Walgreen Co. v. Johnson & Johnson

• Decision Date: 21 February 2020
• Docket Number: No. 19-1730,19-1730
• Citation: 950 F.3d 195
• Parties: WALGREEN CO.; Kroger Co., Appellants v. JOHNSON & JOHNSON; Janssen Biotech Inc.
• Court: U.S. Court of Appeals — Third Circuit

950 F.3d 195

WALGREEN CO.; Kroger Co., Appellants

v.JOHNSON & JOHNSON; Janssen Biotech Inc.

No. 19-1730

United States Court of Appeals, Third Circuit.

Argued November 12, 2019

Filed February 21, 2020

Anna T. Neill, Scott E. Perwin [ARGUED], Michael A. Ponzoli, Lauren C. Ravkind, Kenny Nachwalter, 1441 Brickell Avenue, Four Seasons Tower, Ste. 1100, Miami, FL 33131, Counsel for Appellants

William F. Cavanaugh, Jr. [ARGUED], George A. LoBiondo, Adeel A. Mangi, Patterson Belknap Webb & Tyler, 1133 Avenue of the Americas, New York, NY 10036, Thomas O. Barnett, Ashley E. Bass, Covington & Burling, 850 10th Street, NW, One City Center, Washington, DC 20001, Leslie E. John, Burt M. Rublin, Ballard Spahr, 1735 Market Street - 51st Floor, Philadelphia, PA 19103, Counsel for Appellees

Eric L. Bloom, Monica L. Kiley, Hangley Aronchick Segal Pudlin & Schiller, 2805 Old Post Road – Suite 100, Harrisburg, PA 17110, Barry L. Refsin, Hangley Aronchick Segal Pudlin & Schiller, One Logan Square, 18th & Cherry Streets, 27th Floor, Philadelphia, PA 19103, Counsel for Amicus Appellants CVS Pharmacy Inc. and Rite Aid Corp

Moira E. Cain-Mannix, Brian C. Hill, Marcus & Shapira, 301 Grant Street, One Oxford Centre – 35th Floor, Pittsburgh, PA 15219, Counsel for Amicus Appellant Giant Eagle Inc.

Before: JORDAN, SCIRICA, and RENDELL, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

This case raises the question of whether an assignment of federal antitrust claims is barred by a contract provision proscribing the assignment of any "rights or obligations under" that contract. The District Court answered in the affirmative and granted summary judgment against the appellants, who all want to assert antitrust claims they purportedly obtained by assignment from a party bound by the anti-assignment clause. We conclude that the District Court erred. The antitrust claims are a product of federal statute and thus are extrinsic to, and not rights "under," a commercial agreement. Accordingly, we will reverse the grant of summary judgment and remand for further proceedings.

I. BACKGROUND

Appellants Walgreen Co. and the Kroger Co. (which, for convenience, we refer to collectively and in the singular as "Walgreen") operate retail pharmacies throughout the United States. One of the many pharmaceuticals that Walgreen dispenses to the public is Remicade

, a biologic drug used to treat various autoimmune diseases. Remicade is marketed and manufactured by Appellees Johnson & Johnson and Janssen Biotech, Inc. (which, again, for convenience we refer to collectively and in the singular as "Janssen"). Janssen does not sell Remicade directly to Walgreen. Instead, Walgreen procures Remicade from two wholesale distributors: AmerisourceBergen and Cardinal Health (once more, collectively and in the singular "Wholesaler"). Wholesaler acquires Remicade pursuant to a Distribution Agreement with JOM Pharmaceutical Services, Inc. ("JOM"), a Janssen affiliate.¹ Only Wholesaler and JOM are identified as parties to the Distribution Agreement. It is undisputed that New Jersey law governs the Distribution Agreement.

This appeal pertains to the scope of the anti-assignment language in Section 4.4 (the "Anti-Assignment Provision") of the Distribution Agreement. In relevant part, the Anti-Assignment Provision states that "neither party may assign, directly or indirectly, this agreement or any of its rights or obligations under this agreement ... without the prior written consent of the other party.... Any purported assignment in violation of this section will be void." (JA at 102 (emphasis added).)

In January 2018, Wholesaler assigned to Walgreen "all of its rights, title and interest in and to" its claims against Janssen "under the antitrust laws of the United States or of any State arising out of or relating to [Wholesaler]’s purchase of Remicade

[.]"² (JA at 217.) Less than six months later, Walgreen exercised the rights Wholesaler had assigned to it and filed suit against Janssen, asserting various federal antitrust claims relating to Remicade. At bottom, Walgreen alleges that Janssen used its size and bargaining power in the broader pharmaceutical market to enter into exclusive contracts and anticompetitive bundling agreements with health insurers that suppressed generic competition to Remicade, which in turn allowed Janssen to sell Remicade at supracompetitive prices.

