SMITHKLINE BEECHAM CORPORATION v. ABBOTT LABORATORIES
Filing
752
MEMORANDUM OPINION AND ORDER signed by CHIEF JUDGE WILLIAM L. OSTEEN, JR. on 3/20/2017, for the reasons stated herein, ORDERED that Defendant's Motion for Judgment on the Pleadings Based on Changed Choice-of-Law Principles (Doc. 710 ) and Alternative Motion to Dismiss GSK's Unfair and Deceptive Acts Claim under North Carolina Law (Doc. 721 ) are DENIED. (Butler, Carol)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
SMITHKLINE BEECHAM CORPORATION, )
d/b/a GLAXOSMITHKLINE,
)
)
Plaintiff,
)
)
v.
)
)
ABBOTT LABORATORIES,
)
)
Defendant.
)
1:15CV360
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
This case was transferred to the Middle District of North
Carolina following lengthy proceedings in the Northern District
of California. The case involves a dispute between Plaintiff
SmithKline Beecham Corporation, d/b/a GlaxoSmithKline (“GSK” or
“Plaintiff”) and Defendant Abbott Laboratories (“Abbott” or
“Defendant”). Just prior to the scheduled trial in California,1
GSK filed a Second Amended Complaint. (Second Amended Complaint
(“Second Am. Compl.”) (Doc. 632).) A change in the scope of the
Second Amended Complaint led to a question of the Northern
District of California’s personal jurisdiction over the case,
While there was a trial in 2011, on appeal, the Ninth
Circuit remanded the case for a new trial due to a jury
selection issue. See SmithKline Beecham Corp. v. Abbott Labs.,
740 F.3d 471, 474 (9th Cir. 2014). The scheduled trial
referenced here refers to the second trial, scheduled to occur
after the Ninth Circuit remand.
1
and the parties thereafter stipulated to a transfer of this case
to the Middle District of North Carolina. (See Doc. 681.)
Following a status conference held in this district on May 20,
2015, Abbott filed an Answer to the Second Amended Complaint.
(Def.’s Answer (Doc. 707).)
Presently before this court is Defendant’s Motion for
Judgment on the Pleadings based on Changed Choice-of-law
Principles and its supporting memorandum. (Docs. 710, 711.)
Plaintiff filed a response in opposition. (GSK’s Mem. in Opp’n
to Abbott’s Rule 12(c) Mot. for J. on the Pleadings (“Pl.’s
12(c) Resp.”) (Doc. 720).) Defendant filed a reply. (Abbott’s
Reply in Supp. of Rule 12(c) Mot. for J. (“Def.’s 12(c) Reply”)
(Doc. 725).)
Defendant also filed an alternative motion to dismiss GSK’s
unfair and deceptive claim, with supporting memorandum, in the
event this court finds that North Carolina law applies to the
claim under North Carolina Unfair and Deceptive Trade Practices
Act (“UDTPA”). (Docs. 721, 722.) Plaintiff filed a response in
opposition. (Pl.’s Resp. to Dismiss (Doc. 726).) Defendant filed
a reply. (Def.’s Dismiss Reply (Doc. 730).)
These matters are now ripe for adjudication and, for the
reasons stated below, this court will deny Defendant’s motions.
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I.
PROCEDURAL HISTORY
The procedural history of this case is complex. The case
involves a dispute over a 2003 price increase for an HIV drug
sold by Abbott called Norvir. (See Doc. 708 at 3-4.)2 Abbott
began to sell market licenses for Norvir to its competitors,
including one negotiated in 2002 with GSK that allowed GSK to
market its own HIV drugs to be co-administered with Norvir.
(Id.) After signing this agreement with GSK, at some point in
2003, Abbott increased the price of Norvir from $1.71 per day to
$8.57 per day, an increase of over 400%. (Id. at 4.)
In 2007, GSK brought suit against Abbott in the Northern
District of California. Its 2009 Amended Complaint alleged
violations of federal and state antitrust claims, a claim for
breach of the implied covenant of good faith and fair dealing in
the licensing agreement, and a claim under North Carolina’s
UDTPA, codified at N.C. Gen. Stat. § 75-1.1. (See First Amended
Complaint (“First Am. Compl.”) (Doc. 170).) In 2011, the case
was tried on all four claims, with the jury finding in favor of
GSK only as to the breach of implied covenant claim. See
SmithKline Beecham Corp. v. Abbott Labs., 740 F.3d 471, 475 (9th
All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
2
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Cir. 2014). GSK appealed and the Ninth Circuit vacated the
verdict and remanded on the basis that a juror was improperly
excluded on the basis of sexual orientation. Id. at 475-76.
On remand, Abbott moved for a Rule 50(a) judgment as a
matter of law on the antitrust and UDTPA claims, and the
District Court for the Northern District of California denied
that motion, holding that GSK had presented sufficient evidence
on its antitrust claims and that its UDTPA claim could survive
because antitrust liability was sufficient to establish unfair
trade practice liability. (See Doc. 591 at 14, 15 n.5, 16.)
Trial was set for May 2015, but on March 10, 2015, GSK was
granted leave to amend its complaint a second time. (See Doc.
631.) The Second Amended Complaint was changed from the first
only in that it dropped GSK’s causes of action for both federal
and state antitrust violations. (See generally Second Am. Compl.
(Doc. 632).) As a result of this change, the parties and the
court were concerned that the Northern District of California no
longer had personal jurisdiction over the case, absent the
Sherman Act claims.3 The court entered an order resolving all
pending motions in limine, (Doc. 679), and the parties entered
The Sherman Act grants nationwide jurisdiction, which is
how the parties were able to litigate in the Northern District
of California to begin with. See 15 U.S.C. §§ 15, 22, 26; (see
also First Am. Compl. (Doc. 170).)
3
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into a stipulation, adopted by the court, that transferred the
case to this district. (Doc. 681.)
Currently at issue is a dispute between the parties on
whether North Carolina, Pennsylvania, or New York law governs
the UDTPA claim. (See Doc. 710; Def.’s 12(c) Br. (Doc. 711) at 8
(arguing specifically that North Carolina’s unfair competition
law does not apply).) Abbott contends that the choice-of-law
analysis as to the UDTPA claim has been altered by the change in
venue, (see Doc. 708) at 10; Abbott’s 12(c) Br. (Doc. 711) at
7-22), and that if Pennsylvania or New York law is found to
apply, judgment on the pleadings in its favor will be warranted
on the UDTPA claim. (Abbott’s 12(c) Br. (Doc. 711) at 19.)
II.
FACTUAL BACKGROUND
The following facts are presented in the light most
favorable to Plaintiff. See Drager v. PLIVA USA, Inc., 741 F.3d
470, 474 (4th Cir. 2014).4
GSK was a Pennsylvania corporation with its principal
office in Pennsylvania and with headquarters in both Durham,
North Carolina, and Philadelphia, Pennsylvania. (Second Am.
