                                                                                                                           Opinions of the United
1997 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-18-1997

Barton & Pittinos v. SmithKline Beecham
Precedential or Non-Precedential:

Docket 96-1941




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Filed July 18, 1997

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 96-1941

BARTON & PITTINOS, INC.
Appellant

v.

SMITHKLINE BEECHAM CORPORATION

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civ. No. 95-CV-6619)

Argued: June 13, 1997

Before: COWEN, ALITO, and GARTH, Circuit Judges

(Opinion Filed: July 18, 1997)

BARBARA W. MATHER (Argued)
PHILIP H. LEBOWITZ
NICOLE D. GALLI
PEPPER, HAMILTON & SCHEETZ
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103

KENNETH H. ZUCKER
PEPPER, HAMILTON & SCHEETZ
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312

Attorneys for Appellant
JAMES D. COLEMAN (Argued)
THOMAS B. ROBERTS
BALLARD SPAHR ANDREWS &
 INGERSOLL
1735 Market Street, 51st Floor
Philadelphia, PA 19103

Attorneys for Appellee

OPINION OF THE COURT

ALITO, Circuit Judge:

Appellant Barton & Pittinos, Inc. ("B&P") is a
pharmaceutical marketing company. B&P entered into a
contract with appellee SmithKline Beecham Corp. ("SKB") to
market SKB's Engerix-B vaccine for hepatitis-B ("the
vaccine") to nursing homes. Under the terms of the
program, B&P would provide the nursing homes with
information about the vaccine and would solicit orders.
B&P would then pass the orders to General Injectables and
Vaccines, Inc. ("GIV"), which would buy the vaccine from
SKB and then resell it to the nursing homes, with B&P
receiving a commission. When SKB, B&P, and GIV
launched this program, SKB, it is alleged, was inundated
with a flood of complaints from the consultant pharmacists
who had traditionally supplied the nursing homes with
SKB's vaccines and other pharmaceutical products.
Assertedly bowing to pressure from the pharmacists, SKB
terminated the program.

B&P brought this action against SKB, alleging that SKB
conspired with the pharmacists to restrain competition in
the nursing home market for the vaccine, in violation of § 1
of the Sherman Act, 15 U.S.C. § 1. B&P also asserted
claims under state law for breach of contract and unjust
enrichment. The district court granted summary judgment
in favor of SKB on B&P's antitrust claim on the ground that
B&P lacked standing to sue for its alleged injuries under
the antitrust laws. B&P appealed. We hold that the injury
alleged by B&P is not the type of injury that the antitrust
laws were intended to prevent because B&P was not a

                   2
competitor or a consumer in the market in which trade was
allegedly restrained. Since B&P therefore cannot
demonstrate "antitrust injury," it lacks standing under the
antitrust laws. Accordingly, we affirm.

I.

In 1991, B&P learned that the Occupational Safety and
Health Administration would soon require employers whose
employees might be exposed to blood-borne pathogens to
educate their employees about the vaccine against
hepatitis-B and to make the vaccine available to them free
of charge. See 29 C.F.R. § 1910.1030 (1991). At the time,
the only manufacturers of the vaccine were SKB and Merck
& Co. Sensing an opportunity to profit from this regulatory
mandate, B&P developed a plan to market the vaccine to
nursing homes. SKB agreed to pay B&P a flat fee in
exchange for B&P's preparation and distribution to the
nursing homes of educational materials regarding the
vaccine and the regulations. B&P performed the agreed-
upon work and SKB compensated it according to the
contract. The next step in the program was for B&P to
telephone the nursing homes (under the trade name "The
Medical Phone Company") to solicit orders for the vaccine.
B&P contends that SKB agreed to pay it a commission of
7% on sales of the vaccine as compensation for these
telemarketing services.1

Because B&P, as a marketing company rather than a
pharmaceutical company, lacked the required license to
buy, possess, or sell the vaccine, the program did not call
for B&P actually to distribute the vaccine to the nursing
homes. Rather, B&P's function was to drum up demand for
the vaccine, solicit orders from the nursing homes, and
pass the orders along to GIV, a licensed medical supply
house. GIV would fill the orders by purchasing the vaccine
from SKB and would then resell the vaccine to the nursing
homes.

The program debuted in January 1992. Before the
_________________________________________________________________

1. In accordance with the law governing summary judgment, in our
recitation of the facts we accept B&P's evidence as true.

