In re New England Compounding Pharmacy, Inc.

• Decision Date: 12 June 2013
• Docket Number: MDL No. 1:13–md–2419–FDS.
• Citation: 496 B.R. 256
• Parties: In re NEW ENGLAND COMPOUNDING PHARMACY, INC. PRODUCTS LIABILITY LITIGATION. This Document Relates To: All Cases.
• Court: U.S. District Court — District of Massachusetts

496 B.R. 256

In re NEW ENGLAND COMPOUNDING PHARMACY, INC. PRODUCTS LIABILITY LITIGATION. This Document Relates To: All Cases.

MDL No. 1:13–md–2419–FDS.

United States District Court, D. Massachusetts.

June 12, 2013.

Christopher M. Wolk, Jay J. Blumberg, Law Offices of Jay Blumberg, Woodbury, NJ, for Premier Orthopaedic And Sports Medicine Associates of Southern New Jersey, LLC, Premier Orthopaedic Associates Surgical Center, LLC, Kimberly Yvette Smith, M.D., Defendants.

Mary–Rose Watson, Sean E. Capplis, Ficksman & Conley LLP, Boston, MA, for Ocean State Pain Management, Inc., RI, Defendant.

Ryan A. Ciporkin, Lawson & Weitzen, Boston, MA, for Alaunus Pharmaceutical, LLC, Defendant.

Chris J. Tardio, Matthew H. Cline, C.J. Gideon, Jr., John–Mark Zini, Gideon, Cooper & Essary, PLC, Nashville, TN, for Howell Allen Clinic, A Professional Corporation, St. Thomas Outpatient Neurosurgical Center, LLC, Debra Schamberg, John Culclasure, Defendants.

Geoffrey M. Coan, Hinshaw & Culbertson LLP, Boston, MA, Jessica Saunders Eichel, Frederick H. Fern, Judi Abbott Curry, Harris Beach PLLC, New York, NY, Daniel E. Tranen, Hinshaw & Culbertson LLP, Boston, MA, for New England Compounding Pharmacy, Inc., Defendant.

Paul Saltzman, Matthew P. Moriarty, Matthew E. Mantalos, Thomas W. Coffey, Richard A. Dean, Scott H. Kremer, Scott J. Tucker, Tucker Ellis LLP, Cleveland, OH, Alan M. Winchester, Harris Beach, PLLC, New York, NY, for Ameridose LLC, Defendant.

Robert A. Curley, Jr., Curley & Curley P.C., Boston, MA, Joshua A. Klarfeld, Joseph P. Thomas, Joseph P. Thomas, Ulmer & Berne LLP, Cleveland, OH, for GDC Properties Management, LLC, Defendant.

John P. Ryan, William J. Dailey, Jr., Robert H. Gaynor, Sloane & Walsh, LLP, Boston, MA, Frederick H. Fern, Alan M. Winchester, Harris Beach PLLC, New York, NY, for Barry J. Cadden, Carla Conigliaro, Douglas Conigliaro, Glenn Chin, Lisa Conigliaro Cadden, Greg Conigliaro, Defendants.

Michael Preston Gardner, Leclair Ryan, A Professional Corporation, Roanoke, VA, for Carilion Surgery Center New River Valley LLC, d/b/a New River Valley Surgery Center, LLC, Defendant.

Thomas B.K. Ringe, III, Jennifer Mikels, Michael R. Gottfried, Duane Morris LLP, Boston, MA, Jessica Saunders Eichel, Harris Beach PLLC, New York, NY, for Paul D. Moore, in his capacity as Chapter 11 Trustee of the Defendant New England Compounding Pharmacy, Inc. d/b/a New England Compounding Center, Trustee.

Stephen A. Grossman, Montgomery McCracken Walker & Rhoads LLP, Cherry Hill, NJ, South Jersey Healthcare, South Jersey Regional Medical Center, Defendants.

Christopher E. Hassell, Bonner, Kiernan, Trebach & Crociata, L.L.P., Washington, DC, for Insight Imaging, Inc., Defendant.

Nicki Samson, Daniel M. Rabinovitz, Brady J. Hermann, Michaels, Ward & Rabinovitz, Boston, MA, for Medical Sales Management, Inc., Defendant.

Joseph R. Lang, Lenox, Socey, Formidoni, Giordano, Cooley, Lang & Casey, LLC, Lawrenceville, NJ, John M. Lovely, Cashman & Lovely, Newtonville, MA, for Nitesh Bhagat, Defendant.

Melinda L. Thompson, Christopher R. O'Hara, Heidi A. Nadel, Todd & Weld LLP, Boston, MA, for Carla Conigliaro, Douglas Conigliaro, Defendant.

Kenneth B. Walton, Kristen R. Ragosta, Donovan & Hatem, LLP, Boston, MA, for ARL Bio Pharma, Inc., Defendant.

