Biocad JSC v. F. Hoffman-La Roche Ltd.

Background

Biocad JSC sued F. Hoffmann-La Roche Ltd., Roche Holding AG, Genentech, Inc., and R-Pharm JSC, alleging antitrust violations under federal and state law and related tort claims. Biocad alleged that the defendants engaged in conduct in Russia, including predatory pricing, tying arrangements, registration of a nonexistent drug, fraudulent auction bids, and conduct affecting distribution in the United States. Biocad claimed that it planned to enter the United States market with biosimilar versions of Roche’s cancer-treatment drugs.

The court previously dismissed Biocad’s amended complaint for lack of antitrust standing and failure to state viable claims under the Foreign Trade Antitrust Improvements Act, the Clayton Act, and the Robinson-Patman Act. The Second Circuit affirmed, concluding that the alleged conduct did not fall within the Foreign Trade Antitrust Improvements Act’s import exception. The court had not reached the personal-jurisdiction issue in the earlier dismissal.

Sanctions standards

The defendants sought sanctions under Rule 11 of the Federal Rules of Civil Procedure and 28 U.S.C. § 1927. Rule 11 requires that legal claims have a reasonable basis in existing law or in a nonfrivolous argument for changing the law, and it permits sanctions for violations. Section 1927 permits an award of excess costs, expenses, and attorneys’ fees when an attorney or self-represented litigant unreasonably and vexatiously multiplies the proceedings. The court explained that sanctions are discretionary and generally reserved for extreme cases.

Court’s analysis

The court declined to impose sanctions based on Biocad’s alleged failure to plead antitrust injury. Although Biocad’s original complaint was clearly deficient, the amended complaint and later briefing were not objectively unreasonable on that issue. Courts had taken different approaches to whether the probability of Food and Drug Administration approval was required to show that a prospective pharmaceutical-market entrant was prepared to enter the market. The Second Circuit had not conclusively resolved that question, and a concurrence supported treating approval probability as significant but not decisive.

The court also declined to impose sanctions for Biocad’s Foreign Trade Antitrust Improvements Act theory. Although the theory ultimately failed and rested on a strained reading of circuit precedent, the Second Circuit had recognized possible ambiguity in the statute’s language. The court therefore treated Biocad’s position as a nonfrivolous argument for extending or modifying existing law.

The court found no sanctionable basis in Biocad’s use of sections 15 and 26 of the Clayton Act because Biocad had relied on those provisions as remedial provisions connected to alleged Sherman Act violations, rather than as independent prohibitions. Biocad had withdrawn its separate Clayton Act section 14 claim in the amended complaint.

The court reached a different conclusion about the Robinson-Patman Act claim. Biocad argued that the Act covered alleged price discrimination between consumers in Russia and the United States. Biocad cited no case applying the statute to discriminatory pricing across national markets and devoted only three sentences to the issue in its opposition brief. The court held that sanctions were warranted for this claim under Rule 11.

The court declined to sanction Biocad for allegedly improper motives. The defendants’ evidence, including Biocad’s press releases and an earlier Russian lawsuit, did not definitively establish that Biocad brought the United States action to extract a settlement or use the United States courts to resolve Russian matters.

The court also declined to impose sanctions over Biocad’s arguments for personal jurisdiction over R-Pharm. The court found that some arguments were untenable and that Biocad had not presented a valid basis for jurisdiction. But Biocad had alleged that R-Pharm participated in a conspiracy involving conduct affecting United States drug prices, and Second Circuit precedent recognized a similar conspiracy-based jurisdiction theory. The court therefore concluded that the theory was arguably supported by existing law, even though the alleged facts were insufficient to state a plausible claim.

Disposition

Judge Richard J. Sullivan granted in part and denied in part the defendants’ sanctions motion. The court ordered Biocad to pay the defendants the attorneys’ fees and costs involved in responding to the Robinson-Patman allegations. Because that discussion represented approximately 4% of the pages the defendants spent responding to the amended complaint and litigating the sanctions motion, the court limited the fees proportionally. The defendants were ordered to submit their total costs, and Biocad was permitted to respond. The clerk was directed to terminate the pending sanctions motion.