April Showers Bring Closure On Unsettled Legal Issues Too
As I mentioned in my last post, the Florida Supreme Court's decision to approve the Florida Senate's amended redistricting plan wasn't the only late April 2012 decision to bring a measure of closure to unsettled legal issues. The stars seem to have aligned such that our state appellate courts as well the U.S. Court of Appeals for the 11th Circuit all released decisions in late April bringing a measure of closure on prominent, unsettled issues.
First, in Geico General Insurance Co. v. Virtual Imaging Services, Inc. (a/a/o Maria Tirado), No. 3D11-581,the 3rd DCA went a long way toward finding closure on the hotly contested issue of whether PIP insurers can take advantage of the reimbursement rate caps provided in the 2008 amendments to Florida's No Fault/Personal Injury Protection Law if their policies don't expressly state that the caps will be used. That issue, on which the 4th DCA had the first word among Florida appellate courts in its 2011 decision in Kingsway Amigo Insurance Company v. Ocean Health, Inc., has pre-occupied PIP lawyers ever since. I've also written multiple posts about it, including this one, this one, and this one.
In its Tirado decision, the Third District did a tremendous favor for opponents of the rule set down in Kingway Amigo (PIP insurers and their lawyers chief among them) by certifying the issue as a question of great public imporance. You may recall that the lack of an express and direct conflict among the District Courts of Appeal on the issue has prevented the Florida Supreme Court from stepping in end the controversy.
But now the issue has been certified as a question of great public importance, the Florida Supreme Court can exercise jurisdiction to review Tirado even without a conflict among the DCAs. If the Supreme Court chooses to do so, as the ultimate arbiter of Florida law, it can bring closure to this ongoing PIP battle. I'm guessing that it will.
Second, in the parallel cases of Calder Race Course, Inc. v. Florida Department of Business and Professional Regulation, West Flagler Associates, Ltd. v. Fla. DBPR, and Florida Gaming Centers, Inc. v. Fla. DBPR, the Florida Supreme Court brought closure on the issue of whether the legislature validly exercised its Constitutional authority in enacting 2009 legislation that allowed Hialeah Race Track to operate slot machines. That legislative enactment had been challenged by the three Miami-Dade facilities that were already licensed to operate slot machines prior to the legislation, as discussed in this post. On the same day as its redistricting decision was released, the Supreme Court declined to exercise its discretionary jurisdiction over the competitors' appeal from the 1st DCA's decision upholding Hialeah Race Track's authorization to operate slot machines.
Third, the 11th Circuit released its long awaited decision in FTC v. Watson Pharmaceuticals, Inc., (a/k/a In re: Androgel Antitrust Litigation) addressing the prominent antitrust/patent/health care law issue of the validity of so-called "reverse payment" or "pay for delay" settlements between pharmaceutical patent holders (i.e. name brand drug makers) and competing drug makers seeking to market generic alternatives. The FTC and the Antitrust Division of the DOJ, in addition to certain academics have fretted for years about such arrangements, and their effects on drug prices...
In the common scenario, a generic drug maker applies to the FDA for permission to market a generic version of the name brand drug maker's patented drug, the name brand maker sues the generic maker for patent infringement, and the generic maker counters that the patent is invalid (and perhaps that the generic doesn't infringe the patent). The would-be competitors then enter into an agreement in which the generic maker agrees not to compete with the name brand drug by voluntarily declining to sell the generic drug, and the name brand maker agrees to make period payments to the generic maker that exceed the profits it would have made by entering the market.
Both companies are better off than if they had to compete with one another. But that's because, having bought off the competition, the name brand maker can charge monopolist prices. So consumers, and the health care system, are considerably worse off. And it looks a little suspicious to see a name brand maker agreeing to pay hundreds of millions of dollars to keep a would-be competitor out of a market in which it would have no right to compete at all if the patent was valid. So the FTC and others have been arguing for years that many, if not all, reverse payment settlements are illegitimate agreements that unreasonably restrain competition in violation of U.S. antitrust laws.
But those challengers have found many federal courts to be inhospitable to their arguments. Instead of viewing them as efforts to improperly extend monopoly power obtained through invalid patents and agreements not to compete, courts of appeals have viewed them as something courts have always favored: agreements to settle contested lawsuits prior to trial. In a 2003 case, the 6th Circuit agreed that reverse payment settlements violate antitrust law.
But decisions from the 2nd and 11th Circuits, as well as the Federal Circuit, have gone the other way. They have held that such settlements are presumptively valid, so long as they do not extend past the expiration date of the patent and the and Most have treated them as valid so long as the term of the agreement does not extend past the expiration of the patent, the patent was not shown to have been obtained by fraud, or the suit seeking to enforce the patent frivolous.
Nonetheless, how the 11th Circuit would come down in Androgel was far from a foregone conclusion. The court had not confronted reverse payment settlement agreements since 2005, and the FTC had cause for optimism that the court's thinking may have changed, in light of some significant changes since then.
Those changed circumstances were recognized by the 2nd Circuit in 2010 in a similar case, In re Ciprofloxacin Hydrochloride Antitrust Litigation, when a panel affirmed the dismissal of claims based on reverse payment settlements, but made clear that it was doing so only because it was bound by precedent, and took the highly unusual steps of not only urging the full court to review the case en banc, but arguing why the court's prior decision, In re Tamoxifen Citrate Antitrust Litigation, 466 F.3d 187 (2d Cir. 2006), was flat wrong and dangerous. In the end, however, the full court did not vote to rehear the Cipro case en banc. Judge Rosemary Pooler dissented with an opinion, in which she said that prior to Tamoxifen reverse payment settlements were rare, because everyone thought it obvious that they ran afoul of the antitrust laws, but Tamoxifen had opened the floodgates, making them a fixture in the pharmaceutical market, driving up prices.
So many in the antitrust community had been anxiously waiting to see whether the 11th Circuit might be swayed to depart from its earlier decisions based on the considerations that so were so prominent in Cipro. Ultimately, however, the court did just the opposite, decisively re-affirming the validity of its precedent without reservation. Indeed, the decision may have narrowed the circumstances in which a reverse payment settlement can run afoul of the antitrust laws. The portion of the analysis in Androgel in which the 11th Circuit said it is impracticable for courts to look back to the patent litigation being settled to examine whether the patent holder was likely to prevail could be interpreted to eliminate the frivolous enforcement exception. Determining whether the patent enforcement litigation was frivolous requires the courts to conduct the same type of inquiry into the merits of the suit resolved by the reverse payment settlement.
Finally, there was also one more closure-related development in late April from the 3rd DCA, as Judge Juan Ramirez, who had served on that court for more than 12 years, stepped down to open the Miami office of JAMS, a prominent California-based mediation firm. Judge Ramirez's presence on the court will surely be missed, but we wish him much success in his new endeavor. And even though Judge Ramirez won't be writing 3rd DCA opinions anymore, he is writing about 3rd DCA (and other appellate court) decisions on the blog he recently started, called Florida Law Update.