                                                                                                                           Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


5-30-2000

In Re: Warfarin Sodium Anti-trust Case
Precedential or Non-Precedential:

Docket 99-5034




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Recommended Citation
"In Re: Warfarin Sodium Anti-trust Case" (2000). 2000 Decisions. Paper 111.
http://digitalcommons.law.villanova.edu/thirdcircuit_2000/111


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Filed 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 10017
Pamela 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

                          2
       George 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, anxious
to purchase its generic equivalent, ask us to determine if
complaints filed by them sufficiently state a claim for
injunctive relief under section 16 of the Clayton Act against
Coumadin's manufacturer. We find that in dismissing the
complaints under Fed. R. Civ. P. 12(b)(6), the District Court
improperly referred to matters beyond the complaints and
did not correctly analyze the legal standard for antitrust
standing. For these reasons, we will reverse and remand.

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 drug
because, as the parties stipulated, too little a dose can lead
to a stroke or cardiac arrest and too much can cause
internal bleeding.
_________________________________________________________________

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

                               3
The defendant, DuPont Pharmaceuticals Company,
manufactures Coumadin. Although the patent protection
for Coumadin expired in April 1962, DuPont has dominated
the oral anti-coagulant market for over 30 years. Until one
of the plaintiffs to this action, Barr Laboratories, Inc.,
introduced its generic tablets, no equivalent product
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 generic
substitute for Coumadin, orchestrated a campaign
disparaging generic substitutes generally, and Barr
Laboratories' warfarin sodium particularly. The cumulative
effect of these attacks was to raise Barr Laboratories' cost
to enter the anti-coagulant market and to disable its
market penetration. The by-product claim brought by the
individual plaintiffs is that, due to DuPont's effort to derail
generic competition, they have paid inflated prices for
Coumadin.

The specific allegations of DuPont's anti-competitive
activity in the relevant market concern DuPont's attempt to
prevent and/or delay Food and Drug Administration
approval of warfarin sodium in a generic form, publication
and dissemination of false and misleading information to
the public regarding generic warfarin sodium, undertaking
aggressive public relations efforts involving the circulation
of deceptive information and increasing Coumadin's
marketing efforts by feeding misinformation to doctors and
other medical professionals.

Citing these unlawful attempts to monopolize, Barr
Laboratories filed suit against DuPont, alleging various
antitrust law violations. Barr Laboratories also asserted
claims under the Lanham Act, New York state law and
common law. Four named individuals, each claiming to
represent a nationwide class of 1.8 million Coumadin
users, filed separate complaints for monetary damages and
injunctive relief, alleging that DuPont violated section 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.

                               4
DuPont filed a motion to dismiss both Barr Laboratories'
and the class plaintiffs' claims for failure to state a claim
upon which relief could be granted under Fed. R. Civ. P.
12(b)(6).

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

The only issue relevant to this appeal is the District
Court's decision that the class plaintiffs lack standing to
seek injunctive relief under section 16 of the Clayton 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 unlawful
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 have
standing to request injunctive relief.

Our jurisdiction to review this dismissal is authorized by
28 U.S.C. S 1291.

II.

Rule 12(b)(6)

We first explore whether the District Court erroneously
considered matters beyond the scope of the complaints 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 under
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 granted
only if "after accepting as true all of the facts alleged in the
complaint, and drawing all reasonable inferences in the
plaintiff 's favor, no relief could be granted under any set of
facts consistent with the allegations in the complaint."
_________________________________________________________________

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

                                5
Trump Hotels and Casino Resorts, Inc. v. Mirage Resorts,
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 impermissibly
cited and relied on facts beyond the corners of the
complaints. Excerpts from the District Court opinion
illustrate this point:

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

       * * *

       If defendants' monopolization of the oral anticoagulant
       market resulted in supracompetitive prices for
       Coumadin, the insurance and third party payor
       organizations most likely absorb some or all of that
       overcharge.

