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In this action, plaintiffs, a consortium of counties, towns, and cities throughout New York, seek to hold defendant, McKinsey & Company, Inc., responsible for McKinsey's alleged role as a marketing consultant to nonparty Purdue Pharma, L.P. Plaintiffs allege that Purdue manufactured and marketed oxycontin, an opiate, with McKinsey's assistance. Plaintiffs claim that McKinsey, in collaboration with Purdue, increased sales of oxycontin by marketing it as safe and effective, notwithstanding a possible side effect of addiction. Plaintiffs posit that as a result of their citizens' and employees' becoming addicted to oxycontin, they expended increased costs for, inter alia, police, social services, and health insurance. Plaintiffs interposed claims for violations of General Business Law sections 349 and 350, violations of Social Services Law section 145-B, negligence, negligent misrepresentation, public nuisance, fraud (actual and constructive), "civil conspiracy/joint and several liability," "civil aiding and abetting," and unjust enrichment.

Defendant now moves to dismiss the complaint under CPLR 3211 (a) (5) and (7).

II. Analysis

A. Res judicata

CPLR 3211 (a) (5) allows for dismissal of an action when it is barred by, inter alia, res judicata. McKinsey argues that all of plaintiffs' claims are barred by res judicata based on a consent order and judgment in an action entitled The People of the State of New York, by Letitia James, Attorney General of the State of New York, against McKinsey & Company, Inc. United States (Supreme Court, Suffolk County, index no. 400001/2021) (the prior action).

Res judicata bars a claim when there was a prior disposition on the merits between the same parties, or those in privity with them, of a cause of action arising out of the same transaction or series of transactions as a cause of action that either was raised or could have been raised in the prior proceeding (Luis v Kocherlakota, 241 AD3d 1323, 1324; see e.g. Matter of Josey v Goord, 9 NY3d 386, 389-390). In order for res judicata to apply, the party to be barred must have been a party to the prior action or in privity with a party to the prior action (e.g. Aspen Specialty Ins. Co. v RLI Ins. Co., Inc., 194 AD3d 206, 213).

Insofar as plaintiffs are seeking punitive damages, such request is barred by res judicata. As the Appellate Division has stated, punitive damages are only available when the complained-of conduct is pervasive and grave misconduct affecting the public generally, and those who pursue such damages in the context of private actions should be viewed as acting in the State's behalf, as private attorneys general (Fabiano v Philip Morris Inc., 54 AD3d 146, 150). Unlike compensation actually suffered by a plaintiff, punitive damages claims are quintessentially and exclusively public in their ultimate orientation and purpose, and in that respect peculiarly appropriate for prosecution by the Attorney General in parens patriae (id.). The prior action, commenced by the State, arises out of the same acts or omissions as this action. And even though the State did not expressly seek punitive damages in its complaint, it could have done so (General Business Law section 349 [h]; see Abe v New York Univ., 169 AD3d 445, 449, lv dismissed 34 NY3d 1089; Robinson v 1528 White Plains Rd. Realty, Inc., 137 AD3d 426, 427; see generally O'Brien v City of Syracuse, 54 NY2d 353, 357). Thus, so much of the complaint as seeks punitive damages is dismissed under res judicata (Fabiano, 54 AD3d at 151-152).

Otherwise, though, plaintiffs were not parties to the prior action. Nor were they in privity with the State (People v Ingersoll, 58 NY 1; City of New York v Beretta U.S.A. Corp., 315 F Supp 2d 256, 263-274 [ED NY 2004] [thoroughly discussing the issue]). The State did not interpose the prior action on behalf of plaintiffs. Indeed, plaintiffs are statutorily empowered to sue on their own behalf (County Law section 51; General City Law section 20 [1]; Town Law section 65 [1]). Significantly, plaintiffs allege that they have suffered independent and distinct financial harm. McKinsey does not claim that the State is empowered to sue on behalf of local municipalities whenever local municipalities have suffered independent financial harm that was not suffered by the State. And, in fact, the Attorney General is not so empowered (see generally Executive Law section 63 et seq.). Such a rule would allow the non-aggrieved State to sue for, and collect on, every single instance when a county, town, city, or village is harmed by a breach of contract, for example, and prevent the aggrieved local municipality from receiving redress therefor. Simply put, McKinsey's argument fundamentally misunderstands the relationship between the State and its local municipalities, and totally ignores the statutory right of those local municipalities to independently sue when they have been wronged. The Court rejects it.

Thus, res judicata serves only to bar plaintiffs' claim for punitive damages; the remainder of plaintiffs' claims are unaffected by res judicata.

