Outside counsel for United HealthCare Services had been given the authority to enter into a $125 million settlement with the makers of the sleep-disorder drug Provigil, a federal judge has ruled in finding that the accord settling antitrust claims is enforceable.

U.S. District Judge Mitchell Goldberg of the Eastern District of Pennsylvania ruled Wednesday that a 2015 memorandum of understanding between United and three drug companies was binding. The decision rejected efforts by United to back out of the accord over claims that, among other things, the company never gave its outside counsel authority to enter into a binding settlement.

Although Goldberg said he agreed that the company never gave its outside lawyers express authority to enter into the settlement, he said facts presented during a recent bench trial indicated that United had “cloaked” its outside counsel in the “apparent authority” to settle the claims.

“United—a major health insurance company with a deep and experienced bench of in-house lawyers—decided to hire outside counsel to conduct all settlement negotiations on its behalf on the Provigil litigation,” Goldberg said. “In doing so, United placed complete authority in outside counsel to act on its behalf in these negotiations without providing outside counsel any parameters.”

The $125 million settlement is part of a much broader antitrust litigation over Provigil, which included a claim by a separate generic drug company, a $1.2 billion settlement with the Federal Trade Commission and suits brought by direct purchasers of the drug. United, which is a third-party payer, was part of the litigation brought by indirect purchasers of the drug.

According to Goldberg, the indirect purchasers entered into the accord in late 2015, after class certification for third-party payers had been denied. The agreement said that Cephalon, which was the brand manufacturer of Provigil, and generic drug companies Teva and Barr Pharmaceuticals would pay $48 million to settle with end-payors and $77 million to settle claims brought by third-party payers.

Settlement negotiations, according to Goldberg, were handled by, among others, Kirkland & Ellis New York partner Jay Lefkowitz on behalf of the drug companies and Richard Cohen of Lowey Dannenberg in White Plains, New York, on behalf of the third-party payers. United outside counsel included Mark Sandmann and Pamela Slate of Hill, Hill, Carter, Franco, Cole & Black, Goldberg said.

According to Goldberg, United's outside counsel dealt mostly with Cohen, and did not deal with Cephalon's counsel directly regarding the settlement negotiations.

About six months after the memorandum of understanding was signed in December 2015, United told the drug companies it did not consider itself bound by the settlement, and fired its outside counsel.

In April, Goldberg rejected United's attempts to invalidate the accord. The company had contended that language in the agreement, including the use of the word “will” instead of “shall,” was speculative and ambiguous.

Goldberg rejected those claims, finding instead that the agreement was clear, but said the case should proceed to trial on whether United's outside counsel had authority to enter into the agreement, and whether the company promptly disputed whether the accord was binding.

Regarding the arguments about whether United promptly objected to the accord, Goldberg noted that, although the company had the agreement by January 2016, it did not begin to raise concerns until March 2016. That three-month delay and the company's decision to rely on outside attorneys showed that United effectively ratified the agreement, Goldberg said.

“In short, four of United's in-house lawyers received the MOU in mid-January, but chose either to not read it at all or to rely almost exclusively on outside counsel's interpretation. A sophisticated company ably represented by a team of in-house lawyers cannot remain willfully blind to a contractual obligation and then claim that their ignorance precludes ratification,” Goldberg said in the 84-page opinion. “The MOU was a brief, six-page, double-spaced document containing unambiguous language expressly indicating in plain language that the settlement was binding and enforceable. Once United's in-house lawyers had the MOU in hand, United had full knowledge of the material facts and circumstances regarding the transactions to be ratified.”

Abby Dennis of Boies Schiller & Flexner, who is representing United, did not return a call seeking comment. Bradley Weidenhammer of Kirkland & Ellis is representing the drug companies. He declined to comment without first speaking with his client.

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