Free Response to Motion - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE STATE OF FLORIDA, et al, Plaintiffs, v. ABBOTT LABORATORIES, FOURNIER INDUSTRIE ET SANTÉ, and LABORATOIRES FOURNIER, S.A., Defendants. ) ) ) ) ) ) ) ) ) ) )

C.A. No. 08-155 (SLR)

OPPOSITION TO PLAINTIFF STATES' MOTION TO CONSOLIDATE WITH CASES 05-340, 05-1512, AND 03-120 INTRODUCTION The twenty-six Plaintiff States seek to skip the normal civil litigation process and inject themselves into a trial scheduled to occur in November 2008--less than eight months after they filed their Complaint--a trial which already includes at least three groups of private plaintiffs that have been litigating this case for over three years. And despite their assertions to the contrary, the States' claims involve many dozens of varied state laws and rules that are not implicated in the private cases. Defendants would be severely prejudiced--both procedurally and before the jury--if the States are allowed to consolidate their cases with the long-pending private litigations. The States' motion to consolidate is all about them. The States claim that they have been "investigating this case for over a year and a half," but fail to mention the complete lack of discovery by defendants caused by the States' failure to initiate an action until a few months before the trial of the private-plaintiff actions. They allude to their own cooperation with the private plaintiffs in this matter, but ignore the fact that they have provided no information at -1-

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all to defendants. They point to the fact that the allegations in their complaint are similar to those stated by private plaintiffs, but fail to acknowledge that their allegations raise different factual and legal issues. And they state that they are ready to join in the already-commenced briefing on summary judgment, but fail to note that Abbott and Fournier are just beginning to analyze the States' claims under the various state rules and law and have yet to request, collect or review any State documents to determine whether there is a basis for dispositive motions based on notice or standing requirements, statutes of limitations, and issues of reliance, causation, and mitigation. Thus, all the States' brief really says is that the States believe that they will be well served by taking advantage of the work done by the private plaintiffs, and by joining them at trial. What they do not say is that Abbott and Fournier have had no chance to take discovery of the States, to develop their defenses to the States' claims, or to evaluate dispositive (or partially-dispositive) motions based upon, for example, issues such as notice or standing requirements and statutes of limitations, reliance, causation, and mitigation. But this is not the only prejudice to defendants that is at issue here. As this Court recognized at the April 3, 2008 Status Conference when it first rejected the States' motion for consolidation, the presence of multiple states' attorneys general implicates issues of fairness and prejudice to the defendants. This case already involves an unusually large number of different plaintiffs--two competitors, two proposed classes, and a number of opt-outs. Adding 26

government representatives to the already plaintiff-heavy side of the case simply "piles" additional weight against defendants in a private-party against private-party litigation. This creates a significant risk of prejudice to defendants. Status Conference Tr. at 50-51 (Exhibit A).

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This prejudice, taken together with the fact that defendants have not had any discovery to date, outweighs any benefit of allowing the States to participate in the November trial. ARGUMENT This Court has "broad discretion" to grant or deny consolidation in connection with its powers to manage its docket. See, e.g., Waste Distillation Tech., Inc. v. Pan Am. Res., Inc., 775 F. Supp. 759, 761 (D. Del. 1991) (citing Ellerman Lines, Ltd. v. Atl. & Gulf Stevedores, Inc., 339 F.2d 673, 675 (3d Cir. 1964)). And, while common issues are "a prerequisite to consolidation," "[t]he mere existence of common issues... does not require consolidation." Id. (citing Rohm & Haas Co. v. Mobil Oil Corp., 525 F. Supp. 1298, 1309 (D. Del. 1981)). When considering a motion for consolidation under Rule 42(a), a court must weigh the benefits of consolidation against any prejudice. See, e.g., In re Consol. Parlodel Litig., 182 F.R.D. 441, 444 (D.N.J. 1998). I. CONSOLIDATING THE STATE ACTIONS WITH THE PRIVATE PLAINTIFF CASES WOULD PREJUDICE ABBOTT AND FOURNIER'S ABILITY TO DEFEND THESE ACTIONS.

