Bob Dylan Order

8/12/2019 Bob Dylan Order

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UNITEDSTATESDISTRICTCOURT

SOUTHERNDISTRICTOFFLORIDA

MIAMIDIVISION

CASENO.1224356CIVGOODMAN

[CONSENTCASE]1

PROCAPSS.A.,

Plaintiff,

v.

PATHEONINC.,

Defendant.

_______________________________/

ORDERONCROSSMOTIONSFORSUMMARYJUDGMENT

In his famous The Times They Are aChanging song, Bob Dylan advised

listenerstoadmitthatthewatersaroundyouhavegrownandacceptitthatsoonyoull

be drenched to thebone.2 The consequences of major changes, the subject that Mr.

Dylan

was

singing

about,

are

at

the

heart

of

this

Sherman

Act

antitrust

lawsuit

seeking

severalhundredmilliondollarsintrebledamages.

Section 1 of the Sherman Act, 15 U.S.C. 1, prohibits [e]very contract,

combination in the form of trustor otherwise, or conspiracy, in restraintof tradeor

commerceamongtheseveralStates,orwithforeignnations.Interpretedliterally,this

statutoryprohibition

would

encompass

every contract,

but

as

the

Supreme

Court

has

1 ThepartiesconsentedtofullmagistratejudgejurisdictionandtheDistrictCourt

referred thecase to theUndersigned forall furtherproceedings, including trial. [ECF

Nos.88;89].

2 Fromthealbumofthesamename.(Columbia1964).

Case 1:12-cv-24356-JG Document 565 Entered on FLSD Docket 07/30/2014 Page 1 of 52


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explained, the statutory section does not mean that; it covers only unreasonable

contractualrestraints.Am.Needle,Inc.v.NatlFootballLeague,560U.S.183,189(2010).

Competitors plaintiff Procaps S.A. (Procaps) and defendant Patheon Inc.

(Patheon)enteredintoaCollaborationAgreement,underwhichtheywouldallocate

customersandterritories.Theybothcontendthisinitialrestraintwaslawfulbecauseit

permits the introductionofanewproduct to themarketplace.Patheon lateracquired

Procapscompetitor,BannerPharmcapsEuropeB.V.(Banner).Patheoncontinuedto

tryand

allocate

customers

and

territories,

but

Procaps

refused

to

participate

in

the

allocationbecause itbelieved thecontinuedallocationcreatedanunlawfulhorizontal

restrainton trade.Theprimaryquestionhere iswhether thischangedcircumstance

Patheons acquisition of Banner transformed the oncelawful contract into an

unreasonablehorizontaltraderestraint,inviolationofsection1oftheShermanAct.

ProcapswantstheCourttofirstusetheruleofreasonformofanalysistoassess

theinitialcontract(andtodeemitlawful)butthentoswitchmethodologiesandusethe

persemethodtoevaluatetheverysamecontractaftertheBanneracquisition.Patheon

saystherewasnoagreement toviolate theantitrustlawsbecauseProcapsneverwent

alongwiththeallocation.

Both parties have filed lengthy, detailed, and complicated cross motions for

summary judgment in this fivecount antitrust/unfair competition lawsuit. Procaps



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seeksonlypartialsummaryjudgmentforcertainelementsconcerningCountsI,III,and

IV.Patheonseekssummaryjudgmentonallcounts.

TheCourthasreviewedthemotions,memoranda(supporting,opposition,reply

andposthearing),andtheevidentiaryrecord.TheCourtalsoheardextensiveargument

onthemotions.Forthereasonsexplainedbelow,theCourtDENIES(inlargepart)and

GRANTS(insmallpart)PatheonsmotionandDENIES(inlargepart)andGRANTS

(insmallpart)Procapsmotion.

Thesmall

portion

of

Procaps

motion

which

is

being

granted

concerns

anon

provocative,agreed issue:whether the interstatecommercerequirementforasection1

antitrustclaimhasbeensatisfied.TheCourtdeniestheremainderofProcapssummary

judgmentmotion. Indoing so, theCourtdetermines that thiscasewarrantsa ruleof

reason analysis, not Procaps proposedper se assessment (and not another type of

truncatedmodeofanalysis,suchasthesocalledquicklookdoctrine).

TheCourtdeniesPatheons summaryjudgmentmotionas toCounts IIII.The

Court rejectsPatheonsargument that it isentitled toprevailon thesecountsbecause

therewasneveranagreementtounlawfullyrestraintrade.Therewas(andperhapsstill

is) an agreement between the parties (i.e., the Collaboration Agreement) and the

appropriate finder of fact, using a rule of reason approach, will need to determine

whetherPatheonscontractbasedconductunlawfullyrestrainedtrade.



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On Count IV, the statutory Florida Deceptive Unfair Trade Practices Act

(FDUPTAorFDUTPA)claim, theCourtdenies in largepartPatheons summary

judgmentmotionbecausethesection1ShermanActclaimeffectivelyincorporatedinto

thiscount isstillviable.TheCourtgrants insmallpartPatheonssummaryjudgment

motiononCountIVforrecoverytheoriesotherthanthesection1relatedunreasonable

traderestraintbecausethatistheonlytheorysufficientlyalleged.

TheCourtgrantsPatheon summaryjudgmentonCountV,Procaps claim for

commonlaw

unfair

competition.

There

is

no

evidence

that

Patheon

used

or

disclosed

Procapsconfidentialinformationorthatthereiscustomerconfusion.

Bywayofafinal introductorypoint, theCourtwilldetermine later theprecise

structureof theruleofreasonanalysiswhichultimatelywillbeusedat trial.Because

thereis,inpracticalterms,aslidingscaleinappraisingreasonablenessandbecausethe

qualityofproofvarieswiththecircumstances,theCourtwillchoosethemethodology

whichwillbeappliedunderthebroadcategoryoftheruleofreasonafteranamended

trial scheduling order is entered. The Court expects to enter an amended trial

schedulingorderaftertheforensicanalysisofProcapselectronicallystoredinformation

is complete (and after the nonprivileged results of that analysis are produced to

Patheon).



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I. BACKGROUND

A.TheSoftgelBusiness

Softgels are an oral dosage form for pharmaceutical products consisting of a

gelatinbasedshellcontainingactiveingredients(e.g.,medicine)withintheshell.[ECF

Nos.333,1;335,1].Softgelsareusedforprescriptionandoverthecounter(OTC)

drugs,aswellasnutritionalsupplements.[ECFNos.1,28;333,2].

Thesoftgelbusinesshasproductandservicesectors.[ECFNo.333,2].In the

productsector,

pharmaceutical

companies

develop

and

manufacture

their

own

softgel

Value Added Proprietary Products (VAPPs), also referred to as proprietary

products or internal development products. [Id.]. In the service sector,

pharmaceutical companies outsource the softgel development (PDS) and/or

commercial manufacturing (CMO) to a third party. [Id.]. The third party will run

formulation trials and manufacture the softgels using the pharmaceutical companys

medicine. [Id.]. Some companies provide both softgel services and products, while

othersfocusononlyoneortheother.

B. TheParties

Procaps isaColombiabasedcompany thatdevelopsandmanufactures softgel

capsules. [ECF No. 1, 14, 30]. Before signing the Collaboration Agreement with

Patheon, Procaps marketed its softgel services to pharmaceutical customers in the

UnitedStatesbycallingoncustomers,attendingtradeshows,conductingcustomersite



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tours, and attending meetings with pharmaceutical companies. [ECF No. 333, 3].

These efforts did not result in much success, but Procaps did secure at least one

developmentandmanufacturingagreement.[Id.].ItalsoprovidednutritionalandOTC

softgelproductsintheUnitedStatesthroughitsgenericsoftgeldivision.[Id.].

Patheon provides commercial manufacturing and development services to the

pharmaceuticalindustry.[ECFNo.335,2].IncontrasttoProcaps,Patheonsstrengths

are its substantial pharmaceutical development capabilities and relationships with

pharmaceuticalcustomers

in

North

America,

Europe,

and

Asia.

[ECF

No.

333,

5].

Its

weaknessesareitslimitedintellectualpropertyandmanufacturingcapability.Indeed,it

was only in 2010 that Patheon launched its development and manufacturing softgel

servicesinitsCincinnatifacility.[Id.at45].WhilePatheonhadlimitedproduction

capability, it nonetheless called on customers, and submitted proposals to potential

customers.[Id.at4].LikeProcapsefforts,Patheonseffortsbore littlefruit.Patheon

wononesoftgelopportunity.[Id.].

While theywerenotparticularlysuccessful,undoubtedlyPatheonandProcaps

werecompetitors.Forinstance,inDecember2011theybothsubmittedbidstodowork

forBiocryst althoughProcapsandPatheonendedupworkingtogetherontheproject.

C. TheCollaborationAgreement

Notfindingmuchsuccessonitsown,inearly2011,Patheonbegantoexplorea

strategic relationshipwith another softgel company so that it could compete more



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effectively with Catalent, the dominant softgel company in the world. [Id. at 5].

Patheon lookedatseveralcompanies.[ECFNo.335,9].Among the finalists for this

relationshipwere Banner and Procaps. [Id.]. Patheonbelieved Banner and Procaps

were competitors. [Id. at 1115]. Eventually, Patheon decided to pursue a

relationshipwithProcaps,notBanner.

InJanuary2012,thepartiesenteredintotheCollaborationAgreementtomarket

PDSandCMOsoftgelservicesunderthePGelsbrand.[ECFNos.333,6;335,2].

Patheonand

Procaps

were

targeting

pharmaceutical

companies

looking

for

athird

party todevelopandmanufacturesoftgelcapsules.Patheonwouldmarket thePGels

service to potential customers and offer development services through its Cincinnati

facility. [ECF No. 333, 6]. Procaps wouldprovide softgel development services and

manufacturing services to third parties through its Colombian facility. [Id.]. The key

termsoftheCollaborationAgreementareasfollows:

MarketAllocation:Section3.1 PDSopportunitiesareallocatedbetween

the partiesby mutual agreement, allowing them to service PDS

opportunities through theirrespective facilities. Section 3.2

manufacturingopportunitiesmustbeallocatedtoProcaps.

