Conroy v. Fresh Del Monte Produce, Inc.

325 F.Supp.2d 1049

Kathleen CONROY, Plaintiff, v. FRESH DEL MONTE PRODUCE INC., et al., Defendants.

No. C04-1520 SBA.

United States District Court, N.D. California.

July 8, 2004.

Jenelle Welling and Robert S. Green, Green & Jigarjian, LLP, San Francisco, CA, for Plaintiff.

John F. Cove, Jr. and Kieran P. Ringgengberg, Boies, Schiller & Flexner LLP, Oakland, CA, Stuart H. Singer, Carlos M. Sires, and Carl E. Goldfarb, Boies, Schiller & Flexner LLP, Fort Lauderdale, FL, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO STAY AND GRANTING PLAINTIFF'S MOTION TO REMAND

ARMSTRONG, District Judge.

This matter comes before the Court on two motions: (1) the motion of Kathleen Conroy ("Plaintiff") to remand the proceedings to state court [Docket No. 11]; and (2) the motion of Fresh Del Monte Produce, et al., ("Defendants") to stay Plaintiff's motion pending transfer to the multi-district litigation panel [Docket No. 16]. Having read and considered the arguments presented by the parties in the papers submitted to the Court, the Court finds this matter appropriate for resolution without a hearing. The Court hereby DENIES Defendants' Motion to Stay and GRANTS Plaintiff's Motion to Remand.

BACKGROUND

A. The Dispute

The following factual summary is derived from the allegations of Plaintiff's complaint (the "Complaint"), which are taken as true solely for purposes of resolving the motions. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995).

Defendants, in conjunction with the Maui Pineapple Company ("Maui") developed two pineapple hybrids: 73-114 and 73-50. (Compl.¶ 40.) These genetically engineered pineapples were higher in sugar and vitamin C content, enjoyed higher resistance to disease, and had a longer shelf life. (Id.) Defendants began growing the 73-114 variety in the late 1980's and renamed it MD-2. (Compl.¶ 43.) Defendants sought a patent for the MD-2 variety. The patent application was denied, however, by the Patent and Trademark Office ("PTO") on two grounds: Maui's refusal as co-owner of the MD-2 to agree to the joint patent terms; and Defendants' pre-patent sales of the MD-2. (Compl.¶ 46.) Defendants then sought and obtained a patent on the other pineapple, the 73-50 variety, which Defendants called the CO-2 variety. The PTO granted Defendants the '863 patent for this variety. (Compl.¶ 47.)

Plaintiff alleges that the CO-2 and MD-2 are genetic siblings and virtually identical varieties. (Compl.¶ 48). Plaintiff alleges that Defendants committed fraud on the PTO by failing to disclose this information. But for Defendants' misstatements and omissions, the PTO would not have issued the '863 Patent because the earlier MD-2 pineapple rendered the CO-2 obvious and did not meet the novelty requirement. (Compl.¶ 50.) Defendants also did not disclose that Maui held an ownership interest in the CO-2 variety. (Compl.¶ 51.) Nor had Defendants disclosed that Maui had sold the C0-2 variety prior to the submission of the patent application. (Compl.¶ 54.) Such sales would have disqualified the CO-2 from patentability. (Compl.¶ 46.)

Upon issuance of the '863 Patent, Plaintiff alleges that Defendants engaged in an aggressive and anti-competitive practice in which they used the '863 Patent to threaten competitors producing the MD-2 pineapple, even though the '863 Patent covered only the C0-2 pineapple. (Compl.¶¶ 62, 70.) For example, Defendants' former Vice President of North America Marketing, Michael Pereira stated in an internal memorandum that the '863 patent would hopefully "confuse our competition," leading them to believe that the MD-2 was patented. (Compl.¶ 59.) Defendants sent numerous cease and desist letters to competitors. Mr. Pereira acknowledged during his deposition in Del Monte Fresh Produce Co., et al., v. Dole Food Co. Inc., et al., that these letters implied that the MD-2 was covered by the '863 Patent. (Compl.¶ 64.) One of Defendants' plant scientists testified to the same. (Compl.¶ 65.)

In light of this evidence, Mag. Judge Simonton in Del Monte Fresh Produce Co., et al., v. Dole Food Co. Inc., et al. held that Defendants had used these threatening letters to intentionally mislead and defraud their competitors into believing that Defendants had a United States patent on the MD-2 pineapple and that Defendants would take legal action to protect the allegedly patented MD-2 pineapple if their competitors ignored their demands to cease production and marketing of the MD-2 pineapple. (Compl.¶ 66.)

