Hosp. Auth. of Metro. Gov't of Nashville v. Momenta Pharm., Inc.
Docket: No. 3:15-cv-01100
Court: District Court, M.D. Tennessee; December 4, 2018; Federal District Court
Momenta Pharmaceuticals, Inc. and Sandoz Inc. (collectively "Defendants") filed motions to dismiss concerning jurisdictional issues and failure to state a claim in response to Nashville General Hospital (NGH) and American Federation of State, County and Municipal Employees District Council 37 Health Security Plan (collectively "Plaintiffs"). The court will grant Defendants' motion for lack of subject-matter jurisdiction under Rule 12(b)(1), deny the motion regarding lack of personal jurisdiction under Rule 12(b)(2), and grant in part and deny in part the motion for failure to state a claim under Rule 12(b)(6).
NGH initiated the lawsuit on October 14, 2015, alleging violations of the Sherman Antitrust Act, seeking damages, declaratory, and injunctive relief on behalf of itself and a nationwide class under the Class Action Fairness Act of 2005 and Federal Rules of Civil Procedure 23(a) and (b). The claims involved a conspiracy to monopolize the production and distribution of enoxaparin, a generic version of Lovenox.
Defendants initially sought to transfer the case to the District of Massachusetts and filed motions to dismiss. A Report and Recommendation from Magistrate Judge Barbara Holmes on September 29, 2016, recommended denial of these motions, which Defendants objected to. On March 21, 2017, the court partially adopted the recommendation, dismissing NGH's claims for damages due to lack of standing under the indirect purchaser rule, but allowing claims for declaratory and injunctive relief to proceed.
Following this, NGH sought to amend its complaint, adding DC 37 as a representative plaintiff and including additional state antitrust and consumer protection claims. Magistrate Judge Holmes approved this amendment, and the amended complaint was filed on December 21, 2017, prompting the current motions to dismiss from Defendants.
NGH, a metropolitan charity hospital, purchases enoxaparin, a generic anticoagulant, for administration. DC 37, a non-profit health and welfare benefit plan, claims that it has and will continue to indirectly purchase or reimburse for Lovenox® and enoxaparin. Enoxaparin is used to prevent and treat deep vein thrombosis and heart attacks. Sanofi-Aventis introduced enoxaparin in the U.S. under the brand name Lovenox® and held a patent that became unenforceable in 2007. Momenta holds the "886 Patent," which pertains to a testing process for enoxaparin quality, known as Method 207. In 2003, Momenta entered a Collaboration Agreement with Sandoz, allowing Sandoz to manufacture and sell generic enoxaparin, with profit-sharing provisions and milestone payments tied to Sandoz being the sole supplier of generic enoxaparin in the U.S.
In 2007, Aventis sought to have the United States Pharmacopeial Convention (USP) adopt quality criteria for enoxaparin, proposing Method 207 for testing and had a pending patent application for it. Defendants opposed Aventis holding a patent on the standardized test, leading Aventis to abandon its application. However, Momenta had a pending application for the 886 Patent, which, once granted, would allow it to assert patent rights against third parties using Method 207. In December 2009, the USP adopted Method 207 as the standard test for enoxaparin quality, and shortly after, the 886 Patent was issued. Plaintiffs allege that had Defendants disclosed their patent application, the USP would have either required Momenta to abandon its rights or chosen a non-patented alternative test. Defendants became the first FDA-authorized manufacturers of generic enoxaparin, followed by Amphastar Pharmaceuticals, which received FDA approval to sell generic enoxaparin on September 19, 2011, and was instructed to use the USP compendium, including Method 207.
Defendants initiated a lawsuit against Amphastar in the District of Massachusetts, claiming Amphastar's compliance with Method 207 to produce generic enoxaparin infringed on the 886 Patent. Following the complaint, Defendants secured a temporary restraining order and preliminary injunction against Amphastar's sales. However, the U.S. Court of Appeals for the Federal Circuit stayed the injunction in January 2012 and vacated it in August 2012. In July 2013, the district court granted Amphastar's summary judgment motion, ruling no infringement on the 886 Patent; Defendants appealed, leading to the First Circuit vacating the summary judgment. A jury later found the 886 Patent invalid due to lack of enablement and written description in July 2017, a verdict upheld by the district court in February 2018. Defendants have appealed this ruling.
In their Amended Complaint, Plaintiffs assert four counts under the Sherman Act, seeking declaratory and injunctive relief, alleging that Defendants’ anticompetitive conduct is ongoing. Additionally, they claim various state law violations related to antitrust, consumer protection, and unjust enrichment. Defendants filed a Motion to Dismiss for lack of subject matter jurisdiction, arguing that Plaintiffs lack Article III standing for their claims, as the requested relief would require the court to prohibit hypothetical future conduct. They assert there has been no recent attempt to use the 886 Patent to block market entry and that ongoing litigation prevents such actions, contending that Plaintiffs have not demonstrated a concrete threat of imminent harm, thus failing to establish a justiciable case.
