while “RICO standing” is defined under

(c). The district court dismissed Plaintiffs’
RICO claims only for lack of standing, and thus we address
only that portion of Plaintiffs’ RICO claims.

    To allege civil RICO standing under 

(c), a “plaintiff must show: (1) that his alleged harm
qualifies as injury to his business or property; and (2) that
his harm was ‘by reason of’ the RICO violation.” Canyon
County v. Syngenta Seeds, Inc., 

 (9th Cir.
2008). Defendants do not dispute that Plaintiffs have alleged
an injury to their business or property. Rather, as the district
court held, Defendants argue that Plaintiffs have failed to
allege that their harm was “by reason of” the alleged RICO
violation because they have failed to allege the claimed
RICO violation was the proximate cause of their claimed
losses.

     1. Supreme Court Precedent

    The Supreme Court has interpreted the phrase “by reason
of” in 

(c) to require, as elements for a civil
RICO recovery, both proximate and but-for causation. 6

     5
      To recover for a civil RICO violation, “a plaintiff must prove that
the defendant engaged in (1) conduct (2) of an enterprise (3) through a
pattern (4) of racketeering activity.” Chaset v. Fleer/Skybox Int’l, LP,

, 1086 (9th Cir. 2002) (citing 

).
      6
        Defendants do not argue in this appeal that Plaintiffs’ allegations
fail to allege but-for causation.
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.              11

Holmes v. Sec. Inv’r Prot. Corp., 

 (1992).
The requirement of proximate cause seeks to “limit a
person’s responsibility for the consequences of that person’s
own acts.” 

 Put another way, “the proximate-cause
requirement generally bars suits for alleged harm that is ‘too
remote’ from the defendant’s unlawful conduct.” Lexmark
Int’l, Inc. v. Static Control Components, Inc., 

 (2014). Thus, it “demand[s] . . . some direct relation
between the injury asserted and the injurious conduct
alleged.” Holmes, 

.

   This “direct relation” requirement is based upon three
practical factors, stated in Holmes:

       First, the less direct an injury is, the more
       difficult it becomes to ascertain the amount
       of a plaintiff’s damages attributable to the
       violation, as distinct from other, independent,
       factors. Second, quite apart from problems
       of proving factual causation, recognizing
       claims of the indirectly injured would force
       courts to adopt complicated rules
       apportioning damages among plaintiffs
       removed at different levels of injury from the
       violative acts, to obviate the risk of multiple
       recoveries. And, finally, the need to grapple
       with these problems is simply unjustified by
       the general interest in deterring injurious
       conduct, since directly injured victims can
       generally be counted on to vindicate the law
       as private attorneys general, without any of
       the problems attendant upon suits by
       plaintiffs injured more remotely.
12      PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

 at 269–70 (internal citations omitted). The Supreme
Court has applied the Holmes factors, along with its direct
relation requirement, in each of its decisions addressing
proximate cause for civil RICO claims.

     In Anza v. Ideal Steel Supply Corp., the plaintiff—a steel
mill product retailer in New York City—alleged that one of
its retail competitors caused it economic harm by failing to
charge customers applicable New York state sales taxes,
thereby defrauding the New York state tax authority.

, 457–58 (2006). This conduct, the plaintiff
alleged, allowed the defendant to offer lower prices and
attract more customers, which in turn caused the plaintiff to
lose customers and profit. 

 The district court dismissed
the plaintiff’s complaint under Rule 12(b)(6) for failure to
plead proximate cause, but the Second Circuit vacated the
district court’s judgment, holding that the plaintiff had
adequately pleaded that the defendant proximately caused its
damages. 

. The Supreme Court then reversed the
Second Circuit’s judgment and held that the plaintiff failed
to satisfy the requirement to allege proximate cause under
RICO because the “direct victim of this conduct was the
State of New York, not [the plaintiff].” 

. Indeed,
“[i]t was the State that was being defrauded and the State
that lost tax revenue as a result.” 

 Although the plaintiff
alleged that it suffered its own harms by losing customers
and profits through the defendant’s failure to tax its
customers, the plaintiff’s asserted harms were “entirely
distinct from the alleged RICO violation (defrauding the
state),” and thus the plaintiff’s allegations failed the
Supreme Court’s direct relation requirement for the element
of proximate cause. 

   Likewise, in Hemi Group, LLC v. City of New York, the
Supreme Court reversed the Second Circuit’s holding that
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                13

the plaintiffs had sufficiently alleged damages proximately
caused by the defendants’ actions under RICO to survive
dismissal under Rule 12(b)(6). 

, 4–5 (2010).
There, the City of New York (the “City”), which imposed a
$1.50-per-pack tax on each pack of cigarettes possessed
within New York City for sale or use, sued a New Mexico
retailer that sold cigarettes online to residents in New York
City. 

 at 4–6. The City alleged that the New Mexico
retailer failed to comply with a federal law requiring out-of-
state vendors to submit customer information to the states
into which it ships cigarettes. 

. That failure, the City
argued, not only made it more difficult for the City to track
down people who possessed cigarettes in New York City
purchased elsewhere, but also constituted mail and wire
fraud under RICO, which caused the City to lose millions of
dollars in uncollected per-pack cigarette taxes. 

