### 2000 D e c i sion s O p inion s of the U nit e d

S t a t e s C our t of Appe al s for the Thir d C ir c uit

5-30-2000 

# I n R e: W a r f a r in S o dium An t i-tr u s t C a se

P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 99-5034

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w

. v i l l a no v a

. e du/thir dc ir c uit_2000

Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no v a

U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. I t h as be e n a c c e pt e d for inclusion in 2000 D e c i sion s b y a n a uthor i z e d a dmini s tr a t or of V i l l a no v a

U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. F or mor e infor m a t ion, p le as e c on t a ct Be n j a min

. C a rl s on@l a

w

. v i l l a no v a

. e du

. 

### R e c omme nde d C it a t ion

" I n R e: W a r fa r in S od ium An t i -tr us t C as e " (2000). 2000 D e cisio n s

. P a pe r 111.
h tt p://d i g it alc ommon s .l a

w

. v i l l a no v a

. e du/thir dc ir c uit_2000/111Filed May 30, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-5034

IN RE: WARFARIN SODIUM ANTITRUST LITIGATION

JOHN KUSNERIK; SARA ALTMAN; SAMUEL GORDON TISCHLER; MARIE A. STECKEL; ROBERT BAREISS; JOHN CIVATTE, JR.; MARY BANTEN, Appellants

Appeal from the United States District Court
for the District of Delaware (D.C. Civ. No. 98-cv-01232) District Judge: Honorable Sue L. Robinson

Argued March 24, 2000

Before: MANSMANN, GREENBERG and BARRY, Circuit Judges.

(Filed: May 30, 2000)

Bernard Persky, Esquire (Argued) Barbara J. Hart, Esquire Ngozi Okaro, Esquire Goodkind, Labaton, Rudoff &

Sucharow LLP
100 Park Avenue New York, NY 10017Pamela S. Tikellis, Esquire

Robert J. Kriner, Jr., Esquire
Chimicles & Tikellis One Rodney Square Wilmington, DE 19801

Marvin A. Miller, Esquire Jennifer Winter Sprengel, Esquire Michael C. Dell'Angelo, Esquire Miller, Faucher, Cafferty and Wexler, LLP One Penn Square West
Suite 2500 Philadelphia, PA 19102

Michael A. Hanzman, Esquire Michael A. Criden, Esquire Alan H. Rolnick, Esquire Hanzman, Criden, Chaykin &
Ponce, P.A.
2100 First Union Financial Center 200 South Biscayne Boulevard Miami, FL 33131

James R. Capretz, Esquire Capretz & Associates, LLP
5000 Birch Street Suite 2500, West Tower Newport Beach, CA 92660

Mel Lifshitz, Esquire Mary Hoover, Esquire Bernstein Liebhard & Lifshitz, LLP

10 East 40th Street New York, NY 10016

Paul Goltz, Esquire 840 Allegheny Building Pittsburgh, PA 15219

Counsel for Appellants

2George D. Ruttinger, Esquire

(Argued) Jeane A. Thomas, Esquire Crowell & Moring, LLP 1001 Pennsylvania Avenue, N.W. Washington, D.C. 20004

Donald J. Wolfe, Esquire

Potter Anderson & Corroon LLP

Hercules Plaza
1313 North Market Street Wilmington, DE 19801

Counsel for Appellee

OPINION OF THE COURT

MANSMANN, Circuit Judge.

Consumers of the prescription drug Coumadin, anxiou s to purchase its generic equivalent, ask us to deter mine if complaints filed by them sufficiently state a claim for injunctive relief under section 16 of the Clayton A ct against Coumadin's manufacturer. We find that in dismissing the complaints under Fed. R. Civ. P. 12(b)(6), the Dist rict Court improperly referred to matters beyond the complaint s and did not correctly analyze the legal standard for an titrust standing. For these reasons, we will reverse and re mand.

I.

Coumadin, known generically as warfarin sodium, is the brand name of a blood-thinning drug prescribed for the prevention and treatment of blood clots.1 Treating physicians carefully monitor patients taking the dr ug because, as the parties stipulated, too little a do se can lead
to a stroke or cardiac arrest and too much can caus e internal bleeding.

___________________________________________________ ______________

1. We accept as true the facts as alleged in the co mplaint. Bald Eagle School District v. Keystone Financial, Inc., 189 F. 3d 321, 327 n.7 (3d
Cir. 1999).

