Alpharma v. Pennfield Oil Co. ( 2005 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 04-2958
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Alpharma, Inc., A Delaware *
Corporation, *
*
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the
* District of Nebraska.
Pennfield Oil Company, doing *
business as Pennfield Animal *
Health, A Nebraska Corporation, *
*
Defendant - Appellee. *
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Submitted: March 17, 2005
Filed: June 17, 2005
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Before MURPHY, HEANEY and SMITH, Circuit Judges.
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MURPHY, Circuit Judge.
Alpharma Inc. filed this action against its competitor Pennfield Oil Co.,
alleging that Pennfield had violated the Lanham Act and state law by falsely
advertising that one of its antibiotic animal feed additives was approved for certain
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uses by the Food and Drug Administration (FDA). The district court1 granted
Pennfield's motion to dismiss, holding that Alpharma had failed to exhaust
administrative remedies. Alpharma appeals, and we reverse.
Alpharma and Pennfield are the only manufacturers of bacitracin methylene
disalicylate (BMD), an antibiotic animal feed additive requiring FDA approval under
the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301-399 (FDCA). Under that
Act, the manufacturer of a new animal drug cannot market it for any use until the
FDA has approved the company's product as safe and effective for that use. 21
U.S.C. §§ 331; 351(a)(5)-(6); 360b(a)(1)-(2). In 1976, the predecessors of both
Alpharma and Pennfield received "interim" FDA approval to market BMD for
multiple uses. Antibiotic, Nitrofuran, and Sulfonamide Drugs in the Feed of Animals,
41 Fed. Reg. 8282 (Feb. 25, 1976). This interim approval was codified in 21 C.F.R.
§ 558.15(g)(1). That regulation did not list the uses for which their BMD had been
approved, however, but instead incorporated the statement of uses found in 21 C.F.R.
§ 558.76.
In the years following the promulgation of § 558.15(g)(1), Alpharma's
predecessor sought authorization to market its BMD product for additional uses by
submitting numerous supplemental new drug applications to the FDA, some of which
were approved. See, e.g., New Animal Drugs for Use in Animal Feeds, 47 Fed. Reg.
18,591 (April 30, 1982) (approving the supplemental application of A.L.
Laboratories, Alpharma's predecessor, to market BMD for use in controlling swine
dysentery). After approving these applications, the FDA added the new uses to the
list in § 558.76 and named Alpharma's predecessor as the only manufacturer who had
submitted information in support of their approval. See 21 C.F.R. § 558.76(d)(1).
The interim approval provision of § 558.15(g)(1), which had authorized the
marketing of both parties' products, was however never amended to distinguish
1
The Honorable Joseph F. Bataillon, United States District Judge for the
District of Nebraska.
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between the original uses listed in § 558.76 and those later added following the
successful applications of Alpharma's predecessor. The result was an apparent
expansion in the number of uses for which the product of Pennfield's predecessor had
been approved for marketing. See 68 Fed. Reg. at 47,334.
Pennfield purchased the rights of its predecessor to manufacture and market
BMD in 2002, allegedly relying on the interim approval provisions of §§ 558.15(g)(1)
and 558.76, as well as confirmations of that approval by FDA officials. According
to Alpharma’s complaint, Pennfield began marketing the product nationally during
the same year with advertisements indicating that its drug had been approved for a
variety of uses extending beyond those originally listed in § 558.76. Alpharma
further alleges that Pennfield began selling its BMD in 2003 under a label indicating
that the product had received FDA approval for the same expanded set of uses.
On March 13, 2003, Alpharma brought an action against the FDA in the United
States District Court for the District of Maryland, claiming that the agency had
improperly approved Pennfield's sale of BMD for a number of uses or otherwise
improperly enabled Pennfield to represent that it had approval for those uses.
Alpharma sought a declaratory judgment and injunctive relief. While the Maryland
suit was pending, the FDA published two August 8, 2003 notices relating to
Pennfield: a notice of proposed rulemaking for the "interim marketing provisions" of
§ 558.15 to be eliminated, 68 Fed. Reg. 47,272, and a notice of opportunity for
hearing addressing the extent of Pennfield's approval to market BMD, 68 Fed. Reg.
47,332. After these notices were published, the FDA and Alpharma filed a
Stipulation and Order of Dismissal which acknowledged that the agency lacked any
record of Pennfield's having applied for or received approval to market its BMD for
seven of the seventeen uses the agency had listed as approved. The Maryland suit
was then dismissed with prejudice.
