United States District Court, S.D. New York
FERRING B.V., FERRYING INTERNATIONAL CENTER S.A., AND FERRING PHARMACEUTICALS INC., Plaintiffs,
ALLERGAN, INC., ALLERGAN USA, INC., ALLERGAN SALES, LLC, SERENITY PHARMACEUTICALS CORPORATION, SERENITY PHARMACEUTICALS, LLC, REPRISE BIOPHARMACEUTICS, LLC, SEYMOUR H. FEIN, AND RONALD
Decided Date: March 7, 2014
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For Plaintiffs: Mara E. Zazzali-Hogan, William P. Deni, Jr., GIBBONS P.C., Newark, NJ; James B. Monroe, Esq., Paul W. Browning, Esq., Adriana L. Burgy, Esq., FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP, Washington, D.C.
For Defendants: Joseph Evall, Esq., GIBSON, DUNN & CRUTCHER LLP, New York, NY; Jeffrey T. Thomas, Jeffrey H. Reeves, GIBSON, DUNN & CRUTCHER LLP, Irvine, CA; James Scottile, Esq., Steven M. Cohen, Esq., Noah Solowiejczyk, ZUCKERMAN SPAEDER LLP, New York, NY.
ROBERT W. SWEET, U.S.D.J.
Plaintiffs Ferring B.V., Ferring International Center S.A., and Ferring Pharmaceuticals Inc. (collectively, " Ferring" or the " Plaintiffs" ) have moved presumably pursuant to Rule 14(a)(2) for leave to file the Second Amended Complaint (" SAC" ) against the defendants, Allergan, Inc., Allergan USA, Inc., Allergan Sales, LLC (collectively " Allergan" ), Serenity Pharmaceuticals Corporation, Serenity Pharmaceuticals, LLC (collectively " Serenity" ), Reprise Biopharmaceutics, LLC (" Reprise" ); Seymour H. Fein (" Fein" ), and Ronald V. Nardi (" Nardi" ) (collectively, the " Defendants" ). For the reasons set forth below the motion is denied.
This action presents a dispute over the ownership of certain patents involving desmopressin, a synthetic hormone, used to treat disorders related to excessive urine production. According to the Plaintiffs, Fein, Nardi and their companies Serenity and Reprise improperly obtained the patents at issue starting in 2003 and in selling them to Allergan violated certain duties and obligation to which Allergan was compliant. According to the Defendants, the Plaintiffs have delayed advancing their claims and this litigation in order to impose the risks and costs of drug development on Allergan and then to obtain
patent correction in their favor. The proceedings in the action to date lend some credence to the Defendants' position.
Prior Proceedings & Facts
Familiarity with the prior proceedings and facts as alleged in the initial complaint filed by Ferring on April 5, 2012 is assumed and were set forth in the March 18, 2013 order (the " March 18 Order" ) granting Defendants' motion to dismiss.
The Plaintiffs' motion to reconsider the March 18 Order was denied on August 5, 2013 (the " August 5 Order" ). The August 5 Order denied a request to amend as in violation of the March 18 Order, but " without prejudice to permit Ferring to move for leave to amend in compliance with the Marcy 18 Order." See id. at 10.
Plaintiffs served their First Amended Complaint (the " AC" or " previous Complaint" ) on August 21, 2013, and simultaneously served the instant motion for leave to file a Second Amended Complaint (the " SAC" ) seeking to restore the 14 claims dismissed by the March 18 Order.
The instant motion was heard and marked fully submitted on October 23, 2013.
The Applicable Standard
The party opposing a motion to amend bears the burden of establishing that an amendment would be futile. See Blaskiewicz v. County of Suffolk, 29 F.Supp.2d 134, 137-38 (E.D.N.Y. 1998) (citing Harrison v. NBD Inc., 990 F.Supp. 179, 185 (E.D.N.Y. 1998)).
While leave to amend should be " freely give[n] . . . when justice so requires," district courts " ha[ve] broad discretion to decide whether to grant leave to amend." Gurary v. Winehouse, 235 F.3d 792, 801 (2d Cir. 2000). Leave to amend is properly denied in cases of " undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, [or] futility of the amendment." Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir. 2008) (quoting Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)).
