Verax Biomedical Inc. v. American National Red Cross

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

___________________________________

)

VERAX BIOMEDICAL INC., )

)

Plaintiff, )

) Civil Action

v. ) No. 23-10335

)

AMERICAN NATIONAL RED CROSS, )

)

Defendant. )

______________________________ )

MEMORANDUM AND ORDER

January 19, 2024

Saris, D.J.

INTRODUCTION

Defendant American National Red Cross (“ARC”) is the largest

supplier of blood platelets in the United States. Platelets are

used to treat patients with cancer, blood disorders, critical

injuries, and major surgeries. But platelets are susceptible to

bacterial contamination, which can cause serious side effects in

transfusion recipients. In the past, ARC sold platelets to

hospitals, which then separately employed services to mitigate the

risk of platelets becoming infected (“mitigation services”). The

United States Food and Drug Administration (“FDA”) has endorsed

the safety and effectiveness of multiple mitigation services.

Plaintiff Verax Biomedical Inc. (“Verax”) manufactures one such

mitigation service, a test called PGDprime1 that detects bacterial

growth.

In July 2020, ARC announced its plan to pretreat all platelets

it sold using Cerus Corporation’s INTERCEPT Blood System, an FDA-

approved pathogen reduction treatment. Verax’s PGDprime can be

used with other mitigation services, but not with INTERCEPT. Verax

now sues ARC for allegedly leveraging its power in the market for

platelets to monopolize the market for mitigation services, in

violation of the Sherman Act (Counts I-III). Verax also alleges

that ARC made false and disparaging statements about PGDprime to

Verax’s customers, in violation of state law (Counts IV-VI). ARC

moves to dismiss all counts pursuant to Fed. R. Civ. P. 12(b)(6).

After a hearing, the Court ALLOWS IN PART and DENIES IN PART ARC’s

motion (Dkt. 18).

BACKGROUND

Drawing all inferences in favor of Verax, the Court accepts

the following factual allegations from the complaint as true.

I. Blood Platelets

Platelets are “cell fragments in blood that bind together to

form clots, which stop bleeding and repair damaged blood vessels.”

Dkt. 1 at 5. The human body naturally produces its own platelets,

but some patients “need recurring platelet transfusions because

1 Stylized as “PGDprime.” See, e.g., Dkt. 1 at 4.

their illnesses prevent or reduce the formation of platelets[,] or

degrade the effectiveness” of the platelets. Id. at 6. Hospitals

purchase platelet “doses” -- bags each containing enough platelets

for a single transfusion -- from “blood centers” that collect and

process platelets from unpaid volunteers. Id.

The national market for platelets is “severely supply

constrained.” Id. at 7. This is partly because extracting a donor’s

platelets is more intensive than collecting other blood products.

Drawing platelets from a single donor takes around three hours and

yields only one to three doses. Platelets are scarce also because

they are susceptible to bacterial contamination that renders them

unsafe for transfusion. This gives them a short shelf-life once

harvested. Moreover, the onset of the COVID-19 pandemic led to a

ten-percent decline in platelet donations. ARC has called the

current shortage of platelets and other blood products a “national

blood crisis.” Id.

II. Bad Blood

Because platelets are prone to bacterial contamination, FDA

regulations require “[b]lood collection establishments and

transfusion services [to] assure that the risk of bacterial

contamination of platelets is adequately controlled using FDA

approved or cleared devices or other adequate and appropriate

methods found acceptable for this purpose by FDA.” 21 C.F.R.

§ 606.145(a) (2015). In September 2019, the FDA published

nonbinding guidance listing mitigation services compliant with 21

C.F.R. § 606.145(a). See U.S. Food & Drug Admin., Bacterial Risk

Control Strategies for Blood Collection Establishments and

Transfusion Services to Enhance the Safety and Availability of

Platelets for Transfusion: Guidance for Industry (2019) (“2019

Guidance”). The 2019 Guidance recommends mitigation services

including Pathogen Reduction Treatment (“PRT”), which is a

chemical and light treatment that inhibits bacterial growth, and

Large Volume Delayed Sampling (“LVDS”), Primary Culture, and Rapid

Secondary Testing, which are bacterial testing protocols. Id. at

5-8. Notably, the FDA endorses PRT and LVDS as “single-step

strateg[ies],” meaning that applying either one on its own

satisfies the FDA’s regulations and renders platelets safe for

transfusion within a certain timeframe. Id. at 5. By contrast, the

2019 Guidance lists Rapid Secondary Testing as half of a “two-step

strategy,” meaning that it needs to be used in conjunction with

LVDS or Primary Culture to render platelets safe and FDA-compliant.

