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In re Lidoderm Antitrust Litigation

United States District Court, N.D. California

August 9, 2016

IN RE LIDODERM ANTITRUST LITIGATION

          ORDER ON MOTIONS FOR PRODUCTION OR PRECLUSION AND PRODUCTION OF ATTORNEY NOTES RE: DKT. NOS. 462, 463, 472, 473, 476, 478, 490, 491

          WILLIAM H. ORRICK UNITED STATES DISTRICT JUDGE

         Attorney-client privilege issues lie at the heart of litigation over a settlement alleged to be anticompetitive when a party’s lawyers are the principal negotiators and advisors regarding the agreement. That party cannot testify to its subjective beliefs about the reasons for entering into the settlement and preclude its adversaries from discovering the content of the lawyers’ advice by simply asserting that the attorney-client advice was irrelevant to those subjective beliefs. Instead, when the record shows that attorney-client advice played a significant role in formulating a party’s subjective beliefs on central issues in the case, the adversaries are entitled to disclosure of the otherwise privileged material to test the credibility of those subjective beliefs. But if a party relies solely on objective evidence, or subjective beliefs derived exclusively from business judgment and experience, the attorney-client privilege should be protected.

         Currently before me are two motions: (i) plaintiffs’ renewed motion for production or preclusion, arguing that defendants have put “at issue” subjective beliefs requiring defendants to either waive attorney-client privilege for related information or be precluded from raising the beliefs on summary judgment or trial; and (ii) plaintiffs’ motion to compel Endo to produce the notes of former General Counsel Caroline Manogue regarding the negotiations of the Watson settlement. Each motion raises multiple issues of privilege. On the record developed in discovery, I GRANT in part and DENY in part each motion.

         DISCUSSION

         I. PLAINTIFFS’ RENEWED MOTION FOR PRODUCTION OR PRECLUSION

         Last fall, plaintiffs argued that defendant Endo put “at issue” attorney-client communications by relying on subjective beliefs informed by its counsel with respect to testimony Endo gave to the Federal Trade Commission. At that juncture of the case, prior to the depositions of defendants and “in light of Endo’s express disclaimer of any intent to rely on its subjective belief, ” I declined to find “that Endo has broadly placed at issue unidentified documents and communications that would normally be protected by the attorney-client or work product doctrines.” December 3, 2015 Order at 3. I invited plaintiffs, as the case progressed, to “reassert the waiver issue with respect to specifically identified documents or communications so that I may rule on discrete waiver assertions.” Id.

         Disputes precipitated by the breadth of defendants’ privilege assertions - unsurprising given the subject matter of this case - and the unsettled question of what exact subjective beliefs defendants intend to rely on to defend the Watson settlement have occurred since.[1] In order to provide finality and clarity on the issue, following the April 5, 2016 Case Management Conference I ordered defendants to identify all subjective beliefs that they intend to introduce or rely on at trial on the following topics:

(a) Endo’s assessment of the strength of the relevant patents and its expectations concerning the outcome of the patent litigations;
(b) Endo’s reasons, explanations and intentions for the Payments, and its beliefs about the impact the Payments would have on competition;
(c) Endo’s beliefs about Watson’s final ANDA approval and an at-risk launch by Watson;
(d) Endo’s reasons or incentives, if any, for agreeing to a generic entry date before September 2013;[2] and
(e) Endo’s intention to launch an authorized generic version of Lidoderm.

Defendants did so.[3] Plaintiffs renewed their motion, arguing that defendants’ reliance on the identified subjective beliefs means they have placed “at issue” attorney-client privilege information that in fairness must either be disclosed or defendants should be precluded from relying on the particular subjective beliefs as this case goes forward. Plaintiffs support their motion by showing how, when defendants’ major trial witnesses were deposed, those witnesses relied on assertions of attorney-client privilege to refuse to answer questions regarding topics disclosed under (a) through (e) above. Plaintiffs also rely on the descriptions included in defendants’ privilege logs to demonstrate that numerous documents have been withheld under the attorney-client privilege that expressly implicate the subjective beliefs defendants intend to rely on.

