Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Fla. Litigant found to have standing despite failure to alleviate its injury, (Jan 30, 2014)

By Edward L. Puzzo, J.D.

Procaps, bringing a lawsuit against Patheon for making an acquisition which placed an earlier agreement between the parties in antitrust jeopardy, had Article III standing to maintain the claims, despite having declined the opportunity to terminate the jeopardized agreement and alleviate its injury, the federal district court in Miami has ruled (Procaps S.A. v. Patheon Inc., January 29, 2014, Goodman, J.).

Background. Procaps and Patheon were developers and marketers, respectively, of softgel products. They had entered into a Collaboration Agreement to produce and market a particular brand of softgels. After the agreement was entered into, however, Patheon acquired another softgel company, Banner, that had been Procaps’ main competitor, giving rise to antitrust issues. Procaps filed a lawsuit alleging that Patheon’s acquisition of Banner had made the Collaboration Agreement between itself and Patheon illegal under state and federal antitrust laws.

At this juncture in the ongoing litigation, defendant Patheon contended that plaintiff Procaps lacked Article III standing to pursue its claims and therefore the court did not have jurisdiction to hear them. Patheon argued that it was Procaps’ own refusal to terminate the Collaboration Agreement, despite multiple offers from Patheon to do so, which was the actual cause of its purported antitrust injuries. Thus, Patheon argued, Procaps’ injuries were self-inflicted, depriving them of Article III standing to pursue their claims.

Article III standing. The court explained that one of the elements of Article III standing is causation: the injury must be fairly traceable to the challenged action of the defendant. Patheon alleged that Procap’s antitrust injuries were self-inflicted, because they could have alleviated the injury by terminating the Collaboration Agreement but they chose not to.

The causal chain between the defendant’s conduct and plaintiff’s injury may be broken where the plaintiff’s self-inflicted injury results from its knowing and unreasonable decision to walk into the harm, the court conceded. However, the court continued, the mere fact that the plaintiff’s own decisions played a role in its injury did not obviate the causal connection between the defendants’ conduct and the plaintiff’s injury. An injury is considered self-inflicted only if it is completely due to the plaintiff’s own fault.

The underpinning of Patheon’s argument, the court opined, was that it was Procaps’ responsibility to avoid the consequences of Patheon’s unlawful conduct. Taking Patheon’s argument to its logical conclusion, the court continued, would mean that a defendant could commit unlawful acts and injure a plaintiff, but that the plaintiff would never have standing to sue so long as it was somehow possible for it to avoid the injury from the defendant’s unlawful acts. In the antitrust context specifically, the court continued, Patheon’s argument would mean that when there was a contract between the parties, an antitrust plaintiff would have no standing, so long as it could terminate the illegal agreement. The law does not support such a position, the court stated.

Procaps’ failure to agree to terminate the agreement, or pursue an injunction blocking Patheon’s acquisition of Banner, may well have contributed to its antitrust injury, the court conceded, but its actions were not the entire cause of its antitrust injury so as to break the causal chain Patheon started when it acquired Banner. Not taking steps to avoid injury inflicted by another is not the same as causing the injury, the court stated. Consequently, the court ruled that Procaps did have Article III standing, because its injuries were not entirely self-caused. The court denied without prejudice Patheon’s motion for judgment on the pleadings.

The court also noted that its ruling on standing would not preclude a summary judgment motion on the same self-inflicted injury theory, or prevent the self-inflicted injury argument from being raised during or after trial.

The case is Civil Action No. 12-24356-CIV-GOODMAN

Attorneys: Chris S. Coutroulis (Carlton Fields Jorden Burt, P.A.) for Procaps S.A. David A. Vogel (Cooley, LLP) for Patheon Inc.

Companies: Procaps S.A.; Patheon Inc.

Cases: Antitrust FloridaNews