The FDA does not endorse using Rapid Secondary Testing together

with PRT. See generally id. at 5-8.

In December 2020, the FDA updated the 2019 Guidance to extend

the deadline for implementing its recommendations until October

2021. See U.S. Food & Drug Admin., Bacterial Risk Control

Strategies for Blood Collection Establishments and Transfusion

Services to Enhance the Safety and Availability of Platelets for

Transfusion: Guidance for Industry (2020) (“2020 Guidance”). “The

FDA has expressed no preference” among its recommended mitigation

services. Dkt. 1 at 9. Nevertheless, mitigation services differ in

price and in their effects on platelet quality, platelet shelf-

life, “dose, availability[,] and other factors that could affect

clinical utility.” Id. at 10; 2020 Guidance at 5-8.

III. Parties

Verax is a corporation with its principal place of business

in Marlborough, MA. Verax develops, validates, and commercializes

FDA-cleared tests for detecting bacterial growth in platelets.

Verax’s products include PGDprime, a Rapid Secondary Test that it

sells to hospitals. PGDprime “takes only three minutes to perform,”

“generates results in about thirty minutes,” “uses only a nominal

sample of each platelet dose,” “has no adverse impact on platelet

quality or efficacy,” results in platelets with a seven-day shelf-

life, and costs only $25 per dose. Dkt. 1 at 12-13.

ARC is a federally chartered nonprofit corporation with its

principal place of business in Washington, D.C. It was founded in

1881, reincorporated in 1893, and given its first federal charter

in 1900. Am. Nat’l Red Cross v. S.G., 505 U.S. 247, 250 (1992). By

statute, ARC is responsible for “provid[ing] volunteer aid in time

of war to the sick and wounded of the Armed Forces” pursuant to

the United States’s obligations under the Geneva Convention and

other treaties. 36 U.S.C. § 300102(1). It is also tasked with

“carry[ing] out a system of national and international relief in

time of peace, and . . . apply[ing] that system in mitigating the

suffering caused by . . . great national calamities.” Id.

§ 300102(4). Among other activities, ARC “collects free donated

platelets at its blood centers” and sells those platelets to

hospitals across the country. Dkt. 1 at 7. ARC is “the largest

supplier of platelets in the United States,” accounting for “more

than 40% of all platelets sold” in the country. Id. It is “the

sole supplier of platelets to many hospitals and in some regions

in the United States.” Id.

In 2007, Congress added language to ARC’s statutory charter

describing it as “a Federally chartered instrumentality of the

United States.” See The American National Red Cross Governance

Modernization Act of 2007, Pub. L. No. 110-26, § 3(1), 121 Stat.

103 (2007) (codified at 36 U.S.C. § 300101(a)) (“Modernization

Act”). In the Modernization Act, which amended the charter,

Congress stated that ARC “is and will remain a Federally chartered

instrumentality” and that ARC has “the rights and obligations

consistent with that status.” Id. §§ 2(b)(4)-(5). Since 1905, ARC’s

charter has allowed it to “sue and be sued.” 36 U.S.C.

§ 300105(a)(5); see also 36 U.S.C. § 2 (1905).

IV. ARC’s Policy Change

Prior to July 2020, ARC sold both platelets treated with PRT

and so-called “untreated” platelets “that had been tested with

either a Primary Culture or LVDS” but not treated with PRT. Dkt. 1

at 13. ARC’s untreated platelets were “compatible with multiple

different bacteria mitigation services,” including Verax’s less

expensive PGDprime, so hospitals buying platelets from ARC could

choose which mitigation services to use and from whom to purchase

them. Id.

In July 2020, ARC announced plans to stop selling untreated

platelets and to perform PRT on all platelets prior to sale. ARC

entered an exclusive dealing contract with Cerus Corporation

(“Cerus”), which produces the INTERCEPT Blood System, the only

FDA-approved PRT technology for platelets. Dkt. 1 at 10, 16. Per

their contract, ARC has agreed to sell only platelets treated with

INTERCEPT to hospitals. ARC has indicated that it will fully

transition to selling only platelets treated with INTERCEPT by

some point in 2023.

