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In re Namenda Direct Purchaser Antitrust Litigation

United States District Court, S.D. New York

May 19, 2017

IN RE NAMENDA DIRECT PURCHASER ANTITRUST LITIGATION

          Bruce E. Gerstein, Esq. Dan Litvin, Esq. Joseph Opper, Esq. Noah H. Silverman, Esq. Kimberly M. Hennings, Esq. Garwin Gerstein & Fisher, L..L.P.

          Heather McDevitt, Esq. Jack Pace, Esq. Peter J. Carney, Esq. Martin M. Toto, Esq. Kristen 0'Shaughnessy, Esq. Ryan P. Johnson, Esq. Michael E. Hamburger, Esq. Charles C. Moore, Esq. White & Case LLP

          John M. Gidley, Esq. White & Case LLP, Kevin C. Adam, Esq. White & Case LLP

          ORDER

          JAMES C. FRANCIS IV, UNITED STATES MAGISTRATE JUDGE

         In this putative class action asserting violations of antitrust law by defendants Actavis pic (now known as Allergan pic) and Forest Laboratories, LLC (together, "Forest") in connection with its patented Alzheimer's drugs Namenda IR and Namenda XR (brand names for memantine hydrochloride), the Direct Purchaser Class Plaintiffs (the "plaintiffs") argue that Forest has put privileged communications at issue by advancing certain affirmative defenses and substantive arguments.[1] They therefore seek production of otherwise-privileged documents over which Forest has allegedly waived protection. The motion is denied.

         Background

         The operative complaint in this action, brought on behalf of a class of persons and entities who purchased the relevant Namenda products directly from Forest, alleges that the plaintiffs “have been forced to pay supracompetitive prices for . . . Alzheimer's disease treatments due to Forest's anticompetitive conduct.” Sergeants Benevolent Association Health & Welfare Fund v. Actavis, PLC, Nos. 15 Civ. 6549, 15 Civ. 7488, 2016 WL 4992690, at *1 (S.D.N.Y. Sept. 13, 2016).[2] As relevant here, the plaintiffs contend “that various generic companies [] colluded with Forest to delay entry of generic versions of Namenda IR by entering into settlements in which they agreed not to begin marketing generic Namenda until July 2015.” Id.

         More specifically, the plaintiffs allege that in late 2007, a number of generic manufacturers filed Abbreviated New Drug Applications (“ANDAs”) with the FDA for generic versions of Namenda IR in which they contended that the Namenda patent (known in the papers as the “‘703 patent”) “was invalid, not infringed by their proposed products, or both.” (First Amended Class Action Complaint (“Am. Compl.”), ¶ 103); see Sergeants Benevolent Association, 2016 WL 4992690, at *5. In early 2008, Forest filed patent infringement suits against these generic manufacturers (the “Generic Defendants”), [3] which had the effect of staying FDA action on the ANDAs. (Am. Compl., ¶¶ 104-105); Sergeants Benevolent Association, 2016 WL 4992690, at *5. The generic manufacturers again argued, among other things, that the patents were invalid. (Am. Compl., ¶ 109). “Forest chose to settle the patent lawsuits against each of the Generic Defendants instead of litigating the cases.” Sergeants Benevolent Association, 2016 WL 4992690, at *5. These settlements included cash payments from Forest to the alleged infringers (Am. Compl., ¶ 114), as well as “licensing agreements allowing the Generic Defendants to launch generic versions of Namenda IR, but not until July 11, 2015, ” which was “months before Namenda IR's patent expired, but well after the Generic Defendants could have begun selling generic Namenda IR if Forest's patent was found to be invalid, ” Sergeants Benevolent Association, 2016 WL 4992690, at *5.

         The standard for evaluating whether patent litigation settlements are anticompetitive was set out in FTC v. Actavis, Inc., __ U.S. __, 133 S.Ct. 2223 (2013). In that case, the FTC alleged that settlement agreements between a patent holder and generic competitors that included “reverse payments” -- that is, payments from the patentee to the alleged infringers -- in tandem with an agreement to delay entry of the generic into the marketplace were anticompetitive “because they resulted in the generic manufacturers abandoning their patent challenges and delayed generic competition in exchange for a share of the brand name drug's monopoly profits.” Sergeants Benevolent Association, 2016 WL 4992690, at *12 (discussing Actavis). The Supreme Court held that “a reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects” depending on “its size, its scale in relation to the payor's anticipated future litigation costs, its independence from other services for which it might represent payment, and the lack of any other convincing justification.” Actavis, __ U.S. at __, 133 S.Ct. at 2237.

