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UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
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No. 00-2483
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2003 FED App. 0195P, 2003.C06.0000197<
http://www.versuslaw.com>
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June 13, 2003
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IN RE: CARDIZEM CD ANTITRUST LITIGATION.
LOUISIANA WHOLESALE
DRUG CO., ET AL., PLAINTIFFS-APPELLEES,
v.
HOECHST MARION ROUSSEL,
INC., AND ANDRX PHARMACEUTICALS, INC.,
DEFENDANTS-APPELLANTS.
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Appeal from the United States District Court for the Eastern District
of Michigan at Detroit. No. 99-01278--Nancy G. Edmunds, District
Judge.
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Argued: David E. Everson, Stinson, Mag & Fizzell, Kansas City,
Missouri, Louis M. Solomon, Solomon, Zauderer, Ellenhorn, Frischer &
Sharp, New York, New York, for Appellants. Richard W. Cohen, Lowey,
Dannenberg, Bemporad & Selinger, White Plains, New York, Richard B.
Drubel, Boies, Schiller & Flexner, Hanover, New Hampshire, Steve D.
Shadowen, Schnader, Harrison, Segal & Lewis, Harrisburg, Pennsylvania,
for Appellees.
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ON Brief: Louis M. Solomon, Solomon, Zauderer, Ellenhorn, Frischer
& Sharp, New York, New York, Kathleen McCree Lewis, Dykema Gossett,
Detroit, Michigan, James R. Eiszner, Joseph M. Rebein, Shook, Hardy &
Bacon, Kansas City, Missouri, for Appellants. Richard W. Cohen, Stephen
Lowey, Peter D. St. Phillip, Jr., Lowey, Dannenberg, Bemporad &
Selinger, White Plains, New York, Richard B. Drubel, Boies, Schiller &
Flexner, Hanover, New Hampshire, Steve D. Shadowen, Michael J. Colleran,
Schnader, Harrison, Segal & Lewis, Harrisburg, Pennsylvania, Daniel
Berger, Eric L. Cramer, Berger & Montague, Philadelphia, Pennsylvania,
Angela K. Green, William W. Sellers, Niewald, Waldeck & Brown, Kansas
City, Missouri, Bruce E. Gerstein, Barry S. Taus, Garwin, Bronzaft,
Gerstein & Fisher, New York, New York, Joseph J. Tabacco, Jr.,
Jennifer S. Abrams, Berman, DeVALERIO, Pease & Tabacco, San Francisco,
California, Patrick E. Cafferty, Miller, Faucher, Chertow, Cafferty &
Wexler, Ann Arbor, Michigan, Scott E. Perwin, Kenny, Nachwalter, Seymour,
Arnold, Critchlow & Spector, Miami, Florida, Douglas H. Patton,
Dewsnup, King & Olsen, Salt Lake City, Utah, for Appellees. Marjorie
E. Powell, Pharmaceutical Research & Manufacturers OF America,
Washington, D.C., Karen N. Walker, Edwin J. U, Kirkland & Ellis,
Washington, D.C., Paul E. Slater, Sperling, Slater & Spitz, Chicago,
Illinois, Paul F. Novak, Office OF The Attorney General, Natural Resources
Division, Lansing, Michigan, Jay Himes, Attorney General, State OF New
York, New York, New York, Kathleen L. Harris, New York, New York, Michael
R. Schuster, Washington, D.C., Sarah L. Lock, American Association OF
Retired Persons, Washington, D.C., Donald Louis Bell II, Alexandria,
Virginia, for Amici Curiae.
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Before: Siler and Clay, Circuit Judges; Oberdorfer, District
Judge.*fn1
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The opinion of the court was delivered by: Oberdorfer, District
Judge.
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RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule
206
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ELECTRONIC CITATION: 2003 FED App. 0195P (6th Cir.)
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Argued: April 30, 2002
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OPINION
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This antitrust case arises out of an agreement entered into by the
defendants, Hoescht Marion Roussel, Inc. ("HMR"), the manufacturer of the
prescription drug Cardizem CD, and Andrx Pharmaceuticals, Inc. ("Andrx"),
then a potential manufacturer of a generic version of that drug. The
agreement provided, in essence, that Andrx, in exchange for quarterly
payments of $10 million, would refrain from marketing its generic version
of Cardizem CD even after it had received FDA approval (the "Agreement").
The plaintiffs are direct and indirect purchasers of Cardizem CD who filed
complaints challenging the Agreement as a violation of federal and state
antitrust laws. After denying the defendants' motions to dismiss, see In
re Cardizem CD Antitrust Litigation, 105 F. Supp. 2d 618 (E.D. Mich. 2000)
("Dist. Ct. Op. I") and granting the plaintiffs' motions for partial
summary judgment, id., 105 F. Supp. 2d 682 (E.D. Mich. 2000) ("Dist. Ct.
Op. II"), the district court certified two questions for interlocutory
appeal:
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(1) . . . In determining whether Plaintiffs have properly pled
antitrust injury, does the language of the Sixth Circuit's decisions in
Valley Products Co. v. Landmark, 128 F.3d 398, 404 (6th Cir. 1997) and
Hodges v. WSM, Inc., 26 F.3d 36, 39 (6th Cir. 1994) require dismissal of
Plaintiffs' antitrust claims at the pleading stage if Plaintiffs cannot
allege facts showing that Defendants' alleged anticompetitive conduct was
a "necessary predicate" to their antitrust injury; i.e., that dismissal is
required unless Plaintiffs plead facts showing that the alleged antitrust
injury could not possibly have occurred absent Defendants' alleged
anticompetitive conduct?
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(2) . . . In determining whether Plaintiffs' motions for partial
judgment were properly granted, whether the Defendants' September 24, 1997
Agreement constitutes a restraint of trade that is illegal per se under
section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and under the
corresponding state antitrust laws at issue in this
litigation.
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JA 607. Our answers, explained more fully herein, are as
follows:
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Answer to First Certified Question: As framed, the certified question
is not susceptible to a yes or no answer because it incorporates a
definition of "necessary predicate" that we reject. Hodges and Valley
Products stand for the proposition that in order to survive a motion to
dismiss for failure to allege antitrust injury, a plaintiff must allege
that the antitrust violation is either the "necessary predicate" for its
injury or the only means by which the defendant could have caused its
injury. Under the "necessary predicate" option, dismissal is warranted
only where it is apparent from the allegations in the complaints that the
plaintiffs' injury would have occurred even if there had been no antitrust
violation. Here, Andrx could have made a unilateral and legal decision to
delay its market entry, but the plaintiffs have alleged it would not have
done so but for the Agreement and HMR's payment to it of $40 million per
year. The plaintiffs' allegations satisfy the "necessary predicate" test.
The defendants' claim that Andrx's decision to stay off the market was
motivated not by the $40 million per year it was being paid by HMR, but by
its fear of damages in the pending patent infringement litigation, merely
raises a disputed issue of fact that cannot be resolved on a motion to
dismiss. Accordingly, the district court properly denied the defendants'
motions to dismiss for failure to allege antitrust injury.