Janssen moved to dismiss Walgreen’s complaint on the ground that the Anti-Assignment Provision invalidated Wholesaler’s purported assignment of its antitrust claims to Walgreen. It is undisputed that, if the Anti-Assignment Provision prevents the assignment, then, under the Supreme Court’s seminal decision in Illinois Brick Co. v. Illinois , 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), Walgreen, an "indirect" Remicade

purchaser, would lack antitrust standing to assert claims against Janssen relating to Remicade.³ To take account of the potentially dispositive Distribution Agreement, the District Court converted Janssen’s motion to dismiss into a motion for summary judgment.

After full briefing, on March 25, 2019, the District Court granted the motion for summary judgment and entered judgment in Janssen’s favor on all counts. In reaching its decision, the Court concluded that Janssen was a party to the Distribution Agreement with standing to enforce its terms, and that, under New Jersey law, the Anti-Assignment Provision precluded Wholesaler from assigning its federal antitrust claims against Janssen to Walgreen, thus depriving Walgreen of antitrust standing. This timely appeal followed.

II. DISCUSSION ⁴

Walgreen presses a number of arguments in opposition to the District Court’s dismissal of its claims, but we need only address one: whether Wholesaler’s assignment to Walgreen of its antitrust claims against Janssen was barred by the Anti-Assignment Provision.⁵ Because the answer to that question is no, we will reverse and remand for further proceedings.

The facts of this case are in all material respects the same as those of Hartig Drug Company Inc. v. Senju Pharmaceutical Company Ltd. , 836 F.3d 261 (3d Cir. 2016). In Hartig , an indirect purchaser of medicated eyedrops asserted antitrust claims against the eyedrops’ manufacturer pursuant to an assignment of antitrust claims from a "direct purchaser" distributor. Id. at 264. The district court granted the defendant manufacturer’s motion to dismiss the indirect-purchaser plaintiff’s claims on the ground that "an anti-assignment clause in a distribution agreement between [the manufacturer] and [the distributor] barred any assignment of antitrust claims from [the distributor] to [the indirect purchaser], leaving [the indirect purchaser] without standing to sue and divesting the Court of subject matter jurisdiction." Id. We vacated and remanded, holding that the district court erred both in concluding that the anti-assignment clause implicated that court’s subject matter jurisdiction and in considering the terms of the distribution agreement, which was neither integral to nor attached to the indirect-purchaser plaintiff’s complaint. Id. at 269, 273-74.

Given that the district court might have occasion to again interpret the distribution agreement on remand, considerations of judicial economy prompted us to note our "doubt about the Court’s interpretation of the [distribution agreement] as barring the assignment of antitrust causes of action[.]" Id. at 274. In that regard, we observed, albeit in dictum , that "[b]ecause [the wholesaler]’s antitrust causes of action arise by statute, there is a serious argument that they do not fall within the [distribution agreement]’s plain language limiting assignment of ‘rights and obligations hereunder’—that is, they arise by operation of an extrinsic legal regime rather than by contract." Id. at 275 n.17.

That observation in Hartig provides the appropriate rule of decision here: the statutory federal antitrust claims asserted in Walgreen’s complaint are extrinsic to, and not "rights under," the Distribution Agreement. Applied to the Anti-Assignment Provision, the scope of which is limited to Wholesaler’s "rights under" the Distribution Agreement, it becomes evident that the provision has no bearing on Wholesaler’s antitrust claims, which rely only on statutory rights and do not implicate any substantive right under the Distribution Agreement. Accordingly, the Anti-Assignment Provision does not invalidate Wholesaler’s assignment of antitrust claims to Walgreen or otherwise present a bar to Walgreen’s standing to assert those antitrust claims against Janssen. Our holding here is consistent with the substantial weight of decisions on this issue, which do not bind us but nevertheless are persuasive.⁶

Janssen raises three arguments in opposition to the holding we adopt today: (i) New Jersey law, which governs the Distribution Agreement, recognizes statutory causes of action as "rights under" an agreement; (ii) the term "rights under" an agreement "encompasses any rights engendered by virtue of the relationship the agreement established" and thus includes Walgreen’s antitrust claims, which ultimately flow from the Distribution Agreement; and (iii) the rationale of Hartig has been "eclipsed" by our subsequent decisions in Wallach v. Eaton Corp. , 837 F.3d 356 (3d Cir. 2016), and American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield , 890 F.3d 445 (3d Cir. 2018). (Answering Br. at 22-30 (internal quotation marks omitted).) Each of those arguments falls short.

Regarding the application of New Jersey law to the Anti-Assignment Provision, Janssen correctly notes that neither Hartig nor any of the antitrust cases interpreting the scope of anti-assignment clauses that Walgreen cites (and which we find persuasive) applied New Jersey law. But that fact is not dispositive. Janssen cites no case, let alone a case applying New Jersey law, in which any court has found that federal antitrust claims fall within...