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concluding that the Michigan Department of Public Health and the Michigan Biologic Products Institute are State agencies immune from suit under the Eleventh Amendment
Summary of this case from Joumaah v. McMahonOpinion
Case No. 5:03-CV-031
March 31, 2004
Alan C. Milstein, Derek T. Braslow, Sherman, Silverstein, Kohl, Rose Podolsky, Pennsauken, NJ, for Plaintiffs.
Gerald Zingone, Thelen, Reid Priest LLP, Washington, DC, J. Terrance Dillon, Myers, Nelson, Dillon Shierk, PLLC, Grand Rapids, MI, for Defendants.
OPINION
Plaintiffs in this matter are current or former military members, government contract employees, and spouses who allege harms caused by anthrax vaccine administered under the Department of Defense ("DOD") immunization program. Defendants are the Michigan Department of Public Health ("MDPH"), the Michigan Biologic Products Institute ("MBPI") (together, "MDPH — MBPI"), BioPort, Inc. ("BioPort"), and Dr. Robert C. Myers ("Dr. Myers"). Each Defendant was associated with manufacturing anthrax vaccine. Plaintiffs set forth claims of negligence, breach of warranties, breach of the right to be treated with essential human dignity, strict products liability, fraud, deprivation of civil rights pursuant to 42 U.S.C. § 1983, and loss of consortium. Now before the Court are Defendants' motions to dismiss. For the reasons stated below, the Court will dismiss all claims against MDPH — MBPI, grant in part and deny in part BioPort's motion to dismiss, and grant in part and deny in part Dr. Myers' motion to dismiss.
I. Background
This matter consists of three consolidated cases, each brought by different groups of Plaintiffs but asserting similar claims against the same Defendants. Allaire, et al. v. BioPort, et al. ("Allaire") originally filed in the United States District Court for the District of Columbia. Judge Kollar — Kotelly granted Defendants' motion to transfer Allaire to this District due to insufficient contacts to establish personal jurisdiction under the District of Columbia's long — arm statute. Fleming, et al. v. BioPort, et al. ("Fleming") was originally filed in the United States District Court for the Western District of Louisiana. Judge James granted Defendants' motion to transfer Fleming to this District for lack of personal jurisdiction over all Defendants. Allaire and Fleming have been combined with this case, Ammend, et al. v. BioPort, et al., which was originally filed in this District.
Anthrax is a lethal disease caused by bacteria that can be delivered by biological weapon systems. In 1965, researchers at the U.S. Army Biological Laboratories in Fort Derrick, Maryland designed and patented the process for producing a vaccine known as Anthrax Vaccine Adsorbed ("AVA") (hereafter referred to as "anthrax vaccine" or "vaccine"). In 1970, the federal government issued a license to manufacture anthrax vaccine to MDPH. Since that time, MDPH and its successors were the only licensed anthrax vaccine producers in the U.S. Beginning in 1988, the Department of Defense ("DOD") awarded MDPH a series of contracts for the production and sale of anthrax vaccine.
The DOD began considering a mass anthrax vaccination program in the early 1990s. In 1997, the DOD announced plans to vaccinate U.S. military personnel under the Anthrax Vaccine Immunization Program ("AVIP") in order to protect the force from biological attacks. The program required that all military personnel would receive a six — shot series of anthrax vaccine. Inoculations were mandatory, and any servicemember who refused the shots was disciplined.
Dr. Myers first became an employee of MDPH in 1978. In 1990, he became Chief of the Biologics Division of MDPH. The Biologic Products Division of MDPH was transferred to MBPI in 1996, at which time Dr. Myers became MBPI's Director. In 1998, the U.S. Food and Drug Administration ("PDA") inspected and shut down MBPI's production facility after finding problems in the anthrax vaccine manufacturing, production, storage, and testing processes. On July 8, 1998, BioPort entered into an agreement with the State of Michigan for the purchase of substantially all of MBPI's assets. The transaction closed on September 4, 1998. A novation agreement transferred MBPI's anthrax vaccine production contract with the federal government to BioPort, and BioPort later was awarded additional contracts. Dr. Myers began working for BioPort following the asset sale. Anthrax vaccine at BioPort later underwent supplemental testing and the production line eventually reopened.
