PROVIDENCE, R.I. (Legal Newsline) - Lawsuits filed over so-called “pay-for-delay” deals, such as the string of actions filed in the last few years by the City of Providence, can be “incredibly lucrative” and often attract plaintiffs’ attorneys seeking big paydays, one defense lawyer says.
Douglas McMeyer, a partner at Chicago-based Chapman Spingola LLP, said in an interview with Legal Newsline that part of the problem lies in the U.S. Supreme Court’s 2013 ruling in FTC v. Actavis Inc.
In Actavis, the nation’s highest court held that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny.
The court’s decision stemmed from the Federal Trade Commission’s appeal of a ruling by the U.S. Court of Appeals for the Eleventh Circuit, which had dismissed the agency’s challenge to an alleged pay-for-delay agreement involving the testosterone-replacement drug AndroGel.
Several courts, including the Eleventh Circuit, have found that these agreements were insulated from antitrust scrutiny. However, in July 2012, the Third Circuit held that a reverse payment from a branded drug manufacturer to a generic competitor was presumptively unlawful, creating a split in the circuits and prompting Supreme Court review.
“The Actavis decision kinda threw everything into a tizzy,” McMeyer said. “It didn’t really give any parameters.”
In turn, that area of antitrust law has become both “wide open” and “ambiguous,” McMeyer says.
“It’s become an incredibly lucrative area for the plaintiffs’ bar,” he said.
McMeyer points out that in cases like those brought by the City of Providence -- in which the government entity has teamed up with private law firms to file more than a dozen antitrust lawsuits in federal court since 2012 -- there is an added benefit for the plaintiffs’ attorneys.
“The thing they get by being contingency fee counsel for a government is a whole class, ready-built, without having to go through the normal safeguards for class certification,” he explained.
In Providence’s case, prominent plaintiffs firm Motley Rice, which has an office in the city and connections to the city Solicitor’s Office, stands to earn anywhere from 15 to 40 percent in legal fees from several of the city’s antitrust cases.
The cases, filed through the city’s Solicitor’s Office, allege companies are “scheming” to keep generic versions of their prescription drugs off the market.
The city contends that by blocking generic competition through “pay-for-delay” deals -- in which brand-name drug makers pay their generic competitors to keep cheaper alternatives off the market -- the companies have forced it and its insurers to overpay for medications.
A public records request submitted by Legal Newsline in August revealed the city has given five contracts for the cases. Four of those went to Motley Rice.
The high-powered law firm, which has gone after asbestos makers, tobacco companies and the lead paint industry, holds at least two recent connections to the Solicitor’s Office.
The first was Matthew Jerzyk, who began work as deputy solicitor in 2012 and was listed as counsel for the office on some of the lawsuits.
Jerzyk worked as a law clerk at Motley Rice while in law school. His three-year tenure with the Solicitor’s Office coincided with the rise of antitrust cases, and he also served as senior counsel to the mayor for 18 months before becoming deputy city solicitor.
Jerzyk denied being a link between the Solicitor’s Office and Motley Rice, which has been hired by the city for more than just the antitrust cases.
“When I became Deputy Solicitor, there was already a group of contingent fee firms retained by the City Solicitor and I had no role or authority in their retention or termination,” he said in a statement to Legal Newsline in September.
The second recent connection is new solicitor Jeffrey Dana, who was recommended for the job by both Jerzyk and Robert J. McConnell, an attorney at Motley Rice and brother to Jack McConnell, a former Motley Rice attorney and now a federal judge in Rhode Island.
Troy Bozarth, a member of DRI: The Voice of the Defense Bar’s class action task force and who currently serves as the president of the Illinois Association of Defense Trial Counsel, said the fact that the Providence litigation has been outsourced to mainly one plaintiffs’ firm instead of handled in-house “just seems wrong.”
“A governmental body being used as a tool of a plaintiff’s firm for multiple “cookie-cutter” lawsuits certainly deserves to be scrutinized,” Bozarth said.
“The firm has a ready-made de facto ‘class’ (i.e. the citizens of the governmental body) and is potentially reaping as much as 40 percent in fees to the citizens detriment.”
Both Bozarth and McMeyer questioned how the city handles bids for outside counsel.
Dana has yet to return messages seeking comment on the cases and the city’s bidding process.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.