2017-00218804-CU-WE

Dophen Biomed, Inc. vs. CSPC Dophen Corporation

Nature of Proceeding: Motion to Dismiss Cross-Complaint

Filed By: Close, Andrea M.

** If any party requests oral argument, then at the time the request is made, the requesting party shall inform the court and opposing counsel / opposing party in propria persona of the specific cause(s) of action or issue(s) on which oral argument is sought. **

The motion of Plaintiff and Cross-Defendant Dophen Biomed, Inc. (DBI) and Cross-Defendant Sean Hu (Hu) (collectively “Cross-Defendants”) to dismiss the cross-complaint on grounds of inconvenient forum is DENIED.

Cross-Defendants’ alternative motion for a discretionary stay of the entire action while a parallel federal action proceeds is GRANTED.

Overview

DBI commenced this landlord/tenant dispute on 9/11/17. DBI is the alleged tenant, and Defendant and Cross-Complainant CSPC Dophen Corporation (CSPC) is the alleged landlord. According to DBI, CSPC wrongfully locked it out of a research lab within the leased premises. The complaint contains causes of action for wrongful eviction, trespass, breach of the covenant of quiet enjoyment, breach of lease

agreement, and temporary restraining order and preliminary injunction.

CSPC filed a cross-complaint against Cross-Defendants in November 2017. CSPC alleges that Hu was the director of its research laboratory until he was terminated in 2017. CSPC alleges that the subject lease is invalid because no authorized agent executed it on its behalf. In addition, CSPC alleges that Hu wrongfully created DBI to compete with CSPC. Hu allegedly misrepresented DBI as the same entity as CSPC in order to obtain funding from the NIH, among other things. The cross-complaint contains causes of action for fraud/deceit, constructive fraud, declaratory relief, breach of lease, common counts, trademark infringement and unfair competition.

On 9/11/17–the same date DBI filed the current action, but two months before CSPC file its cross-complaint–CSPC commenced a federal court action against Hu in the Eastern District of California. In that case, CSPC is advancing claims for relief for breach of contract (nondisclosure agreement and conflict-of-interest policy), breach of the duty of loyalty, misappropriation of trade secrets under federal law, violation of the Lanham Act, conversion, violation of the California Comprehensive Computer Data Access and Fraud Act (Penal Code § 502) and unfair competition under California law. Hu filed counterclaims against CPSC as well as another entity and three individuals. Hu’s counterclaims in the federal action include breach of contract, defamation, failure to pay wages, breach of fiduciary duty, conversion, trademark infringement and unfair completion. Although the allegations in the federal case and the current cross-complaint are not identical, there is substantial overlap, including allegations that the lease is a sham and that Hu wrongfully created DBI to obtain NIH funding. DBI, though, is not a party in the federal action.

Discussion

Dismissal

The motion to dismiss the cross-complaint on grounds of inconvenient forum is denied. The court questions whether such a dismissal could be granted in this case, since the inconvenient forum provisions in CCP § 410.30(a) address whether “an action should be heard in a forum outside this state.” The state and federal courthouses currently at issue are both in California and are a few blocks apart.

Assuming § 410.30(a) may be applied in the present circumstances, the court will not enter a dismissal.

“Forum non conveniens is an equitable doctrine invoking the discretionary power of a court to decline to exercise the jurisdiction it has over a transitory cause of action when it believes that the action may be more appropriately and justly tried elsewhere. [Citation.] … [¶] In determining whether to grant a motion based on forum non conveniens, a court must first determine whether the alternate forum is a ‘suitable’ place for trial. If it is, the next step is to consider the private interests of the litigants and the interests of the public in retaining the action for trial in California. The private interest factors are those that make trial and the enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for attendance of unwilling witnesses. The public interest factors

include avoidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation.”

(Investors Equity Life Holding Co. v. Schmidt (2015) 233 Cal.App.4th 1363, 1375.) The burden was on Cross-Defendants to prove that this forum is inconvenient in light of the factors above. Rather than submit such proof, Cross-Defendants merely assert that the parallel actions are duplicative. (See Close Decl.) Having failed to train evidence on the applicable factors, Cross-Defendants have failed to prove that this forum is so inconvenient that a dismissal is warranted. That inconsistent outcomes are possible or that judicial economy will not be promoted absent a dismissal does not prove that this state-court action presents an inconvenient forum.

Stay

Cross-Defendants argue a stay is warranted because the two cases are substantially identical and involve substantially identical parties. (See Caiafa Prof. Law Corp. v. State Farm Fire & Cas. Co. (1993) 15 Cal.App.4th 800, 804 [“It is black letter law that, when a federal action has been filed covering the same subject matter as is involved in a California action, the California court has the discretion but not the obligation to stay the state court action”]; see also Benitez v. Williams (2013) 219 Cal.App.4th 270, 276 [“In exercising its discretion, the superior court should consider a number of factors, including whether the plaintiff’s choice to litigate in two forums was designed solely to harass the adverse party and the importance of avoiding unseemly conflicts with the federal court”].)

CSPC counters that the validity of DBI’s lease is only the focus of this case, not the federal action. In addition, CSPC has produced evidence that, before Hu and his counsel commenced this action, they received a draft of the complaint CSPC intended to file in federal court. (Smith Decl., ¶ 11.) Hence, CSPC argues Cross-Defendants cannot cry foul for having to litigate a state court action that they initiated knowing a federal court action was imminent. CSPC also argues that a stay of his case could result in the loss of evidence and witnesses.

Despite CSPC’s arguments, a stay should be entered to avoid unseemly conflicts between courts. Threshold issues in both cases are Hu’s interest (if any) in CSPC and his related authority to create and operate DBI. Different resolutions of these issues could create incompatible results. Hence, the issues should be resolved in one case, and the parties should only be required to litigate it once. Absent any evidence that the district court is considering staying the action in federal court, this court will enter a stay.

Disposition

This action is STAYED pending disposition of the federal court action or further order of this court.

Nothing bars a party from moving to lift the stay upon a material change of circumstances.

The motion for an order dismissing the cross-complaint is DENIED.