Independence County, Arkansas v. Pfizer, Inc. ( 2009 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 08-1491
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Ashley County, Arkansas; Benton *
County, Arkansas; Cleburne *
County, Arkansas; Faulkner *
County, Arkansas, *
*
Plaintiffs, *
*
Independence County, Arkansas; *
Chicot County, Arkansas; Conway *
County, Arkansas; Cross County, *
Arkansas; Fulton County, *
Arkansas; Jackson County, *
Arkansas; Lawrence County, *
Arkansas; Izard County, Arkansas; *
Monroe County, Arkansas; Nevada * Appeal from the United States
County, Arkansas; Pulaski County, * District Court for the
Arkansas; Sevier County, Arkansas; * Eastern District of Arkansas.
Sharp County, Arkansas; Stone *
County, Arkansas; Woodruff *
County, Arkansas; Union County, * [PUBLISHED]
Arkansas, *
*
Plaintiff-Appellants, *
*
v. *
*
Pfizer, Inc.; PDK Labs, Inc.; *
Warner Lambert Company, LLC; *
Johnson & Johnson; Perrigo *
Company; John Does, 1 through 10, *
*
Defendant-Appellees. *
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Submitted: September 22, 2008
Filed: January 5, 2009
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Before RILEY, HANSEN, and MELLOY, Circuit Judges.
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HANSEN, Circuit Judge.
Twenty individual counties in Arkansas brought this civil suit against Pfizer,
Inc., PDK Labs, Inc., Warner Lambert Company, LLC, Johnson & Johnson, Perrigo
Company, and various John Does (collectively "Defendants"),1 each of whom
manufactures or distributes products containing ephedrine or pseudoephedrine. The
complaint sought compensation to recoup the costs expended by the counties in
dealing with the societal effects of the methamphetamine epidemic in Arkansas, with
liability premised on the use of the Defendants' products in the methamphetamine
manufacturing process. Sixteen of the counties (collectively "Counties") appeal the
district court's2 order granting the Defendants' motion for judgment on the pleadings
under Rule 12(c) of the Federal Rules of Civil Procedure, and we affirm.
1
The original complaint filed in Arkansas state court also named American
Novelties; Cliff McQuay, Cliff McQuay, Jr. and Ellen McQuay, d/b/a/ Cliff McQuay
Sales Company; and Jr. Food Mart of Arkansas, Inc. as defendants. These defendants
were severed from the case when it was removed to federal court, and they were
neither parties to the case in district court, nor are they parties to this appeal.
2
The Honorable William R. Wilson, United States District Judge for the Eastern
District of Arkansas.
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I.
Because we are reviewing a judgment granted on the pleadings, we view all the
facts pleaded by the Counties, the nonmovants, as true, and we make all reasonable
inferences in the Counties' favor. Poehl v. Countrywide Home Loans, Inc., 528 F.3d
1093, 1096 (8th Cir. 2008). Methamphetamine is a highly addictive, synthetic drug
that, according to the Counties, cannot be manufactured, or "cooked," without either
ephedrine or pseudoephedrine. In Arkansas, methamphetamine is manufactured
primarily in small toxic labs ("STLs") located in homes, tents, barns, or hotel rooms.
According to the Counties, Arkansas has one of the highest numbers of STLs in the
nation. The manufacturing process is dangerous, often resulting in explosions,
chemical burns, chemical spills, and toxic fumes. The Counties allege that they have
spent significant amounts of taxpayer dollars combating the manufacture of
methamphetamine, including law enforcement costs to locate, eliminate, and clean up
STLs where the methamphetamine is manufactured; prison and jail costs to house
illegal users, dealers, and manufacturers; addiction treatment costs for users and
addicts; costs to family service agencies for housing and treating children whose
parents are arrested for methamphetamine-related charges; and costs for treating the
physical side effects of methamphetamine use and exposure to its production.
The Defendants are manufacturers and distributors of over-the-counter cold and
allergy medications containing either ephedrine or pseudoephedrine. None of the
Defendants are retailers, nor do they sell the medications directly to the public. The
Counties allege that the Defendants marketed and sold their products in Arkansas
knowing that the products were being used illegally to manufacture
methamphetamine.3 The Counties allege that the Defendants knew that their products
3
In their briefs to this court, the Counties allege that the Defendants
intentionally targeted methamphetamine cooks by printing "pseudoephedrine" on the
outside packaging of their cold medicines. These allegations were not included in the
complaint, by which we are constrained in reviewing this dismissal on the pleadings.
