Ixchel Pharma, LLC. v. Biogen Inc.

Filing 25

MEMORANDUM and ORDER re 20 Defendant's Motion to Dismiss signed by Senior Judge William B. Shubb on 9/12/2017: IT IS ORDERED that 20 Defendant's Motion to Dismiss be, and the same hereby is, GRANTED. Plaintiff has twenty days from the date this Order is signed to file a Second Amended Complaint, if it can do so consistent with this Order. (Kirksey Smith, K)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 IXCHEL PHARMA, LLC, 13 CIV. NO.: 2:17-00715 WBS EFB Plaintiff, 14 v. 15 BIOGEN INC., 16 MEMORANDUM AND ORDER RE: MOTION TO DISMISS Defendant. 17 ----oo0oo---- 18 Plaintiff Ixchel Pharma, LLC brought this action 19 20 against defendant Biogen Inc. asserting federal and state 21 antitrust and state tort claims arising from an agreement that 22 plaintiff entered into with non-party Forward Pharma FA ApS 23 regarding the development of a pharmaceutical drug and a 24 settlement agreement defendant entered into with Forward. 25 the court is defendant’s motion to dismiss pursuant to Federal 26 Rule of Civil Procedure 12(b)(1) and 12(b)(6). 27 I. 28 Before (Docket No. 20.) Factual and Procedural History Plaintiff is a biotechnology company allegedly working 1 1 to develop a drug to treat the neurological disorder Friedreich’s 2 ataxia, using the active pharmaceutical ingredient dimethyl 3 fumarate (“DMF”). 4 17).) 5 a partner. 6 (First Am. Compl. (“FAC”) ¶¶ 8, 10 (Docket No. Plaintiff lacks the resources to develop this drug without (FAC ¶ 20.) In January 2016, plaintiff and Forward, a biotech company, 7 entered into a Collaboration Agreement (“Ixchel-Forward 8 Agreement”) to develop a DMF drug for the treatment of 9 Friedreich’s ataxia. (FAC ¶¶ 13, 22; Tsai Decl., Ex. E (“Ixchel- 10 Forward Agreement”) (Docket No. 22-1)1.) 11 agreement, Forward first would investigate the feasibility of 12 conducting clinical trials for the drug and then, if clinical 13 trials were feasible, conduct and pay for clinical trials. 14 ¶ 23; Ixchel-Forward Agreement § 4.1.) 15 trials, Forward would have the sole discretion to seek FDA 16 approval. 17 Forward would manage and pay for the manufacturing and 18 commercialization of the DMF drug with plaintiff’s assistance, 19 and plaintiff would be entitled to royalties from the sale of the 20 new drug. 21 feasibility of conducting clinical trials for the DMF drug, and 22 plaintiff and Forward began working to set up clinical trials for 23 the new DMF drug. 24 Pursuant to this Following clinical (Ixchel-Forward Agreement § 4.3.) (FAC ¶ 24.) (FAC Upon FDA approval, In October 2016, Forward confirmed the (FAC ¶ 25.) Defendant currently markets the drug Tecfidera, which also 25 26 27 28 1 The court takes judicial notice of the Ixchel-Forward Agreement because the First Amended Complaint repeatedly references it. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 2 1 has DMF as the active pharmaceutical ingredient, to treat the 2 neurological disorder multiple sclerosis. 3 allegedly is the only FDA-approved drug containing DMF for the 4 treatment of neurological disorders in the United States. 5 17.) 6 (FAC ¶ 14.) Tecfidera (FAC ¶ In January 2017, defendant and Forward entered into a 7 settlement of a dispute between them in which Forward agreed, 8 among other things, to terminate all existing, and not enter any 9 new, contracts with plaintiff regarding the development of DMF 10 drugs.2 11 Agreement”) (Docket No. 26-3)3.) 12 (FAC ¶¶ 29, 31-32; Tsai Decl., Ex A (“Biogen-Forward Pursuant to the Biogen-Forward Agreement, Forward 13 subsequently terminated the Ixchel-Forward agreement and ceased 14 working with plaintiff on clinical trials for the new DMF drug. 15 (FAC ¶ 34.) 16 Agreement, plaintiff has been unable to find a new partner to 17 develop the DMF drug. 18 Since the termination of the Ixchel-Forward (FAC ¶ 35.) Based on the termination of Forward’s agreement with 19 plaintiff, plaintiff initiated this action against defendant, 20 alleging: (1) violation of the Sherman Act; (2) tortious 21 interference with contract; (3) intentional and negligent 22 interference with prospective economic advantage; (4) violation 23 24 25 26 27 28 2 Plaintiff alleges that Biogen viewed the new DMF drug as a competitive threat to its sales of Tecfidera and control over the market for DMF drugs for treating neurological diseases. (FAC ¶ 28.) 