                                                      [DO NOT PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                       ________________________                  FILED
                                                        U.S. COURT OF APPEALS
                                No. 10-13196              ELEVENTH CIRCUIT
                                                            OCTOBER 24, 2011
                        ________________________               JOHN LEY
                                                                CLERK
                   D.C. Docket Nos. 1:08-md-01928-DMM,
                               9:08-cv-80873

SOUTHEAST LABORERS HEALTH AND
WELFARE FUND, on behalf of itself and all others
similarly situated,


                                                           Plaintiffs-Appellant,

                                   versus

BAYER CORPORATION, BAYER HEALTHCARE
PHARMACEUTICAL, INC., BAYER HEALTHCARE,
LLC, BAYER HEALTHCARE, A.G.,

                                                        Defendants-Appellees.

                        ________________________

                 Appeal from the United States District Court
                     for the Southern District of Florida
                       _________________________

                             (October 24, 2011)
Before EDMONDSON and MARCUS, Circuit Judges, and FAWSETT,* District
Judge.

FAWSETT, District Judge:

       Southeast Laborers Health and Welfare Fund (“Southeast”) is an employee

welfare benefit plan that reimburses plan members for covered medical expenses.

Southeast filed this purported class action on behalf of itself and all private, non-

governmental entities in the United States and its territories that purchased,

reimbursed, or paid all or part of the cost of the medication Trasylol for purposes

other than resale from January 1, 1999 to November 2007. Southeast alleges that

Appellees Bayer Corporation, Bayer Healthcare Pharmaceutical, Inc., Bayer

Healthcare, LLC, and Bayer Healthcare, A.G., (“Bayer”), the manufacturers of

Trasylol, either misrepresented or suppressed emerging information revealing serious

risks associated with the use of Trasylol. Southeast contends that Bayer’s conduct

violated, among other things, the civil RICO statute, 18 U.S.C. §§ 1962(c)(2),

1964(c); the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1 et seq.

(“NJCFA”); and (3) the implied warranty of merchantability under New Jersey law,

N.J. Stat. Ann. § 12A:2-314. On appeal, Southeast contests the district court’s

dismissal of its third amended complaint with prejudice.


       *
         Honorable Patricia C. Fawsett, United States District Judge for the Middle District of
Florida, sitting by designation.

                                                2
                                          I.

      The allegations of the complaint reflect that aprotinin -- the chemical name

for Trasylol -- was originally developed in the 1950’s to treat pancreatitis.

Scientists later discovered that the drug assists the body in preventing excessive

bleeding during surgery. In the early 1980’s, Bayer began researching aprotinin.

By the late-1990’s, Bayer had received various Food and Drug Administration

(FDA) approvals for the use of aprotinin under the trade name Trasylol to reduce

perioperative blood loss and the need for blood transfusions in patients

undergoing Coronary Artery Bypass Graft (“CABG”) surgeries. From 1993

through 2007, Trasylol was routinely administered to patients undergoing CABG

surgery. Trasylol costs in excess of $1,000.00 per dose, and multiple doses are

often required during the course of one CABG surgery. Other medications used to

manage blood loss during surgery, including Amicar (aminocaproic acid) and

Cyklokapron or TA (tranexamic acid), cost less than $50.00 per dose.

      In February of 2006 the FDA released a public health advisory relating to

Trasylol and set an advisory committee meeting for September of 2006. The

advisory committee concluded in September 2006 that there was not enough

evidence to recommend any change to the safety labeling of Trasylol. The FDA

did release a second public health advisory about Trasylol that month, however.

                                          3
In September of 2007 an expert advisory panel for the FDA recommended that

Bayer be allowed to continue selling Trasylol but cautioned that Trasylol should

only be used in patients at high risk of excessive bleeding during surgery.

However, soon afterward, in November of 2007, the FDA concluded that it could

not identify a specific patient population for whom the benefits of using Trasylol

outweighed the health risks associated with its use. At the same time, Bayer

voluntarily suspended its Trasylol marketing campaign. In May of 2008 Bayer

notified the FDA of its intent to remove all remaining supplies of Trasylol from

hospital pharmacies and warehouses.

