Opposition Brief — Sicor Ltd. v. Cetus Corp.

No. 95-8

In the Supreme Cotr

OF THE

United States

OcTosBer TERM, 1995

Sicor LimIreD, ALCO CHEMICALS LTD.,

Petitioner,

vs.

CeTUs CORPORATION;

Cetus GENERIC CORPORATION;

BEN VENUE LABORATORIES, INC.;

BEN VENUE GENERIC CORPORATION;

and CeTus-BEN VENUE THERAPEUTICS,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

RESPONDENTS’ OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

CHARLES B. COHLER

c/o Lasky, Haas & Cohler, P.C.

505 Sansome Street, 12th FI.

San Francisco, CA 94111

(415) 788-2700

Counsel for Respondents

July 31, 1995

SOWNE OF GAN FRANCISCO. INC. + 343 GANGOME ST. - &.F.. CA 94104 + (415) 362-2300

T BEST AVAILABLE COPY

pres

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i

QUESTIONS PRESENTED

In accordance with Rule 15.1 of the Rules of this Court,

we show below that none of the questions stated in the

Petition is presented on this record. Each of the questions

presupposes that Petitioners were (or at least one of them

was) manufacturing competitors at the relevant time. As

both the district court and court of appeals found, neither

was.

' |

LIST OF PARTIES :

Petitioners accurately list the parties of record in the court |

of appeals, but incompletely respond to Rule 29.1 of the

Rules of this Court.

:

Petitioner Sicor Limited has forfeited its charter in the |

United Kingdom. Sicor, S.p.A. is its successor in interest. |

As the court of appeals accurately noted (App. 4a n.1), |

Respondent Cetus Corporation, formerly a publicly traded

corporation, was acquired by Chiron Corporation through a

merger effective December 12, 1991, and subsequently

changed its name to Cetus Oncology Corporation on

March 6, 1992. As of December 12, 1991, Cetus Corpora-

tion was, and Cetus Oncology Corporation currently is, a

wholly owned subsidiary of Chiron Corporation. Chiron

Corporation is a publicly traded corporation. Approximately

49.5 percent of its shares are held by Ciba-Geigy Limited,

directly or through its wholly owned subsidiaries. Subsidiar-

ies which are not wholly owned by Chiron Corporation

(excluding officer or director qualifying shares) are: Chiron

Technolas Opthalmologics Systeme GmbH, Ciba Corning

Diagnostics de Mexico S.A. de-C.V., Domilens S.A. (Swe-

den), and Cetus-Ben Venue Therapeutics. Chiron Corpora-

tion has announced the pending acquisition of all of the

outstanding shares of Viagene, Inc., subject to requisite

governmental and other approvals. Other affiliates which

have issued shares to the public are Cetus Healthcare

Limited Partnership I and Cetus Healthcare Limited Part-

nership II.

ee te ee. ee

Cetus Generic Corporation is a wholly owned subsidiary |

of Cetus Oncology Corporation. |

Ben Venue Laboratories, Inc. has no publicly traded

parent subsidiary, or affiliated corporations.

/ |

EE

Ben Venue Generic Corporation is a wholly owned sub-

sidiary of Ben Venue Laboratories, Inc.

Cetus-Ben Venue Therapeutics is a partnership between

Cetus Generic Corporation and Ben Venue Generic

Corporation.

iv

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .................... i

LIST OP PARTIE ek li RS ii :

TABLE OF CONTI ONES 6 ok ES iv

TABLE OF AUTHORITIES ..................-. vi

STATEMENT OF THE CASE.................. 1

I. THE PERTINENT FACTUAL BACK-

GRONIIARE S 2

A. Respondent CBVT’s Initial Entry into the

United States Generic Doxorubicin Market

by Obtaining Bulk Doxorubicin from Peti-

BPR ely pres Be ae rales Nee 2

B. The Shutdown of the Manufacturing Plant

Which Was the Source for Petitioners’ Sup-

ply of Doxorubicin to CBVT............. 3

C. Neither of the Petitioners Was the Manufac- :

turer of the Bulk Doxorubicin Which Re-

spondents Had Agreed To Purchase from

PUNE j kk och Ss SC hicwe kets ee 4

II. THE INTERLOCUTORY POSTURE OF THE

CAMs ea eee, CR 6

SUMMARY OF ARGUMENT.................. 7

1. None of the questions purportedly presented

arises on the present record................. 7

2. Even if the questions stated were presented,

none would warrant grant of the writ......... 7

3. The questions purportedly presented may well be

rendered moot by further proceedings after

remand to the district court; the interlocutory

posture of the case is further reason not to grant

WG ME hai ss eas Sindee ess 9

Vv

TABLE OF CONTENTS

Pt eer er rot rere PLT re ree

I.

II.

ITI.

THE QUESTIONS PURPORTEDLY TEN-

DERED IN THE PETITION ARE NOT

PRESENTED ON THIS RECORD.........

