Incyte Corporation v. Flexus Biosciences, Inc.

• Court: Superior Court of Delaware
• Decided: May 26, 2016
• Docket: N15C-09-055 MMJ CCLD
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

INCYTE CORPORATION, ) ) Plaintiff, ) ) v. ) C.A. No. N15C-09-055 MMJ CCLD ) FLEXUS BIOSCIENCES, INC., ) TERRY ROSEN, and JUAN JAEN, ) ) Defendants. )

Submitted: May 19, 2016 Decided: May 26, 2016

On Defendants’ Motion for Reargument DENIED

ORDER

Richard H. Cross, Jr., Esq. (Argued), Joseph Grey, Esq., Christopher P. Simon, Esq., Cross & Simon, LLC, Attorneys for Plaintiff

Jonathan A. Patchen, Esq. (Argued), Taylor & Company Law Offices, LLP, Patricia Carson, Esq. (Argued), Daniel Forchheimer, Esq., Leora Ben-Ami, Esq., Ashley Borom, Esq., Kirkland & Ellis LLP, Gregory V. Varallo, Esq., C. Malcolm Cochran, Esq., Katharine Lester Mowery, Esq., Richards Layton & Finger, P.A., Attorneys for Defendants.

JOHNSTON, J. 1. By Opinion dated April 19, 2016, the Court granted in part and denied

in part Defendants’ Motion to Dismiss. The Court held:

Counts II and V of the Complaint directly implicate the Confidentiality Agreement between Incyte and Dr. Fridman. These counts raise allegations of substantially interdependent and concerted misconduct by both Defendants (nonsignatories) and Dr. Fridman (a signatory). Arbitration is appropriate as to these counts because Incyte’s claims against Defendants arise out of and relate directly to the Confidentiality Agreement between Incyte and Dr. Fridman. The doctrine of equitable estoppels applies. Thus, the Court lacks jurisdiction over these claims. Counts II and V must be dismissed.

Counts I, III, and IV of the Complaint do not relate directly to the Confidentiality Agreement. The resolution of these claims does not depend on parsing out the terms of the agreement. Counts I, III, and IV will not be dismissed.

Resolution of Counts I, III, and IV of the Complaint is not dependent on a determination of whether Dr. Fridman breached the Confidentiality Agreement. Speculative reputational damage, and a mere possibility of inconsistent results from a possible future arbitration, do not warrant dismissal pursuant to Rule 12(b)(7). Dr. Fridman is neither a necessary nor indispensable party to the remaining Counts, and the case may proceed in his absence.1

2. Defendants have moved for reargument. Defendants contend that the

Court overlooked the second independent equitable estoppel test for Counts I, III

1 Incyte Corp. v. Flexus Biosciences, Inc., 2016 WL 1735485, at *10 (Del. Super.).

2 and IV. That test provides that equitable estoppel is warranted to dismiss a claim

in favor of arbitration when the signatory to the contract containing an arbitration

clause raises allegations of substantially interdependent and concerted misconduct

by both the nonsignatory and one or more of the signatories to the contract.

Defendants also assert that Count IV (Conspiracy) should be dismissed because it

tracks the language of Count V (Aiding and Abetting), and Count V was

dismissed.

3. The findings of the Court demonstrate consideration of the principle set

forth in the second prong of the equitable estoppel test. The Court held that the

claims set forth in Counts I (Misappropriation of Trade Secrets), III (Unjust

Enrichment), and IV (Conspiracy) may be determined without looking to the

Confidentiality Agreement. The mere existence of a contract does not compel the

conclusion that disputes among the contracting parties and a nonsignatory must be

resolved through mandatory arbitration. The second prong test cannot be

reasonably read as requiring nonsignatories to be hailed into arbitration on the

basis of allegations of “substantially interdependent and concerted misconduct”

that can be proven or disproved without reference to the contract.

4. The Court clearly considered whether the averred misconduct was

substantially interdependent and concerted “by both the nonsignatory and one or

more of the signatories to the contract.” This prong specifically refers to the

3 contract. As the Court ruled, resolution of Counts I, III and IV “is not dependent

on parsing out the terms of the Confidentiality Agreement.”

5. A prerequisite to liability under Count V (Aiding and Abetting) is a

finding of an underlying breach of contract. Therefore, in this case, equitable

estoppel applies to aiding and abetting a breach of the contract containing a

mandatory arbitration clause. In contrast, Count IV (Conspiracy) resulting in

damage to business interests may be determined without reference to the

Confidentially Agreement.

6. The purpose of moving for reargument is to seek reconsideration of

findings of fact, conclusions of law, or judgment of law. 2 Reargument usually will

be denied unless the moving party demonstrates that the Court overlooked a

precedent or legal principle that would have a controlling effect, or that it has

misapprehended the law or the facts in a manner affecting the outcome of the

decision.3 “A motion for reargument should not be used merely to rehash the

arguments already decided by the court.” 4

7. The Court has reviewed and considered the parties’ written submissions

and arguments. The Court did not overlook a controlling precedent or legal

principle, or misapprehend the law or the facts in a manner affecting the outcome

of the decision. 2 Hessler, Inc. v. Farrell, 260 A.2d 701, 702 (Del. 1969). 3 Ferguson v. Vakili, 2005 WL 628026, at *1 (Del. Super.). 4 Wilmington Trust Co. v. Nix, 2002 WL 356371, at *1 (Del. Super.).

4 THEREFORE, Defendants’ Motion for Reargument is hereby DENIED.

IT IS SO ORDERED.

/s/ The Honorable Mary M. Johnston