      Southeast alleges that throughout the Trasylol marketing campaign, Bayer

engaged numerous doctors, referred to as “Key Opinion Leaders,” to aggressively

market Trasylol to the medical community and employed a fraudulent marketing

scheme to mislead decision makers into believing that Trasylol’s safety and

efficacy profile justified its price of over $1,000.00 per dose. For example,

between 1998 and 2007, the Trasylol label stated, “Data pooled from all patients

undergoing CABG surgery in U.S. placebo-controlled trials showed no

significantly or clinically significant increase in the incidence of postoperative

renal dysfunction in patients treated with Trasylol.” From 2002 to 2007, a

physician’s brochure from Bayer stated, “Trasyslol is generally well tolerated;

                                          4
graft potency, MI, renal or hepatic dysfunction, and mortality similar to placebo.”

And a “key message” in Bayer’s sell-sheet distributed to hospitals and doctors as

recently as 2004 stated in bold letters that in CABG surgery, “Trasylol had no

adverse effect on renal function.”

      The complaint alleges that Bayer knew these statements were false or

misleading. The allegations relating to Bayer’s knowledge include, among other

things: (1) animal studies demonstrating severe kidney damage associated with the

use of aprotinin prior to Trasylol’s approval; (2) a 1992 study revealing renal

dysfunction in 13 out of 20 patients treated with aprotinin; (3) evidence indicating

that Bayer routinely received reports of adverse incidents associated with the use

of Trasylol; (4) Bayer’s refusal to sponsor or support studies seeking to identify

the cause and frequency of renal problems associated with Trasylol; and (5) two

independent studies completed in 2006 revealing a relationship between the use of

Trasylol and increased risks of renal damage and other serious adverse reactions.

      Southeast filed its original complaint in the United States District Court for

the Middle District of Tennessee. The action was later transferred to the United

States District Court for the Southern District of Florida as part of multi-district

litigation proceedings involving Trasylol. There, Bayer filed a motion to dismiss

Southeast’s first amended complaint, which the district court granted without

                                           5
prejudice after determining that the complaint failed to allege the requisite

proximate causation for both the civil RICO and NJCFA claims. In response,

Southeast filed a second amended complaint adding the breach of implied

warranty claim. Upon motion from Bayer, the district court dismissed Southeast’s

second amended complaint, finding that Southeast failed to allege proximate

causation under the relevant standards for the civil RICO, NJCFA, and implied

warranty claims. A third amended complaint was then filed and was dismissed

with prejudice by the court on Bayer’s third motion to dismiss. Judgment was

entered for Bayer on June 10, 2010. On appeal, Southeast challenges the dismissal

of its civil RICO, NJCFA, and implied warranty claims. For the reasons set forth

below, we affirm.

                                         II.

      “‘We review de novo the district court’s grant of a motion to dismiss under

Rule 12(b)(6) for failure to state a claim, accepting the allegations in the complaint

as true and construing them in the light most favorable to the plaintiff.’” Am. Dental

Ass’n v. Cigna Corp., 605 F.3d 1283, 1288 (11th Cir. 2010) (quoting Mills v.

Foremost Ins. Co., 511 F.3d 1300, 1303 (11th Cir. 2008)). “In assessing the

sufficiency of the complaint’s allegations, we are bound to apply the pleading

standard articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and

                                          6
Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009).” Ironworkers Local Union 68 v.

AstraZeneca Pharm. LP, 634 F.3d 1352, 1359 (11th Cir. 2011). Accordingly, “a

complaint must now contain sufficient factual matter, accepted as true, to ‘state a

claim to relief that is plausible on its face.’” Am. Dental, 605 F.3d at 1289 (quoting

Twombly, 550 U.S. at 570).

