Kentucky ex rel. Conway v. Purdue Pharma, L.P. (In re Oxycontin Antitrust Litig.)

• Decision Date: 26 September 2011
• Docket Number: 08 Civ. 3380(SHS).,Nos. 04–MD–1603 (SHS),s. 04–MD–1603 (SHS)
• Citation: 821 F.Supp.2d 591,2011 Trade Cases P 77684
• Parties: In re OXYCONTIN ANTITRUST LITIGATION.Commonwealth of Kentucky, ex rel. Jack Conway, Attorney General, and Pike County, Plaintiffs, v. Purdue Pharma, L.P., Purdue Pharma, Inc., the Purdue Pharma Frederick Company, Inc., d/b/a the Purdue Frederick Company, Purdue Pharmaceuticals, L.P., P.F. Laboratories, Inc., Abbott Laboratories, and Abbott Laboratories, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

2011-2 Trade Cases P 77,684

821 F.Supp.2d 591

In re OXYCONTIN ANTITRUST LITIGATION.Commonwealth of Kentucky, ex rel. Jack Conway, Attorney General, and Pike County, Plaintiffs,

v.Purdue Pharma, L.P., Purdue Pharma, Inc., the Purdue Pharma Frederick Company, Inc., d/b/a the Purdue Frederick Company, Purdue Pharmaceuticals, L.P., P.F. Laboratories, Inc., Abbott Laboratories, and Abbott Laboratories, Inc., Defendants.

Nos. 04–MD–1603 (SHS)

08 Civ. 3380(SHS).

United States District Court, S.D. New York.

Sept. 26, 2011.

OPINION & ORDER

SIDNEY H. STEIN, District Judge.

The Commonwealth of Kentucky—through its Attorney General Jack Conway—and Pike County (collectively, the “Commonwealth”) commenced this action in Kentucky state court alleging that defendants Purdue Pharma, L.P., Purdue Pharma, Inc., The Purdue Pharma Frederick Company, Inc., Purdue Pharmaceuticals, L.P., P.F. Laboratories, Inc., Abbott Laboratories, and Abbott Laboratories, Inc. (collectively, “Purdue”) violated Kentucky state law by misleading health care providers, consumers, and government officials regarding the risks of addiction associated with the prescription drug OxyContin. Defendants removed the action to the United States District Court for the Eastern District of Kentucky, claiming federal subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332(d)(2)(A). The United States Judicial Panel on Multidistrict Litigation (“MDL”) subsequently transferred the action to this Court pursuant to 28 U.S.C. § 1407 for inclusion in the In re OxyContin Antitrust Litigation (04–mdl–1603) MDL proceeding.

The Commonwealth has now moved pursuant to 28 U.S.C. § 1447(c) to have this action remanded to Kentucky state court. Purdue opposes the motion on the grounds that (1) the Court has federal question jurisdiction; and (2) the case constitutes a putative class action removable to federal court under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2)(A) (“CAFA”). Because defendants have failed to meet their burden of establishing that the Court has subject matter jurisdiction over this action, plaintiffs' motion to remand is granted.

I. BACKGROUND

A. Facts

The following facts are taken from the amended complaint.

OxyContin is an opioid analgesic drug approved for use in the management of moderate to severe pain. (Am. Compl. ¶¶ 23, 24.) Purdue—the company that designs, sells, and distributes OxyContin—allegedly misled and deceived consumers, medical providers, and government officials regarding the safety, efficacy, and appropriate uses of OxyContin, in particular with regard to the risks of addiction associated with the drug. ( Id. ¶¶ 2, 10, 81.) Specifically, plaintiffs maintain that from December 1995 to June 2001, Purdue supervisors and employees marketed and promoted OxyContin to medical care providers as “less addictive, less subject to abuse and diversion, and less likely to cause tolerance and withdrawal than other pain medications,” despite knowing that such assertions were false or misleading. ( Id. ¶ 42.) According to plaintiffs, those misrepresentations and omissions prevented physicians and patients from accurately assessing the appropriate uses and risks of OxyContin, causing physicians to prescribe OxyContin and Kentucky patients to request OxyContin more often than they would have had they known the truth about the drug. ( Id. ¶¶ 68, 84.) Plaintiffs assert that Kentucky citizens have become addicted to OxyContin, causing serious adverse health consequences, including death, as well as such problems as “the commission of criminal acts to obtain OxyContin.” ( Id. ¶¶ 2, 68.)

