Print PDF

California’s Waiver of Sovereign Immunity in First Case Did Not Waive State’s Immunity in Later Suit

October 23, 2007
Del Monaco, Anthony D.

Decision icon Decision

Last Month at the Federal Circuit - November 2007

Judges: Rader, Gajarsa, O’Malley (author, District Judge sitting by designation)

[Appealed from: N.D. Cal., Judge Patel]

In Biomedical Patent Management Corp. v. California, No. 06-1515 (Fed. Cir. Oct. 23, 2007), the Federal Circuit affirmed the district court’s grant of a motion to dismiss in favor of the state of California, Department of Health Services (“DHS”), on the ground that DHS was entitled to sovereign immunity under the Eleventh Amendment. The Court held that DHS’s waiver of sovereign immunity in an earlier case did not prevent DHS from asserting immunity in the present case.

Biomedical Patent Management Corporation (“BPMC”) is the owner of U.S. Patent No. 4,874,693 (“the ’693 patent”), which is directed to a method for screening birth defects in pregnant women. In 1997, a subcontractor of DHS filed a DJ action against BPMC claiming that a DHS screening program did not infringe the ’693 patent and that the patent was invalid (“the 1997 lawsuit”). DHS moved to intervene and also sought a declaration of noninfringement and invalidity of the ’693 patent. The district court granted DHS’s motion to intervene. Thereafter, BPMC filed a motion to dismiss the action for improper venue, which the district court granted. In 2006, BMPC filed the present lawsuit against DHS. The district court granted DHS’s motion to dismiss the case on the ground that sovereign immunity barred BPMC’s claims. BPMC appealed.

The Federal Circuit began by noting that BMC did not dispute that DHS, as an arm of the state of California, generally is accorded Eleventh Amendment immunity. The Court explained, however, that by intervening and asserting claims against BPMC in the 1997 lawsuit, DHS voluntarily invoked the district court’s jurisdiction and, thus, waived its sovereign immunity for the purposes of that lawsuit. The question to be resolved in this case, the Court noted, is when, if ever, a waiver of immunity in an earlier lawsuit prevents a state from asserting sovereign immunity in a later lawsuit between the same parties.

BPMC argued that DHS’s waiver in the 1997 lawsuit carried over to the present lawsuit because the two actions involved the same subject matter and the same parties. The Federal Circuit disagreed, rejecting BPMC’s reliance on a number of cases that held that a state’s voluntary waiver of sovereign immunity in an early phase of a proceeding extended to a later phase of the same proceeding. The Federal Circuit explained that “BPMC misses one critical point that runs through almost all of the case law on which it relies: the waivers found in the cases cited by BPMC were based on actions by a State in the same case, not in cases that are either separated by a dismissal or cases that are entirely different actions.” Slip op. at 11.

“In contrast,” the Court stated, “where a waiver of immunity occurs in an earlier action that is dismissed, or an entirely separate action, courts, including our own, have held that the waiver does not extend to the separate lawsuit.” Id. at 17.

The Court clarified, however, that it did not “mean to draw a bright-line rule whereby a State’s waiver of sovereign immunity can never extend to a re-filed or separate lawsuit.” Id. at 19. Instead, “a State’s waiver of immunity generally does not extend to a separate or re-filed suit, and . . . even a waiver by litigation conduct must nonetheless be ‘clear.’” Id. (citing Tegic Commc’ns Corp. v. Bd. of Regents of the Univ. of Tex. Sys., 458 F.3d 1335, 1340 (Fed. Cir. 2006)). The Federal Circuit further noted that the rule governing waiver of immunity by litigation conduct rests on the need to avoid “unfairness” and “inconsistency,” as well as to prevent a state from selectively using immunity to achieve a litigation advantage. Slip op. at 19 (citing Lapides v. Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613, 619 (2002)). The Court concluded “that any unfairness or inconsistency that would arise from permitting DHS to assert sovereign immunity in the present case is not so substantial as to cause us to diverge from the general principles . . . that a waiver generally does not extend to a separate lawsuit, and that any waiver . . . must be ‘clear.’” Id. at 21.

BPMC next argued that DHS should be judicially estopped from asserting sovereign immunity because DHS’s position was inconsistent with its position in the 1997 lawsuit, where it asserted that it was a party over which the district court had jurisdiction in its motion to intervene. The Federal Circuit rejected this argument, finding that DHS was not judicially estopped from asserting a new position that resulted from a change in the law brought about by the Supreme Court’s decision in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999). The Federal Circuit reasoned that only after the Florida Prepaid decision did it become clear that DHS could assert a sovereign immunity defense in a suit for patent infringement. The Federal Circuit thus held that although DHS’s positions were inconsistent, the inconsistency was excused by the intervening change in the law.

BPMC also argued that the conduct of the state of California in the patent system, and in particular patent litigation, operated as a general waiver for all California state defendants participating in patent suits. The Federal Circuit dismissed this argument, noting that the Supreme Court in Florida Prepaid expressly overruled the notion that a state could constructively waive its Eleventh Amendment immunity by its participation in a regulatory scheme.

Lastly, BPMC argued that a recent Supreme Court decision, Cent. Va. Cmty. Coll. v. Katz, 546 U.S. 356 (2006), implicitly overruled Florida Prepaid such that sovereign immunity is no longer available in patent infringement actions. The Federal Circuit again rejected BPMC’s argument, concluding that the holding in Katz was so closely tied to the history of the Bankruptcy Clause and the unique aspects of bankruptcy jurisdiction that it could not be read to extend to actions for patent infringement. The Federal Circuit thus held that DHS was not precluded from asserting sovereign immunity in this case, and affirmed the decision of the district court.