         As discussed in more detail below, given the evidence plaintiffs have presented showing that defendants actually relied on attorney advice in reaching their subjective beliefs, I conclude that defendants will be precluded from relying on specific subjective beliefs unless they choose to waive the privilege as to communications and information regarding the same. This does not mean that defendants will be unable to rely on any evidence with respect to those topics or defenses. Defendants may rely on objective evidence from experts that does not cross into what defendants believed or why defendants were motivated to agree to certain terms in the Watson settlement.

         A. Legal Standard

         Plaintiffs argue that a topic becomes “at issue” and creates an implied waiver of the attorney-client privilege when “in fairness” the privileged information should be disclosed so the other side can refute a claim or defense. Defendants counter that at issue waiver only occurs when a party makes an affirmative choice to rely on attorney advice for a claim or defense. Plaintiffs’ formulation is slightly overbroad and defendants’ is too narrow.

         “The privilege which protects attorney-client communications may not be used both as a sword and a shield. Where a party raises a claim which in fairness requires disclosure of the protected communication, the privilege may be implicitly waived.” Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992) (internal citation omitted); see also Kaiser Found. Health Plan, Inc. v. Abbott Labs., Inc., 552 F.3d 1033, 1042 (9th Cir. 2009). In Bittaker v. Woodford, 331 F.3d 715 (9th Cir. 2003), the Ninth Circuit explained “[i]n practical terms, this means that parties in litigation may not abuse the privilege by asserting claims the opposing party cannot adequately dispute unless it has access to the privileged materials. The party asserting the claim is said to have implicitly waived the privilege.” Id. at 719. However, the “court imposing the waiver does not order disclosure of the materials categorically; rather, the court directs the party holding the privilege to produce the privileged materials if it wishes to go forward with its claims implicating them. The court thus gives the holder of the privilege a choice: If you want to litigate this claim, then you must waive your privilege to the extent necessary to give your opponent a fair opportunity to defend against it.” Id. at 720.[4]

         In the Ninth Circuit, the standard for determining when an implied waiver of the attorney-client privilege occurs is set out in Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975). See Home Indem. Co. v. Lane Powell Moss & Miller, 43 F.3d 1322, 1326 (9th Cir. 1995).

Under Hearn, an implied waiver of the attorney-client privilege occurs when (1) the party asserts the privilege as a result of some affirmative act, such as filing suit; (2) through this affirmative act, the asserting party puts the privileged information at issue; and (3) allowing the privilege would deny the opposing party access to information vital to its defense.

Id. at 1326.

         Plaintiffs rely heavily on United States v. Amlani, 169 F.3d 1189 (9th Cir. 1999). There, the district court found that defendant impliedly waived the attorney-client privilege with respect to communications involving him, his wife, his current counsel, and his former counsel by asserting a claim of attorney disparagement in the appeal of his conviction and sentence. Amlani’s claim for disparagement was based on allegations that the government deprived him of his Sixth Amendment right to counsel when the prosecutor intentionally undermined his confidence in his chosen counsel by disparaging Amlani’s counsel in front of him. Id. at 1191. The district court found that Amlani waived the privilege and allowed the government to investigate the claim by issuing subpoenas and seeking the testimony of defendant, his wife, and his counsel into the circumstances surrounding the substitution of new counsel.

         The Ninth Circuit affirmed, applying the Hearn test. It concluded that Amlani put the circumstances at issue by claiming disparagement and prejudice from having to substitute in new counsel as a result, and that the government “demonstrated a real need for the evidence, especially in deciding the question of whether the allegedly disparaging statements caused Amlani to seek new counsel.” Id. at 1195. The court recognized that privileged communications “do not become discoverable simply because they are related to issues raised in the litigation” and that when the sought-after evidence is only one of several forms of indirect evidence about an issue, the privilege has not been waived. Id. But it explained that “fairness” required the disclosure because to defend against defendant’s claim, “the government must have access to” the communications at issue. Id.

