In re Terazosin Hydrochloride Antitrust Litigation

• Decision Date: 02 July 2001
• Docket Number: No. 99-MDL-1317.,99-MDL-1317.
• Citation: 160 F.Supp.2d 1365
• Court: U.S. District Court — Southern District of Florida
• Parties: In re TERAZOSIN HYDROCHLORIDE ANTITRUST LITIGATION.

160 F.Supp.2d 1365

In re TERAZOSIN HYDROCHLORIDE ANTITRUST LITIGATION.

No. 99-MDL-1317.

United States District Court, S.D. Florida, Southern Division.

July 2, 2001.

Order Granting Motion to Alter July 25, 2001.

COPYRIGHT MATERIAL OMITTED

Mitchell Wayne Berger, Jeffrey Scott Wertman, Candice Diane Tobin, Berger Singerman, Las Olas Centre II, Fort Lauderdale, FL, Daniel L. Berger, David Sorensen, Eric L. Cramer, Berger & Montague, P.C., Philadelphia, PA, David Boies, Boies Schiller & Flexner, Armonk, NY, Joseph C. Kohn, Kohn, Swift & Graf, Philadelphia, PA, Jack Staph, Jack Staph & Associates, Pepper Pike, OH, Richard Drubel, Boies, Schiller & Flexner, Hanover, NH, Robert Scott Palmer, C. Oliver Burt, III, Berman, DeValerio, Pease, Tabacco, Burt & Pucillo, West Palm Beach, FL, Barry S. Taus, Bruce E. Gerstein, Stephen H. Schwartz, Garwin, Bronzaft, Gerstein & Fisher LLP, New York City, Aubrey B. Calvin, Mark S. Armstrong, Calvin Richardson Verner, Armstrong & Camp, Houston, TX, David P. Smith, Percy, Smith, Foote & Gadel, Alexandria, LA, John Gregory Odom, Stuart E. Des Roches, Randall Acree, Odom & Des Roches, New Orleans, LA, Scott Eliot Perwin, Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, Miami, FL, Douglas E. Patton, Dewsnup, King & Olsen, Salt Lake City, UT, Bradley Joseph Gross, Barrett, Gravante, Carpinello & Stern, Fort Lauderdale, FL, Nicholas A. Gravante, Jr., Ryan Kees Higgins, Barrett, Gravante, Carpinello & Stern, New York City, Michael Straus, Straus & Boies, Birmingham, AL, Michael I. Endler, Barrett, Gravante, Carpinello & Stern, Albany, NY, Mary Boies, Boies & McInnes, Bedford, NY, for Valley Drug Company, Louisiana Wholesale, Drug Co., Inc., Walgreen Co., Inc., et al., Drug Mart Pharmacy Corp., plaintiffs.

Paul Alan Shelowitz, Akerman, Senterfitt & Eidson, Miami, FL, Robert Alexander Milne, Wayne A. Cross, Michelle Wilhelm, Paul Olszowka, Joseph Angland, Dewey Ballantine, New York City, Martha Jennet Talley, Dewey Ballantine, Washington, DC, Elizabeth J. Basten, Clark Hill, Detroit, MI, Jay Brian Shapiro, Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, Miami, FL, Gerson A. Zweifach, Kevin M. Downey, Kirsten M. Schimpff, Kathleen L. Jennings, Manish K. Mital, Williams & Connolly, Washington, DC, Jon W. Zeder, Adorno & Zeder, Miami, FL, Kevin Clark Maclay, Jones, Day, Reavis & Pogue, Washington, DC, Stephen E. Morrissey, Jeffrey I. Weinberger, Stuart N. Senator, Munger, Tolles & Olson, Los Angeles, CA, Andrew J. McGuinness, Dykema Gossett, Ann Arbor, MI, for Geneva Pharmaceuticals, Inc., Ivax Pharmaceuticals, Inc., Abbott Laboratories, defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS CERTAIN COUNTS OF THE INDIRECT PURCHASER PLAINTIFFS' COMPLAINT

SEITZ, District Judge.

Defendants Abbott Laboratories ["Abbott"], Geneva Pharmaceuticals, Inc. ["Geneva"], and Zenith Goldline Pharmaceuticals, Inc. ["Zenith"] have moved to dismiss federal and state antitrust or unjust enrichment claims raised by "indirect purchasers" —individuals, corporations, and employee health plans that purchased prescription drugs containing terazosin hydrochloride after October 15, 1995, for consumption or redistribution instead of resale. (Defs.' Mot., Oct. 6, 2000 [D.E. No. 245].) Having carefully weighed the arguments presented by the parties, the Court will grant the defendants' motion in part and allow the indirect purchaser plaintiffs, also known as "end payors," to file a third amended class action complaint.

BACKGROUND

In Spring, 1998, Abbott entered into secret accords with generic drug makers Geneva and Zenith to forestall competition in its lucrative and exclusive domestic market for terazosin hydrochloride drugs. Abbott's drug, "Hytrin," was the only terazosin hydrochloride drug available in the United States for the treatment of hypertension or enlarged prostate until Geneva introduced its generic version of Hytrin on August 12, 1999. See In re Terazosin Hydrochloride Antitrust Litig., Civ. No. 99-MDL-1317, slip. op. at 8-11, ___ F.Supp.2d ___, ___ _ ___ (S.D.Fla. Dec. 13, 2000) (recounting terms of agreements, which sought to preclude Geneva and Zenith from marketing the first generic terazosin hydrochloride drugs in the nation for some time, removed the risk that they would buy or sell the right to introduce such drugs in the interim, and enlisted them as allies who would oppose or at least ignore other companies' applications to produce such drugs).

