Terran Biosciences, Inc. v. Compass Pathfinder Limited
Filing
79
MEMORANDUM OPINION. Signed by District Judge Ellen Lipton Hollander on 2/6/2024. (bas, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
TERRAN BIOSCIENCES, INC., and
SCOTT THOMPSON
Plaintiffs,
v.
Civil Action No. ELH-22-1956
COMPASS PATHFINDER
LIMITED, et al.,
Defendants.
MEMORANDUM OPINION
Plaintiffs Terran Biosciences, Inc. (“Terran Biosciences” or the “Company”), a Delaware
corporation, and Scott Thompson, Ph.D., formerly Professor of Physiology and Chair of the
Department of Physiology at the University of Maryland School of Medicine (collectively,
“Terran”), have filed suit against defendant Compass Pathfinder Limited (“Compass”), a company
incorporated in England and Wales, and ten “John Doe” defendants (collectively, “Compass”).
ECF 48 (“Second Amended Complaint” or “SAC”), ¶¶ 1, 9–11. In sum, plaintiffs allege that
Compass defrauded them of trade secrets concerning the therapeutic application of the
hallucinogenic compound psilocybin. Id. ¶ 1.
The original Complaint was filed solely by Terran Biosciences on August 5, 2022. ECF 1.
It has twice been amended. ECF 34 (“First Amended Complaint”); ECF 48. Plaintiffs now seek
leave to file a Third Amended Complaint, by which they would join the University of Maryland,
Baltimore (“UMB”), a State entity, as a co-plaintiff, and add factual allegations pertinent to the
claims of fraud. ECF 67 (“Motion for Leave” or “Motion”). The Motion for Leave is accompanied
by 38 exhibits. ECF 67-1 to ECF 67-39. 1
The proposed Third Amended Complaint is docketed at ECF 67-1 (“Third Amended
Complaint” or “TAC”). The redlined version is at ECF 67-29. According to plaintiffs, adding
UMB as a plaintiff will render moot Compass’s contention that the case should be dismissed for
failure to join UMB as a necessary party. ECF 67 at 3; see ECF 53, ECF 53-1 at 12-13. Compass
opposes the Motion. ECF 68 (“Opposition”). Terran has replied. ECF 75 (sealed version); ECF
76 (redacted version).
No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that
follow, I shall grant the Motion.
I.
Background
The Complaint (ECF 1) asserted three counts: misappropriation of trade secrets, in
violation of the Defend Trade Secrets Act, 18 U.S.C. § 1831 et seq. (Count I); misappropriation of
trade secrets, in violation of the Maryland Uniform Trade Secrets Act (“MUTSA”), Md. Code
(2013 Repl. Vol., 2022 Supp.), § 11-1201 et seq. of the Commercial Law Article (“C.L.”) (Count
II); and breach of contract (Count III). ECF 1, ¶¶ 31–65. Compass filed a motion to dismiss the
Complaint, arguing, inter alia, that this Court lacks personal jurisdiction as to Compass. ECF 24.
On April 6, 2023, Terran Biosciences filed a motion for leave to amend the Complaint.
ECF 32 (“First Leave Motion”). It sought to include “additional factual allegations relating to the
[Company’s] trade secret claims . . . in Counts I and II of the original Complaint” and to clarify
1
ECF 67-1 to ECF 67-39 total over 1,200 pages. Surprisingly, plaintiffs failed to include
a table of contents for the exhibits.
2
“factual allegations relating to personal jurisdiction” concerning Compass. Id. at 1. I granted the
First Leave Motion. ECF 33. The First Amended Complaint followed. ECF 34.
Then, on May 19, 2023, the Company filed a motion for leave to file a Second Amended
Complaint. ECF 45 (“Second Leave Motion”). It sought to join Professor Thompson as a plaintiff
with respect to Count II, allegedly because he is “the inventor of the Psilocybin Trade Secrets at
issue in this action.” Id. at 2. In addition, Terran Biosciences sought to add Count III, asserted
jointly by the Company and Professor Thompson, alleging unfair competition under Maryland
law. Id. “Counts IV through XI” of the proposed Second Amended Complaint were to be “brought
solely by Professor Thompson, and include[d] claims for detrimental reliance, unjust enrichment,
fraud, and breach of contract.” Id. Although the Second Amended Complaint significantly altered
the suit, adding a new party and several new claims, Compass did “not oppose [the] Second Motion
for Leave.” ECF 46. By Order of June 2, 2023, I granted the Second Leave Motion. ECF 47.
The SAC followed. ECF 48.
The Second Amended Complaint (ECF 48) is now the operative complaint.
It is
accompanied by 25 exhibits. ECF 45-4 to ECF 45-28. 2 In the SAC, plaintiffs allege that Compass
undertook a “malicious and intentional scheme to defraud the State of Maryland and
misappropriate highly confidential and sensitive, proprietary information that Terran
[Biosciences], Professor Thompson, and [UMB] spent years and substantial resources to develop.”
ECF 48, ¶ 1.
2
These documents are actually docketed as exhibits to the Company’s Second Leave
Motion, rather than as exhibits to the Second Amended Complaint. See ECF 48. Nonetheless, I
understand the Second Amended Complaint to have incorporated by reference the exhibits
attached to the Second Leave Motion.
3
According to plaintiffs, “[i]n November 2016, Professor Thompson came up with the idea
of administering psilocybin in the presence of ketanserin (a 5-HT2A antagonist) as a potential
rapid, non-hallucinogenic antidepressant therapy.” Id. ¶ 24. In particular, “Professor Thompson
recognized that [this] combination would reduce or eliminate the hallucinatory effects of
psilocybin, while retaining its antidepressant actions.” Id. Therefore, “[o]ver the next few years,
Professor Thompson engaged in extensive research . . . related to the sequential administration of
ketanserin (or other 5-HT2A antagonists) followed by psilocybin, in order to produce the optimal
non-hallucinatory and anti-depressive effects.” Id. “Further research” conducted by Professor
Thompson “related to the optimal time points, frequency, and dosing for the sequential
administration of the two drugs in combination.” Id.
“The inventions derived from, and the results of, this research constitute the Psilocybin
Trade Secrets.” Id. ¶ 25. “By virtue of Professor Thompson’s employment and invention
assignment agreement with UMB, the Psilocybin Trade Secrets are owned by UMB, which in turn
has exclusively licensed them to Terran [Biosciences].” Id. Nonetheless, “pursuant to UMB’s
intellectual property policies and faculty agreements, Professor Thompson receives a portion of
the revenues that UMB generates from his inventions, including a portion of the royalties UMB
receives from licensing his patents and other inventions, including the Psilocybin Trade Secrets.”
Id.
“On August 13, 2019, Professor Thompson and UMB filed U.S. Provisional Patent
Application No. 62/886,0[9]0 (‘the ’[9]0 Application’), entitled ‘Combination Therapy with Broad
Spectrum Serotonergic Agonists and Anti-Hallucinogenic Serotonergic Antagonists.’” Id. ¶ 27.3
3
Exhibit 15 to Terran’s Second Amended Complaint is a patent application titled
“Combination Therapy with Broad Spectrum Serotonergic Agonists and Anti-Hallucinogenic
Serotonergic Antagonists.” See ECF 45-18. Terran cites Exhibit 15 in support of its assertion that
4
Although the “’[9]0 Application generally disclosed co-administering psilocybin and an
antagonist,” it “did not go into detail about the specifics of the sequential administration of a 5HT2A antagonist followed by psilocybin, or the optimal order, time points, frequency, or dosing
for the therapy, all of which Professor Thompson maintained as trade secrets pending further
experimental data.” Id.
In May 2019, Ekaterina Malievskaia, M.D., MScPH, “the Co-Founder and Head of
Research and Development of Compass,” contacted Todd Gould, Professor of Psychiatry at the
University of Maryland School of Medicine, regarding Compass’s interest in “‘developing
psilocybin for treatment-resistant depression and . . . understand[ing] [the] molecular mechanisms
of psilocybin.’” Id. ¶ 28 (quoting ECF 45-19). Professor Gould referred Dr. Malievskaia to
Professor Thompson. ECF 48, ¶ 28. Thereafter, “Dr. Malievskaia solicited a call with Professor
Thompson to discuss his research on the Psilocybin Trade Secrets.” Id.
Compass “sent Professor Thompson a Mutual Non-Disclosure Agreement (‘NDA’)” on
May 29, 2019, to be executed before his scheduled call with Dr. Malievskaia. Id. ¶ 29 (citing ECF
45-20). “By its terms, the NDA would prohibit Compass from using any information disclosed by
Thompson or his colleagues other than ‘in connection with exploring possible business
arrangements between [Compass and Thompson] and/or their Affiliates.’” ECF 48, ¶ 29 (citing
ECF 45-21) (alteration in SAC). Professor Thompson returned a signed copy of the NDA. ECF
48, ¶ 29. Although “Compass acknowledged receipt of [the] signed NDA on May 30, 2019,”
Compass did not countersign the NDA. Id. (citing ECF 24-1 at 18).
