The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
KING DRUG CO. OF FLORENCE, INC., : CIVIL ACTION
et al. :
v. :
:
ABBOTT LABORATORIES, et al. : NO. 19-3565
MEMORANDUM
Bartle, J. March 23, 2022
Plaintiffs, King Drug Co. of Florence Inc.,
AmerisourceBergen Corp., AmerisourceBergen Drug Corp., Bellco
Drug Co., H.D. Smith LLC, Cardinal Health Inc., Harvard Drug
Group LLC, McKesson Corp., J.M. Smith Corp., Burlington Drug
Co., North Carolina Mutual Wholesale Drug Co., Dakota Drug Inc.,
Value Drug Co., and FWK Holdings LLC are direct-purchase
wholesalers of pharmaceutical drugs. They bring this civil
antitrust action against defendants Abbott Laboratories,
AbbVie Inc., AbbVie Products LLC, and Unimed Pharmaceuticals LLC
(collectively “AbbVie”), Besins Healthcare Inc. (“Besins”),
Actavis Holdco U.S. Inc., Actavis Inc., Paddock Laboratories
Inc., Par Pharmaceutical Inc., and Teva Pharmaceuticals USA Inc.
(“Teva”) who are brand and generic drug manufacturers.
Plaintiffs allege that they were denied the opportunity to
purchase lower-priced generic versions of the pharmaceutical
product AndroGel 1% due to defendants’ anticompetitive conduct
under the Sherman Act, 15 U.S.C. §§ 1 et seq.
This action follows litigation brought by the Federal
Trade Commission (“FTC”) against defendants AbbVie Inc., Abbott
Laboratories, Unimed Pharmaceuticals LLC, and Besins Healthcare
Inc. for violation of § 5(a) of the Federal Trade Commission Act
(“FTC Act”) and § 2 of the Sherman Act in FTC v. AbbVie Inc.,
et al., Civil Action No. 14-5151. Before the court is the
motion of plaintiffs to preclude defendants AbbVie and Besins
from relitigating certain facts and issues decided in that
underlying action.
I
AndroGel 1% is a brand-name transdermal testosterone
gel product developed by AbbVie1 and Besins.2 The United States
Food and Drug Administration (“FDA”) granted approval to
AndroGel 1% in 2000. AbbVie and Besins together own U.S. Patent
No. 6,503,894 (“‘894 patent”) for AndroGel 1%. The complaint
alleges that defendant AbbVie, together with other defendants,
1. The court will use “AbbVie” to generally refer to all of
the subsidiaries and predecessors of AbbVie Inc., including
Solvay Pharmaceuticals LLC, Abbott Products LLC, AbbVie Products
LLC, Unimed Pharmaceuticals LLC, and Abbott Laboratories.
2. The facts are taken from the complaint and this court’s
opinions in the underlying action. See Civil Action
No. 14-5151.
engaged in a scheme from at least 2007 to 2014 to delay and to
exclude generic competition for AndroGel 1%.
Specifically, the complaint makes the following
claims: (1) the unlawful maintenance and extension of a monopoly
through an overarching conspiracy in violation of 15 U.S.C. § 2
against AbbVie (Count I); (2) an anticompetitive reverse payment
agreement in violation of 15 U.S.C. § 1 against AbbVie and
Actavis (Count II); (3) an anticompetitive reverse payment
agreement in violation of 15 U.S.C. § 1 against AbbVie and
Par/Paddock (Count III); (4) the unlawful maintenance and
extension of a monopoly through sham litigation in violation of
15 U.S.C. § 2 against AbbVie and Besins (Count IV); and (5) an
anticompetitive reverse payment agreement in violation of
15 U.S.C. § 1 against AbbVie and Teva (Count V).
The present motion of plaintiffs to preclude relates
to Count IV against defendants AbbVie and Besins which alleges
that these defendants illegally maintained their monopoly over
AndroGel 1% by filing sham patent litigation against Perrigo Co.
(“Perrigo”).
In 2011, AbbVie and Besins filed suits for
infringement of the ‘894 patent against potential competitors
Teva and Perrigo who each sought approval from the FDA to
manufacture a generic testosterone 1% gel. These suits
triggered thirty-month stays under the Hatch-Waxman Act,
21 U.S.C. § 355, which precluded final approval by the FDA of
the generic testosterone product for that period of time or
until the infringement action is resolved in the district court,
whichever occurred first.
In 2014, the FTC brought suit against AbbVie and
Besins in this district court for injunctive and equitable
relief pursuant to § 13(b) of the FTC Act for violation of
§ 5(a) of the FTC Act which prohibits “[u]nfair methods of
competition in or affecting commerce.” See Civil Action No.
14-5151. The FTC sought a disgorgement of profits by AbbVie and
Besins and an injunction to prevent them from engaging in
similar misconduct.
