FTC v. Shire ViroPharma Inc , 917 F.3d 147 ( 2019 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 18-1807
_____________
FEDERAL TRADE COMMISSION,
Appellant
v.
SHIRE VIROPHARMA, INC.
_____________
On Appeal from the United States District Court
for the District of Delaware
District Court No. 1-17-cv-00131
District Judge: The Honorable Richard G. Andrews
Argued December 11, 2018
Before: SMITH, Chief Judge, McKEE, and FISHER,
Circuit Judges
(Filed: February 25, 2019)
Bradley S. Albert
Meredyth Andrus
Thomas J. Dillickrath
Matthew M. Hoffman [ARGUED]
June Im
Nicholas Leefer
Joel R. Marcus
Joseph Mathias
James H. Weingarten
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Counsel for Appellant
J. Clayton Everett, Jr.
Scott A. Stempel
Morgan Lewis & Bockius
1111 Pennsylvania Avenue, N.W.
Suite 800 North
Washington, DC 20004
Noah J. Kaufman
Morgan Lewis & Bockius
One Federal Street
Boston, MA 02110
Steven A. Reed [ARGUED]
Jessica J. Taticchi
Morgan Lewis & Bockius
2
1701 Market Street
Philadelphia, PA 19103
Counsel for Appellee
George P. Slover
Consumers Union
1101 17th Street, N.W.
Suite 500
Washington, DC 20036
Counsel for Amicus Appellant
Richard A. Samp
Washington Legal Foundation
2009 Massachusetts Avenue, N.W.
Washington, DC 20036
Counsel for Amicus Appellee
________________
OPINION OF THE COURT
________________
SMITH, Chief Judge.
3
Shire ViroPharma, Inc. (“Shire”),1 manufactured
and marketed the lucrative drug Vancocin, which is
indicated to treat a life-threatening gastrointestinal
infection. After Shire got wind that manufacturers were
considering making generic equivalents to Vancocin, it
inundated the United States Food and Drug
Administration (“FDA”) with allegedly meritless filings to
delay approval of those generics. The FDA eventually
rejected Shire’s filings and approved generic equivalents
to Vancocin, but the filings nonetheless resulted in a high
cost to consumers—Shire had delayed generic entry for
years and reaped hundreds of millions of dollars in profits.
Nearly five years later—and after Shire had
divested itself of Vancocin—the Federal Trade
Commission (“FTC”) filed suit against Shire in the United
States District Court for the District of Delaware under
Section 13(b) of the Federal Trade Commission Act, 15
U.S.C. § 53(b). The FTC sought a permanent injunction
and restitution, alleging that Shire’s petitioning was an
unfair method of competition prohibited by the Act. Shire
moved to dismiss, arguing that the FTC’s allegations of
long-past petitioning activity failed to satisfy Section
13(b)’s requirement that Shire “is violating” or “is about
1
Shire ViroPharma, Inc. is the corporate successor
to ViroPharma, which it acquired in 2014—after the
petitioning activity at issue in this case ceased.
4
to violate” the law. The District Court agreed and
dismissed the case.
On appeal, the FTC urges us to adopt a more
expansive view of Section 13(b). According to the FTC,
the phrase “is violating, or is about to violate” in Section
13(b) is satisfied by showing a past violation and a
reasonable likelihood of recurrent future conduct. We
reject the FTC’s invitation to stretch Section 13(b) beyond
its clear text. The FTC admits that Shire is not currently
violating the law. And the complaint fails to allege that
Shire is about to violate the law. We will therefore affirm
the District Court’s judgment.
I.2
A.
A company that wishes to manufacture and market
a new drug in the United States must submit to the FDA a
New Drug Application (“NDA”) demonstrating the safety
2
We derive the facts of this case from the FTC’s
complaint. In our review of the grant of the motion to
dismiss, we take the allegations to be true and construe
them in the light most favorable to the FTC. In re: Tower
Air, Inc., 416 F.3d 229, 232 n.1 (3d Cir. 2005).
5
and efficacy of the product.3 Usually, the NDA filer
demonstrates safety and efficacy by using expensive in
vivo clinical endpoint studies, where researchers provide
sick patients with either the proposed drug or a placebo to
compare the safety and efficacy of the drug with the
placebo. See Fed. Trade Comm’n v. Actavis, Inc., 570
U.S. 136, 142 (2013) (describing the “long,
comprehensive, and costly testing process” underlying an
NDA). After FDA approval, the manufacturer must seek
approval through a supplemental NDA if it wishes to
change the drug or its label.
A generic drug manufacturer need not file an NDA
because it is essentially copying the approved branded
drug. The generic manufacturer must instead file an
Abbreviated New Drug Application (“ANDA”), which
relies on the approved drug’s profile for safety and
efficacy. See id. (“The Hatch-Waxman process, by
allowing the generic to piggy-back on the pioneer’s
3
The regulatory scheme employed by the FDA is
governed by the Food, Drug, and Cosmetic Act, 21 U.S.C.
