7 F.3d 1130 (4th Cir. 1993), 93-1041, Mylan Laboratories, Inc. v. Matkari

Docket Nº:93-1041.
Citation:7 F.3d 1130
Party Name:28 U.S.P.Q.2d 1533 MYLAN LABORATORIES, INCORPORATED, Plaintiff-Appellant, v. Raj MATKARI; Dilip Shah; Raju Vegesna; Mohammed F. Azeem; Charles Chang; David J. Brancato; Jin-Shung Chang; Walter Kletch; Jan T. Sturm; Pharmaceutical Basics, Incorporated; Par Pharmaceuticals, Incorporated; Quad Pharmaceuticals, Incorporated; American Therapeutics, Inco
Case Date:October 18, 1993
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 1130

7 F.3d 1130 (4th Cir. 1993)

28 U.S.P.Q.2d 1533

MYLAN LABORATORIES, INCORPORATED, Plaintiff-Appellant,

v.

Raj MATKARI; Dilip Shah; Raju Vegesna; Mohammed F. Azeem;

Charles Chang; David J. Brancato; Jin-Shung Chang;

Walter Kletch; Jan T. Sturm; Pharmaceutical Basics,

Incorporated; Par Pharmaceuticals, Incorporated; Quad

Pharmaceuticals, Incorporated; American Therapeutics,

Incorporated; American Home Products Corporation; Quantum

Pharmics, Limited; Steven Colton; Salvatore J. Pinella,

Defendants-Appellees,

and

Ashok Patel; Vitarine Pharmaceuticals, Incorporated, Defendants.

No. 93-1041.

United States Court of Appeals, Fourth Circuit

October 18, 1993

Argued May 3, 1993.

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Judith Best, Debevoise & Plimpton, Washington, DC, argued (Loren Kieve, Ann M. Ashton, on brief), for plaintiff-appellant.

Peter Zimroth, Arnold & Porter, New York City, Donald John Mulvihill, Cahill, Gordon & Reindel, Washington, DC, argued (Kenneth V. Handal, Arnold & Porter, New York City, Kathy Silberthau Strom, Scott A. Martin, Cahill, Gordon & Reindel, Washington, DC, William J. Ruane, Asst. Gen. Council-Litigation, American Home Products Corp., New York City, Thomas J. McGrew, Richard M. Cooper, Richard S. Hoffman, David C. Kieman, Williams & Connolly, Steven Salky, Zuckerman, Spaeder, Goldstein, Taylor & Kolker, Hamilton P. Fox, III, Sutherland, Asbill & Brennan, Washington, DC, August Draeb, Draeb Law Office, Hebron, ND, on brief), for defendants-appellees.

Before ERVIN, Chief Judge, and MURNAGHAN and NIEMEYER, Circuit Judges. Reversed by published opinion. Judge Murnaghan wrote the opinion, in which Chief Judge Ervin and Judge Niemeyer joined.

OPINION

MURNAGHAN, Circuit Judge:

Plaintiff-appellant Mylan Laboratories, Inc. ("Mylan") has appealed the dismissal of its Third Amended Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court dismissed all of Mylan's claims with prejudice.

On appeal, Mylan has maintained that its Third Amended Complaint was sufficient to survive the Rule 12(b)(6) stage. Specifically, Mylan has asserted that it properly alleged numerous violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., several claims for damages for false advertising under

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the Lanham Act, 15 U.S.C. §§ 1117 and 1125(a), and, finally, state law claims for unfair business competition and tortious interference with prospective business relations. Mylan further has contended that even if it failed to state a claim under Rule 12(b)(6), the district court abused its discretion when it dismissed the complaint with prejudice and prohibited further motions to amend.

Mylan is a corporation engaged in developing, manufacturing, and distributing prescription and generic drugs. In 1989, it filed suit against several manufacturers involved either directly or through a subsidiary in the generic drug industry, various officers of those corporations, and several employees of the Food and Drug Administration ("FDA"). Mylan originally filed its suit in the United States District Court for the District of Columbia; however, in March 1990, Judge Thomas F. Hogan, finding venue to be improper, transferred the case to the District of Maryland. Shortly thereafter, Mylan completed its first round of amendments to its complaint. The First Amended Complaint charged the defendants with numerous anti-trust violations, violations of RICO, and violations of state law for unfair business competition and tortious interference with prospective business relations. Mylan essentially claimed that between 1984 and 1989, the defendants conspired to facilitate and did facilitate fraudulent FDA approval of their abbreviated new drug applications ("ANDAs") for generic drugs. 1 At the same time, the complaint charged, the defendants wrongfully delayed or impeded the processing of Mylan's ANDAs.