Compl. (Doc. 632) ¶ 5; Abbott’s 12(c) Br., Ex. A (“Agreement”)
This court excluded matters not properly considered on the
motion pursuant to Rule 12(c). See A.S. Abell Co. v. Baltimore
Typographical Union No. 12, 338 F.2d 190, 193 (4th Cir. 1964).
4
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(Doc. 711-1) at 3.) North Carolina is the site for “various
sales and marketing, administrative, and corporate functions” of
GSK. (Second Am. Compl. (Doc. 632) ¶ 5.) North Carolina is also
the center for GSK’s “research and development facilities and
commercial operations in the HIV/AIDS area.” (Id.) GSK’s brand
director for its HIV drug Lexiva conducted his business in GSK’s
North Carolina facilities. (Trial Tr., vol. 5, Mar. 4, 2011
(Doc. 542) at 9, 11.)5
Abbott is an Illinois corporation with its principal place
of business in Illinois. Abbott develops, manufactures, and
sells health care products and services. (Second Am. Compl.
(Doc. 632) ¶ 6.) Abbott has operations in numerous states and
sells its products throughout the United States. (Id.)
GSK and Abbott manufacture and sell protease inhibitors
(PIs), which are drugs used to treat HIV infection. (Id. ¶ 13.)
In 1996, Abbott introduced ritonavir, a drug product it had
developed under the brand name Norvir, for use as a stand-alone
PI. (Id. ¶ 14.) Abbott was the sole manufacturer of Norvir. (Id.
“[I]n disposing of a Rule 12(c) motion, ‘courts may
consider relevant facts obtained from the public record, so long
as these facts are construed in the light most favorable to the
plaintiff along with the well-pleaded allegations of the
complaint.’” Massey v. Ojaniit, 759 F.3d 343, 353 (4th Cir.
2014) (finding the district court’s consideration of a trial
transcript did not run afoul of Rule 12(d)). Additionally,
Abbott did not object to the transcript and cited to transcripts
in the record as well.
5
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¶ 22.) It was later discovered that a small dose of Norvir could
“boost” the effectiveness of other PIs paired with it, thus
reducing dosage amounts of the paired PI and slowing the rate at
which HIV developed a resistance to a given PI treatment. (Id.
¶ 15.) Norvir began to be co-prescribe and co-administer with
other PIs, and GSK relied on the reasonable availability of
Norvir as a boosting agent when developing its own PIs. (Id.
¶ 16).
In 2000, Abbott introduced Kaletra, a drug that combined
both Norvir, as a booster, and another PI into a single pill.
(Id. ¶ 19.)
In 2001, Abbott approached GSK requiring GSK to secure a
license to allow GSK to promote Norvir with GSK’s existing PIs
and its PIs in development. (Id. ¶ 20.) The parties’ lead
negotiators met in North Carolina for a face-to-face meeting to
negotiate the terms of the Agreement. (Trial Tr., vol. 5,
Mar. 4, 2011 (Doc. 542) at 170; Trial Tr., vol. 6, Mar. 7, 2011
(Doc. 543) at 77.) GSK alleges that in the license negotiations
with Abbott, Abbott did not disclose that it had begun internal
discussions regarding ways to protect the market share of its PI
Kaletra by damaging competitors’ access to Norvir. (Second Am.
Compl. (Doc. 632) ¶ 25.) For instance, during negotiations in
2002, Abbott began to consider a “supply constraint program” to
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remove Norvir from the U.S. market. (Id. ¶ 28.) Abbott was also
considering options for a “mega price increase.” (Id. ¶¶ 29-30.)
On December 13, 2002, GSK and Abbott executed a NonExclusive License Agreement, under which GSK paid money to
Abbott and for which Abbott granted GSK a license to “recommend,
label, market, use, sell, have sold and offer to sell one or
more of the GSK Products, but no other product, in
co-prescription and/or co-administration with Ritonavir.”
(Agreement (Doc. 711-1) ¶ 2.1.; Second Am. Compl. (Doc. 632)
¶ 21.) The Agreement also contained a provision that “[t]his
Agreement shall be governed exclusively by the laws of the State
of New York.” (Agreement (Doc. 711-1) ¶ 11.4.)
Abbott also licensed other competitors the right to market
PIs to be co-administered with Norvir and was able to sell
Norvir at a profit. (Second Am. Compl. ¶¶ 17, 23-24.)
In 2003, GSK introduced its PI Lexiva into the market
specifically for boosting with Norvir. (Id. ¶¶ 2, 32-33.) Two
weeks after GSK began selling Lexiva, Abbott raised the price it
charged for a 100 mg capsule of Norvir from $1.71 to $8.57,
amounting to a 400-percent increase. (Id.; Def.’s Answer (Doc.
707) ¶ 34.) This price hike commensurately increased the cost of
a boosted Lexiva therapy to some consumers, with the escalated
wholesale acquisition cost of GSK’s boosted Lexiva treatment
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from $19.43 to $33.15. (Second Am. Compl. (Doc. 632) ¶ 34.) The
wholesale acquisition cost of Abbott’s Kaletra remained
unchanged at $18.76. (Id.; Answer (Doc. 707) ¶ 34.) Shortly
after the price hike, a senior Abbott executive congratulated
the virology team on “giving a lump of coal to BMS [Bristol
Myers Squibb] and GSK for the holidays.” (Second Am. Compl.
¶ 32.)
GSK alleges that the price increase and the timing of the
increase following the release of Lexiva disrupted its ability
to promote Lexiva, causing a loss to its anticipated market
share. (Id. ¶¶ 35, 39.) GSK alleges that the price increase
immediately following the release of Lexiva prevented GSK from
promoting Lexiva at prices competitive with Kaletra (and other
PIs), thus causing lost market share and lost profits that it
expected to receive under the Agreement. (Id. ¶¶ 41-42, 47, 50.)
GSK alleges Abbott’s conduct harmed GSK in North Carolina and
effected commerce within California, North Carolina, and
elsewhere. (Id. ¶ 5, 52.)
III. LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(c), a party may
move for judgment on the pleadings “[a]fter the pleadings are
closed — but early enough not to delay trial . . . .” Fed. R.
Civ. P. 12(c). Such motions are “designed to dispose of cases
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when the material facts are not in dispute and the court can
judge the case on its merits by considering the pleadings.”
Preston v. Leake, 629 F. Supp. 2d 517, 521 (E.D.N.C. 2009).
