In re Lipitor Antitrust Litig.
In re Lipitor Antitrust Litig.
Opinion of the Court
Presently before the Court is Defendants Pfizer Inc., Pfizer Manufacturing Limited, Pfizer Ireland Pharmaceuticals, Warner-Lambert Co., and Warner-Lambert Co. LLC's Motion for Judgment on the Pleadings pursuant Federal Rule of Civil Procedure 12(c), regarding End-Payor Plaintiffs' Second Amended Consolidated Complaint. (ECF No. 755). This case arises from allegations that two drug companies, Pfizer and Ranbaxy, engaged in an anticompetitive scheme that prevented the generic drug of Lipitor from entering the market. Plaintiffs are end-payor purchasers (hereinafter "EPP") who claim to have paid inflated costs for the brand-named drug, Lipitor, due to, among other things, a delayed entry provision included in Pfizer and Ranbaxy's settlement agreement. Unlike the Direct Purchaser Plaintiffs, who assert claims under the Sherman Act, the EPPs base their claims on their respective *401state's antitrust and consumer protection acts.
BACKGROUND
I. Parties
Plaintiffs are a collection of organizations including insurance carriers, Taft-Hartley funds, municipalities, and individuals, who have been indirectly affected by Defendants' alleged schemes. For example, jointly administered Taft-Hartley fund and employee welfare benefit plaintiffs include: A.F.L.-A.G.C. Building Trades Welfare Plan, a self-insured health and welfare benefit plan in Alabama (Id. at ¶ 24); New Mexico United Food and Commercial Workers Union's and Employers' Health and Welfare Trust Fund, a Taft-Hartley fund (Id. at ¶ 26); Bakers Local 433 Health Fund of South Dakota; and Minnesota's Twin Cities Bakery Workers Health and Welfare Fund. (Id. at ¶¶ 28-29).
Health insurance carrier plaintiffs include: Louisiana Health Services Indemnity Company d/b/a Bluecross/Blueshield of Louisiana, a corporation licensed to conduct business in Louisiana that provides health benefits to covered members (Id. at ¶ 27); Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, a governmental health insurance plan that provides health and major medical insurance to active and retired Fort Lauderdale police officers and their dependents. (Id. at ¶ 30).
Municipality plaintiffs include: the Mayor and City Council of Baltimore, Maryland (Id. at ¶ 25), and the City of Providence, Rhode Island, both municipal corporations with self-insured health and welfare benefit plans. (Id. at ¶ 31).
Finally, the six individual plaintiffs are Edward Czarnecki, a Wisconsin resident; Emilie Heinle, a North Dakota resident; Andrew Livenzey from Massachusetts; Edward Ellenson from Hawaii; Jean Ellyne Dougan, an Arkansas resident; and Nancy Billington of Montana (Id. at ¶¶ 32-37).
All plaintiffs claim to have purchased or provided partial payment for some of, or the entire price of, Lipitor or its generic version. (Id. at ¶¶ 24-46). Plaintiffs contend that they were all injured as a result of Defendants' anticompetitive schemes, since they paid a premium for the medication. (Id. ).
Defendants in this case are Pfizer and Ranbaxy. (Id. at ¶¶ 38-46). Pfizer Inc., Pfizer Ireland Pharmaceuticals, and Warner-Lambert Company are collectively referred to as Pfizer. (Id. at ¶¶ 38-42). Pfizer Inc. is the parent company of Pfizer Ireland Pharmaceuticals, an Irish unlimited liability company that is a wholly owned, indirect subsidiary of Pfizer Inc. (Id. at ¶¶ 38-39). Pfizer acquired Warner-Lambert Company in 2000. (Id. at ¶ 40). According to the Complaint, reference to Warner-Lambert also includes, but is not limited to, Warner-Lambert employees Bruce D. Roth, Joan Thierstein, and Jerry F. Janssen. (Id. at ¶ 41). In addition, the Complaint names Defendants Ranbaxy Laboratories Limited, Ranbaxy Inc., and Ranbaxy Pharmaceuticals Inc. collectively as Ranbaxy. (Id. at ¶¶ 43-46). Ranbaxy Laboratories Limited is an Indian corporation that wholly owns Ranbaxy Inc., which has a place of business in New Jersey. (Id. at ¶¶ 43-49).
II. Facts
In the Complaint, EPPs identify several anticompetitive schemes that purportedly give rise to the present lawsuit. Specifically, Plaintiffs allege that Defendants fraudulently obtained a second, duplicative, patent from the United States Patent and Trademark Office (PTO); listed that patent in the book of Approved Drug Products with Therapeutic Equivalence Evaluations *402(the "Orange Book"); engaged in sham litigation relating to the second patent; filed a sham citizen petition with the FDA; entered into an unlawful reverse payment agreement with Ranbaxy; and manipulated the statutorily created 180 day first-to-file period
1. Walker Process and Fraudulent Orange Book Allegations
EPPs first present a Walker Process
According to the Complaint, the compounds in the '893 Patent were not limited to any particular stereochemistry; instead, the structure included four different stereoisomers possibilities: R-trans, S-trans, R-cis, and S-cis isomers. (Id. at ¶ 103). Even though the '893 Patent covered the multiple possibilities, Warner-Lambert focused on developing the R-trans enantiomer of the compound, in calcium salt form, which would eventually be sold as Lipitor. (Id. at ¶¶ 106-07). Warner-Lambert achieved patent extensions and regulatory exclusivities that postponed the patent's expiration from May 30, 2006 to March 24, 2010. (Id. at ¶ 104).
