Case 3:14-md WHO Document 742 Filed 06/02/17 Page 1 of 16 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

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1 Case :-md-0-who Document Filed 0/0/ Page of [Submitting Counsel on Signature Page] 0 0 In re LIDODERM ANTITRUST LITIGATION THIS DOCUMENT RELATES TO: END-PAYOR PLAINTIFF ACTIONS UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Master File No. -md-0-who MDL No. END-PAYOR CLASS COUNSEL S MOTION FOR ENTRY OF A SET-ASIDE ORDER ORAL ARGUMENT REQUESTED Date: July, 0 Time: :00 p.m. Courtroom:, th Floor The Honorable William H. Orrick CASE NO. -MD-0-WHO

2 Case :-md-0-who Document Filed 0/0/ Page of 0 TABLE OF CONTENTS NOTICE OF MOTION AND MOTION... STATEMENT OF ISSUE TO BE DECIDED... I. INTRODUCTION... II. FACTUAL AND PROCEDURAL BACKGROUND... III. THE COURT SHOULD ENTER A SET-ASIDE ORDER... A. The Court Has Discretion to Set Aside Funds to Compensate Class Counsel for Common Benefit Work... B. A Set-Aside Order Is Appropriate in This Case... C. EPP Class Counsel s Motion Is Timely... IV. CONCLUSION i CASE NO. -MD-0-WHO

3 Case :-md-0-who Document Filed 0/0/ Page of 0 0 Cases TABLE OF AUTHORITIES Boeing Co. v. Van Gemert U.S. (0)... In re Air Crash Disaster at Florida Everglades on December, F.d 00 (th Cir. )..., In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig. 00 WL (N.D. Cal. Feb., 00)..., In re Diet Drugs F.d (d Cir. 00)... In re Genetically Modified Rice Litig. 00 WL 0 (E.D. Mo. Feb., 00)..., In re Linerboard Antitrust Litig. F. Supp. d (E.D. Pa. 00)... passim In re Orthopedic Bone Screw Prods. Liab. Litig. WL 00 (E.D. Pa. Jun., )... In re Protegen Sling & Vesica Sys. Prods. Liab. Litig. 00 WL (D. Md. Apr., 00)..., In re Rezulin Products Liability Litig. 00 WL (S.D.N.Y. Mar. 0, 00)... In re Zyprexa Prods. Liab. Litig. F. Supp. d (E.D.N.Y. 00)..., In re Zyprexa Prods. Liab. Litig. F.d (d Cir. 00)... Lindy Bros. Builders, Inc. v. Am. Radiator & Standard Sanitary Corp. F.d (d Cir. )... Sprague v. Ticonic Nat l Bank 0 U.S. ()... Turner v. Murphy Oil USA, Inc. F. Supp. d (E.D. La 00)...,,, ii CASE NO. -MD-0-WHO

4 Case :-md-0-who Document Filed 0/0/ Page of Other Authorities Manual for Complex Litigation, Fourth 0..., 0 0 iii CASE NO. -MD-0-WHO

5 Case :-md-0-who Document Filed 0/0/ Page of 0 0 NOTICE OF MOTION AND MOTION TO THE PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on July, 0, at :00 p.m., before the Honorable William H. Orrick, Co-Lead Counsel, Liaison Counsel, and the Executive Committee ( EPP Class Counsel ) for plaintiffs Allied Services Division Welfare Fund, City of Providence, International Union of Operating Engineers Local Health and Welfare Fund, International Union of Operating Engineers Local Health and Welfare Fund, Iron Workers District Council of New England Welfare Fund, NECA-IBEW Welfare Trust Fund, United Food and Commercial Workers Local & Participating Employers Health and Welfare Fund, Welfare Plan of the International Union of Operating Engineers Locals, A, B, C, R, and Letizia Gallotto ( End-Payor Plaintiffs ) will and do hereby move the Court for an order providing a framework for EPP Class Counsel and other counsel to seek payment of expenses and attorneys fees for work performed in this litigation that has benefitted all end-payors of brand and generic Lidoderm (together Lidoderm ) asserting claims arising from Defendants reverse payment agreement. STATEMENT OF ISSUE TO BE DECIDED Should the Court enter a set-aside order establishing a framework for counsel to seek compensation for work performed in this litigation that has benefitted all end-payors of Lidoderm, including persons or entities that may opt out of the End-Payor Class? MEMORANDUM OF LAW I. INTRODUCTION EPP Class Counsel respectfully request that the Court enter an order providing a framework for Class Counsel and other counsel to seek compensation for work performed in this litigation that has benefitted all end-payors of Lidoderm. Under the proposed set-aside order, a portion of any Co-Lead Counsel is Girard Gibbs LLP, Cohen Milstein Sellers & Toll PLLC, and Heins Mills & Olson PLC; Liaison Counsel is The Joseph Saveri Law Firm, Inc.; the Executive Committee is comprised of Hilliard & Shadowen LLP, Miller Law LLC, Motley Rice LLC, Robbins Geller Rudman & Dowd LLP, and The Dugan Law Firm, APLC. EPP Class Counsel as used in this motion also includes any firms and attorneys that performed work at the direction of Co-Lead Counsel. CASE NO. -MD-0-WHO

