# Washington County Health Care Authority, Inc. v. Baxter International Inc.

> District Court, N.D. Illinois · April 3, 2020

URL: https://www.frixlaw.com/law-library/cases/10645149

## Case

- **Court:** District Court, N.D. Illinois
- **Decided:** April 3, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WASHINGTON COUNTY HEALTH )
CARE AUTHORITY, INC. ET AL., )
Plaintiffs,
v. No. 16-CV-10324
BAXTER INTERNATIONAL INC. ET Judge John J. Tharp, Jr.
AL. )
Defendants. )
MEMORANDUM OPINION AND ORDER
In the age of COVID-19 and other public health challenges, supply levels in the medical
industry occupy a prominent place in our national consciousness. In this antitrust suit, the plaintiffs
allege, for a second time, that the defendants conspired to artificially manipulate the market of a
crucial supply in that industry: intravenous (“TV”) saline solution. In their previously dismissed
consolidated amended complaint (“CAC”), the plaintiffs—direct purchasers of IV saline
solution—alleged that Baxter and Hospira, the two biggest IV saline solution producers in the
country, violated Section 1 of the Sherman Act by using a series of bogus voluntary recalls
designed to reduce supply and increase prices. The Court granted the defendants’ motions to
dismiss the CAC without prejudice, concluding that the allegations did not suffice to plausibly
show an agreement between the defendants to restrict output. Although the Court allowed the
plaintiffs the opportunity to amend the CAC, it also cautioned that “there is reason to doubt” that
amendment could make the plaintiffs’ conspiracy claim plausible. Mem. Op. and Order, ECF No.
113.
Perhaps as a result of the Court’s skepticism, the plaintiffs’ second consolidated amended
complaint (“SCAC”) abandoned the theory that the defendants created an artificial shortage of IV

saline solution through bogus voluntary recalls. In its stead, the SCAC now advances a theory,
based on information provided by an anonymous former Hospira employee, that the defendants
restricted output by setting production quotas and discarding any IV saline solution manufactured
in excess of those quotas. This theory suffers all of the defects of the plaintiffs’ “voluntary recall”
theory and then some. Most notably, where the CAC at least alleged facts that showed conduct
reducing the available supply of IV saline solution by each defendant, the SCAC alleges only facts
concerning Hospira’s unilateral conduct; the SCAC offers no non-conclusory allegations that
Baxter engaged in similar conduct. The SCAC similarly dispenses with fact allegations concerning
new defendant ICU Medical, which is alleged to have done nothing more than purchase Hospira’s
solutions business unit in early 2017. Substituting unilateral action for parallel conduct, however,
is no way to make an antitrust conspiracy claim more viable. For this and the other reasons
discussed below, the SCAC, and this case, are dismissed with prejudice.
BACKGROUND
Although the facts alleged in the SCAC are largely the same as those originally set forth in
the CAC, there are some significant differences between the two pleadings. First and foremost, the
SCAC has abandoned the CAC’s allegations and theory that Baxter and Hospira conspired to
reduce their output by engaging in a series of coordinated recalls of IV saline solution. Whereas
the CAC alleged that the recalls were not legitimate and were a means for restricting the supply of
IV saline solution, the SCAC deleted all of the specific allegations detailing the recalls. Instead,
the SCAC alleges only that, whether or not legitimate, the recalls exacerbated existing shortages
in the IV saline solution market. That is not evidence of antitrust conspiracy, of course, and the
plaintiffs’ response to the defendants’ motions to dismiss the SCAC mentions the recalls only in
passing and offers no argument that the recalls provide any support for the plaintiffs’ conspiracy
claim. And, as this Court noted in dismissing the CAC, “without any fact allegations to plausibly

establish that the recalls were shams, the plaintiffs’ theory that the defendants raised prices by
artificially restricting output by conducting a series of spurious recalls collapses: no sham recalls
means no collusive scheme to restrict output means no agreement to charge supracompetitive
prices.” Mem. Op. and Order 12.
In the SCAC, the plaintiffs now allege that “the defendants” restricted output by imposing
production quotas and discarding production in excess of those quotas. These allegations rest on
information provided to the plaintiffs’ counsel by “a former production line employee” of Hospira,
who reported that “he and his co-workers had standing instructions from their supervisors not to
produce IV Saline Solution above a certain supply quota and to discard any IV Saline Solution that
had been produced above that limit but not yet placed in container bags.” SCAC 4 78, ECF No.
120. The SCAC includes no allegations that Baxter imposed production quotas on IV saline
solution or that it had discarded any saleable saline solution that it had produced.
The SCAC also names a new defendant, ICU Medical, but similarly omits any allegations
that the newcomer engaged in any output restricting practices. ICU Medical acquired Hospira’s
infusion systems business (“HIS”), the division that produced Hospira’s IV Saline Solution, in
February 2017. /d. § 43. Beyond the fact that ICU Medical purchased HIS, the SCAC alleges only
that ICU Medical received subpoenas for documents in a grand jury investigation by the
Department of Justice Antitrust Division and in an investigation by the New York Attorney
General’s office (and complied with those subpoenas) and that ICU Medical “sent representatives
to” several large healthcare conferences; of the four conferences identified, three took place in
2015 and 2016, more than a year before ICU Medical acquired HIS.
The plaintiffs tag the commencement of the DOJ and NYAG investigations as another
significant new development pled in the SCAC that was not part of the CAC. It is true enough that

