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Ninth Circuit:
Suits Against Bayer Properly Shunted Back to State Court
Collins Dissents, Saying California Corporation Was Fraudulently Joined to Thwart Diversity Jurisdiction
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has affirmed an order remanding five product liability actions against the pharmaceutical giant Bayer to the San Francisco Superior Court on the ground that there is not complete diversity of the parties, with a dissenter maintaining that the claim against co-defendant McKesson Corporation, a California company, has no conceivable merit and should not divest the District Court of jurisdiction.
Judges Paul J. Watford and Michelle T. Friedland signed the memorandum opinion, filed Wednesday, upholding a March 19, 2019 order by District Court Judge James Donato of the Northern District of California declaring that “these cases were removed improvidently and without jurisdiction” and sending them back to the state court where the plaintiffs filed them.
Given the absence of a federal question, they declared, the action could only be maintained in federal court if there were complete diversity of citizenship, and there is not, rejecting Bayer’s contention that McKesson, a California corporation, was fraudulently named as a defendant. Judge Eric D. Collins, on the other hand, protested that Bayer is indeed “entitled to remove this case to federal court because complete diversity exists among all parties who have been properly joined.”
The plaintiffs, who are California residents, are among many across the nation who have sued the German drug-maker over having been injected with Magnevist, used to enhance MRI images. Magnevist is formulated with gadolinium which is said to cause serious health problems including kidney damage. Each plaintiff alleged, under California law, strict products liability and a negligent failure to warn patients and healthcare professionals of the risks in using Magnevist.
McKesson’s Role
McKesson, which has its main office in San Francisco, was the distributor of the compound in California. (Marketing of Magnevist in the U.S. ceased as of effective September, 2019.)
Bayer, best known for its aspirin tablets, maintains that McKesson was powerless to affect the composition of Magnevist or the labeling of it and was therefore fraudulently joined as a defendant to prevent trial of the case in federal court. Donato rejected that contention, saying:
“Plaintiffs allege that McKesson…sold Magnevist generally throughout California, and specifically to plaintiffs….Plaintiffs further allege that McKesson’s failure to warn about the risks associated with Magnevist was the legal cause of their injuries….California law does not, by any means, rule out plaintiffs’ strict liability and negligence claims against McKesson as a participant in the chain of distribution of the allegedly defective Magnevist product.”
The Ninth Circuit opinion affirming Donato’s remand order cautions that “fraudulent joinder can be found only when a summary review of the complaint reveals that the plaintiff has no possibility of prevailing on any claim against the non-diverse defendant.” It says that to sustain Bayer’s contention that the plaintiffs’ claims against McKesson under state law are preempted by federal law would require a quantum of analysis that “exceeds what is permissible in this procedural posture.”
Collins’s Dissent
Collins did not view such an undertaking daunting, arguing:
“Plaintiffs allege that they were injured by using a drug that was manufactured by Bayer and distributed by McKesson. They claim, in particular, that Bayer and McKesson failed to warn them of the drug’s dangers. But any warning that either Bayer or McKesson might have provided would have been part of what federal law considers to be the drug’s ‘labeling.’ ”
He continued:
“McKesson is not the drug’s applicant—Bayer is. Because federal law prohibits distributors like McKesson from changing the drug’s labeling, a state tort law that imposes a duty on McKesson to modify the labeling is preempted.”
The dissenter went on to say:
“If plaintiffs had articulated any colorable theory of McKesson’s liability- that would have been enough to defeat Bayer’s claim of fraudulent joinder. But confronted with an argument that their claims against McKesson are preempted, plaintiffs have responded with...nothing. They have not suggested that their claims against McKesson rest on anything other than McKesson’s failure to change the drug’s labeling. They have not argued that federal law would have allowed McKesson to change the drug’s labeling. And when asked at oral argument what McKesson could have done to avoid liability without violating federal law, plaintiffs’ only answer was that it should simply have stopped distributing the drug—a theory that is squarely foreclosed by Supreme Court precedent.”
At oral argument, which took place on Dec. 8 via remote technology, Sacramento attorney Margot Cutter, representing Bayer, commented that “McKesson can choose to stop selling the drug.”
In his dissent, Collins cited the U.S. Supreme Court’s 2013 decision in Mutual Pharmacy Co. v. Bartlett in which the majority repudiated “the First Circuit’s stop-selling rationale.” When he pointed to the case at oral argument, Cutter, who appeared to be largely reading from scripts, responded by saying of McKesson: “It’s negligent because they failed to pull the drug.”
Watford told Bayer’s Chicago lawyer, Edward Dumoulin: “You have a very strong argument.” But, he said, he reads the case law as requiring that, to find fraudulent joinder, it must appear from a “quick review” of the allegations that they are “completely frivolous.”
He asked, “Can I say that it’s frivolous?” The judge remarked:
“I don’t know. I mean, I sat around debating the issue with my law clerk.” That, he said, indicates that “it is not so obvious.”
The Ninth Circuit on Sept. 16, 2020, affirmed Donato’s decision, rejecting Bayer’s contention that federal jurisdiction existed because it acted under authority of the federal Food and Drug Administration. The panel—comprised of the same judges who acted on the matter on Wednesday—held that under Ninth Circuit authority, it was precluded from deciding the issue of fraudulent joinder.
In an unrelated case, the U.S. Supreme Court invalidated the precedent on which the panel relied, granted certiorari in the Bayer case, and remanded it, with the issue of fraudulent joinder now alive.
The case is Ulleseit v. Bayer Corp., 19-15778.
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