FERRING PHARMACEUTICALS INC. v. WATSON PHARMACEUTICALS, INC.

Filing 78

OPINION. Signed by Magistrate Judge Joseph A. Dickson on 8/12/13. (DD, )

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
---i?iiRING-PHARMA-ciu'fiCAis--iNc::--------~

Civil Action No. 2:12-cv-05824 (DMC)
Plaintiff,

(JAD)

v.
OPINION
WATSON PHARMACEUTICALS, INC.,

----------~~~~n~_::~:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ____j
JOSEPH A. DICKSON. U.S.M.J.
This matter comes before this Court upon motion by plaintiff Ferring Pharmaceutic s
Inc. ("Plaintiff' or "Ferring") for leave to file an amended complaint pursuant to Fed. R. Civ.
15(a) (the "Motion to Amend") to add two defendants: (1.) Watson Pharma, Inc., a/k/a Acta is
Pharma, Inc. 1 ("Watson Pharma"); and (2.) Watson Laboratories, Inc. ("Watson Labs ).
Pursuant to Rule 78 of the Federal Rules of Civil Procedure, no oral argument was heard. U

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consideration of the parties' submissions, and for the reasons stated below, Plaintiffs motion o
amend is granted in its entirety.

1

Watson represents that Watson Pharma has changed its name to Actavis Pharma, Inc., d
remains a Delaware Corporation. Watson does not object to the Motion to Amend on is
ground, and if the motion is granted does not object to substituting the correct identif · g
information. (Def. 's Br. 2, ECF No. 70).
1

I.

BACKGROUND.

Ferring and Watson Pharmaceuticals2 ("Defendant" or "Watson") are companies t at
market competing products used for in vitro fertilization in a process referred to as assis
reproductive technology.

Plaintiff brought section 43(a) Lanham Act false-advertising

related state law claims against Watson alleging that several of Watson's advertising materi ls
promoting Crinone are false and misleading.

Plaintiffs Complaint alleged that

advertisements "in effect" paint Endometrin as "dangerous, not effective and disliked
consumers."

(Compl.

~

1, ECF No. 1).

Plaintiff further alleged that Watson's market' g

materials improperly state or imply that Crinone is superior to other products, includ'
Plaintiffs Endometrin. As a result, Plaintiff, as a direct competitor of Defendant, claimed it

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lost sales to Watson and suffered "lessening of goodwill associated with [Plaintiff] and ts
products. (Id.

at~

A.

212).
Procedural History.

On September 17, 2012, Plaintiff filed a lengthy Complaint asserting four counts agai st
Watson based on allegations that Defendant made false and misleading statements that comp e
the Crinone product and the Endometrin product in their advertising material and in promotio
their Crinone product. Based on these allegations, Plaintiff asserted: (1) statutory claims aris
under section 43(a) of the Lanham Act, 15 U.S.C § 1125(a); (2) unfair competition un er
N.J.S.A. § 56:8-1 et seq, governing unconscionable trade practices; as well as (3) common 1 w
claims of unfair competition; and (4) defamation.

2

Two days later, Plaintiff moved for

In or around November 2012, Watson announced that it would change its name to Actavis, I
(Am. Compl. ~ 4, ECF No. 68-3).
2

expedited discovery schedule in support of its Motion for Preliminary Injunction. (Pl.'s L .,
ECFNo. 6). 3
A review of the record before this Court reveals that the parties discussed the issue f
Ferring's proposed amendment of its Complaint to include additional claims against Wat n
affiliates as earlier as January 29, 2013.

(Pl.'s Ltr., ECF No. 48).

On that date, Fe · g

submitted a letter to this Court expressing concern for delay by Watson in refusing to prov e
initial disclosures pursuant to Fed. R. Civ. P. 26(a) concerning the identification and naming f
the proper parties to the lawsuit. (Id.). This Court then set a schedule for discovery by Or er
dated February 21, 2013. (Scheduling Order ECF No. 53).
B.

The Proposed Defendants.