the CAC did not include allegations about these investigations (whether because they had not then
begun or become known to the public), but in any event the plaintiffs advised the Court about these
investigations before it ruled on the motions to dismiss the CAC. The Court found the
investigations to add nothing to the plausibility of the plaintiffs’ claim. Mem. Op. and Order 26-
27 n.16. The SCAC’s allegations about the ongoing investigations, then, add nothing new to the
mix. The only new information concerning the investigations is that, after the plaintiffs filed the
SCAC, the DOJ closed its investigation without taking any action at all against any of the
defendants. Hospira’s Reply in Supp. of Mot. to Dismiss Ex. A, ECF No. 151; Baxter’s Reply in
Supp. of Mot. to Dismiss 12, ECF No. 153.
The plaintiffs also allege that the saline solution shortage that began in 2013 still continued
when the SCAC was filed. As of the filing of the SCAC, the plaintiffs allege that the defendants
manufactured just over 75% of the IV saline solution produced in the United States. That combined
market share, however, has declined from the 90% of the market Baxter and Hospira shared
equally as of 2013, when the shortage of IV saline solution first hit the country. The SCAC also
shows that while Baxter’s share of the market increased to almost 50% by 2018, Hospira’s share
decreased by more than 40%, declining from about 45% to 26.4%. Other producers accounted for
almost 25% of production in 2018, up from just 10% in 2013.
The SCAC also adds a few other miscellaneous factual allegations: the continued rise in
price of saline; the public comments made by Baxter’s CEO about the favorable pricing and sales
conditions in the industry; additional healthcare conferences that both Baxter and Hospira
executives (but not ICU executives, apparently) attended; the board of directors on which
executives of Hospira and Baxter both serve; and the transition of multiple employees from
Hospira to Baxter over the course of the prior decade and a half.

New or old, alone or in combination, the facts set forth in the SCAC continue to fall short
of plausibly alleging an agreement between the defendants to restrict the supply of IV saline
solution.
DISCUSSION
At the motion to dismiss stage, the Court accepts as true all well-pleaded facts in the
plaintiffs’ complaint. Zemeckis v. Global Credit & Collection Corp., 679 F.3d 632, 634 (7th Cir.
2012). To survive a motion to dismiss for failure to state a claim, “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 Atlantic Corp. v. Twombly, 550 USS.
544, 570 (2007). As the Court explained in its ruling on the first set of motions to dismiss in this
case:
Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits “[e]very contract,
combination . . . or conspiracy, in restraint of trade or commerce.” The Act “is
designed to prevent businesses from entering into collusive agreements,” and
“[a]greements to fix prices unambiguously fall within the ambit of § 1.” Omnicare,
Inc. v. UnitedHealth Group, Inc., 629 F.3d 697, 705 (7th Cir. 2011). To state a
claim under § 1, a plaintiff must allege the existence of “(1) a contract combination,
or conspiracy; (2) a resultant unreasonable restraint of trade in a relevant market;
and (3) an accompanying injury.” Agnew v. National Collegiate Athletic Ass’n, 683
F.3d 328, 335 (7th Cir. 2012). There must be “an explicit agreement, not merely a
tacit one.” In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 661 (7th
Cir. 2002). A typical price-fixing scheme features “sellers who collude to set their
prices above or below prevailing market prices.” Omnicare, 629 F.3d at 705. This
case concerns price-fixing’s first cousin, output restriction, a scheme in which
market participants agree to reduce the amount of a product in the marketplace,
thereby “reducing supply below demand” and “rais[ing] prices above a competitive
level.” United States v. Andreas, 216 F.3d 645, 667 (7th Cir. 2000).
Mem. Op. and Order 6-7.
The key element in this case remains the first prong of a Section | claim: the existence of
some sort of agreement between the defendants to restrict output. To satisfy the standard put forth
by the Supreme Court in Twombly, a § 1 claim under the Sherman Act must provide “enough

factual matter (taken as true) to suggest that an agreement was made.” 550 U.S. at 556. Twombly
teaches that oligopolistic markets often incentivize producers to engage in “conscious parallelism,”
or the independent restriction of output using cues from competitors. Jd. at 553 (explaining that
such conduct is “a common reaction of firms in a concentrated market that recognize their shared
economic interests and their interdependence with respect to price and output decisions”). For that
reason, parallel conduct on the part of the defendants can help establish that factual basis, but it
“needs some setting suggesting the agreement necessary to make out a § 1 claim; without that
further circumstance pointing toward a meeting of the minds, an account of a defendant’s
commercial efforts stays in neutral territory.” /d. at 557.
Bearing Twombly’s teaching in mind, the Court previously dismissed the CAC largely
because the parallel conduct alleged was not actually parallel and did not, in any event, provide a
sufficient factual basis for an inference of agreement between Baxter and Hospira to manufacture
a shortage of saline solutions. Mem. Op. and Order 23. The Court also concluded that the so-called
“plus factors” included in the CAC failed to support an inference of agreement. These factors
included specific characteristics of the saline solution industry that make it more susceptible to
collusive behavior (for example, the concentration of production in a small number of corporate
actors, the homogenous character of the product, the relatively inelastic demand for the product,
the defendants’ alleged prior history of anticompetitive conduct, and some industry-wide
conferences and meetings that executives from both defendants had attended). The addition of
these so-called “plus factors” to the mix, however, did not add to the plausibility of the CAC’s
factual allegations in any meaningful way, as they were “either equally consistent with conscious
parallelism, or to be expected regardless of whether the defendants unlawfully colluded.” Mem.
Or. and Opinion 30. As a result, the Court concluded that the CAC’s theory that the defendants