" A proposed amendment to a pleading would be futile if it could not withstand a motion to dismiss pursuant to Rule 12(b) (6)." Oneida Indian Nation of New York v. City of Sherrill, 337 F.3d 139, 168 (2d Cir. 2003) (citing Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991)). Therefore, " [f]or the purposes of evaluating futility, the 12(b) (6) standard is applied: all well pleaded allegations are accepted as true, and all inferences are drawn in favor of the pleader." E*Trade Fin. Corp. v. Deutsche Bank AG, 420 F.Supp.2d 273, 282 (S.D.N.Y. 2006) (citing Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993)).
The Motion to Amend With Respect to all Counts is Denied as Futile Because the Claims Remain are Time-Barred or are Otherwise Deficient
The claims asserted by Ferring in the proposed SAC are futile because the new allegations do not cure the time-barred nature of the claims or are otherwise deficient.
The entirety of the amended claims asserted by Ferring, Counts 4-17, were dismissed as time-barred from the face of the AC in the March 18 Order properly and with prejudice. (See March 18, 2013 Order, at 20 (citation omitted).) As such, leave to amend these claims is denied as futile. See Wallace v. NYC Dept. of Corrections, 112 F.Appx. 794, 795 (2d Cir. 2004) (affirming denial of leave to amend due to futility because statute of limitations
had run); see also Troni v. Holzer, 2010 WL 3154852, at *2-5 (S.D.N.Y. July 29, 2010) (dismissals based on untimeliness operate as dismissals with prejudice and should not be revisited).
With respect to claims 4-6, 10-11, and 12-14, Ferring has maintained that its claims are actually timely because it has added allegations of post-2003 conduct to the SAC that brings the claims within the limitations period. Specifically, Ferring points to two forms of post-2003 conduct that it claims alters the time-barred nature of the claims: Fein's and Nardi's (i) sharing of confidential, trade secret, proprietary, and privileged information and documents with Allergan, Serenity and Reprise and (ii) use of Ferring's confidential, trade secret, proprietary, and privileged information and documents to design and conduct the clinical studies of the desmopressin formulations and to obtain and commercialize the patents. (SAC ¶ ¶ 120, 126, 226, 228, 231-34, 244-45, 248-51, 260, 262-64, 266, 274, 276-78, 280, 292-93, 298, 300, 313-14, 319-21, 335, 336-39, 341, 349-52, 358, 370-71, 373-75, 378.)
These allegations fail to save the claims because (i) allegations regarding this same post-2003 conduct were before the Court on the motion to dismiss and denied, and (ii) the statute of limitations began to accrue with respect to these claims at the time of the initial alleged wrongful acts in 2003, not when further alleged wrongful acts occurred.
First, the allegations regarding the sharing of documents with Allergan, as well as Reprise and Serenity, were previously asserted with respect to Counts 6 through 14 in the AC and considered by the Court when it dismissed these claims. (See generally March 18 Order.) Ferring already alleged that Nardi and Fein provided Ferring confidential, trade secret, proprietary, and privileged information to Allergan, Serenity, and Reprise " for use in activities adverse to Ferring's interest." (See AC ¶ ¶ 187, 200 (Counts 6-7); ¶ ¶ 212, 221 (Counts 8-9); ¶ ¶ 234, 250 (Counts 10-11); ¶ 267 (Count 12); ¶ 277 (Count 13); 292 (Count 14).) Ferring also alleged in the AC that Nardi and Fein, in collaboration with Serenity and Reprise, made " use of the confidential and proprietary Ferring documents" and information in designing and conducting clinical trials, as well as in obtaining and commercializing the patents. (See AC ¶ ¶ 189, 201 (Counts 6-7); ¶ ¶ 213, 222 (Counts 8-9); ¶ ¶ 235, 251 (Counts 10-11); ¶ 268 (Count 12); ¶ 280 (Count 13); ¶ 295 (Count 14).) These exact allegations were rejected for timeliness, and as such any amendments based on these same allegations would be futile.
