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Medivas, LLC v. Marubeni Corp.

United States District Court, S.D. California

April 18, 2014

MEDIVAS, LLC, a California limited liability company, et. al., Plaintiffs,
MARUBENI CORP., and DOES 1 through 100, Defendants.


THOMAS J. WHELAN, District Judge.

Pending before this Court is Defendant Marubeni Corporation's motion to remand the fourth cause of action to state court. [Doc. 44.] Plaintiffs oppose. [Doc. 46.]

The Court decides the matters on the papers submitted and without oral argument pursuant to Civil Local Rule 7.1(d.1). For the reasons stated below, the Court GRANTS Defendants' motion. [Doc. 44] and ORDERS the Fourth Cause of Action remanded to the San Diego Superior Court.


A. Factual background.

The following factual background is taken from this Court's previous order.

Marubeni is a Japanese multinational corporation. Plaintiff MediVas is a biomedical company. Plaintiffs Kenneth W. Carpenter, Joseph D. Dowling, William G. Turnell, Sachio Okamura, T. Knox Bell, Dari Darabbeigi, Lindy Hartig, William Summer, and Paul Teirstein (collectively, the "Individual Plaintiffs") are managers, employees, and investors of MediVas.

On April 13, 2004, MediVas and Marubeni entered into an unsecured Convertible Note Purchase Agreement (the "Note Purchase Agreement"). ( See Pls.' Notice of Lodging in Support of Remand Mot. ("Pls.' NOL") Ex. 1 [Doc. 7-4].) The agreement obligated Marubeni to make advances to MediVas in an aggregate principal amount not to exceed $5 million. In exchange, MediVas was obligated to make quarterly interest payments, and to pay the principal on the note's maturity date. The Note Purchase Agreement also included an arbitration provision providing that "[a]ll disputes and differences which may arise out of or in connection with this Agreement, or the breach thereof... shall be submitted to arbitration under the commercial arbitration rules of the International Chamber of Commerce (the "ICC") for final and binding arbitration." ( Id., ¶ 10.14.)

In addition to the Note Purchase Agreement, the parties entered into an Agency Agreement, whereby MediVas appointed Marubeni as its exclusive agent in Japan. ( See Pls.' NOL, Ex. 2.) The Agency Agreement also contains an arbitration provision. ( Id., ¶ 9.2.)

By June 2004, MediVas borrowed the entire $5 million from Marubeni. From April 2004 to June 2007, MediVas made all quarterly interest payments. However, at some point in 2007, MediVas began experiencing cash flow shortages and liquidity problems. By July 2007, when the principal obligation on the Note Purchase Agreement became due, MediVas' could not afford to pay its daily operating expenses and obligations under the note. MediVas informed Marubeni of its inability to retire the debt.

Meanwhile, as a way to deal with its financial hardship, MediVas began merger discussions with Nastech Pharmaceutical Company, Inc. By September 2007, MediVas and Nastech drafted an Agreement and Plan of Merger. In order to complete the merger, Nastech requested that MediVas' lenders consent to the merger. Marubeni refused and threatened to pursue legal action under the Note Purchase Agreement. Eventually, in order to obtain Marubeni's consent, MediVas agreed to enter into three additional contracts: a Forbearance Agreement, Security Agreement, and Intellectual Property Security Agreement ("IP Security Agreement").

On October 10, 2007, MediVas and Marubeni signed the Forbearance Agreement, whereby Marubeni agreed not to exercise any remedies available under the Note Purchase Agreement and promissory note.[1] ( See Pls.' NOL, Ex. 3 at ¶ 2.) In exchange, MediVas' agreed to limit its ability to issue equity ( id. at ¶ 7), and "to grant [Marubeni] a first priority security interest in all of [MediVas'] assets" ( id. at ¶ 4).

The Security Agreement granted Marubeni "a continuing security interest in and to all right, title, and interest" in MediVas' collateral. ( Pls.' NOL, Ex. 4 at ¶ 2.1.) Unlike the 2004 agreements, the Security Agreement does not contain an arbitration provision, and instead includes a venue clause providing that state and federal courts in San Diego "will have exclusive jurisdiction to hear and determine any dispute, claim or controversy between or among them concerning the interpretation or enforcement of this Agreement." ( Id. at ¶ 6.14.)

The IP Security Agreement granted Marubeni a security interest in all of its "intellectual property, copyrights, patents, patent applications, trademark, know-how, trade secrets, and related goodwill." ( Pl.'s NOL, Ex. 5 at p. 1.) ...

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