had worked together to restrict output by conducting voluntary recalls was “quite implausible.”
Mem. Op. and Order 10, 23.
The SCAC suffers from similar shortcomings and fails to remedy the deficiencies of the
CAC. The most significant factual allegation added to the SCAC stems from an anonymous former
Hospira employee reportedly confiding in plaintiffs’ counsel that the company had a standing
policy to limit saline production and dispose of any product manufactured above that threshold.
The plaintiffs admit that they have no direct evidence of any similar policy at Baxter. They insist,
however, that Hospira would only enact that type of measure if there were an agreement in place
with its competitors to limit saline solution supply. According to the plaintiffs, because market
prices were at an all-time high, it would be “economically irrational” for Hospira to unilaterally
restrict its output and dispose of saleable solution. Pl.’s Mem. of Law in Opp’n 10, ECF No. 149.
Consequently, they maintain, the Court should infer a collusive agreement between the parties and
allow the complaint to proceed.
The plaintiffs’ argument fails for at least four fundamental reasons. First, even accepting
the allegations of the former Hospira employee as true, those allegations do not suffice to infer
that Hospira materially limited its production of IV saline solution. Second, even if the allegations
warranted such an inference, the premise that Hospira’s conduct was rational only if it had an
agreement with Baxter to jointly restrict the supply of saline solution 1s flawed; there is nothing
inherently irrational (or unlawful) about an oligopolist’s unilateral limitation on its production.
Third, even if Hospira restricted its output with hopes of inducing Baxter to do the same, there are
no allegations, and so no basis to infer, that Baxter followed suit. And fourth, even if Baxter had
followed suit, there remains no evidence that would allow an inference of agreement from such
parallel conduct.

To begin, the Court must, of course, accept the truth of the allegations attributed to the
former Hospira employee in evaluating a motion to dismiss, and must as well give the plaintiffs
the benefit of all reasonable inferences that can be drawn from those facts. But given the lack of
detail provided about the conduct they describe, the statements are too spare to warrant the
additional inferences the plaintiffs heap upon them. On their face, the allegations say nothing that
reveals inherently irrational conduct and the SCAC provides no basis to infer that they describe
any material restriction in the production or supply of saline solution.
Perhaps most critically and most obviously, the SCAC says nothing about when these
policies were in place or how long they were in effect; the witness is identified only as a former
employee and the SCAC provides no basis to infer that this practice was in place during the entire
period of the alleged conspiracy, or even any portion of it. Nor does the SCAC tell us what the
production quotas were, whether they were historically high or low, at what capacity plants had to
operate to reach those quotas, whether they varied over time, or what factors influenced them. It
sheds no light on how often saline solution was discarded or in what quantities. It does not tell us
whether the discarded solution had been bagged or not.! The SCAC reports no information as to
what explanation production workers were given for discarding saline solution; was its purpose to

' The plaintiffs dismiss Hospira’s criticism of the inconsistency of the SCAC’s allegations
concerning the stage at which excess saline solution was discarded as “quibbl[ing],” Pl.’s Mem.
of Law in Opp’n 11 n.5, but the point is more consequential than they suggest. This is the central
fact allegation in the SCAC, yet the plaintiffs describe the allegation inconsistently. In paragraph
78, which is the paragraph in which the plaintiffs most fully describe the statements of the former
employee, they allege both that Hospira discarded saline solution “that had been produced above
that limit but not yet placed in container bags,” and that Hospira “instructed line employees “to
destroy functional, saleable IV Saline Solution containers above the production quota.” Apart
from undermining the credibility of the plaintiffs’ description of the former employee’s statements
(at no point in the SCAC do the plaintiffs actually quote the former employee), these
inconsistencies are material. A policy of discarding small quantities of unpackaged saline solution
would be more readily explained than would a practice of destroying “saleable bags” of IV saline
solution, yet the SCAC allegations conflate, rather than distinguish, the two possibilities.