6 Case :-md-0-who Document Filed 0/0/ Page of 0 settlement or judgment obtained by a plaintiff who opts out of the End-Payor Class will be withheld and deposited into an escrow account. Payments from the account will be subject to Court approval after a showing by EPP Class Counsel (or any other counsel) specifying the benefits EPP Counsel or other counsel conferred, the legal work they performed, and the costs they incurred. Over the past three years, EPP Class Counsel have substantially advanced this litigation at a cost of millions of dollars in time and expenses, having investigated and brought this action, defeated motions to dismiss, conducted extensive discovery and related motion practice, obtained certification of the End-Payor Class, and retained numerous experts on the issues of liability, causation and damages, all of whom are prepared to testify at trial in this complex antitrust MDL. In class actions and mass actions generally, and pharmaceutical MDLs like this one specifically, certain class members (typically large third-party payors) may opt out of the class and seek recovery outside the class mechanism. Courts faced with similar circumstances have invoked longstanding Supreme Court precedent and applied their equitable authority to ensure that all counsel that have conferred a common benefit have an opportunity to apply for fair compensation for their work and expenditures. Although no end-payors have, to date, obtained any recoveries in this action, entry of a setaside order at this juncture before the opt-out deadline and summary judgment will promote efficiency and avoid ambiguity. EPP Class Counsel therefore respectfully request that the Court enter the proposed order filed with this motion. 0 II. FACTUAL AND PROCEDURAL BACKGROUND On April, 0, the Judicial Panel on Multidistrict Litigation centralized before this Court several antitrust cases brought on behalf of end-payors and direct purchasers of Lidoderm. ECF. This Court then consolidated and coordinated the pending Lidoderm actions and directed plaintiffs to attempt to reach consensus on the appointment of lead counsel and an organizational structure for management of the litigation. ECF at. All end-payor plaintiffs reached agreement on leadership, On May 0, 0, End-Payor Plaintiffs moved to provide notice of the Court s class certification order and provide class members an opportunity to opt out. ECF. CASE NO. -MD-0-WHO

