Walgreen Co. v. Johnson & Johnson
Walgreen Co. v. Johnson & Johnson
Opinion of the Court
Before the Court are Defendants' Motion for Summary Judgment (Doc. No. 50), Plaintiffs' Opposition thereto (Doc. No. 54), Defendants' Reply in Support thereof (Doc. No. 56), and Plaintiffs' Sur-reply thereto (Doc. No. 57). For the reasons set forth below, we grant Defendants' Motion.
This case arises from Plaintiffs' Walgreen Co. and The Kroger Co. ("Retailer Plaintiffs") allegations that Defendants Johnson & Johnson and Janssen Biotech, Inc. (collectively "Janssen") ("J & J") violated federal antitrust laws through an anticompetitive scheme to exclude competition, maintain a monopoly over, and artificially inflate prices for Defendants' biologic infliximab drug, Remicade. Pl. Comp. ¶ 1. These allegations stem from facts set forth in this Court's Memorandums denying J & J's motion to dismiss Pfizer's complaint and denying in part J & J's motion to dismiss Direct and Indirect Purchasers' amended complaints. See *619Pfizer Inc. v. Johnson & Johnson,
At the heart of the dispute here is Defendants' argument that Plaintiffs lack antitrust standing because Wholesalers' purported assignment of "rights" under the Agreements was void pursuant to an anti-assignment provision. Plaintiffs maintain that their antitrust claims are not encompassed by the purported assignments, and may proceed.
I. Factual Background
The following facts are undisputed: Defendants manufacture and market Remicade. (Pl. Resp. to Def. Stmt. Facts at ¶ 2, Doc. No. 54-1). Plaintiffs purchase Remicade from AmerisourceBergen Drug Corporation ("Amerisource") and from Cardinal Health, Inc. ("Cardinal"), pharmaceutical wholesalers who purchase Remicade directly from Defendants. Id. at ¶ 5. Wholesalers' direct purchases of Remicade are governed by Distribution Agreements (together, "the Agreements") with JOM Pharmaceutical Services, Inc. ("JOM"). Id. at ¶ 6. The Agreements are governed by New Jersey law. Id. Section 4.4 of the Agreements between Wholesalers and Defendants each includes a non-assignment provision containing the following language:
Except as provided in this section, neither party may assign, directly or indirectly, this agreement or any of its rights or obligations under this agreement, either voluntarily or involuntarily (whether by merger, acquisition, consolidation, dissolution, operation of law, change of control or otherwise), without prior written consent of the other party....Any purported assignment in violation of this section will be void.
Def. Br. Exs. A and B, Doc. 50-3.
On January 23, 2018, Wholesalers purportedly assigned their claims against Defendants over alleged overcharges for Remicade to Plaintiffs. (Pl. Resp. to Def. Stmt. Facts at ¶ 10, Doc. No. 54-1 at 3). The purported assignment agreements stated, "[Amerisource] hereby conveys, assigns and transfers to Walgreens all of its rights, title and interest in and to all Direct Purchaser Claims it may have against Defendants under the antitrust laws of the United States." "[Cardinal] hereby conveys, assigns and transfers to Kroger all of its rights, title and interest in and to all Direct Purchaser Claims it may have against Defendants under the antitrust laws of the United States." Id.; See Def. Br. Exs. C and D.
On June 6, 2018, Plaintiffs filed the underlying action against Defendants. See Pl. Compl., Doc. No. 1. Plaintiffs' complaint asserts federal antitrust claims purportedly assigned to them by Wholesalers, in addition to asserting claims on their own behalf. (Pl. Resp. to Def. Stmt. Facts at ¶ 12, Doc. No. 54-1). On December 7, 2018, this Court denied Defendants' motion to dismiss Plaintiffs' direct purchaser antitrust claims (those that do not depend on assignments from Wholesalers). See Doc. No. 48, fn 2. Now, Plaintiffs concede that "their purchases of Remicade were indirect" and that any purchases not covered by a purported assignment "will not be *620included in [their] damages model." Pl. Opp. at 54.
