360 F. Supp. 3d 730
E.D. Ill.2019Background
- Acthar (an ACTH drug) was acquired by Questcor in 2001 and later Mallinckrodt in 2014; plaintiffs allege Mallinckrodt and Express Scripts implemented an exclusive distribution program (ASAP) beginning in 2007 that limited distribution to Express Scripts and enabled dramatic price increases in Acthar.
- Plaintiffs are City of Rockford (self‑insured paying for two employees' Acthar) and Acument Global Technologies (covering an employee spouse via CVS); Rockford contracted with Express Scripts (ESI) under a PBM Agreement; Acument contracted with CVS Caremark.
- Plaintiffs allege a vertical price‑fixing and monopolization conspiracy: exclusive dealing with Express Scripts, failure to negotiate lower prices, and Mallinckrodt’s purchase and shelving of Synacthen to eliminate competition.
- Causes of action include federal antitrust (§§1,2), state antitrust/consumer protection claims (24 states), RICO (18 U.S.C. §1962(a),(c),(d)), fraud, unjust enrichment, breach of contract and related contract theories, and declaratory relief; defendants moved to dismiss under Rule 12(b)(6).
- Court accepted allegations as true for the pleading stage, found Rockford plausibly stated federal antitrust claims (Counts VI and VII) and state claims, but dismissed or required repleading on multiple counts: Acument lacked antitrust standing and many claims (RICO, fraud, contract, unjust enrichment, promissory estoppel, implied covenant) were dismissed without prejudice for pleading deficiencies; declaratory judgment dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antitrust standing (Article III and Illinois Brick/AGC) for Rockford | Rockford directly purchased from ESI and alleges co‑conspirator conduct making manufacturers jointly liable; therefore it has standing to sue both Express Scripts and Mallinckrodt | Defendants invoke Illinois Brick (indirect purchaser rule) and AGC proximate‑cause limits to bar claims, especially versus Mallinckrodt | Rockford has Article III and antitrust (AGC/Illinois Brick) standing to pursue §§1 and 2; claims against Mallinckrodt survive at pleading stage |
| Antitrust standing for Acument | Acument asserts injury from payments for Acthar and class claims | Defendants: Acument paid CVS (not an alleged conspirator), so it is an indirect purchaser without alleged co‑conspirator link; AGC factors unsatisfied | Acument lacks antitrust standing for federal §§1 and 2 and state antitrust claims; those counts dismissed without prejudice with leave to replead |
| §1 (Sherman Act) and §2 conspiracy-to-monopolize claims | Plaintiffs allege exclusive dealing (ASAP), price increases, market foreclosure via Synacthen acquisition, and Express Scripts’ agreement not to push back | Defendants contend vertical arrangements are rule‑of‑reason and insufficiently plead an agreement to fix the price paid by plaintiffs | Court: taking SAC as whole, plaintiffs plausibly alleged agreement, anticompetitive effect, and antitrust injury as to Rockford; §§1 and 2 survive for Rockford pending discovery |
| State‑law antitrust/consumer protection claims (multistate class) | Plaintiffs may plead state claims for unnamed class members; Rockford has federal AGC standing and thus should be regarded as proper party for state claims | Defendants challenge Article III standing to assert other states’ claims and AGC proximate‑cause and various state‑specific procedural requirements (notice, exhaustion, class‑action bars) | Court: deferred Article III/class‑representative standing questions to class stage; denied dismissal as to Rockford for the 24 states named; Acument’s state claims dismissed without prejudice; some state technical defenses deferred to later stages |
| Breach of contract / "cost containment" obligation under PBM Agreement (Rockford v. Express Scripts) | Rockford alleges ESI failed to provide cost‑containment and thus breached PBM Agreement | Express Scripts: "cost containment" appears only in recitals and is precatory/vague; no enforceable obligation pleaded | Court: dismissed breach claim without prejudice—recitals ambiguous and term vague; Rockford may replead specifying contractual basis and meaning of "cost containment" |
| RICO (§1962(a),(c),(d)) and predicate mail/wire fraud | Plaintiffs allege mail/wire fraud predicates via misleading communications and use of mail/wires in ASAP to defraud payors | Defendants: Rule 9(b) requires specificity (who, what, when, where, how); proximate cause requires direct relation between predicate acts and plaintiffs' injury | Court: dismissed RICO claims without prejudice for failure to plead predicate acts and proximate causation with required specificity; leave to replead |
| Common‑law fraud / conspiracy to defraud | Plaintiffs allege misrepresentations about prices and cost‑containment that induced payment/reimbursement | Defendants: complaints lack Rule 9(b) particularity as to identity, content, timing, and reliance; high price alone is not fraud | Court: fraud and conspiracy claims dismissed without prejudice for failure to meet Rule 9(b); reliance alleged adequately but factual specificity lacking |
| Unjust enrichment and promissory estoppel | Plaintiffs seek restitution for overpayments; alternative theories to contract claims | Defendants: express contract exists (for Rockford) so promissory estoppel/unjust enrichment not available; for Acument, exhaustion against CVS required (Tennessee) | Court: unjust enrichment and promissory estoppel dismissed without prejudice; Rockford may plead in the alternative but must allege lack of adequate legal remedy; Acument must plead exhaustion of remedies against CVS to proceed |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard for conspiracy claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of Twombly plausibility and use of judicial experience)
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (limits indirect purchaser recovery under federal law)
- Associated Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (AGC proximate‑cause factors for antitrust standing)
- Paper Sys., Inc. v. Nippon Paper Indus. Co., 281 F.3d 629 (7th Cir.) (co‑conspirator exception to Illinois Brick and joint‑and‑several liability)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (requirement to exclude independent action to infer conspiracy at summary/judgment stages)
- Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (proximate cause requirement in RICO claims)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (limits on RICO proximate causation and multi‑step causation concerns)
- Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (Rule 23 v. state procedural bars; class action permissibility in federal court)
- Int’l Bhd. of Teamsters v. Philip Morris Inc., 196 F.3d 818 (7th Cir.) (antitrust standing/AGC considerations)