Delaware Valley Surgical Supply Inc. v. Johnson & Johnson

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

DELAWARE VALLEY SURGICAL 

SUPPLY INC.; NIAGARA FALLS

MEMORIAL MEDICAL CENTER,

Plaintiffs-Appellees,

BAMBERG COUNTY MEMORIAL No. 08-55105

HOSPITAL & NURSING CENTER,

Plaintiff-Appellant,  D.C. No.

CV-05-08809-JVS

v.

OPINION

JOHNSON & JOHNSON; JOHNSON &

JOHNSON HEALTH CARE SYSTEMS

INC.; ETHICON INC.; ETHICON ENDO

SURGERY INC.,

Defendants-Appellants.



Appeal from the United States District Court

for the Central District of California

James V. Selna, District Judge, Presiding

Submitted April 11, 2008*

Pasadena, California

Filed April 30, 2008

Before: Alfred T. Goodwin, Harry Pregerson, and

Dorothy W. Nelson, Circuit Judges.

Opinion by Judge D.W. Nelson

*The panel unanimously finds this case suitable for decision without

oral argument. See Fed. R. App. P. 34(a)(2).

4663

DELAWARE VALLEY v. JOHNSON & JOHNSON 4665

COUNSEL

David M. Schiffman, Sidley Austin LLP, Chicago, Illinois,

for the defendant-appellant.

Russell T. Burke, Nexsen Pruet, LLC, Columbia, South Caro-

lina, for the plaintiff-appellant.

Gretchen M. Nelson, Kreindler & Kreindler LLP, Los Ange-

les, California, for the plaintiff-appellee.

4666 DELAWARE VALLEY v. JOHNSON & JOHNSON

OPINION

D.W. NELSON, Senior Circuit Judge:

This appeal stems from a disagreement between two differ-

ent groups of plaintiffs about who has standing as a “direct

purchaser” to bring a claim under federal antitrust laws. One

group consists of Delaware Valley Surgical Supply Company,

Inc., (“DVSS”) and Niagara Falls Memorial Medical Center

(“Niagara”). They are both entities that bought medical sup-

plies directly from Johnson & Johnson and its subsidiaries

(“J&J”). The other plaintiff is Bamberg County Memorial

Hospital & Nursing Center (“Bamberg”), a hospital that had

a contract with J&J setting a list price for the purchase of

medical supplies, but that ultimately purchased its J&J prod-

ucts through a separate contract with a third-party distributor.

DVSS, Niagara, and Bamberg all brought independent anti-

trust claims against J&J. The district court consolidated the

three cases. Before reaching the merits of the underlying anti-

trust claims, the district court ruled that Bamberg lacked

standing to assert its claim against J&J. The district court rea-

soned that because Bamberg bought its supply through a dis-

tributor and not from J&J, it was not a “direct purchaser.”

Bamberg and J&J both contest that decision through this

interlocutory appeal. We affirm the order of the district court,

and hold that Bamberg lacks standing to pursue an antitrust

claim under a direct purchaser theory.

FACTUAL AND PROCEDURAL BACKGROUND

Three plaintiffs brought antitrust actions against J&J aris-

ing from the manufacturer’s contracts with hospitals and their

group purchasing organizations (“GPOs”). This litigation

involves two categories of products: sutures used to close

wounds and endomechanical products (“endos”) used primar-

ily for minimally invasive laparoscopic surgery. The plaintiffs

DELAWARE VALLEY v. JOHNSON & JOHNSON 4667

are: (1) Bamberg, a hospital; (2) Niagara, a hospital; and (3)

DVSS, a distributor of medical devices.

I. The Underlying Antitrust Claims

In December 2005 and January 2006, Bamberg, DVSS, and

Niagara independently filed suit against J&J, claiming they

were direct purchasers of J&J’s endomechanical products.

