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Case: 1:11-cv-09131 Document #: 1 Filed: 12/23/11 Page 1 of 17 PageID #:1

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

BAXTER INTERNATIONAL INC., Plaintiff, vs. AXA VERSICHERUNG AG, Defendant. _____________________________________

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Case No. 11-cv-9131 Honorable Complaint for (1) Declaratory Relief (2) Breach of Contract Jury Trial Demanded

Plaintiff Baxter International Inc. (Baxter), in its complaint against Defendant AXA Versicherung AG (AXA) for declaratory relief and breach of contract, hereby alleges as follows: PARTIES, JURISDICTION AND VENUE 1. Baxter is the parent company of an Illinois-based global group of healthcare

companies. Baxter is incorporated in Delaware and has its principal place of business in Deerfield, Illinois. As alleged in more detail below, in 1996 Baxter acquired a European-based group of healthcare companies known as the Immuno Group. 2. AXA is the lead insurer on an international insurance policy (the AXA Policy)

which identifies Baxter as a named insured and which promises to provide coverage to Baxter for certain liabilities arising out of the operations of the Immuno Group prior to that Groups acquisition by Baxter. Baxter is informed and believes, and on that basis alleges, that AXA is domiciled in Cologne, Germany.

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3.

This is an action to confirm coverage under the AXA Policy for millions of

dollars in losses incurred by Baxter in defending and resolving certain product liability litigation venued primarily in the Northern District of Illinois, before the Hon. John F. Grady, as part of MDL No. 986 (the Second Generation Litigation). The claimants in the Second Generation Litigation allege inter alia that they were infected with the Hepatitis C Virus (HCV) and, in some cases, the Human Immunodeficiency Virus (HIV), through the use of contaminated blood products known as factor concentrates distributed by the Immuno Group prior to Immunos acquisition by Baxter. 4. Baxter seeks coverage under the AXA Policy only for losses relating to HCV

infections, and only for such losses allegedly caused by the Immuno Groups products. A dispute has arisen between Baxter and AXA over coverage for these HCV losses and, specifically, with respect to whether Baxter faced potential liability for the Immuno-related injuries alleged in the Second Generation Litigation and whether those alleged injuries became manifest after the inception of the AXA Policy. As a result of this dispute, AXA has withheld benefits owed to Baxter under the AXA Policy, thereby breaching its obligations and causing damage to Baxter. 5. AXA has purposefully availed itself of this forum in a manner directly related to

the issues in this coverage litigation by, among other activities herein alleged, expressly agreeing to provide liability coverage to a company based in Illinois for, among other risks, litigation filed in this State. Alternatively, the business activities alleged herein demonstrate that AXAs activities in this State, and in the United States as a whole, are of such a systematic and continuous nature that AXA is subject to this Courts general jurisdiction, as suggested by AXA previously having stipulated in other, unrelated litigation to having continuous and

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systematic contacts with another state (New Jersey). This Court, therefore, may exercise personal jurisdiction over AXA. 6. The amount in controversy in this litigation exceeds $75,000. Because Baxter is

a citizen of Illinois and AXA is a citizen or subject of a foreign state, this Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. 1332(a). 7. As detailed below, a substantial number of the events or omissions giving rise to

Baxters claim against AXA took place (at least in part) within the Northern District of Illinois, and the dispute between the parties turns on American legal issues that could best be understood and decided by this Court, including the nature of the liability that Baxter faced in the Second Generation Litigation in this Court. Alternatively, there is no other district in which this action could be brought, and AXA is subject to the jurisdiction of this Court. Venue in this District is, therefore, appropriate under 28 USC 1391. AXAS OTHER CONTACTS WITH THIS FORUM 8. Baxter is informed and believes, and on that basis alleges, that AXA is the

corporate successor of a company known as Colonia Versicherung AG (Cologne) (Colonia Germany). In 1975, Colonia Germany opened a branch office in the United States. Colonia Germany was licensed to issue insurance policies in the United States as an alien insurer from 1975 until 1991, and it did so under the name Colonia Insurance Company. In 1990, Colonia Germany domesticated its U.S. branch as a New York corporation wholly-owned by Colonia Germanys parent company, Colonia Konzern AG (Cologne). The new corporation was likewise known as Colonia Insurance Company (Colonia U.S.). Beginning in 1991, policies issued in the United States under the name Colonia Insurance Company were issued by Colonia U.S.