         As the court explained, other potential sources of evidence on the issue would be “of little, if any, value in evaluating whether the prosecutor’s statements caused Amlani to retain other counsel. If the government has no access to the subpoenaed documents and other communications because of the privilege, it would be forced to rely almost exclusively on Amlani’s and Katz’s characterization of events.” Id. at 1196. Therefore, “[i]n fairness, to defend against these charges, the government must have access to Amlani’s communications with counsel to determine whether in fact the disparaging comments caused the substitution of counsel.” Id.; see also Apple Inc. v. Samsung Elecs. Co., 306 F.R.D. 234, 243 (N.D. Cal. 2015) (when defendant attempted to defeat sanctions related to an inadvertent disclosure of confidential materials relying on and submitting for in camera review its own privileged documents, it went beyond “mere denials” and its “use placed the privileged information at issue while improperly limiting Apple and Nokia’s ability to assess or challenge these assertions. This waived privilege.”); Landmark Screens, LLC v. Morgan, Lewis & Bockius LLP, No. C08-02581 JF (HRL), 2009 U.S. Dist. LEXIS 102579, at *7-8 (N.D. Cal. Oct. 21, 2009) (where plaintiff put at issue fact of when it became aware of the alleged fraud by alleging tolling of the statute of limitations, “[i]nformation that shows when Landmark discovered the alleged fraud would therefore be vital to MLB’s defense, and the Hearn test is met.”); Rambus Inc. v. Samsung Elecs. Co., No. C-05-02298 RMW, 2007 U.S. Dist. LEXIS 97619, at *13 (N.D. Cal. Nov. 13, 2007) (because defendant asserted tolling of statute of limitations to when it discovered former employee’s fraud counterclaim, implied waiver was found as to relevant communications); cf. Chevron Corp. v. Donziger, 2013 U.S. Dist. LEXIS 168187, at *9, *11 (S.D.N.Y. Nov. 21, 2013) (following Hearn and considering whether it would “be unfair for a party asserting contentions to an adjudicating authority to then rely on its privileges to deprive its adversary of access to material that might disprove or undermine the party’s contentions” and concluding “implied waiver may be found where a party puts a claim or defense at issue that in fairness requires disclosure of privileged material, whether or not the privileged material explicitly was relied upon in making the claim or defense.”).

         Contrary to defendants’ position, the actual use of attorney client information in prosecuting or defending this case is not necessary to effect an implied waiver under Hearn. Cf. Bowne, Inc. v. AmBase Corp., 150 F.R.D. 465, 488 (S.D.N.Y. 1993) (concluding defendant waived privilege for communications by asserting it was not at fault for a missed proxy statement mailing; “[t]he implicit point was that even if a party does not attempt to make use of a privileged communication, he may waive the privilege if he asserts a factual claim the truth of which can only be assessed by examination of a privileged communication.”); but see DR Distributors, LLC v. 21 Century Smoking, Inc., No. 12 CV 50324, 2015 WL 5123652, at *7 (N.D. Ill. Sept. 1, 2015) (following 7th Circuit’s adoption of Rhone-Poulenc Rorer, Inc. v. Home Indemnity Company, 32 F.3d 851, 863 (3rd Cir.1994), and noting that “privilege is waived when the advice is affirmatively used to establish a claim or defense”); Sorensen v. Black & Decker Corp., No. 06CV1572BTM (CAB), 2007 WL 1976652, at *2 (S.D. Cal. Apr. 9, 2007) (following Rhone-Poulenc Rorer).[5]

