FWK Holdings, L.L.C. v. Actavis Elizabeth, LLC et al
OPINION AND ORDER re: (72 in 1:17-cv-01039-JSR) JOINT MOTION to Dismiss on behalf of all Defendants, filed by Upsher-Smith Laboratories, Inc. For the foregoing reasons, the Court denies defendants' joint motions to dismiss the conso lidated amended complaints, except for the part of their motion seeking dismissal of certain state law claims brought by the End-Payors. The Court hereby dismisses with prejudice the End-Payors' antitrust claim brought under Alabama law and cons umer protection claims brought under New York, California, Illinois, South Carolina, and Vermont law, and dismisses without prejudice the antitrust claims brought under Arkansas, D.C., Michigan, Minnesota, Mississippi, Nebraska, New Mexico, North Dak ota, Oregon, South Dakota, Tennessee, West Virginia, and Wisconsin law, the consumer protection claims brought under Arkansas, Montana, Nebraska, and New Mexico law, and the antitrust claim brought under Kansas law insofar as its relates to the Caps ules Conspiracy. The Court additionally hereby reaffirms its Bottom-Line Order, and directs the Clerk of Court to close docket 16-cv-09901 at numbers 65 and 67 and docket 17-cv-01039 at number 72. (Signed by Judge Jed S. Rakoff on 4/6/2017) Filed In Associated Cases: 1:16-cv-09901-JSR, 1:17-cv-01039-JSR(cla)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PROPRANOLOL ANTITRUST LITIGATION
11 - c_v - D Io ~ q C 1) )tC
OPINION AND ORDER
JED S. RAKOFF,
Plaintiffs FKW Holdings and Cesar Castillo
and Sergeants Benevolent Association Health &
Welfare Fund and American Federation of State, County and
Municipal Employees District Council 37 Health & Security Plan
(the "End-Payors") bring putative nationwide class actions
alleging that defendants illegally conspired to fix the price of
the generic drug, propranolol hydrochloride
bottom-line Order dated February 27,
Order"), the Court denied the motion by defendants Heritage
and Upsher-Smith Laboratories,
to dismiss the Direct Purchasers' original
complaints for lack of personal jurisdiction. See ECF No.
Defendants now jointly move to dismiss the Direct Purchasers'
consolidated amended complaints.
For the reasons
set forth below, this Opinion and Order denies defendants'
instant motions, except for part of their motion to dismiss
certain state law claims in the End-Payors'
action. This Opinion
and Order also explains the reasoning for the previous BottomLine Order.
On a motion to dismiss, the Court accepts all well-pleaded
factual allegations as true and draws all reasonable inferences
in favor of the non-moving party. See Goldstein v.
F. 3d 50, 56 (2d Cir. 2008).
In the antitrust context, stating a
claim under Section 1 of the Sherman Act "requires a complaint
with enough factual matter (taken as true)
to suggest that an
agreement was made. Asking for plausible grounds to infer an
agreement does not impose a probability requirement at the
pleading stage; it simply calls for enough fact to raise a
reasonable expectation that discovery will reveal evidence of
illegal agreement." Bell Atl. Corp. v. Twombly,
550 U.S. 544,
Propranolol is the generic version of Inderal and comes in
two forms: capsules and tablets. Direct Purchasers' Consolidated
'lI'lI 81-83, ECF No.
Consolidated Amended Complaint ("EPP")
17-cv-01039, ECF No.
4 6-51, Dkt. No.
60. The pleadings allege two conspiracies,
with one overlapping defendant, to manipulate the price of both
forms of the drug.
DPP 'lI'lI 8-9; EPP 'lI'lI 1-2, 46-51. The defendants
in the "Capsules Conspiracy" are Actavis Elizabeth, LLC
("Actavis"), Breckenridge Pharmaceuticals,
("Breckenridge"), and Upsher-Smith (collectively, the "Capsules
Defendants"). OPP ~~ 46-62; EPP ~~ 19-31. The defendants in the
"Tablets Conspiracy" are Mylan Inc., Mylan Pharmaceuticals Inc.,
and UDL Laboratories,
(collectively, "Mylan"), Teva
Inc., and Pliva,
"Teva"), Endo International PLC, Par Pharmaceuticals Holdings,
Inc., and Qualitest Pharmaceuticals,
Heritage, and Actavis
(collectively, the "Tablets Defendants") .
The well-pleaded allegations of the complaints here at
issue show the following facts:
Prior to 2013, the price of Propranolol had steadily
declined since it entered the market in 1967.
of generic drugs.
67. This was not unusual in the case
In particular, because federal law requires
each generic to be "readily substitutable for another generic of
the same brand drug, the products behave like commodities, with
pricing being the main differentiating feature and the basis for
competition among manufacturers." Id. As a result, prices in a
"mature generic market,
such as the market for
will fall until they stabilize at the generic manufacturers'
marginal costs of production. OPP
Accordingly to the complaints, the prices of various
dosages of Propranolol capsules had either consistently declined
or somewhat stabilized prior to the Capsules Conspiracy. OPP
48-52. In either March or November of 2013,1 however,
the Capsules Defendants abruptly began increasing their
effective prices by significant amounts,
114, 124, 126;
2, 42, and continued to raise prices until approximately
May 2014. EPP
153-173. Prices then remained relatively stable
for a period of months until slightly falling to amounts still
above pre-conspiracy levels. Id.
Several months later, a similar occurrence developed with
regard to Propranolol tablets. After years of stable or
declining prices, the Tablet Defendants abruptly raised the
effective price of all dosages of Propranolol tablets in early
2015. Defendant Heritage increased effective prices by 102%-151%
in January 2015, and, a few weeks later, defendants Teva and
Actavis increased their own prices in March 2015 by 566%-898%
and 395%-638%, respectively, OPP
Mylan and Par began increasing their prices soon after, in April
The Direct Purchasers and End-Payors give slightly different
start dates for the Capsules Conspiracy. The Direct Purchasers
allege that defendant Breckenridge increased its effective
prices for all dosage levels by 88% to 140% in November 2013,
OPP ~ 155, and one month later, in December 2013, defendant
Upsher-Smith also increased its effective prices for all dosage
levels by 49% to 79%. Id. at ~ 168. Defendant Actavis raised
prices two months later in February 2014 with increases between
64% and 81%, id. at ~ 162. The End-Payors, on the other hand,
allege that price increases began in March 2013 and rose by an
average of 80% between March and November of that year. EPP ~~
and June, by amounts ranging from 55% to 607% and 52% to 216%,
193-194, 199-201; EPP
prices continued to increase over the next year by as much as
December 2014 and November 2015, Actavis raised the price of
80mg propranolol tablets by 1,736% (from $0.03 per tablet to
$0.46 per tablet).").
