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Hospital Authority of Metropolitan Government of Nashville and Davidson county v. Momenta Pharmaceuticals, Inc.

United States District Court, M.D. Tennessee, Nashville Division

December 14, 2017




         Presently pending is Plaintiff's motion for leave to file an amended complaint. See Docket Entry No. (“DE”) 140. For the reasons that follow, Plaintiff's motion is GRANTED.[1]


         Plaintiff Nashville General Hospital (“Plaintiff” or “NGH”) filed its initial complaint on October 14, 2015. See DE 1. The complaint involved four separate counts against Defendants Momenta Pharmaceuticals, Inc. (“Momenta”) and Sandoz, Inc. (“Sandoz”) (collectively referred to as “Defendants”) under the Sherman Act, which included allegations of implementation of unreasonable restraints on trade, monopolization, a conspiracy to monopolize, and attempts to monopolize. DE 1 at ¶¶ 81-104. The alleged Sherman Act violations centered on the role of Momenta and Sandoz in producing and distributing enoxaparin, a generic version of the drug Lovenox®. Id. at ¶¶ 11-13, 19, 26. The complaint was filed on behalf of both Plaintiff and a nationwide class of persons and entities, pursuant to Fed.R.Civ.P. 23(a) and (b), that purchased enoxaparin from Defendants or non-party Sanofi-Aventis (“Aventis”), who brought Lovenox® to market in the United States, beginning on September 21, 2011. Id. at ¶¶ 20, 75.

         In response to the initial complaint, Defendants jointly filed a motion to transfer the case to the District of Massachusetts (DE 58) and a motion to dismiss (DE 65), and Momenta additionally filed a separate motion to dismiss or transfer for improper venue. DE 62. On September 29, 2016, a Report and Recommendation was entered in which the undersigned Magistrate Judge recommended that each motion be denied. DE 114. Defendants subsequently filed both joint and separate objections to the Report and Recommendation. DE 117, 119. On March 21, 2017, the District Judge issued a Memorandum Opinion that adopted in part and declined to adopt in part the Report and Recommendation. DE 134. As a result of the District Judge's holding, Plaintiff's claims for declaratory and injunctive relief were permitted to proceed but Plaintiff's claim for damages was dismissed. Id. at 16. This was based on a finding that Plaintiff did not have standing to seek damages under the so-called “indirect purchaser rule, ” derived from the Supreme Court's holding in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), which bars recovery of antitrust damages from Defendants based on Plaintiff's purchase of enoxaparin from a non-party drug wholesaler, McKesson Corporation (“McKesson”), and not directly from Defendants. Id. at 8-14. Plaintiff filed the instant motion for leave to amend thereafter. DE 140.

         II. ANALYSIS

         Plaintiff states that its proposed amended complaint makes three fundamental changes: (1) the addition of a new representative plaintiff identified as the American Federation of State, County and Municipal Employees District Council 37 Health & Security Plan (“DC 37”); (2) the amendment of the claims in the initial complaint to include claims filed under various state antitrust and consumer protection laws that permit indirect purchaser standing; and (3) the addition of substantive allegations pertaining to Defendants' conspiratorial conduct. DE 141 at 5.[3] The amended complaint asserts claims for damages under the statutes of 30 different states and the District of Columbia, referred to as the “Indirect Purchaser Jurisdictions, ”[4] that allow indirect purchasers such as NGH, DC 37, and the proposed class of plaintiffs to recover damages, thus circumventing the federal bar of such claims. Id. Plaintiff asserts that the class it now seeks to represent is comprised of “those end-payers who could bring an indirect claim under their own state's [repealer] laws.” Id.

