Opinion
CIVIL ACTION No. 01-2311-GTV
August 6, 2001
MEMORANDUM AND ORDER
This case is before the court on Plaintiff's Motion to Remand (Doc. 3) and Defendants' Motion For a Stay Pending Action by the Judicial Panel on Multidistrict Litigation (Doc. 9). Plaintiff filed this action in the District Court of Johnson County, Kansas on May 21, 2001 alleging violation of Kansas antitrust laws. Defendants removed the case to federal court on June 22, 2001. Plaintiff contends that such removal was improper, because the court lacks subject matter jurisdiction. The court agrees, and remands the case to the District Court of Johnson County, Kansas. In conjunction, the court denies defendants' motion for a stay.
I. Factual Background
Plaintiff alleges the following in his complaint:Defendant Schering-Plough Corporation ("Schering-Plough") is the manufacturer and patent holder of a brand-name prescription drug referred to as K-Dur 20. Schering-Plough s patent on K-Dur 20 is scheduled to expire on September 5, 2006. Pursuant to the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq., a company wishing to market or sell a prescription drug in the United States must first obtain approval from the Food and Drug Administration ("FDA"). Schering-Plough has obtained approval for K-Dur 20, and markets and sells the drug in the United States.
Manufacturers often create generic drugs that are bioequivalent to brand name drugs. To market or sell these generic drugs in the United States, the manufacturers must obtain approval from the FDA. The Hatch-Waxman Act, 21 U.S.C. § 355, governs the approval process. Pursuant to the Act, a manufacturer seeking approval of a generic drug must file an Abbreviated New Drug Application ("ANDA"). In the application, the manufacturer must reference the relevant brand name drug, and demonstrate that its generic drug is bioequivalent to the brand name drug. If the brand name drug is protected by a patent, the manufacturer must also certify that the brand name drug's patent is invalid or that the generic drug does not infringe upon the brand name drug's patent. This certification is commonly referred to as "Paragraph IV certification." Once the manufacturer certifies under Paragraph IV9 he must notify the brand name drug patent holder. The brand name drug patent holder then has forty-five days to file a patent infringement suit against the manufacturer. If he elects to do so, the FDA will stay final approval of the generic drug until the earliest of three events: (1) the brand name drug patent expires; (2) thirty months pass from the time the brand name drug patent holder is notified of the manufacturer's ANDA with Paragraph IV certification; or (3) a final judicial determination is made that the brand name drug patent is invalid or not infringed. If the manufacturer is the first to file an ANDA with Paragraph IV certification, he will be entitled to a 180-day period of exclusivity: the FDA will refrain from approving any other generic version of the brand name drug until 180 days after either: (1) the original ANDA filer begins marketing its generic drug, or (2) a final judicial determination is made that the brand name drug patent is invalid or not infringed.
On August 6, 1995, defendant Upsher-Smith filed an ANDA seeking approval to market Klor Con M20, a generic version of Schering-Plough's K-Dur 20. Upsher-Smith was the first to file an ANDA regarding K-Dur 20. Because K-Dur 20 was protected by a patent, Upsher-Smith included Paragraph IV certification. Upsher-Smith notified Schering-Plough of its AND A on November 3, 1995. On December 15, 1995, Schering-Plough filed suit against Upsher-Smith for patent infringement.
In accordance with the Hatch-Waxman Act, the FDA stayed final approval of Klor Con M2O awaiting any one of the following: (1) the expiration of Schering-Plough's patent on K-Dur 20 (September 5, 2006); (2) the passing of thirty months from November 3, 1995 — the date on which Upsher-Smith notified Schering-Plough of its ANDA; or (3) a final judicial determination that the K-Dur 20 patent is invalid or not infringed upon by Klor Con M2O. In addition, because Upsher-Smith was the first to file an ANDA with Paragraph IV certification, the FDA stayed final approval of all other generic versions of K-Dur 20 until either: (1) 180 days pass from the time Upsher-Smith begins marketing Klor Con M2O, or (2) a final judicial determination is made that the K-Dur 20 patent is invalid or not infringed upon by Klor Con M2O.