Economic factors make the Propranolol market susceptible to
including industry concentration, barriers to entry,
lack of substitutes, demand inelasticity, and
interchangeability. See OPP
addition, during the period of these price increases, there was
no significant increase in production costs, no significant
decrease in supply, and no significant increase in demand. OPP
214, 254-255; EPP
Federal law further requires drug
manufacturers to report potential drug shortages to the Food and
Drug Administration ("FDA"), and no supply disruption was
The Direct Purchasers also allege that defendants conspired to
increase a secondary pricing mechanism known as Wholescale
Acquisition Cost ("WAC"). WAC represents the "manufacturer's
published catalog or list price for a drug product to
wholesalers as publicly reported by the manufacturer." OPP ~ 153
fn. 6. Although WAC does not represent actual prices, because it
does not include discounts, an increase in WAC results in an
increase in effective prices. Id.
reported during the duration of the alleged conspiracies. OPP ~~
Finally, state and federal agencies are conducting largescale investigations of the generic drug industry for alleged
92-94, 241; EPP
108. Defendant Mylan disclosed in October 2016 that it had
received a subpoena from the Department of Justice
seeking information relating to the "marketing, pricing and
sale" of several generic drugs,
103. Two months later, on December 14, 2016, the DOJ
charged the former chief executive officer ("CEO") and former
president of defendant Heritage for criminal violations of the
Sherman Act in connection with the generic drugs Glyburide and
Doxycycline Hyclate DR. OPP
individuals, Jason Malek and Jeffrey Glazer,
5, 104. The two
guilty and are cooperating. Id.
Plaintiff FWK Holdings LLC filed suit against defendants on
December 23, 2016 on behalf of direct purchasers of Propranolol
for violations of
1 of the Sherman Act. Plaintiff Cesar
Castillo Inc. filed a largely identical class action
Although the pleadings do not cite the relevant FDA provision,
the Court takes judicial notice that the FDA is mandated to
report drug shortages where it determines that "demand or
project demand for the drug within the United States exceeds the
supply of the drug." See 80 FR 38915, 38922.
approximately two weeks later on January 5, 2017. The Court
consolidated the two complaints by Order dated January 11, 2017,
and defendants filed two motions to dismiss on January 27, 2017:
joined by all defendants, sought dismissal for
failure to state a claim; the second,
joined by defendants
Heritage and Upsher-Smith, sought dismissal for failure to plead
Before defendants' motions could be fully briefed, however,
the Government moved to intervene on January 30, 2016, and, upon
consent of the parties, the Court granted the Government leave
on February 7, 2017. Three days later, on February 10, 2017, the
End-Payors filed class action complaints on behalf of end
purchasers of Propranolol seeking injunctive relief under
the Sherman Act, damages under the antitrust laws and consumer
protection laws of numerous states, and restitution for common
law unjust enrichment. The Court subsequently held a scheduling
conference on February 21, 2017, during which the Government
moved for a stay of discovery in both actions because of the
"overlap" between the civil cases and "the Government's ongoing
criminal investigation." See Transcript dated February 21, 2017
at 12, ECF No. 112. The Court denied the motion but granted
leave for the Government to file an ex parte motion for
id. at 14, and the Government timely filed its
submission. See Memorandum of Law in Support of the United
States' Motion for Reconsideration of Its Motion for a Limited
Stay of Certain Discovery ("Government's Mot. for Recons."), ECF
No. 102. 4
The Court held oral argument on the motions to dismiss the
Direct Purchasers' actions on February 24, 2017 and, at the
conclusion of the hearing,
issued a bench ruling denying the
motion by defendants Heritage and Upsher-Smith to dismiss the
Direct Purchasers' complaints for lack of personal jurisdiction.
The Court subsequently issued its Bottom-Line Order on February
27, 2017, dismissing with prejudice the Direct Purchasers'
capsules claim against defendant Mylan (on consent of the
parties), confirming its bench ruling denying defendants'
personal jurisdiction motion, and postponing ruling on the
merits motion so as to allow the Direct Purchasers to file
amended complaints. See ECF No. 108. The same day, the Court
also issued an Order granting in part and denying in part the
Government's motion for reconsideration of its request for a
partial stay of discovery. See ECF No. 107.
In support of that motion, the Government filed an ex parte
affidavit for in camera review by the Court. As the Court stated
on the record during the oral argument on the defendants'
instant motions to dismiss, the decisions made on the instant
motions, as reflected in this Opinion and Order in no way rely
on the statements made in that affidavit. See Transcript dated
March 24, 2017 at 35.
The Direct Purchasers and End-Payors filed consolidated
amended complaints on February 27, 2017 and March 3, 2017, and
defendants timely filed supplemental briefing in the Direct
Purchasers' action and moved to dismiss the End-Payors' action
for lack of standing and failure to state a claim.s On March 9,
2017, the Court issued an Order consolidating the actions of the
End-Payors and ordering that the End-Payor and Direct Purchaser
actions be coordinated for pre-trial and trial purposes on a
master docket styled In re Propranolol Antitrust Litigation and
bearing the case number 1:16-cv-09901-JSR. ECF No. 79. The Court
held oral argument on the defendants'
the Direct Purchasers' and End-Payors'
instant motions to dismiss
amended complaints on March 24, 2017.
With this factual background in mind,
the Court first turns
to defendants' motions to dismiss the counts brought under
of the Sherman Act of the Direct Purchasers' and End-Payors'
consolidated amended complaints. The Sherman Act prohibits
"[e]very contract, combination in the form of trust or
otherwise, or conspiracy,
in restraint of trade or commerce." 15
s Defendants' supplemental memorandum to dismiss the Direct
Purchasers' consolidated amended complaint does not renew their
earlier challenge to the Direct Purchasers' standing. The Court
accordingly considers this argument withdrawn, particularly
given the additional allegations in the amended pleadings
concerning the Propranolol products that the Direct Purchasers'
purchased at artificially inf lated prices and from which
defendants they purchased such products. DPP ~~ 46-47.
O.S.C. § 1. To plead a plausible price-fixing conspiracy,
plaintiffs are "not required to mention a specific time, place
or person involved in each conspiracy allegation." See Starr v.
Sony BMG Music Entm't,
592 F.3d 314,
(2d Cir. 2010).
a conspiratorial agreement "may be inferred on the
basis of conscious parallelism, when such interdependent conduct
is accompanied by circumstantial evidence and plus factors."
Mayor & City Council of Baltimore, Md. v. Citigroup,
F.3d 129, 136
(2d Cir. 2013)
(internal citations omitted). These
plus factors traditionally include:
"a common motive to
"evidence that shows that the parallel acts were
against the apparent individual economic self-interest of the
alleged conspirators"; and
"evidence of a high level of
interfirm communications." Gelboim v. Bank of Am. Corp.,
(2d Cir. 2016)
709 F.3d at
136). However, this list is "neither exhaustive nor exclusive,
but rather illustrative of the type of circumstances which, when
combined with parallel behavior, might permit a jury to infer
the existence of an agreement." Id.
Plaintiffs here allege the presence of four plus factors:
defendants had a motive to increase prices because they
operate in an oligopolistic market characterized by falling
the price increases were against defendants'
interest because in a competitive market, defendants should have
tried to undercut each other's prices to increase their market
(3) defendants frequently communicated at trade
association meetings; and (4) there are ongoing state and
federal investigations for price manipulation of generic drugs,
The Court begins with motive. Defendants are correct that
the bare allegation that defendants operate in an oligopolistic
market is insufficient to establish a common motive to conspire.
