Antitrust Recent Case Update

Antitrust Recent Case Update

Introduction

GELBOIM V. BANK OF AMERICA CORP., 135 S. CT. 897 (2015)

The U.S. Supreme Court’s decision in Gelboim v. Bank of America Corp. confirms that a lower court’s dismissal of antitrust claims is appropriate for immediate appeal, and may keep antitrust litigation in the ongoing LIBOR MDL action alive.

BACKGROUND
Initiated in mid-2011, plaintiffs in the LIBOR action sought to recover monetary damages from banks and financial institutions they allege colluded to manipulate the London InterBank Offered Rate (LIBOR), a global interest rate benchmark. Plaintiffs allege that by misstating borrowing costs, defendants were able to unduly influence and exploit the financial market, resulting in losses to plaintiffs.

The consolidated LIBOR action consisted of three primary categories of class action plaintiffs: (1) over-the-counter plaintiffs; (2) exchange-based plaintiffs; and (3) bondholder plaintiffs. In addition to these class action plaintiffs, a separate set of non-class actions was brought by Charles Schwab entities or funds. Each category of plaintiffs alleged antitrust injuries, with some plaintiffs also alleging other causes of action.

In Gelboim, the district court granted defendants’ motion to dismiss the antitrust claims. Judge Naomi Reice Buchwald of the Southern District of New York found that plaintiffs lacked standing to bring Sherman or Clayton Act claims on the grounds that plaintiffs did not suffer a cognizable antitrust injury.

Ellen Gelboim and Linda Zacher, on behalf of the subset of plaintiffs asserting antitrust-only claims, appealed the district court’s order. In re LIBOR-Based Financial Instruments Antitrust Litigation, 935 F.Supp.2d 666, 685 (S.D.N.Y. 2013). The Court of Appeals for the Second Circuit dismissed the Gelboim-Zacher appeal, finding that it lacked jurisdiction to hear the case on the grounds that the district court’s dismissal of the antitrust-only suits were not final appealable orders as they “did not dispose of all claims in the consolidated action.” In re LIBOR-Based Financial Instruments Antitrust Litig., 2013 WL 9557843, at *1 (2d Cir. Oct. 30, 2013), rev’d sub nom. Gelboim v. Bank of Am. Corp., 135 S. Ct. 897 (2015). The U.S. Supreme Court granted certiorari on June 30, 2014.

DECISION
In a unanimous decision, the U.S. Supreme Court held that the district court’s dismissal of antitrust claims was a final order such that the Court of Appeals had jurisdiction to hear the appeal. The Court reasoned that since the motion to dismiss completely dispensed of the antitrust only claims, the subset of plaintiffs asserting only antitrust claims were removed from the consolidated proceeding, “thereby triggering their right to appeal under [U.S.C.] § 1291.”[1] The Supreme Court found that “[t]he District Court’s order dismissing the Gelboim-Zacher complaint for lack of antitrust injury, without leave to amend, had the hallmarks of a final decision [in terminating the antitrust-only actions].”[2]

SIGNIFICANCE
The Gelboim decision provides clarity for the appeals process in consolidated actions, indicating that the 30 day time frame in which plaintiffs must file an appeal on a motion to dismiss begins with the district court’s order of dismissal. Allowing for immediate appellate review of partial motions to dismiss speeds up the review process for court orders that may have otherwise had to wait for resolution of the entire action, and permits the action to maintain some semblance of cohesion.

Aside from providing clarity regarding appellate procedure, Gelboim provides an opportunity for plaintiffs in the LIBOR action to revive their antitrust claims.  

IN RE NEXIUM ANTITRUST LITIGATION, 2015 WL 265548 (1ST CIR. JAN. 21, 2015); IN RE NEXIUM ANTITRUST LITIGATION, 2015 WL 321818 (1ST CIR. JAN. 21, 2015)

The First Circuit’s January 2015 decisions regarding the Nexium antitrust litigation are the latest decisions in the Nexium “pay for delay” class litigation.

BACKGROUND
The Nexium antitrust litigation arises from defendant AstraZeneca’s alleged anticompetitive behavior. Plaintiffs allege that AstraZeneca, the manufacturer of the heartburn medication Nexium, sued its generic competitors for patent infringement and then paid its competitors—specifically Ranbaxy, Teva, and DRL—not to challenge Nexium’s patents and to postpone manufacturing and marketing the generic counterpart to Nexium.

In November of 2013 the United States District Court for Massachusetts certified end-payor plaintiffs as a damages class, finding that common questions of law and fact existed among the end-payor plaintiffs who claim injury after purchasing Nexium at an inflated price. See In re Nexium (Esomeprazole) Antitrust Litigation, 297 F.R.D. 168 (D. Mass. 2013). In certifying the end-payor cases the district court purposefully excluded a subset of damages plaintiffs, pharmacy benefit managers (PBMs),[3] on the grounds that damages for PBMs were impossible to calculate, as no single formula exists to calculate each company’s damages due to the varying terms of their contracts with the defendant. In the same opinion, the district court denied class certification for an injunctive class of plaintiffs who failed to allege a monetary injury on the grounds that class certification for an injunctive class was improper in light of the monetary damages sought by most of the class.

