Sucampo Pharmaceuticals, Inc. v. Astellas Pharma, Inc. , 471 F.3d 544 ( 2006 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SUCAMPO PHARMACEUTICALS, 
INCORPORATED, a Delaware
corporation,
Plaintiff-Appellant,
v.  No. 06-1036
ASTELLAS PHARMA, INCORPORATED,
formerly known as Fujisawa
Pharmaceutical Company, Limited,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Peter J. Messitte, District Judge.
(CA-05-687-PJM)
Argued: October 24, 2006
Decided: December 22, 2006
Before WILKINS, Chief Judge, GREGORY, Circuit Judge,
and James R. SPENCER, Chief United States District Judge for the
Eastern District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Gregory wrote the opinion, in
which Chief Judge Wilkins and Judge Spencer joined.
COUNSEL
ARGUED: James D. Dasso, FOLEY & LARDNER, L.L.P., Chicago,
Illinois, for Appellant. Karen L. Hagberg, MORRISON & FOER-
2 SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA
STER, L.L.P., New York, New York, for Appellee. ON BRIEF:
Derek L. Wright, FOLEY & LARDNER, L.L.P., Chicago, Illinois;
Vineeta A. Bathia, FOLEY & LARDNER, L.L.P., Washington, D.C.,
for Appellant. Kyle W. K. Mooney, MORRISON & FOERSTER,
L.L.P., New York, New York, for Appellee.
OPINION
GREGORY, Circuit Judge:
Sucampo Pharmaceuticals, Inc. ("Appellant" or "Sucampo")
appeals the dismissal of its breach of contract claims against Astellas
Pharma, Inc. ("Appellee" or "Astellas") on the basis of a forum-
selection clause contained in the parties’ licensing agreement.
Because we find that the safety agreement under which Sucampo sued
was at least "incidental to" the licensing agreement, and thus gov-
erned by the forum-selection clause requiring Sucampo to bring suit
in Japan, we affirm the decision of the district court.
I.
The immediate relationship between the parties dates back to 1998,
when a corporate predecessor to Sucampo signed an agreement
("Development Agreement") with a corporate predecessor of Astellas.
The Development Agreement concerned Sucampo’s development and
testing of a drug based on Astellas’s compound, FK506 ("FK506").
The Development Agreement was written in Japanese and executed
in Japan, but did not contain a forum-selection clause. The Develop-
ment Agreement contained a provision mandating that the parties
agree to guidelines for the exchange of safety information relating to
FK506. Later in 1998, the parties executed an agreement relating to
the exchange of safety information. This agreement was "executed
under" the Development Agreement (J.A. 164), contained detailed
terms dictating the exchange of information relating to FK506, and
was effective until the termination of the Development Agreement,
unless otherwise agreed.
In 1999, the parties executed another agreement ("Basic Agree-
SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA 3
ment") with respect to the continued development and commercializa-
tion of FK506. Like the Development Agreement, the Basic
Agreement contained a provision mandating that the parties develop
guidelines for the exchange of safety information. In addition, the
Basic Agreement provided that "[a]s for each item to be developed
and commercialized in accordance with this Agreement, [the parties]
shall separately enter into an individual agreement pursuant to the
provisions hereof as a basis."1 (J.A. 39.) The Basic Agreement con-
tained a Japanese choice-of-law provision and a forum-selection pro-
vision governing "[t]his Agreement" and specifying the exclusive
jurisdiction of the Japanese courts. (J.A. 43, 190.)
Following the execution of the Basic Agreement, the parties exe-
cuted a new agreement concerning the exchange of safety information
("Safety Agreement"). The Safety Agreement provided that it was
executed "[u]nder the basic agreement," and was intended to "provide
a general guide for the safety information exchange on [the com-
pound] between [the parties.]" (J.A. 24.) The term of the Safety
Agreement "unless otherwise agreed upon between [the parties]" was
"until the termination for whatever reason of the Basic Agreement."
(J.A. 31.) The Safety Agreement did not contain either a choice-of-
law or forum-selection provision.
In 2002, the parties executed a license agreement ("Basic License
Agreement") and "agreed that the total legal relationship between
[them] with respect to this compound shall be governed by this agree-
ment."2 (J.A. 282.) The Basic License Agreement contained a provi-
sion regarding the exchange of safety information, which provided
that "[the parties] shall enter into an agreement concerning the
1
Because the Basic Agreement was executed in Japanese, the provision
quoted in the text is based on the translation provided by the Appellant.