3 The court takes judicial notice of the Biogen-Forward Agreement because it is a document “referred to in the complaint.” Dreiling v. Am. Express Co., 458 F.3d 942, 946 n.2 (9th Cir. 2006). 3 1 of the California Cartwright Act; and (5) violation of 2 California’s Unfair Competition Law (“UCL”). 3 First Amended Complaint on June 14, 2017. Ixchel filed a (Docket No. 17.) 4 Discussion 5 On a motion to dismiss under Rule 12(b)(6), the court 6 must accept the allegations in the complaint as true and draw all 7 reasonable inferences in favor of the plaintiff. 8 Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by 9 Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. Scheuer v. 10 319, 322 (1972). 11 must plead “only enough facts to state a claim to relief that is 12 plausible on its face.” 13 544, 570 (2007). 14 ‘probability requirement,’ but it asks for more than a sheer 15 possibility that a defendant has acted unlawfully.” 16 Iqbal, 556 U.S. 662, 678 (2009). 17 plausibility when the plaintiff pleads factual content that 18 allows the court to draw the reasonable inference that the 19 defendant is liable for the misconduct alleged.” 20 A. 21 To survive a motion to dismiss, a plaintiff Bell Atl. Corp. v. Twombly, 550 U.S. “The plausibility standard is not akin to a Ashcroft v. “A claim has facial Id. Sherman Act and Cartwright Act Plaintiff’s first cause of action is for violation of 22 section 1 of the Sherman Act, 15 U.S.C. § 1, and its fifth cause 23 of action is for violation of the Cartwright Act, Cal. Bus. & 24 Prof. Code § 16700, et seq. 25 Biogen and Forward entered into unlawful agreements to restrict 26 the development of any drugs containing DMF as an active 27 pharmaceutical ingredient for the treatment of neurological 28 diseases. (FAC ¶¶ 41-42.) These causes of action allege that To bring a Sherman Act or Cartwright 4 1 Act claim, a plaintiff must establish antitrust standing.4 2 Associated Gen. Contractors of Cal., Inc. v. Cal. State Council 3 of Carpenters, 459 U.S. 519, 535 n.31 (1983); Dang v. S.F. Forty 4 Niners, 964 F. Supp. 2d 1097, 1110 (N.D. Cal. 2013). 5 determining whether a plaintiff has antitrust standing, the court 6 evaluates five factors. 7 Cal., 190 F.3d 1051, 1054-55 (9th Cir. 1999) (citing Amarel v. 8 Connell, 102 F.3d 1494, 1507 (9th Cir. 1997)). 9 factors, antitrust injury, “is necessary . . . to establish See In Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of One of these 10 standing.” 11 104, 110 n.5 (1986); see Am. Ad Mgmt., 190 F.3d at 1055. 12 Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. To establish antitrust injury, a plaintiff must be “a 13 participant in the same market as the alleged malefactors.” 14 v. NME Hospitals, Inc., 772 F.2d 1467, 1470 n.3 (9th Cir. 1985). 15 In analyzing whether parties participate in the same market, “the 16 focus is upon the reasonable interchangeability of use or the 17 cross-elasticity of demand between the services provided by” each 18 party. 19 Bhan Id. at 1470-71. Even assuming that the relevant market is defined as 20 4 21 22 23 24 25 26 27 28 Antitrust standing is distinct from Article III standing. Plaintiff also does not appear to have Article III standing because it has not allegedly suffered an actual or imminent injury in fact, and this alone would be enough to dismiss the First Amended Complaint. See Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013); Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011) (injury in fact must be “actual or imminent, not conjectural or hypothetical”); cf. Brotech Corp. v. White Eagle Int’l Techs. Grp., Inc., No. Civ.A.03-232, 2004 WL 1427136, at *6 (E.D. Pa. June 21, 2004) (antitrust injury too speculative where there were insufficient allegations regarding how far plaintiff has gone in seeking “FDA approval, when such approval may be anticipated, or whether it will be prepared to enter to product market” upon FDA approval). 