BURLINGTON DRUG CO., INC. et al v. PFIZER INC. et al
Filing
813
MEMORANDUM AND ORDER that Defendant's #755 Motion for Judgment on the Pleadings is granted in part and denied in part. EPPs have thirty (30) days from the filing of this Memorandum and Order to file an Amended Complaint. Signed by Judge Peter G. Sheridan on 8/21/2018. (mps)
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civil Action No. 3:12-cv-2389 (PGS)(DEA)
In re LIPITOR ANTITRUST LITIGATION
MEMORANDUM
AND ORDER
SHERIDAN, U.S.D.J.
Presently before the Court is Defendants Pfizer Inc., Pfizer Manufacturing Limited, Pfizer
Ireland Pharmaceuticals, Warner-Lambert Co., and Warner-Lambert Co. LLC’s Motion for
Judgment on the Pleadings pursuant Federal Rule of Civil Procedure 12(c), regarding End-Payor
Plaintiffs’ Second Amended Consolidated Complaint. (ECF No. 755). This case arises from
allegations that two drug companies, Pfizer and Ranbaxy, engaged in an anticompetitive scheme
that prevented the generic drug of Lipitor from entering the market. Plaintiffs are end-payor
purchasers (hereinafter “EPP”) who claim to have paid inflated costs for the brand-named drug,
Lipitor, due to, among other things, a delayed entry provision included in Pfizer and Ranbaxy’s
settlement agreement. Unlike the Direct Purchaser Plaintiffs, who assert claims under the Sherman
Act, the EPPs base their claims on their respective state’s antitrust and consumer protection acts.
BACKGROUND
I. Parties
Plaintiffs are a collection of organizations including insurance carriers, Taft-Hartley funds,
municipalities, and individuals, who have been indirectly affected by Defendants’ alleged
schemes. For example, jointly administered Taft-Hartley fund and employee welfare benefit
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plaintiffs include: A.F.L.-A.G.C. Building Trades Welfare Plan, a self-insured health and welfare
benefit plan in Alabama (Id. at ¶ 24); New Mexico United Food and Commercial Workers Union’s
and Employers’ Health and Welfare Trust Fund, a Taft-Hartley fund (Id. at
¶ 26);
Bakers Local
433 Health Fund of South Dakota; and Minnesota’s Twin Cities Bakery Workers Health and
Welfare Fund. (Id. at ¶J 2 8-29).
Health insurance carrier plaintiffs include: Louisiana Health Services Indemnity Company
d/b/a Bluecross/Blueshield of Louisiana, a corporation licensed to conduct business in Louisiana
that provides health benefits to covered members (Id. at
¶
27); Fraternal Order of Police, Fort
Lauderdale Lodge 31, Insurance Trust Fund, a governmental health insurance plan that provides
health and major medical insurance to active and retired Fort Lauderdale police officers and their
dependents. (Id. at ¶ 30).
Municipality plaintiffs include: the Mayor and City Council of Baltimore, Maryland (Id. at
¶
25), and the City of Providence, Rhode Island, both municipal corporations with self-insured
health and welfare benefit plans. (Id. at ¶ 31).
Finally, the six individual plaintiffs are Edward Czarnecki, a Wisconsin resident; Emilie
Heinle, a North Dakota resident; Andrew Livenzey from Massachusetts; Edward Ellenson from
Hawaii; Jean Ellyne Dougan, an Arkansas resident; and Nancy Billington of Montana (Id. at
¶J
32-37).
All plaintiffs claim to have purchased or provided partial payment for some of, or the entire
price of, Lipitor or its generic version. (Id. at ¶J 24-46). Plaintiffs contend that they were all injured
as a result of Defendants’ anticompetitive schemes, since they paid a premium for the medication.
(Id.).
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Defendants in this case are Pfizer and Ranbaxy. (Id. at ¶J 3 8-46). Pfizer Inc., Pfizer Ireland
Pharmaceuticals, and Warner-Lambert Company are collectively referred to as Pfizer. (Id. at
¶
3 8-42). Pfizer Inc. is the parent company of Pfizer Ireland Pharmaceuticals, an Irish unlimited
liability company that is a wholly owned, indirect subsidiary of Pfizer Inc. (Id. at ¶ 3 8-39). Pfizer
acquired Warner-Lambert Company in 2000. (Id. at ¶ 40). According to the Complaint, reference
to Warner-Lambert also includes, but is not limited to, Warner-Lambert employees Bruce D. Roth,
Joan Thierstein, and Jerry F. Janssen. (Id. at ¶ 41). In addition, the Complaint names Defendants
Ranbaxy Laboratories Limited, Ranbaxy Inc., and Ranbaxy Pharmaceuticals Inc. collectively as
Ranbaxy. (Id. at
¶ 43-46).
Ranbaxy Laboratories Limited is an Indian corporation that wholly
owns Ranbaxy Inc., which has a place of business in New Jersey. (Id. at ¶ 43-49).
II. Facts
In the Complaint, EPPs identify several anticompetitive schemes that purportedly give rise
to the present lawsuit. Specifically, Plaintiffs allege that Defendants fraudulently obtained a
second, duplicative, patent from the United States Patent and Trademark Office (PTO); listed that
patent in the book of Approved Drug Products with Therapeutic Equivalence Evaluations (the
“Orange Book”); engaged in sham litigation relating to the second patent; filed a sham citizen
petition with the FDA; entered into an unlawful reverse payment agreement with Ranbaxy; and
manipulated the statutorily created 180 day first-to-file period1 to sustain Pfizer’s and Ranbaxy’s
exclusivity and collectively prevent other generic companies from entering the market. The Court
discusses each allegation in turn.
21 U.S.C.
§ 355(j)(5)(B)(iv).
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1. Walker Process and Fraudulent Orange Book Allegations
EPPs first present a Walker Process2 claim against Pfizer, based on Pfizer’s enforcement
of an invalid patent and fraudulent listing of the patent in the Orange Book. By way of background,
Wamer-Lambert, which was later acquired by Pfizer in 2000, applied for the Original Lipitor
Patent on March 30, 1986 and subsequently received Patent No. 4,681,893 (‘893 Patent) on July
21, 1987. (Id. at ¶ 95, 104). The Original Lipitor Patent was for a racemic mixture, which contains
equal amounts of two enantiomers that inhibit the production of cholesterol. (Id. at
¶
7).
Enantiomers are made of mirrored images of stereoisomers, which are two or more compounds
with the same atoms but arranged differently. (Id. at ¶J 85-86). In a racemic mixture, it is common
for one enantiomer to have all or most of the biological activity, while the other is largely inactive.
(Id. at ¶ 89).
According to the Complaint, the compounds in the ‘893 Patent were not limited to any
particular stereochemistry; instead, the structure included four different stereoisomers
possibilities: R-trans, S-trans, R-cis, and S-cis isomers. (Id. at ¶ 103). Even though the ‘893 Patent
covered the multiple possibilities, Warner-Lambert focused on developing the R-trans enantiomer
of the compound, in calcium salt form, which would eventually be sold as Lipitor. (Id. at ¶ 10607). Warner-Lambert achieved patent extensions and regulatory exclusivities that postponed the
patent’s expiration from May 30, 2006 to March 24, 2010. (Id. at ¶ 104).
On July 21, 1989, Warner-Lambert applied for a patent to specifically protect the R-trans
enantiomer, which later became the ‘995 Enantiomer Patent. (Id. at
¶
126). According to the
Complaint, Warner-Lambert had to prove the R-trans enantiomer’s activity had a “surprising” or
“unexpected” characteristic to procure a subsequent patent; put differently, they had to justify why
2
Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965).
4
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the proposed patent was not already protected by the by the ‘893 Patent. (Id. at ¶ 109). Plaintiffs
allege Warner-Lambert tasked its senior management with finding “something that could be
mischaracterized as surprising.” (Id. at ¶ 110-14). Wamer-Lambert included a table in the ‘995
Patent application to demonstrate the surprising results that the R-trans enantiomer was one
hundred times more active than the S-trans enantiomer and ten times more active than the racemic
mixture. (Id. at
¶
128). However, Plaintiffs claim that one skilled in the art would know “one
enantiomer is the ‘active’ isomer, while the other is ‘inactive,’ and thus the active enantiomer is
about twice as active as the racemic mixture.” (Id. at ¶ 121). Further, the Complaint states Warner
Lambert would have known, through testing and experimentation, that the R enantiomer was likely
to be the active isomer. (Id. at ¶ 122). Plaintiffs allege that Warner-Lambert failed to calculate the
average result from its various tests and, instead, “cherry-picked from among the results [of the
tests] in order to generate a table that supported its claim of ‘surprising activity.” (Id. at ¶ 135).
As a result, the data Warner-Lambert provided in its application was allegedly both false and
misleading, since the R-trans enantiomer is approximately twice as active as the racemic mixture,
not ten times. (Id. at ¶ 133).
The PTO originally rejected the ‘995 Patent application, since the invention was already
covered and anticipated by the claims in the previously procured ‘893 Patent. (Id. at ¶ 153). Under
patent law, a patent application can be rejected “if the differences between the subject matters
sought to be patented and the prior art [are] such that the subject matter as a whole would have
been obvious at the time of the invention was made to a person having ordinary skill in the art to
which said subject matter pertains.” (Id. at
¶
154). In response to the PTO’s rejection, Warner
Lambert then requested to amend its application to provide a declaration by Dr. Bruce Roth, who
participated in developing Lipitor, in support of the newfound information regarding the R-trans
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enantiomer’s activity. (Id. at
¶J
159-60). In his declaration, Roth asserted that the available data
“shows the activity of [the R-trans enantiomer] is surprising and unexpected because if the [S
trans enantiomer] is accepted as inactive, the activity of [the R-trans enantiomer] would be
expected to be only twice that of the racemic mixture” and not the ten times that occurred. (Id. at
¶J
165-66). Warner-Lambert argued the surprising nature of this information overcomes the
obvious inclusion under the ‘893 Patent and, thus, warrants the issuance of the ‘995 Patent. (Id. at
¶
161). Plaintiffs contend the data presented to the PTO, including the Roth Declaration were
knowingly false and misleading and used to fraudulently convince the PTO to procure the new
patent. (Id. at
¶J
133, 165, 170-74). Persuaded by the data submitted, the PTO eventually issued
the ‘995 Enantiomer Patent on December 28, 1993. (Id. at ¶ 182).
As a result of its two approved patents, Warner-Lambert submitted a new drug application
to the FDA for Lipitor, which was approved on December 17, 1996. (Id. at
¶
201). Warner
Lambert then listed both the ‘893 Original Lipitor Patent and the ‘995 Enantiomer Patent in the
Orange Book, which expired on May 30, 2006 and December 28, 2010, respectively. (Id. at
¶
203-04). Thereafter, it applied for an extension of the ‘893 Original Lipitor Patent to account for
the difference in time between the issuance of the patent covering the active ingredient in the new
drug and the FDA’s approval of that drug. (Id. at ¶J 206-08). As a result, the PTO postponed ‘893
Patent’s expiration until March 24, 2010. (Id. at ¶ 213).
2. Sham Litigation and Citizen Petition Allegations
Plaintiffs next contend Defendants engaged in sham litigation against Ranbaxy. On August
19, 2002, Ranbaxy filed an Abbreviated New Drug Application (ANDA) to sell a generic version
of Lipitor. (Id. at ¶ 22 1-22). While Ranbaxy verified their generic version would not violate any
of the Lipitor patents, Pfizer, who had acquired Warner-Lambert by this time, filed a patent
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infringement lawsuit against Ranbaxy on February 21, 2003 for allegedly infringing on the ‘893
and ‘995 Patents. (Id. at
¶J 223-24).
