Glynn-Brunswick Hospital Authority et al v. Becton, Dickinson and Company

Filing 45

ORDER granting Defendant's 9 Motion to Dismiss; and granting Defendant's Oral 20 Motion for a Hearing on the Motion to Dismiss. As the Court stated on the record on December 3, 2015, Defendant's Oral Motion for a Hearing (dkt. n o. 20) was, necessarily, GRANTED by virtue of the motions hearing held that day. Dkt. No. 42, 4:2-4. Accordingly, the Clerk of Court is DIRECTED to update this docket entry to reflect the Court's ruling. Defendant's Motion to Dismiss is GRANTED in its entirety. The Clerk of Court is DIRECTED to enter the appropriate judgment of dismissal and to close this case. Signed by Chief Judge Lisa G. Wood on 1/29/2016. (csr)

R the Uniteb btatto 39iotritt COurt
for the boutbtrn Thtrut of deorgia
runMuitk flthiion
GLYNN-BRUNSWICK HOSPITAL
AUTHORITY and SOUTHEAST
GEORGIA HEALTH SYSTEMS, INC.,
individually and as members
of classes,
Plaintiffs,
V.

BECTON, DICKINSON AND
COMPANY,
Defendant.

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CV 215-091

ORDER

This-matter comes before the Court on a Motion to Dismiss
filed by Defendant Becton, Dickinson and Company ("Defendant"),
which the parties have briefed extensively. See Dkt. Nos. 9,
28, 31, 34, 38, 43-44. The Court held a hearing on this Motion
on December 3, 2015. Dkt. No 42. For the reasons set forth
below, Defendant's Motion to Dismiss (dkt. no. 9) is GRANTED. 1

1

Also showing as pending upon the docket of this case is Defendant's
Oral Motion for a Hearing on the Motion to Dismiss. Dkt. No. 20. As
the-Court stated on the record on December 3,2015, Defendant's Oral
Motion for a Hearing (dkt. no . 20) was, necessarily, GRANTED by
virtue of the motions hearing held that day. Dkt. No. 42, 4:2-4.
Accordingly, the Clerk of Court is DIRECTED to update this docket
entry to reflect the Court's ruling.
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BACKGROUND

Plaintiffs Glynn-Brunswick Hospital Authority, doing
business as Southeast Georgia Health System, and Southeast
Georgia Health System, Inc. (collectively, "Plaintiffs") operate
two hospitals providing inpatient acute care in Georgia. Dkt.
No. 1, ¶ 10. Defendant is a New Jersey corporation, with its
principal place of business in New Jersey, that manufactures
hypodermic syringes, IV catheters, and other medical supplies.
Id. at ¶[ 11, 68. Plaintiffs purchase Defendant's syringes and
IV catheters for use in their healthcare facilities. Id. at ¶
10.
I. The Hypodermic-Syringe and IV Catheter Industries

In recent years, the hypodermic-syringe industry has
undertaken an initiative to reduce the risks associated with the
use of syringes. Id. at 1 4. Among these risks is that nurses
experience over 600,000 accidental needle sticks each year and,
in some instances, contract diseases or other illnesses as a
result. Id. at ¶ 3. Additionally, the practice of reusing
syringe bodies threatens the transmission of contaminated blood.
Id. at ¶1 6, 48. Thus, in 2000, Congress passed the federal
Needlestick Safety and Prevention Act, which "directed acute
care providers among others to use safer practices to reduce
injury from 'sharps' such as syringes and IV catheters." Id. at
¶ 50.
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2

For its part, Defendant has created a manual safety syringe
by adding a needle shield and a recapping mechanism to a
conventional syringe. Id. at ¶ 4. Despite being Defendant's
best-selling syringe, the manual safety syringe neither
materially lowers the frequency of needle sticks nor prevents
the reuse of contaminated syringes. Id. The manual safety
syringe has received the rating of "unacceptable" from the
acclaimed, testing laboratory, Emergency Care Research Institute.
Id. at ¶ S.
Defendant's competitor, Retractable Technologies, Inc.
("Retractable"), on the other hand, has developed a retractable
syringe, in which the needle automatically retracts into the
barrel after use, nearly eliminating the risk Of needle sticks.
Id. at ¶ 6. Further, the plunger seals in the retractable
syringe dislodge after injection, such that the syringe cannot
be reused on other patients. Id. The retractable syringe
boasts the highest safety rating from the Emergency Care
Research Institute. Id.
In 2001, Retractable filed suit against Defendant in the
Eastern.District of Texas, alleging unfair competition and
antitrust violations, which the parties later settled. Id. at ¶
60 (citing Retractable Techs., Inc. v. Becton, Dickinson & Co.,
No. 5:01-cv-036 (E.D. Tax. Jan. 29, 2001)). Defendant later
introduced its own line of retractable syringes into the
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marketplace, Id. at 9 90, which resulted in Retractable filing a
second lawsuit against Defendant in the. Eastern District of
Texas in 2007, Id. at

IN

61 (citing Retractable Techs., Inc. v.

Becton, Dickinson & Co., No. 2:07-cv-250 (E.D. Tex. June 6,
2007). In the second action, Retractable claimed patent
infringement, antitrust violations, false advertising, and
unfair competition. Id. at S 61 (citing Retractable Techs.,
Inc., No. 2:07-cv-250).
A jury determined that Defendant was liable for infringing
Retractable's patented technology for the retractable syringe.
Id. (citing Retractable Techs., Inc., No. 2:07-cv-250).
Additionally, Defendant was found liable for attempting to
monopolize the safety-syringe market, as well as false
advertising in disparaging Retractable's products while making
misleading or unsubstantiated statements about its own. Id. at
11 62, 94-95, 99 (citing Retractable Techs., Inc. v. Becton
Dickinson & Co., No. 2:08-cv-16 (E.D. Tex. Nov. 10, 2014)).2
Notwithstanding these events, Defendant's syringe sales
have consistently comprised a dominant share of the syringe
market.. See id. at ¶I 34, 102. After acquiring a significant
safety syringe rival, Safety Syringes Inc., in 2012, Id. at ¶
102, Defendant increased its already dominant market presence to
2

While originally filed as a single action, Retractable's claims of
patent infringement were severed, and thus tried separately, from the
antitrust, false advertising, and unfair competition claims. Dkt. No.
1, ¶ 60.
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an impressive 70% share by revenue, id. at ¶ 34. Meanwhile,
Defendant's next largest competitor, Covidien, holds
approximately a 17% market share. Id. at ¶ 34. Of its
competitors having below 1% in market share prior to 2004, none
rose anywhere above a 1.5% share from 2004 to 2010. Id. at ¶
38. Additionally, Defendant has continued to charge higher
prices than its competitors, selling its syringes for 22% to 33%
more than. the price of Covidien'smanual safety syringes, and as
much as 36% more than that of Retractable's retractable
syringes. Id. at ¶ 30
With regard to IV catheters, Defendant and its competitors
manufacture both conventional IV catheters and IV catheters with
additional safety features. Id. at 1 27. Defendant recently
acquired a primary IV catheter rival,CareFusion Corporation,
and now holds over a 65% share of the IV catheter market by
revenue. Id. at ¶ 43. Notably, small firms in this industry
saw only a 0.5% increase in their market shares from 2004 to
2010. Id. at ¶ 47. Although Defendant charges higher prices
for its IV catheters than do its competitors-22% to 33% more
than its next largest competitor, Covidien, and up to 37% more
than Retractable—this practice has jeopardized Defendant's
market share only to the extent of a 1% loss over a five-year
period. Id. at ¶ 39.

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II. The Contracting and Purchasing Process

Plaintiffs and similar acute care providers obtain
Defendant's syringes and. IV catheters through a multistep
contracting and purchasing process. To begin, a group
purchasing organization ("GPO") acts on behalf of its member
providers in negotiating the purchase of Defendant's medical
supplies. Id. at 91 113. The GPO, however, does not actually
purchase or sell Defendant's products on behalf of the
providers. Id. Rather, the GPO negotiates a "net dealer
contract" with Defendant and notifies its members of the terms
available to them under this contract, including the negotiated
prices, rebates, and other discounts for purchasing Defendant's
products. Id. at 9191 113-14.
If an acute care provider would like to buy Defendant's
medical products under the terms of the net dealer contract, it
must notify Defendant directly. Id. at ¶ 114. The provider
then negotiates with a distributor, or dealer, that purchases
medical supplies from manufacturers for resale to healthcare
providers and other customers. See id. at 191 115-16. The
provider and distributor enter into a "cost-plus" contract,
pursuant to which the distributor agrees to buy Defendant's
products at the GPO-negotiated rates and sell the products to
the provider at a price equal to the cost to procure them plus a
fixed percentage markup of that cost.
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Id. at 11 115.

