Source: https://litigation.consusgroup.com/2017/03/20/clash-of-the-titans-smithkline-beecham-corporation-v-abbott-laboratories-abt/
Timestamp: 2019-04-23 06:43:44+00:00

Document:
03-20-2017 – The district court just denied Abbott’s motion for summary judgment in its high profile litigation with GSK involving 2003 antitrust claims for pricing of an HIV drug called Norvir.
District of California’s personal jurisdiction over the case, and the parties thereafter stipulated to a transfer of this case to the Middle District of North Carolina. (See Doc. 681.) Following a status conference held in this district on May 20, 2015, Abbott filed an Answer to the Second Amended Complaint.
These matters are now ripe for adjudication and, for the reasons stated below, this court will deny Defendant’s motions.
The procedural history of this case is complex. The case involves a dispute over a 2003 price increase for an HIV drug sold by Abbott called Norvir. (See Doc. 708 at 3-4.) Abbott began to sell market licenses for Norvir to its competitors, including one negotiated in 2002 with GSK that allowed GSK to market its own HIV drugs to be co-administered with Norvir.
Cir. 2014). GSK appealed and the Ninth Circuit vacated the verdict and remanded on the basis that a juror was improperly excluded on the basis of sexual orientation. Id. at 475-76.
470, 474 (4th Cir. 2014).
GSK was a Pennsylvania corporation with its principal office in Pennsylvania and with headquarters in both Durham, North Carolina, and Philadelphia, Pennsylvania. (Second Am.
(PIs), which are drugs used to treat HIV infection. (Id. ¶ 13.) In 1996, Abbott introduced ritonavir, a drug product it had developed under the brand name Norvir, for use as a stand-alone PI. (Id. ¶ 14.) Abbott was the sole manufacturer of Norvir. (Id.
¶ 22.) It was later discovered that a small dose of Norvir could “boost” the effectiveness of other PIs paired with it, thus reducing dosage amounts of the paired PI and slowing the rate at which HIV developed a resistance to a given PI treatment. (Id. ¶ 15.) Norvir began to be co-prescribe and co-administer with other PIs, and GSK relied on the reasonable availability of Norvir as a boosting agent when developing its own PIs. (Id.
In 2000, Abbott introduced Kaletra, a drug that combined both Norvir, as a booster, and another PI into a single pill.
Mar. 4, 2011 (Doc. 542) at 170; Trial Tr., vol. 6, Mar. 7, 2011 (Doc. 543) at 77.) GSK alleges that in the license negotiations with Abbott, Abbott did not disclose that it had begun internal discussions regarding ways to protect the market share of its PI Kaletra by damaging competitors’ access to Norvir. (Second Am.
from $19.43 to $33.15. (Second Am. Compl. (Doc. 632) ¶ 34.) The wholesale acquisition cost of Abbott’s Kaletra remained unchanged at $18.76. (Id.; Answer (Doc. 707) ¶ 34.) Shortly after the price hike, a senior Abbott executive congratulated the virology team on “giving a lump of coal to BMS [Bristol Myers Squibb] and GSK for the holidays.” (Second Am. Compl.
Under Federal Rule of Civil Procedure 12(c), a party may move for judgment on the pleadings “[a]fter the pleadings are closed — but early enough not to delay trial . . . .” Fed. R.
when the material facts are not in dispute and the court can judge the case on its merits by considering the pleadings.” Preston v. Leake, 629 F. Supp. 2d 517, 521 (E.D.N.C. 2009).
Massey v. Ojaniit, 759 F.3d 343, 353 (4th Cir. 2014) (quoting Drager, 741 F.3d at 474).
When assessing a Rule 12(c) motion, the complaint, “the answer and any documents incorporated by reference in the pleadings may be considered. The ‘factual allegations of the answer are taken as true, to the extent “they have not been denied or do not conflict with the complaint.”‘“ Blue Rhino Glob. Sourcing, Inc. v. Well Traveled Imps., Inc., 888 F. Supp.
2d 718, 721 (M.D.N.C. 2012) (quoting Farmer v. Wilson Hous.
353 (citations omitted) (quoting Blankenship v. Manchin, 471 F.3d 523, 529 (4th Cir. 2006)).
