State of Alaska v. Eli Lilly and Company

Filing 36

Order on Motion for Hearing, Order on Motion to Remand to State Court, Order on Motion to Stay

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA

STATE OF ALASKA,

Case No. 3:06-cv-88 TMB

Plaintiff,
vs.

ORDER

ELI LILLY & COMPANY,
Defendant.

The State of Alaska brought suit against Defendant Eli Lilly & Company, (“Lilly”), in state
court, seeking damages and penalties arising from the marketing and sale of the prescription drug
Zyprexa. Docket 1, Exhibit A (Complaint). The State alleges that Lilly knew of risks associated
with Zyprexa that were not revealed to the Food and Drug Administration, the state, physicians, or
consumers. Id. Furthermore, the State alleges that Lilly advertised and sold Zyprexa for a number
of non-approved or “off-label” uses. Id.

The State alleges fraud and negligent misrepresentation,

negligence, strict liability, and violations of the Unfair Trade Practices and Consumer Protection
Act, codified in A.S. § 45.50.471, and seeks relief of an award of damages in excess of $100,000
for Zyprexa-related damages of past, present and future medical expenses for recipients of the
Alaska Medicaid program, restitution for the cost of all Zyprexa prescriptions paid by the state, civil
penalties of $5,000 per violation of the Unfair Trade Practices Act, costs, interest, and actual
attorneys’ fees. Id.
Lilly removed this matter to Federal Court on April 19, 2006, alleging that this Court has
jurisdiction pursuant to 28 U.S.C. §§ 1331, 1441, and 1446. Docket 1.
Having reviewed the pleadings and heard oral argument on July 24, 2006, the Court now
enters the following Order.

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DISCUSSION
Pursuant to 28 U.S.C. § 1441(a), a defendant may generally remove to the appropriate
federal district court “[a]ny civil action of which the district courts have original jurisdiction
founded on a claim or right arising under the Constitution, treaties or laws of the United States.”
Plaintiff moves for an order of remand pursuant to 28 U.S.C. § 1447( c). Docket 10. Under
§1447© ), a case shall be remanded “[i]f at any time before final judgment it appears that the
district court lacks subject matter jurisdiction.” The burden of establishing federal jurisdiction falls
to the party invoking the removal statute. California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831,
838 (9th Cir. 2004). Section 1441(a) “is strictly construed against removal jurisdiction.” Id.
Plaintiffs argue that removal was improper, because there is no ground for asserting federal
jurisdiction over this case. Docket 11. Plaintiff argues that removal is generally only appropriate
in three circumstances: 1) the parties meet the statutory requirements for the Court’s diversity
jurisdiction;1 2) the Complaint raises a substantial federal question; or 3) under the “complete
preemption” doctrine, Plaintiff’s state law claims have been totally subsumed by federal law.
Docket 11 at 3 (citations omitted). Plaintiff argues that its claims for relief arise exclusively under
state statutory and common law, and do not require the construction or application of federal law as
essential elements of those claims.2 Docket 11. Accordingly, there is no substantial federal
question, and Plaintiff asserts a remand to state court is required. Id.
Defendant argues that federal question removal is proper, because Plaintiff’s Complaint
raises substantial and disputed federal questions under the federal Food, Drug and Cosmetic Act,
(“FDCA”), and under federal Medicaid law. Docket 23. Defendant relies in part on a decision
from In re Zyprexa Products Liability Litigation, 375 F.Supp.2d 170 (E.D.N.Y. 2005), in which the
United States District Court for the Eastern District of New York found federal question jurisdiction
in a similar case.

1

Diversity is not an issue in this matter.

2

Plaintiff notes that “while Defendant’s conduct may also be in violation of federal law, it is state
law that Plaintiff seeks to enforce.” Docket 27 at 3.