Limitations/Field: Section 10.2 the scope of the Collaboration

Agreement is limited to softgel PDS and CMO services (rather than

VAPPs),and

excludes

the

parties

products.3

Neither

party

may

develop

ormanufacturesoftgelswithinthescopeoftheCollaborationAgreement

individually. Section 10.5 either party may independently develop,

3 The Collaboration Agreement was later expanded to include nonprescription

drugsfortenspecificcustomers.



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manufacture,sellandotherwiseexploitsoftgelsoutsidethescopeofthe

CollaborationAgreement.

ProcapsVetoRightofExpansion:Section10.3 Patheon isrequired to

obtain Procaps approval before expanding its existing manufacturing

capacityto

develop

softgels

within

the

Collaboration

Agreement.

Territory:Section1.9 theCollaborationAgreementencompassedmuch

of the world, including North America, Europe, and most of Asia,but

excluding Mexico, South America, Central America, Iran, Thailand,

Vietnam,Turkey,andtheUnitedArabEmirates.

[ECFNos.333,711;335,45].

UndertheCollaborationAgreement,thepartiesmanufacturedandsoldsoftgels

throughaunifiedbrand,agreedtoshareprofits,expenses,andtheriskoffailure,and

createdaJointSteeringCommittee.[ECFNo.388,40].Theyhadjointtrainingsessions

and got to know each others facilities, customer contacts, and manufacturing

capabilities. Mostrelevant to the issuesbefore theCourt,Patheonexecutives,suchas

Geoffrey

Glass,

toured

Procaps

factories

in

Colombia

and

became

intimately

familiar

withProcapsequipment,productioncapabilities,andtechnology.

Even though the Collaboration Agreement allocated markets and customers

amonghorizontalcompetitors,thepartiesagreethattheCollaborationAgreementwas

lawful because it brought a new competitor and a new product, PGels, into the

Territoryand

Field.

The

Court

is

not

making

aruling

on

the

lawfulness

of

the

initial

Collaboration Agreement; it is merely noting the parties shared contention that the

agreementwaslawful.



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D.PatheonAcquiresBanner

Theparties collaborationdidnotgo well. BetweenJanuary 2012 andOctober

2012,thepartiessubmitted43solicitedandunsolicitedproposals.[ECFNo.333,12].

Theywononly twoprojects fora totalof$123,003 in revenue. [Id.].ByAugust2012,

Patheon,without tellingProcaps,began toreconsiderwhether ithadchosen theright

partner. [ECF No. 335, 24]. Patheonbegan considering (again) entering into a

strategicrelationshipwithBanner,the#2playerintheRxandOTCsoftgelmarketby

size.[ECF

No.

335,

10].

OnOctober22,2012,duringameetinginMiami,PatheonnotifiedProcapsthatit

mightacquireBanner,anditproposedBannerjointhepartiescollaboration.[ECFNo.

333,14].Procapsbegantoanalyzetheprosandconsof integratingBanner.Procaps

hadsomeinitialpredictionsthatprocompetitivebenefitswouldresultfromintegrating

theBannerassets. [Id.at1718].But itnevergavePatheon itsblessing tobring in

Banner.[ECFNo.333,26].OnOctober29,2012,Patheonwentaheadandsignedthe

StockPurchaseAgreementtoacquireBannerwithoutProcapsapproval.[Id.].

By the beginning of November 2012, after some further thought, Procaps

believed that it could not continue performing under the Collaboration Agreement

because it believed the Collaboration Agreement had become an illegal horizontal

restraintontrade.[ECFNo.333,15].Atthesametime,somePatheonexecutivesalso

believed that Banners acquisition was problematic. [ECF No. 335, 3233]. In



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particular,theybelieveditcreatedaconflictofinterestforPatheonbecausebothBanner

andProcapswereengagedinthemanufactureandsaleofprescriptionsoftgels.[Id.].

Thepartiesmet inNovember2012 to try andworkouta solution to continue

working together. [ECF No. 333, 16]. But this strategic relationship was, for all

intentsandpurposes,over.Patheonsuggestedafewwayswhereallthreeentitiescould

work together. [ECFNo.396,14].Procaps rejectedallofPatheonssuggestionsand

offerednone. [Id.]. Instead,Procaps focusedongettingPatheon topay it to leave the

CollaborationAgreement

or

to

divest

Banner.

[ECF

No.

333,

20].

Patheon

was

not

willingtodoeither.

E. TheComplaint

After the November 2012 discussion failed to produce a resolution, Procaps

concludedthatifitfiledalawsuittointerferewiththeBanneracquisition,thenPatheon

wouldbewillingtosettleandpayProcapstoleavetheCollaborationAgreement.[ECF

No.333,20].Asaresult,onDecember10,beforetheacquisitionclosed,Procapsfiled

itscomplaint.[ECFNo.1].ProcapsdidnotchallengePatheonsacquisitionofBanneras

violating any antitrust laws. Rather, Procaps claimed that the parties were not

competitors before the Collaboration Agreement, but that the acquisition would

transform them into competitors. This would in turn transform the Collaboration

Agreementsallocationprovisionsintoaperseunlawfulhorizontalmarketdivision.



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Count Iseeksadeclaration thatonce theacquisitionclosed,theCollaboration

AgreementwillberenderedaviolationofSection1oftheShermanAct. [ECFNo.1,

pp.1922].CountIIseekstoenjointheacquisitionoramandatoryinjunctionordering

PatheontodivestBanner.[Id.atpp.2225].CountIIIseeksantitrustdamagestrebled

forharmtoProcapsallegedlycausedbyPatheonsunlawfulmarketallocation.[Id. at

pp. 2526]. Count IV claims a violation of FDUPTA,based on the same facts and

theoriesofthefederalantitrustclaims.[Id.atpp.2627].CountVseeksdamagesunder

commonlaw

unfair

competition

because

Patheon

allegedly

acted

deceptively

by

enteringintotheCollaborationAgreement,thusgainingaccesstoProcapsintellectual

property...thenshortlythereafter,acquiringBannerandgainingaccesstoBanners

intellectualproperty. [Id.atpp.2728].

F. PostComplaintDevelopments

Shortly after the Complaint was filed, Patheon offered to terminate the

CollaborationAgreement,butProcaps refused. [ECFNo.333,2021].Patheonhas

repeated thatoffer throughout the litigationandProcapshas likewisecontinuedin its

refusal.ProcapscontendsthattheCollaborationAgreementisstillbindingbutthatits

performanceisbeingheldinabeyanceuntilthisallegedlyillegalsituationgetsresolved.

OnDecember14,2012,theBanneracquisitionclosed,andBannerceasedtoexist

as a separately operating business. Patheon removed the Banner assets from the

TerritoryandField.InanattempttoabidebythetermsoftheCollaborationAgreement,



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Patheon appointed David Hamby as the gatekeeper who would interpret the

CollaborationAgreementandimplementitsmarketallocationrequirements.[ECFNo.

335, 37]. Hamby would evaluate each opportunity as it came in. Hisjob was to

determine whether abusiness opportunity went to Procaps or Banner. [Id.]. If the

opportunitywaswithin theCollaboration, itwent toProcaps. [Id.]. If itwasnot, it

went to Banner. [Id.]. As noted, because it suspended its performance, Procaps

refusedtoacceptanyopportunitiesHambydeterminedshouldbeallocatedandsentits

way.

AfterProcapsrepeatedfailurestoperformundertheCollaborationAgreement,

inmid2013,Patheonpurported to terminate theCollaborationAgreementandbegan

using the Banner facilities to provide PDS and CMO services. [ECF No. 388, 22].

ProcapscontendsthattheCollaborationAgreementhasnotbeenterminated.

II. STANDARDOFREVIEW

Summaryjudgment is appropriatewhen thepleadings,depositions,affidavits,

andexhibitsshowthatthere isnogenuine issueofmaterialfact,andthatthemoving

partyisentitledtojudgmentasamatteroflaw.Fed.R.Civ.P.56(a),(c);CelotexCorp.v.

Catrett,477U.S.317,322(1986).Anissueoffactismaterialifitisalegalelementof

theclaimunderapplicablesubstantivelawwhichmightaffecttheoutcomeofthecase.

Andersonv.LibertyLobby,Inc.,477U.S.242,248(1986);Allenv.TysonFoods,Inc.,121F.3d

642,646 (11thCir.1997).An issueof fact isgenuine if the record takenasawhole



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couldleadarationaltrieroffacttofindforthenonmovingparty.Allen,121F.3dat646.

Whenevaluatingasummaryjudgmentmotion,acourtmustviewalltheevidenceand

all factual inferencesdrawn therefrom in the lightmost favorable to thenonmoving

partyanddeterminewhether theevidencecouldreasonablysustainajuryverdictfor

thenonmovant.Celotex,477U.S.at32223;Allen,121F.3dat646.

III. DISCUSSIONTHESHERMANACTCLAIMS(COUNTSIIII)

A. IntroductionandGeneralLegalFramework

Section1of

the

Sherman

Act

provides

that:

Every contract, combination in the form of trust or otherwise, or

conspiracy,inrestraintoftradeorcommerceamongtheseveralStates,or

withforeignnations,isdeclaredtobeillegal.

15 U.S.C. 1 (emphasis added). Section 1 applies both to agreements between

companiesthatdirectlycompetewithoneanother,calledhorizontalagreements,and

toagreementsbetweenbusinessesoperatingatdifferent levelsof the sameproducts

productionchainordistributionchain,knownasverticalagreements.SpanishBroad.

Sys.ofFla.,Inc.v.ClearChannelCommcns.,Inc.,376F.3d1065,1071(11thCir.2004). This

isahorizontalagreementcase.

