IQVIA Inc. et al v. Medimpact Healthcare Systems, Inc. et al, No. 3:2021cv02081 - Document 93 (S.D. Cal. 2022)

Court Description: Order Granting in Part and Denying in Part Defendants' Motion to Dismiss First Amended Complaint - Redacted (Dkt. No. 78 ). Signed by Judge Gonzalo P. Curiel on 10/7/22. (jmo)

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IQVIA Inc. et al v. Medimpact Healthcare Systems, Inc. et al Doc. 93 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 14 IQVIA INC., a Delaware corporation; and IQVIA AG, a Swiss company; and DIMENSIONS HEALTHCARE LLC, a United Arab Emirates limited liability company, 17 18 19 20 21 22 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED COMPLAINT Plaintiffs, 15 16 Case No.: 21-CV-2081-GPC-DEB [REDACTED - ORIGINAL] v. [FILED UNDER SEAL] MEDIMPACT HEALTHCARE SYSTEMS, INC., a California corporation; MEDIMPACT INTERNATIONAL LLC, a California limited liability company; MEDIMPACT INTERNATIONAL HONG KONG, LTD., a Hong Kong corporation; and DALE BROWN, individually, [Dkt. No. 78.] Defendants. 23 24 Before the Court is Defendants’ motion to dismiss pursuant to Federal Rule of 25 Civil Procedure 12(b)(6) and 12(b)(1). (Dkt. No. 78.) Plaintiffs filed an opposition. 26 (Dkt. No. 82.) Defendants filed a reply. (Dkt. No. 85.) The Court finds that the matter 27 28 1 21-CV-2081-GPC-DEB Dockets.Justia.com 1 is appropriate for decision without oral argument pursuant to Local Civ. R. 7.1(d)(1). 2 Based on the reasoning below, the Court GRANTS in part and DENIES in part 3 Defendants’ motion to dismiss 4 5 Procedural Background On December 13, 2021, Plaintiffs IQVIA Inc. and IQVIA AG (collectively 6 “IQVIA”) filed a complaint for 1) misappropriation of trade secrets under the Defend 7 Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836; 2) misappropriation of trade secrets 8 under the California Uniform Trade Secrets Act (“CUTSA”); and 3) violations of 9 Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) 10 against Defendants MedImpact Healthcare Systems, Inc. and Dale Brown (“Mr. 11 Brown”); and 4) breach of fiduciary duty and duty of loyalty; and 5) civil conspiracy 12 against Mr. Brown. (Dkt. No. 1, Compl.) On April 15, 2022, the Court granted 13 Defendants’ motion to dismiss with leave to amend. (Dkt. No. 59.) 14 On May 6, 2022, Plaintiffs IQVIA Inc., IQVIA AG and Dimensions Healthcare 15 LLC (“Dimensions”) (collectively “Plaintiffs”) filed the operative first amended 16 complaint (“FAC”) for 1) misappropriation of trade secrets under the DTSA; 2) 17 misappropriation of trade secrets under CUTSA; and 3) violations of RICO against 18 Defendants MedImpact Healthcare Systems, Inc. (“MHSI”), MedImpact International 19 LLC (“MIL”) and MedImpact International Hong Kong Ltd. (“MI-HK”) (collectively 20 “MedImpact”), and Mr. Brown; as well as 4) breach of fiduciary duty; and 5) civil 21 conspiracy against Mr. Brown. (Dkt. No. 68, FAC) 22 The complaint arises out of litigation in a related case, MedImpact Healthcare 23 Systems, Inc. et al. v. IQVIA Holdings Inc. et al. in Case No. 19cv1865-GPC(DEB) 24 (“Related Case”) in which MedImpact alleges trade secret misappropriation and related 25 claims against IQVIA Inc., IQVIA AG, IQVIA Ltd. and other individual defendants. In 26 that case, the complaint was filed on September 26, 2019, (id., Dkt. No. 1), and an answer 27 28 2 21-CV-2081-GPC-DEB 1 was filed on September 10, 2020, (id., Dkt. No. 131), with an amended answer filed on 2 October 15, 2020, (id., Dkt. No. 134). The answer and amended answer included the 3 affirmative defense of unclean hands. (Id., Dkt. No. 131 at 271; Id., Dkt. No. 134 at 27.) 4 During discovery, the unclean hands defense alleged that MedImpact schemed to steal 5 IQVIA’s drug-to-diagnosis indication and contraindication edits trade secrets. (Id., Dkt. 6 No. 357, Swedlow Decl., Ex. 2, IQVIA’s Second Suppl. Response to Pls’ Interrog. No. 8 7 at 26-30 (UNDER SEAL).) 8 9 On September 1, 2021, IQVIA filed a motion for leave to file a second amended answer to add counterclaims, now alleged in the FAC, which the Court denied on 10 November 16, 2021. (Id., Dkt. Nos. 305, 360.) The Court found that IQVIA failed to 11 demonstrate diligence under Federal Rule of Civil Procedure 16 in seeking to file the 12 proposed pleading because they knew of the proposed claims as far back as February 13 2018 when similar counterclaims were raised in the prior arbitration.2 (Id.) Because the 14 Court denied the request to file a counterclaim, on December 13, 2021, IQVIA Inc. and 15 IQVIA AG filed a complaint, in this case, raising the same claims as the proposed 16 counterclaim in the Related Case. (Dkt. No. 1, Compl.) 17 Factual Background 18 19 Plaintiff IQVIA AG has its principal place of business in Switzerland and is wholly owned by Plaintiff IQVIA Inc., which has its principal place of business in Plymouth 20 21 22 23 24 25 26 27 28 1 Page numbers are based on the CM/ECF pagination. 2 On January 23, 2018, MIL and MI-HK filed claims in arbitration against Dimensions with the Dubai International Financial Centre-London Court of International Arbitration (“DIFC-LCIA”) for breaches of the terms of the parties’ Joint Venture Agreement (“JVA”) and Services and License Contract (“SLC”) with a Partial Final Award on Liability on April 16, 2019 and a Final Award on July 24, 2019. (Dkt. No. 87, Bennett Decl., Exs. 1, 2 (UNDER SEAL).) 3 21-CV-2081-GPC-DEB 1 Meeting, Pennsylvania.3 (Dkt. No. 68, FAC ¶¶ 13, 14.) Plaintiff Dimensions Healthcare 2 LLC (“Dimensions”) is incorporated in the United Arab Emirates (“UAE”). (Id. ¶ 15.) 3 IQVIA AG is the controlling beneficial owner of Dimensions and has the exclusive 4 power to control Dimensions’ operations. (Id. ¶¶ 14, 15.) Defendant MHSI is a 5 California corporation with its principal place of business in San Diego. California. (Id. ¶ 6 16.) MHSI wholly owns its subsidiary MIL, and MIL, in turn, wholly owns MI-HK. 7 (Id.) Defendant Dale Brown was the former President of MHSI, former President of 8 MIL, and a former Board member and General Manager of MedImpact Arabia (“MIA”). 9 (Id. ¶ 19.) 10 In this case, Plaintiffs allege that, since 2011, Defendants schemed to steal 11 confidential and proprietary trade secrets from Dimensions through a Joint Venture 12 (“JV”), also called MIA, between MIL and Dimensions entered on February 1, 2012. (Id. 13 ¶ 1 & n.1.) On January 1, 2014, MIL transferred its interest in the JV to MI-HK. (Id. 14 n.1.) Specifically, Plaintiffs claim that MedImpact sought to build a new “ ” or a “ 15 with web services to take globally 16 by incorporating Plaintiffs’ trade secrets into MedImpact’s existing platform. (Id. ¶ 2 17 (UNDER SEAL).) At issue are Plaintiffs’ confidential and proprietary drug-to-diagnosis indication 18 19 and contraindication edits. (Id. ¶ 3.) “Drug-to-diagnosis indication edits provide a 20 rejection alert when a patient requests to fill a prescription for a medication that is not 21 used to treat that patient’s medical diagnosis. For example, an indication edit would reject 22 23 24 25 26 27 28 3 In their opposition, Plaintiffs assert IQVIA Inc. recently moved its headquarters to New Jersey. (Dkt. No. 82 at 23 n. 12.) “A PBM platform is a platform that allows patients to obtain insurance approvals for prescribed medicines through online, real-time insurance coverage approvals or denials for prescribed medicines, based upon clinical algorithms, plan design rules, and member eligibility.” (Dkt. No. 68, FAC ¶ 2, n. 2.) 4 4 21-CV-2081-GPC-DEB 1 the incorrect prescription of an antibiotic—used to treat bacterial infections—for a viral 2 infection, such as influenza. Relatedly, drug-to-diagnosis contraindication edits provide a 3 rejection alert when a patient requests to fill a prescription for a medication that a result 4 in an adverse drug event if the medication is taken by a patient with certain medical 5 conditions.” (Id.) These edits save lives and minimize errors, fraud, waste, and/or abuse 6 of medications and drive savings. (Id. ¶¶ 23-25.) 7 MedImpact did not have the ability to offer these edits before partnering with 8 Dimensions in the JV and instead of investing resources to develop its own drug-to- 9 diagnosis indication and contraindication edits, it took a “shortcut” and stole Plaintiffs’ 10 trade secrets. (Id. ¶ 5.) After the JV was terminated in 2017, MedImpact had to decide 11 how to proceed without Dimensions’ trade secrets concerning edits and retained 12 13 . (Id. ¶¶ 9, 45-48 (UNDER SEAL).) Plaintiffs allege that ” is based on Plaintiffs’ trade secrets. (Id. ¶ 91.) On April 5, 2018, an 14 15 MIL employee instructed that 16 17 (Id. ¶ 50.) That employee in June 2018 18 (Id. ¶ 51.) In 19 20 June 2018, other statements show that MedImpact was using Dimensions’ trade secrets. 21 (Id. ¶ 52.) 