1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 HOTSPOT THERAPEUTICS, INC., Case No. 22-cv-04109-TSH
8 Plaintiff, ORDER RE: COUNTERCLAIM DEFENDANT’S MOTION TO DISMISS 9 v. AND RELATED ADMINISTRATIVE MOTIONS TO SEAL 10 NURIX THERAPEUTICS, INC., Re: Dkt. Nos. 56, 57, 59, 60, 61, 62 11 Defendant.
12 13 I. INTRODUCTION 14 Pending before the Court are Plaintiff/Counterclaim Defendant HotSpot Therapeutics, 15 Inc.’s (“HotSpot’s”) Motion to Dismiss Defendant Nurix Therapeutics, Inc.’s (“Nurix’s”) 16 Counterclaims (ECF No. 57) pursuant to Federal Rule of Civil Procedure 12(b)(6) and related 17 Administrative Motions to Seal (ECF Nos. 57, 60, and 61). On December 21, 2022, Defendant 18 filed an Opposition. ECF No. 59. On December 28, 2022, Plaintiff filed a Reply. ECF No. 62. 19 ECF No. 63. Having considered the parties’ positions and relevant legal authority, the 20 Court GRANTS IN PART AND DENIES IN PART Plaintiff HotSpot’s Motion to Dismiss 21 Nurix’s Counterclaims and GRANTS the related Administrative Motions to Seal for the following 22 reasons.1 23 II. BACKGROUND 24 A. Factual Background 25 Nurix is a biotechnology company that uses E3 ligase expertise, internally developed 26 DNA-encoded libraries (DELs), and a “DELigase platform” to target proteins to treat cancer and 27 1 diseases. ECF No. 50 (Counterclaims) ¶ 9. DEL technology can be used to accelerate the process 2 of discovering new drugs, and DELs are large collections of small molecules that are screened 3 against targets to identify drug-like molecules. Id. ¶ 12. 4 In September 2015, Nurix and Macroceutics, Inc. (“Macroceutics”) entered into a 5 collaborative agreement (“the Agreement”) and subsequently exchanged confidential information 6 that involved Nurix’s alleged trade secrets. Id. ¶¶ 11-16, 19-20. These trade secrets involved 7 chemistry designs, aqueous chemical synthesis, combinatorial chemistry, purification methods, 8 quality control methods, encoding designs, and Nurix’s DNATag software.2 Id. ¶ 20. 9 In 2018, Macroceutics and HotSpot entered into a collaboration. Id. ¶ 30. In August 2019, 10 HotSpot acquired Macroceutics and Kenneth G. Carson, the founder and CEO of Macroceutics, 11 became the Executive Vice President and Head of Chemical Sciences at HotSpot. Id. ¶ 31. The 12 Agreement applies to HotSpot as successor in interest to Macroceutics. Id. ¶ 32. 13 In May 2020, HotSpot made public statements regarding its E3 ubiquitin ligase drug 14 discovery program. Id. ¶ 36. In February 2021, HotSpot disclosed in a presentation that HotSpot 15 was using DELs. Id. ¶ 37. In October 2021, HotSpot made public statements regarding its 16 acquisition of Macroceutics, Macroceutics’ DELs and/or DEL capabilities, and the E3 ubiquitin 17 ligase drug discoveries HotSpot achieved using DELs. Id. ¶ 38. Nurix alleges HotSpot used 18 Nurix’s confidential and proprietary information, without notice to or permission of Nurix, to 19 design or build DELs. Id. ¶ 50. 20 B. Procedural Background 21 On July 13, 2022, HotSpot filed the instant action, seeking declaratory judgment of 1) no 22 misappropriation under the Defend Trade Secrets Act (“DTSA”); 2) no misappropriation under the 23 California Uniform Trade Secrets Act (“CUTSA”); and 3) no breach of contract. ECF No. 1 ¶¶ 24 64-85. 25 On August 4, 2022, Nurix filed an Answer to Complaint and Counterclaims, alleging 26 claims against HotSpot and Carson. ECF No. 12. Nurix alleged the following against one or both 27 1 parties: 1) Misappropriation of Trade Secrets under the DTSA; 2) Misappropriation of Trade 2 Secrets under the CUTSA; 3) Breach of Contract; 4) violation of the Computer Fraud and Abuse 3 Act (“CFAA”); 5) Breach of Implied Covenant of Good Faith and Fair Dealing; 6) Intentional 4 Interference with Prospective Economic Relations (“IIPER”); 7) Intentional Interference with 5 Performance of a Contract (“IIPC”); and 8) Unjust Enrichment. Id. ¶¶ 71-139. 6 On August 25, 2022, HotSpot filed a Motion to Dismiss Defendant Nurix’s Counterclaims 7 Pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 25. On August 26, 2022, Carson 8 filed a Motion to Dismiss Nurix’s Counterclaims. ECF No. 29. 