Judith C. Herrera, UNITED STATES DISTRICT JUDGE.
Plaintiff State of New Mexico ex rel. Hector Balderas, Attorney General, filed this lawsuit in the First Judicial District of the State of New Mexico against manufacturers and wholesale distributors of prescription opioids, alleging that Defendants improperly marketed and distributed prescription opiate medications nationwide. According to Plaintiff's First Amended Complaint (Complaint) McKesson Corporation and other Distributor Defendants
Compl., Prayer for Relief, ¶ 9.
McKesson filed a notice of removal in this Court, asserting that because Defendants' "duties governing reporting and shipping `suspicious' orders [] arise solely from the federal Controlled Substances Act," this Court has federal jurisdiction over Plaintiff's Complaint under the FCSA. Notice of Removal, Doc. 1, ¶¶ 8, 16. In its Motion to Remand, Plaintiff argues that its 167-page Complaint does not allege any federal claims. Indeed, Plaintiff contends that the Complaint explicitly disavows all federal causes of action, see e.g. Compl. ¶ 47, ("federal question subject matter jurisdiction pursuant to 28 U.S.C. § 1331 is not invoked by the Complaint... nowhere herein does Plaintiff plead... any cause of action or request any remedy that arises under federal law.") Plaintiff also claims that, despite the Complaint's references to federal law and regulations that are incorporated into various analogous New Mexico laws and regulations, the Complaint does not rely on federal law to generate a cause of action. See id. ¶ 48 ("In this complaint, Plaintiff cites federal statutes and regulations. Plaintiff does so to state the duty owed under New Mexico tort law, not to allege an independent federal cause of action and not to allege any substantial federal question....")
Plaintiff explains in its Motion to Remand that New Mexico law "parallels" federal law applicable to manufacturer and wholesale drug distributors, and that in order to comply with state law, Defendants must also comply with federal law. The Complaint describes some state law duties that incorporate federal standards, or require compliance with both New Mexico and federal law. For instance, the Complaint explains how "[t]he [NMCSA] and Administrative Code incorporate by reference relevant federal laws and regulations." Compl. ¶ 162 (citing N.M. Code R. § 16.19.8.13(I) and N.M. Stat. Ann, §§ 30-31-13(C), 30-31-16(A)). Further, "wholesale drug distributors shall operate in compliance with applicable federal, state, and local laws and regulations" and "[w]holesale drug distributors that deal in controlled substances shall register with the [New Mexico Board of Pharmacy] and with the [federal Drug Enforcement Agency]." Compl. ¶ 162 (citing N.M. Code. R. § 16.19.8.13(I) & (I)(2)). The same rules require that "any diversion of a prescription drug be reported to the New Mexico Pharmacy Board, the FDA, and ... the DEA" and that this same duty exists under federal regulations, which are incorporated by reference." Compl. ¶ 163 (citing
Plaintiff's Complaint also alleges that two DEA letters, written in 2006 and 2007, reminded registered wholesale distributors such as Distributor Defendants of "their statutory and regulatory duties" to monitor and report suspicious orders of controlled substances. Compl. ¶¶ 167, 172, 173. The letters explained to the Distributor Defendants that they represented "one of the key components of the distribution chain," and that "[i]f the closed system is to function properly ... distributors must be vigilant in deciding whether a prospective customer can be trusted to deliver controlled substances only for lawful purposes." Id. ¶ 167. The 2006 letter stated that "a distributor has a statutory responsibility to exercise due diligence to avoid filling suspicious orders" that could find their way into illicit channels. Id. ¶ 172. And the 2007 letter reminded distributors to "maintain effective controls against diversion" and "design and operate a system to disclose to the registrant suspicious orders." Id. ¶ 173.