The provider then sends a "letter of commitment" informing
Defendant that it has contracted with the distributor. Id. at ¶
116. The letter of commitment further instructs Defendant that
it should sell its products to the distributor at the price, and
under the terms, provided in the net dealer contract. Id.
Defendant, in turn, enters into a "dealer notification
agreement" with the distributor that sets forth the terms of
their relationship in accordance with the GPO net dealer
contract for sales 'to the provider. Id. at ¶ 117.
Because some of the contracts linking Defendant, the
distributor, and the acute care provider are negotiated between
Defendant and the GPO, id. at ¶ 66, these contracts often
contain three similar features. First, Defendant's net dealer
contract with the GPO, and its dealer notification agreement
with the distributor, commonly provide for rebate bundling,
which means that Defendant agrees to pay substantial rebates on
the bundled products purchased by an acute care provider and its
distributor in the given year. See Id. at ¶t 66, 68-70, 104.
However, if a provider or its distributor switches any
substantial amount (typically 5% to 15%) of its historic
purchases of any product, such as syringes or IV catheters, from
Defendant to a competitor, Defendant may refuse to pay rebates
on all of the products purchased by the provider or its
distributor. Id. at ¶t 69-70, 104.
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Second, the net dealer contract and dealer notification
agreement typically require that the acute care provider or its
distributor commit to making its historic level of purchases for
each product, in order to receive favorable pricing and rebates.
Id. at 191 66, 76-77, 104. That is, the provider or its
distributor must agree to buy the same volume of a product, such
as syringes or IV catheters, that it purchased in the previous .
year, or else it receives Defendant's worst pricing—"tier One"
on Defendant's pricing scale. Id. at 591 76, 104. If the
provider or its distributor makes this commitment, it receives
pricing at one of the four remaining tiers—Tier Two through Tier
Five—with the higher tiers requiring a greater annual volume
commitment and offering better pricing. Id. at 91 77.
Importantly, if a provider or its distributor purchasing at any
tier fails to meet its volume commitment, it constitutes a lack
of "loyalty" to Defendant and results in penalty Tier One
pricing and the forfeiture of year-end rebates. Id. at 191 75,
77.
Third, and finally, Defendant's contracts with the GPO and
distributor often mandate that the distributor handle only
Defendant's syringes and IV catheters, or, in some cases, only
the syringes and IV catheters of Defendant and another large
competitor. Id. at ¶91 66, 83, 104. As a variation on this
"sole-source" requirement, the contracts sometimes stipulate
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that the GPO or distributor must promote Defendant's syringes or
IV catheters over those of competitors, which may include the
GPO or distributor paying its employees more for selling
Defendant's products. Id. at ¶91 86, 104. Another provision
contributing to the sole-source nature of these contracts states
that Defendant will pay the GPO large sums of "administration
fees" when the GPO's member providers buy Defendant's products,
creating a lucrative incentive for: the GPO to endorse these
products over others. Id. at 91 87.
Following this process, Plaintiffs' GPO, Novation, LLC
("Novation"), negotiated the terms of a Net Dealer Contract with
Defendant sometime prior to March 2012, including certain
rebates and other discounts available to Plaintiffs and other
Novation members. Id. at 591 113, 118. Upon learning of those
terms, Plaintiffs notified Defendant of their interest in
purchasing its medical products. Id. at IT 114, 118.
Plaintiffs then entered into a cost-plus distribution agreement
("Distribution Agreement") with-medical-supply dealer Owens and
Minor on March 1, 2012. Id. at 9191 115, 118.
Under the Distribution Agreement, Plaintiffs have made a
"volume commitment" to buy "not less than $7 million a year [in]
syringes, IV catheters and other healthcare supplies" from Owens
and Minor, for a five-year period ending on March 1, 2017. Id.
at ¶ 118. If Plaintiffs fail to meet the volume commitment in
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any given year, they must pay a large penalty. Id. The
Distribution Agreement also contemplates pricing on a cost-plus
basis, with "cost" defined, in part, as "the cost or expense
incurred by [Owens and Minor] to procure the product (excluding
- . . any discounts, fees and other incentives paid by
supplier[] [Defendant] to [Owens and Minor) but including any
manufacturer inbound freight and other manufacturer charges) ."
Id. at ¶ 119 (quoting Distribution Agreement, ¶ 4.1). In other
words, Plaintiffs pay Owens and Minor the Novation-negotiated
rates as the "base cost," plus a percentage markup of 3.00% or
3.75%, for the supplies purchased. Id. 3
III. Plaintiffs' Claims for Relief

On July 17, 2015, Plaintiffs filed this action against
Defendant, purportedly on behalf of a class of acute care
providers having purchased Defendant's hypodermic syringes, as
well as a class having purchased its IV catheters, on or after
July 17, 2011, under cost-plus contracts requiring that the
distributor pass on all of Defendant's pricing to the provider.
Id. at 11 14, 20. Plaintiffs assert two claims of
monopolization in violation of Section 2 of the Sherman Act, 15
U.S.C. § 2—one relating to Defendant's syringe sales, and the
other its sales of IV catheters. Id. at ¶91 123-32. Plaintiffs
While Plaintiffs' Complaint discusses the contents of the relevant
contracts, neither Plaintiffs nor Defendant have submitted copies of
these contracts in connection with any filing before the Court.
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contend that they have standing to pursue these claims, because
they have suffered antitrust price injury in purchasing
Defendant's products—not as direct purchasers, but as indirect
purchasers under cost-plus distributor contracts predating the
purchases and requiring the passing on of all overcharges. Id.
at 191 120-22.
According to Plaintiffs, the relevant syringe market
consists of the sales of Defendant's and its competitors'
hypodermic syringes—including conventional., manual safety, and .
retractable syringes—for use by acute care providers nationwide.
Id. at ¶ 26. Similarly, Plaintiffs define the relevant IV
catheter market as encompassing the nationwide sales of
Defendant's and its competitors' IV catheters, both conventional
and with added safety features, for use by acute care providers.
Id. at 91 27.

Plaintiffs allege that Defendant has market power

in each of these markets, by virtue of "its demonstrated ability
to control pricing or exclude competition, its dominant market
share, and the high barriers to. competitive entry and
expansion." Id. at IT 124, 129.
Plaintiffs further assert that Defendant has employed the
following six "exclusionary schemes" as part of an "integrated
strategy to maintain market power" in the relevant syringe
Plaintiffs specify that "acute care providers" include "hospitals,
hospital systems, and related facilities that perform surgery and
other care on an in-patient [sic] basis (and possibly out-patient
[sic) services as well) ." Dkt. No. 1, IT 26-27.
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market: (1) rebate-bundling contracts that penalize severely
competitive syringe purchases; (2) penalty contracts that raise
the costs of competitive purchases; (3) sole-source contracts
that deny competitors critical distribution; (4) theft of
Retractable's innovative technology to impede its market entry;
(5) deception and false advertising to deny competitors market
share; and (6) acquisition of a significant rival to eliminate
competition. Id. at ¶ 125; see also id. at IT 68-102. To
maintain. its market power in the relevant IV catheter market,
Plaintiffs contend that Defendant has relied on four of these
same exclusionary schemes, using rebate-bundling, penalty, and
sole-source contracts, as well as acquiring a primary rival.
Id. at IT 130, 103-07.
Plaintiffs maintain that Defendant has used its power in
the relevant markets to charge the class of acute care providers
above-competitive pricing through the pass-on requirements of
their cost-plus distribution agreements. Id. at ¶[ 108, 110,
126, 131. Plaintiffs further claim that Defendant has used its
market power to suppress quality competition and, in turn, deny
the providers competitive choice and access to innovative
technology. Id. To remedy these alleged injuries, Plaintiffs
request the following relief: (1) a declaration that Defendant's
conduct violates Section 2 of the Sherman Act, 15 U.S.C. § 2;
(2) a permanent injunction precluding Defendant from further
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engaging in such conduct; (3) treble actual damages.; (4)
reasonable attorneys' fees and costs; and (5) prejudgment and
postjudgment interest. Id. at p. 34.
LEGAL STANDARDS