CORRECTED MEMORANDUM AND ORDER ON TRUSTEE'S MOTION TO TRANSFER CASES AND RELATED MOTIONS

F. DENNIS SAYLOR IV, District Judge.

I. Introduction

This litigation involves claims for wrongful death and personal injury arising out of the administration of an injectable steroid, methylprednisolone acetate (“MPA”), manufactured by defendant New England Compounding Pharmacy, Inc. (“NECC”). The complaints allege, in substance, that NECC produced contaminated MPA that led to serious fungal infections and, in some instances, death. As of May 6, 2013, the Centers for Disease Control and Prevention had reported 53 deaths and 733 incidents of fungal infection across 20 states related to injections of contaminated MPA manufactured by NECC since October 2012.

Lawsuits alleging death or injury based on contaminated MPA have been filed in multiple federal and state jurisdictions around the country, including the District of Massachusetts, beginning in November 2012. In February 2013, the Judicial Panel on Multidistrict Litigation (“JPML”) issued an order under 28 U.S.C. § 1407 transferring various federal-court proceedings to this Court for coordinated and consolidated pretrial proceedings. Subsequent orders of the JPML have transferred other “tag-along” cases to this Court. The matters transferred to this Court typically name additional defendants other than NECC, including certain of its officers and shareholders and certain affiliated corporations.

In the meantime, NECC filed for bankruptcy protection in December 2012. A United States Trustee, Paul Moore, was subsequently appointed to administer the bankruptcy estate.

There are likely to be a large number of victim-claimants in this matter, and it appears undisputed that many of them have suffered death or serious personal injury as a result of the administration of contaminated MPA. It also appears to be undisputed that the pool of available assets to pay claims is likely to be limited; NECC was a fairly small company with relatively few assets, although it appears that there are at least some insurance policies available to cover claims. The trustee, and counsel representing parties in this litigation, essentially agree that it is highly desirable to maximize the resources available to victims and to keep expenditures reasonably low. The trustee, and most counsel, also appear to agree that centralizedmanagement of the litigation and claim process is desirable to create the largest possible pool of funds for victims and to distribute those funds fairly, equitably, and with a minimum of expense and delay.

The trustee has moved to transfer all personal injury and wrongful death cases, wherever filed, to this Court, in order to facilitate that process and achieve that desirable end. The trustee thus seeks the transfer not only of all federal cases, but of all related state cases, regardless of the identity of the defendants. In substance, the trustee contends that this Court can exercise “related-to” jurisdiction over all such matters under 28 U.S.C. §§ 1334 and 157(b), and should transfer the matters to this District.

Consolidation of all NECC litigation in this Court is greatly complicated by the existence of the parallel state-court cases. Some of those cases, particularly those filed after the bankruptcy petition and the automatic stay, name only local healthcare providers (such as pain clinics and individual physicians), and do not name NECC or any affiliates. Some of those plaintiffs object to a centralized proceeding, preferring instead to proceed against those defendants in state court. The trustee, however, contends that those cases could ultimately result in huge claims for contribution or indemnity against the bankruptcy estate, and that such claims could greatly affect or upset the fair administration of the estate, in particular preventing the treatment of all victims fairly and equitably.

Whether, and to what extent, this Court has the power to exercise jurisdiction over state-court litigation, and to transfer it to this District, raises complex and difficult issues of jurisdiction, abstention, and federal-state comity. After careful consideration, and for the reasons set forth below, the trustee's motion to transfer personal injury tort and wrongful death cases will be granted in part and denied in part without prejudice to its renewal. In substance, the Court will assert jurisdiction over, and transfer, all federal cases against NECC and its affiliates, and all state-court cases against NECC and its affiliates, including cases where the claims are third-party claims for contribution or indemnity. The Court will not, however, transfer any state-court cases at this time that do not involve claims against NECC or its affiliates. Any related motions, such as motions to remand or for mandatory abstention, will be treated in a consistent fashion.

II. Background

NECC operated a compounding pharmacy in Framingham, Massachusetts, that combined and mixed ingredients to create specific formulations of pharmaceutical products. NECC was owned and operated by a small group of officers and directors, many of whom were related. NECC is affiliated with a number of other companies; it is unclear what, if any, role those entities played in the events underlying this litigation.¹

In fall 2012, health officials traced a number of cases of fungal meningitis to injections in and around the patients' spinal cords (known as intrathecal administration) of MPA that had been manufacturedby NECC. In response, NECC initiated a recall of several contaminated batches of MPA. As the scope of the problem became evident, NECC eventually surrendered its pharmacy license and ceased production of all pharmaceutical products.

The first complaint against NECC in this Court alleging personal injury from contaminated MPA was filed on November 2, 2012. The complaint names NECC, two affiliated entities, and various individual officers as defendants. In the ensuing months, similar cases were filed in this District, other federal districts, and in various state courts. Most of those cases name NECC, and affiliated entities or individuals, as defendants. Some, however, name only the healthcare providers who actually distributed or administered the MPA.

On December 21, 2012, NECC filed a petition under chapter 11 of the bankruptcy code. Among other things, that triggered an automatic stay of proceedings against NECC pursuant to 11 U.S.C. § 362(a). Although filed as a chapter 11 petition, there is little, if any, likelihood that the company will resume operations. As noted, the company appears to have relatively limited assets, other than insurance policies. The company also,...