Friday, June 26, 2020
California Supreme Court:
DA May Bring UCL Action Seeking Statewide Civil Penalties
By a MetNews Staff Writer
A 2016 action brought by the then-district attorney of Orange County under the Unfair Competition Law, in which a conspiracy among pharmaceutical companies to delay the availability of a generic version of a prescription drug was alleged, properly sought civil penalties for violations occurring statewide, the California Supreme Court held yesterday.
Then-Orange Superior Court Judge Kim G. Dunning (now retired, but sitting on assignment to the Court of Appeal for this district) in 2016 denied a motion by the defendants to strike from the complaint all “claims for restitution and civil penalties based on conduct outside the territorial jurisdiction of Orange County.” Div. Three of the Fourth District Court of Appeal, in a 2-1 decision, on May 31, 2018, granted a writ petition ordering that the scope of then-District Attorney Tony Rackauckas’s be limited to conduct in his own jurisdiction.
His “pay-for-delay” action was aimed at alleged efforts to keep off the market a generic version of Niaspan, used to lower bad cholesterol and boost good cholesterol.
The California Supreme Court yesterday reversed the Court of Appeal’s decision in an opinion by Justice Goodwin H. Liu, who wrote for a unanimous court. Justice Leondra Kruger added a concurring opinion, signed by Chief Justice Tani Cantil-Sakauye and Justice Carol Corrigan, in which she suggested that the Legislature erect a requirement that a district attorney apprise the attorney general of any action he or she brings under the Unfair Competition Law (“UCL”).
There was no question as to Rackauckas’s authority to bring UCL action against the drug-makers. Business and Professions Code §17204 provides that UCL actions “shall be prosecuted exclusively in a court of competent jurisdiction by the Attorney General or a district attorney…” and §17206(a) of that code says:
“Any person who engages, has engaged, or proposes to engage in unfair competition shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General, by any district attorney [and others specified].”
The defendants conceded that a district attorney may seek statewide injunctive relief.
The issue, Liu specified, “is whether a civil enforcement action initiated by a district attorney under the UCL may seek civil penalties for violations occurring outside of the district attorney’s county as well as restitution on behalf of Californians who do not reside in the county.”
The answer he provided was:
“[T]he text of the UCL grants broad civil enforcement authority to district attorneys, and this broad grant of authority is consistent with the statute’s purpose and history. We see no indication that in an enforcement action brought by a district attorney, the Legislature intended to limit civil penalties or restitution to the geographic boundaries of the district attorney’s county.”
The justice said there is no provision in the UCL that directly addresses the scope of a district attorney’s authority, but determined that it can be inferred.
He noted that the UCL authorizes courts to “make such orders or judgments...as may be necessary to restore to any person in interest any money or property...which may have been acquired by means of...unfair competition” and the act says that the court “ shall impose a civil penalty for each violation” that’s found. Lui pointed out:
“The broad language of these provisions is not qualified by any reference to geography or the identity of the plaintiff. The statute contains no geographic limitation on the scope of relief that courts may order in an enforcement action brought by a district attorney.”
He also noted that §17206(c) sets forth:
“If the action is brought by the Attorney General, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half to the General Fund.”
“The Legislature’s allocation of one-half of civil penalties in a statewide action to the county in which the judgment was entered indicates that the Legislature did not design the civil penalty scheme to ensure an allocation of civil penalties to counties in accordance with the number of violations in each county. Rather, penalties are awarded in large part based on the location in which judgment is entered, regardless of the number of violations proven or their corresponding locations.”
“[I]n making injunctions prohibiting unfair competition widely enforceable throughout the state, section 17207, subdivision (b) distinguishes between ‘any county in which the violation occurs’ and ‘any county...where the injunction was issued.’ In other words, the county ‘where the injunction was issued’ is not necessarily the county ‘in which the violation [of the injunction] occurs,’ and civil penalties to punish violation of an injunction may be obtained through a civil action filed in either type of county.”
State Attorney General Xavier Becerra has sided with the defendants, speculating that a district attorney might be at loggerheads with him over how to proceed against defendants. Liu responded that both under a state constitutional provision and the UCL, “the Attorney General retains authority to intervene or take over the case.”
The case is Abbot Laboratories v. Superior Court (People), 2020 S.O.S. 3056.
The action brought by Rackauckas continues. A status conference is slated for Sept. 11.
Allegations of Complaint
The complaint says
“This case is based on several simple and provable facts: the brand name manufacturers of Niaspan entered into agreements with generic drug manufacturers wherein the brand name manufacturers provided substantial value to the generic manufacturers in exchange for the generic manufacturers agreeing not to bring generic versions of Niaspan to market in the United States. Tins agreement was successfully carried out by the defendants, and resulted in California users, their insurers, public healthcare providers and other government payors paying substantially higher prices for Niaspan than they would have if the generic version had been available.”
“As a direct and proximate result of their unlawful scheme to keep generic versions of Niaspan off the market, and in violation of California’s consumer protection laws. Defendants: (a) illegally maintained monopoly power in the market for Niaspan in the United States from 2005 through March 2014. at the earliest, and sold more than $6.7 billion of Niaspan or generic Niaspan from 2005 until at least March of 2014 at supracompetitive prices; (b) illegally maintained the price of Niaspan at supracompetitive levels; and (c) caused California users, their insurers, public healthcare providers and other government payors to overpay millions of dollars by depriving them of the benefits of access to less expensive generic versions of Niaspan.”
A generic version of Niaspan is now on the market.
Niaspan is a pharmaceutical grade of niacin, a B vitamin. A 2014 study showed that niacin does not have efficacy in preventing coronary disease.
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