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BIO/BASICS INTL. CORP. v. ORTHO PHARM. CORP.

August 23, 1982

BIO/BASICS INTERNATIONAL CORPORATION, Plaintiff,
v.
ORTHO PHARMACEUTICAL CORPORATION, Defendant


Ward, District Judge


The opinion of the court was delivered by: WARD

WARD, District Judge.

The complaint filed in this diversity action sets forth six causes of action: two for tortious interference with contract; two for tortious interference with precontractual relations; one for breach of fiduciary relationship; and one for defamation. Plaintiff is Bio/Basics International Corporation ("Bio/Basics"), a New York corporation. Defendant is Ortho Pharmaceutical Corporation ("Ortho"), a New Jersey corporation. All six causes of action set forth in the complaint are based on certain statements made by an Ortho employee during his testimony before a United States Senate Subcommittee. Ortho now moves, pursuant to Rule 56, Fed. R. Civ. P., for an order granting summary judgment in its favor and dismissing the complaint. For the reasons hereinafter stated, Ortho's motion is granted.

 I

 The factual allegations of plaintiff's complaint, which the Court deems to be true for the purposes of deciding defendant's summary judgment motion, may be summarized as follows. Ortho is a subsidiary of Johnson & Johnson, Inc., and is primarily engaged in the manufacture, distribution, and sale of pharmaceutical and medical products. Bio/Basics is a medical research and clinical product development organization. At the time it commenced this action, it had been in business for about eight years. Bio/Basics devotes its activities in large part to matters undertaken on behalf of companies, such as Ortho, that manufacture pharmaceutical products. Among other things, Bio/Basics offers its clients assistance in the testing of new therapeutic substances. The services that Bio/Basics customarily makes available to a client for this purpose include: (1) locating "clinical investigators" who are qualified and willing to engage in testing new therapeutic substances; (2) furnishing administrative services necessary for such testing to be conducted; (3) forwarding the results of such testing to the client, that is, to the manufacturer of the substance being tested; and (4) communicating and consulting with the client on various matters relating to such testing.

 Beginning in September 1975, Ortho and Bio/Basics entered into a series of contracts whereby Bio/Basics agreed to retain the clinical investigators necessary to conduct studies relating to the safety and efficacy in humans of a drug known as "suprofen." Suprofen is a non-narcotic analgesic agent designed to relieve mild to moderate pain. In these contracts, Bio/Basics further agreed to retain a group of recognized academic experts to conduct a "peer group review" of the studies of suprofen that were to be performed by the clinical investigators. The "clinical investigation" and "peer group review" that Bio/Basics agreed to conduct on Ortho's behalf were undertaken for the purpose of supporting a "New Drug Application" ("NDA") that Ortho intended to file with the Food and Drug Administration ("FDA") in order to gain FDA approval of suprofen for marketing to the general public in the United States. Bio/Basics alleges that it fully and properly performed all of its obligations under these contracts.

 On October 11, 1979, George A. Braun, Ortho's Vice-President for Scientific Affairs, appeared before the Subcommittee on Health and Scientific Research of the Committee on Labor and Human Resources of the United States Senate ("the Senate Subcommittee"), which was at that time conducting hearings on fraud and abuse in the testing of new drugs on human subjects. While Braun had not been subpoenaed to testify, his appearance was pursuant to the Senate Subcommittee's specific request that someone from Ortho provide information about the clinical studies conducted on suprofen for Ortho by Bio/Basics. Braun's testimony consisted of a prepared statement, which he read into the record with the permission of Senator Edward M. Kennedy, Chairman of the Senate Subcommittee, and also of answers to certain questions posed by Senator Kennedy. In his prepared statement, Braun first described the aforementioned contractual relationship between Ortho and Bio/Basics. He then told the Senate Subcommittee that the clinical studies of suprofen contemplated by the Ortho-Bio/Basics contracts had been completed by late 1977 and that Ortho had filed its NDA for suprofen in October 1978. According to Braun, the FDA, in the course of processing Ortho's NDA for suprofen, reviewed the data submitted by certain of the clinical investigators retained by Bio/Basics and advised Ortho that the data might be "worthless." Ortho responded to its receipt of this information, said Braun, by commencing a complete review of all the documents relating to the Bio/Basics study of suprofen. Braun's statement then asserted that Ortho's review of Bio/Basics' suprofen study showed that the "peer group review" contemplated by the contracts with Bio/Basics "had not been utilized as originally anticipated," and that "data from many of the [Bio/Basics] studies [were] not usable or [were] usable only to a limited extent."

 Bio/Basics responded to Braun's testimony before the Senate Subcommittee by commencing this lawsuit. According to the complaint, Braun's statement to the Senate Subcommittee contained false and misleading information and was made by Braun with the knowledge that it contained such information and with the intent of injuring Bio/Basics. Several existing and potential clients of Bio/Basics, located in various states of the United States, including New York, learned of Braun's statement to the Senate Subcommittee. As a direct result of Braun's statement, two clients of Bio/Basics, including one client located in New York, terminated their contracts with Bio/Basics, and two potential clients of Bio/Basics, one of which was located in New York, terminated their precontractual relations with Bio/Basics. The complaint alleges that Braun knew of these contractual and precontractual relationships when he made his statement to the Senate Subcommittee and that his statement was intended to interfere with those relationships. Accordingly, the complaint alleges that, by virtue of Braun's statement, Ortho tortiously interfered with contractual relations between Bio/Basics and its clients, tortiously interfered with precontractual relations between Bio/Basics and its potential clients, committed a breach of the fiduciary relationship between Bio/Basics and Ortho, and defamed Bio/Basics.

