Opinion
20cv00706 (DLC)
11-15-2021
FEDERAL TRADE COMMISSION, STATE OF NEW YORK, STATE OF CALIFORNIA, STATE OF OHIO, COMMONWEALTH OF PENNSYLVANIA, STATE OF ILLINOIS, STATE OF NORTH CAROLINA, and COMMONWEALTH OF VIRGINIA, Plaintiffs, v. VYERA PHARMACEUTICALS, LLC, AND PHOENIXUS AG, MARTIN SHKRELI, individually, as an owner and former director of Phoenixus AG and a former executive of Vyera Pharmaceuticals, LLC, and KEVIN MULLEADY, individually, as an owner and former director of Phoenixus AG and a former executive of Vyera Pharmaceuticals, LLC, Defendants.
For plaintiff Federal Trade Commission: James H. Weingarten Markus H. Meier Bradley S. Albert Amanda Triplett Armine Black Daniel W. Butrymowicz J. Maren Schmidt Lauren Peay Leah Hubinger Matthew B. Weprin Neal J. Perlman Federal Trade Commission 600 Pennsylvania Avenue, N.W. Washington, DC 20580 For plaintiff State of New York Amy E. McFarlane Jeremy R. Kasha Elinor R. Hoffman Saami Zain Office of the New York Attorney General Antitrust Bureau 28 Liberty Street, 20th Floor New York, NY 10005, Bryan Lewis Bloom Freshfields Bruckhaus Deringer U.S. LLP 700 13th St. N.W. 10th fl. Washington, DC 20005 For plaintiff State of California For plaintiff State of California: Michael D. Battaglia Office of the Attorney General of California 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102 For plaintiff State of Ohio: Beth Finnerty Office of the Ohio Attorney General 150 E. Gay Street, 22nd Floor Columbus, OH 43215 For plaintiff Commonwealth of Pennsylvania: Joseph Betsko Pennsylvania Office of Attorney General Strawberry Square, 14th Floor Harrisburg, PA 17120 For plaintiff State of Illinois: Richard S. Schultz Office of the Attorney General of Illinois 100 W. Randolph Street, 11th Floor Chicago, IL 60601 For plaintiff State of North Carolina: K.D. Sturgis Jessica V. Sutton North Carolina Dept. of Justice Consumer Protection Division 114 West Edenton Street Raleigh, NC 27603 For plaintiff Commonwealth of Virginia Sarah Oxenham Allen Tyler T. Henry Office of the Attorney General of Virginia 202 North Ninth Street Richmond, VA 23219 For defendants Vyera Pharmaceuticals, LLC and Phoenixus AG: Stacey Anne Mahoney Sarah E. Hsu Wilbur Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178, Scott A. Stempel William Cravens Melina R. Dimattio Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, N.W. Washington, D.C. 20004, Steven A. Reed Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103, Noah J. Kaufman Morgan, Lewis & Bockius LLP One Federal Street Boston, MA 02210, Michael M. Elliott Rachel J. Rodriguez Phillips Nizer LLP 485 Lexington Avenue New York, NY 10017, Michael L. Weiner Dechert LLP (NYC) 1095 Avenue of the Americas New York, NY 10036-6797 For defendant Martin Shkreli: Christopher H. Casey Andrew J. Rudowitz Jeffrey S. Pollack Sarah O'Laughlin Kulik Duane Morris LLP 30 South 17th Street Philadelphia, PA 19103, Sarah Fehm Stewart Duane Morris, LLP (NJ) One Riverfront Plaza, Suite 1800 Newark, N.J. 07102-3889 For defendant Kevin Mulleady: Kenneth R. David Albert Shemtov Mishaan Nicholas Anthony Rendino Kasowitz, Benson, Torres LLP (NYC) 1633 Broadway New York, NY 10019
For plaintiff Federal Trade Commission: James H. Weingarten Markus H. Meier Bradley S. Albert Amanda Triplett Armine Black Daniel W. Butrymowicz J. Maren Schmidt Lauren Peay Leah Hubinger Matthew B. Weprin Neal J. Perlman Federal Trade Commission 600 Pennsylvania Avenue, N.W. Washington, DC 20580
For plaintiff State of New York Amy E. McFarlane Jeremy R. Kasha Elinor R. Hoffman Saami Zain Office of the New York Attorney General Antitrust Bureau 28 Liberty Street, 20th Floor New York, NY 10005, Bryan Lewis Bloom Freshfields Bruckhaus Deringer U.S. LLP 700 13th St. N.W. 10th fl. Washington, DC 20005
For plaintiff State of California For plaintiff State of California: Michael D. Battaglia Office of the Attorney General of California 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102
For plaintiff State of Ohio: Beth Finnerty Office of the Ohio Attorney General 150 E. Gay Street, 22nd Floor Columbus, OH 43215
For plaintiff Commonwealth of Pennsylvania: Joseph Betsko Pennsylvania Office of Attorney General Strawberry Square, 14th Floor Harrisburg, PA 17120
For plaintiff State of Illinois: Richard S. Schultz Office of the Attorney General of Illinois 100 W. Randolph Street, 11th Floor Chicago, IL 60601
For plaintiff State of North Carolina: K.D. Sturgis Jessica V. Sutton North Carolina Dept. of Justice Consumer Protection Division 114 West Edenton Street Raleigh, NC 27603
For plaintiff Commonwealth of Virginia Sarah Oxenham Allen Tyler T. Henry Office of the Attorney General of Virginia 202 North Ninth Street Richmond, VA 23219
For defendants Vyera Pharmaceuticals, LLC and Phoenixus AG: Stacey Anne Mahoney Sarah E. Hsu Wilbur Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178, Scott A. Stempel William Cravens Melina R. Dimattio Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, N.W. Washington, D.C. 20004, Steven A. Reed Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103, Noah J. Kaufman Morgan, Lewis & Bockius LLP One Federal Street Boston, MA 02210, Michael M. Elliott Rachel J. Rodriguez Phillips Nizer LLP 485 Lexington Avenue New York, NY 10017, Michael L. Weiner Dechert LLP (NYC) 1095 Avenue of the Americas New York, NY 10036-6797