Appellee’s translation of the identical provision reads: "[The parties]
shall conclude separate individual agreements regarding items that are to
be developed and/or commercialized based on this agreement, with the
provisions set forth in this agreement as the basic principles." (J.A. 178.)
2
The Basic License Agreement was executed in Japanese. Quotations
in the text are from the Appellee’s translation, provided in the record.
The Appellant did not provide the Basic License Agreement, either in its
original or a translated version.
4 SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA
exchange of such safety information through separate discussion."
(J.A. 289.) Following the execution of the Basic License Agreement,
the parties continued to exchange safety information under the proto-
cols specified by the Safety Agreement. The Basic License Agree-
ment contained a choice-of-law provision specifying Japanese law
and a forum-selection clause specifying that "[a]ny dispute in relation
to this agreement or any agreement incidental hereto" be brought in
Osaka, Japan. (J.A. 314.)
In 2004, wishing to make certain changes with respect to the manu-
facture of any codeveloped drugs, the parties executed a successor
agreement to the Basic License Agreement ("Amended Basic License
Agreement"), which was identical in all relevant respects, but was
drafted in English and changed the exclusive forum for suit to Tokyo,
Japan.
On February 14, 2005, the United States Food and Drug Adminis-
tration ("FDA") issued two alerts regarding a link between cancer and
the use of Protopic, a drug marketed by Astellas, and containing
FK506. The following day, the FDA Pediatric Advisory Committee
("Advisory Committee") recommended that Protopic carry a so-called
"black box warning" about the potential cancer risk. Prior to the Feb-
ruary 15 meeting of the Advisory Committee, Astellas sent a back-
ground document regarding Protopic to the Committee. There is no
indication in the record that Astellas informed Sucampo about the
document sent to the Advisory Committee. On March 10, the FDA
adopted the Advisory Committee’s recommendation and required that
Protopic carry a black box warning. The FDA also issued a public
health advisory concerning Protopic’s potential cancer link. Sucampo
subsequently suspended development of its ophthalmologic product
containing FK506.
On March 11, Sucampo brought a breach of contract action against
Astellas, alleging that Astellas had breached the Safety Agreement by
failing to disclose the FDA’s concerns over Protopic and, as a result
of such failure, Sucampo suffered serious damages relating to the
development of products based on FK506. Astellas filed a motion to
dismiss on the basis of Federal Rule of Civil Procedure 12(b)(1),(2),
and (3). Astellas based its 12(b)(1) and (3) objections on the forum-
selection clause contained in the Amended Basic License Agreement.
SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA 5
Astellas argued that the Safety Agreement was at the very least con-
sidered incidental to the Amended Basic License Agreement, there-
fore Sucampo’s claims were subject to the exclusive jurisdiction of
the courts of Tokyo, Japan, and the district court either lacked subject
matter jurisdiction or was an improper venue. In addition, Astellas
argued that the district court lacked personal jurisdiction over Astel-
las.
On November 28, 2005, without ruling on the personal jurisdiction
objection, the district court held that the Safety Agreement was inci-
dental to the Amended Basic License Agreement and granted Astel-
las’s motion to dismiss on the basis of the forum-selection clause in
the Amended Basic License Agreement. This appeal followed.
II.
This Circuit has not decided the appropriate treatment of a motion
to dismiss based on a forum-selection clause. See, e.g., In re Mil-
lenium Studios, Inc., 286 B.R. 300, 306 (D. Md. 2002) ("There is cur-
rently no procedural mechanism specifically tailored to handle a
motion to dismiss based on a forum-selection clause. The Fourth Cir-
cuit has not decided the issue of what approach to take and which
subsection of Rule 12(b) is most appropriate for the situation."). Other
circuits have characterized such motions as motions under Fed. R.
Civ. P. 12(b)(1), (3), or (6). See, e.g., Silva v. Encyclopedia Britan-
nica Inc., 239 F.3d 385 (1st Cir. 2001) (treating motion to dismiss
based on forum-selection clause as a Rule 12(b)(6) motion to dis-
miss); Lipcon v. Underwriters at Llyod’s, London, 148 F.3d 1285(11th Cir. 1998) (holding that motions to dismiss based on forum-
selection clause should be analyzed under Rule 12(b)(3)); AVC
Nederland B.V. v. Atrium Inv. P’ship 740 F.2d 148 (2d Cir. 1984)
(affirming dismissal of action under Rule 12(b)(1) on basis of forum-
selection clause).
