In June, Mylan Laboratories Inc. and UDL Laboratories, Inc., one of its subsidiaries, sued their former counsel, Eliot G. Disner and his firm, Eliot G. Disner, P.C., in the Circuit Court of Monongalia County, West Virginia (Morgantown), for what they claimed was negligence and breach of contract regarding advice he provided on antitrust issues. Here’s the complaint.
Mylan alleges that Disner committed malpractice in three ways. First, he "allowed Mylan to enter into the exclusive supply agreement with Profarmaco/GYMA [who were to supply Mylan with the "active pharmaceutical ingredients" for lorazepam and clorazepate for the generic versions of the drugs on an exclusive basis] without fully investigating the issues or apprising Mylan of the substantial risks." Mylan also alleges that Disner allowed it "to engage SST/FIS [another supplier of lorazepam and clorazepate] in discussions on a similar exclusive arrangement, introducing a damaging horizontal element into an antitrust equation." Finally, Mylan alleges that after the FTC initiated an investigation into Mylan’s conduct, Disner "offered no advice to mitigate the problems facing Mylan or suggesting the risks that Mylan faced — instead advising that the FTC would accept a harmless consent decree, that the FTC had no ability to seek damages, and that the states would drop their claims when the FTC dropped its claims."
According to the complaint, after acting on Disner’s advice, Mylan was hit with an investigation by the FTC, which turned into an action seeking disgorgement of Mylan’s profits of more than $120 million on certain products. Mylan was also sued by several states, various direct purchasers, who obtained class certification for their suit, and several indirect purchasers. Mylan ended up settling with the FTC, the states, and the indirect purchasers for $147 million, and also paid $14.6 of the $35 million settlement of direct purchasers’ class action. In 2005, Mylan went to trial against four of the plaintiffs who opted out of the class settlement, and was found to be liable for slightly more than $12 million. But with attorney’s fees and treble damages, the plaintiffs seek judgment for approximately $80 million. Finally, Mylan alleges that it has spent more than $55 million in attorney’s fees and expenses for itself and for Profarmaco/ GYMA, which Mylan indemnified.
Disner, who is representing himself and his firm, last month removed the case to the Northern District of West Virginia where it is pending before Chief District Judge Irene M. Keeley. Mylan Laboratories, Inc. v. Eliot G. Disner, Civil Action No. 1:07-CV-00095-IMK. The defendants’ answer or responsive pleading is due by August 24. This case is perplexing. First of all, if my math is right, Mylan has paid out and may ultimately owe to the plaintiffs who opted out of the class settlement a total of approximately $300 million. I don’t know how much of that Mylan realistically expects to recover from Disner, assuming that it proves its allegations against him. As I mentioned, Disner has represented himself and his firm thus far, which suggests that either he hasn’t turned in the claim to his malpractice carrier or he may not have coverage.
The other thing that intrigues me is the degree of control that Mylan apparently gave Disner, at least according to its complaint. While Disner may be a recognized expert in antitrust issues (he is the author of Antitrust: Questions, Answers, Law, And Commentary, 3d Ed., ALI-ABA), Mylan claims that, at least for the transactions that form the basis for its complaint, Disner called the shots. That characterization may be attributed to creative writing (since the complaint should present the plaintiff’s side as forcefully as possible), but I question what kind of recovery Mylan, as a self-described "global pharmaceutical company with market leading positions" in several areas, can expect if Disner’s alleged malpractice consists of the exercise of his judgment, which turned out to be erroneous. Obviously, a lawyer’s erroneous or ill-considered advice can constitute malpractice. But Mylan’s complaint makes it sound like the only opinion that mattered in any of these decisions was Disner’s. I’m not sure if the officers and directors of a corporation, particularly one that’s publicly traded, can basically abdicate responsibility for decisions that didn’t turn out well.
One other item about Disner: he was a partner in the Los Angeles office of McGuireWoods LLP until May of this year, when he was fired for raising objections to the adequacy of a proposed settlement between a class consisting of former BAR/BRI students, whom McGuireWoods represented, and West Publishing and Kaplan, Inc., one of West’s marketing partners. Under the proposed settlement, West would pay $36 million and Kaplan would pay $13 million for a total of $49 million to a class of approximately 300,000 law school graduates. But Disner claimed in a court filing that the plaintiffs should try to get at least $400 million from West, plus the break-up of BAR/BRI. Disner filed the suit in 2005 when he was with another firm in Los Angeles. According to PACER, United States District Judge Manuel Real granted the plaintiffs’ motion for approval of the class settlement on July 9, although it’s not possible to know whether the terms differed from the proposal, as the court sealed virtually all of the documents in the case.