Originally published January 7, 2005
On January 7, 2005, the Supreme Court granted certiorari in four cases of interest to the business community. Amicus briefs in support of petitioners will be due on Thursday, February 24, 2005, and amicus briefs in support of respondents will be due on Thursday, March 31, 2005.
1. Patents ― Infringement ― Safe Harbor For Drug Research. The 1984 Drug Price Competition and Patent Term Restoration Act creates a safe harbor from patent infringement claims for uses of a patented invention that are "reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs." 35 U.S.C. § 271(e)(1). In Merck KGaA v. Integra Lifesciences I, Ltd, No. 03-1237, the Supreme Court granted certiorari to decide whether the safe harbor covers only pre-market testing required in connection with FDA’s new drug approval process, or whether it also covers earlier biomedical research undertaken to determine whether a drug is sufficiently promising to merit subjection to that process.
The United States Court of Appeals for the Federal Circuit adopted the narrower view of the safe harbor. 331 F.3d 860 (2003). In its view, Section 271(e)(1) was enacted so that manufacturers planning to sell generic substitutes for patented drugs could begin the process of obtaining regulatory approval for the substitutes before the patents expired. Id. at 865. Stating that "[t]he FDA has no interest in the hunt for drugs that may or may not later undergo clinical testing for FDA approval," it held that the safe harbor does not extend to "general biomedical research to identify new pharmaceutical compounds." Id.
This case is extremely important to all drug manufacturers and researchers, as well as to the holders of patents on inventions that may be useful in the development of new drugs. The Supreme Court’s decision will determine whether or not researchers must obtain licenses and pay royalties to patent-holders when they use patented materials in exploratory biomedical research. Note that because Justice O’Connor and Justice Breyer did not participate in the decision to grant certiorari, we expect that they also will not participate in deciding the case on the merits.
2. Criminal Liability for Directing Destruction of Documents ― Elements of 18 U.S.C. § 1512(b). Arthur Andersen LLP was convicted of witness tampering after its employees destroyed certain documents following the collapse of Enron. Andersen was charged under 18 U.S.C. § 1512(b), which makes it unlawful to "corruptly persuade another person" to destroy a document in order to make it unavailable in an official proceeding. In Arthur Andersen LLP v. United States, No. 04-368, the Supreme Court granted certiorari to decide whether Andersen’s conviction must be reversed because the jury instructions misinterpreted the elements of that offense.
Under the instructions given by the trial court and approved by the Fifth Circuit (374 F.3d 281 (2004)), the jury was required to convict Andersen upon finding that, in anticipation of a possible future government investigation, one employee asked another to clean up files pursuant to the company’s document retention policy, even if both employees believed their conduct to be perfectly lawful and proper. Andersen argued that Section 1512(b) does not criminalize such conduct, but instead makes it unlawful to persuade another to destroy documents only if improper means, such as bribery, are used, and if a specific proceeding that is pending or has been scheduled is anticipated.
This case is important to all businesses that have or may adopt a document retention policy. The Supreme Court’s decision is likely to have an impact on the circumstances under which a company may dispose of unneeded documents without fear of criminal liability.
Mayer, Brown, Rowe & Maw LLP is co-counsel for Andersen.
3. False Claims Act — Statute of Limitations for Retaliatory Discharge Claims. The False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733, forbids the knowing submission of false or fraudulent claims to the federal government. See 31 U.S.C. § 3729. When Congress amended the FCA in 1986, it added a retaliatory-discharge provision, 31 U.S.C. § 3730(h), to protect whistleblowers. The Supreme Court granted certiorari in Graham County v. United States ex rel. Wilson, No. 04-169, to decide what statute of limitations applies to retaliatorydischarge actions under the FCA.
The statute-of-limitations provision in the FCA, 31 U.S.C. § 3731(b), requires claims to be brought within 6 years of the violation (or 3 years of the discovery of the violation) of Section 3729 – the substantive provision of the FCA. In this case, the Fourth Circuit held that Section 3731(b) applies to retaliatory-discharge claims under the Act, thus tying the limitations period for bringing a retaliatory-discharge action to the timing of the underlying false claim rather than to the timing of the allegedly retaliatory discharge. See 367 F.3d 245 (2004). The Ninth Circuit, by contrast, has held that this statute-of-limitations period does not apply to retaliatory-discharge claims because such claims do not involve a violation of Section 3729 but instead involve violations of Section 3730(h). See Lujan v. Hughes Aircraft Co., 162 F.3d 1027 (1998). According to this analysis, courts should apply the most closely analogous state limitation period to retaliatory-discharge claims under the FCA, tied to the date of discharge rather than to the date of the underlying violation of the FCA.
This case is extremely important to any company that does business with the federal government. A six-year statute-of-limitations period is extremely long for retaliatory-discharge claims, under which plaintiffs can recover twice their past wages as well as prejudgment interest. Also, because the retaliatory-discharge prohibitions in most other federal statutes contain significantly shorter limitations periods, the decision below will encourage plaintiffs to recharacterize a vast array of claims as involving FCA violations, thus forcing companies to defend against FCA liability in many more situations.
4. Federal Jurisdiction ― Removal Jurisdiction ― State-Law Claims that Depend on the Interpretation of Federal Law. The federal removal statute, 28 U.S.C. § 1441, allows lawsuits filed in state court to be removed to federal court if, among other reasons, the federal court would have original jurisdiction over the case and it is "founded on a claim or right arising under the Constitution, treaties or laws of the United States." Id. § 1441(b). The Supreme Court granted certiorari in Grable & Sons Metal Products, Inc. v. Darue Engineers & Manufacturing, No. 04-603, to determine whether removal is proper when the plaintiff brings a claim under state law but (a) the resolution of that claim necessarily involves resolving a disputed question of federal law, and (b) the plaintiff has acknowledged the centrality of the federal issue by discussing it in the complaint.
The specific scenario in this case is unlikely to recur with any frequency. The petitioner sued in state court, under state law, seeking to quiet title to a piece of real property. The IRS had seized the property from the petitioner several years before, to satisfy a tax lien, and had auctioned the property to the respondent. In its complaint, petitioner asserts that the IRS violated the Internal Revenue Code in the way in which it gave petitioner notice of the seizure (by certified mail rather than by personal service), which petitioner believes renders respondent’s claim to the property invalid. Respondent removed the case to federal court on the basis that resolving the litigation would necessarily turn on the interpretation of the relevant sections of the Internal Revenue Code. The district court found removal to be proper, and the Sixth Circuit affirmed. 377 F.3d 592, 594-96 (6th Cir. 2004).
Although the underlying Internal Revenue Code issue in this case is of limited importance, the Court’s decision may have broad implications for the limits of removal jurisdiction. Thus, the case is important to any business that prefers to litigate in federal court rather than state court.
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On January 10, 2004, the Supreme Court invited the Acting Solicitor General to file a brief expressing the views of the United States in the following case of interest to the business community:
Nielson v. Private Fuel Storage LLC, No. 04-575: The question presented is whether the Atomic Energy Act preempts certain state laws addressing non-radiological safety aspects of a proposed storage facility for spent nuclear fuel.
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