Medical Mutual of Ohio v. SmithKline Beecham Corp.
Docket: Civil Action Nos. 08-3301, 12-4212
Court: District Court, E.D. Pennsylvania; June 19, 2013; Federal District Court
Following nearly five years of antitrust litigation involving Flonase nasal spray, a global settlement was reached in January 2013 among the branded manufacturers, generic producers, and both indirect and direct purchasers. The Indirect Purchaser Plaintiffs (IPPs) have filed a Motion for Final Approval of Settlement, which includes a fairness hearing held on June 3, 203. The court has approved the settlement agreement, the allocation plan, and granted attorneys’ fees, expense reimbursements, and incentive awards for class representatives.
The named plaintiffs include various health and welfare plans and Andrea Kehoe, collectively representing indirect purchasers of Flonase and its generic equivalent. They allege that GlaxoSmithKline (GSK) engaged in anti-competitive practices by submitting sham petitions to delay generic entry, leading to inflated prices for consumers. The litigation began with the first complaint filed in July 2008, followed by extensive discovery and depositions, ultimately leading to class certification.
The certified class consists of indirect purchasers defined by specific time frames and geographical locations. For monopolization and unfair trade practices, the class includes those who purchased Flonase from August 2004 to March 2006 and generic FP from March 2006 to March 2009 in Arizona, Florida, Massachusetts, or Wisconsin. For unjust enrichment claims, the class encompasses individuals who purchased branded Flonase in the same states during the earlier period and generic FP in the subsequent one. Exclusions from the class include GSK and its affiliates, government entities (except government-funded employee benefit plans), and those purchasing for resale or directly from GSK for resale purposes.
Insured individuals covered by plans with a flat dollar co-pay for both generic and brand name drugs, as well as fully insured health plans that cover all reimbursement obligations, were involved in the Flonase antitrust litigation. The court previously denied GSK's motions for summary judgment related to causation and Noerr-Pennington immunity. After extensive settlement negotiations, a $46 million settlement was reached in November 2012, which included an $11 million payment to large health insurers and a $35 million payment for the Indirect Purchaser Class. Preliminary approval was granted on January 14, 2013.
Under Federal Rule of Civil Procedure 23(e), a class action settlement requires court approval to ensure it is "fair, reasonable, and adequate." The Third Circuit evaluates settlements using the Girsh factors, which assess the complexity and duration of litigation, class reaction, risk of liability and damages, and several other criteria. Recent decisions suggest expanding this evaluation to include Prudential considerations, which address the maturity of issues, discovery extent, comparisons to other claimants, opt-out rights, and fairness of attorneys’ fees and claims processing procedures. District courts must independently analyze and make findings on each Girsh and Prudential factor rather than relying solely on the parties’ assertions.
The Girsh factors and Prudential considerations support the approval of the settlement in this antitrust class action involving complex issues related to pharmaceutical regulations and manufacturing, which has spanned over four years. The litigation's intricacy and high costs, typical of antitrust cases, were mitigated by reaching a settlement prior to trial, avoiding extensive trial expenses and potential appeals.
The notice plan developed by class counsel ensured broad dissemination, reaching approximately 80% of medication users through targeted mail, national publications, and internet ads. As of March 22, 2013, there were 8,065 downloads of consumer claim forms, and by May 28, 2013, significant claims were filed, indicating a positive response from the class.
Only one consumer opted out, and two objections were raised regarding the clarity of the notice and the perceived excessiveness of class representative awards and attorneys’ fees. However, these objections were struck down due to a lack of proof of class membership from the objectors. A specific objection from Jill Jan, who claimed to act on behalf of her son, was unsupported as it only included a pre-class period doctor's note.
The objections raised by Jan and Payton regarding class membership were deemed insufficient, as neither provided evidence of having purchased Flonase during the relevant period or demonstrated class membership. Despite their claims that the class notice was unclear regarding individual benefits, the notice adequately informed class members that they would receive a pro rata share of the net settlement fund, which cannot be precisely calculated until all claims are processed. The overall class reaction has been largely positive, with only one exclusion and two objections, which are considered procedurally deficient and meritless.
