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From Antitrust Law Daily, March 21, 2017

North Carolina proper setting for GlaxoSmithKline, Abbott dispute

By Gregory Kane, J.D., M.B.A.

In GlaxoSmithKline’s antitrust and unfair trade practices action against Abbott Laboratories, over the licensing and pricing of human immunodeficiency virus (HIV) medications, the federal district court in Greensboro, North Carolina, denied Abbot’s motion for judgment on the pleadings based on changed choice-of-law principles and Abbot’s alternative motion to dismiss GlaxoSmithKline's unfair and deceptive trade practices claim (SmithKline Beecham Corporation v. Abbott Laboratories, March 20, 2017, Osteen, W.).

Global pharmaceutical company SmithKline Beecham Corporation, d/b/a GlaxoSmithKline (GSK) filed suit against Abbott Laboratories for violations of the implied covenant of good faith and fair dealing, the Sherman Act, and North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA). Specifically, GSK contended that Abbott—after licensing to GSK the rights to market Abbott HIV drug Norvir, in conjunction with one of GSK’s—greatly increased the price of the Abbott drug in order to drive business to its own HIV combination drug, Kaletra.

After Abbott’s motion for judgment as a matter of law was denied by the federal district court in Oakland, the case was submitted to a jury. The jury entered a verdict in favor of GSK on its implied covenant claim and in favor of Abbott on GSK’s other claims. GSK appealed and the Ninth Circuit vacated the verdict and remanded on the basis that a juror had been improperly excluded based on sexual orientation. On remand, Abbot moved for judgment as a matter of law under Rule 50(a) on the antitrust and UDTPA claims, but the district court denied the motion, holding that GSK had presented sufficient evidence on its antitrust claims and that the UDPTA claims survived based on the sufficiency of antitrust liability in establishing unfair trade practices.

Two months prior to the second jury trial date, GSK was granted leave to amend its complaint a second time, to drop the claims for federal and state antitrust violations. As a result, there was a question of whether the Northern District of California had personal jurisdiction over the case. The court entered an order resolving all pending motions in limine and the parties agreed, with court approval, that the case would be transferred to the Middle District of North Carolina. The parties disagree as to whether North Carolina, Pennsylvania, or New York law governs the UDTPA claim. Abbot contends that the choice-of-law analysis as to the UDTPA claim has been altered by the change in venue, and that, if Pennsylvania or New York law is found to apply, judgment on the pleadings in its favor will be warranted on the UDTPA claim.

Choice of Law. Abbott argued that the lex loci test, not the most significant relationship test, applied to GSK’s UDTPA claim, which would mean applying Pennsylvania law, where GSK has its principal place of business. Alternatively, Abbott argues that the choice-of-law clause in the parties' agreement to sell Norvir should apply, which would mean applying New York law. Neither New York nor Pennsylvania recognize GSK’s UDTPA claim as alleged. GSK argued that Abbott waived its right to object to North Carolina law because it was willing to rely on North Carolina law for over seven years in the course of this dispute. In addition, GSK argued in favor of applying the significant relationship test, which would mean applying North Carolina law, and that the lex loci test would still mean applying North Carolina law because GSK’s HIV headquarters are located in North Carolina. Lastly, GSK argued that the UDTPA claim was not contractual in nature, making the use of New York law inapplicable.

Due to GSK’s removal of the antitrust claims and the transfer of the case, the court found that Abbott had not waived its objection to the application of North Carolina law. Abbott was successful in convincing the court to move from a significant relationship test to a lex loci test, but GSK was successful in arguing that North Carolina was the center of the economic impact of the dispute because that was where GSK’s research and development facilities and commercial operations in HIV/AIDS are located. The court thus found that North Carolina law applied.

The New York choice-of-law provision in the parties' agreement was also not applicable because the UDTPA claim was not about the enforceability of any portion of the agreement; it was about conduct outside of the agreement.

UDTPA Claim. Abbot argued that, under North Carolina law, the UDTPA claim should be dismissed because, without the antitrust claims, the dispute is about a breach of implied covenant and does not contain the aggravating factors to support a UDTPA claim. Abbott also argued that GSK should not be allowed to pursue a UDTPA claim based on antitrust violations after dismissing its antitrust claims. GSK argued that its UDTPA claims go beyond antitrust liability and that it has provided sufficient evidence to support unfair conduct or practices, as well as aggravating factors of unscrupulous behavior sufficient to support its claims.

GSK adequately pleaded antitrust violations that would survive dismissal by the court, throughout the dispute, but voluntarily removed the claims. Because the factual allegations of Abbott’s alleged anti-competitive conduct remain operative in the complaint, GSK’s UDTPA claim was not precluded by the removal of its antitrust claims. GSK also pleaded sufficient unfair conduct in Abbott’s actions in enticing the Norvir agreement and then timing the assertion of its power within the contract to give rise to a UDTPA claim.

The case is No. 15-cv-360.

Attorneys: Barbara Lynne Harris Chiang (Dillingham & Murphy, LLP), Brian James Hennigan (Hueston Hennigan LLP), and Lee Adam Cirsch (The Lanier Law Firm, PLLC) for SmithKline Beecham Corp., d/b/a GlaxoSmithKline. Gregory Gerald Holland (Smith Moore Leatherwood LLP), Kevin T. Van Wart (Kirkland & Ellis, LLP), and Charles B. Klein (Winston & Strawn LLP) for Abbott Laboratories.

Companies: SmithKline Beecham Corp., d/b/a GlaxoSmithKline; Abbott Laboratories

MainStory: TopStory Antitrust StateUnfairTradePractices NorthCarolinaNews

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