Advanced Targeting Systems, Inc. v. Advanced Pain Remedies, Inc. et al, No. 3:2012cv02915 - Document 23 (S.D. Cal. 2013)
Court Description: ORDER Denying 15 Motion to Dismiss for Lack of Personal Jurisdiction; Denying 16 Motion to Dismiss or Stay the Action Without Prejudice and Subject to Renewal. The court denies Defendants' Rule 12(b)(2) and Rule 12(b)(7) motions without prejudice. Plaintiff has until August 14, 2013 to conduct discovery related to jurisdictional issues. Defendant may file new Rule 12(b)(2) and Rule 12(b)(7) motions by August 30, 2013. Signed by Judge Jeffrey T. Miller on 6/3/2013. (jao)
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Advanced Targeting Systems, Inc. v. Advanced Pain Remedies, Inc. et al Doc. 23 JM 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 Case No.: 3:12-CV-2915-JM (WMC) ADVANCED TARGETING SYSTEMS, INC., a corporation, ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION & DENYING DEFENDANTS’ MOTION TO DISMISS OR STAY THE ACTION WITHOUT PREJUDICE AND SUBJECT TO RENEWAL 10 11 Plaintiff, vs. 12 13 14 ADVANCED PAIN REMEDIES, INC., a corporation; CATO RESEARCH LTD., a corporation; and DOES 1-50, inclusive, 15 16 17 Defendants. Plaintiff Advanced Targeting Systems, Inc. filed a complaint against 18 defendants Advanced Pain Remedies, Inc. (“APR”), and Cato Research Ltd. 19 (“Cato Research”) (together, “Defendants”) in San Diego Superior Court. On 20 December 7, 2012, Defendants removed the present matter to this court. On 21 February 22, 2013, Defendants filed a Federal Rule of Civil Procedure (“Rule”) 22 12(b)(2) motion to dismiss due to the court’s lack of personal jurisdiction over 23 APR (“MPJ”) and a Rule 12(b)(7) motion to dismiss the action for failure to join 24 an indispensable party under Rule 19. Plaintiff contests the Defendants’ motions, 25 but requests the opportunity to conduct discovery or amend its complaint if the 1 Dockets.Justia.com 1 court decides to dismiss this matter. For the following reasons, the court denies 2 Defendants’ Rule 12(b)(2) and Rule 12(b)(7) motions without prejudice. Plaintiff 3 has until August 14, 2013 to conduct discovery related to jurisdictional issues. 4 Defendant may file a new Rule 12(b)(2) and Rule 12(b)(7) motions by August 30, 5 2013. 6 I. Background Plaintiff is a Delaware corporation headquartered in San Diego, California 7 8 that develops and markets reagents1 for scientific research, including a pain-killing 9 conjugate known as Substance P-Sporin (“SP-SAP”). Defendant Cato Holding 10 Company (“Cato Holding”) provides worldwide regulatory consulting and clinical 11 research services to clients seeking regulatory approval for the sale of drugs and 12 the development of drugs for later licensing sales through its subsidiaries. Cato 13 Holding is the holding or parent company for Cato Research, APR, and Research 14 Triangle Pharmaceuticals LLC (“Research Triangle”). Research Triangle is also 15 APR’s predecessor-in-interest. From 2007 to 2008, Plaintiff negotiated the terms of a Development and 16 17 License Agreement (“DLA”) with Cato Holding, which was acting on behalf of its 18 subsidiary Research Triangle. The negotiations between Plaintiff and Cato 19 Holding included six meetings, all of which took place in San Diego at either 20 Plaintiff’s or Cato Holding’s offices. For at least one of these meetings, 21 representatives from Cato Holding’s North Carolina offices traveled to San Diego. 22 Research Triangle eventually entered into a Development and License Agreement 23 24 1 25 “A substance that is consumed in the course of a chemical reaction.” Compendium of Chemical Terminology (Online ed., 1997) (available at http://goldbook.iupac.org/R05163.html). 2 1 (“the DLA”) with Plaintiff. Later, APR assumed the DLA contract on behalf of 2 Research Triangle. 3 Under the DLA, Research Triangle agreed to prepare and prosecute an 4 investigational new drug application (“IND Application”), which is the regulatory 5 filing necessary to obtain Food and Drug Administration (“FDA”) approval of the 6 sale and use of a new drug for humans, for SP-SAP. The DLA required Research 7 Triangle to provide Plaintiff with pertinent data generated by or on behalf of 8 Plaintiff regarding the development of SP-SAP and to notify Plaintiff of any 9 report submitted by Research Triangle to the FDA. The DLA also granted 10 Research Triangle an exclusive license to market a drug based on SP-SAP, but the 11 license terminated if Research Triangle did not file an IND Application with the 12 FDA by January 15, 2011. In addition, the DLA required Research Triangle, as 13 licensee, to “cause “Cato Research Ltd., a global contract research and 14 development organization . . . to use reasonable efforts to . . . [p]repare [an IND 15 Application] package for the Product, . . . [a]ssist [Plaintiff] with preparation for 16 the pre-IND meeting for the Product with the FDA, . . . [a]ttend and participate in 17 the pre-IND meeting, and . . . [p]repare [an] outcomes and future strategy report.” 