7 Case :-md-0-who Document Filed 0/0/ Page of 0 0 with the exception of end-payor plaintiff Government Employees Health Association ( GEHA ), which advocated for the appointment of its counsel. ECF at. On May, 0, the Court adopted the consensus proposal and appointed three firms Girard Gibbs LLP, Heins Mills & Olson, P.L.C., and Cohen Milstein Sellers & Toll PLLC as Interim Co-Lead Counsel for the proposed End-Payor Class. Id. at. The Court also appointed the Joseph Saveri Law Firm as Interim Liaison Counsel and an Executive Committee to assist Co-Lead Counsel with the prosecution of End-Payor Plaintiffs claims. Id. GEHA and its counsel filed their own complaint and elected to prosecute GEHA s claims separately from those of the End-Payor Class. ECF (GEHA Amended Complaint). EPP Class Counsel have diligently pursued the interests of all Lidoderm end-payors with claims arising from Defendants reverse payment agreement. EPP Class Counsel investigated and drafted a forty-five page complaint and opposed Defendants motion to dismiss, which the Court largely denied. The parties then commenced extensive fact discovery in which EPP Class Counsel reviewed over. million pages of documents produced by Defendants (including obtaining certified translations of foreign language documents), reviewed tens of thousands of pages produced by third parties, and deposed more than thirty fact witnesses. EPP Class Counsel have also litigated numerous discovery disputes that have resulted in the production of key documents that support end-payors case against Defendants, secured the Ninth Circuit s denial of two mandamus petitions filed by Defendants, and obtained an order certifying the End-Payor Class (which they are currently defending on appeal). EPP Class Counsel have also retained several testifying experts who have provided reports on liability and causation issues that are relevant to all plaintiffs and other issues that are particular to the claims of end-payor purchasers. Collectively, the parties have retained and produced reports from twenty-three experts and engaged in extensive expert discovery, which is nearing completion. Over the next three months the parties will brief summary judgment motions and prepare for trial, which is set for December 0. To date, EPP Class Counsel have collectively committed tens of thousands of hours in attorney time and have advanced litigation costs of well over $ million in this case. CASE NO. -MD-0-WHO

8 Case :-md-0-who Document Filed 0/0/ Page of III. THE COURT SHOULD ENTER A SET-ASIDE ORDER 0 0 A. The Court Has Discretion to Set Aside Funds to Compensate Class Counsel for Common Benefit Work An MDL court s authority to ensure compensation for attorneys acting for MDL administration and common benefit of all plaintiffs... derives from the Supreme Court s common benefit doctrine. In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig., No. M:0-CV- 0-CRB, 00 WL, at * (N.D. Cal. Feb., 00) (citing Boeing Co. v. Van Gemert, U.S. (0); additional citations omitted); see also Turner v. Murphy Oil USA, Inc., F. Supp. d, 0 (E.D. La 00) ( the U.S. Supreme Court over years ago approved the common benefit doctrine, which provides that when the efforts of a litigant or attorney create, preserve, protect, increase, or discover a common fund, all who benefit from that fund must contribute proportionately to the costs of the litigation ). The common benefit doctrine reflects the traditional practice in courts of equity and rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant s expense. Boeing, U.S. at. A federal court s inherent powers of equity provide the foundation for the historic practice of granting reimbursement for the costs of litigation and allow the court to ensure justice as between a party and the beneficiaries of his litigation. In re Air Crash Disaster at Florida Everglades on December,, F.d 00, 0 (th Cir. ) (quoting Sprague v. Ticonic Nat l Bank, 0 U.S., - ()). Under the common benefit doctrine, a court may use its inherent equitable powers to compensate [class counsel] whose actions in commencing, pursuing or settling litigation, even if taken solely in their own name and for their own interest, benefit a class of persons not participating in the litigation. Lindy Bros. Builders, Inc. v. Am. Radiator & Standard Sanitary Corp., F.d, (d Cir. ). Thus, [a] necessary corollary to court appointment of lead and liaison counsel and appropriate management committees is the power to assure that these attorneys receive reasonable compensation for their work. In re Linerboard Antitrust Litig., F. Supp. d, (E.D. Pa. 00). CASE NO. -MD-0-WHO