§ 301, as amended by the Drug Price Competition and
Patent Term Restoration Act of 1984 (“Hatch-Waxman”),
Pub. L. No. 98-417, 98 Stat. 1585 (1984) (codified as
amended at 21 U.S.C. § 355 and 35 U.S.C. § 271(e)
(1994)), and the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, Pub. L. No.
108-173, 117 Stat. 2066 (2003).
6
approval efforts, speeds the introduction of low-cost
generic drugs to market, thereby furthering drug
competition.” (internal alteration, quotation marks, and
citation omitted)). The generic manufacturer must
demonstrate, inter alia, that the proposed generic drug is
bioequivalent to the referenced branded drug.4 See 21
C.F.R. § 314.3(b) (defining bioequivalence as “the
absence of a significant difference in the rate and extent to
which the active ingredient or active moiety in
pharmaceutical equivalences or pharmaceutical
alternatives becomes available at the site of drug
action . . . .”).
B.
Shire develops, manufactures, and markets branded
drugs. Until Shire divested itself of the product in 2014,
4
The FDA has flexibility in determining how a
manufacturer must establish bioequivalence. See, e.g., 21
C.F.R. § 320.24(a) (providing that the FDA may require
either in vivo or in vitro studies to demonstrate
bioequivalence).
7
this included Vancocin capsules.5 Vancocin capsules are
an oral antibiotic used to treat Clostridium-difficile
associated diarrhea, which is a serious, potentially life-
threatening gastrointestinal infection. When Vancocin
capsules were developed, the NDA did not include in vivo
clinical endpoint studies because the capsules were an
alternative delivery system to Vancocin oral solution,
which the FDA already knew to be safe and effective.
Instead, the NDA included in vitro dissolution data (which
measures how quickly the capsules dissolve) and in vivo
pharmacokinetic data (which compares the absorption of
the drug in capsule form versus oral solution form).
In April 1986, the FDA approved Vancocin
capsules. Shire acquired Vancocin capsules in November
2004. From then until 2011, Vancocin capsules were
Shire’s largest revenue-generating product. Vancocin
capsules accounted for all of Shire’s net revenue until
2009 and up to 53% of its net revenue in 2011. United
5
We take judicial notice of this fact—which is not
in the complaint—from Shire’s Form 8-K filings with the
Securities Exchange Commission. Shire plc, Form 8-K, 5
(Oct. 24, 2014), https://bit.ly/2SxTOm8; see Oran v.
Stafford, 226 F.3d 275, 289 (3d Cir. 2000) (taking judicial
notice of SEC filings).
8
States sales for Vancocin capsules grew from $40 million
in 2003 to almost $300 million in 2011.
Generic manufacturers, attracted by Vancocin’s
financial success, wanted to enter the market. Vancocin
was vulnerable to generic competition because it lacked
both patent protection and regulatory exclusivity. One
primary barrier to generic entry remained—the FDA’s
recommendation that generic manufacturers seeking to
demonstrate bioequivalence conduct in vivo clinical
endpoint studies. Ironically, these tests were more
expensive and onerous than the in vitro dissolution testing
and in vivo pharmacokinetic studies that had been used to
gain approval of Vancocin capsules in the first place. The
FDA apparently realized this inconsistency; in October
2004 it convened a public meeting of the Advisory
Committee for Pharmaceutical Science (the “Advisory
Committee”)6 to reassess bioequivalence testing for
locally-acting gastrointestinal drugs like Vancocin.
Shire became increasingly concerned that the FDA
might allow generic manufacturers to demonstrate
bioequivalence using in vitro data. Shire thus hired a
6
The Advisory Committee is a body of sixteen
independent experts from academia, non-profits, and
hospitals. These experts are “knowledgeable in the fields
of pharmaceutical sciences, clinical pharmacology, and
gastrointestinal diseases.” Compl. ¶ 85.
9
bioequivalence consultant to advise it on the FDA’s likely
course of action. In November 2005, the consultant
confirmed Shire’s suspicions, advising Shire that the FDA
would likely allow generic manufacturers to submit in
vitro dissolution data to establish bioequivalence to
Vancocin capsules. The consultant counseled Shire to
submit a citizen petition “sooner than later” but warned
that without supporting clinical data, Shire “could not
convince the FDA of its position against use of in vitro
dissolution testing.” Compl. ¶ 45.
Shire’s fear came to pass: the FDA indeed changed
its position on bioequivalence testing for Vancocin
capsules. In February 2006, the FDA advised a generic
manufacturer that bioequivalence for Vancocin capsules
could be demonstrated by in vitro dissolution testing. The
FDA also shared this guidance with other generic
manufacturers that inquired. In March 2007, the first
generic manufacturer submitted its ANDA for Vancocin
capsules. Two other generic manufacturers followed suit
later that year.
C.
Not surprisingly, Shire wanted to protect its
monopoly on the Vancocin market. Among its options
was a citizen petition. The First Amendment guarantees
individuals the right to petition the government. U.S.