Inordertoestablishasection1violation,themovantmustshow(1)acontract,

combination,orconspiracyamongtwoormoreseparateentitiesthat(2)unreasonably

restrainstrade,(3)affectsinterstateorforeigncommerce,and(4)causesantitrustinjury



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anddamages.SeeRealcomp IILtd.v.FTC,635F.3d815,824 (6thCir.2011);Todorovv.

DCHHealthcareAuth.,921F.2d1438,1455,1459(11thCir.1991).

Procaps partial summary judgment motion relates only to the second

(unreasonable restraint of trade) and third (affecting interstate or foreign commerce)

elements.AttheheartofProcapsmotionisitspositionthattheperseruleappliestothe

restraintoftradehere.Patheon,however,conteststheapplicabilityoftheperserule,but

itneverthelessbelieves that it isentitled tojudgmentas amatterof lawonProcaps

ShermanAct

claims

because:

(1)

there

is

no

agreement,

as

Procaps

did

not

agree

to

unlawfullyrestrain tradeor,alternatively,Procapswithdrew fromanysuchunlawful

agreement; (2)Procaps lacks antitrust standingbecause itdoesnot have an antitrust

injury;and(3)theuncleanhands(orinparidelicto)doctrinebarsProcapsclaims.

B. Agreement

1. IsThereanAgreement?

Patheon first contends that there was no agreement here, as required under

section 1. Patheon argues that despite Procaps being a party to the Collaboration

Agreement, there was no agreement to unlawfully and unreasonably restrain trade

becauseProcapsneitheragreed to theactivitywhich itsayscreated theunreasonable

restraint theBanneracquisition norparticipatedinPatheonsattemptedallocation

postacquisition. In other words, Patheons argument is that the Collaboration

Agreementisnot,standingalone,sufficienttoconstitutetherequisiteagreementunder



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section 1. Rather, Procaps must have agreed to participate in the activities which

Procaps contendsmade the CollaborationAgreement illegal. And, as Patheonpoints

out, Procaps never agreed to do that. Consequently, Patheon contends, there is no

concertedaction;thereisonlyunilateralaction itsown.

According to Procaps, the Collaboration Agreement itself satisfies section 1s

agreement requirement. Procaps argues that under the Collaboration Agreement,

Patheon has the right to control Procaps participation in the Field and Territory.

Althoughthat

agreement

was

originally

lawful,

it

became

unlawful

after

the

Banner

acquisitionbecausenowPatheoncouldcontrolProcapsandBannersparticipation in

the Field and Territory. Further, Procaps argues that there is no requirement for a

section1violation that itsubjectivelyagreeoracquiesce to thepostacquisition illegal

activitiesundertheCollaborationAgreement.

Whether an agreement exists for purposes of section 1 is separate from the

question of whether an agreement, if found to exist, constitutes an unreasonable

restraint of trade. Am. Needle, Inc., 560 U.S. at 186 (The question whether an

arrangementisacontract,combination,orconspiracyisdifferentfromandantecedent

to the question whether it unreasonably restrains trade) (emphasis added); accord

PaladinAssocs.,Inc.v.MontanaPowerCo.,328F.3d1145,115354(9thCir.2003).Seealso

EskofotA/Sv.E.I.DuPontDeNemours&Co.,872F.Supp.81,9293(S.D.N.Y.1995)(to

allege a section 1 claim, the plaintiff need only allege that there was a contract or



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combinationand thatcontractorcombinationresulted inanunreasonablerestraintof

trade);Areeda,Areeda&Hovenkamp,AntitrustLaw1400batp.4(Intheantitrust

universe, theexistenceofanagreementmustalways [be]considered separately from

thequestionoflegality).

Here, it isundisputed thatProcapsandPatheonentered into theCollaboration

Agreement(i.e.,acontract oneofthescenariosexpresslymentionedintheSherman

Act asbeing prohibited if it restrains trade). It is also undisputed that, under the

CollaborationAgreement,

all

softgel

manufacturing

in

the

Territory

and

Field

is

allocated exclusively to Procaps, while softgel product development services in the

TerritoryandFieldareallocatedbetweenPatheonandProcaps.

The Court first observes that theunderlying factual scenario is substantially

atypicalforafewsignificantreasons.

First, thepartiesboth contend that theCollaborationAgreementwas lawful at

inceptioneventhoughhorizontalcompetitorswereallocatingterritories,butoneparty

nowclaims that thesame lawfulagreementbecame illegal.Second, theconductwhich

Procaps contends violates the Sherman Act arose because of Patheons unilateral

decision to acquire Banner a development never expressly contemplated by the

parties. Third, the purported illegality is a result of changed circumstances

developments which Procaps never specifically agreed to when it entered into the

contract. Fourth, the parties have not submitted any persuasive, onpoint authority



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involvingsimilarchangedcircumstancescases arealitythatbothpartiesconcededat

the allday hearing on the summary judgment motions.4 Fifth, the terms of the

CollaborationAgreementneverchanged,andtheexclusivityprovisionswhichProcaps

sayscaused the illegalitywerealways in thecontract evenwhen itwaspurportedly

lawful.Sixth,Procaps, thepartyalleging theper seantitrustevilofhorizontalmarket

allocation, is itself aparty to thevery contractbeing challenged (albeit a contracting

partywhichrefusedtoparticipateinthecontractspecifiedactivityitultimatelydeemed

unlawful).5

Moving on from these points, the Court is not convinced by Patheons

fundamentalargument that thereneverwas the requisiteagreementbecauseProcaps

4 Atthehearing,theCourtaskedcounseliftheyknewofanycasewhereacourt

hasbranded this type of a change of circumstance as aper se violation? Procaps

counseladvisedthathewasnotawareofacasewherethechronologyofeventsisthat

somethingbegan

as

alawful

restraint,

but

because

of

afundamental

change

in

the

natureofoneofthepartiestotherestraintbecomesaperseunlawfulmarketallocation.

Hisexplanationcontinued:AndIwouldsayaswell thatIamnotawareofanycase

that says that when that occurs, the per se rule doesnt apply. Neither side has

identifiedacase like that. [ECFNo.487,p.15 (emphasisadded)].Procapscounsel

alsonotedthatIcantciteacasethatshowsthechronologywehavehere[Id.atp.

16 (emphasis added)]. The Court asked Patheons counsel the same question, albeit

phrasedinslightlydifferentwords:Howdothecourtsdealwiththat,whereyouhave

a contract that theparties say is legal at thebeginning and then theres a change of

circumstance?Howdoyouevaluatethat?Patheonscounselconfirmedthattheparties

could not pinpoint a published case involving this type of changed circumstance

scenario:Thefirstanswertothequestionis,no,thereisnocasespecificallyonpoint

forthefacts.[Id.atp.17(emphasisadded)].

5 These six reasons are the moreimportant grounds underlying the Courts

decisiontotreatthecaseundertheruleofreason,ratherthanundertheperseapproach.

MoreonthislaterintheOrder.



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neverspecificallyagreedtotheBanneracquisitionanddidnotagreeoracquiescetothe

purportedlyunlawfulactivitiesgeneratedaftertheBanneracquisition.Severalreasons

underliethisconclusion,whichalsoexplainwhyPatheonsargumentisinappropriate

forsummaryjudgmentresolution.

First, relying on Monsanto Co. v. SprayRite Serv. Corp., 465 U.S. 752 (1984),

Patheonisseekingtoaddaunityofpurposerequirementonto theconcertedaction

elementofProcaps case, i.e., thatProcapsneeded to agree to the illegal activities to

havean

unlawful

agreement.

But

Procaps

need

not

show

that

because

its

antitrust

claimsarebasedonacontract notonaconspiracylikeinMonsanto(whichisanother

way, under the Sherman Act, for parties to generate the threshold concerted action

necessaryforasection1violation).

Thedistinctionbetweenacontractandaconspiracyissignificant,aswasmade

clearinEskofot,872F.Supp.81.There,theplaintiff,likeProcapshere,arguedthat the

concerted action requirement was satisfied when the defendants entered into

anticompetitive contracts. Id. at 91. The defendants, like Patheon here, relying on

Monsanto,moved todismiss, asserting that the complaint failed to allege a unity of

purpose or a common design and understanding, or a meeting of the minds in an

unlawfulagreement. Eskofot,872F.Supp.at91,92.Thecourtrejectedthedefendants

argumentanddeniedthemotion,explainingthatMonsantodidnotinvolveallegations

ofacontractinrestraintoftrade,butofaconspiracy,anditslanguageregardinga



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common scheme relates to whether an agreement could be inferred from

circumstantial evidence, not situations where an express contract is itself alleged to

restraintrade:

The rule that Monsanto purports to establish is one that prevents

independentactionfrombeingsubjecttosectiononeoftheShermanAct.

Inotherwords,itisnotenoughthatdefendantandothersactedinaway

thatrestrainedtrade,iftheyactedindependentlyofoneanother.Thus,to

prevail on a conspiracy claim under section one, a plaintiff must

demonstrate that there was a conscious commitment to a common

scheme.

Thesituation

in

the

instant

case

is

quite

different.

There

is

no

allegation

of conspiracy; rather, plaintiff alleges that defendants entered into

combinationsandcontractsinrestraintoftrade.Thereisnoneedtoshow

acommonpurposeinordertoprovetheabsenceofindependentaction

because the relevantmergerorcontractamplydemonstrates that there

wasnoindependenceofaction.

Id.at92(emphasisadded).

Similarly,

in

HelicopterSupport

Systems,

Inc.

v.

Hughes

Helicopter,

Inc.,

818

F.2d

1530 (11th Cir. 1987), the district court granted summaryjudgment to the defendant

becauseitfoundthatcommunicationsbetweenamanufactureranddistributorsdidnot

establishthemanufacturersagreementwiththecompetingdistributorstoterminate

the plaintiff. Id. at 153435. The Eleventh Circuit, specifically applying Monsanto,

reversedbecause

the

district

court

had

overlooked

the

express

agreement

there

the

distributorship contract, which [f]acially . . . indicates that the distributors and [the

manufacturer]haveagreedtofixedresaleprices....Id.at1536.