9 Case :-md-0-who Document Filed 0/0/ Page of 0 0 Courts across the country, including in this District, have invoked the common benefit doctrine and recognized that where lead counsel s work on behalf of a group of plaintiffs confers a benefit on others, a portion of the attorneys fees the beneficiaries pay should be allocated to lead counsel. See, e.g,. In re Zyprexa Prods. Liab. Litig., F. Supp. d, (E.D.N.Y. 00) ( it is standard practice for courts to compensate attorneys who work for the common benefit of all plaintiffs by setting aside a fixed percentage of settlement proceeds ). [F]oreclosing those recoveries as a source of funding for the common benefit work would enrich the non-contributing individual plaintiffs unjustly at the expense of... the lead counsel. In re Zyprexa Prods. Liab. Litig., F.d, 0 (d Cir. 00) (Kaplan, J., concurring). To ensure the availability of funds to equitably compensate lead counsel, courts have directed defendants to sequester and place into an escrow account a portion of the recoveries obtained by individual plaintiffs. As one court explained, In accordance with the common benefit doctrine, it has been a common practice in the federal courts to impose set-asides in the early stages of complex litigation in order to preserve common-benefit funds for later distribution. Turner, F. Supp. d at 0. In the Linerboard antitrust litigation, for example, the court ordered the creation of an escrow account for the purpose of paying class plaintiffs Lead and Liaison Counsel and the Executive Committees appointed by the Court... for work benefitting plaintiffs in all lawsuits filed... by former class members who opted out of the classes certified by the Court. F. Supp. d at. And in Bextra, Judge Breyer directed the defendants to withhold the amount of [the common benefit attorneys fees] assessment from any amounts paid to plaintiffs and their counsel, and to pay the assessment directly into the common benefit fund. 00 WL, at *. See also, e.g., In re Diet Drugs, F.d, - (d Cir. 00); In re Genetically Modified Rice Litig., No. :0 MD CDP, 00 WL 0, at *- (E.D. Mo. Feb., 00); In re Protegen Sling & Vesica Sys. Prods. Liab. Litig., Nos. :0-0, 00 WL, at * (D. Md. Apr., 00); In re Rezulin Products Liability Litig., MDL No., 00 WL, at * (S.D.N.Y. Mar. 0, 00). Although set-aside orders are frequently entered in cases involving products liability claims where many individual cases are consolidated for pretrial proceedings, the rationale for entry of a set-aside order in those cases applies with equal force here, where antitrust opt-out plaintiffs may utilize CASE NO. -MD-0-WHO

10 Case :-md-0-who Document Filed 0/0/ Page 0 of 0 common benefit work performed by court-appointed Class Counsel to advance their own claims and obtain recoveries. See Linerboard, F. Supp. d at - (citing Air Crash Disaster, Diet Drugs, Protegen Sling, and Rezulin). EPP Class Counsel s request is also consistent with the Manual for Complex Litigation, which explains that MDL judges generally issue orders directing that defendants who settle MDL-related cases contribute a fixed percentage of the settlement to a general fund to pay national counsel. Manual for Complex Litigation, Fourth, ( Manual ) 0.. See also Duke Law Center for Judicial Studies, Standards and Best Practices for Large and Mass-Tort MDLs, Standard (H: In imposing fee assessments, the transferee judge should promote fairness among counsel, compensate counsel who made the recovery possible, and suppress perverse incentives among non-performing counsel. This may include imposing fees on attorneys representing individual clients who opt out, yet use MDL discovery materials or otherwise enjoy the fruits of common benefit counsels efforts. ). B. A Set-Aside Order Is Appropriate in This Case 0 The record here presents a strong factual basis for a set-aside order, as EPP Class Counsel have done much to craft the case against defendants, and [t]hat work has benefitted all litigants in the class action and [potential] tag-along actions. Linerboard, F. Supp. d at. At the outset of the litigation, the Court appointed EPP Class Counsel to prosecute this case on behalf of all end-payors. For more than three years, EPP Class Counsel have discharged the duties the Court assigned and have substantially advanced the litigation on behalf of all end-payors of Lidoderm (including any Class members who may elect to opt out). Any opt-out plaintiff will, for example, be able to enjoy the benefits of the Court s motion to dismiss ruling, the extensive fact and expert discovery that has been essential to prosecuting end-payors claims, and the fruits of multiple successful discovery motions that have resulted in the production of key documents. EPP Class Counsel have, among other things, procured Japanese-language translations and documents initially Available at best_practices_for_large_and_mass-tort_mdls.pdf (last visited June, 0). CASE NO. -MD-0-WHO