The primary Plaintiffs in this case received mandatory anthrax inoculations while on military duty. They or their representatives claim that the vaccine caused physical ailments and in some cases death. Alleged symptoms include nausea, fatigue, joint pain, memory loss, cognitive impairment, abdominal pain, migraines, seizures, tremors, insomnia, shooting pains, difficulty hearing, earaches, poor balance, vision problems, digestive problems, numbness, and hypersensitivity to smells, chemicals, and light. Plaintiffs argue that the anthrax vaccine with which they were injected was an unreasonably dangerous, defective, and experimental drug. They contend that Defendants produced and manufactured the vaccine in violation of numerous federal regulations and standards, and also misrepresented and withheld information about the vaccine's risks. Based on these allegations, the Complaint sets forth the aforementioned series of claims against the various Defendants and seeks damages.
II. Standard of Review
An action may be dismissed if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The moving party has the burden of proving that no claim exists. Although a complaint is to be liberally construed, it is still necessary that the complaint contain more than bare assertions of legal conclusions. Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993) (citing Schied v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)). All factual allegations in the complaint must be presumed to be true, and reasonable inferences must be made in favor of the non — moving party. 2 Moore's Federal Practice, § 12.34[l][b] (Matthew Bender 3d ed. 2003). The Court need not, however, accept unwarranted factual inferences. Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). Dismissal is proper "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02 (1957)).
In their briefs, the parties have discussed and attached materials beyond those attached to or referenced in the pleadings. To the extent that this Opinion considers matters outside the pleadings, the Court treats Defendants' motions as ones for summary judgment and disposes of them as provided in Fed.R.Civ.P. 56, which permits courts to render judgment if the parties' submissions "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The parties have had extensive opportunities to address each other's respective submissions and arguments. See Fed.R.Civ.P. 12(b).
III. Discussion
BioPort, MDPH — MBPI, and Dr. Myers have each filed separate motions to dismiss. BioPort's motion sets forth the following arguments: (1) Plaintiffs' claims are barred by the Feres doctrine; (2) Plaintiffs' claims are barred by the government contractor defense; (3) Plaintiffs' claims are barred by Michigan's drug product liability immunity statute; and (4) Plaintiffs fail to state a claim for fraud. BioPort also argues that it incurs no successor liability from MDPH — MBPI. MDPH — MBPI base their motion to dismiss on the following arguments: (1) they were state agencies entitled to sovereign immunity under the Eleventh Amendment; (2) the Court lacks diversity jurisdiction over MDPH — MBPI because as state agencies they are not citizens for diversity purposes; (3) the Court lacks federal question jurisdiction over MDPH — MBPI because there is no valid federal claim as to them; and (4) the Court lacks pendent jurisdiction over Plaintiffs' state law claims against MDPH — MBPI. Dr. Myers adopts and incorporates the arguments offered by BioPort and MDPH — MBPI and also asserts the following additional grounds for dismissal: (1) no cognizable cause of action exists against Dr. Myers for actions in his official capacity as an agent of a state sovereign; and (2) Plaintiffs fail to plead a viable claim against Dr. Myers for personal liability in his individual capacity.Part A of the discussion that follows concludes that all claims against MDPH — MBPI must be dismissed because these Defendants were state agencies and as such are entitled to sovereign immunity under the Eleventh Amendment. Part B addresses the claims against Dr. Myers, concluding that the official capacity and federal law individual capacity claims against him must be dismissed, but that the state law individual capacity claims survive. Part C examines whether BioPort incurs potential liability as a successor to MDPH — MBPI and finds that although successor liability does not attach under the rule announced inTurner v. Bituminous Cas. Co., 397 Mich. 406, 244 N.W.2d 873 (1976), a fact issue remains regarding whether BioPort may have assumed successor liability pursuant to the agreement by which it purchased MDPH — MBPI's assets. Part C also concludes that whether BioPort may have incurred potential liability by conducting supplemental testing of the vaccine remains a disputed issue. Part D addresses various other claims, concluding that Plaintiffs' federal law claims for violations of the right to human dignity and bodily integrity must be dismissed for failure to state a claim and that Plaintiffs have conceded their fraud claims. Finally, Part E turns to other defenses and finds that: BioPort does not inherit MDPH — MBPI's sovereign immunity; the applicability of Michigan's drug product manufacturers liability immunity statute has not been conclusively established; the Feres doctrine does not provide a defense in this case; and the requirements of the government contractor defense have not been conclusively established.
