Endo Pharmaceuticals Inc. et al v. Federal Trade Commission

MOTION to Dismiss for Lack of Jurisdiction , MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

E.D. Pa.December 30, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ENDO PHARMACEUTICALS, INC., et al., v. FEDERAL TRADE COMMISSION, No. 16-cv-05599 ENDO PHARMACEUTICALS, INC., et al., v. FEDERAL TRADE COMMISSION, No. 16-cv-05600 MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION, OR IN THE ALTERNATIVE, FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED The Federal Trade Commission moves to dismiss these cases for lack of subject-matter jurisdiction or, in the alternative, failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(1), (b)(6). As described in the accompanying Memorandum of Law, plaintiffs’ claims for pre-enforcement review of the FTC’s right to sue them fail because the FTC has not taken any final agency action against them, the claims are not ripe for review, and declaratory relief is Case 2:16-cv-05599-PD Document 25 Filed 12/30/16 Page 1 of 3 2 inappropriate under the standards set forth by the Third Circuit. Accordingly, plaintiffs’ complaints should be dismissed without prejudice to their right to raise the same arguments as defenses in any enforcement action that the FTC may file against them.. December 30, 2016 Respectfully submitted, DAVID C. SHONKA Acting General Counsel JOEL MARCUS Deputy General Counsel /s/Matthew M. Hoffman MATTHEW M. HOFFMAN Attorney FEDERAL TRADE COMMISSION 600 Pennsylvania Avenue, N.W. Washington, D.C. 20580 Case 2:16-cv-05599-PD Document 25 Filed 12/30/16 Page 2 of 3 CERTIFICATE OF SERVICE I certify that on December 30, 2016, I caused a copy of the foregoing to be electronically served on counsel of record for all parties via the Court’s CM/ECF system. /s/Matthew M. Hoffman MATTHEW M. HOFFMAN Case 2:16-cv-05599-PD Document 25 Filed 12/30/16 Page 3 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ENDO PHARMACEUTICALS, INC., et al., v. FEDERAL TRADE COMMISSION, No. 16-cv-05599 ENDO PHARMACEUTICALS, INC., et al., v. FEDERAL TRADE COMMISSION, No. 16-cv-05600 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION, OR IN THE ALTERNATIVE, FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 1 of 31 TABLE OF CONTENTS INTRODUCTION ..................................................................................................... 1 BACKGROUND ....................................................................................................... 4 A. Enforcement Under The FTC Act ............................................................... 4 B. The FTC’s Prior Enforcement Lawsuit Against Plaintiffs .......................... 6 C. The Declaratory Judgment Actions ............................................................. 8 ARGUMENT ............................................................................................................. 9 I. The Court Lacks Jurisdiction Because The FTC Has Not Taken Any Final Agency Action Under The APA And Plaintiffs Have Another Adequate Remedy. ............................................. 10 II. Plaintiffs’ Claims For Pre-Enforcement Review Are Unripe. .................. 14 A. The Issues Raised Here Are Not Fit For Judicial Decision. ............................................................................................. 15 B. Raising Their Claims As Defenses In An FTC Enforcement Action Will Cause No Hardship To Plaintiffs. ............................................................................................ 16 III. Declaratory Relief Is Not Appropriate Here In Any Event. ...................... 18 A. Declaratory Relief Will Not Settle The Entire Dispute. .................... 19 B. Plaintiffs Are Engaged In Improper Procedural Fencing. ................. 20 C. The Other Reifer Factors Weigh Against The Exercise Of Jurisdiction. ................................................................................... 22 1. It will be more convenient for the parties to litigate where other related litigation is taking place. ............................. 22 2. The public interest factor weighs against the exercise of jurisdiction. ............................................................... 23 3. Other remedies are available and convenient. ............................ 23 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 2 of 31 ii 4. Entertaining the declaratory judgment actions will result in duplicative litigation. .................................................... 23 CONCLUSION ........................................................................................................ 24 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 3 of 31 iii TABLE OF AUTHORITIES CASES Abbott Laboratories, Inc. v. Gardner, 387 U.S. 136 (1967) ............................................................................ 3, 14, 15, 16 AmSouth Bank v. Dale, 386 F.3d 763 (6th Cir. 2004)................................................................................21 Audobon Life Ins. Co. v. FTC, 543 F. Supp. 1362 (M.D. La. 1982) ....................................................................... 9 Bechuck v. Home Depot U.S.A., Inc., 814 F.3d 287 (5th Cir. 2016)................................................................................22 Bennett v. Spear, 520 U. S. 154 (1997) ...................................................................12 CableAmerica Corp. v. FTC, 795 F. Supp. 1082 (N.D. Ala. 1992) ...................................................................... 9 Chehazeh v. Attorney General, 666 F.3d 118 (3d Cir. 2012) .................................................................................10 Dairymen, Inc. v. FTC, 684 F.2d 376 (6th Cir. 1982).................................................................................. 9 Davis v. United States, 499 F.3d 590 (6th Cir. 2007)................................................................................10 FTC v. Actavis, 133 S. Ct. 2223 (2013) ..................................................................... 