Hartig Drug Co Inc v. Senju Pharmaceutical Co Ltd , 836 F.3d 261 ( 2016 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 15-3289
_____________
HARTIG DRUG COMPANY INC., on behalf of itself
and all others similarly situated,
Appellant
v.
SENJU PHARMACEUTICAL CO. LTD.; KYORIN
PHARMACEUTICAL CO. LTD.;
ALLERGAN INC.
_______________
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-14-cv-00719)
District Judge: Hon. Sue L. Robinson
_______________
Argued
June 13, 2016
Before: AMBRO, JORDAN, and GREENBERG, Circuit
Judges
(Filed: September 7, 2016)
_______________
J. Clayton Athey
Prickett Jones & Elliott
1310 King Street
P.O. Box 1328
Wilmington, DE 19899
Brent W. Landau [ARGUED]
Hausfeld
325 Chestnut – Ste. 900
Philadelphia, PA 19106
Counsel for Appellant
Stephen B. Brauerman
The Bayard Firm
222 Delaware Avenue – Ste. 900
Wilmington, DE 19801
William F. Sondericker
Carter Ledyard & Milburn
2 Wall Street
New York, NY 10005
Counsel for Appellee Senju Pharmaceutical Co. Ltd.
Sara Kusiak
Jones Day
250 Vesey Street
New York, NY 10281
2
Rosanna K. McCalips
Kevin D. McDonald
Jones Day
51 Louisiana Avenue, NW
Washington, DC 20001
David E. Ross
Benjamin J. Schladweiler
Ross Aronstam & Moritz
100 South West Street - #400
Wilmington, DE 19801
Counsel for Kyorin Pharmaceutical Co. Ltd.
Ashley E. Johnson
M. Sean Royall [ARGUED]
Gibson Dunn & Crutcher
2100 McKinney Avenue – Ste. 1100
Dallas, TX 75201
Mark A. Perry
Lucas C. Townsend
Gibson Dunn & Crutcher
1050 Connecticut Avenue, NW – 9th Fl.
Washington, DC 20036
Counsel for Appellee Allergan Inc.
Scott E. Perwin
Kenny Nachwalter
1441 Brickell Avenue – Ste. 1000
Miami, FL 33131
3
Counsel for Amicus Appellants
Walgreen Co., Safeway, Inc., Kroger Co.,
HEB Grocery Co. LP, Albertsons LLC
Barry L. Refsin
Hangley Aronchick Segal Pudlin & Schiller
One Logan Square
18th & Cherry Sts. – 27th Fl.
Philadelphia, PA 19103
Counsel for Amicus Appellant
Rite Aid Corp.
_______________
OPINION OF THE COURT
_______________
JORDAN, Circuit Judge
This appeal arises from a putative class action in which
Hartig Drug Company Inc. (“Hartig”) filed a complaint
against Senju Pharmaceutical Co., Ltd. (“Senju”), Kyorin
Pharmaceutical Co., Ltd. (“Kyorin”), and Allergan Inc.
(“Allergan”) (collectively, the “Defendants”), alleging
antitrust violations involving medicated eyedrops
manufactured by the Defendants. Hartig argues that the
Defendants’ wrongful suppression of generic competition
resulted in supracompetitive pricing of those eyedrops.
Although not a direct purchaser of the medications, Hartig
claims it has standing to sue because of an assignment of
4
rights from AmerisourceBergen Drug Corporation
(“Amerisource”) which is a direct purchaser.
The District Court dismissed Hartig’s complaint under
Federal Rule of Civil Procedure 12(b)(1) for lack of subject
matter jurisdiction. In its opinion, the Court ruled that an
anti-assignment clause in a distribution agreement between
Allergan and Amerisource barred any assignment of antitrust
claims from Amerisource to Hartig, leaving Hartig without
standing to sue and divesting the Court of subject matter
jurisdiction. We conclude that the District Court erred in
treating antitrust standing as an issue of subject-matter
jurisdiction. Accordingly, we will vacate and remand for
further proceedings.
I. BACKGROUND
A. Factual Background1
Kyorin researchers developed an antibiotic called
gatifloxacin and, in 1990, were awarded a patent on the drug.
In 1997, Kyorin licensed Senju to develop, manufacture, and
commercialize ophthalmic solutions containing gatifloxacin.
Later, in 2001, Senju researchers obtained U.S. Patent No.
6,333,045 (the “’045 Patent”) claiming aqueous liquid
pharmaceutical compositions containing gatifloxacin and
1
As explained in greater detail hereafter, it was error
for the District Court to dismiss the action under Rule
12(b)(1). Treating the motion to dismiss as one under Rule
12(b)(6), we recount the facts as alleged by the non-movant,
Hartig, accepting them as true. Fowler v. UPMC Shadyside,
578 F.3d 203, 210 (3d Cir. 2009).
5
methods of utilizing them. The named inventors on that
patent assigned their rights to Kyorin and Senju jointly.
Kyorin and Senju also “licensed to Allergan the right –
including a license under the ’045 [P]atent – to market
aqueous liquid gatifloxacin ophthalmic products in the United
States.” (A33.) Allergan filed New Drug Applications
(“NDAs”) with the Food and Drug Administration for a 0.3%
gatifloxacin solution (branded “Zymar”), and for a 0.5%
gatifloxacin solution (branded “Zymaxid”); those NDAs were
approved in 2003 and 2010 respectively. Amerisource
subsequently began purchasing Zymar and Zymaxid eyedrops
directly from the Defendants and selling them to Hartig, an
Iowa-based drug store chain.
