STEFAN R. UNDERHILL, District Judge.
On March 23, 2015, I issued a decision on several motions to dismiss in this complex multidistrict litigation ("MDL"). See In re Aggrenox Antitrust Litig., 94 F.Supp.3d 224 (D. Conn. 2015) (doc. # 229) (hereinafter "March 23 Order"). I later expanded upon and clarified some aspects of that decision in an order granting a motion to certify it for interlocutory appeal under 28 U.S.C. § 1292(b). See In re Aggrenox Antitrust Litig., 2015 WL 4459607 (D. Conn. July 21, 2015) (doc. # 311) (hereinafter "July 21 Order").
At that time, the indirect-purchaser actions included two complaints: the putative-class complaint of indirect-purchaser plaintiffs ("IPPs," though they style themselves end-payor plaintiffs or EPPs), and a complaint filed by Humana, a large indirect purchaser and opt-out from the putative class. Humana and the IPPs filed amended complaints, though they only actually amended certain portions while leaving others unmodified, re-pleading them merely "to preserve appellate rights." The defendants filed motions to dismiss the amended complaints (doc. ## 290, 291), and I heard oral argument on them, but I took the motions under advisement in part because new actions were being added to the MDL that appeared likely to raise common issues that could efficiently be taken up together.
There are now seven operative complaints in this case, which were filed respectively by: (1) direct-purchaser putative-class plaintiffs ("DPPs") (doc. # 105/109); (2) IPPs (doc. # 263); (3) Humana (doc. # 239); (4) Walgreen plaintiffs
After oral argument on a motion to dismiss the retailer plaintiffs' complaints, which pertained principally to the assignment of rights from (direct-purchaser) wholesalers to (indirect-purchaser) retailers, I denied the motion from the bench (doc. # 338).
The Rule 12(b)(6) motions to dismiss for failure to state a claim are of course reviewed by the same familiar standard that I applied and described at greater length in the March 23 Order. I accept the material facts alleged in the complaints as true, draw all reasonable inferences in favor of the plaintiffs, and decide on a claim-by-claim basis whether it is plausible that the plaintiffs have a valid claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). To survive a motion to dismiss, claims must be supported by factual allegations that are "enough to raise a right to relief above the speculative level" and with "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 555, 570; see also Iqbal, 556 U.S. at 679 ("While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations."). The plausibility standard set forth in Twombly and Iqbal obligates the plaintiff to "provide the grounds of his entitlement to relief" through more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555 (quotation marks omitted).
The IPPs and Humana included without substantive revision in their amended complaints some claims
The IPPs, Humana, and Louisiana Health all plead claims for injunctive relief, and the defendants move to dismiss them on the same basis that they moved to dismiss similar claims pleaded by the retailer plaintiffs. The defendants argue that the claims for injunctive relief are moot, because there is nothing left to enjoin: the challenged agreements were made in 2008, and even if they did unlawfully delay the entry of Aggrenox generics to the market, those generics have now in fact entered (and have been on the market since July 2015). The plaintiffs therefore can seek damages for alleged overcharges already incurred, but they cannot plead ongoing harm or a credible threat of future harm and thus cannot need (or even stand to benefit from) an injunction. The plaintiffs argue somewhat vaguely about the ongoing threat that the generics could be removed from the market (though they plead no plausible factual basis to justify that concern) and assert that even if the generics are not removed, the injunctive claims are not moot because I have the authority (and ought to exercise it) to enjoin bad actors from committing other similar bad acts in the future.
Now that generic entry has occurred, the plaintiffs' arguments for an injunction are thin, and the defendants have a strong argument to dismiss those claims.
As an initial matter, I reassert the reasoning and the holdings of the March 23 Order and the July 21 Order, as applied to Louisiana Health's claims and the motion to dismiss them. To the extent that the defendants renew arguments that I rejected in those orders, I reject them again. Notably, I adhere to my ruling on the significance of Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979), which is discussed at length in the March 23 Order, 94 F. Supp. 3d at 237-39, and in the July 21 Order. In short, "a purchaser suing a monopolist for overcharges in injured anew by each overcharge," id. at 238, and "[c]laims are therefore not time-barred that stem from alleged overcharges incurred within the relevant statutory period, whatever that period may be for a particular statute, measured backward from the filing of the claims." Id. at 248.