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Answer to Second Certified Question: Yes. The Agreement whereby HMR
paid Andrx $40 million per year not to enter the United States market for
Cardizem CD and its generic equivalents is a horizontal market allocation
agreement and, as such, is per se illegal under the Sherman Act and under
the corresponding state antitrust laws. Accordingly, the district court
properly granted summary judgment for the plaintiffs on the issue of
whether the Agreement was per se illegal.
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I. BACKGROUND
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As the district court has set forth a complete outline of the relevant
statutory framework, see Dist. Ct. Op. I, at 627-29; Dist. Ct. Op. II, at
685-86, facts, see Dist. Ct. Op. I, at 629-32; Dist. Ct. Op. II, at
686-89, and procedural history, see Dist. Ct. Op. I, at 632-33; Dist. Ct.
Op. II, at 689-90, we repeat here only what is necessary to our analysis
of the issues on appeal.
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A. Statutory Framework
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In 1984, Congress enacted the Hatch-Waxman Amendments, see Drug Price
Competition & Patent Term Restoration Act of 1984, Pub. L. No. 98-417,
98 Stat. 1585 (1984), to the Federal Food, Drug, and Cosmetic Act, 21
U.S.C. §§ 301-399. Those amendments permit a potential generic*fn2 manufacturer of a patented pioneer drug to file an
abbreviated application for approval with the Food and Drug Administration
("FDA") (known as an Abbreviated New Drug Application ("ANDA")). See 21
U.S.C. § 355(j)(1). Instead of submitting new safety and efficacy studies,
an ANDA may rely on the FDA's prior determination, made in the course of
approving an earlier "pioneer" drug, that the active ingredients of the
proposed new drug are safe and effective. Id. § 355(j)(2)(A). Every ANDA
must include a "certification that, in the opinion of the applicant and to
the best of his knowledge, the proposed generic drug does not infringe any
patent listed with the FDA as covering the pioneer drug." Id. §
355(j)(2)(A)(vii). That certification can take several forms. Relevant
here is the so-called "paragraph IV certification" whereby the applicant
certifies that any such patent "is invalid or will not be infringed by the
manufacture, use, or sale of the new drug for which the application is
submitted." Id. § 355(j)(2)(A)(vii)(IV). An applicant filing a paragraph
IV certification must give notice to the patent-holder, id. §
355(j)(2)(B); the patent-holder then has forty-five days to file a patent
infringement action against the applicant. Id. § 355(j)(5)(B)(iii). If the
patent-holder files suit, a thirty-month stay goes into effect, meaning
that unless before that time the court hearing the patent infringement
case finds that the patent is invalid or not infringed, the FDA cannot
approve the generic drug before the expiration of that thirty-month
period. Id. § 355(j)(5)(B)(iii)(I). In order to encourage generic entry,
and to compensate for the thirty-month protective period accorded the
patent holder, the first generic manufacturer to submit an ANDA with a
paragraph IV certification receives a 180-day period of exclusive
marketing rights, during which time the FDA will not approve subsequent
ANDA applications. Id. § 355(j)(5)(B)(iv). The 180-day period of
exclusivity begins either (1) when the first ANDA applicant begins
commercial marketing of its generic drug (the marketing trigger) or (2)
when there is a court decision ruling that the patent is invalid or not
infringed (the court decision trigger), whichever is earlier.
Id.
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B. Facts
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Unless otherwise noted, the following facts are undisputed. HMR
manufactures and markets Cardizem CD, a brand-name prescription drug which
is used for the treatment of angina and hypertension and for the
prevention of heart attacks and strokes. The active ingredient in Cardizem
CD is diltiazem hydrochloride, which is delivered to the user through a
controlled-release system that requires only one dose per day. HMR's
patent for diltiazem hydrochloride expired in November 1992.
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On September 22, 1995, Andrx filed an ANDA with the FDA seeking
approval to manufacture and sell a generic form of Cardizem CD. On
December 30, 1995, Andrx filed a paragraph IV certification stating that
its generic product did not infringe any of the patents listed with the
FDA as covering Cardizem CD. Andrx was the first potential generic
manufacturer of Cardizem CD to file an ANDA with a paragraph IV
certification, entitling it to the 180-day exclusivity period once it
received FDA approval.
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In November 1995, the United States patent office issued Carderm
Capital, L.P. ("Carderm") U.S. Patent No. 5,470,584 ("'584 patent"), for
Cardizem CD's "dissolution profile," which Carderm licensed to HMR. JA
1796-1810. The dissolution profile claimed by the '584 patent was for
0-45% of the total diltiazem to be released within 18 hours ("45%-18
patent").*fn3
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In January 1996, HMR and Carderm filed a patent infringement suit
against Andrx in the United States District Court for the Southern
District of Florida, asserting that the generic version of Cardizem CD
that Andrx proposed would infringe the '584 patent. See JA 1240-1257
(Complaint, Hoescht Marion Roussel, Inc. v. Andrx Pharmaceuticals, Inc.,
No. 96-06121 (S.D. Fla. filed Jan. 31, 1996)). The complaint sought
neither damages nor a preliminary injunction. Id. However, filing that
complaint automatically triggered the thirty-month waiting period during
which the FDA could not approve Andrx's ANDA and Andrx could not market
its generic product. In February 1996, Andrx brought antitrust and unfair
competition counterclaims against HMR. JA 1717-47. In April 1996, Andrx
amended its ANDA to specify that the dissolution profile for its generic
product was not less than 55% of total diltiazem released within 18 hours
("55%-18 generic"). HMR nonetheless continued to pursue its patent
infringement litigation against Andrx in defense of its 45%-18 patent. On
June 2, 1997, Andrx represented to the patent court that it intended to
market its generic product as soon as it received FDA approval. JA
1758.
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On September 15, 1997, the FDA tentatively approved Andrx's ANDA,
indicating that it would be finally approved as soon as it was eligible,
either upon expiration of the thirty-month waiting period in early July
1998, or earlier if the court in the patent infringement action ruled that
the '584 patent was not infringed.
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Nine days later, on September 24, 1997, HMR and Andrx entered into the
Agreement. JA 1363-73. It provided that Andrx would not market a
bioequivalent or generic version of Cardizem CD in the United States until
the earliest of: (1) Andrx obtaining a favorable, final and unappealable
determination in the patent infringement case; (2) HMR and Andrx entering
into a license agreement; or (3) HMR entering into a license agreement
with a third party. Andrx also agreed to dismiss its antitrust and unfair
competition counterclaims, to diligently prosecute its ANDA, and to not
"relinquish or otherwise compromise any right accruing thereunder or
pertaining thereto," including its 180-day period of exclusivity. In
exchange, HMR agreed to make interim payments to Andrx in the amount of
$40 million per year, payable quarterly, beginning on the date Andrx
received final FDA approval.*fn4 HMR further agreed to pay Andrx $100 million per
year,*fn5 less whatever interim payments had been made, once:
(1) there was a final and unappealable determination that the patent was
not infringed; (2) HMR dismissed the patent infringement case; or (3)
there was a final and unappealable determination that did not determine
the issues of the patent's validity, enforcement, or infringement, and HMR
failed to refile its patent infringement action.*fn6 HMR also agreed that it would not seek preliminary
injunctive relief in the ongoing patent infringement litigation.*fn7
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On July 8, 1998, the statutory thirty-month waiting period expired. On
July 9, 1998, the FDA issued its final approval of Andrx's ANDA. Pursuant
to the Agreement, HMR began making quarterly payments of $10 million to
Andrx, and Andrx did not bring its generic product to
market.
