Hartig Drug Company Inc. v. Senju Pharmaceutical Co. Ltd. et al
Filing
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MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 8/19/2015. (nmfn)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
HARTIG DRUG COMPANY INC.,
Plaintiff,
v.
SENJU PHARMACEUTICAL CO. LTD.,
KYORIN PHARMACEUTICAL CO. LTD.,
and ALLERGAN INC.,
Defendants.
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Civ. No. 14-719-SLR
J. Clayton Athey, Esquire and Eric J. Juray, Esquire of Prickett, Jones & Elliott, P.A.,
Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Brent W. Landau, Esquire
and Melinda R. Coolidge, Esquire of Hausfeld LLP and Gregory A. Frank, Esquire and
Marvin L. Frank, Esquire of Frank & Bianco LLP.
Jack B. Blumenfeld, Esquire of Morris, Nichols, Arsht & Tunnell LLP, Wilmington,
Delaware. Counsel for Defendant Allergan Inc. Of Counsel: Ashley E. Johnson,
Esquire, Jason C. McKenney, Esquire and M. Sean Royall, Esquire of Gibson, Dunn &
Crutcher LLP.
Stephen B. Brauerman, Esquire of Bayard, P.A., Wilmington, Delaware. Counsel for
Defendant Senju Pharmacuetical Co. Ltd. Of Counsel: William F. Sondericker, Esquire
of Carter, Ledyard & Milburn LLP and Derrick Takeuchi, Esquire of Greenberg,
Whitcombe & Takeuchi, LLP.
David Evan Ross, Esquire and Benjamin J. Schladweiler, Esquire of Seitz Ross
Arenstam & Moritz LLP. Counsel for Defendant Kyorin Pharmaceutical. Of Counsel:
Sara R. Kusiak, Esquire and Rosanna K. McCalips, Esquire of Jones Day.
MEMORANDUM OPINION
Dated: August \l\, 2015
Wilmington, Delaware
RJsdofist~udge
I. INTRODUCTION
On June 6, 2014, plaintiff Hartig Drug Company, Inc. ("Hartig" or "plaintiff') filed a
complaint alleging certain antitrust violations concerning defendants Senju
Pharmaceutical Co., Ltd. ("Senju"), Kyorin Pharmaceutical Co., Ltd. ("Kyorin"), and
Allergan, Inc. 's ("Allergan") (collectively "defendants") aqueous liquid gatifloxacin
ophthalmic products, Zymar® and Zymaxid®. (D.I. 1) Defendants are the owners or
licensees of U.S. Patent Nos. 4,980,470 ("the '470 patent") and 5,880,283 ("the '283
patent"), which are listed in the United States Food and Drug Administration's ("FDA's")
publication titled "Approved Drug Products with Therapeutic Equivalence Evaluations"
(known as the "Orange Book") for Zymar® and Zymaxid®. (Id. at
,.m 36, 42, 45, 51, 72-
73) Hartig brings this putative class action on behalf of all direct purchasers in the
United States who purchased or paid for branded Zymar® or Zymaxid® products from
June 15, 2010 until the allegedly anticompetitive effects of defendants' conduct cease
(the "class period"). (Id. at ,-r 1) Hartig purchased Zymar® and Zymaxid® from
AmerisourceBergen Drug Corporation ("Amerisource"). (Id. at ,-r 9) Amerisource directly
purchased Zymar® and Zymaxid® from Allergan subject to a distribution services
agreement (''DSA") during the class period. (Id.)
Hartig asserts that defendants engaged in unlawful anticompetitive acts and
practices including: 1 (1) filing sham patent lawsuits; (2) committing fraud upon the
1
Hartig alleges the same misconduct set forth in the complaint filed by Hartig's
competitors Apotex, Inc. and Apotex Corp. (collectively, "Apotex") against defendants in
a related lawsuit in this court. (Civ. No. 12-196, D.I. 1)
United States Patent & Trademark Office ("USPTO"); and (3) "product hopping" to
preclude pharmacies from substituting generic gatifloxacin ophthalmic formulations form
defendants' more expensive branded drugs. (Id.
at~
3) Specifically, Hartig alleges that
defendants: (1) monopolized in violation of Section 2 of the Sherman Act; (2) conspired
to monopolize in violation of Section 2 of the Sherman Act; and (3) contracted,
combined, or conspired to restrain trade in violation of Section 1 of the Sherman Act.
