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American Pharmaceutical Partners, Inc. v. C.M.H. Care Group

June 30, 2006


The opinion of the court was delivered by: William J. Martini Judge


This matter is before the Court on American Pharmaceutical Partners, Inc.'s ("APP") motion for appeal from Magistrate Judge Hedges' discovery order of October 25, 2005. Also before the Court is APP's motion for appeal from Magistrate Judge Hedges' February 22, 2006 letter opinion and order denying APP's motion to amend its First Amended Complaint to add certain claims and new defendants. For the reasons stated below, both motions are DENIED and both of Magistrate Judge Hedges' orders are AFFIRMED.


The facts and procedural history of this matter are sufficiently detailed in this Court's prior opinions issued in November 2004 and August 2005, thus the following is only a brief summary. Plaintiff APP has been a manufacturer of pharmaceutical products, consisting primarily of injectable products, since June 1998. Defendant CMH purchased products from APP during the period of January 1999 through June 2000. APP offers these products at varying prices, depending upon the purchaser. If the purchaser is a distributor or wholesaler, it will pay significantly higher prices than "own use" purchasers, who usually purchase at a negotiated price through a "group purchasing organization" ("GPO").

APP brought this action against CMH for, among others, fraud and unjust enrichment alleging that CMH purchased APP products for "own use" and then resold those products as a wholesaler. CMH filed an answer and, after extensive discovery and motion practice before both this Court and Magistrate Judge Hedges, filed counterclaims alleging various antitrust violations. On December 20, 2002, by motion, APP filed a First Amended Complaint in response to allegations set forth by CMH. On December 12, 2005, APP moved before Magistrate Judge Hedges to file a Second Amended Complaint pursuant to Rule 15(a) to add additional claims and parties related to CMH's alleged continued deceptive procurement of APP products from third parties following the demise of the APP/CMH business relationship.

On October 3, 2005, the parties came before Magistrate Judge Hedges for a hearing (the "October 2005 Hearing") regarding a series of discovery issues the parties had previously outlined. Following the October 2005 Hearing, a form of order was provided by CMH to Magistrate Judge Hedges and he signed this order on October 17, 2005. However, after certain changes were requested by APP, CMH submitted a slightly corrected order to Magistrate Judge Hedges who signed this corrected order on October 25, 2005 (the "October 2005 Order.")

On February 14, 2006, the Parties came before Magistrate Judge Hedges regarding APP's motion to amend to file a Second Amended Complaint. Magistrate Judge Hedges issued a letter opinion and order on February 22, 2006 (the "Letter Opinion") denying APP's motion. This matter is before the Court now on APP's appeal of both the October 2005 Order and the Letter Opinion.


I. Standard of Review

A magistrate judge's order on a non-dispositive motion should not be disturbed unless the district court finds the ruling clearly erroneous or contrary to law. See Haines v. Liggett Group Inc., 975 F.2d 81, 91 (3d Cir. 1992); 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); L. Civ. R. 72.1(c)(1)(A). The district court is bound by the clearly erroneous rule as to findings of fact, while the phrase "contrary to law" indicates plenary review as to matters of law. Haines, 975 F.2d at 91. According to the Supreme Court, "a finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). Moreover, absent such a conviction, a district court will not reverse the magistrate judge's determination, even in circumstances where the court might have decided the matter differently. Andrews v. Goodyear Tire & Rubber Co., Inc., 191 F.R.D. 59, 68 (D.N.J. 2000) ("A district judge's simple disagreement with the magistrate judge's findings is insufficient to meet the clearly erroneous standard of review.")

II. APP's Appeal of the October 2005 Order

The October 2005 Hearing and subsequent Order involved a series of discovery issues, and APP appeals from seven points in the October 2005 Order. The Court will address each of these issues in turn below.

(a) Magistrate Judge Hedges' Refusal to Allow APP to Obtain "Paper Trails" is AFFIRMED

Paper trails are documents attached to pharmaceutical purchasing invoices that show the movement of product from one buyer to the next. APP sought invoices and paper trails related to CMH purchases of particular APP products from third-parties; Magistrate Judge Hedges ordered CMH to produce the invoices but specifically excluded the paper trails. (Oct. 2005 Order ΒΆ 3-4.) APP argued at the October 2005 Hearing that invoices without paper trails are of limited utility; and in their appeal, they assert that Magistrate Judge Hedges' ruling was clearly erroneous because he "did not fully appreciate 'paper trails'. . . ." (Plaintiff's November 4, 2005 Memorandum of Law ("APP Nov. 2005 Memo") at 8.) However, a review of the hearing, pleadings and history of the case indicate that Magistrate Judge Hedges was well apprised of the paper trail issue. (Nov. 4, 2005 Affidavit of Rodney A. Brown ("Nov. 2005 Brown Aff.") at Ex. E; Oct. 2005 Hearing Tr. at 10-12.) Moreover, it is clear that the question of paper trails was not new to discovery; indeed the matter had been discussed before Magistrate Judge Hedges during an April 25, 2005 hearing when APP counsel admitted that it had "indications from paper trails" as early as 2002 but they "didn't, frankly, appreciate a focus" ...

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