The States contend that they have been "investigating this case for over a year and a half" and that they have "regularly conferred" with counsel for the private plaintiffs. It is one thing for the States to assert that they are ready to try this case. But what about the defendants? While the States have had eighteen months to prepare, during which time they have issued CIDs and had access to the entire discovery record including all of the documents produced by Abbott and Fournier in the private actions, Abbott and Fournier have had no opportunity whatsoever to take discovery of the States. The States' assertion that their cases are identical to the private actions and require no additional preparation by Abbott and Fournier is meritless. While the States assert -3-

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that the factual allegations of each complaint, and the legal theories they rely upon, are "substantively identical" to those in the private actions, they ignore the fact that Abbott and Fournier have had no opportunity to investigate the application of the various state statutes to governmental actions to identify specific legal defenses that they may have available, such as notice or standing requirements and statutes of limitations. Nor have Abbott and Fournier had sufficient time to review the parens patriae law--which varies from state to state and which may provide a basis for unique defenses or separate dispositive motions. And Abbott and Fournier have not had an opportunity to take discovery of the States, and have therefore had no opportunity to explore possible defects in factual elements of the States' claims, including issues of reliance, causation, and mitigation, or to develop evidence in support of their claims. Forcing Abbott and Fournier to defend the States' claims without sufficient discovery would severely hamper Abbott and Fournier's ability to present a complete defense, and would result in severe prejudice. The States chose to be interested-but-untouchable

observers for the last eighteen months. They reaped the benefits of discovery taken of Abbott and Fournier without subjecting themselves to discovery. Now, close to trial in the private litigations, the States are attempting to do an end-run around the well-established civil litigation process. The States' tactic of waiting in the wings while the private litigations played out should not be rewarded. II. PERMITTING THE STATES TO APPEAR AT TRIAL WITH THE PRIVATE PLAINTIFFS WOULD RISK PREJUDICING ABBOTT AND FOURNIER IN THE EYES OF THE JURY.

As this Court has recognized, this case is already unusually "plaintiff-heavy." The plaintiffs lined up to face defendants at trial include two purported nationwide classes, two competitors, and a long list of opt-out plaintiffs. -4Adding the considerable weight of the

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governments of 26 states to this large pile of plaintiffs risks prejudicing Abbott and Fournier in the eyes of the jury. A jury instruction such as the one suggested by the states, that "state Attorneys General should be viewed no more or no less favorably than the private plaintiffs," would do nothing to counterbalance the sheer weight in terms of number of plaintiffs that 26 attorneys general would add to the case on the plaintiffs' side. The States' choice of words is significant. The States cite cases in which State Attorneys General "have litigated side by side" with private plaintiffs. But they do not assert that the State Attorneys General appeared en masse at trial with private litigants, or that the issue of prejudice to the defendants was ever litigated or even considered by any of those courts. Most of the cases cited by the States were multidistrict litigations ("MDL") "coordinated or consolidated for pretrial purposes" under 20 U.S.C. § 1407, not for trial as the States seek here. As the Court is well aware, in MDL litigations, each case is sent back to the transferor court for trial. For example, the States cite In re Pharmaceutical Industry Average Wholesale Price Litigation, No. MDL 1456-01-12257-PBS (D. Mass) ("AWP Litigation"). In that case, a handful of State actions were transferred to the District of Massachusetts, but each State case will go back to the transferor court for trial. In fact, the district judge overseeing the MDL has proposed sending the Nevada and Montana actions back to the transferor courts even for rulings on summary judgment motions. In re Pharm. Indus. Average Wholesale Price Litig., No. 1:01-cv-12257-PBS, Memorandum and Order, Sept. 12, 2007, Docket No. 4708 (attached hereto as Exhibit B). The only claims that went to trial in the District of Massachusetts in the AWP Litigation were claims by private litigants on behalf of Massachusetts consumers. See In re Pharm. Indus. Average Wholesale Price Litig., 491 F. Supp. 2d 20 (D. Mass. 2007). -5-

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Moreover, in most of the cases cited by the States, no State Attorney General actually went to trial (mainly due to settlements before trial), so the issues of which plaintiffs should be grouped for trial (if any), and the prejudice to the defendants was never litigated--and the States cite no ruling in which the risk of prejudice noted by the Court in its April 3, 2008 ruling was addressed. See, e.g., In re Terazosin Hydrochloride Antitrust Litig., No. MDL-131799 (S.D. Fla.); In re Buspirone Antitrust Litig., MDL 1413 (S.D.N.Y.); In re CardizemCD Antitrust Litig., No. MDL 1278 (E.D. Mich); In re Infant Formula Multidistrict Litig., No. 91878 (N.D. Fla.); In re Remeron End-Payor or Antitrust Litig., No. 02-2007, 04-5126 (D.N.J.); State of Ohio v. Bristol-Myers Squibb Co., 02-civ-01080 (D.D.C.). Nor do the States point to any case in which the States prepared for 18 months and then attempted to enter the case on the eve of trial, effectively denying the defendants any discovery and the opportunity to prepare their defense and file dispositive motions. prejudice to defendants in this case outweighs any benefit of consolidation. CONCLUSION For all the foregoing reasons, the Plaintiff States' Motion to Consolidate should be denied. MORRIS, NICHOLS, ARSHT & TUNNELL LLP RICHARDS, LAYTON & FINGER The