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were being used illegally at least as early as 1986 when the federal Drug Enforcement
Administration (DEA) began pushing for controls over the sale of products containing
ephedrine or pseudoephedrine. During two different time periods, in 1995-1996 and
in 1998-1999, the DEA placed restrictions on the importation of bulk ephedrine and
tracked the sales of ephedrine and pseudoephedrine outside of "blister packs."
According to the Counties, methamphetamine use and abuse declined dramatically
during these time periods, but the Defendants allegedly fought to create loopholes in
the regulations to continue reaping large profits in the sale of their products. In time,
the Counties say, methamphetamine cooks learned how to exploit the loopholes, and
methamphetamine use rose again.
The Counties claim that the Defendants knew of measures they could have
voluntarily taken to reduce the availability of their products to methamphetamine
cooks but consciously chose not to, fighting regulatory efforts in order to continue
reaping large profits. The actions that the Defendants (who are manufacturers and
wholesalers) allegedly should have voluntarily taken included directing the retailers
to place the products behind the counter of retail stores; requiring the retailers to make
retail purchasers sign for products when purchased from the retailer; educating the
retailers and their employees about suspicious behavior by persons seeking to
purchase the products for illegal use; requiring the retailers to lock the products in
display cases; and requiring the retailers to limit the amount of product that could be
purchased at retail by an individual during a specified period of time. These measures
were eventually included in DEA regulations issued in 2005. The Counties also
alleged that two of the Defendants, Warner Lambert and Pfizer, developed effective
alternative cold medications that did not contain ephedrine or pseudoephedrine and
that could not be used to produce methamphetamine, but that neither of them brought
the alternative products to market.
In any event, the Counties do not dispute that the packaging complied with the federal
Food and Drug Administration regulations.
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The Counties assert that the Defendants knew they were selling far more than
the legitimate market for their products consumed as evidenced by the fact that the
revenues of one of the Defendants, Perrigo, declined rapidly from $182 million to $30
million once regulations were passed in 2005 limiting access to the Defendants'
products. The Counties also allege that the DEA sent letters to some of the
Defendants warning them that their products were being used to make
methamphetamine and that an executive from Pfizer admitted that the pharmaceutical
industry was responsible for a portion of the methamphetamine problem in the United
States. The Counties do not allege, however, that any of the Defendants violated any
federal or state regulation governing the manufacture, distribution, packaging, or sale
of their products. Nor do the Counties dispute that the sale of products containing
ephedrine and pseudoephedrine is heavily regulated by both state and federal
agencies.
The Counties sought damages under four different causes of action: common
law unjust enrichment; the Arkansas Deceptive and Unconscionable Trade Practices
Act (ADTPA), see Ark Code Ann. § 4-88-107; common law nuisance; and the
Arkansas crime victims civil liability statute, see Ark. Code Ann. § 16-118-107. The
District Court granted the Defendants' motion for judgment on the pleadings,4 and the
Counties appeal.
4
We reject the Counties' claim that the district court inappropriately applied the
summary judgment standard rather than the standard applicable to a judgment on the
pleadings. Although the one-page Judgment referred to the Defendants' Motion for
Summary Judgment, the 13-page Order correctly identified the motion as a Motion
for Judgment on the Pleadings. Upon a careful review of the Order, we are satisfied
that the district court properly limited its consideration to the facts alleged in the
pleadings and correctly applied the standard applicable to a Rule 12(c) motion.
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II.
The Counties filed their case in Arkansas state court, and the Defendants
removed it to federal court based on diversity of citizenship. 28 U.S.C. § 1332. We
therefore apply federal procedural rules, see Scenic Holding, LLC v. New Bd. of
Trustees of Tabernacle Missionary Baptist Church, Inc., 506 F.3d 656, 665 (8th Cir.
2007), but Arkansas substantive law, see Bores v. Domino's Pizza, LLC, 530 F.3d
671, 674 (8th Cir. 2008). The district court granted judgment on the pleadings under
Federal Rule of Civil Procedure 12(c), which required the court to "accept as true all
factual allegations set out in the complaint" and to "construe the complaint in the light
most favorable to the plaintiff[s], drawing all inferences in [their] favor." Wishnatsky
v. Rovner, 433 F.3d 608, 610 (8th Cir. 2006). "Judgment on the pleadings is
appropriate only when there is no dispute as to any material facts and the moving
party is entitled to judgment as a matter of law," id., the same standard used to address
a motion to dismiss for failure to state a claim under Rule 12(b)(6), see Westcott v.