Hartig alleged that the Defendants engaged in a
number of illegal practices to prevent or delay the
introduction into the market of generic alternatives to Zymar
and Zymaxid.2 First, the Defendants filed a baseless lawsuit
against another pharmaceutical company, Apotex, claiming
patent infringement and delaying FDA approval of that
company’s generic version of Zymar. Next, the Defendants
engaged in so-called “product hopping” (A35) – discouraging
doctors from prescribing generic alternatives to the original
0.3% Zymar eyedrops by phasing out that product in favor of
“new” 0.5% Zymaxid eyedrops. To buy time for that shift in
marketing strategy, the Defendants prolonged the Apotex
2
We deliberately refer to the Defendants collectively
in describing the alleged anticompetitive conduct, as Hartig
claims that all the Defendants, and not merely Allergan,
engaged in such conduct.
6
litigation by filing a frivolous motion for a new trial. They
also asked the United States Patent and Trademark Office to
reexamine claims of the ’045 Patent, but failed to disclose
material information both from the trial record in the Apotex
case and from their own expert that undermined their
reexamination claims. After the FDA approved Apotex’s
0.3% gatifloxacin eyedrops, the Defendants sued Apotex a
second time. Although the courts ultimately held that the
Defendants’ suit was barred by claim preclusion, Apotex was
deterred from launching a generic competitor to Zymar.
Since then, the Defendants have filed numerous lawsuits
against competing drug manufacturers to bar the market entry
of generic equivalents to both Zymar and Zymaxid.
B. Procedural Background
Hartig filed its complaint in the United States District
Court for the District of Delaware on June 6, 2014. Styled as
a class action, the complaint alleged that, were it not for the
Defendants’ violations of the Sherman Antitrust Act, generic
versions of the gatifloxacin eyedrops would have been sold
after Kyorin’s patent on gatifloxacin expired in 2010.3 Hartig
alleged that the “Defendants’ unlawful scheme effectively
denied direct purchasers of Zymar and Zymaxid the benefits
3
The complaint alleges that Apotex, when it filed its
Abbreviated New Drug Application (“ANDA”) for a 0.3%
gatifloxacin ophthalmic solution, certified that it would not
market that product until Kyorin’s patent expired on June 15,
2010, and Apotex notified the Defendants that its proposed
ANDA product would not infringe on any valid claim of the
separate ’045 Patent. The complaint also alleges that the
Defendants knew that the claims of the ’045 Patent were
invalid as obvious.
7
of competition and of less expensive, generic versions. As a
result, [Hartig] and members of the Class … have paid
supracompetitive prices for Zymar and Zymaxid and
[Zymaxid’s] generic equivalent[].”4 (A24.)
The complaint acknowledged that Hartig was only an
indirect purchaser of the two gatifloxacin products and that
Hartig obtained the products through Amerisource, a direct
purchaser. That point was – and is – significant because,
under the so-called “direct purchaser rule” recognized in
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), a direct
purchaser of a product has standing to sue under federal
antitrust statutes whereas an indirect purchaser does not.
Nevertheless, the complaint alleged that Amerisource had
entered an assignment agreement with Hartig that
conveyed, assigned, and transferred to Hartig all
of its rights, title and interest in and to all causes
of action it may have against Defendants under
the antitrust laws of the United States or of any
state arising out of or relating to Amerisource’s
purchase of Zymar and Zymaxid to the extent
4
Specifically, Hartig alleged that “Defendants’
anticompetitive actions delayed the entry of any generic
competition from the market for over three years (at least
from June 15, 2010 until October 3, 2013), and has limited
generic competition even today to a single generic competitor
offering a generic to Zymaxid only.” (A48.)
8
such product was subsequently resold to Hartig
… .5
(A24-25 ¶ 9.)
Allergan responded to Hartig’s suit by filing a motion
to dismiss under Federal Rule of Civil Procedure 12(b)(1) for
lack of subject matter jurisdiction. Kyorin and Senju jointly
filed a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6) for failure to state a claim.6 Allergan’s
12(b)(1) motion argued that Hartig lacked “[s]tanding to sue
under the antitrust laws” because an anti-assignment clause in
the Distribution Services Agreement (“DSA”) that Allergan
had with Amerisource expressly prohibited either party from
assigning the agreement or related rights and obligations
without prior written consent from the other party. Hartig v.
Senju, et al., D. Del., CA No. 14-719-SLR Docket Item
5
The Defendants contend that Hartig failed to
establish the existence of the assignment agreement.
Because, as we ultimately conclude, the District Court should
have considered Allergan’s motion to dismiss under Rule
12(b)(6) rather than Rule 12(b)(1), the Court was obligated to
accept the complaint’s factual allegations as true and view
them in the light most favorable to Hartig. See Foglia v.
Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 n.1 (3d Cir.
2014). Thus, even without the introduction of a written copy
of the assignment agreement, the complaint’s allegation that
an assignment of antitrust rights had occurred suffices at this
stage of the proceedings.
6
Allergan subsequently joined that 12(b)(6) motion as
well.