On July 21, 1989, Warner-Lambert applied for a patent to specifically protect the R-trans enantiomer, which later became the '995 Enantiomer Patent. (Id. at ¶ 126). According to the Complaint, Warner-Lambert had to prove the R-trans enantiomer's activity had a "surprising" or "unexpected" characteristic to procure a subsequent patent; put differently, they had to justify why the proposed patent was not already protected by the by the '893 Patent. (Id. at ¶ 109). Plaintiffs allege Warner-Lambert tasked its senior management with finding "something that could be mischaracterized as surprising." (Id. at ¶¶ 110-14). Warner-Lambert included a table in the '995 Patent application to demonstrate the surprising results that the R-trans enantiomer was one hundred times more active than the S-trans enantiomer and ten times more active than the racemic mixture. (Id. at ¶ 128). However, Plaintiffs claim that one skilled in the art would know "one enantiomer is the 'active' isomer, while the other is 'inactive,' and thus the active enantiomer is about twice as active as the racemic mixture." (Id. at ¶ 121). Further, the Complaint states Warner-Lambert would have known, through testing and experimentation, that the R enantiomer was likely to be the active isomer. (Id. at ¶ 122). Plaintiffs allege that Warner-Lambert failed to calculate the average result from its various tests and, instead, "cherry-picked *403from among the results [of the tests] in order to generate a table that supported its claim of 'surprising activity.' " (Id. at ¶ 135). As a result, the data Warner-Lambert provided in its application was allegedly both false and misleading, since the R-trans enantiomer is approximately twice as active as the racemic mixture, not ten times. (Id. at ¶ 133).
The PTO originally rejected the '995 Patent application, since the invention was already covered and anticipated by the claims in the previously procured '893 Patent. (Id. at ¶ 153). Under patent law, a patent application can be rejected "if the differences between the subject matters sought to be patented and the prior art [are] such that the subject matter as a whole would have been obvious at the time of the invention was made to a person having ordinary skill in the art to which said subject matter pertains." (Id. at ¶ 154). In response to the PTO's rejection, Warner-Lambert then requested to amend its application to provide a declaration by Dr. Bruce Roth, who participated in developing Lipitor, in support of the newfound information regarding the R-trans enantiomer's activity. (Id. at ¶¶ 159-60). In his declaration, Roth asserted that the available data "shows the activity of [the R-trans enantiomer] is surprising and unexpected because if the [S-trans enantiomer] is accepted as inactive, the activity of [the R-trans enantiomer] would be expected to be only twice that of the racemic mixture" and not the ten times that occurred. (Id. at ¶¶ 165-66). Warner-Lambert argued the surprising nature of this information overcomes the obvious inclusion under the '893 Patent and, thus, warrants the issuance of the '995 Patent. (Id. at ¶ 161). Plaintiffs contend the data presented to the PTO, including the Roth Declaration were knowingly false and misleading and used to fraudulently convince the PTO to procure the new patent. (Id. at ¶¶ 133, 165, 170-74). Persuaded by the data submitted, the PTO eventually issued the '995 Enantiomer Patent on December 28, 1993. (Id. at ¶ 182).
As a result of its two approved patents, Warner-Lambert submitted a new drug application to the FDA for Lipitor, which was approved on December 17, 1996. (Id. at ¶ 201). Warner-Lambert then listed both the '893 Original Lipitor Patent and the '995 Enantiomer Patent in the Orange Book, which expired on May 30, 2006 and December 28, 2010, respectively. (Id. at ¶¶ 203-04). Thereafter, it applied for an extension of the '893 Original Lipitor Patent to account for the difference in time between the issuance of the patent covering the active ingredient in the new drug and the FDA's approval of that drug. (Id. at ¶¶ 206-08). As a result, the PTO postponed '893 Patent's expiration until March 24, 2010. (Id. at ¶ 213).
2. Sham Litigation and Citizen Petition Allegations
Plaintiffs next contend Defendants engaged in sham litigation against Ranbaxy. On August 19, 2002, Ranbaxy filed an Abbreviated New Drug Application (ANDA) to sell a generic version of Lipitor. (Id. at ¶¶ 221-22). While Ranbaxy verified their generic version would not violate any of the Lipitor patents, Pfizer, who had acquired Warner-Lambert by this time, filed a patent infringement lawsuit against Ranbaxy on February 21, 2003 for allegedly infringing on the '893 and '995 Patents. (Id. at ¶¶ 223-24). In the pre-trial proceedings, Pfizer attempted to amend its complaint to include process patent infringement claims; however, their motion was denied since these patents could not be listed in the Orange Book and, therefore, *404were not a basis for the suit.
Plaintiffs contend since the '995 Patent was fraudulently obtained, the patent infringement litigation against Ranbaxy was a baseless sham, that was intended to interfere with the introduction of Ranbaxy's generic drug into the market. (Id. at ¶ 230).
Plaintiffs also allege that Pfizer filed a baseless citizen petition with the FDA, in further attempt to delay the entry of generic versions of Lipitor. (Id. at ¶ 235). According to the Complaint, Ranbaxy's ANDA could have received FDA approval in August 2005, thereby creating generic competition. (Id. at ¶¶ 236-38). However, a month beforehand, July 2005, Pfizer sent a letter to the FDA, in an attempt to further delay the entry to generic versions of Lipitor. (Id. at ¶ 239). Four months later, November 7, 2005, Pfizer re-filed this letter, as a citizen petition, alleging that the generic brand's use of "amorphous atorvastatincalcium" could be "susceptible to higher levels of impurities" than Pfizer's crystalline version; as such, Pfizer averred that Ranbaxy's application needed to be carefully scrutinized and reviewed with considerable skepticism. (Id. at ¶¶ 241-42). However, Plaintiffs claim Pfizer had also used amorphous versions in their testing and development of Lipitor and, therefore, knew that it could be, and had been, safely made. (Id. at ¶¶ 242-46). As such these purported safety concerns were unfounded. (Id. ). Further, Pfizer knew from its earlier litigation with Ranbaxy that Ranbaxy's generic drug was amorphous, rather than crystalline. (Id. ). According to Plaintiffs, the FDA's previous decisions expressly indicated that special or additional scrutiny would not be applied when reviewing an ANDA, when a different form was used; instead, the stability of a drug, not its substance, would be the key focus in measuring the drug's quality. (Id. at ¶ 251). As such, given Pfizer's knowledge that amorphous versions posed no safety risks, as well as the FDA's approach to treating ANDA claims, Plaintiffs claim the petition was a baseless attempt to delay generic competition. (Id. at ¶¶ 261-66).
