No IN THE. ALICE IVERS Petitioner, WESTERLY PHARMACEUTICALS, INC. Respondent.

Transcription

1 No IN THE ALICE IVERS Petitioner, v. WESTERLY PHARMACEUTICALS, INC. Respondent. On Writ of Certiorari to the United States Court of Appeals for the Twelfth Circuit BRIEF FOR RESPONDENT TEAM #2629

2 QUESTIONS PRESENTED 1. Do the Hatch-Waxman Amendments preempt failure to update label lawsuits against generic drug manufacturers, where the Amendments express Congress s decision to balance marginal cost over marginal safety of generic drugs, empower the FDA to establish and enforce a national standard for generic manufacturers duty of care, and where the manufacturer has updated its label? 2. Does Federal Rule of Civil Procedure 41(d) authorize district courts to award attorney s fees as part of costs, where a plaintiff voluntarily dismisses a case in one forum and refiles substantially the same complaint in another forum for improper reasons? i

3 TABLE OF CONTENTS QUESTIONS PRESENTED... i TABLE OF CONTENTS... ii TABLE OF AUTHORITIES... iv OPINIONS BELOW... 0 CONSTITUTIONAL PROVISIONS INVOLVED... 0 STATUTES, REGULATIONS, AND COURT RULES INVOLVED... 0 STATEMENT OF THE CASE... 1 SUMMARY OF THE ARGUMENT... 5 ARGUMENT... 7 I. IVERS STATE TORT LAW CLAIMS ARE PREEMPTED BECAUSE SUCH CAUSES OF ACTION INTERFERE WITH CONGRESS S REQUIREMENTS AND OBJECTIVES IN THE HATCH-WAXMAN AMENDMENTS A. There Is No Presumption Against Preemption in Regulating Generic Drug Labeling B. Ivers Defective Label Claim Must Fail Because It Would Have Been Impossible for Westerly to Design Initially a Label That Differed from That Approved for the Brand-Name Drug Without Violating Federal Law C. Ivers Failure To Update Claim Must Fail Because Congress Preempted State Tort Law Causes of Action Against Generic Drug Manufacturers That Comply With FDA Regulations State Tort Liability For Generic Drug Labeling Would Interfere With Congressional Balancing Of The Benefits And Risks Of Generic Drugs In The Marketplace Under The Hatch-Waxman Amendments To The FDCA a. Congress Enacted a Nationally Uniform Regulatory Scheme for Generic Drugs, and Liability Sounds in Federal Law, Not in State Law i. State Tort Liability Would Destroy National Uniformity in Generic Drug Regulation ii. State Tort Liability Would Allow State Juries Instead of Congress and the FDA to Balance the Benefits and Risks of Generic Drugs b. Generic Drugs Are Regulated Differently Than Brand-name Drugs to Accomplish Different Congressional Objectives Generic Drug Manufacturer Liability in Tort Would Frustrate the Primary Objective of the Hatch-Waxman Amendments a. The Hatch-Waxman Amendments Have Successfully Lowered Drug Prices and Made Life-Saving Drugs More Accessible to the Public ii

4 b. State Tort Liability Would Increase the Costs to Generic Drug Manufacturers, Dramatically Increasing Prices of Prescription Drugs II. ATTORNEY S FEES WESTERLY INCURRED DEFENDING AGAINST IVERS SUIT IN EAST TEXAS ARE TAXABLE TO IVERS UNDER RULE 41(D) BECAUSE THAT RULE ALLOWS FEE SHIFTING A. The Plain Meaning of the Word Costs Is Broad Enough to Include Attorney s Fees B. Rule 41 s Multiple Provisions Work in Concert to Empower Judges to Punish Plaintiffs Who Abuse the Judicial Process C. Rule 41(d) Allows for an Award of Attorneys Fees Under Two Exceptions to the American Rule Courts Can Use Their Inherent Power to Deter Vexatious Conduct by Awarding Attorney s Fees as Part of Costs Courts Can Look to the Underlying Statute s Definition of Costs to Resolve Whether They May Award Attorney s Fees CONCLUSION APPENDIX A...1A iii

5 TABLE OF AUTHORITIES Cases Alyeska Pipeline Serv. Co. v. Wilderness Soc y, 421 U.S. 240 (1975)... 40, 41 Andrews v. America s Living Ctrs., LLC, 827 F.3d 306 (4th Cir. 2016).. 41, 43, 44, 46 Barclays Capital Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876 (2d Cir. 2011) Behrle v. Olshansky, 139 F.R.D. 370 (W.D. Ark. 1991) Cadle Co. v. Beury, 242 F.R.D. 695 (S.D. Ga. 2007) Cent. Basin Mun. Water Dist. v. Water Replenishment Dist. of S. Cal., No. CV CAS (RZx), 2012 WL (C.D. Cal. Apr. 19, 2012) Delaware & Hudson Ry. Co., Inc. v. Knoedler Mfrs., Inc., 781 F.3d 656 (3d Cir. 2015)... 18, 22 Esposito v. Piatrowski, 223 F.3d 497 (7th Cir. 2000)... 43, 46 Esquivel v. Arau, 913 F. Supp (C.D. Cal. 1996) Farina v. Nokia, Inc., 625 F.3d 97 (3d Cir. 2010)... 20, 21 Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963) Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000). 38 Fulgenzi v. PLIVA, Inc., 711 F.3d 578 (6th Cir. 2013) Geier v. American Honda Motor Co., 529 U.S. 861 (2000) Green v. Bock Laundry Mach. Co., 490 U.S. 504 (1989) Griffin v. Oceanic Contractors, Inc., 458 U.S. 564 (1982) Hines v. Davidowitz, 312 U.S. 52 (1941)... 13, 27 Jochum v. Schmidt, 570 F.2d 1229 (5th Cir. 1978) Jones v. Sec. & Exch. Comm n, 298 U.S. 1 (1936) Key Tronic Corp. v. United States, 511 U.S. 809 (1994)... 34, 37, 40 Kimble v. Marvel Entertainment, LLC, 131 S.Ct (2015) Kurns v. A.W. Chesterton Inc., 620 F.3d 392 (3d Cir. 2010), aff'd sub nom., Kurns v. R.R. Friction Prods. Corp., 132 S.Ct (2012) Marek v. Chesny, 473 U.S. 1, 9 (1985)... passim McCann v. Bentley Stores Corp., 34 F. Supp. 234 (E.D. Mo. 1940) Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996)... 9 Morris v. PLIVA, Inc., 713 F.3d 774 (5th Cir. 2013) Mut. Pharm. Co. v. Bartlett, 133 S.Ct (2013) Oteng v. Golden Star Res., Ltd., 615 F. Supp. 2d 1228 (D. Colo. 2009) Platinum Logistics, Inc. v. Platinum Cargo Logistics, Inc., No.: 3:15-CV-617-CAB- KSC, 2015 WL (S.D. Cal. Sep. 15, 2015) PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011) Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868 (6th Cir. 2000) Sanderson v. Spectrum Labs, Inc., 248 F.3d 1159, 2000 WL (7th Cir. 2000)... 47, 48 Simeone v. First Bank Nat l Ass n, 971 F.2d 103 (8th Cir. 1992) United States v. Locke, 529 U.S. 89 (2000) United States v. Regenerative Scis., LLC, 741 F.3d 1314 (D.C. Cir. 2014) Wyeth v. Levine, 555 U.S. 555 (2009)... 14, 24 iv

6 Constitution, Statutes, Regulations and Rules 15 U.S.C C.F.R (b)(10) U.S.C. 355(e) U.S.C. 355(j)(2)(A)(v) E. Tex. Code Fed. R. Civ. P. 41(a) Fed. R. Civ. P. 41(d) Fed. R. Civ. P. 54(d) Fed. R. Civ. P. 68(d) U.S. Const. art. VI, cl Miscellaneous 2 PALMER D. EDMUNDS, FEDERAL RULES OF CIVIL PROCEDURE (1938) ALEX BRILL, FDA S PROPOSED GENERIC DRUG LABELING RULE: AN ECONOMIC ASSESSMENT (2014) CBO, EFFECTS OF USING GENERIC DRUGS ON MEDICARE S PRESCRIPTION DRUG SPENDING (2010) Costs, ANDERSON S DICTIONARY OF LAW (1889) Costs, BALLENTINE S LAW DICTIONARY (2d ed. 1948) Costs, BLACK S LAW DICTIONARY (3d ed. 1941) Costs, WEBSTER S NEW INTERNATIONAL DICTIONARY (2d ed. 1941) Dalia Buffery, Enhanced Generic Utilization Saves US Healthcare $139.6 Billion in 2009, 3 AM. HEALTH DRUG BENEFITS 274 (2010) Edward H. Hammond, Some Changes in the Preliminary Draft of the Proposed Rules of Federal Civil Procedure, 23 A.B.A. J. 629 (1937) FDA, GENERIC COMPETITION AND DRUG PRICES, o/cder/ucm htm (last updated 5/13/2015) GAO, GENERIC DRUGS UNDER MEDICARE PART D GENERIC DRUG PRICES DECLINED OVERALL, BUT SOME HAD EXTRAORDINARY PRICE INCREASES (Aug. 2016) H.R. REP (I) (1984)... 8, 16, 30 Joseph Walker, Weaker generic drug prices hit makers, wholesalers, MARKETWATCH (Aug. 5, 2017) Letter from Lamar Alexander et. al., Member of United States Congress, to Margaret Hamburg, Commissioner, Federal Drug Administration (Jan. 22, 2014) Stephen Barlas, Generic Drug Prices Take Flight, 39 PHARMACY AND THERAPEUTICS 833 (2014) Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products, 78 Fed. Reg. 219 (proposed Nov. 13, 2013) U.S. DEP T OF HEALTH & HUMAN SERVS., EXPANDING THE USE OF GENERIC DRUGS 5 (Dec. 1, 2010) v

