Schlechtweg v. Celularity, Inc.

• Decision Date: 23 February 2022
• Docket Number: 3:21-CV-785 (SVN)
• Court: U.S. District Court — District of Connecticut
• Parties: JOHN SCHLECHTWEG, Plaintiff, v. CELULARITY, INC., Defendant.

JOHN SCHLECHTWEG, Plaintiff,
v.
CELULARITY, INC., Defendant.

No. 3:21-CV-785 (SVN)

United States District Court, D. Connecticut

February 23, 2022

RULING AND ORDER ON DEFENDANT'S MOTION TO DISMISS AND MOTION TO STAY DISCOVERY

SARALA V. NAGALA, UNITED STATES DISTRICT JUDGE.

Plaintiff John Schlechtweg brought this action against his former employer, Defendant Celularity, Inc. (“Celularity”), alleging that Celularity breached an oral contract by refusing to compensate him beyond his regular pay, despite his performance of certain duties beyond the scope of his regular employment. Specifically, Schlechtweg filed a two-count amended complaint under Connecticut common law alleging claims of breach of contract and, in the alternative, unjust enrichment.

Celularity seeks to dismiss Schlechtweg's action, contending that: the Court lacks personal jurisdiction over it as a foreign corporation; Schlechtweg fails to state a claim for breach of contract or unjust enrichment under Connecticut law; and venue is improper under 28 U.S.C. § 1391(b). In the alternative, Celularity seeks transfer of this action to the United States District Court for the District of New Jersey under the doctrine of forum non conveniens, codified in 28 U.S.C. § 1404(a), to enforce the exclusive venue clause contained in Schlechtweg's employment contract. Finally, Celularity seeks to stay discovery pending resolution of this motion.

For the reasons that follow, the Court agrees with Celularity's argument that the Court

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lacks personal jurisdiction over it. Celularity's motion is thus GRANTED in part. Because a transfer is in the interests of justice, the Clerk is directed to transfer the action to the United States District Court for the District of New Jersey. This Court expresses no opinion on the other issues presented in the motion, including whether Schlechtweg states a valid claim for either breach of contract or unjust enrichment under Fed.R.Civ.P. 12(b)(6).

I. FACTUAL BACKGROUND

Celularity is a biotech corporation, incorporated under the laws of Delaware with its headquarters and principal place of business in New Jersey. ECF No. 21, Mot. to Dismiss, Long Decl. ¶ 3; ECF No. 16, Am. Compl. ¶ 8. Schlechtweg was hired as the Director of Strategic Accounts in the spring of 2018; one year later, he was promoted to Senior Director of Sales. Am. Compl. ¶ 10. Both positions involved selling Celularity's wound care products to hospitals, private physician practices, and government entities. Am. Compl. ¶ 10. Schlechtweg's employment with Celularity ended in 2020. Id. ¶ 16.

Schlechtweg's employment was memorialized in an employment contract, dated and signed in March of 2018. Am. Compl. ¶ 12; Mot. to Dismiss, Long Decl., ¶ 7 & Ex. A. The employment contract references his Director of Strategic Accounts title, contains an integration clause, requires all modifications to take the form of an express written agreement, and contains New Jersey venue and choice-of-law clauses. Mot. to Dismiss, Ex. A to Long Decl. at 1-2. With respect to the venue and choice-of-law clauses, the contract provides, in relevant part: “This agreement will be governed by and construed in accordance with the laws of the state of New Jersey without regard to principles involving conflicts of law, and any action between Celularity and [Schlechtweg] under this Agreement shall be venued in New Jersey.” Id. at 2.

Schlechtweg alleges that there was no written amendment to this agreement when he was

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promoted to the position of Senior Director of Sales. Am. Compl. ¶ 14. Schlechtweg further alleges that he worked from his Connecticut home for the entirety of his employment, with his supervisors' knowledge, and that he rarely traveled to Celularity's offices in New Jersey. Id. ¶¶ 16, 19.

In September 2019, Schlechtweg was allegedly asked by Celularity's President, Dr. Steve Brigido, to change his primary job function. Am. Compl. ¶ 24. Around this time, Schlechtweg alleges, Celularity sought to covert from a privately held company into a publicly traded company by merging with a publicly traded company. Id. ¶ 22. Believing that Celularity would be more marketable for a potential sale if it focused on its cancer treatment products, Celularity decided to sell its division related to its wound care products. Id. ¶ 23. Schlechtweg alleges that Dr. Brigido thus asked him to cease his work selling wound care products and “instead” work on selling Celularity's wound care assets. Id. ¶ 24. Dr. Brigido allegedly told Schlechtweg that “if [Schlechtweg] was able to sell or lease the assets, he would be ‘handsomely rewarded' for his services in doing so.” Id. ¶ 24. Schlechtweg claims that he chose to accept the new job responsibilities, despite an anticipated decrease in his typical incentive compensation as a salesman, because he believed that the “handsome reward” promised by Dr. Brigido would ultimately outweigh his anticipated incentive compensation. Id. ¶¶ 26-27.

