The FTC is Regretting its Forum Selection in Lidoderm/Opana Reverse Payment Case
The Federal Trade Commissions suffered a setback in its effort to hold Endo Pharmaceuticals accountable for two different reverse payment settlement agreements. The FTC sued Endo and two different generic companies in the Eastern District of Pennsylvania over reverse payment agreements concerning Endo’s two most important products, Lidoderm and Opana ER. Endo and the generic defendants took issue with the FTC lumping the two agreements together into one case and moved to sever them into two separate cases as well as moving to dismiss the cases entirely. Both of the challenged agreements are the subject of private antitrust cases pending in other jurisdictions. The Lidoderm case is pending in the Northern District of California, while the Opana ER case is pending in the Northern District of Illinois. The FTC started its case off with a bang, entering into a stipulated permanent injunction against Teikoku, which was implicated in the Lidoderm reverse payment agreement.
Judge Diamond Grants Severance, and Rejects Transfer Suggestion
On October 20, 2016, Judge Paul Diamond granted a motion to sever the FTC case into two separate actions, and chastised the FTC for trying to combine into one case claims that “concern different drugs, different markets, different patents, different patent litigations, different agreements, different alleged payments, different parties, and different timeframes.”
In the Eastern District of Pennsylvania, while the defendants moved to dismiss the FTC’s complaint, the FTC asked that the court first address the severance motion. In a stinging rebuke, Judge Diamond blasted the FTC for indicating that if he granted the severance motion, then the FTC would withdraw its complaint and refile in the jurisdictions where the private litigations were proceeding. Judge Diamond noted, “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.” Indeed, he continued, “Should the FTC voluntarily withdraw them, I will entertain Defendants’ requests for fees and costs.”
Judge Diamond rejected the FTC’s suggestion that he transfer the severed actions on his own motion under Rule 41, noting that to do so would improperly promote forum-shopping, and deprive defendants of the option to seek fees and costs under Rule 41(d) for preparing and filing their motions to dismiss.
Five days later, on October 25, as it had suggested in the briefing on the severance motion, the FTC filed a notice of voluntary dismissal. Judge Diamond ordered that the dismissal be put on hold, and that the parties must brief whether the FTC could dismiss only part of its case given that as part of the stipulated injunction, he retained jurisdiction over the injunction. Thus, it appears that Judge Diamond, who already showed he would entertain a defense motion for costs, is going to make it difficult for the FTC to take its marbles to another forum.
FTC’s Forum Selection Strategy Was Designed to Eliminate Appellate Forum Shopping
Ironically, the FTC’s predicament over its forum selection may well have arisen out of the FTC’s effort to avoid the appellate forum selection afforded defendants from appeals of the rulings from cases initially brought before the Commission itself. The FTC has a choice about whether to proceed before an administrative law judge, which is appealable to the full Federal Trade Commission, or file suit in a District Court. An important difference between the two options is that under 15 U.S.C. § 45 (c), appeals from decisions by the full Commission may be made to “any circuit where the method of competition or the act or practice in question was used or where such person, partnership, or corporation resides or carries on business.” Thus, where the FTC brings its case before an Administrative Law Judge, a defendant seeking appellate review can shop for the most friendly Circuit in which it does business. This happened in the K-Dur case, where the defendants appealed the adverse Commission decision to the Eleventh Circuit, which it thought, and which ultimately proved to be, a friendly forum. The Eleventh Circuit rejected the ruling in favor of the FTC. While the Supreme Court denied certiorari to review the Eleventh Circuit’s K-Dur ruling, it later rejected K-Dur it its Actavis decision. After its K-Dur experience, FTC commissioner Jon Leibowitz noted that in the future that the FTC could exercise its forum selection options more strategically, by considering the option to file complaints in District Courts instead of choosing to litigate in the administrative forum.
Now, the FTC appears to be regretting its choice of forum over the Lidoderm and Opana ER actions, and instead appears to now prefer to join the private cases proceeding in other Districts. By no means is the ability to choose your forum any guarantee; it is, as Forrest Gump’s momma always used to say about life, like a box of chocolates, you never know what you are going to get.
About Faruqi & Faruqi, LLP
Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Delaware and Pennsylvania. The firm is co-lead counsel for the private plaintiffs in the private Lidoderm litigation, and is counsel for the class in the private Opana litigation.
Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, direct purchasers, consumers and employees.
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About Joe Lukens
Joe Lukens is a partner in the firm’s antitrust practice group, resident in the firm’s Pennsylvania office. He has represented plaintiffs in antitrust litigation for over 20 years.