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20

Patheons argument similarly pays inadequate attention to the fact that the

market allocation Procaps challenges results from the Collaboration Agreements

explicit terms. Patheon confuses the parties actual agreement the terms of the

Collaboration Agreement with the effect of that agreement after the Banner

acquisition(i.e.,theremovaloftheBannerassetsfromtheTerritoryandField).Procaps

andPatheonagreed to theCollaborationAgreementsexclusivityprovisions,and the

Court isnotconvinced that federalantitrust lawalso requires that theymust further

haveagreed

to

the

effect

or

result

of

those

provisions

in

all

later

circumstances

in

order

forthecontractrequirementofsection1tobesatisfied.

Moreover, if Patheons argument were correct, as long as a contract did not

restrain tradewhenfirstmade,nosubsequentactivityoreventbringingaboutevena

fundamentalchangeinmarketeffectscouldevergiverisetoasection1challengebased

onthecontract,nomatterhowanticompetitivetheeffectofthecontractbecame.Sucha

finding would lead to the anomalous conclusion that the Collaboration Agreement

wouldconstituteconcertedaction if itwereexecutedafter theBanneracquisition,but

thatsameagreementwouldnotconstituteconcertedactionwhenexecutedbefore the

Banneracquisition,eventhoughtheanticompetitiveeffectoftheexclusivityprovisions

wouldbeidenticalinbothinstances.

Second,PatheonsownconductofallocatingopportunitieswithProcapsmain

competitor(whobecamepartofPatheonaftertheacquisition)canbeviewedbyafact



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21

finderasevidenceofconcertedactionbecausethatconductwas undertakenpursuantto

Patheons exclusivity agreement with Procaps. Whether Procaps subjectively

acquiescedtocertainsubsequentconductisnotcontrollingforpurposesofevaluating

thebasicquestionofwhetherthereisanagreementheresufficienttosatisfysection1.

PatheondidnotsuddenlyunilaterallydecidetowithdrawtheBannerassetsand

appoint David Hamby as the gatekeeper to allocate opportunities on a whim or

because itsuddenlydeemed thosesteps tobewisebusinessstrategy.To thecontrary,

Patheondoes

not

dispute

that

it

allocated

business

between

itself

and

Procaps

because

itwasbound todosobyawrittencontractwithProcaps, requiring it toallocateall

commercialmanufacturing toProcaps. Inotherwords,Patheonmade thosedecisions

pursuant to theCollaborationAgreement,not independent of it.Decisionmaking in

furtherance of the terms of an explicit contract with a competitor seems tobe the

antithesis of unilateral action, and it is sufficient to satisfy the concerted action

requirement(i.e.,theexistenceofacontract)ofsection1oftheShermanAct.

Third, Patheonmakes a related argument that aparty must agree toperform

under the contract for the contract to satisfy the section 1 agreement requirement.

ThisargumentwasrejectedbytheformerFifthCircuitinHobartBros.Co.v.MalcolmT.

Gilliland,Inc.,471F.2d894,900(5thCir.1973).

In Hobart, the parties had entered into a distribution agreement limiting the

plaintiff toa specificgeographicarea, thereby reservingallothergeographicareas to



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22

the defendant. Id. at 89697. Despite the express contract, the defendant argued that

therewasnoagreementtoallocatemarketsbecausetheplaintiffrefusedtoabidebythe

contractandinsteadsoldproductsoutsideitsassignedarea.Id.at899.Butbecausethe

plaintiffdidselloutsidetheassignedterritory,sotheargumentwent,itneverassented.

Id. The appellate court rejected this contention, explaining that to show an illegal

contract in restraintof trade [aplaintiff] isnot required toabideby the termsof that

illegal contract. It cannot successfullybe argued that [a plaintiff] must continue to

subjectitself

to

anti

trust

violations

prior

to

bringing

suit

so

that

it

can

obtain

relief

whenitcomesintocourt.Id.at901.

The Court accordingly concludes that the Collaboration Agreement itself can

provide the basis for satisfying the contract type of concerted action requirement.

Therefore, the Court does not accept for summaryjudgment purposes the argument

that Procaps must have subjectively consented to Patheons removal of the Banner

assets from the Territory and Field in order to generate a section 1 violation. By its

expressterms,section1issatisfiedwhenthereisacontractbetweentheparties.And

thereisonehere.Paladin,328F.3dat115354;UnitedStatesv.DeltaDentalofRhodeIsland,

943 F. Supp. 172 (D.R.I. 1996); Eskofot, 872 F. Supp. at 9192; see also Areeda &

Hovenkamp,AntitrustLaw1400b&1400catp.5([a]nundisputedcontractremains

anagreementforantitrustpurposes).



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23

Forthesereasons,theCourtdeniesPatheonsmotionforsummaryjudgmenton

the issue of agreement. The Court will later in this Order determine whether the

agreementisaperseunreasonablerestraintoftrade,asProcapswouldhavetheCourt

conclude.

2.

DidProcapsWithdrawFromtheAgreement?

In the alternative, Patheon argues that even if Procaps satisfies the concerted

actionrequirementofsection1byvirtueoftheexpresscontract,itwithdrewfromthe

CollaborationAgreement

by

refusing

to

accept

new

allocated

business

under

the

agreementafterPatheonacquiredBanner.Therefore,Patheoncontends,thewithdrawal

meansthatthereisnoagreementandthereforetherecanbenosection1violationunder

the contract type of antitrust violation. Procaps takes the position that it did not

withdrawbecauseitonlyheldtheCollaborationAgreementinabeyance.

First,asnotedabove,HobartBros.holdsthatapartyneednotperformunderan

unlawfulcontractinordertobeabletosueforanantitrustviolation.HobartBros.Co.,

471F.2dat900.Thus,Patheonsargumentisnotlegallypersuasive.

Second, a factfinder could view Patheons position that Procaps withdrew

fromtheagreement asinconsistentwithitsownconductandwithitsownviewofthe

parties roles as the contract unfolded. For example, a factfinder could wonder: if

Procapshadwithdrawn from the contractbefore theBanneracquisition closedand if

Patheon therefore deemed the agreement vitiated, then why did Hamby act as the



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24

gatekeeper to allocate customers to Procaps pursuant to the agreements terms?

Similarly, a factfinder could determine that Patheons postacquisition, mid2013

purported termination of the Collaboration Agreement is inconsistent with the view

thatProcapswithdrewmonthsearlier.Likewise,afactfindercouldrationallyconclude

that, based on the record evidence, Procaps would not have purported to reject

Patheonsterminationattemptifithadwithdrawnmanymonthsearlier.

To be sure, a factfinder could also conclude that Procaps did effectively

withdrawand

that

its

hold

performance

in

abeyance

argument

is

simply

apost

lawsuit, makeweight argument designed to avoid the devastating conclusion that it

withdrew from the agreement. But for summary judgment purposes, there is

insufficient evidence to sufficiently demonstrate withdrawal because there are

disputedissuesoffactonthisPatheoncontention.

C. TheReasonablenessoftheRestraintWhichAnalysisApplies

Both parties acknowledge that the Collaboration Agreement restrained trade

before Patheon acquired Banner. Both parties contend that the restraint between

themselves(ascompetitors)wasatthatpointlawfulbecauseanewproductwasbeing

developed. Framedby thisbackground, the Court now turns to the analysis of the

reasonablenessoftherestraint i.e.,whethertheCollaborationAgreementunlawfully

restrainedtrade.



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25

1. ApplicableLegalFramework

Section1oftheShermanActoutlawsunreasonablerestraints.Ariz.v.Maricopa

Cty.Med.Socy, 457U.S. 332, 343 (1982).The SupremeCourthas set forth twobasic

modesofanalysis fordetermining thereasonablenessofarestraint:perseandruleof

reason.

Perseorothertruncatedformsofanalysisapplyonlytothenarrowcategoryof

activity that issoplainlyanticompetitive thatnoelaborate studyof the industry is

neededto

establish

their

illegality.

Texaco,Inc.

v.

Dagher,

547

U.S.

1,

5,

8(2006)

(citation

omitted). Thus, if the per se standard is applied, then the restraint is deemed

conclusivelyunreasonable.SeeN.Pac.Ry.Co.v.UnitedStates,356U.S.1,5(1958).Asa

result, the per se label shouldbe applied infrequently and with caution[,] ... only

whenhistoryandanalysishaveshownthatinsufficientlysimilarcircumstancestherule

ofreasonunequivocallyresultsinafindingofliability.SeagoodTradingCorp.v.Jerrico,

Inc.,924F.2d1555,1567(11thCir.1991)(internalcitationomitted).Consequently,there

isastrongpresumptioninfavoroftheruleofreasonbecauseapplying theperserule

carriestheriskofcondemningactivitythatpromotescompetition.Dagher,547U.S.at3;

Seagood, 924F.2d at 1567 (Thepresumption in casesbroughtunder section 1of the

ShermanActisthattheruleofreasonstandardapplies.).

Theruleofreasonanalysisencompassesavarietyofformsthataremeetforthe

[particular]case,includinganabbreviatedversionsometimesreferredtoasthequick



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26

lookanalysis.SeeCal.DentalAssnv.FTC,526U.S.756,761(1999)(ruleofreasonisa

continuum and mustbe applied in a manner meet for the case); NCAA v. Bd. of

Regents,468U.S.85,109n.39&110(1984)(ruleofreasoncansometimesbeappliedin

thetwinklingofaneyeandneednotrequiredetailedmarketanalysis).Undertherule

of reason,courtsexamine the reasonablenessof the restraintbyanalyzing things like

thenatureoftherestraint,itseffects,anditshistory.See,e.g.,Chi.Bd.ofTradev.United

States,246U.S.231,238(1918);FTCv.Actavis,Inc.,133S.Ct.2223,2237(2013).

