After the Federal Trade Commission voluntarily dismissed its enforcement action in this Court against Plaintiffs Watson Laboratories and Allergan Finance-and then refiled that same enforcement action in California-Plaintiffs brought this declaratory judgment suit, repeating the arguments made in their motions to dismiss in the original enforcement action. Although the FTC's apparent forum shopping may warrant sanctions, the law does not allow Plaintiffs to challenge the Commission's enforcement decisions by way of declaratory judgment when they can do so in defending against the California enforcement action itself. Accordingly, I will grant the FTC's Motion to Dismiss.
The Original Action
On March 30, 2016, proceeding under the FTC and Clayton Acts, the Commission initiated an enforcement action in this Court seeking injunctive and equitable relief against: Endo Pharmaceuticals Inc.; Endo International plc; Teikoku Pharma USA, Inc.; Teikoku Seiyaku Co., Ltd.; Watson Laboratories, Inc.; Allergan plc (the parent company of Watson); and Impax Laboratories, Inc. See F.T.C. v. Endo Pharms. Inc., No. 16-1440, Doc. Nos. 1 (under seal), 32 (redacted);
When Teikoku settled with the FTC, I approved a Stipulated Order for Permanent Injunction, dismissing the enforcement action as to Teikoku. Endo, No. 16-1440, Doc. No. 14. The remaining defendants-Endo, Impax, APLC, and Watson-moved to dismiss. Endo, No. 16-1440, Doc. Nos. 57, 58, 61, 69, 70; Fed. R. Civ. P. 12(b)(6), 21. They argued that the FTC could not proceed in federal court because the FTC Act does not authorize the Commission to challenge in court only past conduct. See, e.g., Endo, No. 16-1440, Doc. No. 69-2 at 18 ("[Congress] did not authorize the FTC to bring a federal lawsuit alleging only past violations.... Section 13(b), therefore, does not authorize this action and it should be dismissed in its entirety."). They urged that the Commission should instead have pursued its claims in an administrative proceeding pursuant to Section 5(b), which authorizes such proceedings when a party "has been or is using any unfair method of competition." See, e.g.,
The defendant drug companies also asked me to sever the Opana and Lidoderm claims because the challenged agreements, underlying circumstances, generic manufacturers, and the drugs themselves had no factual or temporal nexus. Endo, No. 16-1440, Doc. Nos. 57, 58, 61. In opposing severance, the FTC asked, in the event I severed, to transfer the severed cases to the Northern District of California and the Northern District of Illinois, where related private MDL actions were pending. Endo, No. 16-1440, Doc. No. 73 at 18-20;
On October 20, 2016, I severed the FTC's Opana and Lidoderm claims, but did not transfer the severed cases. Endo, No. 16-1440, Doc. Nos. 119, 120. I took a dim view of the Commission's threatened actions:
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.
Endo, No. 16-1440, Doc. No. 119 at 1.
On October 25, the FTC voluntarily dismissed the action. Endo, No. 16-1440, Doc. No. 121; Fed. R. Civ. P. 41(a)(1)(A)(i). Plaintiffs charged that this was a "transparent effort to prevent this Court from deciding the dispositive issues raised in [the drug companies'] motion to dismiss." (Am. Compl. ¶ 6, Doc. No. 44.)
The Declaratory Judgment Suits and FTC's California Enforcement Action
On October 26, 2016, Endo, Watson, and Impax filed before me declaratory judgment suits against the FTC. (Compl., Doc. No. 1 (Endo and Watson Plaintiffs) ); Endo Pharms. Inc. v. F.T.C., No. 16-5600, Doc. No. 1 (Endo and Impax Plaintiffs). Advancing the same arguments made in their Motions to Dismiss the FTC's enforcement action, Plaintiffs sought a declaration "that Section 13(b) of the FTC Act does not authorize the FTC to file an action in federal court against [them]"-or in the alternative, that it does not "authorize the FTC to seek disgorgement or restitution"-involving claims based on the Lidoderm and Opana agreements. (Compl. at 18); Endo, No. 16-5600, Doc. No. 1 at 19.