Receivables Mgmt., Inc., 335 F. Supp. 2d 636, 646 (M.D.N.C.
unfair competition claim as alleged. Specifically, Abbott argues that the lex loci test, not the most significant relationship test, applies to GSK’s UDTPA claim. Under the lex loci test, Abbott argues Pennsylvania law applies because GSK’s lost profits injury was felt in Pennsylvania, where its principal place of business is located. Abbott also argues in a footnote that if this court were to use the most significant relationship test, Pennsylvania law would still apply because Pennsylvania had the most significant relationship to the claim (and if not Pennsylvania, then Illinois where its principal place of business is located).
North Carolina, where its HIV headquarters are located. Finally, GSK argues that the UDTPA claim is not contractual, consequently the New York choice-of-law clause in the Agreement is not applicable to that claim. Because North Carolina law governs the UDTPA claim, GSK argues Abbott’s motion should be denied.
(Abbott’s 12(c) Br. (Doc. 711) at 3, 9; Pl.’s 12 (c) Resp. (Doc. 720) at 14).) This court agrees and will analyze the issues under North Carolina choice-of-law rules.
GSK argues that Abbott waived any objection to the application of North Carolina law because Abbott acquiesced to and relied upon North Carolina law for over seven years, first arguing North Carolina law did not apply only two months before the second trial. Circuit courts recognize that a party’s litigation conduct can constitute a waiver of choice-of-law issues. Williams v. BASF Catalysts LLC, 765 F.3d 306, 316 n.2 (3d Cir. 2014), reh’g denied (Dec. 1, 2014) (collecting cases).
646 S.E.2d 635, 639 (2007) (quoting Guerry v. Trust Co., 234 N.C. 644, 648, 68 S.E.2d 272, 275 (1951)).
Here, although Abbott relied on North Carolina law in its briefs and arguments as early as 2008, GSK’s removal of the antitrust claims caused the transfer of this case to this court, which led to the application of North Carolina choice-of-law rules to the UDTPA claim. In light of GSK’s amended complaint and the subsequent transfer to this district, this court will not preclude Abbott from making an argument about the effect of the changed choice-of-law analysis on the UDTPA claim.
Court case is dispositive of the issue, this court must seek guidance from the state’s appellate court. Id.
The Supreme Court of North Carolina has yet to address the proper test for UDTPA claims, and there is a split of authority in the North Carolina Court of Appeals on the appropriate rule to be applied. Stetser v. TAP Pharm. Prods., Inc., 165 N.C. App.
1, 15, 598 S.E.2d 570, 580 (2004); Associated Packaging, Inc. v.
Andrew Jackson Sales v. Bi-Lo Stores, Inc., 68 N.C. App. 222, 225, 314 S.E.2d 797, 799 (1984).
911 F. Supp. 2d 331, 338 (E.D.N.C. 2012) (quoting Teague v.
Bakker, 35 F.3d 978, 991 (4th Cir. 1994)).
United Dominion Indus., Inc. v. Overhead Door Corp., 762 F. Supp. 126, 128 n.2 (W.D.N.C. 1991)).
North Carolina Supreme Court would use the lex loci test. In United Dominion, the district court placed “particular importance on the [North Carolina Court of Appeals] decision in United Virginia, which rejected the most significant relationship test in favor of the traditional [lex loci] test.” United Dominion, 762 F. Supp. at 129.
Warner Inc., No. 5:11-CV-00104-RLV-DSC, 2013 WL 66265, at *3 (W.D.N.C. Jan. 4, 2013). However, the United Virginia case (on which these courts partially relied), in finding the lex loci rule to be “the better rule,” did not discuss the use of the significant relationship test in complex injury cases and acknowledged that applying either test in that case would have brought about the same result. 79 N.C. App. at 322, 339 S.E.2d at 94.
did the courts discuss consideration of the most significant relationship test in such cases. In M-tek Kiosk, the court stated “there is no other location alleged where MTEK would have suffered damages except in Oregon.” 2016 WL 2997505, at *16. In Best, the court cited Martinez and United Dominion in a footnote for its decision to apply the lex loci test and found, without much discussion, that California was the place of injury. 2013 WL 66265, at *3 n.4. Likewise, Martinez was not a complex injury case where the place of harm was unclear or highly open to date. 911 F. Supp. 2d at 336-38. The United Dominion case involved a single commercial transaction with the injury taking place either in North Carolina, where one party had corporate headquarters, or in Texas, where the transaction closed. 762 F. Supp. at 129-30. As that court noted, there was a “single clear alternative” to North Carolina. Id.
