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Mutual Pharmaceutical Company, Inc., and United Research v. Eric Warren Goldman

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


July 3, 2012

MUTUAL PHARMACEUTICAL COMPANY, INC., AND UNITED RESEARCH LABORATORIES, INC., PLAINTIFFS,
v.
ERIC WARREN GOLDMAN, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF SANFORD M. BOLTON, DEFENDANT, AND SPIRIDON SPIREAS, PH.D., AND HYGROSOL PHARMACEUTICAL CORP., DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
MUTUAL PHARMACEUTICAL COMPANY, INC., UNITED RESEARCH LABORATORIES, INC., RICHARD ROBERTS, M.D., PH.D., PHARMACEUTICAL IP HOLDINGS, INC., PHARMACEUTICAL HOLDINGS COMPANY, INC., KING PHARMACEUTICALS, INC. AND KING PHARMACEUTICALS RESEARCH AND DEVELOPMENT, INC., THIRD-PARTY/COUNTERCLAIM DEFENDANTS.

The opinion of the court was delivered by: Rufe, J.

MEMORANDUM OPINION

Before the Court is the Motion of Defendants/Third-Party Plaintiffs to Remand this action to the Court of Common Pleas of Philadelphia County. The Motion is opposed by the Third-Party/Counterclaim Defendants, who fall into two groups: (1) King Pharmaceuticals, Inc. and King Pharmaceuticals Research and Development, Inc. (the "King Defendants"); and (2) Mutual Pharmaceutical Company, Inc. ("Mutual"), United Research Laboratories, Inc., Richard Roberts, Pharmaceutical IP Holdings, Inc., and Pharmaceutical Holdings Company, Inc. (the "Mutual Defendants").

I. B ACKGROUND

On or about May 5, 2011, Mutual Pharmaceutical Company, Inc. and United Research Laboratories, Inc. (the "Original Plaintiffs") filed a complaint in the Philadelphia Court of Common Pleas against Dr. Spireas, Dr. Bolton, and Hygrosol Pharmaceutical Corp. ("Hygrosol") (collectively, the "Original Defendants"), *fn1 seeking a declaratory judgment and damages based on breach of contract, fraudulent misrepresentation and unjust enrichment related to a 1998 License Agreement regarding certain "liquisolid technology" patents. *fn2 On or about January 6, 2012, Spireas and Hygrosol (the "Third-Party Plaintiffs") filed an answer and asserted counterclaims for breach of the License Agreement, disclosure of confidential information, conversion, and fraud, alleging that the Original Plaintiffs failed to pay a percentage of the profits owed under the License Agreement for Mutual's use of products developed using Original Defendants' patents and technology, including formulations for metaxalone products sub-licensed by Mutual to the King Defendants. *fn3

Spireas and Hygrosol also filed a "third-party complaint" against the Mutual and King Defendants asserting, inter alia , state claims for restraint of trade under Pennsylvania and California law, civil conspiracy, fraud and breach of contract, and federal claims for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") related to the Third-Party Defendants' use of all metaxalone products developed by Dr. Spireas. *fn4 Third-Party Plaintiffs allege that Third-Party Defendants' agreements and illegal actions relate to both (a) formulations for at least two "more bioavailable metaxalone-based muscle relaxant drug" formulations developed pursuant to the 1998 License Agreement, and (b) two generic formulations for the King Defendants' branded metaxalone-based product Skelaxin (one which could be developed under the 1998 License Agreement with Hygrosol, and one which was subject to a 1999 Development Agreement between certain Mutual Defendants and SigmaPharm, Inc., Dr. Spireas's wholly owned company). *fn5

All Third-Party/Counterclaim Defendants removed the action to this Court based on federal-question jurisdiction over the RICO claims in the Third-Party Complaint, *fn6 and Third-Party Plaintiffs seek to remand. *fn7

II. D ISCUSSION

The Court of Appeals for the Third Circuit has not ruled directly on whether a third-party defendant may properly remove an action under 28 U.S.C. § 1441. *fn8 However, it has been the view of the majority of federal courts that neither counterclaim defendants nor third-party defendants may remove a civil action from state court to federal court pursuant to § 1441, because such parties are not "defendants" within the meaning of § 1441(a), which states in pertinent part that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants . . . ." *fn9

In so holding, these courts have followed the "long-accepted practice of deferring to the Plaintiff's choice of forum by treating the Plaintiff as master of his own complaint," *fn10 as well as the principle that "removal statutes are to be strictly construed against removal and all doubts . . . resolved in favor of remand." *fn11 Some courts have also concluded that the accepted meaning of the term "joined" does not authorize removal by a third-party defendant pursuant to § 1441(c), because a third-party claim is typically "antagonistic to" rather than "joined with" a plaintiff's original claims. *fn12 The Court finds the majority view persuasive in this case, especially as the third-party claims appear to be intertwined with the original cause of action. *fn13

Third-Party Defendants argue that amendments to 28 U.S.C. § 1441(c) effective January 6, 2012 allow the removal by any party of any action containing federal claims. The Court does not agree. The prior language of § 1441(c) read: (c) Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.

As amended, the subsection reads:

(c) Joinder of Federal law claims and State law claims.--

(1) If a civil action includes --

(A) a claim arising under the Constitution, laws, or treaties of the United States (within the meaning of section 1331 of this title), and

(B) a claim not within the original or supplemental jurisdiction of the district court or a claim that has been made nonremovable by statute, the entire action may be removed if the action would be removable without the inclusion of the claim described in subparagraph (B).

The revised language of §1441(c) does not materially alter a third-party defendant's ability to remove under the statute. Contrary to Third-Party Defendants' argument that "the new language makes plain that any case containing a claim arising under federal law may be removed," *fn14 the amendment instead clarifies that subsection (c) allows removal of an action containing nonremovable state claims only if the action would be removable in the absence of the nonremovable claim. The Court can see no reason for the inclusion of this limiting language if any and all actions containing federal claims are removable.

Furthermore, despite the long-running debate among the federal courts as to whether third-party defendants may properly remove under § 1441(c), the language of subsection 1441(a) remains unchanged. Had Congress intended to permit removal by third-party defendants, it could have amended § 1441(a) to clarify the definition of "the defendant or the defendants," or added additional language to § 1441(c) specifying that removal under that subsection is available to parties other than original defendants. It did not.

The Court finds additional support for its conclusion in recent appellate decisions addressing similar arguments in the context of the 2005 Class Action Fairness Act, which confers federal jurisdiction over certain class actions. Some third-party defendants have attempted to remove state court class actions to federal court pursuant to 28 U.S.C. § 1453(b), which provides that a qualifying class action "may be removed by any defendant without the consent of all defendants." *fn15 However, "the majority of the courts that have considered the issue have . . . conclude[d,] that the language of section 1453(b) does not change the prior rule that counterclaim or third-party defendants do not have the right of removal." *fn16 Although the Third Circuit has not ruled on this question, this Court finds the reasoning of the Sixth, Ninth, Seventh and Fourth Circuits instructive in reaching a similar conclusion that recent amendments to § 1441(c) have not expanded the right of removal to third-party defendants.

III. C ONCLUSION

For the reasons stated above, Defendants/Third-Party Plaintiffs' Motion to Remand this action to the Court of Common Pleas of Philadelphia County shall be granted. An appropriate order follows.


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