Second, even if it is concluded that Ferring had alleged " new" post-2003 conduct, the March 18 Opinion already ruled that allegations regarding later conduct would not make the claims timely, a conclusion reiterated in the August 5 Order denying the motion for reconsideration. (See generally March 18 Order.) Claims 4-7, 10-11 and 12-13 all began to accrue when the first actionable alleged breach or tortious act occurred, and as such allegations regarding later conduct do not affect the statute of limitations. (See August 5, 2013 Opinion (Dkt. No. 67) (noting that Ferring's " timelines arrang[ing] post-2003 conduct that the Court previously found irrelevant" failed to provide a basis to support reconsideration).)
Separately, with respect to Counts 4-5, 10-11, 14-15 and 17, Ferring attempts to avoid the time-bar by contending that the proposed SAC has pled adequate claims against Reprise and Serenity because it now alleges that these entities were " alter egos" of Fein and Nardi and thus can be held liable for Fein's and Nardi's actions. (See Plaintiff's Brief in Support of Leave
to Amend, " Pl. Br." ; at 7, 12, 13, 17, 25; SAC ¶ ¶ 111, 142, 208, 222, 233, 250, 263, 277, 299, 302, 320, 323, 424, 430.)
Ferring already alleged in its AC that Fein and Nardi were principals of and equity participants in Reprise, and that they were officers and played a role in incorporating Serenity. (AC ¶ ¶ 82, 84, 105-08). The March 18 Order rejected Ferring's contention that Serenity and Reprise were liable for Fein's and Nardi's conduct based on these positions within those companies. (See, e.g., March 18 Order, at 23 (dismissing Counts 4 and 5 with respect to Reprise and Serenity because Ferring nowhere alleged that Reprise or Serenity had the requisite relationship with or obligation to assign the patents to Ferring and because the claims were time-barred).) A conclusory allegation that Reprise or Serenity are " alter egos" of Fein or Nardi adds nothing to what was already before the Court on the motion to dismiss, and provides no basis for revisiting the Court's prior determination that Reprise and Serenity simply have no legal obligation to Ferring. See, e.g., Brainstorms Internet Mktg. v. USA Networks, Inc., 6 A.D.3d 318, 318-19, 775 N.Y.S.2d 844 (1st Dep't 2004) (" conclusory allegations" regarding alter ego status were insufficient and were properly dismissed); Bonanni v. Straight Arrow Publishers, Inc., 133 A.D.2d 585, 586-87, 520 N.Y.S.2d 7 (1st Dep't 1987) (amended complaint containing only a legal conclusion with no factual allegations supporting the alter ego claim should be dismissed).
Even if Ferring had adequately plead its " alter ego" theory with the requisite specificity, Reprise and Serenity did not exist when the alleged wrongful conduct by Fein and Nardi occurred, nor did they exist when Fein or Nardi assumed the contractual or common law duties creating the requisite relationship to state a claim. See WorldCom Network Servs. v. Polar Communications Corp., 278 A.D.2d 182, 718 N.Y.S.2d 337 (1st Dep't 2000) (evidence that three individuals who formed the original company were thereafter employed by another company is insufficient to infer a relationship between the two companies, much less a relationship sufficiently close to serve as a predicate for the imposition of successor liability); Amalgamated Tr. Union Local 1181, AFL-CIO v. City of New York, 45 A.D.3d 788, 790, 846 N.Y.S.2d 336, (2d Dep't 2007) (Under New York Law, " an assignee or successor will not be bound to the terms of a contract absent an affirmative assumption of the duties under the contract" ). The Court has already recognized that this fundamental defect in Ferring's claims against Reprise and Serenity requires dismissal. (See, e.g., March 18 Order, at 23 (" Counts 4 and 5 assert that Nardi and Fein are obliged to assign patents to Ferring by virtue of associations with Ferring that ended in 2002, several years before Reprise or Serenity were even formed. Thus, Counts 4 and 5 are also dismissed with respect to Reprise or Serenity because Ferring nowhere alleges that Reprise or Serenity had any relationship or obligation to Ferring." ).)
