Purdue Pharma L.P. v. Kentucky

• Decision Date: 09 January 2013
• Docket Number: Docket No. 11–4087–mv.
• Citation: 704 F.3d 208
• Parties: PURDUE PHARMA L.P., Purdue Pharma, Inc., Purdue Pharma Frederick Company, Inc., Purdue Pharmaceuticals, L.P., and P.F. Laboratories, Inc., Defendants–Petitioners, v. Commonwealth of KENTUCKY and Pike County, Plaintiffs–Respondents.
• Court: U.S. Court of Appeals — Second Circuit

704 F.3d 208

PURDUE PHARMA L.P., Purdue Pharma, Inc., Purdue Pharma Frederick Company, Inc., Purdue Pharmaceuticals, L.P., and P.F. Laboratories, Inc., Defendants–Petitioners,

v.Commonwealth of KENTUCKY and Pike County, Plaintiffs–Respondents.

Docket No. 11–4087–mv.

United States Court of Appeals, Second Circuit.

Submitted: March 6, 2012.

Decided: Jan. 9, 2013.

Timothy C. Hester, Covington & Burling LLP, Washington, D.C.; John M. Famularo and Daniel E. Danford, Stites & Harbison PLLC, Lexington, KY; Chilton Davis Varner, Stephen B. Devereaux, Eric M. Wachter, and Merritt E. McAlister, King & Spalding LLP, Atlanta, GA, for Defendants–Petitioners.

Sean Riley and Clay Barkley, Office of the Attorney General, Frankfort, KY, for the Commonwealth, for Plaintiffs–Respondents.

Gary C. Johnson and Rhonda J. Blackburn, Gary C. Johnson, P.S.C., Pikeville, KY, for Pike County, for Plaintiffs–Respondents.

Before: CHIN, Circuit Judge; and UNDERHILL,^* District Judge. ¹

UNDERHILL, District Judge:

The Commonwealth of Kentucky (“Kentucky” or “the Commonwealth”), through its Attorney General, and Pike County, Kentucky (“the County”) (collectively, “Plaintiffs”) commenced this action in Kentucky state court against Purdue Pharma, L.P.; Purdue Pharma, Inc.; Purdue Frederick Company, Inc.; Purdue Pharmaceuticals, L.P.; and P.F. Laboratories, Inc. (collectively, “Purdue”), alleging that Purdue violated Kentucky law by misleading health care providers, consumers, and government officials regarding the risks of addiction associated with the prescription drug OxyContin, which Purdue manufactures, markets and sells. Purdue removed the action to federal court, arguing inter alia that Plaintiffs' claims constituted a putative “class action” removable under the Class Action Fairness Act of 2005 (“CAFA”), Pub.L. No. 109–2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). Following transfer from the Eastern District of Kentucky to the Southern District of New York, the District Court (Sidney H. Stein, J.) granted Plaintiffs' motion to remand, concluding it lacked subject-matter jurisdiction because the suit did not meet CAFA's requirements. Purdue now seeks leave to appeal the remand order under 28 U.S.C. § 1453(c)(1). For the reasons that follow, the petition is DENIED.

I.

Plaintiffs' state court complaint contained the following allegations. Purdue manufactures and sells OxyContin, an opioid analgesic drug used to manage pain. See Am. Compl., at ¶¶ 23–24. From 1995 to 2001, Purdue promoted OxyContin to health care providers 5 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, Purdue's actions prevented Kentuckians from accurately assessing the appropriate uses and risks of OxyContin, and caused physicians to overprescribe OxyContin, which resulted in widespread addiction and other adverse consequences, including death and “the commission of criminal acts to obtain OxyContin.” Id. ¶¶ 2, 68, 84. Kentucky, which covers health care costs for indigent and otherwise eligible residents under its Medicaid and Pharmaceutical Assistance Programs, bore significant additional costs as a result of Purdue's actions. Similarly, Pike County spent millions of dollars investigating, apprehending, prosecuting, and incarcerating persons who, “due to the fraudulently concealed addictive nature of OxyContin, have resorted to criminal means to continue their addiction.” Id. ¶¶ 4, 8–9.

The complaint indicated that the action was brought pursuant to the Kentucky Attorney General's authority under state statutory and common law, “including [his] parens patriae authority,” to recover, inter alia, “all the costs the Commonwealth ... incurred in paying excessive and unnecessary prescription costs”; “all the costs expended for health care services and programs associated with the diagnosis and treatment of adverse health consequences of OxyContin use”; and “all the costs consumers have incurred in excessive and unnecessary prescription costs related to OxyContin.” Id. ¶¶ 5–6. Specifically, Plaintiffs asserted the following claims under state law: (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 claims that have been paid out of the state 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) violations of state antitrust law; (9) strict liability; (10) common-law fraud; (11) conspiracy and concert of action; and (12) punitive damages. In addition to damages based on the Medicaid-related expenses described above, the complaint also sought civil penalties, attorneys' fees, and equitable and injunctive relief.

