Zimmer wins dismissal of federal antitrust and RICO litigation in Third Circuit
Clients Zimmer Holdings, Inc.
On June 1, 2010, the U.S. Court of Appeals for the Third Circuit, in a 3-0 decision, affirmed a dismissal with prejudice of federal antitrust and Racketeer Influenced and Corrupt Organizations Act (RICO) claims brought against Jones Day client Zimmer, Inc., denied plaintiffs leave to amend on remand, and directed entry of judgment in favor of the defendants with costs.
Plaintiffs brought suit against Zimmer and four other orthopedic implant manufacturers basing their allegations on the September 2007 Deferred Prosecution Agreements that Zimmer and other defendants entered into with the Department of Justice to resolve an investigation into consulting payments made to doctors. The plaintiffs alleged that these payments induced various physicians, hospitals, and medical institutions to use defendants' hip, knee, and joint replacements over those of the plaintiffs and deprived them of access to certain geographical markets for these products. Zimmer and the other defendants denied that these payments were illegal or improper and moved to dismiss. The district court agreed, dismissing the complaint in December 2008 with leave to amend. After plaintiffs filed their amended complaint, the defendants again moved for dismissal and the district court dismissed the plaintiffs' amended complaint in its entirety.
The Third Circuit, in affirming the district court's decision, adopted Jones Day's argument that the plaintiffs lacked standing to prosecute either their antitrust or RICO claims and failed to allege plausibly the elements of their claims on the merits. Specifically, the Third Circuit held that, considered as a whole, plaintiffs' allegations both established that their claimed injuries were not direct enough to establish standing under either statute and that any claims of a conspiracy or a RICO enterprise were implausible. More broadly, the Third Circuit went on to express doubt that its previously articulated pleading standards on the enterprise element of a RICO claim remain valid after recent U.S. Supreme Court decisions.
McCullough, et al. v. Zimmer, Inc., et al., No. 08-CV-1123 (W.D. Pa.), aff'd, No. 09-2105 (3d Cir.)