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Abbott Laboratories v. Superior Court(The People ex rel. Tony Rackauckas)

California Court of Appeals, Fourth District, First Division

May 31, 2018

ABBOTT LABORATORIES et al., Petitioners,
THE SUPERIOR COURT OF ORANGE COUNTY, Respondent THE PEOPLE ex rel. TONY RACKAUCKAS, as District Attorney, etc., Real Party in Interest.

          ORIGINAL PROCEEDINGS in mandate following denial of a motion to strike under Code of Civil Procedure sections 435 and 436, Orange County Super. Ct. No. 30-2016-00879117-CU-BT-CXC Kim G. Dunning, Judge. Petition granted.

          Kirkland & Ellis and Michael John Shipley, Jay P. Lefkowitz, Adam T. Humann and Yosef Mahmood for Petitioners Teva Pharmaceuticals USA, Inc., Duramed Pharmaceuticals Sales Corp., Inc. and Barr Pharmaceuticals, Inc.

          Munger, Tolles & Olson and Jeffrey I. Weinberger, Stuart N. Senator and Blanca F. Young for Petitioners AbbVie Inc. and Abbott Laboratories.

          Horvitz & Levy and Jeremy Brooks Rosen, Stanley H. Chen, Janet Y. Galeria, for Chamber of Commerce of the United States of America; Heather Lynn Wallace, for California Chamber of Commerce as Amici Curiae on behalf of Petitioners.

          Tony Rackauckas, Orange County District Attorney, Joseph D'Agostino, Assistant District Attorney, Kelly A. Ernby, Deputy District Attorney; Robinson Calcagnie Inc. and Mark P. Robinson, Jr., Kevin F. Calcagnie on behalf of Real Party in Interest.

          Dennis J. Herrera, City Attorney, Yvonne R. Mere, Owen J. Clements, Deputy City Attorneys, for the City and County of San Francisco; Michael Feuer, City Attorney, Monica D. Castillo, Deputy City Attorney, for the City of Los Angeles; Mara W. Elliot, City Attorney, Kathryn Turner, Kristine Lorenz, Deputy City Attorneys for the City of San Diego; Richard Doyle, City Attorney, Nora Frimann, Assistant City Attorney for the City of San Jose; James R. Williams, County Counsel, Greta S. Hansen, Danny Chou, Assistants County Counsel, Laura S. Trice, Deputy County Counsel, for Santa Clara County; Jennifer Henning for California State Association of Counties as Amici Curiae on behalf of Real Party in Interest.

          Law Office of Valerie T. McGinty and Valerie T. McGinty for Consumer Attorneys of California as Amicus Curiae on behalf of Real Party in Interest.

          Xavier Becerra, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele R. Van Gelderen, Daniel A. Olivas and David A. Jones, Deputy Attorneys General for California Attorney General as Amicus Curiae.

          Mark Louis Zahner of the California District Attorneys Association and Thomas Atlee Papageorge of the San Diego District Attorney's Office, for the California District Attorneys Association as Amici Curiae.

          O'ROURKE, J.

         The Orange County District Attorney (the District Attorney), representing "the People of the State of California, " sued petitioners Abbott Laboratories, AbbVie Inc., Teva Pharmaceuticals USA, Inc., Barr Pharmaceuticals, Inc., Duramed Pharmaceuticals, Inc. and Duramed Pharmaceuticals Sales Corp., alleging generally that petitioners engaged in a scheme to keep generic versions of a prescription drug off the market in violation of California's Unfair Competition Law (UCL; Bus. & Prof. Code, [1] § 17200 et seq.). The District Attorney sought an injunction as well as civil penalties and restitution. Petitioners unsuccessfully moved to strike portions of the operative complaint alleging "claims for restitution and civil penalties based on conduct outside the territorial jurisdiction of Orange County."

