1

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

_____________

No. 11-3122

_____________

IN RE: HYPODERMIC PRODUCTS ANTITRUST LITIGATION

AMERICAN SALES COMPANY, INC; SAJ DISTRIBUTORS, INC; 

LOUISIANA WHOLESALE DRUG CO INC; ROCHESTER DRUG CO-OP 

INC; JM SMITH CORPORATION; DIK DRUG; PARK SURGICAL CO., INC., 

 Petitioners

________________

 

On Appeal from the United States District Court

for the District of New Jersey

District Court No. 2-05-cv-01602

District Judge: The Honorable Jose L. Linares

 

Argued May 17, 2012

Before: SMITH and FISHER, Circuit Judges

and STEARNS, District Judge

(Filed:June 5, 2012)

 

The Honorable Richard G. Stearns, United States District Judge for the United States 

District Court of Massachusetts, sitting by designation.
2

 

Elena K. Chan, Esq.

Bruce E. Gerstein, Esq. (argued)

Garwin Gerstein & Fisher

1501 Broadway

Suite 1416

New York, NY 10036

Eric L. Cramer, Esq.

Daniel Berger, Esq.

Berger & Montague

1622 Locust Street

Philadelphia, PA 19103

Peter Kohn, Esq.

Richard D. Schwartz, Esq.

Faruqi & Faruqi

101 Greenwood Avenue

Suite 600

Jenkintown, PA 19046

Peter S. Pearlman, Esq.

Cohn, Lifland, Pearlman, Hermann & Knopf

Park 80 West – Plaza One

250 Pehle Avenue, Suite 401

Saddle Brook, NJ 07663

Thomas M. Sobol, Esq.

Hagens Berman Sobol Shapiro

One Main Street

4th Floor

Cambridge, MA 02142

Howard J. Serdan, Esq.

Levin, Fishbein, Sedran & Berman

510 Walnut Street

Suite 500

Philadelphia, PA 19106

Counsel for Distributor Petitioners-Appellants
3

James V. Bashian, Esq.

4th Floor 

70 Adams Street

Hoboken, NJ 07030

Thomas S. Biemer, Esq.

James J. Rodgers, Esq.

Holly R. Rogers, Esq.

Dilworth Paxson

1500 Market Street 

Suite 3500E

Philadelphia, PA 19102

Karin E. Fisch, Esq.

Abbe, Spanier, Rodd & Abrams

212 East 39th Street

New York, NY 10016

Torsten M. Kracht, Esq.

Todd M. Stenerson, Esq.

Richard L. Wyatt, Jr., Esq. (argued)

Hunton & Williams

2200 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

R. Laurence Macon, Esq.

Akin, Gump, Strauss, Hauer & Feld

300 Convent Street

Suite 1500

San Antonio, TX 78205

Kenneth A. Wexler, Esq.

Wexler Wallace

55 West Monroe Street

Chicago, IL 60603

Counsel for Healthcare Provider Appellees
4

Robert A. Atkins, Esq.

Steven C. Herzog, Esq.

Jacqueline P. Rubin, Esq.

Hannah S. Sholl, Esq.

Moses Silverman, Esq. (argued)

Paul, Weiss, Rifkind, Wharton & Garrison

1285 Avenue of the Americas

New York, NY 10019

R. Dale Grimes, Esq.

Bass, Berry & Sims

2700 First American Center

315 Deaderick Street

Nashville, TN 37238 

Megan E. Hiorth, Esq.

Gregory B. Reilly, Esq.

Gavin J. Rooney, Esq.

Scott L. Walker, Esq.

Lowenstein Sandler

65 Livingston Avenue

Roseland, NJ 07068

Ellen B. Unger, Esq.

Apartment 306 

48 South Park Street

Montclair, NJ 07042

Counsel for Becton Dickinson Co. Appellee
5

_____________________

 OPINION

_____________________ 

SMITH, Circuit Judge.

This appeal entails a consolidated class action involving two groups of plaintiffs 

alleging that defendant-appellee Becton Dickinson & Co. (“Becton”), a manufacturer of 

hypodermic products,1 violated the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. The 

two plaintiffs’ groups are: (i) distributors of Becton’s hypodermic products

(“Distributors”);

2 and (ii) certain hospitals and clinics that purchase Becton’s hypodermic 

products (“Healthcare Providers”)3 (collectively, Distributors and Healthcare Providers

are the “Plaintiffs”).

4

 1 The hypodermic products are the following devices and their associated needles: 

disposable syringes; blood collection devices; winged IV devices; and IV catheter 

devices. 

