# MSP Recovery Claims, Series LLC v. Mallinckrodt Ard Inc.

> District Court, N.D. Illinois · March 23, 2020

URL: https://www.frixlaw.com/law-library/cases/10142402

## Case

- **Court:** District Court, N.D. Illinois
- **Decided:** March 23, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10142402

## How later opinions describe it (automated extraction)

- describing supply chains as including “manufacturers,” “distributors,” and “retailers.”
- stating that, at the motion-to-dismiss stage, the court “accept[s] as true all well-pleaded facts alleged”

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
WESTERN DIVISION

MSP Recovery Claims, Series LLC, )
et al., )
) Case No. 3:20 C 50056
Plaintiffs, )
) Judge John Z. Lee
v. )
)
Mallinckrodt ARD Inc., et al. )
)
Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiffs, consisting of MSP Recovery Claims, Series LLC (“MRCS”), MAO-
MSO Recovery, II, LLC, Series PMPI, and MSP Claims 1, LLC, filed an amended
class action complaint against Defendants Mallinckrodt plc and Mallinckrodt ARD,
Inc. (together, “Mallinckrodt”), as well as Express Scripts Holding Company,
Express Scripts, Inc., Curascript, Inc., and United Biosource LLC (together, “the
Express Scripts Entities”), alleging that Defendants have violated various federal
and state antitrust statutes and consumer-protection laws by artificially inflating
the price of the drug Acthar. Defendants have filed two motions to dismiss. For the
reasons set forth below, those motions are granted.
Background1

The specialty drug Acthar is an adrenocorticoptropic hormone currently

1 The following facts are taken from Plaintiffs’ amended complaint and are accepted
as true at this stage. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008)
(stating that, at the motion-to-dismiss stage, the court “accept[s] as true all well-pleaded
facts alleged”).
approved by the FDA for various uses, including the treatment of certain rare
illnesses such as infantile spasms and nephrotic syndrome. First Am. Compl.
(“FAC”) ¶¶ 106–109, ECF No. 165.

Medicare Advantage plans (“MA Plans”) are third-party payers that provide
Medicare benefits to their beneficiaries. Id. ¶ 1. Plaintiffs allege the Defendants
took actions to force these MA Plans to pay supra-competitive prices for Acthar.
Certain of these MA Plans have assigned to Plaintiffs their rights to recover for the
alleged overpayment. By way of example, MRSC asserts that it has obtained
assignments from (1) SummaCare, Inc., (2) EmblemHealth Services Company,
(3) ConnectiCare, Inc.,2 (4) University Health Care MSO, Inc. (“UNHC”), and

(5) Alianza Profesional de Cuidado Meidco (“APCM”), id. ¶¶ 16–20. MAO-MSO
Recovery II claims that it has an assignment from Preferred Medical Plan, Inc.
(“PMPI”), id. ¶¶ 65–67; and MSPA Claims 1 asserts an assignment from
Professional Health Choice (“PHC”), id. ¶¶ 69–73. Between 2013 and 2017, the MA
Plans that assigned their rights to Plaintiffs paid $125,550,620.09 for Acthar
prescriptions on behalf of their beneficiaries. Id. ¶ 6.

Plaintiffs claim that the Defendants have engaged in certain monopolistic
and anti-competitive behavior to artificially inflate the price of Acthar. Id. ¶ 7.

2 The Defendants, noting that the EmblemHealth and ConnectiCare assignments took
effect after Plaintiffs filed their original complaint (but before they filed their amended
complaint), contend that those assignments “are insufficient to convey constitutional
standing to Plaintiffs.” Mem. in Supp. of Mallinckrodt’s Mot. to Dismiss at 4, ECF No. 188;
see Mem. in Supp. of Express Scripts Entities’ Mot. to Dismiss at 13–14, ECF No. 191. But,
for reasons discussed below, the Court is not persuaded that Plaintiffs’ constitutional (or
prudential) standing depends on the EmblemHealth and ConnectiCare assignments.
Specifically, Plaintiffs assert that Mallinckrodt (formerly, Questcor
Pharmaceuticals), which manufactures and sells Acthar, acquired the rights to
Acthar’s only viable alternative, Synacthen, and then chose to withhold it from the