In the pre-trial proceedings, Pfizer attempted to amend its
complaint to include process patent infringement claims; however, their motion was denied since
these patents could not be listed in the Orange Book and, therefore, were not a basis for the suit.3
(Id. at
¶IJ 226-27).
On appeal from the District of Delaware, the Federal Circuit ruled in Pfizer’s
favor, finding that Ranbaxy’s product infringed on the ‘893 Patent. However, it also dismissed
Pfizer’s ‘995 Patent infringement claim since it had an improper dependent claim structure. (Id. at
¶
232). As a result, Ranbaxy had to wait until the expiration of the ‘893 Patent in March 2010,
before selling its generic version. (Id. at ¶ 232, 234).
Plaintiffs contend since the ‘995 Patent was fraudulently obtained, the patent infringement
litigation against Ranbaxy was a baseless sham, that was intended to interfere with the introduction
of Ranbaxy’s generic drug into the market. (Id. at ¶ 230).
Plaintiffs also allege that Pfizer filed a baseless citizen petition with the FDA, in further
attempt to delay the entry of generic versions of Lipitor. (Id. at ¶ 235). According to the Complaint,
Ranbaxy’s ANDA could have received FDA approval in August 2005, thereby creating generic
competition. (Id. at ¶J 236-38). However, a month beforehand, July 2005, Pfizer sent a letter to
the FDA, in an attempt to further delay the entry to generic versions of Lipitor. (Id. at ¶ 239). Four
months later, November 7, 2005, Pfizer re-filed this letter, as a citizen petition, alleging that the
generic brand’s use of “amorphous atorvastatin calcium” could be “susceptible to higher levels of
In July 2000 and August 2001, Warner-Lambert acquired Patent Nos. 6,274,740 (‘740 Patent)
and 6,087,511 (‘511 Patent). (Id, at ¶219). According to the Complaint, “[b]oth the ‘740 and ‘511
Patents are process patents, which claim a specific process for making amorphous atorvastatin
calcium using crystalline Form I atorvastatin as a starting material.” (Id.). However, while the
Process Patents were valid and enforceable, they had no exclusionary effect. (Id. at ¶ 308). Put
differently, the Process Patents could not be used to exclude any generic brands of Lipitor from
the market. (Id.).
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impurities” than Pfizer’s crystalline version; as such, Pfizer averred that Ranbaxy’s application
needed to be carefully scrutinized and reviewed with considerable skepticism. (Id. at
¶ 241-42).
However, Plaintiffs claim Pfizer had also used amorphous versions in their testing and
development of Lipitor and, therefore, knew that it could be, and had been, safely made. (Id. at ¶J
242-46). As such these purported safety concerns were unfounded. (Id.). Further, Pfizer knew
from its earlier litigation with Ranbaxy that Ranbaxy’s generic drug was amorphous, rather than
crystalline. (Id.). According to Plaintiffs, the
s previous decisions expressly indicated that
special or additional scrutiny would not be applied when reviewing an ANDA, when a different
form was used; instead, the stability of a drug, not its substance, would be the key focus in
measuring the drug’s quality. (Id. at
¶ 251).
As such, given Pfizer’s knowledge that amorphous
versions posed no safety risks, as well as the FDA’s approach to treating ANDA claims, Plaintiffs
claim the petition was a baseless attempt to delay generic competition. (Id. at ¶J 26 1-66).
3. Reverse Settlement Allegations
Finally, Plaintiffs challenge the validity of a reverse settlement agreement made between
Pfizer and Ranbaxy, after Pfizer attempted to obtain reissuance of the ‘995 Patent. (Id. at
¶ 323).
To correct the invalidation of the ‘995 Patent, Pfizer applied for its reissuance in 2007 and
conceded that the data included in its original application, concerning the R-trans enantiomer’s
effectiveness, contained significant errors. (Id. at
¶J 274-76).
Therefore, it would no longer rely
on this information in its reissuance proceedings. (Id. at ¶ 283). Without this information, Ranbaxy
filed a protest with the PTO, contending that the content of the ‘995 Patent was “anticipated,
obvious, [and] constituted double-patenting.” (Id. at
¶ 279,
284). As a result, the PTO issued a
non-final rejection of Pfizer’s reissuance application, since it “had before it no scientific basis to
conclude the enantiomer claims were anything other than obvious over the ‘893 Patent.” (Id. at ¶
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285, 293). Given Pfizer’s failure to receive approval for the ‘995 Patent, there was a strong
possibility that generic brand drugs would enter the market upon expiration of the ‘893 Patent in
March 2010. (Id. at ¶J 287-88, 294).
While Pfizer struggled to obtain a reissuance of the ‘995 Patent in 2008, it was later
discovered that Ranbaxy may have infringed on another patented drug, Accupril, and, therefore,
Pfizer had a potential patent infringement claim worth millions of dollars in damages. (Id. at
¶J
311-12). According to the Complaint, upon learning of this information “Pfizer needed a stage to
disguise a reverse payment to Ranbaxy in order to buy Ranbaxy’s agreement to delay launching
of its generic version of Lipitor. If there were a pending court case against Ranbaxy involving
Lipitor, Pfizer could settle with Ranbaxy through a reverse payment and (unlawfully) extend its
Lipitor market exclusivity”; however, when Pfizer learned of Ranbaxy’s potential Accupril
infringement, there was no active litigation pending. (Id. at ¶ 313).
Irrespective of its reasoning, it is undisputed that Pfizer filed a complaint against Ranbaxy
in March 2008 for infringing on Process Patents of the ‘740 and ‘511 Patents. (Id. at ¶J 314-315).
However, as mentioned above, a court had already ruled that these patents were not exclusionary
and, therefore, provided no basis for relief. (Id. at
¶J
308, 316). This being said, less than three
months after the suit was filed, the parties entered into a reverse settlement agreement, whereby
Ranbaxy would refrain from manufacturing or selling generic Lipitor until November 30, 2011.
(Id. at ¶J 315, 3 23-26). According to the Complaint, Pfizer and Ranbaxy disguised this agreement
as a way to settle the process patent litigation when, in actuality, it was a “pretext for its true
anticompetitive goals and accomplishments.” (Id. at ¶IJ 3 23-24). Under the terms of the agreement,
Ranbaxy paid Pfizer $1 million and Pfizer dismissed its multi-million dollar patent infringement
claims based on Ranbaxy’ s generic version of Accupril. (Id. at ¶ 327). In addition, Ranbaxy was
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permitted the right to market its generic version of Lipitor in some foreign markets. (Id.). Further,
Ranbaxy did not waive its market exclusivity right to be the first to file an ANDA for Lipitor;
thereby preventing other generic competition from entering the market until after November 30,
2011. (Id. at
¶
363-65). In return, Ranbaxy also ceased challenging Pfizer’s reissuance of the
‘995 Patent. (Id. at ¶ 366). As a result, the PTO eventually granted reissuance of the ‘995 Patent,
relying in part on Lipitor’s commercial success to prove the patent could not have been obvious
and, therefore, was not covered by the ‘893 Original Lipitor Patent. (Id. at ¶ 414).
Plaintiffs contend the accumulation of Pfizer’s conduct demonstrates an anticompetitive
scheme to prevent generic brands from interfering with Lipitor’ s market share and, as a result,
Pfizer’s profitability. (Id. at ¶ 446). Had Pfizer not fraudulently procured the ‘995 Patent, Plaintiffs
claim there would have been no basis for its reissuance. (Id.). In addition, Ranbaxy only stopped
protesting the ‘995 patent after it entered a reverse settlement agreement with Pfizer. (Id.). If not
for these circumstances, the EPPs contend that generic versions of Lipitor would have been able
to enter into the market much earlier. (Id. at ¶ 447).
Plaintiffs bring this case on behalf of themselves and all End-Payor class members to
recover damages, calculated by the increased price they had to pay due to Pfizer’s conduct in
delaying the market entry of generic Lipitor. (Id. at
¶
486). The class contains individuals or
entities who purchased or paid for Lipitor and/or its generic version for consumption by
themselves, their families, or members, employees, insureds, participants, or beneficiaries in
Arizona, California, Florida, Hawaii, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico,
New York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah,
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West Virginia, Wisconsin, and the District of Columbia. (Id. at ¶ 487). The Class sues for overage
damages occurred from March 24, 2010 until the effects of Defendants’ conduct cease. (Id.).
The Complaint outlines four different claims for relief in the class action. The first is for
monopolization under state law against Pfizer. (Id. at ¶ 497). The conduct giving rise to this claim
is the fraudulent obtainment of the ‘995 Patent, its listing in the Orange Book, its sham litigation
and citizen petition, the reissuance of the patent, and the unlawful reverse settlement agreement
with Ranbaxy. (Id. at
¶
500). The same factual allegations and theories asserted in Count I are
again alleged in Count II against all Defendants. (Id. at
¶
511). In Count III, Plaintiffs allege
conspiracy to restrain of trade against all Defendants. (Id. at ¶J 527, 530). Finally, Plaintiffs allege
a claim unfair or deceptive trade practices against all Defendants. (Id. at ¶ 546). Plaintiffs contend
that as a result of Pfizer’s anticompetitive acts or practices, Plaintiffs and the Class were deprived
of the opportunity to obtain a less expensive, generic equivalent to Lipitor. (Id. at ¶ 547). As such,
Plaintiffs seek compensation from Defendants in the form of damages.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(c) permits a party to dismiss a suit “[a]fter the
pleadings are closed.
.
.
but early enough not to delay trial.” Fed. R. Civ. P. 12(c). “A Rule 12(c)
motion for judgment on the pleadings is treated like a motion to dismiss under Rule 12(b)(6).”
Syncsort Inc. v. Sequential Software, Inc., 50 F. Supp. 2d 318, 324 (D.N.J. 1999). Under either
rule, the Court must accept all well-pleaded factual allegations in the complaint as true and draw
all reasonable inferences in favor of the nonmoving party. Id. For a complaint to survive dismissal,
it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.” Wireless Media Innovations, LLC v. Maher Terminals, LLC, 100 F. Supp. 3d 405,
407 (D.N.J. 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d
11
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868 (2009)). As such, “[a] complaint should not be dismissed unless it appears beyond doubt that
‘the facts alleged in the complaint, even if true, fail to support the claim.” Syncsort Inc., 50 F.
Supp. 2d at 325.
ANALYSIS
Defendants presently challenge EPPs’ Complaint on four separate bases. First, Defendants
contend that EPPs’ Complaint should be dismissed in its entirety based on federal preemption
principles. Second, Defendants argue that certain states require pre-fihing notices that Plaintiffs
failed to comply with and proscribe class actions under their respective consumer protection
statutes. Third, Defendants aver that EPPs’ state antitrust claims fail because they lack standing
and fail to plead a concerted act. Finally, Defendants challenge EPPs’ consumer protection claims
for failing to comply with various state consumer protection law requirements.
The Court
addresses each challenge in turn.
I. Federal Law Preemption
Defendants first seek dismissal of all of Plaintiffs’ state law claims, since their state law
claims are preempted by federal law. Plaintiffs respond, contending that because their claims are
based on antitrust and consumer fraud theories, preemption is inapplicable.
“Federal patent law preempts state law claims to the extent that state law ‘stands as an
obstacle to the accomplishment and execution of the full purposes and objectives of Congress’ in
enacting the patent laws.” Wawryzynski
V.
H.J. Heinz Co., 574 F. App’x 99, 102 (3d Cir. 2014)
(quoting Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262 (1979)). Notably, “district courts
shall have original jurisdiction of any civil action arising under any Act of Congress relating to
patents, plant variety protection, copyrights and trademarks. No State court shall have jurisdiction
over any claim for relief arising under any Act of Congress relating to patents, plant variety
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protection, or copyrights.” 28 U.S.C.
