Ortho Pharmaceutical Corporation v. Amgen, Inc.
882 F.2d 806, 1989 U.S. App. LEXIS 12139, 1989 WL 91671 (1989)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The Federal Arbitration Act (FAA) does not abrogate a district court's power to issue a preliminary injunction in a dispute that the parties have contractually agreed to submit to arbitration, provided the traditional prerequisites for such equitable relief are satisfied to preserve the integrity and meaningfulness of the arbitration process.
Facts:
- Amgen, a biotechnology company, possessed the technology for the production of commercial quantities of erythropoietin (EPO), a human protein used to stimulate red blood cell formation for patients with chronic kidney disease.
- On September 30, 1985, Amgen and Ortho Pharmaceutical Company, a subsidiary of Johnson & Johnson, entered into a Technology License Agreement and a Product License Agreement (the Agreement) to bring three biological medicines, including EPO, to market.
- Under the Agreement, Amgen granted Ortho an exclusive, royalty-bearing license to market and sell EPO in the United States for all therapeutic indications except dialysis, a market Amgen reserved for itself; Amgen also promised to manufacture and supply Ortho's requirements for EPO.
- The Agreement stipulated that both companies were responsible for obtaining their own FDA approval (Product License Application (PLA) and Establishment License Application (ELA)), would exchange and cross-reference information to expedite approval, and would submit all disputes arising under the Agreement to arbitration under California law.
- During 1987, Amgen and Ortho began disputing their respective regulatory, marketing, and supply rights and obligations, specifically differing on the strategy for obtaining FDA approval (joint vs. individual filings), marketing collaboration proposals, and the price and quantity terms of the EPO supply arrangement.
- In October 1987, Amgen filed its FDA application for the indication "chronic renal failure," supported solely by its own clinical data from dialysis patients, and this application never included Ortho's pre-dialysis clinical data.
- While Amgen's appeal was pending, on June 1, 1989, the FDA approved Amgen’s product, EPOGEN, for the entire chronic renal failure indication.
Procedural Posture:
- On January 23, 1989, Ortho filed a demand for arbitration with the American Arbitration Association, seeking damages and an order for Amgen to take specific actions related to FDA filings and EPO supply.
- On January 31, 1989, Ortho filed suit in the U.S. District Court for the District of Delaware, seeking preliminary injunctive relief "to maintain the status quo during the pendency of the arbitration proceeding."
- After expedited discovery, the district court held an evidentiary hearing on March 17, 1989.
- On March 23, 1989, the district court issued an opinion and order, determining it had authority under the Federal Arbitration Act to issue a preliminary injunction to preserve the status quo pending arbitration and finding Ortho had met the legal requirements for relief.
- The district court's order mandated, among other things, that Amgen withdraw its request to the FDA to limit its PLA/ELA to end-stage renal failure, Ortho withdraw its own PLA/ELA for chronic renal failure, and Amgen submit Ortho’s data as a supplemental filing.
- Amgen filed a motion for reconsideration and stay of the order, which the district court denied on April 21, 1989, though it clarified that its order did not require Amgen to list Ortho as a distributor and that its factual findings were not binding on the arbitrator.
- Amgen appealed the district court's grant of the preliminary injunction to the U.S. Court of Appeals for the Third Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Federal Arbitration Act prevent a district court from issuing a preliminary injunction when the underlying dispute is subject to a valid arbitration agreement between the parties?
Opinions:
Majority - Scirica, Circuit Judge
No, the Federal Arbitration Act does not prevent a district court from issuing a preliminary injunction in a dispute subject to arbitration. The court reasoned that Section 3 of the FAA declares only that the court "shall" stay the "trial of the action" where an issue is referable to arbitration; it does not mention preliminary injunctions or other pre-trial proceedings, nor does the legislative history suggest a broader meaning for "trial." The court found no implicit prohibition either, concluding that allowing preliminary injunctive relief to preserve the status quo actually reinforces the policy of the Arbitration Act. Congressional intent to enforce arbitration agreements would frequently be frustrated if courts were precluded from issuing such relief, as it prevents one party from unilaterally undermining the significance of the agreed-upon procedures. Therefore, a district court has the authority to grant injunctive relief in an arbitrable dispute, provided the traditional four-pronged prerequisites for such relief are satisfied, and "preservation of the status quo" serves as the goal of preliminary relief, not a separate jurisdictional test. If the existing status quo is causing irreparable injury that threatens to nullify the arbitration process, altering the situation is necessary. The court noted that parts of the district court's order requiring Amgen to withdraw its request to narrow its FDA application and submit Ortho’s data (paragraphs one and three) were moot because the FDA had subsequently approved Amgen's application for the entire chronic renal failure indication. However, other aspects of the order (paragraphs four, five, and seven, mandating communication, cooperation, and expedited arbitration) were still "live" and imposed concrete burdens. Consequently, the court vacated these live paragraphs and remanded the case for the district court to redetermine whether they remained warranted under the traditional four-pronged test for preliminary injunctive relief in light of the FDA's approval.
Analysis:
This case clarifies a circuit split, affirming that the Federal Arbitration Act does not strip district courts of their inherent equitable power to issue preliminary injunctions in disputes destined for arbitration. This ruling is significant as it prevents parties from exploiting the arbitration process by causing irreparable harm that could render any eventual arbitration award meaningless, thereby ensuring the integrity and effectiveness of alternative dispute resolution mechanisms. By applying the traditional four-factor test, courts can provide crucial interim relief that supports, rather than undermines, the FAA's purpose of enforcing arbitration agreements. This decision strikes a balance between judicial deference to arbitration and the need for courts to prevent severe injustices during the pendency of a dispute.
