Defendant Questcor Pharmaceuticals, Inc. (“Questcor”) moves for summary judgment or, in the alternative, summary adjudication against plaintiff Glenridge Pharmaceuticals LLC (“Glenridge”). Questcor also moves for summary adjudication on its claim for declaratory relief against Glenridge, Kenneth Greathouse (“Greathouse”), Stuart Rose (“Rose”), and Lloyd Glenn (“Glenn”) in an action (Case No. 1-12-CV-237225) that has been consolidated with this action.

Questcor’s evidentiary objections are OVERRULED.

Glenridge’s evidentiary objections are OVERRULED.

Questcor contends that its Fifth Affirmative Defense (Unenforceable Contract – California Corporations Code section 310) in its Amended Answer is a complete defense to the claims asserted by Glenridge. (Notice, p. 1:10-13.) According to Questcor, if there exists a contract in which one or more of its directors has a material financial interest in the contract and the requirements of Corporations Code section 310 (“Section 310”) are not met, then the contract is presumptively invalid and voidable. Questcor argues that Greathouse had a material interest in the outcome of the royalty agreement between the parties (“Agreement”) because he would receive a percentage of the royalties paid to Glenridge. As a result, Questcor contends that Section 310 applies to the Agreement and because the requirements of Section 310 have not been met, the Agreement is void and unenforceable.

In opposition, Glenridge notes that Section 310 states that certain contracts are not void or voidable whenever certain conditions are met. Because Section 310 only describes conditions in which a contract is not void or voidable, Glenridge argues that Section 310 can only be used as a shield and not a sword, and therefore contends that Questcor’s attempt to use Section 310 as a sword is faulty. Glenridge argues that Section 310 functions as an exception or a “safe harbor” provision to the general rule that a contract is void if a director had a material interest in the contract. According to Glenridge, Section 310 does not itself declare any transaction to be void or voidable, but only validates transactions under certain circumstances.

Because the plain language of Section 310 describes situations in which contracts are not void or voidable, Section 310 does not proscribe situations in which contracts are necessarily void or voidable, as Questcor so contends. Rather than creating an affirmative defense, Section 310 serves as a defense to attacks on the validity of contracts, as the statute is a safe-harbor mechanism by which corporate directors may protect themselves against allegations of conflicts of interest. (See e.g., Gaillard v. Natomas Co., 208 Cal. App. 3d 1250, 256 Cal. Rptr. 702, 716-17 (Ct. App. 1989) [Section 310 interposed by corporate directors as defense to shareholder derivative suit alleging claims of breach of fiduciary duty, waste and mismanagement, negligence and conversion]; Sammis v. Stafford (1996) 48 Cal. App. 4th 1935, 1939 [Section 310 asserted by corporate officer and director as defense to shareholder’s derivative suit alleging misappropriation of corporate funds].) Accordingly, Questcor’s attempt to use Section 310 as an affirmative defense is based on an improper reading of Section 310.

Setting aside the reference to Section 310, Questcor appears to argue that the Agreement is unenforceable because Greathouse, as an officer of both Questcor and Glenridge, had a material interest in the Agreement, was involved in the negotiations that resulted in the Agreement, and that involvement was never disclosed to Questcor. (See Tevis v. Beigel (1959) 174 Cal. App. 2d 90, 96, citing Kleinsasser v. McNamara (1933) 129 Cal. App. 49, 58 [“…directors, trustees, or other officers of a corporation, who are entrusted with its interests, and occupy a fiduciary relation towards it, will not be allowed to contract with the corporation, directly or indirectly,…where they act both for the corporation and for themselves. In such a case the transaction is, at the least, voidable at the option of the corporation; and it may be avoided and set aside, or affirmed and any profits recovered, without proof of actual fraud, or of actual injury to the corporation.”].)

The evidence submitted by Questcor demonstrates that Greathouse was an officer of both Questcor and Glenridge during the negotiations and at the time the Agreement was made (Questcor Pharmaceuticals, Inc.’s Separate Statement of Undisputed Material Facts (“UMF”), Nos. 36, 91); that Greathouse had a material interest in the Agreement (Questcor’s UMF, Nos. 43, 44, 98, 99); that, unbeknownst to Questcor, he participated in the negotiations without disclosing his involvement to Questcor (Questcor’s UMF, Nos. 23, 78); and that Questcor’s Board ratified the Agreement without knowledge of Greathouse’s involvement (Questcor’s UMF, Nos. 37, 38, 92, 93). Based on this evidence, Questcor meets its initial burden of producing evidence showing that the Agreement is void or voidable.

As Questcor meets its initial burden, the burden shifts to Glenridge to provide evidence that creates a triable issue of material fact. Glenridge vehemently disputes that Questcor had no knowledge of Greathouse’s involvement in the negotiations and that Questcor’s Board ratified the Agreement without this knowledge. Glenridge offers evidence showing that Questcor’s CEO and attorney had knowledge of Greathouse’s involvement in the negotiations. (Glenridge Pharmaceuticals LLC’s Responses to Separate Statement of Undisputed Material Facts and Additional Material Facts in Support of Opposition to Motion for Summary Judgment and/or in the Alternative, Adjudication (“AMF”), Nos. 147-149.) More tellingly, Glendridge provides evidence establishing that not only did Questcor’s CEO and attorney have knowledge of Greathouse’s involvement; they affirmatively reached out to Greathouse for his input regarding the royalty payments during negotiations. (Glenridge’s AMF, Nos. 144-146, 172, 175.) Based on the evidence presented, Glenridge raises a triable issue of material fact regarding whether or not Greathouse’s involvement in the negotiations that resulted in the Agreement was known by Questcor. Accordingly, the motion for summary judgment is DENIED.

Questcor seeks, in the alternative, summary adjudication of the following issue: whether or not the Agreement is, as a matter of law, voidable as a self-dealing transaction not entitled to the “safe harbor” provided by Section 310. However, this issue is not a proper issue for summary adjudication. (See Code Civ. Proc., § 437c, subd. (f)(1).) Accordingly, this motion for summary adjudication is DENIED.

Questcor moves for summary adjudication on its declaratory relief claim against Glenridge, Greathouse, Rose, and Glenn. In this claim, Questcor requests the Court to declare that the Agreement is void or voidable. (Complaint, ¶ 47.) In moving for summary adjudication, “the burden is [on the plaintiff] to produce admissible evidence on each element of a ‘cause of action’ entitling him or her to judgment.” (Hunter v. Pacific Mechanical Corp. (1995) 37 Cal.App.4th 1282, 1287 (disapproved on other grounds in Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826.), citing Code Civ. Proc., § 437c, subd. (p)(1).) If the plaintiff meets this initial burden, it then shifts to the defendant to “show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) As discussed above, Glenridge raises a triable issue of material fact on the issue of whether the Agreement is void or voidable. Accordingly, this motion for summary adjudication is DENIED.