Health Law Daily FTC enforcement suits not ‘final agency actions’ for the purposes of the APA, DJA
Wednesday, October 31, 2018

FTC enforcement suits not ‘final agency actions’ for the purposes of the APA, DJA

By Jeffrey H. Brochin, J.D.

The FTC’s decision to sue pharmaceutical companies first in federal court in Pennsylvania, and after voluntarily dismissing that lawsuit, filing it again in California did not constitute final agency actions allowing the companies to seek redress as Declaratory Judgment Plaintiffs under the Administrative Procedure Act (APA) nor the Declaratory Judgment Act (DJA), a federal district court in Pennsylvania has ruled. Because of the lack of final agency action, no claim could be stated under the APA, and because the court found that the DJA claim was not ripe, the court declined to exercise jurisdiction (Endo Pharmaceuticals Inc. v. Federal Trade Commission, October 29, 2018, Diamond, P.).

Administrative proceeding for past conduct. On March 30, 2016, proceeding under the FTC Act and the Clayton Act, the FTC initiated an enforcement action in federal court in Pennsylvania seeking injunctive and equitable relief against Endo Pharmaceuticals Inc. (Endo) as well as against six other drug companies. The complaint alleged that (1) in June 2010, Endo, manufacturer of Opana® ER, agreed to pay a generic drug manufacturer to delay market introduction of its generic version of the drug, and (2) in May 2012, Endo along with another manufacturer of Lidoderm®, agreed to pay a company to delay market introduction of its generic version of that drug, all in violation of Section 5(a) of the FTC Act. The FTC proceeded under Section 13(b) of the FTC Act, which authorizes the Commission to seek injunctive relief against an entity that is "violating, or is about to violate" any law enforced by the Commission.

Severance and transfer. When the drug companies requested that the court sever the Opana and Lidoderm claims because the challenged agreements, underlying circumstances, generic manufacturers, and the drugs themselves had no factual or temporal nexus, the FTC opposed severance and further asked that in the event of severance, the cases be transferred to the Northern District of California and the Northern District of Illinois where private MDL actions were pending. The FTC further stressed that if the court did not so transfer the cases, they would voluntarily dismiss both actions and re-file them separately in the respective district courts. The judge in fact severed the claims but did not transfer them as requested, and the FTC followed through to voluntarily dismiss the Pennsylvania lawsuits and re-file them in California, incurring a strong rebuke from the bench.

Declaratory Judgment suits. After the FTC settled with one of the defendants by way of a permanent injunction, and subsequently with Endo, two remaining defendants, Watson Laboratories (Watson) and Allergan Finance (Allergan) filed their DJA lawsuits before the Pennsylvania court, citing the need to preserve judicial efficiency as opposed to raising the FTC Act jurisdictional issues in California. The FTC moved to dismiss the declaratory judgment lawsuits which, for the reasons noted below, the court granted.

Failure to state a claim under the APA. The FTC argued that: (1) the companies could not proceed under the APA because there was no final FTC action, and the companies had an adequate remedy in another court; (2) the DJA may not be used to circumvent APA requirements; (3) the companies’ claims were not ripe; (4) the claims were not justiciable because they would not finally and conclusively resolve the entire controversy among the parties; and (5) the court should otherwise decline to exercise jurisdiction.

No final FTC action. The court agreed that the DJA Plaintiffs did not state a claim under the APA because there had been no final agency action. Although the FTC decided twice to sue the companies, two conditions must be met in order for agency action to be "final" under the APA: (1) the action must mark the consummation of the agency’s decision-making process; and (2) the action must be one by which rights or obligations have been determined, or from which legal consequences will flow. The court also cited precedent under which the finality of a disposition is determined by its consequences. Although the companies faced an enforcement suit seeking disgorgement and restitution, the court found that this was different in kind and legal effect from what has been considered to be final agency action. Accordingly, the companies did not state a claim under the APA.

Jurisdiction under the DJA. The court next turned to the issue of jurisdiction under the DJA. The FTC argued that without an APA claim, there could be no DJA claim. Although the court found that the companies could, under the circumstances, invoke the DJA to establish jurisdiction, the court nevertheless declined to exercise jurisdiction due to lack of ripeness. The court noted that declaratory judgment remedies are discretionary, and that courts traditionally have been reluctant to apply them to administrative determinations unless they arise in the context of a controversy ‘ripe’ for judicial resolution. In evaluating the fitness of the issues for judicial decision, only final agency actions involving purely legal questions satisfy the fitness requirement, and, as noted above, the court found no final FTC action present.

In sum, the court found that because of lack of ripeness, it would decline to exercise jurisdiction over the DJA claims, and the FTC’s motion to dismiss was granted.

The case is No. 16-5599.

Attorneys: Charles Weinograd (Arnold & Porter LLP) for Endo Pharmaceuticals Inc. and Endo International PLC. George G. Gordon (Dechert LLP) for Watson Laboratories, Inc. Bryan Daniel Gant (White & Case LLP) for Allergan Finance, LLC. Bradley S. Albert for the FTC.

Companies: Endo Pharmaceuticals Inc.; Endo International PLC; Watson Laboratories, Inc.; Allergan Finance, LLC

MainStory: TopStory CaseDecisions FDCActNews AntitrustNews DrugBiologicNews GenericDrugNews PrescriptionDrugNews PennsylvaniaNews

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