United States, et al v. Cytogel Pharma, LLC

Filing 297

ORDER AND REASONS: IT IS ORDERED that Plaintiff the United States' #76 Motion to Dismiss Counts 10 and 13 of Defendant Cytogel Pharma, LLC's First Amended and Restated Counterclaims be and hereby is GRANTED, as set forth herein. IT IS FURTHER ORDERED that Counts 10 and 13 of Cytogel's #220 Second Amended and Restated Counterclaims as against the United States be and hereby are DISMISSED WITHOUT PREJUDICE. Signed by Judge Susie Morgan on 9/17/2018. (jls)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
THE UNITED STATES and
THE ADMINISTRATORS OF THE
TULANE EDUCATIONAL FUND,
Plaintiffs

CIVIL DOCKET

VERSUS

NO. 16-13987

CYTOGEL PHARMA, LLC,
Defendant

SECTION: “E”

ORDER AND REASONS
Before the Court is Plaintiff the United States’ Motion to Dismiss Counts 10 and
13 1 of the First Amended and Restated Counterclaims by Defendant Cytogel Pharma, LLC
(“Cytogel”) under Rule 12(b)(1) of the Federal Rules of Civil Procedure. 2 Cytogel opposes
this motion as to Count 10, but not as to Count 13. 3 Cytogel brings Count 10 against the
United States pursuant to the Louisiana Unfair Trade Practices and Consumer Protection
Law (“LUTPA”). For the reasons that follow, the Court construes the motion as a motion
to dismiss Counts 10 and 13 of Cytogel’s Second Amended and Restated Counterclaims
pursuant to Rule 12(b)(1) and orders that the motion is GRANTED.
BACKGROUND
In the 1990s, Counterclaim Defendant Dr. James E. Zadina and his colleagues at
Tulane University researched and developed opioid compounds related to endomorphins,
which are opioid peptides found naturally in the human body. 4 Based on their research,
Plaintiff the Administrators of the Tulane Educational Fund (“Tulane”) obtained two

1 In

its Order and Reasons of March 28, 2017, this Court granted the United States’ Motion to Dismiss Count
11 of Cytogel’s counterclaims pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. Because
Count 11 already has been dismissed, the Court will not address Count 11 in this Order and Reasons.
2 R. Doc. 76.
3 R. Doc. 81.
4 R. Doc. 1 at 4–5, ¶ 14–16; R. Doc. 68 at 7, ¶ 16.

1

patents, U.S. Patent Nos. 5,885,958 (“the ’958 Patent”) and 6,303,578 (“the ’578 Patent”),
claiming these compounds. 5 On December 1, 2003, Tulane licensed the patents to
Cytogel. 6 After Tulane and Cytogel signed the Licensing Agreement, Dr. Zadina began
performing consulting work for Cytogel. 7 He advised Cytogel on the development of Cyt1010, another synthetic opioid peptide, for commercial use as an analgesic. 8
Dr. Zadina was a joint employee of Tulane and the Department of Veterans Affairs
(“VA”).9 He and his colleague Dr. Laszlo Hackler developed new synthetic opioid
compounds for Tulane and the VA. 10 Drs. Zadina and Hackler applied for a patent for
these compounds and assigned their ownership rights in the pending patent to Tulane
and the VA. 11 The application resulted in U.S. Patent No. 8,716,436 B2 (“’436 Patent”),
which issued on May 6, 2014 and lists Drs. Zadina and Hackler as co-inventors. 12 Cytogel
alleges Dr. Zadina secretly developed the compounds covered by the ’436 Patent while
acting as a consultant to Cytogel. 13 Cytogel asserts the compounds covered by the ’436
Patent are related to Cyt-1010 and result from Dr. Zadina’s consulting work. 14 As a result,
Cytogel claims ownership of the ’436 Patent. 15
On August 19, 2016, Plaintiffs the United States of America and the Administrators
of the Tulane Educational Fund (“Tulane”), filed suit against Cytogel for declaratory
judgments of ownership and inventorship of the ’436 Patent and related applications. 16