keep prices high or to avoid the burden and cost of ensuring sterile preservation until the next
production cycle? The bare facts alleged in the SCAC—that at some point Hospira set production
quotas for IV saline solution at some level and discarded an unquantified amount of saline solution
produced in excess of those quotas—fall well short of plausibly showing that Hospira was seeking
to materially reduce the supply of saline solution in order to drive up its price.
In assessing the import of the statements attributed to the former Hospira employee, there
are only four explanations for the dearth of detail alleged in the SCAC, and none provides a basis
to draw the inferences the plaintiffs urge. First, the absence of additional information about
Hospira’s practices may not have been included in the SCAC because the questions were not asked,
but that of course would provide no license to guess at the answers. Second, the questions may
have been asked and answered with information that provided further support for the plaintiffs’
position, but were that the case, the plaintiffs would surely have buttressed their claim with that
information. Third, the answers to the questions may not have supported the plaintiffs’ claims, but
that would of course provide no reason to draw inferences in the plaintiffs’ favor. And fourth, it is
also possible that the SCAC provides no further information about quotas or the discard of saline
solution because the former employee had no additional information to offer. Of these explanations
for the lack of detail concerning this statement, which is the central fact allegation in the SCAC,
only the last two are plausible; more importantly, none warrants an inference that the reported
conduct was an effort on Hospira’s part to materially limit its production of saline solution in a bid
to raise prices to a supracompetitive level.
Accordingly, the Court accepts the truth of the allegation that, at some point, Hospira had
production quotas for IV saline solution and discarded solution manufactured in excess of those

quotas. There is no basis to infer anything further from the information obtained from the former
Hospira employee, however.
Even if the information from the former Hospira employee was sufficient to warrant an
inference that Hospira was materially restricting its production of IV saline solution (as opposed,
say, to reducing costs or freeing up capital to pursue other investments’), that fact would not make
the plaintiffs’ claim under Section 1 of the Sherman Act plausible. As discussed in the Court’s
opinion dismissing the CAC, restricting output can be a rational decision by actors in an
oligopolistic market; by keeping supply down, sellers can keep prices up. The plaintiffs concede
that rational oligopolists may set quotas to restrict output, Pl.’s Mem. of Law in Opp’n 3, but say
that Hospira would not have acted unilaterally to restrict output when saline solution prices were
at record levels. Putting aside the absence (noted above) of any information about when Hospira
engaged in the alleged output restricting practices, the prevailing price level is the result, not the
cause, of actions affecting production levels. The suggestion that Hospira would not “stay out” of
a “red-hot” market for IV saline solution ignores the simple truth that, by definition, any oligopolist
that restricts output would necessarily be willing to forego sales at the prevailing market price
(whatever it may be). /d. The prevailing price level does not change the basic relationship between
supply and demand: restrict output, increase price. An oligopolist, moreover, may rationally forego
sales to keep prices high; as the Third Circuit explained in Valspar Corp. v. EI. Du Pont De
Nemours and Co., 873 F.3d 185, 191 (3d Cir. 2017), an oligopolist “is unlikely to lower its price

? Another shortcoming of the SCAC is its failure to allege that limitations on IV saline
solution production were not a rational response to the availability of more attractive business
opportunities. See Twombly, 550 U.S. at 568 (noting plaintiffs’ failure to allege “that competition
as CLECs was potentially any more lucrative than other opportunities being pursued by the ILECs
during the same period.”); id. at 569 (“firms do not expand without limit and none of them enters
every market that an outside observer might regard as profitable, or even a small portion of such
markets.”).

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[i.e., increase its production] in an effort to win market share because its competitors will quickly
learn of that reduction and match it... .”?
Perhaps recognizing the problem with their production quota argument, the plaintiffs
emphasize that Hospira told employees to discard saline solution in excess of the quota, arguing
that there would be no rational basis to throw out product that had already been manufactured,
other than to limit supply. The costs of manufacturing that product had already been incurred;
surely, they maintain, Hospira would not have discarded finished product unless it was sure that it
would make up those costs through an agreement with its competitors. But this argument hardly
explains why Hospira would discard finished product, even in furtherance of a conspiracy to
restrict the supply of saline solution; conspiratorial agreement or no, Hospira had no incentive to
produce saline solution that it was not going to sell. That it did so provides no basis, then, to infer
that it was trying to reduce supply in order to maintain or increase price. If Hospira wanted to limit
production, the rational way to do that would be . . . well, to limit production, not to spend, produce,
and discard. The theory that Hospira restricted supply by discarding saleable product differs little
from the plaintiffs’ original theory that the defendants restricted supply by conducting sham
product recalls and suffers from the same inherent implausibility: no monopolist is likely to restrict
output by discarding finished product.*

> The plaintiffs also argue that the saline solution industry is an essential industry in which
supply shortages can have life-and-death consequences. Pl.’s Mem. of Law in Opp’n 10. As a
result, the plaintiffs encourage the Court to conclude that the nature of the industry further
demonstrates that Hospira would not rationally reduce production in the absence of a conspiracy.
This position is unpersuasive. The nature of the industry does not change the calculus here; the
incentives to restrict output remain in an oligopoly, regardless of whether the industry is “non-
essential.” Jd. Predictably, the plaintiffs can cite no case law drawing such distinctions, and the
Court finds no reason that the nature of the industry is probative in this context.
* The plaintiffs also reassert the claim that the defendants “collusively pressured”
customers using tactics such as requiring buyers to purchase additional products if they wanted to
purchase saline solution. Pl.’s Mem. of Law in Opp’n 6. The plaintiffs seemingly cite this practice