         That said, a simple showing of relevance to a case will not suffice. The information sought must be directly relevant and necessary to allow a party to fully challenge the claims or defenses of the party asserting the privilege, and the information cannot be secured through other sources. See, e.g., In re Geothermal Res. Int’l, Inc., 93 F.3d 648, 653 (9th Cir. 1996) (emphasizing that the privilege is waived only when “the client tenders an issue touching directly upon the substance or content of an attorney-client communication” and not when the testimony sought would be “only one of several forms of indirect evidence” about an issue); 1st Sec. Bank of Washington v. Eriksen, No. CV06-1004RSL, 2007 WL 188881, at *3 (W.D. Wash. Jan. 22, 2007) (information otherwise protected by privilege must be “vital” to party’s claim; “[m]ere relevance to defendant’s case is not sufficient.”); see also Cervantes v. CEMEX, Inc., No. 1:12-CV-1932-LJO-JLT, 2014 WL 4104200, at *9 (E.D. Cal. Aug. 18, 2014) (if “mere showing” that privileged information would be “helpful” to a party “was deemed sufficient, the privilege would be completely eviscerated and clients would no longer be permitted to seek advice of counsel in confidence”).

         Relatedly, defendants cannot avoid waiver by offering to rely at summary judgment or trial solely on non-legal justifications for certain subjective beliefs. There is no doubt - given the question at issue is whether anticompetitive goals motivated defendants’ settlement - that business advice and non-legal facts were considered by settlement decision-makers. But if defendants inject their subjective beliefs on specific topics as part of their defense of the Watson settlement - like a subjective belief that patent litigation is inherently uncertain -where evidence establishes that the subjective belief was also informed by attorney advice, it would be unfair to not allow plaintiffs access to defendants’ contemporaneous attorney-client information to test the veracity of the defendants’ justifications in this litigation even though that belief is based in part on business judgment and executive experience.[6]

         B. Defendants’ Subjective Beliefs

         Endo has identified 29 subjective beliefs as to topics (b) - (e) on which it intends to rely at summary judgment and trial. See Exhibit A to the Declaration of Peter Kohn, Dkt. No. 463-2.[7]Watson/Actavis has identified 28 subjective beliefs on topics (a) - (e). Ex. B to the Kohn Declaration. Teikoku has identified 11 subjective beliefs on topics (a) - (c) and (e). Ex. C to the Kohn Declaration.

         As described in more detail below, plaintiffs have demonstrated that many of the subjective statements identified by defendants rely in significant part on legal advice. The depositions of defense fact witnesses and the assertions of privilege in those depositions demonstrate that legal advice was provided and considered.[8] The privilege logs likewise show that legal advice was provided on these topics and considered by senior management, and confirm that defendants’ settlement negotiators and often primary decision-makers were the attorneys.

         Some of the subjective beliefs under each category plausibly implicate only business decisions and could have been theoretically reached without attorney-client input. For example, under (b) - “Endo’s Reasons, Explanations and Intentions for the Payments, and its Beliefs About the Impact the Payments Would Have on Competition” - Endo’s Subjective Belief 1 is that: “All terms of the Agreement were part of a negotiated package that enabled the parties to resolve the patent litigation in a manner that permitted Watson to enter the market before the expiration of the patents Endo asserted against Watson.” On its face, some components of that belief could plausibly be based solely on business judgment.

         The problem is that in order to test the veracity of that belief - including whether other factors were involved and how much weight each factor had in motivating the parties to “resolve the patent litigation” and allow Watson “early” entry - other justifications that plaintiffs have shown relied on attorney-client advice are also directly implicated. As to many of the subjective beliefs discussed below, defendants’ position is essentially this: “Trust us. The justifications we are putting forward here are why we settled.” But in order to test or rebut defendants’ assertions, in fairness, plaintiffs should be given access to contemporaneous information regarding those topics that necessarily implicate attorney-client advice. Cf. Amlani, 169 F.3d at 1196 (“If the government has no access to the subpoenaed documents . . . it would be forced to rely almost exclusively” on defendants’ characterization of events).[9]