9 On November 2, 2022, the Court issued an Order Regarding Counterclaim-Defendants’ 10 Motions to Dismiss. ECF No. 46. The Court dismissed all claims as against Carson pursuant to 11 Federal Rule of Civil Procedure 12(b)(2). Id. at 16-20. Pursuant to Federal Rule of Civil 12 Procedure 12(b)(6), the Court also dismissed the counterclaims against HotSpot alleging violation 13 of the CFAA, breach of implied covenant of good faith and fair dealing, IIPER, IIPC, and unjust 14 enrichment. Id. at 9-16. The Court granted Nurix leave to amend its dismissed counterclaims. Id. 15 at 13-16. 16 On November 23, 2022, Nurix filed an Amended Answer to Complaint and Counterclaims 17 (“Amended Answer”), renewing and amending its counterclaims against HotSpot for Breach of 18 Implied Covenant of Good Faith and Fair Dealing (Counterclaim IV), IIPER (Counterclaim V), 19 and IIPC (Counterclaim VI). Id. ¶¶ 109-164. 20 On December 7, 2022, HotSpot filed a Motion to Dismiss Defendant Nurix’s Amended 21 Counterclaims Pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 57) and an 22 Administrative Motion to Seal Portions of HotSpot’s Motion to Dismiss (ECF No. 56). On 23 December 21, 2022, Nurix filed Opposition (ECF No. 59) and an Administrative Motion to Seal 24 Portions of Nurix’s Opposition to HotSpot’s Motion to Dismiss (ECF No. 60). On December 28, 25 2022, HotSpot filed a Reply (ECF No. 62) and an Administrative Motion to File Under Seal 26 Portions of Reply (ECF No. 61). 27 The Court will address the Motions to Seal and Motion to Dismiss accordingly. 1 III. MOTIONS TO SEAL 2 Pending before the Court are the following motions to seal: 3 1. HotSpot’s Motion to Seal Portions of its Motion to Dismiss Counterclaims, ECF No. 4 56; 5 2. Nurix’s Motion to Seal Portions of its Opposition to HotSpot’s Motion to Dismiss, ECF 6 No. 60; and 7 3. HotSpot’s Motion to Seal Portions of its Reply, ECF No. 61. 8 “Historically, courts have recognized a ‘general right to inspect and copy public records 9 and documents, including judicial records and documents.’” Kamakana v. City and Cnty. of 10 Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (quoting Nixon v. Warner Commc’ns, Inc., 435 11 U.S. 589, 597 & n.7 (1978)). Consequently, filings that are “more than tangentially related to the 12 merits of a case” may be sealed only upon a showing of “compelling reasons” for sealing. Ctr. for 13 Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1101-02 (9th Cir. 2016). “Because the parties’ 14 sealing motions relate to Defendant’s pleading and the briefing on Plaintiffs’ motion to dismiss 15 and strike that pleading, the sealing motions are more than tangentially related to the merits of the 16 case. Thus, the compelling reasons standard applies.” Pinnacle Ventures LLC v. Bertelsmann 17 Educ. Servs., Case No. 18-cv-3412-BLF, 2019 WL 13126128, at *1 (N.D. Cal. Dec. 10, 2019). 18 Here, all of the parties’ motions seek to seal portions of their motions and briefings that 19 describe the contents of the Agreement. See ECF Nos. 56 at 3; 60 at 3-4; 37 at 1-2; 61 at 3. The 20 Court has reviewed the requested portions to be sealed and finds the parties’ requests are narrowly 21 tailored to the Agreement. The Court agrees that there are compelling reasons to seal the 22 requested portions as they relate to the Agreement. See Regis Metro Associates, Inc. v. NBR Co., 23 LLC, Case No. 20-cv-2309-DMR, 2022 WL 267443, at *14 (N.D. Cal. Jan 28, 2022) (granting 24 motion to seal because “[a]ll of the documents contain sensitive business information or may be 25 subject to confidentiality agreements); Nicolosi Distributing, Inc. v. Finishmaster, Inc., Case No. 26 18-v-03587-BLF, 2018 WL 10758114, at *2 (N.D. Cal. Aug. 28, 2018) (“[C]ompelling reasons 27 exist to seal [contracts] because they contain proprietary and confidential business information, 1 requirements.”). The Court has previously sealed the entirety of the Agreement and material 2 identical to the present requests. ECF Nos. 9, 20, 46, 52. See Synchronos Techs., Inc. v. Dropbox 3 Inc., Case No. 16-cv-0119-HSG, 2020 WL 759528, at *5 (N.D. Cal. Feb. 14, 2020) (“[T]he 4 sealing requests seek to seal information materially identical to prior sealing requests, which this 5 Court granted. The Court sees no reason why it should here find that information it previously 6 deemed sealable no longer meets the ‘compelling reasons’ standard.”). 