The Hospital Authority of Metropolitan Government of Nashville and Davidson county, Tennessee v. Momenta Pharmaceuticals, Inc. et al
Filing
186
ORDER: Based on the foregoing, Plaintiff's motion for leave to file an amended complaint (DE 140 ) is GRANTED, with the additional allegations described in Plaintiffs notice filed on September 15, 2017 (DE 159 ), and the additional mod ification that Plaintiff specify the state laws under which it asserts its unjust enrichment claims. Plaintiff shall file this amended complaint within seven (7) days of the date of entry of this Order. Defendant shall have 28 days after the filing of the amended complaint to answer or otherwise respond Signed by Magistrate Judge Barbara D. Holmes on 12/14/17. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(afs)
IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
THE HOSPITAL AUTHORITY OF
METROPOLITAN GOVERNMENT OF
NASHVILLE AND DAVIDSON
COUNTY, TENNESSEE, d/b/a/
NASHVILLE GENERAL HOSPITAL,
v.
MOMENTA PHARMACEUTICALS,
INC. and SANDOZ, INC.
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No. 3:15-1100
MEMORANDUM AND ORDER
Presently pending is Plaintiff’s motion for leave to file an amended complaint. See
Docket Entry No. (“DE”) 140. For the reasons that follow, Plaintiff’s motion is GRANTED. 1
I. PROCEDURAL BACKGROUND 2
Plaintiff Nashville General Hospital (“Plaintiff” or “NGH”) filed its initial complaint on
October 14, 2015. See DE 1. The complaint involved four separate counts against Defendants
1
Although the Sixth Circuit has not addressed whether a motion to amend is a dispositive
or non-dispositive motion, most of the district courts in the Sixth Circuit, including this court,
consider an order on a motion to amend to be non-dispositive. See, e.g., Gentry v. The Tennessee
Board of Judicial Conduct, 2017 WL 2362494, at *1 (M.D. Tenn. May 31, 2017) (“Courts have
uniformly held that motions to amend complaints are non-dispositive matters that may be
determined by the magistrate judge and reviewed under the clearly erroneous or contrary to law
standard of review …”) (citations omitted); Chinn v. Jenkins, 2017 WL 1177610 (S.D. Ohio
March 31, 2017) (order denying motion to amend is not dispositive); Young v. Jackson, 2014
WL 4272768, at *1 (E.D. Mich. Aug. 29, 2014) (“A denial of a motion to amend is a nondispositive order.”); Hira v. New York Life Insurance Co., at **1-2, 2014 WL 2177799 (E.D.
Tenn. May 23, 2014) (magistrate judge’s order on motion to amend was appropriate and within
his authority because motion to amend is non-dispositive); United States v. Hunter, 2013 WL
5280251, at *1 (S.D. Ohio Oct. 29, 2013) (stating that a magistrate judge’s orders denying
petitioner’s motions to amend a petition pursuant to 28 U.S.C. § 2855 were non-dispositive).
2
The factual background involved in this matter is discussed in detail in the
undersigned’s previous Report and Recommendation (DE 114) and the subsequent memorandum
of the Chief District Judge (DE 134). This memorandum and order therefore discusses only those
facts necessary to address the pending motion.
Momenta Pharmaceuticals, Inc. (“Momenta”) and Sandoz, Inc. (“Sandoz”) (collectively referred
to as “Defendants”) under the Sherman Act, which included allegations of implementation of
unreasonable restraints on trade, monopolization, a conspiracy to monopolize, and attempts to
monopolize. DE 1 at ¶¶ 81-104. The alleged Sherman Act violations centered on the role of
Momenta and Sandoz in producing and distributing enoxaparin, a generic version of the drug
Lovenox®. Id. at ¶¶ 11-13, 19, 26. The complaint was filed on behalf of both Plaintiff and a
nationwide class of persons and entities, pursuant to Fed. R. Civ. P. 23(a) and (b), that purchased
enoxaparin from Defendants or non-party Sanofi-Aventis (“Aventis”), who brought Lovenox®
to market in the United States, beginning on September 21, 2011. Id. at ¶¶ 20, 75.
In response to the initial complaint, Defendants jointly filed a motion to transfer the case
to the District of Massachusetts (DE 58) and a motion to dismiss (DE 65), and Momenta
additionally filed a separate motion to dismiss or transfer for improper venue. DE 62. On
September 29, 2016, a Report and Recommendation was entered in which the undersigned
Magistrate Judge recommended that each motion be denied. DE 114. Defendants subsequently
filed both joint and separate objections to the Report and Recommendation. DE 117, 119. On
March 21, 2017, the District Judge issued a Memorandum Opinion that adopted in part and
declined to adopt in part the Report and Recommendation. DE 134. As a result of the District
Judge’s holding, Plaintiff’s claims for declaratory and injunctive relief were permitted to proceed
but Plaintiff’s claim for damages was dismissed. Id. at 16. This was based on a finding that
Plaintiff did not have standing to seek damages under the so-called “indirect purchaser rule,”
derived from the Supreme Court’s holding in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.
Ct. 2061, 52 L. Ed. 2d 707 (1977), which bars recovery of antitrust damages from Defendants
2
based on Plaintiff’s purchase of enoxaparin from a non-party drug wholesaler, McKesson
Corporation (“McKesson”), and not directly from Defendants. Id. at 8-14. Plaintiff filed the
instant motion for leave to amend thereafter. DE 140.
