Source: https://scocal.stanford.edu/opinion/clayworth-v-pfizer-33875
Timestamp: 2019-04-21 18:14:41+00:00

Document:
to indirect purchasers downstream in the chain of distribution?
Under state antitrust law, only the first question—who may sue—is settled.
state and federal law the same?
that it entitled the alleged price-fixing defendants here to summary judgment.
evidence in the light most favorable to the nonmoving party (here, plaintiffs).
competitive market. They sought treble damages, restitution, and injunctive relief.
did not suffer a compensable injury.
prices, the costs of drugs to Pharmacies increase by the same percentage amount.
dispensing fee; this reimbursement is greater than Pharmacies‟ acquisition costs.
fixing. For purposes of this appeal, we do likewise.
instances an additional dispensing fee.
Pharmacies have has fallen as well.
had not “lost money or property,” as required under section 17204.
had approved application to the Cartwright Act of Hanover Shoe, supra, 392 U.S.
accordingly had sustained no damage.
revenue is static, his costs have been increased by the amount of the overcharge.
the pass-on defense thus were unanimous in rejecting it.
only, might have insufficient motivation even to pursue a class action.
p. 494), and enforcement of the antitrust laws would be compromised.
490.) Writing for the court in Chattanooga Foundry v. Atlanta (1906) 203 U.S.
against that unity as an object. We do not go behind the person of the sufferer.
share for a buyer forced to compete with sellers not subject to the overcharge. (Id.
impacts of a price change, and a severe impairment to deterrence (id. at p. 494).
antitrust damages claim, apply under the Cartwright Act?
offer conclusive evidence of the statute‟s meaning, we need look no further.
(2005) 34 Cal.4th 1012, 1018).
Shoe, at p. 493; Kansas v. UtiliCorp United Inc. (1990) 497 U.S. 199, 224 (dis.
on the value of a business as a going concern due to lost market share (see B.W.I.
particular conclusion as to whether a pass-on defense should be available.
conclusion diametrically opposite to that of the Court of Appeal in this case.
Title 15 United States Code section 15(a).
sustained” because of overcharges and other violations.
evidence of textual ambiguity because it was not a statutory interpretation case.
of § 4 of the Clayton Act [15 U.S.C. § 15].” (California v. ARC America Corp.
Cartwright Act is concerned, the question is an open one.
meaning when it used the phrase in the Cartwright Act.
measure of damages—that it was, in short, ambiguous.
Competition Section of State Bar 7, 7-8; State of California ex rel. Van de Kamp v.
who seek to sue for antitrust loss.
Appeal do not establish any consensus as to how damages were to be measured.
54, section 1761, page 424 (“damages sustained”).
defendant‟s actions, offsetting any benefit to the plaintiff against any loss.
intermediary purchaser antitrust action for price fixing.
the alleged unlawful restraint of trade. (See Associated General Contractors v.
Carpenters (1983) 459 U.S. 519, 540-542; Vinci v. Waste Management, Inc.
§ 12 et seq.) and that must influence our reading of the Cartwright Act.
are antitrust damages to be measured?
legislative intent and applies equally to state claims under the Cartwright Act.
Brick, supra, 431 U.S. 720.
rule prohibiting a pass-on defense (see Hanover Shoe, supra, 392 U.S. at p. 494).
“duplicates amounts which have been awarded for the same injury.” (15 U.S.C.
between authorizing indirect purchaser suits and following Hanover Shoe.
behalf of indirect purchasers. (Remarks of Rep. Rodino, Debate on H.R. No.
application of Hanover Shoe‟s no pass-on defense rule to the Cartwright Act.
accommodate the effects of applying the Hanover Shoe rule. (See Assem. Com.
introduced Mar. 29, 1977 [attachments excerpting Sept. 16, 1976 remarks of Rep.
exclude the previous recovery from an antitrust defendant‟s future liability).
a scenario the exception rather than the rule. (See Union Carbide Corp. v.
