Endo Pharm. Inc. v. Fed. Trade Comm'n

• Decision Date: 29 October 2018
• Docket Number: Civ. No. 16-5599
• Citation: 345 F.Supp.3d 554
• Parties: ENDO PHARMACEUTICALS INC., et al., Plaintiffs, v. FEDERAL TRADE COMMISSION, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

345 F.Supp.3d 554

ENDO PHARMACEUTICALS INC., et al., Plaintiffs,

v.FEDERAL TRADE COMMISSION, Defendant.

Civ. No. 16-5599

United States District Court, E.D. Pennsylvania.

Signed October 29, 2018

George G. Gordon, Dechert LLP, Terry Matthew Henry, Blank Rome LLP, Edward D. Rogers, Matthew Vahey, Ballard, Spahr, Andrews and Ingersoll, Philadelphia, PA, Karen Hoffman Lent, Michael H. Menitove, Skadden Arps Slate Meagher & Flom, Bryan Daniel Gant, Jack E Pace, III, White & Case LLP, New York, NY, Steven C. Sunshine, Timothy H. Grayson, Skadden, Arps, Slate, Meagher & Flom LLP, David R. Courchaine, Peter J. Carney, White & Case LLP, Washington, DC, for Plaintiffs.

Bradley S. Albert, Matthew M. Hoffman, Jamie R. Towey, U.S. Federal Trade Commission, Washington, DC, for Defendant.

MEMORANDUM

Diamond, District Judge.

After the Federal Trade Commission voluntarily dismissed its enforcement action in this Court against Plaintiffs Watson Laboratories and Allergan Finance—and then refiled that same enforcement action in California—Plaintiffs brought this declaratory judgment suit, repeating the arguments made in their motions to dismiss in the original enforcement action. Although the FTC's apparent forum shopping may warrant sanctions, the law does not allow Plaintiffs to challenge the Commission's enforcement decisions by way of declaratory judgment when they can do so in defending against the California enforcement action itself. Accordingly, I will grant the FTC's Motion to Dismiss.

I. BACKGROUND

The Original Action

On March 30, 2016, proceeding under the FTC and Clayton Acts, the Commission initiated an enforcement action in this Court seeking injunctive and equitable relief against: Endo Pharmaceuticals Inc.; Endo International plc; Teikoku Pharma USA, Inc.; Teikoku Seiyaku Co., Ltd.; Watson Laboratories, Inc.; Allergan plc (the parent company of Watson); and Impax Laboratories, Inc. See F.T.C. v. Endo Pharms. Inc., No. 16-1440, Doc. Nos. 1 (under seal), 32 (redacted); 15 U.S.C. §§ 18, 45(a). The FTC alleged, inter alia , that: (1) in June 2010, Endo, which produced "Opana ER," impermissibly agreed to pay Impax to delay market introduction of its generic version of the drug; and (2) in May 2012, Endo and Teikoku, which produced and marketed "Lidoderm," agreed to pay Watson to delay market introduction of its generic, all in violation of Section 5(a) of the FTC Act. See Endo, No. 16-1440, Doc. No. 32 ¶¶ 179–182 (Opana counts), 183–190 (Lidoderm counts); 15 U.S.C. § 45(a). The Commission proceeded under Section 13(b) of the FTC Act, which authorizes the Commission to seek injunctive relief against an entity that is "violating, or is about to violate" any law enforced by the Commission. Endo, No. 16-1440, Doc. No. 32 ¶ 11; 15 U.S.C. § 53(b).

When Teikoku settled with the FTC, I approved a Stipulated Order for Permanent Injunction, dismissing the enforcement action as to Teikoku. Endo, No. 16-1440, Doc. No. 14. The remaining defendants—Endo, Impax, APLC, and Watson—moved to dismiss. Endo, No. 16-1440, Doc. Nos. 57, 58, 61, 69, 70; Fed. R. Civ. P. 12(b)(6), 21. They argued that the FTC could not proceed in federal court because the FTC Act does not authorize the Commission to challenge in court only past conduct. See, e.g., Endo, No. 16-1440, Doc. No. 69-2 at 18 ("[Congress] did not authorize the FTC to bring a federal lawsuit alleging only past violations.... Section 13(b), therefore, does not authorize this action and it should be dismissed in its entirety."). They urged that the Commission should instead have pursued its claims in an administrative proceeding pursuant to Section 5(b), which authorizes such proceedings when a party "has been or is using any unfair method of competition." See, e.g., id. at 10, 12; 15 U.S.C. § 45(b). I previously described these Motions to Dismiss "as anything but frivolous." See Endo, 16-1440, Doc. No. 119 at 7.

The defendant drug companies also asked me to sever the Opana and Lidoderm claims because the challenged agreements, underlying circumstances, generic manufacturers, and the drugs themselves had no factual or temporal nexus. Endo, No. 16-1440, Doc. Nos. 57, 58, 61. In opposing severance, the FTC asked, in the event I severed, to transfer the severed cases to the Northern District of California and the Northern District of Illinois, where related private MDL actions were pending. Endo, No. 16-1440, Doc. No. 73 at 18–20; 28 U.S.C. § 1404(a) ; In re Lidoderm Antitrust Litig., MDL No. 2521 (N.D. Cal.); In re Opana ER Antitrust Litig., MDL No. 2580 (N.D. Ill.). The Commission admonished that if I did not transfer the severed cases, it would "voluntarily dismiss both actions pursuant to Federal Rule of Civil Procedure 41(a)(1) and refile them separately in the respective district courts." Endo, No. 16-1440, Doc. No. 73 at 18.

