Farag et al v. Health Care Service Corporation, d/b/a Blue Cross Blue Shield of Illinois et al
Filing
38
MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 7/5/2017:Civil case terminated.Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TAREK FARAG and SOONA FARAG,
Plaintiffs,
v.
Case No. 17 C 2547
HEALTH CARE SERVICE
CORPORATION, d/b/a BLUE
CROSS BLUE SHIELD OF
ILLINOIS and NOVARTIS
PHARMACEUTICALS CORPORATION,
Judge Harry D. Leinenweber
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court are Motions to Dismiss filed by Defendant
Novartis Pharmaceuticals Corporation (“Novartis”) [ECF No. 16]
and Defendant Health Care Service Corporation d/b/a Blue Cross
Blue
Shield
of
Illinois
reasons
to
follow,
against
Novartis
alternatively,
(“BCBSIL”)
the
with
under
Court
No.
dismisses
prejudice
Rule
[ECF
under
12(b)(6).
15].
Plaintiffs’
Rule
Absent
For
claims
12(b)(1)
those
the
or,
federal
question claims, the Court declines to hear Plaintiffs’ state
law
claims
Instead,
the
against
BCBSIL
Court
remands
County Circuit Court.
or
the
rule
on
balance
the
of
latter’s
the
case
Motion.
to
Kane
I.
BACKGROUND
Plaintiffs Tarek and Soona Farag (referred to collectively
as “Plaintiffs” and individually as “Tarek” or “Soona”) have
employer-sponsored health insurance coverage through Defendant
BCBSIL.
(ECF No. 1 at Ex. 1 (“Compl.”) ¶ 1.)
Tarek has high
blood pressure, and his doctors have tried many medications to
treat his condition.
(Id. ¶ 4.) All have caused side effects
with the exception of the brand-name drug Diovan, manufactured
by Defendant Novartis, which Tarek’s doctors “settled on and
prescribed for him long before January 2011.” (Ibid.)
For a
brief
tried
period
“[a]round
the
beginning
of
2013,”
Tarek
taking the generic form of Diovan (valsartan), but it “caused
him serious side effects.” (Id. ¶ 5.)
Unsurprisingly, valsartan
had a cheaper copay than Diovan, for which Tarek paid $30.00
until
around
June
Diovan to $50.00).
2013
(when
BCBSIL
increased
the
copay
for
Plaintiffs allege that the overall price of
a one-month supply of Diovan was about $207 during 2013, $270
during 2014, $310 during 2015, and about “$400 during 2017.”
(Id. ¶ 25.)
On April 11, 2015, Tarek’s doctor prescribed him twice his
usual dose of Diovan. (Compl. ¶ 7.)
At some point thereafter,
Tarek took medication for numbness in his hands, which caused
his
blood
pressure
and
heart
rate
- 2 -
to
collapse,
leading
his
doctor to advise that Tarek stop taking Diovan and only add it
back into his medication regimen as he recovered.
(Id. ¶ 8.)
On
his
September
19,
2015,
Tarek
sought
to
refill
prescription and expected to pay his usual $50 copay.
Diovan
However,
BCBSIL refused to cover it on the same terms it had previously
and
instead
(Id. ¶ 9.)
requested
“preauthorization”
from
Tarek’s
doctor.
Tarek’s doctor completed the required forms, but
BCBSIL denied coverage because Tarek had not taken Diovan “for
more than 90 days.” (Id. ¶ 10.)
As a result, BCBSIL required
that Tarek pay $173.11 instead of $50.00. (Id. ¶ 11.)
Despite
placing several calls to BCBSIL, Tarek was unable to get the
company to remedy the situation. (Id. ¶¶ 12-13, 15-17.)
On
these calls, BCBSIL agents typically justified the denial of
coverage
on
the
grounds
that
Diovan
is
considered
“a
Step
Therapy medication,” requires preauthorization, is dispensed in
prescriptions that are valid only for one year, must be taken
“for the past 90 days to qualify for the copay of $50,” and must
be precipitated by an attempt to take the generic.
(Id. ¶ 27.)
Tarek continued taking Diovan and paying the higher rate “with
accumulated difference of about $700.”
(Id. ¶ 14.)
Proceeding pro se, Plaintiffs filed suit against BCBSIL on
May 19, 2016 in Kane County Circuit Court.
On May 24, 2016,
Tarek “was in a very stressful situation due to the ongoing
- 3 -
court case and the denial of his proper coverage, which caused
his blood pressure to go high and fluctuate in a dangerous way
that caused him symptoms of a stroke.”
(Compl. ¶ 19.)
He was
rushed to the hospital and, roughly $16,000 later, restored to
good health. (Ibid.)
in
Plaintiffs’
The Kane County court dismissed the claims
original
complaint
without
prejudice,
and
Plaintiffs then filed an Amended Complaint against BCBSIL on
October 5, 2016.
BCSBIL moved to dismiss the Amended Complaint,
and the court obliged – dismissing two claims with prejudice and
two
claims
without
prejudice.
On
March
1,
2017,
Plaintiffs
amended again, this time adding Novartis as a defendant. This is
the operative Complaint.
On the basis of federal question jurisdiction over patent
and antitrust claims that Plaintiffs brought against Novartis,
Defendants removed the Complaint to this Court on April 4, 2017.
(ECF No. 1 ¶¶ 3-6.)
Both Defendants now move to dismiss all
counts.
II.
LEGAL STANDARD
When considering a motion to dismiss a complaint, the Court
accepts the facts stated in the complaint as true and draws
reasonable
inferences
in
favor
of
the
plaintiff.
Newell
Operating Co. v. Int’l Union of United Auto., Aerospace, and
Agr.
Implement
Workers
of
Am.,
532
- 4 -
F.3d
583,
587
(7th
Cir.
2008).
A document filed pro se is to be liberally construed,
and a pro se complaint, however inartfully pleaded, must be held
to less stringent standards than formal pleadings drafted by
lawyers.
Erickson v. Pardus, 551 U.S. 89, 94 (2007).
Although
the
Federal
Rules
of
Civil
Procedure
do
not
require a complaint to include “detailed factual allegations, a
plaintiff’s obligation to provide the grounds of his entitlement
to
relief
requires
more
than
labels
and
conclusions,
and
a
formulaic recitation of the elements of a cause of action will
not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal
citations
omitted).
To
survive
a
Rule
12(b)(6)
motion, “the complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.”
Independent Trust Corp. v. Stewart Info. Servs.
Corp., 665 F.3d 930, 934 (7th Cir. 2012) (internal quotation
marks omitted).
The plausibility standard, while not akin to a
probability requirement, “asks for more than a sheer possibility
that a defendant has acted unlawfully.”
U.S.
662,
pleads
678
facts
(2009)
that
are
Ashcroft v. Iqbal, 556
(citation
omitted).
merely
consistent
Where
with
a
complaint
liability,
it
“stops short of the line between possibility and plausibility.”
Id. (internal quotation marks omitted).
- 5 -
Standing is an essential component of Article III’s caseor-controversy requirement.
U.S. 555, 560 (1992).