market in order to maintain its monopoly pricing. Id. ¶¶ 163–183. Mallinckrodt
agreed to pay $100 million to the Federal Trade Commission to settle claims that it
violated antitrust laws by purchasing the rights to Synacthen. Id. ¶ 179.
According to Plaintiffs, Mallinckrodt also entered into two exclusive
agreements relating to Acthar distribution, one that made CuraScript the exclusive
distributor of Acthar, and one that made United Biosource the exclusive operator of
the “Acthar Support & Access Program,” through which all Acthar prescriptions

must be obtained, id. ¶¶ 131–33. Plaintiffs assert that these agreements effectively
eliminated any incentive for Express Scripts Holding Company and Express Scripts,
Inc. (collectively, “ESI”)—one of the largest pharmacy benefit managers in the
United States and an affiliate of CuraScript and United Biosource—to negotiate
lower prices for Acthar on behalf of its clients. Id. ¶¶ 31, 153. Since 2001, Acthar’s
end-payer price has grown by 107,400%. Id. ¶ 146.

Based on this conduct, Plaintiffs allege that Mallinckrodt and the Express
Scripts Entities violated multiple sections of the Sherman Act, see 15 U.S.C. §§ 1–3
(Counts I and II), various state antitrust laws (Count III), and various state
consumer-protection laws (Count IV). FAC at 42–121. Plaintiffs seek injunctive
relief as to their federal claims and damages and injunctive relief as to their state
claims. Id. ¶¶ 203, 212, 220, 446.
Mallinckrodt and the Express Scripts Entities have each filed motions to
dismiss Plaintiffs’ amended complaint. See Mallinckrodt’s Mot. to Dismiss, ECF
No. 187; Mem. in Supp. of Mallinckrodt’s Mot. to Dismiss, ECF No. 188; Express

Scripts Entities’ Mot. to Dismiss, ECF No. 190; Mem. in Supp. of Express Scripts
Entities’ Mot. to Dismiss, ECF No. 191.
Legal Standard

To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint must
“state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). In this way, the complaint must put the defendants on “fair notice of what
the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
In addition, when considering motions to dismiss, the Court accepts “all well-
pleaded factual allegations as true and view[s] them in the light most favorable to

the plaintiff.” Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013).
At the same time, “allegations in the form of legal conclusions are insufficient to
survive a Rule 12(b)(6) motion.” McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d
873, 885 (7th Cir. 2012) (citing Iqbal, 556 U.S. at 678).
Analysis

I. Prudential Standing

A. MSP Recovery Claims, Series LLC

As Mallinckrodt points out, several of the exemplar assignments were
ultimately assigned to designated subseries of MRSC that are not named plaintiffs,
as opposed to MRSC itself. See, e.g., FAC ¶ 63 (explaining that all rights from the
assignment with SummaCare were later assigned to “Series 16-11-509, a series of
MSP Recovery Claims, Series LLC”); see generally MSP Recovery Claims, Series
LLC v. Farmers Ins. Exch., No. 2:17-cv-02522-CAS, 2018 WL 5086623, at *13 (C.D.
Cal. Aug. 13, 2018) (“Under Delaware law, an LLC may establish one or more ‘series
of members, managers or [LLC] interests’ which ‘may have separate rights, powers
or duties with respect to specified property or obligations of the [LLC] or profits and
losses associated with specified property or obligations’ as well as a ‘separate
business purpose or investment objective.’” (quoting Del. Code Ann. tit. 6, § 18-
215(a))).
But Mallinckrodt’s argument that MRCS lacks standing to sue on behalf of
its series is unpersuasive.3 See Mem. in Supp. of Mallinckrodt’s Mot. to Dismiss at
3–4. Delaware law “permit[s] an LLC to sue on behalf of its series if provided for in