PRT technologies like INTERCEPT “result[] in the loss of

approximately 10-15% of the platelet product,” “degrade[]

platelets, rendering them less efficacious,” result in platelets

with only a five-day shelf-life, and are more expensive than other

mitigation services. Id. at 10-11, 14 (noting that ARC’s INTERCEPT-

treated platelets will cost hospitals $150 per dose). PRT “has

been associated with two transfusion-related deaths from sepsis

caused by bacterial contamination” that the treatment did not

eliminate. Id. at 11. According to Verax, ARC’s plan will make it

“impossible” for hospitals to purchase mitigation services from

Verax, as the FDA has not endorsed pairing Rapid Secondary Tests

like PGDprime with PRT technologies like INTERCEPT. Id. at 14.

Verax alleges that ARC’s policy will harm patients by decreasing

platelet quality and increasing safety risks, and harm hospitals

by raising costs and eliminating choice.

V. ARC’s Statements about Verax

Verax claims that over the course of several years, ARC

knowingly made a series of false or misleading statements about

PGDprime to Verax’s customers. For example, in July 2020, ARC sent

hospitals that purchased PGDprime a document titled “The American

Red Cross Approach to Platelet Safety, Implementation Plan for

Bacterial Control Strategies, Frequently Asked Questions” (“FAQ”).

Dkt. 1 at 17. ARC also published the FAQ on its website. In it,

ARC asserted first that “secondary, point-of-issue . . . bacterial

testing (e.g., the Verax PGD test) involves a new testing regimen

for most hospitals, is time consuming to perform and involves

significant cost both in materials and staff time.” Id. Second, it

declared that “[PRT] platelets offer the best and most efficacious

approach to ensuring platelet safety while sustaining the blood

supply.” Id. at 18. Third, it stated that providing platelets

compatible with Verax’s test would “add additional costs and

inventory management complexity[,] potentially compromising the

platelet supply.” Id. Fourth, it explained that ARC decided to

sell only PRT-treated platelets to “protect the safety and

availability of the platelet supply.” Id. Fifth, it expressed that

PRT “contributes to a stronger blood supply by qualifying more

units for transfusion through the elimination of false positives

associated with . . . rapid testing.” Id. at 19. And sixth, it

touted that PRT-treated platelets “offer substantial patient

safety benefits and improved inventory simplification.” Id.

ARC also discussed Verax in its Winter 2020 newsletter, which

ARC published online and distributed to hospitals including

Verax’s customers. The newsletter stated that “[p]erformance of

secondary . . . rapid testing (e.g., Verax testing) adds

additional labor, cost to the transfusion service, and reduces the

final product volume.” Id. at 20. Finally, between 2015 and October

2021, ARC told Verax’s customers that PGDprime could not extend

the shelf-life of untreated platelets sold by ARC from five to

seven days. During the same period, ARC tried to convince Verax’s

customers to switch from buying untreated platelets to buying PRT-

treated platelets by stating that “PRT broadly qualifies for

Medicare/Medicaid reimbursement, implying that PGDprime did not,”

even though “both PRT and PGDprime qualify for reimbursement under

the exact same circumstances.” Id. at 21.

VI. Procedural History

Verax filed this suit against ARC on February 14, 2023. See

Dkt. 1. It raised three counts under the Sherman Act: tying

(Count I), exclusive dealing (Count II), and attempted

monopolization (Count III). It also raised three counts under state

law: unfair methods of competition and unfair and deceptive

practices (Count IV), defamation (Count V), and tortious

interference with contractual relations (Count VI). ARC moved to

dismiss all counts on April 17, 2023. See Dkt. 18. On August 4,

2023, the United States filed a statement of interest under 28

U.S.C. § 517, arguing that contrary to ARC’s assertions, ARC can

be sued under the Sherman Act. See Dkt. 34. The Court held a

hearing on the motion on September 28, 2023. See Dkt. 39.

LEGAL STANDARD

When considering a motion to dismiss under Federal Rule of

Civil Procedure 12(b)(6), the Court accepts the well-pleaded

allegations in the complaint as true and construes reasonable

inferences in the plaintiff’s favor. Breiding v. Eversource

Energy, 939 F.3d 47, 49 (1st Cir. 2019). “To survive a motion to

dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on

its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Plausible,

of course, means something more than merely possible, and gauging

a pleaded situation’s plausibility is a context-specific job that

compels [the court] to draw on [its] judicial experience and common

sense.” Schatz v. Republican State Leadership Comm., 669 F.3d 50,

55 (1st Cir. 2012) (cleaned up).