Rule 12(c) motions are judged by the same standards as Rule
12(b)(6) motions. Drager v. PLIVA USA, Inc., 741 F.3d 470, 474
(4th Cir. 2014). Accordingly,
[A] motion for judgment on the pleadings “should only
be granted if, after accepting all well-pleaded
allegations in the plaintiff’s complaint as true and
drawing all reasonable factual inferences from those
facts in the plaintiff’s favor, it appears certain
that the plaintiff cannot prove any set of facts in
support of his claim entitling him to relief.”
Id. (citations omitted). However, Rule 12(c) motions are limited
in scope and courts must be “mindful that ‘[a] Rule 12(c) motion
tests only the sufficiency of the complaint and does not resolve
the merits of the plaintiff’s claims or any disputes of fact.’”
Massey v. Ojaniit, 759 F.3d 343, 353 (4th Cir. 2014) (quoting
Drager, 741 F.3d at 474).
When assessing a Rule 12(c) motion, the complaint, “the
answer and any documents incorporated by reference in the
pleadings may be considered. The ‘factual allegations of the
answer are taken as true, to the extent “they have not been
denied or do not conflict with the complaint.”‘“ Blue Rhino
Glob. Sourcing, Inc. v. Well Traveled Imps., Inc., 888 F. Supp.
2d 718, 721 (M.D.N.C. 2012) (quoting Farmer v. Wilson Hous.
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Auth., 393 F. Supp. 2d 384, 386 (E.D.N.C. 2004)) (internal
citation omitted). However, courts “are not obliged to accept
allegations that ‘represent unwarranted inferences, unreasonable
conclusions, or arguments,’ or that ‘contradict matters properly
subject to judicial notice or by exhibit.’” Massey, 759 F.3d at
353 (citations omitted) (quoting Blankenship v. Manchin, 471
F.3d 523, 529 (4th Cir. 2006)).
“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). A claim is facially plausible
provided the plaintiff provides enough factual content to enable
the court to reasonably infer that the defendant is liable for
the misconduct alleged. Id. The pleading setting forth the claim
must be “liberally construed” in the light most favorable to the
nonmoving party, and allegations made therein are taken as true.
Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). However, “the
requirement of liberal construction does not mean that the court
can ignore a clear failure in the pleadings to allege any facts
[that] set forth a claim.” Estate of Williams-Moore v. All. One
Receivables Mgmt., Inc., 335 F. Supp. 2d 636, 646 (M.D.N.C.
2004).
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Rule 12(b)(6) protects against meritless litigation by
requiring sufficient factual allegations “to raise a right to
relief above the speculative level” so as to “nudge[] the[]
claims across the line from conceivable to plausible.” Twombly,
500 U.S. at 555, 570; see Iqbal, 556 U.S. at 680. Under Iqbal,
the court performs a two-step analysis. First, it separates
factual allegations from allegations not entitled to the
assumption of truth (i.e., conclusory allegations, bare
assertions amounting to nothing more than a “formulaic
recitation of the elements”). Iqbal, 556 U.S. at 681. Second, it
determines whether the factual allegations, which are accepted
as true, “plausibly suggest an entitlement to relief.” Id. “At
this stage of the litigation, a plaintiff’s well-pleaded
allegations are taken as true and the complaint, including all
reasonable inferences therefrom, are liberally construed in the
plaintiff’s favor.” Estate of Williams-Moore, 335 F. Supp. 2d at
646.
IV.
SUMMARY OF THE ARGUMENTS
A.
Parties’ Arguments on Abbott’s Motion for Judgment on
the Pleadings on GSK’s UDTPA Claim Based on Changed
Choice of Law
Abbott argues that under the applicable North Carolina
choice-of-law rules, the UDTPA claim is governed by the law of
Pennsylvania or New York, neither of which recognize GSK’s
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unfair competition claim as alleged. Specifically, Abbott argues
that the lex loci test, not the most significant relationship
test, applies to GSK’s UDTPA claim. Under the lex loci test,
Abbott argues Pennsylvania law applies because GSK’s lost
profits injury was felt in Pennsylvania, where its principal
place of business is located. Abbott also argues in a footnote
that if this court were to use the most significant relationship
test, Pennsylvania law would still apply because Pennsylvania
had the most significant relationship to the claim (and if not
Pennsylvania, then Illinois where its principal place of
business is located).
Alternatively, Abbott argues that the New York choice-oflaw clause in the Agreement governs GSK’s UDTPA claim because
the claim relates to the validity and enforceability of the
parties’ Agreement. Because neither Pennsylvania nor New York
recognizes GSK’s UDTPA claim as alleged, Abbott argues judgment
pursuant to Rule 12(c) should be entered in its favor.
GSK argues that Abbott waived any objection to the
application of North Carolina law because Abbott acquiesced to
and relied upon North Carolina law for over seven years, first
arguing North Carolina law did not apply only two months before
the second trial. GSK also disagrees with the use of the lex
loci test, arguing that the appropriate test is the most
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significant relationship test. Under the most significant
relationship test, GSK argues North Carolina law applies because
North Carolina has the most significant relationship to the
claim. GSK further argues that even under the lex loci test,
North Carolina law governs because GSK suffered the injury in
North Carolina, where its HIV headquarters are located. Finally,
GSK argues that the UDTPA claim is not contractual, consequently
the New York choice-of-law clause in the Agreement is not
applicable to that claim. Because North Carolina law governs the
UDTPA claim, GSK argues Abbott’s motion should be denied.
B.
Parties’ Arguments on Abbott’s Motion to Dismiss GSK’s
UDTPA Claim Based on North Carolina Law
Abbott argues that even if North Carolina law applies to
the UDTPA claim, the claim should be dismissed because without
the antitrust claims, it is a breach of implied covenant with no
aggravating factors to support a UDTPA claim. Abbott also argues
that GSK should not be permitted to pursue an antitrust-based
UDTPA theory after dismissing its antitrust claims.
GSK argues that the removal of the antitrust causes of
action do not affect the viability of the UDTPA claim because
such a claim goes beyond antitrust liability. GSK argues it has
alleged facts sufficient to support unfair conduct or practices
actionable under the UDTPA as well as aggravating factors of
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unscrupulous behavior sufficient to support liability under the
UDTPA.
V.
ANALYSIS
As a threshold issue, the parties do not dispute that North
Carolina choice-of-law rules apply following the transfer of
this case to this court pursuant to 28 U.S.C. § 1631. See
(Abbott’s 12(c) Br. (Doc. 711) at 3, 9; Pl.’s 12 (c) Resp. (Doc.
720) at 14).) This court agrees and will analyze the issues
under North Carolina choice-of-law rules.
A.