Carolina court would apply the lex loci test to this issue.”).
not dispute that for causes of action generally considered to be torts, “the state where the injury occurred is considered the situs of the claim.” Id. However, an UDTPA claim is “‘neither wholly tortious nor wholly contractual in nature.’” Stetser, 165 N.C. App. at 15, 598 S.E.2d at 580 (quoting Bernard v. Cent.
582, 584 (1984)); but see Caper Corp. v. Wells Fargo Bank, N.A., 578 F. App’x 276, 280 (4th Cir. 2014) (characterizing an UDTPA claim in violation of N.C. Gen. Stat. § 75-1.1 as a tort claim).
longer persuasive regarding North Carolina law.”); cf.
Derflinger v. Ford Motor Co., 866 F.2d 107, 110 (4th Cir. 1989).
(M.D.N.C. 1996); see also McElmurry v. Alex Fergusson, Inc., No.
1:04CV389, 2006 WL 572330, at *10 n.8 (M.D.N.C. Mar. 8, 2006) (“This court has interpreted the conflicting North Carolina court of appeals opinions to hold that where the place of injury is uncertain the significant relationships test should apply.”).
2013 WL 3965424, at *5 (N.C. Super. Ct. July 30, 2013). Accordingly, this court must determine where GSK allegedly suffered its injury or damages.
Here, GSK alleged that it suffered injury in the form of lost market share and lost profits on sales of Lexiva throughout the United States and that Abbott’s conduct injured consumers and commerce in “California, North Carolina and elsewhere.” (Second Am. Compl. (Doc. 632) ¶¶ 43-52.) “In determining where the injury occurred in a case involving commercial or financial injury . . . , courts often look at the location where the economic loss was felt.” Clifford v. Am. Int’l Specialty Lines Ins. Co., No. 1:04CV486, 2005 WL 2313907, at *8 (M.D.N.C.
On the other hand, GSK argues that it has headquarters in both Pennsylvania and North Carolina. GSK claims its North Carolina offices are where its HIV business is centered, where it conducts HIV research and development, and where it carries out various marketing, administrative, and corporate functions.
impact was felt. Based on the foregoing, the location of GSK’s injury appears to be either in Pennsylvania or North Carolina.
We . . . reject [the] proposed bright line rule. The location of a plaintiff’s residence or place of business may be useful for determining the place of a plaintiff’s injury in those rare cases where, even after a rigorous analysis, the place of injury is difficult or impossible to discern. However, . . . a significant number of cases exist where a plaintiff has clearly suffered its pecuniary loss in a particular state, irrespective of that plaintiff’s residence or principal place of business.
Harco, 206 N.C. App. at 697, 698 S.E.2d at 725-26.
Abbott asserts, GSK alleges the center of economic impact was in North Carolina where the heart for “research and development facilities and commercial operations in the HIV/AIDS area” was located – this is where it felt the damages associated with the loss in market share and lost profits related to the HIV market and Lexiva. See Rhone-Poulenc Agro S.A. v. Monsanto Co., 73 F. Supp. 2d 554, 555 (M.D.N.C. 1999) (applying lex loci in fraud claim, plaintiff suffered injury at its headquarters in both North Carolina and France, but in finding North Carolina “more appropriate,” the court noted that plaintiff’s North Carolina corporation was more involved, plaintiff’s principal negotiator was in North Carolina, and neither party asserted that North Carolina law applied until eve of trial).
Rule 12(c) motions are “designed to dispose of cases when the material facts are not in dispute.” Preston, 629 F. Supp. 2d at 521. Here, Abbott disputes the location of GSK’s headquarters. However, in applying the lex loci test, GSK has plausibly pled that it felt the economic injury in North Carolina. Therefore, North Carolina law governs.