7 OPINIONS BELOW The District Court of Illinoza s order granting judgment on the pleadings (R. at 1) is unreported. The Court of Appeals for the Twelfth Circuit s opinion (No , R. at 9) is also unreported. This Court granted certiorari on July 17, 2017, and that order is unreported (R. at 23). CONSTITUTIONAL PROVISIONS INVOLVED U.S. Const. art. VI, cl. 2, states: This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. STATUTES, REGULATIONS, AND COURT RULES INVOLVED 21 U.S.C. 355(j)(2) states in relevant part: An abbreviated application for a new drug shall contain... (v) information to show that the labeling proposed for the new drug is the same as the labeling approved for the listed drug referred to in clause (i). 21 C.F.R (b) states in relevant part: 0

8 FDA may notify the applicant, and, if appropriate, all other persons who manufacture or distribute identical, related, or similar drug products as defined in 310.6, and for a new drug afford an opportunity for a hearing on a proposal to withdraw approval of the application or abbreviated new drug application under section 505(e) of the act and under the procedure in , if the agency finds... (10) That the labeling for the drug product that is the subject of the abbreviated new drug application is no longer consistent with that for the listed drug referred to in the abbreviated new drug application. Fed. R. Civ. P. 41(d) states: Costs of a Previously Dismissed Action. If a plaintiff who previously dismissed an action in any court files an action based on or including the same claim against the same defendant, the court: (1) may order the plaintiff to pay all or part of the costs of that previous action; and (2) may stay the proceedings until the plaintiff has complied. STATEMENT OF THE CASE Brand-name pharmaceutical manufacturer GlaxoCline, LLC, developed ropidope hydrochloride ( ropidope ), a pharmaceutical treatment for Parkinson s disease, during the 1990s. R. at 2. In 1997, GlaxoCline obtained a patent on the compound and secured FDA approval to market the drug under the brand-name Equip. R. at 2. During its twenty-year patent term, GlaxoCline was the sole manufacturer permitted to sell ropidope. R. at 12. After GlaxoCline s patent 1

9 expired, Westerly Pharmaceuticals, Inc., submitted an Abbreviated New Drug Application ( ANDA ), in which it sought to market a generic version of ropidope. R. at 2. Empowered by Congress since 1984 to use the ANDA process to expedite the entry of generic drugs into the marketplace, the Food and Drug Administration ( FDA ) approved within a year Westerly s ANDA, provided that it be sold with a label identical to that of Equip. R. at 2. In 2009, Westerly began manufacturing and distributing ropidope with a matching label. R. at 2. During the period that Westerly manufactured ropidope, a doctor diagnosed Petitioner Alice Ivers, a resident of Cardozo, Illinoza, with Parkinson s disease and prescribed ropidope to treat her symptoms. R. at 1. In March 2011, Petitioner began daily consumption of the cheaper generic form of ropidope manufactured by Westerly, rather than the more expensive Equip. R. at 1. It is undisputed that at this time the label of Westerly s generic ropidope was the same as the label on the brand-name Equip, listed all known necessary warnings, and was in full compliance with FDA regulations. In June 2011, nearly three months after Petitioner began taking ropidope, and twenty-four years after ropidope entered the market, GlaxoCline modified the Equip label to reflect that new studies had revealed a possible association between ropidope use and impulse control, including compulsive gambling and spending. R. at 2. In January 2012, Westerly submitted a Changes Being Effected ( CBE ) request to the FDA to update the generic ropidope label to match the modified Equip label. R. at 2 3. Within a month Westerly had updated its label. R. at 3. 2

10 Petitioner alleges that in July 2011 she began to develop compulsive spending and gambling behaviors. R. at 3. Petitioner further alleges that she transferred the majority of her retirement savings into an online poker account. R. at 3. Over 2011 and 2012, petitioner won substantial amounts of money gambling but allegedly spent all of it and depleted her life savings. R. at 3. Petitioner believes this loss of money was caused by her use of ropidope. R. at 3. During the majority of this period of alleged spending, Westerly distributed ropidope with an updated warning label containing the risk of impulse control issues, and Petitioner does not allege that the added warning label changed her gambling or spending habits. R. at 3. Despite the fact that Westerly s ropidope label complied with the Federal Food, Drug and Cosmetic Act ( FDCA ) and matched the Equip label when Petitioner was first prescribed ropidope, as well as during the majority of the time during which she allegedly spent her life savings, Petitioner believed that the brief period in which the labels did not match proximately caused her monetary and personal damages. R. at 3. On January 15, 2013, Petitioner filed a Complaint against Westerly in the United States District Court for the Western District of East Texas. R. at 5. On February 14, 2013, the Fifth Circuit issued its opinion rejecting a similar claim in Morris v. PLIVA, Inc., 713 F.3d 774 (5th Cir. 2013); R. at 5. Less than two weeks after it became clear Fifth Circuit precedent would bar her claims, Petitioner filed a Notice of Voluntary Dismissal under Federal Rule of Civil Procedure 41(a)(1). R. at 5. 3

11 Six months later, Petitioner then filed this suit against Westerly in Illinoza state court, and Westerly timely removed the proceeding to the United States District Court for the District of Illinoza. R. at 3. Shortly thereafter, Westerly moved for judgment on the pleadings and an award of costs. R. at 3. District Judge Alan McBeal granted Westerly s motion for judgement on the pleadings and dismissed the complaint. R. at 5. Judge McBeal held that [b]ecause Plaintiff alleges that a generic drug manufacturer breached its state-law duty by failing to alter its FDA-mandated warning label, her claim is preempted, citing Morris v. PLIVA, Inc., 713 F.3d 774, 777 (5th Cir. 2013). R. at 5. Judge McBeal granted Westerly s motion for costs in part, awarding Westerly $ in court filing, copying, delivery, research, and telecommunications costs for the East Texas action, but rejecting the request for $3,442 in attorney fees. R. at 7. Citing a Northern District of California court, Judge McBeal held that Rule 41(d) does not authorize the award of fees Defendant seeks.... The Twelfth Circuit has not held otherwise. R. at 7. Petitioner appealed the district court s judgment on the pleadings to the Twelfth Circuit and Westerly cross-appealed the court s denial of attorney s fees. R. at 9. The court of appeals affirmed the district court s judgment on the pleadings, stating the state-law reasonableness standard is not congruent with the federal law on label changes, and therefore cannot be enforced. R. at 15. The appellate court noted that applying tort liability would run afoul of obstacle preemption and would contravene the intent of the streamlined ANDA process in Hatch-Waxman. 4

12 R. at It further noted that leaving reasonableness up to state law and juries would contravene the FDA s role as administrator of national drug-safety policy. R. at 16. The court of appeals also upheld the award of costs under Rule 41(d), but reversed the district court s decision not to include attorney s fees. The court joined a majority of federal appellate courts in finding that attorney s fees may be included as costs, holding [i]ncreasing the deterrent force of Rule 41(d) by including attorney s fees in the potential costs of voluntary dismissal and refiling directly serves both of these purposes and would best effectuate the Rule s intent. R. at 17. The court determined that Iver s Rule 41(a) dismissal from the Western District of East Texas plainly seeks to trade disadvantageous law in one forum for advantageous law in another and called her actions the very definition of forum shopping. R. at 17. Petitioner timely petitioned for a Writ of Certiorari, which was granted on July 17, R. at 23. SUMMARY OF THE ARGUMENT Westerly designed its label in the only manner allowable under federal law, as a mirror image of the brand-name label. As demonstrated by this Court s precedents, Westerly both could not update its label prior to a change in the brandname label and could not face tort liability for its failure to do so. Unfortunately, this legal disability meant that Westerly s generic ropidope did not contain a warning about compulsive behaviors when Petitioner began taking the drug. Within 5

13 months of the brand-name label s updated warnings, Westerly updated its label to match. Petitioner alleges that this was not soon enough, and consequently Westerly should be liable for her injury. The problem with petitioner s theory is that it allows states to determine the duty of care generic drug manufacturers owe when they update their labels to comply with the FDA requirement of sameness. When states take on this responsibility, it directly impedes Congress s objective to delegate generic drug policy authority to the FDA and to streamline regulations to lower costs on generic manufacturers and lower drug prices. The doctrine of preemption exists in order to prevent such piecemeal determination of the duty of care in compliance with a federal policy. Thus, the Twelfth Circuit and the District of Illinoza both correctly held that Petitioner s claims were preempted by federal law. The Fifth Circuit similarly concluded that federal law preempted an injured consumer s claims against a generic drug manufacturer just a few weeks after Petitioner filed her initial complaint in the Eastern District of West Texas. Just days after that decision came down, Petitioner voluntarily dismissed her case. She then brought the current suit in Illinoza. Rule 41(d) shifts the costs of an unnecessarily dismissed lawsuit from the defendant to the plaintiff when the plaintiff brings a subsequent suit. The rule s purpose is to deter plaintiffs from abusing the legal system by filing improper lawsuits. The plain language of costs at the time of the rule s adoption allows for an inclusion of attorney s fees, and indeed such a reading furthers the rules purpose of discouraging forum shopping and 6

