Federal Trade Commission v. Vyera Pharmaceuticals, LLC

Background

After a trial, the court ordered on January 14, 2022, that Martin Shkreli be banned for life from participating in the pharmaceutical industry in any capacity and pay $64.6 million in disgorgement. This opinion addresses Shkreli’s objections to the injunction proposed by the plaintiffs. The court states that an injunction must be narrowly tailored to the legal violations, describe its requirements specifically, and identify the prohibited or required acts in enough detail for the enjoined person to understand them.

Definitions and employment restrictions

Shkreli objected to parts of the definitions of “Development,” “FDA Authorization,” and “Pharmaceutical Company.” The plaintiffs agreed to remove “Marketing Authorization Applications,” referring to procedures in the European Union and United Kingdom, from the definition of “FDA Authorization.” The court overruled the remaining objections.

The court rejected Shkreli’s argument that the injunction improperly ignored research and development activities or conduct outside the United States. It explained that the trial record included the use of promised research and development activities to recruit executives and induce a restrictive supply agreement, as well as a global network of suppliers and manufacturers connected to the conduct at issue.

The injunction defines “Pharmaceutical Company” as an entity engaged in researching, developing, manufacturing, commercializing, or marketing a drug product or active pharmaceutical ingredient. It permits “Qualified Employment” with a pharmaceutical company that is not primarily involved in those activities and obtains less than 10% of its total gross revenue from them. Shkreli must give notice of an intended written offer, and the plaintiffs may object within the period specified in the injunction. The court retained jurisdiction over the injunction and stated that Shkreli could seek relief if the plaintiffs unreasonably objected to employment.

Industry, speech, and ownership restrictions

Shkreli challenged the injunction’s prohibition on directly or indirectly participating in the pharmaceutical industry, including participating in the formulation, determination, or direction of business decisions. The court found those terms sufficiently clear and necessary to prevent him from continuing to participate through people employed in the industry.

Shkreli also argued that the prohibition on influencing a pharmaceutical company’s management was vague and violated the First Amendment. The court rejected that objection. It held that the restriction covered public statements when Shkreli intended them to influence management or when a reasonable person would conclude that they had that effect. The court added that language to the injunction’s provision concerning influence or control over management or business.

Shkreli objected to requirements that he pay the judgment and sell his shares in Phoenixus, including within 180 days if shares were returned to him by a receiver appointed in an earlier related proceeding. The court found those requirements neither vague nor unduly burdensome and rejected his constitutional objections. It explained that Shkreli had used his position as Phoenixus’s largest shareholder to exert control over Phoenixus and Vyera’s operations, and that the divestiture requirement arose directly from the antitrust violations found at trial.

Reporting requirements and disposition

The court overruled Shkreli’s objections to reporting and access requirements intended to ensure payment of the monetary judgment. It explained that any inspection of financial records would occur during business hours and in the presence of Shkreli’s counsel; the injunction did not require inspection at his home. Shkreli could produce books and records at an appropriate location, including his counsel’s office.

The court therefore overruled Shkreli’s remaining objections, accepted the plaintiffs’ removal of the specified European Union and United Kingdom reference, added the clarification concerning public statements, and issued the injunction and final judgment.