Winson Tang v. Lindsay Rosenwald et al

Filing 36

MINUTES (In Chambers): ORDER REMANDING ACTION 23 by Judge Michael W. Fitzgerald: The Motion is GRANTED. Accordingly, the Court REMANDS the action to the Superior Court of the State of California for the County of Los Angeles (Case No. BC-607346). Defendants pending Motion to Dismiss (Docket No. 25 ) is DENIED as moot. (MD JS-6. Case Terminated.) (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
Present: The Honorable MICHAEL W. FITZGERALD, U.S. District Judge
Deputy Clerk:
Rita Sanchez
Attorneys Present for Plaintiff:
Defendant:
None Present

Court Reporter:
Not Reported
Attorneys Present for
None Present

Proceedings (In Chambers): ORDER REMANDING ACTION [23]
Before the Court is Plaintiff’s Motion to Remand (the “Motion”), filed on
March 23, 2016. (Docket No. 28). Defendants filed an Opposition to the Motion
on April 4, 2016, and Plaintiff’s Reply followed on April 11, 2016. (Docket Nos.
28, 33). The Court reviewed and considered the papers submitted on the Motion,
and held a hearing on April 25, 2016.
The Motion is GRANTED. The Court has no jurisdiction over this action
due to the lack of diversity between Plaintiff Wilson Tang and Defendant City of
Hope (“COH”), both citizens of California. Although Defendants contend that
COH was “fraudulently joined” to defeat the Court’s jurisdiction, they have failed
to meet their heavy burden in establishing that no plausible claims could be
asserted against COH.
I.

BACKGROUND
The First Amended Complaint (“FAC”) makes the following allegations:

Plaintiff agreed with Defendants Rosenwald, Weiss, Opus Point Partners,
and Fortress Biotech (the “Joint Venture Defendants”) to seek out and obtain
licenses for medical technologies. (FAC ¶ 1 (Docket No. 19)). Soon after
reaching that agreement, Plaintiff discovered that COH owned a new technology—
called Chimeric Antigen Receptor (“CAR-T”) technology—that could be used to
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
manipulate a patient’s T-cells to recognize and kill cancer cells. (Id. ¶ 12).
Plaintiff approached COH regarding a potential business deal that would facilitate
development and commercialization of that cutting-edge cancer treatment. (Id. ¶¶
14, 16-17). After some negotiations, COH orally agreed to license the CAR-T
technology to a company in which Plaintiff would have an ownership interest. (Id.
¶ 18).
Plaintiff then corroborated with the Joint Venture Defendants to create a new
entity, Defendant Mustang Bio, Inc., that would serve as the official licensee of the
CAR-T technology. (Id. ¶ 19). The parties discussed their respective equity shares
in Defendant Mustang, and eventually agreed that Plaintiff would obtain a fifteen
percent ownership stake. (Id.). Shortly after Defendant Mustang was formed, it
entered into an exclusive licensing agreement with COH under Plaintiff’s guidance
and oversight. (Id. ¶ 20). As the FAC emphasizes, Plaintiff “was instrumental in
creating and facilitating the relationship between [COH] and Mustang.” (Id. ¶ 25).
Despite the crucial role Plaintiff played in reaching the licensing agreement,
the Joint Venture Defendants never issued Plaintiff a stock certificate for his
fifteen percent interest in Defendant Mustang. (Id. ¶ 22). Instead, they have
insisted that Plaintiff is not entitled to any equity whatsoever, despite a written
agreement to the contrary. (Id.). The Joint Venture Defendants justified their
actions by “inventing non-existent pre-conditions for the vesting of [Plaintiff’s]
15% ownership interest.” (Id. ¶ 1).
Plaintiff thus brought this action in the Los Angeles Superior Court,
asserting claims for breach of contract, promissory estoppel, and fraud against the
Joint Venture Defendants and Defendant Mustang. (Id. ¶¶ 23-36; 42-67). As to
COH, Plaintiff asserts claims for breach of contract and promissory estoppel “in
the alternative.” (Id. ¶¶ 37-50, 60-67). If it turns out that Plaintiff is not a coowner Defendant Mustang, then, the FAC alleges, COH would be liable for
breaching the promise to license the CAR-T technology to a company in which
Plaintiff has an ownership interest. (Id.).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
Defendants removed the action to this Court, invoking diversity jurisdiction.
(Notice of Removal at 1-3 (Docket No. 1)). While the Joint Defendants and
Defendant Mustang are diverse, Defendants admit that both COH and Plaintiff are
citizens of California. (Id. at 2-3). Defendants claim, however, that COH’s
citizenship should be disregarded for jurisdictional purposes because COH was
“fraudulently joined” as a party. (Id. at 3-7). Plaintiff timely brought this Motion
to remand the action back to the Los Angeles Superior Court.
II.

