Ixchel Pharma, LLC. v. Biogen Inc.

Filing 48

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 1/25/18 GRANTING 37 Motion to Dismiss: Plaintiff has twenty days from the date this Order is signed to file a Third Amended Complaint, if it can do so consistent with this order. (Kaminski, H)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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IXCHEL PHARMA, LLC,

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CIV. NO.: 2:17-00715 WBS EFB

Plaintiff,
v.
BIOGEN INC.,
Defendant.

MEMORANDUM AND ORDER RE: MOTION
TO DISMISS SECOND AMENDED
COMPLAINT

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Plaintiff Ixchel Pharma, LLC (“Ixchel”) brought this

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action against defendant Biogen Inc. (“Biogen”) asserting federal

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and state antitrust and state tort claims arising from an

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agreement that plaintiff entered into with non-party Forward

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Pharma FA ApS (“Forward”) regarding the development of a

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pharmaceutical drug and a settlement agreement defendant entered

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into with Forward.

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Dismiss the Second Amended Complaint pursuant to Federal Rule of

Before the court is defendant’s Motion to

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Civil Procedure 12(b)(1) and 12(b)(6).

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I.

(Docket No. 37.)

Procedural History

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Plaintiff initiated this action alleging: (1)

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violation of the Sherman Act, 15 U.S.C. § 1; (2) tortious

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interference with contract; (3) intentional and negligent

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interference with prospective economic advantage; (4) violation

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of the California Cartwright Act, Cal. Bus. & Prof. Code § 16700,

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et seq.; and (5) violation of California’s Unfair Competition Law

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(“UCL”).

Plaintiff filed a First Amended Complaint (“FAC”) on

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June 14, 2017 (Docket No. 17), which the court dismissed on

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September 14, 2017 for four reasons: (1) plaintiff did not appear

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to have Article III standing because it had not allegedly

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suffered an actual or imminent injury in fact; (2) plaintiff was

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not a current or potential competitor in the alleged market and

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therefore did not allege antitrust injury; (3) plaintiff’s

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tortious interference claim failed to allege “wrongful means”;

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and (4) plaintiff could not satisfy either the UCL’s “unlawful”

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or “unfairness” prongs because plaintiff’s other claims had been

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dismissed and plaintiff’s allegations of harm were speculative.

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(Sept. 12 Order Re: Mot. to Dismiss (Docket No. 25).)

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On October 2, 2017, plaintiff filed a Second Amended

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Complaint (“SAC”) asserting all of the same claims the court

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previously dismissed.

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Complaint, plaintiff’s Sherman and Cartwright Act claims remain

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unchanged from the First Amended Complaint.

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amended its other claims and added (1) an allegation that

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defendant included an illegal “non-compete” provision in its

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agreement with Forward; (2) an allegation that Forward did not

(Docket No. 34.)

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In the Second Amended

Plaintiff has

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wait the necessary amount of time before it stopped working for

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plaintiff; and (3) additional facts related to speculative harms

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plaintiff allegedly suffered.

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II.

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Discussion
A.

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Sherman Act and Cartwright Act
To bring a Sherman Act or Cartwright Act claim, a

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plaintiff must establish antitrust standing.1

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Gen. Contractors of Cal., Inc. v. Cal. State Council of

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Carpenters, 459 U.S. 519, 535 n.31 (1983); Dang v. S.F. Forty

See Associated

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Niners, 964 F. Supp. 2d 1097, 1110 (N.D. Cal. 2013).

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plaintiff to have antitrust standing, it must have an antitrust

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injury.

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104, 110 n.5 (1986); see also Am. Ad Mgmt., 190 F.3d at 1055.

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Antitrust injury requires that a plaintiff be “a participant in

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the same market as the alleged malefactors.”

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Hospitals, Inc., 772 F.2d 1467, 1470 n.3 (9th Cir. 1985).

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For a

See Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S.

Bhan v. NME

The court previously dismissed plaintiff’s Sherman and

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Cartwright Act claims because it held that plaintiff had not

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alleged an antitrust injury.

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(Docket No. 25 at 7.)

Plaintiff

Antitrust standing is distinct from Article III
standing. As the court noted when it dismissed plaintiff’s First
Amended Complaint, 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 Second 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 was too
speculative where there were insufficient allegations regarding
how far plaintiff had gone in seeking “FDA approval, when such
approval may be anticipated, or whether it will be prepared to
enter the product to market” upon FDA approval).
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concedes its allegations as to these claims are identical to

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those in the First Amended Complaint.

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No. 40).)

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discussed in the court’s September 12 Order.

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4-7.)

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B.

