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Simone v. VSL Pharmaceuticals, Inc.

United States District Court, D. Maryland

January 5, 2017

CLAUDIO DE SIMONE, Plaintiff/Counterclaim Defendant,
EXEGI PHARMA, LLC, DANISCO USA, INC., and MENDES SA, Third-Party Defendants.


          THEODORE D. CHUANG United States District Judge

         Presently pending are Plaintiff Claudio De Simone's Motion to Dismiss the Counterclaim of Defendant VSL Pharmaceuticals, Inc. ("VSL"), Third-Party Defendant ExeGi Pharma, LLC's ("ExeGi") Motion to Dismiss VSL's Counterclaim, and the joint Motion to Dismiss Counts III, IV, VII, and VIII of the Counterclaim of Defendant Sigma-Tau Pharmaceuticals, Inc. ("Sigma-Tau") filed by De Simone and ExeGi (collectively "the De Simone Parties"). Having reviewed the submitted materials, the Court finds no hearing necessary. See D. Md. Local R. 105.6. For the following reasons, the Motions to Dismiss are GRANTED IN PART and DENIED IN PART.


         The factual background of this case is set forth in the Court's September 23, 2015 Memorandum Opinion on the First Motion for a Preliminary Injunction, De Simone v. VSL Pharm., Inc., 133 F.Supp.3d 776, 780-88 (D. Md. 2015), and June 20, 2016 Memorandum Opinion on the Second Motion for a Preliminary Injunction, De Simone v. VSL Pharm., Inc., No. TDC-15-1356, 2016 WL 3466033 at *1-12 (D. Md. June 20, 2016). Additional facts and procedural history are provided below as necessary.

         I. Legal Standard

         To defeat a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is plausible when the facts pleaded allow "the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Legal conclusions or conclusory statements do not suffice. Id. The Court must examine the complaint as a whole, consider the factual allegations in the complaint as true, and construe the factual allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of Comm so of Davidson Cty., 407 F.3d 266, 268 (4th Cir. 2005). To the extent that VSL alleges fraud, those claims are subject to the heightened pleading standards of Rule 9(b). See Fed. R. Civ. P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."). Under this heightened pleading standard, VSL must allege "the time, place, and contents" of the fraudulent representation, the identity of the person who made the misrepresentation, and "what he obtained thereby." Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999).

         II. Extrinsic Evidence

         In his Motion, De Simone relies on documents attached as exhibits to his brief, in particular, (1) documents from litigation before the United Kingdom High Court of Justice, Chancery Division, between De Simone and Actial Farmaceuiica LDA ("Actial",, a corporate affiliate of VSL (the "UK Litigation",, including an affidavit filed by Actialss counsel on December 8, 2014 ("the Actial Affidavit") and the judgment by the court ("the UK Judgment") issued on March 31, 2015. "[A]s a general rule, extrinsic evidence should not be considered at the 12(b)(6) stage." Am. Chiropraciic Assoc, Inc. v. Trigon Healthcare Inc., 367 F.3d 212, 244 (4th Cir. 2004) (internal quotation marks and citation omitted). A court may consider documents attached to a motion to dismiss only if those documents were "integral to and explicitly relied on in the complain,, " if the plaintiff had "actual notice" of those documents, and if the plaintiff does not challenge their authenticity. Id. This standard is not met here.

         As to the documents from the UK Litigation, although VSL references that lawsuit in its Counterclaim, it does not include the UK Judgment or the Actial Affidavtt as exhibits. Undeterred, De Simone argues that the Court should consider the UK Judgment because VSL "intended to attach" it to its Counterclaim, but mistakenly attached an Order dated May 7, 2015 instead. De Simone Mot. Dismiss VSL Countercl. at 6 n. 1, ECF No. 177. This argument lacks either factual or legal support. Moreover, the UK Litigation is not so central to VSL's claims that the judgment and affidavit could be deemed integral to the Counterclaim. VSL marshals the UK Litigation for the dubious purpose of convincing this Court of the validity of its claims based on a foreign court's acceptance of some of its arguments in a related matter, but VSL would not "unquestionably [have] to offer" the UK Judgment or the Actial Affidavtt to sustain its Counterclaim here. Fudge v. Penthouse Int'l, Ltd,, 840 F.2d 1012, 1015 (1st Cir. 1988). De Simone's use of the UK Litigation documents in his Motion to Dismiss is a response in kind, amounting to an unpersuasive preclusion argument based on a ruling by a foreign court. Cf. Andes v. Versant Corp., 878 F.2d 147, 149 (4th Cir. 1989) ("The Full Faith and Credit Clause of Article IV § 1 of the Constitution of the United States does not apply to foreign judgments."). De Simone has offered no precedent for taking judicial notice on a motion to dismiss of a document such as the Actial Affidavit, which was filed in a foreign court in litigation to which VSL was not a party. Where to do so would circumvent the purposes of a Rule 12(b)(6) motion to assess the sufficiency of the complaint rather than litigate the facts, the Court rejects De Simone's request and will not consider these extrinsic documents in evaluating the pending Motions.

         As for the September 18, 2009 Board Meeting Minutes, that document was not mentioned at all by VSL in its Counterclaim and thus cannot be deemed to be integral to and explicitly relied on in the Counterclaim. Even if De Simone is correct that those minutes defeat one or more of VSL's claims, VSL has not yet had an opportunity to test the authenticity of that evidence or to adduce contradictory evidence through discovery. The Court therefore declines to consider that exhibit or other extrinsic materials.

         III. Choice of Law

         The applicable law on VSL's counterclaims differs depending on the cause of action. On VSL's federal Lanham Act claims, this Court applies federal law as interpreted by the United States Court of Appeals for the Fourth Circuit.