“Professor Thompson and UMB filed U.S. Provisional Patent Application No. 62/886,080” on
August 13, 2019. ECF 48, ¶ 27. However, the application filed as Exhibit 15 is an application
numbered 62/886,090. ECF 45-18. I assume that Terran’s reference to the “’80 Application” is a
typographical error.
5
Professor Thompson, Professor Gould, and Compass held a telephone conference on May
31, 2019, “to discuss the molecular mechanisms of psilocybin.” ECF 48, ¶ 30. In particular, “[t]he
parties discussed Professor Thompson’s and Professor Gould’s plans” to investigate the effects of
administering psilocybin in the presence of sequentially-administered ketanserin. Id. “On the call,
Compass expressed significant interest in Professor Thompson’s research results, in sponsoring
further research, and in the possibility of including ketanserin as part of the treatment regimen in
Compass’s impending clinical study.” Id. 4
Thereafter, on June 12, 2019, “Compass requested a research proposal from Professor
Thompson.” Id. ¶ 31 (citing ECF 45-23). “The next day, Professor Thompson and Professor
Gould sent Compass a scientific proposal and a proposed budget to study the administration of
psilocybin in the presence of ketanserin.” ECF 48, ¶ 31. Professor Thompson and Professor Gould
believed that this disclosure was protected by the NDA. Id.
Compass resplied to Professor Thompson on June 18, 2019, stating “that they ‘were excited
to read about the interesting questions you’d like to explore using psilocybin’ and asked additional
. . . questions . . . about Professor Thompson’s research.” Id. ¶ 32 (quoting ECF 45-23). Professor
Thompson responded to these questions and others posed “throughout the months thereafter.”
ECF 48, ¶ 33. Meanwhile, “Compass and UMB worked on a draft collaboration agreement.” Id.
¶ 34.
On September 5, 2019, Compass asked Professor Thompson whether he had filed any
patent applications regarding his research. Id. ¶ 35. Professor Thompson told Compass that he
had filed the ’090 Application. Id. “In response, Compass asked a flurry of questions about
4
The SAC frequently refers to “Compass” without identifying the representative or
representatives from Compass with whom Thompson or others interacted.
6
Professor Thompson’s work,” and sent “follow-up emails [requesting] more information,
including additional requests for initial research data and an explanation of Professor Thompson’s
past and future plans relating to any psilocybin research.” Id. (citing ECF 45-25).
At this point, Professor Thompson and Professor Gould recognized that “others in the
scientific community were becoming interested in psilocybin’s potential,” and they became
concerned that the parties had not yet reached a collaboration agreement. ECF 48, ¶ 36. “They
therefore informed Compass that they wanted to move forward as fast as they could.” Id. (citing
ECF 45-25). Compass responded on September 24, 2019, by “asking even more questions about
the studies, specifically to confirm that they had not started.” ECF 48, ¶ 36 (citing ECF 45-25).
“Compass also represented that it was hopeful that this would be ‘the start of an open and
productive collaboration’ with UMB, which [might] include the testing of ‘new compounds in the
future.’” ECF 48, ¶ 36 (quoting ECF 45-25).
On October 20, 2019, “Compass sent UMB a heavily marked-up revision of a collaboration
agreement, with particularly heavy redlines to the intellectual property provisions of the draft
agreement.” ECF 48, ¶ 37. Professor Thompson met with Compass the next day, at the annual
meeting of the Society for Neuroscience. Id. ¶ 38. There, “Compass stated that it remained
interested in working with UMB and Professor Thompson.” Id. Nonetheless, “[o]n November
20, 2019, Compass e-mailed Professor Thompson saying that it was ‘unable to proceed with the
collaboration’ and declined to fund Professor Thompson’s experiments.” Id. (quoting ECF 4526).
Terran Biosciences later discovered that, “[o]n August 29, 2019, without telling Professor
Thompson or UMB,” Compass had filed “U.S. Provisional Parent Application No. 62/893,611
(‘the ’611 Application’), which included disclosure of, and draft claims covering, the sequential
7
administration of a 5-HT2A antagonist (expressly including ketanserin) followed by psilocybin to
reduce [psilocybin’s] negative side effects.” ECF 48, ¶ 40 (citing ECF 45-9). According to
plaintiffs, Compass filed this application even though, when it “first began talking with Professor
Thompson and Professor Gould, it had not been researching the combination of psilocybin with a
5-HT2A antagonist, and had no knowledge about that subject.” ECF 48, ¶ 39.
The ’611 Application “does not include any data regarding” the sequential administration
of ketanserin followed by psilocybin. Id. ¶ 40 (citing ECF 45-9). Terran asserts: “This is because
Compass had none. It stole the ideas for the ’611 Application from Professor Thompson and
disclosed them in its own patent application.” ECF 48, ¶ 40.
Certain parts of the ’611 Application were “copied from an earlier, unrelated Compass
application, U.S. Provisional Patent Application No. 62/893,110 (‘the ’110 Application’).” Id. ¶
41. The ’110 Application, which Compass filed on August 28, 2019, “claims methods of reducing
anxiety in a patient undergoing treatment with psilocybin by co-administering benzodiazepines.”
Id. (citing ECF 45-10). It “lists seven inventors: Drummond McCullough, Derek Londesbrough,
Christopher Brown, Julian Northern, Gillian Moore, Hemant Patil, and David Nichols.” ECF 48,
¶ 41 (citing ECF 45-10). The ’611 Application lists the “same seven inventors, in the same order.”
ECF 48, ¶ 42 (citing ECF 45-9). Moreover, “[i]ts text is essentially copied and pasted from the
’110 Application, with references to co-administration with benzodiazepines changed to include
certain of the Psilocybin Trade Secrets.” ECF 48, ¶ 42. Indeed, in the ’611 Application, the font
and size of the text specific to Psilocybin Trade Secrets is different from the font and size of the
text copied from the ’110 Application. Id. ¶ 43 (citing ECF 45-9 at 308–09; ECF 45-10 at 58–59).
And, apparently by mistake, the ’611 Application retains “references to the mechanism of action
8
for benzodiazepines (‘GABAergic manipulation’),” which is not relevant to 5-HT2A antagonists.
ECF 48, ¶ 43 (citing ECF 45-9 at 309).
The ’611 Application contained specific “disclosures regarding the sequential
administration of a 5-HT2A antagonist followed by psilocybin . . . including ranges for the
sequential order, time points, frequency[,] and dosing of such therapy.” ECF 48, ¶ 44; see id. ¶ 45
(citing ECF 45-9 at 265). These disclosures were unsupported by any experimental data. ECF 48,
¶ 44. Moreover, “[a]s of August 29, 2019, Professor Thompson had not made any public
disclosure of these aspects and details of his Psilocybin Trade Secrets.” Id. ¶ 45. “[N]or did he
disclose them in his August 13, 2019 provisional patent application.” Id. On September 5, 2019,
Compass learned that Professor Thompson “had filed his own patent application on the general
co-administration of psilocybin and a 5-HT2A antagonist . . . two weeks before Compass’s filing,”
and “Compass became noticeably upset.” Id. ¶ 46.
“Since 2019, Compass has filed at least four additional United States patent
applications . . . involving the sequential administration of a 5-HT2A antagonist followed by
psilocybin.” Id. ¶ 47. In particular, on October 18, 2021, “Compass filed U.S. Patent Application
No. 17/604,610.” Id. (citing ECF 45-27). This application included claims to “aspects of the
Psilocybin Trade Secrets, including the sequential administration of a 5-HT2A antagonist followed
by psilocybin.” ECF 48, ¶ 47. However, on August 25, 2022, before the Patent Office took any
action with respect to Application No. 17/604,610, Compass canceled its claims to aspects of the
Psilocybin Trade Secrets. Id. (citing ECF 45-28 at 4). Terran asserts that “Compass canceled
these claims because Compass’s patent prosecution attorneys at Cooley LLP became aware of
Compass’s misconduct and the fact that no one at Compass actually invented the claimed subject
matter.” ECF 48, ¶ 47.
9
Also on October 18, 2021, “Compass filed two additional non-provisional
applications . . . U.S. Patent Application Nos. 17/604,606 and 17/604,619, which included, in their
specifications, aspects and details of the Psilocybin Trade Secrets.” Id. ¶ 48. And, on December
2, 2021, “Compass filed U.S. Patent Application No. 17/540,962, which likewise included aspects
and details of the Psilocybin Trade Secrets in its specification.” Id. “That application issued as
U.S. Patent No. 11,564,935.”