II. ANALYSIS
Plaintiff states that its proposed amended complaint makes three fundamental changes:
(1) the addition of a new representative plaintiff identified as the American Federation of State,
County and Municipal Employees District Council 37 Health & Security Plan (“DC 37”); (2) the
amendment of the claims in the initial complaint to include claims filed under various state
antitrust and consumer protection laws that permit indirect purchaser standing; and (3) the
addition of substantive allegations pertaining to Defendants’ conspiratorial conduct. DE 141 at
5. 3 The amended complaint asserts claims for damages under the statutes of 30 different states
and the District of Columbia, referred to as the “Indirect Purchaser Jurisdictions,” 4 that allow
indirect purchasers such as NGH, DC 37, and the proposed class of plaintiffs to recover
damages, thus circumventing the federal bar of such claims. Id. Plaintiff asserts that the class it
now seeks to represent is comprised of “those end-payers who could bring an indirect claim
under their own state’s [repealer] laws.” Id.
3
Plaintiff filed a motion to file the amended complaint under seal, which was denied. See
DE 152.
4
Plaintiff identifies these 31 jurisdictions as the following: Alabama, Arizona, Arkansas,
California, the District of Columbia, Florida, Hawaii, Illinois, Iowa, Kansas, Maine,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, South Dakota,
Tennessee, Utah, Vermont, West Virginia, and Wisconsin. DE 141 at 8, n.5.
3
A. Legal Standard
Rule 15 of the Federal Rules of Civil Procedure, which governs the Court’s consideration
of the pending motion, states that leave to amend a pleading should be “freely given when justice
so requires.” Fed. R. Civ. P. 15(a). The reason behind such policy is “to reinforce the principle
that cases ‘should be tried on their merits rather than the technicalities of pleadings.’” Moore v.
City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986) (quoting Tefft v. Seward, 689 F.2d 637, 639
(6th Cir. 1982)). However, the Supreme Court has indicated that while the moving party “ought
to be afforded an opportunity to test [its] claim on the merits,” one or more of the following
conditions may negate this directive: undue delay, bad faith, dilatory motive, repeated failure to
cure deficiencies by previous amendments, undue prejudice to the opposing party, or futility of
the proposed amendment. Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d
222 (1962). Nevertheless, the determination as to whether justice requires permission to amend
the pleading is within the district court’s “sound discretion.” Moore, 790 F.2d at 559 (internal
citations omitted).
Rule 20 is also implicated by Plaintiff’s motion and states that additional plaintiffs may
be joined to a pending action if such plaintiffs “assert any right to relief jointly, severally, or in
the alternative with respect to or arising out of the same transaction, occurrence, or series of
transactions or occurrences,” and “any question of law or fact common to all plaintiffs will arise
in the action.” Fed. R. Civ. P. 20(a)(1)(A), (B). Such permissive joinder of claims is encouraged
as “the impulse is toward entertaining the broadest possible scope of action consistent with
fairness to the parties ....” Thompson v. Janssen Pharm., Inc., No. 15-cv-2558, 2015 WL
4
12844456, at *1 (W.D. Tenn. Dec. 21, 2015) (quoting United Mine Workers of Am. v. Gibbs, 383
U.S. 715, 724 (1966)).
B. Defendants’ Opposition
The crux of Defendants’ opposition focuses on the alleged futility of Plaintiff’s proposed
amendments. The Sixth Circuit has made clear that any analysis of the futility of proposed
amendments is equivalent to the analysis undertaken as part of a Rule 12(b)(6) motion. See Rose
v. Hartford Underwriters Ins. Co., 203 F.3d 417, 421 (6th Cir. 2000) (“[A] proposed amendment
is futile only if it could not withstand a Rule 12(b)(6) motion to dismiss.”). The policy behind the
futility argument is to prevent the expenditure of unnecessary effort and resources by both the
parties and the court. See, e.g., Matlock v. Rose, 731 F.2d 1236, 1240-41 (6th Cir. 1984) (“[T]he
concern for judicial economy, under the circumstances of this case, is particularly advanced
through the futility doctrine.”). However, judicial economy is only served in this case if the
undersigned concludes, and the District Judge concurs, that denial of Plaintiff’s motion to amend
is required, since, as made clear in their responsive brief, Defendants plan to file a motion to
dismiss under Fed. R. Civ. P. 12(b)(6) if the current motion is granted. See DE 148 at 9, n.1.
While the Court does not in any way view Defendants’ candid statements regarding their planned
course of litigation as deliberately coercive, this posture inevitably effectuates such an end.
Other courts in this circuit have commented on the inelegant nature of the futility
argument in such a context:
There is some conceptual difficulty presented when the primary basis for a party’s
opposition to the filing of an amended pleading is that the pleading is futile, i.e.
that it fails to state a claim upon which relief can be granted. A Magistrate Judge
cannot ordinarily rule on a motion to dismiss, see 28 U.S.C. § 636(b)(1)(A), and
denying a motion for leave to amend on grounds that the proposed new claim is
5
legally insufficient is, at least indirectly, a ruling on the merits of that claim ....
Consequently, rather than determining the actual legal sufficiency of the new
claim, in many cases it will suffice to determine if there is a substantial argument
to be made on that question and, if so, to allow the amended pleading to be filed
with the understanding that a motion to dismiss for failure to state a claim may
follow.
Durthaler v. Accounts Receivable Mgmt., Inc., No. 2:10-cv-1068, 2011 WL 5008552, at *4 (S.D.
Ohio Oct. 20, 2011). See also Vanburen v. Ohio Dep’t of Pub. Safety, No. 2:11-cv-1118, 2012
WL 5467526, at *4 (S.D. Ohio Nov. 9, 2012) (holding that due to this “procedural roadblock,”
the better course would be to allow amendment of the complaint with the understanding that a
motion to dismiss may follow filing of the amended complaint); Research Inst. at Nationwide
Children’s Hosp. v. Trellis Bioscience, LLC, No. 2:15-cv-3032, 2017 WL 1487596, at *3 (S.D.