Upsher-Smith strongly contested the patent infringement suit. On the eve of trial, however, Upsher-Smith entered into a settlement agreement with Schering-Plough. The agreement provided, inter alia, that Schering-Plough would pay Upsher-Smith $60 million, and Upsher-Smith would refrain from marketing Klor Con M2O or any other generic version of K-Dur 20 until September of 2001.
The FDA approved the marketing of Klor Con M2O in November of 1998. Pursuant to its agreement with Schering-Plough, however, Upsher-Smith has neither marketed Klor Con M2O nor attempted to develop another generic version of K-Dur 20. As a result, because of Upsher-Smith's right to 180 days of exclusivity, no manufacturer has been able to obtain approval from the FDA to market a generic version of K-Dur 20. It is likely that no manufacturer will obtain such approval until approximately March of 2002: If Upsher-Smith continues to adhere to its agreement with Schering-Plough, it will refrain from marketing Klor Con M2O until September of 2001. Supposing it then begins to market the drug, the earliest time at which a manufacturer will be able to obtain approval is 180 days thereafter-March of 2002.
Because Schering-Plough and Upsher-Smith settled their lawsuit prior to trial, no final judicial determination can be made that the K-Dur 20 patent is invalid or not infringed upon by Klor Con M20.
On December 29, 1995, defendant ESI Lederle, Inc. ("ESI") filed an ANDA seeking approval to market a generic version of K-Dur 20. ESI included Paragraph IV certification and notified Schering-Plough of its filing. Thereafter, Schering-Plough filed suit against ESI for patent infringement. In 1998, the parties entered into an agreement whereby Schering-Plough agreed to pay ESI up to $30 million, and ESI and defendant American Home Products Corporation ("AHP"), an affiliate of ESI, agreed to refrain from marketing a generic version of K-Dur 20 until January of 2004, refrain from marketing more than one generic version of K-Dur 20 between January of 2004 and September of 2006, and refrain from conducting or supporting a study of the bioequivalence of any product to K-Dur 20 prior to September of 2006.
II. Discussion A. Defendants' Motion to Stay
On May 23, 2001, Schering-Plough filed a motion with the Judicial Panel on Multidistrict Litigation ("MDL") requesting that this case be transferred to the United States District Court for the District of New Jersey. Defendants contend that this court should stay all proceedings in this case, including any ruling on plaintiff's motion to remand, until the MDL decides whether to grant the motion to transfer.The court discerns no reason to stay the proceedings in this case, nor to delay ruling on plaintiff's motion for remand. According to Panel Rule 1.5, the court retains jurisdiction to conduct all pretrial proceedings despite Schering-Plough's pending motion to transfer. See Rules of Procedure of the Judicial Panel on Multidistrict Litigation. Rule 1.5. The court adopts the reasoning of Judge Vratil as stated in Aetna U.S. Healthcare, Inc. v. Hoechst Aktiengesellschaft:
For purposes of judicial economy, the jurisdictional issue should be resolved immediately. If federal jurisdiction does not exist, the case can be remanded before federal resources are further expended. . . . [J]udicial economy dictates a present ruling on the remand issue.54 F. Supp.2d 1042, 1048 (D. Kan. 1999) (citing generally Tortola Restaurants, L.P. v. Kimberly-Clark Corp., 987 F. Supp. 1186, 1188 (N.D. Cal. 1997)). Accordingly, the court denies defendants' motion to stay.
B. Plaintiff's Motion for Remand
A state court action may be removed to federal court if the plaintiff could have brought the action in federal court originally. See 28 U.S.C. § 1441(a). The court is required to remand an action to the state court from which it came "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). The defendant has the burden of demonstrating that the court has jurisdiction. See McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189(1936)."Absent diversity of citizenship, federalquestion jurisdiction is required." Caterpillar Inc. v. Williams, 482 U.S. 386.392 (1987) (citing 28 U.S.C. § 1331). Federal question jurisdiction exists where the action arises "under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.
