Federal Trade Commission v. Shire Viropharma, Inc., 917 F.3d 147 (3d Cir. 2019). A former President of the United States famously uttered the statement that, in interpreting his testimony under oath, “it depends on what the meaning of ‘is’ is.” Today’s opinion by Chief Judge Smith addressed whether the Federal Trade Commission Act, 15 U.S.C. §53(b), section 13(b) of the Act, which allows the Federal Trade Commission (“FTC”) to sue anyone who “is violating” or “is about to violate” the Act subjects to suit someone who previously violated the Act but has not done so for years since.
The District Court granted defendant’s motion to dismiss for failure to state a claim. Today, the Third Circuit affirmed that decision.
For a number of years, defendant had a monopoly on a drug called Vancocin. In 2007, however, generic drug companies submitted Abbreviated New Drug Applications to the Food and Drug Administration (“FDA”), seeking to market generic versions of the drug. Defendant then launched a campaign of filings with the FDA, 43 filings in all, and filed several lawsuits, all designed to delay competition from the generic companies.
In 2012, the FDA rejected defendant’s submissions and concluded that they “lack[ed] merit” and “were unsupported.” The FDA granted the generics the right to go into the market. Within three months thereafter, defendant had lost almost 70% of its unit sales. In 2014, defendant divested itself of Vancocin.
In February 2017, nearly five years after defendant had stopped making submissions to the FDA, the FTC sued defendant under section 13(b). The FTC asserted that defendant’s conduct– “submitting serial, meritless filings”– had harmed consumers and competition by prolonging defendant’s monopoly over Vancocin. The FTC also charged that there was a “cognizable danger” that defendant might engage in similar conduct in the future, because it had the incentive and the opportunity to do so..
Chief Judge Smith recounted the facts and procedural history in detail, and he discussed the Act and its history at length as well. Section 5 of the Act addressed past violations, but the FTC did not invoke that provision.
Exercising plenary review, the panel affirmed the dismissal for failure to state a claim. Applying the plain language of the Act, Chief Judge Smith stated that the statutory language “is unambiguous; it prohibits existing or impending conduct. Simply put, Section 13(b) does not permit the FTC to bring a claim based on long-past conduct without some evidence that the defendant ‘is’ or ‘is about to’ commit another violation.”
The FTC made a number of arguments, none of which persuaded the panel. One of those many contentions relied on the idea that the Act, being remedial, should be broadly construed. Chief Judge Smith rightly observed that that principle did not warrant ignoring clear statutory language. The FTC also claimed that affirming the District Court would hamstring the FTC’s enforcement efforts. The riposte to that was that the FTC could invoke section 5, as to past violations, if it had a basis to do so.
Chief Judge Smith said that the vague allegations of the Complaint did not come close to stating a claim that defendant was “about to violate” the law. And the FTC did not claim that defendant “is” (or, by now, “was”) violating the law. Accordingly, the panel affirmed the District Court’s order of dismissal.