Lujan v. Defenders of Wildlife, 504
Rule 12(b)(1) allows a party to raise by
motion a federal court’s lack of subject-matter jurisdiction,
including a lack of standing.
See, Ret. Police Ass’n v. City of
Chicago, 76 F.3d 856, 862 (7th Cir. 1996).
bears
the
burden
of
establishing
proof of jurisdictional facts.
The plaintiff then
jurisdiction
with
competent
Scanlan v. Eisenberg, 669 F.3d
838, 841-42 (7th Cir. 2012).
III.
A.
ANALYSIS
Novartis
Against Novartis, Plaintiffs seek a judgment for at least
$18,000,
compensatory
attorneys’ fees.
damages,
punitive
damages,
costs
and
They do not seek injunctive relief. According
to Plaintiffs, the inventors listed on Novartis’ U.S. Patent
No. 6,294,197 (“the ’197 patent”), which covers a tablet form of
valsartan “mixed with additives by compression,” are not the
same
inventors
meaning
that
that
Novartis
Novartis
lauded
committed
fraud
for
on
inventing
the
United
Diovan,
States
Patent and Trademark Office (“the PTO”) by listing the wrong
inventors
on
the
face
of
the
’197
patent.
(Compl.
¶
30.)
Plaintiffs further allege that, because the “generic drug for
Diovan” caused Tarek “serious side effects” whereas Diovan did
- 6 -
not,
Novartis
defrauded
the
PTO
by
seeking
protection
for
a
patent that (it knew) flunked the enablement requirement of 35
U.S.C.
§
112(a).
(Id.
¶¶
5,
31.)
Plaintiffs
claim
that
–
ostensibly through these actions and by emerging from the 1996
merger
of
“two
wrongfully
giants
“kept
Ciba-Geigy
others
away
and
from
Sandoz”
–
Novartis
manufacturing
or
has
selling
Diovan or its generic Valsartan” and “unlawfully monopolize[d]
the market for Diovan,” allowing it to charge higher prices for
Diovan
than
generic
drug
manufacturers
charge
for
valsartan.
(Id. ¶¶ 30, 33.)
Without
claims,
citing
Plaintiffs
any
provision
bring
three
of
law
counts
authorizing
against
their
Novartis:
“fraudulently claiming that Novartis’ team is the inventors of
Diovan,” “fraudulently claiming that it has patent protection
for Diovan and monopolizing it,” and “violating the antitrust
laws and abusing of [sic] monopoly power.”
The
Court
finds
these
counts
best
(Compl. ¶¶ 30-32.)
characterized
as
a
Walker
Process claim based on fraudulent procurement of the ’197 patent
and its subsequent unlawful monopolization under Section 2 of
the Sherman Act, 15 U.S.C. § 2, plus a claim under Section 7 of
the Clayton Act, 15 U.S.C. § 18, challenging the merger that
spawned Novartis as “obvious[ly] . . . against the antitrust
laws.”
(Compl.
¶
33.)
(To
the
- 7 -
extent
Plaintiffs
might
be
seeking relief under the Illinois Antitrust Act, 740 Ill. Comp.
Stat. 10/3, it is preempted inasmuch as it relates to the Walker
Process claim.
Because there is “simply no theory for proving a
Walker Process antitrust violation in this case that would not
require a showing of misconduct before the PTO,” “federal patent
law preempts any state antitrust cause of action premised on
[such]
conduct
before
the
PTO.”
In
re
Ciprofloxacin
Hydrochloride Antitrust Litig., 363 F.Supp.2d 514, 543 (E.D.N.Y.
2005); see also, Semiconductor Energy Lab. Co., Ltd. v. Samsung
Elec. Co., Ltd., 204 F.3d 1368, 1382 (Fed. Cir. 2000) (finding
preemption where “the wrong alleged and for which state tort
damages [were] sought [was] no more than bad faith misconduct
before the PTO”); accord, In re K-Dur Antitrust Litig., No. 011652, 2007 WL 5297755, at *24-25 (D.N.J. Mar. 2, 2007).)
Novartis
both
on
moves
Rule
to
dismiss
12(b)(1)
Plaintiffs’
subject-matter
counts
against
jurisdiction
it
and
Rule 12(b)(6) plausibility grounds.
Novartis maintains that the
Court
to
does
requested
not
relief
have
jurisdiction
because
neither
grant
Plaintiff
Plaintiffs
has
their
standing
to
challenge the validity or enforceability of the ’197 patent – or
any patent Novartis holds on Diovan.
In the same vein, Novartis
asserts that Plaintiffs lack antitrust standing and that their
complaint fails to allege a plausible monopolization violation
- 8 -
under
federal
or
state
antitrust
law.
Finally,
Novartis
contends that Plaintiffs’ claim for damages is time-barred.
1. Declaratory Judgment of
Invalidity or Unenforceability
Article III of the Constitution requires an actual “case”
or “controversy” between litigating parties before a court may
adjudicate a dispute.
A party may bring an action under the
Declaratory Judgment Act only if an “actual controversy” exists,
“which
is
the
same
as
an
Article
III
case
or
controversy.”
Arris Group, Inc. v. British Telecomms. PLC, 639 F.3d 1368, 1373
(Fed.
Cir.
declaratory
2011)
(citations
judgment
must
omitted).
show
an
The
party
Article
III
seeking
case
controversy at the time it filed for declaratory relief.
a
or
Id. at
1373 (citing King Pharm., Inc. v. Eon Labs., Inc., 616 F.3d
1267, 1282 (Fed. Cir. 2010)).
When the underlying merits of the
declaratory judgment action involve issues of conduct before the
PTO, Federal Circuit law controls whether an actual controversy
exists.
3M Co. v. Norton Co., 929 F.2d 670, 672 (Fed. Cir.
1991).
This Court must ask whether “the facts alleged, under all
the circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory
judgment.”
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,
- 9 -
132
n.11
relief
(2007).
through
A
a
proper
dispute
decree
of
a
must
“admit
conclusive
of
specific
character,
as
distinguished from an opinion advising what the law would be
upon
a
hypothetical
state
quotation marks omitted).
insufficient
to
create
of
facts.”
Id.
at
127
(internal
“A mere adverse economic interest is
declaratory
judgment
jurisdiction.”
Arris, 639 F.3d at 1374-75 (emphasis in original).
Plaintiffs’
interest
in
having
the
’197
patent
declared
invalid or unenforceable is adverse to Novartis’ interest only
in a pure economic sense, and is thus far too attenuated to
support jurisdiction under the Declaratory Judgment Act.
At
best, securing such a judgment would merely inhibit Novartis
from
excluding
competitors,
thus
leading
indirectly
decrease in the price of Diovan for Tarek.
Circuit
law
suggests
that
purchasers
of
to
a
Indeed, Federal
goods
covered
by
a
patent who do not compete with the patentee and otherwise face
no threat of an action for infringement “cannot challenge [the]
patent’s
validity
judgment action.”
or
enforceability
through
a
declaratory
Ritz Camera & Image, LLC v. SanDisk Corp.,
700 F.3d 503, 506 (Fed. Cir. 2012).
The
extent
Court
they
therefore
can
be
dismisses
construed
as
- 10 -
Plaintiffs’
a
plea
for
claims
a
to
the
declaratory
judgment that the ’197 patent is invalid or unenforceable as a
result of fraud on the PTO.
