Fee Shifting For Response To Subpoena Not Appropriate Where The Non-Party Had Actual Interest In Outcome Of The Case

29 Apr 2021

In SANDOZ v. UNITED THERAPEUTICS, Civil Action No. 19-10170 (D.N.J. April 6, 2021) before the Special Master was Defendant United Therapeutic’s motion to compel non-party Liquida to bear the cost of responding to Defendant’s subpoena. 

During the pendency of the lawsuit, Defendant learned that non-party Liquida would be acquiring Plaintiff.  Upon learning of the merger, Defendant served a subpoena on Liquida to produce documents pertaining to the underlying action and its acquisition of Plaintiff. 

Liquida claimed that it spent months working with Defendant on how to respond to the subpoena and offered to search and review over 25,000 documents including families.  However, Liquida agreed to review the documents only if Defendant agreed to pay an estimated $45,000 arguing that it should not be required to carry such costs because it was an “innocent bystander.”  Unable to resolve the issue, Defendant moved to compel Liquida to bear the costs and fees associated with responding to Defendant’s subpoena. 

To determine whether fee-shifting was appropriate, the Special Master was required to consider “(1) whether the nonparty has an actual interest in the outcome of the case; (2) whether the nonparty can more readily bear the costs than can the requesting party; and (3) whether the litigation is of public importance.”

According to Defendant, Liquida was an interested party because Plaintiff, as a result of the merger, is now a wholly owned subsidiary of Liquida and that Liquida stood to receive a direct financial benefit if Plaintiff prevails on its claims, particularly since any injunctive relief awarded to Plaintiff would result in revenue for Liquida as the parent company of Plaintiff.  Liquida countered with, among others, that it specifically carved out the litigation as part of the merger transaction and that any argument based on future profits from the sale of the generic drug at issue should be ignored otherwise any non-party with an indirect financial benefit would be required to pay for a response to a third party subpoena.

However, Liquida’s arguments were rejected by the Special Master as Liquida did not just have an indirect financial benefit or was a mere bystander.  Indeed, looking at Plaintiff’s First Amended Complaint, Plaintiff alleged that Defendant earned nearly two billion dollars over the past three years from the sale of the generic drug. Based upon such allegations, it was clear that Liquida, as Plaintiff’s parent company, stood to benefit directly from Plaintiff’s claims, if successful.

The Special Master also dismissed Liquida’s argument that the $45,000 it would cost to comply was a “significant expense.  “Liquidia does not explain how this amount is significant within the meaning of the law. Liquidia is a large company, which, as R.J. Reynolds Tobacco’s progeny has explained, has the ability to bear the cost of production.” 

Finally, with respect to the third factor, as determined by the Special Master “this matter is of some public importance as it seeks to make a drug more readily available to patients.”