         Given the importance of many of these beliefs to the merits of this case, if defendants choose to rely on a subjective belief identified below that the record shows directly implicate attorney-client advice, defendants will have effectuated an at-issue waiver for that belief and will be required to produce withheld privileged documents. At oral argument, defendants complained that requiring them to decide whether to waive attorney-client privilege or forego reliance on subjective beliefs to defend this case puts them in an untenable position and would “eviscerate” the attorney-client privilege. Defendants’ sky-is-falling protest ignores the unique circumstances of this case. Defendants’ position would put plaintiffs in a truly untenable posture - requiring them to challenge the subjective beliefs defendants assert to justify the Watson settlement post-hoc without access to the contemporaneous information and documents defendants actually relied on. Moreover, as explained below, many of the “beliefs” defendants wish to rely on at summary judgment or trial can be presented through objective evidence by experts without touching on defendants’ subjective beliefs.

         C. Topic (a) - Defendants’ Assessment of the Strength of the Relevant Patents and Expectations Concerning the Outcome of the Patent Litigations

         Endo, correctly understanding that I have already ruled that any attempt to rely on a subjective belief regarding the strength of the relevant patents and expectations concerning the outcome of the Watson patent litigation would create an at-issue waiver, has not identified any subjective beliefs under (a).[10] Teikoku has identified one subjective belief:

Teikoku may introduce or rely on at trial evidence that at the time it entered into the Settlement Agreement, Teikoku believed that the outcome of the Watson litigation was uncertain.

Watson has identified two subjective beliefs:

1. There are risks inherent in patent litigation, including that District Courts, and Judge Robinson of the District of Delaware specifically, and the Federal Circuit routinely find patents valid, enforceable, and infringed, and as a consequence, there was a risk that the district court and/or the Federal Circuit would find the ‘529, ‘510, ‘333, and/or ‘334 Patents valid, enforceable, and infringed by Actavis.
2. An appeal of the district court decision in the ‘529 patent litigation would last at least a year from the date of decision.

         Given that the subject matter here is the Watson patent litigation and the justifications for resolving that litigation, these subjective beliefs necessarily involve attorney-client advice. Xuedan Wang v. Hearst Corp., No. 12 CV 793 (HB), 2012 U.S. Dist. LEXIS 179609, at *8 (S.D.N.Y. Dec. 19, 2012) (“I find it difficult to imagine that a good faith defense . . . raised by a corporation as large and as sophisticated as Hearst would not involve the advice of its legal department.”).

         Teikoku and Watson’s argument - that these specific subjective beliefs can be based on business judgment and the general knowledge of pharmaceutical executives - is accurate to a point.[11] But the privilege logs and deposition testimony demonstrate that the status of the Watson patent litigation and the risks involved to both sides were discussed between executives and counsel, which is to be expected. Kohn Decl., Ex. E, W1 - W3 (Watson CEO discussed strength of patents and status of patent litigation with counsel), W4-W7 (Watson in-house patent counsel invoked privilege as to discussions regarding Watson patent litigation), W8 (Watson in-house patent counsel knew what CEO’s beliefs were as to merits of patent litigation, but could not reveal those beliefs because of attorney-client privilege), W14;[12] see also Kohn Ex. F T1 (Teikoku CEO could not disclose his opinion about patent litigation without disclosing privileged information because “[e]verything involves opinions from counsel.”), T2-T3 (Teikoku’s Director of Business Development and Manager of Corporate Development did not know anyone at Teikoku who had an opinion about the Watson litigation not based on legal advice), T5 (CEO asserting privilege and lack of knowledge about rulings in Watson litigation).[13] If business executives were allowed to testify concerning their subjective beliefs about the inherent uncertainties in patent litigation and timeframes for trial court and appellate decisions generally, the direct and unmistakable implication from that testimony is that those considerations weighed on the settlement of the Watson litigation as to which defendants have asserted privilege.[14]