The proceedings had progressed significantly before the settlement was reached, satisfying the Girsh and Prudential factors that favor approval. Notably, extensive fact and expert discovery had been completed, including 45 depositions and the exchange of numerous expert reports prior to settlement discussions. The parties were well-prepared for trial, which was imminent.
The complexities of establishing liability and damages present significant risks for the plaintiffs, as they would have to prove that GSK’s FDA petitions regarding generic Flonase were baseless and that GSK could not reasonably expect success with those petitions. These factors further support the approval of the settlement agreement.
Plaintiffs needed to demonstrate that GSK's petitions to the FDA significantly delayed the approval of Roxane's generic FP and that Roxane could have launched its product sooner absent GSK's actions. This posed challenges for establishing liability and damages, requiring evidence of improper overcharges to the Direct Purchaser class (DPs). The complexity of these issues raised doubts about a jury’s potential findings on GSK's liability and the damages calculations.
Additionally, although the Indirect Purchaser class was certified, this certification could be modified or decertified during litigation, posing risks that favored settlement. The Supreme Court's Comcast ruling has made class certification more difficult, further supporting the settlement's approval due to the risks of maintaining class status through trial.
Regarding GSK's capability to pay a higher judgment, no evidence suggested insolvency, and settlements are often deemed fair regardless of a defendant’s financial capacity. Thus, this factor did not affect the settlement's approval.
Finally, the proposed $46 million settlement—$35 million for the non-SHP Indirect Purchaser Class—is reasonable when considering the best possible recovery and the litigation risks. The settlement allows class members to receive funds immediately, avoiding the uncertainties and delays of continued litigation.
In *In re G.M. Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig.*, the Third Circuit emphasized the importance of compromise in settlements, cautioning against excessive demands. The court found a $46 million settlement reasonable, with $35 million allocated to the non-SHP Indirect Purchaser Class, indicating this favored the settlement outcome. The *Prudential* case highlighted the evolving nature of class actions and suggested expanding the traditional *Girsh* factors for evaluating settlements. In this case, the approval of the settlement was supported by extensive discovery and trial preparation, the exclusive benefits to class members, minimal opt-outs, and reasonable provisions for attorneys' fees and claims processing.
Class counsel requested $11,655,000 in fees (one-third of the settlement fund), $1,848,720.15 for expenses, and incentive awards of $25,000 each to several plans and $10,000 to an individual. Under Federal Rule of Civil Procedure 23(h), the court may award reasonable fees and costs. Class counsel informed members of the fee request cap in advance. A thorough judicial review of fee applications is mandated, employing either the lodestar or percentage-of-recovery methods. The settlement establishes a common fund of $35 million for allocations to class members and for attorney awards, with the district court encouraged to establish a mutually agreeable percentage fee arrangement.
The Third Circuit has established ten factors for determining court-awarded attorney fees, which include: the size of the settlement fund and number of beneficiaries; objections from class members regarding settlement terms or fees; attorney skill and efficiency; litigation complexity and duration; risk of nonpayment; time spent by plaintiffs’ counsel; awards in similar cases; benefits from class counsel's efforts compared to other groups; the percentage fee that would have been negotiated in a private contingent fee arrangement; and any innovative settlement terms.
In a specific case involving a $35 million settlement fund, indirect purchaser class members will receive shares based on their Flonase purchases after deducting fees and expenses. This substantial settlement ensures immediate payment to class members, favoring fee approval.
Two objections to the attorneys' fees were filed, but only one was timely. The objections claimed the fees were excessive and contingent upon the payment to specific third-party purchasers (SHPs). The court found these objections procedurally deficient and addressed their substantive arguments, clarifying that the fees do not diminish class members' shares since the total fees are proportionate to the overall fund.
