Civ. A. No. 3:95-CV-78BN.
September 22, 1995.
John W. Barrett, Edward Sanders, Barrett Law Offices, Lexington, MS, for Mike Moore.
Ross F. Bass, Jr., Michael B. Wallace, Phelps Dunbar, Jackson, MS, for Abbott Laboratories and Mead Johnson Co.
William F. Goodman, Jr., Lynn Plimpton Risley, Watkins Eager, Jackson, MS, for Bristol-Myers Squibb and Company and Mead Johnson Co.
This cause is before the Court on the following motions: (1) Plaintiff's Motion to Remand; (2) Defendants' Motion for Leave to File Surreply Memorandum; and (3) Plaintiff's Application for Review and Objections to Magistrate Judge's Order Denying Motion to Quash and for Protective Order. Having considered the Motions, Responses, all attachments to each and supporting and opposing memoranda, the Court finds that (1) Plaintiff's Motion to Remand is well taken and should be granted; (2) Defendants' Motion for Leave to File Surreply Memorandum is well taken and should be granted; and (3) Plaintiff's Application for Review and Objections to Magistrate Judge's Order Denying Motion to Quash and for Protective Order is moot and therefore denied.
I. Factual Background and Procedural History
Plaintiff filed this action on January 18, 1995, in the Circuit Court of Holmes County, Mississippi. Defendants are pharmaceutical companies that manufacture and sell infant formula nationally, including in the State of Mississippi. According to the Plaintiff, Defendants share approximately eighty percent of the Mississippi infant formula market. Plaintiff further asserts the following:
Contrary to Defendants' assertion, this litigation did not begin on October 7, 1993. On that date, some of the same counsel who are prosecuting this suit filed a class action suit in this Court alleging that Defendants were engaged in an interstate conspiracy to raise, fix, maintain and stabilize at artificially high levels the wholesale prices of infant formula sold in the United States. Cothran v. Abbott Laboratories, et al., Civil Action No. 3:93-CV-626LR (Oct. 7, 1993). The plaintiffs in that case voluntarily dismissed the case on November 8, 1993. The Court finds that these two cases, although related in subject matter, are not the same case for the purposes of the current Motion to Remand.
For over twelve years, from 1980 through 1992, defendants abused their overwhelming dominance of the infant formula market by independent action and agreement among themselves, whereby they grossly overcharged Mississippi consumers for infant formula. Complaint at ¶ 15.
The substantial terms of defendants' conspiracy consisted of an agreement to fix the wholesale price of infant formula sold throughout the United States, including that sold in Mississippi. Complaint at ¶ 20. Defendants' illegal conspiracy and agreement caused the price of infant formula to increase over 120 percent during the last ten years, while the price of milk, infant formula's principal ingredient, rose only 36 percent. Complaint at ¶ 16. Because retailers determine their prices based on defendants' wholesale prices, the retail price of infant formula is directly affected by the wholesale prices charged by defendants. Complaint at ¶ 13. Therefore, as a direct result of defendants' illegal conspiracy, plaintiffs and class members paid more for infant formula than they would have absent defendants' illegal conduct. Complaint at ¶ 27-28.
Memorandum of Law in Support of Plaintiff's Motion to Remand at 1-2.
The Plaintiff in this matter is the Attorney General of the State of Mississippi who is suing on behalf of the State and as parens patriae on behalf of Mississippi citizens injured by Defendants' alleged misconduct. On behalf of the State, the Attorney General claims that Defendants' actions had the effect of requiring the State to pay artificially high prices for infant formula for the Mississippi Women, Infants and Children (WIC) Program. Plaintiff asserts that Defendants have thus violated certain provisions of the Mississippi antitrust statute, specifically Miss. Code Ann. §§ 75-21-1 and 75-21-3. Plaintiff seeks recovery for such violations under Miss. Code Ann. § 75-21-7, which sets forth certain penalties for violation of the Mississippi antitrust laws, and Miss. Code Ann. § 75-21-9, seeking a penalty of $500 for each instance of injury to the State.
