Cleveland v. Ludwig Inst. for Cancer Research
| Decision Date | 17 June 2020 |
| Docket Number | Case No.: 19cv2141 JM (JLB) |
| Court | U.S. District Court — Southern District of California |
| Parties | DON CLEVELAND et al., Plaintiffs, v. LUDWIG INSTITUTE FOR CANCER RESEARCH LTD. et al., Defendant. |
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS
Defendants Ludwig Institute for Cancer Research ("Ludwig"), Chi Van Dang, Edward A. McDermott, Jr., and John L. Notter ("Defendants") move to dismiss the Amended Complaint ("Complaint") of Don Cleveland, Arshad Desai, Richard Kolodner, Paul Mischel, Karen Oegema, and Bing Ren, ("Plaintiffs") pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 14.) The motion has been briefed and argued. For the below reasons, Defendants' motion is GRANTED IN PART and DENIED IN PART.
According to their Amended Complaint,1 Plaintiffs are "internationally acclaimed cancer research scientists and physicians." (¶ 1.)2 Ludwig is an international nonprofitorganization dedicated to finding a cure for cancer that operates multiple cancer research branches. (¶¶ 3, 122.) In 1991, Ludwig entered into an "Affiliation Agreement" (hereinafter "the AA") with the University of California at San Diego (UCSD) to establish a San Diego Branch ("the Branch"). (¶ 47.) Ludwig agreed to conduct "active" and "continuous" medical research to "discover, develop, or verify knowledge related to causes, diagnoses, treatment, prevention and control of cancer." (¶ 48.) Ludwig also agreed to "bear the costs directly related to conducting the research program," including equipment and Plaintiffs' compensation. (¶ 52.) The AA, as amended, also "requires Ludwig to operate the [b]ranch at UCSD and in conjunction with the [UCSD hospital] during the term of the [AA]." (¶ 6.) The term of the AA is coterminous with a lease agreement for research facilities between Ludwig and UCSD, which allows Ludwig to terminate the lease no earlier than December 31, 2023. (¶¶ 5, 6, 50.)
In addition to leasing its facilities to Ludwig, UCSD agreed to: (1) grant privileges for the practice of medicine at its hospital to qualified members of the medical staff at the Branch; (2) grant "academic recognition and titles" to qualified Ludwig employees; and (3) pursuant to an August 2000 amendment to the AA, make 15 "full time equivalency" positions available for Ludwig employees. (¶ 130.)
Plaintiffs allege that "[t]he [AA] requires Ludwig to hire Plaintiffs to conduct cancer research[.]" (¶ 1.) Plaintiffs allege that "[b]efore agreeing to join Ludwig, Plaintiffs each held other secure and well-funded positions or had other attractive opportunities to start research careers at other institutions." (¶ 9.) Plaintiffs also allege that "Ludwig solicited Plaintiffs to become 'members' of the Branch," and that "Ludwig assured Plaintiffs that, pursuant to Ludwig's long-term commitment to operate and fund the Branch under the [AA], Ludwig would deploy its vast resources to adequately fund cancer research programs at the Branch, from basic research to cure, for the duration of the [AA]." (¶ 7.) Plaintiffs further allege that "Ludwig induced the Plaintiffs to leave positions, or to decline other offers with noted research organizations, in order to affiliate with Ludwig at its San Diego Branch[.]" (¶ 5.)
Plaintiffs were hired by Ludwig between 1996 and 2011. (¶¶ 29-34.) By October of 2017, the San Diego Branch had a total of 170 administrative and scientific employees. (¶ 15.) Each Plaintiff operated his or her own lab at the Branch that utilized a variety of advanced equipment, much of which was owned or provided by Ludwig. (Id.) Each Plaintiff employs research teams made up of both permanent research staff and postdoctoral and graduate students. (Id.)
On May 4, 2018, Defendant McDermott, the President and Chief Executive Officer of Ludwig, and Defendant Dang, Ludwig's Scientific Director, visited the San Diego Branch and announced the Branch would close over the next four to five years. (¶ 74.) They admitted that under their agreements with UCSD, they were obligated to keep the Branch open through December 31, 2023. (Id.) McDermott claimed that Ludwig had no obligation to provide any further support to the Branch, or any research funding to Plaintiffs, but that they would provide some minimal funding to enable a transition period. (Id.) Ludwig continued, however, to pay Plaintiffs' salaries at their current levels. (¶ 21.)
