Abbott Labs. v. Superior Court of Orange Cnty.

• Decision Date: 31 May 2018
• Docket Number: D072577
• Citation: 233 Cal.Rptr.3d 730,24 Cal. App. 5th 1
• Court: California Court of Appeals
• 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.

24 Cal.App.5th 1

233 Cal.Rptr.3d 730

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.

D072577

Court of Appeal, Fourth District, Division 1, California.

Filed May 31, 2018

As Modified on Denial of Rehearing June 27, 2018

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

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

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

Tony Rackauckas, Orange County District Attorney, Joseph D'Agostino, Assistant District Attorney, Kelly A. Ernby, Deputy District Attorney; Robinson Calcagnie Inc. and Mark P. Robinson, Jr., Kevin F. Calcagnie, Newport Beach, on behalf of Real Party in Interest.

Dennis J. Herrera, City Attorney, Yvonne R. Mere, Owen J. Clements, Deputy City Attorneys, for the City and County of San Francisco; Michael Feuer, City Attorney, Monica D. Castillo, Deputy City Attorney, for the City of Los Angeles; Mara W. Elliot, City Attorney, Kathryn Turner, Kristine Lorenz, Deputy City Attorneys for the City of San Diego; Richard Doyle, City Attorney, Nora Frimann, Assistant City Attorney for the City of San Jose; James R. Williams, County Counsel, Greta S. Hansen, Danny Chou, Assistants County Counsel, Laura S. Trice, Deputy County Counsel, for Santa Clara County; Jennifer Henning, for 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 and David A. Jones, Deputy Attorneys General, for California Attorney General as Amicus Curiae.

Mark Louis Zahner, Sacramento, of the California District Attorneys Association and Thomas Atlee Papageorge, Los Angeles, of the San Diego District Attorney's Office, for the California District Attorneys Association as Amici Curiae.

O'ROURKE, J.

The Orange County District Attorney(the District Attorney), representing "the People of the State of California," sued petitioners Abbott Laboratories, AbbVie Inc., Teva Pharmaceuticals USA, Inc., Barr Pharmaceuticals, Inc., Duramed Pharmaceuticals, Inc. and Duramed Pharmaceuticals Sales Corp., alleging generally that petitioners engaged in a scheme to keep generic versions of a prescription drug off the market in violation of California's Unfair Competition Law (UCL;Bus. & Prof. Code, ¹ § 17200 et seq. ).The District Attorney sought an injunction as well as civil penalties and restitution.Petitioners unsuccessfully moved to strike portions of the operative complaint alleging "claims for restitution and civil penalties based on conduct outside the territorial jurisdiction of Orange County."

In this writ proceeding, petitioners ask us to resolve a single issue: whether section 17204 of the UCL "permit[s] a county district attorney to bring a claim that seeks relief for alleged injuries to residents of California counties whom he or she does not represent, based on conduct occurring outside the county he or she serves ...."Petitioners argue district attorneys have no authority to prosecute civil actions absent specific legislative authorization, and neither the Government Code, nor Business and Professions Code section 17204, authorize the district attorney of a single county to seek statewide penalties for alleged UCL violations.The California Attorney General has filed an amicus brief on the question, as have the California District Attorneys Association; the City Attorneys of Los Angeles, San Diego, San Francisco, and San Jose, Santa Clara County Counsel, and California State Association of Counties(collectively the city attorneys); the United States and California Chambers of Commerce (collectively Chambers of Commerce); and the Consumer Attorneys of California.