         In this writ proceeding, petitioners ask us to resolve a single issue: whether section 17204 of the UCL "permit[s] a county district attorney to bring a claim that seeks relief for alleged injuries to residents of California counties whom he or she does not represent, based on conduct occurring outside the county he or she serves...." Petitioners argue district attorneys have no authority to prosecute civil actions absent specific legislative authorization, and neither the Government Code, nor Business and Professions Code section 17204, authorize the district attorney of a single county to seek statewide penalties for alleged UCL violations. The California Attorney General has filed an amicus brief on the question, as have the California District Attorneys Association; the City Attorneys of Los Angeles, San Diego, San Francisco, and San Jose, Santa Clara County Counsel, and California State Association of Counties (collectively the city attorneys); the United States and California Chambers of Commerce (collectively Chambers of Commerce); and the Consumer Attorneys of California.

         We grant the petition. The California Constitution designates the Attorney General the "chief law officer of the State" (Cal. Const., art. V, § 13), and consistent with this constitutional provision, the Attorney General "has charge, as attorney, of all legal matters in which the State is interested" (Gov. Code, § 12511) and also "shall... prosecute or defend all causes to which the State... is a party in his or her official capacity." (Gov. Code, § 12512.) The District Attorney, on the other hand, is a county officer whose territorial jurisdiction and power is limited accordingly. Though section 17204 confers standing on district attorneys to sue in the name of the people of the State of California, it cannot constitutionally or reasonably be interpreted to grant the District Attorney power to seek and recover restitution and civil penalty relief for violations occurring outside the jurisdiction of the county in which he was elected. A contrary conclusion would permit the District Attorney to usurp the Attorney General's statewide authority and impermissibly bind his sister district attorneys, precluding them from pursuing their own relief. Thus, in the absence of written consent by the Attorney General and other county district attorneys, the District Attorney must confine such monetary recovery to violations occurring within the county he serves.


         Petitioners are companies or wholly-owned subsidiaries involved in the manufacture, distribution or sale of pharmaceuticals or generic prescription drugs, including the prescription drug Niaspan. In October 2016, the Orange County District Attorney, representing "the People of the State of California" in association with private counsel, filed a complaint for violations of the UCL, alleging that petitioners either entered into agreements or otherwise engaged in conduct that prevented other generic manufacturers from launching their own Niaspan equivalent, causing purchasers and others in California to overpay for the drug. The District Attorney filed a first amended complaint, the operative pleading, in December 2016. In part, the operative complaint alleges that "[e]ach sale of Niaspan in violation of Section 17200 constitutes a separate violation, " and purchasers in California sustained substantial losses in the form of overcharges on each sale based on the petitioners' unlawful and unfair business practices, which violated federal, state, and/or common laws, including federal and state antitrust laws. It alleges that "the violations of California law complained of herein resulted in damages to consumers of Niaspan in California, including in the County of Orange." In addition to an injunction, the complaint seeks an order that petitioners pay restitution of any money acquired through the unlawful and unfair business practices, and civil penalties of up to $2, 500 for each violation under sections 17206 and 17206.1.

         Petitioners thereafter moved to strike from the operative complaint "all claims for restitution and civil penalties based on conduct outside the territorial jurisdiction of Orange County."[2] Relying on People v. Hy-Lond Enterprises, Inc. (1979) 93 Cal.App.3d 734, 751 (Hy-Lond)as well as California v. M & P Investments (E.D.Cal. 2002) 213 F.Supp.2d 1208 (M & P Investments), petitioners argued a district attorney's enforcement authority under the UCL was limited to the geographic boundaries of the county for which the district attorney was elected, but contrary to that restriction, the District Attorney sought to recover for overcharges paid by "California Niaspan users, their insurers, public healthcare providers and other government payors...." Petitioners sought to strike several words and phrases from the complaint referring to pursuing relief across California.

         In opposition, the District Attorney argued Hy-Lond was inapposite as it involved a settlement and stipulated injunction that purported to bind the real "client, " which was the state Department of Health, and immunize the defendant as to future actions involving future violations of law. He argued that when statewide business practices are at issue, the California Constitution did not prevent the Legislature from giving district attorneys statewide enforcement authority and the ability to obtain statewide relief, which the UCL's plain language indicated the Legislature had done. The District Attorney argued the California Constitution did not restrict his duties and authority under the UCL to obtain statewide relief.