I similarly adhere to other rulings from the earlier orders, and make new rulings relating to Louisiana Health's claims, as follows.
Louisiana Health has pleaded—quite like the other indirect purchasers pleaded— essentially undifferentiated claims under the separate consumer-protection laws of fifteen states in its Count Eight. It also pleads generic unjust enrichment as its Count Nine, without even listing the jurisdictions whose law(s) it invokes. It treats all of those laws—which may or may not be materially different from each other, and which may or may not protect against the particular harms that antitrust law addresses—as simple surrogates for antitrust law, with very little elaboration. I held in the March 23 Order that:
94 F. Supp. 3d at 255. Louisiana Health's complaint is no better on this score than the other complaints, and I therefore adhere to that ruling. The motion to dismiss is similarly "granted with respect to all such claims, without prejudice to repleading in nonconclusory fashion." Id. at 256.
A basic and complicating feature of all indirect-purchaser antitrust actions is the rule of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). In that case, as I wrote in the March 23 Order, "the Supreme Court held that only the overcharged direct purchaser, and no one else in the chain of distribution, can recover damages under federal antitrust law." 94 F. Supp. 3d at 248. The Court gave indirect purchasers an opening, however, in California v. ARC America Corp., 490 U.S. 93 (1989), where it held that Illinois Brick "does not prevent indirect purchasers from recovering damages under state antitrust laws where the state laws otherwise allow it (and many states have passed so-called `Illinois Brick repealers' in order to do so)." 94 F. Supp. 3d at 248. A recurring issue in this case, therefore, is whether the Illinois Brick rule applies to the antitrust law of particular states.
I noted in the March 23 Order that "Rhode Island was an Illinois Brick state until its legislature enacted a repealer on July 15, 2013." Id. at 252. The parties disputed whether that repealer should be applied retroactively, and I concluded that it should not. I adhere to that ruling with respect to Louisiana Health, and hold that its "claims under the Rhode Island antitrust statute alleging overcharges before July 15, 2013 are dismissed," id. at 253, but that the motion to dismiss Rhode Island antitrust claims is denied with respect to alleged overcharges incurred from that date forward.
Louisiana has not passed an Illinois Brick repealer and there appears to be no authoritative statement from Louisiana's courts that the logic of Illinois Brick does not apply to the state's own antitrust law. Louisiana Health argues that the logic of requiring a repealer is flawed, because Illinois Brick was only concerned with federal antitrust law. Though it is true that the Supreme Court in Illinois Brick was interpreting federal law, I adhere to the reasoning of the March 23 Order that "[i]n the absence of a clear decision—by either the legislature or by the jurisdiction's own courts—to allow indirect-purchaser recovery, the antitrust laws of a state (or territory) are interpreted as presumptively consistent with federal law." 94 F. Supp. 3d at 252. Louisiana is of course free to depart from federal antitrust law and allow indirect-purchaser recovery under its own law, but I cannot conclude that it has done so unless and until Louisiana's legislature or courts clearly say that it has done so.
Louisiana Health filed a notice of supplemental authority (doc. # 483), alerting me to a decision from a Louisiana trial judge that appears to allow indirect-purchaser recovery under Louisiana antitrust law,
The same reasoning applies to claims under the Louisiana Unfair Trade Practices Act. Louisiana Health pleaded that claim as a separate count (Count Six) from the omnibus count of various state consumer-protection claims (Count Eight) discussed above, and it suffers the same infirmity of assuming the non-obvious proposition that a generic consumer-protection statute reaches the same conduct reached by antitrust law and can therefore act as surrogate for it. But more significantly, even if that proposition is correct and any antitrust claim can also be brought under consumer-protection law, that formality of pleading cannot avoid the rule of Illinois Brick. If Louisiana's law redundantly allows the same antitrust claim to be brought under multiple laws, the Illinois Brick rule will nevertheless apply until an authoritative statement of Louisiana's legislature or courts says otherwise. Indirect-purchaser claims under Louisiana antitrust and consumer-protection law are therefore dismissed.