         The plaintiffs' motion to compel centers on Forest's allegedly anti-competitive settlements, or, more precisely, on Forest's assertions that the delayed launch date provisions included in those settlements were lawful. Forest has argued that the settlements were lawful compromises between parties who had assessed the likely outcomes of the actions: “Forest and the generics considered the merits of their respective litigation positions . . . and reached a settlement.” (Forest's Combined Memorandum of Law Supporting Forest's Motion for Partial Summary Judgment (Count 3) and Defendants' Opposition to Plaintiffs' Motion for Partial Summary Judgment (Count 3) (“Def. PSJ Memo.”) at 9-10). The plaintiffs contend that this argument -- “[o]ne of Forest's central defenses” in this litigation -- “clearly make relevant [] the patent merits and Forest's evaluation of the patent merits.” (Memorandum in Support of Direct Purchaser Plaintiffs' Motion to Compel Production of Documents (“Pl. Memo.”) at 2). They similarly argue that the legal merits of the patent litigation are put at issue by Forest's affirmative defenses that the ‘703 Patent was valid and infringed by the Generic Defendants, that the settlement was procompetitive in light of the merits of the infringement litigations, that Forest acted in good faith to further its legitimate business interests, and that the settlement agreements were bona fide and for fair value. (Pl. Memo. at 6-7; Forest Defendants' Answer to Direct Purchasers Plaintiffs' First Amended Class Action Complaint (“Answer”) at 57, 60, 62). They therefore seek production of “purportedly privileged information regarding Forest's legal analysis of the patent merits, and Forest's mental processes during the settlement negotiations.” (Pl. Memo. at 22).

         Discussion

         Both attorney-client privilege and work-product immunity “may implicitly be waived when [the] defendant asserts a claim that in fairness requires examination of protected communications.”[4]United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991); see also John Doe Co. v. United States, 350 F.3d 299, 302 (2d Cir. 2003) (noting that party waives both attorney-client and work product protection by placing substance of protected documents at issue); DeAngelis v. Corzine, No. 11 Civ. 7866, 2015 WL 585628, at *6 (S.D.N.Y. Feb. 9, 2015) (“The ‘fairness doctrine' analysis applies to waiver of work-product protection just as it does to waiver of attorney-client privilege.”). The mere fact that a privileged communication may be relevant to a claim or defense is insufficient to forfeit protection. In re County of Erie, 546 F.3d 222, 229 (2d Cir. 2008); Aiossa v. Bank of America, N.A., No. 10 CV 1275, 2011 WL 4026902, at *5 (E.D.N.Y. Sept. 12, 2011). Rather, a person may waive protection where he “asserts a factual claim the truth of which can only be assessed by examination of a privileged communication, ” even if he does not explicitly rely on that communication. Bowne of New York City, Inc. v. AmBase Corp., 150 F.R.D. 465, 488 (S.D.N.Y. 1993). Thus, privileged information may be placed at issue where a party's “good faith belief in the lawfulness of his conduct[] is relied upon in support of a claim or defense.” Scott v. Chipotle Mexican Grill, Inc., 67 F.Supp.3d 607, 611 (S.D.N.Y. 2014) (quoting Leviton Manufacturing Co. v. Greenberg Traurig LLP, No. 09 Civ. 8083, 2010 WL 4983183, at *3 (S.D.N.Y. Dec. 6, 2010)); see also 2002 Lawrence R. Buchalter Alaska Trust v. Philadelphia Financial Life Assurance Co., No. 12 Civ. 6808, 2016 WL 1060336 (E.D.N.Y. March 11, 2016) (“[I]mplied reliance [on advice of counsel sufficient to waive privilege] is confined to situations involving a party's state of mind concerning a question of law, such as the party's belief as to the lawfulness of its conduct.”); Arista Records LLC v. Lime Group LLC, No. 06 Civ. 5936, 2011 WL 1642434, at *2 (S.D.N.Y. Apr. 20, 2011) (“[A] party may not assert that it believed its conduct was lawful, and simultaneously claim privilege to block inquiry into the basis for the party's state of mind or belief.” (citing Bilzerian, 926 F.2d at 1292)).[5] As noted, the paramount consideration is “[w]hether fairness requires disclosure, ” which must be determined “on a case-by-case basis, and depends primarily on the specific context in which the privilege is asserted.” In re Grand Jury Proceedings, 219 F.3d 175, 183 (2d Cir. 2000).

         The question here, then, is whether Forest's factual assertions in this litigation regarding the infringement settlements -- that its settlement positions were based on its assessment of the likely outcomes of the actions, that the ‘703 patent was valid, that the settlements were made in good faith in light of these and other business concerns, and the like -- can only be tested by recourse to attorney-client communications or attorney work product as to the strength of the patent and the legality of the settlement.

         Forest first argues that the plaintiffs' motion, which comes at the outset of discovery and therefore before it is clear “what, if any, specific subjective beliefs regarding the strength of the patent or likelihood of success in the patent litigations may become relevant, ” is a stratagem “to leverage Forest into abandoning legitimate defenses.” (Def. Memo. at 8). This argument is, it appears, closely tied to Forest's contention that its “routine assertion of affirmative defenses, and general references to settlements of the underlying patent case, does not amount to affirmatively putting at issue privileged ...


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