 The discrete issue on appeal is which group of Plaintiffs, 

Distributors or Healthcare Providers, has standing under the direct-purchaser rule to 

pursue the federal antitrust claims related to the contract sales of Becton’s hypodermic 

2 The Distributors, who are the plaintiff-appellants, are: American Sales Co., Inc.; Dik 

Drug Co.; J M Smith Corp.; Louisiana Wholesale Drug Co., Inc.; Park Surgical Co., Inc.; 

Rochester Drug Co-Operative, Inc.; and SAJ Distributors, Inc.

3 The Healthcare Providers, who are the plaintiff-appellees, are: MedStar Health Inc.; 

MedStar-Georgetown Medical Center, Inc.; National Rehabilitation Hospital, Inc.; and 

Washington Hospital Center Corporation. 

Other plaintiff healthcare providers, such as Hebrew Home for the Aged, chose 

not to participate as appellees. Nonetheless, this decision applies to all plaintiff 

healthcare providers in this action, regardless of whether they chose to respond as 

appellees in this appeal. 

4 The Healthcare Providers claim that there is a third group of plaintiffs, the indirect 

purchasers (e.g., retail pharmacies), but that group has not asserted any issues on appeal.
6

products. The District Court ruled on summary judgment that Healthcare Providers, not 

Distributors, were the direct purchasers and have exclusive standing to pursue these 

claims. We will reverse. 

I. BACKGROUND

A. BECTON’S DISTRIBUTION OF HYPODERMIC PRODUCTS

Plaintiffs allege that Becton maintained a dominant share of the markets for the 

hypodermic products, employed various anticompetitive practices to eliminate 

competition and achieve monopoly positions in the relevant markets, and utilized these 

advantages to charge purchasers higher prices. Although Becton sells the hypodermic 

products through two channels (i.e., contract sales and non-contract sales), only Becton’s 

contract sales are at issue here. 

1. CONTRACT SALES

Contract sales, which account for approximately 74% of Becton’s sales, involve 

three primary contracts: a Net Dealer Contract (“NDC”); a Distribution Agreement; and a 

Dealer Notification Agreement (“DNA”). 

Net Dealer Contract

NDCs are agreements between a manufacturer of medical products and a group 

purchasing organization (“GPO”). GPOs are entities that negotiate prices of products and 

other terms and conditions on behalf of their member healthcare providers. GPOs do not 

purchase or sell any products themselves. By negotiating on behalf of many healthcare 

providers, GPOs are generally able to negotiate lower prices than the manufacturers’ list 

prices. 
7

Here, Novation, which is a GPO that represented Healthcare Providers, entered 

into an NDC with Becton for the sale and purchase of the hypodermic products. 

Although the NDC provided that Novation’s members would have the option of 

purchasing hypodermic products pursuant to the NDC, the members were not obligated 

to make any purchases under the NDC. The NDC required that Becton make the 

hypodermic products “available for purchase by [Distributors] at the [a]ward [p]rices for 

resale to [Healthcare Providers].” (JA3926.) Under the NDC Distributors, on behalf of 

Healthcare Providers, were to submit orders for hypodermic products to Becton; Becton 

would then deliver those products to, and invoice, Distributors; and Distributors were 

responsible for paying Becton pursuant to the rates set forth in the NDC. Notably, the 

NDC did not specify any particular distributor or means of distribution, nor did it purport 

to set the final price at which Distributors would resell the hypodermic products to 

Healthcare Providers. 

Distribution Agreement

After an NDC is executed, the GPO notifies its members of the agreement’s terms 

and conditions. Members who wish to participate in the NDC must notify the 

manufacturer of their intentions. 

The participating members then separately negotiate and execute Distribution 

Agreements with their respective distributors. The Distribution Agreement governs the 

terms and conditions of the distributor’s transaction with the member hospital, and 

generally includes: the price the member will pay to the distributor for the products; any 
8

service fees the distributor may charge the member; and any other terms related to the 

transaction. 

Here, Novation informed its members of the NDC with Becton. Healthcare 

Providers executed letters of commitment with Becton, notifying Becton that it should 

charge their distributor the agreed upon NDC price for the hypodermic products. 