Const. amend. I. Consistent with that right, the
Administrative Procedure Act permits any “interested
10
person” to petition a federal agency “for the issuance,
amendment, or repeal of a rule.” 5 U.S.C. § 553(e); see
also 21 C.F.R. § 10.30 (FDA regulation governing citizen
petitions).
The filing of a citizen petition can substantially
delay approval of a generic drug. During the time period
at issue here, the FDA automatically suspended ANDA
approval if a branded manufacturer filed a citizen
petition.7 The FDA is obligated to respond to every citizen
petition within 180 days.8 Id. § 10.30(e)(5); see also 21
7
Although inapplicable to Shire’s citizen petition,
Congress passed the Food and Drug Administration
Amendments Act of 2007 to assuage the FDA’s fear that
many brand manufacturers’ citizen petitions were
meritless attempts to delay generic competition. See 21
U.S.C. § 355(q). Post-2007, the FDA cannot delay ANDA
approval due to a citizen petition unless “a delay is
necessary to protect the public health.” Id.
§ 355(q)(1)(A)(ii). Under the amendment, the FDA may
also deny a citizen petition filed “with the primary purpose
of delaying” ANDA approval that “does not on its face
raise valid scientific or regulatory issues.” Id.
§ 355(q)(1)(E).
8
This time period has since been shortened to 150
days. 21 C.F.R. § 10.30(e)(5).
11
U.S.C. § 355(q)(1)(F). But the FDA’s response need not
dispose of the entire petition within that time. The FDA
may deny the petition, approve it in whole or in part,
provide a tentative response, or delay a decision by
modifying or postponing any suggested action. See 21
C.F.R. § 10.30(e)(2)(i)–(iv).
From March 2006 to April 2012, Shire submitted a
total of forty-three filings to the FDA and instituted three
federal court proceedings—all allegedly to delay the
approval of generic Vancocin capsules by convincing the
FDA to require ANDA applicants to conduct in vivo
clinical endpoint studies. Shire’s filings ranged from a
citizen petition and amendments thereto to public
comments on other manufacturers’ ANDAs. Many of
these filings were around the same time Shire suspected
the FDA was nearing approval of generic equivalents to
Vancocin.
On April 9, 2012, the FDA rejected Shire’s citizen
petition.9 The FDA concluded that Shire’s scientific
challenges to the bioequivalence recommendation
“lack[ed] merit” and “were unsupported.” Compl. ¶ 104
(internal quotation marks omitted); App. 77–95. On that
same day the FDA approved three ANDAs for generic
9
Shire did not prevail in any of its lawsuits, which
were either dismissed or withdrawn.
12
Vancocin capsules. Shire lost almost 70% of its unit sales
for Vancocin capsules within three months.
D.
Nearly five years later, on February 7, 2017, the
FTC sued Shire, seeking a permanent injunction and
equitable monetary relief under Section 13(b) of the FTC
Act. The FTC claimed that Shire’s conduct—submitting
serial, meritless filings—had harmed consumers and
competition because it enabled Shire to maintain and
extend its monopoly by delaying the FDA’s approval of
generic alternatives to Vancocin capsules. See 15 U.S.C.
§ 45(a).
The FTC alleged that, absent an injunction, “there
is a cognizable danger” that Shire will “engage in similar
conduct causing future harm to competition and
consumers.” Compl. ¶ 150. It based this assertion on
Shire’s (1) knowledge that its petitioning campaign would
enrich it at the expense of consumers; (2) incentive to
engage in similar conduct in the future; and (3)
opportunity to engage in similar conduct in the future. As
to the third point, the FTC specifically alleged that Shire
“marketed and developed drug products,” namely
Cinryze, “for commercial sale in the United States, and it
could do so in the future.” Id. ¶¶ 8, 151.
Shire moved to dismiss the complaint, arguing that
the FTC had failed to plead sufficient facts to invoke its
13
authority under Section 13(b). Shire also contended that
its petitioning activity was immune from antitrust
challenge pursuant to the Noerr-Pennington doctrine. See
E. R.R. Presidents Conference v. Noerr Motor Freight,
Inc., 365 U.S. 127, 136 (1961); United Mine Workers of
Am. v. Pennington, 381 U.S. 657, 670 (1965). The FTC
responded that Section 13(b) authorized its lawsuit and
that Shire had engaged in sham petitioning, which is not
protected by Noerr-Pennington.
The District Court granted Shire’s motion to
dismiss, ruling that the FTC had failed to plead sufficient
facts to show that Shire “is violating, or is about to violate”
the law.10 The Court flatly rejected the FTC’s contention
that Shire was about to violate the law merely because it
had the incentive and opportunity to engage in similar
conduct in the future.
10
Despite the District Court’s grant of Shire’s
motion to dismiss—which was couched in jurisdictional
terms—the Court also reached Shire’s Noerr-Pennington
defense. The Court declined to dismiss the case on these
grounds, explaining that the allegations in the complaint
were sufficient to invoke the sham petitioning exception—
at least at the pleading stage. Because we affirm the
District Court’s dismissal, Shire’s Noerr-Pennington
defense is not before us on appeal.
14
The FTC filed this timely appeal.