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The Well-Pleaded Complaint Rule
In determining the presence or absence of federal jurisdiction, the court first applies the
“‘well-pleaded complaint rule,’ which provides that federal jurisdiction exists only when a federal
question is presented on the face of the plaintiff’s properly pleaded complaint.” Lockyer, 375 F.3d
at 838 (quoting Caterpillar Inc. v, Williams, 482 U.S. 386 (1987)). “The federal issue ‘must be
disclosed upon the face of the complaint, unaided by the answer or by the petition for removal.’”
Id. (quoting Gully v. First Nat’l Bank in Meridian, 299 U.S. 109, 112 (1936)). “A defense is not
part of a plaintiff’s properly pleaded statement of his or her claim.” Id. (quoting Rivet v. Regions
Bank, 522 U.S. 470, 475 (1998)).
On its face, Plaintiff’s Complaint does not state a claim arising under federal law. Plaintiffs
seek relief under Alaska statutes which prohibit deceptive trade practices, and under common law
negligence and strict liability analyses.
The Artful Pleading Doctrine
The court’s inquiry does not end there. Lippitt v. Raymond James Financial Services, Inc.,
340 F.3d 1033, 1041 (9th Cir. 2003). “Under the artful pleading doctrine, a plaintiff may not avoid
federal jurisdiction by ‘omitting from the complaint federal law essential to his claim, or by casting
in state law terms a claim that can be made only under federal law.’” Rains v. Criterion Systems,
Inc., 80 F.3d 339, 344 (9th Cir. 1996)(citation omitted). Courts have applied the artful pleading
doctrine in complete preemption cases and substantial question cases, the latter of which includes
cases where the claim is necessarily federal in character or where the right to relief depends on the
resolution of a substantial, disputed federal question. Lippitt, 340 F.3d at 1041-1042. The Ninth
Circuit has described the artful pleading doctrine as “a useful procedural sieve to detect traces of
federal subject matter jurisdiction in a particular case,” but cautions that “Courts should invoke the
doctrine only in limited circumstances as it raises difficult issues of state and federal relationships
and often yields unsatisfactory results.” 340 F.3d at 1041 (citations and quotations omitted).
– Substantial Federal Question
“The artful pleading doctrine allows federal courts to retain jurisdiction over state law
claims that implicate a substantial federal question.” Lippitt, 340 F.3d at 1042. A state law claim
falls in this category when 1) a substantial, disputed question of federal law is a necessary element
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of the well-pleaded state claim, or the claim is an “inherently federal claim” articulated in state-law
terms, or 2) the right to relief depends on the resolution of a substantial, disputed federal question.
Id., (citations omitted). The Lippitt court observed that “no specific recipe exists for a court to
alchemize a state claim into a federal claim - a court must look at a complex group of facts in any
particular case to decide whether a state claim actually ‘arises’ under federal law.” Id., at 1042-43.
The Supreme Court suggests that the relevant inquiry is “does a state-law claim necessarily raise a
stated federal issue, actually disputed and substantial, which a federal forum may entertain without
disturbing any congressionally approved balance of federal and state judicial responsibilities.”
Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 125 S.Ct. 2363 (2005).
Plaintiff argues that it has alleged violations of state consumer fraud and unfair trade
practice statutes, as well as claims under Alaska common law, and that federal law is implicated
only in light of the state statutory and common law violations as a “factual predicate” for such
violations, not as an essential element. Docket 11 at 8. “No element of Plaintiff’s claims requires
either the interpretation or application of federal law.” Id. Plaintiff argues that while federal law
created the Medicaid program, Congress has delegated to the states the administration and operation
of the program through individual state Medicaid agencies. Docket 11 at 11-12, citing 42 U.S.C.
1396a(a). Plaintiff acknowledges that its state law claims may touch upon areas in which FDA
regulations are present, but those regulations provide no cause of action for Plaintiff. Docket 27 at
5, citing Grable & Sons, 125 S.Ct., 2370.
Defendant argues that “Plaintiff’s case is so infused with federal issues” under the FDCA
and Medicaid law that the Complaint raises “substantial and disputed” issues of federal law that
provide this Court with original jurisdiction. Docket 23 at 3. Specifically, Defendant suggests that
because federal funds constitute at least 50% of Alaska’s Medicaid program funds at issue in the
lawsuit, federal jurisdiction is proper. Docket 23 at 10. Further, Defendant suggests that federal
questions relating to off-label promotion lie at the heart of the Complaint. Docket 23 at 5. “Federal
regulations require that all claims in promotional labeling or advertising be consistent with warning,
labeling and promotional materials approved and monitored by the FDA.” Docket 23 at 5, citing 21
C.F.R. §202.1(e)(4)(2005). Defendant suggests that resolution of the off-label promotion claims