City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). "Because this is a diversity case,
we interpret [Arkansas] law in determining whether the elements of the offenses have
been pled." Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d
1052, 1062 (8th Cir. 2005). We review the district court's dismissal de novo.
Wishnatsky, 433 F.3d at 610.
Our task in this diversity case is to apply Arkansas law and, where an issue has
not been decided by the Supreme Court of Arkansas, to predict how it would decide
the issue. See STL 300 N. 4th, LLC v. Value St. Louis Assocs., L.P., 540 F.3d 788,
792 (8th Cir. 2008). When state law is ambiguous or undeveloped, "we look to
'relevant state precedent, analogous decisions, considered dicta, and any other reliable
data' to determine how the Supreme Court of [Arkansas] would construe [Arkansas]
law." United Bank of Iowa v. Indep. Inputs (In re W. Iowa Limestone, Inc.), 538 F.3d
858, 866 (8th Cir. 2008) (quoting HOK Sport, Inc. v. FC Des Moines, L.C., 495 F.3d
927, 935 (8th Cir. 2007)). The Supreme Court of Arkansas has not addressed the
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issue of whether manufacturers of products containing pseudoephedrine should be
responsible for the societal costs associated with the methamphetamine epidemic
based on the use of their products in the manufacture of methamphetamine (nor has
any other jurisdiction that we could find), so we proceed to review the specific causes
of action under Arkansas law.
A. Unjust Enrichment
The Counties claim that the Defendants were unjustly enriched at the Counties'
expense when methamphetamine cooks purchased the Defendants' products for use
in the illegal manufacture of methamphetamine. Unjust enrichment is an equitable
doctrine that allows a party to recover for benefits conferred on another. It is
restitutionary in nature and focuses on the benefit received. See Dews v. Halliburton
Indus., Inc., 708 S.W.2d 67, 69 (Ark. 1986). It is not enough, however, to establish
a benefit received by another party. "There must also be some operative act, intent,
or situation to make the enrichment unjust and compensable." Id. Further, a party
"who is free from fault cannot be held to be unjustly enriched merely because [it] has
chosen to exercise a legal or contractual right." Varner v. Peterson Farms, 371 F.3d
1011, 1018 (8th Cir. 2004) (applying Arkansas law and citing Guaranty Nat'l Ins. Co.
v. Denver Roller, Inc., 854 S.W.2d 312, 317 (Ark. 1993)); see also Westside
Galvanizing Servs., Inc. v. Ga.-Pac. Corp., 921 F.2d 735, 740 (8th Cir. 1990)
(applying Arkansas law and holding that a contractor who exercised his legal right to
setoff was not unjustly enriched).
The Counties believe they have stated a claim for unjust enrichment by
establishing that the Defendants were enriched by selling their products, that the
enrichment was unjust because the sales allegedly violated the law and public policy
of Arkansas related to manufacturing methamphetamine, and that the Counties are
entitled to compensation related to services provided in dealing with the
methamphetamine epidemic. Unjust enrichment is based on an implied contract
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theory of recovery, however, and Arkansas courts "will only imply a promise to pay
for services where they were rendered in such circumstances as authorized the party
performing them to entertain a reasonable expectation of their payment by the party
beneficiary." Dews, 708 S.W.2d at 69. The Counties did not provide the services for
which they now seek compensation, i.e., law enforcement, inmate housing, social
services, and treatment, with the expectation that the Defendants–manufacturers and
wholesalers of products containing pseudoephedrine–would pay for those services.
In other words, the cold medicine manufacturers cannot be said to be the beneficiaries
of the services provided by the Counties. The circumstances connecting the sales of
cold medication to the provision of these government services are simply too
attenuated to give rise to an implied contract between the manufacturers and the
county providers to state a cause of action for unjust enrichment.