                   3
commencement of this program, the nursing homes had
traditionally obtained their vaccines and other
pharmaceutical products from "consultant pharmacists." A
nursing home's consultant pharmacist would educate
nursing home administrators and staff about
pharmaceutical products and regulatory requirements;
assist the nursing home in storing its pharmaceuticals and
in keeping the required records relating to their
prescription; negotiate directly with pharmaceutical
manufacturers regarding price and other terms of purchase
of pharmaceutical products; and take orders from the
nursing home, purchase the desired products from the
manufacturers, and resell them to the nursing home.
Because the SKB/B&P/GIV program promised economically
advantageous terms to the nursing homes, the nursing
homes accorded the program a favorable reception.

The nursing homes' gain, however, was the pharmacists'
loss. Almost immediately, many individual pharmacists as
well as pharmacist trade associations complained to SKB
that the program bypassed and undercut them on price,
and some threatened to boycott SKB products if SKB
continued the program.2 In March 1992, following meetings
with pharmacist groups, SKB discontinued the program.
SKB terminated the telemarketing and distribution program
involving B&P and GIV and reverted to its prior practice of
distributing the vaccine through consultant pharmacists.
Even after SKB ended the program, it continued to explore
the possibility of continuing to employ B&P to help to
market the vaccine, but the parties were unable to reach
agreement.

II.

B&P filed this action in October 1995. Under § 4 of the
Clayton Act, 15 U.S.C. § 15, B&P claimed that it was
entitled to treble damages for SKB's conspiracy with the
pharmacists to restrain trade in the market for sales of the
vaccine to nursing homes, in violation of § 1 of the
_________________________________________________________________

2. Some state regulatory bodies, apparently at the instigation of
pharmacist groups, also expressed concern to SKB and GIV about the
program, but it does not appear that any official action was taken.

                   4
Sherman Act, 15 U.S.C. § 1. B&P also pled claims under
state law, alleging that SKB had breached its contract with
B&P by terminating the telemarketing program and
refusing to pay B&P any commission and, in the
alternative, that SKB had been unjustly enriched by the
receipt of B&P's telemarketing services.

In August 1996, SKB moved for summary judgment,
contending that B&P lacked antitrust standing because it
was neither a competitor nor a consumer in the market in
which trade was allegedly restrained. The district court held
that B&P had failed to show that its alleged injury
constituted "antitrust injury" and granted the motion.
Barton & Pittinos, Inc. v. SmithKline Beecham Corp., 942 F.
Supp. 235, 237 (E.D. Pa. 1996). The court also held that
the existence of more direct victims than B&P and the
danger of complex apportionment of damages among those
injured by the alleged conspiracy weighed againstfinding
that B&P had antitrust standing. Id. at 237-38. With B&P's
lone federal claim dismissed, the court declined to exercise
supplemental jurisdiction over the state law claims and
dismissed them without prejudice. Id. at 238.

In this appeal, B&P argues that the district court erred in
finding as a matter of law that it did not compete with the
pharmacists. B&P submits that the record contains
evidence from SKB, Merck, and the pharmacists themselves
showing that they all believed that B&P competed with the
pharmacists. We exercise plenary review over the district
court's grant of summary judgment. McCarthy v. Recordex
Services, Inc., 80 F.3d 842, 847 (3d Cir.), cert. denied, 117
S.Ct. 86 (1996).3
_________________________________________________________________

3. In our review, we "apply the same test the district court should have
used initially." In re Unisys Sav. Plan Litig., 74 F.3d 420, 433 n.10 (3d
Cir.), cert. denied, 117 S.Ct. 56 (1996). Summary judgment should be
granted "if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). On a
summary judgment motion the court must construe the evidence in the
light most favorable to the non-moving party and give that party the
benefit of all reasonable inferences. See In re Unisys, 74 F.3d at 433
n.10.