709 F.3d at 139 (allegations that "defendants
operate in an oligopolistic market .
may simply restate the
fact that market behavior is
interdependent and characterized by conscious parallelism.")
Instead, a plaintiff must allege facts,
specific to the market
at issue, suggesting that the defendants had an incentive to
Id.; see Gelboim,
823 F.3d at 766 (plaintiffs
sufficiently plead motive to manipulate LIBOR where the
complaint alleged that defendants were "reeling from the 2007
[and] a high LIBOR submission could signal
deteriorating finances to the public and the regulators").
Plaintiffs here have alleged such market specific factors.
The pleadings set forth that because federal law requires each
generic to be "readily substitutable for another generic of the
same brand drug," competition will cause pricing in a "mature
such as the market for
[P]ropranolol" to fall
until it nears the generic manufacturers' marginal costs of
data cited in the pleadings confirm this trend,
and show that
prior to the alleged conspiracies, the prices of Propranolol
capsules and tablets either were falling or had finally
This gradual devaluation of
Propranolol also caused defendants' profits to decline and level
out over time, giving them a common motive to conspire. See
592 F. 3d at 324
(finding that the "continuing
devaluation" of digital music gave defendant distributors a
common motive to conspire to raise prices) . 7
Defendants' characterization of these industry specific
factors as a bare allegation that defendants wanted to "make
more money" is unconvincing. So too is their reliance on In re
Defendants are correct that the pleadings state that the prices
of some dosages of Propranolol became "stable" prior to the
alleged conspiracies. See EPP ~ 2; see also OPP~~ 147, 180
(alleging that prices were stable for a "substantial" period of
time). Taken in context, however, these allegations confirm that
prices of these dosages had finally reached defendants' marginal
costs of production, which is precisely why defendants had a
motive to conspire to raise prices.
It is immaterial that in Starr, the CEO for one of the
defendants admitted that the defendants' pricing scheme was
designed to prevent the "continuing devaluation of music." Id.
at 319, 324. While the present case lacks such a high level
admission, the common motive (preventing the devaluation of the
sellers' product) is the same.
Baby Food Antitrust Lit i g . , 16 6 F . 3 d 112 , 13 7 ( 3 d Cir . 1 9 9 9 ) ,
which is not binding on this Court and factually distinguishable
from the present dispute. There, plaintiffs submitted an expert
report in support of their motion for summary judgment that
"never made any reference to the evidence in this case" and
"never analyzed the pricing conduct of any of the defendants."
Id. at 134. Instead, the expert made "an abstract statement
based on 'economic theory' that the interest in enhancing
profits motivated the defendants to conspire" to raise the price
of baby food in the United States, id. at 134, and the Third
Circuit found that such "bare opinion of an obvious fact"
(common to all companies in a capitalist economy) was
insufficient to establish motive. Id. at 137-38. The pleadings
here, on the other hand, set forth in detail a regulatory regime
that has historically pushed the price of Propranolol downwards
and gradually reduced defendants' profits, thereby giving them a
common motive to conspire.
The Court next turns to whether plaintiffs have alleged
that defendants' price increases were against their selfinterest. Plaintiffs argue that defendants could not have
sustained their market-wide price increases absent an unlawful
agreement because, "[i]n a competitive industry
would cut its price with the hope of increasing its market share
if its competitors were setting prices above marginal costs."
592 F.3d at 324. This is particularly so given the
magnitude of defendants' price increases
(upwards of 1,736%) and
the fact that Propranolol is identical across manufacturers. A
rational competitor therefore should have kept its prices stable
and vastly increased its market share.
Defendants respond that this analysis oversimplifies
economic markets because, "so long as prices can be easily
readjusted without persistent negative consequences, one firm
can risk being the first to raise prices, confident that if its
price is followed,
all firms will benefit." In re Musical
Instruments & Equip. Antitrust Litig.,
798 F.3d 1186, 1195
Cir. 2015). This argument may be true in theory, but defendants'
application here suffers from a foundational flaw.
condemn the pricing data in the pleadings as not reflective of
their actual prices, but fail to identify any other data that
they believe is accurate. See Transcript dated March 24,
Defendants have thus left themselves with no pricing data
that they can say they have followed.
This situation distinguishes the present case from Musical
(which is not binding on this Court in any event)
While discovery may ultimately prove plaintiffs' pricing data
less than accurate, on a motion to dismiss the Court takes all
well-plead allegations as true, and the pleadings adequately
allege falling or stabilizing prices before the conspiracy and a
sudden rise in prices of capsules in 2013 and tablets in 2015.
and Citigroup, where the complaints alleged that each defendant
engaged in a single instance of anticompetitive activity and
clearly set forth the common impetus for each defendant's
In Musical Instruments, the Ninth Circuit
(in a split
affirmed the dismissal of the case because "the
provide[d] ample independent business
reasons why each of the [defendants] adopted and enforced [the
minimum prices] even absent an agreement." Id. In particular,
each defendant was responding to "similar demands made by a
common, important customer." Id. Likewise, in Citigroup, the
Second Circuit held that defendants' collective decision to exit
the market for auction rate securities
("ARS") was not against
their self-interest where "the complaints vividly
demonstrate[d]" that "the market as a whole was essentially
holding its breath waiting for the inevitable death spiral of
ARS auctions," 709 F.3d at 138, and one of the defendants
subsequently disclosed that it would no longer support such
auctions. Mayor & City Council of Baltimore, Md. v. Citigroup,
Inc., No. 08 CV. 7746
(BSJ), 2010 WL 430771, at *2
Jan. 26, 2010). Here, on the other hand, the. pleadings here
allege a pattern of price fixing spanning several years and no
clear mechanism through which the defendants could legitimately
and consistently monitor each other's pricing activity.9
Defendants' additional explanations for their price
increases, albeit more grounded in the pleadings, do not render
plaintiffs' allegations implausible. With respect to the
Capsules Conspiracy, the pleadings admit that defendant Mylan
ceased selling Propranolol capsules prior to the price increases
in 2013, which,
in defendants' view, establishes that the
increases were simple supply-demand economics. At the motion to
dismiss stage, however, plaintiffs need not "offer evidence that
to rule out the possibility that the defendants were
acting independently." Starr, 592 F.3d at 321.
plaintiffs "need only allege enough factual matter (taken as
to suggest that an agreement was made." Id.
9 To be sure, the pleadings do include pricing information from a
third-party provider known as "IMS," OPP~ 147, which the Direct
Purchasers assert in their opposition is the "gold standard" for
drug sales data in the United States. Direct Purchaser
Plaintiffs' Supplemental Opposition to Defendants' Joint Motion
to Dismiss ("OPP Opp.") at 8, ECF No. 118. The pleadings,
however, do not allege that the defendants followed or monitored
such data, and the defendants explicitly attacked the
reliability of the IMS data during oral argument on the motions
to dismiss. See Transcript dated March 24, 2017 at 22.