9
(“D.I.”) 15, at 4; see id., at 5-9. The DSA is not mentioned in
Hartig’s complaint, but it was appended to Allergan’s motion
to dismiss as an exhibit to a declaration from one of
Allergan’s corporate officers, a Mr. Kafer. The anti-
assignment clause of the DSA provides as follows:
This Agreement may not be assigned by either
party without the prior written consent of the
other party. Notwithstanding the foregoing,
either party may assign its rights and
obligations hereunder without the consent of the
other party to a subsidiary or affiliate or to an
entity which purchases all or substantially all of
the assigning party’s stock or assets or acquires
control of the assigning party, whether by
merger, consolidation or any other means.
(A108-109 § 14.b.) The Kafer declaration stated that Hartig
was not a direct purchaser from Allergan and that
Amerisource had not sought or obtained written consent from
Allergan for the alleged assignment, as purportedly required
by the DSA’s anti-assignment clause.
After briefing on both the 12(b)(1) and 12(b)(6)
motions, the District Court granted Allergan’s 12(b)(1)
motion and, in an order dated August 19, 2015, dismissed the
action for lack of subject matter jurisdiction. The District
Court relied on the anti-assignment clause in the DSA to
conclude that Hartig lacked standing, reasoning that the
clause’s prohibition applied to antitrust claims and therefore
barred the assignment of the very claims on which Hartig’s
standing relied. Hartig timely appealed. Later, a group of
10
seven drug retailers joined the appeal as amici curiae in
support of Hartig.7
II. DISCUSSION8
A. The Appropriateness of Review under Rule
12(b)(1)
The parties have not challenged the District Court’s
decision to address antitrust standing as a question of subject
matter jurisdiction. Rather, it is the amici who contend that
Allergan’s anti-assignment argument implicated only antitrust
standing and that such standing is different from Article III
standing, so that the District Court’s subject matter
jurisdiction has never been rightly in question.
An amicus normally “cannot expand the scope of an
appeal with issues not presented by the parties on appeal,”
Nuveen Mun. Tr. ex rel. Nuveen High Yield Mun. Bond Fund
7
The amici are Walgreen Co., The Kroger Co.,
Safeway Inc., Albertson’s LLC, HEB Grocery Company LP,
CVS Health Corporation, and Rite Aid Corporation.
8
The District Court’s subject matter jurisdiction is the
primary issue in this appeal. We have appellate jurisdiction
to review the final decision of the District Court pursuant to
28 U.S.C. § 1291. The question of whether the District Court
had subject matter jurisdiction is an issue of law that we
review de novo. In re Phar-Mor, Inc. Sec. Litig., 172 F.3d
270, 273 (3d Cir. 1999). Likewise, the determination of a
contract’s legal effect is a question of law subject to plenary
review. Ram Constr. Co. v. Am. States Ins. Co., 749 F.2d
1049, 1053 (3d Cir. 1984).
11
v. WithumSmith Brown, P.C., 692 F.3d 283, 300 n.10 (3d Cir.
2012), at least not “in cases where the parties are competently
represented by counsel,” id. (quoting Universal City Studios,
Inc. v. Corley, 273 F.3d 429, 445 (2d Cir. 2001)). And yet,
federal courts “have an independent obligation to determine
whether subject-matter jurisdiction exists, even in the absence
of a challenge from any party.” Arbaugh v. Y&H Corp., 546
U.S. 500, 514 (2006); see also id. (affirming that “subject
matter jurisdiction, because it involves a court’s power to
hear a case, can never be forfeited or waived”) (internal
quotation marks omitted). A court’s non-waivable obligation
to inquire into its own jurisdiction is most frequently
exercised in the negative – that is, by questioning whether
federal jurisdiction exists even when all parties assume that it
does. But “federal courts [also] have a strict duty to exercise
the jurisdiction that is conferred upon them by Congress,”
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996),
and “have no more right to decline the exercise of jurisdiction
which is given, than to usurp that which is not,” id. (quoting
Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821)).
“[S]ubject-matter delineations must be policed by the courts
on their own initiative,” irrespective of whether that policing
of jurisdictional authority is voiced in the positive or the
negative. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574,
583 (1999). Thus, regardless of the acquiescence or wishes
of the parties, we must question whether the District Court
properly treated antitrust standing as a jurisdictional issue
under Rule 12(b)(1).
We recently confronted a similar jurisdictional issue –
presented in a similar posture – in Group Against Smog and
Pollution, Inc. v. Shenango Inc., 810 F.3d 116 (3d Cir. 2016).
In that case, the District Court treated the “diligent
12
prosecution” bar of 42 U.S.C. § 7604(b)(1)(B) as a limitation
on its subject matter jurisdiction, and therefore dismissed the
action under Rule 12(b)(1). Id. at 121. On appeal, amici
curiae “raise[d] the issue of whether the diligent prosecution
bar is jurisdictional and appropriately decided through a Rule
12(b)(1) motion to dismiss for lack of subject matter
jurisdiction, or whether the diligent prosecution bar is
nonjurisdictional and should be decided through a Rule
12(b)(6) motion to dismiss for failure to state a claim.” Id. at
122. We noted that the appellants themselves had not raised
that argument but had proceeded under the assumption that
the bar was jurisdictional. Id. at 122 n.5. Nevertheless, we
affirmed our independent obligation to “raise and decide
jurisdictional questions that the parties either overlook or
elect not to press,” id. (quoting Henderson ex rel. Henderson
v. Shinseki, 562 U.S. 428, 434 (2011)), an obligation made all
the more significant because “branding a rule as going to a
court’s subject-matter jurisdiction alters the normal operation
of our adversarial system,” id. at 122 (internal quotation
marks and brackets omitted). We ultimately concluded that
the District Court erred in treating the diligent prosecution bar
as a jurisdictional limitation, and therefore should have dealt
with the motion to dismiss under Rule 12(b)(6) rather than
Rule 12(b)(1). Id. at 132.