                    5
III.

Section 4 of the Clayton Act, 15 U.S.C. § 15, provides
that "[a]ny person who shall be injured in his business or
property by reason of anything forbidden in the antitrust
laws" may maintain a private action for treble damages.
Despite this broad statutory language, however, the
Supreme Court has held that the common-law background
of the antitrust laws requires a narrower, less literal
reading. See Associated General Contractors of California,
Inc. v. California State Council of Carpenters, 459 U.S. 519,
529-33 (1983) ("AGC"). In developing the concept of
antitrust standing, the Court "focus[ed] on the nature of the
plaintiff's alleged injury," asking "whether it is of the type
that the antitrust statute was intended to forestall." Id. at
538-39. If the injury is not of the requisite type, even
though the would-be plaintiff may have suffered an injury
as a result of conduct that violated the antitrust laws, he or
she has no standing to bring a private action under the
antitrust laws to recover for it. In AGC, the Court held that
because the plaintiff was "neither a consumer nor a
competitor in the market in which trade was restrained," its
injury was not the type of injury that the antitrust laws
were designed to prevent. Id. at 539. Therefore, the plaintiff
might be able to sue under a different statute or common-
law rule, and a different plaintiff might be able to sue under
the antitrust laws, but the plaintiff had no standing to sue
under the antitrust laws. See also Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).

The Supreme Court in AGC also discussed other factors
that must be balanced in order to determine whether a
plaintiff is a proper party to bring an antitrust claim. See
459 U.S. at 540-44. We have synthesized the Court's
analysis into the following formulation of the factors that
are relevant in an antitrust standing challenge:

(1) the causal connection between the antitrust
violation and the harm to the plaintiff and the intent by
the defendant to cause that harm, with neither factor
alone conferring standing; (2) whether the plaintiff's
alleged injury is of the type for which the antitrust laws
were intended to provide redress; (3) the directness of
the injury, which addresses the concerns that liberal

                    6
application of standing principles might produce
speculative claims; (4) the existence of more direct
victims of the alleged antitrust violations; and (5) the
potential for duplicative recovery or complex
apportionment of damages.

In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d
1144, 1165-66 (3d Cir. 1993) ("Lake Erie").

The district court in this case relied principally on the
second factor that we identified in Lake Erie. On the basis
of its conclusion that B&P was not a competitor or a
consumer in the market allegedly restrained, the court held
that B&P's injury was not of a type that the antitrust laws
were designed to prevent. See Schuylkill Energy Resources,
Inc. v. Pennsylvania Power & Light Co., 113 F.3d 405, 415
(3d Cir. 1997) ("A plaintiff who is neither a competitor nor
a consumer in the relevant market does not suffer antitrust
injury") (quoting Vinci v. Waste Management, Inc., 80 F.3d
1372, 1376 (9th Cir. 1996)).

Antitrust injury is a necessary but insufficient condition
of antitrust standing. Lake Erie, 998 F.2d at 1166
("antitrust injury is more than a component to be factored
in a standing analysis, it must be present in every case")
(citation omitted). Even a plaintiff who can show antitrust
injury may lack antitrust standing, because the remaining
AGC factors may weigh against allowing him or her to sue
under the antitrust laws. Cargill, Inc. v. Monfort of Colorado,
Inc., 479 U.S. 104, 110 n.5 (1986) ("A showing of antitrust
injury is necessary, but not always sufficient, to establish
standing under § 4, because a party may have suffered
antitrust injury but may not be a proper party under § 4 for
other reasons").4

A. We thus turn to the question whether B&P adduced
sufficient evidence to permit a reasonable factfinder to
_________________________________________________________________

4. The antitrust injury requirement in the context of antitrust standing
can thus be seen as analogous to the constitutional minimum required
for standing to sue in federal court in general, and the other AGC factors
may be thought of as prudential limits on standing that are particularly
necessary or appropriate in the antitrust context. Cf. Florida Seed Co.,
Inc. v. Monsanto Co., 105 F.3d 1372, 1374 (11th Cir. 1997).

                    7
conclude that it competed in the market in which trade was
allegedly restrained, such that its alleged injury would
constitute "antitrust injury."5 The answer to this question
depends on how that market is defined. B&P's complaint
defined the relevant market as "all hepatitis-B vaccine sold
to nursing homes" in the United States. (App. 25)
(emphasis added). It alleged that the unlawful conspiracy
aimed "to eliminate B&P as a competitor in the distribution
of hepatitis B vaccine to nursing homes . . . ." (App. 25)
(emphasis added). Because it is undisputed that B&P never
"sold" or "distributed" or sought to sell or distribute any
vaccine to anyone, however, it is plain that B&P was not a
competitor in the market for sales of the vaccine.