A motion under Federal Rule of Civil Procedure 12(b)(1) challenges the court's subject matter jurisdiction, particularly regarding the plaintiff's standing to sue. Standing is a fundamental requirement for federal cases, defined by Article III, and necessitates that the plaintiff demonstrates (1) an injury in fact, (2) a direct connection between the injury and the defendant's conduct, and (3) the likelihood of redress through a favorable court decision. The burden of proof lies with the plaintiff to establish these elements, especially at the pleading stage where they must clearly allege facts supporting each aspect of standing.
To prove injury in fact, a plaintiff must show an invasion of a legally protected interest that is concrete, particularized, and either actual or imminent. An injury is particularized if it uniquely affects the plaintiff, while a concrete injury must exist in reality rather than hypothetically. The concept of imminence ensures that the injury is not overly speculative, requiring that it be “certainly impending.”
In cases where plaintiffs seek injunctive or declaratory relief, they must still demonstrate a real and immediate threat of injury, not just rely on past harms. This threat must be grounded in reality, as emotional responses to previous actions do not suffice for granting injunctive relief without a substantiated threat of future harm.
Plaintiffs allege ongoing anticompetitive conduct by Defendants, asserting harm from September 2011 due to supracompetitive pricing, linked to efforts to exclude competitors from the generic enoxaparin market. They seek injunctive and declaratory relief, claiming standing based on the potential for future injury related to the enforcement of a patent. However, the Court finds that Plaintiffs have not sufficiently demonstrated Article III standing for their Sherman Act claims, as they fail to show a "real and immediate" threat of prospective injury. While Plaintiffs present factual allegations of past harm, these do not establish an imminent future injury. The Court identifies Plaintiffs' argument as a hypothetical chain of events that lacks certainty, which does not meet the legal standard for standing. Additionally, the ongoing litigation in the District of Massachusetts restricts the potential for Defendants to engage in anticompetitive behavior, further undermining Plaintiffs' claims. Consequently, the Court grants Defendants' Rule 12(b)(1) motion to dismiss the Sherman Act claims for lack of standing.
Defendants have filed a motion to dismiss based on Federal Rule of Civil Procedure 12(b)(2), asserting that the Court lacks personal jurisdiction over them concerning Plaintiffs' state law claims. Their argument hinges on the Supreme Court's decision in Bristol-Myers Squibb Co. v. Superior Court, which dictates that personal jurisdiction over non-resident defendants is not permissible for claims arising outside the forum state. Defendants, being non-residents of Tennessee, argue that the claims, governed by the laws of 30 different jurisdictions, arose from activities outside Tennessee, thus precluding jurisdiction.
In response, Plaintiffs assert that Sandoz has consented to general personal jurisdiction in Tennessee by designating an agent for service in the state. They also argue that Bristol-Myers is not applicable to this class action and that specific personal jurisdiction exists over the Defendants for all state law claims.
The applicable law under Federal Rule of Civil Procedure 12(b)(2) allows dismissal for lack of personal jurisdiction, constrained by the Fourteenth Amendment's Due Process Clause. To establish personal jurisdiction, Plaintiffs must demonstrate that Defendants have sufficient minimum contacts with Tennessee, ensuring the suit aligns with "traditional notions of fair play and substantial justice." Minimum contacts arise when a defendant purposefully engages in activities within the forum state.
Personal jurisdiction can be general, based on continuous and systematic contacts, or specific, limited to claims that relate to a defendant’s contacts with the forum state. The Court finds that specific personal jurisdiction applies to the Defendants regarding the state law claims, leading to the decision not to address other arguments.
The Sixth Circuit outlines three criteria essential for establishing specific jurisdiction: (1) the defendant must purposefully engage in activities within the forum state or cause effects there; (2) the cause of action must stem from these activities; and (3) the defendant's actions or their consequences must have a substantial connection to the forum state, making jurisdiction reasonable. Failure to meet any of these criteria precludes the invocation of personal jurisdiction, which must be established for each defendant and each claim brought against them.
In the case at hand, defendants argue that the plaintiffs, who are non-Tennessee residents, have filed class action claims based on enoxaparin purchases made outside Tennessee and assert multiple state-law claims under various jurisdictions. They reference the Supreme Court case Bristol-Myers, which determined that California courts lacked jurisdiction over claims from non-resident plaintiffs because there was no significant connection between the forum and the plaintiffs' claims. The Supreme Court emphasized that a direct link between the forum and the specific claims is necessary, noting that regular in-state sales or the presence of other plaintiffs with ties to California were insufficient for jurisdiction.