3The defendant, DuPont Pharmaceuticals Company,

manufactures Coumadin. Although the patent protecti on for Coumadin expired in April 1962, DuPont has domi nated the oral anti-coagulant market for over 30 years. U ntil one of the plaintiffs to this action, Barr Laboratories , Inc., introduced its generic tablets, no equivalent produ ct competed with DuPont's Coumadin.

Barr Laboratories and the present plaintiffs filed lawsuits alleging that DuPont, anticipating a loss of market share resulting from the introduction of a cheaper generi c substitute for Coumadin, orchestrated a campaign disparaging generic substitutes generally, and Barr Laboratories' warfarin sodium particularly. The cum ulative
effect of these attacks was to raise Barr Laborator ies' cost to enter the anti-coagulant market and to disable i ts market penetration. The by-product claim brought by the individual plaintiffs is that, due to DuPont's effo rt to derail generic competition, they have paid inflated prices for
Coumadin.

The specific allegations of DuPont's anti-competiti ve activity in the relevant market concern DuPont's at tempt to prevent and/or delay Food and Drug Administration approval of warfarin sodium in a generic form, publ ication and dissemination of false and misleading informati on to the public regarding generic warfarin sodium, under taking aggressive public relations efforts involving the c irculation of deceptive information and increasing Coumadin's marketing efforts by feeding misinformation to doct ors and other medical professionals.

Citing these unlawful attempts to monopolize, Barr Laboratories filed suit against DuPont, alleging va rious
antitrust law violations. Barr Laboratories also as serted claims under the Lanham Act, New York state law and common law. Four named individuals, each claiming t o represent a nationwide class of 1.8 million Coumadi n users, filed separate complaints for monetary damag es and injunctive relief, alleging that DuPont violated se ction 2 of
the Sherman Act and various state laws. These class plaintiffs also sought treble damages under section 4 of the Clayton Act and injunctive relief under section 16 of the Clayton Act.

4DuPont filed a motion to dismiss both Barr Laborato ries'

and the class plaintiffs' claims for failure to sta te a claim upon which relief could be granted under Fed. R. Ci v. P. 12(b)(6).

The District Court granted in part and denied in pa rt
DuPont's motion to dismiss Barr Laboratories' lawsu it.2 The class complaints were dismissed in their entirety.

The only issue relevant to this appeal is the Distr ict Court's decision that the class plaintiffs lack sta nding to seek injunctive relief under section 16 of the Clay ton Act. The District Court summarily concluded that because the class had not sufficiently alleged either antitrust injury or a causal connection between DuPont's alleged unlawf ul activity and the supposed injury of Coumadin users, it failed to assert injury of the type the Sherman Act was designed to prevent. As such, the class did not hav e standing to request injunctive relief.

Our jurisdiction to review this dismissal is author ized by

28 U.S.C. S 1291.

II.

Rule 12(b)(6)

We first explore whether the District Court erroneo usly considered matters beyond the scope of the complain ts in rendering its antitrust standing determination. Our review
of a District Court's decision to dismiss a lawsuit for failure to state a claim upon which relief can be granted u nder Fed. R. Civ. P. 12(b)(6) is plenary. Port Authority of New York and New Jersey v. Arcadian Corp., 189 F.3d 305 , 311 (3d Cir. 1999). The motion to dismiss should be gra nted only if "after accepting as true all of the facts a lleged in the complaint, and drawing all reasonable inferences in the plaintiff 's favor, no relief could be granted unde r any set of facts consistent with the allegations in the compla int."

___________________________________________________ ______________

2. The Barr Laboratories' case was subsequently rem anded to the Southern District of New York. At oral argument, co unsel represented that this portion of the litigation has settled.

5Trump Hotels and Casino Resorts, Inc. v. Mirage Res orts,

Inc., 140 F.3d 478, 483 (3d Cir. 1998).

Although the District Court recited this Rule 12(b) (6) standard in making its decision, the court impermis sibly cited and relied on facts beyond the corners of the complaints. Excerpts from the District Court opinio n illustrate this point:

Although class plaintiffs do not discuss thi rd party payor arrangements, it is almost certain tha t most of
the 1.8 million class members had some sort of health
insurance.

* * *

If defendants' monopolization of the oral an ticoagulant market resulted in supracompetitive prices f or Coumadin, the insurance and third party payo r organizations most likely absorb some or all of that overcharge.

* * *

Moreover, the sheer variety of third party p ayor plans would render the apportionment of damages am ong the class plaintiffs incredibly complex.