Determiningwhether

the

rule

of

reason

analysis

or

per seanalysis

applies

in

a

givencaseisaquestionoflawfortheCourt.StateOilCo.v.Khan,522U.S.3(1997). In

thatregard,theCourtnotesthatwhilereportsofthedeathoftheperserulearegreatly

exaggerated,theSupremeCourtsantitrustcasesoverthepast35yearsdemonstratea

strong trend toward the rule of reason approach and away from truncated forms of

analysissuchastheperseapproach.6

6 See,e.g.,Actavis,133S.Ct.at223536(marketallocationjudgedundertheruleof

reason);Dagher, 547U.S. at 48 (price fixingjudged under the rule of reason);Broad.

Music,Inc.v.ColumbiaBroad.Sys.,Inc.,441U.S.1,89(1979)(hereinafter,BMI);NCAA,

468U.S.at103 (applying ruleof reason tohorizontal restraints thatwere thekindof

restrictionsonoutputandprice thatareordinarilydeemed illegalper se,because the

justificationsmaybeprocompetitive);Cal.DentalAssn,526U.S.at770(requiringruleof

reasonfor

restrictions

on

price

advertising).

The trend, however, does not mean that the somewhatdated core opinions

condemninghorizontalrestraintsasperseviolationshavebeenimplicitlyoverruled,nor

does itnecessarilymeanthat theSupremeCourthasexpresslycalledthosedecisions

intoquestion.InreBlueCrossBlueShieldAntitrustLitig.,No.2:13CV20000RDP,2014

WL2767360,at*6(N.D.Ala.June18,2014).SeegenerallyJacobsv.TempurPedicIntl,Inc.,



27/52


28/52

28

andnotbetweencompetitors.However,whentheBanneracquisitionclosed,itturned

the Collaboration Agreement into an agreementbetween competitors that was now

subjecttoperseantitrustreview.

Theargumentsfirstpremise,however,isincorrect.

Thepartieswere competitorsbefore theCollaborationAgreementbecause they

both: (1) could manufacture softgels (albeit Patheon had less capacity than Procaps);

(2)pursuedsoftgelbusinessintherelevantmarkets;(3)calledoncustomerstotryand

winsoftgel

business;

and

(4)

won

softgel

business.In

fact,

because

Patheon

and

Procaps

bothhadPDSmanufacturingcapabilities, theCollaborationAgreementallocatedPDS

opportunitiesbetweenthemonaprojectbyprojectbasis. Likewise,Procapsinsistedon

the right to veto any effortby Patheon to expand its softgel facility to attain CMO

manufacturingscale,andtheCollaborationAgreementallocatedallCMOopportunities

toProcaps.

WhileProcapsnolongerdisputesthatitwasacompetitorofPatheonbeforethe

CollaborationAgreement,itnowarguesthatthepartieswerenotcompletecompetitors.

But the law does not consider degrees of competition, and no distinction is made

betweenactualcompetitors...andpotentialcompetitors.InReTerazosin,352F.Supp.

2d1279,1314n.34(S.D.Fla.2005);UnitedStatesv.ElPasoNaturalGasCo.,376U.S.651,

661 (1964) (Unsuccessfulbidders are no less competitors than the successful one.).



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29

Consequently, the original Collaboration Agreement was subject to antitrust review

and,asProcapsconceded,couldnothavesurvivedunderaperseanalysis.

Asaresult, theCourtfindsthat theoriginaljustificationforapplyingtheperse

analysis thatProcapsandPatheonwerenotcompetitorswhentheyentered into the

CollaborationAgreementbutbecamecompetitorsafterPatheonacquiredBanner isno

longerpresent.

ii. ChangedCircumstances

Itis

abad

idea

to

subject

anovel

way

of

doing

business

(or

an

old

way

in

a

newandpreviouslyunexaminedcontext...)topersetreatmentunderantitrust law.

InreSulfuricAcidAntitrustLitig.,703F.3d 1004 , 1011(7thCir.2012),cert.denied, 134

S. Ct. 224 (2013) (affirming dismissal of class action antitrust claimbrought under

section1).7Theperseruleappliesonlywhenhistoryandanalysishaveshownthatin

sufficientlysimilarcircumstances theruleofreasonunequivocally results inafinding

ofliability.Levine,Levinev.Cent.Fla.Med.Affiliates,Inc.,72F.3d1538,1549(11thCir.

1996); accordSeagood,924 F.2d at 1567.Before applying theper se rule, thejudiciary

musthaveconsiderable experiencewiththebusinesspracticessothat theeconomic

impact of such practices is immediately apparent.BMI,441 U.S.at 9;Consultants&

7 The Seventh Circuit explained that the dismissal wouldbe finalbecause the

plaintiffshavemadeclearthatthecaseisoveriftheyarenotallowedtotryitasaper

se case.703F.3dat1006. In contrast,Procapshasadvised theCourt that itwill still

pursue thecaseundera ruleof reasonbutagrees that itwillbeboundbyPatheons

marketdefinitions.



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30

Designers, Inc.v.ButlerServ.Grp., Inc.,720F.2d1553,1562 (11thCir.1983) (court will

apply theper se standardonly whenhistoryandanalysishaveshown that similar

circumstancesunequivocallyresult[]inafindingof

liability.(emphasisadded)).

Here, the judiciary does not have considerable experience in judging

whetheranagreement thatwasinitiallyprocompetitivebecomesanaked restraint

astheresultofachange incircumstancesunilaterallycausedbyonepartysactions.

Rather, when confronted with the rare scenario involving a change of

circumstances,courts

have

frequently

analyzed

the

change

under

the

rule

of

reason.

ThepartiesagreethattheCollaborationAgreementwaslawfulwhensigned,and

courtslooktothecircumstancessurroundinganoriginalagreementevenifsubsequent

eventscalledintoquestionthearrangementslegality.ValleyDrugCo.v.GenevaPharm.,

Inc.,344F.3d1294,130607 (11thCir.2003) (reversingdistrictcourts finding that the

alleged anticompetitive agreements were per se violations after patent was later

declaredinvalidandnotingthatthereasonablenessofagreementsundertheantitrust

lawsaretobejudgedatthetimetheagreementsareenteredinto).InInreSulfuricAcid

AntitrustLitigation,

Judge

Posner

noted

that

agreements

that

restrict

competition

.

.

.

aregovernedby the ruleof reason, rather thanbeingper se illegal, if thechallenged

practicewhenadoptedcouldreasonablyhavebeenbelievedtopromoteenterpriseand

productivity. 703 F.3d at 101112. Likewise, in Polk Bros. v. Forest City Enterprises,



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31

Judge Easterbrook stated: A court must ask whether an agreement promoted

enterpriseandproductivityatthetimeitwasadopted.Ifitarguablydid,thenthecourt

mustapplytheRuleofReason.776F.2d185,189(7thCir.1985)(emphasisadded).

Because the parties contend (whether rightly or wrongly) that the original

Collaboration Agreement was a lawful, procompetitive venture, the change of

circumstances(i.e.,theacquisition)callsforafreshreviewunderthesameruleofreason

analysis thatboth parties agree shouldbe used to assess the original Collaboration

Agreement.

iii. The Same Original Analysis Should Apply to the Collaboration

Agreement

Apparently realizing its original competitor transformation theory was

problematic,Procapschangeditsargument.Initssummaryjudgmentpapers,Procaps

now

argues

that

even

though

the

original

Collaboration

Agreement

was

a

market

allocationbetween competitors, itwas subject to the ruleof reasonbecause itwasan

efficiencyenhancingintegrationcoveredbyDagher,547U.S.1.[ECFNo.395,pp.910].

Procapsargues, incontrast, that thepostacquisitionCollaborationAgreementmustbe

condemnedper sebecausePatheon couldnot integrateBanner into theCollaboration

Agreement(as

that

required

Procaps

consent,

which

Procaps

would

not

give).

Thisnewargument forapplicationof theper se rule is inapplicable for several

additionalreasons(otherthanthechangeincircumstanceswhichallegedlyconverteda



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32

purportedlylegalagreementintooneimmediatelycondemnedasunlawfulunderaper

seapproach).

First,afactfindercouldconcludethattheoriginalCollaborationAgreementwas

a partial integration. Thus, the fact that Patheon did not integrate Banner into the

CollaborationAgreementcouldmeanthattheCollaborationAgreementcontinuedtobe

apartialintegrationtowhichbothpartieshadnotfullycommittedalloftheirfacilities.

So if Dagher saves the original Collaboration Agreement fromper se condemnation

becauseof

the

partial

integration,

then

it

could

also

be

used

to

save

the

post

Banner

CollaborationAgreementfortheexactsamereason.

Second,Procapswronglyassumesthereisadistinctentity,Banner,tointegrate

intotheCollaborationAgreement.Banner,however,ceasedtoexistasamatteroflaw

when Patheon acquiredBanner and theybecame a single enterprise.Copperweld, 467

U.S.at77071.Thus,thereisnoBannertobeintegrated.Rather,therewasonlyPatheon,

which remained integrated postacquisition, albeit to a lesser degree given that it

possessedmoresoftgelassetspostacquisition.

Third,Procapsprovidesnoauthorityforthepropositionthatalawfulefficiency

enhancing partial integration automatically and immediately becomes per se illegal

simplybecausethedegreeofintegrationhasdeclinedsomewhat.Patheoncontendsthat

theCollaborationAgreementisnotsubjecttopersecondemnationaftertheacquisition

fortheverysamereasonsitwasnotsubjecttopersecondemnationbeforetheacquisition



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33

the market allocation can be viewed as continuing to enhance the ventures

efficiencies. The Court finds this theory tobe logical and persuasive enough tobe

viewedfavorablybyafactfinder.

Procaps also argued that the Collaboration Agreements restrictive provisions

resulted in the subtraction of a competitor from the marketplace when Patheon

acquired Banner. But this variation on its new theory cannot be reconciled with

Copperweldeither,becausethepartieswerecompetitorsbeforetheacquisition,soitwas

theacquisition,

not

the

Collaboration

Agreement,

that

subtracted

acompetitor.