Upon review of a motion to dismiss the First Amended Complaint, Judge Norman P. Ramsey of the United States District Court for the District of Maryland dismissed against all of the defendants Mylan's anti-trust claims and Count 3, a RICO claim premised on a theory of a single conspiracy or joint action among all of the defendants in violation of 18 U.S.C. § 1962(d). In ruling on the legal sufficiency of the remaining RICO counts, Judge Ramsey considered Mylan's pleadings of predicate acts, which included allegations of bribery, obstruction of justice, and mail and wire fraud. He concluded that one of Mylan's theories of mail and wire fraud was legally insufficient and that the other was not pleaded with enough particularity under Federal Rule of Civil Procedure 9(b). Judge Ramsey then dismissed Count 1, arising under RICO, 18 U.S.C. § 1962(c), against only American Home Products Corp. ("AHP"), Quantum Pharmics, Ltd. ("Quantum"), and Jin-Shung Chang on the grounds that Mylan had failed to show a pattern of racketeering activity. He also dismissed Count 2, arising under RICO, 18 U.S.C. § 1962(a), against individual defendants Raj Matkari, Ashok Patel, Dilip Shah, Raju Vegesna, as well as against Jin-Shung Chang and corporate defendants AHP and Quantum. Judge Ramsey completed his review by sustaining, as against all of the defendants, Mylan's state-law claims. See Mylan Lab., Inc. v. Akzo, N.V., 770 F.Supp. 1053 (D.Md.1991).

Mylan then moved to file a Second Amended Complaint. The new complaint contained substantial alterations, including additions of new claims and new allegations, as well as numerous deletions. Judge Ramsey, however, denied without prejudice Mylan's motion to amend on the grounds that Mylan had failed to comply with Local Rule 103.6.c which requires highlighting of all amendments. The record, the Judge noted in his ruling, had become "confused virtually beyond analysis by the proposed second amended complaint." In short, the highlighting of all changes to the complaint was essential for the case to proceed properly. Mylan promptly submitted a corrected complaint and a revised Motion to Amend.

Shortly thereafter, Judge Ramsey left the bench, and the case was transferred to Judge Frederic N. Smalkin of the United States District Court for the District of Maryland. Before granting Mylan's revised motion to

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amend, Judge Smalkin ordered Mylan to delete all claims against corporate defendant Akzo, N.V., in accordance with Judge Ramsey's then-recent ruling dismissing the corporation from the case for lack of personal jurisdiction. See Mylan Lab., Inc. v. Akzo, N.V., 2 F.3d 56 (4th Cir.1993) (affirming Judge Ramsey). Finally, in order "to prevent this case from becoming totally unmanageable," Judge Smalkin announced that he would permit no further motions to amend after Mylan's resubmission. In July 1992, Mylan submitted its Third Amended Complaint.

The most recent and substantially down-sized complaint contains four counts. The complaint lists as defendants seven corporations: Pharmaceutical Basics, Inc. ("PBI"), Par Pharmaceutical, Inc. ("PAR"), a Par subsidiary, Quad Pharmaceuticals, Inc. ("Quad"), American Therapeutics, Inc. ("ATI"), Vitarine Pharmaceuticals, Inc. ("Vitarine"), Quantum, and Quantum's parent, AHP. In addition, the complaint lists various individual defendants, including persons who are or were at all relevant times officers of the defendant corporations or FDA employees. Counts 1 and 2 assert violations of RICO essentially consonant with those Judge Ramsey had ruled in favor of allowing to proceed. Specifically, Count 1 alleges a violation by all defendants of 18 U.S.C. § 1962(c). 2 Count 2 alleges that defendants PBI, Par, Quad, ATI, Vitarine, AHP, Quantum, Mohammed Azeem, Jin-Shung Chang, Charles Chang, David Brancato, Walter Kletch, and Jan T. Sturm violated 18 U.S.C. § 1962(a). 3 In Count 3, Mylan introduced a claim that had not appeared in the First Amended Complaint and, hence, had not been addressed by Judge Ramsey. The new allegations state that defendants AHP, Quantum, PBI, and Par violated the Lanham Act, 15 U.S.C. § 1125(a), by using false and misleading advertisements. Finally, Count 4 reasserts against all of the defendants the state-law claims of unfair business competition and tortious interference with business relations.

With respect to Counts 1 and 2 (the RICO counts) and Count 4 (the state law claim), it is true that Mylan has kept in its Third Amended Complaint general language that suggests some claim of a joint or "global" conspiracy among all of the defendants to commit a single pattern of racketeering activity. Judge Ramsey already had ruled, and Judge Smalkin agreed, that a claim of a global action among all of the defendants was not supported by Mylan's allegations. Perhaps the global conspiracy language which remains in the third version of the complaint was the result of less-than-careful draftsmanship. The language also could be read as a highly simplistic and inartful attempt to provide the court, in so many words, with a general overview to a complex set of circumstances involving numerous defendants. Nevertheless, the complaint also contains numerous factual allegations of separate patterns of racketeering activity committed by various groups of defendants. Although agreeing that the global conspiracy, standing alone, would be insufficient, we are reluctant, at the relatively early Rule 12(b)(6) stage, to affirm the entire dismissal of Mylan's RICO and common law claims for failure to state a claim on the basis of the misleading additional language concerning joint activity. Accordingly, we reverse the decision to dismiss Counts 1, 2, and 4. We caution, however, that a claim held not dismissible at the Rule 12(b)(6) level must eventually still be proven.

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I. Standard of Review

We review a district court's dismissal under Rule 12(b)(6) de novo. See, e.g., Schatz v....

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