Exeltis USA Inc. v. First Databank, Inc.

520 F.Supp.3d 1225

EXELTIS USA INC., Plaintiff,

v.FIRST DATABANK, INC., Defendant.

Case No. 17-cv-04810-HSG

United States District Court, N.D. California.

Signed February 17, 2021

Jaime Allyson Bartlett, Sidley Austin LLP, Ryan M. Sandrock, US Department of Justice, San Francisco, CA, Benjamin Milton Mundel, Pro Hac Vice, Daniel John Hay, Pro Hac Vice, Jacquelyn Erine Fradette, Pro Hac Vice, Sidley Austin LLP, Washington, DC, for Plaintiff.

Thomas R. Burke, Davis Wright Tremaine LLP, San Francisco, CA, Jonathan R. Donnellan, Pro Hac Vice, Nathaniel Scott Boyer, Pro Hac Vice, Ravi Sitwala, Pro Hac Vice, Sarah Sohyun Park, Pro Hac Vice, Hearst Corporation Office of General Counsel, New York, NY, for Defendant.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

Re: Dkt. Nos. 168, 209

HAYWOOD S. GILLIAM, JR., United States District Judge Pending before the Court is Defendant First Databank, Inc.’s motion for summary judgment. See Dkt. No. 168.¹ The Court heard argument on this motion. For the reasons detailed below, the Court GRANTS the motion.

I. BACKGROUND

A. Factual Background

The parties are familiar with the largely undisputed facts of this case, and the Court only briefly summarizes them here as relevant to the pending motion for summary judgment. Plaintiff Exeltis USA Inc., a prenatal vitamin manufacturer, filed this action on August 17, 2017, against Defendant, challenging the new coding system that Defendant intended to implement for Plaintiff's products in its pharmaceutical database called "MedKnowledge." See Dkt. No. 160 ("FAC"). According to Plaintiff, Defendant's database is used by "payors," including pharmacy benefit managers ("PBMs") and Medicaid and private insurance providers to determine whether products are covered by public and private insurance plans. See id. at ¶¶ 1, 16, 53–58, 62–64; see also Dkt. No. 180-8, Ex. 15; Dkt. No. 179-10, Ex. 16 ("Lettrich Depo.") at 16:6–23:24; See Dkt. No. 172 ("Lupinetti Decl.") at ¶¶ 3–4.

Defendant offers payors licenses to the MedKnowledge database, which includes numerous fields, including clinical, descriptive, and pricing data about tens of thousands of pharmaceutical products. See Lupinetti Decl. at ¶¶ 2, 4, 9. Payors may use the database as part of their system to adjudicate claims and determine, based on the rules that the payors establish, whether to reimburse for specific products. See Lettrich Depo. at 16:6–21:24. Historically, the "class value" field in the MedKnowledge database indicated whether manufacturers identified their products as prescription-only. See Lupinetti Decl. at ¶¶ 9–10; see also Dkt. No. 179-2, Ex. 18 at 29. Code "F" identified product labels that indicated prescription or physician supervision was required, including prescription prenatal vitamins, and "O" identified when the product label did not contain any dispensing limitations. See Dkt. No. 172-1, Ex. A.

In May 2017, Defendant announced that it would revise its coding system. See Dkt. No. 172-4, Ex. D; Dkt. No. 172-5, Ex. E. Defendant proposed adjusting the class value field to identify whether federal law requires a prescription. See id. Under this revamped class value field, code "O" would signify "[p]roducts with no federal legal prescription requirement." Id. Under this new system, prescription prenatal vitamins would receive an "O" value. See Dkt. No. 172-5, Ex. E. Then in September 2018, Defendant announced a new plan: the creation of a new class value, "Q," which would include all prenatal vitamins (both prescription and over-the-counter). See Dkt. No. 180-12, Ex. 38, at Ex. A at 3–4. Under this plan, class values "O" and "F" would be limited to drugs and medical devices as specified below:

F – Prescription drugs or medical devices as defined in the Food Drug and Cosmetic Act (FDCA), including bulk drug ingredients

O – Non-prescription drugs or medical devices Q – Products that are neither drugs nor devices, such as dietary supplements (including prenatal and other vitamins), medical foods, herbal preparations, and bulk flavorings or colorants.

See id. at 4.