Procaps

couldhavechallengedthatsubtractionunderSection7oftheClaytonAct,butitdid

notdoso.

iv. TheCollaborationAgreementisNotaNakedRestraintonTrade

Naked restraints of trade are restraints with no purpose except stifling of

competition.BMI,441U.S.at2(quotingWhiteMotorCo.v.UnitedStates,372U.S.253,

263(1963)).Determiningwhetheranagreementisnakedrequiresanexaminationof

thepartiespurpose indesigning therestraint.WhiteMotorCo.,372U.S.at263. If the

restraint was designed to increase economic efficiency and render markets more,

ratherthanless,competitive,thentherestraintisnotanakedrestraintandtheruleof

reasonapplies.BMI,441U.S.at20;NatlBancardCorp.v.VisaU.S.A.,Inc.,779F.2d592,

599 (11th Cir. 1986). So long as there is an efficiency that might plausibly offset the

alleged restraining effects on trade, then courts assess the conduct under the rule of



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34

reason.Copperweld,467U.S.at768;PolkBros.,776F.2dat18889(holdingthattheperse

ruledoesnotapplytoagreementsthatfacilitateproductiveactivity).

The Collaboration Agreement took two competitors with weaknesses and

complementarystrengthsandcreatedasinglepotentiallystrongercompetitor.Procaps

didnothaveasalesforceinNorthAmerica;ithadinadequatecontactswithcustomers;

it lacked North American experience;but it had a substantial softgel manufacturing

facility inColombia,andsomeuniquesoftgeltechnology.Patheonhadasmallsoftgel

manufacturingfacility;

it

had

no

unique

technology;

but

it

had

an

experienced

sales

forceandbettercontactswithNorthAmericancustomers.Under thesecircumstances,

theoriginalCollaborationAgreementwasnotanaked restraintof tradeeven though

thepartieshadbeencompetitors.Afinderoffactcouldagreewiththepartiesviewthat

there were plausible efficiencies inherent in the Collaboration Agreement and the

restraintsthatallowedthepartiestocooperateratherthancompeteagainsteachother

forthesamesoftgelopportunities.

Nevertheless, Procaps condemns the postBanner restraints asper se unlawful

because they allegedly were not ancillary to an efficiency enhancing integration of

economic activity. But the Court does not accept Procaps analysis under aper se

condemnation evaluation and accepts Patheons view that the rule of reason is the

appropriateanalysis.



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PatheonarguesthattheCollaborationAgreementsrestraintsremainedancillary

to theefficiencyenhancing integrationbetweenPatheonandProcapsbothbeforeand

after theBanneracquisition.Ancillary restraintsare those thatareanessentialorat

least importantpartofsomearrangement thathaspotentially redeemingvirtues.11

Hovenkamp,AntitrustLaw1904,at251(1978).Thatis,restraints...thatarepartofa

largerendeavorwhosesuccesstheypromote.PolkBros.,776F.2dat18889.

Under Patheons perspective, the postacquisition Collaboration Agreement

possessedat

aminimum

the

same

efficiencies

as

the

original

Collaboration

Agreement,

and the restraints werejust as necessary to achieve these efficienciesbecause they

wouldassurecooperationbetweenpartiesthatwouldotherwisecompeteagainsteach

other for softgel opportunities. Patheon acknowledges that the acquisition turned

Patheonintoabiggercompetitor,butsaysitdidnotnegatetheoriginalefficienciesand

theoriginaljustificationfortherestraints.

ProcapsargumentisthatthepostacquisitionCollaborationAgreementmustbe

condemnedbecauserestrainingBannerscompetition,astheCollaborationAgreement

required,wasnotancillarytoanything.Whilearestraintancillarytoaprocompetitive

agreementwouldordinarilybesubject to the ruleof reason, itdoesnot follow thata

restraintmust be ancillary to avoid per se condemnation. In fact, this approach is

directlyatoddswithSupremeCourtprecedentthatancillaryrestraintsarejustasubset

oftheformofanalysiscourtsundertaketodetermineifarestraintisanakedrestraint



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36

withnopurpose except stiflingof competition.BMI,441U.S.at 2 (quotingWhite

MotorCo.,372U.S.at263).

As noted, determining whether an agreement is naked requires abroader

examinationofwhether the restraintwouldbe likely toincreaseeconomicefficiency

and rendermarketsmore, rather than less,competitive.BMI,441U.S.at20; seealso

NatlBancard,779F.2dat599.Ifthenetplausibleeffectsmightbeprocompetitive,then

courtswillapplytheruleofreasontostrikethebalance.BMI,441U.Sat8;InreSulfuric

Acid,703

F.3d

at

1012.

Here,

Procaps

internal

consideration

of

efficiencies

that

could

resultfrombringingtheBannerassetsintotheCollaborationAgreementreinforcesthe

notion that the ruleof reasonapplies toboth thepreacquisitionandpostacquisition

events. Indeed, Procaps senior management initially recognized the potential

efficiencies to the Collaboration Agreement resulting from the acquisition, including

opportunities like [b]etter production and development costs and lower

manufacturing costs. It also acknowledged that, through the inclusion of Banners

assets, the Collaboration Agreement wouldbecome a stronger competitor and win

morePGelsbusinessbecauseitwouldnowhaveFDAapprovedsoftgelmanufacturing

facilitiesintheUnitedStates.

Tobesure,theseProcapsnotedefficienciesdidnotoccur.Butthereasonforthat

is (orcouldbe)Procapsrefusal toexplorePatheonsproposals tocontributeBanners

assets to the Collaboration Agreement. A finder of fact could conclude that it was



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37

reasonableforPatheontoabidebytheCollaborationAgreementforsomeperiodwhile

trying to convince Procaps to continue the Collaboration Agreement and thereby

achieveadditionalefficiencies.

v. Conclusion

TheCourtconcludesthattheruleofreasonisthestandardtobeusedtoevaluate

thereasonablenessoftherestraint. TheCourtwilllaterdeterminetheprecisestructure

oftheruleofreasonanalysiswhichultimatelywillbeusedattrial.

Onefinal

point:

the

rule

of

reason

standard

requires

Procaps

to

prove:

(1)

an

anticompetitiveeffectof thedefendantsconducton the relevantmarket,and (2) that

the conduct has no procompetitivebenefit orjustification. Levine, 72 F.3d at 1551

(emphasis added). In order to avoid providing discovery about markets, Procaps

agreed toproceedunderaper seapproachand toadoptandnotchallengePatheons

marketdefinitionifithadtoproceedundertheruleofreason.Itfurtheragreedtonot

putforwarditsownmarketdefinition.Therefore,thepartieswilluseat trialaruleof

reasonanalysisusingPatheonsuncontestedmarketdefinitions.8

8 Procapsabilitytoeffectivelypursuethecaseundertheruleofreasonapproach

usingPatheonsunassailablemarketdefinitionsisbeyondthescopeofthisOrder.



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38

D.AffectingInterstateCommerce

Procaps has moved for partial summaryjudgment on the third element of a

ShermanActSection1violation, that theconductat issueaffects interstateor foreign

commerce. Patheon does not dispute this point, as the Collaboration Agreements

exclusivityrestraintsreachallofNorthAmerica(includingtheUnitedStates)aswellas

Europe,andmuchofAsia.Accordingly,theCourtgrantsProcapssummaryjudgment

onthispoint.

E.

AntitrustInjury

Antitrustinjuryisinjuryofthetypetheantitrustlawswereintendedtoprevent

andthatflowsfromthatwhichmakesthedefendantsactsunlawful.BrunswickCorp.v.

PuebloBowlOMat,429U.S.477 (1977).Patheoncontends thatProcapsdoesnothave

standingbecause it has not demonstrated that it has suffered antitrust injury and,

therefore,Patheonisentitledtosummaryjudgment.TheCourtdisagrees.Procapshas

sufficiently demonstrated antitrust injury at this stage of the proceedings to have

standing.

Patheonfirstarguesthatthereisnoantitrustinjurybecausethereisnoevidence

that themarketdivision reducedoutputor increasedprices.Thisargument confuses

antitrustinjurywithcompetitiveinjurytothemarket.Antitrustinjury asopposedto

injurytocompetition mustbeviewedfromtheperspectiveoftheplaintiffsposition



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39

inthemarketplace,notfromtheperspectiveofthemarketasawhole.DoctorsHosp.of

Jefferson,Inc.v.Se.Med.Alliance,Inc.,123F.3d301,30506(5thCir.1997).

Procaps contends that it has been effectively or substantially excluded from

competingintheTerritoryandFieldbecausetheCollaborationAgreementhasbecome

anunlawfulmarketallocation.9Aplaintiffsexclusionfromthemarketasaresultofan

antitrustviolationconstitutesantitrustinjury.SeeGulfStatesReorganizationGrp.,Inc.v.

NucorCorp., 466F.3d 961 (11thCir. 2006) (antitrust injury existedwhere defendants

conductreduced

competition

by

deny[ing]

consumers

the

benefit

of

the

pressure

to

lower prices that would likely accompany the [plaintiffs] becoming a viable

competitor);DoctorsHosp.,123F.3dat305(antitrustinjurysatisfiedwhenlossesand

competitive disadvantage flowed from defendants conduct); Re/Max Intl v.Realty

One, 173 F.3d 995 (6th Cir. 1999) (impeding an innovative competitors access to the

market isantitrust injury).Thus,ataminimum,disputed issuesoffactexistas to the

degree of Procaps exclusion from the relevant markets and its associated damages

arisingfromPatheonsconduct.

Patheon next argues that Procaps alleged injury is not an antitrust injury

because it is the same injury it would have suffered if Patheon hadbreached the

CollaborationAgreement.ButPatheonconcedesthatlostprofitsisaviablemeasureof

antitrustdamages.[ECFNo.487,p.12223(Yes.Adefendantsconductcanconstitute

9 Theexistenceordegreeofsuchallegedexclusion isnotbefore theCourtat the

summaryjudgmentstage.