(Id.
at~
153-192) Presently before the court is Allergan's motion to dismiss under Fed.
R. Civ. P. 12(b)(1) for lack of jurisdiction over the subject matter (D.I. 14), and Kyorin
and Senju's joint motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a
claim (D.I. 17).2 The court has jurisdiction pursuantto U.S.C. §§ 1331 and 1337(a) and
15 U.S.C. § 15.
II. STANDARD OF REVIEW
Not only may the lack of subject matter jurisdiction be raised at any time, it
cannot be waived and the court is obliged to address the issue on its own motion. See
Moodie v. Fed. Reserve Bank of NY, 58 F.3d 879, 882 (2d Cir. 1995). Once jurisdiction
is challenged, the party asserting subject matter jurisdiction has the burden of proving
its existence. See Carpet Group Int'/ v. Oriental Rug Importers Ass'n, Inc., 227 F.3d 62,
69 (3d Cir. 2000). Under Rule 12(b)(1 ), the court's jurisdiction may be challenged either
facially (based on the legal sufficiency of the claim) or factually (based on the sufficiency
of jurisdictional fact). See 2 James W. Moore, Moore's Federal Practice§ 12.30[4] (3d
ed. 1997). Under a facial challenge to jurisdiction, the court must accept as true the
allegations contained in the complaint. See id. Dismissal for a facial challenge to
2
Allergan joined in the motion to dismiss for failure to state a claim. (D.I. 19)
2
jurisdiction is "proper only when the claim 'clearly appears to be immaterial and made
solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and
frivolous."' Kehr Packages, Inc. v. Fidelcor, Inc., 926F.2d1406, 1408-09 (3d Cir.1991)
(quoting Bell v. Hood, 327 U.S. 678, 682 (1946)).
Under a factual attack, however, the court is not "confine[d] to allegations in the .
. . complaint, but [can] consider affidavits, depositions, and testimony to resolve factual
issues bearing on jurisdiction." Gotha v. United States, 115 F.3d 176, 179 (3d Cir.
1997); see also Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891-92 (3d
Cir. 1977). In such a situation, "no presumptive truthfulness attaches to plaintiff's
allegations, and the existence of disputed material facts will not preclude the trial court
from evaluating for itself the merits of jurisdictional claims." Carpet Group, 227 F.3d at
69 (quoting Mortensen, 549 F.2d at 891 ).
Ill. DISCUSSION
Section 4 of Clayton Act provides a private cause of action for "any person
injured in his business or property by reason of anything forbidden in the antitrust laws."
15 U.S.C. § 15. In Illinois Brick Co. v. Illinois, 431 U.S. 720, 735 (1977), the United
States Supreme Court "established the general rule that only direct purchasers from
antitrust violators may recover damages in antitrust suits." Howard Hess Dental Labs.
Inc. v. Dentsply Int'/, Inc., 424 F.3d 363, 369 (3d Cir. 2005). Indirect purchasers are
generally not entitled to recover damages for passed-on overcharges. Id. This is
referred to as the "indirect purchaser rule." Three policy reasons justified the Court's
decision to impose this rule: "(1) a risk of duplicative liability for defendants and
potentially inconsistent adjudications could arise if courts permitted both direct and
3
indirect purchasers to sue defendants for the same overcharge; (2) the evidentiary
complexities and uncertainties involved in ascertaining the portion of the overcharge
that the direct purchasers had passed on to the various levels of indirect purchasers
would place too great a burden on the courts; and (3) permitting direct and indirect
purchasers to sue only for the amount of the overcharge they themselves absorbed and
did not pass on would cause inefficient enforcement of the antitrust laws by diluting the
ultimate recovery and thus decreasing the direct purchasers' incentive to sue." Id. at
369-70.