Federal Rule of Civil Procedure 8(a) requires that a
plaintiff's complaint contain both "a short and plain statement
of the grounds for the court's jurisdiction" and "a short and
plain statement of the claim showing that the pleader is
entitled to relief." Fed. R. Civ. P. 8(a) (l)-(2). Accordingly,
a responding party may move to dismiss the complaint based on a
"lack of subject-matter jurisdiction," Fed. R. Civ. P. 12(b) (1)
("Rule 12(b) (1)"), or a "failure to state a claim upon which
relief can be granted," Fed. R. Civ. P. 12(b) (6) ("Rule
12(b) (6)").
A Rule 12(b) (6) motion challenges the legal sufficiency of
the complaint in setting forth a claim to relief. See Fed. R.
Civ. P. 12(b) (6).. While a complaint need not contain detailed
factual allegations, it "must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible
on its face.'" Ashcroft v. Igbal, 556 U.S. 662, 678 (2009)
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007))
(interpreting Fed. R. Civ. P. 8(a) (2)). To be plausible on its
face, a complaint must set forth enough facts to "allow[] the

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court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Id.
A plaintiff, therefore, must plead more than mere labels
and conclusions, and a formulaic recitation of the elements of a
particular cause of action does not suffice. Twombly, 550 U.S.
at 555. Rather, at a minimum, a complaint should "contain
either direct or inferential allegations respecting all the
material elements necessary to sustain a recovery under some
viable legal theory." Fin. Sec. Assurance, Inc. v. Stephens,
Inc., 500 F.3d 1276, 1282-83 (11th Cir. 2007) (per curiarn)
(quoting Roe v. Aware Woman Ctr. for Choice, Inc., 253 F.3d 678,
683 (11th Cir. 2001)).
In evaluating a Rule 12(b) (6) motion, a court must "accept
as true the facts as set forth' in the complaint and draw all
reasonable inferences in the plaintiff's favor." Randall v.
Scott, 610 F.3d 701, 705 (11th Cir. 2010). Ordinarily, a
court's review on a motion to dismiss is limited to the factual
allegations on the face of the complaint. See Igbal, 556 U.S.
at 678. If a court is presented with matters outside the
pleadings on a motion to dismiss, the motion to dismiss is
converted into one for summary judgment. Fed. R. Civ. P. 12(d).
However, there are certain instances in which a court may
consider matters outside the pleadings without transforming a
motion to dismiss into a summary judgment motion, see Davis v.
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Self, 547 F. App'x 927, 929 (11th Cir. 2013)—for example, where
those outside matters are facts subject to judicial notice, see
Fed. R. Evid. 201(a) - (d); Tellabs, Inc., 551 U.S. at 322; see
also Fed. R. Evid. 201(b) (2) ('The court may judicially notice a
fact that is not subject to reasonable dispute because
it . . . can be accurately and readily determined from sources
whose accuracy cannot reasonably be questioned.").
DISCUSSION

Defendant now moves to dismiss Plaintiffs' Complaint for
failure to state a claim under Rule 12(b) (6). Dkt. No. 9.
Defendant contends that Plaintiffs and the other members of the
proposed class, by Plaintiffs' own concession, are not direct
purchasers of its medical products, and thus lack standing to
bring damages claims against Defendant on the basis of the
alleged antitrust violations. Id. at pp. 9-15. Additionally,
Defendant argues that Plaintiffs fail to adequately plead the
elements of their monopolization claims. Id. at pp. 15-22.
Plaintiffs urge the Court to deny Defendant's Motion to
Dismiss and allow them to proceed with their claims. Dkt. No.
28. Plaintiffs maintain that they sufficiently allege standing
to pursue these claims, pursuant to a "cost-plus exception" or a
"conspiracy exception" to the direct purchaser rule cited by
Defendant. Id. at pp. 18-26. Additionally, Plaintiffs assert
that they plead facts plausibly demonstrating each of the
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elements of their claims of monopoly maintenance against
Defendant. Id. at pp. 6-18.
Applying the above-described standards, the Court addresses
the parties' arguments regarding standing, and the sufficiency
of the monopolization allegations, in turn. 5
I. Defendant's Motion to Dismiss Plaintiffs' Damages Claims
for Lack of Standing
Section 4 of the Clayton Act provides that "any person who
shall be injured in his business or property by reason of

1.

anything forbidden in the antitrust laws may sue
therefor .

. and shall recover threefold the damages by him

Notable here is that a motion to dismiss for lack of standing would
typically invoke Rule 12(b) (1), not Rule 12(b) (6). See DiMaio v.
Democratic Nat'l Comm., 520 E.3d 1299, 1301 (11th Cir. 2008)
("[S]tanding is a threshold jurisdictional question which must be
addressed prior to and independent of the merits of a party's claims."
(quoting Bochese v. Town of Ponce Inlet, 405 F.3d 964, 974 (11th Cir.
2005))). Nevertheless,.Defendant's Motion does not dispute this
Court's authority to decide the particular claims asserted by
Plaintiffs, but rather challenges the sufficiency of Plaintiffs'
Complaint in setting forth a claim that would entitle them to relief.
See Dkt. No. 9. Because it appears that Defendant has appropriately
styled its Motion as one filed pursuant to Rule 12(b) (6), and
Plaintiffs do not argue otherwise the court reviews this Motion under
the standard applicable to that rule. See Warren Gen. Hosp. v. Amgen
Inc., 643 F.3d 77, 83 (3d Cir. 2011) (affirming the district court's
dismissal under Rule 12(b) (6) for lack of standing, and noting that
"[a] dismissal for lack of statutory standing-is effectively the same
as a dismissal for failure to state a claim" (alteration in original)
(quoting Baldwin v. Univ. of Pittsburgh Med. Ctr., 636 F.3d 69, 73 (3d
Cir. 2011))). In the end, however, this distinction is of no
consequence, as a review of this Motion under Rule 12(b) (1) would
involve the same legal standards and thus lead to the same result
obtained here. See Carmichael v. Kellogg, Brown & Root Servs., Inc.,
572 F.3d 1271, 1279 (11th Cir. 2009) (stating that the same standards
of review apply in evaluating dismissal based on a lack of subjectmatter jurisdiction and a failure to state a claim).
-

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sustained, and the cost of suit, including a reasonable
attorney's fee." 15 U.S.C. § 15(a). The United States Supreme
Court has narrowly interpreted the scope of Section 4, so as to
constrain the class of persons having statutory standing to
bring an antitrust action for damages. See Kansas v. UtiliCorp
United, Inc., 497 U.S. 199, 208-12 (1990) (holding that only a
customer who purchases goods directly from an alleged antitrust
violator has standing to bring claims under Section 4, even if
the direct purchaser passes on the entirety of the unlawful.,
overcharges to its downstream customers); Illinois Brick Co.

V.

Illinois, 431 U.S. 720, 729-36 (1977) (holding that an indirect
purchaser of a product cannot sue a distant manufacturer for
alleged antitrust violations under a "pass-on" theory—meaning a
theory that the intermediary passed on the unlawful overcharges
through the distribution channel to them); see also Hanover
Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 488-94
(1968) (prohibiting a manufacturer from asserting a pass-on
defense against the direct purchaser of its product).
Hanover Shoe and its progeny thus "enunciat[e] a brightline rule that only the purchaser immediately downstream-from
the alleged monopolist may bring an antitrust action." McCarthy
v. Recordex Serv., Inc., 80 F.3d 842, 848 (3d Cir. 1996) (citing
Illinois Brick, 431 U.S. at 744). The rationale for this socalled "direct purchaser rule" is twofold: First, in bringing
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the prohibition on the offensive use of pass on in line with its
defensive use, the rule eliminates the risk, of multiple
liability for defendants. Lowell v. Am. Cyanamid Co., 177 F.3d
1228, 1229 (11th Cir. 1999) (quoting Illinois Brick, 431 U.S. at
730). That is, the rule avoids a situation where the indirect
purchaser, relying on a pass-on theory, recovers for all or part
of an overcharge passed on to it,. yet the alleged monopolist is
unable to. assert pass on in defending against a subsequent suit
by the direct purchaser for the full amount of the overcharge..
Id.

