CELGENE CORPORATION v. DISTINCT PHARMA et al
Filing
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OPINION. Signed by Judge Kevin McNulty on 9/6/2018. (ld, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CELGENE CORPORATION,
Plaintiff,
No. 2: 17-cv-5303-KM-JBC
vs.
OPINION
DISTINCT PHARMA and JOHN DOES
#1-10,
Defendants.
KEVIN MCNULTY, U.S.D.J.:
This is an action asserting claims of Trademark Infringement (Count I),
Unfair Competition (Count II), and False Designation of Origin (Count III) under
the Lanham Act, 15 U.S.C.
§ 1051 et seq.; and violation of the New Jersey
Deceptive Trade Practices Act (Count IV).1 Plaintiff Celgene Corporation, a
Delaware corporation, sues Distinct Pharma, an entity located in Mumbai,
India, for unauthorized and regulatorily unapproved internet sales of Celgene’s
drug REVLIMID® (lenalidomide). Defendant Distinct Pharma has not
responded to the complaint and the clerk has entered default. For the reasons
stated herein, Celgene’s motion for default judgment is denied without
prejudice to renewal in light of further facts about the Indian government’s
efforts, if any, to serve the defendant.
Count IV is titled “New Jersey Deceptive Trade Practices Act,” and it cites N.J.
Stat. Ann. 56:8-2, which identifies fraud in connection with sale or advertisement of
merchandise as an unconscionable practice. Such an unconscionable practice is
actionable under the New Jersey Consumer Fraud Act (“NJCFA9, N.J. Stat. Ann. 56:819.
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I.
DISCUSSION
“[Tjhe entry of a default judgment is left primarily to the discretion of the
district court.” Hritz u. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984) (cifing
Tozer z’. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)).
Because the entry of a default judgment prevents the resolution of claims on
the merits, “this court does not favor entry of defaults and default judgments.”
United States v. $55,518.05 in US. Currency, 728 F.2d 192, 194 (3d Cir. 1984).
Thus, before entering default judgment, the court must determine whether the
“unchallenged facts constitute a legitimate cause of action, since a party in
default does not admit mere conclusions of law.” DirecTV, Inc. u. Asher, No.
3-cv-1969, 2006 WL 680533, at *1 (D.N.J. Mar. 14, 2006) (citing 1OA Wright &
Miller, Federal Practice & Procedure
§ 2688 (3d ed. 1998)).
“[D]efendants are deemed to have admitted the factual allegations of the
Complaint by virtue of their default, except those factual allegations related to
the amount of damages.” Doe v. Simone, No. 12-cv-5825, 2013 WL 3772532, at
*2 (D.N.J. July 17, 2013). While “courts must accept the plaintiffs well-pleaded
factual allegations as true,” they “need not accept the plaintiffs factual
allegations regarding damages as true.” Id. (citing Chanel, Inc.
ii.
Qordasheusky,
558 F. Supp. 2d 532, 536 (D.N.J. 2008)). Moreover, if a court finds evidenUaiy
support to be lacking, it may order or permit a plaintiff seeking default
judgment to provide additional evidence in support of the allegations in the
complaint. Id. at *23.
Before a court can enter a default judgment, the court must be satisfied
of personal jurisdiction and effective service of process.
A. Personal Jurisdiction
Personal jurisdiction, unlike subject matter jurisdiction, may be waived,
and a court generally will not raise personal jurisdiction sua sponte as grounds
for dismissal. See Allaham v. Naddaf, 635 F. App’x 32, 36 (3d Cir. 2015).
Nonetheless, when a default judgment is requested, a court is required to make
a threshold determination regarding any jurisdictional defects. See id.; Bolden
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v. Se. Penn. Transp. Auth., 953 F.2d 807, 812 (3d Cir. 1991) (citing Mansfield,
Coldwater&LakeMichiganR.R. v. Swan, 111 U.s. 379, 382 (1884)). If a court
lacks personal jurisdiction over a defendant, the court does not have authority
to render a default judgment, and any such judgment will be deemed void.
Budget Blinds, Inc. a White, 536 F.3d 244, 258 (3d Cir. 2008). “In the absence
of an evidentiaiy hearing, a plaintiffs complaint need only establish a prima
facie case of personal jurisdiction.” Allaham, 635 F. App’x at 36-37 (citing
Euroflns Pharrna US. Holdings a BioAlliance Phamta SA, 623 F.3d 147, 155 (3d
Cir. 2010); Metcalfe a Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir.
