Expression Systems, LLC., v. UMN Pharma, Inc., et al
Filing
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ORDER denying 16 Motion to Dismiss and granting with prejudice Motion for Judgment on the Pleadings signed by Judge John A. Mendez on 1/22/14. (Kaminski, H)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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EXPRESSION SYSTEMS, LLC,
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2:13-CV-00965-JAM-KJN
Plaintiff,
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No.
v.
UMN PHARMA, INC., KENGO UEMURA,
and JONATHAN DRUTZ,
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ORDER GRANTING DEFENDANTS’
MOTION FOR JUDGMENT ON THE
PLEADINGS AND DENYING THE
MOTION TO DISMISS FOR
UNTIMELY SERVICE
Defendants.
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This matter is before the Court on Defendant Jonathan
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Drutz’s (“Drutz”) Motion for Judgment on the Pleadings pursuant
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to Federal Rules of Civil Procedure Rule 12(c) and Defendants UMN
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Pharma, Inc. (“UMN Pharma”) and Kengo Uemura’s (“Uemura”) Motion
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to Dismiss for untimely service (Doc. #16) against Plaintiff
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Expression Systems, LLC (“Plaintiff”).
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motion (“Opposition”) (Doc. #18). 1
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the Opposition (Doc. #20).
Plaintiff opposes the
Defendant filed a Reply to
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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
originally scheduled for November 6, 2013.
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I.
FACTUAL AND PROCEDURAL BACKGROUND
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This action originated when Plaintiff filed the Complaint
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(Doc. #1) in this Court on May 14, 2013.
Plaintiff is a
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biotechnology company that manufactures and sells animal-free
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medium for use in the production of vaccines.
Comp. ¶¶ 13-17.
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Defendant UMN Pharma is a Japanese company, which employed
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Defendant Uemura, a Japanese citizen.
Id. ¶¶ 6-8.
Defendant
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Drutz is a United States citizen who acted as a liaison between
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Defendant UMN Pharma and Plaintiff.
Id. ¶¶ 9-10, Exh. A.
David
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Hedin is the registered owner of Plaintiff.
Id. ¶ 12.
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Plaintiff alleges that Defendants initiated contact with it
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starting in March 2012.
Comp. ¶ 27.
Over the ensuing three
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months, Plaintiff alleges that negotiations took place to
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establish a long-term purchase agreement between Plaintiff and
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Defendant UMN Pharma.
Plaintiff alleges that over this time
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Defendants deliberately misrepresented their intentions to enter
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into a future contract with Plaintiff in order to gain access to
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Plaintiff’s products and technology.
Plaintiff alleges that it
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reasonably relied on these representations and suffered damages
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as a result.
Plaintiff alleges that in June 2012 the
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negotiations ceased.
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The Complaint asserts six causes of action against all
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Defendants: (1) Intentional Fraud; (2) Negligent
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Misrepresentation; (3) False Promise; (4) Breach of a written
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Contract; (5) Breach of an oral Contract; and (6) Unjust
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Enrichment.
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II.
OPINION
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A.
Legal Standard
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“A judgment on the pleadings is properly granted when,
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taking all the allegations in the non-moving party’s pleadings as
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true, the moving party is entitled to judgment as a matter of
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law.”
Ventress v. Japan Airlines, 603 F.3d 676, 681 (9th Cir.
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2010) (citations omitted).
“For purposes of the motion, the
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allegations of the non-moving party must be accepted as true,
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while the allegations of the moving party which have been denied
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are assumed to be false.”
Hal Roach Studios, Inc. v. Richard
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Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989).
“Judgment on
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the pleadings is proper when the moving party clearly establishes
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on the face of the pleadings that no material issue of fact
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remains to be resolved and that it is entitled to judgment as a
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matter of law.”
Lorbeer v. Am. Tel. & Tel. Co., 958 F.2d 377
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(9th Cir. 1992).
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In considering a motion under Rule 12(c), a court must
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generally limit its review to the pleadings themselves.
Hal
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Roach Studios, 896 F.2d at 1542.
However, “documents attached to
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the complaint and incorporated by reference are treated as part
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of the complaint, not extrinsic evidence” and, thus, may be
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considered in a Rule 12(c) motion.
Summit Media LLC v. City of
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L.A., CA, 530 F. Supp. 2d 1084, 1096 (C.D. Cal. 2008) (citing
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Voest-Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887,
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891 n.4 (5th Cir. 1998)).
Extrinsic evidence that is subject to
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judicial notice may be properly considered in a Rule 12(c)
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motion.
Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971,
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981 n. 18 (9th Cir. 1999).
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B.
Discussion
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Defendant Drutz
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Defendant Drutz argues that he is entitled to judgment on
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the pleadings on each of Plaintiff’s causes of action against
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him.
