A New York district court recently reaffirmed the right of state attorneys general to seek disgorgement on a national level from defendants in antitrust cases brought by the states. The decision in FTC et al. v. Vyera Pharmaceuticals, No. 20cv00706 (S.D.N.Y. Sept. 24, 2021) is particularly noteworthy because the Supreme Court recently limited the FTC’s ability to seek disgorgement in some cases. AMG Capital Management v. FTC, 141 S.Ct. 1341 (Apr. 22, 2021).
Seven states and the Federal Trade Commission sued Vyera Pharmaceuticals and two of its officers, alleging that the defendants used anticompetitive means to block lower-cost generic competition to its drug, Daraprim. The states, suing in their capacity as parens patriae, sought equitable remedies, including injunctive relief and disgorgement. After the Supreme Court’s decision in AMG Capital, the FTC withdrew its disgorgement claims, but the states did not. The defendants moved for summary judgment on the states’ disgorgement claims on the grounds that disgorgement was only available where the defendants’ net profits are tied to sales that have victimized citizens of those states. The states cross-moved for summary judgment. The court granted summary judgment to the states on this issue.
The court declined to rule on whether each state had the authority to seek disgorgement of nationwide profits because she concluded that the New York Attorney General was authorized to do so. New York’s Executive Law permits the attorney general to bring an action in equity to enforce the Donnelly Act (New York’s antitrust statute). Judicial decisions have interpreted the remedies available to the attorney general to include disgorgement, which “focuses on the gain to the wrongdoer as opposed to the loss to the victim.” Because of that focus, “the remedy of disgorgement does not require a showing or allegation of direct losses to consumers or the public; the source of the ill-gotten gains is immaterial.” (citing People v. Ernst & Young, LLP, 980 N.Y.S.2d 456 (N.Y. Sup. Ct. 2014). The court concluded, “[S]hould [the New York Attorney General] succeed to proving a violation of the Donnelly Act and Executive Law stemming from Vyera’s New York-based operations, [the attorney general] may obtain disgorgement of Vyera’s net profits attributable to the entirety of its U.S. sales. As indicated above, a State’s quasi-sovereign interest includes the control of economic activity within the State and the power to seek redress for illegality occurring within its borders.”