Abbott Has Not Waived Its Objection to North Carolina
Law
GSK argues that Abbott waived any objection to the
application of North Carolina law because Abbott acquiesced to
and relied upon North Carolina law for over seven years, first
arguing North Carolina law did not apply only two months before
the second trial. Circuit courts recognize that a party’s
litigation conduct can constitute a waiver of choice-of-law
issues. Williams v. BASF Catalysts LLC, 765 F.3d 306, 316 n.2
(3d Cir. 2014), reh’g denied (Dec. 1, 2014) (collecting cases).
The Fourth Circuit has recognized this principle, Bilancia v.
Gen. Motors Corp., 538 F.2d 621, 623 (4th Cir. 1976), and has
recognized that choice-of-law provisions can be waived when
parties rely on other law throughout the litigation. Grecon
Dimter, Inc. v. Horner Flooring Co., 114 F. App’x 64, 66 (4th
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Cir. 2004). However, a waiver is an “‘intentional relinquishment
of a known right’” and “‘must indicate an intention or election
to dispense with something of value or to forego some advantage
which the party waiving it might at his option have insisted
upon.’” Citibank, S.D., N.A. v. Palma, 184 N.C. App. 504, 509,
646 S.E.2d 635, 639 (2007) (quoting Guerry v. Trust Co., 234
N.C. 644, 648, 68 S.E.2d 272, 275 (1951)).
Here, although Abbott relied on North Carolina law in its
briefs and arguments as early as 2008, GSK’s removal of the
antitrust claims caused the transfer of this case to this court,
which led to the application of North Carolina choice-of-law
rules to the UDTPA claim. In light of GSK’s amended complaint
and the subsequent transfer to this district, this court will
not preclude Abbott from making an argument about the effect of
the changed choice-of-law analysis on the UDTPA claim.
B.
Application of the Lex Loci Test and the Significant
Relationship Test to GSK’s UDTPA Claim
In ascertaining whether North Carolina law governs GSK’s
UDTPA claim, this court must first establish which rule to apply
according to North Carolina choice-of-law. “[I]n determining
state law[,] a federal court must look first and foremost to the
law of the state’s highest court, giving appropriate effect to
all its implications.” Assicurazioni Generali, S.p.A. v. Neil,
160 F.3d 997, 1002 (4th Cir. 1998). If no North Carolina Supreme
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Court case is dispositive of the issue, this court must seek
guidance from the state’s appellate court. Id.
The Supreme Court of North Carolina has yet to address the
proper test for UDTPA claims, and there is a split of authority
in the North Carolina Court of Appeals on the appropriate rule
to be applied. Stetser v. TAP Pharm. Prods., Inc., 165 N.C. App.
1, 15, 598 S.E.2d 570, 580 (2004); Associated Packaging, Inc. v.
Jackson Paper Mfg. Co., No. 10 CVS 745, 2012 WL 707038, at *5
(N.C. Super. Ct. Mar. 1, 2012). Two different methods have been
used by the appellate courts to assess which state’s law governs
an unfair and deceptive trade practice claim. Stetser, 165 N.C.
App. at 15, 598 S.E.2d at 580. One approach is the lex loci
test, which applies “the law of the state where the injuries”
were sustained. E.g., United Va. Bank v. Air-Lift Assocs., Inc.,
79 N.C. App. 315, 321, 339 S.E.2d 90, 93 (1986). The other
approach is the most significant relationship test, which
applies “the law of the state having the most significant
relationship to the occurrence giving rise to the action.” E.g.,
Andrew Jackson Sales v. Bi-Lo Stores, Inc., 68 N.C. App. 222,
225, 314 S.E.2d 797, 799 (1984).
Here, Abbott argues that the lex loci rule is favored by
North Carolina courts and urges this court to adopt the lex loci
rule as the better rule. (Abbott’s 12(c) Br. (Doc. 711) at 10-
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12.) GSK argues that the most significant relationship test is
more appropriate because this is a complex UDTPA claim that
touches many states. (Pl.’s 12(c) Resp. (Doc. 720) at 15-17.)
Faced with conflicting appellate decisions, and “absent
definitive authority from North Carolina’s highest court, this
court must ‘attempt to divine what that court would do were it
faced with this [case].’” Martinez v. Nat’l Union Fire Ins. Co.,
911 F. Supp. 2d 331, 338 (E.D.N.C. 2012) (quoting Teague v.
Bakker, 35 F.3d 978, 991 (4th Cir. 1994)).
While some North Carolina courts have used the most
significant relationship test, federal courts generally appear
to favor the lex loci rule. As one North Carolina court
reasoned, earlier use of the significant relationship test was
done when “there was a nationwide trend to apply the significant
relationship test to torts in general, and that the North
Carolina Supreme Court’s subsequent rejection of this trend in
Boudreau [v. Baughman, 322 N.C. 331, 335, 368 S.E.2d 849, 854
(1988),] indicates that North Carolina court’s would not be
inclined to apply the significant relationship test to UDTPA
claims.” Associated Packaging, 2012 WL 707038, at *5 (citing
United Dominion Indus., Inc. v. Overhead Door Corp., 762
F. Supp. 126, 128 n.2 (W.D.N.C. 1991)).
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The district court in Martinez, also citing the district
court decision in United Dominion, agreed in concluding that the
North Carolina Supreme Court would use the lex loci test. In
United Dominion, the district court placed “particular
importance on the [North Carolina Court of Appeals] decision in
United Virginia, which rejected the most significant
relationship test in favor of the traditional [lex loci] test.”
United Dominion, 762 F. Supp. at 129.
Noting the conflict of authority, and relying on the
reasoning in these decisions, several other North Carolina
district courts have applied the lex loci test. M-Tek Kiosk,
Inc. v. Clayton, 1:15CV886, 2016 WL 2997505, at *12 (M.D.N.C.
May 23, 2016), appeal dismissed (July 19, 2016); Best v. Time
Warner Inc., No. 5:11-CV-00104-RLV-DSC, 2013 WL 66265, at *3
(W.D.N.C. Jan. 4, 2013). However, the United Virginia case (on
which these courts partially relied), in finding the lex loci
rule to be “the better rule,” did not discuss the use of the
significant relationship test in complex injury cases and
acknowledged that applying either test in that case would have
brought about the same result. 79 N.C. App. at 322, 339 S.E.2d
at 94.
Similarly, many of the district court cases applying the
lex loci test did not involve an unclear place of injury, nor
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did the courts discuss consideration of the most significant
relationship test in such cases. In M-tek Kiosk, the court
stated “there is no other location alleged where MTEK would have
suffered damages except in Oregon.” 2016 WL 2997505, at *16. In
Best, the court cited Martinez and United Dominion in a footnote
for its decision to apply the lex loci test and found, without
much discussion, that California was the place of injury. 2013
WL 66265, at *3 n.4. Likewise, Martinez was not a complex injury
case where the place of harm was unclear or highly open to date.