    The Supreme Court disagreed. It held that the New
Mexico retailer’s failure to submit customer information to
the State of New York was too attenuated from the City’s
loss of cigarette possession tax proceeds to satisfy the
proximate cause allegation requirement. See 

. The
Supreme Court explained that the conduct constituting the
alleged fraud was the New Mexico retailer’s failure to
submit customer information to the State of New York, but
“the conduct directly responsible for the City’s harm was the
customers’ failure to pay their taxes.” 

 Thus, “the
conduct directly causing the harm was distinct from the
conduct giving rise to the fraud,” and therefore the City
failed to satisfy the Supreme Court’s direct relation
requirement. 

    In contrast, in Bridge v. Phoenix Bond & Indemnity Co.,
the Supreme Court affirmed the Seventh Circuit’s reversal
of the district court’s order dismissing the plaintiffs’
14       PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

complaint for failure sufficiently to allege the proximate
cause element under RICO. 

 (2008).
The plaintiffs were bidders at a county tax lien auction. 

. To ensure fair distribution of tax liens during the
auctions, the county enacted a “Single, Simultaneous Bidder
Rule,” requiring each “tax [lien] buying entity” to bid in its
own name and not to use agents or employees to submit
simultaneous bids on its behalf. 

 The plaintiffs alleged
that the defendants violated that rule by using agents to
submit simultaneous bids on the defendants’ behalf and
directing those agents to file false attestations that they had
complied with the county’s rules. 

 at 643–44. The
plaintiffs alleged that this deceptive practice resulted in the
defendants receiving a disproportionately higher share of tax
liens at the county auction. 

 The plaintiffs further alleged
that as a result of this deceptive practice, they were deprived
of their ability to obtain their fair share of tax liens at the
county auction. 

.

    The defendants countered that the plaintiffs’ alleged
harm was too speculative to satisfy RICO’s proximate cause
requirement because the defendants misrepresented
information to the county, not the plaintiffs. 

. But
a unanimous Supreme Court rejected this argument, noting
that proximate cause is “a flexible concept that does not lend
itself to a black-letter rule that will dictate the result in every
case.” 

 (internal quotations omitted). Applying its
direct relation requirement, the Supreme Court held that the
plaintiffs’ “alleged injury—the loss of valuable liens—is the
direct result of [the defendants’] fraud. It was a foreseeable
and natural consequence of [the defendants’] scheme to
obtain more liens for themselves that other bidders would
obtain fewer liens.” 

. And unlike in Anza and Hemi
Group, where other parties suffered more direct injuries than
the plaintiffs, in Bridge, the county—which sold the tax liens
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.              15

at prices not dependent on who was the buyer—was not
injured. 

 Rather, the plaintiffs were the immediate
victims of the defendants’ fraud and were best situated to sue
the defendants. 

 Thus, the Supreme Court held that the
plaintiffs had sufficiently alleged proximate cause under
RICO. 

.

    Under the Supreme Court’s Bridge precedent alone, we
think Plaintiffs’ allegations satisfy the Supreme Court’s
direct relation requirement. Here, the alleged violation is
that Defendants actively concealed Actos’s risk of causing
bladder cancer to sell more Actos to unsuspecting persons,
thereby increasing Actos’s revenue. And Plaintiffs’ alleged
injury is that they purchased Actos prescriptions for which
they would not have paid had they been warned about
Actos’s risk of bladder cancer. Because Plaintiffs were
immediate victims of Defendants’ alleged fraudulent
scheme to conceal Actos’s risk of bladder cancer, the alleged
RICO violation (conspiracy to commit mail and wire fraud
violative of 

, 1343) has a direct relation to
Plaintiffs’ alleged harm.

     The Holmes factors also weigh in favor of permitting
Plaintiffs’ RICO claims to proceed. The first Holmes factor
tasks us with determining whether it would be too difficult
to ascertain what damages are attributable to Defendants’
alleged RICO violation, as opposed to factors other than, and
independent of, Defendants’ alleged misrepresentations.

. While “it is often easier to ascertain the
damages that flow from actual, affirmative conduct, than to
speculate what damages arose from a party’s failure to act,”
Oregon Laborers-Employers Health & Welfare Trust Fund
v. Philip Morris Inc., 

 (9th Cir. 1999)
(internal quotation marks omitted), we are not persuaded that
it is so difficult here that Plaintiffs should be denied the
16        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

opportunity to prove their damages. 7 We leave it to the
district court on remand to assess Plaintiffs’ damages, if the
litigation proceeds to that phase.