B. Nuisance and Statutory Claims–Proximate Cause
The remaining three causes of action asserted by the Counties include common
law nuisance, liability for violating the ADTPA, and liability under Arkansas's crime
victims civil liability statute. To state a cause of action for nuisance in Arkansas, the
"the nuisance must . . . be the natural and proximate cause of the injury." Taylor Bay
Protective Ass'n v. Adm'r, U.S. E.P.A., 884 F.2d 1073, 1077 (8th Cir. 1989) (internal
marks omitted) (applying Arkansas law). The ADTPA makes it unlawful to engage
in "any . . . unconscionable, false, or deceptive act or practice in business, commerce,
or trade," Ark. Code Ann. § 4-88-107(a)(10), and it grants a private cause of action
to "[a]ny person who suffers actual damage or injury as a result of an offense or
violation as defined in this chapter," id. § 4-88-113(f) (emphasis added). The crime
victim's civil liability statute provides a civil cause of action to "[a]ny person injured
or damaged by reason of conduct of another person that would constitute a felony
under Arkansas law." Id. § 16-118-107(a)(1) (emphasis added). By allowing for
recovery only when the injury is "a result of" an ADTPA violation, see § 4-88-113(f),
or "by reason of" another person's felonious actions, see § 16-118-107(a)(1), each of
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the Arkansas statutes at issue necessarily includes a proximate cause element, see
Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 456-57 (2006) (construing a statutory
element granting a civil cause of action to persons injured "by reason of" a RICO
violation as a proximate cause requirement). Thus, we turn our focus to the common
element of each of these causes of action–proximate cause.
In Arkansas, proximate cause is "defined as 'that which in a natural and
continuous sequence, unbroken by any efficient intervening cause, produced the
injury, and without which the result would not have occurred.'" City of Caddo Valley
v. George, 9 S.W.3d 481, 487 (Ark. 2000) (quoting Union Pac. R.R. v. Sharp, 952
S.W.2d 658, 662 (Ark. 1997)). Proximate cause encompasses two distinct aspects:
cause in fact and legal cause. See Chambers v. Stern, 64 S.W.3d 737, 744 (Ark.)
("[A] plaintiff must show causation in fact and legal causation."), cert. denied, 536
U.S. 940 (2002). Cause in fact addresses whether, as a matter of fact, an injury
followed from a particular action. Legal cause addresses the separate issue of how far
legal responsibility should extend for a party's actions. See W. Keeton, Prosser &
Keeton on Torts § 41, at 264 (5th ed. 1984) ("As a practical matter, legal
responsibility must be limited to those causes which are so closely connected with the
result and of such significance that the law is justified in imposing liability."). While
proximate cause is generally a fact issue to be decided by a jury, it becomes a question
of law for the court when reasonable minds could not differ. Wilson v. Evans, 679
S.W.2d 205, 206 (Ark. 1984) (reversing jury verdict where there was no causal
connection between two accidents occurring five months apart); cf. Young v. Bryco
Arms, 821 N.E.2d 1078, 1086 (Ill. 2004) ("[T]he lack of proximate cause may be
determined by the court as a matter of law where the facts alleged do not sufficiently
demonstrate both cause in fact and legal cause.").
Arkansas common law incorporates the doctrine of intervening acts, which
reflects the limits that society places on a defendant's liability for his actions. An
"'original act . . . is . . . eliminated as a proximate cause by an intervening cause [if]
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the latter is of itself sufficient to stand as the cause of the injury,'" and the intervening
act is "'totally independent'" of the original act. City of Caddo Valley, 9 S.W.3d at
487 (quoting Hill Constr. Co. v. Bragg, 725 S.W.2d 538, 540 (Ark. 1987)). An
intervening act will not relieve the original actor of liability if the injury is the natural
and probable consequence of the original act and the injury "might reasonably have
been foreseen as probable." Shannon v. Wilson, 947 S.W.2d 349, 356 (Ark. 1997).
Foreseeability is a critical aspect of the legal causation inquiry. See id.; Larson
Mach., Inc. v. Wallace, 600 S.W.2d 1, 11 (Ark. 1980) (reversing jury verdict against
machine manufacturer where dealer's act of removing safety shield from fertilizer
spreader was not foreseeable to the manufacturer, such that dealer's removal of shield
prior to selling spreader to farmer was an efficient intervening cause to preclude
imposing liability on the manufacturer for farmer's injury); cf. Young, 821 N.E.2d at
1086 ("Legal cause involves an assessment of foreseeability . . . "). Likewise, an
original action can be too remote or indirect to be considered the legal cause of a
subsequent injury. See State Farm Mut. Auto. Ins. Co. v. Pharr, 808 S.W.2d 769, 772
(Ark. 1991) (noting that an action can be too remote to be considered the proximate
cause of an injury); see also Lovell v. Brock, 952 S.W.2d 161, 166 (Ark. 1997)
(holding that the act of the individual hunter who accidentally shot a member of his
hunting group was the direct cause of death to the victim, breaking any causal chain
between other hunters' illegal use of dogs and the resulting shooting incident).