7 The Court GRANTS the parties’ administrative motions and seals the highlighted portions 8 contained in: 9 1. HotSpot’s Motion to Dismiss Counterclaims: 3:10-28; 4:1-14; 8:22-28; 9:1-2; 9:16; 10 9:21-27; 11:23- 28; 12:1-25; 11 2. HotSpot’s Motion to Dismiss, Exhibit 1, pages: 3; 5-7; 11-16; 18; 20-25; 27;3 12 3. Nurix’s Opposition to HotSpot’s Motion to Dismiss: 1:23- 25, 1:27-2:4, 2:7-11, 2:13, 13 2:18, 2:21-22, 2:25, 3:2, 3:4, 5:14-16, 5:26-28, 6:3-5, 8:6, 8:17-18, 8:26, 9:1, 9:3-4, 9:23-24, 9:28, 14 10:4-12, 10:24-26, 11:4-6, 11:10-11, 11:15, 12:17, 14:14, 14:20; 14:22; and 15 4. HotSpot’s Reply: 1:18-28, 2:6-7, 3:12-16, 4:11, 5:18-28, 6:1-8, 8:1-5. 16 IV. MOTION TO DISMISS COUNTERCLAIMS 17 A. Legal Standard 18 “A motion to dismiss a counterclaim brought pursuant to Federal Rule of Civil Procedure 19 12(b)(6) is evaluated under the same standard as a motion to dismiss a plaintiff’s complaint.” 20 Snap! Mobile, Inc. v. Croghan, Case No. 18-cv-4686-LHK, 2019 WL 3503376, at *2 (N.D. Cal. 21 Aug. 1, 2019). A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the 22 legal sufficiency of a claim.” Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011) (citation and 23 quotation marks omitted). A complaint must plead “enough facts to state a claim to relief that is 24 plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility does not 25 mean probability, but it requires “more than a sheer possibility that a defendant has acted 26 3 The Motion to Seal HotSpot’s Motion to Dismiss seeks to seal highlighted portions of pages 2, 27 4-6, 10-15, 17, 19-24, and 26 in HotSpot’s Motion to Dismiss Exhibit 1. ECF No. 56 at 3. Upon 1 unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 687 (2009). A complaint must therefore provide 2 “fair notice” of the claims against it and the grounds for relief. Twombly, 550 U.S. at 555 3 (quotations and citation omitted). 4 In considering a motion to dismiss, the Court accepts factual allegations in the complaint 5 as true and construes the pleadings in the light most favorable to the nonmoving party. Manzarek 6 v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008); Erickson v. Pardus, 551 7 U.S. 89, 93-94 (2007). However, “the tenet that a court must accept a complaint’s allegations as 8 true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere 9 conclusory statements.” Iqbal, 556 U.S. at 678. 10 If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no 11 request to amend the pleading was made, unless it determines that the pleading could not possibly 12 be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en 13 banc) (citations and quotations omitted). However, a court “may exercise its discretion to deny 14 leave to amend due to ‘undue delay, bad faith or dilatory motive on part of the movant, repeated 15 failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing 16 party . . ., [and] futility of amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 17 892–93 (9th Cir. 2010) (alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 18 (1962)). 19 B. Discussion 20 1. Counterclaim IV: Breach of Implied Covenant of Good Faith and Fair Dealing 21 HotSpot argues that Nurix’s counterclaim for breach of implied covenant of good faith and 22 fair dealing must be dismissed because the claim centers around a subject matter governed by 23 express contractual terms and is duplicative of Nurix’s breach of contract claim. ECF No. 57 at 24 15-17. Nurix argues that it may plead its breach of implied covenant of good faith and fair dealing 25 counterclaim in the alternative to its breach of contract claim. ECF No. 59 at 9-11. 26 Under California law, “[t]here is an implied covenant of good faith and fair dealing in 27 every contract that neither party will do anything which will injure the right of the other to receive 1 (quoting Comunale v. Traders & Gen. Ins. Co., 50 Cal. 2d 654, 658 (1958)). “The exact nature 2 and scope of this duty is a factual inquiry and is based on the purposes of the Agreement, the 3 express terms of the Agreement, and the reasonable expectations of both parties.” Daly v. United 4 Healthcare Ins. Co., No. 10-CV-03032-LHK, 2010 WL 4510911, at *4 (N.D. Cal. Nov. 1, 2010). 