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Plumbers' Local Union No. 690 Health Plan v. Apotex Corp.

United States District Court, E.D. Pennsylvania

July 24, 2017

PLUMBERS' LOCAL UNION NO. 690 HEALTH PLAN, Plaintiff,
v.
APOTEX CORP., et al., Defendants.

          MEMORANDUM

          Anita B. Brody, J.

         I. INTRODUCTION

         Plaintiff Plumbers Local Union No. 690 Health Plan (“Plumbers”) brings this putative class action against a multitude of Defendants alleging claims under Pennsylvania state law for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, negligent misrepresentation/fraud, unjust enrichment, civil conspiracy, and aiding and abetting. Plumbers also brings claims against Defendants for violations of the consumer protection laws of forty-eight additional states and two territories.[1] Plumbers is a health insurance plan that provides prescription drug coverage to members of Plumbers Local Union No. 690 (“Plumbers' Members”) and Defendants are companies involved in the generic prescription pharmaceutical drug business.

         Fifteen Defendants (“Jurisdiction Defendants”) move to dismiss the Amended Complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2).[2] Eleven of the Jurisdiction Defendants (“Selling Defendants”) concede that they sell their generic prescription drugs in Pennsylvania.[3] Three of the eleven Selling Defendants (“Registration Defendants”) also concede that they are foreign corporations registered to do business in Pennsylvania.[4] Four of the Jurisdictional Defendants (“Non-Selling Defendants”)[5] do not manufacture, market, distribute, or sell any prescription drugs in Pennsylvania.[6]

         For the reasons set forth below, I will grant in part and deny in part the motions to dismiss of the eight Selling Defendants who are not also Registration Defendants. I will deny Registration Defendants' motions to dismiss for lack of personal jurisdiction. I will grant Non-Selling Defendants' motions to dismiss for lack of personal jurisdiction.

         II. BACKGROUND [7]

         Jurisdiction Defendants are companies involved in the generic prescription pharmaceutical drug business. Am. Compl. ¶ 1. Jurisdiction Defendants are not incorporated in Pennsylvania and do not have their principal place of business in Pennsylvania. Am. Compl. ¶¶ 32, 38, 44, 60, 126, 134, 135. Plumbers resides in Pennsylvania, maintains a principal place of business in Pennsylvania, and has members who live in Pennsylvania. Am. Compl. ¶¶ 29, 154.

         Plumbers provides a health insurance plan that includes prescription drug coverage to members of Plumbers Local Union No. 690. See, e.g., Am. Compl. ¶ 157. Prescription drugs are dispensed to Plumbers' Members through medical professionals who administer the drugs to members or through pharmacies that are authorized by medical professionals to dispense the drugs to members. Am. Compl. ¶ 163. After a pharmacist or medical professional provides a drug to a member, the provider then seeks reimbursement from Plumbers. The provider typically bills Plumbers based on the Average Wholesale Price (“AWP”) for the drug. Am. Compl. ¶¶ 165, 169. Plumbers reimburses the providers of the prescription drugs based on a formula, which includes AWPs as “a key component” in determining the amount of reimbursement. Am. Compl. ¶ 157.

         A. Selling Defendants

         Selling Defendants are pharmaceutical companies that manufacture generic prescription drugs and sell their generic drugs in Pennsylvania.[8] Plumbers' Members made numerous purchases of Selling Defendants' generic drugs in Pennsylvania.[9] Selling Defendants reported the AWPs for their prescription drugs to pricing compendia, including First Databank's Blue Book, Medical Economics' Red Book, and Medispan. Am. Compl. ¶¶ 158, 180. Plumbers obtained the AWPs from these compendia and relied on them in its drug reimbursement formula. Am. Compl. ¶¶ 1158-59.

         Since at least 1991 to the present, the AWPs relied on by Plumbers have not reflected the actual average wholesale prices of prescription drugs, and Selling Defendants' generic prescription drugs have increased in price at a rate much faster than the actual average wholesale price. Am. Compl. ¶ 171. Selling Defendants have intentionally inflated their reported AWPs, and the prescription drug providers have billed Plumbers at these inflated AWPs for Selling Defendants' generic drugs, Am. Compl. ¶¶ 163, 200. Consequently, Plumbers has reimbursed the prescription drug providers for its members' purchases of Selling Defendants' generic drugs on the basis of these inflated AWPs. Am. Compl. ¶ 29.

