In Re Namenda Direct Purchaser Antitrust Litigation
MEMORANDUM AND ORDER denying #197 Motion to Compel. The plaintiffs' motion to compel (Docket No. 197) is denied, and the parties shall comply with the procedures set forth above to achieve final resolution of the privilege waiver issue. SO ORDERED. (Signed by Magistrate Judge James C. Francis on 5/19/2017) Copies Transmitted this Date By Chambers. (anc)
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
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
This litigation, now-captioned In re Namenda Direct
Purchaser Antitrust Litigation, is a consolidation of two putative
class actions with “materially identical” complaints, JM Smith
Corp. v. Actavis, PLC, No. 15 Civ. 7488 (S.D.N.Y. Sept. 22, 2015)
(the “JM Smith Action”) and Rochester Drug Cooperative, Inc. v.
Actavis, PLC, No. 15 Civ. 10083 (S.D.N.Y. Dec. 28, 2015) (the “RDC
Action”). (Order dated Dec. 16, 2016, at 2; Order dated Jan. 10,
2017). Briefing on motions to dismiss were coordinated among the
JM Smith Action, the RDC Action, and an earlier-filed action on
behalf of indirect purchasers of Namenda captioned Sergeants
Benevolent Association Health & Welfare Fund v. Actavis, PLC, No.
15 Civ. 6549 (S.D.N.Y. Aug. 19, 2015). (Order dated Jan. 26, 2016
(“1/26/16 Order”); Order, Sergeants Benevolent Association Health
& Welfare Fund v. Actavis, PLC, No. 15 Civ. 6549 (S.D.N.Y. Dec. 9,
A fuller explication of the facts can be found in the
decision of the Honorable Colleen McMahon, U.S.D.J., on the motions
to dismiss, Sergeants Benevolent Association, 2016 WL 4992690, as
well decisions in a 2014 case brought by the state of New York
against Actavis and Forest, New York v. Actavis, PLC, No. 14 Civ.
7473, 2014 WL 7015198 (S.D.N.Y. Dec. 11, 2014), and New York ex
rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015).
The operative complaint here is the First Amended Complaint
filed on October 13, 2015, in the JM Smith Action (“Am. Compl.”).
(1/26/16 Order at 2).
settlements in which they agreed not to begin marketing generic
Namenda until July 2015.”
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
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
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
The statute known as the Hatch-Waxman Act treats a
certification of invalidity in an ANDA as an act of infringement.
Sergeants Benevolent Association, 2016 WL 4992690, at *4.
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.
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
marketplace were anticompetitive “because they resulted in the
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.
allegedly anti-competitive settlements, or, more precisely, on
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.”
Memorandum of Law Supporting Forest’s Motion for Partial Summary
Motion for Partial Summary Judgment (Count 3) (“Def. PSJ Memo.”)
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
(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
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).
therefore seek production of “purportedly privileged information
Forest’s mental processes during the settlement negotiations.”
(Pl. Memo. at 22).
Both attorney-client privilege and work-product immunity “may
implicitly be waived when [the] defendant asserts a claim that in
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
The plaintiffs refer exclusively to “privileged” documents.
I shall similarly use the term, but it should be read to cover
communications protected by work product immunity as well as by
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
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
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 caseby-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).
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
Forest argues that County of Erie requires the party seeking
waiver of privilege to “show that the privilege holder actually
relied on the advice of counsel in forming [its] defense.”
(Defendants’ Opposition to Direct Purchaser Plaintiffs’ Motion to
Compel Production of Documents (“Def. Memo.”) at 17-18). However,
as the court in MBIA Insurance Corp. v. Patriarch Partners VIII,
LLC, recognized, County of Erie “reaffirmed” Bilzerian, a case in
which “the privilege was waived even though the defendant did not
rely on any privileged communications,” and cited with approval
the formulation that attorney-client privilege is waived “when a
party uses an assertion of fact to influence the decisionmaker
while denying his adversary access to privileged material
potentially capable of rebutting the assertion.” MBIA Insurance,
No. 09 Civ. 3255, 2012 WL 2568972, at *6 (S.D.N.Y. July 3, 2012)
(quoting County of Erie, 546 F.3d at 229).
[County of Erie], the Southern District has continued to recognize
the broader principles endorsed by the Second Circuit.”
Insurance, 2012 WL 2568972, at *7 (collecting cases); see also
Scott, 67 F. Supp. 3d at 610-11.
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
argument is, it appears, closely tied to Forest’s contention that
references to settlements of the underlying patent case, does not
amount to affirmatively putting at issue privileged information,
strength of its patent [or] its likelihood of success in the
(Def. Memo. at 11).
There is merit to Forest’s position.
To be sure, Forest has
done more here than merely deny the plaintiffs’ allegations or
assert affirmative defenses, see County of Erie, 546 F.3d at 229
(“A mere indication of a claim or defense  is insufficient to
place legal advice at issue.”); In re Veeco Instruments, Inc.
Securities Litigation, No. 05 MD 1695. 2007 WL 7630569, at *8
(S.D.N.Y. June 28, 2007) (“[N]owhere in Bilzerian or its progeny
does the Second Circuit suggest that a plaintiff has any right to
preclude a defendant from simply denying the allegations set forth
in the plaintiffs complaint, or explaining why it believed its
factual certifications were made in good faith.”), abrogated on
other grounds by Acticon AG v. China North East Petroleum Holdings
Ltd., 692 F.3d 34 (2d Cir. 2012); it has argued in its papers on
cross-motions for summary judgment that it settled the patent
litigations after assessing its likelihood of success in those
actions and the strength of its patent.