                                       III.
                        A. Dismissal of the NJCFA Claim

      The district court dismissed Southeast’s NJCFA claim, finding that Southeast

had not adequately pled a causal connection between Bayer’s alleged fraudulent

conduct and Southeast’s ascertainable loss. On appeal, Southeast contends that the

complaint alleges a clear causal link between its loss and Bayer’s deceptive conduct --

that Southeast would not have paid for Trasylol at all, regardless of price, if Bayer

had not suppressed the truth about this medication. Southeast additionally argues that

the district court improperly characterized this allegation of a direct causal link as a

fraud on the market theory. In response, Bayer maintains that Southeast failed to

adequately plead a causal nexus because the complaint is devoid of allegations

relating to how or why Southeast made the decision to pay for Trasylol and because

Southeast’s alternative theories of causation amount to nothing more than a fraud on

the market theory.



                                           7
      The NJCFA prohibits “[t]he act, use or employment by any person of any

unconscionable commercial practice, deception, fraud, false pretense, false promise,

misrepresentation, or the knowing, concealment, suppression, or omission of any

material fact with intent that others rely upon such concealment, suppression or

omission, in connection with the sale or advertisement of any merchandise.” N.J.

Stat. Ann. § 56:8-2. To state a claim under the NJCFA, “a plaintiff must allege each

of three elements: (1) unlawful conduct by the defendants; (2) an ascertainable loss

on the part of the plaintiff; and (3) a causal relationship between the defendants’

unlawful conduct and the plaintiff’s ascertainable loss.” N.J. Citizen Action v.

Schering-Plough Corp., 842 A.2d 174, 176 (N.J. Super. Ct. App. Div. 2003) (citing

Cox v. Sears Roebuck & Co., 647 A.2d 454 (N.J. 1994)). Unlike claims for common

law fraud, the NJCFA “does not require proof that a consumer has actually relied on

a prohibited act in order to recover.” Int’l Union of Operating Eng’rs Local No. 68

Welfare Fund v. Merck & Co., Inc. (Merck II), 929 A.2d 1076, 1087 (N.J. 2007). In

lieu of this traditional reliance element, a NJCFA plaintiff must demonstrate that its

ascertainable loss is “attributable to conduct made unlawful by the [NJCFA].”

Thiedemann v. Mercedes-Benz USA, LLC, 872 A.2d 783, 791 (N.J. 2005) (citation

omitted).

      In general, the causal nexus between a plaintiff’s ascertainable loss and the

                                          8
unlawful conduct of a defendant may not be presumed in NJCFA claims. Weinberg

v. Sprint Corp., 801 A.2d 281, 291 (N.J. 2002). Instead, “a private plaintiff must

show that he or she suffered an ‘ascertainable loss . . . as a result’ of the unlawful

conduct.” Meshinsky v. Nichols Yacht Sales, Inc., 541 A.2d 1063, 1067 (N.J. 1988)

(citations omitted). In other fraud actions, however, elements similar to ascertainable

loss and causal nexus may be presumed in certain circumstances. For example, the

Supreme Court has adopted a presumption of reliance in the securities fraud context

where the defendant disseminates a fraud to an efficient capital market. See

Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 159 (2008) (citing

Basic Inc. v. Levinson, 485 U.S. 224, 247 (1988)). This presumption of reliance,

referred to as the “fraud on the market theory,” has been described as follows:

             The fraud on the market theory is based on the hypothesis that, in
      an open and developed securities market, the price of a company’s stock
      is determined by the available material information regarding the
      company and its business. . . . Misleading statements will therefore
      defraud purchasers of stock even if the purchasers do not directly rely
      on the misstatements. . . . The causal connection between the
      defendants’ fraud and the plaintiffs’ purchase of stock in such a case is
      no less significant than in a case of direct reliance on misrepresentations.

Basic, 485 U.S. at 241-42 (quotation omitted). In this manner, evidence of a fraud

disseminated to an open market creates a rebuttable presumption of reliance in the

securities fraud context. Id. at 247.



                                           9
      In Merck II, the New Jersey Supreme Court addressed the propriety in NJCFA

claims of using a fraud on the market theory to demonstrate ascertainable loss and

proof of a causal nexus between the defendant’s acts and the claimed damages,

stating:

              Fraud on the market is essentially a creature of federal securities
      litigation. In that context, plaintiffs who purchased securities are
      permitted to demonstrate that they were damaged simply because
      defendant engaged in behavior otherwise prohibited and there was a
      change in price. The theory therefore presumes reliance.

