Teva Pharmaceuticals v. Impax Labs

Opinion

J-A08011-18

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

TEVA PHARAMACEUTICALS USA, INC. : IN THE SUPERIOR COURT OF AND TEVA PHARMACEUTICALS : PENNSYLVANIA CURACAO N.V. : : : v. : : : IMPAX LABORATORIES, INC. : No. 2920 EDA 2017 : Appellant :

Appeal from the Order Dated August 23, 2017 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): February Term, 2017, No. 03632

BEFORE: PANELLA, J., LAZARUS, J., and STRASSBURGER, J.

MEMORANDUM BY PANELLA, J. FILED NOVEMBER 02, 2018

The Pennsylvania Rules of Professional Conduct prohibit a lawyer from

representing a client when the representation will cause an actual or apparent

conflict of interest for the lawyer. One of the most easily recognized conflicts

arises when a lawyer represents a party suing a former client. If the suit is

substantially related to issues involved in representing the former client, the

lawyer may have knowledge of relevant privileged information. And where the

lawyer is found to have knowledge of such confidences, a court may disqualify

the lawyer from representing the new client.

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 Retired Senior Judge assigned to the Superior Court. J-A08011-18

At the same time, a court should give substantial deference to a party’s

choice of counsel. Thus, where the matters are not substantially related, due

process does not require disqualification.

Here, Appellant, Impax Laboratories, Inc., seeks to disqualify the law

firm, Goodwin Procter, LLP, retained by Teva Pharmaceuticals USA, Inc.

(“Teva USA”) and Teva Pharmaceuticals Curacao, N.V. (“Teva Curacao”)

(collectively, “Teva”) in Teva’s suit seeking contractual indemnification from

Impax. Impax contends Teva’s indemnification claim is substantially related

to prior litigation where Goodwin Procter represented Teva and Impax jointly

against claims of patent infringement.

The trial court denied Impax’s motion to disqualify. It held “there is

simply no substantial relationship between the patent case and the instant

indemnity case.” We cannot conclude the court abused its discretion, and

therefore affirm.

As an initial matter, we must determine whether we have jurisdiction

over this appeal, as Teva contends we do not.1 Our jurisdiction is typically

limited to the review of final orders. See Pa.R.A.P. 341(a) (“[A]n appeal may

be taken as of right from any final order….”) By definition, an order that does

not dispose of all claims as to all parties is interlocutory and not final. See

1 We denied Teva’s motion to quash Impax’s appeal without prejudice to Teva’s right to re-file the motion before the merits panel. Teva did not re-file, but has preserved their arguments against jurisdiction in a “Counterstatement of Jurisdiction” in their brief.

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Spuglio v. Cugini, 818 A.2d 1286, 1287 (Pa. Super. 2003). The issue of

finality impacts our jurisdiction over the appeal. See In re Estate of Cella,

12 A.3d 374, 377 (Pa. Super. 2010). “[T]his Court has the power to inquire at

any time, sua sponte, whether an order is appealable.” Id. (brackets in

original; citations omitted).

It is undisputed that the trial court’s order does not constitute a final

order here. In fact, the order was entered before Teva filed its complaint.

Thus, the order did not dispose of all of Teva’s claims against Impax.

We therefore turn to the other bases upon which we have jurisdiction

over appeals. The collateral order doctrine permits appeal from certain non-

final orders. Rule 313(a) of the Rules of Appellate Procedure states that “[a]n

appeal may be taken as of right from a collateral order of an administrative

agency or lower court.”

To determine if an order qualifies for treatment as a Rule 313 collateral

order, we must undertake a three-step analysis. See In re Reglan

Litigation, 72 A.3d 696, 699 (Pa. Super. 2013). First, we must determine

whether the order at issue is separable from and collateral to the main cause

of action. See Crum v. Bridgestone/Firestone North American Tire, LLC,

907 A.2d 578, 583 (Pa. Super. 2006). A separable, collateral order is one

capable of review without considering the case’s underlying merits. See id.

Here, it is clear we can review the order denying disqualification without

considering the underlying merits of Teva’s indemnification claims.

