Antitrust Law Daily Wrap Up, ANTITRUST—EDPenn: $150 Million Settlement Approved in Flonase Antitrust Litigation, (Jun 17, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Philadelphia has approved a $150 million settlement of direct purchaser antitrust litigation alleging that SmithKline Beecham Corp., doing business as GlaxoSmithKline PLC (GSK), improperly delayed the entry of generic competition to its Flonase brand-name version of fluticasone propionate, a nasal corticosteroid (In Re Flonase Antitrust Litigation, June 14, 2013, Brody, A.). The court also approved an attorney fee award of $50 million, $2,069,433 in costs and expenses, and incentive awards of $50,000 and $40,000 to the class representatives.

In 2008, American Sales Company, Inc. filed suit against GSK. The court later certified the case as a class action, and in November 2012 the parties reached a settlement, which the court subsequently preliminarily approved. In the present decision, the court gave its approval to a final settlement of the claims.

Settlement approval. The factors outlined in Girsh v. Jepson, 521 F.2d 153 (1975) weighed in favor of settlement approval, the court found. The complexity, expense, and likely duration of the litigation weighed in favor of the settlement because the case involved “highly complex antitrust issues, FDA bioequivalence standards for suspension nasal spray products, pharmaceutical manufacturing and supply issues, and pharmaceutical regulatory issues,” which had been investigated and litigated for over four years. “The settlement avoided the need for a difficult and expensive multi-week trial involving complex scientific and regulatory testimony,” as well as the costs of appeal, the court noted.

Moreover, none of the 33 class members had objected to the settlement, a factor that “overwhelmingly support[ed] settlement approval.” The parties had also completed sufficient discovery and litigation that they had “an adequate appreciation of the merits of the case before negotiating,” in the court’s view. “Trial was just two months away when the parties reached their agreement,” the court noted.

The factors regarding the risks of establishing liability and damages also weighed in favor of settlement, the court observed. The plaintiffs would have had to establish both (1) “that GSK’s petitions to the FDA regarding generic FP were objectively baseless and that GSK could not have reasonably expected success on the merits of any of its requests to the FDA,” and (2) “that GSK’s petitions to the FDA were a substantial cause of any delay in the approval of Roxane’s generic FP, and that, but for GSK’s actions, Roxane would have had the manufacturing capability to get its product to market sooner.” The complexity of these issues meant it was unclear whether a jury would have found GSK liable, or how they would have decided damages.

The settlement was also reasonable in light of the best possible recovery and the attendant risks of litigation. The settlement would permit the class members to “benefit from the $150 million fund immediately, and avoid the uncertainties and delay inherent in continuing to litigate this complex class action.”

Two remaining factors, the risks of maintaining the class action through trial and the ability of the defendants to withstand a greater judgment, were “neutral,” according to the court. The plaintiff did not face much risk in maintaining a certified class throughout trial, and the fact that GSK likely had the ability to pay more did not mean the settlement was unfair.

Additional factors added to the analysis by the Third Circuit’s 1998 decision in In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283, also weighed in favor of settlement approval, according to the court. The substantive issues of the case were “well-developed,” supporting approval of the settlement. No other direct purchaser claims had been filed against GSK, and therefore “the settlement creates the only award for class members.” The class members had been given the opportunity to opt out when the class had been certified, but none had done so. The absence of a second opportunity to opt out was meaningless, as none of the class members had objected to the settlement. The attorney fees provisions were reasonable, and the procedure for processing individual claims under the settlement was “fair and reasonable.”

Attorney fees. The court also approved an attorney fees award of $50 million (one-third of the settlement fund), $2,069,433 in costs and expenses, and $50,000 and $40,000 in incentive awards to class representatives American Sales Company and Meijer, Inc. respectively.

The court first concluded that the fee award survived assessment under the percentage-of-recovery method. The size of the $150 million fund, in relation to the 33 beneficiaries, “counsel[ed] in favor of approval of the requested fee.” No class members had objected to the settlement. The “counsel for both sides were knowledgeable, tenacious, and highly skillful, and the award “clearly demonstrate[d] the value of class counsel’s efforts.” As with the settlement itself, the complexity and duration of the litigation also “weigh[ed] strongly in favor of the proposed fee.”

Moreover, the risk of nonpayment “support[ed] approval of the requested fee” because the plaintiffs’ counsel took the case on a contingent fee basis, and success in the litigation and a significant recovery of damages were not guaranteed. The amount of time devoted to the case also “weigh[ed] in favor of the requested fee” because the class counsel spent more than 40,000 hours over four years litigating the case, and the complexity of the issues and the defendants’ “robust defense” indicated those hours were necessary. The amount of the fee award in the present case was also consistent with that in similar direct purchaser class actions, and the class counsel did not receive assistance from a government investigation.

The court found two remaining factors to be neutral. The court did not “give great weight to [the] hypothetical exercise” of determining the percentage fee that would have been negotiated had the case been subject to private contingent fee arrangements at the time counsel was retained, and the terms of the settlement were “relatively standard.” The court found the factors overall indicated “overwhelming support for the proposed fee.”

The lodestar crosscheck also supported the award, according to the court. The case involved seven law firms with attorneys charging hourly rates ranging from $120 to $795 working more than 41,000 hours. After certain revisions, the counsel arrived at a lodestar that exceeded $16,750,000. The court determined that the lodestar multiplier was 2.99, and courts in the Third Circuit had frequently awarded “multiples ranging from one to four.” The court thus found the $50 million award to be appropriate.

The court also found the award of $2,069,433 in costs to be “reasonable and proper” given the expenses incurred in litigating the case. In addition, the court approved incentive awards to American Sales and Meijer, recognizing the risk they took from potential retaliation from suing a supplier and their active assistance in the litigation. However, the court considered the requested awards of $85,000 and $75,000 to be “too large,” instead granting awards of $50,000 to American Sales and $40,000 to Meijer.

The case is No. 08-cv-3149 (Direct).

Attorneys: Casandra A. Murphy (Kessler Topaz Meltzer & Check LLP) for American Sales Co. Peter Barile (Grant & Eisenhofer) for Meijer, Inc. Edward D. Rogers (Ballard, Spahr, Andrews & Ingersoll) for SmithKline Beecham Corp.

Companies: American Sales Co.; Meijer, Inc.; SmithKline Beecham Corp.

Cases: Antitrust PennsylvaniaNews