Ecosse Hospital Products v. State of Illinois

ORDER

BIRNBAUM, CJ.

This matter is before the Court on Parties’ Cross Motions for Summary Judgment on Claimant’s Second Amended Complaint filed May 7, 2013. This Court find that the purpose of the contract is not, as Claimant contends, for the mere purchase of flu vaccines or for Claimant’s services rendered in locating and procuring the flu vaccine on behalf of the Claimant. Rather, this Court finds that the purpose of the contract is unambiguous. Specifically, the purpose of the contract is for the purchase and importation of flu vaccines into the United States. For the reasons set forth below, the Court finds the contract at issue is void because it is illegal under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and Summary Judgment is granted in favor of the Respondent.

LEGAL STANDARD

Summary Judgment is proper when the pleadings, affidavits, and other evidence on file viewed in the light most favorable to the non-movant demonstrate that there is no issue of material fact and that the movant is entitled to judgment as a matter of law. 735 ILCS 5/2-1005; Srivastava v. Russell’s Barbecue, Inc., 168 Ill.App.3d 726, 730 (1st Dist. 1988). Construction of contract is a question of law and thus is suitable for summary judgment. Id.

FACTUAL BACKGROUND

This Claim arises from a contract that the State of Illinois entered into with Ecosse Hospital Products (“Claimant”), a U.K. based pharmaceutical company. Claimant contends that it initially entered into a written contract with the State of Illinois (“Respondent”) by written agreement dated October 20, 2004 and signed January 21, 2005 for the purchase of 252,250 flu vaccines totaling in excess of $2.5M and that the contract was subsequently modified by letter dated November 9, 2004 to purchase an additional 519,000 units for Respondent’s partner States and Municipalities. Thus, the Claimant alleges in its Second Amended Complaint that Respondent owes in excess of $8.2M for services rendered in procuring a total of 771,250 doses of flu vaccine for Respondent and its partner States and Municipalities.

Respondent denies that the contract was modified by letter dated November 9, 2004 to include the purchase of flu vaccines for Respondent’s partner states. However, Respondent does [*108] not deny that it entered into a contract with Claimant for the purchase of 252,250 flu vaccines totaling in excess of $2.5M, though it does assert a myriad of defenses to enforcement of that contract, including a defense that asserts that the subject matter of the contract is illegal.

ANALYSIS

This Court focuses on whether the nature of the subject matter of the contract is illegal under the FDCA and is therefore void. This Court notes that it has previously denied Respondent’s motions to dismiss on the basis of illegality. Respondent distinguishes its previous motions by asserting that the previous motions were based on pre-discovery pleadings in which the subject contract was characterized as being for services rather than for goods. This Court agrees.

Under the FDCA, it is illegal to introduce or deliver into interstate commerce unapproved drugs. Foreign versions of US approved drugs are considered unapproved because FDA approvals are manufacturer-specific, product-specific, and include such factors as manufacturing location, formulation, source and specifications of active ingredients, processing methods, manufacturing controls, container/closure system, and appearance (21 CFR § 314.50). 21 U.S. Code § 355. Thus, the FDCA explicitly prohibits the introduction of unapproved foreign drugs into interstate commerce. 21 U.S. Code § 331(d). In the case before the Court, there is no disagreement that the influenza vaccines that are the subject of this action were “unapproved foreign drugs” under the FDCA and are therefore illegal for introduction or delivery for introduction into interstate commerce. Thus, the source of contention between the parties stems from the parties’ disagreement as to the purpose of the contract. At issue here is whether the contract in this case calls for “introduction of unapproved foreign drugs into commerce.” Claimant contends that the purpose of the contract was merely to provide services to locate and advise Respondent as to the acquisition of the vaccines. The Respondent contends that the purpose of the contract is for the purchase and sale of the illegal, unapproved influenza vaccines through interstate commerce to the State of Illinois and distribution to its residents. It is indeed true that the substance of the contract is characterized in the preamble of the October 20, 2004 contract as being one for “technical services to identify vaccine availability and to advise on acquisition process to benefit Illinois residents.” Based on the language in the contract, this Court reaffirms its previous orders finding that dismissal pursuant to 2-619 was inappropriate based on the evidence provided within the four corners of the contract. However, were the determination of illegality limited only to those circumstances where the parties explicitly reduced to writing their intent to engage in illegal activity, such doctrine would be meaningless. Although the contract might appear legal on its face, the parties may proffer additional evidence as to the illegal intent of the agreement. See Brelsford v. Stoll, 304 Ill. App. 222, (3rd Dist. 1940). In this case, the post-pleading discovery since conducted demonstrates to this Court that both Claimant and Respondent understood the true intent of the agreement - namely, to arrange for the purchase of unapproved influenza vaccines by Respondent. Although the contract was dated October 20, 2004, it was not signed until January 21, 2005. Prior to the execution of the contract but after the effective date and after Claimant had already begun to procure the vaccines for Respondent, Mr. Scott McKibbin, then Special Advocate for Prescription Drugs, sent an email stating that the contract needed to be “recast as services…” Dep. Of McKibbin, 200-01. As such, although the contract does not explicitly announce that its purpose is for the illegal purchase and [*109] sale of unapproved vaccines, the evidence indicates that the parties involved in negotiating the contract understood the contract as being one for goods rather than services. Moreover, although Claimant asserts that this contract was one for “technical services to identify vaccine availability and to advise on acquisition process to benefit Illinois residents,” the managing director of Munro Wholesale, the parent corporation of Claimant, acknowledged in his deposition testimony that neither he nor Claimant for which he worked had ever navigated through an FDA drug approval process prior to this transaction. Dep. Of Cochrane, 56, 122.