The Second Circuit has yet to clarify the precise standard for
measuring whether defendants' conduct was against their
individual self-interest. At one end of the spectrum, the Second
Circuit in Starr found it sufficient (but not necessary) that an
industry commentator wrote that "nobody in their right mind"
would want to purchase the defendants' products at their
inflated prices. 592 F.3d at 327. At the other end of the
plaintiffs plausibly allege that because the FDA did not report
a shortage of Propranolol capsules following Mylan's exit, there
was no "shift" in the total supply of Propranolol that would
rationally increase prices. Additionally, because defendants
cite no contemporaneous publications reporting Mylan's exit,
they cannot explain when or how they learned of this development
and whether it was responsible for their price increases.11
Furthermore, while it is true that defendants' price increases
did not always align on a monthly basis, defendants consistently
raised prices on a bi-monthly and quarterly basis, which is
consistent with an illegal agreement. See, e.g., United States
v. Socony-Vacuum Oil Co.,
310 U.S. 150, 222-23
it important that the prices paid by the combination were not
fixed in the sense that they were uniform and inflexible .
An agreement to pay or charge rigid, uniform prices would be an
spectrum, in Citigroup, the Second Circuit held that defendants'
decision to leave the ARS market was not against their selfinterest where "at that point abandoning bad investments was not
just ~ rational business decision, but the only rational
business decision." 709 F.3d at 138. The Court need not resolve
the exact standard here because no company "in its right mind"
would raise prices by as much as 1,700% relying on nothing but
industry data that the company itself claims is flawed (the
This omission is particularly probative given that defendants
have sought that the Court take judicial notice of other
contemporaneous publications allegedly explaining the price
increases for Propranolol tablets. See Defendants' Memorandum of
Law in Support of their Joint Motion to Dismiss the Class Action
Complaints ("Defs.' Br.") at 6, ECF No. 68.
illegal agreement under the Sherman Act. But so would agreements
to raise or lower prices whatever machinery for price-fixing was
Defendants' alternative explanations for the increases in
prices of Propranolol tablets are similarly unpersuasive. The
pleadings admit that six months after the alleged Tablet
Conspiracy began, an organization known as the American Society
of Health-System Pharmacists
of Propranolol tablets.
("ASHP") began reporting shortages
244. The reports consist solely of
statements from the various defendants concerning the purported
including that Activis and Teva "cannot provide a
reason for the shortage," that defendant Heritage was having a
"raw materials issue," that defendant Mylan "discontinued
Propranolol unit-dose tablets," and that defendant Qualitest
refused to provide any reason. While discovery may substantiate
some of these explanations, defendants'
made months after the onset of the price increases, and during a
period in which the FDA did not issue a shortage notification,
are insufficient to render plaintiffs' allegations of price
fixing implausible at this stage of the litigation.
It is also immaterial at this stage of the litigation that
defendant Mylan raised its prices of Propranolol tablets
slightly later than its alleged co-conspirators. "If six firms
act in parallel fashion and there is evidence that five of the
firms entered into an agreement, for example, it is reasonable
to infer that the sixth firm acted consistent with the other
The Court accordingly finds that plaintiffs have plausibly
alleged that the price increases in Propranolol capsules and
tablets were against defendants'
The Court next turns to whether the plaintiffs have alleged
a high level of interfirm communications. The pleadings
extensively recount defendants' participation in trade
association meetings taking place over a number of years and
list the dates of such conferences, the names of the attendees
from each defendant, and their respective job titles. See EPP
113-134. The pleadings further allege that the
representatives had "discussions" at these meetings,
9, and, quoting a recent civil complaint brought by 20
state attorney generals, that "generic drug manufacturer
representatives who attend these functions,
opportunities to discuss and share upcoming bids,
generic drug markets, pricing strategies and pricing terms in
their contracts with customers, among other competitivelysensitive information." EPP
Defendants largely ignore these allegations rather than
challenge their factual basis. See Defendants' Supplemental
Memorandum of Law in Support of Their Joint Motion to Dismiss
five firms' actions because it was also a party to the
agreement. That is especially so if the sister firm's behavior
mirrored that of the five conceded coconspirators." In re Flat
Glass Antitrust Litig., 385 F.3d 350, 363 (3d Cir. 2004).
the Direct Purchaser Complaint
Supp. Br.") at 12, ECF
No. 117. 13 In any event, the Court finds that these allegations
are not conclusory. The pleadings set forth in detail that
attendees were responsible for setting drug prices
and that the stated purposes of the various conferences were to
provide "peer-to-peer connections," OPP 'll 96, "strategic
business discussions," id. at 99, and "one-on-one strategic
meetings," id. at 'll 110 . 14 Plaintiffs accordingly have alleged
far more than the "mere opportunity to conspire," and so have
shown a high level of interfirm communications.
Moreover, lead counsel for the defendants conceded at oral
argument on the motions to dismiss that the allegation that
defendants' representatives spoke at trade association meetings
would be sufficient to add plausibility. See Transcript dated
March 24, 2017 at 27-28 ("to say that the defendants actually
met with each other is a little bit misleading. That's not in
the allegations .
. Without an allegation that the
defendants actually communicated at those events, it doesn't add
The present case is factually distinguishable from In re
Aluminum Warehousing Antitrust Litig., No. 13-MD-2481 KBF, 2014
WL 4277510, at *33 (S.D.N.Y. Aug. 29, 2014), upon which
defendants rely but which is not binding on this Court. There,
Judge Forrest found that allegations concerning defendants'
common committee membership failed to raise an inference of
interfirm communications where there were no allegations as to
"who was on a particular  committee at a particular time .
or at which suspect action by committee members or others within
their control occurred." No. 13-MD-2481 KBF, 2014 WL 4277510, at
*33 (S.D.N.Y. Aug. 29, 2014). Here, on the other hand, the
plaintiffs recount the who, what, where, and when of each trade
association meeting. This raises a plausible inference that the
defendants' representatives communicated with each other.
The Court lastly turns to the relevance of the state and
federal governments' ongoing investigations of generic drug
pricing. Defendants are correct that governmental investigations
into conduct entirely separate from that alleged in the
pleadings cannot support an inference of conspiracy. See In re
Elevator Antitrust Litig., 502 F.3d 47, 52
(2d Cir. 2007). The
investigations here, however, implicate the pleadings in two
First, the DOJ has expanded its investigation to include
Propranolol, as evidenced by the subpoena served on defendant
Mylan for Propranolol-related information. While it is true that
only one defendant has received such a subpoena, a conspiracy,
by its nature,
requires an agreement between two or more
entities, and the subpoena served on Mylan indicates that the
Government is investigating other Tablets Defendants as well.
Moreover, the Government has sought a partial stay of discovery
in this matter on the basis that "Plaintiffs claim of
propranolol price-fixing overlaps substantially with one aspect
of [the DOJ's] criminal investigation," Government's Mot. for
Recons. at 8, and (after its motion was partially denied)
a motion as amicus curie to the United States Judicial Panel on
Multidistrict Litigation seeking to consolidate this action and
others before a single judge (other than this Court) because the
civil suits "overlap significantly with aspects of the ongoing
criminal investigation." MDL No. 2724, ECF No. 285. The presence
of an ongoing investigation into the same subject matter as
alleged in the pleadings here raises an inference of conspiracy.
