Daily Archives: March 25, 2013

Class action plaintiff can’t avoid federal court

The SCOTUS blog reports on Standard Fire Ins. Co. v. Knowles, 11-1450 (2013).  Here, the Supreme Court held that federal courts aren’t bound by plaintiffs in proposed class actions who try to keep cases in state court by stipulating to the amount in controversy.

The Supreme Court ruled on Tuesday in a unanimous opinion by Justice Stephen G. Breyer. Lead plaintiffs don’t have the authority to bind others prior to class certification and their stipulations don’t make “a critical difference,” Breyer said.

At issue were provisions in the Class Action Fairness Act giving federal courts original jurisdiction in class actions when the aggregated amount in controversy exceeds $5 million and there are more than 100 class members.

Lead plaintiff Greg Knowles had filed his suit in Miller County, Ark., and stipulated that the amount in controversy was less than $5 million. His would-be class action against Standard Fire Insurance Co. had alleged the insurer underpaid claims for hail damage. According to the complaint, “hundreds, and possibly thousands” of people in Arkansas had similar claims.

A federal court considering Knowles’ bid to send the case back to state court had found that the amount in controversy would have exceeded $5 million, absent the stipulation.

Breyer said Knowles’ stipulation does not remove the case from the scope of the federal class-action law. “The stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class,” Breyer wrote. “For this reason, we believe the district court, when following the statute to aggregate the proposed class members’ claims, should have ignored that stipulation.”

via SCOTUS: Class action plaintiff can’t avoid federal court by stipulating to amount in controversy – ABA Journal.

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Generic and Branded Drugs

This is an interesting case that the Supreme Court will hear today.  Does a branded drug maker, faced with a potential competitor who makes generic drugs, act illegally if it pays money to the competitor in a deal that postpones the sale of the generic drug for a period of years?

The FTC says it is unlawful, while the generic and branded drug makers disagree.

So why does this matter?  Everyone knows that generic drugs are cheaper than branded drugs.  As the NY Times reported, “73 percent of consumer spending” is spent on branded drugs.  When a generic drug, which costs about 15% of the branded drug cost, enters the market, branded drug makers lose about 90% of their profits.

In FTC v. Actavis, Inc., the 11th Circuit Court of Appeals held companies holding the patent to the branded drug could make those payments to the generic drug maker.  In this case, the generic drug maker challenged the patent of the branded drug maker in court.  Both drug makers came to a settlement, whereby the generic would get some payment as long as the branded drug maker could continue to sell its branded drug exclusively for a time period.

In sum, the 11th Circuit reasoned, “absent sham litigation or fraud” when the anticompetitive effects of a patent fell within that scope, there is no antitrust claim. Further, since there was a settlement, the 11th Circuit stated that it would be hard to predict what the effect would have been.  And since the settlement was with one generic drug maker, this did not impact other generic drug makers from selling the generic version of the drug.

Now, the Supreme Court has to decide on this issue.

via Generic-Brand Name Drug Case Goes to Supreme Court – NYTimes.com.

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