Similarly, the amici here argue that the District Court
erred by addressing Allergan’s motion to dismiss as a factual
challenge to jurisdiction under Rule 12(b)(1), and that the
Court should have addressed the motion under Rule 12(b)(6)
for failure to state a claim. The distinction between Rules
12(b)(1) and 12(b)(6) is important because the 12(b)(6)
standard affords significantly more protections to a
nonmovant. “In deciding a Rule 12(b)(6) motion, a court …
13
consider[s] only the complaint, exhibits attached to the
complaint, matters of public record, as well as undisputedly
authentic documents if the complainant’s claims are based
upon these documents.” Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010). Moreover, the court is “required to
accept as true all allegations in the complaint and all
reasonable inferences that can be drawn from them after
construing them in the light most favorable to the
nonmovant.” Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d
153, 154 n.1 (3d Cir. 2014) (quotation marks and citations
omitted).
A Rule 12(b)(1) attack can be a very different matter.
A facial 12(b)(1) challenge, which attacks the complaint on
its face without contesting its alleged facts, is like a 12(b)(6)
motion in requiring the court to “consider the allegations of
the complaint as true.” Petruska v. Gannon Univ., 462 F.3d
294, 302 n.3 (3d Cir. 2006) (internal quotation marks
omitted). But a factual 12(b)(1) challenge attacks allegations
underlying the assertion of jurisdiction in the complaint, and
it allows the defendant to present competing facts.
Constitution Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d
Cir. 2014). When considering a factual challenge, “the
plaintiff [has] the burden of proof that jurisdiction does in fact
exist,” the court “is free to weigh the evidence and satisfy
itself as to the existence of its power to hear the case,” and
“no presumptive truthfulness attaches to [the] plaintiff’s
allegations … .” Mortensen v. First Fed. Sav. & Loan Ass’n,
549 F.2d 884, 891 (3d Cir. 1977). And, when reviewing a
factual challenge, “a court may weigh and consider evidence
outside the pleadings.” Constitution Party of Pa., 757 F.3d at
358 (internal quotation marks omitted). Therefore, a 12(b)(1)
factual challenge strips the plaintiff of the protections and
14
factual deference provided under 12(b)(6) review. See, e.g.,
Davis v. Wells Fargo, 824 F.3d 333, 348-50 (3d Cir. 2016).
In arguing the motions to dismiss in the District Court,
no one questioned whether Allergan’s attack on Hartig’s
antitrust standing should have been brought under Rule
12(b)(6) instead of as a matter of subject-matter jurisdiction
under Rule 12(b)(1). As mentioned above, it is the amici who
have raised the question on appeal. Remarkably, Hartig
neglects to address the argument at all, except to
acknowledge that the amici have raised it. Even at oral
argument, when squarely faced with the question, Hartig’s
counsel did not ask for consideration under 12(b)(6) but
voiced an apparent preference to confront Allergan’s 12(b)(1)
challenge head-on – that is, by reaching the issue of whether
the DSA precluded the assignment of Amerisource’s antitrust
causes of action. Nevertheless, in keeping with our
independent obligation to consider the boundaries of subject
matter jurisdiction, we conclude that the District Court should
have treated antitrust standing not as an Article III
jurisdictional issue, but rather as a merits issue, and thus
should have resolved the motion to dismiss under Rule
12(b)(6) rather than Rule 12(b)(1).
B. Article III Standing versus Antitrust
Standing
To meet the “irreducible constitutional minimum” of
Article III standing, a plaintiff invoking federal jurisdiction
bears the burden of establishing three elements, as set forth in
the now familiar case of Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992). First, it must establish that it has
suffered an “injury in fact,” meaning a concrete and
15
particularized invasion of a legally protected interest. Id.
Second, it must establish a “causal connection between the
injury and the conduct complained of – the injury has to be
fairly traceable to the challenged action of the defendant, and
not the result of the independent action of some third party
not before the court.” Id. (internal quotation and editorial
marks omitted). Third, it must show a likelihood “that the
injury will be redressed by a favorable decision.” Id. at 561
(internal quotation marks omitted). Article III standing is
essential to federal subject matter jurisdiction and is thus “a
threshold issue that must be addressed before considering
issues of prudential standing.” Miller v. Nissan Motor
Acceptance Corp., 362 F.3d 209, 221 n.16 (3d Cir. 2004)
(citation omitted).
In a case like this, even after a plaintiff has established
Article III standing, antitrust standing remains as a
prerequisite to suit, “‘focus[ing] on the nature of the
plaintiff’s alleged injury,’ [and] asking ‘whether it is of the
type that the antitrust statute was intended to forestall.’”
Barton & Pittinos, Inc. v. SmithKline Beecham Corp., 118
F.3d 178, 181 (3d Cir. 1997) (quoting Associated Gen.