     Second, we consider the risk of multiple recoveries by
plaintiffs at different levels of injury from the defendants’
acts. Holmes, 

. Here, like in Bridge, and
unlike in Anza and Hemi Group, there is no concern of
“duplicative recoveries by plaintiffs removed at different
levels of injury from the violation.” Bridge, 

.
It is each individual plaintiff who paid out money for Actos
prescriptions who now seeks recovery of those payments.
As we read Plaintiffs’ complaint, the damages suffered by
Patients and Painters Fund do not overlap, as it appears that
Patients seek to recover only the dollars they paid for Actos
out-of-pocket, for which they have not been reimbursed by
a TPP. 8 Further, Plaintiffs’ putative class expressly excludes
individuals who are pursuing personal injury claims, so there
     7
       We note that Defendants’ argument that had Plaintiffs not taken
Actos, they would have paid for an alternative drug to treat their type 2
diabetes, has not fallen on deaf ears. It seems quite logical that Plaintiffs
would have paid for a different drug to treat patients’ diabetes had they
known that Actos increases a person’s risk of developing bladder cancer.
But at this stage in the proceedings, we take Plaintiffs’ allegations that
they would not have bought or paid for Actos as true. Bain, 

. Plaintiffs do not allege that they would have paid for an
alternative diabetes drug had they known Actos carries an increased risk
of causing bladder cancer. Further, if what Defendants argue proves
true, Plaintiffs may still be entitled to damages if the alternative drugs
they would have paid for cost less than Actos. Plaintiffs have alleged
there are at least three less expensive alternatives to Actos, and discovery
may prove Plaintiffs were likely to have bought these alternatives. In
any event, this is a damages question for another day.
     8
     Of course, on remand, if discovery reveals that Patients’ claimed
damages overlap with damages claimed by Painters Fund or another
TPP, Plaintiffs should not recover any overlapping damages.
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.              17

is no risk that some plaintiffs will receive overlapping
economic and personal injury damages.

    Finally, under the third Holmes factor, we consider
whether holding Defendants liable in this case justifies the
general interest of deterring injurious conduct or whether
there are more directly injured victims we can count on to
hold Defendants liable. 503 U.S. at 269–70. Here, patients
and TPPs who paid money for Actos are the most direct
victims of those who suffered economic injury. Although
people who ingested Actos and developed bladder cancer
suffered an additional and greater harm than others who paid
for Actos but did not develop bladder cancer, this does not
change the fact that all patients and TPPs who paid for Actos
on the premise that it did not cause an increased risk of
bladder cancer were allegedly defrauded by Defendants and
suffered the same direct economic injury: payments for a
drug which would not have been purchased if suitably
described. Additionally, others may have been affected by
Defendants’ alleged fraud. For instance, prescribing
physicians who prescribed Actos for their patients may have
watched their patients develop bladder cancer. But as far as
we can tell from Plaintiffs’ complaint, prescribing
physicians did not suffer an economic injury. Thus, holding
Defendants liable for Plaintiffs’ alleged injuries advances
the interest in deterring injurious conduct, without including
others who did not suffer direct out-of-pocket losses.

   2. Circuit Court Precedent

    While our court has recognized the Supreme Court’s
direct relation requirement and Holmes factors for RICO
proximate cause in several cases, see, e.g., Harmoni
International Spice, Inc. v. Hume, 

 (9th Cir.
2019); Canyon County, 

; Oregon Laborers,
18        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

185 F.3d at 963–66, 9 we have never applied it to the situation
at issue here—whether patients and TPPs suing

     9
       Oregon Laborers, the case most closely related to the present
action in this circuit to date, is distinguishable. There, six employee
health and welfare benefit plans sued tobacco companies and public
relations companies under federal RICO and other antitrust and state
laws. 

. The plaintiffs alleged that the defendants
conspired to persuade the public that scientific studies linking smoking
to health risks were not accurate and that the connection between
smoking and disease was merely an “open controversy.” 

 The
plaintiffs alleged that this wrongful conduct “resulted in more smoking,
less quitting, and smoking of more hazardous cigarettes” among their
plan participants, which then resulted in more disease among their plan
participants who smoked. 

. In turn, the plaintiffs alleged, they
suffered higher expenditures to cover their plan participants’ medical
bills. 

     The district court held that the plaintiffs failed to state a RICO claim
for relief under Rule 12(b)(6), and we affirmed. 

. We held that
the plaintiffs’ alleged injury was “indirect” and too remote to satisfy
RICO’s proximate cause requirement. 

. We explained that “all
of [the] plaintiffs’ claims rely on alleged injury to smokers—without any
injury to smokers, [the] plaintiffs would not have incurred the additional
expenses in paying for the medical expenses of those smokers.” 

(second emphasis added). Instead of the plaintiffs, we reasoned, the
smokers were the direct victims of the defendant’s alleged wrongful
conduct. 

. Thus, under the Supreme Court’s direct relation
requirement, we held that the alleged RICO violation was distinct from
the plaintiffs’ alleged injury. See 

 at 963–64. Therefore, the plaintiffs
failed to allege that their damages were proximately caused by the
defendants’ actions. See 

.

