Perhaps one of the most influential first year law school classes for the task of learning how to "think like a lawyer" is civil procedure.  Particularly when the professor is bold enough to engage students on the intricacies of the topic, its intricacies can make for a challenging final exam.  These experiences should come to mind for many antitrust lawyers when considering the Third Circuit's decision in Hartig Drug Co. v. Senju Pharmaceutical Co., where the Court applied subject matter jurisdiction principles to reverse a District Court's dismissal of Hartig's antitrust allegations on the pleadings.

The facts while relevant were not dispositive.  At issue were the actions of Senju and its co-defendants, Kyorin Pharmaceutical Co and Allergan Inc. related to ANDA litigation over its medicated eyedrop products, Zymar (a 0.3% gatifloxacin solution) and Zymaxid (a 0.5% gatifloxacin solution).  Allergan, pursuant to a license to U.S. Patent No. 6,333,045, filed NDAs for these products in 2003 and 2010, respectively; Hartig was a secondary purchaser of these drugs from Amerisource Drug Corp., who assigned its rights to Hartig.

In its complaint, Hartig alleged several bases for antitrust injury:

[T]he Defendants engaged in a number of illegal practices to prevent or delay the introduction into the market of generic alternatives to Zymar and Zymaxid.  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 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.

Put more succinctly, Hartig argued that, but for Defendants' actions in violation of the Sherman Antitrust Act, generic versions of these eyedrops would have entered the marketplace after the patent on the drug itself expired in 2010 (specifically, "at least from June 15, 2010 until October 3, 2013"), based in part on Apotex's Paragraph III certification on that base patent and the asserted invalidity of the '045 patent.

Allergan filed a motion to dismiss based on Federal Rule of Civil Procedure 12(b)(1), that the Court did not have subject matter jurisdiction.  Co-defendants Kyorin and Senju filed motions to dismiss under Rule 12(b)(6) that Hartig had failed to state a claim (Allergan later joined in this motion).  Allergan's motion was based on its Distribution Services Agreement (DSA) with Amerisource that precluded that primary distributor from assigning its rights without Allergan's express written agreement.  The Third Circuit's opinion notes that the DSA was not part of Hartig's complaint but was appended to Allergan's motion to dismiss (a factual point relevant to the Court's decision).

The District Court granted Allergan's motion.  On appeal, none of the parties challenged the Court's basis for rendering its decision, but several amici did (including Walgreen Co., The Kroger Co., Safeway Inc., Albertson's LLC, HEB Grocery Company LP, CVS Health Corporation, and Rite Aid Corporation).  The basis for this challenge is that while the anti-assignment clause in the agreement between Allergan and Amerisource might impact whether Hartig had antitrust standing, it did not affect the question of whether the Court could render a decision under Article III of the Constitution.  The Third Circuit first addressed the propriety of considering this issue, on the grounds that under normal circumstances an amicus "cannot expand the scope of an appeal with issues not presented by the parties on appeal," citing Nuveen Mun. Tr. ex rel. Nuveen High Yield Mun. Bond Fund v. WithumSmith Brown, P.C., 692 F.3d 283, 300 n.10 (3d Cir. 2012).  However, the Court also noted that the question of subject matter jurisdiction raised by the amici was one that a court has "an independent obligation" to raise in situations where its jurisdiction (and hence institutional competence) are called into question, citing Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006).  The Court continued that "federal courts [also] have a strict duty to exercise the jurisdiction that is conferred upon them by Congress," citing 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," quoting Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821).  Accordingly, the panel concluded that it had a duty to question the District Court's decision that it did not have jurisdiction regardless of whether this was an issue for the parties.  (The opinion also cites a recent, similar case, Group Against Smog and Pollution, Inc. v. Shenango Inc., 810 F.3d 116 (3d Cir. 2016), where the question was whether the proper grounds for a motion to dismiss was Rule 12(b)(1) or 12(b)(6).)

