Fed. Trade Comm'n v. Iqvia Holdings Inc.

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FEDERAL TRADE COMMISSION, Plaintiff, v. IQVIA HOLDINGS INC. and PROPEL MEDIA, INC., Defendants.

No. 23 Civ. 06188 (ER)

United States District Court, S.D. New York

October 31, 2023

OPINION & ORDER

EDGARDO RAMOS, U.S.D.J.

He Federal Trade Commission (FTC) has moved to strike several constitutional and equitable defenses asserted by IQVIA Holdings Inc. and Propel Media, Inc. (Defendants). Doc. 146. For the reasons set forth below, the motion is GRANTED.

I. BACKGROUND

On July 18, 2023, the FTC filed this action to preliminarily enjoin IQVIA's proposed acquisition of Propel. Doc. 1 at 1. IQVIA is “the world's largest healthcare data provider”; Propel is the owner of DeepIntent, “a leading demand-side platform [] that targets healthcare professionals [] and other healthcare consumers in the programmatic digital healthcare advertising industry.” Id. ¶ 1. He FTC alleges that the proposed acquisition would “substantially lessen competition by combining two of the top three providers of programmatic advertising targeted specifically at U.S.-based [healthcare professionals] on a one-to-one basis.” Id.

He FTC sought a preliminary injunction pursuant to section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b). Id. ¶ 130. An evidentiary hearing before this Court is set to begin on November 20, 2023, and conclude by December 1, 2023. He FTC administrative proceedings are scheduled to begin on December 20, 2023. See id. at 2.

In the meantime, the FTC has moved to strike affirmative constitutional and equitable defenses that IQVIA and Propel raised in their answers. IQVIA's constitutional defenses assert that:

■ “He FTC's parallel administrative proceedings are invalid and unconstitutional because the structure of the FTC violates the U.S. Constitution (including Article II) and the separation of powers .” Doc. 56 at 18 (IQVIA's Tenth Defense).

■ “He FTC's parallel administrative proceedings are invalid and unconstitutional because the FTC is designed as a bipartisan independent agency, but the deliberations relating to the complaint and the vote thereon involved only three Democratic Commissioners, with no Republic [ sic ] Commissioners participating.” Id. at 18-19 (IQVIA's Eleventh Defense).

■ “He absence of bipartisan deliberations also is an independent and supporting reason that the Commissioners' protection from for-cause removal is unconstitutional and in violation of the separation of powers.” Id. at 19 (IQVIA's Twelfth Defense).

■ “He FTC's parallel administrative proceedings are invalid and unconstitutional under the Fifth Amendment Due Process Clause because they deprive IQVIA of a fair opportunity to rebut the government's factual assertions before a neutral decisionmaker. . . .” Id. (IQVIA's Hirteenth Defense).

■ “He FTC's parallel administrative proceedings are invalid and unconstitutional under the Fifth Amendment Equal Protection Clause because they expose persons and entities to differential treatment for arbitrary reasons. . . .” Id. at 19-20 (IQVIA's Fourteenth Defense).

■ “He FTC's parallel administrative proceedings are invalid and unconstitutional because adjudication of the FTC's Complaint by the ALJ violates the U.S. Constitution (including Articles II and III) and the separation of powers. . . .” Id. at 20 (IQVIA's Fifteenth Defense).

Propel's answer raises similar constitutional defenses, asserting that:

■ “He FTC's structure is unconstitutional because the constraints on removal of the Commissioners violate Article II of the Constitution and the separation of powers. . . .” Doc. 70 at 28 (Propel's Tenth Defense).

■ “Hese proceedings are invalid because the structure of the FTC is as a bipartisan independent agency and deliberations relating to the complaint and the related vote involved only three Democratic Commissioners with no Republican Commissioners.” Id. (Propel's Eleventh Defense).

■ “He FTC's structure is unconstitutional because the constraints on for cause removal of the Administrative Law Judge violate Article II of the Constitution and the separation of powers. . . .” Id. (Propel's Twelfth Defense).

■ “He FTC violates Propel Media's right to Equal Protection under the Fifth Amendment due to the Department of Justice, Antitrust Division [] and FTC's black box clearance process. . . .” Id. at 28-29 (Propel's Hirteenth Defense).

■ “He FTC violates Propel Media's due process rights under the Fifth Amendment by depriving Respondents of their right to adjudication before a neutral arbiter. . . .” Id. at 29 (Propel's Fourteenth Defense).

