Clayworth v. Pfizer, Inc.

• Decision Date: 22 August 2012
• Docket Number: A131804
• Parties: JAMES R. CLAYWORTH et al., Plaintiffs and Appellants, v. PFIZER, INC. et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

JAMES R. CLAYWORTH et al., Plaintiffs and Appellants, v. PFIZER, INC. et al., Defendants and Respondents.

A131804

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO

Dated: August 22, 2012

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Alameda County Super. Ct. No. RG04172428)

Fifteen retail pharmacies sued 20 defendants, alleging they conspired to fix the prices on their pharmaceuticals sold in the United States at prices higher than those of the same drugs in Canada in violation of the Cartwright Act (Bus. & Prof. Code, § 16720 et seq.) and the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.). Defendants moved collectively (and in three cases, individually) for summary judgment, arguing that plaintiffs could not produce evidence creating a triable issue of fact that defendants engaged in price fixing. The trial court agreed, and in comprehensive orders granted summary judgment for defendants. Plaintiffs appeal, contending that the trial court erred in granting summary judgment, and also asserting numerous procedural claims, including some that would have caused the motions not to be heard when they were—and not by the judge who heard them. We conclude that none of the procedural claims has merit, and on our de novo review further conclude that summary judgment was properly granted. We thus affirm.

BACKGROUND¹

The Parties

Plaintiffs are 15 retail pharmacies in California.² Defendants are, with two exceptions, research-based pharmaceutical companies that manufacture and distribute brand-name pharmaceuticals throughout the United States.³ The California Supreme Court has described the relationship between plaintiffs and defendants as follows: "[Defendants] sell their drugs to wholesalers at a price referred to as the wholesale acquisition cost. In turn, various independent entities use the wholesale acquisition cost to calculate and publish benchmark drug prices, termed the average wholesale price, for use in the industry. Wholesalers resell the drugs to [plaintiffs] at prices based on a percentage of the average wholesale price. . . . [¶] In turn, [plaintiffs] sell the drugs to . . . consumers . . . ." (Clayworth, supra, 49 Cal.4th at p. 765.)

The Complaint

On August 26, 2004, plaintiffs filed a complaint alleging antitrust violations and unfair business practices arising out of defendants' price-setting practices for pharmaceuticals sold in the United States. Shortly thereafter, the case was designated complex and assigned to the Honorable Ronald M. Sabraw for all purposes. In the order designating the case as complex, Judge Sabraw early on signaled his intent to actively manage the case, setting an initial case management conference and advising that "the parties must be prepared to discuss at length the nature of the case, both factually and legally, as well as the projected management of the case at each stage. This is not a perfunctory exercise. The primary objective of the [conference] is to develop a comprehensive plan for a just, speedy and economical determination of the litigation."

Plaintiffs amended their complaint once as a matter of right, and defendants successfully demurred to that amended complaint, as well as a second amended complaint that followed. In the orders sustaining the demurrers, Judge Sabraw directed plaintiffs to clarify their theories of the case and satisfy the specificity-in-pleading requirements applicable to antitrust claims.

The result was the complaint operative here: a 23-page, third amended complaint filed on May 6, 2005 "for violations of the Cartwright Act (Bus. & Prof. Code §16700 et seq.) and the Unfair Competition Law (Bus. & Prof. Code §17200 et seq.[)] [UCL]." It set forth five causes of action, the first three alleging violations of the Cartwright Act, the last two alleging violations of the UCL.

