LINDENBERG v. ARRAYIT CORPORATION et al

Filing 46

OPINION. Signed by Judge Stanley R. Chesler on 8/6/14. (gmd, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

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TAMARIN LINDENBERG,
Plaintiff,
v.
ARRAYIT CORPORATION, et al.,
Defendants.

Civil Action No. 14-833 (SRC)

OPINION

CHESLER, District Judge
This matter comes before the Court upon the motion filed by Defendant Arrayit
Corporation (“Arrayit Corporation”) pursuant to Federal Rule of Civil Procedure 12(b)(6) to
dismiss all claims asserted against it in the First Amended Complaint. Plaintiff, Tamarin
Lindenberg (“Plaintiff” or “Lindenberg”) has opposed the motion. Also before the Court is the
motion to dismiss filed by Defendant/Third-Party Defendant John Howell (“Howell”), pursuant
to Federal Rule of Civil Procedure 12(b)(2), on the grounds that this Court lacks in personam
jurisdiction over him. Howell’s motion has been opposed by Plaintiff and by Defendant/ThirdParty Plaintiff Avant Diagnostics (formerly known as Arrayit Diagnostics). The Court has
considered the papers filed by the parties. For the reasons that follow, Arrayit Corporation’s
motion to dismiss and Howell’s motion to dismiss will both be granted.

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I.

BACKGROUND
This lawsuit arises out of the termination of Plaintiff’s employment.
In February 2012, Plaintiff Lindenberg, then a resident of Tennessee, entered into a three-

year employment agreement with Arrayit Diagnostics, a medical technology company
incorporated in Nevada. 1 It currently maintains its principal place of business in Scottsdale,
Arizona, although the motion papers indicate that it was previously headquartered in Oregon. At
the time Plaintiff was hired, Defendant John Howell, served as the CEO of Arrayit Diagnostics.
He is a resident of the State of Oregon and has been at all relevant times. Plaintiff alleges that
Howell asked Plaintiff, a cancer survivor, to join Arrayit Diagnostics as an executive and
consultant for the purpose of using her personal story to promote an early detection test for
ovarian cancer, known as OvaDx, to investors. Lindenberg further alleges that, in connection
with her employment, she moved to New Jersey at Howell’s request and resided with her family
in a house leased by Arrayit Diagnostics.
The First Amended Complaint avers that in May 2012, a decision was made by Howell,
Lindenberg and others that a separate private company would be formed for the purpose of
raising capital and commercializing the OvaDx test. This company would be known as Yarra.
According to Plaintiff, it was agreed that Arrayit Diagnostics would transfer to Yarra its
licensing rights to the OvaDx test in exchange for an ownership interest in Yarra. It was further
agreed that Lindenberg would be Yarra’s CEO but would also remain an employee of Arrayit
Diagnostics until the transfer was finally executed. Plaintiff asserts that Howell met with her and

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The company’s name was changed to Avant Diagnostics after Plaintiff was terminated. Because it operated under
the name Arrayit Diagnostics at all times relevant to this suit, the corporate entity which entered into an employment
contract with Plaintiff will be referred to as “Arrayit Diagnostics” in this Opinion.
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other individuals in New Jersey to discuss the formation of Yarra and the transfer of OvaDx.
Howell acknowledges that he traveled to New Jersey for a meeting in May 2012 but maintains
that it pertained to the business of Arrayit Diagnostics. He further asserts that the location was
chosen as mutually convenient for the participants, who were all out-of-state residents, and that
his visit to New Jersey on that occasion lasted 48 hours.
A June 2012 agreement, signed by Howell for Arrayit Diagnostics and Lindenberg for
Yarra, memorializes the plan to transfer OvaDx to Yarra. The plan did not, however, come to
fruition. Lindenberg avers that in or around November 2012, she questioned Howell about a
filing made by Arrayit Diagnostics with the Securities and Exchange Commission (“SEC”)
containing information she claims misrepresented the facts relating to the agreement between
Arrayit Diagnostics and Yarra. Howell resigned from Arrayit Diagnostics in that same month.
He was succeeded by Defendant Steven Scott. Lindenberg alleges that she again raised the issue
of the allegedly false SEC filing in meetings held December 17 and 18, 2012. On December 19,
2012, Arrayit Diagnostics terminated Lindenberg’s employment. In a January 8, 2013 letter
signed by Scott on behalf of Arrayit Diagnostics, Lindenberg was informed that her termination
was based on violations of the employment agreement, including her activity in connection with
Yarra, citing the employment agreement’s non-compete provision.
Lindenberg initiated this action in the Superior Court of New Jersey, Essex County, on or
about October 1, 2013. She named various defendants, including movant Arrayit Corporation,
which is identified as the corporate parent of Arrayit Diagnostics. 2 The action was removed to
this Court by Defendant Arrayit Corporation on grounds of diversity jurisdiction pursuant to 28

