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King Drug Company of Florence, Inc., et al v. Cephalon

July 5, 2011

KING DRUG COMPANY OF FLORENCE, INC., ET AL., PLAINTIFFS,
v.
CEPHALON, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Goldberg, J.

MEMORANDUM OPINION

The primary issue before the Court is whether one of the several named Defendants, Barr Laboratories, Inc., is entitled to withhold documents requested by Plaintiffs based upon the community-of-interest privilege. Also at issue is whether certain Barr communications, previously disclosed in discovery, constitute a waiver of the attorney-client privilege. These questions have been raised through Plaintiffs' motion to compel documents that were requested in discovery.*fn1 For

reasons set forth below, I will grant Plaintiffs' motion in part, and order the production of the documents at issue. I, however, disagree with Plaintiffs' position that Barr has waived the attorney-client privilege regarding other communications.

I. Background

This case involves antitrust allegations raised by several proposed classes of Plaintiffs pursuant to the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2. Plaintiffs' claims are primarily based upon what is commonly referred to as a "reverse payment settlement." These types of settlements are typically entered into as the result of patent litigation between a brand name drug manufacturer and a generic drug manufacturer, such as Barr.

The multi-party litigation before the Court stems from four patent infringement lawsuits involving the drug Provigil® that Plaintiffs allege were resolved through reverse payment settlements. These settlements were entered into between Cephalon, Inc., a pharmaceutical company, and four generic drug manufacturers, all of whom are Defendants in the antitrust cases before the Court. Barr, the respondent to the motion at issue, is one of the four generic drug manufacturers.

Plaintiffs, who have filed the current motion, are members of one of several proposed classes and are referred to as "The King Drug Direct Purchaser Class." This class is comprised of companies who directly purchased Provigil® from Cephalon for re-distribution. Plaintiffs generally allege that the reverse payment settlements constitute an unlawful restraint of trade and have sued Cephalon, Barr and the three other generic companies for antitrust violations.

Plaintiffs have requested documents in discovery regarding communications that Barr had with its supplier, Chemagis. Barr explains that Chemagis "supplied the active pharmaceutical ingredient" ("API") modafinil. (Barr Memo., p. 3.) After Barr refused to produce certain documents, raising the community-of-interest privilege, Plaintiffs filed the motion before the Court.

I have reviewed, in camera, the eighteen documents alleged by Barr to be protected by the community-of-interest privilege. Generally, these documents relate to the settlement between Barr and Cephalon and how, financially, the settlement terms would affect Chemagis. The documents withheld were generated from December of 2005 through January of 2006. The settlement between Barr and Cephalon occurred shortly thereafter on February 1, 2006.

The community-of-interest privilege raised by Barr has been described as allowing attorneys "representing different clients with similar legal interests to share information without having to disclose it to others." In re Teleglobe Commc'ns Corp., 493 F.3d 345, 364 (3d Cir. 2007). Barr justifies withholding the documents in question based upon several theories under this privilege. First, Barr asserts that the community-of-interest privilege applies because it shared a substantially similar legal interest with Chemagis as they jointly developed a generic version of Provigil® and thus both were at risk of being sued for infringement by Cephalon. See 32 U.S.C. § 271 (2006). Barr claims that application of this privilege applies even where one entity, here, Chemagis, was not a party to the patent litigation between Cephalon and Barr. (Barr Memo., p. 12.) Barr also presses an expansive application of the community-of-interest privilege which would not only protect communications between counsel for Barr and Chemagis but also communications between non-lawyer representatives of each party.*fn2 (Barr Memo., p. 10.)

Plaintiffs urge that the documents in question are discoverable for several reasons. Plaintiffs first posit that Chemagis's interests in the Cephalon/Barr patent litigation were purely "financial" and that a common "legal interest," which is required for the community-of-interest privilege to apply, did not exist between the two companies. (Pl. Memo., pp. 6-7.) Plaintiffs also stress that there was never a joint defense strategy between Barr and Chemagis, especially where Chemagis was never sued by Cephalon. (Pl. Memo., p. 7.) In support of this position, Plaintiffs point to documents and testimony in a related Federal Trade Commission ("FTC") investigation which allegedly reflect that Chemagis relinquished any control regarding legal strategy in the Cephalon/Barr patent litigation to Barr. (Pl. Memo., p. 8.) Plaintiffs also assert that many of the communications at issue do not involve attorneys from both Barr and Chemagis thus rendering the community-of-interest privilege inapplicable. (Pl. Memo., p. 11.)

In addition to the eighteen documents discussed above, Plaintiffs also argue that Barr has waived the attorney-client privilege regarding the settlement with Cephalon, and that "Barr must immediately allow discovery regarding such communications." (Barr Memo., p. 20.)

II. The Community-of-Interest Privilege

The United States Court of Appeals for the Third Circuit's most recent and comprehensive examination of the community-of-interest privilege was undertaken in Teleglobe, 493 F.3d 345.*fn3

There, the Court reviewed the evolution and rationale of the privilege:

Recognizing that it is often preferable for co-defendants represented by different attorneys in criminal proceedings to coordinate their defense, courts developed the joint-defense privilege. In its original form, it allowed the attorneys of criminal co-defendants to share confidential information about defense strategies without waiving the privilege as against third parties. Moreover, one co-defendant could not waive the privilege that attached to the shared information without the consent of all others. Later, courts replaced the joint-defense privilege, which only applied to criminal co-defendants, with a broader one that protects all communications shared within a proper "community of interest," whether the context be criminal or civil.

Id., at 363-64 (emphasis added) (citations and footnotes omitted).

As it relates to the issues currently before me, the Teleglobe case articulated the following principles regarding the community-of-interest privilege:

- "[T]he community-of-interest privilege allows attorneys representing different clients with similar legal interests to share information without having to disclose it to others." The privilege ...


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