5 1 “drugs containing DMF as an [active pharmaceutical ingredient] 2 for the treatment of neurological diseases in the United States,” 3 (FAC ¶ 37), plaintiff fails to sufficiently allege that it is 4 either a current or potential competitor. 5 not a current competitor because it concedes that “Biogen is 6 currently the only company in the world selling any drug in that 7 market.” 8 9 First, plaintiff is (Id.) Second, plaintiff is not a potential competitor because it granted Forward the exclusive right to obtain FDA approval 10 for, market, produce, and sell the DMF drug. 11 Ixchel-Forward Agreement §§ 4.1, 4.3.) 12 plaintiff does not seek to enter the market for DMF drugs for the 13 treatment of neurological diseases because it is not the party 14 who will seek FDA approval. 15 355(a) (requiring companies obtain FDA approval before marketing 16 pharmaceutical drugs). 17 Circuit held that a plaintiff and defendant were not competitors 18 in a particular drug market where the plaintiff gave a drug’s 19 manufacturing and development rights to a third party and the 20 third party bore the risk and expense of seeking FDA approval. 21 See Ethypharm S.A. Fr. v. Abbott Labs., 707 F.3d 223, 235-37 (3d 22 Cir. 2013). 23 risk of competing in the U.S. DMF drug market while 24 simultaneously seeking to avail itself of the U.S.’s antitrust 25 laws when that arrangement fails. 26 plaintiff is neither a current nor potential competitor in the 27 alleged market, plaintiff does not have antitrust injury. 28 (See FAC ¶¶ 23-24; Plaintiff concedes that (See FAC ¶¶ 23-24); cf. 21 U.S.C. § In a factually similar case, the Third Ixchel cannot pass on to Forward the expense and See id. at 236. Because Plaintiff also argues that even if it is not a 6 1 competitor, it suffered antitrust injury because “the injury 2 [plaintiff] suffered was inextricably intertwined with the injury 3 the conspirators sought to inflict” and the harm “was a necessary 4 step in effecting the ends of the alleged illegal conspiracy.” 5 Blue Shield of Va. v. McCready, 457 U.S. 465, 479, 484 (1982). 6 This narrow inextricably intertwined doctrine applies where 7 denying standing to the plaintiff is likely to leave a 8 significant antitrust violation undetected or unremedied. 9 Ostrofe v. H.S. Crocker Co., Inc., 740 F.2d 739, 747 (9th Cir. See 10 1984). 11 doctrine to this scenario. 12 at 237, explicitly rejected this doctrine in a similar scenario 13 because the Ethypharm plaintiff had willfully chosen not to enter 14 the U.S. market for a specific drug and this exception is largely 15 limited to instances where plaintiff and defendant are in the 16 business of selling goods in the same relevant market. 17 discussed above, plaintiff is not in the business of selling DMF 18 drugs, and has agreed that Forward would manufacture and 19 commercialize the alleged drug. 20 inextricably intertwined doctrine is not applicable. 21 Plaintiff provides no precedent that extends this To the contrary, Ethypharm, 707 F.3d (FAC ¶¶ 23-24.) As Thus, the Because plaintiff has not alleged that it is a current 22 or potential competitor in the relevant market, plaintiff has not 23 suffered antitrust injury and does not have antitrust standing. 24 Accordingly, the court will dismiss plaintiff’s first and fifth 25 causes of action. 26 27 28 B. Tortious Interference with Contract Plaintiff’s second cause of action alleges defendant intentionally and tortiously interfered with plaintiff’s 7 1 agreement with Forward by causing Forward to breach the Ixchel- 2 Forward Agreement. 3 interference with a contract requires the plaintiff allege: “(1) 4 a valid contract between plaintiff and a third party; (2) 5 defendant’s knowledge of this contract; (3) defendant’s 6 intentional acts designed to induce a breach or disruption of the 7 contractual relationship; (4) actual breach or disruption of the 8 contractual relationship and (5) resulting damage.” 9 Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 55 (1998). 10 (FAC ¶¶ 50-52.) A claim for tortious Quelimane As plaintiff correctly points out, tortious 11 interference with a contract does not generally require 12 independent wrongfulness. 