3 Although Mallinckrodt frames this issue as one of Article III standing, Mem. in
Supp. of Mallinckrodt’s Mot. to Dismiss at 3–4, the Court deems it more properly a matter
of prudential standing. See G&S Holdings LLC v. Continental Cas. Co., 697 F.3d 534, 540
(7th Cir. 2012) (stating that the “prudential limitations on the exercise of federal
jurisdiction” include that, “in general, the plaintiffs must assert their own legal rights and
interests, and cannot rest their claims to relief on the legal rights or interests of third
parties”).
the operating agreement.” Farmers Ins. Exch., 2018 WL 5086623, at *13. And, in
response to Mallinckrodt’s motion to dismiss, MRSC has attached its operating
agreement, which states that “the Company is authorized to pursue or assert any

claim or suit capable of being asserted by any designated series arising from, or by
virtue of an assignment to a designated series.” ECF No. 197-1 at 1. “[T]he Court
construes . . . [the] filing of . . . MSP Recovery Claims, Series LLC’s operating
agreement as a Rule 15(d) supplemental pleading and finds it sufficient to
demonstrate plaintiff’s standing to assert claims on behalf of its series assignees.”
Farmers Ins. Exch., 2018 WL 5086623, at *14.
B. Standing to pursue injunctive relief.

The Court also rejects Defendants’ argument that Plaintiffs have not
plausibly alleged prudential standing to seek injunctive relief. 4 Cf. Biomed
Pharms., Inc. v. Oxford Health Plans (N.Y.), Inc., 775 F. Supp. 2d 730, 736 (S.D.N.Y.
2011) (where assignment “limit[ed] Biomed’s right to sue . . . to actions for money
damages[,] . . . the assignment provision d[id] not grant Biomed the right to seek
‘declatory and/or injunctive relief’”).

It is true that the assignments appear to focus on claims for damages. See,
e.g., FAC Ex. D, PMPI Recovery Agreement at 2, ECF No. 165-4 (stating that “MSP

4 Defendants again present this issue as one of Article III standing, see Mem. in Supp.
of. Mallinckrodt’s Mot. to Dismiss at 5; Mem. in Supp. of Express Scripts Entities’ Mot. to
Dismiss at 11–13. But the question here is whether claims for injunctive relief were
assigned to the Plaintiffs or instead retained by the assigners, a matter of prudential
standing. See RK Co. v. See, 622 F.3d 846, 851 (7th Cir. 2010) (“[P]rudential limitations
include concerns about a claim’s rightful owner.”).
Recovery’s services focus on the analysis, identification and recovery of conditional
payments that have already been made by [PMPI].” (emphasis added)); FAC Ex. M,
APCM Assignment at 1, ECF No. 165-13 (stating in the preamble that “MSP

Recovery desires to provide certain services to prosecute and recover amounts owed
on the Assigned Claims.” (emphasis added)).
But the Court is persuaded that language in the assignments is sufficiently
broad to encompasses the injunctive relief Plaintiffs seek. For instance, the
SummaCare assignment transfers “all rights and claims against . . . third parties .
. . including claims under consumer protection statutes and laws.” FAC Ex. A,
SummaCare Recovery Agreement at 4, ECF No. 165-1 (emphasis added); see also

PMPI Recovery Agreement at 3 (containing nearly identical language); FAC Ex. G,
EmblemHealth Assignment Agreement at 2, ECF No. 165-7 (containing nearly
identical language); FAC Ex. K, UNHC Recovery Agreement at 3, ECF No. 165-11
(containing similar language); FAC Ex. M, APCM Recovery Agreement at 2–3, ECF
No. 165-13 (containing similar language).
Furthermore, the ConnectiCare assignment contains the same language,

while also emphasizing that “[t]his Assignment includes all of Assignor’s right, title
and interest in and to the Assignor’s any legal or equitable actions, rights, causes of
action or lawsuits of any nature whatsoever, arising out of or in connection with [the
Assignor’s right to seek reimbursement and recover payments].” FAC Ex. I,
ConnectiCare Assignment at 2, ECF No. 165-9 (emphases added).5