Contractors of Cal., Inc. v. Cal. State Council of Carpenters,
459 U.S. 519, 538, 540 (1983)).
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. … Therefore, the plaintiff might
be able to sue under a different statute or
common law rule … but the plaintiff [would
16
have] no standing to sue under the antitrust
laws.
Id.
That Article III standing and antitrust standing both
employ the term “standing” tends to confuse matters. The
two concepts are distinct, with the former implicating a
court’s subject matter jurisdiction and the latter affecting only
the plaintiff’s ability to succeed on the merits. In Ethypharm
S.A. France v. Abbott Laboratories, we explained that Article
III standing is of constitutional and hence jurisdictional
consequence, while antitrust standing is not:
Constitutional standing is augmented by
consideration of prudential limitations. For
plaintiffs suing under federal antitrust laws, one
of the prudential limitations is the requirement
of antitrust standing. It does not affect the
subject matter jurisdiction of the court, as
Article III standing does, but prevents a plaintiff
from recovering under the antitrust laws.
707 F.3d 223, 232 (3d Cir. 2013) (internal quotation marks,
footnotes, and citations omitted). The difference between
Article III standing and antitrust standing is apparent from the
Supreme Court’s explanation of the direct purchaser rule in
Illinois Brick, which recognized that, although indirect
purchasers “may have been actually injured by antitrust
violations” through passed-on overcharges, the “legislative
purpose[s]” underlying the antitrust statutes would still be
better served by limiting recovery to the direct purchasers
paying those overcharges in the first instance. 431 U.S. at
746; see generally id. at 737-47. Thus, the direct purchaser
rule represents a policy decision intended to aid the purposes
17
of the antitrust statutes and does not speak to whether there is
an Article III case or controversy.
Sometimes antitrust standing is discussed in terms of
“statutory standing.” See Sullivan v. DB Invs., Inc., 667 F.3d
273, 307 n.35 (3d Cir. 2011) (en banc) (clarifying that the
term “statutory standing” refers “to the possession of a viable
claim or right to relief, not to a jurisdictional requirement”).
Again, however, labels can be misleading. A lack of
“statutory standing” means the absence of a valid cause of
action under a statute, but it “does not implicate subject-
matter jurisdiction, i.e., the court’s statutory or constitutional
power to adjudicate the case.” Lexmark Int’l, Inc. v. Static
Control Components, Inc., 134 S. Ct. 1377, 1387 n.4 (2014)
(original emphasis) (internal quotation marks omitted).
“Accordingly, statutory standing is simply another element of
proof for an antitrust claim, rather than a predicate for
asserting a claim in the first place.” Sullivan, 667 F.3d at
307. In the end, it does not matter “whether the [antitrust]
standing inquiry is characterized as ‘prudential’ or ‘statutory’
… because neither deprives us of Article III jurisdiction and
both bar a plaintiff’s ability to recover.” Ethypharm, 707
F.3d at 232 n.17.
At oral argument before us, the Defendants continued
to press the position that the DSA’s anti-assignment clause
implicated Article III standing. But that is simply not so.
Allergan’s motion to dismiss under Rule 12(b)(1) was always
premised, at bottom, on Hartig’s purported lack of antitrust
standing. True, Allergan framed its 12(b)(1) motion in terms
of Article III standing, referring to the “case-or-controversy
requirement of Article III.” D.I. 15, at 4 (quoting Lujan, 504
U.S. at 560). But the substance of Allergan’s argument
18
focused solely on the Supreme Court’s holding in Illinois
Brick that an indirect purchaser lacks “[s]tanding to sue under
the antitrust laws.”9 Id.
We have repeatedly interpreted Illinois Brick and its
progeny as addressing not the threshold question of whether
an indirect purchaser has Article III standing to sue in federal
court at all, but rather the subsequent question of whether
such a purchaser has standing to recover under federal
antitrust statutes. See, e.g., Warren Gen. Hosp. v. Amgen
Inc., 643 F.3d 77, 79 (3d Cir. 2011) (“In Illinois Brick, the
Supreme Court held that only direct purchasers have standing
under Section 4 of the Clayton Act.”); Howard Hess Dental
Labs. Inc. v. Dentsply Int’l, Inc., 424 F.3d 363, 366 n.2 (3d
Cir. 2005) (“Illinois Brick determined that direct purchasers
are the only parties ‘injured’ in a manner that permits them to
recover damages. It thus held that indirect purchaser
plaintiffs do not have statutory standing to recover damages
under Section 4 of the Clayton Act.”) (internal citations
omitted); Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d
958, 963 (3d Cir. 1983) (identifying Illinois Brick as
9
Indeed, Allergan’s legal argument on this point was
as follows:
Standing to sue under the antitrust laws is
limited to parties that were direct purchasers of
the product at issue. Ill. Brick, 431 U.S. at 746.
Indirect purchasers – that is, parties who
allegedly paid an overcharge that was passed on
by a party that made a purchase directly from
the defendants – lack standing.
D.I. 15, at 4-5.
19
recognizing “that there are certain classes of plaintiffs who,
although able to trace an injury to an antitrust violation, are
generally not within the group of private attorneys general
Congress created to enforce the antitrust laws under section
4”) (internal quotation marks omitted).