DISCUSSION

I. Antitrust Claims (Counts I-III)

Verax brings three claims under the Sherman Act: tying

(Count I), exclusive dealing (Count II), and attempted

monopolization (Count III). The Sherman Act prohibits

“contract[s], combination[s] . . . or conspirac[ies], in restraint

of trade or commerce,” as well as “attempt[s] to monopolize . . .

any part of” interstate commerce. 15 U.S.C. §§ 1-2. As a

preliminary matter, parties dispute whether ARC is subject to

liability under the Sherman Act at all. To determine whether the

Sherman Act reaches ARC, the Court applies the two-step analysis

articulated in FDIC v. Meyer, 510 U.S. 471, 484 (1994). The Court

must first ask whether there is a waiver of sovereign immunity for

actions against ARC. U.S. Postal Serv. v. Flamingo Indus. (USA)

Ltd., 540 U.S. 736, 743 (2004). The second question is “whether

the substantive prohibitions of the Sherman Act apply” to ARC. Id.

The answer to the first question is yes. Since 1905, ARC’s

statutory charter has stated that ARC may “sue and be sued in

courts of law and equity, State or Federal, within the jurisdiction

of the United States.” 36 U.S.C. § 300105(a)(5); see 36 U.S.C § 2

(1905). This language in the charter constitutes a waiver of ARC’s

sovereign immunity. See Flamingo, 540 U.S. at 743. But “[a]n

absence of immunity does not result in liability if the substantive

law in question is not intended to reach the federal entity.” Id.

at 744. Thus, the next question is whether “the substantive

antitrust liability defined by the statute extends to” ARC. Id.

As to the second question, the Sherman Act “imposes liability

on any ‘person,’” which includes “corporations and associations

existing under or authorized by the laws of . . . the United

States.” Flamingo, 540 U.S. at 744-45 (citing 15 U.S.C. § 7).

“[T]he United States is not an antitrust ‘person,’ in particular

not a person who can be an antitrust defendant.” Id. at 745. “The

remaining question, then, is whether for purposes of the antitrust

laws,” ARC “is a person separate from the United States itself.”

Id. at 746. ARC argues that as a federal instrumentality, it is

not. Both Verax and the United States argue that it is.

The Supreme Court’s decision in United States Postal Service

v. Flamingo Industries (USA) Ltd. gives a birds-eye view of the

legal framework. Id. At issue in Flamingo was whether the United

States Postal Service (“USPS”) is an antitrust “person” separate

from the United States. Id. at 746. Analyzing both the “form and

function” of USPS, the Court held that it is “part of the

Government of the United States and so is not controlled by the

antitrust laws.” Id. at 748.

As to form, the Court focused on USPS’s enabling statute,

which describes it as “an independent establishment of the

executive branch of the Government of the United States.” Id. at

740 (citing 39 U.S.C. § 201). This “statutory designation,” the

Court held, is “not consistent with the idea that [USPS] is an

entity existing outside the Government.” Id. at 746. Had Congress

created USPS as a corporation, the Court suggested it “would have

[had] to ask whether the Sherman Act’s definition” of a “person,”

which includes corporations, covered USPS. Id. But the Court did

not decide whether or under what circumstances a federally

chartered corporation would be an antitrust person separate from

the United States. Id.

As to function, the Court noted that USPS has “different

goals, obligations, and powers from private corporations.” Id. at

747. The Court stated that “[t]he most important difference”

between USPS and private corporations is that USPS “does not seek

profits, but only to break even, . . . which is consistent with

its public character.” Id. USPS also fulfills public obligations

“including the provision of universal mail delivery, the provision

of free mail delivery to certain classes of persons, and . . .

increased public responsibilities related to national security.”

Id. (internal citation omitted). Finally, the Court noted that

USPS exercises “many powers more characteristic of Government than

of private enterprise,” including “the power of eminent domain,

and the power to conclude international postal agreements,” which

also supported treating USPS as a public rather than private entity

under the antitrust laws. Id.