     Plaintiffs’ alleged injury in this case is distinct from the plaintiffs’
alleged injury in Oregon Laborers. There, the chain of causation from
the defendant’s alleged misrepresentation to the plaintiffs’ alleged injury
depended upon an independent link that required the smokers to develop
illnesses that necessitated medical treatment, for which the plaintiffs then
paid. But here, Plaintiffs’ alleged injury is directly related to
Defendants’ alleged misrepresentations, as they allege that they paid
          PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                        19

pharmaceutical companies for concealing an allegedly
known safety risk about a drug can satisfy RICO’s proximate
cause requirement. 10 But several of our sister circuits have

money out-of-pocket for Actos, which they otherwise would not have
paid had Defendants not fraudulently omitted Actos’s risk of causing
bladder cancer. Whether Plaintiffs developed bladder cancer is
irrelevant to their claims. Thus, Oregon Laborers is distinguishable and
does not control here.
     10
         The Seventh Circuit once commented that the Ninth Circuit
“deem[s] this [issue] so straightforward that [it] ha[s] issued
nonprecedential decisions” about it. Sidney Hillman Health Ctr. v.
Abbott Labs., 

 (7th Cir. 2017). Not quite. Rather, in
In re Actimmune Marketing Litigation, we summarily affirmed the
district court’s dismissal without prejudice of the plaintiffs’ RICO claims
where the district court held in part that the plaintiffs’ complaint failed
sufficiently to plead proximate cause for their civil RICO claim for lack
of specificity under Federal Rule of Civil Procedure 8(a). 

 (9th Cir. 2011) (citing In re Actimmune Mktg. Litig., 

, 1050–51 (N.D. Cal. 2009)). When the plaintiffs filed their
amended complaint, they abandoned their RICO claims. See In re
Actimmune Mktg. Litig., No. C 08-02376 MHP, 

, at *1
(N.D. Cal. Nov. 6, 2009). Our summary affirmance of the district court’s
decision to dismiss the plaintiffs’ RICO claims without prejudice can
hardly be considered a decision on the merits of the issue that we deemed
“so straightforward” as to issue a non-binding decision.

     In United Food & Commercial Workers Central Pennsylvania &
Regional Health & Welfare Fund v. Amgen, Inc., the plaintiffs sued
Amgen, Inc. for concealing adverse test results about a drug’s off-label
uses. 

 (9th Cir. 2010). We held that the plaintiffs’
complaint failed to identify false statements or material omissions that
Amgen made about the drug’s safety. 

 Further, we held that the
plaintiffs failed to plead a cognizable theory of proximate cause for their
civil RICO claim because the complaint “proffered an attenuated causal
chain that involved at least four independent links”—(1) the United
States Pharmacopeia-Drug Information (“USP-DI”)’s listing of the drug
to be used for a certain off-label use; (2) Medicare’s decision to cover
the drug for that off-label use; (3) third-party payors’ decision to cover
20        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

addressed this question in similar factual scenarios and have
reached different results, creating an apparent inter-circuit
split. We look to their reasoning for guidance.

         a. Seventh Circuit

    In Sidney Hillman Health Center v. Abbott Laboratories,
two TPPs who had paid to cover their patients’ off-label 11
uses of a prescription drug named Depakote sued the drug
manufacturer under RICO for concealing its role in
promoting Depakote’s off-label uses to intermediaries, such
as prescribing physicians. 

 (7th Cir. 2017).
In relevant part, the district court dismissed the TPPs’
complaint for failure to allege that their damages were
proximately caused by the drug manufacturer’s concealed
off-label promotion, and the Seventh Circuit affirmed. 

.

    The Seventh Circuit first noted that, in some cases, an
injury to one person caused by wrongs against another can
satisfy RICO’s proximate cause requirement, as the Supreme
Court held in Bridge, 

. 

.
However, the Seventh Circuit held that the TPPs in Sidney
Hillman were too far removed from the alleged RICO

the drug for the off-label use; and (4) doctors’ decisions to prescribe the
drug for the off-label use. 

 But we never independently addressed
whether patients and TPPs can meet RICO’s proximate cause
requirement under the Supreme Court’s direct relation requirement and
Holmes factors to hold pharmaceutical companies liable for mail and
wire fraud. Further, our present case does not require as many causal
links. And of course, because unpublished dispositions from our circuit
are not precedential, see Ninth Circuit Rule 36-3(a), we are free to decide
this issue in the first instance.
    11
        “Off-label” refers to using a drug to treat conditions other than
those it was originally developed to treat.
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.              21

violation to satisfy the proximate cause requirement. 

The Seventh Circuit opined that while TPPs “part with
money . . . it is not at all clear that they are the initially
injured parties, let alone the sole injured parties.” 

 The
Seventh Circuit explained that patients may be the most
directly injured parties, as they incurred financial loss (if
they paid a copayment to receive Depakote) and personal
injury damages if they suffered harmful effects from using
Depakote for an unsafe off-label use. 

 Moreover, the
Seventh Circuit noted, the “patients’ health and financial
costs come first in line temporally; that pharmacies then send
bills to [TPPs], which cover the remainder of the expense,
does not make those [TPPs] the initial losers” from the drug
manufacturer’s unlawful promotion scheme. 

 The
Seventh Circuit opined that prescribing physicians may also
suffer loss, though indirectly, because “[i]f a physician
prescribes an ineffective medicine and so does not provide
[patients] help, patients may turn elsewhere.” 