The Court's February 21, 2013 Scheduling Order set June 21, 2013 as the deadline to le
any motions to amend the pleadings or join parties. (Scheduling Order

at~

13, ECF No. 5 ).

Plaintiff timely filed the instant motion on June 21, 2013, seeking leave to file an Amen
Complaint to name Watson Pharma, and Watson Labs as defendants.
By way of its present Motion to Amend, Plaintiff argued that the Proposed Amen
Complaint is necessary to assert claims against additional corporate entities with dir ct
involvement in the marketing, sale and distribution of Crinione.
corporate structure consisting of multiple subsidiaries and related companies. (Pl.'s Br. 2, E
No. 68-1). For instance, despite the name "Watson Pharmaceuticals, Inc." appearing on much
the allegedly offending advertising material, counsel for Watson claimed that another Wat n
entity- Watson Pharma -markets, sells and distributes Crinone. (Id.) Further, Watson L s

3

Plaintiff moved for a preliminary injunction against Defendant on November 9, 2012.
District Court entered an Order on April 4, 2013 denying Plaintiff's Motion for Prelimin
Injunction. (ECF No. 55).
3

owns the New Drug Application ("NDA'') for Crinone. (Id.). Plaintiff therefore seeks to am d
the causes of action as follows:
•

Count I continues to allege unfair competition under section 43(a) of the Lanh
Act, but adds Watson Pharma and Watson Labs as Defendants;

•

Count II continues to allege unfair competition under N.J.S.A. § 56:8-1 et seq,
adds Watson Pharma and Watson Labs as Defendants;

•

Count III continues to allege common law unfair competition, but adds Wat n
Pharma and Watson Labs as Defendants;

•

Count IV continues to allege defamation, but adds Watson Pharma and Wat n
Labs as Defendants;

Specifically as to Watson Pharma, Plaintiffs Amended Complaint also alleges that:
•

Watson Pharma "markets, sells, and distributes Crinone." (Am. Compl.
ECF No. 68-3).

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3,

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Specifically as to Watson Labs, Plaintiffs Amended Complaint also alleges that:
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•
•

Watson Labs owns the NDA for Crinone; (Id.

•

II.

Watson Labs is a wholly owned subsidiary of Watson; (Id.

"Upon information and belief, Watson Labs derives financial benefit from
marketing, sale, and distribution ofCrinone." (Id. at~ 37).

at~

6).

34).

STANDARD OF REVIEW.

Rule 15(a) provides that after a responsive pleading has been filed:
[A] party may amend its pleading only with the opposing party's
written consent or the courts leave. The court should freely give
leave when justice so requires.
Fed. R. Civ. P. 15(a)(2).
The grant or denial of leave to amend under Rule 15(a) is a matter "committed to
sound discretion ofthe district court." Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174
Cir. 1993). The Third Circuit adopted a liberal approach to the amendment of pleadings un r

4

Rule 15 to ensure that "a particular claim will be decided on the merits rather than

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technicalities." Dole v. Arco Chern. Co., 921 F.2d 484, 487 (3d Cir. 1990) (internal citaf n
omitted). The burden is generally on the party opposing the amendment to demonstrate why

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amendment should not be permitted. Foman v. Davis, 371 U.S. 178 (1962).
Leave to amend a pleading may be denied where the court finds: (1) undue delay;
undue prejudice to the non-moving party; (3) bad faith or dilatory motive; or (4) futility f
amendment. Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). Unfair prejudice is them st
common factor cited by courts to deny leave. Unfair prejudice is usually found when there

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been a significant unjustified delay in moving to amend that creates an unfair disadvantage