3. Reverse Settlement Allegations
Finally, Plaintiffs challenge the validity of a reverse settlement agreement made between Pfizer and Ranbaxy, after Pfizer attempted to obtain reissuance of the '995 Patent. (Id. at ¶ 323). To correct the invalidation of the '995 Patent, Pfizer applied for its reissuance in 2007 and conceded that the data included in its original application, concerning the R-trans enantiomer's effectiveness, contained significant errors. (Id. at ¶¶ 274-76). Therefore, it would no longer rely on this information in its reissuance proceedings. (Id. at ¶ 283). Without this information, Ranbaxy filed a protest with *405the PTO, contending that the content of the '995 Patent was "anticipated, obvious, [and] constituted double-patenting." (Id. at ¶¶ 279, 284). As a result, the PTO issued a non-final rejection of Pfizer's reissuance application, since it "had before it no scientific basis to conclude the enantiomer claims were anything other than obvious over the '893 Patent." (Id. at ¶ 285, 293). Given Pfizer's failure to receive approval for the '995 Patent, there was a strong possibility that generic brand drugs would enter the market upon expiration of the '893 Patent in March 2010. (Id. at ¶¶ 287-88, 294).
While Pfizer struggled to obtain a reissuance of the '995 Patent in 2008, it was later discovered that Ranbaxy may have infringed on another patented drug, Accupril, and, therefore, Pfizer had a potential patent infringement claim worth millions of dollars in damages. (Id. at ¶¶ 311-12). According to the Complaint, upon learning of this information "Pfizer needed a stage to disguise a reverse payment to Ranbaxy in order to buy Ranbaxy's agreement to delay launching of its generic version of Lipitor. If there were a pending court case against Ranbaxy involving Lipitor, Pfizer could settle with Ranbaxy through a reverse payment and (unlawfully) extend its Lipitor market exclusivity"; however, when Pfizer learned of Ranbaxy's potential Accupril infringement, there was no active litigation pending. (Id. at ¶ 313).
Irrespective of its reasoning, it is undisputed that Pfizer filed a complaint against Ranbaxy in March 2008 for infringing on Process Patents of the '740 and '511 Patents. (Id at ¶¶ 314-315). However, as mentioned above, a court had already ruled that these patents were not exclusionary and, therefore, provided no basis for relief. (Id. at ¶¶ 308, 316). This being said, less than three months after the suit was filed, the parties entered into a reverse settlement agreement, whereby Ranbaxy would refrain from manufacturing or selling generic Lipitor until November 30, 2011. (Id. at ¶¶ 315, 323-26). According to the Complaint, Pfizer and Ranbaxy disguised this agreement as a way to settle the process patent litigation when, in actuality, it was a "pretext for its true anticompetitive goals and accomplishments." (Id. at ¶¶ 323-24). Under the terms of the agreement, Ranbaxy paid Pfizer $1 million and Pfizer dismissed its multi-million dollar patent infringement claims based on Ranbaxy's generic version of Accupril. (Id. at ¶ 327). In addition, Ranbaxy was permitted the right to market its generic version of Lipitor in some foreign markets. (Id. ) Further, Ranbaxy did not waive its market exclusivity right to be the first to file an ANDA for Lipitor ; thereby preventing other generic competition from entering the market until after November 30, 2011. (Id. at ¶¶ 363-65). In return, Ranbaxy also ceased challenging Pfizer's reissuance of the '995 Patent. (Id. at ¶ 366). As a result, the PTO eventually granted reissuance of the '995 Patent, relying in part on Lipitor's commercial success to prove the patent could not have been obvious and, therefore, was not covered by the '893 Original Lipitor Patent. (Id. at ¶ 414).
Plaintiffs contend the accumulation of Pfizer's conduct demonstrates an anticompetitive scheme to prevent generic brands from interfering with Lipitor's market share and, as a result, Pfizer's profitability. (Id. at ¶ 446). Had Pfizer not fraudulently procured the '995 Patent, Plaintiffs claim there would have been no basis for its reissuance. (Id. ). In addition, Ranbaxy only stopped protesting the '995 patent after it entered a reverse settlement agreement with Pfizer. (Id. ). If not for these circumstances, the EPPs contend that generic versions of Lipitor would have been able to enter into the market much earlier. (Id. at ¶ 447).
*406Plaintiffs bring this case on behalf of themselves and all End-Payor class members to recover damages, calculated by the increased price they had to pay due to Pfizer's conduct in delaying the market entry of generic Lipitor. (Id. at ¶ 486). The class contains individuals or entities who purchased or paid for Lipitor and/or its generic version for consumption by themselves, their families, or members, employees, insureds, participants, or beneficiaries in Arizona, California, Florida, Hawaii, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, West Virginia, Wisconsin, and the District of Columbia. (Id. at ¶ 487). The Class sues for overage damages occurred from March 24, 2010 until the effects of Defendants' conduct cease. (Id. ).