         “Throughout the relevant time period, the defendants were aware that a figure called the AWP was the embedded standard used by virtually all payors for drug products . . . to determine how much to reimburse and pay for a given drug.” Am. Compl. ¶ 173. Selling Defendants “deliberately and intentionally” inflated their AWPs “so that the medical providers who purchased and dispensed these drugs at a low cost would bill patients and their insurers at the inflated AWPs, and thereby earn a substantial profit from the ‘spread' between the real cost and the various AWP-related reimbursement rates.” Am. Compl. ¶¶ 208- 09. Selling Defendants inflated their AWPs to provide higher financial remuneration to providers, which encouraged providers to purchase more of their generic drugs thereby increasing Selling Defendants' market share for their prescription drugs. Am. Compl. ¶¶ 176, 188. Accordingly, Selling Defendants “knew, or should have known, that when they did not report actual average wholesale prices to the compendia, those inflated AWPs would increase and distort reimbursement levels, ” Am. Compl. ¶ 184, which would harm third party payors, like Plumbers, who reimburse the cost of prescription drugs for its members, Am. Compl. ¶ 185.

         B. Non-Selling Defendants

         Non-Selling Defendants do not manufacture, market, distribute, or sell any prescription drugs in Pennsylvania. Decl. Andrew S. Boyer ¶ 6, ECF No. 209-2 [hereinafter Boyer Decl.]; Aff. Brian Shanahan ¶ 10, ECF No. 211-2 [hereinafter Shanahan Aff.]; Decl. Abhijit Mukherjee ¶¶ 4, 16, ECF No. 227-2 [hereinafter Mukherjee]; Decl. Martin Shindler ¶ 4, ECF No. 232 [hereinafter Shindler Decl.]. Additionally, Non-Selling Defendants are not registered to conduct business in Pennsylvania. Boyer Decl. ¶ 5; Shanahan Aff. ¶ 9; Mukherjee Decl. ¶ 7; Shindler Decl. ¶ 3. Two of the Non-Selling Defendants, Andrx Corporation (n/k/a Andrx LLC) (“Andrx Corporation”) and Actavis, Inc. f/k/a Watson Pharmaceuticals, Inc. (n/k/a Allergan Finance LLC) (“Allergan Finance”), are holding companies that “exist[] for the purpose of holding shares of companies rather than producing [their] own goods or services.” Boyer Decl. ¶ 7; Shindler Decl. ¶ 5. Two of the Non-Selling Defendants, Dr. Reddy's Laboratories Ltd. (“DRL Limited”) and Teva Pharmaceutical Industries Ltd. (“Teva Ltd.”), are foreign corporations. Shanahan Aff. ¶ 4; Mukherjee Decl. ¶ 4. Although the indirect subsidiary of DRL Limited and subsidiaries and affiliates of Teva Ltd. conduct business in Pennsylvania, these subsidiaries and affiliates are separate legal entities with separate boards of directors that are managed and supervised independently of DRL Limited and Teva Ltd. Shanahan Aff. ¶ 15; Mukherjee Decl. ¶¶ 17-19.

         III. STANDARD OF REVIEW

         If a defendant moves to dismiss a lawsuit for lack of personal jurisdiction, then the plaintiff bears the burden of demonstrating the facts that establish jurisdiction. Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009). “[W]hen the court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor.” Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004). Thus, “[i]n deciding a motion to dismiss for lack of personal jurisdiction, we take the allegations of the complaint as true. But once a defendant has raised a jurisdictional defense, a plaintiff bears the burden of proving by affidavits or other competent evidence that jurisdiction is proper.” Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996) (citation omitted); see also Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330-31 (3d Cir. 2009).

         IV. DISCUSSION

         “Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.” Daimler AG v. Bauman, 134 S.Ct. 746, 753 (2014) (citing Fed.R.Civ.P. 4(k)(1)(A)). Pennsylvania's long-arm statute provides for jurisdiction “based on the most minimum contact with th[e] Commonwealth allowed under the Constitution of the United States.” 42 Pa. Cons. Stat. Ann. § 5322(b). Accordingly, “[t]he Due Process Clause of the Fourteenth Amendment sets the outer boundaries of [Pennsylvania's] authority to proceed against a defendant.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923 (2011). In order for a court to exercise personal jurisdiction over an out-of-state defendant, due process requires that the defendant have “certain minimum contacts with [the State] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).

         There are two types of personal jurisdiction: general jurisdiction and specific jurisdiction. O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 317 (3d Cir. 2007). “As th[e] Court has increasingly trained on the ‘relationship among the defendant, the forum, and the litigation, ' i.e., specific jurisdiction, general jurisdiction has come to occupy a less dominant place in the contemporary scheme.” Daimler, 134 S.Ct. at 758 (footnote omitted) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)).

         A Plaintiff may demonstrate that a court's exercise of personal jurisdiction is proper, by establishing that a court has either general jurisdiction or specific jurisdiction over the defendant, or by establishing that the defendant has consented to jurisdiction. See Bane v. Netlink, Inc., 925 F.2d 637, 640 (3d Cir. 1991).

         Plumbers contends that this Court has both general jurisdiction and specific jurisdiction over Jurisdiction Defendants. Additionally, Plumbers contends that several Jurisdiction Defendants consented to personal jurisdiction in Pennsylvania.

