Abbott Laboratories v. Celebrezze, Civ. A. No. 2737.

• Decision Date: 30 April 1964
• Docket Number: Civ. A. No. 2737.
• Citation: 228 F. Supp. 855
• Parties: ABBOTT LABORATORIES et al., Plaintiffs, v. Anthony J. CELEBREZZE, Secretary of Health, Education and Welfare, and George P. Larrick, Commissioner of Food and Drugs, Defendants.
• Court: U.S. District Court — District of Delaware

228 F. Supp. 855

ABBOTT LABORATORIES et al., Plaintiffs, v. Anthony J. CELEBREZZE, Secretary of Health, Education and Welfare, and George P. Larrick, Commissioner of Food and Drugs, Defendants.

Civ. A. No. 2737.

United States District Court D. Delaware.

April 30, 1964.

COPYRIGHT MATERIAL OMITTED

Alexander L. Nichols and William S. Megonigal, Jr., of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiffs, Gerhard A. Gesell, Stanley L. Temko, and Herbert Dym, of Covington & Burling, Washington, D. C., of counsel, for all plaintiffs except Merck & Co., Inc. and Pharmaceutical Manufacturers Association.

Hayward H. Coburn, of Drinker, Biddle & Reath, Philadelphia, Pa., of counsel, for Merck & Co., Inc.

Lloyd N. Cutler and Marshall Hornblower, of Wilmer, Cutler & Pickering, Washington, D. C., and C. Joseph Stetler, Chicago, Ill., and John K. Worley, Detroit, Mich., of counsel, for Pharmaceutical Manufacturers Association.

Alexander Greenfeld, U. S. Atty., and William J. Wier, Jr., Asst. U. S. Atty., Wilmington, Del., William W. Goodrich, Asst. Gen. Counsel for Food and Drugs; Joanne S. Sisk and Nancy N. Keefe, Attys., United States Department of Health, Education, and Welfare, Washington, D. C., for defendants.

CALEB M. WRIGHT, Chief Judge.

This action arises under the Federal Food, Drug, and Cosmetic Act, 52 Stat. 1040, as amended 21 U.S.C. § 301 et seq. ("the Act").

According to § 502(e) (1) (B) of the Act, 21 U.S.C. § 352(e) (1) (B), the labeling of a prescription drug shall cause that drug to be "misbranded" unless the established or generic name of the drug is printed prominently on any label or labeling material, as defined in the Act, in type half as large as any brand or proprietary name.¹

The proprietary, or brand name, of a prescription drug is used by the manufacturer to identify the source of the drug. The proprietary name distinguishes the drug manufactured by one company from the drug with active ingredients of the same or similar chemical constitution produced by another company. Thus a physician can, if he desires, exercise a choice among sources in prescribing drugs for his patient.

Most prescription drugs also have a non-proprietary or generic name. Such a name may be a systematic chemical name, a common name, or an official name used in some official compendium or designated by the Secretary of Health, Education and Welfare. This is the "established name" which § 502(e) (1) (B) requires to be prominently displayed on drug labeling. If this requirement is not met and a misbranded drug is introduced into interstate commerce (a) the drugs may be seized and forfeited, (b) the introduction of such drugs into interstate commerce may be enjoined, (c) the persons who cause introduction of the misbranded drugs into interstate commerce may be subject to criminal prosecution.

In February, 1963, the defendant, Commissioner of Food and Drugs proposed the adoption of certain new regulations under the Act. The final regulations, 28 Fed.Reg. 6375, were promulgated in June, 1963 and were effective on publication. It is these regulations which are under attack in the present proceeding. Under the new regulations the Act is interpreted to require that the established or generic name be placed in conjunction with every appearance of the proprietary name of the drug on labels and advertising.

Thirty-seven drug companies and the Pharmaceutical Manufacturers Association (PMA) have joined as plaintiffs to challenge the every time requirement. They claim that the statute does not direct or authorize the defendant Commissioner to impose the requirement and that the Commissioner's regulations are therefore null and void. They seek a declaratory judgment to that effect and an injunction restraining defendants from enforcing the disputed regulation. The plaintiffs assert that in the absence of such relief they will be forced to choose between flouting the regulation and possibly incurring penalties or reprinting great quantities of advertising material which already complies with the statute as plaintiffs interpret it. This material, including brochures, price lists, catalogues and labels prominently sets forth the generic name of the prescription drug involved but it does not meet the every time requirement.