Two years after Flamingo, the Sixth Circuit considered

whether the Tennessee Valley Authority (“TVA”), a corporation

created by federal statute, is subject to liability under the

Sherman Act. See McCarthy v. Middle Tenn. Elec. Membership Corp.,

466 F.3d 399, 412-14 (6th Cir. 2006) (citing 16 U.S.C. § 831).

Noting it was not an “easy question,” the Sixth Circuit held that

TVA is a separate antitrust person from the federal government.

Id. at 414 (quoting Flamingo, 540 U.S. at 746). The court reasoned

that “the key distinction presented by Flamingo, that the TVA is

a federal corporation unlike the Postal Service, supports the

conclusion that the TVA is not immune from antitrust liability”

even though it has “certain public characteristics.” Id.

With Flamingo as a guide, this Court concludes that in both

form and function, ARC is not an antitrust person. The issue is

close.

A. Form

First, ARC’s enabling statute demonstrates a congressional

intent to treat it as an instrumentality of the federal government.

Three years after Flamingo, Congress codified ARC’s status as “a

Federally chartered instrumentality of the United States” and

affirmed that it “has the rights and obligations consistent with

that status.” Modernization Act §§ 2(b)(4)-(5) (codified at 36

U.S.C. § 300101(a)). One of those “rights” of an instrumentality

of the United States is immunity from antitrust suit. See Sea-Land

Serv., Inc. v. Alaska R.R., 659 F.2d 243, 244 (D.C. Cir. 1981)

(Ginsburg, J.) (“Congress did not place the United States or its

instrumentalities under the governance of the Sherman Act.”). This

Court treats Congress’ “choice of words [as] more informed than

unconsidered,” see Flamingo, 540 U.S. at 746, especially given

that Congress has also “create[d] entities and confer[red] upon

them non-governmental status” when it has intended to do so, Baker

v. Runyon, 114 F.3d 668, 671 (7th Cir. 1997); see, e.g., 47 U.S.C.

§ 396(b) (creating the “Corporation for Public Broadcasting” but

stating it “will not be an agency or establishment of the United

States Government”). “The mere fact that Congress even had to

explicitly waive [ARC’s] sovereign immunity . . . in the first

place” supports the argument that Congress views ARC as an arm of

the sovereign. See Robinson v. Runyon, 149 F.3d 507, 516-17 (6th

Cir. 1998); Baker, 114 F.3d at 671. “[O]therwise such a waiver

would be unnecessary.” Robinson, 149 F.3d at 517.

Verax contends that ARC’s status as a federal corporation

alone places it within the Sherman Act’s ambit. The caselaw does

not support that ironclad rule. For example, the Sixth Circuit

held that Federal Reserve Banks, which are federal corporations,

are not separate antitrust persons from the United States

government because of the “role of the Federal Reserve System as

manager of the fiscal affairs of the federal government and the

money supply of the nation.” Jet Courier Servs., Inc. v. Fed. Rsrv.

Bank, 713 F.2d 1221, 1228 (6th Cir. 1983). Corporate form is not

dispositive of antitrust personhood; the corporation’s function

matters too.

In its statement of interest, the United States insists that

ARC is a federal instrumentality only for the limited purpose of

immunity from state taxation. In Department of Employment v. United

States, the Supreme Court held that “federal instrumentalities

like the Red Cross” are “exempt from state taxation.” 385 U.S.

355, 361 (1966). The United States argues that Congress expressly

refers to Department of Employment in the Modernization Act’s

prefatory language:

The United States Supreme Court held The American

National Red Cross to be an instrumentality of the United

States, and it is in the national interest that the

Congressional Charter confirm that status and that any

changes to the Congressional Charter do not affect the

rights and obligations of The American National Red

Cross to carry out its purposes.

Modernization Act § 2(a)(7) (emphasis added). According to the

United States, Congress’s reference to Department of Employment

evinces an intent to codify only ARC’s tax immunity, not full

instrumentality status. But the United States overlooks the rest

of the Modernization Act. In the same section cited by the United

States, Congress states twice without qualification that ARC “is

and will remain a Federally chartered instrumentality of the United

States” with “the rights and obligations consistent with that

status.” Modernization Act §§ 2(b)(4)-(5). As noted above, one

such “right” is immunity from antitrust suit. Sea-Land, 659 F.2d

at 244. If Congress intended to limit ARC’s instrumentality status,

it would have stated so explicitly in ARC’s amended charter.