§ 1338(a). “Under § 1338(a), then, jurisdiction extends ‘only
to those cases in which a well-pleaded complaint establishes either that federal patent law creates
the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a
substantial question of federal patent law, in that patent law is a necessary element of one of the
well-pleaded claims.” In re Lipitor Antitrust Litig., 855 F.3d 126, 143 (3d Cir. 2017)
(quoting Christianson v. Colt Industr. Operating Corp., 486 U.S. 800, 809 (1986)). As such, the
court is tasked with determining whether the plaintifrs claims “arise under” patent law. Id. at
144. “[I]f on the face of a well-pleaded complaint there are reasons completely unrelated to the
provisions and purposes of the patent laws why the plaintiff may or may not be entitled to the relief
it seeks,” then the claims do not “arise under” patent law. Id. (internal quotation marks and
citations omitted).
Defendants present three theories supporting their position that Plaintiffs’ state law claims
are preempted. First, because Plaintiffs’ claims are based on the purportedly fraudulent
procurement and enforcement of the ‘995 patent, they must demonstrate that the patent is invalid
or unenforceable, which is preempted under federal patent law. Second, to the extent that
Plaintiffs’ antitrust claims are based on the reverse settlement agreement, they are preempted since
they must demonstrate the validity of the generic patents, which necessarily implicates patent law.
Finally, Defendants contend that Plaintiffs’ “sham” citizen petition claim is preempted, since it
must demonstrate the validity of the generic patents, which, again, implicates patent law.
1. Fraudulent Patent Procurement and Enforcement
Turning first to Defendants’ federal patent preemption argument, Defendants argue that
Plaintiffs’ state law claims require them to plead and prove that the patent is invalid or
unenforceable under federal patent law. According to Defendants, the allegations in Plaintiffs’
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complaint that trigger federal patent law include: (1) the fraudulent procurement of the ‘995 patent
(2) the fraudulent patent listing of the ‘995 Patent in the FDA’s Orange Book; and (3) the “sham”
litigation against Ranbaxy, seeking to enforce the ‘995 Patent, in addition to its two process
patents. Defendants, citing little or no supporting case law, contend that these allegations require
first knowing whether the patent at issue is invalid or unenforceable. If the patent was valid, then
the obtainment and enforcement of same would be lawful. As such, Defendants argue that because
federal patent law is necessary to support these theories, they are preempted by federal law.
However, Defendants’ arguments are in direct contravention with the Third Circuit’s recent
holding in Lipitor, 855 F.3d at 126. In Lipitor, the Third Circuit explicitly held that the present
matter does not “arise under” federal patent law. The Third Circuit held that although a resolution
of a substantial question of federal patent law is necessary for a fraudulent patent claim, that alone
is not sufficient to establish that the Federal Circuit has jurisdiction. Id. at 143. The court explained
that unless every theory of the claim requires resolution of a substantial question of federal law, it
does not “arise under” federal patent law and, therefore, the Third Circuit has jurisdiction. Id. The
court interpreted “arises under” to mean that every theory of the claim requires the resolution of a
substantial question of federal law, if it does not, federal patent law will not preempt. Id. Here,
even if the allegations in the Complaint present substantial questions of patent law, because the
antitrust allegations and sham citizen petition do not, this case does not arise under federal patent
law for purposes of federal patent preemption. Id. (quoting Christianson, 486 U.s. at 812).
Moreover, federal patent law does not preempt a state law claim in which a patent law issue
is implicated if “the state law cause of action [i.] includes additional elements not found in the
Defendants appear to be leading the Court down the same path where it was the last time
sense putting my fingers over the fire a second time.
14
—
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federal patent law cause of action and [ii.] is not an impermissible attempt to offer patent-like
protection to subject matter addressed by federal law.” Dow Chem. Co. v. Exxon Corp., 139 F.3d
1470, 1473 (Fed. Cir. 1998). In Dow, the defendant was issued a patent that disclosed certain wire
and cable devices manufactured using a particular insulating polymer. Id. at 1471. At about the
same time, the plaintiff introduced its own line of polymer products and filed a complaint
contending that its polymer did not infringe on the defendants’ patent since the defendants’ patent
was invalid and unenforceable. Id. at 1471-72. In addition, the plaintiff asserted a state-law unfair
competition claim, alleging that that the defendant obtained its patent through inequitable conduct
before the PTO. Id.
Finding patent preemption inapplicable, the Federal Circuit explained that there are three
objectives for patent law: (1) to provide an incentive to invent; (2) to promote the full disclosure
of inventions; and (3) to ensure “that which is in the public domain cannot be removed therefrom
by action of the states.” Id. at 1474 (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 48081(1974)). With these objectives in mind, the Dow court held that when the state law cause of
action includes additional elements not found in the federal patent law and state law is not an
obstacle to the objectives of federal patent law, it is not preempted even if patent law is implicated.
Id. at 1473. As such, the Federal Circuit held that because the state law unfair competition claim
included additional elements not found in federal patent law and did not otherwise conflict with
the objectives of federal patent law, its claims were not preempted. Id. at 1478-79.
Here, as in Dow, the EPPs state antitrust and consumer protection claims require proof of
elements not found in a patent cause of action. As discussed earlier, the purpose for patent
protection is to provide an incentive to invent, to promote the full disclosure of inventions and to
ensure “that which is in the public domain cannot be removed therefrom by action of the states.”
15
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Antitrust and consumer protection law protect consumers from being overcharged for products,
which is a wholly different goal than patent law.
This is also consistent with the Court’s decision in In re Thalomid and Revlimid Antitrust
Litig., No. 14-6997, 2015 U.S. Dist. LEXIS 177541 (D.N.J. Oct. 29, 2015), where the court held
that even if a state court must adjudicate a question of federal patent law, it is not preempted if it
includes additional elements not part of a federal cause of action. Id. at *61..63. In Thalomid, the
plaintiffs, who were indirect purchasers, alleged that the defendants created an antitrust scheme by
obtaining patents through fraud on the PTO and bringing sham lawsuits to delay generic brands
from entering the market. Id. at *4..5 As is the case here, the defendants argued that the plaintiffs’
antitrust claims should be preempted by federal patent law since they alleged that they obtained
the patents through unjust conduct with the PTO. Id. at *61..62. Relying on Dow, the court held
that even if a question of federal patent law must be adjudicated, the state law claim is not
preempted, as long as it contains additional elements not part of a federal patent cause of action.
Id. Finding the allegations were also premised on bad faith in the marketplace (an element not
required in patent law) the Court reasoned that federal patent preemption was not warranted.
Here, similar to Thalomid, the EPPs allege that the patents were obtained through fraud on
the PTO, Pfizer improperly listed the ‘995 patent in the Orange Book, the generic drug was delayed
entry because of sham litigation, a baseless Citizens Petition was filed, and a reverse payment
settlement agreement was negotiated to prolong a monopoly. As such, because EPPs claims are
predicated on claims wholly separate from the federal patent law, they are not preempted.
2. Antitrust Allegations
Defendants next argue that because Plaintiffs’ antitrust claims arise from the reverse
settlement agreement, it implicates federal patent law and, therefore, must be preempted.
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Defendants rely principally on the Third Circuit’s decision in In re Welibutrin XL Antitrust Litig.,
868 F.3d 132 (3d Cir. 2017) for support. In Welibutrin, the Third Circuit held that in order to
allege an antitrust injury, based on the reverse settlement agreement between pharmaceutical
companies, it is the plaintiffs’ burden to demonstrate that “but for” this agreement, the generic
drug would have entered the market sooner. Id. at 164-65. As such, if a regulatory scheme or
patent law would otherwise prevent the generic drug from market entry, there can be no antitrust
injury. Id. Here, Defendants argue that because Plaintiffs must demonstrate that the generic patents
would have entered the market, but for the settlement, this necessarily implicates patent law.
In Weilbutrin the defendant obtained FDA approval for bupropion hydrochloride, which
was marketed as “Weilbutrin.” Id. at 145. Between September 2004 and May 2005, four generic
manufacturers filed ANDAs, requesting authorization to market generic versions of Welibutrin.
Id. On February 9, 2007, the parties entered into a settlement agreement, which included a payfor-delay scheme, wherein the defendants agreed to not launch their own authorized generic
version of the drug for 180 days and, in return, the generic manufacturer would not launch a low
dosage generic version of the drug until an agreed triggering event. Id. at 146, 162. In May 2008,
the plaintiffs filed suit, alleging that the defendants conspired with generic manufacturers to
prevent a generic version of the drug from entering the market. Id. at 146. The Third Circuit held
that because there was a patent blocking the generic versions’ launch, the settlement agreement
did not cause the injury. Id. at 165. Put differently, the Third Circuit explained that the plaintiffs
were unable to prove that “but for” the defendants’ settlement agreement, the generic drug would
have entered the market, since a patent blocking the generic versions would have nevertheless
created the same effect. Id.
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The Court rejects Defendants’ expansive reading of Welibutrin to hold that antitrust claims,
based on reverse settlement agreements, are preempted by federal patent law. Weilbutrin simply
sets forth considerations to be made when presented with an issue of antitrust standing, based on
reverse settlement agreements. At no point in its decision did the Third Circuit mention that such
an issue would trigger federal patent preemption. See Weilbutrin, 868 F.3d at 163-70. As such,
while an antitrust claim may relate to patent issues, it is not always the case that it is necessary to
explore its validity. Secondly, as noted above in Lipitor, the Third Circuit has already held that
this case was not preempted by federal law, since Plaintiffs’ claims are predicated on theories of
antitrust, not patent law. Lipitor, 855 F.3d at 146. As such, because Plaintiffs’ antitrust claims do
not implicate federal patent law, the Court will not dismiss these claims based on preemption.
Finally, Weilbutrin was decided at summary judgment, where the district court had before it a full
and complete record and was, therefore, capable of making determinations not presently available
at the pleading stage. For these reasons, the Court finds Defendants’ arguments, relying on
Welibutrin, premature.
3. Federal Patent Law Preemption of the Citizen Petition
Lastly, Defendants argue that Plaintiffs’ claim that Defendants filed sham citizen petition
with the FDA is also preempted. By way of background, a citizen petition is a written request
made by an interested person to the FDA, asking the agency to “issue, amend, or revoke a
regulation or order, or take or refrain from taking any other forms of administrative action.” 21
C.F.R.
§ 10.25, 10.30. Here, Defendants make a similar “but for” argument as discussed above
in Weilbutrin and contend that before addressing the merits of the sham citizen petition claim,
Plaintiffs must first prove that the challenged patent was invalid, because if it is valid, then the
patent, and not the citizen petition, prevented market entry of the generic brands.
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This argument fails for two reasons. First, Lipitor expressly held that federal patent law is
not implicated by a citizen petition claim, “whether [an FDA] petition was a sham is an issue
independent of patent law.” Lipitor, 855 F.3d at 146 (quoting In re DDAVP Direct Purchaser
Antitrust Litig., 585 F.3d 677, 686 (2d Cir. 2009)). In any event, even if a citizen petition claim
did implicate federal patent law, the Third Circuit has made clear that unless every theory of the
claim requires the resolution of a substantial question of federal law, it does not “arise under”
federal patent law. Id. Therefore, as discussed above, since this case does not “arise under” federal
patent law, preemption is not appropriate.