The State of Kentucky covers the health care costs—including the costs of OxyContin prescriptions and drug addiction treatment—for indigent and otherwise eligible Kentucky citizens through its state Medicaid program and its Pharmaceutical Assistance Program. ( Id. ¶¶ 1, 7.) Kentucky's Medicaid program, which is a joint federal and state program, covers approximately 669,000—or one in six—Kentuckians and accounts for twenty percent of the state budget. ( Id. ¶ 77.) Kentucky alleges that Purdue's purported wrongful marketing and promotion of OxyContin has resulted in the state paying for prescriptions that never would have been written and medical services provided that never would have been required in the absence of Purdue's deceptive practices. Pike County, which is located in Kentucky, alleges that it has spent millions of dollars to investigate, apprehend, prosecute, and incarcerate individuals who, “due to the fraudulently concealed addictive nature of OxyContin, have resorted to criminal means to continue their addiction.” ( Id. ¶¶ 4, 8–9.)

Based on these allegations, plaintiffs assert claims for: (1) violation of the Kentucky Medicaid Fraud Statute, KRS § 205.8463 and § 446.070; (2) violation of KRS § 15.060, which authorizes Kentucky's Attorney General to institute an action to recover fraudulent monies that have been paid out of the state's treasury; (3) violation of the Kentucky False Advertising Statute, KRS § 517.030 and § 446.070; (4) public nuisance; (5) unjust enrichment and restitution; (6) indemnity; (7) negligence; (8) violation of state antitrust law; (9) strict liability; (10) common-law fraud; (11) conspiracy and concert of action; and (12) punitive damages. The Commonwealth seeks damages based on the Medicaid-related expenses it has incurred, as well as other equitable and injunctive relief.

B. Procedural History

In October 2007, the Commonwealth filed this action in Pike County Circuit Court. Purdue removed the case to the U.S. District Court for the Eastern District of Kentucky, claiming federal subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332(d)(2)(A). In November 2007, Purdue moved to transfer the action to this Court for inclusion in the OxyContin antitrust MDL on the ground that plaintiffs had asserted an antitrust claim against Purdue. The MDL panel granted Purdue's request and transferred the action to this Court in April 2008. ( See MDL Transfer Order, Dkt. No. 1.) The Commonwealth moved to remand the action to Kentucky state court in October 2009. Purdue opposed the motion on the ground that the Court had previously stayed all activity in the MDL proceeding pending a final determination of the validity of the relevant patents. In March 2011, the Court granted the parties' joint request to lift the stay for the limited purpose of deciding the Commonwealth's motion to remand. (Order dated Mar. 11, 2011, Dkt. No. 28.) That motion is now fully briefed.

II. STANDARD

The Commonwealth contends that Purdue's removal of this case from state to federal court was improper because this Court lacks subject matter jurisdiction. It cannot be gainsaid that federal courts are courts of limited jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). “When a party challenges the removal of an action from state court, the burden falls on the removing party to establish its right to a federal forum by competent proof.” Quick v. Shell Oil Co. (In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig.), 399 F.Supp.2d 356, 362 (S.D.N.Y.2005) (internal quotation marks omitted); see Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57–58 (2d Cir.2006).¹ Federal courts are required to construe the removal statute narrowly, resolving any doubts against removability. See Somlyo v. J. Lu–Rob Enters., Inc., 932 F.2d 1043, 1046 (2d Cir.1991). If the removing party cannot establish its right to removal by competent proof, the removal is improper, and the district court must remand the case to the court in which it was filed. Quick, 399 F.Supp.2d at 362; see 28 U.S.C. §§ 1447(c), 1453(c)(1).

Purdue asserts two grounds supporting removal of this action to federal court: first, the amended complaint raises substantial and disputed federal questions, and second, this is a putative class action removable under CAFA. The Court now addresses each of these grounds.

III. DISCUSSION

A. Federal Question Jurisdiction

1. Legal Standard

A defendant may remove a civil action filed in state court to federal court if the action is one “arising under” under federal law. 28 U.S.C. § 1331; see id. § 1441(a). A case arises under federal law where a well-pleaded complaint establishes either that (1) “federal law creates the cause of action [,]” or (2) “the plaintiff' right to relief [on a state-law claim] necessarily depends on resolution of a substantial question of federal law.' ” Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 689–90, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). Here, Purdue does not contend that the Commonwealth has pled a federal cause of action. Rather, Purdue asserts that certain of the Commonwealth's claims necessarily depend on the resolution of a substantial question of federal law.

In Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), the U.S. Supreme Court established three requirements for federal question jurisdiction to exist over a state-law claim: (1) the state-law claim must necessarily raise a stated federal issue; (2) that stated federal issue must be actually disputed and substantial; and (3) a federal forum must be able to entertain the state-law claim without disturbing any congressionally approved balance of federal and state judicial responsibilities. Grable creates only a “slim category” of cases involving state-law claims that may be removed to federal court. Empire, 547 U.S. at 701, 126 S.Ct. 2121. Indeed, the “mere presence” of a federal issue in a state cause of action does not confer federal jurisdiction. Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 813, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986); see also Empire, 547 U.S. at 701, 126 S.Ct. 2121 (“[I]t takes more than a federal element to open the ‘arising under’ door.”) (internal quotation marks omitted)....