Jerome Stevens Pharms. v. Food and Drug Admin.

• Decision Date: 28 May 2004
• Docket Number: No. CIV.A. 02-1939(RMU).,CIV.A. 02-1939(RMU).
• Citation: 319 F.Supp.2d 45
• Parties: JEROME STEVENS PHARMACEUTICALS, INC., Plaintiff, v. FOOD AND DRUG ADMINISTRATION, Department of Health and Human Services, and the United States of America, Defendants.
• Court: U.S. District Court — District of Columbia

319 F.Supp.2d 45

JEROME STEVENS PHARMACEUTICALS, INC., Plaintiff, v. FOOD AND DRUG ADMINISTRATION, Department of Health and Human Services, and the United States of America, Defendants.

No. CIV.A. 02-1939(RMU).

United States District Court, District of Columbia.

May 28, 2004.

Andrew B. Katz, Fox Rothschild LLP, Washington, DC, Jonathan W. Emord, Emord & Associates PC, Burke, VA, for Plaintiffs.

Rupert Mitsch, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

URBINA, District Judge.

GRANTING THE DEFENDANTS' MOTION TO DISMISS

I. INTRODUCTION

Plaintiff Jerome Stevens Pharmaceuticals, Inc. ("Jerome") is a small company that manufactures levothyroxine sodium ("LS") tablets under the name of Unithroid. Jerome brings suit against the Food and Drug Administration ("FDA"), Department of Health and Human Services ("HHS"), and United States (collectively, "the defendants"¹) alleging violations of the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346(b), 2671-2680; Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq.; and Fifth Amendment to the Constitution. The defendants moved to dismiss Jerome's claims pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6). Because the court lacks subject-matter jurisdiction under the FTCA, the APA and the Constitution, the court grants the defendants' motion to dismiss.

II. BACKGROUND

A. Background

Since the 1950s, physicians have prescribed LS tablets for the treatment of thyroid diseases. Compl. ¶ 8. In August 1997, however, FDA issued a notice that new information had shown significant stability and potency problems with currently marketed LS products, and that this lack of stability and consistent potency had the potential to cause serious public-health consequences. Id. ¶¶ 15-16 (citing 62 FED. REG. 43535 (Aug. 14, 1997)). Accordingly, notwithstanding the history of LS use, FDA announced that orally administered LS products were "new drugs," and that manufacturers wishing to continue marketing LS products would have to submit New Drug Applications ("NDAs") for FDA approval by August 14, 2000 or be subject to adverse regulatory action. Id. ¶¶ 14, 17.

FDA initially set a deadline of August 14, 2000 for the NDA approval date. Id. ¶ 17. In April 2000, however, a few months prior to the deadline, FDA extended the deadline by one year, to August 14, 2001. Id. ¶ 29 (citing 65 FED. REG. 24488 (Apr. 26, 2000)). On August 21, 2000, FDA approved Jerome's NDA, making Jerome's Unithroid the first LS drug approved under the new requirements. Id. ¶ 30.

One day after the approval, FDA posted on its website information that, according to Jerome, contained Jerome's confidential and trade-secret information for Unithroid ("the Jerome information").² Id. ¶ 31. Jerome discovered this disclosure about four months later. Id. ¶ 35. Jerome then notified FDA of the disclosure and demanded that FDA remove the Jerome information from its website. Id. ¶¶ 35-37. FDA removed some of the Jerome information on January 12, 2001, and, after receiving additional calls from Jerome, removed the remaining information on January 23, 2001. Id. ¶¶ 38-41.

Meanwhile, in May 2001, FDA approved the NDA for Levoxyl, a competing LS drug manufactured by Jones Pharma. Id. ¶¶ 51-52. Jones Pharma's Levoxyl thereby became the second LS drug approved prior to the August 2001 deadline. Id. No other LS drugs — including Synthroid, Abbott Laboratories' LS drug that traditionally dominated the market — received NDA approval prior to the August 2001 deadline.³ Id. ¶¶ 54-65.