5 “[W]here breach of an actual term is alleged, a separate implied covenant claim, based on the 6 same breach, is superfluous.” Guz v. Bechtel Nat’l Inc., 24 Cal.4th 317, 327 (2000). “If the 7 allegations do not go beyond the statement of a mere contract breach and, relying on the same 8 alleged acts, simply seek the same damages or other relief already claimed in a companion 9 contract cause of action, they may be disregarded as superfluous as no additional claim is actually 10 stated.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1395 (Cal. Ct. App. 11 1990). In sum, “a claim alleging breach of the implied covenant of good faith and fair dealing 12 cannot be based on the same breach as the contract claim, or else it will be dismissed.” Landucci 13 v. State Farm Ins. Co., 65 F. Supp. 3d 694, 716 (N.D. Cal. 2014) (citations and quotations 14 omitted). 15 Conversely, where the implied covenant claim is not based on the same breach as the 16 breach of contract claim, but seeks to impose obligations beyond those contemplated by the 17 parties, it will also fail. The implied covenant “exists merely to prevent one contracting party 18 from unfairly frustrating the other party’s right to receive the benefits of the agreement actually 19 made. . . . It cannot impose substantive duties or limits on the contracting parties beyond those 20 incorporated in the specific terms of their agreement.” Guz, 24 Cal.4th at 350 (citation omitted). 21 “Thus, to the extent a plaintiff seek [sic] to impose limits ‘beyond those to which the parties 22 actually agreed, the [implied covenant of good faith and fair dealing] claim is invalid. To the 23 extent the implied covenant claim seeks simply to invoke terms to which the parties did agree, it is 24 superfluous.’” Sun Grp. U.S.A. Harmony City, Inc. v. CRRC Corp. Ltd., No. 17-CV-02191-SK, 25 2018 WL 10689420, at *9 (N.D. Cal. July 9, 2018) (quoting Guz, 24 Cal.4th at 377.) 26 While Nurix’s Amended Answer provides more facts laying out the basis for its implied 27 covenant of good faith and fair dealing claim, the allegations still amount to the same breach as the 1 improperly. Compare ECF No. 50 ¶ 103 (claiming breach of contract against HotSpot “at least by 2 using Nurix’s confidential and proprietary information outside of the Nurix-Macroceutics 3 collaboration . . . .”), with id. ¶ 114 (claiming breach of implied covenant against HotSpot “at least 4 by using the DNATag software. . . .”), and id. ¶ 115 (claiming breach of implied covenant against 5 HotSpot “at least by using the DNATag software . . . .”). See Carlson v. Clapper, No. 18-CV- 6 07195-VKD, 2019 WL 2211196, at *5 (N.D. Cal. May 22, 2019) (“[p]laintiffs identify no steps 7 defendants took to frustrate the purposes of the Services Agreement that differ in any way from 8 acts plaintiffs say constitute defendants’ failure to perform their obligations under that agreement, 9 which plaintiffs claim is a breach of contract.”). 10 Further, to the extent that Nurix seeks to plead its implied covenant claim in the 11 alternative, the claim cannot survive because it seeks to impose liability for obligations beyond 12 those contemplated by the contract. Nurix’s own pleadings in support of its implied covenant of 13 good faith and fair dealing claim allege that HotSpot’s responsibilities toward the DNATag 14 software were not contemplated by the Agreement. See ECF No. 50 ¶ 113 (pleading that where 15 Nurix provided the DNATag software, “[t]he implied covenant of good faith and fair dealing 16 holds Macroceutics/HotSpot to the same restrictions that had been contemplated for Nurix.”). 17 This theory of liability requires the Court to expand the contract terms, and thus fails in its own 18 regard. See In re Google RTB Consumer Priv. Litig., No. 21-CV-2155-YGR, 2022 WL 2165489, 19 at *6–7 (N.D. Cal. June 13, 2022) (“plaintiffs’ reliance on extracontractual promises and duties not 20 found in the contracts does not save their [implied covenant] claims.”). 