NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 21 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
AIDS HEALTHCARE FOUNDATION, a No. 23-55425 California non-profit public-benefit corporation, D.C. No. 2:22-cv-08450-PA-E
Plaintiff-Appellant, MEMORANDUM* v.
APEXUS, LLC, a Delaware limited liability company,
Defendant-Appellee.
Appeal from the United States District Court for the Central District of California Percy Anderson, District Judge, Presiding
Argued and Submitted April 11, 2024 Pasadena, California
Before: MURGUIA, Chief Judge, and MENDOZA and DE ALBA, Circuit Judges.
Plaintiff-Appellant AIDS Healthcare Foundation (“AIDS Healthcare”) sues
Defendant-Appellee Apexus, LLC (“Apexus”) for allegedly breaching the Prime
Vendor Agreement between Apexus and the Health Resources and Services
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Administration (“HRSA”), issued pursuant to § 340B of the Public Health Services
Act, 42 U.S.C. § 256b. Applying the Supreme Court’s decision in Astra USA, Inc.
v. Santa Clara County, 563 U.S. 110 (2011), the district court dismissed AIDS
Healthcare’s complaint with prejudice. It reasoned that AIDS Healthcare could not
sue as an intended beneficiary of the Prime Vendor Agreement to challenge
Apexus’s alleged failure to negotiate sufficiently discounted pricing for
prescription medications on AIDS Healthcare’s behalf. We have jurisdiction under
28 U.S.C. § 1291; we review de novo a district court’s decision to grant a motion
to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim, Tingley v. Ferguson, 47 F.4th 1055, 1066 (9th Cir. 2022); and we affirm.
1. Neither Apexus nor HRSA clearly intended to render AIDS
Healthcare an intended beneficiary of the Prime Vendor Agreement. “A third
party that wishes to sue under a government contract must demonstrate that it is an
intended beneficiary of the contract, rather than merely an incidental one.” Caltex
Plastics, Inc. v. Lockheed Martin Corp., 824 F.3d 1156, 1160 (9th Cir. 2016). To
demonstrate intended-beneficiary status, a plaintiff must show that “the contracting
parties” clearly intended to grant the nonparty plaintiff “enforceable rights.” Id.
(quoting Orff v. United States, 358 F.3d 1137, 1147 (9th Cir. 2004)). We divine
that intent by “examin[ing] the precise language of the contract,” using “general
principles for interpreting contracts.” GECCMC 2005-C1 Plummer St. Off. Ltd.
2 P’ship v. JP Morgan Chase Bank, Nat’l Ass’n (Plummer Street), 671 F.3d 1027,
1033–34 (9th Cir. 2012) (internal quotations and citations omitted).
The Prime Vendor Agreement’s alleged requirements do not “overcome the
presumption against third-party beneficiaries” established by our case law and
Supreme Court precedent. See Plummer Street, 671 F.3d at 1029–31, 1034.
Entities like AIDS Healthcare are discussed in the agreement and clearly benefit
from its operation. But intended-beneficiary status cannot be established merely
by “explicit reference to a third party,” Orff, 358 F.3d at 1145; a showing that the
contract “was entered into with [nonparty plaintiffs] in mind,” Plummer Street, 671
F.3d at 1033 (quoting Orff, 358 F.3d at 1147) (cleaned up); or allegations that the
contract “operates to the [third parties’] benefit,” Klamath Water Users Protective
Ass’n v. Patterson, 204 F.3d 1206, 1212 (9th Cir. 1999), and provides them with
concrete benefits, see Orff, 358 F.3d at 1145; see also Astra, 563 U.S. at 117–18
(regarding as relevant but insufficient specific references to covered entities in
other § 340B contracts to establish intended beneficiary status).
AIDS Healthcare points us to Apexus’s contractual obligation to provide
“price negotiating services” that guarantee “the most advantageous sub-ceiling
prices” on medications for entities like itself. But we have long held that such
“hortatory statement[s] of purpose at best might qualify [third parties] as incidental
beneficiaries,” a status that “does not confer enforceable rights.” Smith v. Cent.