Compare 12 U.S.C. §§ 1716b, 1723a(c)(2) (creating the Federal

National Mortgage Association as a “[g]overnment-sponsored private

corporation” and exempting it “from all taxation now or hereafter

imposed by any [s]tate”), with 36 U.S.C. § 300101(a) (providing

that ARC is “a Federally chartered instrumentality of the United

States”). Although this issue is less than clear, the language of

ARC’s statutory charter, which does not contain a limitation,

controls.

The United States also maintains that ARC is a separate

antitrust person because “the United States does not own, control,

or supervise the ARC.” Dkt. 34 at 6. However, governmental

ownership and control are not dispositive of personhood under the

Sherman Act. See Flamingo, 540 U.S. at 747. The decisions cited by

the United States are inapposite because they involve different

claims with different legal standards. See, e.g., Dep’t of Transp.

v. Ass’n of Am. R.R., 575 U.S. 43, 53 (2015) (holding that under

the Due Process Clause, Amtrak is not an “autonomous private

enterprise” due to its “unique features and its significant ties

to the Government”); Forsham v. Harris, 445 U.S. 169, 186 (1980)

(holding that a federal grantee was not an agency under the Freedom

of Information Act). Moreover, the sole antitrust case the United

States cites in support treated governmental ownership as

“immaterial” to personhood analysis. See Jet Courier Servs., 713

F.2d at 1228 (focusing on public goals and responsibilities).

B. Function

Second, ARC’s “goals, obligations, and powers” support

treating ARC as a public rather than a private entity. Flamingo,

540 U.S. at 747. In Flamingo, the Court stated that the “most

important difference” between USPS and private enterprises was

that USPS “does not seek profits.” Id. ARC is a nonprofit

corporation. Moreover, ARC’s charter requires it to fulfill a

variety of public functions, see id., including effectuating

treaty obligations and coordinating domestic and international aid

both during peacetime and during war or emergency, 36 U.S.C.

§ 300102. It is true that ARC’s enabling statute does not endow it

with “powers more characteristic of Government than of private

enterprise” such as eminent domain or the ability to conclude

international agreements. Flamingo, 540 U.S. at 747; see 36 U.S.C.

§ 300105 (listing ARC’s powers). Even so, on balance, ARC’s public

attributes outweigh its private ones for this analysis. Cf.

Robinson, 149 F.3d at 516 (“Although the Postal Service has

‘commercial like’ operation, it functions as part of the federal

government.”); Baker, 114 F.3d at 670 (“The Postal Service may be

run in a manner similar to a private commercial entity, but it is

not a private commercial entity.”).

The United States contends that because ARC’s goals require

it to work independently of the government, it is a separate

antitrust person. See Dkt. 34 at 11 (citing 36 U.S.C. § 300102(3)).

In Flamingo, USPS’s statutory status as an “independent

establishment of the executive branch” weighed in favor of treating

it as one with the federal government, not against doing so. See

540 U.S. at 740 (emphasis added). Finally, the United States

asserts that because “[f]ederal courts have repeatedly concluded

that . . . the ARC is a corporate ‘person’ separate from the United

States itself,” the same should follow here. Dkt. 34 at 5. But the

decisions the United States relies on predate the 2007 amendment

to ARC’s statutory charter, and again, they discuss ARC’s

governmental status under distinct legal regimes and standards.

See, e.g., Hall v. Am. Nat’l Red Cross, 86 F.3d 919, 922 (9th Cir.

1996) (Religious Freedom Restoration Act); Marcella v. Brandywine

Hosp., 47 F.3d 618, 624 (3d Cir. 1995) (trial by jury); Irwin Mem’l

Blood Bank of the S.F. Med. Soc’y, 640 F.2d 1051, 1057 (9th Cir.

1981) (Freedom of Information Act); Rayzor v. United States, 937

F. Supp. 115, 119 (D.P.R. 1996) (Federal Tort Claims Act).

Because ARC is an instrumentality of the United States, it is

not a “person” separate from the United States under the Sherman

Act. Verax’s antitrust claims are dismissed.

II. Defamation (Count V)

Verax also sues ARC for defamation. To state a claim for

defamation, Verax must show that ARC “published a false statement

about [it] to a third party that . . . caused [it] economic loss

or was of the type that is actionable without proof of economic

loss.” Phelan v. May Dep’t Stores Co., 819 N.E.2d 550, 553 (Mass.

