West Virginia ex rel McGraw v Bristol Myers Squibb Co., 2014 WL 793569 (D.N.J. Feb. 26, 2014).

In this action, the District Court in New Jersey held that  For those unfamiliar with those types of actions, the District Court was kind enough to provide a footnote explaining parens patriae, literally “parent of the country,” is a doctrine that provides a state with standing to sue as a guardian of its citizens when the state can “articulate an interest apart from the interests of particular private parties.”

Here, the State of West Virginia, by its Attorney General alleged that the defendants Bristol-Meyers Squibb Company, Sanofi-Aventis U.S., LLC, Sanofi U.S. Services Inc., and Sanofi-Synthelabo, Inc., engaged in unfair and deceptive marketing practices relating to the efficacy of Plavix, an anti-clotting prescription drug.

Initially, the Attorney General filed this suit in the West Virginia state court; however, upon removal by the defendants to the federal court, the case was transferred to the District of New Jersey by the Multi-District Litigation Panel as a part of the In re Plavix MDL. The Attorney General moved to remand the case.

At the very outset, the defendants conceded that parens patriae suits brought by state attorneys general are generally not removable as class actions under CAFA. In fact, during pendency of the motion to remand in this case, the Supreme Court addressed this issue in Mississippi ex. rel. Hood. v. A.U. Optronics Corp., 134 S.Ct. 736 (2014), essentially holding that when a state brings suit on behalf of its citizens it is the only named plaintiff; thus, the suit is not removable under CAFA. (Editor’s Note: see the CAFA Law Blog analysis of A.U. Optronics posted on October 8, 2014).

The Attorney General argued that the District Court lacked diversity jurisdiction because the State of West Virginia was real party in interest. The Attorney General reasoned that the West Virginia Consumer Credit Protection Act (“CCPA”), the state’s consumer fraud statute, expressly authorizes the Attorney General to bring suit on behalf of citizens of West Virginia to vindicate its quasi-sovereign interest. Here, in addition to seeking disgorgement of insurance payments on behalf of Public Employees Insurance Agency (“PEIA”), the State also claimed that it had substantial pecuniary stake in the outcome of this litigation as it sought civil penalties against the defendants up to $5,000 for each willful violation of the CCPA, which occurred during the four year period prior to suit being filed. The Attorney General also sought for an injunction to enjoin the defendants from engaging in unfair or deceptive acts or practices in the future relating to the marketing of Plavix.

The District Court noted that the parties’ dispute centered on whether the State of West Virginia is the real party in interest. The District Court noted that Fed. R. Civ. P. 17 makes it clear that diversity jurisdiction is based on the citizenship of the real party in interest. Thus, the District Court opined that the initial step is to examine if West Virginia, the only plaintiff named in the action, is also the real party in interest. The District Court also noted that a state may sue on behalf of its citizens as parens patriae when the interests if a group of citizens are at stake, so long as the state is also pursuing a quasi-sovereign interest. And, a quasi-sovereign interest generally arises from either (1) the State itself having suffered injury, such as direct damage to its economy, or (2) the general public having suffered an injury so that no one individual has legal standing to sue.

The District Court found that the State was in fact the real party in interest in this enforcement action.  The District Court remarked that the defendants’ argument that the complaint “overwhelmingly” sought to vindicate the specific interests of PEIA, not the State in general was unpersuasive.  The District Court explained that the fact that the State, on behalf of PEIA, also sought recovery of prescription drug costs expended by PEIA did not undermine the State’s broader interest in its case.  The District Court observed that the State asserted causes of action, inter alia, for violations of the CCPA, and in that connection, the State sought civil penalties, as well as a statewide injunction to enjoin the defendants from engaging in unfair or deceptive practices in violation of West Virginia law in the future.  As to the civil penalties, the State was seeking up to $5,000 for each willful violation of the CCPA by the defendants.  The District Court found that the penalties were sought by the State were distinct from any particular interests of private parties because monies received under W. Va. Code § 46A–7–111(2) inure to the State alone.

Additionally, the District Court observed that the Attorney General of West Virginia was expressly charged with enforcing certain provisions of the CCPA.  And, the District Court observed that as many authorities suggested, the Attorney General advanced a quasi-sovereign interest when the State sought for relief under the CCPA for the protection and promotion of consumer welfare in the process.  Taken the pleadings as a whole, the District Court remarked that it was satisfied that it had concrete interests and a substantial stake in the litigation.  In other words, the benefits of the remedies that the State sought were relevant to the State as a whole.  Significantly, the District Court remarked that the fact that the State was seeking the remedy of injunctive relief alone supported the position that the State was the only real party in interest.

The defendants then relied on White v. Wyeth, 227 W.Va. 131 (W.Va.2010) and West Virginia ex rel. McGraw v. Bear, Stearns & Co., 217 W.Va. 573 (W.Va.2005), which precluded the State from bringing CCPA claims because the state consumer fraud statute should not apply to the marketing of prescription drugs.  The West Virginia Supreme Court held in White that the CCPA does not apply to private causes of action involving prescription drugs because doctors, rather than consumers, select which drugs to prescribe to an individual, and consumers are thereby protected by the doctor’s medical judgment–which is known as the learned intermediary doctrine.  The District Court remarked that it did not find White helpful under the circumstances of this case because White’s decision was limited to private causes of action.  Similarly, the District Court found that Bear, Stearns & Co. was not relevant to the instant case.

Finally, the State maintained that remand was appropriate because the state law claims asserted here did not explicitly arise under federal law, nor did they raise a federal issue that is actually disputed and substantial.  A substantial federal issue was a serious federal interest in claiming the advantages thought to be inherent in a federal forum, one that justified the resort to the experience, solicitude, and hope of uniformity that a federal forum offers.  The District Court found that the defendant failed to show that the federal issues in this case were substantial.

The District Court explained that the disputed factual issue in this case centered on whether the defendants acted in an unfair and deceptive manner in their marketing and labeling of Plavix.  Other than the fact that the Attorney General’s claims may implicate the FDCA – that is, the FDCA may be consulted or analyzed in establishing certain elements of the state law claims – that in and of itself is not substantial to support federal question jurisdiction.  The District Court concluded that the lack of a federal cause of action under the FDCA weighed heavily in favor of the conclusion that the federal issues in this case are not substantial.

Accordingly, the District Court remanded the action to the state court. — JR