LEGAL STANDARD

As all parties recognize, the threshold requirement for removal under 28
U.S.C. § 1441 is a “finding that the complaint . . . is within the original jurisdiction
of the district court.” Ansley v. Ameriquest Mortgage Co., 340 F.3d 858, 861 (9th
Cir. 2003). In most circumstances, “federal district courts have jurisdiction over
suits for more than $75,000 where the citizenship of each plaintiff is different from
that of each defendant.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1043 (9th
Cir. 2009) (citing 28 U.S.C. § 1332(a)). A well-established exception to the
complete-diversity rule is “‘where a non-diverse defendant has been ‘fraudulently
joined.’” Id. (quoting Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th
Cir. 2001)) (holding that a party was not fraudulently joined simply because the
claims against it were preempted). Joinder is considered fraudulent only if “the
individuals joined in the action cannot be liable on any theory.” Ritchey v. Upjohn
Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998) (holding that two non-diverse
defendants were fraudulently joined when the claims against them were timebarred).
Because all doubts weigh against removal, a court considering whether
joinder is fraudulent “must resolve all material ambiguities in state law in
plaintiff's favor.” Macey v. Allstate Property and Cas. Ins. Co., 220 F. Supp.2d
1116, 1117 (N.D. Cal. 2002) (citing Good v. Prudential Ins. Co. of America, 5
F.Supp.2d 804, 807 (N.D. Cal. 1998)). “If there is a non-fanciful possibility that
plaintiff can state a claim under [state] law against the non-diverse defendant[,] the
court must remand.” Id.; see also Good, 5 F. Supp. 2d at 807 (“[T]he defendant
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
must demonstrate that there is no possibility that the plaintiff will be able to
establish a cause of action in State court against the alleged sham defendant.”).
Given this standard, “[t]here is a presumption against finding fraudulent joinder,
and defendants who assert that plaintiff has fraudulently joined a party carry a
heavy burden of persuasion.” Plute v. Roadway Package Sys., Inc., 141 F. Supp.
2d 1005, 1008 (N.D. Cal. 2001) (holding that the non-diverse defendants were not
fraudulently joined because there was some possibility the plaintiff’s claims were
viable under unsettled California law).
Even when a pleading contains insufficient allegations to state a claim for
relief against a non-diverse defendant, a remand is proper if the “defendant fail[s]
to show that plaintiff would not be granted leave to amend his complaint to cure
the asserted deficiency by amendment.” Johnson v. Wells Fargo & Co., No. CV
14-06708 MMM JCX, 2014 WL 6475128, at *8 (C.D. Cal. Nov. 19, 2014)
(quoting Padilla v. AT & T Corp., 697 F. Supp. 2d 1156, 1159 (C.D. Cal. 2009))
(remanding action because it was “possible” that the plaintiff could amend the
complaint to state a viable claim against the non-diverse defendant).
“Consequently, if a defendant simply argues that plaintiff has not pled sufficient
facts to state a claim, the heavy burden of showing fraudulent joinder has not been
met.” Martinez v. Michaels, No. CV 15-02104 MMM (EX), 2015 WL 4337059, at
*5 (C.D. Cal. July 15, 2015) (remanding action because the defendants have failed
to demonstrate that “there [was] no possibility” that the plaintiff could state viable
harassment claims against the non-diverse defendants); see Birkhead v. Parker,
No. C 12–2264 CW, 2012 WL 4902695, at *3 (N.D. Cal. Oct. 15, 2012) (“Even if
these allegations do not rise to the level of outrageous conduct, Defendants cannot
establish that Plaintiff would not be able to amend the complaint to allege any
viable claim against [the non-diverse defendant] under California law.”).
III.