5 As Defendants note, the PHC assignment Plaintiffs have attached to the amended
complaint does not identify the claims that were assigned. Specifically, the agreement
Furthermore, while Defendants contend that the scope of Plaintiffs’
assignments are limited in time and, therefore, cannot include claims for
prospective injunctive relief, Plaintiffs have plausibly alleged that their rights

under the assignments are ongoing. See, e.g., SummaCare Recovery Agreement at
6 (explaining that the assignment, which was effective as of May 12, 2017, “shall
have an initial term of one . . . year” and “shall automatically renew for successive
terms of one . . . year unless terminated as set forth below”); UNHC Recovery
Agreement at 6 (containing similar language); APCM Recovery Agreement at 5
(containing similar language). This is enough at the pleading stage.
Accordingly, the Court is satisfied that Plaintiffs have “allege[d] sufficient

factual matter, accepted as true, to nudge [their] claim that they are assignees of
the rights at issue ‘across the line from conceivable to plausible.’” MSPA Claims 1,
LLC v. Allstate Ins. Co., No. 17 C 1340, 2019 WL 4305519, at *2 (N.D. Ill. Sept. 11,
2019) (quoting Twombly, 550 U.S. at 570). 6

states that PHC “assign[s] and transfer[s] . . . the rights and causes of action set forth” in
a specific exhibit, yet Plaintiffs have not provided the Court with that exhibit. FAC Ex. F,
PHC Agreement at 1, ECF No. 165-6.

6 Mallinckrodt’s assertion that the exemplar assignments are limited to claims under
the Medicare Secondary Payer Provision also is unavailing. See Mem. in Supp. of
Mallinckrodt’s Mot. to Dismiss at 5–8. To support this contention, Mallinckrodt cites a
portion of the PMPI Assignment that in fact defeats its argument. See id. at 7 (“[A]ll claims
that have been or can be identified by MSP Recovery as being recoverable by the Client
pursuant to the Medicare Secondary Payer Act or any other contractual, statutory, equitable
or legal basis, whether state or federal, . . . and/or as a result of payments made for or on
behalf of a Medicaid beneficiary or as a result of any payment(s) made through any health
plan, shall be deemed Assigned Claims.” (emphasis added) (quoting PMPI Recovery
Agreement at 2)).
II. Antitrust Standing

Where Plaintiffs’ claims flounder are on the shores of antitrust standing.
“‘Antitrust standing’ refers to ‘doctrines that have arisen to clarify the
circumstances under which a particular [entity] may recover from an antitrust
violator.’” In re Broiler Chicken Antitrust Litig., 290 F. Supp. 3d 772, 810 (N.D. Ill.
2017) (quoting Loeb Indust., Inc. v. Sumitomo Corp., 306 F.3d 469, 480 (7th Cir.
2002)). “The two most prominent doctrines were set forth by the Supreme Court in
Illinois Brick Co. v. Illinois[, 431 U.S. 720, 737 (1977)], which held that indirect
purchasers are prohibited from seeking damages under federal antitrust law, and
Associated General Contractors of California, Inc. v. California State Council of

Carpenters[, 459 U.S. 519, 535 (1983)], which imposed a version of proximate
causation on antitrust claims.” In re Broiler Chicken, 290 F. Supp. 3d at 810–11.
Although states generally interpret their antitrust laws consistent with
federal case law, the Supreme Court held in California v. ARC America Corp., 490
U.S. 93 (1989), that state legislatures could “repeal” Illinois Brick and thus provide
for damages under state antitrust law for indirect purchasers. See In re Broiler

Chicken, 290 F. Supp. 3d at 811. Furthermore, in deciding whether to apply
Associated General Contractors to state-law antitrust claims—as opposed to a
different, and potentially more permissive proximate-cause test—courts look to
whether the relevant states’ highest courts have ruled on the issue. See City of
Rockford v. Mallinckrodt ARD, Inc., 360 F. Supp. 3d 730, 759 (N.D. Ill. 2019).
Here, despite its length, Plaintiffs’ amended complaint lacks sufficient facts
from which the Court can assess whether Plaintiffs meet the standard laid out in
Associated General Contractors or “even the least stringent state’s ‘proximate cause’

test.” Id. at 760. As Plaintiffs acknowledge, five of the seven assigners purchased
Acthar from entities that have no affiliation with Defendants, including Caremark,
LLC; Walgreens Specialty Pharmacy, LLC; Procare Pharmacy, LLC; and OptumRx,
Inc. See FAC ¶¶ 241, 265, 281, 568, 670; Resp. to Mots. to Dismiss at 12 n.16, ECF
No. 197. And this is difficult to square with Plaintiffs’ claim that “Defendants
control 100% of the [Acthar] market in . . . price,” and that they “own and operate
the supply chain.” Resp. to Mots. to Dismiss at 12 & n.16; see, e.g., Erie Ins. Co. v.