Their complaints allege that J&J’s conduct is an unreasonable

restraint of trade in violation of § 1 of the Sherman Act, 15

U.S.C. § 1, and an unlawful exclusive dealing in violation of

§ 3 of the Clayton Act, 15 U.S.C. § 14. The plaintiffs further

allege that J&J monopolized or attempted to monopolize the

relevant markets in violation of § 2 of the Sherman Act, 15

U.S.C. § 2.

More specifically, the plaintiffs assert that J&J impermiss-

ibly leveraged its monopoly power in sutures to create a

monopoly in the endos market. They contest J&J’s “market

share purchase requirements,” under which J&J enters into

contractual arrangements that condition discounts and rebates

on a buyer purchasing the bulk of its products from the com-

pany. This scheme, plaintiffs suggest, was coercive and

resulted in artificially inflated prices. Plaintiffs also object to

the bundled discounts offered to hospitals that purchase both

sutures and endos from J&J. They allege that these bundled

discounts are exclusionary because of J&J’s dominance in the

sutures market.

II. Bamberg’s Contracts with J&J and the Distributor

Bamberg is a member of “Premier,” a GPO which negoti-

ated agreements with J&J on Bamberg’s behalf. Those agree-

ments set the pricing options for sutures and endo products.

Bamberg then executed its own contracts with J&J pursuant

to the terms of the Premier agreements. Those contracts noted

that Bamberg would order products either directly from J&J

or from an authorized distributor of J&J’s products. Bamberg

4668 DELAWARE VALLEY v. JOHNSON & JOHNSON

chose the latter option and selected as its distributor Owens &

Minor (“O&M”). Bamberg entered into a separate contract

with O&M, which specified the terms of purchase for J&J

products. Accordingly, Bamberg’s contract with J&J did not

result in the procurement of any goods directly from J&J.

Bamberg did not pay J&J directly for any goods, and J&J did

not ship any goods directly to Bamberg.

The distributor, O&M, is not owned or otherwise controlled

by J&J. O&M’s distributorship agreement with J&J specified

that if products were sold to a J&J contract customer, the dis-

tributor would pay the manufacturer the set price that was

negotiated between J&J and the GPO. In turn, Bamberg’s

contract with O&M permitted the distributor to charge a

markup percentage. Accordingly, the final contract price paid

by Bamberg was equal to the price negotiated under the Pre-

mier agreement with J&J, plus O&M’s markup. Indisputably,

Bamberg paid O&M directly for its orders, and O&M deliv-

ered the products to Bamberg.

III. Proceedings Below

After this contractual scheme was laid out before the dis-

trict court, DVSS moved for partial summary judgment. It

argued that Bamberg did not have standing to seek damages

because it was not a “direct purchaser” of J&J’s products, as

required by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).

J&J and Bamberg moved for a determination that Bamberg

does have standing as a “direct purchaser” because the com-

plaint challenges the legality of Bamberg’s own contracts

with J&J.

The district court entered an order denying the motions

filed by J&J and Bamberg, and granting DVSS’s motion for

partial summary judgment. The court held that Bamberg is not

a “direct purchaser” from J&J because it bought its products

from an independent distributor, and therefore the hospital

lacks standing to sue for antitrust damages. In the district

DELAWARE VALLEY v. JOHNSON & JOHNSON 4669

court’s view, Bamberg’s independent contract with J&J did

“not change the fact that O&M is the direct purchaser here.”

In re Endosurgical Products Direct Purchasher Antitrust

Litig., No. CV-05-8809-JVS (C.D. Cal. Aug. 2, 2007). This

interlocutory appeal followed.

JURISDICTION

The federal courts have jurisdiction to consider questions

alleging the violation of federal laws pursuant to 28 U.S.C.

§ 1331. We have jurisdiction over this interlocutory appeal

pursuant to 28 U.S.C. § 1292(b).