             We have rejected the fraud on the market theory as being
      inappropriate in any context other than federal securities fraud litigation.
      Therefore, to the extent that plaintiff seeks to prove only that the price
      charged for Vioxx was higher than it should have been as a result of
      defendant’s fraudulent marketing campaign, and seeks thereby to be
      relieved of the usual requirements that plaintiff prove an ascertainable
      loss, the theory must fail.

Merck II, 929 A.2d at 1088 (internal citations omitted). The N.J. Citizen Action court

also rejected a fraud on the market theory advanced by the plaintiffs in that case --

that the defendants’ misleading advertising inflated the price the plaintiffs paid for

their products. 842 A.2d at 178. The court expressed similar concern that allowing

a fraud on the market theory to satisfy the mandatory elements of ascertainable loss

and causal nexus “would virtually eliminate the requirement that there be a

connection between the misdeed complained of and the loss suffered. Adopting [a

fraud on the market] theory would therefore fundamentally alter the concept of

                                          10
causation in the [NJCFA] context.” 842 A.2d at 178. Thus, a fraud on the market

theory is insufficient to establish either ascertainable loss or proximate causation in

NJCFA claims.

       In the present case, the district court dismissed Southeast’s NJCFA claim,

finding that Southeast failed to allege “a premise of proximate causation that is

distinguishable from one that relies on a fraud-on-the-market analysis.” Specifically,

the district court determined that “[t]here is no substantive difference between the

question of whether [Southeast] would have paid for Trasylol at all instead of a

lower-priced alternative versus whether Plaintiff paid too much for Trasylol because

of the actual value of the drug.”

       Southeast, conceding that a fraud on the market theory may not be used to

establish ascertainable loss or causation, argues that the district court

mischaracterized its allegations by failing to recognize the distinction between paying

too much for a drug and not paying for a drug at all.1 Southeast argues that in Merck


       1
          The Supreme Court has foreclosed Southeast from asserting a “fraud-on-the-FDA”
theory of causation -- that is, that Southeast relied on FDA’s approval of Trasylol, which itself
was the product of fraud. See Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 348
(2001) (finding state law “fraud on the FDA” claims to be preempted by federal law). Southeast
has also disclaimed a chain of causation that runs through the decisions of individual doctors,
alleging in its second and third amended complaints that “physicians’ decisions to prescribe
Trasylol were completely separate and distinct from the decision of [Southeast] and Class
Members to pay for Trasylol. . . . Irrespective of the physician’s decision to prescribe Trasylol, an
alternative drug or no drug at all, [Southeast] and Class Members had an independent choice
whether or not to pay for Trasylol.”

                                                 11
II, the New Jersey Supreme Court tacitly endorsed a theory of causation for NJCFA

claims whereby a third-party payor is permitted to state a causal nexus between the

alleged fraudulent conduct and the payor’s ascertainable loss that is distinct from a

fraud on the market theory, by simply asserting that absent the allegedly fraudulent

conduct, a medication would not have been on the market.

      In International Union of Operating Engineers Local No. 68 Welfare Fund v.

Merck & Co., Inc. (Merck I), 894 A.2d 1136 (N.J. Super. Ct. App. Div. 2006), rev’d,

929 A.2d 1076 (N.J. 2007), the New Jersey appellate court certified a class of third-

party payors who had paid for the drug Vioxx. 894 A.2d at 1153. The Merck I court

found that the payors could establish a sufficient nexus between the alleged fraud and

the ascertainable loss for purposes of a NJCFA claim by demonstrating, via expert

proof, either that Merck’s scheme “allowed the company to achieve more favorable

placement on the formularies than it otherwise might have,” or “that absent Merck’s

misconduct, Vioxx would not have been on the market at all.” Id. at 1145.