The thrust of the third amended complaint was that defendants conspired "to eliminate price competition and fix prices in the United States" by agreeing "they would not sell their drugs at or below the price at which they sold those same drugs in Canada . . . ." This theory, which became known in this litigation as the "Canadian floorconspiracy," was detailed in paragraph 5, a paragraph plaintiffs repeatedly referenced throughout the third amended complaint as embodying the alleged conspiracy. Paragraph 5 alleged as follows:

"5. The Defendants, pursuant to their unlawful combination and agreement, charge more for their drugs sold in the United States, including California, than they charge for the same drugs sold outside of the United States, including Canada. The Defendants agreed to eliminate price competition and fix prices in the United States, including California, by, inter alia:

"(a) Using the prices charged in Canada as a floor or minimum price level;

"(b) Acting in concert to restrict reimportation and/or purchase of lower priced foreign drugs;

"(c) Restricting price competition from generics and brand name variations of existing drugs;

"(d) Selling drugs for fixed prices above the prices in Canada (so that the prices charged in the United States, including California, would be higher than the prices for the same drugs sold outside of the United States, including Canada);

"(e) Agreeing that they would not sell their drugs at or below the price at which they sold those same drugs in Canada, and/or other countries outside of the United States; and

"(f) Agreeing and ensuring each other that they would maintain their agreement to charge more in the United States, including California, than they charged outside of the United States, particularly Canada."

According to the third amended complaint, PhRMA was the instrument through which the conspiracy was facilitated: "[E]ach of the Defendants has executive-level officers that serve on the Board of Directors for PhRMA and its committees and subcommittees. PhRMA's Board of Directors, its committees and subcommittees meet on a regular basis. It is partly within these meetings that the Defendants' chief executive officers and chief marketing officers agreed between and among themselves to fix the prices at which their drugs are sold in the United States, including California."Discussions concerning the conspiracy purportedly took place at "PhRMA conventions, conferences, or events, and events organized by Defendants' [sic] at corporate offices, hotels, yachts, and resorts . . . ," where "Defendants' highest officials, including their chairmen, presidents, chief executive officers, and top marketing executives" engaged in communications to further their agreement to fix prices.

As noted, the first three causes of action asserted violations of the Cartwright Act. The first alleged a trust to restrain trade, or more specifically to restrict commerce, "by agreeing to maintain high non-competitive prices for drugs sold in the United States, including California, and to eliminate sources of lower and competitive-priced drugs from coming into the United States, including California, to protect the price-fixing conspiracy alleged in paragraph 5 . . . ." The second alleged a trust to fix prices, namely "to increase and/or maintain the high price of drugs sold in the United States, including California, relative to prices in Canada and other countries." And the third alleged a trust to prevent competition and limit availability by "eliminat[ing] sources of lower and competitive priced pharmaceuticals in the United States, including California, as alleged herein, and [by] increas[ing] or maintain[ing] the high non-competitive prices of pharmaceuticals sold in the United States, including California, relative to prices in other countries."

All three trusts were accomplished, plaintiffs alleged, by "agreeing to maintain high artificial prices in the United States, including California; restricting importation of lower priced pharmaceuticals into the United States, including California; and taking collective action to stop such importation by placing foreign wholesalers and retailers on artificial quotas to stop these customers from shipping lower-priced drugs into the United States, including California; refusing to sell to foreign wholesalers and retailers who ship lower-priced drugs into the United States, including California; agreeing with wholesalers and retailers not to sell to persons who ship drugs into the United States, including California; and requiring all foreign wholesalers and retailers of Defendants' drugs to refuse to sell drugs to United States and California citizens at prices the same or lower than the sales price for these same drugs in Canada."

The fourth cause of action alleged an unfair business practice in violation of the UCL. Specifically, plaintiffs asserted that defendants engaged in "unfair competition . . . by charging the plaintiffs more for the same drugs than they charge others outside the United States, particularly Canada; and charging 'the same low prices charged in Canada and Europe' to favored customers in the United States. These price differentials for the same drugs are unfair."

The fifth cause of action alleged illegal business practices in violation of the UCL, namely that defendants' violations of the Cartwright Act also constituted illegal business practices.

Plaintiffs prayed for restitution, treble damages, and injunctive relief, that the court "enjoin[] and restrain[] Defendants from charging higher prices to Plaintiffs than Defendants charge customers outside the United States, including Canada, for the same drugs." Plaintiffs also sought attorney fees and costs.

Significantly, nowhere in the third amended complaint did plaintiffs allege that defendants...