Abbott Labs. v. Superior Court of Orange Cnty.

Decision Date25 June 2020
Docket NumberS249895
CourtCalifornia Supreme Court
Parties ABBOTT LABORATORIES et al., Petitioners, v. The SUPERIOR COURT OF ORANGE COUNTY, Respondent; The People ex rel. Tony Rackauckas, as District Attorney, etc., Real Party in Interest.

Kirkland & Ellis, Michael John Shipley, Los Angeles, Jay P. Lefkowitz, Adam T. Humann and Yosef Mahmood, Los Angeles, for Petitioners Teva Pharmaceuticals USA, Inc., Duramed Pharmaceuticals Sales Corp., Inc., and Barr Pharmaceuticals, Inc.

Munger, Tolles & Olson, Jeffrey I. Weinberger, Stuart N. Senator, Los Angeles, and Blanca F. Young, San Francisco, for Petitioners AbbVie Inc. and Abbott Laboratories.

Horvitz & Levy, Jeremy Brooks Rosen, Burbank, Stanley H. Chen, Los Angeles; Janet Y. Galeria ; and Heather Lynn Wallace, Sacramento, for Chamber of Commerce of the United States of America and California Chamber of Commerce as Amici Curiae on behalf of Petitioners.

No appearance for Respondent.

Tony Rackauckas and Todd Spitzer, District Attorneys, Joseph D'Agostino, Assistant District Attorney, Kelly A. Ernby, Deputy District Attorney; Robinson Calcagnie, Mark P. Robinson, Jr., and Kevin F. Calcagnie, Newport Beach, for Real Party in Interest.

Dennis J. Herrera, City Attorney (San Francisco), Yvonne R. Meré and Owen J. Clements, Deputy City Attorneys; Michael Feuer, City Attorney (Los Angeles), Michael M. Walsh and Monica D. Castillo, Deputy City Attorneys; Mara W. Elliot, City Attorney (San Diego), Mark D. Ankcorn, and Kathryn Turner, Chief Deputy City Attorney, Kristine Lorenz, Deputy City Attorney; Richard Doyle, City Attorney (San Jose), Nora Frimann, Assistant City Attorney; James R. Williams, County Counsel (Santa Clara), Greta S. Hansen and Danny Chou, Chief Assistant County Counsel, Laura S. Trice, Deputy County Counsel; Barbara J. Parker, City Attorney (Oakland), Maria S. Bee, Chief Assistant City Attorney, Erin B. Bernstein, Deputy City Attorney; Alison E. Leary and Jennifer B. Henning for City Attorneys, League of California Cities and California State Association of Counties as Amici Curiae on behalf of Real Party in Interest.

Law Office of Valerie T. McGinty and Valerie T. McGinty for Consumer Attorneys of California as Amicus Curiae on behalf of Real Party in Interest.

Xavier Becerra, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele R. Van Gelderen, Daniel A. Olivas, Hunter Landerholm, and David A. Jones, Deputy Attorneys General, for Attorney General as Amicus Curiae.

Mark Louis Zahner, Sacramento; and Thomas A. Papageorge, Los Angeles, for the California District Attorneys Association as Amicus Curiae.

Jeffrey S. Rosell, District Attorney (Santa Cruz), Douglas B. Allen, Assistant District Attorney, for Santa Cruz County District Attorney as Amicus Curiae.

Opinion of the Court by Liu, J.

The Orange County District Attorney (District Attorney) brought this action against several pharmaceutical companies, alleging that the companies had intentionally delayed the sale of a generic version of a popular pharmaceutical drug to maximize their profits at the expense of consumers throughout California. The companies moved to strike references to "California" in the complaint, arguing that the District Attorney has no jurisdiction to enforce California's consumer protection laws outside the geographic boundaries of Orange County. After the trial court denied the motion to strike, the companies obtained an order from the Court of Appeal directing the trial court to grant the motion.

The People, as real party in interest and represented by the District Attorney, have asked this court to determine whether the District Attorney's authority to enforce California's consumer protection laws under the auspices of the unfair competition law (UCL) ( Bus. & Prof. Code, § 17200 et seq. ) is limited to the county's borders. We hold it is not: The UCL does not preclude a district attorney, in a properly pleaded case, from including allegations of violations occurring outside as well as within the borders of his or her county.

I.

The District Attorney initiated this action by filing a complaint in the name of the People of the State of California against Abbott Laboratories, AbbVie Inc., Teva Pharmaceuticals USA, Inc.; Barr Pharmaceuticals, Inc; Duramed Pharmaceuticals Inc.; and Duramed Pharmaceutical Sales Corp. (collectively, Abbott). The complaint alleged that Abbott violated the UCL by entering into agreements to delay the market debut of generic versions of Niaspan, a prescription drug used to treat high cholesterol. As a result, the District Attorney alleges, users of Niaspan, their insurers, public health care providers, and other government entities paid substantially higher prices for Niaspan than they would have if the generic version had been available without improper delay. The District Attorney sought an injunction prohibiting Abbott from further violating the UCL and an order for restitution and civil penalties, including treble penalties for violations that injured senior citizens or disabled persons. ( Bus. & Prof. Code, §§ 17203, 17206, 17206.1 ; Civ. Code, § 3345 ; all undesignated statutory references are to the Business and Professions Code.)