Plaintiff also alleges violations of the Mississippi Consumer Protection Act, specifically Miss. Code Ann. § 75-24-5, asserting that Defendants have engaged in unfair competition and unfair or deceptive trade practices. As a result of Defendants' alleged wrongful actions, Plaintiff asserts that the State and the citizens of the State have paid more for infant formula than they would have paid in the absence of Defendants' alleged unlawful conduct. Plaintiff asserts a right to recover damages pursuant to Miss. Code Ann. § 75-24-15, in his capacity as parens patriae for the Mississippi citizens who have been injured by Defendants' alleged wrongful conduct.
The Court notes that Miss. Code Ann. § 75-24-15 was amended in 1994 and the provision regarding attorneys' fees was removed from the statute. Plaintiff asserts a general right to recovery of attorneys' fees if successful on the merits of this suit. Defendants assert that Miss. Code Ann. § 75-24-19 now governs the recovery of attorneys' fees and only allows recovery to the Plaintiff when a violation of section 75-24-5 is knowing and willful. Defendants further assert that Mississippi law only allows the recovery of attorneys' fees when provided by statute. Stokes v. Board of Directors of La Cav Improvement Co., 654 So.2d 524 (Miss. 1995). The Court need not address this issue as it is not necessary for a decision on the Motion to Remand.
On February 17, 1995, Defendants removed this action to this Court on grounds of diversity of citizenship and federal question jurisdiction. Each of Defendants is a foreign corporation organized and existing under the laws of a state other than Mississippi. Defendants assert that the State of Mississippi, on whose behalf Mike Moore brought this suit, is not the real party in interest, and that the Attorney General has no parens patriae authority to bring suit on behalf of the citizens of the State. The real parties in interest, according to Defendants, are the private individuals who bought infant formula between 1980 and 1992, and these are the persons whose citizenship matters for the purposes of 28 U.S.C. § 1332. Defendants further assert that Plaintiff has engaged in artful pleading to avoid federal jurisdiction, and that Plaintiff's claims are not cognizable under Mississippi law.
28 U.S.C. § 1441(a) provides in relevant part as follows:
[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending.28 U.S.C. § 1441(a). "The removing party bears the burden of establishing federal jurisdiction." Laughlin v. Prudential Ins. Co., 882 F.2d 187, 190 (5th Cir. 1989) (citation omitted). Whether a case is removable must be determined by reference to the allegations made in the original pleadings. Wheeler v. Frito-Lay, Inc., 743 F. Supp. 483, 485 (S.D.Miss. 1990).
A. Eleventh Amendment Immunity
The Eleventh Amendment to the United States Constitution provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." The United States Supreme Court has interpreted this amendment on many occasions to determine when a suit is one against the State. See, e.g., Pennhurst State Sch. Hosp. v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). That Court has held that "`an unconsenting State is immune from suits brought by her own citizens as well as citizens of another state.'" Id. at 100, 104 S.Ct. at 908 (quoting Employees v. Missouri Dept. of Public Health Welfare, 411 U.S. 279, 280, 93 S.Ct. 1614, 1616, 36 L.Ed.2d 251 (1973)). The Plaintiff in this matter asserts that "[t]he proscriptions of the Eleventh Amendment apply with equal force to a suit brought against a state in federal court, and a suit brought by a state in state court which is removed to federal court." Memorandum in Support at 16-17. Defendants do not directly address the issue of the Eleventh Amendment in their submissions to this Court.
While Defendants assert that the State is not the real party in interest in this lawsuit, Defendants fail to address whether the Eleventh Amendment prohibits the State, if it is the real party in interest, from being brought into federal court through the removal process as an involuntary plaintiff.
The Court has extensively researched this question and has found only a few federal court cases which even mention this issue. The Court has found only one case, however, which actually bases its ruling on the Eleventh Amendment issue. In California v. Steelcase Inc., 792 F. Supp. 84 (C.D.Cal. 1992), the court addressed the issue of Eleventh Amendment immunity where the plaintiff is the state and the case has been removed by the defendants. The court first concluded that the state is not a citizen of itself for diversity purposes. Id. at 86 (citing Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1799, 36 L.Ed.2d 596 (1973)). The court then addressed the Eleventh Amendment immunity issue:
Defendant, relying on the literal wording of the Eleventh Amendment, contends that this is not a "suit . . . against one of the United States . . ." (emphasis added) because the State is the plaintiff. However, since the immunity granted by the Eleventh Amendment is an immunity from being made an involuntary party to an action in federal court, it should apply equally to the case where the state is a plaintiff in an action commenced in state court and the action is removed to federal court by the defendant.