The defendants point out that Kansas antitrust law prohibits only combinations and conspiracies to monopolize and not monopolistic behavior by single parties, and they therefore move to dismiss Louisiana Health's claim under Kansas law to the extent it is a simple monopolization claim rather than a conspiracy-to-monopolize claim. It is obvious that the salient allegations in this case (and in any reverse-payment case) are allegations of an unlawful agreement between at least two parties. Kansas antitrust law would appear to reach such conduct (to the extent that any antitrust law reaches it), and the motion to dismiss a claim under that law is therefore denied.
The defendants move to dismiss the IPPs' and Louisiana Health's claims under the Illinois Consumer Fraud Act on the dual grounds that that statute does not reach antitrust conduct and that the plaintiffs have not sufficiently pleaded a consumer nexus. The defendants also move to dismiss the IPPs' claims under the Illinois Antitrust Act, on the basis that that statute does not permit indirect-purchaser class actions unless they are brought by the Illinois Attorney General.
The Illinois Antitrust Act provides that "no person shall be authorized to maintain a class action in any court of this State for indirect purchasers asserting claims under this Act, with the sole exception of the State's Attorney General." 740 Ill. Comp. Stat. 10/7(2). It is not obvious that the formulaic expression "in any court of this State" appearing in an Illinois statute applies to a federal court in Connecticut, but if it does, the statute potentially raises a Shady Grove problem. In the March 23 Order, I briefly discussed Shady Grove Orthopedic Associates v. Allstate Ins. Co., 559 U.S. 393 (2010), as follows:
94 F. Supp. 3d at 253-54. I declined to "wade any deeper into the difficult problem of what part of the reasoning in Shady Grove is or is not controlling," id. at 254, because I was not able to conclude on the basis of the arguments that were before me that the answer would have made a difference for the particular state law then in question. The same issue arises now in the context of Illinois law, and the parties make the same arguments as before.
The Second Circuit has not taken up the problem of the effect of Shady Grove's split opinions, but the defendants point out that most of the lower courts that have done so—including in this district—have concluded that the Stevens concurrence controls. See, e.g., In re Trilegiant Corp., Inc., 11 F.Supp.3d 82, 115-18 (D. Conn. 2014) (collecting cases and concluding that the Stevens concurrence controls). But see 3M Co. v. Boulter, 842 F.Supp.2d 85, 95 n.7 (D.D.C. 2012) (rejecting the argument that the Stevens concurrence controls). I have some doubt, however, that those courts are correct. The Marks doctrine—that is, the doctrine that in a split decision the controlling rationale is that taken by the Justices who concur in the judgment on the narrowest grounds—works "only when one opinion is a logical subset of other, broader opinions. In essence, the narrowest opinion must represent a common denominator of the Court's reasoning; it must embody a position implicitly approved by at least five Justices who support the judgment." King v. Palmer, 950 F.2d 771, 781 (D.C. Cir. 1991). The Stevens concurrence is "narrower" than the position of the other Justices who made up the Shady Grove majority only in the sense that it would reject state procedural rules in fewer cases. It is not logically narrower, however, because it is not a logical subset of the opinion of the other Justices in the majority. Those Justices do not implicitly approve of its rationale for sometimes allowing state procedural rules to control—on the contrary, they explicitly reject that rationale—and it therefore does not represent the common denominator of the Court's reasoning.
The courts that have taken the Stevens concurrence to be controlling have generally not addressed that problem. At least one court took the Stevens approach to form the "narrowest grounds" not because it represents the common denominator of the judgment but because it "was consistent with [the] approach of the four members of the dissent." In re Wellbutrin XL Antitrust Litig., 756 F.Supp.2d 670, 675 (E.D. Pa. 2010). In other words, even though Stevens joined the majority to hold that Rule 23 trumps New York's class-action bar, he agreed with the dissent that some state procedural rules—when sufficiently intertwined with the state's substantive rights and remedies—can control in federal court. The Wellbutrin Court infers from that agreement that there were five votes for Stevens's approach. The problem is that no other Justice joined his concurrence, and even if we nevertheless infer agreement, the common denominator of a concurrence and a dissent does not support the judgment. It is, in effect, Marks-doctrine dicta rather than Marks-doctrine holding.
