Michael Chappell calls cases like he sees them.

It's a laudable trait for an administrative law judge, but it can also put him at odds with his employer, the Federal Trade Commission.

After a five-week trial, Chappell on Friday sided with Impax Laboratories Inc. and its lawyers from O'Melveny & Myers. It's a big blow to the FTC in its first pay-for-delay drug challenge since the landmark Actavis Supreme Court decision that opened the doors to reverse-payment antitrust claims.

Now, a new slate of four FTC commissioners (plus one holdover) will face an early test: Will they accept the loss, deferring to Chappell and his exhaustive, 162-page decision? Or will they vote to reverse him and revive criticism that the FTC's administrative process is unfair?

In January 2017, the FTC filed an administrative suit against Impax, alleging that the New Jersey-based specialty pharmaceutical maker struck an anti-competitive deal with Endo Pharmaceuticals Inc., in violation of Section 5 of the FTC Act.

In 2010, the two companies allegedly agreed that Impax would refrain from marketing a generic version of Endo's prescription pain reliever Opana ER until January 2013. In exchange, Endo paid Impax more than $112 million—money that the FTC said was unjustified.

“Endo knew that generic competition would decimate its Opana ER sales and that any delay in generic competition would be highly profitable for Endo, but very costly for consumers,” the complaint stated. In the FTC's view, the $112 million payment amounted to little more than a bribe not to compete.

Endo settled with the FTC as part of a larger deal, but Impax—represented by an O'Melveny team led by partner Ted Hassi, as well as of counsel Michael Antalics, and counsel Anna Fabish, Steve McIntyre and Benjamin Hendricks, went to trial before Chappell, determined to prove that there were pro-competitive reasons for the payment. (Endo, represented by Dechert's George G. Gordon and Christine Levin, intervened on a limited basis.)

The trial was a major undertaking. “Over 1,250 exhibits were admitted into evidence, 37 witnesses testified, either live or by deposition, and there are 3,066 pages of trial transcript,” Chappell wrote. “The parties' post-trial briefs, proposed findings of fact and conclusions of law, reply briefs and replies to proposed findings of fact and conclusions of law total 2,869 pages.”

His point: This wasn't some off-the-cuff ruling.

Siding with Impax, Chappell found that “the magnitude and extent of any anticompetitive harm is largely theoretical.”

He did note that Endo paid Impax “to give up its patent challenge and agree not to launch a generic Opana ER until January 2013,” which amounts to “an anticompetitive harm under Actavis.”

But he also found that absent the agreement, it was unlikely Impax would have brought a generic version of the drug to market any earlier. Moreover, the deal “has enabled Impax to sell generic Opana ER without interruption since launching its product in January 2013, while all other potential generic drug manufacturers have been enjoined by patent litigation.”

In other words, no harm, no foul.

The question now is, what will the FTC do?

The commissioners in the past have overruled Chappell when he didn't side with the agency.

As I noted in a prior column, the FTC for 19 years—from 1995 to 2014—won every administrative law case involving allegations of unfair methods of competition. When an administrative law judge sided with the agency, the ruling stood. When a judge ruled against the FTC, the commissioners overturned the judge and voila, they still won (even if it meant they were reversed later by a federal court of appeals).

The streak ended in 2014, when the commissioners deadlocked 2 to 2 along party lines whether pipefitter McWane Inc. colluded to fix prices.

But the commissioners were back to their old tricks in 2016, when they overruled Chappell after he found in favor of medical testing company LabMD in a data privacy case. The case is now pending before the U.S. Court of Appeals for the Eleventh Circuit.

Like Impax, LabMD was another decision that came down to no harm, no foul. Chappell concluded that even if LabMD's data security measures were lax, there was no proof that any consumers were harmed.

The four new FTC commissioners, who all started work less than three weeks ago, will have an interesting test in how they handle Impax. Will the three newbies with Big Law roots be more sympathetic than their predecessors to O'Melveny's client?

Chairman Joseph Simons was previously co-chair of Paul, Weiss, Rifkind, Wharton & Garrison's antitrust practice. Commissioner Noah Joshua Phillips got his start at Cravath, Swaine & Moore in New York City, and Steptoe & Johnson LLP, in Washington, D.C. before becoming chief counsel to U.S. Sen. John Cornyn of Texas. Rebecca Kelly Slaughter was an associate at Sidley Austin before joining Sen. Chuck Schumer's staff as chief counsel.

The other newcomer, consumer finance expert Rohit Chopra, is not a lawyer. Maureen Ohlhausen, who has been a commissioner since 2012, was previously a partner at Wilkinson Barker Knauer.

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