However, Forest also
argues that it can support “all of [its] defenses and assertions
to date” with what it calls “objective evidence,” including the
presumption of validity inhering in the issuance of the patent,
the history of the patent’s issuance, and “the factual evidence at
(Def. Memo. at 14 (emphasis omitted)).
That is, Forest
argues that it has not yet necessarily injected its subjective
views of the strength of the ‘703 patent or of its litigation
positions in the infringement action into this action.
The plaintiffs counter that “[w]hat triggers the waiver is
not the type of evidence that a party selectively offers to prove
an issue, but the issue that the party is seeking to prove (i.e.,
its subjective intent and state of mind).”
is correct, as far as it goes.
(Reply at 8).
But the cases recognize that a
litigant may sometimes use certain kinds of evidence 6 and argument
to show good faith, for example, without waiving privilege.
County of Erie, the Second Circuit noted that the trial court in
Bilzerian “correctly held that if [the defendant] asserted his
good faith, the jury would be entitled to know the basis of his
understanding that his actions were legal.”
County of Erie, 546
F.3d at 228 (quoting Bilzerian, 926 F.2d at 1294).
defendant’s privileged communications [would be left] intact if he
merely denied criminal intent but did not assert good faith or if
examination of witnesses.”
Id.; see also Holman v. Experian
Information Solutions, Inc., No. C 11-180, 2012 WL 2501085, at *5
unequivocally stated to the court that it will not rely on an
advice of counsel defense for any purpose in this case. Experian
I am not certain that describing this evidence as
“objective” is particularly useful, see, e.g., McLaughlin v. Lunde
Truck Sales, Inc., 714 F. Supp. 916, 919 (N.D. Ill. 1989) (“The
supposed ‘objective’-‘subjective’ dichotomy is in a way illusory.”
(quoting Southwire Co. v. Essex Group, Inc., 570 F. Supp. 643, 649
(N.D. Ill. 1983)), and I do not here determine whether the types
of evidence Forest has listed would preserve privilege.
parameters of the types of information that Forest may use without
waiving privilege are explained more fully below.
confined to industry practices in the context of the ongoing
[related] litigation, and would not be offered on the question of
what Experian’s lawyers did or what a reasonable lawyer would have
Experian has not placed attorney advice at issue and that there is
no implied waiver of the attorney-client privilege.”); Order on
Motion for Production or Preclusion at 3, United Food & Commercial
Workers Local 1776 & Participating Employers Health and Welfare
Fund v. Teikoku Pharma USA, Inc., No. 14-md-2521 (N.D. Cal. Dec.
3, 2015), attached as Exh. D to Declaration of Kevin C. Adam dated
May 3, 2017 (“[D]efendants will generally be entitled to assert
the attorney-client privilege and work product protection for
infringement] litigation and settlement only if they continue to
Also, . . . defense experts will not be
able to opine about [the defendant’s] litigation uncertainty [or]
. . . what they would have advised . . . regarding the status of
the [ANDA] litigation.
Defense experts will otherwise be able to
opine about the procompetitive merits of the settlement.”).
In In re Lidoderm Antitrust Litigation, which, like this
action, alleged an anticompetitive patent infringement settlement,
the court found that a
party cannot testify to its subjective beliefs about the
reasons for entering into the settlement and preclude
its adversaries from discovering the content of the
lawyers’ advice by simply asserting that the attorneyclient advice was irrelevant to those subjective
beliefs. Instead, when the record shows that attorneyclient advice played a significant role in formulating
a party’s subjective beliefs on central issues in the
case, the adversaries are entitled to disclosure of the
otherwise privileged material to test the credibility of
those subjective beliefs. But if a party relies solely
on objective evidence, or subjective beliefs derived
exclusively from business judgment and experience, the
attorney-client privilege should be protected.
No. 14-md-2521, 2016 WL 4191612, at *1 (N.D. Cal. August 9, 2016).
So, for example, although there was “no doubt . . . that business
advice and non-legal facts were considered by settlement decisionmakers,” the court held that
if defendants inject their subjective beliefs on
specific topics as part of their defense of the [patent
infringement] settlement -- like a subjective belief
that patent litigation is inherently uncertain -- where
evidence establishes that the subjective belief was also
informed by attorney advice, it would be unfair to not
allow plaintiffs access to defendants’ contemporaneous
attorney-client information to test the veracity of the
defendants’ justifications in this litigation even
though that belief is based in part on business judgment
and executive experience.
communications were put at issue, the court required the defendants
to provide a list of “subjective beliefs” that they planned to
rely on in their defense.
The court then evaluated, in
light of the discovery already completed, whether those subjective
necessarily implicated attorney-client communications.
representations, I cannot determine that Forest has broadly waived
attorney-client privilege and work product protection at this
However, the schedule in this action is constricted, with
fact discovery closing on July 21, 2017, expert discovery closing
on October 17, 2017, and the case trial-ready in January 2018.
(Amended Case Management Order dated May 18, 2017; Minute Entry
dated Dec. 16, 2016; Memorandum Endorsement dated Dec. 13, 2016).
Therefore, I concur with the plaintiffs’ suggestion that Forest
disclose any subjective beliefs it will rely on in its defense of
this action within two weeks of the date of this order. 7
Let me be clear: it is Forest’s burden to establish that it
has not waived privilege.
See, e.g., Norton v. Town of Islip, No.
04 CV 3079, 2015 WL 5542543, at *3 (E.D.N.Y. Sept. 18, 2015) (“Just
I expect that Forest will list the defense, noted above,
that it has already raised in its papers on the pending summary
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