AstraZeneca reached a $68.5 million settlement with 37 states in March over its marketing of the antipsychotic Seroquel, but South Carolina and six other states have continued to prosecute their own cases. South Carolina attorney general Alan Wilson turned to three firms–Bailey Perrin Bailey, the Simmons Law Firm, and Harrison, White, Smith & Goggins–to handle the state’s case on a contingency fee basis.
AstraZeneca and its lawyers at Morgan, Lewis & Bockius filed their own suit against the AG in March. They claimed that by hiring contingency-fee law firms to press money-only claims against the company, Wilson had violated AstraZeneca’s constitutional due process rights. Because the suit seeks only financial penalties, AstraZeneca contends the civil claim amounts to a criminal prosecution driven by financially motivated lawyers. (The AG’s suit seeks $5,000 for each Seroquel prescription written in South Carolina.) Both sides have acknowledged that a criminal action driven by a prosecutor with a financial stake would be a violation of the company’s rights, but Wilson maintained that the contingency fee agreements in the civil suit against AstraZeneca were permissible.
Judge Roger Couch of the Court of Common Pleas in Spartanburg County denied the AG’s motion to dismiss on Tuesday. The judge didn’t rule on whether the penalties-only action was akin to a criminal prosecution, concluding only that the complaint “does state a valid claim for possible relief and dismissal on the pleadings is inappropriate.”
An AstraZeneca spokesman sent us this statement on the decision: “AstraZeneca agrees with Judge Couch’s ruling, which validates AstraZeneca’s challenge to the attorney general’s use of private contingency fee counsel to prosecute a law enforcement proceeding against AstraZeneca, as well as the attorney general’s own financial interest in that prosecution. AstraZeneca intends to vigorously pursue the case in order to fully vindicate its rights.” AstraZeneca counsel J. Gordon Cooney Jr. of Morgan Lewis was not immediately available to comment.
AstraZenaca is not alone in challenging an attorney general’s use of private lawyers in a lawsuit seeking only penalties. In August Merck sued Kentucky Attorney General Jack Conway in federal district court in Frankfort over his hiring of two contingency fee firms in a suit agains the drug company. Conway’s office has moved to dismiss. Judge Danny Reeves has yet to issue a ruling on the motion. (Merck is represented by Skadden, Arps, Slate, Meagher & Flom.)
Donald Coggins of Harrison White, who argued for Wilson and who is involved in the underlying suit against AstraZeneca, said the attorney general wouldseek to dismiss the suit again after discovery is completed. He defended the contingency fee arrangements, noting that they work on a sliding scale where there is “less and less incentive” to seek penalties as the fees mount. Coggins said the suits by companies like AstraZeneca and Merck challenging such arrangements are an attempt to “intimidate” attorneys general, who can’t afford to pay hourly fees given budgetary restraints.
“I don’t think there’s any question it’s to keep the attorneys general from enforcing the laws of his or her state,” Coggins said.