A.
The district court dismissed Sucampo’s complaint on the basis of
the forum-selection clause contained in the Amended Basic License
Agreement before resolving Appellee’s motion to dismiss for lack of
personal jurisdiction. Accordingly, we must resolve whether a dis-
6 SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA
missal based on a forum-selection agreement is under Rule 12(b)(6),
because the dismissal of a case on an issue relating to the merits of
the dispute, such as failure to state a claim, is improper without
resolving threshold issues of jurisdiction, including personal jurisdic-
tion. See Ruhrgas AG v. Marathon Oil, Inc., 526 U.S. 574, 583 (1999)
("Personal jurisdiction . . . is ‘an essential element of the jurisdiction
of a district . . . court,’ without which the court is ‘powerless to pro-
ceed to an adjudication.’" (quoting Employers Reinsurance Corp. v.
Bryant, 299 U.S. 374, 382 (1937))); Constantine v. Rectors & Visitors
of George Mason Univ., 411 F.3d 474, 480 (4th Cir. 2005) ("The
validity of an order of a federal court depends upon that court’s hav-
ing jurisdiction over both the subject matter and the parties." (internal
quotation marks omitted)).
B.
To analyze a motion to dismiss based on a forum-selection clause
under Rule 12(b)(1), a court must engage the legal fiction that the
clause affects the power of the court to adjudicate the dispute. See
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13 (1972) ("The
argument that [forum-selection] clauses are improper because they
tend to ‘oust’ a court of jurisdiction is hardly more than a vestigial
legal fiction."); Lipcon, 148 F.3d at 1289-90 ("[T]he basis upon which
the defendants seek dismissal-namely, that the agreement of the par-
ties prohibits the plaintiff from bringing suit in the particular forum-
is unrelated to the actual basis of federal subject matter jurisdiction-
namely, federal question jurisdiction or diversity of citizenship, as the
case may be.").
In addition to this theoretical incongruence, treating a motion to
dismiss on the basis of a forum-selection clause under Rule 12(b)(1)
presents practical difficulties that undercut the benefits gained from
enforcement of the clauses. For example, the court must raise the
issue of subject-matter jurisdiction sua sponte, if necessary. See Fed.
R. Civ. P. 12(h)(3). Thus, in cases involving forum-selection clauses,
both district and circuit courts would be under an obligation to con-
firm that the clause was not applicable before reaching the merits of
the action. SeeSteel Co. v. Citizens for a Better Environment, 523 U.S.
83, 101-02 (1998) (disapproving of hypothetical-jurisdiction doc-
trine); Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 379
SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA 7
(1981) ("A court lacks discretion to consider the merits of a case over
which it is without jurisdiction.").
More importantly, a motion to dismiss under Rule 12(b)(1) is non-
waivable and may be brought at any time—even on appeal—
regardless of whether a litigant raised the issue in an initial pleading.
See Fed. R. Civ. P. 12(h)(3); Kontrick v. Ryan, 540 U.S. 443, 355
(2004) ("A litigant generally may raise a court’s lack of subject-
matter jurisdiction at any time in the same civil action, even initially
at the highest appellate instance."). Litigants, therefore, could hold
back forum-selection clause objections, until after discovery—or even
an adverse verdict. See, e.g., Grupo Dataflux v. Atlas Global Group
L.P., 541 U.S. 567 (2004) (dismissing an action for lack of subject-
matter jurisdiction where jurisdictional defect, which had been cured
prior to a jury verdict, was raised for first time on appeal). Allowing
this strategy could result in a waste of judicial resources and allow
defendants to "test the waters" of the plaintiff’s chosen forum, before
invoking their rights under the forum-selection clause. The use of
such a strategy undermines the efficiency and convenience that we
believe is gained from enforcement of forum-selection agreements.
See M/S Bremen, 407 U.S. at 13-14.