(quoting Illinois Brick, 431 U.S. at 730). '
Second, the rule ensures that courts will not have to

undertake the uncertain and difficult task of tracing the chain
of distribution and analyzing pricing and output decisions,
under the laws of supply and demand, to determine what fraction
of an overcharge was absorbed, and what fraction was passed on,
at each level. See id. at 1229-31 (quoting Illinois Brick, 431
U.S. at 731-32, 742). Such an exercise, 'according to the
Supreme Court, would not only impose undue costs on the judicial
system but also undermine the efficient enforcement of federal
antitrust laws. Id. at 1229-30 (quoting Illinois Brick, 431
U.S. at 731-32).
The Supreme Court, however, has recognized that the
rationales underlying the direct purchaser rule "'will not apply
with equal force in all cases." UtiliCorp, 497 U.S. at 216.
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Accordingly, the Supreme Court has enumerated two exceptions to
the rule, which provide for indirect purchaser. standing "where
there is a preexisting cost-plus contract or where the direct
purchaser is owned or controlled by its customer." Lowell, 177
F.3d at 1229 n.2 (citing Illinois Brick, 431 U.S. at 735-36 &
n.16). The Court has declined to "carve out exceptions to the
direct purchaser rule for particular types of markets," stating
that any such exception would undermine the rule and lead to the
counterproductive exercise of litigating a series of exceptions.
UtiliCorp, 497 U.S. at 216-17 (alterations omitted) (quoting
Illinois Brick, 431 U.S. at 744). Nevertheless, the Eleventh
Circuit Court of Appeals has determined that the direct
purchaser standing rule simply does not apply in the case of a
vertical conspiracy, with no allegations of pass on, "where the
plaintiff has purchased directly from a conspiring party

in the

chain of distribution." Lowell, 177 F.3d at 1230, 1232.
In the case at bar, the parties agree that Plaintiffs and
other members of the proposed class are not Defendant's direct
purchasers. See Dkt. No. 1, 11 122; Dkt. No. 9, pp. 9-11; Dkt.
No. 28,-p. 18. Plaintiffs' factual allegations support this
conclusion: the acute care providers purchase Defendant's
products from distributors, not from the manufacturer Defendant;
the providers pay the distributors for the products; the price
that the providers pay for the products is determined by their
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cost-plus contracts with the distributors; and the providers
receive the products from the distributors.. See Dkt. No. 1, I1
112-20. Thus, remaining at issue is whether Plaintiffs and the
other class members, as indirect purchasers, have standing to
pursue their damages claims based on one of the recognized
exceptions to the direct purchaser rule, or the inapplicability
of that rule to this case.
A. Cost-Plus Exception

To come within the Supreme Court's cost-plus exception to
the direct purchaser rule, the indirect purchaser must be
operating under a cost-plus distribution agreement that meets
certain requirements. See Illinois Brick, 431 U.S. at 735-36.
Specifically, the cost-plus agreement must (1) predate the
alleged overcharge and (2) obligate the indirect purchaser to
buy a "fixed quantity regardless of price." Id. In these
circumstances, the justifications for the direct purchaser rule
are not present, because the indirect purchaser's commitment to
buy a fixed quantity of products from the direct purchaser
(i.e., the distributor), regardless of their price, insulates
the direct purchaser from any decrease in sales as a result of
passing on the overcharge. Id. at 736.
Because the direct purchaser need not absorb any of the
overcharge to compete for the indirect purchaser's business, the
direct purchaser simply passes on the overcharge in full. See
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id. As a result, "[t]he effect of the overcharge is essentially
determined in advance, without reference to the interaction of
supply and demand that complicates the determination in the
general case." Id.
Here, the parties dispute whether the Supreme Court's
decision not to apply the cost-plus exception to the facts in
UtiliCorp, 497 U.S. at 217-18, served to repeal this - exception.
See, e.g., Dkt. No. 9, pp. 2, 12-13; Dkt. No. 28, p. 19 n.15.
The Court need not resolve this issue here, because even
assuming that the exception remains viable after UtiliCorp,
Plaintiffs fail to meet its requirements for standing in this
case.
As to the first requirement, Plaintiffs fail to allege that
the cost-plus agreements, such as the Distribution Agreement
with Owens and Minor, preexisted the alleged overcharge. See
Illinois Brick, 431 U.S. at 735-36 (cost-plus contract must
predate the alleged overcharge). Plaintiffs' account of the
contracting and purchasing process indicates that the alleged.
overcharge first appeared in the net dealer contracts between
Defendant and the GPOs, such as Novation, which set forth the
pricing and discounts available for the sale of Defendant's
products to GPO members. See Dkt. No. 1, IS 113-14.
Consequently, Plaintiffs and other GPO members were aware of
Defendant's pricing terms at all relevant times: in deciding to
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notify Defendant of their intent to purchase its products, in
entering into a distribution agreement with.a distributor under
these terms, and in instructing Defendant to charge the
distributor the negotiated.rates. See id. at ¶T 114-16.
The resulting contracts—in Plaintiffs' case, their costplus Distribution Agreement with Owens and Minor, as well as the
Dealer Notification Agreement between Owens and Minor and
Defendant—are based on and incorporate the pricing terms
established in the initial net dealer contract between Defendant
and the GPO. Id. at IS 115, 117-19. It thus appears that any
potential action by Defendant to overcharge for its products
occurred when it contractually set the sales price with the GPO,
such that Plaintiffs' and the other proposed class members'
subsequent cost-plus contracts with distributors cannot be said
to preexist the alleged overcharges.
Plaintiffs miss the mark in arguing that these cost-plus
distribution agreements meet this requirement because the class
members "allege that overcharge remedy is sought only after
their . . . distributor contracts are in force." See Dkt. No.
34, p. 8 (emphasis omitted). Plaintiffs' interpretation renders
this requirement superfluous, because in the type of
distribution chain to which the direct purchaser rule and this
exception apply, an indirect purchaser does not buy products
from a manufacturer prior to entering into an agreement with a
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distributor (i.e., the direct purchaser). As such, the indirect
purchaser does not suffer any price injury that could give rise
to antitrust claims against the manufacturer before contracting
with the distributor. Rather, the indirect purchaser's
agreement with the distributor necessarily precedes its purchase
of the manufacturer's products, resulting price injury, and
decision to file suit against the, manufacturer. Thus, under
Plaintiffs' construction, all indirect-purchaser plaintiffs
would meet this requirement; because their distribution
agreements would be in place at the time that they filed suit
seeking a remedy for alleged overcharges. 6
Nor do Plaintiffs' allegations satisfy the second
requirement of the cost-plus exception, mandating that a
distribution agreement contemplate the sale of a fixed quantity
of goods. See Illinois Brick, 431 U.S. at 735-36 (cost-plus
contract must obligate the indirect purchaser to purchase a
6

