Judge: 'Plausible' antitrust allegations made against LifeScan

By Nicholas Malfitano | Jan 11, 2016

The U.S. District Court for the Eastern District of Pennsylvania has ruled all but one of a blood glucose monitoring equipment company’s antitrust claims against one of its chief rivals is "plausible."


PHILADELPHIA – The U.S. District Court for the Eastern District of Pennsylvania has ruled all but one of a blood glucose monitoring equipment company’s antitrust claims against one of its chief rivals is "plausible."

On Dec. 28, Judge Joel H. Slomsky decided plaintiff UniStrip’s allegations towards LifeScan, Inc. and LifeScan, Ltd. of Scotland of violating the antitrust Clayton and Sherman Acts and tortuously interfering with contractual relations would survive a motion to dismiss from the defense.

LifeScan, a wholly-owned subsidiary of Johnson & Johnson, is a major manufacturer and retailer of blood glucose monitoring systems, consisting of single-use test strips and an electrochemical meter, which allows diabetic individuals to monitor and maintain healthy levels of blood sugar.

LifeScan offered its resellers discounts and rebates on its products in order to lower their high costs, since the company’s test strips are exclusively compatible with their own monitoring equipment. LifeScan was the only company in the blood glucose monitoring system market, until the entry of UniStrip in 2013.

UniStrip claims that when it began marketing its own blood glucose test strips, compatible with all brands of monitoring equipment, LifeScan entered into exclusivity agreements with its resellers – allegedly threatening to terminate those coveted discounts and rebates to their resellers if they carried UniStrip products.

UniStrip contends these “predatory” tactics violated both the anti-trust Clayton and Sherman Acts, by maintaining a monopoly over the market share and impeding competition. UniStrip seeks both exemplary and punitive damages, along with other relief, in this matter.

LifeScan moved to dismiss the entirety of UniStrip’s complaint, for failure to state a claim for relief pursuant to Federal Rule of Civil Procedure.

Slomsky ruled the claims made by UniStrip towards LifeScan, its alleged anti-competitive behavior and its exclusivity agreements used to maintain a monopoly on the market in violation of the Clayton and Sherman Acts, would remain in the complaint.

“Viewing the allegations in the second amended complaint in the light most favorable to plaintiff, [these claims are] plausibly indicative of LifeScan’s willful attempt to maintain its monopoly power in the market for test strips that are compatible with its meters,” Slomsky said.

Slomsky also prevented the dismissal of UniStrip’s charge of LifeScan tortuously interfering with actual contractual relations between the company and its resellers.

However, Slomsky did allow the dismissal of UniStrip’s allegation aimed at LifeScan of tortious interference with prospective contractual relations.

“UniStrip has not plausibly pled that it was likely that a contractual relationship would have occurred in the absence of LifeScan’s alleged tortious interference. In short, the Court cannot identify ‘specific business relationships suffering as a result of the defendant’s interference’ that UniStrip is required to plead,” Slomsky said.

“Second, UniStrip merely claims that LifeScan improperly acted without justification, yet it fails to provide any reasoning that underlies this assertion. Merely reciting this element of the tort is not sufficient to reach the levels of a plausible claim,” Slomsky added.

But, Slomsky concluded, most of the antitrust claims levied by UniStrip against LifeScan would survive the motion to dismiss.

“UniStrip has alleged plausible claims of antitrust violations and tortious interference with actual contractual relations against LifeScan,” Slomsky said.

The plaintiff is represented by Neill Wilson Clark and Richard D. Schwartz of Faruqi & Faruqi in Jenkintown, and Donald R. Pepperman, Jennifer S. Elkayam and Maxwell M. Blecher, of Blecher Collins Pepperman & Joye, in Los Angeles, Calif.

The defendants are represented by Robin P. Sumner and Whitney R. Redding of Pepper Hamilton in Philadelphia, and David Kleban, Stephanie Gyetvan and William F. Cavanaugh Jr., of Patterson Belknap Webb & Tyler, in New York, N.Y.

U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-04518

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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