The statute under which this action was removed requires, for an action to be removable, that the district courts "have original jurisdiction" over the action. 28 U.S.C. § 1441(a). Because of the jurisdictional bar of the Eleventh Amendment, the district courts would not have original jurisdiction over this action, absent the consent of the State. The State does not consent to removal. Therefore, subject matter jurisdiction is lacking, at least as to the claim under the unfair competition statute.Id. at 86; but see South Dakota State Cement Plant Comm'n v. Wausau Underwriters Ins. Co., 778 F. Supp. 1515, 1522 (D.S.D. 1991) (declining to address the Eleventh Amendment claim with the State as the plaintiff in a motion to remand concluding that "[t]he contention that the Eleventh Amendment nevertheless has bearing upon this Court's jurisdiction is not supported by any authority cited by either party").
The Court finds the reasoning of the Steelcase court to be sound. By removing this matter to federal court, Defendants have involuntarily subjected the State of Mississippi to the jurisdiction of this Court. Because the State does not consent to this removal, the Court finds that it lacks subject matter jurisdiction over this action due to the Eleventh Amendment proscription, provided that the State of Mississippi is the real party in interest in this matter.
B. Real Party in Interest and Diversity Jurisdiction
The real party in interest issue is relevant to the Eleventh Amendment immunity question as well as to a proper determination of diversity of citizenship. Because the Court has previously found that the Eleventh Amendment precludes the removal of this suit to federal court if the Plaintiff is the real party in interest, the Court will address the issues of real party in interest and diversity of citizenship together because the questions pertaining to each are somewhat intertwined.
Plaintiff asserts that the State of Mississippi is the real party in interest with regard to the parens patriae claims brought under the Mississippi antitrust statute and consumer fraud statute. Plaintiff further asserts that even if the Court determines that the State has no independent interest in the parens patriae claims, the State is still a real party in interest with regard to the statutory penalty and WIC claims. Therefore, according to Plaintiff, because the State is the real party in interest, there is no diversity in this matter because a state is not a citizen for the purposes of diversity jurisdiction under 28 U.S.C. § 1332.
Defendants assert that "the Attorney General is acting as the nominal party for a group of lawyers who want to mask what is in fact a private class action on behalf of Mississippi consumers of infant formula that would otherwise be barred by Mississippi law." Defendants' Joint Memorandum in Opposition at 3. Defendants further assert that Plaintiff's non- parens patriae claims have been fraudulently joined to defeat diversity jurisdiction. Therefore, according to Defendants, the State of Mississippi is not a real party in interest to this litigation, and diversity jurisdiction exists with regard to the Defendants and the true plaintiffs.
The Court need not decide whether the State of Mississippi has the authority to pursue parens patriae claims in the manner asserted in this case in order to dispose of this issue. Miss. Code Ann. § 75-21-7 (rev. 1991) provides as follows:
Any person, corporation, partnership, firm or association of persons and the officers and representatives of the corporation or association violating any of the provisions of this chapter shall forfeit not less than one hundred dollars ($100.00) nor more than two thousand dollars ($2,000.00) for every such violation. Each month in which such person, corporation or association shall violate this chapter shall be a separate violation, the forfeiture and penalty in such case to be recovered alone by suit in the name of the state on the relation of the attorney general and by the consent of the attorney general suits may be brought by any district attorney, such suits to be brought in any court of competent jurisdiction.Id. (emphasis added). This statute clearly gives the Attorney General of the State the authority to bring suit in the name of the State for violations of Mississippi antitrust law. Furthermore, the Attorney General bringing suit in this capacity is merely the alter ego of the State, and the State is therefore the real party in interest. See Tradigrain v. Mississippi State Port Authority, 701 F.2d 1131, 1132 (5th Cir. 1983).
In this case, the State is the real party in interest, therefore diversity jurisdiction does not exist. A state is not considered a citizen for the purposes of diversity jurisdiction under 28 U.S.C. § 1332. Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1799, 36 L.Ed.2d 596 (1973); Tradigrain, 701 F.2d at 1132. Because the State of Mississippi is the real party in interest and is not a citizen for the purposes of diversity jurisdiction, removal on the basis of diversity jurisdiction was improper.
