Teva Pharm. Indus., Ltd. v. United Healthcare Servs., Inc.

• Decision Date: 18 September 2018
• Docket Number: CIVIL ACTION No. 16-4870
• Citation: 341 F.Supp.3d 475
• Parties: TEVA PHARMACEUTICAL INDUSTRIES, LTD., et al., Plaintiffs, v. UNITED HEALTHCARE SERVICES, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

341 F.Supp.3d 475

TEVA PHARMACEUTICAL INDUSTRIES, LTD., et al., Plaintiffs,

v.UNITED HEALTHCARE SERVICES, INC., Defendant.

CIVIL ACTION No. 16-4870

United States District Court, E.D. Pennsylvania.

Signed September 18, 2018

Filed September 19, 2018

Bradley H. Weidenhammer, Britt Cramer, Brendan E. Ryan, Kevin T. Vanwart, Kirkland & Ellis LLP, Chicago, IL, Jay P. Lefkowitz, Adam T. Humann, Kirkland & Ellis LLP, New York, NY, Joseph E. Wolfson, Stevens & Lee, Philadelphia, PA, for Plaintiffs.

Abby L. Dennis, Hamish P.M. Hume, Kyle Smith, Martha L. Goodman, Boies Schiller & Flexner LLP, Washington, DC, Eric W. Buetzow, Jonathan M. Watkins, Judith A. Zahid, Zelle LLP, San Francisco, CA, Jonathan R. MacBride, Zelle LLP, Plymouth Meeting, PA, for Defendant.

MEMORANDUM

Goldberg, District Judge.

The question before me is whether a Memorandum of Understanding ("MOU") pertaining to a $125 million antitrust resolution constitutes a binding settlement agreement.

This dispute arises from several antitrust claims, brought pursuant to FTC v. Actavis, Inc., 570 U.S. 136, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013), involving reverse settlement payments between the brand name manufacturer of the drug Provigil

® and various generic drug manufacturers. On June 1, 2015, I denied class certification for the end-payor plaintiffs in the case of Vista Healthplan v. Cephalon, Inc., et al., Civil Action No. 06-1833. Thereafter, the putative class plaintiffs and a separate group of third-party payers—of which Defendant United Healthcare Services, Inc. ("United") was a part—reached a settlement agreement, memorialized in an MOU, with brand manufacturer Cephalon, Inc. and two generic manufacturers Teva Pharmaceutical Industries/Teva Pharmaceuticals USA, Inc. and Barr Pharmaceuticals, Inc. (collectively, the "Cephalon Parties"). United has renounced the settlement, claiming that the terms set out in the MOU did not constitute a binding and enforceable contract and that its lawyers were not authorized to enter into such an agreement. The Cephalon Parties have sued to enforce the agreement.

In an opinion issued April 20, 2018, I determined that the MOU contained the essential terms of a settlement and constituted a binding, enforceable, and unambiguous contract. Teva Pharm. Indus., Ltd. v. UnitedHealthcare Servs., Inc., No. 16-4870, 2018 WL 1898911 (E.D. Pa. Apr. 20, 2018). Thereafter, from April 23–27, 2018, a bench trial was held on the issues of (a) whether United's attorneys were cloaked with either express or apparent authority to sign the MOU, and (b) whether UHS's actions subsequent to the signing of the MOU constituted a ratification of the MOU. Upon consideration of the evidence presented at trial and additional videotaped depositions and documentary evidence entered into the trial record, I conclude that the settlement is binding upon United.

I. FINDINGS OF FACT

A. Pertinent Procedural Background of the Provigil® Litigation

1. Beginning in May 2006, over sixteen lawsuits (including putative class actions) alleging antitrust violations were filed against the Cephalon Parties and other generic drug manufacturers relating to the branded drug Provigil

®. (Stipulation of Facts ("SOF") ¶ 1.)

2. Pursuant to an August 8, 2006 case management order, these antitrust lawsuits were collectively captioned In re Modafinil Antitrust Litigation and consolidated in a collective docket in the United States District Court for the Eastern District of Pennsylvania. (SOF ¶ 2.) The actions encompassed by the case management order included:

a. The direct purchaser class cases, brought by putative classes consisting of companies that directly purchased Provigil

® from Cephalon for re-distribution, consolidated into King Drug Company of Florence, Inc. et al. v. Cephalon, Inc., et al., No. 2:06-cv-1797 (Id. ¶ 3(a) );

b. The end-payor class cases brought by putative classes consisting of individuals, insurance companies, and other entities that purchased Provigil ® indirectly, consolidated into Vista Healthplan, Inc., et al. v. Cephalon, Inc., et al., No. 2:06-cv-1833; (Id. ¶ 3(b) ); and

c. An action brought by the Federal Trade Commission ("FTC"), captioned as Federal Trade Commission v. Cephalon, Inc., No. 2:08-cv-2141. (Id. ¶ 3(c).)

3. In May 2015, Cephalon, Inc. and Teva Pharmaceuticals Ltd. settled the FTC action. (Id. ¶ 4.) The settlement was announced in a press release issued by the FTC on May 28, 2015, and memorialized in a Stipulated Order for Permanent Injunction and Equitable Monetary Relief that this Court entered on June 17, 2015. (Id. ¶ 5.)

4. The FTC settlement required Cephalon, Inc. to deposit $1.2 billion, less amounts already paid out in related case settlements, into an FTC-administered account.