On or about May 21, 2018, Ludwig sent letters to the lab heads, including Plaintiffs, informing them that their rolling five-year memberships at the Branch would not be renewed, and their remaining terms would be fixed at four or five years. (¶ 75.) Ludwig asserted that its nonrenewal was pursuant to section 6.6 of Ludwig's "Member-Track Appointment and Promotion Policy," which became effective on December 9, 2013 and is binding upon Ludwig pursuant to the AA. (¶¶ 68, 75.) Section 6.6 refers to action following a negative scientific review. (¶ 68.) Under section 6.6, Ludwig was required to conduct an individual review of each Plaintiff and then receive a recommendation from an independent review committee before Ludwig was entitled to convert the Plaintiffs' rolling terms into a fixed term. (Id.) No individual reviews or independent recommendations occurred prior to the May 21, 2018 letters. (Id.) Lab head presentations and a review of the San Diego Branch were scheduled to take place in 2018 and 2019, but were cancelled without explanation. (¶ 76.) Plaintiffs' research has been accorded praise, both by Ludwig and by numerous peer reviews in medical journals. (¶ 77.)
On or about June 12, 2018, counsel for UCSD wrote to McDermott stating that Ludwig was not permitted under the AA to close the Branch prior to December 31, 2023, and that Ludwig was also obligated to operate and adequately fund the Branch until that date. (¶ 80.) The letter also challenged Ludwig's assertions that it performed scientific evaluations of Plaintiffs and could, on that basis, terminate Plaintiffs' rolling Branch memberships. (Id.) Dang then called Plaintiff Kolodner, who was Branch director at the time, and stated that unless Kolodner helped Ludwig obtain the cooperation of UCSD in connection with Ludwig's decision to close the Branch, Ludwig would cut the research funding to the amount Dang and McDermott determined was the absolute minimum Ludwig was required to provide. (¶ 81.)
On or about June 25, 2018, McDermott responded to UCSD and stated, (¶ 82.) McDermott did not dispute UCSD's contention that Ludwig had not performed any individual scientific reviews and thus could not invoke a nonrenewal of Plaintiffs' rolling terms of employment under section 6.6. (Id.) At a subsequent meeting, McDermott and Dang admitted that Ludwig had not reviewed Plaintiffs' work, (¶ 88), and promised to provide Plaintiffs with corrected letters regarding the basis for nonrenewal of their membership terms with the Branch, (¶ 97). Ludwig ultimately sent "amended and restated" letters to Plaintiffs terminating Plaintiffs' Branch memberships, this time under section 7 of the policy, which stated:
[Ludwig] may terminate a scientist's status as . . . . [m]ember in the event the [b]ranch to which the scientist is assigned is closed or relocated, and/or the scientist['s] position . . . . is eliminated for budgetary reasons; provided that [Ludwig] pays the affected . . . . [member] his/her compensation and benefits (or the value thereof) for the balance of the then-current term of his/her appointment or one year whichever is longer.
(¶ 98.)
On or about July 12, 2018, McDermott sent Kolodner a letter setting out the Branch's proposed budget for the next five years, provided that Ludwig received the cooperation of the Branch and UCSD in the transition. (¶ 83.) Under the proposed budget, annual funding for research was cut beginning in 2019, effectively eliminating research funding. (Id.) Between 2013 and 2018, the budget had always been around $12 million per year. (¶ 85.) Ludwig proposed providing $45 million over the next five years (an average of $9 million per year), gradually cutting the budget to $4.5 million for the year 2023. (¶ 86.)
At a February 12, 2019 meeting, Ludwig presented the proposed budget to Plaintiffs, and demanded that all Plaintiffs sign a "transition agreement and release," or else no funding would be provided. (¶ 89.) The transition agreement and release required Plaintiffs to continue to perform research through 2023, and contained a release of all claims, a non-disparagement clause, a confidentiality clause, and a restriction on the use of any information or materials Plaintiffs acquired, developed, or created while affiliated with the Branch. (¶¶ 91-92.) None of the Plaintiffs signed the agreement. (¶ 96.) Ludwig subsequently cut the budget to $37 million over the next five years (an average of $7.4 million per year), (¶ 101), and stated to Plaintiffs that it will not be funding any research at the Branch, starting January 1, 2020, (¶ 108).
On or about October 31, 2019, Kolodner wrote to McDermott and others explaining that the budget for the years 2020 and 2021 was insufficient to pay Ludwigs' lease with UCSD, researcher salaries, prudent administration, and cost-sharing obligations to granting institutions, including the National Institutes of Health (NIH). (¶ 111.) Four days later, Kolodner was replaced by Robert Strausberg, Ludwig's Deputy Scientific Director. (¶ 112.) Strausberg met with each of the Plaintiffs individually and informed them that Ludwig would be withdrawing all research funding for their labs, commencing January 2020. (Id.) Shortly thereafter, Strausberg took medical leave, and on December 31, 2019, was replaced by Jonathan Skipper. (¶ 113.) Skipper subsequently directed certain Plaintiffs to "invalidate" employment contracts...
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