In our December 7th, 2018 Order we also converted Defendants' motion to dismiss Plaintiffs' indirect purchaser antitrust claims (Doc. No. 36) into a summary judgment proceeding, pursuant to the Third Circuit's direction that "[i]f matters outside the bounds of the complaint are considered by the district court, the merits of the claim must be tested by way of motion for summary judgment." JM Mech. Corp. v. United States,
II. LEGAL STANDARD
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). New Jersey law, which we find applicable to the issue of non-assignment provisions in the distributor Agreements in this case, instructs that "interpretation or construction of a contract is usually a legal question for the court, 'suitable for a decision on a motion for summary judgment.' " Driscoll Const. Co. v. State Dep't of Transp.,
"As to materiality.... [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc.,
III. DISCUSSION
Defendants, J & J, assert four arguments for summary judgment. First, Defendants argue that they are parties to the Agreements. Second, Defendants argue that the anti-assignment provisions in the Agreements encompass Plaintiffs' statutory antitrust claims. Third, Defendants argue that the anti-assignment provisions are enforceable under New Jersey law. Fourth, Defendants argue that Wholesalers' assignments to Plaintiffs are void because they were made without Defendants' consent, thereby violating the clear and specific anti-assignment provisions. In sum, Defendants argue that Plaintiffs are barred from asserting an antitrust cause of action because these statutory claims would not exist but for the void assignments. Plaintiffs oppose summary judgment on three grounds: first, that Defendants are not parties to the Agreements; second, that Plaintiffs' antitrust claims are outside the scope of the Agreements; and third, that even if the Wholesalers' assignments violated the anti-assignment provisions, *621federal common law allowing for valid assignment of antitrust claims should preempt state law enforcing anti-assignment provisions.
A. Whether Defendants are Parties to the Agreements
Defendants seek to enforce the anti-assignment provisions of the Agreements, arguing that they are parties to the Agreements. Defendants argue that the Agreement discloses that they are the parent company (Johnson & Johnson) and affiliate (Janssen) of the signatory, JOM, to whom they delegated authority to enter Agreements governing distribution of Defendants' drug, Remicade. Furthermore, Defendants argue, the Agreements explicitly apply to claims involving JOM's parent company, subsidiaries, or affiliates. Exs. A and B §§ 4.21(a). Plaintiffs, on the other hand, argue that JOM signed the Agreements not as Defendants' agent, but as the only party to the contract. Therefore, Plaintiffs' argument goes, Defendants cannot oppose the purported assignments because they are not parties to the Agreements. Pl. Opp. at 9.
"Agency is the fiduciary relationship that arises when one person (a 'principal') manifests assent to another person (an 'agent') that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act." Restat 3d of Agency, § 1.01 (3rd 2006). New Jersey law, applying the Restatement (Third) of Agency § 6.01, has held that a "principal will be bound by contracts with third parties entered into by an agent with actual authority to act on his behalf." Allegheny/AA Bail Bonds, Inc., Atty. in Fact for Allegheny Cas. Co. v. Wright, Nos. A-2066-07T2, A-2071-07T2,
In this case, JOM, the signatory to the Agreements, is a subsidiary of Johnson & Johnson and the agent of Janssen Biotech, Inc. for the purpose of entering distribution contracts. "Schedule A" of the Agreements (Ex. A at 25, Ex. B at 23) names Janssen Biotech, Inc. as an "affiliate" (also referred to as a "Manufacturer," Exs. A and B at 1) of JOM for purposes of the Agreements. The language of the Agreements expressly provides that JOM's affiliates have delegated authority to JOM to enter distribution agreements on their behalf. See Exs. A and B at 1, "[JOM] is an Authorized Distributor of Record for the *622Products with authority delegated by the Manufacturers to designate additional Authorized Distributors of Record (each an "ADR") on their behalf for distribution of Products.... [JOM] and its affiliates desire to retain Distributor [Wholesalers] to provide the necessary Services."