2.
Walker Process Antitrust Action
As the Court lacks subject-matter jurisdiction to issue a
declaratory
alleged
judgment,
misconduct
Plaintiffs’
before
the
claims
PTO
relying
resemble
on
Novartis’
antitrust
claims
under Walker Process Equip., Inc. v. Food Machinery & Chemical
Corp., 382 U.S. 172, 174 (1965) (“[T]he enforcement of a patent
procured by fraud on the Patent Office may be violative of § 2
of the Sherman Act provided the other elements necessary to a
§ 2 case are present.”).
Walker Process allows a plaintiff to
strip a patent holder of its exemption from the antitrust laws
if
its
claimant
patent
may
was
procured
otherwise
by
lack
fraud.
Id.
entitlement
at
177.
to
a
(That
a
declaratory
judgment remedy does not preclude Walker Process relief.
See,
Ritz Camera, 700 F.3d at 506.)
a.
The
standing
Court
to
must
bring
a
first
Walker
Standing
determine
Process
whether
claim,
Plaintiffs
as
each
of
have
their
counts invokes Novartis’ alleged fraudulent conduct in procuring
the ’197 patent.
As a question ancillary to patent matters,
antitrust standing turns on regional circuit law.
See, Shuffle
Tech Int’l, LLC v. Scientific Games Corp., No. 15 C 3702, 2015
- 11 -
WL 5934834 at *9 (N.D. Ill. Oct. 12, 2015).
The Seventh Circuit
has not determined whether end users of patented products who
did not purchase them from the patentee have standing to assert
a Walker Process claim.
Courts in the Second, Third, and Ninth
Circuits have engaged the issue at some length and, even viewed
in the light most favorable to Plaintiffs, they lack standing
under those cases to pursue a Walker Process claim.
First, Novartis’ patent is not “already tarnished” by a
finding of inequitable conduct.
Antitrust
Litig.,
585
F.3d
In re DDAVP Direct Purchaser
677,
691-92
(2d
Cir.
2009)
(conferring antitrust standing on purchaser plaintiffs to pursue
Walker Process claim because the patents at issue were “already
unenforceable due to inequitable conduct”).
Rather, Plaintiffs
are seeking to litigate the inequitable conduct issues in tandem
with their Walker Process antitrust claim.
Thus, Plaintiffs do
not fall within DDAVP’s conferral of standing on Walker Process
claimants
suing
on
patents
found
previously
to
have
been
Diovan
from
procured by fraud.
Nor
Novartis.
772
Plaintiffs
direct
purchasers
of
See, e.g., Ritz Camera & Image, LLC v. SanDisk Corp.,
F.Supp.2d
purchasers
claim
are
had
alleging
1100
(N.D.
standing
that
to
Cal.
2011)
bring
manufacturers
- 12 -
(finding
Sherman
of
Act
flash
that
direct
monopolization
memory
devices
enforced fraudulently obtained patents), aff’d, Ritz Camera, 700
F.3d 503 (Fed. Cir. 2012); Molecular Diag. Labs. v. HoffmanLaRoche, Inc., 402 F.Supp.2d 276, 282 (D.D.C. 2005) (“[D]irect
purchasers
have
standing
to
pursue
Walker
Process
claims.”).
Rather, pharmaceutical companies like Novartis typically provide
their
manufactured
drugs
to
wholesalers
or
distributors,
who
then furnish them to pharmacies, who in turn dispense them to
patients like Tarek.
Accordingly,
Plaintiffs
are
indirect
purchasers
with
respect to Novartis, and courts confronted with such situations
decline to find Walker Process standing.
See, e.g., In re K-Dur
Antitrust Litig., 2007 WL 5297755, at *18 (“If this Court were
to
conclude
that
indirect
purchasers
had
standing
to
bring
Walker Process claims, it would turn antitrust policy on its
head,
and
extend
antitrust
standing
to
an
extraordinary
level[.]”); In re Ciprofloxacin, 363 F.Supp.2d at 542 (holding
that non-infringing consumers of patented products complaining
of supracompetitive prices have no cause of action to invalidate
the patent).
Nonetheless, the Federal Circuit in Ritz Camera
made clear that Walker Process standing should be interpreted in
light of regional circuit law on antitrust standing.
Camera, 700 F.3d at 506-07.
See, Ritz
As such, the Court examines the
question more closely in view of Seventh Circuit law that a
- 13 -
private plaintiff, to have antitrust standing, must plausibly
allege (1) that it suffered an antitrust injury and (2) that it
is
an
acceptable
actions.
plaintiff
to
pursue
the
alleged
antitrust
See, Gatt Commc’ns, Inc. v. PMC Asscs., LLC, 711 F.3d
68, 76 (7th Cir. 2013).
1.
Antitrust injury
Plaintiffs fail to allege a cognizable antitrust injury.
First, the Complaint clearly states that at least one form of
generic valsartan is available on the market.
As such, to the
extent Novartis has market power, it is not maintaining it by
erecting (insurmountable) barriers to generic entry.
Second,
the
injured
gravamen
Plaintiffs
of
by
the
Complaint
charging
higher
is
that
prices
Novartis
(to
direct
has
purchasers,
indirectly leading to higher copays) than generic manufacturers
charge for generic valsartan.
Standing alone, this is hardly
revelatory and fails to clear the Twombly hurdle:
A brand-name
drug’s higher prices are equally consistent (if not more so)
with unilateral exercise of individual market power, which does
not violate the antitrust laws.
F.3d
608,
610
(7th
Cir.
violate the Sherman Act:
whatever
the
traffic
2006)
See, Schor v. Abbott Labs., 457
(“The
price
of
Norvir
cannot
a patent holder is entitled to charge
will
bear.”);
- 14 -
accord,
In
re
Brand
Name
Prescription Drugs Antitrust Litig., 186 F.3d 781, 786-87 (7th
Cir. 1999).
Thus, Seventh Circuit law suggests that the harm Plaintiffs
complain of is not a cognizable antitrust injury.
2.
Acceptable plaintiff
The Court finds further that Plaintiffs are not a proper
antitrust
Novartis.
tests
to
antitrust
plaintiff
to
bring
a
Walker
Process
claim
against
Although federal courts have devised a panoply of
determine
whether
plaintiff,
two
an
bear
injured
particular
party
is
relevance
a
proper
for
the
analysis here.
First, Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977),
limits damages actions under Section 4 of the Clayton Act to
direct
purchasers.
Id.
at
735.
As
indirect
purchasers
(who
purchased Diovan at pharmacies or through intermediary health
plans), Plaintiffs have no cognizable Clayton Act damages claim
based
on
charges
passed on to them.
that
direct
purchasers
of
Diovan
may
have
(See, Section III.A.3.a.1, infra.)
Second, and more specific to Sherman Act claims, is the
balancing test in Associated Gen. Contractors of Calif., Inc. v.
Calif. State Council of Carpenters, 459 U.S. 519, 536-45 (1983).