For defendant Martin Shkreli: Christopher H. Casey Andrew J. Rudowitz Jeffrey S. Pollack Sarah O'Laughlin Kulik Duane Morris LLP 30 South 17th Street Philadelphia, PA 19103, Sarah Fehm Stewart Duane Morris, LLP (NJ) One Riverfront Plaza, Suite 1800 Newark, N.J. 07102-3889
For defendant Kevin Mulleady: Kenneth R. David Albert Shemtov Mishaan Nicholas Anthony Rendino Kasowitz, Benson, Torres LLP (NYC) 1633 Broadway New York, NY 10019
OPINION AND ORDER
DENISE COTE, DISTRICT JUDGE
Trial in this antitrust action is scheduled to begin on December 14, 2021. This Opinion addresses the motion of plaintiffs the United States Federal Trade Commission and seven States (collectively, “Plaintiffs”) to exclude expert testimony to be offered at trial on behalf of defendants Vyera Pharmaceuticals, LLC, its parent company Phoenixus AG (together, “Vyera”), Martin Shkreli, and Kevin Mulleady (collectively, “Defendants”) by Justin McLean. The motion is granted.
Background
Justin McLean is the Managing Principal of Analysis Group, Inc. He describes the areas of his expertise as including damages estimation, applied finance theory, and valuation.
McLean's affidavit of October 20, 2021 constitutes his direct testimony at trial. In that affidavit, McLean opines that the corporate Defendants “do not project to have enough liquid assets (or assets that can become liquid in time) to pay” in the first quarter of 2022 the judgment that the Plaintiffs seek through this trial, that is, a judgment of between $53.1 and $64.6 million. He adds that requiring the payment of this sum in the first quarter of 2022 “may” compromise these Defendants' ability to continue operating as a going concern.
An Order of May 19, 2021 denied the Plaintiffs' request to strike McClean's expert report as untimely. That Order did not rule on the admissibility of McClean's testimony at trial, and the Defendants' suggestion to the contrary is rejected.
Discussion
There are several reasons that this testimony is inadmissible. First and foremost, this testimony is not helpful to the trier of fact. Should the Defendants be found liable at trial, equitable monetary relief in the form of disgorgement may be awarded pursuant to the state law claims. See Fed. Trade Comm'n v. Vyera Pharms., LLC, No. 20CV00706 (DLC), 2021 WL 4392481, at *3 (S.D.N.Y. Sept. 24, 2021). Disgorgement is “a remedy tethered to a wrongdoer's net unlawful profits.” Liu v. Sec. & Exch. Comm'n, 140 S.Ct. 1936, 1943 (2020). The amount of disgorgement ordered may not “exceed the gains made upon any business or investment, when both the receipts and payments are taken into the account.” Id. at 1949-50 (quoting Rubber Co. v. Goodyear, 76 U.S. 788, 804 (1869)). “The district court has broad discretion not only in determining whether or not to order disgorgement but also in calculating the amount to be disgorged.” Sec. & Exch. Comm'n v. Contorinis, 743 F.3d 296, 301 (2d Cir. 2014) (citation omitted).
The Defendants suggest that the Court may defer a decision on this motion. To the extent the Defendants suggest that the award of disgorgement will occur after a separate proceeding, they are in error. There has been no bifurcation at trial of the issues of liability and damages.
The Second Circuit applies a two-step framework for calculating equitable monetary relief. A plaintiff must first show that its calculations reasonably approximate the amount of the defendants' unjust gains, and then the defendants may show that those figures are inaccurate. Fed. Trade Comm'n v. Moses, 913 F.3d 297, 310 (2d Cir. 2019) (citation omitted). “If the disgorgement amount is generally reasonable, any risk of uncertainty about the amount falls on the wrongdoer whose illegal conduct created that uncertainty.” Sec. & Exch. Comm'n v. Fowler, 6 F.4th 255, 267 (2d Cir. 2021) (citation omitted).
Here, the Defendants do not contest the accuracy of the Plaintiffs' calculation of Vyera's net profits. Even if it were appropriate to consider Vyera's ability to pay in determining the amount of disgorgement, McLean's testimony does not address that issue. He opines at most on its financial condition and ability to pay the judgment sought by the Plaintiffs in a single quarter of a single year. McLean does not opine on how much Vyera can pay in that quarter or at any other time.
The Defendants do challenge, however, the reliability of certain assumptions on which those calculations rest.
Moreover, even if a defendant's ability to pay were properly considered, for instance, in setting a post-verdict schedule for any payment of disgorgement, that inquiry would not be limited to the first quarter of 2022. Therefore, even in that scenario McLean's testimony is both premature and of limited relevance.
Finally, as the Plaintiffs point out, McLean's testimony must be stricken in any event to the extent it presents opinions not described in his expert report. These include testimony about the monetization of a Ketamine asset.
Conclusion
The Plaintiffs' October 20, 2021 motion to exclude the testimony of Justin Mclean is granted. 7