2004). Verax alleges that ARC defamed it by telling Verax’s

customers “that Verax’s PGDprime test is less safe, more expensive,

and less effective than” Cerus’s INTERCEPT technology, which

caused Verax “substantial economic harm in the form of lost sales

and revenues.” Dkt. 1 at 45-46. ARC argues that at most, it

disparaged PGDprime, not Verax.

“A threshold issue in a defamation action, whether a

communication is reasonably susceptible of a defamatory meaning,

is a question of law for the court.” Phelan, 819 N.E.2d at 554.

The Court applies “an objective test . . . inquir[ing] into a

reasonable recipient’s understanding of the words rather than the

speaker’s intent.” New Eng. Tractor-Trailer Training of Conn.,

Inc. v. Globe Newspaper Co., 480 N.E.2d 1005, 1010 (Mass. 1985).

A disparaging statement about the plaintiff’s product may be

defamatory to the plaintiff when its “imputation fairly implied is

that the plaintiff is dishonest or lacking in integrity, or that

he is deliberately perpetuating a fraud upon the public by selling

a product which he knows to be defective.” See HipSaver, Inc. v.

Kiel, 984 N.E.2d 755, 762 n.6 (Mass. 2013) (quoting W.L. Prosser

& W.P. Keeton, Torts § 128, at 965 (5th ed. 1984)). Here, Verax’s

allegations fall short of that bar.

Verax alleges that ARC told its customers, among other things,

that PGDprime “is time consuming to perform and involves

significant cost both in materials and staff time,” Dkt. 1 at 17,

that using PGDprime would “add additional costs and inventory

management complexity[,] potentially compromising the platelet

supply,” id. at 18; see also id. at 21, that PRT “contributes to

a stronger blood supply by qualifying more units for transfusion

through the elimination of false positives associated with . . .

rapid testing,” id. at 19, and that PGDprime could not extend the

shelf-life of untreated platelets sold by ARC from five to seven

days, id. at 21. Regardless of their truth or falsity, these

statements are criticisms of PGDprime, not of Verax, and could not

reasonably be interpreted as stating or implying that Verax is

“dishonest or lacking in integrity.” HipSaver, 984 N.E.2d at 762

n.6 (“[C]ourts generally are reluctant to impute a lack of

integrity to a corporation merely from a criticism of its product.”

(cleaned up) (quoting Dairy Stores, Inc. v. Sentinel Publ’g Co.,

516 A.2d 220, 224 (N.J. 1986))). Because Verax has not alleged

that ARC’s statements about PGDprime objectively disparaged its

integrity, it fails to state a claim for defamation.

III. Tortious Interference with Contractual Relations (Count VI)

Verax has alleged that ARC tortiously interfered with Verax’s

contracts with hospitals to sell PGDprime. Dkt. 1 at 46. To state

a claim for tortious interference with a contract, Verax must show

that “(1) [it] had a contract with a third party; (2) [ARC]

knowingly induced the third party to break that contract; (3)

[ARC]’s interference, in addition to being intentional, was

improper in motive or means; and (4) [Verax] was harmed by [ARC]’s

actions.” Psy-Ed Corp. v. Klein, 947 N.E.2d 520, 536 (Mass. 2011).

ARC alleges that Verax has not “identif[ied] a specific contract

that [ARC] allegedly interfered with, or a specific Verax customer”

that ARC induced to breach a contract with Verax. Dkt. 19 at 25.

Verax responds that it has “clearly and precisely defined the set

of customers it lost, even if it did not name each one

individually.” Dkt. 23 at 24-25.

Verax has alleged that it had contractual relationships with

hospitals that purchased non-PRT platelets from ARC and employed

PGDprime as their preferred mitigation service. See Dkt. 1 at 13,

36. It has also alleged that ARC communicated with its customers

intending “to convince [them] to switch to [ARC’s] PRT service,”

which would require customers to stop using PGDprime. Id. at 21.

Although Verax does not state specific customers it lost, it

plausibly alleges that it lost a “substantial” share of its

Massachusetts customers. See, e.g., id. at 41. These facts are

sufficient to show that ARC interfered with Verax’s business

relationships. Moreover, Verax has alleged that ARC knew its

communications to Verax’s customers about PGDprime were false or

misleading. Id. at 17-21. Thus, Verax has pleaded improper means.