The Complaint outlines four different claims for relief in the class action. The first is for monopolization under state law against Pfizer. (Id. at ¶ 497). The conduct giving rise to this claim is the fraudulent obtainment of the '995 Patent, its listing in the Orange Book, its sham litigation and citizen petition, the reissuance of the patent, and the unlawful reverse settlement agreement with Ranbaxy. (Id. at ¶ 500). The same factual allegations and theories asserted in Count I are again alleged in Count II against all Defendants. (Id. at ¶ 511). In Count III, Plaintiffs allege conspiracy to restrain of trade against all Defendants. (Id. at ¶¶ 527, 530). Finally, Plaintiffs allege a claim unfair or deceptive trade practices against all Defendants. (Id. at ¶ 546). Plaintiffs contend that as a result of Pfizer's anticompetitive acts or practices, Plaintiffs and the Class were deprived of the opportunity to obtain a less expensive, generic equivalent to Lipitor. (Id. at ¶ 547). As such, Plaintiffs seek compensation from Defendants in the form of damages.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(c) permits a party to dismiss a suit "[a]fter the pleadings are closed ... but early enough not to delay trial." Fed. R. Civ. P. 12(c). "A Rule 12(c) motion for judgment on the pleadings is treated like a motion to dismiss under Rule 12(b)(6)." Syncsort Inc. v. Sequential Software, Inc. ,
ANALYSIS
Defendants presently challenge EPPs' Complaint on four separate bases. First, Defendants contend that EPPs' Complaint should be dismissed in its entirety based on federal preemption principles. Second, Defendants argue that certain states require pre-filing notices that Plaintiffs failed to comply with and proscribe class actions under their respective consumer protection statutes. Third, Defendants aver that EPPs' state antitrust claims fail because they lack standing and fail to plead a concerted act. Finally, Defendants *407challenge EPPs' consumer protection claims for failing to comply with various state consumer protection law requirements. The Court addresses each challenge in turn.
I. Federal Law Preemption
Defendants first seek dismissal of all of Plaintiffs' state law claims, since their state law claims are preempted by federal law. Plaintiffs respond, contending that because their claims are based on antitrust and consumer fraud theories, preemption is inapplicable.
"Federal patent law preempts state law claims to the extent that state law 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress' in enacting the patent laws." Wawryzynski v. H.J. Heinz Co. ,
Defendants present three theories supporting their position that Plaintiffs' state law claims are preempted. First, because Plaintiffs' claims are based on the purportedly fraudulent procurement and enforcement of the '995 patent, they must demonstrate that the patent is invalid or unenforceable, which is preempted under federal patent law. Second, to the extent that Plaintiffs' antitrust claims are based on the reverse settlement agreement, they are preempted since they must demonstrate the validity of the generic patents, which necessarily implicates patent law. Finally, Defendants contend that Plaintiffs' "sham" citizen petition claim is preempted, since it must demonstrate the validity of the generic patents, which, again, implicates patent law.
1. Fraudulent Patent Procurement and Enforcement
Turning first to Defendants' federal patent preemption argument, Defendants argue that Plaintiffs' state law claims require them to plead and prove that the patent is invalid or unenforceable under federal patent law. According to Defendants, the allegations in Plaintiffs' complaint that trigger federal patent law include: (1) the fraudulent procurement of the '995 patent (2) the fraudulent patent listing of the '995 Patent in the FDA's Orange Book; and (3) the "sham" litigation against Ranbaxy, seeking to enforce the '995 Patent, in addition to its two *408process patents. Defendants, citing little or no supporting case law, contend that these allegations require first knowing whether the patent at issue is invalid or unenforceable. If the patent was valid, then the obtainment and enforcement of same would be lawful. As such, Defendants argue that because federal patent law is necessary to support these theories, they are preempted by federal law.
However, Defendants' arguments are in direct contravention with the Third Circuit's recent holding in Lipitor ,
Moreover, federal patent law does not preempt a state law claim in which a patent law issue is implicated if "the state law cause of action [i.] includes additional elements not found in the federal patent law cause of action and [ii.] is not an impermissible attempt to offer patent-like protection to subject matter addressed by federal law." Dow Chem. Co. v. Exxon Corp. ,
Finding patent preemption inapplicable, the Federal Circuit explained that there are three objectives for patent law: (1) to provide an incentive to invent; (2) to promote the full disclosure of inventions; and (3) to ensure "that which is in the public domain cannot be removed therefrom by action of the states."
Here, as in Dow , the EPPs state antitrust and consumer protection claims require proof of elements not found in a patent cause of action. As discussed earlier, the purpose for patent protection is to provide an incentive to invent, to promote the full disclosure of inventions and to ensure "that which is in the public domain cannot be removed therefrom by action of the states." Antitrust and consumer protection law protect consumers from being overcharged for products, which is a wholly different goal than patent law.
This is also consistent with the Court's decision in In re Thalomid and Revlimid Antitrust Litig. , No. 14-6997,
Here, similar to Thalomid , the EPPs allege that the patents were obtained through fraud on the PTO, Pfizer improperly listed the '995 patent in the Orange Book, the generic drug was delayed entry because of sham litigation, a baseless Citizens Petition was filed, and a reverse payment settlement agreement was negotiated to prolong a monopoly. As such, because EPPs claims are predicated on claims wholly separate from the federal patent law, they are not preempted.
2. Antitrust Allegations
Defendants next argue that because Plaintiffs' antitrust claims arise from the reverse settlement agreement, it implicates federal patent law and, therefore, must be preempted. Defendants rely principally on the Third Circuit's decision in In re Wellbutrin XL Antitrust Litig. ,
In Wellbutrin the defendant obtained FDA approval for bupropion hydrochloride, which was marketed as "Wellbutrin."
The Court rejects Defendants' expansive reading of Wellbutrin to hold that antitrust claims, based on reverse settlement agreements, are preempted by federal patent law. Wellbutrin simply sets forth considerations to be made when presented with an issue of antitrust standing, based on reverse settlement agreements. At no point in its decision did the Third Circuit mention that such an issue would trigger federal patent preemption. See Wellbutrin ,
3. Federal Patent Law Preemption of the Citizen Petition
Lastly, Defendants argue that Plaintiffs' claim that Defendants filed sham citizen petition with the FDA is also preempted. By way of background, a citizen petition is a written request made by an interested person to the FDA, asking the agency to "issue, amend, or revoke a regulation or order, or take or refrain from taking any other forms of administrative action."
This argument fails for two reasons. First, Lipitor expressly held that federal patent law is not implicated by a citizen petition claim, "whether [an FDA] petition was a sham is an issue independent of patent law." Lipitor ,
Alternatively, Defendants argue that the federal law governing the FDA preempts Plaintiffs' sham citizen petition claim. Here, Defendants rely primarily on the Supreme Court's decision in Buckman Co. v. Plaintiffs' Legal Committee ,
However, courts that have been presented with this issue have narrowed the scope of Buckman's holding, concluding that preemption is inapplicable where the plaintiffs assert antitrust and consumer protection claims, in addition to a fraud-on-the-FDA claim. See In re DDAVP Indirect Purchaser Antitrust Litig. ,
To sum up, the Court declines to dismiss any of Plaintiff's claims based on preemption principles.