A. Defendants Michigan Department of Public Health and Michigan Biologic Products Institute: Eleventh Amendment Sovereign Immunity
Defendants MDPH — MBPI argue that they were state government entities and therefore are immune from suit pursuant to the Eleventh Amendment. Plaintiffs counter that state sovereign immunity does not apply to these defendants because they were not acting as arms of the state and were not performing government functions when manufacturing and selling anthrax vaccine. Instead, Plaintiffs contend, MDPH — MBPI acted as autonomous, for — profit, private enterprises to which the Eleventh Amendment renders no protection. The Court finds that MDPH — MBPI were arms of the State of Michigan and as such enjoy sovereign immunity. Therefore, the claims against MDPH — MBPI will be dismissed.
The Eleventh Amendment to the United States Constitution embodies the concept of state sovereign immunity, stating: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. Supreme Court interpretations of the Eleventh Amendment clarify that it bars individuals from suing states in federal court unless the state consents to be sued or Congress overrides such immunity. See Hans v. Louisiana. 134 U.S. 1, 15-18, 10 So. Ct. 504, 507-508 (1890) ( Eleventh Amendment bars suits against a state by its own citizens); Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.Ct. 1347, 1355-56 (1974) ( Eleventh Amendment bars suits against a state by citizens of another state); Pennhurst State Sch. Hosp. v. Halderman, 465 U.S. 89, 106, 104 S.Ct. 900, 911 (1984) (sovereign immunity bars suits against state on both federal and state law grounds); Edelman, 415 U.S. at 673, 94 S.Ct. at 1360-61 (states may waive sovereign immunity by unequivocally expressing an intent to do so); Seminole Tribe of Fla. v. Fla., 517 U.S. 44, 59, 116 S.Ct. 1114, 1125 (1996) (Congress may abrogate Eleventh Amendment immunity with unmistakably clear language in a statute passed pursuant to Section 5 of the Fourteenth Amendment). Plaintiffs in this case, who are individual citizens of Michigan and other states, make no argument that Michigan has waived sovereign immunity or that Congress has abrogated it.
In addition to the exceptions to sovereign immunity based on state waiver and congressional abrogation, a third exception exists for actions against state officers sued in their individual capacities for injunctive and declaratory relief. Ex parte Young, 209 U.S. 123,28 So. Ct. 441 (1908). The action against MDPH-MBPI does not implicate the Ex parte Young doctrine.
State sovereign immunity under the Eleventh Amendment extends to suits brought against state departments and agencies. "It is clear, of course, that in the absence of consent a suit in which the State or one of its agencies or departments is named as the defendant is proscribed by the Eleventh Amendment." Pennhurst, 465 U.S. at 100, 104 S.Ct. at 908. See also Fla. Dep't of State v. Treasure Salvors, Inc., 458 U.S. 670, 684, 102 S.Ct. 3304, 3314 (1982) ("A suit generally may not be maintained directly against the State itself, or against an agency or department of the State, unless the State has waived its sovereign immunity.").
The question, then, is whether MDPH — MBPI were departments or agencies of the state government. If they were, they cannot be sued and Plaintiffs' claims against them must be dismissed. See Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 766, 122 S.Ct. 1864, 1877 (2002) ("Sovereign immunity does not merely constitute a defense to monetary liability or even all types of liability. Rather, it provides an immunity from suit.").