6 FTC v. Amy Travel Serv., Inc., 875 F.2d 564 (7th Cir. 1989).................................................................................. 5 FTC v. Bronson Partners, LLC, 654 F.3d 359 (2d Cir. 2011) ................................................................................... 5 FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1 (1st Cir. 2010) ...................................................................................... 5 FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192 (10th Cir. 2005) ............................................................................. 5 FTC v. Gem Merch. Corp., 87 F.3d 466 (11th Cir. 1996).................................................................................. 5 FTC v. Magazine Solutions, LLC, 432 F. App’x 155 (3d Cir. 2011) ........................................................................... 5 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 4 of 31 iv FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994).................................................................................. 5 FTC v. Ross, 743 F.3d 886 (4th Cir. 2014) ................................................................ 5 FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312 (8th Cir. 1991) ............................................................................... 5 FTC v. Standard Oil Co., 449 U.S. 232 (1980) ................................................. 1, 2, 9, 11, 12, 13, 15, 16, 17 General Finance Corp. v. FTC, 700 F.2d 366 (7th Cir. 1983)..................................................................... 9, 11, 14 Harris Cty. v. MERSCORP Inc., 791 F.3d 545 (5th Cir. 2015)................................................................................10 Hindes v. FDIC, 137 F.3d 148 (3d Cir. 1998) .........................................................14 In re Bath & Kitchen Fixtures Antitrust Litig, 535 F.3d 161 (3d Cir. 2008) .................................................................................22 Jaffee v. United States, 592 F.2d 712 (3d Cir. 1979) .................................................................................11 LabMD, Inc. v. FTC, 776 F.3d 1275 (11th Cir. 2015) ........................................................ 1, 2, 9, 13, 14 Lacey v. Cessna Aircraft Co., 862 F.2d 38 (3d Cir. 1988) ...................................................................................21 Milton v. FTC, 734 F. Supp. 1416 (N.D. Ill. 1990) ................................................... 9 Morgan Drexen, Inc. v. CPFB, 785 F.3d 684 (D.C. Cir. 2015) ............................................................ 3, 18, 20, 21 N.C. State Bd. of Dental Examiners v. FTC, 768 F. Supp. 2d 818 (E.D.N.C. 2011).................................................................... 9 R.J. Reynolds Tobacco Co. v. FTC, 14 F. Supp. 2d 757 (M.D.N.C. 1998) .................................................................... 9 Reifer v. Westport Insurance Corp., 751 F.3d 129 (3d Cir. 2014) ................................................................ 3, 18, 20, 23 Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950) .............................................................................................10 Swedberg v. Marotzke, 339 F.3d 1139 (9th Cir. 2003) .............................................................................22 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 5 of 31 v Swish Mktg., Inc. v. FTC, 669 F. Supp. 2d 72 (D.D.C. 2009) ........................................................ 3, 9, 19, 21 Trudeau v. FTC, 456 F.3d 178 (D.C. Cir. 2006) ...................................................................... 10, 11 Ukiah Valley Medical Center v. FTC, 911 F.2d 261 (9th Cir. 1990)............................................................................9, 14 United States v. W.T. Grant Co., 345 U.S. 629 (1953) .............................................................................................16 Wearly v. FTC, 616 F.2d 662 (3d Cir. 1980) .................................. 1, 2, 9, 14, 15, 17 STATUTES 5 U.S.C. § 704 ............................................................................................... 1, 10, 13 15 U.S.C. § 45(a)(1) ................................................................................................... 4 15 U.S.C. § 45(a)(2) ................................................................................................... 4 15 U.S.C. § 45(b) ...................................................................................................4, 5 15 U.S.C. § 53(b) ....................................................................................................... 5 28 U.S.C. § 1331 ............................................................................................... 11, 14 28 U.S.C. § 1337 ......................................................................................................11 28 U.S.C. § 1337(a) .................................................................................................14 28 U.S.C. §§ 2201-02...............................................................................................10 RULES AND REGULATIONS 16 C.F.R. § 4.14 ......................................................................................................... 6 16 C.F.R. §§ 3.51-3.54 ............................................................................................... 4 Fed. R. Civ. P. 12(b)(1) .............................................................................................. 1 Fed. R. Civ. P. 12(b)(6) ........................................................................................1, 22 Fed. R. Civ. P. 41(a)(1) ................................................................................. 