R. Doc. 1 at 5–6, ¶ 17–19; R. Doc. 68 at 7, ¶ 16.
R. Doc. 1 at 6, ¶ 20; R. Doc. 68 at 7, ¶ 17.
7 R. Doc. 1 at 6–9, ¶ 24–36; R. Doc. 68 at 8, ¶ 19.
8 R. Doc. 1 at 6, ¶ 20–21; R. Doc. 68 at 10, ¶ 30.
9 R. Doc. 1 at 3, ¶ 10–11; R. Doc. 68 at 5, ¶ 10.
10 R. Doc. 1 at 9–10, ¶ 38–41; R. Doc. 68 at 16–19, ¶ 45–56.
11 R. Doc. 1 at 11–12, ¶ 43–47; R. Doc. 68 at 18, ¶ 54.
12 R. Doc. 1 at 11–12, ¶ 43–47; R. Doc. 68 at 19, ¶ 57.
13 R. Doc. 68 at 20, ¶ 61.
14 Id. at 16–17, ¶ 45–50.
15 Id. at 26, ¶ 78.
16 R. Doc. 1.
5

6

2

On September 7, 2016, Cytogel filed thirteen counterclaims against Plaintiffs Tulane and
the United States, joining Dr. Zadina as Counterclaim Defendant. 17 Cytogel brought
Count 10 of its counterclaims alleging a violation of the Louisiana Unfair Trade Practices
and Consumer Protection Law (“LUTPA”) against Tulane, Dr. Zadina, and the United
States. 18 Cytogel brought Count 13, alleging unjust enrichment, against Tulane and the
United States. 19
On November 7, 2016, the United States filed a motion to dismiss Counts 2, 3, and
8–13 of Cytogel’s counterclaims as to the United States pursuant to Rules 12(b)(1) and
12(b)(6) of the Federal Rules of Civil Procedure. 20 On February 6, 2017, the Court granted
the United States’ motion. 21 The Court denied Cytogel’s request to amend its
counterclaims to state explicitly its counterclaims are brought pursuant to the waiver of
sovereign immunity effected by the Federal Tort Claims Act (“FTCA”). 22 On February 21,
2017, Cytogel filed a Motion to Reconsider the Court’s Order of February 6, 2017 pursuant
to Rule 54(b) of the Federal Rules of Civil Procedure. 23 On March 28, 2017, the Court,
vacated its Order of February 6, 2017 with respect to Counts 8–11 and 13 of Cytogel’s
counterclaims. 24 The Court denied the motion as to Counts 8, 9, and 13, granted the
motion as to Count 11, and deferred ruling on Count 10. 25
The Court did not rule on the United States’ motion to dismiss Count 10 of
Cytogel’s counterclaims, which is Cytogel’s LUTPA claim, because the Court could not

R. Doc. 6.
Id. at 40.
19 Id. at 46.
20 R. Doc. 31.
21 Id.
22 Id. at 3–4.
23 R. Doc. 60.
24 R. Doc. 67.
25 Id.
17

18

3

determine from Cytogel’s pleadings whether sovereign immunity under the FTCA extends
to the claim. 26 Specifically, the Court could not determine whether the exception to
FTCA’s waiver of sovereign immunity for tort claims arising out of misrepresentation or
deception applies to this claim. 27 The Court deferred ruling on the motion dismiss Count
10 to allow Cytogel to amend its counterclaims to add more detail about the basis for its
LUTPA claim against the United States. 28
Cytogel filed its First Amended and Restated Counterclaims on April 11, 2017. 29
Cytogel alleges Dr. Zadina, Tulane, and the VA acquired and improperly used “Cytogel’s
confidential information and trade secrets” and “engaged in a long-term and concerted
attempt to conceal their misconduct and delay its discovery by Cytogel.” 30 On May 2,
2017, the United States filed the instant motion to dismiss Counts 10 and 13 of Cytogel’s
First Amended and Restated Counterclaims. 31 On May 23, 2017, Cytogel opposed the
motion as to Count 10, but not as to Count 13. 32
On July 23, 2018, Cytogel filed its First Amended and Restated Affirmative
Defenses and Second Amended and Restated Counterclaims. 33 Count 10 of Cytogel’s
Second Amended and Restated Counterclaims is substantially identical to Count 10 of
Cytogel’s First Amended and Restated Counterclaims. 34 As a result, the Court construes

