In re Lorazepam & Clorazepate Antitrust Litigation, MDL Docket No. 1290 (TFH) (D. D.C. 2/1/2002)

• Decision Date: 01 February 2002
• Docket Number: MDL Docket No. 1290 (TFH).,Misc. No. 99ms276 (TFH).
• Court: U.S. District Court — District of Columbia
• Parties: IN RE LORAZEPAM & CLORAZEPATE ANTITRUST LITIGATION FEDERAL TRADE COMMISSION, Plaintiff, v. MYLAN LABORATORIES, INC. et al., Defendants and STATE OF CONNECTICUT, et al., Plaintiffs, v. MYLAN LABORATORIES, INC. et al., Defendants and UNITED WISCONSIN SERVICES, INC., et al., Plaintiffs, v. MYLAN LABORATORIES, INC. et al., Defendants. and ARKANSAS CARPENTERS HEALTH AND WELFARE FUND, Plaintiff, v. MYLAN LABORATORIES, INC. et al, Defendants.

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IN RE LORAZEPAM & CLORAZEPATE ANTITRUST LITIGATION

FEDERAL TRADE COMMISSION, Plaintiff, v. MYLAN LABORATORIES, INC. et al., Defendants and STATE OF CONNECTICUT, et al., Plaintiffs, v. MYLAN LABORATORIES, INC. et al., Defendants and UNITED WISCONSIN SERVICES, INC., et al., Plaintiffs, v. MYLAN LABORATORIES, INC. et al., Defendants. and ARKANSAS CARPENTERS HEALTH AND WELFARE FUND, Plaintiff, v. MYLAN LABORATORIES, INC. et al, Defendants.

MDL Docket No. 1290 (TFH).

Misc. No. 99ms276 (TFH).

United States District Court, District of Columbia.

February 1, 2002.

MEMORANDUM OPINION Re: Settlement

THOMAS F. HOGAN, District Judge.

Pending before the Court are several motions for final approval of various settlement agreements reached in this MDL action. The Federal Trade Commission and all fifty states and the District of Columbia seek final approval of their settlement agreements with the defendants, which this Court preliminarily approved on April 27, 2001, and the third party payors seek final approval of settlement agreements preliminarily approved on February 9, 2001. Upon careful consideration of the motions and the affidavits, declarations, and reports filed in support thereof, the objections to the settlements filed by various class members, the representations made by all parties at the fairness hearing held on November 29, 2001, and the entire record herein, the Court will grant each motion.

I. BACKGROUND¹

A. Plaintiff States

On December 22, 1998, ten states ("Litigating States") and the Federal Trade Commission ("FTC") filed lawsuits with this Court, charging the defendants with entering illegal agreements to monopolize the markets for the generic anti-anxiety drugs, lorazepam and clorazepate, in violation of various federal and state antitrust laws.² On February 8, 1999, the Litigating States amended their complaint, adding twenty-one states and the District of Columbia as plaintiffs.³ On May 13, 1999, Maryland joined the other thirty-two Litigating States.⁴

After extensive discovery was conducted, the parties began to explore the possibility of settlement in late Spring 2000. The FTC, thirty-three Litigating States, Mylan, Cambrex, Profarmaco, and Gyma reached an agreement in principle in August 2000, under which the defendants would pay $100 million toward consumer and state agency compensation and an additional $8 million toward costs and fees for the investigation and litigation in this mailer. In return, the thirty-three Litigating States agreed to exert their best efforts to bring into the settlement eighteen states ("Joining States") that were not yet a part of this litigation. They were successful in this endeavor, and on February 1, 2001, all fifty states and the District of Columbia ("Plaintiff States") jointly filed a third amended complaint.⁵ At the same time, the Plaintiff States filed two settlement agreements for the Court's review: the "Mylan Settlement Agreement" between the FTC, Plaintiff States, Mylan, Cambrex, Profarmaco, and Gyma; and the "SST Settlement Agreement" between the Plaintiff States and SST. After a hearing on April 27, 2001, the Court preliminarily approved both settlement agreements, the distribution plans, and the notice plan and consumer claims procedure, and it conditionally certified a class of plaintiffs for purposes of settlement only. The FTC and Plaintiff States now seek final approval of the settlements.

B. Third Party Payors

There are also two third party payor actions before the Court. On May 3, 1999, United Wisconsin Services filed the first action here against Mylan, Cambrex, and Gyma, United Wisconsin Services, Inc. v. Mylan Labs., Inc., No. 99-1082.⁶ The plaintiffs in United Wisconsin are third party payors who paid for prescriptions of generic lorazepam and clorazepate filled between January 1, 1998 and December 31, 1999 on behalf of health benefit plan members who reside in twenty states — Arizona, California, the District of Columbia, Florida, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, South Dakota, Tennessee, West Virginia, and Wisconsin — that have specific indirect purchaser statutes or case law permitting private pates to sue in such a capacity. On January 25, 2001, third party payors in thirty-one other states — Alaska, Alabama, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Iowa, Idaho, Illinois, Indiana, Kentucky, Maryland, Missouri, Mississippi, Montana, Nebraska, New Hampshire, Nevada, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah, Virginia, Vermont, Washington, and Wyoming — filed the other action before the Court, Arkansas Carpenters Health and Welfare Fund v. Mylan Labs., Inc., No. 01-0159, to effectuate the settlement of the their claims that had been pending in related state court actions.⁷