Alternatively, Defendants argue that the federal law governing the FDA preempts
Plaintiffs’ sham citizen petition claim. Here, Defendants rely primarily on the Supreme Court’s
decision in Buckman Co. v. Plaintffs’ Legal Committee, 531 U.S. 341 (2001). In Buckman, the
Supreme Court held that fraud-on-the-FDA claims are preempted by federal law. Id. at 353. In that
case, the defendants made two attempts to obtain FDA approval to market their bone screws, for
spinal surgery. Id. at 346. After the FDA denied approval twice, the defendants made a third
application with a more limited use, this time indicating that its use for the long bones in the arms
and legs, which finally received FDA approval. Id. Thereafter, the plaintiffs sued under state law,
alleging that the defendants made fraudulent representations to the FDA as to the intended use of
their product. Id. at 343-47. The Supreme Court held that federal law preempted the state law
claims, since an apparent conflict existed between the state law claims and federal law. Id. at 348,
353. The Supreme Court explained, “[thel conflict stems from the fact that the federal statutory
scheme amply empowers the FDA to punish and deter fraud against the [FDA], and that this
authority is used by the [FDA] to achieve a somewhat delicate balance of statutory objectives.” Id.
Allowing state law claims would distort the balance sought by the FDA and is, therefore,
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preempted by federal law. Id. Relying on Buckman, Defendants contend that Plaintiffs’ sham
citizen petition claim is akin to a fraud-on-the-FDA claim and should therefore be preempted.
However, courts that have been presented with this issue have narrowed the scope of
Buckman ‘s holding, concluding that preemption is inapplicable where the plaintiffs assert antitrust
and consumer protection claims, in addition to a fraud-on-the-FDA claim. See In re DDA VP
Indirect Purchaser Antitrust Litig., 903 F. Supp. 2d 198, 220-21 (S.D.N.Y. 2012). In DDA VP, the
Southern District ofNew York held that “claims mak[ing] ‘freestanding allegations of wrongdoing
apart from the defendant’s purported failure to comply with FDA disclosure requirements” are
sufficiently pled and, therefore, not preempted. Id. (quoting Desiano v. Warner-Lambert & Co.,
467 F.3d 85, 95 (2d Cir. 2006)). Here, Plaintiffs allege freestanding allegations, under state
antitrust and consumer protection laws, that are not preempted. For example, the EPPs allege that
reverse-payment settlement agreement gives rise to their state claims, which is wholly different
from alleging a failure to comply with the FDA. In response, Defendants contend that “DDA VP
unjustifiably narrows the holding of Buckman” and request that the Court “decline to follow its
holding.” However, the Court finds the reasoning in DDA VP persuasive. Buckman was concerned
that fraud-on-the-FDA claims, based on state law, would interfere with the FDA’s statutory
scheme; however, to apply that principle to claims unrelated to FDA authority would be to severely
limit the theories of relief that parties could seek. As such, this Court finds that the sham citizen
petition claim is not preempted by the federal FDA law.
To sum up, the Court declines to dismiss any of Plaintifrs claims based on preemption
principles.
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II. Notice Challenges and Permissibility of Pursuing Class Claims
Defendants next make several challenges to EPPs’ state antitrust and consumer protection
claims. First, Defendants contend that EPPs failed to satisfy the pre-filing notice requirements
mandated in states that require the same.
Second, Defendants argue that Illinois, Montana,
Tennessee, and Utah explicitly prohibit the use of class actions to enforce the rights created therein.
The Court discusses each challenge in turn.
1. Pre-Filing Notice Requirements
Because the Arizona, Hawaii, Nevada, and Utah antitrust laws have notice requirements,
Defendants contend that EPPs’ antitrust claims in these states must be dismissed since EPPs failed
to give proper notice.5 Defendants’ argument is based on the language of the respective state
statutes, requiring any antitrust plaintiff to serve that state attorney general a copy of the complaint.
See Ariz. Rev. Stat.
Utah Code Ann.
§ 44-1415; Haw. Rev.
Stat.
§ 480-13.3; Nev. Rev.
Stat. Ann.
§
598A.210(3);
§ 76-10-3109(9).
Hawaii’s antitrust statutes proscribes “[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of or any trade or commerce.” Haw. Rev. Stat.
§ 48 0-2
(emphasis added). Section 480-13.3 sets forth procedural requirements that must be met for a
putative class of indirect purchasers alleging unfair methods of competition under Section 4 80-2.
First, the class plaintiffs, within seven days of filing the lawsuit, must serve a copy of the
complaint, and all supporting material, with the Hawaii attorney general, who retains sole
It should be noted that during oral argument, EPPs’ attorney contended that notice was provided,
“I’m the one who gave notice in this case; I gave first of all we gave a demand to the defendants
back in 2012, with respect to all states. so that has been fulfilled.” (Tr. of June 25, 2018 Hearing
at 58:35-59:4). To me, this meant Plaintiffs gave notice in accordance with the state statutes. I
have no reason to disbelieve Plaintiffs’ counsel, who is an officer of the Court. However, no
competent proof supporting this assertion has been provided to the Court.
—
.
.
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discretion for determining whether the State will move forward with the action or file its own
action. Haw. Rev. Stat.
§ 480-13.3(a)(1), (4). If the Hawaii attorney general declines to proceed
with the action, the class plaintiffs then have the right to move forward. Haw. Rev. Stat.
§ 480-
13 .3(a)(5)(c).6
Like Hawaii, the Utah Antitrust Act requires notice be made to its attorney general.
Specifically, the Act states, “[t]he attorney general shall be notified by the plaintiff about the filing
of any class action involving antitrust violations that includes plaintiffs from this state. The
attorney general shall receive a copy of each filing from each plaintiff. The attorney general may,
in his or her discretion, intervene or file amicus briefs in the case, and may be heard on the question
of the fairness or appropriateness of any proposed settlement agreement.” Utah Code Ann.
§ 76-
10-3109(9).
Similarly, both Arizona and Nevada’s antitrust statutes require the putative class plaintiff
to provide notice to their respective attorney generals. Specifically, the Arizona Uniform Antitrust
Act states that “[a] person filing a complaint, counterclaim or answer for any violation of the
provisions of this article shall simultaneously with the filing of the pleading in the superior court
or, in the case of pendent state law claims in the federal court, serve a copy of the complaint,
counterclaim or answer on the attorney general. Proof of service on the attorney general shall be
filed with the court.” Ariz. Rev. Stat.
§ 44-1415(a). Under Nevada’s Unfair Trade Practices Act,
“[a]ny person commencing an action for any violation of the provisions of this chapter shall,
6
Courts have understood this notice requirement to apply only to claims of “unfair methods of
competition,” not “unfair or deceptive acts or practices”; however, neither party addresses this
distinction. See In re Chocolate ConfectionaryAntitrust Litig., 749 F. Supp. 2d 224, 243-33 (M.D.
Pa. 2010); In re Flash Memory Litigation, 643 F. Supp. 2d 1133, 1168 (N.D. Cal. 2009).
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simultaneously with the filing of the complaint with the court, mail a copy of the complaint to the
Attorney General.” Nev. Rev. Stat. Ann.
§
598A.210(3).
Finally, both the West Virginia and Massachusetts consumer protection statutes include
pre-fihing notice provisions. Specifically, the West Virginia Consumer Credit Protection Act
provides consumers who are victims to unfair, deceptive, and fraudulent business practices with a
cause of action. W. Va. Code
§ 46A-6-1 06(a).
However, prior to initiating suit, a consumer must
first inform the seller, in writing, of the alleged violation. W. Va. Code
§
46A-6-106(b). Courts
have interpreted this statute as a “mandatory prerequisite[j” to commencing a consumer protection
claim under the Act. Harrison v. Porsche Cars N Am., Inc., No. 15-0381, 2016 W. Va. LEXIS
245, at *5 (W.Va. 2016); see also Stanley v. Huntington Nat’l Bank, No.11-54, 2012 U.S. Dist.
LEXIS 9448, at *20..21 (N.D.W.Va. Jan. 27, 2012). Likewise, the Massachusetts Consumer
Protection Act requires that “[a]t least thirty days prior to the filing of any such action, a written
demand for relief, identifying the claimant and reasonably describing the unfair or deceptive act
or practice relied upon and the injury suffered, shall be mailed or delivered to any prospective
respondent.” Mass. Gen. Laws. Ch. 93A,
§ 9(3).
“The statutory notice requirement is not merely
a procedural nicety, but, rather, ‘a prerequisite to suit.” Rodi v. S. New Eng. Sch. ofLaw, 389 F.3d
5, 19 (1st Cir. 2004) (quoting Entrialgo v. Twin City Dodge, Inc., 333 N.E.2d 202, 204 (Mass.
1975)).
2. State Consumer Protection Class Bars
Defendants next contend that EPPs’ Montana, Tennessee, and Utah7 consumer fraud claims
must be dismissed, since these states prohibit class actions. Each of these statutes contain language
‘
Defendants also make a similar argument for Plaintiff’s Illinois consumer protection claims;
however, being that the Illinois Consumer Fraud & Deceptive Business Practice Act does not
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proscribing the use of class actions to enforce the rights provided therein. See Mont. Code Ann.
§
30-14-133(1) (“A consumer who suffers any ascertainable loss of money or property, real or
personal, as a result of the use or employment by another person of a method, act, or practice
declared unlawful by [the Consumer Protection Act] may bring an individual but not a class
action”); Tenn. Code Ann.
as a result of.
.
.
§
47-1 8-109(a)(l) (“Any person who suffers an ascertainable loss.
an unfair or deceptive act or practice
recover actual damages”); and Utah Code Ann.
§
.
.
.
may bring an action individually to
13-11-19(2) (“A consumer who suffers loss as a
result of a violation of this chapter may recover, but not in a class action, actual damages or $2,000,
whichever is greater, plus court costs.”).
Here, EPPs do not contest the meaning of the above-mentioned statutory provisions;
instead, relying on Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.s. 393,
408 (2010), EPPs contend these statutory provisions are preempted by Federal Rule of Civil
Procedure 23, since “federal procedural rules control over conflicting state rules.”
3. The Shady Grove Decision8
To properly analyze Defendants’ motion, the Court must determine whether the discussed
notice requirements and class action bars are procedural or substantive. It is blackletter law that
that federal courts sitting in diversity jurisdiction must utilize federal procedural law and state
substantive law. See Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). Therefore, if these states’
notice requirements and class action bars are substantive in nature, they apply and must be
followed in federal court. See Shady Grove, 559 U.S. at 410. However, there is no bright line
explicitly bar class actions, the Court finds it more appropriate to consider the substantive
arguments Defendants present later.
8
At the outset, it should be noted that neither party provided any post-Shady Grove analysis or
discussion to support their position.
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between procedural and substantive law and, thus, the distinction is difficult to determine,
especially since these two categories are not mutually exclusive. Godin v. Schencks, 629 F.3d 79,
86 (1st Cir. 2010).
In interpreting Erie, the Supreme Court explained that a federal law will only be procedural
and, thus, applicable, if the case’s outcome would be the same in both federal and state courts.
Guaranty Trust Co. v. York, 326 U.S. 99, 109 (1945). This is consistent with Erie’s “twin aims”
to avoid forum shopping and the inequitable administration of law. Id. at 111-12. The Supreme
Court further elaborated that before a court can consider Erie’s outcome determinative test, it must
first determine whether there is a direct conflict between the federal and state laws in question. See
Hanna v. Plumer, 380 U.S. 460, 470-74 (1965). If there is a conflict, the federal law must be used,
unless it is deemed unconstitutional or outside the scope of the Rules Enabling Act, 28 U.S.C.
§
2072(b), which prohibits the use of federal laws if they “abridge, enlarge, or modify any [state]
substantive right.” Id. If there is not a conflict, the outcome determinative test is utilized to
determine the whether to apply state or federal law. Id. This test has been refined as an inquiry
into “whether the scope of the Federal Rule
.
.
.
is sufficiently broad to control the issue before
the court.” Walker v, Armco Steel Corp., 446 U.S. 740, 749-50 (1980). Only if the federal law is
sufficiently broad, will the court then continue with the Hanna analysis.