Hartig does not allege that it purchased Zymar® and Zymaxid® directly from
defendants during the class period. (D.I. 1 at 1f 9) Rather, Hartig contends that it has
standing to sue as a direct purchaser in that Amerisource "conveyed, assigned, and
transferred to Hartig all of its rights, title and interest in and to all causes of action it may
have against Defendants under the antitrust laws of the United States ... arising out of
or relating to Amerisource's purchase of Zymar and Zymaxid." (D.I. 1 at 1f 9) Allergan
does not dispute that "an antitrust claim can be expressly assigned." Gulfstream Ill
Associates, Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 437 (3d Cir. 1993).
Instead, Allergan asserts that the DSA governing the relationship between it and
Amerisource prevents such an assignment. In relevant part, the anti-assignment
provision contained in the DSA states that "[t]his Agreement may not be assigned by
either party without the prior written consent of the other party. Notwithstanding the
foregoing, either party may assign its rights and obligations hereunder without the
consent of the other party to a subsidiary or affiliate .... " (D.I. 16, ex. 1 at§ 14(b))
Allergan alleges that it did not consent to the assignment of any rights held by
4
Amerisource under the DSA and, therefore, any purported assignment is invalid. (D.I.
16
at~
4)
The DSA begins by stating that Amerisource and Allergan agree to an
"arrangement where [Allergan] agrees to sell products ... to [Amerisource] ... so that
[Amerisource] may distribute the Product to customers." (D.I. 16, ex. 1 at§ 1(a}) The
DSA contains, inter a/ia, guidelines governing price, payment and inventory levels, and
a recitation of the parties' particular obligations under the agreement. Under the
heading of "miscellaneous," the DSA states that "[t]his Agreement contains the entire
agreement between the parties and supersedes any prior or contemporaneous
agreement or understanding between the parties with regards to the subject matter
hereof." (Id. at § 14(g)) The DSA also states that Allergan "will comply with federal,
state and local laws governing the purchase, handling, sale or distribution of Products
purchased under this Agreement." (Id. at§ 4(i)) The DSA, however, does not
specifically mention antitrust law or the assignment of legal claims.
Under Pennsylvania law, which governs the court's reading of the DSA (id. at §
14(c)), "an assignment will ordinarily be construed in accordance with the rules
governing contract interpretation and the circumstances surrounding the execution of
the assignment document," with the caveat that a court should not "modify the plain
meaning of the contract under the guise of interpretation." Crawford Cent. Sch. Dist. v.
Com., 888 A.2d 616, 623 (Pa. 2005). Allergan argues that, under the plain meaning of
the contract, the anti-assignment provision is broad in scope and extends to the
assignment of the right to bring suit. Specifically, Allergen argues that because the
second sentence of the assignment provision permits assignment of both "rights" and
5
"obligations" in certain circumstances, the DSA logically encompasses rights. Allergen
posits that, at least in the context of ERISA litigation, district courts in the Third Circuit
routinely interpret the prohibition against assigning "rights" as including causes of
action. See Lehigh Valley Hosp. v. UAW Local 259 Soc. Sec. Dept', 1999 WL 600539,
at *3 (E.D. Pa. Aug. 10, 1999); Temple Univ. Hosp., Inc. v. Grp. Health, Inc., 2006 WL
1997424, at *10 n.8 (E.D. Pa. July 13, 2006); Torpey v. Blue Cross Blue Shield of Tex.,
2014 WL 346593, at *3 (D.N.J. Jan. 30, 2014).
Hartig argues that the DSA is focused on setting the terms for permitting
Amerisource to act as an authorized distributor and, therefore, the anti-assignment
clause only restricts Amerisource from assigning its right to serve as an authorized
distributor of Allergan's products. Hartig relies on a case from the Northern District of
California, which interpreted the Restatement of Contracts (Second) in the antitrust
context to mean that "the anti-assignment clauses are limited to each party's rights and
obligations under the contracts" and not to the assignment of antitrust claims. In re
TFT-LCD (Flat Panel) Antitrust Litigation, 2011 WL 3475408, at *3 (N.D. Cal, Aug. 9,
2011 ). 3 The relevant language from the Restatement of Contracts (Second) provides:
"Unless the circumstances indicate the contrary, a contract term prohibiting assignment
of 'the contract' bars only the delegation to an assignee of the performance by the
assignor of a duty or condition." Restatement of Contracts (Second)§ 322 (1981 ).
