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Merck Sharp & Dohme Corp. v. Conway

United States District Court, Sixth Circuit

May 24, 2013

MERCK SHARP & DOHME CORP., Plaintiff,
v.
JACK CONWAY, in his Official Capacity as Attorney General of the Commonwealth of Kentucky, Defendant.

MEMORANDUM OPINION AND ORDER

DANNY C. REEVES, District Judge.

This matter is pending for consideration of motions for summary judgment filed by Plaintiff Merck Sharp & Dohme Corporation ("Merck") and Defendant Kentucky Attorney General Jack Conway ("AG"). [Record Nos. 64, 65] Both parties contend that there are no genuine issues of material fact. And each asserts that it/he is entitled to judgment as a matter of law. For the reasons discussed below, the Court will grant the AG's motion and deny the relief requested by Merck.

I.

This action is related to Merck's marketing and distribution of the prescription medication Vioxx. The AG filed suit against Merck in the Franklin Circuit Court on September 28, 2009, pursuant to the Kentucky Consumer Protection Act ("KCPA"), located in Chapter 367 of the Kentucky Revised Statutes ("KRS"). The Complaint alleges that Merck "willfully engaged in acts and practices which are unfair, false, misleading and/or deceptive and has committed acts or practices in trade or commerce in violation of KRS 367.170." [Record No. 2-2 ¶ 34] The requested relief includes civil penalties of "two thousand dollars ($2, 000) for each violation of KRS 367.170, and ten thousand dollars ($10, 000) for each violation targeted to consumers over the age of 65." [ Id., p. 8] These amounts represent the maximum civil penalties recoverable under the KCPA. See KRS § 367.990(2).

Merck removed the case to this Court on October 30, 2009. [Civil Action No. 3:09-54-DCR, Record No. 1] The action was then transferred to the Eastern District of Louisiana on April 15, 2010, as part of the multidistrict litigation ("MDL") proceeding captioned: In re Vioxx Product Liability Litigation, MDL No. 1657. [Civil Action No. 3:09-54-DCR, Record No. 15] On January 3, 2012, the District Court for the Eastern District of Louisiana granted the AG's motion to remand, concluding that the case was improperly removed. In re Vioxx Prods. Liab. Litig., 843 F.Supp.2d 654, 670 (E.D. La. 2012). Merck sought permission to appeal the decision but the Fifth Circuit denied the motion on February 24, 2012. See In Re: Vioxx Prod. Liab., No. 12-90002 (5th Cir. 2012). On March 20, 2012, the case was remanded to the Franklin Circuit Court.

Approximately one year into the underlying action (" Merck I "), the AG retained outside counsel to assist with the Vioxx litigation. On July 28, 2010, the AG issued a "Request for Proposals" and a panel reviewed the six proposals that were submitted. Thereafter, on September 30, 2010, the AG entered into a contract with the firm Garmer & Prather, PLLC. [Record No. 1-4] The contract was approved by Governor Steven L. Beshear by Executive Order 2010-823. [ Id., p. 1] Under this contract (the "Original Contract"), the firm agreed to be compensated by contingency fees "to be withheld from any settlement award resulting from th[e] litigation." [ Id., p. 3]

Garmer & Prather agreed to "assist the [Office of the Attorney General (OAG)] with investigation and potential litigation involving Merck & Co. Inc., manufacturer of the pharmaceutical drug Vioxx and any other potentially liable parties." [ Id., p. 5 (emphasis omitted)] The 2010 Contract contains the following relevant provisions:

Legal services will include, but may not be limited to:

Performing an assessment of the OAG's proposed litigation against Merck & Co. Inc.
Assuming lead role in investigating and, if warranted, preparing litigation against Merck & Co. Inc. and other potentially responsible entities, if any. [The AG] will conduct all phases of investigation and litigation including responding to motions, including motions to dismiss;
... [D]rafting and answering discovery propounded to the Commonwealth; tracking documents obtained in discovery; coordinat[ing] litigation with other states and the federal government to promote, to the extent beneficial, a unified approach to these cases; taking of depositions; defending depositions noticed by the defendants; preparing Commonwealth witnesses for depositions; responding to motions for summary judgment or other pretrial dispositive motions; identification of experts to testify in favor of the Commonwealth; preparation of expert witnesses for deposition or trial testimony; assessing the strength of legal arguments propounded by the litigants; preparation of legal arguments on motions; dealing with discovery disputes; represent the Commonwealth in trial or in any settlement negotiations that may occur; represent the Commonwealth in responding to posttrial motions; represent the Commonwealth in the appeal of any judgment or verdict rendered in any such action(s) and, if applicable, the remand from appeal(s).