Having found that the purpose of the contract is for the purchase of unapproved vaccines, the remaining issue before the Court is whether a contract for purchase of unapproved vaccines is illegal under the FDCA without actually importing said vaccines into interstate commerce. Claimant contends that the contract did not call for the importation of the unapproved vaccines but, rather, only for delivery of the unapproved vaccines to Heathrow Airport. The Court finds this argument unpersuasive. In Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282 290 (1921), a case cited by the Respondent, the Court held that “where goods are purchased in one state for transportation to another, the commerce includes the purchase quite as much as it does the transportation.” Id. (emphasis added). In this case, Claimant attempts to distinguish Dahnke-Walker based on the facts of the case. Claimant’s Response to Respondent’s April 1, 2015 Motion for Summary Judgment, Pg. 20. Specifically, Claimant contends that Dahnke-Walker does not apply because it dealt with whether a Kentucky state law placed an unreasonable restraint on trade as applied to the Commerce Clause. Claimant is correct in its characterization of the facts of Dahnke-Walker, but fails to draw an otherwise compelling distinction. Claimant’s contention that interstate commerce under the FDCA requires actual shipment across state lines (or in this case, its import into the United States) is not compelling. Although shipment of misbranded drugs across state lines is indeed a violation of the FDCA, Claimant has not established that “interstate commerce” is limited only to these circumstances and is not more broadly defined.

For these reasons, this Court finds that the purpose of the contract to purchase unapproved vaccines, which falls within the scope of prohibited conduct under the FDCA, is void as illegal and against public policy. Summary judgment is entered in favor of the Respondent.

IT IS SO ORDERED.

ORDER

This matter is before the Court on Claimant’s petition for reconsideration. On December 4, 2015, this Court granted summary judgment in favor of the Respondent, the State of Illinois. In doing so, this Court found the contract between the Claimant, Ecosse Hospital Products, LTD., and the Respondent was void because the purpose of the contract was illegal. On January 4, 2016, Claimant filed a Motion to Reconsider. On January 22, 2016, Respondent filed Respondent’s Answer to Claimant’s Petition for Rehearing.

LEGAL STANDARD

The standard for a motion for rehearing is found in Court of Claims Rule 790.220. The rule states in relevant part:

[*110] A party desiring a rehearing or new trial in any case shall, within 30 days after the filing of the opinion or order, file with the Clerk 4 copies of the petition for rehearing. The petition shall state briefly the points supposed to have been overlooked or misapprehended by the Court, with authorities and suggestions concisely stated in support of the points. A copy of the petition shall be served on counsel for the other party and proof of service shall be shown in the petition. Any petition violating this Section will be stricken. 74 Ill. Adm. Code 790.220 (emphasis added).

ISSUES

In Claimant’s Motion to Reconsider, Claimant asserts this Court should reconsider the ruling in the Order for the following reasons. (1) This Court misapplied the Food and Drug and Cosmetic Act. (2) This Court misapplied case law and ignored the Law of the Case Doctrine. (3) This Court failed to consider an existing emergency situation. (4) The Respondent breached its covenant of good faith and fair dealing.