8, 21, 22 MISCELLANEOUS 10B Charles Alan Wright et al., Federal Practice & Procedure § 2759 (4th ed. 2016) .........................................................................20 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 6 of 31 INTRODUCTION The Federal Trade Commission moves to dismiss these cases for lack of subject-matter jurisdiction or, in the alternative, failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(1), (b)(6). Plaintiffs ask the Court to declare that the FTC cannot sue them in federal court to enforce the FTC Act, or alternatively, that it cannot seek a monetary judgment against them. Numerous courts—including the Supreme Court and Third Circuit—have rejected similar attempts to preempt FTC enforcement proceedings by using a declaratory judgment action to make arguments properly raised as affirmative defenses. See, e.g., FTC v. Standard Oil Co., 449 U.S. 232, 238-43 (1980); Wearly v. FTC, 616 F.2d 662, 667-68 (3d Cir. 1980); LabMD, Inc. v. FTC, 776 F.3d 1275, 1277 (11th Cir. 2015). Plaintiffs’ claims suffer from the same defects. Although the complaints are artfully pled to avoid mentioning the Administrative Procedure Act, that is the only statute that could potentially provide plaintiffs with a cause of action against the FTC. But the Court does not have jurisdiction to entertain an APA claim because there is no “final agency action” here, let alone one for which “there is no other adequate remedy in a court.” 5 U.S.C. § 704. The FTC Commissioners have not yet decided whether to bring enforcement proceedings against plaintiffs, and if so, whether to do it in district Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 7 of 31 2 court or in an administrative forum. If the Commission decides not to file district court actions, plaintiffs’ claims will be moot. But even if the Commission does proceed against plaintiffs in district court, the Supreme Court’s Standard Oil decision makes clear that the decision to bring an enforcement proceeding is not a “final agency action” subject to judicial review. Standard Oil Co., 449 U.S at 239. Moreover, if the FTC does sue in district court, plaintiffs will have a complete remedy available to them—they can raise every argument they wish to make here as a defense to an enforcement action, just as they did in their motion to dismiss the FTC’s original complaint. Accordingly, the Court lacks jurisdiction. See, e.g., Wearly, 616 F.2d at 667-68; LabMD, 776 F.3d at 1275. To the extent that plaintiffs disclaim reliance on the APA, their claims must be dismissed for failure to state a claim, since neither the Declaratory Judgment Act nor any of the other statutes cited in the complaints authorizes a cause of action against the FTC. Either way, dismissal is required. The complaints also must be dismissed for the related, but independent, jurisdictional reason that the matters they raise are not ripe for judicial review. The Supreme Court has established that pre-enforcement judicial review of agency action is permitted only when the agency action is “final” under the APA, the matter involves purely legal issues, and the plaintiff would face some hardship, such as a risk of civil or criminal penalties, if review were postponed. See Abbott Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 8 of 31 3 Laboratories, Inc. v. Gardner, 387 U.S. 136, 149 (1967). None of those elements is satisfied here. Plaintiffs do not challenge final agency action; their complaint raises factual issues about whether their allegedly unlawful conduct is likely to recur; and deferring resolution of their claims to an FTC enforcement action subjects them to neither the threat of sanctions or penalties nor an imposition on their business activities. Finally, even if this case were justiciable, a declaratory judgment is inappropriate under the standards set forth by the Third Circuit. See Reifer v. Westport Insurance Corp., 751 F.3d 129, 146 (3d Cir. 2014). Declaratory relief will not necessarily resolve the entire controversy. The Court cannot assume that plaintiffs will prevail in this case, and if it determines that the FTC is entitled to bring its claim in federal court, there will need to be a separate proceeding to address the merits. Furthermore, plaintiffs are engaged in improper “procedural fencing” to deny the FTC its right to choose the forum for litigation over plaintiffs’ anticompetitive conduct. And a declaratory judgment action would be wasteful of judicial resources and result in duplicative proceedings. Courts have found declaratory relief unwarranted in virtually identical circumstances. See, e.g., Morgan Drexen, Inc. v. CPFB, 785 F.3d 684, 688 (D.C. Cir. 2015); Swish Mktg., Inc. v. FTC, 669 F. Supp. 2d 72, 76-80 (D.D.C. 2009). Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 9 of 31 4 In short, there is no good reason for this Court to entertain a declaratory judgment action (even if it were permissible). Plaintiffs may raise all of their claims in the ordinary course of an enforcement proceeding and they will suffer no harm in the meantime from any delay. The Court should dismiss these cases. BACKGROUND A. Enforcement Under the FTC Act Congress created the FTC as a multi-member, bipartisan agency and gave it a dual mandate to protect consumers and promote competition. Section 5 of the FTC Act prohibits “unfair methods of competition” and “unfair or deceptive acts or practices” in or affecting commerce. 15 U.S.C. § 45(a)(1). The Act “empower[s] and direct[s]” the FTC to prevent such conduct. Id. § 45(a)(2). The FTC enforces Section 5 through either of two procedural routes: administrative proceedings or lawsuits in federal district court. Under Section 5(b) of the FTC Act, the Commission may issue an administrative complaint when it has “reason to believe” that the respondent has been or is using an unfair method of competition or unfair or deceptive act or practice. 