Case Briefing

Minnesota's complaint included six state-law claims: consumer fraud, false advertising, fraud on senior citizens and handicapped persons, Medicaid fraud, common-law fraud, and unjust enrichment. All these claims are grounded in allegations that Pharmacia misreported the AWPs for various Pharmacia prescription drugs, to the detriment of Minnesota Medicare beneficiaries, the Minnesota Medicaid program and certain other Minnesota state programs that use AWP to set reimbursement rates for prescription drugs.

The court here noted that on first glance Pharmacia should readily win this dispute, because an essential element of Minnesota's parens patriae claims was proof of a discrepancy between the AWPs reported by Pharmacia and the meaning of AWP under the Medicare statute. Nevertheless, under the rule set out by the U.S. Supreme Court in Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 808, 92 L. Ed. 2d 650, 106 S. Ct. 3229 (1986), where a state-law claim includes as a necessary element the violation of a federal statute, the federal statute must provide a private remedy for violation of that standard for federal-question jurisdiction to obtain. Here, Pharmacia made no argument that the Medicare statute provides a private right of action for AWP misreporting. Even though violation of the Medicare statute is a necessary element of Minnesota's Medicare-beneficiary claims, Merrell Dow, the court held, requires a finding that the federal issue is not substantial enough to create federal jurisdiction. Thus, the court found that it was required to remand this suit to Minnesota state court.

Researchers' Fraudulent Joinder Prompts Removal

Researchers who conducted double-blind studies of a drug, did not develop the protocols for the tests they performed, and made no representations to the public concerning the drug's safety could not be held liable for simple negligence or for negligence under a products liability theory for harm caused by use of the drug. Staples v. Merck & Co. Inc., Civ. Action No. 3:03-CV-0180-M (lead case) (Consolidated with 3:03-CV-0181-M through 3:03-CV-0189-M), 2003 U.S. Dist. LEXIS 11318 (U.S. Dist., N.D. Tex, 7/1/03).

The petitions asserted nearly identical claims related to the drug VIOXX' for a variety of causes of action, including simple negligence and a products liability theory of negligence against Merck & Co. Inc. as well as against a clinical researcher and the company that employed him (collectively, Clinical Researchers). The Clinical Researchers were both Texas defendants. The Texas citizenship of the clinical researchers would ordinarily defeat removal jurisdiction under 28 U.S.C. ' 1441(b), but Merck contended that the federal court should exercise removal jurisdiction because they were fraudulently joined.

In support of its motion for removal, Merck pointed to the following facts: The company designed the protocols and provided the instructions to the Clinical Researchers via an Investigator's Brochure; the Clinical Researchers conducted each protocol according to Merck's instructions, then reported the results; Merck had clinical, medical, and statistical monitors who aided in determining what constituted an adverse effect, and sent employees to R/D Clinical Research multiple times to determine whether there was a pattern of drug-related toxicity; the Clinical Researchers were not authorized to report the data to anyone other than Merck; the studies that Merck designed for the Clinical Researchers to conduct were double-blind so that neither the Clinical Researchers nor the patients knew whether the patients received VIOXX, a placebo, or a comparator drug; only Merck had a code that allowed it to match a patient to the treatment he or she was receiving, so that if one of the subjects suffered an adverse effect, the Clinical Researchers had no means of knowing whether the effect was related to VIOXX; none of the plaintiffs in these consolidated actions were subjects of the Clinical Researchers' studies; the Clinical Researchers had no contact with the plaintiffs prior to this litigation; and the Clinical Researchers were only two of the many researchers reporting data on VIOXX to Merck.

The court found that the Clinical Researchers owed no duty to the plaintiffs under a simple negligence theory, because in Texas, generally, independent laboratories have no duty of reasonable care toward parties with whom they have not contracted. Since none of the plaintiffs were actually tested by these researchers, the Clinical Researchers could not be held liable for negligence toward them.

Plaintiffs' claim that the Clinical Researchers owed them a duty under a products liability theory of negligence must also fail, the court noted, unless the Clinical Researchers played a role in the design, manufacture or sale of the product. Plaintiffs had claimed that by collecting data, the Clinical Researchers participated in the marketing of VIOXX. But the court here found that for the reasons cited in Merck's argument, the Clinical Researchers were unaware of the drug's effects on the study's subjects and so were in no position to make any claims whatsoever to the public or to Merck about the safety of VIOXX.

Because plaintiffs could not likely succeed based on any of their theories, joinder of the Clinical Researchers was fraudulent and the district court could properly exercise removal jurisdiction.

Absent Private Right of Action, Removal to Federal Court Barred

A lawsuit by the State of Minnesota against a pharmaceutical company for violation of various state laws was improperly removed from state to federal court because although resolution of a substantial federal question was required to settle the issues, the federal statute conferred no private right of action for its violation. Montana v. Abbot Labs, Civ. Action Nos. 02-12084-PBS, 02-12085-PBS, 02-12086-PBS, 03-10069-PBS, 2003 U.S. Dist. LEXIS 9890 (6/11/03).