As part of that action, the FTC alleged that AbbVie
and Besins maintained an illegal monopoly through the filing of
sham patent infringement lawsuits against Teva and Perrigo to
delay entry into the market of their generic versions of
AndroGel 1%. To prove its case, the FTC had to establish that:
(1) the lawsuits filed by defendants against Teva and Perrigo
were objectively baseless; (2) defendants subjectively intended
to file such baseless lawsuits; and (3) defendants possessed
monopoly power in the relevant market. See Prof’l Real Estate
Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49,
60-61 (1993). This court ruled that the lawsuits against Teva
and Perrigo were objectively baseless and granted summary
judgment in favor of the FTC on that issue. See FTC v. AbbVie
Inc., 2017 WL 4098688 (E.D. Pa. Sept. 15, 2017).
Following a non-jury trial, this court found that it
was the subjective intent of the decision-makers for AbbVie and
Besins to file sham lawsuits to delay Teva and Perrigo from
entering the market with lower-priced generic products and that
this sham litigation was used to maintain monopoly power in the
relevant market. See FTC v. AbbVie Inc., 329 F. Supp. 3d 98
(E.D. Pa. 2018). This court further found that AbbVie and
Besins were liable for disgorgement of ill-gotten profits in the
amount of $448 million as well as prejudgment interest. As for
the request for injunctive relief, this court determined that
the FTC presented no evidence that AbbVie and Besins were
currently violating antitrust laws or about to violate antitrust
laws and that there was no basis to conclude that their
misconduct was likely to reoccur. Accordingly, no injunctive
relief was granted.
On September 30, 2020, our Court of Appeals reversed
the finding that the litigation against Teva was a sham but
affirmed this court’s finding that the litigation against
Perrigo was a sham. See FTC v. AbbVie Inc., 976 F.3d 327
(3d Cir. 2020). The Court also upheld this court’s finding that
AbbVie and Besins had monopoly power in the relevant market.
The Court of Appeals affirmed this court’s denial of
injunctive relief. However, it reversed this court’s decision
that AbbVie and Besins were required to disgorge $448 million in
ill-gotten profits. The Court determined that § 13(b) of the
FTC Act does not confer the power on a court to order
disgorgement and thus ruled that § 13(b) is limited to ordering
injunctive relief and not disgorgement of profits. The Court
noted that, at the time of its decision, the circuits were split
on whether courts may order disgorgement under § 13(b) of the
FTC Act. That issue had yet to be resolved by the Supreme
Court.
On July 9, 2020, after our Court of Appeals heard oral
argument in the underlying action but prior to its decision on
September 30, 2020, the Supreme Court granted certiorari in
AMG Capital Management, LLC v. FTC. See 141 S. Ct. 1341 (2021).
That case was an action brought by the FTC against payday
lenders for unfair or deceptive practices under § 5(a) and
§ 13(b) of the FTC Act. The FTC in AMG Capital sought a
permanent injunction under § 13(b) to prevent future violations
of the Act by the lenders and asked the court to award monetary
relief in the form of restitution and disgorgement pursuant to
that section. The Supreme Court held in its decision handed
down on April 22, 2021 that § 13(b) “does not grant the
Commission authority to obtain equitable monetary relief.”
Id. at 1352. It explained that § 13(b) is limited to
prospective, not retrospective, relief.
II
In plaintiffs’ preclusion motion before this court,
they argue that the allegations of Count IV of the complaint
against defendants AbbVie and Besins rely on the same evidence
and law as did the allegations in Count I in the underlying
action which alleged that AbbVie and Besins engaged in sham
patent litigation against Perrigo and Teva. Plaintiffs maintain
that this court has already found in the underlying case that
the patent litigation against Perrigo was objectively baseless,
that defendants AbbVie and Besins had the subjective intent to
file that baseless lawsuit, and that these two defendants
possessed monopoly power in the relevant market. Plaintiffs
assert that these findings were necessary and essential to the
judgment in favor of the FTC in this court and further contend
that these findings were all affirmed on appeal. Plaintiffs
thus urge that defendants AbbVie and Besins should be precluded
from relitigating the facts and law relating to Count IV in this
action as those issues have already been decided against these
defendants.
As stated in the Second Restatement of Judgments,
“[w]hen an issue of fact or law is actually litigated and
determined by a valid and final judgment, and the determination
is essential to the judgment, the determination is conclusive in
a subsequent action between the parties, whether on the same or
a different claim.” Restatement (Second) of Judgments § 27
(1980). Courts, including the Supreme Court and our Court of
Appeals, have consistently applied this definition in the Second
Restatement when determining whether an issue is precluded.
See e.g., Bobby v. Bies, 556 U.S. 825, 834 (2009);
Jean Alexander Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d
244, 249 (3d Cir. 2006).
Issue preclusion, otherwise known as collateral
estoppel, can be used “ʽoffensively’ in a new federal suit
against the party who lost on the decided issue in the first
case.” Allen v. McCurry, 449 U.S. 90, 95 (1980). This means
that a plaintiff can “seek[] to foreclose the defendant from
litigating an issue the defendant has previously litigated
unsuccessfully in an action with another party.” Parklane
Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4 (1979).