The original act alleged here is the Defendant manufacturers' sales of cold
medicine containing pseudoephedrine to retail establishments, with the knowledge
that methamphetamine cooks purchase the cold medicine (or obtain it illegally) from
the retailers and use it to manufacture methamphetamine, combined with the
Defendants' refusal to implement measures to limit access to their products for illegal
use. The intervening causes asserted by the Defendants include: the conduct of the
independent retailers in selling the products; the illegal conduct of methamphetamine
cooks purchasing the cold medicine along with numerous other items with the intent
to manufacture methamphetamine; the illegal conduct of cooking the items into
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methamphetamine; and the illegal conduct of distributing the methamphetamine to
others in Arkansas. The alleged injury is the cost to the Counties of providing
government services to deal with the methamphetamine epidemic in Arkansas:
expenditures related to law enforcement, inmate housing, treatment, and family
services. The question then is whether the intervening causes are the natural and
probable consequences of the Defendants' sales of cold medicine to retail stores and
whether the Counties' expenditures for government services to deal with the
methamphetamine epidemic "might reasonably have been foreseen [to the cold
medication manufacturers] as probable." Shannon, 947 S.W.2d at 356.
The Counties assert that the district court erred in dismissing the suit on the
pleadings, arguing that but for the Defendants' sale of cold medicine containing
pseudoephedrine, the cooks could not have made methamphetamine in such large
quantities, and the Counties would not have needed to provide additional government
services to deal with the methamphetamine-related problems. Although this line of
reasoning may arguably satisfy the cause in fact prong of proximate cause, it does not
address the separate issue of legal causation. Arkansas courts have dismissed actions
on the pleadings based on a lack of proximate cause where the facts fail to meet the
legal causation standard. In Hartsock v. Forsgren, Inc., 365 S.W.2d 117, 118-19
(Ark.1963), for example, the Supreme Court of Arkansas affirmed a demurrer for lack
of proximate cause where a boy was burned after his parents used gasoline in an
attempt to remove tar from his feet. The defendant had allowed tar to overflow onto
a playground, and the boy walked in it. As the boy's parents attempted to clean the
tar off his feet with gasoline in their backyard, another boy shot a cap gun, creating
a spark that ignited the gasoline and burned the boy. Although the boy would not
have been burned but for getting tar on his feet, the supreme court concluded that the
facts alleged in the complaint failed as a matter of law to establish legal causation as
against the defendant who was responsible for the tar. The court focused on the
intervening action of the parents in introducing the gasoline that caused the injury.
Id. at 119. Here, the Counties do not dispute the facts underlying the alleged
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intervening acts, only whether those acts are sufficient to supersede the Defendants'
actions as the proximate cause of the Counties' injuries.
We have located no published decisions from any jurisdiction addressing a
pharmaceutical manufacturer's civil liability for government services stemming from
the use of pseudoephedrine to manufacture methamphetamine where liability is
premised on the manufacturer's sale of products containing pseudoephedrine through
legal retail channels. The liability that the Counties attempt to impose on the
manufacturers in this case is analogous, however, to cases seeking to impose liability
on gun manufacturers for government services provided to address the hazards of
illegally possessed guns.
In one analogous gun case, the Third Circuit held that under Pennsylvania law,
a city could not maintain an action for public nuisance or negligence against a gun
manufacturer to recover for the city's costs in combating crime involving the illegal
use or possession of guns. See City of Philadelphia v. Beretta U.S.A. Corp., 277 F.3d
415, 426 (3d Cir. 2002). There, the City of Philadelphia brought suit against gun
manufacturers, alleging that the manufacturers' conduct in the marketing and
distribution of handguns allowed the guns to fall into the hands of criminals, creating
and contributing to their criminal use in Philadelphia. Id. at 419. The City sought
compensation for its claimed injuries, which included the costs associated with
preventing and responding to incidents of gun violence and crime. The Third Circuit
held that the City's negligence claim failed for a lack of proximate cause because the
injury to the City was too remote from the gun manufacturer's alleged conduct of
failing to adopt policies that would restrict the activities of the federally licensed
firearms dealers when the manufacturers had knowledge that some guns reached the
hands of prohibited persons. Id. at 423-25. Other jurisdictions have applied similar
reasoning. Where "the defendants' business practices merely create a condition that
makes the eventual harm possible," the "defendants' conduct cannot constitute a legal
cause of the alleged harm." Young, 821 N.E.2d at 1091 (affirming dismissal on the
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pleadings in a claim brought by victims of gun violence against gun manufacturers for
a lack of probable cause); see also District of Columbia v. Beretta, U.S.A., Corp., 872
A.2d 633, 650-51 (D.C.) (refusing to judicially adopt "a right of action for public
nuisance applied to the manufacture and sale of guns generally"), cert. denied, 546
U.S. 928 (2005).