In its briefs and at oral argument, B&P espoused a
slightly different view of the relevant market and its role
therein. B&P argues that the evidence demonstrates that
"Barton & Pittinos and its program competed with and
displaced the pharmacists." Appellant's Br. at 15. In our
view, the key words in this quoted statement are "and its
program." B&P is surely correct in its assertion that the
program whereby B&P marketed the vaccine and GIV filled
the orders solicited by B&P competed with the pharmacists.
The SKB/GIV/B&P program, taken as a whole, offered a
package of marketing and distribution of the vaccine -- a
package that was equivalent to the package offered by the
consultant pharmacists. We agree with B&P that the
pharmacists' efforts to kill the SKB/GIV/B&P program
show that they viewed it as competition. And we agree with
B&P that the nursing homes' eagerness to abandon the
pharmacists in favor of the SKB/GIV/B&P program shows
that the package of goods and services offered by the
SKB/GIV/B&P program was reasonably interchangeable
with the package of goods and services offered by the
pharmacists. See, e.g., Brown Shoe Co. v. United States,
370 U.S. 294, 325 (1962) ("The outer boundaries of a
product market are determined by the reasonable
interchangeability of use or the cross-elasticity of demand
between the product itself and substitutes for it.").

But the question presented in this appeal is whether B&P
_________________________________________________________________

5. B&P does not contend that it was a consumer in the relevant market.

                   8
was in competition with the pharmacists, not whether "the
program" was. In order to hold that B&P was in competition
with the pharmacists, we would have to conclude that what
B&P offered was reasonably interchangeable with what the
pharmacists offered. We agree with the district court that
the record cannot support such a determination. B&P's role
in the program was limited to marketing the vaccine;
without GIV, there was no vaccine, only information about
it. Thus, the nursing homes (the consumers in the relevant
market here) were able to abandon the pharmacists in favor
of the SKB/GIV/B&P program, but they could not have
abandoned the pharmacists in favor of B&P alone. Doing so
would have left the pharmacists without the most
important part of the package of goods and services offered
by SKB, GIV, and B&P together: the vaccine itself.
Consequently, there was no cross-elasticity of demand as
between the pharmacists' offerings and B&P's offerings; no
matter how much the pharmacists raised the price of the
package of the goods and services that they offered, the
nursing homes could not have switched to B&P.6

B. Perhaps anticipating the above analysis, B&P
contends that "the fact that Barton & Pittinos worked with
GIV to provide some elements of the competing package
does not mean that Barton & Pittinos was not a competitor
of the consultant pharmacists." Appellant's Br. at 23
(emphasis added). We accept the basic premise of B&P's
argument, which is that market definition is not determined
by formal labels, but rather takes into account "the realities
of competition." Weiss v. York Hosp., 745 F.2d 786, 826 (3d
Cir. 1984). And we acknowledge that in defining markets
some courts "have recognized that a product should not be
excluded from a market because it requires an additional
input in order to be a reasonable substitute for other
products in the market." Bhan v. NME Hosp., Inc., 772 F.2d
1467, 1471 (9th Cir. 1985) (emphasis added). But we reject
_________________________________________________________________

6. B&P attempts to mask this defect in its argument by referring to the
program as the "Barton & Pittinos program" rather than the
SKB/GIV/B&P program. It thus asserts that "Barton & Pittinos offered
a better package at a lower price than the consultant pharmacists."
Appellant's Br. at 22. As explained in the text, this assertion is simply
untrue.

                    9
B&P's argument, because "the realities of competition" in
this case are that the nursing homes could not have
switched from the pharmacists to B&P alone and because
we do not believe that the product itself can fairly be
described as merely "an additional input."

The cases upon which B&P relies are readily
distinguishable. In Telex Corp. v. Int'l Business Mach. Corp.,
510 F.2d 894, 914-19 (10th Cir.), cert. dismissed, 423 U.S.
802 (1975), the court held that Telex's and IBM's computer
products were in the same market even though they were
incompatible, because the "interchange of these products"
was "easy and practicable." Similarly, in Bhan, the court
held that nurse anesthetists and M.D. anesthesiologists
competed in the same market even though nurse
anesthetists required the "input" of "the supervision of an
attending physician," because "such supervision is not only
easily obtainable but is actually a common practice in the
medical profession." 772 F.2d at 1471. In contrast, in this
case it is clear that the "additional input" required by B&P
-- if the vaccine itself can be so characterized -- was not
"easily obtainable" or "practicable." Indeed, B&P was legally
barred from buying, possessing, or selling the vaccine
because it lacked the required prescription-drug license. Cf.
Schuylkill, 113 F.3d at 415-16 (plaintiff could not show
antitrust injury where it was prohibited by law from
competing in the relevant market).