Most recently, the Supreme Court was presented with a similar issue that is before the
Court. In Shady Grove, the Supreme Court was tasked with determining whether Federal Rule of
Civil Procedure 23 or a New York law controlled if a class action may proceed in federal court.
559 U.S. at 396. The New York law at issue prohibited the use of class actions to recover a
“penalty” or statutory minimum damages. N.Y. Civ. Prac. Law Ann. (CPLR)
§
90 1(b). In Shady
Grove, the class members met the prerequisites of Rule 23, but sued under Section 90 1(b) to
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recover unpaid interest from Allstate, which was classified as a “penalty” and, therefore, not
permitted under the New York law. Id. at 397. In determining which of the two rules applied, the
Supreme Court had to answer two related questions: first, whether the New York rule and Rule 23
addressed the same issue; and, if so, whether Rule 23 was within its statutory authority under the
Rules Enabling Act. Id. at 398 (citing Burlington N. R. Co. v. Woods, 480 U.S. 1, 4-5 (1987);
Hanna, 380 U.S. at 463-64). In doing so, a majority of the Court concluded that Rule 23’s conflict
with the New York law was “unavoidable” and could not fairly be read to not “control the issue.”
Id. at 406 n.8. As such, because the New York rule attempted to answer the same question, the
Court held “it cannot apply in diversity suits unless Rule 23 is ultra vires.” Id. at 398-99. Turning
to the second inquiry, however, no majority was able to come to an agreed standard. Writing for
three justices, Justice Scalia explained that “it is not the substantive or procedural nature of the
affected state law that matters, but the substantive or procedural nature of the Federal Rule.” Id. at
410. As such, the validity of a Federal Rule turns on whether it regulates procedure, if it does, it
is lawfully authorized by the Rules Enabling Act. Id.
However, in his concurring opinion, Justice Stevens criticized the plurality’s categorical
approach, at step two, that any federal rule that “really regulates procedure” is a sufficient basis
for preempting a conflicting state law. Id. at 421-29 (Stevens, J., concurring in part and concurring
in judgment). Instead, in Justice Stevens’ view, the inquiry should “not necessarily turn on whether
the state law at issue takes the form of what is traditionally described as substantive or procedural.
Rather, it turns on whether the state law actually is part of a State’s framework of substantive rights
or remedies.” Id. at 419. This is because there may be state procedural rules that “become so
bound up with the state-created right or remedy that it defines the scope of that substantive right
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or remedy” and, therefore, “make it significantly more difficult to bring or to prove a claim, thus
serving to limit the scope of that claim.” Id. at 420.
Although the Third Circuit has yet to decide whether Justice Stevens’ concurrence controls,
the Court is persuaded by the majority of district and circuit courts that have done so. Greene v.
Gerber Prods. Co., 262 F. Supp. 3d 38, 60 (E.D.N.Y. 2017) (collecting cases). In doing so, courts
presented with the same issue presently before the Court have framed the inquiry as whether the
state statute “provides a procedure that is ‘so bound up with the state-created right or remedy that
it defines the scope of that substantive right or remedy.” In re Digital Music Antitrust Litig., 812
F. Supp. 2d 390, 416 (S.D.N.Y. 2011) (quoting Shady Grove, 559 U.S. at 420 (Stevens, J.
concurring in part and concurring in judgment)); In re Nexium (Esomeprazole) Antitrust Litig.,
968 F. Supp. 2d 367, 409 (D. Mass. 2013). If the answer is in the affirmative, the federal rule must
yield to the state law, since it would “effectively abridge[], enlarge[], or modif[y] a state-created
right or remedy.” Shady Grove, 559 U.S. at 422 (Stevens, J. concurring in part and concurring in
judgment).
4. Application
Against this legal backdrop, the Court finds that Rule 23 is not “sufficiently broad” to cover
the state statutory notice provisions. First, the conflicting rules do not attempt to answer the same
question or subject. See Shady Grove, 559 U.S. at 399.
Here, the state laws in question address
notice provisions for antitrust and consumer protection-related lawsuits; Rule 23, on the other
hand, is a general federal procedural rule governing class actions. Second, contrary to Erie’s twin
aims, to decline to apply state statutory notice provisions “in federal court would encourage forum
From the Court’s perspective, in agreement with Justice Stevens, the state statutes at issue focus
on various forms of deceptive practices. Rule 23 is more generic and applies to all class actions.
As such, the narrower and more focused approach of the state should apply.
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shopping and the inequitable administration of laws.” In re Asacol Antitrust Litig., No. 1 5-12730,
2016 U.S. Dist. LEXIS 94605, at *48 (D. Mass. July 20, 2016). This is also consistent with the
majority of district courts that have been presented with the same issue, and have concluded that
state statutory notice provisions control in federal court. See Asacol, 2016 U.S. Dist. LEXIS 94605,
at *48 (statutory notice provisions in Arizona, Hawaii, Nevada, and Utah apply in federal court);
In re Chocolate Confectionary Antitrust Litig., 749 F. Supp. 2d 224, 232-33 (M.D. Pa. 2010)
(Hawaii notice provision applies); In re Flash MemoryAntitrustLitig., 643 F. Supp. 2d 1133, 1158
(N.D. Cal. 2009) (same). Accordingly, because EPPs failed to comply with the notice provisions
under Arizona’s Uniform Antitrust Act, Hawaii’s Antitrust Act, Nevada’s Unfair Trade Practices
Act, and Utah’s Antitrust Act, as well as Massachusetts’s Consumer Protection Act and West
Virginia’s Consumer Credit Protection Act, EPPs’ class claims under these statutes are dismissed
without prejudice.
For these same reasons, the Court also finds that the class action bars incorporated in the
Montana, Tennessee, and Utah consumer protection laws are not preempted by Rule 23. Here,
EPPs deviate from the majority of district and circuits, which have followed Justice Steven’s
concurrence in Shady Grove, and endorse the approach taken in Lisk v. Lumber One Wood
Preserving, LLC, 792 F.3d 133, 1335 (11th Cir. 2015). In Lisk, the Eleventh Circuit held that there
was “no relevant, meaningful distinction between” the New York law in Shady Grove and the
Alabama Deceptive Trade Practices Act, which also bars class actions. In doing so, the court,
echoing Justice Scalia’s plurality decision, explained, “the question whether a federal rule
abridges, enlarges, or modifies a substantive right turns on matters of substance—not on the
placement of a statute within a state code.” Id. at 1336. However, “[t]he decision in Lisk has not
been widely followed outside of the Eleventh Circuit.” Delgado v. Ocwen Loan Servicing, LLC,
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No. 13-4427, 2017 U.S. Dist. LEXIS 186408, at *23 (E.D.N.Y. Nov. 8, 2017). Instead, “most
courts outside of that circuit implicitly or explicitly disagree[] with its interpretation of Shady
Grove and its determination that there was no ‘meaningful distinction” between the New York
law in Shady Grove and the Alabama class action bar. Id. (collecting cases). Instead, consistent
with the courts to have considered this issue, the Court finds that the class action bars in the
Montana, Tennessee, and Utah consumer protection acts control in federal court. Id. at *23..24.
Moreover, in Delgado, the court explained, “the specific inclusion of the class action bar within
the Alabama, Tennessee, and Georgia consumer protection statutes
.
.
.
evinces a desire by the
state legislature to limit not only the form of the action but also the remedies available, placing
those bars squarely within Justice Stevens’ concurrence.” Id.,’° Fejzulai v. Sam’s West, Inc., 205
F. Supp. 3d 723, 728-29 (D.S.C. 2016). That same reasoning holds here.
In sum, the Court finds that the four notice provisions under Arizona, Hawaii, Nevada, and
Utah antitrust laws are applicable here and Plaintiffs failed to comply. Likewise, the notice
provisions in Massachusetts and West Virginia’s consumer protection laws control. As such,
EPPs’ claims under these six statutes are dismissed without prejudice; Plaintiffs may file an
amended complaint that specifically pleads compliance with each state’s notice requirement.
Similarly, EPPs’ class claims under Montana, Tennessee, and Utah’s consumer protection statutes
are dismissed without prejudice; in these three states, Plaintiffs may amend their complaint to
10
Both Alabama and Georgia’s consumer protection statutes contain similar language to Montana,
Tennessee, and Utah, which all prohibit the use of class actions to enforce the rights created
therein. Ala. Code Ann. § 8-19-1 0(f) (“A consumer or other person bringing an action under this
chapter may not bring an action on behalf of a class”); Ga. Code Ann. § 10-1-399(a) (“Any person
who suffers injury or damages. as a result of consumer acts or practices in violation of this part
may bring an action individually, but not in a representative capacity”).
.
.
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include only claims brought on behalf of Montana, Tennessee, and Utah plaintiffs in their
individual capacities.
III. State Antitrust Challenges
Defendants next seek dismissal of EPP’s Illinois, Rhode Island, and Utah state antitrust
claims, since these states lack standing under Illinois Brick Co. v. Illinois, 431 U.S. 720, 746-47
(1977).
In Illinois Brick, the Supreme Court held that indirect purchasers lacked Article III
standing to assert federal antitrust claims against manufacturers since their injury was likely only
a small portion of the injury caused by the defendants’ alleged conduct. Id. at 725-26.
1. Illinois Antitrust Act
Relying on Illinois Brick, Defendants contend that EPPs’ Illinois antitrust claim fails, since
they lack standing. The plain language of the Illinois Antitrust Act (“IAA”) states “no person shall
be authorized to maintain a class action in any court of this State for indirect purchasers asserting
claims under this Act, with the sole exception of this State’s Attorney General, who may maintain
an action parens patriae.” 740 Ill. Comp. Stat.
§
10/7(2). EPPs respond, contending that under
Shady Grove, the Court should treat the Illinois Antitrust Act as a procedural law and, therefore,
follow Rule 23.
District courts are divided on whether the Illinois Antitrust Act precludes indirect
purchasers from filing class actions. However, a majority of courts have held that the Act is
distinguishable from the New York law in Shady Grove and that it prohibits indirect purchaser
class actions. See, e.g., In re Opana ErAntitrustLitig., 162 F. Supp. 3d 704, 723 (N.D. Iii. 2016);
United Food & Commer. Workers Local 1776 & Participating Employers Health & Welfare Fund
v. TeikokuPharma USA, Inc., 74 F. Supp. 3d 1052, 1083-84 (N.D. Cal. 2014); Digital Music, 812
F. Supp. 2d at 415-16; Wellbutrin XL, 756 F. Supp. 2d at 677. As discussed above, the New York
30
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law at issue in Shady Grove involved a general procedural rule that conflicted with Rule 23; here,
however, the limitation prescribed in the IAA is “in the same paragraph of the same statute that
creates the underlying substantive right.” Digital Music, 812 F. Supp. 2d at 416; see also
Weilbutrin XL, 756 F. Supp. 2d at 677. Further, the restrictions in the Illinois Antitrust Act appear
to reflect a policy decision regarding the feasibility of duplicative recovery, which is explicitly
entrusted to the attorney general, not indirect purchasers. Welibutrin XL, 756 F. Supp. 2d at 677
(citing Illinois ex rel. Burns v. Panhandle E. Pipe Line Co., 935 F. 2d 1469, 1480 (7th Cir. 1991)).
In finding that the Act to bars indirect purchaser antitrust class actions, courts have explained “[t]he
Illinois restrictions on indirect purchaser actions are intertwined with Illinois substantive rights
and remedies
.
.
.
[such that] application of Rule 23 would ‘abridge, enlarge or modify’ Illinois’
substantive rights, and therefore Illinois’ restrictions on indirect purchaser actions must be applied
in federal court.” Id.; see also Nexium, 968 F. Supp. 2d at 408-09; In re Solodyn (Minocycline
Hydrochloride) Antitrust Litig., No. 14-2503, 2015 U.S. Dist. LEXIS 125999, at *66 (D. Mass.
