Mutual Medical of Ohio Inc. v. Braintree Laboratories Inc.
MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 7/12/2011. (nmf)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MEDICAL MUTUAL OF OHIO, INC.,
on behalf of itself and all others
) Civ. No.1 0-604-SLR
Jonathan L. Parshall, Esquire of Murphy & Landon, Wilmington, Delaware. Counsel for
Plaintiff. Of Counsel: Kendall S. Zylstra, Esquire of Faruqi & Faruqi, LLP; Kevin B.
Love, Esquire of Criden & Love P.A.; Mark M. Sandmann, Esquire of Gibson & Sharps
Frederick L. Cottrell, III, Esquire, Steven J. Fineman, Esquire and Elizabeth Rui He,
Esquire of Richards, Layton & Finger, P.A., Wilmington, Delaware. Counsel for
Plaintiff. Of Counsel: Michelle D. Miller, Esquire, Emily R. Schulman, Esquire, Cynthia
D. Vreeland, Esquire, Peter A. Spaeth, Esquire, David B. Bassett, Esquire and
Alexandra McTague, Esquire of Wilmer Cutler Pickering Hale and Dorr, LLP.
Dated: July 12, 2011
This is an antitrust action arising out of a patent infringement case filed on May
16,2003 by Braintree Laboratories, Inc. ("Braintree"), a pharmaceutical company selling
the constipation drug polyethylene glycol 3350 ("PEG") in the United States under the
brand name MiraLax®, against a generic drug manufacturer, Schwarz Pharma, Inc.
("Schwarz"), in which Braintree sought to preclude FDA approval for Schwarz's generic
PEG drug GlycoLax®. (Civ. No. 03-477-SLR (hereinafter, "the Braintree/Schwarz
litigation"» The Braintree/Schwarz litigation commenced when Braintree brought suit
pursuant to 35 U.S.C. § 271 (e)(2)(A)1 responsive to Schwarz's filing of an ANDA
containing a "Paragraph IV" certification2 claiming that the patent listed by Braintree in
the FDA's Orange Book3 as covering MiraLax®. U.S. Patent 5,710,183 ("the '183
patent" or the "Halow patent"), was invalid or not infringed by the manufacture, use, or
sale of GlycoLax®. That suit triggered the 30-month stay on the FDA's approval of
Schwarz's ANDA. See 21 U.S.C. § 3550)(5)(B)(iii). The Braintree/Schwarz litigation
was voluntarily dismissed by Braintree on June 3, 2004. Braintree waived any
remaining portion of the 30-month stay, and GlycoLax® entered the market shortly the
1"(2) It shall be an act of infringement to submit - (A) an application under
section 5050) of the Federal Food, Drug, and Cosmetic Act or described in section
505(b)(2) of such Act for a drug claimed in a patent or the use of which is claimed in a
2See 21 U.S.C. § 3550)(2)(A)(vii)(IV).
3The FDA publishes patent information on approved drug products in its
publication entitled "Approved Drug Products with Therapeutic Equivalence
Evaluations," commonly referred to as the "Orange Book," a register that provides
notice of patents covering name brand drugs.
FDA issued its approval on July 2, 2004. Medical Mutual of Ohio, Inc. ("MMOH") filed
the instant putative class action against Braintree on July 14, 2010, alleging that the
Braintree/Schwarz litigation was sham litigation designed to delay the FDA's approval of
GlycoLax® and to improperly maintain Braintree's monopoly power on MiraLax®'s.
(0.1. 1) In lieu of an answer, Braintree filed a motion to dismiss pursuant to Federal
Rule of Civil Procedure 12(b)(6). (0.1. 10) For the reasons that follow, Braintree's
motion is granted.
A. Procedural History
The Braintree/Schwarz litigation, with which the court presumes familiarity, was
filed in 2003 and concluded in July 2008. (Civ. No. 03-477) In short, the facts of that
case were as follows. Braintree discovered the '183 patent during a literature search
while its NDA was pending with the FDA. It corresponded with the owner and iterated
its position that the '183 patent was invalid as anticipated. Braintree succeeded in
acquiring an exclusive license to the '183 patent for $15,000, whereupon it listed the
'183 patent in the Orange Book (in 1999) and later sued Schwarz for infringement
based on Schwarz's ANDA. Braintree acquired the '183 patent outright (in 2001).