22 IQVIA claims that Defendants misused the partnership with Dimensions for their 23 own gain and engaged in years-long theft of those trade secrets and exploited that theft by 24 offering and/or providing these edits for sale in the United States, Australia, South Africa, 25 Canada, Turkey, 26 (UNDER SEAL).) The theft continued even after IQVIA AG acquired Dimensions in 27 28 as well as other locations. (Id. ¶ 8 5 21-CV-2081-GPC-DEB 1 2016. (Id. ¶ 9.) Defendants avoided years of research and development time and saved 2 tens of millions of dollars. (Id. ¶ 10.) Moreover, Defendants never disclosed that they 3 had been stealing the trade secrets and offering them for sale, and in fact, they actively 4 concealed these facts. (Id.) Further, Mr. Brown engaged in unlawful conduct while 5 serving on the Board and as General Manager of the JV. (Id. ¶ 11.) 6 7 8 9 Discussion A. Legal Standard as to Federal Rule of Civil Procedure 12(b)(6) Federal Rule of Civil Procedure (“Rule”) 12(b)(6) permits dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal 10 under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or 11 sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police 12 Dep’t., 901 F.2d 696, 699 (9th Cir. 1990). Under Federal Rule of Civil Procedure 13 8(a)(2), the plaintiff is required only to set forth a “short and plain statement of the claim 14 showing that the pleader is entitled to relief,” and “give the defendant fair notice of what 15 the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 16 550 U.S. 544, 555 (2007). 17 A complaint may survive a motion to dismiss only if, taking all well-pleaded 18 factual allegations as true, it contains enough facts to “state a claim to relief that is 19 plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 20 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual 21 content that allows the court to draw the reasonable inference that the defendant is liable 22 for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause of 23 action, supported by mere conclusory statements, do not suffice.” Id. “In sum, for a 24 complaint to survive a motion to dismiss, the non-conclusory factual content, and 25 reasonable inferences from that content, must be plausibly suggestive of a claim entitling 26 the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) 27 28 6 21-CV-2081-GPC-DEB 1 (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as true all 2 facts alleged in the complaint, and draws all reasonable inferences in favor of the 3 plaintiff. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). 4 B. 5 Request for Judicial Notice Defendants filed a request for judicial notice of Exhibits 1, 2, and 11 through 16, 6 documents filed or submitted in the prior arbitration, and Exhibits 3 and 4, publicly filed 7 records of the Cayman Islands. (Dkt. No. 78-2, Ds’ RJN.) Plaintiffs did not oppose. 8 On a Rule 12(b)(6) motion, the Court may not consider documents outside the 9 complaint. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). The Ninth 10 Circuit recognizes two exceptions to this general rule. First, documents which are 11 properly attached to the complaint may be considered and if “the documents are not 12 physically attached to the complaint, they may be considered if the documents’ 13 “authenticity . . . is not contested” and “the plaintiff’s complaint necessarily relies” on 14 them. Id. (citing Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998)). Second, a 15 court may take judicial notice of “matters of public record.” Id.; see Fed. R. Evid. 201. 16 Under the first exception, the incorporation by reference doctrine, a document may 17 be considered by the court “if the plaintiff refers extensively to the document or the 18 document forms the basis of the plaintiff's claim.” United States v. Ritchie, 342 F.3d 903, 19 908 (9th Cir. 2003). “The defendant may offer such a document, and the district court 20 may treat such a document as part of the complaint, and thus may assume that its contents 21 are true for purposes of a motion to dismiss under Rule 12(b)(6).” Id. However, a court 22 is not “required to accept as true allegations that contradict exhibits attached to the 23 Complaint or matters properly subject to judicial notice, or allegations that are merely 24 conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels-Hall v. 25 Nat’l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). 26 27 28 7 21-CV-2081-GPC-DEB 1 Plaintiffs seek judicial notice of certain documents that were either submitted or 2 awarded during the prior arbitration, (Dkt. No. 78-2, Ds’ RJN, Exs. 1, 2, 11-16). Because 3 the Court “may take notice of proceedings in other courts, both within and without the 4 federal judicial system, if those proceedings have a direct relation to matters at issue”, 5 U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th 6 Cir. 1992), the Court GRANTS Defendants’ unopposed request for judicial notice of 7 these documents. Additionally, the Court GRANTS Defendants’ unopposed request for 8 judicial notice of Exhibits 3 and 4 as they are publicly filed records of the Cayman 9 Islands. See Fed. R. Evid. 201. 10 C. 11 DTSA/CUTSA - Statute of Limitations Defendants move to dismiss the DTSA and the CUTSA claims as time barred by 12 the three-year statute of limitations, and, further, submit that tolling under fraudulent 13 concealment or equitable estoppel cannot save the claims. (Dkt. No. 78-1 at 14-21.) 14 Plaintiffs respond that fraudulent concealment or equitable estoppel, and equitable tolling 15 apply to make the DTSA and CUTSA claims timely. (Dkt. No. 82 at 10-20.) 16 On a motion to dismiss based on the statute of limitations, the Court must assess 17 whether “the running of the statute is apparent on the face of the complaint.” Huynh v. 18 Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006) (quoting Jablon v. Dean 19 Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980) (“When a motion to dismiss is based on 20 the running of the statute of limitations, it can be granted only if the assertions of the 21 complaint, read with the required liberality, would not permit the plaintiff to prove that 22 the statute was tolled.”)). Here, because the Court grants Defendants’ request for judicial 23 notice, it will consider the allegations in the complaint as well as the judicially noticed 24 documents in determining whether the statute of limitations has run. 25 /// 26 /// 27 28 8 21-CV-2081-GPC-DEB 1 1. 2 The DTSA and CUTSA impose a three-year statute of limitations. 18 U.S.C. § Accrual Date 3 1836(d)5; Cal. Civ. Code § 3426.6.6 They also provide that “a continuing 4 misappropriation constitutes a single claim of misappropriation.” 18 U.S.C. § 1836(d); 5 see Cal. Civ. Code § 3426.6 (“a continuing misappropriation constitutes a single claim”). 6 Defendants argue that both causes of action accrued on February 20, 2018 when 7 Dimensions filed a counterclaim in the arbitration against MIL and MI-HK alleging they 8 breached the JVA and SLC by using its “Diagnosis-to-Drug Indication and 9 Contraindication checks.” (Dkt. No. 78-1 at 13.) They maintain that February 20, 2018 10 is when Plaintiffs should have discovered and did discover the alleged misappropriation 11 that is asserted in the FAC. (Id.) In their opposition, Plaintiffs do not directly challenge 12 the accrual date of February 20, 20187 but instead argue that their trade secret claims are 13 timely because the limitations period should be tolled, from the filing of the counterclaim 14 in the arbitration on February 20, 2018 to at least the dismissal of the counterclaim on 15 April 16, 2019, during the time period when Defendants hindered Plaintiffs’ diligence by 16 blocking discovery for these claims. (Dkt. No. 82 at 10.) 17 18 19 20 21 22 23 24 25 26 27 28 “(d) Period of limitations.--A civil action under subsection (b) may not be commenced later than 3 years after the date on which the misappropriation with respect to which the action would relate is discovered or by the exercise of reasonable diligence should have been discovered. For purposes of this subsection, a continuing misappropriation constitutes a single claim of misappropriation.” 18 U.S.C. § 1836(d). 5 “An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.” Cal. Civ. Code § 3426.6 6 7 Even though Plaintiffs implicitly appear to reject February 20, 2018 as the accrual date, they, in the FAC and opposition, do not affirmatively assert an accrual date of when the statute of limitations should have begun to run on the DTSA and CUTSA claims. 9 21-CV-2081-GPC-DEB Therefore, relying on the accrual date of February 20, 20188, the DTSA and 1 2 CUTSA causes of action, filed on December 13, 2021, are untimely unless a theory of 3 tolling applies to excuse the untimely filing. 4 2. 5 “The doctrine of equitable estoppel, often referred to as fraudulent concealment, is Equitable Estoppel/Fraudulent Concealment 6 based on the principle that a party ‘should not be allowed to benefit from its own 7 wrongdoing.’” Estate of Amaro v. City of Oakland, 653 F.3d 808, 813 (9th Cir. 2011) 8 (quoting Collins v. Gee West Seattle LLC, 631 F.3d 1001, 1004 (9th Cir. 2011)). For 9 equitable estoppel, a plaintiff must plead “(1) knowledge of the true facts by the party to 10 be estopped, (2) intent to induce reliance or actions giving rise to a belief in that intent, 11 (3) ignorance of the true facts by the relying party, and (4) detrimental reliance.” Id. 12 (quoting Bolt v. United States, 944 F.2d 603, 609 (9th Cir. 1991)). “[E]quitable estoppel 13 applies when a plaintiff who knows of his cause of action reasonably relies on the 14 defendant's statements or conduct in failing to bring suit.” Stitt v. Williams, 919 F.2d 15 516, 522-23 (9th Cir. 1990) (“This doctrine may be available when the defendant lulls the 16 plaintiff into failing to bring suit.”). California applies the similar equitable estoppel 17 factors as federal law. Lukovsky v. City & Cnty. of San Francisco, 535 F.3d 1044, 1051- 18 52 (9th Cir. 2008) (“California equitable estoppel is thus similar to and not inconsistent 19 with federal common law, as both focus on actions taken by the defendant which prevent 20 the plaintiff from filing on time.”). 