STANDARD OF REVIEW

“Standing is a question of law reviewed de novo.” Stewart

v. Thorpe Holding Co. Profit Sharing Plan, 207 F.3d 1143,

1148 (9th Cir. 2000). We also review de novo a district

court’s decision to grant summary judgment. Id. We must

determine, viewing the evidence in the light most favorable to

the nonmoving party, whether there are any genuine issues of

material fact and whether the district court correctly applied

the relevant substantive law. Lopez v. Smith, 203 F.3d 1122,

1131 (9th Cir. 2000) (en banc).

DISCUSSION

I. The Direct Purchaser Rule

[1] Section 4 of the Clayton Act broadly authorizes that

“any person who shall be injured” by a violation of the anti-

trust laws may seek treble damages from the offending party.

15 U.S.C. § 15(a). The Supreme Court has interpreted that

section narrowly, thereby constraining the class of parties that

have statutory standing to recover damages through antitrust

suits. See Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977);

Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S.

481 (1968). In particular, the Supreme Court has given con-

4670 DELAWARE VALLEY v. JOHNSON & JOHNSON

siderable attention to the question of who may assert a claim

when a middleman, for example a distributor or a wholesaler,

sits between an end user and a manufacturer.

[2] The first major case to consider the scope of § 4 was

Hanover Shoe, 392 U.S. 481. There, Hanover alleged that

United had monopolized the shoe manufacturing industry in

violation of § 2 of the Sherman Act. Id. at 483. The plaintiff

sought treble damages for overcharges paid in leasing certain

machinery from United. Id. at 483-84. United defended itself

using a “passing-on” theory, arguing that Hanover had passed

on the overcharge to its customers and therefore had suffered

no injury. Id. at 487-88. The Court rejected the pass-on

defense for two reasons. First, it reasoned that establishing the

amount of overcharge shifted to indirect purchasers “would

normally prove insurmountable.” Id. at 493. Second, it con-

cluded that a pass-on defense would reduce the overall effec-

tiveness of antitrust actions by diminishing the recovery

available to any potential plaintiff. Id. at 494. Accordingly,

the Court held that a party could not defend an antitrust suit

brought by a middleman by showing that the actual injury

caused by the overcharge was suffered by the end user. Id.

In Illinois Brick, the Supreme Court extended the Hanover

principle to foreclose the offensive use of a pass-on theory.

431 U.S. at 728 (holding that indirect purchasers may not

recover in an antitrust suit by proving that an overcharge was

passed on to them through the distribution chain). There, the

State of Illinois sued concrete block manufacturers for con-

spiring to raise prices in violation of § 1 of the Sherman Act.

Id. at 726 27. The companies had sold blocks to contractors

who acted as the middlemen before selling to the State. Id. at

726. The Court reasoned that the rule forbidding the use of a

pass-on theory enunciated in Hanover Shoe should “apply

equally to plaintiffs and defendants.” Id. at 728. “[A]llowing

offensive but not defensive use of pass-on would create a seri-

ous risk of multiple liability for defendants.” Id. at 730.

Accordingly, the State was foreclosed from asserting a suit

DELAWARE VALLEY v. JOHNSON & JOHNSON 4671

under § 4 of the Clayton Act because it did not buy concrete

directly from the defendant manufacturers. Id. at 728-29.

[3] The Supreme Court further reasoned that the direct pur-

chaser rule serves to eliminate the “evidentiary complexities

and uncertainties” of apportioning overcharges between direct

and indirect purchasers. Id. at 731-33, 740-43. “[A]ntitrust

laws will be more effectively enforced by concentrating the

full recovery for the overcharge in the direct purchasers rather

than by allowing every plaintiff potentially affected by the

overcharge to sue . . . .” Id. at 735. The Court explicitly

rejected the State’s attempt “to carve out exceptions to the

Hanover Shoe rule for particular types of markets.” Id. at 744.

In sum, a bright line rule emerged from Illinois Brick: only

direct purchasers have standing under § 4 of the Clayton Act

to seek damages for antitrust violations. See id. at 735.

