Merck Sharp & Dohme Corp. v. Conway

• Decision Date: 19 December 2012
• Docket Number: Civil Action No. 3:11–51–DCR.
• Court: U.S. District Court — Eastern District of Kentucky
• Parties: MERCK SHARP & DOHME CORP., Plaintiff, v. Jack CONWAY, in his Official Capacity as Attorney General of the Commonwealth of Kentucky, Defendant.

909 F.Supp.2d 781

MERCK SHARP & DOHME CORP., Plaintiff,

v.Jack CONWAY, in his Official Capacity as Attorney General of the Commonwealth of Kentucky, Defendant.

Civil Action No. 3:11–51–DCR.

United States District Court,

E.D. Kentucky,

Central Division,

at Frankfort.

Dec. 19, 2012.

Tarek Ismail, Goldman, Ismail, Tomaselli, Brennan & Baum, LLP, Chicago, IL, Jessica Davidson Miller, John H. Beisner, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC, Susan J. Pope, Frost Brown Todd LLC, Lexington, KY, Winston E. Miller, Frost Brown Todd LLC, Louisville, KY, for Plaintiff.

Sean J. Riley, Clay A. Barkley, Elizabeth Ungar Natter, Maryellen Buxton Mynear, Todd E. Leatherman, Attorney General's Office, Frankfort, KY, for Defendant.

MEMORANDUM OPINION AND ORDER

DANNY C. REEVES, District Judge.

This matter is pending for consideration of Defendant Jack Conway's renewed motion to dismiss. [Record No. 36] Conway, the Kentucky Attorney General (“AG”), seeks dismissal of Plaintiff Merck Sharp & Dohme Corporation's (“Merck”) complaint on abstention grounds. For the reasons explained below, the AG's motion will be denied.

I. Background¹

The matter underlying this action arose from Merck's marketing and distribution of the prescription medication Vioxx.² The AG filed suit against Merck in the Franklin County Circuit Court on September 28, 2009, alleging a violation of the Kentucky Consumer Protection Act (“KCPA”). [Record No. 2–1, p. 7] The complaint alleges that “Merck has willfully engaged in acts and practices which are unfair, false, misleading and/or deceptive and has committed acts or practices in trade or commerce in violation of [the KCPA].” [Record No. 2–2 ¶ 34] Merck removed the case to federal court on October 30, 2009. [Civil Action No. 3:09–54, Record No. 1] The action was then transferred to the Eastern District of Louisiana on April 15, 2010, as part of the multidistrict litigation (“MDL”) proceeding captioned: In re Vioxx Product Liability Litigation, MDL No. 1657. [Civil Action No. 3:09–54, Record No. 15] On January 3, 2012, the District Court for the Eastern District of Louisiana granted the AG's motion to remand, concluding that the case was improperly removed from state court. In re Vioxx Prods. Liab. Litig., 843 F.Supp.2d 654, 670 (E.D.La.2012). Merck sought permission to appeal the decision but the Fifth Circuit denied the motion on February 24, 2012. See In Re: Vioxx Prods. Liab., No. 12–90002 (5th Cir.2012). On March 20, 2012, the District Court for the Eastern District of Louisiana remanded the case to the Franklin County Circuit Court.

Approximately one year into the Merck I proceeding, the AG retained outside counsel to assist with the Vioxx litigation. [Record No. 17–1, p. 2] Under the contract executed on September 30, 2010, private counsel agreed to be compensated by a contingency fee “to be withheld from any settlement award resulting from th[e] litigation.” [Record No. 1–4, p. 3] The agreement also provides that the AG “retains the right at all times to direct the litigation in all respects.” [ Id., p. 5 (emphasis omitted) ]

Merck filed suit against the AG in federal court on August 16, 2011, seeking a declaratory judgment and injunctive relief.³ [Record No. 1] In its complaint, Merck alleges that the AG has “delegated [his coercive powers] to private lawyers having a clear, direct and substantial financial stake in the outcome of Commonwealth ex rel. Conway v. Merck & Co., Inc. [Merck Sharp & Dohme Corp. v. Conway], a punitive enforcement action that must be prosecuted in the public interest or not at all.” [ Id. ¶ 29] As a result, Merck asserts, its “right to due process under the Fourteenth Amendment has been infringed.” [ Id. ¶ 30] Merck filed a motion for a preliminary injunction, which the Court denied on March 21, 2012, 861 F.Supp.2d 802 (E.D.Ky.2012). [Record Nos. 2, 31] The Court also denied the AG's initial motion to dismiss on March 23, 2012. [Record No. 32] Due to the change in the procedural posture of Merck II after Merck I was remanded to Franklin Circuit Court, the AG sought leave to file a renewed motion to dismiss, which the Court granted. [Record No. 44]

