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Finding no Federal Question Jurisdiction, Oregon District Court Remands Defective Drug Case to State Court

Thursday, December 22, 2011
Oregon v. Johnson & Johnson, 2011 BL 308593 (D. Or. Dec. 7, 2011) Johnson & Johnson and its subsidiaries (collectively J&J) manufacture the over-the- counter pain reliever Motrin. The state of Oregon sued J&J in Oregon state court alleging that J&J violated the Oregon Unlawful Trade Practices Act, Or. Rev. Stat. § 646.605-56 (UTPA), in manufacturing and distributing Motrin. J&J removed the case to federal court and Oregon moved for remand. The court granted Oregon’s motion.

Failure to Comply with Current Good Manufacturing Practices

In 2008, J&J reported to the Food and Drug Administration (FDA) that a particular lot of Motrin failed to dissolve at the rate required by the FDA’s specifications for good manufacturing practices. The FDA did not recall the defective Motrin and J&J chose not to notify wholesalers, retailers, or consumers about the Defective Motrin even though at least one wholesaler continued to ship the defective Motrin to Oregon retailers. In a follow up report to the FDA, J&J stated that the Defective Motrin might result in consumers receiving less than the expected dose of Motrin but that serious adverse health consequences were unlikely to occur.

Oregon Sues under the Oregon Unlawful Trade Practices Act

Oregon sued J&J alleging that J&J had violated the UTPA when it: 1) willfully represented that the defective Motrin conformed with current good manufacturing practices and was effective for its intended use, 2) willfully failed to disclose that the defective Motrin may not have been manufactured consistent with current good manufacturing practices, thereby creating a likelihood of misunderstanding as to the source, sponsorship, approval, or certification of the drug, 3) willfully misrepresented the defective Motrin’s standard, quality or grade, and 4) willfully failed to disclose that the defective Motrin might be ineffective for its intended use, which constituted an unconscionable tactic related to the sale of goods. The court began explained that three of Oregon’s UTPA claims were premised on the fact that J&J violated the FDA’s “current good manufacturing practices” (CGMP) regulations. Under the regulations, 21 C.F.R. § 210.1(a), the FDA requires drug manufacturers to fulfill all manufacturer claims regarding a drug’s identity, strength, quality, and purity. In removing Oregon’s UTPA claims to the court, J&J argued that federal question jurisdiction existed because Oregon’s complaint alleged violations of the CGMP. In response, the court explained that the vast majority of cases coming under federal-question jurisdiction invoke a federally created cause of action. Where, as with Oregon’s UTPA claims, a plaintiff pleads only state causes of action, the court said, federal-question jurisdiction is unavailable unless a substantial and disputed question of federal law is a necessary element of the state law claims.

No Federal Question Jurisdiction

The court then explained that the U.S. Supreme Court hadset forth a four part test in Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005), to determine those rare instances where federal jurisdiction exists even though a federal cause of action is not set forth in the complaint: 1) the federal issue is necessary, 2) the federal issue is actually disputed, 3) the federal issue is substantial, and 4) a finding of federal jurisdiction will not result in an unbalancing of federal and state judicial responsibilities. With regard to Oregon’s UTPA claims and the first Grable factor, the court found that the only federal issue that might be necessary was whether J&J’s manufacturing processes complied with the CGMP. According to the court, Oregon failed to meet the second Grable factor, as there was no apparent dispute between the parties over the meaning or construction of the CGMP. With regard to the third factor, the court found that the claimed violation of a FDA regulation as an element of Oregon’s UTPA claims was insufficiently “substantial” to confer federal question jurisdiction. Finally, with regard to the fourth factor, the court found that the “widely available” state food and drug rights of action could open the federal courthouses to a tremendous number of cases, thereby upsetting the congressionally approved division of labor between the state and federal courts. As a result, the court held, even though reference to the CGMP in Oregon’s complaint might constitute a “necessary” federal issue, this issue was neither actually disputed nor substantial, and recognizing federal jurisdiction over the issue would disrupt the federal-state balance. Accordingly, the court held that federal jurisdiction did not exist under 28 U.S.C. § 1331 and that removal was improper under 28 U.S.C. § 1441.

State Claims Not Completely Preempted

The court next considered J&J’s argument that removal was proper because Oregon’s claims were completely preempted by the federal Food, Drug, and Cosmetics Act, 21 U.S.C. § 301 et seq. (FDCA). The court disagreed, holding that Oregon was not seeking to enforce the FDCA. Rather, the court found, Oregon had claimed that J&J knowingly misled distributors and Oregon consumers into believing that the defective Motrin met FDA standards and it was thismisrepresentation that harmed Oregon consumers. According to the court, this misrepresentation claim did not seek to enforce a federal statute but to vindicate a traditional area of state authority – the protection of consumers from allegedly deceptive trade practices. Accordingly, the court held that Oregon’s claims were not completely preempted by federal law and, as a result, that the court lacked subject matter jurisdiction over the claims. The court granted Oregon’s motion to remand the case to state court.
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