The Court can imagine a situation in which an indirect purchaser,
dissatisfied with the price that a manufacturer has insisted upon in a
net dealer agreement with a GPO, files suit against the manufacturer
before ever contracting with a distributor. However, in such
circumstances, it would be immediately apparent that the indirect
purchaser would lack standing to pursue an action under Section 4,
because it would not have suffered any injury"in [its] business or
property" that would allow for the recovery of 'threefold the damages
by [it] sustained." 15 U.S.C. § 15(a). Because a court would not
even need to reach the direct purchaser rule, and the cost-plus
exception thereto, to conclude that the indirect purchaser lacked
standing, the Court cannot find that such a situation is the type that
this exception is intended to prevent. As such, this scenario would
not trigger the issue of a preexisting a cost-plus contract in any
event, and, accordingly, it has no impact on the Court's finding that
Plaintiffs construe this requirement such that it would be met in
every case to which the cost-plus exception applies.
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"fixed quantity regardless of price") . Plaintiffs do not
specify the terms of any distribution agreement entered into by
a member of the proposed class, other than their own
Distribution Agreement with Owens and Minor. See Dkt. No. 1,
¶JI 115, 118-19. The Distribution Agreement, Plaintiffs allege,
includes a "volume commitment" according to which Plaintiffs
must buy "not less than $7 million a year [in] syringes, IV
catheters. and other healthcare supplies" from Owens and Minor
for a period of five years. Id. at 1 118. In other words,
Plaintiffs have agreed to purchase a minimum dollar amount of
assorted healthcare supplies from Owens and Minor—not a fixed
quantity or dollar amount of supplies, not just hypodermic
syringes and IV catheters, and not just supplies manufactured by
Defendant. As such, Plaintiffs' factual allegations do not
suggest that they have given Owens and Minor any guarantee that
they will purchase any of Defendant's hypodermic syringes and IV
catheters at all, much less a fixed quantity thereof.
Plaintiffs' argument that Defendant's contracts with
Novation and Owens and Minor "effectively fix" the amount of
Plaintiffs' purchases does not persuade the Court otherwise.
See Dkt. Mo. 28, pp. 21-22. According to the allegations in the
Complaint, the overall effect of the rebate-bundling and penalty
contracts is to penalize Plaintiffs and Owens and Minor by
denying rebates—and, in some cases, reverting to Tier One
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pricing-if either switches a substantial amount of its purchases
of any product to a competitor, or if Owens and MinOr purchases
less than the historical amount of any product for Plaintiffs.
See Dkt. No. 1, ¶I 66, 68-70, 76-77, 104. By Plaintiffs' own
account, then, these contracts do not expressly preclude
Plaintiffs or Owens and Minor from switching to a competitor for
hypodermic syringes and IV catheters, or purchasing alternative
supplies from Defendant to use in place of these products. Even
if the contracts contemplate monetary penalties in the year that
Plaintiffs begin buying less of these products from Defendant,
these costs merely deter, but do not prohibit, Plaintiffs from
doing so. 7
Equally unavailing is Plaintiffs' alternative argument that
even if they are not effectively locked in to a certain number
of purchases under the Distribution Agreement, the agreement

' Plaintiffs contend that Defendant's sole-source contracts with GPOs
and distributors likewise contribute to effectively fixing the
quantity of syringes and IV catheters that Plaintiffs are obligated to
purchase. Dkt. No. 28, pp. 21-22. Unlike their pleadings with regard
to rebate bundling and penalties, however, Plaintiffs' factual
allegations do not suggest that Defendant's contracts with Novation
and Owens and Minor-or any other specific contracts with GPOs and
distributors-contain sole-source requirements. To the contrary,
Plaintiffs represent that the Distribution Agreement with Owens and
Minor provides for their purchase of "syringes, IV catheters, and
other healthcare supplies," dkt. no. 1, ¶ 118, suggesting that Owens
and Minor's inventory is not limited to supplies of Defendant in
particular. In any event, Plaintiffs' pleadings render it possible,
but not plausible, that Defendant's contracts with Novation and Owens
and Minor contain sole-source provisions. As a result, the Court
declines to consider whether a sole-source requirement in those
contracts would have the effect of fixing the amount of Plaintiffs'
purchases.
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nevertheless serves as the "functional equivalent" of a fixedquantity contract within the cost-plus exception. See Dkt. No.
28, pp. 22-23 (citing In re Beef Antitrust Indus. Antitrust
Litig., 600 F.2d 1148, 1164-66 (5th Cir. 1979)). In In re Beef,
the Fifth Circuit Court of Appeals found that the cost-plus
exception, though narrow, encompasses a pass-on situation that
is the functional equivalent of a. cost-plus contract case, in.
that the impact of an overchargeon an intermediary's pricing
decisions is determined in advance, without regard to the
interactions of supply and demand. In re Beef Antitrust Indus.
Litig., 600 F.2d at 1163-66. The Fifth Circuit observed-that
"[f]unctional equivalence is not lost simply because the
proponent of passing-on theory cannot demonstrate that the
middleman suffered no loss in volume as the result of raising
the price to his customers." Id. at 1164.
While the parties fervently dispute the continued viability
of the reasoning in In re Beef, see, e.g., dkt. no. 31, pp. 7-8;
dkt. no. 34, pp. 5-8, this issue is inconsequential, because it
appears that Plaintiffs ultimately fail to allege functional
equivalence so as to come within the rule of that case. As
discussed supra, Plaintiffs are able to decrease their demand
for Defendant's syringes and IV catheters, and, as a result, the
impact of any monopoly pricing by Defendant is neither
contractually predefined nor free from the influence supply and
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demand. Although Plaintiffs' decreased demand would, indeed,
result in both Plaintiffs and Owens and Minor forfeiting yearend rebates and receiving penalty pricing on any subsequent
purchases, Plaintiffs allege only that Owens and Minor would
contractually pass on the penalty pricing. See Dkt. No. 1, 1
119 (defining the "cost" to be charged to Plaintiffs in the
cost-plus pricing arrangement as the cost for Owens and Minor to
obtain the product, excluding "any discounts, fees and other
incentives paid by supplier[] [Defendant] to [Owens and
Minor]").
Significantly, Plaintiffs' allegations do not suggest that
Owens and Minor could pass on—or have any other recourse to
mitigate—its losses owing to Defendant's withholding of year-end
rebates that it had expected to receive. It is Plaintiffs'
inability to show that Owens and Minor is insulated from this
loss, not the loss of sales and related profits, that allows
this Court to conclude that the functional equivalence theory
from In re Beef, regardless of its continued validity, is
inapplicable here.
Thus, under the facts as alleged by Plaintiffs, the
Distribution Agreement with Owens and Minor does not fix the
quantity of Defendant's hypodermic syringes and IV catheters
subject to sale—or otherwise dictate the impact of an overcharge
for these products—and, therefore, does not satisfy the second
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requirement to bring this case within the cost-plus. exception to
the direct purchaser rule.
B. Vertical Conspiracy

The Eleventh Circuit has joined a number of other circuit
courts in finding that the direct purchaser rule does not apply
in the case of a vertical conspiracy. Lowell, 177 F.3d at 123132 (citing Arizona v. Shamrock Foods Co., 729 F.2d 1208, 1211-13
(9th Cir.. 1984), and Fontana Aviation, Inc. v. Cessna Aircraft
Co., 617 F.2d 478, 480-82 (7th Cir. 1980)) . In Lowell, the
plaintiffs sued an upstream supplier for conspiring with
middlemen distributors to set a "minimum resale price"—the price
at which the distributors would sell the supplier's products to
the plaintiffs and other customers—in violation of Section 1 of
the Sherman Act, 15 U.S.C. § 1. Id. at 1228-29. The Eleventh
Circuit held that the plaintiffs had standing to sue the
supplier, because the direct purchaser rule is inapplicable
"where the plaintiff has purchased directly from a conspiring
party in the chain of distribution." Id. at 1232. The Court.
reasoned that the rationales for the direct purchaser rule do
not apply "to the very different case of vertical conspiracy
with no allegations of passing on." Id. at 1230. That is,
because a vertical conspiracy case involves "only one illegal
act"—the conspiracy itself—there is no threat of double recovery

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against the supplier, or of complex allocation issues for the
court. Id.
The parties here disagree as to whether the Lowell decision
is limited to vertical price-fixing conspiracies, or whether it
extends to vertical conspiracies involving other antitrust
violations. See Dkt. No. 31, pp. 11 - 12; Dkt. No. 34, p. 3.
Even assuming, without deciding, that Lowell encompasses
conspiracies to commit the type of antitrust violation alleged
here—namely, monopoly maintenance—Plaintiffs' argument regarding
an alleged vertical conspiracy fails. 8 That is, while Plaintiffs
now contend that the dealer notification agreements between
Defendant and the distributors bring this matter within the
8