It does not follow, of course, that the stricter view represented by the Scalia plurality controls: the portions of Scalia's opinion with which Stevens did not agree did not garner a majority. So it may be that in a case where a state procedural rule is part of the state's framework of substantive rights, there simply is no controlling Supreme Court holding, and that Marks-doctrine dicta is the most persuasive guide.
The defendants argue that the indirect-purchaser class-action bar in the Illinois Antitrust Act is just such a procedural rule. A few courts, including the Wellbutrin Court, agree—because the bar is part of and applies only to the antitrust law rather than being a separate and generally applicable procedural provision, and because, in the view of those courts, it "appear[s] to reflect a policy judgment about managing the danger of duplicative recoveries." 756 F. Supp. 2d at 677. Those points are well taken, but I respectfully disagree that they are sufficient to alter the scope of a substantive right or remedy, because any indirect purchaser procedurally blocked from participation in a class action would still have the same remedy in an individual action. It may be true that many indirect purchasers will decide not to bother, and that fact could have a profound effect on the defendants' total liability. But that was also true in Shady Grove, which "transform[ed] a $500 case into a $5,000,000 award." 559 U.S. 393, 436 (2010) (Ginsburg, J., dissenting).
In sum, I cannot square Shady Grove's allowance of a Rule 23 class action despite New York's class-action bar with the disallowance of a Rule 23 class action in the case of Illinois's class-action bar simply on the basis that Illinois's bar is narrower. It is narrower because its application is limited to indirect-purchaser antitrust claims, and that does tie it more specifically to particular substantive rights; but if New York's state-law bar is not a procedural rule that alters the scope of a substantive right or remedy, then the narrower scope of Illinois's state-law bar does not make it one that does. I therefore deny the motion to dismiss claims under the Illinois Antitrust Act. This issue will no doubt surface again later in this litigation. Perhaps by then we will have clearer guidance about the applicability of Shady Grove.
The IPPs and Louisiana Health plead claims under the Illinois Consumer Fraud and Deceptive Business Practices Act, which provides that "[u]nfair methods of competition and unfair or deceptive acts or practices . . . in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby." 815 Ill. Comp. Stat. § 505/12. The defendants argue that because indirect purchasers are not consumers—whom that statute protects from fraud and deception—they must plead a sufficient "consumer nexus" in order for their claims under the statute to survive. That may be so, but even if the IPPs and Louisiana Health were able to plead such a nexus, I agree with the Wellbutrin Court (which held in an earlier opinion than the one already cited above) that "plaintiffs may not assert what are essentially antitrust claims in the guise of a claim under the Illinois consumer protection statute." In re Wellbutrin XL Antitrust Litig., 260 F.R.D. 143, 162 (E.D. Pa. 2009).
The allegations in this case are antitrust allegations, plainly and clearly, and the "allegations of consumer fraud overlap entirely with the allegations of anticompetitive conduct." Id. The Supreme Court of Illinois has reasoned that "[t]here is no indication that the legislature intended that the Consumer Fraud Act be an additional antitrust enforcement mechanism. The language of the Act shows that its reach was to be limited to conduct that defrauds or deceives consumers or others. The title of the Act is consistent with its content." Laughlin v. Evanston Hosp., 133 Ill.2d 374, 390 (1990).