(Emphasis added.)

While these factors loomed large in the District Co urt's conclusion regarding the absence of a significant n exus between DuPont's activity and the classes' injury, the complaints are notably silent regarding the impact of third party payor and prescription drug insurance plans o n the price paid for Coumadin. The complaints instead all eged that the class members paid inflated prices for Cou madin because DuPont thwarted the generic's market entry. The District Court should have accepted this as true, a nalyzed if DuPont's preclusive conduct was violative of ant itrust laws, and then decided whether to dismiss the compl aints. Instead, in granting the motion, the District Court considered facts gleaned from counsel's argument an d from its own experience, factors not contemplated by the dictates of Rule 12(b)(6).

6DuPont submits a number of reasons why the District

Court's consideration of factual assumptions de hor s the complaints were properly considered. DuPont urges t hat the allegations concerning third party payors are w ithin everyday knowledge and that the District Court coul d easily infer the presence of such entities from the pleadi ngs. Alternatively, DuPont asserts that the District Cou rt could take judicial notice of such facts. These contentio ns are not persuasive. First, Rule 12(b)(6) instructs that the District Court draw inferences in favor of plaintiffs, not t he proponent of the motion. Second, the types of facts of which courts take judicial notice are of a differen t nature than those relied upon by the District Court here-- that the class members are most likely being reimbursed to some extent for the amount spent to purchase Coumad in. A judicially noticed fact is "one not subject to re asonable dispute in that it is either (1) generally known . .. . or (2) capable of accurate and ready determination" throug h unquestionably reliable sources. See Fed. R. Evid. 201(b); United States v. Carr, 25 F.3d 1194, 1202 n.3 (3d C ir. 1994). The facts cited by the District Court concer ning third party payors not contained in the complaints do not fit the criteria of Rule 201(b).

Because these findings were integral to the Distric t Court's standing decision, we must now determine wh ether the District Court's erroneous application of Rule 12(b)(6) caused a misinterpretation of the substantive stand ing
issue.

III.

Section 16 Antitrust Standing

Section 16 of the Clayton Act, authorizing suits fo r injunctive relief, provides in part:

Any person, firm, corporation, or associati on shall be entitled to sue for and have injunctive reli ef, in any court of the United States having jurisdicti on over the parties, against threatened loss or damage b y a violation of the antitrust laws, . . . when and under the same conditions and principles as injunctive relief

7against threatened conduct that will cause l oss or

damage is granted by courts of equity.

15 U.S.C. S 26 (1976).

Recovery under section 16 is best understood in how it differs from recovery under section 4 of the Clayto n Act. While relief sought pursuant to section 4 of the Cl ayton Act requires proof of loss and any damages proven are t rebled, injunctive relief under section 16 only requires a threat of loss. See Cargill, Inc. v. Monfort of Colorado, Inc ., 479 U.S. 104, 109-111 (1986). An antitrust plaintiff proceed ing under section 16 must, however, still demonstrate t hat the injury in question is "injury of the type the antit rust laws were intended to prevent." Brunswick Corp. v. Puebl o BowlO-Mat, Inc., 429 U.S. 477, 489 (1977). A section 4 plaintiff 's standing is tested by an application of a number of factors designed to determine if the asserted damage goes b eyond speculation and, that if there is cognizable damage , the plaintiff is the appropriate person to assert it fo r antitrust purposes. Associated General Contractors, Inc. v. C alifornia State Council of Carpenters, 459 U.S. 519, 538 (198 3), ("Associated General"). Section 16 is not as demand ing, but it does require a showing that there is "a signific ant threat of injury from [a] . . . violation of the antitrust laws . . . ." Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130 (1969).

In dissecting the Coumadin classes' section 4 claim , the District Court conducted a standing test under thef ive Associated General factors: (1) the causal connecti on between the antitrust violation and the harm to the plaintiff; (2) whether the plaintiff 's alleged inj ury is of the type that the antitrust laws were intended to redre ss; i.e., did the plaintiff suffer antitrust injuries; (3) th e directness of the injury; (4) the existence of more direct vic tims of the violation; and (5) the potential for duplicative re covery or complex apportionment of damages. 459 U.S. at 535-4 6.