911 F. Supp. 2d at 336-38. The United Dominion case involved a
single commercial transaction with the injury taking place
either in North Carolina, where one party had corporate
headquarters, or in Texas, where the transaction closed. 762 F.
Supp. at 129-30. As that court noted, there was a “single clear
alternative” to North Carolina. Id.
In applying the lex loci test, these courts also relied on
the North Carolina Supreme Court’s Boudreau decision. See, e.g.,
United Dominion, 762 F. Supp. at 129 (“This Court relies heavily
upon the Boudreau decision . . . in concluding that a North
Carolina court would apply the lex loci test to this issue.”).
The Boudreau court stated that North Carolina’s Supreme Court
“has consistently adhered to the lex loci rule in tort actions.”
Boudreau, 322 N.C. at 335, 368 S.E.2d at 854. This court does
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not dispute that for causes of action generally considered to be
torts, “the state where the injury occurred is considered the
situs of the claim.” Id. However, an UDTPA claim is “‘neither
wholly tortious nor wholly contractual in nature.’” Stetser, 165
N.C. App. at 15, 598 S.E.2d at 580 (quoting Bernard v. Cent.
Carolina Truck Sales, Inc., 68 N.C. App. 228, 230, 314 S.E.2d
582, 584 (1984)); but see Caper Corp. v. Wells Fargo Bank, N.A.,
578 F. App’x 276, 280 (4th Cir. 2014) (characterizing an UDTPA
claim in violation of N.C. Gen. Stat. § 75-1.1 as a tort claim).
Additionally, there is Fourth Circuit precedence that
states “when the place of injury is open to debate in regard to
an unfair trade practices claim, North Carolina choice of law
rules require a court to apply the law of the state with the
most significant relationship to the transaction.” Edmondson v.
Am. Motorcycle Ass’n, Inc., No. 99-1290, 2001 WL 91104, at *12
(4th Cir. 2001); see New England Leather Co. v. Feuer Leather
Corp., 942 F.2d 253, 255 (4th Cir. 1991). This court cannot
ignore the Fourth Circuit decisions in analyzing this issue. See
Spirax Sarco, Inc. v. SSI Eng’g, Inc., 122 F. Supp. 3d 408, 419
(E.D.N.C. 2015) (“[I]f the Fourth Circuit has predicted how the
North Carolina Supreme Court would rule, then this court should
follow that decision in the absence of a later state court
decision that renders the Fourth Circuit’s decision clearly no
- 21 -
longer persuasive regarding North Carolina law.”); cf.
Derflinger v. Ford Motor Co., 866 F.2d 107, 110 (4th Cir. 1989).
Given that context, this court will apply the lex loci test
unless its application does not yield a clear answer and the
place of injury is so open to debate that application of the
significant relationship test is more appropriate. See Food
Lion, Inc. v. Capital Cities/ABC, Inc., 951 F. Supp. 1224, 1228
(M.D.N.C. 1996); see also McElmurry v. Alex Fergusson, Inc., No.
1:04CV389, 2006 WL 572330, at *10 n.8 (M.D.N.C. Mar. 8, 2006)
(“This court has interpreted the conflicting North Carolina
court of appeals opinions to hold that where the place of injury
is uncertain the significant relationships test should apply.”).
C.
North Carolina Law Governs GSK’s UDTPA Claim
Under the lex loci rule, the “the state where the injury
occurred is considered the situs of the claim.” Stetser, 165
N.C. App. at 14, 598 S.E.2d at 580 (quoting Boudreau, 322 N.C.
at 335, 368 S.E.2d at 853–54). For an UDTPA claim, the injury is
considered “sustained in the state ‘where the last act occurred
giving rise to [the] injury.’” Harco Nat’l Ins. Co. v. Grant
Thornton LLP, 206 N.C. App. 687, 694, 698 S.E.2d 719, 724 (2010)
(quoting United Virginia, 79 N.C. App. at 321, 339 S.E.2d at
94). North Carolina requires that a plaintiff “suffer damages as
a prerequisite for a cause of action under [the] unfair and
- 22 -
deceptive trade practice act[]. Thus, the suffering of
damages . . . would be the last event necessary to make [a
party] liable under the [North Carolina] unfair and deceptive
trade practices act[].” Synovus Bank v. Parks, No. 10 CVS 5819,
2013 WL 3965424, at *5 (N.C. Super. Ct. July 30, 2013).
Accordingly, this court must determine where GSK allegedly
suffered its injury or damages.
Here, GSK alleged that it suffered injury in the form of
lost market share and lost profits on sales of Lexiva throughout
the United States and that Abbott’s conduct injured consumers
and commerce in “California, North Carolina and elsewhere.”
(Second Am. Compl. (Doc. 632) ¶¶ 43-52.) “In determining where
the injury occurred in a case involving commercial or financial
injury . . . , courts often look at the location where the
economic loss was felt.” Clifford v. Am. Int’l Specialty Lines
Ins. Co., No. 1:04CV486, 2005 WL 2313907, at *8 (M.D.N.C.
Sept. 21, 2005) (collecting cases); see Harco, 206 N.C. App. at
697, 698 S.E.2d at 726. Abbott argues that GSK suffered damages
in many states, therefore, the location of the economic loss
could only be felt at GSK’s principal place of business, which
it argues is in Pennsylvania. (Abbott’s 12(c) Br. (Doc. 711) at
15.) Specifically, Abbott argues that GSK is a Pennsylvania
corporation with its sole headquarters in Pennsylvania. Abbott
- 23 -
contends that GSK can have only one headquarters, which is in
Pennsylvania, not North Carolina. Therefore, Abbott argues that
because the injury is nationwide and GSK is a Pennsylvania
corporation with its headquarters in Pennsylvania, the site of
the injury must be at its headquarters in Pennsylvania.
Alternatively, Abbott makes the argument that any focus on its
conduct relating to the UDTPA claim would implicate Illinois,
where its principal place of business is located. (Abbott’s
12(c) Br. (Doc. 711) at 15 n.4.)
On the other hand, GSK argues that it has headquarters in
both Pennsylvania and North Carolina. GSK claims its North
Carolina offices are where its HIV business is centered, where
it conducts HIV research and development, and where it carries
out various marketing, administrative, and corporate functions.
GSK asserts the center of economic impact was at its North
Carolina headquarters where its center for “research and
development facilities and commercial operations in the HIV/AIDS
area” is located because that is where it felt the damages
associated with the loss in market share and lost profits
related to the HIV market and Lexiva. (Second Am. Compl. (Doc.
632) ¶ 5.) GSK further argues that even if its headquarters were
legally only in Pennsylvania, North Carolina was still the site
of the injury because that is where the center of the economic
- 24 -
impact was felt. Based on the foregoing, the location of GSK’s
injury appears to be either in Pennsylvania or North Carolina.