See Starr, 592 F.3d at 324.
Second, the former CEO and former president of defendant
Heritage have pled guilty to fixing prices, and while their
pleas do not concern Propranolol, they provide circumstantial
evidence of motive, actions against interest, and interfirm
communications. Defendants respond,
relying on the Second
Circuit's decision in Elevator Antitrust Litig., that these
guilty pleas are immaterial as a matter of law because they
concern generic drugs other than Propranolol. Defendants are
mistaken. In Elevator Antitrust Litig., the plaintiffs argued
that investigations by European regulators into price fixing by
defendants' European subsidiaries raised an inference that
defendants' American subsidiaries had also engaged in price
502 F.3d at 52 The Second Circuit affirmed the dismissal
of the case,
reasoning that "[a]llegations of anticompetitive
wrongdoing in Europe-absent any evidence of linkage between such
foreign conduct and conduct here-is merely to suggest
Despite defendants' argument that the Government's
investigation concerns solely the Tablets Conspiracy, the
Government's public filings never make this distinction.
that 'if it happened there, it could have
happened here.'" Id.
Plaintiffs' allegations here,
on the other hand, establish
such a linkage. Malek and Glazer enacted their price fixing
scheme contemporaneously with the alleged conspiracies and, by
virtue of their high-level corporate positions, were plausibly
responsible for setting prices of Propranolol.16 Moreover, the
Government has represented that the Direct Purchasers have
propounded document requests on Malek and Glazer, in addition to
the corporate defendants, and, "[e]ven if these requests were
limited to propranolol .
. they would overlap directly with
the United [States'] criminal investigation." Government's Mot.
for Recons. at 4-5. These facts establish a plausible link
between the conduct to which Malek and Glazer plead guilty and
the conspiracies alleged in the present case.
16 Defendants' reliance on In re London Silver Fixing, Ltd.,
Antitrust Litig. is similarly misplaced. No. 14-MD-2573 (VEC),
2016 WL 5794777, at *15 (S.D.N.Y. Oct. 3, 2016). There, the
plaintiffs claimed that defendants conspired to fix silver
prices and alleged that employees sitting at the same trading
desk were being investigated for wrongdoing concerning FX
trading and LIBOR. Id. at *15. Judge Caproni held that these
other forms of trading were distinct from silver trading, and
also found relevant that the Government had been investigating
silver trading for over two years but never indicted any of the
defendants. Id. There is a difference, however, between a
trading desk being investigated and the former CEO and president
of a company pleading guilty to price fixing. Moreover, the
Government's investigation here is still in its early days.
Taken as a whole, the plus factors alleged in the
consolidated amended complaints plausibly establish that the
defendants illegally conspired to fix the prices of Propranolol
capsules and tablets in 2013 and 2015. The Court accordingly
denies defendants' motion to dismiss the Direct Purchasers' and
respective claims under
1 of the Sherman Act.17
The Court next turns to defendants' motion to dismiss the
state law claims. The End-Payors bring claims under
the antitrust laws of 29 states and the District of Columbia,
the unfair competition statutes of 13 states and the District of
Columbia, and a common law unjust enrichment claim under the
laws of unspecified states.
the motion to dismiss,
During the course of the briefing on
the End-Payors voluntarily withdrew their
claims under the antitrust statues of Utah and Missouri and the
consumer protection statutes of Rhode Island, Hawaii, Missouri,
and the District of Columbia. Defendants now move to dismiss all
of the remaining state law claims for lack of standing and for
failure to state a claim.
17 Given that the Court finds that the plus factors alleged in
the consolidated amended complaints are sufficient to state a
claim under § 1 of the Sherman Act, the Court does not reach the
issue of whether the price changes here were so "unprecedented"
that this fact alone would be sufficient to survive a motion to
dismiss. See OPP Opp. at 9.
The Court begins with the End-Payors'
in particular, whether the End-Payors have
sufficiently alleged standing. To establish standing, a private
antitrust plaintiff must demonstrate not only that it is an
"efficient enforcer" of antitrust claims, but also that it has
suffered an injury in fact.
658 F. Supp. 2d 603,
IBM Corp. v.
(S.D.N.Y. 2009). In deciding whether
plaintiffs are efficient enforcers, courts consider: "(1) the
directness or indirectness of the asserted injury;
existence of an identifiable class of persons whose selfinterest would normally motivate them to vindicate the public
interest in antitrust enforcement;
the alleged injury; and (4)
the speculativeness of
the difficulty of identifying
damages and apportioning them .
so as to avoid duplicative
recoveries." Gatt Commc'ns,
PMC Assocs., L.L.C.,
(2d Cir. 2013)
(citing Associated General
Contractors of Cal.,
Inc. v. California State Council of
("AGC")). The action by the
End-Payors here meets the four criteria set forth in AGC.
Under the first factor,
"[d]irectness in the antitrust
context means close in the chain of causation." Gatt, 711 F.3d
(quoting International Bus. Machs. Corp. v.
Inc., 658 F.Supp.2d 603,
the chain of distribution in the pharmaceutical industry is
short, direct, and well-understood: manufacturers sell to
wholesalers, which in turn sell to the pharmacies from which the
End-Payors' buy the drug. EPP ':II 52; OPP ':II':II 82,
153, 244; see
In re Asacol Antitrust Litig., No. CV 15-12730-DJC, 2017 WL
53695, at *3
(D. Mass. Jan.
(chain of distribution
passes "from Defendants [manufacturers], to wholesalers, to
pharmacies, and then to end payors."). Price increases can be
directly traced throughout this distribution chain. See In re
(Buprenorphine Hydrochloride & Naloxone) Antitrust
64 F. Supp. 3d 665,
("The End Payors
also point out that they have purchased the product and/or
provided reimbursement to their members who have purchased the
product. This is not the situation .
numerous links in the causal chain.")
where there are
The decisions cited by defendants where the Second Circuit has
rejected standing are not to the contrary because the "harm" in
those cases was probabilistic and highly speculative. For
example, in Paycom Billing Servs., Inc. v. Mastercard Int'l,
Inc., the plaintiff (a credit card payment processor) alleged
that absent the price fixing conspiracy, third-party credit card
companies could have accessed additional banks, making the third
parties more competitive, and this increased competition could
have caused the defendant to adopt more favorable contractual
agreements with the plaintiff, thereby boosting its profits. 467
F.3d 283, 293 (2d Cir. 2006). Likewise, in Gatt, the Second
Circuit held that the plaintiff, a former member of a bid
rigging conspiracy, lacked antitrust standing to sue the
orchestrator of the scheme because it failed to allege that it
could lawfully have won the contracts absent the conspiracy. See
711 F.3d at 79 (plaintiff "did not pay higher prices by virtue
Second, the End-Payors have a sufficient self-interest in
the litigation. Defendants are correct that there is another
class of persons "potentially inclined" to enforce the antitrust
claims here: the Direct Purchasers. Their presence, however,
does not necessarily destroy the End-Payors'
in In re DDAVP Direct Purchaser Antitrust Litig.,
(2d Cir. 2009), the Second Circuit found that
direct purchasers of a generic drug had standing to bring
antitrust claims even though competitors of the defendant were
also plaintiffs in the action and arguably was "most directly
impacted by the alleged anticompetitive behavior." The court
reasoned that the presence of the competitors was "not
dispositive" because the relevant question was whether "the
plaintiff was an entity most motivated by self-interest, not the
entity most motivated by self-interest." Id.