Motion at p. 2.
In the Opposition, Plaintiff does not
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oppose judgment in Defendant Drutz’s favor on the Breach of
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Contract claims in the fourth and fifth causes of action and the
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Unjust Enrichment claim in the sixth cause of action.
Opposition
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at p. 2.
Therefore, the Court grants Defendant Drutz’s motion as
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to those claims against him.
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Defendant Drutz contends the remaining causes of action
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involve claims of fraud and thus are subject to the heightened
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pleading standard of Rule 9 of the Federal Rules of Civil
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Procedure.
Motion at pp. 15-16.
He argues that Plaintiff has
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failed to meet these requirements in three respects: (1)
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Plaintiff’s allegations regard future intentions not past or
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present material fact as required; (2) Plaintiff has not
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adequately alleged that its reliance was reasonable; and (3)
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Plaintiff has failed to allege any facts demonstrating the
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required element that the statements were false.
Motion at pp.
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18-19.
As a result, Defendant Drutz contends the Court should
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grant judgment in his favor on the remaining claims.
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Plaintiff does not contest that the remaining causes of
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action are subject to Rule 9.
Opp. at p. 4.
It argues the
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claims are based on the continued misrepresentations offered by
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Defendant Drutz regarding the then existing intentions of
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Defendant UMN Pharma that Defendant Drutz knew, or should have
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known, were false and that were made with the intention to
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defraud Plaintiff.
Id. at pp. 5-8.
Plaintiff argues it
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reasonably believed the representation and relied on it,
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resulting in damages.
Id. at p. 9.
It argues these elements
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were pleaded with the requisite particularity to meet Rule 9
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requirements.
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“The elements of a cause of action for fraud in California
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are: ‘(a) misrepresentation (false representation, concealment,
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or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c)
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intent to defraud, i.e., to induce reliance; (d) justifiable
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reliance; and (e) resulting damage.’”
Kearns v. Ford Motor Co.,
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567 F.3d 1120, 1126 (9th Cir. 2009) (quoting Engalla v.
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Permanente Med. Group, Inc., 15 Cal. 4th 951, 974 (1997)).
Under
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the heightened pleading standard in the federal rules, a
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plaintiff must also allege the specific circumstances
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constituting fraud such that the defendant has notice of the
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actual misconduct.
Id. at 1124.
“Averments of fraud must be
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accompanied by the who, what, when, where, and how of the
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misconduct charged.”
Id. (quoting Vess v. Ciba-Geigy Corp. USA,
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317 F.3d 1097, 1106 (9th Cir. 2003)).
A cause of action “‘based
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on a false promise is simply a type of intentional
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misrepresentation, i.e., actual fraud.’”
Foster Poultry Farms v.
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Alkar-Rapidpak-MP Equip., Inc., 868 F. Supp. 2d 983, 995 (E.D.
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Cal. 2012) (emphasis in original).
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Under California law, a cause of action for negligent
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misrepresentation is comprised of the same elements as a claim
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for fraud: “‘(1) the misrepresentation of a past or existing
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material fact, (2) without reasonable ground for believing it to
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be true, (3) with intent to induce another's reliance on the fact
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misrepresented, (4) justifiable reliance on the
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misrepresentation, and (5) resulting damage (citations
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omitted).’”
Foster Poultry Farms, 868 F. Supp. 2d at 994-95.
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The only difference is that a negligent misrepresentation claim
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does not require knowledge of falsity.
Id.
“Rather, to plead
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negligent misrepresentation, it is sufficient to allege that the
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defendant lacked reasonable grounds to believe the representation
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was true.” Neilson v. Union Bank of California, N.A., 290 F.
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Supp. 2d 1101, 1141-42 (C.D. Cal. 2003).
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Although the Ninth Circuit has not definitively held that
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Rule 9’s requirements apply to a claim for negligent
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misrepresentation, most federal courts in California hold that
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they do.
Villegas v. Wells Fargo Bank, N.A., C 12-02004 LB, 2012
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WL 4097747 (N.D. Cal. 2012).
Plaintiff does not contest this and
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the Court will follow the majority in finding Rule 9 applies to
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the three remaining claims.
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Reviewing Plaintiff’s claims, the Court finds Plaintiff has
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failed to adequately allege viable claims in the first three
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causes of action.
“It is hornbook law that an actionable
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misrepresentation must be made about past or existing facts;
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statements regarding future events are merely deemed opinions.”
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San Francisco Design Ctr. Associates v. Portman Companies, 41
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Cal. App. 4th 29, 43-44 (1995) (dismissed, remanded and ordered
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published, 911 P.2d 1373 (Cal. 1996)).
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As alleged, Defendant
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Drutz’s representations did not involve past or existing material
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facts.