14 vexatious litigation. The rule was in fact an effort to codify the Court s inherent powers to award fees as a part of costs in these types of situations. The Twelfth Circuit correctly held that Rule 41(d) allowed the court to award attorney s fees to Westerly as a part of costs for the dismissed action. ARGUMENT I. IVERS STATE TORT LAW CLAIMS ARE PREEMPTED BECAUSE SUCH CAUSES OF ACTION INTERFERE WITH CONGRESS S REQUIREMENTS AND OBJECTIVES IN THE HATCH-WAXMAN AMENDMENTS. The Twelfth Circuit correctly held that federal law preempted Ivers failure to warn and defective design claims because those applications of state tort law irreconcilably conflict with Congress s purpose in enacting the Hatch-Waxman Amendments. [T]he Laws of the United States... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. U.S. Const. art. VI, cl. 2. Congress enacted the Drug Price Competition and Patent Term Restoration Act, colloquially known as the Hatch-Waxman Amendments to the FDCA, to lower drug prices and increase the presence of generic drugs on the market. See R. at 14, H.R. REP (I), at 14 (1984). Any state tort liability that adds additional duties to generic drug manufacturers will either make compliance with the federal 7

15 regulations impossible or directly interfere with congressional objectives to lower generic drug prices. See R. at 16 ( Imposing additional duties of reasonableness for the process of updating would create additional compliance burdens on generic manufacturers that contravene the intent of the streamlined ANDA process in Hatch-Waxman. ) Thus, any state tort liability for a generic drug manufacturer who has complied with the FDA regulations is preempted by the Hatch-Waxman Amendments. Ivers claims are preempted under two different theories. The first is impossibility preemption, in which it is impossible to comply with both federal and state obligations. The second is objective preemption, in which the state law frustrates or impedes the objectives and purposes of a federal law. Ivers claims are preempted under both forms. A. There Is No Presumption Against Preemption in Regulating Generic Drug Labeling. As a preliminary matter, there is no presumption against preemption of state law in this case. First, there is no presumption against preemption in an area in which the federal government has consistently regulated. Second, the absence of an express preemption clause is not determinative. Rather, the purpose of Congress is the ultimate touchstone in every pre-emption case. Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (internal citations and quotations omitted). 8

16 In United States v. Locke, this Court held that an assumption of nonpreemption is not triggered when the State regulates in an area where there has been a history of significant federal presence. 529 U.S. 89, 108 (2000). In Locke the Court held that state regulations on oil tankers were preempted by uniform federal regulations on maritime commerce. Id. The Court ruled similarly in regards to fraud-against-the-fda claims. Buckman Co. v. Plaintiffs Legal Comm., 531 U.S. 341 (2000) (noting the relationship between a federal agency and the entity it regulates is inherently federal in character because the relationship originates from, is governed by, and terminates according to federal law. ). Likewise, Congress has extensively regulated the labeling of generic drugs for decades, and the field of pharmaceuticals for over a hundred years. Similar to policing fraud, policing the updating of generic drug labels is historically the role of the FDA and not the states. Petitioner may argue that the Amendments lack of a preemption clause in comparison to other sections of the FDCA conclusively demonstrates that Congress did not preempt either cause of action. However, in Buckman this Court rejected that very argument. 531 U.S. at 352 (stating neither an express pre-emption provision nor a saving clause bar[s] the ordinary working of conflict pre-emption principles ) (internal quotes and citation omitted). Therefore, neither of these two threshold arguments should impede this Court from conducting an ordinary preemption analysis. When this Court analyzes Congress s intentions in enacting the Hatch-Waxman Amendments, it will find 9

17 Congress preempted state causes of action against generic drug manufacturers for defective design and failure to update. B. Ivers Defective Label Claim Must Fail Because It Would Have Been Impossible for Westerly to Design Initially a Label That Differed from That Approved for the Brand- Name Drug Without Violating Federal Law. Ivers is preempted from pursuing any claim that Westerly initially designed its label in a defective manner, when it contained no warnings about the risk of impulsive behavior as a side-effect, because it would have been impossible for Westerly to design a label that included such warnings. State laws are preempted where compliance with both federal and state regulations is a physical impossibility for one engaged in interstate commerce. Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, (1963). In PLIVA, Inc. v. Mensing, this Court considered two cases where generic drug manufacturers were found liable under state tort law for inadequate warnings. 564 U.S. 604, (2011). This Court reversed the Fifth and Eighth Circuits, noting that [b]rand-name and generic drug manufacturers have different federal drug labeling duties. Id. at 613. While a brand-name manufacturer seeking new drug approval is responsible for the accuracy and adequacy of its label... a manufacturer seeking generic drug approval... is responsible for ensuring that its warning label is the same as the brand-name s. Id. at 613. Thus, while brand- 10

18 name drug manufacturers could face state tort liability under a failure to warn theory, 1 such claims against generic manufacturers are preempted. Id. at 618 ( We find impossibility here. It was not lawful under federal law for the Manufacturers to do what state law required of them. ) A few years later, this Court again considered whether state tort liability could attach to generic drug manufacturers whose labels matched the brand-name drug. Mut. Pharm. Co. v. Bartlett, 133 S.Ct. 2466, 2471 (2013). It held that allowing a jury to determine liability under New Hampshire law by assessing whether the risks of a generic drug outweighed the benefits, was preempted by the FDA regulations. Id. at 2476 ( Thus, federal law prohibited Mutual from taking remedial action required to avoid liability under New Hampshire law. ). This Court noted that the only way the generic manufacturer could avoid liability was to stop selling the drug and determined that this stop-selling rationale [is] incompatible with our pre-emption jurisprudence. Id. at It is undisputed that [t]he labeling on Westerly s generic ropidope [was] identical to the approved brand-name or reference-listed drug (RLD) Equip in all relevant aspects when it was introduced to the marketplace in R. at 2. In fact, similar to the defendants in PLIVA and Bartlett, Westerly could not have possibly designed any other label for ropidope and still obtain FDA approval. 21 U.S.C. 355(j)(2)(A)(v). Further, at the time Petitioner began her use of ropidope, GlaxoCline had not updated its brand-name label to reflect any danger of 1 See Wyeth v. Levine, 555 U.S. 555, 567 (2009) 11

19 compulsive behavior. Federal law therefore prevented Westerly from updating its label prior to Petitioner s use of ropidope, thus any state tort liability for design failure of the label is pre-empted as impossible under this Court s precedents. C. Ivers Failure To Update Claim Must Fail Because Congress Preempted State Tort Law Causes of Action Against Generic Drug Manufacturers That Comply With FDA Regulations. Subjecting generic drug manufacturers to liability under state tort law definitions of reasonableness directly interferes with Congress s objectives in enacting the Hatch-Waxman Amendments. A state law cannot be given effect under objective preemption when under the circumstances of [a] particular case, [state] law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Hines v. Davidowitz, 312 U.S. 52, 67 (1941). There would undoubtedly be fewer harmful side effects from prescription drugs if Congress were to increase the requirements for a new drug to come to market. Congress could increase the number of clinical tests required; it could decrease the allowable amount of side effects found in those tests. It could go to the logical extreme and make it illegal to sell any drug that has ever exhibited a side effect in any patient. But, of course, that would drive nearly all pharmaceuticals from the marketplace and leave millions of Americans without access to prescription drugs. Instead, Congress must engage in a delicate act of balancing 12

20 patient safety with patient access to life-saving drugs. This Court should hesitate to interfere with the balance Congress has struck for two reasons. First, the Twelfth Circuit correctly held that state-by-state determinations of reasonableness in updating generic drug labels would directly interfere with the FDA s role as the administrator of a nationally uniform generic drug policy. Second, state tort liability for generic drug manufacturers would contravene the purpose of the Hatch-Waxman Amendments to lower generic drug prices and make them more readily available to the public. While the FDCA was initially enacted to increase regulation of pharmaceuticals and thus increase safety (with a side effect of increased cost), Congress enacted the Hatch-Waxman Amendments to decrease regulation of generic drugs and make them cheaper and more accessible. Contrast Wyeth, 555 U.S. at 574 with H.R. REP (I), at 15 (1984). Congress made an explicit decision that the slight safety risks of decreased clinical trials for generic drugs must be tolerated to decrease the price of such drugs and ensure they are accessible to the public. This Court should not interfere with that directive by allowing juries across the states to substitute their own interpretation of how these delicate issues should be balanced for the reasoned determinations of Congress and the FDA. 1. State Tort Liability For Generic Drug Labeling Would Interfere With Congressional Balancing Of The Benefits And Risks Of Generic Drugs In The Marketplace Under The Hatch-Waxman Amendments To The FDCA. 13