         For the state law causes of action, this Court applies the choice-of-Iaw principles of the forum state, in this case, Maryland. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Branhaven, LLC v. BeefTek, Inc., 965 F.Supp.2d 650, 664 (D. Md. 2013) ("When a claim is based on state law, the choice of law rules are those of the state in which the district court sits.").

         For common law torts, Maryland applies the law of the state in which the injury occurred. Lab. Corp. of Am. v. Hood, 911 A.2d 841, 845 (Md. 2006). Here, the alleged torts are civil conspiracy, fraud, tortious interference with a business relationship, usurpation of a corporate opportunity, conversion, unjust enrichment, tortious interference with economic relations, and tortious interference with prospective economic advantage. The injuries resulting from these torts are economic, rather than personal, so are traditionally interpreted as accruing where the injured party resides. See 21 M.L.E. Torts § 2 ("The place of injury means the place where the injury was suffered rather than the place where the wrongful act took place[.]"); Restatement (Second) of Conflict of Laws § 145 (Am. Law Inst. 1971) ("The effect of the loss, which is pecuniary in its nature, will normally be felt most severely at the plaintiffs headquarters or principal place of business."). Furthermore, "[w]hen a person sustains loss by fraud, the place of wrong is where the loss is sustained, not where fraudulent representations are made." Restatement (First) of Conflict of Laws § 377 n.4 (Am. Law Inst. 1934); see also Lab. Corp. of Am., 911 A, 2d at 845 (noting that Maryland courts follow the principles stated in the Restatement (First) of Conflict of Laws).

         VSL is headquartered in Virginia, so the Court applies Virginia law to its common law tort claims. Sigma-Tau is headquartered in Maryland, so the Court applies Maryland law to its common law tort claims. Although the parties have proceeded under the assumption that Maryland law applies to all the claims, the Court notes that there is no appreciable difference between Maryland law and Virginia law as to the causes of action at issue here, so the Court's choice of law does not alter its determination as to the viability of VSL's or Sigma-Tau's common law tort claims.

         As for contract claims, Maryland courts follow the principle of lex loci contractus, under which the applicable law is that of the jurisdiction where the contract was made. See, e.g., Allstate Ins. Co. v. Hart, 611 A.2d. 100, 101 (Md. 1992). However, if a contract contains a choice-of-Iaw provision, Maryland courts will apply the law stipulated to in that provision, because "parties to a contract may agree to the law which will govern their transaction, even as to an issue going to the validity of the contract." Kunda v. C.R. Bard, Inc., 671 F.3d 464, 469 (4th Cir. 2011) (citing Kronovet v. Lipchin, 415 A.2d 1096, 1104 (Md. 1980)). Accordingly, for contract interpretation and claims of breach, this Court applies the law specified by the parties in the agreement and, in the absence of a choice-of-Iaw provision, applies the law of the jurisdiction where the contract was formed.

         On a claim for breach of fiduciary duty, which involves "a matter peculiar to the relationships among and between the corporation and its directors, " Maryland courts apply the law of the state of incorporation. See, Inc. v. Gurland, 895 A.2d 355, 372-73 (Md. Ct. Spec. App. 2006), aff'd 915 A.2d 991 (Md. 2007) (holding that because the plaintiff corporation was incorporated in Delaware, the trial court erred in not applying Delaware law to its claim that the defendant had breached his fiduciary duty, but finding that such error was harmless); Restatement (Second) of Conflict of Laws S 309 ("The local law of the state of incorporation will be applied to determine the existence and extent of a director's or officer's liability to the corporation(.]"). VSL is incorporated in Delaware, so this Court applies Delaware law to its breach of fiduciary duty claim.

         As for procedural issues on the common law claims, such as the running of the statute of limitations, this Court applies Maryland law, because "the statute of limitations of the forum state applies even when that state's choice-of-Iaw rules require that another state's substantive law be applied." Sherwin-Williams Co. v. Artra Group, Inc., 125 F.Supp.2d 739, 756-57 (D. Md. 2001); see Lewis v. Waletzky, 31 A, 3d 123, 133 (Md. 2011) (holding that Maryland law controls procedural matters and that "statutes of limitations are procedural for choice-of-Iaw purposes"). In Maryland, civil suits must be filed within three years from the date the action accrues. Md. Code Ann., Ct. & Jud. Proc. 9 5-101 (West 2011).

         IV. Know-How Claims

         The origins of the present dispute trace back to United States Patent number 5, 716, 615 ("the 615 Patent") obtained in 1998 by De Simone and two other researchers for pharmaceutical compositions used in the probiotic VSL#3. The 615 Patent expired in February 2015, so the core of this dispute is the ownership of certain "know-how" ("the Know-How") associated with that patent, consisting of a unique biochemical profile, formulae, data processes, data, and other technical and non-technical information necessary to make, develop, and use the probiotic that was the subject of the 615 Patent. The Court first addresses the claims that relate to the ownership and alleged misappropriation of the Know-How, consisting of the declaratory judgment, misappropriation of trade secrets, unjust enrichment, conversion, and breach of contract claims in VSL Counts I, III, IX, X, XI, XVII against De Simone; VSL Counts XIX and XX against ExeGi; and Sigma-Tau Count III against De Simone and ExeGi.

         A. Contract Interpretation

         In resolving the First Motion for a Preliminary Injunction, the Court concluded that VSL and Sigma-Tau (collectively, "the VSL Parties") were unlikely to succeed on the merits of their respective claims that they own and have an exclusive license to use the Know-How and, by extension, their claims that the De Simone Parties had misappropriated that trade secret. De Simone, 133 F.Supp.3d at 794. In their Motions to Dismiss, the De Simone Parties attempt to parlay that preliminary victory into a dismissal of the VSL Parties' trade secrets claims, ...

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