18 MPJ, Declaration of Craig Nicholas, Exhibit A, Section 3.2. If a dispute regarding 19 the DLA arose, the DLA provided that California law would govern and required 20 the parties to the DLA to mediate disputes before resorting to litigation. 21 Pursuant to the DLA, Cato Research, Research Triangle, and later, APR in 22 place of Research Triangle, began to take the steps necessary to obtain FDA 23 approval for SP-SAP. Here, the parties’ stories diverge. Plaintiff claims that it 24 had instructed APR not to take any actions that would hinder progress on SP-SAP, 25 such as filing a deficient IND Application, though Plaintiff assured APR that it 3 1 intended on continuing their partnership. See Opp. MTD at 4; Compl. ¶ 25. 2 Nevertheless, APR filed an IND Application that Plaintiff considers to be a “Sham 3 IND Application” because of its deficiencies. See Opp. MTD at 4; Compl. ¶ 26. 4 After filing the alleged “sham” IND Application, APR requested that the 5 FDA take no action on this IND Application. See Opp. MTD at 4; Compl. ¶ 28. 6 Plaintiff claims that the filing of this allegedly deficient IND Application violated 7 the DLA’s terms. Plaintiff further claims that Cato Holding and its affiliates 8 falsely told it that the FDA response to the IND Application was quite positive 9 and thereby violated the common law prohibition on false concealment. See Opp. 10 11 MTD at 4; Compl. ¶ 53. Defendants counter that “[t]he reality is very different” and deny Plaintiff’s 12 accusations. See MTD at 4. After the IND Application was filed, Defendants 13 claim that the FDA called Lynda Sutton, President of Cato Holding, to discuss 14 issues related to the IND Application that could have led to it being placed on 15 hold. See id. Specifically, Defendants claim that the FDA was concerned about 16 the clinical trial materials that Plaintiff allegedly controlled. See id. Defendants 17 claim that Cato Research put the IND Application on inactive status to avoid the 18 difficulty and stigma of removing a hold on the IND Application. See id. 19 Defendants claim that the FDA later sent a letter detailing the issues that needed to 20 be resolved for the IND Application to be acceptable, half of which could easily 21 be resolved by Cato Research and half of which Plaintiff needed to resolve. See 22 id. at 5. 23 In mid-2011, the parties initiated a contractual dispute resolution process, 24 which commenced with a mutually agreed upon meeting at the San Diego Marina 25 Marriott in San Diego, California. APR canceled the meeting at the last minute, 4 1 so a videoconference was held instead. APR terminated the videoconference after 2 a short presentation by Plaintiff. The next step of the mediation took place at the 3 JAMS office in San Diego in November 2011, but the parties did not explain the 4 steps involved. After mediation failed, Plaintiff filed a complaint against Defendants in 5 6 California State court on October 29, 2012. Pursuant to California Code of Civil 7 Procedure § 415.40, APR was served by registered mail on November 8, 2012. 8 That same day, APR filed an “Application and Order Extending Time to File 9 Complaint.” APR later filed a complaint regarding the same dispute over the 10 DLA at issue here in North Carolina on November 28, 2012. 11 II. Personal Jurisdiction 12 A. Legal Standard 13 Plaintiff, as the party seeking to invoke jurisdiction, bears the burden of 14 establishing that personal jurisdiction can be exercised over Defendants. See 15 Flynt Distributing Co. v. Harvey, 734 F.2d 1389, 1392 (9th Cir. 1984). Plaintiff 16 cannot rely solely on allegations in the complaint that have been appropriately 17 challenged by affidavit. See Taylor v. Portland Paramount Corp., 383 F.2d 634, 18 639 (9th Cir. 1967). If this court acts on the motion to dismiss without holding an 19 evidentiary hearing, however, Plaintiff is only required to make a prima facie 20 showing of jurisdiction rather than a showing by a preponderance of the evidence. 21 See Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001) (“That is, the plaintiff 22 need only demonstrate facts that if true would support jurisdiction over the 23 defendant.”). If unchallenged, Plaintiff’s version of the facts is taken as correct. 