21 The Hatch-Waxman Amendments were a congressional effort to create a uniform federal regulatory scheme for generic drugs under the FDCA. See United States v. Regenerative Scis., LLC, 741 F.3d 1314, 1319 (D.C. Cir. 2014). The Amendments make regulations for generic drugs purposefully different than those for brand-name drugs. They allow[] manufacturers to develop generic drugs inexpensively, without duplicating the clinical trials already performed on the equivalent brand-name drug. PLIVA, 564 U.S. at 612. As the legislative history shows, the purpose of Title I of the Bill [which became the Amendments] is to make available more low cost generic drugs by establishing a generic drug approval procedure for pioneer drugs first approved after H.R. REP (I), at 15 (1984). Congress s decision required a careful balancing of the need for patient safety and the need to keep drug prices affordable so that members of the public could benefit from them. It decided that, for generic drugs, some regulations must give way to increase drug affordability. To the extent that state tort law conflicts with this objective, it is preempted. Further, because the objectives of Congress when regulating generic drugs are different than those when regulating brand-name drugs, it is entirely logical that different preemption results occur. a. Congress Enacted a Nationally Uniform Regulatory Scheme for Generic Drugs, and Liability Sounds in Federal Law, Not in State Law. 14

22 In enacting the Hatch-Waxman Amendments Congress intended to create a nationally uniform policy encouraging generic drug manufacturers to make lifesaving drugs available on the marketplace at reasonable prices. Appellant s state law tort claims directly conflict with Congress purpose for two reasons. First, it allows the states to create their own standards for regulating generic drug manufacturers and destroys national uniformity. Secondly, it allows juries to substitute their determination of reasonable compliance with generic drug regulations for those of Congress and the FDA. Here, while state tort liability might increase the objective of safety, it would greatly undermine Congress s objective to ensure access to affordable life-saving generic drugs. Pre-emption doctrine exists to prevent state juries from interfering with the objectives of Congress in enacting a nationally uniform regulatory scheme. i. State Tort Liability Would Destroy National Uniformity in Generic Drug Regulation. The Hatch-Waxman Amendments provide a nationally uniform generic drug policy that regulates generic drug manufacturers in an efficient and consistent manner. National uniformity allows manufacturers to have increased certainty in complying with regulations, and lowers the costs required to comply with varying and possibly conflicting standards. Further, it encourages drug manufacturers to 15

23 participate in the national market as opposed to entering state markets one by one to ensure proper compliance with each state s laws. Preventing piecemeal state laws from interfering with federal objectives is one of the main purposes of preemption. For example, in the vehicular safety context, this Court has noted that preemption avoid[s] the conflict, uncertainty, cost, and occasional risk to safety itself that too many different safety-standard cooks might otherwise create. Geier v. American Honda Motor Co., 529 U.S. 861, 871 (2000). In Geier, this Court addressed a conflict between federal and District of Columbia regulations on airbags. Id. at 881. The Court held that DC requirements that cars have airbags was preempted by federal objectives to encourage a variety and mix of safety devices in cars, as it would have required all manufacturers to comply with the DC requirements to sell cars in that area. Id. The Second Circuit recognized the importance of national uniformity in protection for authors. [C]entral to the principle of preemption generally is the value of providing for legal uniformity where Congress has acted nationally. Barclays Capital Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876, 897 (2d Cir. 2011). In that case the court held that federal copyright law preempted state hot news misappropriation claims. Id. The court reasoned that piecemeal state laws would make what was perfectly permissible in one state actionable in another, which is this sort of patchwork protection that the drafters of the Copyright Act sought to prevent. Id. at

24 The Third Circuit has recognized the primary rationale for federal preemption in the field of railroad safety regulation is national uniformity. Delaware & Hudson Ry. Co., Inc. v. Knoedler Mfrs., Inc., 781 F.3d 656, 666 (3d Cir. 2015). There the court noted that preemption allows railroad carriers to abide by a single set of national equipment regulations, instead of having to meet different standards and, potentially, to change equipment when a train crosses state lines. Id; see also, Kurns v. A.W. Chesterton Inc., 620 F.3d 392, 398 (3d Cir. 2010), aff'd sub nom., Kurns v. R.R. Friction Prods. Corp., 132 S.Ct (2012) ( The goal of the LIA [Locomotive Inspection Act] is to prevent the paralyzing effect on railroads from prescription by each state of the safety devices obligatory on locomotives that would pass through many of them. (citations and internal quotation marks omitted). In the generic drug context, state tort liability for alleged label violations would lead to complex and conflicting duties of care on generic drug manufacturers that would directly interfere with Congress s goal to bring affordable pharmaceuticals to the national marketplace. It would allow each state to rebalance the tension between drug safety and drug costs leading to a patchwork of state requirements. In Illinoza the standard would be to act in a reasonable amount of time, while New Hampshire would impose strict liability, while other states could impose absolute liability. Generic Drug manufacturers could thus have to comply with fifty different standards and would have to engage in different responses in different states to avoid liability. Like trains, generic drugs travel through the 17

25 national marketplace, and manufacturers would be paralyzed by the necessity of meeting varying state standards. Furthermore, manufacturers might avoid state marketplaces that have tilted the balance in favor of consumers. For instance, they may exit the market in states that impose absolute liability. In addition, each state s patchwork of regulations could affect the market in other states. Generic drug manufacturers likely use distributors that operate in regional areas. If one state that the distributor operates in imposes absolute liability, the manufacturer might reasonably withdraw its drugs from the entire distributor to avoid liability in one state. Allowing each state to reweigh the risks and benefits of generic drugs and determine their own reasonableness for compliance frustrates Congress s intention to enact a nationally uniform generic drug policy. ii. State Tort Liability Would Allow State Juries Instead of Congress and the FDA to Balance the Benefits and Risks of Generic Drugs. Beyond imposing inconsistent regulations on generic drug manufacturers, state tort liability would also replace the FDA and Congress s balancing determination with those of state court juries. Such state-by-state rebalancing of these factors is preempted by a nationwide, congressional directive. Allowing juries to make determinations that Congress has delegated to the FDA frustrates the congressional objectives in two ways. First, it interferes with Congress s goal to 18

26 entrust the FDA with generic drug enforcement policy. Second, it interferes with objectives of the Hatch-Waxman Amendments to balance safety and drug prices in favor of lowering drug prices. First, difficult policy decisions crafted by Congress and delegated to federal agencies cannot be overthrown by state court juries. When Congress charges an agency with balancing competing objectives, it intends the agency to use its reasoned judgment to weigh the relevant considerations and determine how best to prioritize between these objectives. Allowing state law to impose a different standard permits a re-balancing of those considerations. Farina v. Nokia, Inc., 625 F.3d 97, 123 (3d Cir. 2010). For example, the Farina court found objective preemption where a class of plaintiff cell phone users sued cell phone manufacturers and service providers, alleging that radio-frequency ( RF ) emissions from cell phones violated a state standard of strict liability, even though the Federal Communications Commission ( FCC ) had approved the devices under the Telecommunications Act of Id. The court affirmed dismissal because it would have empowered states to determine reasonableness for RF emissions, which conflicted with the uniformity in regulation [that] helps ensure that adequate service is accessible throughout the country at a low cost. Id. at 124. Further, the court found that Congress had entrusted the FCC to establish a set of standards that limit RF emissions enough to protect the public and workers while, at the same time, leave RF levels high enough to enable cell phone companies to provide quality nationwide service in a 19

27 cost-effective manner. Id. at 125. Because allowing juries to impose liability on cell phone companies for claims like Farina s would conflict with the FCC s regulations and could vary from state to state, eradicating the uniformity necessary to regulating the wireless network, the court found the claims preempted. Id. at Similarly, this Court has already recognized that state juries should not substitute their own balancing determinations for those entrusted by Congress to the FDA. Buckman, 531 U.S. at 348. In Buckman, this Court held that state-law fraud-on-the-fda claims upset the somewhat delicate balance of statutory objectives enacted in the federal statutory scheme. Id. The Court recognized that the FDA must ensure both that the medical devices are reasonably safe and effective and that... [they] are on the market within a relatively short period of time and that the balance sought by the Administration can be skewed by allowing fraud-on-the-fda claims under state tort law. Id. at 348, 350. Further, [c]omplying with the FDA s detailed regulatory regime in the shadow of 50 States tort regimes will dramatically increase the burdens facing potential applicants-- burdens not contemplated by Congress in enacting the FDCA and the [Medical Device Amendments]. Id. at 350. Just as the Telecommunications Act empowered the FCC to regulate RF emissions and the Medical Device Amendments empowered the FDA to regulate medical amendments, so too the Hatch-Waxman Amendments empowered the FDA to regulate generic drugs. And like regulating RF emissions or medical devices, 20

28 regulating generic drugs requires balancing safety with efficiency. This balance must be applied in a uniform manner. Second, while Petitioners may argue that state tort liability is in harmony with the federal requirement of sameness of labels between generic drugs and their reference brand-name drug and in fact encourages compliance with federal law, this overlooks the fact that it would allow state juries to determine the reasonable standard of care for compliance with the regulations. Contrast Delaware & Hudson, 781 F.3d at 666 ( [T]he enforcement under state law of a federal standard of care does not undermine national uniformity because it does not impose conflicting regulations that a railroad must heed during interstate travel. ). Surely Congress did not intend that juries across the states would determine how generic drug manufacturers should comply with federal regulations. The mechanisms and timing of updating a generic drug label are a matter of federal policy and law, to be determined by Congress and the FDA. Indeed, the Fifth Circuit has recognized that a claim that [a generic manufacturer] breached a federal labeling obligation sounds exclusively in federal (not state) law, and is preempted. Morris v. PLIVA, Inc., 713 F.3d 774, 777 (5th Cir. 2013). The only circuit that has applied tort liability for failure to update did so when the manufacturer failed to ever update the label. Fulgenzi v. PLIVA, Inc., 711 F.3d 578 (6th Cir. 2013). The Twelfth Circuit correctly distinguished Fulgenzi from the instant case because Fulgenzi deals not with a determination of reasonableness or how to comply with the federal duty of sameness, but rather with a complete failure 21

