People of The State of California v. Boehringer Ingelheim Pharmaceuticals, Inc. et al

Filing 69

MINUTES (IN CHAMBERS) ORDER by Judge Andrew J. Guilford granting 19 MOTION to Remand Case to State Court and denying 45 MOTION to Stay Case. Case Remanded to Superior Court of California, County of Orange; 30-02017-00914577-CU-BT-CXC. MD JS-6. Case Terminated. (see document for details). (dro)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 17-00923 AG (KSx)

Title

PEOPLE OF THE STATE OF CALIFORNIA v. BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC. ET AL.

Present: The Honorable

July 31, 2017

ANDREW J. GUILFORD

Lisa Bredahl
Deputy Clerk
Attorneys Present for Plaintiffs:
Proceedings:

Date

Not Present
Court Reporter / Recorder

Tape No.

Attorneys Present for Defendants:

[IN CHAMBERS] ORDER GRANTING MOTION TO
REMAND

The People of the State of California, acting through the Orange County District Attorney,
brought this civil law enforcement action for alleged violations of California’s Unfair
Competition Law, see Cal. Bus. & Prof. Code § 17200 et seq., in the Superior Court of the
State of California for the County of Orange. It’s hard to imagine a scenario where the “usual
assumption” regarding removal jurisdiction would be more fitting. See Lightfoot v. Cendant
Mortg. Corp., 137 S. Ct. 553, 565 (2017). Justice Sotomayor, writing for a unanimous Supreme
Court, put it well: “[S]tate courts are up to the task of adjudicating their own laws.” Id.
Still, the defendants in this case, Boehringer Ingelheim Pharmaceuticals, Inc., Boehringer
Ingelheim Pharma GmbH & Co. KG, Boehringer Ingelheim International GmbH, Teva
Pharmaceuticals USA, Inc., Barr Pharmaceuticals, Inc., Barr Laboratories, Inc., Duramed
Pharmaceuticals, Inc., and Duramed Pharmaceuticals Sales Corp., removed on the asserted
basis of “diversity jurisdiction.” See U.S. Const. art. III, § 2; 28 U.S.C. § 1332(a). The People
move to remand, however, arguing that original jurisdiction is lacking because “[a] state is
not a citizen” for purposes of diversity. See Postal Tel. Cable Co. v. State of Alabama, 155 U.S.
482, 487 (1894).
CIVIL MINUTES - GENERAL
Page 1 of 6

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 17-00923 AG (KSx)

Date

July 31, 2017

Title

PEOPLE OF THE STATE OF CALIFORNIA v. BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC. ET AL.

The Court GRANTS the motion to remand, and DENIES the motion to stay proceedings
pending a ruling from the Judicial Panel on Multidistrict Litigation. (Dkt. Nos. 19, 45.)
1. BRIEF BACKGROUND
The People, through District Attorney Tony Rackauckas, brought this civil enforcement
action in Orange County Superior Court to “protect the public safety and welfare . . . in the
exercise of . . . [the State’s] police power.” (Compl., Dkt. No. 1-1 at 2.) The complaint alleges
violations of California’s Unfair Competition Law, see Cal. Bus. & Prof. Code § 17200 et seq.,
regarding “the purchases of, and reimbursements for, the prescription drug Aggrenox
occurring in California, including California Aggrenox users, their insurers, public healthcare
providers and other government payors.” (Id.) According to the complaint, Defendant
pharmaceutical companies and manufacturers allegedly schemed to keep generic versions of
Aggrenox off the market and, therefore, caused Californians and various government entities
to overpay for the drug by millions of dollars. (Id. at 2–3, 5.) With this enforcement action,
the People sought to enjoin Defendants from engaging in unlawful and unfair business
practices, and to recover certain civil penalties and restitution. (Id. at 31.) Defendants
removed to federal court, on the asserted basis of diversity jurisdiction, anticipating a transfer
to ongoing multidistrict litigation regarding Aggrenox in the District of Connecticut. (Notice
of Removal, Dkt. No. 1 at 3–4.) Soon after, the People filed a motion to remand the case for
lack of subject matter jurisdiction. (Mot. to Remand, Dkt. No. 19.) Defendants, for their
part, filed a motion to stay the case pending resolution of a motion to vacate a conditional
transfer order by the Judicial Panel on Multidistrict Litigation. (Mot. to Stay, Dkt. No. 45.)
2. LEGAL STANDARD
Federal courts possess “only that power authorized by Constitution and statute.” Kokkonen v.
Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994) (“It is to be presumed that a cause
lies outside of [a federal court’s] limited jurisdiction,” and “the burden of establishing the
contrary rests upon the party asserting jurisdiction.”). The Constitution provides, in Article
III, § 2, that “[t]he judicial Power [of the United States] shall extend . . . to all Cases . . .
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 17-00923 AG (KSx)