15 U.S.C. § 45(b). Administrative cases are initially tried before an administrative law judge and are then subject to de novo review by the full Commission and review by the court of appeals. See id.; 16 C.F.R. §§ 3.51-3.54. If the Commission concludes that the Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 10 of 31 5 respondent has engaged in prohibited conduct, it can order the respondent to cease and desist, but cannot order monetary relief. See 15 U.S.C. § 45(b). Alternatively, the Commission may file a federal lawsuit under Section 13(b) of the FTC Act, which authorizes the Commission to sue in federal district court whenever it has “reason to believe” that the defendant is violating or is about to violate any provision of law enforced by the FTC (including Section 5). 15 U.S.C. § 53(b). The statue empowers the district court in a case brought under Section 13(b) to issue “a permanent injunction,” which courts have unanimously determined includes the authority to issue equitable monetary relief such as restitution to injured consumers and disgorgement of unjust gains. See FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 15 (1st Cir. 2010); FTC v. Bronson Partners, LLC, 654 F.3d 359, 365 (2d Cir. 2011); FTC v. Magazine Solutions, LLC, 432 F. App’x 155, 158 n.2 (3d Cir. 2011); FTC v. Ross, 743 F.3d 886, 890-92 (4th Cir. 2014); FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 571-72 (7th Cir. 1989); FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991); FTC v. Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir. 1994); FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192, 1202 n.6 (10th Cir. 2005); FTC v. Gem Merch. Corp., 87 F.3d 466, 470 (11th Cir. 1996). Many cases could be brought either as a Section 5 administrative complaint or a Section 13(b) lawsuit. The Commission decides which route is most Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 11 of 31 6 appropriate in any case based on the facts and circumstances of that case. It takes into account the recommendations of FTC staff, but is not bound by those recommendations. Whichever procedural vehicle it chooses, any new proceeding must be approved by majority vote of the Commission. See 16 C.F.R. § 4.14. B. The FTC’s Prior Enforcement Lawsuit Against Plaintiffs In March 2016, the Commission authorized FTC staff to file a Section 13(b) complaint against Endo Pharmaceuticals, Inc. and Endo International plc (collectively, “Endo”), Watson Laboratories, Inc. (“Watson”), Impax Laboratories, Inc. (“Impax”) and other companies for engaging in unfair methods of competition. The vote was 2-1, with the dissenting Commissioner arguing that the better course would be to pursue the matter administratively. The FTC’s complaint charged that Endo, the owner of two brand-name drugs, had entered into reverse-payment agreements with the other defendants—i.e., Endo agreed to pay those companies a share of its monopoly profits in exchange for their agreement to refrain from launching generic versions of the drugs. As the Supreme Court has recognized, such agreements can have “significant anticompetitive effects” and may violate the antitrust laws. FTC v. Actavis, 133 S. Ct. 2223, 2237 (2013). Endo entered into a reverse-payment agreement with Watson concerning Lidoderm (a topical patch containing the anesthetic lidocaine) and with Impax relating to Opana ER (an extended release opioid painkiller). The FTC chose to file Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 12 of 31 7 a single complaint relating to both drugs and agreements because Endo was a defendant in both instances and because all the claims involved similar antitrust theories that would be supported by much of the same economic theories and expert testimony. The FTC filed the case in this district because Endo’s U.S. headquarters are located here. The FTC’s complaint sought declaratory relief, an injunction barring future reverse-payment agreements similar to the Lidoderm and Opana ER agreements, and equitable monetary relief in the form of disgorgement of unjust enrichment or restitution to consumers who were forced to pay higher prices as a result of delayed generic entry. See FTC v. Endo Pharms. Inc., No. 16- cv-1440 (E.D. Pa.) (“Endo I”) Dkt. No. 1. The defendants moved to sever the claims involving Opana ER from those involving Lidoderm. Id. Dkt. Nos. 57, 58, 61. They also moved to dismiss, arguing (1) that the FTC was required to assert its claims in an administrative proceeding rather than a judicial proceeding because the alleged misconduct occurred “entirely in the past,” (2) that Section 13(b) does not authorize monetary relief, and (3) that the claims for disgorgement based on Opana ER were time- barred. Id. Dkt. No. 69. This Court granted the motion to sever, but did not rule upon the motion to dismiss. Id. Dkt. No. 119. The severance order meant that the FTC could not realize the efficiencies of a single proceeding, and the agency concluded that in that circumstance it could Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 13 of 31 8 more efficiently pursue its claims in other districts where private-party litigation presenting highly similar issues is currently pending. See In re Lidoderm Antitrust Litig., No. 3:14-md-2521 (N.D. Cal.); In re Opana ER Antitrust Litig, No. 1:14-cv- 10150 (N.D. Ill.). Accordingly, on October 25, 2016, the FTC voluntarily dismissed its complaint without prejudice under Rule 41(a)(1). Endo I Dkt. No. 121. That dismissal terminated the prior enforcement action. C. The Declaratory Judgment Actions The day after the FTC dismissed the enforcement case, Endo, Watson and Impax filed these declaratory judgment actions: one relating to Lidoderm and one to Opana ER. The companies seek declaratory judgments on the same three issues they raised in their earlier motion to dismiss. Since these actions were filed, the FTC has engaged in settlement discussions with the plaintiffs. Those discussions are ongoing. The FTC’s future actions depend, in large part, on the outcome of these negotiations. If the FTC is unable to reach a settlement with all plaintiffs, FTC staff will recommend to the Commission that new actions be filed against Endo and Watson in the Northern District of California and against Endo and Impax in the Northern District of Illinois. The ultimate decision as to whether and how the FTC will proceed, however, rests with the Commissioners. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 14 of 31 9 ARGUMENT Endo, Watson and Impax are hardly the first plaintiffs that have tried to preempt a potential FTC enforcement action by filing a declaratory judgment complaint. The Supreme Court rejected a similar effort in Standard Oil, holding that plaintiffs could not maintain a declaratory judgment action challenging the FTC’s authority to commence a Section 5 administrative proceeding. 449 U.S. at 246-47. The Third Circuit similarly held in Wearly that the district court lacked jurisdiction to consider a declaratory judgment action to preempt the FTC from enforcing an investigatory subpoena in district court. Wearly, 616 F.2d at 667-68. Numerous other appellate and trial courts have dismissed claims seeking declaratory or injunctive relief to preempt the FTC’s ordinary enforcement processes. See, e.g., LabMD, 776 F.3d at 1277; Ukiah Valley Medical Center v. FTC, 911 F.2d 261 (9th Cir. 1990); General Finance Corp. v. FTC, 700 F.2d 366 (7th Cir. 1983); Dairymen, Inc. v. FTC, 684 F.2d 376 (6th Cir. 1982); N.C. State Bd. of Dental Examiners v. FTC, 768 F. Supp. 2d 818 (E.D.N.C. 2011); Swish Mktg., 669 F. Supp. 2d at 76-80; R.J. Reynolds Tobacco Co. v. FTC, 14 F. Supp. 2d 757 (M.D.N.C. 1998); CableAmerica Corp. v. FTC, 795 F. Supp. 1082 (N.D. Ala. 1992); Milton v. FTC, 734 F. Supp. 1416 (N.D. Ill. 1990); Audobon Life Ins. Co. v. FTC, 543 F. Supp. 1362 (M.D. La. 1982). Plaintiffs’ claims here suffer from the same defects and must meet the same fate. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 15 of 31 10 I. THE COURT LACKS JURISDICTION BECAUSE THE FTC HAS NOT TAKEN ANY FINAL AGENCY ACTION UNDER THE APA AND PLAINTIFFS HAVE ANOTHER ADEQUATE REMEDY. Plaintiffs’ complaints rely principally on the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02. But that Act is a purely procedural statute. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 671-72. (1950). It expands the range of remedies available to the federal courts, but “does not create a federal cause of action.” Harris Cty. v. MERSCORP Inc., 791 F.3d 545, 552 (5th Cir. 2015); accord Davis v. United States, 499 F.3d 590, 594 (6th Cir. 2007). The proper vehicle for private parties to sue government agencies in federal court is the Administrative Procedure Act, which provides “a limited cause of action for parties adversely affected by agency action.” Chehazeh v. Attorney General, 666 F.3d 118, 125 n.11 (3d Cir. 2012); Trudeau v. FTC, 456 F.3d 178, 184-85 (D.C. Cir. 2006). The APA allows parties to challenge “[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court.” 5 U.S.C. § 704. Plaintiffs’ complaints do not mention the APA. But the requirements of the APA—in particular, the “final agency action” requirement—cannot be avoided by artful pleading. In Standard Oil, the Supreme Court held that pre-enforcement judicial review of an FTC administrative complaint was available “only if the issuance of the complaint was ‘final agency action’ or otherwise was ‘directly Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 16 of 31 11 reviewable’ under … the APA.” 449 U.S. at 238 (emphasis added). And the Seventh Circuit explained in General Finance that a plaintiff “may not bypass the specific method that Congress has provided for reviewing agency action simply by suing the agency in federal district court under [28 U.S.C. §§] 1331 or 1337; the specific statutory method, if adequate, is exclusive.” General Finance, 700 F.2d at 368. Allowing a plaintiff to assert a declaratory judgment claim against an agency whenever it faces a threat of an agency lawsuit would eviscerate the APA’s requirements and permit judicial review in a vast array of cases where Congress has not authorized such review. Plaintiffs’ complaints therefore must be treated as APA actions and dismissed for lack of finality.1 The FTC has not taken any “final agency action” within the meaning of the APA. Indeed, at this time, the FTC has not even made any decision as to how it will proceed against Endo, Watson and Impax. The Commission may decide to initiate Section 13(b) lawsuits against one or more of the plaintiffs in federal district court, but it could decide to initiate administrative proceedings instead (or even conceivably drop the matter altogether). The Commission’s ultimate decision will likely be influenced by the outcome of the ongoing settlement discussions. If 1 In “extremely limited” circumstances, where an agency acts ultra vires, a court may entertain an action for “nonstatutory review” even if an APA cause of action is lacking. Trudeau, 456 F.3d at 189-90; Jaffee v. United States, 592 F.2d 712, 718-19 & n.12 (3d Cir. 1979). The complaints do not allege any ultra vires action that could possibly form the basis for a nonstatutory review claim. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 17 of 31 12 the Commission decides not to institute Section 13(b) complaints, that would moot plaintiffs’ claims, since the relief they seek is a declaration that the Commission cannot maintain an action or obtain monetary relief in federal court. For this reason alone, there is no “final agency action” for the plaintiffs to challenge. But even if the Commission does authorize new Section 13(b) complaints, that will not be a “final agency action” under the APA. Agency action is “final” if it is a “consummation” of the “process” that determines “rights or obligations” or triggers “legal consequences.” Bennett v. Spear, 520 U.S. 154, 177-78 (1997) (internal quotation marks omitted). The FTC’s decision to institute an enforcement proceeding—whether in district court or before the agency—does not mark the consummation of anything; to the contrary, it marks the initiation of a process by which either a court or the Commission will decide whether a party’s conduct is lawful and whether any legal remedy is appropriate. Nor does the FTC’s decision to institute suit determine any rights or obligations or trigger any legal consequences. Only the outcome of the suit has that effect. The Supreme Court addressed this precise issue in Standard Oil. It held that the Commission’s determination that it had “reason to believe”—the standard used in both Section 5 and Section 13(b)—that a company was violating the FTC Act and its issuance of an administrative complaint based on that determination was not “final agency action.” 