B&P relies most heavily on Yellow Pages Cost
Consultants, Inc. v. GTE Directories Corp., 951 F.2d 1158
(9th Cir. 1991). In that case, GTE, the defendant, published
telephone directories and sold advertisements in them.
Advertisers had a choice between purchasing
advertisements and advertising consulting services as a
package offered at one price by GTE or purchasing
advertising consulting services from the plaintiffs,
independent companies that placed ads with GTE. When
GTE ended its practice of allowing independent companies
to place ads, the plaintiffs remained free to sell advertising
consulting services, but their business suffered because
advertisers found it inconvenient to deal with the plaintiffs
once they could no longer place the ads as well. The Ninth
Circuit held that the plaintiffs had standing because they

                    10
competed with GTE in the market for yellow-pages
advertising consulting services. Id. at 1161-62.

Yellow Pages might help B&P if the court had held that
the plaintiffs competed with GTE in the market for sales of
yellow-pages advertising despite the fact that the plaintiffs
did not actually sell yellow-pages ads, but rather merely
information about yellow-pages ads. If such were the case,
the analogy to the instant case would be good: B&P, like
the Yellow Pages plaintiffs, offered marketing and
educational services concerning a product, but did not offer
the actual product itself. But this is not what the Yellow
Pages court held. The Ninth Circuit has reiterated in
subsequent cases that its holding in Yellow Pages was that
"the plaintiffs and defendants did compete in the same
market: the market for advising yellow page advertisers as
to the form, content, and cost of yellow page advertising."
Amarel v. Connell, 102 F.3d 1494, 1510 (9th Cir. 1997).
Accord American Ad Management, Inc. v. GTE Corp., 92
F.3d 781, 786 n.7 (9th Cir. 1996). Yellow Pages thus does
not provide a basis for holding that by marketing the
vaccine B&P competed in the market for the package of
marketing and distribution of the vaccine.7

B&P has not pointed us to, and we have been unable to
locate, any case holding that an advertiser or broker has
standing to sue for antitrust violations restraining trade in
the market for sales of the good or service advertised or
brokered. On the contrary, courts have held that
advertisers and brokers of a good or service are not
competitors of companies that actually supply the good or
service. See, e.g., Bodie-Rickett and Assoc. v. Mars, Inc., 957
F.2d 287, 290-91 (6th Cir. 1992); S.D. Collectibles, Inc. v.
Plough, Inc., 952 F.2d 211, 213 (8th Cir. 1992).8
_________________________________________________________________

7. B&P does not contend that a distinct market exists exclusively for the
marketing of the vaccine.

8. The district court, in reaching the same conclusion as we have, relied
on evidence such as the deposition of B&P's president James Pittinos, in
which Pittinos described B&P as an advertising and marketing agency
which did not compete with wholesalers and pharmacists. See 942 F.
Supp. at 237.

                    11
We therefore conclude that B&P did not compete with the
pharmacists in the market for the package of marketing
and distribution of the vaccine. Because B&P was thus not
a competitor or a consumer in the market in which trade
was allegedly restrained by the antitrust violations pled by
B&P, we hold that B&P's alleged injury is not "antitrust
injury," meaning injury "of the type that the antitrust
statute was intended to forestall." AGC, 459 U.S. at 539.
Accordingly, we agree with the district court's
determination that B&P lacked standing to institute this
private treble-damages action.9

IV.

For the foregoing reasons, we affirm the judgment of the
district court.

A True Copy:
Teste:

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



_________________________________________________________________

9. Because B&P fails the antitrust injury requirement, it would lack
standing even if the other AGC/Lake Erie factors favored it. We therefore
need not address the district court's findings that there were more direct
victims of the alleged conspiracy than B&P and that B&P's claims
presented a danger of complex apportionment of damages. See 942 F.
Supp. at 238. In light of our affirmance of the grant of summary
judgment to SKB on B&P's antitrust claim, we affirm as well the district
court's decision not to exercise supplemental jurisdiction over B&P's
state law claims. B&P may properly pursue its contractual claims
against SKB in state court.

                    12