2009)). If an evidentiary hearing is held, a plaintiff bears the burden of proving
that the court has personal jurisdiction over the defendant by a preponderance
of the evidence. See Control Screening LLC a Tech. Application & Prod. Co., 687
F.3d 163, 167 (3d Cir. 2012); Carteret Saz’. Bank, FA a Shushan, 954 F.2d 141,
142 n.1 (3d Cir, 1992).
“A district court sitting in diversity may assert personal jurisdiction over
a nonresident defendant to the extent allowed under the law of the forum
state.” Metcalfe, 566 F.3d at 330; see Fed. I?. Civ. P. 4(k)(1)(A) (authorizing the
exercise of personal jurisdiction over a defendant “who is subject to the
jurisdiction of a court of general jurisdiction in the state where the district
court is located”). In a state such as New Jersey, where the long-arm statute
allows the exercise of personal jurisdiction to the full extent permitted by the
Constitution, the standard for a federal court sitting in diversity is whether a
“defendant ha[s] ‘minimum contacts,’” such “that the exercise of jurisdiction
comport[s] with ‘tradition notions of fair play and substantial justice.”’ Allaham,
635 F. App’x at 37 (Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001)
(quoting Int’l Shoe Co. a Washington, 326 U.S. 310, 316 (1945))).
There are two distinct theories under which personal jurisdiction can
arise: general and specific. Grimes v. Vitalink Commc’ns Corp., 17 F.3d 1553,
1559 (3d Cir. 1994). A court has general jurisdiction when a defendant has
“continuous and systematic” contacts with the forum state. O’Connor v. Sandy
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Lane Hotel Co., 496 F.3d 312, 317 (3d Cir. 2007). A court has specific
jurisdiction when a plaintiffs claim arises from a defendant’s actions within the
forum state, such that the defendant could “reasonably anticipate being haled
into [the state’s] court[sJ.” Vetrotex Certainteed Corp.
ii.
Consol. Fiber Glass
Prods. Co., 75 F.3d 147, 151 (3d Cir. 1996) (quoting World-Wide Volkswagen
Corp. u. Woodson, 444 U.S. 286, 297 (1980)) (internal quotation marks
omitted).
Celgene does not claim that this court has general jurisdiction over
Distinct Pharma. Rather, Celgene argues that the court has specific jurisdiction
because Distinct Pharma sells its allegedly infringing pharmaceuticals in places
including New Jersey.
To satisfy federal due process limits (incorporated by the New Jersey
long-arm statute), a defendant’s minimum contacts are examined in relation to
“the nature of the interactions and type of jurisdiction asserted.” Telcordia Tech
Inc. a Telkom SA Ltd., 458 F.3d 172, 177 (3d Cir. 2006). “[T]he relationship
us] the central concern of
among the defendant, the forum, and the litigation
...
the inquiry into personal jurisdiction.” Shaffer a Heitner, 433 U.S. 186, 204
(1977). For specific jurisdiction, the Supreme Court has delineated three due
process requirements: First, the plaintiff must demonstrate that the defendant
“purposefully directed [its] activities at the forum.” O’Connor, 496 F.3d at 317
(quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)) (internal
quotation marks omitted). Second, “the litigation must ‘arise out of or relate to’
at least one of those activities.” Id. (quoting Helicopteros Nacionales de
Colombia, S.A. a Hall, 466 U.S. 408, 414 (1984)). Third, if the plaintiff satisfies
the first two requirements, “a court may consider whether the exercise of
jurisdiction otherwise ‘comport[s] with fair play and substantial justice.”’ Id.
(quoting Burger King Corp., 471 U.S. at 476) (internal quotation marks
omitted).
A defendant can be subject to personal jurisdiction in a state it never
entered:
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Jurisdiction in these circumstances may not be avoided merely
because the defendant did not physically enter the forum State.
Although territorial presence frequently will enhance a potential
defendant’s affiliation with a State and reinforce the reasonable
foreseeability of suit there, it is an inescapable fact of modern
commercial life that a substantial amount of business is
transacted solely by mail and wire communications across state
lines, thus obviating the need for physical presence within a State
in which business is conducted. So long as a commercial actor’s
efforts are “purposefully directed” toward residents of another
State, we have consistently rejected the notion that an absence of
physical contacts can defeat personal jurisdiction there.
Burger King, 471 U.S. at 476.