Ohio Apr. 26, 2017) (same). Indeed, “it is usually a sound exercise of discretion to permit the
claim to be pleaded and to allow the merits of the claim to be tested before the District Judge by
way of a motion to dismiss.” Durthaler, 2011 WL 5008552, at *4. See also Greenwald v.
Holstein, No. 2:15-cv-2451, 2016 WL 9344297, at *5 (S.D. Ohio Feb. 3, 2016) (same). 5 With
such guidance in mind, the Court turns to the merits of Defendants’ opposition to the motion.
(1) Personal Jurisdiction
Defendants contend that the addition of DC 37 as a plaintiff to the instant lawsuit would
be futile because the Court lacks personal jurisdiction with respect to any claims that could be
asserted by DC 37. DE 148 at 9. DC 37 is described as a “health and welfare benefit plan located
in New York covering New York public sector employees, retirees, and their families wherever
This approach is also the most conceptually and intellectually consistent with the view
that motions to amend are non-dispositive proceedings.
5
6
they reside, and is New York’s largest public employee union.” DE 141 at 7. Defendants
emphasize, however, that the proposed amended complaint contains no allegation that DC 37
purchased enoxaparin in Tennessee, reimbursed its union members for enoxaparin in Tennessee,
or was otherwise injured in Tennessee. DE 148 at 19. Defendants also rely on the recent decision
in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., in which the
Supreme Court reaffirmed that “there must be an affiliation between the forum and the
underlying controversy, principally” for a court to exercise specific personal jurisdiction over a
defendant. 6 137 S. Ct. 1773, 1780, 198 L. Ed. 2d 395 (2017) (quoting Goodyear Dunlop Tires
Operations, S.A. v. Brown, 564 U.S. 915, 918, 131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011))
(internal quotations omitted).
Plaintiff responds that DC 37’s claims are appropriately before this Court based on the
doctrine of pendent personal jurisdiction, which holds that “where a federal statute authorizes
nationwide service of process, and the federal and state claims ‘derive from a common nucleus
of operative fact’ ... the district court may assert personal jurisdiction over the parties to the
related state law claims even if personal jurisdiction is not otherwise available.” Iron Workers
Local Union No. 17 Ins. Fund v. Philip Morris Inc., 23 F. Supp. 2d 796, 805 (N.D. Ohio 1998)
(quoting Gibbs, 383 U.S. at 725, 86 S. Ct. 1130). The Court has previously determined that
Section 12 of the Clayton Act, the antitrust statute at issue in the instant matter, provides for
6
Plaintiff does not assert that DC 37 is subject to general personal jurisdiction in the
instant matter, as such an exercise involves a court’s ability “to hear any and all claims against
[foreign (sister-state or foreign-country) corporations] when their affiliations with the State are
so ‘continuous and systematic’ as to render them essentially at home in the forum State.’”
Goodyear, 564 U.S. at 919, 131 S. Ct. 2846 (internal citation omitted).
7
nationwide personal jurisdiction in the case of corporate defendants such as Sandoz and
Momenta. See DE 114 at 38-39; DE 134 at 6. The issue, therefore, is whether the Court may
exercise pendent personal jurisdiction with respect to the state law claims brought under the 31
“Indirect Purchaser Jurisdictions” named in the proposed amended complaint. 7
In providing jurisdiction over a cause of action involving enforcement of a federal right,
“Congress granted the district courts power also to consider state law claims provided they had a
nucleus of pertinent facts in common with a substantial federal claim.” Iron Workers, 23 F.
Supp. 2d at 805 (quoting Hargrave v. Oki Nursery, Inc., 646 F.2d 716, 719 (2nd Cir. 1980)).
Here, despite Defendants’ correct observation that the Fifth Amendment limits a court’s ability
to exercise jurisdiction over a non-resident defendant (DE 148 at 18), the Court takes its cue
from the Iron Workers decision in finding that such a “nucleus of pertinent facts in common”
with the pending federal claim exists in this matter:
The Supreme Court has yet to address the scope of due process protection under
the Fifth Amendment in the jurisdictional context. Since the Sixth Circuit also has
yet to address this precise issue, the Court will follow the view that Fifth
Amendment due process is satisfied when the defendant in question resides in the
United States and a statute provides for nationwide service of process .... Because
this Court has personal jurisdiction over the defendants under the [] antitrust
claims, and because the state law claims alleging a conspiracy to sell and market
7
Counsel for Defendants suggested during oral arguments that pendent personal
jurisdiction should not apply in the instant case because neither the Supreme Court nor the Sixth
Circuit has formally adopted the use of such jurisdiction. This contention is unpersuasive in light
of the use of pendent personal jurisdictions in numerous other courts in this circuit, as well as
recognition of this principle by the Sixth Circuit. See, e.g., Beautytuft, Inc. v. Factory Ins. Ass’n,
431 F.2d 1122, 1128 (6th Cir. 1970) (affirming the district court’s exercise of pendent personal
jurisdiction); Capitol Specialty Ins. Corp. v. Splash Dogs, LLC, 801 F. Supp. 2d 657, 668 (S.D.
Ohio 2011) (“The Court has little difficulty applying this concept here.”); Bennett v. Steiner-Liff
Iron & Metal Co., 714 F. Supp. 895, 897 (M.D. Tenn. 1989) (noting that pendent jurisdiction “is
a matter for the discretion of the court”).
8
tobacco derive from a common nucleus of operative facts with the federal claims,
the Court need not reach the question of whether personal jurisdiction with
respect to the state law claims is otherwise available .... Accordingly, the Court
finds that it has jurisdiction over Defendants ... as to both the federal and state law
claims contained in the Amended Complaint.