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This is not to say that the allegations that Hospira discarded finished product are not true;
it is only to recognize the limits of those allegations. The former production line employee
evidently provided no information about the amount of saline solution that Hospira discarded; for
all the SCAC tells us, the discarded amount could have been trivial. Indeed, given the
implausibility that any producer would discard significant quantities of finished product as a means
of restricting output, the reasonable inference to draw is that the quantity discarded was immaterial,
not that Hospira adopted an irrationally expensive means of limiting market supply. This is
particularly true if one considers, as Hospira urges, how much solution would have to be discarded
in order to have a material effect on the market price.”
But even if we assume that Hospira’s conduct was as nefarious as the plaintiffs suggest,
their claim would still fail because the SCAC alleges no comparable facts concerning output
restricting conduct by Baxter (or ICU-Medical, but the Court will defer discussion of ICU for the
moment). In this way, the theory advanced by the SCAC is even less plausible than that alleged in
the CAC, which at least included allegations that Baxter had participated in the voluntary recalls
that were alleged to have been the mechanism for the conspiracy’s output restrictions. The
information obtained from the former Hospira employee says nothing about Baxter’s adoption of

as additional circumstantial evidence of coordination on the part of the defendants. But as the Court
explained in its prior opinion, such tying arrangements must be pursued in standalone tying claims,
which the plaintiffs have not included here. Mem. Op. and Order 23, n.15. The plaintiffs add no
meaningful detail to these allegations that did not appear in the CAC and there is thus again “no
basis to draw that inference. At best, plaintiffs’ allegations bespeak efforts by the defendants to
use the shortage to bolster other areas of their business. The complaint contains no facts suggesting
that these efforts were the product of an agreement, and not the result of independent strategies
designed to expand defendants’ business relationships.” /d.
> Based on the SCAC’s allegation that over | billion units of IV saline solution are used in
the United States each year, 9, Hospira points out that to reduce supply by just one percent, some
27,000 units would have to be discarded every day of the year. Regardless of its degree of
precision, the point is well taken: it is unreasonable to infer that Hospira pursued a plan to reduce
the supply of IV saline solution by discarding substantial quantities of saleable product.

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production quotas, or its practice of discarding solution manufactured in excess of such quotas, yet
the SCAC alleges not just that Baxter must also have limited its production in some way, but
expressly alleges that it did so: “Defendants began instructing their production line employees to
adhere to artificially low production quotas and began discarding saleable IV Saline Solution
produced in excess of those targets.” SCAC 44 70, 77-78 (emphasis added). This statement is a
conclusion masquerading as an allegation of fact and it should not have been included in the
SCAC.
The plaintiffs attempt to justify misstatements like this by insisting that it is plausible to
infer from Hospira’s otherwise irrational conduct that Baxter engaged in similar conduct. As
discussed above, however, Hospira’s conduct was not inherently irrational, so the premise of the
argument fails. In any event, even indulging the assumption that Hospira acted with the hope and
intention that Baxter would follow its lead, that fact, standing alone, would plausibly establish no
more than that. And that Hospira hoped that Baxter would follow suit tells us nothing about
whether Baxter did so—and the SCAC does not either. “A bare allegation that a corporate policy
is against a single corporation's economic interest does not imply joint action in any way. If
alleging that a business policy was contrary to a corporation's interests was enough alone to plead
an antitrust conspiracy, a host of unilateral business decisions would be caught within the antitrust
net.” Rochester Drug Co-op., Inc. v. Biogen Idec U.S., 130 F. Supp. 3d 764, 778 (W.D.N.Y. 2015);
see also Hinds Cty., Miss. v. Wachovia Bank N.A., 708 F. Supp. 2d 348, 362 (S.D.N.Y. 2010) (“to
state a viable § 1 claim, Plaintiffs must allege a factual connection between each defendant and the
alleged conspiracy, and may not rely solely on . . . conclusory allegations based on mere
participation in the [relevant] market’).

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As Hospira observes, the plaintiffs “muster no case where a court made the inferential leap
from single-firm conduct to conspiracy.” Hospira’s Reply in Supp. of Motion. to Dismiss 2.
Instead, they cite two cases in which courts have found that complaints adequately alleged a
conspiracy in which multiple defendants “reduce production by various means.” Pl.’s Mem. of
Law in Opp’n 10; see, e.g., In re Broiler Chicken Antitrust Litig., 290 F. Supp. 3d 772 (N.D. IIL.
2017); In re Processed Egg Prods. Antitrust Litig., 821 F. Supp. 2d 709 (E.D. Pa. 2011). The cases
cited, however, are neither remarkable nor on point; they involved allegations that all of the
defendants engaged in output restricting conduct, not inferences that because some defendants
restricted output all must have done so. See Broiler Chicken, 290 F. Supp. 3d at 796 (“Plaintiffs
have cited industry reports to support their allegation that all Defendants destroyed Broiler
flocks”) (emphasis added); Processed Egg Prods., 821 F. Supp. 2d at 714-15 (E.D. Pa. 2011)
(alleging means of restricting output by each defendant). Here, the problem is not that the SCAC
alleges that Baxter cut production by some means other than those employed by Hospira, but that
the plaintiffs have not sufficiently alleged any output restricting action by Baxter. That won’t do;
an inference cannot be drawn from a vacuum. Before it can reasonably be inferred that Baxter
restricted its production of IV saline solution, there must be fact allegations from which that
inference can be drawn. The SCAC contains none.
Apart from the infirmity of the plaintiffs’ premise that it can reasonably be inferred from
Hospira’s unilateral conduct that Baxter also engaged in output restricting conduct, other
allegations in the SCAC also undermine the plaintiffs’ claim. Most significantly, the SCAC reports
that Baxter gained market share in the two years before the SCAC was filed—a result obviously
inconsistent with an inference that Baxter followed Hospira’s lead in setting restrictive production
quotas and discarding finished product. SCAC § 103. The plaintiffs protest that these statistics do