24 See id. If there is a factual conflict in the affidavits, the court must resolve that 25 conflict in Plaintiff’s favor. See id. 5 1 Determining whether a basis for the exercise of personal jurisdiction in a 2 diversity of citizenship case exists depends on: (1) whether a state statute of the 3 forum confers personal jurisdiction over the nonresident defendant and (2) 4 whether the exercise of jurisdiction accords with federal constitutional principles 5 of due process. See Data Disc, Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 6 1280, 1286 (9th Cir. 1977). California’s long-arm statute authorizes personal 7 jurisdiction to the extent allowed under the constitution. See id.; Cal. Code Civ. 8 Pro. § 410.10. Under the constitution, personal jurisdiction can take the form of 9 either general or specific jurisdiction. See Data Disc, 557 F.2d at 1286. 10 General jurisdiction is established if a party’s activities in the state are 11 “substantial” or “continuous and systematic” regardless of whether those activities 12 are related to the claim at issue. See Helicopteros Nacionales de Colombia, S.A. 13 v. Hall, 466 U.S. 408, 414-15 (1984); Data Disc., 557 F.2d at 1287. However, a 14 defendant may still be subject to specific jurisdiction if it has purposefully availed 15 itself of the forum state and the controversy is related to or arises out of those 16 contacts. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). A 17 court may only exercise specific jurisdiction over a defendant if doing so would 18 comport with notions of fair play and substantial justice. See id. at 477. When 19 analyzing whether a party’s contacts with the forum support the exercise of 20 specific jurisdiction, the court will consider whether: (1) the nonresident 21 defendant engaged in some act or consummated some transaction with the forum 22 or performed some act by which he purposefully availed himself of the privilege 23 of conducting activities in the forum, thereby invoking the benefits and 24 protections of its laws; (2) the claim arises out of or results from the defendant’s 25 6 1 forum-related activities; and (3) the exercise of jurisdiction is reasonable. See 2 Flynt Distributing Co., 734 F.2d at 1393; Data Disc, 557 F.2d at 1287. 3 “This purposeful availment requirement ensures that a defendant will not be 4 haled into a jurisdiction solely as a result of random, fortuitous, or attenuated 5 contacts, or of the unilateral activity of another party or third person.” Rudzewicz, 6 471 U.S. at 475 (citations and internal quotations omitted). The rubric for 7 determining whether a defendant purposefully availed himself of conducting 8 activities in the forum differs if the action lies in contract rather than tort. The 9 existence of a contract with a resident of the forum state is insufficient by itself to 10 create personal jurisdiction over the nonresident. See id. at 478 (“If the question 11 is whether an individual’s contract with an out-of-state party alone can 12 automatically establish sufficient minimum contacts in the other party’s home 13 forum, we believe the answer clearly is that it cannot.”); see also Gray & Co. v. 14 Firstenberg Machinery Co., 913 F.2d 758, 761 (9th Cir. 1990). 15 “The existence of a relationship between a parent company and its 16 subsidiaries is [also] not sufficient to establish personal jurisdiction over the 17 parent on the basis of the subsidiaries’ minimum contacts with the forum.” Doe v. 18 Unocal, 248 F.3d 915, 925 (9th Cir. 2001) (citing Transure, Inc. v. Marsh and 19 McLennan, Inc., 766 F.2d 1297, 1299 (9th Cir. 1985)). “[A] parent corporation 20 may be directly involved in the activities of its subsidiaries without incurring 21 liability so long as that involvement is ‘consistent with the parent’s investor 22 status.’” Unocal, 248 F.3d at 926 (quoting United States v. Bestfoods, 524 U.S. 23 51, 72 (1998)). “Appropriate parental involvement includes: ‘monitoring of the 24 subsidiary’s performance, supervision of the subsidiary’s finance and capital 25 budget decisions, and articulation of general policies and procedures.’” Id. 7 1 (citing Bestfoods, 524 U.S. at 72). “Nonetheless, if the parent and subsidiary are 2 not really separate entities, or one acts as an agent of the other, the local 3 subsidiary’s contacts with the forum may be imputed to the foreign parent 4 corporation. An alter ego or agency relationship is typified by parental control of 5 the subsidiary’s internal affairs or daily operations.” Id. at 926 (quotation 6 omitted); see also Am. Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 7 586, 591 (9th Cir. 1996) (“A parent corporation’s relationship with its subsidiary 8 may confer personal jurisdiction over the parent if the subsidiary is acting as the 9 parent company’s alter ego, so as to justify disregard of the corporate entity.”). 10 B. Discussion 11 Defendants contend that the court has neither general nor specific 12 jurisdiction over APR. However, Plaintiff only alleges that Defendant APR is 13 subject to specific jurisdiction, thereby obviating the need for the court to consider 14 whether this court has general jurisdiction over APR. 15 Defendants argue that APR never purposefully availed itself by conducting 16 activities in California and that Cato Holding’s activities should not be attributed 17 to APR. Defendants assert that APR had no pre-contract contacts with California 18 because APR was not involved with the negotiation of the DLA and entered into 19 the DLA in Durham, North Carolina. See MPJ at 10. Defendants claim that the 20 only potential contacts with California under the DLA are its California 21 choice-of-law provision and provision to mediate any dispute in California. See 22 id. Citing Gundle Lining Construction Corporation v. Adams County Asphalt, 85 23 F.3d 201, 206 (5th Cir. 1996), Defendants note that “consent to a forum’s laws is 24 not consent to jurisdiction by that forum’s courts.” MPJ at 10-11. Defendants add 25 that Plaintiff’s claim did not arise out of the mediation in California because the 8 1 parties’ dispute matured well before mediation. See MPJ at 11. Finally, 2 Defendants claim that their contacts with California were limited and that APR’s 3 performance under the DLA would take place primarily in North Carolina, where 4 the company was located, and in Maryland, where the FDA was located. See MPJ 5 at 11-12. Defendants then conclude that the aforementioned limited contacts with 6 California do not amount to “purposeful availment.” See id. 7 Plaintiff counters that APR “cannot demonstrate that it is ‘unreasonable’ to 8 expect it to litigate in California, given (among other things) that Plaintiff is based 9 here, the parties negotiated a California choice-of-law clause, and they mediated 10 their dispute in San Diego.” Opp. MPJ at 10. In support of this argument, 11 Plaintiff relies heavily on Burger King v. Rudzewicz, 471 U.S. 462 (1985), which 12 held that specific jurisdiction is proper over an out-of-state defendant that has 13 “created continuing obligations between himself and the residents of the forum.” 14 Id. at 475-76. In addition, Plaintiff notes that “the prior negotiations [of a contract 15 with a party in another forum] and contemplated future consequences, along with 16 the terms of the contract and the parties’ actual course of dealing, must be 17 evaluated to determine whether a defendant purposefully established minimum 18 contacts within the forum.” Id. at 479. And while the Rudzewicz decision held 19 that a choice-of-law provision alone would be insufficient to confer jurisdiction, 20 an ongoing interdependent relationship, such as the one Plaintiff claims was 21 established under the DLA, “reinforce[s a party’s] deliberate affiliation with the 22 forum State and the reasonable foreseeability of possible litigation there.” Id. at 23 482. Plaintiff explains that APR had an ongoing obligation “to develop and 24 market a drug candidate based on SP-SAP, to keep [it] apprised of regulatory 25 developments, and, ultimately, to pay annual royalties to [Plaintiff].” Opp. MPJ at 9 1 10-11. Plaintiff also contends that APR dealt directly and had an ongoing and 2 direct relationship with Plaintiff, increasing the foreseeability of possible litigation 3 here. See id. at 11. 4 Finally, Plaintiff argues that specific jurisdiction applies over its tort claim 5 for fraud based on APR’s suppression of its request to suspend the FDA’s review 6 of the “sham” IND Application. See Opp. MPJ at 12. Plaintiff argues that APR 7 had an obligation to keep it apprised of regulatory matters, but instead led Plaintiff 8 to believe that the FDA had cleared the SP-SAP drug candidate for clinical trials. 9 See id. 12. 