Forced to confront the distinction between
constitutional and antitrust standing, the Defendants now
attempt to change the discussion by arguing that Hartig’s
assertion of antitrust standing via assignment was actually a
fatal misstep, somehow undermining its ability to establish
constitutional standing. In a supplemental filing, they
endeavor to reformulate the arguments that Allergan made in
the 12(b)(1) motion in the District Court, saying,
Had Hartig sued for its own injury – the alleged
overcharge it paid to Amerisource – Allergan
would have moved to dismiss for lack of
antitrust standing under Rule 12(b)(6). Because
Hartig sued for someone else’s injury – the
alleged overcharge paid by Amerisource –
Allergan properly moved under Rule 12(b)(1)
advancing a constitutional standing argument.
(Defendants’ Letter Dated June 24, 2016, at 2.) This is a
wholly new argument. Allergan’s motion to dismiss was
always premised upon Hartig’s lack of antitrust standing as an
indirect purchaser, which was an Illinois Brick argument and
not a constitutional challenge to standing. See D.I. 15, at 4-5
(“Indirect purchasers … lack standing.” (citing Illinois Brick,
431 U.S. at 746)); see also id. at 5 n.1 (urging that, even if the
District Court were to consider Allergan’s motion under Rule
12(b)(6), the Court could still consider the DSA “in deciding
20
whether Hartig satisfies the indispensable element of antitrust
standing” (emphasis added)).
But, even ignoring that none of the Defendants
previously made the argument that the assignment from
Amerisource to Hartig created a problem of constitutional
magnitude, the substance of the Defendants’ new argument is
unpersuasive. For purposes of constitutional standing, the
underlying questions raised by the argument are captured in
the first two of the well-known Lujan factors.10 In particular,
those questions are whether Hartig has suffered an injury in
fact and whether that injury is fairly traceable to the
Defendants. On these matters, the distinction between direct
and indirect purchasers is of little relevance.11
Hartig certainly has alleged such an injury. Its
complaint asserted that it bought Zymar and Zymaxid from
Amerisource, which in turn purchased those products from
the Defendants. (A24-25.) Thus, notwithstanding that the
“direct purchaser rule” from Illinois Brick would disqualify
Hartig from serving as a private attorney general under the
10
The third element from Lujan, redressibility, is not
raised by the Defendants’ new Article III standing argument.
11
We are careful not to say that the distinction
between direct and indirect purchasers is wholly irrelevant to
the question of Article III standing, since an indirect
purchaser could be so remote as to be unable to meet its
burden of establishing either that it had suffered an injury in
fact or that such injury was fairly traceable to the defendant’s
actions.
21
antitrust statutes,12 Hartig’s allegations are that it was in fact
harmed by the downstream effects of the Defendants’
anticompetitive behavior. Indeed, while the Defendants
argued that Hartig did not assert its own injuries, in the same
breath they recognized that Hartig has “alleged” it paid
“overcharge[s]” for the Zymar and Zymaxid products.
(Defendants’ Letter Dated June 24, 2016, at 2.) The
complaint plainly and repeatedly emphasizes that, as a result
of the Defendants’ anticompetitive behavior in suppressing
generic equivalents of Zymar and Zymaxid, Hartig has paid
inflated prices for those products.13 Those allegations,
12
That disqualification may or may not be overcome
by the alleged assignment from Amerisource. That is a
question for the District Court in the first instance.
13
See A24 ¶ 8 (“Defendants’ unlawful scheme
effectively denied direct purchasers of Zymar and Zymaxid
the benefits of competition and of less expensive, generic
versions. As a result, Plaintiff [Hartig] … ha[s] paid
supracompetitive prices for Zymar and Zymaxid and its
generic equivalents.”); A48 ¶ 124 (“Defendants’
anticompetitive actions resulted in Plaintiff [Hartig] …
paying higher prices for gatifloxacin ophthalmic formulations
than [it] would have paid if a generic equivalent to Zymar and
Zymaxid had been available throughout the class period.”);
A51 ¶ 141 (same); A50 ¶¶ 136-37 (alleging that, “[a]s a result
of the Defendants’ illegal conduct,” Hartig and other
“purchasers of Zymar and Zymaxid have sustained substantial
losses and damage to their business and property in the form
of overcharges”); A52 ¶ 143 (asserting that, “as a direct and
proximate result of Defendants’ wrongful conduct,” Hartig
and other class members “paid artificially inflated prices for
22
together with the complaint’s specific descriptions of
anticompetitive behavior indulged in by the Defendants, are
sufficient to establish a judicially redressable injury-in-fact
that is fairly traceable to the Defendants – or, in other words,
an Article III case or controversy.
We recognize that the conflation of Article III standing
with antitrust standing may arise, at least in part, from those
doctrines’ overlap in both the factual questions they can
involve and in their terminology. Nevertheless, we again
caution against expanding Rule 12(b)(1) “beyond its proper
purpose,” and reaffirm that, in general, “Rule 12(b)(6) – with
its attendant procedural and substantive protections for
plaintiffs – is the proper vehicle for the early testing of a
plaintiff’s claims.” Davis, 824 F.3d at 348-49.14 As we
Zymar and Zymaxid and were deprived of the benefits of
earlier and robust competition from cheaper generic versions
of those products”); A55-56 ¶¶ 164-65 (claiming that, “[b]ut
for Defendants’ unlawful actions,” Hartig “would have
benefitted from the presence of [] low-cost generic …
alternative[s]” to Zymar and Zymaxid that the Defendants’
embattled competitors “could and would have supplied”);
A57 ¶¶ 177-78 (same); A59 ¶¶ 190-91 (same).