         Relatedly, Watson argues that it should be allowed to rely on identified subjective beliefs where they are backed up by “public statements” made by Watson during the relevant timeframe. Watson Oppo. at 2-3; see also Hoffman Lent Decl., Ex. C W1-W7. However, those public statements do not disprove the evidence that attorney advice was provided on these subjective beliefs. Nor do the public statements show that attorney advice played no direct role in Watson’s formation of the subjective beliefs. In essence, Watson is arguing that because it said something publicly at that time, no other motivations could have been at play, despite evidence that extensive attorney information about the patent litigation was provided to Watson executives. Cf. United States v. Amlani, 169 F.3d at 1196 (“If the government has no access to the subpoenaed documents and other communications because of the privilege, it would be forced to rely almost exclusively on Amlani’s and Katz’s characterization of events.”).

         At summary judgment or trial, defendants’ experts will be allowed to testify on these topics based on objective evidence (including the pleadings and transcripts from the Watson patent litigation). Those experts may also opine on the timing of the trial court decision, post-trial motions, and resolution of appeals to the Federal Circuit. Those experts, however, will not be allowed to discuss or suggest what the defendants’ actual subjective beliefs may have been on these topics.

         D. Topic (b) - Defendants’ Reasons, Explanations and Intentions for the Payments, and Beliefs about the Impact the Payments Would Have on Competition

         On topic (b), Endo identifies the following subjective beliefs:

1. All terms of the Agreement were part of a negotiated package that enabled the parties to resolve the patent litigation in a manner that permitted Watson to enter the market before the expiration of the patents Endo asserted against Watson
2. The Agreement permitted Watson to enter the market before the expiration of the patents Endo asserted against Watson.
3. The Agreement eliminated or reduced uncertainty concerning the latest date that Watson would be able to launch a generic form of Lidoderm® if it obtained FDA approval.
4. The Agreement created a second seller of branded Lidoderm®, during a time when it was uncertain whether Watson would have a generic Lidoderm® available to market.
5. A generic Lidoderm® product would not have been introduced to the market earlier in the absence of the Agreement.
6. The Agreement reduced litigation expenses and the business distractions associated with litigation.
7. Endo was unwilling to agree to a Start Date, as that term is defined in the Agreement, earlier than September 15, 2013.
8. Endo agreed to the terms of the Agreement in order to resolve the costs, distractions, and uncertainties inherent in its patent litigation with Watson.
9. Endo agreed to the terms of the Agreement in order to obtain certainty as to the date of entry of generic competition and thereby permit it to make more informed and rational decisions about the allocations of its resources and to facilitate its access to capital to grow its business, all of which enhanced competition.
10. The provision of branded Lidoderm pursuant to Section 3(b)-3(k) of the Agreement addressed Watson’s concern that it might not obtain FDA approval of its ANDA.
11. The provision of branded Lidoderm pursuant to Section 3(b)-3(k) of the Agreement was not intended to delay the Start Date and was not in exchange for a later Start Date, as that term is defined in the Agreement.
12. The Agreement does not limit or impede Watson’s wholesaler affiliate, Anda, Inc., from offering branded Lidoderm provided pursuant to Section 3(b)-3(k) to its customers at a price lower than what Endo charged or what other wholesalers charged for Lidoderm.
13. Section 3(e) of the Agreement ensured that entities with contracts with Endo for branded Lidoderm would get the benefit of those contracts even if they purchased branded Lidoderm® from Anda, Inc.
14. Any cost associated with the provision of Branded Lidoderm pursuant to Section 3(b)-3(k) of the Agreement was counterbalanced by Watson’s agreement to pay Endo a royalty on its generic Lidoderm.
15. The partially exclusive licensing provisions in the Agreement, including Section 2(b), were not intended to delay the Start Date and were not in exchange for a later Start Date, as that term is defined in the Agreement.
16. There is no way to know whether the parties would have reached a settlement agreement had they been required to negotiate without all of the elements in the Agreement.