Plaintiff argues Defendant Drutz was making fraudulent
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representations about UMN Pharma’s intentions at the time.
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However, the representations provided by Plaintiff as the basis
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of its claims fail to support this contention.
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The misrepresentations alleged by Plaintiff in the Complaint
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and echoed in the Opposition all involve statements by Defendant
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Drutz concerning “goals,” “possibilities,” and particular
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“interests.”
Opp. at pp. 6-8; Comp. Exh. A, C, I, and O.
The
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Complaint and the exhibits attached thereto include numerous
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examples of ongoing negotiations between the parties, but no
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evidence of any promises or definitive future agreements. 2
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Even were the Court to find these communications constituted
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actionable misrepresentations about Defendant UMN Pharma’s goals
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and intentions, Plaintiff fails to adequately allege how it could
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reasonable rely on the quoted statements to conclude that
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Defendant UMN Pharma had agreed to enter into a long-term
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purchase agreement, or that one already existed, and that
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Plaintiff would absolutely be compensated for its work.
As the
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Motion points out, Defendants’ communications frequently
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reiterated that Defendant Drutz was not the final decision maker
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and that he could not discuss final details such as price.
Comp.
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Exh. I.
The documents provided by Plaintiff show that even Mr.
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The only explicit references in the Complaint regarding
representations made by Defendant Drutz concern “the idea of
selling media in the future” (¶57), implying a “growing
relationship” between the companies and “future growth” (¶¶59,
64, 69-70), and Defendant Drutz asking for more information
(¶79).
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Hedin understood that required details of any possible agreement
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still needed to be worked out and as far as the negotiations were
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concerned there was “no real commitment in the future, just a
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hope . . . .”
Comp. Exh. G, N, P.
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Accordingly, the Court hereby grants Defendant Drutz’s
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motion for judgment on the pleadings as to the remaining causes
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of action.
As the Complaint, the attached communications, and
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the Opposition show, amendment of the Complaint would be futile;
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the communications between Defendant Drutz and Plaintiff cannot
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serve as the basis for actionable misrepresentation claims.
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Therefore, the remaining claims against him are dismissed with
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prejudice.
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2.
Foreign Defendants
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Defendants UMN Pharma and Uemura contend the Court should
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dismiss the suit against them based on Plaintiff’s failure to
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timely serve them.
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Defendants contend Plaintiff failed to meet the 120-day time
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limit set by this Court (Doc. #5) and imply in the Motion that
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Plaintiff has failed to perform due diligence.
Motion at pp. 22-
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23.
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“Once service is challenged, [a plaintiff] bear[s] the
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burden of establishing that service was valid under Rule 4.”
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Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir. 2004).
Rule 4(f)
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of the Federal Rules of Civil Procedure states that a plaintiff
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may serve a foreign defendant by any internationally agreed means
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that is reasonably calculated to give notice.
Rule 4(m) sets a
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time limit of 120 days; however, it is inapplicable to the
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service of foreign defendants subject to Rule 4(f).
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Plaintiff states in the Opposition, and Plaintiff’s counsel
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avers in an attached declaration (Doc. #18-1), that it has
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translated the complaint into Japanese and has attempted three
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times to serve it on the foreign Defendants through the Ministry
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of Justice of Japan.
Opp. at p. 11.
According to the
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declaration of Plaintiff’s counsel, the first two attempts
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resulted in the documents being returned with changes requested.
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After making the requested changes, Plaintiff’s counsel attempted
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service a third time on October 1, 2013.
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The Court finds that Plaintiff has diligently attempted to
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properly serve Defendants UMN Pharma and Uemura.
The Court finds
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Defendants’ reliance on a footnote in Thayer v. Dial Industrial
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Sales, Inc., 85 F. Supp. 2d 263, 266 n.1 (S.D.N.Y. 2000),
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unpersuasive.
As opposed to the plaintiff in Thayer who failed
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to make any attempts at serving the defendant, here, Plaintiff
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has thrice attempted to meet the requirements of service under
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Rule 4.
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Accordingly, Defendants UMN Pharma and Uemura’s Motion to
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Dismiss for Untimely Service is DENIED WITHOUT PREJUDICE. The
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Motion may be renewed if proof of service of the Complaint on
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these Defendants is not filed within sixty (60) days of the date
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of this Order or good cause is not shown by Plaintiff for its
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failure to meet this deadline.
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III. ORDER
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For the foregoing reasons, Defendant Drutz’s Motion for
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Judgment on the Pleadings is GRANTED WITH PREJUDICE.
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Defendants
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UMN Pharma and Uemura Motion to Dismiss for Untimely Service is
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DENIED.
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IT IS SO ORDERED.
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Dated:
January 22, 2014
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