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Albany Molecular Research v. George C.

December 14, 2010

ALBANY MOLECULAR RESEARCH, INC., PLAINTIFF,
v.
GEORGE C. SCHLOEMER, DEFENDANT.



MEMORANDUM-DECISION AND ORDER

This matter comes before the Court on a Motion to dismiss (Dkt. No. 7) filed on behalf of Defendant George C. Schloemer. For the reasons that follow, that Motion is partially granted.

I. BACKGROUND

On January 8, 2010, Plaintiff Albany Molecular Research, Inc. ("Plaintiff" or "AMRI"), a Delaware corporation with a principle place of business in Albany, New York, filed this action in the State of New York Supreme Court. See Dkt. No. 1-2, Ex. A. ("Complaint"). AMRI's Complaint asserts four causes of action against Defendant George C. Schloemer ("Defendant" or "Schloemer"): 1) breach of fiduciary duty; 2) fraudulent omissions; 3) tortious interference with a contract; and 4) tortious interference with prospective economic relations. Id. ¶¶ 2, 29-50; Notice of Removal (Dkt. No. 1) ¶6. Defendant , a Florida domiciliary, removed the action to the Northern District of New York on February 24, 2010. See Notice of Removal. Jurisdiction is based on diversity of citizenship and an amount in controversy in excess of $75,000. Id. On March 3, 2010, Defendant filed the instant Motion seeking dismissal of all claims against him or, in the alternative, to stay the action pending resolution of a related Massachusetts state action. Dkt. No. 7.

The instant dispute centers around a March 14, 2007 contract (the "contract") between AMRI and Clinical Data Inc., and its successor, PGxHealth ("PGx"). Compl. ¶ 6. The contract required AMRI to provide research synthesis, analysis, and batch production of Vilazodone, a chemical product that PGx intends to sell as a new, federally-approved drug for the treatment of depression. Id. ¶¶ 6-7. According to the Complaint, once the development phase was complete, AMRI expected that it would enter into further agreements with PGx to produce Vilazodone on an ongoing basis. Id. ¶ 8. In October 2007, PGx hired Schloemer, a chemist consultant, to assist with the development of Vilazodone; unbeknownst to AMRI, Schloemer was simultaneously consulting ScinoPharm Taiwan Ltd. ("ScinoPharm"), an AMRI competitor. Id. ¶¶ 10-12.

Schloemer's position with PGx allegedly led him to visit AMRI facilities, speak with AMRI personnel, and keep apprised of AMRI's progress. Id. ¶ 13. According to the Complaint, during these visits and interactions, Schloemer became "privy to AMRI technology and know-how." Id. Plaintiff alleges that it provided Schloemer access to its facilities and its intellectual property because it "believed that Schloemer was an independent consultant . . . and trusted Schloemer to provide AMRI with honest and unconflicted advice." Id. ¶ 23. The Complaint alleges that, instead, Schloemer actively undermined and disparaged AMRI while promoting ScinoPharm to PGx as a more capable, reliable, and cost-effective long-term supplier of Vilazodone. Id. ¶ 14. As an example of Schloemer's alleged "undermining" of AMRI, the Complaint recounts an instance in which Schloemer insisted over AMRI's objections that the latter immediately produce full-scale registration batches of Vilazodone despite known deficiencies discovered in early demonstration batches; once the registration batches were complete and exhibited the same deficiencies, Schloemer and PGx "castigated" AMRI for failing to correct its prior error. Id. ¶ 24. When the same circumstances faced ScinoPharm, Schloemer allegedly advised ScinoPharm to resolve the issue prior to engaging in full-scale production batches. Id. ¶ 25. The Complaint further alleges that Schloemer disparaged almost all aspects of AMRI's capacities (he admitted that AMRI had better analytic support and achieved a better production process than PGx originally called for) "with the intent of inducing PGx to (1) end its development contract with AMRI once the development process was 99 percent complete, and (2) decline to hire AMRI as a producer of Vilazodone and instead hire ScinoPharm" as its sole provider. Id. ¶ 17. Plaintiff alleges that Schloemer provided ScinoPharm with technical information produced by AMRI, while simultaneously withholding important technical information in his and PGx's possession that could assist AMRI. Id. ¶¶ 18, 21.

The Complaint states that Schloemer was under a fiduciary duty to act in good faith, accurately transmit and convey information, and give advice for the benefit of AMRI and PGx and that the above actions were in contravention of that duty. Id. ¶ 19. Plaintiff alleges that Schloemer actively worked to induce PGx to breach its contract, and that PGx did so in February 2009 as a direct result of Schloemer's wrongful conduct. Id. ¶ 22. Plaintiff accuses Schloemer of using "wrongful means and breach[ing] his fiduciary duty in order to interfere with AMRI's prospective economic relations with PGx and in order to ensure that Schloemer's client, ScinoPharm, would become the sole commercial supplier of Vilazodone instead of AMRI." Id. ¶ 28. Plaintiff contends that "but for" this wrongful conduct, AMRI and PGx would have completed their contract and entered into further agreements for the production of Vilazodone. Id.