Purdue removed the action to federal court, asserting that Plaintiffs' claims (1) raised federal questions under 28 U.S.C. § 1331; and (2) constituted a disguised “class action” removable under CAFA, 28 U.S.C. §§ 1332(d) and 1453. Following transfer to the United States District Court for the Southern District of New York, Plaintiffs moved to remand, arguing that the District Court lacked subject-matter jurisdiction because all of their claims arose exclusively under state law, and the case otherwise failed to meet CAFA's requirements. The District Court agreed and granted Plaintiffs' motion to remand in a published decision. See In re Oxycontin Antitrust Litig., 821 F.Supp.2d 591, 603 (S.D.N.Y.2011). This petition timely followed.

II.

As a general rule, “[a]n order remanding a case ... is not reviewable on appeal or otherwise.” 28 U.S.C. § 1447(d). Section 1453(c)(1), however, carves out a limited exception: “a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals [within a specified time period].” 28 U.S.C. § 1453(c)(1). Despite this narrow expansion of jurisdiction, we retain discretion over whether to accept such appeals, and our decision “will be guided by consideration of the importance and novelty of the issues raised by the case.” Estate of Pew v. Cardarelli, 527 F.3d 25, 29 (2d Cir.2008); see also Koral v. Boeing Co., 628 F.3d 945, 946 (7th Cir.2011) (providing examples of CAFA cases in which leave to appeal was granted “because the appeal presents novel issues”). But even where a petition presents an “important” CAFA issue, courts have nevertheless denied leave to appeal when a determination can be made, on the basis of the petition alone, that the district court correctly remanded the case. See LG Display Co. v. Madigan, 665 F.3d 768, 771 (7th Cir.2011).² That determination inevitably requires delving into the merits, but when assessing removal under CAFA, “the jurisdictional inquiry overlaps with the merits,” id., and “[a]s always, we have jurisdiction to determine our jurisdiction.” Cardarelli, 527 F.3d at 28.

III.

Purdue seeks leave to appeal the District Court's remand order, insisting this case presents an “important” and “unsettled” question under CAFA—namely, whether parens patriae lawsuits brought by state attorneys general qualify as “class actions” under CAFA. See Defs.' Pet. For Leave to Appeal, at 1–2.³ We concede the importance of the question, but in light of recent decisions by our Sister Circuits, we determine that the answer is straightforward. Indeed, every Circuit to consider this precise issue—including the Fourth, the Seventh, the Ninth and, most recently, the Fifth—has reached the same conclusion we reach today: parens patriae suits are not removable as “class actions” under CAFA. See West Virginia ex rel. McGraw v. CVS Pharmacy, Inc., 646 F.3d 169, 172 (4th Cir.2011) (“Because this [ parens patriae ] action was brought by the State under state statutes that are not ‘similar’ to Federal Rule of Civil Procedure 23, we conclude that it is not removable under CAFA as a class action.”); Madigan, 665 F.3d at 774 (holding parens patriae action was not removable as a “class action” nor as a “mass action” under CAFA); Washington v. Chimei Innolux Corp., 659 F.3d 842, 848–49 (9th Cir.2011) (“[ P ] arens patriae lawsuits are not class actions within the meaning of CAFA....”); Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796, 798–99, 802–03 (5th Cir.2012) (holding parens patriae action by state attorney general was not removable as a “class action” under CAFA, but was otherwise removable under CAFA's “mass action” provision). Because this action is not a “class action” within the meaning of CAFA, federal jurisdiction does not exist to hear this case, and Purdue's petition must be denied.

A.

We begin with the apodictic observation that “federal courts are courts of limited jurisdiction” and, as such, “lack the power to disregard such limits as have been imposed by the Constitution or Congress.” Durant, Nichols, Houston, Hodgson, & Cortese–Costa, P.C. v. Dupont, 565 F.3d 56, 62 (2d Cir.2009) (quotation omitted). Congress has granted district courts original jurisdiction over cases in which there is a federal question, see28 U.S.C. § 1331, and certain cases between citizens of different states, so long as the requirements of complete diversity and amount in controversy are met, see28 U.S.C. § 1332.

In tandem with this limited grant of jurisdiction, the “federal removal statute allows a defendant to remove an action to the United States District Court in ‘any civil action brought in a State court of which the district courts of the United States have original jurisdiction.’ ” Bounds v. Pine Belt Mental Health Care Res., 593 F.3d 209, 215 (2d Cir.2010) (quoting 28 U.S.C. § 1441(a)). Ho...