Analyzing forum-selection clauses under Rule 12(b)(6) does not
present the problems that analysis under 12(b)(1) would present. See
Lipcon, 148 F.3d at 1290 (holding that consideration of forum-
selection clauses under Rule 12(b)(6) does not present "significant
doctrinal error"). Nevertheless, Supreme Court precedent suggests
that 12(b)(6) is not the appropriate motion for enforcing a forum-
selection clause. In Argueta v. Banco Mexicano, 87 F.3d 320, 324
(9th Cir. 1996), the Ninth Circuit noted that "[u]nder the Supreme
Court’s standard for resolving motions to dismiss based on a forum-
selection clause, the pleadings are not accepted as true, as would be
required under a Rule 12(b)(6) analysis." (citing Carnival Cruise
Lines v. Shute, 499 U.S. 585 (1991); Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614 (1985); Scherk v. Alberto-
Culver Co., 417 U.S. 506 (1974); M/S Bremen, 407 U.S. 1). In addi-
tion, because a 12(b)(6) motion may be brought at any time prior to
adjudication on the merits, analyzing forum-selection clauses under
Rule 12(b)(6) would present some of the same timing concerns as in
the 12(b)(1) context. See Fed. R. Civ. P. 12(h)(2); Silva, 239 F.3d at8 SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA
388 ("Accordingly, a motion to dismiss based on a forum-selection
clause may be raised at any time in the proceedings before disposition
on the merits.").
Analyzing forum-selection agreements under Rule 12(b)(3) would
avoid the doctrinal and timing disadvantages of utilizing Rule
12(b)(1) or (6) and be consistent with Supreme Court precedent. In
Lipcon, the Eleventh Circuit discussed the Supreme Court’s decision
in Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (1988), noting that
"[a]lthough the Supreme Court did not decide the precise question
. . . , the Court’s conclusion that the federal transfer-of-venue statute
governs district court decisions in enforcing forum-selection clauses
provides support for our view that motions to dismiss based upon
forum-selection clauses are cognizable as motions to dismiss for
improper venue." 148 F.3d at 1290.
In addition to being consistent with Stewart, because a motion
under Rule 12(b)(3) is a disfavored 12(b) motion, a defendant will
have to raise the forum selection issue in her first responsive pleading,
or waive the clause. See Fed. R. Civ. P. 12(h)(1). This will result in
an efficient disposition of cases involving forum-selection clauses and
not waste judicial resources on a case that ultimately will have to be
dismissed and relitigated in another forum. Treating a motion to dis-
miss based on a forum-selection clause under Rule 12(b)(3) avoids
the logistic and theoretical intricacies of utilizing 12(b)(1), allows the
court to freely consider evidence outside the pleadings, unlike under
a 12(b)(6) motion, Argueta, 87 F.3d at 324, and is more consistent
with the Supreme Court’s treatment of such clauses, Lipcon, 148 F.3d
at 1290. Accordingly, a motion to dismiss based on a forum-selection
clause should be properly treated under Rule 12(b)(3) as a motion to
dismiss on the basis of improper venue.3
3
Because a district court has the discretion to dismiss on the basis of
improper venue before reaching the issue of personal jurisdiction, the
district court did not err in dismissing Sucampo’s complaint on the basis
of the forum-selection clause without addressing Astellas’s personal
jurisdiction objections. See Ruhrgas, 526 U.S. at 584-85; Leroy v. Great
W. United Corp., 443 U.S. 173, 180 (1979).
SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA 9
III.
We review a district court’s grant of a motion to dismiss under
Rule 12(b)(1), (3), or (6) de novo. See, e.g., Suter v. United States,
441 F.3d 306, 310 (4th Cir. 2006) (reviewing dismissal under
12(b)(1)); Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004)(re-
viewing dismissal under 12(b)(3)); Partington v. Am. Int’l Specialty
Lines Ins. Co., 443 F.3d 334, 338 (4th Cir. 2006) (reviewing dismissal
under 12(b)(6)).