During litigation, the inventor of the '183 patent (Dr. Halow) was deposed for the first
time, during which he testified that the clinical trials for MiraLax® were not done under
confidentiality agreements. The Federal Circuit law at that time (in 2004) provided that
such trials could be used as § 102 anticipatory prior art.4 Braintree dismissed its suit on
4See Baxter Int'l, Inc. v. Cobe Labs., Inc., 88 F.3d 1054, 1058 (Fed. Cir. 1996);
compare Bernhardt, L.L.C. v. Col/ezione Europa USA, Inc., 386 F.3d 1371 (Fed. Cir.
May 27, 2004,5 granted Schwarz a free license, waived the rest of the 30-month stay,
and generic approval soon followed on June 2, 2004. Schwarz's generic PEG product,
GlycoLax®, hit the United States market on or about July 8,2004. (Civ. No. 03-477,
0.1. 262 at 1119)
Schwarz maintained its counterclaims of unfair competition, "tortious interference
with business advantage/opportunities," and actual or attempted monopolization of the
market for PEG laxatives in the United States in violation of the Sherman Act, 15 U.S.C.
§ 2. After a bench trial, the court found that Schwarz did not meet its high burden of
proof to demonstrate that the sham litigation exception to Noerr-Pennington immunity
applied. (Id. at 11386 Specifically, Braintree advanced a colorable claim construction
under which its claims would be valid. Although not entirely consistent with its
infringement position, the court determined that Braintree's position was not frivolous,
and entered judgment for Braintree. (/d.)
Thereafter, a class action litigation was filed by drug wholesalers (direct
purchaser plaintiffs, hereinafter "DPPs") on March 12, 2007.
(Civ. No. 07-142
(hereinafter the "direct purchaser litigation")) DPPs brought a claim for a violation of the
Sherman Act based on Braintree's improper maintenance of its monopoly on MiraLaX®
which, DPPs allege, resulted in artificially inflated prices on their PEG purchases. (Civ.
2004) (absence of confidentiality agreements not dispositive on issue of § 102(b) public
5(Civ. No. 03-477, 0.1. 61) The court granted Braintree's motion for voluntary
dismissal on June 3, 2004.
6Reported as Braintree Labs., Inc. v. Schwarz Pharma, Inc., 568 F. Supp. 2d 487
(D. Del. 2008).
No. 07-142, 0.1. 21 at ~ 104) In denying Braintree's motion to dismiss, the court found
that: (1) DPPs stated a claim for antitrust injury, which could properly be forged as an
"overall scheme" to forestall competition; (2) DPPs have alleged facts supporting their
claim for objective baselessness; (3) DPPs may make their own record, and succeed
where Schwarz did not; and (4) the prior holding has no estoppel effect, as it was
premised on Schwarz's failure to meet its high burden of proof, i.e., Braintree did not
obtain a judgment of non-baselessness. (ld., 0.1. 277) Following Braintree's
termination of DPPs as authorized wholesalers per its agreements with Group
Purchasing Organizations ("GPOs"), the court recently granted DPPs' motion for an
injunction pendente lite and ordered Braintree to restore DPPs as customers upon the
posting of a bond. (ld., 0.1. 145, 146)
Following the filing of the direct purchaser litigation in March 2007, a second
antitrust action was 'filed on April 11, 2007, this time by the Philadelphia Federation of
Teachers Health and Welfare ("PFTH&W") in the United States District Court for the
District of Massachusetts. (D. Mass. Civ. No. 07-10704) PFTH&W's putative class
action (hereinafter, the "PFTH&W litigation") was filed on behalf of indirect purchasers
of MiraLax® who, PFTH&W alleged, paid higher prices for MiraLax® than they would
have paid for generic PEG. The PFTH&W litigation was transferred to this court on
June 6,2007 and, after the court's decision in the Braintree/Schwarz litigation,
PFTH&W voluntarily dismissed the case on June 2,2009. (D. Del. Civ. No. 07-356, 0.1.
7Reported as Rochester Drug Co-Operative, Inc. v. Braintree Labs., 712 F. Supp.
2d 308 (D. Del. 2010).
B. The Current Suit
MMOH brings this class action on behalf of the following class of indirect
purchasers of MiraLax®:
All persons and entities in the United States and U.S. territories, who from
December 23, 2003, until the effects of defendant's anticompetitive conduct
cease (the "Class Period"), indirectly purchased, paid for and/or reimbursed for
lVIiraLax® and/or any generic version thereof for consumption by their members,
employees, insureds, participants or beneficiaries, and as to whom law or equity
affords a claim upon which relief can be granted. Excluded from the Class are
Defendant and its parents, employees, subsidiaries, and affiliates.
