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Apotex Corp. v. Hospira Healthcare India Private Ltd.

United States District Court, S.D. New York

January 6, 2020

APOTEX CORP., Plaintiff,



         Plaintiff Apotex Coip. ("Apotex") brings claims against Defendants Hospira Healthcare India Private Ltd. ("Hospira India") and Hospira, Inc. (together with Hospira India, "Hospira"), successors of an entity that had agreed with Apotex to jointly develop and market certain generic pharmaceutical products for sale in the United States. In an earlier Opinion and Order, the Court granted in part and denied in part a motion to dismiss Apotex's claims, and granted Apotex leave to file a second amended complaint. See Apotex Corp. v. Hospira Healthcare India Private Ltd., No. 18-CV-4903 (JMF), 2019 WL 3066328 (S.D.N.Y. July 12, 2019). Thereafter, Apotex filed the operative Second Amended Complaint, which includes claims against Hospira for breach of contract; unfair competition under the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), Fla. Stat. Ann. §§ 501.201 et seq.; and monopolization and attempted monopolization under Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2. ECF No. 74 ("SAC"). Hospira now moves, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss Apotex's antitrust claims and its claim for punitive damages for breach of contract. ECF Nos. 84-85. For the reasons that follow, Hospira's motion is GRANTED as to the antitrust claims. The Court reserves judgment on the punitive damages claim pending further briefing on subject-matter jurisdiction in light of the dismissal of the antitrust claims.


         The relevant background is set forth in the Court's prior Opinion and will be summarized only briefly here. In 2003, Apotex entered into an agreement - the Development, Manufacturing, Supply and Commercialization Agreement ("Agreement"), see ECF No. 39, at 5-8 - with Hospira's predecessor. Orchid Chemicals and Pharmaceuticals, Ltd. ("Orchid"). SAC ¶ 1. The Agreement provided that Orchid would supply Apotex with certain drugs, including cefazolin, ceftriaxone, cefoxitin, cefepime, and piperacillin-tazobactam ("pip/taz"). Id. In addition, the Agreement prohibited Orchid from supplying the covered drugs to Apotex's competitors and from directly competing with Apotex in the United States. Id. ¶¶ 47-50; see also Id. ¶ 53 (describing amendment creating an exception for certain customers). On March 23, 2010, Hospira succeeded Orchid through a contractual novation ("Novation"), see ECF No. 39, at 11-13, and thus became subject to the Agreement's exclusive supply provision and other restrictions on competition with Apotex, see SAC ¶¶ 58-64.

         On June 1, 2018, Apotex sued Hospira India for breach of the Agreement and Novation anda variety of related claims. See ECF No. 1. On July 12, 2019, the Court granted in part and denied in part a motion to dismiss these claims. ECF No. 70. In brief, the Court ruled that Apotex's three fraud-based claims and claims for unfair competition, breach of the implied covenant of good faith and fair dealing, tortious interference, and unjust enrichment failed as a matter of law, but its claim under the FDUTPA did not. See 2019 WL 3066328, at *4-8. In addition, the Court ruled that Apotex may seek only benefit-of-the-bargain damages, attorney's fees, and costs for its FDUTPA claim; that Apotex is bound by the Agreement and Novation's limitation on damages; and that it was ambiguous whether the limitation on damages precluded lost profit damages for Apotex's contract claim. Id. at *8-9. Most relevant for present purposes, the Court reserved judgment on whether Apotex adequately pleaded a claim for punitive damages for breach of contract and whether any such claim was barred by the limitation on damages, see Id. at *8 n.5, and granted Apotex leave to file a second amended complaint adding "new allegations and claims . . . regarding monopolization and attempted monopolization," id. at *10. Thereafter, Apotex filed the Second Amended Complaint, adding Hospira, Inc. as a new Defendant and alleging claims under the Sherman Antitrust Act. See SAC ¶¶ 169-192.

         The Second Amended Complaint alleges that Hospira monopolized the U.S. market for cefepime, a type of cephalosporin antibiotic, and attempted to monopolize the U.S. market for several other drugs. See SAC¶¶ 169-192. Apotex alleges that Hospira did so by breaching its obligations under the parties' agreement to act as Apotex's exclusive suppher for these drugs, and by selling its own version of the drugs to Apotex's competitors and directly to Apotex's customers. See Id. ¶¶ 176, 184. For example, Hospira allegedly cut off Apotex's supply of cefepime and manufactured and sold its own brand-name version of the drug, Maxipime, to Apotex's competitors and customers. Id. at¶¶ 176, 180. Hospira allegedly used "confidential average price" information obtained through the parties' partnership to sell Maxipime "on par with or near Apotex's contract price." Id. at ¶ 176(d). Through this alleged scheme, Hospira's share of the cefepime market "soared from negligible to a majority market share," reaching 56.58% in August 2016. Id. at ¶¶ 173, 178. In addition, Hospira ultimately closed "the only facility at which it manufactures Products for Apotex," known as the IKKT facility, leaving Apotex entirely ''unable to compete." Id. at¶¶ 8, 203. Hospira allegedly used the same scheme in an attempt to monopolize the U.S. market for other drugs - namely, ceftriaxone, cefazolin, cefoxitin, andpip/taz. See Id. at ¶¶ 1, 189-91. Hospira allegedly gained 43.75% of the market for ceftriaxone "as of January 2017," and 30.76% of the market for cefazolin "as of January 2016." Id. ¶ 191. (It is unclear what, if any, market share Hospira gained for the other drugs.) On the basis of these allegations, Apotex now seeks, inter alia, treble damages, plus costs and attorney's fees, for the alleged antitrust violations and punitive damages for the alleged breach of contract. See SAC at Prayer for Relief ¶ 1(a), (c).[1]