Iron Workers, 23 F. Supp. 2d at 805-06. There is at least a substantial argument to be made as to
jurisdiction, and the Court therefore declines to find futility on this ground.
(2) Statute of Limitations
(a) Accrual of cause of action
Defendants additionally allege that the proposed amended complaint is futile because any
potential claim asserted by DC 37 is barred by the relevant statute of limitations, which requires
a plaintiff to file its antitrust action “within four years after the cause of action accrued.”
15 U.S.C. § 15b.8 Defendant states that any claims asserted by NGH or DC 37 and all proposed
state law claims began accruing in January of 2012, when non-party Amphastar was permitted to
begin selling enoxaparin, thus rendering time-barred any claims brought after February of 2016.
DE 148 at 22-23. 9 Plaintiff responds by first arguing that such claims did not begin accruing in
January of 2012 because Plaintiff alleges damages “through the present,” and that even if such
claims had begun accruing in January of 2012, the statute of limitations was tolled by both
Defendants’ fraudulent concealment of their actions and the discovery rule, the latter of which
holds that “accrual occurs when the plaintiff discovers that he has been injured and who caused
the injury.” Med. Ctr. at Elizabeth Place v. Premier Health Partners, No. 3:12-cv-26, 2016 WL
8
Defendants also note that most of the state law claims proffered in the amended
complaint are similarly subject to four-year statutes of limitation. DE 148 at 22-23, n.9.
9
Amphastar’s role in the current case is discussed in detail in previous opinions from
both the undersigned and the Chief District Judge. See DE 114, 134.
9
9460026, at *14 (S.D. Ohio Oct. 6, 2016) (quoting In re Copper Antitrust Litig., 436 F.3d 782,
789 (7th Cir. 2006)) (internal quotations omitted).
In an antitrust lawsuit, the cause of action accrues and the accompanying limitation
period commences “each time a defendant commits an act that injures the plaintiff’s business.”
In re Southeastern Milk Antitrust Litig., 555 F. Supp. 2d 934, 946-47 (E.D. Tenn. 2008) (citing
Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S. Ct. 795, 28 L. Ed. 2d 77
(1971)). When a plaintiff alleges a continuing antitrust violation, the cause of action “accrues
each time a plaintiff is injured by an act of the defendants.” Barnosky Oils, Inc. v. Union Oil Co.
of California, 665 F.2d 74, 81 (6th Cir. 1981). However, even in the event of an alleged
continuing violation, “an overt act by the defendant is required to restart the statute of limitations
and the statute runs from the last overt act.” Peck v. Gen. Motors Corp., 894 F.2d 844, 849 (6th
Cir. 1990) (internal citation omitted). Such an overt act involves both “a new and independent
act that is not merely a reaffirmation of a previous act” and that “inflict[s] new and accumulating
injury on the plaintiff.” Southeastern Milk, 555 F. Supp. 2d at 947 (internal citation omitted).
Here, Plaintiff alleges ongoing harm in light of the “supracompetitive prices resulting
from Defendants’ conspiracy.” DE 153 at 13 (citing to DE 143 at ¶¶ 71, 74, 76, 79, and 83). The
fact that Amphastar was finally permitted to begin selling generic enoxaparin in January of 2012
does not necessarily mean that the instant cause of action began accruing at that time. The
proposed amended complaint alleges, among other things, that the wholesale price of generic
enoxaparin did not begin to decline until May of 2012 and subsequently “began plummeting” in
2014, until which time Plaintiff claims to have paid “hundreds of millions of dollars in
overcharges.” DE 143 at ¶¶ 74-75. As noted by the Supreme Court:
10
Antitrust law provides that, in the case of a “continuing violation,” say, a price–
fixing conspiracy that brings about a series of unlawfully high priced sales over a
period of years, “each overt act that is part of the violation and that injures the
plaintiff,” e.g., each sale to the plaintiff, “starts the statutory period running again,
regardless of the plaintiff’s knowledge of the alleged illegality at much earlier
times.”
Klehr v. A.O. Smith Corp., 521 U.S. 179, 189, 117 S. Ct. 1984, 1990, 138 L. Ed. 2d 373 (1997)
(internal citations omitted). Such a price-fixing conspiracy is alleged in the amended complaint,
with overpayments occurring well past Amphastar’s entry into the market in January of 2012.
Indeed, Plaintiff seeks to represent specific individuals and entities that bought Lovenox® or
generic enoxaparin “from September 21, 2011, through the present ....” DE 143 at ¶ 83
(emphasis added). The Court finds that there is substantial merit to Plaintiff’s contention that the
claims in the proposed amended complaint are timely, and such claims are therefore not futile for
purposes of the pending motion to amend.
(b) Fraudulent concealment
With respect to alleged fraudulent concealment, Defendants argue that Plaintiff has failed
to plead fraudulent concealment with the requisite level of particularity under Fed. R. Civ. P.
9(b). 10 To establish fraudulent concealment, a party must plead and prove: (1) wrongful
concealment of their actions by the defendants; (2) failure of the plaintiff to discover the
operative facts that are the basis of his cause of action within the limitations period; and
(3) plaintiff’s due diligence until discovery of the facts. Dayco Corp. v. Goodyear Tire & Rubber
Co., 523 F.2d 389, 394 (6th Cir. 1975). Although Plaintiff’s allegations here of fraudulent
10
This position was advanced by Defendants during oral arguments.