The applicability of the Bristol-Myers ruling to class actions remains unresolved, with differing opinions among courts. The text indicates that this issue is still debated, as only district court cases exist on the matter, and opinions are nearly evenly split regarding its extension to class actions.
Application of the Bristol-Myers decision reveals that no Court of Appeals has yet addressed the specific issue within the context of federal class actions. District courts are split on the applicability of Bristol-Myers in such cases, yet they consistently conclude that in putative class actions, only the named plaintiffs' jurisdictional obligations matter, rendering unnamed class members irrelevant for specific jurisdiction determinations. In the current case, NGH, a Tennessee resident, purchased enoxaparin in Tennessee, establishing a sufficient connection between the forum and the underlying controversy. Although DC 37 has not specified where it purchased enoxaparin, it claims to have indirectly acquired it for members in multiple states, including Tennessee, which is adequate to confer specific personal jurisdiction over Tennessee state law claims. This is bolstered by the relatively minor burden on DC 37. Unlike the situation in Bristol-Myers, DC 37 demonstrates an affiliation between the forum and the controversy due to the enoxaparin's intended distribution to Tennessee members. Consequently, since specific jurisdiction exists for Tennessee claims, DC 37 is permitted to pursue other state law claims as well.
Regarding Defendants' arguments based on Bristol-Myers, the Court agrees with Plaintiffs that the decision does not apply to class actions. Several courts highlight distinctions between class actions and mass torts, asserting that in mass tort cases, each plaintiff is an actual party in interest, unlike in class actions where named plaintiffs represent a broader group. For class certification under Rule 23, additional due process standards must be met, emphasizing the difference between the two types of actions, as recognized in relevant case law.
The class-action mechanism is an exception to the rule that litigation is typically pursued by named parties only. For a case to qualify as a class action, it must satisfy additional due process requirements for certification under Rule 23, including numerosity, commonality, typicality, adequacy of representation, predominance, and superiority, which are not necessary in mass tort actions. The Court determined it has specific personal jurisdiction over the Defendants concerning the Plaintiffs' remaining state law claims, denying Defendants' Rule 12(b)(2) motion to dismiss based on lack of personal jurisdiction.
Regarding Defendants' Rule 12(b)(6) motion to dismiss various state law claims, they argue that (1) the statute of limitations bars almost all claims, (2) Plaintiffs lack standing, and (3) Plaintiffs fail to meet state pleading requirements. Plaintiffs counter these arguments, asserting their claims are timely, they have standing, and their Amended Complaint sufficiently pleads the necessary elements.
Defendants claim the statute of limitations began on January 26, 2012, after a Federal Circuit stay ended, arguing that Plaintiffs' amendment filed in December 2017 is beyond the limitations period. They contend that doctrines like continuing violation, fraudulent concealment, and the discovery rule do not toll the limitations periods. In response, Plaintiffs argue these doctrines extend their claims' timeliness. The Court concluded that the continuing violation doctrine applies, stating that in antitrust cases, the statute of limitations begins anew with each harmful act by the defendant, focusing on the timing of the injury-causing actions rather than their outcomes.
A plaintiff asserting a continuing violation experiences an accrual of the cause of action each time they are injured by a defendant's act. An overt act by the defendant is necessary to reset the statute of limitations, which begins anew from the last overt act. This overt act must be independent and result in new injury to the plaintiff. Plaintiffs allege ongoing harm due to overpayment for generic enoxaparin caused by the defendants' anti-competitive actions, claiming that the wholesale price did not decline until May 2012 and that they incurred substantial overcharges until 2014. The Supreme Court's ruling in Klehr v. A.O. Smith Corporation clarifies that in a price-fixing conspiracy, each injurious overt act restarts the statute of limitations, regardless of the plaintiff's prior knowledge of the illegality. Defendants argue that Klehr does not apply since the amended complaint does not allege a price-fixing agreement, but the court finds this argument unconvincing, noting that the plaintiffs' allegations indicate a conspiracy to inflate prices by preventing market entry. As such, each sale of enoxaparin at inflated prices until at least 2014 restarts the five-year statute of limitations, rendering the plaintiffs' claims timely. Additionally, the defendants contest the plaintiffs' standing to bring claims under laws of states where they do not reside or purchase the drug. The plaintiffs counter that this issue pertains to class representation adequacy, as determined during class certification, referencing Fallick v. Nationwide Mutual Insurance Co.
The Sixth Circuit has yet to determine if class certification should precede the assessment of standing for state law claims made by non-resident named plaintiffs. District courts have taken varied approaches, with some addressing standing before class certification (e.g., In re Packaged Ice Antitrust Litig.) and others postponing the standing analysis until after class certification (e.g., Hoving v. Transnation Title Insur. Co.). The prevailing view suggests deferring standing issues regarding state law claims until the class certification stage, as this allows for a more nuanced understanding of Article III standing and class certification complexities. The Court will therefore delay its decision on the plaintiffs' standing for their state law claims until class certification is addressed.