II.
We begin by addressing whether Section 13(b)’s
requirements are jurisdictional. The FTC contends that
Section 13(b) is not jurisdictional while Shire argues the
opposite. The District Court appears to have assumed—
without expressly analyzing the issue—that Section 13(b)
does not impose a jurisdictional requirement.11
The Supreme Court of the United States has
instructed us to assume that statutory limitations are
nonjurisdictional unless Congress provides otherwise. In
Arbaugh v. Y&H Corp., the Court addressed whether Title
VII’s definition of “employer” (which only includes those
having fifteen or more employees) “affects federal-court
subject-matter jurisdiction or, instead, delineates a
substantive ingredient of a Title VII claim for relief.” 546
U.S. 500, 503 (2006). The Court held that it was the latter,
cautioning courts against “drive-by jurisdictional rulings”
11
The District Court’s opinion was murky on this
point, citing both Rule 12(b)(1) and 12(b)(6) of the Federal
Rules of Civil Procedure. At several points the District
Court couched its inquiry as jurisdictional, yet still
addressed the merits of Shire’s Noerr-Pennington defense.
Regardless of the District Court’s conclusion, our review
is plenary.
15
that fail to actually assess “whether the federal court had
authority to adjudicate the claim in suit.” Id. at 511
(citation omitted).
The Supreme Court reiterated that a plaintiff obtains
the “basic statutory grant[]” of subject matter jurisdiction
in 28 U.S.C. § 1331 by pleading a colorable claim that
arises under the Constitution or the laws of the United
States. Id. at 513. The plaintiff in Arbaugh had invoked
federal question jurisdiction by pleading a claim under
Title VII. Id. The Court held that the fifteen-employee
threshold went to the merits of the Title VII claim,
explaining that Congress had not clearly delineated it as a
jurisdictional requirement. Id. at 514–16. The Supreme
Court created a “readily administrable bright line”—
“when Congress does not rank a statutory limitation on
coverage as jurisdictional, courts should treat the
restriction as nonjurisdictional in character.” Id. at 516.
Under the standard announced in Arbaugh, Section
13(b)’s “is” or “is about to violate” requirement is
nonjurisdictional. Section 13(b) provides, in relevant part:
Whenever the [FTC] has reason to believe—
16
(1) that any person, partnership, or
corporation is violating, or is about to
violate, any provision of law enforced
by the [FTC,] and
(2) that the enjoining thereof pending the
issuance of a complaint by the [FTC]
and until such complaint is dismissed
by the [FTC] or set aside by the court
on review, or until the order of the
[FTC] made thereon has become final,
would be in the interest of the public—
the [FTC] . . . may bring suit in a district court
of the United States to enjoin any such act or
practice.
15 U.S.C. § 53(b) (emphasis added).
The FTC’s claim arises under a law of the United
States—15 U.S.C. § 53(b). It thus falls within the general
grant of jurisdiction in § 1331. The District Court also had
jurisdiction under 28 U.S.C. §§ 1337(a) and 1345.
Section 13(b) includes no indicia that Congress
intended to “rank a statutory limitation . . . as
jurisdictional”; as such, we must follow the Supreme
Court’s “readily administrable bright line” rule and treat
the statutory language as nonjurisdictional. Arbaugh, 546
U.S. at 516. Whether a person “is violating, or is about to
17
violate” the law relates to the merits of a Section 13(b)
claim, and does not indicate that Congress intended to strip
district courts of their authority to resolve the FTC’s claim.
Because “nothing in [Section 13(b)] displays any intent to
withdraw federal jurisdiction . . . we will not presume that
the statute means what it neither says nor fairly implies.”
Verizon Md. Inc. v. Pub. Serv. Comm’n of Md., 535 U.S.
635, 644 (2002).
We conclude that the District Court had jurisdiction
pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345.
18
III.12
A.
The FTC Act declares “[u]nfair methods of
competition in or affecting commerce” to be unlawful, 15
U.S.C. § 45(a)(1), and directs the FTC to prevent
violations of the Act, id. § 45(a)(2). The FTC has multiple
instruments in its toolbox to combat unfair methods of
competition; among these are administrative proceedings
and lawsuits in federal court. See id. §§ 45(b), 53(b).
Section 5(b), the FTC’s administrative remedy, is
its traditional enforcement tool. See id. § 45(b). Since its
inception, the FTC Act has provided for administrative
12
We exercise jurisdiction under 28 U.S.C. § 1291.
Because Section 13(b)’s requirements are
nonjurisdictional, we consider the dismissal to be under
Rule 12(b)(6) of the Federal Rules of Civil Procedure. We
exercise plenary review over the District Court’s order
granting a motion to dismiss for failure to state a claim.
Mariotti v. Mariotti Bldg. Prods., Inc., 714 F.3d 761, 765
(3d Cir. 2013). We accept “all well-pleaded allegations in
the complaint as true and view[] them in the light most
favorable to the plaintiff.” Id. The movant can obtain
relief only if the complaint’s allegations, “however true,
could not raise a claim of entitlement to relief.” Id.