      In Merck II, the New Jersey Supreme Court reversed the appellate court’s class

certification, finding that the fraud on the market theory is “inappropriate in any

context other than federal securities fraud litigation,” and “[t]herefore, to the extent

that plaintiff seeks to prove only that the price charged for Vioxx was higher than it

should have been as a result of defendant’s fraudulent marketing campaign, and seeks

                                          12
thereby to be relieved of the usual requirements that plaintiff prove an ascertainable

loss, the theory must fail.” Merck II, 929 A.2d at 1088 (citations omitted).

      However, the Merck II court did not specifically address the appellate court’s

statement that a causal nexus between the alleged fraud and the ascertainable loss

could be established by demonstrating “that absent Merck’s misconduct, Vioxx would

not have been on the market at all.” Merck I, 894 A.2d at 1145. In the instant appeal,

Southeast argues that by failing to address the lower court’s statement, the Merck II

court tacitly endorsed this theory of causation. We disagree.

      A theory of causation relying solely on an allegation that the medication in

question would not have been on the market absent the alleged fraudulent conduct is

no more than a state law “fraud on the FDA” theory, a theory that has been

specifically rejected by the Supreme Court. Buckman, 531 U.S. at 348. In Buckman,

plaintiffs sought damages under state tort law, arguing that absent defendant’s

fraudulent representations, the FDA would not have approved the orthopedic bone

screws and the plaintiffs would not have been injured by these devices. Id. at 343-44.

The Court dismissed plaintiffs’ state law “fraud on the FDA” claims, concluding that

such claims are in “conflict with, and . . . therefore impliedly pre-empted by, federal

law.” Id. at 348 (footnote omitted). The conflict was found to arise “from the fact

that the federal statutory scheme amply empowers the FDA to punish and deter fraud

                                          13
against the [FDA], and that this authority is used by the [FDA] to achieve a somewhat

delicate balance of statutory objectives. The balance sought by the [FDA] can be

skewed by allowing fraud-on-the-FDA claims under state tort law.” Id. Accordingly,

the Merck II court could not have implicitly approved of a state law “fraud on the

FDA” theory of causation for NJCFA claims whereby a third-party payor is permitted

to state a causal nexus between the alleged fraudulent conduct and the payor’s

ascertainable loss by simply asserting that absent the allegedly fraudulent conduct,

the FDA would not have approved the medication to be on the market.

      Southeast additionally argues that the complaint sets forth a second, direct

chain of causation that is also distinct from a fraud on the market theory, contending

that (1) the plan documentation stating that Southeast would only pay for “medically

necessary” expenses and (2) the FDA’s pronouncement that it could not identify any

specific patient population for whom the benefits of using Trasylol outweigh the

safety risks, establish a causal nexus between Bayer’s alleged fraudulent conduct and

Southeast’s decision to pay for Trasylol. Such a theory of causation, supported by

factual allegations connecting the alleged fraud to the implementation of the plan

documentation, may be sufficient to allege a causal nexus in a hypothetical NJCFA

claim. In the present case, however, the complaint fails to provide any factual

allegations connecting the FDA’s pronouncement to Southeast’s determination of

                                          14
medical necessity as a precondition to its payment. Even if Trasylol was in fact

medically unnecessary and contraindicated for all uses, Southeast alleges no facts

indicating how it would have independently evaluated Trasylol’s medical

appropriateness, aside from relying on the intermediaries of prescribing physicians,

the FDA, or the market. Reliance on the first of these intermediaries Southeast itself

has disclaimed, while reliance on the second and third of these intermediaries is

precluded by Buckman and Merck II, respectively. Thus, Southeast’s supposedly

“direct chain of causation” is unsupported by factual allegations. On the facts

alleged, the only causal nexus between the revelation of Trasylol’s true risk profile

and Southest’s determination not to pay for Trasylol is merely a repackaged form of

indirect causation -- relying either on the FDA’s approval decisions for Trasylol or

a market capable of efficiently digesting the truth and relaying it to Southeast in the

form of a market price. Contrary to Southeast’s suggestion, either theory of causation

is far from direct, and foreclosed by the relevant case law.

