By Peter Reap, J.D., LL.M.
A court-approved class action settlement of indirect purchaser antitrust claims against GlaxoSmithKline (GSK) alleging that GSK filed sham petitions to delay the introduction of a generic version of GSK’s Flonase drug could not be enforced against the State of Louisiana, the U.S. Court of Appeals in Philadelphia has ruled. The Eleventh Amendment applied to the motion to approve the settlement agreement as a suit against a state and GSK was unable to show that Louisiana waived its sovereign immunity. Therefore, a ruling by the federal district court in Philadelphia was affirmed (In re: Flonase Antitrust Litigation, December 22, 2017, Greenaway, Jr., J.).
On July 14, 2008, private indirect purchasers of Flonase, a brand-name prescription drug, sued GSK, alleging that: (a) GSK had filed sham citizen petitions with the Food and Drug Administration to delay the introduction of a generic version of Flonase, and (b) this delay forced the private indirect purchasers to pay more for Flonase than they would have if the generic version were available. In that primary suit, the private indirect purchasers moved for final approval of settlement on April 1, 2013, after the district court certified the class and approved the notice to settlement. The State of Louisiana, an indirect Flonase purchaser, qualified as a potential class member but did not receive the approved notice. Instead, it only received a Class Action Fairness Act ("CAFA") Notice.
On June 19, 2013, the Philadelphia district court approved the final settlement of the indirect purchasers’ claims. The settlement agreement, among other things, provided compensation to the plaintiffs and class members, released the plaintiffs’ and class members’ claims, "reserv[ed] exclusive and continuing jurisdiction over the Settlement and this Settlement Agreement" for the district court, and gave GSK the power to enforce the settlement. The court also permanently enjoined all members of the settlement class, including Louisiana, from bringing released claims against GSK, even in Louisiana’s state court.
Meanwhile, in an ancillary suit, GSK filed a motion to enforce the settlement agreement against the Louisiana Attorney General because, according to GSK, Louisiana violated the settlement agreement. In its motion, GSK argued that "Louisiana did not opt-out of the Settlement Class, and thus is bound by the release and covenant not to sue provisions." On December 21, 2015, the district court denied this request and dismissed the case. It held that the Eleventh Amendment covered this enforcement action because, pursuant to the Eleventh Amendment, "a State retains the autonomy to choose ‘not merely whether it may be sued, but where it may be sued.’" Shortly before the district court decided GSK’s motion to enjoin Louisiana’s state court action, GSK moved pursuant to Rule 60(b)(2) for relief from the judgment because of newly discovered evidence that a third party had allegedly submitted a settlement claim on behalf of Louisiana. On May 31, 2016, the district court denied this motion.
GSK appealed the December 21 and May 31 orders. It argued that the Eleventh Amendment did not apply to the primary suit and that, even if it did, Louisiana had waived its sovereign immunity. It also argued that the district court abused its discretion in denying its Rule 60(b) motion.
Eleventh Amendment application. The Eleventh Amendment applied to the primary suit, the appellate court held. The Eleventh Amendment provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."
In Missouri v. Fiske, the Supreme Court found that the Eleventh Amendment applied to a motion to enjoin a state from suing in its own court. 290 U.S. 18, 26 (1933). The Supreme Court came to this conclusion because the Eleventh Amendment covers claims that seek equitable remedies and because the private party’s motion to enjoin the State from suing in its own court qualified as a suit that sought an equitable remedy. Id. at 27. Like the private parties in Fiske, the private parties here sought an equitable remedy against a state, the court observed. Because Fiske held that the Eleventh Amendment covers a motion to enjoin a state from suing in its own court and because the motion for final settlement approval sought to enjoin Louisiana from suing in its own court, the Eleventh Amendment covered the motion for final approval of settlement at issue here, according to the Third Circuit.
The Supreme Court has established a rule to determine whether a settlement agreement carries the force of federal law and has held that a settlement agreement becomes enforceable federal law when it: (a) receives a federal court’s approval, (b) springs from a federal dispute, and (c) furthers the objectives of federal law, the court noted. As GSK conceded, this settlement agreement "was functionally a consent decree" that "federal courts may enforce." As a result, Fiske applied even though the private parties in Fiske requested an injunction in the form of a court order—as opposed to in the form of a court approved settlement agreement.
GSK cited three Supreme Court cases that held that the Eleventh Amendment did not cover a private party’s suit involving a state. In addition, GSK relied on three sister circuit cases that held that motions to remove or transfer did not implicate the Eleventh Amendment. All of these Supreme Court and sister circuit cases were distinguishable from the case at bar because none of the private parties in the cases cited by GSK sought legal or equitable remedies against the state, the Third Circuit explained. As a result, the Eleventh Amendment applied here.
Louisiana did not waive its sovereign immunity. GSK argued that Louisiana waived its sovereign immunity. The appellate court disagreed.
The State of Louisiana did not waive its sovereign immunity by receiving a CAFA notice and by failing to oppose the settlement based on that notice. The law requires a clear declaration by the State of its waiver, the court noted.
In College Savings Bank, the Supreme Court found that "[t]here is a fundamental difference between a State’s expressing unequivocally that it waives its immunity and Congress’s expressing unequivocally its intention that if the State takes certain action it shall be deemed to have waived that immunity." Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ.
Expense Bd., 527 U.S. 666, 671 (1999). And, in Lapides v. Board of Regents of University System of Georgia, the Supreme Court observed that College Savings did "require a ‘clear’ indication of the State’s intent to waive its immunity" and held that "[t]he relevant ‘clarity’ here must focus on the litigation act the State takes that creates the waiver. 535 U.S. 613, 620 (2002).
In light of College Savings Bank and Lapides, Louisiana did not clearly indicate its intent to waive its sovereign immunity in the primary suit, the appellate court opined. It received a CAFA notice. That notice may not "impose any obligations, duties, or responsibilities upon . . . State officials," the court explained. 28 U.S.C. § 1715(f). After it received this notice, it did not act, in its capacity either as a litigant, as was the case in Lapides, or as a market participant, as was the case in College Savings Bank. As a result, Louisiana did not waive its sovereign immunity in the primary suit by merely receiving a CAFA notice and failing to act.
GSK’s Rule 60(b) motion. The district court did not abuse its discretion in denying GSK’s Rule 60(b) motion. After the district court had denied GSK’s motion to enforce the settlement agreement, GSK learned that an organization, Humana, had submitted a claim on behalf of Louisiana. Based on this information, GSK then moved pursuant to Rule 60(b) on the theory that it had discovered new evidence. The district court denied this motion.
The district court found that GSK had not carried its burden to show that the newly discovered evidence could not have been discovered in time to move for a new trial under Rule 59(b). It came to this conclusion because GSK did not draw on the court’s power to recover the discovered information and because GSK did not show that it could not have received this information with a court order. GSK failed to cite a case to support its position that reasonable diligence requires less than a court order. As a result, the district court did not abuse its discretion in denying this motion.
The cases are Nos. 16-1124 and -3019.
Attorneys: Anthony J. Bolognese (Bolognese & Associates, LLC) for International Brotherhood of Electrical Workers National Electrical Contractors Association Local 505 Health & Welfare Plan., AF of L A G C Building Trades Welfare Plan and Painters District Council No. 30 Health & Welfare Fund. Jessica M. Anthony (Ballard Spahr LLP) for SmithKline Beecham Corp.
Companies: International Brotherhood of Electrical Workers National Electrical Contractors Association Local 505 Health & Welfare Plan.; AF of L A G C Building Trades Welfare Plan; Painters District Council No. 30 Health & Welfare Fund; SmithKline Beecham Corp.
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