Aug. 14, 2015) (holding that it would be inconsistent with Shady Grove to conclude that Rule 23
preempts the ban on class actions contained within Illinois Antitrust Law).
Several district courts have taken a less restrictive interpretation of the Illinois Antitrust
Act and have allowed indirect purchasers to bring class actions under the Act. See, e.g., In re
Broiler Chicken Antitrust Litig., 290 F. Supp. 3d 772, 817-18 (N.D. Iii. 2017); In re Propranolol
Antitrust Litig., 249 F. Supp. 3d 712, 729 (S.D.N.Y 2017); In re Aggrenox Antitrust Litig.
(Aggrenox II), No. 14-25 16, 2016 U.S. Dist. LEXIS 104647, at *23..28 (D. Conn. Aug. 9, 2016).
In Broiler Chicken, the Northern District of Illinois held that Rule 23 applies in federal court,
despite the state law’s requirement that the attorney general bring class actions, since the Act does
not hinder the class’s substantive rights. Broiler Chicken, 290 F. Supp. 3d at 818. This is “because
31
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any indirect purchaser procedurally blocked from participation in a class action would still have
the same remedy in an individual action.” Aggrenox II, 2016 U.S. Dist. LEXIS 104647, at *28.
As such, these courts view the Illinois Antitrust Act as a procedural conflict with Rule 23, rather
than substantive, and, therefore, apply Rule 23 to permit indirect purchasers to file class actions
under the Act, so long as they satisfy its prerequisites. See, e.g., Propranolol., 249 F. Supp. 3d at
728.
Although district courts have taken different approaches in interpreting the Illinois
Antitrust Act, the Court finds the rationale of Digital Music persuasive. The language of the Act
presents a substantive conflict with Rule 23; as such, since the Illinois Antitrust Act controls, the
Court finds that EPPs lack standing to assert claims under the Act and, therefore, dismisses this
claim with prejudice.
2. Rhode Island Antitrust Act
Defendants next move for dismissal of EPPs Rhode Island antitrust claims since they, too,
lack standing to bring an antitrust claim under Illinois Brick. Since the Supreme Court’s decision,
multiple states have enacted Illinois Brick repealer statutes that allow indirect purchasers to recover
under their state law. On July 15, 2013, Rhode Island passed such a repealer, which states “[tihe
fact that a person or public body has not dealt directly with the defendant shall not bar or otherwise
limit recovery.” R.I. Gen. Laws § 6-36-7(d). As such, Plaintiffs argue the statute should be applied
retroactively and, even if it cannot be applied retroactively, they nevertheless fall within the
repealer’s protection since Plaintiffs suffered damages past July 15, 2013.
Here, Defendants argue that the activity alleged in this claim predated July 15, 2013, since
the alleged anticompetitive conduct that prevented the generic brands from entering the market
occurred prior to November 30, 2011. (SAC ¶J 23, 469, 512, 523, 535). As such, since the conduct
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giving rise to the present cause of action occurred prior to the passing of Rhode Island’s repealer,
Defendants contend it does not apply and, under illinois Brick, must be dismissed. In addition,
Defendants aver that the statute cannot be applied retroactively.
Under Rhode Island law, it is well established that statutes cannot be applied retroactively,
unless clearly stated.
The Rhode Island Supreme Court has held that, “statutes and their
amendments are construed to operate prospectively unless a specific contrary intent is expressed
by the Legislature, or retroactivity must necessarily be inferred from the language employed by
the law makers.” State v. Jennings, 944 A.2d 171, 173 (R.I. 2008); see also Rodrigues v. State,
985 A.2d 311, 318 (R.I. 2009); Wilkinson v. State Crime Lab. Comm ‘n, 788 A.2d 1129, 1140-41
(R.I. 2002); Hydro-Manufacturing v. Kayser-Roth Corp., 640 A.2d 950, 954-55 (R.I. 1994).
Additionally, courts
have consistently held that the Rhode Island repealer applies
prospectively. See, e.g., In re Aggrenox Antitrust Litig. (“Aggrenox I”), 94 F. Supp. 3d 224, 25253 (D. Conn. 2015); In re Cast Iron Soil Pipe & FittingsAntitrust Litig., No. 14-2508, 2015 U.S.
Dist. LEXIS 121620, at *63, (E.D. Tenn. July 24, 2015); In re Niaspan Antitrust Litig., 42 F.
Supp. 3d 735, 759 (E.D. Pa. 2014). Finally, Plaintiffs’ contention that Defendants’ conduct has
continued past July 15, 2013, thereby placing it within the repealer’s protection, is belied by the
explicit allegations set forth in their Complaint, which focus solely on Defendants’ actions made
prior to November 30, 2011. (SAC
¶J 23, 469,
512, 523, 535). As such, because Rhode Island’s
repealer does not apply retroactively and none of the activity giving rise to their claims occurred
after the date of enactment (July 15, 2013), EPPs’ Rhode Island antitrust claims are dismissed with
prejudice.
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3. Utah Antitrust Act
Lastly, in addition to failing to provide notice, Defendants contend that EPPs’ Utah
antitrust claims fail, since none of the named Plaintiffs are Utah residents, as required under Utah
law. (SAC ¶ 487). As such, Defendants contend that EPPs lack standing to assert claims under the
Utah Antitrust Act. See Niaspan, 42 F. Supp. 3d at 759-60. Plaintiffs respond that dismissal is
not warranted, since only a member of a putative class must be from Utah. See In re Liquid
Aluminum Sulfate Antitrust Litig., No. 16-2687, 2017 U.S. Dist. Lexis 115294, at *1 12-13 (D.N.J.
July 20, 2017).
Under the Utah Antitrust Act, “[a] person who is a citizen of this state or a resident of this
state” can bring a claim. Utah Code Ann.
§
76-10-3109(1)(a) (emphasis added). The majority of
courts that have been presented with this statute require at least one Utah citizen or resident be a
named plaintiff. See Opana Er, 162 F. Supp. 3d at 725; Aggrenox I., 94 F. Supp. 3d at 25 1-52;
Niaspan, 42 F. Supp. 3d at 759-60; Nexium, 968 F. Supp. 2d at 410; In Re Magnesium Oxide
Antitrust Litig., No. 10-5943, 2011 U.S. Dist. LEXIS 121373, at *30 n.10 (D.N.J. Oct. 20, 2011).
Here, neither party disputes that none of the named Plaintiffs are Utah residents or citizens. As
such, guided by the majority of courts to address this issue, because there must be at least one
named plaintiff who is a Utah citizen or resident in order to establish standing for the putative
class, EPPs’ claims under the Utah Antitrust Act are dismissed without prejudice.
In sum, EPPs’ antitrust claims under Illinois and Rhode Island are dismissed and there is
no right to amend due to futility. Under Utah, the claim is dismissed without prejudice; but
Plaintiff may amend to name such plaintiff within thirty days.
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4. States Requiring Concerted Action
Defendants next seek dismissal of Count I of EPPs’ Kansas, New York, and Tennessee
antitrust claims, which asserts a single claim of monopolization against Pfizer, based on
fraudulently obtaining and listing the ‘995 Patent, obtaining reissuance of that patent, filing serial
sham litigation and a sham citizen petition, and entering into a reverse settlement agreement with
Ranbaxy. (SAC
¶
504). Specifically, Defendants argue that because Kansas, New York, and
Tennessee require unlawful behavior between two or more individuals, Count I must be dismissed
since it alleges unilateral conduct by Pfizer.
It is clear from the Complaint that the allegations concerning the obtaining, listing, and
reissuance of the ‘995 Patent, in addition to the sham litigation and sham citizen petition, are all
unilateral actions by Pfizer (SAC
¶
500). As such, since these allegations describe unilateral
conduct, Defendants contend that Count I fails in Kansas, New York and Tennessee. See Kan.
Stat. Ann.
§
50-101, -112, -132; N.Y. Gen. Bus. Law
§
340(1); Tenn. Code Ann.
§ 47-25-101,
-102.
The Kansas Monopolies and Unfair Trade Act proscribes “all arrangements, contracts,
agreements, trusts, or combinations between persons made with a view or which tend to prevent
full and free competition” and those “designed or which tend to advance, reduce or control the
price or the cost to the producer or to the consumer of any such products or articles.” Kan. Stat.
Ann.
§
50-1 12. The Act defines a “trust” as a “combination of capital, skill, or acts, by two or
more persons” and prohibits conspiracy or combination “with any other persons.
of monopolizing any line of business.” Kan. Stat. Ann.
§
.
.
for the purpose
50-101, 132. While there is scant case
law interpreting the Kansas Monopolies and Unfair Trade Act, the Kansas Court of Appeals has
held that since the Act emphasizes agreements between two or more individuals, the legislature
35
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intended for the Act to require more than unilateral conduct. Smith v. Philip Morris Cos., 335 P.3d
644, 662-67 (Kan. Ct. App. 2014); see also In re RelafenAntitrustLitig., 221 F.R.D. 260, 283 (D.
Mass. 2004).
Like Kansas, the New York Donnelly Act defines an antitrust violation as “every contract,
agreement, arrangement, or combination whereby a monopoly in the conduct of any business,
trade, or commerce..
.
may be established or maintained, or whereby [c]competition or the free
exercise of any activity in the conduct of any business, trade, or commerce
restrained.” N.Y. Gen. Bus. Law
.
.
.
is or may be
§ 340(1). As such, in New York “[ajn antitrust claim under the
Donnelly Act.. must allege both concerted action by two or more entities and a consequent
.
restraint of trade within an identified relevant product market.” Global Reins. Corp. US. Branch
-
v. Equitas Ltd., 969 N.E. 2d 187, 192 (N.Y. 2012); see also In reAluminum WarehousingAntitrust
Litig. No. 13-2481, 2014 U.S. Dist. Lexis 140765, at *23 (S.D.N.Y. Sept. 14, 2014). However,
the Northern District of New York has held that allegations of monopolistic activities, based on
conspiring with other individuals, suffices to state a claim under the Donnelly Act. See N. Cnly.
Communs. Corp. v. Verizon N.Y. Inc., 233 F. Supp. 2d 381, 385 (N.D.N.Y. 2002).
Finally, like Kansas and New York, the Tennessee Trade Practices Act proscribes “[ajll
arrangements, contracts, agreements, trusts, or combinations between persons or corporations
made with a view to lessen, or which tend to lessen, full and free competition
.
.
.
and all
arrangements, contracts, agreements, trusts, or combinations between persons or corporations
designed, or which tend, to advance, reduce, or control the price or the cost to the producer or the
consumer.” Tenn. Code Ann.
§
47-25-101. Despite limited case law interpreting the statute,
several district courts have held that “the absence of an arrangement or conspiracy between two
actors is a bar” to a claim under the Tennessee statute. Sheet Metal Workers Local 441 Health &
36
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Welfare Plan v. GlaxoSmithKline, PLC, 737 F. Supp. 2d 380, 445-46 (E.D. Pa. 2010); see also In
re Ditropan XL Antitrust Litig., 529 F. Supp. 2d 1098, 1108-09 (N.D. Cal. 2007); Relafen, 221
F.R.D. at 284.
As established above, the case law as well as the plain language of the Kansas, New York,
and Tennessee antitrust statutes require concerted action between two parties. As such, allegations
relating to Pfizer’s unilateral conduct fails to state a claim under these statutes. The Court is not
persuaded by Plaintiffs’ argument that all alleged conduct falls within a single cause of action.