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9.

The AXA Policy was issued to the Immuno Group in 1990 by Colonia Germany

and had an initial term of ten years. After Baxter agreed to acquire the Immuno Group in 1996, Colonia Germany agreed to add Baxter and its subsidiaries as named insureds on the Policy. Baxter is informed and believes, and on that basis alleges, that in or around 1997, Colonia Germany and Colonia U.S. were acquired by the AXA Group, a global group of financial services companies based in France. Following that acquisition, Colonia Germany was initially known as AXA Colonia Versicherung AG and later by its current name. Colonia U.S., in turn, eventually became known as AXA Insurance Company. Thereafter, AXA continued to accept millions of dollars in insurance premiums from Baxter to provide and extend the coverage of the AXA Policy, the term of which remains in force today. 10. In addition to its continued insurance operations in Illinois and the United

States, more generally, AXA is and has been a frequent litigant in courts throughout the country. For example, Baxter is informed and believes that AXA is or has been a litigant in at least 20 United States cases (under the names of AXA Versicherung AG, AXA Colonia Versicherung AG, and Colonia Versicherung AG). AXA has been a plaintiff in the majority of these cases, demonstrating its willingness to avail itself of the benefits of courts in the United States. 11. Baxter is further informed and believes that the number of United States cases in

which AXA has been a party is likely much higher than the 20 indicated above, as Colonia Insurance Company (the name under which AXA appears to have issued policies in the United States until 1991) is identified as a party in hundreds of lawsuits in the United States. THE SECOND GENERATION LITIGATION AND SETTLEMENT 12. For more than two decades, Baxter has been managing the repercussions of the

tragic but inadvertent spread of infectious viruses through the worldwide human blood supply -4-

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and through blood-derived products. A significant portion of Baxters efforts in this regard has been focused on infections with HIV and HCV within the international hemophiliac community. As these previously-unknown viruses spread through the blood supply in the 1970s and 1980s, individuals with hemophilia became infected through their use of factor concentrates used to treat hemophilia. 13. As a result, since the mid-1980s, when it was first discovered that hemophiliacs

had contracted HIV from such products, Baxter has been defending lawsuits seeking damages allegedly caused by its factor concentrates. Baxter has settled a large number of individual lawsuits over the years and participated in a class action settlement approved in 1997 and administered by Judge Grady involving HIV-infected claimants in the United States. That class action was part of an initial wave of similar lawsuits and claims brought around the world and collectively referred to as the First Generation of factor concentrate litigation. 14. In June of 2003, what is now known as the Second Generation of factor

concentrate litigation began. That litigation started when a new putative class action was filed against Baxter and other defendants in the United States District Court for the Northern District of California on behalf of persons with hemophilia who either: (1) lived outside of the United States and allegedly became infected with HIV and/or HCV as a result of their use of factor concentrates, or (2) lived in the United States and became infected with HCV without any coinfection with HIV. The action, captioned Gullone, et al. v. Bayer, et al., was the first of a new wave of 141 separate lawsuits, including three class actions, that were ultimately filed in state and federal courts throughout the United States and included more than 3,000 claimants from more than 25 countries around the world alleging injuries from HIV and/or HCV infections caused by factor concentrates. This new wave of lawsuits was transferred to this Court in 2004

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to become part of the Multi-District Litigation proceeding administered by Judge Grady. The Second Generation MDL proceeding remains pending before Judge Grady today. 15. Baxters alleged liability in the Second Generation Litigation arises from two

distinct product groups: (1) factor concentrates manufactured and distributed by Baxters own Hyland Therapeutics Division, and (2) factor concentrates manufactured and distributed by the Immuno Group. Both Hyland and Immuno products were distributed in markets around the world, including most of the countries in which the claimants in the Second Generation Litigation resided. With respect to Immuno Group products, the complaints filed by Second Generation plaintiffs generally allege that Baxter is legally responsible for the plaintiffs injuries by virtue of Baxters acquisition of the Immuno Group. 16. In this action, Baxter seeks to confirm coverage under the AXA Policy solely for