         Teikoku identifies the following:

1. The branded Lidoderm provided pursuant to the Settlement Agreement would permit Watson (a) early entry to the market for prescription adhesive 5% lidocaine patches (the “market”), and (b) to compete against Endo on price.
2. The cost of Teikoku’s contribution to the settlement - consisting of half-price discounts to Endo totaling $5 million - was small.
3. Teikoku believed that its contribution to the settlement would maintain good business relations with Endo and in turn benefit Teikoku in their ongoing business negotiations.
4. Teikoku believed that Endo had the contractual right to control the litigation and settlement with Watson pursuant to the Teikoku-Endo April 10, 2007 letter agreement.
5. Teikoku believed that resolution of the patent litigation against Watson would (a) help avoid the further costs, distractions and uncertainties inherent in such litigation, and (b) allow Watson to launch a generic version of Lidoderm before the expiration of the ‘529 patent.
6. Apart from maintaining good business relations and avoiding further costs, distractions and uncertainties, as set forth above, and without taking into consideration the potential outcomes of the litigation or regulatory proceedings in the FDA, Teikoku believed that the terms embodied in the May 28, 2012 Settlement and License Agreement would not necessarily benefit Teikoku.

         Watson identifies the following:

3. All of the terms of the Agreement, including the partially-exclusive patent license, provision of branded Lidoderm product and royalty for generic sales, were part of a negotiated package that enabled the parties to reach a settlement that allowed Actavis to launch generic Lidoderm significantly in advance of the last patent expiration.
4. The terms of the Agreement were procompetitive, because they were part of a negotiated settlement that enabled Actavis to launch generic Lidoderm 25 months before the expiration of the last patent, which had 41 months remaining at the time of settlement.
5. Even if Actavis prevailed during the ‘529 patent trial, given the time an appeal would take regarding that litigation alone, the terms of the Agreement were procompetitive because they were part of a negotiated settlement that enabled Actavis to launch generic Lidoderm before patent litigation proceedings would have ended.
6. The terms of the Agreement were procompetitive, because they were part of a settlement that precluded Endo/Teikoku from submitting a new Citizen Petition, amending the pending Citizen Petition, and/or bringing suit against the FDA, thereby removing potential barriers to Actavis receiving FDA approval for generic Lidoderm.
7. Endo’s provision of brand Lidoderm was procompetitive, because it added a competing supplier of brand Lidoderm during a time period when Actavis did not or was unlikely to have had generic Lidoderm available to market, and facilitated sales at a price lower than what Endo charged and/or what other wholesalers charged for Lidoderm.
8. The Agreement was procompetitive because it reduced litigation expenses and the business distractions associated with litigation.
9. Actavis agreed to the terms of the Agreement in order to obtain certainty as to the date of entry of generic competition and thereby permit it to make more informed and rational decisions about the allocations of its resources, all of which enhanced competition.
10. The provision of branded Lidoderm pursuant to Section 3(b)-3(k) of the Agreement was not intended to and did not delay the Entry Date, as that date is defined in the Agreement.
11. The provision of the partially exclusive licensing provisions in the Agreement, including Section 2(b), was not intended to and did not delay the Entry Date, as that date is defined in the Agreement.

         As an initial matter I recognize that the first part of this topic - the reasons, explanations, and intentions for the “payment” of free product to Watson - would appear to necessarily implicate attorney-client advice because that payment was a key, if not the central, term of the Watson settlement negotiated by defendants’ counsel.[15] The second part of this topic - the “beliefs about the impact” on competition - by its nature falls more squarely into the provenance of business knowledge and industry experience (except where the testimony implicates whether and why Watson’s generic entry was “early” or “uncertain, ” because those statements necessarily rely on defendants’ attorney-client-informed beliefs about the strength of the Watson patent litigation and uncertainties regarding the FDA’s actions). With that foundation, I group the beliefs identified by defendants to resolve whether the particular subjective beliefs put at issue privileged information.