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Second, the order must “involve a right that is too important to be

denied review.” In re Reglan Litigation, 72 A.3d 696, 699 (Pa. Super. 2013)

(citation and internal quotation marks omitted). A right is deemed sufficiently

important if it represents an interest that outweighs the policy of judicial

efficiency embodied by the final order rule. See Shearer v. Hafer, 177 A.3d

850, 858-859 (Pa. 2018). Also, the interest at stake must be “deeply rooted

in public policy” and be important to more than just the present case. Id., at

859.

Impax argues Goodwin Procter has confidential information it gained

through its prior representation of Impax.2 In contrast, Teva contends

Goodwin Procter gained no relevant information from Impax during the patent

infringement case that is privileged as against Teva. Teva argues Goodwin

Procter’s joint representation of Teva and Impax was conditioned on full

access between the two parties.

We conclude Teva’s argument is ultimately an argument on the merits

of the appeal. In order to accept Teva’s argument, we must conclude there

are no confidences at stake in Goodwin Procter’s representation of Teva in the

2 Impax’s initial appellate brief does not provide argument in support of our jurisdiction. Rather, Impax invites this Court to review documents it had filed in opposition to Teva’s motion to quash. See Appellant’s Brief, at 1 n.1. This is improper. See Moses Taylor Hosp. v. White, 799 A.2d 802, 804 (Pa. Super. 2002) (“When an appellant attempts to incorporate by reference issues addressed elsewhere and fails to argue them in his brief, the issues are waived.”). However, Impax remedies this oversight in its reply brief, and their arguments are not waived.

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current suit. Answering this question ultimately provides an answer on the

merits of Impax’s claims on appeal. Thus, Impax’s claims that confidences will

be violated by Goodwin Procter are sufficient to establish the second

requirement for interlocutory review. See Commonwealth v. Harris, 32

A.3d 243, 248-249 (Pa. 2011) (reaffirming that “claims of privilege implicate

rights rooted in public policy, and impact individuals other than those involved

in the litigation”). See also Levy v. Senate of Pennsylvania, 65 A.3d 361,

368-369 (Pa. 2013) (reiterating the attorney-client privilege is deeply rooted

in jurisprudence).

Finally, the claim on appeal must be “such that if review is postponed

until final judgment in the case, the claim will be irreparably lost.” Pa.R.A.P.

313(b). “Once putatively privileged material is in the open, the bell has been

rung, and cannot be unrung by a later appeal.” Harris, 32 A.3d at 249

(citations omitted). This appears to be the crux of Impax’s argument on

appeal: that Goodwin Procter will reveal to Teva putatively privileged

information. We therefore conclude the third requirement for interlocutory

review of a collateral order has been established.

With our jurisdiction established, we turn to the merits of Impax’s claim

that Goodwin Procter should be disqualified from representing Teva in this

case. “We employ a plenary standard of review.” Weber v. Lancaster

Newspapers, Inc., 878 A.2d 63, 80 (Pa. Super. 2005).

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Teva initiated this case by filing a writ of summons. Both Teva and

Impax subsequently filed various motions with the court, including Impax’s

motion to disqualify Goodman Procter. Teva did not file its complaint until after

the court denied the motion to disqualify. Thus, the following summary of the

history of this case is gleaned from Impax’s motion to disqualify and Teva’s

responses, including the affidavit of attorney Jordan Weiss.

Impax and Teva Curacao are parties to a business agreement, otherwise

known as a Strategic Alliance Agreement (“SAA”). Under the SAA, Impax

would develop generic drugs and submit them for approval by the Food and

Drug Administration (“FDA”). As generic drugs, the products developed by

Impax could bypass certain regulatory requirements, such as clinical studies,

if studies showed the product was “bioequivalent” 3 to the already approved

brand name product. After FDA approval, the SAA provided that Teva would

market the drug.

One product developed by Impax under the SAA was bupropion

hydrochloride, 300 mg extended release tablets, also known as Budeprion XL.

Impax submitted an Abbreviated New Drug Application (“ANDA”) to the FDA

3 Bioequivalence is a concept involving a comparison of active ingredient concentrations, normally in the bloodstream, between the name brand and the generic dosage forms, as a function of time after ingestion. See 21 C.F.R. § 314.3(b). In its draft complaint, Teva asserts that Impax sought, and received, an FDA waiver on in vivo (a process taking place in a living organism) testing of Budeprion XL, and instead relied upon in vitro (a process taking place outside a living organism) dissolution testing to establish bioequivalence.