In considering this issue, the opinion sets out the distinctions between the two Rules, noting that "the 12(b)(6) standard affords significantly more protections to a nonmovant."  In a Rule 12(b)(6) motion, the court properly considers "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," citing Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010), and also must consider all allegations in the complaint as true as well as all reasonable inferences that can be drawn from them when taken in a light most favorable to the nonmovant.  Rule 12(b)(1), on the other hand, provides the defendant the ability to present competing facts (i.e., the defense is not limited to the facts alleged in the complaint).  The Plaintiff bears the burden of proof that jurisdiction is proper; and a court can consider all evidence without the presumptions that attach under Rule 12(b)(6); importantly here, a court can also consider evidence "outside the pleadings."  Consequently, "a 12(b)(1) factual challenge strips the plaintiff of the protections and factual deference provided under 12(b)(6) review" according to the opinion.

Here, according to the Court, "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)."  But the opinion goes on to explicate its reasoning for this decision in a way informative on the difference between the two grounds for standing (while acknowledging that its discussion is complicated by the varying uses of the term "standing").  First the opinion reviewed the requirements for Article III standing, according to Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992):

First, [a plaintiff] must establish that it has suffered an "injury in fact," meaning a concrete and 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.  . . .  Third, it must show a likelihood "that the injury will be redressed by a favorable decision."  Id. at 561.

Even if the Article III requirements for standing are satisfied, however, another prerequisite for standing is antitrust standing, which requires that the injury a plaintiff suffered was one "that the antitrust statute was intended to forestall," citing 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).  The opinion further explained that even if a plaintiff suffered injury as a result of an antitrust violation, if the standing requirement is not satisfied the antitrust laws do nor permit a plaintiff to be a "private attorney general" under the statute.  And the opinion set out the distinction plainly:  Article III jurisdiction "implicat[es] a court's subject matter jurisdiction" while antitrust standing affects "only the plaintiff's ability to succeed on the merits."  Whether or not a plaintiff as antitrust standing does not implicate the subject matter jurisdiction under Article III according to the opinion, citing Ethypharm S.A. France v. Abbott Laboratories, 707 F.3d 223, 232 (3d Cir. 2013).  And this distinction, according to the Court, is at the heart of the Supreme Court's explanation of the "direct purchaser rule" in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), wherein the Court stated 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.

The significance of this distinction in this case stems in part from the Court's appreciation that "Allergan's motion to dismiss under Rule 12(b)(1) was always premised, at bottom, on Hartig's purported lack of antitrust standing," despite Allergan premising its motion on Rule 12(b)(1).  This is not the correct question, according to the Court; for a motion to dismiss on an Article III basis the "case or controversy" standards are those enunciated by the Supreme Court in Lujan and the panel held that Hartig had satisfied these requirements.

The opinion closes with a discussion of whether Allergan and its co-defendants properly moved to dismiss Hartig's claims under Rule 12(b)(6) and found that they did not.  This judgment turns on the differences in scope of the factual challenges permitted under each of these rules, and the Third Circuit panel recognized that the District Court relied on evidence regarding the DSA that would not be permitted in deciding a motion predicted on Rule 12(b)(6) (where all allegations in the complaint are taken as being true and all inferences drawn in the nonmovant's favor).  And finally, while the panel acknowledged that the question of whether the District Court could have (or will in future) properly consider the DSA were not before it, the opinion suggests that this agreement is not sufficient under Pennsylvania law to strip Hartig of its capacity to bring suit under the antitrust laws.

The Court vacated the judgment below and remanded to the District Court, providing perhaps another opportunity for the parties to craft appropriate motions under the rules of civil procedure to effect their aims.

Hartig Drug Co. v. Senju Pharmaceutical Co. (3rd Cir. 2016)
Panel: Circuit Judges Ambro, Jordan, and Greenberg
Opinion by Circuit Judge Jordan