Friday, October 08, 2021

NY can still seek disgorgement even if FTC can't

Federal Trade Comm’n v. Vyera Pharms., LLC, 2021 WL 4392481, No. 20cv00706 (DLC) (S.D.N.Y. Sept. 24, 2021)

Featuring Martin Shkreli as a defendant! The FTC, with NY and a number of other states, sued Vyera for violating the antitrust laws in the market for the pharmaceutical Daraprim, which treats the potentially fatal infection toxoplasmosis. In a reminder that satire is dead and that no cartoon villains can match reality, the day after acquiring the rights to Daraprim, Vyera raised the price from $17.50 per tablet to $750 per tablet; defendants also allegedly schemed to block lower-cost generic drug competition.

The locus of the bad conduct was NY; seven states sued in their parens patriae capacity, that is, they asserted a quasi-sovereign interest “in the health and well-being -- both physical and economic -- of its residents in general.”  They sought injunctive relief and disgorgement of nationwide profits. The FTC can no longer seek disgorgement, but the states sought to do so both under the Sherman Act and under their respective state laws.

Vyera argued that the states lacked parens patriae standing to obtain equitable monetary relief, including disgorgement, on behalf of those who weren’t citizens of their States. Regardless of whether the other states did, NY could do so because the alleged violations stemmed “from decisions made and contracts executed in New York.”  The Attorney General can seek relief on behalf of out-of-state residents injured by the wrongdoing, furthering “New York’s vital interest in securing an honest marketplace,” which is threatened when a defendant uses “a New York business” to engage in its scheme. Thus, disgorgement of net profits attributable to all US sales was potentially available. This was not a penalty, because the states indicated that, should they prevail, they’d undertake to distribute the disgorged profits to all victims wherever they were. And overlapping awards could be avoided by courts sitting in equity (which is how you get disgorgement).

Vyera argued that NY had no parens patriae interest in other states’ citizens. But parens patriae is about standing, not about the scope of a disgorgement remedy.

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