Therefore, Defendants’ motion as it relates to Kansas, New York, and Tennessee are granted in
part and denied in part. To the extent Count I is based on Pfizer fraudulently obtaining the ‘995
Patent, listing that patent in the Orange Book, obtaining reissuance of the ‘995 Patent, filing a
sham citizen petition, and engaging in sham litigation, these claims are dismissed, since the
conduct is unilateral. However, the Court denies Defendants’ motion to the extent that they seek
dismissal of Count I based on the reverse settlement agreement with Ranbaxy.
IV. State Law Consumer Protection Claims
Defendants next challenge the sufficiency of EPPs’ state consumer protection claims. The
Court discusses each state individually.”
1. Calfornia
Defendants first seek dismissal of EPPs’ claims under the California Unfair Competition
Law, since EPPs failed to plead reliance. The Unfair Competition Law proscribes “any unlawful,
unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code
§ 17200. As such, courts
have understood Section 17200 to provide relief for three varieties of unfair competition:
11
Because the Court has already dismissed EPPs’ claims under Massachusetts, Montana,
Tennessee, Utah and West Virginia’s consumer protection statutes, it does not address the
remaining arguments pertaining to these states.
37
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“practices which are unlawful, unfair, or fraudulent.” Ditropan XL, 529 F. Supp. 2d at 1105.
However, contrary to Defendants’ assertion, reliance is only required “when a[n] [Unfair
Competition Law] claim is premised on allegations that the Defendants engaged in fraudulent
business practices.” Id. at 1106. Here, EPPs claims are predicated on unlawful and unfair business
practices engaged by defendants.
Specifically, Plaintiffs challenge, among other things,
Defendants’ sham litigation, fraudulent procurement of the PTO, and reverse settlement
agreement. As such, “at the very least, [EPPs] allege a claim premised on the unfair prong.” Id.;
see also In re Weilbutrin XL Antitrust Litig., 260 F.R.D. 143, 160 (E.D. Pa. 2009). Therefore,
because EPPs’ allege sufficient facts to sustain an Unfair Competition Law claim based on unfair
business practices, Defendants’ motion for judgment on the pleadings with respect to this claim is
denied. 12
2. Illinois
Defendants next seek dismissal of EPPs’ claims under the Illinois Consumer Fraud and
Deceptive Business Practices Act since: (1) the Act does not provide additional relief beyond
antitrust claims; (2) EPPs failed to plead deception or reliance; and (3) EPPs fail to demonstrate
that the alleged conduct was consumer-oriented or had a consumer nexus. The Illinois Consumer
Fraud and Deceptive Business Practices Act states that “[u]nfair methods of competition and unfair
or deceptive acts or practices
.
.
.
in the conduct of any trade or commerce are hereby declared
unlawful whether any person has in fact been misled, deceived or damaged thereby.” 815 Ill.
Comp. Stat. Ann. 5 05/2. However, the state legislature did not intend for the Act to serve as an
“additional antitrust enforcement mechanism.” Laughlin v. Evanston Hosp., 550 N.E.2d 986, 993
12
Moreover, it should be noted that, at the pleading stage it is difficult to determine whether
Plaintiffs claims under California law are even based on fraudulent conduct; as such, the Court
also finds Defendants’ motion to be premature.
38
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(Ill. 1990) (consumer fraud statutes cannot be used when conduct is not actionable under the state
antitrust law); Siegel v. Shell Oil Co., 480 F. Supp. 2d 1034, 1046-48 (N.D. Ill. 2007) (consumers
can bring a consumer fraud claim when conduct is actionable under the Illinois Antitrust Act). As
such, if the plaintiff fails to plead an antitrust claim under the Illinois Antitrust Act, those same
allegations of anticompetitive conduct cannot give rise to a claim under the Illinois Consumer
Fraud and Deceptive Business Practices Act. Id.; Siegel, 480 F. Supp. 2d at 1034; Wellbutrin XL,
260 F.R.D. at 162.
As discussed above, the Illinois Antitrust Act prohibits indirect purchaser class actions.
Moreover, when reviewing the Complaint, EPPs’ claims are primarily focused on anticompetitive
conduct and its “allegations of consumer fraud overlap entirely with the allegations of
anticompetitive conduct.” Weilbutrin XL, 260 F.R.D. at 162 (quoting Gaebler v. New Mexico
Potash Corp., 676 N.E.2d 228, 230 (Iii. App. Ct. 1996)). Simply put, “plaintiffs may not assert
what are essentially antitrust claims in the guise of a claim under [the Illinois Consumer Protection
Act].” Id. Since any amendment would be futile, judgment on the pleadings is granted without
leave to amend.
3. Maine
Defendants next seek dismissal of EPPs’ claims under the Maine Unfair Trade Practices
Act, since EPPs failed to allege deception and, alternatively, EPPs are not considered “consumers”
under the Act. The Act proscribes “[ulnfair methods of competition and unfair or deceptive acts
or practices in the conduct of any trade or commerce.” Me. Rev. Stat. tit. 5
§ 207. “A business
practice is ‘unfair’ if the injury it produces is (1) ‘substantial,’ (2) not ‘outweighed by any
countervailing benefits to consumers or competition that the practice produces,’ and (3) not
reasonably avoidable by consumers.” In re Chocolate Confectionary Antitrust Litig., 602 F. Supp.
39
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2d 538, 584 (M.D. Pa. 2009) (quoting Tungate v. MacLean-Stevens Studios, Inc., 714 A.2d 792,
797 (Me. 1998)). “In pricing cases, the allegedly unfair practice must also induce the consumer to
acquire something that he or she would not otherwise have purchased.” Id. However, where as
here, the purported conduct resulted in higher prices, the Maine Unfair Trade Practices Act
provides no such relief, since higher prices do not induce a consumer to make purchases. In re
Graphics Processing Units (GPU) Antitrust Litig., 527 F. Supp. 2d 1011, 1031 (N.D. Cal. 2007).
As such, since any amendment to EPPs’ claims under the Maine Consumer Protection Act would
be futile, judgment on the pleadings is granted without leave to amend. See Chocolate
Confectionary, 602 F. Supp. 2d at 585.
It is worth briefly noting that the court is unpersuaded by Plaintiff’s reliance on In re Motor
Vehicles Canadian Exp. Antitrust Litig., 350 F. Supp. 2d 160 (D. Me. 2004), which held that
deception or reliance only applies to “unfair or deceptive acts,” not “unfair methods of
competition.” Id. at 186-87. First, federal courts have criticized the rationale in In re Motor
Vehicles, concluding that its “crabbed reading of Tungate” is incongruent with the Maine Supreme
Court’s holding since “[t]he Maine Supreme Court [did] not qualify its pronouncement as
applicable to only ‘unfair or deceptive acts.” In re Polyurethane Foam Antitrust Litig., 799 F.
Supp. 2d 777, 787 (N.D. Ohio 2011) (quoting Flash Memory, 643 F. Supp. 2d at 1159); see also
Chocolate Confectionary, 602 F. Supp. 2d at 5 84-85; In re TFT-LCD Antitrust Litig., 586 F. Supp.
2d 1109, 1126-27 (N.D. Cal. 2008).
Second, the allegations in that case concerned group
boycotts,’3 not price fixing or reverse settlements, which the In re Motor Vehicles court reasoned
would nevertheless support an unfair method of competition claim.
13
In their brief in opposition to Defendants’ motion, EPPs make explicitly clear that they “have
not alleged a claim based on group boycott.” (Pis’ Brief in Opp. at 41).
40
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4. Nebraska
Defendants next seek dismissal of Plaintiffs’ claims under the Nebraska Consumer
Protection Act, since the purportedly wrongful conduct does not have a consumer nexus. The
Nebraska Consumer Protection Act proscribes “[ujnfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or commerce” and allows injured individuals
a private right of action. Neb. Rev. Stat. Ann
§
59-1602; -1609. In order to state a valid claim
under the Act, “the unfair or deceptive act or practice must have an impact upon the public
interest.” Nelson v. Lusterstone Surfacing Co., 605 N.W.2d 136, 142 (Neb. 2000). “The purpose
of the Act is to provide consumers with protection against unlawful practices in the conduct of any
trade or commerce which directly or indirectly affects the people of Nebraska” and “was intended
to be an antitrust measure to protect Nebraska consumers from monopolies and price-fixing
conspiracies.” Arthur v. Microsoft Corp., 676 N.W.2d 29, 37 (Neb. 2004). As such, “the Act
allows any person who is injured by a violation of
§
59-1602 to 59-1606 which directly or
indirectly affects the people of Nebraska to bring a civil action to recover damages.” Id. at 38.
Here, as discussed above, EPPs allege that Defendants engaged in anticompetitive schemes
to prevent the market entry of generic-brand Lipitor, which caused EPPs to pay a premium. Since
the schemes alleged in the Complaint had an indirect impact on Nebraska consumers, EPPs’ have
adequately alleged that the scheme impacted the public interest. As such, Defendants’ motion for
judgment on the pleadings with respect to EPPs’ claims under the Nebraska Consumer Protection
Act is denied.
5. Nevada
Defendants argue that EPPs claims under the Nevada Deceptive Trade Practices Act
should be dismissed, since EPPs failed to allege consumer reliance. Under Section 41.600 of
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Nevada’s Revised Statutes, “any person who is a victim of.
.
[a] deceptive trade practice as
.
defined in [the Nevada Deceptive Trade Practices Act]” may a bring an action thereunder. Nev.
Rev. Stat.
§ 41.600.
Some courts have held that when a plaintiff seeks relief based on prohibited
acts listed under Section 598.0915, the plaintiff is required to demonstrate deception or reliance.
See, e.g., Picus v. Wal-Mart Stores, Inc., 256 F.R.D. 651, 657 (D. Nev. 2009); Sheet Metal
Workers, 737 F. Supp. 2d at 417. However, contrary to Defendants’ contention, EPPs’ claims do
not arise under Section 598.0915; instead, EPPs’ claims appear to be predicated on Section
598.0923(3), which states that “[a] person engages in a ‘deceptive trade practice’ when in the
course of his or her business or occupation he or she knowingly.
.
.
violates state or federal statute
or regulation relating to the sale or lease of goods or service.” Nev. Rev. Stat.
§ 598.0923(3).
Under Section 598.0923(3), the Nevada Deceptive Trade Practices Act does not appear to
require the plaintiff must plead reliance, nor do Defendants identify any case-law that would
otherwise support this contention. See In re Pharm. Indus. Average Wholesale Price Litig., 252
F.R.D. 83, 98 (D. Mass. 2008) (parties agreeing that the Nevada Deceptive Trade Practices Act
does not require proof of reliance); see also In re Packaged Seafood Prods. Antitrust Litig., 242 F.
Supp. 3d 1033, 1080-81 (S.D. Cal. 2017) (rejecting the defendant’s motion to dismiss the end
purchaser plaintiff’s Nevada Deceptive Trade Practices Act claims, arising from an alleged antirust
conspiracy regarding packaged seafood products). As such, since EPPs’ claims are predicated on
allegations of anticompetitive conduct, which are considered prohibited acts under Nev. Rev. Stat.
§
598A.060(a), the Court denies Defendants’ motion for judgment on the pleadings.
6. New Mexico
Defendants next challenge EPPs’ claims under the New Mexico Unfair Practices Act, since
the Act does not provide relief for price fixing and, in any event, they fail to plead unconscionable
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conduct. The New Mexico Unfair Practices Act prohibits unfair, deceptive, and unconscionable
trade practices. N.M. Rev. Stat.
§ 57-12-2.
Given the remedial nature of the Act, “courts construe
its provisions broadly to facilitate this purpose.” Chocolate Confectionary, 602 F. Supp. 2d at 585
(citing State ex rel. Stratton v. Gurley Motor Co., 737 P.2d 1180, 1185 (N.M. 1987)). The Act
defines “unconscionable trade practice” as “an act or practice in connection with the sale
any goods or services.
