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Hempel v. Cydan Development, Inc.

United States District Court, D. Maryland

November 2, 2018

ADDISON HEMPEL, CASSIDY HEMPEL CHRISTINE HEMPEL, HUGH HEMPEL, and SOLUTION THERAPEUTICS, Plaintiffs,
v.
CYDAN DEVELOPMENT, INC., CYDAN II, INC., VTESSE, INC., and SUCAMPO PHARMACEUTICALS, INC., Defendants.

          ORDER

          MIRANDA M. DU UNITED STATES DISTRICT JUDGE

         I. SUMMARY

         The more things change, the more they stay the same. The Court's minimum contacts inquiry in this case sounding in contract and tort, assessing relationships between the parties and the State of Nevada that developed largely through contacts via the internet, is a prime example of that refrain. Out-of-state Defendants Cydan Development, Inc., Cydan II, Inc., Vtesse. Inc., and Sucampo Pharmaceuticals, Inc. (collectively, “Defendants”) move to have the case dismissed for (1) lack of personal jurisdiction and (2) failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (ECF Nos. 11, 12.)[1] Because the Court's minimum contacts inquiry must focus on the Defendants' relationships with the state, and the Court finds such relationships to be tenuous and thus fall short of the connection needed to haul Defendants into this forum, the Court will dismiss the case for lack of personal jurisdiction over Defendants. The Court therefore does not address Defendants' 12(b)(6) motion (ECF No. 12), the opposition to that motion (ECF No. 28), or the reply (ECF No. 32).

         II. RELVANT BACKGROUND

         The following facts are taken from the Complaint (ECF No. 1).

         A. The Parties

         Plaintiffs Addison Hempel, Cassidy Hempel, Christine Hempel, and Hugh Hempel (collectively, “the Hempels”) are Nevada residents. Addison and Cassidy are Christine and Hugh's (“Mr. and Mrs. Hempel”) daughters. Solution Therapeutics is an entity wholly owned by the Hempels and headquartered in Reno, Nevada.[2]

         All Defendants are Delaware corporations, and none is alleged to have an office or place of business located in Nevada or to have engaged in business with any person(s) or entity in Nevada aside from Plaintiffs. Defendant Cydan Development, Inc. (“Cydan”) has its principal place of business in Cambridge, Massachusetts. Defendant Cydan II, Inc. (“Cydan II”) also has its principal place of business in Cambridge, Massachusetts. Vtesse, which is wholly owned by Sucampo Pharmaceuticals, Inc. (“Sucampo”), has its principal place of business in Maryland. Sucampo's principal place of business is likewise in Maryland.

         B. Underlying Facts and the Parties' Dispute

         Mr. and Mrs. Hempel developed proprietary information, which they characterize as “trade secrets” during the course of caring for their daughters who were diagnosed in 2007 with Niemann-Pick disease, Type C (“NPC”). The proprietary information includes medical research, clinical data and business plans concerning the use of the chemical compound 2-hyrdoxypropyl-β-cyclodextrin (“cyclodextrin”) to treat NPC. Specifically, the information Mr. and Mrs. Hempel obtained and/or developed includes: the protocols for administering cyclodextrin through multiple routes of administration; the data they collected regarding the effects of treatment and potential indications for cyclodextrin to treat other diagnoses; patient data; relationships with researchers; technology and intellectual property dealing with the formulations of administered cyclodextrin, study design elements, and other high proprietary data developed with Johnson & Johnson and its subsidiary Janssen Pharmaceuticals; and a detailed business plan to commercialized the Hempels' research and development.

         As noted, the Complaint seeks relief under contract and tort theories. Plaintiffs assert eight claims for relief.

         The first and second claims are for breach of contract and breach of fiduciary duty. (Id. at 18, 19.) Plaintiffs assert these claims only against Cydan. Plaintiffs claim Cydan breached the Agreement For Mutual Exchange of Confidential Information (“the Confidentiality Agreement” or “the Agreement”) Cydan entered into with the Plaintiffs, and violated fiduciary duties when it allegedly used the Hempels' confidential information for its own profits to the Hempels' detriment and without their permission.

         The third, fourth and fifth claims are unjust enrichment, tortious interference with contractual rights, and conversion against Vtesse and Sucampo. (Id. at 20-22.) These claims stem from Plaintiffs allegations that Vtesse interfered with Plaintiffs' relationship with Cydan. Plaintiffs further allege that Vtesse was incorporated as Cydan's affiliate by a business model and focused on research that Vtesse, through Cydan or directly through researchers who had access to the Hempels' research, misappropriated from Plaintiffs. (Id. at 12-13.)

         Plaintiffs assert the three remaining claims against all Defendants. (Id. at 22-24.) The sixth claim is brought under NRS § 600A.010 et seq. for Defendants' alleged misappropriation and exploitation of Plaintiffs' claimed trade secret information. The seventh claim involves the same allegations as the sixth, but is brought under 18 U.S.C. § 1836. The eighth claim is for civil conspiracy whereby Plaintiffs allege that Defendants conspired to deprive the Hempels of the value of their efforts by misappropriating confidential information and trade secrets for Defendants' profit and benefit. It appears Cydan II is included in the case merely by being “an affiliate or successor of [Cydan.]” (Id. at ¶ 6.)

         III. LEGAL STANDARD

         In opposing a defendant's motion to dismiss for lack of personal jurisdiction, a plaintiff bears the burden of establishing that jurisdiction is proper. Boschetto v. Hansin, 539 F.3d 1011, 1015 (9th Cir. 2008). Where a defendant's motion to dismiss is based on written materials rather than an evidentiary hearing, “the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss.” Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010) (internal quotation marks omitted). The plaintiff cannot “simply rest on the bare allegations of its complaint, ” but uncontroverted allegations in the complaint must be taken as true. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (quoting Amba Mktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)). The court “may not assume the truth of allegations in a pleading which are contradicted by affidavit, ” Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1284 (9th Cir. 1977), but it may resolve factual disputes in the plaintiff's favor, Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).

         IV. ...


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