Defendants assert, however, that Plaintiff's statutory penalty claim was fraudulently joined by the Plaintiff in that such a claim cannot succeed as a matter of Mississippi law. This argument is not persuasive. The removing party bears the burden of demonstrating fraudulent joinder. Carriere v. Sears, Roebuck Co., 893 F.2d 98, 100 (5th Cir.) (citing Laughlin v. Prudential Ins. Co., 882 F.2d 187, 190 (5th Cir. 1989)), cert. denied, 498 U.S. 817, 111 S.Ct. 60, 112 L.Ed.2d 35 (1990). To prove fraudulent joinder, Defendants must establish that Plaintiff has no possibility of establishing a cause of action against them in state court. Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992).
In evaluating fraudulent joinder claims, we must initially resolve all disputed questions of fact and all ambiguities in the controlling state law in favor of the nonremoving party. We are then to determine whether that party has any possibility of recovery against the party whose joinder is questioned. . . . We do not decide whether the plaintiff will actually or even probably prevail on the merits, but look only for a possibility that he may do so. . . . If that possibility exists, then "`a good faith assertion of such an expectancy in a state court is not a sham . . . and is not fraudulent in fact or in law.'"Id. at 42-43 (citations omitted); see also Jernigan v. Ashland Oil Inc., 989 F.2d 812, 815-16 (5th Cir.) (concluding that all factual allegations must be viewed in the light most favorable to the plaintiff in determining the issue of fraudulent joinder), cert. denied, ___ U.S. ___, 114 S.Ct. 192, 126 L.Ed.2d 150 (1993).
The Court finds that Defendants have failed to establish fraudulent joinder in this matter. Defendants argue vehemently that Mississippi antitrust law is limited to intrastate conspiracies. Defendants argue legislative history, cite Mississippi cases regarding legislative intent and quote from authoritative treatises to support their argument. Curiously absent from Defendants' argument, however, is any decision by the Mississippi Supreme Court concerning whether the Mississippi antitrust statute is limited in application to intrastate conspiracies. The Court finds that Plaintiff has stated an arguably valid claim on the face of the Complaint, pursuant to Miss. Code Ann. §§ 75-21-1, 75-21-3 and § 75-21-7, the penalty provision of the antitrust statute. Even if that claim is ambiguous under state law, the Mississippi state courts are the proper forum for determining this issue of state law which has not yet been decided by the highest court in Mississippi.
The Court is assuming in making this determination that there can be fraudulent joinder of claims, as Defendants assert, as opposed to fraudulent joinder of persons.
Defendants can therefore only secure removal of this case, based upon diversity jurisdiction, by proceeding under 28 U.S.C. § 1441(c) which permits the removal of a claim joined to a nonremovable claim if it is "separate and independent" from the nonremovable claim. McKay v. Boyd Constr. Co., 769 F.2d 1084, 1087 (5th Cir. 1985). The McKay court concluded that section 1441(c) must be construed narrowly "to reduce the number of cases removable from state to federal court." Id. at 1087 (citation omitted). Thus, "`where there is a single wrong to plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim or cause of action under § 1441(c).'" Id. (quoting American Fire Casualty Co. v. Finn, 341 U.S. 6, 13, 71 S.Ct. 534, 540, 95 L.Ed. 702 (1951)).
The Court finds that Defendants have failed to meet the section 1441(c) standard of showing that the other claims asserted in Plaintiff's Complaint are separate and independent from Plaintiff's claims under the Mississippi antitrust statute. As stated previously, Defendants merely argue that Plaintiff has no valid state law antitrust claim. The Court finds that this claim, along with all others asserted in Plaintiff's Complaint, should be decided by the state courts because the antitrust claim is a state law claim which is interlocked with and interdependent upon Plaintiff's remaining claims in the Complaint.
C. Federal Question Jurisdiction
Defendants assert that Plaintiff is using artful pleading to avoid federal jurisdiction. According to Defendants, Plaintiff has no cause of action under state law because Plaintiff alleges an interstate conspiracy which should properly be brought as an alleged violation of the federal Sherman Act. Plaintiff asserts that this cause of action is valid under state law, and that Defendants have failed to prove the necessary elements for the artful pleading doctrine.
