Suture Express, Inc. v. Owens & Minor Distrib., Inc., 851 F.3d 1029 (10th Cir.)

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1 Antitrust Law Case Summaries Coordinated Conduct Case Summaries Prosterman et al. v. Airline Tariff Publishing Co. et al., No. 3:16-cv (N.D. Cal.) Background: Forty-one travel agents filed an antitrust lawsuit against American Airlines, Inc., United Airlines, Inc., Delta Air Lines, Inc. ( Airline Defendants ) and Airline Tariff Publishing Company ( ATPCO ) for fixing prices of domestic, multicity flights. American, United, and Delta are the three largest passenger airlines in the United States and collectively control approximately 70% of the market for domestic passenger air travel. ATPCO is a not-for-profit corporation owned by airlines, including Defendants, that publishes airfare information to airlines and computer reservation systems used by passengers and travel agents. In March 2016, each Airline Defendant changed its combinability rules so that customers were no longer permitted to combine less expensive multicity flights into one airline ticket, rather than purchasing a single roundtrip ticket. Plaintiffs alleged the Airline Defendants and ATPCO conspired to use ATPCO s system to coordinate their rule change and prices, forcing passengers to pay hundreds of dollars more for the same tickets. The Court initially dismissed Plaintiffs claims for failure to allege anything more than conscious parallel conduct among the Defendants. Plaintiffs filed an amended complaint, which provided more detailed allegations as to the timing of the Airline Defendants rule change, the particulars of the ATPCO system, the oligopolistic nature of the commercial passenger airline industry, and the record low price of jet fuel. Defendants again moved to dismiss. Outcome: On December 8, 2016, the Northern District of California granted Defendants motion to dismiss, finding that the amended complaint failed to plausibly allege that Defendants conduct amounted to an antitrust conspiracy. According to the Court, Plaintiffs did not allege any direct evidence of an antitrust conspiracy and the fact that the Airline Defendants used ATPCO s airfare information to make pricing decisions did not demonstrate that they agreed on prices. The Court distinguished other cases where the plaintiffs specifically alleged that defendants met and agreed to raise prices. Further, according to the Court, it is rational for an oligopolist to decide, independently, to raise prices with the expectation that others will follow suit because action by one oligopolist often has a drastic effect on the market. Plaintiffs filed a motion to vacate or amend the Court s order, arguing that the Court did not consider whether Plaintiffs alleged sufficient plus factors. In February 2017, the Court denied Plaintiffs motion. Suture Express, Inc. v. Owens & Minor Distrib., Inc., 851 F.3d 1029 (10th Cir.) Background: Suture Express, Inc. ( Suture ) sued Cardinal Health 200, LLC ( Cardinal ) and Owens & Minor Distribution, Inc. ( O&M ) (together, Defendants ) alleging that they illegally conspired to introduce tying and bundling contracts to exclude Suture from the market. Cardinal and O&M are distributors of approximately 30 categories of medical and surgical ( med-surg ) products to hospitals nationwide, with market shares as high as 31% and 38%, respectively. Suture specialized in only one category: sutures. Suture alleged that the bundling packages

2 caused hospitals to pay more if they ordered sutures from Suture rather than together with their other med-surg products. The District of Kansas dismissed the horizontal conspiracy claim, but allowed the independent tying and bundling claims to proceed. Suture introduced expert evidence that Defendants bundling packages resulted in below-cost prices for certain products, which Suture argued resulted in lost business. Defendants moved for summary judgment arguing that they did not have market power and that Suture failed to demonstrate any injury to competition. After the District Court granted summary judgment, Suture appealed to the Tenth Circuit. Outcome: The Tenth Circuit affirmed the judgment of the District Court. The Court held that Suture failed to demonstrate that Defendants had market power based on shares of 31% to 38% (the Court did not aggregate the Defendants shares because the conspiracy claims had been dismissed). The Court held that it could not conclude the existence of market power based on those shares alone, and that although Suture introduced evidence that 56-64% of the market accepted the bundle, it was possible that purchasers simply preferred the bundle for non-coercive reasons. The Court also found that the growth of a third broadline distributor, and the shrinking margins of Defendants, was inconsistent with the claim that Defendants could exclude competition and control prices. Finally, the Court held that Suture could not establish antitrust injury because it could not show that the challenged conduct resulted in an overall increase in price or a decrease in output. Instead, the Court found that the during the time period in question, the Defendants profit margins were decreasing, while overall industry revenues increased. The Court therefore affirmed the judgment. In re Lipitor Antitrust Litig., 868 F.3d 231 (3d Cir. 2017) Background: Direct and indirect purchasers ( Plaintiffs ) of Lipitor filed antitrust lawsuits against Pfizer Inc., which sells Lipitor, and generic drug manufacturer Ranbaxy Inc., along with their corporate affiliates (together, Defendants ), alleging that they engaged in an anticompetitive scheme to restrain trade and monopolize the market for Lipitor in violation of federal and state antitrust laws. Plaintiffs allege that Pfizer fraudulently procured a patent, engaged in sham patent litigation, and filed a sham citizen petition with the U.S. Food and Drug Administration to prevent the entry of generic Lipitor. Plaintiffs further allege that Defendants entered into an anticompetitive reverse payment settlement agreement in a patent litigation over Lipitor to delay the entry of generic Lipitor. The terms of the alleged reverse payment agreement provided, among other things, that Ranbaxy would delay entry of its generic Lipitor until November 30, 2011 in exchange for a release of Pfizer s claims against Ranbaxy in a separate patent infringement action regarding the drug Accupril. Although Ranbaxy paid Pfizer $1 million to settle the Accupril litigation, Pfizer s claims in that litigation were allegedly worth hundreds of millions of dollars to Pfizer and likely to be successful. The District of New Jersey dismissed the case on the ground that the Plaintiffs did not plausibly allege a large and unjustified reverse payment because they did not plead a reliable monetary estimate of the size of the alleged reverse payment.