losses Baxter has incurred in the Second Generation Litigation in connection with HCV infections allegedly caused by Immuno products. Baxter does not seek coverage in this action for any HIV losses or for losses attributable to Baxters own Hyland operations. 17. Defending against Immuno-related claims in the Second Generation Litigation

has thus far cost Baxter approximately $12 million, and a nearly complete settlement of those claims has and will ultimately cost Baxter millions more. These extensive losses, in turn, resulted from years of contentious litigation in this Court. 18. Although the defendants sought leave to file motions to dismiss at the inception

of the Second Generation Litigation, in a March 17, 2004 Case Management Order, Judge Grady stayed the briefing on those motions and ordered the completion of certain discovery relevant to the motions and to class certification issues. As a result, the Second Generation plaintiffs have conducted substantial discovery of Baxter and others in this Court.

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19.

To begin with, Judge Grady ordered that the documents produced to the

plaintiffs in the First Generation MDL proceedings be transferred to plaintiffs counsel in the Second Generation proceedings, and Judge Grady allowed the Second Generation plaintiffs to pursue additional discovery regarding (a) the sale, promotion and shipment of allegedly infected products to overseas customers; (b) the alleged failure to prevent HCV contamination through detergent treatment; (c) any donor tracing issues not fully covered by discovery during the First Generation litigation; and (d) any insurance information not previously produced. 20. Baxter and the other Second Generation defendants eventually produced

millions of pages of documents in response to discovery requests that plaintiffs served under the Courts order. Plaintiffs also deposed another 30 present and former defendant employees, third-party witnesses and experts in the Second Generation Litigation. 21. The vast majority of Second Generation Litigation documents were created in

the English language and are stored at the offices of Baxters counsel in the United States. Depositions and other formal discovery have taken place in English, with the documents related to such discovery again stored in the United States. 22. Judge Grady also ordered each Second Generation plaintiff to complete a

Preliminary Patient Profile Form (PPPF) to be signed under penalty of perjury. The PPPF indicates the infected persons date of birth, that persons date of death (if applicable), the factor concentrates used by the infected person, the dates (years) of such use, the infection(s) (HIV and/or HCV) allegedly suffered as a result of such use, and the date when the claimant tested positive for HIV infection (if applicable). While many claimants completed PPPFs in their respective native languages, any non-English submissions have since been translated into English and are stored in the United States offices of Baxters counsel.

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23.

While core discovery was proceeding in the MDL, the defendants defeated the

plaintiffs motion for class certification (plaintiffs declined to appeal the decision at that time) and obtained the dismissal on forum non conveniens grounds of the claims of residents of the U.K., Argentina and Israel. Certain other FNC motions remain pending. In the meantime, to avoid further costs in this protracted litigation, the parties attempted to negotiate a global settlement. 24. In or around 2009, the defendants in the Second Generation Litigation reached

agreement with plaintiffs counsel on a global settlement that would encompass at least 95% of the Second Generation claims around the world. The settlement was presented to Judge Grady, who on June 15, 2009 entered Case Management Order no. 12 staying the MDL proceedings so that the settlement could be effectuated. Among other things, the Case Management Order imposes strict discovery and production burdens on any plaintiffs who choose not to participate in the settlement and whose claims have not otherwise been dismissed, and provides for summary judgment or dismissal for failure to comply with that order. 25. Judge Grady has retained jurisdiction over the Second Generation MDL during

the settlement implementation period, has been regularly advised of the settlement status, and is presently presiding over several motions relating to the completion of the settlement and the dismissal of claims. The parties have further agreed to the continued jurisdiction of the United States District Court for the Northern District of Illinois for any matter relating to the settlement.

