Monday, August 21, 2017

Tag-along state UDAP claim leads to $18.5 million fee shift against unsuccessful plaintiff

Procaps S.A. v. Patheon Inc., No. 12-24356-CIV, 2017 WL 3536917 (S.D. Fla. Aug. 17, 2017)

This case stands as a stark reminder that adding a state-law deceptive trade practices claim to a federal claim can have serious consequences—the only reason to do it as a plaintiff is if you think the substantive standards will vary (certainly possible, depending on the state) or the remedies will vary (likewise).  But where that’s true, consider whether the fee-shifting standards will also vary.  In Florida, they do.

Here, Procaps is ordered to pay about $18.5 million in attorneys’ fees and costs after losing “a full-throttle lawsuit which has generated 1165 docket entries and an appeal (including oral argument) since it was first filed in mid-December 2012.”  Procaps’ main claim was a federal antitrust claim, but it brought a coordinate Florida Deceptive and Unfair Trade Practices Act claim.  The federal antitrust statute authorizes an award to a prevailing plaintiff but not to a prevailing defendant, but that turns out not to matter even though the FDUTPA claim was a “tag-along” claim, “based mostly (though not entirely) on the same circumstances at issue in its federal Sherman Act antitrust claim.”

Under FDUTPA, a “prevailing defendant” is permitted to recover its attorney’s fees and costs from a non-prevailing plaintiff after the exhaustion of all appeals; the court has to consult a non-exhaustive list of discretionary factors:

(1) the scope and history of the litigation; (2) the opposing party’s ability to satisfy the award; (3) whether an award would deter others from acting in similar circumstances; (4) the merits of the respective positions, including the degree of [Procaps’] culpability or bad faith; (5) whether the claim brought was not in subjective bad faith but was frivolous, unreasonable, or groundless; (6) whether the defense raised a defense mainly to frustrate or stall; and (7) whether the claim brought was to resolve a significant legal question under FDUTPA law.

I’ll let the judge summarize the scope and history: “Nothing was easy in this case. Nothing. Basically, the parties fought about anything and everything.” Further descriptors: “difficult,” “problematic,” “stressful,” “grueling,” “especially unpleasant and nasty.”  Procaps could pay.  On appeal, the Eleventh Circuit characterized its theory as “intrinsically hopeless,” so that supported a fee award.  Procaps and its counsel, “at a minimum, … made this case far more difficult than it had to be, and … this caused Patheon to incur additional attorney’s fees and costs.” Frivolousness isn’t a requirement, and courts award fees under FDUTPA to defendants who prevail on summary judgment on a FDUTPA claim after a plaintiff initially gets past a motion to dismiss.  Though the court declined to find the claim frivolous, its antitrust theory was “either unreasonable or approaching the level of being unreasonable,” because it needed and could not show concerted action.

In terms of deterrence, the court considered that Procaps apparently brought its antitrust claim because it was a limited exception to the parties’ arbitration agreement “and because it wanted to use the threat of treble damages to pressure Patheon into paying a hefty settlement.” Because of the weakness of the antitrust claim, a fee award wouldn’t deter legitimate antitrust claims brought by private attorneys general, but it would be good to deter a putative plaintiff from bringing an “intrinsically hopeless” antitrust claim.  The remaining factors were neutral, and the court declined to follow a few federal district court cases holding that FDUTPA fees shouldn’t be awarded when the FDUTPA claim is a tag-along to a separate federal claim.

In fact, Florida state caselaw indicates that the prevailing party should get the benefit of overlapping claims; fees can’t be deducted for work unless it was clearly unrelated to the FDUTPA claim.  “[I]t is Procaps’ burden to establish that the attorney’s fees and costs incurred by Patheon were clearly not related to the FDUTPA claim, which was largely based on the same antitrust theory as the antitrust count.” Thus, “the time Patheon spent defending the Sherman Act claim was time spent defending the FDUTPA claim.”  And that’s $18.5 million.

The court emphasized that not every party who prevails on a FDUTPA claim would be entitled to fees; if “some” of the factors had gone in Procaps’ favor, the result could well have been different. But the factors “strongly” favored a fee award.

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