Among the parties Defendants sued were Maui and Dole. Several years into the litigation, Defendants admitted that due to pre-patent application sales by Maui of the CO-2 pineapple, the '863 Patent was invalid. Defendants did not state, however, that they had prior knowledge of these sales when they filed the '863 application. (Compl.¶ 78.) In May 6, 2003 Defendants filed a disclaimer of their patent rights with the PTO. (Compl.¶ 79.)

B. Plaintiff's Causes of Action

Based on the above allegations, Plaintiff filed a complaint in the Superior Court of Alameda, California for violations of the California Cartwright Act; California Business and Professions Code § 16720 et seq.; the California Unfair Competition Law, Business and Professions Code § 17200 et seq.; common law prohibitions against monopolies, and unjust enrichment. Plaintiff did not cite to nor invoke federal statutes, rules or regulations relating to patent law or any other federal law.

C. Similar Suits Against Defendants

The findings by Mag. Judge Simonton in Del Monte Fresh Produce Co., et al., v. Dole Food Co. Inc., et al., and Defendants' subsequent disclaimer of the '863 Patent have given rise to a dozen separate suits against Defendants throughout the country. Many of these suits state causes of actions similar to Plaintiff's, but at least a few are based on other states' laws.

Four of the actions are direct purchaser actions and they have been consolidated in federal court in the Southern District of New York. Two indirect purchaser actions are also pending against Defendants in that court. That court directed that the plaintiffs in those six actions file a joint amended complaint.

Six indirect purchaser actions (including Plaintiff's) have been filed in five other courts in California, Tennessee, Arizona and Florida. Apparently, these cases were originally filed in state courts, but Defendants removed each one to federal court.

In June 2004, Defendants invoked 28 U.S.C. § 1407 and Rule 7.2 of the Rules of Procedure of the Judicial Panel on Multi-District Litigation to move the Judicial Panel on Multi-District Litigation ("MDL") for an order transferring all pretrial proceedings in these cases, as well as any future related actions to the United States District Court for the Southern District of New York.

D. Procedural History

On April 19, 2004, Defendants removed this case from the Superior Court of Alameda to this Court on the grounds that it raised a federal question: "The Complaint on its face attacks a patent and alleges that the patent was obtained through fraud on the U.S. Patent and Trademark Office." (Def's Notice of Removal at 2:10-11.)

Plaintiff now moves for the case to be remanded on the grounds that the Complaint does not raise a federal question. In the meantime, Defendants seek to stay Plaintiff's motion to remand pending the MDL Panel's decision on whether this case should be related to, and therefore transferred to, the Southern District of New York.

MOTION TO STAY

A. Legal Standard

The decision to grant or deny a temporary stay of proceedings pending a ruling on the transfer of the matter to the MDL court lies within this Court's discretion. Landis v. North American Co., 299 U.S. 248, 254-55, 57 S.Ct. 163, 81 L.Ed. 153 (1936); Good v. Prudential Ins. Co. of Am., 5 F.Supp.2d 804, 809 (N.D.Cal.1998); see also Rules of the Judicial Panel on MDL, Rule 1.5 ("The pendency of a motion ... before the Panel concerning transfer ... of an action pursuant to 28 U.S.C. § 1407 does not affect or suspend orders and proceedings in the district court in which the action is pending and does not in any way limit the pretrial jurisdiction of that court.").

Often, deference to the MDL court for resolution of a motion to remand provides the opportunity for the uniformity, consistency, and predictability in litigation that underlies the MDL system. See 28 U.S.C. § 1407; see also, Rivers v. Walt Disney Co., 980 F.Supp. 1358, 1360-61 (C.D.Cal.1997) (staying action pending transfer decision by MDL panel after finding that judicial resources would be conserved and defendant would not be prejudiced).

In deciding whether to rule on the motion to remand, courts consider whether the motion raises issues likely to arise in other actions pending in the MDL transferee court. Shields v. Bridgestone/Firestone, Inc., 232 F.Supp.2d 715, 718 (E.D.Tex.2002). The fullest discussion of the methodological issues raised by simultaneous remand and stay motions in the MDL context appears in Meyers v. Bayer AG, 143 F.Supp.2d 1044, 1048-1049 (E.D.Wis.2001), which settles on a sensible three-step approach. First, the court should give preliminary scrutiny to the merits of the motion to remand. If this preliminary assessment suggests that removal was improper, the court should promptly complete its consideration and remand the case to state court. Although the Meyers court did not expressly discuss it, preliminary scrutiny to the merits appears to be necessary because the venue statute, 28 U.S.C. § 1404(a), does not vest courts with unlimited power to transfer a civil action to any federal district. Rather, § 1404(a) limits transfer of a civil action to "any other district or division where it might have been brought." A district or division is one where the action "might have been brought" if, among other things, when the action began the proposed transferee district court would have had subject matter jurisdiction over the...