The Supreme Court reaffirmed the reasoning of Illinois

Brick in Kansas v. UtiliCorp United Inc., 497 U.S. 199

(1990). There, the States of Kansas and Missouri, on behalf

of individual energy consumers, initiated suits against a pipe-

line company and five gas production companies, alleging

that the defendants conspired to inflate the price of gas. Id. at

204. The Court determined that the States lacked standing

because the consumers they represented were indirect pur-

chasers. Id. at 207 (“In the distribution chain, they are not the

immediate buyers from the alleged antitrust violators.”). The

consumers bought gas directly from the utilities, so “any anti-

trust claim against the defendants is . . . for the utilities to

assert.” Id.

The Court refused to create an exception to the Illinois

Brick rule, even where its previous concerns “about the diffi-

culties of apportionment, the risk of multiple recovery, and

the diminution of incentives for private antitrust enforcement”

would “not apply with equal force.” Id. at 208. The Court

rejected the States’ argument that the rule should not apply

because it would be relatively easy to apportion the over-

4672 DELAWARE VALLEY v. JOHNSON & JOHNSON

charge among the purchasers. Id. at 208-10. In order to avoid

extensive fact-based litigation in antitrust suits to establish

standing, the Court specifically noted its desire for a bright-

line rule. Id. at 211 (“The difficulties posed by issues of

[apportionment] led us to adopt the direct purchaser rule, and

we must decline to create an exception that would require

their litigation.”). The Court noted that the Illinois Brick rule

“often den[ies] relief to consumers who have paid inflated

prices because of their status as indirect purchasers,” id. at

211-12, yet refused to broaden the scope of relief in order to

maintain stability in the law, id. at 216. The Court concluded,

The rationales underlying Hanover Shoe and Illinois

Brick will not apply in equal force in all cases. We

nonetheless believe that ample justification exists for

our stated decision not to ‘carve out exceptions to

the [direct purchaser] rule for particular types of

markets.’ The possibility of allowing an exception,

even in rather meritorious circumstances, would

undermine the rule.

...

In sum, even assuming that any economic assump-

tions underlying the Illinois Brick rule might be dis-

proved in a specific case, we think it an unwarranted

and counterproductive exercise to litigate a series of

exceptions. Having stated the rule in Hanover Shoe,

and adhered to it in Illinois Brick, we stand by our

interpretation of § 4.

Id. at 216-17 (internal citation omitted).

In Royal Printing Co. v. Kimberly-Clark Corp., 621 F.2d

323 (9th Cir. 1980), this circuit applied the direct purchaser

rule. A printing company and other small businesses brought

suit against ten manufacturers of paper products. Id. at 324.

The plaintiffs had never bought paper products directly from

DELAWARE VALLEY v. JOHNSON & JOHNSON 4673

any of the defendants, but instead purchased through whole-

saling firms. Id. This court permitted the suit to proceed inso-

far as plaintiffs could demonstrate that the wholesaler was a

subsidiary of a defendant. Id. at 326. However, those plain-

tiffs who bought through independent wholesalers that were

not owned or controlled by any defendant were only indirect

purchasers. Id. at 327-28. Therefore, the Illinois Brick rule

barred them from sustaining a suit under § 4 of the Clayton

Act. Id.

We recently reaffirmed the direct purchaser rule in Kendall

v. Visa U.S.A., Inc., 518 F.3d 1042, 1049-50 (9th Cir. 2008).

There, merchants brought an antitrust action against both

credit card companies and banks, alleging that the defendants

conspired to set fees on credit card purchases. Id. at 1044-45.

We found that, because the fee at issue was set by the credit

card companies and not by the banks, the banks were the

“middlemen.” Id. at 1048-49. As a result, plaintiffs could not

maintain an antitrust suit against the credit card companies as

direct purchasers because they ran “squarely into the Illinois

Brick wall.” Id. at 1049. The plaintiffs could not get around

the direct purchaser rule because they failed to allege any

facts showing that the banks were either controlled by or in

a conspiracy with the credit card companies. Id. at 1050.