Plaintiff alleges that these coding changes would falsely characterize its prenatal vitamins as over-the-counter and mislead users of the database. See FAC at ¶¶ 93–109. Plaintiff further urges that Defendant's new coding "will cause patients to lose coverage for prescription prenatal vitamins," which are critical to preventing birth defects. Id. at ¶¶ 111–16. Plaintiff asserts that by October 14, 2019, Defendant implemented the coding change as to most of Plaintiff's prescription prenatal vitamins—and many sold by other companies—in Defendant's database. See Dkt. No. 196 at ¶ 4. Based on these allegations, Plaintiff brings five causes of action against Defendant for (1) violating 15 U.S.C. § 1125(a)(1) of the Lanham Act; (2) violating California's Unfair Competition Law prohibiting "unlawful, unfair, [and] fraudulent" conduct; (3) false advertising under Cal. Bus. & Prof. Code §§ 17500 et seq. ; (4) intentional interference with prospective economic advantage; and (5) trade libel. See FAC at ¶¶ 117–160.

B. Procedural History

On December 21, 2017, the Court denied Plaintiff's motion for a preliminary injunction, denied Defendant's motion to strike the state law claims under California's anti-SLAPP statute, and denied Defendant's motion to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6). See Dkt. No. 57. Defendant appealed the Court's denial of its special motion to strike on January 2, 2018. See Dkt. No. 58 (No. 18-15001). On October 4, 2019, the Ninth Circuit issued a memorandum disposition holding that Plaintiff's filing of an amended complaint mooted the appeal of the anti-SLAPP denial. See Exeltis v. First Databank , 779 Fed.Appx. 486 (9th Cir. 2019). Following months of discovery, Defendant now moves for summary judgment. See Dkt. No. 168.

II. LEGAL STANDARD

Summary judgment is proper when a "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). And a dispute is "genuine" if there is evidence in the record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id. But in deciding if a dispute is genuine, the court must view the inferences reasonably drawn from the materials in the record in the light most favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), and "may not weigh the evidence or make credibility determinations," Freeman v. Arpaio , 125 F.3d 732, 735 (9th Cir. 1997), overruled on other grounds by Shakur v. Schriro , 514 F.3d 878, 884–85 (9th Cir. 2008). If a court finds that there is no genuine dispute of material fact as to only a single claim or defense or as to part of a claim or defense, it may enter partial summary judgment. Fed. R. Civ. P. 56(a).

III. DISCUSSION

Defendant has moved for summary judgment as to all of Plaintiff's claims. See Dkt. No. 168. First , Defendant challenges Plaintiff's Lanham Act, false advertising, and unfair competition law claims. Defendant contends that its database is not commercial speech and that Plaintiff cannot raise a genuine dispute as to whether its speech—reclassifying Plaintiff's prenatal vitamins as "[p]roducts that are neither drugs nor devices" under Class "Q"—could be found false or misleading. See Dkt. No. 168 at 12–31. Second , Defendant challenges Plaintiff's intentional interference and trade libel claims, arguing that there is no evidence of actual malice. See id. at 33–35.

A. Lanham Act, False Advertising, and Unfair Competition Claims

i. The Database Is Not Commercial Speech

Much as they did at the preliminary injunction stage in this case, the parties dispute whether the MedKnowledge database constitutes commercial speech. Plaintiff can only succeed on its Lanham Act and state law claims for violations of the FAL and UCL if Defendant's database is commercial speech.² Defendant urges that it is undisputed that it "has no economic motivation whatsoever to publish an ‘O’ or ‘Q’ for Exeltis's products." See Dkt. No. 168 at 12. In response, Plaintiff contends that the database is integral to commercial transactions by which payors determine whether to reimburse for specific products under their respective insurance plans. See Dkt. No. 180 at 28–31.

As this Court has previously explained, the law is not "clear" about "what type of speech qualifies as commercial speech." United States v. Schiff , 379 F.3d 621, 626 (9th Cir. 2004) ; cf. Kasky , 27 Cal. 4th at 956–60, 969, 119 Cal.Rptr.2d 296, 45 P.3d 243 (applying Supreme Court precedent and declining to articulate a separate test for distinguishing commercial and noncommercial speech under the California Constitution). Although the Supreme Court has held that the "core notion of commercial speech" encompasses "speech which does no more than propose a commercial transaction," see Bolger v. Youngs Drug Prod. Corp. , 463 U.S. 60, 66, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983) (quotation omitted), courts have been reluctant to articulate a bright-line rule to identify commercial speech that falls outside this "core" zone. Cf. City of Cincinnati v. Discovery Network, Inc. , 507 U.S. 410, 419, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993) (acknowledging "the difficulty of drawing bright lines that will clearly cabin commercial speech in a distinct category"); Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of New York , 447 U.S. 557, 579, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980) (Stevens, J., concurring) (cautioning that commercial speech should "not be defined too broadly lest speech deserving of greater constitutional protection be inadvertently suppressed"). Rather, the "commercial speech analysis is fact-driven," and co...