IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
April 4, 2012
IN RE: AVANDIA MARKETING, SALES PRACTICES AND PRODUCTS
The opinion of the court was delivered by: Hon. Cynthia M. Rufe
THIS DOCUMENT APPLIES TO: MARK SHURTLEFF, ATTORNEY GENERAL CIVIL ACTION OF THE STATE OF UTAH ex rel. THE STATE OF UTAH v. GLAXOSMITHKLINE, LLC, formerly SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE NO. 11-2915 STATE OF LOUISIANA CIVIL ACTION v. : GLAXOSMITHKLINE, LLC, formerly SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE; GLAXOSMITHKLINE, PLC NO. 11-3521
In these actions, filed on behalf of the states of Utah and Louisiana, Plaintiffs (collectively, "the States") allege that Defendant, GlaxoSmithKline ("GSK"), violated state consumer-protection statutes and committed state-law torts. In essence, Plaintiffs allege that Medicaid funds were improperly dispersed to Utah and Louisiana Medicaid participants and suppliers for the non-medically appropriate use of the diabetes drug Avandia because of fraudulent and deceptive practices by GSK that misrepresented the safety and efficacy of Avandia. The cases were filed in the applicable state courts, removed to federal court by GSK, and transferred to this Court by the Judicial Panel on Multidistrict Litigation. GSK argues that removal was proper in these cases because this Court has federal-question jurisdiction pursuant to 28 U.S.C. § 1331; in the Louisiana case, GSK also argues that removal was proper pursuant to 28 U.S.C. § 1332 because the true parties in interest to the dispute are of diverse citizenship and the amount in controversy exceeds $75,000. The States seek to have the cases remanded to the state courts.
II. STANDARD OF REVIEW
Removal of a civil action from state to federal court is proper only if the action initially could have been brought in federal court. *fn1 The removal statutes "are to be strictly construed against removal and all doubts should be resolved in favor of remand." *fn2 28 U.S.C. § 1331 grants federal district courts original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." *fn3 28 U.S.C. § 1332 provides that the federal courts have original jurisdiction over "all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States." *fn4
As the party removing the case, GSK has the burden to prove that federal jurisdiction is proper at all stages of the litigation. *fn5
A. Federal Question Jurisdiction
Although there is no "mechanical test for determining when an 'action aris[es] under' federal law," *fn6 for purposes of jurisdiction, it is generally accepted that the "well-pleaded complaint [must] establish either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." *fn7
"Arising under" federal-question jurisdiction is generally appropriate in two types of actions. The first, most common, category involves suits in which the plaintiff pleads a cause of action created by federal law. *fn8 In the second "slim category of cases," *fn9 a plaintiff pleads a state-law cause of action that "implicate[s] significant federal issues" or "turn[s] on substantial questions of federal law," and therefore contains an "embedded federal issue." *fn10
In both categories, every putative federal-question case must adhere to the "well-pleaded complaint" rule. Under that rule, a suit "'arises under' federal law 'only when the plaintiff's statement of his own cause of action shows that it is based upon [federal law].'" *fn11 The existence of a federal defense to a state-law cause of action will not suffice; *fn12 instead, the plaintiff's well-pleaded complaint must include, within its four corners, either an explicit federal cause of action or a state-law cause of action that contains an embedded federal question that is both substantial and disputed. " *fn13 Moreover, "[t]he fact that a complaint mentions, or even incorporates a federal law, does not determine whether it 'arises under' the Constitution, laws or treaties of the United States." *fn14
Jurisdiction will lie only if three conditions are met: 1) the case necessarily raises a federal issue, 2) the federal issue is substantial and in actual dispute, and 3) the exercise of federal jurisdiction will not disturb "any congressionally approved balance of federal and state judicial responsibilities." *fn15
If the dispute is fact-bound and does not rely solely on a determination of federal law, remand is appropriate.*fn16
Here, the States have asserted only state-law causes of action. *fn17 GSK argues that the cases involve embedded federal questions because: 1) the States' obligation to pay for Avandia is rooted in the federal Medicaid statutes; and 2) whether GSK misrepresented Avandia requires interpretation of decisions by the federal Food and Drug Administration ("FDA"). *fn18 In the Utah case, GSK argues that because the federal Medicaid program requires Utah to pay for a "covered outpatient drug," and because the FDA approved the use Avandia for treatment of type 2 diabetes at the relevant times, Avandia was a covered drug and federal law required Utah to pay for it. Therefore, according to GSK, Utah's claim that GSK fraudulently induced all Avandia presecriptions in effect challenges Avandia's status as an approved and covered drug under federal law. *fn19 Similarly, in the Louisiana case, GSK argues that Louisiana's effort to compel GSK to provide a refund for every state-paid Avandia prescription requires the State to prove a basis under federal law to remove Avandia as a covered drug. *fn20 However, as the Court reads the Complaints, the States do not allege that Avandia is not a covered drug under the federal Medicaid statute. The States allege that GSK's fraudulent and deceptive actions caused physicians to prescribe Avandia instead of safer and less expensive drugs. *fn21 The issues of federal law do not predominate. Instead, the Court finds that disputed issues of state law predominate and that those issues are better suited to resolution by the state courts. *fn22
GSK also argues that the States repeatedly invoked the federal Food, Drug, and Cosmetic Act ("FDCA") *fn23 in the Complaints, including allegations that the FDA cited GSK for violations of the law in connection with its marketing of Avandia. Although Plaintiffs indeed so allege, "[t]he mere presence of a federal standard embedded in a state law cause of action is not sufficient to warrant federal subject matter jurisdiction where there is no federal remedy for a violation of the federal statute." *fn24 These allegations will not establish the States' ability to recover under their state-law claims; instead, these allegations relate to possible evidence to support the state-law claims. *fn25 After careful consideration, this Court finds that the cases brought by the States do not fall within that narrow class of cases in which federal jurisdiction may be found when only state-law causes of action are asserted.
B. Diversity Jurisdiction
It is well established that a state is not considered a citizen for purposes of diversity jurisdiction. *fn26 GSK argues in the Louisiana case, however, that the real party in interest is not the State but the Louisiana Department of Health and Hospitals ("LDHH"), that LDHH does not qualify as a state agency but is instead simply a citizen of Louisiana, and therefore that diversity jurisdiction exists (as the amount in controversy is considerably more than $75,000). The Court disagrees. Even if LDHH is the real party in interest, which GSK has not established, LDHH is a state agency for purposes of diversity jurisdiction.
"Questions concerning the citizenship of state agencies for purposes of diversity are unavoidably linked to questions of agency immunity under the Eleventh Amendment. Despite the differing policies underlying the two inquiries, they are almost identical."*fn27 The courts of the Fifth Circuit have held consistently that LDHH is a state agency for Eleventh Amendment
purposes. *fn28 GSK has given this Court no reason to conclude that LDHH should be treated differently for purposes of removal jurisdiction here. *fn29
"An assertion of a violation of the FDCA as an element of a state tort claim is not a sufficiently substantial federal issue to confer federal question jurisdiction." *fn30 GSK has not established that legal interpretations of the FDCA or the federal Medicaid statute predominate over the state-law issues to be determined in these cases, or that the parties are of diverse citizenship. The cases therefore will be remanded for lack of subject-matter jurisdiction. Because the question of the propriety of removal in cases such as these has been resolved differently within the federal courts, the Court does not find a basis for awarding costs to the States. *fn31
Appropriate orders will be entered.