29 to adhere to that duty. R. at 16. The trier of fact in Fulgenzi did not determine how a generic drug manufacturer must comply with federal regulations. In other words, tort liability in that case did not substitute a state jury s determination of reasonable compliance with that of the FDA. In contrast, when the trier of fact determines the reasonable time for response to a brand-name label change, then it essentially also regulates how generic drug manufacturers must comply with FDA regulations. It would be irrational to allow fifty different standards for how quickly or in what manner generic manufacturers must update their label because it would directly contravene the Hatch-Waxman Amendment s goals of streamlining the regulations for generic drugs to lower drug prices for consumers. Congress s generic pharmaceutical goal requires a uniform, federal policy not the patchwork of different standards that state tort liability would provide. b. Generic Drugs Are Regulated Differently Than Brandname Drugs to Accomplish Different Congressional Objectives. Generic drug policy involves different statutory sections, regulations, objectives and concerns than brand-name drug policy. Whereas brand-name drug regulation focuses on increased safety at the expense of cost, generic drug policy focuses on decreased cost at the potential expense of safety. This policy recognizes two major differences between brand-name drugs and generic drugs. First, brand- 22

30 name drugs enjoy high prices due to their initial monopoly on the market, whereas generic drugs sell at much lower prices. Second, brand-name drugs come to market long before generics, when risks are less likely to be known. This Court has recognized that it is beyond dispute that the federal statutes and regulations that apply to brand-name drug manufacturers are meaningfully different than those that apply to generic drug manufacturers. PLIVA, 564 U.S. at 626. It is entirely logical that different federal statutes and regulations may, as here, lead to different pre-emption results, especially where the statutes and regulations serve different purposes. Id. In Wyeth v. Levine this Court determined that state tort liability for brandname drugs was not preempted by the FDCA. 555 U.S. 555 (2009). The majority held that it appears that the FDA traditionally regarded state law as a complementary form of drug regulation to further Congress s goal in enacting the FDCA to protect the public health and assure the safety, effectiveness, and reliability of drugs. Id. at 566, 579. State tort liability for brand-name drug producers could coexist with federal drug policy because state tort liability strengthened, rather than interfered with, Congressional objectives. Whatever the merits of this decision, 2 it cannot be extended to generic drug policy. Congress regulates generic drugs differently than brand-name drugs for good reason. For instance, generic drugs only appear on the market after both the patent 2 See Wyeth, 555 U.S. at 604 (Alito, J. dissenting) ( This case illustrates that tragic facts make bad law. The Court holds that a state tort jury, rather than the Food and Drug Administration (FDA), is ultimately responsible for regulating warning labels for prescription drugs. That result cannot be reconciled with... general principles of conflict pre-emption. ). 23

31 term and exclusivity of the brand-name drug expire. This creates two fundamental differences between generic and brand-name drugs for purposes of liability. First, the brand-name drug has an extended monopoly on the market allowing the manufacturer exclusive sales for a number of years and a higher price and profit margin. Thus, Congress in enacting the FDCA placed the duty of proof of safety and efficacy on the brand-name manufacturer. State tort liability arguably does not detract from this purpose. In contrast, generic drug manufacturers must compete in the market only after the expiration of the patent, and, at that point, they must charge lower prices. To encourage generic manufacturers to enter the marketplace and to lower the cost of drugs for consumers, the Hatch-Waxman Amendments lessened the regulations generic drug manufacturers face. Thus, state tort liability, an additional burden and expense on generic manufacturers, directly interferes with Congressional generic drug policy. Second, by the time generic drugs come to market any risks are likely to have been discovered. PLIVA, 564 U.S. at 635 n.9. In fact, new risks in generic drugs are apparently so rare that the FDA has no formal regulation establishing generic drug manufacturers duty to initiate a label change, nor does it have any regulation setting out that label-change process. Id. Thus, it is reasonable to place a greater duty on the first manufacturer of the drug to enter the marketplace, i.e., the brandname manufacturer, than on those who manufacture drugs that come years later when years of additional data have been collected. The premise of the Hatch- 24

32 Waxman Amendments is that the safety risks of generic drugs are less than those of brand-name drugs due to the presence of the drug on the marketplace. To be clear, Respondents do not argue that generic drug manufacturers are not required to update their labels when the brand-name manufacturer does so. But the requirements for doing so must be determined by uniform federal law enacted by Congress or the FDA, not the states in piecemeal fashion. In fact, the FDA does have a mechanism in place to ensure generic drug manufacturers update their label: any manufacturer with a non-compliant label risks having their FDA approval revoked. 21 U.S.C. 355(e); 21 C.F.R (b)(10). Thus, federal law provides a mechanism for ensuring compliance with the duty of sameness. This Court has recognized that federal enforcement efforts of federal regulations preempt state causes of action. See Buckman, 531 U.S. at 348. Presumably, Congress and the FDA have determined that the possibility of federal enforcement action is sufficient to encourage generic manufacturers to update their labels in a reasonable time frame without driving up the cost consumers must pay for generic drugs. If this system is inadequate, it is a policy decision to be made by Congress and the FDA, not the courts. See PLIVA, 564 U.S. at 626 ( As always, Congress and the FDA retain the authority to change the law and regulations if they so desire. ) 2. Generic Drug Manufacturer Liability in Tort Would Frustrate the Primary Objective of the Hatch-Waxman Amendments. 25

33 Congress engaged in a delicate balancing act when it determined that some risk must be tolerated to ensure wide public access to affordable drugs, and this Court should hesitate before it chooses to disrupt that balance. While this Court may be sympathetic to Ms. Ivers, millions of Americans depend on affordable prescription drugs every day. If this Court tips the scales Congress has carefully balanced towards Ms. Ivers, then it also tips the scales against other generic drug consumers. Tragic accidents should not blind the Court to the vital role affordable drugs play in our healthcare system and the rationale for Congress s enactment of the Hatch-Waxman Act. If the Court increases liability for generic drug manufacturers, then it will counteract the positive effects Hatch-Waxman have had on the drug market and contribute to a dramatic increase in the price of generic drugs. This Court recognized long ago that where the federal government, in the exercise of its superior authority in this field, has enacted a complete scheme of regulation... states cannot, inconsistently with the purpose of Congress, conflict or interfere with, curtail or complement, the federal law, or enforce additional or auxiliary regulations. Hines, 312 U.S. at Congress unequivocally enacted the Hatch-Waxman Amendments to encourage generic drugs to enter the market to drive down costs. H.R. REP (I), at 15 (1984). While individuals may disagree with this policy, they should direct such disagreement to the legislature. See, e.g. Kimble v. Marvel Entertainment, LLC, 131 S.Ct. 2401, 2414 (2015) ( Kimble s real complaint may go to the merits of such a patent policy... [but] the choice of what 26

34 patent policy should be lies first and foremost with Congress.... Congress, not this Court, is the proper audience. ) a. The Hatch-Waxman Amendments Have Successfully Lowered Drug Prices and Made Life-Saving Drugs More Accessible to the Public. Tort liability for generic pharmaceutical manufacturers will frustrate Congress s objective because it will drive up costs of prescription drugs. The Hatch- Waxman Amendments were enacted to streamline the regulations on generic drugs and encourage their entry to the market to lower costs for consumers. For instance, the House Report found that generic drugs would save consumers $920 million dollars over twelve years. H.R. REP (I), at 15 (1984). The evidence demonstrates that this effort has been successful and that the decreased regulation created by the Amendments has successfully attracted generic manufacturers to the market. When generic pharmaceuticals enter the marketplace, they create savings in health care, which are realized by private citizens, insurers, as well as government healthcare organizations. U.S. DEP T OF HEALTH & HUMAN SERVS., EXPANDING THE USE OF GENERIC DRUGS 5 (Dec. 1, 2010). 3 The Congressional Budget Office estimates that generic drugs saved Medicare $33 billion in a single year. CBO, EFFECTS OF USING GENERIC DRUGS ON MEDICARE S PRESCRIPTION DRUG SPENDING 3 Available at 27

35 (2010). 4 Generics saved the entire healthcare system an estimated $139.6 billion in Dalia Buffery, Enhanced Generic Utilization Saves US Healthcare $139.6 Billion in 2009, 3 AM. HEALTH DRUG BENEFITS 274 (2010). 5 This cost savings is possible because the FDA, not state juries, regulate generic drugs and have created streamlined regulations to ease costs. The main success of Hatch-Waxman has been to increase competition in the marketplace by incentivizing generic manufacturers to enter the market. As the FDA discovered in a study of generic drugs, it is the presence of multiple generic competitors that truly drives down drug prices: FDA, GENERIC COMPETITION AND DRUG PRICES, CDER/ucm htm (last updated 5/13/2015). 4 Available at 5 Available at 28