As Abbott argued, courts do often find that financial harm
occurs where a business’ principal place of business is located.
However, courts have rejected a bright line rule that in all
cases an injury is sustained where corporate headquarters are
located. Harco, 206 N.C. App. at 697, 698 S.E.2d at 725-26
(finding persuasive United Dominion’s reasoning that such a rule
“would allow a corporation to conduct an entire transaction in a
foreign jurisdiction and urge the law of the corporation’s state
of residency in subsequent litigation,” 762 F. Supp. at 130);
see Synovus Bank, 2013 WL 3965424, at *5 (“place of residence is
not dispositive”); cf. Santana, Inc. v. Levi Strauss & Co., 674
F.2d 269, 273 (4th Cir. 1982). As the Harco court stated,
We . . . reject[] [the] proposed bright line rule. The
location of a plaintiff’s residence or place of
business may be useful for determining the place of a
plaintiff’s injury in those rare cases where, even
after a rigorous analysis, the place of injury is
difficult or impossible to discern. However, . . . a
significant number of cases exist where a plaintiff
has clearly suffered its pecuniary loss in a
particular state, irrespective of that plaintiff’s
residence or principal place of business.
Harco, 206 N.C. App. at 697, 698 S.E.2d at 725-26.
Abbott’s alleged conduct caused GSK to lose revenue from
many states, and consumers and competition were affected in many
states. Thus, turning to where the economic loss was felt, GSK
- 25 -
may have been a Pennsylvania corporation with corporate
headquarters in Pennsylvania, however, GSK also claims it had
headquarters in North Carolina. (Second Am. Compl. (Doc. 632)
¶ 5.) Although GSK may have suffered injury in Pennsylvania as
Abbott asserts, GSK alleges the center of economic impact was in
North Carolina where the heart for “research and development
facilities and commercial operations in the HIV/AIDS area” was
located – this is where it felt the damages associated with the
loss in market share and lost profits related to the HIV market
and Lexiva. See Rhone-Poulenc Agro S.A. v. Monsanto Co., 73 F.
Supp. 2d 554, 555 (M.D.N.C. 1999) (applying lex loci in fraud
claim, plaintiff suffered injury at its headquarters in both
North Carolina and France, but in finding North Carolina “more
appropriate,” the court noted that plaintiff’s North Carolina
corporation was more involved, plaintiff’s principal negotiator
was in North Carolina, and neither party asserted that North
Carolina law applied until eve of trial).
Rule 12(c) motions are “designed to dispose of cases when
the material facts are not in dispute.” Preston, 629 F. Supp. 2d
at 521. Here, Abbott disputes the location of GSK’s
headquarters. However, in applying the lex loci test, GSK has
plausibly pled that it felt the economic injury in North
Carolina. Therefore, North Carolina law governs.
- 26 -
Even if this court were to apply the most significant
relationship test because of the alleged nationwide impact, the
place of injury still appears to be North Carolina. Courts
analyzing North Carolina UDTPA claims under the most significant
relationship test focus on “where the relationship between the
parties was created and where it was centered.” Jacobs v. Cent.
Transp., Inc., 891 F. Supp. 1088, 1111 (E.D.N.C. 1995), rev’d on
other grounds, Nos. 95-2395, 95-2396, 95-2397, 1996 WL 223688
(4th Cir. May 3, 1996); see also New England Leather, 942 F.2d
at 256; Edmondson, 2001 WL 91104, at *12. Federal courts and
North Carolina courts applying the most significant relationship
test to UDTPA claims engage in fact-specific inquiries under
that guidance. Id. See, e.g., Andrew Jackson Sales, 68 N.C. App.
at 225, 314 S.E.2d at 799; Michael v. Greene, 63 N.C. App. 713,
715, 306 S.E.2d 144, 145 (1983). However, it may also be
appropriate to consider the factors listed in the Restatement
(Second) of Conflict of Laws, which include “(a) the place where
the injury occurred, (b) the place where the conduct causing the
injury occurred, (c) the domicile, residence, nationality, place
of incorporation and place of business of the parties, and (d)
the place where the relationship, if any, between the parties is
centered.” Restatement (Second) of Conflict of Laws § 145 (Am.
Law Inst. 1971).
- 27 -
The first factor, in effect, is the lex loci test. As
already discussed, the application of the first factor favors
North Carolina. For the second factor, GSK offers the conclusory
statement that “conduct giving rise to Abbott’s liability
occurred in North Carolina.” (Pl.’s 12(c) Resp. (Doc. 720) at
19.) Abbott argues that the UDTPA claim focuses on Abbott’s
conduct “relating to the pricing of Norvir and statements Abbott
allegedly made about that pricing” which occurred at its
principal place of business in Illinois. (Def.’s 12(c) Reply
(Doc. 725) at 8.)
The third factor does not favor any one state. Abbott is an
Illinois corporation with its principal place of business in
Illinois. GSK was a Pennsylvania corporation with its principal
office in Pennsylvania and with headquarters in both Durham,
North Carolina, and Philadelphia, Pennsylvania.
The fourth factor is essentially the factor that courts
focus on when analyzing North Carolina UDTPA claims under the
most significant relationship test. Abbott argues that the
center of the parties’ relationship is reflected in the
Agreement, which “does not contain a single reference to North
Carolina.” (Id. at 10.) Abbott asserts that the Agreement
describes GSK as a Pennsylvania corporation, requires notice to
be sent to GSK in Pennsylvania and Abbott in Illinois, and
- 28 -
grants GSK a worldwide license. (Id.) Abbott suggests it is
unimportant that the parties had meetings in North Carolina or
that GSK had key employees and its HIV operations in North
Carolina. (Id. at 11.) Abbott further asserts that it contracted
with GSK, not GSK’s HIV business. (Id.) Abbott, in support of
its claim that if North Carolina “had mattered . . . it would
have appeared in the Agreement,” cites a quote from Edmondson
stating that the “joint venture agreement provides it was
entered into in Ohio.” (Id.) However, the Edmondson court found
that “North Carolina had a more significant relationship to this
case than Ohio” even though the agreement provided it was
entered into in Ohio and even though the defendant asserted all
of plaintiff’s claims arose out of the parties’ joint venture
relationship. Edmondson, 2001 WL 91104, at *12.
GSK asserts that negotiations between the parties regarding
the Agreement took place in North Carolina. Abbott makes the
argument that its conduct relating to the UDTPA claim occurred
in Illinois, where its principal place of business is located.
However, GSK asserts that Abbott did not disclose certain
material information during the negotiations in North Carolina.