Shoe to the Cartwright Act.
additional intermediary indirect purchasers). In Illinois Brick, supra, 431 U.S.
to sue for overcharges arising from antitrust violations.
direct purchaser and some additional amount to the indirect purchaser. (Id. at pp.
supra, 392 U.S. 481, was a sound rule of law.
(Assem. Com. on Judiciary, Analysis of Assem. Bill No. 3222 (1977-1978 Reg.
Indirect Purchaser Antitrust Standing and Consumer Justice (2004) 30 Wm.
the Illinois Brick dissent‟s proposed methods for reconciliation.
Cartwright Act over the years.
punishment of violators for the larger purpose of promoting free competition.
equal weight. The Legislature‟s adoption of a double damages remedy (Stats.
plaintiffs, but they do so in order to maximize deterrence.
enforcement by reducing incentives to sue and police antitrust violations.
overcharge might have in the form of lost sales and other tertiary consequences.
allow alleged antitrust violators to escape without sanction.
purchaser could pass on some or all of that overcharge downstream to others.
and Kansas v. UtiliCorp United Inc., supra, 497 U.S. 199, are in play here.
waived these other forms of injury. The record does not support this claim.
and one that considers all the consequences of the overcharge.
as under federal law, that a pass-on defense generally may not be asserted.
defendant must show the plaintiff could not have raised rates otherwise (Kansas v.
has suffered no injury as the result of an illegal overcharge.
overcharge—and that different response (e.g., lower sales) may injure the plaintiff.
the amount of the overcharge paid by the plaintiff.
and the statute of limitations for the period at issue has long since expired.
Manufacturers on the basis of a pass-on defense.
ineligible for any relief. We consider each ground in turn.
subject matter of the dispute to press their case with vigor.” (Common Cause v.
pharmaceuticals, Manufacturers depend on a network of wholesalers and retailers.
standing].) They lost money: the overcharges they paid. (See Hall v. Time Inc.
to those who suffer injury in fact is satisfied here. (See Chattanooga Foundry v.
it lacks standing to argue for its entitlement to them. (See Southern Pac. Co. v.
Darnell-Taenzer Co., supra, 245 U.S. at p. 534 [“The plaintiffs suffered losses . . .
proving it is entitled to recovery.
text or history of Proposition 64 that suggests the voters intended such a result.
their complaint‟s request for injunctive relief to defeat summary adjudication.
ignored Pharmacies‟ request for injunctive relief.
whether Pharmacies may eventually be entitled to restitution.
remand for further proceedings not inconsistent with this opinion.
Name of Opinion Clayworth v. Pfizer, Inc.
Law Offices of James M. Dombroski, James M. Dombroski; Law Offices of Jeffery K. Perkins, Jeffrey K.
Jaime Goldstein for Plaintiffs and Appellants.
Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants.
Winston & Strawn, Tyler M. Paetkau, Nicole P. Dogwill, James F. Hurst, Susan A. Pipal, Matthew J.
Defendant and Respondent Abbott Laboratories.
for Defendant and Respondent Amgen, Inc.
Covington & Burling, Elizabeth Abigail Brown, Anita F. Stork, Theodore Voorhees, Jr., and Thomas J.
Cosgrove for Defendant and Respondent Boehringer Ingelheim Pharmaceuticals, Inc.
David Graham and Aaron Mills Scott for Defendant and Respondent Eli Lilly & Company.
Sara D. Schotland and David I. Gelfand for Defendant and Respondent GlaxoSmithKline PLC.
and Joanne C. Lewers for Defendant and Respondent Hoffmann-La Roche Inc.
Folger Levin & Kahn, Crowell & Moring, Beatrice Bich-Dao Nguyen, Samuel Ray Miller, Tracy E.
Health Care Systems, Inc., Ortho Biotech, Inc., and Ortho-McNeil Pharmaceutical, Inc.
Merck Sharp & Dohme Corp. formerly known as Merck & Co., Inc.
Arnold & Porter, Ronald C. Redcay, Douglas L. Wald, Mark R. Merley, Daniel R. Waldman, Anne P.
