Curtis Ulleseit v. Bayer Corp. ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 29 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CURTIS ULLESEIT; LISA WEHLMANN, No. 19-15778
Plaintiffs-Appellees, D.C. No. 3:17-cv-07026-JD
v.
MEMORANDUM*
BAYER HEALTHCARE
PHARMACEUTICALS INC.; et al.,
Defendants-Appellants,
and
BAYER PHARMA AG, FKA Bayer
Schering Pharma AG; et al.,
Defendants.
BETH WINKLER, No. 19-15782
Plaintiff-Appellee, D.C. No. 3:18-cv-03077-JD
v.
BAYER HEALTHCARE
PHARMACEUTICALS INC.; et al.,
Defendants-Appellants,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Page 2 of 5
and
MCKESSON CORPORATION;
MCKESSON MEDICAL-SURGICAL INC.,
Defendants.
On Remand From the United States Supreme Court
Argued and Submitted December 8, 2021
San Francisco, California
Before: WATFORD, FRIEDLAND, and MILLER, Circuit Judges.
Dissent by Judge MILLER
Bayer HealthCare Pharmaceuticals Inc., Bayer Corporation, and Bayer
Healthcare LLC (collectively, Bayer) appeal from the district court’s order
remanding five cases to California state court. We previously affirmed the district
court’s holding that Bayer did not meet the requirements for federal officer
removal. Ulleseit v. Bayer HealthCare Pharms. Inc., 826 F. App’x 627, 629 (9th
Cir. 2020). Following then-controlling circuit precedent, we declined to review
Bayer’s other asserted ground for removal. Id. at 628. The Supreme Court
subsequently overturned our prior precedent, holding in a different case that a court
of appeals has jurisdiction to review any asserted basis for federal jurisdiction
when a defendant properly appeals under 28 U.S.C. § 1447(d) from a remand
order. BP p.l.c. v. Mayor & City Council of Baltimore, 141 S. Ct. 1532 (2021).
The Court granted Bayer’s petition for certiorari, vacated our judgment, and
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remanded for further proceedings. Bayer HealthCare Pharms. Inc. v. Ulleseit, 142
S. Ct. 57 (2021). We now address Bayer’s remaining ground for removal—
namely, that diversity jurisdiction exists because the only non-diverse defendants
(the distributors of the drug at issue) were fraudulently joined.
1. The district court correctly held that Bayer has not carried its “heavy
burden” of showing that plaintiffs’ state law claims against the distributor
defendants are obviously foreclosed by federal preemption principles. GranCare,
LLC v. Thrower ex rel. Mills, 889 F.3d 543, 548 (9th Cir. 2018). Our decision in
Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009), does not categorically
bar a defendant from relying on preemption to establish that claims against a non-
diverse defendant are wholly insubstantial.1 But 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. Id. at
1046; GranCare, 889 F.3d at 548–49.
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Hunter stands for the proposition that, in the “unique situation” when the
preemption analysis is identical as to both the non-diverse and diverse defendants,
a court may not decide that the non-diverse defendants were fraudulently joined on
the basis of preemption, because such a determination would “effectively decide[]
the entire case.” Id. at 1044–45 (quotation marks omitted). In this case, the
preemption analysis differs as to the diverse and non-diverse defendants, so Hunter
does not preclude the possibility that, if the claims against the distributors were
obviously preempted, the distributors would have been fraudulently joined.
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Bayer contends that this standard is met, citing PLIVA, Inc. v. Mensing, 564
U.S. 604 (2011), as principal support for its preemption argument. That case
involved failure-to-warn claims against the manufacturers of generic drugs, not
drug distributors. Although there are strong arguments for extending the reasoning
of Mensing to claims against drug distributors, doing so would require additional
analytical work.
In holding that claims against generic drug manufacturers were preempted,
the Court in Mensing relied in part on a federal regulation stating that only brand-
name drug manufacturers are permitted to alter their drugs’ approved labeling. See
id. at 614 (citing 21 C.F.R. § 314.70(c)(6)(iii)). But that regulation did not give
rise to the federal law duty that the Court concluded generic drug manufacturers
would be forced to violate if they attempted to comply with state law. In
concluding that the generic drug manufacturers would necessarily violate federal
law, the Court pointed to regulations requiring them to keep their labels “the same”
as the labels of the corresponding brand-name drug. See id. at 613–14 (citing 21
C.F.R. § 314.94(a)(8)(iv)). Bayer has not identified any equivalent regulation
governing drug distributors, and it is likely that an analysis of federal law
prohibitions on “misbranding” would be necessary to establish that plaintiffs’ state
law failure-to-warn claims are subject to impossibility preemption. See 21 U.S.C.