16) (emphasis added) Plaintiffs allege that, as a result of Braintree's
maintenance of the Braintree/Schwarz litigation, they were denied the benefits of
unrestrained competition in the PEG market, that is, they were denied the opportunity to
choose between MiraLax® and generic versions which would have been priced lower.
(ld. at ~~ 10-11)
The instant action was filed by MMOH on July 14, 2010, more than six years
after the Braintree/Schwarz litigation was dismissed and GlycoLax® was introduced for
sale, but within 60 days of this court's order denying Braintree's motion to dismiss the
direct purchaser litigation. MMOH alleges in its complaint that Braintree unlawfully
extended its monopoly power in the PEG market in violation of the antitrust laws of the
states of Alabama, Arizona, California, Iowa, Kansas, Michigan, Mississippi, Nevada,
New York, North Carolina, Tennessee, West Virginia, Wisconsin and the laws of the
District of Columbia. (0.1. 18 at ~~ 96-112) MMOH also brings claims under the state
consumer fraud and unjust enrichment laws of Arizona, Arkansas, California, Colorado,
8AII docket numbers hereinafter reference Civ. No.1 0-604, unless specifically
Connecticut, Florida, Georgia, Illinois, Kansas, Kentucky, Maryland, Michigan, Missouri,
Nevada, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South
Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and the laws of
the District of Columbia. (ld. at 1f1f 115-142)
In reviewing a motion filed under Federal Rule of Civil Procedure 12(b)(6), the
court must accept all factual allegations in a complaint as true and take them in the light
most favorable to plaintiff. See Erickson v. Pa rdus, 551 U.S. 89, 127 S.Ct. 2197, 2200
(2007); Christopher v. Harbury, 536 U.S. 403, 406 (2002). A complaint must contain "a
short and plain statement of the claim showing that the pleader is entitled to relief, in
order to give the defendant fair notice of what the ... claim is and the grounds upon
which it rests." Bell At!. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964 (2007)
(hereinafter, "Twombly') (interpreting Fed. R. Civ. P. 8(a)) (internal quotations omitted).
A complaint does not need detailed factual allegations; however, "a plaintiff's obligation
to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do."
Id. at 1964-65 (alteration in original) (citation omitted). The H[f]actual allegations must
be enough to raise a right to relief above the speculative level on the assumption that
all of the complaint's allegations are true." Id. at 1959.
A. Accrual of Claims
In order to address Braintree's claims that this suit is time-barred, the court must
first determine the accrual date for purpose of tolling the statute of limitations. MMOH
argues that the earliest its claims accrued was on June 3, 2004 - the date the court
granted Braintree's motion to dismiss its claims against Schwarz - because an
"antitrust claim related to baseless litigation can only be determined upon the
termination of the initial action." (D.1. 13 at 9, 12 (citing Chemi SpA v. Glaxo Smith Kline ,
356 F. Supp. 2d 495, 500 (E.D. Pa. 2005)) The court disagrees.
A sham litigation counterclaim is compulsory where it "generally involve[s] the
same factual issues as those involved in the patent infringement litigation between the
same parties." See Critical-Vac Filtration Corp. v. Minuteman In t 'I, Inc., 233 F.3d 697,
703 (2d Cir. 2000). Schwarz's sham litigation claim was logically connected to
Braintree's infringement action such that it was properly considered a compulsory
counterclaim.9 Fed. R. Civ. P. 13(a)(1 )(A); see also Jarrow Formulas, Inc. v. Int'l
Nutrution Co., 175 F. Supp. 2d 296, 308 (D. Conn. 2001) (citing Critical-Vac, 233 F.3d
at 703-04)). Although Rule 13(a) does not require a defendant to file as a compulsory
counterclaim a claim that has not yet accrued, see, gen., Allan Block Corp. v. Cty.
Materials Corp, 512 F.3d 912, 920 (7th Cir. 2008) (collecting cases), several courts
considering the issue have held that sham litigation claims accrue when the case is
filed. See AI George, Inc. v. Envirotech Corp., 939 F.2d 1271, 1275 (5th Cir. 1991);
P&M Services, Inc. v. Gubb, Civ. No. 07-12816, 2008 WL 4185903, *6 (E.D. Mich.
Sept. 8, 2008), aff'd, 372 Fed. Appx. 613 (6th Cir. 2010).
9Had Schwarz not pled sham litigation as a counterclaim in the original action,
the claim could not have been raised in a subsequent suit. See Critical-Vac, 233 F.3d
at 699 (citing Baker V. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n.1 (1974)).
