Jerome Stevens Pharmaceuticals, Inc. v. Food & Drug Administration

402 F.3d 1249, 365 U.S. App. D.C. 270, 74 U.S.P.Q. 2d (BNA) 1451, 2005 U.S. App. LEXIS 5665, 2005 WL 783074
CourtCourt of Appeals for the D.C. Circuit
DecidedApril 8, 2005
Docket04-5238
StatusPublished
Cited by1,279 cases

This text of 402 F.3d 1249 (Jerome Stevens Pharmaceuticals, Inc. v. Food & Drug Administration) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jerome Stevens Pharmaceuticals, Inc. v. Food & Drug Administration, 402 F.3d 1249, 365 U.S. App. D.C. 270, 74 U.S.P.Q. 2d (BNA) 1451, 2005 U.S. App. LEXIS 5665, 2005 WL 783074 (D.C. Cir. 2005).

Opinion

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge.

The Food and Drug Administration (“FDA”) posted on its website trade secrets and confidential information contained in a New Drug Application (“NDA”) filed by Jerome Stevens Pharmaceuticals, Inc. (“JSP”) for Unithroid, a levothyroxine sodium (“LS”) drug used to treat thyroid diseases. FDA also extended the NDA approval deadline, allowing JSP’s competitors to continue marketing their unapproved LS drugs for three years after Unithroid had been approved. JSP filed a six-count complaint against FDA, including two counts under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. §§ 2671-2680 (2000), for misappropriation of trade secrets and breach of a confidential relationship, and one count under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706 (2000), for the arbitrary and capricious extension of the NDA deadline. The district court dismissed the complaint for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure, and JSP appeals the dismissal of Counts I, II, and VI. We conclude that the district court properly dismissed the APA claim in Count VI but erred as a matter of law in ruling that the tort claims in Counts I and II were barred by the discretionary function and intentional tort exceptions to the FTCA. Accordingly, we affirm the dismissal of Count VI, reverse the dismissal of Counts I and II, and remand the case to the district court for further proceedings.

I.

The court reviews the district court’s dismissal of the complaint de novo and “accept[s] all of the factual allegations in [the] complaint as true.” Sloan v. U.S. Dep’t of Housing & Urban Dev., 236 F.3d 756, 759 (D.C.Cir.2001) (second alteration in original) (quoting United States v. Gaubert, 499 U.S. 315, 327, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991)) (internal quotation marks omitted).

JSP is a small New York company that manufactures Unithroid, an orally administered LS tablet used to treat thyroid diseases. On August 14, 1997, FDA announced that, although doctors had been prescribing LS tablets to millions of patients since the 1950s, they were considered “new drugs” because “no currently marketed orally administered levothyrox-ine sodium product ha[d] been shown to demonstrate consistent potency and stability.” 62 Fed.Reg. 43,535, 43,538 (Aug. 14, *1251 1997). Accordingly, FDA required LS manufacturers to submit NDAs for FDA approval by August 14, 2000, and allowed the continued marketing of unapproved LS tablets until that date. See id. FDA stated that after the NDA deadline, any unapproved orally administered LS drug would be “subject to regulatory action.” Id.

On October 19, 1999, JSP filed an NDA for Unithroid. Pursuant to FDA requirements, the NDA contained JSP’s “trade secrets and confidential information for the manufacture of safe, stable, and effective LS,” Compl. ¶ 28, including “[t]he order in which Unithroid’s ingredients are added together; the steps that the additions go through in the formation of Unithroid’s tablets; and the processing of the active ingredient, levothyroxine sodium,” id. ¶ 19. On April 26, 2000, FDA extended the August 14, 2000 approval deadline by one year to allow manufacturers additional time to conduct studies and to prepare applications. 65 Fed.Reg. 24,488, 24,489 (Apr. 26, 2000).

On August 21, 2000, FDA approved Uni-throid, making it the first orally administered LS drug to be approved under the new requirements. The next day, without JSP’s knowledge or consent, FDA posted on its website JSP’s trade secrets and confidential information for manufacturing Unithroid. On December 18, 2000, upon discovering FDA’s disclosure of its trade secrets, JSP demanded that the information be removed immediately from FDA’s website. After repeated requests, FDA removed some of the information on January 12, 2001, and the remaining information on January 28, 2001. Consequently, JSP’s trade secrets were available to the public on FDA’s website for five months.

Meanwhile, following FDA approval and anticipating increased demand for Uni-throid, JSP doubled its staff and invested $2 million in expanding its facilities. On November 17, 2000, JSP filed a petition asking FDA not to extend the NDA deadline a second time, asserting that it was prepared to supply the entire market for LS drugs. Nonetheless, on July 18, 2001, FDA announced that because “it will take time for the millions of patients taking unapproved [LS] products to switch to approved products, and for manufacturers of approved products to scale up their production and to introduce this increased production into the distribution chain,” manufacturers with NDAs pending by August 14, 2001, could continue marketing their unapproved LS tablets for an additional two years. 66 Fed.Reg. 36,794, 36,-794 (July 13, 2001). Following this announcement, Abbott Laboratories “flooded the retail market” with Synthroid, its unapproved LS tablet. Compl. ¶ 47. “Having lost de facto market exclusivity due to FDA’s publication of its secrets and FDA’s extensions of compliance deadlines,” JSP was forced to lay off half its workforce and to destroy excess Unithroid worth up to $30 million. Id. ¶ 48.

On October 2, 2002, JSP filed a six-count complaint against FDA in the district court. Counts I and II alleged that, by disclosing JSP’s trade secrets and confidential information, FDA misappropriated JSP’s trade secrets and breached its confidential relationship with JSP. Counts III and IV alleged that FDA’s disclosure of JSP’s trade secrets violated procedural and substantive due process. Counts V and VI alleged that FDA’s disclosure of JSP’s trade secrets and its extensions of the NDA deadlines were arbitrary and capricious under the APA. The complaint sought more than $1.3 billion in compensatory damages “for [JSP’s] injuries resulting from [FDA’s] misappropriation of [JSP’s] trade secrets and breach of FDA’s confidential relationship with [JSP],” *1252 Compl. ¶ 118, and declaratory relief for the remaining claims.

FDA filed a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), which the district court granted. See Jerome Stevens Pharm., Inc. v. FDA, 319 F.Supp.2d 45, 47 (D.D.C.2004) (“JSP ”). The district court construed Counts I and II as alleging injuries caused solely by FDA’s extensions of the NDA deadlines, and ruled that the tort claims in those counts were barred by federal sovereign immunity because the deadline extensions fell within both the discretionary function and intentional tort exceptions to the FTCA. Id. at 50-52. The district court ruled that Counts III, IV, and V failed to present a live case or controversy because FDA had already removed JSP’s trade secrets from its website. Id. at 52-54.

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402 F.3d 1249, 365 U.S. App. D.C. 270, 74 U.S.P.Q. 2d (BNA) 1451, 2005 U.S. App. LEXIS 5665, 2005 WL 783074, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jerome-stevens-pharmaceuticals-inc-v-food-drug-administration-cadc-2005.