At least one court has distinguished Laughlin as preventing the use of the consumer-protection statute to reach antitrust conduct only when the antitrust law provides no remedy (that is, it prevents the use of the consumer-protection law as an end-run around limitations on the antitrust law). See Siegel v. Shell Oil Co., 480 F.Supp.2d 1034, 1046-48 (N.D. Ill. 2007). That is consistent with the holding in Laughlin, but the Laughlin Court nevertheless used the broader language doubting whether the consumer-protection statutes were "an additional antitrust enforcement mechanism" at all, not merely in some class of antitrust cases. 133 Ill. 2d at 390. If the antitrust claims in this case were not cognizable under Illinois's antitrust law, then using the state's consumer-protection law in the absence of non-antitrust allegations would be an end-run around the antitrust law and would squarely violate the rule of Laughlin. If the antitrust claims in this case are cognizable under Illinois's antitrust law, then pleading claims under the state's consumer-protection law as well is duplicative and merely muddies the water, violating at least the broad dicta of Laughlin if not squarely violating its holding.
The plaintiffs' argument for using the consumer-protection law as a surrogate for antitrust law is essentially that the language of the consumer-protection law is so vague and so broad that it reaches any "unfair" business practice, which manifestly includes antitrust violations. By that reasoning, all antitrust claims can be brought under the consumer-protection law, and the antitrust statute is redundant. A state's highest court may authoritatively interpret its laws that way, but Laughlin suggests that Illinois's highest court does not. I accordingly grant the motions to dismiss claims under the Illinois Consumer Fraud and Deceptive Business Practices Act.
The defendants move to dismiss the IPPs claims under the California Unfair Competition Law, which creates a cause of action for persons who have "has lost money or property as a result of . . . unfair competition," Cal. Bus. & Prof. Code § 17204, which is defined as "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited" by the false advertising law. Id. § 17200.
The defendants argue that the statute requires deception and reliance, citing cases about deceptive practices and false advertising. The IPPs argue again that the statute is extremely broad and phrased in the disjunctive, and that the conduct alleged (and presumably any conceivable antitrust violation) constitutes "unfair" business practices. The problem here is the same as the problem with the Illinois claims above. This is an antitrust case, and California has antitrust law. The IPPs offer no authority for the proposition that other provisions of California law besides its antitrust law can act as surrogates for antitrust law. The motion to dismiss the IPPs claims under the California Unfair Competition Law is therefore granted.
The IPPs, Humana, and Louisiana Health all plead claims under the Florida Deceptive and Unfair Trade Practices Act. That statute prohibits "[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce." Fla. Stat. § 501.204. The statute does not define the proscribed methods, acts, or practices, and it is not obvious that they would reach any alleged antitrust conduct. Antitrust claims brought under that statute might therefore seem to suffer from the same infirmity discussed in the context of Illinois and California law above. The plaintiffs do, however, point to the authority of at least one Florida appellate court that has held that those proscribed acts include antitrust violations, and therefore that the statute can be used as a surrogate for antitrust law. See Mack v. Bristol-Myers Squibb Co., 673 So.2d 100, 110 (Fla. Dist. Ct. App. 1996). I recognize the authority of Florida's appellate courts to so interpret Florida's law, and I accordingly deny the motions to dismiss claims under the Florida Deceptive and Unfair Trade Practices Act.
The IPPs, Humana, and Louisiana Health plead claims under sections nine and eleven of the Massachusetts Consumer Protection Act. Those sections, however, are mutually exclusive. Section eleven provides standing to any person "who engages in the conduct of any trade or commerce," Mass. Gen. Laws. ch. 93A, § 11, while section nine provides standing to any person "other than a person entitled to bring action under section eleven." Mass. Gen. Laws. ch. 93A, § 9. The precise meaning of "the conduct of any trade or commerce" may be slippery, but those provisions are naturally construed to make section nine exclusively applicable to consumers and section eleven exclusively applicable to business entities. See, e.g., Cont'l Ins. Co. v. Bahman, 216 F.3d 150, 156 (1st Cir. 2000) ("Withal, section 11 affords no relief to consumers and, conversely, section 9 affords no relief to persons engaged in trade or commerce."). Where there is ambiguity, the choice between consumer and business claims under the statute "appears to turn on whether a given party has undertaken the transaction in question for business reasons, or has engaged in it for purely personal reasons (such as the purchase of an item for personal use)." Frullo v. Landenberger, 814 N.E.2d 1105, 1112 (Mass. App. Ct. 2004).
