Quintara Biosciences, Inc. v. Ruifeng Biztech Inc. et al.

Filing 19

ORDER DENYING #11 MOTION FOR PRELIMINARY INJUNCTIVE RELIEF. SIGNED BY JUDGE ALSUP. (whalc2, COURT STAFF) (Filed on 9/9/2020)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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QUINTARA BIOSCIENCES, INC.,
Plaintiff,

United States District Court
Northern District of California

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No. C 20-04808 WHA

v.
RUIFENG BIZTECH INC., et al.,

ORDER DENYING PRELIMINARY
INJUNCTIVE RELIEF

Defendants.

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INTRODUCTION

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In this potpourri of disputes between former business partners, plaintiff moves for a

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temporary restraining order and preliminary injunction. But plaintiff’s delay undercuts its claim

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of irreparable harm. The motion is DENIED.

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STATEMENT
The allegations here tell quite a story. Drs. Qun ‘Richard’ Shan and Xueling ‘Sue’ Zhao

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started their DNA-sequence analysis company, plaintiff Quintara Biosciences, Inc., in their

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garage in 2005. Purchasing startup equipment with a $230,000 home equity loan, they toiled

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long hours and many sleepless nights, while raising children and working other full-time jobs,

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to eventually build Quintara into a respected genetic-sequencing analysis business.

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Despite success, however, Quintara developed cash flow problem in 2013. Then entered

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defendant Gangyou Wang, whom Shan and Zhao met through a mutual acquaintance. Wang

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said he could solve Quintara’s problems with an interest-free $1,000,000 loan with conditions

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structured to aid his green card application. Wang’s company, defendant Ruifeng Biztech Inc.,

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would appear to take over, at least in name, operation of Quintara. Ruifeng would operate the

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lab and pay the employees. On his green card application, then, Wang could say that he had

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brought a million dollar startup with at least ten employees to the United States. By the time

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Wang obtained his green card, Quintara would have paid back the million dollar loan, and the

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relationship would terminate. The parties finalized the deal with a handshake.

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Following the initial loan, though, Wang convinced Shan and Zhao to enter a

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collaboration agreement. Quintara and Ruifeng would start a joint venture; Ruifeng would own

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51%; Quintara would own 49%. The parties, however, never formed any new entity.

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Skip ahead to September 2017. Wang asked for another favor, that Ruifeng be added onto

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Northern District of California

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the lease for Quintara’s California headquarters, 3563 Investment Blvd., Suite 2, Hayward,

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California. Wang promised nothing would change in the parties’ actual practice; Quintara

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would operate as usual, pay rent to Ruifeng, and Ruifeng would pass the rent along to the

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landlord. Unbeknownst to Shan and Zhao however, Wang forged Shan’s name on a lease

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termination agreement, leaving the premises in Ruifeng’s name alone.

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In early 2019, Quintara had repaid the million dollar loan and Wang had obtained his

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green card, so Shan and Zhao sought to terminate the relationship between Quintara and

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Ruifeng. But Wang refused, claiming under the collaboration agreement that Ruifeng owned

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51% of Quintara’s business assets. When Quintara nonetheless announced termination of the

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relationship, Wang secretly (and successfully) solicited several Quintara employees to jump

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ship to Ruifeng. Finally, on March 9, 2020, the wolf emerged from the sheep’s clothing. Wang

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changed the locks on the 3563 Investment Blvd. premises and denied entry to Quintara

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employees. He then started defendant RF Biotech LLC to operate Quintara’s business, out of

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Quintara’s premises, with Quintara’s equipment, and with Quintara’s prior employees,

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defendants Alex Wong, Alan Li, Rui Shao.

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Five months later, Quintara now seeks both a temporary restraining order and preliminary

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injunction compelling defendants to turn over the 3563 Investment Blvd. premises, Quintara’s

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equipment, and cease using any trade secrets obtained. Following briefing from both sides, the
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undersigned determined that oral argument would be of little assistance, so this order was

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decided on the papers.
ANALYSIS

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“A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on

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the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that

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the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter

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v. NRDC, 555 U.S. 7, 20 (2008). A plaintiff must establish the same to obtain a TRO.

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Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush and Co., Inc., 240 F.3d 832, 839 n. 7 (9th Cir.

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2001).

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It must be reemphasized. A plaintiff seeking preliminary injunctive relief must

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Northern District of California

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demonstrate that irreparable injury is not merely possible in the absence of an injunction, but

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likely. “[I]njunctive relief [is] an extraordinary remedy that may only be awarded upon a clear

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showing that the plaintiff is entitled to such relief.” Winter v. NRDC, 555 U.S. at 22.

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Here, plaintiff fails to demonstrate a sufficient likelihood of irreparable harm. To be sure,

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plaintiff alleges quite a sequence of events. Following Shan and Zhao’s introduction to Wang

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in 2013, Wang (allegedly) conned his way into control of the finances, of the premises, of the

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employees, and eventually of the business itself. Ever since, defendants have (allegedly)

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irreparably stolen plaintiff’s trade secrets, consumer base, and damaged its business standing.

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But that all culminated on March 9, 2020, when Wang changed the locks of the premises.

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Plaintiff then waited five months until August 19 to move for preliminary injunctive relief. It

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remains unclear what has changed, or what now prompts this motion where events five months

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ago did not. Plaintiff offers no explanation. “[Such] long delay before seeking a preliminary

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injunction implies a lack of urgency and irreparable harm.” See Oakland Tribune, Inc. v.

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Chronicle Pub. Co., Inc., 762 F.2d 1374, 1377 (9th Cir. 1985).

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Simply, irreparable injury calls for immediate and diligent response. On this ground

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alone, preliminary injunctive relief would be inappropriate. This order briefly notes two other

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grounds for denial.

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First, “he who comes into equity must come with clean hands.” In plaintiff’s telling, Shan

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and Zhao joined an elaborate scheme involving a shell company and an unwritten one million

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dollar, interest-free loan to help Wang fraudulently obtain resident status in the United States.

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Only now that this improper scheme has fallen apart do they come running to the courts for aid.

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Equity, though it “does not demand that its suitors shall have led blameless lives,” nevertheless

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“does require that they shall have acted fairly and without fraud or deceit as to the controversy

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in issue,” and will not condone plaintiff’s behavior here. Precision Inst. Mfg. Co. v. Auto.

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Maint. Mach. Co., 324 U.S. 806, 814 (1945); cf. Sierra Club v. Trump, 963 F.3d 874, 896 (9th

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Cir. 2020).

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Second, plaintiff paints a compelling picture of Wang as an adept con-man, but defendants

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Northern District of California

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vigorously contest (with ample documentation) nearly every aspect of plaintiff’s retelling. On

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these unsettled facts, we can hardly determine that plaintiff is likely to succeed on the merits.

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Finally, this Court’s jurisdiction over this non-diverse matter rests entirely on the federal

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trade secret claim. It remains otherwise a suit about a deteriorating business relationship,

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committed to California’s jurisdiction. Should the trade secret claims fail, the undersigned will

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be unlikely to exercise supplemental subject-matter jurisdiction over the remaining claims.
CONCLUSION

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Preliminary injunctive relief is DENIED. The September 17 hearing is VACATED.

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Defendants’ motion to dismiss will be heard along with an initial case management conference

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on OCTOBER 22 AT 8:00 A.M.

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IT IS SO ORDERED.

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Dated: September 9, 2020.

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WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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