On January 23, 2017, the Commission filed an enforcement action in the Northern District of California against APLC, Allergan Finance LLC, Watson, and Endo, reasserting claims the FTC had brought before me related to the Lidoderm agreement. FTC v. Allergan plc, No. 17-312 (N.D. Cal.). California filed a parallel action, alleging violations of federal and state antitrust laws. California v. Allergan plc, No. 17-562 (N.D. Cal.). The matters were assigned to the Honorable William Orrick, who is overseeing private party antitrust litigation involving Lidoderm. In re Lidoderm Antitrust Litig., MDL No. 2521 (N.D. Cal.). On January 27, Allergan filed before me its own declaratory judgment suit against the FTC, "seek[ing] relief that tracks that sought by Watson in its ... Declaratory Judgment Action." Allergan Finance, LLC v. FTC, 17-406, Doc. No. 1 at 2.
On January 24, 2017, Endo and the FTC settled all their litigation, including Endo's claims in its two declaratory judgment suits pending before me. (Doc. No. 31); Endo, No. 16-5600, Doc. No. 28. On January 27, 2017, Impax informed my Chambers that the Commission had initiated an administrative proceeding against the Company some eight days earlier. Endo, No. 16-5600, Doc. No. 32. In light of Endo's settlement and the FTC's initiation of an administrative proceeding against Impax, all parties stipulated to the voluntary dismissal of the Endo-Impax declaratory judgment suit, and Endo voluntarily dismissed its claims against the FTC in the Endo-Watson declaratory judgment suit. (Doc. No. 43); Endo, No. 16-5600, Doc. No. 34; Fed. R. Civ. P. 41(a)(1)(A)(i), (ii).
The Instant Consolidated Declaratory Judgment Suit
Watson and Allergan are thus the only remaining Declaratory Judgment Plaintiffs, each proceeding in a separate suit, but seeking the same relief. (Compl. at 19); Allergan, No. 17-406, Doc. No. 1 at 20. I consolidated the two suits, and on February 14, 2017, Watson and Allergan filed a Consolidated Amended Complaint. (Am. Compl., Doc. No. 44.)
Plaintiffs "seek[ ] to preserve the judicial efficiency of having this Court ...
[u]nder the Declaratory Judgment Act or, in the alternative, the Administrative Procedure Act, Declaratory Judgment Plaintiffs seek a declaratory judgment that Section 13(b) of the FTC Act does not authorize the FTC to pursue an action in federal court [or seek disgorgement or restitution] against Declaratory Judgment Plaintiffs involving claims based on, or arising from, the Lidoderm Settlement Agreement.
(Id. at ¶¶ 89, 93.)
On March 2, 2017, the FTC moved to dismiss Plaintiffs' claims. The Motion has been fully briefed. (Doc. Nos. 47, 48, 49, 52.) On April 5, Judge Orrick granted Watson and Allergan's Motion to Stay the FTC's enforcement action in California, pending resolution of the instant declaratory judgment suit. (Doc. No. 53); FTC v. Allergan plc, No. 17-312 (N.D. Cal.), Doc. No. 64. On May 9, 2017, Watson and Allergan moved for summary judgment, and the matter was fully briefed. (Doc. Nos. 54, 56, 57, 59.) On January 30, 2018, the FTC renewed its Motion to Dismiss after I ordered additional briefing. (Doc. Nos. 66, 67.)
II. STANDARDS
I must conduct a two-part analysis. Fowler v. UPMC Shadyside,
III. DISCUSSION
The FTC argues that: (1) Plaintiffs may not proceed under the Administrative Procedure Act because there is no final FTC action, and Plaintiffs have an adequate remedy in another court; (2) the Declaratory Judgment Act may not be used to circumvent APA requirements; (3) Plaintiffs' claims are not ripe; (4) Plaintiffs' claims are not justiciable because they would not finally and conclusively resolve the entire controversy among the parties; and (5) I should otherwise decline to exercise jurisdiction.
