Eli Lilly and Company v. Alderwood Surgical Center LLC

[7] UNITED STATES DISTRICT COURT [8] WESTERN DISTRICT OF WASHINGTON AT SEATTLE [10] ELI LILLY AND COMPANY, CASE NO. 2:24-cv-00878-LK [11] Plaintiff, ORDER GRANTING MOTION TO 12 v. DISMISS COUNTERCLAIM 13 ALDERWOOD SURGICAL CENTER LLC D/B/A ALLURE ESTHETIC, D/B/A 14 GALLERY OF COSMETIC SURGERY, D/B/A SEATTLE PLASTIC SURGERY, et 15 al., 16 Defendants. [17] 18 This matter comes before the Court on Plaintiff Eli Lilly’s Motion to Dismiss Defendants’ 19 Abuse of Process Counterclaim. Dkt. No. 36. For the reasons explained below, the motion is [20] granted.1 The counterclaims are dismissed without leave to amend.2 [21] 22 1 Because this matter can be decided based on the written submissions, the Court denies Eli Lilly’s request for oral argument. Dkt. No. 36 at 1. [23] 2 Eli Lilly only moves to dismiss one of the two counterclaims (the abuse of process counterclaim). See generally Dkt. No. 36. But as explained below, the second counterclaim—for declaratory judgment—cannot exist as a freestanding 24 claim, and so it is also dismissed. 1 I. BACKGROUND 2 A. Eli Lilly’s Complaint 3 Plaintiff Eli Lilly and Company is a multinational pharmaceutical company headquartered 4 in Indiana. Dkt. No. 1 at 5. Defendants are medical clinics in the greater Seattle region and two 5 physicians who operate them. Id. 6 Eli Lilly sells Mounjaro and Zepbound, the only FDA-approved drugs containing the active 7 ingredient tirzepatide. Dkt. No. 1 at 2. Mounjaro and Zepbound are prescribed for adults with type 8 two diabetes, obesity, or excess weight and weight-related medical problems. Id. Eli Lilly alleges 9 that Defendants improperly use its Mounjaro and Zepbound trademarks to promote the sale of 10 compounded tirzepatide to patients, despite not selling either of Eli Lilly’s medicines or being 11 authorized to use Eli Lilly’s trademarks. Dkt. No. 1 at 15–19. 12 On June 20, 2024, Eli Lilly filed a complaint alleging that Defendants’ conduct violates 13 the Lanham Act and Washington’s Consumer Protection Act (the “CPA”). Id. at 5, 20–25. Eli Lilly 14 seeks a declaratory judgment, injunctive relief halting the alleged wrongdoing, an order requiring 15 Defendants to take various corrective actions, and an award of damages and fees. Id. at 25–27. 16 B. The Court Dismisses Eli Lilly’s CPA Claim, Leaving the Federal Claims Intact 17 On March 7, 2025, the Court partially granted Defendants’ motion to dismiss. Dkt. No. 34. 18 Specifically, it dismissed Eli Lilly’s state law CPA claim (Count 4) but held that the federal 19 trademark and false advertising claims were adequately pleaded. See id. Eli Lilly did not amend 20 its complaint further—deciding to proceed only with the federal claims—and Defendants 21 subsequently answered the complaint. Dkt. No. 35. 22 C. Defendants’ Counterclaims 23 Along with their answer, Defendants filed counterclaims for abuse of process and a 24 declaratory judgment. Id. at 10–15. 1 Defendants’ allegations are as follows. They assert that they have the authority to prescribe 2 lawful medicines, including Mounjaro and Zepbound, when appropriate for patient needs and 3 when commercially available. Id. at 11. Because Mounjaro and Zepbound were in short supply 4 and were listed on the FDA’s drug shortage list until August 5, 2024, the FDA allowed state- 5 licensed pharmacies and physicians to compound tirzepatide during the period of shortage. Id. at 6 11–12.3 Defendants, who have a licensed physician on staff, lawfully compounded tirzepatide7 based drugs under Section 503A of the Federal Food, Drug, and Cosmetic Act. Id. at 12. They also 8 allege that Eli Lilly’s production limitations restricted its ability to profit, because it could not meet 9 market demand. Id. 10 Based on those allegations, Defendants assert two claims: a state law abuse of process 11 claim and a declaratory judgment claim. The former alleges that Eli Lilly has misused court 12 procedures to damage Defendants’ reputation, goodwill, and professional standing by falsely 13 alleging that they “are prescribing unsafe and ineffective treatments.” Id. at 12–13. Defendants 14 argue that although Eli Lilly’s claims focus on trademark misuse—and not the safety or propriety 15 of compounded medicines—Eli Lilly nonetheless used this lawsuit to target Defendants’ 16 compounding practices in order to undermine patient confidence and to create settlement leverage. 17 Id. at 13. More broadly, Defendants assert that this lawsuit is part of a larger campaign against 18 compounded medications. Id. at 12–13. They allege that they have suffered harms including 19 increased legal costs, reputational damage, loss of goodwill, and business interference, id. at 14, 20 and seek damages and injunctive relief. Id. at 15. Defendants’ second claim—for a declaratory 21 judgment—seeks a court order declaring that their “advertising is fair use and . . . [did] not infringe [23] 3 In December 2024, the FDA indicated that it would take no action against state-licensed pharmacies or physicians compounding, distributing or dispensing tirzepatide injections for violations of the Federal Food, Drug, and Cosmetic Act arising from the inclusion of the drug on the FDA’s drug shortage list until February 18, 2025. Id. at 12. That 24 period was extended to March 5, 2025 due to litigation. Id. 1 Plaintiffs’ asserted trademarks,” and that their advertising is not false or deceptive. Id. at 14–15. 