According to the First Amended Complaint, Arrayit Corporation owned 61% of Arrayit
Diagnostics during the time of Plaintiff’s employment.
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U.S.C. § 1332(a). The First Amended Complaint asserts the following state law claims against
all Defendants: retaliatory termination in violation of the Conscientious Employee Protection Act
(“CEPA”); breach of contract; breach of the implied covenant of good faith and fair dealing;
economic duress; and intentional infliction of emotional distress. It also asserts a claim against
Arrayit Corporation for tortious interference with her employment agreement.

II.

ARRAYIT CORPORATION’S MOTION TO DISMISS
Arrayit Corporation moves for dismissal of the entire First Amended Complaint pursuant

to Rule 12(b)(6) for failure to state a claim upon which relief may be granted. A complaint will
survive a motion under Rule 12(b)(6) only if it states “sufficient factual allegations, accepted as
true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S.
at 556.) Following Iqbal and Twombly, the Third Circuit has held that, to prevent dismissal of a
claim, the complaint must show, through the facts alleged, that the plaintiff is entitled to relief.
Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). While the Court must accept all
factual allegations as true and construe the complaint in the light most favorable to the plaintiff,
it need not accept a “legal conclusion couched as a factual allegation.” Baraka v. McGreevey,
481 F.3d 187, 195 (3d Cir. 2007); Fowler, 578 F.3d at 210-11; see also Iqbal, 556 U.S. at 679
(“While legal conclusions can provide the framework of a complaint, they must be supported by
factual allegations.”). “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, will not suffice.” Iqbal, 556 U.S. at 678.
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The Court will apply this standard as it analyzes, in turn, the six claims asserted against
Arrayit Corporation.
A. CEPA Claim
CEPA, N.J.S.A. 34:19-1, et seq., prohibits employers from taking retaliatory actions
against employees “who ‘blow the whistle’ on organizations engaged in illegal or harmful
activity.” Young v. Schering Corp., 141 N.J. 16, 23 (1995). It provides a cause of action to an
aggrieved employee or former employee against the employer. See N.J.S.A. 34:19-5. The statute
defines an employee as “any individual who performs services for and under the control and
direction of an employer for wages or other remuneration.” N.J.S.A. 34:19-2b. An employer is
also expressly defined by CEPA as “any individual, partnership, association, corporation or any
person or group of persons acting directly or indirectly on behalf of or in the interest of an
employer with the employer's consent . . . .” N.J.S.A. 34:19-2a.
Arrayit Corporation argues that Lindenberg cannot state a plausible CEPA against it for
the simple reason that the First Amended Complaint does not, and cannot allege that Arrayit
Corporation was Lindenberg’s employer. Arrayit Corporation is correct that the First Amended
Complaint lacks factual allegations that plausibly support the label of employer, within the
meaning of CEPA. Lindenberg alleges that she was hired by Howell, then CEO of Arrayit
Diagnostics. It further alleges that pursuant to an agreement she entered into with Arrayit
Diagnostics, Lindenberg served as a consultant for that company. The First Amended Complaint
does not allege any facts demonstrating that Lindenberg performed services for Arrayit
Corporation, that Arrayit Corporation directed and controlled the performance of her duties as a
consultant and/or executive or that Arrayit Corporation paid Lindenberg wages or other
remuneration for her services. Her allegation, in paragraph 8 of the First Amended Complaint,
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that Arrayit Corporation was her employer, as defined by CEPA, is a purely conclusory recital of
an essential element of a CEPA claim and thus insufficient to state a plausible a claim. Iqbal,
556 U.S. at 678. Moreover, while an individual or entity, though not strictly a plaintiff’s