It appears that two other circuits have expressly limited the
conspiracy exclusion to vertical conspiracies to fix prices. Del.
Valley Surgical Supply Inc. v. Johnson & Johnson, 523 F.3d 1116, 1123
n.1 (9th cir. 2008) ("[T]his court has held that an indirect purchaser
may bring suit where he establishes a price-fixing conspiracy between
the manufacturer and the middleman." (citing Shamrock Foods Co., 729
F.2d at 1211)); Dickson v. Microsoft Corp., 309 F.3d 193, 215 (4th
Cir. 2002) ("(W]e interpret the[] (conspiracy] cases as standing for
the more narrow proposition that Illinois Brick is inapplicable to a
particular kind of conspiracy—price-fixing conspiracies."). However,
as Plaintiffs persuasively point out, "[w]hen Lowell relied upon the
[conspiracy] exception, . . . it did not limit its application to any
particular antitrust vertical conspiracy and certainly did not rule
out application of the exception to a vertical conspiracy leading to
monopoly, as opposed to price-fixing, overcharges levied on the
hospitals." Dkt. No. 34, p. 2. Indeed, while the facts in Lowell
involved a price-fixing conspiracy, the Eleventh Circuit Court spoke
in general terms in concluding that vertical conspiracies lie outside
the bounds of the direct purchaser rule. See, e.g., Lowell, 177 F.3d
at 1232 ("Illinois Brick does not apply to a single vertical
conspiracy where the plaintiff has purchased directly from a
conspiring party in the chain of distribution."). The Court thus
finds adequate reason to further explore the sufficiency of
Plaintiffs' allegations of a monopolization conspiracy for the purpose
of standing.
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vertical-conspiracy doctrine, dkt. no. 28, P. 24, their
Complaint fails to provide any plausible support for this
argument, for several reasons.
At the outset, Plaintiffs' conspiracy argument meets
resistance in the "pass-on" allegations in the Complaint. While
Plaintiffs' counsel correctly noted at the December 3, 2015,
hearing that Plaintiffs may plead . a cost-plus exception and
vertical conspiracy in the alternative, dkt. no. 42, 23:21-24:7,
the pass-on allegations in the Complaint—of which there are
many—cannot be parsed from the allegations that Plaintiffs cite
in support of their conspiracy argument. The Complaint defines
the proposed class members as acute care providers having
purchased Defendant's hypodermic syringes or IV catheters under
cost-plus contracts requiring that the distributor pass on
Defendant's pricing to the provider. Dkt. No. 1, 15 14, 20.
Additionally, the Complaint states that Plaintiffs and the
proposed class members have standing based on the antitrust
price injury that they have sustained as indirect purchasers of
Defendant's products under cost-plus distributor contracts
requiring the passing on of all overcharges. Id. at ¶[ 120-22.
These allegations of pass on run contrary to the verticalconspiracy allegations envisioned by the Court in Lowell. 177
F.3d at 1230 (referring to a "vertical conspiracy with no
allegations of passing on").
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Additionally, the Complaint lacks any suggestion that the
distributors unlawfully combined with Defendant, at'any time, to
fix the resale price charged to the providers, or to otherwise
construct the allegedly exclusionary schemes. Cf. id. at 122829. Plaintiffs allege that Defendant negotiates and executes
net dealer contracts with GPOs that set forth the terms
available to GPO members purchasing Defendant's productsincluding, pricing, rebate-bundling, penalty, and sole-source
provisions. Dkt. No. 1, 191 66-89, 104, 113-14. Only after a
provider notifies Defendant of its interest and contract's with a
middleman distributor, do Defendant and the distributor enter
into a dealer notification agreement. See id. at 9191 114-17.
Crucially, Plaintiffs do not allege that Defendant and the
distributor negotiate at any time; rather, they.assert that the
two enter into a dealer notification agreement defining their
relationship pursuant to the terms of the net dealer contractincorporating the pricing, rebate-bundling, penalty, and solesource provisions therein. See id. at ¶9166-89, 104, 114-17.,
Thus, Plaintiffs' Complaint demonstrates, and expressly
acknowledges, that the contracts linking Defendant, the
distributor, and the provider are essentially negotiated between
Defendant and the GPO, not the distributor. Id. at 91 66.
The Complaint also suggests that it is Defendant-not the
distributor or even the GPO-that insists upon and enforces the
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rebate-bundling, penalty, and sole-source provisions in these
contracts. See, e.g., id. at S 68 ("'Becton.. . . . exploits
[its] diversity [of products] to implement a rebate bundling
scheme making it very costly for acute care providers or their
distributors to switch to competitive products." (emphasis
added)); id. at ¶I 75, 77 ("Becton employs contracts to penalize
an acute care provider if it displays a lack of
'loyalty'. . . . [and] require the acute care provider or its
distributor to purchase 80% to 95% of the prior year's syringe
volume." (emphasis added)); id. at ¶ 86 ("Becton requires some
distributors and GPOs to promote Becton syringes over
competitive products." (emphasis added)).
Moreover, the Complaint does not suggest that the
distributors agreed to these provisions, or generally entered
into the dealer notification agreements, with the specific
intent of maintaining Defendant's alleged monopolies. See
Dickson, 309 F.3d at 204 n.14 (stating that Section 2 of the
Sherman Act, 15 U.S.C. § 2, requires that the alleged
coconspirators have a "specific intent to conspire to achieve
the stated goal of the conspiracy" (quoting TV Cornmc'ns Network
Inc. v. Turner Network Tele., Inc., 964 F.2d 1022, 1026-27 (10th
Cir. 1992))) . Rather, Plaintiffs repeatedly claim that
Defendant—and Defendant alone—implements these exclusionary
schemes and contracts as part of its own strategy to maintain
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and abuse its market power. See, e.g.,.Dkt. No. 1, ¶ 10.8 ("By
employing [these schemes] . . . , Becton has maintained it[s]
market power . . . . [and] has used its market power to charge
members of the [proposed class] above-competitive
pricing . . . and to deny free, competitive access to innovative
[competitive] technology." (emphasis added));-id. at 91 120
("[Members of the proposed class], have suffered antitrust price
injury by paying above-competitive pricing as a result of
Becton's monopolization of the syringe and IV catheter relevant
markets." (emphasis added)); id. at ¶ 125 ("As part of its
integrated strategy to maintain market power in this relevant
market, Becton has willfully engaged in at least six
exclusionary schemes." (emphasis added)).
Plaintiffs' characterization of the agreement as a
"mutually beneficial collusion," dkt. no. 34, p. 4, does not
change this result. Plaintiffs emphasize that the distributors
stand to benefit from the inflated pricing of Defendant's
products, in part because the distributors, on resale, tack on a
percentage markup of the cost to obtain the product—a markup
that translates to a higher dollar amount with each increase in
the product's base cost. See Dkt. No. 28, pp. 24-25. However,
any intermediary in a chain of distribution whose resale price
is calculated on a cost-plus basis is in a position to profit
from an increase in the cost of the good. That an intermediary,
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such as the distributors here, stands in this position when the
cost of the good is artificially inflated does not, by itself,
suggest that the intermediary engaged in anticompetitive
behavior to influence such cost in its favor. 9
Moreover, Plaintiffs' factual allegations suggest that the
distributors stood not only to benefit—but also to suffer harm—
as a result of the high prices of Defendant's products. Indeed,
if the prices of Defendant's products were to cause acute care
providers to purchase these products from other manufacturers,
the distributors would suffer a loss of sales. If the
distributors themselves were to find the products to be cost
prohibitive and turn to competing suppliers, the rebate
contracts between Defendant and the distributors are such that
the distributors would face substantial penalties. As such, the
Court cannot find that the potentially beneficial prospects of
the distribution agreements alone support an inference that the
distributors were motivated to maintain Defendant's monopoly
power. Cf. Dickson, 309 F.3d at 204 n.14 (suggesting that a
"rational motive to create a monopolistic environment" may
provide. "an inference of specific intent to conspire to achieve
the stated goal of the conspiracy" under Section 2 of the
The same can be said of the other purported benefits cited by
Plaintiffs: financial incentives paid to the distributor; markups on
products other than syringes and IV catheters sold to the providers;
protection from competition; and compensation for promoting
Defendant's products over others. Dkt. No. 28, p. 25.
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Sherman Act (alterations omitted) (quoting TV Coinmc'ns Network,
Inc., 964 F.2d at 1026-27)).
Also unhelpful to Plaintiffs' argument is that their
Complaint cites Section 2, rather than Section 1, of the Sherman
Act as the basis for their monopolization claims. Id. at ¶I
127, 132; cf. Lowell, 177 F.3d at 1229 (involving claims of a
vertical price-fixing conspiracy under Section 1 of the Sherman.
Act, 15 U.. S.C. § 1). Unlike Section 1 of the Sherman Act, which
makes unlawful "[e]very contract, combination in the form of