2 Eli Lilly’s motion to dismiss the abuse of process counterclaim followed. Dkt. No. 36. 3 II. DISCUSSION 4 A. Jurisdiction 5 The Court has supplemental jurisdiction over Defendants’ state law abuse of process 6 counterclaim4 because it arises from the same underlying facts as Eli Lilly’s federal claims. See [7] 28 U.S.C. § 1367 (a); Bahrampour v. Lampert, 356 F.3d 969, 978 (9th Cir. 2004) (“A state law 8 claim is part of the same case or controversy when it shares a common nucleus of operative fact 9 with the federal claims and the state and federal claims would normally be tried together.” 10 (quotation marks omitted)). 11 B. Legal Standards 12 When deciding a motion under Federal Rule of Civil Procedure 12(b)(6), a court must 13 assume the truth of the pleading’s actual allegations and credit all reasonable inferences arising 14 from those allegations. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). The court “need not 15 accept as true conclusory allegations that are contradicted by documents referred to in the 16 [pleading].” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). 17 Instead, the plaintiff must point to factual allegations that “state a claim to relief that is plausible 18 on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible 19 “when the plaintiff pleads factual content that allows the court to draw the reasonable inference 20 that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662 , 678 21 (2009). Although “detailed factual allegations” are not required, the pleading must include “more 22 than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. A pleading “that offers [23] 4 The declaratory judgment claim is not relevant for subject matter jurisdiction purposes because, as explained below, 24 that claim is not a separate, substantive claim for relief. 1 ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not 2 do.’” Id. (quoting Twombly, 550 U.S. at 555 ). 3 C. Defendants’ Abuse of Process Counterclaim is Dismissed 4 Under Washington law, the elements of an abuse of process claim are “(1) the existence of 5 an ulterior purpose—to accomplish an object not within the proper scope of the process—and 6 (2) an act in the use of legal process not proper in the regular prosecution of the proceedings.” Sea7 Pac Co. v. United Food & Com. Workers Loc. Union 44, 699 P.2d 217, 220 (Wash. 1985) (quoting 8 Fite v. Lee, 521 P.2d 964, 968 (Wash. Ct. App. 1974)). “[T]he crucial inquiry is whether the 9 judicial system’s process, made available to insure the presence of the defendant or his property 10 in court, has been misused to achieve another, inappropriate end.” Gem Trading Co. v. Cudahy 11 Corp., 603 P.2d 828 , 832 n.2 (Wash. 1979). “[T]he mere institution of a legal proceeding even 12 with a malicious motive does not constitute an abuse of process”; “[t]hus, there must be an act 13 after filing suit using legal process empowered by that suit to accomplish an end not within the 14 purview of the suit.” Sea-Pac, 699 P.2d at 220–21 (citation modified). Accordingly 15 Some definite act or . . . objective not legitimate in the use of the process, is required; and there is no liability where the defendant has done nothing more than 16 carry out the process to its authorized conclusion, even though with bad intentions. The improper purpose usually takes the form of coercion to obtain a collateral 17 advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club. [18] Batten v. Abrams, 626 P.2d 984, 989 (Wash. Ct. App. 1981). [19] Eli Lilly argues that Defendants’ abuse of process counterclaim fails on both elements: it [20] does not plausibly allege that Eli Lilly used this action for an ulterior purpose, and does not [21] plausibly allege an improper act. Dkt. No. 36 at 3–4. The Court need not reach both, because there [22] are no plausible allegations of an improper act, which is dispositive here. Indeed, this is far from [23] a close call. See LCR 11(c). [24] 1 As noted above, merely filing a lawsuit—even with a malicious motive, and even if the 2 allegations are baseless or vexatious—is not sufficient to make out a claim for abuse of process. 3 Batten, 626 P.2d at 990 ; see also Fite, 521 P.2d at 968 . Instead, the “improper act” must be “an 4 act after filing suit using legal process empowered by that suit to accomplish an end not within the 5 purview of the suit.” Sea-Pac, 699 P.2d at 220–21 (citation modified). 