13 at-will contract has been viewed as functionally equivalent to 14 interference with a prospective economic advantage, which does 15 require a pleading of wrongful means. 16 1152 (finding “economic relationship between parties to contracts 17 that are terminable at will is distinguishable from the 18 relationship between parties to other legally binding 19 contracts”). 20 will contract, such as the type alleged in this case, a plaintiff 21 must also allege “that the defendant engaged in an independently 22 wrongful act.” 23 wrongful beyond its interfering character, meaning “it is 24 proscribed by some constitutional, statutory, regulatory, common 25 law, or other determinable legal standard.” 26 Andersen LLP, 44 Cal. 4th 937, 944 (2008) (citations omitted). 27 “An act is not independently wrongful merely because defendant 28 acted with an improper motive.” See id. However, interference with an See Reeves 33 Cal. 4th at Thus, to prove tortious interference with an at- Id. The interference must be independently Edwards v. Arthur Korea Supply Co. v. Lockheed 8 1 Martin Corp., 29 Cal. 4th 1134, 1158 (2003). 2 Plaintiff argues there is no independently wrongful act 3 requirement in this case because plaintiff takes the position 4 that the requirement is limited to the employment context. 5 Popescu v. Apple Inc., 1 Cal. App. 5th 39, 62 (Ct. App. 2016), 6 the court declined to extend Reeves to the facts of that case, 7 but did not hold more generally that Reeves could never apply 8 outside the employment context. In 5 9 In Freeman Expositions, Inc. v. Global Experience 10 Specialists, Inc., Case No. 2:17-cv-00364-CJC-JDEx, 2017 WL 11 1488269,*8 (C.D. Cal. Apr. 24, 2017), the court held that the 12 plaintiff did not need to “allege an independently wrongful act 13 to sufficiently plead intentional interference with contractual 14 relations” because the interference at issue was not analogous to 15 that in Reeves. 16 contrary to Freeman and supports the defendant’s position that 17 Reeves does apply outside of the employment context. See, e.g., 18 Hip Hop Beverage Corp. v. Monster Energy Co., Case No. 2:16-cv- 19 01421-SVW-FFM, 2016 WL 7479402, at *4 n.7 (C.D. Cal. July 7, 20 2016) (applying Reeves to a commissary broker contract); Maritz 21 Inc. v. Carlson Mktg. Grp., Inc., Case No. C. 07-05585 JSW, 2009 However, the great weight of authority is 22 23 24 25 26 27 28 Plaintiff also points to First Financial Security, Inc., v. Freedom Equity Group, LLC, Case No. 15-cv-01893-HRL, 2017 WL 3593369 (N.D. Cal. Aug. 21, 2017) as evidence that Reeves is limited to at-will employment contracts. However, the First Financial court declined to state whether the application of Reeves is necessarily limited to such a narrow set of facts and chose to leave the question open, commenting that the Reeves court did not express an opinion, and it remains unclear, whether “a plaintiff must prove an independently wrongful act” for an interference that differed from the type in Reeves. Id. at 7. 9 5 1 WL 3561521, at *4 (N.D. Cal. Oct. 30, 2009) (explaining that “one 2 cannot maintain a claim for intentional interference with an at- 3 will contract, even in the non-employment context”); Lenhoff 4 Enters. V. United Talent Agency, Inc., Case No. CV 15-01086-BRO- 5 FFMX, 2015 WL 7008185, at *5 (C.D. Cal. Sept. 18, 2015) (applying 6 Reeves to a contract between agency and clients). 7 the court holds that Reeves applies to at-will contracts in the 8 non-employment context. 9 Accordingly, Here, the Ixchel-Forward Agreement was an at-will 10 contract because Forward could terminate it at any time. 11 Ixchel-Forward Agreement § 12.4.) 12 allege any independently wrongful act by defendant and defendant 13 should not be held liable for seeking to enforce its own 14 intellectual property rights and settling a dispute with Forward. 15 Plaintiff suggests that defendant’s independently wrongful act 16 was inducing Forward to not pay for the clinical trials after 17 Forward terminated the agreement. 18 to, and the court is unaware of, any such provision in the 19 Ixchel-Forward Agreement. 20 to exist, defendant cannot be liable for inducing Forward to 21 breach this provision. 