Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Pharmacies Denied Supreme Court Review of California State Court's Rejection of Price Fixing Claims, (Jun 3, 2013)

By Jeffrey May, J.D.

The U.S. Supreme Court will not consider California state law price fixing claims brought by 15 retail pharmacies against more than a dozen pharmaceutical companies that manufacture and distribute brand-name pharmaceuticals. Today, the Court denied the pharmacies' petition for certiorari (Clayworth v. Pfizer, Inc., Dkt. No. 12-1241).

Left standing is a California appellate court decision, affirming summary judgment in favor of the defendants on the ground 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, since 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: erroneously limiting the plaintiffs’ discovery; denying the plaintiffs’ request to reopen discovery before the merits motions were heard; and sustaining the defendants’ objections to some of the plaintiffs’ exhibits.

The California Supreme Court denied review of the appellate court decision on November 28, 2012. Then, the pharmacies sought U.S. Supreme Court review, filing their petition on April 12, 2013.

The pharmacies argued that their constitutional rights were violated. In their petition, they asked: (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 contended 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 suggested 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 James R. Clayworth. Madeleine Marie McDonough (Shook, Hardy & Bacon, L.L.P.) for Pfizer, Inc.

Companies: Pfizer, Inc.

News: Antitrust