      Finally, Southeast raises a novel theory of causation, arguing that Bayer’s

alleged material omissions give rise to a presumption of causation. This argument

was not raised below, and on that ground we may decline to address its merits on

appeal. See Formby v. Farmers and Merchs. Bank, 904 F.2d 627, 634 (11th Cir.

1990) (“As a general rule, an appellate court will not consider a legal issue or theory

                                          15
raised for the first time on appeal.” (quotation omitted)). Southeast contends that it

raised this argument in a reply to Bayer’s motion to dismiss by stating that “payment

for a product by someone exposed to misleading materials ‘would be sufficient to

establish prima facie proof of causation,’” quoting Varacallo v. Mass. Mut. Life Ins.

Co. (Varacallo), 752 A.2d 807, 817 (N.J. Super. Ct. App. Div. 2000). However, this

argument was made in the context of explaining that a NJCFA claim requires proof

of a causal nexus, not actual reliance. At no point did Southeast reference a

presumption of causation arising from an allegation of an omission or otherwise

acknowledge the discussion of this presumption in Varacallo.2 Accordingly, the

argument is waived. See Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr

S.A., 377 F.3d 1164, 1169 (11th Cir. 2004) (finding an argument waived where

nothing in the party’s brief to the district court “could have possibly alerted the

district judge to the argument [made on appeal]”).

       Moreover, even if this argument had been raised below, it would have been to

no avail. Southeast primarily depends on Varacallo to support its argument that

Bayer’s alleged material omissions give rise to a presumption of causation. Such

       2
         Furthermore, pages 813 and 814 of the Varacallo opinion, cited in Southeast’s response
to the motion to dismiss, discuss the proposition that common law fraud requires proof of
reliance while NJCFA claims only require proof of a causal nexus between the concealment of
the material fact and the loss. Varacallo, 752 A.2d at 813-14. In contrast, pages 817 and 818 of
the Varacallo opinion, cited in Southeast’s reply brief, specifically discuss the presumption of
causation arising from an allegation of an omission. Id. at 817-18.

                                               16
dependence is ill-founded. The Varacallo court confronted a situation unlike the

circumstances of the present case. There, the court addressed the following narrow

question: “For purposes of certifying a class, must the plaintiffs offer direct proof that

the entire class relied on defendant’s representation that omitted material facts, where

the plaintiffs have established that the defendant withheld these material facts for the

purpose of inducing the very action the plaintiffs pursued?” Varacallo, 752 A.2d at

817. In addition, Varacallo testified that he had read the alleged misstatements and

relied upon them in deciding to purchase the policies at issue. Id. at 811.

      In contrast in the present case, the question is not whether Southeast must offer

direct proof that the entire proposed class relied upon Bayer’s representations.

Instead, the question is whether Southeast itself can establish a causal nexus between

the alleged omission and its ascertainable loss. However, unlike the facts in

Varacallo, the third amended complaint in the instant case is devoid of allegations

that Southeast, or any other proposed class member, actually relied on Bayer’s

representations.     The allegations of Southeast’s complaint are therefore

distinguishable from Varacallo and do not raise a presumption of causation.

Accordingly, we affirm the district court’s dismissal of Southeast’s NJCFA claim.

                       B. Dismissal of the Civil RICO Claim

      The district court dismissed Southeast’s civil RICO claim after finding that

                                           17
Southeast failed to sufficiently allege a direct relationship between its payment for

Trasylol and Bayer’s alleged fraudulent concealment. On appeal, Southeast argues

that the causal chain is “simple, direct and uninterrupted.”

       The federal RICO laws provide civil and criminal liability for persons engaged

in a pattern of racketeering activity. See 18 U.S.C. §§ 1962-1964. To state a claim

for a RICO violation, a plaintiff must allege: “(1) a violation of section 1962; (2)

injury to business or property; and (3) that the violation caused the injury.” Avirgan

v. Hull, 932 F.2d 1572, 1577 (11th Cir. 1991) (citing O’Malley v. O’Neill, 887 F.2d

1557, 1561 (11th Cir. 1989)). In order to adequately plead the first element, a

violation of § 1962, a plaintiff must allege: “(1) conduct (2) of an enterprise (3)

through a pattern (4) of racketeering activity.”3 Williams v. Mohawk Indus., Inc., 465

F.3d 1277, 1282 (11th Cir. 2006) (quotation omitted).