I agree that Plaintiffs have not stated a claim under the APA. Moreover, I will decline to exercise jurisdiction over Plaintiffs' DJA claim because the action is not ripe. In the alternative, I will decline jurisdiction
A. Failure to State a Claim Under the Administrative Procedure Act
The APA provides that "[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review."
There are "two conditions that generally must be satisfied for agency action to be 'final' under the APA": (1) "the action must mark the consummation of the agency's decisionmaking process"; and (2) "the action must be one by which rights or obligations have been determined, or from which legal consequences will flow." United States Army Corps of Eng'rs,
Accordingly, even if the Commission "consummated" its decisionmaking by filing the enforcement action, the decision is not final because it does not determine any rights or obligations and has no legal consequences. See Quicken Loans Inc. v. United States,
Although Plaintiffs correctly note that they face "an enforcement suit seeking disgorgement and restitution," (Pls.' Opp. Mot. Dismiss 12), this is "different in kind and legal effect from the burdens attending what heretofore has been considered to be final agency action." F.T.C. v. Standard Oil Co. of California,
Moreover, Plaintiffs "cannot satisfy the second prong of the APA requirement, for almost by definition they have an adequate remedy in a court": moving to dismiss the Commission's California enforcement action on the same grounds they have raised here. N.A.A.C.P. v. Meese,
Accordingly, Plaintiffs have not stated a claim under the APA. See Treasurer of New Jersey v. United States Dep't of Treasury,
B. Jurisdiction Under the DJA
The Commission argues that "without an APA claim, [P]laintiffs cannot invoke the Declaratory Judgment Act to gain entry to the courthouse." (Mem. Supp. Mot. Dismiss Am. Compl. 11.) Plaintiffs respond that the FTC's enforcement action confirms the existence of an actual controversy among the parties. The DJA thus allows Plaintiffs to "borrow" the FTC's cause of action under Section 13(b). (Pls.' Opp. Mot. Dismiss 10 (citing Browne v. Zaslow,
I agree that in these circumstances, Plaintiffs may invoke the DJA to establish jurisdiction. Gen. Motors Corp. v. Volpe,
Because Plaintiffs seek "extra-enforcement" review of the FTC's actions outside Section 13(b)'s review procedure and their claim does not satisfy the
Ripeness
"The injunctive and declaratory judgment remedies are discretionary, and courts traditionally have been reluctant to apply them to administrative determinations unless these arise in the context of a controversy 'ripe' for judicial resolution." Abbott Labs. v. Gardner,
Here, Section 13(b) provides that "whenever the Commission has reason to believe" that a corporation "is violating, or is about to violate" the FTC Act, the Commission "may bring suit in a district court" and "in proper cases ... may seek, and after proper proof, the court may issue, a permanent injunction."
In limited circumstances, pre- or extra-enforcement review may be necessary, providing the controversy is "ripe" for judicial review. Abbott Labs.,
Plaintiffs have not made out hardship: "the impact of the [FTC's enforcement action] falls far short of that of the regulation challenged in Abbott Laboratories, which required 'an immediate significant change in the plaintiffs' conduct of their affairs with serious penalties attached to noncompliance ....' " Gen. Fin. Corp.,
Moreover, only "[f]inal agency actions involving purely legal questions satisfy the fitness requirement." CEC Energy Co. v. Pub. Serv. Comm'n of Virgin Islands,
In sum, because Plaintiffs' seek to circumvent review pursuant to Section 13(b), and because the matter is not otherwise ripe for review, "relief under the [DJA] is also unavailable." Automated Merch. Sys., Inc. v. Lee,
Accordingly, I will decline to exercise jurisdiction over Plaintiffs' DJA claims. See Exxon Corp. v. F.T.C.,
Reifer Factors
In the alternative, I will decline to exercise DJA jurisdiction based on my consideration of the following factors:
(1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;
(2) the convenience of the parties;
(3) the public interest in settlement of the uncertainty of obligation;
(4) the availability and relative convenience of other remedies;
(5) a general policy of restraint when the same issues are pending in a state court;
(6) avoidance of duplicative litigation;
(7) prevention of the use of the declaratory action as a method of procedural fencing or as a means to provide another forum in a race for res judicata; and
(8) (in the insurance context), an inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion.