Inc. v. Mastercard Int'l,
467 F.3d 283,
(2d Cir. 2006)). Here, the End-Payors are significantly
motived not only "due to their 'natural economic self-interest'
in paying the lowest price possible," see id., but also because
Propranolol is a life-saving drug for which no substitutes are
of the conspiracy; it merely lost the right to sell one brand of
Third, the End-Payors' damages are not speculative. As set
forth in the extensive pricing data cited in the pleadings, the
details of each transaction are tracked by wholesalers,
pharmacies, pharmacy benefit managers, and third-party payors.
153, 244. Consequently damages
can be readily determined.
Lastly, under the fourth factor,
there is no dispute that
allowing both the Direct Purchasers' and End-Payors'
proceed would result in a duplicative recovery. However, the
Court agrees with the general view among district courts that
. which have repealed Illinois Brick and allowed
End-Payors to sue for antitrust violations, have necessarily
made the policy decision that duplicative recovery may
permissibly occur." In re Dynamic Random Access Memory (Dram)
516 F. Supp. 2d 1072, 1093
Accordingly, "[d]uplicative recovery is
(N.D. Cal. 2007)
consequence that flows from indirect purchaser recovery" and no
bar against standing.
See In re Ductile Iron Pipe Fittings (DIPF) Indirect Purchaser
Antitrust Litig., No. CIV. 12-169, 2013 WL 5503308, at *18
(D.N.J. Oct. 2, 2013) (citing same); In re Auto. Parts Antitrust
Litig., No. 12-MD-02311, 2013 WL 2456612, at *18 (E.D. Mich.
June 6, 2013) (citing same); In re Flash Memory Antitrust
Litig., 643 F. Supp. 2d 1133, 1156 (N.D. Cal. 2009) (citing
same); see also In re Intel Corp. Microprocessor Antitrust
Litig., 496 F. Supp. 2d 404, 410 (D. Del. 2007).
For the foregoing reasons,
the Court holds that the End-
Payors have alleged facts sufficient to establish that they are
"efficient enforcers" of their antitrust claims.
Defendants next challenge the injury-in-fact element of
Defendants argue that the End-Payors do
"not allege that they purchased or provided reimbursement for
Propranolol in any state other than New York" and thus lack
Article III standing to sue under the laws of states other than
New York. The Court partially agrees. The End-Payors do allege
that "they indirectly purchased, paid, and reimbursed for
generic propranolol" in seventeen states,
17-18, which is
sufficient to establish standing under these states'
United Food & Commercial Workers Local 1776 & Participating
Emps. Health & Welfare Fund v. Teikoku Pharm. USA,
3d 1052, 1080
(N.D. Cal. 2014)
The End-Payors nonetheless fail to allege that they
indirectly purchased, paid, or reimbursed for Propranolol in the
10 remaining states named in their consolidated amended
complaint. 20 Instead, they argue that the Court should defer the
standing question until after class certification. The Court is
unpersuaded. Although an Article III court must ordinarily
The states are Arkansas, D.C., Michigan, Minnesota,
Mississippi, Nebraska, New Mexico, North Dakota, Oregon, South
Dakota, Tennessee, West Virginia, and Wisconsin.
assure itself that it has jurisdiction before proceeding, there
is an exception to that rule when class certification issues are
"logically antecedent to Article III concerns." In re Digital
Music Antitrust Litig., 812 F. Supp. 2d 390, 406
2011). This exception, however, applies only where "resolution
of class certification obviates the need to decide issues of
Article III standing." Mahon v. Ticor Title Ins. Co.,
(2d Cir. 2012); In re Facebook,
Offering Derivative Litig.,
797 F.3d 148, 156-57
(2d Cir. 2015)
("Supreme Court precedent in the class
certification context suggests that if a threshold, non-merits
basis for dismissal is
'logically antecedent' to the
adjudication of an alleged jurisdictional defect, the court is
not required to decide the jurisdictional question.").
Here, because there is no dispute that the End-Payors at
least have standing under New York law, the case will move
forward regardless of how the Court decides the class
certification issue. See In re AIG Advisor Grp., No. 06 CV 1625
(JG), 2007 WL 1213395, at *5 (E.D.N.Y. Apr. 25, 2007)
("Defendants do not challenge the named
plaintiff' standing with respect to funds in which they have
owned shares, so the case can move forward on the plaintiffs'
claims, whether or not similarly situated plaintiffs are brought
into the action pursuant to Rule 23.")
It is therefore
inappropriate to defer the standing issue to after class
The Court is cognizant that some courts in this Circuit
have held oppositely under similar circumstances. For example,
in Blessing v. Sirius XM Radio Inc., Judge Baer held that
because there was "no question that named plaintiffs have
standing to sue" under the consumer protection statutes of nine
states, the standing issue could be deferred to after class
certification because the "class certification process will
address whether named plaintiffs'
injuries are sufficiently
similar to those of the proposed class to justify a nationwide
and the answer to that question will determine
See also In re AllianceBernstein Mut. Fund Excessive Fee
Litig., No. 04 CIV. 4885(SWK), 2005 WL 2677753, at *9 (S.D.N.Y.
Oct. 19, 2005) ("because Plaintiffs clearly have standing to sue
on behalf of the thirteen Funds in which they own shares,
addressing class certification would not be outcome
determinative."); Parks v. Dick's Sporting Goods, Inc., No. 05CV-6590 (CJS), 2006 WL 1704477, at *3 (W.D.N.Y. June 15, 2006)
("when considering standing, the Court must look at the named
plaintiff or plaintiffs, not the unnamed class members, and
since here, there is just one named plaintiff, who lacks either
statutory or Article III standing to sue for violations of state
laws other than those of New York, the Court fails to see what
impact a motion for class certification would have on the
pending motion"); Hoffman v. UBS-AG, 591 F. Supp. 2d 522, 531
(S.D.N.Y. 2008) ("Class certification in this case is not
similarly dispositive. Plaintiffs' case will move forward
regardless of whether Defendants prevail on their standing
argument because Defendants are not contesting standing for all
of Plaintiffs' claims.").
whether there are plaintiffs with standing to bring claims under
the laws of states in which no currently-named plaintiff
resides." 756 F. Supp. 2d 445,
The flaw with this approach, however,
is that in "a class
action, a court must analyze the injuries allegedly suffered by
the named plaintiffs, not unnamed members of the potential
class, to determine whether the plaintiffs have Article III
standing. Vigil v. Take-Two Interactive Software,
2017 WL 398404, at *6
(citing Warth v. Seldin,
Inc., No. 15-
since "a plaintiff must demonstrate
standing for each claim [s]he seeks to press," Mahon,
(quoting DaimlerChrysler Corp. v. Cuno, 547 U.S.
(2006)), each state law claim must be accompanied by a named
plaintiff who has suffered an injury under that state's statute,
and class certification does not remedy this requirement.