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On September 11, 1998, Andrx, in a supplement to its previously filed
ANDA, sought approval for a reformulated generic version of Cardizem CD.
Andrx informed HMR that it had reformulated its product; it also urged HMR
to reconsider its infringement claims. On February 3, 1999, Andrx
certified to HMR that its reformulated product did not infringe the '584
patent.
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On June 9, 1999, the FDA approved Andrx's reformulated product. That
same day, HMR and Andrx entered into a stipulation settling the patent
infringement case and terminating the Agreement. At the time of
settlement, HMR paid Andrx a final sum of $50.7 million, bringing its
total payments to $89.83 million. On June 23, 1999, Andrx began to market
its product under the trademark Cartia XT, and its 180-day period of
marketing exclusivity began to run. Since its release, Cartia XT has sold
for a much lower price than Cardizem CD and has captured a substantial
portion of the market.
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C. Procedural History
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The first complaint challenging the legality of the Agreement was
filed in August 1998, shortly after the FDA issued its final approval for
Andrx's generic version of Cardizem CD. That complaint, and the other
complaints that were subsequently filed, have been consolidated by the
Judicial Panel on Multidistrict Litigation, pursuant to 28 U.S.C. § 1407,
for coordinated or consolidated pretrial proceedings in the Eastern
District of Michigan.*fn8 JA 56-58.
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For all of the plaintiffs, the foundation for their claims is the
allegation that but for the Agreement, specifically the payment of $40
million per year, Andrx would have brought its generic product to market
once it received FDA approval and at a lower price than the patented
Cardizem CD sold by HMR. They further allege that the Agreement protected
HMR from competition from both Andrx and other potential generic
competitors because Andrx's delayed market entry postponed the start of
its 180-day exclusivity period, which it had agreed not to relinquish or
transfer. The Sherman Act Class Plaintiffs and the Individual Sherman Act
Plaintiffs bring claims under the federal antitrust laws, specifically
section 1 of the Sherman Act, 15 U.S.C. § 1; they seek treble damages
under section 4 of the Clayton Act, 15 U.S.C. § 4. The State Law Class
Plaintiffs bring claims under various state antitrust laws.*fn9
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The defendants, HMR and Andrx, filed various motions to dismiss, all
of which were denied. See Dist. Ct. Op. I, at 624. Of relevance to the
present appeal, the defendants argued that all of the plaintiffs had
failed to allege and could not allege an "antitrust injury" cognizable
under section 1 of the Sherman Act or under the respective state antitrust
statutes. Id. at 645. The district court concluded that the plaintiffs had
adequately alleged "antitrust injury." Id. at 645-58. In reaching its
conclusion, the district court first considered whether the plaintiffs'
allegations satisfied the test articulated by the Supreme Court in
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). In
Brunswick, the Supreme Court defined "antitrust injury" as "injury of the
type the antitrust laws were intended to prevent and that flows from that
which makes defendants' acts unlawful." 429 U.S. at 489. The district
court explained its conclusion that the plaintiffs satisfied this test as
follows:
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As to the first prong of the antitrust injury test, the Supreme Court
has observed that "[t]he Sherman Act was enacted to assure our customers
the benefits of price competition, and our prior cases have emphasized the
central interest in protecting the economic freedom of participants in the
relevant market." Associated General, 459 U.S. at 538. Plaintiffs are
customers, not competitors of Defendants, and the injury claimed consists
of higher prices paid for drugs as a result of the contractually mandated
absence of competition between HMRI and Andrx. As to the second, or causal
connection prong of the antitrust injury test, Plaintiffs have alleged
that the HMRI/Andrx Agreement decreased generic competition, and that the
decreased competition bargained for in the HMRI/Andrx Agreement caused
their injuries. Thus, Plaintiffs' injuries coincide precisely with the
rationale for finding a violation of the antitrust laws in the first
place. Since the very purpose of antitrust law is to ensure that the
benefits of competition flow to purchasers of goods affected by the
violation, "buyers have usually been preferred plaintiffs in private
antitrust litigation," and a purchaser's standing "to recover for an
overcharge paid directly to an illegal cartel or monopoly is seldom
doubted." 2 P. Areeda & H. Hovemkamp, supra, ¶ 370[,] at 253.
Plaintiffs have sufficiently pled facts that show they satisfy the
"antitrust injury" test set forth in Brunswick.
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Dist. Ct. Op. I, at 650-51. The district court then considered whether
the Sixth Circuit's decisions in Axis, S.p.A. v. Micafil, 870 F.2d 1105
(6th Cir. 1989), Hodges v. WSM, Inc., 26 F.3d 36 (6th Cir. 1994), and
Valley Products Co. v. Landmark, 128 F.3d 398 (6th Cir. 1997) required a
different conclusion, Dist. Ct. Op. I, at 651-57, particularly the
statement in Hodges that "because plaintiffs did not allege, nor could
they that the illegal antitrust conduct was a necessary predicate to their
injury or that defendants could exclude plaintiffs only by engaging in the
antitrust violation, it was appropriate to dismiss the case." 26 F.3d at
39 (emphasis added). After closely examining the facts and holdings of
those cases, it rejected the defendants' contention that the Sixth
Circuit's "necessary predicate" test meant that an antitrust complaint
should be dismissed "simply because the defendant can conjure up a set of
facts, contradicting those alleged in the plaintiff's complaint, but
supporting an alternative possible cause for Plaintiffs' injuries that
would not offend the antitrust laws." Dist. Ct. Op. I, at 651. It
explained further:
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While the Sixth Circuit language found in the last paragraph of Hodges
and repeated in Valley Products appears to broadly apply to the facts
presented here, careful examination of these decisions reveals otherwise.
The quoted language goes well beyond the antitrust injury test announced
in Brunswick, goes well beyond what the Sixth Circuit actually did in each
of these cases, goes further than the underlying facts allow, and is
mutually inconsistent with the material cause standard that is to be
applied in antitrust cases.
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Id. at 652. Accordingly, the district court denied the defendants'
motions to dismiss for failure to allege antitrust injury.
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The plaintiffs then moved for partial summary judgment on the issue of
whether the Agreement was a per se illegal restraint of trade. The
district court concluded that the Agreement, specifically the fact that
HMR paid Andrx $10 million per quarter not to enter the market with its
generic version of Cardizem CD, was a naked, horizontal restraint of trade
and, as such, per se illegal. Dist. Ct. Op. II, at 705-06.
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Pursuant to 28 U.S.C. § 1292(b), the district court certified for
interlocutory appeal the two questions quoted above.*fn10
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II. DISCUSSION
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As we believe that our answer to the second question sheds light on
our consideration of the first, we address first whether the Agreement was
a per se illegal restraint of trade before considering whether the
plaintiffs adequately alleged antitrust injury.