    The Seventh Circuit next explained that physicians make
independent decisions when prescribing patients medicine,
and it would be difficult to disentangle which physicians’
decisions, if any, were influenced by the drug
manufacturer’s unlawful promotions. 

 at 577–78. That,
and other factors, such as the fact that some patients may
have benefited from using Depakote for an off-label use,
convinced the Seventh Circuit that it would be too difficult
to calculate the plaintiffs’ alleged damages. 

 Thus, the
Seventh Circuit held that the TPPs—“several levels removed
in the causal sequence” from the drug manufacturer’s
actions—could not satisfy RICO’s proximate cause
requirement. 

 at 576–78.
22      PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

       b. Second Circuit

    Similarly, in UFCW Local 1776 v. Eli Lilly & Co., TPPs
and individual patients brought a putative class action for
civil RICO fraud against the manufacturer of the drug
Zyprexa, alleging that the manufacturer misrepresented
Zyprexa’s side effects and effectiveness to physicians and
promoted Zyprexa for off-label uses when there was no
evidence that Zyprexa was effective for off-label uses.

 (2d Cir. 2010). The plaintiffs alleged
two damages theories: (1) the “excess price theory”—that
they overpaid for Zyprexa prescriptions because the
manufacturer relied on its misrepresentations to charge
higher prices; and (2) the “quantity effect theory”—that they
paid for Zyprexa prescriptions “that would not have been
issued but for the alleged misrepresentations.” 

 The
district court certified a class of TPPs based upon their
excess price theory for damages, but the Second Circuit
reversed. 

.

    As to the proximate cause requirement under RICO, the
Second Circuit held that the plaintiffs’ injuries under both of
their damages theories were too attenuated, as they “rest[] on
the independent actions of third and even fourth parties.” 

at 134 (quoting Hemi Group, 

). The Second
Circuit was not persuaded by the plaintiffs’ argument that
“the ultimate source for the information on which doctors
based their prescribing decisions was [the manufacturer] and
its consistent, pervasive marketing plan,” because the
manufacturer was “not . . . the only source of information
on which doctors based prescribing decisions.” 

(emphasis in original). Rather, “[a]n individual patient’s
diagnosis, past and current medications being taken by the
patient, the physician’s own experience with prescribing
Zyprexa, and the physician’s knowledge regarding the side
          PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                         23

effects of Zyprexa are all considerations that would have
been taken into account in addition to the alleged
misrepresentations distributed by [the manufacturer].” 

Accordingly, the Second Circuit held that the plaintiffs
failed to allege that their damages were proximately caused
by the drug manufacturer’s wrongful conduct and reversed
the district court’s certification order. 12 

; see
also Sergeants Benevolent Ass’n Health & Welfare Fund v.
Sanofi-Aventis U.S. LLP, 

, 90–91 (2d Cir. 2015)
(holding that the plaintiff’s RICO claims were foreclosed by
UFCW Local 1776, 

).

         c. First Circuit

     To the contrary, in In re Neurontin Marketing & Sales
Practices Litigation, a jury awarded Kaiser Foundation
Health Plan (“Kaiser”), a TPP, damages for the injury it
suffered in paying for off-label Neurontin prescriptions that
were induced by Pfizer’s (the drug manufacturer) fraudulent
scheme to misrepresent Neurontin’s effectiveness for off-
label conditions. 

, 25–26 (1st Cir. 2013). The
district court had found that Kaiser relied on Pfizer’s
fraudulent marketing campaign in deciding to include
Neurontin in its formulary—a list of medications its treating
physicians were authorized to prescribe. 

 at 28–29. The
district court subsequently denied Pfizer’s motion for a new
trial, and Pfizer appealed. 

.



    12
        The Second Circuit remanded, however, for the district court to
consider individual claims based upon the plaintiffs’ quantity effect
damages theory. UFCW Local 1776, 

. The Second
Circuit noted that “while that theory cannot support class certification, it
is not clear that the theory is not viable with respect to individual claims
by some TPPs or other [individual] purchasers.” 

24       PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

    Pfizer argued that Kaiser could not satisfy RICO’s
proximate cause requirement as a matter of law. Id. at 34.
But the First Circuit disagreed, holding that “Kaiser has met
both the direct relationship and functional tests articulated in
Holmes and its progeny.” Id. at 38. Unlike the Second and
Seventh Circuits, the First Circuit rejected the argument that
there were “too many steps in the causal chain between
[Pfizer’s] misrepresentations and Kaiser’s alleged injury” to
meet the “direct relation” requirement. Id. Rather, the First
Circuit held that “the causal chain in this case is anything but
attenuated,” because Pfizer “has always known that, because
of the structure of the American health care system,
physicians would not be the ones paying for the drugs they
prescribed.” Id. at 38–39. Pfizer’s fraudulent marketing
scheme, which was meant to increase its sales and profits,
“only became successful once Pfizer received payments for
the additional Neurontin prescriptions it induced.” Id. at 39.
Those payments came from TPPs, including Kaiser. Id.