       * * *

       Moreover, the sheer variety of third party payor plans
       would render the apportionment of damages among the
       class plaintiffs incredibly complex.

(Emphasis added.)

While these factors loomed large in the District Court's
conclusion regarding the absence of a significant nexus
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 on the
price paid for Coumadin. The complaints instead alleged
that the class members paid inflated prices for Coumadin
because DuPont thwarted the generic's market entry. The
District Court should have accepted this as true, analyzed
if DuPont's preclusive conduct was violative of antitrust
laws, and then decided whether to dismiss the complaints.
Instead, in granting the motion, the District Court
considered facts gleaned from counsel's argument and from
its own experience, factors not contemplated by the dictates
of Rule 12(b)(6).

                               6
DuPont submits a number of reasons why the District
Court's consideration of factual assumptions de hors the
complaints were properly considered. DuPont urges that
the allegations concerning third party payors are within
everyday knowledge and that the District Court could easily
infer the presence of such entities from the pleadings.
Alternatively, DuPont asserts that the District Court could
take judicial notice of such facts. These contentions are not
persuasive. First, Rule 12(b)(6) instructs that the District
Court draw inferences in favor of plaintiffs, not the
proponent of the motion. Second, the types of facts of
which courts take judicial notice are of a different 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 Coumadin.
A judicially noticed fact is "one not subject to reasonable
dispute in that it is either (1) generally known . .. . or (2)
capable of accurate and ready determination" through
unquestionably reliable sources. See Fed. R. Evid. 201(b);
United States v. Carr, 25 F.3d 1194, 1202 n.3 (3d Cir.
1994). The facts cited by the District Court concerning third
party payors not contained in the complaints do notfit the
criteria of Rule 201(b).

Because these findings were integral to the District
Court's standing decision, we must now determine whether
the District Court's erroneous application of Rule 12(b)(6)
caused a misinterpretation of the substantive standing
issue.

III.

Section 16 Antitrust Standing

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

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

                                7
       against threatened conduct that will cause loss 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 Clayton Act.
While relief sought pursuant to section 4 of the Clayton Act
requires proof of loss and any damages proven are trebled,
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 proceeding
under section 16 must, however, still demonstrate that the
injury in question is "injury of the type the antitrust laws
were intended to prevent." Brunswick Corp. v. Pueblo Bowl-
O-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 beyond
speculation and, that if there is cognizable damage, the
plaintiff is the appropriate person to assert it for antitrust
purposes. Associated General Contractors, Inc. v. California
State Council of Carpenters, 459 U.S. 519, 538 (1983),
("Associated General"). Section 16 is not as demanding, but
it does require a showing that there is "a significant 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 thefive
Associated General factors: (1) the causal connection
between the antitrust violation and the harm to the
plaintiff; (2) whether the plaintiff 's alleged injury is of the
type that the antitrust laws were intended to redress; i.e.,
did the plaintiff suffer antitrust injuries; (3) the directness
of the injury; (4) the existence of more direct victims of the
violation; and (5) the potential for duplicative recovery or
complex apportionment of damages. 459 U.S. at 535-46.

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

                                8
managed care on what consumers pay for prescription
drugs as reasons for holding that the class plaintiffs'
alleged injury and DuPont's alleged conduct was too
attenuated to justify antitrust standing. Specifically, the
District Court opined that the class plaintiffs' ability to
trace their overpayment to the alleged anticompetitive
conduct " `traverses several somewhat vaguely defined
links.' AGC, 456 U.S. at 540." The District Court thus
concluded that the case described a "typical indirect
purchaser scenario" and that, from the complaints, "it was
unclear whether the class suffered any antitrust injury at
all."