         In evaluating a motion to dismiss pursuant to Rule 12(b)(6), a court must accept all facts set forth in the complaint as true and draw all reasonable inferences in the plaintiffs favor. See, e.g., Kashef v. BNP Paribas S.A., 925 F.3d 53, 58 (2d Cir. 2019). A claim will survive a Rule 12(b)(6) motion, however, only if the plaintiff alleges facts sufficient "to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible ''when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). A plaintiff must show "more than a sheer possibility that a defendant has acted unlawfully," id., and cannot rely on mere "labels and conclusions" to support a claim, Twombly, 550 U.S. at 555. If the plaintiffs pleadings "have not nudged [his or her] claims across the line from conceivable to plausible, [the] complaint must be dismissed." Twombly, 550 U.S. at 570.


         The Court begins with the motion to dismiss Apotex's antitrust claims, its sole federal claims. Section 2 of the Sherman Antitrust Act prohibits "monopolizing], or attempt[ing] to monopolize . . . any part of the trade or commerce among the several States." 15 U.S.C. § 2. A claim of monopolization "requires, in addition to the possession of monopoly power in the relevant market, the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a supenor product, business acumen, or historic accident." In re Adderall XR Antitrust Litig., 754F.3d 128, 133 (2dCir. 2014) (internal quotation marks omitted) (quoting Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004)). "To state an attempted monopolization claim, a plaintiff must establish '(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.'" PepsiCo., Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002) (per curiam) (quoting Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993)). The two claims "are substantially identical, with the exception that attempted monopolization requires a showing of specific intent to monopolize." New York v. Actavis, PLC, No. 14-CV-7473 (RWS), 2014 WL 7015198, at *35 (S.D.N.Y. Dec. 11, 2014), aff'd sub nom. New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015).

         Hospira argues that Apotex's claims fail for at least two reasons: first, because Apotex fails to make a showing of "anticompetitive conduct," ECF No. 85 ("Defs.' Mem."), at 10-14; and second, because Apotex fails to plausibly allege that Hospira actually monopolized or dangerously threatened to do so, id. 19-22.[2] The Court agrees on both fronts.

         A. Anticompetitive Conduct

         A claim under the Sherman Act must allege anticompetitive conduct, as federal antitrust laws were "enacted for the protection of competition not competitors." Brunswick Corp. v. Pueblo Bowi-O-Mat, Inc., 429 U.S. 477, 488 (1977) (internal quotation marks omitted). "[Anticompetitive conduct is conduct without a legitimate business purpose that makes sense only because it eliminates competition." In re Adder all, 754 F.3d at 133 (internal quotation marks omitted). A "prototypical valid business purpose" is expanding into a new market to compete on the basis of increased efficiency. See Port Dock & Stone Corp. v. Oldcastle Northeast, Inc., 507 F.3d 117, 124-25 (2d Cir. 2007) (holding that a manufacturer's breach of a distributorship agreement was not anticompetitive because the manufacturer "expected to perform the second level service more efficiently than the old trading partners"). Conduct undertaken for such a purpose cannot, as a matter of law, be the basis for an antitrust claim.

         In this case, Apotex's own allegations reveal that Hospira's conduct was undertaken for legitimate, pro-competitive purposes. The primary conduct alleged in the Second Amended Complaint is Hospira's decision to breach the exclusive supplier agreement with Apotex in order to compete directly with Apotex and to supply Apotex's competitors. See, e.g., SAC ¶¶ 84 ("Hospira has sold or otherwise supplied to third parties in the Territory certain drugs that directly compete with Apotex's sale of the Products."), 88 (describing "Hospira's deliberate decision to divert supply of Products to its own use in competition with Apotex"); see also Id. ¶ 2 (alleging that "Hospira did compete with Apotex in the United States pharmaceuticals market" prior to the parties' agreement). That decision is consistent with competitive business behavior: "Like any seller of a product," Hospira "would prefer multiple competing buyers unless an exclusive distributorship arrangement provides other benefits." E&L Consulting, Ltd. v. Doman Indus. Ltd.,472 F.3d 23, 30 (2d Cir. 2006). Engaging in competition was especially rational given Hospira's competitive advantage over Apotex. Apotex alleges that "many" firms produce "virtually identical drugs," which means that firms must compete on factors like "consistency of supply." Id. ΒΆΒΆ 39-40. Hospira, as a manufacturer, has direct access to a consistent supply of products, unlike a reseller like Apotex. Hospira's decision to capitalize on this advantage is not the type of ...

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