Even if this court were to apply the most significant relationship test because of the alleged nationwide impact, the place of injury still appears to be North Carolina. Courts analyzing North Carolina UDTPA claims under the most significant relationship test focus on “where the relationship between the parties was created and where it was centered.” Jacobs v. Cent. Transp., Inc., 891 F. Supp. 1088, 1111 (E.D.N.C. 1995), rev’d on other grounds, Nos. 95-2395, 95-2396, 95-2397, 1996 WL 223688 (4th Cir. May 3, 1996); see also New England Leather, 942 F.2d at 256; Edmondson, 2001 WL 91104, at *12. Federal courts and North Carolina courts applying the most significant relationship test to UDTPA claims engage in fact-specific inquiries under that guidance. Id. See, e.g., Andrew Jackson Sales, 68 N.C. App. at 225, 314 S.E.2d at 799; Michael v. Greene, 63 N.C. App. 713, 715, 306 S.E.2d 144, 145 (1983). However, it may also be appropriate to consider the factors listed in the Restatement (Second) of Conflict of Laws, which include “(a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered.” Restatement (Second) of Conflict of Laws § 145 (Am.
Illinois corporation with its principal place of business in Illinois. GSK was a Pennsylvania corporation with its principal office in Pennsylvania and with headquarters in both Durham, North Carolina, and Philadelphia, Pennsylvania.
grants GSK a worldwide license. (Id.) Abbott suggests it is unimportant that the parties had meetings in North Carolina or that GSK had key employees and its HIV operations in North Carolina. (Id. at 11.) Abbott further asserts that it contracted with GSK, not GSK’s HIV business. (Id.) Abbott, in support of its claim that if North Carolina “had mattered . . . it would have appeared in the Agreement,” cites a quote from Edmondson stating that the “joint venture agreement provides it was entered into in Ohio.” (Id.) However, the Edmondson court found that “North Carolina had a more significant relationship to this case than Ohio” even though the agreement provided it was entered into in Ohio and even though the defendant asserted all of plaintiff’s claims arose out of the parties’ joint venture relationship. Edmondson, 2001 WL 91104, at *12.
it also had headquarters in North Carolina, specifically, its HIV headquarters. The parties’ Agreement states that “GSK is interested in obtaining a license from Abbott to promote and market certain of GSK’s HIV products.” (Agreement (Doc. 711-1) at 3.) GSK asserts North Carolina is where its HIV business is centered, where it conducts HIV research and development, where its Lexiva brand director conducted his business, and where it carries out other marketing, administrative, and corporate functions.
While Pennsylvania and Illinois are not without connection to the parties and the subject matter of the suit, application of the factors point to North Carolina as the state with the most significant relationship and thus this court finds that the law of North Carolina governs.
Co. v. Byrd, 299 N.C. 260, 262, 261 S.E.2d 655, 656 (1980).
Corp., Commercial Div., 722 F.2d 42, 49 n.11 (4th Cir. 1983).
Similar to the United Dominion court’s conclusion, “[t]he contractual provision here may govern the choice of laws as to the interpretation and construction of the contract; however, it does not provide the applicable law for a claim based on unfair and deceptive acts.” United Dominion, 762 F. Supp. at 128. As explained in ITCO, North Carolina courts would apply N.C. Gen. Stat. § 75-1.1 to an UDTPA claim, without regard to the contractual choice-of-law clause, because “the nature of the liability allegedly to be imposed by the statute is ex delicto, not ex contractu.” ITCO, 722 F.2d at 49 n.11. “No issue of contractual construction, interpretation, or enforceability” was raised. Id.
determining whether North Carolina’s UDTPA applies. See Robinson v. Ladd Furniture, Inc., No. 92-2286, 1993 WL 211309, at *5 (4th Cir. June 14, 1993) (stating “[t]he argument could have been made in [the] ITCO [case] that the terms of the . . . agreements would be directly relevant to the wrongful termination claims, but we still declined to apply the contractual choice of law provisions in these actions”).
Abbott moves to dismiss GSK’s N.C. Gen. Stat. § 75-1.1 claim for unfair and deceptive trade practices. North Carolina’s UDTPA prohibits “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce.” N.C. Gen. Stat. § 75–1.1(a). To state a claim for unfair and deceptive trade practices, a plaintiff must show that (1) the defendant committed an unfair or deceptive act or practice; (2) the act in question was in or affecting commerce; and (3) the act proximately caused injury to the plaintiff. Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704, 711 (2001).
anti-competitive conduct. Sparks v. Oxy-Health, LLC, 134 F.
Supp. 3d 961, 997–98 (E.D.N.C. 2015) (collecting cases); Exclaim Mktg., LLC v. DirecTV, LLC, 134 F. Supp. 3d 1011, 1022 (E.D.N.C.