Amazon.com, Inc., 925 F.3d 135, 144 (4th Cir. 2019) (describing supply chains as
including “manufacturers,” “distributors,” and “retailers.”). Because it is not clear
what role these intermediary entities are playing or how that role is consistent with
Plaintiffs’ theory of antitrust standing, the Court cannot determine whether
Plaintiffs’ have satisfied the proximate causation requirement under Associated
General Contractors or some relevant lesser state standard. See City of Rockford,

360 F. Supp. 3d at 753 (“Until [the Court] knows the contours of [intermediary] CVS’
role in supplying Acthar to [plaintiff’s] employee’s spouse, the Court is not able to
engage in a complete application of the AGC factors to [plaintiff].”).
To be sure, two of Plaintiffs’ assigners—EmblemHealth and ConnectiCare—
purchased Acthar from Accredo Health Group Inc. (“Accredo”), which Plaintiffs
contend is an “ESI-affiliated entity.” Resp. to Mots. to Dismiss at 12 n.15. But the
amended complaint only makes a few brief references to Accredo, which is not a
Defendant in this action. FAC ¶¶ 27, 128, 132. This is not enough to plausibly
establish that Accredo was a co-conspirator in the alleged conspiracy, and thus not

enough to plausibly argue that EmblemHealth and ConnectiCare were entitled to
sue the named Defendants for damages notwithstanding the applicability of Illinois
Brick. Cf. City of Rockford, 360 F. Supp. 3d at 748–751 (discussing the “co-
conspirator” exception to Illinois Brick). And, even setting aside Illinois Brick,
Plaintiffs must provide more information as to Accredo’s role in supplying Acthar to
EmblemHealth and ConnectiCare’s beneficiaries, as well as Accredo’s role vis-à-vis
the named Defendants, before the Court can determine whether standing plausibly

exists under AGC or any other proximate-cause test. As such, Plaintiffs’ federal and
state antitrust claims (Counts I, II, and III) are dismissed.
Finally, the Court concludes that Plaintiffs’ state consumer-protection claims
suffer from the same shortcomings. As in City of Rockford, “[t]he parties put forth
no argument that [Associated General Contractors] is irrelevant to state-law
consumer protection claims.” 360 F. Supp. 3d at 759 n.18; see also In re Aluminum

Warehousing Antitrust Litig., No. 13-md-2481 (KBF), 2014 WL 4277510, at *38
(S.D.N.Y. Aug. 29, 2014) (dismissing indirect-purchaser plaintiffs’ state consumer-
protection claims because plaintiffs “failed to include any specific allegations of
proximate cause,” and “every state statute requires a direct or indirect allegation
supporting proximate cause”). Thus, for purposes of this order, “the Court considers
all of the state laws invoked by the [amended complaint] as state laws that implicate
Plaintiffs’ antitrust standing.” City of Rockford, 360 F. Supp. 3d at 759 n.18. And
because, as noted above, Plaintiffs have not pleaded sufficient facts to meet even
the least stringent state’s proximate-cause test, the Court dismisses Plaintiffs’
consumer-protection claims (Count IV).
Finally, Defendants argue that the Court should not provide Plaintiffs with
another opportunity to amend their complaints. But, discovery remains ongoing,
and the Court finds that Defendants would suffer no undue prejudice if Plaintiffs
are permitted to file a second amended complaint to address the deficiencies
outlined here. Therefore, the Court grants Plaintiffs leave to file a second amended
complaint. Any such complaint must be filed within 45 days of this order.7
Conclusion
For the foregoing reasons, Defendants’ motions to dismiss are granted.
Plaintiffs’ amended complaint is dismissed without prejudice. Plaintiffs may file a
second amended complaint within 45 days of this order.
ENTERED: 3/23/20

John Z. Lee
United States District Court Judge

7 Because standing is a threshold issue and any amendment likely will impact the
nature and scope of Plaintiffs’ claims, the Court declines to address Defendants’ arguments
under Rule 12(b)(6) at this time.
12

13

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10142402. Public record. Not legal advice.