DISCUSSION

Defendants contend that COH was “fraudulently joined” because the
allegations against it are too vague to form plausible claims for relief. (Opposition
at 8). The alleged oral contract between Plaintiff and COH, argue Defendants, is
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
nothing more than an “agreement to agree,” which is unenforceable under
California law. (Id.); see Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199, 213, 45
Cal. Rptr. 3d 692 (2006) (“Because essential terms were only sketched out, with
their final form to be agreed upon in the future (and contingent upon third-party
approval), the parties had at best an ‘agreement to agree,’ which is unenforceable
under California law.”). And even assuming that the alleged agreement is
enforceable, Defendants continue, the FAC pleads the essential elements of a
breach of contract claim—consideration, breach, and damages—in only
“conclusory” terms. (Opposition at 8-11). Such allegations, Defendants
emphasize, fail “to satisfy the pleading requirements of federal and California
law.” (Id. at 11).
Defendants make similar arguments as to Plaintiff’s claim for promissory
estoppel. They contend that the FAC’s allegations are insufficient to establish that
(1) COH made an unambiguous promise; (2) Plaintiff foreseeably relied on that
promise to his detriment; and (3) that reliance caused Plaintiff to incur damages.
(Id. at 13-14); Moncada v. W. Coast Quartz Corp., 221 Cal. App. 4th 768, 780,
164 Cal. Rptr. 3d 601 (2013) (“The elements of promissory estoppel are (1) a clear
promise, (2) reliance, (3) substantial detriment, and (4) damages
. . . .”). Given
these alleged deficiencies, Defendants contend that Plaintiff’s promissory estoppel
claim is not plausible under Rule 8. (Opposition at 14-15).
Finally, Defendants challenge Plaintiff’s allegations that he was a third-party
beneficiary of the licensing agreement, and that all Defendants, including COH,
were obligated to convey to Plaintiff a fifteen percent ownership interest in
Defendant Mustang. (Id. at 15-19). The FAC, argue Defendants, “does not
contain any specific or plausible allegations” showing that COH and Defendant
Mustang entered into the licensing agreement for Plaintiff’s benefit. (Id. at 16).
Defendants thus conclude that Plaintiff failed to state a plausible claim for relief
against COH. (Id. at 19).
But Defendants misunderstand their burden of persuasion on this Motion.
They must show not that the FAC fails to state a plausible claim for relief, but that
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
no claim whatsoever, under any legal theory, could be asserted against COH in this
action. In other words, Defendants must establish that no amendment to the FAC
would cure the alleged deficiencies in Plaintiffs’ claims. See, e.g., Martinez, 2015
WL 4337059, at *5 (“[T]he defendant must establish that plaintiff could not amend
his complaint to add additional allegations correcting any deficiencies.”). And that
burden Defendants fail to meet.
Even assuming that the FAC’s allegations are inadequate under Rule 8—an
issue on which the Court expresses no opinion—there is plainly a “non-fanciful
possibility,” Macey, 220 F. Supp.2d at 1117, that Plaintiff could assert plausible
claims against COH in a Second Amended Complaint. Plaintiff could at least
possibly allege, for instance, that (1) COH agreed to negotiate a licensing
agreement with a company in which Plaintiff has an ownership interest; (2) in
exchange, Plaintiff agreed to facilitate the negotiation and finalize the terms of the
agreement; (3) COH was aware that Plaintiff did not have an ownership interest in
Defendant Mustang; (4) COH negotiated with Defendant Mustang anyway, thus
breaching its obligation to negotiate in good faith with Plaintiff’s company; and (5)
Plaintiff suffered damages by expending his time and money on the negotiations or
by being deprived of the value of COH’s promise. Defendants have failed to
demonstrate that such allegations would not plausibly state a viable claim for
breach of contract. See Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251,
1257, 117 Cal. Rptr. 2d 875 (2002) (“A contract to negotiate the terms of an
agreement is not, in form or substance, an ‘agreement to agree.’ . . . A party will be
liable only if a failure to reach ultimate agreement resulted from a breach of that
party’s obligation to negotiate or to negotiate in good faith.”).
Similar allegations could form the basis of a claim for promissory estoppel.
It is possible that Plaintiff could allege that (1) COH made a promise to negotiate a
licensing agreement with a company in which Plaintiff holds stock; (2) in reliance
on that promise, Plaintiff expended time and money facilitating the negotiations
and finalizing the terms of the agreement; (3) Plaintiff’s reliance was reasonable
and foreseeable because the value of his stock would increase if COH were to enter
into an agreement with his company; (4) COH was aware, however, that Plaintiff
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
held no stock in Defendant Mustang; (5) COH entered into an agreement with
Defendant Mustang anyway; and (6) Plaintiff suffered damages by expending his
time and money on the negotiations or by being deprived of the value of COH’s
promise. Nothing in Defendants’ Notice of Removal and Opposition to this
Motion indicates that such allegations are not actionable as a matter of law.