In response to the district court’s grant of class certification, defendants filed an interlocutory appeal asserting that certification of the end-payor class was improper, as all class members had yet to prove injury.

DECISIONS
In two decisions issued the same day, the First Circuit addressed the remaining issues in the Nexium litigation.  Before deciding whether defendants could voluntarily dismiss the appeal, the First Circuit affirmed the district court’s certification of the end-payor class, reasoning that all class members are not required to prove injury at the class certification stage.

The court then issued its second decision, effectively mooted by its prior decision, addressing defendants’ motion to dismiss the appeal. In their voluntary motion to dismiss, defendants argued that the appeal should be dismissed on the grounds that most of the underlying claims had been resolved through settlement or jury outcomes. Defendants also expressed the desire to avoid the First Circuit’s ruling on their class certification appeal.

Before reaching its decision to deny defendants’ motion, the First Circuit noted that it possesses “broad discretion to grant voluntary motions to dismiss.”[4] The court concluded, however, that given the unsettled underlying issues, time invested by the court in preparing the decision, and the possible strategic motives of the defendant in filing the voluntary motion to dismiss, it was in the best interest of all parties involved that the court rule on the appeal and deny defendant’s motion.

SIGNIFICANCE
In re Nexium served as a test case for “pay for delay” cases and may discourage similar cases in the future after defendant AstraZenaca prevailed at trial.[5] Although some practitioners believe that In re Nexium is an indicator that pay-for-delay cases may be harder to prove than initially thought, others point to unusual “extenuating circumstances” in the case that may have uniquely barred recovery.[6]

Regardless of the outcome of In re Nexium, the case serves as a favorable decision for class action plaintiffs’ attorneys to use when seeking to certify a class, even if the ultimate outcome was less favorable to the plaintiffs. From the First Circuit’s discussion of the issue in In re Nexium, as well as the opinions of other circuit courts, it is clear that courts prefer a functional approach to proving injury at the class certification level, choosing to overlook possible shortcomings for individual class members in favor of the benefits of litigation for the class as a whole. See In re Nexium Antitrust Litig., 2015 WL 265548, at *10 (1st Cir. Jan. 21, 2015); Kohen v. Pacific Inv. Mgmt. Co., 571 F.3d 672 (7th Cir. 2009).

IN RE SUBOXONE ANTITRUST LITIGATION, 2014 WL 6792663 (E.D. PA. DEC. 3, 2014)

In the first judicial opinion to address “product hopping,” the U.S. District Court for the Eastern District of Pennsylvania denied defendant drug manufacturer’s motion to dismiss, green lighting antitrust litigation against a pharmaceutical company accused of monopolistic behavior.

BACKGROUND
Plaintiff drug purchasers sought recovery of damages stemming from defendant Reckitt Benckiser, Inc.’s alleged product hopping scheme intended to thwart the manufacturing and marketing of a generic equivalent of its brand name drug, Suboxone. Suboxone is currently the only pharmaceutical drug on the U.S. market that allows patients to treat and manage their opioid dependence at home, as opposed to similar drugs which must be administered within a clinic.

In order for a generic drug to be approved by the FDA, and thus able to be sold on the U.S. market, the generic company must prove that the generic version of a brand-name drug is bioequivalent to its brand counterpart. For a generic drug to be deemed bioequivalent to an existing drug, the generic drug must “deliver the same amount of active ingredient into a patient’s blood stream for the same amount of time as the brand-name drug.”[7]

Plaintiffs allege that defendant changed the mode of delivery for Suboxone from a tablet form to a film delivery mode, and then aggressively marketed the new film delivery system for the sole purpose of maintaining a monopoly on the market for Suboxone and depressing the generic market for the drug. This strategy—changing the mode of delivery of a pharmaceutical drug before the initial patent expires and preventing generic companies from competing in the market for the new form of the drug—is commonly referred to as “product hopping.”

Plaintiff’s claimed that defendant’s intentional alteration of mode of delivery of Suboxone constituted unlawful maintenance of monopoly power under § 2 of the Sherman Act. In support of their argument, plaintiffs asserted that the newly developed Suboxone film delivery system was not superior to that of the tablet delivery system, alleging that a change from tablet to film could only be made for strategic purposes.