Pursuant to orders of the Court, the plaintiffs engaged in extensive coordinated pretrial discovery of the defendants, SST, and other nonparty witnesses. This discovery included the review and analysis of thousands of documents and the taking of more than seventy depositions. The plaintiffs also met with counsel for the FTC and Plaintiff States to engage in further cooperative discovery and investigation. And with their consulting expert, the plaintiffs reviewed and analyzed extensive sales data concerning the generic drugs at issue in this case during the relevant period.

In March 2000, the parties began settlement negotiations. They reached an agreement on settlement amounts by July 2000 and completed negotiations on other terms and conditions of settlement in January 2001. The third party payor plaintiffs, the defendants, and SST executed a Stipulation of Settlement ("Settlement Agreement") in each case on January 29, 2001. After a hearing held on February 9, 2001, the Court preliminarily approved both Settlement Agreements and conditionally certified the respective third party payor classes for settlement purposes only.

II. DISCUSSION

A. Plaintiff States

The FTC and Plaintiff States moved for final approval of their settlement agreements on November 5, 2001, specifically seeking: (1) final approval of the Mylan Settlement Agreement and the SST Settlement Agreement;⁸ (2) final approval of the Plaintiff States' proposed distribution plans; (3) final approval of the payment of the costs of notice and claims administration; (4) final approval of the payment of attorneys' fees and litigation costs; and (5) both a final ruling that certain states have authority to represent consumers and to settle and release their claims, and a final certification of the following class for settlement purposes only:

All natural person consumers within Plaintiff States where such a class action may be brought, not otherwise represented by the Plaintiff States as parens patriae, who purchased generic lorazepam and/or clorazepate sold in the United States from January 1, 1998 through December 31, 1999.

11/5/01 Mot. at 2.

(1) Final Approval of Settlement Agreements

Approval of a proposed class action settlement lies within the discretion of this Court. In re: Vitamins Antitrust Litig., 2001-2 Trade Cas. (CCH) ¶ 73,361, 2001 WL 856290, at *1 (D.D.C. July 19, 2001); United States v. District of Columbia, 933 F. Supp. 42, 67 (D.D.C. 1996). Federal Rule of Civil Procedure 23(e) provides that "[a] class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs." Fed.R.Civ.P. 23(e).⁹ The Rule 23 requirements are fully consistent with the long-standing judicial attitude favoring class action settlements. Mayfield v. Barr, 985 F.2d 1090, 1092 (D.C. Cir. 1993). While the Court should "scrutinize the terms of the settlement carefully," the discretion to reject a settlement is thus "restrained by the `principle of preference' that encourages settlements." Pigford v. Glickman, 185 F.R.D. 82, 103 (D.D.C. 1999); see also United States v. District of Columbia, 933 F. Supp. at 47 ("`The trial court in approving a settlement need not inquire into the precise legal rights of the parties nor reach and resolve the merits of the claims or controversy, but need only determine that the settlement is fair, adequate, reasonable and appropriate under the particular facts and that there has been valid consent by the concerned parties.'") (quoting Citizens for a Better Env't v. Gorsuch, 718 F.2d 1117, 1126 (D.C. Cir. 1983)).

There is no single test in this Circuit for determining whether a proposed class action settlement should be approved under Rule 23(e), and the relevant factors may vary depending on the factual circumstances. Pigford, 185 F.R.D. at 98 & n. 13 (citing Thomas v. Albright, 139 F.3d 227, 231 (D.C. Cir. 1998)). Generally, in determining whether a settlement should be approved, courts consider whether the proposed settlement "is fair, reasonable, and adequate under the circumstances and whether the interests of the class as a whole are being served if the litigation is resolved by settlement rather than pursued." Manual for Complex Litigation (Third), § 30.42 at 238 (1995). In making this determination, courts in this Circuit have examined the following factors: (a) whether the settlement is the result of arms-length negotiations; (b) the terms of the settlement in relation to the strength of plaintiffs' case; (c) the stage of the litigation proceedings at the time of settlement; (d) the reaction of the class; and (e) the opinion of experienced counsel. See Thomas, 139 F.3d at 231-33; Pigford, 185 F.R.D. at 98-101; Osher v. SCA Realty I, 945 F. Supp. 298, 304 (D.D.C. 1996); Stewart v. Rubin, 948 F. Supp. 1077, 1087 (D.D.C. 1996), aff'd, 124 F.3d 1309 (D.C. Cir. 1997); Pray v. Lockheed Corp., 644 F. Supp. 1289, 1290 (D.D.C. 1986); In re Nat'l Student Marketing Litig., 68 F.R.D. 151,...