21 22 23 24 25 26 27 28 8 In the prior order, the Court had previously noted, based on the complaint and the judicially noticed documents, that on February 20, 2018, Dimensions was armed with some evidence to support counterclaims in the arbitration that Defendants were engaged in some sort of misappropriating conduct concerning their intellectual property, including “Diagnosis-to Drug Indication and Contraindication checks.” (Dkt. No. 59 at 14) 10 21-CV-2081-GPC-DEB 1 2 3 4 5 6 In Johnson v. Henderson, 314 F.3d 409, 414 (9th Cir. 2002), the Ninth Circuit also noted that: [a] finding of equitable estoppel rests on the consideration of a nonexhaustive list of factors, including: (1) the plaintiff's actual and reasonable reliance on the defendant's conduct or representations, (2) evidence of improper purpose on the part of the defendant, or of the defendant's actual or constructive knowledge of the deceptive nature of its conduct, and (3) the extent to which the purposes of the limitations period have been satisfied. 7 8 9 Id. (quoting Santa Maria v. Pacific Bell, 202 F.3d 1170, 1176 (9th Cir. 2000)). Even though the Ninth Circuit has referred to equitable estoppel as fraudulent 10 concealment, see Estate of Amaro, 653 F.3d at 813; Lukovsky, 535 F.3d at 1051 11 (“Equitable estoppel, on the other hand, focuses primarily on actions taken by the 12 defendant to prevent a plaintiff from filing suit, sometimes referred to as ‘fraudulent 13 concealment’”); Johnson, 314 F.3d at 414 (“Equitable estoppel, then, may come into play 14 ‘if the defendant takes active steps to prevent the plaintiff from suing in time’—a 15 situation that the Seventh Circuit terms ‘fraudulent concealment.’”), the elements to 16 support equitable estoppel are distinct from fraudulent concealment. 17 Specifically, a plaintiff seeking to rely on fraudulent concealment must “plead 18 facts showing that [the defendant] affirmatively misled it, and that [the plaintiff] had 19 neither actual nor constructive knowledge of the facts giving rise to its claim despite its 20 diligence in trying to uncover those facts.” Hexcel Corp. v. Ineos Polymers, Inc., 681 21 F.3d 1055, 1060 (9th Cir. 2012). “[F]raudulent concealment . . . requires a showing . . . 22 the plaintiff was, in fact, ignorant of the existence of his cause of action.” Id. (quoting 23 Wood v. Santa Barbara Chamber of Commerce, Inc., 705 F.2d 1515, 1521 (9th Cir. 24 1983)). Moreover, allegations of fraudulent concealment must be pled with particularity. 25 Conmar Corp. v. Mitsui & Co. (USA), Inc., 858 F.2d 499, 502 (9th Cir. 1988) 26 (“Conclusory statements are not enough.”). Under California law, fraudulent 27 28 11 21-CV-2081-GPC-DEB 1 concealment requires a showing of “(1) when the fraud was discovered; (2) the 2 circumstances under which it was discovered; and (3) that the plaintiff was not at fault for 3 failing to discover it or had no actual or presumptive knowledge of facts sufficient to put 4 him on inquiry.” Mills v. Forestex Co., 108 Cal. App. 4th 625, 641 (2003). Although “it 5 is generally inappropriate to resolve the fact-intensive allegations of fraudulent 6 concealment at the motion to dismiss stage,” In re Rubber Chemicals Antitrust Litig., 504 7 F. Supp. 2d 777, 789 (N.D. Cal. 2007), Plaintiffs must allege specific factual allegations 8 of fraudulent concealment to survive a motion to dismiss, In re Transpacific Passenger 9 Air Transp. Antitrust Litig., No. C 07–5634 CRB, 2011 WL 1753738, at *20–21 (N.D. 10 Cal. May 9, 2011). 11 In their briefing, the parties conflate the elements of equitable estoppel and 12 fraudulent concealment by raising arguments on certain elements of each tolling doctrine. 13 Defendants move to dismiss arguing that the third element, “ignorance of the true facts 14 by the relying party”, of equitable estoppel articulated in Estate of Amaro cannot be met 15 as well as the first and third non-exhaustive factors, “reasonable reliance”, and “extent to 16 which the purposes of the limitations period have been satisfied” articulated in Johnson 17 cannot be satisfied. (Dkt. No. 78-1 at 14.) Plaintiffs oppose arguing that they have 18 sufficiently alleged the elements of equitable estoppel to make their trade secrets claims 19 timely under Estate of Amaro9 and they oppose Plaintiffs’ argument on the two non- 20 exhaustive factors of Johnson. (Dkt. No. 82 at 15.10) In reply, Defendants maintain that 21 22 23 24 25 26 27 28 Defendants do not reply to Plaintiffs’ argument that the first, second and fourth elements of equitable estoppel established in Estate of Amaro. As such, these factors are not in dispute and the Court’s analysis is not needed. 9 Plaintiffs cite to Estate of Amaro for the elements for “fraudulent concealment”; however, that case addressed equitable estoppel. (See Dkt. No. 82 at 15.) 10 12 21-CV-2081-GPC-DEB 1 Plaintiffs had constructive knowledge about the trade secret issues since at least February 2 2018 and did not lose that constructive knowledge. (Dkt. No. 85 at 7-8.) 3 4 a. Ignorance of the True Facts by the Relying Party On the third Estate of Amaro factor, “ignorance of the true facts by the relying 5 party”, the Ninth Circuit reiterated precedent stating that “a plaintiff can know, or 6 suspect, that she has a cause of action and still be ‘ignorant of the true facts’ of the case 7 such as “when a plaintiff who knows of his cause of action reasonably relies on the 8 defendant's statements or conduct in failing to bring suit.” Estate of Amaro, 653 F.3d at 9 813 (quoting Stitt v. Williams, 919 F.2d 516, 522 (9th Cir. 1990)). In other words, “the 10 focus of the equitable estoppel analysis is not whether the plaintiff knew she had a cause 11 of action—or even pursued some other form of litigation based on that knowledge—but 12 whether the defendant's fraudulent concealment or misrepresentation deprived the 13 plaintiff of a full understanding of the true facts, and thus, dissuaded the plaintiff from 14 filing the claim at issue within the limitations period.” Id. 15 Here, Defendants maintain that Plaintiffs had at least constructive knowledge of 16 the initial act of misappropriation that Defendants had incorporated and adopted the 17 ability to manage diagnosis-to-drug indication and contraindication edits since at least 18 February 2018. (Dkt. No. 78-1 at 14-15.) Plaintiffs argue that the statute of limitations 19 should be tolled for about fourteen months from February 20, 2018, the date the 20 counterclaim was filed in the arbitration to at least April 16, 2019, the date they withdrew 21 the counterclaim based on Defendants’ conduct in blocking or hindering discovery of the 22 “true facts” to support their current claims. (Dkt No. 82 at 10.) 23 After a careful review of the allegations in the FAC and the judicially noticed 24 documents, the Court concludes that Plaintiffs have sufficiently alleged equitable 25 estoppel to survive a motion to dismiss based on Defendants’ alleged conduct in 26 blocking, hindering and affirmatively misrepresenting facts during the arbitration. See 27 28 13 21-CV-2081-GPC-DEB 1 Johnson, 314 F.3d at 414 (“Equitable estoppel, then, may come into play “if the 2 defendant takes active steps to prevent the plaintiff from suing in time”). 3 On January 23, 2018, MIL and MI-HK filed claims in arbitration against 4 Dimensions with the DIFC-LCIA for breaches of the terms of the parties’ JVA and SLC 5 with a Partial Final Award on Liability on April 16, 2019 and a Final Award on July 24, 6 2019. (Dkt. No. 87, Bennett Decl., Exs. 1, 2 (UNDER SEAL).) According to the FAC, 7 during the arbitration, on February 20, 2018, Dimensions filed a counterclaim for breach 8 of contract against MIL and MI-HK for using Dimensions’ “Diagnosis-to-Drug 9 Indication and Contraindication checks.” (Dkt. No. 68, FAC ¶ 82 (UNDER SEAL).) 