Schlechtweg alleges that, as a result of his efforts, the sale of Celularity's wound care assets closed in August of 2020 for a price of $24 million in cash and additional millions of dollars in expected licensing royalties. Am. Compl. ¶ 38. Schlechtweg claims that, as intended, this divestment enhanced Celularity's marketability, and it subsequently merged with a special purpose acquisition company. Id. ¶ 40.

Schlechtweg further alleges that, after the closing of the sale of the wound care division,

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he asked Dr. Brigido when he would receive the promised compensation for his work on the sale. Id. ¶ 41. Between August and December 2020, Dr. Brigido repeatedly told Schlechtweg that he was working with Celularity's CEO, Dr. Robert Hariri, and the compensation committee to determine Schlechtweg's compensation for the sale of the wound care assets. Id. ¶¶ 41-42, 44. Schlechtweg quotes correspondence with Dr. Brigido in which Dr. Brigido allegedly said: “You have my word hang tight, working with Bob [Dr. Hariri].” Id. ¶ 41. Schlechtweg alleges that he never received the promised compensation. Id. ¶ 46.

Schlechtweg filed the present action in June 2021. ECF No. 1, Compl. The Amended Complaint raises two claims: (1) Celularity's breach of the oral contract formed between Schlechtweg and Dr. Brigido regarding the sale of the wound care assets; and (2) in the alternative, Celularity's unjust enrichment arising from Schlechtweg's detrimental reliance on Dr. Brigido's assurance of compensation. Am. Compl. ¶¶ 50, 74-77. In lieu of an answer, Celularity filed the present motion to dismiss. ECF No. 21, Mot. to Dismiss.

The Court begins by addressing whether personal jurisdiction in this forum is proper.

II. PERSONAL JURISDICTION

Celularity contends that the Court should dismiss the amended complaint because the Court lacks personal jurisdiction over it as a foreign corporation. Specifically, Celularity asserts that Connecticut's long-arm statute does not support personal jurisdiction over it and the Court's exercise of personal jurisdiction over Celularity, even if supported by Connecticut law, would not comport with due process. Mem. in Supp. of Mot. to Dismiss at 9-13. Schlechtweg denies each assertion, maintaining that Celularity's activities in Connecticut with respect to their clients and Schlechtweg's employment satisfy both Connecticut law and due process. ECF No. 24, Mem. in Opp. to Mot. to Dismiss at 12-14.

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A. Federal Rule of Civil Procedure 12(b)(2)

Federal Rule of Civil Procedure 12(b)(2) permits a defendant to raise lack of personal jurisdiction as a defense by motion before a responsive pleading. “[T]he showing a plaintiff must make to defeat a defendant's claim that the court lacks personal jurisdiction over it varies depending on the procedural posture of the litigation.” Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013) (citation and internal quotation marks omitted). “Although . . . the plaintiff has the ultimate burden of establishing jurisdiction over [a] defendant by a preponderance of the evidence, . . . until an evidentiary hearing is held, [the plaintiff] need make only a prima facie showing by its pleadings and affidavits that jurisdiction exists.” CutCo Industries, Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986) (citation omitted). The pleadings and affidavits “are construed in the light most favorable to [the] plaintiff and all doubts are resolved in its favor.” Id.

“Personal jurisdiction over a defendant in a diversity action is determined by the law of the forum in which the court sits.” Id. Under the law of both the Connecticut Supreme Court and the Second Circuit, personal jurisdiction presents a two-step analysis: first, the Court must determine whether Connecticut's long-arm statute supports the Court's exercise of personal jurisdiction over the foreign defendant; second, the Court must determine whether such exercise of personal jurisdiction comports with the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Thomason v. Chemical Bank, 234 Conn. 281, 285-86 (1995) (stating that the Connecticut long-arm statute permits a trial court to exercise personal jurisdiction over a foreign defendant “only if the defendant's intrastate activities meet the requirements both of our statute and of the due process clause of the federal constitution”); Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 163-64 (2d Cir. 2010) (“To determine personal jurisdiction over a non-

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domiciliary . . . the Court must engage in a two-step analysis. . . . First, we apply the forum state's long-arm statute. . . . If the long-arm statute permits personal jurisdiction, the second step is to analyze whether personal jurisdiction comports with the Due Process Clause of the United States Constitution.” (citations omitted)).

B. Connecticut's Long-Arm Statute 1. Legal Standard

Connecticut...