Additionally, the skill and efficiency of the attorneys are emphasized, noting that the success of class counsel is a primary indicator of their quality. The Third Circuit aims to incentivize competent counsel to engage in complex litigation by using a percentage fee-award system. Overall, the factors support the approval of the requested attorney fees.
Class counsel is recognized as highly skilled in complex class action and antitrust cases, demonstrating significant expertise throughout the lengthy litigation process. The substantial settlement award reflects the effectiveness of their efforts, supporting the approval of the requested fee. The complexity and duration of the case further bolster the justification for the fee, as does the notable risk of nonpayment faced by counsel, who worked on a contingent fee basis without receiving payment during the litigation. Class counsel dedicated over 32,700 hours over more than four years, which was essential given the case's complexity and the defendants' robust defense, reinforcing the request for the fee.
A one-third fee is standard in similar complex antitrust cases, consistent with awards in the pharmaceutical industry, and is justified by the litigation's complexity and contingent nature. Notably, class counsel did not receive assistance from any government investigations, making their contributions integral to the settlement's value. This situation aligns with precedents where class counsel alone was credited for the benefits accrued to class members. Determining a hypothetical negotiated fee at the outset is challenging, as it heavily depends on the unique circumstances of the case.
A Special Master was appointed to assess the appropriateness of attorneys’ fees in a class action securities lawsuit, leading Judge Dalzell to approve a thirty percent fee recommendation, which reflects typical private contingency fee agreements ranging from thirty to forty percent. However, Judge Katz expressed skepticism about the weight of such hypothetical negotiations, particularly in this case involving a substantial but not extraordinarily large settlement. The settlement terms were deemed standard, which did not influence the fee request positively or negatively.
An evaluation of the Gunter/Prudential factors revealed that eight out of ten factors favored the proposed fee, while two were neutral, indicating strong support for the fee request. The lodestar calculation method was also employed, which involves multiplying the number of hours worked by reasonable hourly rates based on regional standards and attorney experience. Class counsel reported over 37,761.95 hours of work across nearly five years, primarily by two lead firms, totaling $17,280,746.50 in costs, averaging a billing rate of $527 per hour. The lodestar amount was calculated as of January 31, 2013, supporting the reasonableness of the proposed fee.
A lodestar multiplier can be applied to the determined lodestar amount, allowing courts to adjust the fee based on factors such as the risks of non-recovery or the extraordinary results achieved. The Third Circuit recognizes that while multipliers typically range from one to four in common fund cases, a negative multiplier indicates that class counsel's fee request is significantly lower than their billed hours. In this case, a negative multiplier of 0.67 was calculated, resulting in an attorneys' fee award of $11,655,000, which is thirty-three and a third percent of the common fund. Additionally, class counsel seeks reimbursement of $1,848,720.15 for litigation expenses, which includes payments to experts and litigation fund assessments. The court deems these expenses reasonable and approves their reimbursement from the settlement fund.
Incentive awards for class representatives are common in class action litigation, compensating named plaintiffs for their contributions and risks. Plaintiffs requested $25,000 for each of several plans and $10,000 for an individual representative. However, the court finds the requests excessive and awards $10,000 each to the plans and $5,000 to the individual representative.
Class counsel asserts that class representatives were actively engaged in assisting with the case's prosecution but fail to provide evidence of their substantial involvement beyond depositions. Declarations from the named plaintiffs indicate that most spent no more than 12 hours on the case over several years. Incentive awards proposed are consistent with those awarded in other cases within the circuit, with amounts set at $5,000 for deposed plaintiffs and $2,500 for those not deposed. The plan of allocation must be fair, reasonable, and adequate, which aligns with court standards for settlement approval; plans compensating class members based on injury type and extent are deemed reasonable. The submitted plan of distribution and claim form are found to meet these criteria. Consequently, the motion for final approval of the settlement, along with requests for attorney fees, expense reimbursement, and incentive awards for representative plaintiffs, is granted. The matter was heard on June 3, 2013, concerning the final approval of the settlement between SmithKline Beecham Corporation and the plaintiffs, including various health and welfare plans.