The difference between claims brought under sections nine and eleven is particularly consequential because of the application of the Illinois Brick rule. The Massachusetts Antitrust Act is "construed in harmony with judicial interpretations of comparable Federal antitrust statutes," and thus "the rule of law established in Illinois Brick" applies. Ciardi v. F. Hoffmann-La Roche, Ltd., 436 Mass. 53, 57-58 (2002). Section eleven of the Massachusetts Consumer Protection Act "includes a specific provision that in any action brought under that section, the court shall be guided in its interpretation of unfair methods of competition by the provisions of the Antitrust Act," id., and section nine does not. Thus, Massachusetts courts hold that Illinois Brick applies to section eleven and not to section nine.
Despite the fact that they are business entities, the IPPs, Humana, and Louisiana Health argue that they are not engaged in the conduct of any trade or commerce, and therefore can bring claims under section nine.
Because the IPPs, Humana, and Louisiana Health are business entities rather than consumers and have not purchased Aggrenox "for purely personal reasons (such as the purchase of an item for personal use)," Frullo, 814 N.E.2d at 1112, I decline to follow In re AWP, and I follow instead In re Lidoderm Antitrust Litigation, 103 F.Supp.3d 1155, 1163 (N.D. Cal. 2015), and United Food & Commercial Workers Local 1776 & Participating Employers Health & Welfare Fund v. Terikoku Pharm. USA, Inc., 74 F.Supp.3d 1052, 1084-85 (N.D. Cal. 2014). I hold as those courts did that the indirect purchasers are engaged in the conduct of trade or commerce and therefore cannot make claims under section nine. For the foregoing reasons, the motions to dismiss are granted with respect to all claims under the Massachusetts Consumer Protection Act.
The defendants move to dismiss the IPPs claim under the South Carolina Unfair Trade Practices Act. They argue that the claim should be dismissed because the statute by its own terms does not permit class actions (it allows that a plaintiff may "bring an action individually, but not in a representative capacity." S.C. Code Ann. § 39-5-140(a)), and because the indirect purchasers should not be permitted to use that statute as an end-run around Illinois Brick.
I am not persuaded by the first argument, because my analysis of the effect of Shady Grove on the class-action bar in this statute is not materially different than the parallel analysis in the discussion of Illinois law above. But I agree that Illinois Brick is decisive. The rule of Illinois Brick appears to control in South Carolina, and the IPPs have offered no authority to the contrary. Nor have they offered any authority for the argument that the South Carolina Unfair Trade Practices Act can operate as a surrogate for antitrust law, even if the Illinois Brick rule did not apply. The motion to dismiss is granted with respect to the claim brought under the South Carolina Unfair Trade Practices Act.
The defendants move to dismiss Humana's claim under the Vermont Consumer Fraud Act on the basis that Humana is not a "consumer." Humana argues that it is a consumer under the Act, because it defines that word to include, among other things, "a person who purchases . . . or otherwise agrees to pay consideration for goods or services not for resale in the ordinary course of his or her trade or business but for the use or benefit of his or her business or in connection with the operation of his or her business." Vt. Stat. Ann. tit. 9, § 2451a(a).
That definition of "consumer" allows businesses to sue as consumers with respect to the products that they use as consumers. The fact that Humana's members are consumers, and that Humana co-purchases or reimburses for consumer products that its members use, does not make Humana a consumer of those products. Humana may be able to sue under the Vermont Consumer Fraud Act in connection with computers or office equipment of which Humana is a business consumer, but not in connection with drugs of which Humana's members are consumers. Moreover, Humana has not offered authority for the proposition that the Vermont Consumer Fraud Act reaches antitrust conduct. The motion to dismiss claims under that act is therefore granted.
The defendants' motions to dismiss the IPPs' amended complaint (doc. # 290), Humana's amended complaint (doc. # 291), and Louisiana Health's complaint (doc. # 374) are granted in part and denied in part as follows:
It is not necessary for any party to re-assert dismissed claims in order to preserve appellate rights. The rulings set forth in this order may be raised on appeal from a final judgment.
So ordered.