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A. Per Se Illegal Restraint of Trade
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We review de novo the district court's ruling on summary judgment that
the Agreement was a per se illegal restraint of trade. Holloway v. Brush,
220 F.3d 767, 772 (6th Cir. 2000). Summary judgment is appropriate only
when there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c).
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1. Relevant Antitrust Law
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Section 1 of the Sherman Act*fn11 provides that "Every contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations, is declared to
be illegal . . . ." 15 U.S.C. § 1. Read "literally," section 1 "prohibits
every agreement in restraint of trade." Arizona v. Maricopa Cty. Medical
Soc., 457 U.S. 332, 342 (1982). However, the Supreme Court has long
recognized that Congress intended to outlaw only "unreasonable"
restraints. State Oil Co. v. Khan, 522 U.S. 3, 10 (1997); Maricopa Cty.,
457 U.S. at 342-43 (citing United States v. Joint Traffic Ass'n, 171 U.S.
505 (1898)). Most restraints are evaluated using a "rule of reason." State
Oil, 522 U.S. at 10. Under this approach, the "finder of fact must decide
whether the questioned practice imposes an unreasonable restraint on
competition, taking into account a variety of factors, including specific
information about the relevant business, its condition before and after
the restraint was imposed, and the restraint's history, nature, and
effect." Id. (citing Maricopa Cty., 457 U.S. at 343 &
n.13).
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Other restraints, however, "are deemed unlawful per se" because they
"have such predictable and pernicious anticompetitive effect, and such
limited potential for procompetitive benefit." Id. (citing Northern
Pacific Ry. Co. v. United States, 356 U.S. 1, 5 (1958)). "Per se treatment
is appropriate '[o]nce experience with a particular kind of restraint
enables the Court to predict with confidence that the rule of reason will
condemn it.'" Id. (quoting Maricopa Cty., 457 U.S. at 344); see also
Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1,
19-20 (1979) (a per se rule is applied when "the practice facially appears
to be one that would always or almost always tend to restrict competition
and decrease output."). The per se approach thus applies a "conclusive
presumption" of illegality to certain types of agreements, Maricopa Cty.,
457 U.S. at 344; where it applies, no consideration is given to the intent
behind the restraint, to any claimed pro-competitive justifications, or to
the restraint's actual effect on competition.*fn12 National College Athletic Ass'n ("NCAA") v. Board of
Regents, 468 U.S. 85, 100 (1984). As explained by the Supreme Court,
"[t]he probability that anticompetitive consequences will result from a
practice and the severity of those consequences must be balanced against
its procompetitive consequences. Cases that do not fit the generalization
may arise, but a per se rule reflects the judgment that such cases are not
sufficiently common or important to justify the time and expense necessary
to identify them." Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S.
36, 50 n.6 (1977).
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The Supreme Court has identified certain types of restraints as
subject to the per se rule. The classic examples are naked, horizontal
restraints pertaining to prices or territories. See, e.g., NCAA, 468 U.S.
at 100 ("Horizontal price fixing and output limitation are ordinarily
condemned as a matter of law under an 'illegal per se' approach because
the probability that these practices are anticompetitive is so high.");
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984)
("Certain agreements, such as horizontal price fixing and market
allocation, are thought so inherently anticompetitive that each is illegal
per se without inquiry into the harm it has actually caused."); United
States v. Topco Assocs., 405 U.S. 596, 608 (1972) ("One of the classic
examples of a per se violation of § 1 is an agreement between competitors
at the same level of the market structure to allocate territories in order
to minimize competition. Such concerted action is usually termed a
'horizontal' restraint, in contradistinction to combinations of persons at
different levels of the market structure, e.g., manufacturers and
distributors, which are termed 'vertical' restraints. This Court has
reiterated time and time again that horizontal territorial limitations . .
. are naked restraints of trade with no purpose except stifling of
competition. Such limitations are per se violations of the Sherman Act."
(internal citations omitted)); Northern Pacific Ry., 356 U.S. at 5 ("Among
the practices which the courts have heretofore deemed to be unlawful in
and of themselves are price fixing, division of markets, group boycotts,
and tying arrangements." (internal citations omitted)).
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2. Application
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In answering the question whether the Agreement here was per se
illegal, the following facts are undisputed and dispositive. The Agreement
guaranteed to HMR that its only potential competitor at that time, Andrx,
would, for the price of $10 million per quarter, refrain from marketing
its generic version of Cardizem CD even after it had obtained FDA
approval, protecting HMR's exclusive access to the market for Cardizem CD
throughout the United States until the occurrence of one of the end dates
contemplated by the Agreement. (In fact, Andrx and HMR terminated the
Agreement and the payments in June 1999, before any of the specified end
dates occurred.) In the interim, however, from July 1998 through June
1999, Andrx kept its generic product off the market and HMR paid Andrx
$89.83 million. By delaying Andrx's entry into the market, the Agreement
also delayed the entry of other generic competitors, who could not enter
until the expiration of Andrx's 180-day period of marketing exclusivity,
which Andrx had agreed not to relinquish or transfer.*fn13 There is simply no escaping the conclusion that the
Agreement, all of its other conditions and provisions notwithstanding,
was, at its core, a horizontal agreement to eliminate competition in the
market for Cardizem CD throughout the entire United States, a classic
example of a per se illegal restraint of trade.
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None of the defendants' attempts to avoid per se treatment is
persuasive. As explained in greater detail in the district court's
opinion, see Dist. Ct. Op. II, at 700-705, the Agreement cannot be fairly
characterized as merely an attempt to enforce patent rights or an interim
settlement of the patent litigation. As the plaintiffs point out, it is
one thing to take advantage of a monopoly that naturally arises from a
patent, but another thing altogether to bolster the patent's
effectiveness*fn14 in inhibiting competitors by paying the only
potential competitor $40 million per year to stay out of the market.
Individual Sherman Act Plaintiffs Br. at 26-30. Nor does the fact that
this is a "novel" area of law preclude per se treatment, see Maricopa
Cty., 457 U.S. at 349. To the contrary, the Supreme Court has held that
"'[w]hatever may be its peculiar problems and characteristics, the Sherman
Act, so far as price-fixing agreements are concerned, establishes one
uniform rule applicable to all industries alike.'" Id. at 349 (quoting
United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 222 (1940)). We see
no reason not to apply that rule here, especially when the record does not
support the defendants' claim that the district court made "errors" in its
analysis.*fn15 Finally, the defendants' claims that the Agreement
lacked anticompetitive effects and had procompetitive benefits are simply
irrelevant. See, e.g., Maricopa Cty., 457 U.S. at 351. To reiterate, the
virtue/vice of the per se rule is that it allows courts to presume that
certain behaviors as a class are anticompetitive without expending
judicial resources to evaluate the actual anticompetitive effects or
procompetitive justifications in a particular case. As the Supreme Court
explained in Maricopa County:
|
| [56] |
The respondents' principal argument is that the per se rule is
inapplicable because their agreements are alleged to have procompetitive
justifications. The argument indicates a misunderstanding of the per se
concept. The anticompetitive potential inherent in all price-fixing
agreements justifies their facial invalidation even if procompetitive
justifications are offered for some. Those claims of enhanced competition
are so unlikely to prove significant in any particular case that we adhere
to the rule of law that is justified in its general
application.
|
| [57] |
457 U.S. at 351. Thus, the law is clear that once it is decided that a
restraint is subject to per se analysis, the claimed lack of any actual
anticompetitive effects or presence of procompetitive effects is
irrelevant. Of course, our holding here does not resolve the issues of
causation and damages, both of which will have to be proved before the
plaintiffs can succeed on their claim for treble damages under the Clayton
Act.
|
| [58] |
B. Antitrust Injury
|
| [59] |
We now consider whether the district court properly denied the
defendants' motion to dismiss the complaint for failure to allege an
"antitrust injury."*fn16 A district court's denial of a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6) is subject to de novo
review. Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 511-12 (6th Cir.