Due and adequate notice of the Settlement Agreement has been provided to members of the Settlement Class, and a Final Approval Hearing has taken place. The Court, having reviewed all relevant documents and proceedings, determined that there is no justification for delay under Rule 54(b) of the Federal Rules of Civil Procedure.
1. The Final Order incorporates definitions from the Settlement Agreement dated December 6, 2012, and terms used herein shall have the same meanings as defined in that Agreement.
2. The Court has jurisdiction over the subject matter and all parties involved, including members of the Settlement Class.
3. The Court confirms that due process and adequate notice were given under Rule 23, informing the Settlement Class of the actions and proposed settlement with GSK.
4. Notice was provided through reasonable individual efforts and published in multiple outlets, complying fully with Rule 23 and due process requirements.
5. Members of the Settlement Class were informed of their right to object to the Settlement and related matters, with a full opportunity to be heard.
6. The Court certifies the Settlement Class as all individuals in the U.S. who purchased fluticasone propionate nasal spray, branded as Flonase or its generic equivalents, from May 19, 2004, to March 31, 2009. This includes Third Party Payors that paid for or reimbursed the spray for members or beneficiaries. Third Party Payors encompass health insurance companies and related entities that bear the cost of payments.
7. Certain entities are excluded from the Settlement Class.
Defendant and associated parties, including employees and affiliates, are not included in the Settlement Class, with exceptions for government entities purchasing fluticasone propionate nasal spray for employees under health plans. Direct purchasers of the nasal spray from the Defendant or its affiliates, judges involved in the case, and specific health benefit plans listed in the Settlement Agreement are also excluded. Members of the Settlement Class who opted out are identified and bound by the Final Order and Judgment.
The Court finds that the requirements of Rule 23 are met for class certification: the Settlement Class is sufficiently numerous, common legal and factual issues exist regarding violations of antitrust and consumer protection laws, the claims of named Plaintiffs are typical of the class, Class Counsel adequately represents the class interests, and common issues predominate over individual ones, making a class action the superior method for adjudication.
The Court approves the Settlement Agreement and Plan of Allocation, deeming them fair, reasonable, and in the best interests of the Settlement Class. This approval is based on thorough investigations, discovery, expert analyses, and good faith negotiations among experienced counsel, confirming compliance with the standards established in Girsh v. Jepson.
The Court has held a hearing regarding the fairness and adequacy of the proposed Settlement, during which two objections from individuals claiming to be Class members were considered. Despite being untimely and lacking proof of membership, the Court found the objections to be without merit. Consequently, the Settlement Agreement and Plan of Allocation are approved. The Parties are instructed to implement the Settlement in accordance with its terms, including provisions for termination.
If the final approval is overturned or modified on appeal, the Settlement Agreement will be terminated at the discretion of either the Plaintiffs or GSK. Should the Settlement Agreement be terminated or become ineffective, it will have no force except for costs related to notice and administration, and the Settlement Fund, along with any earned interest, will be returned to GSK after covering valid notice and administration expenses. Any releases granted under the Settlement Agreement will also be voided.
The Court has approved the proposed Plan of Allocation, which distributes net Settlement proceeds based on Class members’ purchases of Flonase during the Class period, deeming it fair and efficient. Rust Consulting, Inc. has been designated as the Claims Administrator to manage the distribution.
Class members can only claim the net Settlement proceeds as satisfaction for claims released by this Order and are not entitled to additional compensation. All disputes related to the Settlement must be resolved exclusively in this Court. The Court retains exclusive jurisdiction over all matters related to the Settlement, its administration, and the enforcement of this Final Order and Judgment.