3 Ariz. Water Conservation Dist., 418 F.3d 1028, 1037 (9th Cir. 2005); see also
Kremen v. Cohen, 337 F.3d 1024, 1029 (9th Cir. 2003) (considering contractual
language that required a signatory to “facilitate the most effective, efficient and
ubiquitous registration services possible” on behalf of third parties and holding that
such language “does not indicate a clear intent to grant” those third parties
“enforceable contract rights”). Put simply, AIDS Healthcare’s allegations and the
Prime Vendor Agreement’s terms do not demonstrate Apexus’s or HRSA’s clear
intent to permit intended-beneficiary suits to enforce the Agreement.
Section 340B’s underlying statutory framework confirms that, as pled, AIDS
Healthcare cannot sue in federal court as an intended beneficiary to Apexus’s and
HRSA’s Prime Vendor Agreement. When a “contract is mandated by a federal
statute,” we also consider “the ‘governing statute and its purpose’” in our analysis.
See County of Santa Clara v. Astra USA, Inc., 588 F.3d 1237, 1245 (9th Cir. 2009)
(quoting Sec’y of State for Def. v. Trimble Navigation Ltd., 484 F.3d 700, 706 (4th
Cir. 2007)), rev’d on other grounds by Astra, 563 U.S. 110; see also Plummer
Street, 671 F.3d at 1035 (directing courts to consider the “circumstances of the
transaction,” which includes the governing statute that mandated the contract
(internal quotation marks and citation omitted)). Congress enacted § 340B to lower
prices for prescription drugs under Medicaid by encouraging drug manufacturers to
offer discounted drugs to “covered entities”—namely, healthcare providers like
4 AIDS Healthcare—in exchange for Medicaid coverage of those drugs. See County
of Santa Clara, 588 F.3d at 1246; 42 U.S.C. § 256b(a)(1), (4). To facilitate that
goal, Congress anticipated that HRSA would enter into an agreement with a prime
vendor like Apexus to distribute those discounted drugs. See 42 U.S.C.
§ 256b(a)(8). But as the Court reasoned in Astra, § 340B evinces no
Congressional intent to permit covered entities to directly enforce those statutory
obligations in federal court. See 563 U.S. at 119–21. Not only does § 340B lack a
private right of action, but it does not permit covered entities like AIDS Healthcare
“to sue for overcharges under the statute itself.” Id. at 113. In fact, “Congress
Free access — add to your briefcase to read the full text and ask questions with AI
NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 21 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
AIDS HEALTHCARE FOUNDATION, a No. 23-55425 California non-profit public-benefit corporation, D.C. No. 2:22-cv-08450-PA-E
Plaintiff-Appellant, MEMORANDUM* v.
APEXUS, LLC, a Delaware limited liability company,
Defendant-Appellee.
Appeal from the United States District Court for the Central District of California Percy Anderson, District Judge, Presiding
Argued and Submitted April 11, 2024 Pasadena, California
Before: MURGUIA, Chief Judge, and MENDOZA and DE ALBA, Circuit Judges.
Plaintiff-Appellant AIDS Healthcare Foundation (“AIDS Healthcare”) sues
Defendant-Appellee Apexus, LLC (“Apexus”) for allegedly breaching the Prime
Vendor Agreement between Apexus and the Health Resources and Services
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Administration (“HRSA”), issued pursuant to § 340B of the Public Health Services
Act, 42 U.S.C. § 256b. Applying the Supreme Court’s decision in Astra USA, Inc.
v. Santa Clara County, 563 U.S. 110 (2011), the district court dismissed AIDS
Healthcare’s complaint with prejudice. It reasoned that AIDS Healthcare could not
sue as an intended beneficiary of the Prime Vendor Agreement to challenge
Apexus’s alleged failure to negotiate sufficiently discounted pricing for
prescription medications on AIDS Healthcare’s behalf. We have jurisdiction under
28 U.S.C. § 1291; we review de novo a district court’s decision to grant a motion
to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim, Tingley v. Ferguson, 47 F.4th 1055, 1066 (9th Cir. 2022); and we affirm.