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for Budeprion XL, which, in relevant part, indicated Budeprion XL was

bioequivalent to Wellbutrin XL, a previously approved brand name formulation

of buproprion hydrochloride, 300 mg extended release tablets. Wellbutrin XL

was jointly developed by GlaxoSmithKline LLC (“GSK”) and Biovail

Laboratories, Inc. (“Biovail”).

In conformance with regulatory requirements, Impax certified that

Budeprion XL did not violate GSK and Biovail’s patents on Wellbutrin XL.

Shortly after Impax filed the ANDA, Biovail sued Impax, claiming Budeprion

XL infringed upon a Wellbutrin XL patent: U.S. Patent No. 6,096,341 (the

“Patent”). The Patent did not cover the use of buproprion hydrochloride in

treating any specific ailment. Rather, the Patent covered the extended release

design of Wellbutrin XL. Specifically, it covered the design of the tablet to

control the release of the drug from the tablet over time. See Biovail

Laboraties Intern. SRL v. Impax Laboratories, Inc., 433 F.Supp.2d 501,

512-522 (E.D. Pa. 2006).

Goodwin Procter represented Teva and Impax jointly in defending the

patent infringement claim. Ultimately, Biovail reached a settlement agreement

with Teva and Impax, as well as another company.

After the FDA subsequently approved Impax’s ANDA, Teva began selling

Budeprion XL. Sales were interrupted nearly six years later when the FDA’s

independent testing revealed Budeprion XL was not bioequivalent to

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Wellbutrin XL. Impax requested the FDA withdraw its approval of the

Budeprion XL ANDA, and Teva stopped shipping the product.

GSK subsequently filed trademark infringement complaints against

Teva. GSK claimed Teva had falsely advertised Budeprion XL as bioequivalent

to Wellbutrin XL, thereby allegedly harming consumers and GSK’s business

interest in Wellbutrin XL. Teva, in turn, notified Impax of the suit, and that

Goodwin Procter would represent Teva. Teva also notified Impax that they

were reserving their right to seek indemnification from Impax under the SAA.

Impax eventually replied, denying there was any basis for

indemnification. Impax noted GSK’s claims were for false advertising. It

asserted Teva was solely responsible for advertising under the SAA, and thus

there was no basis for indemnification.

Teva ultimately settled with GSK on the false advertising claims. They

then filed this suit seeking indemnification from Impax, with Goodwin Procter

as their counsel. Impax sought to have Goodwin Procter disqualified, and the

parties filed various supporting affidavits. After receiving argument from the

parties, the court denied the motion, concluding the patent case was not

substantially related to this indemnification action.

On appeal, Impax continues to advocate for disqualification of Goodwin

Procter. Pennsylvania’s Rules of Professional Conduct govern the practice of

law in the Commonwealth. However, they were not intended to create

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substantive law applicable outside disciplinary proceedings. See Pa.R.P.C.,

Preamble and Scope, at ¶ 18, 19.

The Rules prohibit a lawyer from prosecuting a case against a former

client if the case is substantially related to an issue pertinent to the

representation of the former client. See Pa.R.P.C. 1.9(a). A court may

sanction an attorney who violates the Rules. See McCarthy v. Se. Pa.

Transp. Auth., 772 A.2d 987, 991 (Pa. Super. 2001). Possible sanctions

include disqualification. See id. However, “courts should not lightly interfere

with the right to counsel of one’s choice.” Weber, 878 A.2d at 80 (citation

omitted). Thus, “a court’s authority to disqualify counsel based on [the] Rules

of Professional Conduct is limited.” McCarthy, 772 A.2d at 991.

Disqualification is only proper when due process requires it. See id.

Rule 1.9 is a recognition of the common law duty lawyers owe to their

current and former clients. See Dougherty v. Philadelphia Newspapers,

LLC, 85 A.3d 1082, 1086-1087 (Pa. Super. 2014). The duty encompasses

confidentiality and avoidance of conflicts of interest. See id. As such, a

“breach of such duty is actionable.” Id. (citation omitted). Thus, a court may

disqualify an attorney whose representation constitutes a breach of the duty

of confidentiality and loyalty to a former client. See id., at 1087.

To establish grounds for disqualification, the former client must establish

three elements. First, the attorney’s current representation is adverse to the

relationship established with the former client. See id. Second, the subject

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matter of the current case is substantially related to the subject matter of the

previous representation. See id. And finally, the attorney acquired knowledge

of confidential information about the prior client during the prior

representation. See id.