For the foregoing reasons, the Court dismisses the EndPayors'
state law antitrust claims under Arkansas,
Michigan, Minnesota, Mississippi, Nebraska, New Mexico, North
While the argument could be made that the numerous state law
antitrust actions here constitute one "claim" for the purposes
of standing, the Supreme Court has explicitly rejected the
argument that "federal jurisdiction extends to all claims
sufficiently related to a claim within Article III to be part of
the same case, regardless of the nature of the deficiency that
would keep the former claims out of federal court if presented
on their own." Daimler, 547 U.S. at 351.
Dakota, Oregon, South Dakota, Tennessee, West Virginia, and
Wisconsin law, with leave to the End-Payors' amending their
pleadings to add additional named plaintiffs.
The Court next turns to whether the End-Payors have stated
a claim under the 17 state antitrust statutes for which they
Defendants argue that the antitrust laws of four
(Alabama, Nevada, New York, and North Carolina)
plaintiffs to allege intrastate price fixing conduct,
defendants actually conspired or manufactured Propranolol within
the relevant state. While defendants are correct that Alabama
law does impose such a requirement,
see Abbott Labs. v. Durrett,
746 So. 2d 316, 339 (Ala. 1999), the other three states require
only allegations of intrastate effects on commerce,
someone in the state purchased Propranolol at inflated prices.
See In re Intel Corp. Microprocessor Antitrust Litig., 496 F.
Supp. 2d 404,
(Nevada); In re Aggrenox
94 F. Supp. 3d 224, 253
(D. Conn. 2015)
In re DDAVP Indirect Purchaser Antitrust Litig.,
Supp. 2d 198, 231
(North Carolina). The Indirect
Purchasers have made such a showing of intrastate effects. EPP
'!I'll 16, 131-165.
The Court does not reach the alternative reasons for
dismissing the 13 antitrust claims for which End-Payors
presently lack standing.
The Court further finds unpersuasive defendants' argument
that Illinois and Hawaii law prohibit end-payors from bringing
state law antitrust claims. While it is true that the relevant
Illinois statute states that "no person shall be authorized to
maintain a class action in any court of this State for EndPayors .
. with the sole exception of this State's Attorney
General," 740 ILCS 10/7(2), it is "not obvious that the
formulaic expression 'in any court of this State' appearing in
an Illinois statute applies to a federal court in [New York]."
In re Aggrenox Antitrust Litig., No.
4204478, at *5
(D. Conn. Aug.
In addition, the Court
is persuaded that this state procedural rule does not control in
federal court, where Rule 23 sets the only relevant requirements
to file a class action. See id. (citing Shady Grove Orthopedic
Associates v. Allstate Ins. Co.,
393, 397-406 (2010))
The same is true of the procedural rules set forth in Hawaii's
antitrust statute. See In re Aggrenox Antitrust Litig.,
Supp. 3d 224, 254
(D. Conn. 2015)
(citing Shady Grove,
at 397-406) . 24
The Court acknowledges that while the End-Payors partially
complied with Hawaii's procedural requirements by filing notice
of their complaint with the Hawaii Attorney General, see Girard
Deel., Ex. 2, they did not file their complaint under seal and
wait 60 days (as set forth in the statute). The Court is
persuaded, however, that the statute does not require dismissal
for failure to comply with this procedural rule. See In re
Aftermarket Filters Antitrust Litig., No. 08 C 4883, 2009 WL
The Court agrees, however,
that Kansas law imposes a three-
year statute of limitations barring End-Payors'
See Kan. Stat.
60-512. Although End-Payors argue that defendants
"ignore" the discovery rule,
tolling for fraudulent concealment,
or the "continuing violation" doctrine,
it is plaintiffs' burden
to show that these exceptions apply. See Vincent v. Money Store,
Supp. 2d 553,
Goodyear Tire & Rubber Co.,
737 F.2d 238,
For the foregoing reasons,
prejudice the End-Payors'
(citing Katz v.
(2d Cir. 1984))
the Court dismisses with
antitrust claim under Alabama law, and
dismisses without prejudice the End-Payors'
under Kansas law for conspiracy to manipulate the price of
The Court next turns to the End-Payors'
state law consumer
and the Court agrees,
the End-Payors lack standing to bring consumer protection claims
under the laws of those states in which they did not indirectly
purchase, pay, or reimburse for Propranolol
Nebraska, and New Mexico). The Court additionally dismisses the
remaining consumer protection claims, except for the
claim brought under North Carolina law, because they have failed
3754041, at *6 (N.D. Ill. Nov. S, 2009) (holding that dismissal
of an action for failure to fully comply with Hawaii's antitrust
statute is inconsistent with the remedial purposes of the act).
to show that the defendants engaged in a "deceptive act" under
the relevant state statutes. See In re Digital Music Antitrust
812 F. Supp. 2d 390, 408-10
plaintiffs' New York consumer protection claim for failure to
show a deceptive act but denying dismissal of plaintiffs' North
Carolina consumer protection claim because plaintiffs' antitrust
allegations constitute "unfair conduct" under the statute); In
re Aggrenox Antitrust Litig., 2016 WL 4204478, at *9
South Carolina, and Vermont consumer
protection claims for failing to show a deceptive act).
Here, the End-Payors'
sole argument that the price
increases were deceptive is that defendants "concealed the true
cause of these price increases." However, if "failure to
disclose participation in a purported antitrust conspiracy were
sufficient to state a consumer-protection claim, then any
Section 1 antitrust case would automatically become a consumerprotection case. That is not the law." Digital Music Antitrust
Litig., 812 F. Supp. 2d at 408-10
(quoting In re New Motor
Vehicles Canadian Exp. Antitrust Litig.,
350 F. Supp. 2d 160,
(D. Me. 2004)); accord Leider v. Ralfe, 387 F.Supp.2d 283,
(S.D.N.Y. 2005). Instead, antitrust schemes are deceptive
for example, the defendant secretly altered its product
as part of the scheme. See, e.g., Cox v. Microsoft Corp.,
(2004). The End-Payors make no such allegations
For the foregoing reasons,
the Court dismisses without
consumer protection claims under Arkansas,
Montana, Nebraska and New Mexico, and dismisses with prejudice
consumer protection claims under New York,
Illinois, South Carolina, and Vermont law.
The Court next addresses defendants'
argument to dismiss
unjust enrichment claims for failure to specify
under which state laws they are brought. The Court is persuaded
that such identification is not necessary at the pleading stage
because the "elements of unjust enrichment are similar in every
state." In re Credit Default Swaps Antitrust Litig., No.
2014 WL 4379112,
(citing Daniel R. Karon,
Undoing the Otherwise Perfect Crime:
Applying Unjust Enrichment to Consumer Price-Fixing Claims, 108
W. Va. L. Rev.
410 & n.
(2005)). Moreover, defendants
have made no showing that any differences in the various state
laws are material at this early stage of the litigation.
While defendants cite Sperry v. Crompton Corp., 8 N.Y.3d 204,
216 (2007) for the proposition that "End-Payors cannot use
unjust enrichment as a substitute for antitrust claims," the
holding of this decision is much narrower and ruled only that it
was not appropriate for end-payors to substitute unjust
enrichment to avoid statutory limitations on treble damages.