Healthcare Providers also entered into Distribution Agreements with their 

respective distributors and notified Becton of their distribution relationships. For 

example, appellee MedStar Health (“MedStar”), a Healthcare Provider and named 

plaintiff, negotiated and entered into a Distribution Agreement with Cardinal Company 

(“Cardinal”), a distributor, for the sale and delivery of, inter alia, the hypodermic 

products. MedStar agreed to submit orders directly to Cardinal. Cardinal was 

responsible for obtaining the requested hypodermic products from Becton, delivering 

them to MedStar, and invoicing Medstar. MedStar agreed to pay Cardinal an amount 

equal to the price Cardinal paid to purchase the products from Becton plus a markup, line 

fee, or an activity fee on a per-purchase-order basis. 

Dealer Notification Agreement

After the member identifies its distributor, the manufacturer generally enters into 

some type of agreement with the distributor governing the terms and conditions of their

relationship. 
9

Here, Becton entered into Dealer Notification Agreements with Distributors. 

These agreements referred to Distributors as Becton’s “servicing agent[s].” (JA5626.)

5

The DNA also governs Becton’s payment and rebate system. Becton’s list prices 

for the hypodermic products — i.e., the prices Becton charges distributors in non-contract 

sales — is higher than the prices set forth in contract sales under an NDC. Becton is 

concerned that distributors will obtain products from Becton at the lower NDC price and

resell those products in non-contract sales. To protect against such behavior, Becton 

invoices Distributors at the higher list price for all shipments it makes to them. 

Subsequently, if a Distributor provides proof that it delivered the products to a customer 

pursuant to an NDC, then Becton issues a rebate to that Distributor for the difference 

between the higher list price that was invoiced and the lower contract price set forth in 

the NDC. 

 

Under the DNAs, the member hospitals may submit orders directly to Distributors, and 

Distributors are to regard these orders as purchase orders from Becton. The DNAs 

require Distributors to ship the products within 3-6 days and invoice the member 

hospitals on behalf of Becton. 

Moreover, the DNA also governs the products’ title. Pursuant to the DNA, title to 

the products transferred from Becton to Distributors upon their shipment to Distributors. 

However, once Distributors shipped the products to a customer in a contract sale, title 

 5 Becton asserts that since 2006, its DNA no longer referred to distributors as its servicing 

agents. 
10

reverted back to Becton and was then transferred to the end customer once the delivery 

was completed.

6

Operation of the Hypodermic Products’ Supply Chain for Contract Sales

 

The operation of the supply chain appears straightforward: (1) a Distributor orders 

a large volume of hypodermic products from Becton. These orders are for anticipated 

contract and non-contract sales (i.e., Distributors do not know at that time which products 

it orders from Becton will be part of a contract sale). Becton ships these products to and 

invoices the Distributor at the distributor list price, not the NDC price. The Distributor 

takes title to the products, warehouses them, insures them against loss, and pays Becton; 

(2) a Healthcare Provider submits a request to its Distributor to purchase certain 

hypodermic products; (3) the Distributor ships the products to — and invoices — the 

Healthcare Provider as set forth in their Distribution Agreement; (4) the Healthcare 

Provider pays the Distributor directly for the products and the markup/line-fee/activityfee; and (5) the Distributor applies for a rebate from Becton within 45 days of the end of 

the month in which the Distributor’s transaction with the Healthcare Provider occurred, 

and Becton pays the rebate to the Distributor.

2. NON-CONTRACT SALES

Non-contract sales, which account for the remaining 26% of Becton’s sales for 

hypodermic products, are those sales of the hypodermic products that were not made 

pursuant to an NDC. The District Court ruled that Distributors were the direct purchasers

 6 Becton asserts that since 2006, the DNAs no longer state that title reverts to Becton 

upon Distributors’ shipment of the products to customers. 
11

of Becton’s hypodermic products that they resold pursuant to non-contract sales. 

Healthcare Providers have not appealed that determination, and thus, Distributors’ noncontract sales are not at issue on appeal. 

B. PROCEDURAL BACKGROUND

In 2005, several of the Distributors filed class action complaints alleging that 

Becton — in violation of Sections 1 and 2 of the Sherman Antitrust Act (15 U.S.C. §§ 1 

and 2) and Section 4 of the Clayton Act (15 U.S.C. § 15) — illegally acquired and 

maintained monopoly power over sales of the hypodermic products and charged 

Distributors unlawfully inflated prices. The Judicial Panel on Multidistrict Litigation (the 

“MDL Panel”) consolidated these cases in the District of New Jersey. 

In 2006, MedStar and several of the other Healthcare Providers filed class action

complaints against Becton, alleging the same underlying conduct asserted in Distributors’ 

complaints. The MDL Panel also consolidated these cases in the District of New Jersey. 

 On April 27, 2009, Distributors and Becton agreed upon a conditional settlement. 