McKesson responds that all of Defendants' duties to monitor for, report, and refuse suspicious orders for prescription opioids arise solely under the FCSA and its implementing regulations. See Notice of Removal, ¶ 8. Specifically, Defendants' duty to disclose suspicious orders derives from a federal regulation, 21 C.F.R. § 1301.74(b), and McKesson argues that Plaintiff identified no "provision of New Mexico law or regulation that contains a requirement analogous to the federal CSA's suspicious order-reporting requirement." Id. ¶ 22 n. 4. Concerning the Drug Distributor's duty to not ship suspicious orders, McKesson does not argue that the FCSA itself imposes such a duty. Rather, according to McKesson "[t]he source of the asserted legal duty to suspend shipments of suspicious orders" arises from an interpretation of the FCSA by the DEA in the 2006 and 2007 letters. Id. ¶ 38. McKesson argues that although Plaintiff's claims are packaged as state law negligence, fraud, public nuisance, unfair practices, and racketeering claims, each claim is predicated upon disclosure and shipping duties arising only under federal law. See Def.'s Resp. to Mot. to Remand, p. 8 ("the Complaint repeatedly restates the same federal question: did the Distributor Defendants violate the DEA's suspicious order-reporting requirement, 21 C.F.R. § 1301.74(b), and a related DEA `shipping requirement' [i.e. the 2006 and 2007 DEA letters].'") McKesson thus argues that this Court has subject matter jurisdiction because Plaintiff pleads facially federal claims in Counts I-VII, and that all of Plaintiffs claims depend on a substantial federal question — namely, the meaning and application of the FCSA, its implementing regulations, and the DEA letters.
In the background of this case is a Judicial Panel on Multidistrict Litigation (JPML) that formed a multidistrict litigation (MDL) arising from nationwide lawsuits addressing similar issues raised in this case. On December 7, 2017 the JPML centralized proceedings in the United
"Federal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and statute." Gunn v. Minton, 568 U.S. 251, 256, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013). Removal statutes are to be strictly construed, and the party invoking federal jurisdiction bears the burden of proof with a presumption against federal jurisdiction. See Dutcher v. Matheson, 733 F.3d 980, 985 (10th Cir. 2013). Any doubts regarding subject matter jurisdiction are to be resolved against removal. See Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir. 1982). In its notice of removal, McKesson argues that two statutory provisions confer federal jurisdiction: 28 U.S.C. § 1331 and 28 U.S.C. § 1441. See Notice of Removal 5. Section 1441(a) permits the removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Section 1331, the "general federal-question statute," Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 134 S.Ct. 2024, 2030 n. 2, 188 L.Ed.2d 1071 (2014), gives district courts original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." A case improperly removed to federal court must be remanded to state court. See 28 U.S.C. § 1447.
Section 1331 "is invoked by and large by plaintiffs pleading a cause of action created by federal law." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). However, causes of action under state law may nonetheless "arise under" federal law for purposes of § 1331 even when the complaint does not explicitly plead a federal cause of action if the four-pronged Grable test is met. Under that test, "federal jurisdiction over a state law claim will lie if a federal issue is: (1)
To better contextualize this case, the Court briefly recounts some of the Supreme Court's seminal decisions analyzing jurisdiction under § 1331 based on the presence of a federal element in a state law claim. In Merrell Dow, in two state tort law actions, the plaintiffs alleged that the defendants misbranded a drug in violation of the Federal Food, Drug, and Cosmetic Act, which created a rebuttable presumption of negligence under Ohio law. Thus, within a state law negligence claim was a federal issue about the interpretation and application of the FDCA. The defendant removed the actions, but the Supreme Court held the removal improper because the case did not arise under federal law within the meaning of § 1331. The plaintiffs' right to relief did not necessarily depend on a resolution of federal law, the Court held, since the "[p]laintiffs' causes of action referred to the FDCA merely as one available criterion for determining whether Merrell Dow was negligent. Because the jury could find negligence on the part of Merrell Dow without finding a violation of the FDCA, the plaintiffs' causes of action did not depend necessarily upon a question of federal law." Merrell Dow, 478 U.S. at 807, 106 S.Ct. 3229.
In Gunn, the Court readdressed somewhat similar issues raised in Merrell Dow — namely, whether a state law tort action in which the defendant's negligence turned on an issue of federal law conferred federal jurisdiction. The federal law in Gunn was patent law. The plaintiff sued for patent infringement, lost, and then sued his lawyer for legal malpractice in Texas state court for mishandling the patent case. Because his legal malpractice claim was predicated on the underlying patent case, the plaintiff argued that his case should have been brought in federal rather than state courts (because federal courts have exclusive jurisdiction over patent law under 28 U.S.C. § 1338(a)). A unanimous Supreme Court disagreed. The plaintiff's malpractice claim — although it would necessarily require a state court to examine federal patent law — was not substantial to the federal patent law system as a whole since a state court's analysis of federal patent law would not bind federal courts.