22 Sherman Act, Cartwright Act, and UCL claims will be dismissed, so 23 these also are not sufficient bases for independently wrongful 24 conduct. 25 (See However, plaintiff fails to But plaintiff does not point Because the provision does not appear As discussed above and below, plaintiff’s Because the Ixchel-Forward Agreement is an at-will 26 contract and plaintiff does not allege defendant engaged in 27 independently wrongful conduct, plaintiff fails to state a claim 28 for tortious interference with a contract. 10 Accordingly, the 1 2 court will dismiss plaintiff’s second cause of action. C. 3 Intentional Interference with Prospective Economic Advantage 4 Plaintiff’s third and fourth causes of action allege 5 that defendant intentionally and negligently interfered with 6 plaintiff’s economic relationship with Forward when defendant and 7 Forward entered into the Biogen-Forward Agreement. 8 intentional interference with a prospective economic advantage 9 requires the plaintiff allege: 10 “(1) an economic relationship between plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) defendant's knowledge of the relationship; (3) an intentional act by the defendant, designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant's wrongful act, including an intentional act by the defendant that is designed to disrupt the relationship between the plaintiff and a third party.” 11 12 13 14 15 16 17 18 A claim for Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 944 (2008). As in plaintiff’s claim for intentional interference 19 20 with a contract, plaintiff fails to allege independently wrongful 21 conduct, a necessary requirement to sustain its claim for 22 interference with prospective economic advantage. 23 the court will dismiss plaintiff’s third and fourth causes of 24 action for intentional and negligent interference with a 25 prospective economic advantage. 26 27 28 D. Accordingly, UCL Plaintiff’s sixth cause of action is for violation of the UCL, Cal. Bus. & Prof. Code § 17200, et seq. 11 The UCL 1 prohibits unfair competition, which is defined to include “any 2 unlawful, unfair, or fraudulent business act or practice.” 3 Bus. & Prof. Code § 17200. 4 and distinct theory of liability . . . .” 5 Co., 567 F.3d 1120, 1127 (9th Cir. 2009) (citing S. Bay Chevrolet 6 v. Gen Motors Acceptance Corp., 72 Cal. App. 4th 861, 886 (4th 7 Dist. 1999)). 8 9 Cal. “Each prong of the UCL is a separate Kearns v. Ford Motor Because the court would dismiss all of plaintiff’s other claims, the unlawful prong of the UCL is not met. See 10 name.space, Inc. v. Internet Corp. for Assigned Names & Numbers, 11 No. CV 12-8676 PA (PLAx), 2013 WL 2151478, at *9 (C.D. Cal. Mar. 12 4, 2013); Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 13 1544, 1554 (4th Dist. 2007) (“[T]he UCL borrows violations of 14 other laws . . . and makes those unlawful practices actionable 15 under the UCL.”). 16 requires conduct “that threatens an incipient violation of an 17 antitrust law, or violates the policy or spirit of one of those 18 laws because its effects are comparable to or the same as a 19 violation of the law, or otherwise significantly threatens or 20 harms competition.” 21 Tel. Co., 20 Cal. 4th 163, 187 (1999). 22 “tethered to some legislatively declared policy or proof of some 23 actual or threatened impact on competition.” 24 In the antitrust context, the unfairness prong Cel-Tech Commc’ns, Inc. v. L.A. Cellular Unfairness must be Id. at 186-87. Here, plaintiff fails to identify and sufficiently 25 allege conduct tethered to actual or threatened impact on 26 competition--Ixchel’s allegations are limited to speculative 27 harms to competition, as discussed above. 28 must dismiss plaintiff’s sixth cause of action for violation of 12 Accordingly, the court 1 the UCL. 2 IT IS THEREFORE ORDERED that defendant’s motion to 3 dismiss (Docket No. 20) be, and the same hereby is, GRANTED. 4 Plaintiff has twenty days from the date this Order is 5 signed to file a Second Amended Complaint, if it can do so 6 consistent with this Order. 7 Dated: September 12, 2017 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13

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