A. Petitioncrs Were Not Manufacturer-Com-

petitors because Sicor, S.p.A.’s Plant Was

Shut Down during the Entirety of the Rele-

Co) tS ere

B. The Court of Appeals’ Reference to “Mak-

ing Money” Negated Any Inference of

Predatory Pricing at a Short-Term Loss,

and Petitioners Err in Implying that the

Court of Appeals Meant To Establish a

Safe Harbor Precluding Antitrust Liability

THERE IS A HIGH LIKELIHOOD THAT

THE QUESTIONS PURPORTEDLY

PRESENTED WILL, IN ANY EVENT, BE

RENDERED MOOT UPON REMAND TO

THE DISTRICT COURT 2... ccsevdeccee.

WHEN PETITIONERS WERE UNABLE TO

PERFORM THEIR SUPPLY AGREEMENT,

IT WAS PRO-COMPETITIVE FOR RE-

SPONDENTS TO MAKE ALTERNATIVE

SUPPLY ARRANGEMENTS IN ORDER TO

CONTINUE THEIR ENTRY INTO THE

ee RG Cy aA GN Tir apet ere aaa mie ay

CREME, 66 5 b.0 9 nhs SAG KOE eRe awed hae Cabee

11

12

vi

TABLE OF AUTHORITIES

Cases

Page

American Title Ins. Co. v. Lacelaw Corp., 861 F.2d

TO8 CPR. CR FIED bie eka eis eR ae 12

Banco do Brasil, S.A. v. Latian, Inc., 234 C.A.3d 973

(1991), cert. denied, 504 U.S. 986 (1992)........ 12

Brotherhood of L. F. & E. v. Bangor & A. R. C., 389

EE RE cy eRe gd alates amenetrcoay exe tniee eee 12

Chicago Board of Trade v. United States, 246 U.S.

APE CERES cc cvied Sedcad de Lape taws shee s8s 13,14

Dictograph Products v. Federal Trade Comm’n, 217

F.2d 821 (2d Cir. 1954), cert. denied, 349 U.S.

DOD CEPR ee bai hike Ce RNR RRER AEs Caen’ 18, 19

Goodman v. Lukens Steel Co., 482 U.S. 656 (1987) 2

Graver Tank & Mfg. Co. v. Linde Air Prod. Co., 336

CEs Ae GEOON ee Ss RRR eS 2

Illinois Corporate Travel v. American Airlines, 889

F.2d 751 (7th Cir. 1989), cert. denied, 495 U.S.

SES (1900) ooo LR Rie ieeve ie. 15

NCAA v. Board of Regents of Univ. of Okla., 468

ae Ge CED inc pb vewsepeweweds Fact dee dec’ 2, 14

Perington Wholesale, Inc. v. Burger King Corp., 631 :

£26 1508 CLOG. 19798) Bo ARR ee 16, 17

SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056

(3rd Cir.), cert. denied, 439 U.S. 838 (1978) ..... 17,18

Standard Oil Co. v. United States, 337 U.S. 293

CRON 5 SSE SIT I SNS Se Recess 15

Tampa Electric Co. v. Nashville Coal Co., 365 U.S.

BE MEOUED a.n.vcesccacun sous eres cxeecpeaielas 15, 19

vii

TABLE OF AUTHORITIES

CASES

Page

United States v. Container Corp. of America, 393

Se MO AS) Bea ein eaity. 50a Sane 16

United States v. Dairymen, Inc., 660 F.2d 192 (6th

Sy SEDs 5 urbe WR eee Poe cs ccweckck 19

Statutes

California Evidence Code § 622................... 12

Clayton Act § 3, 15 U.S.C. § 14 (1914) ....... 15, 18, 19

Sherman Act § 1, 15 U.S.C. § 1 (1890) ....... 14, 16, 18

Sherman Act § 2, 15 U.S.C. § 2 (1890) .......... 14,17

pee Sees tn Be eek 9

Miscellaneous

III P. Areeda & D. Turner, Antitrust Law (1978)

SOI i i llied Geka eb NES Cac k he Bes ww 14

TOR 5 i a tie ae TERK PAA LORE Eh cee 14, 15

R. Stern, E. Gressman, S. Shapiro, Supreme Court

Practice, § 4.18 (6th ed. 1986) ................. 12

No. 95-8

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1995

SIcor LIMITED, ALCO CHEMICALS LTD.,

Petitioner,

VS.

CETUS CORPORATION;

CETUS GENERIC CORPORATION;

BEN VENUE LABORATORIES, INC.;

BEN VENUE GENERIC CORPORATION;

and CeTUS-BEN VENUE THERAPEUTICS,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

RESPONDENTS’ OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

STATEMENT OF THE CASE

We first state the facts pertinent to the Petition, largely as

found by both the district court and the court of appeals,’

' The district court entered a summary judgment, finding that certain

facts were not controverted and thus not in dispute. The court of appeals

also found certain of those facts not to be in dispute. This circumstance

is akin to the Two Court Rule, that only in exceptional circumstances

does this Court undertake to review concurrent findings of fact by two

2

because the questions purportedly presented are, in fact, not

present on this record. We then describe the interlocutory

posture of the case, because one of the reasons to deny the

Petition is that any question of the kind tendered is highly

likely to be rendered moot upon remand to the district court.