(Pl.’s Opp’n

at 1 (Docket

The court therefore dismisses them for the reasons
(Docket No. 25 at

Tortious Interference with Contract
Although plaintiff’s Second Amended Complaint pleads

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additional facts related to defendant’s alleged tortious

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interference with contract, this claim continues to suffer from

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the same shortfalls this court identified in its September 12,

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2017 Order granting defendant’s Motion to dismiss the First

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Amended Complaint.

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A claim for tortious interference with a contract

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requires the plaintiff allege: “(1) a valid contract between

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plaintiff and a third party; (2) defendant’s knowledge of this

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contract; (3) defendant’s intentional acts designed to induce a

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breach or disruption of the contractual relationship; (4) actual

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breach or disruption of the contractual relationship and (5)

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resulting damage.”

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Cal. 4th 26, 55 (1998).

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contract does not generally require independent wrongfulness, see

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id., interference with an at-will contract requires a pleading of

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wrongful means.

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The court previously held that the Forward-Ixchel Agreement was

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an at-will contract because Forward could terminate it at any

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time, and thus in order to plead tortious interference plaintiff

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must also allege “that the defendant engaged in an independently

Quelimane Co. v. Stewart Title Guar. Co., 19
While tortious interference with a

Reeves v. Hanlon, 33 Cal. 4th 1140, 1152 (2004).

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wrongful act.”

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(Id.; see also Docket No. 25 at 8-10.)2

In the Second Amended Complaint, plaintiff identifies

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two allegedly “wrongful means”: (1) Forward’s cessation of

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clinical trial work following termination of its agreement with

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plaintiff (SAC ¶ 64) and (2) Forward’s failure to wait the

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required 60 days before ceasing its work with plaintiff after

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serving its notice of termination (SAC ¶ 62).

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With regard to the first claim, plaintiff alleges
that Forward breached an obligation to conduct clinical trials

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after its Collaboration Agreement with plaintiff had terminated.

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(FAC 34; SAC 64.)

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an obligation to continue with trials post-termination did not

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exist.

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for inducing Forward to breach this nonexistent duty.

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However, the court previously noted that such

(Docket No. 25 at 10.)

Thus, defendant cannot be liable

As to plaintiff’s new claim that Forward failed to

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honor the full 60-day notice period, plaintiff does not allege

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that defendant instructed Forward not to wait the requisite time

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period.

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instructed Forward to terminate its existing contract with

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plaintiff, but has not alleged that defendant instructed Forward

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to in any way breach the existing contract or terminate it in

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such a way that would constitute a violation.

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claim for tortious interference with a contract, plaintiff must

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allege that defendant’s “intentional acts [were] designed to

In fact, plaintiff merely indicates that defendant

To state a valid

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Plaintiff again attempts to argue, using the same
reasoning the court previously rejected, that there is no
independently wrongful act requirement in this case. However,
the court remains unpersuaded by plaintiff’s argument and again
holds that independent wrongfulness is a required element.
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induce a breach or disruption of the contractual relationship”

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between Forward and plaintiff.

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55.

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terminate its contracts with plaintiff, but plaintiff has not

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identified any evidence that indicates that defendant

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specifically told Forward to terminate its contract with

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plaintiff before the requisite 60 days had elapsed, or to breach

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its contract in any other way.

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to aver that defendant intentionally directed this alleged

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See Quelimane Co., 19 Cal. 4th at

Here, plaintiff has pled that defendant induced Forward to

Accordingly, plaintiff has failed

breach.

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Additionally, plaintiff fails to allege any harm that

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resulted from this alleged early termination.

Plaintiff does

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not, and seemingly cannot, allege that had Forward waited 60 days

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to cease its work on the clinical trials, plaintiff would have

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avoided the alleged speculative harms it asserts.

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even if plaintiff had satisfied the other requirements of a claim

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for tortious interference with a contract, plaintiff’s failure to

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plead “resulting damage” means that its tortious interference

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claim based on this supposed breach would still warrant

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dismissal.

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3476 SVW JWJX, 2015 WL 1323127, at *7 (C.D. Cal. Feb. 22,

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2005)(plaintiff claiming intentional interference with contract

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based on induced breach must show damages “attributable to” the

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alleged induced breach “and not other causes unrelated to the

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alleged wrong”).

Accordingly,

See Sebastian Int’l, Inc. v. Russolillo, Civ. No. 00-

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C.

Intentional and Negligent Interference with
Prospective Economic Advantage

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As with plaintiff’s claim for intentional interference

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with a contract, plaintiff fails to allege independently wrongful

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conduct, a necessary requirement to sustain its claims for

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intentional and negligent interference with prospective economic

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advantage.