Celgene has pled a prima facie case of specific jurisdiction. First, Celgene
alleges that Distinct Pharma purposefully directed his activities to New Jersey.
It is alleged that Distinct Pharma sold pharmaceutical products directly to
customers in New Jersey (and elsewhere in the United States). (Compi.
See J. McIntyre Mach., Ltd.
ii.
¶
22)
Nicastro, 564 U.S. 873, 884-86 (2011) (noting the
difference, for personal jurisdiction purposes, between directly selling products
to a forum and products that end up in a forum because of the stream of
commerce). Second, the litigation arises out of this activity. Those alleged New
Jersey sales are sales of the very products that, according to Celgene’s
complaint, violate federal and state trademark and unfair competition laws.
Third, the exercise of jurisdiction comports with “fair play and substantial
justice.” Factors to consider in this inquiry include “the burden on the
defendant,” “the forum State’s interest in adjudicating the dispute,” “the
plaintiffs interest in obtaining convenient and effective relief,” “the interstate
judicial system’s interest in obtaining the most efficient resolution of
controversies,” and the “shared interest of the several States in furthering
fundamental substantive social policies.” World-Wide Volkswagen Corp., 444
U.S. at 292; see also Burger King, 471 U.S. at 477. These factors do not weigh
against a finding of personal jurisdiction.
B. Service of Process
Service of process must satis& both the statute under which service is
effectuated and constitutional due process. When the defendant resides
abroad, the statutory prong is governed principally by the Hague Convention
on the Service Abroad of Judicial and Extrajudicial Documents in Civil or
Commercial Matters, an international treaty that has been ratified by several
countries, including the United States and India. As a ratified treaty, the Hague
Convention is “the supreme Law of the Land.” See U.S. Const. Art. VI, cl. 2;
Ackennann v. Levine, 788 F.2d 830, 838-39 (2d Cir. 1986).
Article 15 of the Hague Convention permits default judgments against a
foreign defendant as long as:
(a) the document was served by a method prescribed by the
internal law of the State addressed for the service of documents in
domestic actions upon persons who are within its territory, or
(b) the document was actually delivered to the defendant or to his
residence by another method provided for by this Convention, and
that in either of these cases the service or the delivery was effected
in sufficient time to enable the defendant to defend.
Convention Done at the Hague Nov. 15, 1965, art. 15, 20 U.S.T. 361. There is
no evidence here, however, that Distinct Pharma was served by any method.
Celgene thus turns to another provision of the Hague Convention, which
provides for a default judgment without service of process. Under that
provision, a default judgment can be rendered against a foreign defendant that
did not receive service of process if:
(a) the document was transmitted by one of the methods provided
for in this Convention,
(b) a period of time of not less than six months, considered
adequate by the judge in the particular case, has elapsed since
the date of the transmission of the document,
(c) no certificate of any kind has been received, even though every
reasonable effort has been made to obtain it through the
competent authorities of the State addressed.
Hague Convention, Art. 15.
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Article 5 of the Convention permits service via a “Central Authority” of
the country in which service is to be made.2 Celgene has submitted an affidavit
attesting that the appropriate documents were delivered to the “Central
Authority” of India on August 16, 2017. (ECF No. 7). Furthermore, according to
the affidavit, Celgene submitted two letters to the Central Authority requesting
a status update. Those letters were delivered to the Central Authority of India
on December 14, 2017 and February 5, 2018. (Id. Exs. 3, 4, 5). Celgene has not
received a certificate (or, apparently, any kind of reply), and approximately a
year has elapsed. (Id.). Those actions satisfy the statutory requirements of
service of process under the Hague Convention.
Nonetheless, a separate inquiry is necessary to determine if the
constitutional due process requirements have been satisfied. Foreign nationals
are assured under the Due Process Clause “of either personal service, which
typically will require service abroad and trigger the [Hague] Convention, or
substituted service that provides notice reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency of the action and
afford them an opportunity to present their objections.” Volkswagenwerk
Aktiengesellschaft v. Schiunk, 486 U.S. 694, 705 (1988) (citing Mullane v.
Articles 2 and 5 of the Hague Convention delineate how a plaintiff can
effectuate process on an international party through a “Central Authority.” Article 2
provides, in pertinent part:
Each contracting State shall designate a Central Authority which will
undertake to receive requests for service coming from other contracting
States and to proceed in conformity with the provisions of articles 3 to 6.