II. Notice Challenges and Permissibility of Pursuing Class Claims
Defendants next make several challenges to EPPs' state antitrust and consumer *412protection claims. First, Defendants contend that EPPs failed to satisfy the pre-filing notice requirements mandated in states that require the same. Second, Defendants argue that Illinois, Montana, Tennessee, and Utah explicitly prohibit the use of class actions to enforce the rights created therein. The Court discusses each challenge in turn.
1. Pre-Filing Notice Requirements
Because the Arizona, Hawaii, Nevada, and Utah antitrust laws have notice requirements, Defendants contend that EPPs' antitrust claims in these states must be dismissed since EPPs failed to give proper notice.
Hawaii's antitrust statutes proscribes "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of or any trade or commerce."
Like Hawaii, the Utah Antitrust Act requires notice be made to its attorney general. Specifically, the Act states, "[t]he attorney general shall be notified by the plaintiff about the filing of any class action involving antitrust violations that includes plaintiffs from this state. The attorney general shall receive a copy of each filing from each plaintiff. The attorney general may, in his or her discretion, intervene or file amicus briefs in the case, and may be heard on the question of the fairness or appropriateness of any proposed settlement agreement."
Similarly, both Arizona and Nevada's antitrust statutes require the putative class plaintiff to provide notice to their respective attorney generals. Specifically, the Arizona Uniform Antitrust Act states that "[a] person filing a complaint, counterclaim or answer for any violation of the provisions of this article shall simultaneously with the filing of the pleading in *413the superior court or, in the case of pendent state law claims in the federal court, serve a copy of the complaint, counterclaim or answer on the attorney general. Proof of service on the attorney general shall be filed with the court."
Finally, both the West Virginia and Massachusetts consumer protection statutes include pre-filing notice provisions. Specifically, the West Virginia Consumer Credit Protection Act provides consumers who are victims to unfair, deceptive, and fraudulent business practices with a cause of action. W. Va. Code § 46A-6-106(a). However, prior to initiating suit, a consumer must first inform the seller, in writing, of the alleged violation. W. Va. Code § 46A-6-106(b). Courts have interpreted this statute as a "mandatory prerequisite[ ]" to commencing a consumer protection claim under the Act. Harrison v. Porsche Cars N. Am., Inc. , No. 15-0381,
2. State Consumer Protection Class Bars
Defendants next contend that EPPs' Montana, Tennessee, and Utah
Here, EPPs do not contest the meaning of the above-mentioned statutory provisions; instead, relying on *414Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co. ,
3. The Shady Grove Decision
To properly analyze Defendants' motion, the Court must determine whether the discussed notice requirements and class action bars are procedural or substantive. It is blackletter law that that federal courts sitting in diversity jurisdiction must utilize federal procedural law and state substantive law. See Erie R.R. v. Tompkins ,
In interpreting Erie , the Supreme Court explained that a federal law will only be procedural and, thus, applicable, if the case's outcome would be the same in both federal and state courts. Guaranty Trust Co. v. York ,
Most recently, the Supreme Court was presented with a similar issue that is before the Court. In Shady Grove , the Supreme Court was tasked with determining whether Federal Rule of Civil Procedure 23 or a New York law controlled if a class action may proceed in federal court.
However, in his concurring opinion, Justice Stevens criticized the plurality's categorical approach, at step two, that any federal rule that "really regulates procedure" is a sufficient basis for preempting a conflicting state law.
Although the Third Circuit has yet to decide whether Justice Stevens' concurrence controls, the Court is persuaded by the majority of district and circuit courts that have done so.
4. Application
Against this legal backdrop, the Court finds that Rule 23 is not "sufficiently broad" to cover the state statutory notice provisions. First, the conflicting rules do not attempt to answer the same question or subject. See Shady Grove ,
For these same reasons, the Court also finds that the class action bars incorporated in the Montana, Tennessee, and Utah consumer protection laws are not preempted by Rule 23. Here, EPPs deviate from the majority of district and circuits, which have followed Justice Steven's concurrence in Shady Grove , and endorse the approach taken in Lisk v. Lumber One Wood Preserving, LLC ,
*417Fejzulai v. Sam's West, Inc. ,
In sum, the Court finds that the four notice provisions under Arizona, Hawaii, Nevada, and Utah antitrust laws are applicable here and Plaintiffs failed to comply. Likewise, the notice provisions in Massachusetts and West Virginia's consumer protection laws control. As such, EPPs' claims under these six statutes are dismissed without prejudice; Plaintiffs may file an amended complaint that specifically pleads compliance with each state's notice requirement. Similarly, EPPs' class claims under Montana, Tennessee, and Utah's consumer protection statutes are dismissed without prejudice; in these three states, Plaintiffs may amend their complaint to include only claims brought on behalf of Montana, Tennessee, and Utah plaintiffs in their individual capacities.
III. State Antitrust Challenges
Defendants next seek dismissal of EPP's Illinois, Rhode Island, and Utah state antitrust claims, since these states lack standing under Illinois Brick Co. v. Illinois ,
1. Illinois Antitrust Act
Relying on Illinois Brick , Defendants contend that EPPs' Illinois antitrust claim fails, since they lack standing. The plain language of the Illinois Antitrust Act ("IAA") states "no person shall be authorized to maintain a class action in any court of this State for indirect purchasers asserting claims under this Act, with the sole exception of this State's Attorney General, who may maintain an action parens patriae." 740 Ill. Comp. Stat. § 10/7(2). EPPs respond, contending that under Shady Grove , the Court should treat the Illinois Antitrust Act as a procedural law and, therefore, follow Rule 23.