6 The counterclaim alleges that the “improper act” here is Eli Lilly’s decision to use this 7 lawsuit to “improperly demand[] that Defendants enter formal admissions of wrongdoing that 8 would impair Defendants’ licenses and ability to practice medicine.” Dkt. No. 35 at 13.5 Assuming 9 without deciding that settlement demands can be an “improper act” (Eli Lilly argues that they 10 cannot be, see Dkt. No. 39 at 4), this settlement attempt was not improper. As Eli Lilly points out, 11 its complaint seeks a declaration that Defendants knowingly and willfully infringed on its 12 trademarks and engaged in false advertising practices. Dkt. No. 1 at 25. The complaint also asks 13 the Court to order Defendants “to engage in corrective advertising by informing consumers” that 14 they were never affiliated with Eli Lilly, that their compounded drugs are not the same as or generic 15 versions of Zepbound and Mounjaro, and that the compounded drugs have not been approved or 16 reviewed by the FDA or tested for safety, quality, or effectiveness in clinical trials. Id. at 26. 17 Against that backdrop, Eli Lilly’s settlement demand—that Defendants formally admit 18 wrongdoing—simply seeks some of the relief that it is asking for in the complaint. The type of [20] 5 Defendants’ response brief calls this “just one example” of an improper act that Eli Lilly engaged in, but it is really the only arguable example. Dkt. No. 37 at 12. The gist of the other “improper acts” is that Eli Lilly has engaged in 21 expansive discovery beyond the scope of what is relevant to its claims, which makes this lawsuit expensive and perhaps increases settlement pressure. Id. at 13–14; see also Dkt. Nos. 38-1, 38-2 (discovery requests). Oddly, 22 Defendants advance this argument despite the fact that the present motion is limited to the pleadings, and the allegedly improper discovery requests were submitted after pleadings were closed. Compare Dkt. No. 35 (May 23, 2025) with 23 Dkt. No. 38 at 1–2 (noting that discovery requests were served on June 3, 2025). Regardless, overbroad discovery is not an abuse of process; Defendants may move for a protective order if they believe Eli Lilly’s requests are not permissible under the Federal Rules. And the accusations of unsafe practices in the complaint and/or briefing are also 24 not an “improper act”—even if Defendants think those allegations are baseless. See Batten, 626 P.2d at 990 . 1 “improper act” that might give rise to an abuse of process claim is one that is “a form of 2 extortion”—using the process (i.e., the litigation) to achieve something that the party could not 3 seek as part of that process. See Loeffelholz v. Citizens for Leaders with Ethics & Accountability 4 Now (C.L.E.A.N.), 82 P.3d 1199, 1217 (Wash. Ct. App. 2004). By contrast, the demand that 5 Defendants formally admit wrongdoing cannot be an improper act because it sought the same end 6 goal that the litigation was “designed to accomplish.” Id. 7 “[A]buse of process claims are exceptionally rare,” and are generally limited to “unlawful, 8 quid pro quo situations.” Maytown Sand & Gravel, LLC v. Thurston Cnty., 423 P.3d 223 , 248 9 (Wash. 2018) (en banc), as amended (Oct. 1, 2018), and abrogated on other grounds by Yim v. 10 City of Seattle, 451 P.3d 694 (Wash. 2019). This is not one of those rare situations, and Defendants’ 11 abuse of process counterclaim is therefore dismissed. 12 D. Defendants’ Declaratory Judgment Counterclaim is Dismissed for Lack of an Underlying Cause of Action [13] “[T]he Declaratory Judgment Act does not provide an affirmative cause of action where [14] none otherwise exists.” City of Reno v. Netflix, Inc., 52 F.4th 874 , 878 (9th Cir. 2022); see also [15] Longview Tugboat Co. v. Jameson, 218 F.2d 547, 548 (9th Cir. 1955) (“The Declaratory Judgment [16] Act is limited in its operation to those cases which would be within the jurisdiction of the federal [17] courts if affirmative relief were being sought.” (citation modified)). Here, Defendants’ declaratory [18] judgment claim does not rest on an affirmative cause of action. The Court thus dismisses the claim [19] for lack of an underlying cause of action.6 [21] 6 Even if the declaratory judgment counterclaim were not dismissed for this reason, the Court would strike it under 22 Rule 12(f) because it merely repackages Defendants’ affirmative defenses, making it redundant. Lincoln Nat. Corp. v. Steadfast Ins. Co., No. 06-CV-00058, 2006 WL 1660591 , at *2 (N.D. Ind. June 9, 2006) (“repetitious and 23 unnecessary pleadings, such as a counterclaim that merely restates an affirmative defense, or which seeks the opposite effect of the complaint, should be stricken regardless of whether prejudice has been shown.”); Righthaven LLC v. Choudhry, No. 2:10-CV-2155 JCM PAL, 2011 WL 1743839 , at *5 (D. Nev. May 3, 2011) (“courts have stricken 24 counterclaims under Rule 12(f), if those claims raise the same facts or legal issues as those asserted in the pleadings”). 1 III. CONCLUSION 2 For the reasons stated above, the Court GRANTS Eli Lilly’s motion to dismiss. Dkt. No. 3 36. The Court further finds that leave to amend these claims based on Eli Lilly’s actions as reflected 4 in the current record before the Court would be futile.7 5 Dated this 23rd day of July, 2025. 6 A 7 Lauren King United States District Judge [23] 7 The Court notes that Federal Rule of Civil Procedure 15(d) permits supplemental pleadings based on events that 24 occur after the relevant pleading is filed.