(alteration and internal quotation marks omitted).
19
proceedings to remedy unfair methods of competition.
Federal Trade Commission Act § 5, 38 Stat. 719 (1914)
(current version at 15 U.S.C. § 45(b) (2018)). If the FTC
has “reason to believe” that a person, partnership, or
corporation “has been or is using” unfair methods of
competition, the FTC can issue an administrative
complaint “stating its charges in that respect.” 15 U.S.C.
§ 45(b). If after receiving the FTC’s complaint the
respondent contests the charges, the parties adjudicate in a
trial-type proceeding in front of an administrative law
judge (“ALJ”). Either party may appeal the ALJ’s
decision. If the FTC believes the respondent is violating
the law, it issues a written report and serves a cease and
desist order upon the respondent. Id. The respondent has
sixty days to seek review “in the appropriate court of
appeals.”13 Id.
In addition to cease and desist orders, Section 5
provides for limited monetary remedies. If a respondent
violates a cease and desist order, the FTC may seek a civil
penalty of no more than $10,000 per violation. Id. § 45(l).
The civil penalty is recoverable in a “civil action brought
by the Attorney General.” Id. The FTC may also file a
civil action to recover a penalty for knowing violations of
13
The appropriate court of appeals is “any circuit
where the method of competition . . . was used or where
[the respondent] resides or carries on business.” 15 U.S.C.
§ 45(c).
20
rules “respecting unfair or deceptive acts or practices.” Id.
§ 45(m)(1)(A). In these actions the District Court is
permitted “to grant mandatory injunctions and such other
and further equitable relief” as appropriate to enforce the
FTC’s final order. Id. § 45(l).
Section 13 authorizes the FTC—in certain
circumstances—to file suit in federal district court. Unlike
Section 5, Section 13 was not part of the original FTC Act.
Rather, Section 13(b) was added later in an effort to solve
one of the main problems of the FTC’s relatively slow-
moving administrative regime—the need to quickly enjoin
ongoing or imminent illegal conduct. In Section 5
proceedings, the FTC must prevail to obtain a cease and
desist order. See id. § 45(b). Even if the FTC issues a
cease and desist order, it must seek a court’s aid in
enforcing the order. Id. § 45(l) To remedy this
shortcoming and allow a quicker response, Congress
amended the FTC Act in 1973 to allow the FTC to obtain
a temporary restraining order or preliminary injunction in
federal court whenever it “has reason to believe” that
violations of the FTC Act are occurring or are about to
occur. Id. § 53(b). Section 13(b) thus empowers the FTC
to speedily address ongoing or impending illegal conduct,
rather than wait for an administrative proceeding to
conclude. See id.
21
B.
The crux of the FTC’s claim is that it is entitled to
pursue immediate relief in the District Court under Section
13(b), rather than via the administrative remedy set forth
in Section 5. We begin with the text of the FTC Act. See
Murphy v. Millennium Radio Grp. LLC, 650 F.3d 295, 302
(3d Cir. 2011) (“When the statute’s language is plain, the
sole function of the courts—at least where the disposition
required by the [text] is not absurd—is to enforce it
according to its terms.” (internal quotation marks
omitted)). Section 13(b) provides, in relevant part,
Whenever the [FTC] has reason to believe—
(1) that any person, partnership, or
corporation is violating, or is about to
violate, any provision of law enforced
by [the FTC,] and
(2) that the enjoining thereof
pending the issuance of a complaint by
the [FTC] and until such complaint is
dismissed by the [FTC] or set aside by
the court on review, or until the order
of the [FTC] made thereon has become
final, would be in the interest of the
public—
22
the [FTC] by any of its attorneys designated
by it for such purpose may bring suit in a
district court of the United States to enjoin
any such act or practice. Upon a proper
showing that, weighing the equities and
considering the [FTC]’s likelihood of
ultimate success, such action would be in the
public interest, and after notice to the
defendant, a temporary restraining order or a
preliminary injunction may be granted
without bond: Provided, however, That if a
complaint is not filed within such period (not
exceeding 20 days) as may be specified by
the court after issuance of the temporary
restraining order or preliminary injunction,
the order or injunction shall be dissolved by
the court and be of no further force and effect:
Provided further, That in proper cases the
[FTC] may seek, and after proper proof, the
court may issue, a permanent injunction.
15 U.S.C. § 53(b)(1)–(2) (first emphasis added).
Section 13(b) requires that the FTC have reason to
believe a wrongdoer “is violating” or “is about to violate”
the law. Id. § 53(b)(1). We conclude that this 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
23
that the defendant “is” committing or “is about to” commit
another violation.