         During arguments on the motion, the trial court stated its view that the appellate court in Hy-Lond did not address the Napa County district attorney's ability in that case to recover statewide civil penalties; in its opinion, Hy-Lond addressed only whether the district attorney could bind the Attorney General in a settlement relating to misconduct spanning more counties than just Napa County. The court explained that if a settlement occurred in the present case, the Attorney General would be permitted to appear and be heard. The court also questioned Hy-Lond's reliance on Singh v. Superior Court (1919) 44 Cal.App. 64 in which the Court of Appeal pointed out a district attorney's powers were "limited territorially to the county for which he has been elected, " but rejected an argument that a district attorney was not an executive officer or officer of the state for purposes of a bribery statute and dismissed a writ seeking to enjoin proceedings on an indictment. (Id. at pp. 66-68.) The court denied petitioners' motion to strike.

         Petitioners sought writ relief by this petition. We issued an order to show cause and stayed further proceedings in the superior court pending further order.


         I. District Attorney's Demurrer to Petition

         Preliminarily, we address seriatim the District Attorney's arguments made in a general demurrer to the petition. (Code Civ. Proc., § 1089 [when the court issues an alternative writ, "the party upon whom the writ... has been served may make a return by demurrer, verified answer or both"]; see Cal. Rules of Court, rule 8.487(b)(1) ["If the court issues an alternative writ or order to show cause, the respondent or any real party in interest, separately or jointly, may serve and file a return by demurrer, verified answer, or both"]; Agricultural Labor Relations Board v. Superior Court (2016) 4 Cal.App.5th 675, 681.) The demurrer admits the facts pleaded in the writ petition. (Agricultural Labor Relations Board v. Superior Court, at p. 682.)

         A. Service on Attorney General

         The District Attorney first contends the petition is procedurally defective because petitioners did not provide a proof of service of a copy of the writ petition on the Attorney General as required by section 17209.[3] He points out that if the Attorney General is not properly served and the time for serving the brief has not been extended, the court may not enter judgment, grant relief, or issue an opinion. (§ 17209.)

         The District Attorney fails to point out that on September 11, 2017, before we issued the order to show cause in this matter, petitioners submitted their certificate of service on the Attorney General of their petition and letter brief in reply to the District Attorney's informal opposition. The Attorney General thereafter sought leave to file an amicus brief and has filed that brief. In view of these developments, we retain power and find good cause to sua sponte retroactively extend the time for providing the notice required under section 17209. (Accord, Black v. Financial Freedom Senior Funding Corp. (2001) 92 Cal.App.4th 917, 924, fn. 6; see also Californians for Population Stabilization v. Hewlett-Packard Co. (1997) 58 Cal.App.4th 273, 284 [section 17209's requirements are not jurisdictional], overruled on other grounds in Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 175-177.) Because the Attorney General has received adequate notice and is not prejudiced in any way, there is no basis to sustain a demurrer to the petition on this procedural ground.

         B. Advisory Opinion

         The District Attorney next contends the petition seeks an improper advisory opinion on an abstract proposition of law, assertedly because the issue is "not tethered to the facts in this case" or to "any order that is now properly justiciable." The contention is not further explained, and we reject it. Petitioners challenge the trial court's ruling denying their motion to strike allegations seeking to recover restitution and civil penalties for each sale of Niaspan in the State of California, which rejected the argument that the District Attorney was geographically limited to the County of Orange in seeking such relief. The court's ruling presents a concrete legal dispute over the scope of recovery that a district attorney may seek under the UCL, which is properly the subject of a motion to strike. (Accord, Commodore Home Systems, Inc. v. Superior Court (1982) 32 Cal.3d 211, 213-215 [considering petition for writ of mandate filed after superior court denied motion to strike portions of complaint, and deciding legal recoverability of punitive damages in a suit for job discrimination under the California Fair Employment and Housing Act]; Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255 [deciding whether plaintiffs could seek at the pleading stage punitive damages and statutory penalties for unlawful wiretapping].) Our review of the legal question presented here is not an abstract proposition, and an early resolution of the issue will streamline both discovery and any trial on the matter. (Accord, Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1037 [extraordinary relief was warranted where court denied motion to strike emotional distress and punitive damage allegations; "[i]f forced to proceed to trial on the amended complaint as it stands, petitioners will be required to conduct further discovery on plaintiff's emotional distress claim, and trial will be extended by the introduction of evidence on that issue.... In addition, the ability of a party to recover emotional distress damages in negligence actions involving only economic injury is an issue of great public importance and requires immediate resolution"].)