2001). In deciding a motion to dismiss, we, like the district court, "must
construe the complaint in the light most favorable to the plaintiff,
accept all of the complaint's factual allegations as true, and determine
whether the plaintiff undoubtedly can prove no set of facts in support of
his claim that would entitle him to relief." Id. at 512. "When an
allegation is capable of more than one inference, it must be construed in
the plaintiff's favor." Helwig v. Vencor, Inc., 251 F.3d 540, 553 (6th
Cir. 2001) (internal citations omitted), cert. dismissed, 536 U.S. 935
(2002).
|
| [60] |
1. Relevant Antitrust Law
|
| [61] |
A private antitrust plaintiff, in addition to having to show
injury-in-fact and proximate cause, must allege, and eventually prove,
"antitrust injury." Brunswick, 429 U.S. at 489. "Antitrust injury" is (1)
"injury of the type the antitrust laws were intended to prevent" and (2)
injury "that flows from that which makes defendants' acts unlawful." Id.
As explained by the Supreme Court in Brunswick, the antitrust injury
doctrine is designed to ensure that "the injury should reflect the
anticompetitive effect either of the violation or of anticompetitive acts
made possible by the violation." Id. The Supreme Court has further
explained the requirement as "ensur[ing] that the harm claimed by the
plaintiff corresponds to the rationale for finding a violation of the
antitrust laws in the first place," and, more specifically, it "ensures
that a plaintiff can recover only if the loss stems from a
competition-reducing aspect or effect of the defendant's behavior."
Atlantic Richfield Co. v. USA Petroleum Co. 495 U.S. 328, 342-343
(1990).
|
| [62] |
2. Plaintiffs' Allegations
|
| [63] |
In the present case, the plaintiffs' critical allegations include the
following: (1) Andrx had developed and was ready to market a generic
version of Cardizem CD; (2) Andrx had certified to the FDA that its
generic product did not infringe any of the patents associated with
Cardizem CD; (3) the patent infringement litigation was a "sham"*fn17; (4) prior to entering into the Agreement, Andrx had
represented to the federal district court presiding over the patent
infringement litigation that it intended to market and sell its generic
version of Cardizem CD as soon as it received final FDA approval; (5) the
Agreement entered into by Andrx and HMR provided, among other things, that
once the FDA approved Andrx's ANDA, HMR would commence making quarterly
payments of $10 million in exchange for Andrx not bringing its generic
product to market; (6) Andrx did not enter the market upon receiving FDA
approval on July 9, 1998; (7) pursuant to the Agreement, HMR ultimately
paid Andrx $89.83 million; (8) "but for" the Agreement and the payment,
Andrx would have begun to market its generic version of Cardizem CD on or
shortly after July 9, 1998; (9) the Agreement effectively eliminated
generic competition in the market for Cardizem CD from July 1998 through
July 1999, when the Agreement was terminated; and (10) due to the lack of
a competitive market, the plaintiffs were deprived of the option of
purchasing a generic lower-priced drug and paid more than they otherwise
would have for Cardizem CD. JA 908-1011 (State Law Pls. Compl.); JA
139-159 (Sherman Act Class Pls. Compl.); JA 848-859, 860-881, 887-896
(Individual Sherman Act Pls. Compls.); see also Dist. Ct. Op. I, at
647.
|
| [64] |
3. Application of Brunswick
|
| [65] |
The plaintiffs' allegations fall easily within the two critical
Brunswick categories. It is clear, and not disputed on appeal, that the
plaintiffs have alleged the "type of injury" the antitrust laws were meant
to prevent. The plaintiffs are consumers of the patented drug Cardizem CD,
who allege that they were deprived of a less expensive generic product,
forcing them to purchase the higher-priced brand name product, because of
a per se illegal horizontal market restraint. Preventing that kind of
injury was undoubtedly a raison d'etre of the Sherman Act when it was
enacted in 1890. See Associated Gen. Contractors v. California State
Council, 459 U.S. 519, 538 (1983).
|
| [66] |
There remains the issue of whether the alleged injury "flows" from
that "which makes defendants' acts unlawful," i.e., its anticompetitive
effects. The facts of Brunswick shed light on the meaning and purpose of
this requirement. In Brunswick, a bowling alley owner claimed that another
competitor's takeover of two failing bowling alleys was an illegal merger.
The plaintiff alleged that it was injured by the merger because if the
other bowling alleys had simply gone out of business, it would have
increased its sales in the bowling alley market. What would have made the
acquisition unlawful for antitrust purposes, however, was the risk that
increased concentration in the bowling alley market would reduce future
competition and cause prices to rise. The plaintiff's injury, on the other
hand, flowed from the more immediate competition-enhancing effects of the
merger; not its future potential to reduce competition. Accordingly, there
was no antitrust injury because the plaintiff's injury did not "flow" from
the anticompetitive effects of the alleged antitrust
violation.
|
| [67] |
In the present case, the facts are much more straightforward. As
explained above, the alleged antitrust violation, HMR's agreement to pay
Andrx $40 million per year not to bring its generic product to market and
compete with Cardizem CD, is a naked, horizontal restraint of trade that
is per se illegal because it is presumed to have the effect of reducing
competition in the market for Cardizem CD and its generic equivalents to
the detriment of consumers. Unlike in Brunswick, here there is no question
that the alleged injury - paying higher prices for a product due to a lack
of competition in the market - is the type of injury that can, and the
plaintiffs have alleged did, flow from the anticompetitive effects of the
Agreement (a horizontal market allocation agreement). Under these
circumstances, dismissal would be appropriate only if the plaintiffs'
allegations, taken as true and construed in their favor, somehow precluded
the possibility that their injury flowed from the anticompetitive effects
of the Agreement and payment. No such conclusion can be reached in this
case. To the contrary, the complaint clearly alleges that but for the
Agreement, specifically the payment of $40 million per year, the
plaintiffs would not have suffered their injury; there is nothing in the
complaint that belies this allegation or justifies this Court not
accepting it as true. The defendants' argument to the contrary, that Andrx
would not have entered the market even if there had been no Agreement and
payment because of its fear of damages in the patent infringement
litigation, creates a disputed issue of fact, not appropriately resolved
on a motion to dismiss. Indeed, a trier of fact may well find that the $89
million payment renders incredible the defendants' claim that Andrx would
have refrained from marketing simply because of its fear of infringement
damages.