The Court accordingly denies defendants' motion to dismiss the
End-Payors' unjust enrichment claims.
Having addressed the instant motions to dismiss the
consolidated amended complaints, the Court now turns to its
Bottom-Line Order denying the motion by defendants Heritage and
Upsher-Smith to dismiss the Direct Purchasers' complaint for
lack of personal jurisdiction. Defendants are headquartered out
(New Jersey and Minnesota,
principally, that the complaints fail to establish specific
jurisdiction under New York's long arm statute because the
Direct Purchasers are located out of state and do not allege
that they purchased Propranolol in New York. The Direct
Purchasers respond that since the Clayton Act provides for
nationwide service of process, they do not need to establish
that defendants Heritage and Upsher-Smith had contacts with New
York in order to establish personal jurisdiction. Instead, it is
sufficient that defendants'
suit-related activities occurred
within the United States.
Defendants do not dispute that the Sherman Act provides for
nationwide service of process. They argue, however, that Second
Circuit has "not yet decided" whether this approach to personal
jurisdiction is constitutional, see Gucci Am. v. Li, 768 F.3d
122, 142 n. 21
(2d Cir. 2014), and that the Court should hold
that nationwide provision of service violates the Fifth
Amendment's due process clause. The Court is unpersuaded.
In cases such as here where Congress has authorized a
federal court to exercise its jurisdiction in matters involving
federal questions, the constitutionality of such jurisdiction is
tested under the due process clause of the Fifth Amendment.
S.E.C. v. Softpoint,
95 CIV. 2951 GEL,
2001 WL 43611,
Jan. 18, 2001). The Fifth Amendment, in turn,
does not prohibit nationwide service of process as a general
matter. As the Second Circuit has held,
"the due process
is basically the same under both the Fifth and
Fourteenth Amendments. The principal difference is that under
the Fifth Amendment the court can consider the defendant's
contacts throughout the United States, while under the
Fourteenth Amendment only the contacts with the forum state may
be considered." Waldman v.
(2d Cir. 2016)
Palestine Liberation Org.,
143 F.3d 24, 28 n.4
(quoting Chew v.
(2d Cir. 1998)) . 26 Accordingly,
Defendants are correct that the court in Waldman did not
address whether it was reasonable to subject the defendants
there to nationwide service of process because the Court found,
as a preliminary matter, that the defendants lacked "minimum
contacts" with the United States. It is nonsensical, however,
that the panel would state that under the Fifth Amendment the
court can consider the defendant's contacts throughout the
United States, but leave open the question of whether such
consideration is per se unconstitutional. The decision in
Waldman is properly read as holding that the Court must conduct
defendants must show that the application of nationwide service
of process here would run afoul of the Fifth Amendment.
"Pursuant to the due process clauses of the Fifth and
Fourteenth Amendments, there are two parts to the due process
test for personal jurisdiction .
inquiry and the
the 'minimum contacts'
'reasonableness" inquiry.'" Id.
citations and quotations omitted) . "The reasonableness inquiry
requires the court to determine whether the assertion of
personal jurisdiction over the defendant comports with
'traditional notions of fair play and substantial justice' under
the circumstances of the particular case." Id.
134 S.Ct. at 754)). Relevant factors include: "(l)
that the exercise of jurisdiction will impose on the defendant;
the interests of the forum state in adjudicating the case;
the plaintiff's interest in obtaining convenient and
the interstate judicial system's interest
in obtaining the most efficient resolution of the controversy."
Softpoint, 2001 WL 43611, at *3
(citing Metro. Life Ins. Co. v.
84 F.3d 560,
(2d Cir. 1996)). The
burden is on the defendant to demonstrate that the assertion of
jurisdiction in the forum will "make litigation so gravely
difficult and inconvenient that
[he] unfairly is at a severe
a fact specific inquiry into the reasonableness of subjecting
the defendants to nationwide service of process.
disadvantage in comparison to his opponent." Id.
King Corp. v. Rudzewicz,
Defendants Heritage and Upsher-Smith conspicuously fail to
(or mention) any of these factors.
Perhaps this is
because defendants have global bases of operations, maintain
distribution networks throughout the United States, and have
retained New York counsel. OPP Complaint
50, ECF No.
Or maybe it is because defendants sell substantial quantities of
Propranolol in this district and therefore do not dispute that
the Southern District of New York is a proper venue for the
litigation. Augusteijn Deel.
Bd. of Emergency Med.,
4., ECF No.
428 F.3d 408,
86; see Daniel v. Am.
(2d Cir. 2005)
that the Sherman Act "can properly confer personal jurisdiction
over a defendant" only where the action is brought in "the
district where .
venue lies."). What is certain, however,
that defendants have failed to show that litigation in this
forum will be so gravely difficult and inconvenient that they
27 Indeed, according to Google Maps, defendant Heritage's
principal place of business in Eatontown, New Jersey is
approximately 50 miles away from the courthouse located in
Manhattan - a shorter commute than that of many federal judges.
Courts commonly use internet mapping tools to take judicial
notice of distance and geography. See, e.g, Logan v.
Matveevskii, 57 F. Supp. 3d 234, 265 (S.D.N.Y. 2014);
Rindfleisch v. Gentiva Health Sys., Inc., 752 F. Supp. 2d 246,
259 (E.D.N.Y. 2010).
will be at a severe disadvantage in comparison to their
The remaining factors also favor personal jurisdiction. New
York has a "manifest interest in providing effective means of
redress for its residents," Chloe v. Queen Bee of Beverly Hills,
616 F.3d 158, 173
(2d Cir. 2010)
(citing Burger King, 471
U.S. at 483), and given that the claims here are for conspiracy,
the parties at trial will undoubtedly seek to call witnesses and
introduce evidence from the other defendants named in the
pleadings. A joint trial of all the defendants will ensure
convenient and effective relief for all parties, and enhance the
efficiency of the proceedings, and it is for these reasons that
the Court issued its Bottom-Line Order denying the motion by
defendants Heritage and Upsher-Smith.
For the foregoing reasons, the Court denies defendants'
joint motions to dismiss the consolidated amended complaints,
except for the part of their motion seeking dismissal of certain
state law claims brought by the End-Payors. The Court hereby
dismisses with prejudice the End-Payors' antitrust claim brought
under Alabama law and consumer protection claims brought under
New York, California,
Illinois, South Carolina, and Vermont law,
and dismisses without prejudice the antitrust claims brought
D.C., Michigan, Minnesota, Mississippi,
Nebraska, New Mexico, North Dakota, Oregon, South Dakota,
Tennessee, West Virginia, and Wisconsin law, the consumer
protection claims brought under Arkansas, Montana, Nebraska, and
New Mexico law, and the antitrust claim brought under Kansas law
insofar as its relates to the Capsules Conspiracy. The Court
additionally hereby reaffirms its Bottom-Line Order, and directs
the Clerk of Court to close docket 16-cv-09901 at numbers 65 and
67 and docket 17-cv-01039 at number 72.
New York, NY
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