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THE AXA POLICY 26. The AXA Policy was initially issued in the German language on

March 1, 1990 to Immuno Management AG (Switzerland) by a consortium of insurers led by what is now AXA and provided limits of liability of DEM 153 million (approximately USD $102 million) for claims filed within an initial ten-year term beginning on March 1, 1990. Also insured under the Policy as originally issued were Immuno subsidiaries operating in the United States, Argentina, Brazil, Italy, England, and Venezuela, and Immuno production entities in Austria, among other Immuno companies worldwide. 27. Attached hereto as Exhibit A is an English translation of the AXA Policy which,

Baxter is informed, is accurate and complete. 28. As it relates to Products Risk, and subject to other extensions and limitations of

coverage, the AXA Policy provides worldwide coverage for liability at law for personal injuries . . . arising from products manufactured or delivered or services (e.g., work, advice, etc.) rendered by [Immuno]. . . . during the term of the Policy. (AXA Policy, Part III, Section 1). However, the Policy specified that health-related injuries (e.g., infectious diseases) would be deemed to have occurred when the injured person first consulted a physician with respect to symptoms that then or subsequently turn out to be symptoms of the health injury. (AXA Policy, Part III, Section 5). 29. When Baxter entered into an agreement to acquire the Immuno Group of

companies in 1996, Baxter and AXA agreed to amend the AXA Policy to ensure that Baxter and its subsidiaries would be covered for product liability claims arising from historical Immuno Group products. In Endorsement 1 to the AXA Policy, AXA agreed with Baxter that Baxter International and/or its subsidiaries or branches are co-insured in the event that any claims are brought against them by a third party for personal injury . . . caused by the -9-

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Policyholder, Immuno Management AG, or the [Immuno-related] companies co-insured under this Policy. Endorsement 1 expressly provided coverage to the Baxter Group for liabilities arising out of products distributed by the Immuno Group prior to the Baxter acquisition by specifying that product liability coverage applied to products originating and quality control released by Immuno before December 19, 1996. (AXA Policy, Endorsement 1 at 2). 30. In order to further make clear that Baxter had a right to coverage for historical

Immuno Group products like those at issue in the Second Generation Litigation, Endorsement 1 goes on to clearly exclude Baxters right to coverage for other types of claims. The date specified in paragraph 2 of Endorsement 1 excludes coverage for products released by the Immuno Group after the Groups acquisition by Baxter. Endorsement 1 likewise terminates any right to coverage for property or environmental risks at the former Immuno Group premises ( 1), and cancels coverage for any liabilities arising out of clinical trials conducted after the acquisition(4). 31. Despite the elimination of these coveragesand as a direct reflection of the

importance of coverage for pre-acquisition Immuno Group productsBaxter paid approximately $4.4 million (DEM 6.5 million) to have the Baxter Group covered under the AXA Policy for product liability claims like those at issue in the Second Generation Litigation and to extend the term of the Policy until 2001. (AXA Policy, Endorsement 1 at 5). 32. Moreover, Baxter continued to pay AXA millions of additional dollars to secure

its right to coverage for claims arising from Immuno Group products. As reflected in Endorsement No. 3 to the policy, on or about September 13, 1999, Baxter paid an additional $3.1 million (DEM 4.7 million) to extend the term of the AXA Policy through December 19, 2011.

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33.

The AXA Policy provides that certain disputes under the Policy may be resolved

in Cologne, Germany. (AXA Policy, Part VII, Section 11). However, that provision is merely permissive, relates only to the original signatories of the Policy (i.e., Colonia Germany and Immuno Management AG (Switzerland)), and does not require that Baxter bring this action in Germany. 34. Likewise, while the AXA Policy provides for the application of German law

(AXA Policy, Part VII, Section 11), that provision does not limit coverage under the Policy only to those liabilities recognized under German law. Instead, the AXA Policy provides coverage for the Policys insureds with respect to liabilities arising in legal jurisdictions around the world. The controversy in this case focuses on the nature of the liabilities facing Baxter under U.S. law. Accordingly, Baxter hereby presents these issues to the U.S. court in which the Second Generation Litigation has been (and continues to be) pending. THE PARTIES DISPUTE 35. In seeking coverage for the Second Generation Immuno-related claims under the

