Molina Healthcare, Inc. v. Celgene Corporation

Background

Molina Healthcare, Inc. sued Celgene Corporation and Bristol-Myers Squibb Company in the California Superior Court for San Francisco County. Molina asserted claims under the laws of 23 states, including California’s Unfair Competition Law, alleging that Celgene used several strategies to protect its market for Thalomid and Revlimid from generic competition. The alleged conduct included misuse of the federal drug-safety distribution program, exclusive supplier contracts, fraud involving patents, sham patent litigation, anticompetitive settlements, and baseless petitions to the Food and Drug Administration.

Molina alleged that its subsidiaries assigned their claims to Molina. Those claims arose from the subsidiaries’ reimbursement of plan members’ purchases of the drugs in multiple states, including California and New Jersey. Molina sought money damages and a declaration that Celgene’s conduct was unlawful under state law.

Celgene and Bristol-Myers Squibb removed the case to federal court. They asserted federal-question jurisdiction because Molina’s state-law claims allegedly depended on the federal Sherman Act and other federal laws. They also asserted diversity jurisdiction, arguing that Molina was not the real party in interest, that a New York subsidiary should be disregarded, and that Bristol-Myers Squibb had been improperly included as a defendant. The defendants separately moved to transfer the case to the District of New Jersey and to dismiss for lack of personal jurisdiction. Molina moved to remand, meaning to return the case to state court.

Federal-Question Jurisdiction

The court held that the defendants had not shown that Molina’s claims necessarily raised a federal issue. Although the complaint referred to federal laws concerning drug regulation, patents, and antitrust law, the court concluded that merely mentioning federal law did not establish federal jurisdiction when the requested relief was based on state law.

The court reasoned that Molina’s claims under the California Unfair Competition Law could potentially proceed under the statute’s “unfair” prong without proving a Sherman Act violation. Because Molina was not a competitor of Celgene, the court found that Molina might prevail by showing that the alleged conduct was immoral, oppressive, unscrupulous, or substantially injurious to consumers, or that the harm outweighed Celgene’s reasons and justifications. The court therefore concluded that federal law was not necessarily an element of those claims.

The court reached the same conclusion regarding Molina’s request for a declaration that the conduct was unlawful. That request sought a declaration under state statutes and state unjust-enrichment law, not a separate declaration that Celgene violated federal law. Possible federal defenses, including the argument that federal law permitted or protected some conduct, could not create federal-question jurisdiction.

Diversity Jurisdiction

For diversity jurisdiction, the defendants had to show complete diversity, meaning that no plaintiff shared citizenship with any defendant. The parties agreed that Molina shared Delaware citizenship with Celgene and Bristol-Myers Squibb.

The court held that the assignments from Molina’s subsidiaries were complete. The subsidiaries assigned all rights, titles, ownership, and interests in their claims to Molina and could no longer bring those claims themselves. The court followed the reasoning of decisions holding that a complete assignment in a case removed from state court could not be disregarded merely because it affected diversity jurisdiction. The subsidiaries’ continued interest in receiving net recoveries did not change that conclusion.

The court also explained that, even apart from Molina’s shared Delaware citizenship, the defendants had not shown that Bristol-Myers Squibb was fraudulently joined or that the claims associated with the New York subsidiary could be disregarded. The court noted that deficiencies involving Bristol-Myers Squibb or the New York subsidiary might potentially be cured by amendment.

Disposition

Judge Joseph C. Spero granted Molina’s motion to remand. The Clerk was ordered to remand the case to the California Superior Court for San Francisco County and close the federal case. Because the federal court lacked subject-matter jurisdiction, it did not reach the defendants’ motions to transfer or dismiss. The opinion states that the defendants could renew dismissal arguments in state court.