Id.
Compass has since “filed U.S. Patent Application No.
18/077,876, a continuation patent application with the same specification.” Id. In addition,
Compass has “filed multiple international patent applications” that “disclose aspects and details of
the Psilocybin Trade Secrets in their specifications.” Id. “Many of the inventors listed on these
patent applications are the same Compass employees who were involved in the communications
with Professor Thompson and Professor Gould starting in May 2019 . . . .” Id. These listed
inventors “were included on email correspondence, attended meetings with Professor Thompson
and Professor Gould, and had access to the Psilocybin Trade Secrets.” Id.
“On May 7, 2021, UMB and Terran [Biosciences] entered into a Master License
Agreement (‘MLA’), exclusively licensing to Terran [Biosciences] certain of Professor
Thompson’s [i]nventions (‘Licensed Inventions’) and related Confidential Information, including
the Psilocybin Trade Secrets.” Id. ¶ 50. “[T]he MLA grants Terran [Biosciences] the right to
institute any action for misappropriation of any Psilocybin Trade Secret that has existed at any
period in time, including prior to the MLA.” Id. ¶ 51.
Compass moved to dismiss the Second Amended Complaint on June 26, 2023. ECF 51;
ECF 51-1; ECF 53 (“Motion to Dismiss”). In that motion, Compass maintained that it is not
subject to the Court’s personal jurisdiction. ECF 51 at 1. Compass also argued, inter alia, that the
SAC failed to plead fraud with the requisite particularity required by Fed. R. Civ. P. 9(b), id. at 2,
10
or to join UMB, “a necessary party under Fed. R. Civ. P. 19,” as a plaintiff, “necessitating joinder
or dismissal of all counts.” Id. at 1. Terran opposed the Motion to Dismiss. ECF 55. Compass
replied. ECF 57.
On December 7, 2023, plaintiffs provided notice to the Court that, “[f]ollowing review and
approval by the Office of the Maryland Attorney General [‘OAG’], UMB has agreed to join this
action as co-plaintiff . . . .” ECF 66 (“Joinder Notice”). According to Terran, “[t]he joinder of
UMB moots Compass’s necessary party argument.” Id. Further, Terran stated: “Plaintiffs have
notified Compass of this development, and Plaintiffs reached out to Defendant to discuss a process
to address the third amended complaint and Compass’s pending Motion to Dismiss, while
eliminating—or at least minimizing—motion practice before the Court.” Id.
The Motion for
Leave to file the Third Amended Complaint followed. ECF 67; ECF 67-1.
II.
Standard of Review
Fed. R. Civ. P. 15(a)(1) provides: “A party may amend its pleading once as a matter of
course no later than . . . 21 days after serving it, or . . . if the pleading is one to which a responsive
pleading is required, 21 days after service of a responsive pleading or 21 days after service of a
motion under Rule 12(b), (e), or (f), whichever is earlier.” “In all other cases, a party may amend
its pleading only with the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P.
15(a)(2). Notably, “[t]he court should freely give leave when justice so requires.” Id.
As the Fourth Circuit has observed, “[t]he Supreme Court has emphasized that ‘this
mandate is to be heeded.’” Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)
(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). Moreover, it is the Fourth Circuit’s “policy
to liberally allow amendment in keeping with the spirit of Federal Rule of Civil Procedure 15(a).”
Galustian v. Peter, 591 F.3d 724, 729 (4th Cir. 2010) (citing Coral v. Gonse, 330 F.2d 997, 998
11
(4th Cir. 1964)); see also United States ex rel. Nicholson v. MedCom Carolinas, Inc., 42 F.4th 185,
197 (4th Cir. 2022). Therefore, “leave to amend a pleading should be denied only when the
amendment would be prejudicial to the opposing party, there has been bad faith on the part of the
moving party, or the amendment would be futile.” Oroweat, 785 F.2d at 509 (citing Foman, 371
U.S. at 182); see also Davison v. Randall, 912 F.3d 666, 690 (4th Cir. 2019); Scott v. Family Dollar
Stores, 733 F.3d 105, 121 (4th Cir. 2013); Equal Rights Ctr. v. Niles Bolton Assocs., 602 F.3d 597,
603 (4th Cir. 2010).
“This liberal rule gives effect to the federal policy in favor of resolving cases on their merits
instead of disposing of them on technicalities.” Laber v. Harvey, 438 F.3d 404, 427 (4th Cir.
2006); see also MedCom, 42 F.4th at 197. Ultimately, however, the decision whether to grant
leave to amend falls within the sound discretion of the district court. Medigen of Ky., Inc. v. Pub.
Serv. Comm’n of W. Va., 985 F.2d 164, 167–68 (4th Cir. 1993) (citing Nat’l Bank v. Pearson, 863
F.2d 322, 327 (4th Cir. 1988)). “At bottom,” this “is a standard of deference, where the trial judge
‘will not be reversed simply because an appellate court disagrees.’” MedCom, 42 F.4th at 197
(quoting Henry J. Friendly, Indiscretion About Discretion, 31 Emory L. J. 747, 754 (1982))
(additional citation omitted). “Put simply, an abuse of discretion is when the district judge is
‘fundamentally wrong.’” MedCom, 42 F.4th at 198 (citing Bluestein v. Cent. Wis. Anesthesiology,
S.C., 769 F.3d 944, 957 (7th Cir. 2014)).
III.
Discussion
A.
Terran asserts that “the main catalyst” for the Motion for Leave was the State of Maryland’s
decision to approve the participation of UMB in the lawsuit as a co-plaintiff. ECF 67 at 3. In
addition, Terran asserts that the Third Amended Complaint, which contains additional factual
12
allegations related to Compass’s alleged fraud, is intended to “moot Compass’s misguided
argument that Professor Thompson failed to plead fraud with particularity.” Id. According to
Terran, the Court should allow the proposed amendments because they cause “no prejudice to
Compass”; Terran “acted diligently and in good faith”; and “the amendments support clearly
meritorious claims.” Id. at 9.
With respect to prejudice, Terran argues that the Third Amended Complaint “is entirely
responsive to arguments raised by Compass in its motion to dismiss” the Second Amended
Complaint. Id. In particular, Terran asserts that the Third Amended Complaint will moot
Compass’s arguments that Terran failed to join UMB as a necessary party or plead fraud with
particularity. See id. at 3–4. In Terran’s view, “it [is] strange for Compass to refuse [consent to
file the Third Amended Complaint] when it previously told the Court” in its Motion to Dismiss
the Second Amended Complaint “that UMB ‘must be joined if the case proceeds.’” Id. at 4 (citing
ECF 53-1 at 12–13 (emphasis in ECF 67)).
To support its position, Terran cites Judge Gallagher’s statement in Bioiberica Nebraska,
Inc. v. Nutramax Mfg., Inc., SAG-18-3133, 2019 WL 5102674, at *4 (D. Md. Oct. 10, 2019)
(quoting Laber, 438 F.3d at 427), that “a proposed amendment carries little prejudice ‘if it merely
adds an additional theory of recovery to the facts already pled and is offered before any discovery
has occurred.’” ECF 67 at 10. According to Terran, the factual allegations added to the Third
Amended Complaint pertain to “essentially the same fraud claim as” the claim advanced in the
Second Amended Complaint. ECF 67 at 10. Moreover, Terran maintains that the proposed
amendments “will have no effect on the case schedule or Compass’s ability to defend itself,”
because “Compass’s motion to dismiss remains pending, Compass has not filed an answer, no
discovery has occurred, and there is no trial date.” Id.
13
With respect to the question of good faith, Terran asserts: “Plaintiffs and their counsel
diligently pursued the joinder of UMB—who[] Compass insisted ‘must be joined if the case
proceeds’ (ECF No. 53-1 at 12–13)—through the approval process required by the State, over
which Plaintiffs[] had little control.” ECF 67 at 11. Terran explains that “obtaining the State’s
approval was a lengthy process that required communications with the Governor of Maryland.”
Id. at 3.
Dustin Guzior, counsel for Terran, has submitted a Declaration describing Terran’s
involvement and efforts with regard to the approval process. ECF 67-30. The Declaration is
supported by nine exhibits. ECF 67-31 to ECF 67-39. These exhibits contain, inter alia,
correspondence between counsel for Terran and the Maryland Office of the Attorney General
(“OAG”) regarding UMB’s participation in the lawsuit. See ECF 67-31 to ECF 67-36.
The Motion includes a “Statement of Facts Regarding Joinder of UMB.” ECF 67 at 6. In
Terran’s view, these facts demonstrate its good faith. I review these facts here.