In contrast to Merrell Dow and Gunn, the Court's case in Grable fell within the "slim category" of cases where the Court upheld removal jurisdiction over a state law claim that incorporated a federal element because that element implicated substantial
McKesson claims that Plaintiff's claims facially arise under federal law because Defendants' manufacturing quotas and duties regarding reporting and shipping suspicious opioid orders arise "solely" from the FCSA and its implementing regulations. See Notice of Removal ¶ 8. Thus, McKesson argues that "[f]ederal question jurisdiction is independently proper in this case because the Complaint facially pleads a cause of action under the federal CSA." Def.'s Resp. 24. However, Plaintiff's Complaint does not allege a federal cause of action under the FCSA — nor could it have because the FCSA provides no federal cause of action. See Zink v. Lombardi, 783 F.3d 1089, 1113 (8th Cir. 2015) ("[The plaintiffs] acknowledge, however, that there is no private right of action under federal law to enforce these alleged violations [of the Controlled Substances Act]."); Durr v. Strickland, 602 F.3d 788, 789 (6th Cir. 2010) (same). Because Plaintiff's Complaint has not pleaded a non-existent federal cause of action under the FCSA, federal jurisdiction will lie only if the state law claims implicate substantial federal issues. See Grable, 545 U.S. at 312, 125 S.Ct. 2363.
Thus, in order to establish removal jurisdiction Defendants must satisfy the four-prong test in Grable. Turning to the second prong first, in its briefing Plaintiff made no substantive arguments about whether the federal issues in its Complaint are "actually disputed," and thus the Court presumes the parties agree the second factor is met. But the parties do quarrel about whether the other three factors derived from Grable are satisfied, so the Court will analyze those components. The first factor that Defendants must show is that a federal issue is "necessarily raised" in Plaintiff's Complaint, meaning that "the issue is an `essential element' of a plaintiff's claim." Gilmore v. Weatherford, 694 F.3d 1160, 1173 (10th Cir. 2012). McKesson argues that all of Plaintiff's claims depend necessarily on a purportedly federal issue — whether the Distributor Defendants violated the DEA's suspicious order-reporting requirement (21 C.F.R. § 1301.74(b)), and related DEA shipping requirement as spelled out in the 2006 and 2007 DEA letters.
The Court first addresses McKesson's arguments concerning the DEA letters. As noted earlier, McKesson locates
Here, Plaintiff's Complaint cites the DEA letters to show that the DEA reminded and warned the Distributor Defendants of their statutory duties. However, like West Virginia's complaint in Morrisey, Plaintiff's claims stretch beyond the DEA letters to include state law duties applicable to prescription drug distributors — for instance to "report any theft, suspect theft, diversion or other significant loss of any prescription drug" to the New Mexico Board of Pharmacy, N.M. Code R. § 16.19.8.13(F), and to "provide effective controls and procedures to guard against theft and diversion of controlled substances." N.M. Code R. § 16.19.20.48(A). McKesson argues that these two regulations in particular contain no requirement compelling the Distributor Defendants to halt suspicious orders on which Plaintiff's claims are allegedly based. However, Plaintiff's claims are not predicated exclusively on a duty to halt suspicious orders. The Complaint alleges that the Distributor Defendants had a duty also to monitor, detect, investigate, and refuse suspicious orders of opioids. See e.g. Compl. ¶¶ 175, 177-78. There is no reason to believe that the New Mexico regulations cited above, which require the Distributor Defendants to report on and guard against diversion of controlled substances could not include the Complaint's allegations that Defendants unlawfully distributed prescription opioids in New Mexico.
