Commonwealth v. Janssen Pharmaceutica, Inc.

8 A.3d 267, 607 Pa. 406, 2010 Pa. LEXIS 3051
CourtSupreme Court of Pennsylvania
DecidedAugust 17, 2010
Docket24 EAP 2009
StatusPublished
Cited by33 cases

This text of 8 A.3d 267 (Commonwealth v. Janssen Pharmaceutica, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commonwealth v. Janssen Pharmaceutica, Inc., 8 A.3d 267, 607 Pa. 406, 2010 Pa. LEXIS 3051 (Pa. 2010).

Opinions

OPINION

Chief Justice CASTILLE.

This appeal of the trial court’s order denying the motion of appellant Janssen Pharmaceutica, Inc. (“Janssen”) to disqualify contingent fee counsel retained by appellee, the Commonwealth’s Office of General Counsel (“OGC”), is before this Court on a grant of extraordinary relief pursuant to 42 Pa.C.S. § 726,1 by which we exercised jurisdiction to consider the possible statutory and constitutional implications of the contingent fee representation agreement entered into between OGC and the Texas law firm of Bailey Perrin Bailey, LLP (“Bailey Perrin”).2 We affirm.

[410]*410On January 17, 2008, OGC filed a complaint against Janssen in the Court of Common Pleas of Philadelphia County, raising statutory and common law tort claims related to Risperdal, a prescription antipsychotic medication marketed by Janssen. Although Risperdal had been approved by the Food and Drug Administration (“FDA”), OGC alleged, inter alia, that Janssen improperly marketed and promoted Risperdal for non-FDA approved uses, commonly known as “off-label” uses. OGC contended that the Commonwealth has expended millions of dollars for Risperdal prescriptions through Medicaid and the Pharmaceutical Assistance Contract for the Elderly (“PACE”). In filing the action, OGC was not represented by government-employed lawyers. Instead, OGC retained Bailey Perrin, a private law firm based in Houston, Texas, to prosecute the action on a contingent fee basis.

On June 9, 2008, Janssen filed a motion in the trial court seeking to disqualify Bailey Perrin as OGC’s counsel in the litigation. Janssen alleged that, while OGC filed the complaint against Janssen on behalf of the Commonwealth, no attorney from OGC entered an appearance, the complaint was signed by local Philadelphia counsel for Bailey Perrin, and a Bailey Perrin attorney verified the complaint. Janssen contended that the contingent fee agreement restricts OGC’s ability to consent to a non-monetary settlement of the Risperdal action because it requires that any settlement include reasonable compensation for Bailey Perrin; contains a provision waiving conflicts of interests arising out of Bailey Perrin representing other states in similar actions that varies from the usual conflict of interest provisions included in contingent fee agreements executed by the Attorney General; and does not pro[411]*411vide for OGC’s control and management of the litigation as is generally the case with the Attorney General’s contingent fee agreements. Janssen argued that the contingent fee agreement violates the separation of powers doctrine by usurping the General Assembly’s exclusive spending powers. Finally, Janssen claimed that the agreement deprives it of its due process rights because those who exercise the government’s powers in adjudicative proceedings must have no financial interest in the outcome, must be impartial, and must maintain the appearance of impartiality.3

OGC responded that Janssen misrepresented the terms of the contingent fee agreement regarding the scope of OGC’s control over the litigation. OGC stated that the agreement relegates Bailey Perrin to advising, counseling and recommending actions to OGC and carrying out OGC’s directives to the best of its ability and further provides that Bailey Perrin is directly responsible to OGC on all matters of strategy and tactics. In addition, according to OGC, the agreement provides that, at the time of settlement or'judgment, OGC will consult with Bailey Perrin and agree to appropriate legal fees. OGC noted that the agreement provides that Bailey Perrin must advance all costs of litigation and, if there is no recovery, could expend millions of dollars with no remuneration.

Regarding alleged restrictions on the ability to reach a non-monetary settlement, OGC argued that, because the Risperdal complaint seeks monetary damages, the likelihood of an acceptable non-monetary settlement is extremely remote, and Janssen had not proposed any non-monetary settlement. On the issue of the alleged conflict of interest, OGC responded that Janssen failed to point to any such conflict or establish how Bailey Perrin’s representation of other states against [412]*412Janssen presents a conflict. OGC added that the contingent fee agreement does not violate the separation of powers doctrine because any fees paid to Bailey Perrin would issue from Janssen and not from the state treasury. Finally, OGC countered Janssen’s due process argument by noting that all of the caselaw on that issue involves criminal matters and the impartiality of judges, not counsel representing a governmental entity.

The Honorable Howland W. Abramson denied the motion to disqualify counsel on December 8, 2008, without filing an opinion or otherwise stating the reasons for denial on the record. Janssen then filed an application for extraordinary relief with this Court, asking this Court to exercise jurisdiction to review the denial of its motion to disqualify. Janssen renewed the arguments it had forwarded below, i.e., that the contingent fee contract restricted OGC’s authority to settle the litigation for non-monetary relief, and that the contract did not vest control of the litigation with OGC but rather provided that Bailey Perrin need only consult with OGC; that the process by which Bailey Perrin was retained was irregular because the contingent fee contract was not the subject of competitive bidding or legislative authorization; and that the contract violated the separation of powers doctrine and Janssen’s due process rights. Finally, Janssen noted that if OGC prevailed in this litigation, Bailey Perrin would be paid fees of as much as fifteen percent of the actual recovery.

OGC opposed the application for extraordinary relief, arguing that Sections 204 and 501 of the Commonwealth Attorneys Act (“Attorneys Act” or “Act”) specifically authorized OGC to hire outside counsel to represent it. See 71 P.S. §§ 732-204 and 732-501. Further, OGC claimed that Janssen lacked standing to move to disqualify Bailey Perrin under Section 103 of the Attorneys Act, which explicitly states that no party other than a Commonwealth agency has standing to challenge the authority of the legal representation of the agency. 71 P.S. § 732-103. As to Janssen’s separation of powers argument, OGC renewed its position that Bailey Perrin’s compensation would come from Janssen, not from the state treasury, [413]*413because any fee would be paid directly to Bailey Perrin prior to any recovery from Janssen being deposited into the treasury. In any event, according to OGC, the majority of other jurisdictions that have considered such a separation of powers argument have rejected it. Regarding Janssen’s due process claim, OGC noted that it appears that Janssen would not object if OGC were represented by government-employed attorneys or private counsel working on an hourly basis; therefore, OGC characterized Janssen’s true objection as being a strategic one, reflecting its concern with Bailey Perrin’s level of skill, experience and special expertise in pharmaceutical reimbursement claims. OGC posits that due process principles cannot be construed to deny the Commonwealth the ability to retain superior legal representation.

On June 30, 2009, this Court exercised jurisdiction due to the public importance of the disqualification issue and directed the parties to brief the following four issues:

A. Whether 71 P.S.

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Bluebook (online)
8 A.3d 267, 607 Pa. 406, 2010 Pa. LEXIS 3051, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commonwealth-v-janssen-pharmaceutica-inc-pa-2010.