21 There is an exception to the rule requiring dismissal of a breach of the implied covenant of 22 good faith and fair dealing that fails to go beyond the same acts as contract breach “where a 23 plaintiff alleges that the defendant acted in bad faith to frustrate the contract’s actual benefits.” 24 Shaterian v. Wells Fargo Bank, N.A., 829 F. Supp. 2d 873, 884 (N.D. Cal. 2011). See also JH 25 Kelly, LLC v. AECOM Tech. Servs., Inc., No. 20-CV-05381-HSG, 2022 WL 195648, at *3 (N.D. 26 Cal. Jan. 21, 2022) (“several federal district courts have read Guz to allow simultaneous breach of 27 contract and implied covenant claims when the plaintiff alleges that the defendant exercised a right 1 counterclaim for breach of the implied covenant of good faith and fair dealing makes multiple 2 references to “bad faith.” ECF No. 50 ¶¶ 114, 115, 118, 120. However, as pled, these appear to 3 be allegations that HotSpot breached the contract, and not more. Should Nurix have factual 4 allegations making out that HotSpot acted in bad faith to frustrate the contract’s actual benefits, 5 such a claim would be permissible. 6 Accordingly, the Court GRANTS HotSpot’s Motion to Dimiss Nurix’s breach of implied 7 covenant of good faith and fair dealing counterclaim and GRANTS Nurix leave to amend. 8 2. Counterclaims V: Intentional Interference with Prospective Economic Relations 9 10 Hotspot argues that Nurix’s intentional interference with prospective economic relations 11 claim is superseded by the CUTSA. ECF No. 57 at 17-19. Nurix argues that its IIPER claim 12 stands independently of trade secret misappropriation. ECF No. 59 at 11-16. 13 “CUTSA provides the exclusive civil remedy for conduct falling within its terms and 14 supersedes other civil remedies based upon misappropriation of a trade secret.” Waymo LLC v. 15 Uber Techs., Inc., 256 F. Supp. 3d 1059, 1062 (N.D. Cal. 2017). “‘[I]f the basis of the alleged 16 property right is in essence that the information is “not . . . generally known to the public,” . . . 17 then the claim is sufficiently close to a trade secret claim’ to trigger the ‘preclusive effect of 18 CUTSA.’” Navigation Holdings, LLC v. Molavi, 445 F. Supp. 3d 69, 81 (N.D. Cal. 2020) 19 (quoting SunPower Corp. v. SolarCity Corp., No. 12-CV-00694-LHK, 2012 WL 6160472, at *5 20 (N.D. Cal. Dec. 11, 2012). Instead of analyzing whether underlying information ultimately 21 constitutes a trade secret, CUTSA “preempt[s] claims based on the same nucleus of facts as trade 22 secret misappropriation.” Arthur J. Gallagher & Co v. Tarantino, 498 F. Supp. 3d 1155, 1174 23 (N.D. Cal. 2020). The nucleus of facts test “focuses on whether other claims are not more than a 24 restatement of the same operative facts supporting trade secret misappropriation . . . If there is no 25 material distinction between the wrongdoing alleged in a [C]UTSA claim and that alleged in a 26 different claim, the [C]UTSA claim preempts the other claim.” Id. “At the pleadings stage, the 27 supersession analysis considers whether, stripped of facts supporting trade secret 1 other causes of action.” Waymo, 256 F. Supp. 3d at 1062. 2 Multiple facts pled by Nurix in its IIPER claim support trade secret misappropriation, 3 specifically facts related to the DNATag software Nurix alleges in its CUTSA claim to be a trade 4 secret. Compare ECF No. 50 ¶ 82 (alleging trade secret misappropriation in that “[a]t least by 5 using the DNATag software outside of the Nurix-Macroceutics collaboration, HotSpot exceeded 6 the scope of any authorization granted to Macroceutics to use Nurix’s confidential and proprietary 7 information.”), with id. ¶ 130 (alleging IIPER where “Hotspot worked with Macroceutics to use 8 the DNATag software . . . .”), and id. ¶ 132 (alleging IIPER where “Hotspot worked with 9 Macroceutics to screen . . . using Nurix’s DNATag software.”). These factual allegations are 10 based on misuse of trade secrets, which forecloses them as a basis for Nurix’s IIPER claim 11 regardless of whether the Court later finds the information not to be a trade secret. See Five Star 12 Gourmet Foods, Inc. v. Fresh Express, Inc., No. 19-CV-05611-PJH, 2020 WL 513287, at *15 13 (N.D. Cal. Jan. 31, 2020) (“CUTSA displaces claims alleging misappropriation of even 14 confidential information that does not qualify for trade-secret protection.”). Thus, an IIPER claim 15 based on these factual allegations would be superseded. 