Terran’s current counsel is Sullivan & Cromwell LLP (“S&C”). According to Terran,
“S&C replaced Plaintiffs’ previous counsel in August 2023.” Id. Terran asserts that, after
beginning its representation of Terran, “S&C immediately” resumed “discussions regarding UMB
joining this case, which were ongoing between previous counsel and the” OAG. Id. (citing ECF
67-30, ¶¶ 2–3). During “an introductory call with UMB and the OAG” on August 25, 2023, Terran
“learn[ed] that[,] because UMB is a state entity, it was required to engage in a comprehensive
approval process involving the OAG and the Office of the Governor of Maryland before it could
join this litigation as a co-plaintiff.” ECF 67 at 7 (citing ECF 67-30, ¶ 3; ECF 67-31; ECF 67-32).
Terran remained in regular contact with the OAG in September and October of 2023. ECF 67 at
14
7–8. During this time Terran believed “that the approval process was close to resolution.” Id. at
7 (citing ECF 67-30, ¶ 5).
In early November of 2023, “the OAG informed S&C that alternative counsel would be
needed to represent UMB in light of potential future conflicts.” ECF 67 at 7 (citing ECF 67-30, ¶
7). According to Terran, “S&C proposed that Plaintiffs’ Maryland co-counsel at Silverman,
Thompson, Slutkin & White (‘Silverman Thompson’) represent UMB.” ECF 67 at 8 (citing ECF
67-30, ¶ 5). “Silverman Thompson and the OAG were then in contact several times for multiple
weeks discussing this potential arrangement.” ECF 67 at 8 (citing ECF 67-30, ¶ 7). However, on
December 7, 2023, the OAG informed S&C that, because of potential conflicts of interest, the
State could not engage Silverman Thomson to represent UMB. ECF 67 at 8. Nonetheless, the
OAG informed S&C that it had appointed Steven Tiller of Whiteford, Taylor & Preston LLP as
counsel to UMB. Id. (citing ECF 67-30, ¶ 8; ECF 67-36). On the same date, December 7, 2023,
Terran filed the Joinder Notice. ECF 66. It also “emailed Compass a draft of its proposed” Third
Amended Complaint. ECF 67 at 8.
The parties met to discuss Terran’s proposed Third Amended Complaint on December 11,
2023. Id. On December 12, 2023, Compass informed Terran that it would not consent to the filing
of the Third Amended Complaint. Id.
In Terran’s view, its engagement with the OAG regarding the joinder of UMB as a coplaintiff “is far from the carelessness that might evidence bad faith.” Id. at 12. Terran also affirms
that it “acted in good faith with respect to the amendments in the [Third Amended Complaint]
relating to the fraud claim.” Id. Terran explains, id.:
Given that UMB—if and when it is joined as a co-plaintiff—would be asserting
substantially the same fraud claim on behalf of the University . . . it was eminently
sensible to wait to amend the fraud allegations until a decision was reached on
whether UMB would join this litigation. It would have wasted party and Court
15
resources to brief a motion for leave to amend with respect to Professor
Thompson’s fraud claim, and then later, raise the joinder of UMB and amendments
UMB might want to make to join or add claims.
In sum, Terran asserts that “[t]he lack of any evidence of bad faith delay weighs in favor
of granting” the Motion. Id. at 13.
With respect to futility, Terran argues that, although “the factual allegations in the [Second
Amended Complaint] supporting Professor Thompson’s fraud claim are already sufficiently
specific,” the proposed amendments “provide the details that Compass argues are missing with
respect to” this fraud claim. Id. In particular, Terran asserts that the proposed amendments
“identif[y] in the pleading itself the details that were already presented in the correspondence
incorporated by reference into the SAC: Dr. Ekaterina Malievskaia and Dr. Shaun Hurley are the
specific Compass employees who perpetrated the fraud on Compass’s behalf.” Id. at 14 (citing
ECF 67-1, ¶¶ 3, 30–39). And, Terran asserts that the Third Amended Complaint “identifies the
specific statements and omissions of those individuals that were fraudulent.” ECF 67 at 14 (citing,
inter alia, ECF 67-1, ¶¶ 30–37; 40–49).
Moreover, Terran contends that, even if its allegations of fraud in the Second Amended
Complaint were insufficiently specific, “the proposed amendments in the TAC do nothing more
than convert purportedly general allegations of fraud into more specific allegations.” ECF 67 at
14. Terran asserts: “Courts in this district frequently permit a party to amend a complaint that
contains only generalized allegations of fraud.” Id. (citing Rosedale v. CarChez, LLC, SAG-192780, at *6 (D. Md. Mar. 2, 2020); Pasadena Boat Works v. Carolina Skiff, LLC, JKB-20-1414,
2020 WL 4903884, at *3–4 (D. Md. Aug. 20, 2020)). Terran concludes that, “[e]ven assuming
arguendo that the SAC did not itself satisfy the particularity requirement of Rule 9(b) . . .
16
amendments that merely convert purportedly general allegations of fraud into more specifics [sic]
allegations . . . are not futile” and “should be allowed.” ECF 67 at 15.
In its Opposition (ECF 68), Compass argues that there are at least three grounds on which
to deny Terran’s Motion. Id. at 6. First, Compass contends that Terran’s “proposed amendments
are futile because they fail to remediate Compass’s pending challenges to the fraud-type claims”
Terran advanced in its Second Amended Complaint. Id. (emphasis in original). Second, Compass
asserts that Terran “acted with undue delay in seeking to amend,” because “every proposed
amendment in the TAC is predicated on alleged facts that were known and available to Plaintiffs
when the original Complaint was filed in 2022.” Id. (emphasis in original). And third, Compass
claims that granting leave to amend “will cause undue prejudice . . . as Plaintiffs’ serial
amendments drag out this case, cause unnecessary expense, and add scandalous allegations
seemingly designed to harass and embarrass Compass.” Id. (emphasis in original). In sum,
Compass complains: “Plaintiffs have repeatedly employed the following strategy: file a complaint,
allow Compass to raise the complaint’s deficiencies in a motion to dismiss, allow months to pass,
switch law firms, and file an amended complaint futilely responding to Compass’s motion.” Id.
With respect to the alleged futility of Terran’s proposed amendments, Compass
acknowledges that “[t]he addition of UMB as a plaintiff . . . is not futile,” because “UMB is a
necessary party in this case.” Id. at 10 n.2. Nonetheless, Compass asserts that the proposed
amendments are futile insofar as they “do nothing to rebut Compass’s criticisms that the court
lacks personal jurisdiction over Compass, that Plaintiffs fail to state a trade secret claim, that
Plaintiffs’ kitchen-sink approach to pleading is wasteful, or that the Doe defendants are not
properly identified.” Id. at 11.
17
Compass also argues that the proposed amendments fail to rectify “the pleading
deficiencies” in the “four fraud-related claims” advanced in the Second Amended Complaint:
“fraudulent misrepresentation (Count VII), negligent misrepresentation (Count VIII), fraudulent
concealment (Count IX), and constructive fraud (Count X).” Id. at 12. In particular, Compass
contends that, even assuming that the Third Amended Complaint “addresses and moots”
Compass’s argument that Terran did not plead fraud with particularity, the “proposed amendments
are nonetheless futile because they do not address two additional pleading requirements of fraudtype claims: justifiable reliance and a tort duty.” Id. at 13.
Citing, inter alia, Chubb & Son v. C & C Complete Servs., LLC, 919 F. Supp. 2d 666, 673
(D. Md. 2013), Compass asserts that, “[t]o plausibly assert fraudulent misrepresentation, negligent
misrepresentation, and fraudulent concealment,” plaintiffs “must show that they justifiably relied
on an alleged Compass misrepresentation or concealment.” ECF 68 at 14. And, according to
Compass, any such justifiable reliance was foreclosed by the NDA executed by Professor
Thompson, which provided, in part: “‘Neither this Agreement nor any action taken prior to or in
connection with this Agreement will give rise to any obligation on the part of either party to engage
in discussions or negotiations with the other party.’” Id. at 14 (quoting ECF 16, ¶ 8).
Compass argues that the Third Amended Complaint’s claims of fraud are also deficient
because they are unsupported by allegations “show[ing] that Compass owed Thompson (or UMB)
a tort duty, a required element of the claims for negligent misrepresentation, fraudulent
concealment, and constructive fraud.” ECF 68 at 14 (citing J.G. Wentworth Originations, LLC v.
Mobley, ELH-11-1406, 2012 WL 4922862, at *9 (D. Md. Oct. 12, 2012); Topline Sols., Inc. v.