It is not disputed that Abbott is an Illinois corporation with
its principal offices in that state. GSK was a Pennsylvania
corporation with headquarters there. However, GSK asserts that
- 29 -
it also had headquarters in North Carolina, specifically, its
HIV headquarters. The parties’ Agreement states that “GSK is
interested in obtaining a license from Abbott to promote and
market certain of GSK’s HIV products.” (Agreement (Doc. 711-1)
at 3.) GSK asserts North Carolina is where its HIV business is
centered, where it conducts HIV research and development, where
its Lexiva brand director conducted his business, and where it
carries out other marketing, administrative, and corporate
functions.
While Pennsylvania and Illinois are not without connection
to the parties and the subject matter of the suit, application
of the factors point to North Carolina as the state with the
most significant relationship and thus this court finds that the
law of North Carolina governs.
D.
The New York Choice-of-Law Clause in the Agreement
Does Not Govern GSK’s UDTPA Claim
The Agreement contains a choice-of-law clause providing
that “[t]his Agreement shall be governed exclusively by the laws
of the State of New York.” (Agreement (Doc. 711-1) ¶ 11.4.) As a
general matter, in North Carolina, parties to a contract can
agree in advance as to the choice of law that will govern
certain disputes that arise between them. See Tanglewood Land
Co. v. Byrd, 299 N.C. 260, 262, 261 S.E.2d 655, 656 (1980).
However, a contractual choice-of-law provision does not
- 30 -
necessarily apply to a claim for damages arising under North
Carolina’s Unfair and Deceptive Trade Practices act. United
Dominion, 762 F. Supp. at 127–28; ITCO Corp. v. Michelin Tire
Corp., Commercial Div., 722 F.2d 42, 49 n.11 (4th Cir. 1983).
Similar to the United Dominion court’s conclusion, “[t]he
contractual provision here may govern the choice of laws as to
the interpretation and construction of the contract; however, it
does not provide the applicable law for a claim based on unfair
and deceptive acts.” United Dominion, 762 F. Supp. at 128. As
explained in ITCO, North Carolina courts would apply N.C. Gen.
Stat. § 75-1.1 to an UDTPA claim, without regard to the
contractual choice-of-law clause, because “the nature of the
liability allegedly to be imposed by the statute is ex delicto,
not ex contractu.” ITCO, 722 F.2d at 49 n.11. “No issue of
contractual construction, interpretation, or enforceability” was
raised. Id.
Here, GSK’s UDTPA claims do not rely on the validity or
enforceability of any contractual provision in the Agreement.
United Dominion, 762 F. Supp. at 128; see United Virginia, 79
N.C. App. at 320-21, 339 S.E.2d at 93 (referring to the ITCO
decision as “persuasive”). Even if GSK’s alleged UDTPA claims
are directly relevant to the Agreement, this court will still
decline to apply the contractual choice-of-law provision in
- 31 -
determining whether North Carolina’s UDTPA applies. See Robinson
v. Ladd Furniture, Inc., No. 92-2286, 1993 WL 211309, at *5 (4th
Cir. June 14, 1993) (stating “[t]he argument could have been
made in [the] ITCO [case] that the terms of the . . . agreements
would be directly relevant to the wrongful termination claims,
but we still declined to apply the contractual choice of law
provisions in these actions”).
E.
GSK Has Alleged Sufficient Facts to Support Its UDTPA
Claim
Abbott moves to dismiss GSK’s N.C. Gen. Stat. § 75-1.1
claim for unfair and deceptive trade practices. North Carolina’s
UDTPA prohibits “[u]nfair methods of competition in or affecting
commerce, and unfair or deceptive acts or practices in or
affecting commerce.” N.C. Gen. Stat. § 75–1.1(a). To state a
claim for unfair and deceptive trade practices, a plaintiff must
show that (1) the defendant committed an unfair or deceptive act
or practice; (2) the act in question was in or affecting
commerce; and (3) the act proximately caused injury to the
plaintiff. Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704,
711 (2001).
The UDTPA language generally covers five categories: (1)
unfair conduct; (2) deceptive misrepresentations; (3) certain
per se violations of § 75-1.1; (4) breaches of contract
occurring under aggravating circumstances; and (5)
- 32 -
anti-competitive conduct. Sparks v. Oxy-Health, LLC, 134 F.
Supp. 3d 961, 997–98 (E.D.N.C. 2015) (collecting cases); Exclaim
Mktg., LLC v. DirecTV, LLC, 134 F. Supp. 3d 1011, 1022 (E.D.N.C.
2015), aff’d in part, No. 15-2339, 2016 WL 7479315 (4th Cir.
Dec. 29, 2016). The conduct sufficient to constitute an unfair
or deceptive trade practice is a “somewhat nebulous concept,”
and depends on the circumstances of the particular case. ABT
Bldg. Prods. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh,
472 F.3d 99, 122-23 (4th Cir. 2006). Whether a particular
commercial act or practice constitutes an unfair or deceptive
practice is a question of law for the court. Norman Owen
Trucking, Inc. v. Morkoski, 131 N.C. App. 168, 177, 506 S.E.2d
267, 273 (1998).
In this case, the dispute arises over the first prong of
whether Abbott committed an unfair or deceptive act or practice
sufficient to support an UDTPA claim. Abbott argues that GSK’s
two UDTPA theories, unfairness and antitrust, fail because GSK
dismissed its antitrust claims. (Def.’s Dismiss Br. (Doc. 722)
at 6-7.) Abbott contends that because GSK chose to dismiss its
antitrust claims, GSK “should not be permitted to pursue an
antitrust-based UDTPA theory.” (Id. at 10-12.) Specifically,
Abbott contends that “dismissal of antitrust claims requires
- 33 -
dismissal of a UDTPA claim based on the same allegations.” (Id.
at 12.)
It may be correct that when a Sherman Act claim is
dismissed by a court as legally deficient, and the UDTPA claim
is premised on the same factual allegations, dismissal of the
UDTPA claim may be appropriate. See, e.g., R. J. Reynolds
Tobacco Co. v. Philip Morris Inc., 199 F. Supp. 2d 362, 396
(M.D.N.C. 2002); Sea-Roy Corp. v. Parts R Parts, Inc., No.
1:94CV00059, 1997 WL 1046282, at *19 n.25 (M.D.N.C. Dec. 2,
1997). However, that is not the posture of this case. Here, in
various stages of litigation, it has been found that GSK
adequately pled antitrust violations. (See, e.g., Docs. 82, 195,
325, 591.) The court did not dismiss the antitrust claims. GSK
chose to dismiss them and proceed on an alternate theory. See
Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1160 (9th
Cir. 2002). Although GSK dismissed its antitrust claims, all of
the factual allegations regarding Abbott’s alleged
anti-competitive conduct remain in the operative complaint.