16 However, not all the facts Nurix pleads in support of its IIPER claim are facts supporting 17 trade secret misappropriation. Nurix also pleads facts related to the breach of the Agreement and 18 Nurix-Macroceutics collaboration independent of Nurix’s trade secrets or confidential 19 information. See ECF No. 50 ¶¶ 131, 136. See Angelica Textile Servs., Inc. v. Park, 220 Cal. 20 App. 4th 495, 508 (2013), as modified (Oct. 29, 2013), as modified on denial of reh’g (Nov. 7, 21 2013) (holding that the plaintiff’s tort claims, including interference with business relations, were 22 not superseded by CUTSA where the plaintiff alleged wrongful conduct in violating the 23 noncompetition agreement and his duty of loyalty “[b]ecause [plaintiff’s] theory of liability on 24 these claims was independent of any trade secret claim.”); Tarantino, 498 F. Supp. 3d at 1175 25 (finding plaintiff’s tort claims were predicated in part on facts supporting trade secret 26 misappropriation, but also finding the tort claims could proceed to the extent that the plaintiff 27 “alleged misconduct on the part of [defendants] independent of any trade secrets.”). 1 whether the remaining facts plausibly plead an IIPER claim. Waymo, 256 F. Supp. 3d at 1062. 2 IIPER requires the following elements:
3 (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future 4 economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt 5 the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action. 6 7 Roy Allan Slurry Seal, Inc. v. Am. Asphalt S., Inc., 2 Cal. 5th 505, 512 (2017). In relation to the 8 third prong, “a plaintiff seeking to recover for alleged interference with prospective economic 9 relations has the burden of pleading and proving that the defendant’s interference was wrongful 10 ‘by some measure beyond the fact of the interference itself.’” Della Penna v. Toyota Motor Sales, 11 U.S.A., Inc., 11 Cal. 4th 376, 392-93 (1995) (quotation and footnote omitted). “[A]n act is 12 independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, 13 statutory, regulatory, common law, or other determinable legal standard.” Korea Supply Co. v. 14 Lockheed Martin Corp., 29 Cal. 4th 1134, 1159 (2003) (finding independent wrongfulness where 15 defendant allegedly engaged in bribery and offered sexual favors). Cf. Eco Elec. Sys., LLC v. 16 Reliaguard, Inc., No. C 20-00444 WHA, 2022 WL 1157481, at *9 (N.D. Cal. Apr. 19, 2022) 17 (“wining and dining” of third party was improper, but not unlawful as required for IIPER). 18 The Court finds that the remaining facts outside of trade secret misappropriation cannot 19 plausibly state a claim for IIPER. Particularly, without allegations supporting trade secret 20 misappropriation there are no facts pointing to an independently wrongful act to satisfy IIPER’s 21 third prong. See Rovince Int’l Corp. v. Preston, No. CV 13-3527 CAS PJWX, 2013 WL 5539430, 22 at *5 (C.D. Cal. Oct. 7, 2013) (finding IIPER claim superseded by the CUTSA where “[t]he only 23 ‘wrongful conduct’ proffered by the FAC is Preston’s alleged misappropriation of Rovince’s trade 24 secrets.”). Cf. Aavid Thermalloy LLC v. Cooler Master Co., No. 17-CV-05363-JSW, 2018 WL 25 11348438, at *3 (N.D. Cal. June 15, 2018) (finding IIPER survived CUTSA supersession where 26 the alleged wrongful act was making false statements to third parties regarding patent 27 infringement, but noting that to the extent the plaintiff alleged wrongful acts supporting 1 Background Servs. Corp. v. Priv. Eyes, Inc., 569 F. Supp. 2d 929, 937 (N.D. Cal. 2008) 2 (determining the plaintiff could not satisfy the wrongful act requirement of IIPER with allegations 3 related to trade secrets, but could satisfy with allegations of trade libel). 4 To the extent there are facts supporting an independently wrongful act by HotSpot beyond 5 trade secret misappropriation, the Amended Answer does not make that clear. 