14

not rule out conspiracy in earlier years, but they certainly render it implausible over the period they
cover. It is, moreover, the plaintiffs’ burden to allege facts that plausibly support their claim; the
defendants can only respond to what has been pleaded. And what has been pleaded makes the
plaintiffs’ claim that Baxter must also have set production quotas and discarded product in an effort
to reduce supply less plausible, not more.
So, the Court finds no basis in the SCAC on which one can reasonably infer that Baxter
engaged in parallel conduct. But even if there were, there remains the lesson of Twombly: “lawful
parallel conduct fails to bespeak unlawful agreement.” 550 U.S. at 556. As the Supreme Court
explained, “even conscious parallelism, a common reaction of firms in a concentrated market that
recognize their shared economic interests and their interdependence with respect to price and
output decisions is not in itself unlawful.” /d. at 553-54 (cleaned up). Self-interested but not
unlawful oligopolistic behavior supplies an “obvious alternative explanation” for parallel conduct,
id. at 567, that renders an inference of agreement implausible. See, e.g., In re Ins. Brokerage
Antitrust Litig., 618 F.3d 300 (3d Cir. 2010) (“Twombly makes clear that a claim of conspiracy
predicated on parallel conduct should be dismissed if “common economic experience,” or the facts
alleged in the complaint itself, show that independent self-interest is an “obvious alternative
explanation” for defendants' common behavior.”).
There must, in short, be more than parallel conduct to plausibly infer antitrust conspiracy,
but here the plaintiffs have not alleged even that much. If parallel conduct among oligopolists is
not itself a sufficient basis to infer participation in an antitrust conspiracy, it 1s certainly not
sufficient to draw such an inference on the basis of allegations about a single firm’s unilateral
conduct.

15

And, again, the statistics the SCAC includes bear out the absence of agreement between
Baxter and Hospira (or ICU). Over the intervening time frame between the filings of the CAC and
SCAC, the plaintiffs’ allegations show that Hospira’s (and ICU’s) market share declined from 45%
to 26%. SCAC 4 103; CAC 4 96. Again, the plaintiffs contend that this shift, which occurred
between late 2016 and 2018, paints an incomplete picture of the conspiracy, which allegedly
stretches back to 2013. The plaintiffs nonetheless fail to explain why Hospira (or ICU) would
continue to engage in a conspiracy that appears to be having an enormously detrimental impact on
its business—especially one that has also directly enriched its primary competitor and opened the
market to additional competitors. The plaintiffs deny the import of Hospira’s lost market share,
noting that the majority of Hospira’s lost share went to new players in the industry, but that fact is
hardly probative of an agreement between Baxter and Hospira to reduce the overall production of
saline solution. Why on earth would two firms that controlled 90% of the market agree to a course
of action that transferred a substantial portion of that market share to new entrants in the saline
solution market? The plaintiffs offer no plausible answer.
Relatedly, the plaintiffs also fail to satisfactorily address why it is plausible to infer that the
conspiracy continued after Hospira’s solutions business was sold to ICU in 2017. Indeed, they do
not even try to explain why ICU would plausibly have agreed to conspire with Baxter upon
stepping into Hospira’s shoes. The plaintiffs allege no facts about output reducing conduct after
ICU’s acquisition of HIS;° rather, with classic post hoc ergo propter hoc reasoning, the plaintiffs

6 The SCAC contains very few allegations regarding ICU. It briefly details its acquisition
of HIS, includes some information relating to ICU’s responses to and cooperation with the federal
and New York investigations, and cites the attendance of some of its executives at industry-wide
meetings and conferences. The plaintiffs also allege that the acquisition-related agreement between
ICU and Pfizer to mutually indemnify each other with respect to any claims arising from their
respective ownership of the solutions business counts as a “public acknowledgement” of the
plausibility of the plaintiffs’ claim that the conspiracy continued after ICU purchased the business.

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assert that because shortages and high prices continued after the acquisition, they must be the
product of the alleged antecedent conspiracy. Antitrust conspiracy claims require fact allegations
that plausibly show agreement, however, not assumptions about causation.’ And here, given the
implausibility of the premise that ICU would agree to join a conspiracy involving conduct that was
already the subject of multiple government investigations at both the federal and state levels, as
well as class action litigation like this case, the alternative inference is far more reasonable: if
conditions didn’t change after ICU replaced Hospira, then it is implausible to believe that the status
quo was the product of an antecedent conspiracy. In short, not only does the SCAC fail to allege
facts that plausibly show that ICU joined a conspiracy to reduce the supply of saline solution going
forward, the fact that ICU acquired HIS undermines the inference that there was any conspiracy
before the acquisition.
The other new allegations in the SCAC, with which the plaintiffs seek to adorn the so-
called “plus factors” pled, considered, and rejected in the order dismissing the CAC, again fail to
bridge the gap between the plaintiffs’ claim and a plausible claim. Indeed, like the other new
additions to the SCAC (e.g., the information from the former Hospira employee and the allegations
that the conspiracy continued after ICU’s acquisition of HIS), the new “plus factor” allegations
actually weaken, rather than strengthen, the plausibility of the plaintiffs’ claim.*