District courts are divided on whether the Illinois Antitrust Act precludes indirect purchasers from filing class actions. However, a majority of courts have held that the Act is distinguishable from the New York law in Shady Grove and that it prohibits indirect purchaser class actions. See, e.g., In re Opana ER Antitrust Litig. ,
Several district courts have taken a less restrictive interpretation of the Illinois Antitrust Act and have allowed indirect purchasers to bring class actions under the Act. See, e.g., In re Broiler Chicken Antitrust Litig. ,
Although district courts have taken different approaches in interpreting the Illinois Antitrust Act, the Court finds the rationale of Digital Music persuasive. The language of the Act presents a substantive conflict with Rule 23 ; as such, since the Illinois Antitrust Act controls, the Court finds that EPPs lack standing to assert claims under the Act and, therefore, dismisses this claim with prejudice.
2. Rhode Island Antitrust Act
Defendants next move for dismissal of EPPs Rhode Island antitrust claims since they, too, lack standing to bring an antitrust claim under Illinois Brick . Since the Supreme Court's decision, multiple states have enacted Illinois Brick repealer statutes that allow indirect purchasers to recover under their state law. On July 15, 2013, Rhode Island passed such a repealer, which states "[t]he fact that a person or public body has not dealt directly with the defendant shall not bar or otherwise limit recovery." R.I. Gen. Laws § 6-36-7(d). As such, Plaintiffs argue the statute should be applied retroactively and, even if it cannot be applied retroactively, they nevertheless fall within the repealer's protection since Plaintiffs suffered damages past July 15, 2013.
Here, Defendants argue that the activity alleged in this claim predated July 15, 2013, since the alleged anticompetitive conduct that prevented the generic brands from entering the market occurred prior to November 30, 2011. (SAC ¶¶ 23, 469, 512, 523, 535). As such, since the conduct giving rise to the present cause of action occurred prior to the passing of Rhode Island's repealer, Defendants contend it does not apply and, under Illinois Brick , *419must be dismissed. In addition, Defendants aver that the statute cannot be applied retroactively.
Under Rhode Island law, it is well established that statutes cannot be applied retroactively, unless clearly stated. The Rhode Island Supreme Court has held that, "statutes and their amendments are construed to operate prospectively unless a specific contrary intent is expressed by the Legislature, or retroactivity must necessarily be inferred from the language employed by the law makers." State v. Jennings ,
3. Utah Antitrust Act
Lastly, in addition to failing to provide notice, Defendants contend that EPPs' Utah antitrust claims fail, since none of the named Plaintiffs are Utah residents, as required under Utah law. (SAC ¶ 487). As such, Defendants contend that EPPs lack standing to assert claims under the Utah Antitrust Act. See Niaspan ,
Under the Utah Antitrust Act, "[a] person who is a citizen of this state or a resident of this state" can bring a claim.
In sum, EPPs' antitrust claims under Illinois and Rhode Island are dismissed and there is no right to amend due to futility. Under Utah, the claim is dismissed without prejudice; but Plaintiff may amend to name such plaintiff within thirty days.
*4204. States Requiring Concerted Action
Defendants next seek dismissal of Count I of EPPs' Kansas, New York, and Tennessee antitrust claims, which asserts a single claim of monopolization against Pfizer, based on fraudulently obtaining and listing the '995 Patent, obtaining reissuance of that patent, filing serial sham litigation and a sham citizen petition, and entering into a reverse settlement agreement with Ranbaxy. (SAC ¶ 504). Specifically, Defendants argue that because Kansas, New York, and Tennessee require unlawful behavior between two or more individuals, Count I must be dismissed since it alleges unilateral conduct by Pfizer.
It is clear from the Complaint that the allegations concerning the obtaining, listing, and reissuance of the '995 Patent, in addition to the sham litigation and sham citizen petition, are all unilateral actions by Pfizer (SAC ¶ 500). As such, since these allegations describe unilateral conduct, Defendants contend that Count I fails in Kansas, New York and Tennessee. See
The Kansas Monopolies and Unfair Trade Act proscribes "all arrangements, contracts, agreements, trusts, or combinations between persons made with a view or which tend to prevent full and free competition" and those "designed or which tend to advance, reduce or control the price or the cost to the producer or to the consumer of any such products or articles."
Like Kansas, the New York Donnelly Act defines an antitrust violation as "every contract, agreement, arrangement, or combination whereby a monopoly in the conduct of any business, trade, or commerce ... may be established or maintained, or whereby [c]competition or the free exercise of any activity in the conduct of any business, trade, or commerce ... is or may be restrained."
Finally, like Kansas and New York, the Tennessee Trade Practices Act proscribes "[a]ll arrangements, contracts, agreements, trusts, or combinations between persons or corporations made with a view to lessen, or which tend to lessen, full and free competition ... and all arrangements, *421contracts, agreements, trusts, or combinations between persons or corporations designed, or which tend, to advance, reduce, or control the price or the cost to the producer or the consumer."
As established above, the case law as well as the plain language of the Kansas, New York, and Tennessee antitrust statutes require concerted action between two parties. As such, allegations relating to Pfizer's unilateral conduct fails to state a claim under these statutes. The Court is not persuaded by Plaintiffs' argument that all alleged conduct falls within a single cause of action. Therefore, Defendants' motion as it relates to Kansas, New York, and Tennessee are granted in part and denied in part. To the extent Count I is based on Pfizer fraudulently obtaining the '995 Patent, listing that patent in the Orange Book, obtaining reissuance of the '995 Patent, filing a sham citizen petition, and engaging in sham litigation, these claims are dismissed, since the conduct is unilateral. However, the Court denies Defendants' motion to the extent that they seek dismissal of Count I based on the reverse settlement agreement with Ranbaxy.
IV. State Law Consumer Protection Claims
Defendants next challenge the sufficiency of EPPs' state consumer protection claims. The Court discusses each state individually.