Four standard requirements for issue preclusion are:
“(1) the identical issue was previously adjudicated; (2) the
issue was actually litigated; (3) the previous determination was
necessary to the decision; and (4) the party being precluded
from relitigating the issue was fully represented in the prior
action.” Jean Alexander, 458 F.3d at 249. Courts also look to
“whether the party being precluded ‘had a full and fair
opportunity to litigate the issue in question in the prior
action,’ . . . and whether the issue was determined by a final
and valid judgment.” Id.
The Supreme Court in a unanimous opinion in Bobby v.
Bies most recently explained that “issue preclusion is a plea
available to prevailing parties. The doctrine bars relitigation
of determinations necessary to the ultimate outcome of a prior
proceeding.” Bobby, 556 U.S. at 829. “If a judgment does not
depend on a given determination, relitigation of that
determination is not precluded.” Id. at 834. The Court further
explained that “[i]ssue preclusion, in short, does not transform
final judgment losers, in civil or criminal proceedings, into
partially prevailing parties.” Id. at 829.
Defendants AbbVie and Besins do not dispute that in
the underlying action they actually litigated whether the patent
infringement lawsuit against Perrigo was a sham litigation.
They also do not dispute that they were fully represented in
that case. They do, however, disagree that this court’s
findings and legal conclusions against them regarding the sham
litigation were essential to the final outcome of that action
since in their view the FTC did not prevail on appeal.
While the Supreme Court in Bobby did not specifically
define the term “prevailing party,” it explained that “final
judgment losers” in both the civil and criminal context cannot
be transformed into “partially prevailing parties” for purposes
of issue preclusion. Id. This echoes the language of the
Second Restatement which refers to issues of fact and law
determined “by a valid and final judgment.” Thus, based on the
Supreme Court’s decision in Bobby and the Second Restatement,
issue preclusion prevents a defendant from relitigating an issue
only when there is a valid and final judgment against that
defendant predicated on that issue.
The Supreme Court similarly defined prevailing party
in Hewitt v. Helms regarding a claim for attorney fees in a case
under 42 U.S.C. § 1983. 482 U.S. 755 (1987). The Court
explained that to be a prevailing party the plaintiff who sought
attorney fees in Hewitt must have “receive[d] at least some
relief on the merits of his claim before he can be said to
prevail.” Id. at 760. The Court, however, noted that plaintiff
had not received any relief, either injunctive, declaratory, or,
because of defendants’ qualified immunity, equitable monetary
relief. Plaintiff did not even obtain relief without a formal
judgment, as in a consent decree or settlement. The Supreme
Court therefore determined that he was not a prevailing party.
In so finding, the Court explained that “[i]n all
civil litigation, the judicial decree is not the end but the
means. At the end of the rainbow lies not a judgment, but some
action . . . by the defendant that the judgment produces – the
payment of damages, or some specific performance.” Id. at 761.
A proper judicial resolution of a case “rather than an advisory
opinion – is in the settling of some dispute which affects the
behavior of the defendant towards the plaintiff.” Id.
As the Supreme Court wrote in Bobby, “[a]
determination ranks as necessary or essential only when the
final outcome hinges on it.” 556 U.S. at 835. This court’s
findings and legal conclusions regarding the sham litigation
were not essential to the final judgment of the Court of Appeals
which determined that the FTC was not entitled to any relief.
The final judgment after appeal in the underlying action did not
depend on whether AbbVie and Besins engaged in sham litigation.
Thus, “relitigation of that determination is not precluded.”
Id. at 834.
The fact that our Court of Appeals affirmed this
court’s findings regarding the sham litigation claim before
denying the FTC any relief does not transform the FTC into a
“partially prevailing part[y].” See Bobby, 556 U.S. at 829.
The Supreme Court in Hewitt explained that a “favorable judicial
statement of law in the course of litigation that results in
judgment against the plaintiff does not suffice to render him a
‘prevailing party.’” 482 U.S. at 763. Thus, plaintiffs here
cannot rely on issue preclusion against defendants AbbVie and
Besins because the FTC was not the prevailing party against
AbbVie and Besins in the underlying lawsuit.
It should also be noted that at the time that our
Court of Appeals issued its opinion, the circuits were split on
whether damages were permissible under § 13(b), and the Supreme
Court had granted certiorari but not yet decided this issue. It
therefore was in the interest of judicial economy for our Court
of Appeals to review this court’s findings in detail and decide
each issue before ultimately ruling against the FTC should the
Supreme Court have concluded that damages are authorized under
§ 13(b).
Accordingly, plaintiffs here cannot benefit from issue
preclusion as the FTC was not a prevailing party in the
underlying action. The issue of sham litigation as decided by
this court in the prior action was not determined “by a valid
and final judgment” and was not “essential to the judgment.”
Those findings and legal conclusions are not binding in this
action. The motion of plaintiffs to preclude relitigation of
the facts and issues in Count IV of the complaint against
defendants AbbVie and Besins will be denied.