That contention is silly; the agreement says nothing of the sort and mutual indemnification
agreements are a staple of corporate acquisitions. The plaintiffs’ reliance on it is indicative of
nothing more than the tenuous and threadbare nature of the plaintiffs’ claim against ICU.
7 Remarkably, the plaintiffs argue that ICU has it “backwards” in arguing that the pleadings
fail to show that ICU conspired with Baxter. Pl.’s Mem. of Law in Opp’n 36. That is precisely
what the plaintiffs are required to plausibly allege. They cannot simply assume that an alleged
conspiracy continued in the absence of evidence that ICU reached an agreement with Baxter.
8 Again, because the SCAC does not even allege facts to plausibly infer parallel conduct
by the defendants, as discussed supra, even if the “plus-factors” did strengthen the plaintiffs’
claim, they still would not be enough to meet the bar set by Twombly, in which the Supreme Court
held that adequately pled facts of parallel conduct and market conditions conducive to collusion

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Most significantly in that regard, the plaintiffs add a substantial amount of detail in the
SCAC relating to the two governmental investigations into the defendants’ conduct. As the Court
stated in its previous opinion, those investigations do little to further plaintiffs’ arguments:
The mere fact that an investigation is being conducted says nothing about whether
unlawful conduct has occurred. Investigations require no minimum predication or
threshold of evidence to begin; indeed, the purpose of an investigation is to
determine whether there is evidence of unlawful conduct; its existence does not
therefore signal that there must be such conduct. The Court therefore accords no
weight to the [investigations].
Mem. Op. and Order 26 n.16. The additional allegations in the SCAC add no meat to the bone;
they merely reflect that subpoenas were issued and that the defendants have complied with them
by producing records—acts that shed no light whatsoever on whether the defendants engaged in
an antitrust conspiracy. As if to prove the point, moreover, the Department of Justice has closed
its investigation without taking any adverse action against the defendants.” Having vested the

were not enough. 550 U.S. at 553. Indeed, the defendants do not contest the allegations that the
saline solution industry is susceptible to collusive practices. Those allegations, though, are not new
to the SCAC and were included in the CAC. As the Court explained in its prior opinion: “[W]hile
market structure can provide some evidence of an unlawful agreement, it (even combined with
parallel conduct) cannot sustain plaintiffs’ complaint all on its own.” Mem. Op. and Order 26.
The Court may properly take judicial notice of the formal closure of a DOJ investigation,
which the defendants have made publicly known, see, e.g., Nate Raymond, U.S. Closes IV Solution
Shortage Antitrust Probe, Baxter Says, REUTERS, Feb. 22, 2019,
https://www.reuters.com/article/us-baxter-intl-antitrust/u-s-closes-iv-solution-shortage-antitrust-
probe-baxter-says-id USKCN1IQB25K, and the veracity of which the plaintiffs do not contest. See,
e.g., Daniels—Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010) (“It is appropriate to
take judicial notice of this information, as it was made publicly available by government entities
(the school districts), and neither party disputes the authenticity of the web sites or the accuracy of
the information displayed.”); Taleff'v. Southwest Airlines Co., 554 Fed. App’x 598, 599 n.1 (9th
Cir. 2014) (“We grant Appellants’ request for judicial notice of a Department of Justice press
release dated April 26, 2011, announcing the closure of its investigation into the challenged
merger. . .”); Shaw v. City of Dayton, 183 F. Supp. 3d 876, 882 n.2 (S.D. Ohio 2016 (“The Court
takes judicial notice of the DOJ's press release titled, “Federal Officials Close the Investigation
Into the Death of Kylen English” and DOJ's letter to City Manager Timothy H. Riordan on July
20, 2012, summarizing its investigation and findings regarding Mr. English's death”.) (internal
citations omitted).

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ongoing DOJ investigation with substantial probative force, the plaintiffs would be hard pressed
now to assert that closure of that investigation does nothing to weaken the plausibility of their
claims.
As for the remaining new “plus factor” allegations, they continue to fall short. The
plaintiffs devote an inordinate amount of space to identifying the industry-wide conferences
attended by defendants’ “executives” and “representatives,” but none of those allegations offers
more probative force than the fact that attendance at such conferences provides an “opportunity”
for the defendants to conspire.'° That is true enough, but that is merely to say that it is possible the
defendants conspired at such conferences; they add nothing, however, to push past the possible to
the plausible. See Twombly, 550 U.S. at 570 (concluding that “plaintiffs here have not nudged their
claims across the line from conceivable to plausible”). The closest the plaintiffs come to alleging
facts that representatives of Baxter and Hospira ever communicated during such a conference or
meeting is to allege that one day after a conference attended by both Hospira and Baxter, both
defendants sent letters to their customers concerning the saline solution shortage. Those letters, the
plaintiffs assert, are evidence that the defendants used the conference as a place to meet and further
their conspiracy, much like the defendants in Kleen Prods., LLC et al. v. Packaging Corp. of Am.,
et al. 775 F. Supp. 2d 1076 (N.D. Ill. 2011). That case is easily distinguished, however, because
the eight defendants there all raised prices after an industry event on six separate occasions. /d. at
1080. There is no such pattern here; the SCAC describes only a single occasion when
representatives of the two defendants sent out descriptive letters relating to the industry-wide
shortage in saline. One would expect the two largest producers of saline solution to report to

10 This is an extremely generous evaluation of these allegations, moreover. Nowhere in the
SCAC do the plaintiffs allege any details about who attended these conferences and meetings or
that they ever communicated with their counterparts.

