Cases & Deals

Cardinal Health wins Seventh Circuit affirmance of dismissal of antitrust conspiracy claims

Client(s) Cardinal Health, Inc.

In an antitrust conspiracy case, the Seventh Circuit affirmed across-the-board the dismissal with prejudice of a second amended complaint (“SAC”) filed against Jones Day client Cardinal Health, Inc. (“Cardinal”). The litigation was first brought by a putative class in 2018. The litigation, which alleged a conspiracy to inflate the prices of Becton Dickinson (“BD”) syringes, safety syringes, and safety catheters (“Products”), was dismissed with prejudice in November 2018, but reversed and remanded by the Seventh Circuit on standing grounds, with leave to re-plead, in an opinion that also made clear that the complaint did not adequately allege a hub-and-spokes conspiracy involving distributors like Cardinal. On remand, plaintiffs abandoned both their hub-and-spokes conspiracy theory and four defendants (two group purchasing organizations and two distributors), alleging instead two separate vertical conspiracies, one between BD and Cardinal, and one between BD and McKesson. Cardinal and McKesson (“Distributors”) moved for dismissal based on plaintiffs’ lack of standing to sue Cardinal (from which plaintiffs had purchased no Products) as well as plaintiffs’ failure to adequately plead conspiracy. The court dismissed the SAC with prejudice on both grounds.  

Plaintiffs appealed. Although not actually pled in the SAC, their arguments rested on the theory that Defendants’ alleged actions necessarily had an impact on the entire market for the sale of the Products (as distinct from the distribution market in which Cardinal and McKesson participate) and that all purchasers of the Products were paying an inflated price for the Products because of the alleged separate conspiracies between BD and Cardinal, and BD and McKesson. The Seventh Circuit upheld the district court’s ruling that plaintiffs had no Article III standing to sue Cardinal because the injury Plaintiffs claimed was not fairly traceable to any Cardinal conduct, and further held that plaintiffs lacked antitrust standing to sue Cardinal because they did not purchase directly from Cardinal or its sole alleged co-conspirator, BD.  In so holding, the court adopted Defendants’ argument that without market power, it would be impossible for Cardinal or McKesson to raise prices on BD Products since purchasers could simply buy from other distributors not alleged to have conspired with BD. The court also agreed that plaintiffs failed to adequately allege a conspiracy, finding that many of the allegations in the SAC were simply recycled versions of allegations the court previously found insufficient, and that the new ones, which were “just as consistent with the Distributors’ rational, lawful self-interest in encouraging sales with a leading manufacturer,” fared no better.

Marion Diagnostic Center v. Becton Dickinson, No. 18-cv-01059 (S.D. Ill.); No. 18-3735 (7th Cir.)