employer, may be exposed to CEPA liability based on its involvement in the decision to subject
the plaintiff to a retaliatory employment action, see Michel v. Mainland Regional Sch. Dist.,
2009 WL 2391293, at *2 (D.N.J. July 30, 2009), Lindenberg’s allegations that Arrayit
Corporation caused Arrayit Diagnostics to terminate her employment are also conclusory. The
First Amended Complaint avers that Arrayit Corporation knew of Lindenberg’s three-year
employment contract with Arrayit Diagnostics, knew that she complained of the fraudulent SEC
filing and “caused” Scott, by then the CEO of Arrayit Diagnostics, to terminate her on December
19, 2012. It does not allege that Arrayit Corporation directed that this allegedly retaliatory action
against Plaintiff be taken, nor does it otherwise elaborate on the facts supporting the conclusion
that it caused Scott to terminate Lindenberg for “blowing the whistle” with regard to the SEC
filing.
Plaintiff, in opposition to Arrayit Corporation’s motion, argues that the claim against
Arrayit Corporation should survive based on a veil piercing theory. This attempt fails for two
reasons. Initially, the Court notes, this theory of liability is not pled in the First Amended
Complaint, and a pleading may not be amended through briefing on dispositive motions.
Federico v. Home Depot, 507 F.3d 188, 201–02 (3d Cir. 2007). Second, while the First
Amended Complaint alleges facts demonstrating that Arrayit Diagnostics was a subsidiary of
Arrayit Corporation, it is a fundamental proposition of New Jersey corporate law that “a
corporation is a separate entity from its shareholders.” State, Dep’t of Envtl Protection v.
Ventron Corp., 94 N.J. 473, 500 (1983). According to this principle, shareholders are typically
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shielded from the liabilities of the corporation, “even in the case of a parent corporation and its
wholly-owned subsidiary. . . .” Id. To pierce this corporate veil, and pursue a shareholder or
parent corporation, a plaintiff must demonstrate that the “subsidiary was ‘a mere instrumentality
of the parent corporation.’” Id. (quoting Mueller v. Seaboard Commercial Corp., 5 N.J. 28, 3435 (1950)). The New Jersey Supreme Court has described this standard as limited to
extraordinary situations demonstrating abuse of the corporate form. It has held as follows:
Application of this principle depends on a finding that the parent so
dominated the subsidiary that it had no separate existence but was merely
a conduit for the parent . . . Even in the presence of corporate dominance,
liability generally is imposed only when the parent has abused the
privilege of incorporation by using the subsidiary to perpetrate a fraud or
injustice, or otherwise to circumvent the law.
Id. at 501 (citations omitted). The First Amended Complaint is devoid of actual allegations that
Arrayit Diagnostics was used by Arrayit Corporation as an instrumentality for its own ends or in
some other way completely dominated such that the two entities did not exist separately. The
bald assertion that Arrayit Corporation used its subsidiary to gain control of the OvaDx test
through fraudulent means does not suffice to state a plausible veil piercing theory of CEPA
liability against Arrayit Corporation, such that the Court could consider, at least at the pleading
stage, Arrayit Corporation to be the employer in substance if not in form.
Accordingly, Plaintiff’s CEPA claim against Arrayit Corporation will be dismissed
B. Contract Claims
A prima facie breach of contract claim requires a plaintiff to show, at a minimum, that a
contract existed between the parties. Video Pipeline, Inc. v. Buena Vista Home Entertainment,
Inc., 275 F. Supp. 2d 543, 566 (D.N.J.2003) (applying New Jersey law). Plaintiff’s claim that
Arrayit Corporation breached the three-year employment agreement fails to allege the essential
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element that Arrayit Corporation was a party to the contract. Simply put, taking as true the First
Amended Complaint’s factual allegations, Plaintiff entered into an agreement with Arrayit