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On September 30, 2003, Alpharma filed the present action against Pennfield
in the United States District Court for the District of Nebraska. Alpharma alleged that
the advertisements and labels for Pennfield's BMD falsely advertised that it had been
approved by the FDA for a number of uses for which it had not, in violation of the
Lanham Act § 43(a), 15 U.S.C. § 1125(a), and the Nebraska Uniform Deceptive
Trade Practices Act, Neb. Rev. Stat. §§ 87-301–87-306. The company also
contended that Pennfield’s practices constituted unfair competition and unjust
enrichment under Nebraska common law. Alpharma sought injunctive relief,
compensatory, treble and punitive damages, fees and costs.
Pennfield moved to dismiss Alpharma’s claims under Federal Rule of Civil
Procedure 12(b)(6), arguing that §§ 558.15(g)(1) and 558.76 showed that its product
had been approved for the contested uses, that Alpharma’s action was an
impermissible private attempt to enforce FDCA and FDA regulations, that the
Lanham Act was not intended as a means of indirectly enforcing the FDCA and FDA
regulations, and that Alpharma’s action intruded upon the FDA’s discretion and
expertise in the area of drug approval and marketing.
The district court granted Pennfield’s motion to dismiss, referencing the
doctrine of primary jurisdiction but ultimately concluding that the "plaintiff's failure
to exhaust" required dismissal. Alpharma, Inc. v. Pennfield Oil. Co., 2004 WL
1562870, *1 (D.Neb. 2004). The court cited a number of factors in concluding that
dismissal was proper: the absence of a decision by the FDA clarifying the meaning
of “completely confusing historical records” regarding Pennfield’s approval to market
BMD; the pending FDA actions on issues relating to the case; the FDA’s expertise
on questions involved; the FDA’s responsibility to interpret its own regulations first;
and the absence of any indication that exhaustion would be ineffective or futile. Id.
Alpharma appeals the district court's dismissal of its action, arguing that
exhaustion and other related doctrines do not apply in this case. We review the
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district court’s Rule 12(b)(6) dismissal de novo, taking all facts alleged in the
complaint as true. Carter v. Arkansas, 392 F.3d 965, 968 (8th Cir. 2004). "A motion
to dismiss should be granted only if it appears beyond doubt that the plaintiff can
prove no set of facts which would entitle him to relief.” Knapp v. Hanson, 183 F.3d
786, 788 (8th Cir. 1999).
Alpharma first argues that the district court erred in dismissing its Lanham Act
claim on exhaustion grounds. Under the doctrine of exhaustion, "no one is entitled
to judicial relief for a supposed or threatened injury until the prescribed
administrative remedy has been exhausted." Myers v. Bethlehem Shipbuilding Corp.,
303 U.S. 41, 50-51 (1938); see also Cornish v. Blakey, 336 F.3d 749, 753 (8th Cir.
2003) (requiring exhaustion of "statutory administrative remedies"). The doctrine
applies when the plaintiff's claim is "'cognizable in the first instance by an
administrative agency alone,'" and does not apply when the relevant agency is unable
to grant relief. Harris v. P.A.M. Transport, Inc., 339 F.3d 635, 638 (8th Cir. 2003)
(quoting United States v. W. Pac. R.R. Co., 352 U.S. 59, 63 (1956)); Jackson v. Swift
Eckrich, Inc., 53 F.3d 1452, 1456 (8th Cir. 1995) (exhaustion "ordinarily requires a
plaintiff to pursue relief, when available, from an administrative agency before
proceeding to the courts"). Alpharma argues that the Lanham Act does not require
that any administrative procedures be exhausted before filing suit, but rather places
exclusive jurisdiction to resolve false advertising claims in the district courts. The
company also contends that its false advertising claim is not cognizable by the FDA
since the agency cannot award the requested damages. Alpharma finally notes that,
unlike the plaintiffs in Bradley v. Weinberger, 483 F.2d 410 (1st Cir. 1973), and other
cases cited by the district court, it is not seeking review of agency action under the
Administrative Procedure Act or any other statute requiring exhaustion.
Alpharma is incorrect in its assertion that district court jurisdiction over
Lanham Act claims is exclusive. 15 U.S.C. § 1121(a); Aquatherm Industries, Inc. v.
Florida Power & Light Co., 84 F.3d 1388, 1394 (11th Cir. 1996) ("Federal courts do
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not have exclusive jurisdiction over an action brought under the Lanham Act.").
Nonetheless, the statute does not create administrative procedures for the resolution
of false advertising claims brought by Alpharma. See Sandoz Pharmaceuticals Corp.
v. Richardson-Vicks, Inc., 902 F.2d 222, 226-29 (contrasting the administrative
apparatus of the Federal Trade Commission Act with the civil remedy created by §
43(a) of the Lanham Act). Moreover, the FDA does not have the authority to award
the compensatory and punitive damages sought by Alpharma in the present lawsuit.