|
| [68] |
4. "Necessary Predicate" Test
|
| [69] |
We turn now to the defendants' contention, and the reason for this
certified appeal, that the Sixth Circuit's "necessary predicate" test
requires more than Brunswick and leads to a different conclusion.*fn18 The defendants' argument arises out of a statement
made in this Court's decision in Hodges. In that case, after having
decided to affirm the district court's dismissal for failure to allege
antitrust injury, the Court stated: "[b]ecause plaintiffs did not allege,
nor could they, that the illegal antitrust conduct was a necessary
predicate to their injury or that defendants could exclude plaintiffs only
by engaging in the antitrust violation, it was appropriate to dismiss the
case pursuant to Federal Rule of Civil Procedure 12(b)(6)." Hodges, 26
F.3d at 39 (emphasis added).
|
| [70] |
The defendants contend that this statement means that in order to
allege antitrust injury adequately, a plaintiff must allege that the only
way the defendant could have caused the plaintiff's injury was by engaging
in the antitrust violation. Defs. Br. at 32-33. In other words, if the
defendant could have in theory caused the same injury without engaging in
an antitrust violation, the plaintiff has not suffered an "antitrust
injury," even if in fact it was the antitrust violation that caused the
actual injury in a particular case. Applied to the present case, the
defendants contend that the plaintiffs cannot allege an antitrust injury
because Andrx could have unilaterally (and legally) decided not to market
its generic version of Cardizem CD; they contend it is immaterial whether,
in fact, it was the Agreement and the payment of $40 million per year that
caused them to do so. Id.
|
| [71] |
We disagree.
|
| [72] |
First, simply looking at the actual language of the statement suggests
that the defendants have conflated two ideas. What the court in Hodges
said was that in order to survive a motion to dismiss for failure to
allege antitrust injury, a plaintiff must allege either: (1) that the
antitrust violation was "a necessary predicate" to their injury; or (2)
that the defendants could injure plaintiffs only by engaging in the
antitrust violation. 26 F.3d at 39. The defendants' interpretation
conflates these options, effectively requiring plaintiffs to satisfy the
second one even if they have already satisfied the first.
|
| [73] |
Second, nothing in the facts or holding of Axis, Hodges, or Valley
Products, the cases relied upon by the defendants, supports their
interpretation. Although it does not use the "necessary predicate"
language, we consider first the Sixth Circuit's decision in Axis, the
starting point for this line of antitrust injury cases.
|
| [74] |
In Axis, 870 F.2d 1105, the plaintiff was a foreign manufacturer of
armature winding machines which sought to enter the United States market.
After another foreign manufacturer purchased two American manufacturers,
the plaintiff filed an antitrust suit against the purchaser claiming that
the purchase was illegal because it reduced competition in the armature
winding machine market. The plaintiff's alleged injury was its exclusion
from the United States market. However, the plaintiff also alleged that it
could not enter the market because it lacked access to indisputably valid
and essential patents controlled by the defendant; the plaintiff did not
challenge the legal right of the patent-holder to refuse to grant it a
license. Nor did it or anyone else challenge the validity of the patents.
We affirmed dismissal of the complaint because it failed to allege
antitrust injury, noting that the "the anticompetitive act of purchasing
[the American manufacturer] did not cause the plaintiff's alleged injury.
The patents were an impenetrable barrier to the plaintiff's entry before
[the defendant] purchased [the American manufacturer], and they remained
as great a barrier afterwards." 870 F.2d at 1107 (emphasis
added).
|
| [75] |
In Hodges, 26 F.3d 39, the plaintiff was an airport shuttle and tour
bus operator who wanted to participate in the market for shuttle services
from the Nashville airport to Opryland, an amusement park, hotel and
convention center. It filed an antitrust suit against the companies that
owned the Opryland site and operated the Grand Old Opry music radio
program, as well as a sightseeing and tour company known as Grand Old Opry
tours. The complaint alleged that those defendants had reached an illegal
market division agreement with other shuttle and tour bus operators that
the competitors would refrain from transporting passengers from the
airport to the Opryland complex, leaving the airport shuttle market to the
defendants themselves. In exchange, the defendants would hire vans and
buses from their former competitors for Opryland's sightseeing tour
business. The plaintiff's alleged injury was its exclusion from the
airport to Opryland shuttle market. The plaintiff further alleged that the
defendants policed their illegal agreement by refusing the plaintiff, and
any other non-conspiring shuttle service companies, access to the Opryland
property; the plaintiff did not challenge the defendants' lawful right to
exclude it from their private property. The case was dismissed for failure
to allege antitrust injury.
|
| [76] |
In Valley Products, 128 F.3d 398, the plaintiff was a manufacturer of
logo-bearing hotel soaps and other hotel amenities which wanted to supply
its products to franchisees of a certain hotel franchisor. The hotel
franchisor authorized certain vendors to use its trademark on products,
which the franchisees would then purchase. After the plaintiff's vendor
agreement was terminated, it filed an antitrust suit against the hotel
franchisor and its two remaining authorized vendors, the plaintiff's
competitors, alleging that their arrangement was an attempt to impose an
illegal tying arrangement on franchisees (by conditioning the franchise
agreement on the purchase of logoed amenities from the two preferred
vendors). There was no allegation that the vendors and the franchisor had
agreed to exclude the plaintiff. The plaintiff's alleged injury was its
exclusion from the logoed amenity market for the defendant franchisor's
franchisees. The case was dismissed for failure to allege antitrust
injury. On appeal, we observed that the Sixth Circuit "has been reasonably
aggressive in using the antitrust injury doctrine to bar recovery where
the asserted injury, although linked to an alleged violation of the
antitrust laws, flows directly from conduct that is not itself an
antitrust violation." Valley Products, 128 F.3d at 403.
|
| [77] |
As the above discussion of Axis, Hodges and Valley Products
demonstrates, the facts and holdings of those cases provide no support for
the defendants' proposed interpretation of the "necessary predicate"
language in Hodges. In none of these cases was a complaint dismissed for
failure to allege antitrust injury based on a defendant's claim that it
could have caused the same injury without committing the alleged
violation. Rather, the complaints were dismissed for failure to allege
antitrust injury because each of the defendants had taken an action that
it was lawfully entitled to take, independent of the alleged antitrust
violation, which was the actual, indisputable, and sole cause of the
plaintiff's injury. In Axis, the antitrust violation was not the
"necessary predicate" because the plaintiff's alleged injury - its
exclusion from competing in the armature winding machine market -
admittedly flowed not from the anticompetitive effects of the allegedly
illegal purchase, but from its lack of access to "impenetrable" patents.
