Boos v. Abbott Laboratories, Civil Action No. 95-10091-NG.

• Decision Date: 30 April 1996
• Docket Number: Civil Action No. 95-10091-NG.
• Citation: 925 F. Supp. 49
• Court: U.S. District Court — District of Massachusetts
• Parties: April BOOS, on behalf of herself and all others similarly situated, Plaintiff, v. ABBOTT LABORATORIES, Bristol-Meyers Squibb Co., Mead Johnson & Co., and American Home Products Corp., Defendants.

925 F. Supp. 49

April BOOS, on behalf of herself and all others similarly situated, Plaintiff, v. ABBOTT LABORATORIES, Bristol-Meyers Squibb Co., Mead Johnson & Co., and American Home Products Corp., Defendants.

Civil Action No. 95-10091-NG.

United States District Court, D. Massachusetts.

April 30, 1996.

Kenneth G. Gilman, Gilman & Pastor, Boston, MA, for April Boos.

Joseph R. Valle, Jr., Riemer & Braunstein, Boston, MA, William N. Berkowitz, Bingham, Dana & Gould, Boston, MA, for Abbott Laboratories, Bristol-Myers Squibb Company and Mead Johnson & Company.

James C. Burling, Hale & Dorr, Boston, MA, William N. Berkowitz, Bingham, Dana

& Gould, Boston, MA, for American Home Products Corp.

MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS THE COMPLAINT

GERTNER, District Judge.

I. INTRODUCTION

Plaintiff brought this action on behalf of herself and all other Massachusetts residents similarly situated for damages arising out of an alleged conspiracy among the defendants to fix prices for infant formula in Massachusetts and throughout the United States. Count I of the complaint alleges that defendants' alleged conspiracy constitutes an "unfair method of competition" or an "unfair or deceptive act or practice" within the meaning of the Massachusetts Consumer Protection Act, M.G.L. ch. 93A § 2. Count II alleges that the defendants' actions are in violation of the common law of Massachusetts.

Defendants have moved to dismiss the complaint for failure to state a claim. See Fed.R.Civ.P. 12(b)(6). They contend that under the doctrine of Illinois Brick v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), plaintiff, as an indirect purchaser of infant formula from the defendants, has no standing to raise antitrust claims against them. They further contend that plaintiff's Chapter 93A claim is barred because antitrust claims are cognizable under Chapter 93A only to the extent they are cognizable under the Massachusetts Antitrust Statute, M.G.L. ch. 93, which, plaintiff concedes, recognizes no such claim.

II. DISCUSSION

A. Plaintiff's Common Law Claim (Count II)

1. Illinois Brick

In Illinois Brick v. Illinois, the Supreme Court held that indirect purchasers of goods could not bring an action under Section 4 of the Clayton Antitrust Act, 15 U.S.C. § 15, to recover damages from violations of federal antitrust laws. The Court's analysis centered on the practicalities of antitrust litigation, and in particular, the difficulties in allocating antitrust losses between direct purchasers, and downstream customers onto whom overcharges were allegedly passed. Illinois Brick, 431 U.S. at 729-736, 97 S.Ct. at 2066-2070.

The Court started its discussion by referring to its decision in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968), in which the Court had held that it was not a defense to an antitrust action to show that the plaintiff had been able to pass on any overcharges to its customers. To the contrary, the Hanover Shoe Court held that the plaintiff in such a suit is entitled to damages based on the entire amount that the plaintiff was overcharged, notwithstanding the fact that the plaintiff did not suffer an actual loss of profits because overcharges were passed on to consumers. Hanover Shoe, 392 U.S. at 491-492, 88 S.Ct. at 2231.

In Illinois Brick, the Court was faced with the converse situation: whether the parties to whom overcharges had been passed could maintain a cause of action against the anti-competitive actors. To hold that they could, the Court would have had to modify its rule in Hanover Shoe, since to do otherwise would have permitted multiple recovery of the same damages: once by the direct purchasers, and then again by the indirect purchasers. Illinois Brick, 431 U.S. at 729, 736, 97 S.Ct. at 2066, 2069. In particular, it was proposed that the Court modify Hanover Shoe to permit an allocation of damages between direct and indirect purchasers when direct and indirect purchasers were parties to the same action. Id. at 729-730, 97 S.Ct. at 2066-2067.

The Court rejected the proposed modification for two reasons. First, the Court reasoned that the principle of stare decisis dictated that in matters of statutory interpretation, where Congress is free to overrule earlier decisions by statutory amendment, Congressional silence should be interpreted as acquiescence. Id. at 736, 97 S.Ct. at 2069.

