Gottesfeld v. RepliGen Corporation

Filing 16

ORDER Re Motion to Dismiss. Signed by Judge Cathy Ann Bencivengo on 7/14/2017. (jjg)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JOEL GOTTESFELD, Case No.: 3:17-CV-0249-CAB-AGS Plaintiff, 12 13 14 ORDER RE MOTION TO DISMISS v. REPLIGEN CORPORATION, a Delaware Corporation, 15 [Doc. No. 9] Defendant. 16 17 18 This matter is before the Court on Defendant Repligen Corporation’s motion to 19 dismiss. The motions have been fully briefed and the Court deems them suitable for 20 submission without oral argument.1 For the reasons set forth below, the motion to dismiss 21 is GRANTED. 22 I. 23 Plaintiff Joel Gottesfeld is a professor of cell and molecular biology and chemistry FACTUAL BACKGROUND 24 employed by The Scripps Research Institute. 25 publicly-traded life sciences company which focuses on the development, production, and Defendant Repligen Corporation is a 26 27 28 1 Accordingly, Plaintiff’s request for oral argument is denied. 1 3:17-cv-0249-CAB-AGS 1 commercialization of products used in the processing of biologic drugs. On or about March 2 31, 2007, Gottesfeld and Repligen entered into a consulting agreement. Under the 3 agreement, Gottesfeld would assist Repligen in its efforts to develop treatments for 4 Friedreich’s Ataxia (“FA”) using the compounds invented by Gottesfeld. 5 In addition to the consulting agreement, Gottesfeld and Repligen entered into a 6 Common Stock Purchase Warrant (the “Warrant”). The Warrant granted Gottesfeld the 7 right to purchase 150,000 shares of Repligen stock, at a cost of $0.01 per share, in three 8 tranches of 50,000 shares. [Doc. No. 1 at 3-4.]2 The options to purchase each of the three 9 tranches were to be executable upon the occurrence of three separately defined milestones 10 in the Warrant. [Id.] The first milestone in the Warrant is entitled “First Patient Dosing,” 11 which means “the first patient dosed in a US clinical study sponsored by the [Defendant] 12 with a pharmaceutical for the treatment of Friedrich’s Ataxia.” [sic] [Id. at 4]. The 13 complaint does not allege that any patient in a clinical study in the United States was ever 14 dosed by Repligen with a drug for the treatment of FA, and Gottesfeld does not contend in 15 his opposition that any such study occurred. However, the complaint does allege that in 16 2012, Repligen conducted a clinical study with a drug for the treatment of FA in Italy. 17 [Doc. No. 1 at 4-6.] 18 On January 27, 2014, Gottesfeld sent a letter and a check for $500 to Repligen 19 attempting to exercise his option to purchase the first tranche of 50,000 shares—executable 20 upon the “First Patient Dosing”—under the Common Stock Purchase Warrant. [Doc. No. 21 1 at 7]. Repligen returned Gottesfeld’s $500 check because “no patient was ever dosed in 22 a U.S. clinical study.” [Id.; Doc. No. 9-1 at 11]. After additional unsuccessful efforts to 23 exercise his first option under the Warrant, Plaintiff filed this lawsuit. 24 25 26 27 28 2 Document numbers and page references are to those assigned by CM/ECF for the docket entry. 2 3:17-cv-0249-CAB-AGS 1 II. 2 To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain 3 sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 4 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. 5 Twombly, 550 U.S. 544, 570 (2007)). Thus, the Court “accept[s] factual allegations in the 6 complaint as true and construe[s] the pleadings in the light most favorable to the 7 nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 8 (9th Cir. 2008). On the other hand, the Court is “not bound to accept as true a legal 9 conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678; see also Lee v. City of 10 Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001) (“Conclusory allegations of law are 11 insufficient to defeat a motion to dismiss”). Nor is the Court “required to accept as true 12 allegations that contradict exhibits attached to the Complaint or . . . allegations that are 13 merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels- 14 Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 2010). “In sum, for a complaint to 15 survive a [12(b)(6)] motion to dismiss, the non-conclusory factual content, and reasonable 16 inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff 17 to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations 18 omitted). LEGAL STANDARD 19 III. 20 Both parties concede that the only issue before the Court is whether the phrase “US 21 clinical study,” as used within the definition of “First Patient Dosing” in the Warrant, is 22 ambiguous.3 Repligen argues that the phrase is unambiguous and means a clinical study 23 conducted in the United States. Because no clinical study was ever conducted in the United 24 States, Repligen asserts that the first milestone in the Warrant was not met and Gottesfeld DISCUSSION 25 26 27 28 3 Because the relevant language from the Warrant was alleged in the complaint, the Court did not review any of the documents included by Repligen with its motion. Accordingly, Gottesfeld’s evidentiary objections are denied as moot. 3 3:17-cv-0249-CAB-AGS 1 has no right to exercise his option to purchase the first tranche of 50,000 shares of Repligen 2 stock. 