Sandler Sys., Inc., ELH-09-3102, 2017 WL 1862445, at *35 (D. Md. May 8, 2017); Donalds v.
Ethicon, Inc., GLR-20-1659, 2021 WL 6126297, at *11–12 (D. Md. Dec. 28, 2021)). Compass
18
observes that the NDA provides, in part: “‘The parties do not intend that any agency or partnership
relationship be created between them by this Agreement.’” ECF 68 at 15 (quoting ECF 16, ¶ 8).
According to Compass, this provision precludes the existence of any “tort duty” between plaintiffs
and Compass. ECF 68 at 15.
With respect to undue delay, Compass asserts that Terran Biosciences “knew [that] UMB
was a necessary party at the time the Complaint was filed in August 2022,” but failed to pursue
UMB’s joinder diligently until August 2023. Id. at 16–17. Compass notes that the MLA, which
Terran executed in May 2021, “specifically requires that ‘the joinder [of UMB must be] approved
by the Maryland Attorney General.’” Id. at 16 (quoting ECF 68-2, § 9.4.3(b)) (alteration in ECF
68). “Therefore,” asserts Compass, “Plaintiffs’ contention that they ‘came to learn’ that they
needed approval from the Maryland Attorney General in August 2023 is not credible.” ECF 68 at
16 (quoting ECF 67 at 7). Moreover, according to Compass, “Terran was aware of the potentially
time-consuming requirement of state approval in 2021, and should have engaged in the process of
obtaining the approval prior to filing this lawsuit in August 2022.” ECF 68 at 17.
Compass also disputes Terran’s contention that it was “‘eminently sensible to wait to
amend the fraud allegations until a decision was reached on whether UMB would join this
litigation.’” Id. at 18 (quoting ECF 67 at 12). According to Compass, Terran’s explanation for
the delay is “illogical,” because Terran’s “amendments directed toward the Rule 9(b) particularity
requirement are not at all specific to UMB, and therefore could have been added at any time.”
ECF 68 at 18.
Further, Compass argues that it would be prejudiced by Terran’s proposed amendments in
at least three ways. Id. at 18–20. First, Compass asserts that “Plaintiffs’ undue delay in filing their
motion” has forced Compass to endure “‘[e]xpense, delay, and wear and tear.’” Id. at 18 (quoting
19
Foster Poultry Farms v. Alkar-Rapidpak-MP Equip., Inc., 11-CV-0030 AWI SMS, 2013 WL
398664, at *6 (E.D. Cal. Jan. 31, 2013)). Compass insists that the fact that discovery has not yet
begun is not dispositive. Instead, according to Compass, prejudice from undue delay “‘can occur
even when discovery has not yet begun,’ particularly when ‘the fact that discovery has not yet
begun is illustrative of the prejudice [defendant] has already suffered.’” ECF 68 at 19 (quoting
Synopsys, Inc. v. Library Techs., Inc., CRB-20-7014, 2022 WL 2356819, at *2 (N.D. Cal. June 30,
2022)).
Second, Compass argues that, by “serially amending the Complaint,” Terran has
contravened the principle that “[p]laintiffs should not be permitted to ‘use prior . . . Motions to
Dismiss as a road map to cure deficiencies in [their] pleadings.’” ECF 68 at 19 (quoting Palacios
v. U.S. Bank Nat’l Ass’n, ELH-15-2081, 2016 WL 3440124, at *18 (D. Md. June 23, 2016)). 5
And, third, Compass claims that it would be prejudiced by the addition of paragraph 51 of the
Third Amended Complaint, which, according to Compass, “adds scandalous allegations from
unsubstantiated internet articles.” ECF 68 at 19.
In its Reply (ECF 75; ECF 76), Terran argues, first, that it did not unduly delay moving for
leave to file the Third Amended Complaint. ECF 75 at 4–5. According to Terran, the MLA’s
provisions were not sufficiently clear to put it on notice of the need to obtain the State’s approval
for joinder of UMB as a co-plaintiff. In particular, Terran states that Section 9.4.3 of the MLA
requires the OAG’s approval of UMB’s joinder only if “the parties or a court determines that UMB
is a necessary party, which did not happen” in this case. Id. at 4. Moreover, Terran observes that
5
Compass’s complaint about serial amendments flies in the face of its claim that Terran
could have added, at any time, amendments pertaining to Fed. R. Civ. P. 9(b)’s particularity
requirement. If Terran had done so, the Court could now be considering a Fourth Amendment
Complaint.
20
“Compass itself did not raise the necessary party argument until June 2023.” Id. (emphasis in
original). And, with respect to Compass’s claim that Terran unduly delayed providing specificity
regarding Compass’s alleged fraud, Terran asserts that the proposed amendments simply
“incorporate into the body of the TAC the details from e-mails” already “attached to the SAC,”
and thus part of it. Id. at 5.
With regard to Compass’s claim of prejudice, Terran asserts “that nothing has happened in
this case beyond a motion to dismiss, which the Court has not yet ruled on.” Id. at 6. According
to Terran, the early stage of this litigation is important, because courts “almost uniformly allow
amendments if leave is sought” prior to the commencement of discovery. Id. (citing Grp. Home
on Gibson Island, LLC v. Gibson Island Corp., LKG-20-0891, 2023 WL 8004886, at *9 (D. Md.
Nov. 16, 2023); Future Field Sols., LLC v. Erik Van Norstrand, DKC-23-1301, 2023 WL 8934021,
at *3 (D. Md. Dec. 27, 2023)). Terran also emphasizes that the proposed Third Amended
Complaint does not introduce any new claims “that would . . . require[] the defendant to expend
additional time and resources to respond.” ECF 75 at 6. At most, according to Terran, the
proposed Third Amended Complaint “add[s] detail to existing claims.” Id. at 7.
Finally, with respect to Compass’s argument that the proposed amendments are futile,
Terran asserts that “the proposed amendments are not futile insofar as they eliminate two of the
bases upon which Compass asked the Court to dismiss the case”—namely, failure to join UMB,
and failure to allege fraud with particularity. Id. at 8. In Terran’s view, Compass has conceded
that the proposed amendments moot Compass’s arguments that dismissal is appropriate because
Terran failed to join UMB or to allege fraud with particularity. Id. (citing ECF 68 at 10 n.2, 13).
Indeed, Terran asserts that “Compass’s futility arguments focus instead on the other issues raised
in its pending motion to dismiss, predominantly personal jurisdiction.” ECF 75 at 8.
21
According to Terran, “Compass argues that the Court should deny leave to amend because
Compass should prevail on its pending motion to dismiss as to those other issues.” Id. But, Terran
states that “[t]he futility standard is a lower bar” than the standard applied on a motion to dismiss,
because a court assessing futility “ask[s] only if a claim is ‘clearly insufficient or frivolous on its
face.’” Id. (quoting Bioiberica, 2019 WL 5102674, at *4). Nonetheless, in the interest of
efficiency, Terran invites the Court to “resolve all issues in the motion for leave and pending
motion to dismiss on the existing briefs,” by treating the pending Motion to Dismiss as if it
addresses the Third Amended Complaint. ECF 75 at 9 (citing Malik v. Centennial Med. Grp.,
LLC, RDB-22-3356, 2023 WL 7089934, at *5 (D. Md. Oct. 26, 2023)).
B.
I shall first address Compass’s contention that the Court should deny leave to amend
because the proposed amendments are futile.
“Leave to amend . . . should only be denied on the ground of futility when the proposed
amendment is clearly insufficient or frivolous on its face.” Oroweat, 785 F.2d at 510 (citing Davis
v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980), cert. dismissed, 448 U.S. 911 (1980);
Buder v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644 F.2d 690, 695 (8th Cir. 1981)).
“‘Futility is apparent if the proposed amended complaint fails to state a claim under the applicable
rules and accompanying standards.’” Davison v. Randall, 912 F.3d 666, 690 (4th Cir. 2019)
(quoting Katyle v. Penn Nat. Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011)). “Accordingly, [a
defendant’s] proposed amendment [is] futile if the new claim would not . . . survive[] a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6).” Davison, 912 F.3d at 690.
However, “it does not follow that every plaintiff seeking leave to amend [a] claim[] must
demonstrate that [the] claim[] can withstand a Rule 12(b)(6) motion.” Bioiberica, 2019 WL
22
5102674, at *3. Indeed, “[s]uch a requirement would render superfluous the Fourth Circuit’s
definition of a futile claim as one that is ‘clearly insufficient or frivolous on its face.’” Id. (quoting
Oroweat, 785 F.2d at 510) (emphasis in Bioiberica); see also Aura Light US Inc. v. LTF Int’l LLC,
GLR-15-3198, GLR-15-3200, 2017 WL 2506127, at *5 (D. Md. June 8, 2017).
