Davis Polk achieved a significant victory in California state court for its client, AstraZeneca LP, and on behalf of 16 other major pharmaceutical companies and PhRMA, the pharmaceutical industry trade association. In Clayworth v. Pfizer, the California Court of Appeals answered a previously open question of California antitrust law: “Whether the pass-on defense is available to defendants accused of price fixing.” In a 41-page opinion, a unanimous panel of the First District Court of Appeals in San Francisco held that it is, and affirmed summary judgment for AstraZeneca and the other defendants. Davis Polk partner William J. Fenrich argued on behalf of all defendants at both the trial court and the Court of Appeals.

In its decision, the court adopted virtually all of the arguments advanced by the defendants. Perhaps most importantly, the court did not limit its ruling to cases where the plaintiffs have admittedly absorbed no overcharges. Thus, in the future, defendants who are accused of price fixing in California by anyone other than ultimate consumers (who do not pass-on) should be able to rely on Clayworth’s holding to reduce the amount of damages for which they can be held liable.

The Davis Polk team included partners Arthur F. Golden and William J. Fenrich as well as associates Daniel J. Schwartz, Sandra West, Ronja Bandyopadhyay, Amitabh Chibber, former associate Nicholas William Haddad and legal assistant Leah K. Edwards.