Abbott, in turn, filed a motion to strike "claims for restitution and civil penalties to the extent that those are not limited to Orange County." Noting that the District Attorney's complaint makes no specific claim to penalties or restitution extending beyond the bounds of the county, Abbott asked the trial court to strike 16 references to "California" from the complaint on the ground that a district attorney's enforcement authority under the UCL is limited to the geographic boundaries of his or her county. According to Abbott, the motion was intended to "focus" the case, discovery, and scope of any potential settlement.

The trial court denied the motion to strike, finding "premature" Abbott's concerns about the scope of discovery and financial exposure as well as any enforcement concerns that might arise if the Attorney General were excluded from a negotiated statewide settlement. The court explained: "If there's a settlement, I can guarantee you the Attorney General ... is going to know about [it]. So, we will deal with that if and when. ... There are going to be more players in any kind of settlement unless there's a carve-out." The court did not refer specifically to the geographic scope of the District Attorney's authority during the hearing or in its minute order.

Abbott sought review by means of a writ petition. A divided Court of Appeal overruled the District Attorney's demurrer and granted relief to Abbott, directing the trial court to vacate its order denying the motion to strike and to enter a new order striking the allegations under which the District Attorney sought statewide monetary relief. ( Abbott Laboratories v. Superior Court (2018) 24 Cal.App.5th 1, 31, 233 Cal.Rptr.3d 730 ( Abbott ).)

The Court of Appeal observed that "though district attorneys have plenary authority to pursue actions in the criminal arena in the State's name [citation], their ‘authority is territorially limited’ to the confines of their county." ( Abbott , supra , 24 Cal.App.5th 1, 19, 233 Cal.Rptr.3d 730, quoting Pitts v. County of Kern (1998) 17 Cal.4th 340, 361, 70 Cal.Rptr.2d 823, 949 P.2d 920 ( Pitts ).) By contrast, "with respect to civil actions, a district attorney has no plenary power." ( Abbott , at p. 19, 233 Cal.Rptr.3d 730.) "Rather, it is settled that a ‘district attorney has no authority to prosecute civil actions absent specific legislative authorization.’ " (Id. at p. 20, 233 Cal.Rptr.3d 730, quoting People v. Superior Court (Humberto S. ) (2008) 43 Cal.4th 737, 753, 76 Cal.Rptr.3d 276, 182 P.3d 600 ( Humberto S. ).) As to whether the UCL grants such authority, the court looked to People v. Hy-Lond Enterprises, Inc. (1979) 93 Cal.App.3d 734, 155 Cal.Rptr. 880 ( Hy-Lond ), which held that a district attorney has no authority to limit the powers of the Attorney General or other public agencies under the guise of UCL enforcement. ( Hy-Lond , at pp. 752–753, 155 Cal.Rptr. 880.) The Court of Appeal here explained it had "no difficulty applying Hy-Lond ’s principles to bar a district attorney's unilateral effort to seek restitution and civil penalties for UCL violations occurring outside his or her own county jurisdiction." ( Abbott , at p. 25, 233 Cal.Rptr.3d 730.)

Writing in dissent, Justice Dato explained that Abbott had failed to "offer anything approaching an ‘extraordinary reason’ to justify this court's decision to intervene at the pleading stage" in order to address "a motion to strike that does not challenge the plaintiff's ability to plead a valid claim, but merely seeks to edit the language of the complaint in a manner that better suits the defendants’ tactical purposes." ( Abbott, supra , 24 Cal.App.5th at p. 34, 233 Cal.Rptr.3d 730 (dis. opn. of Dato, J.).) Even if Abbott had met this threshold showing, Justice Dato continued, "the majority opinion reaches the wrong result." ( Id. at p. 37, 233 Cal.Rptr.3d 730 (dis. opn. of Dato, J.).) According to Justice Dato, it is the court, not the plaintiff, that awards restitution, and "there is nothing inherently problematic about the court awarding restitution to statewide victims of defendants’ unlawful business practice." ( Ibid. ) "[E]ven absent a request by the District Attorney the court is empowered by section 17203 to award restitution ‘to any person ’ adversely affected by the defendants unlawful conduct. ... This includes, potentially, residents of counties other than Orange." ( Ibid. , quoting § 17203, italics added by Dato, J.) Similarly, Justice Dato explained, the court could impose civil penalties based on any violation proven in the case, within or outside of Orange County: "The penalties are the punishment imposed for each violation proved in a law enforcement action brought on behalf of the People of the ...

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