Federal jurisdiction extends over "only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Board of California v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 2855-56, 77 L.Ed.2d 420 (1983). Under the well-pleaded complaint rule, the federal question must be present on the face of the complaint, Gully v. First National Bank, 299 U.S. 109, 113, 57 S.Ct. 96, 98, 81 L.Ed. 70 (1936), and jurisdiction cannot be based on the existence of a federal defense. Trans World Airlines, Inc. v. Mattox, 897 F.2d 773, 787 (5th Cir.), cert. denied, 498 U.S. 926, 111 S.Ct. 307, 112 L.Ed.2d 261 (1990). "[F]or federal question jurisdiction to exist, the federal law must be a direct element in the plaintiff's claim and . . . it is not enough that it comes in remotely or indirectly." 13B Charles A. Wright Arthur R. Miller, Federal Practice and Procedure § 3562 (1984).
The Court finds that Defendants have failed to show that Plaintiff's claims are only cognizable, if at all, under federal law. As noted previously, Plaintiff has stated, on the face of the Complaint, an arguably valid cause of action under Miss. Code Ann. §§ 75-21-1, 75-21-3 and § 75-21-7, the penalty provision of the antitrust statute. Defendants' argument that the facts set forth in the Complaint do not state a valid cause of action under that statute is an argument which should be made to the state courts in a motion to dismiss once this case is remanded. Defendants have failed to offer any Mississippi case which has held that the Mississippi antitrust statute applies only to intrastate, as opposed to interstate, violations of the statute. Until the state courts have so ruled, this Court will not speculate concerning this area of state law, especially in deciding a Motion to Remand.
The Court is not required to make an Erie guess in the context of a Motion to Remand concerning how the Mississippi state courts would rule on this issue of state law. The Court will not usurp the function of the state court in determining the meaning of the Mississippi antitrust statute in a case instituted in a state court.
The only exception to the well-pleaded complaint rule, which might be applicable to this case, is whether federal antitrust law completely preempts state antitrust law such that Plaintiff could not maintain an action in state court. The United States Supreme Court has specifically ruled that state antitrust indirect purchaser statutes are not preempted by federal law. California v. ARC America Corp., 490 U.S. 93, 102, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989). Therefore, Plaintiff's claims are not preempted by federal law.
Although Plaintiff raises the res judicata exception to the well-pleaded complaint rule, there is no federal judgment which would act as a bar to Plaintiff's state law claims. See Federated Dept. Stores, Inc. v. Moitie, 452 U.S. 394, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981); Powers v. South Cent. United Food Commercial Workers Unions, 719 F.2d 760, 766 (5th Cir. 1983).
The Court finds that there is no apparent federal question on the face of Plaintiff's Complaint, and that Plaintiff has asserted only state law causes of action in the Complaint. Furthermore, federal antitrust law does not preempt the state statutes at issue in this case. Removal based upon federal question jurisdiction is therefore improper.
The Court finds that Plaintiff's Motion to Remand should be granted. Plaintiff has asserted, on the face of the Complaint, a valid cause of action pursuant to Miss. Code Ann. § 75-21-7 (rev. 1991). The Court makes no finding regarding the other causes of action asserted by the Plaintiff or whether such causes of action are cognizable under state or federal law. These claims cannot be separated pursuant to 28 U.S.C. § 1441(c). The Court will therefore remand the entire case to state court. See McKay, 769 F.2d at 1087.
Because the Court has considered the Surreply Memorandum, the Court will grant Defendants' Motion to File Surreply Memorandum. The Plaintiff's Application for Review is now moot because this case is being remanded to state court and is therefore denied.
Plaintiff has requested an award of attorneys' fees incurred in opposing this removal. Plaintiff asserts that Defendants have acted egregiously in removing this case when they knew it should remain in state court. The Court finds that the legal arguments presented by Defendants to support their opposition to Plaintiff's Motion to Remand were not frivolous nor presented solely for delay, and that an award of attorneys' fees is therefore not proper in this matter.
IT IS THEREFORE ORDERED that Plaintiff's Motion to Remand should be and hereby is granted. This matter is hereby remanded to the Circuit Court of Holmes County, Mississippi.
IT IS FURTHER ORDERED that Plaintiff's request for attorneys' fees is hereby denied.
IT IS FURTHER ORDERED that Defendants' Motion for Leave to File Surreply Memorandum should be and hereby is granted.
IT IS FURTHER ORDERED that Plaintiff's Application for Review and Objections to Magistrate Judge's Order Denying Motion to Quash and for Protective Order is moot and therefore denied.