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and the warnings-related claims requires construction and application of the relevant federal
statutory and regulatory provisions. Docket 23 at 6.
The Supreme Court has counseled that “federal jurisdiction demands not only a contested
federal issue, but a substantial one, indicating a serious federal interest in claiming the advantages
thought to be inherent in a federal forum.” Grable, 125 S.Ct. at 2367 (emphasis added). The Court
finds no substantial federal question in this matter at this time. Contra In re Zyprexa Products
Liability Litigation, 375 F.Supp.2d 170 (E.D.N.Y. 2005).
– Complete Preemption
“Preempted state law claims may be removed to federal court only in the rare instances
where Congress has chosen to regulate the entire field.” ARCO Environmental Remediation v.
Dept. of Health and Environmental Quality of the State of Montana, 213 F.3d 1108,1114 (9th Cir.
2000). The Ninth Circuit has observed that there are two categories of cases where the Supreme
Court has found complete preemption: ERISA and the Labor Management Relations Act.3 340
F.3d, at 1042. Complete preemption only applies when “federal law completely preempts state law
and provides a federal remedy.” ARCO, 213 F.3d, at 1114, (quoting Ethridge v. Harbor House
Restaurant, 861 F.2d 1389, 1403 (9th Cir. 1988)). In other words, the exclusive cause of action for
the claim under these federal statutes was found within the statute itself.4
Defendant suggests that complete preemption exists here because “Congress has so
thoroughly and intentionally regulated the marketing and promotion of prescription medications
that any challenge to such marketing and promotions necessarily states a federal cause of action.”

3

Plaintiffs note that complete preemption also has been found by the National Bank Act. Docket 11
at 17 (citations omitted).
4

In contrast, “conflict preemption” exists when state law actually conflicts with federal law.
Defendant suggests that conflict preemption exists in light of the FDA’s position that is approval of labeling
under the act preempts conflicting or contrary state law. Docket 23 at 7. Plaintiff, however, notes that “the
FDA recognizes that FDS’s regulation of drug labeling will not preempt all State law actions.” Docket 27 at
6, citing Requirements on Content and Format of Labeling for Human Prescription Drug and Biologic
Products, 71 Fed. Reg. 3922, 3936. “Unlike complete preemption, preemption that stems from a conflict
between federal and state law is a defense to a state law cause of action and, therefore, does not confer federal
jurisdiction over the case.” ARCO, 213 F.3d at 1114 (emphasis added). Therefore, Defendant’s argument that
conflict-preemption principles apply to failure-to-warn claims such as those asserted here is not dispositive.
Docket 23 at 7-8.

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Docket 23, fn. 11. However, as Plaintiff observes, the FDCA does not provide an exclusive cause
of action or remedy, and it provides no private right of action. Docket 11 at 17. Similarly, “federal
Medicaid law does not provide exclusive remedies, or in some cases remedies at all, for those
requests for relief.” Docket 27 at 7. Rather, “federal medicaid law delegates the management of
the Medicaid program, and recovery of Medicaid funds, to the states. Further, the states are
required to have laws in place to facilitate this recovery.” Docket 27 at 7. Accordingly, neither the
FDCA nor Medicaid completely preempt state law and provide a federal remedy, and complete
preemption does not apply.

In light of the foregoing, the Court concludes that the artful pleading doctrine does not
apply. Plaintiff’s claims do not implicate a substantial federal question, and the Court does not find
complete preemption. Plaintiff’s claims seek relief to recover damages solely under Alaska law.

CONCLUSION
For the reasons set out above, the Motion for Remand at Docket 10 is GRANTED, and this
matter is REMANDED to the Superior Court for the State of Alaska, Third Judicial District at
Anchorage. It is further ordered that Defendant’s motion at docket 4 to stay all proceedings, and
Plaintiff’s motion for hearing at Docket 13 are DENIED AS MOOT.
Dated at Anchorage, Alaska, this 28th day of July, 2006.

/s/ Timothy Burgess
Timothy M. Burgess
United States District Judge

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