Patton v. Smithkline Beecham Corp., CIVIL ACTION NO. 11-5965
| Decision Date | 14 December 2011 |
| Docket Number | CIVIL ACTION NO. 11-6641,CIVIL ACTION NO. 11-6644,CIVIL ACTION NO. 11-6269,CIVIL ACTION NO. 11-5965,CIVIL ACTION NO. 11-6643,CIVIL ACTION NO. 11-6642,CIVIL ACTION NO. 11-6645,CIVIL ACTION NO. 11-5967,CIVIL ACTION NO. 11-6268 |
| Parties | JADA PATTON, a minor, by DAWN DANIELS-PATTON, Guardian v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE ERIKA D. DREESSEN, a minor, by HEATHER M. DREESSEN A/K/A HEATHER M. WHITE, Guardian v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE BROOKE SEACRIST and CHARLES SEACRIST, Individually and on behalf of JAXSON SEACRIST v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE CAROLINE WILLIAMS and KEVIN WILLIAMS, Individually and on behalf of KEVION WILLIAMS v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE AUSTIN STALEY, a minor, by SALLE MILLER, Guardian and SALLE MILLER Individually v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE JOSEPH CAMMAROTA, a minor, by AMY LYNN HALLOCK, Guardian and AMY LYNN HALLOCK, Individually v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE ISABELLA CINTAO, a minor, by MARIA PINO and TOMAS CINTAO, Guardians and MARIA PINO and TOMAS CINTAO Individually v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE MIRACLE KENNEY, a minor, by CHRISTINE KENNEY, Guardian and CHRISTINE KENNEY, Individually v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE KAYLEA GUDDECK, a minor, by JULIE GUDDECK, Guardian and JULIE GUDDECK Individually v. SMITHKLINE BEECHAM CORPORATION d/b/a GLAXOSMITHKLINE |
| Court | U.S. District Court — Eastern District of Pennsylvania |
As it did in earlier pharmaceutical product liability cases involving the drug Paxil that it had removed from the state court, the defendant GlaxoSmithKline, LLC ("LLC") opposes the plaintiffs' motions to remand these cases. It challenges the determination in Brewer v. SmithKline Beacham Corp., 774 F. Supp. 2d 720 (E.D. Pa. Mar. 24, 2011) that, for jurisdictional purposes, LLC is a Pennsylvania citizen and cannot remove a case from a Pennsylvania state court on the basis of federal diversity jurisdiction under 28 U.S.C. § 1332. LLC argues that we misapplied the "nerve center" test announced in Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010), and the citizenship test established in Zambelli Fireworks Manufacturing Co. v. Wood, 592 F.3d 412 (3d Cir. 2010), when we held that in the case of a limited liability company whose sole member is a non-operating holding company, which delegated its operational decision-making to the limited liability company, the "nerve center" is that of the limited liability company rather than the non-operating holding company.
LLC does not and cannot contest the facts recited in Brewer.1 It challenges the
inferences and conclusions drawn from those facts, and disagrees with the application of the law to those facts. In short, LLC argues that the Brewer decision was wrong.
LLC miscomprehends the reasoning in Brewer and misapplies the facts to the law. After thoroughly reviewing the current record, including the supplemental materials submitted in the recent cases, and reconsidering the Brewer opinion, we conclude that Brewer was correctly decided. Therefore, we shall remand these actions.
LLC contends that the record now is more developed since Brewer was decided. LLC argues that newly presented evidence shows that there was no delegation of LLC's sole member's authority, there was no jurisdictional manipulation, and the corporate structure was not unusual. Despite the supplements, the essential facts remain the same.
Nothing LLC has presented since Brewer changes the framework of the jurisdictional analysis focusing on operational decision-making. The essential facts have not changed. They are the same now as they were then. LLC is a limited liability company that operates GlaxoSmithKline plc's pharmaceutical and health care business in the United States. Its sole member is GlaxoSmithKline Holdings (Americas) Inc. ("Holdings"), a non-operating holding company incorporated in Delaware. Holdings does not direct, manage or control any of LLC's operations. LLC's officers and directors do what they did for LLC's predecessor corporation, SmithKlineBeecham Corporation ("SKB") – making operating decisions in the Philadelphia headquarters.