10 The court concludes that Plaintiff has not yet demonstrated that APR had 11 continuing obligations that tied APR to San Diego. The submissions do not make 12 clear whether APR’s obligations under the DLA require it to maintain anything 13 other than a standard contractual relationship. It is also unclear whether APR 14 even existed when the DLA was being negotiated. The court also is wary of 15 holding that this claim alone suffices for jurisdiction, especially as the fraud was 16 based on a contractual duty. 17 However, Plaintiff has made a colorable showing that the court can exercise 18 personal jurisdiction over APR because Cato Holding and APR’s ties to one 19 another appear to go beyond that of a normal parent-subsidiary relationship. 20 Indeed, the court has concerns regarding Cato Holding’s negotiation of the DLA 21 on behalf of APR’s predecessor-in-interest. It is questionable whether negotiating 22 contracts is something an investor would typically do on behalf of a company. 23 Such actions suggest that Cato Holding and APR may have a relationship that 24 goes beyond the ordinary investor relationship. Defendants have not contradicted 25 Plaintiff’s colorable showing. 10 “[T]o obtain discovery on jurisdictional facts, the plaintiff must make at 1 2 least a ‘colorable’ showing that the Court can exercise personal jurisdiction over 3 the defendant.” Mitan v. Feeney, 497 F. Supp. 2d 1113, 1119 (C.D. Cal. 2007) 4 (citing Central States, S.E. & S. W. Areas Pension Fund v. Reimer Express World 5 Corp., 230 F.3d 934, 946 (7th Cir. 2000)). A district court has discretion to permit 6 or deny such jurisdictional discovery. See Boschetto v. Hansing, 539 F.3d 1011, 7 1020 (9th Cir. 2008). As previously stated, the Plaintiff has made a colorable 8 showing. The court therefore, in its discretion, permits Plaintiff to conduct limited 9 discovery to determine whether Cato Holding and its subsidiaries, including 10 Plaintiff, has a relationship that existed beyond investor status. 11 III. 12 Motion to Stay or Dismiss this Action for Failure to Join an Indispensable Party 13 A party may file a Rule 12(b)(7) motion to dismiss for failure to join a party 14 under Rule 19, which governs whether a party is considered indispensable to a 15 civil action. See Fed. R. Civ. P. 19; Confederated Tribes of Chehalis Indian 16 Reservation v. Lujan, 928 F.2d 1496, 1498 (9th Cir. 1991). The court must first 17 determine whether a party is “necessary” to the adjudication of the case. See 18 Confederated Tribes, 928 F.2d at 1498. If a party is necessary, the court must 19 determine whether it is feasible to join that party. See id. Only if a necessary 20 party cannot be joined does the court proceed to inquire into whether that party is 21 “indispensable.” See id. If an indispensable party cannot be joined, the action 22 must be dismissed. See id. 23 Whether a party is necessary to the adjudication of the case is a fact-specific 24 inquiry. Bakia v. County of Los Angeles, 687 F.2d 299, 301 (9th Cir. 1982). The 25 Ninth Circuit has pointed to two significant issues: “First, the court must consider 11 1 if complete relief is possible among those parties already in the action. Second, 2 the court must consider whether the absent party has a legally protected interest in 3 the outcome of the action.” Confederated Tribes, 928 F.2d at 1498 (citing Makah 4 Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir. 1990)). Rule 19(b) provides 5 that the factors to be considered in determining if an action should be dismissed 6 because an absent party is indispensable: “(1) prejudice to any party or to the 7 absent party; (2) whether relief can be shaped to lessen prejudice; (3) whether an 8 adequate remedy, even if not complete, can be awarded without the absent party; 9 and (4) whether there exists an alternative forum.” Fed. R. Civ. P. 19; 10 Confederated Tribes, 928 F.2d at 1498. 11 The court denies Defendants’ Rule 12(b)(7) motion because it has denied 12 Defendants’ Rule 12(b)(2) motion, rendering Defendants’ Rule 12(b)(7) motion 13 moot. Assuming that the court later determines that personal jurisdiction exists, 14 Defendants’ motion remains moot. However, if the court later finds that it does 15 not have specific jurisdiction over APR, then the court will entertain another Rule 16 12(b)(7) motion. 17 IV. 18 Conclusion For the aforementioned reasons, the court denies Defendants’ Rule 12(b)(2) 19 and Rule 12(b)(7) motions without prejudice. Plaintiff has until August 14, 2013 20 to conduct discovery related to jurisdictional issues. Defendant may file new Rule 21 12(b)(2) and Rule 12(b)(7) motions by August 30, 2013. 22 23 IT IS SO ORDERED. DATED: June 3, 2013 ______________________________ ___________________________ _ _ _ Jeffrey T. Miller Jeffrey Miller f United States District Judge United 24 25 12
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