The plain language of Section 13(b) is reinforced by
its history. “Generally, where the text of a statute is
unambiguous, the statute should be enforced as written
and only the most extraordinary showing of contrary
intentions in the legislative history will justify a departure
from that language.” Millennium Radio Grp. LLC, 650
F.3d at 302 (internal quotation marks omitted). When
Congress added Section 13(b), the provision was expected
to be used for obtaining injunctions against illegal conduct
pending completion of FTC administrative hearings. See
S. Rep. No. 93-151, at 30 (1973) (“The purpose of
[Section 13(b)] is to permit the [FTC] to bring an
immediate halt to unfair or deceptive acts or practices
when . . . [a]t the present time such practices might
continue for several years until agency action is
completed.”). The provision was not designed to address
hypothetical conduct or the mere suspicion that such
conduct may yet occur. Cf. id. (explaining that Section
13(b) is meant to “bring an immediate halt to unfair or
deceptive acts or practices. . . .”). Nor was it meant to
duplicate Section 5, which already prohibits past conduct.
C.
The FTC’s arguments to the contrary are
unconvincing. The FTC contends that relief under Section
13(b) is appropriate when it shows a reasonable likelihood
24
that past violations will recur. In other words, “when a
defendant has already violated the law but the illegal
conduct has ceased, injunctive relief should be granted if
‘there exists some cognizable danger of recurrent
violation.’” Br. of Appellant 21 (quoting United States v.
W.T. Grant Co., 345 U.S. 629, 633 (1953)).
The FTC borrows its “likelihood of recurrence”
standard from the common law standard for an award of
injunctive relief. A party can generally obtain injunctive
relief for past conduct that is likely to recur; the wrongdoer
cannot avoid an injunction by voluntarily ceasing its
illegal conduct. W.T. Grant Co., 345 U.S. at 632.
Although injunctive relief can survive discontinuance of
the illegal conduct, “the moving party must satisfy the
court that relief is needed. The necessary determination is
that there exists some cognizable danger of recurrent
violation, something more than the mere possibility which
serves to keep the case alive.” Id. at 633.
The FTC insists that other courts have
“consistently” applied the likelihood of recurrence
standard in Section 13(b) cases. Br. of Appellant 21–22.
This is true, and unsurprising, given that Section 13(b)
explicitly authorizes the FTC to obtain injunctions. But
none of the cases cited by the FTC considers the issue
presented here—the meaning of Section 13(b)’s threshold
requirement that a party “is” violating or “is about to”
violate the law.
25
The FTC relies heavily on Federal Trade
Commission v. Evans Products Co., 775 F.2d 1084, 1087
(9th Cir. 1985). There, the United States Court of Appeals
for the Ninth Circuit upheld the denial of an injunction
under Section 13(b), ruling that “an injunction will issue
only if the wrongs are ongoing or likely to recur.” Id. The
FTC sued a home seller at least two years after it had
stopped making allegedly illegal misrepresentations. Id.
at 1085–88. The district court denied the FTC’s motion
for an injunction; the Ninth Circuit affirmed, ruling that
26
the seller’s conduct had completely ceased and was not
likely to recur.14 Id.
In another case cited by the FTC, Federal Trade
Commission v. Accusearch Inc., the United States Court of
Appeals for the Tenth Circuit upheld a Section 13(b)
injunction prohibiting the operator of a website that sold
illegally-acquired personal data from engaging in future
misconduct. 570 F.3d 1187, 1191 (10th Cir. 2009). The
Tenth Circuit did not even quote—let alone analyze—
Section 13(b)’s “about to violate” language because it was
14
Although the result in Evans Products Co. cuts
against the FTC, the Commission tries to rely on portions
of the Ninth Circuit’s reasoning. The Ninth Circuit,
however, did not interpret “about to violate.” See Fed.
Trade Comm’n v. Evans Prods. Co., 775 F.2d 1084, 1086
(9th Cir. 1985). Instead, it gave Chevron deference to the
FTC’s interpretation of a different part of Section 13(b)—
the so-called permanent injunction proviso. See id. The
FTC claimed that the permanent injunction proviso was a
standalone cause of action that authorized it to obtain a
permanent injunction against violations of any provision
of law it enforced. See id. Here, however, the FTC has
expressly disclaimed reliance on the permanent injunction
proviso, see Br. of Appellant 23 n.8, making the FTC’s
arguments relying on Evans Products Co. at best
inapposite and at worst misleading.
27
clear that the website operator had the capacity and
motivation to engage in similar conduct in the future. See
id. at 1202. The Tenth Circuit did not address whether the
FTC had properly filed suit under Section 13(b).
The FTC next protests that our interpretation of “is
about to violate” would make it harder to get in the
courthouse door than to win injunctive relief.15 The FTC
contends that the likelihood of recurrence standard—
which applies when a court is considering whether to grant
or deny injunctive relief—must be the sole standard to
plead a Section 13(b) claim. But the FTC cannot
overcome Congress’s plain language in Section 13(b),
which requires the FTC to plead, at the time it files suit,
that a violation “is” occurring or “is about to” occur. 15
U.S.C. § 53(b). Furthermore, the FTC ignores that the
“about to violate” and “likelihood of recurrence” standards
coexist. The “about to violate” pleading requirement—
15
The FTC argues that the District Court erred by
imposing a “higher” pleading threshold of “imminent
recurrence.” Br. of Appellant 22. The FTC is wrong. The
District Court never imposed an imminence requirement.