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dismiss plaintiff’s third and fourth causes of action.

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D.

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(Docket No. 25 at 11.)

Accordingly, the court must

UCL
California’s Unfair Competition Law prohibits unfair

competition, which is defined to include “any unlawful, unfair,

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or fraudulent business act or practice.”

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Cal. Bus. & Prof. Code

§ 17200.

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Unlawfulness

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Because the court would dismiss all of plaintiff’s

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other claims, as discussed above, the unlawful prong of the

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Unfair Competition Law is not met.

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Internet Corp. for Assigned Names & Numbers, Civ. No. 12-8676 PA

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(PLAx), 2013 WL 2151478, at *9 (C.D. Cal. Mar. 4, 2013); Berryman

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v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (4th

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Dist. 2007) (“[T]he UCL borrows violations of other laws . . .

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and makes those unlawful practices actionable under the UCL.”).

See name.space, Inc. v.

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In an attempt to otherwise satisfy the unlawfulness

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requirement, plaintiff argues that defendant’s inclusion of §

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2.13 in the Forward-Biogen Agreement is an allegedly illegal

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“non-compete” provision that violates California Business &

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Professions Code § 16600 and New York common law. (SAC ¶¶ 56, 59,

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113.)

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non-compete agreement.

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preserves Forward’s ability to compete against Biogen under the

However, the court does not find that § 2.13 is in fact a
The Forward-Biogen Agreement expressly

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terms of a co-exclusive license.

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explicitly permits Forward to “authoriz[e] contractors to perform

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services for [Forward], including services to manufacture or

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import products and to perform wholesale and distribution

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services for [Forward].”

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Therefore, § 2.13 clearly does not prevent Forward from

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developing and selling any pharmaceutical products containing

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DMF, as plaintiff asserts, and thus does not prevent Forward from

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competing with Biogen.

In fact, the Agreement

Forward-Biogen Agreement § 3.01.

Accordingly, this section cannot be

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classified as a “non-compete covenant,” which Black’s Law

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Dictionary defines as a commitment “not to engage in the same

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type of business.”

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Black’s Law Dictionary 420 (9th ed. 2009).

Rather than defining § 2.13 as some sort of illegal

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non-compete agreement, the court views it instead as an ancillary

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restraint, one that is subordinate to the larger, lawful

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agreement between Forward and defendant.

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a restriction that prevents Forward from competing with defendant

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in very limited and defined circumstances, and as such is not

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subject to the principles that govern non-competes as a matter of

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law.

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LGHG, 2015 WL 381332, at *8 (D.N.J. Jan. 28, 2014)(principles

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that govern “non-compete clause” were “not applicable” when

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license “restricted [licensor] from competing with [licensee] in

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only defined circumstances”).

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Section 2.13 is merely

See Educ. Impact, Inc. v. Danielson, Civ. No. 14-937 FLW,

The Supreme Court has explained that the Rule of Reason

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“has been regarded as a standard for testing the enforceability

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of covenants in restraint of trade which are ancillary to a

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legitimate transaction.”

Nat’l Soc. of Prof’l Engineers v.
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United States, 435 U.S. 679, 689 (1978).

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is a non-compete clause, because it falls outside of the

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employment context, the court would analyze its legality under

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the antitrust law’s Rule of Reason and not the narrower rule of

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per se illegality § 16600 applies to non-compete agreements in

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employment contracts.

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App. 3d 1130, 1133 (2nd Dist. 1985); Ikon Office Solutions, Inc.

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v. Rezente, Civ. No. 2:10-1704 WBS KJM, 2010 WL 5129293, at *4

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n.5 (E.D. Cal. Dec. 9, 2010) (explaining that Section 16600 “bars

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restrictive covenants in employment contracts”); Dayton Time Lock

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Service, Inc. v. Silent Watchman Corp., 52 Cal. App. 3d 1, 6

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(1975)(applying the Rule of Reason to a Section 16600 challenge

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to an exclusive dealing arrangement).

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Whether or not § 2.13

See, e.g., Martikian v. Hong, 164 Cal.

Although plaintiff argues that Section 16600, and not

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the Rule of Reason, should be applied in this case, California

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courts have concluded that Section 16600 does not apply outside

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of the employment context.

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notably Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008),

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indicates that Section 16600, rather than the Rule of Reason,

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applies when assessing “employee noncompetition agreements,” but

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plaintiff has identified no case law expanding the Edwards

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decision to situations outside of the narrow employee context.

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When restraints, whether ancillary restraints as is the case

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here, or non-compete clauses, do not involve an employment

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agreement, a court must apply the antitrust law’s Rule of Reason.

