Barton & Pittinos, Inc. v. SmithKline Beecham Corp., 96-1941

• Citation: 118 F.3d 178
• Decision Date: 18 July 1997
• Docket Number: No. 96-1941,96-1941
• Parties: 1997-2 Trade Cases P 71,874 BARTON & PITTINOS, INC., Appellant, v. SMITHKLINE BEECHAM CORPORATION.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 178

118 F.3d 178

1997-2 Trade Cases P 71,874

BARTON & PITTINOS, INC., Appellant, v. SMITHKLINE BEECHAM CORPORATION.

No. 96-1941.

United States Court of Appeals, Third Circuit.

Argued June 13, 1997.

Decided July 18, 1997.

Barbara W. Mather (Argued), Philip H. Lebowitz, Nicole D. Galli, Pepper, Hamilton & Scheetz, Philadelphia, PA, Kenneth H. Zucker, Pepper, Hamilton & Scheetz, Berwyn, PA, for Appellant.

James D. Coleman (Argued), Thomas B. Roberts, Ballard Spahr Andrews & Ingersoll, Philadelphia, PA, for Appellee.

Before: COWEN, ALITO, and GARTH, Circuit Judges.

OPINION OF THE COURT

ALITO, Circuit Judge:

Appellant Barton & Pittinos, Inc. ("B&P") is a pharmaceutical marketing company. B&P entered into a contract with appellee SmithKline Beecham Corp. ("SKB") to market SKB's Engerix-B vaccine for hepatitis-B ("the vaccine") to nursing homes. Under the terms of the program, B&P would provide the nursing homes with information about the vaccine and would solicit orders. B&P would then pass the orders to General Injectables and Vaccines, Inc. ("GIV"), which would buy the vaccine from SKB and then resell it to the nursing homes, with B&P receiving a commission. When SKB, B&P, and GIV launched this program, SKB, it is alleged, was inundated with a flood of complaints from the consultant pharmacists who had traditionally supplied the nursing homes with SKB's vaccines and other pharmaceutical products. Assertedly bowing to pressure from the pharmacists, SKB terminated the program.

B&P brought this action against SKB, alleging that SKB conspired with the pharmacists to restrain competition in the nursing home market for the vaccine, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. B&P also asserted claims under state law for breach of contract and unjust enrichment. The district court granted summary judgment in favor of SKB on B&P's antitrust claim on the ground that B&P lacked standing to sue for its alleged injuries under the antitrust laws. B&P appealed. We hold that the injury alleged by B&P is not the type of injury that the antitrust laws were intended to prevent because B&P was not a competitor or a consumer in the market in which trade was allegedly restrained. Since B&P therefore cannot demonstrate "antitrust injury," it lacks standing under the antitrust laws. Accordingly, we affirm.

I.

In 1991, B&P learned that the Occupational Safety and Health Administration would soon require employers whose employees might be exposed to blood-borne pathogens to educate their employees about the vaccine against hepatitis-B and to make the vaccine available to them free of charge. See 29 C.F.R. § 1910.1030 (1991). At the time, the only manufacturers of the vaccine were SKB and Merck & Co. Sensing an opportunity to profit from this regulatory mandate, B&P developed a plan to market the vaccine to nursing homes. SKB agreed to pay B&P a flat fee in exchange for B&P's preparation and distribution to the nursing homes of educational materials regarding the vaccine and the regulations. B&P performed the agreed upon work and SKB compensated it according to the contract. The next step in the program was for B&P to telephone the nursing homes (under the trade name "The Medical Phone Company") to solicit orders for the vaccine. B&P contends that SKB agreed to pay it a commission of 7% on sales of the vaccine as compensation for these telemarketing services. ¹

Because B&P, as a marketing company rather than a pharmaceutical company, lacked the required license to buy, possess, or sell the vaccine, the program did not call for B&P actually to distribute the vaccine to the nursing homes. Rather, B&P's function was to drum up demand for the vaccine, solicit orders from the nursing homes, and pass the orders along to GIV, a licensed medical supply house. GIV would fill the orders by purchasing the vaccine from SKB and would then resell the vaccine to the nursing homes.