         A. General Jurisdiction

         “[O]nly a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there.” Daimler, 134 S.Ct. at 760. “A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic' as to render them essentially at home in the forum State.” Goodyear, 564 U.S. at 919. The paradigm forums, in which a corporation is reasonably regarded as at home, are the place of incorporation and the principal place of business. Daimler, 134 S.Ct. at 760. “The exercise of general jurisdiction is not limited to these forums; in an ‘exceptional case, ' a corporate defendant's operations in another forum ‘may be so substantial and of such a nature as to render the corporation at home in that State.'” BNSF Ry. Co. v. Tyrrell, 137 S.Ct. 1549, 1558 (2017) (quoting Daimler, 134 S.Ct. at 761, n.19). However, “the exercise of general jurisdiction in every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business' . . ., is unacceptably grasping.” Daimler, 134 S.Ct. at 761 (citation omitted). “The Fourteenth Amendment due process constraint described in Daimler. . . applies to all state-court assertions of general jurisdiction over nonresident defendants; the constraint does not vary with the type of claim asserted or business enterprise sued.” Tyrrell, 137 S.Ct. at 1558-59.

         Jurisdiction Defendants are not incorporated in Pennsylvania and do not have their principal place of business in Pennsylvania. Plumbers contends that this Court has general jurisdiction over Jurisdiction Defendants because of their continuous and systematic contacts with Pennsylvania. Daimler establishes, however, that engaging in a substantial, continuous, and systematic course of business is insufficient to establish general jurisdiction. A court may only assert general jurisdiction in a forum in which the corporation is regarded as home-typically, the place of incorporation or the principal place of business. Plumbers does not argue that this is an exceptional case in which Jurisdiction Defendants' operations in Pennsylvania are so substantial and important as to render them at home in Pennsylvania. Because Jurisdiction Defendants are not incorporated in Pennsylvania and do not have their principal place of business in Pennsylvania, they are not at home in Pennsylvania. Accordingly, this Court lacks general jurisdiction over Jurisdiction Defendants.

         B. Specific Jurisdiction

         The analysis of whether a forum state has sufficient minimum contacts to exercise specific jurisdiction over a nonresident defendant “focuses on ‘the relationship among the defendant, the forum, and the litigation.'” Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984) (quoting Shaffer, 433 U.S. at 204). “For a State to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State.” Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). The minimum contacts necessary to create specific jurisdiction “must arise out of contacts that the ‘defendant himself'' creates with the forum State.” Id. at 1122 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). The “analysis looks to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.” Id. “[A]lthough physical presence in the forum is not a prerequisite to jurisdiction, physical entry into the State-either by the defendant in person or through an agent, goods, mail, or some other means-is certainly a relevant contact.” Id. (citation omitted). Specific jurisdiction “depends on an ‘affiliation between the forum and the underlying controversy, ' principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State's regulation.” Goodyear, 564 U.S. at 919 (citation omitted).

         Accordingly, specific personal jurisdiction over a defendant exists when: (1) the defendant “purposefully directed [its] activities” at the forum; and (2) the litigation “arise[s] out of or relate[s] to” at least one of the defendant's activities in Pennsylvania. O'Connor, 496 F.3d at 317 (internal quotation marks omitted). If the “purposeful availment” and “relatedness” requirements are met, a court may exercise personal jurisdiction as long as the assertion of jurisdiction “comport[s] with ‘fair play and substantial justice'.” Burger King, 471 U.S. at 476 (citation omitted).

         While a court usually determines specific jurisdiction on a claim-by-claim basis, claim specific analysis may not be necessary “for certain factually overlapping claims.” O'Connor, 496 F.3d 312, 317 n.3 (3d Cir. 2007); see also Bhd. of Locomotive Eng'rs & Trainmen v. United Transp. Union, 413 F.Supp.2d 410, 417 (E.D. Pa. 2005) (“[W]here the considerations in analyzing jurisdiction do not differ between particular claims, a claim specific analysis is not necessary.”). Because Plumbers' claims all stem from the same conduct of Jurisdiction Defendants-the alleged intentional misrepresentation of the AWPs for their generic drugs-a claim-specific analysis is not necessary. Plumbers' Pennsylvania state law claims (“Pennsylvania Claims”), however, require separate analysis from Plumbers' claims against Jurisdiction Defendants for violations of the consumer protection laws of forty-eight additional states and two territories (“Non-Pennsylvania Claims”).

         1. Pennsylvania Claims

         a. Selling Defendants

         Selling Defendants sold their generic drugs in Pennsylvania to Plumbers' Members. The inquiry is whether Selling Defendants purposefully directed their activities at Pennsylvania when they sold their generic drugs in Pennsylvania, and whether Plumbers' claims arise out of or relate to the sale of these drugs. If the purposeful availment and relatedness requirements are met, then the final inquiry is whether the exercise of jurisdiction ...


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