I. THE PERTINENT FACTUAL BACKGROUND

A. Respondent CBVT’s Initial Entry into the United

States Generic Doxorubicin Market by Obtaining

Bulk Doxorubicin from Petitioners

There are five respondents. One of them, Cetus-Ben

Venue Therapeutics, Inc. (“CBVT”), is a partnership

formed by two others of them; the remaining two respon-

dents are the corporate parents of those two partners. (App.

4a n.1; App. 34a n.1 and accompanying text.) CBVT is the

entity that was involved in the transactions of which peti-

tioners, plaintiffs in the district court, complained. The court

of appeals referred to “CBVT” as encompassing all of the

parties that are here respondents (App. 8a n.5), and so shall

we.

Until June 1988, other parties, referred to below as

“Erbamont” or the “Farmitalia Group”, held a United

States product patent covering a chemical compound that is

widely used in cancer treatment, doxorubicin. (App. 3a;

App. 33a-34a.) Upon expiry of that product patent,

Erbamont still held certain process patents whose term did

not expire until nearly three years later. (App. 34a.)

courts below. Goodman v. Lukens Steel Co., 482 U.S. 656, 665 (1987);

NCAA v. Board of Regents of Univ. of Okla., 468 U.S. 85, 98 n.15

(1984); Graver Tank & Mfg. Co. v. Linde Air Prod. Co., 336 U.S. 271,

275 (1949).

Where both of the lower courts found a fact to which we refer, we cite

the court of appeals’ opinion first and then the district court’s order.

Where only one citation appears, only one of the courts found the fact to

which reference is being made.

3

Upon expiry of Erbamont’s United States product patent,

CBVT wished to sell doxorubicin in the United States. To

do so, it required a supply of bulk doxorubicin from a

manufacturer who had the requisite approval of the United

States Food and Drug Administration (the “FDA”). (App.

2a-4a.) CBVT entered into a supply and distribution agree-

ment with petitioner Sicor Limited.? CBVT’s agreement

with Sicor Limited was an exclusive agreement for all of

CBVT’s requirements, precluding CBVT from acquiring

bulk doxorubicin from any other supplier. (App. 4a; App.

34a.) CBVT began its entry into the doxorubicin market in

the United States with this supply, making its first sale on

May 25, 1989. (App. 5a.)

B. The Shutdown of the Manufacturing Plant Which

Was the Source for Petitioners’ Supply of Dox-

orubicin to CBVT

The supply agreement between CBVT and petitioner

Sicor Limited was for a three-year term commencing with

CBVT’s first sale in the United States, hence it was to run

through May 24, 1992. (App. 5a.) Two months into that

three-year term, the plant which had been manufacturing

the doxorubicin to be supplied to CBVT was shut down by

authorities in Italy and remained closed for nearly nine

months. (App. 6a.) That plant temporarily reopened during

1990 and was again shut down by Italian authorities in

September 1990. It has remained closed ever since. (Jd.)

? Through amendments, by the time this action was commenced in

the district court that agreement had taken the form of two agreements,

one between CBVT and petitioner Sicor Limited for the supply of bulk

doxorubicin and one between CBVT and petitioner Alco Chemicals,

Ltd. for distribution. (App. 3a-5a; App. 34a.) For present purposes, the

fact of those different contracts is not material, and we shall simply refer

to the existence of a supply agreement between CBVT and Sicor

Limited.

4

After half a year had passed following the second, final,

shutdown of the Italian plant, CBVT entered into an alter-

native supply agreement for bulk doxorubicin with the

Farmitalia Group. Their agreement also settled all pending

litigation between the Farmitalia Group and CBVT. (App.

8a; App. 35a.)

This suit followed.

C. Neither of the Petitioners Was the Manufacturer of

the Bulk Doxorubicin Which Respondents Had

Agreed To Purchase from Petitioners.

CBVT’s written supply contract referred to a third party,

Sicor, S.p.A., as the manufacturer of the buik doxorubicin

which it was buying. It was the manufacturing plant of

Sicor, S.p.A. that was shut down by the Italian authorities

as stated above. On a motion for summary judgment, the

district court interpreted the contract between CBVT and

Sicor Limited as requiring that the bulk doxorubicin be

manufactured at that plant in Italy owned by Sicor, S.p.A.

(App. 39a-42a.) As a result, among other things the district

court held that since petitioners could not perform their

contract in view of the shutdown of the Sicor, S.p.A. plant in

Italy, the contract was canceled as a matter of law and

CBVT was entirely free to protect itself by entering into an

alternative supply agreement with the Farmitalia Group.

(App. 42a.)

The court of appeals held that the supply contract was

ambiguous and that it might be interpreted to require only

that bulk doxorubicin be supplied in conformance with

stated technical specifications, whether or not manufactured

by Sicor, S.p.A. at its plant in Italy. (App. 17a-19a.) The

court of appeals remanded for, among other things, further

proceedings in light of that perceived ambiguity.

