By William Zale, J.D.
A state enforcement action under West Virginia antitrust and consumer laws—asserting that Pfizer prosecuted baseless patent infringement actions regarding the drug Lipitor and its generic equivalent and entered into an anticompetitive pay-for-delay agreement with the generic drug company Ranbaxy—was not subject to federal jurisdiction, the federal district court in Huntington, West Virginia has ruled (West Virginia v. Pfizer, Inc., May 13, 2013, Chambers, R.). The court denied the defendants’ motion to stay pending possible transfer to federal multidistrict litigation and remanded the case to state court.
West Virginia brought suit in state court, asserting violations of the West Virginia Antitrust Act (WVAA) and unfair or deceptive acts or practices in violation of the West Virginia Consumer Credit and Protection Act (WVCCPA). According to the defendants, this case is one of thirty actions that have been filed against them in state and federal court since November 2011, alleging anticompetitive conduct based on nearly identical factual allegations. The other actions have been consolidated as multidistrict litigation before U.S. District Judge Peter G. Sheridan in the District of New Jersey. In re Lipitor Antitrust Litig., MDL No. 2332 (J.P.M.L. Apr. 20, 2012).
The Judicial Panel on Multidistrict Litigation (JPML) issued a conditional transfer order, transferring this action to the MDL court. The state objected and subsequently filed a motion to vacate the conditional transfer order, which is still pending before the JPML. The state moved to remand to state court. The defendants asked the court to stay the case pending transfer to the federal MDL. The court denied the stay, finding that the jurisdictional issue should be resolved immediately for purposes of judicial economy.
On the state’s motion to remand, the defendant’s offered two bases for federal jurisdiction: (1) the right to relief arises under federal law—especially federal patent law—and (2) there is federal diversity jurisdiction pursuant to the Class Action Fairness Act (CAFA).
Federal question jurisdiction. A federal court will have “arising under” jurisdiction over state law claims if the federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress, the court observed, citing the U.S. Supreme Court’s recent decision in Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013). A federal issue is substantial if it is significant to the federal system as a whole. A federal question is insufficient to establish “arising under” jurisdiction if a state court’s resolution of the federal question would have an effect that is fact-bound and situation-specific, rather than being controlling in numerous other cases, the court noted.
In support of its WVAA and WVCCPA claims, the state asserted four theories: (1) Pfizer fraudulently obtained a duplicative patent from the USPTO and then wrongfully listed that patent in FDA’s Orange Book; (2) Pfizer engaged in sham patent infringement litigation against Ranbaxy; (3) Pfizer filed a sham citizen petition with FDA regarding Ranbaxy’s generic ANDA; and (4) Pfizer and Ranbaxy entered into an anticompetitive market allocation agreement.
Although the claims under the first two theories require application of federal patent law, the court determined that they do not present questions of federal law that are of such significance to the federal system that they must be resolved by a federal court. Although FDCA standards may be embedded in the third theory, that does not constitute a substantial federal issue sufficient to confer jurisdiction, especially where the FDCA confers no private cause of action, the court concluded.
The state’s fourth theory—that the defendants entered into a “pay-for-delay” agreement, an agreement ostensibly designed to resolve the patent infringement litigation and to protect Ranbaxy from infringement liability—did not arise under patent law. The defendants argued that, because the agreement at issue was evidently in settlement of the patent infringement lawsuit, it is presumed to be lawful. In order to overcome this presumption, the state must show that the patent was invalid, the defendants contended. The court noted, however, that the allegedly wrongful terms of the agreement extended five months beyond the expiration of Pfizer’s Patent.
Because none of the theories in support of the state’s claims necessarily raised substantial questions of patent or other federal law, the claims did not arise under federal law. The court lacked federal question jurisdiction.
Federal diversity jurisdiction. The defendants argued that although this action is labeled a parens patriae action brought in the name of the state and attorney general, it is effectively a class action and subject to this Court’s CAFA-conferred jurisdiction. The court held that this argument was foreclosed by the Fourth Circuit’s opinion in West Virginia ex rel. McGraw v. CVS Pharmacy, Inc., 646 F.3d 169 (2011), cert. denied, 132 S. Ct. 761 (Nov. 28, 2011).
CAFA defines “class action” to mean “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action” (emphasis added by court).
The power to sue as parens patriae—literally, parent of the country—is inherent in the supreme power of every state, the court noted. As recognized by CVS Pharmacy, this attorney general WVCCPA and WVAA action is brought by the state as parens patriae. The state’s quasi-sovereign interests, not those of the individual purchasers, dominate the complaint, and it is not a class action, according to the court. Because this action was not brought under Federal Rule of Civil Procedure 23 or a similar state statute, CAFA does not permit its removal, and the court lacked federal diversity jurisdiction.
The court directed that the case be remanded to the Circuit Court of Mason County, West Virginia.
The case is No. 3:13-cv-02546.
Attorneys: D. Christopher Hedges, Office of Attorney General, State of West Virginia. Brendan G. Woodard (White & Case) for Pfizer, Inc.
Companies: Pfizer Inc.; Pfizer Ireland Pharmaceuticals; Warner-Lambert Co.; Ranbaxy Inc.; Ranbaxy Pharmaceuticals, Inc.; Ranbaxy Laboratories Limited.
MainStory: TopStory Antitrust StateUnfairTradePractices WestVirginiaNews
Interested in submitting an article?
Submit your information to us today!Learn More