In July 2001, one month before the August 2001 deadline, FDA announced that it was "continu[ing] to exercise its enforcement discretion by establishing a gradual phase-out of unapproved [LS] products." Id. ¶ 44 (quoting 66 FED. REG. 36794 (July 13, 2001)). Specifically, FDA stated that those LS manufacturers who filed but did not receive approval for an NDA ("the non-approved manufacturers") before the August 2001 deadline could nonetheless continue marketing their LS products for another two years through August 2003, although they had to gradually phase out distribution during that period.⁴ Id. ¶¶ 44-45. Jerome reports that after FDA's announcement, Abbott Laboratories "flooded the retail market with mass quantities of its then unstable LS drug product [Synthroid]." Id. ¶ 47. Having lost de facto market exclusivity "due to FDA's publication of its secrets and FDA's extensions of compliance deadlines," Jerome laid off 22 employees hired to supply the previously anticipated demand for Unithroid, and Jerome's partner Watson Laboratories destroyed drums of Unithroid valued at up to $33 million. Id. ¶ 48.

Jerome subsequently filed a six-count complaint in this court.⁵ Id. ¶¶ 66-117. Counts one and two ("the tort claims") allege that the defendants misappropriated Jerome's trade secrets and breached a confidential relationship by disclosing the Jerome information via FDA's website. Id. ¶¶ 66-86. Counts three and four ("the constitutional claims") assert that the defendants violated Jerome's procedural and substantive due-process Fifth Amendment rights by disclosing the Jerome information. Id. ¶¶ 87-97. Finally, count five ("the APA disclosure claim") and count six ("the APA deadline-extension claim") allege that the defendants' failure to guard against disclosure of the Jerome information and granting of the deadline extensions⁶ qualify as arbitrary and capricious under the APA. Id. ¶¶ 98-117. For relief, Jerome seeks compensatory damages of more than $1.3 billion for the tort claims and declaratory relief for the remaining claims. Id. ¶¶ 118-24. In response, the defendants moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim on which relief may be granted. The court now addresses the defendants' motion to dismiss.

III. ANALYSIS

A. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(1)

Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (noting that "[a]s a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction").

Because "subject-matter jurisdiction is an `Art. III as well as a statutory requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir.2003) (quoting Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982)). On a motion to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject-matter jurisdiction. Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir.1999); Rasul v. Bush, 215 F.Supp.2d 55, 61 (D.D.C.2002) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 182-83, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)). The court may dismiss a complaint for lack of subject-matter jurisdiction only if "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338, 343 (D.C.Cir.2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

Because subject-matter jurisdiction focuses on the court's power to hear the claim, however, the court must give the plaintiff's factual allegations closer scrutiny when resolving a Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a claim. Macharia v. United States, 334 F.3d 61, 64, 69 (D.C.Cir.2003); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C.2001). Moreover, the court is not limited to the allegations contained in the complaint. Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), vacated on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987). Instead, to determine whether it has jurisdiction over the claim, the court may consider materials outside the pleadings. Herbert v. Nat'l Acad. of Sciences, 974 F.2d 192, 197 (D.C.Cir.1992).

B. The Court Lacks Subject-Matter Jurisdiction Over Jerome's Tort Claims

1. The Federal Tort Claims Act

The FTCA "grants federal district courts jurisdiction over claims arising from certain torts committed by federal employees in the scope of their employment, and waives the government's sovereign immunity from such claims." Sloan v. Dep't of Housing & Urban Dev., 236 F.3d 756, 759 (D.C.Cir.2001) (citing 28 U.S.C. §§ 1346(b) & 2674). To protect the government from liability "that would seriously handicap efficient government operations," the waiver of sovereign immunity is subject to several exceptions. Beins v. United States, 695 F.2d 591, 611 (D.C.Cir.1982) (internal quotations omitted); 28 U.S.C. § 2680. If any one of the exceptions applies, the district court lacks subject-matter jurisdiction. 28 U.S.C. § 2680; Sloan, 236 F.3d at 759.

An oft-cited exception to the FTCA's sovereign-immunity waiver is the discretionary-function exception, which bars claims "based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." 28 U.S.C. § 2680(a). To determine whether the discretionary-function exception applies, courts engage in a two-part inquiry. Macharia, 334 F.3d at 65 (citing United States v. Gaubert, 499 U.S. 315, 322-23, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991)). First, the court must determine whether a federal statute, regulation, or policy ...