Additionally, the defendants argue that the Amended Complaint inadequately pleads state law claims due to a lack of sufficient nexus to various states, such as Arizona and New York, for antitrust and consumer protection statutes. Both parties agree that specific jurisdictions require a clear connection between the defendant's actions and intrastate commerce, and mere boilerplate allegations are insufficient. Disagreement arises over whether the plaintiffs' claims meet these requirements. Plaintiffs assert that the defendants' anticompetitive behavior has harmed competition and increased prices within these jurisdictions, which they argue satisfies the "intrastate effects" requirement at the pleading stage, referencing precedents that support this view.
Plaintiffs have adequately presented facts at the pleading stage to establish intrastate effects relevant to competition in specified jurisdictions, which supports their claims under the consumer protection statutes of California, New York, and North Carolina. Defendants argue that the Utah antitrust claim cannot proceed since only Utah citizens or residents may file such claims. Although Plaintiffs acknowledge this limitation, they contend that the issue pertains to standing and is better addressed during class certification. Regarding consumer protection claims in Massachusetts, Missouri, Montana, and Vermont, Defendants assert that only consumers purchasing for personal use can bring claims. Plaintiffs counter that recent statutory changes in Massachusetts and Montana have removed this limitation, and Vermont’s statute allows claims involving business use. They also argue that Missouri’s statute permits claims irrespective of the purchase context. The Court recognizes that Plaintiffs’ allegations can encompass Utah residents, sufficient to withstand a motion to dismiss. The standing issue for the Utah antitrust claim and the consumer protection claims from the other states will not be resolved at this stage. Additionally, Defendants challenge the viability of Plaintiffs’ unjust enrichment claims across 14 states, asserting that Plaintiffs failed to show direct benefits to Defendants and did not plead the absence of legal remedies for certain jurisdictions. Furthermore, Defendants argue that California law does not recognize unjust enrichment as a standalone cause of action.
Plaintiffs assert that the Amended Complaint sufficiently alleges a direct benefit to Defendants and the absence of a legal remedy, as California allows unjust enrichment claims based on other legal rights. Indirect purchasers, however, primarily benefit others in the distribution chain, with only direct purchasers providing a direct benefit to the Defendants. Courts have previously allowed unjust enrichment claims from indirect purchasers in antitrust cases where overpayment is alleged. Plaintiffs claim they conferred benefits to Defendants through overpayments related to anti-competitive behavior, which the Court finds adequate for an unjust enrichment claim in certain states. However, since Plaintiffs failed to demonstrate the absence of a legal remedy, unjust enrichment claims under Arizona, Hawaii, Massachusetts, Minnesota, and Tennessee laws will be dismissed. Additionally, California does not recognize unjust enrichment as a standalone cause of action, leading to the dismissal of that claim as well. The Court's conclusions include denying Defendants' motion to dismiss for lack of personal jurisdiction, granting the motion for lack of subject-matter jurisdiction, and granting in part and denying in part the motion for failure to state a claim. The case will continue with the remaining state law claims. Furthermore, the Court acknowledges the USP's role in setting enforceable standards for pharmaceuticals and food ingredients, and it takes judicial notice of the District of Massachusetts proceedings as they are integral to the case. Plaintiffs argue that Defendants' motion conflates jurisdictional issues with merits, but the Court finds it appropriately addresses Article III standing.
Defendants challenge Plaintiffs' Article III standing to pursue Sherman Act claims for injunctive and declaratory relief, rather than disputing their compliance with federal antitrust law elements. The Court maintains subject matter jurisdiction over Plaintiffs' state law claims under the Class Action Fairness Act, which applies to multi-state class actions exceeding $5 million in controversy and where there is diversity in citizenship between class members and defendants.
The burden is on Plaintiffs to demonstrate personal jurisdiction over Defendants concerning state law claims, which is considered "relatively slight" when the court rules without an evidentiary hearing. Plaintiffs must provide a prima facie case for personal jurisdiction and cannot solely rely on their pleadings but must present specific facts establishing jurisdiction. Tennessee's long-arm statute aligns with federal due process requirements, meaning the court must ascertain whether exercising personal jurisdiction would breach constitutional due process.
Defendants argue that the analysis in Keeton was undermined by the Bristol-Myers decision, which pertains to mass torts and is deemed inapplicable to class actions. Consequently, the Court will not address arguments regarding fraudulent concealment or the discovery rule. Additionally, Defendants and Plaintiffs agree that Alabama’s antitrust law does not apply in this case, leading to the dismissal of that claim with prejudice.