449 U.S. at 239-43. The Court explained that the Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 18 of 31 13 “reason to believe” finding was “not a definitive statement of position,” but merely “a threshold determination that further inquiry is warranted.” The Court held further that the issuance of the complaint would have no legal force or effect on the company’s business. Id. at 241, 242. Numerous other courts, following Standard Oil, have reached the same result. See, e.g., LabMD, 776 F.3d at 1277; Ukiah Valley, 911 F.2d at 263-64. Although this case involves a district court complaint brought under Section 13(b) rather than an administrative complaint under Section 5, there is no logical difference between the two types of proceedings for purposes of finality. Both types of complaints are based on the same “reason to believe” determination, and neither has any direct or immediate impact on the defendant beyond the need to defend against the complaint. Thus if the decision to file an administrative complaint is not a final agency action, then neither is the decision to file a district court complaint under Section 13(b). Furthermore, in Wearly, the Third Circuit held that there was no final agency action even though the FTC subsequently filed a proceeding to enforce a subpoena in district court. Wearly, 616 F.2d at 667. If the FTC chooses to file enforcement actions in district court, the same reasoning would apply. Finally, if the FTC does file new enforcement actions, Plaintiffs will have an “adequate remedy in a court.” 5 U.S.C. § 704. They can raise exactly the same Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 19 of 31 14 arguments they are making now as defenses to the FTC’s complaints—as they already did in response to the Commission’s original complaint in this Court. Plaintiffs thus cannot satisfy the prerequisites for an APA action. Lack of finality under the APA deprives the district court of subject matter jurisdiction, even if jurisdiction would otherwise be available under §§ 1331 and 1337(a). See, e.g., Hindes v. FDIC, 137 F.3d 148, 162 (3d Cir. 1998); Wearly, 616 F.2d at 667-68; LabMD, 776 F.3d at 1277; Ukiah Valley, 911 F.2d at 264 n.1; General Finance, 700 F.2d at 372. Accordingly, the complaints must be dismissed for lack of subject matter jurisdiction. Alternatively, if plaintiffs disclaim reliance on the APA, the complaint must be dismissed for failure to state a claim, since no other federal statute supplies a cause of action. Either way, the result is the same: the complaints must be dismissed, without prejudice to plaintiffs’ right to assert their claims as defenses in an enforcement action. II. PLAINTIFFS’ CLAIMS FOR PRE-ENFORCEMENT REVIEW ARE UNRIPE. Plaintiffs’ claims also fail because they are not ripe for judicial review. The Supreme Court has set forth two factors to determine whether a claim for pre- enforcement review of agency action is ripe: (1) the “fitness of the issues for judicial decision” and (2) the “hardship to the parties of withholding court consideration.” Abbott Labs, 387 U.S. at 149. Both the Supreme Court and the Third Circuit have held that under the Abbott Laboratories framework, declaratory Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 20 of 31 15 judgment suits brought against the FTC to preempt a later enforcement proceeding are not ripe. Standard Oil, 449 U.S. at 238-43; Wearly, 616 F.2d at 667-68. These controlling decisions compel the conclusion that Plaintiffs’ claims here are unripe. A. The Issues Raised Here Are Not Fit For Judicial Decision. An issue is fit for judicial decision under the first prong of Abbott Laboratories when it is “purely legal” and presents a “final agency action” under the APA. Abbott Labs, 387 U.S. at 149. As discussed above, the Commission has not yet decided how or whether to proceed against Plaintiffs. But as we have shown, even if it does decide to file new lawsuits in federal district court that would not be a “final agency action” under Standard Oil. For that reason alone, Plaintiffs’ claims fail the first prong of the Abbott Laboratories test. Their claims also fail because they do not involve “purely legal” issues. Plaintiffs argue that the challenged reverse-payment agreements are “wholly past conduct” and that such conduct “will not recur at any time in the future,” and consequently that the FTC has no basis to proceed against them under Section 13(b). E.g., Compl. (No. 16-cv-05599) ¶ 62; Compl. (No. 16-cv-05600) ¶ 64. This is not a purely legal question. A district court may grant forward-looking injunctive relief based on past misconduct where “there exists some cognizable danger of recurrent violation.” United States v. W.T. Grant Co., 345 U.S. 629, 633 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 21 of 31 16 (1953). Whether there is a danger that prior conduct will recur is a factual question, making pre-enforcement review inappropriate. B. Raising Their Claims As Defenses In An FTC Enforcement Action Will Cause No Hardship To Plaintiffs. Even if plaintiffs could pass the first prong of Abbott Laboratories, they would fail the second. Plaintiffs will not suffer any hardship if they must wait to raise their arguments as defenses to an FTC enforcement action. Pre-enforcement review can be appropriate where challenged agency conduct will have a “direct and immediate” impact on the plaintiff’s day-to-day business. Abbott Labs, 387 U.S. at 152. Thus, in Abbott Laboratories, the companies faced the dilemma of either altering their business practices immediately to comply with regulations they believed to be unlawful, or running the risk of “serious criminal and civil penalties.” Id. at 153. The Court held that this was a sufficient hardship to justify pre-enforcement review of the regulations. The situation here, by contrast, presents no such effect on plaintiffs, as both the Supreme Court and the Third Circuit have already determined. In Standard Oil, the Supreme Court explained that the issuance of an FTC administrative complaint had “no legal force comparable to that of the regulation at issue in Abbott Laboratories, nor any comparable effect upon [Standard Oil’s] daily business.” 