dismiss the case No. C-01-2251-PJH is GRANTED.
B. Biosite's Motion to Dismiss
1. Standing of XOMA Bermuda and XOMA Technology Ltd.
Biosite argues that XOMA Bermuda and XOMA Technology Ltd. are
wholly-owned subsidiaries of XOMA, Ltd., and are not parties to the
license agreements, are not owners of the patents at issue and thus, have
no standing to bring this action.
XOMA contends that XOMA Bermuda is a party, by way of assignment of 2
of the 3 licenses at issue. XOMA also asserts that XOMA Technology is an
owner, by way of assignment, of each of the 5 patents at issue. XOMA
supports these contentions with a declaration by Christopher J.
Margolin, the President, General Counsel, and Secretary of XOMA Ltd. and
Biosite responds that plaintiff XOMA should have stated facts in the
complaint showing that "each of the plaintiffs owns the claims it
asserts." Biosite argues that the blanket assertion of all claims on
behalf of all plaintiffs is inconsistent with the claims in the Margolin
declaration, and that most of the claims in XOMA's complaint are asserted
by parties who lack standing. For example, Biosite contends that only
XOMA Ireland has standing to assert the claim for breach of the December
1999 agreement, and only XOMA (Bermuda) has standing to assert the claim
for breach of the September 1998 and December 1998 agreements; that only
XOMA Technology, as the sole assignee of all the patents at issue, has
standing to assert the patent infringement claims; and that XOMA
Technology and XOMA (Bermuda) lack standing to assert the fraud claims
because XOMA never disclosed to Biosite that any interests in the patents
or the licenses had been transferred to those two XOMA entities.
XOMA argues that XOMA (Bermuda) and XOMA Technology are wholly-owned
subsidiaries of XOMA Ltd, which is, in turn, the successor to XOMA
Corporation. XOMA contends that its allegation in the complaint that
"Plaintiffs (collectively `XOMA') are party to the three license
agreements breached by Biosite" is sufficient to establish standing.
To establish a "case or controversy" within the meaning of Article
III, a plaintiff must show, at a minimum, injury in fact, causation, and
redressability. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112
S.Ct. 2130, 119 L.Ed.2d 351 (1992). Standing generally requires that a
plaintiff has suffered an actual loss, damage, or injury, or is threatened
with impairment of his or her own interests — in other words, a
plaintiff must have a sufficient stake in the outcome of the suit to make
it a real "case or controversy." Gladstone Realtors v. Village of
Bellwood, 441 U.S. 91, 100, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979).
In this case, XOMA Ltd. appears to have standing to assert all the
claims because it has a direct pecuniary interest in the licenses and in
the patents. It is not clear, however, which claims the two wholly-owned
subsidiaries (XOMA Technology and XOMA Bermuda) can assert. Therefore,
XOMA shall amend the complaint to clarify which plaintiff is bringing
2. XOMA's Qualification to Do Business in California
Biosite argues that XOMA's state law claims should be dismissed because
the XOMA plaintiff's are disabled from asserting these claims by reason
of their failure to obtain a certificate of qualification.
There is compelling support for XOMA's argument that its state law
claims can be
maintained in federal court because this case is not based on diversity
jurisdiction. See 3B Moore, Federal Practice, §§ 17.26 (3d ed. 1988)
("forum state restrictions, however, do not apply to claims arising under
federal law"); see also Charles A. Wright, Arthur R. Miller and Mary Kay
Kane, Federal Practice and Procedure § 1561 (3d ed. 1998) ("Of
course, if subject matter jurisdiction is not based in diversity of
citizenship, the federal court need not apply forum state restrictions on
a corporation's ability to sue"); Viva Ltd. v. United States,
490 F. Supp. 1002, 1007 ("where the right asserted is instead federally
created, the Woods rule does not apply and the (state) statute does not
operate to bar such an action") (citing Angel v. Bullington, 330 U.S. 183,
67 S.Ct. 657, 91 L.Ed. 832 (1947); Holmberg v. Armbrecht, 327 U.S. 392,
66 S.Ct. 582, 90 L.Ed. 743 (1946); Lyon v. Quality Courts United,
249 F.2d 790 (6th Cir. 1957)).
Since the direct action is not based on diversity, the state law claims
need not be dismissed.
3. Fraud Claim
Biosite argues that the complaint fails to plead fraud with
particularity, as required by Federal Rule of Civil Procedure 9(b).