H

trust or otherwise, or conspiracy, in restraint of trade or
commerce," 15 U.S.C. § 1, Section 2 of the Sherman Act more
broadly proscribes acts to "monopolize, or attempt to
monopolize, or combine or conspire with any other person or
persons, to monopolize any part of the trade or commerce," 15
U.S.C. § 2. Although Section 2's prohibition on combinations
and conspiracies encompasses some of the same conduct covered
under Section 1, see Dickson v. Microsoft Corp., 309 F.3d 193,
202 (4th Cir. 2002), Plaintiffs' reliance on only Section 2,
without any mention of a combination, conspiracy, or otherwise
unlawful agreement, fails to plausibly indicate that their
claims are based on a theory of conspiracy to monopolize, rather
than monopolization alone.
Thus, the Complaint alleges, at most, that the contractual
arrangement between Defendant and the distributors is tuch that

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vertical conspiracies are possible. However, the Complaint
stops there. Without any facts plausibly suggesting that
Defendant and the distributors actually conspired in entering
into these agreements, the Court cannot conclude that Plaintiffs
sufficiently allege vertical conspiracies under Lowell.
C. Conclusion

Plaintiffs thus are not direct purchasers of Defendant's
products,. and fail to plausibly show that any exception to the
direct purchaser rule applies. As such, this case falls
squarely within the ambit of that rule, such that Plaintiffs are
barred from pursuing their damages claims against Defendants.
This portion of Defendant's Motion is, therefore, GRANTED.
II. Defendant's Motion to Dismiss Based on a Failure to Allege
Monopoly Maintenance10

Section 2 of the Sherman Act provides, in pertinent part,
that "[e]very person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or
persons, to monopolize any part of trade or commerce among the
several [s]tates,or with foreign nations., shall be deemed
10 The direct purchaser rule serves only as a limitation on standing
to pursue. damages claims under Section .4 of the Clayton Act, 15 U.S.C.
§ 15(a), and does not apply to claims for injunctive relief under
Section 16 of the Clayton Act, 15 U.S.C. § 26. Collins v. Int'l Dairy
Queen, 59 F. Supp. 2d 1305, 1311 (M.D. Ga. 1999) (quoting Campos v.
Ticketmaster Corp., 140 F.3d 1166, 1172 (8th Cir. 1998)). Thus,
Plaintiffs' claims for injunctive relief do not present the standing
issues discussed in Part I, and, instead, the Court addresses here
Defendant's arguments regarding the sufficiency of Plaintiffs'
monopolization allegations, as they relate to the remaining claims for
injunctive relief.

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guilty of a felony." 15 U.S.C. § 2. To establish a violation
of Section 2, plaintiffs must show: "(1) the possession of
monopolypower in the relevant market and (2) the willful
acquisition or maintenance of that power as distinguished from
growth or development as a consequence of a superior product,
business acumen, or historic accident." United States v.
Grinnell Corp., 384 U.S. 563, 570-71 (1966).
The first element—monopoly power in a relevant market—
requires that plaintiffs demonstrate harm to competition within
a distinct market having both product and geographic
limitations. Spanish Broad. Sys. of Fla., Inc. v. Clear Channel
Coinmc'ns, Inc., 376 F.3d 1065, 1074 (11th Cir. 2004) (citing
U.S. Anchor Mfg. v. Rule Indus., 7 F.3d 986, 995 (11th Cir.
1993)). A failure to delineate either the product or geographic
dimension of the relevant market is fatal to an antitrust claim.
See id. Additionally, the harm caused by an alleged monopolist
must be directed toward competition, rather than a particular
competitor, in the relevant market. Id. at 1075-76. Harm to
competition occurs where a defendant has substantial market
power, such that it is able to control prices or exclude
competitors in the relevant market. Aspen Skiing Co. v. Aspen
Highlands Skiing Corp., 472 U.S. 585, 595-97, 596 n.20 (1985).
Here, Defendant does not challenge Plaintiffs' monopolization
claims to the extent that they define the relevant geographic
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markets for the sales of hypodermic syringes and IV catheters as
the United States, see generally dkt. no. 9; instead, the
parties' dispute under the first element concerns the relevant
product markets and Defendant's alleged monopoly power therein,
see id. at pp. 15-17; dkt. no. 28, pp. 6-10.
The relevant product market must include "those products or
services that are either (1) identical to or (2) available
substitutes for the defendant[Is] product or service."
Aguatherm Indus., Inc. v. Fla. Power & Light Co., 971 F. Supp.
1419, 1426 (M.D. Fla. 1997) aff'd, 145 F.3d 1258 (11th Cir.
1998). As such, the outer boundaries of the product market are
determined by the "reasonable interchangeability" .of a product
and its substitutes, as well as the "cross-elasticity of demand"
for the products. U.S. Anchor Mfg., Inc., 7 F.3d at 995 (citing
Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962)); see
also Jacobs v. Tempur-Pedic Int'l, Inc., 626 F.3d 1327, 1337-38
(11th Cit. 2010) (referring to reasonable interchangeability as
"reasonable substitutability"); " As a general matter, all of
the purchasers and suppliers within those boundaries comprise
the market for the product. See U.S. Anchor Mfg., Inc., 7 F.3d
at 995.
11 The cross-elasticity of demand is "the change in the quantity
demanded by consumers of one product relative to the change in price
of another." Jacobs, 626 F.3d at 1337 n.13. A positive correlation
in the cross-elasticity of demand indicates that two products are
close substitutes and hence part of the same market. See id.