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40

bothanantitrustviolationandabreachofcontract.Andthemeasureofdamagesinan

antitrustviolationunderappropriateconditionscanbelostprofits.)].

Inaddition,Patheonsargument thataplaintiffdoesnotsufferantitrust injury

becauseitwouldhavesufferedthesameinjuryintheabsenceofanantitrustviolationis

unconvincingunderthefactsatissue.

Procapsexperteconomist,Dr.Blair,testifiedthatthedamagesProcapssuffered

to itsbusiness or property flow from the injury to competition that is presumedby

virtueof

the

relevant

markets

being

deprived

of

the

benefit

of

the

Collaboration

Agreement.Hestated:Becauseof[theacquisition],thenumberofsoftgelsuppliersin

theTerritory/Fieldisreducedbelowthenumberinthebutforworld,therebylimiting

theoptionsavailabletobuyersandharmingcompetition.Ataminimum,thisraisesa

genuine issue of fact as to whether and to what extent Procaps claimed injuries

constituteantitrustinjury.

F. UncleanHands

Finally,PatheonarguesthatProcapssection1claimisbarredbythedefenseof

uncleanhandsorinparidelicto.InPermaLifeMufflersv.InternationalPartsCorp.,392U.S.

134 (1968), theSupremeCourtappeared tocompletelyreject[] theapplicationof the

doctrineofinparidelictoinantitrustactions,whichmeansthatanagreementmaybe

challengedevenbyoneofthepartieswhohasacquiescedintheunlawfulagreement.

TidmoreOilCo.,Inc.v.BPOilCo.,932F.2d1384,1388(11thCir.1991).But latercourts



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41

have suggested that the defense is available in antitrust actions, albeit in situations

limited to those where the plaintiffs responsibility is essentially indistinguishable

fromorclearlygreaterthanthedefendantsresponsibility.Phraseddifferently,some

courtsholdthattheinparidelictodoctrinedoesnotbaranantitrustclaimwherethereis

merelysomeculpabilityonthepartoftheplaintiff.Moeckerv.HoneywellIntl,Inc.,144

F.Supp.2d1291,1314(M.D.Fla.2001).

To be sure, Perma Life left open the question of whether truly complete

involvementand

participation

in

amonopolistic

scheme

could

ever

be

abasis,

wholly

apartfromtheideaofinparidelicto,forbarringaplaintiffscauseofaction.392U.S.at

140. Likewise, the Eleventh Circuit, in a postTidmore letter of credit fraud case not

involving antitrust claims, noted that the defense should notbe allowed unless the

degrees of fault are essentially indistinguishable or the plaintiffs responsibility is

clearlygreater.BancoIndus.DeVenezuela,C.A.v.CreditSuisse,99F.3d1045,1049(11th

Cir. 1996) (noting that thejury advised that plaintiffs fault was at least equal to or

greaterthanthedefendants).

Given the language in Perma Life which suggests that the defense mightbe

available in a complete involvement (by plaintiff) case and the Eleventh Circuits

succinct, conclusory statement inTidmore that thedefense is inapplicable to antitrust

cases,theCourtisnotpreparedtoconclusivelydeterminethatinparidelictocannotbea

defense here. Indeed, Procaps has not advanced that argument. To the contrary, it



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42

impliedly concedes the theoretical viability of the defense, arguing instead that the

resolutionofthedefenseisinappropriateforsummaryjudgment.

Both parties dispute who bears the greater responsibility for the parties

challenged conduct. For instance, Procaps argues that Patheon bears far greater

responsibilitybecause (1)Patheonthrew theunlawfulantitrustpunchbyacquiring

Banner, (2) Patheonbetrayed its collaborative partnerby turning itself into Procaps

fiercestcompetitor,(3)Patheonbenefitedfromtheantitrustscheme,whileProcapsdid

not,because

Procaps

was

excluded

from

the

Territory

and

Field,

and

(4)

Procaps

refused toacceptallocatedcustomersfromPatheon.Consequently,becausethe inpari

delicto defense involves a weighing of the evidence bearing on the issue of

responsibilitybased on disputed issues of fact, summaryjudgment is inappropriate.

Wagerv.Pro,575F.2d882,885 (D.C.Cir.1976) (reversingjudgmenton thepleadings

against plaintiff on in pari delicto defensebecause of factual dispute concerning the

issueofwhetherplaintiffwasmoreatfaultthandefendant).

G.Conclusion

Giventheforegoing, theCourtdeniesPatheonsmotionforsummaryjudgment

onCountI(declaratoryrelief),CountII(injunctiverelief),andCountIII(damages).For

thesame reason, theCourtdenies in largepartProcapspartialmotion forsummary

judgmentonCountsIandIII.TheCourtgrantsinsmallpartProcapspartialsummary



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43

judgment motion that the affecting interstate commerce requirement for a Section 1

antitrustclaimhasbeensatisfied.

IV. DISCUSSIONTHEFDUPTACLAIM(COUNTIV)

ProcapsFDUPTAclaim(CountIV)isbasedsolelyontheagreementtoallocate

customersor territoriesunder theCollaborationAgreement. [ECFNo.1,106 (The

[acquisition] renders the Collaboration Agreement an unfair method of competition

and/orunfairorunconscionabletradepractice.).Thereisnoothermisconductalleged

inCount

IV.

So

the

allegations

making

up

the

FDUPTA

claim

are

identical

to

those

supportingtheShermanActclaims.

The Courts ruling on the cross summary judgment motions concerning the

ShermanActclaimsappliestotheFDUPTAclaim.Cf.QSGI,Inc.v.IBMGlobalFin.,No.

1180880CIV,2012WL1150402,at *4 (S.D.Fla.Mar.14,2012) (finding thatwhena

plaintiffsFDUPTAclaimisbasedonthesameallegationsasitsantitrustclaim,failure

to establish aviolationofantitrust law is sufficient to conclude theplaintiffhas also

failedtostateaFDUTPAclaim.).WhiletheCourtisdenyingPatheonsandProcaps

summaryjudgmentmotionsonCountIV,itisappropriateatthistimetopinpointwhat

claimsProcapscannotpursueattrialunderthisCount.

Procapsnow, in itsproposed summaryjudgmentorder, says that itsFDUPTA

claim is alsobased on allegations that Patheon did not protect Procaps confidential

informationtowhichProcapsgavePatheonfullaccess.FDUTPA,however,requires,



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44

at a minimum, that a defendant misuse or unlawfully disclose the confidential

informationtoathirdparty.SensormaticElecs.Corp.v.TAGCo.US,LLC,632F.Supp.2d

1147, 1193 (S.D. Fla. 2008) (defendant violated FDUTPA where its employees

unlawfullydisclosedplaintiffsconfidentialinformation).

ProcapsaccesstoinformationFDUPTAtheoryisthatPatheonhadfullaccessto

Procaps confidential information and can now use it to compete with Procaps and

could disclose it. The meat of Procaps allegation is that Patheon executive Geoffrey

Glass,who

is

now

the

head

of

the

Banner

unit

at

Patheon,

had

access

to

Procaps

confidentialinformationandthisinformationisinhisheadand,therefore,hemayuse

ordiscloseit.

ButProcaps theory isjust that a theory. There isno evidence thatPatheon

disclosedProcapsconfidentialinformation toathirdparty.Thereisalsonoevidence

that Patheon has misused Procaps confidential information. Even Procaps concedes

thatitcannotpinpointanyspecificpieceofconfidentialinformationthat[Patheonhas]

actuallymisused.Therefore,PatheonisentitledtosummaryjudgmentonCountIVfor

allclaimsbeyondtheantitrustclaim.

V. DISCUSSIONTHEUNFAIRCOMPETITIONCLAIM(COUNTV)

Procaps common law unfair competition claim (Count V) is based on the

following factualallegation:Patheonengaged indeceptiveor fraudulentconductby

enteringintotheCollaborationAgreement,thusgainingaccesstoProcapsintellectual



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45

property and information . . . and then, shortly thereafter acquiring Banner and

gainingaccesstoBannersintellectualpropertyandinformation.[ECFNo.1,112].

Procaps alleges that Patheons actions caused customer confusionbecause customers

wereconfusedastothestatusofPGelsandwhyPatheonchosetoacquireBannerafew

months after entering into the Collaboration Agreement with Procaps. [Id. at 113].

Therearenootherallegationsofmisconduct.

A.RelevantBackground

Underthe

Collaboration

Agreement,

Procaps

trained

Patheon

employees

on

its

new technologies, softgel formulation, and development. Such training sessions

occurred in Colombia, North Carolina, and England. In addition to training sales

personnel, Procaps also trained Patheons executives, technology experts, and

pharmaceuticaldevelopmentpersonnel.WhileinColombia,Patheonemployeestoured

ProcapsmanufacturingfacilitiesandhearddetailedpresentationsnotonlyonProcaps

existingmachines,butalsoon thenew technology thatProcapshadcreated.Procaps

alsodisclosed toPatheon itsproprietarypricingstrategies,businessmodels,andcost

sheetsforingredients,materials,andproducts.

B. ApplicableLegalStandard

Floridascommonlawofunfaircompetitionistheumbrellaforallstatutoryand

nonstatutory causes of action arising out ofbusiness conduct which is contrary to

honestpracticeinindustrialorcommercialmatters.Am.HeritageLifeIn.Co.v.Heritage



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46

Life Ins.Co.,494F.2d 3, 14 (5thCir. 1974).The elementsofFloridas common lawof

unfaircompetitionare far fromprecise.AlphamedPharms.Corp.v.ArrivaPharms., Inc.,

432 F. Supp. 2d 1319, 135354 (S.D. Fla. 2006) (internal citation omitted), affd, 294 F.

Appx501(11thCir.2008).Nevertheless,courtshavefoundthatapartymustshow(1)

deceptive or fraudulent conduct of a competitor and (2) likelihood of consumer

confusion.ThirdPartyVerification, Inc.v.Signaturelink, Inc.,492F.Supp.2d1314,1324

(M.D.Fla.2007) (internalcitationsomitted);AlphamedPharms.Corp.v.ArrivaPharms.,

Inc.,391

F.

