State v. Actavis Pharma, Inc.

• Decision Date: 30 June 2017
• Docket Number: No. 2016–0199,2016–0199
• Citation: 167 A.3d 1277,170 N.H. 211
• Parties: The STATE of New Hampshire v. ACTAVIS PHARMA, INC. & a.
• Court: New Hampshire Supreme Court

170 N.H. 211

167 A.3d 1277

The STATE of New Hampshire

v.ACTAVIS PHARMA, INC. & a.

No. 2016–0199

Supreme Court of New Hampshire.

Argued: March 1, 2017

Opinion Issued: June 30, 2017

Joseph A. Foster, attorney general (Lisa M. English, senior assistant attorney general, and Francis C. Fredericks, assistant attorney general, on the brief, and Ms. English orally), for the State.

Preti Flaherty, PLLP, of Concord (Brian M. Quirk on the joint brief), for defendant Actavis Pharma, Inc.

McLane Middleton, Professional Association, of Manchester (Wilbur A. Glahn, III and Michael A. Delaney on the joint brief, and Mr. Glahn orally), for defendant Endo Pharmaceuticals, Inc.

Boutin & Altieri, P.L.L.C., of Londonderry (Edmund J. Boutin on the joint brief), for defendant Janssen Pharmaceuticals, Inc.

Nixon Peabody LLP, of Manchester (David A. Vicinanzo, Gordon J. MacDonald, Holly J. Barcroft, and Anthony J. Galdieri on the joint brief), for defendant Purdue Pharma L.P.

Hinckley Allen, of Concord (Michael J. Connolly and Christopher H.M. Carter on the joint brief), for defendant Teva Pharmaceuticals USA, Inc.

DALIANIS, C.J.

The State appeals, and the defendants, Actavis Pharma, Inc., Endo Pharmaceuticals, Inc., Janssen Pharmaceuticals, Inc., Purdue Pharma L.P., and Teva Pharmaceuticals USA, Inc., cross-appeal, an order of the Superior Court (Nicolosi, J.) denying the State's motion to enforce administrative subpoenas issued to the defendants under the Consumer Protection Act (CPA), RSA chapter 358–A (2009 & Supp. 2016), and granting the defendants' motion for a protective order. We reverse and remand.

I

The relevant facts follow. In June 2015, the Office of the Attorney General (OAG) retained the law firm of Cohen Milstein Sellers & Toll PLLC (Cohen Milstein) on a contingency fee basis "to represent [the OAG] in an investigation and litigation of potential claims regarding fraudulent marketing of opioid drugs." (Emphasis added.) In September, the OAG and Cohen Milstein entered into a second retainer agreement that "supersedes the initial retainer agreement, executed June 15, 2015, and is effective as of that date." The September retainer agreement states that Cohen Milstein is retained "to assist [the OAG] in an investigation and litigation of potential claims regarding fraudulent marketing of opioid drugs." (Emphasis added.)

In August 2015, pursuant to RSA 358–A:8 (2009), the OAG subpoenaed the defendants, with return dates of September 15, "to produce for examination by the Attorney General" specified "information and documentary material because the Attorney General has reason to believe that [the defendants] have engaged in or have information about unfair trade practices and methods of competition." The subpoenas seek documents and information related to each defendant's opioid sales volume in New Hampshire, the nature and scope of each defendant's plans and efforts to market opioids for chronic pain, the nature of and basis for representations made to prescribers and consumers about the use of opioids for chronic pain, and each defendant's role in causing health care providers to prescribe opioids to treat chronic pain. Although the defendants initially stated that they intended to comply with the subpoenas, they subsequently refused to do so, citing their objection to the OAG's retention of Cohen Milstein to assist in the investigation on a contingency fee basis.

In October, the State moved to enforce the administrative subpoenas. The defendants answered the State's complaint and counterclaimed that the OAG's engagement of outside counsel is unlawful. In addition, the defendants moved for a protective order, seeking to "bar the Attorney General from engaging contingent fee counsel to: (a) participate in or assume responsibility for any aspect of the State's investigation of alleged violations of the CPA ...; or (b) participate in or assume responsibility for any subsequent enforcement action pertaining to alleged CPA violations." The defendants argued that the OAG's fee agreements with Cohen Milstein: (1) violate RSA 21–G:22 and :23 (2012) (amended 2016); (2) violate New Hampshire common law; (3) are ultra vires because the OAG did not comply with RSA 7:12 (2013) (amended 2016) or :6–f (Supp. 2016); (4) violate the doctrine of separation of powers; (5) violate the New Hampshire Rules of Professional Conduct; and (6) violate due process under the New Hampshire and United States Constitutions. The State replied, asserting that "an objection to the Attorney General's use of outside counsel is not an appropriate justification for refusing to comply with lawful subpoenas" and that the defendants "lack standing to raise that complaint at all in this proceeding."