Sucampo does not dispute the validity of the forum-selection
agreement, but argues that the instant case is not governed by the
clause because the dispute arises under the Safety Agreement, which
is not incidental to the Amended Basic License Agreement. Under
general principles of contract interpretation, this argument must fail.4
To begin, the definitions of "incidental" cited by Appellant include
"subordinate." The Safety Agreement explicitly notes that it was exe-
cuted "under the Basic Agreement," with a term concurrent with the
Basic Agreement. There is no dispute that the Amended Basic
4
We note that rejection of Sucampo’s argument accords with the sub-
stantive law of Japan. Appellee cites two decisions of the Tokyo District
Court, Vulcan Int’l Servs. Ltd. v. Makashi-Ya, Inc., 1077 Hanrei Taimuzu
282 (Tokyo D. Ct., Nov. 24, 2000), and Riken v. Mabuchi, 1244 Hanrei
Jiho 97 (Tokyo D. Ct., Oct. 11, 1987). Both Vulcan and Riken held a
forum-selection clause contained in one agreement applicable to a dis-
pute between the parties under a different agreement. Based on these
cases, Astellas’s expert concluded that a Japanese court would find that
the Safety Agreement is incidental to the Amended Basic License Agree-
ment and, thus, the forum-selection clause in the Amended Basic License
Agreement encompasses the instant dispute regarding the Safety Agree-
ment. The cited cases and the affidavit of an expert are sufficient to
establish Japanese law on the issue of whether the Safety Agreement is
incidental to the Amended Basic License Agreement. See United States
v. Mitchell, 985 F.2d 1275, 1280 (4th Cir. 1993) ("In determining ques-
tions of foreign law, courts have turned to a wide variety of sources
including affidavits and expert testimony from . . . a South African attor-
ney; foreign case law . . . ; and the court’s own independent research and
analysis of a Yugoslavian law." (citations and internal quotations omit-
ted)).
10 SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA
License Agreement is a successor agreement to the Basic Agreement.
The Safety Agreement, then, had no independent validity apart from
the continued validity of the Basic Agreement. When that agreement
was succeeded by the Basic License Agreement, the Safety Agree-
ment either became null or was extended by the force of the Basic
License Agreement. As the parties continued to exchange information
under the Safety Agreement after the effectiveness of the Basic
License Agreement (and, later, the Amended Basic License Agree-
ment), the latter must have occurred. Given this, it is hard to conceive
of the Safety Agreement as anything but subordinate to the Amended
Basic License Agreement, when the Safety Agreement would have no
continued validity without the Amended Basic License Agreement.
In addition, the Safety Agreement lists as its purpose the facilita-
tion of exchange of safety information. It does not contain any inde-
pendent obligations of the parties beyond that exchange, nor does it
list the contemplated reliance of the parties on the information. There
is no governing law, confidentiality terms, or the like. Rather than
having the attributes of an independent agreement, the Safety Agree-
ment reads as a specific explication of procedures for sharing safety
information as contemplated by the Basic Agreement (and, later, the
Basic License Agreement and Amended Basic License Agreement).
Again, these attributes are the very definition of incidental. Cf. Kva-
erner ASA v. Bank of Tokyo-Mitsubishi, Ltd., N.Y. Branch, 210 F.3d
262, 265 (4th Cir. 2000) (holding that agreement referencing "rights
and remedies" of another agreement was subject to the referenced
agreement’s arbitration clause).
Finally, Sucampo cannot avoid the fact that the Safety Agreement
is incidental to the Amended Basic License Agreement by artful
pleading. Sucampo included a copy of the Amended Basic License
Agreement with its complaint and referenced the agreement in its
damage calculation. The Safety Agreement was executed under the
Basic Agreement and contains none of the terms that one would
expect from an independent agreement. In sum, even if we assume
that the breach was confined to the terms of the Safety Agreement,
because that agreement has no existence apart from the Amended
Basic License Agreement, we would need to consult the Amended
Basic License Agreement to fully adjudicate Sucampo’s claims. Cf.
Drews Distributing, Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 350
SUCAMPO PHARMACEUTICALS v. ASTELLAS PHARMA 11
(4th Cir. 2001) ("Although the complaint carefully alleges only fraud
in inducing Drews to enter into the Letter Agreement . . . , it expressly
acknowledges . . . that the Letter Agreement ‘contemplated’ that the
parties would enter into the Distributor Agreement, which ‘would
control the rights of the parties as to the sale of these Odyssey
machines.’")
There is no reasonable reading of the word "incidental" in the
forum-selection clause that would exclude the Safety Agreement from
its coverage. Given this, Sucampo’s suit could only be filed in the
Tokyo District Court, not the District Court of Maryland.
IV.
Because the Safety Agreement is incidental to the Amended Basic
License Agreement, the forum-selection clause contained in the
Amended Basic License Agreement governs Sucampo’s complaint.
The District Court of Maryland was thus an improper venue and the
ruling of the district court dismissing the suit is hereby affirmed.
AFFIRMED