Janssen Ortho LLC v. United States, 020620 USCIT, 13-00296

Docket Nº:13-00296, Slip Op. 20-14
Opinion Judge:Jennifer Choe-Groves, Judge
Party Name:JANSSEN ORTHO LLC, Plaintiff, v. UNITED STATES, Defendant.
Attorney:Gregory L. Diskant, Amy N. Vegari, Andrew D. Cohen, Daniel M. Eisenberg, Emma Ellman-Golan, and Joshua A. Kipnees, Patterson Belknap Webb & Tyler LLP, of New York, N.Y., argued for Plaintiff Janssen Ortho LLC. Of counsel was Kathryn A. Meisel, Johnson & Johnson of New Brunswick, N.J., and Richard...
Judge Panel:Before: Jennifer Choe-Groves, Judge
Case Date:February 06, 2020
Court:Court of International Trade
 
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JANSSEN ORTHO LLC, Plaintiff,

v.

UNITED STATES, Defendant.

No. 13-00296

Slip Op. No. 20-14

Court of Appeals of International Trade

February 6, 2020

At the conclusion of a bench trial, holding that darunavir ethanolate is properly classified under HTSUS subheading 2935.00.60 and eligible for duty-free treatment under the Pharmaceutical Appendix.

Gregory L. Diskant, Amy N. Vegari, Andrew D. Cohen, Daniel M. Eisenberg, Emma Ellman-Golan, and Joshua A. Kipnees, Patterson Belknap Webb & Tyler LLP, of New York, N.Y., argued for Plaintiff Janssen Ortho LLC. Of counsel was Kathryn A. Meisel, Johnson & Johnson of New Brunswick, N.J., and Richard M. Belanger, Sidley Austin, LLP, of Washington, D.C. Irina Royzman and Sean H. Murray, Patterson Belknap Webb & Tyler LLP, of New York, N.Y., also appeared.

Monica P. Triana and Guy R. Eddon, Trial Attorneys, U.S. Department of Justice, of New York, N.Y., argued for Defendant United States. With them on the briefs were Joseph H. Hunt, Assistant Attorney General, Patricia M. McCarthy, Assistant Director, and Jason M. Kenner, Trial Attorney, Commercial Litigation Branch, U.S. Department of Justice, Civil Division, New York, N.Y. Of counsel was Alexandra Khrebtukova, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection of New York, N.Y.

Before: Jennifer Choe-Groves, Judge

OPINION

Jennifer Choe-Groves, Judge

The court conducted a bench trial to determine whether darunavir ethanolate, a medicine for the treatment of the human immunodeficiency virus (HIV), should be classified as a pharmaceutical eligible for duty-free treatment when imported into the United States. Plaintiff Janssen Ortho LLC ("Plaintiff" or "Janssen") asserts that it has paid approximately $100 million in duties in this case for its Prezista medicine that should have been duty-free. The trial focused on the classification of darunavir ethanolate under the Harmonized Tariff Schedule of the United States ("HTSUS") and the treatment of the subject merchandise under the Pharmaceutical Appendix to the Tariff Schedule ("Pharmaceutical Appendix"). Based on the following findings of fact and conclusions of law, the court concludes that the subject merchandise is properly classified under HTSUS subheading 2935.00.60 and is eligible for duty-free treatment under the Pharmaceutical Appendix.

PROCEDURAL HISTORY

Janssen filed this action to contest the denial by U.S. Customs and Border Protection ("CBP") of Janssen's protests as to the tariff classification of darunavir ethanolate. Compl. ¶¶ 1- 4, Dec. 11, 2013, ECF No. 5; see also First Am. Compl. ¶¶ 1, 6-9, 75-76, Mar. 7, 2019, ECF No. 129 ("Am. Compl."). Plaintiff sought leave to amend its complaint to add a claim pursuant to the Due Process Clause of the Fifth Amendment of the United States Constitution on July 13, 2015. Pl. Janssen's Mot. Am. Compl. Opp. Def.'s Mot. Prot. Order, July 13, 2015, ECF No. 31; see U.S. Const. amend. V. The United States ("Government" or "Defendant") opposed. Def.'s Mem. Law Opp'n Pl.'s Mot. Leave to File Am. Compl., Aug. 24, 2015, ECF No. 37. Following oral argument, the court held Janssen's motion to amend in abeyance pending the resolution of the classification claim. Oral Argument, Nov. 18, 2015, ECF No. 56; Order, Nov. 19, 2015, ECF No. 59. Discovery concluded on November 1, 2016. See Scheduling Order, July 22, 2014, ECF No. 17; Scheduling Order, Aug. 3, 2016, ECF No. 100. The case remained pending without further action for several years.

The case was reassigned on January 18, 2019. Order of Reassignment, Jan. 18, 2019, ECF No. 123. Following a status conference, the court granted Plaintiff's motion to amend the complaint. Hr'g, Mar. 5, 2019, ECF No. 126; Order, Mar. 5, 2019, ECF No. 128. Janssen filed its First Amended Complaint on March 7, 2019. Am. Compl. ¶ 1. In addition to Plaintiff's claims contesting CBP's denial of Janssen's protests as to the tariff classification of darunavir ethanolate, Plaintiff alleged that the CBP officials involved in the protest denial "lacked the neutrality and detachment required by the Due Process Clause of the Fifth Amendment by virtue of their actual or institutional interest in the outcome of the proceeding." Id. ¶¶ 75-76, 79. Defendant filed a partial motion to dismiss. Def.'s Partial Mot. to Dismiss, Apr. 8, 2019, ECF No. 136 ("Def.'s Partial Mot. to Dismiss"). Plaintiff responded. Pl.'s Mem. Opp'n Def.'s Partial Mot. to Dismiss, Apr. 26, 2019, ECF No. 165; Pl.'s Mem. Opp'n Def.'s Partial Mot. to Dismiss, Apr. 29, 2019, ECF No. 167. Defendant replied. Def.'s Mem. Law Further Supp. Partial Mot. to Dismiss, May 6, 2019, ECF No. 168. The Parties submitted a list of stipulated facts. The Parties' List of Stipulated Facts for Trial ¶ 5, Apr. 26, 2019, ECF No. 164 ("Stipulated Facts").