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In some cases, the relevant product market may exist as a
distinct subset, or "submarket," of a larger product market.
Jacobs,. 626 F.3d at 1337 (citing U.S. Anchor Mfg., Inc.,. 7 F.3d
at 995). The process for identifying the contours of a product
submarket is the same as that for the larger market. U.S.
Anchor Mfg., Inc., 7 F.3d at 995. However, some additional
"practical indicia" may be helpful to this end, such as
"industry or public recognition of the submarket as a separate
economic entity, the product's peculiar characteristics and
uses, unique production facilities, distinct customers, distinct
prices, sensitivity to price changes, and specialized vendors."
Jacobs, 626 F.3d at 1337.
Plaintiffs in this case err in narrowly defining the
relevant product markets for the sales of hypodermic syringes
and IV catheters to include only a subset of purchasers.
Plaintiffs' Complaint states that the relevant product markets
for syringes and IV catheters consist of - the products sold by
Defendant and its competitors for use by acute care providers.
Dkt. No. 1, 11 26-27. Acute care providers, Plaintiffs allege,
include hospital systems and related facilities that perform
surgeries and provide care on an inpatient basis. Id. However,
Plaintiffs also recognize that healthcare providers other than
acute care providers use syringes and IV catheters in
administering patient care, albeit on an outpatient basis. See
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id. at ¶ 50 (Needlestick Safety and Prevention Act applies to
"acute care providers among others"). As such, Plaintiffs'
proposed product markets include only syringes and IV catheters
sold to hospital systems and related facilities providing
inpatient treatment, while excluding the syringes and Iv
catheters sold to other healthcare providers, such as nursing
homes, physicians' offices, and diabetes centers.
Importantly, Plaintiffs do not allege that there is any
difference between a hypodermic syringe or IV catheter that
Defendant or its competitor sells to an acute care provider, and
one that it sells to another healthcare provider. See Aguatherm
Indus., Inc., 971 F. Supp. at 1426 (relevant product market must
include all products that are identical); see also Lockheed
Ma.rtin Corp. v. Boeing Co., 314 F. Supp. 2d 1198, 1224-29 (M.D.
Fla. 2004) (pleading of the relevant product market was
insufficient where it failed to distinguish between products
sold within and outside of the proposed market); cf. Pepsico,
Inc. v. Coca-Cola Co., No. 98 CIV. 3282 (LA?), 1998 WL 547088,
at *12 (S.D.N.Y. Aug. 27, 1998) (plaintiff adequately plead the
relevant product market by showing that a seemingly identical
product sold outside of the proposed market differed due to
dissimilar delivery methods). Nor do Plaintiffs allege any
facts suggesting that a syringe or IV catheter sold to another
healthcare provider, such as a physicians' office, would not be
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a reasonable substitute for one sold to an acute care provider.
See Aguatherm Indus., Inc., 971 F. Supp. at. 142.6 (relevant
product market must include available substitutes). For
example, "[t]here is not a single fact alleged to suggest that
if a box of [Defendant's] syringes intended for a nursing home
was misdelivered to (Plaintiffs], those syringes could not be
used to care for [Plaintiffs'] patients, or vice versa." Dkt
No. 31, pp. 14-15. In leaving out certain purchasers of
hypodermic syringes and IV catheters, Plaintiffs' averments
sweep far short of the duter boundaries of the markets for the
sales of these products.
Moreover, Plaintiffs' Complaint fails to plausibly
demonstrate that the portion of purchasers identified—acute care
providers—make up a distinct subxnarket within each of the
broader markets for hypodermic-syringe and IV catheter sales.
The Complaint is devoid of any facts suggesting that the
industry or general public recognizes the sales of syringes or
IV catheters to acute care providers as a discrete market. See
Jacobs, 626 F.3d at 1337 (practical indicia of the existence of
a submarket include industry or public recognition). There are
also no facts indicating that the syringes and IV catheters sold
to acute care providers are peculiar in terms of their function,
use, production process, price, or method of distribution.. See
id. (practical indicia also include a "product's peculiar
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characteristics and uses, unique production
facilities . . - distinct prices, sensitivity to price changes,
and specialized vendors"). Rather, the only conceivable basis
for Plaintiffs' attempt to narrow the general syringe and
IV catheter markets is that acute care providers constitute
"distinct customers," see Id., though even this proposition
lacks any plausible basis in the complaint.
While a relevant market can consist of only some of the
purchasers of a broadly defined product, it is the nature of the
more specific product—not the nature of the purchasers—that
makes narrowing the market to these distinct purchasers
appropriate. See Lockheed Martin Corp., 314 F. Supp. 2d. at 1226
(citing T. Harris Young & Assocs., Inc. v. Marquette Elecs.,
Inc., 931 F.2d 816, 82.4-25 (11th Cir. 1991)). In T. Harris
Young, the plaintiff brought antitrust claims against a
manufacturer of recording paper used in electrocardiograph
("ERG") machines. 931 F.2d at 819. In attempting to define the
relevant product market, the plaintiff included only "hospitals
with 200 or more beds," even though the manufacturer sold
identical EKG recording paper to smaller customers as well. Id.
at 820. The Eleventh Circuit Court of Appeals affirmed the
district court's finding that the plaintiff failed to establish
the product dimension of the relevant market, because it did not
show that the ERG recording paper used by hospitals with 200 or
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more beds was any different from the paper used by smaller
hospitals, clinics, and doctors' offices. Id..at 825. The
Eleventh Circuit explained its ruling as follows:
While a relevant product market can be limited to a
portion of customers, such a limitation must be based
on a distinction in the product sold to those
customers. If,-for example, a product is specially
designed for a certain group of purchasers and the
suppliers concentrate their efforts almost exclusively
on those purchasers, as in Heatransfer, the product
dimension may be limited to the sale of that product
to those purchasers. Similarly, where one product is
distinct from another because of its salability, as in
International Boxing Club of New York, Inc. v. United
States, the relevant market can consist solely of that
product.
Id. at 824-25 (citations omitted) (citing Int'l Boxing Club of
N.Y., Inc. v. United States, 358 U.S. 242, 242 (1959), and
Heatránsfer Corp. v. Volkswagenwerk, A.G., 553 F.2d 964, 964
(5th Cir. 1977))
In Heatransfer, an antitrust suit involving the sale of
automobile air conditioners, the plaintiff limited the relevant
market to air conditioners sold for use in imported Volkswagen
automobiles, as opposed to those sold for use in all vehicles.
553 F.2d at 980. The Court of Appeals for the Fifth Circuit
affirmed the jury's finding that the plaintiff properly narrowed
the relevant product market to only these distinct purchasers.
Id. at 981.12 The Court reasoned that "the distinct engineering

12

In Bonner v. City of Prichard, the Eleventh Circuit Court of
Appeals adopted as binding precedent all decisions of the former Fifth
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problems associated with the Volkswagen imports" distinguished
the air conditioners marketed to Volkswagen. importers from those
marketed to other customers. Id. at 980. Further, the Court
observed that the manufacturers of the air conditioners used in
Volkswagen imports concentrated their sales efforts primarily on
this group of customers. Id.
International Boxing involved antitrust claims defining the
relevant .product market as the market forthe promotion of
championship boxing contests, rather than professional boxing
contests generally. 358 U.S. at 250. The Supreme Court upheld
the lower court's determination that the relevant product market
was appropriately limited to championship boxing contests, based
on detailed findings regarding the salability of the
championship events. Id. at 250-51. Specifically, the Court
remarked that the "particular and special demand" for
championship fights was such that the nonchampionship events
were not "reasonably interchangeable for - the same purposes" as
the championship contests. Id at 251.
Plaintiffs' Complaint presents circumstances that are •morë
similar to those in T. Harris Young than those in Heatransfer
and International Boxing. As discussed supra, Plaintiffs do not
allege that the hypodermic syringes and IV catheters used by

Circuit handed down prior to October 1, 1981. 661 F.20 1206, 1207
(11th dr. 1981)
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acute care providers are any different from those used by other
healthcare providers. See T. Harris Young, 931 F.2d at 825.
Nor do Plaintiffs contend that Defendant and its competitors
specially design syringes and IV catheters for acute care
providers and focus their sales efforts on the same,' cf.
Heatransfer, 553 F.2d at 980-81, or that the syringes and IV
catheters sold to acute care providers differ in terms of
salability from those sold to other providers, cf. Int'l Boxing,
358 U.S. at 250-51. If the Complaint were to allege that the
prbducts sold to acute care providers were distinct in any of
these ways, then the Court would have to accept those facts as
true at this stage and could perhaps find that Plaintiffs
sufficiently defined the relevant markets for the sales of
syringes and IV catheters. However, because Plaintiffs'
Complaint limits the markets to only a select group of
customers, without even remotely identifying a difference in the
products supplied to those customers, the Complaint fails to
properly define the relevant product markets, as required to
state a plausible monopolization claim.
Plaintiffs nevertheless urge the Court not to dismiss their
claims on this basis. See Dkt. No. 28, p. 7 n.2 ("A court
should not dismiss a complaint for failure to allege a relevant
market 'unless it is apparent from the face of the complaint
that the alleged market suffers a fatal legal defect.'" (quoting
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Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1045
(9th Cir. 2008))). The Court recognizes that the scope of the
relevant market is an issue of fact, U.S. Anchor Mfg., Inc., 7
F.3d at 994, and that the fact-intensive nature of antitrust
cases counsels against their dismissal, Covad Conimc'ns Co.

V.

BellSouth Corp., 299 F.3d 1272, 1279 (11th Cir. 2002). However,
where, as here, plaintiffs "allege[] a proposed relevant market
that clearly does not encompass all interchangeable substitute
products even when all factual inferences are granted in
plaintiff[Is] favor, [the] relevant market is legally
insufficient and a motion to dismiss may be granted." JES
Props., Inc. v. USA Equestrian, Inc., 253 F. Supp. 2d 1273, 1282
(M.D. Fla. 2003) (citing Queen City Pizza v. Domino's Pizza,
Inc., 124 F.3d 430, 436 (3d Cir. 1997)). In other words, even
if Plaintiffs were able to prove the facts alleged, it would not
support a finding of monopolization.
Because dismissal is appropriate onthis basis, the Court
need not reach Defendant's additional arguments concerning the
legal sufficiency of Plaintiffs' monopolization claims. See
Dkt. No. 9, pp. 16-22. This portion of Defendant's Motion to
Dismiss is GRANTED.

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CONCLUSION

As noted herein, the Court GRANTED Defendant's Oral Motion
for a Hearing (dkt. no. 20) on the record at the December 3,
2015, motion hearing

Dkt No 42, 4:2-4. Because this Motion

appears to remain pending upon the docket of this case, the
Clerk of Court is DIRECTED to update the docket to reflect this
ruling.
Additionally, for the reasons set forth above, Defendant's
Motion to Dismiss (dkt. no. 9) is GRANTED in its entirety. The
Clerk of Court: is DIRECTED to enter the appropriate judgment of
dismissal and to close this case.

SO ORDERED, this 29TH day of January, 2016.

LISA GODBEY OOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

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