     The First Circuit also rejected Pfizer’s argument that
“because doctors exercise independent medical judgment in
making decisions about prescriptions, the actions of these
doctors are independent intervening causes” that cut off the
chain of causation. Id. The First Circuit explained that
“Pfizer’s scheme relied on the expectation that physicians
would base their prescribing decisions in part on Pfizer’s
fraudulent marketing.” Id. “The fact that some physicians
may have considered factors other than Pfizer’s detailing
materials in making their prescribing decisions does not add
such attenuation to the causal chain as to eliminate
proximate cause”; rather, “[t]his is a damages question”
about the “total number of prescriptions that were
attributable to Pfizer’s actions.” Id. Finally, the First Circuit
noted that “[h]olding Pfizer liable will have an effect in
deterring wrongful conduct,” and thus it held that Kaiser had
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                25

satisfied the proximate cause requirement under RICO. Id.
at 39–40.

       d. Third Circuit

    Similarly, in In re Avandia Marketing, Sales Practices &
Product Liability Litigation, the Third Circuit held that the
TPP plaintiffs sufficiently alleged proximate cause for their
civil RICO claims. 

 (3d Cir. 2015). There,
TPPs filed a putative class action against the defendant
alleging under RICO that the defendant misrepresented
significant heart-related safety risks associated with the drug
Avandia. 

 at 634–36. The plaintiffs alleged that they
included Avandia in their formularies and covered it at
favorable rates for their members in reliance on the
defendant’s misrepresentations about Avandia’s safety. 

. The plaintiffs also alleged that physicians relied on
the defendant’s misrepresentations in deciding to prescribe
Avandia and that they would have prescribed it to fewer
patients if the defendant had not concealed its safety risks.

 The district court held that the plaintiffs adequately
alleged that the defendant proximately caused their damages
but certified its decision for interlocutory appeal. 

.

      The Third Circuit affirmed. Applying the Supreme
Court’s direct relation requirement, the Third Circuit held
that “[t]he conduct that allegedly caused [the] plaintiffs’
injuries is the same conduct forming the basis of the RICO
scheme alleged in the complaint—the misrepresentation of
the heart-related risks of taking Avandia that caused TPPs
. . . to place Avandia in the formulary.” 

. Next,
looking to the Holmes factors, the Third Circuit noted that it
would not be too difficult to distinguish between the
damages attributable to the defendant’s alleged violation
from other independent factors, and that at the pleadings
stage, the question of damages was “a question for another
26      PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

day.” 

 Further, the Third Circuit observed that the
plaintiffs were best situated to sue, as the plaintiffs’ alleged
injury “is an economic injury independent of any physical
injury suffered by Avandia users,” and “prescribing
physicians did not suffer RICO injury from [the defendant’s]
marketing of Avandia.” 

    The Third Circuit, like the First Circuit, rejected the
defendant’s argument that “the presence of intermediaries,
doctors and patients, destroys proximate cause because they
were the ones who ultimately decided whether to rely on [the
defendant’s] misrepresentations.” 

. The Third
Circuit explained that “drug manufacturers are well aware
that TPPs cover the cost of their drugs” and the defendant’s
“fraudulent scheme could have been successful only if [the]
plaintiffs paid for Avandia, [which] is the very injury that
[the] plaintiffs seek recovery for.” 

 Thus, the plaintiffs’
alleged injury had a direct relation to the alleged RICO
violation. 

 Therefore, the Third Circuit affirmed the
district court’s holding that the plaintiffs adequately alleged
RICO proximate cause at the pleadings stage. 

 at 645–46.

       e. Circuit Court Precedent Analysis

    Although each of these four circuit court opinions arises
under similar factual scenarios, factual and procedural
distinctions exist between them. For example, the Third and
Seventh Circuits’ opinions confronted the issue whether the
plaintiffs could satisfy the proximate cause requirement
under RICO at the pleadings stage, whereas the Second
Circuit considered the issue at the class certification stage,
and the Third Circuit reviewed the issue post-trial. Further,
while the Second, Third, and Seventh Circuit cases involved
putative class actions, the First Circuit’s opinion involved a
single TPP. But these minor factual and procedural
differences do not help us resolve the central dispute
          PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                           27

between the Second and Seventh Circuits’ reasoning and the
First and Third Circuits’ reasoning.

    Indeed, it seems the central dispute between the Second
and Seventh Circuits and the First and Third Circuits is
whether the decisions of prescribing physicians and
pharmacy benefit managers constitute intervening causes
that sever the chain of proximate cause between the drug
manufacturer and TPP. 13 We think the First and Third
Circuits have it right because their reasoning is more
consistent with the Supreme Court’s direct relation
requirement.

    In this case, although prescribing physicians serve as
intermediaries between Defendants’ fraudulent omission of
Actos’s risk of causing bladder cancer and Plaintiffs’
payments for Actos, prescribing physicians do not constitute
an intervening cause to cut off the chain of proximate cause.
An intervening cause is “a later cause of independent origin
that was not foreseeable.” Mendez v. County of Los Angeles,

 (9th Cir. 2018) (quoting Exxon Co. v.
Sofec, 

, 837 (1996)). Here, since Actos was a

    13
        We note that all four of our sister circuits’ opinions may support
the claims by individual patients who are plaintiffs in this case, not just
the First and Third Circuits’ opinions. In Sidney Hillman, in holding that
TPPs are too far removed from the drug manufacturer’s alleged wrongful
conduct to satisfy the RICO proximate cause requirement, the Seventh
Circuit implied that individual patients may be able to satisfy the
proximate cause requirement, as they are the most directly injured party
whose “health and financial costs come first in line temporally.”