LLC's supplemental submissions do not change the result. Although Victor Vogel's2 testimony and the amended government contracts tend to show that Holdings was erroneously listed as the contracting party with a Philadelphia address, it does not dispelthe reasonable inference that Holdings and LLC had perceived the Philadelphia headquarters as the principal place of business. The timing of the changes to the contract documents is not coincidental. Only after it became apparent that its decision-making out of the Philadelphia headquarters posed jurisdictional problems in the multitude of Paxil cases did LLC make any effort to correct its contracts and to amend its by-laws to change the office from Philadelphia to Wilmington. As we observed in Brewer, these efforts were belatedly made to defeat jurisdiction in Pennsylvania.
We repeat and emphasize that the formation of LLC was not done with the intent to manipulate jurisdiction. Rather, the post-litigation conduct was. Nevertheless, whether LLC's and Holdings's later conduct constitutes jurisdictional manipulation is not controlling. Whether it was manipulation or not does not affect the ultimate conclusion.
LLC has presented no new facts regarding Holdings's delegating the operational decision-making to LLC's directors and officers who made those decisions in Philadelphia. Indeed, there is nothing in the supplemental record that contradicts, and there has been no retraction of, Heslop's testimony that LLC is "simply a continuation of what used to be SKB,"3 which made and continues to make its business decisions in its Philadelphia office.
Isolating language outside its context, LLC makes much of our characterization of the corporate relationship between LLC and Holdings as "unique" and the circumstances presented for application of the Hertz nerve center test as an "anomaly." Perhaps we were unclear and we could have stated it differently to convey our intended meaning.
We agree with LLC and its expert, Jonathan Macey, that holding companies and single member limited liability companies are not unusual and are, indeed, common. LLC is not unlike any other holding company. Despite LLC's implication, Brewer did not say otherwise.
What Brewer means is that the corporate structure and the relationship between the limited liability company and its sole member were not what the Hertz and Zambelli courts confronted. The Hertz "nerve center" test and the limited liability company citizenship test, which has not been adopted by the Supreme Court, did not intersect in either case. In Brewer, they did. Thus, when we referred to the "melding" of the two tests in these "unique circumstances," we were acknowledging that the issue was a novel one, requiring application of the two tests to circumstances never before encountered.
In Brewer, we could have used clearer language in describing the interplay between the Hertz "nerve center" test and the Zambelli limited liability company citizenship test. Rather than stating that the tests meld, we should have more precisely explained that they intersect where the sole member of a limited liability company is a holding company that has a single constituent operating company.
Under the Delaware Limited Liability Company Act ("LLC Act"), a limited liability company may be managed either by its members or by a non-member manager. Who manages the company is designated in the operating agreement. If the agreement is silent, the members manage it. Unless the operating agreement provides otherwise, "themanagement of a limited liability company shall be vested in its members."4 Del. Code Ann. tit. 6, §§ 18-402. The members can designate a non-member person to manage the company. If the operating agreement provides that the company shall be managed by a non-member, then the "management of the limited liability company, to the extent so provided, shall be vested in the manager" chosen by the members.5 Id. Thus, the members forming the company designate who will manage the company - either the members or non-members.
Holdings, which had been the sole shareholder of SKB, converted SKB into a limited liability company under the LLC Act. See Del. Code Ann. tit. 6, §§ 18-201, 214.6 When Holdings created LLC, it was LLC's sole member.7 At LLC's inception, Holdings, as the sole member, had the exclusive right and power to control, direct, run, manage and operate LLC. See Del. Code Ann. tit. 6, § 18-402. Had it chosen the member-managed form of a limited liability company, Holdings would have retained its absolute right, power and authority to control and operate LLC's business. See id.; Thomas A. Humphreys, Limited Liability Companies & Limited Liability Partnerships § 2.02[4](d) (2010). Instead, Holdings elected to make LLC a manager-managed company. In doing so, it relinquished its right and power to manage and operate the company. When Holdings adopted the Operating Agreement to effectuate its election, it delegated the operational decision-making authority and power to LLC's officers and directors. Put another way, Holdings determined that the directors and officers of LLC were to be LLC's "managers."
Management of LLC's operations does not reside in Holdings, the sole member. Rather, as intended, Holdings plays no role in LLC's operations, a significant factor in applying the Hertz "nerve center" test.
LLC asserts that Brewer is based on a misunderstanding that Holdings delegated its operational decision-making. It argues that because LLC was formed as a manager-managed company via its Operating Agreement, Holdings had nothing to delegate under §18- 407.8 Stated differently, LLC...
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