In fact, it didn’t even use the word “imminent” in its
opinion. The Court held that the factual allegations in the
FTC’s complaint failed to “plausibly suggest [Shire] is
‘about to violate’ any law enforced by the FTC,
particularly when the alleged misconduct ceased almost
five years before filing of the complaint.” Op. 12.
28
which is applied right out of the gate—is not inconsistent
with the likelihood of recurrence standard, which a court
uses to determine the FTC’s entitlement to an injunction.
The FTC also places much weight on cases
interpreting the Securities Act of 1933 and the Securities
Exchange Act of 1934. These Acts permit the Securities
Exchange Commission to seek injunctive relief in federal
court when a defendant “is engaged” or is “about to
engage” in a violation of securities laws. 15 U.S.C.
§§ 77t(b) and 78u(d)(1). We reject the FTC’s invitation to
import the interpretation of “is” or “is about to” contained
in cases interpreting the securities laws. We “look to other
statutes pertaining to the same subject matter which
contain similar terms” only if “the ordinary meaning of a
statute and the statute’s legislative history fail to provide
sufficient guidance to a term’s meaning.” Liberty Lincoln-
Mercury, Inc. v. Ford Motor Co., 171 F.3d 818, 823 (3d
Cir. 1999). Here, the plain language of Section 13(b)
answers the question for us—“is about to violate” means
something more than a past violation and a likelihood of
recurrence. If we were in doubt, the structure and history
of the FTC Act support our interpretation. Moreover, the
statutory scheme—the addition of Section 13(b) to cure a
shortcoming of Section 5(b)—is not similar to the
securities laws, which have always permitted suits for
injunctions. See also Amicus Br. of Washington Legal
Foundation 9 (“While several other statutes include
language similar to the FTC’s ‘about to violate’ language,
29
none of those statutes include agency-litigating authority
that even remotely resembles the overall structure and
history of the FTC Act.”).
Finally, the FTC trots out the old adage that a
remedial statute like the FTC Act should be construed
broadly. Because Section 13(b)’s “is” or “is about to”
requirement allegedly conflicts with the remedial purpose
of the FTC Act, the FTC says we should disregard the
plain meaning of that language. Of course, none of the
authority the FTC cites stands for the broad proposition
that we can ignore clear statutory language if it does not
promote a remedial interpretation. See Touche Ross & Co.
v. Redington, 442 U.S. 560, 578 (1979) (explaining that
“generalized references” to “remedial purposes” of a
statute will “not justify reading a provision more broadly
than its language and the statutory scheme reasonably
permit” (internal quotation marks omitted)).
The FTC points to a parade of horribles that it
predicts will result if we uphold the District Court’s
decision.16 See, e.g., Br. of Appellant 35 (“Limiting the
FTC’s Section 13(b) authority to cases of ongoing or
imminent violation would make it easy for wrongdoers to
16
The FTC also claims that the District Court’s
interpretation could interfere with other statutes that
contain similar language. Given the unique history and
structure of the FTC Act, we consider this fear unfounded.
30
evade Congress’ purposes in creating the regime. As soon
as a potential defendant got wind that the FTC was
investigating its activities, it could simply stop those
activities and render itself immune from suit in federal
court unless the FTC could allege and prove an imminent
re-violation.”). But there is no reason to believe that our
decision today unnecessarily restricts the FTC’s ability to
address wrongdoing. Section 5 authorizes administrative
proceedings based on past violations. And, of course, if
the FTC believes that a wrongdoer is “about to violate” the
law during the pendency of an administrative proceeding,
it could then come to court and obtain an injunction under
Section 13(b).
The FTC’s understandable preference for litigating
under Section 13(b), rather than in an administrative
proceeding, does not justify its expansion of the statutory
language. If the FTC wants to recover for a past
violation—where an entity “has been” violating the law—
it must use Section 5(b). 15 U.S.C. § 45(b). If the FTC
instead chooses to use Section 13(b), it must plead that a
violation of the law “is” occurring or “is about to” occur.
Id. § 53(b). Here, the FTC wants to use the most
advantageous aspects of each statutory provision—to
punish Shire for a past violation using the less onerous
enforcement mechanism. But the FTC’s attempt to
squeeze Shire’s conduct into the “about to violate”
category distorts Section 13(b) beyond its intended
purpose. Section 13(b) cannot accommodate the FTC’s
31
interpretation—that “about to violate” means only that a
violation could recur at some future point.
In short, we reject the FTC’s contention that Section
13(b)’s “is violating” or “is about to violate” language can
be satisfied by showing a violation in the distant past and
a vague and generalized likelihood of recurrent conduct.17
Instead, “is” or “is about to violate” means what it says—
the FTC must make a showing that a defendant is violating
or is about to violate the law.