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the defendant. However, delay alone will not justify denying a motion to amend. See Cureto
Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 273 (3d Cir. 2001) (holding that mere passage f
time does not require that a motion to amend a complaint be denied on grounds of delay). 0 ly
where delay becomes 'undue', i.e., placing an unwarranted burden on the court, or 'prejudici
i.e., placing an unfair burden on the opposing party, is denial of a motion to amend appropri
Adams v. Gould Inc.,_739 F.2d 858, 868 (3d Cir.1984) ("The question ofundue delay, as well s
the question of bad faith, requires that [the Court] focus on the plaintiffl's] motives for ot
amending [its] complaint to assert [the] claim[ s] earlier; the issue of prejudice requires that [ e
Court] focus on the effect on the [defendant]."). Delay may become undue when there has b n
previous opportunity to amend the complaint. See Lorenz v. CSX Corp., 1 F.3d 1406, 1414
Cir.1993) (finding that a three-year lapse between the filing of the complaint and the propo
amendment was ''unreasonable" delay when plaintiff had previous opportunities to amend).
such cases, the Court must focus on the moving party's reasons for not amending the plead g
sooner. USX Corp. v. Barnhart, 395 F.3d 161, 168 (3d Cir. 2004).

5

A proposed amendment may also be denied based on futility if it "would fail to stat a
claim upon which relief could be granted." Shane v. Fauver, 213 F.3d at 115. Thus, "[ n
assessing 'futility' the District Court applies the same standard of legal sufficiency as appl s
under Rule 12(b)(6)." Id. To survive dismissal under Rule 12(b)(6), a complaint "must cont ·n
sufficient factual matter accepted as true to 'state a claim to relief that is plausible on its face "
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).
III.

DISCUSSION.

As an initial matter, Defendant does not object to the addition of Watson Pharma s
defendant (Def.'s Br. 1, ECF No. 70), therefore the Motion to Amend as to that aspect of

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Proposed Amended Complaint is granted.
A.

Whether Plaintiff Has Demonstrated Undue Dela
Motives.

Bad Faith or Dilato

Defendant first argues that Plaintiff's Proposed Amended Complaint is nothing more t
a delayed assertion of claims that could have been brought at the time of the original Compla·
(Def.'s Br. 2-3, ECF No. 70).

Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 273 (3d Cir.2001). Rather, it is only where de y
becomes ''undue", i.e., placing an unwarranted burden on the court, or "prejudicial", i.e., plac· g
an unfair burden on the opposing party, is denial of a motion to amend appropriate. Adams v.
Gould Inc., 739 F.2d 858, 868 (3d Cir.1984). "Implicit in the concept of 'undue delay' is
premise that Plaintiffs, in the exercise of due diligence, could have sought relief from the co
earlier." In re Pressure Sensitive Labelstock Antitrust Litig., No. MDL.03-1556, 2006
433891, at *1 (M.D.Pa. Feb. 21, 2006).

6

Upon reviewing the procedural history of this case, this Court declines to find
Plaintiff engaged in any undue delay or dilatory tactics. The Federal Rules of Civil Proced e
require that a party have a proper legal and factual foundation before initiating a lawsuit or fili g
a claim against a party. Fed.R.Civ.P. 11(b). Plaintiff plausibly alleged that although it
reason to suspect the participation of the additional defendants, 4 it did not have sufficient supp rt
for adding such defendants until Watson confirmed that its answer to Plaintiffs Interrogato
requesting the names of Watson corporate entities involved in the marketing, sale,
distribution of Crinone was complete. Specifically, it did not become clear to Plaintiff
Watson Pharma and Watson Labs were the proper parties to add to the Complaint until it
received Watson's May 14, 2013 e-mail stating that "Watson Pharma[] is the sole marketer f
Crinone.