There, the Supreme Court crafted a multi-factor “direct injury”
barometer of whether the plaintiff is a proper party to bring a
- 15 -
private
antitrust
action.
These
factors
are
(1)
the
causal
connection between the violation and the harm; (2) the presence
of improper motive; (3) the type of injury and whether it was
one
Congress
sought
to
redress;
(4)
the
directness
of
the
injury; (5) the speculative nature of damages; and (6) the risk
of duplicate recovery and complex damage apportionment.
Loeb
Indus., Inc. v. Sumitomo Corp., 306 F.3d 469, 484 (7th Cir.
2002) (citing Associated Gen., 459 U.S. at 537-45).
As
applied
to
Plaintiffs’
factors are left wanting.
Complaint,
too
many
of
these
Plaintiffs do allege in the barest
terms possible an improper motive on the part of Novartis with
respect to conduct before the PTO, but their allegation of its
improper motive (“greed”) in charging higher prices for Diovan
than generic manufacturers charge for valsartan is of dubious
sufficiency
motive.
–
particularly
because
greed
See, Schor, 457 F.3d at 610.
is
not
an
unlawful
As mentioned previously,
the causal connection is loose, the directness of the injury
oblique.
Further,
the
damages
are
speculative;
Plaintiffs
cannot with a straight face claim that brand-name drugs should
cost the same as generics, meaning that “to obtain damages the
plaintiffs would have to separate the price effects of [unlawful
monopoly activity] from the price effects of the defendant[‘]s
lawful market power.”
Brand Name Prescription Drugs, 186 F.3d
- 16 -
at 786 (citing Blue Cross & Blue Shield United of Wisc. v.
Marshfield Clinic, 152 F.3d 588, 593-94 (7th Cir. 1998)).
also
seems
a
risk
apportionment,
of
duplicate
because
more
recovery
direct
and
complex
purchasers
as
There
damages
well
as
insurance carriers pay a significant portion of any unlawfully
supracompetitive prices that Novartis might be found to charge.
Working
within
this
“direct
injury”
framework,
recent
Seventh Circuit cases have found that indirect purchasers lack
antitrust standing.
For example, where consumers of aluminum-
containing products brought an antitrust action against aluminum
manufacturers, the court held that such indirect purchasers were
not participants in the aluminum market merely “by creating a
demand
for
aluminum.”
In
re
Aluminum
Warehousing
Litig., 833 F.3d 151, 161-62 (7th Cir. 2016).
similarly
alleged
were
not
a
“necessary
anti-competitive
distribution
chain”
and
step”
conspiracy,
“purely
in
but
Antitrust
Their injuries
carrying
incidental,”
as
the
“down
instead
out
the
the
alleged
scheme would have been just as effective from the defendants’
point of view if direct purchasers paid supracompetitive prices
without passing that cost on to consumers. Id. at 162.
The same
is true in this case. Plaintiffs cannot claim to be participants
in the Diovan market merely because Tarek, by having high blood
pressure (and experiencing side effects from valsartan), creates
- 17 -
demand for Diovan.
Novartis did not need to injure indirect
purchasers like Tarek for the alleged monopolization to work;
all it requires is for Novartis’ direct purchasers – namely,
drug
wholesalers
irrespective
of
or
distributors
whether
they
-
to
would
pay
pass
monopoly
that
prices,
cost
on
to
pharmacies, or pharmacies to ultimate consumers.
Even
if
Plaintiffs
they
are
suffered
unlikely
a
under
cognizable
Seventh
antitrust
Circuit
injury,
precedent
to
qualify as proper antitrust plaintiffs, as they have only an
indirect nexus to the alleged monopoly.
*
*
*
Although it appears to be a matter of first impression in
this
Circuit,
the
Court
holds
that
Walker
Process
does
not
confer standing on a party whose only connection to the patentee
is as an indirect purchaser of products covered by the patent.
Novartis’ Rule 12(b)(1) Motion is granted in relevant part.
b.
Fraud on the PTO
Even if Plaintiffs do have standing to bring their Walker
Process count, their Complaint fails to state a claim on which
relief can be granted.
Showing fraud on the PTO under Walker
Process requires evidence that:
(1) the patent at issue was
procured
fraud
by
knowing
or
willful
on
the
PTO;
(2)
the
defendant was aware of the fraud when enforcing the patent; (3)
- 18 -
the defendant clearly intended to deceive the examiner; (4) the
patent would not have issued but for the misrepresentation or
omission.
See, Nobelpharma AB v. Implant Innovations, Inc., 141
F.3d 1059, 1068-71 (Fed. Cir. 1998); accord, C.R. Bard, Inc. v.
M3 Sys., Inc., 157 F.3d 1340, 1364 (Fed. Cir. 1998).
plausible
claim
under
Walker
Process
that
To state a
Novartis
committed
fraud on the PTO, Plaintiffs must therefore adequately allege
these elements under Federal Circuit law.
See, Dippin’ Dots,
Inc. v. Mosey, 476 F.3d 1337, 1346 (Fed. Cir. 2007) (citation
omitted).
claims,
In addition, because Walker Process claims are fraud
Plaintiffs
must
requirements of Rule 9(b).
427
F.3d
958,
967
(Fed.
meet
the
heightened
pleading
Medimmune, Inc. v. Genentech, Inc.,
Cir.
2005)
(“Like
all
fraud-based
claims, Walker Process allegations are subject to the pleading
requirements of Fed. R. Civ. P. 9(b).”), rev’d and remanded on
other grounds, 549 U.S. 118 (2007).
However, Plaintiffs utterly fail to identify any references
or
statements
plausibly
meet
made
the
to
or
withheld
Walker
Process
Rule 9(b)’s required specificity.
from
the
PTO
elements
–
that
could
let
alone
First, Plaintiffs claim that
the inventors of the ’197 patent were incorrectly named based on
an
August
24,
2000
Novartis
press
release
naming
different
individuals as the “inventor of Diovan(R) (valsartan) and his
- 19 -
research
team.”
(Compl.
at
Ex.
A2.)
Novartis
maintains,
however, that the much earlier U.S. Patent No. 5,399,578 (“the
’578 patent”) covers the valsartan compound and lists the same
inventors
referenced
Plaintiffs
admit
in
that
the
the
Novartis
’197
press
patent
release.
does
not
Even
cover
the
“invention” of valsartan or Diovan but, on the other hand, is
directed
to
compression
“solid
methods
expressly
in
patent
at
U.S.
dosage
(Compl.
discloses
described
oral
that
patent
2:53-55.)
(In
¶
[of
32).
“[t]he
valsartan]
Indeed,
preparation
specification
ruling
the
on
a
No.
of
formed
’197
motion
patent
valsartan
5,399,578.”
to
by
is
(’197
dismiss
for
failure to state a claim, the Court may consider documents, like
the ’197 patent, that are referred to in the Complaint, as well
as
facts
readily
ascertainable
from
sources
reasonable dispute, such as the ’578 patent.
not
subject
to
See, Williamson v.
Curran, 714 F.3d 432, 436 (7th Cir. 2013); Ennenga v. Starns,
677
F.3d
766,
773
(7th
Cir.
2012).)