Plaintiff State of Minnesota brought these actions against the pharmaceutical company alleging the company violated state law by fraudulently misrepresenting prescription drug prices. Defendant removed the suit from state court on the ground that plaintiff's claims raised federal questions, because the outcome of the claims turns on the meaning of “average wholesale price” (AWP) in the federal Medicare statute, 42 U.S.C. '1395u(o). Plaintiff argued in support of its bid for remand to state court that any federal issues were not substantial enough to confer jurisdiction and that Pharmacia's statutory argument was simply a defense, which is not a ground for removal.

Minnesota's complaint included six state-law claims: consumer fraud, false advertising, fraud on senior citizens and handicapped persons, Medicaid fraud, common-law fraud, and unjust enrichment. All these claims are grounded in allegations that Pharmacia misreported the AWPs for various Pharmacia prescription drugs, to the detriment of Minnesota Medicare beneficiaries, the Minnesota Medicaid program and certain other Minnesota state programs that use AWP to set reimbursement rates for prescription drugs.

The court here noted that on first glance Pharmacia should readily win this dispute, because an essential element of Minnesota's parens patriae claims was proof of a discrepancy between the AWPs reported by Pharmacia and the meaning of AWP under the Medicare statute. Nevertheless, under the rule set out by the U.S. Supreme Court in Merrell Dow Pharmaceuticals Inc. v. Thompson , 478 U.S. 804, 808, 92 L. Ed. 2d 650, 106 S. Ct. 3229 (1986), where a state-law claim includes as a necessary element the violation of a federal statute, the federal statute must provide a private remedy for violation of that standard for federal-question jurisdiction to obtain. Here, Pharmacia made no argument that the Medicare statute provides a private right of action for AWP misreporting. Even though violation of the Medicare statute is a necessary element of Minnesota's Medicare-beneficiary claims, Merrell Dow, the court held, requires a finding that the federal issue is not substantial enough to create federal jurisdiction. Thus, the court found that it was required to remand this suit to Minnesota state court.

Researchers' Fraudulent Joinder Prompts Removal

Researchers who conducted double-blind studies of a drug, did not develop the protocols for the tests they performed, and made no representations to the public concerning the drug's safety could not be held liable for simple negligence or for negligence under a products liability theory for harm caused by use of the drug. Staples v. Merck & Co. Inc. , Civ. Action No. 3:03-CV-0180-M (lead case) (Consolidated with 3:03-CV-0181-M through 3:03-CV-0189-M), 2003 U.S. Dist. LEXIS 11318 (U.S. Dist., N.D. Tex, 7/1/03).

The petitions asserted nearly identical claims related to the drug VIOXX' for a variety of causes of action, including simple negligence and a products liability theory of negligence against Merck & Co. Inc. as well as against a clinical researcher and the company that employed him (collectively, Clinical Researchers). The Clinical Researchers were both Texas defendants. The Texas citizenship of the clinical researchers would ordinarily defeat removal jurisdiction under 28 U.S.C. ' 1441(b), but Merck contended that the federal court should exercise removal jurisdiction because they were fraudulently joined.

In support of its motion for removal, Merck pointed to the following facts: The company designed the protocols and provided the instructions to the Clinical Researchers via an Investigator's Brochure; the Clinical Researchers conducted each protocol according to Merck's instructions, then reported the results; Merck had clinical, medical, and statistical monitors who aided in determining what constituted an adverse effect, and sent employees to R/D Clinical Research multiple times to determine whether there was a pattern of drug-related toxicity; the Clinical Researchers were not authorized to report the data to anyone other than Merck; the studies that Merck designed for the Clinical Researchers to conduct were double-blind so that neither the Clinical Researchers nor the patients knew whether the patients received VIOXX, a placebo, or a comparator drug; only Merck had a code that allowed it to match a patient to the treatment he or she was receiving, so that if one of the subjects suffered an adverse effect, the Clinical Researchers had no means of knowing whether the effect was related to VIOXX; none of the plaintiffs in these consolidated actions were subjects of the Clinical Researchers' studies; the Clinical Researchers had no contact with the plaintiffs prior to this litigation; and the Clinical Researchers were only two of the many researchers reporting data on VIOXX to Merck.

The court found that the Clinical Researchers owed no duty to the plaintiffs under a simple negligence theory, because in Texas, generally, independent laboratories have no duty of reasonable care toward parties with whom they have not contracted. Since none of the plaintiffs were actually tested by these researchers, the Clinical Researchers could not be held liable for negligence toward them.

Plaintiffs' claim that the Clinical Researchers owed them a duty under a products liability theory of negligence must also fail, the court noted, unless the Clinical Researchers played a role in the design, manufacture or sale of the product. Plaintiffs had claimed that by collecting data, the Clinical Researchers participated in the marketing of VIOXX. But the court here found that for the reasons cited in Merck's argument, the Clinical Researchers were unaware of the drug's effects on the study's subjects and so were in no position to make any claims whatsoever to the public or to Merck about the safety of VIOXX.

Because plaintiffs could not likely succeed based on any of their theories, joinder of the Clinical Researchers was fraudulent and the district court could properly exercise removal jurisdiction.