Davis and Ryan Z. Watts for Defendant and Respondent Wyeth.
Petition for review after the Court of Appeal affirmed the judgment in a civil action. This case presents the following issues: (1) When plaintiffs pay overcharges on goods or services as a result of the anticompetitive conduct of defendant sellers but recover the overcharges through increased prices at which the goods or services are sold to end users, may defendants assert a "pass-on" defense and argue that plaintiffs were not injured because they did not suffer financial loss as a result of the anticompetitive conduct? (2) Is restitution available under the Unfair Competition Law (Bus. & Prof. Code, 17200 et seq.) to plaintiffs who recovered from third persons the overcharges paid to defendants? (3) When plaintiffs recover from third persons the overcharges paid to defendants, have they suffered actual injury and lost money or property for purposes of establishing standing under the Unfair Competition Law, as amended by Proposition 64?
Kaye Scholer Fierman et al.
The time for granting or denying review in the above-entitled matter is hereby extended to and including December 4, 2008, or the date upon which review is either granted or denied.
Kennard, Chin and Corrigan, JJ., were recused and did not participate. Votes: George, C.J., Werdegar, Moreno, and Miller*, JJ. * Hon. Douglas P. Miller, Associate Justice of the Court of Appeal, Fourth Appellate District, Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
For appellants to file the opening brief on the merits, to 2-17-09.
On application of appellants and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including February 17, 2009. No further extensions of time are contemplated.
Appellants' opening brief on the merits, containing oversized exhibits. Submitted to court for approval.
joint request of all respondents for extension of time to file a single answer brief on the merits, to 5-11-09.
On joint application of respondents and good cause appearing, it is ordered that the time to serve and file a single answer brief on the merits is extended to and including May 11, 2009.
by James Clayworth,et al., appellants, for an extension until June 22, 2009, to file the reply brief on the merits.
On application of appellants and good cause appearing, it is ordered that the time to serve and file appellants' reply brief on the merits is extended to and including June 22, 2009.
Consumer Attorneys of California Pamela Parker, Kimberly Kralowek, counsel Motion for Judicial Notice received in conjunction with the amicus brief.
The application of Consumer Attorneys of California for permission to file an amicus curiae brief in support of appellants is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
The application of Pharmacists Planning Services, Inc. for permission to file an amicus curiae brief in support of appellants is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Merck Sharp & Dohme Corp. formerly known as Merck & Co., Inc. counsel for defendant and respondent.
the additional record received 1/27/10 has been returned to the 1DCA (misc. documentation that was already before the court).
The order filed on March 5, 2010, granting pro hac vice status to Robert P. Reznick, is amended to read in its entirety: "The application of Robert P. Reznick for admission pro hac vice to appear on behalf of Merck Sharp & Dohme Corp. is hereby granted. (See Cal. Rules of Court, rule 9.40.)" This order is filed nunc pro tunc as of March 5, 2010, due to clerical error.
Pamela M. Parker counsel for amicus curiae Consumer Attorneys of California. "Notice of Firm Name Change" effective March 31, 2010.
The request for judicial notice by amicus curiae Consumer Attorneys of California, filed on August 4, 2009, is granted.
To be filed Monday, July 12, 2010 at 10 a.m.
The plaintiffs are retail pharmacies located in California. The plaintiffs sued the defendants, who are, with two exceptions, companies that manufacture, market, and/or distribute brand-name pharmaceutical products throughout the United States, under section 1 of the Cartwright Act and the unfair competition law for unlawfully conspiring to fix the prices of their brand-name pharmaceuticals in the United States market.
Defendants sell their drugs to wholesalers at a price referred to as the wholesale acquisition cost. In turn, various independent entities use the wholesale acquisition cost to calculate and publish benchmark drug prices, termed the average wholesale price, for use in the industry. Wholesalers resell the drugs to plaintiffs at prices based on a percentage of the average wholesale price. Plaintiffs then sell the drugs to two groups of consumers: (1) those with third party insurance or a drug benefit plan, and (2) uninsured consumers. For the first group, plaintiffs have no price-setting discretion; while for the second group, plaintiffs establish the retail prices unilaterally. Over time, however, the first group has come to compromise the bulk of the plaintiffs’ customers, with the consequence that the degree of price-setting discretion by the plaintiffs has fallen and plaintiffs have largely passed on any alleged price overcharges.