The Court retains exclusive jurisdiction to resolve disputes regarding the Settlement Agreement, the Settlement, Plan of Allocation, Settlement Fund, attorneys' fees, administration costs, and distribution amounts to Settlement Class members. All parties, including the Defendant, Plaintiffs, and Settlement Class members, irrevocably submit to the jurisdiction of the United States District Court for the Eastern District of Pennsylvania for any disputes related to the Settlement or its interpretation, including Release provisions. However, this submission does not prevent any Released Party from asserting that the Release is a defense in another forum, nor does it preclude the determination of such defenses in that forum if necessary.
References to "Settlement Class members" encompass their past, present, and future representatives and affiliates. Upon the Settlement Agreement's effectiveness, all Released Parties will be released from any claims or liabilities related to actions prior to the date of the document, including those known or unknown, and regardless of participation in the Settlement Fund. Settlement Class members agree not to pursue liability against any Released Party based on the Released Claims, except for the enforcement of the Settlement Agreement.
Released Parties include specific entities associated with GlaxoSmithKline, such as SmithKline Beecham Corporation, GlaxoSmithKline LLC, and several other related companies. Upon the Settlement's effectiveness, Plaintiffs and Settlement Class members waive any rights or benefits under California Civil Code Section 1542, which typically protects unknown claims from general releases. This waiver includes the relinquishment of any known or unknown claims related to the Released Claims, including those under California Business and Professions Code Section 17200. However, the release does not apply to claims regarding ordinary business matters, product liability, breach of warranty or contract (except those related to the challenged conduct), or personal injury claims linked to fluticasone propionate nasal spray products. Additionally, all Plaintiffs and Settlement Class members are permanently enjoined from initiating any legal actions against the Released Parties concerning these Released Claims in any court or administrative agency.
Released Parties' releases of claims remain effective regardless of any later discoveries of additional facts or claims. Plaintiffs and their counsel will ensure that all claims forms include the releases from the Settlement Agreement, requiring Settlement Class members to sign these forms to access the Settlement Fund. These releases are binding and permanently bar all Settlement Class members from asserting any released claims. The Settlement does not imply any admission of wrongdoing or liability by the Defendant and is not admissible as evidence in any proceedings, except for disputes related to the Settlement itself. All claims against GSK are dismissed with prejudice, and the Court retains jurisdiction for enforcement of the Settlement. The Settlement Agreement benefits successors and assigns of the parties and binds all Settlement Class members. Data from Settlement Class members will be kept confidential and only accessible to designated parties, with public disclosure limited to Court Orders. The Court approved Class Counsel’s fee of 33 1/3% of the initial $35 million Settlement Fund, totaling $11,655,000, plus additional sums from future contributions, and reimbursement of $1,848,720.15 in expenses, deeming these amounts fair and reasonable. Each of the five named Plaintiffs will receive incentive payments as specified.
Medical Mutual of Ohio, the AFL Plan, the IBEW Plan, and Painters District Council are awarded $10,000 each, while Andrea Kehoe receives $5,000 for their representation of the Settlement Class, in addition to any funds from the Class Settlement Fund according to the approved Plan of Allocation. The Court deems these awards fair and reasonable. Plaintiffs are required to submit an accounting of the remaining Settlement Fund distribution by February 1, 2014, after covering claims administration costs, incentive payments, attorneys' fees, and reimbursement of expenses. Payments will be made from the Class Settlement Fund. The Court instructs the clerk to enter a judgment of dismissal promptly under Rule 54(b) of the Federal Rules of Civil Procedure, as there is no just reason for delay. This judgment conclusively resolves the claims against the Defendants, facilitates the Settlement's consummation, and accelerates the distribution of proceeds to Class members. An exhibit lists James O. Guleke II as excluded from the Settlement Class. Additional cases involved direct purchasers of the drug, with only one timely objection filed by Jill Jan by the May 3, 2013 deadline. An objection from James Payton was submitted late, and Jan’s objection is invalid as she is not a licensed attorney and cannot represent her adult son. Palmer’s objection was also untimely.