II. Bamberg Is Not a Direct Purchaser

A. Precedent Controls the Outcome

[4] Quite simply, we are bound by the sensible and straight-

forward rule set forth by Illinois Brick. Appellants argue this

situation is distinguishable because Bamberg and J&J did

have an independent contractual relationship. However,

Supreme Court jurisprudence has been neither vague nor

ambiguous in establishing the direct purchaser rule. The

Supreme Court intended to make a bright line rule for identi-

fying the proper plaintiff when an antitrust violation occurs in

a multi-tiered distribution system. See Illinois Brick, 431 U.S.

4674 DELAWARE VALLEY v. JOHNSON & JOHNSON

at 735-36. The Court has explicitly rejected attempts to create

exceptions to that rule, even when the considerations in a par-

ticular market may undermine some of the reasoning used by

the Illinois Brick Court. See UtiliCorp, 497 U.S. at 211. The

undisputed truth is that Bamberg only indirectly purchased

goods from J&J.

[5] Under the direct purchaser rule, Bamberg lacks standing

under § 4 of the Clayton Act to assert an antitrust violation

against J&J. It is undisputed that O&M, as the distributor, was

the immediate purchaser of sutures and endo products from

J&J. O&M paid J&J directly for its inventory and took title

in the products before selling them to Bamberg. Bamberg

directly paid O&M, not J&J, for its orders. O&M is not an

agent or subsidiary of J&J, but rather an independently owned

and managed company. Following the clear rule set forth in

Illinois Brick, Bamberg lacks standing because the hospital is

not a direct purchaser of products from J&J. Although the

price that Bamberg pays O&M is set, in part, by an agreement

negotiated by a GPO on behalf of Bamberg, the hospital con-

tracted separately with O&M for the actual sale and delivery

of products. The final price paid by Bamberg included the list

price negotiated by Premier, plus a markup fee charged by

O&M.

[6] The presence of a contractual relationship between

Bamberg and J&J does not change the fact that Bamberg also

had a contract with O&M, and it was that contract that ulti-

mately effectuated the transfer of these goods. Furthermore,

the plaintiffs are not merely seeking to invalidate an individ-

ual contract between a GPO and J&J; rather they are attacking

the pricing scheme employed by J&J in its negotiations with

a wide range of health care providers. Appellants’ contention

that we should myopically focus on the contract between

Bamberg and J&J, without taking into consideration where

the hospital actually bought its products, is therefore unavail-

ing.

DELAWARE VALLEY v. JOHNSON & JOHNSON 4675

B. We Decline To Adopt Appellants’ Reformulation of the

Direct Purchaser Rule

Appellants do not contend that Bamberg qualifies for any

previously-recognized exception to the direct purchaser rule.1

Rather, they urge this court to adopt a new rule that they

believe is better attuned to the business relationships between

health care providers and manufacturers. They contend that

this case presents a common arrangement whereby a GPO

negotiates prices with manufacturers on behalf of hospitals,

but then individual hospitals place orders through independent

distributors. Appellants assert that the hospital, not the distrib-

utor, is the direct victim of the alleged antitrust violation.

Under their reasoning, the hospital is therefore the proper

plaintiff to enforce the antitrust laws because any injury to the

distributor was, at most, derivative. Bamberg and J&J propose

that a party should be deemed a “direct purchaser” when (1)

the plaintiff contracted directly with the defendant, (2) its

complaint challenges the lawfulness of that contract and (3)

the alleged injury is that the defendant charged artificially

high prices in its contract with plaintiff. Under this new for-

mulation of the Illinois Brick rule, Bamberg would have

standing to bring suit against J&J, despite the fact that it actu-

ally bought its products from O&M. Bamberg did have a con-

tract with J&J and the hospital contests the validity of the

price set in that contract.