That
the
individuals
identified in the Novartis press release as the inventors of
Diovan/valsartan are not listed as inventors of the ’197 patent
gives rise to no reasonable inference in Plaintiffs’ favor.
Second, Plaintiffs nod toward a patent issued to HoffmanLaRoche, Inc., U.S. Patent No. 5,696,116 (“the ’116 patent”),
claiming that Novartis knew its press release was false because
- 20 -
the
’116
patent
compound
to
application
was
treat
was
the
high
filed
first
to
blood
on
July
disclose
pressure.
12,
valsartan
The
1994,
as
’116
claimed
a
a
patent
foreign
priority date of July 15, 1993, and issued on December 9, 1997.
(Compl. ¶ 20.)
However, the ’578 patent application disclosing
the preparation of a valsartan compound was filed December 29,
1992, claimed a foreign priority date of February 19, 1990, and
was issued March 21, 1995.
To the extent the ’116 patent is
relevant to Plaintiffs’ Walker Process fraud allegations at all,
it offers no support for the allegation that Novartis knew its
scientists were not the true inventors of Diovan and somehow
committed fraud on the PTO in applying for the ’197 patent.
Finally,
taking
based
valsartan
on
side
that
he
effects
does
not
Tarek
experienced
experience
while
while
taking
Diovan, Plaintiffs allege that Novartis “knew that the patent
protection
for
Diovan
was
enablement
requirement.
“contain
written
a
invalid”
Every
description
of
for
failure
patent
the
to
meet
specification
invention,
and
the
must
of
the
manner and process of making and using it, in such full, clear,
concise, and exact terms as to enable any person skilled in the
art
to
which
it
pertains,
or
with
connected, to make and use the same.”
which
it
is
most
nearly
35 U.S.C. § 112(a).
Yet
an individual’s experiencing side effects when taking a generic
- 21 -
drug but not the associated brand-name drug, standing alone,
lends no plausibility to an enablement invalidity argument.
Even
assuming
manufactured
that
precisely
the
valsartan
according
to
Tarek
the
took
’197
was
patent’s
disclosures – something Plaintiffs do not allege - there are far
too many independent factors that could explain Tarek’s side
effects and are exceedingly more plausible than impugning the
’197 patent’s written description.
version
rationale
may
be
for
Prescription
produced
under
trademarks)”
Drugs,
186
For example, “the branded
better
than
the
at
787.
F.3d
quality
control
(the
generic.
Brand
Name
For
another,
varying
absorption rates between the generic and the brand-name drug may
account for differing side effects.
See, e.g., IMS Health, Inc.
v. Sorrell, 630 F.3d 263, 267-68 (2d Cir. 2010) (“Bioequivalent
generic drugs are not necessarily identical to the brand name
version,
but
are
required
to
demonstrate
an
absorption
between 80 and 125 percent of the brand-name drug.
rate
Variations
in absorption rates among branded or generic drugs may cause
different reactions, such as side effects.”), aff’d, 564 U.S.
552 (2011).
Regardless of whether valsartan side effects bear
on the sufficiency of the ’197 patent’s written description, the
first salient question for Walker Process purposes would be some
knowledge on the part of Novartis concerning the ’197 patent’s
- 22 -
shortcomings during its prosecution – something Plaintiffs do
not even allege generally.
Thus, the Complaint lacks plausible
allegations that the ’197 patent fails to meet the enablement
requirement or that Novartis did anything unlawful at all in
that respect.
Plaintiffs fail to allege any of the required substantive
elements of fraud on the PTO – to say nothing of Rule 9(b)’s
requirement
that
Absent
other
any
these
allegations
basis
for
be
their
pled
claim
with
that
specificity.
Novartis
made
fraudulent statements to the PTO regarding the ’197 patent, the
Complaint does not implicate any of the required Walker Process
elements.
the
Plaintiffs’ fraud counts against Novartis thus flunk
plausibility
standard,
and
the
Court
grants
Novartis’
Rule 12(b)(6) Motion in relevant part.
c.
As
a
final
basis
Time-Barred Recovery
for
dismissal,
the
Court
finds
that
Plaintiffs’ Walker Process claim is barred by the statute of
limitations.
Generally, a federal antitrust claim that accrues
more than four years prior to a plaintiff’s suit is time-barred.
Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321,
338
(1971).
generally
While
begins
the
running
four-year
when
the
statute
of
allegedly
limitations
fraudulently
procured patent issued, see, Brunswick Corp. v. Riegel Textile
- 23 -
Corp., 752 F.2d 261, 268 (7th Cir. 1984), the situation may well
be different where a purchaser plaintiff who is not a business
competitor
of
the
defendant
merely
claims
to
have
paid
supracompetitive prices for a product covered by the patent.
See,
e.g.,
In
re:
Evanston
Northwestern
Healthcare
Corp.
Antitrust Litig., No. 07 C 4446, 2016 WL 4720014, at *8-9 (N.D.
Ill. Sept. 9, 2016) (citing Berkey Photo, Inc. v. Eastman Kodak
Co., 603 F.2d 263, 295 (2d Cir. 1979)).
of
action
for
illegal
monopolization
In such cases, a cause
under
Section
2
of
the
Sherman Act may accrue once a purchaser plaintiff actually pays
the supracompetitive price.
Berkey, 603 F.2d at 295.
Under the general rule, Plaintiffs’ Walker Process claim is
unquestionably time-barred.
Plaintiffs readily admit that the
patent issued on September 25, 2001 (Compl. ¶ 22), meaning that
the statute of limitations on their Walker Process claim expired
on September 25, 2005.
Novartis
until
However,
even
March
the
They did not file their claims against
1,
2017
more
–
lenient
nearly
Berkey
purchaser plaintiffs is of no avail here.
that
Tarek’s
doctor
began
a
prescribing
dozen
years
accommodation
late.
for
The Complaint alleges
Diovan
“for
him
long
before January 2011,” which he took without interruption until
“[a]round the beginning of 2013,” when he first tried generic
valsartan. (Compl. ¶¶ 4-5.)
The only prices Tarek was paying
- 24 -
for
Diovan
health
(in
the
benefit
form
plan
of
a
copay
premiums
or,
potentially,
associated
with
higher
his
Diovan
prescriptions) he was paying well before March 1, 2013 – and
thus
his
cause
of
action
accrued
before
then,
barring
on
statute-of-limitations grounds Plaintiffs’ March 1, 2017 Walker
Process claim against Novartis.
Ostensibly
concealment
Copper
to
to
the
the
statute
toll
Antitrust
Plaintiffs
invoke
Litig.,
nakedly
436
assert
discovery
of
F.3d
that
or
limitations,
782,
they
rule
789
“could
see,
(7th
not
fraudulent
In
Cir.
2006),
find
out
re
how
Novartis monopolized Diovan until July 12, 2014.” (Compl. ¶ 24.)
No detail is provided about what Plaintiffs learned on this date
and
why
whatever
they
it
could
was.
not
In
reasonably
fact,
many
of
have
the
earlier
discovered
allegations
in
the
complaint undercut the notion that there was any concealed or
undetectable
injury
resulting
from
Novartis’
alleged
wrongful
exclusion of others from the market or extraction from Tarek of
“an
extremely
high
price”
for
Diovan.