/s/ Mary B. Graham
Mary B. Graham (#2256) James W. Parrett, Jr. (#4292) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200 [email protected] [email protected]

/s/Anne Shea Gaza
Frederick L. Cottrell, III (#2555) Anne Shea Gaza (#4093) One Rodney Square Wilmington, DE 19801 (302) 651-7700 [email protected] [email protected]

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OF COUNSEL: William F. Cavanaugh, Jr. Thomas W. Pippert Chad J. Peterman Alexis Deise PATTERSON, BELKNAP, WEBB & TYLER LLP 1133 Avenue of the Americas New York, NY 10036-6710 Attorneys for Abbott Laboratories

OF COUNSEL: William Baer James L. Cooper Anne P. Davis ARNOLD & PORTER LLP 555 Twelfth Street, N.W. Washington, DC 20004

Timothy C. Bickham STEPTOE & JOHNSON LLP 1330 Connecticut Avenue, N.W. Washington, DC 20036-1795 Attorneys for Fournier Industrie et Santé and Laboratoires Fournier, S.A., June 2, 2008
2349424

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CERTIFICATE OF SERVICE I hereby certify that on June 2, 2008, I caused the foregoing to be electronically filed with the Clerk of the Court using CM/ECF which will send electronic notification of such filing to the following: Elizabeth G. Arthur R. Scott Palmer OFFICE OF THE ATTORNEY GENERAL FOR THE STATE OF FLORIDA Craig S. Farringer Susan Phan OFFICE OF THE ATTORNEY GENERAL FOR THE DISTRICT OF COLUMBIA Additionally, I hereby certify that true and correct copies of the foregoing were caused to be served on June 2, 2008 upon the following individuals in the manner indicated: BY ELECTRONIC MAIL Representing the Plaintiff States: Elizabeth G. Arthur [email protected] R. Scott Palmer [email protected] OFFICE OF THE ATTORNEY GENERAL FOR THE STATE OF FLORIDA Craig S. Farringer [email protected] Susan Phan [email protected] OFFICE OF THE ATTORNEY GENERAL FOR THE DISTRICT OF COLUMBIA Representing the Fournier Defendants: Frederick L. Cottrell, III [email protected] Anne Shea Gaza [email protected] RICHARDS, LAYTON & FINGER William Baer [email protected] James L. Cooper [email protected] Anne P. Davis [email protected] ARNOLD & PORTER LLP Timothy C. Bickham [email protected] STEPTOE & JOHNSON LLP

/s/ Mary B. Graham
Mary B. Graham (#2256)
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EXHIBIT A

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EXHIBIT B

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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS _____________________________________ IN RE PHARMACEUTICAL INDUSTRY ) AVERAGE WHOLESALE PRICE ) LITIGATION ) MDL No. 1456 _____________________________________) THIS DOCUMENT RELATES TO: ) CIVIL ACTION NO. State of Nevada v. American Home ) 01-CV-12257 Products, et al., ) Civil Action No. 02-CV-12086-PBS ) ) State of Montana v. Abbott Labs., ) Inc., et al., ) Civil Action No. 02-CV-12084-PBS ) _____________________________________) MEMORANDUM AND ORDER September 12, 2007 Saris, U.S.D.J. I. INTRODUCTION The states of Nevada and Montana allege that pharmaceutical manufacturers fraudulently overstate the published "average wholesale prices" ("AWPs") of many of their prescription drugs to the detriment of the states, which reimburse providers based on AWPs. The Judicial Panel on Multidistrict Litigation ("JPML")

transferred the cases to this Court for pretrial proceedings, as part of the major multidistrict litigation ("MDL") on pharmaceutical pricing. Defendants move the Court to suggest

transfer of the cases back to the Federal courts in their home states to decide summary judgment motions. After hearing oral The Court suggests

argument, the defendants' motion is ALLOWED.

that the Montana and Nevada cases be remanded to their Federal courts of origin.