Here, we find no genuine dispute that for the purposes of the distribution Agreements, JOM is an agent of Defendants, as JOM was delegated authority to enter the Agreements on behalf of their named affiliates, the "principals." There is also no dispute that the principals were "disclosed" to the other contracting party in Schedule A of the Agreements. Therefore, applying New Jersey law, we find it is beyond reasonable dispute that Defendants are parties to the Agreements when they are named in the Agreement as an "affiliate" of the signatory and when the Agreements provide that JOM is authorized to enter the Agreement on the affiliates' (Defendants') behalf. See Allegheny/AA Bail Bonds, Inc., Atty. in Fact for Allegheny Cas. Co.,
B. Applicable Law
The Parties do not dispute that New Jersey law applies to the anti-assignment provisions. See Pl. Opp. at 6, "[b]oth sides agree that the two Distribution Agreements are governed by state law - in this case, the law of New Jersey.... [which] generally follows the Restatement of Contracts." See Bel-Ray Co. v. Chemrite (Pty) Ltd.,
The dispute is over whether Plaintiffs' antitrust claims are encompassed by the anti-assignment provisions in the Agreements. Defendants contend that the Agreements' prohibition on assignment of "rights" without consent necessarily includes a prohibition on assignment of statutory causes of action, such as the right to recover overcharge damages. Accordingly, where the anti-assignment provisions have been violated, under New Jersey law the purported assignments are void, and, as a result, Plaintiffs' have no basis on which to assert their statutory claims. By contrast, Plaintiffs argue that the anti-assignment provisions narrowly prohibit performance of the contract, while the right to bring a statutory antitrust claim is "in some way independent of, or pre-existing to, the 'rights or obligations' " that the provisions prohibit from being assigned. Def. Br. at 12. If Plaintiffs' statutory claims exist independent of the Agreements, Plaintiffs argue, then federal common law, not New Jersey law, will resolve the issue at summary judgment. We find there is no reasonable dispute that the anti-assignment provisions prohibited assignment of rights under the Agreements, including statutory causes of action; therefore, we grant summary judgment for Defendants, where Plaintiffs' antitrust claims exist by virtue of void assignments.
It is established that "under controlling federal law,...antitrust claims are assignable." Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp.,
However, a threshold question is whether the assignment in issue is valid. See Lehigh Valley Hosp. v. UAW Local 259 Soc. Sec. Dep't, No. 98-4116,
Furthermore, the Third Circuit made clear in Wallach, in line with § 317 of the Restatement, that it rejects the "antiquated distinction" between "rights" under a contract, which may be assigned or contractually prohibited from being assigned, and non-contractual causes of action: "the historical common-law rule that a chose in action could not be assigned has largely disappeared."
Here, we agree with Defendants that New Jersey law, not federal common law applies to the assignment issue in this case. Plaintiffs' argument that federal common law preempts even an invalid assignment is not supported by Third Circuit law. Wallach and Gulfstream, holding that antitrust claims are assignable under federal common law, apply to valid assignments only. Here, there is no valid assignment. The anti-assignment provisions in the distributor Agreements between Wholesalers (direct purchasers) and Defendants (drug manufacturer) clearly manifested an intent to prohibit assignment of any rights or obligations under the Agreements without the consent of either party; indeed, the provisions specified that assignments in violation of the provisions would be void. Wholesalers violated these provisions by purporting to assign their rights under the Agreements to Retailer Plaintiffs, without Defendants' consent. We agree with Defendants that "neither Wallach, nor Gulfstream, nor In re Fine Paper Litig. (none of which addresses anti-assignment provisions affecting statutory causes of action in the antitrust context) supports the notion that the 'federal common law' of antitrust assignment instruments overrides an anti-assignment clause in the underlying sales contract that is valid as a matter of state law." Def. Rep. Br. at 12.
*624Finally, the Third Circuit has adopted the "plain meaning" approach to whether statutory claims are encompassed within the scope of a non-assignment provision prohibiting assignment of "rights" under a contract. Here, Plaintiffs try to advance the argument rejected by the First Circuit in City of Hope (whose reasoning the Third Circuit adopted in American Orthopedic ), "[i]n effect, [that we] read into ERISA's allowance for the assignability of ERISA-regulated welfare plan benefits a bar to the contractual non-assignability of such benefits." City of Hope Nat'l Med. Ctr.,
Yet, there is no federal common law, nor New Jersey state contract law, nor grounding in the Restatement, to support this view. The First Circuit has held and the Third Circuit has concurred that limiting non-assignment provisions so that they do not pertain to "causes of action" ("as distinguished from 'rights or benefits' ") "would strain the plain meaning of the contract language at issue in this case."