Id. at 11.
Id.
28 Id.
29 R. Doc. 68. On April 13, 2017, the Court denied as moot the United States’ motion to dismiss Count 10 of
Cytogel’s counterclaims prior to Cytogel’s amendment. R. Doc. 69.
30 R. Doc. 68 at ¶ 132, 135.
31 R. Doc. 76.
32 R. Doc. 81.
33 R. Doc. 220.
34 Id. at 40–42, ¶ 134–40; 46–47, ¶ 162–68.
26
27

4

the instant motion as a motion to dismiss Count 10 of Cytogel’s Second Amended and
Restated Counterclaims pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.
LAW AND ANALYSIS
“Federal courts are courts of limited jurisdiction; without jurisdiction conferred by
statute, they lack the power to adjudicate claims.” 35 A motion to dismiss under Federal
Rules of Civil Procedure 12(b)(1) challenges a federal court’s subject-matter
jurisdiction. 36 Under Rule 12(b)(1), “[a] case is properly dismissed for lack of subject
matter jurisdiction when the court lacks the statutory or constitutional power to
adjudicate the case.” 37 “Lack of subject-matter jurisdiction may be found in the complaint
alone, the complaint supplemented by the undisputed facts as evidenced in the record, or
the complaint supplemented by the undisputed facts plus the court’s resolution of the
disputed facts.” 38
“The United States is immune from tort suits except as to the manner and degree
that sovereign immunity is waived.” 39 The Federal Tort Claims Act (“FTCA”) waives
sovereign immunity in tort suits against the United States caused “by the negligent or
wrongful act or omission of any employee of the [federal] Government while acting within
the scope of his office or employment, under circumstances where the United States, if a
private person, would be liable to the claimant in accordance with the law of the place
where the act or omission occurred.” 40 The FTCA creates an exception to its waiver of
35 In re FEMA Trailer Formaldehyde Products Liab. Litig. (Mississippi Plaintiffs), 668 F.3d 281, 286 (5th
Cir. 2012).
36 See FED. R. CIV. P. 12(b)(1).
37 Home Builders Ass’n of Miss., Inc. v. City of Madison, Miss., 143 F.3d 1006, 1010 (5th Cir. 1998) (internal
quotation marks and citation omitted).
38 In re FEMA, 668 F.3d at 287.
39 Robinnett v. State Farm Mut. Auto. Ins. Co., 2002 WL 1822933, at *1 (E.D. La. Aug. 8, 2002) (citing
Gregory v. Mitchell, 634 F.2d 199, 203 (5th Cir. 1981)).
40 28 U.S.C. § 1346(b)(1).

5

sovereign immunity for “[a]ny claim arising out of assault, battery, false imprisonment,
false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation,
deceit, or interference with contract rights.” 41 For such claims, sovereign immunity is not
waived.
In determining whether a claim arises out of one of these enumerated torts, courts
“focus on the conduct upon which the plaintiff’s claim is based. . . . Even if a plaintiff styles
a claim so that it is not one that is enumerated in section 2680(h), the plaintiff’s claim is
still barred ‘when the underlying governmental conduct ‘essential’ to the plaintiff’s claim
can fairly be read to ‘arise out of conduct that would establish an excepted cause of
action.’” 42
For claims alleging misrepresentation, the Fifth Circuit applies a two-step analysis
to determine whether the exception to the FTCA’s waiver of sovereign immunity applies.
Courts first “determine whether ‘the chain of causation’ from the alleged negligence to the
injury depends upon a misrepresentation by a government agent.” 43 For a claim to fall
within the exception, it must allege “negligence in the communication of (or failure to
communicate) information” and not merely “negligence in the performance of an
operational task, with misrepresentation being merely collateral to such performance.’” 44
Second, courts determine “whether Congress has nonetheless waived sovereign immunity
independently of the FTCA.” 45

