Kaiser Found. Health Plan, Inc. v. Pfizer, Inc. (In re Neurontin Mktg. & Sales Practices Litig.)

• Decision Date: 31 August 2011
• Docket Number: Civil Action No. 04–cv–10739–PBS.
• Citation: 810 F.Supp.2d 366
• Parties: In re NEURONTIN MARKETING AND SALES PRACTICES LITIGATION.This Document Relates to:Kaiser Foundation Health Plan, Inc., et al. v. Pfizer, Inc., et al.
• Court: U.S. District Court — District of Massachusetts

810 F.Supp.2d 366

In re NEURONTIN MARKETING AND SALES PRACTICES LITIGATION.This Document Relates to:Kaiser Foundation Health Plan, Inc., et al.

v.Pfizer, Inc., et al.

Civil Action No. 04–cv–10739–PBS.

United States District Court, D. Massachusetts.

Aug. 31, 2011.

Joel Z. Eigerman, Joel Z. Eigerman, Attorney–at–Law, Pavel Bespalko, Thomas G. Shapiro, Shapiro Haber & Urmy LLP, Boston, MA, Mark D. Fisher, Rawlings & Associates, P.L.L.C., Louisville, KY, Marlene F. Gibbons, Justine J. Kaiser, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., Washington, DC, Linda P. Nussbaum, Grant & Eisenhofer PA, New York, NY, Mark S. Sandmann, Rawlings & Associates, LaGrange, KY, for Plaintiff, The Guardian Life Insurance Company of America.

David B. Chaffin, White and Williams LLP, Boston, MA, for Defendant, Parke–Davis.

Mark S. Cheffo, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for Defendant, Pfizer, Inc.

MEMORANDUM AND ORDER

SARIS, District Judge.

After a five-week trial in which 40 witnesses testified and more than 400 exhibits were admitted into evidence, this Court issued an 143–page opinion finding that defendants engaged in fraudulent business acts or practices under California's Unfair Competition Law and awarded plaintiffs $95,286,518 in restitution. In re Neurontin Mktg. & Sales Practices Litig., 748 F.Supp.2d 34 (D.Mass.2010) (hereinafter “Findings”). Judgment was entered on February 22, 2011 (Docket No. 3326).

Defendants have filed a Motion for Amended and Additional Findings pursuant to Fed.R.Civ.P. 52(b) (Docket No. 3364). The Court ALLOWS IN PART and DENIES IN PART defendants' motion for amended and additional findings. The Court writes now to address several issues that were not fully developed at trial and were flagged in post-judgment briefing. Defendants requested certain other clarifications, which, where useful, are incorporated in an amended findings of fact and conclusions of law issued with this order.

DISCUSSION

Federal Rule of Civil Procedure 52(b) provides that “[o]n a party's motion filed no later than 10 days after entry of judgment, the court may amend its findings-or make additional findings-and may amend the judgment accordingly.” Fed.R.Civ.P. 52(b). Rule 52(b) motions are designed “to correct, clarify, or amplify the findings.” 9 J. Moore et al., Moore's Federal Practice § 52.60[3] (3d ed.2011). However, a party may not utilize a Rule 52(b) motion to assert new theories not raised at trial, or “to rehash old arguments already considered and rejected by the trial court.” Nat'l Metal Finishing Co., Inc. v. BarclaysAmerican/Commercial, Inc., 899 F.2d 119, 123 (1st Cir.1990). Ultimately, the decision to grant or deny a motion to amend lies within the discretion of the Court. Sequa Corp. v. GBJ Corp., 156 F.3d 136, 143 (2d Cir.1998) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 331, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971)).

A. Kaiser's Corporate Structure

Defendants state that, because Kaiser Foundation Health Plan's subsidiaries are not named as parties to the complaint, the parent health plan has no standing to recover restitution on their behalf.

This issue was raised prior to trial in an objection filed by defendants. (Docket No. 2538 at 7.) The Court addressed the issue before the trial began, but counsel for Kaiser assured the Court that it was not necessary to explicitly join the subsidiaries as named parties because the “testimony will clearly show ... contracting, purchasing is all from the parent company” and accordingly the parent had standing to recover damages for prescriptions written to subsidiary members. (Trial Tr. vol. 1, 26–27, Feb. 22, 2010.) Kaiser's counsel now concedes that her statement regarding purchasing was a mistake, and that in fact Kaiser Foundation Health Plan only performs contracting, as opposed to purchasing, for the subsidiaries. In post-trial briefing, defendants raised the issue in a footnote buried among a multitude of arguments that they pursued more zealously. ( See Docket No. 2808–3 at 2 n. 1.) It is only now, after judgment, that the issue has been pressed wholeheartedly. Indeed, it was only after the Court issued an order requesting further briefing on the issue that either party provided more than one paragraph of legal analysis. ( See Electronic Order, July 18, 2011.)