Second, and more significantly, the Court found that the proposed modification would greatly increase the complexity of antitrust litigation and would undermine the effectiveness of the federal antitrust laws. Under the rule of Hanover Shoe, direct purchasers act as private attorneys general in the antitrust context. Their ability to realize from litigation triple the full amount of antitrust overcharging, notwithstanding their own actual damages, provides them with a significant incentive to pursue antitrust violators and to deprive them of the fruits of their illegality. Id. at 745, 97 S.Ct. at 2074. The Court reasoned that if indirect purchasers were potential parties, direct purchaser plaintiffs would be required to join them in all antitrust litigation and to share with them the proceeds of any action. Id. at 737-740, 97 S.Ct. at 2070-2072. Moreover, the Court perceived the task of allocating loss between direct and indirect purchasers as highly speculative. Id. at 741-743, 97 S.Ct. at 2072-2074.

Based on all of these concerns, the Court concluded that the simpler rule, allowing actions only by direct purchasers, should apply in federal antitrust litigation.

2. Massachusetts Antitrust Law

The Massachusetts Antitrust Act provides that:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce in the commonwealth shall be unlawful.

M.G.L. ch. 93 § 4. The Act also creates a private cause of action for "any person who shall be injured ... by reason of a violation" of the Act. M.G.L. ch. 93 § 12. The Act further provides, however, that it "shall be construed in harmony with judicial interpretations of comparable federal antitrust statutes insofar as practicable." M.G.L. ch. 93 § 1. Thus, Illinois Brick would appear to apply with equal force to claims brought under M.G.L. ch. 93 as it does to claims under the Clayton Act. See Commonwealth v. Mass. CRINC, 392 Mass. 79, 85, 90, n. 7, 466 N.E.2d 792 (1984).

Plaintiff does not dispute that she is an indirect purchaser within the meaning of Illinois Brick and concedes that she is therefore foreclosed from bringing suit under either the Clayton Act or the Massachusetts Antitrust Statute.¹ She contends, rather, that there exists under Massachusetts common law a nonstatutory cause of action for restraint of trade in "necessities," an action the parameters of which are not affected by Illinois Brick. See California v. ARC America, 490 U.S. 93, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989) (federal antitrust laws do not preempt indirect purchaser actions under state law).

Plaintiff bases her contention primarily on certain dicta found in SDK Medical Computer Services Corporation v. Professional Operating Management Group, 371 Mass. 117, 354 N.E.2d 852 (1976). In SDK the plaintiff charged that the defendants had monopolized the market for medical data processing in Massachusetts. The Court dismissed SDK's claim under M.G.L. ch. 93 because that statute, by its terms, did not encompass service industries of the type engaged in by the defendants. The Court then considered plaintiff's claim that defendants' conduct violated Massachusetts common law. The Court stated:

Our cases ... confine any common-law proscription to monopolies of `necessities'. This is perhaps a reflection of the fact that the early common law concerned itself with preventing manipulation of the markets for foodstuffs. There has been criticism in some places of any such restrictions of the common-law action, and some courts have adopted an expansive definition of that action. We are reluctant to make the present case the occasion for reexamining our own position, especially as the statutory provisions have largely if not altogether supplanted the common law; at any rate we have found no instances in our books of monopolistic behavior being condemned at common law apart from statute since the relevant provisions of G.L. c. 93 were enacted. It remains to say that the services here, although useful, do not qualify as `necessities.'

SDK, 371 Mass. at 128-129, 354 N.E.2d 852 (citations omitted). The Court further noted in a footnote that "the relation of the common-law action to G.L. c. 93 § 2 has not been exactly elucidated and need not be for the purposes of the present case." Id.

Plaintiff contends that the quoted language in SDK evidences the existence of a common-law cause of action for monopolization of necessities which both survives the enactment of M.G.L. ch. 93, and which permits a cause of action on behalf of indirect purchasers. Based on my review of the sources cited by plaintiffs, as well as my own research, I am unable to satisfy myself that such a cause of action exists under Massachusetts law.

Although the Court in SDK recognized the possibility that there might exist a cause of action for monopolization of necessities under Massachusetts common law, my research has revealed not one reported case of a successful claim of this type in Massachusetts. The rule that monopolies and contracts to restrain trade are "unlawful" is an old one, having its roots in English common law. See United States v. Addyston Pipe & Steel Co., 85 F. 271, 279-281 (6th Cir.1898) aff'd 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136 (1899) (citing Mitchel v. Reynolds, 1 P.Wms. 181, 190); Alger v. Thacher, 19 Pick. 51 (Mass. 1837); 54 Am.Jur.2d, Monopolies, §§ 443-450. In this context, however, "unlawful" did not mean "tortious" but merely "unenforceable". Addyston Pipe, 85 F. at 286 ("contracts void as a...