1. Neither Apexus nor HRSA clearly intended to render AIDS
Healthcare an intended beneficiary of the Prime Vendor Agreement. “A third
party that wishes to sue under a government contract must demonstrate that it is an
intended beneficiary of the contract, rather than merely an incidental one.” Caltex
Plastics, Inc. v. Lockheed Martin Corp., 824 F.3d 1156, 1160 (9th Cir. 2016). To
demonstrate intended-beneficiary status, a plaintiff must show that “the contracting
parties” clearly intended to grant the nonparty plaintiff “enforceable rights.” Id.
(quoting Orff v. United States, 358 F.3d 1137, 1147 (9th Cir. 2004)). We divine
that intent by “examin[ing] the precise language of the contract,” using “general
principles for interpreting contracts.” GECCMC 2005-C1 Plummer St. Off. Ltd.
2 P’ship v. JP Morgan Chase Bank, Nat’l Ass’n (Plummer Street), 671 F.3d 1027,
1033–34 (9th Cir. 2012) (internal quotations and citations omitted).
The Prime Vendor Agreement’s alleged requirements do not “overcome the
presumption against third-party beneficiaries” established by our case law and
Supreme Court precedent. See Plummer Street, 671 F.3d at 1029–31, 1034.
Entities like AIDS Healthcare are discussed in the agreement and clearly benefit
from its operation. But intended-beneficiary status cannot be established merely
by “explicit reference to a third party,” Orff, 358 F.3d at 1145; a showing that the
contract “was entered into with [nonparty plaintiffs] in mind,” Plummer Street, 671
F.3d at 1033 (quoting Orff, 358 F.3d at 1147) (cleaned up); or allegations that the
contract “operates to the [third parties’] benefit,” Klamath Water Users Protective
Ass’n v. Patterson, 204 F.3d 1206, 1212 (9th Cir. 1999), and provides them with
concrete benefits, see Orff, 358 F.3d at 1145; see also Astra, 563 U.S. at 117–18
(regarding as relevant but insufficient specific references to covered entities in
other § 340B contracts to establish intended beneficiary status).
AIDS Healthcare points us to Apexus’s contractual obligation to provide
“price negotiating services” that guarantee “the most advantageous sub-ceiling
prices” on medications for entities like itself. But we have long held that such
“hortatory statement[s] of purpose at best might qualify [third parties] as incidental
beneficiaries,” a status that “does not confer enforceable rights.” Smith v. Cent.
3 Ariz. Water Conservation Dist., 418 F.3d 1028, 1037 (9th Cir. 2005); see also
Kremen v. Cohen, 337 F.3d 1024, 1029 (9th Cir. 2003) (considering contractual
language that required a signatory to “facilitate the most effective, efficient and
ubiquitous registration services possible” on behalf of third parties and holding that
such language “does not indicate a clear intent to grant” those third parties
“enforceable contract rights”). Put simply, AIDS Healthcare’s allegations and the
Prime Vendor Agreement’s terms do not demonstrate Apexus’s or HRSA’s clear
intent to permit intended-beneficiary suits to enforce the Agreement.
Section 340B’s underlying statutory framework confirms that, as pled, AIDS
Healthcare cannot sue in federal court as an intended beneficiary to Apexus’s and
HRSA’s Prime Vendor Agreement. When a “contract is mandated by a federal
statute,” we also consider “the ‘governing statute and its purpose’” in our analysis.
See County of Santa Clara v. Astra USA, Inc., 588 F.3d 1237, 1245 (9th Cir. 2009)
(quoting Sec’y of State for Def. v. Trimble Navigation Ltd., 484 F.3d 700, 706 (4th
Cir. 2007)), rev’d on other grounds by Astra, 563 U.S. 110; see also Plummer
Street, 671 F.3d at 1035 (directing courts to consider the “circumstances of the
transaction,” which includes the governing statute that mandated the contract
(internal quotation marks and citation omitted)). Congress enacted § 340B to lower
prices for prescription drugs under Medicaid by encouraging drug manufacturers to
offer discounted drugs to “covered entities”—namely, healthcare providers like
4 AIDS Healthcare—in exchange for Medicaid coverage of those drugs. See County
of Santa Clara, 588 F.3d at 1246; 42 U.S.C. § 256b(a)(1), (4). To facilitate that
goal, Congress anticipated that HRSA would enter into an agreement with a prime
vendor like Apexus to distribute those discounted drugs. See 42 U.S.C.