At the hearing, Defendants challenged the Court’s conclusion primarily on
three grounds:
First, Defendants suggested that it is inappropriate to consider what Plaintiff
could allege in a Second Amended Complaint under Kruso v. International
Telephone & Telegraph Corporation, 872 F.2d 1416 (1989). But Kruso does not
support Defendants’ position. There, the Ninth Circuit declined to consider the
plaintiffs’ proposed amended complaint in its fraudulent joinder analysis, holding
that allegations in the original complaint made clear that plaintiffs lacked standing
to bring any claims against the non-diverse defendants. Id. at 1426 & n.12. Kruso
thus reaffirmed the overarching principle that, absent some special circumstances,
only a categorical defect in the plaintiff’s claims would support a finding of
fraudulent joinder. No such categorical defect exists in this action; rather, the
FAC’s allegations show that there is at least a non-fanciful possibility that a valid
claim could be asserted against COH.
Second, Defendants argued that no amendment to the FAC could transform
Plaintiff’s alleged oral contract with COH into something other than an “agreement
to agree.” However, assuming that Plaintiff is not a co-owner of Defendant
Mustang, it is possible that COH breached not an “agreement to agree” but an
agreement to negotiate in good faith with a company in which Plaintiff does have
an ownership interest. Contrary to Defendants’ suggestion, COH’s negotiation of
the licensing agreement with Defendant Mustang, as opposed to a company in
which Plaintiff actually holds stock, could be actionable under California law. See
Copeland, 96 Cal. App. 4th at 1257 (holding that “a cause of action will lie for
breach of a contract to negotiate the terms of an agreement”).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
Third, Defendants contended that COH could not have breached an
agreement to negotiate with Plaintiff’s company because it believed that Plaintiff
either had or would have an ownership interest in Defendant Mustang. Plaintiff
disputed that assertion both at the hearing and in the papers, arguing that COH
played an integral part in denying Plaintiff his right to the fifteen percent interest in
Defendant Mustang. (See Motion at 6). The very existence of this factual dispute,
which the Court cannot resolve at this juncture, indicates that it is at least possible
that COH is a proper Defendant. Indeed, if Plaintiff is correct that COH intended
to prevent Plaintiff from obtaining stock in Defendant Mustang during the
negotiations of the licensing agreement, it is certainly possible that Plaintiff could
state a cognizable claim against COH.
Defendants’ underlying argument is that COH’s inclusion in this action was
a “transparent effort” to defeat jurisdiction (Opposition at 1), which is probably
true, but the motive of Plaintiff simply does not matter. “Fraudulent joinder” is a
term of art. For example, it does not mean that a defendant must prove that a
plaintiff did something improper or intended to deceive the district court. Rogers
v. Sun Delivery, Inc., No. 5:14-CV-01461-ODW, 2014 WL 5849357, at *2 (C.D.
Cal. Nov. 12, 2014); see Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th
Cir. 1998) (“Fraudulent joinder is a term of art. If the plaintiff fails to state a cause
of action against a resident defendant, and the failure is obvious according to the
settled rules of the state, the joinder of the resident defendant is fraudulent.”)
(internal quotation marks, citations, and alterations omitted).
However, it is likewise true that a defendant does not succeed in showing
fraudulent joinder by asserting—or proving—that the motive of a plaintiff was to
defeat diversity jurisdiction. See, e.g., Smallwood v. Illinois Cent. R. Co., 385 F.3d
568, 578 (5th Cir. 2004) (“The subjective intent of the plaintiff [who joined a nondiverse defendant] is irrelevant . . . .”); Abels v. State Farm Fire & Cas. Co., 770
F.2d 26, 32 (3d Cir. 1985) (“The fact that the plaintiffs’ motive for joining a Doe
defendant is to defeat diversity is not considered indicative of fraudulent joinder.”);
Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999)
(“[The plaintiff’s] motive in joining [the non-diverse defendant] is immaterial to
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV-16-01317-MWF-PLA
Date: April 27, 2016
Title:
Winson Tang -v- Lindsay Rosenwald, et al.
our determination regarding fraudulent joinder.”); Kuperstein v. Hoffman-Laroche,
Inc., 457 F. Supp.2d 467, 470 (S.D.N.Y.2006) (“[A]part from fraud, the plaintiff's
motive in joining the non-diverse party is irrelevant, so long as the claim against
that party is colorable.”).
Accordingly, the Court cannot conclude that COH was “fraudulently
joined,” as that term is used in the technical jurisdictional sense. Even if the Court
were to accept all of Defendants’ arguments and determine that Plaintiff’s claims
were deficient as currently pleaded, the Court would certainly grant Plaintiff leave
to amend. That fact alone requires a remand.
IV.

CONCLUSION

For the foregoing reasons, the Motion is GRANTED. Accordingly, the
Court REMANDS the action to the Superior Court of the State of California for
the County of Los Angeles (Case No. BC-607346).
Defendants’ pending Motion to Dismiss (Docket No. 25) is DENIED as
moot.
IT IS SO ORDERED.

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