Biosite relies on In re GleuFed Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th
Cir. 1994) (en banc) for the proposition that a plaintiff alleging fraud
is required to plead the time, place, and nature of the alleged
fraudulent activities, as well as specifying the affirmative
misrepresentations and/or material omissions. Biosite also argues that
the claim is deficient because XOMA does not allege the existence of a
confidential relationship between Biosite and XOMA.
XOMA responds that a confidential relationship is implied by virtue of
the licensing agreements between Biosite and XOMA, and asserts that the
complaint does allege fraud with particularity, citing ¶¶ 31-33,
36-41, 59-61, and ¶¶ 45, 51-55, 57, and 62-66. In the reply, Biosite
simply reiterates that XOMA fails to allege a confidential relationship,
and generally fails to comply with Rule 9(b).
Most of the paragraphs of the complaint cited by XOMA do not allege
fraud with particularity. The problem is that ¶¶ 7-69 allege all the
facts and the causes of action follow separately. The "facts" section
identifies some actions as fraudulent, but the components of the fraud
claim are not clear. For example, ¶ 31 alleges that Biosite "sought
to leverage the commercial opportunities which arise out of its practice
of antibody phage display generally and its development of polyvalent
antibody phage display specifically," and that "[i]n doing so, Biosite
concealed and failed to disclose to XOMA and to others that Biosite
used, without permission, the XOMA Expression Technology as critical
elements. . . ." Paragraph 32 makes similar allegations with regard to
another technology created by Biosite.
Paragraph 33 alleges that Biosite's rights to use XOMA technology "were
obtained by fraud." Paragraph 38 alleges that during an April 15, 1998
meeting between Biosite representatives and XOMA representatives, Biosite
"misrepresented its intended use of any license from XOMA," representing
that it was "not interested in any license from XOMA to be used for the
commercial production of therapeutic antibodies," and that it wanted
access to XOMA's Expression Technology simply for the purpose of taking
antibodies that Biosite had discovered and producing them in sufficient
quantities to make reagents for commercial diagnostic products. The
paragraph concludes, "Biosite's statements to XOMA were knowingly false."
Following the "Facts" section are the nine causes of action (one for
for breach, three for patent infringement, one for misappropriation, and
one for unfair business practices). Count 1 —
Fraud/Misrepresentation — alleges as follows:
Having been made aware of the existence and
significance of the XOMA patent estate relating to
XOMA Expression Technology, including the existence of
pending applications directed to the expression and
secretion of functional antibodies in bacteria,
commencing in the Spring of 1998, Biosite sought and
obtained the right to practice that technology by
fraud, misleading silence and incomplete
representations of fact which, in context, were
misleading. XOMA reasonably relied on Biosite's false
and misleading statements and has been directly and
proximately injured thereby.
Complaint ¶¶ 71-72.
Basically, XOMA appears to be alleging that Biosite told XOMA it wanted
the licenses for one purpose, when in fact it wanted them for another
purpose, related to commercial development — and that Biosite knew
that XOMA would not grant the licenses for the purpose that Biosite
The court agrees with Biosite that the allegations of fraud lack the
particularity required by Rule 9. Given the length and relative complexity
of the complaint, XOMA shall amend it to specifically allege, in a
separate section, the "who, what, when, and where" that constitute the
fraud, even if allegations appearing in the "Facts" section of the
complaint must be repeated.
In accordance with the foregoing, the court hereby rules as follows:
1. Defendant XOMA's motion to dismiss the complaint in case No.
C-01-2251 is GRANTED with prejudice.
2. Defendant Biosite's motion to dismiss the complaint in case No.
C-01-2580 is GRANTED IN PART and DENIED IN PART. The motion to dismiss
the state law claims is DENIED. The motion to dismiss XOMA (Bermuda) and
XOMA Technology Ltd. due to lack of the requisite standing to sue is
GRANTED with leave to amend to clarify the claims of XOMA (Bermuda) and
XOMA Technology Ltd. The motion to dismiss the fraud claim is GRANTED
with leave to amend to plead fraud with particularity in accordance with
Federal Rule of Civil Procedure 9(b). The amended complaint shall be
filed by October 15, 2001. Biosite shall file a responsive pleading
including any counterclaims by November 7, 2001.
This order fully adjudicates the motion listed at No. 37 of the clerk's
docket for case No. C-01-2251 PJH and terminates case No. C-01-2251 PJH
and any pending motions. The clerk shall close the file for case No.
This order fully adjudicates the motion listed at No. 6 of the clerk's
docket for case No. C-01-2580 PJH.
IT IS SO ORDERED.
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