Date

July 31, 2017

Title

PEOPLE OF THE STATE OF CALIFORNIA v. BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC. ET AL.

between Citizens of different States.” And Congress, in 28 U.S.C. § 1332(a), has authorized
district courts to exercise jurisdiction over “all civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interests and costs, and is between . . .
citizens of different States.” Principles of federalism, due respect for the state courts, comity,
and judicial economy require courts to “scrupulously confine their [removal] jurisdiction to
the precise limits which [Congress] has defined.” See Shamrock Oil & Gas Corp. v. Sheets, 313
U.S. 100, 109 (1941); see also In re La Providencia Dev. Corp., 406 F.2d 251, 252 (1st Cir. 1969)
(“Removal in diversity cases, to the prejudice of state court jurisdiction, is a privilege to be
strictly construed.”) In short, “[n]othing is to be more jealously guarded by a court than its
jurisdiction.” See United States v. Ceja-Prado, 333 F.3d 1046, 1051 (9th Cir. 2003) (internal
quotation marks omitted).
3. ANALYSIS
With those essential standards in mind, the Court turns to the People’s motion to remand for
lack of diversity jurisdiction. The parties seem to agree, and the Court assumes for present
purposes, that the amount-in-controversy requirement is satisfied here. (Compare Mot. to
Remand, Dkt. No. 19 at 6 n.2, with Opp’n, Dkt. No. 43 at 1.) Rather, the “dispute” concerns
complete diversity citizenship—whether the real party in interest is the State of California, or,
instead, the County of Orange and other natural persons.
Start with the face of the complaint. See Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir. 1985)
(Kennedy, J.) (“The diversity upon which removal is predicated . . . should generally be
determined from the face of the complaint.”). As the caption makes plain, this action was
nominally brought by “the People of the State of California.” (Compl., Dkt. No. 1-1 at 1–2.)
And, at risk of stating the obvious, the titles “People of the State of California” and “State of
California” are essentially “descriptive of the same sovereignty.” See Tevis v. Randall, 6 Cal.
632, 635 (1856). Further, Plaintiff represents that “[t]his is a law enforcement action which
primarily seeks to protect the public safety and welfare, brought by a governmental unit in
the exercise of and to enforce its police power.” (Id. at 2.) Those details matter. It’s wellsettled that “a State is not a citizen of itself” and, thus, “neither a state nor a state agency
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 17-00923 AG (KSx)

Date

July 31, 2017

Title

PEOPLE OF THE STATE OF CALIFORNIA v. BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC. ET AL.