The court bifurcated the action into two trials. Order, Jun. 28, 2019, ECF No. 187 ("Bifurcation Order"). The court ordered that the first trial would consider the merits of Janssen's First, Second, Third, and Fourth Claims for Relief pertaining to the classification of darunavir ethanolate. Id. at 1. The court ordered that the second trial would address Janssen's Fifth Claim for Relief as to whether Janssen's application for further review was "heard and decided by a neutral and detached CBP adjudicator." Id. at 2; see also Am. Compl. ¶¶ 53, 56, 117-21. The court scheduled the first trial to begin on July 29, 2019. Bifurcation Order at 2. The court stayed Defendant's Partial Motion to Dismiss and reserved scheduling of the second trial pending the outcome of the first trial. Id. at 1-2.

The Parties filed pretrial briefs and schedules. Pl. Janssen's Pretrial Mem., July 15, 2019, ECF No. 211 ("Pl.'s Pretrial Mem."); Def.'s Pretrial Brief, July 15, 2019, ECF No. 210; Pl. Janssen's Pretrial Schedules, July 9, 2019, ECF No. 192-1 ("Pl.'s Schedule"). Def.'s Pretrial Schedules, July 9, 2019, ECF Nos. 190-91 ("Def.'s Schedule"). The court conducted a bench trial in July 2019. Bench Trial, July 31, 2019, ECF No. 248. The court heard live testimony from: Ms. Sigrid Stokbroekx, M.S., Scientific Director, Global Head Scientific Integration Drug Product Development, Janssen Pharmaceutical Companies of Johnson & Johnson; Dr. Jeffrey Kinzer, Ph.D., Director, Regulatory Affairs, CMC, at Janssen Pharmaceutical Companies of Johnson & Johnson; Dr. Paul Reider, Ph.D., Professor, Princeton University Department of Chemistry; Dr. Bernhardt Trout, Ph.D., Massachusetts Institute of Technology Department of Chemical Engineering; Dr. Rao Kambhampati, Ph.D., U.S. Food and Drug Administration; Dr. Hugh Hemmings, M.D., Ph.D., Weill Cornell Medical College; and Dr. Matthew Toussant, Ph.D., CAS, a division of the American Chemical Society. Trial Transcript Vol. I, Sept. 3, 2019, ECF No. 253; Trial Transcript Vol. II, Sept. 18, 2019, ECF No. 261; Trial Transcript Vol. III, Sept. 18, 2019, ECF No. 262. The Parties filed post-trial briefs and responses. Pl. Janssen's Post-Trial Mem., Sept. 9, 2019, ECF No. 258; Post-Trial Br., Sept. 9, 2019, ECF No. 259; Pl. Janssen's Resp. to the Gov't's Post-Trial Mem., Oct. 4, 2019, ECF No. 265 ("Pl.'s Resp. to Gov't Post-Tr. Mem."); Def.'s Post-Trial Resp. Br., Oct. 4, 2019, ECF No. 266. Closing arguments were held in November 2019. Closing Arguments, Nov. 27, 2019, ECF No. 270.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (2012). The court reviews classification cases based on the record made before the court. 28 U.S.C. § 2640(a).

FINDINGS OF FACT

The court makes the following findings of fact:

1. The subject merchandise is darunavir ethanolate. Stipulated Facts ¶ 12.

2. The following chemical names describe darunavir ethanolate: Carbamic acid, N-[(1S, 2R)-3-[[(4-aminophenyl)sulfonyl](2-methylpropyl)amino]-2hydroxy-1-(phenylmethyl)propyl]-, (3R, 3aS, 6aR)-hexahydrofuro[2, 3-b]furan-3-yl ester, compd. with ethanol (1:1) and

Carbamic acid, [(1S, 2R)-3-[[4-aminophenyl)sulfonyl](2-methylpropyl)amino]-2hydroxy-1-(phenylmethyl)propyl]-, (3R, 3aS, 6aR)-hexahydrofuro[2, 3-b]furan-3-yl ester, compd. with ethanol (1:1) (9CI).

Stipulated Facts ¶ 33; Zregistry Entry for 635728-49-3, PTX-063.

3. Darunavir ethanolate is created by crystallizing darunavir and ethanol molecules into a crystal lattice structure. Ms. Sigrid Stokbroekx Test. 94:2-13; 107:10-12, Sept. 3, 2019, ECF No. 253 ("Stokbroekx Test.").

4. Darunavir ethanolate is a channel solvate. Stokbroekx Test. 94:17-19.

5. Ethanol molecules in the channels of darunavir ethanolate support the crystal lattice. Stokbroekx Test. 94:10-16.

6. Darunavir is crystalized in an ethanol bath to form darunavir ethanolate. Dr. Bernhardt Trout Test...

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