We grant the petition.The California Constitution designates the Attorney General the "chief law officer of the State"( Cal. Const., art. V, § 13 ), and consistent with this constitutional provision, the Attorney General"has charge, as attorney, of all legal matters in which the State is interested"( Gov. Code, § 12511 ) and also "shall ... prosecute or defend all causes to which the State ... is a party in his or her official capacity."( Gov. Code, § 12512.)The District Attorney, on the other hand, is a county officer whose territorial jurisdiction and power is limited accordingly.Though section 17204 confers standing on district attorneys to sue in the name of the people of the State of California, it cannot constitutionally or reasonably be interpreted to grant the District Attorney power to seek and recover restitution and civil penalty relief for violations occurring outside the jurisdiction of the county in which he was elected.A contrary conclusion would permit the District Attorney to usurp the Attorney General's statewide authority and impermissibly bind his sister district attorneys, precluding them from pursuing their own relief.Thus, in the absence of written consent by the Attorney General and other county district attorneys, the District Attorney must confine such monetary recovery to violations occurring within the county he serves.

FACTUAL AND PROCEDURAL BACKGROUND

Petitioners are companies or wholly-owned subsidiaries involved in the manufacture, distribution or sale of pharmaceuticals or generic prescription drugs, including the prescription drug Niaspan.In October 2016, the Orange County District Attorney, representing "the People of the State of California" in association with private counsel, filed a complaint for violations of the UCL, alleging that petitioners either entered into agreements or otherwise engaged in conduct that prevented other generic manufacturers from launching their own Niaspan equivalent, causing purchasers and others in California to overpay for the drug.The District Attorney filed a first amended complaint, the operative pleading, in December 2016.In part, the operative complaint alleges that "[e]ach sale of Niaspan in violation of Section 17200 constitutes a separate violation," and purchasers in California sustained substantial losses in the form of overcharges on each sale based on the petitioners' unlawful and unfair business practices, which violated federal, state, and/or common laws, including federal and state antitrust laws.It alleges that "the violations of California law complained of herein resulted in damages to consumers of Niaspan in California, including in the County of Orange."In addition to an injunction, the complaint seeks an order that petitioners pay restitution of any money acquired through the unlawful and unfair business practices, and civil penalties of up to $2,500 for each violation under sections 17206and17206.1.

Petitioners thereafter moved to strike from the operative complaint "all claims for restitution and civil penalties based on conduct outside the territorial jurisdiction of Orange County."²Relying on People v. Hy-Lond Enterprises, Inc.(1979)93 Cal.App.3d 734, 751, 155 Cal.Rptr. 880( Hy-Lond ) as well as California v. M & P Investments(E.D.Cal.2002)213 F.Supp.2d 1208( M & P Investments ), petitioners argued a district attorney's enforcement authority under the UCL was limited to the geographic boundaries of the county for which the district attorney was elected, but contrary to that restriction, the District Attorney sought to recover for overcharges paid by "California Niaspan users, their insurers, public healthcare providers and other government payors ...."Petitioners sought to strike several words and phrases from the complaint referring to pursuing relief across California.

In opposition, the District Attorney argued Hy-Lond was inapposite as it involved a settlement and stipulated injunction that purported to bind the real "client," which was the state Department of Health, and immunize the defendant as to future actions involving future violations of law.He argued that when statewide business practices are at issue, the California Constitution did not prevent the Legislature from giving district attorneys statewide enforcement authority and the ability to obtain statewide relief, which the UCL's plain language indicated the Legislature had done.The District Attorney argued the California Constitution did not restrict his duties and authority under the UCL to obtain statewide relief.

During arguments on the motion, the trial court stated its view that the appellate court in Hy-Lond did not address the Napa County district attorney's ability in that case to recover statewide civil penalties; in its opinion, Hy-Lond addressed only whether the district attorney could bind the Attorney General in a settlement relating to misconduct spanning more counties than just Napa County.The court explained that if a settlement occurred in the present case, the Attorney General would be permitted to appear and be heard.The court also questioned Hy-Lond's reliance on Singh v. Superior Court(1919)44 Cal.App. 64, 185 P. 985 in which the Court of Appeal pointed out a district attorney's powers were "limited territorially to the county for which he has been elected," but rejected an argument that a district attorney was not an executive officer or officer of the state for purposes of a bribery statute and...