11 Case :-md-0-who Document Filed 0/0/ Page of 0 0 withheld as privileged, and Defendants have foregone certain defenses based on attorney-client privilege waiver elections. In addition, opt-out plaintiffs have the benefit of the litigation strategy EPP Class Counsel have developed. As in Linerboard, [i]n the favorable rulings of this Court and the Court of Appeals on the class action motions, the tag-along plaintiffs obtained the benefit of the imprimatur of those courts on the theory of the case formulated by class plaintiffs and adopted in the tag-along actions. F. Supp. d at. This case involves the interplay of multiple complex issues, including Watson s ability to manufacture generic Lidoderm, the Lidoderm launch strategies that Endo and Watson would have adopted absent the settlement agreement, and the FDA s evaluation of Endo s citizen petition all issues that EPP Class Counsel have spent considerable time analyzing and developing. EPP Class Counsel also marshaled evidence concerning liability and impact issues common to all end-payors in support of their motion for class certification. Any end-payor that opts out will thus obtain the benefit of the theory of the case formulated by class plaintiffs. Id. The size of any opt-out plaintiff s recovery will be directly tied to the strength of the case that EPP Class Counsel has developed over the past three years. EPP Class Counsel has thus made a sufficient showing to warrant establishment of a framework to ensure that funds will be available to compensate them should the Court later determine such compensation is warranted. Id. at. Accordingly, EPP Class Counsel request that the Court enter the proposed order submitted concurrently with this motion. The proposed order is substantially similar to the orders entered in Linerboard, Bextra, and numerous other cases, and includes the following key features:. In the event an opt-out plaintiff obtains a settlement or judgment in this matter, Defendants shall set aside and place into a Lidoderm End-Payor Fee and Expense Account. percent (or another percentage designated by the Court) of such settlement or judgment;. The set-aside funds shall be available, at the Court s discretion, to compensate EPP Class Counsel for their common benefit work, subject to a showing that EPP Class Counsel is entitled to such payments; CASE NO. -MD-0-WHO

12 Case :-md-0-who Document Filed 0/0/ Page of 0 0. The common benefit work for which EPP Class Counsel shall be eligible for compensation from the Lidoderm End-Payor Fee and Expense Account includes the work outlined in the Court s April, 0 Initial Case Management Order (ECF at -) and May, 0 order appointing EPP Class Counsel (ECF );. Any other counsel for one or more opt-out plaintiffs that believe they have performed compensable common benefit work shall also be permitted to apply to the Court for compensation from the set-aside funds; and. Any set-aside funds not paid to EPP Class Counsel or other counsel for common benefit work shall be remitted pro rata to the opt-out plaintiffs from whose settlements or judgments the set-aside funds were withheld. EPP Class Counsel s proposal deploys the preferable procedure of having Defendants set aside funds before distribution to opt-out plaintiffs rather than requiring EPP Class Counsel to recover common benefit attorneys fees and expenses from the opt-out plaintiffs directly. Linerboard, F. Supp. d at (collecting cases requiring set-asides). EPP Class Counsel s proposed set-aside order also includes key features that will protect the interests of the opt-out plaintiffs. First, no payments will be made from the set-aside funds unless and until approved by the Court. Id. at. Second, any set-aside funds not paid to Class Counsel for common benefit work will revert to the opt-out plaintiffs. Id. at. The. percent sequestration percentage proposed by EPP Class Counsel is consistent with set-asides approved in other cases. E.g., Genetically Modified Rice, 00 WL 0, at * ( Courts have ordered contributions between and percent in MDLs for common benefit work. ); Turner, F. Supp. d at ( percent); Protegen Sling, 00 WL, at * ( percent); In re Orthopedic Bone Screw Prods. Liab. Litig., MDL No. 0, WL 00, at *- (E.D. Pa. Jun., ) ( percent for costs and as much as percent for fees); Air Crash Disaster, F.d at 00- (lead counsel awarded %). It bears emphasis that EPP Class Counsel do not propose to automatically recover. percent of any opt-out settlement or judgment, but will instead make a showing and seek Court approval for payment of any portion of an opt-out recovery. CASE NO. -MD-0-WHO

