U.S. Court of Appeals for the Third Circuit, Walgreen Co v. Johnson & Johnson, Docket No. 19-1730

Assignment

 

Forum Selection Clause

 

Contract Provision Proscribing the Assignment of Any “Rights or Obligations Under” That Contract

 

Assignment of Federal Antitrust Claims. Barred by the Contract Provision?

 

Contract Provision Regarding Forum Selection Clause, Applicable in Antitrust Claims?

 

Distribution Agreement

 

New Jersey Law

 

Contract Drafting

 

 

 

(“Indirect” purchaser would lack antitrust standing).

 

This case raises the question of whether an assignment of federal antitrust claims is barred by a contract provision proscribing the assignment of any “rights or obligations under” that contract. The District Court answered in the affirmative and granted summary judgment against the appellants, who all want to assert antitrust claims they purportedly obtained by assignment from a party bound by the anti-assignment clause. We conclude that the District Court erred. The antitrust claims are a product of federal statute and thus are extrinsic to, and not rights “under,” a commercial agreement. Accordingly, we will reverse the grant of summary judgment and remand for further proceedings.

 

It is undisputed that New Jersey law governs the Distribution Agreement.

 

This appeal pertains to the scope of the anti-assignment language in Section 4.4 (the “Anti-Assignment Provision”) of the Distribution Agreement. In relevant part, the Anti-Assignment Provision states that “neither party may assign, directly or indirectly, this agreement or any of its rights or obligations under this agreement ... without the prior written consent of the other party.... Any purported assignment in violation of this section will be void.” (JA at 102 (emphasis added).)

 

In January 2018, Wholesaler assigned to Walgreen “all of its rights, title and interest in and to” its claims against Janssen “under the antitrust laws of the United States or of any State arising out of or relating to Wholesaler’s purchase of Remicade.

 

(…) It is undisputed that, if the Anti-Assignment Provision prevents the assignment, then, under the Supreme Court’s seminal decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), Walgreen, an “indirect” Remicade purchaser, would lack antitrust standing to assert claims against Janssen (…) In Illinois Brick, the Supreme Court created a “direct purchaser” rule for antitrust claims, “providing that only entities that purchase goods directly from alleged antitrust violators have statutory standing to bring a lawsuit for damages.” Wallach v. Eaton Corp., 837 F.3d 356, 365 (3d Cir. 2016). “The rule of Illinois Brick was founded on the difficulty of analyzing pricing decisions, the risk of multiple liability for defendants, and the weakening of private antitrust enforcement that might result from splitting damages for overcharges among direct and indirect purchasers.”

 

The statutory federal antitrust claims asserted in Walgreen’s complaint are extrinsic to, and not “rights under,” the Distribution Agreement. Applied to the Anti-Assignment Provision, the scope of which is limited to Wholesaler’s “rights under” the Distribution Agreement, it becomes evident that the provision has no bearing on Wholesaler’s antitrust claims, which rely only on statutory rights and do not implicate any substantive right under the Distribution Agreement. Accordingly, the Anti-Assignment Provision does not invalidate Wholesaler’s assignment of antitrust claims to Walgreen or otherwise present a bar to Walgreen’s standing to assert those antitrust claims against Janssen.

 

((…) The State has not brought the assigned claims based on any substantive right or duty found in the contract itself.)

 

(…) Courts that have considered the scope of anti-assignment clauses in the antitrust context often have looked to Section 322 of the Restatement (Second) of Contracts as part of their analysis.

 

(…) The terms “arise out of” and “arise under” are facially broader, more encompassing, and ultimately distinct from, the concept of “rights under” an agreement.

 

Regarding the application of New Jersey law to the Anti-Assignment Provision, Janssen correctly notes that neither Hartig nor any of the antitrust cases interpreting the scope of anti-assignment clauses that Walgreen cites (and which we find persuasive) applied New Jersey law. But that fact is not dispositive. Janssen cites no case, let alone a case applying New Jersey law, in which any court has found that federal antitrust claims fall within the scope of an anti-assignment clause prohibiting the assignment of “rights under” an agreement. Nor does Janssen identify any particular feature of New Jersey law that suggests it would diverge from the weight of authority on this issue. To the contrary, the New Jersey cases that Janssen does cite, in which anti-assignment clauses were held to foreclose statutory causes of action, are readily distinguishable. In each of those cases, unlike the antitrust claims at issue here, the statutory claims that were precluded by an anti-assignment provision all flowed from an underlying breach of one or more provisions of the contract containing the anti-assignment provision.

 

(…) Rini Wine Co. v. Guild Wineries & Distilleries, 604 F. Supp. 1055, 1057–59 (N.D. Ohio 1985) (forum selection clause applicable to “any action entered under the distributor agreement” encompassed antitrust claims where “the incident from which this dispute arises is indeed the termination of the distributor agreement,” and “Plaintiff has chosen to explain defendant’s conduct as an ‘unlawful combination and conspiracy’ in violation of federal and state antitrust laws in its complaint.”).

 

(…) Wallach did not involve a contractual anti-assignment provision. Instead, we addressed the entirely distinct question of whether the assignment of antitrust claims must be supported by consideration. Wallach, 837 F.3d at 361. In that context, we maintained our prior recognition that both contractual rights and non-contractual causes of action are assignable, and that the argument that non-contractual causes of action cannot be assigned rests “on an antiquated distinction between contractual rights and choses in action that no longer has a significant effect on the common law.” Id. at 369. Nowhere did we hold, or even suggest, that statutory antitrust claims are rights under a contract.

 

 

 

(U.S. Court of Appeals for the Third Circuit, February 21, 2020, Walgreen Co v. Johnson & Johnson, Docket No. 19-1730, Precedential)