10 Plaintiffs allege that at the time when the counterclaims were filed, they did not have 11 actual or constructive knowledge of the underlying facts or a Rule 1111 basis to file their 12 trade secrets claims. (Id. ¶ 80.) It was not until August 2021 when MedImpact produced 13 documents in the Related Case of MedImpact v. IQVIA, 19cv1865-GPC(DEB) that 14 Plaintiffs procured the evidence through discovery. (Id.) According to the FAC, prior to 15 the discovery in the Related Case, Plaintiffs “did not have actual or constructive 16 knowledge that MedImpact was developing a new product to include drug-to-diagnosis 17 edits stolen from Plaintiffs ( 18 shared with 19 included drug-to-diagnosis edits stolen from (sic) MedImpact; or that MedImpact was 20 offering Plaintiffs’ drug-to-diagnosis edits for sale.” (Id. ¶ 89; see also id. ¶ 81) 21 ); that Plaintiffs’ drug-to-diagnosis edits had been ); that MedImpact U.S.’s domestic PBM engine Plaintiffs explain that prior to the evidence procured in August 2021, they did not 22 know the specifics that MedImpact was using their stolen trade secrets of drug-to- 23 diagnosis edits to develop that these trade secrets had been shared with 24 25 26 27 28 “Rule 11 imposes a duty on attorneys to certify that they have conducted a reasonable inquiry and have determined that any papers filed with the court are well grounded in fact, legally tenable, and “not interposed for any improper purpose.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). 11 14 21-CV-2081-GPC-DEB 1 and they were offering Plaintiffs’ drug-to-diagnosis edits for sale. (Id.) Instead, 2 Plaintiffs allege the counterclaim in the arbitration concerned MedImpact's U.S.’s 3 domestic PBM platform, did not relate to 4 MedImpact’s domestic PBM platform would be capable of performing diagnosis-editing 5 in the future. (Id. ¶¶ 83, 84.) In other words, Plaintiffs did not understand the full scope 6 of Plaintiffs’ intended scheme to misappropriate their trade secrets. The FAC also alleges 7 that the arbitration counterclaim was broad and included not only the drug-to-diagnosis 8 edits but also other issues related to “web services, electronic prescribing capabilities, and 9 controlled medications, among other things.” (Id. ¶ 85.) As such, when the counterclaim and they only knew at the time that 10 was filed in the arbitration, Plaintiffs claim they did not have actual or constructive 11 knowledge of the details of MedImpact’s misappropriation scheme. 12 13 14 Plaintiffs allege that Dimensions was “highly diligent” in pursuing the counterclaim in arbitration but MedImpact refused and blocked discovery into inspecting and concealed evidence of its misuse of Plaintiffs’ drug-to-diagnosis trade 15 secrets during the entirety of the arbitration. (Id. ¶¶ 95, 96, 97, 98.) MedImpact’s refusal 16 or resistance to discovery sought by Dimensions was stated in Dimensions’ expert reports 17 dated December 14, 2018, January 17, 2019, February 12, 2019 and by the testimony of 18 Dimensions’ expert on February 24, 2019. (Id. ¶ 95.) In fact, MedImpact blocked 19 Dimensions from inspecting 20 (Id. ¶ 98.) In addition, from January 23, 2018 to July 24, 2019, the duration of the arbitration, 21 Plaintiffs assert that MedImpact and Mr. Brown falsely and repeatedly denied that 22 MedImpact had misused Dimensions’ drug-to-diagnosis indication and contraindication 23 edits. (Id. ¶¶ 99a-99k.) The FAC points to pleadings, arguments, witness statements, 24 expert reports and sworn statements by Mr. Brown affirmatively denying or asserting that 25 MedImpact did not perform drug-indication edits outside the JV or that MedImpact 26 would not have use any of Dimensions’ proprietary drug-to-diagnosis edits. (Id.) The 27 28 15 21-CV-2081-GPC-DEB 1 FAC alleges false statements on September 23, 2018, December 14, 2018, January 3, 2 2019, and February 11, 2019. (Id.) 3 Based on this, the FAC alleges that Defendants fraudulently concealed their misuse 4 of Plaintiffs’ trade secrets by knowingly making false statements and concealing highly 5 relevant evidence. (Id. ¶ 100.) They maintain that Dimensions justifiably relied on 6 MedImpact’s representations, and on March 6, 2019, it withdrew all its counterclaim in 7 the arbitration. (Id. ¶ 101.) Dimensions wrote, 8 9 (Id. (UNDER SEAL).) But Dimensions informed 10 11 the arbitrator that it “ .” (Id. ¶ 102.) 12 13 According to Plaintiffs, at the time Dimensions withdrew its counterclaim, it had no basis 14 to seek relief. (Id.) 15 In the withdrawal, Dimensions also stated “[ 16 17 18 but 19 this statement did not provide Plaintiffs with actual or constructive notice of any alleged 20 misappropriation because it references potential business in 21 Moreover, reference to the PBM platform offered in 22 to-diagnosis edits and the system had not yet been built. (Id.) 23 (Id. ¶ 104.) makes no reference to drug- Therefore, at the time of withdrawal on March 6, 2019, Plaintiffs claim that they 24 still did not have actual or constructive knowledge that “Medimpact was developing a 25 new product to include drug-to-diagnosis edits stolen from Plaintiffs ( 26 Plaintiffs’ drug-to-diagnosis edits had been shared with 27 28 ; that 16 21-CV-2081-GPC-DEB 1 that MedImpact U.S.’s domestic PBM engine included drug-to-diagnosis edits stolen 2 from MedImpact; or that MedImpact was offering Plaintiffs’ drug-to-diagnosis edits for 3 sale.” (Id. ¶ 103.) Plaintiffs also suggest that even if they had notice of the claims at the 4 time of withdrawal on March 6, 2019 or during the arbitration hearing held from 5 February 18, 2019 to February 24, 2019, these dates were within the three-year statute of 6 limitations period. (Id. ¶ 104.) 7 On February 21, 2019, Yousef Ghosheh of Dimensions testified during the 8 arbitration that the the name of the file sent by MedImpact to CamelR 9 potentially including Dimensions’ trade secrets, “ 10 ”, but MedImpact refused to disclose the 11 discovery. (Id. ¶ 105.) The FAC complains that even if Yousef Ghosheh’s testimony put 12 Plaintiffs on notice of a claim, it is within the statute of limitations period. (Id.) during 13 The FAC alleges that despite Dimensions’ diligence in timely pursuing these 14 claims against MedImpact during the arbitration, Plaintiffs could not have discovered and 15 did not discover the alleged claims until the summer of 2021 during discovery in the 16 Related Case due to MedImpact’s false statements and concealment in the arbitration. 17 (Id. ¶ 106.) 18 On September 26, 2019, MedImpact filed the complaint in the Related Case. (Id. ¶ 19 107.) IQVIA filed an answer asserting an unclean hands defense based on MedImpact’s 20 misappropriation of the drug-to-diagnosis edits, among other things. (Id.) Plaintiffs 21 allege that at the time the complaint was filed in the Related Case, they did not have a 22 basis under Rule 11 to file a counterclaim against MedImpact related to the drug-to- 23 diagnosis edits. (Id. ¶ 108.) IQVIA Inc. and IQVIA AG served discovery requests 24 regarding their unclean hands defense, and documents were not produced by MedImpact 25 until May 17, 2021 and more than half of the documents were produced on or after 26 August 6, 2021. (Id. ¶¶ 109, 110.) In fact, in a March 2021 discovery response, IQVIA 27 28 17 21-CV-2081-GPC-DEB 1 running of a statute of limitations’ and ‘is analogous to a clock stopping, then 2 restarting’”). Even though Plaintiffs suspected the initial misappropriation at the time 3 Dimensions filed the counterclaim in the arbitration, Plaintiffs have alleged Defendants’ 4 conduct prevented and dissuaded Plaintiffs from learning and knowing the true facts. 5 Whether Defendants, in fact, engaged in such conduct are issues of fact that the Court 6 cannot resolve on a motion to dismiss. 7 b. 8 9 Reasonable Reliance on the Defendant’s Conduct or Representations On the first Johnson non-exhaustive factor, reasonable reliance on the defendant’s 10 conduct or representations, the FAC alleges that Dimensions justifiably relied on 11 MedImpact’s representation and on March 6, 2019, it withdrew all its counterclaims in 12 the arbitration. (Dkt. No. 68, FAC ¶ 101.) While Defendants point to language that 13 Plaintiffs did not reasonably rely when Dimensions withdrew the counterclaim because at 14 that time it was “ 15 confidential information, (Dkt. No. 82 at 20), whether a plaintiff’s reliance was 16 reasonable “depends on a myriad of factual questions.” Vu v. Prudential Prop. & 17 Casualty Ins. Co., 26 Cal. 4th 1142, 1153 (2001) (equitable estoppel as a defense to 18 statute of limitations). Accordingly, taking the allegations in the FAC as true, the Court 19 concludes Plaintiffs have sufficiently alleged reasonable reliance on Defendants’ conduct. 20 21 c. ” with MedImpact’s use of Dimensions’ protectable Extent to Which the Purposes of the Limitations Period Have Been Satisfied 22 On the third Johnson non-exhaustive factor, the extent to which the purposes of the 23 limitations period have been satisfied, Defendants argue that the purpose of enforcing the 24 statute of limitations is to encourage plaintiffs to pursue claims diligently and protect 25 defendants from defending stale claims. (Dkt. No. 78-1 at 20-21.) Plaintiffs respond that 26 the purpose of the statute of limitations is to provide timely notice to Defendants of 27 28 19 21-CV-2081-GPC-DEB 1 Plaintiffs’ claims which has been met because Defendants have been on notice of the 2 claims since the arbitration. (Dkt. No. 82 at 22 n. 11.) 