3 Outcome: On August 21, 2017, the Third Circuit reversed the District Court s dismissal, concluding that Plaintiffs plausibly alleged an unlawful reverse payment. Specifically, Plaintiffs sufficiently alleged that Pfizer agreed to release its Accupril claims against Ranbaxy, which were allegedly worth hundreds of millions of dollars, in exchange for Ranbaxy s agreement to delay bringing its generic Lipitor to the market. Further, according to the Court, at the motion to dismiss stage, Plaintiffs are not required to allege a detailed estimate of the size of an alleged reverse payment. In re Effexor XR Antitrust Litig., 868 F.3d 231 (3d Cir. 2017) Background: Direct and indirect purchasers ( Plaintiffs ) of Effexor XR filed antitrust lawsuits against Wyeth Inc. ( Wyeth ), which sells Effexor XR, and generic drug manufacturer Teva Pharmaceutical Industries Ltd. ( Teva ) and their corporate affiliates (together, Defendants ), alleging that they engaged in an anticompetitive scheme to delay the entry of generic Effexor XR in violation of federal and state antitrust laws. Plaintiffs allege that Wyeth fraudulently procured patents and engaged in sham patent litigation to unlawfully maintain its monopoly over Effexor XR and prevent generic entry. Plaintiffs also allege that Defendants entered into an unlawful reverse payment agreement to settle a patent dispute over Teva s generic Effexor XR. The terms of Defendants settlement provided, among other things, that Wyeth would grant Teva an exclusive license to sell a generic version of Effexor XR on July 1, 2010, prior to the expiration of Wyeth s patents. When Teva did enter the market with its generic Effexor XR, Wyeth agreed not to compete with its own authorized generic (the No-AG Agreement ) during Teva s 180- day exclusivity period. Plaintiffs valued the No-AG Agreement at over $500 million. The District of New Jersey granted in part and denied in part Defendants motion to dismiss. The District Court granted Defendants motion to dismiss as to the reverse payment claims. The Court found that Plaintiffs did not plausibly allege a large and unjustified reverse payment because they did not plead a reliable monetary estimate of the size of the payment or provide evidence for the Court to determine the value of the payment. Outcome: In a consolidated appeal with the Lipitor case, the Third Circuit reversed the District Court s dismissal of the reverse payment claims and remanded the case. The Third Circuit concluded that Plaintiffs plausibly alleged an unlawful reverse payment. The Plaintiffs, according to the Court, pleaded sufficient factual detail regarding the settlement agreement to suggest that the alleged reverse payment (the No-AG Agreement) is plausibly large and unjustified. Specifically, Plaintiffs plausibly alleged that Wyeth leveraged its valuable promise not to introduce an authorized generic Effexor XR in exchange for Teva s agreement to delay entering the Effexor XR market.

