Stc.Unm v. Quest Diagnostics Inc.

• Decision Date: 08 March 2019
• Docket Number: CIV 17-1123 MV/KBM
• Parties: STC.UNM, Plaintiff, v. QUEST DIAGNOSTICS INCORPORATED and QUEST DIAGNOSTICS CLINICAL LABORATORIES, INC., Defendants.
• Court: U.S. District Court — District of New Mexico

STC.UNM, Plaintiff, v. QUEST DIAGNOSTICS INCORPORATEDand QUEST DIAGNOSTICS CLINICAL LABORATORIES, INC., Defendants.

CIV 17-1123 MV/KBM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

March 8, 2019

PROPOSED FINDINGS OF FACT AND RECOMMENDED DISPOSITION

THIS MATTER comes before the Court on two motions filed by Plaintiff STC.UNM ("STC"): its Motion to Dismiss (Doc. 10), filed December 7, 2017, and its Motion to Remand (Doc. 12), filed December 8, 2017. These motions were not fully briefed until October 29, 2018, when STC filed its Consolidated Reply Doc. 67. By two separate Orders of Reference, entered January 31, 2018 and July 30, 2018, the motions were referred to me by the presiding judge to conduct hearings if warranted, including evidentiary hearings, and to perform any legal analysis required to recommend to the Court an ultimate disposition of this case. Doc. 37, 59. Having reviewed the motions, the memoranda and exhibits submitted by the parties, and the relevant authorities, the Court recommends that STC's Motion to Remand be granted and that Defendant's Motion to Dismiss be denied as moot, as the Court lacks subject matter jurisdiction.

I. BACKGROUND

Plaintiff STC is a nonprofit research park corporation formed, owned and controlled by the University of New Mexico's ("UNM's") Board of Regents. Doc. 1-1 ¶ 5. STC's purpose is to "nurture innovation and catalyze economic development of new technologies developed at UNM." Id. ¶ 6. STC furthers its role by "protecting technologies developed at UNM and transferring those technologies to the marketplace, connecting the business community to UNM for access to UNM's expertise, facilities, and research activities, and facilitating UNM's role as a contributor to New Mexico's economic development." Id. ¶ 7. STC allows UNM to "more efficiently transfer technology developed at [UNM] to the marketplace through the creation of start-up companies and the negotiation of license agreements with start-ups and established companies." Doc. 63-1, at 169 (2015 Designation Application).¹ In short, through the creation of STC, UNM has delegated to it the commercialization of intellectual property. Doc. 63-1 at 24, Kuuttila Dep. at 90:3-9.²

In 2006, STC entered into a License Agreement with Quest Diagnostics Incorporated. Doc. 63-1, Ex. 6 at 173-188. Thereafter, STC filed its Complaint, on September 25, 2017, in the Second Judicial District Court, County of Bernalillo, State of New Mexico, asserting claims against Defendant Quest Diagnostics Incorporated and Quest Diagnostic Clinical Laboratories, Inc. (the "QuestDefendants") for breach of contract, declaratory judgment, and breach of the implied covenant of good faith and fair dealing. Doc. 1-1. Quest Defendants removed the case to federal court on November 9, 2017, and they indicated that "[w]ithin (7) days of filing this Notice of Removal, Quest will file its Answer to Plaintiff's Complaint along with a compulsory counterclaim . . . ." Doc.1 ¶ 3.

The Notice of Removal asserted three bases for subject matter jurisdiction in federal court. Doc. 1. First, Quest Defendants contend that subject matter jurisdiction exists because STC alleges a cause of action in which "its rights to relief necessarily depends [sic] on the resolution of a substantial question of federal patent law." Id. at 4. Accordingly, they maintain that jurisdiction exists pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1338(a). Id. Second, they suggest that the Court has exclusive jurisdiction under 28 U.S.C. § 1338(a) and 28 U.S.C. § 1454(a), given their plan to later assert a compulsory federal patent counterclaim. Id. at 6-7. In their Notice of Removal, Quest Defendants explained that they "will seek a declaratory judgment" regarding the non-infringement of Licensed Patents. Id. at 6. To the extent that STC's claims do not depend upon the resolution of a substantial question of federal patent law, Quest Defendants submit that the Court has supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a). Id. at 7. Finally, Quest Defendants assert that the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, because the action is between citizens of different states and the amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. Id.