B. Failure to state a cause of action

CPLR 3211 (a) (7) allows a defendant to seek dismissal of the complaint for failure to state a cause of action. When reviewing a defendant's motion to dismiss a complaint for failure to state a cause of action, a court must give the complaint a liberal construction, accept the allegations as true, and provide plaintiffs with the benefit of every favorable inference (Nomura Home Equity Loan, Inc., Series 2006-FM2 v Nomura Credit & Capital, Inc., 30 NY3d 572, 582). However, the Court is not required to accept bare legal conclusions or facts that are utterly contradicted by documentary evidence (Chic Realty 712, LLC v GSA Holding Corp., 220 AD3d 914, 916; Browne v Lyft, Inc., 219 AD3d 445, 446). Whether a plaintiff can ultimately prevail is irrelevant (Cortlandt St. Recovery Corp. v Bonderman, 31 NY3d 30, 38; Grabowski v Orange County, 219 AD3d 1314, 1314). Although inartfully pleaded, a claim should not be dismissed when the facts stated are sufficient to make out a cause of action (Houtenbos v Fordune Assn., Inc., 200 AD3d 662, 664; see Lam v Weiss, 219 AD3d 713, 715).

Negligence

McKinsey argues that the negligence claim should be dismissed because it did not owe a duty to third parties such as plaintiffs. The complaint describes a contractual relationship between McKinsey and Purdue (and other opioid manufacturers). Generally, a contractual obligation, standing alone, will not give rise to tort liability in favor of a third party (H.B. v Town of Oyster Bay, 236 AD3d 620, 621-622; see e.g. Rivera v Sodexo, Inc., 233 AD3d 721, 722), as the duty to avoid harm to others is distinct from the contractual duty of performance (Landon v Kroll Lab. Specialists, Inc., 22 NY3d 1, 6, rearg denied 22 NY3d 1084).

However, a party that enters into a contract to render services may be said to have assumed a duty of care, and thus, be potentially liable in tort to third persons, where (1) the contracting party, in failing to exercise reasonable care in the performance of its duties, launches a force or instrument of harm; (2) the plaintiff detrimentally relies on the continued performance of the contracting party's duties; or (3) the contracting party has entirely displaced the other party's duty to maintain the premises safely (Martinelli v Dublin Deck, Inc., 198 AD3d 635, 637; see Espinal v Melville Snow Contrs., 98 NY2d 136, 140). A passive omission that did not create or exacerbate a dangerous condition is not a force or instrument of harm (Stiver v Good & Fair Carting & Moving, Inc., 9 NY3d 253, 257-258; Church v Callahan Indus., 99 NY2d 104, 112-113).

Here, broadly construed, plaintiffs sufficiently allege that McKinsey assumed a duty under the first Espinal exception, i.e., that McKinsey launched a force or instrument of harm. The complaint alleges, inter alia, that McKinsey (1) marketed and promoted oxycontin as less addictive and safer despite knowing that the contrary was true, and (2) pushed for physicians to prescribe higher doses of oxycontin despite knowing its unsafe and addictive qualities. Such acts arguably launched a force or instrument of harm by causing or contributing to the increased prescription of oxycontin and other opiates that McKinsey marketed as being safe despite knowing that they were not safe, which in turn caused or contributed to the opioid crisis that engulfed plaintiffs' communities.

Simply stated, plaintiffs have sufficiently pleaded that McKinsey owed a duty to them.

General Business Law sections 349 and 350

General Business Law section 349 states that deceptive acts or practices in the conduct of any business, trade, or commerce, or in the furnishing of any service in this state, are hereby declared unlawful. To state a claim under section 349, a plaintiff must prove three elements: first, that the challenged act or practice was consumer-oriented; second, that it was misleading in a material way; and third, that the plaintiff suffered injury as a result of the deceptive act (Stutman v Chemical Bank, 95 NY2d 24, 29; see Beneficial Homeowner Serv. Corp. v Williams, 113 AD3d 713, 714). Intent to defraud and justifiable reliance by the plaintiff are not elements under the statute (Small v Lorillard Tobacco Co., 94 NY2d 43, 55).

Although McKinsey argues that these claims should be dismissed due to a lack of reliance, reliance is not required under these claims (Koch v Acker, Merrall & Condit Co., 18 NY3d 940, 941). Also contrary to McKinsey's argument, plaintiffs here have sufficiently pleaded direct damages. In short, these claims are—at least at the pleading stage—viable.

III. Conclusion

It is critical to note that this Court's decision was made through the prism of a CPLR 3211 pre-answer motion. In this procedural context, the law mandates that the complaint be broadly construed, and with extreme deference to the facts as alleged therein. The Court expresses no opinion on whether plaintiffs' surviving claims will overcome a subsequent motion under CPLR 3212, 4401, or 4404.

This shall constitute the decision and order of the Court.

Hon. Joseph C. Pastoressa, J.S.C.