Courts have held that “[c]onduct is ‘anti-competitive’
where it amounts to an unfair use of market power to harm the
competitive process and thereby harm consumers.” Exclaim Mktg.,
134 F. Supp. 3d at 1022 (citing Dickson v. Microsoft Corp., 309
F.3d 193, 206 (4th Cir. 2002); and ITCO, 722 F.2d at 48)). The
- 34 -
Fourth Circuit has held that “proof of conduct violative of the
Sherman Act is proof sufficient to establish” liability under
North Carolina’s UDTPA. ITCO, 722 F.2d at 48. Although “anticompetitive conduct is similar in nature to that conduct which
could give rise to a violation of the Sherman Act . . . [and a]
violation of the Sherman Act is sufficient to give rise to a
UD[T]PA claim, it is not necessary.” Exclaim Mktg., 134 F. Supp.
3d at 1025 (citing ITCO, 722 F.2d at 48; and citing Gray v. N.C.
Ins. Underwriting Ass’n, 352 N.C. 61, 71, 529 S.E.2d 676 (2000)
for the proposition that “plaintiff need not prove a technical
violation of a statute regulating trade to give rise to UD[T]PA
claim, where defendant’s conduct substantially violates
statute”)). That GSK voluntarily dismissed its antitrust claims
does not itself preclude GSK from proceeding on an alternative
anti-competitive UDTPA claim, and this court will not dismiss
GSK’s UDTPA claim on those grounds. See ITCO, 722 F.2d at 48-52.
Abbott further argues that without the antitrust claims,
GSK can allege no aggravating factors sufficient to support a
UDTPA violation, making GSK’s unfairness theory a mere breach of
contract claim. (Def.’s Dismiss Br. (Doc. 722) at 7-10.) Unfair
conduct is that which a court of equity would find unfair.
South Atl. Ltd. P’ship of Tennessee, L.P. v. Riese, 284 F.3d
518, 535 (4th Cir. 2002). An act or practice is unfair if it
- 35 -
“offends established public policy”; if it is “immoral,
unethical, oppressive, unscrupulous, or substantially injurious
to consumers”; or if it “amounts to an inequitable assertion of
[a party’s] power or position.” Carcano v. JBSS, LLC, 200 N.C.
App. 162, 172, 684 S.E.2d 41, 50 (2009) (emphasis omitted); see
Marshall v. Miller, 302 N.C. 539, 548, 276 S.E.2d 397, 403
(1981). “[T]he fairness or unfairness of particular conduct is
not an abstraction to be derived by logic. Rather, the fair or
unfair nature of particular conduct is to be judged by viewing
it against the background of actual human experience and by
determining its intended and actual effects upon others.” South
Atlantic, 284 F.3d at 535.
North Carolina courts have construed the UDTPA liberally,
but there are some limits on its application. Gilbane Bldg. Co.
v. Fed. Reserve Bank of Richmond, 80 F.3d 895, 903 (4th Cir.
1996). Whether GSK’s allegations demonstrate unfair conduct,
anti-competitive conduct or a breach of contract by Abbott, GSK
must prove that such conduct or breach was surrounded by
substantial aggravating circumstances. Dalton, 353 N.C. at 657,
548 S.E.2d at 711; Griffith v. Glen Wood Co., 184 N.C. App. 206,
217, 646 S.E.2d 550, 558–59 (2007).
To satisfy a showing of substantial aggravating
circumstances, courts have opined that unfairness or “deception
- 36 -
either in the formation of the contract or in the circumstances
of its breach” may be adequate. Bartolomeo v. S.B. Thomas, Inc.,
889 F.2d 530, 535 (4th Cir. 1989); United Roasters, Inc. v.
Colgate-Palmolive Co., 649 F.2d 985, 992 (4th Cir. 1981). Courts
have also found that aggravating factors can “include an
intentional misrepresentation for the purpose of deceiving
another and which has a natural tendency to injure the other.”
Pan-Am. Prods. & Holdings, LLC v. R.T.G. Furniture Corp., 825
F. Supp. 2d 664, 700 (M.D.N.C. 2011). Obtaining a contract
without intending to adhere to the contract or abandoning and
frustrating its performance can give rise to an action for
unfair and deceptive trade practices as well. Swan Racing Co.,
LLC v. XXXtreme Motorsport, LLC, Civil Action No. 5:14CV155-RLV,
2015 WL 4430257, at *3 (W.D.N.C. July 20, 2015) (taking assets
without paying, stripping contract of value, and frustrating
agreed payment method could “plausibly give rise to an action
for unfair and deceptive trade practices”).
GSK alleges the following unfair conduct: (1) Abbott
deliberately withheld its plans to use Norvir as a weapon to
destroy competition while negotiating with GSK for substantial
compensation in the Norvir Agreement (Second Am. Compl. (Doc.
632) ¶¶ 28-32; Pl.’s Resp. to Dismiss (Doc. 726) at 7, 9);
(2) Abbott inequitably asserted its power or position by
- 37 -
manipulating GSK into the Agreement that Abbott sought to
undermine (Id. ¶ 60; Id. at 8-9); and (3) Abbott deliberately
timed the Norvir price increase to disrupt the launch of Lexiva
in the market and harm GSK (Id. ¶¶ 35, 41, 45-48; Id. at 8-9).
These actions, if proved, could reasonably give rise to an UDTPA
claim within the meaning of section 75.1–1.
“The obligations imposed by the UD[T]PA ‘create a cause of
action broader than traditional common law actions.’” South
Atlantic, 284 F.3d at 537 (quoting Marshall, 302 N.C. at 547,
276 S.E.2d at 402). In South Atlantic, the Fourth Circuit,
applying North Carolina law, found that a party who
“deliberately withheld information” knowing it would harm the
other party to an agreement, even if not necessarily legally
obligated to convey such information, was “the essence of
unscrupulous behavior . . . sufficiently egregious to constitute
an unfair trade practice.” Id. at 538. The South Atlantic court
also found that when one party “manipulated and exploited” the
timing of its conduct to ensure that the other party received no
compensation for its work was “the kind of inequitable
assertions of power that North Carolina deems to be unfair trade
practices.” Id. at 539-40 (internal quotations omitted). Based
on the foregoing, GSK’s allegations that Abbott, after
negotiating with GSK for the Agreement, knowingly took steps to
- 38 -
undermine the value of the Agreement, if proved, is sufficiently
egregious to support an UDTPA claim.
VI.
CONCLUSION
For the reasons stated herein, IT IS HEREBY ORDERED that
Defendant’s Motion for Judgment on the Pleadings Based on
Changed Choice-of-Law Principles (Doc. 710) and Alternative
Motion to Dismiss GSK’s Unfair and Deceptive Acts Claim under
North Carolina Law (Doc. 721) are DENIED.
This the 20th day of March, 2017.
_______________________________________
United States District Judge
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