We sometimes start our posts with disclaimers about how we do not know all the details of a case, perhaps supplemented by a little digging on the internet, or that we are not experts in some substantive area. We start this post with disclaimers that we (and our respective firms) are not involved in the case we are writing about (or the related cases mentioned in it) and we are not specialists in antitrust or patent law (although others at our respective firms are). We do know misjoinder, forum shopping, and judicial smackdowns when we see them, though. We typically encounter misjoinder when a bunch of individual plaintiffs from various places are listed on a single caption because they each are pursuing individual claims over injuries allegedly caused by the same or similar products. As long as at least one plaintiff is from where they have sued and at least one plaintiff is from the defendant’s home state, they all get to stay where their lawyers chose to sue, at least if they get their way. (Set aside CAFA for now.) When confronted with a motion to sever—or another motion that implicates the issue—they argue that joinder is perfectly appropriate because all cases against the manufacturer of product(s) are really about the same set of facts—i.e., the company designed a dangerous product and marketed it without adequate warnings of its risks.
Forum shopping is the other half of litigation tourism, as we often call it—like picking the campground for the family reunion. The lawyer’s reason for picking the court is typically not revealed, just that a plaintiff gets to pick and their choice should be afforded deference. We have yet to see a lawyer say they picked the venue where they felt they had the most influence with the bench and/or juries apt to put extra zeros on the damages in a case against an out-of-state defendant. That the plaintiff lawyers, rightly or wrongly, consider where to file and how to package their clients as part of their desire to maximize the total recovery by verdict or settlement—and their fees—should not be a shock to anyone. But we might suppose that the government lawyers trying to enforce the Federal Trade Commission Act and the Clayton Act might be above such base considerations.
FTC v. Endo Pharms., Inc., Civ. No. 16-1440, 2016 U.S. Dist. LEXIS 145329 (E.D. Pa. Oct. 20, 2016), changes our mind about that and delivers the sort of smackdown that lawyers tend not to like to see in print. Basically, five separate pharmaceutical companies were sued by the FTC in one case over alleged anticompetitive behavior related to patent litigation regarding two different branded drugs and wannabe generic versions. Other than the FTC as plaintiff and one company being simultaneously the developer/NDA-holder/seller of one drug and the U.S. seller (but not NDA-holder) of the other drug, there was no commonality between the facts or parties in the cases. There were, however, already separate MDL proceedings of the “In re [drug] Antitrust Ligation” variety, already pending in courts 2000 miles away from each other. Yet, the FTC chose to file a single new case in a third court 750 miles from the nearer MDL court. When the defendants moved to sever the claims—the complaint had conveniently divided the counts so that none of them related to both drugs—the FTC took umbrage. “Remarkably, the FTC suggests that if I sever, I should transfer the actions to other Districts—where similar, private-party MDL actions are pending—and, if I do not transfer, threatens voluntarily to withdraw its split claims and refile them in those Districts.” Id. at *3. The defendants had also moved to dismiss the complaint on the merits and it was “anything but frivolous” to suggest that the threatened voluntary dismissal would be “to avoid an unfavorable decision on the dismissal Motions.” Id. at *12. In ruling on the motion to sever and request to transfer, the court reminded that threatening and overt gamesmanship can backfire.
Keep in mind, as the court noted more than once, that severance is within the court’s “broad discretion.” Id. at **12 & 14. Severance is basically the flip side of joinder, so the familiar questions of whether the claims “aris[e] out of the same transaction, occurrence, or series of transactions and occurrences” and whether “any question of law or fact common to all defendants will arise.” Id. at *13. Having written a complaint that described no overlap between the claims about the two different drugs, the only thing FTC could come up with for the first requirement was that one defendant allegedly wanted to delay generic entry for two of its drugs, which suggested a “plan” to make money off of its period of exclusivity. Id. at *16. “By the FTC’s reasoning, any claims based on different ‘reverse-payment’ agreements could be joined.” Id. We might go further and say that the FTC’s reasoning would suggest any number of cases against the same branded manufacturer related to generic entry could be joined together because exclusivity is a valuable asset. Even if the motivation or behavior of the patent litigation was similar, that does not mean the all claims arose from “the same set of circumstances.” Id. at *17 (emphasis in original). The FTC also claimed that severance would somehow prejudice it, but the court noted that prejudice was both irrelevant and “entirely contrived.” Id. at **18-19. Thus, the claims related to the two different drugs were misjoined and severance was granted.
FTC’s request that the severed cases be transferred to the MDLs to be decided was presumed on increased convenience to it in avoiding having to dismiss and refile new cases. This “cavalier suggestion” was easy to reject, principally because it sought to “circumvent Rule 41’s anti-forum shopping provisions.” Id. at *20. Without an actual motion, the court had nothing else to deny, but it make a few more things clear. A formal motion to transfer would need to show changed circumstances from when FTC chose to in the E.D. Pa. Realizing that you would lose probably is not a changed circumstance. Moreover, a voluntary dismissal would not necessarily be the end of the court’s involvement. As it said at the start of the opinion,
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. I will not transfer the claims. Should the FTC voluntarily withdraw them, I will entertain Defendants’ requests for fees and costs.
Id. at *3. That is not an idle threat, as a perusal of this court’s past rulings would indicate.