The FTC Settlement was to be held in trust to satisfy the amount of any settlement or judgment regarding other Provigil

® claims. (No. 2:08-cv-2141, ECF No. 405.)

5. Jay Lefkowitz, Esq. from the law firm of Kirkland & Ellis LLP, represented Cephalon in settlement negotiations relating to the Provigil

® antitrust claims. (Notes of Testimony ("N.T.") 4/23/18, 123:18–24.) Greg Skidmore, Esq. from Kirkland & Ellis, also worked on the Provigil matter, including settlement, on behalf of Cephalon. (N.T. 4/24/18 108:18–109:25.)

B. United's Corporate Structure and Legal Departments

6. UnitedHealth Group ("UHG") is a holding company with two subsidiary business units: (a) United Healthcare Services, Inc. ("United Healthcare"), which provides health insurance services to third parties, and (b) OptumInsight ("Optum"), which provides information and technology-enabled health related services. (N.T. 4/25/18, 34:3–18; N.T. 4/27/18, 33:8–13.)

7. During the relevant time period, Marianne Short, Esq. was general counsel of UHG and the most senior lawyer in the organization. (N.T. 4/27/18, 65:11–15.) Matthew Shors, Esq. was UHG's head of litigation and reported to Short. (N.T. 4/27/18, 33:2–4.) Heather Redmond, Esq. was a deputy general counsel for intellectual property and litigation at UHG and reported to Shors. (Redmond Dep. 9:21–23; N.T. 4/27/18, 29:22–25.)

8. During the relevant time period, Chris Zaetta, Esq. was head of litigation for United Healthcare. (N.T. 4/27/18, 4:6–11.) Andrea Boado, Esq. was Deputy General Counsel and oversaw a group of lawyers who provided legal support for UHS's commercial pharmacy business. (N.T. 4/26/18, 9:18–25, 47:3–5.) Both Zaetta and Boado reported to Thad Johnson, Esq. who was United Healthcare's General Counsel. (N.T. 4/26/18, 44:24–45:4; 33:17–20.) Jeremy Johnson, Esq. was a senior associate general counsel who reported to Zaetta. (N.T. 4/26/18, 91:1–92:11.) Laurie Wolfe, Esq. was a senior associate general counsel reporting to Boado. (Wolfe Dep. 16:19–21:6.)

9. During the relevant time period, Matthew Klein, Esq. was the head of litigation for Optum. (N.T. 4/25/18, 28:5–7.) Elizabeth (Betsy) Schmiesing, Esq. was a litigation manager tasked with overseeing a team of lawyers. (Klein Dep. 20:5–10.) Klein supervised four lawyers, including Schmiesing. Schmiesing had an additional five lawyers that reported directly to her. (Klein Dep. 19:11–16.)

10. Optum handled "national recovery matters" for the entire UnitedHealth Group. (N.T. 4/25/18, 29:1–4, 38:9–14.) National recovery matters are those that mostly involve claims against medical device manufacturers or pharmaceutical companies to recover some fraction of the costs or the "spend" for the device or drug, and generally take the form of either a mass tort action or an antitrust pricing-type case. (N.T. 4/25/18, 29:5–17.) Schmiesing was the individual at Optum responsible for handling the national recovery cases for UnitedHealth Group. (N.T. 4/25/18, 39:3–7.)

11. The Provigil

® matter was one such national recovery case and fell within Schmiesing's responsibilities. (N.T. 4/25/18, 39:8–15.)

12. To summarize, the in-house counsel for United involved with the Provigil matter include the following:

                NAME UNITED BRANCH POSITION
                Marianne Short       UHG                   General counsel
                Matthew Shors        UHG                   Head of litigation
                Heather Redmond      UHG                   Deputy general counsel for
                                                           intellectual property &amp
                                                           litigation
                Thad Johnson         United Healthcare     General counsel
                Andrea Boado         United Healthcare     Deputy general counsel
                Chris Zaetta         United Healthcare     Head of litigation
                Jeremy Johnson       United Healthcare     Senior associate general
                                                           counsel
                Laurie Wolfe         United Healthcare     Senior associate general
                                                           counsel
                Matt Klein           Optum                 Head of litigation
                Betsy Schmiesing     Optum                 Litigation manager
                

C. United's Retention of Outside Counsel to Handle Provigil

® Matters

13. On April 20, 2012, Schmiesing signed an engagement letter, on behalf of United, retaining Robert Rhoad, Esq. of Crowell & Moring LLP ("Crowell") and Mark Sandmann, Esq. of Gibson & Sharps ("Gibson") "in resolving potential claims United has against Cephalon, Inc. ("Cephalon") in the pending matter captioned as In Re Modafinil Antitrust Litigation, No. 06-CV-01797-RBS (E.D. Pa.) ... as a result of Cephalon's alleged anticompetitive conduct in connection with its marketing and sale of Provigil

®." (Trial Exhibit ("TX") 2; N.T. 4/25/18, 32:1–18.)

14. The "Scope" provision of the engagement letter stated:

In conjunction with its representation of United in this Matter, Crowell & Moring and Gibson & Sharps will pursue settlement of claims on behalf of United against Cephalon based on alleged violations of state antitrust/consumer protection statutes and common law due to Cephalon's alleged anticompetitive conduct in connection with its marketing and sale of Provigil

. The representation in this Matter will pertain to efforts to obtain recovery for United through settlement...