To address this issue, the Court must fully address the relationship between Kaiser Foundation Health Plan and its wholly-owned regional subsidiaries. Kaiser Foundation Health Plan is the parent corporation of six regional health plans: Kaiser Foundation Health Plan of Colorado; Kaiser Foundation Health Plan of Georgia, Inc.; Kaiser Foundation Health Plan of the Mid–Atlantic States, Inc.; Kaiser Foundation Health Plan of the Northwest; and Kaiser Foundation Health Plan of Ohio. Kaiser Foundation Health Plan directly provides medical coverage to beneficiaries in California and Hawaii. Although the regional health plans were not named plaintiffs in the complaint, plaintiffs alleged: “As of December 2004, Kaiser Foundation Health Plan, Inc. had 8.2 million members in nine states and the District of Columbia, with over 6 million members in California. The remaining members are in Colorado, Georgia, Maryland, Virginia, Oregon, Washington, Hawaii, Ohio and the District of Columbia.” (Third Amended Compl. ¶ 7 (Docket No. 583).)

The question here is whether Kaiser Foundation Health Plan, as the parent company, has standing to recover damages suffered by its subsidiaries, and if not, whether the subsidiaries may now be joined as parties to this case.

The Supreme Court has held, in the context of a challenge to California's tax statutes, that a parent company does have Article III standing on the basis of injury to a subsidiary. Franchise Tax Bd. of Calif. v. Alcan Aluminium Ltd., 493 U.S. 331, 335–36, 110 S.Ct. 661, 107 L.Ed.2d 696 (1990). The Court then addressed nonconstitutional prudential considerations, which require that “the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.” Id. at 337, 110 S.Ct. 661 (citing Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)).

As to prudential standing, courts look to a related principle of corporate law called the shareholder standing rule. Id. at 336–37, 110 S.Ct. 661. Generally, “a shareholder of a corporation possesses no personal or individual right of action for injury to the corporation, even an injury which reduces the corporation's net worth, because the injury suffered by the shareholder is merely incidental to the injury suffered by the corporation.” Resolution Trust Corp. v. Fleischer, 848 F.Supp. 917, 922–23 (D.Kan.1994) (citing K–B Trucking Co. v. Riss Int'l Corp., 763 F.2d 1148, 1154 n. 7 (10th Cir.1985)). This rule is still applicable when the plaintiff is the sole stockholder of the injured corporation. See, e.g., Canderm Pharmacal, Ltd. v. Elder Pharms., Inc., 862 F.2d 597, 603 (6th Cir.1988). More specifically, “[w]rongdoing to a subsidiary does not confer standing upon the parent company, even where the parent is the sole shareholder of the subsidiary.” Tullett Prebon, PLC v. BGC Partners, Inc., No. 09–cv–5365–SRC, 2010 WL 2545178, at *4 (D.N.J. June 18, 2010); see also Aetna U.S. Healthcare, Inc. v. Columbia Cas. Co., No. 99–596, 1999 WL 554606, at *3 (E.D.Pa. July 20, 1999) (holding plaintiff company had no standing to bring suit based on harm to wholly owned indirect subsidiary); Diesel Sys., Ltd. v. Yip Shing Diesel Eng'g Co., 861 F.Supp. 179, 181 (E.D.N.Y.1994) (holding that “[a] corporation does not have standing to assert claims belonging to a related corporation, simply because their business is intertwined”); Site Microsurgical Sys., Inc. v. Cooper Cos., Inc., 797 F.Supp. 333, 338–39 (D.Del.1992) (rejecting argument that parent company of subsidiary patent holder had standing to sue for infringement, even though parent argued that it effectively controlled patent and had suffered lost sales of its product as a result of the infringement).

Under this line of cases, Kaiser Foundation Health Plan does not have standing to recover on behalf of the regional subsidiaries. However, it does have standing to sue on its own behalf, as it has directly incurred 77% of the losses. (Trial Exhibit (“TX”) 268.)

To address this late-arising issue, Kaiser Foundation Health Plan contends that this Court should join the six regional subsidiaries, pointing out that there is no prejudice to Pfizer from a post-judgment addition. Kaiser points out that there was extensive discovery and expert analysis of the subsidiaries. Federal Rule of Civil Procedure 21 states, “Misjoinder of parties is not a ground for dismissing an action. On motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party.” Rule 21 “specifically permits a change in parties ‘at any stage in the action.’ ” 7 C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 1688.1 (3d ed.2001). Courts have held that parties may be added after trial has concluded “to add a party who for some innocent reason has not been made a party to the action and whose presence is necessary or desirable.” Data Gen. Corp. v. Grumman Sys. Support Corp., 825 F.Supp. 340, 344 (D.Mass.1993); see also Du Shane v. Conlisk, 583 F.2d 965, 967 (7th Cir.1978) (holding that “a party can be added sua sponte by the court after judgment”). In fact, the Supreme Court added parties under Rule 21 on appeal in Mullaney v. Anderson, 342 U.S. 415, 72 S.Ct. 428, 96 L.Ed. 458 (1952), stating

The addition of these two parties ... can in no wise embarrass the defendant. Nor would their earlier joinder have in any way affected the course of the litigation. To dismiss the present petition and require ... plaintiffs to start over in the (state court) would entail needless waste and...