.
.
.
.
.
of
that to a person’s detriment: (1) takes advantage of the lack of knowledge,
ability, experience or capacity of a person to a grossly unfair degree; or (2) results in a gross
disparity between the value received by a person and the price paid.” N.M. Stat. Ann.
§
57-12-
2(E).
“Federal courts generally permit [New Mexico Unfair Practices Act] actions in price-fixing
cases provided that the plaintiff alleges a ‘gross disparity’ between the price paid for a product and
the value received.” Chocolate Confectionary, 602 F. Supp. 2d at 585 (collecting cases); see also
Flash Memory, 643 F. Supp. 2d at 1159-60; Liquid Aluminum Sulfate, 2017 U.S. Dist. LEXIS
115294, at *1o8..o9; In re Aflermarket Filters Antitrust Litig., No. 08-4883, 2009 U.S. Dist. LEXIS
104114, at *37 (N.D. Ill. Nov. 5,2009). Unlike GPU, 527 F. Supp. 2d at 1029-30, where the court
dismissed the plaintiffs’ New Mexico Unfair Practices Act for failing to plead unequal bargaining
power, the Court is satisfied that, at this juncture, that EPPs have sufficiently pled enough facts to
state a claim under the New Mexico statute. EPPs Complaint is replete with allegations of price
fixing and anticompetitive schemes, and it is beyond cavil that these schemes resulted in
consumers paying a substantial premium for goods that they would have otherwise paid a fraction
for. See TFT-LCD, 586 F. Supp. 2d at 1127 (allegations of price fixing and “gross disparity”
between the value of products received and amount paid sufficient to state a claim under the New
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Mexico Unfair Practices Act). As such, the Court denies Defendants’ motion for judgment on the
pleadings as to EPPs’ New Mexico Unfair Practices Act claims.
7. New York
Defendants next challenge EPPs’ claims under the New York Consumer Protection from
Deceptive Acts and Practices Act, since EPPs fail to allege particular conduct directed specifically
at them and, in the alternative, fail to allege consumer reliance. Section 349 of New York’s
Business Law states, “[d]eceptive acts or practices in the conduct of any business, trade or
commerce or in the furnishing of any service in this state are hereby declared unlawful.” N.Y. Gen.
Bus. Law
§ 349(a). “[S]ection 349 is directed at wrongs against the consuming public.”
In re
Rezulin Prods. Liab. Litig., 392 F. Supp. 2d 597, 613 (S.D.N.Y. 2005) (quoting Oswego Laborers’
Local 214 Pension Fund v. Marine Midland Bank, NA., 647 N.E.2d 741, 744 (N.Y. 1995)). In
order to state a claim under Section 349, the plaintiff must prove three elements: (1) “the
challenged act or practice was consumer-oriented;” (2) “it was misleading in a material way;” and
(3) “the plaintiff suffered injury as a result of the deceptive act.” Flash Memory, 643 F. Supp. 2d
at 1160 (quoting Stutman v. Chem. Bank, 731 N.E.2d 608, 611 (N.Y. 2000)). “To satisfy the
consumer-oriented prong, plaintiffs need only allege consumer-oriented conduct that implicates
the public interest in New York.” In re Dynamic Random Access Memory Antitrust (DRAM II)
Litig., 536 F. Supp. 2d 1129, 1144-45 (N.D. Cal. 2008)).
Here, contrary to Defendants’ assertion, the Court is satisfied that EPPs have alleged
sufficient facts to sustain a claim under Section 349. As discussed above, EPPs’ claims focus on
the anticompetitive conduct of Defendants, which prevented the earlier market entry of generic
Lipitor and, as a result, caused individuals to pay a premium. See MacQuarie Grp. Ltd. v. Pac.
Corporate Grp., LLC, No. 08-cv-21 13, 2009 U.S. Dist. LEXIS 16554, at *23.25 (S.D. Cal. Mar.
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2, 2009) (recognizing that “courts routinely treat[J antitrust violations as deceptive acts”); see also
New York v. Feldman, 210 F. Supp. 2d 294, 302 (S.D.N.Y. 2002)). In fact, similar allegations
were made in both TFT-LCD, 586 F. Supp. 2d at 1128-29, and DRAMII, 536 F. Supp. 2d at 114344, where the district courts denied the defendants’ motions to dismiss, finding the plaintiffs
alleged sufficient facts to state a claim. As such, for these reasons, the Court denies Defendants’
motion as to EPPs’ Section 349 claims.
8. North Carolina
Defendants next contend that EPPs lack standing to assert claims under North Carolina’s
Unfair and Deceptive Trade Practices Act, since Plaintiffs are neither competitors nor in
commercial dealings with Defendants. Section 75-1.1 of the Act proscribes “[u]nfair methods of
competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting
commerce” and provides “any person” or “business of any person, firm or corporation” the right
to sue for injuries arising from unfair business practices. N.C. Gen. Stat.
§
75-1.1; -16. “Federal
courts interpreting the [North Carolina’s Unfair and Deceptive Trade Practices Act] have allowed
claims asserted by businesses against one another as long as the challenged practices affect
commerce or the marketplace.” Sheet Metal Workers, 737 F. Supp. 2d at 419. Here, as discussed,
EPPs claim that Defendants engaged in anticompetitive schemes, which ultimately resulted in
consumers purchasing Lipitor at inflated prices. This suffices, under the Act, to confer EPPs with
standing; as such, Defendants’ motion for judgment on the pleadings is denied. See id. The Court
only adds that Defendants’ reliance on Food Lion, Inc. v. Capital Cities/ABC, Inc., 194 F.3d 505,
519-20 (4th Cir. 1999) is of no moment. In Food Lion, the Fourth Circuit held that the plaintiffs
could not bring a claim against the defendant under the Act, despite engaging in deceptive conduct,
since the conduct “did not harm the consuming public.” Id. at 520. Here, unlike Food Lion, EPPs’
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allegations that Defendants’ anticompetitive scheme resulted in consumers paying inflated costs
for Lipitor demonstrates a harm to the “consuming public.”
9. Rhode Island
Finally, Defendants challenge EPPs’ claims under the Rhode Island Unfair Trade Practices
and Consumer Protection Act, since: (1) the misconduct alleged in the Complaint is not prohibited
under the Act and (2) EPPs are not “consumers” as defined under the Act. The Rhode Island
Unfair Trade Practices and Consumer Protection Act proscribes “[u]nfair methods of competition
and unfair or deceptive acts or practices in the conduct of any trade or commerce.” R.I. Gen. Laws
§ 6-13.1-2. The Act goes on to list twenty “acts or practices” that are considered unfair or
deceptive competition. R.I. Gen. Laws
§ 6-13.1-1 (6)(i)-(xx). In determining whether a practice is
“unfair” under the Act, courts must consider: “(1) whether the practice affronts public policy, as
delineated by the common law, statutes, and ‘other established concept[s] of unfairness; (2)
whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes
substantial injury to consumers (or competitors or other businessmen).” Chocolate Confectionary,
602 F. Supp. 2d at 587 (quoting Ames v. Oceanside Welding and Towing Co., Inc., 767 A.2d 677,
681 (R.I. 2001)).
The Court finds Defendants’ first argument unconvincing. The majority of courts that have
been presented with this issue have held that the three prong Ames standard “encompass price
fixing injuries, and [therefore] consumers subject to collusive pricing possess a cognizable claim
under the [Act].” Chocolate Confectionary, 602 F. Supp. 2d at 587; TFT-LCD, 586 F. Supp. 2d at
1129-30; DRAM II, 536 F. Supp. 2d at 1144-45. As such, since EPPs allege anticompetitive
conduct, which resulted in consumers purchasing Lipitor at a premium rate, EPPs have sufficiently
alleged unfair conduct under the Rhode Island Unfair Trade Practices and Consumer Protection
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Act. See DRAM II, 536 F. Supp. 2d at 1145 (allegations that the defendants engaged price fixing
“offend[s] public policy as has been established by statute and/or common law”).
Alternatively, Defendants seek dismissal of EPPs’ Rhode Island Unfair Trade Practices
and Consumer Protection Act claims since they are not “consumers” within the meaning of the
Act. The Act limits claims to “[ajny person who purchases or leases goods or services primarily
for personal, family, or household purposes.” R.I. Gen. Laws § 6-13.1-5.2(a). Citing no supporting
case law, EPPs contend that the Act defines “person” to include entities such as corporations,
trusts, and associations. However, contrary to EPPs’ assertion, “the Rhode Island Supreme Court
has construed the [Rhode Island Unfair Trade Practices and Consumer Protection Act]to require
that only natural persons are permitted to bring private rights of actions under the statute.” In re
Dynamic Random Access Memory (DRAM I) Antitrust Litig., 516 F. Supp. 2d 1072, 1117 (N.D.
Cal. 2007) (citing ERI Max Entm ‘t, Inc. v. Streisand, 690 A.2d 1351, 1354 (R.I. 1997)); see also
TFT-LCD, 586 F. Supp. 2d at 1130 (same); Sheet Metal Workers, 737 F. Supp. 2d at 423 (same).
As such, Defendants’ motion for judgment on the pleadings is granted. “However, because there
may be unusual circumstances under which a business entity may be able to allege that its
purchases were primarily for personal, family or household purposes, the Court will not preclude
plaintiffs from amending the complaint to allege such a claim on behalf of business entities.” TFT
LCD, 586 F. Supp. 2d at 1130.
To sum up, the Court declines to grant judgment as to EPPs’ consumer protection claims
in California, Nebraska, Nevada, New Mexico, New York, and North Carolina. However, the
Court grants Defendants’ motion, without leave to amend as to EPPs’ Illinois and Maine consumer
protection claims; and with leave to amend with regards to EPPs’ Rhode Island consumer
protection claims.
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ORDER
ITlSonthis ‘2 day of
C_3J.t
,2018,
ORDERED that Defendants’ Motion for Judgment on the Pleadings (ECF No. 755) is
GRANTED IN PART and DENIED IN PART as follows:
•
Defendants’ Motion for Judgment on the Pleadings based on preemption principles is
DENIED;
•
Defendants’ Motion for Judgment on the Pleadings as to EPPs’ state consumer
protection claims in California, Nebraska, Nevada, New Mexico, New York, and North
Carolina is DENIED.
•
Defendants’ Motion for Judgment on the Pleadings as it pertains to EPPs’ Arizona,
Hawaii, Nevada, and Utah antitrust claims is GRANTED WITHOUT PREJUDICE;
EPPs are granted leave to amend their Complaint to plead compliance with these notice
provisions;
•
Defendants’ Motion for Judgment on the Pleadings as it pertains to EPPs’
Massachusetts, Montana, West Virginia, Rhode Island, Tennessee and Utah consumer
protection claims is GRANTED WITHOUT PREJUDICE; EPPs are granted leave
to amend their Complaint to plead compliance with Massachusetts and West Virginia’s
notice provisions, and plead individual claims in Montana, Rhode Island, Tennessee,
and Utah;
•
Defendants’ Motion for Judgment on the Pleadings as it pertains to EPPs’ Illinois and
Rhode Island antitrust claims, and EPPs’ Illinois and Maine consumer protection
claims is GRANTED WITH PREJUDICE;
•
Defendants’ Motion for Judgment on the Pleadings as to Count I of EPPs’ Complaint
under Kansas, New York, and Tennessee is GRANTED to the extent these claims are
predicated on unilateral activity by Pfizer.
•
EPPs have thirty (30) days from the filing of this Memorandum and Order to file an
Amended Complaint, consistent with this Memorandum.
PETER G. SHERIDAN, U.S.D.J.
48
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