17
The FTC also asserts that Section 13(b)’s “reason
to believe” language confers upon it unreviewable
discretion to file suit. See 15 U.S.C. § 53(b) (“Whenever
the Commission has reason to believe—(1) that any
person, partnership, or corporation is violating, or is about
to violate, any provision of law. . .[the FTC] may bring
suit in a district court of the United States to enjoin any
such act or practice.” (emphasis added)). We decline to
consider this argument because the FTC failed to raise it
in the District Court. Garza v. Citigroup Inc., 881 F.3d
277, 284 (3d Cir. 2018) (“It is well established that
arguments not raised before the District Court are waived
on appeal.” (internal citation omitted)). Even if this
argument were not waived, we would find it unpersuasive.
Here, there is no evidence to support the FTC’s “reason to
believe” Shire is violating or is about to violate the law.
32
D.
Here, the FTC never initiated Section 5 proceedings
against Shire.18 Instead, the FTC waited until five years
after Shire had stopped its allegedly illegal conduct before
seeking an injunction under Section 13(b). Viewed under
the correct standard, the FTC’s complaint fails to allege
that Shire “is violating” or “is about to violate” the law.
The FTC does not contest that Shire is not currently
violating the law. Indeed, Shire divested itself of
Vancocin in 2014, two years after generic competition
entered the market.
Instead, the FTC relies on Section 13(b)’s “is about
to violate” language. The few factual allegations in the
FTC’s forty-five page complaint that suggest Shire “is
about to violate” the law are woefully inadequate to state
a claim under Section 13(b). The FTC alleges generally
that Shire “is engaged in the business of, among other
things, developing, manufacturing, and marketing branded
drug products, including inter alia, Cinryze.” Compl. ¶ 8.
As to the likelihood that Shire will engage in illegal
18
At oral argument in the District Court, the FTC
explained that it “generally” pursues administrative
proceedings and a preliminary injunction simultaneously.
App. 381. It is unclear why the FTC did not use that
strategy here, particularly when Shire’s allegedly illegal
conduct ceased long before the FTC filed suit.
33
behavior, the FTC alleges, “[a]bsent an injunction, there is
a cognizable danger that [Shire] will engage in similar
conduct causing future harm to competition and
consumers. [Shire] knowingly carried out its
anticompetitive and meritless petitioning campaign to
preserve its monopoly profits. It did so conscious of the
fact that this conduct would greatly enrich it at the expense
of consumers.” Id. ¶ 150. Without mentioning Cinryze by
name, the FTC alleges that Shire “has the incentive and
opportunity to continue to engage in similar conduct in the
future. At all relevant times, [Shire] marketed and
developed drug products for commercial sale in the United
States, and it could do so in the future. Consequently,
[Shire] has the incentive to obstruct or delay competition
to these or other products.” Id. ¶ 151.
The District Court concluded that these vague
allegations failed to “plausibly suggest [Shire] is ‘about to
violate’ any law enforced by the FTC, particularly when
the alleged misconduct ceased almost five years before
filing of the complaint.” Op. 12. We agree. Taking the
factual allegations in the complaint as true, Shire stopped
its sham petitioning campaign in 2012 when the FDA
approved generic equivalents to Vancocin. The complaint
contains no allegations that Shire engaged in sham
petitioning in the five-year gap between the 2012 cessation
in petitioning and the 2017 lawsuit. The complaint also
lacks specific allegations that Shire is “about to violate”
34
the law by petitioning as to Cinryze, the only other drug
mentioned.
At oral argument in the District Court, the FTC
provided more support for its argument that Shire “is about
to violate” the law. The FTC explained that Shire is
“perfectly positioned” to commit violations in the future
because it is already marketing a “blockbuster drug” that
is in the pipeline. Id. at 11. That drug, Cinryze, is not ripe
for generic entry but has “the same type of significance as
Vancocin . . . .” Id. We need not consider whether these
allegations might satisfy the pleading standard. None of
these facts—other than that Shire markets Cinryze—are
pleaded in the complaint, which the FTC chose not to
amend. Based upon the pleading before us, we conclude
that the FTC has failed to plead that Shire is “about to
violate” any law.
In this case, given the paucity of allegations in the
complaint, the FTC fails to state a claim under any
reasonable definition of “about to violate.” Whatever the
outer reach of “about to violate” may be, the facts in this
case do not approach it.19 We therefore leave for another
19
We also reject the FTC’s standalone claim for
equitable monetary relief. Assuming that such relief is
available under Section 13(b), the FTC must still meet the
“is” or “is about to” requirement.
35
day the exact confines of Section 13(b)’s “about to
violate” language.
IV.
Under Section 13(b) of the FTC Act, the FTC must
plead that Shire “is” violating or “is about to” violate the
law. But Shire indisputably is not currently violating the
law, nor is it alleged to be poised to do so anytime in the
foreseeable future. The FTC thus fails to state a claim
upon which relief can be granted. We will affirm the
District Court’s judgment.
The FTC’s improper use of Section 13(b) to pursue
long-past petitioning has the potential to discourage lawful
petitioning activity by interested citizens—activity that is
protected by the First Amendment. Because we affirm the
District Court’s judgment dismissing the complaint, we
need not address the issue further but suggest that the FTC
be mindful of such First Amendment concerns.
36