36 Thus, the key to Hatch-Waxman s success is to maintain high levels of competition to keep prices competitive. Manufacturers can only compete in an environment of legal and regulatory certainty. This certainty would be frustrated if states are permitted to apply their own causes of action against generic drug manufacturers and thus determine reasonable standards of care in drug labeling. It is for Congress and the FDA to determine where to draw the line and dictate our federal generic drug policy, not the states. b. State Tort Liability Would Increase the Costs to Generic Drug Manufacturers, Dramatically Increasing Prices of Prescription Drugs. In order to be effective, Hatch-Waxman Amendments requires a lessened regulatory framework for generic drugs. If generic manufactures were to face tort liability, the states would effectively impose additional regulatory burdens. Additional regulation would undermine Congress s intent because it would raise drug prices for at least four reasons. First, the increased compliance costs and liability costs would directly drive up drug prices. The FDA has previously considered a rule change that would abrogate PLIVA v. Mensing s holding that generic manufacturers cannot be held accountable for the brand-name manufacturer s failure to update. Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products, 78 Fed. Reg. 219 (proposed Nov. 13, 2013). One researcher found that if 29

37 consumers could sue generic manufacturers for failing to update their labels independently of the brand-name drug, combined liability, compliance, and insurance costs could add $4 billion a year in healthcare costs. ALEX BRILL, FDA S PROPOSED GENERIC DRUG LABELING RULE: AN ECONOMIC ASSESSMENT (2014). 6 Congressional leaders wrote a letter to the FDA commissioner opposing this rule change as it would conflict directly with the statute, thwart the law s purposes and objectives, and impose significant costs on the drug industry and healthcare consumers. Letter from Lamar Alexander et. al., Members of United States Congress, to Margaret Hamburg, Commissioner, Federal Drug Administration (Jan. 22, 2014) (see Appendix A). Second, because generic manufacturers face higher levels of competition and lower profit margins, even slight increases in costs could encourage manufacturers to leave the market, which would drive up costs. As demonstrated in the previous section, the price of drugs is extremely dependent on the number of competitors in the marketplace. It is basic economics that holding demand constant the greater the supply, the lower the price. More competition thus benefits consumers. In fact, the FDA has noted that even the difference between six generic manufacturers and five leads to significant differences in cost. FDA, GENERIC COMPETITION AND DRUG PRICES, CDER/ucm htm (last updated 5/13/2015). Regulatory action that drives even 6 Available at _MGA.pdf. 30

38 a few manufacturers out of the market is likely to increase prices dramatically. See Joseph Walker, Weaker generic drug prices hit makers, wholesalers, MARKETWATCH (Aug. 5, 2017) ( But in recent years, prices for many generics increased sometimes dramatically because of market disruptions that decreased competition. ). 7 Third, if profitability decreases for generic manufacturers, competitors are likely to merge, further lessening the competition and driving up prices. See Stephen Barlas, Generic Drug Prices Take Flight, 39 PHARMACY AND THERAPEUTICS 833, (2014). 8 Despite media attention on a few exceptions where generic drug prices have spiked, on average generic drug prices have declined, and Hatch- Waxman has been successful in bringing affordable drugs to the marketplace. GAO, GENERIC DRUGS UNDER MEDICARE PART D GENERIC DRUG PRICES DECLINED OVERALL, BUT SOME HAD EXTRAORDINARY PRICE INCREASES (Aug. 2016). 9 The major driver of this decrease is competition. Id. ( Manufacturers reported that competition, determined by the price and availability of the same drug from other manufacturers, is the primary driver of generic drug prices, as less competition could drive prices higher. ). Fourth, a state-by-state scheme will drive up the costs of compliance. Further, manufacturers may be forced to pull out of certain state markets where liability and compliance costs are greatest. For example, manufacturers are likely to exit any state market with absolute or strict liability, or where states determine 7 Available at 8 Available at 9 Available at 31

39 reasonableness in a very narrow fashion. This clearly frustrates the very purpose of the Hatch-Waxman Amendments to encourage generic drug manufacturers to enter the market and make affordable life-saving drugs accessible to consumers. Because many of the costs of drug manufacturing are shared across the entire market, when drug manufacturers remove their products from some states, it will also drive up the drug prices in other markets. In conclusion, Congress has made the balancing determination of how to increase competition and drive down costs. This Court should not allow state juries to reject this congressional decision and re-weigh the costs and benefits of generic drugs. This is a difficult, complicated and controversial policy decision, and it should be made by our elected officials, not judges and juries. It is an understandable impulse to reason that when a person has been injured by a product, then a manufacturing company should pay. But the Court must pause and remember that it is the public who will pay, and the public who will lose if drugs are not accessible to those who need them. Congress has made its balancing decision, and state tort law must yield to that Congressional determination, for our constitution decrees that federal law is to be the supreme law of the land. Because Congress has created a uniform federal policy to regulate generic drug labels, state tort causes of action for drug labels are preempted. II. ATTORNEY S FEES WESTERLY INCURRED DEFENDING AGAINST IVERS SUIT IN EAST TEXAS ARE TAXABLE TO 32

40 IVERS UNDER RULE 41(D) BECAUSE THAT RULE ALLOWS FEE SHIFTING. The Twelfth Circuit correctly held that the district court may assess attorney s fees that Westerly incurred defending the ropidope litigation in East Texas. Rule 41(d) authorizes a district court to order the plaintiff to pay all or part of the costs of the previous action, where the plaintiff files successive suits alleging the same claim. Fed. R. Civ. P. 41(d). Where a statute evinces an intent to provide for [attorney s] fees as part of costs, a court may do so. Key Tronic Corp. v. United States, 511 U.S. 809, 815 (1994). Because [c]osts awarded under Rule 41(d)... are intended to serve as a detriment to forum shopping, Rule 41(d) evinces an intent for an expansive definition of costs that encompasses attorneys fees. Simeone v. First Bank Nat l Ass n, 971 F.2d 103, 108 (8th Cir. 1992). Three separate grounds support the conclusion that Rule 41(d) embraces a definition of costs that may include attorney s fees. First, the plain meaning of the word costs is broad enough to include litigation-related expenses, such as attorney s fees. Second, the various sections of Rule 41 should be interpreted as a concerted effort to curb abuses to the judicial process perpetrated by plaintiffs. Third, this Court s prior decisions, as interpreted by the lower courts, suggest Rule 41 allows for an award of attorney s fees because it fits into one of the exceptions to the American rule that parties are generally responsible for their own expenses unless otherwise specified by statute. Specifically, through Rule 41(d) Congress either has empowered courts to use their inherent powers to deter vexatious conduct or has 33

41 instructed courts to look to an underlying substantive statute to determine whether they have the authority to tax fees to deter vexatious conduct. A. The Plain Meaning of the Word Costs Is Broad Enough to Include Attorney s Fees. The word costs as it appears in Rule 41(d) may include attorney s fees because costs, at the time of the Rules adoption, was understood to encompass all expenses incurred by litigants. When a court interprets a statute, it is called upon to give effect to the will of Congress, and where its will has been expressed in reasonably plain terms, that language must ordinarily be regarded as conclusive. Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570 (1982) (internal quotations omitted). However, when a term is ambiguous, the Court must then seek guidance from the legislative history and the Rules overall structure. Green v. Bock Laundry Mach. Co., 490 U.S. 504, 508 (1989). When the Federal Rules of Civil Procedure achieved the force of congressionally enacted law, the word costs was generally understood to include component subsets of expenses. A general-audience dictionary published three years after the Rules implementation broadly defines costs as an aggregate; they are [e]xpenses incurred in litigation, as: (a) Those payable to the attorney or counsel by his client, especially when fixed by law; commonly called fees....(b) Those given by the law or the court to the prevailing against the losing party. Costs, WEBSTER S NEW INTERNATIONAL DICTIONARY (2d ed. 1941). Legal dictionaries of the era also 34

42 reflect the aggregation of expenses. Ten years after the Rules implementation, Ballentine listed only two entries under costs, the expenses of litigation as between litigants, and statutory allowances to a party to an action for his expenses incurred in the action and having reference only to the parties and the amounts paid by them. Costs, BALLENTINE S LAW DICTIONARY (2d ed. 1948). While some contemporary legal dictionaries distinguished costs from fees, those authorities frequently explained how attorney s fees could be subsumed as costs. For instance, Anderson, in 1889, illustrated his definition of costs through a case abstract that concludes about a lawyer s fees, disbursements, and expenses incurred by a prevailing party, when these united sums are taxable in the case they constitute the costs for which [a losing party] is liable. Costs, ANDERSON S DICTIONARY OF LAW (1889) (emphasis added). One legal dictionary published three years after the promulgation of the Rules noted, [t]he word costs is frequently understood as including attorney s fees. Costs, BLACK S LAW DICTIONARY (3d ed. 1941). The Rules themselves illustrate this point. Like Rule 41(d), Rule 54(d) originally included an undefined reference to costs. In 1993, the Advisory Committee updated and further subdivided Rule 54(d) to clarify how costs included two components, costs other than attorney s fees and attorney s fees. Fed. R. Civ. P. 54(d). The plain meaning of costs thus admits attorney s fees. Courts that have refused to include attorney s fees as part of Rule 41(d) costs have done so on the 35