II. Legal Analysis

The AG argues in his renewed motion to dismiss that the Court should abstainfrom exercising jurisdiction pursuant to the Younger abstention doctrine. He asserts that the Court's adjudication of this matter would interfere with the pending state proceeding “in which the Attorney General is advancing the interests of the sovereign Commonwealth.” [Record No. 36–1, p. 2] Additionally, he maintains that abstention is proper because the Franklin Circuit Court is a “viable forum” for Merck to raise the constitutional claims asserted in Merck II. [Id.] Merck disputes this point and also contends that the federal action does not pose a risk of interfering with the pending state proceeding. Additionally, Merck contends that this federal case has “significantly progressed” to the point where Younger abstention would be inappropriate. [Record No. 40, p. 1]

The abstention doctrine announced in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), provides that when a state proceeding is pending, principles of federalism dictate that any federal constitutional claims should be raised and decided in state court without interference by the federal courts. See Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 17, 107 S.Ct. 1519, 95 L.Ed.2d 1 (1987); Tindall v. Wayne County Friend of the Court, 269 F.3d 533, 538 (6th Cir.2001). If a federal district court concludes that its resolution of the case before it would “directly interfere with ongoing state proceedings,” then it must determine whether to abstain from hearing the case altogether. Mass. Delivery Ass'n v. Coakley, 671 F.3d 33, 45 (1st Cir.2012) (internal quotation marks omitted). The following requirements must be met for Younger abstention to apply: (1) there must be an ongoing state judicial proceeding; (2) the proceeding must implicate important state interests; and (3) there must be an adequate opportunity in the state proceeding to raise constitutional challenges. Middlesex Cnty. Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982); see Kelm v. Hyatt, 44 F.3d 415, 419 (6th Cir.1995).

A. Interference

The threshold issue in any Younger analysis is the “question of whether ‘interference’ exists.” Coakley, 671 F.3d at 40. “ ‘In the typical Younger case, the federal plaintiff is a defendant in ongoing or threatened state court proceedings seeking to enjoin continuation of those state proceedings.’ ” Devlin v. Kalm, 594 F.3d 893, 894 (6th Cir.2010) (quoting Crawley v. Hamilton Cnty. Comm'rs, 744 F.2d 28, 30 (6th Cir.1984)). Thus, if the “plaintiffs are not attempting to use the federal courts to shield them from state court enforcement efforts,” there is no basis for Younger abstention. Id. at 895 (internal quotations omitted).

Merck asserts that it is “not asking the Court to enjoin the AG from suing it.” [Record No. 40, p. 5 (emphasis omitted) ] Instead, it maintains that it seeks an “injunction barring the AG from pursuing his lawsuit against Merck with contingency-fee counsel.” [ Id. (internal quotation marks omitted) ] The AG argues that such an injunction would unduly interfere with the state proceeding because it would be “tantamount to forcing the Attorney General not to use outside counsel at all,” due to the limited resources of the AG's office. [Record No. 45, p. 3]

The Court need not decide whether enjoining the use of contingency-fee counsel would interfere with the state court action to the extent that Younger abstention would be appropriate because Merck has expressly requested the type of relief contemplated in Younger itself. See401 U.S. at 39, 91 S.Ct. 746 (explaining that the federal plaintiff filed a complaint “asking [the district] court to enjoin the ... DistrictAttorney of Los Angeles County[ ] from prosecuting him”). In its Complaint, Merck demands that “the defendant be enjoined or otherwise restrained from violating Merck's right to due process under the Fourteenth Amendment through an injunction banning further prosecution of [ Merck I] and barring counsel from participating in [that] action on defendant's behalf.” ⁴ [Record No. 1, p. 7] On its face, therefore, the Complaint requests the Court to enjoin the AG's civil enforcement action.

If the Court were to grant the injunction sought by Merck, it would halt the state court action. This would, by definition, “unduly interfere” with the state proceeding.⁵Younger, 401 U.S. at 44, 91 S.Ct. 746. Therefore, this case implicates the Younger abstention doctrine, and the Court must determine if abstention is warranted by applying the Middlesex test.⁶See Middlesex, 457 U.S. at 432, 102 S.Ct. 2515. To that end, the Court must first determine if the underlying action in Merck I implicates important state interests. Then, it will consider whether Merck has an adequate opportunity to raise its constitutional challenges to the AG's retention of contingency-fee attorneys in that state action. Finally, the Court will address whether the state judicial proceeding qualifies as “ongoing” for Younger purposes.

B. Important State Interests

Although the Younger Court dealt specifically with the issue of federal court interference with ongoing state criminal proceedings, the doctrine has been expanded to apply to most civil litigation in which the state itself is a party. See Huffman v. Pursue, Ltd., 420 U.S. 592, 607, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975) (holding that Younger abstention applies in federal action challenging state civil nuisance proceeding). Here, the Commonwealth of Kentucky is a party to the action. Moreover, because the state proceeding at issue in this case is a civil prosecution under the KCPA, it involves an important state interest. Marathon Petroleum Co. v. Stumbo, 528 F.Supp.2d 639, 645 (E.D.Ky.2007) (“Courts have...