Regarding factors one and three, which required the class to show that DuPont's monopolization of the anticoa gulant market directly caused their injuries, the District Court identified the consumers' "third" position in the c hain of
distribution from DuPont to user and the influence of

8managed care on what consumers pay for prescription

drugs as reasons for holding that the class plainti ffs' alleged injury and DuPont's alleged conduct was too attenuated to justify antitrust standing. Specifica lly, the District Court opined that the class plaintiffs' ab ility to trace their overpayment to the alleged anticompetit ive conduct " `traverses several somewhat vaguely defin ed links.' AGC, 456 U.S. at 540." The District Court t hus concluded that the case described a "typical indire ct purchaser scenario" and that, from the complaints, "it was unclear whether the class suffered any antitrust in jury at

all."

As to the class plaintiffs' request for injunctive relief under section 16, the District Court summarily conc luded, by relying upon its section 4 discussion, that the class had not sufficiently alleged the required antitrust inj ury or the causal connection between DuPont's alleged unlawful activity and their purported injury. Thus, the Dist rict Court decided that the class failed to allege injury of t he type the Sherman Act was designed to prevent; the class, the refore, did not have standing to request injunctive relief.

The Coumadin class fits the stereotypical indirect purchaser mold. Indirect purchaser status, however, is not fatal to a plaintiff 's request for injunctive reli ef under section 16 of the Clayton Act.

In Mid-West Paper Products Co. v. Continental Group , Inc., 596 F.2d 573 (3d Cir. 1979), we explained how the
difference between sections 4 and 16 claims influen ces the question of standing as it relates to indirect purc haser

status:

in contrast to the treble damage action, a c laim for injunctive relief does not present the count ervailing considerations -- such as the risk of duplic ative or ruinous recoveries and the spectre of a tria l burdened with complex and conjectural economic analys es -- that the Supreme Court emphasized when limit ing the availability of treble damages.

Id. at 590. Accordingly, we held that the plaintiff s did not have to satisfy the direct purchaser requirement as a condition of seeking injunctive relief. Id. at 594. See also

9Schoenkopf v. Brown & Williamson Tobacco Corp., 637 F.2d

205, 210 (3d Cir. 1980) (Section 16 relief more encompassing because language is less restrictive t han section 4 and because injunctive remedy is flexible
, adaptable tool for enforcing antitrust laws).

While direct purchaser status is not mandated, the class must still make a showing of entitlement to injunct ive relief requiring the demonstration of: (1) threatened loss or injury cognizable in equity; (2) proximately resulting fro m the alleged antitrust injury. See McCarthy v. Recordex Service, Inc., 80 F.3d 842, 856 (3d Cir. 1996). The narrow q uestion before us then is whether the allegations of the cl ass members' complaints, that DuPont's conduct preclude d competition which caused Coumadin users to pay infl ated prices for the drug, meet this standard.

We turn first to guidance from the United States Supreme Court. The threatened injury to the class h ere resembles that of the plaintiff in Blue Shield of V irginia v. McCready, 457 U.S. 465 (1982). In McCready , the pl aintiff complained of a conspiracy among psychiatrists and Blue Shield to shield psychiatrists from competition. Mc Cready's visits to her psychologist were not covered by Blue Shield, although visits to psychiatrists were reimbursed.

In deciding McCready, the Supreme Court addressed t he relationship between the indirect purchaser doctrin e and antitrust injury. The Court stated that whether a p articular injury is too remote from the alleged violation to confer section 4 Clayton Act standing, depends upon the relationship of the injury alleged and the types of injury that Congress was targeting when it legislated part icular anticompetitive conduct as unlawful. Id. at 476-78. The Court first determined that, in the absence of a ri sk of duplicative recovery, a plaintiff is not barred fro m bringing
a claim under section 4 if he is a foreseeable vict im of the
antitrust violation. Id. at 475. Then the Court dec reed that McCready's injury was "inextricably intertwined wit h the injury the conspirator sought to inflict," and had standing to pursue her section 4 claim. Id., 457 U.S. at 484

.

As in McCready, the class alleges injury by an unla wful restraint on competition in the market, and McCread y is

10thus instructive. First, McCready reinforces our ho lding in

McCarthy that the Coumadin class cannot be barred f rom bringing suit simply based on its indirect purchase r status. McCready held that due to the absence of duplicativ e recovery, McCready and her class could maintain the ir suit for treble damages. Similarly, here, there is no ri sk of duplicative recovery because the class only seeks s ection 16 injunctive relief.