The program debuted in January 1992. Before the commencement of this program, the nursing homes had traditionally obtained their vaccines and other pharmaceutical products from "consultant pharmacists." A nursing home's consultant pharmacist would educate nursing home administrators and staff about pharmaceutical products and regulatory requirements; assist the nursing home in storing its pharmaceuticals and in keeping the required records relating to their prescription; negotiate directly with pharmaceutical manufacturers regarding price and other terms of purchase of pharmaceutical products; and take orders from the nursing home, purchase the desired products from the manufacturers, and resell them to the nursing home. Because the SKB/B&P/GIV program promised economically advantageous terms to the nursing homes, the nursing homes accorded the program a favorable reception.

The nursing homes' gain, however, was the pharmacists' loss. Almost immediately, many individual pharmacists as well as pharmacist trade associations complained to SKB that the program bypassed them and undercut them on price, and some threatened to boycott SKB products if SKB continued the program. ² In March 1992, following meetings with pharmacist groups, SKB discontinued the program involving B&P and GIV and reverted to its prior practice of distributing the vaccine through consultant pharmacists. Even after SKB ended the program, it continued to explore the possibility of continuing to employ B&P to help to market the vaccine, but the parties were unable to reach agreement.

II.

B&P filed this action in October 1995. Under § 4 of the Clayton Act, 15 U.S.C. § 15, B&P claimed that it was entitled to treble damages for SKB's conspiracy with the pharmacists to restrain trade in the market for sales of the vaccine to nursing homes, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. B&P also pled claims under state law, alleging that SKB had breached its contract with B&P by terminating the telemarketing program and refusing to pay B&P any commission and, in the alternative, that SKB had been unjustly enriched by the receipt of B&P's telemarketing services.

In August 1996, SKB moved for summary judgment, contending that B&P lacked antitrust standing because it was neither a competitor nor a consumer in the market in which trade was allegedly restrained. The district court held that B&P had failed to show that its alleged injury constituted "antitrust injury" and granted the motion. Barton & Pittinos, Inc. v. SmithKline Beecham Corp., 942 F.Supp. 235, 237 (E.D.Pa.1996). The court also held that the existence of more direct victims than B&P and the danger of complex apportionment of damages among those injured by the alleged conspiracy weighed against finding that B&P had antitrust standing. Id. at 237-38. With B&P's lone federal claim dismissed, the court declined to exercise supplemental jurisdiction over the state law claims and dismissed them without prejudice. Id. at 238.

In this appeal, B&P argues that the district court erred in finding as a matter of law that it did not compete with the pharmacists. B&P submits that the record contains evidence from SKB, Merck, and the pharmacists themselves showing that they all believed that B&P competed with the pharmacists. We exercise plenary review over the district court's grant of summary judgment. McCarthy v. Recordex Service, Inc., 80 F.3d 842, 847 (3d Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 86, 136 L.Ed.2d 42 (1996). ³

III.

Section 4 of the Clayton Act, 15 U.S.C. § 15, provides that "[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" may maintain a private action for treble damages. Despite this broad statutory language, however, the Supreme Court has held that the common-law background of the antitrust laws requires a narrower, less literal reading. See Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 529-33, 103 S.Ct. 897, 903-06, 74 L.Ed.2d 723 (1983) ("AGC "). In developing the concept of antitrust standing, the Court "focus[ed] on the nature of the plaintiff's alleged injury," asking "whether it is of the type that the antitrust statute was intended to forestall." Id. at 538, 540, 103 S.Ct. 908, 909. If the injury is not of the requisite type, even though the would-be plaintiff may have suffered an injury as a result of conduct that violated the antitrust laws, he or she has no standing to bring a private action under the antitrust laws to recover for it. In AGC, the Court held that because the plaintiff was "neither a consumer nor a competitor in the market in which trade was restrained," its injury was not the type of injury that the antitrust laws were designed to prevent. Id. at 539, 103 S.Ct. at 909. Therefore, the plaintiff might be able to sue under a different statute or common law rule, and a different plaintiff might be able to sue under the antitrust laws, but the plaintiff had no standing to sue under the antitrust laws. See also Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697-98, 50 L.Ed.2d 701 (1977)

The Supreme Court in AGC also discussed other factors that must be balanced in order to determine whether a plaintiff is a proper party to bring an antitrust claim. See 459 U.S. at 540-44, 103 S.Ct. at 909-12. We have synthesized the Court's analysis into the following formulation of the factors that are relevant in an antitrust standing challenge:

(1) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing; (2) whether the plaintiff's alleged injury is of the type for which the antitrust laws were intended to provide redress; (3) the directness of the injury, which addresses the concerns that liberal application of standing principles might produce speculative claims; (4) the existence of more direct victims of the...