In opposing the motion for summary judgment in the

district court, petitioners had offered evidence that during

5

the early period of the final shutdown of the Sicor, S.p.A.

plant there had been negotiations between petitioners and a

Japanese company, Mercian. According to petitioners, Mer-

cian would have been able to obtain timely FDA approval

and thereafter would have been able to supply bulk dox-

orubicin to CBVT. (App. 7a-8a.) Petitioners asserted that

they would have obtained a middleman’s commission on

such substitute supply if CBVT had not turned instead to

the Farmitalia Group. In reversing and remanding, the court

of appeals held that there was a triable issue as to whether

Sicor was damaged by loss of profit “as an intermediary

between third party manufacturers and CBVT, notwith-

standing the [Italian] injunction and sequestration order.”

(App. 23a.)

Thus, both lower courts concurred that neither of these

petitioners was ever to be a manufacturer-competitor of

Erbamont or the Farmitalia Group. Even before the Italian

authorities shut down the Sicor, S.p.A. plant, petitioners

were only intermediaries. Even if one conceives that peti-

tioner Sicor Limited could be considered to be a manufac-

turer-competitor by reason of the fact that it was a

subsidiary of Sicor, S.p.A., it was no longer a manufacturer-

competitor at the pertinent time when CBVT entered into its

alternative supply agreement with Erbamont. CBVT entered

into that alternative supply agreement precisely because the

Sicor Italian supply was no longer available to it.

Thus, both lower courts concurred that, at most, petition-

ers were potential intermediaries, hoping to earn a middle-

man’s commission if CBVT turned to another possible

alternative source of supply after petitioners’ original sup-

plier, Sicor, S.p.A., was shut down.

From that fact alone, the court of appeals held that any

harm to competition came from the Italian authorities’

shutdown of the Sicor, S.p.A. plant, not from the agreement

between CBVT and Farmitalia. (App. 12a-13a.)

6

Il. THE INTERLOCUTORY POSTURE OF THE

CASE

Although the court of appeals affirmed the district court’s

summary disposition of petitioners’ antitrust claims, it re-

versed as to some of petitioners’ state law claims and

remanded for further proceedings.

Among the issues remanded to the district court by the

court of appeals are questions of contract interpretation of

the basic CBVT supply agreement with Sicor Limited. If

that agreement is interpreted after remand (either at or

before trial or upon a subsequent appeal) as the district

court had done on summary judgment, then it will have

been adjudicated that CBVT had no duty under that con-

tract to purchase doxorubicin from any substitute third party

supplier obtained by petitioners once Sicor, S.p.A.’s plant

was shut down. That would end any possibility of any kind of

actionable damage to petitioners, regardless of their conten-

tions about their antitrust claims. That would return the

matter to the same posture as the district court had con-

cluded was correct on the basis of its interpretation of the

contract:

“In this case, plaintiffs can prove no damages from the

alleged breach because they have been incapable of

competing in the U.S. bulk doxorubicin market since

September of 1990. The Sicor, S.p.A. plant was shut

down by the Italian government well before CBVT

settled its litigation with Erbamont; thus, Sicor could

not have suffered any lost profits since it couldn’t even

manufacture or sell any doxorubicin.”

(App. 46a.)

Although the court of appeals found (App. 23a) that

summary judgment was inappropriate on the record before it

because of the ambiguity that it found in the parties’

contract, if CBVT prevails on that question of contract

7

interpretation on remand the matter will be right back where

the district court had said it should be on summary

judgment.

SUMMARY OF ARGUMENT

1. None of the questions purportedly presented arises on

the present record.

We submit that the shutdown of the Sicor, S.p.A. plant in

Italy throughout the relevant time period was the sole and

proximate cause of any injury to petitioners. At the very

least, the shutdown of the Sicor, S.p.A. plant eliminated

petitioners as “manufacturer-competitors” of the Farmitalia

Group, even if one would ever have so regarded them in

light of the fact that it was Sicor, S.p.A., not either peti-

tioner, that was to be the manufacturer.

As a result, this is not a case in which one manufacturer is

foreclosed from a market because a competitive manufac-

turer exercises exclusionary market power through an exclu-

sive contractual arrangement with a distributor. Each of the

questions tendered to this Court in the Petition is founded

upon the assumption that it is such a case, but it is not such

a case.

For the same reasons, there was no injury in fact, much

less antitrust injury, to petitioners by reason of CBVT’s

obtaining an alternative supply from the Farmitalia Group

after Sicor, S.p.A.’s plant was shut down. As both courts

below found, petitioners’ injury came from the shutdown of

the Sicor, S.p.A. plant, not from CBVT’s agreement with

the Farmitalia Group.

2. Even if the questions stated were presented, none

would warrant grant of the writ.