11
concealment are not extensive, the Court declines to hold that the possibility of fraudulent
concealment is futile at this early stage of litigation. See Jones v. TransOhio Sav. Ass’n, 747 F.2d
1037, 1043 (6th Cir. 1984) (“We are unprepared to hold, prior to any discovery on the issue, that
Appellants can prove no set of facts consistent with these allegations sufficient to toll the statute
of limitations. Appellants are entitled to have their cause tried on the merits if they can prove that
the doctrine of fraudulent concealment should be applied to their case.”). Cf. Packaged Ice, 723
F. Supp. 2d at 1018 (“[W]here there is a dispute as to the issue of fraudulent concealment, the
question is one for the jury.”) (quoting Dry Cleaning & Laundry Institute of Detroit, Inc. v.
Flom’s Corp., 841 F. Supp. 212, 216 (E.D. Mich. 1993)).
In numbered paragraphs 2 and 3 of the amended complaint (DE 143), Plaintiff alleges
that Defendants secretly manipulated the generic drug approval process to further their
monopolization scheme. Plaintiff’s allegations of secrecy and concealment by Defendants
continue throughout at least numbered allegations 36 through 55. These same allegations also
describe the fraudulent concealment as the failure of Momenta’s experts to self-disclose conflicts
of interest as required by the USP, the scientific organization that sets (among other things) drug
standards enforced by the FDA. Further, it is entirely plausible that the only required due
diligence in discovery of the facts of Defendants’ conduct is reliance on the self-reporting rules
of the USP, as alleged in Plaintiff’s proposed modified numbered allegation 27 and new
numbered allegation 71 (see DE 159). 11 The Court finds that there is a substantial argument that
An order directing that Plaintiff’s notice of additional allegations (DE 159) be unsealed
is entered separately. See also DE 158 and DE 162. The Court has considered Defendants’
response to the supplemental allegations, and for the reasons herein, does not find that the
arguments made by Defendants compel denial of the motion to amend.
11
12
the amended complaint (with the proposed additional allegations) plausibly, and therefore
sufficiently, alleges affirmative acts of fraudulent concealment. For that reason, the Court
declines to deny the motion to amend as futile. 12
(3) Standing
Defendants argue that Plaintiff’s proposal to represent a “nationwide class” under the
laws of 31 different jurisdictions is futile because NGH and DC 37, who reside for purposes of
this motion in Tennessee and New York, respectively, lack standing to assert claims on behalf of
individuals from the other 29 jurisdictions. DE 148 at 23. Defendants rely on a case from the
Eastern District of Michigan in which the court noted that to establish standing in a class action
suit, the “named plaintiffs who represent a class must allege and show that they personally have
been injured, not that injury has been suffered by other, unidentified members of the class to
which they belong and which they purport to represent.” In re Packaged Ice Antitrust Litig., 779
F. Supp. 2d 642, 657 (E.D. Mich. 2011) (“Packaged Ice II”) (quoting Lewis v. Casey, 518 U.S.
343, 357, 116 S. Ct. 2174, 2183, 135 L. Ed. 2d 606 (1996)). The court ultimately held that the
named plaintiffs in that case, which consisted of indirect purchasers that resided in California,
Florida, Indiana, Michigan, and New York, lacked standing to assert claims pursuant to the laws
of 26 additional states in which none of them resided or suffered the injury in question. Id. at
657-58.
The Court further notes that the tolling argument based on fraudulent concealment may
be academic to the extent that it is simply an alternative to Plaintiff’s contention that the
amended complaint is not untimely because of alleged ongoing antitrust violations, a contention
with which the Court concurs as discussed herein.
12
13
Plaintiff does not dispute the Packaged Ice II holding, instead arguing that the Court’s
analysis should be guided by an earlier decision in which the Sixth Circuit held that once
standing has been established with respect to a named plaintiff, the issue of “whether a plaintiff
will be able to represent the putative class, including absent class members, depends solely on
whether he is able to meet the additional criteria encompassed in Rule 23 of the Federal Rules of
Civil Procedure.” Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 423 (6th Cir. 1998)
(internal citation omitted). 13 Plaintiff contends that Defendants confuse the issue of standing with
the adequacy of class representation and argues that, in accordance with Fallick, the ability of
NGH and DC 37 to seek relief on behalf of the unnamed class members residing in the
remaining 29 state jurisdictions should be determined as part of the class certification process
and not a motion to dismiss (or a motion to amend). DE 153 at 14-15. 14 The Court agrees.
Weighing in favor of Plaintiff’s argument is a case from the Northern District of Ohio, in
which the district court, applying Fallick, discussed standing and class certification as part of a
motion to dismiss in a similar scenario involving indirect purchaser plaintiffs seeking relief
under the consumer protection statutes of twenty different state jurisdictions:
This Court would similarly confuse Article III standing and Federal Civil Rule
23’s requirements if it would, at this stage, dismiss all state-law claims but those
of the jurisdictions in which the named Indirect Purchaser Plaintiffs reside, or to
which they are connected. Both the named Indirect Purchaser Plaintiffs and the
absent members of the putative class identify the same general cause for their
injuries: the alleged price-fixing and customer allocation conspiracy. The named
13
Plaintiff also notes that the district court in Packaged Ice II failed to consider the
Fallick decision in its opinion. DE 153 at 16.
14
As discussed supra, the futility analysis is the equivalent of a Rule 12(b)(6) analysis.
See Rose, 203 F.3d at 421 (6th Cir. 2000) (“[A] proposed amendment is futile only if it could not
withstand a Rule 12(b)(6) motion to dismiss.”).