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II. PROCEDURAL HISTORY In 2002, Montana filed a single complaint, Montana v. Abbott Laboratories, et. al., 02-CV-12084-PBS (Montana), and Nevada filed two complaints against two different sets of defendants, Nevada v. Abbott Laboratories, et. al., CV-2-00260 ("Nevada I"), and Nevada v. American Home Products, et. al., 02-CV-12086-PBS ("Nevada II"). Defendants removed all three cases to federal The

court and the JPML transferred the cases to this Court.

states then moved to remand the cases, arguing that there were no federal issues substantial enough to confer federal jurisdiction. In 2003, this Court denied the motions to remand the Montana and Nevada II cases, but remanded Nevada I. See Montana v. Abbott After the states In

Labs, 266 F. Supp. 2d 250 (D. Mass. 2003).

filed amended complaints, the defendants moved to dismiss.

2004, this Court allowed in part and denied in part the motions to dismiss. See In re Pharm. Indus. Average Wholesale Price The official cut-

Litig., 321 F. Supp. 2d 187 (D. Mass. 2004).

off for pretrial discovery was March 31, 2006, though some discovery was conducted through last summer as to defendant Baxter Healthcare Corporations and Baxter International, Inc.1

On March 5, 2007, the Court allowed plaintiffs' motion to stay, with respect to Baxter, the Montana and Nevada cases (Docket No. 3806) for 120 days to allow the parties to develop an alternative schedule to deal with the remaining discovery issues for that defendant. On June 21, 2007, plaintiffs filed an another motion to continue the stay which was denied by the Court on July 2, 2007. The magistrate judge has reported there are no pending matters involving Baxter. Accordingly, all discovery 2

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and two third party depositions.

On February 8, 2007 the

defendants filed a joint motion for summary judgment in both the Montana and Nevada II cases, as well as individual motions on behalf of many of the over twenty defendants. Montana also filed

a motion for partial summary judgment against certain defendants. On the same date, defendants filed a motion to suggest transfer of the Montana and Nevada II cases to their Federal courts of origin. III. DISCUSSION The defendants argue that the most efficient and practical course is for this Court to suggest transfer now, rather than to decide multiple summary judgment motions which address primarily state law claims.2 Plaintiffs contend that the summary judgment

motions should be decided here, because this Court has experience interpreting common issues including the meaning of AWP and the imputation of knowledge based on government reports and other documents that have been presented to this Court in several proceedings. Plaintiffs contend that remanding the cases now

would invite inefficiencies and inconsistencies that the MDL referral was meant to diminish. Under the statute governing MDL actions, "[e]ach action so

should now be finished. The Court has denied without prejudice any pending motions for summary judgment so that they may be refiled in the transferor Districts in light of my recent rulings. See Docket # 4707. 3
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transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated." 28 U.S.C. § 1407(a)(emphasis added). While the MDL

panel makes the ultimate decision of whether remand is appropriate, the panel looks to the transferee court to "suggest when it should order remand." Fed. Judicial Ctr., Manual for "Whether Section 1407

Complex Litigation Fourth § 20.13 (2004).

remand is appropriate for an action in any particular multidistrict docket is based upon the totality of circumstances involved in that docket." In re Managed Care Litig., 2006 U.S. One key factor in

Dist. LEXIS 26561 at *2 (J.P.M.L. 2006).

making this determination is "when remand will best serve the expeditious disposition of the litigation." Litigation Fourth § 20.13. Manual for Complex

Thus, it is not necessary that the

transferee court complete all pretrial proceedings before suggesting remand. See In re Multidistrict Civil Actions

Involving Air Crash Disaster Near Dayton, 386 F. Supp. 908, 909 (J.P.M.L. 1975) ("It is not contemplated that a Section 1407 transferee judge will necessarily complete all pretrial proceedings in all actions transferred and assigned to him by the Panel, but rather that the transferee judge in his discretion will conduct the common pretrial proceedings with respect to the various actions and any additional pretrial proceedings as he deems otherwise appropriate."). 4

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A section from the Manual for Complex Litigation Fourth is particularly instructive3 in this situation: If summary judgment motions are pending, the transferee judge must consider whether to decide the motions or to transfer the cases back to the transferor districts. If the summary judgment motion pertains to one or few cases, or rests on application of the transferor court's conflicts-of-law and substantive law rules, the transferor judge may be able to decide the motions most efficiently. If the summary judgment motions involve issues common to all the cases centralized before the MDL court, however, the transferee judge may be in the best position to rule. Manual for Complex Litigation Fourth § 22.36. After reviewing the issues presented in the summary judgment motions, I believe it is appropriate to transfer the cases back to their home states at this time. This Court, as the MDL

transferee court, has served several important functions for handling these pharmaceutical pricing cases. I have issued

numerous extensive opinions to help transferor Federal courts and state courts to understand the complex world of drug pricing. the class certification order, with the aid of an independent expert, I explained in detail the pharmaceutical industry and the reimbursement systems under private contracts, federal statutes and regulations, and state laws. See In re Pharm. Indus. Average This In

Wholesale Price Litig., 230 F.R.D. 61, (D. Mass. 2005).

