JM Smith Corporation v. AstraZeneca Pharmaceuticals L P
- Colleen McMahon
- 1:19-cv-07233
- U.S. District Court · Southern District of New York
- 20
In JM Smith v. AstraZeneca, Judge McMahon transferred the antitrust class action to Delaware under a contract’s forum-selection clause.
JM Smith Corporation, the proposed direct-purchaser class, and all defendants were affected because the entire case was transferred from the Southern District of New York to the District of Delaware.
What happened
JM Smith Corporation sued AstraZeneca Pharmaceuticals L P and other defendants, claiming agreements delaying generic Seroquel XR competition violated federal antitrust law. Smith brought the case for itself and proposed direct-purchaser class members.
The defendants asked the court to dismiss the case or transfer it. They argued that Smith’s agreements with AstraZeneca required related lawsuits to be filed in Delaware. Smith disputed that its antitrust claims were covered and argued that transferring the case would be unfair and inefficient.
Judge Colleen McMahon granted the defendants’ motion to transfer the entire case to the U.S. District Court for the District of Delaware. The court did not decide whether the alleged antitrust violations occurred or whether the defendants were liable.
The detailed version
- JM Smith Corporation v. AstraZeneca Pharmaceuticals L P · No. 1:19-cv-07233
- Colleen McMahon
- Aug. 11, 2020
Background
JM Smith Corporation, doing business as Smith Drug Company, brought an antitrust class action for itself and proposed direct-purchaser plaintiffs. Smith alleged that AstraZeneca Pharmaceuticals L.P., AstraZeneca L.P., AstraZeneca UK Limited, Handa Pharmaceuticals, LLC, and Par Pharmaceutical, Inc. entered into agreements that delayed or suppressed competition from generic versions of Seroquel XR, an extended-release drug. Smith asserted five claims under Sections 1 and 2 of the Sherman Act concerning several strengths of the drug.
Smith alleged that the delayed generic competition caused direct purchasers to pay more for Seroquel XR. The defendants identified two distribution-services agreements between Smith and AstraZeneca. Those agreements required Smith to maintain specified inventory and purchasing levels for AstraZeneca products, including the Seroquel XR strengths at issue. They also included a mandatory forum-selection clause requiring actions related to the agreements to be brought exclusively in state or federal courts in Delaware. The agreements selected Delaware law.
Motions and Issues
The defendants moved to dismiss for lack of personal jurisdiction, improper venue, and failure to state a claim. In the alternative, they moved under 28 U.S.C. § 1404(a) to transfer the case to the District of Delaware. The court addressed the transfer request first and did not decide the personal-jurisdiction issue in the Southern District of New York.
The court applied the federal transfer statute, which permits transfer for the convenience of the parties and witnesses and in the interest of justice. Because the defendants relied on a forum-selection clause, Smith had to make a strong showing that enforcement would be unreasonable or unjust. The court found that Smith did not dispute that the clause was clearly communicated or mandatory.
Claims Against AstraZeneca
Applying Delaware law, the court held that the clause’s coverage of actions “arising out of or relating to” the agreements was broad. The court concluded that Smith’s antitrust claims related to the agreements because those agreements governed the quantity of Seroquel XR that Smith purchased, and those purchases formed the basis of Smith’s direct-purchaser claims and alleged overcharge damages. The fact that Smith asserted antitrust rather than contract claims did not change that conclusion.
The court also rejected Smith’s argument that public-interest considerations made enforcement unreasonable or unjust. It found that the case was not a localized New York controversy, that the alleged conduct and relevant transactions occurred outside New York, and that the District of Delaware’s docket was not a sufficient extraordinary circumstance to overcome the forum-selection clause.
Claims Against the Other Defendants
The forum-selection clause did not bind AstraZeneca UK Limited, Handa, or Par. The court nevertheless considered the transfer factors for the claims against those defendants because the law generally requires transfer of the entire action rather than individual claims.
The court found that Smith’s choice of the Southern District of New York deserved less weight because Smith was located in South Carolina, sought to represent a nationwide class, and had agreed to litigate related claims against AstraZeneca in Delaware. The witness-convenience and party-convenience factors were neutral. The court found that the interest of justice strongly favored transfer because the claims against all defendants were factually related, all defendants could be subject to jurisdiction in Delaware or consented to it for this litigation, and transfer would keep the case together while honoring the forum-selection clause.
Disposition
The court held that transfer was warranted under Section 1404(a) for all claims against all defendants. Judge Colleen McMahon granted the defendants’ motion to transfer the case to the United States District Court for the District of Delaware. The clerk was directed to close the motion at Docket No. 68 and transfer the case. The opinion does not state a disposition of the defendants’ separate motion to dismiss for failure to state a claim at Docket No. 69, and it does not resolve the merits of Smith’s antitrust claims.
Read the full 20-page opinion on CourtListener, the free public archive maintained by the Free Law Project.