Hartig adds that such an interpretation of the anti-assignment provision is consistent
with§ 4 of the Clayton Act, 38 Stat. 731, which upholds a strong national interest in
3
The broadest anti-assignment clause at issue in TFT stated that "[n]o right, interest,
privilege, or obligation of this Agreement shall be assigned." In re TFT-LCD, 2011 WL
3475408 at *3.
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promoting private enforcement of anti-trust laws. See Blue Shield of Virginia v.
Mccready, 457 U.S. 465, 472 (1982) (In enacting§ 4, "Congress sought to create a
private enforcement mechanism that would deter violators and deprive them of the fruits
of their illegal actions, and would provide ample compensation to the victims of antitrust
violations.").
The parties draw the court's attention to two opinions from the Northern District of
California, each of which considered highly analogous facts to the case-at-bar, and
each of which reached a different conclusion. See United Food and Commercial
Workers Local 1776 & Participating Employers Health and Welfare Fund v. Teikoku
Pharma USA, 2015 WL 4397396 (N.D. Cal. July 17, 2015) (finding that the antiassignment provision did not bar assignment of causes of action); and In re Ditropan XL
Antitrust Litigation 2007 WL 2978329, at *2 (N.D. Cal. Oct. 11, 2007) (finding that the
anti-assignment provision did bar assignment of causes of action). The court
respectfully declines to follow the reasoning in United Food, and instead reaches the
same conclusion as the court in Ditropan XL. In United Food, the agreement between
the parties prohibited assignment of "this Agreement" or any of its "duties or
responsibilities" without the other party's consent. 2015 WL 4397396 at *4. The court
reasoned that "a duty is not equivalent to a right arising from a breach of that duty" and,
therefore, the assignment of the right to sue for antitrust violations did not violate the
anti-assignment provision. Id.
Unlike the anti-assignment clause in United Food, which did not expressly
prohibit assignment of rights, this court is persuaded by Allergan's logic that the antiassignment clause in the instant agreement refers to both rights and obligations.
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Accordingly, assignment of a right would conflict with the plain meaning of the antiassignment provision in the instant DSA. The court also finds that reading the DSA as
prohibiting the right to bring a cause of action in the antitrust context is consistent with
the DSA as a whole, as well as the circumstances surrounding the execution of the
document. In particular, Hartig's antitrust claim is founded on pricing and purchases of
Zymar® and Zymaxid® made pursuant to the DSA. Additionally, an antitrust claim
fundamentally concerns the question of whether defendants complied with the provision
in the DSA ensuring compliance "with federal ... laws governing the purchase,
handling, sale or distribution of Products." (D.I. 16, ex. 1 at§ 4(i)) 4
Altogether, the court finds that the DSA forbids the assignment of the right to
bring suit. As Hartig does not allege that Amerisource sought the permission of
Allergan prior to executing the assignment, the court finds that such assignment is
invalid. As such, the court grants Allergan's motion to dismiss pursuant to Fed. R. Civ.
P. 12(b )( 1). Because the court lacks subject matter jurisdiction, it dismisses the action
with respect to the remaining defendants. 5
IV. CONCLUSION
For the aforementioned reasons, Allergan's motion to dismiss for lack of
jurisdiction over the subject matter (D.I. 14) is granted and defendants' joint motion to
4
This conclusion is consistent with the Restatement of Contracts (Second)§ 322, in
that the "circumstances" - the factual context (a business relationship memorialized in a
contract between a seller and a direct purchaser) and the clear legal principles
governing such relationships (those enunciated in Illinois Brick) - "indicate the contrary,"
i.e., indicate that the right to bring an antitrust action cannot be assigned from a direct to
an indirect purchaser.
5
For the same reason, defendants' joint motion to dismiss under 12(b)(6) (D.I. 17) is
denied as moot.
8
dismiss for failure to state a claim (D.I. 17) is denied as moot. An appropriate order
shall issue.
9
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