Teva Pharm. Indus., Ltd. v. Unitedhealthcare Servs., Inc.
| Decision Date | 20 April 2018 |
| Docket Number | CIVIL ACTION No. 16-4870 |
| Parties | TEVA PHARMACEUTICAL INDUSTRIES, LTD., et al., Plaintiffs, v. UNITEDHEALTHCARE SERVICES, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
MEMORANDUM
This case arises out of a set of antitrust actions, brought pursuant to FTC v. Actavis, Inc., 570 U.S. 136 (2013), which involve reverse settlement payments between the brand name manufacturer of the drug Provigil® and various generic drug manufacturers. Following my denial of class certification for the end-payor plaintiffs in the case of Vista Healthplan v. Cephalon, Inc., et al., Civil Action No. 06-1833, the putative class plaintiffs and a separate group of third-party payers—of which Defendant United Healthcare Services, Inc. ("UHS") was a part—allegedly reached a settlement agreement with brand manufacturer Cephalon, Inc. and two generic manufacturers Teva Pharmaceutical Industries/Teva Pharmaceuticals USA, Inc. and Barr Pharmaceuticals, Inc. (collectively, the "Cephalon Parties"). UHS has renounced the settlement, claiming that the terms set out in the Memorandum of Understanding ("MOU") do not constitute a binding contract and are unenforceable. UHS also asserts that even if the MOU is valid, its lawyers were not authorized to enter into such an agreement. The Cephalon Parties have sued to enforce the MOU.
The Cephalon Parties have moved for partial summary judgment on the sole issue of whether the contract is binding and enforceable as written (the question of the lawyers' authority involves factual issues not appropriate for disposition under Federal Rule of Civil Procedure 56). For the reasons set forth below, I find that the MOU sets forth the essential terms of a settlement and constitutes a binding, enforceable, and unambiguous contract.
In connection with their briefing on the Motion for Partial Summary Judgment, the parties submitted lengthy recitations of the underlying facts accompanied by numerous supporting exhibits. I provide a synopsis of these facts only for the purpose of lending context to the dispute giving rise to this litigation. This summary is not necessary to determine, as I do below, that the four corners of the MOU at issue create a legally binding and enforceable contract, are unambiguous, and clearly define the parties' mutual obligations.
Beginning in 2006, a series of antitrust suits were brought alleging that delayed entry of generic versions of the branded drug Provigil® resulted in various entities and individuals overpaying for the drug. These lawsuits were consolidated into multiple subcategories, including: cases filed by direct purchasers of Provigil from Cephalon for re-distribution, King Drug Company of Florence, Inc., et al. v. Cephalon, Inc., et al., Civil Action No. 06-1797; cases brought by end-payors that purchased Provigil indirectly, Vista Healthplan, Inc. et al. v. Cephalon, Inc., et al., Civil Action No. 06-1833; a case filed by the Federal Trade Commission ("FTC"), Federal Trade Commission v. Cephalon, Inc., Civil Action No. 08-2141, and a case brought by a separate generic drug company, Apotex v. Cephalon, Inc., et al., Civil Action No. 06-2768.
Cephalon, Inc. reached a settlement with the FTC in May 2015, resulting in a Stipulated Order for Permanent Injunction and Equitable Monetary Relief, which I entered on June 17, 2015. That settlement required Cephalon, Inc. to deposit $1.2 billion, less amounts already paid out in related case settlements, into an FTC-administered account. I also ordered that the FTC Settlement Fund be held in trust to satisfy the amount of any settlement or judgment regarding other Provigil claims. Subsequently, the Cephalon Parties reached settlements with other plaintiffs, all of which have been or will be paid from the FTC Settlement Fund.
As noted above, a class action was brought by the end-payors of Provigil ("end-payor plaintiffs") in Vista HealthPlan, Inc. et al. v. Cephalon Inc., et al. Civ. A. No. 06-1833. The lead lawyers for that proposed putative class included, among others, Jeffrey Kodroff and John Macoretta of Spector Roseman Kodroff & Willis, P.C. (Decl. of Abby Dennis ("Dennis Decl."), Ex. 1, at UHS-EDPa-0000420.) I denied class certification on June 1, 2015.
Following the denial of the class certification motion, Mr. Macoretta, on behalf of the former putative class members, began settlement discussions with Jay Lefkowitz of Kirkland and Ellis LLP, counsel for the Cephalon Parties. (Dennis Decl., Ex. 7.) Soon thereafter, another attorney, Richard Cohen of the Lowey firm, also contacted Mr. Lefkowitz, stating that he represented "a group of large third party payers including Aetna, Humana, the Blue Cross Association, and others" that intended to either intervene in the existing action or file a new action. (Dennis Decl., Ex. 8.) UHS was among this group of third-party payers. (Id.)
At that time, UHS, as an individual entity, was represented by Robert Rhoad of Crowell & Moring LLP, and Mark Sandmann and Pamela Slate, both of Hill, Hill, Carter, Franco, Cole &Black, P.C. (collectively, "UHS outside counsel"). (Dennis Decl., Ex. 10.) UHS's in-house counsel was Elizabeth Schmiesing. (Id.)
Given the myriad of attorneys involved in the settlement talks, a summary of the various parties/groups and attorneys/law firms is helpful:
(Id.) When asked about her understanding of this e-mail, Ms. Schmiesing testified:
(Weidenhammer Decl., Ex. 3, Dep. of Elizabeth Schmiesing ("Schmiesing Dep.") 78:10-79:14.)
On July 10, 2015, Mr. Cohen informed Mr. Lefkowitz that (Dennis Decl., Ex. 12.) Ten days later, Mr. Cohen wrote again, stating "we've made peace with the Macoretta class action group, so we expect to be able to negotiate for virtually all endpayers." (Dennis Decl., Ex. 13.)
During this time, Mr. Cohen and Mssrs. Lefkowitz and Skidmore negotiated a tolling agreement. This agreement was first executed by Mr. Cohen on July 8, 2015, on behalf of the approximately twenty health plans his firm represented, with additional lawyers signing on behalf of different clients at later dates. (Dennis Decl., Exs. 14-16.) Mr. Sandmann and Mr. Rhoad, on behalf of UHS, signed the tolling agreement on July 22, 2015. (Id.) These healthplans, through lead counsel Mr. Cohen, eventually became known as the Settling Health Plans ("SHPs").
All parties agree that, on October 22, 2015, Mr. Lefkowitz and Mr. Cohen participated in a phone call in which they agreed to a $125 million settlement number in exchange for a global release of Provigil-related claims against the Cephalon Parties. (Lefkowitz Dep. 85:18-86:11.) Mr. Cohen described it as a "routine settlement negotiation" which was the final step after "many, many steps leading up to it." (Dennis Decl., Ex. 18, Dep. of Richard Cohen ("Cohen Dep."), 111:4-113:4.)
Mr. Cohen indicated that he engaged in multiple communications to keep his negotiating partners from the other SHPs apprised of the progress in the settlement negotiations:
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