3 The purpose of a statute of limitation is “repose, elimination of stale claims, and 4 certainty about a plaintiff's opportunity for recovery and a defendant's potential 5 liabilities.” Young v. United States, 535 U.S. 43, 47 (2002) (quoting Rotella v. Wood, 6 528 U.S. 549, 555 (2000)). Setting a deadline to file a complaint encourages diligence by 7 plaintiffs and protects defendants against “stale or unduly delayed claims.” In re Neff, 8 824 F.3d 1181, 1185 (9th Cir. 2016). Yet, the purpose of equitable estoppel is to toll the 9 limitations period when a defendant engages in fraudulent conduct to prevent the plaintiff 10 11 from filing a timely suit. See Johnson, 314 F.3d at 414. Here, because Plaintiffs have sufficiently alleged equitable estoppel based on 12 Defendants’ alleged conduct in preventing Plaintiffs from discovering the true facts on 13 the DTSA and CUTSA claims, whether the purposes of the statute of limitations have 14 been met is a disputed question of fact not appropriate on a motion to dismiss. 15 3. 16 Finally, Defendants argue that Plaintiffs have not plead any new and relevant facts Pleading Facts with the Requisite Particularity 17 with the requisite particularity but instead simply allege that Mr. Brown denied 18 wrongdoing or MedImpact withheld discovery. (Dkt. No. 78-1 at 21.) Plaintiffs respond 19 that they have provided details as to the alleged affirmative statements and what was 20 concealed. (Dkt. No. 82 at 21-22.) 21 “The plaintiff must demonstrate that he relied on the defendant's misconduct in 22 failing to file in a timely manner and “must plead with particularity the facts which give 23 rise to the claim of fraudulent concealment.” Guerrero v. Gates, 357 F.3d 911, 920 (9th 24 Cir. 2004) (plaintiff's equitable estoppel defense to statute of limitations was barred 25 where plaintiff “failed to plead with particularity any . . . fraudulent behavior”). 26 27 28 20 21-CV-2081-GPC-DEB 1 Plaintiffs have provided detailed allegations, with the requisite particularity, to 2 support equitable estoppel. They allege specific dates, identified the author or speaker, 3 the content of the statements and why the statements were false. (Dkt. No. 68, FAC ¶¶ 4 99(a)-(k).) Plaintiffs allege instances when Mr. Brown falsely denied that MedImpact 5 misappropriated Dimensions’ trade secret and instances when Mr. Brown affirmatively 6 asserted that MedImpact did not misuse Dimensions’ trade secrets. (Id.) They also claim 7 that Heather Bates, MedImpact’s expert, affirmatively and falsely stated that MIL and 8 MedImpact do not perform drug-indication edits outside the JV. (Id.) MedImpact’s 9 allegations are not mere denials of liability but include affirmative misrepresentations. 10 Accordingly, Defendants’ argument that Plaintiffs have failed to allege the requisite 11 particularity concerning equitable estoppel is without merit and the court DENIES 12 Defendants’ motion to dismiss on this ground.12 In conclusion, the Court DENIES Defendants’ motion to dismiss the DTSA and 13 14 CUTSA based on the statute of limitations. Because the Court concludes that Plaintiffs 15 have sufficiently alleged equitable estoppel to toll the statute of limitations, the Court 16 need not address equitable tolling under federal and state law. 13 17 D. 18 RICO Defendants argue that the RICO cause of action fails for lack of distinctness. (Dkt. 19 No. 78-1 at 23-24.) In response, Plaintiffs do not address the substantive law on 20 distinctness but argue that to the extent MedImpact pled the same enterprise and persons 21 22 23 24 25 26 27 28 Defendants also challenge Plaintiffs’ allegation that MedImpact or Mr. Brown lied in denying wrongdoing or that MedImpact withheld evidence. (Dkt. No. 78-1 at 22.) However, these are factual issues that the Court is unable to determine on a motion to dismiss. 12 The Court also need not address Defendants’ summary argument that the discovery rule, continuing violation and continuous accrual theories of tolling do not apply. (Dkt. No. 78-1 at 23.) 13 21 21-CV-2081-GPC-DEB 1 in the Related Case, then either the RICO claims in both cases survive or both claims 2 must fail.14 (Dkt. No. 82 at 22.) 3 The FAC alleges that all Defendants, comprising of a parent company, two 4 subsidiaries, and an officer, qualify as “persons” and the same Defendants are members 5 of an associated-in-fact “enterprise” or the “MedImpact RICO Enterprise.” (Dkt. No. 68, 6 FAC ¶¶ 139, 140.) It also summarily claims that each member of the MedImpact RICO 7 Enterprise is separate and distinct from the Enterprise. (Id. ¶ 141.) In order to establish RICO liability under § 1962(c), a plaintiff “must allege and 8 9 prove the existence of two distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that is 10 not simply the same ‘person’ referred to by a different name.” Cedric Kushner 11 Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). The term “enterprise” is defined as 12 “any individual, partnership, corporation, association, or other legal entity, and any union 13 or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 14 1961(4). “A plaintiff cannot meet RICO's distinctness requirement by alleging that a 15 RICO enterprise is comprised of entities within a corporate family and that those 16 individual corporate entities are the RICO persons.” Geovector Corp. v. Samsung Elecs. 17 Co. Ltd., Case No. 16-cv-02463-WHO, 2016 WL 6662996, at *5 (N.D. Cal. Nov. 10, 18 2016); Chagby v. Target Corp., 358 Fed. App’x 805, 808 (9th Cir. 2009) (theory that “an 19 enterprise existed between Target Corporation and its wholly-owned subsidiaries fails to 20 meet the distinctiveness requirement of civil RICO claims”). While “a plaintiff may name all members of an associated-in-fact enterprise as 21 22 individual RICO persons,” the individual members must be “’separate and distinct’ from 23 the enterprise they collectively form.” Moran v. Bromma, 675 Fed. App’x 641, 645 (9th 24 25 26 27 28 14 In the Related Case, the RICO claim survived a motion to dismiss because IQVIA did not move to dismiss the RICO claims based on lack distinctness but on other grounds. (Case No. 19cv1865GPC(DEB), Dkt. No. 107.) 22 21-CV-2081-GPC-DEB 1 Cir. 2017) (quoting River City Mkts., Inc. v. Fleming Foods W., Inc., 960 F.2d 1458, 2 1461-62 (9th Cir. 1992) (“a single individual or entity cannot be both the RICO 3 enterprise and an individual RICO defendant”) and Living Designs, Inc. v. E.I. Dupont de 4 Nemours and Co., 431 F.3d 353, 361 (9th Cir. 2005) (if the “enterprise” consisted only of 5 [corporate defendant] and its employees, the pleading would fail for lack of 6 distinctiveness.”)). Therefore, a plaintiff must allege that the individual members are 7 separate and distinct from the enterprise. See id.; Ice Cream Distrib. of Evansville, LLC 8 v. Dreyer's Grand Ice Cream, Inc., No. 09–5815 CW, 2010 WL 3619884, at *5 (N.D. 9 Cal. Sept. 10, 2010) (“[A] § 1962(c) claim [cannot] be based on a RICO enterprise 10 comprised of a corporation, a wholly-owned subsidiary and an employee of that 11 corporate family if these entities were also plead as the RICO persons.”). 12 Here, Plaintiffs have not alleged in the FAC or argued in opposition that each 13 member of the enterprise is separate and distinct from the enterprise. Because Plaintiffs 14 have not alleged distinctness as required under RICO, the Court GRANTS Defendants’ 15 motion to dismiss. See Chang v. Noh, Case No. 2:17–cv–06205–RGK–JC, 2017 WL 16 7411155, at *4 (C.D. Cal. Nov. 27, 2017) (dismissing RICO claims for alleging that Noh, 17 Yoon, and Park are RICO persons and that together they formed an associated-in-fact 18 enterprise but fail to allege how the enterprise and the alleged RICO persons are distinct 19 from each other). As such, the Court declines to address Defendants’ additional arguments seeking 20 21 dismissal for failing to allege domestic injury and concrete injury. See id. at *4 n. 1 22 (“Because the Court g[r]ants the Motion as to the RICO claim for failure to sufficiently 23 allege the enterprise element, the Court need not address Defendants’ additional 24 arguments for dismissal, namely that Chang failed to plead the predicate acts with the 25 requisite degree of particularity, relatedness between the acts and continuity.”). 26 /// 27 28 23 21-CV-2081-GPC-DEB 1 E. 2 Breach of Fiduciary Duty Defendants argue that (1) Cayman law applies to the fiduciary duty claim under the 3 internal affairs doctrine; (2) the Court should decline supplemental jurisdiction over the 4 cause of action because Plaintiffs failed to plead Dimensions’ principal place of business 5 in the FAC; and (3) under Cayman law, the breach of fiduciary duty claim fails to state a 6 claim because Mr. Brown, as a board member and general manager of the Joint Venture, 7 did not owe a fiduciary duty to IQVIA AG and IQVIA Inc. given that they were not 8 members of the Joint Venture and did not owe a fiduciary duty to Dimensions since they 9 have not alleged a “special relationship.”15 (Dkt. No. 78-1 at 24-27.) In response, 10 Plaintiffs argue that Defendants have not established that Cayman Law applies due to 11 several questions of fact not amenable on a motion to dismiss. (Dkt. No. 82 at 25-27.) 