This text is found in section 2 of the Manual for Complex Litigation Fourth, which deals with mass torts. While the AWP litigation does not necessarily fit the definition of a mass tort, the section is nonetheless instructive for its guidance to an MDL court dealing with summary judgment motions in an MDL action involving plaintiffs in a substantial number of states. 5

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included an analysis of the many parties involved, the interactions between those parties, and the different systems for physician administered drugs versus self administered drugs. id. See

After careful review of the relevant legislative history, I

also defined the meaning of "average wholesale price" in the federal Medicare statute to accord with the plain meaning of those terms. See In re Pharm. Indus. Average Wholesale Price Most recently, after a

Litig., 460 F. Supp. 2d 277 (2006).

twenty day bench trial, I found that three defendant pharmaceutical companies unfairly and deceptively inflated drug prices in violation of Massachusetts consumer protection laws. See In re Pharm. Indus. Average Wholesale Price Litig., 491 F. Supp. 2d 20 (D. Mass. June 21, 2007). In that decision, I made

numerous factual findings regarding the conduct of the particular defendant manufacturers and ruled on various legal issues raised on summary judgment before trial, as well as the Daubert challenge. Finally, in the Montana and Nevada II cases

specifically, the magistrate judge and I have dealt with a multitude of discovery matters and dismissal motions that have prepared these cases for summary judgment proceedings. The remaining issues in the Nevada II and Montana cases depend almost exclusively upon the application and interpretation of substantive state laws, primarily relating to state Medicaid benefits. Neither Nevada nor Montana is seeking to recover

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damages on behalf of Medicare Part B beneficiaries.4

(See Nevada

Pl.'s Mem. in Opp. to Defs.' Joint Mot. for Summ. J. at 23; Montana Pl.'s Mem. in Opp. to Defs.' Joint Mot. for Summ. J. 22.) The main issues in the summary judgment motions are the at

knowledge and expectations of each state regarding acquisition costs and spreads, and the meaning of AWP as used in certain state laws or administrative rules. These issues are specific to

their respective states and do not require the benefit of my experience grappling with the complexities of drug reimbursement under Medicare, although many of the issues are similar. Furthermore, given the heavy burden on this docket, due in great part to various stages of this MDL, the Montana and Nevada II cases may be significantly delayed if they remain in this Court. The federal government has entered with a storm of qui

tam cases and there are related cases that have been removed from state court, or that involve generic drugs, wholesalers or publication companies. It is in the interests of justice to

return the cases to their home districts, so that the Federal courts in Montana and Nevada can begin dealing with the claims

Nevada is still bringing a parens patriae claim on behalf of Nevada citizens in which it seeks only "civil penalties incurred by the Nevada Medicaid Program." (Nevada Pl.'s Mem. in Opp. to Defs.' Joint Mot. for Summ. J. (Docket No. 3910) at 23.) The state is not pursuing "claims on behalf of non-Medicaid state entities." (Id. at 29.) Similarly, Montana continues to press its parens patriae claims, but notes that damages are limited to those "incurred by the Montana Medicaid Program." (Montana Pl.'s Mem. in Opp. to Defs.' Joint Mot. for Summ. J. (Docket No. 3902) at 22.) 7

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and theories of the cases based on the Medicaid laws in the states in which they sit. See Lexecon Inc. v. Milberg Weiss

Bershad Hynes & Lerach, 523 U.S. 26, 34 (1998) (Section 1407 "obligates the Panel to remand any pending case to its originating court when, at the latest, those pretrial proceedings have run their course."). The Court had originally deferred ruling on the motion to transfer until the Court issued its decision in the bellwether trial and because of pending mediation sessions with Eric Green. However, the decision has now been issued and there is no reason that a transfer would disrupt the mediation discussions, which I believe all parties have agreed to.

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ORDER The defendants' motion to suggest transfer of the Montana and Nevada II cases to their Federal courts of origin (Docket No. 3685) is ALLOWED.

S/PATTI B. SARIS United States District Judge

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