Zirvi v. Flatley

• Decision Date: 14 January 2020
• Docket Number: 18-cv-7003 (JGK)
• Citation: 433 F.Supp.3d 448
• Parties: Monib ZIRVI et al., Plaintiffs, v. Jay T. FLATLEY et al., Defendants.
• Court: U.S. District Court — Southern District of New York

433 F.Supp.3d 448

Monib ZIRVI et al., Plaintiffs,

v.Jay T. FLATLEY et al., Defendants.

18-cv-7003 (JGK)

United States District Court, S.D. New York.

January 14, 2020

Timothy M. Kolman, Kolman Ely, P.C., Penndel, PA, for Plaintiff.

Jay I Alexander, Covington & Burling LLP, Washington, DC, Robert Haney, Swati Roopa Prakash, Covington & Burling LLP (NYC), New York, NY, Charles Tait Graves, Vernon Alan Norviel, Wilson Sonsini Goodrich & Rosati(SF), San Francisco, CA, Matthew David Gorman, Wilson Sonsini Goodrich & Rosati (NYC), New York, NY, Jonathan Bach, Lauren Capaccio, Shapiro Arato Bach LLP, New York, NY, Adam Tschop, PRO HAC VICE, Thermo Fisher Scientific, Inc., Carlsbad, CA, Jason A. Lief, Nicholas Andrew Flath, Cooley LLP (NY), New York, NY, for Defendant.

OPINION AND ORDER

John G. Koeltl, United States District Judge

In the Second Amended Complaint (the "Complaint" or "SAC"), the plaintiffs allege that the defendants have orchestrated a wide-ranging conspiracy over the past twenty-five years to steal the plaintiffs' trade secrets consisting of proprietary discoveries related to the encoding and decoding of DNA. The plaintiffs are scientists Monib Zirvi, Matthew Lubin, Maria Kempe, and Norman Gerry. The defendants are scientists and businesspeople Jay Flatley, David Walt, Stephen Fodor, Kevin Gunderson, Jian-Bing Fan, Mark Chee, and John Stueplnagel, a patent lawyer Robin Silva, and biotechnology companies Affymetrix, P.E. Applied Biosystems, and Illumina, Inc. The plaintiffs allege claims under the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836, et seq. ; the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq. ; the New York common law of trade secrets protections; and claims for other common law torts of fraud, conversion, tortious interference with prospective business advantage, inequitable conduct, civil conspiracy, and breach of confidence. The defendants collectively move to dismiss the Complaint under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure on the grounds that the plaintiffs lack standing, that the plaintiffs' claims are barred by various statutes of limitations, and that in any event the facts alleged do not amount to violations of federal or state law. In addition to joining the defendants' motion, Stephen Fodor also moves individually to dismiss the claims against him.

For the reasons set out below, the motions to dismiss the Complaint are granted and the Complaint is dismissed with prejudice.

I.

The defendants move to dismiss the Complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction because the plaintiffs allegedly lack standing to pursue their claims. "Dismissal of a case for lack of subject matter jurisdiction under Rule 12(b)(1) is proper ‘when the district court lacks the statutory or constitutional power to adjudicate it.’ " Ford v. D.C. 37 Union Local 1549, 579 F.3d 187, 188 (2d Cir. 2009) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) ). In considering a Rule 12(b)(1) motion, courts must construe all ambiguities and inferences in a plaintiff's favor. However, a court may refer to evidence outside of the pleadings, and the burden is on the plaintiff to prove by a preponderance of the evidence that jurisdiction exists. See Makarova, 201 F.3d at 113. "To survive the motion to dismiss, the pleadings must only allege facts that affirmatively and plausibly suggest that Plaintiffs have standing to sue." Lowell v. Lyft, Inc., 352 F. Supp. 3d 248, 255 (S.D.N.Y. 2018) (quotations and alterations omitted). "[A]t the pleading stage, standing allegations need not be crafted with precise detail, nor must the plaintiff prove his allegations of injury." Baur v. Veneman, 352 F.3d 625, 631 (2d Cir. 2003).

The defendants also move to dismiss the Complaint pursuant to Rule 12(b)(6). In deciding a motion to dismiss pursuant to Rule 12(b)(6), the allegations in the complaint are accepted as true, and all reasonable inferences must be drawn in the plaintiff's favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss the complaint if the plaintiff has stated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Although the Court should construe the factual allegations in the light most favorable to the plaintiff, "the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions." Id. at 678, 129 S.Ct. 1937. When presented with a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents that are referenced in the complaint, documents that the plaintiff relied on in bringing suit and that are either in the plaintiff's possession or that the plaintiff knew of when bringing suit, or matters of which judicial notice may be taken. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002).