. And in UFCW Local 1776, although the Second Circuit
reversed the district court’s class certification order because the plaintiffs
could not satisfy RICO’s proximate cause requirement as a class, it
remanded to the district court to consider in the first instance individual
plaintiffs’ claims based upon the quantity effect damages theory.

.
28      PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

prescription drug, it was required to be prescribed by
physicians. Hence, it was perfectly foreseeable that
physicians who prescribed Actos would play a causative role
in Defendants’ alleged fraudulent scheme to increase
Actos’s revenues. Further, “because of the structure of the
American health care system,” Defendants have always
known that “physicians would not be the ones paying for the
drugs they prescribed.” Neurontin, 712 F.3d at 38–39.
Rather, they are well aware that TPPs and individual patients
pay for the drugs. See Avandia, 

.
Defendants’ alleged fraudulent marketing scheme, which
was intended to increase Actos’s sales, “only became
successful once [they] received payments for the additional
[Actos] prescriptions [they] induced”—the very injury for
which Plaintiffs seek recovery. Neurontin, 

.
This is consistent with the Supreme Court’s requirement that
the proximate cause inquiry focus on the direct relation
between the alleged violation and alleged injury. Hemi
Group, 

.

    If we were to hold the opposite—that prescribing
physicians’ and pharmacy benefit managers’ decisions
constitute an intervening cause to sever the chain of
proximate cause—as the Second and Seventh Circuits have
held, drug manufacturers would be insulated from liability
for their fraudulent marketing schemes, as they could
continuously hide behind prescribing physicians and
pharmacy benefit managers. That is not the purpose the
requirement of proximate cause is intended to serve.
Proximate cause exists to “limit a person’s responsibility for
the consequences of that person’s own acts.” Holmes,

. Here, Plaintiffs seek to hold Defendants
liable for the consequences of their own acts and omissions
toward Plaintiffs: the money spent by Plaintiffs to purchase
Actos.
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.              29

    There is also a difference between fraudulent promotion
of “off-label” uses for a prescription drug as in Sidney
Hillman, 

 and UFCW Local 1776, 

, and fraudulent failure to warn of a drug’s known risk
of causing bladder cancer, as in this case.

    It was recognized in both Sidney Hillman and UFCW
Local 1776 that the drug manufacturer’s fraudulent
promotion of a prescription drug for off-label uses was not
the only basis upon which the prescribing physicians relied
in prescribing the drug. In Sidney Hillman, the Seventh
Circuit noted that it would be too difficult to disentangle
which physicians’ prescribing decisions, if any, were
influenced by the defendants’ unlawful promotion of the
prescription drug for off-label uses. 873 F.3d at 577–78.
Similarly, in UFCW Local 1776, the Second Circuit noted
that the drug manufacturer’s unlawful promotion of the
prescription drug for off-label uses was not the only source
of information upon which the prescribing physicians based
their decisions to prescribe the drug. 

.

    Echoing the first factor of Holmes, the failure to warn of
the bladder cancer risk in this case makes Plaintiffs’
damages more clearly “attributable to [Defendants’]
violation.” 

. The damages claimed from off-
label uses in Sidney Hillman and UFCW Local 1776 are less
directly attributable to the alleged false promotions. It is
much more likely that Actos’s risk of causing a disease as
serious as bladder cancer would materially influence
prescribing physicians’ decisions whether to prescribe
Actos. Plaintiffs’ allegations confirm this theory, as they
allege that a survey conducted by Defendants in 2003
showed that 75% of surveyed physicians’ interest in a
different oral anti-diabetic drug declined “greatly” once they
learned that it carried a risk of causing bladder cancer.
30      PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

Further, Plaintiffs allege that those survey results are
confirmed by their allegation that sales of Actos decreased
approximately 80% once the FDA issued its official warning
that Actos may be linked to bladder cancer in patients who
use it over a prolonged period of time. Taking those
allegations as true, as we must, the question whether
prescribing physicians would not have been influenced by
Defendants’ alleged fraudulent omission is less concerning
in this case than it was to the Second and Seventh Circuits.

    Moreover, the Seventh Circuit’s distinction that TPPs’
injuries are too far removed from the drug manufacturer’s
fraudulent scheme to satisfy the RICO proximate cause
requirement because they are not “the sole injured parties”
and because individual patients’ “health and financial costs
come first in line temporally” misses the mark. Sidney
Hillman, 

. The Supreme Court has never
made a distinction about temporal proximity of the plaintiffs
to the damages caused to others when evaluating whether a
plaintiff has adequately alleged that the defendant
proximately caused the plaintiff’s damages under RICO.
Additionally, the fact that individual patients and TPPs both
suffered economic injuries from a drug manufacturer’s
fraudulent scheme does not mean that one group of plaintiffs
should be favored to recover over the other, so long as they
both suffered the same economic injuries from the drug
manufacturer’s same misconduct. Finally, the Seventh
Circuit’s comment that prescribing physicians may suffer
indirect loss does not attenuate the chain of causation so far
as to break it. See 

 Even if prescribing physicians suffer
an indirect loss such as reputational harm for prescribing an
ineffective or unsafe drug, they are not out of pocket for the
price of the drug and thus do not suffer the same economic
loss as do individual patients and TPPs. For these reasons,
we agree with the First and Third Circuits that Plaintiffs’
         PAT DIST. COUNCIL 82 V. TAKEDA PHARM.                 31

damages are not too far removed from Defendants’ alleged
omissions and misrepresentations to satisfy RICO’s
proximate cause requirement.