An entity enjoys state sovereign immunity under the Eleventh Amendment if it is deemed an "arm of the state" government. Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572 (1977). The Supreme Court has not formulated a precise rule to determine whether an entity is an "arm of the state." Instead, the determination is made on a case — by — case basis, with various courts taking into account factors such as: (1) whether state funds would be used to pay a judgment against the entity; (2) the nature of the entity as created by state law; (3) whether the state intended to confer Eleventh Amendment immunity on the entity; (4) whether the entity exercises the state power and is under state control; (5) whether the entity performs functions typically performed by a state government; (6) whether the entity has the right to sue in its own name; and (7) whether the entity has the power to hold property in its own name. 17A Moore's Federal Practice, § 123.23[4][b][i] (Matthew Bender 3d ed. 2003).
While most circuits have enunciated their own multi — factor tests for the "arm of the state" analysis, the Sixth Circuit has not. However, the Sixth Circuit discussed with approval other circuits' tests in Brotherland v. Cleveland, 173 F.3d 552 (6th Cir. 1999):
Most of our sister circuits undertake a multi — factor analysis to decide whether an entity is an arm of the state. See, e.g., Duke v. Grady Mun. Schs., 127 F.3d 972, 974 n. 4 (10th Cir. 1997) (compiling cases and tests from the Second, Third, Fourth, Eighth, and Tenth Circuits.) The Eleventh Circuit's test is illustrative; in Hufford v. Rodgers, 912 F.2d 1338 (11th Cir. 1990), cert. denied, 449 U.S. 921, 111 S.Ct. 1312, 113 L.Ed.2d 246 (1991), it listed four factors relevant to its inquiry: "how state law defines the entity, what degree of control the state maintains over the entity, where funds for the entity are derived, and who is responsible for judgment against the entity." Id. at 1341 (quoting Tuveson v. Florida Governor's Council on Indian Affairs, Inc., 734 F.2d 730, 732 (11th Cir. 1984)). The Tenth Circuit provides a helpful overview by categorizing its factors as broadly reflecting "the degree of autonomy of the particular entity . . . and the source from which the entity receives its funds, and in particular, whether a money judgment against the entity would be satisfied out of the state treasury." Duke, 127 F.3d at 974 n. 3.Id. at 560. In the explanation that follows, the Court applies the aforementioned factors and other indicia to explain its rationale for concluding that MDPH — MBPI were "arms of the state."
(1) Source of Funds to Pay Judgment Against MDPH — MBPI
The most important factor in the "arm of the state" analysis is whether state funds would be used to pay any judgment resulting from a suit against the entity. See Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 430, 117 S.Ct. 900, 904 (1997); Alkire v. Irving, 330 F.3d 802, 811 (6th Cir. 2003). Indeed, protecting the solvency of state treasuries is one of the Eleventh Amendment's primary goals, the other being to preserve the dignity and autonomy of state governments. See Hess v. Port Auth. Trans — Hudson Corp.. 513 U.S. 30, 47, 115 S.Ct. 394, 404(1994). Plaintiffs point to agreements whereby either BioPort or the federal government has promised to indemnify MDPH — MBPI for any money judgments. Because of these indemnification agreements, Plaintiffs contend, the state's purse risks no danger of being depleted. MDPH — MBPI counter that the agreements provide only "possible indemnification," and that in any event, the State of Michigan may have to enforce the indemnity agreements in federal court, thus subjecting the state twice to suit in federal court.
