Beus Gilbert PLLC v. Donald L. Robertson Trust, 043021 FED10, 20-4061

Docket Nº20-4061
Opinion JudgeROBERT E. BACHARACH CIRCUIT JUDGE
Party NameBEUS GILBERT PLLC, Plaintiff, v. DONALD L. ROBERTSON TRUST, Defendant Crossclaimant -Appellant, v. BRIGHAM YOUNG UNIVERSITY, Defendant Crossclaim Defendant-Appellee.
Judge PanelBefore TYMKOVICH, Chief Judge, EBEL and BACHARACH, Circuit Judges.
Case DateApril 30, 2021
CourtUnited States Courts of Appeals, Court of Appeals for the Tenth Circuit

BEUS GILBERT PLLC, Plaintiff,

v.

DONALD L. ROBERTSON TRUST, Defendant Crossclaimant -Appellant,

v.

BRIGHAM YOUNG UNIVERSITY, Defendant Crossclaim Defendant-Appellee.

No. 20-4061

United States Court of Appeals, Tenth Circuit

April 30, 2021

(D.C. Nos. 2:12-CV-00970-RJS & 2:14-CV-00206-RJS) (D. Utah)

Before TYMKOVICH, Chief Judge, EBEL and BACHARACH, Circuit Judges.

ORDER AND JUDGMENT [*]

ROBERT E. BACHARACH CIRCUIT JUDGE

This case arises out of the discovery of the COX-2 enzyme. The discovery proved lucrative, leading three biochemists to claim partial credit. Among them was Dr. Donald L. Robertson, who allegedly helped discover the enzyme while working as a biochemistry professor at Brigham Young University. The discovery was shared with a major pharmaceutical company, which used the information to develop a blockbuster drug called "Celebrex." BYU sued the pharmaceutical company and settled in 2012 for $450 million.

After paying attorney's fees, BYU kept 55% for itself and agreed to distribute the other 45% to the biochemists responsible for the discovery. Dr. Robertson and the two other biochemists disagreed on the allocation, and litigation ensued.

During the litigation, Dr. Robertson died. His successor in interest, the Donald L. Robertson Trust, moved for leave to file amended crossclaims against BYU for breach of contract and misappropriation of trade secrets. The district court denied the motion, and the Trust appeals.

In deciding this appeal, we conclude that the Trust's allegations • state a valid claim for breach of contract and

• show that the limitations period had already expired for a claim of misappropriation of trade secrets.

Given these conclusions, we partially affirm and partially reverse the denial of leave to amend.

I. The Denial of Leave to Amend

The Trust challenges the denial of leave to amend the crossclaims to add claims for breach of contract and misappropriation of trade secrets. The district court denied the motion as futile, concluding that the amended claims would not survive a motion to dismiss.

A. The Standard of Review for Futility

When reviewing a denial of leave to amend, we ordinarily apply the abuse-of-discretion standard. Johnson v. Spencer, 950 F.3d 680, 720-21 (10th Cir. 2020). But when a district court disallows amendments based on futility, we conduct de novo review. Id. Here the district court concluded that the amendments were futile because they would not survive a motion to dismiss for failure to state a valid claim. So our review is de novo.

Dismissal for failure to state a claim is proper only if the allegations lack enough facts to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim is facially plausible when the allegations give rise to a reasonable inference that the defendant is liable." Mayfield v. Bethards, 826 F.3d 1252, 1255 (10th Cir. 2016).

In determining facial plausibility, "we will disregard conclusory statements and look only to . . . the remaining[] factual allegations . . . ." Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012). But "specific facts" are unnecessary; the claimant needs only to provide "fair notice" of the claim and its grounds. Id. at 1192. We credit the "well-pled factual allegations," viewing them "in the light most favorable" to the claimant and in "the context of the entire [crossclaim.]" Evans v. Diamond, 957 F.3d 1098, 1100 (10th Cir. 2020) (quoting Peterson v. Grisham, 594 F.3d 723, 727 (10th Cir. 2010)); Ullery v. Bradley, 949 F.3d 1282, 1288 (10th Cir. 2020).

B. The Proposed Addition of a Crossclaim for Breach of Contract

For substantive legal principles on the proposed amendment to the crossclaim for breach of contract, we apply Utah law. Corneveaux v. CUNA Mut. Ins. Grp., 76 F.3d 1498, 1506 (10th Cir. 1996). Under Utah law, a contract claim requires four elements: 1. the existence of a contract,

2. the performance by the party seeking recovery,

3. a breach by the other party, and

4. the existence of damages.

Am. W. Bank Members, L.C. v. State, 342 P.3d 224, 230-31 (Utah 2014). The district court denied the adequacy of allegations on the first two elements: a contract and Dr. Robertson's performance.1 We disagree with the district court.