43 basis that the rule does not contain an explicit statutory grant of attorney s fees. E.g., Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 874 (6th Cir. 2000). The explicitness requirement, however, should not be elevated to a search for magic words. Key Tronic Corp., 511 U.S. at 823 (Scalia, J., dissenting). The word costs can still have plain meaning even where it does not include a definition that contains the magic words attorney s fees. Marek v. Chesny, 473 U.S. 1, 9 (1985). See also Cadle Co. v. Beury, 242 F.R.D. 695, (S.D. Ga. 2007) (observing that the Rogers court s reasoning mirrored the dissent s in Marek). However, even if this Court finds the term was ambiguous when promulgated by the Advisory Committee and given the force of law by Congress, the purpose of Rule 41(d), its legislative history, and its functions in the context of the Rules all support the Twelfth Circuit s reading of the Rule. B. Rule 41 s Multiple Provisions Work in Concert to Empower Judges to Punish Plaintiffs Who Abuse the Judicial Process. If the plain meaning of costs is ambiguous, this Court should decide its meaning in the context of Rule 41 s framework to derogate a plaintiff s common-law right to dismiss a cause of action without consequences. Courts should interpret a statute as a symmetrical and coherent regulatory scheme and fit, if possible, all parts into an harmonious whole, Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (internal quotation marks and internal citations omitted). 36

44 Two years prior to the adoption of the Rules, this Court described a plaintiff s common-law right to dismiss a complaint voluntarily as unqualified... unless some plain legal prejudice will result to the defendant other than the mere prospect of a second litigation upon the subject matter. Jones v. Sec. & Exch. Comm n, 298 U.S. 1, 19 (1936). The framers of Rules specifically characterized the new Rule 41 as a departure from this tradition. For example, in a 1937 address to the Judicial Conference of the Fourth Circuit, a staff attorney from the Rules Advisory Committee explained how what became Rule 41 moved away from the common law position: The rule on dismissal of actions has been redrafted. Without leave of court or the consent of the other parties, a plaintiff may not dismiss without prejudice,... and he can only do that once. Under the preliminary draft [a plaintiff] could dismiss at any time before the introduction of evidence and as many times as he wanted to. After an answer has been served, under the new draft, the court can dismiss at the plaintiff s instance without prejudice, imposing terms and conditions if it sees fit.... Edward H. Hammond, Some Changes in the Preliminary Draft of the Proposed Rules of Federal Civil Procedure, 23 A.B.A. J. 629, 632 (1937) (emphasis added). The staff attorney further underscored how the Rules would further derogate the plaintiff s absolute right to dismiss when he announced that the proposed rule added a provision giving the court power to require a plaintiff to pay the costs of an action previously dismissed by him and to stay proceedings in the new action until he pays. Id. at 633. Since the adoption of the Rules, courts interpreting Rule 41(a)(2) have consistently held that attorney s fees may, at a court s discretion, be part of the 37

45 terms of voluntary dismissal and have recognized the change in policy that it effectuated. See Fed. R. Civ. P. 41(a). See also, e.g., Jochum v. Schmidt, 570 F.2d 1229, 1232 (5th Cir. 1978) (upholding a district court s condition that plaintiff pay defendant s attorney s fees as a condition of dismissal without prejudice because it would be grossly inequitable to allow the defendant to suffer the duplicative costs and fees ). In McCann v. Bentley Stores Corp., decided two years after the adoption of the Rules, a district court included attorney s fees as part of the conditions for a voluntary dismissal. 34 F. Supp. 234, 234 (E.D. Mo. 1940). In explaining its decision, the court praised the newly adopted Rule 41 noting how subdivision (a) has done much to put an end to that evil... [where] a defendant is damaged by being dragged into court and put to expense with no chance whatever (if there is a dismissal without prejudice) of having the suit determined in his favor. Id. (parenthetical in original). Similarly, subdivision (d) works in tandem with subdivision (a)(2) to punish voluntary dismissals under (a)(1) where the vexatious conduct occurs on the filing of the second suit. As a commentator to the 1938 edition of the Rules noted, Subdivision (d) is obviously designed to punish a plaintiff who has once dismissed an action and commenced it again. 2 PALMER D. EDMUNDS, FEDERAL RULES OF CIVIL PROCEDURE 1190 (1938). This Court should interpret Rule 41(d) costs to allow attorney s fees as part of costs to harmonize the subdivisions of Rule 41 that have a punitive and curative purpose. 38

46 C. Rule 41(d) Allows for an Award of Attorneys Fees Under Two Exceptions to the American Rule. A district court applying subdivision (d) to award costs to Westerly could include attorney s fees under two exceptions to the American rule that each party must bear its own costs of litigation. [A]ttorney s fees generally are not a recoverable cost of litigation absent explicit Congressional authorization. Key Tronic, 511 U.S. at 815. First, the district court, having found bad faith on the part of Ivers, may invoke subdivision (d) to award attorney s fees under unquestionabl[e] assertions of inherent power in the courts. Alyeska Pipeline Serv. Co. v. Wilderness Soc y, 421 U.S. 240, 258 (1975). Second, the district court may award attorney s fees because Ivers originally filed suit in East Texas, a jurisdiction where the legislature had abrogated the American rule, and the underlying statute defines costs to include attorney s fees. Marek, 473 U.S. 1 at Courts Can Use Their Inherent Power to Deter Vexatious Conduct by Awarding Attorney s Fees as Part of Costs. Because Ivers back-to-back lawsuits indicate forum shopping, a court may award attorney s fees to Westerly for Ivers first action because a court has the inherent power to punish abuses of the judicial process. Congress has not repudiated [certain] judicially fashioned exceptions to the general rule against allowing substantial attorney s fees, which emanate from unquestionabl[e] 39

47 assertions of inherent power in the courts to allow attorneys fees in particular situations.... Alyeska, 421 U.S. at Among these assertions of inherent power that Congress has not repudiated, [a] court may..., within its discretion, award attorneys fees where it makes a specific finding that the plaintiff has acted, in bad faith, vexatiously, wantonly, or for oppressive reasons. Andrews v. America s Living Ctrs., LLC, 827 F.3d 306, 311 (4th Cir. 2016) (quoting Alyeska, 421 U.S. at ). For example, a federal court in Colorado exercised its inherent power to tax the costs of a previous action, including attorney s fees, to a plaintiff shareholder who voluntarily dismissed his direct and derivative actions and then refiled them in another jurisdiction. Oteng v. Golden Star Res., Ltd., 615 F. Supp. 2d 1228, 1241 (D. Colo. 2009). In Oteng, the plaintiff stockholder claimed that he voluntarily dismissed his previous action in the District of Columbia and refiled his complaint in Colorodo, where the foreign corporation defendant allegedly had its principal place of business, after he realized that Defendants' filings with the SEC were not as extensive as [he] thought. Id. The court found this reasoning a weak basis for trying to have asserted [the District of Columbia court s] jurisdiction in the previous case. Id. Furthermore, the court analyzed the complaints filed in both actions, and it found the new complaint tracked almost verbatim the previous complaint. Id. On these grounds, the court decided to award costs from the D.C. litigation, including attorney s fees, to the defendant before the Colorado litigation could continue. Id. 40

48 Similarly, when a plaintiff novelist refiled a complaint concerning property rights in cinematic adaptations of her novels, a federal court in California held her conduct warranted a 41(d) award of costs including attorney s fees before her suit could continue. Esquivel v. Arau, 913 F. Supp. 1382, 1388 (C.D. Cal. 1996). In that case, the author voluntarily dismissed her complaint in the Southern District of New York after the defendants had filed a motion to dismiss based on the court s lack of personal jurisdiction over the parties. Id. at Even though the plaintiff s California complaint included several new claims, the court found that her choice to refile in California constitute[d] blatant forum shopping, Id. at 1386, and evinced a recognition that her suit in the Southern District was vulnerable on the grounds asserted in the motion. Id. at Specifically, the court noted that the litigation had no significant ties to the original forum, neither party is a citizen or resident of New York, the complaint made no allegations of acts taking place in New York, and none of the witnesses or documents are in New York. The court held that the plaintiff s forum shopping led to the defendants incurr[ing] needless expenditures, which could be offset with a Rule 41(d) award including attorney s fees. Id. at Even in cases where the initial and subsequent forums may both appropriately exercise personal jurisdiction, courts have held that fees may be appropriate where a plaintiff forces a defendant to engage in fruitless litigation. E.g., Behrle v. Olshansky, 139 F.R.D. 370, 374 (W.D. Ark. 1991). As an example, the Seventh Circuit affirmed a lower court s ruling that a pre-trial detainee s successive 41