13 Case :-md-0-who Document Filed 0/0/ Page of C. EPP Class Counsel s Motion Is Timely 0 0 Although no settlements or judgments have occurred in this litigation to date, now is an appropriate time for the Court to establish a structure to ensure that EPP Class Counsel may seek equitable compensation for their common benefit work. The Manual for Complex Litigation explains that Early in the litigation the court should... establish the arrangements for the [leadership group s] compensation, including setting up a fund to which designated parties should contribute in specified proportions. Manual, 0.. Courts are likewise in agreement that set-aside orders may issue before any settlement or judgment. As the court in Zyprexa explained: Even if no common benefit compensation had yet been earned, there would be a need to put a holdback method into place promptly. Without the entry of a set-aside order in advance of individual action settlements or judgments, individual actions could be dismissed after settlement or a judgment, requiring [lead counsel] to pursue separate compensation claims in any number of jurisdictions around the country. F. Supp. d at (internal quotation omitted); see also Turner, F. Supp. d at 0 ( it has been a common practice in the federal courts to impose set-asides in the early stages of complex litigation in order to preserve common-benefit funds for later distribution ). Entry of a set-aside order now before the deadline for End-Payor Class members to exclude themselves from the Class and before summary judgment will avoid uncertainty and streamline the proceedings. Although the deadline to opt out of the End-Payor Class has not yet passed, one third-party payor GEHA will presumably opt out and continue to litigate its claims independently. ECF (GEHA Amended Complaint). GEHA s counsel Lowey Dannenberg Cohen & Hart, P.C. and Rawlings & Associates, PLLC have advised this Court that they frequently represent other insurers that opt out in complex MDLs. ECF at ; see also In re Nexium (Esomeprazole) Antitrust Litig., :-md-00-wgy (D. Mass.), ECF - at Ex. B (showing that GEHA s counsel represented over 0 opt-out plaintiffs). Other third-party payors may opt out as well. To promote the efficient and orderly conduct of the litigation, the Court should enter the proposed set-aside order. CASE NO. -MD-0-WHO

14 Case :-md-0-who Document Filed 0/0/ Page of IV. CONCLUSION For the reasons stated above, EPP Class Counsel request that the Court enter an order governing the payment of attorneys fees and expenses for work performed for the common benefit of all Lidoderm end-payors with claims arising from Defendants reverse payment agreement. 0 0 DATED: June, 0 Respectfully submitted, /s/ Dena C. Sharp Daniel C. Girard (SBN ) Dena C. Sharp (SBN ) Scott Grzenczyk (SBN 0) GIRARD GIBBS LLP 0 California Street, th Floor San Francisco, CA 0 Telephone: () -00 Facsimile: () - dcg@girardgibbs.com chc@girardgibbs.com smg@girardgibbs.com /s/ Renae D. Steiner Renae D. Steiner HEINS MILLS & OLSON, P.L.C. 0 Clifton Avenue Minneapolis, MN 0 Telephone: () -0 Facsimile: () - rsteiner@heinsmills.com /s/ Sharon K. Robertson Sharon K. Robertson Donna M. Evans COHEN MILSTEIN SELLERS & TOLL PLLC Pine Street, th Floor New York, New York 000 Telephone: () - Facsimile: () - srobertson@cohenmilstein.com devans@cohenmilstein.com 0 CASE NO. -MD-0-WHO

15 Case :-md-0-who Document Filed 0/0/ Page of 0 Interim Co-Lead Counsel for Plaintiffs and the Proposed End-Payor Class Joseph R. Saveri Joshua P. Davis Andrew M. Purdy Ryan J. McEwan JOSEPH SAVERI LAW FIRM, INC. 0 Montgomery Street, Suite San Francisco, California Telephone: () Facsimile: () -0 jsaveri@saverilawfirm.com rmcewan@saverilawfirm.com Interim Liaison Counsel for Plaintiffs and the Proposed End-Payor Class ATTESTATION I, Dena C. Sharp, am the ECF User whose identification and password are being used to file this Motion for Entry of a Set-Aside Order Pursuant to Civil L.R. -(i)(), I attest under penalty of perjury that concurrence in this filing has been obtained from all counsel. 0 DATED: June, 0 /s/ Dena C. Sharp Dena C. Sharp CASE NO. -MD-0-WHO

16 Case :-md-0-who Document Filed 0/0/ Page of CERTIFICATE OF SERVICE I hereby certify that on June, 0, I electronically filed the foregoing document using the CM/ECF system, which will send notification of such filing to all counsel of record registered in the CM/ECF system. I also caused a copy of the foregoing document to be served via on counsel of record for all parties. /s/ Dena C. Sharp Dena C. Sharp 0 0 CASE NO. -MD-0-WHO