The allegations in the Third Circuit case are nearly identical to the allegations
here–that the Defendant manufacturers failed to take steps to restrict access to the
products containing pseudoephedrine when they knew (an alleged fact we take as true
at the judgment on the pleadings stage) that the pseudoephedrine-containing products
were being purchased and used illegally to make methamphetamine. Critical to the
Third Circuit's analysis was the "long and tortuous" route the guns took from the
manufacturers, who complied with the law in selling the guns, to the streets of
Philadelphia. City of Philadelphia, 277 F.3d at 423. Additionally, the court noted the
lack of intent by the manufacturers to harm the citizens of Philadelphia, the derivative
nature of the City's injuries, and the speculative nature of the City's claimed injuries,
stemming from the difficulty in assessing how many incidents of gun violence could
have been avoided had the gun manufacturers taken the suggested precautions. Id. at
424-25. Important to the court's analysis was the fact that the gun manufacturers'
actions are regulated and that they shipped the guns to independent, licensed
distributors and dealers before the guns reached the illegal market. Id. at 424. Again,
the same is true here. The sale of products containing pseudoephedrine is–and was
at the time alleged in the complaint–highly regulated, and the Defendants sold their
products to legitimate independent retailers prior to the products reaching the hands
of the methamphetamine cooks.
We recognize that not all jurisdictions to address the liability of gun
manufacturers have taken the same approach as the Third Circuit of dismissing cases
at the pleading stage. See Camden County Bd. of Chosen Freeholders v. Beretta,
U.S.A. Corp., 273 F.3d 539, 540 (3d Cir. 2001) (noting that although "a majority of
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courts have rejected [tort claims against handgun manufacturers] as a matter of law,"
a few courts in factually distinguishable cases did not dismiss the claims outright);
James v. Arms Tech., Inc., 820 A.2d 27, 33-34 & nn.2-3 (N.J. Super. Ct. 2003)
(discussing approaches taken by various courts in similar cases). We are mindful that
we must apply the law of Arkansas and, where that law is not clear, apply the law as
we predict the Arkansas courts would apply it. The only word from the Arkansas
courts in this analogous gun situation comes from the Supreme Court of Arkansas's
rejection of attempts to hold a gun manufacturer liable for negligence based solely on
the ultimate use of the gun to harm another person where the manufacturer had no
control over how the retailer sold its product. See First Commercial Trust Co. v.
Lorcin Eng'g, Inc., 900 S.W.2d 202, 205 (Ark. 1995); Franco v. Bunyard, 547 S.W.2d
91, 93 (Ark.), cert. denied, 434 U.S. 835 (1977); see also First Commercial Trust Co.,
N.A. v. Colt's Mfg. Co, 77 F.3d 1081, 1083 (8th Cir. 1996) (applying Lorcin and
affirming Rule 12(b)(6) dismissal of an Arkansas negligence claim against gun
manufacturer premised on manufacturer's failure to develop a safe-sales policy or train
retailers to avoid sales to "probable misusers" of handguns). In Lorcin, the estate of
a gun violence victim brought a negligence claim against the gun manufacturer
premised on the manufacturer's promotion of its .380 handgun to a market it knew or
should have known included persons who would use the gun illegally and its
negligence in failing to provide its distributors with a safe-sales policy. The Lorcin
court concluded that the gun manufacturer owed no duty to the victim of a gun
shooting because no special relationship existed upon which to base the duty,
specifically noting that the manufacturer had no control over its dealers. Lorcin, 900
S.W.2d at 204-05 (relying on District of Columbia and Illinois cases). The
independence of the retailer was also critical to the court's conclusion in Franco that
the manufacturer should not be held civilly responsible for injuries stemming from
actions outside the manufacturer's control, see 547 S.W.2d at 93, similar to the
reasoning applied by the Third Circuit in City of Philadelphia, 277 F.3d at 424.