On October 20, 2016, I severed the FTC's Opana and Lidoderm claims, but did not transfer the severed cases. Endo, No. 16-1440, Doc. Nos. 119, 120. I took a dim view of the Commission's threatened actions:

Having chosen to litigate in this District, it comes with ill grace for the FTC to pick up its marbles and play in venues more to its liking. I will not transfer the claims. Should the FTC voluntarily withdraw them, I will entertain Defendants' requests for fees and costs.

Endo, No. 16-1440, Doc. No. 119 at 1.

On October 25, the FTC voluntarily dismissed the action. Endo, No. 16-1440, Doc. No. 121; Fed. R. Civ. P. 41(a)(1)(A)(i). Plaintiffs charged that this was a "transparent effort to prevent this Court from deciding the dispositive issues raised in [the drug companies'] motion to dismiss." (Am. Compl. ¶ 6, Doc. No. 44.)

The Declaratory Judgment Suits and FTC's California Enforcement Action

On October 26, 2016, Endo, Watson, and Impax filed before me declaratory judgment suits against the FTC. (Compl., Doc. No. 1 (Endo and Watson Plaintiffs) ); Endo Pharms. Inc. v. F.T.C., No. 16-5600, Doc. No. 1 (Endo and Impax Plaintiffs). Advancing the same arguments made in their Motions to Dismiss the FTC's enforcement action, Plaintiffs sought a declaration "that Section 13(b) of the FTC Act does not authorize the FTC to file an action in federal court against [them]"—or in the alternative, that it does not "authorize the FTC to seek disgorgement or restitution"—involving claims based on the Lidoderm and Opana agreements. (Compl. at 18); Endo, No. 16-5600, Doc. No. 1 at 19.

On January 23, 2017, the Commission filed an enforcement action in the Northern District of California against APLC, Allergan Finance LLC, Watson, and Endo, reasserting claims the FTC had brought before me related to the Lidoderm agreement. FTC v. Allergan plc, No. 17-312 (N.D. Cal.). California filed a parallel action, alleging violations of federal and state antitrust laws. California v. Allergan plc, No. 17-562 (N.D. Cal.). The matters were assigned to the Honorable William Orrick, who is overseeing private party antitrust litigation involving Lidoderm. In re Lidoderm Antitrust Litig., MDL No. 2521 (N.D. Cal.). On January 27, Allergan filed before me its own declaratory judgment suit against the FTC, "seek[ing] relief that tracks that sought by Watson in its ... Declaratory Judgment Action." Allergan Finance, LLC v. FTC, 17-406, Doc. No. 1 at 2.

On January 24, 2017, Endo and the FTC settled all their litigation, including Endo's claims in its two declaratory judgment suits pending before me. (Doc. No. 31); Endo, No. 16-5600, Doc. No. 28. On January 27, 2017, Impax informed my Chambers that the Commission had initiated an administrative proceeding against the Company some eight days earlier. Endo, No. 16-5600, Doc. No. 32. In light of Endo's settlement and the FTC's initiation of an administrative proceeding against Impax, all parties stipulated to the voluntary dismissal of the Endo–Impax declaratory judgment suit, and Endo voluntarily dismissed its claims against the FTC in the Endo–Watson declaratory judgment suit. (Doc. No. 43); Endo, No. 16-5600, Doc. No. 34; Fed. R. Civ. P. 41(a)(1)(A)(i), (ii).

The Instant Consolidated Declaratory Judgment Suit

Watson and Allergan are thus the only remaining Declaratory Judgment Plaintiffs, each proceeding in a separate suit, but seeking the same relief. (Compl. at 19); Allergan, No. 17-406, Doc. No. 1 at 20. I consolidated the two suits, and on February 14, 2017, Watson and Allergan filed a Consolidated Amended Complaint. (Am. Compl., Doc. No. 44.)

Plaintiffs "seek[ ] to preserve the judicial efficiency of having this Court ... consider the threshold legal issue" of whether the FTC can initiate litigation challenging conduct that occurred entirely in the past. (Id. at ¶ 1.) Although the Commission's California enforcement action is pending, "requir[ing] Declaratory Judgment Plaintiffs to brief—and a different federal court to decide—new motions to dismiss raising the same threshold issues already briefed to this Court ... would be the height of inefficiency." (Id. ¶¶ 7–8.) Plaintiffs again argue that "[t]he FTC Act does not allow the FTC to pursue allegations in federal court challenging conduct that occurred, and was completed, entirely in the past." (Id. ¶ 10.) Yet, "[n]either the Original Action nor the California Action involve(d) ongoing or imminent future conduct" and instead "focus on the Lidoderm Settlement Agreement, which was signed in 2012." (Id. at ¶¶ 14, 16.) Accordingly,

[u]nder the Declaratory Judgment Act or, in the alternative, the Administrative Procedure Act, Declaratory Judgment Plaintiffs seek a declaratory judgment that Section 13(b) of the FTC Act does not authorize the FTC to pursue an action in federal court [or seek disgorgement or restitution] against Declaratory Judgment Plaintiffs involving claims based on, or arising from, the Lidoderm Settlement Agreement.

(Id. at ¶¶ 89, 93.)

On March 2, 2017, the FTC moved to dismiss Plaintiffs' claims. The Motion has been fully briefed. (Doc. Nos. 47, 48, 49, 52.) On April 5, Judge Orrick granted Watson and...