6 Accordingly, the Court GRANTS HotSpot’s Motion to Dismiss Nurix’s IIPER 7 counterclaim. The Court GRANTS Nurix leave to amend its IIPER counterclaim. 8 3. Counterclaim VI: Intentional Interference with Performance of a Contract 9 a. The CUTSA Supersession 10 Hotspot argues that Nurix’s intentional interference with performance of a contract claim is 11 superseded by the CUTSA. ECF No. 57 at 17-19. Nurix argues that its claim stands 12 independently of trade secret misappropriation. ECF No. 59 at 11-16. 13 The facts alleged by Nurix in support of its IIPC claim are nearly identical to those 14 supporting its IIPER claim. Compare ECF No. 50 ¶¶ 130-132 (pleading IIPER), with id. ¶¶ 151- 15 153 (pleading IIPC); id. ¶¶ 135-137 (pleading IIPER), with id. ¶¶ 156-158 (pleading IIPC). Thus, 16 to the extent Nurix’s IIPC claim is premised on HotSpot interfering with the Agreement by 17 misappropriating confidential information and trade secrets, these allegations cannot form the 18 basis of its IIPC claim in the same way such facts cannot not form the basis of its IIPER claim. 19 See Tarantino, 498 F.Supp.3d at 1174 (“nucleus of fact” test). While allegations related to trade 20 secret misappropriation may support a breach of contract claim, they cannot form the basis of a 21 tortious interference with contract claim. See Angelica Textile, 220 Cal. App. 4th at 505 22 “[CUTSA] expressly allows contractual and criminal remedies, whether or not based on trade 23 secret misappropriation. At the same time, [CUTSA] implicitly preempts alternative civil 24 remedies based on trade secret misappropriation.”) (quotations and citations omitted). 25 Just as with its IIPER claim, however, Nurix’s facts in support of the IIPC claim are not 26 solely based on trade secret misappropriation, but also allege breach of the Agreement 27 independent of Nurix’s trade secrets or confidential information. See ECF No. 50 ¶¶ 152, 157. 1 Tarantino, 498 F. Supp. 3d at 1175. 2 IIPC requires a plaintiff plead and prove the following elements: “(1) the existence of a 3 valid contract between the plaintiff and a third party; (2) the defendant’s knowledge of that 4 contract; (3) the defendant’s intentional acts designed to induce a breach or disruption of the 5 contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) 6 resulting damage.” Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130, 1141 (2020) (quoting 7 Reeves v. Hanlon, 33 Cal. 4th 1140, 1148 (2004)). Notably, as opposed to an IIPER claim, “it is 8 not necessary that the defendant’s conduct be wrongful apart from the interference with the 9 contract itself.” Quelimane Co. v. Stewart Title Guar. Co., 19 Cal. 4th 26, 55 (1998), as modified 10 (Sept. 23, 1998). 11 Without the requirement of pleading independently wrongful action, removing the facts 12 related to trade secret misappropriation from Nurix’s IIPC claim does not appear to be fatal to it. 13 Nurix alleges contract interference independent of trade secret misappropriation, and thus on its 14 face the Court cannot find that the CUTSA supersedes Nurix’s IIPC claim. 15 b. Failure to Plead Sufficient Facts Supporting IIPC 16 HotSpot alternatively moves to dismiss Nurix’s IIPC claim based on failure to plead facts 17 stating a claim for IIPC, particularly that Nurix has not sufficiently pled third-party interference 18 where HotSpot is a successor to the contract. ECF No. 57 at 20-21. Nurix argues it has 19 sufficiently pled all elements of its IIPC claim, and that its theory of liability permissibly alleges 20 HotSpot interfered in the contract prior to acquiring Macroceutics. ECF No. 59 at 18. 