Defendants contend that federal question jurisdiction exists in this case because plaintiff's claims require the court to "interpret substantial questions of federal law, including specifically the validity of [Schering-Plough's] patent and whether it was infringed, and whether any of the [defendants] enjoys marketing exclusivity under the federal Hatch-Waxman Act." (Defendants' Memorandum in Opposition to Plaintiff's Motion to Remand at 4.) The court disagrees.
Plaintiff alleges in his complaint that defendants violated Kansas antitrust laws by conspiring:
(a) to prevent market entry of products that would compete against K-Dur 20; (b) to increase and/or maintain the price of K-Dur 20 in Kansas; (c) to create and carry out unreasonable restrictions on the free flow of the trade and commerce in Kansas . . .; and (d) to prevent or restrain competition in the sale of K-Dur 20 in Kansas.
(Plaintiff's Complaint at ¶¶ 80-81.) Plaintiff's claims do not require the court to determine whether Schering-Plough's patent on K-Dur 20 is valid, and if so, whether Upsher-Smith and/or ESI infringed upon Schering-Plough's patent. Instead, plaintiff's claims require the court to determine whether defendants entered into one or more conspiracies with the intent to prevent or restrain competition of the sale of K-Dur 20 in Kansas. To the extent patent law is discussed, it is "merely tangential to [plaintiff's] claim that [defendants] had an ill motive which resulted in [state law violations]." Aetna U.S. Healthcare. Inc., 54 F. Supp.2d at 1054. "While federal law may be implicated in an examination of [defendants'] motives, it is hardly a substantial or necessary part of plaintiff's claim[s]." Id (citing Gaines-Tabb v. Mid-Kansas Co-op. Assn, 980 F. Supp. 1424, 1428 (D. Kan. 1997)).
Similarly, plaintiff's claims do not require the court to interpret the Hatch-Waxman Act. Plaintiff's claims do not seek a determination that defendants violated the Hatch-Waxman Act. Plaintiff's claims seek a determination that defendants agreed to prevent or restrain competition of the sale of K-Dur 20 in Kansas. As with patent law, any discussion of the Hatch-Waxman Act is merely tangential to plaintiffs claims. "[W]hile consideration of the agreement will reference defendants' rights under the [Hatch-Waxman Act], it will not require an interpretation or application of the [Hatch-Waxman Act]." Id. at 1055.
Defendants contend in the alternative that federal jurisdiction exists because plaintiff's claims "seek to undermine the settlement and dismissal of [defendants'] federal patent litigations." (Defendants' Memorandum in Opposition to Plaintiff's Motion to Remand at 4.) The court does not agree.
Plaintiff's claims do not seek to undermine or set aside the settlement agreements that were entered into in connection with defendants' federal patent litigations. To the extent the settlement agreements are involved, they simply "form part of the factual basis of [p]laintiff's claims"; they simply explain the circumstances under which defendants allegedly conspired to prevent or restrain competition of the sale of K-Dur 20 in Kansas. (Plaintiff's Memorandum in Support of Motion to Remand at 9.)
The court determines that it lacks subject matter jurisdiction over this case and thus the case should be remanded to the state court from which it came.
IT IS, THEREFORE, BY THE COURT ORDERED that plaintiffs motion for remand (Doc. 3) is granted; the case is remanded to the District Court of Johnson County, Kansas.
IT IS FURTHER BY THE COURT ORDERED that defendants' motion to stay (Doc. 9) is denied.
The clerk is directed to take such steps as are necessary to remand the case to the District Court of Johnson County, Kansas.
The clerk is also directed to transmit copies of this order to counsel of record for the parties.
IT IS SO ORDERED.