Compass concedes that the proposed joinder of UMB would moot its argument that
Terran’s failure to join UMB as a co-plaintiff necessitates dismissal of the case. ECF 68 at 11.
And, Compass does not appear to contest that the proposed Third Amended Complaint would
obviate Compass’s concern with regard to the sufficiency of the fraud allegations. Id. at 13.
Nevertheless, Compass suggests that the proposed amendments are futile because they do not
“cure” the other purported deficiencies identified by Compass in its pending Motion to Dismiss.
Id. at 11; see ECF 51. In particular, according to Compass, the Third Amended Complaint “do[es]
nothing to rebut Compass’s criticisms [in the Motion to Dismiss] that the court lacks personal
jurisdiction over Compass, that Plaintiffs fail to state a trade secret claim, that Plaintiffs’ kitchensink approach to pleading is wasteful, or that the Doe defendants are not properly identified.” ECF
68 at 11.
Therefore, as Terran observes in its Reply, see ECF 75 at 8–9, Compass rests its request
for denial of leave to amend on the arguments advanced in its Motion to Dismiss. And, it asks the
Court to assess the viability of Terran’s proposed amendments by providing what is, in substance
and effect, a ruling on that Motion to Dismiss. See ECF 68 at 11.
The fact that the Third Amended Complaint does not address every objection presented by
Compass in its Motion to Dismiss is not, by itself, a ground to deny the Motion for Leave. The
Court has not yet determined whether the grounds for dismissal asserted by Compass do, indeed,
warrant dismissal. To be sure, if the Court had so ruled, an amended pleading that failed to cure
23
these defects would indeed be “clearly insufficient or frivolous on its face.” Oroweat, 785 F.2d at
510 (citation omitted). But, given the posture of the case, there are no pleading “deficiencies” that
have been established by a Court ruling, which Terran is obligated to “cure” as a condition of
obtaining leave to amend. ECF 68 at 11.
Of course, the fact that the Court has not previously ruled that Terran’s pleadings are
deficient in a certain respect does not mean that it cannot so rule now. As noted, it is just such a
ruling that Compass appears to request from the Court.
However, I do not believe that I must construe Compass’s Opposition as a mere restatement
of its pending Motion to Dismiss. To do so would not be consistent with the Fourth Circuit’s
admonition that “[l]eave to amend . . . should only be denied on the ground of futility when the
proposed amendment is clearly insufficient or frivolous on its face.” Oroweat, 785 F.2d at 510
(citation omitted). As other judges of this Court have recognized, this admonition suggests that
there is a meaningful difference between the inquiry a judge undertakes when ruling on a motion
to dismiss and the inquiry a judge undertakes when deciding whether to grant leave to amend a
pleading. See Bioiberica, 2019 WL 5102674, at *3; Aura Light, 2017 WL 2506127, at *5.
Therefore, I decline to decide the question of futility by providing the equivalent of a ruling
on Compass’s pending Motion to Dismiss. Instead, I undertake the “much less demanding”
inquiry proper to the assessment of a motion for leave to amend: “whether ‘the proposed
amendment is clearly insufficient or frivolous on its face.’” Aura Light, 2017 WL 2506127, at *5
(quoting Oroweat, 785 F.2d at 510). I readily conclude that the proposed Third Amended
Complaint is not clearly insufficient or frivolous on its face.
The ground for dismissal most vigorously pressed by Compass is that Compass is not
subject to this Court’s personal jurisdiction. “[T]o assert personal jurisdiction over a nonresident
24
defendant, two conditions must be satisfied: (1) the exercise of jurisdiction must be authorized
under the state’s long-arm statute; and (2) the exercise of jurisdiction must comport with the due
process requirements of the Fourteenth Amendment.”
Carefirst of Md., Inc. v. Carefirst
Pregnancy Centers, Inc., 334 F.3d 390, 396 (2003) (citing Christian Sci. Bd. of Dirs. Of the First
Church of Christ v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001)).
Maryland’s long-arm statute is codified at Md. Code (2020 Repl. Vol., 2022 Supp.), § 6103(b) of the Courts and Judicial Proceedings Article. It authorizes “personal jurisdiction over a
person, who directly or by an agent,” id.:
(1) Transacts any business or performs any character of work or service in the
State;
(2) Contracts to supply goods, food, services, or manufactured products in the
State;
(3) Causes tortious injury in the State by an act or omission in the State;
(4) Causes tortious injury in the State or outside the State by an act or omission
outside the State if he regularly does or solicits business, engages in an other
persistent course of conduct in the State or derives substantial revenue from
goods, food, services, or manufactured products used or consumed in the State;
(5) Has an interest in, uses, or possesses real property in the State; or
(6) Contracts to be insured or act as surety for, or on, any person, property, risk,
contract, obligation, or agreement located, executed, or to be performed within
the State at the time the contract is made, unless the parties otherwise provide
in writing.
“[T]he limits of Maryland’s statutory authorization for the exercise of personal jurisdiction
are coterminous with the limits of the Due Process Clause. . . .” Stover v. O’Connell Assocs., Inc.,
84 F.3d 132, 135–36 (4th Cir. 1996). Therefore, “the statutory inquiry necessarily merges with
the constitutional inquiry, and the two inquiries essentially become one.” Id.; see also Beyond
25
Sys., Inc. v. Realtime Gaming Holding Co., 388 Md. 1, 15, 878 A.2d 567, 576 (2005) (“[O]ur
statutory inquiry merges with our constitutional examination.”).
As the Supreme Court made clear in Ford Motor Co. v. Montana Eighth Judicial District
Court, 592 U.S. ___ , 141 S.Ct. 1017, 1024 (2021), “[t]he canonical decision” interpreting the
constitutional limits on a state court’s “power to exercise jurisdiction over a defendant . . . remains
International Shoe Co. v. Washington, 326 U.S. 310 (1945).” In International Shoe, “the Court
held that a tribunal’s authority depends on the defendant’s having such ‘contacts’ with the forum
State that ‘the maintenance of the suit’ is ‘reasonable, in the context of our federal system of
government,’ and ‘does not offend traditional notions of fair play and substantial justice.’” Id.
(quoting Int’l Shoe, 326 U.S. at 316–17). “In giving content to that formulation, the Court has
long focused on the nature and extent of the defendant’s relationship to the forum State.” Ford
Motor Co., 141 S. Ct. at 1024 (internal quotation marks and citation omitted).
That focus has led the Court to “recognize[] two types of personal jurisdiction: ‘general’
(sometimes called ‘all-purpose’) jurisdiction and ‘specific’ (sometimes called ‘case-linked’)
jurisdiction.” Bristol-Myers Squibb Co. v. Super. Ct. of Cal., 582 U.S. 255, 262 (2017) (quoting
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)).
“A court with general jurisdiction may hear any claim against that defendant, even if all
the incidents underlying the claim occurred in a different State.” Bristol-Myers, 582 U.S. at 262
(citing Goodyear, 564 U.S. at 919). But, “only a limited set of affiliations with a forum will render
a defendant amenable to all-purpose jurisdiction there.” Daimler AG v. Bauman, 571 U.S. 117,
137 (2014). In particular, with respect to “‘an individual, the paradigm forum for the exercise of
general jurisdiction is the individual’s domicile. . . .’” Id. (quoting Goodyear, 564 U.S. at 924).
And, with respect to “‘a corporation, it is an equivalent place, one in which the corporation is fairly
26
regarded as at home.’” Daimler, 571 U.S. at 137 (quoting Goodyear, 564 U.S. at 924). “[T]he
place of incorporation and principal place of business are paradig[m] . . . bases for general
jurisdiction” over a corporation. Daimler, 571 U.S. at 137 (internal quotation marks and citation
omitted) (alteration in Daimler).
“Specific jurisdiction is very different.” Bristol-Myers, 582 U.S. at 262. “In order for a
state to exercise specific jurisdiction, ‘the suit’ must ‘aris[e] out of or relat[e] to the defendant’s
contacts with the forum.’” Id. (quoting Daimler, 571 U.S. at 127) (alterations and emphasis in
Daimler). “The contacts needed for this kind of jurisdiction often go by the name ‘purposeful
availment.’” Ford Motor Co., 141 S.Ct. at 1024 (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985)). These “contacts must be the defendant’s own choice and not ‘random,
isolated, or fortuitous.’” Ford Motor Co., 141 S. Ct. at 1025 (quoting Keeton v. Hustler Magazine,
Inc., 465 U.S. 770, 774 (1984)). In other words, the contacts must “show that the defendant
deliberately ‘reached out beyond’ its home—by, for example, ‘exploi[ting] a market’ in the forum
State or entering a contractual relationship centered there.” Ford Motor Co., 141 S.Ct. at 1025
(quoting Walden v. Fiore, 571 U.S. 277, 285 (2014)) (alterations in Ford Moto Co.).