The company's claim was therefore not cognizable by the agency, and it was not
required to refrain from litigation until some "administrative process ha[d] run its
course." Western Pac. R.R., 352 U.S. at 63.
In dismissing Alpharma's claims the district court also referred to primary
jurisdiction. The doctrine of primary jurisdiction "'applies where a claim is originally
cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed
within the special competence of an administrative body.'" Atlantis Exp., Inc. v.
Standard Transp. Services, Inc., 955 F.2d 529, 532 (8th Cir. 1992) (quoting Western
Pac. R.R., 352 U.S. at 64)). The contours of primary jurisdiction are not fixed by a
precise formula. Rather, the applicability of the doctrine in any given case depends
on "whether the reasons for the existence of the doctrine are present and whether the
purposes it serves will be aided by its application." Western Pac. R.R., 352 U.S. at
64. Among the reasons and purposes served are the promotion of consistency and
uniformity within the areas of regulation and the use of agency expertise "'in cases
raising issues of fact not within the conventional experience of judges or cases
requiring the exercise of administrative discretion." Access Telecomm. v.
Southwestern Bell Tel. Co., 137 F.3d 605, 608 (8th Cir. 1998) (quoting Far East
Conference v. United States, 342 U.S. 570, 574 (1952)).
When it is determined that primary jurisdiction to resolve an issue lies with an
agency, a court otherwise having jurisdiction over the case may stay or dismiss the
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action pending the agency's resolution of the question. Jackson v. Swift Eckrich,
Inc., 53 F.3d 1452, 1456 (8th Cir. 1995). The doctrine is to be "invoked sparingly,
as it often results in added expense and delay." Red Lake Band of Chippewa Indians
v. Barlow, 846 F.2d 474, 477 (8th Cir. 1988) (internal quotations omitted).
Alpharma contends that this is not a case in which the primary jurisdiction
doctrine should be applied. According to Alpharma, the question of whether
Pennfield's product has received FDA approval for certain uses does not require the
agency's expertise since its resolution requires only a review of agency materials the
district court is fully capable of interpreting. Alpharma notes that the FDA has
already provided substantial guidance on the issue by its stipulation in the Maryland
case and in its August 8, 2003 notices of opportunity for hearing and proposed
rulemaking. Alpharma also argues that there is no issue of consistent or uniform
regulation since the question of approval only concerns Pennfield and that substantial
delay would resulting from staying or dismissing the case, particularly since the FDA
has taken no action since publishing the notices nearly two years ago.
We agree with Alpharma that this is not the rare case requiring "expert
consideration and uniformity of resolution." See United States v. McDonnell
Douglas Corp., 751 F.2d 220, 224 (8th Cir. 1984) (primary jurisdiction "should
seldom be invoked unless a factual question requires both expert consideration and
uniformity of resolution"). A determination of whether Pennfield's product has
received FDA approval for certain uses turns on the meaning of agency publications
in the Federal Register and Code of Federal Regulations. Interpretation of such
materials is well within the "conventional experience of judges." See Access
Telecomm., 137 F.3d at 608.
The question of whether Pennfield's BMD has been approved as safe and
effective is much different from the question of whether Pennfield's BMD should be
approved as safe and effective, and it is only the latter that requires the FDA's
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scientific expertise. Consistency and uniformity of regulation would also not be
jeopardized by judicial resolution of this case since Alpharma has raised only the
issue of Pennfield's approval to market a single drug. Finally, an order staying or
dismissing this action would almost certainly result in substantial added expense and
delay. Nearly two years have passed since the FDA published its August 8, 2003,
notices relating to Pennfield's approval, and there is no indication that the agency will
soon finalize those actions. We conclude that Alpharma's claims should not have
been dismissed on the basis of primary jurisdiction.
Pennfield focuses its argument for affirmance on a related doctrine it extracts
from a number of cases brought under the Lanham Act and dealing with FDA issues.
It argues that these cases require dismissal of Alpharma's claims. According to
Pennfield, the courts in PDK Labs, Inc. v. Friedlander, 103 F.3d 1105 (2d Cir. 1997),
Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993), and Sandoz
Pharmaceuticals Corp., established that plaintiffs may not bring Lanham Act false
advertising claims involving FDCA or FDA regulations because there is no private
right of action to enforce these provisions, Congress did not intend for the Lanham
Act to be a vehicle for enforcing the provisions indirectly, and the area is within the
expertise of the FDA.2 After examining these cases, we conclude that they do not
support Pennfield's arguments here.
