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University of Massachusetts Biologic Laboratories v. CSL Behring AG

United States District Court, D. Massachusetts

November 1, 2016

UNIVERSITY OF MASSACHUSETTS BIOLOGIC LABORATORIES and THIRD SECTOR NEW ENGLAND, INC., Plaintiffs,
v.
CSL BEHRING AG, Defendant.

          MEMORANDUM AND ORDER ON PLAINTIFFS' MOTION TO REMAND AND DEFENDANT'S MOTION TO DISMISS

          F. DENNIS SAYLOR, IV UNITED STATES DISTRICT JUDGE

         This is an action for declaratory judgment arising out of a contract dispute. In 2002, the University of Massachusetts Biologic Laboratories (“MassBiologics”), Third Sector New England (“TSNE”), and a predecessor to CSL Behring AG (“CSL”) entered into a licensing agreement. Under the agreement, TSNE and MassBiologics granted CSL the exclusive right and license to technology related to the prevention and treatment of cytomegalovirus infection using immunoglobulin and monoclonal antibodies. CSL was to pay MassBiologics and TSNE royalties on the sale of products made using that technology, including a product called CytoGam.

         In September 2015, CSL sent letters to MassBiologics and TSNE stating its belief that it was no longer required to pay royalties under the licensing agreement. MassBiologics and TSNE then filed this declaratory judgment action in the Suffolk Superior Court seeking to clarify the parties' rights and obligations under the agreement. Asserting diversity jurisdiction, CSL removed the action to this Court.

         MassBiologics and TSNE have now moved to remand the action to state court. They contend that complete diversity is lacking because MassBiologics is an arm of the state and therefore not a citizen of Massachusetts for the purposes of diversity jurisdiction. CSL has moved to dismiss for failure to state a claim upon which relief can be granted.

         For the reasons stated below, plaintiffs' motion to remand will be granted. CSL's motion to dismiss will remain pending after the remand.

         I. Background

         A. Factual Background

         On April 23, 1990, Third Sector New England (“TSNE”), a Massachusetts non-profit corporation, and Molecular Vaccines (later known as MedImmune) entered into a licensing agreement concerning the production of an anti-cytomegalovirus product. (Compl. ¶ 6, 8). Cytomegalovirus (“CMV”) is a common herpes virus that can be dangerous for individuals with weakened immune systems, such as organ-transplant recipients. (Compl. ¶ 7). Under the agreement, TSNE agreed to transfer to MedImmune the information and technical assistance necessary to enable MedImmune to manufacture, test, and package hyperimmune CMV intravenous immunoglobulin, later sold as CytoGam. (Compl. ¶ 8). TSNE also granted MedImmune an exclusive right and license to TSNE's “Technology, ” which was defined as any “discovery, know how, invention, improvements, development, trade secret, data, governmental approvals or licenses” concerning the prevention and treatment of CMV. (Compl. ¶ 10, 11).

         MedImmune agreed to pay TSNE royalties of ten to fifteen percent of the net sales of products made using TSNE's “Technology, ” including CytoGam. (Compl. ¶ 14). MedImmune also agreed to “use reasonable efforts under the circumstances” to commercialize, market, and sell CMV-related products. (Compl. ¶ 15).

         The University of Massachusetts Biologic Laboratories (“MassBiologics”) was established in 1996 by the Massachusetts legislature in order to “research, develop[] and produc[e] . . . vaccines and biologic products designed to reduce or prevent morbidity and mortality in the commonwealth.” Mass. Gen. Laws ch 75, § 43(a). In 2002, MedImmune, TSNE, and MassBiologics entered into an assignment agreement that transferred TSNE's rights, interests, and obligations under the original agreement to MassBiologics, reserving to TSNE, among other things, the right to a portion of the royalties paid. (Compl. ¶ 19, 20).

         In December 2006, MedImmune assigned all of its rights and obligations under the agreement to ZLB Behring AG (later known as CSL Behring AG). (Compl. ¶ 22, 23). Since 2007, CSL has paid royalties to MassBiologics and TSNE as required by the agreement. However, on September 7, 2015, CSL sent letters to MassBiologics and TSNE stating its belief that, under the terms of the agreement, it was no longer obligated to pay royalties. (Compl. ¶ 31).

         B. Procedural Background

         On January 20, 2016, MassBiologics and TSNE filed a complaint in the Suffolk County Superior Court seeking (1) a declaratory judgment affirming that CSL is required to continue to pay royalties on sales of CytoGam and (2) specific performance of CSL's obligations under the agreement. (Compl. ¶ 35, 36). On July 13, 2016, CSL removed this action to this Court pursuant to 28 U.S.C. §§ 1441 and 1446.

         TSNE and MassBiologics have moved to remand this action back to the Suffolk County Superior Court. CSL has moved to dismiss the complaint for failure to ...


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