PharmacyChecker.com LLC v. LegitScript LLC

• Docket Number: Case No. 3:22-cv-252-SI
• Decision Date: 11 July 2022
• Citation: 614 F.Supp.3d 796
• Parties: PHARMACYCHECKER.COM LLC, Plaintiff, v. LEGITSCRIPT LLC, Defendant.
• Court: U.S. District Court — District of Oregon

614 F.Supp.3d 796

PHARMACYCHECKER.COM LLC, Plaintiff,

v.LEGITSCRIPT LLC, Defendant.

Case No. 3:22-cv-252-SI

United States District Court, D. Oregon.

Signed July 11, 2022

Philip S. Van Der Weele, K&L Gates LLP, One SW Columbia Street, Suite 1900, Portland, OR 97204; Aaron R. Gott, Bona Law PC, 331 Second Avenue South, Suite 420, Minneapolis, MN 55401; and James F. Lerner, Bona Law PC, 287 Park Avenue South, Suite 422, New York, NY 10010. Of Attorneys for Plaintiff PharmacyChecker.com LLC.

Richard P. Sybert, Gordon Rees Scully Mansukhani LLP, 1300 SW Fifth Avenue, Suite 2000, Portland, OR 97201; and John T. Mills, Gordon Rees Scully Mansukhani LLP, One Battery Park Plaza, 28th Floor, New York, NY 10004. Of Attorneys for Defendant LegitScript LLC.

OPINION AND ORDER

Michael H. Simon, District Judge.

Earlier this year, the Ninth Circuit issued a decision in a federal antitrust case brought by a company that sold clear teeth aligners through a direct-to-consumer online platform. The company had sued dentists and orthodontists who provided competing teeth-alignment services and were members or employees of a California dental board. A district court dismissed the antitrust claim, and the Ninth Circuit reversed that decision. At the beginning of the Ninth Circuit's opinion, U.S. Circuit Judge Margaret M. McKeown, writing for a unanimous panel, put the case in the following context:

It is easy to recall examples of consumer-oriented business models in the medical field that were once resisted by incumbents but ultimately—through litigation, regulation, and legislation—resulted in cheaper and more accessible services. Take, for example, eyeglass prescriptions. At one time, the consumer had to purchase eyeglasses from the prescribing doctor. Now doctors must provide a copy of the prescription, so consumers can get their eyeglasses at Costco, Warby Parker, or a host of online suppliers. Hearing aids represent another consumer advance. Once approved by the Food and Drug Administration, certain over-the-counter hearing aids can be purchased without seeing a healthcare professional. In the dental field, hygienists in some states can sometimes provide services without the supervision of a dentist. In each case, entrenched interests fought to preserve the status quo and to stifle the innovators’ entry into the market.

In a similar vein, this appeal involves a company that developed an online service model that, according to the company, makes it cheaper, easier, and more convenient for patients to access certain orthodontic services, namely clear teeth aligners. The company alleges that incumbents in the dental and orthodontia markets have illegally conspired to shut down its disruptive business model. What distinguishes this case from most run-of-the-mill antitrust lawsuits is that it involves not only business competitors, but competitors who sit on a regulatory board that oversees the practice of dentistry.

SmileDirectClub, LLC v. Tippins , 31 F.4th 1110, 1115 (9th Cir. 2022).

As the facts develop in the federal antitrust case now before this Court, they may reveal important similarities with the SmileDirect lawsuit. Here, PharmacyChecker.com LLC (PharmacyChecker) alleges that the cost of prescription medicine in the United States is higher than anywhere in the world, and the effect on public health is disastrous. Millions of Americans each year do not fill prescriptions because of cost, and many become sicker or even die as a result. Others—about four million people each year—seek their medications from pharmacies abroad. Although prescription drug importation is restricted under some circumstances in the United States, PharmacyChecker contends that the law is generally applied only to bulk commercial importations and not to personal importation by consumers. Amended Complaint (AC) (ECF 82), at 2; see also id. ¶¶ 15-19.