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Although these cases rely on the lack of a duty owed to support a tort claim,
they are instructive on the issue of proximate cause. There is a "link between the
questions of the existence of a duty and the existence of legal cause" because "[b]oth
depend on an analysis of foreseeability." City of Chicago v. Beretta U.S.A. Corp.,
821 N.E.2d 1099, 1136 (Ill. 2004) (analyzing the relationship between duty and legal
cause in a gun case brought by the City of Chicago premised on the gun dealers'
alleged intent to market guns to facilitate their unlawful use). We also note that the
Supreme Court of Arkansas in Lorcin relied on cases from Illinois and the District of
Columbia, see Lorcin, 900 S.W.2d at 204 (discussing Delahanty v. Hinckley, 564
A.2d 758 (D.C. 1989); id. at 205 (discussing Riordan v. Int'l Armament Corp., 477
N.E.2d 1293 (Ill. Ct. App. 1985)), both jurisdictions that have rejected attempts to
hold gun manufacturers liable to victims of gun violence based on a lack of proximate
cause, see Beretta, U.S.A., Corp., 872 A.2d at 650-51; Young, 821 N.E.2d at 1091.
The criminal actions of the methamphetamine cooks and those further down the
illegal line of manufacturing and distributing methamphetamine are "sufficient to
stand as the cause of the injury" to the Counties in the form of increased government
services, and they are "totally independent" of the Defendants' actions of selling cold
medicine to retail stores, City of Caddo Valley, 9 S.W.3d at 487 (internal marks
omitted), even if the manufacturers knew that cooks purchased their products to use
in manufacturing methamphetamine, see City of Chicago, 821 N.E.2d at 1136-37.
Arkansas law will not support a conclusion that the "natural and probable
consequences," Shannon, 947 S.W.2d at 356, of manufacturers selling cold medicine
to independent retailers through highly regulated legal channels is that the cold
medicine will create a methamphetamine epidemic resulting in increased government
services, cf. City of Gary ex rel. King v. Smith & Wesson Corp., 801 N.E.2d 1222,
1244 (Ind. 2003) ("As a matter of law, in the absence of other facts, it is not a natural
and probable consequence of the lawful sale of a handgun that the weapon will be
used in a crime.").
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As in the analogous gun cases, "[t]he Count[ies] make[] no allegation that any
manufacturer violated any federal or state statute or regulation governing the
manufacture and distribution of [pseudoephedrine], and no direct link is alleged
between any manufacturer and any specific criminal act." Camden County Bd. of
Chosen Freeholders, 273 F.3d at 539 (affirming dismissal of nuisance claim for failure
to state a claim brought against gun manufacturers based on their alleged contribution
to the illegal gun market). They argue instead that the manufacturers failed to take
voluntary restrictive measures before those measures were required by regulation and
that they actively lobbied against implementation of the regulations. Even if liability
could be premised on the failure to take voluntary action, each of the suggested
actions are actions that required implementation at the independent retail sales level.
The Counties do not allege that the retailers were not independent of the
manufacturers or that the manufacturers had sufficient control over the retailers that
the manufacturers could require the retailers to implement the suggested measures.
Given the Arkansas courts' reliance on the independence of retailers in the gun
manufacturing setting, see Lorcin, 900 S.W.2d at 204; Franco, 547 S.W.2d at 93, we
predict that the Arkansas courts would not impose liability on these manufacturers
based on actions that could only be taken by the independent retailers, putting aside
the fact that the measures were not then required in the highly regulated industry.5
5
The allegation made in the briefs that the manufacturers marketed the products
to the methamphetamine cooks by placing the word "pseudoephedrine" prominently
on the packaging does not change the analysis. The products were still sold to
independent retailers, and these alleged marketing methods did not change the fact
that the methamphetamine cooks still had to obtain the products through the retailers.
See Lorcin, 900 S.W.2d at 203 (rejecting nuisance claim premised in part on
manufacturer's promotion of its handgun to a market it knew included persons likely
to misuse the handgun); Camden County Bd. of Chosen Freeholders, 273 F.3d at 539,
541 (rejecting a nuisance claim brought by a county against a gun manufacturer who
allegedly advertised handguns in such a way as to facilitate their use by criminals).
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Proximate cause is bottomed on public policy as a limitation on how far society
is willing to extend liability for a defendant's actions. As a federal court construing
state law, we are very reluctant to open Pandora's box to the avalanche of actions that
would follow if we found this case to state a cause of action under Arkansas law. We
could easily predict that the next lawsuit would be against farmers' cooperatives for
not telling their farmer customers to sufficiently safeguard their anhydrous ammonia
(another ingredient in illicit methamphetamine manufacture) tanks from theft by
methamphetamine cooks. And what of the liability of manufacturers in other
industries that, if stretched far enough, can be linked to other societal problems?