Bldg. Prods. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 472 F.3d 99, 122-23 (4th Cir. 2006). Whether a particular commercial act or practice constitutes an unfair or deceptive practice is a question of law for the court. Norman Owen Trucking, Inc. v. Morkoski, 131 N.C. App. 168, 177, 506 S.E.2d 267, 273 (1998).
dismissal of a UDTPA claim based on the same allegations.” (Id.
Tobacco Co. v. Philip Morris Inc., 199 F. Supp. 2d 362, 396 (M.D.N.C. 2002); Sea-Roy Corp. v. Parts R Parts, Inc., No.
Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1160 (9th Cir. 2002). Although GSK dismissed its antitrust claims, all of the factual allegations regarding Abbott’s alleged anti-competitive conduct remain in the operative complaint.
UD[T]PA claim, it is not necessary.” Exclaim Mktg., 134 F. Supp.
GSK’s UDTPA claim on those grounds. See ITCO, 722 F.2d at 48-52.
Abbott further argues that without the antitrust claims, GSK can allege no aggravating factors sufficient to support a UDTPA violation, making GSK’s unfairness theory a mere breach of contract claim. (Def.’s Dismiss Br. (Doc. 722) at 7-10.) Unfair conduct is that which a court of equity would find unfair.
“offends established public policy”; if it is “immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers”; or if it “amounts to an inequitable assertion of [a party’s] power or position.” Carcano v. JBSS, LLC, 200 N.C.
Marshall v. Miller, 302 N.C. 539, 548, 276 S.E.2d 397, 403 (1981). “[T]he fairness or unfairness of particular conduct is not an abstraction to be derived by logic. Rather, the fair or unfair nature of particular conduct is to be judged by viewing it against the background of actual human experience and by determining its intended and actual effects upon others.” South Atlantic, 284 F.3d at 535.
North Carolina courts have construed the UDTPA liberally, but there are some limits on its application. Gilbane Bldg. Co.
217, 646 S.E.2d 550, 558–59 (2007).
LLC v. XXXtreme Motorsport, LLC, Civil Action No. 5:14CV155-RLV, 2015 WL 4430257, at *3 (W.D.N.C. July 20, 2015) (taking assets without paying, stripping contract of value, and frustrating agreed payment method could “plausibly give rise to an action for unfair and deceptive trade practices”).
GSK alleges the following unfair conduct: (1) Abbott deliberately withheld its plans to use Norvir as a weapon to destroy competition while negotiating with GSK for substantial compensation in the Norvir Agreement (Second Am. Compl. (Doc.
manipulating GSK into the Agreement that Abbott sought to undermine (Id. ¶ 60; Id. at 8-9); and (3) Abbott deliberately timed the Norvir price increase to disrupt the launch of Lexiva in the market and harm GSK (Id. ¶¶ 35, 41, 45-48; Id. at 8-9). These actions, if proved, could reasonably give rise to an UDTPA claim within the meaning of section 75.1–1.
undermine the value of the Agreement, if proved, is sufficiently egregious to support an UDTPA claim.
North Carolina Law (Doc. 721) are DENIED.
This the 20th day of March, 2017.
 While there was a trial in 2011, on appeal, the Ninth Circuit remanded the case for a new trial due to a jury selection issue. See SmithKline Beecham Corp. v. Abbott Labs., 740 F.3d 471, 474 (9th Cir. 2014). The scheduled trial referenced here refers to the second trial, scheduled to occur after the Ninth Circuit remand.
 All citations in this Memorandum Opinion and Order to documents filed with the court refer to the page numbers located at the bottom right-hand corner of the documents as they appear on CM/ECF.
 This court excluded matters not properly considered on the motion pursuant to Rule 12(c). See A.S. Abell Co. v. Baltimore Typographical Union No. 12, 338 F.2d 190, 193 (4th Cir. 1964).
 “[I]n disposing of a Rule 12(c) motion, ‘courts may consider relevant facts obtained from the public record, so long as these facts are construed in the light most favorable to the plaintiff along with the well-pleaded allegations of the complaint.’” Massey v. Ojaniit, 759 F.3d 343, 353 (4th Cir. 2014) (finding the district court’s consideration of a trial transcript did not run afoul of Rule 12(d)). Additionally, Abbott did not object to the transcript and cited to transcripts in the record as well.

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