Under the conditional settlement, Becton would make a $45 million cash payment to a 

proposed class of entities similarly situated to Distributors in exchange for dismissal of 

their complaints with prejudice and certain releases. The settlement was contingent upon 

the District Court determining that Distributors, not Healthcare Providers, had standing 

under the Clayton Act to pursue antitrust claims against Becton. In accordance with the 

conditional settlement agreement, Distributors filed motions seeking: (a) certification of 
12

the proposed class7

On September 30, 2010, the District Court, focusing on the “economic substance” 

of the hypodermic products’ supply chain, granted Healthcare Providers’ motion for 

partial summary judgment on the issue of direct-purchaser standing (the “Order”), 

holding that Healthcare Providers, not Distributors, were the direct purchasers of 

Becton’s hypodermic products. 

and preliminary approval of the proposed settlement; and (b) partial 

summary judgment on the issue of direct-purchaser standing. Becton also moved for 

preliminary approval of the proposed settlement. Healthcare Providers opposed the

motions by Distributors and Becton and filed a cross motion for partial summary 

judgment on the issue of direct-purchaser standing. 

On November 23, 2010, the District Court, pursuant to 28 U.S.C. § 1292, certified 

its Order for interlocutory appeal. On July 22, 2011, we granted Distributors’ petition for 

permission to appeal under § 1292(b). 

 7 Distributors defined the class as: 

All persons or entities (and assignees of claims from such persons and 

entities) who (1) purchased BD Hypodermic Products in the United States 

from BD at any time during the period of March 23, 2001 through April 27, 

2009 (the “Class Period”), and (2) were invoiced by BD for said purchases 

(the “Direct Purchaser Class”). 

The Direct Purchaser Class excludes BD, BD’s parents, subsidiaries and 

affiliates, and United States Government Entities and those persons or 

entities who are permitted by the Court to opt out of the Direct Purchaser 

Class.

 
13

II. ANALYSIS8

Section 4 of the Clayton Act provides that “any person who shall be injured in his 

business or property by reason of anything forbidden in the antitrust laws may sue 

therefor . . . and shall recover threefold the damages by him sustained, and the cost of 

suit, including a reasonable attorney’s fee.” 15 U.S.C. § 15(a). The Supreme Court has 

limited the scope of § 4 through the direct-purchaser rule, which states that only the 

immediate buyer of a product has standing to maintain a federal antitrust action. See, 

e.g., Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 206-09 (1990) (holding that only the 

direct purchaser has standing to bring federal antitrust claims even where the direct 

purchaser may pass the entire unlawful overcharge to downstream purchasers); Illinois 

Brick Co. v. Illinois, 431 U.S. 720, 728-29 (1977) (holding that an indirect purchaser 

lacked standing to pursue federal antitrust claims); Hanover Shoe, Inc. v. United Shoe 

Mach. Corp., 392 U.S. 481, 489-91 (1968) (rejecting the alleged antitrust violator’s

argument that the direct purchasers of its goods lacked standing to pursue federal antitrust 

claims because those purchasers passed on the alleged overcharges to downstream 

 8 The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1337. We have 

jurisdiction under 28 U.S.C. § 1292(b).

We review the District Court’s disposition of a summary judgment motion de

novo, applying the same standard as the District Court. Pichler v. UNITE, 542 F.3d 380, 

385 (3d Cir. 2008) (citing Marten v. Godwin, 499 F.3d 290, 295 (3d Cir. 2007)). “The 

court shall grant summary judgment if the movant shows that there is no genuine dispute 

as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. 

Civ. P. 56(a). All inferences must be viewed in the light most favorable to the 

nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 

587 (1986). “The issue of antitrust standing is a legal issue, over which we exercise 

plenary review.” Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77, 83 (3d Cir. 2011)

(citing McCarthy v. Recordex Serv., Inc., 80 F.3d 842, 847 (3d Cir. 1996)). 
14

customers); see also McCarthy v. Recordex Serv., 80 F.3d 842, 848 (3d Cir. 1996)

(interpreting UtiliCorp, Illinois Brick, and Hanover Shoe as “enunciating a bright-line 

rule that only a purchaser immediately downstream from the alleged monopolist may 

bring an antitrust action”).

Our recent decision in Warren General Hospital v. Amgen Inc., 643 F.3d 77 (3d 

Cir. 2011), issued after the decision we now review, is particularly instructive. There, a 

hospital plaintiff sued a pharmaceutical manufacturer, asserting an illegal tying claim 

under federal antitrust laws. Id. at 80. The hospital purchased the products at issue 

through contract sales, which involved a GPO-negotiated contract structuring the supply 

chain so that the manufacturer would sell the products to wholesalers, who in turn would 

resell those products to the member hospitals. Id. at 83. The district court ruled that the 

hospital was an indirect purchaser and dismissed the complaint. Id. at 79. 