14
We have repeatedly cautioned against
allowing a Rule 12(b)(1) motion to dismiss for
lack of subject matter jurisdiction to be turned
into an attack on the merits. Caution is
necessary because the standards governing the
two rules differ markedly, as Rule 12(b)(6)
provides greater procedural safeguards for
plaintiffs than does Rule 12(b)(1). First,
23
recently reaffirmed in Davis v. Wells Fargo, “dismissal via a
Rule 12(b)(1) factual challenge to standing should be granted
proceeding under Rule 12(b)(1) inverts the
burden of persuasion. When presenting a Rule
12(b)(6) motion, the defendant bears the burden
to show that the plaintiff has not stated a claim.
But under Rule 12(b)(1), the plaintiff must
prove the court has subject matter jurisdiction.
The two rules also treat the complaint’s factual
allegations very differently. Unlike Rule
12(b)(6), under which a defendant cannot
contest the plaintiff’s factual allegations, Rule
12(b)(1) allows a defendant to attack the
allegations in the complaint and submit contrary
evidence in its effort to show that the court
lacks jurisdiction. Thus, improper
consideration of a merits question under Rule
12(b)(1) significantly raises both the factual and
legal burden on the plaintiff. Given the
differences between the two rules, a plaintiff
may be prejudiced if what is, in essence, a Rule
12(b)(6) challenge to the complaint is treated as
a Rule 12(b)(1) motion.
Davis, 824 F.3d at 348–49 (internal citations, quotation
marks, and brackets omitted). Because Rule 12(b)(6) is the
preferred mechanism for the early testing of a plaintiff’s
claims, and because defendants are nevertheless likely to
prefer the relaxed standards of Rule 12(b)(1), district courts
confronted with arguments framed as 12(b)(1) challenges to
jurisdiction should approach those arguments with particular
care.
24
sparingly,” id. at 350, and it is only the “unusual” case that
will be properly dismissed under 12(b)(1) “when the facts
necessary to succeed on the merits are at least in part the
same as must be alleged or proven to withstand jurisdictional
attacks,” id. (citing Mortensen, 549 F.2d at 892) (internal
quotation marks omitted). In this case, Hartig has not alleged
claims “so … completely devoid of merit as to not involve a
federal controversy.” Kulick v. Pocono Downs Racing Ass’n,
Inc., 816 F.2d 895, 899 (3d Cir. 1987) (quoting Oneida
Indian Nation v. County of Oneida, 414 U.S. 661, 666
(1974)). On the contrary, it had Article III standing sufficient
to give the District Court subject matter jurisdiction, and thus
a dismissal under Rule 12(b)(1) was not legitimately in play.
C. Review Under Rule 12(b)(6) Rather than
Rule 12(b)(1)
Because “we may affirm on any basis supported by the
record,” we next consider whether the District Court could
have granted Allergan’s motion to dismiss under the Rule
12(b)(6) framework. Davis, 824 F.3d at 350. The
Defendants admit that Allergan, in styling its Rule 12(b)(1)
argument as one of constitutional standing, “did not make an
argument in the alternative under Rule 12(b)(6).”
(Defendants’ Letter Dated June 24, 2016, at 2 n.1.) Even had
the Court treated the 12(b)(1) motion in the alternative as the
12(b)(6) motion that it actually was, the decision would
nonetheless be unsound because the Court relied upon the
DSA, whereas it should have measured Allergan’s motion
primarily “against the bare allegations of the complaint.” JM
Mech. Corp. v. HUD, 716 F.2d 190, 196-97 (3d Cir. 1983).
As mentioned above, for purposes of Rule 12(b)(6), a court
“must consider only the complaint, exhibits attached to the
25
complaint, matters of public record, as well as undisputedly
authentic documents if the complaint’s claims are based upon
these documents.” Mayer, 605 F.3d at 230.
Allergan has argued that the DSA can be considered in
a 12(b)(6) analysis because it is a document “integral to or
explicitly relied upon in the complaint.” D.I. 15, at 5 n.1
(quoting Warren Gen. Hosp., 643 F.3d at 82 n.4). Not so.
The DSA was never mentioned in Hartig’s complaint, was
not attached to the complaint, was not a matter of public
record,15 and did not form a basis for any of the claims.16
Although Allergan cites authority suggesting that the District
Court could have considered the DSA “to determine whether
the plaintiff was a direct purchaser,” id., Hartig’s complaint
readily acknowledged that the company was an indirect
purchaser, and instead predicated its antitrust standing on an
assignment from Amerisource, itself a direct purchaser. Rule
12(b)(6) requires that those specific allegations be accepted as
true and viewed in the light most favorable to Hartig. Thus,
we cannot say that the DSA was integral to Hartig’s claims.
It is integral only to the Defendants’ attack on those claims.
15
In fact, for purposes of this appeal, the DSA has
been filed separately under seal, and it states at the bottom of
every page that it is “confidential” and “not to be shared with
any third party.” (A100-15.)