12 Irrespective of which law applies, they claim that as a fiduciary Mr. Brown owed a 13 fiduciary duty to the JV, as the corporation and its shareholders, Dimensions, MI-HK and 14 MIL. (Id. at 27-28.) They also argue that whether a special relationship existed between 15 Mr. Brown and Dimensions is a question of fact not to be decided at this stage. (Id.) 16 The FAC claims that Mr. Brown breached his fiduciary duty to the JV and 17 Plaintiffs “by misusing Plaintiffs’ confidential information in violation of confidentiality 18 agreements; partnering with Dimensions under false pretenses; directly participating in 19 making materially false and/or misleading statements to Plaintiffs about the purpose of 20 the Joint Venture (concealing Defendants’ fraudulent scheme from Plaintiffs); misusing 21 Plaintiffs’ confidential information; diverting opportunities away from the Joint Venture; 22 and serving MedImpact’s ulterior motives and engaging in self-dealing. (Dkt. No. 68, 23 FAC ¶ 164.) All named Plaintiffs allege a breach of fiduciary duty claim against Mr. 24 25 26 27 28 15 Defendants also argue that the breach of fiduciary duty claim is an impermissible derivative action under Cayman law, and if California law applies, the breach of fiduciary duty claim is time barred, and preempted. (Dkt. No. 78-1 at 29-30.) 24 21-CV-2081-GPC-DEB 1 Brown, (Dkt. No. 68, FAC ¶¶ 161-166), yet the parties do not dispute that this cause of 2 action applies solely to Mr. Brown’s alleged fiduciary duty to Plaintiff Dimensions and 3 not IQVIA Inc. or IQVIA AG. (See Dkt. No. 78-1 at 29; Dkt. No. 82 at 27-28 (solely 4 arguing that Mr. Brown owed a breach of fiduciary duty to Dimensions).) Therefore, the 5 Court considers only Dimensions’ breach of fiduciary duty claim against Mr. Brown. 6 As a threshold matter, the parties dispute which law applies to the breach of 7 fiduciary duty cause of action. “A federal court sitting in diversity must look to the 8 forum state's choice of law rules to determine the controlling substantive law.” Mazza v. 9 Am. Honda Motor Co., 666 F.3d 581, 589 (9th Cir. 2012) (quoting Zinser v. Accufix 10 Research Inst., Inc., 253 F.3d 1180, 1187 (9th Cir.), opinion amended on denial of reh'g, 11 273 F.3d 1266 (9th Cir. 2001)); Downing v. Abercrombie & Fitch, 265 F.3d 994, 1005 12 (9th Cir. 2001) (“In a diversity case, federal courts apply the substantive law of the forum 13 in which the court is located, including the forum's choice of law rules.”). 14 California has adopted and codified the “internal affairs doctrine,” which requires a 15 court to apply the law of the state of incorporation to those matters concerning the 16 internal affairs of a corporation. State Farm Mut. Auto. Ins. Co. v. Superior Ct., 114 Cal. 17 App. 4th 434, 442 (2003); Vaughn v. LJ Int'l, Inc., 174 Cal. App. 4th 213, 223 (2009): 18 Cal. Corp. Code § 2116 (“The directors of a foreign corporation transacting intrastate 19 business are liable to the corporation, its shareholders, creditors, receiver, liquidator or 20 trustee in bankruptcy for the making of unauthorized dividends, purchase of shares or 21 distribution of assets or false certificates, reports or public notices or other violation of 22 official duty according to any applicable laws of the state or place of incorporation or 23 organization, whether committed or done in this state or elsewhere.”). “The internal 24 affairs doctrine is a conflict of laws principle which recognizes that only one State should 25 have the authority to regulate a corporation's internal affairs—matters peculiar to the 26 relationships among or between the corporation and its current officers, directors, and 27 28 25 21-CV-2081-GPC-DEB 1 shareholders—because otherwise a corporation could be faced with conflicting 2 demands.”16 Lidow v. Superior Ct., 206 Cal. App. 4th 351, 358-59 (2012) (quoting 3 Edgar v. MITE Corp., 457 U.S. 624, 645 (1982) (internal quotation marks omitted)). California recognizes a limited exception to the internal affairs doctrine “where, 4 5 with respect to the particular issue, some other state has a more significant relationship . . 6 . to the parties and the transaction[.]” Id. at 359 (quoting Restatement 2d Conflicts of 7 Laws, § 309). In Lidow, after reviewing precedent on the application of this “exception”, 8 the court of appeals commented “that courts are less apt to apply the internal affairs 9 doctrine when vital statewide interests are at stake, such as maintaining the integrity of 10 California security markets and protecting its citizens from harmful conduct. . . [and] 11 when less vital state interests are at stake (e.g., whether a foreign corporation 12 headquartered in another state pays promised dividends to its shareholders, or whether 13 the shareholder of a foreign corporation must fulfill certain procedural requirements set 14 before bringing a derivative suit), courts are more apt to apply the internal affairs 15 doctrine.” Id. at 362 (declining to apply internal affairs because wrongful termination in 16 violation of public policy concerns conduct beyond corporate governance and implicate 17 California’s vital state interest in protecting its residents from harmful conduct such as 18 retaliation and wrongful termination). 19 The California Supreme Court has suggested and the Ninth Circuit has applied the 20 internal affairs doctrine, the state of the law of incorporation, to breach of fiduciary duty 21 22 23 24 25 26 27 28 Matters that typically fall under the internal affairs doctrine and “which involve primarily a corporation's relationship to its shareholders include steps taken in the course of the original incorporation, the election or appointment of directors and officers, the ad/option of by-laws, the issuance of corporate shares, preemptive rights, the holding of directors' and shareholders' meetings, methods of voting including any requirement for cumulative voting, shareholders' rights to examine corporate records, charter and by-law amendments, mergers, consolidations and reorganizations and the reclassification of shares.” Lidow, 206 Cal. App. 4th at 359. 16 26 21-CV-2081-GPC-DEB 1 claims. In Nedlloyd, even though the California Supreme Court found that the choice-of- 2 law provision applied to the plaintiff’s breach of fiduciary duty claim, it also noted that it 3 would reach the same conclusion based on the internal affairs doctrine. Nedlloyd Lines 4 B.V. v. Superior Ct., 3 Cal. 4th 459, 471 (1992) (“even in the absence of a choice-of-law 5 clause, Hong Kong's overriding interest in the internal affairs of corporations domiciled 6 there would in most cases require application of its law.”). The Ninth Circuit has stated, 7 “[c]laims involving ‘internal affairs’ of corporations, such as the breach of fiduciary 8 duties, are subject to the laws of the state of incorporation.” Davis & Cox v. Summa 9 Corp., 751 F.2d 1507, 1527 (9th Cir. 1985) superseded on other grounds as stated in 10 Mattel, Inc. v. MGA Entm't, Inc., 705 F.3d 1108, 1110 (9th Cir. 2013); see also In re 11 Verisign, Inc., Derivative Litig., 531 F. Supp. 2d 1173, 1215 (N.D. Cal. 2007) (claims 12 related to internal affairs of a corporation include “claims for breach of fiduciary duty, 13 accounting, unjust enrichment, rescission, constructive fraud, corporate waste, breach of 14 contract, gross mismanagement, and restitution”); Voss v. Sutardja, No. 14-01581-LHK, 15 2015 WL 349444, at *9 (N.D. Cal. Jan. 26, 2015) (in a case concerning breach of 16 fiduciary duty claim and others, applying Bermuda law and rejecting the plaintiff's 17 argument that an exception to internal affairs doctrine should apply simply because of the 18 company’s extensive contacts with California); Booth v. Strategic Realty Trust, Inc., No. 19 13-04921-JST, 2014 WL 3749759, at *8 (N.D. Cal. July 29, 2014) (applying Maryland 20 law to a breach of fiduciary duty claim based on the internal affairs doctrine); Vaughn, 21 174 Cal. App. 4th at 223-25 n. 5 (applying internal affairs doctrine to breach of fiduciary 22 duty). 23 While California case law and Ninth Circuit precedent support the application of 24 the internal affairs doctrine to a claim for breach of a fiduciary duty, if a claim implicates 25 a broader public interest that California has a vital interest in protecting, then the doctrine 26 does not apply. See Kaul v. Mentor Graphics Corp., No. 16-CV-02496-BLF, 2016 WL 27 28 27 21-CV-2081-GPC-DEB 1 6249024, at *9 (N.D. Cal. Oct. 26, 2016), aff'd, 730 Fed. App’x 437 (9th Cir. 2018) 2 (holding that the law of the state where a company is incorporated should apply to breach 3 of fiduciary duties unless there was no choice-of-law clause in the agreement and it is an 4 unusual case where a different state has a more significant relationship to the parties and 5 corporation). 6 Here, Defendants argue that Cayman law applies based on California conflict of 7 law principles adopting the internal affairs doctrine. (Dkt. No. 78-1 at 26-27.) In 8 response, without arguing in favor or against Cayman law, Plaintiffs maintain that three 9 issues need to be determined before the application of Cayman law and these issues have 10 not been addressed by Defendants and involve a factual inquiry. (Dkt. No. 82 at 25-27.) 