PharmacyChecker alleges that it is the victim of an alleged conspiracy and that two of the alleged coconspirators are direct competitors of PharmacyChecker in one of the two alleged relevant markets. PharmacyChecker contends that the alleged coconspirators—and the interests behind them—benefit from higher U.S. drug prices and do not want competition from international pharmacies. Relying heavily on their contention that importation is illegal, the alleged coconspirators reached private agreements with key gatekeepers of online commerce, including search engines, social media networks, shipping companies, and payment intermediaries, to manipulate and suppress information available to consumers worldwide seeking information about cheaper prescription medicine from safe online pharmacies. According to PharmacyChecker, the purpose and effect of the alleged conspiracy is to choke off information about affordable prescription medications from regulated, reputable pharmacies worldwide. PharmacyChecker also alleges that it is unique among its competitors (which include two of the alleged coconspirators) by providing information about reputable pharmacies worldwide, and the "shadow" regulation scheme of the coconspirators has deprived PharmacyChecker of its most essential competitive resource—its visibility to consumers seeking this information on the internet. Id. at 2-3; see also id. ¶¶ 20-26.

Before the Court is a motion to dismiss for failure to state a claim filed by one of the alleged coconspirators, which—because of issues relating to personal jurisdiction—is the only defendant in this case. The remaining alleged coconspirators are still defendants in the original lawsuit brought by PharmacyChecker in federal court in New York, which is continuing. For the reasons explained below, the Court denies the pending motion to dismiss.

STANDARDS

A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc. , 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept as true all well-pleaded material facts alleged in the complaint and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co. , 668 F.3d 1136, 1140 (9th Cir. 2012) ; Daniels-Hall v. Nat'l Educ. Ass'n , 629 F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint "may not simply recite the elements of a cause of action but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca , 652 F.3d 1202, 1216 (9th Cir. 2011). The court must draw all reasonable inferences from the factual allegations in favor of the plaintiff. Newcal Indus. v. Ikon Off. Sol. , 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit a plaintiff's legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal , 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

A complaint must contain sufficient factual allegations to "plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr , 652 F.3d at 1216. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Mashiri v. Epsten Grinnell & Howell , 845 F.3d 984, 988 (9th Cir. 2017) (quotation marks omitted).

PROCEDURAL BACKGROUND

PharmacyChecker alleges that LegitScript LLC (LegitScript) is part of a conspiracy to restrain trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. As noted, this lawsuit is closely related to an ongoing action in federal court in New York against the other four alleged coconspirators. A more detailed procedural background than the Court typically provides may be helpful.

In August 2019, PharmacyChecker filed an antitrust lawsuit in federal court in New York against five defendants, alleging a violation of § 1 of the Sherman Act. In that action, PharmacyChecker sued: (1) the National Association of Boards of Pharmacy (NABP); (2) the Alliance for Safe Online Pharmacies (ASOP); (3) the Center for Safe Internet Pharmacies Ltd. (CSIP); (4) the Partnership for Safe Medicines, Inc. (PSM); and (5) the defendant here, LegitScript LLC (LegitScript).¹ Shortly after filing the New York Lawsuit, PharmacyChecker moved for a preliminary injunction, which the district court denied. In October 2019, PharmacyChecker filed an Amended Complaint.

In a joint motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure, all five of the original defendants in the New York Lawsuit moved to dismiss. ASOP and PSM also filed separate motions to dismiss under Rule 12(b)(6). In addition, LegitScript filed its own motion to dismiss, both under Rule 12(b)(2) and Rule 12(b)(6), arguing that the federal court in New York lacked personal jurisdiction over LegitScript, that PharmacyChecker failed to plead facts showing unlawful concerted action, and that the claim against LegitScript is barred by the Sherman Act's statute of limitations.

In March 2021, U.S. District Judge Kenneth M. Karas ruled on the motions before him. See PharmacyChecker.com, LLC v. Nat'l Ass'n of Boards of Pharmacy , 530 F. Supp. 3d 301 (S.D.N.Y. 2021). Judge Karas found that on the record presented, the court lacked personal jurisdiction over LegitScript and accordingly dismissed PharmacyChecker's claim against LegitScript without...