KPH HEALTHCARE SERVICES, INC. v. JANSSEN BIOTECH, INC., 2:20-cv-05901

Background

BTG obtained a patent on abiraterone acetate in 1997; the licensee (Cougar) was later acquired by Janssen, which commercialized Zytiga (FDA approval 2011).
Janssen obtained a follow-on patent in 2013 (after earlier PTO rejections); generics filed ANDAs in 2015, and Janssen sued under Hatch‑Waxman, triggering regulatory delays.
The follow-on patent was later held invalid for obviousness by the PTAB and the courts, including the Federal Circuit.
KPH, as assignee of direct purchaser McKesson, sued Janssen and BTG under the Sherman Act, alleging overcharges caused by delayed generic entry; McKesson’s Distribution Agreement with Janssen contains a dispute‑resolution clause requiring mediation then arbitration of “any controversy or claim arising out of or relating to this Agreement.”
Defendants moved to compel arbitration and stay the case; the court found the arbitration clause sufficiently broad to cover the antitrust claims, compelled arbitration against Janssen, held BTG (a non‑signatory) could enforce arbitration via equitable estoppel, and found no waiver of arbitration.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Scope: Do KPH’s antitrust claims fall within the Distribution Agreement’s arbitration clause?	Antitrust/statutory claims fall outside arbitration or the clause is limited by the clause’s opening sentence about disputes “regarding this Agreement.”	Clause is broad (“arising out of or relating to this Agreement”) and covers antitrust overcharge claims tied to purchases under the Agreement.	Held: Claims arise out of/relate to the Agreement and are arbitrable.
Statutory‑claims waiver: Must waivers of litigation of statutory rights be explicit?	New Jersey law requires explicit waivers of statutory rights; antitrust claims therefore should not be swept into arbitration absent explicit language.	Remicade and commercial‑contract context permit arbitration of statutory claims under broad language.	Held: Remicade controls; explicit‑waiver rule for consumer/employment contexts does not bar arbitration here.
Non‑signatory enforcement: Can BTG (non‑signatory licensor) compel arbitration?	BTG cannot compel arbitration because it didn’t sign the Distribution Agreement.	BTG may enforce arbitration via equitable estoppel (and alternatively agency principles) because claims are intertwined and BTG detrimentally relied on Janssen’s agreement.	Held: BTG may compel arbitration under New Jersey equitable‑estoppel principles (detrimental reliance shown).
Waiver: Did defendants waive arbitration by litigating in court and delaying the motion?	Defendants litigated and waited ~10 months, filed a motion to dismiss, and followed court scheduling — conduct that waives arbitration and prejudices KPH.	Defendants timely sought arbitration after coordinating with court scheduling; limited litigation and no discovery mitigates waiver concerns.	Held: No waiver; Hoxworth factors weighed against finding waiver (notably no discovery and compliance with scheduling).

Key Cases Cited

MZM Constr. Co. v. N.J. Bldg. Laborers Statewide Benefit Funds, 974 F.3d 386 (3d Cir. 2020) (Rule 12(b)(6) standard where arbitration agreement appears on complaint’s face)
John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132 (3d Cir. 1998) (two threshold arbitrability questions: existence and scope of agreement)
CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165 (3d Cir. 2014) (arbitration refusal where clause limited to disputes over performance/interpretation)
In re Remicade (Direct Purchaser) Antitrust Litig., 938 F.3d 515 (3d Cir. 2019) (antitrust overcharge claims held arbitrable under similar broad clause)
Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (courts decide arbitrability absent clear delegation)
Moon v. Breathless Inc., 868 F.3d 209 (3d Cir. 2017) (apply state contract law to determine arbitration agreement formation/scope)
Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174 (N.J. 2013) (limits on compelling arbitration by non‑signatories; equitable estoppel and agency paths explained)
Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3d Cir. 2007) (waiver analysis and prejudice inquiry for arbitration rights)
Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912 (3d Cir. 1992) (prejudice is the touchstone for waiver of arbitration)
Cavlovic v. J.C. Penney Corp., 884 F.3d 1051 (10th Cir. 2018) (contrast where allegedly related claims did not actually depend on the contract)