Following a hearing, the trial court denied the State's motion to enforce the subpoenas and granted the defendants' motion for a protective order "to the extent that the OAG and Cohen Milstein's contingency fee agreement is invalid." The trial court determined that the defendants had demonstrated standing to bring their claims. Construing RSA 7:12 and :6–f, the court concluded that "in executing the contingency fee agreement without the approval of joint legislative fiscal committee and the governor and council, ... the OAG acted outside the scope of its statutory authority to hire and compensate outside counsel," and, therefore, "the contingency fee agreement between the OAG and Cohen Milstein is ultra vires and void."

The trial court rejected the defendants' ethics violations arguments, finding that because Cohen Milstein is not a "public employee" under the Executive Branch Code of Ethics (Ethics Code), see RSA 21–G:21 – :27 (2012) (amended 2016), or a "public attorney" under the common law or the New Hampshire Rules of Professional Conduct, the contingency fee arrangement "does not create a conflict of interest." The court also rejected the defendants' claim that the contingency fee arrangement violates their due process rights, agreeing with "the greater weight of judicial precedent finding no violation of due process by contingency fee arrangements in certain civil litigation where the OAG supervises outside counsel and retains control over all critical decisions such that the outside counsel's personal interest is neutralized." This appeal followed.

II

The State appeals the trial court's finding that the defendants have standing "to make an ultra vires challenge to a government contract that they are not a party to and that is predicated upon the [OAG's] alleged failure to follow claimed state contract formalities." The State asserts that the defendants "failed to make the requisite showing of ‘actual harm.’ " Further, the State argues that, "even if speculative risk did amount to a cognizable harm, the [defendants] have failed to show the alleged risk of future harm is in any way linked to the challenged conduct—namely the OAG's decision to enter into a contingency fee agreement without seeking approval from the fiscal committee or the [Governor and Council]."

The defendants counter that the trial court "did not find standing based on any ‘hypothetical’ or ‘future’ harm," but correctly found that "the contingency-fee agreement presently taints the investigation in a manner adverse" to them, "because the State's investigation of [them] is inherently biased by Cohen Milstein's conflict of interest." (Quotations omitted.) In addition, the defendants argue that the trial court "properly found that this injury is personal to [them] because they are the direct targets of subpoenas issued in an investigation that ... exceeds an executive agency's authority." (Quotations omitted.)

When the relevant facts are not in dispute, we review de novo the trial court's determination on standing. Lynch v. Town of Pelham, 167 N.H. 14, 20, 104 A.3d 1047 (2014). "[S]tanding under the New Hampshire Constitution requires parties to have personal legal or equitable rights that are adverse to one another, with regard to an actual, not hypothetical, dispute, which is capable of judicial redress." Duncan v. State, 166 N.H. 630, 642–43, 102 A.3d 913 (2014) (citations omitted). "In evaluating whether a party has standing to sue, we focus on whether the party suffered a legal injury against which the law was designed to protect." O'Brien v. NH Democratic Party, 166 N.H. 138, 142, 89 A.3d 1202 (2014) (quotation omitted). Neither an "abstract interest in ensuring that the State Constitution is observed" nor an injury indistinguishable from a "generalized wrong allegedly suffered by the public at large" is sufficient to constitute a personal, concrete interest. Duncan, 166 N.H. at 643, 646, 102 A.3d 913 (quotation omitted). Rather, the party must show that its "own rights have been or will be directly affected." Eby v. State, 166 N.H. 321, 334, 96 A.3d 942 (2014) (quotation omitted).

"The requirement that a party demonstrate harm to maintain a legal challenge rests upon the constitutional principle that the judicial power ordinarily does not include the power to issue advisory opinions." Birch Broad. v. Capitol Broad. Corp., 161 N.H. 192, 199, 13 A.3d 224 (2010). "The doctrine of standing serves to prevent the judicial process from being used to usurp the powers of the political branches." O'Brien, 166 N.H. at 144, 89 A.3d 1202 (quotation omitted). "In light of this overriding and time-honored concern about keeping the Judiciary's power within its proper constitutional sphere, we must put aside the natural urge to proceed directly to the merits of an important dispute and to ‘settle’ it for the sake of convenience and efficiency." Id. (quotation omitted).

As a threshold matter, the defendants argue that standing principles do not apply to them because "standing applies only to a plaintiff's ability to initiate a lawsuit, not a defendant's right to resist the claims against it." According to the defendants, by bringing its action to enforce administrative subpoenas, "the State affirmatively put at issue...