3 For his part, Gottesfeld points out that the Warrant does not define the phrase “US 4 clinical study and argues that the study conducted in Italy was a “US clinical study” 5 because the phrase “includes any study in which it is contemplated that said study will be 6 submitted to the FDA for approval of the drug for use in the United States in accordance 7 with 21 CFR § 312.120.” [Id. at 4-5]. At the very least, Gottesfeld argues that the phrase 8 “US clinical study” is ambiguous and open to more than one reasonable interpretation. 9 Whether a contract is clear and unambiguous is a question of law. United States v. 10 Sacramento Mun. Util. Dist., 652 F.2d 1341, 1343-45 (9th Cir. 1981). In determining 11 whether a contract is ambiguous, the Court looks to the terms of the agreement itself. 12 Greco v. Dep’t of the Army, 852 F.2d 558, 560 (Fed. Cir. 1988). “Resolution of contractual 13 claims on a motion to dismiss is proper if the terms of the contract are unambiguous.” 14 Monaco v. Bear Stearns Residential Mortg. Corp., 554 F.Supp.2d 1034, 1040 (C.D. Cal. 15 2008) (quoting Bedrosian v. Tenet Healthcare Corp., 208 F.3d 220 (9th Cir. 2000)). 16 The parties agree that the Warrant contains a Delaware choice of law provision and 17 that Delaware law controls the interpretation of the Warrant. Under Delaware law, “a 18 contract’s construction should be that which would be understood by an objective, 19 reasonable third party.” HIFN, Inc. v. Intel Corp., No. 1835-VCS, 2007 WL 1309376, at 20 *9 (Del. Ch. May 2, 2007).4 Contracts are to be read “as a whole,” with each provision 21 and term given effect “so as not to render any part of the contract mere surplusage.” Osborn 22 23 24 25 26 27 28 4 Even though there is no dispute that Delaware law governs the interpretation of the contract here, California law on contract interpretation is virtually identical. “‘In interpreting an unambiguous contractual provision we are bound to give effect to the plain and ordinary meaning of the language used by the parties.’” People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., 132 Cal. Rptr. 2d 151, 158 (Cal. Ct. App. 2003) (quoting Coast Plaza Doctors Hosp. v. Blue Cross of California, 99 Cal. Rptr. 2d 809 (Cal. Ct. App. 2000)). “Thus, where ‘contract language is clear and explicit and does not lead to absurd results, we ascertain intent from the written terms and go no further.’” Id. (quoting Shaw v. Regents of Univ. of California 67 Cal. Rptr. 2d 850 (Cal. Ct. App. 1997). 4 3:17-cv-0249-CAB-AGS 1 v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (quoting Kuhn Constr., Inc. v. Diamond State 2 Port Corp., 990 A.2d 393 (Del. 2010)). “A court must accept and apply the plain meaning 3 of an unambiguous term in the context of the contract language and circumstances, insofar 4 as the parties themselves would have agreed ex ante.” Lorillard Tobacco Co. v. Am. Legacy 5 Found., 903 A.2d 728, 740 (Del. 2006). The “true test is not what the parties to the contract 6 intended it to mean, but what a reasonable person in the position of the parties would have 7 thought it meant.” Rhone-Poulenc Basic Chem. Co. v. Am. Motorists Ins. Co., 616 A.2d 8 1192, 1196 (Del. 1992) (citing Steigler v. Ins. Co. of N. Am., 384 A.2d 398, 401 (Del. 9 1978)). 10 “A contract is not ambiguous merely because the parties disagree as to its proper 11 construction.” Matria Healthcare, Inc. v. Coral SR LLC, No. 2513-N, 2007 WL 763303, 12 at *6 (Del. Ch. Mar 1, 2007). “Ambiguity does not exist where the court can determine 13 the meaning of a contract ‘without any other guide than a knowledge of the simple facts on 14 which, from the nature of language in general, its meaning depends.’” Rhone-Poulenc 15 Basic Chem. Co., 616 A.2d at 1196 (quoting Holland v. Hannan, 456 A.2d 807, 815 (D.C. 16 1983)). “When the contract is clear and unambiguous, [the court] will give effect to the 17 plain-meaning of the contract’s terms and provisions.” Osborn, 991 A.2d at 1159–60. 18 Here, “US clinical study” is not ambiguous. An objective, reasonable third party 19 would understand the term “US clinical study” to mean a clinical study conducted in the 20 United States, and no reasonable third party would understand the term to include a study 21 conducted in Italy. Any alternate definition would render the geographic qualifier “US” 22 mere surplusage. Accordingly, the Court need not review any of the evidence or statutes 23 that Gottesfeld argues support a different interpretation or render the phrase ambiguous. 24 See United Rentals, Inc. v. RAM Holdings, Inc., 937 A.2d 810, 830 (Del. Ch. 2007) 25 (“[E]xtrinsic, parol evidence cannot be used to manufacture an ambiguity in a contract that 26 facially has only one reasonable meaning.”). 27 Using this interpretation of “US clinical study,” the complaint does not state a claim. 28 Because the complaint does not allege (and Gottesfeld does not argue) that a clinical study 5 3:17-cv-0249-CAB-AGS 1 was ever conducted by Repligen in the United States, the first milestone in the warrant was 2 never satisfied. Therefore, Repligen did not breach the Warrant by refusing to allow 3 Gottesfeld to exercise his first option under the Warrant. 4 IV. 5 For the foregoing reasons, the motion to dismiss is GRANTED and the complaint 6 7 8 CONCLUSION is DISMISSED WITH PREJUDICE. It is SO ORDERED. Dated: July 14, 2017 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 3:17-cv-0249-CAB-AGS

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