Petitioners claim error, asserting that the court of appeals’

decision is at odds with decisions of this Court. The authori-

8

ties with which the court of appeals decision is said to

conflict are long-standing and basic antitrust cases concern-

ing exclusive dealing. The court of appeals did not depart

from them, nor does its opinion purport to proclaim princi-

ples at odds with any of them. At the very most, petitioners

assert that the court of appeals applied settled law in an

erroneous way.

The court of appeals’ and district court’s finding that it

was pro-competitive for CBVT to continue its attempt to

enter the market by obtaining an alternative source of supply

was fully in line with basic rule of reason analysis. CBVT

would have had to increase its risk of entry by hoping for an

even better arrangement if it had rejected Farmitalia’s offer,

as well as continuing to run the risk of patent infringement

litigation which might have further foreclosed entry. No

subtle issue of antitrust law is raised on these facts.

Petitioners have taken out of context the court of appeals’

phrase about “making money”. The court of appeals did not

purport to create a safe haven from antitrust liability for all

parties whose motivation is to make money. The court of

appeals used that phrase in negating any inference that there

had been predatory below-cost pricing.

Nor was any agreement tendered in the district court that

provided for a cessation of price competition between manu-

facturers. If there had been, it would hardly require this

Court’s grant of certiorari to pronounce horizontal price-

fixing agreements unlawful. The court of appeals did not

proclaim that horizontal price-fixing was lawful.

9

3. The questions purportedly presented may well be

rendered moot by further proceedings after remand to the

district court; the interlocutory posture of the case is further

reason not to grant the writ.

Moreover, resolution of state law issues which the court of

appeals remanded to the district court could render moot all

of the antitrust issues purportedly presented now. The case

being at an interlocutory stage, it is not ripe for this Court’s

consideration on discretionary certiorari review.

ARGUMENT

I. THE QUESTIONS PURPORTEDLY TEN-

DERED IN THE PETITION ARE NOT

PRESENTED ON THIS RECORD.

In accordance with the admonishment in Rule 15.1 of the

Rules of this Court, we show that the questions purportedly

tendered are not presented on this record.

A. Petitioners Were Not Manufacturer-Competitors

because Sicor, S.p.A.’s Plant Was Shut Down dur-

ing the Entirety of the Relevant Time Period.

We have shown above (pp. 3-5) that both courts below

concurred that neither petitioner was a manufacturer-com-

petitor of the Farmitalia Group. Yet that is precisely the

pose to which petitioners pretend in their statement of

questions presented. This fact alone eliminates any possibil-

ity of petitioners recovering by reason of conduct for which a

manufacturer-competitor might have standing to recover.

Petitioners’ first “question presented” concerns supposed

barriers to entry by one manufacturer because a rival manu-

facturer captured the only viable distributor. But both courts

below concurred that petitioners were not a manufacturer-

10

competitor.’ Petitioners’ second “question presented” as-

sumes that petitioners themselves constitute the “only sig-

nificant competitor”, but both courts below concurred that

petitioners were not a manufacturer-competitor at all. Peti-

tioners’ third “question presented” refers to supposed cessa-

tion of price competition “at the wholesale level”, but both

courts below concurred that petitioners were not doing

business at the wholesale level.

When petitioners argue here that the court of appeals

erred, they submit to this Court that the court of appeals

failed to take account of petitioners’ competition at the very

manufacturing level where petitioners have had no competi-

tion to offer since the Italian authorities shut down Sicor,

S.p.A.’s plant. For instance (Petition at 10), petitioners

speak of Erbamont taking over CBVT as an act where

Erbamont became “the exclusive supplier to its principal

competitor’s only distributor”; and to “exclusion of the

monopolist’s competitor through capture of the competitor’s

only distributor”; and to “elimination of the only manufac-

turer which competed on the basis of price”; and (Petition

at 12) to “eliminating competitors”. Those are simply ficti-

tious sentiments, not in any way supportable on this record.

> If it were true that CBVT was the only viable distributor and that it

was essential to any manufacturer to have a viable distributor, there

could never be more than one supplier and it would not matter who that

supplier was. As the court of appeals noted (App. 14a n.9):

“Sicor’s allegation that no other finisher-distributor would have

been readily available to contract with Sicor or other potential

foreign entrants into the American market at the supply level is

arguably beside the point, for elimination of Sicor as a competitor

would still leave the market essentially where it was before Sicor’s

entry, viz., with two producers and three finisher-distributors.”

.

a

1]

B. The Court of Appeals’ Reference to “Making

Money” Negated Any Inference of Predatory Pric-

ing at a Short Term Loss, and Petitioners Err in

Implying that the Court of Appeals Meant To Es-

tablish a Safe Harbor Precluding Antitrust

Liability.

Petitioners have taken the court of appeals’ reference to

“making money” out of context. We replace it (App. 13a):

“Moreover, it is apparent from the materials before

us that valid business reasons existed for CBVT’s

action, i.e., CBVT’s reason for buying from Farmitalia

was to obtain the product, and Farmitalia’s reason for

selling that product to CBVT was to make money. In

the absence of a showing of selling at a loss or similar

conduct explainable only by a motive to reduce or

eliminate competition, the appellants’ claim is not

persuasive.”