Supp.

2d

1148,

1166

(S.D.

Fla.

2005)

(citing

DonaldFrederickEvansandAssoc.

v.ContlHomes,Inc.,785F.2d897,914(11thCir.1986)).

C. Analysis

Intheinstantcase,itisclearthatProcapshasnotestablishedeitherelementofa

commonlawunfaircompetitionclaim.

1. DeceptiveorFraudulentConduct

According toProcaps,Patheonacteddeceptivelyor fraudulently byentering

into the Collaboration Agreement, thus gaining access to Procaps confidential

information,andthenshortlythereafteracquiringBanner.[ECFNo.1,112(emphasis

added)]. But there is no evidence, direct or circumstantial, that Patheon entered the

CollaborationAgreementtogainaccess toProcapsconfidentialinformation,knowing

allalong that itwasgoing toacquireBanner.In fact,Procapshasnotevenmade that

allegation. Likewise, Procaps has presented no authority for the proposition that



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47

entering into a contractwith one party and then later entering into another contract

with another party constitutes fraudulent or deceptive conduct. See, e.g., Alphamed

Pharms.Corp.,432F.Supp.2dat1353(proposedjuryinstructionforunfaircompetition

included corporateespionageand sabotageasexamplesofunfair competition). This

leadstothesecondpoint.

TheheartofCountVis thatbycoupling theBanneracquisitionwithPatheons

access to Procaps confidential information, Patheon is now going tobe able to use

Procapsconfidential

information

to

unfairly

compete

with

Procaps.

To

that

end,

ProcapsmakesmuchofthefactthatPatheonexecutiveGeoffreyGlass,whohadaccess

toProcapsconfidentialinformation,isnowinchargeoftheBannerunitinPatheon.10

10 Although Procaps now alleges that Patheon misused Procaps confidential

informationbyusingittointernallyreviewtheproposedBanneracquisitionbeforethe

deal

closed,

that

theory

appears

nowhere

in

Count

V

or

in

Procaps

summary

judgment

briefs.Procapsraisedthistheoryinitsproposedsummaryjudgmentorder.Toasserta

new claim at the summaryjudgment stage, the proper procedure is to amend the

complaint notargue it inabriefopposingasummaryjudgmentmotion.Gilmourv.

Gates,McDonald&Co.,382F.3d1312,131415(11thCir.2004).Thisrulenotonlyapplies

to legalclaims,but toadditional factsaswell.GeorgiaCarry.Org, Inc.v.Georgia,687

F.3d1244,1258n.27(11thCir.2010)(decliningtoconsideradditionalfactsfirstraisedin

summaryjudgmentbriefing);seealsoFlintlockConstr.Servs.,LLCv.WellComeHoldings,

LLC,710F.3d1221,122728(11thCir.2013).Consequently,Procapscannotadvancethis

newtheoryandfactsnow.

Moreover,eveniftheCourtweretoconsiderthisnewtheory,theCourtdoesnot

find it persuasive because Procaps confidential information was not the material

considered. Procaps allegation is thatPatheon reviewed PGelspricing in reviewing

the Banner acquisition. PGels is the product the partiesjointly introduced into the

marketplaceaspartoftheircollaboration.[ECFNos.333,6;335,2].AstheCourthas

previouslynoted,becausePGelswasjointly introduced,theinformationsurrounding



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TheproblemforProcapsistwofold.First,merepossessionofinformation,even

inMr.Glasshead,isinsufficienttoestablishacommonlawunfaircompetitionclaimin

the context of this case. Rather, Florida law requires proof, at a minimum, that

defendant improperly used or disclosed the allegedly confidential information to

unfairlycompetewithplaintiff.Gettingerv.Fla.Tape&Labels,Inc.,194So.2d695,697

(Fla. 2d DCA 1967) (holding plaintiff stated unfair competition claim only where

defendantsused the [confidential] information inunfaircompetitionwithplaintiff);

Sensormatic Elecs. Corp.,

632

F.

Supp.

2d

at

1186

(finding

misappropriation

of

confidential information that was disclosed to thirdparties), aff d in part sub nom.

SensormaticElecs.,LLCv.Kahle,367F.Appx143(Fed.Cir.2010).

Second, there is no evidence that Patheon has improperly used or disclosed

Procaps confidential information. Indeed, Procaps has previously conceded that it

cannot pinpoint any specific piece of confidential information that [Patheon has]

actually misused and that it cannot pinpoint damages proximately causedby the

allegedmisuseofitsconfidentialinformation.[ECFNos.138,pp.67;333,p.12,25].

Moreover, Procaps also revealed that it could not describe the specific, actual

competitive harm that has occurred from any actual misuse of this Confidential

it, including pricing information, cannotbe specific or proprietary to Procaps only.

Rather,itisrelevanttoPatheonandProcaps.[ECFNo.505,p.4].Asaresult,Procaps

newtheoryfails.



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49

Information, other than the fact that Procaps direct competitor possesses its most

sensitiveconfidentialbusinessinformation.[ECFNo.3338,p.17].

The Court understands that it may be difficult for Procaps to have direct

evidencethatitsconfidentialinformationwasmisused.ButProcapshasnotpresented

anycircumstantialevidenceofmisuse.Forinstance,thereisnoevidence thatPatheon

usedProcapsconfidentialinformationpostacquisitionto:changeitspricestobebelow

Procapsprices; incorporateProcapsmanufacturingprocedure in itsown facilities;or

reverseengineer

Procaps

technology

or

products.

Indeed,

as

the

Court

is

intimately

familiarwiththepartiesdiscoveryrequests,itdoesnotappearthatProcapseventried

to get that information by, for example, requesting to inspect Patheon/Banners

manufacturing or development facilities. And the time to conduct that kind of

discoveryhaslongsincepassed.

2. CustomerConfusion

Procapscustomerconfusiontheoryisnotbasedonconfusionbetweenproducts

orservices,amistakeaboutwhetheraproductisproducedbyProcapsratherthanby

Patheon(orbyBanner),oramarketingplanwhichmisdescribedPatheonproductsas

Procaps products. Instead, it is based on the unusual notion that customers are

confusedastowhyPatheonchosetoacquireBanneronlyafewmonthsafterentering

intotheCollaborationAgreementwithProcaps,creatingquestioningastowhetherthis



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50

indicates that Patheon perceived something wrong with Procaps services and

manufacturing.[ECFNo.1,113].

Thisisanattenuatedtheory.Procapshasnotsubmittedanyauthoritytosuggest

thatanunfaircompetitionclaimcanbebasedoncustomerswhoheardaboutPatheons

Banner acquisition and then wondered if Procaps committed some type ofbusiness

blunderwhichcausedPatheontoacquireProcapsmaincompetitor.Assuch,theCourt

findsthistheoryofcustomerconfusionunpersuasive.

Inaddition,

this

customer

confusion

theory

is

problematic

for

another

reason:

Procapshasnotyetestablishedthatthisallegedcustomerconfusion(involvingrandom

questioning about Patheons business motivations) proximately caused damages, a

requiredelementforacommonlawunfaircompetitionclaim.See,e.g.,Alphamed,432F.

Supp. 2d at 1354 (holding proof of damages essential to unfair competition claim);

PracticeMgmt.Assocs.,Inc.v.OldDominionIns.Co.,601So.2d58788(Fla.1stDCA1992)

(Floridacase law[]requires injury . . .asanessentialelementofanyclaimofunfair

competition.). The inability to establish that any unfair competition proximately

causeddamagesplaguesallofProcapsunfaircompetition theories,whetheractually

alleged in the complaint or mentioned later in response to Patheons summary

judgmentmotion.



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3. Conclusion

As the former Fifth Circuit hasnoted, [u]nfair competition is amatterof the

totalityoftheevidence,...B.H.BunnCo.v.AAAReplacementPartsCo.,451F.2d1254,

1262 (5thCir.1971).Afterreviewing the totalityof theevidencehere, theCourt finds

that there are no genuine disputed issues of fact to defeat Patheons entitlement to

summaryjudgment on this Count. Accordingly, the Court grants Patheon summary

judgmentonCountV.

VI.

PROCAPSDISCOVERY

FAILURES

PatheonarguedthattheCourtshoulddenyProcapssummaryjudgmentmotion

becauseofitsdiscoveryfailures.Thatrequestisnowacademic,astheCourthasdenied

Procapsmotionforpartialsummaryjudgment(other thanon theagreedposition that

theactivitiesatissuemettheaffectinginterstatecommercerequirementforaSection1

violation). Therefore, the Court need not wade into the thorny thicket of alleged

discovery abuses, a result which is particularly appropriate given that the forensic

analysisofProcapselectronicallystoredinformationisnotyetcompleteandgiventhat

theCourthasappointeda specialmaster toaddress issues flowing from the forensic

analysis.[ECFNo.558].



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VII. CONCLUSION

For the foregoing reasons, the Court: denies Patheons summary judgment

motiononCountsIIII;deniesinpartandgrantsinpartPatheonssummaryjudgment

motionastoCountIV;grantsPatheonsummaryjudgmentonCountV;deniesProcaps

motionforpartialsummaryjudgmentonCountsI,III,andIV,withtheexceptionthat

theaffectinginterstatecommercerequirementhasbeenmet;andfindsthattheruleof

reasonmethodologyappliestothiscase.TheCourtwillissueamoredetailedrulingon

thespecific

structure

of

the

rule

of

reason

analysis

to

be

used

at

trial.

DONEANDORDEREDinChambers,inMiami,Florida,July30,2014.

Copiesfurnishedto:

AllCounselofRecord


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