Both the end payors and the "direct purchasers," who purchased terazosin hydrochloride drugs principally for resale, have filed class action complaints alleging that the defendants' clandestine accords violated federal and state antitrust or consumer protection statutes. On December 13, 2000, this Court granted the direct purchasers' motion for a partial summary judgment that these agreements were patently anti-competitive, unreasonable, and illegal per se under section one of the Sherman Antitrust Act, 15 U.S.C. § 1. Id. at 11-12, 18-19, ___ _ ___, ___ _ ___. Later in these proceedings, the direct purchasers will seek to prove that the defendants' illegal conduct actually injured them in "business or property" under section four of the Clayton Act, 15 U.S.C. § 15.

DISCUSSION

The defendants' motion to dismiss essentially asks whether the end payors are legally entitled to the benefit of the Court's partial summary judgment decision in favor of the direct purchasers. As the defendants challenge the indirect purchasers' right to sue under both federal and state laws, the Court will address the parties' arguments in that order.

1. Standard Governing Dismissal for Failure to State a Claim

Federal Rule of Civil Procedure 12(b)(6) provides that dismissal of a claim is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. Alabama, 30 F.3d 117, 120 (11th Cir.1994) (citation omitted). The Court must accept the indirect purchasers' allegations as true and view those allegations in a favorable light to determine whether the complaint fails to state a claim for relief. S & Davis Int'l, Inc. v. Republic of Yemen, 218 F.3d 1292, 1298 (11th Cir.2000).

2. The Indirect Purchasers' Federal Claims and Illinois Brick

Three federal claims appear in the end payors' second amended complaint ["complaint"]. Count One charges Abbott with "extend[ing] its monopoly power beyond the lawful boundaries of its patents," and Count Three charges all defendants with conspiring to "allow[] Abbott to maintain its monopoly," both "in violation of [s]ection [two] of the Sherman Act, 15 U.S.C. § 2." (Compl., Aug. 31, 2000, at 34, 39-40 [D.E. No. 227].) Count Five charges Abbott, Geneva, and Zenith with entering into contracts that were unreasonable restraints of trade under section one of the Sherman Act. (Id. at 42.) In all of these counts, the class plaintiffs allege that "their injury consists of paying more for terazosin [hydrochloride] than they would have paid in the absence of [the antitrust] violation." (Id. at 34, 40, 42.)

Nearly twenty five years ago, in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), the United States Supreme Court held that indirect purchasers of goods produced by firms engaged in price-fixing or other antitrust violations cannot pursue federal antitrust actions for damages against those firms. Illinois Brick Co., 431 U.S. at 745-48, 97 S.Ct. 2061 (discussing section four of the Clayton Antitrust Act, 15 U.S.C. § 15(a)). Although this decision "denies recovery to those indirect purchasers who may have been actually injured by antitrust violations," it simplifies private enforcement and public adjudication of antitrust suits by "elevating direct purchasers to a preferred position," id. at 748, 97 S.Ct. 2061, and complements the U.S. Supreme Court's decision in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968), which precluded defendants from challenging federal antitrust claims with evidence that direct purchasers "passed on" an illegal overcharge to their own customers. Illinois Brick Co., 431 U.S. at 736-47, 97 S.Ct. 2061.

Illinois Brick blocks the end payors' federal claims. Although the end payors contend that they have suffered a unique injury in the form of "lost savings," (Pls.' Opp'n, Nov. 3, 2000, at 3 [D.E. No. 274]), this locution does not disguise the fact that they are seeking damages for "paying more for terazosin [hydrochloride]." (Compl. at 34, 40, 42.) Like the direct purchasers, the end payors want to recoup an overcharge under federal law. The U.S. Supreme Court has flatly repudiated such efforts to trace damages through multiple levels in a chain of distribution or to apportion damages between direct and indirect purchasers. Illinois Brick Co., 431 U.S. at 746, 97 S.Ct. 2061.

Contrary to the plaintiffs' suggestion, none of the exceptions to Illinois Brick apply here. The end payors' consolidated complaint does not demand injunctive relief or allege that the direct purchasers participated in the defendants' conspiracy. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969); In re Beef Indus. Antitrust Litig., 600 F.2d 1148, 1168 (5th Cir.1979).¹

Correspondence from the end payors' counsel indicates that, after oral argument, the indirect purchasers "have been persuaded to withdraw [the federal] claims." (Letter from Robert C. Gilbert, Esq., Liason Counsel, to the Honorable Patricia A. Seitz (Feb. 9, 2001).) For the preceding reasons, the Court will dismiss these claims with prejudice and turn to the end payors' other claims.

3. The Indirect Purchasers' State Law Claims

The four remaining counts in the end payors' complaint invoke state laws, and the first three of these counts parallel the end payors' federal claims. Count Two of the complaint charges Abbott...