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Hague Convention, Art. 2. Article 5 provides, in pertinent part:
The Central Authority of the State addressed shall itself serve the
document or shall arrange to have it served by an appropriate agency,
either—
(a) by a method prescribed by its internal law for the service of
documents in domestic actions upon persons who are within its
territory, or
(b) by a particular method requested by the applicant, unless such
a method is incompatible with the law of the State addressed.
Hague Convention, Art. 5.
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Central Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950)) (internal quotation
marks omitted).
Compliance with the Hague Convention does not necessarily satisfy due
process. The Supreme Court of Nevada explained in Ompo Famsa:
[C]onstitutional due process is not necessarily satisfied merely
because the foreign nation’s central authority has issued a
certificate of compliance. We recognize the Hague Convention, like
our nation’s concept of due process, works to ensure judicial
documents are brought to the attention of the defendant within a
reasonable time. However, we are not convinced that a
constitutional inquiry is inappropriate or unnecessaiw where the
Hague Convention applies. Indeed, a due process inquiry is
necessary to ensure the veracity of the certificate when the
underlying facts are contested.
Gnipo Famsa v. Eighth Jud. Dist. Ct., 371 P.3d 1048, 1051 (Nev. 2016) (internal
quotations omitted). Additionally, “many jurisdictions have either explicitly or
implicitly held that whether service complies with the Constitution is a
separate, albeit related, question from whether service complies with the Hague
Convention.” Id.; see, e.g., Burda Media, Inc. v. Viedel, 417 F.3d 292, 303 (2d
Cir. 2005) (“[I]n addition to the Hague Convention, service of process must also
satisfy constitutional due process.”); Lidus, Inc. v. United States, 238 F.3d
1076, 1084 (9th Cir. 2001) (suggesting that, although the Hague Convention
did not require actual receipt of notice of an IRS summons, a constitutional
due process inquiry was still necessary); Ackennann v. Levine, 788 F.2d 830,
838 (2d Cir. 1986) (“Service of process must satisfy both the statute under
which service is effectuated and constitutional due process. The statutory
prong is governed principally by the Hague Convention....”); Heredia v. Transp.
S.A.S., Inc., 101 F. Supp. 2d 158, 162 (S.D.N.Y. 2000) (“In addition to the
Hague Convention, service of process must also satisfy constitutional due
process.”); Eli Lilly & Co. v. Roussel Corp., 23 F. Supp. 2d 460, 474 (D.N.J.
1998) (“Service of process must satisfy both the statute under which service is
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effectuated Fin this case, the Hague Convention} and constitutional due
process.” (internal quotation marks omitted)).
It would therefore be inappropriate to conclude, without further fact
finding, that the Central Authority of India’s service efforts, if any, whatever
they may have been, satisfied due process requirements. Gmpo Famsa, for
example, held that fact finding was necessary to determine if a certificate of
compliance from a foreign nation’s Central Authority satisfied due process. 371
P.3d at 1051-52.
The facts of this case are yet another step removed from those found not
sufficient in Grupo Famsa. Celgene has not received certificate of compliance
from India’s Central Authority. There is no evidence that the Central Authority
of India engaged in any efforts whatever to serve process. I do not say that they
have not, but Celgene submits no evidence that they have. Since the Central
Authority’s actions are unknown, there is no basis to conclude that its service
efforts complied with our Constitution’s due process standards. Cf Burda
Media, 417 F.3d at 303 (finding that, “in addition to the Hague Convention,”
service of process must also satisfy constitutional due process, which can be
met by service of process by personal delivery). Evidence is needed to determine
whether attempts at service—if any—were “reasonably calculated, under all the
circumstances, to apprise [Distinct Pharma] of the pendency of the action and
afford [himj an opportunity to present
[hisi objections.” Mullane, 339 U.S. at
314.
In sum, before a court may enter a default judgment, the court must
determine whether service of process complied with statutory and
constitutional due process standards. For Celgene, this is a frustrating
situation, to be sure. Celgene has demonstrated that its compliance with the
Hague Convention was answered by silence. Still, due process requires
evidence that the attempts of India’s Central Authority to serve the defendant
satisfied due process, and as to that issue the court has no information.
Celgene’s motion for default judgment is thus denied without prejudice to the
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submission of additional information about what efforts, if any, were made to
serve the defendant in India.
II.
CONCLUSION
For the foregoing reasons, Celgene’s motion for default judgment is
denied, without prejudice. An appropriate order accompanies this opinion.
Dated: September 6, 2018
KEVIN MCNULTY
United States District Judge
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