One week after the removal of this action, Quest Defendants indeed filed an Answer asserting counterclaims for declaratory judgments of non-infringement and invalidity. See Doc. 4 at 21-28. Specifically, Quest Defendants seek a declaration that "Disputed Products" are not "Licensed Products" as defined in the parties' License Agreement because none of the "Disputed Products infringes any valid claim of the 'Licensed Patents.'" Id at 17.

II. LEGAL STANDARD

An action is removable if the federal district court would have original jurisdiction over the matter. 28 U.S.C. § 1441(a). It is the obligation of the removing party, here Quest Defendants, to establish the subject matter jurisdiction of the federal court. Huffman v. Saul Holdings Ltd. P'ship, 194 F.3d 1072, 1079 (10th Cir. 1999). There is a presumption against removal jurisdiction. Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).

Federal district courts have original jurisdiction over civil actions which arise under "the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Additionally, they have original jurisdiction over civil actions between citizens of different states when the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. 28 U.S.C. § 1332. For purposes of diversity jurisdiction, both the existence of diversity and the requisite amount in controversy must be affirmatively established by a preponderance of the evidence on the face of either the complaint or the removal notice. Martin v. Franklin Capital Corp., 251 F.3d 1284, 1290 (10th Cir. 2001). Diversity jurisdiction requires complete diversity in that no plaintiff be the citizen of thesame state as any defendant. Gadlin v. Sybron Int'l Corp., 222 F.3d 797, 799 (10th Cir. 2000). Furthermore, a defendant may only remove the action to federal court if no defendant "is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b).

III. ANALYSIS

Before reaching the merits of the parties' claims, the Court must resolve the jurisdictional issue raised by STC's Motion to Remand. Quest Defendants maintain, both in their Notice of Removal and in their Combined Memorandum in Opposition to STC.UNM's Motion to Dismiss and Motion to Remand, that the Court has federal question jurisdiction, patent jurisdiction, patent counterclaim jurisdiction, and diversity jurisdiction. Docs. 1; 63. STC, in contrast, insists that the Court lacks subject matter jurisdiction altogether. See Doc. 12. Although the Court concludes that it must determine, first, whether the case must be remanded for lack of subject matter jurisdiction, it concurrently considers the arguments in STC's Motion to Dismiss to the extent that they bear on this analysis.

Quest Defendants invoked the Court's jurisdiction upon removal and therefore bear the burden of establishing that jurisdiction exists, Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002), with "all doubts [being] resolved against removal." Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir. 1982). The Court considers each of the three grounds of jurisdiction asserted by Quest Defendants in turn.

A. Federal Question or Patent Jurisdiction under 28 U.S.C. § 1331 or 28 U.S.C. § 1338

Under the well-pleaded complaint rule, a suit "arises under" federal law and is appropriate for removal to federal court, when a federal question is presented on the face of the plaintiff's properly-pleaded complaint. Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 9-12 (1983). Here, examination of STC's Complaint, which asserts only state law contract claims, fails to reveal a federal question on its face. Yet, this does not end the inquiry, because federal district courts also "have original jurisdiction of any civil action arising under any Act of Congress relating to patents . . . ." 28 U.S.C. § 1338(a). Borrowing from its interpretation of federal question jurisdiction, the United States Supreme Court explained that § 1338(a) jurisdiction extends:

only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.

Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808-09 (1988). Put another way, a case arises under federal patent laws when patent law creates the cause of action or the claims asserted "necessarily raise" an "actually disputed" and "substantial" question of patent law "capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn v. Minton, 133 S. Ct. 1059 (2013). The Supreme Court has clarified that alternative theories in a complaint may not form the basis for § 1338(a) jurisdiction if patent law is not essential to each of those theories. Christianson, 486 U.S. at 801.

STC's state-law claims for breach of contract, declaratory judgment, and breach of the implied covenant of good faith and fair dealing relate to the parties' License Agreement. STC's claims were not created by federal patent law but by state contract law. The question becomes, then, whether STC's right to relief on these claims necessarily depends on resolution of a substantial question of federal patent law. In answering that question, STC urges the Court to follow the rationale applied by the Federal Circuit Court of Appeals in University of Florida Research Foundation, Inc. v. Medtronic plc, No. 16-2422, 2017 WL 6210801, at *2 (Fed. Cir. Jan. 27, 2017). The factual...