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See, e.g., Martikian v. Hong, 164 Cal. App. 3d 1130, 1133 (2d

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Dist. 1985) (upholding restrictive covenant in commercial lease

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under antitrust principles and explaining that “from earliest

The case law plaintiff relies on,

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times there has been developed a ‘rule of reason’ whereby any

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given restraint is to be tested as lawful or unlawful” (citing

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Standard Oil Co. v. United States, 221 U.S. 1 (1911)).

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Accordingly, the court finds that the legality of § 2.13 must be

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analyzed according to the Rule of Reason.

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v. Case, 244 Cal. App. 4th 197, 209 (1st Dist. 2016)(holding

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Edwards inapplicable unless the provision at issue is a

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“quintessential noncompete agreement that expressly restrain[s]

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an employee”).

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See USS-POSCO Indus.

The Rule of Reason states that “the antitrust laws

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prohibit only those contracts which unreasonably restrain

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competition.”

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App. 3d 62, 72 (3rd Dist. 1979).

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whether the restraint imposed is such as merely regulates and

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perhaps thereby promotes competition or whether it is such as may

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suppress or even destroy competition.”

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GTE Sylvania Inc., 433 U.S. 36, 49 n. 15 (citing Board of Trade

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of City of Chicago v. U.S., 246 U.S. 231, 238 (1918).

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all inquiry conducted under the Rule of Reason “is confined to a

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consideration of impact on competitive conditions,” Nat’l Soc. of

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Prof’l Engineers, 435 U.S. at 690, it requires that plaintiff

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file well-pleaded allegations of harm to competition.

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v. University of Southern California, 252 F.3d 1059, 1063 (9th

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Cir. 2001).

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Centeno v. Roseville Community Hosp., 107 Cal.
“The true test of legality is

Continental T.V., Inc. v.

Because

See Tanaka

The court previously rejected plaintiff’s First Amended

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Complaint, holding that the “allegations are limited to

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speculative harms to competition.”

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court finds that the Second Amended Complaint adds nothing new,
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(Docket No. 25 at 12.)

The

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and thus again must dismiss this cause of action for failure to

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plead harm to competition.

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that, due to defendant’s actions, it lost a $150,000 grant,

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(Pl.’s Opp’n at 49), but this allegation does not establish

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injury in fact as a lost grant does not constitute a harm to

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competition.

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Amended Complaint added allegations that § 2.13 completely blocks

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Forward from competing with defendant, (id. at 17-18), as

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described above, the Forward-Biogen Agreement explicitly granted

Plaintiff re-invokes its allegation

Further, although plaintiff claims that the Second

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Forward the right to compete in particular situations.

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Accordingly, the court holds that plaintiff’s purported harms

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remain entirely speculative and do not sufficiently allege harm

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to competition.3

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2.

Unfairness

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In the antitrust context, the unfairness prong of the

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Unfair Competition Law requires conduct “that threatens an

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incipient violation of an antitrust law, or violates the policy

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or spirit of one of those laws because its effects are comparable

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to or the same as a violation of the law, or otherwise

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significantly threatens or harms competition.”

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Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 187

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(1999).

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declared policy or proof of some actual or threatened impact on

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competition.”

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Cel-Tech

Unfairness must be “tethered to some legislatively

Id. at 186-87.

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In its Opposition to the Motion to Dismiss, plaintiff
makes a weak argument that § 2.13 also violates New York Law.
(Id. at 28-19.) However, plaintiff previously disavowed reliance
on New York law in its Complaint (SAC ¶ 60) and thus cannot now
attempt to rely on it.
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Here, plaintiff fails to identify and sufficiently

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allege conduct tethered to an actual or threatened impact on

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competition.

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allegations are limited to speculative harms to competition, as

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discussed above.

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court must dismiss plaintiff’s sixth cause of action for

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violation of California’s Unfair Competition Law.

As with the First Amended Complaint, plaintiff’s

(See Docket No. 25 at 12.)

Accordingly, the

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IT IS THEREFORE ORDERED that defendant’s Motion to

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Dismiss (Docket No. 37) be, and the same hereby is, GRANTED.

The

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Second Amended Complaint is hereby DISMISSED.

Plaintiff has

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already amended its complaint two times, and the court finds that

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further amendment as to plaintiff’s first, second, third, and

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fourth claims would be futile.

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presented a new argument related to defendant’s alleged violation

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of the California Unfair Competition Law, the court will grant

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plaintiff one more opportunity to amend its complaint with regard

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to this claim.

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Order is signed to file a Third Amended Complaint, if it can do

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so consistent with this order.

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Dated:

However, because plaintiff

Plaintiff has twenty days from the date this

January 25, 2018

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