Diagnostics, not Arrayit Corporation. The absence of an alleged contract with Arrayit
Corporation defeats the breach of contract claim. It also defeats the claim for breach of the
implied covenant of good faith and fair dealing, as “[o]ne cannot read additional terms into a
non-existent contract.” McQuitty v. Gen. Dynamics Corp., 204 N.J. Super. 514, 520-21 (App.
Div. 1985). For these reasons, the Court will dismiss Plaintiff’s claims against Arrayit
Corporation for breach of contract and breach of the implied covenant of good faith and fair
dealing.
C. Economic Duress
New Jersey law recognizes the doctrine of economic duress as grounds for invalidating
an otherwise enforceable contract. Cont’l Bank of Pa. v. Barclay Riding Academy, 93 N.J. 153,
175-76 (1983). It is not, however, recognized as an “affirmative tort action.” Nat'l Amusements,
Inc. v. N.J. Tpk. Auth., 261 N.J. Super. 468, 479 (Law Div. 1992), aff’d, 275 N.J. Super. 134
(App. Div. 1992.); see also Am. Rubber & Metal Hose Co. v. Strahman Valves, Inc., 2011 WL
3022243, at *7 (D.N.J. July 22, 2011) (noting same and citing governing cases). Plaintiff, in her
opposition to Arrayit Corporation’s motion to dismiss, cites no New Jersey authority to the
contrary. Accordingly, the economic duress claim will be dismissed.
D. Intentional Infliction of Emotional Distress
A viable claim for intentional infliction of emotional distress requires a plaintiff to
establish “intentional and outrageous conduct by the defendant, proximate cause, and distress
that is severe.” Buckley v. Trenton Sav. Fund Soc., 111 N.J. 355, 366 (1988). In her brief,
Plaintiff argues that a plausible claim is stated based on Arrayit Corporation’s allegedly unlawful
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termination of Plaintiff despite knowing two things: (1) that she was a cancer survivor and would
lose health insurance benefits upon termination and (2) that she had relocated with her children
to New Jersey for her employment and would be forced to find a new home, as the lease was
paid by her employer. This argument mischaracterizes the facts alleged in the First Amended
Complaint. As the Opinion has discussed, the First Amended Complaint does not allege that
Arrayit Corporation terminated her employment or breached an employment contract to which it
was not a party. Moreover, Plaintiff has not alleged that Arrayit Corporation engaged in the kind
of conduct targeted by this cause of action. To state an intentional infliction of emotional distress
claim, Plaintiff would have to allege conduct by Arrayit Corporation that was “so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be
regarded as atrocious, and utterly intolerable in a civilized community.” Id. (quoting
Restatement (Second) of Torts, § 46, cmt. d (1965)). Therefore, Lindenberg’s claim for
intentional infliction of emotional distress will be dismissed.
E. Tortious Interference
In the alternative to pleading for relief against Arrayit Corporation on a breach of contract
theory, Plaintiff asserts a claim for tortious interference. This claim requires a plaintiff to allege,
among other elements, that the defendant interfered with the plaintiff’s reasonable expectation of
economic advantage and, further, that the interference was done with “malice,” meaning that
“the harm was inflicted intentionally and without justification or excuse.” Printing MartMorristown v. Sharp Electronics Corp., 116 N.J. 739, 751 (1989). Plaintiff argues that she states
a plausible claim because the First Amended Complaint alleges that Arrayit Corporation knew of
her three-year employment contract with Arrayit Diagnostics and directed it to terminate
Plaintiff’s employment after she questioned the allegedly fraudulent SEC filing, thus interfering
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with the economic gain Plaintiff expected to receive under her contract. This alleged act of
intentional and unjustifiable interference with Plaintiff’s employment contract is, however, based
on conclusions rather than factual allegations. The claim will be dismissed pursuant to Rule
12(b)(6).