Next, concerning remoteness, the high price paid by consumers for Coumadin clearly resulted in " `the t ype of
loss that the claimed violations . . . would be lik ely to cause,' " id. at 479, (quoting Brunswick, 429 U.S. at 489). The class members here, like McCready, were "forese eable and necessary victims" of DuPont's efforts to exclu de the generic drug from the market. Indeed, if McCready, who voluntarily sought uncovered treatment from psychol ogists did not suffer from remoteness, then the purchasers of Coumadin, who have no choice in which warfarin sodi um they purchased, were more predictable and more compelling victims of antitrust violations.

Finally, McCready determined that an antitrust inju ry occurred because the higher cost for services paid by McCready was so "inextricably intertwined" with the true target of the conspiracy, the psychologists, that M cCready also suffered antitrust injury. Utilizing this same rationale, we find that Coumadin consumers clearly suffer anti trust injury. Coumadin purchasers were the target of DuPo nt's antitrust violation. Regardless of the existence of the various links of middlemen, if there were no ultima te consumer of Coumadin, prices charged for the drug b y DuPont to distributors, pharmacies, etc., would be irrelevant. The excess amount paid by Coumadin user s not only is "inextricably intertwined" with the injury DuPont aimed to inflict, the overcharge was the aim of DuP ont's preclusive conduct. It is difficult to imagine a mo re formidable demonstration of antitrust injury.

The District Court's refusal to recognize standing to pursue this relief is also, as alluded to above, co ntrary to our jurisprudence.

The authority of McCarthy v. Recordex, 80 F.3d at 8 45,

11strongly supports a favorable standing determinatio n. In

McCarthy, the plaintiffs had complained that they p aid inflated prices for photocopies of their medical re cords due to a conspiracy between hospitals and copy centers to inflate the cost of records. The plaintiffs were cl ients of the lawyers who were the direct purchasers of the fixed price copies. Despite the plaintiffs' status as indirect purchasers,
we refused to view the multifaceted chain of distri bution as too attenuated to support a finding of causation. 3

Finally, decisions from our court which negated ant itrust standing are distinguishable. In City of Pittsburgh v. West Penn Power Co., 147 F.3d 256 (3d Cir. 1998), the ci ty brought suit against two electric companies seeking damages and an injunction precluding the merger of the companies. The City claimed that the merger would v oid the possibility of lower-priced electric service ch arged to city residents. We held that the City's injunctive relie f claim failed to meet section 16 standing requirements due to a
lack of causal connection between the defendant's i njuries and the alleged harm and because of the absence of antitrust injury. We arrived at this conclusion, ho wever, because an intervening regulatory scheme precluded the companies from competing, i.e., the merger was not the cause of the injury. No significant antitrust injur y inquiry was required to reach this conclusion and none was undertaken. We can reasonably posit, however, that if not for this regulatory quirk, the City would have been entitled to section 16 relief because the proposed merger wo uld have eradicated competition, a result prohibited un der the Clayton Act, and detrimental to the City's electric al

customers.

In Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir. 1999), union he alth and welfare funds brought class actions against tobacco companies under antitrust laws to recover for the f unds' cost of treating fund participants who had smoking related diseases. We concluded that the funds' injuries wer e too

___________________________________________________ ______________

3. In McCarthy, we acknowledged the appropriateness of injunctive relief, but remanded because the District Court had not exp ressly addressed the question of indirect purchaser standing.

12remote from the tobacco company's antitrust activit y to

satisfy the Associated General causal connection requirement, because the tobacco companies could ha ve achieved their alleged aim to preclude marketing of safer tobacco products without the existence of the funds or the relationship between the funds and the smokers. The
existence of smokers would be sufficient reason for such an alleged conspiracy.

In this case, the purchasers of Coumadin are akin t o the smokers in Steamfitters. DuPont's efforts to keep t he generic drug off the market emanate from the fact t hat the introduction of the generic product would force dow n the price paid for the anti-coagulant. The higher price s paid
were the raison d'etre of DuPont's antitrust conduc t.

We, therefore, conclude, under the controlling jurisprudence, that this class has satisfied the requirements of standing for injunctive relief unde r section 16 of the Clayton Act. The facts as alleged in the complaints plainly establish the required causal co nnection between DuPont's exclusionary anticompetitive condu ct and the direct harm to Coumadin purchasers. Unless enjo ined,
DuPont's unlawful conduct will continue unchecked a nd
the class will continue to bear the financial brunt of the
antitrust violations.

IV.

We will reverse the order of the District Court dis missing the class complaints based on lack of antitrust sta nding and remand for continued proceedings.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

13