Finally, Verax also claims it “lost sales and revenues,” which is

sufficient to show damages at this stage. Id. at 46.

IV. Massachusetts Consumer Protection Law (Count IV)

Verax also brings a claim under Mass. Gen. Laws ch. 93A. Verax

alleges that “ARC has engaged . . . in unfair methods of

competition and unfair and deceptive practices” by:

[T]ying its sales of platelets to sales of its platelet

bacteria mitigation services, by attempting to

monopolize the market for platelet bacteria mitigation

services, by coercing its most reliant platelet

customers into exclusive dealing arrangements for its

platelet bacteria mitigation services, by defaming

Verax, by repeatedly issuing false and misleading

statements about its and Verax’s platelet bacteria

mitigation services, and by tort[i]ously interfering

with Verax’s customer relationships.

Dkt. 1 at 44. ARC argues that insofar as Verax’s Chapter 93A claim

is derivative of its antitrust, defamation, and tortious

interference claims, if those claims are dismissed, this one must

be as well. See Skehel v. DePaulis, No. 13-11202, 2017 WL 2380164,

at *2 (D. Mass. June 1, 2017) (“Chapter 93A claims [that] are

derivative of . . . unsuccessful claims . . . cannot succeed.”).

Additionally, ARC contends that Verax has not alleged any

misconduct occurred “primarily and substantially within”

Massachusetts as required under Chapter 93A. Dkt. 19 at 26 (quoting

Mass. Gen. Laws ch. 93A, § 11). Verax responds that its Chapter

93A claim is not wholly derivative of its other claims, and that

the “center of gravity” of its allegations is Massachusetts.

Dkt. 23 at 23 (quoting Bradley v. Dean Witter Realty, Inc., 967 F.

Supp. 19, 29-30 (D. Mass. 1997)).

Even if this Court accepted ARC’s argument about derivative

claims, as noted above, Verax has successfully pleaded tortious

interference, so a Chapter 93A claim based on the same underlying

conduct may proceed. Verax has also alleged that ARC violated

Chapter 93A “by repeatedly issuing false and misleading statements

about its and Verax’s platelet bacteria mitigation services,”

which is not derivative of any other claim. Dkt. 1 at 44. ARC does

not dispute that issuing misleading statements would constitute an

unfair and deceptive trade practice under Chapter 93A but argues

that Verax has not satisfied Chapter 93A’s geographic

requirements.

Chapter 93A only allows for suit when “the alleged unfair

method of competition or the unfair or deceptive act or practice

occurred primarily and substantially within” Massachusetts. Mass.

Gen. Laws ch. 93A, § 11. Massachusetts courts consider three

factors in determining whether challenged acts occurred “primarily

and substantially in Massachusetts”: “(1) where the alleged

conduct took place, (2) where the plaintiff received and acted

upon the statements, and (3) where the plaintiff’s losses were

suffered.” Bradley, 967 F. Supp. at 29 (citing Bushkin Assocs.,

Inc. v. Raytheon Co., 473 N.E.2d 662, 672 (Mass. 1985)).

Verax is based in Massachusetts. It claims that ARC “issu[ed]

false, defamatory, misleading, and deceptive statements in

Massachusetts to Verax’s . . . Massachusetts customers.” Dkt. 1 at

44 (emphasis added). Verax further alleges that ARC sent the

allegedly misleading FAQ and the Winter 2020 newsletter to Verax’s

customers, which include the Massachusetts hospitals to whom Verax

“often” sells PGDprime. Id. at 17, 20. Thus, Verax has sufficiently

pleaded that it received ARC’s statements and suffered losses in

Massachusetts. ARC is not based in Massachusetts and Verax notes

that it does not know whether ARC issued its FAQ, newsletter, and

other communications from Massachusetts, notwithstanding that it

may have directed them to Massachusetts hospitals. See Dkt. 23 at

23-24. Nevertheless, because the other two factors weigh in favor

of Verax, this Court holds that the conduct occurred primarily and

substantially in Massachusetts.

Because at least some of Verax’s Chapter 93A theories are

adequately pled, the Court does not dismiss.

ORDER

For the reasons stated above, ARC’s Motion to Dismiss

(Dkt. 18) is ALLOWED IN PART as to Counts I-III & V, and DENIED IN

PART as to Counts IV and VI.

SO ORDERED.

/s/ PATTI B. SARIS

Patti B. Saris

United States District Judge