870 F.2d at 1107. In Hodges, the antitrust violation was not the
"necessary predicate" because the plaintiff's alleged injury - its
exclusion from competing in the shuttle services from the airport to the
Opryland site owned by defendants - actually flowed not from the
anticompetitive effects of an allegedly unlawful market division
agreement, but from the defendants' "lawful refusal to grant plaintiffs
access to their private property." 26 F.3d at 39. In Valley Products, the
antitrust violation was not the "necessary predicate" because the
plaintiff's alleged injury - its exclusion from competing in the
franchisor's logoed amenity market - actually flowed, not from the
anticompetitive effects of an allegedly unlawful tying arrangement, but
from the defendant's lawful termination of a vendor agreement.*fn19 Thus, in reality, we have only dismissed a case for
failure to allege that an antitrust violation is the "necessary predicate"
for the plaintiff's injury where it has been apparent from the face of the
complaint that actual and unequivocally legal action by the defendant
would have caused plaintiff's injury, even if there had been no antitrust
violation.
|
| [78] |
Application to this case of the "necessary predicate" test, as we have
applied it in the cases which are the subject of the certified question,
demonstrates that the district court correctly refused to dismiss these
complaints for failure to allege antitrust injury. In essence, as exposed
by the per se analysis above, see supra Part II.A., the complaints allege
a plain vanilla horizontal agreement to restrain trade in the form of a
multi-million dollar cash payment in consideration for forbearance by
Andrx from selling on the market a product that it was ready and able to
sell at a price lower than that charged by HMR for the patented product.
There is nothing on the face of the complaint that suggests, much less
establishes as a matter of law, that there was any physical or
"impenetrable" legal impediment to Andrx's production and sale of its
FDA-approved generic product. Indeed, some plaintiffs allege that HMR's
patent infringement suit against Andrx was a "sham." JA 948, ¶ 101; JA
949, ¶¶ 103-04; JA 154, ¶ 53. Nor can the defendants identify a lawful
right that they had and exercised and that indisputably caused plaintiffs'
injury. Thus, the complaint may be fairly construed as alleging that the
per se illegal Agreement with its $89 million payment, not HMR"s disputed
45%-18 patent, constituted the "necessary predicate" for Andrx's decision
to keep its FDA-approved 55%-18 generic product off the market and HMR
free from any generic product competition. The fact that Andrx could have
unilaterally, and legally, decided not to bring its generic product to a
manifestly profitable market has no relevance in assessing whether the
plaintiffs adequately alleged that the antitrust violation was the
necessary predicate for their injury.*fn20
|
| [79] |
What remains is the defendants' contention that Andrx would have
stayed out of the market even absent the Agreement and the payment of $40
million per year because Andrx feared incurring damages in the patent
infringement litigation. Proof of allegations on the face of this
complaint and reasonable inferences therefrom, however, could persuade a
trier of fact that had HMR been confident of the independent durability of
its patent and the validity of its infringement claim, it would not have
paid $89 million to effect what the patent and infringement suit had
already accomplished. Under the aegis of the complaint and inferences, a
fact trier could also find that even if it is a "prudent" industry
practice for a generic manufacturer to stay out of the market until the
resolution of patent infringement litigation, Defs. Br. at 33, in this
case, the patent infringement suit was a "paper tiger" incapable of
deterring the generic producer from entering the market as soon as the FDA
approved its product - as it had formally advised the patent court. If
proved to be true, it would almost necessarily follow that the plaintiffs'
injury flowed from the Agreement and payment of $40 million per year. At
this stage of the litigation, we must leave this dispute for the trier of
fact to evaluate.
|
| [80] |
III. CONCLUSION
|
| [81] |
For the foregoing reasons, we answer both of the district court's
certified questions as follows: it properly resolved the questions that it
put to us in the course of denying defendants' motions to dismiss and
granting the plaintiffs' motions for summary judgment that the defendants
had committed a per se violation of the antitrust laws.
|
| |
|
| |
Opinion Footnotes |
| |
|
| [82] |
*fn1 The Honorable Louis F. Oberdorfer, United States District Judge
for the District of Columbia, sitting by designation.
|
| [83] |
*fn2 A "generic" drug contains the same active ingredients
but not necessarily the same inactive ingredients as a "pioneer" drug sold
under a brand name. United States v. Generix Drug Corp., 460 U.S. 453,
454-55 (1983).
|
| [84] |
*fn3 Two other patents for the dissolution profile of
Cardizem CD had previously been issued, one in February 1994 and one in
August 1995. Neither is relevant to the present litigation.
|
| [85] |
*fn4 The payments were scheduled to end on the earliest of:
(1) a final and unappealable order or judgment in the patent infringement
case; (2) if HMR notified Andrx that it intended to enter into a license
agreement with a third party, the earlier of: (a) the expiration date of
the required notice period or (b) the date Andrx effected its first
commercial sale of the Andrx product; or (3) if Andrx exercised its option
to acquire a license from HMR, the date the license agreement became
effective.
|
| [86] |
*fn5 HMR and Andrx stipulated that, for the purposes of the
Agreement, Andrx would have realized $100 million per year in profits from
the sale of its generic product after receiving FDA
approval.
|
| [87] |
*fn6 HMR had to notify Andrx within thirty days of such a
determination that it continued to believe that Andrx's generic version of
the drug infringed its patent and that it intended to refile its patent
infringement action.
|
| [88] |
*fn7 HMR also agreed that it would give Andrx copies of
changes it proposed to the FDA regarding Cardizem CD's package insert and
immediate container label, that it would notify Andrx of any labeling
changes pending before or approved by the FDA, and that it would grant
Andrx an irrevocable option to acquire a nonexclusive license to all
intellectual property HMR owned or controlled that Andrx might need to
market its product in the United States.
|
| [89] |
*fn8 As described by the district court, the plaintiffs
fall into three groups: (1) the "State Law Plaintiffs," indirect
purchasers, and class representatives, from various states whose
complaints, initially filed in state court and then removed to federal
district court by defendants, allege violations of state antitrust and
consumer protection statutes, JA 908-1011; (2) the "Sherman Act Class
Plaintiffs," direct purchasers, and class representatives, whose
complaint, filed in federal district court, alleges a violation of federal
antitrust law, JA 139-159; and (3) the "Individual Sherman Act
Plaintiffs," two groups of purchasers, not representatives of any class,
whose complaints, filed in federal district court, allege violations of
federal antitrust law, JA 860-881 (filed by The Kroger Co., Albertson's,
Inc., The Stop and Shop Supermarket Co., and Eckerd Corp.); JA 887-896
(filed by CVS Meridian, Inc. and Rite Aid Corp.). See Dist. Ct. Op. I, at
625-27. Each group has filed a brief on appeal.
|
| [90] |
*fn9 Of the State Law Plaintiffs, the plaintiffs from seven
states (California, Michigan, Minnesota, New York, North Carolina,
Tennessee, and Wisconsin) and the District of Columbia claim violations of
state antitrust law. Dist. Ct. Op. I, at 625 n.3.
|
| [91] |
*fn10 Since oral argument before this Court, the
defendants have reached a settlement with the Sherman Act Class
Plaintiffs. A settlement with the State Law Plaintiffs and the State
Attorneys' General is subject for a final approval hearing before the
District Court in October 2003. The Sherman Act Individual Plaintiffs have
settled with HMR (now Aventis Pharmaceuticals), but have not settled with
Andrx. The defendants have represented to the Court that these settlements
have not mooted the certified issues presented by this appeal. See Letter
to U.S. Court of Appeals for the Sixth Circuit, filed Feb. 20,
2003.
|
| [92] |
*fn11 It is undisputed that the state antitrust statutes
at issue either follow federal Sherman Act precedent or find federal case
law persuasive. See State Law Pls. Br. at 41-44.