In addition to Ferring's broad assertions of post 2003 conduct with respect to timeliness and its alter ego theory with respect to Fein and Nardi, each of Ferring's specific proposed amended claims also fail to cure the deficiencies as addressed in the March 18 Order, or present any new allegations upon which a valid cause of action could be based. See Lucente v. I.B.M. Corp., 310 F.3d 243, 258 (2d Cir. 2002). Accordingly, a Count by Count discussion of why each amended claim fails follows.
I. Counts 4 and 5 (Patent Ownership) Remain Time-Barred and are in any event Meritless
Plaintiffs' have realleged counts 4 and 5, seeking ownership of patents-in-suit, asserting
that as amended the claims would sound in replevin, and that their limitations period did not begin to run until early 2012, when there was " demand and refusal." (See Pl. Br. (Dkt. 71) at 6-7, 24.)
Counts 4 and 5 have already twice been dismissed with prejudice. (See Mar. 18 Order at 23-24 (" Count 4 sounds in breach of contract, not replevin, . . . ." ) (emphasis added); id. at 25-26 (Claim 5 accrued in 2003, not at demand-and-refusal); see also Aug. 5 Order (denying motion for reconsideration, which included replevin argument).) Dismissal " with prejudice . . . signifies that the court intended to dismiss the action 'on the merits,'" and " bring the action to final conclusion." Yonkers Constr. v. Port Auth., 93 N.Y.2d 375, 380, 712 N.E.2d 678, 690 N.Y.S.2d 512 (1999).
As held in the March 18 Order and reaffirmed in the August 5 Opinion, the claims sound in contract, not replevin. (See id. at 23-24). Plaintiffs' baseless attempt to recast Claims 4 and 5 as actions for replevin, so that the statute of limitations does not begin to run until " demand and refusal," fails for the same reasons as previous articulated: " where, [as here,] a plaintiff is essentially seeking enforcement of the bargain, the action should proceed under a contract theory." Usov v. Lazar, No. 13-cv-818, 2013 WL 3199652 at *7 (S.D.N.Y. June 25, 2013) (dismissing plaintiff's replevin claim because " where a plaintiff is essentially seeking enforcement of the bargain, the action should proceed under a contract theory" ) (quotation marks and citation omitted)
Accordingly, Counts 4 and 5 are subject to the patent ownership six-year statute of limitations, under which both counts accrued when Plaintiffs learned of the patent application in 2002 and under which both claims are therefore time-barred. (See Dkt. 57 at 24-26.)
Plaintiffs' " new" assertion that these claims accrued in 2012 has already been twice before this court without success. (See Dkt. 49 at 13; Dkt. 60 at 7.) As the March 18 Order explains: " The latter accrual period  applies only if defendants' alleged acquisition of the Ferring documents and patents-in suit were lawful. However, Ferring has pled that the acquisition was unlawful." (See Mar. 18 Order at 41); see also Kunstsammlungen Zu Weimar v. Elicofon, 678 F.2d 1150, 1161 (2d Cir. 1982). Plaintiffs still allege that the acquisition was unlawful; accordingly the demand-and-refusal rule still does not apply.
As to Allergan specifically, the March 18 Order concluded held that third-party transferees of allegedly misappropriated patents-such as Allergan-are not proper defendants in ownership actions. (See March 18 Order, at 22.) Plaintiffs now cites Solomon R. Guggenheim Found. v. Lubell, 77 N.Y.2d 311, 569 N.E.2d 426, 567 N.Y.S.2d 623 (1991) to overcome this rule. Yet Lubell concerns the special rules that apply to good faith purchasers; by contrast, Plaintiffs here repeatedly allege that Allergan is anything but a good-faith purchaser. (See, e.g., SAC ¶ ¶ 204, 218.) Moreover, Lubell involves the sale of tangible property (i.e., fine art); it says nothing about the proper defendants in a patent ownership action such as this (replevin, like conversion, does not apply to patentable ideas). Further, since the claims sounded in contract, the Court also dismissed them because Allergan was not involved in the inventions claimed in the patent, and was neither a party to, nor a beneficiary of, Nardi's and ...