         A. Legal Standard

         Rule 15 of the Federal Rules of Civil Procedure, which governs the Court's consideration of the pending motion, states that leave to amend a pleading should be “freely given when justice so requires.” Fed.R.Civ.P. 15(a). The reason behind such policy is “to reinforce the principle that cases ‘should be tried on their merits rather than the technicalities of pleadings.'” Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986) (quoting Tefft v. Seward, 689 F.2d 637, 639 (6th Cir. 1982)). However, the Supreme Court has indicated that while the moving party “ought to be afforded an opportunity to test [its] claim on the merits, ” one or more of the following conditions may negate this directive: undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, or futility of the proposed amendment. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Nevertheless, the determination as to whether justice requires permission to amend the pleading is within the district court's “sound discretion.” Moore, 790 F.2d at 559 (internal citations omitted).

         Rule 20 is also implicated by Plaintiff's motion and states that additional plaintiffs may be joined to a pending action if such plaintiffs “assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences, ” and “any question of law or fact common to all plaintiffs will arise in the action.” Fed.R.Civ.P. 20(a)(1)(A), (B). Such permissive joinder of claims is encouraged as “the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties ....” Thompson v. Janssen Pharm., Inc., No. 15-cv-2558, 2015 WL 12844456, at *1 (W.D. Tenn. Dec. 21, 2015) (quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966)).

         B. Defendants' Opposition

         The crux of Defendants' opposition focuses on the alleged futility of Plaintiff's proposed amendments. The Sixth Circuit has made clear that any analysis of the futility of proposed amendments is equivalent to the analysis undertaken as part of a Rule 12(b)(6) motion. See Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 421 (6th Cir. 2000) (“[A] proposed amendment is futile only if it could not withstand a Rule 12(b)(6) motion to dismiss.”). The policy behind the futility argument is to prevent the expenditure of unnecessary effort and resources by both the parties and the court. See, e.g., Matlock v. Rose, 731 F.2d 1236, 1240-41 (6th Cir. 1984) (“[T]he concern for judicial economy, under the circumstances of this case, is particularly advanced through the futility doctrine.”). However, judicial economy is only served in this case if the undersigned concludes, and the District Judge concurs, that denial of Plaintiff's motion to amend is required, since, as made clear in their responsive brief, Defendants plan to file a motion to dismiss under Fed.R.Civ.P. 12(b)(6) if the current motion is granted. See DE 148 at 9, n.1. While the Court does not in any way view Defendants' candid statements regarding their planned course of litigation as deliberately coercive, this posture inevitably effectuates such an end.

         Other courts in this circuit have commented on the inelegant nature of the futility argument in such a context:

There is some conceptual difficulty presented when the primary basis for a party's opposition to the filing of an amended pleading is that the pleading is futile, i.e. that it fails to state a claim upon which relief can be granted. A Magistrate Judge cannot ordinarily rule on a motion to dismiss, see 28 U.S.C. § 636(b)(1)(A), and denying a motion for leave to amend on grounds that the proposed new claim is legally insufficient is, at least indirectly, a ruling on the merits of that claim .... Consequently, rather than determining the actual legal sufficiency of the new claim, in many cases it will suffice to determine if there is a substantial argument to be made on that question and, if so, to allow the amended pleading to be filed with the understanding that a motion to dismiss for failure to state a claim may follow.

Durthaler v. Accounts Receivable Mgmt., Inc., No. 2:10-cv-1068, 2011 WL 5008552, at *4 (S.D. Ohio Oct. 20, 2011). See also Vanburen v. Ohio Dep't of Pub. Safety, No. 2:11-cv-1118, 2012 WL 5467526, at *4 (S.D. Ohio Nov. 9, 2012) (holding that due to this “procedural roadblock, ” the better course would be to allow amendment of the complaint with the understanding that a motion to dismiss may follow filing of the amended complaint); Research Inst. at Nationwide Children's Hosp. v. Trellis Bioscience, LLC, No. 2:15-cv-3032, 2017 WL 1487596, at *3 (S.D. Ohio Apr. 26, 2017) (same). Indeed, “it is usually a sound exercise of discretion to permit the claim to be pleaded and to allow the merits of the claim to be tested before the District Judge by way of a motion to dismiss.” Durthaler, 2011 WL 5008552, at *4. See also Greenwald v. Holstein, No. 2:15-cv-2451, 2016 WL 9344297, at *5 (S.D. Ohio Feb. 3, 2016) (same).[5] With such guidance in mind, the Court turns to the merits of Defendants' opposition to the motion.