Here, the court concluded Impax had failed to establish the second

element. Specifically, the court found that this contract indemnification case

is not substantially related to the patent infringement case where Goodwin

represented Impax. Also, Teva contends Impax has not established the third

element, as Teva asserts none of the information gained by Goodwin during

the patent infringement case was privileged as against Teva pursuant to the

SAA.

We need not reach Teva’s claim, as we agree with the court that the

cases are not substantially related. The patent infringement case dealt with

the construction and interpretation of the Patent. For purposes of this

argument only, we assume Goodwin received confidential information from

Impax in the course of its representation of Impax in that case. We further

assume, pursuant to Impax’s claims, these confidences included scientific data

on Budeprion XL’s bioequivalency to Wellbutrin XL.

In contrast, Teva’s claims in this case deal with the construction and

interpretation of the SAA. Under the SAA, Impax warranted that Budeprion XL

met the FDA’s regulatory requirements. See SAA, § 12.1.5. Impax further

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agreed to indemnify Teva against any claims resulting from a breach of its

warranties under the SAA. See id., at § 14.1(a).

It is undisputed the FDA required Budeprion XL be bioequivalent to

Wellbutrin XL. It is further undisputed the FDA eventually found Budeprion XL

not bioequivalent to Wellbutrin. As a result, the FDA requested Teva and

Impax withdraw Budeprion XL from the market. Both companies agreed to

withdraw the product. The only link left in the chain is to determine whether

GSK’s false advertising suits arose out of Impax’s alleged breach.

We therefore turn to the basis of GSK’s lawsuit. GSK asserted in its

complaint that “Teva’s advertising … made explicitly and necessarily implicitly

false … claims of bioequivalence … to … Wellbutrin XL.” While this claim does

not explicitly reference the FDA, or any regulatory action taken by the FDA, it

is clearly related to FDA regulatory requirements. When FDA testing indicated

Budeprion XL was not bioequivalent to Wellbutrin XL, it requested the parties

remove Budeprion XL from the market.

Impax has argued GSK’s claims focused on advertising, a duty assigned

to Teva in the SAA. While superficially correct, it is clear the claims of false

advertising are founded not upon any decision made by Teva during their

marketing campaign, but upon Budeprion XL’s lack of bioequivalency. The

absence of bioequivalence is the basis of GSK’s complaint against Teva.

Under the SAA, Impax warranted that Budeprion XL was bioequivalent

to Wellbutrin XL. Thus, Teva’s allegations are capable of establishing Impax

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breached its warranty under § 12.1.5 of the SAA. This is the substantive issue

at the heart of Teva’s claim here.

Impax argues the development history of Budeprion XL and the data

associated with its evasion of the Patent are necessarily relevant to Teva’s

indemnification claim. We disagree.

Impax has not disputed that the FDA and other independent testing

indicated Budeprion XL was not bioequivalent. Nor has it disputed that Teva

and Impax voluntarily agreed to withdraw Budeprion XL from the market as a

result of this testing. Arguably, Budeprion XL’s non-bioequivalence to

Wellbutrin XL is now beyond dispute. However, even if Impax desired to

litigate the issue at this late date, it is not relevant to Teva’s indemnification

claim.

Teva incurred costs and damages from settling GSK’s false advertising

claim based upon GSK’s claim that Budeprion XL was not bioequivalent to

Wellbutrin XL. Even if Impax has confidential data supporting a conclusion of

bioequivalence, it is now irrelevant to the indemnification claim. Impax has

not asserted that it assisted or indemnified Teva in the GSK litigation. The only

issue to be decided in this case is a purely legal one: whether Impax was

required, under the SAA, to indemnify Teva for, and defend Teva from, the

false advertising suit.

The court correctly found Teva’s indemnification claim is not

substantially related to the patent infringement action. Any confidential

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information Goodwin Procter may have received from Impax regarding

bioequivalence or the development history of Budeprion XL is not relevant in

this action. There is no danger that Impax will be denied due process if

Goodwin Procter continues to represent Teva in this action.

Order affirmed.

Judge Lazarus joins the memorandum.

Judge Strassburger files a concurring/dissenting memorandum.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 11/2/18

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