AbbVie Inc. v. Adcentrx Therapeutics Inc.

• Docket Number: 3:23-cv-02290-BEN-DEB
• Decision Date: 29 July 2024
• Parties: ABBVIE INC., a Delaware corporation, Plaintiff, v. ADCENTRX THERAPEUTICS INC., a Delaware corporation; DONG JUN Danny LEE, an individual; and DOES 110, Defendants.
• Court: U.S. District Court — Southern District of California

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ABBVIE INC., a Delaware corporation, Plaintiff, v. ADCENTRX THERAPEUTICS INC., a Delaware corporation; DONG JUN Danny LEE, an individual; and DOES 110, Defendants.

No. 3:23-cv-02290-BEN-DEB

United States District Court, S.D. California

July 29, 2024

ORDER: (1) DENYING-IN-PART DEFENDANT DON JUN LEE'S MOTION TO COMPEL ARBITRATION, OR IN THE ALTERNATIVE, TO DISMISS; AND (2) DENYING-IN-PART DEFENDANT ADCENTRX'S MOTION TO STAY, OR IN THE ALTERNATIVE, TO DISMISS [ECF NOS. 14,15]

HON ROGER T. BENITEZ UNITED STATES DISTRICT JUDGE

On December 15, 2023, Plaintiff AbbVie, Inc. (“Plaintiff') filed its complaint against Defendants Adcentrx Therapeutics Inc. (“Adcentrx”), Dong Jun Lee (“Lee”) and DOES 1 through 10 (collectively “Defendants”) alleging four claims for relief. ECF No. 1 (Compl.). On January 22, 2024, Defendant Lee moved to compel arbitration or, in the alternative, dismiss the complaint. ECF No. 14. The same day, Defendant Adcentrx I moved to stay the action pending arbitration between Lee and Plaintiff, or in the alternative, to dismiss. ECF No. 15. Both motions are fully briefed. ECF Nos. 22-25.

The motions were submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1) and Rule 78(b) of the Federal Rules of Civil Procedure. ECF No. 26.

For the reasons set forth below, the Court: (1) DENIES Defendant Lee's motion to compel arbitration; (2) GRANTS Defendant Lee's motion to dismiss; (3) DENIES-AS-MOOT Defendant Adcentrx's Motion to Stay; and (2) GRANTS Defendant Adcentrx's Motion to Dismiss.

I. BACKGROUND^[1]

Plaintiff AbbVie is a pharmaceutical corporation. Compl. ¶ 26. Plaintiff alleges Defendant Lee worked for AbbVie for over six years. Id. ¶ 2. “During his tenure, Lee was a key scientist on one of AbbVie's anti-cancer research programs, known as the microtubule inhibitor (‘MTi') ADC program. The MTi ADC program involved a particular type of therapeutic known as antibody drug conjugates (‘ADCs'), which are compounds where an anti-cancer payload is conjugated to an antibody via a chemical linker, allowing for targeted delivery of the payload directly to cancer cells. The combination of the anti-cancer payload and the linker is typically referred to as a linker-drug.” Id.

Plaintiff began its MTi ADC program in 2015. Id., ¶ 29. Defendant Lee was hired in 2015 and was one of the key scientists in the MTi-ADC program from November 2016 through February 2021. Id. ¶¶ 30-31. Plaintiff alleges Lee had access to the full scope of the MTi-ADC program and engaged directly with biologists who tested the compounds for efficacy and safety. Id. ¶ 32. In April 2021, Lee secretly accepted a position at Adcentrx. Id. ¶ 74. Lee remained employed by Plaintiff until June 2021.^[2] Id. Shortly after Lee left, Adcentrx began filing patent applications for MTi-ADC type drugs, naming Lee as the inventor. Id. ¶¶ 75-76, 80. Plaintiff alleges Lee used confidential information and trade secrets he learned while working for AbbVie's MTi-ADC program to develop these drugs for Adcentrx. Id. ¶ 34.

On December 15, 2023, Plaintiff filed its original complaint alleging four causes of action: (1) misappropriation of trade secrets under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836, et seq', (2) declaratory judgment; and (3-4) two breach of contract claims against Defendant Lee based on breaches of Lee's employment agreement.

II. LEGAL STANDARDS

A. Motion to Compel

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., arbitration agreements “shall be valid irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of a contract.” 9 U.S.C. § 2. The district court's role in ruling on a motion to compel arbitration is “limited to determining (1) whether a valid agreement to arbitrate exists[,] and if it does, (2) whether the agreement encompasses the dispute at issue.” Revitch v. DIRECTV, LLC, 977 F.3d 713, 716 (9th Cir. 2020). Only if the court answers both questions in the affirmative will the FAA require the Court “to enforce the terms of the arbitration agreement in accordance with its terms.” Revitch, 977 F.3d at 716. Federal substantive law governs the scope of an arbitration agreement, Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126 (9th Cir. 2013), and state contract law governs issues pertaining to the validity, revocability, and enforceability of an arbitration agreement. Revitch, at 716-17.

B. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable, plausible claim. See Balistreri v. Pacific Police Dep 't., 901 F.2d 696, 699 (9th Cir. 1990). A complaint may survive a motion to dismiss only if, taking all well pled factual allegations as true, it contains enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A motion to dismiss tests the “legal sufficiency” of the complaint. Ueto v. Glock Inc., 349 F.3d 1191, 1199-200 (9th Cir. 2003).

III. DISCUSSION

Defendant Lee brings a motion to compel arbitration or in the alternative, to dismiss the complaint. ECF No. 14 (“Lee Mot.”). Defendant Adcentrx brings a motion to stay the case pending arbitration of Lee's claims, or in the alternative, to dismiss the complaint. ECF No. 15 (“Ad. Mot.”). Relevant to the discussion of both motions are two written agreements.

First, in February 2015, Defendant Lee and Plaintiff signed an Employment Agreement. See ECF No. 22-2, Ex. A (“Employment Agreement”). Defendant Lee's purported breaches of the Employment Agreement form the basis of Plaintiff s breach of contract claims. Second, Defendant Lee and Pharmacyclics LLC (“PCYC”)^[3] executed a Mutual Arbitration Agreement in October 2018. See ECF No. 14-2 (“Arbitration Agreement”). The Arbitration Agreement defines “Employer” as PCYC and “Employee” as Defendant Lee. Id. at 1. Importantly, the Arbitration Agreement provides that: “Employee and Employer agree that.. .any existing, currently pending and/or future claim.. .that has arisen or arises between Employee Parties and.. .Employer Parties.. .shall be resolved by final and binding arbitration...” Id. at 2 (cleaned up). The Arbitration Agreement defines “Employer Parties” as PCYC and “its past, present and future: parent(s), subsidiaries, affiliates, and/or their respective past, present and future: officers, directors and/or employees[.]” Id. The Arbitration Agreement forms the basis of Defendant Lee's motion to compel arbitration.

A. Motion to Compel

Defendant Lee argues that a valid and binding agreement exists that requires Plaintiff to arbitrate disputes against him. Lee Mot. at 2. Lee argues because PCYC is a subsidiary of Plaintiff, Plaintiff falls under the definition of “Employer Party” in the Arbitration Agreement. Id. Plaintiff responds that it was not a signatory to the arbitration agreement and accordingly cannot be compelled to arbitration. Lee Oppo, at 1. Plaintiff further contends it was “unaware of the arbitration agreement” until it was produced by Lee's counsel. Lee Oppo, at 4.

Generally, “a party cannot be compelled to arbitrate a dispute that he or she has not agreed to resolve by arbitration.” Benaroya v. Willis, 23 Cal.App.5th 462, 469 (2018) (collecting cases). Under California law, a party seeking to compel arbitration against a non-signatory to the agreement must show that one of the following exceptions applies: (1) incorporation by reference; (2) assumption; (3) agency; (4) piercing the corporate veil or alter ego; (5) estoppel; and (6) third party beneficiary. Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006); see also Cal. Civ. Code § 1559 (third parties may enforce contracts made expressly for their benefit). Whether an arbitration agreement is binding on a third-party such as a non-signatory is a question of law. Daniels v. Sunrise Senior Living, Inc., 212 Cal.App.4th 674, 680 (2013).

Here, Defendant Lee argues that the agency, estoppel and the third party beneficiary exceptions allow for Plaintiff to be bound by the Arbitration Agreement. ECF No. 24 (“Lee Reply”) at 2. The Court will address these arguments in reverse order.

1. Third Party Beneficiary. “A third party beneficiary is someone who may enforce a contract because the contract is made expressly for his benefit,” Pillar Project AG v. Payward Ventures, Inc., 64 Cal.App.5th 671, 677 (2021) (citation omitted, cleaned up). “The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract.” Pillar, 64 Cal.App.5th at 677 (quoting Jensen v. U-Haul Co. of California, 18 Cal.App.5th 295, 301 (2017)). Lee argues Plaintiff is a third party beneficiary because it benefitted from a covenant not to sue. ECF No. 24 at 10. Lee argues, “AbbVie concedes that under the covenant not to sue, Dr. Lee is prohibited from suing ‘Employer Parties,' which includes AbbVie.” Id. However, “The mere fact that a contract results in benefits to a third party does not render that party a third party beneficiary.” Pillar, at 677 (citation omitted, cleaned up). The Court cannot conclude that Plaintiffs arguable inclusion in the definition of the term “Employer Parties” is sufficient to show the Arbitration Agreement was made expressly for Plaintiffs benefit.

2. Estoppel. In general, under both federal and California authority, “a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action...