Lorem Vascular, Pty. Ltd. v. Cytori Therapeutics, Inc.
| Decision Date | 11 July 2018 |
| Docket Number | Case No.: 18cv815 MMA (MDD) |
| Court | U.S. District Court — Southern District of California |
| Parties | LOREM VASCULAR, Pty. Ltd., an Australian proprietary limited company, Plaintiff, v. CYTORI THERAPEUTICS, Inc., a Delaware corporation, Defendants. |
ORDER GRANTING DEFENDANT CYTORI THERAPEUTICS, INC.'S MOTION TO DISMISS
Plaintiff Lorem Vascular, Pty. Ltd. ("Plaintiff") filed a Complaint against Cytori Therapeutics, Inc. ("Cytori") alleging three causes of action for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) promissory estoppel. See Complaint (hereinafter "Compl."). Cytori moves to dismiss Plaintiff's Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). See Doc. No. 7-1. Plaintiff filed an opposition to Cytori's motion, to which Cytori replied. See Doc. Nos. 10, 11. The Court found the matter suitable for determination on the papers and without oral argument pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, the Court GRANTS Cytori's motion to dismiss.
In 2013, Plaintiff began discussions with Cytori regarding an agreement that would grant Plaintiff an exclusive license to market and sell some of Cytori's products in China, Hong Kong, Malaysia, Singapore, and Australia for 30 years. Compl. ¶ 7. On October 23, 2013, Plaintiff and Cytori entered into two written agreements: (1) a License Agreement; and (2) a Stock Purchase Agreement. Id. ¶ 8. Under the License Agreement, Plaintiff agreed to pay $500 million in exchange for a thirty year exclusive license to Cytori's products. Id. ¶ 8. Under the Stock Purchase Agreement, Plaintiff agreed to pay two $12 million installments in exchange for 8 million shares of Cytori's common stock. Id. Both the License Agreement and Stock Purchase Agreement contained integration clauses, as well as clauses prohibiting oral modification. See Compl., Ex. 1 at 8.2 Upon signing the Stock Purchase Agreement, Plaintiff made its first $12 million payment. Id. ¶ 9. The parties entered into an Amended License Agreement on January 30, 2014, which changed the amount of Cytori product Plaintiff was required to initially order, subject to regulatory approval of Cytori's product in China. See Doc. No. 7-3 ("RJN") at 56.3
Plaintiff alleges that shortly after entering into the initial License and Stock Purchase Agreements, in response to issues with the License Agreement, Plaintiff and Cytori began to discuss a modification to the Stock Purchase Agreement. Id. In late November 2013, Plaintiff alleges Cytori orally agreed to purchase 5% of Plaintiff's common stock in exchange for $5 million. Id. Plaintiff concedes the agreement was never reduced to writing. Id. Based upon the oral agreement, Plaintiff delivered its second payment of $12 million to Cytori, and made 5% of its common stock available forCytori's purchase. Id. ¶ 12. On December 26, 2013, the Cytori Board of Directors approved a "motion for the Company to invest $5MM into Lorem Vascular." Id. ¶ 13. On or about September 9, 2014, Cytori provided Plaintiff with a copy of the Board's minutes to allegedly reassure it that Cytori would perform on the oral modification. Id. Plaintiff alleges Cytori kept pushing back the stock purchase date until December 29, 2017, when Cytori informed Plaintiff it had no obligation to go through with the $5 million investment. Id. ¶ 10. Plaintiff alleges it has been and remains willing and able to tender 5% of its shares to Cytori in exchange for $5 million. Id. ¶ 15. As a result, Plaintiff commenced the instant action.
A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief. . . ." Fed. R. Civ. P. 8(a)(2). However, plaintiffs must also plead "enough facts to state a claim to relief that is plausible on its face." Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plausibility standard thus demands more than a formulaic recitation of the elements of a cause of action, or naked assertions devoid of further factual enhancement. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Instead, the complaint "must contain allegations of underlying facts sufficient to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
In reviewing a motion to dismiss under Rule 12(b)(6), courts must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The court need not take legal conclusions as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).
In determining the propriety of a Rule 12(b)(6) dismissal, courts generally may not look beyond the complaint for additional facts. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "A court may, however, consider certain materials—documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment." Id.; see also Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). "However, [courts] are not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint." Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295-96 (9th Cir. 1998). Where dismissal is appropriate, a court should grant leave to amend unless the plaintiff could not possibly cure the defects in the pleading. Knappenberger v. City of Phoenix, 566 F.3d 936, 942 (9th Cir. 2009).
As an initial matter, Cytori requests the Court take judicial notice of three exhibits in connection with its motion to dismiss. See RJN. Exhibit 1 is a copy of minutes from the Cytori Board of Directors meeting held on December 26, 2013. See id. at 2. Exhibit 2 is a copy of the parties' License Agreement dated October 28, 2013. See id. Exhibit 3 is a copy of the parties' Amended License Agreement dated January 30, 2014. See id. Plaintiff objects to Cytori's request for judicial notice. See Doc. No. 8-1.
Generally, a district court's review on a 12(b)(6) motion to dismiss is "limited to the complaint." Lee, 250 F.3d at 688 (quoting Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993)). However, "a court may take judicial notice of matters of public record." Id. at 689 (internal quotations omitted). Additionally, pursuant to the doctrine of incorporation by reference, "courts may take into account 'documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading.'" Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir. 2012) (quoting Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005)). Courts "may treat such a document as part of the complaint, andthus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)." Ritchie, 342 F.3d at 908.
Here, Plaintiff challenges the authenticity of Exhibit 1, arguing that it has only been provided with a redacted version of the minutes from the Board of Directors meeting, and that Exhibit 1 and its redacted version are not the same. See Doc. No. 8-1 at 5. However, whether or not a party had access to and reviewed the proffered documents is a matter unrelated to their authenticity—i.e., whether the documents are what the proponent claims. See Davis, 691 F.3d at 1161-62. Even if the Court assumes Plaintiff did not read the complete version of the minutes from the meeting, Plaintiff does not cast doubt on whether Exhibit 1 is an accurate reproduction of the original document. See Id. at 1161. Contrary to Plaintiff's contention, a cursory review of the documents reveal that they are the same, which is further supported by the declaration of Tiago Girao submitted in support of Defendant's request. See Doc. No. 7-2. Moreover, Plaintiff references the minutes from the Board meeting numerous times in his Complaint. See Compl. ¶¶ 1, 9-10, 13; see also In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (). Thus, the Court finds Plaintiff's objection is insufficient to challenge the authenticity of Exhibit 1.
Plaintiff also objects to Exhibits 2 and 3. Doc. No. 8-1 at 7-8. Plaintiff argues that although his "Complaint does reference the first license agreement, it is not central to any of LV's claims." Id. at 8. However, Plaintiff indicates the reasoning behind the alleged oral modification to the Stock Purchase Agreement was due to issues with the License Agreement. See Compl. ¶ 8. Moreover, Plaintiff does not question the authenticity of either the License or Amended License Agreements. Although Plaintiff does not explicitly reference the Amended License Agreement in his Complaint, Plaintiff's claims are relevant to its content. See, e.g., Coto Settlement v. Esienberg, 593 F.3d 1031, 1038 (9th Cir. 1999) ().
Having reviewed the three exhibits attached to Cytori's request for judicial notice, the Court finds that the proffered documents have been incorporated by reference into the Complaint. Ritchie, ...
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