Watson Labs[], only owns the NDA, and does not do the selling, marketing

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distribution of Crinone." (Def. 's Br.2, ECF No. 70). Shortly after receiving that e-mail, Plain ff
filed its Motion to Amend.
Defendant, moreover, does not challenge Plaintiffs representation that it repeate
indicated its intent to amend its Complaint- both in letters to this Court dated January 29, 2
(ECF No. 48) and May 16, 2013 (ECF No. 59)- but that its efforts were hampered by vari

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factors, including active discussion of the many discovery disputes. Plaintiff has proffere a
reasonable explanation for the delay and is not guilty of repeated failure to cure deficiencies
previous amendment since this is Plaintiffs first attempt to amend its Complaint. Therefore,

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Motion to Amend will not be denied on the basis of undue delay or prejudice.
4

Plaintiff acknowledges that Watson, in its Answer, repeatedly answers with reference to ' ts
affiliate, Watson Pharma[]" (Pl.'s Ltr., ECF No. 48; Answer~~ 1, 19, 22, 24, 26-27, 32-34, 6,
ECF No. 33). Also, the fact that Watson Labs owns the New Drug Application for Crinon is
public record. (Def.'s Br. 2, ECF No. 70). Thus, Defendant argues that it has not ''refused
provide discovery, or hidden the names of any entity so they could not be named in an amen
complaint." (Id. at 3).
7

Given the fact that Defendant has not established any undue delay, dilatory moti e,
undue prejudice or bad faith by the Plaintiff; (indeed, Defendant does not explicitly contend t t
Plaintiff's Motion to Amend should be denied on such grounds) and considering that this Co
review of the record in this case has not revealed any such actions by Plaintiff, this Court m st
next consider Defendant's futility argument.
B.

Whether the Proposed Amendment to Add Watson Labs is Futile.

In their second argument, Defendant contends that Plaintiff's Motion to Amend should e

denied as futile on the grounds that Plaintiff "has not and cannot state a cause of action agai st
Watson Labs[]" (Def.'s Br. 4, ECF No. 70). "Futility'' means that the complaint, as amend

,

would fail to state a claim upon which relief could be granted. Holst v. Oxman, 290 Fed.Ap
508, 510 (3d Cir.2008). The futility analysis on a motion to amend is essentially the same a a
Rule 12(b)(6) motion. Id. The trial court may thus deny leave to amend where the amendm t
would not withstand a motion to dismiss. Massarsky v. Gen. Motors Corp., 706 F.2d 111, 1
(3d Cir.1983). Given the liberal standard for the amendment of pleadings, however, "co
place a heavy burden on opponents who wish to declare a proposed amendment futile." '"""'Aru""-=:=t""""
v. New Jersey, No. Civ.A.06-296, 2009 WL 114556, at *2 (D.N.J. Jan. 15, 2009).
Here, Plaintiff asserted claims arising under section 43(a) of the Lanham Act, in Co
of its Proposed Amended Complaint. 5

Specifically, Plaintiff claimed that Watson Labs m

I
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false and misleading statements regarding its product, Crinone, and Plaintiffs prod
Endometrin.

(Am. Compl.

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55-58).

Plaintiff further alleged that it, as a competitor f

5

"[U]nfair competition claims under New Jersey statutory and common law generally para el
.,
those under § 43(a) of the Lanham Act." Bracco Dia ostics Inc. v. Amersham Health
627 F. Supp. 2d 384,454 (D.N.J. 2009).
8

Defendant, suffered losses in the form of lost sales and by lessening of goodwill associated
Plaintiff and its products. (Am. Compl. ~ 230, ECF No. 68-3).
In its Reply, Defendant argued that these allegations are insufficient to establish a cl
under section 43(a) of the Lanham Act. In support of its argument, Defendant pointed out t at
Plaintiffs Proposed Amended Complaint failed to allege "that Watson Labs[] has made any f:

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or misleading statements." (Def.'s Br. 4, ECF No. 70). Moreover, Defendant argued that, at
most, Plaintiff can allege that Watson Labs "derives financial benefit from the marketing, s le
and distribution of Crinone." (Id.) Defendant further claims that no cases exist that suggest
an entity can be held liable for false advertising for merely deriving financial benefit.
In order to prevail on a claim of false advertising pursuant to section 43(a) of the Lanh
Act, a plaintiff must establish that: ( 1) the defendant made false or misleading statements ab ut
the plaintiffs or [defendant's] own product; (2) there is actual deception or a tendency to dece e
a substantial portion of the intended audience; (3) the deception is material in that it is likel
influence purchasing decisions; (4) the advertised goods traveled in interstate commerce; and
there is a likelihood of injury to the plaintiff. Pharmacia Co . v. GlaxoSmithK.line Consu
Healthcare. L.P., 292 F.Supp.2d 594, 598 (D.N.J.2003) (quoting =H""-l:i==""--"'=--'-'-~"'""""'~':.=.
Health Plan, Inc., 276 F.3d 160, 171 (3d Cir.2001) (internal editing marks omitted)); 15 U.S.
1125(a)(1)(B). However, ifthe plaintiff alleges literal falsity, he need not show that the audie
was misled. Santana Prod., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 136
Cir.2005).
Plaintiff argues that it sufficiently pleaded its Lanham Act false-advertising claim agai
Watson Labs. In support of its argument, Plaintiff alleged that when the term "Defendants" is
used in its Proposed Amended Complaint, it refers to all Defendants, collectively. The added

9

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language in the Proposed Amended Complaint is found in the Background and General
Allegations portion. Accordingly, this Court finds that Plaintiff has sufficiently pleaded the fir
element of its Lanham Act claim because Plaintiffhas asserted that Watson Labs, among other
has made false or misleading statements.
Furthermore, this Court finds that Plaintiff has sufficiently pleaded element five of its
Lanham Act claim. To satisfy element five, Plaintiff must establish that there is a likelihood o
injury to the plaintiff in terms of declining sales, and loss of good will. Defendant acknowledg s
that Watson Labs "derives financial benefit from the marketing, sale and distribution of
Crinone." (Def.'s Br. 4, ECF No. 70). Moreover, Plaintiff is entitled to lost profits and
disgorgement of all profits associated with the sale of Crinone. See Bracco Dia ostics Inc. v
Amersham Heath. Inc., 627 F. Supp. 2d 384, 484 (D.N.J. 2009). This includes the financial
benefit, if any, acquired by Watson Labs in association with the sale of Crinone. 6
With respect to the remaining elements (two -four) of Plaintiffs Lanham Act claim, ts
lengthy Proposed Amended Complaint sufficiently details statements found in Defendan '
advertising materials regarding both Crinone and Endometrin that it believes are false
misleading. Plaintiff also alleges that Defendants made allegedly misleading statements du ·
webcasts. (Am. Compl.

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55-118, ECF No. 68-3). Those allegations suggest that Defendan s'

alleged misstatements were made in interstate commerce. Taking these allegations as true, s

6

As noted above, courts within the Third Circuit favor a liberal policy in granting amendments
pleadings, including adding parent companies for their direct involvement. See A ere S
Guardian Corp. v. Proxim. Inc., 190 F. Supp. 2d 726, 736 (D. Del. 2002) (the court granted le
to add an alter-ego entity as a party because the court hesitates to foreclose potentially via
avenues for relief at this stage of the proceedings). Similarly, this Court is reluctant to forecl
Plaintiffs potential avenue for recovery against Watson Labs at this stage of the proceeding.
Plaintiff correctly noted, the "financial arrangement by, between or among Crinone, Wats
Watson Pharma and Watson Labs will be uncovered during discovery." (Pl.'s Reply Br. 4, E
No. 71).
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o
s.
e
le
e
,
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required by Federal Rule of Civil Procedure 12(b)(6), this Court finds it is plausible that Plain
will prevail on its Lanham Act and related state law claims. Plaintiffs Proposed Amen
Complaint goes beyond mere legal conclusions and includes facts sufficient to put defendants n
notice of the claims against them. Ultimately, the full scope of discovery may establish that

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claims against Watson Labs are groundless. This Court cannot, however at this juncture,
that the addition ofWatson Labs as a defendant is clearly futile. As such, and given the lib
standard to be afforded amendment applications under Rule 15, Plaintiff's application will e
granted.

IV.

CONCLUSION.

For the reasons set forth above, Plaintiffs Motion to Amend (ECF No. 68) is
GRANTED.
SO ORDERED

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