         C. Ripeness

         Similarly, the District Attorney contends the petition must be dismissed because the trial court did not rule on the issue presented and thus no ruling is "ripe for appellate review." Specifically, the District Attorney argues the court "made no ruling with respect to what the permissible amount of penalties should be in this case." The District Attorney points to the court's remarks during oral argument on the petitioners' demurrer that concerns over damages "are a little premature" and during the motion to strike that there was no reason to reach "[w]hat kind of remedies plaintiff may be entitled to down the line...."

         " '[T]he ripeness doctrine is primarily bottomed on the recognition that judicial decisionmaking is best conducted in the context of an actual set of facts so that the issues will be framed with sufficient definiteness to enable the court to make a decree finally disposing of the controversy.' " (Vandermost v. Bowen (2012) 53 Cal.4th 421, 452.) Here, the cited remarks do not support the District Attorney's assertion that the court did not rule on the issue presented.[4] By denying petitioners' motion to strike the broad allegations as to violations of the UCL for "purchases of, and reimbursements for, the prescription drug Niaspan occurring in California, " the court necessarily determined that the District Attorney in its UCL action was permitted to pursue restitution and civil penalties for violations occurring throughout California, including outside the geographical limits of Orange County. The issues were sufficiently framed in the motion, are definite and concrete, and the court's ruling is ripe for judicial review.

         D. Irreparable Harm for Purposes of Writ Relief

         The District Attorney next contends petitioners have not established irreparable harm to support extraordinary writ review of the "amount of penalties to be awarded in this case." (Some capitalization omitted.) We reject the premise of this argument, namely that the petition at hand challenges merely the "amount" or sum of the award, as opposed to the District Attorney's power to collect penalties from sales or reimbursements occurring outside the limits of Orange County. We also reject the District Attorney's argument that because the pleading of civil penalties is legally authorized by the UCL, the remedies are not "irrelevant, false, or improper matter" subject to a motion to strike. The first amended complaint did not simply plead entitlement to civil penalties, a legally proper remedy in the abstract, but specifically sought such penalties for sales, purchases and reimbursements-alleged to constitute violations of "federal, state, statutory and/or common laws"-occurring throughout California. As stated, a motion to strike is proper where petitioners challenge the scope of UCL recovery sought by the District Attorney's pleading.

         E. Important Question of Law

         Finally, the District Attorney argues that this matter does not present, and petitioners have not identified, conflicting lower court decisions or an important issue of law that that should be settled by a ruling on their petition. The District Attorney argues that the proper remedy is "fact specific, " and "[s]uch matters cannot be determined in one broad sweeping statement of the law...."

         The arguments are without merit. We have already determined by issuing an alternative writ that there is no adequate legal remedy in this case. (Accord, Smith v. Superior Court, supra, 10 Cal.App.4th at p. 1037, citing Robbins v. Superior Court (1985) 38 Cal.3d 199, 205.) And this court has granted petitioner's request that we judicially notice the existence of conflicting superior court decisions on the issue. (See Linda Vista Village San Diego Homeowners Association, Inc. v. Tecolote Investors, LLC (2015) 234 Cal.App.4th 166, 185 [judicial notice is properly taken of existence of court orders to establish the legal effect of the results reached]; Shersher v. Superior Court (2007) 154 Cal.App.4th 1491, 1501, fn. 5.) Whether a district attorney acting in the name of the People of the State of California may obtain restitution and civil penalties for UCL violations occurring outside his or her county is in our view an important legal issue, and one that implicates constitutional principles. (See Omaha Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1266, 1273 [general criteria for determining the propriety of an extraordinary writ include that the issue tendered presents a significant and novel constitutional issue, or the party seeking the writ lacks an adequate means by which to attain relief], citing Britt v. Superior Court (1978) 20 Cal.3d 844, 851-852 [discovery order compelling disclosure of information as to plaintiffs' and nonparties' private associational activities raised significant and novel constitutional issues of great importance, justifying review by extraordinary writ].)

         II. The District Attorney's Authority to Recover Restitution and Civil Penalties Is Limited to Violations Occurring in the County in Which He Was Elected

         A. Stand ...

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