1. California
Defendants first seek dismissal of EPPs' claims under the California Unfair Competition Law, since EPPs failed to plead reliance. The Unfair Competition Law proscribes "any unlawful, unfair or fraudulent business act or practice."
*4222. Illinois
Defendants next seek dismissal of EPPs' claims under the Illinois Consumer Fraud and Deceptive Business Practices Act since: (1) the Act does not provide additional relief beyond antitrust claims; (2) EPPs failed to plead deception or reliance; and (3) EPPs fail to demonstrate that the alleged conduct was consumer-oriented or had a consumer nexus. The Illinois Consumer Fraud and Deceptive Business Practices Act states that "[u]nfair methods of competition and unfair or deceptive acts or practices ... in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby." 815 Ill. Comp. Stat. Ann. 505/2. However, the state legislature did not intend for the Act to serve as an "additional antitrust enforcement mechanism." Laughlin v. Evanston Hosp. ,
As discussed above, the Illinois Antitrust Act prohibits indirect purchaser class actions. Moreover, when reviewing the Complaint, EPPs' claims are primarily focused on anticompetitive conduct and its "allegations of consumer fraud overlap entirely with the allegations of anticompetitive conduct." Wellbutrin XL ,
3. Maine
Defendants next seek dismissal of EPPs' claims under the Maine Unfair Trade Practices Act, since EPPs failed to allege deception and, alternatively, EPPs are not considered "consumers" under the Act. The Act proscribes "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." Me. Rev. Stat. tit. 5 § 207. "A business practice is 'unfair' if the injury it produces is (1) 'substantial,' (2) not 'outweighed by any countervailing benefits to consumers or competition that the practice produces,' and (3) not reasonably avoidable by consumers." In re Chocolate Confectionary Antitrust Litig. ,
It is worth briefly noting that the court is unpersuaded by Plaintiff's reliance on In re Motor Vehicles Canadian Exp. Antitrust Litig. ,
4. Nebraska
Defendants next seek dismissal of Plaintiffs' claims under the Nebraska Consumer Protection Act, since the purportedly wrongful conduct does not have a consumer nexus. The Nebraska Consumer Protection Act proscribes "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" and allows injured individuals a private right of action. Neb. Rev. Stat. Ann §§ 59-1602 ; -1609. In order to state a valid claim under the Act, "the unfair or deceptive act or practice must have an impact upon the public interest." Nelson v. Lusterstone Surfacing Co. ,
Here, as discussed above, EPPs allege that Defendants engaged in anticompetitive schemes to prevent the market entry of generic-brand Lipitor, which caused EPPs to pay a premium. Since the schemes alleged in the Complaint had an indirect impact on Nebraska consumers, EPPs' have adequately alleged that the scheme impacted the public interest. As such, Defendants' motion for judgment on the pleadings with respect to EPPs' claims under the Nebraska Consumer Protection Act is denied.
5. Nevada
Defendants argue that EPPs claims under the Nevada Deceptive Trade Practices Act should be dismissed, since EPPs failed to allege consumer reliance. Under Section 41.600 of Nevada's Revised Statutes, "any person who is a victim of ... [a] deceptive trade practice as defined in [the Nevada *424Deceptive Trade Practices Act]" may a bring an action thereunder.
Under Section 598.0923(3), the Nevada Deceptive Trade Practices Act does not appear to require the plaintiff must plead reliance, nor do Defendants identify any case-law that would otherwise support this contention. See In re Pharm. Indus. Average Wholesale Price Litig. ,
6. New Mexico
Defendants next challenge EPPs' claims under the New Mexico Unfair Practices Act, since the Act does not provide relief for price fixing and, in any event, they fail to plead unconscionable conduct. The New Mexico Unfair Practices Act prohibits unfair, deceptive, and unconscionable trade practices. N.M. Rev. Stat. § 57-12-2. Given the remedial nature of the Act, "courts construe its provisions broadly to facilitate this purpose." Chocolate Confectionary ,
"Federal courts generally permit [New Mexico Unfair Practices Act] actions in price-fixing cases provided that the plaintiff alleges a 'gross disparity' between the price paid for a product and the value received." Chocolate Confectionary ,
7. New York
Defendants next challenge EPPs' claims under the New York Consumer Protection from Deceptive Acts and Practices Act, since EPPs fail to allege particular conduct directed specifically at them and, in the alternative, fail to allege consumer reliance. Section 349 of New York's Business Law states, "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful."
Here, contrary to Defendants' assertion, the Court is satisfied that EPPs have alleged sufficient facts to sustain a claim under Section 349. As discussed above, EPPs' claims focus on the anticompetitive conduct of Defendants, which prevented the earlier market entry of generic Lipitor and, as a result, caused individuals to pay a premium. See Macquarie Grp. Ltd. v. Pac. Corporate Grp., LLC , No. 08-cv-2113,
8. North Carolina
Defendants next contend that EPPs lack standing to assert claims under North Carolina's Unfair and Deceptive Trade Practices Act, since Plaintiffs are neither competitors nor in commercial dealings with Defendants. Section 75-1.1 of the Act proscribes "[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce" and provides "any person" or "business of any person, firm or corporation" the right to sue for injuries *426arising from unfair business practices.