By no stretch of imagination was the court of appeals

creating a safe haven against antitrust liability because a

party is motivated to “make money”. Any doubt of that is

dispelled by the footnote the court of appeals appended at

the close of the portion just quoted (App. 13a n.8):

“While it is true as a general proposition that the

existence of valid business reasons motivating a monop-

olist’s conduct is ordinarily a question of fact [citation

omitted], the absence of evidence to the contrary in the

instant case is dispositive of this issue. See also Matsu-

shita, 475 U.S. at 588 (‘conduct as consistent with

permissible competition as with illegal conspiracy does

not, standing alone, support an inference of antitrust

conspiracy’ ).”

12

Il. THERE IS A HIGH LIKELIHOOD THAT THE

QUESTIONS PURPORTEDLY PRESENTED

WILL, IN ANY EVENT, BE RENDERED MOOT

UPON REMAND TO THE DISTRICT COURT.

This Court does not ordinarily issue a writ of certiorari

from an interlocutory order. E.g., Brotherhood of L. F. & E.

v. Bangor & A. R. C., 389 U.S. 327, 328 (1967); R. Stern,

E. Gressman, S. Shapiro, Supreme Court Practice, § 4.18,

p. 224 (6th ed. 1986). The present decision is not only

interlocutory, but the questions urged upon this Court are

likely to evaporate.

After remand to the district court from the court of

appeals, whether before trial, at trial, or upon a subsequent

appeal, it is highly likely that it will be determined that

petitioners were obliged to provide bulk doxorubicin specifi-

cally manufactured at the Sicor, S.p.A. plant in Italy. That

will end all aspects of this case, because there will be no

possible showing of injury in fact from the supposed anti-

trust violations.

That result is highly likely because petitioners themselves

so averred in their complaint (App. 39a), and such aver-

ments are conclusive unless petitioners seek and receive

leave to amend in the district court. E.g., American Title

Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir.

1988).

That result is also highly likely because the contract in

issue so states in its own recitals (App. 4la), and such

recitals are conclusive as between the parties under the

applicable California law. Calif. Evid. Code § 622; Banco do

Brasil, S.A. v. Latian, Inc., 234 C.A.3d 973 (1991), cert.

denied, 504 U.S. 986 (1992).

13

Ill. WHEN PETITIONERS WERE UNABLE TO

PERFORM THEIR SUPPLY AGREEMENT, IT

WAS PRO-COMPETITIVE FOR RESPON-

DENTS TO MAKE ALTERNATIVE SUPPLY AR-

RANGEMENTS IN ORDER TO CONTINUE

THEIR ENTRY INTO THE MARKET.

CBVT had been a new entrant in the United States

doxorubicin business after the product patent covering it

expired. CBVT was then utterly dependent upon petitioners

for its supply of bulk doxorubicin. When petitioners could no

longer provide bulk doxorubicin from the Sicor, S.p.A. plant

in Italy, CBVT’s continued attempt to enter the market was

severely jeopardized. Any alternative source of supply would

have been better than leaving CBVT stranded with no

source of supply. Any contract of supply in lieu of the one

petitioners could no longer perform was pro-competitive in

reviving the chance of entry for CBVT. Particularly in the

very market petitioners describe, every intendment favored

an arrangement that would enhance CBVT’s chance of

surviving as a new entrant.

If Erbamont had refused to deal with CBVT at all, CBVT

would have been at the mercy of a possible arrangement

with the Japanese supplier, Mercian, pending necessary

approvals from the FDA. In the district court, there were

various “scenarios” of such approval offered by petitioners.

(App. 7a-8a.) They were all just that, “scenarios” that

might or might not eventuate. None of them, however

plausible or implausible, was as certain as an assured source

of supply from Erbamont, which was already fully approved

by the FDA and immediately available.

Both courts below concluded that CBVT’s resort to an

alternative source of supply from Erbamont was pro-com-

petitive. (App. 12a-13a; App. 51a.) It is fundamental, and

has been ever since Justice Brandeis’s famous statement in

Chicago Board of Trade v. United States, 246 U.S. 231, 238

4

(1918), that only unreasonable restraints are unlawful re-

straints. E.g, NCAA v. Board of Regents of Univ. of Okla.,

supra, 468 U.S. at 98 n.17 and accompanying text. The

antitrust law does not require a party to forego known, pro-

competitive agreements in order to speculate on the likeli-

hood of obtaining yet another agreement that may prove to

be of greater or lesser advantage, if it eventuates at all. That

would subject parties to second-guessing of the most perni-

cious kind. A wrong guess in foregoing an available pro-

competitive contract would lead to loss of that very pro-

competitive alternative. The law does not require one to

forego a known and socially-desirable “bird in hand” in

order to see whether there might later be an even more

desirable “bird in the bush”.