Appellants fail to persuade this court that there is anything

extraordinary about the facts of this case warranting a devia-

tion from the firmly established Illinois Brick rule. Appellants

1

The case law recognizes standing for an indirect purchaser if (1) there

was a pre-existing cost-plus contract, see UtiliCorp, 497 U.S. at 217-18,

or (2) the direct purchaser is owned or controlled by the indirect pur-

chaser, Royal Printing Co., 621 F.2d at 326. Additionally, this court has

held that an indirect purchaser may bring suit where he establishes a price-

fixing conspiracy between the manufacturer and the middleman. See Ari-

zona v. Shamrock Foods Co., 729 F.2d 1208, 1211 (9th Cir. 1984). Appel-

lants here have made no such allegation.

4676 DELAWARE VALLEY v. JOHNSON & JOHNSON

urge that we look to the substance of a plaintiff’s antitrust the-

ory, and not just the formalities of the purchase transaction to

determine if there is standing. The allegedly predatory behav-

ior here occurred in the manufacturer’s dealings with the

GPOs, who were representing the hospitals’ interests. Appel-

lants may well be correct in positing that a hospital has a

greater incentive than a distributor to bring an antitrust claim

when the conduct complained of involves price negotiations

with a GPO. The distributor is not a party to the initial negoti-

ations that set the list price for its products. Such a distributor

arguably has a smaller stake in contesting the price than a

hospital whose representative was part of those negotiations

and felt that the manufacturer was engaging in illegal behav-

ior.

[7] However, the Supreme Court has already rejected a

similar argument. See UtiliCorp, 497 U.S. at 218. There, even

though the middleman passed on 100 percent of the over-

charge to consumers, the Supreme Court still held that the

consumer was not a direct purchaser and only the middleman

could bring an antitrust suit. Id. at 208-12, 218. In so doing,

the Court closed the door on the theory that an end user who

buys from an independent distributor rather than the manufac-

turer, should have standing because it may be the most effi-

cient enforcer of antitrust laws. The Court ensured that the

rule of Illinois Brick was straightforward so that it could be

administered with “simplicity and certainty.” Id. at 218. Illi-

nois Brick is not a policy holding, but rather a case of statu-

tory construction. See California v. ARC America Corp., 490

U.S. 93, 102-03 (1989) (“As we made clear in Illinois Brick,

the issue before the Court in both that case and in Hanover

Shoe was strictly a question of statutory interpretation —

what was the proper construction of § 4 of the Clayton Act.”).

The Court’s firm rule does not provide us the leeway to make

a policy determination on a case-by-case basis as to whether

standing should be recognized when there are special business

arrangements. See Illinois Brick, 431 U.S. at 744 (“We reject

these attempts to carve out exceptions to the Hanover Shoe

DELAWARE VALLEY v. JOHNSON & JOHNSON 4677

rule for particular types of markets.”). Accordingly, appel-

lants’ policy arguments are unavailing.

Even if we opted to strike out on a new path, we are not

convinced that appellants’ rule would be a better mechanism

for enforcing antitrust violations. Adopting their formulation

of the direct purchaser rule would still present problems of

multiple liability and force courts to engage in complex fac-

tual inquiries to determine how damages should be appor-

tioned between parties. For instance, under their rule, both

O&M and Bamberg could theoretically bring a claim against

J&J for the same overcharge. This would subject J&J to the

possibility of multiple liability and would require the courts

to disentangle the proper recovery for each party in the distri-

bution chain. These are precisely the concerns that troubled

the Supreme Court in Illinois Brick.

[8] Moreover, the distributor is not a completely irrelevant

economic actor in this contractual framework. In theory, a

demand curve exists for the bundle of goods and services that

O&M sells. If the price of the goods is artificially inflated by

the anti-competitive practices of J&J, that will affect the

attractiveness of the distributor’s products in the marketplace.

There is no reason to believe that market forces do not work

on O&M and other distributors. The presence of another dis-

tributor as a plaintiff in this case, DVSS, shows that distribu-

tors are indeed affected by J&J’s allegedly predatory pricing

scheme and do have incentives to bring suit against the manu-

facturer. This directly undermines Bamberg’s argument that

hospitals should always have standing because distributors

will not be efficient enforcers of antitrust law. There are

clearly other motivated plaintiffs, distributors and hospitals

alike, who unquestionably meet the direct purchaser require-

ment and can serve the role of private attorney general con-

templated by § 4 of the Clayton Act. The direct purchaser rule

is a clearly established tenet of antitrust law and this case falls

within its mandate.