In affirming the district court’s decision, we focused on the “mechanics of the 

transactions” between the hospital, the wholesaler, and the manufacturer. Id. at 79, 88. 

In particular, we noted that: (1) when the hospital wants to purchase the products at issue, 

it places an order through the wholesaler; (2) the wholesaler negotiates the final sales 

price of the products separately with the hospital; (3) the hospital physically takes 

delivery of the shipment from the wholesaler; and (4) the hospital pays the wholesaler 

directly and does not transmit funds to the manufacturer. Id. at 88. Thus, we determined 

that the hospital’s purchases “go through at least one other stage in the chain of 

distribution” before reaching the hospital, and that the hospital was an indirect purchaser 

that lacked standing. Id.
15

Here, the mechanics of the distribution chain for Becton’s hypodermic products 

are essentially identical to those that were at issue in Warren General. Most notably: (1) 

when Healthcare Providers needed hypodermic products, they placed orders through 

Distributors; (2) Distributors negotiated the final sales price of the hypodermic products 

separately with the Healthcare Providers; (3) Distributors physically shipped the products 

to Healthcare Providers; and (4) Healthcare Providers paid Distributors directly and did 

not transmit funds to Becton. Thus, because the hypodermic products pass through at 

least one other stage in the chain of distribution before reaching Healthcare Providers, the 

Distributors, not Healthcare Providers, are the direct purchasers in contract sales.

9

 See, 

e.g., Warren General, 643 F.3d at 88.10

 9 We are not persuaded by Healthcare Providers’ attempt to distinguish Warren General. 

Healthcare Providers argue that, unlike the wholesalers in Warren General, Distributors 

were acting as Becton’s servicing agents for the contract sales, and thus, the hypodermic 

product supply chain had only one transaction between Becton/Distributors on one hand 

and Healthcare Providers on the other. Even assuming, without deciding, that Healthcare 

Providers are correct both that Distributors were acting as the servicing agents for Becton 

in contract sales and that servicing agents cannot be direct purchasers as a matter of law, 

the Healthcare Providers are still indirect purchasers because the products had already 

passed through at least one other stage in the chain of distribution before Distributors 

acted as Becton’s servicing agents. As discussed supra, at the time that Distributors 

receive the hypodermic products from Becton, title to those products and the associated 

risks of ownership and loss transfer to Distributors, who warehouse these fungible 

products in their inventory without knowing whether any will be the subject of a contract 

sale. Becton invoices Distributors for all of these hypodermic products at the higher list 

price. Thus, the hypodermic products already passed through a stage in the chain of 

distribution before they could be the subject of any contract sale in which Distributors 

allegedly act as Becton’s servicing agents. 

10 We recognize that the District Court, which issued its Order prior to our decision in 

Warren General, did not have the benefit of our position on this issue. 
16

Accordingly, we will reverse.11

 11 On October 17, 2011, Distributors and Becton filed a joint motion to seal their 

appellate briefs and Volumes 1 and 3-12 of the Joint Appendix (the “First Sealing 

Motion”). Distributors and Becton reasoned that these materials included documents or 

references to documents that were filed under seal with the District Court pursuant to a 

protective order. Healthcare Providers opposed the First Sealing Motion to the extent 

that it sought to seal publicly-available documents. On October 31, 2011, after 

consulting with the Clerk’s Office, Distributors and Becton filed another joint motion 

requesting leave to strike portions of the Joint Appendix and to file a supplemental 

redacted appendix containing the unsealed documents (the “Second Sealing Motion”). 

Healthcare Providers have not opposed the Second Sealing Motion except to the extent 

that it seals the District Court’s Order and Decision underlying this appeal, which was 

sealed by the District Court. On December 5, 2011, Healthcare Providers filed a motion 

to seal their reply brief for the instant appeal (the “Third Sealing Motion”) because it 

references matters that were filed under seal before the District Court. We will deny the 

First Sealing Motion and grant both the Second and Third Sealing Motions. Because 

these motions did not specify a desired duration for the sealing order, we will direct the 

Clerk’s Office to seal the materials subject to the aforementioned motions for five years 

from the conclusion of the case, after which the materials shall be unsealed without 

notice to the parties. See Local App. R. 106.1(c)(2).