Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Fla.: Attorney fees awarded where motions to compel discovery required, (Dec 4, 2013)

By Edward L. Puzzo, J.D.

In the discovery phase of an antitrust dispute that stemmed from an agreement between Procaps S.A. and Patheon Inc. to develop and market a branded softgel capsule service for pharmaceutical products, Patheon was entitled to a partial award of attorney fees on its motion to compel against both Procaps and its attorneys, the federal district court in Miami has ruled (Procaps S.A. v. Patheon Inc., December 3, 2013, Goodman, J.).

Procaps and Patheon were developers and marketers, respectively, of softgel products. After Patheon acquired another softgel company, litigation between the parties arose as to the antitrust effect the acquisition might have made on their business agreement. As part of this litigation, Patheon had filed two motions to compel discovery after the parties disagreed as to the antitrust implications of the discovery requests.

Rule 37 mandate. The court had notified the parties during litigation that it took seriously the mandate of Federal Rule of Civil Procedure 37 to award attorney fees to the prevailing party in discovery disputes. Rule 37, the court stated, required entering an award of reasonable expenses, including attorney fees, against the party or attorney advising the conduct that necessitated the successful discovery motion, unless one of three exceptions applied. One exception was when the opposing party’s nondisclosure, response, or objection was substantially justified. Another exception to the Rule 37 mandate for fees is when other circumstances made an award of expenses unjust.

Patheon subsequently sought attorney fees for litigating its two motions to compel discovery. The court separately examined each interrogatory in Patheon’s motions to compel answers to interrogatories, and its motions to compel responses to its requests for production, for a total of 15 discovery requests at issue. After examining the merits of each request, the court found that Patheon was entitled to an expense award for 6 of the 15 requests, or 40 percent of the time it spent on the discovery disputes.

The court therefore granted Patheon’s attorney fees request, but in an amount, $40,451, which was approximately 85 percent less than the amount requested. The court based the fee award reduction on factors such as: Patheon had not prevailed on all aspects of their two motions to compel; some of the positions Procaps had made to resist discovery were substantially justified; hourly billable rates for South Florida were used instead of the higher Washington, DC rates proposed by Patheon; and Patheon’s attorneys had overstaffed the work they did on the discovery motions. Without attributing bad faith to Patheon’s legal efforts, the court emphasized, the rulings merely reflected the fee shifting consequences mandated by Rule 37.

Allocation of responsibility to pay awarded fees. Next, the court addressed the issue of whether the fees should be paid by Procaps or its attorneys. Federal courts routinely award Rule 37 expense awards, including attorney fees, against both the party and its counsel, the court noted. Here, the court concluded that there was sufficient evidence in the record to find that Procaps itself was aware of the discovery positions articulated by its counsel. Therefore, the court ruled, it was appropriate that Procaps assume some of the financial responsibility. A mitigating factor, however, was that Procaps was a foreign-based corporation involved in its first American lawsuit. Consequently, the court ruled, Procaps must pay 25 percent of the attorney fee award, Procaps’ law firm must pay 65 percent and the seven individual lawyers must equally pay the remaining 10 percent.

The case is Civil Action No. 12-24356-CIV.

Attorneys: Chris S. Coutroulis (Carlton Fields) for Procaps S.A. David A. Vogel (Cooley, LLP) for Patheon Inc.

Companies: Procaps S.A.; Patheon Inc.

Cases: Antitrust FloridaNews