In addition to these constitutional defenses, both answers raise equitable defenses of laches and estoppel. Doc. 56 at 20 (IQVIA's Seventeenth and Eighteenth Defenses); Doc. 70 at 29-30 (Propel's Sixteenth and Seventeenth Defenses).

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(f), a court may strike “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter” of its own accord or on motion by a party. Motions to strike, however, are generally disfavored, City of New York v. FedEx Ground Package Sys., Inc., No. 13 Civ. 9173 (ER), 2017 WL 633445, at *2 (S.D.N.Y. Feb. 14, 2017), and “courts should not tamper with the pleadings unless there is a strong reason for so doing,” Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976).

Courts in this Circuit have traditionally applied a three-part test to motions to strike an affirmative defense: “In order to prevail on a motion to strike [an affirmative defense], a plaintiff must show that: (1) there is no question of fact which might allow the defense to succeed; (2) there is no question of law which might allow the defense to succeed; and (3) the plaintiff would be prejudiced by inclusion of the defense.” GEOMC Co. v Calmare Therapeutics Inc., 918 F.3d 92, 96 (2d Cir. 2019) (alteration in original) (quoting SEC v. McCaskey, 56 F.Supp.2d 323, 326 (S.D.N.Y 1999)).

Revisiting this test in GEOMC, the Second Circuit explained that the first factor should be governed by the plausibility standard of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)-with the caveat that “applying the plausibility standard to any pleading is a ‘context-specific' task.” 918 F.3d at 97-98 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). He second factor remained the same: “an affirmative defense is improper and should be stricken if it is a legally insufficient basis for precluding a plaintiff from prevailing on its claims.” Id. at 98. As for the third factor, the court said that whether prejudice “should be a basis for dismissing or opposing the addition of an otherwise valid affirmative defense will normally depend on when the defense is presented.” Id.

III. DISCUSSION

With respect to both the constitutional and equitable defenses, the Court agrees with the FTC that the defenses are either legally insufficient or inadequately pled and that the FTC would be prejudiced by their inclusion. Accordingly, these defenses are stricken with prejudice.

A. Constitutional Defenses

Section 13(b) authorizes the FTC to obtain a preliminary injunction “[u]pon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest.” 15 U.S.C. § 53(b). According to the FTC, this requires a two-pronged approach: First, the district court considers whether the FTC has “a fair and tenable chance of ultimate success on the merits.” Doc. 147 at 9 (quoting FTC v. Crescent Publ'g Grp., Inc., 129 F.Supp.2d 311, 319 (S.D.N.Y. 2001)). Second, the court must “consider the equities.” Id. at 10 (quoting Crescent Publ'g, 129 F.Supp.2d at 319).

The FTC contends that Defendants' constitutional defenses are immaterial to both prongs and therefore provide “a legally insufficient basis for precluding a plaintiff from prevailing on its claims.” Id. at 13 (quoting GEOMC, 918 F.3d at 98).

1. Likelihood of Ultimate Success ”

On the first prong, the FTC asserts that the inquiry “focuses on the antitrust merits of the case and the likelihood of success in the underlying administrative proceedings.” Id. at 9. In Defendants' view, however, the likelihood of ultimate success “refers to the likelihood of an outcome favorable to the FTC as the final result.” Doc. 156 at 6. In other words, “‘success' must be measured by the final resolution of the proceedings” rather than by the chances of success on the antitrust merits in the administrative proceedings. Id. at 9. And if the constitutional defects they have alleged turn out to be valid, Defendants reason, then any judgment against them in the administrative proceedings will be vacated upon judicial review. Id. at 7.

He Court agrees with the FTC that the constitutional defenses raised here are immaterial to the section 13(b) inquiry. He overwhelming weight of the case law indicates that the relevant metric of “success” concerns the antitrust merits in the underlying proceedings. In FTC v Lancaster Colony Corp., 434 F.Supp. 1088 (S.D.N.Y. 1977), for instance, the court explained that the FTC can satisfy the “likelihood of success” prong by showing “that it has a fair and tenable chance of ultimate success on the merits.” Id. at 1090. His requirement is satisfied, the court said, “if the FTC has raised questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance and ultimately by the Court of Appeals.” Id. at 1091 (emphasis added). He focus, then, is on the merits-not on constitutional issues. It would make little sense to conclude that questions about the constitutionality of the FTC warrant “thorough...