AXA Policy, Baxter has pointed out in numerous prior communications with AXA, and herein alleges, that the subject claims are precisely the types of claims that AXA agreed to insure when it modified the Policy in 1996, i.e., claims brought against Baxter for injuries allegedly caused by products released for distribution by the former Immuno Group and which became manifest for the first time during the term of the Policy. Baxter further explained in the previous communications, and herein alleges, that while the Second Generation claimants appear to allege infections with HCV occurring between the late 1970s and 1990, the vast majority of the HCV-infected persons were asymptomatic for many years following their alleged infections and sought no treatment for their disease until well after 1990, nor was there any test available to diagnose an HCV infection in the absence of such symptoms prior to 1990. -11-

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Accordingly, Baxter has asserted, and hereby alleges, that the Second Generation claims fell squarely within the scope of the AXA Policys coverage. 36. At the time Baxter provided AXA with notice of the Gullone case, however,

Baxter also provided notice under certain occurrence-based insurance policies issued to the Immuno Group by a different Colonia company, Colonia Versicherung AG, Vienna (Colonia Austria), which policies are now the responsibility of an Austrian insurance company named UNIQA Sachversicherung AG (UNIQA). The latter policies (hereinafter, the UNIQA Policies) collectively provided the Immuno Group companies with coverage for injuries that occurred between 1976 through 1990 regardless of when those injuries became manifest. 37. When Baxter provided AXA with notice of the Gullone case under both the

AXA and UNIQA insurance programs in 2003, AXA initially took the position that the AXA Policy need not provide coverage for the Second Generation Litigation if coverage is available under the UNIQA Policies. At the same time, however, AXA undertook to act as the claims representative for UNIQA in connection with the latters policies, and in its role as UNIQAs claims representative, took the position that neither of the Baxter entities sued in the Second Generation Litigation (Baxter International Inc. and Baxter Healthcare Corporation) were insureds (or direct corporate successors of insureds) under the UNIQA Policies. These two positions, of course, were entirely inconsistent, as Baxter pointed out to UNIQA on numerous occasions. UNIQA ultimately denied coverage under its policies in 2009. 38. AXA first articulated these inconsistent positions in or around July 2003, when

representatives of AXA and Baxter met to discuss a variety of claims-related issues (only some of which related to the Second Generation Litigation). While Baxter and AXA regularly discussed these issues over the following five years (i.e., between 2003 and 2008), both during

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in-person and telephonic meetings and via written correspondence, AXA continued to maintain during this time period that any coverage obligations under the AXA Policy were secondary or excess to coverage under the UNIQA Policies. 39. Notwithstanding AXAs refusals to acknowledge coverage under its policy for

the Second Generation Litigation, Baxter also provided AXA with information concerning settlement discussions with plaintiffs counsel in that litigation and sought input from AXA with respect to the terms of such a settlement. For example, by letter dated April 26, 2007 Baxter provided AXA with a detailed report of the Second Generation Litigation and the terms of the settlement then being discussed. Baxter and AXA thereafter exchanged numerous letters discussing the Second Generation Litigation and its possible settlement, and AXA requested and received copies of the claimants PPPFs after signing an appropriate agreement to preserve the privacy of the claimants health information. Despite receiving a tremendous amount of information, however, AXA thereafter asserted that it did not have sufficient information to assess its coverage obligations under either the UNIQA Policies or AXA Policy. 40. As the settlement of the Second Generation Litigation proceeded and a payment

demand drew nearer, UNIQA assumed control of the claims handling for the UNIQA Policies and, in May 2009, formally denied coverage under those policies. Following the UNIQA declination, Baxter reasserted its right to coverage under the AXA Policy. While AXA acknowledged the claim, AXA has never provided a substantive response, either by denying or accepting coverage, ostensibly in light of AXAs uncertainty over whether Baxter faced potential liability for the Immuno-related injuries alleged in the Second Generation Litigation. In addition, AXA has also appeared to question the timing of the underlying injuries, i.e., the

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determination of when the underlying claimants were first treated for symptoms of their alleged disease or were first diagnosed with HCV. 41. At the same time, AXA has never denied the existence or validity of the AXA

