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Advanced Targeting Systems, Inc. v. Advanced Pain Remedies, Inc.

United States District Court, Ninth Circuit

June 3, 2013

ADVANCED TARGETING SYSTEMS, INC., a corporation, Plaintiff,
ADVANCED PAIN REMEDIES, INC., a corporation; CATO RESEARCH LTD., a corporation; and DOES 1-50, inclusive, Defendants.


JEFFREY T. MILLER, District Judge.

Plaintiff Advanced Targeting Systems, Inc. filed a complaint against defendants Advanced Pain Remedies, Inc. ("APR"), and Cato Research Ltd. ("Cato Research") (together, "Defendants") in San Diego Superior Court. On December 7, 2012, Defendants removed the present matter to this court. On February 22, 2013, Defendants filed a Federal Rule of Civil Procedure ("Rule") 12(b)(2) motion to dismiss due to the court's lack of personal jurisdiction over APR ("MPJ") and a Rule 12(b)(7) motion to dismiss the action for failure to join an indispensable party under Rule 19. Plaintiff contests the Defendants' motions, but requests the opportunity to conduct discovery or amend its complaint if the court decides to dismiss this matter. For the following reasons, the court denies Defendants' Rule 12(b)(2) and Rule 12(b)(7) motions without prejudice. Plaintiff has until August 14, 2013 to conduct discovery related to jurisdictional issues. Defendant may file a new Rule 12(b)(2) and Rule 12(b)(7) motions by August 30, 2013.

I. Background

Plaintiff is a Delaware corporation headquartered in San Diego, California that develops and markets reagents[1] for scientific research, including a pain-killing conjugate known as Substance P-Sporin ("SP-SAP"). Defendant Cato Holding Company ("Cato Holding") provides worldwide regulatory consulting and clinical research services to clients seeking regulatory approval for the sale of drugs and the development of drugs for later licensing sales through its subsidiaries. Cato Holding is the holding or parent company for Cato Research, APR, and Research Triangle Pharmaceuticals LLC ("Research Triangle"). Research Triangle is also APR's predecessor-in-interest.

From 2007 to 2008, Plaintiff negotiated the terms of a Development and License Agreement ("DLA") with Cato Holding, which was acting on behalf of its subsidiary Research Triangle. The negotiations between Plaintiff and Cato Holding included six meetings, all of which took place in San Diego at either Plaintiff's or Cato Holding's offices. For at least one of these meetings, representatives from Cato Holding's North Carolina offices traveled to San Diego. Research Triangle eventually entered into a Development and License Agreement ("the DLA") with Plaintiff. Later, APR assumed the DLA contract on behalf of Research Triangle.

Under the DLA, Research Triangle agreed to prepare and prosecute an investigational new drug application ("IND Application"), which is the regulatory filing necessary to obtain Food and Drug Administration ("FDA") approval of the sale and use of a new drug for humans, for SP-SAP. The DLA required Research Triangle to provide Plaintiff with pertinent data generated by or on behalf of Plaintiff regarding the development of SP-SAP and to notify Plaintiff of any report submitted by Research Triangle to the FDA. The DLA also granted Research Triangle an exclusive license to market a drug based on SP-SAP, but the license terminated if Research Triangle did not file an IND Application with the FDA by January 15, 2011. In addition, the DLA required Research Triangle, as licensee, to "cause "Cato Research Ltd., a global contract research and development organization... to use reasonable efforts to... [p]repare [an IND Application] package for the Product, ... [a]ssist [Plaintiff] with preparation for the pre-IND meeting for the Product with the FDA, ... [a]ttend and participate in the pre-IND meeting, and... [p]repare [an] outcomes and future strategy report." MPJ, Declaration of Craig Nicholas, Exhibit A, Section 3.2. If a dispute regarding the DLA arose, the DLA provided that California law would govern and required the parties to the DLA to mediate disputes before resorting to litigation.

Pursuant to the DLA, Cato Research, Research Triangle, and later, APR in place of Research Triangle, began to take the steps necessary to obtain FDA approval for SP-SAP. Here, the parties' stories diverge. Plaintiff claims that it had instructed APR not to take any actions that would hinder progress on SP-SAP, such as filing a deficient IND Application, though Plaintiff assured APR that it intended on continuing their partnership. See Opp. MTD at 4; Compl. ¶ 25. Nevertheless, APR filed an IND Application that Plaintiff considers to be a "Sham IND Application" because of its deficiencies. See Opp. MTD at 4; Compl. ¶ 26.

After filing the alleged "sham" IND Application, APR requested that the FDA take no action on this IND Application. See Opp. MTD at 4; Compl. ¶ 28. Plaintiff claims that the filing of this allegedly deficient IND Application violated the DLA's terms. Plaintiff further claims that Cato Holding and its affiliates falsely told it that the FDA response to the IND Application was quite positive and thereby violated the common law prohibition on false concealment. See Opp. MTD at 4; Compl. ¶ 53.

Defendants counter that "[t]he reality is very different" and deny Plaintiff's accusations. See MTD at 4. After the IND Application was filed, Defendants claim that the FDA called Lynda Sutton, President of Cato Holding, to discuss issues related to the IND Application that could have led to it being placed on hold. See id. Specifically, Defendants claim that the FDA was concerned about the clinical trial materials that Plaintiff allegedly controlled. See id. Defendants claim that Cato Research put the IND Application on inactive status to avoid the difficulty and stigma of removing a hold on the IND Application. See id. Defendants claim that the FDA later sent a letter detailing the issues that needed to be resolved for the IND Application to be acceptable, half of which could easily be resolved by Cato Research and half of which Plaintiff needed to resolve. See id. at 5.

In mid-2011, the parties initiated a contractual dispute resolution process, which commenced with a mutually agreed upon meeting at the San Diego Marina Marriott in San Diego, California. APR canceled the meeting at the last minute, so a videoconference was held instead. APR terminated the videoconference after a short presentation by Plaintiff. The next step of the mediation took place at the JAMS office in San Diego in November 2011, but the parties did not explain the steps involved.

After mediation failed, Plaintiff filed a complaint against Defendants in California State court on October 29, 2012. Pursuant to California Code of Civil Procedure § 415.40, APR was served by registered mail on November 8, 2012. That same day, APR filed an "Application and Order Extending Time to File Complaint." APR later filed a complaint regarding the same dispute over the DLA at issue here in North Carolina on November 28, 2012.

II. Personal Jurisdiction

A. Legal Standard

Plaintiff, as the party seeking to invoke jurisdiction, bears the burden of establishing that personal jurisdiction can be exercised over Defendants. See Flynt Distributing Co. v. Harvey , 734 F.2d 1389, 1392 (9th Cir. 1984). Plaintiff cannot rely solely on allegations in the complaint that have been appropriately challenged by affidavit. See Taylor v. Portland Paramount Corp. , 383 F.2d 634, 639 (9th Cir. 1967). If this court acts on the motion to dismiss without holding an evidentiary hearing, however, Plaintiff is only required to make a prima facie showing of jurisdiction rather than a showing by a preponderance of the evidence. See Doe v. Unocal Corp. , 248 F.3d 915, 922 (9th Cir. 2001) ("That is, the plaintiff need only demonstrate facts that if true would support jurisdiction over the ...

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