|
| [93] |
*fn12 The risk that the application of a per se rule will
lead to the condemnation of an agreement that a rule of reason analysis
would permit has been recognized and tolerated as a necessary cost of this
approach. See, e.g., Maricopa Cty., 457 U.S. at 344 ("As in every rule of
general application, the match between the presumed and the actual is
imperfect. For the sake of business certainty and litigation efficiency,
we have tolerated the invalidation of some agreements that a fullblown
inquiry might have proved to be reasonable."); United States v. Topco
Associates, Inc., 405 U.S. 596, 609 (1972) ("Whether or not we would
decide this case the same way under the rule of reason used by the
District Court is irrelevant to the issue before us.").
|
| [94] |
*fn13 As the district court for the Eastern District of
New York recently observed, in distinguishing the district court's opinion
in the present case (Cardizem II), By agreeing both not to end the
underlying patent dispute and not to market a generic drug product in the
relevant domestic market, Andrx . . . effectively precluded or seriously
delayed both the [patent] court decision and the commercial marketing
trigger of the 180-day exclusivity period. As a result, any future
[generic] filers were delayed in coming to market . . . . In re
Ciprofloxacin Hydrochloride Antitrust Litigation, MDL No. 1383, 2003 WL
21146562, at *46 (E.D.N.Y. May 20, 2003); see also In re Tamoxifen Citrate
Antitrust Litigation, MDL No. 1408, 2003 WL 21196817, at *9 (E.D.N.Y. May
13, 2003).
|
| [95] |
*fn14 As the court in In re Ciprofloxacin observed, [w]hen
the Cardizem [district] court condemned the HMR/Andrx Agreement, it
emphasized that the agreement [there] restrained Andrx from marketing
other bioequivalent or generic versions of Cardizem that were not at issue
in the pending litigation, . . . . Thus, the court found that the
agreement's restrictions extended to noninfringing and/or potentially
noninfringing versions of generic Cardizem. 2003 WL 21146562, at
*46.
|
| [96] |
*fn15 For example, the defendants charge that the district
court erred in concluding that in the absence of the Agreement, Andrx
would have marketed its generic product before the end of the patent
litigation (once it had received FDA approval). However, the district
court never held that Andrx would have launched the original formulation
of its generic while the patent suit was pending, only that it could have.
The defendants also contend that the district court erred in assuming that
Andrx could have marketed its reformulated generic, which only received
FDA approval in June 1999, before it did, but the district court made no
such assumption. Finally, the defendants argue that the district court
erred in reaching the conclusion that Andrx and HMRI were horizontal
competitors. They maintain that it would be inconsistent with Hatch-Waxman
scheme to allow a court to treat a generic manufacturer who is seeking FDA
approval and has been charged with patent infringement and the patent
holder as horizontal competitors. Hatch-Waxman notwithstanding, the
defendants are potential rivals in the market for Cardizem CD; an
agreement between them is thus an agreement between horizontal
competitors.
|
| [97] |
*fn16 Our conclusion that the Agreement was a per se
illegal restraint of trade does not obviate the need to decide whether the
plaintiffs adequately alleged antitrust injury. See Atlantic Richfield Co.
v. USA Petroleum Co., 495 U.S. 328, 341-42 (1990) ("The per se rule is a
method of determining whether § 1 of the Sherman Act has been violated,
but it does not indicate whether a private plaintiff has suffered
antitrust injury and thus whether he may recover damages under § 4 of the
Clayton Act.").
|
| [98] |
*fn17 The State Law Plaintiffs allege that the '584 patent
"represented no substantive change or improvement to Cardizem CD but
rather was prosecuted and listed solely to give HMR a basis for initiating
sham patent infringement litigation to delay and exclude Andrx's generic
Cardizem CD from the Cardizem CD market for at least 30 months." JA 948, ¶
101. They further allege that Andrx's specified dissolution profile,
submitted to the FDA after the patent infringement litigation was filed,
was "clearly distinct" from the '584 patent, JA 949, ¶ 103, and that HMR
continued its pursuit of the patent infringement litigation "despite the
absence of any reasonable belief that their claim would be held to be
valid upon adjudication," id. ¶ 104. Finally, they allege that HMR's "goal
and intention in pursuing [the patent infringement litigation] was solely
to indefinitely delay and prevent the entry of Andrx's product into the
marketplace and invoke the automatic 30-month administrative delay in the
FDA approval process." Id.; see also JA 154, ¶ 53 (amended complaint of
Sherman Act Class Plaintiffs alleging that "patent litigation" was
"sham[]")).
|
| [99] |
*fn18 It is noteworthy that the district court has
responsibility for these cases by assignment of the Judicial Panel on
Multidistrict Litigation, and we address this certified question in aid of
the district court. This consolidated proceeding includes cases that were
originally filed in various state and federal courts, raising state and
federal antitrust claims. The state cases were first removed to federal
district court and then transferred to the Eastern District of Michigan.
In considering the issue of antitrust injury, the district court applied
the same analysis, including the application of Sixth Circuit precedent,
to all of the antitrust claims. Id. at 645-58. As no party has taken issue
with this approach, either before the district court or on appeal, we have
followed the same path. We note, however, that although it is clear and
undisputed that the state antitrust laws at issue all "either follow
federal Sherman Act precedent or find federal case law persuasive," Dist.
Ct. Op. II, at 692 & n.6 (citing state cases); see also State Law Pls.
Br. at 41-15, and that in a federal multidistrict litigation there is a
preference for applying the law of the transferee district, see In re
Temporomandibular Joint (TMJ) Implants Prod. Liab. Litig., 97 F.3d 1050
(8th Cir. 1996); Menowitz v. Brown, 991 F.2d 36 (2d Cir. 1993), it is not
clear that precedent "unique" to a particular circuit and arguably
divergent from the predominant interpretation of a federal law, such as
the Sixth Circuit's "necessary predicate" gloss on the antitrust injury
doctrine, should be applied to state antitrust laws or federal antitrust
claims that originated in other circuits, see In re Korean Air Lines
Disaster of Sept. 1, 1983, 829 F.2d 1171 (2d Cir. 1987), aff'd, 490 U.S.
122 (1989) (law of transferor forum on federal question merits close
consideration, but does not have stare decisis effect). As we agree with
the district court that the plaintiffs have alleged antitrust injury as
contemplated by the Sixth Circuit, this consideration is of academic
interest only. Were the outcome otherwise, it might require further
consideration.
|
| [100] |
*fn19 This court's decision in Watkins & Son Pet
Supplies v. Iams Co., 254 F.3d 607 (6th Cir. 2001), similarly found no
antitrust injury where the plaintiff's alleged injury - its exclusion from
the market - flowed from the termination of its distributorship, not from
the defendants' allegedly illegal distribution restraints.
|
| [101] |
*fn20 In addition, the defendants' position, if adopted,
risks undermining a basic premise of antitrust law that, as the district
court observed, in many instances, an otherwise legal action - e.g.
setting a price - becomes illegal if it is pursuant to an agreement with a
competitor. Under the defendants' view, such an action would never cause
antitrust injury because a defendant could have unilaterally and legally
set the same
price.
|