Nothing in conventional antitrust analysis requires such a

result, and nothing in the court of appeals’ decision is at

odds with conventional antitrust analysis. As the court of

appeals noted (App. 11a), it is undisputed that the contract

at issue is a vertical supply agreement. Exclusive supply

agreements, such as both the petitioners’ own agreement

with CBVT and CBVT’s substitute supply agreement with

Erbamont, are evaluated under the rule of reason.‘

Applying the traditional analysis of requirements con-

tracts to the CBVT-Erbamont contract frames the question

as whether competitive manufacturers of doxorubicin are

being unreasonably foreclosed from their ability to reach

health care users of doxorubicin because of the CBVT

contract with Erbamont. III P. Areeda & D. Turner, Anti-

* Petitioners included claims under both Section 1 and Section 2 of

the Sherman Act, 15 U.S.C. §§ 1, 2. Exclusive dealing contracts being

by their nature “exclusionary,” analysis is the same whether conducted

under the rule of reason for a Section 1 claim or whether the claim be

placed under Section 2 simply because the supplier happens to have

monopoly power. III P. Areeda & D. Turner, Antitrust Law, ¥ 731a,

pp. 247-48 (1978).

15

trust Law, J 732 (1978). Cf, Tampa Electric Co. v. Nash-

ville Coal Co., 365 U.S. 320 (1961); Standard Oil Co. v.

United States, 337 U.S. 293 (1949), both of which were

decided under Section 3 of the Clayton Act, whose prohibi-

tion is broader than the Sherman Act provisions petitioners

have invoked. Petitioners have not been such a competitor at

any time since the Sicor, S.p.A. plant was shut down. Nor

do petitioners suggest any analysis of how any other existing

manufacturer has been foreclosed from the health care

market by reason of CBVT’s contract with Erbamont. In-

deed, if, as petitioners suggest, the effect of the Erbamont-

CBVT contract were to keep prices up, that would simply

add incentive to entry for any other manufacturers that may

exist. Furthermore, to the extent that CBVT provides a

particularly favorable channel of distribution, in fully ex-

ploiting its own capabilities in finishing and marketing

doxorubicin in competition with Erbamont it is providing

the very efficiency in distribution to health care users of

these products that the antitrust laws are intended to

achieve from competition.

Petitioners’ submissions would make it per se unlawful to

have dual distribution arrangements, i.e., agreements where

a manufacturer competes with its distributor. Such agree-

ments are a commonplace in our economy, are frequently

pro-competitive, and are certainly not per se unlawful. Sze,

e.g., Illinois Corporate Travel v. American Airlines, 889

F.2d 751, 753 (7th Cir. 1989), cert. denied, 495 U.S. 919

(1990):

“Dual distribution therefore does not subject to the per

se ban a practice that would be lawful if the manufac-

turer were not selling direct to customers; antitrust laws

encourage rather than forbid this extra competition.”

The only other antitrust principle which petitioners claim

to have been established by this Court and ignored by the

court of appeals below is found in their reference (Petition

16

23) to United States v. Container Corp. of America, 393

U.S. 333, 337 (1969). Container Corp. considered agree-

ments of competitors to exchange price information without

an accompanying agreement to adhere to a price schedule.

393 U.S. at 334. The defendants in Container Corp. had

urged that the Court ought not infer a price-stabilizing

agreement because prices had been declining. Justice Doug-

las, writing for the majority of a divided Court, said that

stabilizing prices as well as raising them is within the ban of

Section 1 of the Sherman Act. That reference to stabilizing

prices is what petitioners quote. (Petition 23.) The quota-

tion had nothing to do with exclusive dealing agreements.

Container Corp. had nothing to do with exclusive dealing

analysis. Nothing in Container Corp. establishes a per se

rule that all exclusive dealing contracts are unlawful if they

are accompanied by “price stabilization”.

Nor does the court of appeals’ decision create a conflict

between the circuits. Petitioners’ references to four cases

from other courts of appeals are all wide of the mark.

Perington Wholesale, Inc. v. Burger King Corp., 631 F.2d

1369 (10th Cir. 1979), involved reversal of the district

court’s dismissal on the pleadings for failure to state a claim.

The plaintiff had been a distributor who supplied certain

goods to Burger King franchisees. The court of appeals held

that its complaint was susceptible of interpretation to claim

that its distribution contract had been terminated at the

behest of a competitive distributor (id. at 1375):

“Perhaps Burger King, or its subsidiary Davmor, could

supply all logoed paper cups and other items to its

outlets and franchisees without violation of the antitrust

laws. But once independent businesses are employed in

its distribution structure, it cannot accede to the de-

mands of one competitor-distributor to lessen competi-

tion in that entity’s market. [Citation omitted. ]”

ecient

17

The court thus held that it was improper to cut off one

distributor at the behest of its competitor. Such distributor-

cutoff cases are far wide of the analysis of exclusive dealing

agreements as such and offer no guidance to proper analysis

of the CBVT agreement with Sicor Limited. The court of

appeals’ decision below is in no way at odds with the Burger

King decision.