11 Specifically, Plaintiffs argue that there is an issue of whether the internal affairs doctrine 12 applies to exempted companies incorporated and existing under the Cayman Island laws, 13 whether the dispute is the type of internal organizational issue that is covered by the 14 internal affairs doctrine and whether the exception applies where one state has a “more 15 significant relationship” to the parties and the transaction. (Id. at 25-26.) In reply, 16 Defendants do not address the three issues raised in Plaintiffs’ opposition, and instead, 17 suggest that because Plaintiffs have argued for the application of California law, and 18 “conceded its claim, the Court need not address Cayman law.”17 (Dkt. No. 85 at 14.) 19 The parties’ positions on the application of Cayman law are not clear and a full 20 analysis of California’s conflict of law principles have not been conducted by the parties. 21 The Court declines to conduct an analysis without the parties’ positions and without full 22 23 24 25 26 27 28 17 Defendants have not provided legal authority that a party can concede or waive conflict of law principles. 28 21-CV-2081-GPC-DEB 1 legal analysis on the issue. Therefore, the Court DENIES Defendants’ motion to dismiss 2 the breach of fiduciary duty claim.18 3 1. 4 Defendants also move to dismiss the breach of fiduciary duty claim under Rule 5 12(b)(1) for Plaintiffs’ failure to plead diversity jurisdiction by omitting Dimensions’ 6 principal place of business, and therefore the Court should decline supplemental 7 jurisdiction over the state law claim. (Dkt. No. 78-1 at 27.) Plaintiffs respond that the 8 Court has diversity jurisdiction over the case and it may consider documents outside the 9 complaint to support subject matter jurisdiction. (Dkt. No. 82 at 29-30.) Defendants did 10 Rule 12(b)(1) - Subject Matter Jurisdiction not reply. 11 Under Rule 12(b)(1), a party may move to dismiss for lack of subject matter 12 jurisdiction. Fed. R. Civ. P. 12(b)(1). A Rule 12(b)(1) jurisdictional challenge may be 13 facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). 14 “In a facial attack, the challenger asserts that the allegations contained in a complaint are 15 insufficient on their face to invoke federal jurisdiction.” Id. When evaluating a facial 16 attack, the court assumes the truth of the complaint's allegations and draws all reasonable 17 inferences in plaintiff's favor. See Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 18 2004). Where the attack is factual, however, “the court need not presume the truthfulness 19 of the plaintiff's allegations.” Safe Air for Everyone, 373 F.3d at 1039. In resolving a 20 factual dispute as to the existence of subject matter jurisdiction, a court may review 21 extrinsic evidence beyond the complaint without converting a motion to dismiss into one 22 for summary judgment. Id.; McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988) 23 24 25 26 27 28 18 Because the threshold issue of which law applies to the breach of fiduciary duty claim has not been resolved, the Court declines to address Defendants’ additional arguments that the breach of fiduciary duty claim is an impermissible derivative action under Cayman law and if California law applies, the fiduciary duty claim is time barred and preempted. 29 21-CV-2081-GPC-DEB 1 “Given their limited jurisdiction, federal courts have repeatedly held that a 2 complaint must include allegations of both the state of incorporation and the principal 3 place of business of corporate parties.” Harris v. Rand, 682 F.3d 846, 850 (9th Cir. 4 2012). For diversity purposes, a corporation's principal place of business is “the place 5 where [the] corporation's high level officers direct, control, and coordinate the 6 corporation's activities” or the “nerve center.” Hertz Corp. v. Friend, 559 U.S. 77, 92-93 7 (2010). Typically, the principal place of business is where the corporation maintains its 8 headquarters. Id. at 93. 9 Defendants make a facial challenge to subject matter jurisdiction arguing Plaintiffs 10 failed to allege Dimensions’ principal place of business. In response, Plaintiffs present 11 the declaration of Dimensions’ in-house counsel stating that Dimensions’ principal place 12 of business, since 2009, has been in the UAE. (Dkt. No. 82-1, Shanti Decl. ¶ 3.) 13 However, because Defendants present a facial challenge, the Court may not consider the 14 declaration of Shanti. Notwithstanding the declaration, the Court may consider 15 documents incorporated by reference in the FAC without converting the motion into one 16 for summary judgment. In opposition, Plaintiffs also ask the Court to consider the JV 17 agreement which was filed in the Related Case under the incorporation by reference 18 doctrine. (Dkt. No. 82 at 29 & n. 18.) 19 The Court may consider documents outside the complaint under the incorporation 20 by reference doctrine. See Ritchie, 342 F.3d at 908 Here, because the FAC discusses 21 and references the Related Case, the Court takes judicial notice of documents filed in that 22 case. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 23 2006) (taking judicial notice of briefs, transcripts, and various other court filings from a 24 related case). 25 26 27 28 While the JV agreement does not provide an assertion that Dimensions’ principal place of business is in the UAE, it states Dimensions is a limited liability company 30 21-CV-2081-GPC-DEB 1 established under the UAE laws with a registered address in the UAE. (Case No. 2 19cv1865-GPC(DEB), Dkt. No. 452-35, Swedlow Decl., Ex. 41 at 4, 27 (UNDER 3 SEAL).) Moreover, in the Related Case, MedImpact alleged that Dr. Omar Ghosheh, a 4 co-founder of Dimensions until his retirement, is a resident of Dubai, UAE. (Dkt. No. 5 93, FAC ¶ 22.) Dr. Ghosheh was also the General Manager/CEO of Dimensions. (Dkt. 6 No. 198-2, Shanti Decl. ¶¶ 22, 24.) Further, Dimensions is a UAE company with three 7 offices in the UAE and provides services to customers in the Middle East. (Dkt. No. 59- 8 5, Dr. Ghosheh Decl. ¶ 2.) 9 Here, while the FAC alleges that Dimensions is incorporated in the UAE, it does 10 not allege its principal place of business. (Dkt. No. 68, FAC ¶ 15.) However, the 11 documents considered under the incorporation by reference doctrine provide support that 12 Dimensions’ principal place of business or its nerve center where its officers or directors 13 conduct the corporation’s activities is in the UAE and sufficient to survive a motion to 14 dismiss. Therefore, the Court DENIES Defendants’ motion to dismiss for lack of subject 15 matter jurisdiction. 16 F. Conspiracy 17 Defendants argue that the conspiracy claim is preempted by CUTSA and because 18 conspiracy is not a stand-alone cause of action, the claim must be dismissed. (Dkt. No. 19 78-1 at 31.) Plaintiffs disagree maintaining that because they have adequately pled their 20 other cause of action, this claim should survive. (Dkt. No. 82 at 31.) 21 “The elements of an action for civil conspiracy are the formation and operation of 22 the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of 23 the common design. . . . In such an action the major significance of the conspiracy lies in 24 the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor 25 for all damages ensuing from the wrong, irrespective of whether or not he was a direct 26 27 28 31 21-CV-2081-GPC-DEB 1 actor and regardless of the degree of his activity.” Applied Equip. Corp. v. Litton Saudia 2 Arabia Ltd., 7 Cal. 4th 503, 511 (Cal. 1994) (citation and quotation marks omitted). 3 “Conspiracy is not a cause of action, but a legal doctrine that imposes liability on 4 persons who, although not actually committing a tort themselves, share with the 5 immediate tortfeasors a common plan or design in its perpetration.” Id. at 510-11. A 6 conspiracy must be activated by the commission of an actual tort. Id. at 511. In support of the preemption argument, Defendants merely cite to the Court’s 7 8 preemption analysis in the Related Case without conducting their own independent 9 analysis. However, the Related Case involves different underlying facts than in this case. 10 Thus, the Court DENIES Defendants’ motion to dismiss the conspiracy cause of action as 11 not factually or legally supported. 12 G 13 Shareholder Standing Rule Defendants argue that the shareholder standing rule bars any claims by IQVIA AG, 14 as a parent of Dimensions, and IQVIA Inc., as a parent of IQVIA AG, for failing to 15 allege their own independent injuries because they license the alleged trade secrets to 16 customers and act through Dimensions. (Dkt. No. 78-1 at 31-32.) Plaintiffs respond that 17 IQVIA AG and IQVIA Inc.’s claims are not barred by the shareholder standing rule 18 because they are possessors of the trade secrets and have alleged their own independent 19 harm. (Dkt. No. 82 at 30-31.) In reply, Defendants do not address whether IQVIA AG 20 and IQVIA Inc’s status as possessors support their separate independent harm distinct 21 from Dimensions and merely reiterate that the FAC alleges that IQVIA AG and IQVIA 22 Inc. license the alleged trade secrets to customers through Dimensions. (Dkt. No. 85 at 23 15.) 24 There are two standing doctrines: Article III or “constitutional standing”, see Lujan 25 v. Defenders of Wildlife, 504 U.S. 555, 560 (1992), raised on a Rule 12(b)(1) motion, and 26 “prudential standing” raised on the Rule 12(b)(6) motion, see Lexmark Int'l, Inc. v. Static 27 28 32 21-CV-2081-GPC-DEB 1 Control Components, Inc., 572 U.S. 118, 126 (2014). Because Defendants move to 2 dismiss under Rule 12(b)(6) and shareholder standing is a prudential limitation on a 3 federal court jurisdiction, they are asserting Plaintiffs lack prudential standing. 