21 “California recognizes a cause of action against noncontracting parties who interfere with 22 the performance of a contract. ‘It has long been held that a stranger to a contract may be liable in 23 tort for intentionally interfering with the performance of the contract.’” Applied Equip. Corp. v. 24 Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 513-14 (1994) (quoting Pac. Gas & Electric Co. v. Bear 25 Stearns & Co., 50 Cal. 3d 1118, 1126 (1990)). “Consequently, a contracting party is incapable of 26 interfering with the performance of his or her own contract and cannot be held liable in tort for 27 conspiracy to interfere with his or her own contract.” PM Grp., Inc. v. Stewart, 154 Cal. App. 4th 1 Recent California caselaw indicates that an owner of a company is not per se barred from 2 liability for interference with that company’s contract. See Asahi Kasei Pharma Corp. v. Actelion 3 Ltd., 222 Cal. App. 4th 945, 967 (2013), modified on denial of reh’g (Jan. 16, 2014) (analyzing a 4 circumstance where a parent company acquired a subsidiary and concluding the owner parent 5 company could be liable under IIPC, but also noting that the parent company had not assumed 6 liability for the contract); Woods v. Fox Broad. Sub., Inc., 129 Cal. App. 4th 344, 353 (2005) 7 (noting it highly unlikely Applied Equip. Corp., 7 Cal. 4th 503 intended to hold that “persons or 8 entities with an ownership interest in a corporation are automatically immune from liability for 9 interfering with their corporation’s contractual obligation.”). But see Martinez v. Donna Indep. 10 Sch. Dist., No. CV M-03-377, 2005 WL 8161862, at *2 (S.D. Tex. Mar. 31, 2005) (applying 11 Texas law and dismissing a tortious interference with a contract claim against a school board 12 where prior board members entered into a contract and then reorganized members repudiated the 13 contract); Dryden v. Tri-Valley Growers, 65 Cal. App. 3d 990, 997 (Cal. Ct. App. 1977) (finding a 14 successor-in-interest was not liable for interference with contract relations as a party to the 15 contract). Although pertinent, both Martinez and Dryden are potentially distinguishable from 16 Nurix’s allegations based on the timing of the disruptions with the underlying contract. In 17 Martinez, the contract breach appears to have taken place after the new school board took over and 18 was decidedly a party. 2005 WL 8161862, at *2. Dryden is the most analogous, but the plaintiff 19 there appears not to have plausibly alleged that the successor interfered with the contract except by 20 the fact of its acquisition of the company. 65 Cal. App. 3d at 996-98. 21 Examining the relevant caselaw and the facts as pled in this case, interpreted in the light 22 most favorable to Nurix, the facts plausibly provide that in 2018, prior to HotSpot’s August 2019 23 acquisition of Macroceutics, Hotspot knowingly interfered in the Agreement through its work with 24 Macroceutics beyond use of alleged trade secrets. See ECF No. 50 ¶¶ 30, 35-46, 148-150, 152. 25 Such work can plausibly be inferred to have occurred prior to acquisition based on the timeline of 26 HotSpot’s public announcement regarding CBL-B discoveries which Nurix states was a brief 27 timeframe compared to industry standards. See ECF No. 50 ¶¶ 30, 35-46. This timeline also 1 becoming successor and therefore a party to the contract. The caselaw in California does not 2 || necessarily appear to foreclose this theory of liability, where the tortious elements occur prior to 3 acquisition. 4 HotSpot raises in its Reply that Nurix’s IIPC claim “impermissibly seeks damages for the 5 same economic loss under both contract and tort law.” ECF No. 62 at 10-12. “It is inappropriate 6 || to consider arguments raised for the first time in a reply brief.” Ass’n of Irritated Residents v. C & 7 || R Vanderham Dairy, 435 F. Supp. 2d 1078, 1089 (E.D. Cal. 2006). See also United States v. 8 || Romm, 455 F.3d 990, 997 (9th Cir. 2006) (“arguments not raised by a party in its opening brief are 9 || deemed waived.”) (quoting Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999)). Therefore, this 10 || Court does not address HotSpot’s economic loss argument here. 11 Accordingly, the Court DENIES HotSpot’s Motion to Dismiss Nurix’s IIPC counterclaim. %L Vv. CONCLUSION 13 For the reasons stated above, the Court GRANTS the parties’ Administrative Motions to 14 || Seal, GRANTS IN PART AND DENIES IN PART Plaintiff HotSpot’s Motion to Dismiss 3 15 || Nurix’s Counterclaims. The Court GRANTS Nurix leave to amend its Counterclaims. Nurix shall a 16 || have 21 days from the date of this order to file its amended Counterclaims. IS SO ORDERED. 18 19 Dated: February 3, 2023 20 AZ\ I. THOMAS S. HIXSON 21 United States Magistrate Judge 22 23 24 25 26 27 28