At the outset, a host of jurisdictional problems are presented.

I. Venue

The defendants, Secretary of Health, Education and Welfare and Commissioner of Food and Drugs claim that venue is improper as to twenty-six of the thirty-seven plaintiff corporations. These twenty-six are not incorporated in the State of Delaware.

The applicable venue statute, 28 U.S.C. § 1391(e) reads:

"A civil action in which each defendant is an officer or employee of the United States or any agency thereof acting in his official capacity or under color of legal authority, or an agency of the United States, may, except as otherwise provided by law, be brought in any judicial district in which: (1) a defendant in the action resides, or (2) the cause of action arose, or (3) any real property involved in the action is situated, or (4) the plaintiff resides if no real property is involved in the action."

Defendants admit that the pharmaceutical companies incorporated in Delaware are residents of Delaware within 28 U.S.C. § 1391(e) (4). They maintain that the other plaintiffs fall without the bounds of the venue provision because they do not reside in the forum state.

28 U.S.C. § 1391(e) does not define residence as applied to corporations. Elsewhere in the venue statute, however, at 28 U.S.C. § 1391(c) it is provided:

"A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes."

Plaintiffs argue that this broad definition of residence should be applied to the twenty-six contested parties. Defendant counters that 28 U.S.C. § 1391(c) applies only to corporations appearing as defendants and not to plaintiff corporations because it refers only to corporations which "may be sued."

The interpretation of 28 U.S.C. § 1391 (c) presents no novel question. There is a classic split of authority among the federal courts as to whether the statute applies to defendant corporations only or to plaintiff and defendant corporations alike.² Nor do the commentators find ground for agreement.³

Those courts which conclude that 28 U. S.C. § 1391(c) redefined the law of corporate residence for corporations as plaintiffs as well as corporations as defendants rely on interpretation of the last words of the section, "and such judicial district shall be regarded as the residence of such corporation for venue purposes." These words, it is argued, would be superfluous unless applied to corporations as plaintiffs, for the first part of the section grants the right to sue corporations as defendants where they are incorporated, or licensed to do business, or are actually doing business.

Judge Dimock's statement is representative:

"I do not feel at liberty to attribute to Congress any * * * tautology. The statute first gives permission to sue a corporation in any district where it is incorporated or licensed or doing business. It then declares that such district shall be regarded as its residence. No one has suggested any reason for that declaration unless it was to give permission to the corporation to sue others in such district in addition to the previously given permission given to others to sue the corporation in any such district." Southern Paper-board Corporation v. United States, 127 F.Supp. 649, 650 (S.D.N.Y. 1955).

Professor Moore has found a meaning for the disputed words which does not comport with the above.

"The language of the first clause of subsection (c) restricts the subsection to a corporation which `may be sued.' And this restriction does not make superfluous the second, and concluding clause that `such judicial district in which the corporation is incorporated or licensed to do business or is doing business shall be regarded as the residence of such corporation for venue purposes.' This clause serves a purpose in laying venue, in a transitory action, in a defendant's district where there are multiple defendants residing in different districts of the same state; and also in the case where defendants reside in different divisions of the same district or different districts in the same state. * * *" 1 Moore, Federal Practice 1503 2d ed. 1963.

Nonetheless, Moore does not place his chief reliance on this interpretation in deciding that the statute defines residence for corporate defendants only. He emphasizes the fact that the Reviser's Note fails to indicate any intention to effect what would be a far-reaching change as to residence of corporate plaintiffs.

This position is seconded in the recent opinion, Robert E. Lee & Co. Inc. v. Veatch, 301 F.2d 434 (4 Cir. 1961) cert. den. 371 U.S. 813, 83 S.Ct. 23, 9 L.Ed.2d 55 (1962). There the court concluded that Congress would have designed a more sweeping language for Section 1391 (c), such as using "all corporations" in the second clause "instead of the restrictive term `such corporation'", if Congress had intended to do more than codify the rule of Neirbo Co. v. Bethlehem Shipbuilding Corp. Ltd., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167 (1939), that a corporation waives its venue privilege not to be sued in a state by obtaining a license to do business there.

Because of the well-balanced forces of reason on either side of this controversy a gentlemanly disagreement will no doubt continue among the courts and commentators until settled by Congress or the Supreme Court. This court is persuaded by those who argue that Congress did not intend the sweeping change which plaintiffs assert and that for purposes of 28 U.S.C. § 1391(c) residence is defined only for corporate defendants. The court also holds that the...