 Ortho now moves, pursuant to Rule 56, Fed. R. Civ. P., for an order granting summary judgment in its favor on all six claims set forth in the complaint. In support of its motion, Ortho relies primarily *fn1" on the legal proposition that it is entitled to be found absolutely immune from suit with respect to each of plaintiff's six causes of action. Having set forth the necessary factual background, the Court now proceeds to analyze the legal merit of Ortho's immunity argument.

 II

 The briefs filed with the Court in this case disclose a vigorous dispute between the parties regarding the extent to which New York law immunizes a witness who appears before a legislative committee from a subsequent lawsuit based on his or her testimony to the committee. Plainly, this question of New York law is only controlling here if the immunity issue presented by this case is governed by New York law. Thus, the Court's first task is to decide what body of law governs the immunity of a witness who testifies before a federal legislative committee such as the Senate Subcommittee.

 A

 The Court begins by considering the applicability of federal law. To be sure, there is no federal constitutional or federal statutory provision setting forth the extent to which a witness who appears before a federal legislative committee is immune from a subsequent lawsuit based upon his or her testimony to the committee. Cf. Hutchinson v. Proxmire, 443 U.S. 111, 123-33, 61 L. Ed. 2d 411, 99 S. Ct. 2675 (1979) (delineating scope of defamation immunity afforded members of Congress by "speech or debate clause," U.S. Const. art. I, § 6); Yessenin-Volpin v. Novosti Press Agency, 443 F. Supp. 849, 854-57 (S.D.N.Y. 1978) (delineating scope of defamation immunity afforded foreign states by Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)). However, federal law would govern the immunity issue raised in this case, notwithstanding the absence of a controlling constitutional or congressional directive, if the facts of this case present one of the "few and restricted" instances, see Wheeldin v. Wheeler, 373 U.S. 647, 651, 10 L. Ed. 2d 605, 83 S. Ct. 1441 (1963), where the courts are permitted to fashion and apply "federal common law" as the rule of decision. *fn2"

 The situations where federal common law may be developed fall into essentially two categories: (1) those in which Congress has given the courts the power to develop substantive law, and (2) those in which a federal rule of decision is necessary to protect uniquely federal interests. Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640, 68 L. Ed. 2d 500, 101 S. Ct. 2061 (1981). *fn3" The immunity issue raised by this case clearly does not fall in the first of these categories. This category of cases refers to situations where the court fashions federal common law in order to supplement a federal statutory program that itself embodies congressional policy determinations. In re "Agent Orange" Product Liability Litigation, 635 F.2d 987, 995 (2d Cir. 1980), cert. denied, 454 U.S. 1128, 102 S. Ct. 980, 71 L. Ed. 2d 116 (1981); see, e.g., Textile Workers v. Lincoln Mills, 353 U.S. 448, 456-57, 1 L. Ed. 2d 972, 77 S. Ct. 912 (1957); Owens v. Haas, 601 F.2d 1242, 1248 (2d Cir.), cert. denied, 444 U.S. 980, 100 S. Ct. 483, 62 L. Ed. 2d 407 (1979); Ivy Broadcasting Co. v. American Telephone & Telegraph Co., 391 F.2d 486, 491 (2d Cir. 1968). The instant case might fall in this category, then, if Congress had, without treating the precise immunity issue raised here, either enacted a federal defamation statute or granted the federal courts original jurisdiction of any action that seeks to recover damages caused by the testimony of a witness who appeared before a federally created body. However, since there has been no congressional enactment of this sort, the first category of federal-common-law cases cannot possibly be stretched to cover this case.

 After careful consideration, the Court has concluded that this case is not covered by the second category noted above either. The second category of federal-common-law cases refers to those situations where federal common law is fashioned because the court identifies a particular federal policy or interest that is implicated by an issue raised in the case before it, and perceives a significant conflict between that policy or interest and the use of state law as the rule of decision. City of Milwaukee v. Illinois, 451 U.S. 304, 313, 68 L. Ed. 2d 114, 101 S. Ct. 1784 (1981); Miree v. DeKalb County, 433 U.S. 25, 31, 53 L. Ed. 2d 557, 97 S. Ct. 2490 (1977). In cases where the United States is a party or where its rights and duties are directly implicated, such a conflict is often easily found: the use of state law as the rule of decision in such cases would conflict with the federal government's interest in having uniform rules govern its rights and obligations. In re Agent Orange Product Liability Litigation, supra, 635 F.2d at 993; see, e.g., United States v. Standard Oil Co., 332 U.S. 301, 305, 91 L. Ed. 2067, 67 S. Ct. 1604 (1947); Clearfield Trust Co. v. United States, 318 U.S. 363, 366-67, 87 L. Ed. 838, 63 S. Ct. 573 (1943). Even where the litigation does not directly implicate the rights and duties of the United States, meaning that there is no paramount federal interest in uniformity for its own sake, the requisite conflict may be found by virtue of ...


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