Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Pharmacies Ask U.S. Supreme Court to Review California State Court's Rejection of Price Fixing Claims, (Apr 18, 2013)

By Jeffrey May, J.D.

The U.S. Supreme Court has been asked to review a California appellate court decision that rejected state law price fixing claims brought in 2004 by 15 retail pharmacies against pharmaceutical companies that manufacture and distribute brand-name pharmaceuticals. The pharmacies filed their petition for certiorari on April 12 (Clayworth v. Pfizer, Inc., Dkt. No. 12-1241).

The appellate court decision at issue affirmed summary judgment in favor of the defendants after concluding that the pharmacies failed to present evidence creating triable issues of material fact regarding the existence of a conspiracy. In the court's view, the complaint alleged a conspiracy "to eliminate price competition and fix prices in the United States" by agreeing "they would not sell their drugs at or below the price at which they sold those same drugs in Canada . . . ." This theory was known as the "Canadian floor conspiracy." However, the pharmacies failed to introduce either direct evidence concerning the Canadian floor theory or evidence of parallel pricing, they failed to satisfy their burden of producing evidence showing the alleged conspiracy was more likely than not.

The appellate court also rejected a number of "procedural errors" raised by the pharmacies on appeal, most notably the lower court judge's decision not to recuse himself. In addition to rejecting the pharmacies’ argument that the lower court judge should have recused himself due to a conflict of interest because the judge's sister-in-law was a partner at a law firm that had represented one of the defendants, the lower court rebuffed assertions that the judge erred by: (1) erroneously limiting the plaintiffs’ discovery; (2) denying the plaintiffs’ request to reopen discovery before the merits motions were heard; and (4) sustaining the defendants’ objections to some of the plaintiffs’ exhibits.

The pharmacies petitioned the California Supreme Court for review of the appellate court decision. The petition for review was denied on November 28, 2012. Then, the pharmacies sought U.S. Supreme Court review, receiving an extension of time to file their petition in February 2013.

In their petition, the pharmacies ask: (1) whether the right of trial by jury in suits at common law preserved by the Seventh Amendment is a fundamental right that applies to the states through the Fourteenth Amendment, and is, therefore, protected by the Fourteenth Amendment from infringement by the states; and (2) whether the requirement protected by the Fourteenth Amendment that a judge be fair and impartial is violated when a judge decides a dispositive motion which was authored and/or supported by the judge's sister-in-law who was a partner in one of the law firms making the motion and submitting the papers.

The pharmacies argue in their petition that their right to a jury trial was plainly violated in light of the significant evidence demonstrating a price fixing conspiracy, including increasing U.S. drug prices in the face of decreasing foreign drug prices.

They also contend that the lower court's ruling on summary judgment was tainted by conflict of interest. Covington & Burling, LLP, the law firm at which the judge's sister-in-law was a partner, had represented one of the defendants for six years. After the case was assigned to the lower court judge, Covington & Burling filed a substitution of attorney removing itself as counsel in favor of Jones, Day. The pharmacies argue that, after their motion to disqualify the judge was denied, the judge improperly granted summary judgment in favor of the defendants, based on a motion for summary judgment that had been co-authored and signed by Covington & Burling.

Attorneys: Joseph M. Alioto (Alioto Law Firm) for petitioner James R. Clayworth.

Companies: Pfizer, Inc.

News: Antitrust