The dispute over indemnity misses the point. Whether or not BioPort or the federal government will indemnify MDPH — MBPI in the event of an adverse judgment is irrelevant to the "arm of the state" analysis. What matters is the state's potential for legal liability. A state may be legally liable even though in actually it will not pay due to reimbursement or indemnification from a third party. See Regents of Univ. of Cal. v. Doe. 519 U.S. 425, 431, 117 S.Ct. 900, 904 (1997) (state's potential legal liability rather than actual liability determinative; fact that Department of Energy would pay damage award does not affect Eleventh Amendment analysis; an agreement by the federal government to indemnify a state instrumentality against an adverse judgment does not divest a state agency of Eleventh Amendment immunity);Shands Teaching Hosp. Clinics. Inc. v. Beech St. Corp.. 208 F.3d 1308, 1311-13 (11th Cir. 2000) (provisions indemnifying state are irrelevant to determination of whether entity is entitled to state immunity). Thus, the real question is whether the state treasury would have to pay if the indemnification provisions were inoperative. Because the answer to that question in this case is yes, the source of payment factor favors a conclusion that MDPH — MBPI were "arms of the state."
(2) Nature of MDPH — MBPI Under State Law
Another factor in the "arm of the state" analysis requires examining the nature of the entity under state law. See Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572 (1977). The following discussion reviews the legal context in which MDPH — MBPI came into being, evolved, and operated. It shows that state law treated MDPH — MBPI as state government entities up to the time of the asset sale to BioPort. Accordingly, this factor suggests that they were "arms of the state."
The constitution of the State of Michigan divides the state government into the Executive, Legislative, and Judicial branches. Mich. Const. art. III, § 2. The Executive branch consists of principal departments. Mich. Const. art. V, § 2. Michigan law defines these departments, as well as other state — affiliated organizations, to be part of the State of Michigan. See M.C.L. § 691.1401(c) (defining "state" to mean "the state of Michigan and its agencies, departments, commissions, courts, boards, councils, and statutorily created task forces and includes every public university and college of the state, whether established as a constitutional corporation or otherwise"). The Michigan Department of Public Health (MDPH) was one of the principal departments designated by the Executive Reorganization Act of 1965, M.C.L. § 16.104. A state statute authorized the MDPH to "develop and produce pharmaceutical, biologic, and diagnostic products and by — products for human, veterinary, or agricultural use for distribution or sale outside this state for both public and private use. . . ." M.C.L. § 333.9111(2).
A 1978 statute established the Michigan Biologic Products Division within the MDPH. The Michigan Constitution authorizes the establishment of temporary commissions or agencies for special purposes with a life of no more than two years and provides that such temporary commissions or agencies need not be allocated within a principal department. Mich. Const. art. V, § 4. Pursuant to this constitutional provision, the Michigan Biologic Products Division of MDPH was transferred in its entirety out of the MDPH and renamed the Michigan Biologic Products Institute (MBPI) in 1996 by Executive Reorganization Order (E.R.O.) No. 1995-20, M.C.L. § 333.26323. The E.R.O. established MBPI as a "temporary agency," and also established the Michigan Biologic Products Commission as a "temporary agency" to supervise MBPI. M.C.L. § 333.26323(I)(A). The E.R.O. mandated that both MBPI and the Michigan Biologic Products Commission have a life of no more than two years. M.C.L. § 333.26323(I)(B), (C). MBPI was to be independent and autonomous of other state departments or agencies: "The Institute shall
ORDER
In accordance with the Opinion filed on this date,IT IS HEREBY ORDERED that the State Agency Defendants' Motion to Dismiss Complaint (docket no. 9) is GRANTED.
IT IS FURTHER ORDERED that BioPort Corporation's Motion to Dismiss Plaintiffs' Complaint (docket no. 15) is GRANTED IN PART and DENIED IN PART. The motion is GRANTED with respect to Plaintiffs' federal constitutional claims for breach of the rights to bodily integrity and essential human dignity. The motion is DENIED with respect to all other claims.
IT IS FURTHER ORDERED that the Motion of Dr. Robert C. Myers to Dismiss the Complaint (docket no. 17) is GRANTED IN PART and DENIED IN PART. The motion is GRANTED with respect to Plaintiffs' federal constitutional claims for breach of the rights to bodily integrity and essential human dignity, and with respect to all claims brought against Dr. Myers in his official capacity. The motion is DENIED with respect to the state law claims brought against Dr. Myers in his individual capacity.