United States District Court, S.D. California
ORDER RE MOTION TO DISMISS [DOC. NO. 9]
Cathy Ann Bencivengo United States District Judge
matter is before the Court on Defendant Repligen
Corporation's motion to dismiss. The motions have been
fully briefed and the Court deems them suitable for
submission without oral argument. For the reasons set forth
below, the motion to dismiss is GRANTED.
Joel Gottesfeld is a professor of cell and molecular biology
and chemistry employed by The Scripps Research Institute.
Defendant Repligen Corporation is a publicly-traded life
sciences company which focuses on the development,
production, and commercialization of products used in the
processing of biologic drugs. On or about March 31, 2007,
Gottesfeld and Repligen entered into a consulting agreement.
Under the agreement, Gottesfeld would assist Repligen in its
efforts to develop treatments for Friedreich's Ataxia
(“FA”) using the compounds invented by
addition to the consulting agreement, Gottesfeld and Repligen
entered into a Common Stock Purchase Warrant (the
“Warrant”). The Warrant granted Gottesfeld the
right to purchase 150, 000 shares of Repligen stock, at a
cost of $0.01 per share, in three tranches of 50, 000 shares.
[Doc. No. 1 at 3-4.] The options to purchase each of the three
tranches were to be executable upon the occurrence of three
separately defined milestones in the Warrant. [Id.]
The first milestone in the Warrant is entitled “First
Patient Dosing, ” which means “the first patient
dosed in a U.S. clinical study sponsored by the [Defendant]
with a pharmaceutical for the treatment of Friedrich's
Ataxia.” [sic] [Id. at 4]. The complaint does
not allege that any patient in a clinical study in the United
States was ever dosed by Repligen with a drug for the
treatment of FA, and Gottesfeld does not contend in his
opposition that any such study occurred. However, the
complaint does allege that in 2012, Repligen conducted a
clinical study with a drug for the treatment of FA in Italy.
[Doc. No. 1 at 4-6.]
January 27, 2014, Gottesfeld sent a letter and a check for
$500 to Repligen attempting to exercise his option to
purchase the first tranche of 50, 000 shares-executable upon
the “First Patient Dosing”-under the Common Stock
Purchase Warrant. [Doc. No. 1 at 7]. Repligen returned
Gottesfeld's $500 check because “no patient was
ever dosed in a U.S. clinical study.” [Id.;
Doc. No. 9-1 at 11]. After additional unsuccessful efforts to
exercise his first option under the Warrant, Plaintiff filed
survive a motion to dismiss under Rule 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Thus, the Court
“accept[s] factual allegations in the complaint as true
and construe[s] the pleadings in the light most favorable to
the nonmoving party.” Manzarek v. St. Paul Fire
& Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.
2008). On the other hand, the Court is “not bound to
accept as true a legal conclusion couched as a factual
allegation.” Iqbal, 556 U.S. at 678; see
also Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th
Cir. 2001) (“Conclusory allegations of law are
insufficient to defeat a motion to dismiss”). Nor is
the Court “required to accept as true allegations that
contradict exhibits attached to the Complaint or . . .
allegations that are merely conclusory, unwarranted
deductions of fact, or unreasonable inferences.”
Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d
992, 998 (9th Cir. 2010). “In sum, for a complaint to
survive a [12(b)(6)] motion to dismiss, the non-conclusory
factual content, and reasonable inferences from that content,
must be plausibly suggestive of a claim entitling the
plaintiff to relief.” Moss v. U.S. Secret
Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations
parties concede that the only issue before the Court is
whether the phrase “US clinical study, ” as used
within the definition of “First Patient Dosing”
in the Warrant, is ambiguous. Repligen argues that the phrase
is unambiguous and means a clinical study conducted in the
United States. Because no clinical study was ever conducted
in the United States, Repligen asserts that the first
milestone in the Warrant was not met and Gottesfeld has no
right to exercise his option to purchase the first tranche of
50, 000 shares of Repligen stock.
part, Gottesfeld points out that the Warrant does not define
the phrase “US clinical study and argues that the study
conducted in Italy was a “US clinical study”
because the phrase “includes any study in which it is
contemplated that said study will be submitted to the FDA for
approval of the drug for use in the United States in
accordance with 21 CFR § 312.120.” [Id.
at 4-5]. At the very least, Gottesfeld argues that the phrase
“US clinical study” is ambiguous and open to more
than one reasonable interpretation.
a contract is clear and unambiguous is a question of law.
United States v. Sacramento Mun. Util. Dist., 652
F.2d 1341, 1343-45 (9th Cir. 1981). In determining whether a
contract is ambiguous, the Court looks to the terms of the
agreement itself. Greco v. Dep't of the Army,
852 F.2d 558, 560 (Fed. Cir. 1988). “Resolution of
contractual claims on a motion to dismiss is proper if the
terms of the contract are unambiguous.” Monaco v.
Bear Stearns Residential Mortg. Corp., 554 F.Supp.2d
1034, 1040 (C.D. Cal. 2008) (quoting Bedrosian v. Tenet
Healthcare Corp., 208 F.3d 220 (9th Cir. 2000)).
parties agree that the Warrant contains a Delaware choice of
law provision and that Delaware law controls the
interpretation of the Warrant. Under Delaware law, “a
contract's construction should be that which would be
understood by an objective, reasonable third party.”
HIFN, Inc. v. Intel Corp., No. 1835-VCS, 2007 WL
1309376, at *9 (Del. Ch. May 2, 2007). Contracts are to
be read “as a whole, ” with each provision and
term given effect “so as not to render any part of the
contract mere surplusage.” Osborn v.
Kemp, 991 A.2d 1153, 1159 (Del. 2010) (quoting Kuhn
Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393
(Del. 2010)). “A court must accept and apply the plain
meaning of an unambiguous term in the context of the contract
language and circumstances, insofar as the parties themselves
would have agreed ex ante.” Lorillard Tobacco Co.
v. Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006). The
“true test is not what the parties to the contract
intended it to mean, but what a reasonable person in the
position of the parties would have thought it meant.”
Rhone-Poulenc Basic Chem. Co. v. Am. Motorists Ins.
Co., 616 A.2d 1192, 1196 (Del. 1992) (citing
Steigler v. Ins. Co. of N. Am., 384 A.2d 398, 401
contract is not ambiguous merely because the parties disagree
as to its proper construction.” Matria Healthcare,
Inc. v. Coral SR LLC, No. 2513-N, 2007 WL 763303, at *6
(Del. Ch. Mar 1, 2007). “Ambiguity does not exist where
the court can determine the meaning of a contract
‘without any other guide than a knowledge of the simple
facts on which, from the nature of language in general, its
meaning depends.'” Rhone-Poulenc Basic Chem.
Co., 616 A.2d at 1196 (quoting Holland v.
Hannan, 456 A.2d 807, 815 (D.C. 1983)). “When the