[ Id., pp. 5-6] The agreement also provides:

The OAG retains the right at all times to direct the litigation in all respects, including but not limited to, whether and when to initiate litigation, against whom actions will be taken, the claims to be made in said litigation, approval and/or rejection of settlements and the amount and type of damages to be requested.

[ Id., p. 5 (emphasis in original)]

Merck filed this action against the AG on August 16, 2011, seeking a declaratory judgment and injunctive relief. [Record No. 1] The complaint alleges that the AG has "delegated [its coercive powers] to private lawyers having a clear, direct and substantial financial stake in the outcome of [ Merck I ], a punitive enforcement action that must be prosecuted in the public interest or not at all." [ Id. ¶ 29] As a result, Merck asserts, its "right to due process under the Fourteenth Amendment has been infringed." [ Id. ¶ 30] The Court denied Merck's motion for a preliminary injunction on March 21, 2012. [Record No. 31] The Court also denied the AG's motion to dismiss and renewed motion to dismiss on March 23, 2012 and December 19, 2012, respectively. [Record Nos. 32, 57]

On July 1, 2012, after the expiration of the original contingency-fee contract, the AG entered into a new contract with Garmer & Prather, LLC. This updated contract (the "Current Contract") contained the following additional terms:

The Attorney General shall have final authority over all aspects of this litigation, including the course and conduct of the case, as well as total control over all discretionary decisions. The litigation may be commenced, conducted, settled, approved, and ended only with the express approval and signature of the Attorney General. The Attorney General at his sole discretion has the right to appoint a designated assistant ("designated assistant") to oversee the litigation, which appointment the Attorney General may modify at will.
Contractor shall provide legal services to the Attorney General subject to the approval of the Attorney General for the purposes of seeking injunctive relief, monetary relief, and other relief against all entities in this litigation....
Contractor shall coordinate the provision of the legal services with the Attorney General or his designated assistant, other personnel of the Office of the Attorney General, and such others as the Attorney General may appoint as Contractor. All substantive pleadings, motions, briefs, and other material which may be filed with the court shall first be approved by the Attorney General and provided to his office in draft form in a reasonable and timely manner for review. Regular status meetings may be held as requested by the Attorney General.
Contractor shall communicate with state entities through the Office of the Attorney General unless otherwise authorized by the Attorney General designee and Merck can contact the Office of the Attorney General or his designee at any time....
The Attorney General must approve in advance all aspects of this litigation and shall be included in any settlement discussions. Contractor agrees that any settlement in this case must receive the Attorney General's express prior approval in writing. Contractor shall confer with the Attorney General as early as practicable in any settlement negotiation process.

[Record No. 64-16, p. 5]

After a period of discovery, Merck and the AG filed cross motions for summary judgment. [Record Nos. 64, 65] The Court held a pretrial conference in this matter on April 30, 2013. [Record No. 103] Both parties asserted that the facts are not in dispute and that the issues raised in this action are appropriate for determination at this stage.[1]

II.

Summary judgment is required when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Chao v. Hall Holding Co., 285 F.3d 415, 424 (6th Cir. 2002). A dispute over a material fact is not "genuine" unless a reasonable jury could return a verdict for the nonmoving party. That is, the determination must be "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

The party moving for summary judgment bears the burden of showing conclusively that no genuine issue of material fact exists. CenTra, Inc. v. Estrin, 538 F.3d 402, 412 (6th Cir. 2008). Once the moving party has met its burden of production, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Sigler v. Am. Honda Motor Co., 532 F.3d 469, 483 (6th Cir. 2008) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). Instead, the nonmoving party must present "significant probative evidence" of a genuine dispute in order to defeat the motion for summary judgment. Chao, 285 F.3d at 424. The nonmoving party cannot rely upon the assertions in its pleadings; rather, it must come forward with probative evidence, such as sworn affidavits, to support its claims. Celotex, 477 U.S. at 324. In deciding whether to grant summary judgment, the Court views all the facts and inferences drawn from the evidence in the light most favorable to the nonmoving party. Matsushita, 475 U.S. at 587.

III.

As an initial matter, the Court will address the AG's argument that Merck's claims should be dismissed as moot. The Court has previously found that Merck has standing to bring this action. However, as the AG points out, "mootness is a different inquiry and requires that standing be met at all stages of the litigation." [Record No. 65-1, p. 28] A case becomes moot "when the issues presented are no longer live' or the parties lack a legally cognizable interest in the outcome." Wedgewood Ltd. P'ship I v. Twp. of Liberty, Ohio, 610 F.3d 340, 348 (6th Cir. 2010) (internal quotations omitted). The AG maintains that Merck's Complaint was based on the terms of the Original Contract and, therefore, the adoption of the Current Contract rendered the claims and allegations in the Complaint ...


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