Plaintiffs allege that defendants have agreed to set artificially high prices for their products, and have acted in concert to restrain reimportation of their lower-priced foreign drugs into the United States and to restrict price competition from generics. As a result, plaintiffs allege that defendants were able to maintain prices for their drugs at levels 50 to 400 percent higher than for the same drugs sold outside the United States. In turn, plaintiffs were forced to pay the overcharge between the conspiracy-inflated prices set by defendants and the prices plaintiffs would have paid in a competitive market.
Plaintiffs filed suit under section 1 of the Cartwright Act and unfair competition law. Defendants denied plaintiffs’ allegations and asserted as an affirmative defense that plaintiffs passed on any alleged overcharge to third parties and therefore did not suffer a compensable injury. Plaintiffs filed a motion for summary adjudication of defendants’ pass-on defense. Defendants responded with a cross-motion for summary judgment. Trial court granted defendants’ summary judgment cross-motion and denied as moot plaintiffs’ summary adjudication motion. The Court of Appeals affirmed.
Whether under the Cartwright Act an antitrust defendant can defeat liability by asserting a pass-on defense.
No, generally, an antitrust defendant cannot defeat liability under the Cartwright Act by asserting a pass-on defense. Under the Cartwright Act, antitrust violators typically cannot assert as a defense that any illegal overcharges have been passed on by a plaintiff direct purchaser to indirect purchasers, with certain exceptions. Such a defense is still available for “cost-plus” contracts and where the defense is needed to avoid duplication in the recovery of damages.
Looking first to the text of the Cartwright Act, the Court found the words of the statute themselves did not dictate whether a pass-on defense should be available or not under the Cartwright Act. The Cartwright Act authorizes anyone “injured in his or her business or property” by actions forbidden under the Act to recover three times the “damages sustained.” CAL. BUS. & PROF. CODE § 16750(a). Thus, while the text does allow recovery of damages, it does not state how the injury or damages are to be quantified and thus does not provide a conclusion to the question of whether a pass-on defense is available.
Finally, the Court examined subsequent amendments to related sections of the Cartwright Act and the objectives of the Cartwright Act and concluded these sources and considerations lead to the conclusion that a pass-on defense should not be generally be available under the Cartwright Act. Within months of the Illinois Brick Co. v. Illinois decision, 431 U.S. 720 (1977), the California legislature introduced and unanimously passed in both houses a bill preventing Illinois Brick’s ban on indirect purchaser suits from having any effect on judicial interpretation of the Cartwright Act. Neither the bill nor any committee reports, however, suggested that this legislation in anyway repudiated Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968), under the Cartwright Act, which held antitrust violators could not ordinarily assert a pass-on defense. Consequently, amendments to the Cartwright Act left intact the ability for indirect purchasers and those passing on any overcharges to bring suit for antitrust violations, but denied alleged antitrust violators the right to use a pass-on defense. Moreover, the Court found such an interpretation to be in accord with the objectives of the Cartwright Act: maximizing effective deterrence of antitrust violations, enforcing the state’s antitrust laws against those violations that do occur, and ensuring disgorgement of any ill-gotten proceeds. By accepting the Hanover Shoe rule, the Court streamlines antitrust trials, renders the process of proving antitrust damages less daunting, and ultimately enhances enforcement.
Oral argument report: Clayworth v. Pfizer, Inc.
SCOCAL, Clayworth v. Pfizer , 49 Cal. 4th 758, 233 P.3d 1066, 111 Cal. Rptr. 3d 666 available at: (https://scocal.stanford.edu/opinion/clayworth-v-pfizer-33875) (last visited Sunday April 21, 2019).

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