9. Rhode Island
Finally, Defendants challenge EPPs' claims under the Rhode Island Unfair Trade Practices and Consumer Protection Act, since: (1) the misconduct alleged in the Complaint is not prohibited under the Act and (2) EPPs are not "consumers" as defined under the Act. The Rhode Island Unfair Trade Practices and Consumer Protection Act proscribes "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." R.I. Gen. Laws § 6-13.1-2. The Act goes on to list twenty "acts or practices" that are considered unfair or deceptive competition. R.I. Gen. Laws § 6-13.1-1(6)(i)-(xx). In determining whether a practice is "unfair" under the Act, courts must consider: "(1) whether the practice affronts public policy, as delineated by the common law, statutes, and 'other established concept[s] of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers (or competitors or other businessmen).' " Chocolate Confectionary ,
The Court finds Defendants' first argument unconvincing. The majority of courts that have been presented with this issue have held that the three prong Ames standard "encompass price-fixing injuries, and [therefore] consumers subject to collusive pricing possess a cognizable claim under the [Act]." Chocolate Confectionary ,
Alternatively, Defendants seek dismissal of EPPs' Rhode Island Unfair Trade Practices and Consumer Protection Act claims since they are not "consumers" within the meaning of the Act. The Act limits claims to "[a]ny person who purchases or leases goods or services primarily for personal, family, or household purposes." R.I. Gen. Laws § 6-13.1-5.2(a). Citing no supporting case law, EPPs contend *427that the Act defines "person" to include entities such as corporations, trusts, and associations. However, contrary to EPPs' assertion, "the Rhode Island Supreme Court has construed the [Rhode Island Unfair Trade Practices and Consumer Protection Act]to require that only natural persons are permitted to bring private rights of actions under the statute." In re Dynamic Random Access Memory (DRAM I) Antitrust Litig. ,
To sum up, the Court declines to grant judgment as to EPPs' consumer protection claims in California, Nebraska, Nevada, New Mexico, New York, and North Carolina. However, the Court grants Defendants' motion, without leave to amend as to EPPs' Illinois and Maine consumer protection claims; and with leave to amend with regards to EPPs' Rhode Island consumer protection claims.
ORDER
IT IS on this 21 day of August, 2018,
ORDERED that Defendants' Motion for Judgment on the Pleadings (ECF No. 755) is GRANTED IN PART and DENIED IN PART as follows:
• Defendants' Motion for Judgment on the Pleadings based on preemption principles is DENIED ;
• Defendants' Motion for Judgment on the Pleadings as to EPPs' state consumer protection claims in California, Nebraska, Nevada, New Mexico, New York, and North Carolina is DENIED .
• Defendants' Motion for Judgment on the Pleadings as it pertains to EPPs' Arizona, Hawaii, Nevada, and Utah antitrust claims is GRANTED WITHOUT PREJUDICE ; EPPs are granted leave to amend their Complaint to plead compliance with these notice provisions;
• Defendants' Motion for Judgment on the Pleadings as it pertains to EPPs' Massachusetts, Montana, West Virginia, Rhode Island, Tennessee and Utah consumer protection claims is GRANTED WITHOUT PREJUDICE ; EPPs are granted leave to amend their Complaint to plead compliance with Massachusetts and West Virginia's notice provisions, and plead individual claims in Montana, Rhode Island, Tennessee, and Utah;
• Defendants' Motion for Judgment on the Pleadings as it pertains to EPPs' Illinois and Rhode Island antitrust claims, and EPPs' Illinois and Maine consumer protection claims is GRANTED WITH PREJUDICE ;
• Defendants' Motion for Judgment on the Pleadings as to Count I of EPPs' Complaint under Kansas, New York, and Tennessee is GRANTED to the extent these claims are predicated on unilateral activity by Pfizer.
• EPPs have thirty (30) days from the filing of this Memorandum and Order to file an Amended Complaint, consistent with this Memorandum.
Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. ,
In July 2000 and August 2001, Warner-Lambert acquired Patent Nos. 6,274,740 ('740 Patent) and 6,087, 511 ('511 Patent). (Id. at ¶ 2l9). According to the Complaint, "[b]oth the '740 and '511 Patents are process patents, which claim a specific process for making amorphous atorvastatin calcium using crystalline Form I atorvastatin as a starting material." (Id. ). However, while the Process Patents were valid and enforceable, they had no exclusionary effect. (Id. at ¶ 308). Put differently, the Process Patents could not be used to exclude any generic brands of Lipitor from the market. (Id. ).
Defendants appear to be leading the Court down the same path where it was the last time - no sense putting my fingers over the fire a second time.
It should be noted that during oral argument, EPPs' attorney contended that notice was provided, "I'm the one who gave notice in this case; I gave - first of all we gave a demand to the defendants back in 2012, with respect to all states ... so that has been fulfilled." (Tr. of June 25, 2018 Hearing at 58:35-59:4). To me, this meant Plaintiffs gave notice in accordance with the state statutes. I have no reason to disbelieve Plaintiffs' counsel, who is an officer of the Court. However, no competent proof supporting this assertion has been provided to the Court.
Courts have understood this notice requirement to apply only to claims of "unfair methods of competition," not "unfair or deceptive acts or practices"; however, neither party addresses this distinction. See In re Chocolate Confectionary Antitrust Litig ,
Defendants also make a similar argument for Plaintiff's Illinois consumer protection claims; however, being that the Illinois Consumer Fraud & Deceptive Business Practice Act does not explicitly bar class actions, the Court finds it more appropriate to consider the substantive arguments Defendants present later.
At the outset, it should be noted that neither party provided any post- Shady Grove analysis or discussion to support their position.
From the Court's perspective, in agreement with Justice Stevens, the state statutes at issue focus on various forms of deceptive practices. Rule 23 is more generic and applies to all class actions. As such, the narrower and more focused approach of the state should apply.
Both Alabama and Georgia's consumer protection statutes contain similar language to Montana, Tennessee, and Utah, which all prohibit the use of class actions to enforce the rights created therein. Ala. Code Ann. § 8-19-10(f) ("A consumer or other person bringing an action under this chapter may not bring an action on behalf of a class");
Because the Court has already dismissed EPPs' claims under Massachusetts, Montana, Tennessee, Utah and West Virginia's consumer protection statutes, it does not address the remaining arguments pertaining to these states.
Moreover, it should be noted that, at the pleading stage it is difficult to determine whether Plaintiff's claims under California law are even based on fraudulent conduct; as such, the Court also finds Defendants' motion to be premature.
In their brief in opposition to Defendants' motion, EPPs make explicitly clear that they "have not alleged a claim based on group boycott." (Pls' Brief in Opp. at 41).
Reference
- Full Case Name
- IN RE LIPITOR ANTITRUST LITIGATION
- Cited By
- 38 cases
- Status
- Published