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customers about the long-term supply prognosis for this critical product, and the fact that they did
so coming off a global healthcare conference is hardly revelatory of collusion. The facts in the
SCAC relating to the attendance of industry-wide conferences and meetings continue to reflect
nothing more than lawful and entirely unremarkable behavior by the defendants."!
The same holds true of the plaintiffs’ allegations that employees moved from Hospira to
Baxter or vice versa in the more than ten years leading up to the alleged conspiracy period.!* That
type of employee movement is just another example of normal and competitive activity in the
corporate world. See, e.g., St. Clair v. Citizens Fin. Grp., 340 F. App’x 62, 65 (3d Cir. 2009)
(“conspiracy claims rely[ing] on . . . the assertion that the individual defendants . . . each had prior
work experience at other banks . . . are wholly mnadequate”). In the same vein, there is nothing
conspiratorial about the executives’ public comments that current aspects of the market were
favorable to the defendants. Pointing out that prices were high due to the shortage is precisely the

'! The plaintiffs contend that defendants are unreasonable in their assertion that the SCAC
provides no specificity as to how Baxter and Hospira used these conferences and meetings in
furtherance of the supposed conspiracy. Pl.’s Mem. of Law in Opp’n. While the plaintiffs are
correct that they need not provide “exquisite detail” about “which coffee break between sessions”
the defendants used to meet, they must provide some plausible basis to infer that the defendants
used the conferences or meetings to further a conspiracy. /d. Merely pointing out that unidentified
executives from both companies attended industry-wide events attended by hundreds or thousands
of others serves only to raise the question: why was the attendance of Baxter and Hospira
representatives probative of illicit agreement rather than indicative that they shared the same non-
collusive reasons that prompted thousands of others to attend? The SCAC provides no answer; it
does not even allege that the defendants met with one another or communicated in any way at these
events.
'? Tn yet another argument that pushes the boundaries of credibility, the plaintiffs argue that
the mere fact that the headquarters of Baxter and Hospira are only 10 miles apart supports an
inference of conspiracy. SCAC 133. There is simply no logical relationship between the distance
between competitors and the likelihood of collusion. By the plaintiffs’ logic, it would be
reasonable to infer that competitors located in New York and Los Angeles are less likely to collude
than competitors located in New York and Philadelphia. In an era in which global communications
are instantaneous and inexpensive, the argument that physical proximity—whether by virtue of
headquarters locations or attendance at the same industry conferences—makes collusion more
likelihood is antiquated and unpersuasive.

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type of observation that one would expect to see in a quarterly report or hear as part of a corporate-
wide presentation. !
In short, even if the plaintiffs had adequately pleaded a factual basis for a strong inference
of parallel action between the defendants, which they have not, the complaint would still fail to
state a claim because the plus factors do not add to the plausibility of their allegations.
Circumstantial evidence still must be probative of an anticompetitive agreement; the plus-factors
alleged here detail nothing that is inconsistent with lawful business conduct in the ordinary course.
As such, the defendants’ “plus factor” allegations do nothing to enhance the plausibility of the
plaintiffs’ claim that the defendants have conspired to reduce the supply of IV saline solution over
the past seven years.
* * *
In their complaints, the plaintiffs have alleged that the defendants are responsible for a
public health crisis because they have conspired to restrict the supply of IV saline solution. After
more than three years and multiple attempts, however, they have not been able to allege facts that
plausibly support that claim. Accordingly, the Court grants the defendants’ motions to dismiss the
Second Consolidated Amended Complaint. And because the plaintiffs have had ample opportunity
to investigate and amend, and because the resulting second consolidated amended complaint is

‘3 The plaintiffs also argue that the Court should not consider each of the plus-factors
independently of the others, but rather the totality of all of the factors. They conclude that “[t]aken
together, the plus factors alleged by Plaintiffs individually and collectively make plausible the
claim that Defendants conspired to reduce the supply and thus drive up the prices of IV Saline
Solution.” Pl.’s Mem. of Law in Opp’n 23. The problem for the plaintiffs is that the sum of their
plus-factors is no greater than their parts. The plus-factors alleged, even when taken as true,
illustrate nothing more than legal, routine, and competitive behavior—both when considered in
isolation and in total.

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even weaker than the first, the Court concludes that any further attempt to amend would be futile.
The SCAC is therefore dismissed with prejudice.
/ /
ff □□
te J (oof, Vt
\ / \
Date: April 3, 2020 John J. Tharp, Jr.
United States District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10645149. Public record. Not legal advice.