The foregoing dispatches MMOH's argument that its sham litigation claims did
not accrue until July 31, 2008, when the court published its opinion concluding the
Braintree/Schwarz litigation. (0.1. 13 at 12) While there is one district court that has
adopted this view, it did so in distinguishable circumstances. See Chemi SpA, 356 F.
Supp. 2d at 500 (holding that antitrust claims accrued on the date of the court's opinion
that defendant procured the patent on its branded drug through fraudulent
representations to the PTO and that the patent was unenforceable). This court did not
find in favor of Schwarz on July 31, 2008; judgment instead was entered for Braintree
as the court found that Schwarz did not meet its high burden of proving objective
baselessness. Therefore, the July 31,2008 opinion did not provide any confirmation
regarding the merits of MIVIOH's potential claims against Braintree. 1o
To hold otherwise would ignore that a plethora of information evaluated by the
court in connection with the Braintree/Schwarz litigation - for example, the '183 patent
and its prosecution history - was publicly available prior to the court's 2008 opinion.
Indeed, MMOH does not specifically iterate what information was not available to it prior
to 2008. See Molecular Diagnostics Labs. v. Hoffman-La Roche Inc., 402 F. Supp. 2d
276, 284-85 (D. D.C. 2005) (where court's findings in 2004 mirrored those made in
1999, notice was deemed provided on the earlier date as "no remaining pieces of the
puzzle needed to be discovered"). Moreover, to the extent Braintree's (allegedly
inconsistent and objectively baseless) positions on the '183 patent were not
1°Braintree points out that the Chemi SpA court did not cite any judicial authority
for the proposition that "an antitrust claim based on baseless litigation requires proof
that the litigation was unsuccessful, which can only be determined upon the termination
of the initial action." Chem; SpA, 356 F. Supp. 2d at 500 (emphasis added).
ascertainable from public pleadings filed as early as 2003, they were exposed at trial
between January 29 and February 2,2007. 11
In view of the foregoing, the complained-of act vis a vis MMOH's sham ANDA
litigation claim generally would be the filing of the underlying suit against Schwarz by
Braintree on May 16, 2003. See In re Relafen Antitrust Litig., 286 F. Supp. 2d 56, 61
62 (D. Mass. 2003). There are two possible exceptions to the tolling of this accrual
date: (1) if Braintree committed a "continuing violation of the Sherman Act" inflicting
continuing and accumulating harm; or (2) if damages flowing from Braintree's alleged
anticompetitive conduct were unascertainable at the time Braintree engaged in such
conduct. Zenith Radio Corp., 401 U.S. at 338-39 (citations omitted). In a factually
analogous situation, the United States District Court for the District of Massachusetts
concluded that the act of merely "[c]ontinuing to litigate a sham law suit does not
constitute a 'continuing violation' of the antitrust laws." In re Relafen Antitrust Litig., 286
F. Supp. 2d at 62. MMOH, like plaintiffs in the Relafen litigation, did not allege a "series
of discrete acts of predatory pricing" or an enduring price-fixing conspiracy such as
might constitute a continuing violation. Id.; (0.1. 1 at,-r,-r 97, 114) Therefore, there is no
continuing violation exception to the running of the statute of limitations in this case. 12
11Schwarz asserted its sham litigation counterclaim in 2003. MMOH implies that
it could not be fully aware of the details of the Braintree/Schwarz litigation as "nearly
everything [was] filed under seal." (0.1. 13 at 11) MMOH does not argue that it was not
aware of the filing of the Braintree/Schwarz litigation, only that the success of
Bratinree's allegedly baseless claims could not be ascertained until the court's decision.
(ld. at 9) The court notes further that the Braintree/Schwarz trial transcript was made
part of the public record in February 2007.
12MMOH's argument that the statute of limitations issue is not ripe because it is
unclear on what date recoverable overcharge damages ceased (i.e., there is a
"The cause of action for future damages [accrues] only on the date they are
suffered[.]" Zenith Radio Corp., 401 U.S. at 339. In this regard, the In re Relafen
Antitrust Litigation court found that the speculative damages exception applied to toll
plaintiffs' accrual date from the date of the filing of the allegedly sham ANDA litigation to
the date the first tentative approval was received by a generic competitor. 286 F. Supp.