§ 256b(a)(8). But as the Court reasoned in Astra, § 340B evinces no
Congressional intent to permit covered entities to directly enforce those statutory
obligations in federal court. See 563 U.S. at 119–21. Not only does § 340B lack a
private right of action, but it does not permit covered entities like AIDS Healthcare
“to sue for overcharges under the statute itself.” Id. at 113. In fact, “Congress
vested authority to oversee compliance with the 340B Program in [the Department
of Health and Human Services] and assigned no auxiliary enforcement role to
covered entities” like AIDS Healthcare. Id. at 117.
Although this case is not Astra redux, we cannot ignore Congress’s
intentions regarding the implementation of § 340B or its interaction with the
broader Medicaid program. The Prime Vendor Agreement largely derives from
and incorporates § 340B’s statutory terms, and it anticipates that Apexus will
negotiate sub-ceiling pricing set by statute. And, as Astra warned, permitting suits
like AIDS Healthcare’s to proceed would “undermine the [government’s] efforts to
administer both Medicaid and § 340B harmoniously and on a uniform, nationwide
basis.” 563 U.S. at 120. To allow such suits would, instead, “spawn a multitude of
5 dispersed and uncoordinated lawsuits” by covered entities, creating an
unmanageable risk of “conflicting adjudications.” Id.; see also Plummer Street,
671 F.3d at 1035; County of Santa Clara, 588 F.3d at 1248 (“The breadth and
indefiniteness of a class of beneficiaries is entitled to some weight in negating the
inference of intended beneficiary status.”). Our precedent, balanced alongside the
Congressional imperatives of the 340B Program and the Agreement’s clear terms,
dictates that AIDS Healthcare’s lawsuit is not premised on enforceable rights under
the Prime Vendor Agreement. Of course, nothing in our conclusion impedes
HRSA from properly enforcing the Agreement’s obligations.
2. We will not disturb the district court’s dismissal of AIDS Healthcare’s
claim under California’s Unfair Competition Law (“UCL”) or its claim for
declaratory relief. California’s UCL prohibits “unlawful, unfair or fraudulent
business act[s] or practice[s].” Cal. Bus. & Prof. Code § 17200. As we held in
Caltex Plastics, AIDS Healthcare is “prohibited from ‘bootstrap[ping]’ an unfair-
competition claim using a failed breach-of-contract claim, because ‘[p]ermitting
such recovery would completely destroy the principle that a third party cannot sue
on a contract to which he or she is merely an incidental beneficiary.’” 824 F.3d at
1161 (quoting Berryman v. Merit Prop. Mgmt., Inc., 62 Cal. Rptr. 3d 177, 185 (Ct.
App. 2007)). AIDS Healthcare’s current and proposed allegations stem
exclusively from Apexus’s failure to meet its express and implied obligations
6 under the Prime Vendor Agreement. Additionally, and regardless of whether
§ 340B “preempt[s] States from maintaining state-law fraud claims,” Astra, 563
U.S. at 120 n.5 (taking no position on preemption), AIDS Healthcare does not
allege any violations of § 340B. Indeed, AIDS Healthcare concedes that Apexus
has distributed drugs and provided medications at or below the § 340B price
ceiling, as § 340B requires. Thus, AIDS Healthcare has failed to state a plausible
unlawful- or unfair-competition claim. And, given the lack of justiciable
controversy, AIDS Healthcare is not entitled to declaratory relief. See Shell Gulf of
Mex. Inc. v. Ctr. for Biological Diversity, Inc., 771 F.3d 632, 635 (9th Cir. 2014)
(noting that the Declaratory Judgment Act “does not create new substantive rights,
but merely expands the remedies available in federal courts”); see also Cal. Ins.
Guar. Ass’n v. Superior Ct., 283 Cal. Rptr. 104, 108 (Ct. App. 1991) (reasoning
similarly under California law).
AFFIRMED.