         1. Resolving Litigation to Allow Watson “Early Entry” Into Market on a Specific Date

         Defendants argue that the fact that the Settlement allowed Watson to enter the market and sell its generic Lidoderm before the expiration of the patents can be shown by the agreed-to date of entry provided in settlement (September 15, 2013) and the patent expiration dates (one year later for the ‘510 patent and two years later for the ‘529 patent). That is true. That fact can be established through testimony about the Settlement Agreement and evidence on the face of the patents themselves. See Endo Subjective Belief 2, Watson Subjective Belief 4 (in part). Allowing subjective testimony as to that fact would not create an at issue waiver.[16]

         However, describing the entry as “early” and testimony concerning how or why Watson would seek early entry, why Endo/Teikoku would agree to early entry (the “reasons, explanations and intentions” for the payments), and why early entry was procompetitive, necessarily involves beliefs about the strength of the patents and the outcome of the patent litigation. See Endo Subjective Beliefs1, 7; Teikoku Subjective Belief 1(a); Watson Subjective Beliefs 3 (in part) 4 (in part), 5. In deposition, Endo’s witnesses would not explain why the entry date was agreed to other than it was part of a negotiated package, and rested on assertions of attorney-client privilege. Declaration of Daniel Asimow (Dkt. No 475-1), Ex. 2 (Dep. Tr. of Levin) at 302 (Endo CFR would not “speculate” on earlier date but it would have been “challenging”), Ex. 4 (Levin FTC testimony) at 125; see also Kohn Decl., Ex. D E8, E44 (General Counsel discussed September 2013 start date with Endo executives); E9 (Endo patent attorney and VP of Intellectual Property instructed not to answer question regarding entry date on grounds of privilege); see also Ex. E W17 (Watson in-house counsel asserted privilege when questioned whether entry date reflected assessment of strength of patent litigation); W20 (asserting privilege over reasons for September 2013 entry date); W44 (in-house counsel asserting privilege as to best launch date scenario); W49 (General Counsel discussed the reasons for the September 15, 2013 launch date with CEO, including reasons based on legal advice).[17] Allowing subjective testimony on these issues would create an at issue waiver.

         2. Agreement was a Negotiated Package

         Defendants’ business executives[18] may testify that they accepted the terms of the settlement as a package, and would not have settled unless all elements of the agreement were present. Endo Subjective Beliefs 1 and 16 (in part); Watson Subjective Belief 3 (in part). Defendants cannot, however, offer testimony as to their negotiation strategy or attempt to explain why each component was necessary to the settlement “package.” Plaintiffs have shown that defendants in-house counsel (and in the case of Teikoku, outside counsel) were the main negotiators and in most cases the actual decision-makers on the Settlement. See, e.g., Kohn Decl., Ex D E3 (Endo CEO Holveck relied on advice of General Counsel who “had the details” on settlement negotiations and ultimate agreement); Kohn Reply Decl., Ex. J E69 (Endo General Counsel approved settlement of patent litigation). Testimony about what was negotiated, when it was negotiated, and why provisions were required to settle would necessarily put at issue attorney-client information.

         3. Resolving “Uncertainty” of Date of Generic Launch

         Beliefs about the date on which Watson would be able to launch their generic based solely on competitive intelligence (at Endo/Teikoku) or on business plans and status (at Watson) about Watson’s capacity to launch (e.g., Watson’s access to ingredients, manufacturing capacity), do not necessarily involve attorney-client advice and do not create an at issue waiver. Similarly, testimony about the business benefits of knowing exactly when a generic might enter the market from Endo (Endo ...


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