§§ 331(a), 352. The need for that additional layer of analysis exceeds what is
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permissible in this procedural posture. See Hunter, 582 F.3d at 1044 (“[T]he
inability to make the requisite decision in a summary manner itself points to an
inability of the removing party to carry its burden.”) (quotation marks omitted).
2. The district court correctly rejected Bayer’s second argument for finding
fraudulent joinder. Our case law provides just two ways to establish fraudulent
joinder: (1) actual fraud in the pleading of jurisdictional facts, or (2) the inability of
the plaintiff to establish a cause of action against the non-diverse party. GranCare,
889 F.3d at 548; Hunter, 582 F.3d at 1044. Bayer asks us to consider a third
possibility. It contends that objective evidence shows that plaintiffs do not intend
to pursue a judgment against the distributor defendants. Bayer has not identified
any case in this circuit permitting a finding of fraudulent joinder on that basis, and
the limited authority we do have suggests that Bayer’s asserted third basis for
finding fraudulent joinder is not valid. See Smith v. S. Pac. Co., 187 F.2d 397, 400
(9th Cir. 1951) (noting that, if the complaint’s allegations establish a potentially
meritorious claim, the plaintiff’s “motive in joining the individual defendant is not
fraudulent even if the sole reason for joinder is to prevent removal”).
AFFIRMED.
FILED
Ulleseit v. Bayer Corp., No. 19-15778+ DEC 29 2021
MOLLY C. DWYER, CLERK
MILLER, Circuit Judge, dissenting: U.S. COURT OF APPEALS
Bayer is entitled to remove this case to federal court because complete
diversity exists among all parties who have been properly joined. Although
Bayer’s co-defendant, McKesson, is not diverse from the plaintiffs, “courts may
disregard the citizenship of a non-diverse defendant who has been fraudulently
joined,” and McKesson was fraudulently joined because it “‘cannot be liable on
any theory.’” GranCare, LLC v. Thrower ex rel. Mills, 889 F.3d 543, 548 (9th Cir.
2018) (quoting Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998)).
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.” 21 C.F.R. § 202.1(l)(2)
(defining “labeling” to include any “printed, audio, or visual matter descriptive of a
drug . . . supplied by the manufacturer, packer, or distributor of the drug”). FDA
regulations make clear that only the drug’s manufacturer—the “applicant” for FDA
approval—may change the labeling. See id. § 314.70 (permitting post-approval
changes to a drug’s labeling only by the drug’s “applicant”); id. § 314.3 (defining
“applicant”); PLIVA, Inc. v. Mensing, 564 U.S. 604, 614–15 (2011). McKesson is
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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. See PLIVA, 564 U.S. at 618(holding that failure-to-warn claims against generic drug manufacturers are
preempted because generic drug manufacturers, unlike brand-name manufacturers,
cannot alter a drug’s labeling). It follows that McKesson “cannot be liable” to
plaintiffs. GranCare, 889 F.3d at 548 (quoting Ritchey, 139 F.3d at 1318).
To be sure, fraudulent joinder is a demanding standard, one that we have
described as “similar to the ‘wholly insubstantial and frivolous’ standard for
dismissing claims under Rule 12(b)(1) for lack of federal question jurisdiction.”
GranCare, 889 F.3d at 549 (quoting Bell v. Hood, 327 U.S. 678, 682–83 (1946)).
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
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drug—a theory that is squarely foreclosed by Supreme Court precedent. Mutual
Pharm. Co. v. Bartlett, 570 U.S. 472, 488–90 (2013).
Whatever analytical work may be necessary to conclude that plaintiffs’
claims are preempted, it is not work that anyone should find unduly taxing.
Because plaintiffs can offer no explanation of how their claims against McKesson
might avoid preemption, I would reverse the district court’s remand order and
allow this case to proceed in federal court.
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