DECISION
The District Court for the Eastern District of Pennsylvania denied defendant’s motion to dismiss on the grounds that the facts presented by the plaintiffs indicate that the development of Suboxone from tablets into film by defendant could constitute coercive measures taken by defendant to encourage Suboxone users to switch from tablets to film, thus maintaining a monopoly on the market for the drug.  In reaching its decision, the court also found that the suit could still proceed despite the small generic market for tablet-form Suboxone, as “competitors need not be barred from all means of distribution.”[8]

SIGNIFICANCE
The district court’s decision in In re Suboxone is the first decision to address claims of product-hopping. Addressing the novelty of the issue the district court opined that “simply introducing a new product on the market, whether it is a superior product or not, does not, by itself, constitute exclusionary conduct. The key question is whether the defendant combined the introduction of a new product with some other wrongful conduct . . . .”[9]

ABRAHAM & VENEKLASEN JOINT VENTURE V. AMERICAN QUARTER HORSE ASS’N, 2015 WL 178989 (5TH CIR. JAN. 14, 2015)

The United States Court of Appeals for the Fifth Circuit overturned a jury verdict, holding that defendant American Quarter Horse Association (AQHA), which refused to register cloned quarter horses, did not, as a matter of law, engage in anticompetitive or monopolistic behavior and was therefore entitled to judgment in its favor notwithstanding the jury’s verdict for plaintiff.

BACKGROUND
Plaintiffs Jonathan Abraham and Gregg Veneklasen operated a business in which they invested in cloned reproductions of elite quarter horses. Plaintiffs filed an antitrust action against defendant American Quarter Horse Association (AQHA) alleging that defendant engaged in anticompetitive and monopolistic behavior in violation of § 1 and § 2 of the Sherman Act in refusing to register cloned quarter horses. Plaintiffs contended that “meaningful participation in [the] multimillion dollar industry is dependent upon AQHA membership and AQHA registration” and allege injuries from defendant’s exclusionary conduct. See Hatley v. American Quarter Horse Ass’n, 552 F.2d 646, 654 (5th Cir. 1977). The case was tried before a jury.

After a jury verdict finding in favor of plaintiffs, but denying to award damages, the district court issued an injunction against defendant, prohibiting the AQHA from preventing the registration of cloned quarter horses.  Defendants appealed the jury verdict, requesting reconsideration of their end of trial motion for judgment as a matter of law.

DECISION
The Fifth Circuit rejected the Sherman Act claims, reversing the jury verdict and order for injunction.  The Sherman Act § 1 claim was rejected due to lack of proof of a conspiracy, as the plaintiffs’ principal evidence was a one-sided complaint about competition, with no evidence of agreement from any co-conspirators.  The court also rejected a § 2 claim on the basis that the AQHA was not a competitor in the relevant market.

SIGNIFICANCE
The court distinguished the association in this case from the NFL in Am. Needle, 560 U.S. 183 (2010).  In Am. Needle, the confederation of entities that came together to form a league engaged in common and competitive activities.  The court distinguished the AQHA, saying it “is more than a sports league, it is not a trade association, and its quarter million members are involved in ranching, horse training, pleasure riding and many other activities besides the ‘elite Quarter Horse’ market.”[10]  The vast majority of the members, all but a tiny fraction, do not gain from any exclusion arising out of cooperative decision making regarding breeding standards. Still, the court accepted the possibility that Am. Needle’s “separate economic interests” standard might be satisfied, and therefore the AQHA could be part of a conspiracy even though it is technically a single entity.  The court did note, because the rule of reason applies, that there were substantial non-economic interests that might overcome the concern over the exclusionary behavior, such as maintaining breed standards for aesthetic purposes, but ultimately stopped short of attempting to plum the edges of Am. Needle in this context, as it rested its decision on a finding that there was insufficient evidence of any actual conspiracy. 

- Bryan Bleichner is a partner at Chestnut Cambronne in Minneapolis, Minnesota and serves as an officer of the Antitrust Section of the FBA.

- Jennell Shannon is a second-year law student at the University of Minnesota Law School and a Law Clerk at Chestnut Cambronne.



[1] Gelboim v. Bank of America Corp., 135 S. Ct. 897, 899 (2015).

[2] Id. at 905.

[3] Pharmacy benefit managers “process prescriptions for the groups that pay for drugs, usually insurance companies or corporations, and use their size to negotiate with drug makers and pharmacies.” Thomas Gryta, What is a ‘Pharmacy Benefit Manager?,’ Wall St. J. (July 21, 2011, 6:03 PM), http://on.wsj.com/1zBqGaH.

[4] In re Nexium Antitrust Litig., 2015 WL 321818, at *1 (1st Cir. Jan. 21, 2015).

[5] Despite a jury finding that defendant AstraZenaca participated in anticompetitive conduct, the jury found that AstraZenaca caused no damages to Plaintiffs as there was no proof that a generic version of Nexium would have become available sooner had the agreements between AstraZenaca and the generic companies never occurred.  

[6] See Ed Silverman, What the AstraZeneca and Ranbaxy Pay-to-Delay Case Didn’t Tell Us, The Wall St. J. (Dec. 11, 2014, 6:08 PM), http://blogs.wsj.com/pharmalot/2014/12/11/what-the-astrazeneca-and-ranbaxy-pay-to-delay-case-didnt-tell-us/.

[7] In re Suboxone Antitrust Litig., 2014 WL 6792663, at *2 (E.D. Pa. Dec. 3, 2014).

[8] Id. at *12.

[9] Id. at *10.

[10] Abraham & Veneklasen Joint Venture v. American Quarter Horse Ass’n, 2015 WL 178989, at *4 (5th Cir. Jan. 14, 2015).

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