1. The Trust plausibly alleged a contract and Dr. Robertson's performance.

In our view, the Trust's amended crossclaim for breach of contract satisfied the first two elements by alleging a contract and Dr. Robertson's performance.

a. The Trust plausibly alleged a contract between Dr. Robertson and BYU based on the IP Policies in effect from 1989 to 1992 and adopted in 1992.

For a contract claim, the Trust must allege a contract between Dr. Robertson and BYU. The district court regarded the allegations as deficient for failing to say • what the material terms were or

• when and how a contract had been formed.

We disagree because the Trust plausibly alleged that Dr. Robertson and BYU had entered into implied contracts governed by the IP Policies • in effect from 1989 to 1992 and

• adopted in 1992.2

i. A contract may be implied.

"An implied contract may arise from . . . personnel policies Cabaness v. Thomas, 232 P.3d 486, 502 (Utah 2010), abrogated on other grounds by Gregory & Swapp, PLLC v. Kranendonk, 424 P.3d 897 (Utah 2018). Personnel policies create an implied contract if • the employer communicates a "promise of employment under certain terms" to the employee and

• the employee performs under the offer.

Johnson v. Morton Thiokol, Inc., 818 P.2d 997, 1001-02 (Utah 1991).

ii. The alleged facts establish an implied contract under the IP Policy in effect between 1989 and 1992.

The Trust plausibly alleged an implied contract under the IP Policy in effect from 1989 to 1992 by stating the material terms.

The Trust paraphrased the terms but did not attach the IP Policy in effect before the adoption of the 1992 policy. Attaching the policy was unnecessary; the Trust needed only to plead the key promises. See T.G. Slater & Son, Inc. v. Donald P. & Patricia A. Brennan LLC, 385 F.3d 836, 841-42 (4th Cir. 2004) (concluding that a plaintiff had adequately pleaded a breach of contract without attaching written documentation by pleading that a defendant had "retained" the plaintiff to work on a real estate purchase and had agreed to pay "a customary real estate commission for [the plaintiff's] services"); Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993) ("A plaintiff is under no obligation to attach to her complaint documents upon which her action is based . . . ."); see also 5A Arthur R. Miller, Mary Kay Kane & A. Benjamin Spencer, Federal Practice and Procedure § 1327 (4th ed. Oct. 2020 update) ("The provision for incorporation of exhibits in Rule 10(c) is permissive only, and there is no requirement that the pleader attach a copy of the writing on which his claim for relief or defense is based.").

The Trust satisfied this requirement by pleading the key promises of the IP Policy: 10. The development of COX-2 occurred on BYU's campus between 1989 and 1992.

11. At all times during their employment, in particular during the development of COX-2, BYU's employment agreements with Dr. Robertson, Dr. Simmons, and Dr. Xie included the provisions of BYU Intellectual Property Policy as it existed at that time.

* * * *

13. Under the IP Policy that was effective from 1989 through 1992 during the development of COX-2, BYU claimed ownership of the COX-2 technology as the property of BYU.

14. Under the IP Policy that was effective from 1989 through 1992 during the development of COX-2, BYU has a duty to distribute income to the individuals from whom BYU has claimed ownership of the COX-2 technology.

Appellant's App'x vol. 2, at 76.

The district court concluded that the Trust had needed to allege more specific facts. We disagree. The Trust's factual allegations imply two key promises: 1. Dr. Robertson promised to work at BYU (Id. ¶ 11) and to relinquish ownership of any discoveries like COX-2 (Id. ¶¶ 11, 13).

2. BYU promised to employ Dr. Robertson (Id. ¶ 11), to support his research (Id. ¶¶ 10-11), and to distribute income to employees making discoveries (like COX-2) subject to BYU's ownership (Id. ¶¶ 11, 14).

The Trust also adequately alleged the formation of an implied contract based on these terms because • BYU had communicated the IP Policy to Dr. Robertson and

• he had accepted the offer by continuing performance.

The Trust alleged communication of the IP Policy in two ways. First, the Trust alleged that • the IP Policy in existence "at the time" had been "included" in the "employment agreement" with BYU (Id. at 76 ¶ 12) and

• the IP Policy made key promises. (See p. 7, above.)

These allegations reasonably imply that BYU communicated the terms as a binding promise to Dr. Robertson: if Dr. Robertson didn't know the terms of his employment agreement, how could he have been expected to comply? See Johnson v. Morton Thiokol, Inc., 818 P.2d 997, 1001 (Utah 1991) ("[I]f an employee manual is to be considered part of an employment contract, the terms should be considered terms of a unilateral contract.").

Second, the Trust attached correspondence from Dr. Robertson, stating his belief that "[t]he acknowledgment of the participants in this [COX-2] discovery [was] consistent with research policies which [were] firmly established at both universities and in industry for the acknowledgment of contributions to any discovery." Appellant's App'x, vol. 2 at 136. Dr. Robertson's reference to the "firmly established"...

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