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BRACCO DIAGNOSTICS, INC. v. BERGEN BRUNSWIG DRUG

September 30, 2002

BRACCO DIAGNOSTICS INC., PLAINTIFF,
V.
BERGEN BRUNSWIG DRUG CO., DEFENDANT.



The opinion of the court was delivered by: Cooper, District Judge.

MEMORANDUM OPINION

This matter comes before the Court on the motion of defendant to dismiss Counts I and II of plaintiffs Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated in this Memorandum and Order, the Court will grant the motion to dismiss.

BACKGROUND

Plaintiff Bracco Diagnostics Inc. ("Bracco") develops and markets a variety of health care products, including diagnostic imaging agents and diagnostic pharmaceutical products. (Compl. ¶ 6.) Defendant Bergen Brunswig Drug Co. ("Bergen") is a wholesaler of pharmaceuticals and other health care products. To distribute its products to end-users, Bracco sells its products to wholesalers, such as Bergen, which have warehouse and distribution facilities across the United States. The wholesalers then sell and distribute Bracco's products to customers, including hospitals and physicians. (Compl. ¶¶ 1, 2, 6.) Since 1994, Bergen has been one of Bracco's wholesalers. (Id. ¶ 2, 6.)

The terms governing Bracco's sales to wholesalers are set forth in "Wholesale Distribution Agreements." (Id. ¶ 9.) In 1995, Bracco and Bergen entered into such a Wholesale Distribution Agreement. Bracco and Bergen are parties to certain other agreements that include substantially similar terms, referred to collectively in the Complaint as "Wholesale Distribution Agreements." (Id. ¶ 9.) The terms of the Wholesale Distribution Agreements require, among other things, that (1) Bergen purchase Bracco products exclusively from Bracco; (2) Bergen maintain accurate records of sales and returns of Bracco products; (3) Bergen report to Bracco on a monthly basis information on sales and returns of Bracco product; and (4) Bergen allow audit of its records from time to time, at Bracco's expense, by Bracco or by a public accounting firm selected by Bracco. (Id. ¶ 10.)

Bracco also enters into contracts with certain groups of hospitals ("contract customers"). (Id. ¶ 11.) Those contract customers purchase Bracco's products at a negotiated "contract price" that, in most instances, is lower than the wholesale acquisition price that wholesalers pay Bracco. (Id.) Under the terms of the Wholesale Distribution Agreements, Bergen sells Bracco products to contract customers at the Bracco contract price. (Id.) Bergen then periodically sends an electronic report to Bracco detailing sales to such contract customers and the price differential between the contract price and the higher wholesale price at which Bergen purchased the products. (Id. ¶¶ 11, 12.) That price differential, which Bracco reimburses to Bergen, is known as a "chargeback." (Id. ¶ 11.) Bracco pays the chargeback owed Bergen either by making payments to Bergen or by crediting Bergen's account in the amount of the chargeback. (Id. ¶ 12.) The purpose of the chargeback is to make Bergen whole in those cases in which it sells a product to a Bracco contract customer for less than Bergen paid for the product. (Id. ¶ 11.) In certain circumstances, wholesalers such as Bergen are required to return the chargeback to the manufacturer. (Id.) Such a return or reversal of the chargeback is referred to as a "negative chargeback." (Id.)

According to the Complaint, Bergen began using the chargeback system in a "scheme to cheat" Bracco, involving two types of transactions. (Id. ¶ 14.) Bracco alleges that in the first type of transaction, Bergen failed to submit a negative chargeback when required and thus kept many unearned chargebacks. (Id. ¶ 15.) Bergen often would re-sell the returned product and submit a report to Bracco claiming a second reimbursement for the same item while failing to disclose that it (Bergen) had already received reimbursement. (Id.) That "double dipping" would result in Bergen obtaining two chargeback reimbursements for the same product. (Id.) Bracco alleges that in the second type of transaction, Bergen purchased Bracco products from sources other than Bracco in violation of the Wholesale Distribution Agreements. (Id. ¶ 16.) According the Complaint, Bergen then sold such "secondary source" goods to contract customers, and Bracco subsequently paid chargebacks to Bergen on those sales. (Id.)

Bracco filed a six-count Complaint on December 12, 2001. In addition to claims for breach of contract, Bracco asserts claims for common-law fraud (Count I) and violation of the New Jersey Consumer Fraud Act (Count II). Bergen now moves for dismissal of the fraud and statutory claims contained in Counts I and II of the Complaint pursuant to Rule 12(b)(6).

DISCUSSION

I. Standard Under Rule 12(b)(6)

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted does not attack the merits of the case, but merely tests the legal sufficiency of the complaint. Sturm v. Clark, 835 F.2d 1009, 1011 (3d Cir. 1987). When considering such a motion, the reviewing court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Wisniewski v. Johns-Manville Co., 759 F.2d 271, 273 (3d Cir. 1985); Rogin v. Bensalem Township, 616 F.2d 680, 685 (3d Cir. 1980), cert. denied, 450 U.S. 1029, 101 S.Ct. 1737, 68 L.Ed.2d 223 (1981). A court may not dismiss the complaint "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

In considering the motion, a district court must accept as true the facts pleaded in the complaint and any and all reasonable inferences derived from those facts. Unger v. Nat'l Residents Matching Program, 928 F.2d 1392, 1400 (3d Cir. 1991); Glenside West Corp. v. Exxon Co., 761 F. Supp. 1100, 1107 (D.N.J. 1991); Gutman v. Howard Sav. Bank, 748 F. Supp. 254, 260 (D.N.J. 1990). Moreover, it is not necessary for the plaintiff to plead evidence, and it is not necessary to plead the facts that serve as the basis for the claim. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978); In re Midlantic Corp. S'holder Litig., 758 F. Supp. 226, 230 (D.N.J. 1990). Legal conclusions offered in the guise of factual allegations, however, are given no presumption of truthfulness. Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

The question before the court is not whether the plaintiff will ultimately prevail; rather, it is whether the plaintiff can prove any set of facts in support of the asserted claims that would entitle the plaintiff to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). However, although the Federal Rules of Civil Procedure do not dictate that a "claimant set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give the defendant fair notice of what the plaintiffs claim is and the grounds upon which it rests." ...


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