II.

The following facts alleged in the Complaint are accepted as true for the purposes of ruling on the motions to dismiss.

The plaintiffs' claims, under both federal and New York State law, arise out of two alleged instances of misappropriation of trade secrets, one occurring in 1994 when certain trade secrets were allegedly stolen from a confidential grant proposal, and one occurring in 1999 when alleged trade secrets were allegedly misappropriated during confidential communications. The plaintiffs allege that these two acts of misappropriation resulted in the theft of both positive and negative trade secrets.¹ In order to overcome the various statutes of limitations, the plaintiffs also allege the existence of an overarching, twenty-five-year conspiracy of fraudulent concealment engineered by the defendants that allegedly prevented the plaintiffs from learning the full extent of the defendants' misconduct until 2015. Because they allegedly only discovered the conspiracy in 2015, the plaintiffs allege that this action, which the plaintiffs filed on August 3, 2018, is timely because the statutes of limitations should be equitably tolled until the discovery of the alleged conspiracy. SAC ¶¶ 5-6, 9-13, 26-31.

Throughout the early 1990s, the plaintiffs began collaborating in various capacities with Dr. Francis Barany of Cornell University Medical College (now Weill Cornell Medical College) to "creat[e] an entirely novel method for diagnosing human genetic defects." SAC ¶¶ 2, 16, 20 (Lubin), 34 (Zirvi), 37 (Gerry), 102 (Lubin and Gerry), 196 (Kempe).² In February 1994, Barany's team, which included Lubin, submitted a grant proposal to the National Cancer Institute containing alleged trade secrets. Id. at ¶¶ 102-03. The achievement of the Barany proposal, allegedly, was "a radical new idea of ‘Universal Addressable Arrays.’ " Id. at ¶ 104. The array was a grid structure made up of numerous squares in which each square contained a "man-made designed DNA sequence[ ]" that the Barany team referred to as a "zip code" and each square was referred to as an "address[ ]." Id. at ¶ 109(I). The arrays worked together with a ligase detection reaction ("LDR") in which DNA would be extracted from a biological sample and matched up to the array to reveal genetic mutations through a process known as polymerase chain reaction

("PCR"). Id. at ¶¶ 72, 104, 107(3), 109(I), 109(III). The technologies developed by the plaintiffs throughout the 1990s and early 2000s, and which formed the basis for numerous patent applications, were all broadly related to LDR, PCR, zip code array, and DNA sequencing. Id. at ¶¶ 135 ( '917 and '470 patent series), 162 ( '594 patent series), 208 ( '917, 470, and '594 patent series), 259 ( '293, '470, and '917 patent series), 310 ( '470 and '293 patent series).³

The first alleged instance of misappropriation occurred on or around June 1, 1994 when Stephen Fodor, the Chief Technology Officer of the biotechnology company Affymetrix, in his capacity as a peer reviewer for the National Institute of Health ("NIH"), reviewed the Barany proposal. Id. at ¶ 16. According to the plaintiffs, upon reviewing the grant proposal, Fodor "immediately resolved to steal those ideas" contained in the grant proposal in violation of confidentiality agreements that he was bound to obey in his capacity as an NIH reviewer. Id. at ¶¶ 20, 114-17. Fodor then allegedly enlisted Affymetrix employees, the defendants Mark Chee, Jian-Bing Fan, and Kevin Gunderson, to begin filing patent applications based on the technologies and ideas described in the grant proposal. Id. at ¶ 123.

According to the plaintiffs, Fodor "deliberately removed himself as a co-inventor of the October 26th, 1994 patent application" and instructed Chee, Fan, and Gunderson to file the patent applications in order to cover his tracks. Id. at ¶ 125. The October 26, 1994 patent application was one in a series of related patent applications that eventually resulted in the final application filed on April 3, 1996 and published as United States Patent No. 6,156,501 on December 5, 2000. Prakash Decl., Ex. 23, at 1:[63]; SAC ¶ 124. Notwithstanding the allegations in the Complaint that Fodor deliberately removed himself from these patent applications, his name appeared on an International Patent Application that was published to the world on May 4, 1995 under International Publication Number WO 95/11995. Gorman ...