449 U.S. at 242. The only “legal or practical effect” of the administrative proceeding was “to impose upon [Standard Oil] the burden of Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 22 of 31 17 responding to the charges made against it.” Id. But that burden, the Court explained, is simply “part of the social burden of living under government.” Id. at 244 (citation and internal quotation marks omitted). Likewise, in Wearly, the Third Circuit held that the recipient of an FTC subpoena was not entitled to sue for pre-enforcement declaratory relief because he was not “on the horns of a dilemma” like the plaintiff in Abbott Laboratories. Wearly, 616 F.2d at 667. The court explained that the subpoena recipient “was under no compulsion to either turn over the documents to the FTC or suffer civil or criminal penalties as a result. He was free to await enforcement proceedings, and at that time, or thereafter, could have raised his objections . . . .” Id. Accordingly, the Third Circuit held, the district court lacked jurisdiction to entertain a pre- enforcement declaratory judgment action challenging the subpoena. Id. at 668. Those holdings apply squarely to this case. FTC enforcement actions, if they are filed, will not have any direct or immediate impact on Plaintiffs’ day-to- day business. Such actions will not require the companies to do anything other than appear to present a defense and will not subject them to a risk of civil or criminal sanctions. Thus Plaintiffs face no dilemma like that described in Abbott Laboratories. Rather, like the plaintiffs in Standard Oil and Wearly, they can raise all of their arguments as defenses in FTC enforcement proceedings. Accordingly, the cases are unripe, and must be dismissed. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 23 of 31 18 III. DECLARATORY RELIEF IS NOT APPROPRIATE HERE IN ANY EVENT. Even if the Court had jurisdiction to decide this case, it would not be proper to exercise that authority. The Third Circuit has set forth a non-exhaustive list of factors district courts should consider in determining whether to grant a declaratory judgment: (1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy; (2) the convenience of the parties; (3) the public interest in settlement of the uncertainty of obligation; (4) the availability and relative convenience of other remedies; (5) a general policy of restraint when the same issues are pending in a state court; (6) avoidance of duplicative litigation; (7) prevention of the use of the declaratory action as a method of procedural fencing or as a means to provide another forum in a race for res judicata; (8) (in the insurance context), an inherent conflict of interest between an insurer’s duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion. Reifer, 751 F.3d at 146. Applying similar multifactor tests, several courts have declined to adjudicate cases where plaintiffs sought a declaratory judgment to preempt an enforcement proceeding by a government agency. For example, in Morgan Drexen, plaintiffs sued the Consumer Financial Protection Bureau challenging its authority to file an enforcement action against them. 785 F.3d at 696-97. And in Swish Marketing, Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 24 of 31 19 plaintiffs sued the FTC, arguing that it lacked authority to file a Section 13(b) action. 669 F. Supp. 2d at 76-80. In both cases, the courts held that plaintiffs should raise their arguments as defenses to the enforcement actions and dismissed the complaints. In this case, the Reifer factors weigh decisively against the exercise of declaratory judgment jurisdiction for many of the same reasons set forth in Morgan Drexen and Swish Marketing. A. Declaratory Relief Will Not Settle The Entire Dispute. The first Reifer factor considers whether declaratory judgment will resolve the entire dispute between the parties; if not, then relief is inappropriate. In considering this factor, the Court cannot “assume . . . that it will resolve the merits of [the] complaint in the [plaintiff’s] favor.” Swish Mktg., 669 F. Supp. 2d at 77- 78. Rather, it must consider whether continued litigation in another proceeding will be necessary if the Court rules against the declaratory judgment plaintiff. Thus, in Swish Marketing the Court denied declaratory relief because “continued litigation would seem almost inevitable” if it were to rule in favor of the FTC. Similarly, in Morgan Drexen, resolution of the case “would not finally settle the controversy and could result in piecemeal litigation if the [declaratory judgment] court ruled in the Bureau’s favor,” thus allowing a pending enforcement action in Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 25 of 31 20 another court to continue. Morgan Drexen, 785 F.3d at 697 (citation and internal quotation marks omitted). The same reasoning applies here. The Court cannot assume that it will resolve the merits of the declaratory judgment complaint in plaintiffs’ favor. And if the Court were to rule that the FTC is entitled to maintain a Section 13(b) action, the merits of the dispute would remain alive for resolution by another court in another proceeding. Yet, if the Court declines jurisdiction, plaintiffs will be able to raise all of their claims as defenses in the enforcement proceedings. The first Reifer factor thus weighs heavily against granting declaratory relief. B. Plaintiffs Are Engaged In Improper Procedural Fencing. The law discourages the use of a declaratory action “as a method of procedural fencing or as a means to provide another forum in a race for res judicata.” Reifer, 751 F.3d at 146; accord 10B Charles Alan Wright et al., Federal Practice & Procedure § 2759 (4th ed. 2016). That is exactly what plaintiffs are trying to do here. Plaintiffs’ goals are transparent: they filed their complaints the very day after the FTC dismissed its complaint, and (if successful) their suits will either result in judgments that will preclude litigation of the FTC’s California and Illinois cases or serve as an “anchor” to support an argument that the other actions should be transferred to this Court. Either outcome boils down to nothing more than forum manipulation. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 26 of 31 21 Both Morgen Drexen and Swish Marketing held that similar efforts by declaratory judgment plaintiffs to preempt an enforcement action amounted to improper procedural fencing that weighed heavily against exercising declaratory judgment jurisdiction. Morgan Drexen, 785 F.3d at 698; Swish Mktg., 669 F. Supp. 2d at 78-79. As the D.C. Circuit explained in Morgan Drexen, “[t]he anticipation of defenses is not ordinarily a proper use of the declaratory judgment procedure” because it “deprives the plaintiff of his traditional choice of forum and timing, and it provokes a disorderly race to the courthouse.” 785 F.3d at 697 (citation and internal quotation marks omitted). Courts therefore “take a dim view of declaratory plaintiffs” who file their suits shortly before suits filed by a “‘natural plaintiff’” and who “seem to have done so for the purpose of acquiring a favorable forum.” Swish Mktg. at 669 F. Supp. 2d at 78 (quoting AmSouth Bank v. Dale, 386 F.3d 763, 788 (6th Cir. 2004)). That description fits plaintiffs to a tee. Plaintiffs undoubtedly will argue, as they have in the past, that it is not they, but the FTC, that is engaged in improper forum shopping, by dismissing its earlier complaint and filing new lawsuits in other districts. But as the plaintiff, the FTC is entitled to choose the forum it deems most appropriate and its “choice of forum should rarely be disturbed.” Lacey v. Cessna Aircraft Co., 862 F.2d 38, 43 (3d Cir. 1988). Even where a plaintiff has initially chosen one forum, it has an absolute right under Rule 41(a)(1) to reconsider that decision and choose a different forum Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 27 of 31 22 (subject only to the possibility of paying costs), so long as the defendant has not served an answer or summary judgment motion. See In re Bath & Kitchen Fixtures Antitrust Litig, 535 F.3d 161, 165 (3d Cir. 2008). As the Ninth Circuit has explained, “because Rule 41(a)(1) specifically allows a plaintiff to dismiss a complaint without prejudice in the face of a 12(b)(6) motion, such a dismissal is not regarded as forum-shopping.” Swedberg v. Marotzke, 339 F.3d 1139, 1145 (9th Cir. 2003). Indeed, “[i]t is not uncommon for plaintiffs to use voluntary dismissal to secure their preferred forum.” Bechuck v. Home Depot U.S.A., Inc., 814 F.3d 287, 293 (5th Cir. 2016) (citations and internal quotation marks omitted). But defendants have no such choice of forum, and—as Morgan Drexen and Swish Marketing make clear—they may not use a declaratory judgment action simply to defeat the plaintiff’s choice. C. The Other Reifer Factors Weigh Against The Exercise Of Jurisdiction. The other Reifer factors either weigh against the exercise of declaratory judgment jurisdiction or are neutral.2 1. It will be more convenient for the parties to litigate where other related litigation is taking place. It will be more convenient for the parties to litigate the legality of the reverse-payment agreements in the districts where related litigation is already 2 Factors 5 and 8 are inapplicable here. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 28 of 31 23 taking place. Among other things, litigating there may make it possible for the parties to take advantage of discovery that has already taken place and to coordinate future discovery so as to avoid duplication. At the same time, plaintiffs will suffer no inconvenience by litigating in venues where they are already represented by counsel in related litigation. 2. The public interest factor weighs against the exercise of jurisdiction. Reifer instructs courts to consider “the public interest in settlement of the uncertainty of obligation.” 751 F.3d at 146. In this case, any uncertainty about the FTC’s authority to sue plaintiffs and to obtain equitable monetary relief will be resolved in the enforcement litigation. There is no public interest in resolving the matter through declaratory judgment. 3. Other remedies are available and convenient. Reifer instructs courts to consider “the availability and relative convenience of other remedies.” 751 F.3d at 146. Plaintiffs have an adequate and complete remedy—they can raise all of their declaratory judgment claims as defenses in the enforcement litigation. 4. Entertaining the declaratory judgment actions will result in duplicative litigation. For all of the reasons discussed above, the declaratory judgment actions will simply duplicate the defenses that plaintiffs can raise in the enforcement actions. Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 29 of 31 24 There is no need for a separate and wasteful declaratory judgment action to consider these defenses piecemeal. CONCLUSION The declaratory judgment complaints should be dismissed. December 30, 2016 Respectfully submitted, DAVID C. SHONKA Acting General Counsel JOEL MARCUS Deputy General Counsel /s/Matthew M. Hoffman MATTHEW M. HOFFMAN Attorney FEDERAL TRADE COMMISSION 600 Pennsylvania Avenue, N.W. Washington, D.C. 20580 Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 30 of 31 CERTIFICATE OF SERVICE I certify that on December 30, 2016, I caused a copy of the foregoing to be electronically served on counsel of record for all parties via the Court’s CM/ECF system. /s/Matthew M. Hoffman MATTHEW M. HOFFMAN Case 2:16-cv-05599-PD Document 25-1 Filed 12/30/16 Page 31 of 31