    3. Reliance

    As a threshold matter, any argument that Patients have
not alleged that they relied on Defendants’
misrepresentations and omissions lacks merit. Each patient
alleged that had he “known that Actos increased the risk of
causing bladder cancer, he would never have purchased and
ingested the drug.” Additionally, Patients alleged that they
“relied on Defendants’ . . . misrepresentations of Actos’[s]
safety in purchasing the drug.” These statements are
sufficient to allege that Patients relied on Defendants’
misrepresentations.

    Next, the Supreme Court has explained that if there is a
direct relationship between a defendant’s wrongful conduct
and a plaintiff’s alleged injury, a RICO plaintiff who did not
directly rely on the defendant’s omission or
misrepresentation can still satisfy the requirement of
proximate causation of damages. Recall that in Bridge the
defendants’ misrepresentations that they complied with the
county’s “Single, Simultaneous Bidder Rule” were made to
the tax lien selling county, not to the plaintiff tax lien buyers.

. But the Supreme Court held that it was
sufficient to establish proximate cause between the
defendants’ alleged wrongful conduct and the plaintiffs’
alleged injury that the county had relied on the defendants’
false attestations. See 

 at 658–59. What mattered most in
the RICO proximate causation inquiry was whether there
was a direct relationship between the alleged RICO violation
and the plaintiffs’ alleged injury. See 

 And there was. The
plaintiffs’ “alleged injury—the loss of valuable [tax] liens—
32      PAT DIST. COUNCIL 82 V. TAKEDA PHARM.

[was] the direct result of . . . [the defendants’] scheme to
obtain more liens for themselves.” 

.

    In so holding, the Supreme Court expressly rejected the
defendants’ argument that “[direct] reliance is an element of
a civil RICO claim predicated on mail fraud.” 553 U.S.
at 646–49. The Supreme Court explained that the civil
RICO statute has no reliance requirement on its face, and a
person may be injured “by reason of” another person’s fraud
even if the injured party did not rely on any
misrepresentation. 

 at 648–49. Nonetheless, the Supreme
Court noted that it “may well be that a RICO plaintiff
alleging injury by reason of a pattern of mail fraud must
establish at least [indirect] reliance in order to prove
causation.” 553 U.S. at 658–59. This is because, logically,
a plaintiff cannot even establish but-for causation if no one
relied on the defendant’s alleged misrepresentation. 

    Despite this precedent, Defendants argue that Painters
Fund failed to allege reliance on Defendants’ omissions of
Actos’s bladder cancer risk, since Painters Fund expressly
alleged that, as a TPP, it “relies on [its] members and their
prescribers to make informed decisions about which drugs
will be prescribed and, in turn, submitted to Plaintiff Painters
Fund for reimbursement.” This argument is also meritless.
Like in Bridge, where it was sufficient to satisfy RICO’s
proximate cause requirement that the county (a third party)
had relied on the defendants’ false attestations, here, it is
sufficient to satisfy RICO’s proximate cause requirement
that Painters Fund alleged that prescribing physicians (also
third parties, but not intervening causes) relied on
Defendants’ misrepresentations and omissions.

    Finally, Defendants argue that even if Painter’s Fund has
alleged indirect reliance, its general allegations of indirect
reliance—i.e., that prescribing physicians relied on
        PAT DIST. COUNCIL 82 V. TAKEDA PHARM.               33

Defendants’ misrepresentations and omissions in
prescribing Actos for their patients, which Painters Fund
then reimbursed—are insufficient, because Painters Fund
should have alleged with specificity exactly which
prescribing physicians were misled by Defendants’ alleged
misrepresentations. Remembering that this case is before us
at the pleadings stage and without the benefit of discovery,
we recognize that it would be difficult for Painters Fund to
determine with specificity exactly which doctors relied on
Defendants’ alleged misrepresentations. All that is required
of Painters Fund at this stage is to allege that someone in the
chain of causation relied on Defendants’ alleged
misrepresentations and omissions, which it has done here.
Thus, we hold that Plaintiffs have adequately alleged the
reliance necessary to satisfy RICO’s proximate cause
requirement.

                    III. CONCLUSION

    While we express no opinion on Plaintiffs’ chances of
success in this litigation as it proceeds, we hold that
Plaintiffs have satisfactorily alleged that Defendants
proximately caused their claimed damages at the pleadings
stage. We reverse the district court’s judgment dismissing
Plaintiffs’ RICO claims under Rule 12(b)(6) for lack of
RICO standing, and we remand to the district court for
further proceedings consistent with this disposition.