III.

HOWELL’S MOTION TO DISMISS
Defendant Howell moves to dismiss pursuant to Rule 12(b)(2), arguing that he lacks

sufficient contacts with New Jersey for this Court to have personal jurisdiction over him. Upon
the filing of a Rule 12(b)(2) challenge to a court’s exercise of personal jurisdiction, the burden
falls on the plaintiff to establish, by a preponderance of the evidence, that personal jurisdiction
over a defendant exists. D’Jamaoos v. Pilatus Aircraft Ltd., 566 F.3d 94, 102 (3d Cir. 2009);
Carteret Sav. Bank v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992).
The concept of “personal jurisdiction,” or “in personam jurisdiction,” refers to a court’s
power over a particular defendant. Int’l Shoe Co. v. State of Wash., 326 U.S. 310, 316 (1945).
The Federal Rules of Civil Procedure provide that a district court may exercise personal
jurisdiction over a non-resident defendant to the extent permitted under state law. Fed. R. Civ. P.
4(k)(1). A district court exercising diversity jurisdiction over a case must look to the forum
state’s long-arm statute in analyzing whether there is personal jurisdiction over a non-resident
defendant. Sunbelt Corp. v. Noble, Denton & Assocs., 5 F.3d 28, 31 (3d Cir. 1993). New
Jersey’s long-arm statute permits the exercise of personal jurisdiction “to the fullest limits of due
process.” IMO Indus., Inc. v. Kiekert AG, 155 F.2d 254, 259 (3d Cir. 1998). The Fourteenth
Amendment’s Due Process Clause requires that “individuals have fair warning that a particular
activity may subject [them] to the jurisdiction of a foreign sovereign.” Burger King Corp. v.
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Rudzewicz, 471 U.S. 462, 472 (1985). Consistent with the Due Process Clause, a court may
assert personal jurisdiction so long as the defendant has “certain minimum contacts” with the
forum, in this case New Jersey, such as not to “offend ‘traditional notions of fair play and
substantial justice.’” Int'l Shoe Co., 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457,
463 (1940)). There are “two types of personal jurisdiction which comport with these due process
principles: general and specific jurisdiction.” Kehm Oil Co. v. Texaco, Inc., 537 F.3d 290, 300
(3d Cir. 2008). 3
In this case, both Plaintiff Lindenberg and Third-Party Plaintiff Arrayit Diagnostics have
argued in their opposition papers that this Court has specific jurisdiction over Howell. “Specific
jurisdiction is established when a non-resident defendant has ‘purposefully directed’ his
activities at a resident of the forum and the injury arises from or is related to those activities.”
Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2001) (quoting Burger King Corp., 471
U.S. at 472). They point to two instances in which Howell, a resident of Oregon, directed his
activities to New Jersey: the leasing of a home in New Jersey by Arrayit Diagnostics, while
Howell was CEO, for Lindenberg in connection with her employment and the all-day meeting in
New Jersey in May 2012. Neither of these, however, provides sufficient minimum contacts to
satisfy due process. Plaintiff’s claims for relief arise out of the termination of her employment
with Arrayit Diagnostics. Though Lindenberg points to the fact that the termination letter was
directed to New Jersey, that January 8, 2013 letter was signed by Defendant Scott as CEO of

“General jurisdiction exists when a defendant has maintained systematic and continuous
contacts with the forum state.” Kehm Oil Co., 537 F.3d at 300. Lindenberg and Arrayit
Diagnostics make clear in their opposition papers that they do not contend that this Court has
general jurisdiction over Howell. Thus, the Court will discuss only specific jurisdiction in its
analysis.
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Arrayit Diagnostics. There is no indication that it was sent to Lindenberg’s New Jersey address
by Howell. Indeed, Howell had resigned from Arrayit Diagnostics prior to Lindenberg’s
termination. Nor is there any indication that this action relates to Howell’s meeting with
Lindenberg in New Jersey. Even assuming that the meeting in fact involved discussions about
the formation of Yarra, which Scott’s January 8, 2013 letter cited as cause for Lindenberg’s
termination under the employment agreement, Howell’s travel to New Jersey for a single
business meeting occurring in the course of Plaintiff’s employment with Arrayit Diagnostics is at
most tangential to the breach of contract claim she asserts. It does not meet the standard that
Howell’s contacts with New Jersey were “instrumental in either the formation or the breach” of
the employment contract. Control Screening LLC v. Tech. Application & Prod. Co., 687 F.3d
163, 167 (3d Cir. 2012) (setting forth the showing that must be made in a contract case to
establish sufficient minimum contacts with the forum in which personal jurisdiction is asserted).
The New Jersey meeting does not appear to relate to the CEPA whistleblower claim at all.
In short, Plaintiff and Third-Party Plaintiff have not demonstrated that Howell’s contacts
with this forum give rise or relate to Plaintiff’s claimed injury of wrongful termination from
Arrayit Diagnostics. The Court finds that it has no in personam jurisdiction over Howell.
Accordingly, Howell’s motion to dismiss will be granted.

IV.

CONCLUSION
For the foregoing reasons, the Court will grant Arrayit Corporation’s motion, dismissing

all claims asserted against it in the First Amended Complaint. Leave to amend will not be
granted, as there is no indication that Plaintiff could assert additional factual allegations to cure
the deficiencies discussed above. See Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d
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Cir.2002) (holding that upon granting a defendant's motion to dismiss a deficient complaint, a
district court should grant the plaintiff leave to amend within a set period of time, unless
amendment of the complaint would be inequitable or futile). Amendment of the First Amended
Complaint, should additional facts be available to Plaintiff, will require a motion for leave to
amend in accordance with Federal Rule of Civil Procedure 15.
The Court will also grant Howell’s motion to dismiss, for lack of personal jurisdiction.
An appropriate Order will be filed.

s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge

Dated: August 6, 2014

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