14
Indirect Purchaser Plaintiffs merely seek relief for themselves under the statutes
of the jurisdictions in which they reside, and seek similar relief for absent class
members under the antitrust and consumer protection statutes of each such class
member's state. Properly understood, neither plaintiff grouping seeks relief for
themselves under the laws of a foreign state jurisdiction. The [amended
complaint] contains a mixture of state-law claims only because the Indirect
Purchaser Plaintiffs bring this suit as a proposed class action.
In re Polyurethane Foam Antitrust Litig., 799 F. Supp. 2d 777, 806 (N.D. Ohio 2011) (emphasis
in original). Similarly, the Court follows the Fallick decision in concluding that the current
standing dispute, which has been raised by Defendants in response to a motion for leave to
amend a complaint, would be more appropriately addressed following a ruling on class
certification. See In re Cast Iron Soil Pipe And Fittings Antitrust Litig., No. 1:14-MD-2508, 2015
WL 5166014, at *19 (E.D. Tenn. June 24, 2015) (“If the Court were to decide the standing issue
at this juncture on the basis that the named plaintiffs do not reside in some of the states under
whose laws they bring claims on behalf of the class, it would not be giving due appreciation to
the complex nature of Article III standing in class actions and the nuances of class
certification.”); see also In re Auto. Parts Antitrust Litig., No. 12-MD-02311, 2013 WL 2456612,
at *11 (E.D. Mich. June 6, 2013) (“[T]he Court finds the better path is to defer this issue until the
class certification stage.”). The Court therefore rejects Defendants’ futility arguments as to
standing for purposes of this motion to amend.
(4) The Purported Class
Defendants assert that Plaintiff’s attempt to “rewrite its class definition” to include
indirect purchasers of enoxaparin from 31 different jurisdictions is both futile and unduly
15
prejudicial. DE 148 at 26-27. 15 Defendants argue that neither NGH nor DC 37 fit within their
proposed class of plaintiffs because: (a) neither entity indirectly purchases enoxaparin “for their
own use and not for resale” as described in the proposed class (DE 143 at ¶¶ 82-83), with NGH
instead reselling enoxaparin through the NGH pharmacy and DC 37 reimbursing its members for
their use of enoxaparin; and (b) the interests of the indirect purchasers, such as NGH, the endpayors, such as DC 37, and the actual consumers of enoxaparin all conflict, a scenario that
Defendants contend “will plunge this case into chaos.” DE 148 at 27-29.
Defendants’ arguments again broach precisely the types of issues that are better suited for
a class certification determination (or at the very least a Rule 12(b)(6) analysis). This point is
perhaps best accentuated by the dearth of case law cited by Defendants involving a district
court’s denial of a motion to amend a complaint based on proposed changes to a class definition.
The Court acknowledges that Defendants have cited one such decision from the Eastern District
of New York, Pierre v. JC Penney Co., in which a motion to amend was denied, to support their
argument that futility has served as a basis for courts to deny motions seeking leave to amend a
complaint to include a redefined class of proposed plaintiffs. DE 148 at 27. The facts in that case,
Defendants also argue (see DE 163) that Plaintiff is definitionally excluded from its
own proposed new class (see DE 159) because the class excludes persons who transacted in
generic enoxaparin or Lovenox® for purposes of resale, and the motion to amend must therefore
be denied as futile. First, the Court agrees with Plaintiff that there is a reasonable construction of
this class definition (see DE 166); namely, that Plaintiff is not excluded from the class, but can
only claim damages for transactions where Plaintiff dispenses to patients at its own cost, which
was previously alleged by Plaintiff (see DE 143 at ¶ 11). The Court further concurs that this is a
semantics issue at best; nevertheless, to address Defendants’ strained interpretation of the class
definition, the Court will permit insertion of the word “only” in Plaintiff’s class exclusion, as
proposed by Plaintiff. See DE 166 at 2, n.1. Finally, for all of the reasons stated herein, the
Court finds that Defendants’ arguments about the propriety of the class do not compel a finding
of futility for purposes of a motion to amend.
15
16
however, are distinguishable from the instant matter, including the significant difference that the
district court had already allowed the plaintiffs in Pierre to amend their complaint on two
occasions. Pierre, No. 03-4782, 2006 WL 407553, at *1 (E.D.N.Y. Feb. 21, 2006). 16 The court
ultimately held that the third amended complaint proposed by the Pierre plaintiffs, which sought
to add new causes of action, utterly failed to state an actionable claim under 42 U.S.C. § 1981,
thus rendering the proposed amendments futile. Id. at *4. Even then, the court denied the motion
without prejudice to allow the plaintiff an opportunity to seek amendment of the proposed class.
Id. at *6-7. This is far from analogous to the facts at issue here.
Defendants claim that the proposed amended complaint’s class definition fails to cover
Plaintiff because it seeks to encompass all individuals and entities residing in the United States
that indirectly purchased enoxaparin “for their own use and not for resale.” DE 143 at ¶¶ 82-83.
Defendants note that Plaintiff identified itself in the original complaint as an entity that buys
enoxaparin and “dispenses the drugs to hospital patients or re-sells them through the NGH
pharmacy.” DE 1 at ¶ 11. However, even if the Court chose to hold Plaintiff to its original
complaint, that initial definition does not definitively—and especially not at this stage of this
proceeding—exclude Plaintiff from seeking damages based on its dispersal of enoxaparin to
patients at NGH, sometimes at its own cost (DE 143 at ¶ 11), separate from its resale of
enoxaparin through its pharmacy. Regardless, such parsing of definitions is not appropriate at
this stage of litigation in light of the liberal pleading standard set forth by Rule 15. See
Broughton v. St. John Health Sys., 246 F. Supp. 2d 764, 775 (E.D. Mich. 2003) (“Granting leave
16
Notably, counsel for the plaintiffs failed to even appear for oral arguments on the
motion for leave to amend the complaint. Pierre, 2006 WL 407553, at *1.