Extending this reasoning to non-assignment clauses in the context of statutory ERISA claims, the Third Circuit has recently held that "anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable." Am. Orthopedic & Sports Med. v. Indep. Blue Cross Blue Shield,
The Hartig anti-assignment clause states, "[t]his Agreement may not be assigned by either party without the prior written consent of the other party. Notwithstanding the forgoing, either party may assign its rights and obligations hereunder without the consent of the other party to a subsidiary or affiliate ...."
*625We find Plaintiffs' argument that the non-assignment provisions here do not encompass rights to bring statutory causes of action untenable. Without the assignment of Wholesalers' rights under the Agreements, Plaintiffs would have no basis from which to assert the Wholesalers' claim for overcharges on purchases of Remicade. Thus, Plaintiffs' antitrust claims flow from the purported assignment of Wholesalers' rights. Therefore, we find that there is no genuine dispute that Plaintiffs' allegations of anticompetitive overcharges for Remicade (Compl. ¶¶ 1, 60-61) are "assignment-based claims." Def. Br. at 10. Accordingly, New Jersey law applies when interpreting the anti-assignment provisions of the Agreements. See Hartig Drug,
C. Applying New Jersey Law to the Anti-Assignment Provisions
Defendants argue that under New Jersey law, the anti-assignment agreement invalidates Wholesalers' assignment of their rights under the agreement, since Defendants did not consent. We agree with Defendants and grant summary judgment on the grounds that it is beyond reasonable dispute that the anti-assignment provision manifested the parties' intent to prohibit assignment of rights under the Agreement, including antitrust causes of action.
Where an anti-assignment provision unambiguously expresses the clear intent to prohibit assignment of "rights" under a contract, New Jersey law will enforce the provision. See Torpey v. Blue Cross Blue Shield of Tex., Civil Action No. 12-cv-7618 (JAP),
"As a general rule of law, where the parties' intent is clear, courts will enforce non-assignment provisions." Davidowitz v. Delta Dental Plan of Cal., Inc.,
New Jersey courts interpreting assignment provisions apply the Restatement. See Somerset Orthopedic Assocs., P.A.,
Plaintiffs argue that the anti-assignment provisions in the Agreements do not encompass their "rights" to bring statutory antitrust claims, citing district court opinions, none from the Third Circuit, in support. Yet, in United Food & Commer. Workers Local 1776 v. Teikoku Pharma United States, Inc., No. 14-md-02521-WHO,
The anti-assignment provision in Lidoderm"[did] not clearly prevent wholesalers from assigning claims arising out of antitrust law."
Plaintiffs angle for yet another view, arguing that statutory antitrust claims are not contemplated by language in the assignment provision barring assignment of "rights." Yet New Jersey courts have not treated statutory antitrust claims as exempted from a clear and specific non-assignment provision. In this case, the Wholesalers' rights to recover antitrust damages against Defendants, although statutory in nature, exist " 'by virtue of the relationship,' established by the Agreements-indeed, 'there is no context other than [those] preexisting contractual relationship[s] in which [those rights] could have arisen.' " Def. Br. at 11 (quoting *627Am. Fin. Capital Corp. v. Princeton Elecs. Prods.,
D. Plaintiffs' Unassigned Claims
Plaintiffs "do not dispute that their purchases of Remicade were indirect." Pl. Opp. at 9. Accordingly, any claim for overcharges on purchases of Remicade by Plaintiffs arose through the unauthorized assignment by Wholesalers of rights under their distributor Agreements. These assignment-based antitrust claims, grounded in invalid assignments, cannot proceed.
IV. CONCLUSION
For the foregoing reasons, Defendants' Motion for Summary Judgment is GRANTED. An appropriate Order will follow.
Reference
- Full Case Name
- WALGREEN CO. v. JOHNSON & JOHNSON
- Cited By
- 1 case
- Status
- Published