       Civil RICO plaintiffs “must also satisfy the requirements of 18 U.S.C. §

1964(c).” Williams, 465 F.3d at 1282. Section 1964(c) provides that “[a]ny person

injured in his business or property by reason of a violation of section 1962 of this

chapter may sue therefor.” 18 U.S.C. § 1964(c) (emphasis added). To establish the

“by reason of” element of § 1964(c), a plaintiff must demonstrate that the defendant’s



       3
        The alleged racketeering activity here was mail and wire fraud. See 18 U.S.C. §
1961(1)(B).

                                              18
violation was not only the “but for” cause of the plaintiff’s injury but also its

proximate cause. Holmes v. Sec. Investor Protection Corp., 503 U.S. 258, 268

(1992); Williams, 465 F.3d at 1287.

      “When a court evaluates a RICO claim for proximate causation, the central

question it must ask is whether the alleged violation led directly to the plaintiff’s

injuries.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006). In Holmes,

the Supreme Court discussed three specific factors for courts to consider in evaluating

the directness between an alleged injury and the injurious conduct as follows:

      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.

503 U.S. at 269-70 (citations omitted).

      In the present case, the district court conducted a thorough analysis of

Southeast’s civil RICO allegations and found that the factors described in Holmes

weighed heavily against a finding of proximate causation. The first Holmes factor



                                          19
was found to be the most problematic to Southeast’s claims because, although

Southeast alleged that it had an independent choice of whether or not to pay for

Trasylol, Southeast failed to explain how or why it made the choice to pay for

Trasylol and how or why Bayer’s alleged concealment of the dangers of Trasylol led

Southeast to pay for Trasylol.

       On appeal, Southeast continues to assert that it would never have incurred the

expense of Trasylol if Bayer had been honest about Trasylol’s safety and efficacy,

arguing that, taken together, (1) the plan documentation stating that Southeast would

only pay for “medically necessary” expenses and (2) the FDA’s pronouncement that

it could not identify any specific patient population for whom the benefits of using

Trasylol outweighed the safety risks, establish a direct injury to Southeast. Yet,

despite being provided with several opportunities, Southeast failed to allege facts

plausibly demonstrating that Southeast would have independently determined4 that

Trasylol was not “medically necessary” if Bayer had disclosed the allegedly

suppressed material information. In the absence of such factual allegations, it cannot

reasonably be inferred that Bayer’s allegedly fraudulent conduct led directly to

Southeast’s decision to pay for Trasylol. Consequently, the complaint fails to meet



       4
       As with its NJCFA claim, Southeast may not rely on a fraud-on-the-market or fraud-on-
the-FDA theory of causation for its RICO claim.

                                             20
the direct relation requirement, and the district court properly dismissed Southeast’s

civil RICO claim.5

                    C. Dismissal of the Implied Warranty Claim

       Finally, Southeast challenges the district court’s dismissal of its implied

warranty claim under New Jersey law, disputing the district court’s conclusion that

Southeast had “not adequately pled that Trasylol’s defect proximately caused its

economic damages,” and had “not alleged that Trasylol was not fit for its intended

use in preventing perioperative bleeding.”

       Under New Jersey law, “a warranty that the goods shall be merchantable is

implied in a contract for their sale if the seller is a merchant with respect to goods of

that kind.”     N.J. Stat. Ann. § 12A:2-314(1).              In order for “[g]oods to be

merchantable,” they must be “fit for the ordinary purposes for which such goods are

used.” Id. § 12A:2-314(2). This “implied warranty of merchantability means that the

product is reasonably fit for the purpose intended; it does not imply absolute

perfection.” Jakubowski v. Minn. Mining & Mfg., 199 A.2d 826, 831 (N.J. 1964).

In order to establish an implied warranty claim, a plaintiff must prove “that the

product was not reasonably fit for the ordinary purposes for which it was sold and


       5
        The parties submitted supplemental briefs addressing this court’s recent decision in
Ironworkers Local Union 68 v. AstraZeneca Pharmaceuticals, LP, 634 F.3d 1352 (11th Cir.
2011). The holding in the present case is not inconsistent with the Ironworkers decision.