49 1983 claims against a jailhouse nurse warranted an award of attorney s fees. Esposito v. Piatrowski, 223 F.3d 497, 501 (7th Cir. 2000). In Esposito, the plaintiff detainee stipulated to dismiss without prejudice his claim against a particular nurse in his original complaint. Id. at 498. He thereafter filed a second action against the same nurse alleging the same constitutional violations. Id. The appellate court affirmed the trial court s ruling that the second action be stayed until the detainee paid the defendant nurse s costs in the first litigation, inclusive of attorney s fees. Id. at 502. In contrast, the Fourth Circuit held that a plaintiff in an employment discrimination case did not act vexatiously, and thus should not be taxed her opponent s attorney s fees when she refiled a much more detailed complaint in the same district. Andrews, 827 F.3d at 314. In Andrews, the plaintiff had missed the twenty-one day deadline that allowed her to unilaterally amend her complaint. Id. at 308. The court of appeals found that the magistrate judge led the plaintiff to believe reasonably that the plaintiff s choice to dismiss and refile a more detailed complaint would avoid a situation where the plaintiff would have to expose herself to the magistrate s possible adverse ruling on whether to deny the plaintiff leave to amend the complaint on account of futility. Id. at 313. The appellate court affirmed the lower court s power to include attorney s fees as part of a rule 41(d) award of costs. Id. at 311. However, the appellate court held that district court abused its discretion to award those costs because plaintiff had engaged in neither forum shopping nor other vexatious conduct. Id. 42

50 In the instant case, Ivers chose to file her original complaint in East Texas. Like the plaintiffs in Oteng and Esquivel, Ivers choice of forum is suspect. Neither Ivers nor Westerly are citizens or residents of East Texas, and none of the acts alleged in Ivers complaint ostensibly occurred in East Texas. Westerly is incorporated in Texas and has its principal place of business in New Jersey. Both Oteng and Esquivel demonstrate that a plaintiff s mistake of an appropriate forum is a cost that a federal court may equitably shift back to the plaintiff. Esquivel also suggests that a court may use a 41(d) award of costs to punish a plaintiff whose conduct suggests that she has chosen a jurisdiction under the impression that its laws are hospitable to her claim. Here, the district court noted in its opinion that Ivers dismissed her suit immediately after the Fifth Circuit handed down a decision that created negative binding precedent relating to one of Ivers claims. R. at 5. Furthermore, as the Esposito and Andrews courts holdings demonstrate, vexatious behavior that gives rise to a 41(d) award of attorney s fees is not limited to forum-related abuses of justice. Here, as in both those cases, Ivers initial litigation had not progressed much further than the filing of an initial complaint before she filed notice of her voluntary dismissal. The plaintiff s conduct after dismissing the initial complaint created a situation where either the defendant reasonably could have expected the litigation not to continue, as in Esposito, or to continue immediately but with a substantially modified claim, as in Andrews. Here, Ivers waited two years and then filed substantially the same claim. And just as the 43

51 Esposito court held, such conduct constitutes vexatious behavior that gives rise to the court s power to use 41(d) to authorize an award of attorney s fees. 2. Courts Can Look to the Underlying Statute s Definition of Costs to Resolve Whether They May Award Attorney s Fees. The Illinoza district court could have discretionarily awarded Westerly attorney s fees because East Texas law expressly defines them as part of a litigant s costs. When a federal rule refers to costs without defining that term, courts should look to how the underlying statute defines costs to determine what may be included in those costs. Marek, 473 U.S. at 9. For example, this Court held in Marek that Rule 68 costs in a civil rights lawsuit included attorney s fees because the civil rights statute giving rise to a right of recovery defined costs as including attorney s fees. Id. at 11. Rule 68 encourages parties to settle by shifting any costs incurred to a prevailing party that has refused a settlement offer [i]f the judgment that the offeree finally obtains is not more favorable than the unaccepted offer.... Fed. R. Civ. P. 68(d); see Marek, 473 U.S. at 5. In Marek, the executor of a man wrongfully killed by policemen recovered at trial a money judgment that was smaller than what the policemen had offered as a settlement. Id This Court reasoned that because 42 U.S.C. 1988, the statute giving rise to a right of recovery for costs in civil rights suits, included reasonable attorney s fees in its definition of costs, then the attorney s fees were 44

52 subject to Rule 68 s cost-shifting provisions. Id. at 9. The court rejected the dissent s notion that Rule 68 s cost-shifting provisions could not be applied in favor of a civil rights defendant merely because the civil rights statute would not have allowed the defendant to recover attorney s fees. Id. at 11. See also id. at 22 (Marshall, J., dissenting) (criticizing the majority s Rule 68 cost-shifting approach because outside of such a context case law would prohibit a prevailing civil rights defendant from recovering attorney s fees unless it can show a plaintiff s bad faith.). Instead, this Court reasoned that Section 1988 encourages plaintiffs to bring meritorious civil rights suits; Rule 68 simply encourages settlements. There is nothing incompatible between these two objectives. Id. at 11. Although federal appellate courts have purportedly extended the Marek Court s reasoning to Rule 41(d) contexts, they have frequently misapplied the precedent because they have focused not on the statutory definition of costs but the statutory recipient of costs. Esposito, 223 F.3d at 501; Andrews, 827 F.3d at For example, the Fourth Circuit in Andrews examined the Fair Labor Standards Act ( FLSA ), to determine which costs a defendant employer might recover after a plaintiff voluntarily dismissed her first suit and filed a second suit alleging the same claims. 827 F.3d at , 312. Even though FLSA includes attorney s fees in its definition of costs, the court held that because the statute is silent as to attorneys' fees in suits where the defendant prevails... an award of attorneys' fees on a statutory basis would be improper. Id. at 312. The court thus erroneously applied Marek to stand for the proposition that costs are defined based on the 45

53 purpose of the underlying statute, whereas Marek stands for the proposition that when the term costs is ambiguous or undefined by the rule, costs should be defined by the statute. The Esposito/Andrews analysis conflates how a statute defines costs with a statute s requirements for obtaining those costs. However, courts have successfully separated these two inquiries when deciding Rule 41(d) motions in other cases. See, e.g. Sanderson v. Spectrum Labs, Inc., 248 F.3d 1159, 2000 WL , at *1 (7th Cir. 2000) (unpublished); Platinum Logistics, Inc. v. Platinum Cargo Logistics, Inc., No.: 3:15-CV-617-CAB-KSC, 2015 WL (S.D. Cal. Sep. 15, 2015). In Sanderson, the Seventh Circuit affirmed a district court s award of costs including attorney s fees in a case where a plaintiff brought successive Lanham Act claims. Sanderson, 2000 WL , at *1. Under the Lanham Act only a prevailing party is entitled to costs, including fees, and only in exceptional cases. See 15 U.S.C. 1117; Cent. Basin Mun. Water Dist. v. Water Replenishment Dist. of S. Cal., No. CV CAS (RZx), 2012 WL , at *1 (C.D. Cal. Apr. 19, 2012) (defendants could not seek costs including attorneys' fees under Lanham Act because voluntary dismissal without prejudice did not confer prevailing party status on defendants). However, as the Sanderson court noted, the defendant did not need to achieve prevailing party status to receive costs through a Rule 41(d) motion. Sanderson, 2000 WL , at *5. The court could award attorney s fees because the Lanham Act defined costs as inclusive of fees, and the plaintiff s second 46

54 complaint raised the same Lanham Act claim against [the defendant] as his first complaint did.... Id. In this case, the relevant inquiry is not whom the East Texas Code would allow to recover costs because Rule 41(d) sets out the qualifications for whom may recover. Rather, the relevant inquiry is merely whether the term costs includes fees, as defined by East Texas Product Liability Law. As Marek illustrates, a court may apply a federal rule s cost-shifting provisions to deny plaintiffs the attorney s fees they otherwise would have been granted. Thus, where the underlying statute defines costs for the plaintiff s benefit in one context, the definition applies to their detriment in another. Furthermore, this application of the East Texas Product Liability Law s definition of costs is fully compatible with Rule 41(d). The East Texas statute defines costs to include attorney s fees, probably to encourage plaintiffs to bring suit. E. Tex. Code ( [T]here shall be taxed and allowed to the plaintiff, as part of the costs of the action, a reasonable amount to be fixed by the court as attorney s fees. ). Rule 41(d) exists to discourage vexatious litigation and forum shopping by shifting costs onto the plaintiff for the unnecessary suit. As this Court said, application of Rule 68 will require plaintiffs to think very hard about whether continued litigation is worthwhile ; likewise application of Rule 41(d) will require plaintiffs to think very hard about bringing vexatious litigation. Marek, 473 U.S. at

55 Petitioner chose to bring her first cause of action in the Western District of East Texas where the relevant substantive laws define costs as including attorney s fees. Thus, when she dismissed her claims to seek a more advantageous forum, Rule 41(d) authorized the District Court to award reasonable attorney s fees for defending the frivolous action. The district court could properly award Westerly attorneys fees from the East Texas litigation under either of these interpretations of subdivision (d). Under the first interpretation, the district court could use its inherent power, which the Advisory Committee codified in Rule 41, to remedy an inequity. Under the second interpretation, the district court could use the discretion entrusted to it by the Advisory Committee to look to the underlying statute to determine whether it authorized a departure from the American rule. This court should thus affirm the Twelfth Circuit s holding regarding the availability of attorney s fees under subdivision (d) or affirm its judgment on the alternate grounds that the East Texas Product Liability statute s definition of costs authorizes a departure from the American rule. 48

56 CONCLUSION For the foregoing reasons this Court should affirm the Twelfth Circuit s rulings affirming both the judgment on the pleadings dismissing Plaintiff s complaint the award of costs, including attorney s fees, to the defendants under Rule 41(d). TEAM #2629 COUNSEL FOR RESPONDENTS 49

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