Reifer,
The first factor weighs against exercising jurisdiction. As the Commission notes, I "cannot assume ... that [I] will resolve the merits of [Plaintiffs'] complaint in [Plaintiffs'] favor." Swish Mktg., Inc. v. F.T.C.,
The second factor (convenience) is neutral. As Plaintiffs observe, the parties briefed the underlying issue in the original enforcement action before me, and now seek to "preserve ... judicial efficiency" by having me decide it. (Am. Compl. ¶ 1; Pls.' Opp. Mot. Dismiss 23); see Scottsdale Ins. Co. v. RSE Inc.,
With respect to public interest (the third factor), the FTC has argued that exercising jurisdiction over this matter would "deny [it] the choice of venue Congress accorded to it, thereby undermining the legislature's delegation of executive authority." (Renewed Mot. Dismiss 8.) The FTC's "choice of venue" conduct in this matter is hardly something to celebrate. See Endo, No. 16-1440, Doc. No. 142 at 7 ("I continue to be disturbed by the [FTC]'s threat that if I severed, it would voluntarily dismiss the Action and refile the severed claims in venues more to its liking."). I nonetheless agree that the public interest usually requires deference to the FTC's venue choice. See Moog Indus. v. Fed. Trade Comm'n,
For many of the reasons that I have already discussed, the fourth (availability and relative convenience of other remedies) and sixth (avoidance of duplicative litigation) factors weigh against exercising jurisdiction. (See supra §§ III(A), III(B)(1).) Indeed, the Third Circuit has observed that "where the parallel cases involve a declaratory judgment action and a mirror-image action seeking coercive relief ... we ordinarily give priority to the coercive action, regardless of which case was filed first." Honeywell Int'l Inc. v. Int'l Union, United Auto., Aerospace & Agr. Implement Workers of Am.,
As I have discussed, this is particularly significant where the natural plaintiff is the Government: "Judicial review of the averments in the [FTC's] complaints should not be a means of turning prosecutor into defendant before adjudication concludes." Standard Oil Co.,
Although Plaintiffs correctly note that courts also "routinely favor first-filed actions," in these circumstances-where Watson filed its declaratory judgment suit in anticipation of the FTC's refiling the enforcement action, and Allergan filed its declaratory judgment suit after the FTC brought the California enforcement action-it is appropriate to give priority to the coercive action. (Pls.' Opp. Mot. Dismiss 24.)
Finally, in considering the seventh factor, I am compelled again to discuss the unsavory appearance of the FTC's conduct. See Wearly,
Whether the FTC's actions are sufficiently vexatious to warrant the imposition of costs or sanctions is a question Plaintiffs have yet to raise. See
Regardless of the questionable nature of the FTC's tactics, I remain bound by controlling authority authorizing the Commission voluntarily to dismiss its original enforcement action. In re Bath & Kitchen Fixtures Antitrust Litig.,
Where a putative defendant files a declaratory action whose only purpose is to defeat liability in a subsequent coercive suit, no real value is served by the declaratory judgment except to guarantee to the declaratory plaintiff her choice of forum-a guarantee that cannot be given consonant with the policy underlying the Declaratory Judgment Act.
Swish Mktg.,
In these circumstances, I conclude that the seventh factor favors neither side.
In sum, most of the Reifer factors weigh against exercising jurisdiction in this case, although not resoundingly so. Accordingly, I will, in the alternative, decline to exercise jurisdiction on this ground.
IV. CONCLUSION
Because Plaintiffs do not challenge a "final agency action for which there is no other adequate remedy in a court," I will dismiss their APA claim. See
An appropriate Order follows.