(Compl.
¶
30.)
For
example, the ’197 patent application and the August 24, 2000
Novartis
press
release,
both
of
which
form
the
basis
for
Plaintiffs’ Walker Process claim, were matters of public record.
Further, Tarek was aware by “the beginning of 2013” of facts
- 25 -
undercutting
any
claim
that
Novartis
had
monopolized
the
relevant market, as he was taking generic valsartan then.
Striding further down the rabbit hole, the Court notes that
the
Walker
discovery
Process
rule
did
claim
apply
would
to
be
toll
time-barred
the
statute
even
of
if
the
limitations
until Plaintiffs knew or reasonably should have known that the
prices paid for Diovan were supracompetitive.
explicitly
defined
their
injury
as
their
Plaintiffs have
Diovan
exceeded those charged for generic valsartan.
copays
that
Yet Plaintiffs
allege that “around the beginning of 2013,” Tarek tried to use
generic valsartan and “[a]t that time” his “copay for Diovan was
$30 and BCBS was paying $176.61, while he paid $12.6 for the
generic and BCBS paid $0.0.” (Compl. ¶ 5.)
He thus became aware
of the complained-of disparity in price more than four years
prior
to
March
1,
2017
Diovan copay to $50).
(although
BCBSIL
later
increased
his
(It is not reasonable to infer that “the
beginning of 2013” encompasses a date after March 1, 2013, and
any
uncertainty
concerning
the
exact
time
at
which
Tarek
discovered the disparity in copays flows from Plaintiffs’ own
imprecise allegations.
See, e.g., Morrison v. Int’l Union Sec.,
Police, and Fire Professionals of Am., No. 13 C 1146, 2013 WL
5274280,
at
dismiss
with
*4
(D.
Md.
prejudice
Sept.
16,
because
- 26 -
2013)
the
(granting
plaintiff’s
motion
to
“imprecise
allegations” that harassment “occurred [continuously] throughout
or
during
occurred
2012”
did
within”
“not
the
satisfy
the
six-month
Court
statute
that
of
any
breach
limitations);
Farbstein v. Hicksville Pub. Library, 323 F.Supp.2d 414, 421
(E.D.N.Y.
2004)
(“Plaintiff
refers
generally
to
events
that
occurred in the four year period prior to initiation of this
lawsuit. . . .
Thus,
these
imprecise
allegations
are
ineffective, as framed, to rescue Plaintiff’s . . . claims from
the [three-year] statute of limitations.”).)
For
the
sake
of
completeness,
the
Court
notes
that
the
continuing violation exception to the statute of limitations in
antitrust actions is of no avail here either.
Corp., 401 U.S. at 338.
See, Zenith Radio
That exception allows an antitrust
defendant’s “overt act” to restart the statute of limitations,
which act “‘must be a new and independent act that is not merely
a reaffirmation of a previous act’” and “‘must inflict new and
accumulating
injury
on
the
plaintiff.’”
Xechem,
Inc.
v.
Bristol-Myers Squibb Co., 274 F.Supp.2d 937, 944-45 (N.D. Ill.
2003) (quoting Grand Rapids Plastics, Inc. v. Lakian, 188 F.3d
401, 406 (6th Cir. 1999)).
such
an
prices
overt
in
act.
excess
of
Plainly, this case does not involve
Continuing
those
to
charged
charge
for
direct
generic
purchasers
valsartan
is
merely reaffirming prior pricing acts, much like the filing of
- 27 -
repeated
infringement
lawsuits
that
“did
nothing
more
than
reaffirm” prior efforts to block the same competitor from the
market.
Xechem, 274 F.Supp.2d at 945.
More specifically, price
increases are generally not considered overt acts, see, e.g., Z
Techs. Corp. v. Lubrizol Corp., 753 F.3d 594, 600-601 (6th Cir.
2014), as opposed to, for example, “a series of ongoing meetings
to correct a cartel and adjust its prices.”
Areeda & Hovenkamp,
Antitrust Law: An Analysis of Antitrust Principles and Their
Application, ¶ 320 (3d ed. 2007) (“If the mere charging of a
monopoly price constitutes a ‘continuing violation’ tolling the
statute, then we have indefinitely lengthened the statute of
limitation on claims of successful monopolization.”) (internal
quotation marks and citation omitted).
And even if bare price
increases were overt acts, Plaintiffs’ only specific allegation
of a price increase that affected them is BCBSIL’s increase of
Tarek’s copay to $50 “[a]round June 2013” (Compl. ¶ 6), passing
on more of the cost of Diovan to consumers.
This is not an
overt act of Novartis.
For the foregoing reasons, Novartis’ Rule 12(b)(6) Motion
is granted in relevant part.
3.
Antitrust Violation of Section 7 of the Clayton Act
In their third count, Plaintiffs allege that the “December
1996”
merger
of
“two
giants
Ciba-Geigy
- 28 -
and
Sandoz,”
which
spawned Novartis, “resulted in a very harmful monopoly and price
increase, which is against the antitrust laws.”
33.)
(Compl. ¶¶ 21,
The Court charitably construes this as a claim brought
under Section 4 for a violation of Section 7 of the Clayton Act,
which
is
the
principal
federal
antitrust
statute
concerning
mergers and acquisitions, stock purchases, and joint ventures.
It prohibits acquisitions, both direct and indirect, the effect
of which “may be substantially to lessen competition, or to tend
to create a monopoly.” 15 U.S.C. § 18.
As with Sherman Act
claims, if a party seeks to sue a putative section 7 violator,
it must commence its enforcement action “within four years after
the cause of action accrued,” or the enforcement action “shall
be forever barred.” 15 U.S.C. § 15b.
reasons
already
explored,
these
However, for many of the
allegations
fail
to
state
a
plausible claim.
a.
1.
Antitrust Standing
Proper antitrust plaintiff
With respect to antitrust standing under the Clayton Act,
Plaintiffs
purchasers
better
are
–
such
situated
lawsuit.
indirect
as
under
drug
purchasers
of
wholesalers
Illinois
Brick
or
to
Diovan,
and
distributors
bring
a
direct
-
are
Clayton
Act
See, Illinois Brick, 431 U.S. at 737-42 (holding that
only overcharged direct purchaser, and not others in chain of
- 29 -
manufacture or distribution, is party “injured in his business
or
property”
within
meaning
of
Clayton
Act).
Although
the
Illinois Antitrust Act appears to permit indirect purchasers to
sue for antitrust violations, 740 Ill. Comp. Stat. 10/7(2) (“No
provision of this act shall deny any person who is an indirect
purchaser the right to sue for damages.”) – potentially making
Plaintiffs’
merger
proper
under
parties
state
law
-
to
challenge
the
federal
the
Ciba-Geigy/Sandoz
pleading
standards
and
statute of limitations otherwise mirror those governing claims
under the Illinois Antitrust Act.
See, e.g., 740 Ill. Comp.