Proximate cause seems an appropriate avenue for limiting liability in this context, as
in the gun manufacturer context, particularly "where an effect may be a proliferation
of lawsuits not merely against these defendants but against other types of commercial
enterprises–manufacturers, say, of liquor, anti-depressants, SUVs, or violent video
games–in order to address a myriad of societal problems regardless of the distance
between the 'causes' of the 'problems' and their alleged consequences." Beretta,
U.S.A., Corp., 872 A.2d at 651 (internal marks omitted); see also City of Chicago, 821
N.E.2d at 1138 ("In the present case, the consequences of imposing a duty upon the
dealer defendants to prevent the creation of a public nuisance in the city of Chicago
by those intent on illegally possessing and using guns in the city are equally
far-reaching. The same concerns underlie our conclusion that it is inadvisable as a
matter of public policy to deem the dealer defendants' actions a legal cause of the
alleged nuisance.")
The Counties assert that this situation is different from the gun cases from other
jurisdictions based on two unique Arkansas statutes: the Drug Dealer Liability Act,
Ark. Code Ann. § 16-124-101 to § 16-124-112, and the crime victims civil liability
statute, id. § 16-118-107, which allegedly set this case apart from analogous cases
brought under common law theories of liability. Neither of these statutes convinces
us that the Arkansas courts would extend civil liability as a matter of public policy to
the pharmaceutical manufacturers in this case. The Drug Dealer Liability Act is
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premised on "damages caused by use of an illegal drug by an individual," § 16-124-
104(a), with the individual drug user being critical to the Act's provisions, see id. § 16-
124-104(a)(4) (granting a cause of action to a "governmental entity . . . that funds a
drug treatment program . . . for the individual drug user or that otherwise expended
money on behalf of the individual drug user" (emphasis added)); § 16-124-102(4)
(defining "individual drug user" as "the individual whose illegal drug use is the basis
for an action brought under this chapter"). The Counties' assertion that this Act
establishes a public policy holding manufacturers of products containing
pseudoephedrine liable for societal costs, as opposed to costs related to individual
drug users, is unavailing.
Arkansas's crime victims civil liability statute fares no better. That statute
provides a civil cause of action to "[a]ny person injured or damaged by reason of
conduct of another person that would constitute a felony under Arkansas law." Ark.
Code Ann. § 16-118-107(a)(1). The Counties claim that the Defendants' actions
constitute the felony of selling or distributing a product containing ephedrine or
pseudoephedrine "with reckless disregard as to how the product will be used." See
Ark. Code Ann. § 5-64-1102(b)(1)(B). Subsection (b) was added to § 5-64-1102 in
2001, see 2001 Ark. Acts, Act 1209, § 4, by the same Act in which the Arkansas
legislature added § 5-64-1103, see 2001 Ark. Acts, Act 1209, § 5, limiting retail sales
of products containing pseudoephedrine to no more than three packages. Thus, at the
same time that the Defendant manufacturers allegedly became subject to criminal
liability based on their reckless disregard for how their products were being used,
those same products could be sold by retailers in very limited quantities (one of the
measures the Counties asserted the Defendants should have taken voluntarily). The
Counties do not allege that the retailers to whom the Defendant manufacturers sold
their cold medications failed to comply with this statute, or any other statute or
regulation governing the sale of products containing pseudoephedrine. Given the
Arkansas legislature's focus on curtailing the availability of products from legitimate
retail sources, we cannot agree with the Counties that Arkansas courts would extend
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civil liability to manufacturers who sell their pseudoephedrine-containing products to
independent retailers, who in turn are limited in their sales of the products. In any
event, as previously discussed, the statutory civil cause of action includes an element
of proximate cause, which we have found lacking as a matter of law.
The Counties cite no case, federal or state, that recognizes a cause of action
available to a government entity to recover against pharmaceutical manufacturers for
the legal sale of products containing pseudoephedrine based on the subsequent use of
the product in the manufacture of methamphetamine. "[I]t is not the role of a federal
court to expand state law in ways not foreshadowed by state precedent," City of
Philadelphia, 277 F.3d at 421; see also Trimble v. Asarco, Inc., 232 F.3d 946, 963 (8th
Cir. 2000) (refusing to expand Nebraska law to recognize a cause of action previously
unrecognized by Nebraska courts), and our review of related Arkansas case law does
not foreshadow such an expansion. Because proximate cause is lacking, and because
it is a necessary element of each of the three remaining causes of action alleged by the
Counties, we need not address the remaining elements of the individual claims.
III.
Given the current state of the law in Arkansas, we affirm the district court's
judgment.
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