Policy, nor has it disputed Baxters standing as a named insured under that policy. Likewise, AXA has never disputed Baxters contention that the AXA Policy affords coverage in connection with personal injury liability arising out of HCV infections allegedly caused by Immuno products (such as factor concentrates) distributed prior to 1996. To the contrary, AXA acknowledged in correspondence pre-dating the Gullone suit that coverage for at least defense costs would exist for suits involving allegations of pre-1990 HCV infections caused by Immuno products. Nevertheless, AXA has refused to accept any responsibility for the defense or resolution of the Second Generation Litigation. 42. AXA was obligated by its Policy to acknowledge promptly its obligation to

defend and potentially indemnify Baxter from covered loss incurred in the Second Generation Litigation. Having refused to participate in Baxters defense of the Second Generation Litigation, and having otherwise refused to acknowledge any obligation to provide coverage to Baxter, AXA has breached its contractual obligations to Baxter. 43. Baxter provided AXA with timely notice of the Second Generation Litigation,

cooperated with AXA in all respects, paid all premiums owed and due, and otherwise fully or sufficiently complied with all conditions necessary to give rise to AXAs obligation to perform as required under the AXA Policy. 44. As a result of AXAs breach, Baxter has been forced to fund its own defense of

the Second Generation Litigation, and Baxter has incurred and will continue to incur additional losses by virtue of settlements paid to HCV claimants in connection with Immuno product use.

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FIRST CLAIM FOR RELIEF (Declaratory Relief) 45. Baxter hereby refers to and incorporates the preceding paragraphs as though

fully set forth herein. 46. An actual and justiciable controversy within the meaning of 28 U.S.C. 2201

exists between Baxter and AXA concerning the nature and extent of AXAs coverage obligations under the AXA Policy in connection with the Second Generation Litigation. 47. Baxter is entitled to a declaration from this Court that AXA has an obligation

under the AXA Policy to provide Baxter with insurance coverage for defense and settlement costs incurred by Baxter in the Second Generation Litigation in connection with Immuno products. SECOND CLAIM FOR RELIEF (Breach of Contract) 48. Baxter hereby refers to and incorporates the preceding paragraphs as though

fully set forth herein. 49. and AXA. 50. Baxter has fully or sufficiently performed all duties under the AXA Policy, The AXA Policy constitutes a valid and enforceable contract between Baxter

thereby giving rise to AXAs obligation to perform. 51. AXA has failed and refused to perform its obligations, thereby breaching the

terms of the AXA Policy. 52. As a result of said breaches, Baxter has been forced to fund its own defense of

the Second Generation Litigation, incurring almost $12 million in defense costs fairly attributable to Immuno products and covered under the AXA Policy. Baxter has also incurred -15-

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and will continue to incur other losses covered by the AXA Policy, including millions of dollars in settlements paid or to be paid to the HCV claimants in the Second Generation Litigation in connection with Immuno product use.

WHEREFORE, Baxter hereby prays that:

FIRST CLAIM FOR RELIEF (Declaratory Relief) 1. Judgment be entered against AXA declaring that it has an obligation under the

AXA Policy to provide Baxter with insurance coverage for losses incurred in the Second Generation Litigation; 2. 3. proper. Baxter be awarded costs of its suit herein; and Baxter be awarded such other and further relief the Court may find just and

SECOND CLAIM FOR RELIEF (Breach of Contract) 1. Judgment be entered against AXA for breach of contract in an amount to be

determined at trial; 2. 3. proper. Baxter be awarded its costs of its suit herein; and Baxter be awarded such other and further relief the Court may find just and

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JURY DEMAND 1. Baxter demands trial by jury on all claims asserted in this Complaint.

Dated: December 23, 2011

Respectfully submitted, /s G.David Mathues Nader R. Boulos, P.C. (IL Bar No. 83306) G. David Mathues (IL Bar No. 6293314) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, IL 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Carl W. Shapiro (pro hac to be filed) Teresa Z. Youhanaie (pro hac to be filed) Jeffrey A. Kiburtz (pro hac to be filed) SHAPIRO, RODARTE & FORMAN LLP 233 Wilshire Boulevard, Suite 700 Santa Monica, California 90401 Telephone: (310) 319-5400 Facsimile: (310) 319-5401 Attorneys for Baxter International Inc.

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