[can] be a party to a diversity action.” See Dep’t of Fair Employment & Hous. v. Lucent Techs., Inc.,
642 F.3d 728, 737 (9th Cir. 2011) (internal quotation marks omitted); see also Fifty Assocs. v.
Prudential Ins. Co. of Am., 446 F.2d 1187, 1191 (9th Cir. 1970) (collecting cases). From the face
of the complaint, then, it appears that this Court lacks subject matter jurisdiction.
Perhaps recognizing as much, Defendants ask the Court to “look behind the pleadings to
ensure that parties are not improperly creating or destroying diversity jurisdiction.” See Miss.
ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736, 745 (2014) (“[A] State’s presence as a party
will destroy complete diversity.”). Specifically, Defendants argue that Orange County is the
real party in interest and, as a political subdivision, “is a citizen of the State for diversity
purposes.” See Moor v. Alameda Cty., 411 U.S. 693, 718 (1973) (citing Cowles v. Mercer Cty., 74
U.S. 118, 121 (1868)).
The Court disagrees for several reasons. After examining “the essential nature and effect of
the proceeding as it appears from the entire record,” see Nevada v. Bank of Am. Corp., 672 F.3d
661, 670 (9th Cir. 2012), the Court concludes that the State of California is indeed the real
party in interest.
First, the California legislature has explicitly authorized district attorneys within the State to
bring civil enforcement actions on behalf of the People. See Cal. Bus. & Prof. Code §§ 17204
(“Actions for relief [under] this chapter shall be prosecuted . . . by . . . a district attorney . . .
in the name of the people of the State of California.”), 17535 (“Actions for injunction under
this section may be prosecuted by . . . any district attorney . . . in this state in the name of the
people of the State of California.”). Second, both the California Supreme Court and the
Ninth Circuit have confirmed that “a civil action brought by a governmental entity under
[Cal. Bus. & Prof. Code §] 17200 is ‘fundamentally a law enforcement action designed to
protect the public and not to benefit private parties.’” See City & Cty. of San Francisco v. PG &
E Corp., 433 F.3d 1115, 1125 (9th Cir. 2006) (quoting People v. Pac. Land Research Co., 20 Cal.
3d 10, 17 (1977)). Third, the People have a substantial and specific interest in enforcing the
consumer protection laws. As specifically stated in the complaint, the People allege that
Defendants unlawfully schemed to deprive the California market—including individual
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 17-00923 AG (KSx)

Date

July 31, 2017

Title

PEOPLE OF THE STATE OF CALIFORNIA v. BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC. ET AL.

consumers and public entities—of a “less expensive” version of Aggrenox, and thus ensured
that various pharmaceutical companies could charge “supracompetetive prices” for the drug
from 1999 to 2015. (Compl., Dkt. No. 1-1 at 2–5.) Whatever the ultimate merit of that claim,
the California Supreme Court has recognized that “[p]rotection of unwary consumers from
being duped by unscrupulous sellers is an exigency of the utmost priority in contemporary
society.” See Vasquez v. Superior Court, 4 Cal. 3d 800, 808 (1971). Fourth, the People seek
injunctive relief and civil penalties that are designed to benefit the public as a whole. See Cal.
Bus. & Prof. Code §§ 17204, 17206(c) (providing that civil penalties “shall be for the
exclusive use by the Attorney General, the district attorney, the county counsel, and the city
attorney for the enforcement of consumer protection laws”). That the People also seek
restitution doesn’t diminish the State’s sovereign interests: restitution is merely “ancillary to
the primary remedies sought for the benefit of the public.” See PG & E Corp., 433 F.3d at
1126 (quoting Pacific Land Research Co., 20 Cal. 3d at 17); see also Nevada, 672 F.3d at 671.
Defendants contrary arguments are unpersuasive and, more importantly, fail to satisfy the
burden of establishing subject matter jurisdiction. See Kokkonen, 511 U.S. at 377.
Despite all this, Defendants seek to stay proceedings pending a ruling from the Judicial Panel
on Multidistrict Litigation regarding its conditional transfer order. Although district courts
have “the inherent authority to manage their dockets and courtrooms with a view toward the
efficient and expedient resolution of cases,” Dietz v. Bouldin, 136 S. Ct. 1885, 1892 (2016), the
Court isn’t convinced that a stay is necessary or appropriate here. As courts have recognized,
and the relevant rules make clear, district judges retain “authority to rule” on a motion to
remand, even though the case may have been “conditionally transferred” to multidistrict
litigation. See Claytor v. Volkswagen Grp. of Am., Inc., 189 F. Supp. 3d 602, 606 (W.D. Va. 2016)
(clarifying that); see also Rules of Procedure of the Judicial Panel on Multidistrict Litigation
2.1(d) (“The pendency of a . . . conditional transfer order . . . before the Panel . . . does not
affect or suspend orders and pretrial proceedings in any pending federal district court action
and does not limit the pretrial jurisdiction of that court.”).
4. DISPOSITION
CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 17-00923 AG (KSx)

Date

July 31, 2017

Title

PEOPLE OF THE STATE OF CALIFORNIA v. BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC. ET AL.

For these reasons, the Court GRANTS the motion to remand. (Dkt. No. 19.) Further, the
Court DENIES the motion to stay proceedings pending a ruling from the Judicial Panel on
Multidistrict Litigation regarding a conditional transfer. (Dkt. No. 45.)
:
Initials of
Preparer

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