4 Class Action Case Summaries Briseno v. ConAgra Foods, Inc., 844 F.3d 1121 (9th Cir. 2017) Background: Plaintiffs, consumers who purchased Wesson-brand cooking oil products labeled 100% Natural, filed suit against ConAgra Foods, Inc. ( ConAgra ), arguing that the 100% Natural label was false or misleading. Plaintiffs moved to certify eleven state-specific classes comprised of persons who purchased Wesson Oils within their state s applicable statute of limitations periods. ConAgra argued that the classes were not eligible for certification because there was no administratively feasible way to identify class members. The District Court certified the statewide classes for damages under Rule 23(b)(3), and ConAgra appealed. Outcome: On appeal, ConAgra argued that class proponents must demonstrate an administratively feasible way to determine who is in the class, in addition to the other requirements of Rule 23. The Ninth Circuit rejected ConAgra s argument, holding that Rule 23 does not require a showing of administrative feasibility as a prerequisite to class certification. The Ninth Circuit first noted that under traditional tools of statutory construction, the omission of administrative feasibility from the prerequisites for class actions listed in Rule 23(a) is meaningful. The Ninth Circuit also reasoned that imposing an administrative feasibility requirement would render Rule 23(b)(3) s requirement that courts consider the likely difficulties in managing a class action largely superfluous. Although the Ninth Circuit noted that the Third Circuit had found administrative feasibility to be a prerequisite to class certification, the Ninth Circuit joined the Sixth, Seventh, and Eighth Circuits in declining to adopt an administrative feasibility requirement. The Ninth Circuit affirmed the District Court s decision, holding that the District Court did not err in declining to condition class certification on Plaintiffs demonstrating an administratively feasible way to identify putative class members. In re Modafinil Antitrust Litigation, 837 F.3d 238 (3d Cir. 2016) Background: A putative class of direct purchasers ( DPPs ) of the branded drug Provigil brought antitrust claims against Provigil s manufacturer, Cephalon, and four generic manufacturers, alleging that Cephalon and the generic manufacturers entered into an illegal reverse-payment agreement to settle Hatch-Waxman litigation. The putative class consisted of members. After eight years of litigation, the DPPs filed for class certification, which the District Court granted. The two remaining Defendants in the case appealed, arguing that the DPP class did not satisfy Rule 23 s numerosity and predominance requirements. Outcome: A divided panel of the Third Circuit vacated and remanded the District Court s class certification order. The majority held that the District Court abused its discretion by failing to properly conduct its numerosity analysis. The majority identified six non-exhaustive factors that are appropriate for district courts to consider when evaluating whether joinder would be impracticable, and thus whether numerosity is satisfied: (1) judicial economy; (2) the claimants ability and motivation to litigate as joined plaintiffs; (3) the financial resources of class members; (4) the geographic dispersion of class members; (5) the ability to identify future claimants; and (6) whether the claims are for injunctive relief or for damages. Among these factors, the Third Circuit identified two of elevated importance: judicial economy and the ability to litigate as

5 joined parties. The Third Circuit held the District Court erred by failing to fully explore whether the class members could join as parties and by improperly considering the late stage of the proceeding in its numerosity analysis. The majority noted that if the class satisfied the numerosity requirement on remand, the Defendants argument regarding lack of predominance would be untenable. In re Lidoderm Antitrust Litigation, No. 14-md WHO (N.D. Cal. Feb. 21, 2017) Background: Direct purchaser and end-purchaser plaintiffs ( Plaintiffs ) moved for class certification in their antitrust lawsuit against brand and generic drug manufacturers of lidocaine patches ( Defendants ). Plaintiffs alleged that Defendants reverse payment settlement of Hatch-Waxman litigation led to inflated costs for brand name and generic lidocaine patches. In opposing class certification, Defendants argued that Plaintiffs could not show injury or damages through class-wide proof due to the complex nature of the distribution chain for pharmaceutical drugs. Defendants argued that individual questions regarding each direct purchaser and endpurchaser s place in the purchasing chain meant that individualized issues would swamp any common ones. Additionally, Defendants moved to exclude Plaintiffs experts damages models as unreliable under Daubert. Outcome: The District Court granted Plaintiffs motions for class certification. While the District Court acknowledged that the prescription drug distribution chain was indeed complex, it nonetheless found that common questions predominated. The District Court explained that key disputes would be resolved largely through common evidence, such as what the but-for price of lidocaine patches would have been absent Defendants conduct, and when the generic lidocaine patches would have entered the market. With respect to the admissibility of the Plaintiffs damages models, the District Court held that Plaintiffs experts had demonstrated reliable methods to determine aggregate damages with class-wide proof. According to the District Court, the fact that Plaintiffs expert made assumptions as to how he would calculate aggregate damages at summary judgment and trial did not undermine his preliminary methodology because his model could accommodate future changes to the class definition and subsequent judicial rulings and findings of fact. Ultimately, the District Court certified the classes and denied Defendants Daubert motions.