Two federal courts have recently granted attorney general motions to remand that presented nearly identical issues, and both courts held that state law language similar to New Mexico's imposed duties on McKesson and other defendants to not fill suspicious orders. See Morrisey, 2017 WL 357307 *8 (West Virginia's requirement that "[a]ll registrants shall provide effective controls and procedures to guard against theft and diversion of controlled substances" could support theory to not fill suspicious orders.); State of Delaware, ex rel. Matthew P. Denn, Attorney General of the State of Delaware v. Purdue Pharma L.P., et al., 1:18-383-RGA, 2018 WL 1942363, at *3 (D. Del. Apr. 25, 2018) (holding that Delaware's requirement that distributors "maintain `effective controls against diversion [into illegitimate] channels'" supported theory that defendants created a public nuisance by not reporting suspicious orders.) Whatever putative duty exists under the DEA letters, McKesson has not shown that Plaintiff's claims are predicated solely on obligations under federal
Thus, contrary to McKesson's claim that Plaintiff can prevail only by showing that Defendants violated the FCSA, it appears that Plaintiff could show that Defendants violated state law duties to control, report and guard against the diversion of prescription drug orders, meaning that the federal statute is not necessarily raised. While a determination of a duty and violation of that duty under the FCSA will likely occur in examining Plaintiff's claims, so also will examination of New Mexico common law, statutes, and promulgated rules to determine Defendants' duty, if any, to prevent "diversion" of prescription drugs into illicit channels. And to the extent, if any, that Plaintiff's claims are "partially predicated on federal law, federal law would still not be necessarily raised." Manning v. Merrill Lynch Pierce Fenner & Smith, Inc., 772 F.3d 158, 164 (3d Cir. 2014) (citing Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 810, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) ("[A] claim supported by alternative theories in the complaint may not form the basis for [federal] jurisdiction unless [federal] law is essential to each.")) (emphasis removed). New Mexico state law provides alternate theories for a finding of liability against McKesson and its codefendants because the Complaint implicates numerous alleged duties under state law. Thus, as in Merrell Dow, the Complaint refers to the FCSA, its regulations, and the DEA letters as "available criter[ia] for determining whether" Defendants are liable, but their liability, if any, does not hinge exclusively on federal law, as McKesson argues. Merrell Dow, 478 U.S. at 807, 106 S.Ct. 3229.
Nor are the federal issues raised in the Complaint "substantial" under the third Grable factor in that they are not important "to the federal system as a whole." Gunn, 568 U.S. at 260, 133 S.Ct. 1059. Even if there was a violation of the FCSA, its promulgated rules, and the DEA's interpretation of the statute, no large-scale federal interests of the kind in Grable — the tax code — are implicated by such a violation. In Grable federal adjudication was appropriate over the plaintiff's state law quite title action because of the government's interest in uniformly satisfying its tax claims and providing secure title to purchasers at tax sales. Here, Plaintiff's statutory and common law claims of negligence, fraud, public nuisance, unfair practices, and racketeering raise no larger substantial federal interests and do not implicate "the action of any federal department, agency, or service," such as the IRS. Empire, 547 U.S. at 700, 126 S.Ct. 2121. Plaintiff's claims will be "fact-bound and situation-specific" and do not readily present a pure issue of law which federal adjudication could resolve "once and for all." Id. See Bender, 623 F.3d at 1130 ("[F]ederal jurisdiction is disfavored for cases that are `fact-bound and situation specific' or which involve substantial questions of state as well as federal law.") Moreover, the Court notes that, as here, "the absence of a private right of action" under the FCSA is a "consideration in the assessment of substantiality" — the "primary importance" of which is
It is thus clear that the final element of Grable is not satisfied — namely, federal adjudication of Plaintiff's state law claims would "disrupt[] the federal-state balance approved by Congress." McKesson recently unsuccessfully removed a similar opioid related lawsuit brought by the State of Delaware to a federal district court on similar grounds as its removal to this District. As nicely stated by the Delaware federal district court, the final Grable prong counseled against removal jurisdiction because
Delaware ex rel. Denn, 2018 WL 1942363, at *5 (citing Grable, 545 U.S. at 318, 125 S.Ct. 2363). Federal jurisdiction over this case would result in a "horde of original filings and removal cases raising other state claims with embedded federal issues," Grable, 545 U.S. at 318, 125 S.Ct. 2363, which weighs heavily in factor of remanding this case to state court.