As to the class plaintiffs' request for injunctive relief
under section 16, the District Court summarily concluded,
by relying upon its section 4 discussion, that the class had
not sufficiently alleged the required antitrust injury or the
causal connection between DuPont's alleged unlawful
activity and their purported injury. Thus, the District Court
decided that the class failed to allege injury of the type the
Sherman Act was designed to prevent; the class, therefore,
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 relief 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 influences the
question of standing as it relates to indirect purchaser
status:

       in contrast to the treble damage action, a claim for
       injunctive relief does not present the countervailing
       considerations -- such as the risk of duplicative or
       ruinous recoveries and the spectre of a trial burdened
       with complex and conjectural economic analyses --
       that the Supreme Court emphasized when limiting the
       availability of treble damages.

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

                                9
Schoenkopf v. Brown & Williamson Tobacco Corp., 637 F.2d
205, 210 (3d Cir. 1980) (Section 16 relief more
encompassing because language is less restrictive than
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 injunctive relief
requiring the demonstration of: (1) threatened loss or injury
cognizable in equity; (2) proximately resulting from the
alleged antitrust injury. See McCarthy v. Recordex Service,
Inc., 80 F.3d 842, 856 (3d Cir. 1996). The narrow question
before us then is whether the allegations of the class
members' complaints, that DuPont's conduct precluded
competition which caused Coumadin users to pay inflated
prices for the drug, meet this standard.

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

In deciding McCready, the Supreme Court addressed the
relationship between the indirect purchaser doctrine and
antitrust injury. The Court stated that whether a particular
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 particular
anticompetitive conduct as unlawful. Id. at 476-78. The
Court first determined that, in the absence of a risk of
duplicative recovery, a plaintiff is not barred from bringing
a claim under section 4 if he is a foreseeable victim of the
antitrust violation. Id. at 475. Then the Court decreed that
McCready's injury was "inextricably intertwined with 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 unlawful
restraint on competition in the market, and McCready is

                               10
thus instructive. First, McCready reinforces our holding in
McCarthy that the Coumadin class cannot be barred from
bringing suit simply based on its indirect purchaser status.
McCready held that due to the absence of duplicative
recovery, McCready and her class could maintain their suit
for treble damages. Similarly, here, there is no risk of
duplicative recovery because the class only seeks section 16
injunctive relief.

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

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

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

The authority of McCarthy v. Recordex, 80 F.3d at 845,

                               11
strongly supports a favorable standing determination. In
McCarthy, the plaintiffs had complained that they paid
inflated prices for photocopies of their medical records due
to a conspiracy between hospitals and copy centers to
inflate the cost of records. The plaintiffs were clients 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 distribution as
too attenuated to support a finding of causation. 3

Finally, decisions from our court which negated antitrust
standing are distinguishable. In City of Pittsburgh v. West
Penn Power Co., 147 F.3d 256 (3d Cir. 1998), the city
brought suit against two electric companies seeking
damages and an injunction precluding the merger of the
companies. The City claimed that the merger would void
the possibility of lower-priced electric service charged to city
residents. We held that the City's injunctive relief claim
failed to meet section 16 standing requirements due to a
lack of causal connection between the defendant's injuries
and the alleged harm and because of the absence of
antitrust injury. We arrived at this conclusion, however,
because an intervening regulatory scheme precluded the
companies from competing, i.e., the merger was not the
cause of the injury. No significant antitrust injury 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 would
have eradicated competition, a result prohibited under the
Clayton Act, and detrimental to the City's electrical
customers.

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

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

                               12
remote from the tobacco company's antitrust activity to
satisfy the Associated General causal connection
requirement, because the tobacco companies could have
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 to the
smokers in Steamfitters. DuPont's efforts to keep the
generic drug off the market emanate from the fact that the
introduction of the generic product would force down the
price paid for the anti-coagulant. The higher prices paid
were the raison d'etre of DuPont's antitrust conduct.

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

IV.

We will reverse the order of the District Court dismissing
the class complaints based on lack of antitrust standing
and remand for continued proceedings.

A True Copy:
Teste:

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

                                13