4678 DELAWARE VALLEY v. JOHNSON & JOHNSON

C. In re Lorazepam Does Not Dictate a Different Result

Appellants also attempt to find support for their position

from a recent decision from the United States District Court

for the District of Columbia. See In re Lorazepam & Cloraze-

pate Antitrust Litig., 202 F.R.D. 12, 20 (D.D.C. 2001). The

plaintiffs there included an individual hospital, a GPO, and a

health maintenance organization that operated hospitals. Id. at

14-15. The plaintiffs sought class certification as “direct pur-

chasers” of drugs from pharmaceutical manufacturers who

allegedly engaged in price-fixing. Id. at 22. The defendants

moved to dismiss on the grounds that the plaintiffs had “nei-

ther adequately defined the term ‘direct purchaser’ nor suffi-

ciently explained how they and other putative class members

‘directly’ purchased the drugs from [the defendant].” Id. The

defendants contended that “direct purchasers are unascertain-

able” in the pharmaceuticals market. Id.

The district court disagreed, concluding that the plaintiffs

had made a “sufficient showing of standing” to warrant class

certification. Id. at 23. The district court noted, however, that

plaintiffs “are members of the direct purchaser class ‘to the

extent that they purchased directly from [the defendant] for

their own account.’ ” Id. Those purchasers were billed

directly by the defendant, and paid the defendant directly for

their products. Id. The district court noted that “discerning

direct purchasers vis-à-vis indirect purchasers in the pharma-

ceuticals industry is complex.” Id. But, the district court opted

to approve class certification because it was wary that the

complicated nature of this market would result in the “sense-

less point that no one may be sued for antitrust injury in the

pharmaceuticals industry because it is too difficult to weed

out the indirect purchasers.” Id.

Furthermore, the Lorazepam court explicitly rejected the

defendants’ argument that the district court should adopt a

rule that would better serve the business interests at issue in

that case. Id. at 19-20. The district court noted that “any

DELAWARE VALLEY v. JOHNSON & JOHNSON 4679

exception to the Illinois Brick direct purchaser rule must be

narrowly restricted to a situation in which complex market

forces are stripped of their effect due to preexisting condi-

tions, such as with a cost-plus contract, so that the pass-on is

clearly discernable.” Id. at 19-20. The court refused to enter-

tain policy arguments advocating for a new exception. Id. at

20. Similarly, we reject appellants’ attempt to craft a new rule

that they suggest would be better suited to enforce antitrust

laws in the modern healthcare industry.

Lorazepam simply does not buttress appellants’ position —

in fact, it undermines many of their arguments. Unlike this

case, the Lorazepam suit was a class action. The district court

certified the class of “putative direct purchasers” to allow the

suit to go forward, but the court was careful to note that a

direct purchaser was a plaintiff who “purchased directly

from” the manufacturer. Id. at 23. Bamberg did not purchase

its products directly from J&J. Rather, it was invoiced by, and

sent payments directly to, O&M. In Lorazepam, the district

court’s willingness to grant class certification so that litigation

could proceed does not support a finding that this court should

relax the direct purchaser rule when we have parties before us

that clearly do satisfy the direct purchaser standard. The

Lorazepam court itself never stated that a party who was

shown not to be a direct purchaser could ultimately seek

recovery. Instead, by saying that a party was a member of the

class “to the extent” they were direct purchasers, the Loraze-

pam court endorsed the Illinois Brick rule. See id.

CONCLUSION

For the foregoing reasons, we affirm the order of the dis-

trict court, holding that Bamberg lacks standing to seek dam-

ages for an alleged antitrust violation.

AFFIRMED.