ANALYSIS

I. The Food and Drug and Cosmetic Act was applied properly.

Claimant asserts that this Court erroneously ruled that the subject matter of the contract, for the delivery of influenza vaccines, between the Respondent and Claimant was illegal. Claimant argues that the vaccines were never introduced into interstate commerce, and that 21 U.S. Code §355 should not apply because the vaccines in question are not “new drugs.”

In the Order from December 4, 2015, this Court noted there is no disagreement that the influenza vaccines that are the subject of this action were “unapproved foreign drugs.” (Order 2, December 4, 2015). Claimant contends that the vaccines were never introduced into interstate commerce and therefore §355 is inapplicable. This Court addressed this argument in the Order finding Claimant’s argument that interstate commerce under the FDCA requires actual shipment across states lines not compelling. (Order 2, December 4, 2015). Rather, the Court found Claimant failed to establish interstate commerce is limited only to shipment across state lines. Id. In the Motion to Reconsider, Claimant again failed to properly show this Court that interstate commerce is limited only to shipment across state lines.

II. The case law was applied properly and the Law of the Case Doctrine does

not apply.

Claimant asserts that this Court failed to properly apply case law because in the decision from December 4th, 2015, this Court implied that there was a condition precedent present in the contract when the Court “declared the contract illegal since vaccines were not first approved by the FDA.” The declaration by the Court of an illegal contract on December 4th, 2015 does not imply a condition precedent. This declaration only asserts that the contract’s purpose was illegal because the vaccines were not approved by the FDA, and due to the illegality of the purpose, the contract is void.

[*111] Claimant also asserts that this Court failed to follow “the Law of the Case Doctrine.” The Law of the Case Doctrine states that “a rule established as controlling in a particular case will continue to be the law of the case, as long as the facts remain the same. People v. Patterson, 154 Ill. 2d 414, 468 (1992) (emphasis added). The Law of the Case Doctrine “expresses the practice of courts generally to refuse to reopen what has been decided; it is not a limit on [the court’s] power.” Commonwealth Edison Co. v. Illinois Commerce Comm’n, 368 Ill. App. 3d 734, 742 (2nd Dist. 2006). The Law of the Case Doctrine binds a court only where a court’s prior order was final. Id. (emphasis added).

As Respondent correctly points out, the Law of the Case Doctrine does not apply to motions to dismiss. See O’Rourke v. McIlvaine, 2014 IL App (2d) 131191, ¶15 appeal denied, 23 N.E.3d 1202 (Ill. 2015) (emphasis added). Claimant’s claim that the Law of the Case Doctrine applies to this Court’s previous motion to dismiss ruling is incorrect. The Law of the Case Doctrine does not apply in this case because the previous ruling was a motion to dismiss and not a final order.

III. Claimant’s assertion that an “emergency situation was ignored” does not

have merit.

Claimant states that due to an emergency situation, caused by a shortage of influenza vaccines in the United States, the illegal contract between Respondent and Claimant should not be void. The purpose of this motion is to, “state briefly the points supposed to have been overlooked or misapprehended by the Court.” 74 Ill. Adm. Code 790.220. The purpose of this motion is not to allow a party to bring in new legal theories which the party failed to claim in earlier arguments. Claimant failed to raise this “emergency situation” argument in its reply briefs. Further, Claimant must bring forth “authorities and suggestions concisely stated in support of the points.” Id. Claimant does not cite any statutes or case law to support this emergency situation standard, and this Court does not find Claimant’s “chicken versus the egg argument” compelling.

IV. Covenant of Good Faith and Fair Dealing are not grounds for

reconsideration in this case.

Claimant contends that the contract was fulfilled in good faith and Respondent acted in bad faith, and, therefore, Respondent breached the covenant of good faith. As mentioned above, the purpose of this motion is to “state briefly the points supposed to have been overlooked or misapprehended by the Court.” 74 Ill. Adm. Code 790.220. The purpose of this motion is not to allow a party to bring in new legal theories which the party failed to claim in earlier arguments. Claimant failed to raise this “good faith” argument in its reply brief. Further, as Respondent points out, in Claimant’s Motion to Reconsider Claimant fails to support this good faith argument with any actual case law or authorities, and for a motion to reconsider, Claimant must bring forth “authorities and suggestions concisely stated in support of the points.” Id.

CONCLUSION

For the foregoing reasons, Claimant’s Motion to Reconsider is DENIED.