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From Antitrust Law Daily, May 29, 2014

Drug companies entitled to costs in price fixing action brought by pharmacies

By Jeffrey May, J.D.

Drug companies that ultimately prevailed in a long-running price fixing action brought by pharmacies under the California Cartwright Act were entitled to more than $1 million in costs, even though an initial grant of summary judgment in favor of the defendants was overturned. The dissolution of a first award of costs to the defendants following the reversal of summary judgment did not foreclose litigation of costs after summary judgment was resolved in favor of the drug companies on remand (Clayworth v. Abbott Laboratories, May 29, 2014, Humes, J.).

The complaining California pharmacies brought the action a decade ago, alleging that the drug companies conspired to fix prices to reap a higher profit from the sale of drugs sold in the United States than from the sale of the same drugs in Canada. The drug companies moved for summary judgment on the ground that the pharmacies “passed on” the alleged overcharges to their customers. At that time, California law with respect to the “pass-on” defense was unsettled. In 2006, the district court granted the drug companies’ motion, and the pharmacies appealed. In 2010, the California Supreme Court, in a case of first impression, decided that alleged victims of a price fixing scheme can pursue treble damages claims under the California Cartwright Act, even though the victims passed on some or all of the purported overcharges to indirect purchasers downstream in the chain of distribution (2010-2 Trade Cases ¶77,088). The pharmacies’ case was remanded to the lower court.

While the appeal had been pending, the drug companies moved for approximately $1.6 million in costs. The court awarded costs to each individual drug company, for a total award of $1,157,534.25, about $442,400 less than what the drug companies had requested. Following the reversal, this award was, however, vacated.

On remand, judgment was entered for the drug companies in 2011. In addition, the trial court entered judgment awarding costs to the drug companies. The award was $1,152,658.43, about $4,800 less than what had been awarded after the drug companies prevailed on their first summary judgment motion.

The pharmacies argued that the drug companies were barred from recovering costs under the doctrines of law of the case, estoppel, and waiver because the costs award entered in connection with the first motion for summary judgment was invalidated after the state supreme court reversed the order granting summary judgment. The appellate court said that the argument was specious at best. At that point, the drug companies became the prevailing parties and were entitled to costs as a matter of right, the court held.

Judicial disqualification. The court also rejected “as frivolous” the pharmacies’ argument that the award of costs should be reversed because their request to disqualify the lower court judge was improperly denied. When the case was remanded and assigned to Judge Steven A. Brick, the pharmacies moved to disqualify him on the ground that his sister-in-law had been a partner in a law firm that represented one of the pharmacies. The disqualification request was denied, and the denial was upheld on appeal. In affirming the order awarding costs, the appellate court explained that the pharmacies did not even attempt to explain why they should be allowed to challenge the denial of their disqualification motion.

The case is A132527.

Attorneys: Joseph Michelangelo Alioto (Alioto Law Firm) for James R. Clayworth. Nicole Paula Dogwill (Winston & Strawn) for Abbott Laboratories.

Companies: Abbott Laboratories

MainStory: TopStory Antitrust CaliforniaNews

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