29 F.4th 337
7th Cir.2022Background
- Plaintiffs (two small Illinois healthcare providers, putative class) challenge alleged conspiracies to raise prices for conventional syringes, safety syringes, and safety IV catheters manufactured by Becton, Dickinson & Co. (BD).
- BD is alleged to dominate the product markets (≈55–60% share) and charge materially higher prices than rivals; providers obtain contractual terms through GPO-negotiated “Net Dealer Contracts” but purchase from distributors (e.g., McKesson, Cardinal).
- FAC originally alleged a hub-and-spokes conspiracy involving BD, GPOs, and multiple distributors; this court (Marion I) held the FAC deficient because it failed to allege distributor coordination and permitted an amendment.
- On remand Plaintiffs filed a SAC narrowing claims to two vertical conspiracies (BD–McKesson and BD–Cardinal) and dropped the horizontal/distributor-group theory; Plaintiffs purchased only from McKesson, not Cardinal.
- The district court dismissed the SAC for (1) lack of standing to sue Cardinal (Article III / Illinois Brick) and (2) failure to plausibly plead a vertical conspiracy with McKesson; the Seventh Circuit AFFIRMED.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue Cardinal (Article III) | Plaintiffs paid supracompetitive prices affected by BD–Cardinal conduct so injury is fairly traceable to Cardinal | Plaintiffs did not purchase from Cardinal; alleged injury is not fairly traceable to Cardinal's conduct | No Article III standing; Plaintiffs' injury not fairly traceable to Cardinal |
| Direct-purchaser rule / Illinois Brick exception | Conspirator-exception allows suing a co-conspirator even if purchases were from a different conspirator | SAC alleges two separate vertical conspiracies, not a single conspiracy tying distributors together | Illinois Brick/conspirator-exception inapplicable because Plaintiffs do not purchase from Cardinal and no horizontal conspiracy alleged |
| Sufficiency of vertical conspiracy pleading (BD–McKesson) | Distributors received commissions, bonuses, perks, enforce Net Dealer terms, monitor providers, supply BD info — supporting quid pro quo and conscious commitment | Conduct (communications, incentives, contract enforcement, marketing) is consistent with lawful distributor self-interest and routine manufacturer-distributor coordination | Allegations fail Monsanto/Twombly plausibility standard; no plausible conscious commitment to a common unlawful scheme; claim dismissed |
| Need to allege distributor market power | BD has product-market power; conspiracy plausibly raises prices even if distributors lack market power | Plaintiffs allege no distribution-market power for Cardinal or McKesson; without distributor market power, conspiracy cannot plausibly explain supracompetitive prices across different distributors | Court did not decide market-power issue on merits but found absence of distributor-market-power allegations undermines plausibility and relevance to Illinois Brick analysis |
Key Cases Cited
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (direct-purchaser rule bars recovery by indirect purchasers)
- Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (vertical conspiracy requires conscious commitment to a common unlawful scheme)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (antitrust conspiracy pleadings must be plausible; parallel conduct insufficient)
- Paper Sys., Inc. v. Nippon Paper Indus. Co., 281 F.3d 629 (direct purchaser may sue any co-conspirator; allocation of right to sue to first non-conspirator)
- Marion Healthcare, LLC v. Becton Dickinson & Co., 952 F.3d 832 (7th Cir. 2020) (earlier opinion vacating dismissal and describing defect in FAC)
- Loeb Indus., Inc. v. Sumitomo Corp., 306 F.3d 469 (Article III standing where defendants’ conduct in one market affected prices in another)
- Sanner v. Board of Trade of City of Chicago, 62 F.3d 918 (standing where futures-market manipulation caused cash-market harm)
- Apple v. Pepper, 139 S. Ct. 1514 (Illinois Brick analysis focuses on buyer–seller relationship)
- Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (vertical restraints analyzed under rule of reason)