17
freely under Rule 15 ‘reinforce[s] the principle that cases should be tried on their merits rather
than the technicalities of pleadings.’”) (quoting Tefft, 689 F.2d at 639).
Defendants’ argument with respect to DC 37 is similarly unpersuasive. Defendants
employ semantic dexterity to contend that DC 37 does not fit within the proposed class definition
because DC 37, as a health and welfare benefit plan, does not “use” enoxaparin as described in
the proposed class definition. DE 148 at 28. Yet the amended complaint defines DC 37 as an
entity that “indirectly purchased, paid, and reimbursed for Lovenox® and/or generic enoxaparin
intended for consumption by its members, retirees, and their families[.]” DE 143 at ¶ 12. The
proposed class definition with respect to indirect purchasers includes “[a]ll persons and entities
that ... indirectly purchased ... for their own use and not for resale Lovenox® or generic
enoxaparin.” Id. at ¶ 83. This appears to cover an entity that indirectly purchases the subject
drugs and distributes them to its own members.
A class representative must “possess the same interest and suffer the same injury as the
class members.” Reid v. White Motor Corp., 886 F.2d 1462, 1471 (6th Cir. 1989) (quoting East
Texas Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S. Ct. 1891, 1896, 52 L.
Ed. 2d 453 (1977)) (internal quotations omitted). The amended complaint makes clear the
allegation that DC 37, as an indirect purchaser, paid overcharges for Lovenox® and enoxaparin
as a result of Defendants’ monopolization efforts. See DE 143 at ¶¶ 3, 81, 119. The fact that
DC 37 did not physically ingest these drugs, which appears to be the primary component of
Defendants’ argument, does not negate DC 37’s involvement in indirectly purchasing them for
subsequent use by their members. The Court also finds support for its determination in the
decision in In re Nexium Antitrust Litigation, cited in Plaintiff’s brief (DE 153 at 20-21), in
18
which the First Circuit affirmed a district court’s certification of a similarly described class with
named plaintiffs who were “union health and welfare funds that reimburse plan members for
prescription drugs,” which consisted of “[a]ll persons or entities in the United States and its
territories who purchased or paid for some or all of the purchase price for Nexium or its ABrated generic equivalents ... for consumption by themselves, their families, or their members,
employees, insureds, participants or beneficiaries[.]” 777 F.3d 9, 13-14 (1st Cir. 2015).
Defendants’ additional assertion that Plaintiff’s proposed class definition is untenable due
to potential conflicts between putative class members is similarly unavailing. Citing In re
Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004), Defendants seamlessly claim that
DC 37, NGH, and consumers are “fundamentally different groups that, at a minimum, require
separate counsel and representatives to ensure adequate representation.” DE 148 at 28. This,
however, is a shallow interpretation of the Third Circuit’s ruling, which actually rejected the very
argument regarding class member conflict that Defendants in the instant case have proffered:
[W]e reject Appellants’ contention that the interests of the class members were in
conflict in such a way that the District Court abused its discretion in certifying a
single class including several types of injured plaintiffs. As the District Court
found, the named parties, who included consumers and [third party payors], as
well as consumers from the indirect purchaser states, all shared the same goal of
establishing the liability of DuPont, suffered the same injury resulting from the
overpayment for warfarin sodium, and sought essentially the same damages by
way of compensation for overpayment .... Although some courts have created
subclasses of class action plaintiffs where there are conflicts of interest among
class members ... we do not believe that this was required in this case. Appellants
have only asserted, rather than established, an inherent conflict among consumers
and between consumers and [third party payors].
Warfarin Sodium, 391 F.3d at 532-33. The fact that the Third Circuit viewed favorably the
presence of separate counsel for the consumers and third party payors does not amount to a
19
mandate that such separate representation exist in every class action suit. This alone is sufficient
to overcome any assertion by Defendants that Plaintiff’s proposed amendment in this regard is
futile. See id. at 533 (“Appellants have only asserted, rather than established, an inherent conflict
among consumers and between consumers and [third party payors].”).
Defendants further argue that NGH has abandoned its previous position as a direct
purchaser and now seeks to improperly fundamentally change the nature of this case by
shoehorning indirect purchaser claims into the lawsuit, thus causing undue prejudice to
Defendants. DE 148 at 29-31. Defendants cite several cases in support of this position, although
none support denial of a motion to amend in a case involving facts similar to those currently
before the Court. See Town of Lexington v. Pharmacia Corp., No. 12-cv-11645, 2015 WL
1321448, at *4 (D. Mass. Mar. 24, 2015) (denying motion to file amended complaint that
changed theory of case from defendants’ failure to regulate levels of polychlorinated biphenyls
in schools to defendants’ negligence in using contaminated caulk that allegedly caused increased
levels of polychlorinated biphenyls); Acosta-Mestre v. Hilton Int’l of Puerto Rico, Inc., 156 F.3d
49, 51 (1st Cir. 1998) (affirming district court’s denial of motion to amend complaint that was
filed near the close of discovery period, which had been extended on three previous occasions,
and added a new defendant); Davis v. Lenox Hill Hosp., No. 03-cv-3746 DLC, 2004 WL
1926086, at *4 (S.D.N.Y. Aug. 31, 2004) (denying motion to amend that was filed after the close
of class discovery); Bissell Homecare, Inc. v. PRC Indus., Inc., No. 1:13-cv-1182, 2014 WL
3756131, at *16 (W.D. Mich. July 31, 2014) (finding that a motion to amend the complaint that
was not filed until after the opposing party’s motion to dismiss for lack of personal jurisdiction
was pending, and several months “after the basis of the amendment was or should have been
20
known to Plaintiff based on Defendant’s Answer,” should be denied); Nat’l Union Fire Ins. Co.
of Pittsburgh, Pa. v. Cont’l Illinois Corp., 113 F.R.D. 527, 531 (N.D. Ill. 1986) (denying
defendant’s motion to join excess insurers as counterclaim defendants under Fed. R. Civ. P.