In PDK Labs, a plaintiff who had developed but not yet marketed a weight loss
product filed a Lanham Act claim, alleging that PDK had falsely advertised that its
own weight loss products had been approved by the FDA. 103 F.3d at 1107.
2
Pennfield also cites a number of district court opinions for the same
proposition. See Ethex Corp. v. First Horizon Pharmaceutical Corp., 228 F. Supp. 2d
1048, 1051-55 (E.D. Mo. 2002); Healthpoint, Ltd. v. Ethex Corp., 273 F. Supp. 2d
817, 838-39 (W.D. Tex. 2001); Eli Lilly and Co. v. Roussel Corp., 23 F. Supp. 2d 460,
475-80 (D.N.J. 1998); Summit Tech., Inc. v. High-Line Medical Instruments, Co.,
933 F. Supp. 918 (C.D. Cal. 1996).
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Referencing its earlier holding that a Lanham Act plaintiff must "demonstrate a
reasonable interest to be protected against the advertiser's false or misleading claims,"
the Second Circuit held that the developer lacked standing to bring the action since
his product was not yet in competition with the defendant's. Id. at 1111-12 (internal
quotations omitted). In so holding, the court remarked that the plaintiff's "dogged
insistence that PDK's products are sold without proper FDA approval
suggest[ed]...that [his] true goal [was] to privately enforce alleged violations of the
FDCA," for which there was no private right of action. Id. at 1113. Pennfield argues
that this means that all Lanham Act claims involving FDA approval are impermissible
attempts at private enforcement of the FDCA. The case was decided on standing
grounds, however, and the court indicated a willingness to consider such a claim if
brought by a party in actual competition with a manufacturer who had falsely
advertised having FDA approval.
In Mylan Laboratories, a manufacturer of prescription and generic drugs filed
a Lanham Act claim against four competitors, alleging that their advertisements had
falsely represented both that their products had received FDA approval and that their
drugs were "bioequivalent" to the plaintiff's. 7 F.3d at 1137-38. While allowing the
bioequivalence claims to go forward, the Fourth Circuit dismissed the claims alleging
false representations of approval since plaintiff's complaint had not referenced any
"statement or representation in the defendants' advertising which declared 'proper
FDA approval.'" Id. at 1138-39. Were manufacturers permitted to file Lanham Act
suits in the absence of "some claim or representation that is reasonably clear from the
face of the defendants' advertising," the court concluded, the statute would be
inappropriately converted into a vehicle for privately enforcing the FDCA. Id.
(emphasis in original). Contrary to Pennfield's reading of the case, the Fourth Circuit
did not bar all Lanham Act claims involving false representations of FDA approval,
but only those where there had not been any claim of approval. Because Alpharma
has alleged reasonably clear claims of FDA approval by Pennfield, Mylan
Laboratories is inapposite.
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Finally, in Sandoz Pharmaceuticals, a cough syrup manufacturer sued a
competitor, alleging that the label of the competitor's product falsely listed an
ingredient as "inactive" when FDA standards suggested that the ingredient was in fact
active. 902 F.2d at 230. The Third Circuit assumed without deciding that false
labeling was actionable under the Lanham Act, and concluded that the plaintiff had
not shown the defendant's label was false. Id. The FDA had not yet determined
whether the ingredient at issue was properly characterized as active or inactive, and
the court declined to answer the question first due to the agency's expertise in the
area. Id. 230-31. The court did not reject all Lanham Act suits involving drug
labeling, and it actually considered the false advertising claim on the merits, refusing
only to "determine preemptively how a federal administrative agency will interpret
and enforce its own regulations." Id. at 231. Alpharma's claim does not require such
a preemptive determination, and Pennfield's attempt to place this case within the
reasoning of Sandoz is mistaken.
Our own opinion in Rhone-Poulenc Rorer Pharmaceuticals, Inc. v. Marion
Merrell Dow, Inc., 93 F.3d 511 (8th Cir. 1996), contradicts the principle Pennfield
tries to extract from the preceding cases. In Rhone-Poulenc, the manufacturer of a
drug approved only to treat hypertension, circulated advertisements with statements
implying that its product could be freely substituted for a competitor's medication that
had been approved for the treatment of both hypertension and angina. Id. at 513, 516.
The district court held that the manufacturer's advertisements violated § 43(a) of the
Lanham Act by falsely representing that the medication was approved to treat angina.
Id. at 514. We affirmed and thus confirmed the viability of Lanham Act claims
concerning representations of FDA approval.
For these reasons we reverse the order of dismissal and remand the case to the
district court for further proceedings consistent with this opinion.
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