On April 16, 2009, PGx filed an action in Massachusetts state court (the "Massachusetts' action), see PGxHealth, LLC v. Albany Molecular Research, Inc., No. 09-1558-BLS-1 (Suffolk Sup. Ct.), alleging breach of contract by AMRI.*fn1 Davis Aff., Ex. A. (Dkt. No. 7-2). AMRI answered PGx's state law complaint, and asserted counterclaims against PGx for breach of contract and breach of good faith and fair dealing, quantum meruit, and unjust enrichment. Id., Ex. B. PGx filed a motion for summary judgment in that action on December 18, 2009. Davis Aff.

II. STANDARD OF REVIEW

In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must "accept all [factual] allegations in the complaint as true and draw all inferences in the light most favorable to" the non-moving party. In re NYSE Specialists Sec. Litig., 503 F.3d 89, 95 (2d Cir. 2007). At this stage, the movant faces a substantial burden, as "the issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims." Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995) (internal quotation and citations omitted)).

To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, __ U.S.__, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This plausibility standard "is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Facial plausibility exists "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Additionally, the "tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. Thus, the Court must "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 1950. As to a plaintiff's well-pleaded factual allegations, the Court will "assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. That determination is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950 (citation omitted).

III. DISCUSSION

A. Breach of Fiduciary Duty

Plaintiff's first cause of action alleges that "Schloemer owed AMRI a fiduciary duty due to his position of trust and confidence and his role as a consultant on the Vilazodone project," and that he "breached his fiduciary duty by failing to inform AMRI that he was simultaneously working for its competitor, ScinoPharm." Compl. ¶¶ 30, 32. Plaintiff alleges that Defendant further breached his fiduciary duty by "actively undermining AMRI's work for PGx" and "promoting ScinoPharm -instead of AMRI" to PGx. Id. ¶¶ 33-34.

Plaintiff's Complaint states in a conclusory fashion that, "[t]hroughout his engagement as a consultant, Schloemer was under a fiduciary duty to act or to give advice for the benefit of AMRI and PGx in the development of Vilazodone." Compl. ¶ 19. Plaintiff's Complaint alleges that, "[a]s a consultant on the Vilazodone project, Schloemer . . . rendered advice to[] AMRI personnel," and was granted access to confidential information. Compl. ¶ 13, 23. Defendant, who was hired and paid by PGx, not AMRI, moves to dismiss, asserting that he had no fiduciary obligations toward AMRI as a matter of law. Mem. in Supp. Mot. to Dismiss (Dkt. No. 7-4) ("Def.'s Mem.") at 5-6.

Where a fiduciary relationship exists, it creates an "affirmative duty of utmost good faith, and full and fair disclosure of all material facts, as well as an affirmative obligation to employ reasonable care to avoid misleading [the fiduciary's] clients." SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194 (1963) (internal quotations and footnotes omitted). Under New York law, "[i]n order to establish a breach of fiduciary duty, a plaintiff must prove the existence of a fiduciary relationship, misconduct by the defendant, and damages that were directly caused by the defendant's misconduct." Kurtzman v. Bergstol, 40 A.D.3d 588, 590, 835 N.Y.S.2d 644, 646 (2d Dep't 2007); see also Cramer v. Devon, 774 F. Supp. 176, 184 (S.D.N.Y. 1991) (two primary elements of breach of fiduciary duty claim are (1) the existence of a fiduciary relationship between the parties and (2) a breach of the duty flowing from that relationship). Both the existence of a fiduciary relationship and the breach of obligations arising from such relationship tend to be "fact-specific inquir[ies] reserved for a jury." Official Comm. of Unsecured Creditors v. Donaldson, Lufkin & Jenrette Sec. Corp., No. 00 Civ. 8688, 2002 WL 362794, *9 (S.D.N.Y. Mar. 6, 2002); Wiener v. Lazard Freres & Co., 672 N.Y.S.2d 8, 14 (1st Dep't 1998) (existence of a fiduciary relationship"is necessarily fact-specific to the particular case"); Cramer, 774 F. Supp. at 185 ("comparison of a party's conduct with the fiduciary standard of care is a question of fact."); but see WIT Holding Corp. v. Klein, 724 N.Y.S.2d 66, 68 (2d Dep't 2001) (court erred in not dismissing a fiduciary claim where complaint alleged only an arm's length commercial relationship). Thus, Plaintiff argues that its fiduciary breach claim is not subject to dismissal, and it insists that the Complaint alleges sufficient facts to withstand Defendant's Motion. Resp. Mem. at 6-10.

Plaintiff also rejects Defendant's characterization of their relationship as being of "arm's length." Resp. at 7-8. AMRI emphasizes that the Complaint alleges that Defendant worked closely with, and rendered advice to, AMRI personnel and was given access to AMRI's confidential technology and production methods; AMRI points to an April 1, 2008 Confidentiality Agreement between it and Chemquest Consulting, of which Defendant is President, as evidence of a close ...


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