Stat. 10/7 (“Any action for damages under this subsection is
forever barred unless commenced within 4 years after the cause
of action accrued.”); id. at 10/11 (“When the wording of this
act is identical or similar to that of a federal antitrust law,
the
courts
of
this
State
shall
use
the
construction
of
the
federal law by the federal courts as a guide in construing this
Act.”); Hackman v. Dickerson Realtors, Inc., 520 F.Supp.2d 954,
968
(N.D.
Ill.
2007)
(“[T]he
pleading
requirements
of
the
Sherman Act inform the pleading requirements under the Illinois
Antitrust
Hosp., 550
interpret
Act.”)
N.E.2d
the
(citations
986,
Illinois
990
omitted);
(Ill.
Antitrust
1990)
Act
antitrust law upon which it is modeled).
- 30 -
Laughlin
(holding
in
light
v.
Evanston
that
of
courts
federal
Thus, all the other
deficiencies explored herein leave Plaintiffs high and dry on
any cognizable state-law challenge to the merger as well.
2.
With
standing,
Novartis
respect
to
Plaintiffs
used
its
Antitrust injury
the
fail
patent
antitrust
to
state
monopoly
injury
a
necessary
plausible
(presumed
for
claim
valid
Clayton Act claim) unlawfully in the relevant market.
that
for
the
Not only
does the Complaint admit the existence of at least one generic
valsartan manufacturer – and this during times that preceded
expiration of the ’197 patent by several years – but the mere
allegation that Diovan has steadily increased in price is just
as consistent (if not more so) with the rights Novartis enjoys
by
virtue
of
its
immunized
patent
monopoly.
(See,
Section III.A.2.a.1, supra.)
b.
Moreover,
although
Time-barred Recovery
Clayton
Act
claims
for
violation
of
Section 7 may accrue later, the four-year statute of limitations
generally begins to run as soon as the acquisition takes place.
See, United States v. E.I. du Pont de Nemours & Co., 353 U.S.
586, 598 (1957).
As the merger Plaintiffs appear to challenge
occurred over twenty years ago, quite clearly the statute of
limitations has run under the default rule.
For a merger that
produced anticompetitive effects only post-merger, the statute
- 31 -
of limitations begins to run not when the merger transpired, but
when the injury occurred.
E.I. du Pont, 353 U.S. at 597-98.
In
the words of the Seventh Circuit, “old activity (as in du Pont,
a
stock
acquisition
preceding
the
suit
by
30
years)
is
not
immunized, if the potential for a reduction in output is created
or realized more recently as market conditions change.”
U.S.
Gypsum Co. v. Ind. Gas Co., 350 F.3d 623, 628 (7th Cir. 2003).
Yet Plaintiffs’ claims are time-barred regardless of the theory
invoked to delay accrual.
The
Clayton
Act’s
prohibition
on
anticompetitive
acquisitions regulates injuries arising out of “holding as well
as obtaining assets,” U.S. v. ITT Cont’l Banking Co., 420 U.S.
223, 240, 242 (1975), leading many courts to christen the theory
for delaying the accrual date for such injuries the “hold-anduse
doctrine.”
In
(citations omitted).
re:
Evanston,
2016
WL
4720014
at
*12
As such, subsequent anticompetitive acts
committed by the merger enterprise may be dated “from the time
these events actually transpired and not only from the date of
the mergers which made these actions possible.”
Julius Nasso
Concrete Corp. v. Dic Concrete Corp., 467 F.Supp. 1016, 1023
(S.D.N.Y.
1979).
However,
for
the
hold-and-use
doctrine
to
apply, a plaintiff must show – and thus must at least plead
facts supporting a plausible inference – that the conduct was
- 32 -
made possible by the acquisition.
2016
WL
4720014
at
*13;
See, e.g., In re: Evanston,
Julius
Nasso,
467
F.Supp.
at
1023.
There are no such allegations here, and Ciba-Geigy or Sandoz on
their own could have done precisely what Novartis allegedly did
–
patent
increase
a
drug
and
during
distinguished
unilaterally
the
from
term
the
of
institute
the
situation
a
in,
for
price
monopoly.
patent
steady
As
example,
In
re:
Evanston – where health care providers in a certain geographic
area
merged
and
supracompetitive
then
pricing
later
policy
instituted
for
services
an
–
alleged
unilaterally
increasing the price of a brand-name drug is within the ambit of
a lawful patent monopoly.
See, e.g., Schor, 457 F.3d at 610;
Brand Name Prescription Drugs, 186 F.3d at 786-87.
Even
cause
of
if
the
action
hold-and-use
would
have
doctrine
accrued
applied,
at
the
time
instituted its supracompetitive pricing policy.
Evanston, 2016 WL 4720014, at *13.
Plaintiffs’
Novartis
See, In re:
Although Plaintiffs provide
data about price increases from 2013 through 2107 – that is,
within the window of the four-year statute of limitations – they
do not allege that Novartis kept the price of Diovan constant
(or only increased it in proportion to, say, the consumer price
index)
prior
Novartis,
to
after
2013.
securing
It
is
its
not
’197
- 33 -
reasonable
patent
to
monopoly
infer
in
that
2001,
waited until 2013 to increase Diovan prices under an allegedly
supracompetitive pricing policy enabled by the 1996 merger.
such,
even
applying
the
hold-and-use
doctrine
to
As
Plaintiffs’
allegations does not bring their challenge to the merger within
the four-year statute of limitations.
Next, Plaintiffs have no recourse here to the continuing
violation doctrine, which does not apply to alleged violations
of section 7 of the Clayton Act.
Lubrizol
Corp.,
753
F.3d
594,
See, e.g., Z Techs. Corp. v.
599,
604-05
(6th
Cir.
2014);
Midwestern Machinery Co., Inc. v. Northwest Airlines, Inc., 392
F.3d 265, 270-71 (8th Cir. 2004); accord, Shuffle Tech, 2015 WL
5934834, at *13-14.
And even if it did, in the absence of an
overt act (see, Section III.A.2.c, supra), “the doctrine would
only at best allow [plaintiffs] to reach back to when [they
were] first injured by the anticompetitive effects of the merger
– that is, when [plaintiffs] paid [defendant’s] supracompetitive
prices.”
In re: Evanston, 2016 WL 4720014, at *14.
Thus, this
doctrine cannot do for Plaintiffs’ challenge to the Novartis
merger what it cannot do for Plaintiffs’ Walker Process claim.
Similarly,
and
Section III.A.2.c,
copay)
for
Diovan
for
Tarek’s
“long
the
same
taking
before
(and
reasons
discussed
presumably
January
2011”
paying
in
a
anesthetizes
Berkey, which suspends running of the statute of limitations
- 34 -
until
a
purchaser
plaintiff
pays
the
supracompetitive
That clearly happened well before March 1, 2013.
price.
And, finally,
even in the best case for Plaintiffs, where the discovery rule
somehow applies to toll the four-year statute of limitations on
their challenge to the merger until they discovered that they
were paying a supracompetitive price (which Plaintiffs define
with
respect
to
the
disparity
in
copays
between
Diovan
and
generic valsartan), their imprecise allegations about the timing
of their discovery do not permit an inference that it occurred
after March 1, 2013.
(See, Section III.A.2.c.)
As such, there is no basis on which to find that Plaintiffs
timely brought a federal or state antitrust claim challenging
the merger.