Petitioners’ argument (Petition 16-17) that the court of

appeals decision below is in conflict with SmithKline Corp.

v. Eli Lilly & Co., 575 F.2d 1056 (3rd Cir.), cert. denied,

439 U.S. 838 (1978), is, with all due respect, unintelligible.

SmithKline had nothing whatever to do with exclusive

dealing agreements or with any other principle of antitrust

analysis to which petitioners make even tangential reference.

In SmithKline, the Third Circuit addressed a question of

product market definition in a Section 2 case.’ Having

agreed with the district court’s definition of the product

market, the court then considered whether the defendant

had monopoly power and whether its pricing program, which

had admittedly been adopted after expiry of its product

patent, constituted monopolization under Section 2. In re-

ferring to the defendant’s market power in the properly-

defined product market, the court noted that the fact that

the defendant had obtained that position when it held a valid

product patent did not insulate it from Section 2 liability for

conduct that was allegedly improper in maintaining its

monopoly power after expiry of the product patent. The

court then held that maintaining its monopoly power after

expiry of the product patent through an improper pricing

*The court so described the question before it at the outset of its

opinion (575 F.2d at 1057-58):

“The major question for decision is whether the district court in a

non-jury trial erred in defining the relevant product market in a

proceeding... .”

Its opinion centered on that question. Jd. at 1062-65.

18

plan constituted unlawful monopolization. 575 F.2d at 1065.

There is nothing whatever in the defendant’s pricing plan

there at issue which is remotely related to any question

about exclusive dealing in the case at Bar. There was

nothing analyzed by the Third Circuit in SmithKline which

could inform, much less conflict with, anything decided by

the court of appeals below.

Petitioners also assert a conflict between the court of

appeals’ decision below and Dictograph Products v. Federal

Trade Comm’n, 217 F.2d 821, 827 (2d Cir. 1954), cert.

denied, 349 U.S. 940 (1955).° Petitioners say (Petition 18)

that the market shares referred to in Dictograph should

control disposition of the present case. Market share of a

manufacturer is not the relevant inquiry when one is consid-

ering a case in which the distributor is said to be the

potential bottleneck in the channels of distribution. In the

case at Bar, the supposed restraint of trade is said to lie in

the uniqueness of CBVT, the distributor. That calls for

examination of market power, or potential bottleneck ef-

fects, at the distributor level, not at the manufacturer level.

Dictograph considered an entirely different situation.

There were in that case many competitive suppliers of

hearing aids, and they were held to have been disadvantaged

by reason of defendant Dictograph’s agreements with nu-

° Petitioners pay lip service to the fact that Dictograph was a decision

about market effect under the lower standard of Section 3 of the Clayton

Act (Petition 18), but discuss the case as if it were in conflict with the

court of appeals’ decision here under Section | of the Sherman Act. The

court in Dictograph emphasized (217 F.2d at 826-27) the legislative

history of Section 3 of the Clayton Act and Congress’s evident desire to

avoid rule of reason analysis under the Sherman Act. Moreover, Dicto-

graph involved exclusive dealing agreements which had numerous terms

in addition to a requirement that the distributor take all of its require-

ments from Dictograph, including a noncompetition covenant by the

distributor for a period after termination of the agreement, which the

court emphasized. 217 F.2d at 823-24.

.

19

merous distributors. That is the opposite of the situation

here. CBVT did not have numerous competitive suppliers to

whom to turn when the Sicor, S.p.A. plant stayed shut down

for over half a year. When CBVT made its agreement with

Erbamont, it had lost the only supplier that had theretofore

been available other than Erbamont. Whether or not Mer-

cian would have materialized was problematic, to one de-

gree or another. The references in Dictograph to the number

of alternative suppliers highlights a controlling difference

between it and this case.

Nor did United States v. Dairymen, Inc., 660 F.2d 192

(6th Cir. 1981), another Clayton Section 3 case, establish

any principles in conflict with the decision of the court of

appeals below. Dairymen did not even say what petitioners

claim for it. In Dairymen, the court considered the extent of

immunity for price-setting by agricultural cooperatives

under the Capper-Volstead Act, holding that there would be

no immunity for an attempt to monopolize. The court’s

statement that the district court had set “too high a burden”

on the Government, which the Petition quotes (Petition

18), was not made in conjunction with the court’s quotation .

from Tampa Electric, as petitioners imply to this Court.

Petitioners put both quotations in the same sentence in their

petition to this Court and then cite the case “Jd. at 194-95.”

(Petition 18-19.) That is an inaccurate citation. The court

in Dairymen made the “too high” statement relative to the

question whether specific intent in an attempt to monopolize

case required a showing of predatory pricing. Four

paragraphs later, in a footnote to a different analysis, the

court in Dairymen quoted from Tampa Electric. It is those

two, entirely disjointed statements, which petitioners join in

their argument here. Dairymen has nothing to do with the

analysis in the present case.

20

CONCLUSION

Respondents respectfully submit that the Petition be

denied.

Respectfully submitted,

CHARLES B. COHLER

Counsel of Record

for All Respondents

July 31, 1995

San Francisco, California