                                               21
such defect proximately caused injury to the ultimate consumer.” Hollinger v.

Shoppers Paradise of N.J., Inc., 340 A.2d 687, 692 (N.J. Super. Ct. Law Div. 1975)

(citations omitted).

      Southeast does not assert that Trasylol’s alleged defect physically harmed any

of its plan members. Instead, Southeast contends that the complaint states a claim for

breach of implied warranty under New Jersey law because a harmful medication is

per se unmerchantable. In support of this theory, Southeast relies primarily on Mones

v. Imperial Bottling Works, Inc., 185 A. 483 (N.J. 1936).

      In Mones, the court held that a magnesia solution that failed to comply with the

United States Pharmacopoeia requirements was unmerchantable because it was sold

to a business for purposes of resale and the business could not legally resell it. 185

A. at 483. On these facts, the New Jersey Supreme Court concluded that “[c]ertainly

a dealer who purchases for resale cannot be said to be without warranty if the goods

which he purchases cannot be resold without violating the law of this state.” Id.

Thus, Mones does not stand for the proposition that a drug is per se unmerchantable

because it is harmful, even where it does not cause harm to the plaintiff. Instead,

Mones stands for the familiar proposition that a breach of implied warranty claim is

properly asserted where a good is not reasonably fit for the ordinary purposes for

which it was sold. The remaining cases cited by Southeast similarly fail to support

                                         22
Southeast’s theory that a harmful medication is per se unmerchantable.

       In the present case, the complaint alleges that Trasylol was “not fit for the

ordinary purpose for which anti-fibrinolytic drugs are used.” Nonetheless, Southeast

does not allege that Trasylol failed to act as an anti-fibrinolytic or that it or any of its

members were physically harmed by Trasylol. Moreover, Southeast has failed to

identify any case law to support its theory that the potential of a drug to cause harmful

side effects, in the abstract, renders a drug per se unmerchantable, even as to plaintiffs

that did not suffer the side effects. Thus, the complaint does not allege that Trasylol

is unfit for the ordinary purpose for which it was sold, a requirement to state a claim

for breach of implied warranty under New Jersey law.

       In addition, Southeast has not alleged that Trasylol’s defect proximately caused

Southeast’s economic damages. To succeed on a breach of warranty claim, the

plaintiff’s injury must arise as a proximate result of the alleged defect of the product.

See Santor v. A & M Karagheusian, Inc., 207 A.2d 305, 313 (N.J. 1965) (requiring

product defect to “cause[] injury or damage” to support a breach of implied warranty

claim); Hollinger, 340 A.2d at 692 (to be liable for breach of warranty, the “defect

[must] proximately cause[] injury to the ultimate consumer”). Here, the alleged

product defect is that Trasylol created an undue risk of kidney failure and other bodily

harms. However, Southeast does not assert that Trasylol’s alleged defect physically

                                            23
harmed Southeast, nor does Southeast assert a derivative claim on behalf of any its

members that might have suffered physical injuries from ingesting Trasylol. Instead,

the economic harm for which Southeast seeks recovery is the excess money that it

paid for the high-priced Trasylol instead of the cheaper generic alternative drugs. But

this harm was not caused by the condition which rendered Trasylol unmerchantable,

namely, its unsafe condition.        Instead, it was allegedly caused by Bayer’s

misrepresentations and fraud. However, fraud is not relevant misconduct for

purposes of a breach of warranty claim. See Santor, 207 A.2d at 313 (“The liability

[for a product defect under tort or contract law] does not depend on . . . proof of legal

or equitable fraud.”). Thus, the alleged product defect underlying Southeast’s breach

of warranty claim did not cause Southeast’s asserted injury. Accordingly, Southeast’s

implied warranty claim was properly dismissed.

                                          IV.

      For the foregoing reasons, the district court’s judgment dismissing Southeast’s

third amended complaint is AFFIRMED.




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