         (1) Personal Jurisdiction

         Defendants contend that the addition of DC 37 as a plaintiff to the instant lawsuit would be futile because the Court lacks personal jurisdiction with respect to any claims that could be asserted by DC 37. DE 148 at 9. DC 37 is described as a “health and welfare benefit plan located in New York covering New York public sector employees, retirees, and their families wherever they reside, and is New York's largest public employee union.” DE 141 at 7. Defendants emphasize, however, that the proposed amended complaint contains no allegation that DC 37 purchased enoxaparin in Tennessee, reimbursed its union members for enoxaparin in Tennessee, or was otherwise injured in Tennessee. DE 148 at 19. Defendants also rely on the recent decision in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., in which the Supreme Court reaffirmed that “there must be an affiliation between the forum and the underlying controversy, principally” for a court to exercise specific personal jurisdiction over a defendant.[6] 137 S.Ct. 1773, 1780, 198 L.Ed.2d 395 (2017) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 918, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011)) (internal quotations omitted).

         Plaintiff responds that DC 37's claims are appropriately before this Court based on the doctrine of pendent personal jurisdiction, which holds that “where a federal statute authorizes nationwide service of process, and the federal and state claims ‘derive from a common nucleus of operative fact' ... the district court may assert personal jurisdiction over the parties to the related state law claims even if personal jurisdiction is not otherwise available.” Iron Workers Local Union No. 17 Ins. Fund v. Philip Morris Inc., 23 F.Supp.2d 796, 805 (N.D. Ohio 1998) (quoting Gibbs, 383 U.S. at 725, 86 S.Ct. 1130). The Court has previously determined that Section 12 of the Clayton Act, the antitrust statute at issue in the instant matter, provides for nationwide personal jurisdiction in the case of corporate defendants such as Sandoz and Momenta. See DE 114 at 38-39; DE 134 at 6. The issue, therefore, is whether the Court may exercise pendent personal jurisdiction with respect to the state law claims brought under the 31 “Indirect Purchaser Jurisdictions” named in the proposed amended complaint.[7]

         In providing jurisdiction over a cause of action involving enforcement of a federal right, “Congress granted the district courts power also to consider state law claims provided they had a nucleus of pertinent facts in common with a substantial federal claim.” Iron Workers, 23 F.Supp.2d at 805 (quoting Hargrave v. Oki Nursery, Inc., 646 F.2d 716, 719 (2nd Cir. 1980)). Here, despite Defendants' correct observation that the Fifth Amendment limits a court's ability to exercise jurisdiction over a non-resident defendant (DE 148 at 18), the Court takes its cue from the Iron Workers decision in finding that such a “nucleus of pertinent facts in common” with the pending federal claim exists in this matter:

The Supreme Court has yet to address the scope of due process protection under the Fifth Amendment in the jurisdictional context. Since the Sixth Circuit also has yet to address this precise issue, the Court will follow the view that Fifth Amendment due process is satisfied when the defendant in question resides in the United States and a statute provides for nationwide service of process .... Because this Court has personal jurisdiction over the defendants under the [] antitrust claims, and because the state law claims alleging a conspiracy to sell and market tobacco derive from a common nucleus of operative facts with the federal claims, the Court need not reach the question of whether personal jurisdiction with respect to the state law claims is otherwise available .... Accordingly, the Court finds that it has jurisdiction over Defendants ... as to both the federal and state law claims contained in the Amended Complaint.

Iron Workers, 23 F.Supp.2d at 805-06. There is at least a substantial argument to be made as to jurisdiction, and the Court therefore declines to find futility on this ground.

         (2) Statute ...

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