4 “Prudential standing” is a doctrine that is not derived from Article III and is “’not 5 exhaustively defined’ but encompass[es] . . . at least three broad principles: “the general 6 prohibition on a litigant's raising another person's legal rights, the rule barring 7 adjudication of generalized grievances more appropriately addressed in the representative 8 branches, and the requirement that a plaintiff's complaint fall within the zone of interests 9 protected by the law invoked.” Lexmark Int'l, Inc. v. Static Control Components, Inc., 10 11 572 U.S. 118, 126 (2014) (citation and internal quotation marks omitted). The shareholder standing rule is a prudential limitation on the exercise of federal 12 court jurisdiction holding that “[g]enerally, a shareholder must assert more than personal 13 economic injury resulting from a wrong to the corporation. A shareholder must be 14 injured directly and independently of the corporation.” Shell Petroleum, N.V. v. Graves, 15 709 F.2d 593, 595 (9th Cir. 1983) (internal citations omitted); Vigilante.com, Inc. v. 16 Argus Test.com, Inc., No. 04–cv–00413–MO, 2005 WL 2218405, at *8 (D. Or. Sept. 6, 17 2005) (citation omitted) (“To avoid the limitations imposed by the shareholder standing 18 rule, “[a] shareholder must be injured directly and independently of the corporation.”). 19 Here, the FAC alleges that IQVIA AG is the controlling beneficial owner of 20 Dimensions, and acquired, among other things, its intellectual property, and it is wholly- 21 owned by IQVIA Inc. (Dkt. No. 68, FAC ¶¶ 1, 14.) The FAC further claims that 22 Plaintiffs, acting through Dimensions, license their alleged trade secrets to customers. 23 (Id. ¶ 74.) The FAC also maintains that Plaintiffs own and possess the trade secrets at 24 issue through the acquisition of Dimensions. (Id. ¶ 118.) The damages or harm alleged 25 are lost sales of indication and contraindication edits, price erosion, lost license royalties, 26 27 28 33 21-CV-2081-GPC-DEB 1 loss of return on investment and Defendants’ avoided costs. (Id. ¶¶ 54-55, 63-64, 67-69, 2 74, 79.) 3 On the DTSA and CUTSA claims, IQVIA AG and IQVIA Inc. have sufficiently 4 alleged independent, separate harm based on their status as possessors19 of the trade 5 secrets and because the issue of whether IQVIA AG and IQVIA Inc. are possessors is 6 intertwined with the merits of the claims, dismissal is not appropriate at the motion to 7 dismiss stage. See Boston Scientific Corp. v. BioCardia, Inc., 524 F. Supp. 3d 914, 918 8 (9th Cir. 2021) (dismissal improper under Rule 12(b)(6) prudential standing analysis 9 because whether the plaintiff owned the trade secret required a resolution of facts that go 10 to the merits of the plaintiff’s claims). 11 As to conspiracy, the only other remaining cause of action by IQVIA AG and 12 IQVIA Inc., Defendants argue that because conspiracy is not a standalone cause of action 13 but relies on an underlying tort, then the shareholder standing rule also applies to this 14 claim, or in other words, because the shareholder standing rule bars the DTSA and 15 CUTSA causes of action, then the conspiracy claim also fails. (Dkt. No. 78-1 at 33.) 16 Because the Court denies dismissal of the DTSA and CUTSA claims based on the 17 shareholder standing rule, the conspiracy claim also necessarily survives. Thus, the 18 Court DENIES Defendants’ motion to dismiss based on the shareholder standing rule. 19 H. 20 Claim Preclusion Defendants maintain that MIL and MI-HK should be dismissed as defendants 21 under the doctrine of claim preclusion because there is an identity of claims between the 22 counterclaims raised in the arbitration and the claims in this case as both cases concerned 23 24 25 26 27 28 The elements of a misappropriation claim under the DTSA requires the plaintiff to prove “(1) that the plaintiff possessed a trade secret, (2) that the defendant misappropriated the trade secret; and (3) that the misappropriation caused or threatened damage to the plaintiff.” InteliClear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 657-58 (9th Cir. 2020) (citing 18 U.S.C. § 1839(5)). 19 34 21-CV-2081-GPC-DEB 1 Dimensions’ drug-to-diagnosis indication and contraindication edits. (Dkt. No. 78-1 at 2 33-34.) Plaintiffs oppose contending that there is not an identity of claims because the 3 conduct in this case concerns post-arbitration conduct of continuing misappropriation and 4 acts to cover up the misappropriation which is conduct distinct from those alleged in the 5 arbitration. (Dkt. No. 82 at 24-25.) Defendants did not reply on this issue. (See Dkt. No. 6 85.) 7 Under claim preclusion, a final judgment bars “successive litigation of the very 8 same claim, whether or not relitigation of the claim raises the same issues as the earlier 9 suit.” Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New Hampshire v. Maine, 10 532 U.S. 742, 748 (2001)). “[C]laim preclusion prevents parties from raising issues that 11 could have been raised and decided in a prior action—even if they were not actually 12 litigated. If a later suit advances the same claim as an earlier suit between the same 13 parties, the earlier suit's judgment ‘prevents litigation of all grounds for, or defenses to, 14 recovery that were previously available to the parties, regardless of whether they were 15 asserted or determined in the prior proceeding.’” Lucky Brand Dungarees, Inc. v. Marcel 16 Fashions Grp., Inc., 140 S. Ct. 1589, 1595-96 (2020) (quoting Brown v. Felsen, 442 U.S. 17 127, 131 (1979)). The elements of claim preclusion are “(1) an identity of claims, (2) a 18 final judgment on the merits, and (3) privity between parties.” V.V.V. & Sons Edible Oils 19 Ltd. v. Meenakshi Overseas, LLC, 946 F.3d 542, 545 (9th Cir. 2019) (quoting Tahoe- 20 Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 21 2003) (internal quotation marks omitted)). 22 23 24 25 26 27 28 In assessing whether there is an “identity of claims”, the Ninth Circuit directs courts to look at four factors which are not to be applied mechanistically: (1) whether the two suits arise out of the same transactional nucleus of facts; (2) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (3) whether the two suits involve infringement of the same right; and (4) whether substantially the same evidence is presented in the two actions. 35 21-CV-2081-GPC-DEB 1 Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985, 987 (9th Cir. 2005) (citation 2 omitted). While all four factors are considered, “[r]eliance on the transactional nucleus 3 element is especially appropriate because the element is ‘outcome determinative.’” 4 ProShipLine Inc. v. Aspen Infrastructures LTD, 609 F.3d 960, 968 (9th Cir. 2010) 5 (quoting Mpoyo, 430 F.3d at 988). “Whether two events are part of the same transaction 6 or series depends on whether they are related to the same set of facts and whether they 7 could conveniently be tried together.” Media Rights Techs., Inc. v. Microsoft Corp. 922 8 F.3d 1014, 1027 (9th Cir. 2019) (quoting Western Sys., Inc. v. Ulloa, 958 F.2d 864, 871 9 (9th Cir. 1992) and citing Restatement (Second) of Judgments § 24 (1982)). “If the 10 harm[s] arose at the same time, then there was no reason why the plaintiff could not have 11 brought [both] claim[s] in the first action. The plaintiff simply could have added a claim 12 to the complaint.” Id. (quoting Howard, 871 F.3d at 1039). In contrast, “’[i]f the harm[s] 13 arose from different facts,’ then a party is not obligated to bring both claims on pain [sic] 14 of preclusion.” Id. As the United States Supreme Court recently confirmed “[s]uits 15 involve the same claim (or cause of action) when they aris[e] from the same transaction, 16 or involve a ‘common nucleus of operative facts.’” Lucky Brand Dungarees, Inc., 140 S. 17 Ct. at 1595. Where two claims are grounded in different conduct, different subject and 18 different times, they do not share a “common nucleus of operative facts.” Id. 19 Here, the two suits do not arise out of the same transactional nucleus of facts. Part 20 of this case involves continuing misappropriation that occurred after the conclusion of the 21 arbitration. (Dkt. No. 68, FAC ¶¶ 49, 68, 69, 112.) Therefore, Defendants have not 22 shown that there is an identity of claims between the allegations in the counterclaim with 23 the causes of action in this case. Accordingly, the Court DENIES Defendants’ motion to 24 dismiss MIL and MI-HK as defendants. 25 /// 26 /// 27 28 36 21-CV-2081-GPC-DEB 1 2 Conclusion Based on the reasoning above, the Court GRANTS in part and DENIES in part 3 Defendants’ motion to dismiss. Specifically, the Court GRANTS Defendants’ motion to 4 dismiss the RICO cause of action and DENIES the remaining causes of action. 5 6 IT IS SO ORDERED. Dated: October 7, 2022 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 37 21-CV-2081-GPC-DEB

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