16
The complaint does not mention Amerisource at all
except for the single paragraph alleging that (1) Amerisource
“directly purchased branded Zymar and Zymaxid from
Defendants” (A25 ¶9), (2) Hartig purchased those same drugs
from Amerisource, and (3) Amerisource assigned its antitrust
rights to Hartig.
26
Because the DSA is extrinsic to the complaint, the District
Court could not have properly considered it for purposes of a
Rule 12(b)(6) motion to dismiss, and, without the DSA,
Allergan’s entire challenge to the validity of Amerisource’s
assignment lacks a foundation.
For the District Court to have considered documents
that, like the DSA, lie outside the bounds of the complaint, it
would have had to do so by “convert[ing the 12(b)(6) motion]
into a summary judgment proceeding and afford[ing] the
plaintiff a reasonable opportunity to present all material made
pertinent to a summary judgment motion by Rule 56.” JM
Mech. Corp., 716 F.2d at 197; see also Rose v. Bartle, 871
F.2d 331, 342 (3d Cir. 1989) (“We have held that it is
reversible error for a district court to convert a motion under
Rule 12(b)(6) … into a motion for summary judgment unless
the court provides notice of its intention to convert the motion
and allows an opportunity to submit materials admissible in a
summary judgment proceeding or allows a hearing.”).
Because the District Court considered the DSA under Rule
12(b)(1), none of those procedures were followed. It may be,
as the Defendants urge, that “Hartig would not have objected
to the district court considering the DSA on a Rule 12(b)(6)
motion.” (Defendants’ Letter Dated June 24, 2016, at 2 n.1.)
Based on the record before us, though, that assent is still
theoretical: Allergan did not proffer its anti-assignment
argument in the alternative as grounds for dismissal under
Rule 12(b)(6); the District Court did not consider the DSA
under that framework; and Hartig thus had no occasion to
formally waive any of its 12(b)(6) protections or to respond,
after proper notice, to a converted motion for summary
judgment. We will not affirm on such a record, but instead
will remand so that the parties may have the opportunity to
27
make their arguments under the proper procedural
framework, with its attendant safeguards.
Once the correct procedures have been followed, the
District Court may have occasion to interpret the effect of the
DSA. Therefore, considerations of judicial economy merit
our noting some doubt about the Court’s interpretation of the
DSA as barring the assignment of antitrust causes of action.
In light of the DSA’s choice-of-law provision, the
District Court correctly looked to Pennsylvania law to
determine the DSA’s effect, but it may have misstepped in its
choice of interpretive principles. It cited Crawford Central
School District v. Commonwealth, 888 A.2d 616, 623 (Pa.
2005), for the idea that “an assignment will ordinarily be
construed in accordance with the rules governing contract
interpretation and the circumstances surrounding the
execution of the assignment document.” In Pennsylvania, the
“[c]onsideration of the surrounding circumstances” does not
appear to be a general principle of contract law, U.S. Nat’l
Bank in Johnstown v. Campbell, 47 A.2d 697, 700 (Pa. 1946),
but rather has developed as a principle of interpretation
specific to assignments. See Horbal v. Moxham Nat’l Bank,
697 A.2d 577, 583 (Pa. 2001) (“In interpreting an assignment,
it will ordinarily be construed in accordance with the rules of
construction governing contracts and the circumstances
surrounding the execution of the assignment document.”).
Perhaps because this case implicated an assignment, the
District Court considered not only the language of the DSA,
but also expressly considered the “circumstances”
surrounding that agreement. (A11 n.4.) The problem with
that approach is that the Court was not interpreting an
assignment. The DSA, not the assignment agreement, was
28
under scrutiny, and the DSA is simply a contract, not an
assignment. Thus, it seems likely that Pennsylvania’s general
principles of contract interpretation should have applied,
which focus on the “clear and unambiguous” language of an
agreement “as manifestly expressed, rather than as, perhaps,
silently intended.”17 Amoco Oil Co. v. Snyder, 478 A.2d 795,
798 (Pa. 1984) (original emphasis) (internal quotation marks
omitted); see also LJL Transp., Inc. v Pilot Air Freight Corp.,
962 A.2d 639, 647 (Pa. 2009) (“When the words of an
agreement are clear and unambiguous, the intent of the parties
is to be ascertained from the language used in the agreement,
which will be given its commonly accepted and plain
meaning.” (internal citations omitted)). But that is a question
for the District Court to address, if necessary, on remand.
V. CONCLUSION
We part from the District Court in its treatment of
antitrust standing as a factual challenge to subject matter
jurisdiction under Rule 12(b)(1), and we reject the
proposition that the Court could have considered the extrinsic
17
The DSA’s limitation on assignments provides that
“[t]his Agreement may not be assigned” without prior written
consent, but that “either party may assign its rights and
obligations hereunder” without written consent if the
assignment is to a “subsidiary or affiliate.” (A108 (emphasis
added).) Because Amerisource’s antitrust causes of action
arise by statute, there is a serious argument that they do not
fall within the DSA’s plain language limiting assignment of
“rights and obligations hereunder” – that is, they arise by
operation of an extrinsic legal regime rather than by contract.
29
evidence of the DSA’s anti-assignment clause under Rule
12(b)(6). The case should not have been dismissed pursuant
to Allergan’s Rule 12(b)(1) motion. Therefore, we will
vacate the order of dismissal and remand for further
proceedings.
30