In the proposed Third Amended Complaint, Terran alleges that Compass is subject to this
Court’s personal jurisdiction because it “engag[ed] in seven months of extensive negotiations with
UMB professors” who were located in Maryland, ECF 67-1, ¶ 17; “induce[d] [those] professors
to disclose further proprietary information under the guise of the preemptive protections of an
NDA,” id.; “conduct[ed] clinical trials of its own therapeutic psilocybin product at the Sheppard
Pratt Health System in Baltimore, Maryland during the time it [was] misappropriating the alleged
trade secrets,” id. ¶ 18; and “established, funds, and operates a ‘Centre of Excellence’ to ‘carry out
new research in the use of psilocybin therapy’ on Sheppard Pratt’s Towson, Maryland campus.”
27
Id.
Moreover, Terran argues that, “[t]o the extent specific jurisdiction is not proper in
Maryland . . . Compass is subject to personal jurisdiction under Fed. R. Civ. P. 4(k)(2), as a
foreign defendant who is not subject to any state’s court of general jurisdiction.” ECF 67-1, ¶ 19.
For its part, Compass vigorously denies in its motion to dismiss that it is subject to the
Court’s personal jurisdiction.
ECF 51-1 at 21–30.
Compass’s argument in this regard is
thoughtfully presented and supported by citations to pertinent authority. Terran, in response, has
advanced well-considered arguments of its own. ECF 55-1. “The complexity of the arguments
advanced by counsel on both sides indicates that the issue” of personal jurisdiction “is not
obviously frivolous.” Oroweat, 785 F.2d at 511.
Moreover, if the Court were to “address[] the personal jurisdiction question by reviewing
only the parties’ motion papers, affidavits attached to the motion, supporting legal memoranda,
and the allegations in the complaint,” it would be bound to “take the allegations and available
evidence relating to personal jurisdiction in the light most favorable to the plaintiff.” Grayson v.
Anderson, 816 F.3d 262, 268 (4th Cir. 2016). On the other hand, to the extent that there exists any
factual dispute relating to personal jurisdiction, such a dispute would provide an additional reason
to defer a jurisdictional ruling. As the Fourth Circuit said in Combs v. Bakker, 886 F.2d 673, 676
(4th Cir. 1989): “If the existence of jurisdiction turns on disputed factual questions, the court may
resolve the [jurisdictional] challenge on the basis of a separate evidentiary hearing, or may defer
ruling pending receipt at trial of evidence relevant to the jurisdictional question.”
With these principles in mind, I am satisfied that Terran’s assertion that this Court has
personal jurisdiction over Compass is not “clearly insufficient or frivolous on its face.” Oroweat,
785 F.2d at 510.
28
As noted, Compass also argues that the proposed amendments are futile because “they do
not address two . . . pleading requirements of fraud-type claims: justifiable reliance and a tort
duty.” ECF 68 at 13. Again, I am unpersuaded that Compass has identified clear pleading
deficiencies that render Terran’s proposed amendments futile.
With regard to justifiable reliance, I disagree with Compass that justifiable reliance is
clearly foreclosed by the NDA, which states, in part: “‘Neither this Agreement nor any action
taken prior to or in connection with this Agreement will give rise to any obligation on the part of
either party to engage in discussions or negotiations with the other party.’” Id. at 14 (quoting ECF
16, ¶ 8). To be sure, this provision appears to disclaim any obligation to engage in discussions or
negotiations with the other party. But, the text quoted by Compass says nothing about obligations
that arise once the parties have begun discussions or negotiations.
In addition, I do not agree with Compass’s assertion that Terran’s fraud allegations are
“clearly insufficient,” Oroweat, 785 F.2d at 510, insofar as they do not allege the existence of a
“tort duty.” See ECF 68 at 14. As an initial matter, the term “tort duty” does not appear in any of
the three opinions Compass cites in support of this assertion. See id. at 14–15 (citing J.G.
Wentworth, 2012 WL 4922862, at *25; Topline Sols., Inc., 2017 WL 1862445, at *35; Ethicon,
2021 WL 6126297, at *11–12). In fact, in J.G. Wentworth, the Court wrote, 2012 WL 4922862,
at *25: “In a claim for negligent misrepresentation where . . . the alleged injury is economic loss,
Maryland requires an ‘intimate nexus’ between the parties. This intimate nexus is satisfied by
contractual privity or its equivalent.” (Citations and internal quotation marks omitted). Notably,
the proposed Third Amended Complaint appears to allege “contractual privity or its equivalent”
insofar it advances claims of “Detrimental Reliance/Promissory Estoppel” (Count IV), ECF 67-1,
¶¶ 92–97; “Unjust Enrichment” (Count V), id. ¶¶ 98–102; and “Quantum Meruit/Implied-in-Fact
29
Contract” (Count VI). Id. ¶ 103–108. Without deciding whether any or all of these theories of
obligation, if proved, would establish the “tort duty” Compass claims is missing, I conclude that
Terran’s fraud allegations are not “clearly insufficient.” Oroweat, 785 F.2d at 510.
In sum, I do not consider Terran’s proposed amendments to be so clearly insufficient or
frivolous that denial of leave to amend is appropriate.
C.
Compass also argues that denial of leave is warranted because Terran unduly delayed
seeking the joinder of UMB as a co-plaintiff. ECF 68 at 16. As noted, Compass asserts that Terran
was on notice of the need to seek the State’s approval for UMB’s joinder as early as May of 2021,
when Terran Biosciences signed the MLA. Id.
Section 9.4.3 of the MLA provides, in part, that UMB “may agree to join in the suit or
action as a nominal party, but only if,” inter alia, “the joinder is approved by the Maryland
Attorney General.” ECF 68-2, § 9.4.3(b).
In Compass’s view, the delay between Terran
Biosciences’s initiation of suit on August 5, 2022 (ECF 1), and the time at which Terran arguably
began diligently pursuing the joinder of UMB—August of 2023—is sufficiently long and
unjustified to warrant denial of leave to amend. ECF 68 at 17.
Compass also objects to Terran’s assertion that it was “‘eminently sensible to wait to
amend the fraud allegations until a decision was reached on whether UMB would join this
litigation.’” Id. at 18 (quoting ECF 67 at 12). In particular, according to Compass, the proposed
amendments to Terran’s fraud allegations are not specific to UMB, and therefore could have been
added well before Terran secured UMB’s joinder as co-plaintiff. ECF 68 at 18.
Terran’s current counsel has provided a detailed account of Terran’s efforts, beginning in
August of 2023, to obtain the State’s permission for the joinder of UMB as a co-plaintiff. See ECF
30
67 at 11–13; ECF 67-30. However, as Compass observes, by August of 2023, more than a year
had elapsed since the filing of suit, during which time Terran could have sought and received the
State’s permission for the joinder of UMB. Terran’s account of its efforts as of August of 2023 to
obtain the State’s permission to join UMB as a co-plaintiff does not describe what attempts at
securing UMB’s joinder, if any, it had made in the preceding year. See ECF 67 at 11–12.
Therefore, there is some reason to believe that Terran could have acted with greater diligence in
pursuing the joinder of UMB.
Nonetheless, as Terran observes, see ECF 75 at 5, Compass itself did not assert the
necessity of joining UMB until June of 2023, when it filed its Motion to Dismiss. See ECF 45.
This is so even though the original Complaint alleged that UMB “spent years and substantial
resources to develop” the Psilocybin Trade Secrets,” ECF 1, ¶ 1, and stated that UMB licensed
them to Terran pursuant to the MLA. Id. ¶¶ 29–30. In view of Compass’s own apparent failure
to perceive the necessity of joining UMB, the delay in joining UMB seems less a consequence of
Terran’s culpable neglect than it does an understandable result of the complexity of the relationship
between Terran, Professor Thompson, and UMB.
In addition, I consider Terran to have provided a reasonable explanation of its decision to
wait to amend the fraud allegations until the joinder status of UMB could be ascertained. It may
be true, as Compass asserts, that the proposed amendments are not specific to UMB, and therefore
could have been added at any time. But, Terran could not have known in advance whether or in
what way UMB might seek to supplement or amend the allegations of fraud. Moreover, as
Compass suggests, serial amendments are not favored. See ECF 68 at 19. In my view, it was not
unreasonable for Terran to wait until UMB’s joinder was accomplished to amend the fraud
allegations.
31
To be sure, “a court may consider a movant’s ‘undue delay’ or ‘dilatory motive’ in deciding
whether to grant leave to amend under Rule 15(a).” Krupski v. Costa Crociere, S.P.A., 560 U.S.