*
*
*
Therefore, Novartis’ Motion to Dismiss under Rule 12(b)(6)
is granted to the extent Plaintiffs’ claims invoke a Section 7
violation of the Clayton Act or a comparable theory under the
Illinois Antitrust Act.
B.
BCBSIL
Against BCBSIL, Plaintiffs bring counts for “violating the
contract,”
“committing
“committing
fraud
to
fraud
provide
to
deny
low
the
quality
proper
coverage,”
medications,”
and
“committing fraud to increase the incomes of its managements.”
- 35 -
(Compl. ¶¶ 26-29.)
As best the Court can tell, these claims
sound in breach of contract and common-law fraud.
seek
compensatory
damages,
punitive
damages,
Plaintiffs
costs,
and
attorneys’ fees.
This case was removed from state court on the basis of
Novartis’ federal question claims.
(See, ECF No. 1 ¶ 4 (“This
Court has original jurisdiction in this case under 28 U.S.C.
§ 1331.”), ¶ 6 (“All Defendants consent to the removal of this
matter pursuant to 28 U.S.C. § 1446(b)(2)(A).”).)
Because the
Court has dismissed the federal question claims against Novartis
that grounded removal, it now searches for independent subjectmatter jurisdiction to hear Plaintiffs’ state law claims against
BCBSIL.
Subject-matter jurisdiction is a threshold matter that
must
established
be
before
resolving
issues
on
the
merits.
Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 9495 (1998).
The Court has an independent obligation to ensure
that jurisdiction exists.
DeBartolo v. HealthSouth Corp., 569
F.3d 736, 740 (7th Cir. 2009).
Because Plaintiffs’ claims for
fraud and breach of contract do not arise under federal law,
subject-matter jurisdiction to hear them can only be grounded in
diversity jurisdiction under 28 U.S.C. § 1332, which requires
that plaintiffs and defendants be citizens of different states
and that the amount in controversy exceeds $75,000.
- 36 -
Plaintiffs do not allege their own citizenship in their
Complaint.
As individuals, Plaintiffs are citizens of the state
in which they are “domiciled,” that is, “the state in which a
person intends to live over the long run.”
See, Heinen v.
Northrop Grumman Corp., 671 F.3d 669, 670 (7th Cir. 2012).
In
their Complaint, Plaintiffs list their address as 33W135 Bonnie
Street, Saint Charles, Illinois 60174.
have
health
insurance
coverage
They further claim to
through
BCBSIL
by
virtue
of
Soona’s longtime employment with “School Dist. 33” (Compl. ¶ 1),
evidencing an intent to remain in Illinois.
v.
O&K
(naming
“place
Steel
as
of
Corp.,
factors
42
Fed.Appx.
relevant
employment,”
and
to
830,
domicile
“location
of
833
See, e.g., Newell
(7th
“current
Cir.
2002)
residence,”
property”);
24
Hour
Fitness USA, Inc. v. Bally Total Fitness Holding Corp., No. 08 C
3853, 2008 WL 4671748, at *3 (N.D. Ill. Oct. 21, 2008) (also
noting the importance of the “presence of family members”).
In
view of the mute pleadings, Plaintiffs appear to be domiciled in
and citizens of Illinois for purposes of diversity jurisdiction.
In the same vein, Plaintiffs’ Complaint does not allege the
citizenship of BCBSIL.
The Court has little reason to doubt
that BCBSIL is an Illinois citizen for purposes of diversity.
See, e.g., Raines v. Health Care Service Corp., No. 86 C 5352,
1988 WL 58591, at *1 (N.D. Ill. May 31, 1988) (“Defendant Health
- 37 -
Care Service Corporation, a mutual legal reserve company d/b/a
Blue
Cross
Blue
Shield
of
Illinois
(‘Blue
Cross’)
is
a
corporation with its principal place of business in Chicago,
Illinois.”); Health Care Service Corp. v. Califano, 466 F.Supp.
1190, 1192 n.8 (N.D. Ill. 1979) (“In 1975, HCSC was incorporated
by the State of Illinois as a non-profit health care service
corporation thus merging the Illinois Blue Cross and Blue Shield
plans.”) (citation omitted).
Shield
Association”
corporation.
is
Similarly, “Blue Cross and Blue
registered
as
an
active
Illinois
See, Office of the Illinois Secretary of State,
https://www.ilsos.gov/corporatellc/CorporateLlcController
visited June 27, 2017).
(Such filings are matters of public
record and are properly subject to judicial notice.
See, e.g.,
GE Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 108081 (7th Cir. 1997) (stating that a district court is permitted
to take judicial notice of matters of public record); City of
Waukegan v. Bond Safeguard Ins. Co., No. 15 C 3007, 2015 WL
68770106, at *2 (N.D. Ill. Nov. 6, 2015) (“With respect to [the
defendant’s] state of incorporation, the Court takes judicial
notice of filings with the Secretary of State. . . .”); Patten
v. Northern Trust Co., 703 F.Supp.2d 799, 803 n.2 (N.D. Ill.
2010) (finding it proper to take judicial notice of “matters of
public
record,
such
as
[regulatory]
- 38 -
filings”).)
Similarly,
according to its website, BCBSIL’s headquarters are located at
300
East
Randolph
BlueCross
Street,
BlueShield
Chicago,
of
Illinois
60601.
Contact
Illinois,
See,
Us,
https://www.bcbsil.com/employer/contact_us.htm (visited June 27,
2017).
Thus, BCBSIL appears to be a citizen of Illinois.
Absent
diversity,
the
Court
does
not
appear
to
have
independent subject-matter jurisdiction over Plaintiffs’ statelaw claims against BCBSIL.
As a result, the Court remands the
balance of the case to Kane County Circuit Court.
U.S.C.
§
appears
1447(c)
that
jurisdiction,
(“If
the
the
at
any
time
district
case
shall
before
court
be
final
lacks
See, 28
judgment
subject
remanded.”);
see,
it
matter
generally,
Adkins v. Illinois Cent. R. Co., 326 F.3d 828 (7th Cir. 2003).
Alternatively,
to
the
extent
the
Court
may
enjoy
residual
authority to hear the claims based on supplemental jurisdiction
– notwithstanding that the federal question anchor is now aweigh
– the Court exercises its discretion to remand them.
U.S.C.
§
exercise
1367(c)
(permitting
supplemental
a
district
jurisdiction
over
court
a
to
claim
See, 28
decline
if
it
to
“has
dismissed all claims over which the district court has original
jurisdiction”); see, generally, Carnegie-Mellon Univ. v. Cohill,
484 U.S. 343 (1988); Groce v. Eli Lilly & Co., 193 F.3d 496 (7th
Cir. 1999).
- 39 -
IV.
CONCLUSION
For the reasons stated herein, Defendant Novartis’ Motion
to Dismiss [ECF No. 16] is granted.
are
dismissed
alternatively,
with
Rule
prejudice
12(b)(6).
The claims against Novartis
under
Absent
Rule
the
12(b)(1)
federal
and,
question
claims against Novartis that formed the basis for removal, the
Court remands the balance of the case to Kane County Circuit
Court.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: July 5, 2017
- 40 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?