13(h)); Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990)
(affirming district court’s denial of motion to amend complaint that sought to change action from
enforcement of an Indian tribe’s sovereign power under federal common law to new federal
claims involving the Racketeer Influenced and Corrupt Organizations Act, criminal depredation
and trespass statutes, and claims brought pursuant to 42 U.S.C. § 1985); Mississippi Ass’n of
Cooperatives v. Farmers Home Admin., 139 F.R.D. 542, 542-43 (D.D.C. 1991) (denying motion
to amend complaint in a case brought under the Freedom of Information Act in which “the bulk
of the documents” sought by the subject plaintiffs had already been provided before plaintiffs
moved to add new parties and claims involving alleged civil rights violations and the
Administrative Procedure Act).
In contrast, the proposed amended complaint in the instant matter continues to assert
antitrust violations committed by Defendants, but now focuses on statutes from 31 jurisdictions
that permit “indirect purchaser” standing, thus purportedly curing the defect contained in the
original complaint that precluded Plaintiff from seeking damages pursuant to Illinois Brick. This
is a far cry from “plung[ing] this case into chaos,” as Defendant claims. DE 148 at 29. Of note,
Plaintiff reports that Defendants “have propounded no affirmative discovery and no expert work
has occurred.” DE 153 at 19. Defendants’ assertion of undue prejudice at this stage of litigation
rings hollow, and the Court therefore finds no compelling reason to deny the motion to amend as
either futile or unduly prejudicial based on the class certification issues.
21
(5) Unjust Enrichment
Defendants finally argue that Plaintiff’s unjust enrichment claim is futile and thus subject
to dismissal solely because the amended complaint does not specify which of the unjust
enrichment laws from the various states are being invoked. DE 148 at 31. Defendants again rely
on the Packaged Ice II decision, in which the district court dismissed the “undifferentiated unjust
enrichment claims” proffered by indirect purchasers because such claims “did not identify the
states under whose laws they brought their claims.” 779 F. Supp. at 667-68 (citing In re
Chocolate Confectionary Antitrust Litig., 602 F. Supp. 2d 538, 587 (M.D. Pa. 2009)).
There is support for Defendants’ argument that Plaintiff’s failure to identify any of the
laws under which its unjust enrichment claims might proceed warrants dismissal of such claims.
See Auto. Parts, 2013 WL 2456612, at *31 (holding that the indirect purchaser plaintiffs’
“failure to identify the unjust enrichment laws of any particular jurisdiction subjects the causes of
action to dismissal”). However, given the liberal standard contained in Fed. R. Civ. P. 15(a), the
Court finds that dismissal is not appropriate based on the alleged futility of the proposed unjust
enrichment claim. The Court finds persuasive the course taken in the Chocolate Confectionary
decision, which is cited favorably in Packaged Ice II, and in which the district court provided the
subject plaintiffs an opportunity to amend their complaint to identify the laws under which their
proposed unjust enrichment claims would proceed. See Chocolate Confectionary, 602 F. Supp.
2d at 587 (M.D. Pa. 2009) (“The ... plaintiffs will be permitted to pursue these [unjust
enrichment] claims in the form of a second amended complaint provided, however, that they
clearly identify the state jurisdictions invoked therein.”). The Court also relies on the district
court’s decision in In re Static Random Access Memory (SRAM) Antitrust Litig., 580 F. Supp. 2d
22
896 (N.D. Cal. 2008), another case cited favorably in both the Packaged Ice II opinion and
Defendants’ brief (DE 148 at 31-32), which similarly permitted the subject indirect purchaser
plaintiffs to cure this defect. See SRAM, 580 F. Supp. 2d at 910 (“[T]he Court dismisses
Plaintiffs’ unjust enrichment claim with leave to amend. If Plaintiffs re-plead this claim, they
must identify which State’s or States’ law they rely upon.”). For all of these reasons, the Court
finds that permitting Plaintiff to modify its proposed amended complaint to identify the unjust
enrichment claims by state, rather than denying amendment at all, is the most consistent with
Fed. R. Civ. P. 15.
III. CONCLUSION
Based on the foregoing, Plaintiff’s motion for leave to file an amended complaint
(DE 140) is GRANTED, with the additional allegations described in Plaintiff’s notice filed on
September 15, 2017 (DE 159), and the additional modification that Plaintiff specify the state
laws under which it asserts its unjust enrichment claims. Plaintiff shall file this amended
complaint within seven (7) days of the date of entry of this Order. Defendant shall have 28 days
after the filing of the amended complaint to answer or otherwise respond. 17
Although the Court previously entered an order (DE 139) allowing Defendants thirty
days from entry of any order granting the motion to amend to file an answer or other response,
that order did not necessarily contemplate that further modification of the amended complaint
might be directed. Additionally, given that the Federal Rules of Civil Procedure generally
compute time in increments of seven (7) days, the time for Defendants to respond is amended to
allow for a 28-day (rather than a 30-day) response. See also Fed. R. Civ. P. 15(a)(3).
17
23
Any party objecting to this memorandum opinion and order may seek review by way of a
“motion for review” in accordance with Local Rule 72.02(b), which must be filed within
fourteen (14) days after service of this memorandum and order.
It is SO ORDERED.
______________________________________
BARBARA D. HOLMES
United States Magistrate Judge
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