Bracco Diagnostics Inc. v. Bergen Brunswig Drug Co.

226 F. Supp. 2d 557, 2002 U.S. Dist. LEXIS 18305, 2002 WL 31161665
District Court, D. New Jersey·Decided September 30, 2002·No. CIVIL ACTION NO. 01-5777(MLC)·Published·Cited by 71 cases

Opinion

MEMORANDUM OPINION

COOPER, District Judge.

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

The terms governing Braeco’s sales to wholesalers are set forth in “Wholesale Distribution Agreements.” (Id. ¶ 9.) In 1995, Braceo and Bergen entered into such a Wholesale Distribution Agreement. Braceo 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 Braceo products exclusively from Braceo; (2) Bergen maintain accurate records of sales and returns of Braceo products; (3) Bergen report to Braceo on a monthly basis information on sales and returns of Braceo product; and (4) Bergen allow audit of its records from time to time, at Bracco’s expense, by Braceo or by a public accounting firm selected by Brac-eo. (MUIO.)

Braceo 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 Brac-eo. (Id) Under the terms of the Wholesale Distribution Agreements, Bergen sells Braceo products to contract customers at the Braceo contract price. (Id) Bergen then periodically sends an electronic report to Braceo 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 *559 differential, which Braceo reimburses to Bergen, is known as a “chargeback.” (Id. ¶ 11.) Braceo 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 Braceo 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” Braceo, involving two types of transactions. (Id. ¶ 14.) Braceo alleges that in the first type of transaction, Bergen failed to submit a negative charge-back when required and thus kept many unearned chargebacks. (Id. ¶ 15.) Bergen often would re-sell the returned product and submit a report to Braceo 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.) Braceo alleges that in the second type of transaction, Bergen purchased Braceo products from sources other than Braceo in violation of the Wholesale Distribution Agreements. (Id. ¶ 16.) According the Complaint, Bergen then sold such “secondary source” goods to contract customers, and Braceo subsequently paid chargebacks to Bergen on those sales. (Id.)

Braceo filed a six-count Complaint on December 12, 2001. In addition to claims for breach of contract, Braceo 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 Corp., 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).

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Bracco Diagnostics Inc. v. Bergen Brunswig Drug Co., 226 F. Supp. 2d 557, 2002 U.S. Dist. LEXIS 18305, 2002 WL 31161665 (D.N.J. 2002).

226 F. Supp. 2d 557 (Bracco Diagnostics Inc. v. Bergen Brunswig Drug Co.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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