2d at 63-64. The court reasoned that, prior to this point, damages are "entirely
speculative" since it is unclear "whether the FDA itself would even approve [ ]
competitors" in the first instance. Id. at 63. The In re Relafen Antitrust Litigation court
also noted the "absurd result" that would occur absent the application of the exception,
as "vast numbers of potential antitrust plaintiffs would be required in every patent or
business litigation to sue or intervene preemptively in those actions in the unlikely (but
possible) event that the suit was filed fraudulently." Id. at 64. The court finds this
reasoning convincing and holds that MMOH's claims accrued no later than December
23, 2003 - the date Schwarz received tentative approval to sell GlycoLax®. (D.1. 1 at 11
B. Application of the Statute of Limitations
The question before the court at this juncture is whether MMOH's claims are
untimely on the face of its complaint. See Oshiver v. Levin, Fishbein, Sedran &
Berman, 38 F.3d 1380, 1385 n. 1 (3d Cir. 1994) (cautioning the decision of the statute
"damages tail") is, therefore, moot.
13Braintree acknowledges in this case that plaintiffs' claims did not accrue when
the Braintree/Schwarz litigation was filed "because prior to that point Schwarz could not
have received final FDA approval ... and therefore there would have been no
'overcharge'." (D.1. 16 at 3 & n.2)
of limitations in the context of a Rule 12 motion, except in situations where "the
complaint facially shows noncompliance with the limitations period and the affirmative
defense clearly appears on the face of the pleading"). As noted previously, MMOH
brings claims for violations of state antitrust, consumer fraud and unjust enrichment
laws. In these regards, Delaware's Borrowing Statute, 10 Del. C. § 8121, requires the
court to apply the shorter of Delaware's statute of limitations (three years 14) or the
statute of limitation of the state in which the claim arose. In all instances, therefore, the
applicable statute of limitations is three years or less. 15
The court rejects MMOH's argument that the Delaware Borrowing Statute does
not apply because Braintree is a "forum shopper," having elected to sue Schwarz in
Delaware in the underlying litigation. (0.1. 13 at 6) WI-lile MMOH argues that it was
bound to litigate here, since this was the Braintree/Schwarz litigation forum and
because the PFTH&W litigation was transferred here in 2007, that argument is not
supported by any failed attempt by MMOH to litigate elsewhere. Had MMOH filed in
another district and its case transferred to this court, the transferor's choice of law rules
would have applied. See Ferens v. John Deere Co., 494 U.S. 516, 523 (1990) ("A
transfer under § 1404(a) ... does not change the law applicable to a diversity case").
Notwithstanding, the court declines to hold that Braintree sued Schwarz in Delaware in
2003 in order to secure this venue (and its statute of limitations) for multiple future
14See 6 Del. C. § 2111 (antitrust); 6 Del. C. § 8106 (unjust enrichment and unfair
15Braintree has provided an index of MMOH's claims with citations to the
corresponding state statute of limitations for each claim. (0.1. 11 at 1) MMOH does not
dispute Braintree's representations.
antitrust lawsuits against it.
Finally, the parties agree that the running of the statute of limitations should toll
in this case based on the time the PFTH&W litigation was pending. 16 (0.1. 11 at 12-13;
0.1. 13 at 8) That is, the running of the statute of limitations in this case tolls for two
years, one month and 23 days. (Id.) The calculations are as follows: 17
MMOH filed its complaint
July 14, 2010
December 23, 2003
6 years, 6 months and 21 days
- 2 years, 1 month and 23 days
Subtract tolled period
4 years, 4 months and 29 days
Add three year SOL
Add tolled period
December 23, 2006
+ 2 years, 1 month and 23 days
February 15, 2009
As the foregoing indicates, MMOH's claims, filed July 14, 2010, or 4 years, 4 months
and 29 days from the date of tentative FDA approval on GlycoLax® on December 23,
16Under Federal law, "the commencement of a class action suspends the
applicable statute of limitations as to all asserted members of the class who would have
been parties had the suit been permitted to continue as a class action." American Pipe
& Construction Co. v. Utah, 414 U.S. 538, 554 (1974). "Once the statute of limitations
has been tolled, it remains tolled for all members of the putative class until class
certification is denied." Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345, 353-54
(1983). The PFTH&W litigation was voluntarily dismissed on June 2, 2009, prior to any
denial of class certification.
17The court garners assistance from the date calculator supplied at
http://www.timeanddate.comin these regards.
2003, are untimely under even a three-year statute of limitations. 18
For the foregoing reasons, Braintree's motion to dismiss is granted. An
appropriate order shall issue.
18The court need not reach Braintree's alternative grounds for dismissal.