538, 553 (2010) (quoting Foman, 371 U.S. at 182). But, “[d]elay alone is an insufficient reason
to deny leave to amend.” Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999); see
also Davis, 615 F.2d at 613 (4th Cir. 1980) (“Delay alone however, without any specifically
resulting prejudice, or any obvious design by dilatoriness to harass the opponent, should not suffice
as a reason for denial.”); MedCom, 42 F.4th at 197. “Rather, the delay must be accompanied by
prejudice, bad faith, or futility.” Edwards, 178 F.3d at 242.
I have already concluded that the proposed amendments are not futile. And, I do not
discern in the delays attributed to Terran any indicia of bad faith. In fact, Compass does not appear
to argue that the delays it complains of were the result of Terran’s bad faith. See ECF 68 at 15–
18. Instead, in Section II.B of its Opposition, Compass appears to suggest that a possibly
unjustified delay is, by itself, sufficient cause to deny leave to amend. See id. at 10–13. I decline
to apply such an unforgiving rule, which, in my view, “would run contrary to the Fourth Circuit’s
well-established ‘policy to liberally allow amendment in keeping with the spirit of Federal Rule of
Civil Procedure 15(a).’” Bioiberica, 2019 WL 5102674, at *3 (quoting Galustian, 591 F.3d at
729).
As indicated, Compass does assert, in a separate section of its Opposition, Section II.C,
that it will be prejudiced by the amendments. ECF 68 at 18. 6 Compass’s claim of prejudice is, in
essence, that it has incurred needless expense responding to Terran’s serially amended
6
Curiously, Terran asserts that Compass does not oppose the Motion based on prejudice.
ECF 67 at 9-10; id. at 9 n.6.
32
complaints. 7 However, in general, “the time, effort, and money . . . expended in litigating [a] case”
do not constitute “substantial prejudice.” Nat’l Recovery Agency, Inc. v. AIG Domestic Claims,
Inc., 4:05-CV-0033, 2006 WL 1289545, at *3 (M.D. Pa. May 9, 2006); see also Block v. First
Blood Assocs., 988 F.2d 344, 351 (2d Cir. 1993) (concluding that the time, effort, and money
expended by the plaintiffs in litigating the case did not amount to substantial prejudice).
“Prejudice is the weightiest factor, the absence thereof, ‘though not alone determinative,
will normally warrant granting leave to amend.’” Oliver v. Dep’t of Public Safety and Correctional
Servs., 350 F. Supp. 3d 340, 346 (D. Md. 2018) (Blake, J.) (quoting Davis, 615 F.2d at 613); see
V.E. v. Univ. of Md. Balt. Cty., JRR-22-02338, 2023 WL 5153650, at *2 (D. Md. Aug. 10, 2023).
To be sure, expense incurred in responding to an adversary’s bad faith litigation tactics
would likely constitute prejudice sufficient to justify denial of leave to amend. Here, however, the
Court has no basis to conclude that the amendments effected by Terran were made in bad faith.
Therefore, the fact that Compass has had to expend significant resources in defending this
complex, multi-party lawsuit is not, by itself, reason to deny Terran leave to amend.
Compass also challenges the allegations in paragraph 51 of the proposed Third Amended
Complaint, asserting that they must be excluded as unfairly prejudicial. Paragraph 51 is captioned:
“Compass Intentionally Developed and Executed its Fraudulent Scheme.” ECF 67-1, ¶ 51. It
includes the following excerpt from a news article about Compass, which describes interactions
between Compass’s co-founders and other psilocybin researchers, id. (quoting ECF 67-27 at 9–
10):
These academics described behavioral patterns that undermined their trust in the
couple. They detailed how Goldsmith and Malievskaia lavished them with
attention—invitations to their home, expensive dinners, and all-expenses-paid trips
7
Again, Compass cannot have it both ways—complaining that Terran could have amended
the fraud allegations earlier yet asserting prejudice because of the number of amendments.
33
to the Isle of Man, a self-governing British Isles island in the Irish Sea—only to go
abruptly quiet once they’d seemingly gathered the information they needed. Quartz
[the news publication] has seen documents that support these allegations. Compass,
Goldsmith, and Malievskaia did not respond to requests for comment about these
trips. . . .
“It felt seductive. It was very flattering, but there was something odd about it,”
says one of the psilocybin researchers, who requested anonymity out of concern for
potential repercussions for speaking about Compass.
According to Compass, these allegations are unfairly prejudicial because they are “entirely
irrelevant to any claim, [insofar] as they refer to Compass’s interactions with researchers who are
not parties to this case.” ECF 68 at 19–20.
As I understand it, the “prejudice” asserted by Compass arises from the content of the
allegations in paragraph 51, not from the fact that they were presented in an allegedly untimely
manner. Therefore, Compass’s objection to paragraph 51 is, in essence, a request that the Court
strike the allegations as “immaterial, impertinent, or scandalous” under Fed. R. Civ. P. 12(f).
Requests to strike an allegation from a complaint are disfavored and “generally will [not]
be . . . granted unless the challenged allegations have no possible or logical connection to the
subject matter of the controversy and may cause some form of significant prejudice to a party.”
Gilman & Bedigian, LLC v. Sackett, 337 F.R.D. 113, 117 (D. Md. 2020). I cannot conclude that
paragraph 51 of the proposed Third Amended Complaint has “no possible or logical connection to
the subject matter of the controversy.” Id.
Fed. R. Evid. 404(b)(1) provides: “Evidence of any other crime, wrong, or act is not
admissible to prove a person’s character in order to show that on a particular occasion the person
acted in accordance with the character.” But, Fed. R. Evid. 404(b)(2) states: “This evidence may
be admissible for another purpose, such as proving motive, opportunity, intent, preparation, plan,
knowledge, identity, absence of mistake, or lack of accident.” Therefore, the allegations in
34
paragraph 51 that Compass defrauded other psilocybin researchers who are not parties to this case
have, at least, a “possible . . . connection to the subject matter of the controversy” in this case:
namely, whether Compass defrauded Terran of trade secrets regarding the therapeutic application
of psilocybin. Sackett, 337 F.R.D. at 117.
Compass’s frustration with what it characterizes as Terran’s “serial amendments,” ECF 68
at 6, is understandable.
Nevertheless, at this juncture, the number of amendments is not
dispositive. Moreover, Terran’s delay in moving for leave to file the proposed amendments is not,
by itself, sufficient cause to deny leave to amend.
And, I am satisfied that the proposed
amendments are not clearly futile, have not been made in bad faith, and do not unfairly prejudice
Compass. Therefore, I shall allow Terran leave to file its Third Amended Complaint.
Pursuant to Local Rule 103.6(A), the Third Amended Complaint “shall be deemed to have
been served, for the purpose of determining the time for response under Fed. R. Civ. P. 15(a), on
the date that the Court grants leave for its filing.”
D.
As mentioned, Compass has filed a Motion to Dismiss the Second Amended Complaint
(ECF 51; ECF 53), which is pending. However, the Third Amended Complaint supersedes the
Second Amended Complaint. See Goodman v. Diggs, 986 F.3d 493, 498 (4th Cir. 2021); Young
v. City of Mt. Rainier, 238 F.3d 567, 573 (4th Cir. 2001). In general, it is appropriate to deny, as
moot, a motion to dismiss that is addressed to a superseded complaint.
Nonetheless, Terran urges the Court to treat the Motion to Dismiss, which is addressed to
the Second Amended Complaint, as if it were addressed to the Third Amended Complaint. See
ECF 75 at 9 (citing Malik, 2023 WL 7089934, at *5). In support of its request, Terran observes
35
that, in opposing the Motion for Leave, Compass has largely rested on the arguments advanced in
the Motion to Dismiss. ECF 75 at 8–9; see ECF 68 at 11.
I decline to construe the Motion to Dismiss, addressed to the SAC, as if it were directed to
the TAC. Because Compass’s Motion to Dismiss seeks dismissal of the Second Amended
Complaint, which shall be superseded, I shall deny the Motion to Dismiss, as moot. However, this
denial is without prejudice to the right of defendants to move to dismiss the Third Amended
Complaint, if appropriate, due by March 5, 2024.
IV.
Conclusion
For the foregoing reasons, I shall grant the Motion for Leave. ECF 67. And, I shall deny
the Motion to Dismiss, as moot. ECF 51; ECF 53. Moreover, the Clerk is directed to docket the
Third Amended Complaint (ECF 67-1).
An Order follows, consistent with this Memorandum Opinion.
Date: February 6, 2024
/s/
Ellen Lipton Hollander
United States District Judge
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