28 U.S.C. § 2680(h).
Truman v. United States, 26 F.3d 592, 594 (5th Cir. 1994) (citing United States v. Neustadt, 366 U.S.
696 (1961) McNeily v. United States, 6 F.3d 343, 347 (5th Cir. 1993)).
43 Life Partners Inc. v. United States, 650 F.3d 1026, 1031 (5th Cir. 2011).
44 Id.
45 Id.
41

42

6

The United States argues that, because Cytogel’s LUTPA claim arises out of an
alleged misrepresentation, the claim falls within the exception to the FTCA’s waiver of
sovereign immunity, and, as a result, it should be dismissed pursuant to Rule 12(b)(1) of
the Federal Rules of Civil Procedure. 46 The Court agrees. LUTPA makes unlawful “[u]nfair
methods of competition and unfair or deceptive acts or practices in the conduct of any
trade or commerce.” 47 “[T]he range of prohibited practices under LUTPA is extremely
narrow,” 48 and a LUTPA claim requires proof of “some element of fraud,
misrepresentation, deception, or other unethical act.” 49
In Count 10 of its Amended Counterclaims, Cytogel alleges Dr. Zadina, Tulane, and
the VA acquired and improperly used “Cytogel’s confidential information and trade
secrets” and “engaged in a long-term and concerted attempt to conceal their misconduct
and delay its discovery by Cytogel.” 50 This claim arises out of misrepresentation and
deceit. Cytogel’s allegation that the VA concealed its alleged misconduct is essential to
Cytogel’s LUTPA claim because the alleged concealment provides the “element of fraud,
misrepresentation, or other similar act” 51 necessary to state a LUTPA claim. The “chain
of causation” from the VA’s alleged actions to the alleged unfair trade practice depends
on the VA’s alleged deception and concealment of misconduct. This is a failure to
communicate information, not merely an instance of negligence in performing an
operational task. The alleged misrepresentation and deceit are not collateral to Cytogel’s
LUTPA claim.

R. Doc. 76-1 at 1.
La. R.S. § 51:1401.
48 Cheramie Servs., Inc. v. Shell Deepwater Prod., Inc., 2009-1633 (La. 4/23/10), 35 So. 3d 1053, 1060.
49 Tubos de Acero de Mexico S.A. v. Amer. Int’l Investment Corp., 292 F.3d 471, 480 (5th Cir. 2002)
(quoting Omnitech Intern., Inc. v. Clorox Co., 11 F.3d 1316, 1332 (5th Cir.1994)).
50 R. Doc. 68 at ¶ 132, 135.
51 Tubos de Acero de Mexico S.A, 292 F.3d at 480 (quoting Omnitech Intern., 11 F.3d at 1332).
46
47

7

As a result, Cytogel’s LUTPA claim against the United States arises out of
misrepresentation and deceit for purposes of Section 2680(h). The FTCA does not waive
sovereign immunity as to the claim, and Congress has not otherwise waived sovereign
immunity for such a claim independent of the FTCA. This Court does not have subject
matter jurisdiction over Cytogel’s LUTPA claim against the United States.
CONCLUSION
For the foregoing reasons, IT IS ORDERED that Plaintiff the United States’
Motion to Dismiss Counts 10 and 13 of Defendant Cytogel Pharma, LLC’s (“Cytogel”) First
Amended and Restated Counterclaims be and hereby is GRANTED. 52
IT IS FURTHER ORDERED that Counts 10 and 13 of Cytogel’s Second
Amended and Restated Counterclaims 53 as against the United States be and hereby are
DISMISSED WITHOUT PREJUDICE.
New Orleans, Louisiana, this 17th day of September, 2018.
__________ ___________ _________
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE

52
53

R. Doc. 76.
R. Doc. 220.

8